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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended February 3, 1996
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 0-7258
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CHARMING SHOPPES, INC.
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(Exact name of registrant as specified in its charter)
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PENNSYLVANIA 23-1721355
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
450 Winks Lane, Bensalem, Pennsylvania 19020
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (215) 245-9100
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $.10 per share)
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(Title of Class)
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. (X) YES ( ) NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. (X)
As of March 29, 1996, 103,358,316 common shares were outstanding. The
aggregate market value of the common shares (based upon the closing price on
March 29, 1996), held by non-affiliates was approximately $500 million.
DOCUMENTS INCORPORATED BY REFERENCE: As stated in Part III of this annual
report, portions of the following document are incorporated herein by
reference:
Definitive proxy statement for annual shareholders meeting to be filed within
120 days after the end of the fiscal year covered by this annual report.
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CHARMING SHOPPES, INC.
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
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Item 1 Business
General ................................................................ 2
Merchandising and Marketing ............................................ 3
Purchasing ............................................................. 5
Distribution ........................................................... 5
Stores ................................................................. 6
Store Management and Employees ......................................... 7
Trademarks and Servicemarks ............................................ 7
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995 ....................... 8
Item 2 Properties ................................................................ 9
Item 3 Legal Proceedings ......................................................... 9
Item 4 Submission of Matters to a Vote of Security Holders ....................... 9
Item 4a Executive Officers of the Registrant ...................................... 10
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PART II
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Item 5 Market for the Registrant's Common Equity and Related Stockholders' Matters .. 11
Item 6 Selected Financial Data ...................................................... 12
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations ..................................................... 13
Item 8 Financial Statements and Supplementary Data .................................. 19
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ...................................................... 36
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PART III
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Item 10 Directors and Executive Officers of the Registrant .............. 37
Item 11 Executive Compensation .......................................... 37
Item 12 Security Ownership of Certain Beneficial Owners and Management .. 37
Item 13 Certain Relationships and Related Transactions .................. 37
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PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 38
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PART I
ITEM 1. BUSINESS
GENERAL
Charming Shoppes, Inc., a Pennsylvania corporation formed in 1969, operates
through its subsidiary corporations 1,301 women's specialty apparel stores in
46 states (as of February 3, 1996), the substantial majority of which are
located in the Northeast quadrant of the United States. Unless the context
indicates otherwise, the term "Company" refers to Charming Shoppes, Inc. and,
where appropriate, one or more of its wholly-owned subsidiaries. The Company's
1,234 "Fashion Bug" stores specialize in selling, at moderate and popular
prices, a wide variety of junior, misses, large-size and girls size sportswear,
dresses, coats, lingerie, accessories and casual footwear. The Company's 67
"Fashion Bug Plus" stores specialize in similar merchandise for the large-size
customer. The Company also has a selection of petite women's apparel in
certain Fashion Bug stores. An assortment of casual men's apparel and
accessories is also available in most Fashion Bug stores. The Company's stores
sell both brand-name merchandise and specially manufactured garments under one
of the Company's private labels.
In response to the Company's declining sales productivity and profit
performance, commencing in the third quarter of the year ended February 3, 1996
("Fiscal 1996"), the Company made significant changes in its management, with
Dorrit J. Bern joining the Company as President and Chief Executive Officer in
September 1995. Ms. Bern had been employed by Sears, Roebuck & Co. ("Sears")
since 1987 and had most recently held the position of Group Vice President for
Women's Apparel and Home Fashions at Sears. Ms. Bern was instrumental in the
creation and execution of the women's apparel strategy at Sears. In addition
to Ms. Bern, the Company is led by new senior merchandising executives, a newly
appointed Chief Financial Officer and a new Executive Vice President of
Sourcing. Under the direction of Ms. Bern and her new management team, during
the fourth quarter of Fiscal 1996 management redesigned many aspects of the
Company's business strategy: merchandising, marketing, purchasing,
distribution and financial. This new strategy is aimed at enhancing sales
productivity and improving financial performance commencing in the fiscal year
ending February 2, 1997 ("Fiscal 1997").
As part of this new business strategy, management has placed increased focus on
meeting the demands of its primary customers. Such customers are generally in
the 20 to 45 year old age group, and in the lower-middle to middle income
range, and tend to follow, rather than set, fashion trends. The Company has
responded to the needs of its customer by expanding the variety of choices in
its merchandise assortment. In addition, the Company is expanding its
merchandise assortment in previously underdeveloped products such as career
wear and dresses, and petite sizes are being offered for the first time.
Product assortments will also be tailored to the demographics of an area, and
merchandise will be available for six distinct seasons -- spring, summer,
transitional, fall, holiday and transitional -- rather than two seasons as in
the past. In addition, the Company has raised its quality standards with
respect to merchandise fabrication, construction and fit. More realistic value
pricing is also part of the new business strategy. In addition, advertising
expenditures are being shifted from in-store promotions to radio and newspaper
advertising, and management intends to more actively utilize targeted direct
mail advertising to its list of approximately 3,300,000 active proprietary
credit card customers.
As a result of management's increased focus on meeting the demands of its
primary customer, the Company, which had previously placed heavy reliance on
internally developed product sourced overseas, has shifted a significant
portion of its purchases to the domestic market, allowing management to
decrease lead times and respond more quickly to current fashion trends. While
overseas sourcing resulted in lower product cost and increased initial markups,
six to twelve month lead times were generally required to procure merchandise.
Use of the domestic market allows the Company to make purchase decisions
generally with two to four month lead times, and quickly replenish merchandise
inventory as necessary (generally with one to two month lead times). The
Company continues to use its overseas sourcing operation, which has been
reorganized to support this strategic change, to procure basic low-risk
commodity merchandise which generally requires three to eight month lead times.
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The Company's new merchandise and purchasing strategy, and enhancements to the
Company's inventory management, facilitate the timely and orderly purchase and
flow of merchandise, thereby enabling the stores to offer fresh product
assortments on a regular basis. Management expects that such changes and
enhancements should reduce the expense of outside storage facilities, and
decrease borrowing costs incurred in connection with merchandise procurement.
Management expects that the new business strategy will likely result in lower
initial unit sales prices and higher unit costs of merchandise product .
However, management also believes that such effects will be offset by (i) a
reduced need for aggressive price promotions, resulting in improved gross
margins, (ii) increased sales productivity and (iii) enhanced inventory
management flexibility, resulting in reduced inventory investment, in each case
as compared to Fiscal 1996. Due to purchase commitments made by the Company in
Fiscal 1996 for planned sales in Fiscal 1997, the full effect of this strategic
change is not expected until the latter half of Fiscal 1997.
In addition, in November 1995, the Company (i) entered into an agreement with a
commercial finance company to provide a revolving credit facility with a
maximum availability of $157,000,000, subject to limitations based upon
eligible inventory, (ii) negotiated the conversion of $82,862,000 of existing
trade obligations into a term loan, and (iii) renegotiated an outstanding term
loan in the amount of $9,488,000.
The new business strategy complements the Company's existing real estate
strategy, which is focused on locating stores in strip shopping centers
primarily in the Northeast quadrant of the United States. As of the end of
Fiscal 1996 approximately eighty percent of the Company's stores were located
in strip shopping centers. The Company believes that its customers visit strip
shopping centers more frequently than malls for their shopping needs as a
result of the mix of the tenants in, and the convenience of, strip shopping
centers. In addition, the Company benefits from substantially lower occupancy
costs as compared to store occupancy costs in malls. The Company's Fashion Bug
stores average 9,700 square feet in size.
During the fourth quarter of Fiscal 1996, the Company's Board of Directors
approved a restructuring plan (the "Restructuring Plan") to support the
Company's new business strategy. The Restructuring Plan resulted in a fourth
quarter pre-tax charge of $103,000,000. The primary components of the
Restructuring Plan are (i) the planned closing through Fiscal 1997 of 290
under-performing "Fashion Bug" and "Fashion Bug Plus" stores, (ii) the
reorganization and reduction of foreign merchandise sourcing operations
discussed above and (iii) reductions in corporate support operations which were
not necessary to support the Company's new business strategy. The pre-tax
operating loss for Fiscal 1996 for these 290 stores, exclusive of the
restructuring charge and before allocation of fixed overhead, was approximately
$34,000,000. Given the Company's disappointing performance in Fiscal 1996 and
the implementation of its new business strategy, however, such operating loss is
not indicative of future savings resulting from the closing of such stores.
The Company has also implemented an expense reduction initiative to further
reduce operating costs. The primary components of this initiative are (i) the
further reduction of distribution, merchandising and administrative personnel,
(ii) the renegotiation of store lease obligations and (iii) the reduction of
various other overhead costs. The Restructuring Plan and the further expense
reduction initiative are expected to result in a workforce reduction of
approximately 2,300 store employees and 800 non-store employees.
MERCHANDISING AND MARKETING
The Company has implemented a new merchandise strategy which increases the
variety of choices in its merchandise assortment. The Company now utilizes
domestic fashion market guidance, fashion advisory services and in-store
testing to determine the optimal product assortment for its customer base.
Management believes that this should result in a higher degree of accuracy in
predicting consumer preferences while reducing the Company's inventory
investment and risk. The purpose of this new strategy is to enable the Company
to provide merchandise assortments to meet its customers' preferences.
In addition, the Company is expanding its merchandise assortment in previously
underdeveloped products such as career wear and dresses, and petite sizes are
being offered for the first time. Product assortments will also be tailored to
the demographics of an area, and merchandise will be available for six distinct
seasons -- spring, summer, transitional, fall, holiday and transitional --
rather than two seasons as in the past. In addition, the Company has raised
its quality standards with respect to
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merchandise fabrication, construction and fit. In addition, the Company has
begun to redefine its merchandise assortments to reflect the needs and demands
of diverse customer groups. The Company has distribution systems in place
whereby stores which are identified as having certain customer profiles, can be
merchandised with products specifically targeted to such customers. In
addition, the Company intends to improve inventory turnover by better managing
the inventory receipt flow of seasonal merchandise to its stores across all
geographic regions. Further, the Company has addressed the different lifestyle
needs of its customers with respect to fashion by varying the depth and
assortments of career and casual merchandise.
A new realistic value pricing strategy has been implemented which reduces the
initial price markup of fashion merchandise in order to increase the percentage
of sales at the ticketed price. Management believes this new strategy should
result in a greater degree of credibility with the customer, reducing the need
for aggressive price promotions. The Company expects to continue to achieve a
higher initial markup in the basic low-risk commodity merchandise that is
purchased through its overseas sourcing operation.
The Company continues to be promotionally oriented. In accordance with its new
strategy, advertising expenditures are being shifted from in-store promotions
to radio and newspaper advertising, and management intends to more actively
utilize targeted direct mail advertising to its list of approximately
3,300,000 active proprietary credit card customers. In addition, the Company
is exploring alternative forms of advertising such as network television in
selected markets. Pricing policies, displays, store promotions, and convenient
store hours are also used to attract customers. With the planning and guidance
of specialized home office personnel, each store provides such displays and
advertising as may be necessary to feature certain merchandise or certain
promotional selling prices from time to time.
As a result of management's increased focus on meeting the demands of its
primary customer, the Company has shifted a significant portion of its
purchases to the domestic market. This allows management to decrease lead
times and respond more quickly to current fashion trends. Use of the domestic
market allows the Company to make purchase decisions generally with two to four
month lead times, and quickly replenish merchandise inventory as necessary
(generally with one to two month lead times). In previous years, the Company
had placed an increasing reliance on its ability to develop and dictate fashion
trends to its customers. During Fiscal 1996, over 70% of its merchandise was
developed in-house by product developers who would research fabric and fashion
trends in order to predict consumer preferences and demand. These products
were then purchased primarily from overseas resources (see "Purchasing") which
generally required lead times of six to twelve months in advance of the selling
season. A higher initial markup was achieved on the products purchased
overseas, but because foreign sourcing required such lengthy lead times, the
Company was unable to react quickly to changes in fashion trends. Further, the
Company had narrowed the assortment of its merchandise, and the customer did
not respond favorably to the Company's selections. These factors led to large
price reductions and losses in Fiscal 1996. The Company continues to use its
overseas sourcing operation, which has been reorganized to support this
strategic change, to procure basic low-risk commodity merchandise which
generally requires three to eight month lead times. Management expect that
such merchandise will account for approximately 35% of the Company's purchases
in Fiscal 1997.
The retail sale of women's apparel is a highly competitive business with
numerous competitors, including moderate price department stores, discount
department stores and other low to moderate price specialty apparel stores.
The Company cannot estimate the number of competitors or its relative
competitive position, due to the large number of companies selling women's
apparel. The primary elements of competition are merchandise style, size,
selection, quality, display and price, as well as store location, design,
advertising and promotion and personalized service to the customers.
The Company experiences a normal seasonal sales pattern for the retail apparel
industry, with its peak sales occurring during the Christmas season and other,
less significant, increases around Easter and Labor Day. The Company generally
builds inventory levels prior to these peak selling periods. To keep inventory
current and fashionable, the Company reduces the price of slow-moving
merchandise throughout the year. End-of-season sales are conducted with the
objective of carrying a minimal amount of seasonable merchandise over from one
season to another. Sales for the four quarters of Fiscal 1996, as a percent of
total sales, were 22.2%, 24.3%, 24.3% and 29.2%, respectively.
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The Company encourages sales on its proprietary credit card. The proprietary
credit program has approximately 3,300,000 active accounts which accounted for
40% of retail sales in Fiscal 1996. The Company believes that the credit card
is a promotional vehicle in itself, engendering customer loyalty, creating a
substantial base for targeted direct mail promotion and encouraging incremental
sales. The Company controls and services its entire proprietary credit card
file, and has entered into various agreements whereby it securitizes and sells
substantially all of these receivables. In each securitization, the
receivables are transferred to a trust which issues certificates representing
ownership interests in the trust.
Under these agreements, the Company continues to service the receivables and
control credit policies. This allows the Company to continue to fund
receivable growth, provide customer service and collect past-due accounts.
Accordingly, its relationship with its credit card customers is not affected by
the securitization agreements. The Company's proprietary credit card portfolio
is administered by Spirit of America National Bank, a national banking
association and wholly-owned subsidiary of the Company. Spirit of America
National Bank approves credit applications and a third party performs all
billing and collection activities. The Company's proprietary credit card
customers tend to be a higher credit risk than bank issued credit card
customers.
The Company's stores feature wall and selling-floor displays which coordinate
merchandise in order to promote multiple sales. The stores, which the Company
believes must present a fresh, contemporary shopping environment, are
redecorated or remodeled as necessary. The Company is constantly testing and
implementing new store designs and fixture packages aimed at providing an
effective merchandise presentation.
The Company emphasizes customer service, including the presence of salespeople
in the stores, rather than self-service; lay-away plans; and acceptance of
merchandise returns for cash or credit within a reasonable time period.
PURCHASING
Purchasing is conducted on a departmental basis for each of the "Fashion Bug"
and "Fashion Bug Plus" merchandise groups by a staff of buyers supervised by
one or more merchandise managers. The Company believes that specialization of
buyers within their departments enhances their expertise in obtaining quality
merchandise at a cost which will permit attractive selling prices, while
obtaining the desired markup for the Company.
The merchandising staff obtains store and chain-wide inventory information
generated by a merchandise information system utilizing point-of-sale
terminals, through which merchandise can be followed from the placement of the
order to the actual sale. Based upon this data, the merchandise managers
compare budgeted-to-actual sales and make merchandising decisions, as
indicated, including re-order, markdowns and changes in the buying plans for
upcoming seasons.
The Company does not own or operate any significant manufacturing facilities.
During Fiscal 1996, the Company purchased merchandise from approximately 700
suppliers, none of which accounted for more than 4% of its purchases. The
shift in the Company's merchandising strategy toward greater reliance on the
domestic market will result in an increase in the size of the Company's vendor
base. As a result of the Company's merchandise strategy of shifting to the
domestic market, the Company's wholly-owned contracting and buying offices,
headquartered in Hong Kong, have been reorganized. The Company has also
reduced the size and scope of this office's operation. During Fiscal 1996, the
Company's Hong Kong office conducted its sourcing operations in 23 countries
with satellite offices in 14 of these countries. By the end of Fiscal 1997,
the Company expects to be sourcing merchandise from approximately 12 countries
while maintaining satellite offices in 4 of these countries. For Fiscal 1997,
the Hong Kong office is expected to manage the procurement of approximately
35% of the Company's merchandise purchases.
DISTRIBUTION
The Company operates two distribution centers. One is located in Bensalem,
Pennsylvania, adjacent to the Company's corporate headquarters. This automated
facility, which also contains executive, administrative and buying offices,
occupies approximately 515,000 square feet. The second distribution facility
is located in Greencastle, Indiana. The 150-acre tract of land contains a
building of
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approximately 525,000 square feet, which includes a 175,000 square foot
expansion completed during Fiscal 1996. The Company estimates that, by
operating multiple shifts, it would have the ability to service over 2,000
stores from these two distribution centers.
The majority of merchandise purchased by the Company is received at these
centers, where it is prepared for distribution to the stores. The functions
performed at these central facilities include quality control inspection,
receiving, ticketing, packing and shipping. The Company's automated sortation
system in its Bensalem, Pennsylvania distribution center enhances the flow of
merchandise from receipt to shipment. A similar system was implemented in the
Greencastle, Indiana facility during Fiscal 1996. Shipments to each store are
made by trucks operated principally by common carriers. The Company utilizes a
computerized automated distribution model which enhances the efficiency of the
distribution department and enables that department to build various customer
profiles into each store's plan to determine not only the number of units, but
also the type of unit to be distributed to each store.
The Company's new merchandise and purchasing strategy, and enhancements to the
Company's inventory management, facilitate the timely and orderly purchase and
flow of merchandise, thereby enabling the stores to offer fresh product
assortments on a regular basis. Management expects that changes and
enhancements should reduce the expense of outside storage facilities, and
decrease borrowing costs incurred in connection with merchandise procurement.
STORES
The Company's 1,301 stores, as of February 3, 1996, are primarily located in
suburban areas and small towns. Approximately eighty percent of these stores
are located in strip shopping centers, while the balance are located in
community and regional malls. Typically, stores are open seven days per week,
eleven hours per day Monday through Saturday and seven hours on Sunday.
The "Fashion Bug" stores range in size, generally, from 6,000 square feet to
14,000 square feet, averaging approximately 9,700 square feet. The "Fashion
Bug Plus" stores range in size, generally, from 3,000 square feet to 5,000
square feet, averaging approximately 4,000 square feet. During the fourth
quarter of Fiscal 1996, the Company announced that it would close 290 of its
under-performing "Fashion Bug" and "Fashion Bug Plus" stores as part of its
Restructuring Plan. As of the end of Fiscal 1996, 122 of these 290 stores were
closed, and as of May 1, 1996, 196 of these 290 stores were closed. The
Company expects to close the remaining stores during Fiscal 1997. Total leased
space decreased to 12,238,000 square feet as of the end of Fiscal 1996, from
13,073,000 square feet as of the end of Fiscal 1995, a 6% decrease. Although
the Company has suspended its expansion program, it intends to open
approximately 4 new stores during Fiscal 1997. The Company's store expansion
over the past five fiscal years is set forth in the following table:
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FISCAL YEAR ENDED
FEB. 3, JAN. 28, JAN. 29, JAN. 30, FEB. 1,
1996 1995 1994 1993 1992
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NUMBER OF STORES
Open at beginning of period 1,428 1,333 1,220 1,137 1,058
Opened during period 47 126 157 129 111
Closed or combined during period (174) (31) (44) (46) (32)
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1,301 1,428 1,333 1,220 1,137
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STORE TYPE
Fashion Bug 1,234 1,346 1,248 1,116 1,011
Fashion Bug Plus 67 82 85 104 126
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1,301 1,428 1,333 1,220 1,137
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STORE MANAGEMENT AND EMPLOYEES
All stores are operated under the direct management of the Company. Each store
has a manager and an assistant manager who are in daily operational control.
The Company has 106 district managers who travel to all stores in their
district on a frequent basis, to supervise store operations, each having
responsibility for an average of approximately 12 stores. The district
managers are supervised by 12 regional managers who report to the Director of
Stores. Generally, store managers are appointed from the group of assistant
managers, and district managers are appointed from the group of existing store
managers. The Company's policy is to motivate its store personnel through
promotion from within, with competitive wages and various incentive, medical
and retirement plans. Store operational and purchasing policies are developed
centrally, leaving individual store management with the principal duties of
display, selling and reporting through point-of-sale terminals. As of the end
of Fiscal 1996, the Company employed approximately 14,200 people, approximately
7,500 of whom were employed on a part-time basis. In addition, a number of
temporary employees are hired during the Christmas season.
TRADEMARKS AND SERVICEMARKS
"Fashion Bug" (R), "Fashion Bug Plus" (R), "Glitter" (R), "Sopre" (R), "Maggie
Lawrence" (R), "Stefano" (R), "Stefano Man" (R), "L.A. Blues" (R), "Details"
(R), "Best United Garment Company" (R) and several other trademarks and
servicemarks of lesser importance to the Company have been registered with the
United States Patent and Trademark Office and in other countries.
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CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company has made in this report, and from time to time may otherwise make,
forward looking statements concerning the Company's operations, performance and
financial condition. This report includes, in particular, forward looking
statements regarding the Company's expectations of future performance following
implementation of its new business strategy, recent restructuring and expense
reduction initiative and the expected benefits thereof. In addition, the
information contained herein includes certain forward looking statements
regarding store openings and closings, foreign sourcing operations, capital
requirements, and other matters. Such forward looking statements are subject
to various risks and uncertainties. Actual results could differ materially
from those currently anticipated due to a number of factors, including those
identified below.
RECENT OPERATING LOSSES AND ABILITY TO IMPLEMENT NEW BUSINESS STRATEGY
Net income has decreased significantly since the fiscal year ended January 30,
1993 and the Company experienced a significant loss for Fiscal 1996. As
described above (see "Business - General"), under the direction of Dorrit J.
Bern and her new management team, during the fourth quarter of Fiscal 1996,
management began implementing a new business strategy in response to the
Company's declining sales productivity and profit performance. Management
expects this new business strategy will likely result in lower initial unit
sales prices and higher unit costs of merchandise product. However, management
also believes that such effects will be offset by (i) a reduced need for
aggressive price promotions, resulting in improved gross margins, (ii)
increased sales productivity and (iii) enhanced inventory management
flexibility, resulting in reduced inventory investment, in each case as
compared to Fiscal 1996. Due to purchase commitments made by the Company in
Fiscal 1996 for planned sales in Fiscal 1997, the full effect of this strategic
change is not expected until the latter half of Fiscal 1997. The Company's
future results and financial condition are dependent on the successful
implementation of this new business strategy. While the Company believes that
this strategy will enable it to improve its financial results, there can be no
assurance that this new strategy will be successful, that the anticipated
benefits of this new strategy will be realized, that management will be able to
implement such strategy on a timely basis, that the Company will return to
profitability levels experienced prior to Fiscal 1996 or that losses will not
continue in the future.
RECENT RESTRUCTURING
While the Company believes that the $103,000,000 restructuring charge taken in
the fourth quarter of Fiscal 1996 in connection with the Restructuring Plan
should be sufficient to cover all expenses associated with the Restructuring
Plan, in the event such costs, including litigation expenses in relation to the
Restructuring Plan, are higher than anticipated, or additional restructuring
charges are taken, either in connection with the Restructuring Plan or
otherwise, this could have a material adverse effect on the Company's results
of operations and financial condition. In addition, certain aspects of the
Company's expense reduction initiative, such as renegotiation of store lease
obligations, are not fully within the control of the Company and as a result
there can be no assurance that such initiative will be successful. To the
extent these anticipated cost savings do not materialize, this will have an
adverse effect on the Company's expenses and will reduce expected earnings
levels.
DEPENDENCE ON KEY MANAGEMENT
The Company's success and its ability to successfully implement its new
business strategy depends largely on the efforts and abilities of Dorrit J.
Bern and her management team. The loss of the services of one or more of such
key personnel could have a material adverse effect on the Company's business
and financial results. The Company does not maintain key-man insurance
policies with respect to any of its employees.
Actual results could also differ materially from those currently anticipated
due to (i) rapid changes in or miscalculation of fashion trends, (ii) extreme
or unseasonable weather conditions, (iii) economic downturns, a weakness in
overall consumer demand, inflation and cyclical variations in the retail market
for women's fashion apparel, (iv) an increase in Federal (or State) Minimum
Wage, (v) an acceleration in the rate of business failures in the retail
industry, (vi) the loss of certain or all of the collateral pledged under the
Company's credit facilities, (vii) the availability and/or cost of receivables
securitization arrangements, (viii) an increase in the rate of bad debt expense
among the Company's proprietary credit
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card customers, (ix) the risks attendant to the sourcing of the Company's
merchandise needs abroad, including China's assumption of control of Hong Kong
in 1997, exchange rate fluctuations, political instability, trade sanctions or
restrictions, changes in quota and duty regulations, delays in shipping or
increased costs of transportation, (x) the availability and cost of external
financing, (xi) competitive pressures, and (xii) the imposition of more onerous
payment terms for merchandise purchases. In addition, the market price of the
Company's Common Stock which is quoted on the Nasdaq National Market, may be
subject to significant fluctuation in response to quarter-to-quarter variations
in the Company's revenues and earnings, variations in monthly sales figures,
and general stock market volatility unrelated to the Company's operating
performance.
ITEM 2. PROPERTIES
The Company leases all store premises, with the exception of 9 stores, which
the Company owns. Typically, store leases have initial terms of 5 to 20 years
and contain provisions for renewal options, additional rental charges based on
sales performance and payment of real estate taxes and common area charges.
During the fourth quarter of Fiscal 1996, the Company announced the intention
to close 290 under-performing stores, of which 3 operated on Company-owned real
estate. The Company has either entered into termination agreements or is
negotiating termination agreements for those leased stores scheduled to close.
The 3 Company-owned properties scheduled to close are currently for sale or
lease. As of May 1, 1996, 196 of these 290 stores were closed. With respect
to leased stores open as of February 3, 1996 that the Company intends to
continue to operate or for which the Company has no agreed-upon termination as
of May 1, 1996, the following table shows the number of store leases expiring
during the periods indicated, assuming the exercise of the Company's renewal
options:
<TABLE>
<CAPTION>
NUMBER
OF LEASES
PERIOD EXPIRING
----------- --------
<S> <C>
1996 7
1997 - 2001 50
2002 - 2006 104
2007 - 2011 216
2012 - 2016 211
2017 - 2043 621
</TABLE>
The Company owns offices and an approximately 515,000 square foot distribution
center in Bensalem, Pennsylvania and a 525,000 square foot distribution center
in Greencastle, Indiana (see "Item 1. Business - Distribution" above).
The Company owns approximately 22 acres in two parcels across the street from
the Company's offices and distribution center in Bensalem, Pennsylvania. This
22-acre tract contains a 110,000 square foot office building which houses the
Company's data processing facility and additional administrative offices.
Spirit of America National Bank, a wholly-owned subsidiary of the Company,
which is the Company's proprietary credit card bank, occupies 15,000 square
feet of leased office space in Milford, Ohio. The Company owns or leases a
total of 100,000 square feet of office and warehouse space in Hong Kong.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Company or any of its
subsidiaries is a party or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year.
9
<PAGE> 11
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following list contains certain information relative to Executive Officers
of the Company. There are no family relationships among any Executive
Officers. The term of each Executive Officer expires at the next annual
meeting of the Board of Directors following the Annual Meeting of Shareholders
scheduled to be held during June 1996, or until their successors are duly
elected and qualified.
Dorrit J. Bern, 46, has served as President, Chief Executive Officer and Vice
Chairman of the Board of Directors since September 1995. Prior to that, she
served as Group Vice President of Women's Apparel and Home Fashions at Sears,
Roebuck & Co. from December 1993 to August 1995. She also served at Sears,
Roebuck & Co. as Category Vice President of Women's Apparel from December 1992
to December 1993 and as Divisional Vice President of Misses and Junior
Sportswear, Dresses, Outerwear, Petite and Large Size Sportswear and Dresses,
and Maternity from 1987 to December 1992. Ms. Bern's term as a Director
expires in 1996.
Patricia DeRosa, 43, has served as Executive Vice President - Business
Development since August 1995. Prior to that, she served as President, Gap
Kids Division at Gap Stores, Inc. from August 1993 to April 1995 and as
Executive Vice President, Gap Division from April 1991 to July 1993.
Anthony A. DeSabato, 47, has served as Executive Vice President and Corporate
Director of Human Resources for more than five years.
Colin D. Stern, 47, has served as Executive Vice President and General Counsel
for more than five years.
Elizabeth Williams, 42, has served as Executive Vice President - Merchandising
since October 1995. Prior to that, she served as Divisional Vice President -
Misses Sportswear and Special Sizes at Sears, Roebuck & Co. from February 1994
to October 1995 and as Divisional Merchandise Manager from August 1990 to
February 1994.
Jeffrey Zelenko, 40, has served as Executive Vice President - Merchandising
since June 1995. Prior to that, he served as Senior Vice President - General
Merchandise Manager - Junior Division of Petrie Retail, Inc. from August 1993
to June 1995. From June 1992 to August 1993, he was self-employed in the
garment manufacturing industry. Prior to that, he was Vice President -
Merchandising at Charming Shoppes, Inc. for more than five years.
Erna Zint, 52, has served as Executive Vice President - Sourcing since January
1996. Prior to that, she served as Corporate Vice President - Southeast Asia
Operations for Leslie Fay Companies, Inc. from December 1990 to December 1995.
Eric Specter, 38, has served as Vice President - Chief Financial Officer since
December 1995. Prior to that, he served as Vice President - Corporate
Controller for more than five years.
Vivian Behrens, 43, has served as Vice President - Marketing since September
1994. Prior to that, she served as Vice President - Marketing with the Lane
Bryant Division of The Limited, Inc. from November 1990 to August 1994.
Bernard Brodsky, 56, has served as Vice President, Treasurer and Secretary for
more than five years.
Jon A. Goldberg, 36, has served as Vice President - Corporate Controller since
December 1995. Prior to that, he served as Vice President - Retail Controller
from May 1995 to December 1995 and as Retail Controller from August 1990 to May
1995.
Terry Pritikin, 47, has served as Vice President - Director of Stores since
November 1994. Prior to that, he served as President of Retail Specialty,
Tommy Hilfiger, USA, from March 1994 until November 1994 and as Executive Vice
President of Stores with the Lerner Division of The Limited, Inc. from May 1988
to March 1994.
10
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS
(a) PRINCIPAL MARKET: The Company's Common Stock is traded on the
over-the-counter market and quoted on the Nasdaq National Market under the
symbol CHRS.
(b) The following table sets forth the high and low closing sale prices for
the Company's Common Stock during the indicated periods, as reported by
Nasdaq, and the amount of cash dividend declared by the Company on its
Common Stock during the indicated periods.
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1995 DIVIDENDS PER SHARE
HIGH LOW HIGH LOW 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $6 5/8 $5 $13 7/8 $10 1/4 $.0225 $.0225
2nd Quarter 5 3/8 3 7/8 10 5/8 8 15/16 .0225 .0225
3rd Quarter 5 5/8 2 1/4 9 3/8 7 1/4 -- .0225
4th Quarter 3 1/2 2 1/8 7 1/2 5 15/16 -- .0225
</TABLE>
On October 2, 1995, the Company's Board of Directors announced an
indefinite suspension of dividends on the Company's Common Stock. On
November 30, 1995, the Company entered into borrowing agreements that
require, among other things, that the Company not pay dividends on its
Common Stock (see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Item 8. Financial
Statements and Supplementary Data; Notes to Consolidated Financial
Statements - Debt" below).
(c) Approximate Number of Holders of Common Stock:
The approximate number of holders of record of the Company's Common Stock
as of March 29, 1996, was 3,351. This number excludes individual
stockholders holding stock under nominee security position listings.
11
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial data for the Company for each
of the five fiscal years ended as of February 1, 1992 through February 3,
1996. All of the selected financial data are extracted from the Company's
audited financial statements and should be read in conjunction with the
financial statements and the notes thereto included under Item 8 of this Form
10-K.
<TABLE>
<CAPTION>
CHARMING SHOPPES, INC. AND SUBSIDIARIES
FIVE-YEAR COMPARATIVE SUMMARY
YEAR ENDED
(in thousands except FEBRUARY 3, JANUARY 28, JANUARY 29, JANUARY 30, FEBRUARY 1,
per share amounts) 1996(1) 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 1,102,384 $ 1,272,693 $ 1,254,122 $ 1,178,714 $ 1,020,656
Restructuring charge 103,000(2) 0 0 0 0
Income (loss) before
cumulative effect
of accounting change (139,241) 44,689 75,765(3) 81,127 58,302
Income (loss) per share
before cumulative effect
of accounting change (1.35) .42 .70(3) .75 .55
Cash dividends per
common share .045(4) .09 .09 .08 .06
AT YEAR END:
Total assets $ 681,746 $ 840,809 $ 829,233 $ 737,251 $ 637,015
Current portion -
Long-term debt 57,691(5) 5,002 5,005 4,828 4,820
Long-term debt 38,102(5) 17,298 22,298 26,246 31,199
Working capital 199,457 191,815 181,906 200,083 182,289
Stockholders' equity 419,029 558,822 522,100 445,309 362,208
</TABLE>
(1) The fiscal year ended February 3, 1996 consists of 53 weeks.
(2) During the fourth quarter of the fiscal year ended February 3, 1996, the
Company's Board of Directors approved the Restructuring Plan which resulted in
a fourth quarter pre-tax charge of $103,000,000 (see "Item 8. Financial
Statements and Supplementary Data; Notes to Consolidated Financial Statements -
Restructuring Charge" below).
(3) Net income for the fiscal year ended January 29, 1994 is before the
cumulative effect of an accounting change of $3,991,000 or $.04 per share (see
"Item 8. Financial Statements and Supplementary Data; Notes to Consolidated
Financial Statements - Summary of Significant Accounting Policies - Income
Taxes" below).
(4) On October 2, 1995, the Company's Board of Directors announced an
indefinite suspension of dividends on the Company's Common Stock (see "Item 5.
Market for the Registrant's Common Equity and Related Stockholders' Matters"
above).
(5) In November 1995, the Company renegotiated portions of existing trade
obligations. As a result, $82,862,000 of trade acceptances which were recorded
as accounts payable were converted into a term loan. As the Company is
required to make payments on the loan equal to the proceeds of all income tax
refunds, $56,953,000 of such term loan has been recorded as short-term debt
(see "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - FINANCIAL CONDITION" below).
12
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FINANCIAL SUMMARY
The following table sets forth certain financial data expressed as a percentage
of net sales and on a comparative basis:
<TABLE>
<CAPTION>
PERCENTAGE INCREASE
(DECREASE)
PERCENTAGE OF NET SALES FROM PRIOR YEAR
FISCAL FISCAL FISCAL FISCAL FISCAL
1996 1995 1994 1995-1996 1994-1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% (13.4)% 1.5%
Cost of goods sold,
buying and occupancy 83.2 73.2 68.9 (1.6) 8.0
Selling, general and
administrative 27.1 22.4 22.8 5.0 (0.2)
Interest 0.3 0.2 0.2 59.1 (9.9)
Restructuring charge 9.3 - - NA NA
Income tax (benefit) expense (6.9) 1.4 2.9 NA (50.4)
Net income (loss) (12.6) 3.5 6.1(1) NA (41.0)
- ----------------------------------------------------------------------------------
</TABLE>
(1) Net income for the fiscal year ended January 29, 1994 is before the
cumulative effect of an accounting change of $3,991,000 or $.04 per share (see
"Item 8. Financial Statements and Supplementary Data; Notes to Consolidated
Financial Statements - Summary of Significant Accounting Policies - Income
Taxes" below).
IMPLEMENTATION OF NEW BUSINESS STRATEGY AND RECENT RESTRUCTURING
Dorrit J. Bern joined the Company as President and Chief Executive Officer in
September 1995. During the fourth quarter of the fiscal year ended February 3,
1996 ("Fiscal 1996"), Ms. Bern and her new management team began implementing a
new business strategy in response to the Company's declining sales productivity
and profit performance. This strategy is aimed at enhancing sales productivity
and improving financial performance beginning in the fiscal year ending
February 2, 1997 ("Fiscal 1997") through expansion of the variety of choices in
its merchandise assortment, improvement in merchandise quality and
implementation of a more realistic value pricing strategy. In addition, the
Company is expanding its merchandise assortment in previously underdeveloped
products, such as career wear and dresses, and petite sizes are being offered
for the first time. As part of this new business strategy, management has
placed increased focus on meeting the demands of its primary customers. Such
customers are generally in the 20 to 45 year old age group, and in the
lower-middle to middle income range, and tend to follow, rather than set,
fashion trends. Therefore, the Company, which had previously placed heavy
reliance on internally developed product sourced overseas, has shifted a
significant portion of its purchases to the domestic market, allowing
management to decrease lead times and respond more quickly to current fashion
trends. The Company continues to use its overseas sourcing operation, which
has been reorganized to support this strategic change, to procure basic
low-risk commodity merchandise. Management expects that this strategy will
likely result in lower initial unit sales prices and higher unit costs of
merchandise product. However, management also believes that such effects will
be offset by (i) a reduced need for aggressive price promotions, resulting in
improved gross margins, (ii) increased sales productivity and (iii) enhanced
inventory management flexibility, resulting in reduced inventory investment, in
each case as compared to Fiscal 1996. Due to purchase commitments made by the
Company in Fiscal 1996 for planned sales in Fiscal 1997, the full effect of
this strategic change is not expected until the latter half of Fiscal 1997.
During the fourth quarter of Fiscal 1996, the Company's Board of Directors
approved a restructuring plan (the "Restructuring Plan") to support the
Company's new business strategy. The Restructuring Plan resulted in a fourth
quarter pre-tax charge of $103,000,000. The primary components of the
Restructuring Plan are (i) the planned closing through Fiscal 1997 of 290
under-performing "Fashion Bug" and "Fashion Bug Plus" stores, (ii) the
reorganization and reduction of foreign merchandise
13
<PAGE> 15
sourcing operations discussed above and (iii) reductions in corporate support
operations which were not necessary to support the Company's new business
strategy. The pre-tax operating loss for Fiscal 1996 for these 290 stores,
exclusive of the restructuring charge and before allocation of fixed overhead,
was approximately $34,000,000. Given the Company's disappointing performance in
Fiscal 1996 and the implementation of its new business strategy, however, such
operating loss is not indicative of future savings resulting from the closing of
such stores. The Company has also implemented an expense reduction initiative
to further reduce operating costs. The primary components of this initiative
are (i) the further reduction of distribution, merchandising and administrative
personnel, (ii) the renegotiation of store lease obligations and (iii) the
reduction of various other overhead costs. The Restructuring Plan and the
further expense reduction initiative are expected to result in a workforce
reduction of approximately 2,300 store employees and 800 non-store employees.
In addition, the Company (i) entered into an agreement with a commercial finance
company to provide a revolving credit facility with a maximum availability of
$157,000,000, subject to limitations based upon eligible inventory, (ii)
negotiated the conversion of $82,862,000 of existing trade obligations into a
term loan and (iii) renegotiated an outstanding term loan in the amount of
$9,488,000.
NET SALES
Net sales for Fiscal 1996 totaled $1,102,384,000, a 13.4% decrease from
$1,272,693,000 for the fiscal year ended January 28, 1995 ("Fiscal 1995"). The
Company experienced a 17.1% decrease in Fiscal 1996 from Fiscal 1995 in
comparable store sales (sales generated by stores in operation during the same
weeks of each period). In addition, sales from new stores open less than a
full year equaled 5.4% of Fiscal 1995 sales; sales of stores closed in Fiscal
1996 equaled 2.7% of Fiscal 1995 sales; and, an additional week of sales in
Fiscal 1996 equaled 1.1% of Fiscal 1995 sales. The number of retail stores
decreased from 1,428 on January 28, 1995 to 1,301 on February 3, 1996.
Sales for the fourth quarter of Fiscal 1996 totaled $321,822,000, a 6.8%
decrease from $345,382,000 for the corresponding period of Fiscal 1995. The
Company experienced a 10.5% decrease in the fourth quarter of Fiscal 1996 from
the fourth quarter of Fiscal 1995 in comparable store sales. In addition,
sales from new stores open less than a full year equaled 3.7% of Fiscal 1995
fourth quarter sales; sales of stores closed in Fiscal 1996 equaled 3.9% of
Fiscal 1995 fourth quarter sales; and, an additional week of sales in the
fourth quarter of Fiscal 1996 equaled 4.2% of Fiscal 1995 fourth quarter sales.
The decreases in sales were primarily attributable to a disappointing response
to the Company's merchandise assortment resulting in aggressive price
reductions to stimulate customer demand. In addition, the Company was also
affected by a continuing general weakness in women's apparel sales. The
Company believes that its new merchandising strategy should reduce the risks
associated with predicting emerging fashion trends and, combined with a new
marketing strategy of realistic value pricing, should reduce the need for
aggressive price reductions in the future.
The net sales increase of 1.5% in Fiscal 1995 was primarily attributable to the
sales generated from the net addition of new stores which was partially offset
by a 6.3% decrease in comparable store sales. Net sales for the fourth quarter
of Fiscal 1995 decreased 3.3% as compared to the corresponding period during
the fiscal year ended January 29, 1994 ("Fiscal 1994"). This decrease in sales
was primarily due to a 10.1% decrease in comparable store sales which was
partially offset by sales attributable to newly-opened stores.
COST OF GOODS SOLD, BUYING AND OCCUPANCY
Cost of goods sold, buying and occupancy expenses expressed as a percentage of
sales increased 10.0% in Fiscal 1996 as compared to the prior year and
increased 4.3% in Fiscal 1995 as compared to Fiscal 1994. The Company's cost
of goods sold in relation to sales increased during Fiscal 1996, and to a
lesser extent in Fiscal 1995, as a result of aggressive price reductions
initiated to stimulate consumer demand, which caused a reduction in merchandise
gross margins. In Fiscal 1996, merchandise price reductions were taken
earlier, more frequently and more aggressively than in Fiscal 1995.
Buying and occupancy expenses, which are relatively unaffected by comparable
store sales fluctuations, increased in Fiscal 1996 and Fiscal 1995, as a
percentage of sales, as a result of spreading these costs over decreased
comparable store sales.
14
<PAGE> 16
Cost of goods sold, buying and occupancy expenses expressed as a percentage of
sales increased 15.7% in the fourth quarter of Fiscal 1996 as compared to the
corresponding period of Fiscal 1995 and increased 8.2% in the fourth quarter of
Fiscal 1995 as compared to the corresponding period of Fiscal 1994. During the
fourth quarter of Fiscal 1996 and Fiscal 1995, the Company's cost of goods sold
as a percentage of sales increased as compared to cost of goods sold as a
percentage of sales for the corresponding period of the previous fiscal year.
The increases resulted from aggressive price reductions initiated to stimulate
consumer demand. Buying and occupancy expenses, as a percentage of sales,
increased in both the fourth quarter of Fiscal 1996 and the fourth quarter of
Fiscal 1995 as a result of spreading these costs over decreased comparable
store sales.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses expressed as a percentage of sales
increased 4.7% in Fiscal 1996 as compared to Fiscal 1995. This was primarily
attributable to an increase in advertising and promotional expenses as a result
of promotions to stimulate customer demand and the effect of lower comparable
store sales on relatively fixed general and administrative costs. In Fiscal
1995, selling, general and administrative expenses, as a percentage of sales,
decreased 0.4% from Fiscal 1994. The primary reason for the decrease was the
favorable effect of the lower cost of servicing the Company's proprietary
credit card program as compared to the corresponding period of the prior fiscal
year. This was partially offset by the effect of lower comparable store sales
on relatively fixed general and administrative expenses.
INTEREST EXPENSE
Interest expense increased in Fiscal 1996 primarily due to renegotiation of the
terms of certain of the Company's outstanding liabilities and the resulting
increase in long-term debt in November 1995 (see "FINANCIAL CONDITION" below
and "Item 8. Financial Statements and Supplementary Data; Notes to Consolidated
Financial Statements - Debt" below). Interest expense remained relatively
constant in Fiscal 1995.
RESTRUCTURING CHARGE
During the fourth quarter of Fiscal 1996, the Company's Board of Directors
approved the Restructuring Plan that resulted in a fourth quarter pre-tax
charge of $103,000,000. The restructuring charge includes an amount of
$58,878,000 related to the closing of the 290 stores, including (i) $39,260,000
for the write-off of store fixtures, equipment and inventories, (ii)
$17,270,000 for the early termination of store leases and (iii) $2,348,000 for
severance benefits and other expenses. Charges of $34,487,000 relate to the
reorganization of foreign merchandise sourcing operations. These charges
include the write-off of joint-venture investments and advances, settlements
related to non-fulfillment of production commitments, employee severance
benefits, and the write-down of other Company-owned investments. Other charges
include $5,445,000 for severance benefits and a $4,190,000 write-off of surplus
store construction fixtures and equipment.
As of the end of Fiscal 1996, the Company had closed 122 stores as part of the
Restructuring Plan. The remaining stores are expected to be closed during
Fiscal 1997. As of the end of Fiscal 1996, approximately 960 store employees
and 250 non-store employees had been terminated.
INCOME TAX (BENEFIT) EXPENSE
The income tax benefit for Fiscal 1996 was $75,747,000, resulting in a 35.2%
effective rate, compared with a $17,830,000 income tax expense, resulting in a
28.5% effective tax rate for Fiscal 1995. The increase in the effective tax
rate is primarily attributable to a reduction in tax-exempt investment income
and other non-taxable permanent differences. This compares with a $35,967,000
income tax expense, resulting in a 32.2% effective tax rate for Fiscal 1994.
The decrease in the effective tax rate for Fiscal 1995 as compared to Fiscal
1994 is attributable to an increase in tax-exempt investment income and other
non-taxable permanent differences (see "Item 8. Financial Statements and
Supplementary Data; Notes to Consolidated Financial Statements - Income Taxes"
below).
15
<PAGE> 17
PERFORMANCE ANALYSIS
The following ratios measure the Company's overall performance as shown by the
return on average stockholders' equity and return on average total assets.
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1996 1995 1994
- -------------------------------------------------------------------
<S> <C> <C> <C>
Net return on average stockholders' equity (28.5%) 8.3% 16.5%
Net return on average total assets (18.3%) 5.4% 10.2%
- -------------------------------------------------------------------
</TABLE>
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of working capital are cash flow from operations,
and its proprietary credit card receivables securitization agreements and $157
million revolving credit facility described below. The Company considers, and
currently uses for internal management purposes, the following measures of
liquidity and capital resources:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
(dollars in thousands) 1996 1995 1994
- -------------------------- -------- -------- --------
<S> <C> <C> <C>
Working capital $199,457 $191,815 $181,906
Cash provided by (used in)
operating activities (55,434) 70,700 90,236
Current ratio 2.0 1.8 1.7
Debt to equity ratio 22.9% 4.0% 5.2%
- -------------------------- -------- -------- --------
</TABLE>
The Company's cash flow from operations decreased $126.1 million in Fiscal 1996
as compared to Fiscal 1995. The primary reason for this decrease was a $139.2
million loss in Fiscal 1996 as compared to $44.7 million of net income in
Fiscal 1995. In addition, the increases in the income tax refund receivable
and current deferred taxes served to further reduce cash flow from operations.
However, the effects of losses from abandonment of capital assets, the accrual
of restructuring expenses, the reduction of merchandise inventories, net of
accounts payable, and the reduction of prepayments contributed to offset the
majority of the negative impact on cash flow from operations. In Fiscal 1995,
the Company's cash flow from operations decreased $19.5 million as compared to
Fiscal 1994. This was primarily a result of a reduction in net income of $35.1
million and a reduced benefit from an increase in accrued expenses which was
offset in part by a reduction in the net investment in inventory.
In November 1995, the Company entered into an agreement with a commercial
finance company to provide a revolving credit facility with a maximum
availability of $157,000,000, subject to limitations based upon eligible
inventory. The primary purpose of this facility, which expires on June 1,
1998, is to enable the Company to issue letters of credit for overseas
purchases of merchandise as well as to provide for seasonal cash borrowings.
This facility is secured by merchandise inventory, cash, mortgages on the
Company's Bensalem, Pennsylvania and Greencastle, Indiana corporate and
distribution facilities, rights to mortgages on certain retail store
properties, liens on the cash surrender value of Company-owned life insurance
policies and certain other Company assets. As of the end of Fiscal 1996, the
availability under this facility was approximately $132,000,000, against which
the Company had outstanding letters of credit of $65,400,000. There were no
cash borrowings outstanding under this agreement as of the end of Fiscal 1996.
This agreement, as well as the term loans discussed below, requires that, among
other things, the Company maintain a minimum net worth of $350,000,000 and not
pay dividends on its Common Stock.
In November 1995, the Company renegotiated portions of existing trade
obligations. As a result, $82,862,000 of trade acceptances which had been
recorded as accounts payable were converted into a term loan. The loan is
scheduled to mature on June 1, 1998. The loan is secured by mortgages on the
Company's Bensalem, Pennsylvania and Greencastle, Indiana corporate and
distribution facilities, mortgages on certain retail store properties, liens on
the cash surrender value of Company-owned life
16
<PAGE> 18
insurance policies and liens on all income tax refunds. The loan is also
secured by liens on merchandise inventory, equipment and certain other Company
assets. The Company is required to make payments on the loan equal to the
proceeds of all income tax refunds and, among other things, certain asset sales
and a portion of the proceeds of any debt or equity offerings. The Company
expects to receive a refund of income taxes of approximately $56,953,000 as a
result of net operating loss carrybacks against taxes paid in prior years. If
such refunds received by January 31, 1997 are less than $30,000,000, any
shortfall will be paid from a letter of credit up to an amount of $22,000,000
issued under the Company's revolving credit facility. The Company has a
$7,000,000 cash deposit which serves as collateral against this letter of
credit. To the extent that such refunds are less than $30,000,000 and the
long-term lenders draw against such letter of credit, the restricted cash will
be paid to the provider of the revolving credit facility. However, the Company
expects to receive its refund of income taxes prior to January 31, 1997.
Following receipt of this refund, the Company expects that the $22,000,000
letter of credit will be canceled and the $7,000,000 cash deposit will be
returned to the Company. The unpaid portion of the loan is due at maturity.
Additionally, the Company renegotiated an outstanding term loan in the amount
of $9,488,000. This note originally had scheduled annual amortization through
1998 and carried an interest rate of 9.3%. The loan presently carries an
interest rate of 11.8%, is due June 1, 1998 and is secured by the same
collateral as the aforementioned term loan, although priority with respect to
the collateral varies. The Company is required to make payments on the loan
equal to the proceeds of, among other things, certain asset sales and a portion
of the proceeds of any debt or equity offerings.
The Company has formed a trust to which it has transferred, at face value, its
interest in receivables created under the Company's proprietary credit card
program. The Company, together with the trust, has entered into various
agreements whereby it can sell, on a revolving basis, interests in these
receivables for a specified term. When the revolving period terminates, an
amortization period begins whereby the principal payments are made to the party
with whom the trust has entered into the securitization agreement. Through the
end of Fiscal 1996, the trust has securitized $371.8 million of receivables, of
which $28.5 million were retained by the Company (see "Item 8. Financial
Statements and Supplementary Data; Notes to Consolidated Financial Statements -
Asset Securitization" below).
These securitization agreements improve the overall liquidity of the Company
and lessen the effect of interest rate volatility by providing short-term
sources of funding. The agreements provide for the Company to continue to
service the credit card receivables and control credit policies. This control
allows the Company to fund continued credit card receivable growth and to
provide the appropriate customer service and collection activities.
Accordingly, its relationship with its credit card customers is not affected by
these agreements.
The Company has historically entered into interest-rate swap and interest-rate
cap agreements to reduce the impact of increases in interest rates on the
Company's floating-rate credit card securitizations. During 1996, the Company
terminated all of its interest-rate swap agreements and no such agreements were
outstanding as of the end of Fiscal 1996. The Company had entered into
interest-rate cap agreements with an aggregate notional amount of $538.9
million as of the end of Fiscal 1996 (see "Item 8, Financial Statements and
Supplementary Data; Notes to Consolidated Financial Statements - Derivative
Financial Instruments Held For Purposes Other Than Trading" below).
The Company believes that cash flow from operations, its proprietary credit
card receivables securitization agreements and its $157 million revolving
credit facility are sufficient to support current operations. The Company
continues, however, to evaluate alternative financing options.
CAPITAL REQUIREMENTS
Capital expenditures amounted to $30.0 million, $75.7 million, and $79.0
million in Fiscal 1996, 1995 and 1994, respectively. These expenditures were
primarily for new store construction, the remodeling and expansion of existing
stores and the expansion of the Company's Greencastle, Indiana distribution
center.
17
<PAGE> 19
During Fiscal 1997, the Company anticipates capital expenditures of
approximately $8 million, which are principally for the fixturing of existing
retail stores. The Company plans to open approximately 4 stores during Fiscal
1997. It is anticipated that the funds required for capital expenditures will
be financed principally through internally generated funds.
The Company has estimated debt maturity payments of $57.7 million in Fiscal
1997. This is comprised primarily of required amortization of the Company's
term loan as a result of the anticipated receipt of income tax refunds of $57.0
million.
In connection with the Restructuring Plan, as of the end of Fiscal 1996, the
Company had approximately $19,983,000 of accrued, unpaid restructuring costs,
of which approximately $7,390,000 relate to severance benefits. These costs,
which are included in current liabilities, are expected to be paid by the end
of Fiscal 1997.
Cash dividends were $4,634,000 during Fiscal 1996 as compared to $9,255,000
during Fiscal 1995. On October 2, 1995, the Company's Board of Directors
announced an indefinite suspension of dividends on the Company's Common Stock.
In addition, the Company's revolving credit facility and term loans (discussed
above) require the Company to refrain from paying dividends on its Common Stock
during the term of such agreements.
INFLATION
The Company's financial statements are presented on a historical cost basis.
The Company believes that the impact of inflation during Fiscal 1996 has not
been material to its financial condition and results of operations.
ADOPTION OF NEW ACCOUNTING STANDARDS
The Company will adopt the provisions of SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and For Long-Lived Assets to be Disposed Of"
and SFAS 123, "Accounting for Stock-Based Compensation" in the fiscal year
beginning February 4, 1996. The adoption of these standards is not expected to
have a material impact on the Company's financial statements. SFAS 123
provides two alternative forms of accounting for stock compensation: pro-forma
disclosure of the effects on net income and earnings per share, or a charge to
earnings. The Company intends to adopt the pro-forma disclosure alternative in
its financial statements.
18
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and Board of Directors
Charming Shoppes, Inc.
We have audited the accompanying consolidated balance sheets of Charming
Shoppes, Inc. and subsidiaries as of February 3, 1996 and January 28, 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three fiscal years in the period ended February 3, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Charming Shoppes,
Inc. and subsidiaries at February 3, 1996 and January 28, 1995, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended February 3, 1996, in conformity with
generally accepted accounting principles.
As discussed in the Notes to Consolidated Financial Statements, the Company
changed its method of accounting for investments as of January 30, 1994 and its
method of accounting for income taxes as of January 31, 1993.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
March 20, 1996
19
<PAGE> 21
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 3, JANUARY 28,
(in thousands except shares and per share amounts) 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $25,117 $43,923
Restricted Cash 7,000 0
Available-for-Sale Securities 34,054 40,180
Income Tax Refund Receivable 56,953 7,493
Merchandise Inventories 220,850 258,552
Deferred Taxes 13,409 2,376
Prepayments and Other 48,178 79,191
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 405,561 431,715
Property, Equipment and Leasehold Improvements - at Cost 435,531 483,372
Less: Accumulated Depreciation and Amortization 200,943 197,119
- --------------------------------------------------------------------------------
NET PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS 234,588 286,253
AVAILABLE-FOR-SALE SECURITIES [including a fair value
adjustment of $22 as of February 3, 1996 and ($2,591)
as of January 28, 1995] 7,309 76,988
OTHER ASSETS 34,288 45,853
- --------------------------------------------------------------------------------
TOTAL ASSETS $681,746 $840,809
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $40,471 $137,622
Accrued Expenses 87,959 97,276
Accrued Restructuring Expenses 19,983 0
Current Portion - Long-Term Debt 57,691 5,002
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 206,104 239,900
DEFERRED TAXES 18,511 24,789
LONG-TERM DEBT 38,102 17,298
STOCKHOLDERS' EQUITY
Common Stock $.10 par value
Authorized 300,000,000 Shares
Issued and Outstanding 103,252,650 and 102,894,239
Shares 10,325 10,289
Additional Paid-In Capital 54,913 55,176
Deferred Employee Compensation (2,414) (5,025)
Unrealized Gains (Losses) on Available-for-Sale
Securities [net of
income tax (expense) benefit of ($9) as of February
3, 1996 and $906 as of January 28, 1995] 13 (1,685)
Retained Earnings 356,192 500,067
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 419,029 558,822
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $681,746 $840,809
- --------------------------------------------------------------------------------
</TABLE>
Certain prior-year amounts have been reclassified to conform to current-year
presentation.
See Notes to Consolidated Financial Statements
20
<PAGE> 22
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 3, JANUARY 28, JANUARY 29,
(in thousands except shares and per share amounts) 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $1,102,384 $1,272,693 $1,254,122
Other Income 5,655 9,358 9,352
- -----------------------------------------------------------------------------------------
TOTAL REVENUE 1,108,039 1,282,051 1,263,474
Cost of Goods Sold, Buying and Occupancy Expenses 917,064 932,138 863,381
Selling, General and Administrative Expenses 299,297 285,090 285,804
Interest Expense 3,666 2,304 2,557
- -----------------------------------------------------------------------------------------
TOTAL EXPENSES 1,220,027 1,219,532 1,151,742
Restructuring Charge 103,000 0 0
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (214,988) 62,519 111,732
Income Tax (Benefit) Expense (75,747) 17,830 35,967
- -----------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (139,241) 44,689 75,765
Cumulative Effect of Adoption of SFAS 109 0 0 3,991
- -----------------------------------------------------------------------------------------
NET INCOME (LOSS) $(139,241) $ 44,689 $ 79,756
- -----------------------------------------------------------------------------------------
PER SHARE DATA
- --------------
Net Income (Loss) Before Cumulative Effect of
Accounting Change $(1.35) $.42 $.70
Cumulative Effect of Accounting Change .00 .00 .04
- -----------------------------------------------------------------------------------------
Net Income (Loss) $(1.35) $.42 $.74
- -----------------------------------------------------------------------------------------
Cash Dividends $.045 $.09 $.09
- -----------------------------------------------------------------------------------------
Weighted Average Number of Common Shares
and Share Equivalents Outstanding During
the Year 103,038,224 107,207,660 108,390,583
- -----------------------------------------------------------------------------------------
</TABLE>
The fiscal year ended February 3, 1996 consists of 53 weeks.
See Notes to Consolidated Financial Statements
21
<PAGE> 23
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 3, JANUARY 28, JANUARY 29,
(in thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $(139,241) $44,689 $79,756
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by (Used In) Operating Activities:
Deferred Income Taxes (21,065) 4,682 2,007
Depreciation and Amortization 46,988 46,924 42,487
Amortization of Deferred Compensation Expense 2,195 2,535 3,597
Cumulative Effect of an Accounting Change 0 0 (3,991)
(Gain) loss on Sale of Available-for-Sale Securities 44 (174) (115)
Loss from Abandonment of Capital Assets 37,546 1,153 2,333
Changes in Operating Assets and Liabilities:
Income Tax Refund Receivable (49,460) (7,493) 0
Merchandise Inventories 37,702 975 (51,082)
Accounts Payable (14,289) (10,016) 413
Prepayments and Other 33,480 (4,096) (9,475)
Income Taxes Payable 0 (8,521) 2,949
Accrued Expenses (9,317) 42 21,357
Accrued Restructuring Expenses 19,983 0 0
- -----------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (55,434) 70,700 90,236
INVESTING ACTIVITIES
Investment in Capital Assets (30,007) (75,656) (79,023)
Gross Purchases of Available-for-Sale Securities (30,525) (91,118) (107,557)
Proceeds from Sales of Available-for-Sale Securities 108,898 100,518 87,107
(Increase) Decrease in Other Assets 8,703 706 (25,022)
Purchase of Accounts Receivable 0 0 (186,857)
Sale of Accounts Receivable 0 0 186,857
- -----------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 57,069 (65,550) (124,495)
FINANCING ACTIVITIES
Proceeds from Short-Term Borrowings 247,822 0 0
Reduction of Short-Term Borrowings (247,822) 0 0
Proceeds from Long-Term Borrowings 0 0 1,200
Reduction of Long-Term Borrowings (9,369) (5,003) (4,971)
Increase in Restricted Cash (7,000) 0 0
Proceeds from Exercise of Stock Options 562 641 870
Dividends Paid (4,634) (9,255) (9,236)
- -----------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (20,441) (13,617) (12,137)
DECREASE IN CASH AND CASH EQUIVALENTS (18,806) (8,467) (46,396)
Cash and Cash Equivalents, Beginning of Year 43,923 52,390 98,786
- -----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 25,117 $ 43,923 $52,390
- -----------------------------------------------------------------------------------------------
</TABLE>
The year ended February 3, 1996 consists of 53 weeks.
Certain prior-year amounts have been reclassified to conform to current-year
presentation.
See Notes to Consolidated Financial Statements
22
<PAGE> 24
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL DEFERRED
COMMON STOCK PAID-IN EMPLOYEE
(in thousands except shares) SHARES AMOUNT CAPITAL COMPENSATION
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 30, 1993 102,448,158 $ 10,245 $ 51,708 $ (10,757)
Issued to Employees, Net (69,193) (7) (822) 145
Exercise of Stock Options 356,472 36 1,524
Amortization 3,597
Tax benefit - Employee Stock Programs 1,798
------------------------------------------------------------------------------------
BALANCE, JANUARY 29, 1994 102,735,437 10,274 54,208 (7,015)
Issued to Employees, Net (44,939) (5) 87 (545)
Exercise of Stock Options 203,741 20 506
Amortization 2,535
Tax Benefit - Employee Stock Programs 375
------------------------------------------------------------------------------------
BALANCE, JANUARY 28, 1995 102,894,239 10,289 55,176 (5,025)
Issued to Employees, Net 88,406 9 (169) 416
Exercise of Stock Options 270,005 27 279
Amortization 2,195
Tax Expense - Employee Stock Programs (373)
------------------------------------------------------------------------------------
BALANCE, FEBRUARY 3, 1996 103,252,650 $ 10,325 $ 54,913 $ (2,414)
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED GAINS
(LOSSES) ON
AVAILABLE-FOR-SALE RETAINED
(in thousands) SECURITIES EARNINGS
- -------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, JANUARY 30, 1993 $ 0 $394,113
Cash Dividends (9,236)
Net Income 79,756
- -------------------------------------------------------------------------------
BALANCE, JANUARY 29, 1994 0 464,633
Unrealized Losses [net of income taxes of $906] (1,685)
Cash Dividends (9,255)
Net Income 44,689
- -------------------------------------------------------------------------------
BALANCE, JANUARY 28, 1995 (1,685) 500,067
Unrealized Gains [net of income taxes of ($914)] 1,698
Cash Dividends (4,634)
Net Loss (139,241)
- -------------------------------------------------------------------------------
BALANCE, FEBRUARY 3, 1996 $ 13 $356,192
- -------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
23
<PAGE> 25
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 3, 1996
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The Company operates a chain of specialty stores located throughout the
continental United States which merchandises moderately priced junior, misses,
large-size and girls size sportswear, dresses, coats, lingerie, accessories and
casual footwear. The Company also has a selection of petite women's apparel in
certain stores. An assortment of casual men's apparel and accessories is also
available in most stores.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All significant intercompany
accounts and transactions are eliminated. The parent and its subsidiaries have
a 52-53 week fiscal year ending the Saturday nearest January 31.
FOREIGN OPERATIONS
The Company follows the practice of using a December 31 fiscal year for all
foreign subsidiaries in order to expedite the year-end closing.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. These amounts are stated
at cost, which approximates market value.
INVESTMENTS
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain
Investments in Debt and Equity Securities." The Company adopted the provisions
of the new standard for investments held as of or acquired after January 30,
1994. The cumulative effect of adopting SFAS 115 was an increase in
Stockholders' Equity of $1,357,000. In accordance with SFAS 115, prior-period
financial statements were not restated. Pursuant to SFAS 115, management has
determined that the Company's investments should be classified as
available-for-sale. As available-for-sale investments, these securities are
carried at fair value (previously carried at amortized cost) and unrealized
gains and losses are reported in a separate component of stockholders' equity.
The cost of investments is adjusted for amortization of premiums and the
accretion of discounts to maturity. Such amortization is included in other
income. Realized gains and losses and interest from investments are also
included in other income. The cost of securities sold is based on the specific
identification method.
Short-term investments include investments with an original maturity of greater
than three months and a remaining maturity of less than one year. Short-term
investments are stated at cost which approximates market value.
INVENTORIES
Merchandise inventories are valued at the lower of cost or market as determined
by the retail method (average cost basis).
24
<PAGE> 26
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
PROPERTY AND DEPRECIATION
Depreciation and amortization for financial reporting purposes are principally
computed by the straight-line method over the estimated useful lives of the
assets, or in the case of leasehold improvements, over the lives of the
respective leases. Accelerated depreciation methods are used for income tax
reporting purposes. Depreciation expense was $44,126,000, $42,583,000 and
$36,417,000 in Fiscal 1996, 1995 and 1994, respectively.
COMMON STOCK PLANS
Deferred compensation expense relating to Employee Stock Option and Stock
Incentive Plans is amortized over the required employment period.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising costs charged
to expense were $26,211,000, $11,894,000 and $13,242,000 in Fiscal 1996, 1995
and 1994, respectively.
INCOME TAXES
Effective January 31, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes" and
has separately reported the cumulative effect of that change in the
Consolidated Statement of Income for the fifty-two weeks ended January 29,
1994. SFAS 109 requires a change from the deferred method of accounting for
income taxes under APB Opinion 11 to the liability method of accounting for
income taxes. Under the liability method, deferred tax assets and liabilities
are adjusted to reflect the effect of changes in enacted tax rates on expected
reversals of financial statement and income tax carrying value differences. As
permitted by SFAS 109, the Company has elected not to restate the financial
statements for any prior years. The effect of the change on pre-tax income
from continuing operations for the twelve months ended January 29, 1994 was not
material; however, the cumulative effect of the change increased net income by
$3,991,000 or $.04 per share.
U.S. income taxes have not been provided on undistributed earnings of foreign
subsidiaries accumulated prior to February 3, 1996 because the Company intends
to reinvest such undistributed earnings in the operations. Presently, income
taxes would not be significantly increased if such earnings were remitted
because of available foreign tax credits.
NET INCOME PER SHARE
Net income per common share is based on the weighted average number of shares
and share equivalents outstanding during each fiscal year. Common stock
equivalents include the effect of dilutive stock options. Share equivalents
are not included in the weighted average shares outstanding for determining net
loss per common share as the result would be antidilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company will adopt the provisions of SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and For Long-Lived Assets to be Disposed Of"
and SFAS 123, "Accounting for Stock-Based Compensation" in the fiscal year
beginning February 4, 1996. The adoption of these standards is not expected to
have a material impact on the Company's financial statements. SFAS 123
provides two alternative forms of accounting for stock compensation: pro-forma
disclosure of the effects on net income and earnings per share, or a charge to
earnings. The Company intends to adopt the pro-forma disclosure alternative in
its financial statements.
25
<PAGE> 27
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
RESTRICTED CASH
The Company has a $7,000,000 cash deposit with a commercial finance company
which provides the Company's working capital line of credit. The cash is
collateral against a letter of credit issued to guarantee payment of up to
$22,000,000 of the Company's tax refund receivable by January 31, 1997 to
certain long-term debt lenders. To the extent that such refunds are less than
$30,000,000 and the long-term lenders draw against such letter of credit, the
restricted cash will be paid to the commercial finance company.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
<TABLE>
<CAPTION>
LIVES
(in thousands) (YEARS) 1996 1995
- -----------------------------------------------------------------
<S> <C> <C> <C>
Land $ 4,191 $ 4,845
Buildings and Improvements 10 to 33 72,822 69,718
Store Fixtures 5 to 10 102,127 120,808
Equipment 3 to 10 116,995 105,216
Leasehold Improvements 10 to 20 139,396 172,168
Construction in Progress 0 10,617
- -----------------------------------------------------------------
Total at Cost 435,531 483,372
Less Accumulated Depreciation
and Amortization 200,943 197,119
- -----------------------------------------------------------------
$234,588 $286,253
- -----------------------------------------------------------------
</TABLE>
AVAILABLE-FOR-SALE SECURITIES
The following is a summary of available-for-sale securities as of February 3,
1996:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED ESTIMATED
(in thousands) COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charming Shoppes Master Trust Certificates $ 28,502 $ 0 $ 0 $ 28,502
Charming Shoppes Master Trust Note 5,500 0 0 5,500
U. S. Treasury and Government Agency Bonds 2,202 22 0 2,224
Low Income Housing Partnerships 4,560 0 0 4,560
Other 577 0 0 577
- ------------------------------------------------------------------------------------------
$ 41,341 $ 22 $ 0 $ 41,363
- ------------------------------------------------------------------------------------------
</TABLE>
The gross realized gains and (losses) on available-for-sale securities totaled
$592,000 and ($636,000), respectively, for the fiscal year ended February 3,
1996.
26
<PAGE> 28
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
The following is a summary of available-for-sale securities as of January 28,
1995:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED ESTIMATED
(in thousands) COST GAINS LOSSES FAIR VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charming Shoppes Master Trust Certificates $ 30,680 $ 0 $ 0 $ 30,680
Charming Shoppes Master Trust Note 5,500 0 0 5,500
Municipal Bonds and Municipal Bond Funds 49,743 18 (926) 48,835
Government Agency Mortgage-
Backed Securities 11,428 0 (1,746) 9,682
U. S. Treasury and Government Agency Bonds 15,324 470 (295) 15,499
Low Income Housing Partnerships 3,208 0 0 3,208
Preferred Stocks 3,096 52 (144) 3,004
Other 780 0 (20) 760
- ----------------------------------------------------------------------------------------------
$ 119,759 $ 540 $(3,131) $ 117,168
- ----------------------------------------------------------------------------------------------
</TABLE>
The gross realized gains and (losses) on available-for-sale securities totaled
$198,000 and ($24,000), respectively, for the fiscal year ended January 28,
1995.
The contractual maturities of available-for-sale securities at February 3.1996
were:
<TABLE>
<CAPTION>
ESTIMATED
(in thousands) COST FAIR VALUE
- ----------------------------------------------------------
<S> <C> <C>
Due in One Year or Less $34,054 $34,054
Due After One Year Through Five Years 2,727 2,749
- ----------------------------------------------------------
36,781 36,803
Equity Securities 4,560 4,560
- ----------------------------------------------------------
$41,341 $41,363
- ----------------------------------------------------------
</TABLE>
INCOME TAXES
The Company adopted SFAS 109 as of January 31, 1993. The cumulative effect of
this change in accounting for income taxes of $3,991,000 was determined as of
January 31, 1993 and is reported separately in the consolidated statement of
income for the year ended January 29, 1994.
The components of income (loss) before income taxes and the cumulative effect
of an accounting change consist of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ----------------------------------------------------
<S> <C> <C> <C>
Domestic $(212,698) $58,279 $106,755
Foreign (2,290) 4,240 4,977
- ----------------------------------------------------
$(214,988) $62,519 $111,732
- ----------------------------------------------------
</TABLE>
27
<PAGE> 29
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
Income tax (benefit) expense consists of:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
CURRENT:
Federal $(56,953) $ 8,771 $29,971
State 591 2,046 2,393
Foreign 1,680 2,331 1,596
- --------------------------------------------------------
(54,682) 13,148 33,960
DEFERRED:
Federal (19,026) 5,653 2,250
State (2,039) (971) (243)
- -------------------------------------------------------
(21,065) 4,682 2,007
- -------------------------------------------------------
$(75,747) $17,830 $35,967
- -------------------------------------------------------
</TABLE>
The Company made income tax payments of $3,531,000, $30,081,000 and $33,674,000
during the years ended February 3, 1996, January 28, 1995 and January 29, 1994,
respectively.
The components of deferred tax assets and liabilities for the year ended
February 3, 1996 are as follows:
<TABLE>
<CAPTION>
NET CURRENT NET LONG-TERM
ASSETS ASSETS
(in thousands) (LIABILITIES) (LIABILITIES)
- -------------------------------------------------------------------------------
<S> <C> <C>
Property, Equipment and Leasehold
Improvements $(21,472)
Alternative Minimum Tax Credits 8,194
Accrued Restructuring Expense $ 6,525
Inventory (5,033)
Deferred Employee Compensation 4,388
Prepaid Employee Benefits 1,984
Accounts Receivable 4,472
Deferred Rent 3,197
Other 2,264 (9,621)
- --------------------------------------------------------------------------------
$13,409 $(18,511)
- --------------------------------------------------------------------------------
</TABLE>
The components of deferred tax assets and liabilities for the year ended January
28, 1995 are as follows:
<TABLE>
<CAPTION>
NET CURRENT NET LONG-TERM
ASSETS ASSETS
(in thousands) (LIABILITIES) (LIABILITIES)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Property, Equipment and Leasehold
Improvements $(23,886)
Inventory $(8,250)
Deferred Employee Compensation 4,278
Prepaid Employee Benefits (1,815)
Accounts Receivable 4,510
Deferred Rent 3,802
Other 4,129 (5,181)
- -----------------------------------------------------------------------------------------------
$2,376 $(24,789)
- -----------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 30
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
A reconciliation of the effective tax rate with the statutory federal income
tax rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal Income Tax Rate 35.0% 35.0% 35.0%
State Income Tax, Net of Federal Income Tax Benefit 0.4 1.1 1.3
Foreign Income (1.1) 1.4 (0.1)
Investment Income 0.3 (1.7) (1.1)
Employee Benefits 1.6 (3.9) (1.6)
Other, Net (1.0) (3.4) (1.3)
- ----------------------------------------------------------------------------------------
35.2% 28.5% 32.2%
- ----------------------------------------------------------------------------------------
</TABLE>
DEBT
Long-term debt at year end consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Variable Rate Term Loan, Interest Rate
3.5% Above Prime, Due 1998
(11.75% at 2/3/96) $60,862 $ 0
Variable Rate Term Loan, Interest Rate
2% Above Prime, Due 1998
(10.25% at 2/3/96) 22,000 0
11.8% Note Payable, Due 1998 9,488 17,143
Variable Rate Mortgage Note, Interest Rate
1.25% Above Hong Kong Prime Rate,
Payable Monthly Through 2001
(10.25% at 2/3/96) 357 425
Variable Rate Mortgage Note, Interest Rate
1% Above HIBOR, Payable Monthly
Through 2000 (6.875% at 2/3/96) 2,217 2,692
Variable Rate Mortgage Note, Interest Rate
1% Above SIBOR, Payable Monthly Through
2000 (6.94% at 2/3/96) 714 885
Other 155 155
Variable Rate Mortgage Due 1996 0 1,000
- --------------------------------------------------------------------------------
Total Long-Term Debt 95,793 22,300
Less Current Portion 57,691 5,002
- --------------------------------------------------------------------------------
$38,102 $17,298
- --------------------------------------------------------------------------------
</TABLE>
In November 1995, the Company renegotiated portions of existing trade and
working capital facilities. As a result, $82,862,000 of trade acceptances
which had been recorded as accounts payable were converted into a term loan.
The loan is scheduled to mature on June 1, 1998. The loan is secured by
mortgages on the Company's Bensalem, Pennsylvania and Greencastle, Indiana
corporate and distribution facilities, mortgages on certain retail store
properties, liens on the cash surrender value of Company-owned life insurance
policies and liens on all income tax refunds. The loan is also secured by
liens on merchandise inventory, equipment and certain other Company assets.
The Company is required to make payments on the loan equal to the proceeds of
all income tax refunds and, among other things, certain asset sales and a
portion of the proceeds of any debt or equity offerings. The Company expects
to receive a refund of income taxes of approximately $56,953,000 as a result of
net operating loss carrybacks against taxes paid in prior years. If such
refunds received by January 31, 1997
29
<PAGE> 31
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
are less than $30,000,000, any shortfall will be paid from a letter of credit
up to an amount of $22,000,000 issued under the Company's revolving credit
facility discussed below. The Company has a $7,000,000 cash deposit which
serves as collateral against this letter of credit. To the extent that such
refunds are less than $30,000,000 and the long-term lenders draw against such
letter of credit, the restricted cash will be paid to the provider of the
revolving credit facility. In addition, upon payment of at least $30,000,000
toward this loan, the remaining balance would then carry an interest rate of 2%
above the prime rate. The unpaid portion of the loan is due at maturity.
Additionally, the Company renegotiated an outstanding term loan in the amount
of $9,488,000. This note originally had scheduled annual amortizations through
1998 and carried an interest rate of 9.3%. The loan presently carries an
interest rate of 11.8%, is due June 1, 1998 and is secured by the same
collateral as the aforementioned term loan, although priority with respect to
the collateral varies. The Company is required to make payments on the loan
equal to the proceeds of, among other things, certain asset sales and a portion
of the proceeds of any debt or equity offerings.
In November 1995, the Company entered into an agreement with a commercial
finance company to provide a revolving credit facility with a maximum
availability of $157,000,000, subject to limitations based upon eligible
inventory. The primary purpose of this facility, which expires on June 1,
1998, is to enable the Company to issue letters of credit for overseas
purchases of merchandise as well as to provide for seasonal cash borrowings.
This facility is secured by merchandise inventory, cash, mortgages on the
Company's Bensalem, Pennsylvania and Greencastle, Indiana corporate and
distribution facilities, rights to mortgages on certain retail store
properties, liens on the cash surrender value of Company-owned life insurance
policies and certain other Company assets. There is a fee of 3/8 of 1% on the
unused portion of the first $105,000,000 of the facility, and an annual
servicing fee of $100,000. As of February 3, 1996, the availability under this
facility was approximately $132,000,000, against which the Company had
outstanding letters of credit of $65,400,000. There were no cash borrowings
outstanding under this agreement as of February 3, 1996. This agreement, as
well as the aforementioned term loans, requires that, among other things, the
Company maintain a minimum net worth of $350,000,000 and not pay dividends on
its Common Stock.
Term loans and the revolving credit facility are collateralized by mortgages on
buildings with a net book value of $50,675,000, as well as the cash surrender
value of Company-owned life insurance policies with a carrying value of
$5,697,000. The variable rate mortgages are collateralized by buildings with a
net book value of $8,827,000.
During the fiscal years ended February 3, 1996, January 28, 1995 and January
29, 1994, the Company made interest payments of $4,267,000, $2,436,000 and
$2,688,000, respectively.
The carrying amount of the Company's variable rate debt approximates its fair
value. The carrying amount of the Company's $9,488,000 11.8% note payable
approximates its fair value, as the interest rate on the note approximates the
Company's current rate for similar borrowing arrangements.
Aggregate maturities of long-term debt during the next five fiscal years are:
<TABLE>
<S> <C> <C>
(in thousands) 1997 $57,691
1998 747
1999 36,154
2000 760
2001 364
</TABLE>
30
<PAGE> 32
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
STOCKHOLDERS' EQUITY
The Company's capital consists of 1,000,000 shares of Series Participating
Preferred Stock, $1.00 par value, of which 300,000 shares of Participating
Series A Junior Preferred Stock, $1.00 par value have been authorized; and
300,000,000 shares of Common Stock, $.10 par value.
STOCK OPTION AND STOCK INCENTIVE PLANS
The Company's 1993 Employee Stock Incentive Plan provides for the grant of
options to purchase up to 9,000,000 shares of Common Stock plus 9% of shares
issued by the Company after the effective date of the plan and any shares
available but unissued under the 1990 Plan described below. The form of the
grants and exercise price where applicable, are at the discretion of the Stock
Option Committee of the Board of Directors. As of February 3, 1996, 799,560
options were exercisable.
The Company's 1990 Employees' Stock Incentive Plan provides for the grant of
options to purchase Common Stock to key employees of the Company. The exercise
price of such options may not be less than the fair market value at the date of
the grant. As a result of the adoption of the 1993 Employees' Stock Incentive
Plan, the Company no longer intends to issue shares under this Plan. As of
February 3, 1996, 5,475,669 options were exercisable.
The Company's 1989 Non-Employee Director Stock Option Plan provides for the
grant of options to purchase up to 30,000 shares of Common Stock to each member
of the Board of Directors who is a non-employee of the Company. The exercise
price of such options shall be equal to the fair market value of the stock on
the date that the option is granted. As of February 3, 1996, 114,000 options
were exercisable.
The Company's 1988 Key Employee Stock Option Plan provides for the grant of
options to purchase up to 3,000,000 shares of Common Stock to key employees of
the Company. The exercise price of options granted under this plan is $1.00
per share. As of February 3, 1996, 1,263,105 options were exercisable.
The table below summarizes the activity in all Stock Option Plans:
<TABLE>
<CAPTION>
AVERAGE OPTION
OPTION OPTION PRICES
SHARES PRICE PER SHARE
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at January 30, 1993 9,098,206 $ 4.927 $ .222 - 18.563
Granted 1,270,000 14.253 1.000 - 18.875
Canceled (327,224) 4.376 .500 - 18.875
Exercised (356,472) 8.621 .222 - 13.500
- -----------------------------------------------------------------------
Outstanding at January 29, 1994 9,684,510 6.045 .222 - 18.563
Granted 2,206,050 10.047 1.000 - 13.250
Canceled (188,518) 2.582 .500 - 18.563
Exercised (203,741) 9.160 .222 - 10.938
- -----------------------------------------------------------------------
Outstanding at January 28, 1995 11,498,301 6.818 .222 - 17.000
Granted 3,976,800 5.089 1.000 - 6.125
Canceled (2,099,554) 9.403 .500 - 17.000
Exercised (270,005) 1.134 .222 - 4.500
- -----------------------------------------------------------------------
Outstanding at February 3, 1996 13,105,542 $ 5.996 $ .222 - 17.000
- -----------------------------------------------------------------------
</TABLE>
At February 3, 1996, 3,932,629 shares were available for future grant under the
1988 Key Employee Stock Option and the 1993 Employees' Stock Incentive plans.
31
<PAGE> 33
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
The Company's Non-Employee Directors Restricted Stock Plan provides for a
one-time grant of 5,000 shares of restricted Common Stock to each member of the
Board of Directors who is a non-employee of the Company at the time of the
inception of this plan and a pro-rata grant to each non-employee Director who
is elected thereafter. Directors will pay no cash consideration for the
restricted stock granted to them. Under this plan, 40,000 shares of the
Company's Common Stock have been reserved for issuance, of which 0, 0 and 3,250
shares were issued during the fiscal years ended February 3, 1996, January 28,
1995 and January 29, 1994, respectively.
The Company's Restricted Stock Award Plan for Associates was adopted by the
Company's Board of Directors on January 26, 1995. The plan provides for
discretionary awards of rights to receive up to 200,000 shares of restricted
Common Stock to associates who are not directors or executive officers of the
Company. Associates will pay no cash consideration for restricted stock
received under an award. As of February 3, 1996, rights to receive 88,615
shares have been granted and 1,202 shares have been issued.
The shares issued and options granted under the above plans are subject to
forfeiture if the employees do not remain employed by the Company for a
specified period of time, or, in the case of the 1989 Non-Employee Director
Stock Option Plan, if the individual ceased to remain a Director of the
Company.
EMPLOYEE STOCK PURCHASE PLAN
The 1994 Employee Stock Purchase Plan was approved by shareholders at the 1994
annual meeting. The Plan permits employees to purchase shares during each
quarterly offering period at a price equal to 85% of the market price of the
Company's Common Stock on either the first day of the offering period or the
fifth business day after the end of the offering period, whichever is lower.
The shares are purchased through the accumulation of payroll deductions up to
10% of each participating employee's compensation during such offering period.
Under this plan, 2,000,000 shares have been reserved for grant. During fiscal
1996, 88,626 shares were purchased under the plan.
SHAREHOLDER RIGHTS PLAN
In April 1989, the Board of Directors adopted a Shareholder Rights Plan and
declared a dividend of one Right for each outstanding share of Common Stock.
In connection with the Company's two-for-one stock split which was effected on
December 7, 1992, the number of Rights associated with each outstanding share
of Common Stock was adjusted from one Right per share of Common Stock to
one-half of a Right per share of Common Stock. Such Rights only become
exercisable or transferable apart from the Common Stock, ten days after a
person or group (Acquiring Person) acquires beneficial ownership of, or
commences a tender or exchange offer for, twenty percent (20%) or more of the
Company's outstanding common shares. Each Right then may be exercised to
acquire one three-hundredth of a share of newly created Series A Junior
Participating Preferred Stock or a combination of securities and assets of
equivalent value at a price of $70, subject to adjustment.
Upon the occurrence of certain events (for example, if the Company is a
surviving corporation in a merger with an Acquiring Person), the Rights entitle
holders other than the Acquiring Person to acquire Common Stock having a value
of twice the exercise price of the Rights, or, upon the occurrence of certain
other events (for example, if the Company is acquired in a merger or other
business combination transaction in which the Company is not the surviving
corporation), to acquire Common Stock of the Acquiring Person having a value
twice the exercise price of the Rights. The Rights may be redeemed by the
Company at $.01 per Right at any time until the tenth day following public
announcement that a twenty percent (20%) position has been acquired. The
Rights will expire on April 26, 1999.
32
<PAGE> 34
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
RESTRUCTURING CHARGE
During the fourth quarter of the year ended February 3, 1996, the Company's
Board of Directors approved a restructuring plan that resulted in a fourth
quarter pre-tax charge of $103,000,000. The restructuring plan includes the
planned closing of 290 under-performing "Fashion Bug" and "Fashion Bug Plus"
stores, the reorganization and reduction of foreign merchandise sourcing
operations and reductions in corporate support operations.
The restructuring charge includes an amount of $58,878,000 related to the
closing of the 290 stores, including (i) $39,260,000 for the write-off of store
fixtures, equipment and inventories, (ii) $17,270,000 for the early termination
of store leases and (iii) $2,348,000 for severance benefits and other expenses.
Charges of $34,487,000 relate to the reorganization of foreign merchandise
sourcing operations. These charges include the write-off of joint-venture
investments and advances, settlements related to non-fulfillment of production
commitments, employee severance benefits and the write-down of other
Company-owned investments. Other charges include $5,445,000 for severance
benefits and a $4,190,000 write-off of surplus store construction fixtures and
equipment. The restructuring charge includes severance with respect to a
workforce reduction of approximately 2,300 store employees and 600 non-store
employees.
As of February 3, 1996, the Company had approximately $19,983,000 of accrued,
unpaid restructuring costs, of which approximately $7,390,000 relate to
severance benefits. These costs, which are included in current liabilities,
are expected to be paid by the end of fiscal 1997. As of February 3, 1996,
approximately 960 store employees and 250 non-store employees have been
terminated.
EMPLOYEE RETIREMENT BENEFIT PLAN
The Company provides a comprehensive retirement benefit program for its
employees. This plan provides for a noncontributory profit-sharing
contribution which covers substantially all full-time employees who meet age
and service requirements. The contribution is completely discretionary and is
determined by the Board of Directors on an annual basis.
The program also includes a 401(k) employee savings plan, whereby eligible
participating employees may elect to contribute up to 15% of their compensation
to an investment trust. The Company contributes an amount equal to 30% of the
participant's elective contribution, up to 6% of the participant's
compensation.
The total expense for the above plans amounted to $741,442, $3,394,241 and
$3,323,000 for the years ended February 3, 1996, January 28, 1995 and January
29, 1994, respectively.
ASSET SECURITIZATION
The Company securitizes and sells substantially all of its private label credit
card receivables in the public and private markets. These asset-backed
securities are generally credit-enhanced by a third party to provide an AAA
credit rating at the time of issuance. In each securitization, credit card
receivables are transferred to a trust which issues certificates representing
ownership interests in the trust to institutional investors. The Company
retains a participation interest in the trust, reflecting the excess of the
total amount of receivables transferred to the trust over the portion
represented by certificates sold to investors. The retained participation
interests in the credit card trust were $28,502,000 and $30,680,000 at February
3, 1996 and January 28, 1995, respectively, and are included as
available-for-sale securities in the accompanying consolidated balance sheets.
Although the Company continues to service the underlying credit card accounts
and maintain the customer relationships, these transactions are treated as
sales for financial reporting purposes to the extent of the investors'
interests in the trusts. Accordingly, the associated credit card receivables
are not reflected on the balance sheets.
33
<PAGE> 35
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
Due to the relatively short average life of credit card loans, no gain or loss
is recorded at the time of sale. Rather, loan servicing fees (credit card
interest income and fees in excess of interest paid to certificate holders,
credit losses and other expenses) are recognized monthly over the life of the
transaction when earned as a reduction of selling, general and administrative
expenses. Transaction expenses are deferred and amortized over the
reinvestment period of the transaction as a component of selling, general and
administrative expenses. The monthly pattern of recording loan servicing fees
is similar to the revenue recognition that the Company would have experienced
if the loans had not been securitized.
The Company is subject to certain recourse provisions in connection with these
securitizations. At February 3, 1996 and January 28, 1995, the Company had
reserves of $25,599,000 and $26,649,000, respectively, related to these
recourse provisions. At February 3, 1996, the Company had $5,500,000 of
receivables from the credit card securitizations which were subject to liens in
favor of the providers of the credit enhancement facilities for the individual
securitizations. Fashion SPC, Inc., a wholly-owned subsidiary of the Company,
is a special-purpose corporation. Its assets of $21,800,000 of Charming
Shoppes Master Trust Certificates will be available first and foremost to
satisfy the claims of its creditors, including certain claims of investors in
Charming Shoppes Master Trust. The providers of the credit enhancements and
trust investors have no other recourse to the Company. The Company does not
receive collateral from any party to the securitization, and the Company does
not have any risk of counterparty non-performance.
As of February 3, 1996, the Company had securitized approximately $371.8
million of receivables. The facilities under which the securitizations were
originated mature as follows, provided an early amortization event does not
occur: $153.5 million - 1996 and $218.3 million - 1999.
The Company is active in originating private label credit card lines to the
customers of the Company's retail stores. Holders of credit cards issued by
the Company are located throughout the United States and have various available
lines of credit which are made on an unsecured basis after reviewing each
potential cardholder's credit application and evaluating their financial
history and ability to repay.
DERIVATIVE FINANCIAL INSTRUMENTS HELD FOR PURPOSES OTHER THAN TRADING
The Company has historically entered into interest-rate swap and interest-rate
cap agreements to reduce the impact of increases in interest rates on the
Company's floating-rate credit card securitizations. During 1996, the Company
terminated all of its interest-rate swap agreements and no such agreements were
outstanding as of February 3, 1996. In addition, the Company had no material
deferred gains or losses related to terminated contracts as of February 3,
1996. As of January 28, 1995, $100 million notional amount of such "pay-fixed"
swaps were in effect.
The Company has entered into interest-rate cap agreements with an aggregate
notional amount of $538.9 million as of February 3, 1996, which mature as
follows: $435.0 million - 1996, $93.9 million - 1997, $10.0 million - 1999.
The agreements effectively entitle the Company to receive from a bank the
amount, if any, by which the interest rates on the Company's floating-rate
credit card securitizations exceed 9% for $300.0 million notional amount, 10%
for $128.9 million notional amount and 12% for $110.0 million notional amount.
The premiums paid for these interest-rate cap agreements are included in other
assets and are being amortized to selling, general and administrative expense
over the respective lives of the individual interest-rate cap agreements. Any
payments that may be received as a result of the cap will be accrued as a
reduction of selling, general and administrative expense.
34
<PAGE> 36
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
The Company's credit exposure on interest-rate caps is limited to the value of
interest-rate caps that have become favorable to the Company, but the Company
does not anticipate non-performance by any of these counterparties. The amount
of such exposure is generally the unrealized gains in the contracts. The
market value of interest-rate caps as of February 3, 1996 and January 28, 1995
was $11,000 and $175,000, respectively. The market value of interest-rate caps
was determined on the basis of valuation pricing models which take into account
current market and contractual prices of the underlying instruments, as well as
the time value and yield curve or volatility factors underlying the positions.
LEASES
The Company leases substantially all of its stores under non-cancelable
operating lease agreements. Generally, these leases have initial periods of 5
to 20 years and contain provisions for renewal options, additional rentals
based on a percentage of sales and payment of certain real estate taxes. The
Company also leases certain other buildings and equipment.
Rental expense was:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ----------------------------------------------
<S> <C> <C> <C>
Minimum Rental $103,440 $ 97,976 $82,425
Contingent Rental 14,841 14,302 12,413
- ----------------------------------------------
$118,281 $112,278 $94,838
- ----------------------------------------------
</TABLE>
Minimum annual rental commitments for all non-cancelable leases for the next
five fiscal years and thereafter are:
<TABLE>
<S> <C> <C>
(in thousands) 1997 $98,782
1998 89,661
1999 79,377
2000 69,703
2001 60,929
Thereafter 206,323
</TABLE>
35
<PAGE> 37
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED FEBRUARY 3, 1996
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands except per share amounts) FIRST SECOND THIRD FOURTH
FISCAL 1996 QUARTER QUARTER QUARTER QUARTER(1)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $244,342 $268,448 $267,772 $321,822
Gross Profit 57,565 60,717 40,291 26,747
Net Loss (4,370) (3,133) (24,706) (107,032)(2)
Net Loss per Share (.04) (.03) (.24) (1.04)
</TABLE>
(1) Consists of 14 weeks
(2) Includes a pre-tax restructuring charge of $103,000
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1995 QUARTER QUARTER QUARTER QUARTER
- -------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $297,611 $323,417 $306,283 $345,382
Gross Profit 86,896 93,682 77,261 82,716
Net Income 13,955 18,064 7,507 5,163
Net Income per Share .13 .17 .07 .05
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are no matters which are required to be reported under this Item 9.
36
<PAGE> 38
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding Directors of the Company is set forth under the caption
"Election of Directors" of the Company's definitive proxy statement which is
incorporated herein by reference. Information regarding Executive Officers is
set forth herein under "Item 4A. Executive Officers of the Registrant," in
Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth under the captions
"Management Compensation" and "Report of the Compensation and Stock Option
Committees of the Board of Directors on Executive Compensation" of the
Company's definitive proxy statement which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the security ownership of certain beneficial owners and
management is set forth under the caption "Principal Shareholders and
Management Ownership" of the Company's definitive proxy statement which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is set
forth under the caption "Certain Relationships and Related Transactions" of the
Company's definitive proxy statement which is incorporated herein by reference.
37
<PAGE> 39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
The following Consolidated Financial Statements of Charming Shoppes, Inc. and
its subsidiaries are included in Part II, Item 8:
<TABLE>
<S> <C>
Report of independent auditors ....................................... 19
Consolidated Balance Sheets - February 3, 1996 and January 28, 1995 .. 20
Consolidated Statements of Income - years ended
February 3, 1996, January 28, 1995 and January 29, 1994............ 21
Consolidated Statements of Cash Flows - years ended
February 3, 1996, January 28, 1995 and January 29, 1994 ........... 22
Consolidated Statements of Stockholders' Equity - years ended
February 3, 1996, January 28, 1995 and January 29, 1994 ........... 23
Notes to Consolidated Financial Statements ........................... 24
</TABLE>
(a)(2) FINANCIAL STATEMENT SCHEDULES
No schedules required to be filed.
(b) REPORTS ON FORM 8-K
No reports were filed during the quarter ended February 3, 1996.
(c) EXHIBITS, INCLUDING THOSE INCORPORATED BY REFERENCE
The following is a list of Exhibits filed as part of this Annual Report on Form
10-K. Where so indicated by footnote, Exhibits which were previously filed are
incorporated by reference. For Exhibits incorporated by reference, the
location of the Exhibit in the previous filing is indicated in parenthesis. If
page numbers are listed, they refer to the page numbers where such Exhibits are
located using the sequential numbering system specified by Rule 0-3 under the
Securities Exchange Act of 1934 and Rule 403 under the Securities Act of 1933:
38
<PAGE> 40
ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Restated Articles of Incorporation, incorporated by reference to Form
10-K of the Registrant for the fiscal year ended January 29 1994.
(Exhibit 3.1)
3.2 By-Laws, as Amended and Restated, incorporated by reference to Form 10-K
of the Registrant for the fiscal year ended January 29, 1994. (Exhibit
3.2)
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
4.1 Shareholders' Rights Plan, incorporated by reference to Form 8-K of the
Registrant, filed May 23, 1989.
MATERIAL CONTRACTS
10.1.1 Participation Agreement between the Registrant, Charming Shoppes of
Delaware, Inc., and various financial services companies for Lease
Financing of Point-of-Sale Equipment dated October 31, 1991, incorporated
by reference to Form 10-K of the Registrant for the fiscal year ended
February 1, 1992. (Exhibit 10-1, Pg. 161)
10.1.2 Agreement of Lease between Charming Shoppes of Delaware, Inc., as Lessee
and Mellon Financial Services Corporation as Lessor dated October 31,
1991, incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended February 1, 1992. (Exhibit 10-1, Pg. 214)
10.1.3 Amended and Restated Pooling and Servicing Agreement dated as of
December 24, 1992, as amended and restated as of May 4, 1994, by and
between Spirit of America National Bank, as Seller and Servicer, and
First Fidelity Bank, National Association, as Trustee, incorporated by
reference to Form 8-K of Spirit of America National Bank (No. 33-73884)
dated May 4, 1994. (Exhibit No. 4)
10.1.4 Series 1994-1 Supplement dated as of May 4, 1994 to Amended and Restated
Pooling and Servicing Agreement dated as of December 24, 1992 and amended
and restated as of May 4, 1994, by and between Spirit of America National
Bank, as Seller and Servicer, and First Fidelity Bank, National
Association, as Trustee, (for $200,000,000 Charming Shoppes Master Trust
Asset-Backed Certificates Series 1994-1), incorporated by reference to
Form 8-K of Spirit of America National Bank (No. 33-73884) dated May 4,
1994. (Exhibit No. 4)
10.1.5 Series 1994-2 Supplement dated as of August 15, 1994, to Amended and
Restated Pooling and Servicing Agreement, dated as of December 24, 1992,
as amended and restated as of May 4, 1994 (Exhibit 10.1.7) by and between
Spirit of America National Bank, as Seller and Servicer, and First
Fidelity Bank, National Association, as Trustee (for $14,000,000 Charming
Shoppes Master Trust Asset-Backed Certificates Series 1994-2),
incorporated by reference to Form 10-K of the Registrant for the fiscal
year ended January 28, 1995. (Exhibit 10.1.14)
10.1.6 Winks Lane, Inc. 11.8% Amended and Restated Senior Secured Notes Due June
1, 1998, Guaranteed by Charming Shoppes, Inc. and Certain Subsidiaries of
Charming Shoppes, Inc., Amended and Restated Note Agreement dated as of
November 30, 1995.
10.1.7 Amended and Restated Loan and Security Agreement By and Between Congress
Financial Corporation as Lender and Charming Shoppes, Inc., Charming
Shoppes of Delaware, Inc., CSI Industries, Inc., and FB Apparel, Inc. as
Borrowers, and Charming Shoppes of Delaware, Inc. as Borrowers' Agent,
Dated November 30, 1995.
39
<PAGE> 41
10.1.8 Credit Agreement among (a) Charming Shoppes, Inc., CSI Industries, Inc.,
Charming Shoppes of Delaware, Inc., International Apparel, Inc., W.L.
Distributors, Inc., Sentani Trading Limited, Sentani Trading (Macau)
Limited, Kirkstone Company Limited, Huambo Limited, and Trimoland
Limited, as Borrowers, (b) Charming Shoppes of Delaware, Inc., as
Borrowers' Agent, (c) the Several Lenders from Time to Time Parties
Hereto, and (d) Chemical Bank, as Agent, Dated as of November 30, 1995.
10.1.9 Receivables Purchase Agreement, dated as of April 4, 1996, among (a)
First Union National Bank, solely in its capacity as the trustee for
Charming Shoppes Master Trust, as the Seller, (b) Fashion SPC, Inc., as
the Subordinated Purchaser, (c) Spirit of America National Bank, as the
Owner and as the Servicer, (d) CXC Incorporated, as the Purchaser, and
(e) Citicorp, North America, Inc., as the Agent.
10.1.10 Receivables Purchase Agreement (Parallel Purchase Commitment), dated as
of April 4, 1996, among (a) First Union National Bank, solely in its
capacity as the trustee for Charming Shoppes Master Trust, as the
Seller, (b) Fashion SPC, Inc., as the Subordinated Purchaser, (c) Spirit
of America National Bank, as the Owner and as the Servicer, and (d)
Citibank, N.A. and Citicorp, North America, Inc., as the Agent.
10.1.11 Amendment No. 1, dated as of December 22, 1995, to Amended and Restated
Pooling and Service Agreement, dated as of December 24, 1992, as Amended
and Restated as of May 4, 1994, between Spirit of America National Bank
as Seller and Servicer, and First Fidelity Bank, National Association,
as Trustee for Charming Shoppes Master Trust.
10.1.12 Amendment No. 2, dated as of March 22, 1996, to Amended and Restated
Pooling and Service Agreement, dated as of December 24, 1992, as Amended
and Restated as of May 4, 1994, as Amended by Amendment No. 1 as of
December 22, 1995, between Spirit of America National Bank as Seller and
Servicer, and First Union National Bank as Trustee for Charming Shoppes
Master Trust.
10.1.13 Amendment No. 1, dated as of March 29, 1996, to Series 1994-2
Supplement, between Spirit of America National Bank as Seller and
Servicer, and First Union National Bank as Trustee for Charming Shoppes
Master Trust.
MANAGEMENT CONTRACTS AND COMPENSATORY PLANS AND ARRANGEMENTS
10.2.1 The 1986 Employees' Stock Option Plan of Charming Shoppes, Inc.,
incorporated by reference to Form 10-K of the Registrant for the fiscal
year ended February 1, 1992. (Exhibit 10.2.2, Pg. 240)
10.2.2 The 1988 Key Employee Stock Option Plan of Charming Shoppes, Inc., as
amended, incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended January 30, 1993. (Exhibit 10.2.3, Pg. 486)
10.2.3 The 1990 Employees' Stock Incentive Plan of Charming Shoppes, Inc., as
amended, incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended January 30, 1993. (Exhibit 10.2.4, Pg. 492)
10.2.4 The 1989 Non-Employee Director Stock Option Plan of Charming Shoppes,
Inc., as amended, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended January 30, 1993. (Exhibit 10.2.5,
Pg. 499)
10.2.5 Non-Employee Director Restricted Stock Plan of Charming Shoppes, Inc., as
amended, incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended January 30, 1993. (Exhibit 10.2.6, Pg. 503)
10.2.6 Subplan and Summary Description of the Annual Incentive Plan of Charming
Shoppes, Inc., incorporated by reference to Form 10-K of the Registrant
for the fiscal year ended February 1, 1992. (Exhibit 10.2.13, Pg. 251)
40
<PAGE> 42
10.2.7 The 1993 Employees' Stock Incentive Plan of Charming Shoppes, Inc.,
incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended January 29, 1994. (Exhibit 10.2.10)
10.2.8 The 1993 Employees' Stock Incentive Plan Stock Option Agreement
(regular vesting schedule) of Charming Shoppes, Inc., incorporated by
reference to Form 10-K of the Registrant for the fiscal year ended
January 29, 1994. (Exhibit 10.2.11)
10.2.9 The 1993 Employees' Stock Incentive Plan Stock Option Agreement
(accelerated vesting schedule) of Charming Shoppes, Inc., incorporated
by reference to Form 10-K of the Registrant for the fiscal year ended
January 29, 1994. (Exhibit 10.2.12)
10.2.10 The Charming Shoppes, Inc. Employee Stock Purchase Plan, as amended.
10.2.11 The Charming Shoppes, Inc. Restricted Stock Award Plan for Associates.
10.2.12 The Charming Shoppes, Inc. 1996 Restricted Stock Award Program.
10.2.13 The Charming Shoppes, Inc. 1996 Restricted Stock Award Program
Restricted Stock Agreement.
10.2.14 Employment Agreement, dated as of May 17, 1995, by and between
Charming Shoppes, Inc., and David V. Wachs.
10.2.15 Employment Agreement, dated as of August 22, 1995 by and between
Charming Shoppes, Inc., and Dorrit J. Bern.
10.2.16 1993 Employees' Stock Incentive Plan Stock Option Agreement, dated as
of August 23, 1995, by and between Charming Shoppes, Inc., and Dorrit
J. Bern.
10.2.17 1993 Employees' Stock Incentive Plan Restricted Stock and Stock Bonus
Agreement, dated as of March 20, 1996, by and between Charming
Shoppes, Inc., and Dorrit J. Bern.
10.2.18 Settlement Agreement and Release, dated as of December 7, 1995, by and
between Charming Shoppes, Inc., and Mordechay Kafry.
10.2.19 Settlement Agreement and Release, dated as of December 7, 1995, by and
between Charming Shoppes, Inc., and Ivan M. Szeftel.
10.2.20 Settlement Agreement and Release, dated as of February 9, 1996, by and
between Charming Shoppes, Inc., and Philip Wachs.
10.2.21 Settlement Agreement and Release, dated as of April 25, 1996, by and
between Charming Shoppes, Inc., and Samuel Sidewater.
OTHER EXHIBITS
Exhibit 21 - Subsidiaries of Registrant
Exhibit 23 - Consent of independent auditors
Exhibit 27 - Financial data schedule
All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
41
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Charming Shoppes, Inc., has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CHARMING SHOPPES, INC.
S / Dorrit J. Bern
-----------------------
By: Dorrit J. Bern
Vice Chairman of the Board
President and Chief Executive Officer
Date: May 1, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C>
S / Dorrit J. Bern S / Eric M. Specter
- ------------------------------------- ----------------------------------------
Dorrit J. Bern, May 1, 1996 Eric M. Specter, May 1, 1996
Vice Chairman of the Board Vice President - Chief Financial Officer
President and Chief Executive Officer
S / Joseph L. Castle II S / Alan Rosskamm
- ------------------------------------- ----------------------------------------
Joseph L. Castle II, May 1, 1996 Alan Rosskamm, May 1, 1996
Chairman of the Board Director
S / Michael Solomon S / Geoffrey W. Levy
- ------------------------------------- ---------------------------------------
Michael Solomon, May 1, 1996 Geoffrey W. Levy, May 1, 1996
Director Director
S / Jon A. Goldberg S / Marvin L. Slomowitz
- ------------------------------------- --------------------------------------
Jon A. Goldberg, May 1, 1996 Marvin L. Slomowitz, May 1, 1996
(Chief Accounting Officer) Director
42
</TABLE>
<PAGE> 1
EXHIBIT 10.1.6
===============================================================================
- -------------------------------------------------------------------------------
WINKS LANE, INC.
11.8% AMENDED AND RESTATED SENIOR SECURED NOTES DUE JUNE 1, 1998
GUARANTEED BY
CHARMING SHOPPES, INC.
AND CERTAIN SUBSIDIARIES OF CHARMING SHOPPES, INC.
-------------------------------------
AMENDED AND RESTATED NOTE AGREEMENT
-------------------------------------
DATED AS OF NOVEMBER 30, 1995
- -------------------------------------------------------------------------------
===============================================================================
1
<PAGE> 2
TABLE OF CONTENTS
PAGE
1. BACKGROUND; AUTHORIZATION OF AMENDMENT AND RESTATEMENT EXISTING
NOTE AGREEMENT AND EXISTING NOTES, EXCHANGE OF NOTES; CLOSING
CONDITIONS....................................................... 1
2. PREPAYMENT OF NOTES.............................................. 2
2.1 Required Prepayments.................................... 2
2.2 Optional Prepayments.................................... 3
2.3 Prepayment of Notes in Connection
with Certain Transactions............................. 3
2.4 Notice of Prepayments................................... 4
2.5 Allocation of Prepayments............................... 4
2.6 Direct Payment.......................................... 5
3. REPRESENTATIONS............................ ..................... 5
3.1 Representations of the Company
and the Guarantor..................................... 5
3.2 Representations of the Noteholder....................... 11
4. AFFIRMATIVE AND NEGATIVE COVENANTS............................... 11
4.1 Corporate Existence, Etc................................ 11
4.2 Insurance............................................... 11
4.3 Taxes, Claims for Labor and Materials
and Compliance with Laws.............................. 11
4.4 Maintenance............................................. 12
4.5 Nature of Business...................................... 12
4.6 Adjusted Net Worth...................................... 12
4.7 Limitations on Indebtedness............................. 12
4.8 Limitations on Guarantee Obligations,
Loans and Investments, Etc............................ 14
4.9 Limitation on Liens..................................... 14
4.10 Dividends and Redemptions............................... 16
4.11 Mergers, Consolidations and
Sales of Assets....................................... 16
4.12 Limitations on Consolidated
Capital Expenditures.................................. 19
4.13 Repurchase of Notes..................................... 19
4.14 Transactions with Affiliates............................ 19
4.15 Limitation on Asset Acquisitions. ..................... 19
4.16 Reports and Rights of Inspections. .................... 19
4.17 Certificates; Other Information......................... 21
4.18 Notices................................................. 22
4.19 ERISA Compliance........................................ 23
4.20 Changes in Fiscal Year.................................. 24
4.21 After-Acquired Property................................. 24
4.22 Sale of the Bensalem Property........................... 25
4.23 Payment of Expenses and Taxes. ........................ 25
4.24 Further Assurances...................................... 26
i
<PAGE> 3
5. EVENTS OF DEFAULT AND REMEDIES .................................. 26
5.1 Events of Default....................................... 26
5.2 [Intentionally Deleted]................................. 29
5.3 Acceleration of Maturities.............................. 29
5.4 Rescission of Acceleration.............................. 30
6. AMENDMENTS AND WAIVERS........................................... 30
6.1 Consent Required........................................ 30
6.2 Effect of Amendment or Waiver........................... 31
7. INTERPRETATION OF AGREEMENT AND DEFINITIONS...................... 31
7.1 Definitions............................................. 31
7.2 Accounting Principles................................... 42
7.3 Directly or Indirectly.................................. 42
7.4 Usage................................................... 42
8. MISCELLANEOUS.................................................... 42
8.1 Registered Notes........................................ 42
8.2 Exchange of Notes....................................... 43
8.3 Loss, Theft, Etc. of Notes.............................. 43
8.4 [Intentionally Deleted]................................. 43
8.5 Powers and Rights Not Waived; Cumulative Remedies....... 43
8.6 Notices................................................. 44
8.7 Successors and Assigns.................................. 44
8.8 Survival of Covenants and Representations............... 44
8.9 Severability............................................ 44
8.10 Governing Law........................................... 44
8.11 Usury................................................... 44
8.12 Confidentiality......................................... 45
8.13 Captions................................................ 46
8.14 Reinstatement........................................... 47
8.15 Submission To Jurisdiction; Waivers..................... 47
8.16 Acknowledgements........................................ 48
8.17 WAIVERS OF JURY TRIAL................................... 48
ii
<PAGE> 4
ATTACHMENTS TO AMENDED AND RESTATED NOTE AGREEMENT:
**
Annex A - Names and Addresses of Noteholders
Annex B - ERISA Affiliates
Omnibus Schedule 1 - Charming Shoppes, Inc. Subsidiaries
Omnibus Schedule 8 - Material Litigation
Omnibus Schedule 11 - Environmental Matters
Omnibus Schedule 12 - Existing Indebtedness
Omnibus Schedule 13 _ Permitted Liens
Omnibus Schedule 14 - Existing Investments and Guarantees
Omnibus Schedule 16 - Tax Returns
Omnibus Schedule 18 - Real Property Development Company Mortgages
Omnibus Schedule 21 - Term Lender Priority Collateral
Exhibit A - Form of the 11.8% Amended and Restated
Senior Secured Note
iii
<PAGE> 5
WINKS LANE, INC.
AND
CHARMING SHOPPES, INC.
450 WINKS LANE
BENSALEM, PENNSYLVANIA 19020
AMENDED AND RESTATED NOTE AGREEMENT
RE: 11.8% SENIOR SECURED NOTES
DUE JUNE 1, 1998
Dated as of November 30, 1995
To the Persons listed in
Annex A attached hereto
Ladies and Gentlemen:
Capitalized terms used and not defined herein have the meanings set forth in
Section 7.1 hereof. The undersigned, WINKS LANE, INC., a Pennsylvania
corporation (the "COMPANY") and CHARMING SHOPPES, INC., a Pennsylvania
corporation (the "GUARANTOR"), agree with you as follows:
1. BACKGROUND; AUTHORIZATION OF AMENDMENT AND RESTATEMENT OF EXISTING NOTE
AGREEMENT AND EXISTING NOTES; EXCHANGE OF NOTES; CLOSING CONDITIONS.
(a) The Company has authorized and issued to you its senior promissory
notes (collectively, the "EXISTING NOTES") in the original aggregate principal
amount of $30,000,000 pursuant to, and in accordance with the terms of, that
certain Note Agreement (as amended up to, but excluding, the Effective Date, the
"EXISTING NOTE AGREEMENT"), dated as of June 1, 1988, among the Company, the
Guarantor and you. As of the date hereof, the Company has paid $17,142,856 in
respect of such aggregate principal amount, resulting in an aggregate
outstanding principal balance of $12,857,144. Each of the Company and the
Guarantor has requested the amendment and restatement in their entirety of the
Existing Note Agreement and the Existing Notes as provided for in this Agreement
and in the Amendment Agreement.
(b) The parties hereto agree that (a) the Existing Note Agreement is
hereby amended and restated in its entirety as set forth herein and (b) the form
of the Existing Notes issued by the Company is hereby amended and restated in
its entirety as set forth in Exhibit A to this Agreement. The Company will
execute and deliver promissory notes in the aggregate
1
<PAGE> 6
principal amount of $9,488,277, to be dated as of the Effective Date, to mature
June 1, 1998, to bear interest on the unpaid balance thereof at a rate per annum
of 11.8% or as otherwise provided in the Notes, and to be substantially in the
form of Exhibit A attached hereto (said promissory notes, as amended, restated,
renewed, consolidated or extended from time to time, together with any other
promissory notes issued, delivered, substituted or exchanged pursuant to any
provision of this Agreement, the "NOTES").
(c) On the Effective Date, the Company agrees to execute and deliver
to you, at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York,
New York, the aggregate principal amount of Notes set forth opposite your name
in Annex A attached hereto, against your delivery to the Company of the Existing
Notes held by you for cancellation by the Company. All amounts owing under, and
evidenced by, the Existing Notes as of the Effective Date shall continue to be
outstanding under, and after the Effective Date shall be evidenced by, the
Notes, and shall be repayable in accordance with this Agreement and the Notes.
No penalty or premium shall be payable by the Company on the prepayment of the
Existing Notes contemplated by Section 3.3 of the Amendment Agreement or the
issuance of the Notes in exchange for the Existing Notes.
(d) The amendment and restatement of the Existing Note Agreement and
the Existing Notes, as provided in paragraph 1(a) and paragraph 1(b) of this
Agreement, and the substitution of the Notes for the Existing Notes, as provided
in paragraph 1(c) of this Agreement, shall not become effective until all the
conditions set forth in Section 3 of the Amendment Agreement have been
satisfied.
2. PREPAYMENT OF NOTES
2.1 REQUIRED PREPAYMENTS.
(a) Subject to the requirements of Section 2.4, in the event of any
Offering, each of the Company and the Guarantor agrees that it shall prepay or
cause to be prepaid on the closing date of such Offering an aggregate principal
amount of Notes equal to the Noteholder Offering Percentage of 75% of the Net
Proceeds of such Offering.
(b) Subject to the requirements of Section 2.4, in the event of any
Asset Sale, each of the Company and the Guarantor agrees that it shall prepay or
cause to be prepaid on the closing date of such Asset Sale an aggregate
principal amount of Notes equal to that portion of Net Proceeds of such Asset
Sale payable to the Collateral Trustee for the benefit of the Noteholders in
accordance with the Term Lender Intercreditor Agreement.
(c) The entire unpaid principal amount of the Notes, together with all
accrued and unpaid interest thereon and all other amounts due and payable under
the Financing Documents, shall be due and payable on June 1, 1998.
No premium shall be payable in connection with any required prepayment made
pursuant to this Section 2.1. Any payment of less than all of the Notes pursuant
to the provisions of Section
2
<PAGE> 7
2.2 shall not relieve the Company of the obligation to make required payments or
prepayments on the Notes in accordance with the terms of this Section 2.1.
2.2 OPTIONAL PREPAYMENTS. The Company shall have the privilege, at any
time and from time to time, of prepaying the outstanding Notes, either in
whole or in part (but if in part then in units of $100,000 or an integral
multiple of $10,000 in excess thereof) by payment of the principal amount
of the Notes, or portion thereof to be prepaid, and accrued interest
thereon to the date of such prepayment, together with the premium, if any,
due in accordance with the provisions of this Section 2.2. For the purpose
of this Section 2.2 the premium shall mean the product of (a) the excess,
if any, of (i) the present value as of the date of payment of the principal
payment due at final maturity and the remaining scheduled interest payments
on the Notes (determined by discounting such amounts at the Reinvestment
Yield from the date of final maturity and the respective dates on which
such interest payments are payable), minus, (ii) 100% of the principal
amount of the outstanding Notes, times (b) a fraction, the numerator of
which is the principal amount of the Notes to be paid on such date pursuant
to this Section 2.2 and the denominator of which is 100% of the principal
amount of the outstanding Notes. Solely for the purpose of calculating the
premium, if any, that would be payable under this Section 2.2, "remaining
scheduled interest payments" shall be calculated using 9.3% per annum as
the interest rate in effect under the Notes.
2.3 PREPAYMENT OF NOTES IN CONNECTION WITH CERTAIN TRANSACTIONS.
(a) In the event that at any time, or from time to time, the Company
shall request in writing that the holders of the Notes waive for a period
of 180 days (computed from the date on which the transaction for which
such request for a waiver is consummated) the requirements of one or
more covenants set forth in Section 4 which would be violated by a
proposed business transaction entered into by the Company for reasons
primarily unrelated to any benefits which may be obtained by refinancing
the Notes (any such action being herein referred to as a "RESTRICTED
TRANSACTION"), and the holders of 66-2/3% in aggregate principal
amount of the Notes then outstanding shall have failed or refused to give
such waiver within 30 days after the date of receipt of such written
request, then the Company may prepay the unpaid principal of all (or
such lesser portion of the Notes as shall be required to effect such
waiver) of the Notes of each holder which shall have failed or refused
to execute a waiver within such 30-day period. Prepayment of the Notes
pursuant to this Section 2.3 shall be made concurrently with the
occurrence of the Restricted Transaction for which the Company shall
have sought waivers upon not less than 3 days' prior written notice from
the Company (which notice shall be in addition to the request for
waiver made pursuant to this Section 2.3).
(B) Waivers obtained by the Company pursuant to this Section 2.3 shall
be effective for a period of 180 days (the "WAIVER PERIOD"). Not more than 45
nor less than 30 days prior to the expiration of each Waiver Period, the Company
shall (unless the Restricted Transaction in question will no longer cause a
violation of Section 4 at the expiration of the Waiver Period) request in
writing that the holders of the Notes then outstanding renew any waiver granted
pursuant to this Section 2.3 for an additional
3
<PAGE> 8
Waiver Period. In the event that any holder of the Notes shall fail or
refuse to execute an extension of an outstanding waiver for a new Waiver
Period, the Company may prepay the unpaid principal of all, or any portion,
of the Notes of each holder which shall have failed or refused to execute a
new waiver within such 30-day period. Prepayment pursuant to this Section
2.3(b) shall be made within 15 days after the expiration of any Waiver
Period and during such period no Default or Event of Default shall exist
under this Agreement solely as a result of a failure of any holder of the
Notes to execute a new waiver.
(c) Any request of the Company for a waiver pursuant to this Section 2.3,
shall be accompanied by (i) a certified copy of a resolution adopted by the
Board of Directors of the Company authorizing the proposed Restricted
Transaction which is the subject of such request; (ii) a description of the
terms and purpose of such proposed Restricted Transaction containing
sufficient information to permit the holders of the Notes to make an
informed decision as to the effect of such proposed Restricted Transaction
upon the business, prospects and financial condition of the Company and its
Subsidiaries; and (iii) a certificate, executed by the Chairman of the
Board and Chief Executive Officer of the Company, stating that the waiver
is requested for reasons primarily unrelated to any benefits which may be
obtained by refinancing the Notes. The request of the Company shall also
state that if the holders of 66-2/3% in aggregate principal amount of the
Notes shall fail to execute the waiver requested by the Company then all or
a portion of the Notes held by such holders who have not executed such
waiver shall be prepaid in accordance with the provisions of this Section
2.3.
(d) Prepayments of Notes pursuant to this Section 2.3 shall be made by
payment of the principal amount to be prepaid together with accrued
interest to the prepayment date but without premium. Any prepayment
pursuant to this Section 2.3 of less than all of the Notes of more than one
holder of the Notes shall be allocated ratably among the outstanding
principal amount of the Notes of the holders who shall have failed or
refused to execute a waiver in accordance with the provisions of this
Section 2.3.
2.4 NOTICE OF PREPAYMENTS. The Company will give notice of any prepayment
of the Notes to each holder thereof not less than 10 Business Days before the
date fixed for such prepayment specifying (i) such date, (ii) the section of
this Agreement under which the prepayment is to be made, (iii) the principal
amount of the holder's Notes to be prepaid on such date, (iv) the premium, if
any, and (v) accrued interest applicable to the prepayment. Such notice of
prepayment shall also certify all facts which are conditions precedent to any
such prepayment. In the case of any prepayment for which a premium may be
payable, the Company shall furnish to each holder of the Notes to be prepaid not
less than three days prior to such prepayment date, a calculation, in reasonable
detail, setting forth the premium to be paid on such prepayment date. Notice of
prepayment having been so given, the aggregate principal amount of the Notes
specified in such notice, together with the premium, if any, and accrued
interest thereon shall become due and payable on the date specified for
prepayment.
4
<PAGE> 9
2.5 ALLOCATION OF PREPAYMENTS. All partial prepayments shall be applied on
all outstanding Notes ratably in accordance with the unpaid principal amounts
thereof.
2.6 DIRECT PAYMENT. Notwithstanding anything to the contrary in this
Agreement or the Notes, in the case of any Note owned by a Noteholder, its
nominee or any other institutional holder who has given written notice to the
Company requesting that the provisions of this Section shall apply, the Company
will promptly and punctually pay as and when due the principal thereof and
premium, if any, and interest thereon, without any presentment thereof directly
to such Noteholder or such subsequent holder at the address of such Noteholder
set forth in Annex A or at such other address as such Noteholder or such
subsequent holder may from time to time designate in writing to the Company or,
if a bank account is designated for such Noteholder on Annex A hereto or in any
written notice to the Company from such Noteholder or any such subsequent
holder, the Company will make such payments in immediately available funds to
such bank account, marked for attention as indicated, or in such other manner or
to such other account of such Noteholder or such holder in any bank in the
United States as the Noteholder or any such subsequent holder may from time to
time direct in writing. Any payment in respect of the Notes received by any
Noteholder after 12:00 noon (New York time) shall be credited as of the next
Business Day. Any payment due on a date other than a Business Day shall be
payable on the first Business Day following such due date, and any calculation
of interest payable in respect of the Notes shall include any such additional
time allowed for such payment. Each Noteholder agrees that in the event it shall
sell or transfer any such Notes (i) it will, prior to the delivery of such Notes
(unless it has already done so), make a notation thereon of all principal, if
any, prepaid on such Notes and will also indicate thereon the date to which
interest has been paid on such Notes, and (ii) it will promptly notify the
Company of the name and address of the transferee of any Notes so transferred.
With respect to Notes to which this Section applies, the Company shall be
entitled to presume conclusively that the original or such subsequent
institutional holder as shall have requested the provisions hereof to apply to
its Notes remains the holder of such Notes until (y) the Company shall have
received notice of the transfer of such Notes, and of the name and address of
the transferee, or (z) such Notes shall have been presented to the Company as
evidence of the transfer.
3. REPRESENTATIONS
3.1 REPRESENTATIONS OF THE COMPANY AND THE GUARANTOR. The Company and
the Guarantor jointly and severally represent and warrant to you as follows:
(a) CORPORATE ORGANIZATION; SUBSIDIARIES; OWNERSHIP;
INTERRELATED BUSINESSES.
(i) Omnibus Schedule 1 attached hereto accurately reflects
the jurisdiction of incorporation, full legal name and ownership
of the Guarantor and its Subsidiaries.
5
<PAGE> 10
(ii) The entities listed in (A) Part A(1), (4) - (7) of
Omnibus Schedule 1 constitute all the Non-Retail Store
Subsidiaries, (B) Part A(2) of Omnibus Schedule 1 constitute all
the Retail Store Subsidiaries which are currently operating and
selling Inventory, or are reasonably expected to be doing the
same prior to December 31, 1995, and (C) Part A(3) of Omnibus
Schedule 1 constitute all the Retail Store Subsidiaries which are
not currently operating or selling Inventory and are not expected
to be doing the same prior to December 31, 1995 (the "INACTIVE
RETAIL STORE SUBSIDIARIES"), in each case by its registered
corporate name and not under any trade name.
(iii) The Guarantor is the direct and beneficial owner and
holder of all of the issued and outstanding shares of Capital
Stock of the Restricted Subsidiaries whose shares of Capital
Stock are pledged by Guarantor pursuant to the Shared Pledge
Agreement as set forth on Omnibus Schedule 5 attached to the
Shared Pledge Agreement. Kafco Development Co., Inc., a
Pennsylvania corporation, is the owner and holder of all of the
issued and outstanding Capital Stock of the Real Property
Development Companies. FSHC is the owner and holder of at least
80% of the issued and outstanding Capital Stock of each of the
entities whose shares of Capital Stock are pledged by FSHC
pursuant to the Term Lender Pledge Agreement set forth on Omnibus
Schedule 6 attached to the Term Lender Pledge Agreement.
(iv) The Guarantor and each Subsidiary has good and
marketable title to all of the shares it purports to own of the
stock of each Subsidiary, free and clear in each case of any
Lien, other than Liens granted to Congress and the Collateral
Agent pursuant to the Shared Pledge Agreement and the Term Lender
Pledge Agreement. All such shares have been duly issued and are
fully paid and non-assessable.
(v) The Guarantor and the Restricted Subsidiaries share an
identity of interests such that any benefit received by each such
Person benefits each of the others. The Guarantor and the
Restricted Subsidiaries (i) render services to or for the benefit
of each other, (ii) make loans and advances and provide other
financial accommodations to or for the benefit of each other
(including, among other things, the payment and/or guarantees of
Indebtedness of such other Persons) and (iii) provide
administrative, marketing, payroll and management services to or
for the benefit of each other. The Guarantor and the Restricted
Subsidiaries have centralized accounting and legal services.
(b) CORPORATE ORGANIZATION AND AUTHORITY. The Guarantor and each
Subsidiary,
(i) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation;
6
<PAGE> 11
(ii) has all requisite power and authority and has all
licenses and permits to own and operate its Properties and to
carry on its business as now conducted and as presently proposed
to be conducted, except for those licenses and permits, the
absence of which would not have a Material Adverse Effect; and
(iii) is duly licensed or qualified and is in good standing
as a foreign corporation in each jurisdiction wherein the nature
of the business transacted by it or the nature of the Property
owned or leased by it makes such licensing or qualification
necessary, except for those licenses and qualifications the
failure of which to obtain would not have a Material Adverse
Effect.
(c) AUTHORIZATION, EXECUTION AND ENFORCEABILITY. The execution
and delivery by each of the Guarantor, the Company and each Guarantor
Subsidiary of the Financing Documents to which it is a party,
respectively, and the performance of its respective obligations under
each of the Financing Documents have been duly authorized by all
necessary action on the part of such Persons, respectively. Each of
the Financing Documents to which each such Person is a party
constitutes a valid and binding obligation of such Person enforceable
in accordance with its respective terms, except that the
enforceability thereof may be:
(i) limited by bankruptcy, insolvency or other similar
laws affecting the enforceability of creditors' rights generally;
and
(ii) subject to the availability of equitable remedies.
(d) OPERATING LEASES. None of the Guarantor or any of the
Restricted Subsidiaries has obligations in respect of any lease of
Property (other than a Capitalized Lease), except retail store leases,
leases of office space and office equipment and other miscellaneous
equipment in the ordinary course of business, automobile leases,
leases between the Guarantor and a Subsidiary or between Subsidiaries
and leases of computer hardware and software.
(e) FINANCIAL STATEMENTS.
(i) The consolidated balance sheets of the Guarantor and
its Subsidiaries as of January 28, 1995, and the statements of
income and retained earnings and changes in financial position
for the fiscal years ended on said date accompanied by a report
thereon containing an opinion unqualified as to scope limitations
imposed by the Guarantor and otherwise without qualification
except as therein noted, by Ernst & Young have been prepared in
accordance with GAAP consistently applied except as therein
noted, present fairly the financial position of the Guarantor and
its Subsidiaries as of such dates and the results of their
operations and changes in their financial position for such
periods.
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(ii) Since July 29, 1995, there has been no change in the
condition, financial or otherwise, of the Guarantor and its
Subsidiaries as shown on the consolidated balance sheet as of
such date, except changes in the ordinary course of business,
none of which individually or in the aggregate has been
materially adverse, except for changes heretofore disclosed to
the Noteholders in writing.
(f) INDEBTEDNESS. Omnibus Schedule 12 attached hereto correctly
describes all existing Indebtedness of the Guarantor and its
Restricted Subsidiaries outstanding on the Effective Date and after
giving effect to all transactions contemplated by the Amendment
Agreement.
(g) FULL DISCLOSURE. The financial statements referred to in
Section 3.1(e) do not, nor does any other written statement furnished
by the Guarantor to you in connection with the issuance of the Notes,
contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein not
misleading, taking all such information as a whole. There is no fact
peculiar to the Guarantor or its Subsidiaries that the Guarantor has
not disclosed to you in writing which materially affects adversely
nor, so far as the Guarantor can now foresee, will materially affect
adversely the Properties, business, prospects, profits or condition
(financial or otherwise) of the Guarantor and its Subsidiaries taken
as a whole.
(h) PENDING LITIGATION. Except as disclosed in Omnibus Schedule
8 attached hereto and incorporated herein, there are no proceedings
pending or, to the knowledge of the Guarantor threatened, against or
affecting the Guarantor or any Subsidiary in any court or before any
governmental authority or arbitration board or tribunal which involve
the possibility of materially and adversely affecting the Properties,
business, prospects, profits or condition (financial or otherwise) of
the Guarantor and its Subsidiaries taken as whole. Neither the
Guarantor nor any Subsidiary is in default with respect to any order
of any court or governmental authority or arbitration board or
tribunal.
(i) TITLE TO PROPERTIES. The Guarantor and each Subsidiary has
good and marketable title in fee simple (or its equivalent under
applicable law) to all the real Property and has good title to all the
other Property it purports to own, including that reflected in the
most recent balance sheet referred to in Section 3.1(e), except as
sold or otherwise disposed of in the ordinary course of business and
except for Liens disclosed in notes to the financial statements
referred to in Section 3.1(e) hereof or otherwise permitted by the
Financing Documents.
(j) PATENTS AND TRADEMARKS. The Guarantor and each Subsidiary
owns or possesses all the patents, trademarks, trade names, service
marks, copyrights, licenses and rights with respect to the foregoing
necessary for the present and planned future conduct of its business,
without any known conflict with the rights of others.
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(k) SALE IS LEGAL AND AUTHORIZED. The sale of the Notes and
compliance by each of the Guarantor, the Company and each Guarantor
Subsidiary with all of the provisions of the Financing Documents to
which each such Person is a party:
(i) are within the corporate powers of such Person and have
been duly authorized by proper corporate action on the part of
such Person; and
(ii) will not violate any provisions of any law or any
order of any court or governmental authority or agency and will
not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under the
Articles of Incorporation or By-laws of such Person or any
indenture or other agreement or instrument to which any such
Person is a party or by which such Person may be bound or result
in the imposition of any Liens on any Property of such Person.
(l) NO DEFAULTS. After giving effect to the transactions
contemplated by the Amendment Agreement, as of the Effective Date,
there are no Defaults or Events of Default in existence. None of the
Company, the Guarantor or any Guarantor Subsidiary has any defenses,
counterclaims, offsets or other claims in respect of the financing
evidenced by the Notes or the obligations of such Person under the
Financing Documents.
(m) GOVERNMENTAL CONSENT. No approval, consent or withholding
of objection on the part of any regulatory body, federal, state or
local, is necessary in connection with the execution and delivery by
the Company, the Guarantor or any Guarantor Subsidiary of any of the
Financing Documents or compliance by such Persons with any of the
provisions of the Financing Documents.
(n) TAXES. Except as set forth on Omnibus Schedule 16 attached
hereto, all tax returns required to be filed by the Guarantor or any
Subsidiary in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the
Guarantor or any Subsidiary or upon any of their respective
Properties, income or franchises, which are shown to be due and
payable in such returns have been paid, except for tax returns, taxes,
assessment, fees and other governmental charges, the failure to file
or pay of which would not have a Material Adverse Effect. The
Guarantor does not know of any proposed additional tax assessment
against it for which adequate provision has not been made on its
accounts. The Federal income tax liability of the Guarantor and its
Subsidiaries has been finally determined by the Internal Revenue
Service for all taxable years up to and including the taxable year
ended January 31, 1992.
(o) USE OF PROCEEDS. The net proceeds from the sale of the
Existing Notes was used in connection with the purchase and renovation
of a distribution center, for expenditures incurred in connection with
a corporate headquarters and principal distribution facility (or to
reimburse the Company for expenditures incurred in connection with
such purchases and renovation) and to provide additional working
capital and other
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<PAGE> 14
corporate purposes. None of the transactions contemplated in the
Financing Documents (including, without limitation thereof, the use of
proceeds from the issuance of the Notes) will violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as
amended, or any regulation issued pursuant thereto, including, without
limitation, Regulations G, T and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter 11. Neither the Company nor
any Subsidiary owns or intends to carry or purchase any margin stock
within the meaning of said Regulation G. None of the proceeds from the
sale of the Notes have been used to purchase, or refinance any
borrowing, the proceeds of which were used to purchase any security
within the meaning of the Securities Exchange Act of 1934, as amended.
(p) PRIVATE OFFERING. Neither the Company nor any agent on its
behalf has offered or will offer the Notes or any similar Security or
has solicited or will solicit an offer to acquire the Notes or any
similar Security from or has otherwise approached or negotiated or
will approach or negotiate in respect of the Notes or any similar
Security with any Person. Neither the Company nor any agent on its
behalf has offered or will offer the Notes or any similar Security or
has solicited or will solicit an offer to acquire the Notes or any
similar Security from any Person so as to bring the issuance and sale
of the Notes within the provisions of Section 5 of the Securities Act
of 1933, as amended.
(q) ERISA. Annex B attached hereto sets forth all ERISA
Affiliates and all "employee pension benefit plans" with respect to
which the Guarantor, any Subsidiary of the Guarantor or any
"affiliate" of any of the Guarantor or any such Subsidiary is a
"party-in-interest" or in respect of which the Notes could constitute
an "employer security" ("employee pension benefit plan" and
"party-in-interest" have the meanings specified in section 3 of ERISA,
"affiliate" has the meaning specified in Section V(a)(1) of the
Department of Labor Prohibited Transaction Exemption 95-60 (60 FR
35925, July 12, 1995) and "employer security" has the meaning
specified in section 407(d) of ERISA).
No "employee benefit plans" (as defined in section 3 of ERISA and
not excluded from the coverage of section 302 of ERISA pursuant to
section 301 of ERISA) maintained by the Guarantor or any Person which
is under common control with the Guarantor within the meaning of
Section 4001(b) of ERISA, nor any trusts created thereunder, have
incurred any "accumulated funding deficiency" (as defined in Section
302 of ERISA) nor does the present value of all benefits vested under
any such plan exceed, as of January 28, 1995, the last annual
valuation date, the value of the assets of such plan allocable to such
vested benefits.
(r) ENVIRONMENTAL MATTERS. Except as set forth on Omnibus
Schedule 11, and other than exceptions to the following that are not,
individually or in the aggregate, reasonably likely to give rise to a
Material Adverse Effect:
(i) No Property presently owned, leased or operated
by the Guarantor or any of its Subsidiaries contains, or has
previously contained, and,
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to the knowledge of the Guarantor and its Subsidiaries, no
Property formerly owned, leased or operated by the Guarantor or
any of its Subsidiaries or former subsidiaries during the period
of such ownership, lease or operation, contained, any Materials
of Environmental Concern in amounts or concentrations which (i)
constitute or constituted a violation of, or (ii) could give rise
to liability under, any Environmental Law.
(ii) The Guarantor and each Subsidiary are in compliance,
and for the duration of all applicable statutes of limitations
periods have been in compliance, with all applicable
Environmental Laws, and there is no contamination at, under or
about any Properties presently owned, leased, or operated by the
Guarantor or any Subsidiary or violation of any Environmental Law
with respect to such Properties which could reasonably be
expected to interfere with any of their continued operations or
reasonably be expected to impair the fair saleable value thereof.
(iii) None of the Guarantor or any Subsidiary has received
any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters
or compliance with Environmental Laws and none of the Guarantor
or any Subsidiary has knowledge that any such notice will be
received or is being threatened.
(iv) Materials of Environmental Concern have not been
transported or disposed of in a manner or to a location which are
reasonably likely to give rise to liability of any of the
Guarantor or any Subsidiary under any Environmental Law.
(v) No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of the
Guarantor or any Subsidiary, threatened, under any Environmental
Law to which any of the Guarantor or any Subsidiary is or, to the
knowledge of the Guarantor or any Subsidiary, will be named as a
party, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding, the
implementation of which is reasonably likely to have an adverse
effect on the Guarantor or any Subsidiary, under any
Environmental Law.
(s) OTHER REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained in the Credit Agreement and the Congress Loan
Agreement are true, accurate and complete.
(t) INDEBTEDNESS OF THE COMPANY TO CERTAIN AFFILIATES. All
Indebtedness of the Company to the Guarantor and to any other
Subsidiary of the Guarantor has been subordinated in accordance with
the terms of the Subordination Agreement.
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<PAGE> 16
3.2 REPRESENTATIONS OF THE NOTEHOLDER. You represent that you are
acquiring the Notes for your own account with funds from your general account
assets or from assets of one or more segments of such general account, and that,
solely for purposes of determining whether such acquisition is a "prohibited
transaction" (as provided for in section 406 of ERISA or section 4975 of the
IRC) and in reliance on the representations forth in Section 3.1(q) and the
related disclosure of "employee benefit plans" set forth in Annex B, all
requirements for an exemption under Department of Labor Prohibited Transaction
Exemption 95-60 (60 FR 35925, July 12, 1995) in respect of such "employee
pension benefit plans" have been satisfied.
4. AFFIRMATIVE AND NEGATIVE COVENANTS
For so long as any amount remains unpaid on any Note:
4.1 CORPORATE EXISTENCE, ETC. The Guarantor and its Restricted
Subsidiaries shall preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, except as otherwise permitted pursuant to Section 4.11.
4.2 INSURANCE. The Guarantor will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers in such forms and amounts and against such risks as may be required
pursuant to any of the Financing Documents and as are customary for corporations
of established favorable reputation engaged in the same or a similar business
and owning and operating similar Properties.
4.3 TAXES, CLAIMS FOR LABOR AND MATERIALS AND COMPLIANCE WITH LAWS.
The Guarantor will promptly pay and discharge, and will cause each Subsidiary
promptly to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon the Guarantor or such Subsidiary, respectively,
or upon or with respect to all or any part of the Property or business of the
Guarantor or such Subsidiary, all trade accounts payable in accordance with
usual and customary business terms, and all claims for work, labor or materials,
which if unpaid might become a Lien upon any Property of the Guarantor or such
Subsidiary; provided, that the Guarantor or such Subsidiary shall not be
required to pay any such tax, assessment, charge, levy, account payable or claim
if (i) the validity, applicability or amount thereof is being contested in
accordance with the requirements of this Agreement and the other Financing
Documents, in good faith, by appropriate actions or proceedings which will
prevent the forfeiture or sale of any Property of the Guarantor or such
Subsidiary or any material interference with the use thereof by the Guarantor or
such Subsidiary, (ii) the Guarantor or such Subsidiary shall set aside on its
books, reserves deemed by it to be adequate with respect thereto or (iii) such
taxes, assessments, charges, levies, accounts payable or claims, in the
aggregate, would not have a Material Adverse Effect. The Guarantor will promptly
comply and will cause each Subsidiary to promptly comply with all laws,
ordinances or governmental rules and regulations to which it is subject,
including without limitation, the Occupational Safety and Health Act of 1970,
ERISA and all Environmental Laws, the violation of which would have a Material
Adverse Effect or would result in any Lien upon any Property of the Guarantor or
any Subsidiary.
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4.4 MAINTENANCE. The Guarantor will maintain, preserve and keep, and
will cause each Subsidiary to maintain, preserve and keep, its respective
Properties which are used or useful in the conduct of its respective business
(whether owned in fee or a leasehold interest) in good repair and working order
and from time to time will make all necessary repairs, replacements, renewals
and additions so that at all times the efficiency thereof shall be maintained.
4.5 NATURE OF BUSINESS. Neither the Guarantor nor any Subsidiary will
engage in any business if, as a result thereof, the general nature of the
business, taken on a consolidated basis, in which the Guarantor and its
Subsidiaries would then be engaged, would be substantially changed from the
general nature of the business in which the Guarantor and its Subsidiaries are
engaged as of the Effective Date. Without limiting the generality of the
foregoing, the Company agrees that it shall not engage in any business activity
other than with respect to the ownership, operation, management and leasing of
the Bensalem Property.
4.6 ADJUSTED NET WORTH. Neither the Guarantor nor any Subsidiary
shall permit Adjusted Net Worth at any time to be less than $350,000,000.
4.7 LIMITATIONS ON INDEBTEDNESS. Neither the Guarantor nor any
Subsidiary (other than the Financing Subsidiaries or Executive Flights, Inc.)
shall create, incur, assume or suffer to exist any Indebtedness, except:
(a) Indebtedness of the Guarantor, the Company and the
Guarantor Subsidiaries under this Agreement and the other Financing
Documents;
(b) Indebtedness of the Guarantor and certain of its
Subsidiaries under the Congress Loan Documents in an amount not to
exceed the aggregate principal amount of (i) $167,000,000 during the
period in which the Congress Cash Collateral (as defined in the
Congress Intercreditor Agreement) has not been set-off by Congress or
returned to Guarantor or any of its Subsidiaries pursuant to the
Congress Loan Documents, or (ii) $160,000,000 from and after the date
on which the Congress Cash Collateral has been set-off by Congress or
returned to Guarantor or any of its Subsidiaries pursuant to the
Congress Loan Documents;
(c) Indebtedness of the Guarantor, the Company and certain
other Subsidiaries of the Guarantor under the Bank Term Loan Documents
in an amount not to exceed (i) the aggregate principal amount of
$82,862,073.25 in respect of funded Indebtedness and (ii)
$27,851,327.85 in respect of outstanding letters of credit.
(d) Indebtedness of the Guarantor or any of its Subsidiaries to
any of one another, provided that Indebtedness of any such Person to
C.S.A.C., Inc. or of the Company to any such Person shall be subject
to the Subordination Agreement;
(e) long-term Indebtedness for borrowed money of Foreign
Subsidiaries incurred for working capital purposes in an amount not to
exceed $20,000,000;
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(f) short-term Indebtedness of Foreign Subsidiaries incurred
for working capital purposes in an amount not to exceed $25,000,000;
(g) Indebtedness of the Guarantor or any Restricted Subsidiary
incurred to finance the acquisition of fixed or capital assets
(whether pursuant to a loan, Financing Lease or otherwise) in an
aggregate principal amount not exceeding as to all such Persons
$25,000,000 at any time outstanding;
(h) Indebtedness outstanding on the date hereof and listed on
Omnibus Schedule 12;
(i) to the extent not otherwise permitted pursuant to Section
4.7(a) through Section 4.7(h), additional Indebtedness of the
Guarantor or any Restricted Subsidiary incurred in the ordinary course
of business not exceeding $3,000,000 in aggregate principal amount at
any one time outstanding;
(j) Guarantee Obligations permitted by Sections 4.8(c) and
ection 4.8(d);
(k) Indebtedness of the Guarantor or any Restricted Subsidiary
in respect of loans against life insurance policies owned by such
Persons to pay for premiums thereon, provided that, after giving
effect to such loans, the cash surrender value of such policies shall
not be less than the cash surrender value thereof on the Effective
Date; and
(l) Indebtedness incurred to renew, extend, refinance, or
refund any Indebtedness expressly permitted by Sections 4.7(a) through
Section 4.7(j), provided there is no increase in the then-outstanding
principal amount of such Indebtedness and, with respect to the
renewal, extension, refinancing or refunding of Indebtedness described
in Sections 4.7(b), 4.7(c) and 4.7(h), such new Indebtedness shall be
on terms no less favorable to the Guarantor, the Company and its
Subsidiaries than the Indebtedness so renewed, extended, refinanced or
refunded.
4.8 LIMITATIONS ON GUARANTEE OBLIGATIONS, LOANS AND INVESTMENTS,
ETC. Neither the Guarantor nor any Subsidiary (other than any Finance Subsidiary
and Executive Flights, Inc.) shall make any advance, loan, extension of credit
or capital contribution to, or purchase any stocks, bonds, notes, debentures or
other securities of or any assets constituting a business unit of, or make any
other investment in any Person, or create, incur, assume or suffer to exist any
Guarantee Obligations, except:
(a) the endorsement of instruments for collection or deposit
in the ordinary course of business;
(b) investments in Cash Equivalents and the securities listed
in Omnibus Schedule 14 hereto and the Guarantee Obligations listed on
Omnibus Schedule 14 (subject to the limitation in subsection 4.8(d))
and renewals and extensions of such Guarantee Obligations;
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(c) investments or Guarantee Obligations by the Guarantor in
or of any Restricted Subsidiary or any Finance Subsidiary (other than
an Inactive Retail Store Subsidiary) and investments or Guarantee
Obligations of the Guarantor or any Restricted Subsidiary in or of the
Guarantor or any other Restricted Subsidiary or any Finance Subsidiary
(other than an Inactive Retail Store Subsidiary);
(d) Guarantee Obligations of the Guarantor of short-term
Indebtedness of Foreign Subsidiaries incurred for working capital
purposes in an aggregate amount not to exceed $20,000,000, provided
that any such Guarantee Obligations shall be only a guarantee of
collection;
(e) investments by any Foreign Subsidiary in any other Foreign
Subsidiary;
(f) investments in New Retail Store Subsidiaries, provided
that the provisions of Section 4.21 are satisfied;
(g) existing investments in manufacturing joint ventures that
do not constitute Subsidiaries of the Guarantor in an aggregate amount
not to exceed $20,000,000;
(h) investments after the Effective Date in joint ventures
that do not constitute Subsidiaries of the Guarantor in an amount
equal to (i) the noncash investment of costs previously capitalized as
"other assets" or "prepaid expenses" attributable to the creation or
development of joint venture concepts, and (ii) cash investments by
the Guarantor or any Subsidiary in an aggregate amount not to exceed
$5,000,000; and
(i) investments of a type not described in the foregoing
clauses in an aggregate amount at any time not to exceed $1,000,000.
4.9 LIMITATION ON LIENS. Neither the Guarantor nor any Subsidiary
(other than the Finance Subsidiaries or Executive Flights, Inc.) shall create,
incur, assume or suffer to exist any Lien upon any of its Property, assets or
revenues, whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the
Guarantor (as to taxes of the Guarantor or any Consolidated
Subsidiary) or the respective nonconsolidated Foreign Subsidiary (as
to the taxes of such Foreign Subsidiary), in conformity with GAAP (or,
in the case of Foreign Subsidiaries, generally accepted accounting
principles in effect from time to time in their respective
jurisdictions of incorporation);
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a
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period of more than 60 days or which are being contested in good faith
by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), freight and customs duties,
leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary
course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the Property subject thereto or
materially interfere with the ordinary conduct of the business of the
Guarantor or any Subsidiary;
(f) Permitted Exceptions (as defined in each Mortgage);
(g) Liens created pursuant to the Financing Documents, the
Bank Term Loan Documents, the Congress Loan Documents, and those
permitted as exceptions on title insurance policies issued in favor of
the Collateral Trustee, the Collateral Agent, the Bank Agent or
Congress;
(h) Liens created by, and/or setoff rights in favor of, Mellon
Bank, N.A., or any successor cash management bank with respect to
obligations and related expenses, costs and fees solely with respect
to the cash management system provided by Mellon Bank, N.A., or any
such successor to the Guarantor and its Subsidiaries;
(i) Liens by any Retail Store Subsidiary in favor of C.S.A.C.,
Inc. to secure advances or financial accommodations made by C.S.A.C.,
Inc. on behalf of such Retail Store Subsidiary for the purpose of
owning and operating the retail store owned by such Retail Store
Subsidiary, provided that any such Liens are subordinate to any Liens
granted by any such Retail Store Subsidiary pursuant to any of the
Financing Documents;
(j) Liens in existence on the date hereof listed on Omnibus
Schedule 13 attached hereto;
(k) Liens on assets of any Foreign Subsidiary securing
Indebtedness of such Foreign Subsidiary permitted by Section 4.7(b),
Section 4.7(e) or Section 4.7(f);
(l) Liens securing Indebtedness of any of the Company, the
Guarantor and the Guarantor Subsidiaries permitted by Section 4.7(g)
incurred to finance the acquisition of fixed or capital assets,
provided that (i) such Liens shall be created substantially
simultaneously with the acquisition of such fixed or capital assets,
(ii) such
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Liens do not at any time encumber any Property other than the Property
financed by such Indebtedness, (iii) the amount of Indebtedness
secured thereby is not increased and (iv) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed 100% of
the original purchase price of such Property at the time it was
acquired;
(m) Liens upon any Property of the Company, the Guarantor and
the Guarantor Subsidiaries to secure Indebtedness incurred pursuant to
Section 4.7(m); provided that (i) the Indebtedness renewed, extended
or refinanced was secured by a Lien on such Property, (ii) such Lien
does not extend to or cover any other Property of any of the Company,
the Guarantor and the Guarantor Subsidiaries and (iii) such Lien does
not secure any Indebtedness other than the Indebtedness so incurred
(in a principal amount not exceeding the principal amount of the
Indebtedness so renewed, extended or refinanced that was outstanding
immediately prior to such renewal, extension or refinancing);
(n) Liens arising by operation of law pursuant to Section
107(l) of the federal Comprehensive Environmental Response,
Compensation and Liability Act or a similar state law which secure
obligations that, individually or in the aggregate, are reasonably
expected to involve less than $1,000,000 and (i) are not due and
payable by virtue of a written demand for payment, or (ii) if due and
payable, are being contested in good faith by appropriate proceedings;
and
(o) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding $1,000,000 in aggregate amount at any time
outstanding.
4.10 DIVIDENDS AND REDEMPTIONS. Neither the Guarantor nor any of its
Subsidiaries shall declare or pay any dividend on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any shares
of any class of Capital Stock of the Guarantor or any of its Subsidiaries or any
warrants or options to purchase any such stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, whether in cash
or Property or in obligations of the Guarantor or any of its Subsidiaries,
except for (a) cash dividends paid by any Subsidiary to the Guarantor or to
another Subsidiary, and (b) dividends of each Foreign Subsidiary ratably to each
shareholder other than FSHC, the Guarantor or any other Subsidiary of the
Guarantor.
4.11 MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. Neither the
Guarantor nor any of its Subsidiaries (other than any Finance Subsidiary and
Executive Flights, Inc.) shall:
(a) in the case of the Guarantor and its Subsidiaries (other
than Foreign Subsidiaries), merge into or with any other Person, except that any
Subsidiary of the Guarantor may be merged or consolidated with or into the
Guarantor (provided that the Guarantor shall be the continuing or surviving
corporation) or with or into any one or more wholly-owned Subsidiaries of the
Guarantor (other than an Inactive Retail Store Subsidiary) (provided that the
wholly-owned Subsidiary or Subsidiaries shall be the continuing or surviving
corporation); or
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(b) permit any Foreign Subsidiary to merge into or with any
other Person, except that any Foreign Subsidiary may be merged or consolidated
with or into another Foreign Subsidiary; or
(c) sell, lease, assign, transfer or otherwise dispose of any
of its assets, with the exception of the following transactions:
(i) (x) sales of Inventory in the ordinary course of
business (including sales between and among the Guarantor and its
Subsidiaries), (y) sales of Inventory by the Guarantor or any
Restricted Subsidiary to a Person outside of the ordinary course of
business which is not the Guarantor or a Restricted Subsidiary in an
aggregate amount in any single transaction or related series of
transactions of up to $1,000,000, provided that such Inventory is not
sold for a sales price below 75% of the cost for such Inventory, the
purchase price therefor is due and payable on or before delivery to
the buyer thereof, written notice thereof is given to the Collateral
Agent, and the proceeds are (A) paid to Congress, if the Congress
Obligations are not paid in full, or (B) paid to the Collateral Agent
for application in accordance with the Term Lender Intercreditor
Agreement, and (z) sales of Inventory by the Guarantor and the
Restricted Subsidiaries to an Affiliate or an unrelated third party
where such Inventory has been bought for the specific purpose of
resale thereof to such Person, provided that the Inventory is not sold
for a sales price below 100% of the cost for such Inventory, the
purchase price therefor is due and payable on or before delivery to
the buyer thereof, written notice thereof is given to each Noteholder
and the proceeds are (A) paid to Congress, if the Congress Obligations
are not paid in full, or (B) paid to the Collateral Agent for
application in accordance with the Term Lender Intercreditor
Agreement;
(ii) the disposition of worn-out or obsolete equipment
or equipment no longer used in the business of the Guarantor or any
Restricted Subsidiary not located on the Property encumbered by the
Mortgages to third parties provided that, (A) if no Event of Default
has occurred and is continuing, such proceeds are used to repair and
replace such equipment, and (B) if an Event of Default has occurred
and is continuing, such proceeds are (I) paid to Congress, if the
Congress Obligations are not paid in full and such proceeds are not
proceeds of the Lender Loan Priority Collateral, or (II) paid to the
Collateral Agent for application in accordance with the Term Lender
Intercreditor Agreement;
(iii) dispositions of Property (other than Property set
forth on Omnibus Schedule 21 attached hereto) by the Guarantor or any
Restricted Subsidiary to any other of such Persons (other than an
Inactive Retail Store Subsidiary);
(iv) dispositions of the Property of any Foreign
Subsidiary to another Foreign Subsidiary;
(v) (A) disposition of the Bensalem Property with the
consent of the Collateral Trustee (at the direction of the
Noteholders) and (B) dispositions of any Property set forth on Omnibus
Schedule 21 (other than the Bensalem Property) with the
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<PAGE> 23
consent of the Collateral Agent (each such disposition constituting an
"Asset Sale"); provided, that the Net Proceeds thereof are paid to the
Collateral Agent (except in the case of a disposition of the Bensalem
Property, in which case such Net Proceeds shall be paid to the
Collateral Trustee) for distribution in accordance with the provisions
of the Term Lender Intercreditor Agreement;
(vi) dispositions of Cash Equivalents or any other
investments permitted pursuant to Section 4.8(b);
(vii) dispositions of Property by any Foreign Subsidiary
to any Person not a Foreign Subsidiary, provided that such
dispositions are in exchange for reasonably equivalent value and on
commercially reasonable terms; and
(viii) the dissolution, sale or liquidation of any
Foreign Subsidiary, or the sale of Capital Stock of any Foreign
Subsidiary, provided that, if the Net Proceeds of such dissolution,
sale or liquidation are not retained by another Foreign Subsidiary
then such Net Proceeds (in this circumstance, also constituting an
"Asset Sale") are paid to the Collateral Agent for distribution in
accordance with the Term Lender Intercreditor Agreement;
(ix) any winding-up, liquidation or dissolution of a
Retail Store Subsidiary and the disposition of assets of such Retail
Store Subsidiaries in connection with such winding-up, liquidation or
dissolution of such Retail Store, provided that, such Retail Store
Subsidiary receives aggregate proceeds from sales of Inventory
included in such assets of an amount at least equal to 75% of the
aggregate cost of such Inventory and such proceeds are (A) paid to
Congress, if the Congress Obligations are not paid in full and such
proceeds are not the proceeds of Term Lender Priority Collateral, or
(B) paid to the Collateral Agent for distribution in accordance with
the Term Lender Intercreditor Agreement; and
(x) other dispositions of assets not exceeding $250,000
form the Effective Date to the end of fiscal year 1996, and $1,000,000
in each fiscal year thereafter.
4.12 LIMITATIONS ON CONSOLIDATED CAPITAL EXPENDITURES. Until such
time as the Banks shall have received an aggregate of $56,000,000 of principal
prepayments in respect of the Term Loans, neither the Guarantor nor any
Subsidiary shall make or commit to make (by way of the acquisition of securities
of a Person or otherwise) any Consolidated Capital Expenditure, except in the
aggregate for the Guarantor and its Consolidated Subsidiaries during any of the
fiscal periods of the Guarantor set forth below, the amount set forth opposite
such fiscal period below:
<TABLE>
<CAPTION>
Fiscal Period Amount
------------- ------
<S> <C>
Effective Date through
February, 1996 $5,000,000.
</TABLE>
19
<PAGE> 24
<TABLE>
<CAPTION>
Fiscal Period Amount
------------- ------
<S> <C>
Year Ending February, 1997 $10,000,000.
Year Ending January, 1998 $15,000,000.
Quarter Ending April, 1998 $3,750,000.
</TABLE>
4.13 REPURCHASE OF NOTES. Neither the Guarantor, nor any Restricted
Subsidiary or Affiliate, may repurchase or make any offer to repurchase any
Notes unless the offer has been made to repurchase Notes, pro rata, from all
holders of the Notes at the same time and upon the same terms. In case the
Guarantor repurchases any Notes, such Notes shall thereafter be cancelled and no
Notes shall be issued in substitution therefor.
4.14 TRANSACTIONS WITH AFFILIATES. The Guarantor will not, and will
not permit any Restricted Subsidiary to, enter into or be a party to, any
transaction or arrangement with any Affiliate (including without limitation, the
purchase from, sale to or exchange of Property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of and pursuant
to the reasonable requirements of the Guarantor's or such Restricted
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Guarantor or such Restricted Subsidiary than would obtain in a comparable
arm's-length transaction with a Person other than an Affiliate.
4.15 LIMITATION ON ASSET ACQUISITIONS. Each of the Guarantor and the
Company agrees that it shall not purchase, acquire, receive, develop or create
any assets for the account of the Company, other than assets reasonably
necessary and appropriate for the continued use and operation of the Bensalem
Property by the Company and its tenants in a manner consistent with past
practice, including any repairs or replacements thereof.
4.16 REPORTS AND RIGHTS OF INSPECTIONS. The Guarantor shall deliver
or cause its Subsidiaries (other than Executive Flights, Inc.) to deliver to
each Noteholder:
(a) as soon as available, but in any event within 90 days after
the end of each fiscal year of the Guarantor, a copy of the
Consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries as at the end of such year and the related Consolidated
statements of income and retained earnings and of cash flows for such
year, and the accompanying notes thereto, setting forth in each case
in comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Ernst & Young
or other independent certified public accountants of nationally
recognized standing;
(b) as soon as available, but in any event not later than 30
days after the end of each fiscal month of Guarantor, the unaudited
Consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries as at the end of such month and the related unaudited
Consolidated statements of income and retained earnings and of cash
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<PAGE> 25
flows of the Guarantor and its Consolidated Subsidiaries for such
month and the portion of the fiscal year through the end of such
month, setting forth in each case in comparative form the figures for
the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments);
(c) at the time of furnishing the Consolidated financial
statements required by Sections 4.16(a) and (b), the unaudited
consolidating balance sheets of Guarantor and its Consolidated
Subsidiaries, by group, and the related unaudited consolidating
statements of income and retained earnings and of cash flows of
Guarantor and its Consolidated Subsidiaries, by group, certified by a
Responsible Officer as being (i) fairly stated in all material
respects and (ii) those utilized in arriving at the respective
Consolidated financial statements to which they relate;
(d) to the extent not furnished pursuant to subsection 4.16(a),
as soon as available, but in any event within 150 days after the end
of each Foreign Subsidiary's fiscal year, a copy of the balance sheet
of each Foreign Subsidiary as at the end of such year and the related
statements of income and retained earnings and of cash flows for such
year, setting forth in reach case in comparative form the figures for
the previous years, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope
of the audit, by independent certified public accountants of
internationally recognized standing; and
(e) to the extent not furnished pursuant to subsection 4.16(b),
as soon as available, but in any event not later than 90 days after
the end of each fiscal month of each Foreign Subsidiary, the unaudited
consolidated balance sheet of each Foreign Subsidiary as at the end of
such month and the related unaudited statements of income and retained
earnings and of cash flows of each Foreign Subsidiary for such month
and the portion of the fiscal year through the end of such month,
setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments).
All such financial statements shall be complete and correct in all material
respects and, (except for the monthly statement of cash flows) shall be prepared
in reasonable detail and in accordance (i) in respect of Guarantor and its
Consolidated Subsidiaries, with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such accountants
or officer, as the case may be, and disclosed therein) or (ii) in respect of
Foreign Subsidiaries, with generally accepted accounting principles consistently
applied in their respective jurisdictions of incorporation.
4.17 CERTIFICATES; OTHER INFORMATION. The Guarantor shall deliver
or cause its Subsidiaries to deliver:
(a) concurrently with the delivery of the financial statements
referred to in Section 4.16(a) and Section 4.16(b), a certificate of
the independent certified public
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<PAGE> 26
accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of
any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in Section 4.16(a) through Section 4.16(d), inclusive, a
certificate of a Responsible Officer (i) stating that, to the best of
such Officer's knowledge, each of the Guarantor and each Restricted
Subsidiary during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Financing Documents to be
observed, performed or satisfied by it, and that such Officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate, and (ii) showing in detail the
calculations supporting such statement in respect of Section 4.6;
(c) not later than thirty days after the end of each fiscal
year of the Guarantor, a copy of the projections by Guarantor of the
operating budget and cash flow budget of Guarantor and its
Subsidiaries for the succeeding fiscal year, and if prepared, a copy
of the projections for each Foreign Subsidiary, such projections in
each case to be accompanied by a certificate of a Responsible Officer
to the effect that such projections were approved by such Person's
Board of Directors;
(d) within five days after the same are sent, copies of all
financial statements and reports which Guarantor sends to its
stockholders, and within five days after the same are filed, copies of
all financial statements and reports which the Guarantor may make to,
or file with, the Securities and Exchange Commission or any successor
or analogous Governmental Authority;
(e) on the last day of the end of the month immediately
following the end of each fiscal quarter, beginning on May 31, 1997, a
certificate of a Responsible Officer stating the amount of the
Consolidated Cash Flow and Excess Availability and showing in detail
the calculation thereof;
(f) concurrently with the delivery of all appraisals or notices
of an event of default (howsoever defined or denominated) under the
Bank Term Loan Documents and the Congress Loan Documents, copies
thereof to each Noteholder; and
(g) promptly, such additional financial and other information
as any Noteholder may from time to time reasonably request, including,
if so requested, not more than one appraisal for each of the
Properties subject to a Mortgage.
Without limiting the foregoing, the Guarantor will permit you, so long
as you are the holder of any Note, and each institutional holder of the then
outstanding Notes (or such Persons as either you or such holder may designate)
to visit and inspect, under the Guarantor's guidance, any of the Properties of
the Guarantor, the Company or any other Subsidiary, to examine all their books
of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their
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<PAGE> 27
respective officers and employees all at such reasonable times and as often as
may be reasonably requested. The Company hereby authorizes you to discuss the
affairs, finances and accounts of the Guarantor and its Subsidiaries with the
Guarantor's independent public accountants (and by this provision, the Guarantor
authorizes said accountants to discuss with you the finances and affairs of the
Company, the Guarantor and its Subsidiaries, all at such reasonable times and as
often as may be reasonably requested). Unless a Default or an Event of Default
shall exist, neither the Guarantor nor the Company shall be required to pay or
reimburse you or any such holder for expenses which you or any such holder may
incur in connection with any such visitation or inspection.
4.18 NOTICES. The Guarantor shall give or shall cause its
Subsidiaries to give prompt notice to the Collateral Trustee and each Noteholder
of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Guarantor or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between the Guarantor or any of its Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;
(c) any litigation or proceeding affecting, or pending or
threatened against, the Guarantor or any of its Subsidiaries in which
the amount involved is $500,000 or more and not covered by insurance
or in which injunctive or similar relief is sought;
(d) (i) any
(A) "reportable event" (as defined in
section 4043 of ERISA), or
(B) "prohibited transaction" (as
defined in section 406 of ERISA or section 4975 of
the IRC),
in connection with any Plan or any trust created thereunder, a
written notice specifying the nature thereof, what action the
Guarantor or any Subsidiary is taking or proposes to take with
respect thereto and, when known, any action taken by the
United States Internal Revenue Service, the United States
Department of Labor or the PBGC with respect thereto; and
(ii) prompt written notice of and, where
applicable, a description of
(A) any notice from the PBGC in respect of
the commencement of any proceedings pursuant to
section 4042 of ERISA to terminate any Plan or for
the appointment of a trustee to administer any Plan,
23
<PAGE> 28
(B) any distress termination notice
delivered to the PBGC under section 4041 of ERISA in
respect of any Plan, and any determination of the
PBGC in respect thereof,
(C) the placement of any Multiemployer
Plan in reorganization status under Title IV of
ERISA,
(D) any Multiemployer Plan becoming
"insolvent" (as defined in section 4245 of ERISA)
under Title IV of ERISA, and
(E) the whole or partial withdrawal of the
Guarantor, the Company or any ERISA Affiliate from
any Multiemployer Plan and the withdrawal liability
incurred in connection therewith; and
(e) any development or event which could reasonably be expected
to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the applicable Person and Parent propose to take with
respect thereto.
4.19 ERISA COMPLIANCE.
(a) COMPLIANCE. To the extent that the Guarantor, the
Company or an ERISA Affiliate (if any) has any operational or
administrative responsibility with respect to any Plan, the Guarantor
and the Company will, and will cause each such ERISA Affiliate to, at
all times with respect to each such Plan, make timely payment of
contributions required to meet the minimum funding standard set forth
in ERISA or the IRC with respect thereto, and to comply with all other
applicable provisions of ERISA.
(b) RELATIONSHIP OF VESTED BENEFITS TO PLAN ASSETS. In the
event that the Guarantor or the Company is the sponsor of any defined
benefit plan (as defined in Section 3 of ERISA), the Guarantor and/or
the Company (as the case may be) will not at any time permit the
present value of all employee benefits vested under each such defined
benefit plan to exceed the assets of such defined benefit plan
allocable to such vested benefits at such time, in each case determined
pursuant to Section 4.17(c) by an amount that could have a Material
Adverse Effect.
(c) VALUATIONS. To the extent applicable, all assumptions
and methods used to determine the actuarial valuation of vested
employee benefits under any defined benefit plan sponsored by the
Guarantor or the Company and the present value of assets of such plan
will be reasonable in the good faith judgment of the Guarantor or the
Company and will comply with all requirements of law.
(d) PROHIBITED ACTIONS. The Guarantor and the Company will
not, and will not permit any ERISA Affiliate to:
24
<PAGE> 29
(i) engage in any "prohibited transaction" (as such
term is defined in Section 406 of ERISA or Section 4975 of the
IRC) or "reportable event" (as such term is defined in Section
4043 of ERISA) that could result in the imposition of a tax or
penalty;
(ii) incur with respect to any Plan any "accumulated
funding deficiency" (as such term is defined in Section 302 of
ERISA), whether or not waived;
(iii) terminate any Plan in a manner that could
result in
(A) the imposition of a Lien on the Property
of the Company or any Subsidiary pursuant to Section
4068 of ERISA or
(B) the creation of any liability under
Section 4062 of ERISA;
(iv) fail to make any payment required by Section
515 of ERISA; or
(v) incur withdrawal liability under Title IV of
ERISA with respect to any Multiemployer Plan or any
liability as a result of the termination of any
Multiemployer Plan, or
(vi) incur any liability or suffer the existence of
any Lien on Property of the Guarantor or any ERISA
Affiliate, in either case pursuant to Title I or Title IV of
ERISA or pursuant to the penalty or excise tax or security
provisions of the IRC;
if the aggregate amount of the taxes, penalties, funding deficiencies,
interest, amounts secured by Liens, and other liabilities in respect
of any of the foregoing at any time could be reasonably expected to
have a Materially Adverse Effect.
4.20 CHANGES IN FISCAL YEAR. The Guarantor shall not permit its
fiscal year to end on a day other than the Saturday closest to January 31.
4.21 AFTER-ACQUIRED PROPERTY.
(a) Upon the acquisition by the Guarantor or any Restricted
Subsidiary after the Effective Date of any real Property (other than leaseholds)
having a fair market value individually in excess of $250,000, or in the
aggregate in excess of $1,000,000, such Person shall cause such Property or
asset to become subject to a Lien in favor of the Collateral Agent (which Lien
shall either be (x) a first-priority Lien or (y) subordinate in priority only to
a Lien in favor of Congress under the Congress Loan Documents to the extent
required thereunder) by properly executing, delivering, filing and recording
such additional documents as may be required to create such Lien, and shall
deliver to the Collateral Agent (with a copy for the Collateral Trustee and each
Noteholder) promptly thereafter an opinion, satisfactory in
25
<PAGE> 30
substance and form to the Collateral Trustee and each Noteholder, as to the due
authorization, execution, delivery, recording, validity and enforceability of
such additional documents, and stating that (i) such instruments are sufficient
to subject such Property to the Lien of the Collateral Agent, (ii) such Property
is subject to no other Liens of record other than Liens which are subordinate to
those of the Collateral Agent (except as provided in clause (y) above), and
(iii) such additional documents have been duly recorded, registered and filed in
such manner and in such places as may be required by applicable law in order to
establish, protect, perfect and preserve the Lien of the Collateral Agent and
the rights of the Collateral Trustee and the Noteholders therein.
(b) The Guarantor or any Restricted Subsidiary after the
Effective Date may acquire or open any New Retail Store Subsidiary, provided
that (i) the Guarantor or any Subsidiary gives the Collateral Agent and the
Collateral Trustee at least ten (10) Business Days' written notice of the
intended acquisition or opening of such New Retail Store Subsidiary, (ii) such
New Retail Store Subsidiary is within the United States, (iii) the Guarantor or
any such Restricted Subsidiary, as the case may be, shall cause the Capital
Stock of such New Retail Store Subsidiary to become subject to a Lien in favor
of the Collateral Agent (which Lien shall either be (x) a first-priority Lien or
(y) subordinate in priority only to a Lien in favor of Congress under the
Congress Loan Documents to the extent required thereunder) by properly
executing, delivering, filing and recording such additional documents as may be
required to create such Lien and delivering such Capital Stock, together with
the appropriate executed stock powers, as directed by the Collateral Agent, (iv)
the Guarantor or any such Restricted Subsidiary shall cause such New Retail
Store Subsidiary to guarantee the Note Obligations by executing the Note
Guarantee Agreement as a guarantor thereunder, and (v) the Guarantor or any such
Restricted Subsidiary shall cause such New Retail Store Subsidiary to secure its
obligations under the Note Guarantee Agreement by executing the Master Security
Agreement and appropriate Uniform Commercial Code financing statements and
taking such further action and executing such additional documentation as the
Collateral Agent may reasonably require to create, perfect and preserve a Lien
under the Master Security Agreement.
4.22 SALE OF THE BENSALEM PROPERTY. The Company agrees that it shall
use good faith, commercially reasonable efforts to seek and to consummate a sale
or other disposition of the Bensalem Property, if in the exercise of the
Company's good faith business judgment, such sale or disposition would be
prudent, given the Company's and the Guarantor's financial condition and
prospects and their ability to pay the Note Obligations in accordance with this
Agreement and the other Financing Documents, provided that any such sale or
other disposition shall be subject to the prior consent and approval of the
Noteholders.
4.23 PAYMENT OF EXPENSES AND TAXES. Each of the Guarantor and the
Company agrees (a) to pay or reimburse each Noteholder for all their
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Agreement and the other Financing Documents and any other documents
prepared in connection herewith and therewith, and the consummation of the
transactions contemplated hereby and thereby, whether incurred before or after
the Effective Date, including, without limitation, the reasonable fees and
disbursements of counsel (including the allocated fees and expenses of in-house
counsel) to each Noteholder,
26
<PAGE> 31
(b) to pay or reimburse each Noteholder for all its costs and expenses incurred
in connection with the judicial or non-judicial enforcement, defense or
preservation of any rights under this Agreement, the other Financing Documents
and any such other documents (whether before or after Default), including,
without limitation, the fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) and other professionals to each
Noteholder, (c) to pay, indemnify, and hold each Noteholder harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other
Financing Documents and any such other documents, (d) to pay or reimburse each
Noteholder for all its out-of-pocket costs and expenses incurred following the
Effective Date in connection with the post-Effective Date administration of the
transactions contemplated hereby and attending to various post-Effective Date
matters, including, without limitation, the reasonable fees and disbursements of
counsel to such Noteholder, and (e) to pay, indemnify, and hold each Noteholder
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the other
Financing Documents and any such other documents, including, without limitation,
any of the foregoing relating to the violation of, noncompliance with or
liability under, any Environmental Law applicable to the operations of the
Guarantor or any of its Subsidiaries or any of the Properties (all the foregoing
in this clause (e), collectively, the "indemnified liabilities"), provided, that
the Guarantor and the Company shall not have any obligation hereunder to any
Noteholder with respect to indemnified liabilities arising from (i) the gross
negligence or willful misconduct of such Noteholder or (ii) legal proceedings
commenced against any Noteholder by any security holder or creditor thereof
arising out of and based upon rights afforded any such security holder or
creditor solely in its capacity as such. The agreements in this subsection shall
survive repayment of the Notes and all other amounts payable hereunder.
4.24 FURTHER ASSURANCES. The Guarantor shall and shall cause its
Subsidiaries to execute and file all such further documents and instruments, and
perform such other acts, as the Collateral Trustee or the Noteholders may
determine are necessary or advisable to create or maintain Liens in favor of the
Collateral Trustee and the Collateral Agent in connection with this Agreement
and to maintain the priority of Liens purported to be granted pursuant to this
Agreement and the Financing Documents (subject to the Intercreditor Agreements),
and each of the Collateral Trustee Collateral Agent is hereby authorized to file
financing and continuation statements with respect to such Liens.
5. EVENTS OF DEFAULT AND REMEDIES
5.1 EVENTS OF DEFAULT. Any one or more of the following shall
constitute an Event of Default as the term is used herein:
(a) Default shall occur in the payment of interest on any
Note when the same shall have become due and such default shall
continue for more than two Business
27
<PAGE> 32
Days (it being understood and agreed that a failure to pay occasioned
by Congress blocking the Guarantor's, the Company's or any Guarantor
Subsidiary's bank account nevertheless constitutes a default under
this Section); or
(b) Default shall occur in the payment of any required
prepayment on any of the Notes as provided in Section 2.1 (it being
understood and agreed that a failure to pay occasioned by Congress
blocking the Guarantor's, the Company's or any Guarantor Subsidiary's
bank account nevertheless constitutes a default under this Section);
or
(c) Default shall occur in the making of any other payment
of principal on any Note or the premium thereon at the expressed or
any accelerated maturity date or at any date fixed for prepayment (it
being understood and agreed that a failure to pay occasioned by
Congress blocking the Guarantor's, the Company's or any Guarantor
Subsidiary's bank account nevertheless constitutes a default under
this Section); or
(d) Default shall be made in the payment of the principal
of or interest on any Indebtedness of the Company, the Guarantor or
any Subsidiary for borrowed money having an aggregate principal amount
in excess of $5,000,000, as and when the same shall become due and
payable by the lapse of time, by declaration, by call for redemption
or otherwise, and such default shall continue beyond the period of
grace (not to exceed ten days), if any, allowed with respect thereto;
or
(e) Default or the happening of any event shall occur under
the Bank Term Loan Documents, the Congress Loan Documents or any other
indenture, agreement, or other instrument under which any Indebtedness
of the Company, the Guarantor or any Subsidiary for borrowed money
having an aggregate principal amount in excess of $2,000,000 may be
issued and such default or event shall continue for a period of time
sufficient to permit the acceleration of the maturity of any
Indebtedness of the Company, the Guarantor or any Subsidiary
outstanding thereunder; or
(f) Default shall occur in the observance or performance of
(i) any obligation under Section 4.6 through Section
4.15, inclusive, Section 4.20 or Section 4.21, or
(ii) any other obligation set forth in this Agreement or the
other Financing Documents which is not remedied within 10
Business Days after the earlier of (i) knowledge of such
Default by the Chairman of the Board, the President or any
Vice President of the Guarantor or the President or any Vice
President of the Company or (ii) notice thereof to the
Guarantor or the Company by any holder of any Note; provided,
that a default in performance of Section 4.18(c) shall not
constitute an Event of Default if the litigation or
proceeding for which notice is to be provided relates to a
Retail Store Subsidiary and could not reasonably be expected
to have a Material Adverse Effect;
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<PAGE> 33
(g) If any representation or warranty made by the Company or
the Guarantor herein, or made by the Company or the Guarantor in any
statement or certificate furnished by the Company or the Guarantor in
connection with the consummation of the issuance and delivery of the
Notes or furnished by the Company or the Guarantor pursuant hereto, is
untrue in any material respect as of the date of the issuance or
making thereof; or
(h) (i) One or more judgments or decrees for the payment of
money shall be entered against the Guarantor or any Subsidiary (other
than Fashion Service Corp., any Finance Subsidiary and Executive
Flights, Inc.) involving in any one case a liability (not paid or
fully covered by insurance) of $500,000 or more, or in the aggregate a
liability (not paid or fully covered by insurance) of $1,000,000 or
more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 30 days from the
entry thereof; or (ii) any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered
against the Guarantor or any Subsidiary or any of their assets, which
judgment would have a Material Adverse Effect; provided, that, any
default by a Retail Store Subsidiary under this paragraph (i) in
connection with the closing of the Retail Store it operates shall not
constitute an Event of Default unless such default results in a
Material Adverse Effect; or
(i) Any of the Financing Documents shall cease, for any
reason, to be in full force and effect, or the Guarantor or any
Restricted Subsidiary which is a party to any of the Financing
Documents shall so assert or (ii) the Lien created by any of the
Financing Documents shall cease to be enforceable and of the same
effect and priority purported to be created thereby; or
(j) Any Guaranty of any Guarantor Subsidiary under the Note
Guarantee Agreement shall cease, for any reason, to be in full force
and effect or any Guarantor Subsidiary shall so assert; or
(k) Any Change in Control;
(l) Any change in existing laws or procedures governing the
taxation of mortgages, deeds of trust or debts secured by mortgages or
deeds of trust so as to impair the security of the Bensalem Mortgage
or to reduce the net income to the Noteholders in respect of the
Notes, unless (i) upon request of the Collateral Trustee or any of the
Noteholders, the Guarantor or any Subsidiary shall promptly pay to the
Noteholders or to the taxing authority (if so directed by the
Collateral Trustee or any of the Noteholders), all taxes, charges and
related costs for which the Collateral Trustee and/or the Noteholders
may be liable as a result thereof, and (ii) in the Noteholder's
reasonable opinion, such payment by the Guarantor or any Subsidiary
shall be permitted by applicable law, would not subject the Collateral
Trustee or any Noteholder to any liability, penalty or charge of any
kind and would not render the Notes usurious;
(m) (i) The Guarantor or any Subsidiary (other than Fashion
Service Corp., any Finance Subsidiary and Executive Flights, Inc., and
other than a maximum of ten Retail
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Store Subsidiaries each of which operates a single Retail Store) shall
commence any case, proceeding or other action (A) under any existing
or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of
its assets, or the Guarantor or any Restricted Subsidiary (other than
Fashion Service Corp., any Finance Subsidiary and Executive Flights,
Inc., and other than a maximum of ten Retail Store Subsidiaries each
of which operates a single Retail Store) shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against any the Guarantor or any Restricted Subsidiary
(other than Fashion Service Corp., any Finance Subsidiary and
Executive Flights, Inc., and other than a maximum of ten Retail Store
Subsidiaries each of which operates a single Retail Store) any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged
or unbonded for a period of 60 days; or (iii) there shall be commenced
against the Guarantor or any Subsidiary (other than Fashion Service
Corp., any Finance Subsidiary and Executive Flights, Inc., and other
than a maximum of ten Retail Store Subsidiaries each of which operates
a single Retail Store) any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not
have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (iv) the Guarantor or any
Subsidiary (other than Fashion Service Corp., any Finance Subsidiary
and Executive Flights, Inc., and other than a maximum of ten Retail
Store Subsidiaries each of which operates a single Retail Store) shall
take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) the Guarantor or any Subsidiary
(other than Fashion Service Corp., any Finance Subsidiary and
Executive Flights, Inc., and other than a maximum of ten Retail Store
Subsidiaries each of which operates a single Retail Store) shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; provided, that, any
default by a Retail Store Subsidiary under this paragraph (h) in
connection with the closing of the Retail Store it operates shall not
constitute an Event of Default unless such default results in a
Material Adverse Effect;
(n) The Financing Subsidiaries shall be unable to finance up
to $300,000,000 of accounts receivable generated by the Retail Store
Subsidiaries on terms and conditions that provide at any time no less
than 75% of the face amount of such accounts receivable (before
discount) to the sellers of inventory giving rise to such accounts
receivable (or their assignees) and such condition shall continue
unremedied for a period of 30 consecutive days; or
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(o) The Collateral Agent shall not have received within 15
days after the Effective Date share certificates in the name of the
Collateral Agent (or its nominee) representing the shares of each
Pledged Foreign Subsidiary (as defined in the Credit Agreement),
together with a copy, certified as true and correct by a Responsible
Officer, of the register of members of such Pledged Foreign Subsidiary
indicating the entry of the Collateral Agent (or its nominee) as a
member of that Pledged Foreign Subsidiary in respect of the relevant
shares so pledged.
5.2 [INTENTIONALLY DELETED].
5.3 ACCELERATION OF MATURITIES. When any Event of Default described
in paragraph (a), (b) or (c) of Section 5.1 has happened and is continuing, any
holder of any Note may, and when any Event of Default described in paragraph (d)
through (l) of said Section 5.1 has happened and is continuing, the holder or
holders of 66-2/3% or more of the principal amount of Notes at the time
outstanding may, by notice in writing sent by registered or certified mail to
the Company and the Guarantor, declare the entire principal and all interest
accrued on all Notes to be, and all Notes shall thereupon become, forthwith due
and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. When any Event of Default
described in Section 5.1(m) has occurred, then all outstanding Notes shall
immediately become due and payable without presentment, demand or notice of any
kind. Upon the Notes becoming due and payable as a result of any Event of
Default as aforesaid, the Company and the Guarantor will forthwith pay to the
holders of the Notes the entire principal and interest accrued on the Notes and,
to the extent permitted by law, a premium in the amount of the amount which
would be payable if the Company then had elected to prepay the Notes at a
premium pursuant to Section 2.2. No course of dealing on the part of any holder
of any Notes nor any delay or failure on the part of any holder of any Notes to
exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. The Company and the
Guarantor further agree, to the extent permitted by law, to pay to the holder or
holders of the Notes all costs and expenses incurred by them in the collection
of any Notes upon any default hereunder or thereon, including reasonable
compensation to such holder's or holders' attorneys for all services rendered in
connection therewith.
5.4 RESCISSION OF ACCELERATION. The provisions of Section 5.3 are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(l), inclusive, of Section 5.1, the holders of 66-2/3% in aggregate principal
amount of the Notes then outstanding may, by written instrument filed with the
Company and the Guarantor, rescind and annul such declaration and the
consequences thereof, provided that at the time such declaration is annulled and
rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the
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Notes which has become due and payable solely by reason of such
declaration under Section 6.3) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have
been made good, cured or waived pursuant to Section 6; and provided
further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right
consequent thereto.
6. AMENDMENTS AND WAIVERS
6.1 CONSENT REQUIRED. Any term, covenant, agreement or condition of
this Agreement may, with the consent of the Company and the Guarantor, be
permanently amended (generally and either retroactively or prospectively) or
waived for a temporary period if the Company shall have obtained the written
consent of the holders of at least 66-2/3% in aggregate principal amount of
outstanding Notes; provided that without the written consent of the holders of
all of the Notes then outstanding, no such amendment or waiver shall be
effective (i) which will extend the time of payment (including any prepayment
required by Section 2.1) of the principal of or the interest on any Note (ii)
reduce the principal amount of any Note, (iii) change the rate of interest on
any Note, (iv) change any of the provisions of this Agreement with respect to
optional prepayments, or (v) change the percentage of holders of the Notes
required to consent to any such amendment, alteration or modification of any of
the provisions of Section 4, Section 5 or Section 6.
6.2 EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver
shall apply equally to all of the holders of the Notes and shall be binding upon
them, upon each future holder of any Note, the Company and the Guarantor,
whether or not such Note shall have been marked to indicate such amendment or
waiver. No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon.
7. INTERPRETATION OF AGREEMENT AND DEFINITIONS
7.1 DEFINITIONS. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
ADJUSTED NET WORTH-- shall mean, as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
Consolidated basis for such Person and its Subsidiaries (if any), the amount
equal to (a) the difference between (i) the aggregate net book value of all
assets of such Person and its Subsidiaries, calculating the book value of
inventory for this purpose on a first-in, first-out basis at the lower of cost
or market as determined by the retail method (average cost basis), after
deducting from such book values all appropriate reserves in accordance with
GAAP, including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (ii) the aggregate amount of the Indebtedness
and other liabilities of such Person and its Subsidiaries (including tax and
other
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proper accruals), plus (b) the Indebtedness of such Person which is subordinated
in right of payment to the full and final payment of the Indebtedness evidenced
by the Notes on terms and conditions acceptable to the Noteholders.
AFFILIATE -- shall mean, as to any Person, a Person (other than a
Subsidiary) (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such Person,
(ii) which beneficially owns or holds 10% or more of any class of the Voting
Stock of such Person or (iii) 10% or more of the Voting Stock (or in the case of
a Person which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by such Person or a Subsidiary of such
Person. The term control means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock, by contract or otherwise.
AMENDMENT AGREEMENT -- shall mean the Amendment Agreement dated as of
the date hereof among the Company, the Guarantor and the Noteholders listed on
the signature page thereof.
ASSET SALE -- Section 4.11(c)(v) and Section 4.11(c)(viii).
BANK AGENT -- shall mean Chemical Bank, as agent for each of the
Banks, pursuant to the Credit Agreement dated as of the date hereof among the
Banks and the Borrowers (as defined in the Credit Agreement).
BANK OBLIGATIONS -- the unpaid principal of and interest on
(including, without limitation, interest accruing at the then applicable rate
provided in this Agreement after the maturity of the Term Loans and interest
accruing at the then applicable rate provided in the Credit Agreement after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Guarantor or any Subsidiary
obligated in respect of the Term Loans, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding) the Term Loans, and all
other obligations and liabilities of the Guarantor and each Subsidiary obligated
in respect of the Term Loans to the Banks, whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement, any
other Bank Term Loan Document, or any other document made, delivered or given in
connection therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Bank Agent or any Bank) that are required to be paid by the Guarantor or any
Subsidiary pursuant thereto.
BANKS -- shall mean the "Lenders" as defined in the Term Lender
Intercreditor Agreement.
BANK TERM LOAN DOCUMENTS--shall mean collectively the Credit Agreement
and each of the other Loan Documents (as defined in the Credit Agreement on the
Effective Date).
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BENSALEM ASSIGNMENT OF RENTS--shall mean the Assignment of Rents and
Leases dated as of the date hereof by the Company in favor of the Collateral
Trustee with respect to leases and rentals of and from the Bensalem Property.
BENSALEM MORTGAGE-- shall mean the Mortgage, Assignment of Rents and
Security Agreement dated as of the date hereof by the Company in favor of the
Collateral Trustee, encumbering the Bensalem Property.
BENSALEM MORTGAGE DOCUMENTS--shall mean, collectively, the Bensalem
Mortgage, the Bensalem Assignment of Rents and all Uniform Commercial Code
Financing Statements filed with respect to the Liens created thereby.
BENSALEM PROPERTY -- shall mean the Property owned by the Company
situated in the Township of Bensalem, Bucks County, Pennsylvania, known as 3434
State Road, 3720 State Road, 3750 State Road and 450 Winks Lane, and more
particularly described in Schedule A to the Bensalem Mortgage.
BUSINESS DAY-- means a day other than a Saturday, Sunday or other day
on which commercial banks in New York City, Chicago, Illinois and Boston,
Massachusetts are authorized or required by law to close.
CAPITALIZED LEASE -- shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a balance sheet of the
lessee in accordance with GAAP.
CAPITAL STOCK -- any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
CASH EQUIVALENTS -- (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of one year or less from the date of
acquisition and overnight bank deposits of any Bank or commercial bank having
capital and surplus in excess of $500,000,000, (c) repurchase obligations of any
Bank or of any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days with respect to securities
issued or fully guaranteed or insured by the United States Government, (d)
commercial paper of a domestic issuer rated at least A-2 by Standard and Poor's
Rating Group ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), (e)
securities with maturities of one year or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which
state, commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A by
Moody's, (f) securities with maturities of one year or less from the date of
acquisition backed by standby letters of credit issued by any Bank or any
commercial bank satisfying the requirements of clause (b) of this definition or
(g) shares of money market mutual or similar
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funds which invest exclusively in assets satisfying the requirements of clauses
(a) through (f) of this definition.
CHANGE IN CONTROL -- shall mean, with respect to (a) the Guarantor,
the result caused by any Person and/or its Affiliates acquiring or otherwise
obtaining the right to vote more than 30% of the issued and outstanding Voting
Stock of the Guarantor, (b) any Restricted Subsidiary and Fashion Service Corp.,
the result caused by the Guarantor or any Restricted Subsidiary not having legal
and beneficial ownership of, and the right to vote, 100% of the issued and
outstanding Capital Stock of such entity and (c) any Foreign Subsidiary, the
result caused by the Guarantor, FSHC and/or another Foreign Subsidiary not
having legal and beneficial ownership of, and the right to vote, more than 50%
of the issued and outstanding Capital Stock of such Foreign Subsidiary;
provided, that neither (i) the pledges of the Capital Stock of any Subsidiary
pursuant to the Shared Pledge Agreement or the Term Lender Pledge Agreement, nor
(ii) any transaction permitted by Section 4.11 (other than the sale to a third
party of the Capital Stock of a Foreign Subsidiary) shall be a Change of
Control.
COLLATERAL AGENT -- shall mean the collateral agent for the Bank
Agent, the Collateral Trustee and Mellon Bank, N.A. under the Term Lender
Intercreditor Agreement.
COLLATERAL TRUST INDENTURE -- shall mean the Collateral Trust
Indenture dated as of the date hereof between the Company, the Guarantor, the
Guarantor Subsidiaries and State Street Bank and Trust Company, as the same may
be amended or supplemented from time to time.
COLLATERAL TRUSTEE -- shall mean at any time the collateral trustee
(including any co-trustee) under the Collateral Trust Agreement at such time.
CONGRESS -- shall mean Congress Financial Corporation, a California
corporation.
CONGRESS INTERCREDITOR AGREEMENT -- shall mean the Intercreditor
Agreement dated as of the date hereof between Congress, the Collateral Agent,
the Bank Agent, the Banks, the Collateral Trustee and the Noteholders, as the
same may be amended or supplemented in accordance with its terms.
CONGRESS LOAN AGREEMENT -- shall mean the Amended and Restated Loan
and Security Agreement dated as of the date hereof among (a) Congress, as Lender
(b) Charming Shoppes of Delaware, Inc., CSI Industries, Inc. and FB Apparel,
Inc., as Borrowers, (c) Charming Shoppes of Delaware, Inc., as agent for
Borrowers and (d) the Guarantor.
CONGRESS LOAN DOCUMENTS -- shall mean the Congress Loan Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by a
"Borrower" or an "Obligor" (as each is defined in Congress Loan Agreement) in
connection with the Congress Loan Agreement, as each now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced.
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CONGRESS OBLIGATIONS -- shall mean all obligations of every nature
owing under the Congress Loan Documents, whether matured or unmatured, absolute
or contingent.
CONSOLIDATED -- when used in connection with any defined term, and not
otherwise defined, means such term as it applies to Guarantor and its
Subsidiaries on a consolidated basis, after eliminating all intercompany items.
CONSOLIDATED CAPITAL EXPENDITURES -- for any period, the aggregate of
all expenditures (including that portion of the obligations under a Financing
Lease incurred during such period) made by Guarantor and its Subsidiaries during
such period in respect of the purchase, construction or other acquisition of
fixed or capital assets (excluding any such asset acquired in connection with
normal replacement and maintenance programs properly charged to current
operations, any purchase or refinancing of any equipment leased under the POS
Agreements [as defined in the Term Lender Intercreditor Agreement] and any
acquisition or financing of any existing computer equipment or replacement
thereof) computed in conformity with GAAP.
CONSOLIDATED CASH FLOW -- shall mean, for any period, (a) the
consolidated net income of Guarantor and its Consolidated Subsidiaries for such
period, after all expenses and other proper charges but before any deduction for
income tax expense or extraordinary losses during such period or any addition
for income tax benefits or extraordinary gains during such period, determined in
accordance with GAAP, plus (b) all depreciation, amortization and other noncash
charges (to the extent deducted in determining net income) for such period,
minus (c) the sum of (i) all cash payments of income taxes by Guarantor and its
Consolidated Subsidiaries during such period, (ii) the aggregate amount of all
Consolidated Capital Expenditures by Guarantor and its Consolidated Subsidiaries
during such period to the extent not financed by the incurrence of Indebtedness
by Guarantor or any Consolidated Subsidiary and (iii) all earnings attributable
to equity interests in any Person that is not a Consolidated Subsidiary unless
actually received by Guarantor or any Consolidated Subsidiary.
CONTRACTUAL OBLIGATION -- shall mean, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
CREDIT AGREEMENT--means the Credit Agreement dated as of the date
hereof among the Banks, the Bank Agent, the Guarantor and certain Subsidiaries
of the Guarantor.
DEFAULT -- shall mean any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default as defined in Section 5.1.
EFFECTIVE DATE -- shall have the meaning set forth in the Amendment
Agreement.
ENVIRONMENTAL LAWS -- shall mean any and all Federal, foreign, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, any and all Requirements of Law and any and all common law
requirements, rules and bases of liability regulating, relating to or imposing
liability or standards of conduct concerning pollution,
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protection of the environment, or the impact of pollutants, contaminants or
toxic or hazardous substances on human health or the environment, as now or may
at any time hereafter be in effect.
ERISA -- shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
ERISA AFFILIATE--shall mean any trade or business (whether or not
incorporated) that is treated as a single employer together with the Guarantor
or any Subsidiary under section 414 (b) or (c) of the IRC.
EXCESS AVAILABILITY -- has the meaning ascribed to such term in the
Congress Loan Documents as of the Effective Date.
EXISTING NOTE AGREEMENT -- shall have the meaning set forth in Section
1(a) of this Agreement.
EXISTING NOTES -- shall have the meaning set forth in Section 1(a) of
this Agreement.
FINANCE BUSINESS -- shall mean the business of making or discounting
loans, advances, extending credit or providing financial accommodations
(including leasing) to, or purchasing the obligation of, others as well as such
other business as may be reasonably incidental thereto, including the ownership
and use of Property in connection therewith.
FINANCE SUBSIDIARY -- shall mean Fashion Service Corp., Fashion SPC,
Inc., Spirit of America National Bank and any other Subsidiary engaged solely in
one or more of the activities included in the definition of Finance Business.
FINANCING DOCUMENTS -- shall mean, collectively, the Amendment
Agreement, this Agreement, the Notes, the Note Guarantee Agreement, the
Collateral Trust Indenture, the Bensalem Mortgage Documents, the Greencastle
Mortgage Documents, the Shared Pledge Agreement, the Term Lender Pledge
Agreement, the Master Security Agreement, the Trademark Security Agreements, the
Real Property Development Company Mortgages, the Intercreditor Agreements and
the Subordination Agreement, together with any and all other instruments,
documents and agreements now or hereafter evidencing or securing the Notes, as
the same may be amended, restated or supplemented from time to time.
FINANCING LEASE -- any lease of Property, the obligations of the
lessee in respect of which are required in accordance with GAAP to be
capitalized on a balance sheet of the lessee.
FOREIGN SUBSIDIARY -- shall mean any Subsidiary of the Guarantor or
FSHC organized under the laws of any jurisdiction other than the United States
or any State thereof or any State, territory or commonwealth of the United
States which conducts all or substantially all of its business outside of the
United States or which has all or substantially all of its assets located
outside of the United States.
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FSHC -- shall mean FSHC, Inc., a Pennsylvania corporation.
GAAP -- generally accepted accounting principles in the United States
of America in effect from time to time.
GOVERNMENTAL AUTHORITY -- any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
GREENCASTLE MORTGAGE-- shall mean the Mortgage dated as of the date
hereof by FB Distro, Inc. in favor of the Collateral Agent, encumbering the
Greencastle Property, as the same may be amended, restated or supplemented from
time to time.
GREENCASTLE MORTGAGE DOCUMENTS -- shall mean, collectively,
Greencastle Mortgage and all Uniform Commercial Code Financing Statements filed
with respect to the Liens created thereby.
GREENCASTLE PROPERTY-- shall mean the Property owned by FB Distro,
Inc., an Indiana corporation, situated in Greencastle, Indiana, and more
particularly described in Schedule A to the Greencastle Mortgage.
GUARANTEE OBLIGATION -- as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any Bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any Property constituting direct or indirect security therefor,
(ii) to advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase Property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by such guaranteeing person in good faith.
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GUARANTOR SUBSIDIARY -- means each Restricted Subsidiary (other than
the Company) and Fashion Service Corp.
INACTIVE RETAIL STORE SUBSIDIARIES -- as defined in Section
3.1(a)(ii).
INDEBTEDNESS -- of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of Property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or created
for the account of such Person and (e) all liabilities secured by any Lien on
any Property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
IRC--means the Internal Revenue Code of 1986, as amended.
INTERCREDITOR AGREEMENTS -- collectively, the Congress Intercreditor
Agreement and the Term Lender Intercreditor Agreement.
INVENTORY -- the raw materials, work in process, finished goods and
all other inventory of whatsoever kind or nature, wherever located of Guarantor
or any of its Subsidiaries.
LIEN -- any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).
MATERIAL ADVERSE EFFECT--means, with respect to any event or
circumstance (either individually or in the aggregate with all other events and
circumstances), (a) a material adverse effect on the business, operations,
condition (financial or otherwise) or prospects of the Guarantor and its
Subsidiaries, taken as a whole, or (b) a condition or occurrence or event which
would impede the ability of (i) the Guarantor or any Subsidiary (other than a
Retail Store Subsidiary), or the Retail Stores Subsidiaries, taken as a whole,
to perform its or their respective obligations hereunder or under any other
Financing Documents or (ii) the Collateral Trustee or any Noteholder to collect
the Indebtedness evidenced by the Notes or realize upon any collateral security
for such Indebtedness.
MATERIALS OF ENVIRONMENTAL CONCERN -- means, any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined, listed, classified,
or regulated as such in or under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls and
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<PAGE> 44
urea-formaldehyde insulation, and any other substance that could give rise to
liability under any Environmental Law.
MORTGAGES--shall mean, collectively, the Bensalem Mortgage, the
Greencastle Mortgage and the Real Property Development Company Mortgages.
MULTIEMPLOYER PLAN -- means any Plan that is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
NET PROCEEDS -- means, in the case of (i) any Asset Sale, cash
proceeds received, net of (a) bona fide, reasonable and customary costs of sale
(including (I) income taxes incurred and reasonably estimated to be actually
payable as a result of such Asset Sale within 18 months of the closing date of
the Asset Sale, and (II) payment of the outstanding principal amount of, premium
or penalty, if any, and interest on, any Indebtedness (other than the loans and
other obligations owed under (x) this Agreement and the other Financing
Documents, (y) the Bank Term Loan Documents and (z) the Congress Loan Documents)
required to be repaid under the terms thereof as a result of such Asset Sale)
and (b) appropriate amounts provided by the seller of such assets as a reserve,
in accordance with GAAP, against any liabilities directly associated with the
assets sold in such Asset Sale and retained by the seller of such assets after
such Assets Sale, including pension and other post-employment benefits
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with such Asset Sale, provided that to
the extent such reserve is subsequently reduced, Net Proceeds shall be deemed to
increase by an amount equal to such reduction, and (ii) any Offering, the cash
proceeds received, net of bona fide, reasonable and customary, direct costs of
sale (including legal and other professional fees and underwriting fees).
NEW RETAIL STORE SUBSIDIARY -- shall mean any Retail Store Subsidiary
acquired or opened by the Guarantor or any Restricted Subsidiary on or after the
Effective Date.
NON-RETAIL STORE SUBSIDIARY -- shall mean any Restricted Subsidiary
that does not own a retail store
NOTE GUARANTEE AGREEMENT -- shall mean the Note Guarantee Agreement
dated as of the date hereof by the Guarantor and each of the Guarantor
Subsidiaries in favor of the Noteholders, as amended, restated, supplemented or
otherwise modified from time to time.
NOTE OBLIGATIONS -- shall mean at any time the unpaid principal of and
interest on the Notes (including, without limitation, interest accruing at the
then applicable rate provided in the Notes and the Note Agreement after the
maturity of the Notes and interest accruing at the then applicable rate provided
in this Agreement or the Notes after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding,
relating to the Company, the Guarantor or any Guarantor Subsidiary whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding), any premium payable in respect of the Notes and all other
obligations and liabilities of the Company, the Guarantor and each Guarantor
Subsidiary to any Noteholder or the Collateral Trustee, at such time, whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter
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<PAGE> 45
incurred, which may arise under, out of, or in connection with, the Financing
Documents whether on account of principal, interest, premium, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to any Noteholder or the
Collateral Trustee) that are required to be paid by the Company, the Guarantor
or any Guarantor Subsidiary pursuant thereto.
NOTEHOLDER OFFERING PERCENTAGE-- means, at any time, the ratio
(expressed as a percentage) of (i) the aggregate amount of the Note Obligations
at such time, to (ii) the sum of (x) the aggregate amount of the Bank
Obligations at such time, plus (y) the Note Obligations at such time.
NOTEHOLDERS -- means at any time, collectively, the holders of the
Notes at such time.
NOTES -- shall have the meaning set forth in Section 1(b) of this
Agreement.
OFFERING --the issuance and public or private sale of Capital Stock or
any subordinated debt instrument or other evidence of subordinated indebtedness
by or on behalf of the Guarantor or any of its Subsidiaries, or the receipt of
capital contributions in the form of cash to the Guarantor or any of its
Restricted Subsidiaries, except (a) the exercise of stock options or warrants by
a current or former director, officer or employee, (b) the purchase of Capital
Stock of the Guarantor by a current or former director, officer of employee or
the Guarantor or any Subsidiary pursuant to an employee benefit or similar plan
and (c) capital contributions by the Guarantor or any of its Subsidiaries to one
another.
OMNIBUS GUARANTY AGREEMENT -- the Omnibus Guaranty Agreement dated as
of the date hereof by Guarantors (as defined in the Credit Agreement in effect
on the date hereof) in favor of the Banks, as amended, restated, supplemented or
otherwise modified from time to time.
PBGC--means the Pension Benefit Guaranty Corporation and any successor
corporation or governmental agency.
PERSON -- shall mean and refer to any and all individuals, sole
proprietorships, partnerships, joint ventures, associations, limited liability
companies, trusts, estates, business trusts, corporations (non-profit or
otherwise), financial institutions, governments (and agencies, instrumentalities
and political subdivisions thereof), and other entities and organizations.
PLAN -- means an "employee benefit plan" (as defined in section 3(3)
of ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Guarantor, the Company or any
ERISA Affiliate or with respect to which the Guarantor, the Company or any ERISA
Affiliate may have any liability.
PLEDGED REAL PROPERTY DEVELOPMENT COMPANIES -- as defined on Part A(4)
of Omnibus Schedule 1 hereto.
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<PAGE> 46
PROPERTY -- means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
REAL PROPERTY DEVELOPMENT COMPANY--shall mean any Subsidiary listed at
Part (A)(4) of Omnibus Schedule 1 hereto.
REAL PROPERTY DEVELOPMENT COMPANY MORTGAGES -- shall mean the
Mortgages executed by each of the Pledged Real Property Development Companies,
as set forth in Omnibus Schedule 18 attached hereto, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
REINVESTMENT YIELD-- shall mean, with respect to any prepayment of any
principal amount of Notes, the sum of (a) the Treasury Rate in respect of such
prepaid principal amount determined, the date that is 2 Business Days before the
date of prepayment, plus (b) fifty one-hundredths percent (0.50%) per annum.
As used herein, Treasury Rate -- means, with respect to any date
and any prepaid principal amount,
(a) the semi-annual pay equivalent of the yield reported
as of 10:00 a.m., New York City time, on such date on the display
designated as page "USD" on the Bloomberg Financial Markets
System (or such other display as may replace page "USD" on such
system) providing the most current yields for actively traded
United States of America Treasury securities with maturities
corresponding to the date of final maturity of the Notes, or
(b) if and only if Bloomberg Financial Markets System
ceases to exist or fails to report such yield, the semi-annual
pay equivalent of such yield as reported on such reasonably
comparable electronic service as may be designated by the holders
of 66-2/3% in aggregate principal amount of the outstanding Notes
and that is generally accepted by institutional investors as a
source of United States of America Treasury rate information, or
(c) if and only if Bloomberg Financial Markets System
ceases to exist or fails to report such yield and the holders of
66-2/3% in aggregate principal amount of the outstanding Notes
shall fail to agree upon a comparable electronic service pursuant
to clause (b) of this definition, the semi-annual pay equivalent
of such yield reported under the heading "This Week" and under
the caption "Treasury Constant Maturities" of the maturity
corresponding to the remaining term to maturity of the Notes as
most recently published and made available to the public in the
statistical release designated "H.15(519)" or any successor
publication that is published weekly by the United States of
America Federal Reserve System and that establishes yields on
actively traded United States of America Treasury securities or,
if no such successor publication is available, then any other
source of current information in respect of interest rates on the
securities of the United States of America that is generally
available and, in the
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<PAGE> 47
judgment of the holders of 66-2/3% in aggregate principal amount
of the outstanding Notes provides information reasonably
comparable to the H.15(519) statistical release.
If no maturity exactly corresponds to the date of final maturity of
the Notes the semi-annual pay equivalents of the yields for the two
(2) most closely corresponding published maturities next above and
below the date of final maturity of the Notes shall be calculated
pursuant to the immediately preceding sentence and the Treasury Rate
shall be interpolated from such yields on a linear basis, rounding
with respect to each such relevant period to the nearest one twelfth
(1/12).
RESPONSIBLE OFFICER -- shall mean, with respect to any of the
Guarantor or its Subsidiaries, the chief executive officer, the president, or
any vice president who has executive and supervisory responsibility regarding
the relevant subject matter, or with respect to financial matters, the chief
financial officer or controller .
RESTRICTED SUBSIDIARY -- shall mean any direct or indirect Subsidiary
of the Guarantor, including any New Retail Store Subsidiary, but not including
any Foreign Subsidiary, any Finance Subsidiary and Executive Flights, Inc.
RETAIL STORE -- any retail store which is operated by a Restricted
Subsidiary and which sells Inventory.
RETAIL STORE SUBSIDIARY -- any Restricted Subsidiary which owns a
Retail Store, including a New Retail Store Subsidiary.
SECURITY -- shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
SHARED PLEDGE AGREEMENT -- shall mean the Shared Pledge Agreement
dated as of the date hereof by the Guarantor in favor of the Collateral Agent,
as the same may be amended, supplemented or otherwise modified from time to
time.
SUBORDINATION AGREEMENT -- shall mean the Subordination Agreement by
C.S.A.C., Inc., the Guarantor and certain other Subsidiaries of the Guarantor in
favor of Congress, the Banks and the Noteholders, as the same may be amended,
supplemented or otherwise modified from time to time.
SUBSIDIARY -- as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests 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, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. The term "Subsidiary" shall mean a subsidiary of the Guarantor,
including the Company, unless otherwise indicated or the context otherwise
requires.
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<PAGE> 48
TERM LENDER INTERCREDITOR AGREEMENT -- the Tern Lender Intercreditor
Agreement dated as of the date hereof among each of the Banks, the Bank Agent,
the Noteholders, the Collateral Trustee, Mellon Bank, N.A., as point-of-sale
financier, and the Collateral Agent, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
TERM LENDER PLEDGE AGREEMENT -- the Term Lender Pledge Agreement dated
as of the date hereof by the Guarantor, FSHC, Inc., a Pennsylvania corporation,
and Kafco Development Co., Inc., a Pennsylvania corporation, in favor of the
Collateral Agent, as the same may be supplemented or amended in accordance with
the terms thereof and the Term Lender Intercreditor Agreement.
TERM LENDER PRIORITY COLLATERAL-- shall mean the Property listed on
Omnibus Schedule 21 hereto.
TERM LOANS -- shall have the same meaning ascribed thereto in the
Credit Agreement on the Effective Date.
TRADEMARK SECURITY AGREEMENTS -- (i) the Trademark Collateral
Assignment and Security Agreement dated as of the date hereof by C.S.F., Inc.,
in favor of the Collateral Agent, as the same may be amended, supplemented or
otherwise modified from time to time, and (ii) the Trademark Collateral
Assignment and Security Agreement dated as of the date hereof by the Guarantor
in favor of the Collateral Agent, as the same may be amended, supplemented or
otherwise modified from time to time.
VOTING STOCK -- shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
7.2 ACCOUNTING PRINCIPLES. Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
7.3 DIRECTLY OR INDIRECTLY. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
7.4 USAGE. Each reference in this Agreement to any gender shall be
deemed also to include any other gender, and the use in this Agreement of the
singular shall be deemed also to include the plural and vice versa, unless the
context requires otherwise.
8. MISCELLANEOUS
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<PAGE> 49
8.1 REGISTERED NOTES.
The Company shall cause to be kept at its principal office a register
for the registration and transfer of the Notes (hereinafter called the Note
Register), and the Company will register or transfer or cause to be registered
or transferred, as hereinafter provided and under such reasonable regulations as
it may prescribe, any Note issued pursuant to this Agreement.
At any time and from time to time the registered holder of any Note
which has been duly registered as hereinabove provided may transfer such Note
upon surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or its attorney duly authorized in writing together with an
opinion of counsel (who may be employed by the Noteholder) in form and substance
reasonably satisfactory to the Guarantor that the proposed transfer of the Note
complies with applicable requirements under the Securities Act of 1933, as
amended.
The Person in whose name any registered Note shall be registered shall
be deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on any registered Note shall be made to or upon the written order of
such registered holder.
8.2 EXCHANGE OF NOTES. At any time, and from time to time, upon not
less than ten days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to Section 8.1,
this Section 8.2 or Section 8.3, and, upon surrender of such Note at its office,
the Company will deliver in exchange therefor, without expense to the holder,
except as set forth below, Notes for the same aggregate principal amount as the
then unpaid principal amount of the Note so surrendered, in the denomination of
$500,000 or any amount in excess thereof as such holder shall specify, dated as
of the date to which interest has been paid on the Note so surrendered or, if
such surrender is prior to the payment of any interest thereon, then dated as of
the date of issue, payable to such Person or Persons, or order, as may be
designated by such holder, and otherwise of the same form and tenor as the Notes
so surrendered for exchange. The Company may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
8.3 LOSS, THEFT, ETC. OF NOTES. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Noteholder or any subsequent institutional holder
acceptable to the Company in its sole discretion is the owner of any such lost,
stolen or destroyed Note, then the affidavit of an authorized officer of such
owner, setting forth the fact of loss, theft or destruction and of its ownership
of the Note at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the
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<PAGE> 50
execution and delivery of a new Note other than the written agreement of such
owner to indemnify the Company.
8.4 [INTENTIONALLY DELETED].
8.5 POWERS AND RIGHTS NOT WAIVED; CUMULATIVE REMEDIES.
No delay or failure on the part of the holder of any Note in the
exercise of any power or right shall operate as a waiver thereof; nor shall any
single or partial exercise of the same preclude any other or further exercise
thereof, or the exercise of any other power or right, and the rights and
remedies of the holder of any Note are cumulative to and are not exclusive of
any rights or remedies any such holder would otherwise have, and no waiver or
consent, given or extended pursuant to Section 8 hereof, shall extend to or
affect any obligation or right not expressly waived or consented to.
8.6 NOTICES. All communications provided for hereunder shall be in
writing and, if to you, delivered or mailed by registered or certified mail,
addressed to you at your address appearing on Annex A to this Agreement or such
other address as you or the subsequent holder of any Note initially issued to
you, may designate to the Company and the Guarantor in writing, and if to the
Company, delivered or mailed by registered or certified mail to the Company at
450 Winks Lane, Bensalem, Pennsylvania 19020, Attention: Chief Financial
Officer, with a copy to the Guarantor at 450 Winks Lane, Bensalem, Pennsylvania
19020, Attention: Colin Stern, Esq., and if to the Guarantor, delivered or
mailed by registered or certified mail to the Guarantor at 450 Winks Lane,
Bensalem, Pennsylvania 19020, Attention: Colin Stern, Esq., or to such other
address as the Company or the Guarantor may in writing designate to you or to a
subsequent holder of the Note initially issued to you.
8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company, the Guarantor and their respective successors and assigns and shall
inure to your benefit and to the benefit of your successors and assigns,
including each successive holder or holders of any Notes.
8.8 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made by the Company and the Guarantor herein and
in any certificates delivered pursuant hereto, whether or not in connection with
the Effective Date, shall survive the closing and the delivery of this Agreement
and the Notes.
8.9 SEVERABILITY. Should any part of this Agreement for any reason
be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Agreement had been executed with the invalid portion thereof eliminated
and it is hereby declared the intention of the parties hereto that they would
have executed the remaining portion of this Agreement without including therein
any such part, parts, or portion which may, for any reason, be hereafter
declared invalid.
8.10 GOVERNING LAW. This Agreement and the Notes issued and sold
hereunder shall be governed by and construed in accordance with New York law.
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<PAGE> 51
8.11 USURY.
(a) It is the intention of the Company and the Noteholders to
comply strictly with the10 Interest Law (as hereinafter defined).
Accordingly, notwithstanding anything to the contrary set forth in the
Notes or in any of the other Financing Documents, the aggregate of all
charges constituting interest under the Interest Law that may be
taken, reserved, contracted for, charged or received in connection
with the financing evidenced by the Notes (whether pursuant to any of
the aforesaid instruments or documents or otherwise) shall under no
circumstances exceed the maximum amount of interest allowed by the
Interest Law. If any excess interest is provided for pursuant to any
of the aforesaid instruments or documents, then (i) the provisions of
this Section shall govern and control, (ii) the Company shall not be
obligated to pay the amount of such interest to the extent that it is
in excess of the maximum amount of interest allowed by the Interest
Law, (iii) any such excess shall be deemed a mistake and cancelled
automatically and, if theretofore paid, shall be credited against the
then-outstanding principal balance of the Notes (or if such principal
balance shall have been paid in full, then to be refunded to the
Company), and (iv) the effective rate of interest shall be
automatically reduced to the Maximum Legal Rate of Interest (as
hereinafter defined).
(b) As used herein, the term "INTEREST LAW" shall mean any and
all present or future laws of the State of New York (meaning the
internal laws of said State and not the laws of said State relating to
choice of law), The United States of America and any other
jurisdiction, which apply to the interest and other charges required
to be paid pursuant to the Note or any of the other Financing
Documents, and which apply to the respective classifications of the
Company and the Noteholders under such law.
(c) As used herein, the term "MAXIMUM LEGAL RATE OF INTEREST"
shall mean the maximum effective rate of interest that the Noteholders
may from time to time, by agreement with the Company, legally charge
the Company and in regard to which the Company would be prevented
successfully from raising the claim or defense of usury under the
Interest Law, as now or hereafter construed by courts of appropriate
jurisdiction.
8.12 CONFIDENTIALITY. Each of the Company and the Guarantor
acknowledge that each Noteholder may deliver copies of any financial
statements and other documents delivered to such Noteholder, and
disclose any other information disclosed to such Noteholder, by or on
behalf of the Guarantor, the Company or any other Subsidiary in
connection with or pursuant to this Agreement to
(a) such holder's directors, officers, employees, agents and
professional consultants,
(b) any other Noteholder,
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<PAGE> 52
(c) any Person to which such holder offers to sell such Note
or any part thereof,
(d) any Person to which such holder sells or offers to sell a
participation in all or any part of such Note,
(e) any federal or state regulatory authority having
jurisdiction over such holder,
(f) the National Association of Insurance Commissioners or any
similar organization, or
(g) any other Person to which such delivery or disclosure may
be necessary or appropriate
(i) in compliance with any law, rule, regulation or
order applicable to such holder,
(ii) in response to any subpoena or other legal process,
(iii) in connection with any litigation to which such
holder is a party, or
(iv) in order to protect such holder's investment in such
Note.
You agree that any information concerning the Guarantor, the Company or any
other Subsidiary that has been supplied to you by the Guarantor, the Company or
any Subsidiary and identified in writing by such party as confidential which is
not, at the time supplied to you, information available to the public shall be
treated as confidential by you in accordance with the procedures and standards
that you generally apply to information of a confidential nature. The
obligations under this Section 8.12 shall supersede and replace any obligations
of the Noteholders under any confidentiality letters or agreements signed prior
to the Effective Date.
8.13 CAPTIONS.
(a) The descriptive headings of the various Sections or parts
of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
(b) The execution hereof by you shall constitute a contract
between us for the uses and purposes hereinabove set forth, and this
Agreement may be executed in any number of counterparts, each executed
counterpart constituting an original but all together only one
agreement.
8.14 REINSTATEMENT. If all or any part of any payment on account of
the Notes shall be invalidated, set aside, declared or found to be void or
voidable or required to be repaid to the Company, the Guarantor or any Guarantor
Subsidiary or to any trustee, custodian, receiver,
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<PAGE> 53
conservator, master, liquidator or other person pursuant to any present or
future law relating to bankruptcy, reorganization, arrangement, composition,
readjustment, liquidation, dissolution or insolvency or pursuant to any common
law or equitable cause, then, to the extent of such invalidation, set aside,
voidness, voidability or required repayment, neither the Notes nor the Lien of
any Financing Document shall be deemed to have been paid, satisfied, released or
discharged, and, to the extent of such invalidation, set aside, voidness,
voidability or required repayment, the Notes and the Lien of the Financing
Documents shall be immediately and automatically revived without the necessity
of any action by any Person, and the Lien of the Financing Documents shall
continue in full force and effect thereafter until the Notes and all other
amounts due hereunder and under the other Financing Documents shall have been
fully, finally and indefeasibly paid.
8.15 SUBMISSION TO JURISDICTION; WAIVERS. The Guarantor and the
Company each hereby irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Financing
Documents to which it is a party, or for recognition and enforcement
of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York and the
Commonwealth or Pennsylvania, the courts of the United States of
America for the Southern District of New York and any district of the
Commonwealth of Pennsylvania, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient court
and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the address set forth in subsection 8.6 or at such other
address of which the Collateral Trustee shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary,
punitive or consequential damages.
8.16 ACKNOWLEDGEMENTS. The Guarantor and the Company each hereby
acknowledges that:
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<PAGE> 54
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Financing
Documents;
(b) neither the Collateral Trustee nor any Noteholder has any
fiduciary relationship with or duty to the Guarantor or the Company
arising out of or in connection with this Agreement or any of the
other Financing Documents, and the relationship between the Collateral
Trustee and Noteholders, on one hand, and the Guarantor or the
Company, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other
Financing Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Noteholders, the Guarantor and its
Subsidiaries.
8.17 WAIVERS OF JURY TRIAL. EACH OF THE GUARANTOR, THE COMPANY AND
THE NOTEHOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
FINANCING DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
[REMAINDER OF PAGE INTENTIONALLY BLANK; NEXT PAGE IS SIGNATURE PAGE.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
WINKS LANE, INC.
By:_______________________________________
Its
CHARMING SHOPPES, INC.
By:_______________________________________
Its
Accepted as of November 30, 1995
[VARIATION]
By:_______________________________________
Its
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ANNEX A
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NOTEHOLDERS PRINCIPAL AMOUNT OF NOTES
------------------------------- -------------------------
<S> <C>
NATIONWIDE LIFE INSURANCE COMPANY $4,744,138.50
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income
Securities
PAYMENTS
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as to issuer,
security, principal and interest) to:
Morgan Guaranty Trust Company
of New York
ABA No. 021-000-238
Journal No. 999-99-024
FAO Nationwide Life Insurance
Company
Custody Account No. 71615
Attention Custody Service
Department
Reference Wink's Lane, Inc.,
11.8% Amended and Restated
Senior Secured Notes Due June
1, 1998
PPN No. 97425* AB 9
NOTICES
All notices of payment, on or in respect of
the Notes and written confirmation of
each such payment to:
Nationwide Life Insurance Company
One Nationwide Plaza (1-32-09)
Columbus, Ohio 43215-2220
Attention: Corporate Money
Management
</TABLE>
Annex A-1
<PAGE> 57
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NOTEHOLDERS PRINCIPAL AMOUNT OF NOTES
------------------------------- -------------------------
<S> <C>
All notices and communications other
than those in respect to payments to be
addressed as first provided above.
ALLSTATE LIFE INSURANCE COMPANY (ON
BEHALF OF HARRIS TRUST & SAVINGS BANK, AS $3,162,759.00
COLLATERAL AGENT AND TRUSTEE UNDER THE
SECURITY AND TRUST AGREEMENT DATED AS OF
SEPTEMBER 1, 1993)
In care of:
Allstate Plaza
Northbrook, Illinois 60062
Attention: Investment Department - Taxable Fixed
Income Division E2
PAYMENTS
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as to issuer,
security, principal and interest) to:
Harris Trust and Savings Bank
(ABA #0710-0028-8)
111 West Monroe Street
Chicago, Illinois 60690
Attention: Trust Collection
Department
for deposit in Allstate Life
Insurance Company Collection
Account No. 168-124-6
Reference: DPP 97425* AB 9
NOTICES
All notices and communications other
than those in respect to payments to be
addressed as first provided above.
AID ASSOCIATION FOR LUTHERANS $1,581,379.50
4321 North Ballard Road
Appleton, Wisconsin 54919
Attention: Investment Department
PAYMENTS
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as to issuer,
security, principal and interest to:
</TABLE>
Annex A-2
<PAGE> 58
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NOTEHOLDERS PRINCIPAL AMOUNT OF NOTES
------------------------------- -------------------------
<S> <C>
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Attention: Commercial Banking
Department
for credit to Aid Association for
Lutherans' Account No. 164-096-0
NOTICES
All notices and communications, to be
addressed as first provided above, except
notices with respect to payment, and
written confirmation of each such
payment, addressed
Attention: Investment Accounting
</TABLE>
Annex A-3
<PAGE> 59
ANNEX B
ERISA AFFILIATES:
Other than the entities listed in Omnibus Schedule 1, there are no ERISA
Affiliates of the Guarantor or any Subsidiary.
PENSION BENEFIT PLANS:
Charming Shoppes, Inc. Employees Savings Plan
Annex B-1
<PAGE> 60
OMNIBUS SCHEDULES
[Omnibus Schedules 1, 8, 11, 12, 13, 14, 16, 18 and 21]
Annex B-2
<PAGE> 61
EXHIBIT A
[FORM OF AMENDED AND RESTATED NOTE]
WINKS LANE, INC.
11.8% AMENDED AND RESTATED SENIOR SECURED NOTE DUE JUNE 1, 1998
NO. R-__
$____________ NOVEMBER 30, 1995
PPN: 97425* AB 9
WINKS LANE, INC. (together with its successors and assigns, the
"COMPANY"), a Pennsylvania corporation, for value received, hereby promises to
pay to __________________ or registered assigns the principal sum of [______]
DOLLARS ($____________) on June 1, 1998, together with interest (computed on the
basis of a 360-day year of twelve 30-day months) on the unpaid principal balance
hereof from time to time outstanding from the date of this Note until the
principal amount hereof shall become due and payable at the rate of eleven and
eight-tenths percent (11.8%) per annum, monthly on the fifteenth (15th) day of
each month, commencing on December 15, 1995, until the principal amount hereof
shall become due and payable. In addition to (i) making the payments and
prepayments otherwise required by the Note Agreement and (ii) paying the entire
outstanding principal amount, and the interest thereon, due on this Note on the
maturity date hereof, the Company shall pay on demand interest on any overdue
principal and premium, if any, and (to the extent permitted by applicable law)
on any overdue installment of interest, at a rate equal to the lesser of (a) the
highest rate allowed by applicable law and (b) thirteen and eight-tenths percent
(13.8%) per annum. Each installment of principal and interest shall be applied
first to the payment in full of accrued interest then due on the unpaid
principal balance of this Note.
Payments of principal, premium, if any, and interest shall be made in
lawful money of the United States of America which at the time of payment is
legal tender for the payment of public and private debts to the registered
holder hereof as shown in the register maintained by the Company pursuant to the
Note Agreement.
This Note is one of an issue of Notes of the Company issued in an
aggregate principal amount limited to Nine Million Four Hundred Eighty-Eight
Thousand Two Hundred Seventy-Seven and 00/100's Dollars ($9,488,277.00) pursuant
to the Company's Amended and Restated Note Agreement dated as of the date hereof
(as may be amended from time to time, the "NOTE AGREEMENT"), with the purchasers
listed on Annex A thereto (such issue of Notes, the "RESTATED NOTES"). This
Note, together with each of the other Restated Notes, amends and restates the
Company's 9.30% Senior Notes originally issued in an aggregate principal amount
of $30,000,000.
Exhibit A-1
<PAGE> 62
This Note is entitled to the benefits of the Collateral Trust Indenture
dated as of the date hereof (as may be amended, restated or otherwise modified
from time to time, the "COLLATERAL TRUST INDENTURE"), between the Company and
State Street Bank and Trust Company, as Collateral Trustee, and the terms of the
Collateral Trust Indenture are incorporated herein by reference. Capitalized
terms used herein and not otherwise defined herein have the meanings specified
in the Note Agreement. This Note is secured by Liens on certain Property of the
Company, the Guarantor and certain Subsidiaries of Guarantor as provided in the
Collateral Trust Indenture and elsewhere.
This Note is a registered Note and is transferable only by surrender
hereof at the office of the Company as specified in the Note Agreement, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing. This
Note may be authenticated pursuant to Section 2.1(a) of the Collateral Trust
Indenture.
Under certain circumstances, as specified in the Note Agreement, the
principal of this Note (together with any applicable premium) may be declared,
or may otherwise become, due and payable in the manner and with the effect
provided in the Note Agreement.
The Company hereby irrevocably authorizes and empowers any attorney or
the Prothonotary of Clerk of any Court of record in the Commonwealth of
Pennsylvania, or elsewhere, to appear for the Company in any such Court in an
appropriate action there brought or to be brought against the Company at the
suit of the holder of any Note, and therein to confess judgment against the
Company for all sums due from the Company together with costs of suit and
attorneys' fees in connection therewith, and for so doing this Note or a copy
hereof verified by affidavit shall be a sufficient warrant. This warrant of
attorney shall be effective only after the occurrence of an Event of Default,
but shall not be exhausted by any exercise thereof.
The Company hereby releases each holder of a Note and its attorneys from
all procedural errors, defects and imperfections whatsoever in entering judgment
by confession as aforesaid or in issuing any process or instituting any
proceedings relating thereto and hereby waives all benefit that might accrue to
the Company by virtue of any present or future laws exempting the Bensalem
Property (as defined in the Indenture) and any other collateral for this Note,
or any part of the proceeds arising from any sale of any such Property, from
attachment, levy or sale under execution, or providing for any stay of
execution, exemption from civil process or extension of time, and agrees that
such Property may be sold to satisfy any judgment entered on this Note or the
Mortgage, in whole or in part and in any order as may be desired by the holder
of any Note.
The Company confirms to the holder hereof that (a) the Company is a
business entity and that its principals are knowledgeable in business matters,
(b) the terms of this Note, including the foregoing warrant of attorney to
confess judgment, have been negotiated and agreed upon in a commercial context
and (c) it has fully reviewed the aforesaid warrant of attorney to confess
judgment with its own counsel and understands that it is waiving certain rights
it would otherwise possess.
Exhibit A-2
<PAGE> 63
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND IN ANY OTHER FINANCING
DOCUMENT, THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH JURISDICTION THAT WOULD
REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH
JURISDICTION.
WINKS LANE, INC.
By
----------------------------
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is a Note described in the Collateral Trust Indenture and is
entitled to the rights and privileges set forth therein.
STATE STREET BANK AND TRUST
COMPANY, AS COLLATERAL TRUSTEE
Date: ____________________ By__________________________________
Name:
Title:
Exhibit A-3
<PAGE> 1
EXHIBIT 10.1.7
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION
AS LENDER
AND
CHARMING SHOPPES, INC.
CHARMING SHOPPES OF DELAWARE, INC.
CSI INDUSTRIES, INC.
AND
FB APPAREL, INC.
AS BORROWERS
AND
CHARMING SHOPPES OF DELAWARE, INC.
AS BORROWERS' AGENT
DATED: NOVEMBER 30, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS.......................................................................... - 2 -
SECTION 2. CREDIT FACILITIES.................................................................... - 12 -
2.1 Revolving Loans..................................................................... - 12 -
2.2 Letter of Credit Accommodations..................................................... - 13 -
2.3 Availability Reserves............................................................... - 15 -
2.4 Acknowledgement of Existing Obligations............................................. - 15 -
SECTION 3. INTEREST AND FEES.................................................................... - 16 -
3.1 Interest............................................................................ - 16 -
3.2 Closing Fee......................................................................... - 17 -
3.3 Servicing Fee....................................................................... - 18 -
3.4 Unused Line Fee..................................................................... - 18 -
3.5 Changes in Laws and Increased Costs of Loans.................................... - 18 -
3.6 Compensation Adjustment............................................................. - 19 -
SECTION 4. CONDITIONS PRECEDENT.................................................................. - 20 -
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations........... - 20 -
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations............... - 23 -
SECTION 5. GRANT OF SECURITY INTEREST........................................................... - 23 -
5.1 Collateral.......................................................................... - 23 -
5.2 Excluded Collateral................................................................. - 24 -
5.3 Release or Return of Congress Cash Collateral....................................... - 24 -
5.4 Real Property of Development Companies.............................................. - 25 -
SECTION 6. COLLECTION AND ADMINISTRATION........................................................ - 25 -
6.1 Borrowers' Loan Accounts............................................................ - 25 -
6.2 Statements.......................................................................... - 25 -
6.3 Collection of Accounts and Proceeds of Sales of Inventory........................... - 25 -
6.4 Payments............................................................................ - 27 -
6.5 Authorization to Make Loans......................................................... - 27 -
6.6 Use of Proceeds..................................................................... - 28 -
SECTION 7. COLLATERAL REPORTING AND COVENANTS................................................... - 28 -
7.1 Collateral Reporting................................................................ - 28 -
7.2 Accounts Covenants.................................................................. - 29 -
7.3 Inventory Covenants................................................................. - 31 -
7.4 Equipment Covenants................................................................. - 32 -
7.5 Power of Attorney................................................................... - 32 -
7.6 Right to Cure....................................................................... - 33 -
7.7 Access to Premises.................................................................. - 33 -
SECTION 8. REPRESENTATIONS AND WARRANTIES....................................................... - 34 -
8.1 Corporate Existence, Power and Authority; Subsidiaries.............................. - 34 -
8.2 Financial Statements; No Material Adverse Change.................................... - 34 -
8.3 Chief Executive Office; Collateral Locations........................................ - 34 -
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
8.4 Priority of Liens; Title to Properties.............................................. - 35 -
8.5 Tax Returns......................................................................... - 35 -
8.6 Litigation.......................................................................... - 35 -
8.7 Compliance with Other Agreements and Applicable Laws................................ - 35 -
8.8 Environmental Compliance............................................................ - 36 -
8.9 Employee Benefits................................................................... - 37 -
8.10 Accuracy and Completeness of Information............................................ - 37 -
8.11 Interrelated Businesses............................................................. - 37 -
8.12 Survival of Warranties; Cumulative.................................................. - 38 -
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS................................................... - 38 -
9.1 Maintenance of Existence; Subsidiaries.............................................. - 38 -
9.2 New Collateral Locations............................................................ - 39 -
9.3 Compliance with Laws, Regulations, Etc.............................................. - 39 -
9.4 Payment of Taxes and Claims......................................................... - 40 -
9.5 Insurance........................................................................... - 40 -
9.6 Financial Statements and Other Information.......................................... - 41 -
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc............................. - 42 -
9.8 Encumbrances........................................................................ - 43 -
9.9 Indebtedness........................................................................ - 44 -
9.10 Loans, Investments, Guarantees, Etc................................................. - 45 -
9.11 Dividends and Redemptions........................................................... - 46 -
9.12 Transactions with Affiliates........................................................ - 46 -
9.13 Adjusted Net Worth.................................................................. - 47 -
9.14 Compliance with ERISA............................................................... - 47 -
9.15 Use of Fashion Bug Card............................................................. - 47 -
9.16 Costs and Expenses.................................................................. - 48 -
9.17 Further Assurances.................................................................. - 48 -
SECTION 10. EVENTS OF DEFAULT AND REMEDIES...................................................... - 49 -
10.1 Events of Default.................................................................. - 49 -
10.2 Remedies........................................................................... - 51 -
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW .................................................. - 52 -
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver............. - 52 -
11.2 Waiver of Notices................................................................. - 53 -
11.3 Amendments and Waivers............................................................ - 53 -
11.4 Waiver of Counterclaims; Punitive Damages and Consequential Damages............... - 54 -
11.5 Indemnification................................................................... - 54 -
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS..................................................... - 54 -
12.1 Term............................................................................... - 54 -
12.2 Appointment of Borrowers' Agent.................................................... - 56 -
12.3 Notices............................................................................ - 56 -
12.4 Partial Invalidity................................................................. - 56 -
12.5 Successors......................................................................... - 56 -
12.6 Confidentiality.................................................................... - 57 -
12.7 Entire Agreement................................................................... - 57 -
</TABLE>
<PAGE> 4
INDEX TO
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Omnibus Schedule 2 Eligible Inventory Locations (Section 1.25)
Omnibus Schedule 1 Subsidiaries (Section 8.1)
Omnibus Schedule 2 Collateral Locations (Section 8.3)
Omnibus Schedule 13 Existing Liens (Sections 8.4 and 9.8)
Omnibus Schedule 16 Tax Returns (Section 8.5)
Omnibus Schedule 8 Litigation (Section 8.6)
Omnibus Schedule 9 Defaulted Agreement (Section 8.7)
Omnibus Schedule 11 Environmental Matters (Section 8.8)
Omnibus Schedule 12 Existing Indebtedness (Section 9.9)
Omnibus Schedule 14 Existing Investments and Guarantees (Sections 9.9 and 9.10)
</TABLE>
<PAGE> 5
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement dated November
30, 1995 is entered into by and among (a) Congress Financial Corporation, a
California corporation ("Lender"), (b) Charming Shoppes, Inc., a Pennsylvania
corporation ("Parent"), Charming Shoppes of Delaware, Inc., a Pennsylvania
corporation ("CS Delaware"), CSI Industries, Inc., a Delaware corporation
("CSI") and FB Apparel, Inc., an Indiana corporation ("FB Apparel"; and,
together with Parent, CS Delaware, CSI and FB Apparel, hereinafter referred to
individually as a "Borrower" and collectively as "Borrowers") and (c) CS
Delaware in its capacity as agent for itself as a Borrower and for the other
Borrowers ("Borrowers' Agent").
WITNESETH:
WHEREAS, Borrowers, together with the other members of the Apparel
Group (as hereinafter defined), operate a chain of retail stores which sell
apparel and certain related businesses; and
WHEREAS, Borrowers, Borrowers' Agent and Lender are parties to that
certain Loan and Security Agreement, dated October 24, 1995 (the "Existing Loan
Agreement", as hereinafter further defined) pursuant to which Lender has made
loans and provided other financial accommodations to CS Delaware, CSI and FB
Apparel, which have been fully guaranteed by Parent; and
WHEREAS, Lender has entered or is about to enter into the Trade
Financing Agreement (as hereinafter defined) with the Additional L/C Debtors (as
hereinafter defined) pursuant to which Lender will, upon certain terms and
conditions, provide Additional L/C Accommodations (as hereinafter defined) to
each of the Additional L/C Debtors, with the Additional L/C Debt (as hereinafter
defined) relating thereto being guaranteed by the Borrowers, the Obligors (as
hereinafter defined) and each of the other Additional L/C Debtors and secured by
the Collateral (as hereinafter defined), the other property which is security
for the Obligations (as hereinafter defined) and the Additional L/C Collateral
(as hereinafter defined); and
WHEREAS, Borrowers have requested that Lender continue to make loans
and provide other financial accommodations to CS Delaware, CSI and FB Apparel,
and to provide the Additional L/C Accommodations to the Additional L/C Debtors
and, upon and after the date hereof, to increase the Maximum Credit under the
Existing Loan Agreement and make loans and provide other financial
accommodations to Parent; and
WHEREAS, Lender is willing to increase the Maximum Credit under the
Existing Loan Agreement and make such loans and provide such other financial
accommodations, subject to the terms and conditions set forth herein and in the
other Financing Agreements (as hereinafter defined); and
- 1 -
<PAGE> 6
WHEREAS, the parties to the Existing Loan Agreement desire to amend and
restate the Existing Loan Agreement in its entirety and amend certain of the
Financing Agreements (as such term is defined in the Existing Loan Agreement) as
hereinafter provided in connection therewith;
NOW, THEREFORE, in consideration of the foregoing, the mutual
conditions and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree that the Existing Loan Agreement is hereby amended and
restated in its entirety as provided below and further agree as follows (the
covenants, warranties and agreements of Borrowers, except as otherwise expressly
set forth herein, being joint and several):
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural. All
references to Borrowers shall, unless the context otherwise expressly provides,
mean any one Borrower and all Borrowers, individually and collectively, jointly
and severally. All references to Borrowers, Borrowers' Agent, Parent, Additional
L/C Debtors, Obligors and Lender pursuant to the definitions set forth in the
recitals hereto, or to any other person herein, shall include their respective
successors and assigns. The words "hereof", "herein", "hereunder", "this
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement and as this Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. The words "this
Agreement" and words of similar import when used in this Agreement shall mean,
unless the context otherwise requires, the Existing Loan Agreement as amended
and restated hereby. An Event of Default shall exist or continue or be
continuing until such Event of Default is waived in accordance with Section
11.3. Any accounting term used herein unless otherwise defined in this Agreement
shall have the meanings customarily given to such term in accordance with GAAP.
For purposes of this Agreement, the following terms shall have the respective
meanings given to them below:
1.1 "Accounts" shall mean all of each Borrower's accounts and other
rights to payment for goods sold or leased or for services rendered, which are
not evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Additional L/C Accommodations" shall mean the letters of credit,
guarantees and other financial accommodations provided by Lender to the
Additional L/C Debtors pursuant to the Trade Financing Agreement.
1.3 "Additional L/C Collateral" shall mean the "Collateral" as defined
on the date hereof in the Trade Financing Agreement.
1.4 "Additional L/C Debt" shall mean, collectively, the reimbursement
obligations with respect to the Additional L/C Accommodations and other
indebtedness owed by the Additional L/C Debtors to Lender pursuant to the Trade
Financing Agreement.
- 2 -
<PAGE> 7
1.5 "Additional L/C Debtors" shall mean, individually and collectively,
Sentani Trading Limited, Trimoland Limited, Huambo Limited, Loyal Paradise
Limited, Sentani Trading (Macau) Limited and CS Insurance Ltd.
1.6 "Adjusted Cash Flow" shall mean as to any applicable period, (1)
the consolidated net income of Parent and its consolidated Subsidiaries for such
period, after all expenses and other proper charges, but before any deduction
for income tax expense and extraordinary losses or any addition for income tax
benefits and extraordinary gains during such period, determined in accordance
with GAAP, plus (2) the sum of all depreciation, amortization and other noncash
charges (to the extent deducted in determining net income) for such period,
minus (3) the sum of (i) all cash payments of income taxes by Parent and its
consolidated Subsidiaries during such period, (ii) the aggregate amount of all
capital expenditures by Parent or its consolidated Subsidiaries during such
period, to the extent not financed by the incurrence of indebtedness by Parent
or any consolidated Subsidiary and (iii) all earnings during such period
attributable to equity interests in any Person that is not a consolidated
Subsidiary unless actually received by Parent or any consolidated Subsidiary.
1.7 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (1) the Eurodollar Rate for such Interest Period by (2) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.8 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis at the lower of cost or
market as determined by the retail method (average cost basis), after deducting
from such book values all appropriate reserves in accordance with GAAP
(including all reserves for doubtful receivables, obsolescence, depreciation and
amortization) and (ii) the aggregate amount of the indebtedness and other
liabilities of such Person and its subsidiaries (including tax and other proper
accruals) plus (b) indebtedness of such Person and its subsidiaries which is
subordinated in right of payment to the full and final payment of all of the
Obligations on terms and conditions acceptable to Lender.
1.9 "Apparel Group" shall mean, collectively, Borrowers and US
Subsidiaries which are Obligors.
1.10 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and revise
in good faith reducing the amount of Revolving Loans and Letter of Credit
Accommodations which would otherwise be available to Borrowers or (with respect
- 3 -
<PAGE> 8
to Additional L/C Accommodations) to Additional L/C Debtors under the lending
formula(s) provided for herein: (a) to reflect events, conditions, contingencies
or risks which, as determined by Lender in good faith, do or may affect either
(i) the Collateral, the Additional L/C Collateral or any other property which is
security for the Obligations or its value, (ii) the assets, business or
prospects of any Borrower, or any other Obligor or (iii) the security interests
and other rights of Lender in the Collateral or any other property which is
security for the Obligations (including the enforceability, perfection and
priority thereof) or (b) to reflect Lender's good faith belief that any
collateral report or financial information furnished by or on behalf of any
Borrower or any Obligor or any additional L/C Debtor to Lender is or may have
been incomplete, inaccurate or misleading in any material respect or (c) in
respect of any state of facts which Lender determines in good faith constitutes
an Event of Default or may, with notice or passage of time or both, constitute
an Event of Default.
1.11 "Bank Group" shall mean, individually and collectively, CoreStates
Bank, N.A., Mellon Bank, N.A., Chemical Bank, The Hong Kong and Shanghai Banking
Corporation and Marine Midland Bank, N.A., and their respective successors and
assigns.
1.12 "Bank Group Agreements" shall have the meaning ascribed thereto in
the Intercreditor Agreement.
1.13 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.14 "Business Day" shall mean (a) for the Prime Rate Loans, any day
other than a Saturday, Sunday, or other day on which commercial banks are
authorized or required to close under the laws of the State of New York or the
Commonwealth of Pennsylvania, and a day on which the Reference Bank and Lender
are open for the transaction of business, and (b) for all Eurodollar Rate Loans,
any such day as described in (a) above in this definition of Business Day,
excluding any day on which banks are closed for dealings in dollar deposits in
the London interbank market or other applicable Eurodollar Rate market.
1.15 "Cash Equivalents" shall mean, individually and collectively, (a)
securities with maturities of one year or less from the date of acquisition
thereof issued or fully guaranteed or insured by the United States Government or
any agency thereof, (b) certificates of deposit and eurodollar time deposits
with maturities of one year or less from the date of acquisition thereof and
overnight bank deposits with any commercial bank having capital and surplus in
excess of $500,000,000, (c) repurchase obligations of any commercial bank
satisfying the requirements of clause (b) of this definition, having a term of
not more than 30 days with respect to securities issued or fully guaranteed or
insured by the United States Government, (d) commercial paper of a domestic
issuer rated at least A-2 by Standard and Poor's Rating Group ("S&P") or P-2 by
Moody's Investors Service, Inc. ("Moody's""), (e) securities with maturities of
one year or less from the date of acquisition thereof issued or fully guaranteed
by any state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or territory or
by any foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by S&P or A by Moody's, (f) securities with
maturities of one year or less from the date of acquisition thereof backed by
standby letters of credit issued by any commercial bank satisfying the
requirements of clause (b) of this definition or (g) shares of money market
mutual or
- 4 -
<PAGE> 9
similar funds which invest exclusively in assets satisfying the requirements of
clauses (a) through (f) of this definition.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.17 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.18 "Concentration Accounts" shall mean, individually and
collectively, the concentration and cash management deposit account maintained
by CS Delaware at each of Mellon Bank, N.A. and CoreStates Bank, N.A.
1.19 "Congress Cash Collateral" shall mean, collectively, the sum of
$7,000,000 or cash equivalents or securities having a value of not less than
such amount pledged by Parent to Lender on the date hereof as security for the
Obligations, including, without limitation, Parent's reimbursement obligations
to Lender pursuant to the terms hereof for any draw under the Prepayment L/C and
the interest accruing thereon to the extent not paid to Parent.
1.20 "Credit Card Agreements" shall mean all agreements now or
hereafter entered into by Parent or a Subsidiary with any Credit Card Issuer or
Credit Card Processor, as the same may now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.21 "Credit Card Issuer" shall mean any person (including, without
limitation, the Financing Subsidiaries) who issues or whose members issue credit
cards used by customers of the Retail Store Subsidiaries to purchase goods,
including, without limitation, MasterCard or VISA bank credit or debit cards or
other bank credit or debit cards, and American Express, Discover, Diners Club,
Carte Blanche, the Fashion Bug Card and other non-bank credit or debit cards.
1.22 "Credit Card Processor" shall mean any servicing or processing
agent or any factor or financial intermediary who facilitates, services,
processes or manages the credit authorization, billing transfer and/or payment
from a Credit Card Issuer or Credit Card Processor and other procedures with
respect to any sales transactions of the Retail Stores involving credit card or
debit card purchases by customers using credit cards or debit cards issued by
any Credit Card Issuer.
1.23 "Credit Card Receivables" shall mean all accounts consisting of
the present and future rights of Parent or any Subsidiary of Parent (including,
without limitation, Borrowers and the Retail Store Subsidiaries) to payment by
Credit Card Issuers or Credit Card Processors for merchandise sold and delivered
to customers of the Retail Stores who have purchased such goods using a credit
card or a debit card issued by a Credit Card Issuer.
1.24 "Development Companies" shall mean, individually and collectively,
the nine (9) retail store real property development corporations as to which all
of the stock thereof is owned by Kafco Development Co., Inc.
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1.25 "Eligible Inventory" shall mean Inventory of each Borrower and of
each Retail Store Subsidiary, consisting of finished goods held for resale in
the ordinary course of the business of such Borrower or such Retail Store
Subsidiary, which are acceptable to Lender based on the criteria set forth below
and are located only at the premises set forth on Part A to Omnibus Schedule 2
hereto; provided, that, with respect to any such premises of any of Borrowers
not owned by such Borrower, Lender shall have received an agreement in writing
from the person in possession of such Inventory and/or the owner or operator of
such premises (including, without limitation, any other Borrower) in form and
substance satisfactory to Lender acknowledging Lender's first priority security
interest in the Inventory, waiving security interests and claims by such person
against the Inventory and permitting Lender access to, and the right to remain
on, the premises so as to exercise Lender's rights and remedies and otherwise
deal with the Collateral. In general, Eligible Inventory shall not include (a)
raw materials for such finished goods, (b) work-in-process; (c) components which
are not part of finished goods; (d) spare parts for equipment; (e) packaging and
shipping materials; (f) supplies used or consumed in such Borrower's or such
Retail Store Subsidiary's business; (g) Inventory in transit to Borrowers or any
Retail Store Subsidiary or at premises other than those set forth on Omnibus
Schedule 1 hereto (except Inventory in transit (i) to a warehouse location of
Borrowers listed on Omnibus Schedule 2 hereto, which Inventory is located in the
United States, has cleared United States customs and with respect to which all
United States import duties and foreign and domestic freight charges has been
paid, (ii) to the United States for which the foreign vendor thereof has been
paid the entire purchase price therefor and which is the subject of an ocean
bill of lading in the possession of a customs broker, as to which there has been
compliance with Section 4.1(g) hereof, and (iii) to any Retail Store Subsidiary
from a warehouse location of Borrowers); (h) Inventory subject to a security
interest or lien in favor of any person other than Lender except those
specifically permitted in this Agreement; (i) bill and hold goods; (j)
unserviceable, obsolete or slow moving Inventory; (k) Inventory which is not
subject to the first priority, valid and perfected security interest of Lender;
(l) returned, damaged and/or defective Inventory; (m) Inventory held for return
to vendors; (n) Inventory returned by customers and not held for resale; (o)
Inventory purchased or sold on consignment; and (p) Inventory consisting of
samples. General criteria for Eligible Inventory may be established and revised
from time to time by Lender in good faith. Any Inventory which is not Eligible
Inventory shall nevertheless be part of the Collateral and security for the
Obligations.
1.26 "Environmental Laws" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to any Borrower's
business and facilities (whether or not owned by it), including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes.
1.27 "Equipment" shall mean all of each Borrower's and Retail Store
Subsidiary's now owned and hereafter acquired equipment, machinery, computers
and computer hardware and software (whether owned or licensed), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.
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1.28 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.29 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b) or 414(c) of the
Code.
1.30 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrowers' Agent and approved by
Lender) on or about 9:00 a.m. (New York time) two (2) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to the
principal amount of the Eurodollar Rate Loans requested by and available to
Borrowers in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by Borrowers' Agent.
1.31 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.32 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.33 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the amount of the Revolving Loans
available to Borrowers as of such time based on the applicable lending formulas
described in Section 2.1(a)(i) hereof, as determined by Lender, and subject to
the Availability Reserves from time to time established by Lender hereunder,
minus (b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations, plus (ii) the aggregate amount of all then outstanding and unpaid
trade payables for merchandise owed to the United States and Canadian vendors
thereof by Borrowers and/or any other US Subsidiary which are sixty (60) days or
more past due as of such time and which are not disputed in good faith.
1.34 "Excluded Collections" shall have the meaning set forth in Section
5.2(b)(ii) hereof.
1.35 "Existing Loan Agreement" shall mean the Loan and Security
Agreement, dated October 24, 1995, among (a) Lender, (b) CS Delaware, CSI and FB
Apparel, (c) CS Delaware, as agent, and (d) Parent.
1.36 "Fashion Bug Card" shall mean the private label credit card or
private label credit cards issued by the Financing Subsidiaries (or any
subsequent Credit Card Issuer replacing the Financing Subsidiaries with respect
to such private label credit card or private label credit cards as to which
there has been compliance with Sections 4.1(h) and 9.15 hereof) to customers or
prospective customers of the Retail Store Subsidiaries.
1.37 "FB Distro" shall mean FB Distro, Inc., an Indiana corporation.
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1.38 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by any
Borrower or any Obligor or the Additional L/C Debtors in connection with this
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.39 "Financing Subsidiaries" shall mean, individually and
collectively, Fashion Service Corp., Fashion SPC, Inc. and Spirit of America
National Bank and any other Subsidiary of any of them engaged in financing
receivables owed to any of them by customers of the Retail Store Subsidiaries
who have purchased merchandise using the Fashion Bug Card.
1.40 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as 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 Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 1.6 and 9.13 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements of Parent delivered
to Lender prior to the date hereof.
1.41 "Gordon Brothers Valuation Review" shall mean the Inventory
Valuation and Limited Review, dated September 1995, prepared by Gordon Brothers
Partners, Inc. with respect to and appraising the Eligible Inventory of CSI, CS
Delaware, FB Apparel and the Retail Store Subsidiaries.
1.42 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
1.43 "Indemnity L/Cs" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
1.44 "Intercreditor Agreement" shall mean the Intercreditor Agreement
referred to in Section 4.1(k) hereof and dated of even date, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.45 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrowers' Agent may elect, the exact duration to be determined in accordance
with the customary practice in the applicable Eurodollar Rate market; provided,
that, Borrowers' Agent may not elect an Interest Period which will end after the
last day of the then-current term of this Agreement.
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1.46 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of
three-quarters of one percent (3/4%) percent per annum in excess of the Prime
Rate and, as to Eurodollar Rate Loans, a rate of three and three-eighths
(3-3/8%) percent per annum in excess of the Adjusted Eurodollar Rate (based on
the Eurodollar Rate applicable for the Interest Period selected by Borrowers'
Agent as in effect three (3) Business Days after the date of receipt by Lender
of the request of Borrowers' Agent for such Eurodollar Rate Loans in accordance
with the terms hereof, whether such rate is higher or lower than any rate
previously quoted to Borrowers); provided, that, the Interest Rate shall mean
the rate of two and quarter (2- 3/4%) percent per annum in excess of the Prime
Rate as to Prime Rate Loans and the rate of five and three- eighths (5-3/8%)
percent per annum in excess of the Adjusted Eurodollar Rate as to Eurodollar
Rate Loans, at Lender's option, without notice, (a) for the period on and after
the date of termination or non-renewal hereof, or the date of the occurrence of
any Event of Default, and for so long as such Event of Default or period on or
after the date of termination or non-renewal hereof is continuing as determined
by Lender and until such time as all Obligations are indefeasibly paid in full
(notwithstanding entry of any judgment against Borrowers) and (b) on the
Revolving Loans at any time outstanding in excess of the amounts available to
Borrowers under Section 2 (whether or not such excess(es), arise or are made
with or without Lender's knowledge or consent and whether made before or after
an Event of Default). Each rate referred to in this Section 1.46 is subject to a
one time reduction as set forth in Section 3.1(e) hereof.
1.47 "Inventory" shall mean all of each Borrower's and each Retail
Store Subsidiary's now owned and hereafter existing or acquired raw materials,
work in process, finished goods and all other inventory of whatsoever kind or
nature, wherever located.
1.48 "Inventory Advance Rate" shall mean fifty-five (55%) percent from
the date hereof to January 1, 1996, fifty-four (54%) percent from January 1,
1996 to February 1, 1996, fifty-three (53%) percent from February 1, 1996 to
March 1, 1996, fifty-two (52%) percent from March 1, 1996 to April 1, 1996,
Fifty-one (51%) percent from April 1, 1996 to May 1, 1996 and fifty (50%)
percent on May 1, 1996 and thereafter.
1.49 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties, including, without limitation,
the Additional L/C Accommodations, (a) which are from time to time issued or
opened by Lender for the account of any of Borrowers or any Obligor or any
Additional L/C Debtor (including, but not limited to, the Prepayment L/C and the
Indemnity L/Cs) or (b) with respect to which Lender has agreed to indemnify the
issuer or guaranteed to the issuer the performance by any of Borrowers or any
Obligor or any Additional L/C Debtor of its obligations to such issuer
(including, without limitation, the Prepayment L/C and the Indemnity L/Cs).
1.50 "Loans" shall mean the Revolving Loans.
1.51 "Material Adverse Retail Store Event" means a condition or
occurrence or event as to any number of the Retail Store Subsidiaries which in
Lender's reasonable judgment adversely affects the Collateral or other property
which is security for the Obligations or the consolidated assets, business or
operations of the Retail Store Subsidiaries or the Apparel Group, taken as a
whole, in any material respect.
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1.52 "Maximum Credit" shall mean the amount of $157,000,000, subject to
reduction to $150,000,000 upon the earlier of (i) termination or expiration of
the Prepayment L/C, without any draw being made thereunder, or (ii) any drawing
under the Prepayment L/C and payment of such drawing.
1.53 "Mortgages" shall mean, individually and collectively, each of the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (a) the Open-End
Mortgage and Security Agreement, dated of even date herewith, by Winks in favor
of Lender with respect to the Real Property and related assets of Winks in
Bensalem, Pennsylvania, and (b) the Mortgage and Security Agreement, dated of
even date herewith, by FB Distro in favor of Lender with respect to the Real
Property and related assets of FB Distro in Greencastle, Indiana.
1.54 "Noteholders" shall mean, individually and collectively, Allstate
Life Insurance Company on behalf of Harris Trust and Savings Bank as Collateral
Agent and Trustee under Security and Trust Agreement dated as of September 1,
1993, AID Association for Lutherans and Nationwide Life Insurance Company and
their respective successors and assigns.
1.55 "Noteholders Agreements" shall mean the "Insurance Group
Agreements" as defined in the Intercreditor Agreement.
1.56 "Obligations" shall mean any and all Revolving Loans, all Letter
of Credit Accommodations and all other obligations, liabilities and indebtedness
of every kind, nature and description owing by any or all of Borrowers, Retail
Store Subsidiaries, other Obligors or Additional L/C Debtors to Lender (but not
owed solely to any affiliate of the original Lender), including principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, whether arising under this
Agreement or otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to any or all of
Borrowers, any Retail Store Subsidiary or other Obligor or Additional L/C Debtor
under the United States Bankruptcy Code or any similar statute (including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the commencement of such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by Lender.
1.57 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than any of Borrowers
or the Additional L/C Debtors, but including, without limitation, each of the
Retail Store Subsidiaries.
1.58 "Participant" shall mean any person which at any time participates
with Lender in respect of the Loans, the Letter of Credit Accommodations or
other Obligations or any portion thereof.
1.59 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.60 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code of
1986, as amended), business trust, unincorporated association, joint stock
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corporation, limited liability company, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.61 "Prepayment L/C" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
1.62 "Prepayment Amount" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
1.63 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.64 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.65 "Real Property" shall mean all now owned and hereafter acquired
real property of Borrowers and Obligors (other than the Development Companies),
including leasehold interests, together with all buildings, structures, and
other improvements located thereon and all licenses, easements and appurtenances
relating thereto, wherever located, including without limitation, the real
property and related assets more particularly described in the Mortgages.
1.66 "Records" shall mean all of each Borrower's and each Obligor's
present and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping evidence
or documents of title, statements, correspondence, memoranda, credit files and
other data relating to the Collateral or other property which is security for
the Obligations or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored (including any rights of such
Borrower or Obligor with respect to the foregoing maintained with or by any
other person).
1.67 "Reference Bank" shall mean CoreStates Bank, N.A., or such other
bank as Lender may from time to time designate.
1.68 "Retail Sales Price" shall mean the current ticketed sales price
in the Retail Stores, net of markdowns from the original retail sales price with
respect thereto, for the types, categories and styles of inventory included in
the Eligible Inventory of Borrowers and the Retail Store Subsidiaries.
1.69 "Retail Stores" shall mean the retail stores which are operated by
US Subsidiaries of Parent and which sell Inventory purchased from Borrowers.
1.70 "Retail Store Subsidiary" shall mean a US Subsidiary of Parent
which owns a Retail Store or which has owned a Retail Store in the past or which
is now or hereafter organized to operate a Retail Store in the future.
1.71 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrowers on a revolving basis (involving
advances, repayments and readvances) as set forth
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in Section 2.1 hereof and payments made by Lender to any issuer of Letter of
Credit Accommodations or to the beneficiary of any Letter of Credit
Accommodations opened by Lender pursuant to Section 2.2.
1.72 "Subsidiary" shall mean any corporation of which more than fifty
(50%) percent of the outstanding securities of any class or classes thereof, as
to which the holders thereof are ordinarily, in the absence of contingencies,
entitled to elect a majority of the directors (or Persons performing similar
functions), of such corporation, is now or hereafter directly or indirectly
(through one or more intermediaries), owned by Parent or any of Borrowers and/or
one or more of their Subsidiaries.
1.73 "Term Loan Priority Collateral" shall have the meaning ascribed
thereto in the Intercreditor Agreement.
1.74 "Trade Financing Agreement" shall mean, individually and
collectively, (a) the Trade Financing Agreement [Security Agreement] between the
Additional L/C Debtors (other than CS Insurance Limited) and Lender, dated as of
the date hereof, (b) the Letter of Credit Reimbursement Agreement between CS
Insurance Ltd. and Lender, dated of even date, and (c) all other agreements,
documents and instruments executed in connection with the foregoing as all of
the foregoing now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.75 "US Subsidiary" means a Subsidiary which is a corporation
organized under the laws of the United States of America or of any state within
the United States of America, except that such term shall not include the
Financing Subsidiaries or Executive Flights, Inc.
1.76 "Value" shall mean, with respect to Inventory, the lower of (a)
cost as determined by the retail method (average cost basis) in accordance with
GAAP or (b) market value.
1.77 "Winks" shall mean Winks Lane, Inc., a Pennsylvania corporation.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrowers from time to time in
amounts requested by Borrowers' Agent of up to the amount equal to the sum of:
(i) the lesser of: (A) the Inventory Advance Rate multiplied
by the Value of the Eligible Inventory, or (B) twenty-five (25%)
percent of the Retail Sales Price of the Eligible Inventory, less
(ii) any Availability Reserves.
(b) For purposes of determining the "cost" of Inventory
hereunder, with respect to any Inventory sold by a Borrower to any other
Borrower or a Retail Store Subsidiary, such term shall mean
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the original cost thereof to the Borrower or Subsidiary which originally
purchased such Inventory and shall not include any mark up or profit on such
intercompany sale.
(c) Lender may, in its reasonable discretion, from time to
time, upon not less than two (2) days prior notice to Borrowers' Agent, reduce
the lending formula(s) with respect to Eligible Inventory to the extent that
Lender determines that: (A) the number of days of the turnover of the Inventory
for any period has changed in any material respect or (B) the liquidation value
of the Eligible Inventory has decreased in any material respect, or (C) the
nature and quality of the Inventory has deteriorated in any material respect. In
determining whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Inventory or in establishing Availability Reserves.
(d) Except in Lender's discretion, the aggregate amount of the
Loans and Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(c) or the Maximum Credit, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrowers shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained
herein, at the request of Borrowers' Agent, Lender agrees to provide or arrange
for Letter of Credit Accommodations for the account of Borrowers or any
Additional L/C Debtor containing terms and conditions acceptable to Lender and
the issuer thereof. Any payments made by Lender to any issuer thereof and/or
related parties in connection with the Letter of Credit Accommodations shall
constitute additional Revolving Loans to Borrowers pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations, Borrowers
shall pay to Lender a letter of credit fee at a rate equal to one and
three-eighths (1-3/8%) percent per annum on the daily outstanding balance of the
Letter of Credit Accommodations for the immediately preceding month (or part
thereof), except with respect to the outstanding maximum amount of the
Prepayment L/C, minus the outstanding amount of the Congress Cash Collateral,
Borrowers shall pay to Lender a letter of credit fee at a rate equal to one and
five-eighths (1-5/8%) percent per annum on the daily outstanding balance of such
amount of the Prepayment L/C for the immediately preceding month (or part
thereof), payable in arrears as of the first day of each succeeding month;
provided, however, that such letter of credit fee shall be increased, at
Lender's option without notice, to three and three-eighths (3-3/8%) percent per
annum for the period on or after the date of termination or non-renewal of this
Agreement, or the date of occurrence of an Event of Default and during the
continuation thereof. Such letter of credit fee shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrowers to pay such fee shall survive the termination or
non-renewal of this Agreement. Notwithstanding anything to the contrary
contained in this Section 2.2(b) hereof, the letter of credit fees referred to
herein shall be
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reduced, only once, by one-eighth of one (1/8%) percent if (i) the Adjusted Cash
Flow of Parent for Parent's immediately prior fiscal year commencing after the
date hereof, based upon Parent's annual audited financial statements prepared on
a consolidated basis for such fiscal year received by Lender, is greater than
$5,000,000 and (ii) as of the effective date of such reduction in the fee, the
Excess Availability as determined by Lender is not less than $50,000,000. Such
reduction in the Letter of Credit fees shall become effective upon acceptance of
such financial statements by Lender which shall be deemed to have occurred
automatically on the tenth (10th) Business Day after receipt of such financial
statements by Lender, unless Lender shall have notified Borrowers' Agent
otherwise.
(c) No Letter of Credit Accommodations shall be available
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to Borrowers based on the
applicable lending formulas described in Section 2.1(a) hereof (subject to the
Maximum Credit and any Availability Reserves) are equal to or greater than: (i)
if the proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory, the sum of (A) one hundred (100%) percent of the face amount
thereof, minus the lending formula for Eligible Inventory set forth in Section
2.1(a)(i) hereof, multiplied by the cost of the Eligible Inventory which is the
subject of such Letter of Credit, plus (B) freight, taxes, duties and other
amounts which Lender estimates must be paid in connection with such Eligible
Inventory upon arrival and for delivery to one of Borrowers' locations for
Eligible Inventory within the United States of America and (ii) if the proposed
Letter of Credit Accommodation is for any other purpose (including, without
limitation, the acquisition of raw materials) or does not require the
presentation thereunder of a copy of a cargo receipt, bill of lading or other
transport document with respect to Eligible Inventory, including, but not
limited to, the outstanding maximum amount of the Prepayment L/C, minus the
outstanding amount of the Congress Cash Collateral, and any portion of the
Indemnity L/Cs in excess of the amount of the letters of credit and guaranties
indemnified thereunder or which does not relate to or is in excess of the cost
of Eligible Inventory to be acquired thereunder by any of the account parties
thereunder, an amount equal to one hundred (100%) percent of the face amount
thereof and all other commitments and obligations made or incurred by Lender
with respect thereto. Effective on the issuance of each Letter of Credit
Accommodation, the amount of Revolving Loans which might otherwise be available
to Borrowers shall be reduced by the applicable amount set forth in Section
2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith, shall not at any time exceed (A)
the Maximum Credit, minus (B) the aggregate amount of the then outstanding
Revolving Loans. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrowers will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrowers shall not be reduced as provided in Section
2.2(c) to the extent of such cash collateral.
(e) Borrowers shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation, except
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as a result of an intentional breach of contract by Lender or Lender's own acts
or omissions constituting gross negligence or willful misconduct, as determined
pursuant to a final and non-appealable judgment or order of a court of competent
jurisdiction. Borrowers assume all risks with respect to the acts or omissions
of the drawer under or beneficiary of any Letter of Credit Accommodation and for
such purposes the drawer or beneficiary shall be deemed the agent of Borrowers.
Borrowers assume all risks for, and agrees to pay, all foreign, Federal, State
and local taxes, duties and levies relating to any goods subject to any Letter
of Credit Accommodations or any documents, drafts or acceptances thereunder.
Borrowers hereby release and hold Lender harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by Borrowers, by any issuer
or correspondent or otherwise with respect to or relating to any Letter of
Credit Accommodation, except as a result of an intentional breach of contract by
Lender or Lender's own acts or omissions constituting gross negligence or
willful misconduct, as determined pursuant to a final and non-appealable
judgment or order of a court of competent jurisdiction. The provisions of this
Section 2.2(e) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrowers, any Additional L/C Debtor or Borrowers' Agent any right or
authority to pledge the credit of Lender in any manner. Lender shall have no
liability of any kind with respect to any Letter of Credit Accommodation
provided by an issuer other than Lender unless Lender has duly executed and
delivered to such issuer the application or a guarantee or indemnification in
writing with respect to such Letter of Credit Accommodation. Borrowers and
Additional L/C Debtors shall be bound by any interpretation made in good faith
by Lender, or any other issuer or correspondent under or in connection with any
Letter of Credit Accommodation or any documents, drafts or acceptances
thereunder, notwithstanding that such interpretation may be inconsistent with
any instructions of Borrowers. In connection with any Letter of Credit
Accommodations, Lender shall have the sole and exclusive right and authority to,
and Borrowers, Additional L/C Debtors and Borrowers' Agent shall not: (i) at any
time an Event of Default exists or has occurred and is continuing, (A) approve
or resolve any questions of non-compliance of documents, (B) give any
instructions as to acceptance or rejection of any documents or goods or (C)
execute any and all applications for steamship or airway guaranties, indemnities
or delivery orders, and (ii) at any time without the prior written approval of
Lender, (A) grant any extensions of the maturity of, expiration date of, any
drafts, acceptances, letters of credit or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral, except (unless an Event of Default or a
condition or event which, with notice or the passage of time or both, would
constitute an Event of Default has occurred), Borrowers and Additional L/C
Debtors may waive discrepancies in the presentation of documents required for
payment under any Letter of Credit Accommodations other than for the required
presentation or delivery of a bill of lading or cargo receipt or other transport
document with respect to Eligible Inventory thereunder. Lender may take such
actions either in its own name or in the name of any of Borrowers.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrowers to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been granted or undertaken by Borrowers and Additional L/C
Debtors to Lender. Any duties or obligations undertaken by Lender to any issuer
or correspondent in any application for any
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Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrowers to Lender and to apply in all
respects to Borrowers.
2.3 Availability Reserves. All Revolving Loans otherwise available to
Borrowers pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves, including, without limitation,
Availability Reserves for unpaid foreign and domestic freight charges and unpaid
United States customs fees and duties with respect to imported Inventory.
2.4 Acknowledgement of Existing Obligations. Borrowers hereby
acknowledge, confirm and agree that (a) each of them are directly obligated to
Lender for all Obligations (as such term is defined in the Existing Loan
Agreement), all of which Obligations are unconditionally owing by Borrowers to
Lender without offset, defense or counterclaim of any kind, nature or
description whatsoever, (b) all of such Obligations are secured by a valid,
enforceable and (unless otherwise specifically consented to in writing by
Lender) perfected security interests in all "Collateral" (as defined in the
Existing Loan Agreement) and all other property securing such Obligations, (c)
the outstanding amount of the Revolving Loans, Letter of Credit Accommodations
and Obligations (as each of such terms is defined in the Existing Loan
Agreement) shall be and are included in and shall be part of, respectively, the
Revolving Loans, Letter of Credit Accommodations and Obligations pursuant to
this Agreement, and (d) nothing contained in this Agreement, the transactions in
connection herewith or otherwise shall in any manner be construed to constitute
payment or satisfaction or impair, cancel, extinguish, terminate or constitute a
novation of any Borrower's or any Obligor's indebtedness, obligations or
liabilities to Lender arising under or evidenced by the existing Loan Agreement
or otherwise or with respect to the security interests and liens securing such
indebtedness, obligations and liabilities.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Lender interest on the outstanding
principal amount of the non- contingent Obligations at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Borrowers' Agent may from time to time request that Prime
Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar
Rate Loans continue for an additional Interest Period. Such request from
Borrowers' Agent shall specify the amount of the Prime Rate Loans which will
constitute Eurodollar Rate Loans (subject to the limits set forth below) and the
Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the
terms and conditions contained herein, three (3) Business Days after receipt by
Lender of such a request from Borrowers' Agent, such Prime Rate Loans shall be
converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue,
as the case may be, provided, that, (i) no Event of Default, or event which with
notice or passage of time or both would constitute an Event of Default exists or
has occurred and is continuing, (ii) no party hereto shall have sent any notice
of termination or non-renewal of this Agreement, (iii) Borrowers and Borrowers'
Agent shall have complied with such customary procedures as are established by
Lender and
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specified by Lender to Borrowers' Agent from time to time for requests by
Borrowers' Agent for Eurodollar Rate Loans, (iv) no more than five (5) Interest
Periods may be in effect at any one time, (v) the aggregate amount of the
Eurodollar Rate Loans must be in an amount not less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof, (vi) the maximum amount of
the Eurodollar Rate Loans at any time requested by Borrowers' Agent shall not
exceed the amount equal to eighty (80%) percent of the daily average of the
principal amount of the Revolving Loans and Letter of Credit Accommodations
which it is anticipated will be outstanding during the applicable Interest
Period, in each case as determined by Lender (but with no obligation of Lender
to make such Revolving Loans and Letter of Credit Accommodations) and (vii)
Lender shall have determined that the Interest Period or Adjusted Eurodollar
Rate is available to Lender through the Reference Bank and can be readily
determined as of the date of the request for such Eurodollar Rate Loan by
Borrowers' Agent. Any request by Borrowers' Agent to convert Prime Rate Loans to
Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Lender
and Reference Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Lender and Reference Bank had purchased such deposits to
fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate Loan
at least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrowers' Agent, convert to Prime Rate Loans in the event that (i)
an Event of Default or event which with the notice or passage of time or both
would constitute an Event of Default, shall exist, (ii) this Agreement shall
terminate or not be renewed, or (iii) the aggregate principal amount of the
Prime Rate Loans which have previously been converted to Eurodollar Rate Loans
or existing Eurodollar Rate Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time during such Interest Period
exceed either (A) the aggregate principal amount of the Loans then outstanding,
or (B) the then outstanding principal amount of the Revolving Loans then
available to Borrowers under Section 2 hereof. Borrowers shall pay to Lender,
upon demand by Lender (or Lender may, at its option, charge any loan account of
Borrowers) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (including loss of anticipated profits),
cost or expense incurred by such person, as a result of the conversion of
Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Lender monthly
in arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrowers to Lender exceed the maximum amount
or the rate permitted under any applicable law or regulation, and if any such
part or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
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(e) The Interest Rate shall be automatically reduced, but not
more than once, by one eighth of one (1/8%) percent if (i) the Adjusted Cash
Flow of Parent, for its immediately prior fiscal year commencing after the date
hereof, based upon its annual audited financial statements on a consolidated
basis for such fiscal year received by Lender, is greater than $5,000,000 and
(ii) as of the effective date of such reduction, the Excess Availability is
greater than $50,000,000. Such reduction in the Interest Rate shall become
effective upon acceptance of such financial statements by Lender which shall be
deemed to have occurred automatically on the tenth (10th) Business Day after
receipt of such financial statements by Lender, unless Lender shall have
notified Borrowers' Agent otherwise.
3.2 Closing Fee. Borrowers shall pay to Lender as a closing fee the
amount of $1,962,500 which fee shall be fully earned as of the date hereof, of
which (i) the sum of $937,500 previously paid to Lender as a commitment fee
shall be credited against such closing fee, (ii) the sum of $43,750 shall be due
and payable on the date hereof, (iii) the sum of $490,625 shall be due and
payable six (6) months from the date hereof and (iv) the sum of $490,625 shall
be due and payable one (1) year from the date hereof.
3.3 Servicing Fee. Borrowers shall pay to Lender an annual servicing
fee in an amount equal to $100,000 in respect of Lender's services for each year
or part thereof while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the date hereof and on each annual
anniversary of the date hereof.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee equal to a rate equal to three-eighths of one (3/8%) percent per annum
calculated upon the amount by which $105,000,000 exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations (exclusive of the Prepayment L/C) during the immediately
preceding month while this Agreement is in effect and for so long thereafter as
any of the Obligations are outstanding, which fee shall be payable on the first
day of each month in arrears.
3.5 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Lender to Borrowers' Agent,
convert to Prime Rate Loans in the event that (i) any change in applicable law
or regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, by an amount deemed by Lender to be material, or
(B) shall result in the increase in the costs to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans or (C) reduce the
amounts received or receivable by Lender in respect thereof, by an amount deemed
by Lender to be material or (ii) the cost to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans shall otherwise
increase by an amount deemed by Lender to be material. Borrowers shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrowers) any amounts required to compensate Lender, the Reference
Bank or any participant with Lender for any loss (including loss of anticipated
profits), cost or expense incurred by such person as a result of the foregoing,
including, without limitation, any such loss, cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such
person to make or maintain the Eurodollar Rate Loans or any portion thereof. A
certificate of Lender setting forth the basis for the
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determination of such amount necessary to compensate Lender as aforesaid shall
be delivered to Borrowers' Agent and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar
Rate Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrowers shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss, cost or
expense incurred by such person as a result of such prepayment or payment,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
person to make or maintain such Eurodollar Rate Loans or any portion thereof.
3.6 Compensation Adjustment.
(a) If after the date of this Agreement the introduction of,
or any change in, any law or any governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
interpretation thereof, or compliance by Lender or any Participant therewith:
(i) subjects Lender to any tax, duty, charge or
withholding on or from payments due from Borrowers (excluding franchise taxes,
imposed upon, and taxation of the overall net income of, Lender or any
Participant), or changes the basis of taxation of payments, in either case in
respect of amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve
requirement or other reserve, assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by Lender or any Participant, or
(iii) imposes any other condition the result of which is to
increase the cost to Lender or any Participant of making, funding or maintaining
the Revolving Loans or Letter of Credit Accommodations or reduces any amount
receivable by Lender or any Participant in connection with the Revolving Loans
or Letter of Credit Accommodations, or requires Lender or any Participant to
make payment calculated by references to the amount of loans held or interest
received by it, by an amount deemed material by Lender or any Participant, or
(iv) imposes or increases any capital requirement or
affects the amount of capital required or expected to be maintained by Lender or
any Participant or any corporation controlling Lender or any Participant, and
Lender or any Participant determines that such imposition or increase in capital
requirements or increase in the amount of capital expected to be maintained is
based upon the existence of this Agreement or the Revolving Loans or Letter of
Credit Accommodations hereunder, all of which may be determined by Lender's
reasonable allocation of the aggregate of its impositions or increases in
capital required or expected to be maintained,
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining the Revolving Loans or Letter of Credit
Accommodations, or to reduce the rate of return to
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Lender or any Participant on the Revolving Loans or Letter of Credit
Accommodations, then upon demand by Lender, Borrowers shall pay to Lender, and
continue to make periodic payments to Lender or any Participant, such additional
amounts as may be necessary to compensate Lender or any Participant for any such
additional cost incurred or reduced rate of return realized.
(b) A certificate of Lender claiming entitlement to compensation
as set forth above will be conclusive in the absence of manifest error. Such
certificate will set forth the nature of the occurrence giving rise to such
compensation, the additional amount or amounts to be paid and the compensation,
and the method by which such amounts were determined. In determining any
additional amounts due from Borrowers under this Section 3.6, Lender shall act
reasonably and in good faith and will, to the extent that the increased costs,
reductions, or amounts received or receivable relate to the Lender's loans or
commitments generally and are not specifically attributable to the Revolving
Loans and commitments hereunder, use averaging and attribution methods which are
reasonable and equitable and which cover all loans and commitments under this
Agreement by such Lender, as the case may be, whether or not the loan
documentation for such other loans and commitments permits such Lender to
receive compensation costs of the type described in this Section 3.6.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans hereunder and providing the Letter of Credit Accommodations
pursuant to this Agreement:
(a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and (except to the
extent otherwise consented to in writing by Lender) first priority security
interests in and liens upon the Collateral and any other property which is
intended to be security for the Obligations or the liability of any Obligor in
respect thereof, except for any senior or subordinate security interests and
liens permitted herein, in the Intercreditor Agreement or in the other Financing
Agreements;
(b) all requisite corporate actions and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including, without limitation, records
of requisite corporate action and proceedings which Lender may have requested in
connection therewith, such documents where requested by Lender or its counsel to
be certified by appropriate corporate officers or governmental authorities;
(c) no material adverse change shall have occurred in the
consolidated assets, business or prospects of the Apparel Group since the date
of Lender's latest field examination and no change or event shall have occurred
which would impair the ability of any Borrower or any Obligor to perform its
obligations hereunder or under any of the other Financing Agreements to which it
is a party or of Lender to enforce the Obligations or realize upon the
Collateral, except, with respect to only the Retail Store Subsidiaries, any such
change or event which is not a Material Adverse Retail Store Event;
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(d) Lender shall have completed an updated field review of the
Records and such other information with respect to the Collateral and other
property which is security for the Obligations or the liability of any Obligor
or Additional L/C Debtor in respect thereof as Lender may require to determine
the amount of Revolving Loans available to Borrowers, the results of which shall
be satisfactory to Lender, not more than three (3) business days prior to the
date of the initial Loans hereunder;
(e) Lender shall have received, in form and substance
satisfactory to Lender, (i) a guarantee of payment by each Borrower of the
Obligations owed by each of the other Borrowers, the Obligors and the Additional
L/C Debtors, and (ii) a guarantee of payment by all other US Subsidiaries
(including, without limitation the Retail Store Subsidiaries) of all
Obligations, secured by a first and only security interest in favor of Lender
granted by all other US Subsidiaries (including, without limitation, the Retail
Store Subsidiaries, but excluding the Financing Subsidiaries, Executive Flights,
Inc. and the Retail Store Subsidiaries that are not presently operating a Retail
Store and which have no material assets), except as otherwise agreed in writing
by Lender, in all of their existing and future assets;
(f) Lender shall have received the original executed copy of
each promissory note and security agreement executed in favor of any Borrower or
any US Subsidiary by a Retail Store Subsidiary and photocopies of all UCC
Financing Statements filed with respect thereto and, at the request of Lender,
any other documents executed or delivered in connection therewith;
(g) except as otherwise agreed by Lender, Lender shall have
received, in form and sub stance satisfactory to Lender, all consents, waivers,
acknowledgments and other agreements from third persons which Lender may deem
necessary or desirable in order to permit, protect and perfect its security
interests in and liens upon the Collateral and the other property securing the
Obligations or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including, without limitation, acknowledgements
by lessors, mortgagees, warehousemen, customs brokers, freight forwarders and
cargo consolidators (including, without limitation, American Consolidation
Services, Ltd.) of Lender's security interests in the Collateral and the other
property securing the Obligations, waivers by such persons of any security
interests, liens or other claims by such persons to the Collateral and
agreements permitting Lender access to, and the right to remain on, the premises
(except with respect to locations of the Retail Stores) in which Collateral is
located to exercise its rights and remedies and otherwise deal with the
Collateral;
(h) all Credit Card Issuers and Credit Card Processors
(including, without limitation, the Financing Subsidiaries) shall have been
irrevocably directed by the US Subsidiary or US Subsidiaries which are parties
to Credit Card Agreements, and such Credit Card Companies and Credit Card
Processors shall agree, that all proceeds of Credit Card Receivables shall be
remitted to the Blocked Accounts;
(i) Borrowers shall have Excess Availability as determined by
Lender, as of the date hereof, in an amount not less than $110,000,000 or, if
Borrowers have made scheduled payments of an aggregate amount up to $30,000,000
on or before the date hereof to United States vendors of merchandise (other than
any Subsidiary) or their factors for invoices which were due and payable on
November 10, 1995, and Lender has received evidence of such payment in form and
substance satisfactory to Lender, then such Excess Availability shall be not
less than an amount equal to $110,000,000 minus the amount of such payments of
up to an aggregate amount of $30,000,000, after
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giving effect to the initial Loans made or to be made and Letter of Credit
Accommodations issued or to be issued in connection with the initial
transactions hereunder; for purposes only of this Section 4.1(i), such
calculation of Excess Availability shall not be limited by the amount of the
Maximum Credit.
(j) Lender shall have received, in form and substance
satisfactory to Lender, copies of the Bank Group Agreements and the Noteholder
Agreements, each duly authorized, executed and delivered by the Borrowers,
Obligors and each of the Bank Group and the Noteholders, respectively.
(k) Lender shall have received, in form and substance
satisfactory to Lender, the Intercreditor Agreement among Lender, the Bank
Group, the Noteholders and their respective agents and trustees, as acknowledged
and agreed to by Borrowers and the Obligors, providing for the relative rights
and priorities of each party to such Intercreditor Agreement with respect to the
assets and properties of Borrowers and Obligors, the permitted payments to be
made by Borrowers and Obligors with respect to the indebtedness of each owed to
the Bank Group and the Noteholders and related matters, duly authorized,
executed and delivered by the Bank Group, the Noteholders, their respective
agents and trustees and Lender;
(l) Lender shall have received, in form and substance
satisfactory to Lender, an intercompany subordination agreement among Lender,
the Bank Group, the Noteholders and each of the Subsidiaries, as acknowledged
and agreed to by Borrowers, providing for the subordination of certain
indebtedness of Borrowers and the Subsidiaries to one another (but which shall
not include Credit Card Receivables owed by the Financing Subsidiaries and
accounts owed by the Retail Store Subsidiaries or any of the other Subsidiaries
to the Borrowers or to any other Retail Store Subsidiary) to the prior payment
in full of all Obligations and the indebtedness owing to the Bank Group and the
Noteholders;
(m) Lender shall have received, in form and substance
satisfactory to Lender, such blocked account and/or deposit account agreements
as are more particularly described in Section 6.3(a) hereof;
(n) Each of the depository banks used by the Retail Store
Subsidiaries for the deposit of Retail Store receipts from the sale of
merchandise and by any of the Borrowers or other Obligors for the deposit of
other proceeds of Collateral and other property which is security for the
Obligations shall have been notified of Lender's security interest therein and
shall have been irrevocably authorized and directed to send all funds on deposit
with such banks only to the Concentration Accounts or as Lender otherwise
directs;
(o) Lender shall have received, in form and substance,
satisfactory to Lender, the executed Trade Financing Agreement;
(p) Lender shall have received the Congress Cash Collateral,
which shall be of a type acceptable to Lender, and a pledge in favor of Lender
of the cash surrender value of all life insurance policies owned by Borrowers or
any Obligor, together with such pledge agreements and other agreements and
documents as Lender shall require in connection therewith, all in form and
substance satisfactory to Lender.
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(q) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(r) Lender shall have received, in form and substance
satisfactory to Lender, a valid and effective title insurance policy (or any
irrevocable commitment therefor with all conditions and exceptions deleted or
marked as being satisfied) issued by a company and agent acceptable to Lender
(i) insuring the priority, amount and sufficiency of the Mortgages, (ii)
insuring against matters that would be disclosed by surveys and (iii) containing
any legally available endorsements, assurances on affirmative coverage requested
by Lender for protection of its interest;
(s) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrowers, the US
Subsidiaries and the Additional L/C Debtors with respect to the Financing
Agreements and such other matters as Lender may request; and
(t) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and providing Letter of Credit Accommodations to Borrowers,
including the initial Loans and Letter of Credit Accommodations and any future
Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
5.1 Collateral. To secure payment and performance of all Obligations,
each Borrower hereby grants to Lender and confirms its prior grant to Lender of
a continuing security interest in, a lien upon, and a right of set off against,
and hereby assigns to Lender as security, the following property and interests
in property of such Borrower, whether now owned or hereafter acquired or
existing, and wherever located (collectively, the "Collateral"):
(a) all of such Borrower's Accounts, Credit Card Receivables
and indebtedness owed to such Borrower, including, without limitation, by the
other Borrowers, or by any of the other Subsidiaries, together with any
collateral therefor;
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(b) all of such Borrower's present and future contract rights,
general intangibles (including, but not limited to, tax and duty refunds,
registered and unregistered patents, trademarks, service marks, copyrights,
trade names, applications for the foregoing, trade secrets, goodwill, processes,
drawings, blueprints, customer lists, licenses, whether as licensor or licensee,
choses in action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents (including,
without limitation, bills of lading, warehouse receipts and cargo receipts),
instruments, securities (including stock in US Subsidiaries), cash surrender
value of life insurance policies owned by such Borrowers, letters of credit,
bankers' acceptances and guaranties;
(c) all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of such Borrower now or hereafter
held or received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of such Borrower,
whether for safekeeping, pledge, custody, transmission, collection or otherwise,
and all present and future liens, security interests, rights, remedies, title
and interest in, to and in respect of such Borrower's Accounts, Inventory and
the other Collateral, including, without limitation, (i) rights and remedies
under or relating to guaranties, contracts of suretyship, letters of credit and
credit and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts, cargo receipts or instruments with respect to, or
otherwise representing or evidencing, such Borrower's Accounts, Inventory or
other Collateral, including, without limitation, returned, repossessed and
reclaimed goods, and (iv) deposits by and property of account debtors or other
persons securing the obligations of account debtors;
(d) Inventory of such Borrower;
(e) Equipment of such Borrower;
(f) Real Property of such Borrower;
(g) Records of such Borrower; and
(h) all products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
5.2 Excluded Collateral. Notwithstanding subsection 5.1 of this Section
5, the Collateral shall not include (a) the stock of (i) any subsidiary that is
not a US Subsidiary, (ii) the Financing Subsidiaries, (iii) FSHC, Inc., (iv)
Kafco Development Corp., (v) the Development Companies, (vi) Executive Flights,
Inc., and (vii) any Retail Store Subsidiary that does not currently and does not
intend in the future to own or operate a Retail Store and (b) all (i)
receivables owed to the Financing Subsidiaries as a Credit Card Issuer by
customers of the Retail Store Subsidiaries who have purchased merchandise using
the Fashion Bug Card and (ii) collections from such customers for such
receivables ("Excluded Collections").
5.3 Release or Return of Congress Cash Collateral. If the Prepayment
L/C expires or is canceled without any draw thereunder or to the extent that the
remaining Congress Cash Collateral exceeds the
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amount of any draws under the Prepayment L/C and the Prepayment L/C has expired,
provided there then exists no Event of Default or condition or event which, with
notice or the passage of time or both, would constitute an Event of Default,
then Lender agrees to release its security interest in the Congress Cash
Collateral and redeliver the remaining Congress Cash Collateral to Parent
without representation or recourse of any kind or nature whatsoever. If a draw
is made under the Prepayment L/C and all or part of the Congress Cash Collateral
is applied to the Obligations after such draw (the "Application Amount"), unless
there exits an Event of Default or condition or event which would, with notice
or the passage of time or both, constitute and Event of Default, if Lender
thereafter receives payment from Tax Refunds (as defined in the Intercreditor
Agreement) pursuant to the Intercreditor Agreement, Lender shall remit to Parent
a sum but not in excess of the Application Amount, equal to (a) the entire
amount of such payment from tax refunds if such draw under the Prepayment L/C is
$7,000,000 or less or (b) if the amount of such draw under the Prepayment L/C is
more than $7,000,000, the amount of such payment from Tax Refunds in excess of
(i) the amount of such draw under the Prepayment L/C minus (ii) the sum of
$7,000,000.
5.4 Real Property of Development Companies. Parent hereby agrees, upon
Lender's request, to cause each of the Development Companies that own real
property upon which exists a Retail Store to grant Lender a mortgage and
security interest in and to such real property as security for such Development
Companies' obligations owed to Lender pursuant to the Financing Agreements.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Accounts. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations, other Obligations and the Collateral and property of the
Retail Store Subsidiaries securing the Obligations, (b) all payments made by or
on behalf of Borrowers and (c) all other appropriate debits and credits as
provided in this Agreement, including, without limitation, fees, charges, costs,
expenses and interest. All entries in the loan account(s) shall be made in
accordance with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrowers' Agent each month a
statement setting forth the balance in the loan account(s) maintained by Lender
for Borrowers pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers, Parent and Borrowers'
Agent and conclusively binding upon Borrowers, Parent and Borrowers' Agent as an
account stated except to the extent that Lender receives a written notice from
Borrowers' Agent of any specific exceptions thereto within thirty (30) days
after the date such statement has been mailed by Lender. Until such time as
Lender shall have rendered to Borrowers' Agent a written statement as provided
above, the balance in Borrowers' loan account(s) shall be presumptive evidence
of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts and Proceeds of Sales of Inventory.
(a) Borrowers shall establish and maintain, at their expense,
blocked accounts or lock boxes and related blocked accounts (in either case
"Blocked Accounts"), as Lender may specify, with
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such banks as are acceptable to Lender and Borrowers shall promptly deposit in
such Blocked Accounts and direct, and Parent shall cause each of the other
Obligors to deposit in such Blocked Accounts and direct, their respective
account debtors, Credit Card Issuers and Credit Card Processors to directly
remit to such Blocked Accounts payments on its Accounts, Credit Card Receivables
and all other payments constituting proceeds of Inventory, other Collateral or
other property which is security for the Obligations in the identical form in
which such payments are made, whether by cash, check or other manner.
Notwithstanding the preceding sentence, Borrowers may direct each of the Retail
Store Subsidiaries to first deposit all collections from customers of their
Retail Stores into a depository account maintained by them with a local bank,
provided that (i) such Retail Store Subsidiary shall irrevocably direct (except
as Lender otherwise directs after occurrence of an Event of Default) its local
depository bank to remit no less frequently than once each week, and more
frequently upon Lender's reasonable request, all collected funds in such
depository account to one of the Concentration Accounts and (ii) on each
Business Day CS Delaware shall remit or cause the applicable depository bank to
remit all collected funds in such Concentration Accounts to the Blocked
Accounts, except for Excluded Collections. The banks at which the Blocked
Accounts are established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or deposited in the
Blocked Accounts are the property of Lender, that the depository bank has no
lien upon, or right to setoff against, the Blocked Accounts, the items received
for deposit therein or the funds from time to time on deposit therein and that
the depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into the Blocked
Accounts to such bank account of Lender as Lender may from time to time
designate for such purpose or for the purpose of receiving other payments on
account of the Obligations ("Payment Account"). Borrowers agree that all
deposits and payments made to such Blocked Accounts or other funds received and
collected by Lender, whether on the Accounts or as proceeds of Inventory or
other Collateral or property securing the Obligations or otherwise (except with
respect to Excluded Collections and deposits in the Blocked Accounts remitted to
the Concentration Accounts pursuant to an unrevoked direction of Lender as
hereafter provided) shall be the property of Lender. At the written request of
Borrowers' Agent, Lender in its discretion may direct the depository bank or
banks maintaining such Blocked Accounts to remit the deposits therein to the
Concentration Accounts as directed by Borrowers' Agent at any time that, (x) no
Revolving Loans are then outstanding, (y) Excess Availability at such time is in
excess of $25,000,000 and (z) no Event of Default or any condition or event
which, with notice or the passage of time or both, would constitute an Event of
Default then exists. Such direction by Lender to the depository bank maintaining
the Blocked Accounts may be revoked by Lender at any time in its discretion.
None of Borrowers nor any of the other US Subsidiaries shall open or use any
concentration or cash management accounts at any bank or other financial
institution, other than the Concentration Accounts, without the prior written
consent of Lender. Notwithstanding anything to the contrary in this Section 6.3,
Lender does not have any interest in the Excluded Collections.
(b) Borrowers, and the other Subsidiaries and all of their
respective affiliates, Subsidiaries, shareholders, employees or agents shall,
acting as trustee for Lender, receive, as the property of Lender, any monies,
checks, notes, drafts or any other payment relating to and/or proceeds of
Accounts or other Collateral or property which is security for the Obligations
(but excluding any Excluded Collections and any Term Loan Priority Collateral or
any proceeds thereof to the extent the Intercreditor Agreement is still in
effect) which come into their possession or under their control and immediately
upon receipt thereof, shall deposit or cause the same to be deposited in the
Blocked Accounts or, at Lender's written direction, to be remitted directly to
the Payment Account or in kind to
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Lender, except in each case as expressly provided in Section 6.3(a) hereof. In
no event shall the same be commingled with any Borrower's,, or Subsidiary's own
funds except as specifically permitted in Section 6.3(a) hereof. Borrowers agree
to reimburse Lender on demand for any amounts owed or paid to any bank at which
a Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person in connection herewith.
The obligation of Borrowers to reimburse Lender for such amounts pursuant to
this Section 6.3 shall survive the termination or non-renewal of this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement or
otherwise, except to the extent required pursuant to the Intercreditor
Agreement, Lender does not waive or release its security interest in any
proceeds of Collateral or other property which is security for the Obligations.
(c) For purposes of calculating interest on the Obligations,
such payments or other funds received and collected by Lender on account of the
Obligations will be applied (conditional upon final collection) to the
Obligations one (1) Business Day following the date of receipt of immediately
available funds by Lender in the Payment Account. In addition, with respect to
all proceeds of Accounts, Credit Card Receivables and Inventory deposited in the
Blocked Accounts or otherwise received by Borrowers, which are not remitted to
the Payment Account (which shall only be in accordance with Section 6.3(a) and
(b) hereof or as hereafter specifically permitted in writing by Lender),
Borrowers shall pay to Lender a collection fee on the first day of each month
equal to the amount of the Interest Rate on Prime Rate Loans with respect to
such proceeds (a) from the earlier of the date of receipt of such proceeds by
Borrowers or the date of deposit of such proceeds in the Blocked Accounts and
(b) until the next Business Day. For purposes of calculating the amount of the
Revolving Loans available to Borrowers, such payments will be applied
(conditional upon final collection) to the Obligations on the business day of
receipt by Lender in the Payment Account, if such payments are received within
sufficient time (in accordance with Lender's usual and customary practices as in
effect from time to time) to credit Borrower's loan account on such day, and if
not, then on the next business day.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from Borrowers or for
the account of Borrowers (including, without limitation, the monetary proceeds
of collections or of realization upon any Collateral or other property which is
security for the Obligations) to such of the Obligations, whether or not then
due, in such order and manner as Lender determines. Lender agrees to apply such
payments to the Prime Rate Loans prior to applying such payments against the
Eurodollar Rate Loans, unless otherwise directed by Borrowers' Agent. At
Lender's option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of Borrowers. Borrowers shall make all
payments to Lender on the Obligations free and clear of, and without deduction
or withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral or other property which is security for the Obligations applied to
the payment of, any of the Obligations, Lender is required to surrender or
return such payment or proceeds to any Person for any reason, then the
Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrowers
shall be liable to pay to Lender, and each of Borrowers does hereby indemnify
and hold Lender harmless for the amount of any payments or proceeds surrendered
or returned. This Section 6.4 shall remain effective notwithstanding any
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contrary action which may be taken by Lender in reliance upon such payment or
proceeds. This Section 6.4 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of a Borrower or
of Borrowers' Agent or other authorized person or, at the discretion of Lender,
if such Loans are necessary to satisfy any Obligations. All requests for Loans
or Letter of Credit Accommodations hereunder shall specify the date on which the
requested advance is to be made or Letter of Credit Accommodations established
(which day shall be a Business Day) and the amount of the requested Loan.
Requests received after 11:00 a.m. New York City time on any day shall be deemed
to have been made as of the opening of business on the immediately following
Business Day. All Loans and Letter of Credit Accommodations under this Agreement
shall be conclusively presumed to have been made to a Borrower or, with respect
to Additional L/C Accommodations, to an Additional L/C Debtor, and at the
request of and for the benefit of all Borrowers, when deposited to the credit of
any Borrower or otherwise disbursed or issued in accordance with the
instructions of any Borrower or Borrower's Agent or in accordance with the terms
and conditions of this Agreement.
6.6 Use of Proceeds. The proceeds of the initial Loans made by Lender
to Borrowers and Letter of Credit Accommodations extended by Lender to Borrowers
hereunder shall be used only for (a) payments to each of the persons listed in
the disbursement direction letter furnished by Borrowers to Lender on or about
the date hereof, (b) the issuance of the Prepayment L/C and the Indemnity L/Cs,
(c) repayment in full of all outstanding obligations of Borrowers and Obligors
to Lender, at the election of Lender, existing as of the date hereof under the
Existing Loan Agreement or otherwise, and (d) to pay costs, expenses and fees in
connection with the preparation, negotiation and delivery of the Existing Loan
Agreement, this Agreement and the other Financing Agreements. All other Loans
made or Letter of Credit Accommodations provided by Lender to Borrowers and
Additional L/C Debtors pursuant to the provisions hereof shall be used by
Borrowers only for general operating, working capital and other proper corporate
purposes of Borrowers not otherwise prohibited by the terms hereof and in
Lender's discretion to satisfy any of the Obligations. Without limitation, none
of the proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Loans to
be considered a "purpose credit" within the meaning of Regulation G of the Board
of Governors of the Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrowers or Borrowers' Agent shall provide
Lender with the following documents in a form satisfactory to Lender: (a) on
Tuesday and Thursday of each week, as of the immediately preceding business day,
a schedule of Eligible Inventory of Borrowers, setting forth the location
thereof, aggregate cost and Retail Sales Price of such Eligible Inventory at
each owned and leased warehouse location (including markdowns from the original
retail sales price or ticketed sales price with respect thereto); (b) on Tuesday
of each week for the immediately preceding week ending on the close of business
on Saturday of that week or more frequently as Lender may request, (i) reports
of deposits in each of the Concentration Accounts, together with the separate
amounts thereof arising from
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cash sales, Excluded Collections, Credit Card Receivables by each Credit Card
Issuer (other than the Financing Subsidiaries) and miscellaneous collections,
(ii) a schedule of the Eligible Inventory at the Retail Stores setting forth the
aggregate cost and Retail Sales Price of such Eligible Inventory (including
markdowns from the original sales price or ticketed sales price with respect
thereto), (iii) except as otherwise agreed in writing by Lender, reports of the
cost and other information as required by Lender of or with respect to inventory
and other goods at each of the premises of American Consolidation Services, Ltd.
and any other cargo consolidator used by Borrowers and approved by Lender as
provided herein, (iv) except as otherwise agreed in writing by Lender, reports
of the cost and other information as required by Lender of inventory and other
goods acquired by Borrowers or Additional L/C Debtors with Letter of Credit
Accommodations or Additional L/C Accommodations which are the subject of bills
of lading and which have not been delivered to Borrowers at the permitted
locations of Eligible Inventory in the United States, and (v) reports of
Eligible Inventory to be sold by each department of the Retail Store
Subsidiaries; (c) once each month, on or before the tenth (10th) business day of
such month for the immediately preceding month or more frequently as Lender may
request, (i) agings of merchandise accounts payable, lease payables and other
payables, (ii) a schedule of Credit Card Receivables, (iii) the aggregate amount
of all sales of Inventory for all Retail Stores and all sales of Inventory by
Borrowers to Persons other than Retail Store Subsidiaries, and (iv) a
certificate from an authorized officer of Borrowers representing that Borrowers
have made payment of sales and use taxes during such month or, at Lender's
request, other evidence of such payment, (d) once each month, on or before the
twentieth (20th) day of such month, for the immediately preceding month or more
frequently as Lender may request, a Schedule of Accounts, Credit Card
Receivables owed by the Financing Subsidiaries and intercompany payables
(including, those owed to or by the Financing Subsidiaries), and (e) upon
Lender's reasonable request, (i) perpetual inventory reports, (ii) copies of
customer statements and credit memos, remittance advices and reports, and copies
of deposit slips and bank statements, (iii) copies of shipping and delivery
documents, and (iv) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrower; and (f) such other reports as
to the Collateral and other property which is security for the Obligations as
Lender shall reasonably request from time to time. If any of Borrowers' or any
other Obligor's records or reports of the Collateral or other property which is
security for the Obligations are prepared or maintained by an accounting
service, contractor, shipper or other agent, each of Borrowers hereby
irrevocably authorizes, and Parent shall cause each of the Obligors to
irrevocably authorize, such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Each Borrower or Borrowers' Agent shall notify Lender
promptly of: (i) any material delay in performance by such Borrower of its
obligations to any account debtor or the assertion of any claims, offsets,
defenses or counterclaims in excess of $100,000 by any account debtor, or any
disputes in excess of such sum with account debtors, or any settlement,
adjustment or compromise thereof and (ii) all material adverse information
relating to the financial condition of any account debtor if such information
would have a material adverse effect on the consolidated assets, liabilities,
properties or condition, financial or otherwise, of the Apparel Group, taken as
a whole. No credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor without Lender's consent,
except in the ordinary course of such Borrower's business in accordance with
practices and policies previously disclosed in writing to Lender. So long as no
Event of Default exists or has
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occurred and is continuing, each Borrower shall settle, adjust or compromise any
claim, offset, counterclaim or dispute with any account debtor. At any time that
an Event of Default exists or has occurred and is continuing, Lender shall, at
its option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors or grant any credits,
discounts or allowances.
(b) Each Borrower or Borrower's Agent shall promptly report to
Lender any return of Inventory by an account debtor to any of Borrowers'
warehouse locations having a sales price in excess of $25,000 for reasons
relating to the quality of such Inventory. In the event any account debtor of
any Borrower returns Inventory when an Event of Default exists or has occurred
and is continuing, such Borrower shall, upon Lender's request, (i) hold the
returned Inventory in trust for Lender, (ii) segregate all returned Inventory
from all of its other property, (iii) dispose of the returned Inventory solely
according to Lender's instructions, and (iv) not issue any credits, discounts or
allowances with respect thereto without Lender's prior written consent.
(c) With respect to each Account and Credit Card Receivable:
(i) the amounts shown on any invoice delivered to Lender or schedule thereof
delivered to Lender shall be true and complete, (ii) no payments shall be made
thereon except payments made pursuant to the terms of this Agreement, (iii)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement or as provided herein, (iv) none
of the transactions giving rise thereto will violate any applicable State or
Federal laws or regulations, all documentation relating thereto will be legally
sufficient under such laws and regulations and all such documentation will be
legally enforceable in accordance with its terms, and (v) there shall be
compliance with the provisions of Section 4.1(h) hereof as to each Credit Card
Issuer obligated on any Credit Card Receivables.
(d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account, Credit Card Receivable or
other Collateral or property which is security for the Obligations, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrowers shall deliver or cause to be delivered to
Lender, with appropriate endorsement and assignment, with full recourse to
Borrowers, all chattel paper and instruments arising from sales of Borrowers'
Inventory or other Collateral which any Borrower now owns or may at any time
acquire immediately upon any Borrower's receipt thereof, except as Lender may
otherwise agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts, Credit Card Receivables and other obligations included in the
Collateral have been assigned to Lender and that Lender has a security interest
therein and Lender may direct any or all account debtors to make payment thereof
directly to Lender, (ii) extend the time of payment of, compromise, settle or
adjust for cash, credit, return of merchandise or otherwise, and upon any terms
or conditions, any and all Accounts, Credit Card Receivables or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts, Credit Card Receivables or such other
obligations, but without any duty to do so, and Lender shall not be liable for
its failure to collect or
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enforce the payment thereof nor for the negligence of its agents or attorneys
with respect thereto and (iv) take whatever other action Lender may deem
necessary or desirable for the protection of its interests. At any time that an
Event of Default exists or has occurred and is continuing, at Lender's request,
all invoices and statements sent to any account debtor shall state that the
Accounts, Credit Card Receivables and such other obligations have been assigned
to Lender and are payable directly and only to Lender and each Borrower shall
deliver to Lender such originals of documents evidencing the sale and delivery
of goods or the performance of services giving rise to any Accounts as Lender
may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) each
Borrower shall, and Parent shall cause each other US Subsidiary to, at all times
maintain inventory records reasonably satisfactory to Lender, keeping correct
and accurate records itemizing and describing the kind, type, quality, location
and quantity of Inventory, such Borrower's or US Subsidiary's cost therefor, the
Retail Sales Price thereof (including markdowns with respect thereto) and daily
withdrawals therefrom and additions thereto in accordance with such Borrower's
or US Subsidiary's existing business practices; (b) each Borrower or US
Subsidiary shall conduct a physical count of the Inventory at least once each
year, but at any time or times as Lender may request on or after an Event of
Default, and promptly following such physical inventory shall supply Lender with
a report in the form and with such specificity as may be reasonably satisfactory
to Lender concerning such physical count; (c) each Borrower shall not remove,
and Parent shall cause each Retail Store Subsidiary and each other Subsidiary to
not remove, any Inventory from the locations set forth or permitted herein,
without the prior written consent of Lender, except for sales of Inventory as
permitted hereby and except to move Inventory directly from one location set
forth or permitted herein to any other such location; (d) upon Lender's request,
Borrowers' Agent shall, at its expense, no more than three times in any twelve
(12) month period, but at any time or times as Lender may request on or after an
Event of Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender by Gordon Brothers Partners, Inc. or by any other appraiser acceptable to
Lender, addressed to Lender or upon which Lender is expressly permitted to rely;
(e) each Borrower shall produce, use, store and maintain the Inventory, with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including, but not limited to,
the requirements of the Federal Fair Labor Standards Act of 1938, as amended and
all rules, regulations and orders related thereto); (f) each Borrower assumes
all responsibility and liability arising from or relating to the production,
use, sale or other disposition of the Inventory; (g) each Borrower shall not
sell Inventory to any customer on approval, or any other basis which entitles
the customer to return or may obligate Borrower to repurchase such Inventory
except with respect to a customer which is a Retail Store Subsidiary; (h) each
Borrower shall keep the Inventory in good and marketable condition; and (i) each
Borrower shall not, without prior written notice to Lender, acquire or accept
any Inventory on consignment or approval except with respect to sales of
Inventory to Retail Store Subsidiaries. Borrowers shall not sell any Inventory
to any Person other than to any other Borrower or to any Retail Store
Subsidiaries or other US Subsidiary without Lender's written consent, except,
that, Borrowers may sell Inventory to a Person which is not a US Subsidiary (i)
in an aggregate amount in any single transaction or related series of
transactions of up to $1,000,000, provided, that, such Inventory is not sold for
a sales price below seventy-five (75%) percent of the cost for such Inventory,
the purchase price therefor is due and payable on or before delivery to the
buyer thereof, written notice thereof is given to Lender pursuant to Section
7.1(c)(iii) hereof, and, all proceeds of such sales of Inventory are immediately
paid to Lender, and (ii) where Inventory has been acquired by Borrowers for the
specific purpose of resale thereof to such Person, provided that, such Inventory
is not sold for a sales price below
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one hundred (100%) percent of the cost for such Inventory, the entire purchase
price therefor is due and payable on or before delivery to the buyer thereof,
written notice thereof is given to Lender pursuant to Section 7.1(c)(iii) hereof
and the entire proceeds of such sale are immediately paid to Lender. Upon
delivery to or for the account of any Borrower, Parent or other Subsidiary of
documents of title with respect to Inventory accompanying drafts under a letter
of credit opened for the account of any of Borrowers or otherwise relating to
Inventory, such documents of title shall be immediately delivered to and held by
a customs broker or freight forwarder who has executed a bailment letter with
respect thereto in favor of Lender, in form and substance satisfactory to
Lender, or, if an Event of Default has occurred, as Lender otherwise directs.
All inventory acquired pursuant to the Additional L/C Accommodations shall be
owned by and title thereof shall only be in the name of Borrowers, until resold
to a Retail Store Subsidiary and all bills of lading with respect to the
importation of such inventory into the United States shall be delivered by an
overnight courier service only to a customs broker who has executed a bailment
letter with respect thereto in favor of Lender, in form and substance
satisfactory to Lender. Borrowers shall not use any customs broker or freight
forwarder for the importation of Inventory into the United States or any cargo
consolidator or store any of their Eligible Inventory nor permit the Additional
L/C Debtors to store any of their finished goods inventory outside the United
States (other than such inventory which is in transit and covered by a bill of
lading issued by a third party and finished goods inventory for which the
purchase price has not been paid to the manufacturer thereof located at the
premises of such manufacturer) with any Person, except, with respect to each of
the foregoing, for any such Person who has executed a bailment letter with
respect thereto in favor of Lender, in form and substance satisfactory to
Lender.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon
Lender's request, each Borrower shall, at its expense, at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender, addressed to Lender upon which Lender is expressly permitted to rely;
(b) each Borrower shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (c) each Borrower shall
use the Equipment with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with all applicable
laws; (d) the Equipment is and shall be used in Borrower's business and not for
personal, family, household or farming use; (e) each Borrower shall not remove
any Equipment from the locations set forth or permitted herein, except to the
extent necessary to have any Equipment repaired or maintained in the ordinary
course of the business of such Borrower or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of such Borrower in
the ordinary course of business; (f) the Equipment is now and shall remain
personal property and each Borrower shall not permit any of the Equipment to be
or become a part of or affixed to real property other than the Equipment located
on the Real Property which is of the type that has previously become affixed to
real property by Borrower; and (g) each Borrower assumes all responsibility and
liability arising from the use of the Equipment.
7.5 Power of Attorney. Each Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as such Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's
name, to: (a) at any time an Event of Default or event which with notice or
passage of time or both would constitute an Event of Default exists or has
occurred and is continuing (i) demand payment on Accounts or other proceeds of
Inventory or other Collateral, (ii)
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enforce payment of Accounts, Credit Card Receivables or other obligations
included in the Collateral by legal proceedings or otherwise, (iii) exercise all
of such Borrower's rights and remedies to collect any Account, Credit Card
Receivables or other Collateral, (iv) sell or assign any Account upon such
terms, for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, Credit Card Receivables or other obligation included in the
Collateral, (vii) prepare, file and sign such Borrower's name on any proof of
claim in bankruptcy or other similar document against an account debtor, (viii)
notify the post office authorities to change the address for delivery of such
Borrower's mail to an address designated by Lender, and open and dispose of all
mail addressed to such Borrower, and (ix) do all acts and things which are
necessary, in Lender's determination, to fulfill such Borrower's obligations
under this Agreement and the other Financing Agreements and (b) at any time to
(i) take control in any manner of any item of payment or proceeds thereof,
except Excluded Collections, (ii) have access to any lockbox or postal box into
which such Borrower's mail is deposited, (iii) endorse such Borrower's name upon
any items of payment or proceeds thereof (except Excluded Collections) and
deposit the same in the Lender's account for application to the Obligations,
(iv) endorse such Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement received or otherwise held by Lender
relating to any Account or any goods pertaining thereto or any other Collateral,
(v) sign such Borrower's name on any verification of Accounts or Credit Card
Receivables and notices thereof to account debtors and (vi) execute in such
Borrower's name and file any UCC financing statements or amendments thereto with
respect to the Collateral. Each Borrower hereby releases Lender and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
wilful misconduct as determined pursuant to a final non-appealable judgment or
order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) cure any default by
any Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against any Borrower or any other US Subsidiary, (b) discharge
taxes, liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral or other property which is security for
the Obligations and (c) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral or other property which is security for the
Obligations and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge such Borrower's account
therefor, such amounts to be repayable by such Borrower on demand. Lender shall
be under no obligation to effect such cure, payment or bonding and shall not, by
doing so, be deemed to have assumed any obligation or liability of any Borrower
or any other US Subsidiary. Any payment made or other action taken by Lender
under this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at
the cost and expense of Borrowers, (a) Lender or its designee shall have
complete access to all of Borrowers' premises, and Parent shall cause each other
US Subsidiary to permit Lender to have complete access to all of such other US
Subsidiary's premises, during normal business hours and after notice to
Borrowers' Agent, or at any time and without notice to Borrowers or Borrowers'
Agent or Parent if an Event of Default exists or has occurred and is continuing,
for the purposes of inspecting, verifying and auditing the Collateral and other
property which is security for the Obligations and all of Borrowers' and such
other US Subsidiary's books
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and records, including, without limitation, the Records, and (b) Borrowers shall
promptly furnish or cause to be furnished to Lender such copies of such books
and records or extracts therefrom as Lender may request, and (c) Lender may use
during normal business hours such of Borrowers', and Parent shall cause each
other US Subsidiary to permit Lender to use such of such other US Subsidiary's,
personnel, equipment, supplies and premises as may be reasonably necessary for
the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Accounts and realization of other Collateral
and property which is security for the Obligations.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrowers hereby, jointly and severally, represent and warrant to
Lender the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations by Lender to
Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Except as
set forth on Omnibus Schedule 7, each Borrower and each other Obligor is a
corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on the Apparel Group's consolidated
financial condition, results of operations or business or the rights of Lender
in or to any of the Collateral or other property which is security for the
Obligations. The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within each Borrower's and each other Obligor's corporate
powers, have been duly authorized and are not in contravention of law or the
terms of each Borrower's or any other Obligor's certificate of incorporation,
by-laws, or other organizational documentation, or any indenture, agreement or
undertaking to which any Borrower or any other Obligor is a party or by which
any Borrower or any other Obligor or any of their respective property is bound.
This Agreement and the other Financing Agreements constitute legal, valid and
binding obligations of Borrowers, Parent, the other Obligors and Borrower's
Agent enforceable in accordance with their respective terms. Borrowers do not
have any Subsidiaries except as set forth on Omnibus Schedule 1 hereto or, after
the date hereof, as disclosed in writing to Lender and as to which there has
been compliance with Sections 9.1 and 9.2 hereof.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrowers or any other Subsidiary which have been or may
hereafter be delivered by Borrowers to Lender have been prepared in accordance
with GAAP and fairly present the financial condition and the results of
operation of Borrowers or such other Subsidiary at the dates and for the periods
set forth therein. Except as disclosed in any interim financial statements
furnished or as otherwise disclosed in writing by Borrowers to Lender prior to
the date of this Agreement, there has been no material adverse change in the
consolidated assets, liabilities, properties and condition, financial or
otherwise, of the Apparel Group, since the date of the most recent audited
financial statements furnished by Borrowers to Lender prior to the date of this
Agreement.
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8.3 Chief Executive Office; Collateral Locations. The chief executive
office of each Borrower and each Borrower's Records concerning Accounts are
located only at its respective address set forth below and its only other places
of business and the only other locations of Collateral or other property which
is security for the Obligations, if any, are the addresses set forth for such
Borrower on Omnibus Schedule 2 hereto, subject to the right of any Borrower or
other Obligor to establish new locations in accordance with Section 9.2 below.
Omnibus Schedule 2 hereto correctly identifies as of the date hereof any of such
locations of Borrowers which are not owned by Borrowers and sets forth the
owners and/or operators thereof.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and, except as otherwise specifically consented to in writing
by Lender, perfected first priority liens and security interests in and upon the
Collateral and other property which is security for the Obligations subject only
to the subordinate liens indicated on Omnibus Schedule 13 hereto and the senior
security interests and liens, respectively, as set forth in the Intercreditor
Agreement of the Bank Group and the Noteholders on the Term Loan Priority
Collateral. Each Borrower and the other Obligors has good and marketable title
to all of its properties and assets subject to no liens, mortgages, pledges,
security interests, encumbrances or charges of any kind, except those granted to
Lender and such others as are specifically listed on Omnibus Schedule 13 hereto
or permitted under Section 9.8 hereto and the senior security interests and
liens, respectively, as set forth in the Intercreditor Agreement of the Bank
Group and Noteholders on the Term Loan Priority Collateral.
8.5 Tax Returns. Except as set forth in Omnibus Schedule 16 hereto,
each of Borrowers and the other US Subsidiaries has filed, or caused to be
filed, in a timely manner all tax returns, reports and declarations which are
required to be filed by it (without requests for extension except as previously
disclosed in writing to Lender). All information in such tax returns, reports
and declarations is complete and accurate in all material respects. Each of
Borrowers and the other US Subsidiaries has paid or caused to be paid all taxes
due and payable or claimed due and payable in any assessment received by it, as
to which non-payment thereof (a) would result in a material adverse change in
the consolidated assets, business or prospects of the Apparel Group or (b) would
impair the ability of any Borrower or any other Obligor to perform its
obligations hereunder or under any of the Financing Agreements to which it is a
party or of Lender to enforce any obligations or realize upon any Collateral or
other property which is security for the Obligations, except taxes the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to, as applicable, Borrowers or the other US Subsidiaries
and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on Omnibus Schedule 8 hereto, there
is no present investigation by any governmental agency pending, or to the best
of any Borrower's knowledge threatened, against or affecting any Borrower or any
other Subsidiary, its assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of any Borrower's
knowledge threatened, against any Borrower or other Subsidiary or its assets or
goodwill, or against or affecting any transactions contemplated by this
Agreement, which if adversely determined against any Borrower or such other
Subsidiary (a) would result in any material adverse change in the consolidated
assets, business or prospects of the Apparel Group or (b) would impair the
ability of any Borrower or any other Obligor
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to perform its obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Lender to enforce any Obligations or
realize upon any Collateral or other property which is security for the
Obligations.
8.7 Compliance with Other Agreements and Applicable Laws. Except as set
forth in Omnibus Schedule 9 hereto, none of Borrowers or other Subsidiaries is
in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and each of Borrower and the other US Subsidiaries is in compliance in all
material respects with all applicable provisions of laws, rules, regulations,
licenses, permits, approvals and orders of any foreign, Federal, State or local
governmental authority, as to which any such default, violation or
non-compliance (a) would result in a material adverse change in the consolidated
assets, business or prospects of the Apparel Group or (b) would impair the
ability of any Borrower or any other Obligor to perform its obligations
hereunder or under any of the Financing Agreements to which it is a party or of
Lender to enforce any obligations or realize upon any Collateral or other
property which is security for the Obligations.
8.8 Environmental Compliance.
(a) Except as set forth on Omnibus Schedule 11 hereto and as
provided in subsection (e) of this Section 8.8, Borrowers have not generated,
used, stored, treated, transported, manufactured, handled, produced or disposed
of any Hazardous Materials, on or off its premises (whether or not owned by it)
in any manner which at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar authorization thereunder and
the operations of Borrowers comply in all material respects with all
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder.
(b) Except as set forth on Omnibus Schedule 11 hereto and as
provided in subsection (e) of this Section 8.8, there has been no investigation,
proceeding, complaint, order, directive, claim, citation or notice by any
governmental authority or any other person nor is any pending or to the best of
any Borrower's knowledge threatened, with respect to any non-compliance with or
violation of the requirements of any Environmental Law by Borrowers or the
release, spill or discharge, threatened or actual, of any Hazardous Material or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which affects Borrowers or its business, operations or
assets or any properties at which Borrowers have transported, stored or disposed
of any Hazardous Materials.
(c) Except as provided in subsection (e) of this Section 8.8,
Borrowers have no material liability (contingent or otherwise) in connection
with a release, spill or discharge, threatened or actual, of any Hazardous
Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Except as provided in subsection (e) of this Section 8.8,
Borrowers have all licenses, permits, certificates, approvals or similar
authorizations required to be obtained or filed in connection with the
operations of Borrowers under any Environmental Law and all of such licenses,
permits, certificates, approvals or similar authorizations are valid and in full
force and effect.
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(e) Each of subsections (a), (b), (c) and (d) of this Section
8.8 are subject to an additional exception for conditions, events or
circumstances that are not, individually or in the aggregate, reasonably likely
to give rise to a Material Adverse Retail Store Event.
8.9 Employee Benefits.
(a) Borrowers and Obligors have not engaged in any transaction
in connection with which Borrowers or any of its ERISA Affiliates could be
subject to either a material civil penalty assessed pursuant to Section 502(i)
of ERISA or a material tax imposed by Section 4975 of the Code, including any
accumulated funding deficiency described in Section 8.9(c) hereof and any
deficiency with respect to vested accrued benefits described in Section 8.9(d)
hereof.
(b) No liability to the Pension Benefit Guaranty Corporation
has been or is expected by Borrowers to be incurred with respect to any employee
pension benefit plan of Borrowers or any of its ERISA Affiliates. There has been
no reportable event (within the meaning of Section 4043(b) of ERISA) or any
other event or condition with respect to any employee pension benefit plan of
Borrowers or any of its ERISA Affiliates which presents a risk of termination of
any such plan by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrowers
or any of its ERISA Affiliates is required under Section 302 of ERISA and
Section 412 of the Code to have paid under the terms of each employee pension
benefit plan as contributions to such plan as of the last day of the most recent
fiscal year of such plan ended prior to the date hereof, and no accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists with respect to any employee pension
benefit plan, including any penalty or tax described in Section 8.9(a) hereof
and any deficiency with respect to vested accrued benefits described in Section
8.9(d) hereof.
(d) The current value of all vested accrued benefits under all
employee pension benefit plans maintained by Borrowers that are subject to Title
IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.9(a) hereof and any accumulated funding deficiency
described in Section 8.9(c) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) Neither Borrowers nor any of their respective ERISA
Affiliates is or has (except to the extent that any applicable statute of
limitation bars any remedy, proceedings, or actions with respect thereto) ever
been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.10 Accuracy and Completeness of Information. The information
furnished by or on behalf of any Borrower or any other Subsidiary in writing to
Lender in connection with this Agreement or any of the other Financing
Agreements or any transaction contemplated hereby or thereby, taken as a whole,
is true and correct in all material respects on the date as of which such
information is dated or certified and does not omit any material fact necessary
in order to make such information not misleading. No event or circumstance has
occurred which has had or could reasonably be expected to have a material
adverse affect on the consolidated business, assets or prospects of the Apparel
Group, which has not been fully and accurately disclosed to Lender in writing.
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8.11 Interrelated Businesses. Parent is the direct and beneficial owner
and holder of all of the issued and outstanding shares of capital stock of the
Borrowers other than FB Apparel. FB Clothing, Inc., which is a US Subsidiary, is
the beneficial owner and holder of all of the issued and outstanding shares of
capital stock of FB Apparel. Each of the Additional L/C Debtors is a Subsidiary
and the Additional L/C Accommodations are opened solely for the purpose of (a)
with respect to the Additional L/C Debtors other than CS Insurance Ltd.,
acquiring Inventory by Borrowers for ultimate resale in the Retail Stores and
(b) with respect to CS Insurance Limited, providing insurance services for the
Apparel Group. Borrowers and the other US Subsidiaries share an identity of
interests such that any benefit received by each of Borrowers benefits the
others (except the Financing Subsidiaries). Each Borrower and the other
Subsidiaries (a) render services to or for the benefit of the other Borrowers
and other Subsidiaries (other than the Financing Subsidiaries), (b) make loans
and advances and provide other financial accommodations to or for the benefit of
the other Borrowers and the other Subsidiaries (other than the Financing
Subsidiaries) (including, inter alia, the payment and/or guaranties by Borrowers
and the other Subsidiaries of indebtedness of the other Borrowers and the other
Subsidiaries), and (c) provide administrative, marketing, payroll and management
services to or for the benefit of the other Borrowers and the other Subsidiaries
(other than the Financing Subsidiaries). Borrowers and the other Subsidiaries
(other than the Financing Subsidiaries) have centralized accounting and legal
services.
8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
any Borrower or any other Obligor shall now or hereafter give, or cause to be
given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence; Subsidiaries. Each Borrower shall, and
Parent shall cause each other US Subsidiary and the Additional L/C Debtors to,
at all times preserve, renew and keep in full force and effect its corporate
existence and rights and franchises with respect thereto and maintain in full
force and effect all permits, licenses, trademarks, tradenames, approvals,
authorizations, leases and contracts necessary to carry on the business as
presently or proposed to be conducted, except, as to only Retail Store
Subsidiaries, the failure to do any of the foregoing which does not constitute a
Material Adverse Retail Store Event. Each Borrower shall, and Parent shall cause
each other Obligor to, give Lender fifteen (15) days prior written notice of any
proposed change in its corporate name, which notice shall set forth the new name
and, as applicable, such Borrower or other Obligor shall deliver to Lender a
copy of the amendment to the Certificate of Incorporation of such Borrower or
other Obligor providing for the name change certified by the Secretary of State
of the jurisdiction of incorporation of, as applicable, such Borrower or Obligor
as soon as it is available. None of Borrowers shall organize or cause to be
organized any new US Subsidiary except for a new Retail Store Subsidiary which
within ten (10) days after the organization thereof, executes and delivers to
Lender (in form and substance satisfactory to Lender) a guarantee of payment of
the Obligations, a security agreement granting to
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Lender a first and prior security interest in all of its assets as security for
such guarantee, UCC financing statements and such other documents as Lender
deems necessary to implement the foregoing.
9.2 New Collateral Locations. Any Borrower or US Subsidiary may only
open any new location within the continental United States provided (a)
Borrowers' Agent gives Lender ten (10) days prior written notice of the intended
opening of any such new location and (b) Lender receives such agreements,
guaranties, documents, and instruments as Lender may deem reasonably necessary
or desirable to protect its interests in the Collateral and other property which
is security for the Obligations at such location, including, without limitation,
UCC financing statements, executed (i) with respect to any new location of
Borrowers, by Borrower's Agent and Borrowers, (ii) with respect to any new
location of a Retail Store operated by a Retail Store Subsidiary, by such Retail
Store Subsidiary, and (iii) with respect to a new location of any other US
Subsidiary, by such other US Subsidiary.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower shall, and Parent shall cause each other
Subsidiary to, at all times, comply in all material respects with all laws,
rules, regulations, licenses, permits, approvals and orders applicable to it and
duly observe all requirements of any Federal, State or local governmental
authority, including, without limitation, the Employee Retirement Security Act
of 1974, as amended, the Occupational Safety and Hazard Act of 1970, as amended,
the Fair Labor Standards Act of 1938, as amended, and all statutes, rules,
regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including, without limitation, all of
the Environmental Laws.
(b) Each Borrower shall establish and maintain, at its
expense, a system to assure and monitor its continued compliance with all
Environmental Laws in all of its operations, which system shall include annual
reviews of such compliance by employees or agents of such Borrower who are
familiar with the requirements of the Environmental Laws. Copies of all
environmental surveys, audits, assessments, feasibility studies and results of
remedial investigations shall be promptly furnished, or caused to be furnished,
by Borrowers to Lender at Lender's request. Borrowers shall take prompt and
appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Lender on such response at
Lender's request, provided that Borrowers shall give written notice of such
non-compliance to Lender by Borrowers.
(c) Each Borrower shall give both oral and written notice to
Lender immediately upon such Borrower's receipt of any notice of, or such
Borrower's otherwise obtaining knowledge of, (i) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of any
Hazardous Material, which shall reasonably be expected to result in a Material
Adverse Retail Store Event, or (ii) any investigation, proceeding, complaint,
order, directive, claims, citation or notice with respect to: (A) any
non-compliance with or violation of any Environmental Law by Borrower or (B) the
release, spill or discharge, threatened or actual, of any Hazardous Material or
(C) the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which affects Borrower or its business,
operations or assets or any properties at which Borrower transported, stored or
disposed of any Hazardous Materials, which shall reasonably be expected to
result in a Material Adverse Retail Store Event.
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(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of any Borrower in order to avoid any
material non-compliance, with any Environmental Law, such Borrower shall, at
Lender's request and such Borrower's expense: (i) cause an independent
environmental engineer acceptable to Lender to conduct such tests of the site
where such Borrower's non-compliance or alleged non-compliance with such
Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non-compliance setting forth the results
of such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (ii) provide to
Lender a supplemental report of such engineer whenever the scope of such
non-compliance, or such Borrower's response thereto or the estimated costs
thereof, shall change in any material respect.
(e) Borrowers shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including attorneys' fees and legal expenses) directly or indirectly
arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including, without limitation, the costs of
any required or necessary repair, cleanup or other remedial work with respect to
any property of Borrowers or Obligors and the preparation and implementation of
any closure, remedial or other required plans, provided that such
indemnification shall not be available to Lender to the extent such losses are
determined by a final and non-appealable order of a court of competent
jurisdiction to have resulted solely from the gross negligence or wilful
misconduct of Lender. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Each Borrower shall, and Parent shall
cause each other Subsidiary to, duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, as to which non-payment thereof (a) would result in a material adverse
change in the consolidated assets, business or prospects of the Apparel Group or
(b) would impede the ability of any Borrower or any other Obligor to perform its
obligations hereunder or under any of the other Financing Agreements or Lender
to enforce any Obligations or realize upon any Collateral or other property
which is collateral for the Obligations, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to any Borrower or any of their Subsidiaries and with respect to
which adequate reserves have been set aside on its books. Each Borrower shall be
liable for any tax or penalties imposed on Lender as a result of the financing
arrangements provided for herein and each Borrower agrees to indemnify and hold
Lender harmless with respect to the foregoing, and to repay to Lender on demand
the amount thereof, and, until paid by Borrowers, such amount shall be added and
deemed part of the Loans, provided, that, nothing contained herein shall be
construed to require Borrowers or Parent to pay any income or franchise taxes
attributable to the income of Lender from any amounts charged or paid hereunder
to Lender. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
9.5 Insurance. Each Borrower shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral and other property which is security for the Obligations against loss
or damage and all other insurance of the kinds and in the amounts customarily
insured
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against or carried by corporations of established reputation engaged in the same
or similar businesses and similarly situated. Said policies of insurance shall
be satisfactory to Lender as to form, amount and insurer. Each Borrower shall
furnish certificates, policies or endorsements to Lender as Lender shall require
as proof of such insurance, and, if any Borrower fails to do so, Lender is
authorized, but not required, to obtain such insurance at the expense of
Borrowers. All policies shall provide for at least thirty (30) days prior
written notice to Lender of any cancellation or reduction of coverage and that
Lender may act as attorney for Borrowers in obtaining, and at any time an Event
of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Each Borrower shall cause Lender to be
named as a loss payee and an additional insured (but without any liability for
any premiums) under such insurance policies and each Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear (except with respect to of any Term Loan
Priority Collateral, to the extent the Intercreditor Agreement is in effect) and
further specify that Lender shall be paid regardless of any act or omission by
any Borrower or any of its affiliates. At its option, Lender may apply any
casualty insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Lender may determine
or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Each Borrower shall, and Parent shall cause each other
Subsidiary to, keep proper books and records in which true and complete entries
shall be made of all dealings or transactions of or in relation to the
Collateral, other property which is security for the Obligations and the
business of such Borrower and other Subsidiaries (if any) in accordance with
GAAP and Borrowers' Agent shall furnish or cause to be furnished to Lender: (i)
within thirty (30) days after the end of each fiscal month, monthly unaudited
consolidated financial statements for Parent, and its consolidated Subsidiaries
including, without limitation, consolidated financial statements for all of the
Retail Store Subsidiaries as a whole, (including in each case balance sheets,
statements of income and loss, statements of cash flow and statements of
shareholders' equity), all in reasonable detail, fairly presenting the
consolidated financial position and the results of the consolidated operations
of Parent and its consolidated Subsidiaries as of the end of and through such
fiscal month and (ii) within ninety (90) days after the end of each fiscal year,
audited consolidated financial statements of Parent (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting the consolidated financial position and the
results of the consolidated operations of Parent and its consolidated
Subsidiaries, including the other Borrowers, as of the end of and for such
fiscal year, together with the opinion of independent certified public
accountants, which accountants shall be an independent accounting firm selected
by Parent and reasonably acceptable to Lender, that such financial statements
have been prepared in accordance with GAAP, and present fairly the results of
operations and financial condition of Parent and its consolidated Subsidiaries,
as of the end of and for the fiscal year then ended.
(b) Borrowers' Agent shall promptly notify Lender in writing
of the details of (i) any loss, damage, investigation, action, suit, proceeding
or claim relating to Inventory having a cost of $100,000 or more or which would
otherwise adversely affect the Collateral or any other property which is
security for the Obligations in any material respect or which would result in
any material adverse
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change in the consolidated business, properties, assets, goodwill or condition,
financial or otherwise of the Apparel Group and (ii) the occurrence of any Event
of Default or event which, with the passage of time or giving of notice or both,
would constitute an Event of Default.
(c) Borrowers' Agent shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all reports which
Parent or any other Borrower sends to its stockholders generally and copies of
all reports and registration statements which Parent or any other Borrower files
with the Securities and Exchange Commission, any national securities exchange or
the National Association of Securities Dealers, Inc.
(d) Borrowers' Agent shall furnish or cause to be furnished to
Lender such budgets, forecasts, projections and other information respecting the
Collateral and any other property which is security for the Obligations and the
consolidated business of the Apparel Group, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrowers or any other Obligor to any court or other government agency or to any
participant or assignee or prospective participant or assignee, subject to the
confidentiality provisions of Section 12.6 hereof. Each Borrower hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at Borrowers' expense, copies of the financial statements of Parent or
any of the other Borrowers or any other Obligor and any reports or management
letters prepared by such accountants or auditors on behalf of Parent or any of
Borrowers and to disclose to Lender such information as they may have regarding
the business of Parent or any of the other Borrowers or any other Obligor. Any
documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except for any longer period as otherwise designated by
Borrowers' Agent to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Neither
any Borrower nor any other Obligor shall (a) merge into or with or consolidate
with any other Person (other than a Borrower or Obligor) or permit any other
Person (other than a Borrower or Obligor) to merge into or with or consolidate
with it, or (b) sell, assign, lease, transfer, abandon or otherwise dispose of
any of its assets to any other Person, except for (i) sales of Inventory in the
ordinary course of business or as otherwise permitted by Section 7.3 hereof,
(ii) the disposition of (x) Equipment to other US Subsidiaries which are
Obligors or (y) of worn-out or obsolete Equipment or Equipment no longer used in
the business of such Borrower or such Obligor, provided that, if an Event of
Default exists or has occurred and is continuing, any proceeds are paid to
Lender, unless such proceeds are Term Loan Priority Collateral, and then only if
such proceeds are paid to the Bank Group or the Noteholders, (iii) dispositions
by any Borrower or any Obligor of any property to any other Borrower or any
other Obligor, (iv) dispositions of any Term Loan Priority Collateral to a
Person if the proceeds thereof are applied in accordance with the Intercreditor
Agreement, (v) dispositions of assets owned by any Retail Store Subsidiaries in
connection with the closing of any Retail Stores, so long as such Retail Store
Subsidiary receives aggregate proceeds from sales of inventory included in such
assets of an amount at least equal to seventy-five (75%) percent of the
aggregate cost of such inventory and the net sale proceeds thereof are
immediately remitted to Lender unless such assets are Term Loan Priority
Collateral, and (vi) dispositions of the Cash Equivalents and other investments
permitted under Section 9.10(b) hereof or (c) form or acquire any US
Subsidiaries after the date hereof, except after ten (10) days written notice
thereof to Lender, for the organization of a new and additional Retail Store
Subsidiary which becomes an Obligor and grants Lender a first and prior
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security interest in all of its existing and future assets and property, or (d)
wind up, liquidate or dissolve, except that any Retail Store Subsidiary may be
wound up, liquidated or dissolved by Parent if the Retail Store operated by such
Retail Store Subsidiary shall have been closed and any Subsidiary that does not
conduct business activities and has no assets may be wound up, liquidated or
dissolved, or (e) agree to do any of the foregoing.
9.8 Encumbrances. None of Borrowers or any other Obligor shall create,
incur, assume or suffer to exist any security interest, mortgage, pledge, lien,
charge or other encumbrance of any nature whatsoever on any of its assets or
properties, including, without limitation, the Collateral or other property
which is security for the Obligations, except: (a) liens and security interests
of Lender; (b) liens securing the payment of taxes which are not a lien upon the
Collateral or other property which is security for the Obligations or are
subordinate to the security interest of Lender in the Collateral or other
property which is security for the Obligations and as to which non-payment
thereof (i) would not result in a material adverse change in the consolidated
assets, business or prospects of the Apparel Group and (ii) would not impede the
ability of any Borrower to perform its obligations hereunder or under any of the
other Financing Agreements or Lender to enforce any Obligations or realize upon
any Collateral or other property which is collateral for the Obligations, which
taxes are either not yet overdue or the validity of which are being contested in
good faith by appropriate proceedings diligently pursued and available to any
Borrower or such other US Subsidiary and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of any
Borrower's or Obligor's business to the extent: (i) such liens secure
indebtedness which is not overdue, (ii) such liens secure indebtedness relating
to claims or liabilities which are fully insured and being defended at the sole
cost and expense and at the sole risk of the insurer and are being contested in
good faith by appropriate proceedings diligently pursued and available to such
Borrower or such Obligor, in each case prior to the commencement of foreclosure
or other similar proceedings and with respect to which adequate reserves have
been set aside on its books, (iii) non-payment thereof would not result in a
material adverse change in the consolidated assets, business or properties of
the Apparel Group, or (iv) non-payment thereof would not impede the ability of
any Borrower or Obligor to perform its obligations hereunder or under any of the
other Financing Agreements or Lender to enforce any Obligations or realize upon
any Collateral or other property which is collateral for the Obligations; (d)
zoning restrictions, easements, licenses, covenants and other, Permitted
Exceptions (as defined in each Mortgage) and other restrictions affecting the
use of real property or other similar encumbrances which, in the aggregate, are
not material in amount and do not interfere in any material respect with the use
of such real property or ordinary conduct of the business of any Borrower or
Obligor as presently conducted thereon or materially detract from the value of
the real property which may be subject thereto; (e) the liens and security
interests of the Bank Group and the Noteholders described in the Intercreditor
Agreement and which are subject to the terms of the Intercreditor Agreement; (f)
purchase money security interests in Equipment (including capital leases) and
purchase money mortgages on real estate so long as such security interests and
mortgages do not apply to any property of any Borrower or Obligor other than the
Equipment or real estate so acquired, and the indebtedness secured thereby does
not exceed the cost of the Equipment or real estate so acquired, as the case may
be; (g) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation; (h) deposits to
secure the performance of bids, trade contracts (other than for borrowed money),
freight and customs duties, leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (i) liens and security interests created by a
Retail Store Subsidiary in
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favor of C.S.A.C., Inc. to secure advances or financial accommodations made by
C.S.A.C., Inc. for purposes of opening and operating Retail Stores operated by
such Retail Store Subsidiary and which liens are subordinated in favor of and
assigned to Lender pursuant to the Financing Agreements; (j) liens arising by
operation of law pursuant to Section 107(1) of the federal Comprehensive
Environmental Response, Compensation and Liability Act or a similar state law
which secure obligations that, individually or in the aggregate, are reasonably
expected to involve less than $1,000,00 and (i) are not due and payable by
virtue of a written demand for payment, or (ii) if due and payable, are being
contested in good faith by appropriate proceedings; (k) liens created by, and/or
setoff rights, in favor of Mellon Bank or any successor cash management bank
approved by Lender, (i) with respect to the "Imprest Account" (as defined in its
Blocked Account Agreement) as permitted in its Blocked Account Agreement, and
(ii) with respect to its Concentration Account for Returned Items and Account
Fees (as such terms are defined in its Blocked Account Agreement; (l) liens and
security interests (not otherwise permitted hereunder) which secure obligations
not exceeding (as to Borrowers and all US Subsidiaries) $1,000,000 in aggregate
amount at any time and which are not secured by Accounts, Inventory, Credit Card
Receivables or the proceeds thereof of any of Borrowers or similar assets of any
of the Obligors or Additional L/C Debtors; (m) the security interests and liens
set forth on Omnibus Schedule 13 hereto; and (n) liens and security interests
arising out of the refinancing, extension, renewal or refunding of any
indebtedness secured by any lien or security interest permitted by any of the
foregoing clauses of this Section 9.8, provided, that (i) such indebtedness is
not secured by any additional assets, (ii) the maturity or due date(s) of such
indebtedness is not shortened and (iii) the amount of such indebtedness secured
by any such lien or security interest is not increased.
9.9 Indebtedness. None of Borrowers shall incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any indebtedness
except (a) the Obligations; (b) unsecured obligations and indebtedness owed by
any of Borrowers to any of the other Borrowers or any other Subsidiary; (c)
trade obligations and normal accruals in the ordinary course of business not yet
due and payable, or with respect to which any Borrower is contesting in good
faith the amount or validity thereof by appropriate proceedings diligently
pursued and available to any such Borrower and with respect to which adequate
reserves have been set aside on its books; (d) purchase money indebtedness
(including capital leases) to the extent not incurred or secured by liens
(including capital leases) in violation of any other provision of this
Agreement; (e) indebtedness of Borrowers and certain Obligors to the Bank Group
evidenced by the Bank Group Agreements, all of which indebtedness is secured by
the liens and security interests permitted under Section 9.8(e) hereof;
provided, that: (i) neither Borrowers nor any Obligors shall make any scheduled
prepayments or required payments or other payments of such indebtedness, except
as permitted pursuant to clauses (a) through (i), inclusive, of Section 2.17 of
the Intercreditor Agreement; (ii) such indebted Borrower or Obligor shall not,
directly or indirectly, (A) amend, modify, alter or change the terms of such
indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof in a manner that is materially adverse to the Apparel
Group, or (B) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, except as permitted pursuant to clauses (a) through (i), inclusive, of
Section 2.17 of the Intercreditor Agreement and (iii) Borrowers' Agent shall
furnish to Lender all notices or demands in connection with such indebtedness as
to which non-payment thereof (A) would result in a material adverse change in
the consolidated assets, business or prospects of the Apparel Group or (B) would
impede the ability of any Borrower to perform its obligations hereunder or under
any of the other Financing Agreements or Lender to enforce any Obligations or
realize upon any Collateral, either received by any Borrower or on its behalf,
promptly after the receipt thereof, or sent by any Borrower or
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on its behalf, concurrently with the sending thereof, as the case may be, (f)
indebtedness of Borrowers and certain Obligors to the Noteholders evidenced by
the Noteholders Agreements, all of which indebtedness is secured by the liens
and security interests permitted under Section 9.8(e) hereof; provided, that:
(i) neither Borrowers nor any Obligors shall make any scheduled prepayments or
required payments or other payments of such indebtedness, except as permitted
pursuant to clauses (a) through (i), inclusive, of Section 2.17 of the
Intercreditor Agreement; (ii) such indebted Borrower or Obligor shall not
directly or indirectly (A) amend, modify, alter or change the terms of such
indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof in a manner that is materially adverse to the Apparel
Group, or (B) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, except as permitted pursuant to clauses (a) through (i), inclusive, of
the Intercreditor Agreement, and (ii) Borrowers' Agent shall furnish to Lender
all notices or demands in connection with such indebtedness as to which
non-payment thereof (A) would result in a material adverse change in the
consolidated assets, business or prospects of the Apparel Group or (B) would
impede the ability of any Borrower to perform its obligations hereunder or under
any of the other Financing Agreements or Lender to enforce any Obligations or
realize upon any Collateral, either received by any Borrower or on its behalf,
promptly after the receipt thereof, or sent by any Borrower or on its behalf,
concurrently with the sending thereof, as the case may be; (g) unsecured
obligations or indebtedness set forth on Omnibus Schedule 12 hereto; provided,
that, (i) except pursuant to and only to the extent of any refinancing thereof
permitted pursuant to this Agreement, Borrower may only make regularly scheduled
payments of principal and interest in respect of such indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
indebtedness as in effect on the date hereof, (ii) such indebted Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof in a manner that is materially adverse to the Apparel
Group, or (B) except pursuant to and only to the extent of any refinancing
thereof permitted pursuant to this Agreement, redeem, retire, defease, purchase
or otherwise acquire such indebtedness, or set aside or otherwise deposit or
invest any sums for such purpose, and (iii) Borrowers' Agent shall furnish to
Lender all notices or demands in connection with such indebtedness as to which
non-payment thereof (A) would result in a material adverse change in the
consolidated assets, business or prospects of the Apparel Group or (B) would
impede the ability of any Borrower to perform its obligations hereunder or under
any of the other Financing Agreements or Lender to enforce any Obligations or
realize upon any Collateral, either received by any Borrower or on its behalf,
promptly after the receipt thereof, or sent by any Borrower or Parent or on its
behalf, concurrently with the sending thereof, as the case may be; (h) unsecured
indebtedness of a type not described in the foregoing clauses, in an aggregate
amount existing at any time not to exceed $3,000,000; (i) any indebtedness under
any amendments, restatements, renewals, refinancing, extensions or modifications
of any of the foregoing unless such amendment, restatement, renewal, extension,
refinancing or modification (A) is materially adverse to the Apparel Group or
(B) would impede the ability of any Borrower to perform its obligations
hereunder or under any other Financing Agreements or the ability of Lender to
enforce any of the Obligations or realize upon any Collateral, (C) would
increase the amount or shorten the due dates or maturity dates of any
indebtedness permitted hereunder or (D) would result in any of the foregoing
being secured by assets which are not collateral therefor on the date hereof;
(j) indebtedness of Parent (but only pursuant to Section 9.10(b) hereof) or any
of the US Subsidiaries to any of the other US Subsidiaries and indebtedness of
any of the US Subsidiaries to Parent; (k) loans against life insurance policies
owned by Borrower to pay for premiums thereunder, provided that, after giving
effect to such loans, the cash surrender value of such policies (after giving
effect to such loans) shall not be less than the lower of (i)
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$6,000,000 or (ii) the cash surrender value thereof on the date hereof; and (l)
unsecured guaranties permitted under Omnibus Schedule 9.9 hereto.
9.10 Loans, Investments, Guarantees, Etc. None of Borrowers or any
other US Subsidiary shall, directly or indirectly, make any loans or advance
money or property to any person, or invest in (by capital contribution, loan,
dividend or otherwise) or purchase or repurchase the stock or indebtedness or
all or a substantial part of the assets or property of any person, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly)
the indebtedness, performance, obligations or dividends of any Person or agree
to do any of the foregoing, except: (a) the endorsement of instruments for
collection or deposit in the ordinary course of business; (b) investments (which
may be by capital contributions, loans, dividends or purchases, including,
without limitation, loans and dividends by any of the other Borrowers to Parent
for the purpose of such permitted investments to be made by Parent): (i) in
C.S.I.C., Inc. for the purpose of acquiring Cash Equivalents, (ii) in long term
investments (those greater than twelve (12) months in duration) in an aggregate
amount (for all of Borrowers and other US Subsidiaries) not greater than
$10,000,000 at any time, provided, that, there are no Revolving Loans then
outstanding, (iii) in C.S.A.C., Inc. for the purpose of opening and operating
new Retail Stores for new Retail Store Subsidiaries and in Retail Store
Subsidiaries for the purpose of opening and operating new Retail Stores,
provided that, in each case, the conditions of Section 9.1 hereof are satisfied,
(iv) in joint ventures after the date hereof that do not constitute Subsidiaries
of Parent in an amount (for all of Borrowers and other US Subsidiaries) equal to
or less than (A) the noncash investment of the costs previously capitalized as
"other assets" or "prepaid expenses" attributable to the creation or development
of joint venture concepts as set forth on Parent's balance sheet immediately
after making such investment and delivered to Lender pursuant to Section 9.6(a)
hereof, and (B) cash investments by Parent and the US Subsidiaries in such joint
ventures in an amount not to exceed $5,000,000 in the aggregate (for all of
Borrowers and other US Subsidiaries) existing at any time, (v) in any US
Subsidiary (other than a US Subsidiary which does not conduct business in any
material respect or have any material assets), (vi) in the securities described
on Omnibus Schedule 14 hereto and (vii) of a type not described in the foregoing
clauses (b)(i) through (b)(vi) hereof in an aggregate amount (for all of
Borrowers and other US Subsidiaries) existing at any time not to exceed
$1,000,000, provided that, with respect to the investments described in the
foregoing clauses (b)(i) through (b)(vii) hereof there does not exist any Event
of Default or condition or event which would, with notice or the passage of time
or both, constitute an Event of Default at the time such investment is made or
acquired, (c) consistent with past business practices, the unsecured guaranties
(i) by Parent of Borrowers and the other Subsidiaries and (ii) by each Borrower
of Parent, the other Borrowers and the other Subsidiaries, and (d) the unsecured
guaranties set forth on Omnibus Schedule 14 hereto and any renewals or
extensions thereof which do not increase the then outstanding amount thereof.
9.11 Dividends and Redemptions. Except for (a) cash dividends by
Borrowers (other than Parent) to Parent for the purpose of (i) paying corporate
overhead of Parent and the US Subsidiaries consistent with past business
practices or (ii) funding investments by Parent permitted under Section 9.10(b)
hereof and (b) dividends by US Subsidiaries to Borrowers (other than Parent) or
other US Subsidiaries of which it is a Subsidiary; none of Borrowers or any
other US Subsidiary shall, directly or indirectly, declare or pay any dividends
in cash or other of its assets on account of any shares of class of capital
stock of such Borrower or any other US Subsidiary now or hereafter outstanding,
or set aside or otherwise deposit or invest any sums for such purpose, or
redeem, retire, defease, purchase or otherwise acquire any shares of any class
of capital stock (or set aside or otherwise deposit or invest any sums for
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such purpose) for any consideration other than common stock or apply or set
apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the foregoing.
9.12 Transactions with Affiliates. None of Borrowers or any other
Obligor shall enter into any transaction for the purchase, sale or exchange of
property to or by any affiliate except (a) in the ordinary course consistent
with past business practices of and pursuant to the reasonable requirements of
such Borrower's or other Obligor's business or (b) upon fair and reasonable
terms no less favorable to such Borrower or Parent than such Borrower or other
Obligor would obtain in a comparable arm's length transaction with an
unaffiliated person, except with respect to sales of Inventory to or purchases
of Inventory by a Borrower or other Obligor, as to which the sales or purchase
price is not less than the cost thereof to the seller thereof.
9.13 Adjusted Net Worth. Parent shall, at all times, maintain Adjusted
Net Worth of not less than $350,000,000.
9.14 Compliance with ERISA. Borrowers shall not with respect to any
"employee pension benefit plans" maintained by Borrower or any of its ERISA
Affiliates:
(a) to the extent any of the following would constitute a
Material Adverse Retail Store Event or create a lien on any of the Collateral or
other assets securing the Obligation, (i) terminate any of such employee pension
benefit plans so as to incur any liability to the Pension Benefit Guaranty
Corporation established pursuant to ERISA, (ii) allow or suffer to exist any
prohibited transaction involving any of such employee pension benefit plans or
any trust created thereunder which would subject Borrowers or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA, (iii) fail to pay to any such
employee pension benefit plan any contribution which it is obligated to pay
under Section 302 of ERISA, Section 412 of the Code or the terms of such plan,
(iv) allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee pension benefit plan, (v) allow or
suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such employee pension benefit plan that is a single
employer plan, which termination could result in any liability to the Pension
Benefit Guaranty Corporation or (vi) incur any withdrawal liability with respect
to any multiemployer pension plan.
(b) As used in this Section 9.14, the term "employee pension
benefit plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.
9.15 Use of Fashion Bug Card. Parent shall cause, at the request of
Lender, each of the Retail Store Subsidiaries to cease making any sales of
merchandise to customers of the Retail Store Subsidiaries that purchase such
merchandise with the Fashion Bug Card (a) upon the occurrence of an Event of
Default that is continuing or (b) if the percentage against the Credit Card
Receivables owed by the Financing Subsidiaries which is advanced or paid to
Borrowers or any Obligor with respect to such Credit Card Receivables by the
Financing Subsidiaries with respect thereto is at any time less than
seventy-five (75%) percent (before financing discounts, if any). The Financing
Subsidiaries shall not be
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replaced by any other Credit Card Issuer with respect to the Fashion Bug Card
except for any arrangement with such replacement Credit Card Issuer which is not
materially adverse from the existing financing arrangements with the Financing
Subsidiaries with respect to the Fashion Bug Card and as to which there has been
compliance with the provisions of Section 4.1(h) hereof.
9.16 Costs and Expenses. Borrowers shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, the other property which is security for the
Obligations, this Agreement, the other Financing Agreements and all other
documents related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to: (a)
all costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable); (b) costs and expenses
and premiums for title insurance and other insurance premiums, environmental
audits, surveys, assessments, engineering reports and inspections, appraisal
fees and search fees; (c) costs and expenses of remitting loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
the Blocked Accounts, together with Lender's customary charges and fees with
respect thereto; (d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (e) costs and expenses of
preserving and protecting the Collateral and other property which is security
for the Obligations; (f) costs and expenses paid or incurred in connection with
obtaining payment of the Obligations, enforcing the security interests and liens
of Lender, selling or otherwise realizing upon the Collateral or other property
which is security for the Obligations, and otherwise enforcing the provisions of
this Agreement and the other Financing Agreements or defending any claims made
or threatened against Lender arising out of the transactions contemplated hereby
and thereby (including, without limitation, preparations for and consultations
concerning any such matters); (g) all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Lender during the course
of periodic field examinations of the Collateral and other property which is
security for all the Obligations and Borrowers' and any other Obligor's
operations, plus a per diem charge at the rate of $600 per person per day for
Lender's examiners in the field and office; (h) costs and expenses incurred by
Lender or arising with respect to the refinancing or proposed refinancing by
Lender of the Obligations arising under this Agreement and the other Financing
Agreements; and (i) the reasonable fees and disbursements of counsel (including
legal assistants) to Lender in connection with any of the foregoing.
9.17 Further Assurances. At the request of Lender at any time and from
time to time, Borrowers shall, and Parent shall cause each of the other Obligors
and Additional L/C Debtors to, at Borrowers' expense, duly execute and deliver,
or cause to be duly executed and delivered, such further agreements, documents
and instruments, and do or cause to be done such further acts as may be
necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and other property which is
security for the Obligations and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of any
of Borrowers or Borrowers' Agent representing that all conditions precedent to
the making of Loans and providing Letter of Credit Accommodations contained
herein are satisfied.
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In the event of such request by Lender, Lender may, at its option, cease to make
any further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, each of Borrowers
hereby authorize Lender to execute and file one or more UCC financing statements
with respect to Collateral signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events (except, with respect to only the Retail Store
Subsidiaries, any such event under clauses (d) through (k) which does not
constitute a Material Adverse Retail Store Event) are referred to herein
individually as an "Event of Default", and collectively as "Events of Default":
(a) any Borrower shall fail (i) to pay when due any of the
Obligations within two (2) Business Days of the due date thereof or (ii) to
observe or perform any of the other terms, covenants, conditions or provisions
contained in this Agreement or the other Financing Agreements other than as
described in Section 10.1(a)(i) above and such failure shall continue for ten
(10) consecutive days; provided, that, such ten (10) day period shall not apply
in the case of: (A) any failure to observe any such term, covenant or condition
or provision which is not capable of being cured at all or within such ten (10)
day period or which has been the subject of a prior failure within a six (6)
month period or (B) an intentional breach by any Borrower of any such term,
covenant, condition or provision, or (C) the failure to observe or perform any
covenants or provisions with respect to Collateral under this Agreement or any
of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by
any Borrower, any Obligor or any Additional L/C Debtor to Lender in this
Agreement, the other Financing Agreements or any other agreement, schedule,
confirmatory assignment or otherwise shall when made or deemed made be false or
misleading in any material respect, provided that such false or misleading
representation, warranty or statement of fact made by a Retail Store Subsidiary
(other than those which are intentional or which adversely affect Lender's
security interest in all such Retail Store Subsidiaries' inventory in any
material respect) shall not constitute an Event of Default unless the number of
Retail Store Subsidiaries which make such representations, warranties or
statements of fact constitute more than two (2%) percent of the total number of
Retail Store Subsidiaries;
(c) any Obligor or Additional L/C Debtor revokes, terminates or
fails to perform any of the terms, covenants, conditions or provisions of any
guarantee, endorsement or other agreement of such party in favor of Lender,
provided that such failure to so perform (other than any such non-performance
which is intentional or which adversely affects Congress' security interest in
all such Retail Store Subsidiaries' inventory in any material respect) by a
Retail Store Subsidiary shall not constitute an Event of Default unless the
number of Retail Store Subsidiaries which fail to so perform constitutes more
than two (2%) percent of the total number of Retail Store Subsidiaries which
operate Retail Stores.
(d) (i) any judgment for the payment of money is rendered
against any Borrower or any Obligor in excess of $500,000 in any one case or in
excess of $1,000,000 in the aggregate and which shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or (ii) any judgment other than for the payment
of money, or injunction, attachment, garnishment or execution is rendered
against any Borrower or any Obligor or any of their assets, which judgment (A)
would result in a material adverse change in the consolidated assets, business
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<PAGE> 54
or prospects of any Borrower or Parent or (B) would impede the ability of any
Borrower, Parent or any Obligor to perform its obligations hereunder or under
any of the other Financing Agreements or Lender to enforce any Obligations or
realize upon any Collateral;
(e) except as otherwise permitted in this Agreement, (i) any
Obligor (being a natural person or a general partner of an Obligor which is a
partnership) dies or (ii) any Borrower or any Obligor, which is a partnership or
corporation, dissolves or suspends or discontinues doing business;
(f) any Borrower or any Obligor becomes insolvent (however
defined or evidenced), makes an assignment for the benefit of creditors or,
makes or sends notice of a bulk transfer (provided that the making or sending of
notice of a bulk transfer by Retail Store Subsidiaries shall not constitute an
Event of Default unless it constitutes a Material Adverse Retail Store Event);
(g) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or Additional L/C Debtor
or all or any part of its properties and such petition or application is not
dismissed within thirty (30) days after the date of its filing or any Borrower
or any Obligor shall file any answer admitting or not contesting such petition
or application or indicates its consent to, acquiescence in or approval of, any
such action or proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or any Obligor or Additional L/C Debtor or
for all or any part of its property; or
(i) any default by any Borrower, any Obligor or any of the
Financing Subsidiaries under any agreement, document or instrument relating to
any indebtedness for borrowed money owing to any person other than Lender
(including, without limitation, under the Bank Group Agreements or the
Noteholders Agreements), or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, which
default continues for more than the applicable cure period if any, with respect
thereto, and would have a material adverse effect upon the consolidated assets,
business or prospects of the Apparel Group, or any default by any Borrower or
any Obligor or the Financing Subsidiaries under any material contract, lease,
license or other obligation to or with any person other than Lender, which
default continues for more than the applicable cure period, if any, with respect
thereto, and would have a material adverse effect upon the consolidated assets,
business or prospects of the Apparel Group;
(j) any change in the controlling ownership of any of Borrowers
or any of the other Obligors;
(k) the indictment or threatened indictment of any of Borrowers,
Parent or any other Obligor under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against Borrower or any
other Obligor, pursuant to which statute or proceedings the
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<PAGE> 55
penalties or remedies sought or available include forfeiture of any of the
property of Borrower or such Obligor, except as set forth on Schedule 8.5 hereto
and with respect to only the Retail Store Subsidiaries, any of the foregoing
which does not constitute a Material Adverse Retail Store Event;
(l) any action or inaction by or any of the Borrowers or
Obligors which would result in a breach of any of the terms and conditions of
the Intercreditor Agreement;
(m) there shall be a material adverse change in the business or
assets of the Apparel Group or, to the extent adversely affecting Credit Card
Receivables owed by the Financing Subsidiaries in any material amount, any
change in the controlling ownership of or material adverse change in the
business or assets of the Financing Subsidiaries after the date hereof; or
(n) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by any Borrower or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Borrower or
Borrowers' Agent of this Agreement or any of the other Financing Agreements.
Lender may, at any time or times, proceed directly against any Borrower or any
Obligor to collect the Obligations without prior recourse to the Collateral or
any other property which is security for the Obligations.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require any Borrower, at Borrowers' expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with the Lender having the right to purchase the whole or any part of
the Collateral at
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any such public sale, all of the foregoing being free from any right or equity
of redemption of any Borrower, which right or equity of redemption is hereby
expressly waived and released by each Borrower and/or (vii) terminate this
Agreement. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, five (5) Business Days prior
notice by Lender to Borrowers' Agent designating the time and place of any
public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof to Borrowers and each of Borrowers waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, each of Borrowers waives the posting of
any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral and Congress Cash Collateral to payment of the Obligations, in whole
or in part and in such order as Lender may elect, whether or not then due. Each
of Borrowers shall remain liable to Lender for the payment of any deficiency
with interest at the highest rate provided for herein and all costs and expenses
of collection or enforcement, including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrowers and Additional L/C Debtors and/or (ii)
terminate any provision of this Agreement or the other Financing Agreements
providing for any future Loans or Letter of Credit Accommodations to be made by
Lender to Borrowers or Additional L/C Debtors.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Each of the parties hereto irrevocably consents and submits
to the non-exclusive jurisdiction of the Supreme Court of the State of New York,
County of New York and the United States District Court for the Southern
District of New York and waives any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only
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in the courts described above (except that Lender shall have the right to bring
any action or proceeding against any Borrower or its property in the courts of
any other jurisdiction which Lender deems necessary or appropriate in order to
realize on the Collateral or to otherwise enforce its rights against any
Borrower or its property).
(c) Each of Borrowers and Borrowers' Agent hereby waives
personal service of any and all process upon it and consents that all such
service of process may be made by certified mail (return receipt requested)
directed to its address set forth on the signature pages hereof and service so
made shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Lender's option, by service upon any
of Borrowers or Borrowers' Agent in any other manner provided under the rules of
any such courts. Within thirty (30) days after such service, such Borrower or
Borrowers' Agent, as the case may be, shall appear in answer to such process
with respect to each of them, failing which such Borrower or Borrowers' Agent,
as the case may be, shall be deemed in default and judgment may be entered by
Lender against such Borrowers or Borrowers' Agent, as the case may be, for the
amount of the claim and other relief requested.
(d) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER
THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH OF
THE PARTIES HERETO HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT EACH OF THE PARTIES HERETO MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to any Borrower (whether
in tort, contract, equity or otherwise) for losses suffered by any Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or order of a court of competent jurisdiction binding on
Lender, that the losses were the result of an intentional breach of contract by
Lender or Lender's own acts or omissions constituting gross negligence or
willful misconduct. In any such litigation, Lender shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement.
11.2 Waiver of Notices. Each Borrower and Borrowers' Agent hereby
expressly waives demand, presentment, protest and notice of protest and notice
of dishonor with respect to any and all instruments and commercial paper,
included in or evidencing any of the Obligations or the Collateral, and any and
all other demands and notices of any kind or nature whatsoever with respect to
the Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on any Borrower or Borrowers' Agent
which Lender may elect to give shall entitle
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such Borrower or any other Borrower or Borrowers' Agent to any other or further
notice or demand in the same, similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims; Punitive Damages and Consequential
Damages. Each Borrower and Borrowers' Agent waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) or claims for punitive or consequential damages of any
kind of nature in any action or proceeding with respect to this Agreement, the
Obligations, the other Financing Agreements, the Collateral or any matter
arising therefrom or relating hereto or thereto.
11.5 Indemnification. Each Borrower shall indemnify and hold Lender,
and its directors, agents, employees and counsel, harmless from and against any
and all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them (except to the extent resulting
solely from Lender's own acts or omissions constituting gross negligence or
willful misconduct, as determined pursuant to a final and non-appealable
judgment or order of a court of competent jurisdiction) in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, each Borrower shall pay the maximum portion
which it is permitted to pay under applicable law to Lender in satisfaction of
indemnified matters under this Section. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof (except with
respect to any of the other Financing Agreements executed after the date hereof
and which shall become effective on such date of execution) and shall continue
in full force and effect for a term ending on June 1, 1998 unless sooner
terminated by Lender pursuant to the terms hereof. Upon the effective date of
termination of the Financing Agreements, Borrowers shall pay to Lender, in full,
all outstanding and unpaid Obligations and shall furnish cash
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collateral to Lender in such amounts as Lender determines are reasonably
necessary to secure Lender from loss, cost, damage or expense, including
attorneys' fees and legal expenses, in connection with any contingent
Obligations, including checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such payment and cash collateral shall be remitted by wire
transfer in Federal funds to such bank account of Lender, as Lender may, in its
discretion, designate in writing to Borrowers' Agent for such purpose. Interest
shall be due until and including the next business day, if the amounts so paid
by Borrowers to the bank account designated by Lender are received in such bank
account later than 12:00 noon, New York City time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower, Parent or any other Obligor
or Additional L/C Debtor of its respective duties, obligations and covenants
under this Agreement or the other Financing Agreements until all Obligations
have been fully and finally discharged and paid, and Lender's continuing
security interest in the Collateral and other property which is security for the
Obligations and the rights and remedies of Lender hereunder, under the other
Financing Agreements and applicable law, shall remain in effect until all such
Obligations have been fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to
the end of the then current term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrowers agree to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
<TABLE>
<CAPTION>
Amount Period
------ ------
<S> <C>
(i) two (2%) percent of Maximum Credit The date hereof to and including the
first annual anniversary of the date
hereof.
(ii) one (1%) percent of Maximum Credit The day after the first annual
anniversary of the date hereof to and
including the second annual anniversary
of the date hereof.
(iii) one half of one (l/2%) percent
of Maximum Credit The day after the second annual
anniversary of the date hereof to but not
including June 1,1998.
</TABLE>
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. The early
termination fee provided for in this Section 12.1 shall be deemed included in
the Obligations. Notwithstanding anything to the contrary contained in this
Section 12.1, the early termination fee provided herein shall be only
one-quarter of one (l/4%) percent of the Maximum Credit if this Agreement is
terminated after the first annual anniversary of the date hereof but on or prior
to the
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second annual anniversary of the date hereof and will be zero if terminated
after the second annual anniversary of the date hereof, provided, that, all of
the following conditions are complied with at the time of such termination after
the first annual anniversary date hereof, (i) Borrowers elect to terminate the
Agreement and the other Financing Agreements, (ii) Borrowers have entered into
an agreement with a recognized financial institution to replace the financing
arrangements with Lender pursuant to which such financial institution agrees to
make loans and provide financial accommodations to Borrowers for working capital
on an unsecured basis, (iii) Lender receives payment in full for all outstanding
Obligations (including cash collateral for all contingent obligations) on the
date of termination from the initial loan proceeds of the replacement loan
facility and (iv) no Event of Default has occurred and is continuing.
12.2 Appointment of Borrowers' Agent.
(a) Each Borrower hereby irrevocably appoints CS Delaware as
Borrowers' Agent hereunder and CS Delaware hereby irrevocably agrees to act in
such capacity as agent for each and all of Borrowers hereunder. Each Borrower
further irrevocably authorizes Borrowers' Agent to take such action on such
Borrowers' behalf and to exercise such rights and powers hereunder as are
delegated to Borrowers' Agent by the terms hereof, together with such rights and
powers as are reasonably incidental thereto.
(b) Borrowers' Agent is hereby expressly and irrevocably
authorized by each Borrower, without hereby limiting any other implied or
expressed authority, without notice to any Borrower (i) to give and receive on
behalf of such Borrower all notices and other materials delivered or to be
delivered by Lender to such Borrower or by such Borrower to Lender pursuant to
the Financing Agreements, (ii) to request Revolving Loans and Letter of Credit
Accommodations on behalf of such Borrower and (iii) to pay, on behalf of such
Borrower, all Obligations at any time owed to Lender pursuant to the terms of
the Financing Agreements.
12.3 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to each
Borrower and Borrowers' Agent at the chief executive office of Borrowers' Agent
set forth below, or to such other address of Lender as Lender may designate by
written notice to Borrowers' Agent or to such other address of Borrowers' Agent
as Borrowers' Agent may designate by written notice to Lender in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.4 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.5 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable in
- 56 -
<PAGE> 61
accordance with its terms by the parties hereto and their respective successors
and assigns, except that none of Borrowers or Borrowers' Agent may assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Lender. Lender may, after notice to Borrowers' Agent, assign its rights and
delegate its obligations under this Agreement and the other Financing Agreements
and further may assign, or sell participations in, all or any part of the Loans
or any other interest herein to another financial institution or other person
which agrees to comply with Section 12.6 hereof, in which event, the assignee or
participant shall have, to the extent of such assignment or participation, the
same rights and benefits as it would have if it were the Lender hereunder,
except as otherwise provided by the terms of such assignment or participation.
12.6 Confidentiality.
(a) Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrowers or Borrowers' Agent pursuant to this
Agreement which is clearly confidential by its nature or which is clearly and
conspicuously marked as confidential at the time such information is furnished
by Borrowers or Borrowers' Agent to Lender, provided, that, nothing contained
herein shall limit the disclosure of any such information: (i) to the extent
required by statute, rule, regulation, subpoena or court order, (ii) to bank
examiners and other regulators, auditors and/or accountants, (iii) in connection
with any litigation to which Lender is a party, (iv) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) shall have first agreed in
writing to treat such information as confidential in accordance with this
Section 12.6, or (v) to counsel for Lender or any participant or assignee (or
prospective participant or assignee).
(b) In no event shall this Section 12.6 or any other provision
of this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrowers or
Borrowers' Agent or any third party without breach of this Section 12.6 or
otherwise become generally available to the public other than as a result of a
disclosure in violation hereof, (ii) to apply to or restrict disclosure of
information that was or becomes available to Lender on a non- confidential basis
from a person other than Borrowers or Borrowers' Agent, (iii) to require Lender
to return any materials furnished by Borrowers or Borrowers' Agent to Lender or
(iv) to prevent Lender from responding to routine informational requests in
accordance with the Code of Ethics for the Exchange of Credit Information
promulgated by The Robert Morris Associates or other applicable industry
standards relating to the exchange of credit information. The obligations of
Lender under this Section 12.6 shall supersede and replace the obligations of
Lender under any confidentiality letter signed prior to the date hereof.
12.7 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
- 57 -
<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWERS
CONGRESS FINANCIAL CORPORATION CHARMING SHOPPES, INC.
By:________________________________ By:_______________________________
Title:_____________________________ Title:____________________________
Address Chief Executive Office:
1133 Avenue of the Americas 450 Winks Lane
New York, New York 10036 Bensalem, Pennsylvania 19020
CHARMING SHOPPES OF DELAWARE, INC.
By:_______________________________
Title:____________________________
Chief Executive Office
450 Winks Lane
Bensalem, Pennsylvania 19020
[SIGNATURES CONTINUE ON NEXT PAGE]
- 58 -
<PAGE> 63
[SIGNATURES CONTINUED FROM PRECEDING PAGE]
CSI INDUSTRIES, INC.
By:_______________________________
Title:____________________________
Chief Executive Office:
3411 Silverside Road
106 Weldin Building
Wilmington, Delaware 19810
FB APPAREL, INC.
By:_______________________________
Title:____________________________
Chief Executive Office:
1901 State Road 240E
Greencastle, Indiana 46135
BORROWERS' AGENT
CHARMING SHOPPES OF DELAWARE, INC.,
Borrower's Agent
By:_______________________________
Title:____________________________
Chief Executive Office:
450 Winks Lane
Bensalem, Pennsylvania 19020
- 59 -
<PAGE> 1
EXHIBIT 10.1.8
CREDIT AGREEMENT
among
CHARMING SHOPPES, INC.
CSI INDUSTRIES, INC.
CHARMING SHOPPES OF DELAWARE, INC.
INTERNATIONAL APPAREL, INC.
W.L. DISTRIBUTORS, INC.
SENTANI TRADING LIMITED
SENTANI TRADING (MACAU) LIMITED
KIRKSTONE COMPANY LIMITED
HUAMBO LIMITED and TRIMOLAND LIMITED,
as Borrowers
CHARMING SHOPPES OF DELAWARE, INC.,
as Borrowers's Agent
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO
and
CHEMICAL BANK,
as Agent
Dated as of November 30, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
BACKGROUND .................................................... 1
SECTION 1. DEFINITIONS ........................................ 2
1.1 Defined Terms ................................................. 2
1.2 Other Definitional Provisions ................................. 19
SECTION 2. TERM LOANS ......................................... 20
2.1 Term Loans .................................................... 20
2.2 Procedure for Term Loan Conversion ............................ 20
2.3 Repayment of Term Loans; Evidence of Debt ..................... 20
2.4 Optional Prepayments .......................................... 21
2.5 Mandatory Prepayments ......................................... 22
2.6 Interest Rates and Payment Dates .............................. 24
2.7 Computation of Interest and Fees .............................. 24
2.8 Borrowings and Payments ....................................... 24
2.9 Fees .......................................................... 25
2.10 Taxes ......................................................... 25
SECTION 3. LETTERS OF CREDIT .................................. 27
3.1 Letters of Credit ............................................. 27
3.2 Back-up L/C's; Presentment of Certificates Thereunder;
Reimbursement Obligation of the Borrower ...................... 27
3.3 Obligations Absolute .......................................... 29
SECTION 4. REPRESENTATIONS AND WARRANTIES ..................... 29
4.1 Financial Condition ........................................... 29
4.2 No Change ..................................................... 30
4.3 Corporate Existence; Compliance with Law ...................... 30
4.4 Corporate Power; Authorization; Enforceable Obligations ....... 30
4.5 No Legal Bar .................................................. 31
4.6 No Material Litigation ........................................ 31
4.7 No Default .................................................... 31
4.8 Ownership of Property; Liens .................................. 31
4.9 Intellectual Property ......................................... 32
4.10 No Burdensome Restrictions .................................... 32
4.11 Taxes ......................................................... 32
4.12 Federal Regulations ........................................... 33
4.13 ERISA ......................................................... 33
4.14 Investment Company Act; Other Regulations ..................... 34
4.15 Corporate Organization; Subsidiaries; Ownership;
Interrelated Businesses ....................................... 34
4.16 Environmental Matters ......................................... 35
4.17 Regulation H .................................................. 36
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 5. CONDITIONS PRECEDENT ............................... 36
SECTION 6. AFFIRMATIVE COVENANTS .............................. 42
6.1 Financial Statements .......................................... 43
6.2 Certificates; Other Information ............................... 44
6.3 Payment of Obligations ........................................ 45
6.4 Conduct of Business and Maintenance of Existence .............. 45
6.5 Maintenance of Property; Insurance ............................ 45
6.6 Inspection of Property; Books and Records; Discussions ........ 45
6.7 Notices ....................................................... 46
6.8 Environmental Laws ............................................ 46
6.9 After-Acquired Property ....................................... 47
6.10 Further Assurances ............................................ 48
6.11 Tax Refund .................................................... 48
SECTION 7. NEGATIVE COVENANTS ................................. 49
7.1 Financial Condition Covenant .................................. 49
7.2 Limitation on Indebtedness .................................... 49
7.3 Limitation on Liens ........................................... 50
7.4 Limitation on Fundamental Changes and Asset Sales ............. 52
7.5 Limitation on Dividends ....................................... 54
7.6 Limitation on Consolidated Capital Expenditures ............... 54
7.7 Limitation on Guarantee Obligations, Investments,
Term Loans and Advances ....................................... 55
7.8 Limitation on Transactions with Affiliates .................... 56
7.9 Limitation on Changes in Fiscal Year .......................... 56
7.10 Swap Transactions ............................................. 56
7.11 Limitation on Lines of Business ............................... 56
SECTION 8. EVENTS OF DEFAULT .................................. 56
SECTION 9. THE AGENT .......................................... 61
9.1 Appointment ................................................... 61
9.2 Delegation of Duties .......................................... 61
9.3 Exculpatory Provisions ........................................ 61
9.4 Reliance by Agent ............................................. 62
9.5 Notice of Default ............................................. 62
9.6 Non Reliance on Agent and Other Lenders ....................... 62
9.7 Indemnification ............................................... 63
9.8 Agent and Lenders in Their Individual Capacity ................ 63
9.9 Successor Agent ............................................... 64
SECTION 10. MISCELLANEOUS ..................................... 64
10.1 Amendments and Waivers ........................................ 64
10.2 Notices ....................................................... 65
10.3 No Waiver; Cumulative Remedies ................................ 65
</TABLE>
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Credit Agreement
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
10.4 Survival of Representations and Warranties .................... 66
10.5 Payment of Expenses and Taxes ................................. 66
10.6 Successors and Assigns; Participations and Assignments ........ 67
10.7 Adjustments; Set off .......................................... 69
10.8 Counterparts .................................................. 70
10.9 Severability .................................................. 70
10.10 Integration ................................................... 70
10.11 GOVERNING LAW ................................................. 70
10.12 Submission To Jurisdiction; Waivers ........................... 70
10.13 Acknowledgements .............................................. 71
10.14 WAIVERS OF JURY TRIAL ......................................... 71
10.15 Confidentiality ............................................... 71
</TABLE>
OMNIBUS SCHEDULES
<TABLE>
<S> <C>
1 Corporate Organization; Subsidiaries
1A(4) Real Property Development Companies
4 Existing Letter of Credit Agreements
6 Stock Pledged Pursuant to Term Lender Stock Pledge Agreement
7 Entities Not In Good Standing As Of November 30, 1995
8 Material Litigation
9 Material Defaults of Contractual Obligations
12 Certain Permitted Indebtedness
13 Certain Permitted Liens
14 Certain Permitted Guarantees
15A Existing Letters of Credit Funded Amounts
15B Existing Letter of Credit Funded Surplus
21 Term Lender Priority Collateral
</TABLE>
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Credit Agreement
<PAGE> 5
EXHIBITS
16.-1 FORM OF TRANCHE A TERM NOTE
A-2 Form of Tranche B Term Note
17. FORM OF LENDER BENSALEM MORTGAGE
18. FORM OF CONGRESS INTERCREDITOR AGREEMENT
19. FORM OF GREENCASTLE MORTGAGE
20. FORM OF SUBORDINATION AGREEMENT
21. FORM OF MASTER SECURITY AGREEMENT
22. FORM OF RELEASE
23. FORM OF OMNIBUS GUARANTEE
24. FORM OF PREPAYMENT L/C
25. FORM OF REAL PROPERTY DEVELOPMENT
Company Mortgages
26. FORM OF SHARED STOCK PLEDGE AGREEMENT
27. FORM OF TERM LENDER INTERCREDITOR AGREEMENT
28. FORM OF TERM LENDER STOCK PLEDGE AGREEMENT
29.-1 FORM OF TRADEMARK SECURITY AGREEMENT (C.S.F., INC.)
N-2 Form of Trademark Security Agreement (Charming Shoppes, Inc.)
30. FORM OF TRUSTEE BENSALEM MORTGAGE
31. FORM OF BACK UP L/C
32. FORM OF CLOSING CERTIFICATE
33.-1 FORM OF LEGAL OPINION OF
Davis Polk & Wardwell, New York Special Counsel
R-2 Form of Legal Opinion of
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Credit Agreement
<PAGE> 6
Drinker, Biddle & Reath, Pennsylvania Special Counsel
R-3 Form of Legal Opinion of
Baker & Daniels, Indiana Special Counsel
R-4 Form of Legal Opinion of
Colin Stern, General Counsel
R-5 Form of Legal Opinion of
Panitch Schwarze Jacobs & Nadel, P.C., Special Trademark Counsel
R-6 Form of Legal Opinion of
Greene & Greene, Tennessee Real Estate Special Counsel
R-7 Form of Legal Opinion of
Goodell, Stratton, Edmonds & Palmer,
Kansas Real Estate Special Counsel
R-8 Form of Legal Opinion of
Andrews & Kurth, Texas Real Estate Special Counsel
R-9 Form of Legal Opinion of
Stinson, Mag & Fizzell, Missouri Real Estate Special
Counsel
R-10 Form of Legal Opinion of
Thompson, McNabue, Ashley & Bull, Maine Real Estate
Special Counsel
R-11 Form of Legal Opinion of
Sidley & Austin, Illinois Real Estate Special Counsel
R-12 Form of Legal Opinion of
Johnson Stokes & Master, Hong Kong Special Counsel
34. FORM OF ASSIGNMENT
- v -
Credit Agreement
<PAGE> 7
CREDIT AGREEMENT, dated as of November 30, 1995, among (a)
CHARMING SHOPPES, INC., a Pennsylvania corporation ("Parent"), CSI INDUSTRIES,
INC., a Delaware corporation ("CSI"), CHARMING SHOPPES OF DELAWARE, INC., a
Pennsylvania corporation ("CS Delaware"), INTERNATIONAL APPAREL, INC., a
Pennsylvania corporation ("IAI"), W.L. DISTRIBUTORS, INC., a Pennsylvania
corporation ("WLD"), SENTANI TRADING LIMITED, a company incorporated in Hong
Kong, SENTANI TRADING (MACAU) LIMITED, a company incorporated in Macau,
KIRKSTONE COMPANY LIMITED, a company incorporated in Hong Kong, HUAMBO LIMITED,
a company incorporated in Hong Kong and TRIMOLAND LIMITED, a company
incorporated in Hong Kong (each individually, a "Borrower" and collectively the
"Borrowers"), (b) CS Delaware as agent for itself and the other Borrowers, (c)
the several banks and other financial institutions from time to time parties to
this Agreement (the "Lenders") and (d) Chemical Bank, a New York banking
corporation, as agent for the Lenders hereunder.
BACKGROUND
Parent and the other Borrowers (each, including Parent, an "Existing Borrower"
and collectively the "Existing Borrowers") have entered into certain separate
credit agreements, letter of credit agreements, facility letters, lines of
credit and related agreements with each of the Lenders (collectively, for the
purposes hereof, the "Existing Letter of Credit Agreements"), pursuant to which
the Lenders issued letters of credit, guarantees and made loans and other
financial accommodations (collectively, for the purposes hereof, the "Existing
Letters of Credit") to, for the benefit of, or at the request of Parent or the
Borrower or Borrowers specified in such Existing Letter of Credit Agreements.
<PAGE> 8
The parties to the Existing Letter of Credit Agreements have agreed to
amend the Existing Letter of Credit Agreements and the obligations of the
Existing Borrowers thereunder pursuant to this Agreement and the other Loan
Documents in order to, among other things (a) convert certain of the amounts
owed to each Lender in respect of unreimbursed drawings governed by the Existing
Letter of Credit Agreements into term loans, (b) repay certain of the amounts
owed to each Lender under the Existing Letter of Credit Agreements; (c) provide
for issued but undrawn Existing Letters of Credit to be covered by the
provisions hereof governing letters of credit hereunder and (d) provide security
interests and liens for, and guarantees of, the obligations under this Agreement
as set forth in the Loan Documents.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
2. DEFINED TERMS. AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS SHALL
HAVE THE FOLLOWING MEANINGS:
<PAGE> 9
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes hereof: "Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Agent as its prime rate in
effect at its principal office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged by Chemical Bank in
connection with extensions of credit to debtors); "Base CD Rate" shall mean
the sum of (a) the product of (i) the Three-Month Secondary CD Rate and
(ii) a fraction, the numerator of which is one and the denominator of which
is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate;
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in
effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board of Governors of the Federal Reserve
System (the "Board") through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not
be so reported on such day or such next preceding Business Day, the average
of the secondary market quotations for three month certificates of deposit
of major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the Agent from three
New York City negotiable certificate of deposit dealers of recognized
standing selected by it; and "Federal Funds Effective Rate" shall mean, for
any day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for the day
of such transactions received by the Agent from three federal funds brokers
of recognized standing selected by it. Any change in the ABR due to a
change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal
Funds Effective Rate shall be effective as of the opening of business on
the effective day of such change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate, respectively. Agent
shall give the Lenders written notice of such change within one Business
Day.
"Adjusted Net Worth": as to Parent and its Consolidated Subsidiaries,
at any time, in accordance with GAAP (except as otherwise specifically set
forth below), determined on a Consolidated basis, the amount equal to (a)
the difference between (i) the aggregate net book value of all assets of
Parent and its Consolidated Subsidiaries, calculating the book value of
Inventory for this purpose on a first-in-first-out basis at the lower of
cost or market as determined by the retail method (average cost basis),
after deducting from such book values all appropriate reserves in
accordance with GAAP (including reserves for doubtful receivables,
obsolescence, depreciation and amortization) and (ii) the aggregate amount
of Indebtedness and other liabilities of Parent and its Consolidated
Subsidiaries (including tax and other proper accruals).
<PAGE> 10
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether by
contract or otherwise.
"Agent": Chemical Bank, together with any Affiliate so designated, as
the agent for the Lenders under this Agreement and the other Loan
Documents.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Asset Sale": as defined in subsection 7.4.
"Assignee": as defined in subsection 10.6(c).
"Back-up L/C": as defined in subsection 3.2.
"Back-up L/C Issuer": any bank or other financial institution issuing
a Back-up L/C, each of which such bank or financial institution and such
Back-up L/C shall be satisfactory to the Agent and satisfactory to any
Lender receiving a Back-up L/C from such Back-up L/C Issuer.
"Bank Obligations": the unpaid principal of and interest on
(including, without limitation, interest accruing at the then applicable
rate provided in this Agreement after the maturity of the Term Loans and
interest accruing at the then applicable rate provided in this Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to any Borrower,
whether or not a claim for post-filing or post-petition interest is allowed
in such proceeding) the Term Loans, and all other obligations and
liabilities of each Borrower to any Lender, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document, or any other document made, delivered
or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Agent or any Lender) that are required to
be paid by the Borrowers pursuant thereto.
"Bank Offering Percentage": at any time, the percentage which the
aggregate amount of the Bank Obligations bears to the sum of the Bank
Obligations and the Note Obligations.
<PAGE> 11
"Bensalem": the Property subject of the Lender Bensalem Mortgage.
"Bensalem Tax Refund": any monies that may hereafter be due, payable
or paid or otherwise recoverable by Winks Lane from the Commonwealth of
Pennsylvania (or any subdivision thereof) for any and all income tax
refunds, including interest payable or paid thereon (if any), resulting
from the filing of tax return(s), amended tax returns and/or claims for
refunds in respect of any fiscal year, and all amounts, judgments, decrees,
settlements and other payments relating to the foregoing, solely to the
extent such monies relate to income taxes of Winks Lane paid by the Note
Trustee or any Noteholder.
"Borrowers' Agent": CS Delaware in its capacity as Borrowers' Agent
for the Borrowers under this Agreement and the other Loan Documents.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close and, with respect to HKSB, a day other than a day on which
commercial banks in Hong Kong are authorized or required by law to close.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"Cash Equivalents": (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the
date of acquisition and overnight bank deposits of any Lender or of any
commercial bank having capital and surplus in excess of $500,000,000, (c)
repurchase obligations of any Lender or of any commercial bank satisfying
the requirements of clause (b) of this definition, having a term of not
more than 30 days with respect to securities issued or fully guaranteed or
insured by the United States Government, (d) commercial paper of a domestic
issuer rated at least A-2 by Standard and Poor's Rating Group ("S&P") or
P-2 by Moody's Investors Service, Inc. ("Moody's"), (e) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by
any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of
which state, commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's, (f) securities with maturities of one year or less
from the date of acquisition backed by standby letters of credit issued by
any Lender or any commercial bank satisfying the requirements of clause (b)
of this definition or (g) shares of money market mutual or similar funds
which invest exclusively in assets satisfying the requirements of clauses
(a) through (f) of this definition.
<PAGE> 12
"C/D Assessment Rate": for any day as applied to any ABR Loan, the
annual assessment rate in effect on such day which is payable by a member
of the Bank Insurance Fund maintained by the Federal Deposit Insurance
Corporation (the "FDIC") classified as well-capitalized and within
supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. Section 327.3(d) (or any
successor provision) to the FDIC (or any successor) for the FDIC's (or such
successor's) insuring time deposits at offices of such institution in the
United States.
"C/D Reserve Percentage": for any day as applied to any ABR Loan, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) (the "Board"), for determining the maximum reserve requirement
for a Depositary Institution (as defined in Regulation D of the Board) in
respect of new non personal time deposits in Dollars having a maturity of
30 days or more.
"Change in Control": with respect to (a) Parent, the result caused by
any Person and/or its Affiliates acquiring or otherwise obtaining the right
to vote more than 30% of the issued and outstanding Capital Stock of Parent
entitled to vote, (b) any Domestic Subsidiary and Fashion Service Corp.,
the result caused by Parent or another Domestic Subsidiary not having legal
and beneficial ownership of, and the right to vote, 100% of the issued and
outstanding Capital Stock of such entity and (c) any Foreign Subsidiary,
the result caused by Parent, FSHC and/or another Foreign Subsidiary not
having legal and beneficial ownership of, and the right to vote, more than
50% of the issued and outstanding Capital Stock of such Foreign Subsidiary,
provided, that neither (i) the pledges of the Capital Stock of any
Subsidiary pursuant to the Shared Pledge Agreement or the Term Lender
Pledge Agreement nor (ii) any transaction permitted by subsection 7.4
(other than the sale to a third party of the Capital Stock of a Foreign
Subsidiary) shall be a Change in Control.
"Chemical": Chemical Bank.
"Closing Date": the date on which the conditions precedent set forth
in subsection 5.1 shall be satisfied, but in any event no later than
November 30, 1995.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all assets of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security
Document.
"Collateral Agent": Chemical Bank, together with its Affiliates, as
collateral agent under the Term Lender Intercreditor Agreement, the other
Security Documents and the Congress Intercreditor Agreement.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with any Borrower within the meaning of
Section 4001 of ERISA
<PAGE> 13
or is part of a group which includes any Borrower and which is treated as a
single employer under Section 414(b) or (c) of the Code.
"Congress": Congress Financial Corporation, a California corporation.
"Congress Event of Default": the occurrence or existence of an Event
of Default pursuant to and as described in any of the Congress Loan
Documents.
"Congress Intercreditor Agreement": the Intercreditor Agreement to be
executed and delivered by Congress, the Collateral Agent, the Agent and the
Note Trustee substantially in the form of Exhibit C, as the same may be
amended, supplemented or otherwise modified from time to time.
"Congress Loan Agreement": that Amended and Restated Loan and Security
Agreement dated as of November __, 1995 among (a) Congress, as Lender (b)
CS Delaware, CSI and FB Apparel, as Borrowers, (c) CS Delaware as agent for
Borrowers and (d) Parent.
"Congress Loan Documents": the Congress Loan Agreement and all notes,
guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by a
"Borrower" or an "Obligor" (as each is defined in Congress Loan Agreement)
in connection with the Congress Loan Agreement, as each now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
"Congress Obligations": all obligations of every nature owing under
the Congress Loan Documents, whether matured or unmatured, absolute or
contingent.
"Consolidated": when used in connection with any defined term, and not
otherwise defined, means such term as it applies to Parent and its
Subsidiaries on a consolidated basis, after eliminating all intercompany
items.
"Consolidated Capital Expenditures": for any period, the aggregate of
all expenditures (including that portion of the obligations under a
Financing Lease incurred during such period) made by Parent and its
Subsidiaries during such period in respect of the purchase, construction or
other acquisition of fixed or capital assets (excluding any such asset
acquired in connection with normal replacement and maintenance programs
properly charged to current operations, any purchase or refinancing of
Point of Sale equipment and any acquisition or financing of any existing
computer equipment or replacement thereof) computed in conformity with
GAAP.
"Consolidated Cash Flow": for any period, (a) the consolidated net
income of Parent and its Consolidated Subsidiaries for such period, after
all expenses and other proper charges but before any deduction for income
tax expense or extraordinary losses or any addition for income tax benefits
or extraordinary gains during such period, determined in accordance with
GAAP, plus (b) all depreciation, amortization and other noncash charges
<PAGE> 14
(to the extent deducted in determining net income) for such period, minus
(c) the sum of (i) all cash payments of income taxes by Parent and its
Consolidated Subsidiaries during such period, (ii) the aggregate amount of
all Consolidated Capital Expenditures by Parent and its Consolidated
Subsidiaries during such period to the extent not financed by the
incurrence of Indebtedness by Parent or any Consolidated Subsidiary and
(iii) all earnings attributable to equity interests in any Person that is
not a Consolidated Subsidiary unless actually received by Parent or any
Consolidated Subsidiary.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Discrepant Letters of Credit": as defined in subsection 3.1.
"DLC Notice": as defined in subsection 3.1.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Domestic Borrower": any of Parent, CSI, CS Delaware, IAI or WLD.
"Domestic Subsidiary": any Subsidiary of Parent organized under the
laws of the United States of America or of any state, territory or
commonwealth of the United States of America including New Retail Store
Subsidiaries, but excluding (a) any Domestic Borrower, (b) any Financing
Subsidiary or (c) Executive Flights, Inc.
"Environmental Laws": any and all Federal, foreign, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, any and all Requirements of Law and any and all common law
requirements, rules and bases of liability regulating, relating to or
imposing liability or standards of conduct concerning pollution, protection
of the environment, or the impact of pollutants, contaminants or toxic or
hazardous substances on human health or the environment, as now or may at
any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default": any of the events specified in Section 8, provided
that any requirement for the giving of notice, the lapse of time, or both,
or any other condition, has been satisfied.
<PAGE> 15
"Excess Availability": has the meaning ascribed to such term in the
Congress Financing Documents as of the Closing Date.
"Existing Letter of Credit Agreements": the separate credit
agreements, letter of credit agreements, facility letters, lines of credit
and related agreements between the Lenders and the Existing Borrowers, as
referenced in items 1 4 of Omnibus Schedule 13 hereto.
"Existing Letter of Credit Funded Amount": as to any Existing Letter
of Credit Agreement, the amount of drawings of or advances under such
Existing Letter of Credit Agreement as of October 18, 1995 (to the extent
outstanding on the Closing Date) stated in Dollars (with amounts previously
stated in Hong Kong dollars having been converted at a rate of 7.73 Hong
Kong dollars to $1) as set forth on Omnibus Schedule 15A hereto.
"Existing Letter of Credit Funded Surplus": as to any Existing Letter
of Credit Agreement, the aggregate principal amount of drawings of, or
advances under, Existing Letters of Credit after October 18, 1995 but prior
to the Closing Date.
"Existing Letters of Credit": the letters of credit issued and other
financial accommodations made to, for the benefit of, or at the direction
of the Existing Borrower(s) party to the Existing Letter of Credit
Agreement, each as amended, supplemented or otherwise modified from time to
time.
"FB Distro": FB Distro, Inc., an Indiana corporation.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"Financing Subsidiaries": Fashion Service Corp., Fashion SPC, Inc. and
Spirit of America National Bank and any other Subsidiary of any of them
exclusively or primarily engaged in financing credit card or other
receivables of the Domestic Borrowers or Domestic Subsidiaries.
"FSHC": FSHC, Inc., a Pennsylvania corporation.
"Foreign Borrower": any Borrower organized under the laws of a nation
or jurisdiction other than the United States of America or any state,
territory or commonwealth of the United States of America.
"Foreign Subsidiary": any Subsidiary of Parent or FSHC organized under
the laws of a nation or jurisdiction other than the United States of
America or any state, territory or commonwealth of the United States of
America.
<PAGE> 16
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Greencastle Mortgage": the Mortgage to be executed and delivered by
FB Distro, Inc., in favor of the Collateral Agent, substantially in the
form of Exhibit D, as the same may be amended, supplemented or otherwise
modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "primary obligations") of any other third Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee
Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrowers in
good faith.
"Guarantor": each Domestic Borrower, each Domestic Subsidiary and
Fashion Service Corp..
"Hedge Transaction": shall mean any Swap Transaction entered into by
Parent or any of its Subsidiaries that is entered into in order to (a)
protect against the risk of changes of interest rates payable on all or a
portion of Indebtedness of Parent or a Subsidiary, (b) protect against a
risk in the fluctuation of the price or value of a physical commodity
<PAGE> 17
produced, purchased or sold in the ordinary course of business of Parent or
a Subsidiary, (c) protect against a risk in the fluctuation of the exchange
rate of a currency in which a payment to be made or received by Parent or a
Subsidiary in the ordinary course of its business is denominated or (d)
provide local currency to any Foreign Subsidiary for use by such Subsidiary
in the ordinary course of its business.
"HKSB": The Hongkong and Shanghai Banking Corporation Limited.
"Inactive Retail Store Subsidiaries": as defined in subsection 4.15.
"Indebtedness": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by
a note, bond, debenture or similar instrument, (c) all obligations of such
Person under Financing Leases, (d) all obligations of such Person in
respect of acceptances issued or created for the account of such Person and
(e) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable
for the payment thereof.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intercompany Notes": the notes executed by certain Retail Store
Subsidiaries to the order of C.S.A.C., Inc..
"Intercreditor Agreements": the Congress Intercreditor Agreement and
the Term Lender Intercreditor Agreement.
"Interest Payment Date": the fifteenth day of each month.
"Inventory": the raw materials, work in process, finished goods and
all other inventory of whatsoever kind or nature, wherever located of
Parent or any of its Subsidiaries.
"Issuing Lender": as to any Letter of Credit, the Lender which issued
such Letter of Credit, as set forth on Omnibus Schedule 4.
"Kafco": Kafco Development Co., Inc., a Pennsylvania corporation.
"Lender Bensalem Mortgage": the Mortgage to be executed and delivered
by Winks Lane in favor of the Agent, substantially in the form of Exhibit
B, as the same may be amended, supplemented or otherwise modified from time
to time.
<PAGE> 18
"Letters of Credit": as defined in paragraph
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
and any Financing Lease having substantially the same economic effect as
any of the foregoing).
"Loan Documents": this Agreement, any Term Notes, the Omnibus
Guarantee Agreement, the Subordination Agreement, the Lender Bensalem
Mortgage and the Security Documents, as each now exists or may hereafter be
amended, modified supplemented, extended, renewed, restated or replaced.
"Loan Parties": the Borrowers, the Parent and each Domestic Subsidiary
which is a party to a Loan Document.
"Master Security Agreement": the Master Security Agreement executed
and delivered by the Domestic Borrowers and Domestic Subsidiaries (other
than Inactive Retail Store Subsidiaries) substantially in the form of
Exhibit F, as the same may be amended, supplemented or otherwise modified
from time to time.
"Material Adverse Effect": (a) a material adverse effect on the
business, operations, property, condition (financial or otherwise) or
prospects of the Parent and its Subsidiaries, taken as a whole, or (b) a
condition or occurrence or event which would impede the ability of (i) any
Borrower, Parent or any Domestic Subsidiary (other than a Retail Store
Subsidiary), individually, or the Retail Store Subsidiaries, taken as a
whole, to perform its or their respective obligations hereunder or under
any other Loan Document or (ii) the Collateral Agent, the Agent or any
Lender to enforce the Bank Obligations or realize upon any Collateral.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined, listed,
classified, or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation, and any other substance that could give rise
to liability under any Environmental Law.
"Mortgages": the collective reference to the Lender Bensalem Mortgage,
the Greencastle Mortgage and the Real Property Development Company
Mortgages.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
<PAGE> 19
"Mutual Release": the Release executed and delivered by Parent, among
others, and its Subsidiaries and each Lender substantially in the form of
Exhibit G, as the same may be amended, supplemented or otherwise modified
from time to time.
"Net Proceeds": in the case of (i) any Asset Sale, cash proceeds, net
of (a) bona fide, reasonable and customary direct costs of sale (including
(I) income taxes incurred and reasonably estimated to be actually payable
in cash as a result of such Asset Sale within 18 months of the closing date
of the Asset Sale, and (II) payment of the outstanding principal amount of,
premium or penalty, if any, and interest on any Indebtedness (other than
the loans and other obligations owed under this Agreement and the other
Loan Documents, the Note Agreement and the Congress Documents) required to
be repaid under the terms thereof as a result of such Asset Sale) and (b)
appropriate amounts provided by the seller of such assets as a reserve,
whether required by GAAP or the agreement relating to such Asset Sale,
against any liabilities directly associated with the assets sold in such
Asset Sale and retained by the seller of such assets after such Asset Sale,
including pension and other post employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with such Asset Sale, provided, that to the extent
such reserve is subsequently reduced, Net Proceeds shall be deemed to
increase by an equal amount, and (ii) any Offering, the cash proceeds net
of bona fide, reasonable and customary direct costs of sale (including
legal and other professional fees and underwriting fees).
"New Retail Store Subsidiary": as defined in subsection 6.9.
"Non-Excluded Taxes": as defined in subsection 2.10.
"Non-Retail Store Subsidiary": any Domestic Subsidiary which does not
own a retail store.
"Note Agreement": that certain Amended and Restated Note Agreement
dated as of November 30, 1995 among Winks Lane, Parent, and the purchasers
identified therein, as in effect on the Closing Date and as amended from
time to time.
"Note Documents": the Notes, the Note Agreement, the Note Guarantee,
the Note Indenture, the Trustee Security Documents and the other Financing
Documents (as defined in the Note Agreement).
"Note Guarantee": the Guaranty dated as of November 30, 1995 to be
executed and delivered by the Guarantors (other than Winks Lane) in favor
of the Noteholders.
"Noteholders": individually and collectively, Allstate Life Insurance
Company (on behalf of Harris Trust and Savings Bank, as Collateral Agent
and Trustee Under Security and Trust Agreement dated as of September 1,
1993), Aid Association for Lutherans and Nationwide Life Insurance Company
and their respective successors and assigns,
<PAGE> 20
including any person, subsequent to the date hereof, acquiring any part of
the Note Obligations.
"Note Indenture": that certain Collateral Trust Indenture, dated as of
November 30, 1995, among Parent, Winks Lane, certain subsidiaries of Parent
listed on Schedule 1 thereto and State Street Bank and Trust Company, as in
effect on the Closing Date and as amended from time to time.
"Note Obligations": the unpaid principal of and interest on the Notes
(including, without limitation, interest accruing at the then applicable
rate provided in the Note Documents after the maturity of the Notes and
interest accruing at the then applicable rate provided in the Note
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to Winks Lane, or any guarantor of the Notes whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), any
premium payable in respect of the Notes and all other obligations and
liabilities of Winks Lane and each guarantor of the Notes to any Noteholder
or the Note Trustee, whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may
arise under, out of, or in connection with, the Note Documents whether on
account of principal, interest, premiums, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to any Noteholder or the Note
Trustee) that are required to be paid by Winks Lane or any guarantor of the
Notes pursuant thereto.
"Notes": the 11.8% Notes, dated November 30, 1995 due June 1, 1998, in
the aggregate principal amount of $9,488,277 issued by Winks Lane pursuant
to the Note Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated, or replaced.
"Note Trustee": the collateral trustee or collateral trustees under
the Note Indenture.
"Offering": the issuance and public or private sale of Capital Stock
or any subordinated debt instrument or other evidence of subordinated
indebtedness by or on behalf of Parent or any of its Domestic Subsidiaries,
or the receipt of capital contributions in the form of cash to Parent or
any of its Domestic Subsidiaries, except (a) the exercise of stock options
or warrants by a current or former director, officer or employee, (b) the
purchase of Capital Stock of Parent by a current or former director,
officer or employee of Parent or any Subsidiary pursuant to an employee
benefit or similar plan and (c) capital contributions by Parent or any of
its Subsidiaries to one another.
"Omnibus Guarantee Agreement": the Omnibus Guarantee Agreement to be
executed and delivered by the Guarantors, substantially in the form of
Exhibit H, as the same may be amended, supplemented or otherwise modified
from time to time.
"Original Lender": each Person whose name appear on the signature
pages hereof and are designated as "Lenders" during the period such Person
is a Lender.
<PAGE> 21
"Parent": Charming Shoppes, Inc., a Pennsylvania corporation.
"Participant": as defined in subsection 10.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any defined benefit retirement plan
which is covered by ERISA and in respect of which any Borrower or a
Commonly Controlled Entity is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Pledged Foreign Subsidiaries": (i) the following subsidiaries of
FSHC, each a company incorporated in Hong Kong: Trimoland Limited, Sentani
Trading Limited, Kirkstone Company Limited, Elegant Crown Limited, Evatone
Trading Limited, Huambo Limited, Loyal Paradise Limited, Sentron
International Limited, Curlford Limited, Century Excellence Limited and
Limburg Limited and (ii) CS Insurance Ltd., a company organized under the
laws of The Islands of Bermuda.
"Pledged Real Property Development Companies": any Subsidiary listed
on Part A(4) of Omnibus Schedule 1 hereto and whose stock is pledged
pursuant to the Term Lender Stock Pledge Agreement.
"Prepayment Amount": an aggregate of $30,000,000 of principal
prepayments of the Term Loans from the Tax Refund and the Bank Offering
Percentage of the Net Proceeds of any Offering.
"Prepayment L/C": the standby letter of credit to be issued to the
Agent by the Prepayment L/C Issuer for the account of Parent, in the
initial face amount of $22,000,000, substantially in the form of Exhibit I
and satisfactory to the Agent and the Lenders, and any letter(s) of credit
issued as replacement therefor.
"Prepayment L/C Issuer": the bank issuing the Prepayment L/C, which
bank shall be satisfactory to the Agent and the Lenders.
"Prepayment Shortfall": an amount equal to $30,000,000 minus the sum
of (a) Tax Refund payments paid to the Agent for the benefit of the Lenders
or the POS Financer (as defined in the Term Lender Intercreditor
Agreement), (b) the Net Proceeds of Offerings paid to the Agent for the
benefit of the Lenders and (c) drawings under the Prepayment L/C paid to
the Agent for the benefit of the Lenders.
<PAGE> 22
"Properties": the collective reference to the properties that are
encumbered by Mortgages.
"Real Property Development Company": any Subsidiary listed on Omnibus
Schedule 1A(4) hereto.
"Real Property Development Company Mortgages": the Mortgages executed
by each of the Pledged Real Property Development Companies substantially in
the form of Exhibit J, as the same may be amended, supplemented or
otherwise modified from time to time.
"Register": as defined in subsection 10.6(d).
"Regulation U": Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Reimbursement Obligation": as defined in subsection 3.2.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043 of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Section 2615.
"Required Lenders": at any time, Lenders having an aggregate of
66-2/3% of the Term Loan Percentages.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer": with respect to any Borrower, the chief
executive officer, the president, or any vice president who has executive
and supervisory responsibility regarding the relevant subject matter, or
with respect to financial matters, the chief financial officer or
controller.
"Retail Store": any retail store which is operated by a Domestic
Subsidiary of Parent and which sells Inventory.
"Retail Store Subsidiary": any Domestic Subsidiary which owns a Retail
Store, including a New Retail Store Subsidiary.
<PAGE> 23
"Security Documents": the collective reference to the Master Security
Agreement, the Mortgages (other than the Lender Bensalem Mortgage), the
Stock Pledge Agreements, the Trademark Security Agreement and all other
security documents hereafter delivered to the Collateral Agent granting a
Lien on any asset or assets of any Person in favor of the Collateral Agent
to secure the Bank Obligations of the Borrowers hereunder and under any of
the other Loan Documents or to secure any guarantee of any such Bank
Obligations.
"Shared Stock Pledge Agreement": the Stock Pledge Agreement to be
executed and delivered by Parent in favor of the Collateral Agent
substantially in the form of Exhibit K, as the same may be amended,
supplemented or otherwise modified from time to time.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Stock Pledge Agreements": the collective reference to the Shared
Stock Pledge Agreement and the Term Lender Stock Pledge Agreement.
"Subordination Agreement": the Subordination Agreement to be executed
and delivered by C.S.A.C., Inc., Parent, Winks Lane and certain
Subsidiaries of Parent in favor of Congress, the Lenders and the
Noteholders, substantially in the form of Exhibit E, as the same may be
amended, supplemented or otherwise modified from time to time.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
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, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person.
"Swap Transaction": shall mean (a) any rate, basis, commodity,
currency, debt or equity swap, (b) any cap, collar or floor agreement, (c)
any rate, basis, commodity, currency, debt or equity exchange or forward
agreement, (d) any rate, basis, commodity, currency, debt or equity option,
(e) any other similar agreement, (f) any option to enter into any of the
foregoing, (g) any master agreement, investment management agreement or
other agreement providing for any of the foregoing and (h) any combination
of any of the foregoing.
"Tax Refund": all monies that may now or hereafter be due, payable,
paid or otherwise recoverable or recovered by Parent and/or any of its
Subsidiaries, individually, jointly and/or severally, from the Internal
Revenue Service, Department of the Treasury, United States of America (the
"IRS") or any state or local taxing authority for any and all income tax
refunds, including interest payable or paid thereon (if any), resulting
from the filing of tax return(s), amended tax return(s) and/or claims for
refund in respect of any
<PAGE> 24
fiscal year, and all amounts, judgments, decrees, settlements and other
payments relating to the foregoing, but not including the Bensalem Tax
Refund.
"Termination Date": June 1, 1998.
"Term Lender Intercreditor Agreement": the Term Lender Intercreditor
Agreement to be executed and delivered by each Lender, the Agent, each
Noteholder, the Note Trustee, Mellon Bank, N.A, as point-of-sale financer,
and the Collateral Agent substantially in the form of Exhibit L, as the
same may be amended, supplemented or otherwise modified from time to time.
"Term Lender Stock Pledge Agreement": the Stock Pledge Agreement to be
executed and delivered by Parent, FSHC and Kafco substantially in the form
of Exhibit M, as the same may be amended, supplemented or otherwise
modified from time to time.
"Term Loan Percentage": as to any Lender at any time, the percentage
which the aggregate principal amount of such Lender's Term Loans then
outstanding constitutes of the aggregate principal amount of the Term Loans
then outstanding.
"Term Loan Priority Collateral": the property listed on Omnibus
Schedule 21.
"Term Loans": the collective reference to Tranche A Term Loans and
Tranche B Term Loans.
"Term Notes": the collective reference to the Tranche A Term Notes and
Tranche B Term Notes.
"Trademark Security Agreements": (i) the Trademark Collateral
Assignment and Security Agreement to be executed and delivered by C.S.F.,
Inc., substantially in the form of Exhibit N-1, as the same may be amended,
supplemented or otherwise modified from time to time and (ii) the Trademark
Collateral Assignment and Security Agreement to be executed and delivered
by Charming Shoppes, Inc., substantially in the form of Exhibit N-2, as the
same may be amended, supplemented or otherwise modified from time to time.
"Tranche A Term Loans": as defined in subsection 2.1(a).
"Tranche B Stub Limit": the first $8 million of aggregate prepayments
received by the Agent (for the benefit of the Lenders) collectively from
Tax Refund payments and the Bank Offering Percentage of the Net Proceeds of
any Offering.
"Tranche B Term Loans": as defined in subsection 2.1(a).
"Tranche A Term Notes": as defined in subsection 2.3(e).
"Tranche B Term Notes": as defined in subsection 2.3(e).
<PAGE> 25
"Transferee": as defined in subsection 10.6(f).
"Trustee Bensalem Mortgage": the mortgage to be executed and delivered
by Winks Lane in favor of the Note Trustee, substantially in the form of
Exhibit O, as the same may be amended, supplemented or otherwise modified
from time to time.
"Winks Lane": Winks Lane, Inc., a Pennsylvania corporation.
1. Other Definitional Provisions. 1. Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined
meanings when used in any Term Notes or any certificate or other document
made or delivered pursuant hereto.
1. AS USED HEREIN AND IN ANY TERM NOTES, AND ANY CERTIFICATE OR OTHER
DOCUMENT MADE OR DELIVERED PURSUANT HERETO, ACCOUNTING TERMS RELATING TO THE
PARENT, THE BORROWERS AND THE SUBSIDIARIES NOT DEFINED IN SUBSECTION 1.1 AND
ACCOUNTING TERMS PARTLY DEFINED IN SUBSECTION 1.1, TO THE EXTENT NOT DEFINED,
SHALL HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM UNDER GAAP.
2. THE WORDS "HEREOF", "HEREIN" AND "HEREUNDER" AND WORDS OF SIMILAR
IMPORT WHEN USED IN THIS AGREEMENT SHALL REFER TO THIS AGREEMENT AS A WHOLE AND
NOT TO ANY PARTICULAR PROVISION OF THIS AGREEMENT, AND SECTION, SUBSECTION,
OMNIBUS SCHEDULE AND EXHIBIT REFERENCES ARE TO THIS AGREEMENT UNLESS OTHERWISE
SPECIFIED.
3. THE MEANINGS GIVEN TO TERMS DEFINED HEREIN SHALL BE EQUALLY
APPLICABLE TO BOTH THE SINGULAR AND PLURAL FORMS OF SUCH TERMS.
<PAGE> 26
SECTION 4. TERM LOANS
1. TERM LOANS. 1. ON THE CLOSING DATE, SUBJECT TO THE TERMS AND
CONDITIONS HEREOF, EACH LENDER SEVERALLY AGREES TO CONVERT EACH OF THE
EXISTING LETTER OF CREDIT FUNDED AMOUNTS OWED BY EACH BORROWER TO SUCH
LENDER INTO A TERM LOAN (A "TRANCHE A TERM LOAN") IN AN AMOUNT EQUAL TO
26.550144% OF SUCH EXISTING LETTER OF CREDIT FUNDED AMOUNTS AND INTO A TERM
LOAN (A "TRANCHE B TERM LOAN") IN AN AMOUNT EQUAL TO 73.449856% OF SUCH
EXISTING LETTER OF CREDIT FUNDED AMOUNTS AND MAINTAIN SUCH CONVERTED
EXISTING LETTER OF CREDIT FUNDED AMOUNTS AS TERM LOANS UNDER THIS AGREEMENT
FOR THE SEPARATE ACCOUNT, SUBJECT TO CLAUSE (i)(B) AND (ii) BELOW, OF EACH
SUCH BORROWER IN AN AGGREGATE AMOUNT NOT TO EXCEED THE AMOUNT OPPOSITE SUCH
LENDER'S NAME AS SET FORTH ON OMNIBUS SCHEDULE 15A. (i) EACH DOMESTIC
BORROWER'S OBLIGATIONS ARE AS (A) A BORROWER OF ITS TERM LOANS, IF ANY, AND
(B) A JOINT AND SEVERAL BORROWER OF THE TERM LOANS OF EACH OTHER DOMESTIC
BORROWER (AND OF EACH FOREIGN BORROWER TO THE EXTENT PRESENTLY SET FORTH IN
THE EXISTING LETTER OF CREDIT AGREEMENTS) AND (ii) EACH FOREIGN BORROWER'S
OBLIGATIONS ARE AS A BORROWER OF ONLY ITS TERM LOANS; PROVIDED, HOWEVER,
THAT TO THE EXTENT ANY FOREIGN BORROWER IS JOINTLY AND SEVERALLY LIABLE TO
ANY LENDER WITH ANY OTHER FOREIGN BORROWER OR DOMESTIC BORROWER WITH
RESPECT TO EXISTING LETTERS OF CREDIT UNDER THE EXISTING LETTER OF CREDIT
AGREEMENTS, THEN SUCH FOREIGN BORROWER'S JOINT AND SEVERAL LIABILITY WITH
RESPECT TO EXISTING LETTER OF CREDIT FUNDED AMOUNTS SHALL CONTINUE
UNIMPAIRED BY THIS AGREEMENT AND SHALL BE EVIDENCED BY THE TRANCHE A TERM
NOTE AND TRANCHE B TERM NOTE WITH RESPECT THERETO.
5. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT NOTHING CONTAINED IN
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS (EXCEPT AS EXPRESSLY SET FORTH IN THE
MUTUAL RELEASE) IS INTENDED TO RELEASE OR DISCHARGE ANY OBLIGATION OR LIABILITY
OF ANY BORROWER OR ANY OTHER PERSON TO ANY LENDER (EXCEPT AS EXPRESSLY SET FORTH
IN THE MUTUAL RELEASE) AND THAT THE TRANSACTIONS DESCRIBED HEREIN AND THEREIN
ARE INTENDED TO RESET THE PAYMENT TERMS OF EXISTING INDEBTEDNESS, ON A SECURED
BASIS, AND NOT CREATE A NOVATION.
6. PROCEDURE FOR TERM LOAN CONVERSION. EACH TERM LOAN SHALL BE
ESTABLISHED WITHOUT ANY PAYMENTS BEING MADE BY THE LENDERS. THE AGENT SHALL ON
THE CLOSING DATE DEBIT THE ACCOUNT OF EACH BORROWER ON THE BOOKS OF THE OFFICE
OF THE AGENT WITH THE AGGREGATE OF THE AMOUNT OF THE TERM LOANS OF EACH
BORROWER.
7. REPAYMENT OF TERM LOANS; EVIDENCE OF DEBT. (a) EACH BORROWER,
SEVERALLY BUT NOT JOINTLY (EXCEPT AS PROVIDED IN SUBSECTION 2.1(a) AND OTHERWISE
IN THIS AGREEMENT), HEREBY UNCONDITIONALLY PROMISES TO PAY TO THE AGENT FOR THE
ACCOUNT OF THE LENDERS NO LATER
<PAGE> 27
THAN THE TERMINATION DATE THE AGGREGATE PRINCIPAL AMOUNT OF THE TERM LOANS
BORROWED BY SUCH BORROWER. EACH BORROWER HEREBY FURTHER AGREES TO PAY INTEREST
TO EACH LENDER ON THE UNPAID PRINCIPAL AMOUNT OF THE TERM LOANS ESTABLISHED FOR
ITS ACCOUNT BY SUCH LENDER FROM TIME TO TIME OUTSTANDING FROM THE DATE HEREOF
UNTIL PAYMENT IN FULL THEREOF AT THE RATES PER ANNUM, AND ON THE DATES, SET
FORTH IN SUBSECTION 2.6.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the Term Loans of such Lender, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Agent shall maintain the Register pursuant to subsection
10.6(d), and a subaccount therein for each Lender, in which shall be recorded
(i) the amount of each Tranche A Term Loan and Tranche B Term Loan established
hereunder, (ii) the amount of any principal or interest due and payable or to
become due and payable from each Borrower on account of its Tranche A Term Loans
and Tranche B Term Loans hereunder and (iii) both the amount of any sum received
by the Agent (or by any Lender) hereunder from each Borrower and each Lender's
share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 2.3(b) shall, to the extent permitted by
applicable law, be prima facie evidence, absent manifest error, of the existence
and amounts of the obligations of each Borrower therein recorded; provided,
however, that the failure of any Lender or the Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of each Borrower to repay (with applicable interest) in accordance
with the terms of this Agreement the Term Loans made to such Borrower.
(e) Each Borrower agrees that, upon the request to the Agent by any
Lender, such Borrower will execute and deliver to such Lender two promissory
notes executed by such Borrower, one such promissory note evidencing such
Borrower's Tranche A Term Loan (a "Tranche A Term Note") and the other such
promissory note evidencing such Borrower's Tranche B Term Loan (a "Tranche B
Term Note") owed to such Lender, substantially in the form of Exhibits A-1 and
A-2, respectively, with appropriate insertions as to date and principal amount.
8. OPTIONAL PREPAYMENTS. EACH BORROWER MAY AT ANY TIME AND FROM TIME
TO TIME PREPAY ANY OF ITS TERM LOANS, IN WHOLE OR IN PART, WITHOUT PREMIUM OR
PENALTY, UPON AT LEAST ONE BUSINESS DAY'S IRREVOCABLE NOTICE TO THE AGENT,
SPECIFYING THE DATE AND AMOUNT OF PREPAYMENT. UPON RECEIPT OF ANY SUCH NOTICE
THE AGENT SHALL PROMPTLY NOTIFY EACH LENDER THEREOF. IF ANY SUCH NOTICE IS
GIVEN, THE AMOUNT SPECIFIED IN SUCH NOTICE SHALL BE DUE AND PAYABLE ON THE DATE
SPECIFIED THEREIN. AMOUNTS PREPAID ON ACCOUNT OF THE TERM LOANS MAY NOT BE
REBORROWED. PARTIAL PREPAYMENTS SHALL BE IN AN AGGREGATE MINIMUM PRINCIPAL
AMOUNT OF $250,000, AND SHALL BE PAID TO THE AGENT (FOR THE BENEFIT OF THE
LENDER OF SUCH TERM LOAN), PROVIDED, HOWEVER, THAT AS A CONDITION TO ANY
BORROWER'S OPTIONAL PREPAYMENT OF ANY OF ITS TERM LOANS, SUCH BORROWER MUST
ITSELF OR MUST CAUSE OTHER
<PAGE> 28
BORROWERS TO PREPAY THEIR TERM LOANS SUCH THAT THE TERM LOAN PERCENTAGE OF EACH
LENDER IS THE SAME BOTH BEFORE AND AFTER GIVING EFFECT TO ALL SUCH PREPAYMENTS.
9. MANDATORY PREPAYMENTS.
10. PREPAYMENTS FROM ASSET SALES. THE BORROWERS SHALL PREPAY THE TERM
LOANS AND THE TERM NOTES, TO BE APPLIED PURSUANT TO SUBSECTION 2.5(e), IN AN
AMOUNT EQUAL TO THAT PORTION OF THE NET PROCEEDS FROM ASSET SALES PAID TO THE
AGENT BY THE COLLATERAL AGENT IN ACCORDANCE WITH THE TERM LENDER INTERCREDITOR
AGREEMENT.
11. PREPAYMENTS FROM THE TAX REFUND OR PREPAYMENT L/C.
(i) Each Borrower shall prepay the Term Loans, to be applied
pursuant to subsection 2.5(e), on the date of receipt by such Borrower (or
any Affiliate thereof) or the Collateral Agent of any Tax Refund in an
amount equal to such Tax Refund, except that if any Tax Refund is received
after a drawing under the Prepayment L/C the Tax Refund shall be paid to
the Collateral Agent and applied as follows:
First, to Congress, an amount equal to the drawing under the
Prepayment L/C, but in no event more than $15,000,000 in the
aggregate;
Second, to the Agent (for the benefit of the Lenders), an amount
equal to the Prepayment Shortfall;
Third, provided that no Event of Default has occurred and is
continuing, to Congress an amount equal to the drawing under the
Prepayment L/C minus the aggregate amount previously distributed to
Congress pursuant to clause First;
Fourth, to the Agent (for the benefit of the Lenders), until the
Bank Obligations are paid in full; and
Fifth, the balance, if any, in accordance with clauses Second
through Fifth of subsection 4.2(c) of the Term Lender Intercreditor
Agreement;
provided, however, that if any Tax Refund is received after the occurrence
and during the continuance of an Event of Default, the amounts otherwise
payable to the Agent as a prepayment of the Term Loans pursuant to this
clause (i) shall in each instance instead be paid to the Agent and the POS
Financer (as defined in the Term Lender Intercreditor Agreement) ratably in
accordance with the proportion which each of the Bank Obligations and POS
Deficiency (as defined in the Term Lender Intercreditor Agreement) bears to
the aggregate amount of the Bank/POS Obligations (as defined in the Term
Lender Intercreditor Agreement) owing at such time. All payments to the POS
Financer
<PAGE> 29
shall be applied to reduce the POS Deficiency (as defined in the Term
Lender Intercreditor Agreement).
(ii) If the Lenders have not received the Prepayment Amount on or
prior to January 31, 1997, the Agent shall present documents under the
Prepayment L/C for payment pursuant to the terms thereof and the Term Loans
shall be prepaid, in an amount equal to the cash received from the
Prepayment L/C Issuer, provided, if for any reason the Prepayment L/C
Issuer fails to honor the Prepayment L/C (and without affecting the rights
of the Agent or the Lenders against the Prepayment L/C Issuer in respect of
any such failure), there shall become immediately due and payable by
Borrowers a principal payment in an amount equal to that requested under
the Prepayment L/C.
(iii) The Agent agrees not to make any draw under the Prepayment
L/C for an amount in excess of the unpaid amount of the Prepayment Amount
existing on the date of any draw under the Prepayment L/C. The Agent, with
approval of all Lenders, shall consent in writing to cancellation of the
Prepayment L/C if the Prepayment Amount has been paid in full prior to any
draw being made thereunder. To the extent that payments of the Prepayment
Amount are received in excess of the Tranche B Stub Limit, but in an
aggregate amount less than the Prepayment Amount, the Agent shall promptly
thereafter submit a reduction certificate (in the form of Exhibit C to the
Prepayment L/C) reducing the maximum amount thereof in an amount equal to
such excess.
12. PREPAYMENTS FROM CASH FLOW SWEEP. UNTIL THE AGGREGATE AMOUNT OF
PREPAYMENTS OF THE TERM LOANS FROM ALL SOURCES (INCLUDING PREPAYMENTS PURSUANT
TO THIS SUBSECTION 2.5(c)) EQUALS $56,000,000, THE TERM LOANS SHALL BE PREPAID,
WITH SUCH AMOUNTS APPLIED AS PROVIDED IN SUBSECTION 2.5(e), FIVE DAYS AFTER THE
LAST DAY OF THE MONTH IMMEDIATELY FOLLOWING THE MONTH IN WHICH EACH FISCAL
QUARTER OF PARENT ENDS, BEGINNING WITH THE FISCAL QUARTER ENDING IN APRIL, 1997,
IN AN AMOUNT EQUAL TO 50% OF THE CONSOLIDATED CASH FLOW FOR SUCH FISCAL QUARTER,
PROVIDED, THAT NO PREPAYMENTS SHALL BE MADE PURSUANT TO THIS SUBSECTION IF THE
EXCESS AVAILABILITY, BEFORE AND AFTER GIVING EFFECT TO SUCH PAYMENT, IS NOT
GREATER THAN $50,000,000 OR (ii) A CONGRESS EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING.
13. PREPAYMENTS FROM OFFERING. ON THE DATE OF RECEIPT BY ANY DOMESTIC
BORROWER OR ANY OTHER DOMESTIC SUBSIDIARY OF THE NET PROCEEDS AFTER THE CLOSING
DATE OF ANY OFFERING, THE TERM LOANS SHALL BE PREPAID, AS PROVIDED IN SUBSECTION
2.5(e), IN AN AMOUNT EQUAL TO THE BANK OFFERING PERCENTAGE OF 75% OF SUCH NET
PROCEEDS.
2.0.13.0.0.0.0.1. Application of Prepayments. Any amounts prepaid to
the Agent pursuant to subsection 2.5(a) through 2.5(d) shall be distributed
ratably to the Lenders in accordance with each Lender's Term Loan Percentage,
and applied by each Lender as follows: 2.0.13.0.0.0.0.1. prepayments pursuant
to subsections 2.5(a), (b), (c) and (d) shall be applied first, ratably to
the Tranche B Term Loan of each Borrower for whose account
<PAGE> 30
such Lender has established a Term Loan, until each such Tranche B Term Loan
is paid in full, and second, to the Tranche A Term Loan of each Borrower for
whose account such Lender has established a Term Loan, provided, that, for
purposes of clause (i) aggregate prepayments pursuant to subsections 2.5(b)
and (d) shall not exceed the Tranche B Stub Limit, and (ii) aggregate
prepayments pursuant to subsections 2.5(b) and (d) in excess of Tranche B
Stub Limit shall be applied first, ratably to the Tranche A Term Loan of each
Borrower for whose account such Lender has established a Term Loan, until
each such Tranche A Term Loan is paid in full, and second, ratably to the
Tranche B Term Loan of each Borrower for whose account such Lender has
established a Term Loan.
1. Interest Rates and Payment Dates. 1. Until the Agent has
received an aggregate amount of prepayments equal to $30,000,000, (i) each
Tranche A Term Loan shall bear interest at a fluctuating rate per annum
equal to ABR plus 2%, and (ii) each Tranche B Term Loan shall bear interest
at a fluctuating rate per annum equal to the ABR plus 3-1/2%. After the
Agent has received an aggregate amount of prepayments equal to $30,000,000,
all Term Loans shall bear interest at a fluctuating rate per annum equal to
the ABR plus 2%.
14. IF ALL OR A PORTION OF (i) ANY PRINCIPAL OF ANY TERM LOAN, (ii)
ANY INTEREST PAYABLE THEREON, OR (iii) ANY OTHER AMOUNT PAYABLE HEREUNDER SHALL
NOT BE PAID WHEN DUE (WHETHER AT THE STATED MATURITY, BY ACCELERATION OR
OTHERWISE), THE PRINCIPAL OF THE TERM LOANS AND ANY SUCH OVERDUE INTEREST OR
OTHER AMOUNT SHALL BEAR INTEREST AT A RATE PER ANNUM WHICH IS (x) IN THE CASE OF
PRINCIPAL, THE RATE THAT WOULD OTHERWISE BE APPLICABLE THERETO PLUS 2% OR (y) IN
THE CASE OF ANY SUCH OVERDUE INTEREST, THE RATE AT WHICH THE PRINCIPAL ON WHICH
SUCH INTEREST HAD ACCRUED BEARS INTEREST PLUS 2% OR (z) IN THE CASE OF ANY SUCH
OVERDUE FEE OR OTHER AMOUNT, THE RATE THEN APPLICABLE TO TRANCHE B TERM LOANS
PLUS 2%, IN EACH CASE FROM THE DATE OF SUCH NON PAYMENT UNTIL SUCH OVERDUE
PRINCIPAL, INTEREST, FEE OR OTHER AMOUNT IS PAID IN FULL (AS WELL AFTER AS
BEFORE JUDGMENT).
15. INTEREST SHALL BE PAYABLE IN ARREARS ON EACH INTEREST PAYMENT
DATE, PROVIDED THAT INTEREST ACCRUING PURSUANT TO PARAGRAPH (b) OF THIS
SUBSECTION SHALL BE PAYABLE FROM TIME TO TIME ON DEMAND.
1. Computation of Interest and Fees. 1. Interest shall be
calculated on the basis of a 360 day year for the actual days elapsed.
16. EACH DETERMINATION OF AN INTEREST RATE BY THE AGENT PURSUANT TO
ANY PROVISION OF THIS AGREEMENT SHALL BE CONCLUSIVE AND BINDING ON THE BORROWERS
AND THE LENDERS IN THE ABSENCE OF MANIFEST ERROR.
1. Borrowings and Payments. 1. The Term Loans of each Foreign
Borrower shall be Term Loans solely for such Borrower's account and no
Foreign Borrower, by
<PAGE> 31
virtue of this Agreement, assumes or otherwise becomes indebted for the
Bank Obligations of any other Borrower. The Term Loans of all Domestic
Borrowers are the joint and several obligations of each Domestic Borrower.
17. ALL PAYMENTS (INCLUDING PREPAYMENTS) TO BE MADE BY ANY BORROWER
HEREUNDER, WHETHER ON ACCOUNT OF PRINCIPAL, INTEREST OR OTHERWISE, EXCEPT FOR
AMOUNTS OWING TO HKSB IN RESPECT OF INTEREST, FEES AND CHARGES, SHALL BE MADE
WITHOUT SET OFF OR COUNTERCLAIM AND SHALL BE MADE PRIOR TO 12:00 NOON, NEW YORK
CITY TIME, ON THE DUE DATE THEREOF TO THE AGENT, FOR THE ACCOUNT OF THE LENDERS
(OTHER THAN HKSB), AT THE AGENT'S OFFICE SPECIFIED IN SUBSECTION 10.2, IN
DOLLARS AND IN IMMEDIATELY AVAILABLE FUNDS. THE AGENT SHALL DISTRIBUTE SUCH
PAYMENTS TO THE APPLICABLE LENDER PROMPTLY UPON RECEIPT IN LIKE FUNDS AS
RECEIVED.
18. ALL PAYMENTS TO BE MADE BY ANY BORROWER HEREUNDER TO HKSB ON
ACCOUNT OF INTEREST, FEES AND CHARGES SHALL BE MADE WITHOUT SET OFF OR
COUNTERCLAIM AND SHALL BE MADE PRIOR TO 12:00 NOON, HONG KONG TIME, ON THE DUE
DATE THEREOF TO HKSB, FOR ITS OWN ACCOUNT, AT THE OFFICE OF HKSB, SPECIFIED ON
THE SIGNATURE PAGE HEREOF, IN DOLLARS AND IN IMMEDIATELY AVAILABLE FUNDS. HKSB
SHALL PROMPTLY PROVIDE WRITTEN NOTICE TO THE AGENT OF ITS NON RECEIPT OF
PAYMENTS PURSUANT TO THIS SUBSECTION 2.8(c).
19. IF ANY PAYMENT HEREUNDER BECOMES DUE AND PAYABLE ON A DAY OTHER
THAN A BUSINESS DAY, SUCH PAYMENT SHALL BE EXTENDED TO THE NEXT SUCCEEDING
BUSINESS DAY, AND, WITH RESPECT TO PAYMENTS OF PRINCIPAL, INTEREST THEREON SHALL
BE PAYABLE AT THE THEN APPLICABLE RATE DURING SUCH EXTENSION.
1. Fees. 1. The Borrowers agree to pay to the Agent, for its own
account, the fees in the amounts previously agreed to in writing by Parent
and Borrowers' Agent and the Agent.
20. EACH BORROWER SHALL PAY ON DEMAND TO THE ISSUING LENDER OF A
LETTER OF CREDIT FOR THE ACCOUNT OF SUCH BORROWER ALL FEES PAYABLE UNDER SUCH
LETTER OF CREDIT.
1. Taxes. 1. All payments made by each Borrower under this
Agreement shall be made free and clear of, and without deduction or
withholding and in the case of HKSB, any obligation for United States
federal, state and local income or franchise taxes arising from such
payments, for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding, except in the case of HKSB, net income
taxes and franchise taxes (imposed in lieu of net income taxes) imposed on
the Agent or any Lender as a result of a present or former connection between
the Agent or such Lender, or a branch office of such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or
<PAGE> 32
taxing authority thereof or therein (other than any such connection arising
solely from the Agent or such Lender having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement or
any Note). If any such non-excluded taxes, levies, imposts, duties, charges,
fees deductions or withholdings ("Non-Excluded Taxes") are required to be
withheld from any amounts payable to the Agent or any Lender hereunder, and
in the case of HKSB, payable by HKSB, the amounts so payable to the Agent or
such Lender shall be increased to the extent necessary to yield to the Agent
or such Lender (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, provided, however, that a Borrower shall not be required to
increase any such amounts payable to any Lender that is not organized under
the laws of the United States of America or a state thereof if such Lender
fails to comply with the requirements of paragraph (b) of this subsection to
the extent that such subsection applies to such Lender. Whenever any
Non-Excluded Taxes are payable by a Borrower, as promptly as possible
thereafter the Borrower shall send to the Agent for its own account or for
the account of such Lender, as the case may be, a certified copy of an
original official receipt received by a Borrower showing payment thereof. If
a Borrower fails to pay any Non-Excluded Taxes when due to the appropriate
taxing authority or fails to remit to the Agent the required receipts or
other required documentary evidence, the Borrower shall indemnify the Agent
and the Lenders for any incremental taxes, interest or penalties that may
become payable by the Agent or any Lender as a result of any such failure.
For purpose of this subsection 2.10 any monies or properties received by the
Lenders out of any Collateral or pursuant to any participation purchased in
accordance with Section 10.7 shall be deemed to be a payment by the Borrowers
to Lenders under this Agreement. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the Term Loans
and all other amounts payable hereunder.
21. EACH LENDER (OTHER THAN HKSB) THAT IS NOT INCORPORATED UNDER THE
LAWS OF THE UNITED STATES OF AMERICA OR A STATE THEREOF SHALL:
3. DELIVER TO BORROWERS' AGENT AND THE AGENT (A) TWO DULY COMPLETED
COPIES OF UNITED STATES INTERNAL REVENUE SERVICE FORM 1001 OR 4224, OR
SUCCESSOR APPLICABLE FORM, AS THE CASE MAY BE, AND (B) AN INTERNAL REVENUE
SERVICE FORM W 8 OR W 9, OR SUCCESSOR APPLICABLE FORM, AS THE CASE MAY BE;
3.1. DELIVER TO BORROWERS' AGENT AND THE AGENT TWO FURTHER COPIES OF
ANY SUCH FORM OR CERTIFICATION ON OR BEFORE THE DATE THAT ANY SUCH FORM OR
CERTIFICATION EXPIRES OR BECOMES OBSOLETE AND AFTER THE OCCURRENCE OF ANY
EVENT REQUIRING A CHANGE IN THE MOST RECENT FORM PREVIOUSLY DELIVERED BY IT
TO SUCH BORROWERS; AND
<PAGE> 33
3.2. OBTAIN SUCH EXTENSIONS OF TIME FOR FILING AND COMPLETE SUCH FORMS
OR CERTIFICATIONS AS MAY REASONABLY BE REQUESTED BY ITS BORROWERS OR THE
AGENT;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrowers and the Agent.
Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W 8 or W 9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Participant
pursuant to subsection 10.6 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements to the Lender
from which the related participation shall have been purchased.
<PAGE> 34
SECTION 4. LETTERS OF CREDIT.
1. Letters of Credit. 1. Subject to the terms and conditions
hereof, each Existing Letter of Credit shall become, without further action
by any Lender or Borrower, a letter of credit or guarantee hereunder
("Letters of Credit") for the account of the Borrower identified opposite
such Letter of Credit on Omnibus Schedule 4. Each Lender, in its capacity
as a provider of Letters of Credit, is referred to herein as an "Issuing
Lender".
1. AN ISSUING LENDER SHALL NOTIFY THE ACCOUNT PARTY FOR SUCH
LETTER OF CREDIT, WITH A COPY TO BORROWERS' AGENT, IN WRITING (A "DLC NOTICE")
WITHIN SEVEN BUSINESS DAYS OF SUCH ISSUING LENDER'S RECEIPT OF DOCUMENTS UNDER A
LETTER OF CREDIT THAT DO NOT CONFORM TO THE TERMS AND CONDITIONS THEREOF (A
"DISCREPANT LETTER OF CREDIT"). WITHIN THREE BUSINESS DAYS OF THE ISSUING
LENDER'S SENDING OF SUCH DLC NOTICE, SUCH ACCOUNT PARTY SHALL AUTHORIZE OR NOT
AUTHORIZE IN WRITING THE DRAW UNDER SUCH DISCREPANT LETTER OF CREDIT, PROVIDED,
THAT, SUCH ACCOUNT PARTY MAY NOT AUTHORIZE A DRAW IF ANY DISCREPANCY INVOLVES
(i) EXCESS DRAWINGS, (ii) EXPIRED LETTERS OF CREDIT OR (iii) THE FAILURE OF THE
BENEFICIARY TO SUPPLY ANY DOCUMENT WHICH EVIDENCES (A) THE RECEIPT BY THE
BORROWER (THAT IS THE ACCOUNT PARTY) OR ITS AGENT OF MERCHANDISE OR (B) THE
SHIPMENT OF MERCHANDISE AND WHICH IS REQUIRED TO BE SUPPLIED BY THE TERMS OF THE
RELEVANT LETTER OF CREDIT. FAILURE OF THE RELEVANT ACCOUNT PARTY TO AUTHORIZE A
DRAW UNDER THE DISCREPANT LETTER OF CREDIT WITHIN SUCH THREE-BUSINESS DAY PERIOD
OR DISCREPANCIES OF THE TYPE ENUMERATED IN CLAUSES (i) THROUGH (iii) OF THE
PRECEDING SENTENCE SHALL BE DEEMED AN EXPRESS DIRECTION TO THE ISSUING LENDER TO
REJECT THE DOCUMENTS PRESENTED UNDER SUCH DISCREPANT LETTER OF CREDIT. EACH
BORROWER HEREBY DIRECTS EACH ISSUING LENDER TO AUTOMATICALLY REJECT DOCUMENTS
PRESENTED UNDER ALL DISCREPANT LETTERS OF CREDIT FROM AND AFTER THE SECOND
BUSINESS DAY FOLLOWING AN ISSUING LENDER'S RECEIPT OF A WRITTEN NOTICE OF A
CONGRESS EVENT OF DEFAULT. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
HEREIN, AN ISSUING LENDER SHALL HAVE NO OBLIGATION TO PAY ON A DISCREPANT LETTER
OF CREDIT UNLESS IT HAS ALREADY RECEIVED THE CORRESPONDING REIMBURSEMENT
OBLIGATION UNDER ITS BACK-UP L/C IN ACCORDANCE WITH SUBSECTION 3.2. EACH
BORROWER HEREBY AGREES THAT AN ISSUING LENDER FOLLOWING THE PROCEDURES SET FORTH
IN THIS PARAGRAPH (b) IN RESPECT OF A DISCREPANT LETTER OF CREDIT SHALL BE
FOREVER RELEASED AND DISCHARGED FROM ANY LIABILITY WHATSOEVER TO ANY BORROWER
WITH RESPECT TO ANY SUCH DISCREPANT LETTER OF CREDIT.
1. BACK-UP L/C'S; PRESENTMENT OF CERTIFICATES THEREUNDER;
REIMBURSEMENT OBLIGATION OF THE BORROWER. 1. ON THE CLOSING DATE, CONGRESS
WILL CAUSE TO BE ISSUED LETTERS OF CREDIT PURSUANT TO THE CONGRESS LOAN
AGREEMENT (THE "BACK-UP L/C'S") FOR THE BENEFIT OF EACH ISSUING LENDER WITH
A STATED AMOUNT IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA (INCLUDING
AMOUNTS CONVERTED FROM HONG KONG DOLLARS INTO DOLLARS AT THE RATE OF 7.73
HONG KONG DOLLARS TO $1) EQUAL TO
<PAGE> 35
THE AGGREGATE FACE AMOUNT OF LETTERS OF CREDIT MAINTAINED BY SUCH ISSUING
LENDER, PLUS A GROSS-UP FOR INTEREST, FEES AND EXPENSES OF AT LEAST THREE
PERCENT (3%) BUT NOT MORE THAN EIGHT PERCENT (8%), AS SPECIFIED BY THE
ISSUING LENDER, OF SUCH STATED AMOUNT.
2. EACH BACK-UP L/C, SUBSTANTIALLY IN THE FORM OF EXHIBIT P, SHALL
PROVIDE FOR THE PRESENTMENT BY THE ISSUING LENDER THAT IS THE BENEFICIARY
THEREUNDER OF MULTIPLE DRAFTS AT LEAST EQUAL IN NUMBER TO THE AGGREGATE NUMBER
OF DRAFTS THAT MAY BE PRESENTED UNDER ALL THE LETTERS OF CREDIT MAINTAINED BY
SUCH ISSUING LENDER. FOLLOWING THE PRESENTMENT OF DOCUMENTS UNDER A LETTER OF
CREDIT TO AN ISSUING LENDER, SUCH ISSUING LENDER SHALL PROVIDE, IN ACCORDANCE
WITH THE TERMS OF THE BACK-UP L/C, A CERTIFICATION (IN THE FORM OF EXHIBIT B TO
ITS BACK-UP L/C) TO THE BACK-UP L/C ISSUER, WHICH CERTIFICATION, TOGETHER WITH A
SIGHT DRAFT (IN THE FORM OF EXHIBIT A TO ITS BACK-UP L/C), SHALL CONSTITUTE A
DRAW AND REQUEST FOR PAYMENT UNDER THE BACK-UP L/C OF (i) THE AMOUNT OF THE DRAW
UNDER THE RELEVANT LETTER OF CREDIT AND (ii) ANY INTEREST, FEES AND COSTS
INCURRED BY SUCH ISSUING LENDER IN CONNECTION THEREWITH (COLLECTIVELY, THE
"REIMBURSEMENT OBLIGATION"). EACH ISSUING LENDER AGREES TO PROVIDE A COPY OF
SUCH CERTIFICATION AND SIGHT DRAFT TO CONGRESS AND THE BORROWERS' AGENT. EACH
ISSUING LENDER AGREES TO LOOK INITIALLY TO ITS BACK-UP L/C FOR PAYMENT OF THE
REIMBURSEMENT OBLIGATION.
3. EACH ISSUING LENDER HEREBY AGREES TO PROVIDE PROMPT NOTICE TO ITS
BACK UP L/C ISSUER, WITH A COPY TO CONGRESS AND BORROWERS' AGENT, OF THE
CANCELLATION, TERMINATION OR EXPIRATION OF LETTERS OF CREDIT, PROVIDED THAT FOR
PURPOSES OF THIS PARAGRAPH (c), "EXPIRATION" SHALL BE DEEMED TO OCCUR ON THE
DATE THAT IS NOT LESS THAN THIRTY (30) NOR MORE THAN FORTY-FIVE (45) DAYS, IN
THE DISCRETION OF THE ISSUING LENDER, FOLLOWING THE STATED EXPIRATION DATE OF
ANY LETTER OF CREDIT. EACH ISSUING LENDER FURTHER AGREES THAT SIMULTANEOUSLY
WITH, OR PROMPTLY AFTER REIMBURSEMENT, TO SUCH ISSUING LENDER OF A DRAW UNDER A
LETTER OF CREDIT FROM A SOURCE OTHER THAN THE BACK-UP L/C TO NOTIFY THE BACK-UP
L/C ISSUER TO REDUCE THE MAXIMUM AMOUNT OF SUCH BACK-UP L/C BY THE RELEVANT
AMOUNT (TAKING INTO ACCOUNT THE ORIGINAL GROSS-UP USED).
4. TO THE EXTENT THE REIMBURSEMENT OBLIGATION OF AN ISSUING LENDER IS
NOT SATISFIED FROM ITS BACK-UP L/C IN ACCORDANCE WITH THE TERMS THEREOF
FOLLOWING PRESENTMENT OF THE CERTIFICATION TO CONGRESS AS SET FORTH IN PARAGRAPH
(b) OF THIS SUBSECTION 3.2, THE BORROWER FOR WHOSE ACCOUNT SUCH BACK-UP L/C WAS
ISSUED AGREES TO PAY SUCH ISSUING LENDER ON DEMAND THE REIMBURSEMENT OBLIGATION
UNDER ANY LETTER OF CREDIT. EACH SUCH PAYMENT SHALL BE MADE TO THE ISSUING
LENDER AT ITS ADDRESS FOR NOTICES SPECIFIED HEREIN IN LAWFUL MONEY OF THE UNITED
STATES OF AMERICA AND IN IMMEDIATELY AVAILABLE FUNDS, WITHOUT PRESENTMENT,
DEMAND, PROTEST OR OTHER FORMALITIES OF ANY KIND.
<PAGE> 36
5. INTEREST SHALL BE PAYABLE ON ANY AND ALL AMOUNTS REMAINING UNPAID
BY THE BORROWER UNDER SUBSECTION (d) FROM THE DATE SUCH AMOUNTS BECOME PAYABLE
(WHETHER AT STATED MATURITY, BY ACCELERATION OR OTHERWISE) UNTIL PAYMENT IN FULL
AT THE HIGHEST RATE WHICH WOULD BE PAYABLE ON ANY OUTSTANDING TRANCHE B TERM
LOANS WHICH WERE THEN OVERDUE.
1. Obligations Absolute. 1. Each Borrower's obligations to its
Issuing Lender under this Section shall be absolute and unconditional under
any and all circumstances and irrespective of any set-off, counterclaim or
defense to payment which such Borrower may have or have had against such
Issuing Lender or any beneficiary of a Letter of Credit.
4.0.5.0.0.1.0.1. Each Borrower also agrees with each Issuing
Lender that such Issuing Lender shall not be responsible for, and such
Issuing Lender's rights of recourse to its Back-up L/C and such Borrower's
Reimbursement Obligations under subsection 3.2(a) shall not be affected by,
among other things, 4.0.5.0.0.1.0.1. the validity or genuineness of
documents or of any endorsements thereon, even though such documents shall
in fact prove to be invalid, fraudulent or forged, or 4.0.5.0.0.1.0.1. any
dispute between or among such Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred
or 4.0.5.0.0.1.0.1. any claims whatsoever of such Borrower against any
beneficiary of such Letter of Credit or any such transferee.
5. ANY ISSUING LENDER SHALL NOT BE LIABLE FOR ANY ERROR, OMISSION,
INTERRUPTION OR DELAY IN TRANSMISSION, DISPATCH OR DELIVERY OF ANY MESSAGE OR
ADVICE, HOWEVER TRANSMITTED, IN CONNECTION WITH ANY LETTER OF CREDIT, EXCEPT FOR
ERRORS OR OMISSIONS CAUSED BY SUCH ISSUING LENDER'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
1. EACH BORROWER AGREES THAT ANY ACTION TAKEN OR OMITTED BY ANY
ISSUING LENDER UNDER OR IN CONNECTION WITH ANY LETTER OF CREDIT OR THE RELATED
DRAFTS OR DOCUMENTS, IF DONE IN THE ABSENCE OF GROSS NEGLIGENCE OF WILLFUL
MISCONDUCT AND IN ACCORDANCE WITH THE STANDARDS OF CARE SPECIFIED UNDER
APPLICABLE LAW, SHALL BE BINDING ON SUCH BORROWER AND SHALL NOT RESULT IN ANY
LIABILITY OF THE ISSUING LENDER TO SUCH BORROWER.
SECTION 2. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement,
Parent hereby represents and warrants to the Agent and each Lender that:
<PAGE> 37
3. FINANCIAL CONDITION. THE CONSOLIDATED BALANCE SHEET OF THE PARENT
AND ITS CONSOLIDATED SUBSIDIARIES AS AT JANUARY 28, 1995 AND THE RELATED
CONSOLIDATED STATEMENTS OF INCOME AND OF CASH FLOWS FOR THE FISCAL YEAR ENDED ON
SUCH DATE, REPORTED ON BY ERNST & YOUNG, L.L.P, COPIES OF WHICH HAVE HERETOFORE
BEEN FURNISHED TO EACH LENDER, EXCEPT AS DISCLOSED TO THE LENDERS IN WRITING ON
OR PRIOR TO OCTOBER 24, 1995, PRESENT FAIRLY THE CONSOLIDATED FINANCIAL
CONDITION OF THE PARENT AND ITS CONSOLIDATED SUBSIDIARIES AS AT SUCH DATE, AND
THE CONSOLIDATED RESULTS OF THEIR OPERATIONS AND THEIR CONSOLIDATED CASH FLOWS
FOR THE FISCAL YEAR THEN ENDED. THE UNAUDITED CONSOLIDATED BALANCE SHEET OF THE
PARENT AND ITS CONSOLIDATED SUBSIDIARIES AS AT JULY 29, 1995 AND THE RELATED
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND OF CASH FLOWS FOR THE THREE
MONTH PERIOD ENDED ON SUCH DATE, CERTIFIED BY A RESPONSIBLE OFFICER OF PARENT,
COPIES OF WHICH HAVE HERETOFORE BEEN FURNISHED TO EACH LENDER, EXCEPT AS
DISCLOSED TO THE LENDERS IN WRITING ON OR PRIOR TO OCTOBER 24, 1995, PRESENT
FAIRLY THE CONSOLIDATED FINANCIAL CONDITION OF PARENT AND ITS CONSOLIDATED
SUBSIDIARIES AS AT SUCH DATE, AND THE CONSOLIDATED RESULTS OF THEIR OPERATIONS
AND THEIR CONSOLIDATED CASH FLOWS FOR THE THREE MONTH PERIOD THEN ENDED (SUBJECT
TO NORMAL YEAR END AUDIT ADJUSTMENTS). ALL SUCH FINANCIAL STATEMENTS, INCLUDING
THE RELATED SCHEDULES AND NOTES THERETO, HAVE BEEN PREPARED IN ACCORDANCE WITH
GAAP APPLIED CONSISTENTLY THROUGHOUT THE PERIODS INVOLVED (EXCEPT AS APPROVED BY
SUCH ACCOUNTANTS OR RESPONSIBLE OFFICER OF PARENT, AS THE CASE MAY BE, AND AS
DISCLOSED THEREIN). EXCEPT AS DISCLOSED IN THE SCHEDULES HERETO, NEITHER PARENT
NOR ANY OF ITS CONSOLIDATED SUBSIDIARIES HAD, AT THE DATE OF THE MOST RECENT
BALANCE SHEET REFERRED TO ABOVE, ANY MATERIAL GUARANTEE OBLIGATION, CONTINGENT
LIABILITY OR LIABILITY FOR TAXES, OR ANY LONG TERM LEASE OR UNUSUAL FORWARD OR
LONG TERM COMMITMENT WHICH IS NOT REFLECTED IN THE FOREGOING STATEMENTS OR IN
THE NOTES THERETO. DURING THE PERIOD FROM JULY 29, 1995 TO AND INCLUDING THE
DATE HEREOF THERE HAS BEEN NO SALE, TRANSFER OR OTHER DISPOSITION BY PARENT OR
ITS CONSOLIDATED SUBSIDIARIES OF ANY MATERIAL PART OF ITS BUSINESS OR PROPERTY
AND NO PURCHASE OR OTHER ACQUISITION OF ANY BUSINESS OR PROPERTY (INCLUDING ANY
CAPITAL STOCK OF ANY OTHER PERSON) MATERIAL IN RELATION TO THE CONSOLIDATED
FINANCIAL CONDITION OF PARENT AND ITS CONSOLIDATED SUBSIDIARIES AT JULY 29,
1995.
4. NO CHANGE. (a) SINCE OCTOBER 24, 1995 THERE HAS BEEN NO DEVELOPMENT
OR EVENT WHICH HAS HAD OR COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT, AND (b) DURING THE PERIOD FROM JULY 29, 1995 TO AND INCLUDING
THE DATE HEREOF NO DIVIDENDS OR OTHER DISTRIBUTIONS HAVE BEEN DECLARED, PAID OR
MADE UPON THE CAPITAL STOCK OF PARENT NOR HAS ANY OF THE CAPITAL STOCK OF PARENT
BEEN REDEEMED, RETIRED, PURCHASED OR OTHERWISE ACQUIRED FOR VALUE BY PARENT OR
ANY OF ITS SUBSIDIARIES.
5. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. PARENT AND EACH OF ITS
SUBSIDIARIES (a) IS, EXCEPT AS SET FORTH ON OMNIBUS SCHEDULE 7, DULY ORGANIZED,
VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS
ORGANIZATION, (b) HAS THE CORPORATE OR OTHER POWER AND AUTHORITY, AND THE LEGAL
RIGHT, TO OWN AND OPERATE ITS PROPERTY, TO LEASE THE PROPERTY IT OPERATES AS
LESSEE AND TO CONDUCT THE BUSINESS IN WHICH IT IS CURRENTLY ENGAGED, (c) IS DULY
QUALIFIED AS A FOREIGN CORPORATION AND IN GOOD STANDING
<PAGE> 38
UNDER THE LAWS OF EACH JURISDICTION WHERE ITS OWNERSHIP, LEASE OR OPERATION OF
PROPERTY OR THE CONDUCT OF ITS BUSINESS REQUIRES SUCH QUALIFICATION AND (d) IS
IN COMPLIANCE WITH ALL REQUIREMENTS OF LAW EXCEPT, IN THE CASE OF CLAUSES (c)
AND (d), TO THE EXTENT THAT THE FAILURE TO DO SO COULD NOT REASONABLY BE
EXPECTED, IN THE AGGREGATE, TO HAVE A MATERIAL ADVERSE EFFECT.
6. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. EACH LOAN
PARTY, HAS THE CORPORATE OR OTHER POWER AND AUTHORITY, AND THE LEGAL RIGHT, TO
MAKE, DELIVER AND PERFORM THE LOAN DOCUMENTS TO WHICH IT IS A PARTY AND, IN THE
CASE OF EACH BORROWER, TO BORROW HEREUNDER; EACH BORROWER HAS TAKEN ALL
NECESSARY CORPORATE ACTION TO AUTHORIZE THE BORROWINGS ON THE TERMS AND
CONDITIONS OF THIS AGREEMENT, THE TERM NOTES AND THE PROVISIONS OF SECTION 3
GOVERNING LETTERS OF CREDIT; AND EACH LOAN PARTY HAS TAKEN ALL NECESSARY
CORPORATE OR OTHER ACTION TO AUTHORIZE THE EXECUTION, DELIVERY AND PERFORMANCE
OF THE LOAN DOCUMENTS TO WHICH IT IS A PARTY. NO CONSENT OR AUTHORIZATION OF,
FILING WITH, NOTICE TO OR OTHER ACT BY OR IN RESPECT OF, ANY GOVERNMENTAL
AUTHORITY OR ANY OTHER PERSON IS REQUIRED IN CONNECTION WITH THE BORROWINGS
HEREUNDER OR WITH THE EXECUTION, DELIVERY, PERFORMANCE, VALIDITY OR
ENFORCEABILITY OF THE LOAN DOCUMENTS TO WHICH ANY LOAN PARTY IS A PARTY EXCEPT
FOR SECURITY INTEREST FILINGS AND RECORDINGS. THIS AGREEMENT AND EACH OTHER LOAN
DOCUMENT TO WHICH EACH LOAN PARTY IS A PARTY HAVE BEEN DULY EXECUTED AND
DELIVERED ON BEHALF OF THE LOAN PARTY THERETO. THIS AGREEMENT AND EACH OTHER
LOAN DOCUMENT TO WHICH EACH LOAN PARTY IS A PARTY CONSTITUTE A LEGAL, VALID AND
BINDING OBLIGATION OF SUCH LOAN PARTY ENFORCEABLE AGAINST SUCH LOAN PARTY IN
ACCORDANCE WITH ITS TERMS, SUBJECT TO THE EFFECTS OF BANKRUPTCY, INSOLVENCY,
FRAUDULENT CONVEYANCE, REORGANIZATION, MORATORIUM AND OTHER SIMILAR LAWS
RELATING TO OR AFFECTING CREDITORS' RIGHTS GENERALLY, GENERAL EQUITABLE
PRINCIPLES (WHETHER CONSIDERED IN A PROCEEDING IN EQUITY OR AT LAW) AND, TO THE
EXTENT EXISTING UNDER APPLICABLE LAW, AN IMPLIED COVENANT OF GOOD FAITH AND FAIR
DEALING.
7. NO LEGAL BAR. THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN
DOCUMENTS TO WHICH THE BORROWERS ARE PARTY, THE BORROWINGS HEREUNDER AND THE USE
OF THE PROCEEDS THEREOF WILL NOT (a) AS TO ANY BORROWER, PARENT OR ANY
NON-RETAIL STORE SUBSIDIARY, (i) VIOLATE ANY REQUIREMENT OF LAW OR MATERIAL
CONTRACTUAL OBLIGATION, AND (ii) RESULT IN, OR REQUIRE, THE CREATION OR
IMPOSITION OF ANY LIEN ON PROPERTIES OR REVENUES OF ANY BORROWER, THE PARENT OR
ANY NON-RETAIL STORE SUBSIDIARY PURSUANT TO ANY SUCH REQUIREMENT OF LAW OR
CONTRACTUAL OBLIGATION, EXCEPT LIENS REQUIRED HEREUNDER FOR THE BENEFIT OF THE
AGENT AND THE LENDERS, AND (b) AS TO ANY RETAIL STORE SUBSIDIARY, (i) VIOLATE
ANY REQUIREMENT OF LAW OR MATERIAL CONTRACTUAL OBLIGATION, AND (ii) EXCEPT FOR
LIENS REQUIRED HEREUNDER FOR THE BENEFIT OF THE AGENT AND THE LENDERS, RESULT
IN, OR REQUIRE, THE CREATION OR IMPOSITION OF ANY LIEN ON PROPERTIES OR REVENUES
OF ANY RETAIL STORE SUBSIDIARY PURSUANT TO ANY SUCH REQUIREMENT OF LAW OR
CONTRACTUAL OBLIGATION, IN EACH CASE CONCERNING ANY RETAIL STORE SUBSIDIARY, IN
ANY RESPECT THAT COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.
<PAGE> 39
8. NO MATERIAL LITIGATION. NO LITIGATION, INVESTIGATION OR PROCEEDING
OF OR BEFORE ANY ARBITRATOR OR GOVERNMENTAL AUTHORITY IS PENDING OR, TO THE
KNOWLEDGE OF PARENT, THREATENED BY OR AGAINST PARENT OR ANY OF ITS SUBSIDIARIES
OR AGAINST ANY OF SUCH PERSON'S RESPECTIVE PROPERTIES OR REVENUES (a) WITH
RESPECT TO ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, OR (b) WHICH COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT EXCEPT AS SET FORTH IN OMNIBUS SCHEDULE 8.
9. NO DEFAULT. EXCEPT AS SET FORTH ON OMNIBUS SCHEDULE 9, NONE OF
PARENT, THE BORROWER NOR THE SUBSIDIARIES OF PARENT IS IN DEFAULT UNDER OR WITH
RESPECT TO ANY OF THEIR RESPECTIVE CONTRACTUAL OBLIGATIONS IN ANY RESPECT WHICH
COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT. NO DEFAULT OR
EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING.
10. OWNERSHIP OF PROPERTY; LIENS. EACH OF PARENT AND ITS SUBSIDIARIES
(OTHER THAN THE INACTIVE RETAIL STORE SUBSIDIARIES) HAS GOOD RECORD AND
MARKETABLE TITLE IN FEE SIMPLE TO, OR A VALID LEASEHOLD INTEREST IN, ALL ITS
REAL PROPERTY, AND GOOD TITLE TO, OR A VALID LEASEHOLD INTEREST IN, ALL ITS
OTHER PROPERTY, AND NONE OF SUCH PROPERTY IS SUBJECT TO ANY LIEN EXCEPT AS
PERMITTED BY SUBSECTION 7.3.
11. INTELLECTUAL PROPERTY. PARENT AND EACH OF ITS SUBSIDIARIES OWNS,
OR IS LICENSED TO USE, ALL TRADEMARKS, TRADENAMES, COPYRIGHTS, TECHNOLOGY, KNOW
HOW AND PROCESSES NECESSARY FOR THE CONDUCT OF ITS BUSINESS AS CURRENTLY
CONDUCTED EXCEPT FOR THOSE THE FAILURE TO OWN OR LICENSE WHICH COULD NOT
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT (THE "INTELLECTUAL
PROPERTY"). NO CLAIM HAS BEEN ASSERTED AND IS PENDING BY ANY PERSON CHALLENGING
OR QUESTIONING THE USE OF ANY SUCH INTELLECTUAL PROPERTY OR THE VALIDITY OR
EFFECTIVENESS OF ANY SUCH INTELLECTUAL PROPERTY, NOR DOES ANY BORROWER KNOW OF
ANY VALID BASIS FOR ANY SUCH CLAIM. THE USE OF SUCH INTELLECTUAL PROPERTY BY
PARENT AND EACH OF ITS SUBSIDIARIES DOES NOT INFRINGE ON THE RIGHTS OF ANY
PERSON, EXCEPT FOR SUCH CLAIMS AND INFRINGEMENTS THAT, IN THE AGGREGATE, COULD
NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.
12. NO BURDENSOME RESTRICTIONS. NO REQUIREMENT OF LAW OR CONTRACTUAL
OBLIGATION OF PARENT OR ANY OF ITS SUBSIDIARIES HAS A MATERIAL ADVERSE EFFECT.
1. Taxes. 1. Except as described in the financial statements, or
in the notes thereto, referred to in subsection 4.1, Parent has filed or
caused to be filed all federal and material state and local tax returns for
Parent and its Consolidated Subsidiaries which, to the knowledge of Parent,
are required to be filed, and has caused to be paid all taxes shown to be
due and payable on said returns or on any assessments made against it or
any of its property or the property of any Subsidiary and all other taxes,
fees or other charges imposed on it or any of its property by any
Governmental Authority (other than the amount or validity of
<PAGE> 40
which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have
been provided on the books of Parent and its Consolidated Subsidiaries). No
tax Lien has been filed, and, to the knowledge of Parent, no claim is being
asserted, with respect to any such tax, fee or other charge.
13. PARENT REPORTED AGGREGATE TAXABLE INCOME OF $204,507,000 AND PAID
AN AGGREGATE OF $69,987,000 OF FEDERAL CORPORATE NET INCOME TAX FOR ITS FISCAL
YEARS ENDED ON OR ABOUT JANUARY 31, 1993, JANUARY 31, 1994 AND JANUARY 31, 1995.
PARENT WILL LIKELY INCUR A NET OPERATING LOSSES FOR FEDERAL INCOME TAX PURPOSES
IN ITS FISCAL YEAR ENDED FEBRUARY 3, 1996, AND WOULD BE ENTITLED TO A REFUND OF
THESE TAXES PREVIOUSLY PAID. THE MAXIMUM REFUNDS AVAILABLE FROM EACH PRIOR TAX
YEAR ARE AS FOLLOWS:
<TABLE>
<CAPTION>
Year by which loss must
Fiscal year ending in be incurred in order to
which tax paid secure refund
<S> <C> <C>
January 1993 $28,248,000 February 1996
January 1994 30,224,000 February 1996 or 1997
January 1995 7,388,000 February 1996 or 1997 or January 1998
-----------
$65,860,000
===========
</TABLE>
For illustrative purposes only, Parent has calculated that tax refunds for
various amounts of taxable losses for the tax year ended February 3, 1996 would
be approximately on the order indicated below provided that Parent cannot
represent as to the amount of taxable loss, and provided, further, that certain
factors might cause the amount of the resulting tax refund to vary from the
representative amounts set forth below.
<TABLE>
<CAPTION>
Taxable Loss Tax Refund
Year Ended February 3, 1996 from Carryback Claim
<S> <C>
$173,700,000 $48,900,000
145,700,000 43,300,000
115,700,000 37,300,000
98,200,000 32,900,000
88,100,000 30,000,000
</TABLE>
14. FEDERAL REGULATIONS. NO PART OF THE PROCEEDS OF ANY TERM LOANS
WILL BE USED FOR "PURCHASING" OR "CARRYING" ANY "MARGIN STOCK" WITHIN THE
RESPECTIVE MEANINGS OF EACH OF THE QUOTED TERMS UNDER REGULATION G OR REGULATION
U OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM AS NOW AND FROM TIME
TO TIME HEREAFTER IN EFFECT. IF REQUESTED BY ANY LENDER OR THE AGENT, THE
BORROWERS WILL FURNISH TO THE AGENT AND EACH
<PAGE> 41
LENDER A STATEMENT TO THE FOREGOING EFFECT IN CONFORMITY WITH THE REQUIREMENTS
OF FR FORM G-1 OR FR FORM U-1 REFERRED TO IN SAID REGULATION G OR REGULATION U,
AS THE CASE MAY BE.
15. ERISA. NEITHER A REPORTABLE EVENT NOR AN "ACCUMULATED FUNDING
DEFICIENCY" (WITHIN THE MEANING OF SECTION 412 OF THE CODE OR SECTION 302 OF
ERISA) HAS OCCURRED DURING THE FIVE YEAR PERIOD PRIOR TO THE DATE THEREOF WITH
RESPECT TO ANY PLAN, AND EACH PLAN HAS COMPLIED IN ALL MATERIAL RESPECTS WITH
THE APPLICABLE PROVISIONS OF ERISA AND THE CODE. NO TERMINATION OF A SINGLE
EMPLOYER PLAN HAS OCCURRED, AND NO LIEN IN FAVOR OF THE PBGC OR A PLAN HAS
ARISEN, DURING SUCH FIVE-YEAR PERIOD. THE PRESENT VALUE OF ALL ACCRUED BENEFITS
UNDER EACH SINGLE EMPLOYER PLAN (BASED ON THOSE ASSUMPTIONS USED TO FUND SUCH
PLANS) DID NOT, AS OF THE LAST ANNUAL VALUATION DATE PRIOR TO THE DATE THEREOF,
EXCEED THE VALUE OF THE ASSETS OF SUCH PLAN ALLOCABLE TO SUCH ACCRUED BENEFITS.
NO BORROWER OR ANY COMMONLY CONTROLLED ENTITY HAS HAD A COMPLETE OR PARTIAL
WITHDRAWAL FROM ANY MULTIEMPLOYER PLAN, AND NO BORROWER OR ANY COMMONLY
CONTROLLED ENTITY WOULD BECOME SUBJECT TO ANY LIABILITY UNDER ERISA IF ANY
BORROWER OR ANY SUCH COMMONLY CONTROLLED ENTITY WERE TO WITHDRAW COMPLETELY FROM
ALL MULTIEMPLOYER PLANS AS OF THE VALUATION DATE MOST CLOSELY PRECEDING THE DATE
THEREOF. NO SUCH MULTIEMPLOYER PLAN IS IN REORGANIZATION OR INSOLVENT. THE
PRESENT VALUE (DETERMINED USING ACTUARIAL AND OTHER ASSUMPTIONS WHICH ARE
REASONABLE IN RESPECT OF THE BENEFITS PROVIDED AND THE EMPLOYEES PARTICIPATING)
OF THE LIABILITY OF EACH BORROWER AND EACH COMMONLY CONTROLLED ENTITY FOR POST
RETIREMENT BENEFITS, OTHER THAN BENEFITS REQUIRED UNDER PART 6 OF TITLE I OF
ERISA, TO BE PROVIDED TO THEIR CURRENT AND FORMER EMPLOYEES UNDER PLANS WHICH
ARE WELFARE BENEFIT PLANS (AS DEFINED IN SECTION 3(1) OF ERISA) DOES NOT, IN THE
AGGREGATE, EXCEED THE ASSETS UNDER ALL SUCH PLANS ALLOCABLE TO SUCH BENEFITS BY
AN AMOUNT IN EXCESS OF $100,000.
16. INVESTMENT COMPANY ACT; OTHER REGULATIONS. NONE OF THE BORROWERS,
PARENT OR THE DOMESTIC SUBSIDIARIES IS AN "INVESTMENT COMPANY", OR A COMPANY
"CONTROLLED" BY AN "INVESTMENT COMPANY", WITHIN THE MEANING OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED. NONE OF THE BORROWERS, PARENT OR THE DOMESTIC
SUBSIDIARIES IS SUBJECT TO REGULATION UNDER ANY FEDERAL OR STATE STATUTE OR
REGULATION (OTHER THAN REGULATION X OF THE BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM) WHICH LIMITS ITS ABILITY TO INCUR INDEBTEDNESS.
6. CORPORATE ORGANIZATION; SUBSIDIARIES; OWNERSHIP; INTERRELATED
BUSINESSES. 6. OMNIBUS SCHEDULE 1 ACCURATELY REFLECTS THE JURISDICTION OF
INCORPORATION, FULL LEGAL NAME AND OWNERSHIP OF PARENT AND ITS SUBSIDIARIES.
6.0.0.0.0.0.0.1. The entities listed in 6.0.0.0.0.0.0.1. Part
A(1), (4) - (7) of Omnibus Schedule 1 constitute all the Non-Retail Store
Subsidiaries, 6.0.0.0.0.0.0.1. Part A(2) of Omnibus Schedule 1 constitute
all the Retail Store Subsidiaries which are currently
<PAGE> 42
operating and selling Inventory, or are reasonably expected to be doing the
same prior to December 31, 1995, 6.0.0.0.0.0.0.1. Part A(3) of Omnibus
Schedule 1 constitute all the Retail Store Subsidiaries which are not
currently operating or selling Inventory and are not expected to be doing
the same prior to December 31, 1995 (the "Inactive Retail Store
Subsidiaries"), in each case by its registered corporate name and not under
any trade name.
7. PARENT IS THE DIRECT AND BENEFICIAL OWNER AND HOLDER OF ALL OF THE
ISSUED AND OUTSTANDING SHARES OF CAPITAL STOCK OF THE DOMESTIC SUBSIDIARIES
WHOSE SHARES OF CAPITAL STOCK ARE PLEDGED BY PARENT PURSUANT TO THE SHARED
PLEDGE AGREEMENT AS SET FORTH ON PART A OF OMNIBUS SCHEDULE 5. KAFCO IS THE
OWNER AND HOLDER OF ALL OF THE ISSUED AND OUTSTANDING CAPITAL STOCK OF THE REAL
PROPERTY DEVELOPMENT COMPANIES. FSHC IS THE OWNER AND HOLDER OF AT LEAST 80% OF
THE ISSUED AND OUTSTANDING CAPITAL STOCK OF EACH OF THE ENTITIES WHOSE SHARES OF
CAPITAL STOCK ARE PLEDGED BY FSHC PURSUANT TO THE TERM LENDER PLEDGE AGREEMENTS
AS SET FORTH ON OMNIBUS SCHEDULE 6.
<PAGE> 43
1. PARENT AND EACH OTHER BORROWER, TOGETHER WITH THE OTHER
SUBSIDIARIES OF PARENT (OTHER THAN THE FINANCING SUBSIDIARIES), SHARE AN
IDENTITY OF INTERESTS SUCH THAT ANY BENEFIT RECEIVED BY EACH BORROWER BENEFITS
THE OTHER BORROWERS AND SUCH OTHER SUBSIDIARIES OF PARENT. PARENT, EACH OTHER
BORROWER AND THE OTHER SUBSIDIARIES OF PARENT (OTHER THAN THE FINANCING
SUBSIDIARIES) (i) RENDER SERVICES TO OR FOR THE BENEFIT OF THE OTHER BORROWERS,
PARENT AND THE OTHER SUBSIDIARIES OF PARENT, (ii) MAKE LOANS AND ADVANCES AND
PROVIDE OTHER FINANCIAL ACCOMMODATIONS TO OR FOR THE BENEFIT OF THE OTHER
BORROWERS, PARENT AND THE OTHER SUBSIDIARIES OF PARENT (INCLUDING, AMONG OTHER
THINGS, THE PAYMENT AND/OR GUARANTEES BY BORROWERS, PARENT AND THE OTHER
SUBSIDIARIES OF PARENT OF INDEBTEDNESS OF OTHER BORROWERS, PARENT AND THE OTHER
SUBSIDIARIES OF PARENT) AND (iii) PROVIDE ADMINISTRATIVE, MARKETING, PAYROLL AND
MANAGEMENT SERVICES TO OR FOR THE BENEFIT OF THE OTHER BORROWERS, PARENT AND THE
OTHER SUBSIDIARIES OF PARENT. PARENT, THE OTHER BORROWERS, AND THE DOMESTIC
SUBSIDIARIES HAVE CENTRALIZED ACCOUNTING AND LEGAL SERVICES.
2. ENVIRONMENTAL MATTERS. OTHER THAN EXCEPTIONS TO THE FOLLOWING THAT
ARE NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY LIKELY TO GIVE RISE TO A
MATERIAL ADVERSE EFFECT:
1. NO PROPERTY PRESENTLY OWNED, LEASED OR OPERATED BY PARENT
OR ANY OF ITS SUBSIDIARIES CONTAINS, OR HAS PREVIOUSLY CONTAINED,
AND, TO THE KNOWLEDGE OF PARENT OR ANY OF ITS SUBSIDIARIES, NO
PROPERTY FORMERLY OWNED, LEASED OR OPERATED BY PARENT OR ANY OF
ITS SUBSIDIARIES OR FORMER SUBSIDIARIES DURING THE PERIOD OF SUCH
OWNERSHIP, LEASE OR OPERATION, CONTAINED, ANY MATERIALS OF
ENVIRONMENTAL CONCERN IN AMOUNTS OR CONCENTRATIONS WHICH (i)
CONSTITUTE OR CONSTITUTED A VIOLATION OF, OR (ii) COULD GIVE RISE
TO LIABILITY UNDER, ANY ENVIRONMENTAL LAW.
2. EACH BORROWER, THE PARENT AND THE SUBSIDIARIES ARE IN
COMPLIANCE, AND FOR THE DURATION OF ALL APPLICABLE STATUTES OF
LIMITATIONS PERIODS HAVE BEEN IN COMPLIANCE, WITH ALL APPLICABLE
ENVIRONMENTAL LAWS, AND THERE IS NO CONTAMINATION AT, UNDER OR
ABOUT ANY PROPERTIES PRESENTLY OWNED, LEASED, OR OPERATED BY THE
PARENT OR ANY SUBSIDIARY OR VIOLATION OF ANY ENVIRONMENTAL LAW
WITH RESPECT TO SUCH PROPERTIES WHICH COULD REASONABLY BE
EXPECTED TO INTERFERE WITH ANY OF THEIR CONTINUED OPERATIONS OR
REASONABLY BE EXPECTED TO IMPAIR THE FAIR SALEABLE VALUE THEREOF.
3. NO BORROWER, PARENT OR ANY SUBSIDIARY HAS RECEIVED ANY
NOTICE OF VIOLATION, ALLEGED VIOLATION, NON-COMPLIANCE, LIABILITY
OR POTENTIAL LIABILITY REGARDING ENVIRONMENTAL MATTERS OR
COMPLIANCE WITH ENVIRONMENTAL LAWS AND NO BORROWER, PARENT OR ANY
SUBSIDIARY
<PAGE> 44
HAS KNOWLEDGE THAT ANY SUCH NOTICE WILL BE RECEIVED OR IS BEING
THREATENED.
4. MATERIALS OF ENVIRONMENTAL CONCERN HAVE NOT BEEN
TRANSPORTED OR DISPOSED OF IN A MANNER OR TO A LOCATION WHICH ARE
REASONABLY LIKELY TO GIVE RISE TO LIABILITY OF ANY BORROWER, THE
PARENT, OR ANY SUBSIDIARY UNDER ANY ENVIRONMENTAL LAW.
5. NO JUDICIAL PROCEEDING OR GOVERNMENTAL OR ADMINISTRATIVE
ACTION IS PENDING OR, TO THE KNOWLEDGE OF ANY BORROWER,
THREATENED, UNDER ANY ENVIRONMENTAL LAW TO WHICH ANY BORROWER,
THE PARENT OR ANY SUBSIDIARY IS OR, TO THE BORROWER'S KNOWLEDGE,
WILL BE NAMED AS A PARTY, NOR ARE THERE ANY CONSENT DECREES OR
OTHER DECREES, CONSENT ORDERS, ADMINISTRATIVE ORDERS OR OTHER
ORDERS, OR OTHER ADMINISTRATIVE OR JUDICIAL REQUIREMENTS
OUTSTANDING, THE IMPLEMENTATION OF WHICH IS REASONABLY LIKELY TO
HAVE AN ADVERSE EFFECT ON ANY BORROWER, THE PARENT, OR ANY
SUBSIDIARY, UNDER ANY ENVIRONMENTAL LAW.
3. REGULATION H. EXCEPT FOR THE REAL PROPERTY DEVELOPMENT COMPANY
MORTGAGE RELATING TO THE PROPERTY IN FESTUS, MISSOURI, NO MORTGAGE ENCUMBERS
IMPROVED REAL PROPERTY WHICH IS LOCATED IN AN AREA THAT HAS BEEN IDENTIFIED BY
THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT AS AN AREA HAVING SPECIAL FLOOD
HAZARDS AND IN WHICH FLOOD INSURANCE HAS BEEN MADE AVAILABLE UNDER THE NATIONAL
FLOOD INSURANCE ACT OF 1968.
SECTION 1. CONDITIONS PRECEDENT
The agreements of each Lender to convert its aggregate Existing Letter
of Credit Funded Amount into several Term Loans hereunder and to become an
Issuing Lender in respect of certain Letters of Credit, in each case for the
collective benefit of Parent and its Subsidiaries, are subject to the
satisfaction, on the Closing Date, of the following conditions precedent:
1. LOAN DOCUMENTS. (i) THE AGENT SHALL HAVE RECEIVED (A)
THIS AGREEMENT, EXECUTED AND DELIVERED BY A DULY AUTHORIZED
OFFICER OF EACH BORROWER, WITH A COUNTERPART FOR EACH LENDER, (B)
FOR THE ACCOUNT OF EACH LENDER, A TERM NOTE FROM EACH BORROWER TO
WHICH SUCH LENDER MADE A TERM LOAN PURSUANT TO SUBSECTION 2.1,
AND (C) THE LENDER BENSALEM MORTGAGE, EXECUTED AND DELIVERED BY A
DULY AUTHORIZED OFFICER OF THE PARTY THERETO, WITH A COUNTERPART
OR A CONFORMED COPY FOR EACH LENDER, AND (ii) THE COLLATERAL
AGENT SHALL HAVE RECEIVED (A) THE OMNIBUS GUARANTEE AGREEMENT,
EXECUTED AND DELIVERED BY A DULY AUTHORIZED OFFICER OF THE
PARTIES THERETO, WITH A COUNTERPART OR A CONFORMED COPY FOR EACH
LENDER, (B) THE MASTER
<PAGE> 45
SECURITY AGREEMENT, EXECUTED AND DELIVERED BY A DULY AUTHORIZED
OFFICER OF THE PARTIES THERETO, WITH A COUNTERPART OR A CONFORMED
COPY FOR EACH LENDER, (C) THE STOCK PLEDGE AGREEMENTS, EXECUTED
AND DELIVERED BY A DULY AUTHORIZED OFFICER OF THE PARTIES
THERETO, WITH A COUNTERPART OR A CONFORMED COPY FOR EACH LENDER,
(D) THE TRADEMARK SECURITY AGREEMENTS, EXECUTED AND DELIVERED BY
A DULY AUTHORIZED OFFICER OF THE PARTIES THERETO, WITH A
COUNTERPART OR A CONFORMED COPY FOR EACH LENDER, AND (E) THE
MORTGAGES (OTHER THAN THE LENDER BENSALEM MORTGAGE), EXECUTED AND
DELIVERED BY A DULY AUTHORIZED OFFICER OF THE PARTY THERETO, WITH
A COUNTERPART OR A CONFORMED COPY FOR EACH LENDER.
2. RELATED AGREEMENTS. THE AGENT SHALL HAVE RECEIVED, WITH A
COPY FOR EACH LENDER, TRUE AND CORRECT COPIES, CERTIFIED AS TO
AUTHENTICITY BY A RESPONSIBLE OFFICER OF BORROWERS' AGENT, OF THE
CONGRESS LOAN DOCUMENTS, THE NOTE DOCUMENTS, AND SUCH OTHER
DOCUMENTS OR INSTRUMENTS AS MAY BE REASONABLY REQUESTED BY THE
AGENT, AND THE TERMS AND CONDITIONS OF THE CONGRESS LOAN
DOCUMENTS AND THE NOTE AGREEMENT SHALL CONFORM IN ALL MATERIAL
RESPECTS TO THE TERM SHEETS THEREFOR AND SHALL IN ALL OTHER
RESPECTS BE SATISFACTORY IN FORM AND SUBSTANCE TO THE LENDERS.
3. CLOSING CERTIFICATE. THE AGENT SHALL HAVE RECEIVED, WITH
A COUNTERPART FOR EACH LENDER, A CERTIFICATE OF PARENT, DATED THE
CLOSING DATE, SUBSTANTIALLY IN THE FORM OF EXHIBIT Q, WITH
APPROPRIATE INSERTIONS AND ATTACHMENTS, SATISFACTORY IN FORM AND
SUBSTANCE TO THE AGENT OR ANY LENDER EXECUTED BY A RESPONSIBLE
OFFICER OF PARENT.
4. CORPORATE PROCEEDINGS. THE AGENT SHALL HAVE RECEIVED,
WITH A COUNTERPART FOR EACH LENDER, A COPY OF THE RESOLUTIONS, IN
FORM AND SUBSTANCE SATISFACTORY TO THE AGENT, OF THE BOARD OF
DIRECTORS OF THE LOAN PARTY AUTHORIZING (i) THE EXECUTION,
DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS TO WHICH SUCH LOAN
PARTY IS A PARTY, (ii) IN THE CASE OF EACH BORROWER, THE
BORROWINGS CONTEMPLATED HEREUNDER AND (iii) THE GRANTING BY SUCH
LOAN PARTY OF THE LIENS CREATED PURSUANT TO THE SECURITY
DOCUMENTS, CERTIFIED BY THE SECRETARY OR AN ASSISTANT SECRETARY
OF SUCH LOAN PARTY AS OF THE CLOSING DATE, WHICH CERTIFICATE
SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE AGENT AND
SHALL STATE THAT THE RESOLUTIONS THEREBY CERTIFIED HAVE NOT BEEN
AMENDED, MODIFIED, REVOKED OR RESCINDED.
5. INCUMBENCY CERTIFICATES. THE AGENT SHALL HAVE RECEIVED,
WITH A COUNTERPART FOR EACH LENDER, A CERTIFICATE OF EACH LOAN
PARTY, DATED THE CLOSING DATE, AS TO THE INCUMBENCY AND SIGNATURE
OF THE OFFICERS OF SUCH LOAN PARTY EXECUTING ANY LOAN DOCUMENT
SATISFACTORY
<PAGE> 46
IN FORM AND SUBSTANCE TO THE AGENT, EXECUTED BY THE SECRETARY OR
ANY ASSISTANT SECRETARY OF THE PARENT.
6. CORPORATE DOCUMENTS. THE AGENT SHALL HAVE RECEIVED, WITH
A COUNTERPART FOR EACH LENDER, TRUE AND COMPLETE COPIES OF THE
CERTIFICATE OF INCORPORATION AND BY LAWS OF PARENT, EACH OTHER
BORROWER AND EACH NON-RETAIL STORE SUBSIDIARY (EXCEPT FOR THE
REAL PROPERTY DEVELOPMENT COMPANIES OTHER THAN THE PLEDGED REAL
PROPERTY DEVELOPMENT COMPANIES), AS WELL AS A REPRESENTATIVE SET
OF SUCH DOCUMENTS FOR THE RETAIL STORE SUBSIDIARIES AND THE REAL
PROPERTY DEVELOPMENT COMPANIES OTHER THAN THE PLEDGED REAL
PROPERTY DEVELOPMENT COMPANIES, CERTIFIED AS OF THE CLOSING DATE
AS COMPLETE AND CORRECT COPIES THEREOF BY THE SECRETARY OR AN
ASSISTANT SECRETARY OF SUCH LOAN PARTY, WHICH CERTIFICATE SHALL
STATE THAT EACH RETAIL STORE SUBSIDIARY HAS SUBSTANTIALLY SIMILAR
ORGANIC DOCUMENTS.
7. FEES. (i) ON THE CLOSING DATE, THE AGENT SHALL HAVE
RECEIVED FOR THE ACCOUNT OF EACH LENDER, A FEE IN THE AMOUNT
EQUAL TO 1.25% OF SUCH LENDER'S TERM LOANS (EXCEPT THAT IN THE
CASE OF HKSB, ON THE CLOSING DATE, A FEE IN THE AMOUNT OF 1.25%
OF HKSB'S TERM LOANS SHALL HAVE BEEN PAID DIRECTLY TO HKSB BY
SENTANI TRADING LIMITED); (ii) THE AGENT SHALL HAVE RECEIVED THE
AGREED UPON AGENT'S FEE ON THE CLOSING DATE; AND (iii) THE COSTS
AND EXPENSES OF COLLATERAL AGENT, AGENT AND EACH LENDER
(INCLUDING COUNSEL AND OTHER PROFESSIONAL FEES) THERETOFORE
BILLED SHALL HAVE BEEN PAID.
8. LEGAL OPINIONS. THE AGENT SHALL HAVE RECEIVED, WITH A
COUNTERPART FOR EACH LENDER, THE FOLLOWING EXECUTED LEGAL
OPINIONS:
8. THE EXECUTED LEGAL OPINION OF DAVIS POLK & WARDWELL, SPECIAL NEW YORK
COUNSEL TO THE BORROWERS AND THE OTHER LOAN PARTIES, SUBSTANTIALLY IN THE
FORM OF EXHIBIT R-1;
8.1. the executed legal opinion of Drinker, Biddle & Reath, special
Pennsylvania counsel to the Borrower and the other Loan parties,
substantially in the form of Exhibit R-2;
8.2. the executed legal opinion of Baker & Daniels, special Indiana
counsel to the Borrowers and the other Loan Parties, substantially in the
form of Exhibit R-3:
<PAGE> 47
9. THE EXECUTED LEGAL OPINION OF COLIN STERN, ESQ., GENERAL COUNSEL OF THE
BORROWERS, SUBSTANTIALLY IN THE FORM OF EXHIBIT R 4;
10. THE EXECUTED LEGAL OPINION OF PANITCH SCHWARZE JACOBS & NADEL,
P.C., SPECIAL COUNSEL TO THE BORROWERS WITH RESPECT TO TRADEMARK MATTERS,
SUBSTANTIALLY IN THE FORM OF EXHIBIT R-5;
10.1. the executed legal opinion of Greene & Greene, special Tennessee
real estate counsel, substantially in the form of Exhibit R-6;
10.2. the executed legal opinion of Goodell, Stratton, Edmonds &
Palmer, special Kansas real estate counsel, substantially in the form of
Exhibit R-7;
10.3. the executed legal opinion of Andrews & Kurth, special Texas real
estate counsel, substantially in the form of Exhibit R-8;
10.4. the executed legal opinion of Stinson, Mag & Fizzell, special
Missouri real estate counsel, substantially in the form of Exhibit R-9;
11. THE EXECUTED LEGAL OPINION OF THOMPSON, MCNABUE, ASHLEY &
BULL, SPECIAL MAINE REAL ESTATE COUNSEL, SUBSTANTIALLY IN THE FORM OF
EXHIBIT R 10;
11.1. the executed legal opinion of Sidley & Austin, special Illinois
real estate counsel, substantially in the form of Exhibit R-11;
12. THE EXECUTED LEGAL OPINION OF JOHNSON STOKES AND MASTER, SPECIAL
HONG KONG COUNSEL, SUBSTANTIALLY IN THE FORM OF EXHIBIT R-12.
Each such legal opinion shall cover such other matters
incident to the transactions contemplated by this Agreement
as the Agent may reasonably require.
<PAGE> 48
13. PREPAYMENT L/C. THE AGENT SHALL HAVE RECEIVED THE
PREPAYMENT L/C, IN FORM AND SUBSTANCE SATISFACTORY TO THE AGENT
AND EACH LENDER.
1. BACK-UP L/C. EACH ISSUING LENDER SHALL HAVE RECEIVED ITS
BACK-UP L/C, IN FORM AND SUBSTANCE SATISFACTORY TO SUCH ISSUING
LENDER.
2. PLEDGED STOCK; STOCK POWERS. (i) THE COLLATERAL AGENT
SHALL HAVE RECEIVED THE CERTIFICATES REPRESENTING THE SHARES OF
(A) KAFCO, (B) EACH REAL PROPERTY DEVELOPMENT COMPANY, (C)
FASHION SERVICE CORP., (D) SOURCENET, INC. AND (E) FSHC, TOGETHER
WITH AN UNDATED STOCK POWER FOR EACH SUCH CERTIFICATE EXECUTED IN
BLANK BY A DULY AUTHORIZED OFFICER OF PARENT AND (ii) CONGRESS
SHALL HAVE RECEIVED (A) THE CERTIFICATES REPRESENTING THE SHARES
OF REMAINING SUBSIDIARIES OF PARENT PLEDGED PURSUANT TO THE
SHARED STOCK PLEDGE AGREEMENT, TOGETHER WITH AN UNDATED STOCK
POWER FOR EACH SUCH CERTIFICATE EXECUTED IN BLANK BY A DULY
AUTHORIZED OFFICER OF PARENT AND (B) THE INTERCOMPANY NOTES
PLEDGED PURSUANT TO THE MASTER SECURITY AGREEMENT.
3. FOREIGN SUBSIDIARY STOCK PLEDGE. EXCEPT WITH RESPECT TO
CS INSURANCE LTD., THE COLLATERAL AGENT SHALL HAVE RECEIVED (i)
THE CERTIFICATES REPRESENTING THE SHARES OF EACH PLEDGED FOREIGN
SUBSIDIARY, TOGETHER WITH UNDATED INSTRUMENTS OF TRANSFER AND
CONTRACT NOTES RELATING TO SUCH SHARES EXECUTED IN BLANK BY A
DULY AUTHORIZED OFFICER OF FSHC AND (ii) A COPY OF MINUTES OF A
MEETING OF THE BOARD OF DIRECTORS OF EACH PLEDGED FOREIGN
SUBSIDIARY APPROVING AND AUTHORIZING, SUBJECT ONLY TO STAMPING OF
THE RELEVANT INSTRUMENT OF TRANSFER (A) THE TRANSFER, FOR
SECURITY, OF THE SHARES OF SUCH PLEDGED FOREIGN SUBSIDIARY INTO
THE NAME OF THE COLLATERAL AGENT (OR ITS NOMINEE), (B) THE ISSUE
OF A NEW SHARE CERTIFICATE REPRESENTING THE PLEDGED SHARES IN THE
NAME OF COLLATERAL AGENT (OR ITS NOMINEE) AND (C) THE ENTRY INTO
SUCH FOREIGN SUBSIDIARY'S REGISTER OF MEMBERS OF THE COLLATERAL
AGENT (OR ITS NOMINEE) AS A MEMBER OF SUCH FOREIGN SUBSIDIARY IN
RESPECT OF THE SHARES SO PLEDGED, CERTIFIED BY A DIRECTOR OF SUCH
PLEDGED FOREIGN SUBSIDIARY AS OF THE CLOSING DATE, WHICH
CERTIFICATE SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE
AGENT AND SHALL STATE THAT THE MINUTES OF A MEETING OF THE BOARD
OF DIRECTORS THEREBY CERTIFIED HAVE NOT BEEN AMENDED, MODIFIED,
REVOKED OR RESCINDED.
4. ACTIONS TO PERFECT LIENS. THE COLLATERAL AGENT SHALL HAVE
RECEIVED EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY TO IT THAT
ALL FILINGS, RECORDINGS, REGISTRATIONS AND OTHER ACTIONS,
INCLUDING, WITHOUT
<PAGE> 49
LIMITATION, THE FILING OF DULY EXECUTED FINANCING STATEMENTS ON
FORM UCC-1, NECESSARY OR, IN THE OPINION OF THE COLLATERAL AGENT,
DESIRABLE TO PERFECT THE LIENS CREATED BY THE COLLATERAL
DOCUMENTS SHALL HAVE BEEN COMPLETED (EXCEPT WITH RESPECT TO (i)
THE MORTGAGES, THE COLLATERAL AGENT AND THE AGENT SHALL HAVE
RECEIVED THE POLICIES (OR COMMITMENTS) OF TITLE INSURANCE
DESCRIBED IN SUBSECTIONS 5(o)(i) AND SUBSECTIONS 5(o)(ii),
RESPECTIVELY, AND (ii) THE SHARES OF THE PLEDGED FOREIGN
SUBSIDIARIES, THE REQUIREMENTS OF SUBSECTION 5(l) SHALL HAVE BEEN
SATISFIED).
5. SURVEYS. THE COLLATERAL AGENT SHALL HAVE RECEIVED, AND
THE TITLE INSURANCE COMPANY ISSUING THE POLICIES REFERRED TO IN
SUBSECTION 5.1(O) (THE "TITLE INSURANCE COMPANY") SHALL HAVE
RECEIVED SURVEYS OF THE SITES OF THE PROPERTIES CERTIFIED TO THE
COLLATERAL AGENT AND THE TITLE INSURANCE COMPANY IN A MANNER
SATISFACTORY TO THEM, DATED A DATE SATISFACTORY TO THE COLLATERAL
AGENT AND THE TITLE INSURANCE COMPANY BY AN INDEPENDENT
PROFESSIONAL LICENSED LAND SURVEYOR SATISFACTORY TO THE
COLLATERAL AGENT AND THE TITLE INSURANCE COMPANY, WHICH SURVEYS
SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE COLLATERAL
AGENT AND THE LENDERS.
6. TITLE INSURANCE POLICY. (i) THE COLLATERAL AGENT SHALL
HAVE RECEIVED IN RESPECT OF EACH PARCEL COVERED BY A MORTGAGE
(OTHER THAN THE LENDER BENSALEM MORTGAGE) A MORTGAGEE'S TITLE
POLICY (OR POLICIES) OR MARKED UP UNCONDITIONAL BINDER (OR
BINDERS) FOR SUCH INSURANCE DATED THE CLOSING DATE, WITH A COPY
FOR EACH LENDER. EACH SUCH POLICY SHALL (A) BE IN AN AMOUNT
SATISFACTORY TO THE COLLATERAL AGENT; (B) BE ISSUED AT ORDINARY
RATES; (C) INSURE THAT THE MORTGAGE INSURED THEREBY CREATES A
VALID FIRST LIEN ON SUCH PARCEL FREE AND CLEAR OF ALL DEFECTS AND
ENCUMBRANCES EXCEPT FOR PERMITTED EXCEPTIONS (AS DEFINED IN THE
MORTGAGE RESPECTING SUCH PROPERTY); (D) NAME THE COLLATERAL AGENT
AS THE INSURED THEREUNDER; (E) BE IN THE FORM OF ALTA LOAN POLICY
- 1970 (AMENDED 10/17/70) OR SUCH OTHER FORM AS MAY BE
SATISFACTORY TO THE COLLATERAL AGENT; (F) CONTAIN SUCH
ENDORSEMENTS AND AFFIRMATIVE COVERAGE AS THE COLLATERAL AGENT MAY
REASONABLY REQUEST AND (G) BE ISSUED BY TITLE COMPANIES
SATISFACTORY TO THE COLLATERAL AGENT. THE COLLATERAL AGENT SHALL
HAVE RECEIVED EVIDENCE SATISFACTORY TO IT THAT ALL PREMIUMS IN
RESPECT OF EACH SUCH POLICY, AND ALL CHARGES FOR MORTGAGE
RECORDING TAX, IF ANY, HAVE BEEN PAID.
(ii) The Agent shall have received in respect of each parcel
covered by the Lender Bensalem Mortgage a mortgagee's title
policy (or policies) or marked up unconditional binder (or
binders) for such insurance dated the Closing Date, with a copy
for each Lender. Each such policy shall (i) be in an amount
satisfactory to the Agent; (ii) be issued at ordinary rates;
<PAGE> 50
(iii) insure that the Mortgage insured thereby creates valid
second Lien subject only to the first Lien of the Note Trustee
pursuant to the Trustee Bensalem Mortgage and the other Permitted
Exceptions (as defined in the Lender Bensalem Mortgage); (iv)
name the Agent as the insured thereunder; (v) be in the form of
ALTA Loan Policy - 1970 (Amended 10/17/70) or such other form as
may be satisfactory to the Agent; (vi) contain such endorsements
and affirmative coverage as the Agent may reasonably request and
(vii) be issued by title companies satisfactory to the Agent. The
Agent shall have received evidence satisfactory to it that all
premiums in respect of each such policy, and all charges for
mortgage recording tax, if any, have been paid.
7. FLOOD INSURANCE. IF REQUESTED BY THE COLLATERAL AGENT,
THE COLLATERAL AGENT SHALL HAVE RECEIVED, WITH RESPECT TO ANY
PROPERTY WHICH IS LOCATED IN A FLOOD AREA DESIGNATED AS "FLOOD
PRONE" (AS DEFINED IN THE REGULATIONS ADOPTED UNDER THE NATIONAL
INSURANCE FLOOD PROGRAM) (i) A POLICY OF FLOOD INSURANCE WHICH
(A) COVERS ANY PARCEL OF IMPROVED REAL PROPERTY WHICH IS
ENCUMBERED BY ANY MORTGAGE (B) IS WRITTEN IN AN AMOUNT NOT LESS
THAN THE OUTSTANDING PRINCIPAL AMOUNT OF THE INDEBTEDNESS SECURED
BY SUCH MORTGAGE WHICH IS REASONABLY ALLOCABLE TO SUCH REAL
PROPERTY OR THE MAXIMUM LIMIT OF COVERAGE MADE AVAILABLE WITH
RESPECT TO THE PARTICULAR TYPE OF PROPERTY UNDER THE ACT,
WHICHEVER IS LESS, AND (C) HAS A TERM ENDING NOT LATER THAN THE
MATURITY OF THE INDEBTEDNESS SECURED BY SUCH MORTGAGE AND (ii)
CONFIRMATION THAT THE COMPANY HAS RECEIVED THE NOTICE REQUIRED
PURSUANT TO SECTION 208(e)(3) OF REGULATION H OF THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
8. COPIES OF DOCUMENTS. THE COLLATERAL AGENT SHALL HAVE
RECEIVED A COPY OF ALL RECORDED DOCUMENTS REFERRED TO, OR LISTED
AS EXCEPTIONS TO TITLE IN, THE TITLE POLICY OR POLICIES REFERRED
TO IN SUBSECTION 5.1(o) AND A COPY, CERTIFIED BY SUCH PARTIES AS
THE COLLATERAL AGENT OR THE AGENT, AS THE CASE MAY BE, MAY DEEM
APPROPRIATE, OF ALL OTHER DOCUMENTS AFFECTING THE PROPERTY
COVERED BY EACH MORTGAGE.
9. LIEN SEARCHES. THE COLLATERAL AGENT SHALL HAVE RECEIVED
THE RESULTS OF A RECENT SEARCH BY A PERSON SATISFACTORY TO THE
COLLATERAL AGENT OF THE UNIFORM COMMERCIAL CODE FILINGS WHICH MAY
HAVE BEEN FILED WITH RESPECT TO PERSONAL PROPERTY OF ANY
BORROWERS, THE PARENT OR ANY SUBSIDIARY, AND THE RESULTS OF SUCH
SEARCH SHALL BE SATISFACTORY TO THE COLLATERAL AGENT.
10. INVENTORY APPRAISAL. EACH LENDER SHALL HAVE RECEIVED
COPIES OF THE APPRAISAL, IN FORM AND SUBSTANCE SATISFACTORY, OF
THE INVENTORY OF THE RETAIL STORE SUBSIDIARIES PREPARED BY
REPRESENTATIVES
<PAGE> 51
OF GORDON BROTHERS PARTNERS, INC. AND ALL OTHER AUDITS DELIVERED
TO CONGRESS.
11. INSURANCE. THE COLLATERAL AGENT SHALL HAVE RECEIVED
EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY TO IT THAT ALL OF THE
REQUIREMENTS OF SUBSECTION 6.5, SECTION 4.2 OF THE MASTER
SECURITY AGREEMENT AND SECTION 5 OF THE MORTGAGES (OTHER THAN THE
LENDERS BENSALEM MORTGAGE) SHALL HAVE BEEN SATISFIED.
12. EXISTING LETTER OF CREDIT FUNDED SURPLUS; OTHER AMOUNTS.
EACH LENDER SHALL HAVE RECEIVED PAYMENT OF THE EXISTING LETTER OF
CREDIT FUNDED SURPLUS AS SET FORTH ON OMNIBUS SCHEDULE 15B
ARISING UNDER THE EXISTING LETTER OF CREDIT AGREEMENTS TO WHICH
SUCH LENDER IS A PARTY AND ALL UNPAID INTEREST, FEES, COSTS AND
CHARGES RELATING THERETO, PLUS UNPAID INTEREST, FEES, COSTS AND
CHARGES, IF ANY, OWING IN RESPECT OF THE EXISTING LETTER OF
CREDIT FUNDED AMOUNT.
13. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. EACH OF THE
REPRESENTATIONS AND WARRANTIES MADE BY ANY BORROWER IN THIS
AGREEMENT AND BY ANY OTHER LOAN PARTY IN OR PURSUANT TO THE LOAN
DOCUMENTS SHALL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS ON
AND AS OF THE CLOSING DATE. NO DEFAULT OR EVENT OF DEFAULT SHALL
HAVE OCCURRED AND BE CONTINUING ON THE CLOSING DATE OR AFTER
GIVING EFFECT TO THE TRANSACTIONS CONTEMPLATED BY ANY LOAN
DOCUMENT.
14. CONDITIONS PRECEDENT TO CONGRESS LOAN AGREEMENT. THE
CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THE CONGRESS LOAN
AGREEMENT SHALL HAVE BEEN SATISFIED OR WAIVED AND CONGRESS SHALL
HAVE MADE THE INITIAL ADVANCE THEREUNDER.
15. CONDITIONS PRECEDENT TO NOTE AGREEMENT. THE CONDITIONS
PRECEDENT TO THE EFFECTIVENESS OF THE NOTE AGREEMENT SHALL HAVE
BEEN SATISFIED OR WAIVED AND THE NOTES SHALL HAVE BEEN ISSUED.
16. MUTUAL RELEASE OF CLAIMS. THE AGENT SHALL HAVE RECEIVED,
WITH A COUNTERPART FOR EACH LENDER, THE MUTUAL RELEASE DULY
EXECUTED BY AN AUTHORIZED REPRESENTATIVE OF EACH PARTY THERETO.
17. APPRAISALS. EACH LENDER SHALL HAVE RECEIVED COPIES OF
ALL APPRAISALS OR REPORTS REGARDING THE PROPERTIES SUBJECT TO THE
LENDER BENSALEM MORTGAGE OR THE GREENCASTLE MORTGAGE AND THE
EQUIPMENT LOCATED THEREON.
18. SUBORDINATION AGREEMENT. THE AGENT SHALL HAVE RECEIVED,
WITH A COUNTERPART FOR EACH LENDER, THE SUBORDINATION AGREEMENT
<PAGE> 52
DULY EXECUTED AND DELIVERED BY AN AUTHORIZED REPRESENTATIVE OF
EACH PARTY THERETO.
SECTION 1. AFFIRMATIVE COVENANTS
Parent and each Borrower hereby agree that, so long as any amount is
owing to any Lender, the Agent or the Collateral Agent hereunder or under any
other Loan Document, Parent shall, and (except in the case of delivery of
financial information, reports and notices) shall cause each of its Subsidiaries
(other than Executive Flights, Inc.) to:
1. FINANCIAL STATEMENTS. FURNISH TO EACH LENDER:
2. AS SOON AS AVAILABLE, BUT IN ANY EVENT WITHIN 90 DAYS
AFTER THE END OF EACH FISCAL YEAR OF THE PARENT, A COPY OF THE
CONSOLIDATED BALANCE SHEET OF THE PARENT AND ITS CONSOLIDATED
SUBSIDIARIES AS AT THE END OF SUCH YEAR AND THE RELATED
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS AND OF
CASH FLOWS FOR SUCH YEAR, AND THE ACCOMPANYING NOTES THERETO,
SETTING FORTH IN EACH CASE IN COMPARATIVE FORM THE FIGURES FOR
THE PREVIOUS YEAR, REPORTED ON WITHOUT A "GOING CONCERN" OR LIKE
QUALIFICATION OR EXCEPTION, OR QUALIFICATION ARISING OUT OF THE
SCOPE OF THE AUDIT, BY ERNST & YOUNG OR OTHER INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS OF NATIONALLY RECOGNIZED STANDING;
3. AS SOON AS AVAILABLE, BUT IN ANY EVENT NOT LATER THAN 30
DAYS AFTER THE END OF EACH FISCAL MONTH OF PARENT, THE UNAUDITED
CONSOLIDATED BALANCE SHEET OF THE PARENT AND ITS CONSOLIDATED
SUBSIDIARIES AS AT THE END OF SUCH MONTH AND THE RELATED
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
AND OF CASH FLOWS OF PARENT AND ITS CONSOLIDATED SUBSIDIARIES FOR
SUCH MONTH AND THE PORTION OF THE FISCAL YEAR THROUGH THE END OF
SUCH MONTH, SETTING FORTH IN EACH CASE IN COMPARATIVE FORM THE
FIGURES FOR THE PREVIOUS YEAR, CERTIFIED BY A RESPONSIBLE OFFICER
AS BEING FAIRLY STATED IN ALL MATERIAL RESPECTS (SUBJECT TO
NORMAL YEAR END AUDIT ADJUSTMENTS);
4. AT THE TIME OF FURNISHING THE CONSOLIDATED FINANCIAL
STATEMENTS REQUIRED BY SUBSECTIONS 6.1(a) AND (b), THE UNAUDITED
CONSOLIDATING BALANCE SHEETS OF PARENT AND ITS CONSOLIDATED
SUBSIDIARIES, BY GROUP, AND THE RELATED UNAUDITED CONSOLIDATING
STATEMENTS OF INCOME AND RETAINED EARNINGS OF PARENT AND ITS
CONSOLIDATED SUBSIDIARIES, BY GROUP, CERTIFIED BY A RESPONSIBLE
OFFICER AS BEING (i) FAIRLY STATED IN ALL MATERIAL RESPECTS AND
(ii) THOSE UTILIZED IN ARRIVING AT THE RESPECTIVE CONSOLIDATED
FINANCIAL STATEMENTS TO WHICH THEY RELATE;
<PAGE> 53
5. TO THE EXTENT NOT FURNISHED PURSUANT TO SUBSECTION
6.1(a), AS SOON AS AVAILABLE, BUT IN ANY EVENT WITHIN 150 DAYS
AFTER THE END OF EACH FOREIGN SUBSIDIARY'S FISCAL YEAR, A COPY OF
THE BALANCE SHEET OF EACH FOREIGN SUBSIDIARY AS AT THE END OF
SUCH YEAR AND THE RELATED STATEMENTS OF INCOME AND RETAINED
EARNINGS FOR SUCH YEAR, SETTING FORTH IN REACH CASE IN
COMPARATIVE FORM THE FIGURES FOR THE PREVIOUS YEARS, REPORTED ON
WITHOUT A "GOING CONCERN" OR LIKE QUALIFICATION OR EXCEPTION, OR
QUALIFICATION ARISING OUT OF THE SCOPE OF THE AUDIT, BY
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF INTERNATIONALLY
RECOGNIZED STANDING; AND
6. TO THE EXTENT NOT FURNISHED PURSUANT TO SUBSECTION
6.1(b), AS SOON AS AVAILABLE, BUT IN ANY EVENT NOT LATER THAN 90
DAYS AFTER THE END OF EACH FISCAL MONTH OF EACH FOREIGN
SUBSIDIARY, THE UNAUDITED CONSOLIDATED BALANCE SHEET OF EACH
FOREIGN SUBSIDIARY AS AT THE END OF SUCH MONTH AND THE RELATED
UNAUDITED STATEMENTS OF INCOME AND RETAINED EARNINGS OF EACH
FOREIGN SUBSIDIARY FOR SUCH MONTH AND THE PORTION OF THE FISCAL
YEAR THROUGH THE END OF SUCH MONTH, SETTING FORTH IN EACH CASE IN
COMPARATIVE FORM THE FIGURES FOR THE PREVIOUS YEAR, CERTIFIED BY
A RESPONSIBLE OFFICER AS BEING FAIRLY STATED IN ALL MATERIAL
RESPECTS (SUBJECT TO NORMAL YEAR-END AUDIT ADJUSTMENTS).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance (i) in
respect of Parent and its Consolidated Subsidiaries, with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein) or (ii) in respect of Foreign Subsidiaries, with generally
accepted accounting principles consistently applied in their respective
jurisdictions of incorporation.
1. CERTIFICATES; OTHER INFORMATION. FURNISH TO EACH LENDER:
1. CONCURRENTLY WITH THE DELIVERY OF THE FINANCIAL
STATEMENTS REFERRED TO IN SUBSECTION 6.1(a) AND (b), A
CERTIFICATE OF THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
REPORTING ON SUCH FINANCIAL STATEMENTS STATING THAT IN MAKING THE
EXAMINATION NECESSARY THEREFOR NO KNOWLEDGE WAS OBTAINED OF ANY
DEFAULT OR EVENT OF DEFAULT, EXCEPT AS SPECIFIED IN SUCH
CERTIFICATE;
2. CONCURRENTLY WITH THE DELIVERY OF THE FINANCIAL
STATEMENTS REFERRED TO IN SUBSECTIONS 6.1(a) THROUGH (d), A
CERTIFICATE OF A RESPONSIBLE OFFICER (i) STATING THAT, TO THE
BEST OF SUCH OFFICER'S KNOWLEDGE, EACH LOAN PARTY DURING SUCH
PERIOD HAS OBSERVED OR PERFORMED ALL OF ITS COVENANTS AND OTHER
AGREEMENTS, AND SATISFIED EVERY CONDITION, CONTAINED IN THIS
AGREEMENT AND THE OTHER LOAN
<PAGE> 54
DOCUMENTS TO BE OBSERVED, PERFORMED OR SATISFIED BY IT, AND THAT
SUCH OFFICER HAS OBTAINED NO KNOWLEDGE OF ANY DEFAULT OR EVENT OF
DEFAULT EXCEPT AS SPECIFIED IN SUCH CERTIFICATE, AND (ii) SHOWING
IN DETAIL THE CALCULATIONS SUPPORTING SUCH STATEMENT IN RESPECT
OF SUBSECTION 7.1;
3. NOT LATER THAN THIRTY DAYS AFTER THE END OF EACH FISCAL
YEAR OF THE PARENT, A COPY OF THE PROJECTIONS BY PARENT OF THE
OPERATING BUDGET AND CASH FLOW BUDGET OF PARENT AND ITS
SUBSIDIARIES FOR THE SUCCEEDING FISCAL YEAR, AND IF PREPARED, A
COPY OF THE PROJECTIONS FOR EACH FOREIGN BORROWER, SUCH
PROJECTIONS IN EACH CASE TO BE ACCOMPANIED BY A CERTIFICATE OF A
RESPONSIBLE OFFICER TO THE EFFECT THAT SUCH PROJECTIONS WERE
APPROVED BY PARENT'S BOARD OF DIRECTORS;
4. WITHIN FIVE DAYS AFTER THE SAME ARE SENT, COPIES OF ALL
FINANCIAL STATEMENTS AND REPORTS WHICH PARENT SENDS TO ITS
STOCKHOLDERS, AND WITHIN FIVE DAYS AFTER THE SAME ARE FILED,
COPIES OF ALL FINANCIAL STATEMENTS AND REPORTS WHICH THE PARENT
MAY MAKE TO, OR FILE WITH, THE SECURITIES AND EXCHANGE COMMISSION
OR ANY SUCCESSOR OR ANALOGOUS GOVERNMENTAL AUTHORITY;
5. ON THE LAST DAY OF THE END OF THE MONTH IMMEDIATELY
FOLLOWING THE END OF EACH FISCAL QUARTER, BEGINNING ON MAY 31,
1997, A CERTIFICATE OF A RESPONSIBLE OFFICER STATING THE AMOUNT
OF THE CONSOLIDATED CASH FLOW AND EXCESS AVAILABILITY AND SHOWING
IN DETAIL THE CALCULATION THEREOF;
6. CONCURRENTLY WITH THE DELIVERY OF ALL APPRAISALS OR
NOTICES OF A CONGRESS EVENT OF DEFAULT OR UNMATURED CONGRESS
EVENT OF DEFAULT TO CONGRESS, THE NOTE TRUSTEE OR THE
NOTEHOLDERS, COPIES THEREOF TO THE AGENT AND EACH LENDER; AND
7. PROMPTLY, SUCH ADDITIONAL FINANCIAL AND OTHER INFORMATION
AS ANY LENDER MAY FROM TIME TO TIME REASONABLY REQUEST,
INCLUDING, IF SO REQUESTED, NOT MORE THAN ONE APPRAISAL FOR EACH
OF THE PROPERTIES SUBJECT TO A REAL PROPERTY DEVELOPMENT COMPANY
MORTGAGE BETWEEN THE CLOSING DATE AND THE TERMINATION DATE.
2. PAYMENT OF OBLIGATIONS. PAY, DISCHARGE OR OTHERWISE SATISFY AT OR
BEFORE MATURITY OR BEFORE THEY BECOME DELINQUENT, AS THE CASE MAY BE, ALL ITS
OBLIGATIONS OF WHATEVER NATURE, EXCEPT WHERE THE AMOUNT OR VALIDITY THEREOF IS
CURRENTLY BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS AND RESERVES
IN CONFORMITY WITH GAAP WITH RESPECT THERETO HAVE BEEN PROVIDED ON THE BOOKS OF
THE PERSON CONTESTING SUCH OBLIGATION AND EXCEPT TO THE EXTENT THAT FAILURE TO
PAY, DISCHARGE OR OTHERWISE SATISFY SUCH OBLIGATIONS COULD NOT REASONABLY BE
EXPECTED TO, IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.
<PAGE> 55
3. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. CONTINUE TO
ENGAGE IN BUSINESS OF THE SAME GENERAL TYPE AS NOW CONDUCTED BY THE PARENT AND
ITS SUBSIDIARIES AND PRESERVE, RENEW AND KEEP IN FULL FORCE AND EFFECT ITS
CORPORATE EXISTENCE AND TAKE ALL REASONABLE ACTION TO MAINTAIN ALL RIGHTS,
PRIVILEGES AND FRANCHISES NECESSARY OR DESIRABLE IN THE NORMAL CONDUCT OF ITS
BUSINESS, EXCEPT AS OTHERWISE PERMITTED PURSUANT TO SUBSECTION 7.4; AND COMPLY
WITH ALL CONTRACTUAL OBLIGATIONS AND REQUIREMENTS OF LAW EXCEPT TO THE EXTENT
THAT FAILURE TO COMPLY THEREWITH COULD NOT REASONABLY BE EXPECTED TO, IN THE
AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.
4. MAINTENANCE OF PROPERTY; INSURANCE. KEEP ALL PROPERTY USEFUL AND
NECESSARY IN ITS BUSINESS IN GOOD WORKING ORDER AND CONDITION; MAINTAIN WITH
FINANCIALLY SOUND AND REPUTABLE INSURANCE COMPANIES INSURANCE ON ALL ITS
PROPERTY IN AT LEAST SUCH AMOUNTS AND AGAINST AT LEAST SUCH RISKS (BUT INCLUDING
IN ANY EVENT PUBLIC LIABILITY, PRODUCT LIABILITY AND BUSINESS INTERRUPTION) AS
ARE USUALLY INSURED AGAINST IN THE SAME GENERAL AREA BY COMPANIES ENGAGED IN THE
SAME OR A SIMILAR BUSINESS; AND FURNISH TO EACH LENDER, UPON WRITTEN REQUEST,
FULL INFORMATION AS TO THE INSURANCE CARRIED. EACH BORROWER AND PARENT SHALL
CAUSE THE COLLATERAL AGENT TO BE NAMED AS A LENDER LOSS PAYEE AND, WITH RESPECT
TO LIABILITY INSURANCE, AN ADDITIONAL INSURED (BUT WITHOUT ANY LIABILITY FOR ANY
PREMIUMS) AS TO THE PROPERTIES (OTHER THAN BENSALEM) AND THE EQUIPMENT LOCATED
THEREON UNDER SUCH INSURANCE POLICIES AND SHALL OBTAIN NON-CONTRIBUTORY LENDER'S
LOSS PAYABLE ENDORSEMENTS TO ALL INSURANCE POLICIES IN FORM AND SUBSTANCE
SATISFACTORY TO COLLATERAL AGENT.
5. INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. KEEP PROPER
BOOKS OF RECORDS AND ACCOUNT IN WHICH FULL, TRUE AND CORRECT ENTRIES IN
CONFORMITY WITH GAAP AND ALL REQUIREMENTS OF LAW SHALL BE MADE OF ALL DEALINGS
AND TRANSACTIONS IN RELATION TO ITS BUSINESS AND ACTIVITIES; AND PERMIT
REPRESENTATIVES OF ANY LENDER TO VISIT AND INSPECT ANY OF ITS PROPERTIES AND
EXAMINE AND MAKE ABSTRACTS FROM ANY OF ITS BOOKS AND RECORDS AT ANY REASONABLE
TIME AND AS OFTEN AS MAY REASONABLY BE DESIRED AND TO DISCUSS THE BUSINESS,
OPERATIONS, PROPERTIES AND FINANCIAL AND OTHER CONDITION OF THE PARENT AND ITS
SUBSIDIARIES WITH OFFICERS AND EMPLOYEES OF EACH LOAN PARTY AND WITH SUCH LOAN
PARTY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS (IN THE PRESENCE OF THE
REPRESENTATIVES OF SUCH LOAN PARTY IF SUCH LOAN PARTY REQUESTS).
6. NOTICES. PROMPTLY GIVE NOTICE TO THE AGENT, THE COLLATERAL AGENT
AND EACH LENDER OF:
1. THE OCCURRENCE OF ANY DEFAULT OR EVENT OF DEFAULT;
2. ANY (i) DEFAULT OR EVENT OF DEFAULT UNDER ANY CONTRACTUAL
OBLIGATION OF PARENT OR ANY OF ITS SUBSIDIARIES OR (ii)
LITIGATION, INVESTIGATION OR PROCEEDING WHICH MAY EXIST AT ANY
TIME BETWEEN PARENT OR ANY OF ITS SUBSIDIARIES AND ANY
GOVERNMENTAL AUTHORITY, WHICH IN EITHER CASE, IF NOT CURED OR IF
ADVERSELY DETERMINED, AS THE
<PAGE> 56
CASE MAY BE, COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT;
3. ANY LITIGATION OR PROCEEDING AFFECTING, OR PENDING OR
THREATENED AGAINST, PARENT OR ANY OF ITS SUBSIDIARIES IN WHICH
THE AMOUNT INVOLVED IS $500,000 OR MORE AND NOT COVERED BY
INSURANCE OR IN WHICH INJUNCTIVE OR SIMILAR RELIEF IS SOUGHT;
4. THE FOLLOWING EVENTS, AS SOON AS POSSIBLE AND IN ANY
EVENT WITHIN 30 DAYS AFTER PARENT OR ANY OF ITS SUBSIDIARIES
KNOWS OR HAS REASON TO KNOW THEREOF: (i) THE OCCURRENCE OR
EXPECTED OCCURRENCE OF ANY REPORTABLE EVENT WITH RESPECT TO ANY
PLAN, A FAILURE TO MAKE ANY REQUIRED CONTRIBUTION TO A PLAN, THE
CREATION OF ANY LIEN IN FAVOR OF THE PBGC OR A PLAN OR ANY
WITHDRAWAL FROM, OR THE TERMINATION, REORGANIZATION OR INSOLVENCY
OF, ANY MULTIEMPLOYER PLAN OR (ii) THE INSTITUTION OF PROCEEDINGS
OR THE TAKING OF ANY OTHER ACTION BY THE PBGC OR THE PARENT OR
ANY COMMONLY CONTROLLED ENTITY OR ANY MULTIEMPLOYER PLAN WITH
RESPECT TO THE WITHDRAWAL FROM, OR THE TERMINATING,
REORGANIZATION OR INSOLVENCY OF, ANY PLAN; AND
5. ANY DEVELOPMENT OR EVENT WHICH COULD REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the applicable Person and Parent propose to take with
respect thereto.
1. Environmental Laws. 1. Comply with, and use reasonable efforts
to ensure compliance by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply with and maintain, and
use reasonable efforts to ensure that all tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws. The
Borrowers, the Parent, and their Subsidiaries shall be deemed to be in
compliance with an Environmental Law for purposes of this section 6.8(a)
provided that, upon learning of any actual or suspected non-compliance, the
affected Borrowers, Parent and Subsidiaries shall promptly undertake all
reasonable efforts to ensure that full compliance is achieved and provided
further that, in any case, such non-compliance would not reasonably be
expected to have a Material Adverse Effect.
7. CONDUCT AND COMPLETE ALL INVESTIGATIONS, STUDIES, SAMPLING AND
TESTING, AND ALL REMEDIAL, REMOVAL AND OTHER ACTIONS REQUIRED UNDER
ENVIRONMENTAL LAWS. THE BORROWERS AND THEIR RESPECTIVE SUBSIDIARIES SHALL BE
DEEMED TO BE IN COMPLIANCE WITH ALL SUCH ENVIRONMENTAL LAW REQUIREMENTS FOR
PURPOSES OF THIS SUBSECTION 6.8(b) PROVIDED THAT, UPON LEARNING OF THE NECESSITY
OR SUSPECTED NECESSITY OF ANY SUCH REQUIRED ACTION, THE
<PAGE> 57
AFFECTED PERSON SHALL PROMPTLY UNDERTAKE ALL REASONABLE EFFORTS TO ENSURE THAT
FULL COMPLIANCE WITH SUCH REQUIREMENTS IS ACHIEVED, AND PROVIDED FURTHER, THAT,
IN ANY CASE, NON-COMPLIANCE WITH SUCH REQUIREMENTS WOULD NOT REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.
8. PROMPTLY COMPLY IN ALL MATERIAL RESPECTS WITH ALL LAWFUL ORDERS AND
DIRECTIVES OF ALL GOVERNMENTAL AUTHORITIES REGARDING ENVIRONMENTAL LAWS EXCEPT
TO THE EXTENT THAT THE SAME ARE BEING CONTESTED IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS AND THE PENDENCY OF SUCH PROCEEDINGS IS NOT REASONABLY LIKELY TO
HAVE A MATERIAL ADVERSE EFFECT.
9. AFTER-ACQUIRED PROPERTY. (a) UPON THE ACQUISITION BY ANY DOMESTIC
BORROWER AND/OR ANY DOMESTIC SUBSIDIARY AFTER THE CLOSING DATE OF ANY REAL
PROPERTY (OTHER THAN LEASEHOLDS) HAVING A FAIR MARKET VALUE INDIVIDUALLY IN
EXCESS OF $250,000, OR IN THE AGGREGATE IN EXCESS OF $1,000,000, SUCH DOMESTIC
BORROWER AND/OR SUCH DOMESTIC SUBSIDIARY SHALL CAUSE SUCH PROPERTY OR ASSET TO
BECOME SUBJECT TO A LIEN IN FAVOR OF THE COLLATERAL AGENT (WHICH LIEN SHALL
EITHER BE (x) A FIRST-PRIORITY LIEN OR (y) SUBORDINATE IN PRIORITY ONLY TO A
LIEN IN FAVOR OF CONGRESS UNDER THE CONGRESS LOAN DOCUMENTS TO THE EXTENT
REQUIRED THEREUNDER) BY PROPERLY EXECUTING, DELIVERING, FILING AND RECORDING
SUCH ADDITIONAL DOCUMENTS AS MAY BE REQUIRED TO CREATE SUCH LIEN, AND SHALL
DELIVER TO THE COLLATERAL AGENT (WITH A COPY FOR EACH LENDER) PROMPTLY
THEREAFTER AN OPINION, SATISFACTORY IN SUBSTANCE AND FORM TO THE COLLATERAL AND
THE AGENT, AS TO THE DUE AUTHORIZATION, EXECUTION, DELIVERY, RECORDING, VALIDITY
AND ENFORCEABILITY OF SUCH ADDITIONAL DOCUMENTS, AND STATING THAT (i) SUCH
INSTRUMENTS ARE SUFFICIENT TO SUBJECT SUCH PROPERTY TO THE LIEN OF THE
COLLATERAL AGENT, (ii) SUCH PROPERTY IS SUBJECT TO NO OTHER LIENS OF RECORD
OTHER THAN LIENS WHICH ARE SUBORDINATE TO THOSE OF THE COLLATERAL AGENT (EXCEPT
AS PROVIDED IN CLAUSE (y) ABOVE), AND (iii) SUCH ADDITIONAL DOCUMENTS HAVE BEEN
DULY RECORDED, REGISTERED AND FILED IN SUCH MANNER AND IN SUCH PLACES AS MAY BE
REQUIRED BY APPLICABLE LAW IN ORDER TO ESTABLISH, PROTECT, PERFECT AND PRESERVE
THE LIEN OF THE COLLATERAL AGENT AND THE RIGHTS OF THE LENDERS HEREUNDER.
(b) Any Domestic Borrower or any Domestic Subsidiary after the Closing
Date may acquire or open any Retail Store Subsidiary (a "New Retail Store
Subsidiary") provided that (i) Borrowers' Agent gives the Agent at least ten
Business Days' written notice of the intended acquisition or opening of such New
Retail Store Subsidiary, (ii) such New Retail Store Subsidiary is within the
United States and (iii) such Domestic Borrower or Domestic Subsidiary, as the
case may be, shall cause the Capital Stock of such New Retail Store Subsidiary
to become subject to a Lien in favor of the Collateral Agent (which Lien
<PAGE> 58
shall either be (x) a first-priority Lien or (y) subordinate in priority only to
a lien in favor of Congress under the Congress Loan Documents to the extent
required thereunder) by properly executing, delivering, filing and recording
such additional documents as may be required to create such Lien and delivering
such Capital Stock, together with the appropriate executed stock powers, as
directed by the Collateral Agent, (iv) such Domestic Borrower or Domestic
Subsidiary, as the case may be, shall cause such New Retail Store Subsidiary to
grant a Lien on in its personal and real property (which Lien shall either be
(x) a first-priority Lien or (y) subordinate in priority only to a lien in favor
of Congress under the Congress Loan Documents to the extent required thereunder)
and (v) such Domestic Borrower or Domestic Subsidiary, as the case may be, shall
cause such New Retail Store Subsidiary to guarantee the Bank Obligations by
executing the Omnibus Guarantee Agreement as a Guarantor thereunder.
10. FURTHER ASSURANCES. EXECUTE AND FILE ALL SUCH FURTHER DOCUMENTS
AND INSTRUMENTS, AND PERFORM SUCH OTHER ACTS, AS THE LENDERS MAY DETERMINE ARE
NECESSARY OR ADVISABLE TO CREATE OR MAINTAIN LIENS IN FAVOR OF THE COLLATERAL
AGENT IN CONNECTION WITH THIS AGREEMENT AND TO MAINTAIN THE PRIORITY OF LIENS
PURPORTED TO BE GRANTED PURSUANT TO THIS AGREEMENT AND THE LOAN DOCUMENTS
(SUBJECT TO THE INTERCREDITOR AGREEMENTS), AND THE COLLATERAL AGENT IS HEREBY
AUTHORIZED TO FILE FINANCING AND CONTINUATION STATEMENTS WITH RESPECT TO SUCH
LIENS.
11. TAX REFUND. AFTER THE END OF THE CURRENT FISCAL YEAR OF PARENT AND
ITS CONSOLIDATED SUBSIDIARIES (AND EACH FUTURE FISCAL YEAR IN WHICH PARENT AND
ITS CONSOLIDATED SUBSIDIARIES INCUR A LOSS FROM OPERATIONS), (i) PROCEED
DILIGENTLY TO FILE THEIR CONSOLIDATED FEDERAL INCOME TAX RETURNS FOR SUCH FISCAL
YEAR AND ALL RELATED FORMS AND INFORMATION NECESSARY TO CARRY BACK, TO THE
MAXIMUM EXTENT POSSIBLE, THE NET OPERATING LOSS (AS SUCH TERM IS DEFINED IN
SECTION 179 OF THE INTERNAL REVENUE CODE) FOR SUCH FISCAL YEAR TO PRIOR TAX
YEARS, CLAIMING A REFUND OF TAXES PAID WITH RESPECT TO SUCH PRIOR TAX YEARS,
INCLUDING (A) IRS FORM 1139 SHOWING CALCULATION OF THE NET OPERATING LOSS FOR
THE RELEVANT FISCAL YEAR(S) AND THE TAX REFUND RELATED THERETO, AND (B) IRS FORM
8302, IRS FORM 2848, SUCH OTHER FORMS AND DOCUMENTS AND/OR A SEPARATE POWER OF
ATTORNEY, EACH AS REQUESTED BY THE COLLATERAL AGENT IN ACCORDANCE WITH
SUBSECTION 5.2 OF THE MASTER SECURITY AGREEMENT IN ORDER TO AUTHORIZE THE
COLLATERAL AGENT (OR ITS NOMINEE) TO RECEIVE ALL CHECKS OR WIRE TRANSFERS OR
OTHER MEANS OF PAYMENT OF THE TAX REFUND AND TO COLLECT, ENDORSE AND DEPOSIT ANY
SUCH PAYMENTS; (ii) PROVIDE TO THE AGENT AND TO ALL LENDERS A COPY OF ALL SUCH
TAX RETURNS AND RELATED FORMS PRIOR TO AND AFTER THEIR FILING AND PROVIDE NOTICE
TO THE AGENT AND THE LENDERS PRIOR TO FILING; (iii) NOT AMEND SUCH TAX RETURNS
AND RELATED FORMS OR MAKE ANY ELECTION UNDER SECTION 172(b)(3) OF THE INTERNAL
REVENUE CODE WITHOUT THE CONSENT OF THE LENDERS, EXCEPT AS REQUIRED BY
APPLICABLE LAW; (iv) PROVIDE THE AGENT WITH COPIES OF ALL CORRESPONDENCE AND
SUMMARIES OF ALL OTHER COMMUNICATIONS WITH THE INTERNAL REVENUE SERVICE
REGARDING SUCH TAX RETURNS; (v) RESPOND TO REASONABLE REQUESTS OF ANY LENDER FOR
INFORMATION CONCERNING SUCH TAX RETURNS; AND (vi) TAKE ALL FURTHER REASONABLE
STEPS REQUESTED BY THE AGENT OR THE COLLATERAL AGENT TO OBTAIN THE PROMPT
REALIZATION OF THE MAXIMUM AMOUNT OF THE TAX REFUND.
SECTION 2. NEGATIVE COVENANTS
<PAGE> 59
The Borrowers hereby agree that until payment in full of all Term
Loans and other Bank Obligations, no Borrower nor any of their respective
Subsidiaries (other than the Financing Subsidiaries and Executive Flights, Inc.)
shall directly or indirectly:
1. FINANCIAL CONDITION COVENANT. PERMIT ADJUSTED NET WORTH AT ANY TIME
TO BE LESS THAN $350,000,000.
2. LIMITATION ON INDEBTEDNESS. CREATE, INCUR, ASSUME OR SUFFER TO
EXIST ANY INDEBTEDNESS, EXCEPT:
3. INDEBTEDNESS OF THE BORROWERS UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS;
4. INDEBTEDNESS OF PARENT AND CERTAIN SUBSIDIARIES UNDER THE CONGRESS
LOAN DOCUMENTS IN A PRINCIPAL AMOUNT NOT TO EXCEED (i) $167,000,000 DURING THE
PERIOD IN WHICH THE CONGRESS CASH COLLATERAL (AS DEFINED IN THE CONGRESS
INTERCREDITOR AGREEMENT) HAS NOT BEEN SET-OFF BY CONGRESS OR RETURNED TO PARENT
OR ANY OF ITS SUBSIDIARIES PURSUANT TO THE CONGRESS LOAN DOCUMENTS AND (ii)
$160,000,000 FROM AND AFTER THE DATE ON WHICH THE CONGRESS CASH COLLATERAL HAS
BEEN SET-OFF BY CONGRESS OR RETURNED TO PARENT OR ANY OF ITS SUBSIDIARIES
PURSUANT TO THE CONGRESS LOAN DOCUMENTS;
5. INDEBTEDNESS OF PARENT, THE DOMESTIC BORROWERS AND CERTAIN DOMESTIC
SUBSIDIARIES TO THE NOTEHOLDERS UNDER THE NOTE DOCUMENTS IN A PRINCIPAL AMOUNT
NOT TO EXCEED $9,488,277;
6. INDEBTEDNESS OF PARENT OR ANY OF ITS SUBSIDIARIES TO ANY OF ONE
ANOTHER, PROVIDED THAT INDEBTEDNESS OF ANY SUCH PERSON TO C.S.A.C., INC. OR OF
WINKS LANE TO ANY SUBSIDIARY OF PARENT SHALL BE SUBJECT TO THE SUBORDINATION
AGREEMENT;
7. LONG-TERM INDEBTEDNESS FOR BORROWED MONEY OF FOREIGN SUBSIDIARIES
IN AN AMOUNT NOT TO EXCEED $20,000,000;
8. SHORT-TERM INDEBTEDNESS OF FOREIGN SUBSIDIARIES INCURRED FOR
WORKING CAPITAL PURPOSES IN AN AMOUNT NOT TO EXCEED $25,000,000;
<PAGE> 60
9. INDEBTEDNESS OF ANY DOMESTIC BORROWER OR ANY DOMESTIC SUBSIDIARY
INCURRED TO FINANCE THE ACQUISITION OF FIXED OR CAPITAL ASSETS (WHETHER PURSUANT
TO A LOAN, A FINANCING LEASE OR OTHERWISE) IN AN AGGREGATE PRINCIPAL AMOUNT NOT
EXCEEDING AS TO ALL SUCH ENTITIES $25,000,000 AT ANY TIME OUTSTANDING;
10. INDEBTEDNESS OUTSTANDING ON THE DATE HEREOF AND LISTED ON OMNIBUS
SCHEDULE 12;
11. TO THE EXTENT NOT OTHERWISE PERMITTED PURSUANT TO SUBSECTION
7.2(a) THROUGH (h), ADDITIONAL INDEBTEDNESS OF ANY DOMESTIC BORROWER OR ANY
DOMESTIC SUBSIDIARY INCURRED IN THE ORDINARY COURSE OF BUSINESS NOT EXCEEDING
$3,000,000 IN AGGREGATE PRINCIPAL AMOUNT AT ANY ONE TIME OUTSTANDING;
12. GUARANTEE OBLIGATIONS PERMITTED BY SUBSECTIONS 7.7(c) AND (d);
13. INDEBTEDNESS OF DOMESTIC BORROWER OR ANY DOMESTIC SUBSIDIARY IN
RESPECT OF LOANS AGAINST COMPANY OWNED LIFE INSURANCE POLICIES TO PAY FOR
PREMIUMS PROVIDED, THAT, AFTER GIVING EFFECT TO SUCH LOANS, THE CASH SURRENDER
VALUE OF SUCH POLICIES SHALL NOT BE LESS THAN THE CASH SURRENDER VALUE THEREOF
AT THE CLOSING DATE; AND
14. INDEBTEDNESS INCURRED TO RENEW, EXTEND, REFINANCE OR REFUND ANY
INDEBTEDNESS EXPRESSLY PERMITTED BY SUBSECTIONS 7.2(a) THROUGH (h) AND (j) AND
(k).
15. LIMITATION ON LIENS. CREATE, INCUR, ASSUME OR SUFFER TO EXIST ANY
LIEN UPON ANY OF ITS PROPERTY, ASSETS OR REVENUES, WHETHER NOW OWNED OR
HEREAFTER ACQUIRED, EXCEPT FOR:
16. LIENS FOR TAXES NOT YET DUE OR WHICH ARE BEING CONTESTED IN GOOD
FAITH BY APPROPRIATE PROCEEDINGS, PROVIDED THAT ADEQUATE RESERVES WITH RESPECT
THERETO ARE MAINTAINED ON THE BOOKS OF PARENT (AS TO TAXES OF PARENT OR ANY
CONSOLIDATED SUBSIDIARY) OR THE RESPECTIVE NONCONSOLIDATED FOREIGN SUBSIDIARY
(AS TO THE TAXES OF SUCH FOREIGN SUBSIDIARY), IN CONFORMITY WITH GAAP (OR, IN
THE CASE OF FOREIGN SUBSIDIARIES, GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN
EFFECT FROM TIME TO TIME IN THEIR RESPECTIVE JURISDICTIONS OF INCORPORATION);
17. CARRIERS', WAREHOUSEMEN'S, MECHANICS', MATERIALMEN'S, REPAIRMEN'S
OR OTHER LIKE LIENS ARISING IN THE ORDINARY COURSE OF BUSINESS WHICH ARE NOT
OVERDUE FOR A
<PAGE> 61
PERIOD OF MORE THAN 60 DAYS OR WHICH ARE BEING CONTESTED IN GOOD FAITH BY
APPROPRIATE PROCEEDINGS;
18. PLEDGES OR DEPOSITS IN CONNECTION WITH WORKERS' COMPENSATION,
UNEMPLOYMENT INSURANCE AND OTHER SOCIAL SECURITY LEGISLATION;
19. DEPOSITS TO SECURE THE PERFORMANCE OF BIDS, TRADE CONTRACTS (OTHER
THAN FOR BORROWED MONEY), FREIGHT AND CUSTOMS DUTIES, LEASES, STATUTORY
OBLIGATIONS, SURETY AND APPEAL BONDS, PERFORMANCE BONDS AND OTHER OBLIGATIONS OF
A LIKE NATURE INCURRED IN THE ORDINARY COURSE OF BUSINESS;
20. EASEMENTS, RIGHTS-OF-WAY, RESTRICTIONS AND OTHER SIMILAR
ENCUMBRANCES INCURRED IN THE ORDINARY COURSE OF BUSINESS WHICH, IN THE
AGGREGATE, ARE NOT SUBSTANTIAL IN AMOUNT AND WHICH DO NOT IN ANY CASE MATERIALLY
DETRACT FROM THE VALUE OF THE PROPERTY SUBJECT THERETO OR MATERIALLY INTERFERE
WITH THE ORDINARY CONDUCT OF THE BUSINESS OF SUCH DOMESTIC BORROWER OR SUCH
DOMESTIC SUBSIDIARY;
21. PERMITTED EXCEPTIONS (AS DEFINED IN EACH MORTGAGE);
22. LIENS CREATED PURSUANT TO THE SECURITY DOCUMENTS, THE CONGRESS
LOAN DOCUMENTS, THE LENDER SECURITY DOCUMENTS AND THE TRUSTEE SECURITY
DOCUMENTS, AND THOSE PERMITTED AS EXCEPTIONS ON TITLE INSURANCE POLICIES ISSUED
IN FAVOR OF THE COLLATERAL AGENT, THE AGENT, THE NOTE TRUSTEE OR CONGRESS;
23. LIENS CREATED BY, AND/OR SETOFF RIGHTS IN FAVOR OF, MELLON BANK,
N.A., OR ANY OTHER SUCCESSOR CASH MANAGEMENT BANK SOLELY WITH RESPECT TO
OBLIGATIONS AND RELATED EXPENSES, COSTS AND FEES WITH RESPECT TO THE CASH
MANAGEMENT SYSTEM PROVIDED BY MELLON BANK, N.A., OR ANY SUCH SUCCESSOR TO PARENT
AND ITS SUBSIDIARIES;
24. LIENS BY ANY RETAIL STORE SUBSIDIARY IN FAVOR OF C.S.A.C., INC. TO
SECURE ADVANCES OR FINANCIAL ACCOMMODATIONS MADE BY C.S.A.C., INC. ON BEHALF OF
SUCH RETAIL STORE SUBSIDIARY FOR THE PURPOSE OF OWNING AND OPERATING THE RETAIL
STORE OWNED BY SUCH RETAIL STORE SUBSIDIARY;
25. LIENS IN EXISTENCE ON THE DATE HEREOF LISTED ON OMNIBUS SCHEDULE
13;
<PAGE> 62
26. LIENS ON ASSETS OF ANY FOREIGN SUBSIDIARY SECURING INDEBTEDNESS OF
SUCH FOREIGN SUBSIDIARY PERMITTED BY SUBSECTION 7.2 (b), (e) OR (f);
27. LIENS SECURING INDEBTEDNESS OF ANY DOMESTIC BORROWER OR ANY OF
DOMESTIC SUBSIDIARY PERMITTED BY SUBSECTION 7.2(g) INCURRED TO FINANCE THE
ACQUISITION OF FIXED OR CAPITAL ASSETS, PROVIDED THAT (i) SUCH LIENS SHALL BE
CREATED SUBSTANTIALLY SIMULTANEOUSLY WITH THE ACQUISITION OF SUCH FIXED OR
CAPITAL ASSETS, (ii) SUCH LIENS DO NOT AT ANY TIME ENCUMBER ANY PROPERTY OTHER
THAN THE PROPERTY FINANCED BY SUCH INDEBTEDNESS, (iii) THE AMOUNT OF
INDEBTEDNESS SECURED THEREBY IS NOT INCREASED AND (iv) THE PRINCIPAL AMOUNT OF
INDEBTEDNESS SECURED BY ANY SUCH LIEN SHALL AT NO TIME EXCEED 100% OF THE
ORIGINAL PURCHASE PRICE OF SUCH PROPERTY AT THE TIME IT WAS ACQUIRED;
28. LIENS UPON REAL AND/OR TANGIBLE PERSONAL PROPERTY OF ANY DOMESTIC
BORROWER OR ANY DOMESTIC SUBSIDIARY TO SECURE INDEBTEDNESS INCURRED PURSUANT TO
SECTION 7.2(l) HEREOF; PROVIDED THAT (i) THE INDEBTEDNESS RENEWED, EXTENDED OR
REFINANCED WAS SECURED BY A LIEN ON SUCH PROPERTY, (ii) SUCH LIEN DOES NOT
EXTEND TO OR COVER ANY OTHER PROPERTY OF ANY DOMESTIC BORROWER OR DOMESTIC
SUBSIDIARY AND (iii) SUCH LIEN DOES NOT SECURE ANY INDEBTEDNESS OTHER THAN THE
INDEBTEDNESS SO INCURRED (IN A PRINCIPAL AMOUNT NOT EXCEEDING THE PRINCIPAL
AMOUNT OF THE INDEBTEDNESS SO RENEWED, EXTENDED OR REFINANCED THAT WAS
OUTSTANDING IMMEDIATELY PRIOR TO SUCH RENEWAL, EXTENSION OR REFINANCING);
29. LIENS ARISING BY OPERATION OF LAW PURSUANT TO SECTION 107(l) OF
THE FEDERAL COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT
OR A SIMILAR STATE LAW WHICH SECURE OBLIGATIONS THAT, INDIVIDUALLY OR IN THE
AGGREGATE, ARE REASONABLY EXPECTED TO INVOLVE LESS THAN $1,000,000 AND (i) ARE
NOT DUE AND PAYABLE BY VIRTUE OF A WRITTEN DEMAND FOR PAYMENT, OR (ii) IF DUE
AND PAYABLE, ARE BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS; AND
<PAGE> 63
30. LIENS (NOT OTHERWISE PERMITTED HEREUNDER) WHICH SECURE OBLIGATIONS
NOT EXCEEDING $1,000,000 IN AGGREGATE AMOUNT AT ANY TIME OUTSTANDING.
31. LIMITATION ON FUNDAMENTAL CHANGES AND ASSET SALES.
32. PERMIT ANY DOMESTIC BORROWER OR ANY DOMESTIC SUBSIDIARY TO MERGE
INTO OR WITH ANY OTHER PERSON, EXCEPT THAT ANY SUBSIDIARY OF ANY BORROWER MAY BE
MERGED OR CONSOLIDATED WITH OR INTO SUCH BORROWER (PROVIDED THAT SUCH BORROWER
SHALL BE THE CONTINUING OR SURVIVING CORPORATION) OR WITH OR INTO ANY ONE OR
MORE WHOLLY OWNED SUBSIDIARIES OF SUCH BORROWER (OTHER THAN AN INACTIVE RETAIL
STORE SUBSIDIARY) (PROVIDED THAT THE WHOLLY OWNED SUBSIDIARY OR SUBSIDIARIES
SHALL BE THE CONTINUING OR SURVIVING CORPORATION); OR
33. PERMIT ANY FOREIGN BORROWER OR FOREIGN SUBSIDIARY OF PARENT TO
MERGE INTO OR WITH ANY OTHER PERSON, EXCEPT THAT ANY FOREIGN BORROWER MAY BE
MERGED INTO OR WITH ANY OTHER FOREIGN BORROWER OR ANY SUBSIDIARY OF ANY FOREIGN
BORROWER MAY BE MERGED OR CONSOLIDATED WITH OR INTO SUCH FOREIGN BORROWER
(PROVIDED THAT A FOREIGN BORROWER SHALL BE THE CONTINUING OR SURVIVING
CORPORATION) OR WITH OR INTO ANY ONE OR MORE SUBSIDIARIES OF SUCH FOREIGN
BORROWER (PROVIDED THAT THE SUBSIDIARY OR SUBSIDIARIES SHALL BE THE CONTINUING
OR SURVIVING CORPORATION); OR
34. SELL, LEASE, ASSIGN, TRANSFER OR OTHERWISE DISPOSE OF ANY OF ITS
ASSETS, WITH THE EXCEPTION OF THE FOLLOWING TRANSACTIONS:
14. (x) SALES OF INVENTORY IN THE ORDINARY COURSE OF BUSINESS
(INCLUDING SALES BETWEEN AND AMONG PARENT AND ITS SUBSIDIARIES), (y) SALES
OF INVENTORY BY A DOMESTIC BORROWER OR DOMESTIC SUBSIDIARY TO A PERSON
OUTSIDE OF THE ORDINARY COURSE OF BUSINESS WHICH IS NOT A DOMESTIC
SUBSIDIARY IN AN AGGREGATE AMOUNT IN ANY SINGLE TRANSACTION OR RELATED
SERIES OF TRANSACTIONS OF UP TO $1,000,000, PROVIDED THAT SUCH INVENTORY IS
NOT SOLD FOR A SALES PRICE BELOW 75% OF THE COST FOR SUCH INVENTORY, THE
PURCHASE PRICE THEREFOR IS DUE AND PAYABLE ON OR BEFORE DELIVERY TO THE
BUYER THEREOF, WRITTEN NOTICE THEREOF IS GIVEN TO THE COLLATERAL AGENT, THE
AGENT AND EACH LENDER, AND THE PROCEEDS ARE (A) PAID TO CONGRESS, IF THE
CONGRESS OBLIGATIONS ARE NOT PAID IN FULL, OR (B) PAID TO THE COLLATERAL
AGENT FOR APPLICATION IN ACCORDANCE WITH THE TERM LENDER INTERCREDITOR
AGREEMENT, AND (z) SALES OF INVENTORY BY A DOMESTIC BORROWER OR DOMESTIC
SUBSIDIARY TO AN AFFILIATE OR UNRELATED THIRD PARTY WHERE SUCH INVENTORY
<PAGE> 64
HAS BEEN BOUGHT FOR THE SPECIFIC PURPOSE OF RESALE THEREOF TO SUCH PERSON,
PROVIDED THAT THE INVENTORY IS NOT SOLD FOR A SALES PRICE BELOW 100% OF THE
COST FOR SUCH INVENTORY, THE PURCHASE PRICE THEREFOR IS DUE AND PAYABLE ON
OR BEFORE DELIVERY TO THE BUYER THEREOF, WRITTEN NOTICE THEREOF IS GIVEN TO
THE COLLATERAL AGENT, THE AGENT AND EACH LENDER AND THE PROCEEDS ARE (A)
PAID TO CONGRESS, IF THE CONGRESS OBLIGATIONS ARE NOT PAID IN FULL, OR (B)
PAID TO THE COLLATERAL AGENT FOR APPLICATION IN ACCORDANCE WITH THE TERM
LENDER INTERCREDITOR AGREEMENT;
14.0.1. THE DISPOSITION OF WORN-OUT OR OBSOLETE EQUIPMENT OR EQUIPMENT
NO LONGER USED IN THE BUSINESS OF DOMESTIC BORROWERS OR DOMESTIC SUBSIDIARIES
NOT LOCATED ON THE PROPERTIES TO THIRD PARTIES PROVIDED THAT, (A) IF NO EVENT OF
DEFAULT HAS OCCURRED AND IS CONTINUING, SUCH PROCEEDS ARE USED TO REPAIR AND
REPLACE SUCH EQUIPMENT, AND (B) IF AN EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING, SUCH PROCEEDS ARE (I) PAID TO CONGRESS, IF THE CONGRESS OBLIGATIONS
ARE NOT PAID IN FULL AND SUCH PROCEEDS ARE NOT PROCEEDS OF TERM LOAN PRIORITY
COLLATERAL, OR (II) PAID TO THE COLLATERAL AGENT FOR APPLICATION IN ACCORDANCE
WITH THE TERM LENDER INTERCREDITOR AGREEMENT;
14.0.2. DISPOSITIONS OF EQUIPMENT OR ANY PROPERTY BY ANY DOMESTIC
BORROWER OR DOMESTIC SUBSIDIARY TO ANY OTHER DOMESTIC BORROWER OR DOMESTIC
SUBSIDIARY (OTHER THAN AN INACTIVE RETAIL STORE SUBSIDIARY);
14.0.3. DISPOSITIONS OF THE PROPERTY OF ANY FOREIGN SUBSIDIARY TO
ANOTHER FOREIGN SUBSIDIARY;
14.0.4. DISPOSITIONS OF ANY PROPERTY SET FORTH ON OMNIBUS SCHEDULE 21
WITH THE CONSENT OF THE AGENT (EACH SUCH DISPOSITION CONSTITUTING AN "ASSET
SALE"), PROVIDED, THAT THE NET PROCEEDS THEREOF ARE PAID TO THE COLLATERAL AGENT
FOR DISTRIBUTION IN ACCORDANCE WITH THE PROVISIONS OF THE TERM LENDER
INTERCREDITOR AGREEMENT;
14.0.5. DISPOSITION OF BENSALEM, WITH THE CONSENT OF THE NOTE TRUSTEE
AND PROVIDED THAT THE NET PROCEEDS FROM SUCH SALE ARE PAID TO THE NOTE TRUSTEE
FOR DISTRIBUTION IN ACCORDANCE WITH THE PROVISIONS OF THE TERM LENDER
INTERCREDITOR AGREEMENT;
14.0.6. DISPOSITIONS OF CASH EQUIVALENTS OR ANY OTHER INVESTMENTS
PERMITTED PURSUANT TO SUBSECTION 7.7(b);
<PAGE> 65
14.0.7. DISPOSITIONS OF PROPERTY BY ANY FOREIGN SUBSIDIARY TO ANY
PERSON NOT A FOREIGN SUBSIDIARY, PROVIDED THAT SUCH DISPOSITIONS ARE IN EXCHANGE
FOR REASONABLY EQUIVALENT VALUE AND ON COMMERCIALLY REASONABLE TERMS;
14.0.8. THE DISSOLUTION, SALE OR LIQUIDATION OF ANY FOREIGN
SUBSIDIARY, OR THE SALE OF THE CAPITAL STOCK OF ANY FOREIGN SUBSIDIARY, PROVIDED
THAT, IF THE NET PROCEEDS OF SUCH DISSOLUTION, LIQUIDATION OR SALES ARE NOT
RETAINED BY ANOTHER FOREIGN SUBSIDIARY THEN SUCH NET PROCEEDS (IN THIS
CIRCUMSTANCE, ALSO CONSTITUTING AN "ASSET SALE") ARE PAID TO THE COLLATERAL
AGENT FOR DISTRIBUTION IN ACCORDANCE WITH THE TERM LENDER INTERCREDITOR
AGREEMENT;
14.0.9. ANY WINDING UP, DISSOLUTION OR LIQUIDATION OF A RETAIL STORE
SUBSIDIARY, AND DISPOSITIONS OF ASSETS OF RETAIL STORE SUBSIDIARIES IN
CONNECTION WITH SUCH WINDING UP, DISSOLUTION OR LIQUIDATION OF SUCH RETAIL
STORE, PROVIDED THAT, SUCH RETAIL STORE SUBSIDIARY RECEIVES AGGREGATE PROCEEDS
FROM SALES OF INVENTORY INCLUDED IN SUCH ASSETS OF AN AMOUNT AT LEAST EQUAL TO
75% OF THE AGGREGATE COST OF SUCH INVENTORY AND SUCH PROCEEDS ARE (A) PAID TO
CONGRESS, IF THE CONGRESS OBLIGATIONS ARE NOT PAID IN FULL AND SUCH PROCEEDS ARE
NOT PROCEEDS OF TERM LOAN PRIORITY COLLATERAL, OR (B) PAID TO THE COLLATERAL
AGENT; AND
14.0.10. OTHER DISPOSITIONS OF ASSETS NOT EXCEEDING $250,000 FROM THE
CLOSING DATE TO THE END OF FISCAL 1996, AND $1,000,000 IN EACH FISCAL YEAR
THEREAFTER.
15. LIMITATION ON DIVIDENDS. DIRECTLY OR INDIRECTLY DECLARE OR PAY ANY
DIVIDEND ON, OR MAKE ANY PAYMENT ON ACCOUNT OF, OR SET APART ASSETS FOR A
SINKING OR OTHER ANALOGOUS FUND FOR, THE PURCHASE, REDEMPTION, DEFEASANCE,
RETIREMENT OR OTHER ACQUISITION OF, ANY SHARES OF ANY CLASS OF CAPITAL STOCK OF
ANY BORROWER OR ANY SUBSIDIARY OF PARENT OR ANY WARRANTS OR OPTIONS TO PURCHASE
ANY SUCH STOCK, WHETHER NOW OR HEREAFTER OUTSTANDING, OR MAKE ANY OTHER
DISTRIBUTION IN RESPECT THEREOF, EITHER DIRECTLY OR INDIRECTLY, WHETHER IN CASH
OR PROPERTY OR IN OBLIGATIONS OF PARENT OR ANY OF ITS SUBSIDIARIES, EXCEPT FOR
(a) CASH DIVIDENDS PAID BY DOMESTIC BORROWERS OR ANY OF THEIR RESPECTIVE
SUBSIDIARIES TO OTHER DOMESTIC BORROWERS OR ANY SUBSIDIARY OF PARENT OR (b)
DIVIDENDS OF EACH FOREIGN SUBSIDIARY RATABLY TO EACH SHAREHOLDER OTHER THAN
FSHC, PARENT OR ANY OTHER SUBSIDIARY OF PARENT.
<PAGE> 66
1. LIMITATION ON CONSOLIDATED CAPITAL EXPENDITURES. PRIOR TO THE DATE
ON WHICH THE LENDERS HAVE RECEIVED AN AGGREGATE OF $56,000,000 OF PRINCIPAL
PREPAYMENTS OF THE TERM LOANS, MAKE OR COMMIT TO MAKE (BY WAY OF THE ACQUISITION
OF SECURITIES OF A PERSON OR OTHERWISE) ANY CONSOLIDATED CAPITAL EXPENDITURE,
EXCEPT IN THE AGGREGATE FOR THE PARENT AND ITS CONSOLIDATED SUBSIDIARIES DURING
ANY OF THE FISCAL PERIODS OF THE PARENT SET FORTH BELOW, THE AMOUNT SET FORTH
OPPOSITE SUCH FISCAL PERIOD BELOW:
<TABLE>
<CAPTION>
Fiscal Period Amount
------------- ------
<S> <C>
Closing Date through
February, 1996 $ 5,000,000
Year Ending February, 1997 $10,000,000
Year Ending January, 1998 $15,000,000
Quarter Ending April, 1998 $ 3,750,000
</TABLE>
2. LIMITATION ON GUARANTEE OBLIGATIONS, INVESTMENTS, TERM LOANS AND
ADVANCES. MAKE ANY ADVANCE, LOAN, EXTENSION OF CREDIT OR CAPITAL CONTRIBUTION
TO, OR PURCHASE ANY STOCK, BONDS, NOTES, DEBENTURES OR OTHER SECURITIES OF OR
ANY ASSETS CONSTITUTING A BUSINESS UNIT OF, OR MAKE ANY OTHER INVESTMENT IN ANY
PERSON, OR CREATE, INCUR, ASSUME OR SUFFER TO EXIST ANY GUARANTEE OBLIGATION,
EXCEPT :
1. THE ENDORSEMENT OF INSTRUMENTS FOR COLLECTION OR DEPOSIT
IN THE ORDINARY COURSE OF BUSINESS;
2. INVESTMENTS IN CASH EQUIVALENTS AND THE SECURITIES LISTED
ON OMNIBUS SCHEDULE 14 HERETO AND THE GUARANTEE OBLIGATIONS
LISTED ON OMNIBUS SCHEDULE 14 (SUBJECT TO THE LIMITATION IN
SUBSECTION 7.7(d)) AND RENEWALS AND EXTENSIONS OF SUCH GUARANTEE
OBLIGATIONS;
3. INVESTMENTS OR GUARANTEE OBLIGATIONS BY ANY DOMESTIC
BORROWER IN, OR OF, ANY OTHER DOMESTIC BORROWER, DOMESTIC
SUBSIDIARY (OTHER THAN AN INACTIVE RETAIL STORE SUBSIDIARY) OR
ANY FINANCING SUBSIDIARY, AND INVESTMENTS OR GUARANTEE
OBLIGATIONS BY ANY DOMESTIC SUBSIDIARY IN, OR OF, ANY DOMESTIC
BORROWER, ANY OTHER DOMESTIC SUBSIDIARY (OTHER THAN AN INACTIVE
RETAIL STORE SUBSIDIARY) OR ANY FINANCING SUBSIDIARY;
4. GUARANTEE OBLIGATIONS OF PARENT OF SHORT-TERM
INDEBTEDNESS OF FOREIGN SUBSIDIARIES INCURRED FOR WORKING CAPITAL
PURPOSES IN AN AGGREGATE AMOUNT NOT TO EXCEED $20,000,000,
PROVIDED THAT ANY SUCH GUARANTEE OBLIGATIONS SHALL BE ONLY A
GUARANTEE OF COLLECTION;
5. INVESTMENTS BY ANY FOREIGN SUBSIDIARY IN ANY OTHER
FOREIGN SUBSIDIARY;
<PAGE> 67
6. INVESTMENTS IN NEW RETAIL STORE SUBSIDIARIES, PROVIDED
THAT THE PROVISIONS OF SUBSECTION 6.9(b) ARE SATISFIED;
7. EXISTING INVESTMENTS IN MANUFACTURING JOINT VENTURES THAT
DO NOT CONSTITUTE SUBSIDIARIES OF PARENT IN AN AGGREGATE AMOUNT
OF $20 MILLION;
8. INVESTMENTS AFTER THE CLOSING DATE IN JOINT VENTURES THAT
DO NOT CONSTITUTE SUBSIDIARIES OF PARENT IN AN AMOUNT EQUAL TO
(i) THE NONCASH INVESTMENT OF COSTS PREVIOUSLY CAPITALIZED AS
"OTHER ASSETS" OR "PREPAID EXPENSES" ATTRIBUTABLE TO THE CREATION
OR DEVELOPMENT OF JOINT VENTURE CONCEPTS AND (ii) CASH
INVESTMENTS BY PARENT OR ANY OF ITS SUBSIDIARIES IN AN AMOUNT NOT
TO EXCEED $5,000,000 IN THE AGGREGATE; AND
9. INVESTMENTS OF A TYPE NOT DESCRIBED IN THE FOREGOING
CLAUSES IN AN AGGREGATE AMOUNT AT ANY TIME NOT TO EXCEED
$1,000,000.
3. LIMITATION ON TRANSACTIONS WITH AFFILIATES. ENTER INTO ANY
TRANSACTION, INCLUDING, WITHOUT LIMITATION, ANY PURCHASE, SALE, LEASE OR
EXCHANGE OF PROPERTY OR THE RENDERING OF ANY SERVICE, WITH ANY AFFILIATE UNLESS
SUCH TRANSACTION IS (a) OTHERWISE PERMITTED UNDER THIS AGREEMENT, (b) IN THE
ORDINARY COURSE OF THE SUCH LOAN PARTY'S BUSINESS AND (c) UPON FAIR AND
REASONABLE TERMS NO LESS FAVORABLE TO SUCH LOAN PARTY THAN IT WOULD OBTAIN IN A
COMPARABLE ARM'S LENGTH TRANSACTION WITH A PERSON WHICH IS NOT AN AFFILIATE.
4. LIMITATION ON CHANGES IN FISCAL YEAR. PERMIT THE FISCAL YEAR OF
PARENT TO END ON A DAY OTHER THAN THE SATURDAY CLOSEST TO JANUARY 31.
5. SWAP TRANSACTIONS. PARENT OR ANY OF ITS SUBSIDIARIES WILL NOT ENTER
INTO OR BECOME OR REMAIN OBLIGATED IN RESPECT OF ANY SWAP TRANSACTION OTHER THAN
A HEDGE TRANSACTION.
1. Limitation on Lines of Business. 1. Permit any of Parent or
any of its Subsidiaries (excluding the Financing Subsidiaries) to engage in
any business if, as a result thereof, the general nature of the business,
taken on a Consolidated basis, in which Parent and its Subsidiaries (other
than the Financing Subsidiaries) would then be engaged would be
substantially changed from the general nature of the business in which
Parent and its Subsidiaries (other than the Financing Subsidiaries) are
engaged on the Closing Date.
<PAGE> 68
6. PERMIT ANY OF THE FINANCING SUBSIDIARIES TO ENGAGE IN ANY BUSINESS
IF, AS A RESULT THEREOF, THE GENERAL NATURE OF THE BUSINESS, TAKEN AS A WHOLE,
IN WHICH THE FINANCING SUBSIDIARIES WOULD THEN BE ENGAGED WOULD BE SUBSTANTIALLY
CHANGED FROM THE GENERAL NATURE OF THE BUSINESS IN WHICH THE FINANCING
SUBSIDIARIES ARE ENGAGED ON THE CLOSING DATE.
SECTION 1. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
1. ANY BORROWER SHALL FAIL TO PAY ANY PRINCIPAL OF ANY OF
ITS TERM LOANS OR REIMBURSEMENT OBLIGATIONS WHEN DUE IN
ACCORDANCE WITH THE TERMS THEREOF OR HEREOF; OR ANY BORROWER
SHALL FAIL TO PAY ANY INTEREST ON ANY OF ITS TERM LOANS, OR ANY
OTHER AMOUNT PAYABLE HEREUNDER, WITHIN FIVE DAYS AFTER ANY SUCH
INTEREST OR OTHER AMOUNT BECOMES DUE IN ACCORDANCE WITH THE TERMS
THEREOF OR HEREOF (IT BEING UNDERSTOOD AND AGREED, IN EACH CASE,
THAT IN EACH CASE A FAILURE TO PAY OCCASIONED BY CONGRESS
BLOCKING ANY LOAN PARTY'S BANK ACCOUNT NEVERTHELESS CONSTITUTES A
DEFAULT UNDER THIS SECTION); OR
2. ANY REPRESENTATION OR WARRANTY MADE BY THE BORROWER OR
ANY OTHER LOAN PARTY HEREIN OR IN ANY OTHER LOAN DOCUMENT OR
WHICH IS CONTAINED IN ANY CERTIFICATE, DOCUMENT OR FINANCIAL OR
OTHER STATEMENT FURNISHED BY IT AT ANY TIME UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY SUCH OTHER LOAN DOCUMENT
SHALL PROVE TO HAVE BEEN INCORRECT IN ANY MATERIAL RESPECT ON OR
AS OF THE DATE MADE; OR
3. ANY BORROWER OR ANY OTHER LOAN PARTY SHALL DEFAULT IN THE
OBSERVANCE OR PERFORMANCE OF ANY AGREEMENT CONTAINED IN
SUBSECTIONS 6.9 OR 6.11 OF THIS AGREEMENT, SECTION 5(b)(3) OF THE
SHARED STOCK PLEDGE AGREEMENT, SECTION 5(b)(3) OF THE TERM LENDER
STOCK PLEDGE AGREEMENT AND SECTION 4.4 OF THE MASTER SECURITY
AGREEMENT; OR
4. ANY BORROWER OR ANY OTHER LOAN PARTY SHALL DEFAULT IN THE
OBSERVANCE OR PERFORMANCE OF ANY AGREEMENT CONTAINED IN SECTION
7; OR
5. ANY BORROWER OR ANY OTHER LOAN PARTY SHALL DEFAULT IN THE
OBSERVANCE OR PERFORMANCE OF ANY OTHER AGREEMENT CONTAINED IN
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (OTHER THAN AS PROVIDED
IN PARAGRAPHS (a) THROUGH (d) OF THIS SECTION), AND SUCH DEFAULT
SHALL CONTINUE UNREMEDIED FOR A PERIOD OF 30 DAYS; PROVIDED,
THAT, A DEFAULT IN PERFORMANCE OF SUBSECTION 6.7(c) SHALL NOT
CONSTITUTE AN EVENT OF
<PAGE> 69
DEFAULT IF THE LITIGATION OR PROCEEDING FOR WHICH NOTICE IS NOT
PROVIDED RELATES TO A RETAIL STORE SUBSIDIARY AND COULD NOT
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT; OR
6. ANY BORROWER OR ANY OTHER LOAN PARTY SHALL (i) DEFAULT IN
ANY PAYMENT OF PRINCIPAL OF OR INTEREST OF ANY INDEBTEDNESS
(OTHER THAN THE TERM LOANS OR REIMBURSEMENT OBLIGATIONS) OR IN
THE PAYMENT OF ANY GUARANTEE OBLIGATION (OTHER THAN THOSE ARISING
UNDER THE OMNIBUS GUARANTEE AGREEMENT), BEYOND THE PERIOD OF
GRACE (NOT TO EXCEED 10 DAYS), IF ANY, PROVIDED IN THE INSTRUMENT
OR AGREEMENT UNDER WHICH SUCH INDEBTEDNESS OR GUARANTEE
OBLIGATION WAS CREATED, IF THE AGGREGATE AMOUNT OF THE
INDEBTEDNESS AND/OR GUARANTEE OBLIGATIONS ARISING UNDER SUCH
INSTRUMENT OR AGREEMENT UNDER WHICH SUCH DEFAULT OR DEFAULTS
SHALL HAVE OCCURRED IS AT LEAST $5,000,000; OR (ii) DEFAULT IN
THE OBSERVANCE OR PERFORMANCE OF ANY OTHER AGREEMENT OR CONDITION
RELATING TO ANY INDEBTEDNESS OR GUARANTEE OBLIGATION OF AT LEAST
$2,000,000 OR CONTAINED IN ANY INSTRUMENT OR AGREEMENT
EVIDENCING, SECURING OR RELATING THERETO, OR ANY OTHER EVENT
SHALL OCCUR OR CONDITION EXIST, THE EFFECT OF WHICH DEFAULT OR
OTHER EVENT OR CONDITION IS TO CAUSE, OR TO PERMIT THE HOLDER OR
HOLDERS OF SUCH INDEBTEDNESS OR BENEFICIARY OR BENEFICIARIES OF
SUCH GUARANTEE OBLIGATION (OR A TRUSTEE OR AGENT ON BEHALF OF
SUCH HOLDER OR HOLDERS OR BENEFICIARY OR BENEFICIARIES) TO CAUSE,
WITH THE GIVING OF NOTICE IF REQUIRED, SUCH INDEBTEDNESS TO
BECOME DUE PRIOR TO ITS STATED MATURITY OR SUCH GUARANTEE
OBLIGATION TO BECOME PAYABLE; PROVIDED, THAT, ANY DEFAULT BY A
RETAIL STORE SUBSIDIARY UNDER THIS PARAGRAPH (f) IN CONNECTION
WITH THE CLOSING OF THE RETAIL STORE IT OPERATES SHALL NOT
CONSTITUTE AN EVENT OF DEFAULT UNLESS SUCH DEFAULT RESULTS IN A
MATERIAL ADVERSE EFFECT; OR
7. THE FINANCING SUBSIDIARIES SHALL BE UNABLE TO FINANCE UP
TO $300 MILLION OF ACCOUNTS RECEIVABLE GENERATED BY THE RETAIL
STORE SUBSIDIARIES ON TERMS AND CONDITIONS THAT PROVIDE AT ANY
TIME NO LESS THAN 75% OF THE FACE AMOUNT OF SUCH ACCOUNTS
RECEIVABLE (BEFORE DISCOUNT) TO THE SELLERS OF INVENTORY GIVING
RISE TO SUCH ACCOUNTS RECEIVABLE (OR THEIR ASSIGNEES) AND SUCH
CONDITION SHALL CONTINUE UNREMEDIED FOR A PERIOD OF 30
CONSECUTIVE DAYS; OR
8. (i) ANY BORROWER OR OTHER LOAN PARTY (OTHER THAN A
MAXIMUM OF TEN RETAIL STORE SUBSIDIARIES EACH OF WHICH OPERATES A
SINGLE RETAIL STORE) SHALL TAKE ANY ACTION OR COMMENCE ANY CASE,
PROCEEDING OR OTHER ACTION (A) UNDER ANY EXISTING OR FUTURE LAW
OF ANY JURISDICTION, DOMESTIC OR FOREIGN, RELATING TO BANKRUPTCY,
INSOLVENCY, REORGANIZATION OR RELIEF OF DEBTORS, SEEKING TO HAVE
AN ORDER FOR RELIEF ENTERED WITH RESPECT TO IT, OR SEEKING TO
ADJUDICATE IT A BANKRUPT OR
<PAGE> 70
INSOLVENT, OR SEEKING REORGANIZATION, ARRANGEMENT, ADJUSTMENT,
WINDING UP, LIQUIDATION, DISSOLUTION, COMPOSITION OR OTHER RELIEF
WITH RESPECT TO IT OR ITS DEBTS, OR (B) SEEKING APPOINTMENT OF A
RECEIVER, TRUSTEE, CUSTODIAN, CONSERVATOR OR OTHER SIMILAR
OFFICIAL FOR IT OR FOR ALL OR ANY SUBSTANTIAL PART OF ITS ASSETS,
OR ANY BORROWER OR ANY OTHER LOAN PARTY (OTHER THAN A MAXIMUM OF
TEN RETAIL STORE SUBSIDIARIES EACH OF WHICH OPERATES A SINGLE
RETAIL STORE) SHALL MAKE A GENERAL ASSIGNMENT FOR THE BENEFIT OF
ITS CREDITORS; OR (ii) THERE SHALL BE COMMENCED AGAINST ANY
BORROWER OR ANY OTHER LOAN PARTY (OTHER THAN A MAXIMUM OF TEN
RETAIL STORE SUBSIDIARIES EACH OF WHICH OPERATES A SINGLE RETAIL
STORE) ANY CASE, PROCEEDING OR OTHER ACTION OF A NATURE REFERRED
TO IN CLAUSE (i) ABOVE WHICH (A) RESULTS IN THE ENTRY OF AN ORDER
FOR RELIEF OR ANY SUCH ADJUDICATION OR APPOINTMENT OR (B) REMAINS
UNDISMISSED, UNDISCHARGED OR UNBONDED FOR A PERIOD OF 60 DAYS; OR
(iii) THERE SHALL BE COMMENCED AGAINST ANY BORROWER OR ANY OTHER
LOAN PARTY (OTHER THAN A MAXIMUM OF TEN RETAIL STORE SUBSIDIARIES
EACH OF WHICH OPERATES A SINGLE RETAIL STORE) ANY CASE,
PROCEEDING OR OTHER ACTION SEEKING ISSUANCE OF A WARRANT OF
ATTACHMENT, EXECUTION, DISTRAINT OR SIMILAR PROCESS AGAINST ALL
OR ANY SUBSTANTIAL PART OF ITS ASSETS WHICH RESULTS IN THE ENTRY
OF AN ORDER FOR ANY SUCH RELIEF WHICH SHALL NOT HAVE BEEN
VACATED, DISCHARGED, OR STAYED OR BONDED PENDING APPEAL WITHIN 60
DAYS FROM THE ENTRY THEREOF; OR (iv) ANY BORROWER OR ANY OTHER
LOAN PARTY (OTHER THAN A MAXIMUM OF TEN RETAIL STORE SUBSIDIARIES
EACH OF WHICH OPERATES A SINGLE RETAIL STORE) SHALL TAKE ANY
ACTION IN FURTHERANCE OF, OR INDICATING ITS CONSENT TO, APPROVAL
OF, OR ACQUIESCENCE IN, ANY OF THE ACTS SET FORTH IN CLAUSE (i),
(ii), OR (iii) ABOVE; OR (v) ANY BORROWER OR ANY OTHER LOAN PARTY
(OTHER THAN A MAXIMUM OF TEN RETAIL STORE SUBSIDIARIES EACH OF
WHICH OPERATES A SINGLE RETAIL STORE) SHALL GENERALLY NOT, OR
SHALL BE UNABLE TO, OR SHALL ADMIT IN WRITING ITS INABILITY TO,
PAY ITS DEBTS AS THEY BECOME DUE; PROVIDED, THAT, ANY DEFAULT BY
A RETAIL STORE SUBSIDIARY UNDER THIS PARAGRAPH (h) IN CONNECTION
WITH THE CLOSING OF THE RETAIL STORE IT OPERATES SHALL NOT
CONSTITUTE AN EVENT OF DEFAULT UNLESS SUCH DEFAULT RESULTS IN A
MATERIAL ADVERSE EFFECT; OR
9. (i) ANY BORROWER OR OTHER COMMONLY CONTROLLED ENTITY, OR
ANY OFFICER OR DIRECTOR THEREOF SHALL ENGAGE IN ANY "PROHIBITED
TRANSACTION" (AS DEFINED IN SECTION 406 OF ERISA OR SECTION 4975
OF THE CODE) INVOLVING ANY PLAN, (ii) ANY "ACCUMULATED FUNDING
DEFICIENCY" (AS DEFINED IN SECTION 302 OF ERISA), WHETHER OR NOT
WAIVED, SHALL EXIST WITH RESPECT TO ANY PLAN OR ANY LIEN IN FAVOR
OF THE PBGC OR A PLAN SHALL ARISE ON THE ASSETS OF ANY BORROWER
OR ANY COMMONLY CONTROLLED ENTITY (OTHER THAN A RETAIL STORE
SUBSIDIARY WHICH OPERATES A SINGLE RETAIL STORE), (iii) A
REPORTABLE EVENT SHALL
<PAGE> 71
OCCUR WITH RESPECT TO, OR PROCEEDINGS SHALL COMMENCE TO HAVE A
TRUSTEE APPOINTED, OR A TRUSTEE SHALL BE APPOINTED, TO ADMINISTER
OR TO TERMINATE, ANY SINGLE EMPLOYER PLAN, WHICH REPORTABLE EVENT
OR COMMENCEMENT OF PROCEEDINGS OR APPOINTMENT OF A TRUSTEE IS, IN
THE REASONABLE OPINION OF THE REQUIRED LENDERS, LIKELY TO RESULT
IN THE TERMINATION OF SUCH PLAN FOR PURPOSES OF TITLE IV OF
ERISA, (iv) ANY SINGLE EMPLOYER PLAN SHALL TERMINATE FOR PURPOSES
OF TITLE IV OF ERISA, (v) ANY BORROWER OR ANY COMMONLY CONTROLLED
ENTITY SHALL, OR IN THE REASONABLE OPINION OF THE REQUIRED
LENDERS IS LIKELY TO, INCUR ANY LIABILITY IN CONNECTION WITH A
WITHDRAWAL FROM, OR THE INSOLVENCY OR REORGANIZATION OF, A
MULTIEMPLOYER PLAN OR (vi) ANY OTHER EVENT OR CONDITION SHALL
OCCUR OR EXIST WITH RESPECT TO A PLAN; AND IN EACH CASE IN
CLAUSES (i) THROUGH (vi) ABOVE, SUCH EVENT OR CONDITION, TOGETHER
WITH ALL OTHER SUCH EVENTS OR CONDITIONS, IF ANY, COULD
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT; OR
10. (i) ONE OR MORE JUDGMENTS OR DECREES FOR THE PAYMENT OF
MONEY SHALL BE ENTERED AGAINST ANY BORROWER OR ANY OTHER LOAN
PARTY INVOLVING IN ANY ONE CASE A LIABILITY (NOT PAID OR FULLY
COVERED BY INSURANCE) OF $500,000 OR MORE, OR IN THE AGGREGATE A
LIABILITY (NOT PAID OR FULLY COVERED BY INSURANCE) OF $1,000,000
OR MORE, AND ALL SUCH JUDGMENTS OR DECREES SHALL NOT HAVE BEEN
VACATED, DISCHARGED, STAYED OR BONDED PENDING APPEAL WITHIN 30
DAYS FROM THE ENTRY THEREOF; OR (ii) ANY JUDGMENT OTHER THAN FOR
THE PAYMENT OF MONEY, OR INJUNCTION, ATTACHMENT, GARNISHMENT OR
EXECUTION IS RENDERED AGAINST ANY BORROWER OR ANY OTHER LOAN
PARTY OR ANY OF THEIR ASSETS, WHICH JUDGMENT WOULD HAVE A
MATERIAL ADVERSE EFFECT; PROVIDED, THAT, ANY DEFAULT BY A RETAIL
STORE SUBSIDIARY UNDER THIS PARAGRAPH (j) IN CONNECTION WITH THE
CLOSING OF THE RETAIL STORE IT OPERATES SHALL NOT CONSTITUTE AN
EVENT OF DEFAULT UNLESS SUCH DEFAULT RESULTS IN A MATERIAL
ADVERSE EFFECT; OR
11. (i) ANY OF THE SECURITY DOCUMENTS, SHALL CEASE, FOR ANY
REASON, TO BE IN FULL FORCE AND EFFECT, OR ANY BORROWER OR ANY
OTHER LOAN PARTY WHICH IS A PARTY TO ANY OF THE SECURITY
DOCUMENTS SHALL SO ASSERT OR (ii) THE LIEN CREATED BY ANY OF THE
SECURITY DOCUMENTS SHALL CEASE TO BE ENFORCEABLE AND OF THE SAME
EFFECT AND PRIORITY PURPORTED TO BE CREATED THEREBY; OR
12. THE GUARANTEE OF ANY LOAN PARTY UNDER THE OMNIBUS
GUARANTY AGREEMENT SHALL CEASE, FOR ANY REASON, TO BE IN FULL
FORCE AND EFFECT OR ANY LOAN PARTY SHALL SO ASSERT; OR
13. THE PREPAYMENT L/C OR THE BACK-UP L/C SHALL CEASE TO BE
IN FULL FORCE AND EFFECT OR ANY DOCUMENTS PRESENTED UNDER EITHER
SHALL NOT BE HONORED; OR
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14. ANY CHANGE IN CONTROL; OR
15. A DISPOSITION OF BENSALEM, UNLESS (i) THE AGENT AND EACH
LENDER RECEIVES 30-DAYS PRIOR WRITTEN NOTICE THEREOF AND (ii) (A)
THE CASH CONSIDERATION THEREFOR IS AT LEAST 80% OF THE FAIR
MARKET VALUE OF BENSALEM DETERMINED BY REFERENCE TO THE APPRAISAL
OF DALEY-HODKIN CORPORATION DATED SEPTEMBER 21, 1995, A COPY OF
WHICH WAS PREVIOUSLY DELIVERED TO EACH LENDER OR (B) THE
DISPOSITION, WHEN TAKEN AS A WHOLE, IS IN THE BEST INTERESTS OF
PARENT AND ITS SUBSIDIARIES AND IS STRUCTURED IN A MANNER THAT
PRESERVES THE THEN-EXISTING EQUITY VALUE OF WINKS LANE (OR OTHER
OWNER OF BENSALEM) IN SUCH PROPERTY FOR THE BENEFIT OF THE AGENT,
AS SECOND MORTGAGEE AND CONGRESS, AS THIRD MORTGAGEE; OR
16. THE COLLATERAL AGENT SHALL NOT HAVE RECEIVED WITHIN 15
DAYS OF THE CLOSING DATE SHARE CERTIFICATES IN THE NAME OF THE
COLLATERAL AGENT (OR ITS NOMINEE) REPRESENTING THE SHARES OF EACH
PLEDGED FOREIGN SUBSIDIARY, TOGETHER WITH A COPY, CERTIFIED AS
TRUE AND CORRECT BY A RESPONSIBLE OFFICER OF SUCH PLEDGED FOREIGN
SUBSIDIARY, OF THE REGISTER OF MEMBERS OF SUCH PLEDGED FOREIGN
SUBSIDIARY INDICATING THE ENTRY OF THE COLLATERAL AGENT (OR ITS
NOMINEE) AS A MEMBER OF THAT PLEDGED FOREIGN SUBSIDIARY IN
RESPECT OF THE RELEVANT SHARES SO PLEDGED; OR
17. THE COLLATERAL AGENT SHALL NOT HAVE RECEIVED WITHIN 15
DAYS OF THE CLOSING DATE CERTIFICATES REPRESENTING THE SHARES OF
CAPITAL STOCK OF CS INSURANCE LTD. AND AN OPINION OF COUNSEL, IN
FORM AND SUBSTANCE SATISFACTORY TO THE AGENT AND THE LENDERS
STATING THAT UNDER THE LAWS OF ISLANDS OF BERMUDA THE COLLATERAL
AGENT HAS A DULY PERFECTED, FIRST PRIORITY LIEN ON THE SHARES SO
PLEDGED; OR
18. THE AGENT AND EACH LENDER SHALL NOT HAVE RECEIVED WITHIN
45 DAYS OF THE CLOSING DATE SATISFACTORY EVIDENCE THAT THE
MATTERS LISTED ON OMNIBUS SCHEDULE 7 SHALL HAVE BEEN REMEDIED
SUCH THAT THOSE SUBSIDIARIES OF PARENT THAT WERE NOT IN GOOD
STANDING IN THEIR JURISDICTION OF INCORPORATION AS OF THE CLOSING
DATE ARE IN GOOD STANDING AS OF THE DATE 45 DAYS AFTER THE
CLOSING DATE;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (h) of this Section with respect to any
Borrower or any other Loan Party Store), automatically the Term Loans hereunder
(with accrued interest thereon) and all other amounts owing under this Agreement
shall immediately become due and payable, and (B) if such event is any other
Event of Default, with the consent of the Required Lenders, the Agent may, or
upon the request of the Required Lenders, the Agent shall, with notice to the
Borrowers' Agent, declare the
<PAGE> 73
Term Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement to be due and payable forthwith, whereupon the same shall
immediately become due and payable, provided, that, thirty days after the
occurrence and continuation of an unwaived Event of Default specified in
paragraphs (a), (f)(ii) (but only if the relevant Indebtedness or Guarantee was
at least $10,000,000), (g), (h), (j) (but only if the amount involved is
$10,000,000 or more) and (m) any Original Lender may declare its Term Loans
hereunder (with accrued interest thereon) and all other amounts owing to such
Original Lender under this Agreement to be due and payable forthwith, whereupon
the same shall immediately become due and payable. Except as expressly provided
above in this Section, presentment, demand, protest and all other notices of any
kind are hereby expressly waived.
SECTION 2. THE AGENT
1. APPOINTMENT. 1. EACH LENDER HEREBY IRREVOCABLY DESIGNATES AND
APPOINTS THE AGENT AS THE AGENT OF SUCH LENDER UNDER THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS, AND EACH SUCH LENDER IRREVOCABLY AUTHORIZES THE
AGENT, IN SUCH CAPACITY, TO TAKE SUCH ACTION ON ITS BEHALF UNDER THE
PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND TO EXERCISE
SUCH POWERS AND PERFORM SUCH DUTIES AS ARE EXPRESSLY DELEGATED TO THE AGENT
BY THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, TOGETHER WITH
SUCH OTHER POWERS AS ARE REASONABLY INCIDENTAL THERETO INCLUDING EXECUTING
THE INTERCREDITOR AGREEMENTS AND ACTING AS "BANK AGENT" UNDER THE TERM
LENDER INTERCREDITOR AGREEMENT AND "BANK GROUP AGENT" UNDER THE CONGRESS
INTERCREDITOR AGREEMENT, PROVIDED THAT IN ACTING IN SUCH CAPACITIES UNDER
THE INTERCREDITOR AGREEMENTS, RESPECTIVELY, THE AGENT SHALL NOT CONSENT TO
THE RELEASE OF COLLATERAL (UNLESS REQUIRED BY THE TERMS OF THE
INTERCREDITOR AGREEMENTS) OR AN AMENDMENT, MODIFICATION OR WAIVER OF THE
PROVISIONS OF THE INTERCREDITOR AGREEMENTS, IN EACH CASE, WITHOUT THE
CONSENT OF ALL ORIGINAL LENDERS AND REQUIRED LENDERS, PROVIDED FURTHER,
THAT, THE AGENT'S CONSENT (OR THE SATISFACTION OF CONDITIONS PRECEDENT TO
ITS DEEMED CONSENT) PURSUANT TO SUBSECTION 7.4(c)(v) SHALL REQUIRE THE
ACKNOWLEDGMENT OR CONSENT OF ALL ORIGINAL LENDERS AND REQUIRED LENDERS, AND
THE AGENT SHALL NOT OTHERWISE RELEASE THE LIENS UNDER THE LENDER BENSALEM
MORTGAGE WITHOUT THE CONSENT OF ALL ORIGINAL LENDERS AND REQUIRED LENDERS.
NOTWITHSTANDING ANY PROVISION TO THE CONTRARY ELSEWHERE IN THIS AGREEMENT,
THE AGENT SHALL NOT HAVE ANY DUTIES OR RESPONSIBILITIES, EXCEPT THOSE
EXPRESSLY SET FORTH HEREIN, OR ANY FIDUCIARY RELATIONSHIP WITH ANY LENDER,
AND NO IMPLIED COVENANTS, FUNCTIONS, RESPONSIBILITIES, DUTIES, OBLIGATIONS
OR LIABILITIES SHALL BE READ INTO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
OR OTHERWISE EXIST AGAINST THE AGENT.
1. DELEGATION OF DUTIES. THE AGENT MAY EXECUTE ANY OF ITS DUTIES UNDER
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY OR THROUGH AGENTS OR ATTORNEYS IN
FACT AND SHALL BE ENTITLED TO ADVICE OF COUNSEL CONCERNING ALL MATTERS
PERTAINING TO SUCH DUTIES. THE
<PAGE> 74
AGENT SHALL NOT BE RESPONSIBLE FOR THE NEGLIGENCE OR MISCONDUCT OF ANY AGENTS OR
ATTORNEYS IN FACT SELECTED BY IT WITH REASONABLE CARE.
2. EXCULPATORY PROVISIONS. NEITHER THE AGENT NOR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS IN FACT OR AFFILIATES SHALL BE (i)
LIABLE FOR ANY ACTION LAWFULLY TAKEN OR OMITTED TO BE TAKEN BY IT OR SUCH PERSON
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (EXCEPT
FOR ITS OR SUCH PERSON'S OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OR (ii)
RESPONSIBLE IN ANY MANNER TO ANY OF THE LENDERS FOR ANY RECITALS, STATEMENTS,
REPRESENTATIONS OR WARRANTIES MADE BY ANY BORROWER OR ANY OFFICER THEREOF
CONTAINED IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR IN ANY CERTIFICATE,
REPORT, STATEMENT OR OTHER DOCUMENT REFERRED TO OR PROVIDED FOR IN, OR RECEIVED
BY EACH AGENT UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR FOR THE VALUE, VALIDITY, EFFECTIVENESS, GENUINENESS, ENFORCEABILITY
OR SUFFICIENCY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR FOR ANY FAILURE
OF ANY BORROWER TO PERFORM THEIR OBLIGATIONS HEREUNDER OR THEREUNDER. THE AGENT
SHALL NOT BE UNDER ANY OBLIGATION TO ANY LENDER TO ASCERTAIN OR TO INQUIRE AS TO
THE OBSERVANCE OR PERFORMANCE OF ANY OF THE AGREEMENTS CONTAINED IN, OR
CONDITIONS OF, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR TO INSPECT THE
PROPERTIES, BOOKS OR RECORDS OF ANY BORROWER.
3. RELIANCE BY AGENT. THE AGENT SHALL BE ENTITLED TO RELY, AND SHALL BE
FULLY PROTECTED IN RELYING, UPON ANY TERM NOTE, WRITING, RESOLUTION, NOTICE,
CONSENT, CERTIFICATE, AFFIDAVIT, LETTER, TELECOPY, TELEX OR TELETYPE MESSAGE,
STATEMENT, ORDER OR OTHER DOCUMENT OR CONVERSATION BELIEVED BY IT TO BE GENUINE
AND CORRECT AND TO HAVE BEEN SIGNED, SENT OR MADE BY THE PROPER PERSON OR
PERSONS AND UPON ADVICE AND STATEMENTS OF LEGAL COUNSEL (INCLUDING, WITHOUT
LIMITATION, COUNSEL TO THE BORROWERS), INDEPENDENT ACCOUNTANTS AND OTHER EXPERTS
SELECTED BY THE AGENT. THE AGENT MAY DEEM AND TREAT THE PAYEE OF ANY NOTE AS THE
OWNER THEREOF FOR ALL PURPOSES UNLESS A WRITTEN NOTICE OF ASSIGNMENT,
NEGOTIATION OR TRANSFER THEREOF SHALL HAVE BEEN FILED WITH THE AGENT. THE AGENT
SHALL BE FULLY JUSTIFIED IN FAILING OR REFUSING TO TAKE ANY ACTION UNDER THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT UNLESS IT SHALL FIRST RECEIVE SUCH ADVICE
OR CONCURRENCE OF THE REQUIRED LENDERS AS IT DEEMS APPROPRIATE OR IT SHALL FIRST
BE INDEMNIFIED TO ITS SATISFACTION BY THE LENDERS AGAINST ANY AND ALL LIABILITY
AND EXPENSE WHICH MAY BE INCURRED BY IT BY REASON OF TAKING OR CONTINUING TO
TAKE ANY SUCH ACTION. THE AGENT SHALL IN ALL CASES BE FULLY PROTECTED IN ACTING,
OR IN REFRAINING FROM ACTING, UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
IN ACCORDANCE WITH A REQUEST OF THE REQUIRED LENDERS, AND SUCH REQUEST AND ANY
ACTION TAKEN OR FAILURE TO ACT PURSUANT THERETO SHALL BE BINDING UPON ALL THE
LENDERS AND ALL FUTURE HOLDERS OF THE TERM LOANS.
4. NOTICE OF DEFAULT. THE AGENT SHALL NOT BE DEEMED TO HAVE KNOWLEDGE
OR NOTICE OF THE OCCURRENCE OF ANY DEFAULT OR EVENT OF DEFAULT HEREUNDER UNLESS
THE AGENT HAS RECEIVED NOTICE FROM A LENDER OR ANY BORROWER REFERRING TO THIS
AGREEMENT, DESCRIBING SUCH DEFAULT OR EVENT OF DEFAULT AND STATING THAT SUCH
NOTICE IS A "NOTICE OF DEFAULT". IN THE EVENT THAT THE AGENT RECEIVES SUCH A
NOTICE, THE AGENT SHALL PROMPTLY GIVE NOTICE THEREOF
<PAGE> 75
TO THE LENDERS. THE AGENT SHALL TAKE SUCH ACTION WITH RESPECT TO SUCH DEFAULT OR
EVENT OF DEFAULT AS SHALL BE REASONABLY DIRECTED BY THE REQUIRED LENDERS;
PROVIDED THAT UNLESS AND UNTIL THE AGENT SHALL HAVE RECEIVED SUCH DIRECTIONS,
THE AGENT MAY (BUT SHALL NOT BE OBLIGATED TO) TAKE SUCH ACTION, OR REFRAIN FROM
TAKING SUCH ACTION, WITH RESPECT TO SUCH DEFAULT OR EVENT OF DEFAULT AS IT SHALL
DEEM ADVISABLE IN THE BEST INTERESTS OF THE LENDERS.
5. NON RELIANCE ON AGENT AND OTHER LENDERS. EACH LENDER EXPRESSLY
ACKNOWLEDGES THAT NEITHER THE AGENT NOR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS IN FACT OR AFFILIATES HAS MADE ANY REPRESENTATIONS
OR WARRANTIES TO IT AND THAT NO ACT BY THE AGENT HEREINAFTER TAKEN, INCLUDING
ANY REVIEW OF THE AFFAIRS OF THE BORROWERS, SHALL BE DEEMED TO CONSTITUTE ANY
REPRESENTATION OR WARRANTY BY THE AGENT TO ANY LENDER. EACH LENDER REPRESENTS TO
THE AGENT THAT IT HAS, INDEPENDENTLY AND WITHOUT RELIANCE UPON THE AGENT OR ANY
OTHER LENDER, AND BASED ON SUCH DOCUMENTS AND INFORMATION AS IT HAS DEEMED
APPROPRIATE, MADE ITS OWN APPRAISAL OF AND INVESTIGATION INTO THE BUSINESS,
OPERATIONS, PROPERTY, FINANCIAL AND OTHER CONDITION AND CREDITWORTHINESS OF THE
BORROWERS AND MADE ITS OWN DECISION TO MAKE ITS TERM LOANS HEREUNDER AND ENTER
INTO THIS AGREEMENT. EACH LENDER ALSO REPRESENTS THAT IT WILL, INDEPENDENTLY AND
WITHOUT RELIANCE UPON THE AGENT OR ANY OTHER LENDER, AND BASED ON SUCH DOCUMENTS
AND INFORMATION AS IT SHALL DEEM APPROPRIATE AT THE TIME, CONTINUE TO MAKE ITS
OWN CREDIT ANALYSIS, APPRAISALS AND DECISIONS IN TAKING OR NOT TAKING ACTION
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND TO MAKE SUCH
INVESTIGATION AS IT DEEMS NECESSARY TO INFORM ITSELF AS TO THE BUSINESS,
OPERATIONS, PROPERTY, FINANCIAL AND OTHER CONDITION AND CREDITWORTHINESS OF THE
BORROWERS. EXCEPT FOR NOTICES, REPORTS AND OTHER DOCUMENTS EXPRESSLY REQUIRED TO
BE FURNISHED TO THE LENDERS BY THE AGENT HEREUNDER, THE AGENT SHALL NOT HAVE ANY
DUTY OR RESPONSIBILITY TO PROVIDE ANY LENDER WITH ANY CREDIT OR OTHER
INFORMATION CONCERNING THE BUSINESS, OPERATIONS, PROPERTY, CONDITION (FINANCIAL
OR OTHERWISE), PROSPECTS OR CREDITWORTHINESS OF THE BORROWERS WHICH MAY COME
INTO THE POSSESSION OF THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS IN FACT OR AFFILIATES.
6. INDEMNIFICATION. EACH LENDER AGREES TO INDEMNIFY THE AGENT, IN ITS
CAPACITY AS SUCH (TO THE EXTENT NOT REIMBURSED BY THE BORROWERS AND WITHOUT
LIMITING THE OBLIGATION OF THE BORROWERS TO DO SO), FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME
(INCLUDING, WITHOUT LIMITATION, AT ANY TIME FOLLOWING THE PAYMENT OF THE TERM
LOANS AND THE OTHER BANK OBLIGATIONS) BE IMPOSED ON, INCURRED BY OR ASSERTED
AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF, THIS AGREEMENT, ANY
OF THE OTHER LOAN DOCUMENTS OR ANY DOCUMENTS CONTEMPLATED BY OR REFERRED TO
HEREIN OR THEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY
ACTION TAKEN OR OMITTED BY THE AGENT UNDER OR IN CONNECTION WITH ANY OF THE
FOREGOING; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT OF ANY
PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING SOLELY FROM THE
AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE OBLIGATION OF EACH LENDER
UNDER THIS SUBSECTION IS RATABLE ACCORDING TO ITS TERM LOAN
<PAGE> 76
PERCENTAGE ON THE DATE ON WHICH INDEMNIFICATION IS SOUGHT, PROVIDED THAT IF
INDEMNIFICATION IS SOUGHT WITH RESPECT TO MATTERS INVOLVING SECTION 2.10, SUCH
INDEMNIFICATION WOULD BE THE SOLE OBLIGATION OF THE LENDER ON WHOSE ACCOUNT SUCH
LIABILITY WAS INCURRED. THE AGREEMENTS IN THIS SUBSECTION SHALL SURVIVE THE
PAYMENT OF THE TERM LOANS AND ALL OTHER BANK OBLIGATIONS PAYABLE HEREUNDER.
7. AGENT AND LENDERS IN THEIR INDIVIDUAL CAPACITY. THE AGENT AND ANY
LENDER AND THEIR RESPECTIVE AFFILIATES MAY MAKE LOANS TO, ACCEPT DEPOSITS FROM
AND GENERALLY ENGAGE IN ANY KIND OF BUSINESS WITH THE BORROWERS AS THOUGH THE
AGENT WERE NOT AN AGENT AND THE LENDER NOT A LENDER HEREUNDER AND UNDER THE
OTHER LOAN DOCUMENTS. WITH RESPECT TO ITS TERM LOANS AND LETTERS OF CREDIT, THE
AGENT SHALL HAVE THE SAME RIGHTS AND POWERS UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS AS ANY LENDER AND MAY EXERCISE THE SAME AS THOUGH IT WERE NOT THE
AGENT, AND THE TERMS "LENDER" AND "LENDERS" SHALL INCLUDE THE AGENT IN ITS
INDIVIDUAL CAPACITY.
8. SUCCESSOR AGENT. THE AGENT UNDER THIS AGREEMENT MAY RESIGN AS AGENT
UPON ONE DAY NOTICE TO THE LENDERS, WHICH RESIGNATION SHALL BECOME EFFECTIVE
UPON THE EARLIER OF THE DATE (a) TEN DAYS AFTER THE GIVING OF SUCH NOTICE AND
(b) THE APPOINTMENT OF A SUCCESSOR AGENT PURSUANT TO THE FOLLOWING SENTENCE. IF
THE AGENT SHALL RESIGN AS AGENT UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, THEN THE REQUIRED LENDERS SHALL APPOINT FROM AMONG THE LENDERS A
SUCCESSOR AGENT FOR THE LENDERS, WHEREUPON SUCH SUCCESSOR AGENT SHALL SUCCEED TO
THE RIGHTS, POWERS AND DUTIES OF THE AGENT, AND THE TERM "AGENT" SHALL MEAN SUCH
SUCCESSOR AGENT EFFECTIVE UPON SUCH APPOINTMENT AND APPROVAL, AND THE FORMER
AGENT'S RIGHTS, POWERS AND DUTIES AS AGENT SHALL BE TERMINATED, WITHOUT ANY
OTHER OR FURTHER ACT OR DEED ON THE PART OF SUCH FORMER AGENT OR ANY OF THE
PARTIES TO THIS AGREEMENT OR ANY HOLDERS OF THE TERM LOANS. AFTER ANY RETIRING
AGENT'S RESIGNATION AS AGENT, THE PROVISIONS OF THIS SECTION 9 SHALL INURE TO
ITS BENEFIT AS TO ANY ACTIONS TAKEN OR OMITTED TO BE TAKEN BY IT WHILE IT WAS
AGENT UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
<PAGE> 77
SECTION 3. MISCELLANEOUS
1. AMENDMENTS AND WAIVERS. NEITHER THIS AGREEMENT NOR ANY OTHER LOAN
DOCUMENT, NOR ANY TERMS HEREOF OR THEREOF MAY BE AMENDED, SUPPLEMENTED OR
MODIFIED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THIS SUBSECTION. THE
REQUIRED LENDERS MAY, OR, WITH THE WRITTEN CONSENT OF THE REQUIRED LENDERS, THE
AGENT MAY, FROM TIME TO TIME, (a) ENTER INTO WRITTEN AMENDMENTS, SUPPLEMENTS OR
MODIFICATIONS TO THE LOAN DOCUMENTS FOR THE PURPOSE OF ADDING ANY PROVISIONS TO
THE LOAN DOCUMENTS OR CHANGING IN ANY MANNER THE RIGHTS OF THE AGENT, THE
LENDERS OR OF ANY LOAN PARTY HEREUNDER OR THEREUNDER OR (b) WAIVE, ON SUCH TERMS
AND CONDITIONS AS THE REQUIRED LENDERS OR THE AGENT, AS THE CASE MAY BE, MAY
SPECIFY IN SUCH INSTRUMENT, ANY OF THE REQUIREMENTS OF THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS OR ANY DEFAULT OR EVENT OF DEFAULT AND ITS CONSEQUENCES;
PROVIDED, HOWEVER, THAT NO SUCH WAIVER AND NO SUCH AMENDMENT, SUPPLEMENT OR
MODIFICATION SHALL (i) REDUCE THE AMOUNT OR EXTEND THE DATE ANY PAYMENT IS DUE
UNDER ANY TERM LOAN OR IN RESPECT OF ANY AMOUNT PAYABLE UNDER SUBSECTION 3.2(d),
REDUCE THE STATED RATE OF ANY INTEREST OR FEE PAYABLE HEREUNDER OR EXTEND THE
SCHEDULED DATE OF ANY PAYMENT THEREOF, IN EACH CASE WITHOUT THE CONSENT OF EACH
LENDER AFFECTED THEREBY; (ii) AMEND, MODIFY OR WAIVE ANY PROVISION OF THIS
SUBSECTION, REDUCE THE PERCENTAGE SPECIFIED IN THE DEFINITION OF REQUIRED
LENDERS, CONSENT TO THE ASSIGNMENT OR TRANSFER BY ANY BORROWER OR ANY OTHER LOAN
PARTY OF, OR RELEASE ANY BORROWER OR ANY OTHER LOAN PARTY FROM, ANY OF ITS
RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, IN EACH
CASE WITHOUT THE CONSENT OF ALL LENDERS; (iii) (A) AMEND OR MODIFY ANY PROVISION
OF SECTION 3 OR 8, OR ANY PROVISIONS OF SUBSECTIONS 2.5, 2.6, 2.10, 6.9, 6.11,
7.1, 7.2(b) AND (c), 7.3(F), 7.4, 9.1 (ONLY TO THE EXTENT SUCH AMENDMENT OR
MODIFICATION RELATES TO THE PROVISOS IN SUCH SUBSECTION 9.1) OR 10.7, OR (B)
WAIVE A DEFAULT ARISING UNDER SUBSECTIONS 8(a), (b), (d) (BUT ONLY TO THE EXTENT
SUCH DEFAULT ARISES UNDER SUBSECTION 7.1, 7.2(b) OR (c), 7.3(f) OR 7.4),
(f)(ii), (g), (h), (k), (l), OR (m), IN EACH CASE WITHOUT THE WRITTEN CONSENT OF
ALL THE ORIGINAL LENDERS AND REQUIRED LENDERS, OR (iv) AMEND, MODIFY OR WAIVE
ANY PROVISION OF SECTION 9 OR SUBSECTION 10.5 WITHOUT THE WRITTEN CONSENT OF THE
THEN AGENT. ANY SUCH WAIVER AND ANY SUCH AMENDMENT, SUPPLEMENT OR MODIFICATION
SHALL APPLY EQUALLY TO EACH OF THE LENDERS AND SHALL BE BINDING UPON THE
BORROWERS, THE OTHER LOAN PARTIES, THE LENDERS, THE AGENT AND ALL FUTURE HOLDERS
OF THE RIGHT TO PAYMENT OF THE BANK OBLIGATIONS. IN THE CASE OF ANY WAIVER, EACH
BORROWER, THE OTHER LOAN PARTIES, THE LENDERS AND THE AGENT SHALL BE RESTORED TO
THEIR FORMER POSITIONS AND RIGHTS HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS,
AND ANY DEFAULT OR EVENT OF DEFAULT WAIVED SHALL BE DEEMED TO BE CURED AND NOT
CONTINUING; NO SUCH WAIVER SHALL EXTEND TO ANY SUBSEQUENT OR OTHER DEFAULT OR
EVENT OF DEFAULT OR IMPAIR ANY RIGHT CONSEQUENT THEREON.
2. NOTICES. ALL NOTICES, REQUESTS AND DEMANDS TO OR UPON THE RESPECTIVE
PARTIES HERETO TO BE EFFECTIVE SHALL BE IN WRITING (INCLUDING BY FACSIMILE
TRANSMISSION) AND, UNLESS OTHERWISE EXPRESSLY PROVIDED HEREIN, SHALL BE DEEMED
TO HAVE BEEN DULY GIVEN OR MADE (a) IN THE CASE OF DELIVERY BY HAND, WHEN
DELIVERED, (b) IN THE CASE OF DELIVERY BY MAIL, THREE DAYS AFTER BEING DEPOSITED
IN THE MAILS, POSTAGE PREPAID, OR (c) IN THE CASE OF DELIVERY
<PAGE> 78
BY FACSIMILE TRANSMISSION, WHEN SENT AND RECEIPT HAS BEEN CONFIRMED, ADDRESSED
TO BORROWERS' AGENT IN THE CASE OF ANY LOAN PARTY AND THE AGENT, AS FOLLOWS AND
AS SET FORTH ON THE SIGNATURE PAGES HEREOF IN THE CASE OF THE LENDERS, OR TO
SUCH OTHER ADDRESS AS MAY BE HEREAFTER NOTIFIED BY THE RESPECTIVE PARTIES
HERETO:
Any Borrower: Charming Shoppes of Delaware, Inc.
450 Winks Lane
Bensalem, Pennsylvania 19020
Attention: Ivan Szeftel
Fax: (215) 638-6759
with a copy to: Colin Stern, Esq.
Charming Shoppes, Inc.
450 Winks Lane
Bensalem, Pennsylvania 19020
Fax: (215) 638-6648
The Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: William Caggiano
Fax: (212) 972-0009
3. NO WAIVER; CUMULATIVE REMEDIES. NO FAILURE TO EXERCISE AND NO DELAY
IN EXERCISING, ON THE PART OF THE AGENT OR ANY LENDER, ANY RIGHT, REMEDY, POWER
OR PRIVILEGE HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS SHALL OPERATE AS A
WAIVER THEREOF; NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY RIGHT, REMEDY,
POWER OR PRIVILEGE HEREUNDER PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF OR
THE EXERCISE OF ANY OTHER RIGHT, REMEDY, POWER OR PRIVILEGE. THE RIGHTS,
REMEDIES, POWERS AND PRIVILEGES HEREIN PROVIDED ARE CUMULATIVE AND NOT EXCLUSIVE
OF ANY RIGHTS, REMEDIES, POWERS AND PRIVILEGES PROVIDED BY LAW.
4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. ALL REPRESENTATIONS AND
WARRANTIES MADE HEREUNDER, IN THE OTHER LOAN DOCUMENTS AND IN ANY DOCUMENT,
CERTIFICATE OR STATEMENT DELIVERED PURSUANT HERETO OR IN CONNECTION HEREWITH
SHALL SURVIVE UNTIL THE TERM LOANS HAVE BEEN PAID IN FULL.
5. PAYMENT OF EXPENSES AND TAXES. THE BORROWER AGREES (a) TO PAY OR
REIMBURSE THE AGENT AND ANY LENDER FOR ALL THEIR OUT OF POCKET COSTS AND
EXPENSES INCURRED IN CONNECTION WITH THE DEVELOPMENT, PREPARATION AND EXECUTION
OF, AND ANY AMENDMENT, SUPPLEMENT OR MODIFICATION TO, THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, THE TERM LENDER INTERCREDITOR AGREEMENT AND ANY OTHER DOCUMENTS
PREPARED IN
<PAGE> 79
CONNECTION HEREWITH AND THEREWITH, AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, WHETHER INCURRED BEFORE OR AFTER THE CLOSING
DATE, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL (INCLUDING THE ALLOCATED FEES AND EXPENSES OF IN-HOUSE COUNSEL) TO EACH
LENDER AND OF COUNSEL TO THE AGENT, (b) TO PAY OR REIMBURSE EACH LENDER AND THE
AGENT FOR ALL ITS COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE JUDICIAL OR
NON-JUDICIAL ENFORCEMENT, DEFENSE OR PRESERVATION OF ANY RIGHTS UNDER THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, THE TERM LENDER INTERCREDITOR AGREEMENT AND
ANY SUCH OTHER DOCUMENTS (WHETHER BEFORE OR AFTER DEFAULT), INCLUDING, WITHOUT
LIMITATION, THE FEES AND DISBURSEMENTS OF COUNSEL (INCLUDING THE ALLOCATED FEES
AND EXPENSES OF IN-HOUSE COUNSEL) AND OTHER PROFESSIONALS TO EACH LENDER AND OF
COUNSEL TO THE AGENT, (c) TO PAY, INDEMNIFY, AND HOLD EACH LENDER AND THE AGENT
HARMLESS FROM, ANY AND ALL RECORDING AND FILING FEES AND ANY AND ALL LIABILITIES
WITH RESPECT TO, OR RESULTING FROM ANY DELAY IN PAYING, STAMP, EXCISE AND OTHER
TAXES, IF ANY, WHICH MAY BE PAYABLE OR DETERMINED TO BE PAYABLE IN CONNECTION
WITH THE EXECUTION AND DELIVERY OF, OR CONSUMMATION OR ADMINISTRATION OF ANY OF
THE TRANSACTIONS CONTEMPLATED BY, OR ANY AMENDMENT, SUPPLEMENT OR MODIFICATION
OF, OR ANY WAIVER OR CONSENT UNDER OR IN RESPECT OF, THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, THE TERM LENDER INTERCREDITOR AGREEMENT AND ANY SUCH OTHER
DOCUMENTS, (d) TO PAY OR REIMBURSE THE AGENT FOR ALL ITS OUT OF POCKET COSTS AND
EXPENSES INCURRED FOLLOWING THE CLOSING DATE IN CONNECTION WITH THE POST-CLOSING
DATE ADMINISTRATION OF THE TRANSACTIONS CONTEMPLATED HEREBY AND ATTENDING TO
VARIOUS POST-CLOSING DATE MATTERS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE
FEES AND DISBURSEMENTS OF COUNSEL TO THE AGENT, AND (e) TO PAY, INDEMNIFY, AND
HOLD EACH LENDER AND THE AGENT HARMLESS FROM AND AGAINST ANY AND ALL OTHER
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WITH RESPECT
TO THE EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE AND ADMINISTRATION OF THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, THE TERM LENDER INTERCREDITOR AGREEMENT AND
ANY SUCH OTHER DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING
RELATING TO THE VIOLATION OF, NONCOMPLIANCE WITH OR LIABILITY UNDER, ANY
ENVIRONMENTAL LAW APPLICABLE TO THE OPERATIONS OF THE BORROWER, ANY OF ITS
SUBSIDIARIES OR ANY OF THE PROPERTIES (ALL THE FOREGOING IN THIS CLAUSE (e),
COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"), PROVIDED, THAT NO BORROWER SHALL
HAVE ANY OBLIGATION HEREUNDER TO THE AGENT OR ANY LENDER WITH RESPECT TO
INDEMNIFIED LIABILITIES ARISING FROM (i) THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE AGENT OR ANY SUCH LENDER OR (ii) LEGAL PROCEEDINGS COMMENCED
AGAINST THE AGENT OR ANY SUCH LENDER BY ANY SECURITY HOLDER OR CREDITOR THEREOF
ARISING OUT OF AND BASED UPON RIGHTS AFFORDED ANY SUCH SECURITY HOLDER OR
CREDITOR SOLELY IN ITS CAPACITY AS SUCH. THE AGREEMENTS IN THIS SUBSECTION SHALL
SURVIVE REPAYMENT OF THE TERM LOANS AND ALL OTHER AMOUNTS PAYABLE HEREUNDER.
1. Successors and Assigns; Participations and Assignments. 1.
This Agreement shall be binding upon and inure to the benefit of the
Borrowers, the Lenders, the Agent and their respective successors and
assigns, except that no Borrower may assign or transfer any of its rights
or obligations under this Agreement without the prior written consent of
each Lender.
<PAGE> 80
6. ANY LENDER MAY, IN THE ORDINARY COURSE OF ITS COMMERCIAL BANKING
BUSINESS AND IN ACCORDANCE WITH APPLICABLE LAW, AT ANY TIME SELL TO ONE OR MORE
BANKS OR OTHER ENTITIES ("PARTICIPANTS") PARTICIPATING INTERESTS IN ANY TERM
LOAN OWING TO SUCH LENDER OR ANY OTHER INTEREST OF SUCH LENDER HEREUNDER AND
UNDER THE OTHER LOAN DOCUMENTS, PROVIDED, THAT NO LENDER MAY SELL ANY INTEREST
IN ANY BORROWER'S TRANCHE A TERM LOAN WITHOUT ALSO SELLING AN EQUIVALENT
PERCENTAGE INTEREST IN SUCH BORROWER'S TRANCHE B TERM LOAN AND VICE VERSA. IN
THE EVENT OF ANY SUCH SALE BY A LENDER OF A PARTICIPATING INTEREST TO A
PARTICIPANT, SUCH LENDER'S OBLIGATIONS UNDER THIS AGREEMENT TO THE OTHER PARTIES
TO THIS AGREEMENT SHALL REMAIN UNCHANGED, SUCH LENDER SHALL REMAIN SOLELY
RESPONSIBLE FOR THE PERFORMANCE THEREOF, SUCH LENDER SHALL REMAIN THE HOLDER OF
ANY SUCH TERM LOAN FOR ALL PURPOSES UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AND THE BORROWERS AND THE AGENT SHALL CONTINUE TO DEAL SOLELY AND
DIRECTLY WITH SUCH LENDER IN CONNECTION WITH SUCH LENDER'S RIGHTS AND
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. EACH BORROWER
AGREES THAT IF AMOUNTS OUTSTANDING UNDER THIS AGREEMENT ARE DUE AND UNPAID, OR
SHALL HAVE BEEN DECLARED OR SHALL HAVE BECOME DUE AND PAYABLE UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT, EACH PARTICIPANT SHALL, TO THE MAXIMUM EXTENT
PERMITTED BY APPLICABLE LAW, BE DEEMED TO HAVE THE RIGHT OF SETOFF IN RESPECT OF
ITS PARTICIPATING INTEREST IN AMOUNTS OWING UNDER THIS AGREEMENT TO THE SAME
EXTENT AS IF THE AMOUNT OF ITS PARTICIPATING INTEREST WERE OWING DIRECTLY TO IT
AS A LENDER UNDER THIS AGREEMENT, PROVIDED THAT, IN PURCHASING SUCH
PARTICIPATING INTEREST, SUCH PARTICIPANT SHALL BE DEEMED TO HAVE AGREED TO SHARE
WITH THE LENDERS THE PROCEEDS THEREOF AS PROVIDED IN SUBSECTION 10.7(a) AS FULLY
AS IF IT WERE A LENDER HEREUNDER. THE BORROWERS ALSO AGREE THAT EACH PARTICIPANT
SHALL BE ENTITLED TO THE BENEFITS OF SUBSECTION 2.10 WITH RESPECT TO ITS
PARTICIPATION IN THE TERM LOANS OUTSTANDING FROM TIME TO TIME AS IF IT WAS A
LENDER; PROVIDED THAT SUCH PARTICIPANT SHALL HAVE COMPLIED WITH THE REQUIREMENTS
OF SAID SUBSECTION AND PROVIDED, FURTHER, THAT NO PARTICIPANT SHALL BE ENTITLED
TO RECEIVE ANY GREATER AMOUNT PURSUANT TO SUCH SUBSECTION THAN THE TRANSFEROR
LENDER WOULD HAVE BEEN ENTITLED TO RECEIVE IN RESPECT OF THE AMOUNT OF THE
PARTICIPATION TRANSFERRED BY SUCH TRANSFEROR LENDER TO SUCH PARTICIPANT HAD NO
SUCH TRANSFER OCCURRED.
7. ANY LENDER MAY, IN THE ORDINARY COURSE OF ITS COMMERCIAL BANKING
BUSINESS AND IN ACCORDANCE WITH APPLICABLE LAW, AT ANY TIME AND FROM TIME TO
TIME ASSIGN TO ANY LENDER OR ANY AFFILIATE THEREOF, OR TO ANY ENTITY HAVING
CAPITAL AND SURPLUS OF $100,000,000 (AN "ASSIGNEE") ALL OR ANY PART OF ITS
RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
PURSUANT TO AN ASSIGNMENT, SUBSTANTIALLY IN THE FORM OF EXHIBIT S, EXECUTED BY
SUCH ASSIGNEE, SUCH ASSIGNING LENDER (AND, IN THE CASE OF AN ASSIGNEE THAT IS
NOT THEN A LENDER OR AN AFFILIATE THEREOF, BY THE AGENT) AND DELIVERED TO THE
AGENT FOR RECORDING IN THE REGISTER, PROVIDED THAT, IN THE CASE OF ANY
ASSIGNMENT NOT TO A LENDER OR ANY AFFILIATE THEREOF, THE SUM OF THE AGGREGATE
PRINCIPAL AMOUNT OF THE TERM LOANS BEING ASSIGNED AND, IF SUCH ASSIGNMENT IS OF
LESS THAN ALL OF THE RIGHTS AND OBLIGATIONS OF THE ASSIGNING LENDER, THE SUM OF
THE AGGREGATE PRINCIPAL AMOUNT OF THE TERM LOANS REMAINING WITH THE ASSIGNING
LENDER ARE EACH NOT LESS THAN 10% OF THE AGGREGATE PRINCIPAL AMOUNT OF THE TERM
LOANS OF ALL THE LENDERS THEN OUTSTANDING (OR SUCH LESSER AMOUNT AS MAY BE
AGREED TO BY THE AGENT) (EXCEPT THAT ANY ORIGINAL LENDER WHOSE INITIAL TERM LOAN
<PAGE> 81
PERCENTAGE IS LESS THAN 10% AS OF THE CLOSING DATE MAY ASSIGN ITS ENTIRE
INTEREST WITHOUT REGARD TO THE 10% LIMITATION SET FORTH IN THIS PROVISO);
PROVIDED, FURTHER, THAT NO LENDER MAY ASSIGN ANY INTEREST IN ANY BORROWER'S
TRANCHE A TERM LOAN WITHOUT ALSO ASSIGNING AN EQUIVALENT PERCENTAGE INTEREST IN
SUCH BORROWER'S TRANCHE B TERM LOAN AND VICE VERSA. UPON SUCH EXECUTION,
DELIVERY AND RECORDING, FROM AND AFTER THE EFFECTIVE DATE DETERMINED PURSUANT TO
SUCH ASSIGNMENT, (x) THE ASSIGNEE THEREUNDER SHALL BE A PARTY HERETO AND, TO THE
EXTENT PROVIDED IN SUCH ASSIGNMENT, HAVE THE RIGHTS AND OBLIGATIONS OF A LENDER
HEREUNDER WITH TERM LOANS AS SET FORTH THEREIN, AND (y) THE ASSIGNING LENDER
THEREUNDER SHALL, TO THE EXTENT PROVIDED IN SUCH ASSIGNMENT, BE RELEASED FROM
ITS OBLIGATIONS UNDER THIS AGREEMENT (AND, IN THE CASE OF AN ASSIGNMENT COVERING
ALL OR THE REMAINING PORTION OF AN ASSIGNING LENDER'S RIGHTS AND OBLIGATIONS
UNDER THIS AGREEMENT, SUCH ASSIGNING LENDER SHALL CEASE TO BE A PARTY HERETO).
UNLESS REQUESTED BY THE ASSIGNEE AND/OR THE ASSIGNING LENDER, NEW TERM NOTES
SHALL NOT BE REQUIRED TO BE EXECUTED AND DELIVERED BY EACH BORROWER, FOR ANY
ASSIGNMENT WHICH OCCURS AT ANY TIME WHEN ANY OF THE EVENTS DESCRIBED IN SECTION
8(g) SHALL HAVE OCCURRED AND BE CONTINUING.
8. THE AGENT, ON BEHALF OF THE BORROWER, SHALL MAINTAIN AT THE ADDRESS
OF THE AGENT REFERRED TO IN SUBSECTION 10.2 A COPY OF EACH ASSIGNMENT DELIVERED
TO IT AND A REGISTER (THE "REGISTER") FOR THE RECORDATION OF THE NAMES AND
ADDRESSES OF THE LENDERS AND THE PRINCIPAL AMOUNTS OF THE TERM LOANS OWING TO,
EACH LENDER FROM TIME TO TIME. THE ENTRIES IN THE REGISTER SHALL BE CONCLUSIVE,
IN THE ABSENCE OF MANIFEST ERROR, AND THE BORROWER, THE AGENT AND THE LENDERS
MAY (AND, IN THE CASE OF ANY LOAN OR OTHER OBLIGATION HEREUNDER NOT EVIDENCED BY
A TERM NOTE, SHALL) TREAT EACH PERSON WHOSE NAME IS RECORDED IN THE REGISTER AS
THE OWNER OF A LOAN OR OTHER OBLIGATION HEREUNDER AS THE OWNER THEREOF FOR ALL
PURPOSES OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, NOTWITHSTANDING ANY
NOTICE TO THE CONTRARY. ANY ASSIGNMENT OF ANY TERM LOAN OR OTHER OBLIGATION
HEREUNDER NOT EVIDENCED BY A TERM NOTE SHALL BE EFFECTIVE ONLY UPON APPROPRIATE
ENTRIES WITH RESPECT THERETO BEING MADE IN THE REGISTER. THE REGISTER SHALL BE
AVAILABLE FOR INSPECTION BY THE BORROWERS' AGENT OR ANY LENDER AT ANY REASONABLE
TIME AND FROM TIME TO TIME UPON REASONABLE PRIOR NOTICE.
9. UPON ITS RECEIPT OF AN ASSIGNMENT EXECUTED BY AN ASSIGNING LENDER
AND AN ASSIGNEE TOGETHER WITH PAYMENT TO THE AGENT OF A REGISTRATION AND
PROCESSING FEE OF $2,500, THE AGENT SHALL (i) PROMPTLY ACCEPT SUCH ASSIGNMENT
AND (ii) ON THE EFFECTIVE DATE DETERMINED PURSUANT THERETO RECORD THE
INFORMATION CONTAINED THEREIN IN THE REGISTER AND GIVE NOTICE OF SUCH ACCEPTANCE
AND RECORDATION TO THE LENDERS AND THE BORROWERS' AGENT.
10. EACH BORROWER AUTHORIZES EACH LENDER TO DISCLOSE TO ANY PARTICIPANT
OR ASSIGNEE (EACH, A "TRANSFEREE") AND ANY PROSPECTIVE TRANSFEREE, SUBJECT TO
THE PROVISIONS OF SUBSECTION 10.15, ANY AND ALL FINANCIAL INFORMATION IN SUCH
LENDER'S POSSESSION CONCERNING THE BORROWERS AND THEIR AFFILIATES WHICH HAS BEEN
DELIVERED TO SUCH LENDER BY OR ON BEHALF OF THE BORROWERS PURSUANT TO THIS
AGREEMENT OR WHICH HAS BEEN DELIVERED TO
<PAGE> 82
SUCH LENDER BY OR ON BEHALF OF THE BORROWERS IN CONNECTION WITH SUCH LENDER'S
CREDIT EVALUATION OF THE BORROWERS AND THEIR AFFILIATES PRIOR TO BECOMING A
PARTY TO THIS AGREEMENT.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Term Loans and
Term Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including, without limitation,
any pledge or assignment by a Lender of any Term Loan or Note to any Federal
Reserve Bank in accordance with applicable law.
1. Adjustments; Set off. 1. Notwithstanding any other provision
of this Agreement or any of the other Loan Documents, if any Lender (a
"benefitted Lender") shall at any time receive any payment of all or part
of its aggregate Term Loans, or interest thereon, or receive any collateral
in respect thereof (whether voluntarily or involuntarily, by set off,
pursuant to events or proceedings of the nature referred to in Section
8(h), or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Term Loans, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Term Loans, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest.
11. IN ADDITION TO ANY RIGHTS AND REMEDIES OF THE LENDERS PROVIDED BY
LAW, EACH LENDER SHALL HAVE THE RIGHT, WITHOUT PRIOR NOTICE TO ANY LOAN PARTY,
ANY SUCH NOTICE BEING EXPRESSLY WAIVED BY EACH LOAN PARTY TO THE EXTENT
PERMITTED BY APPLICABLE LAW, UPON ANY AMOUNT BECOMING DUE AND PAYABLE BY A LOAN
PARTY HEREUNDER (WHETHER AT THE STATED MATURITY, BY ACCELERATION OR OTHERWISE)
TO SET OFF AND APPROPRIATE AND APPLY AGAINST SUCH AMOUNT ANY AND ALL DEPOSITS
(GENERAL OR SPECIAL, TIME OR DEMAND, PROVISIONAL OR FINAL), IN ANY CURRENCY, AND
ANY OTHER CREDITS, INDEBTEDNESS OR CLAIMS, IN ANY CURRENCY, IN EACH CASE WHETHER
DIRECT OR INDIRECT, ABSOLUTE OR CONTINGENT, MATURED OR UNMATURED, AT ANY TIME
HELD OR OWING BY SUCH LENDER OR ANY BRANCH OR AGENCY THEREOF TO OR FOR THE
CREDIT OR THE ACCOUNT OF SUCH LOAN PARTY. EACH LENDER AGREES PROMPTLY TO NOTIFY
BORROWERS' AGENT AND THE AGENT AFTER ANY SUCH SET OFF AND APPLICATION MADE BY
SUCH LENDER, PROVIDED THAT THE FAILURE TO GIVE SUCH NOTICE SHALL NOT AFFECT THE
VALIDITY OF SUCH SET OFF AND APPLICATION.
12. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED BY ONE OR MORE OF THE
PARTIES TO THIS AGREEMENT ON ANY NUMBER OF SEPARATE COUNTERPARTS (INCLUDING BY
FACSIMILE TRANSMISSION), AND ALL OF SAID COUNTERPARTS TAKEN TOGETHER SHALL BE
DEEMED TO CONSTITUTE ONE
<PAGE> 83
AND THE SAME INSTRUMENT. A SET OF THE COPIES OF THIS AGREEMENT SIGNED BY ALL THE
PARTIES SHALL BE LODGED WITH THE BORROWER AND THE AGENT.
13. SEVERABILITY. ANY PROVISION OF THIS AGREEMENT WHICH IS PROHIBITED
OR UNENFORCEABLE IN ANY JURISDICTION SHALL, AS TO SUCH JURISDICTION, BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR UNENFORCEABILITY WITHOUT
INVALIDATING THE REMAINING PROVISIONS HEREOF, AND ANY SUCH PROHIBITION OR
UNENFORCEABILITY IN ANY JURISDICTION SHALL NOT INVALIDATE OR RENDER
UNENFORCEABLE SUCH PROVISION IN ANY OTHER JURISDICTION. THE UNENFORCEABILITY OF
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AS AGAINST ANY BORROWER SHALL NOT
AFFECT THE ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AS TO ANY
OTHER BORROWER OR OTHER LOAN PARTY.
14. INTEGRATION. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE AGREEMENT OF EACH BORROWER, THE AGENT AND THE LENDERS WITH RESPECT TO THE
SUBJECT MATTER HEREOF, AND THERE ARE NO PROMISES, UNDERTAKINGS, REPRESENTATIONS
OR WARRANTIES BY THE AGENT OR ANY LENDER RELATIVE TO SUBJECT MATTER HEREOF NOT
EXPRESSLY SET FORTH OR REFERRED TO HEREIN OR IN THE OTHER LOAN DOCUMENTS.
15. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
16. SUBMISSION TO JURISDICTION; WAIVERS. EACH BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
1. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGEMENT IN RESPECT THEREOF, TO THE NON EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND APPELLATE COURTS FROM ANY THEREOF;
2. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT
IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
3. AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED
OR
<PAGE> 84
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO BORROWERS' AGENT AT ITS ADDRESS SET FORTH IN SUBSECTION
10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN
NOTIFIED PURSUANT THERETO;
4. AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND
5. WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO IN THIS SUBSECTION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES.
17. ACKNOWLEDGEMENTS. EACH BORROWER HEREBY ACKNOWLEDGES THAT:
1. IT HAS BEEN ADVISED BY COUNSEL IN THE NEGOTIATION,
EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS;
2. NEITHER THE AGENT NOR ANY LENDER HAS ANY FIDUCIARY
RELATIONSHIP WITH OR DUTY TO SUCH BORROWER ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS,
AND THE RELATIONSHIP BETWEEN AGENT AND LENDERS, ON ONE HAND, AND
SUCH BORROWER, ON THE OTHER HAND, IN CONNECTION HEREWITH OR
THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR; AND
3. NO JOINT VENTURE IS CREATED HEREBY OR BY THE OTHER LOAN
DOCUMENTS OR OTHERWISE EXISTS BY VIRTUE OF THE TRANSACTIONS
CONTEMPLATED HEREBY AMONG THE LENDERS OR AMONG SUCH BORROWER AND
THE LENDERS.
<PAGE> 85
18. WAIVERS OF JURY TRIAL. EACH BORROWER, THE AGENT AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
19. CONFIDENTIALITY. EACH LENDER AGREES TO KEEP CONFIDENTIAL ALL
NON-PUBLIC INFORMATION PROVIDED TO IT BY OR ON BEHALF OF ANY BORROWER OR ANY
OTHER LOAN PARTY PURSUANT TO THIS AGREEMENT THAT IS PLAINLY MARKED BY THE
PROVIDER OF SUCH INFORMATION IN WRITING AS CONFIDENTIAL OR THAT BY ITS NATURE
WOULD BE REASONABLY CONSIDERED TO BE CONFIDENTIAL; PROVIDED THAT NOTHING HEREIN
SHALL PREVENT ANY LENDER FROM DISCLOSING ANY SUCH INFORMATION (i) TO THE AGENT
OR ANY OTHER LENDER, (ii) TO ANY TRANSFEREE WHICH AGREES TO COMPLY WITH THE
PROVISIONS OF THIS SUBSECTION, (iii) TO ITS EMPLOYEES, DIRECTORS, AGENTS,
ATTORNEYS, ACCOUNTANTS AND OTHER PROFESSIONAL ADVISORS, (iv) UPON THE REQUEST OR
DEMAND OF ANY GOVERNMENTAL AUTHORITY HAVING JURISDICTION OVER SUCH LENDER, (v)
IN RESPONSE TO ANY ORDER OF ANY COURT OR OTHER GOVERNMENTAL AUTHORITY OR AS MAY
OTHERWISE BE REQUIRED PURSUANT TO ANY REQUIREMENT OF LAW, (vi) WHICH HAS BEEN
PUBLICLY DISCLOSED OTHER THAN IN BREACH OF THIS AGREEMENT, OR (vii) IN
CONNECTION WITH THE EXERCISE OF ANY REMEDY HEREUNDER, PROVIDED, FURTHER, THAT IF
ANY LENDER RECEIVED A REQUEST OR DEMAND PURSUANT TO CLAUSE (iv) OF THE FOREGOING
PROVISO (OTHER THAN A REQUEST OR DEMAND MADE IN THE ORDINARY EXERCISE OF A
GOVERNMENTAL AUTHORITY'S REGULATORY REVIEW OF SUCH LENDER) OR IS OTHERWISE
OBLIGATED TO TURNOVER CONFIDENTIAL MATERIAL PURSUANT TO CLAUSE (v) OF THE
FOREGOING PROVISO, SUCH LENDER SHALL, IF PERMITTED BY LAW, PROMPTLY PROVIDE
NOTICE OF THE SAME TO BORROWERS' AGENT.
<PAGE> 86
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
CHARMING SHOPPES, INC.
By:
Title:
CSI INDUSTRIES, INC.
By:
Title:
CHARMING SHOPPES OF DELAWARE, INC.
By:
Title:
INTERNATIONAL APPAREL, INC.
By:
Title:
W.L. DISTRIBUTORS, INC.
By:
Title:
SENTANI TRADING LIMITED
By:
Title:
<PAGE> 87
SENTANI TRADING (MACAU) LIMITED
By:
Title:
KIRKSTONE COMPANY LIMITED
By:
Title:
HUAMBO LIMITED
By:
Title:
TRIMOLAND LIMITED
By:
Title:
<PAGE> 88
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate
Tranche A Tranche B Term Loans
Term Loans Term Loans ----------
---------- ----------
<S> <C> <C> <C>
CHEMICAL BANK, $6,577,208.00 $18,195,571.00 $24,772,779.00
as Agent and as a Lender
</TABLE>
By:
Title:
270 Park Avenue
New York, NY 10017
Attn: William J. Caggiano
Tel: (212) 270-1338
Fax: (212) 972-0009
<PAGE> 89
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate
Tranche A Tranche B Term Loans
Term Loans Term Loans ----------
---------- ----------
<S> <C> <C> <C>
MELLON BANK, N.A., $4,891,154.00 $13,531,170.00 $18,422,324.00
as a Lender
</TABLE>
By:
Title:
Mellon Bank Center
1735 Market Street
P.O. Box 7899
Philadelphia, PA 19101
Attn: Green E. Dim
Tel: (215) 533-4828
Fax: (215) 553-4560
<PAGE> 90
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate
Tranche A Tranche B Term Loans
Term Loans Term Loans ----------
---------- ----------
<S> <C> <C> <C>
CORESTATES BANK, N.A., $6,998,044.23 $19,359,794.85 $26,357,839.08
as a Lender
</TABLE>
By:
Title:
FC 1-8-13-2
1339 Chestnut Street
Philadelphia, PA 19107
Attn: Jon W. Peterson
Tel: (215) 786-7799
Fax: (215) 786-7657
<PAGE> 91
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate
Tranche A Tranche B Term Loans
Term Loans Term Loans ----------
---------- ----------
<S> <C> <C> <C>
MARINE MIDLAND BANK, $2,267,732.00 $6,273,584.00 $8,541,316.00
as a Lender
</TABLE>
By:
Title:
140 Broadway, 20th Floor
New York, NY 10005-1180
Attn: Jean P. Dornhofer
Tel: (212) 658-5456
Fax: (212) 658-5746
<PAGE> 92
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate
Tranche A Tranche B Term Loans
Term Loans Term Loans ----------
---------- ----------
<S> <C> <C> <C>
THE HONGKONG AND SHANGHAI $1,265,862.00 $3,501,954.00 $4,767,816.00
BANKING CORPORATION LIMITED,
as a Lender
</TABLE>
By:
Title:
1 Queens Road Central
GPO Box 64
Hong Kong
Attn: Tim R. Slater
Tel: 011-852-2-822-3678
Fax: 011-852-2-810-0806
<PAGE> 1
EXHIBIT 10.1.9
[EXECUTION COPY]
RECEIVABLES PURCHASE AGREEMENT
Dated as of April 4, 1996,
Among
FIRST UNION NATIONAL BANK
solely in its capacity as the trustee for
CHARMING SHOPPES MASTER TRUST
as the Seller
and
FASHION SPC, INC.
as the Subordinated Purchaser
and
SPIRIT OF AMERICA NATIONAL BANK
as the Owner and as the Servicer
and
CXC Incorporated
as the Purchaser
and
CITICORP NORTH AMERICA, INC.
as the Agent
<PAGE> 2
Table of Contents
Section Page
ARTICLE I - AMOUNTS AND TERMS OF THE PURCHASES 3
SECTION 1.01. Purchase Facility 3
SECTION 1.02. Making Purchases 4
SECTION 1.03. Fees 5
SECTION 1.04. Payments and Computations, Etc. 5
SECTION 1.05. Increased Costs 6
SECTION 1.06. Additional Yield on Purchaser
Receivable Interests Bearing
a Eurodollar Rate: Breakage Fee 7
ARTICLE II - ALLOCATION AND DISTRIBUTION OF COLLECTIONS 8
SECTION 2.01. General Allocation Procedures 8
SECTION 2.02. Allocation Among the Purchasers,
the subordinated Purchaser and
the Seller 9
SECTION 2.03. Allocation and Distribution of Finance
Charges 10
SECTION 2.04. Allocation and Distribution of Excess
Finance Charge Collections 12
SECTION 2.05. Required Amount; Subordinated
Principal Collections; Charge-Offs 14
SECTION 2.06. Allocation and Distribution of
Allocable Principal Collections 16
SECTION 2.07. Dilution Amounts 18
ARTICLE III - REPRESENTATIONS AND WARRANTIES; COVENANTS;
EARLY AMORTIZATION EVENTS 19
SECTION 3.01. Representation and Warranties;
Covenants 19
SECTION 3.02. Early Amortization Events 20
ARTICLE IV - INDEMNIFICATION; PURCHASE OF INELIGIBLE
RECEIVABLES 20
SECTION 4.01. Indemnities by the Owner 20
SECTION 4.02. Indemnities by the Servicer 23
SECTION 4.03. Purchase of Ineligible and Certain
Other Receivables 25
SECTION 4.04. Reassignment of Receivables and
Receivable Interests 25
SECTION 4.05. Repurchase of Purchaser Receivable
Interests 26
ARTICLE V - THE SERVICER 27
<PAGE> 3
SECTION 5.01. Designation of the Servicer;
Delegation of Duties 27
SECTION 5.02. Administration and Collection
of the Pool Receivables 28
SECTION 5.03. Servicer Fee 28
SECTION 5.04. The Servicer Escrow Account 28
ARTICLE VI - THE PURCHASER REPRESENTATIVE 32
SECTION 6.01. Designation of the Purchaser
Representative 32
SECTION 6.02. Duties of the Purchaser
Representative 32
SECTION 6.03. Limitation on Purchaser Representative
Liability, Etc. 33
ARTICLE VII - MISCELLANEOUS 35
SECTION 7.01. Amendments, Waivers, Etc 35
SECTION 7.02. Notices, Etc. 36
SECTION 7.03. Assignability 37
SECTION 7.04. Costs, Expenses and Taxes 39
SECTION 7.05. No Proceedings 40
SECTION 7.06. Confidentiality 40
SECTION 7.07. GOVERNING LAW 42
SECTION 7.08. Execution in Counterparts 42
SECTION 7.09. Survival of Termination 43
SECTION 7.10. Tax Treatment 43
SECTION 7.11. Duties of the Trustee 43
SECTION 7.12. Limitation on Seller/Trustee
Liability, Etc. 43
SECTION 7.13. Third Party Beneficiaries 44
SECTION 7.14. Limited Recourse 45
SECTION 7.15. Limitation on Rights of Purchasers 45
SECTION 7.16. The SP Escrow Account 46
EXHIBITS
Exhibit I Definitions
Exhibit II Conditions of Purchases
Exhibit III Representations and Warranties
Exhibit IV Covenants
Exhibit V Administration and Collection of Pool Receivables
Exhibit VI Early Amortization Events
ANNEXES
Annex A Form of Servicer Report
Annex B Form of Depositary Agreement
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Annex C Form of Opinion of Counsel to the Trustee
Annex D-1 Form of Opinion of Counsel to the Owner,
the Subordinated Purchaser, the Servicer
and the Companies
Annex D-2 Form of Opinion of Counsel to the Owner
and the Servicer
Annex D-3 Form of Opinion of Counsel to the Owner, the
Subordinated Purchaser and the Servicer
Annex D-4 Form of Opinion of Counsel to the Subordinated
Purchaser and the Companies
Annex E Form of Opinion of Counsel to the Companies
Annex F Form of Store Payment Notice
Annex G Form of Summary of Interest Rate Agreements
SCHEDULES
Schedule I Credit Facilities
Schedule II Depositary Banks
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RECEIVABLES
PURCHASE AGREEMENT
Dated as of April 4, 1996
FIRST UNION NATIONAL BANK (formerly known as First Fidelity Bank,
National Association) a national banking association, solely in its capacity as
the trustee (the "Trustee") for CHARMING SHOPPES MASTER TRUST (formerly known as
Spirit of America Master Trust), a trust formed pursuant to the Pooling and
Servicing Agreement (defined in Exhibit I hereto) (in such capacity, the
"Seller"), FASHION SPC, INC., a Delaware corporation (the "Subordinated
Purchaser"), SPIRIT OF AMERICA NATIONAL BANK, a national banking association
("Spirit"), in its capacity as the originator or the owner (prior to the sale
thereof to the Seller pursuant to the Pooling and Servicing Agreement) of the
Accounts (defined in Exhibit I hereto) (in such capacity, the "Owner") and in
its capacity as the Servicer (in such capacity, the "Servicer"), CXC
INCORPORATED, a Delaware corporation ("CXC"), and CITICORP NORTH AMERICA, INC.,
a Delaware corporation ("CNAI"), as agent (the "Agent") for the Purchasers,
agree as follows:
PRELIMINARY STATEMENTS. (1) Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I to this Agreement. References
in the Exhibits to "the Agreement" refer to this Agreement, as amended,
restated, modified or supplemented from time to time.
(2) Spirit is the owner of certain revolving credit card accounts and
expects to become the owner of certain additional credit card accounts from time
to time (collectively defined as the "Accounts" in Exhibit I to this Agreement).
(3) Pursuant to the Pooling and Servicing Agreement, Spirit has sold to
the Seller an ownership interest in all amounts shown on its records as billed
to the Obligor on any Account from time to time in respect of purchases of
merchandise or services, including, without limitation, finance charges and fees
payable thereon, all Insurance Proceeds relating thereto, all rights, remedies,
powers and privileges with respect thereto, and all proceeds thereof
(collectively, the "Receivables"), and Spirit has been appointed and agreed to
act as the servicer under the Pooling and Servicing Agreement.
(4) Pursuant to the Pooling and Servicing Agreement and certain related
agreements, the Seller may, among other things, sell undivided ownership
interests in the Receivables (referred to herein as "Receivable Interests") to
various purchasers and may sell certificates of beneficial interest in the
Receivables in the Trust to various investors.
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(5) The Subordinated Purchaser and the Purchaser are prepared to
purchase the Receivable Interests on the terms set forth herein.
(6) Pursuant to the Pooling and Servicing Agreement, a portion of all
Collections of the Receivable Interests and all Loss Amounts with respect
thereto will be allocated to the Receivables Purchase Interests based on the
Allocation Percentage.
(7) Spirit has been requested and is prepared to act as the Servicer
hereunder.
(8) This Agreement is one of the "Receivables Purchase Agreements"
referred to in the Pooling and Servicing Agreement and creates a Receivables
Purchase Series thereunder.
(9) Notwithstanding anything to the contrary in this Agreement, the
Agent, the Purchaser and the Subordinated Purchaser hereby acknowledge that
their rights and remedies hereunder, and the rights and remedies of their
respective assignees under this Agreement, may be subject to the limitations set
forth in the Pooling and Servicing Agreement. To the extent that any provision
in this Agreement or in any certificate or document delivered in connection with
this Agreement is inconsistent with any provision under the Pooling and
Servicing Agreement, or in any circumstance in which it is unclear whether this
Agreement or the Pooling and Servicing Agreement shall control, the provisions
contained in the Pooling and Servicing Agreement shall control, except that with
respect to any such inconsistency between any such provision and Section 2 of
this Agreement (including the defined terms used in such Section 2), this
Agreement shall control.
(10) The Purchasers acknowledge that the purchase of the Receivable
Interests shall not include the right to sell the Owner's customer lists, the
right to use the Owner's customer lists for any purpose other than a purpose
expressly set forth in this Agreement, or the right to use any trademarks of the
Seller, the Owner or the Servicer or any of their respective Affiliates.
Accordingly, the parties agree as follows:
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ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.01. Purchase Facility
1. ON THE TERMS AND CONDITIONS HEREINAFTER SET FORTH, A PURCHASER MAY,
IN ITS SOLE DISCRETION, PURCHASE PURCHASER RECEIVABLE INTERESTS FROM THE
SELLER FROM TIME TO TIME DURING THE PERIOD FROM THE DATE HEREOF TO THE
FACILITY TERMINATION DATE. UNDER NO CIRCUMSTANCES SHALL ANY PURCHASER MAKE
ANY SUCH PURCHASE ON ANY DATE IF AFTER GIVING EFFECT TO SUCH PURCHASE THE
AGGREGATE OUTSTANDING PURCHASER CAPITAL, TOGETHER WITH THE AGGREGATE
OUTSTANDING "PURCHASER CAPITAL" OF "PURCHASER RECEIVABLE INTERESTS" UNDER THE
PARALLEL PURCHASE COMMITMENT, WOULD EXCEED THE PURCHASE LIMIT ON SUCH DATE.
2. THE SUBORDINATED PURCHASER SHALL, ON THE DATE OF EACH PURCHASE OF
PURCHASER RECEIVABLE INTERESTS BY THE PURCHASER HEREUNDER, PURCHASE
SUBORDINATED RECEIVABLE INTERESTS IN THE AMOUNT DETERMINED PURSUANT TO
PARAGRAPH 3 OF EXHIBIT II HERETO.
3. THE SELLER MAY, UPON AT LEAST 30 DAYS' PRIOR NOTICE TO THE AGENT,
TERMINATE IN WHOLE OR, FROM TIME TO TIME, REDUCE IN PART THE UNUSED PORTION
OF THE PURCHASE LIMIT; PROVIDED THAT EACH PARTIAL REDUCTION SHALL BE IN THE
AMOUNT OF AT LEAST $1,000,000 OR AN INTEGRAL MULTIPLE THEREOF.
(d) On the date of this Agreement, the Agent is entering into (i) an
APA with Citibank, N.A. in the maximum amount of $60,000,000 and (ii) APAs with
certain other banks in the maximum aggregate amount of $60,000,000. From time to
time after the date hereof the Agent may enter into one or more additional APAs
with banks other than Citibank, N.A., and such additional APAs will result in
automatic increases in the Purchase Limit calculated as follows: (x) if the
maximum aggregate amount of all APAs (other than the APA with Citibank, N.A.) is
greater than $60,000,000 but not greater than $75,000,000, then the new Purchase
Limit will be twice such maximum aggregate amount (but in no event greater than
$150,000,000), and (y) if the maximum aggregate amount of all APAs (other than
the APA with Citibank, N.A.) is greater than $75,000,000, then the new Purchase
Limit will be equal to the sum of such maximum aggregate amount plus $75,000,000
(but in no event greater than $160,000,000); provided, however, that no incease
in the Purchase Limit to an amount greater than $150,000,000 shall be effective
unless the Agent shall have received, in form and substance satisfactory to it,
assignments to the Seller of Interest Rate Agreements covering in the aggregate
a notional balance at least equal to the new Purchase
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Limit, together with related documents substantially similar to those
delivered on the Effective Date pursuant to paragraphs 1(b)(xxii) and (xxiii) of
Exhibit II to this Agreement. At any time after the date hereof when the Agent
enters into an additional APA with a bank other than Citibank, N.A., the Agent
shall immediately notify the Seller, the Subordinated Purchaser, the Owner, the
Servicer, CXC and CapMAC thereof, and of the new Purchase Limit, calculated as
aforesaid, and upon such notice (and, if the proviso in the immediately
preceding sentence is applicable, satisfaction of the conditions set forth in
such proviso), the Purchase Limit shall automatically increase as provided in
such notice.
SECTION 1.02. Making Purchases
4. EACH OFFER BY THE SELLER TO SELL PURCHASER RECEIVABLE INTERESTS TO
THE PURCHASER HEREUNDER SHALL BE MADE, BY WRITTEN NOTICE FROM THE SELLER TO
THE AGENT AND THE SUBORDINATED PURCHASER, AT LEAST THREE BUSINESS DAYS' PRIOR
TO THE DATE OF THE PROPOSED SALE. EACH SUCH NOTICE OF AN OFFER TO SELL
PURCHASER RECEIVABLE INTERESTS SHALL SPECIFY (I) THE AMOUNT REQUESTED TO BE
PAID TO THE SELLER (SUCH AMOUNT, WHICH SHALL NOT BE LESS THAN $1,000,000,
BEING REFERRED TO HEREIN AS THE INITIAL "PURCHASER CAPITAL" OF THE PURCHASER
RECEIVABLE INTEREST THEN BEING SOLD) AND (II) THE PROPOSED DATE OF SUCH
PURCHASE (WHICH SHALL BE A DISTRIBUTION DATE). THE AGENT SHALL PROMPTLY
THEREAFTER NOTIFY THE SELLER WHETHER CXC HAS DETERMINED THAT IT MAY MAKE A
PURCHASE AND, IF SO, WHETHER ALL OF THE TERMS SPECIFIED BY THE SELLER ARE
ACCEPTABLE TO THE PURCHASER.
5. ON THE DATE OF EACH PURCHASE OF A PURCHASER RECEIVABLE INTEREST BY
THE PURCHASER, THE PURCHASER SHALL, UPON SATISFACTION OF THE APPLICABLE
CONDITIONS SET FORTH IN EXHIBIT II HERETO, MAKE AVAILABLE TO THE SELLER IN
SAME DAY FUNDS, BY DEPOSIT TO THE SELLER ACCOUNT NO LATER THAN 12:00 NOON
(NEW YORK CITY TIME), AN AMOUNT EQUAL TO THE INITIAL PURCHASER CAPITAL OF
SUCH PURCHASER RECEIVABLE INTEREST.
6. EFFECTIVE ON THE DATE OF EACH PURCHASE BY THE PURCHASER PURSUANT TO
THIS SECTION 1.02 AND EACH REINVESTMENT ON BEHALF OF THE PURCHASER PURSUANT
TO SECTION 2.06(A) HEREOF, THE SELLER HEREBY SELLS AND ASSIGNS TO THE AGENT,
FOR THE BENEFIT OF THE PURCHASER MAKING SUCH PURCHASE OR REINVESTMENT, AN
UNDIVIDED PERCENTAGE OWNERSHIP INTEREST, TO THE EXTENT OF THE PURCHASER
RECEIVABLE INTEREST THEN BEING PURCHASED, IN EACH POOL RECEIVABLE THEN
EXISTING OR THEREAFTER ARISING AND IN THE COLLECTIONS WITH RESPECT THERETO.
7. ON THE DATE OF EACH PURCHASE BY THE PURCHASER PURSUANT TO SECTION
1.02(A) ABOVE, THE SUBORDINATED PURCHASER
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SHALL MAKE AVAILABLE TO THE SELLER IN SAME DAY FUNDS, BY DEPOSIT TO THE
SELLER ACCOUNT NO LATER THAN 12:00 NOON (NEW YORK CITY TIME), AN AMOUNT EQUAL
TO THE AMOUNT REQUIRED UNDER PARAGRAPH 3 OF EXHIBIT II HERETO (SUCH AMOUNT
BEING REFERRED TO HEREIN AS THE INITIAL "SUBORDINATED PURCHASER CAPITAL" OF
THE SUBORDINATED RECEIVABLE INTEREST THEN BEING PURCHASED). EFFECTIVE ON THE
DATE OF EACH SUCH PAYMENT AND EACH REINVESTMENT ON BEHALF OF THE SUBORDINATED
PURCHASER PURSUANT TO SECTION 2.06(A) HEREOF, THE SELLER HEREBY SELLS AND
ASSIGNS TO THE SUBORDINATED PURCHASER A SUBORDINATED (TO THE EXTENT SET FORTH
IN SECTION 1.02(E) AND ARTICLE II HEREOF) UNDIVIDED PERCENTAGE OWNERSHIP
INTEREST, TO THE EXTENT OF THE SUBORDINATED RECEIVABLE INTEREST THEN BEING
PURCHASED, IN EACH POOL RECEIVABLE THEN EXISTING OR THEREAFTER ARISING AND IN
THE COLLECTIONS WITH RESPECT THERETO.
8. THE INTEREST OF THE PURCHASERS IN THE POOL RECEIVABLES AND THE
COLLECTIONS WITH RESPECT THERETO SHALL BE DEEMED TO HAVE A PRIORITY SENIOR TO
ANY INTEREST OF THE SUBORDINATED PURCHASER THEREIN. SUCH PRIORITY SHALL BE
IRRESPECTIVE OF THE TIME, ORDER OR METHOD OF ATTACHMENT OR PERFECTION OF THE
RESPECTIVE INTERESTS OF THE PURCHASERS AND THE SUBORDINATED PURCHASER, OR THE
TIME OR ORDER OF THE FILING OF FINANCING STATEMENTS. UNTIL THE FIRST DAY
AFTER THE FACILITY TERMINATION DATE ON WHICH ALL AMOUNTS DESCRIBED IN CLAUSES
(I), (II) AND (IV) OF THE DEFINITION OF FINAL DISTRIBUTION DATE HAVE BEEN
PAID IN FULL, THE SUBORDINATED PURCHASER AGREES THAT IT WILL NOT COMMENCE OR
CONTINUE ANY DEFAULT, FORECLOSURE OR LIQUIDATION PROCEEDINGS OR REMEDIES IN
RESPECT OF THE POOL RECEIVABLES OR THE COLLECTIONS.
SECTION 1.03. The fees set forth in the separate fee agreement of even
date among the Seller, the Owner, and the Agent, as amended or restated from
time to time (the "Fee Letter") shall be payable to the Agent and the Purchaser
in the amounts and on the dates set forth therein, subject to the allocation and
priority of distribution of such Collections set forth in Article II hereof.
SECTION 1.04. Payments and Computations, Etc.
9. ALL AMOUNTS TO BE PAID OR DEPOSITED BY THE SELLER OR THE SERVICER
HEREUNDER SHALL BE PAID OR DEPOSITED NO LATER THAN 11:00 A.M. (NEW YORK CITY
TIME) ON THE DAY WHEN DUE IN SAME DAY FUNDS TO THE AGENT'S ACCOUNT.
10. THE OWNER (WITH RESPECT TO PAYMENTS OR DEPOSITS TO BE PAID BY THE
SELLER) AND THE SERVICER (WITH RESPECT TO PAYMENTS OR DEPOSITS TO BE PAID BY
THE SERVICER) SHALL, TO THE EXTENT PERMITTED BY LAW, PAY OR CAUSE TO BE PAID
INTEREST ON ANY AMOUNT NOT PAID OR DEPOSITED BY THE SELLER OR THE SERVICER
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<PAGE> 10
WHEN DUE HEREUNDER (WITHOUT REGARD TO ANY APPLICABLE GRACE PERIOD BEFORE SUCH
MISSED PAYMENT OR DEPOSIT GIVES RISE TO AN EARLY AMORTIZATION EVENT
HEREUNDER), AT AN INTEREST RATE PER ANNUM EQUAL TO 2.0% PER ANNUM ABOVE THE
ALTERNATE BASE RATE, PAYABLE ON DEMAND.
11. ALL COMPUTATIONS OF INTEREST UNDER SUBSECTION (B) ABOVE AND ALL
COMPUTATIONS OF YIELD, FEES, AND OTHER AMOUNTS HEREUNDER SHALL BE MADE ON THE
BASIS OF A YEAR OF 360 DAYS FOR THE ACTUAL NUMBER OF DAYS ELAPSED. WHENEVER
ANY PAYMENT OR DEPOSIT TO BE MADE HEREUNDER SHALL BE DUE ON A DAY OTHER THAN
A BUSINESS DAY, SUCH PAYMENT OR DEPOSIT SHALL BE MADE ON THE NEXT SUCCEEDING
BUSINESS DAY AND SUCH EXTENSION OF TIME SHALL BE INCLUDED IN THE COMPUTATION
OF SUCH PAYMENT OR DEPOSIT.
SECTION 1.05. Increased Costs
12. IF CNAI, ANY PURCHASER, ANY ENTITY WHICH ENTERS INTO A COMMITMENT
TO PURCHASE PURCHASER RECEIVABLE INTERESTS OR INTERESTS THEREIN, OR ANY OF
THEIR RESPECTIVE AFFILIATES (EACH AN "AFFECTED PERSON") DETERMINES THAT
COMPLIANCE WITH ANY LAW OR REGULATION OR ANY GUIDELINE OR REQUEST FROM ANY
CENTRAL BANK OR OTHER GOVERNMENTAL AUTHORITY (WHETHER OR NOT HAVING THE FORCE
OF LAW) AFFECTS OR WOULD AFFECT THE AMOUNT OF CAPITAL REQUIRED OR EXPECTED TO
BE MAINTAINED BY SUCH AFFECTED PERSON AND SUCH AFFECTED PERSON DETERMINES
THAT THE AMOUNT OF SUCH CAPITAL IS INCREASED BY OR BASED UPON THE EXISTENCE
OF ANY COMMITMENT TO MAKE PURCHASES OF OR OTHERWISE TO MAINTAIN THE
INVESTMENT IN POOL RECEIVABLES OR INTERESTS THEREIN RELATED TO THIS AGREEMENT
OR TO THE FUNDING THEREOF AND OTHER COMMITMENTS OF THE SAME TYPE, THEN, UPON
DEMAND BY SUCH AFFECTED PERSON (WITH A COPY TO THE AGENT), THE OWNER SHALL
IMMEDIATELY PAY, OR CAUSE TO BE PAID, TO THE AGENT, FOR THE ACCOUNT OF SUCH
AFFECTED PERSON (AS A THIRD-PARTY BENEFICIARY), FROM TIME TO TIME AS
SPECIFIED BY SUCH AFFECTED PERSON, ADDITIONAL AMOUNTS SUFFICIENT TO
COMPENSATE SUCH AFFECTED PERSON IN THE LIGHT OF SUCH CIRCUMSTANCES, TO THE
EXTENT THAT SUCH AFFECTED PERSON REASONABLY DETERMINES SUCH INCREASE IN
CAPITAL TO BE ALLOCABLE TO THE EXISTENCE OF ANY OF SUCH COMMITMENTS. A
CERTIFICATE AS TO SUCH AMOUNTS SUBMITTED TO THE SELLER, THE OWNER, THE
SERVICER AND THE AGENT BY SUCH AFFECTED PERSON SHALL BE CONCLUSIVE AND
BINDING FOR ALL PURPOSES, ABSENT MANIFEST ERROR.
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13. IF, DUE TO EITHER (I) THE INTRODUCTION OF OR ANY CHANGE (OTHER THAN
ANY CHANGE BY WAY OF IMPOSITION OR INCREASE OF RESERVE REQUIREMENTS REFERRED
TO IN SECTION 1.06) IN OR IN THE INTERPRETATION OF ANY LAW OR REGULATION OR
(II) COMPLIANCE WITH ANY GUIDELINE OR REQUEST FROM ANY CENTRAL BANK OR OTHER
GOVERNMENTAL AUTHORITY (WHETHER OR NOT HAVING THE FORCE OF LAW), THERE SHALL
BE ANY INCREASE IN THE COST TO A PURCHASER OF AGREEING TO PURCHASE OR
PURCHASING, OR MAINTAINING THE OWNERSHIP OF PURCHASER RECEIVABLE INTERESTS IN
RESPECT OF WHICH YIELD IS COMPUTED BY REFERENCE TO THE EURODOLLAR RATE, THEN,
UPON DEMAND BY SUCH PURCHASER (WITH A COPY TO THE AGENT), THE OWNER SHALL
IMMEDIATELY PAY, OR CAUSE TO BE PAID, TO THE AGENT, FOR THE ACCOUNT OF SUCH
PURCHASER (AS A THIRD-PARTY BENEFICIARY), FROM TIME TO TIME AS SPECIFIED BY
SUCH PURCHASER, ADDITIONAL AMOUNTS SUFFICIENT TO COMPENSATE SUCH PURCHASER
FOR SUCH INCREASED COSTS. A CERTIFICATE AS TO SUCH AMOUNTS SUBMITTED TO THE
SELLER, THE OWNER, THE SERVICER AND THE AGENT BY SUCH PURCHASER SHALL BE
CONCLUSIVE AND BINDING FOR ALL PURPOSES, ABSENT MANIFEST ERROR.
SECTION 1.06. Additional Yield on Purchaser Receivable Interests
Bearing a Eurodollar Rate; Breakakage Fee.
14. THE OWNER SHALL PAY, OR CAUSE TO BE PAID, TO ANY PURCHASER, SO
LONG AS SUCH PURCHASER SHALL BE REQUIRED UNDER REGULATIONS OF THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM TO MAINTAIN RESERVES WITH RESPECT TO
LIABILITIES OR ASSETS CONSISTING OF OR INCLUDING EUROCURRENCY LIABILITIES,
ADDITIONAL YIELD ON THE UNPAID PURCHASER CAPITAL OF EACH PURCHASER RECEIVABLE
INTEREST OF SUCH PURCHASER DURING EACH FIXED PERIOD IN RESPECT OF WHICH YIELD
IS COMPUTED BY REFERENCE TO THE EURODOLLAR RATE, FOR SUCH FIXED PERIOD, AT A
RATE PER ANNUM EQUAL AT ALL TIMES DURING SUCH FIXED PERIOD TO THE REMAINDER
OBTAINED BY SUBTRACTING (I) THE EURODOLLAR RATE FOR SUCH FIXED PERIOD FROM
(II) THE RATE OBTAINED BY DIVIDING SUCH EURODOLLAR RATE REFERRED TO IN CLAUSE
(I) ABOVE BY THAT PERCENTAGE EQUAL TO 100% MINUS THE EURODOLLAR RATE RESERVE
PERCENTAGE OF SUCH PURCHASER FOR SUCH FIXED PERIOD, PAYABLE ON THE NEXT
SUCCEEDING DATE ON WHICH YIELD IS PAYABLE ON SUCH PURCHASER RECEIVABLE
INTEREST. SUCH ADDITIONAL YIELD SHALL BE DETERMINED BY SUCH PURCHASER AND
NOTIFIED TO THE SELLER, THE OWNER AND THE SERVICER THROUGH THE AGENT WITHIN
30 DAYS AFTER ANY YIELD PAYMENT IS MADE WITH RESPECT TO WHICH SUCH ADDITIONAL
YIELD IS REQUESTED. A CERTIFICATE AS TO SUCH ADDITIONAL YIELD SUBMITTED TO
THE SELLER, THE OWNER AND THE SERVICER AND THE AGENT BY SUCH PURCHASER SHALL
BE CONCLUSIVE AND BINDING FOR ALL PURPOSES, ABSENT MANIFEST ERROR.
15. IF (I) ANY PAYMENT OF PURCHASER CAPITAL WITH RESPECT TO A
PURCHASER RECEIVABLE INTEREST AS TO WHICH YIELD
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IS COMPUTED BY REFERENCE TO THE EURODOLLAR RATE IS MADE BY THE SELLER TO OR
FOR THE ACCOUNT OF ANY PURCHASER(S) OTHER THAN ON THE LAST DAY OF THE FIXED
PERIOD FOR SUCH PURCHASER RECEIVABLE INTEREST, AS A RESULT OF A PAYMENT
PURSUANT TO SECTION 4.03, OR FOR ANY OTHER REASON, OR (II) THE TERMINATION
DATE SHALL OCCUR DURING ANY FIXED PERIOD, THE OWNER SHALL, UPON DEMAND BY
SUCH PURCHASER (WITH A COPY TO THE SELLER, THE SERVICER AND THE AGENT),
IMMEDIATELY PAY, OR CAUSE TO BE PAID, TO THE AGENT FOR THE ACCOUNT OF SUCH
PURCHASER (AS A THIRD-PARTY BENEFICIARY) ANY AMOUNTS REQUIRED TO COMPENSATE
SUCH PURCHASER FOR ANY ADDITIONAL LOSSES, COSTS OR EXPENSES WHICH IT MAY
REASONABLY INCUR AS A RESULT OF SUCH PAYMENT, INCLUDING, WITHOUT LIMITATION,
ANY LOSS (INCLUDING LOSS OF ANTICIPATED PROFITS), COSTS OR EXPENSES INCURRED
BY REASON OF THE LIQUIDATION OR REEMPLOYMENT OF DEPOSITS OR OTHER FUNDS
ACQUIRED BY SUCH PURCHASER TO FUND OR MAINTAIN ITS INTEREST IN SUCH PURCHASER
RECEIVABLE INTEREST. A CERTIFICATE AS TO SUCH AMOUNTS SUBMITTED TO THE
SELLER, THE SERVICER, THE OWNER AND THE AGENT BY SUCH PURCHASER SHALL BE
CONCLUSIVE AND BINDING FOR ALL PURPOSES, ABSENT MANIFEST ERROR.
ARTICLE II
ALLOCATION AND DISTRIBUTION
OF COLLECTIONS
SECTION 2.01. Pursuant to the Pooling and Servicing Agreement, the
Servicer will allocate to the Receivables Purchase Interest arising under this
Agreement a portion of all Collections of Pool Receivables and all Loss Amounts
for each Due Period, based on the Allocation Percentage. Collections of Pool
Receivables and Loss Amounts which have been so allocated to the Receivables
Purchase Interest arising under this Agreement shall be allocated and
distributed or reallocated among the Purchasers, the Subordinated Purchaser and
the Seller as set forth in this Article II.
SECTION 2.02. Allocation Among the Purchasers, the Subordinated
Purchaser and the Seller
16. THE SERVICER SHALL, ON EACH DAY ON WHICH COLLECTIONS OF POOL
RECEIVABLES ARE RECEIVED BY IT WHICH ARE ALLOCATED TO THE RECEIVABLES
PURCHASE INTEREST ARISING UNDER THIS AGREEMENT, HOLD SUCH COLLECTIONS IN
TRUST FOR THE PURCHASERS, THE SUBORDINATED PURCHASER AND THE SELLER, AND
SHALL ALLOCATE SUCH AMOUNTS, DURING EACH DUE PERIOD, AS FOLLOWS:
a) during the Revolving Period and the Amortization Period,
Allocable Finance Charge Collections will be allocated to the Purchasers
and the Subordinated
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Purchaser jointly based on the Floating Allocation Percentage for such Due
Period;
b) during the Revolving Period and the Amortization Period,
Allocated Loss Amounts will be allocated to the Purchasers and the
Subordinated Purchaser jointly based on the Floating Allocation Percentage
for such Due Period;
c) during the Revolving Period, Allocable Principal Collections
will be allocated to the Purchasers and the Subordinated Purchaser jointly
based on the Floating Allocation Percentage for such Due Period and the
Servicer shall, on behalf of the Purchasers and the Subordinated Purchaser
which own such Receivables Purchase Interest, have the proceeds of the
Allocable Principal Collections attributable to such Receivables Purchase
Interest automatically reinvested in additional undivided percentage
interests in the Pool Receivables pursuant to Section 2.06(a) below;
d) during the Amortization Period, Allocable Principal
Collections will be allocated to the Purchasers and the Subordinated
Purchaser jointly based on the Fixed Allocation Percentage for such Due
Period; and
(v) notwithstanding the occurrence of the Final Distribution Date
or the termination of the Trust under the Pooling and Servicing Agreement,
the Purchasers shall be entitled to receive all amounts constituting the
Allocation Percentage of Recoveries of Pool Receivables up to the amount
of the unreimbursed Purchaser Charge-Offs on such date.
17. AMOUNTS NOT ALLOCATED TO THE PURCHASERS AND THE SUBORDINATED
PURCHASER JOINTLY AS DESCRIBED ABOVE WILL BE ALLOCATED TO THE SELLER INTEREST
AND DEPOSITED INTO THE SELLER ACCOUNT. AMOUNTS ALLOCATED UNDER SUBSECTION
(A)(III) AND (A)(IV) ABOVE FOR ANY DUE PERIOD ARE REFERRED TO AS THE "TOTAL
PRINCIPAL COLLECTIONS" FOR SUCH DUE PERIOD.
18. AMOUNTS WHICH ARE ALLOCATED TO THE PURCHASERS AND THE SUBORDINATED
PURCHASER JOINTLY AS DESCRIBED ABOVE WILL BE DEPOSITED INTO THE COLLECTION
ACCOUNT ON THE DATE REQUIRED BY SECTION 4.3(A) OF THE POOLING AND SERVICING
AGREEMENT. THE PORTION OF SUCH AMOUNTS CONSTITUTING ALLOCABLE FINANCE CHARGE
COLLECTIONS SHALL REMAIN ON DEPOSIT IN THE COLLECTION ACCOUNT UNTIL THE NEXT
APPLICABLE DISTRIBUTION DATE, WHEN SUCH ALLOCABLE FINANCE CHARGE COLLECTIONS
SHALL BE DISTRIBUTED PURSUANT TO SECTIONS 2.03 AND 2.04. THE PORTION OF SUCH
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AMOUNTS CONSTITUTING TOTAL PRINCIPAL COLLECTIONS SHALL (I) DURING THE
REVOLVING PERIOD, BE DISTRIBUTED FROM THE COLLECTION ACCOUNT DAILY PURSUANT
TO SECTION 2.06(A), AND (II) DURING THE AMORTIZATION PERIOD, REMAIN ON
DEPOSIT IN THE COLLECTION ACCOUNT UNTIL THE NEXT APPLICABLE DISTRIBUTION
DATE, WHEN SUCH TOTAL PRINCIPAL COLLECTIONS SHALL BE DISTRIBUTED PURSUANT TO
SECTION 2.06(B). NOTWITHSTANDING THE TWO PRECEDING SENTENCES, THE SERVICER
SHALL, AT THE REQUEST OF THE AGENT AT ANY TIME FOLLOWING AN EARLY
AMORTIZATION EVENT, DEPOSIT COLLECTIONS ALLOCATED JOINTLY TO THE PURCHASERS
AND THE SUBORDINATED PURCHASER PURSUANT TO THIS SECTION 2.02 INTO THE
COLLECTION ACCOUNT WITHIN ONE BUSINESS DAY AFTER RECEIPT THEREOF AND DEPOSIT
OR CAUSE SUCH COLLECTIONS TO BE DEPOSITED INTO THE AGENT'S ACCOUNT WITHIN ONE
BUSINESS DAY OF DEPOSIT INTO THE COLLECTION ACCOUNT.
SECTION 2.03. Allocation and Distribution of Finance Charges.
19. ON EACH DISTRIBUTION DATE, THE SERVICER WILL ALLOCATE ALL
ALLOCABLE FINANCE CHARGE COLLECTIONS FOR THE IMMEDIATELY PRECEDING DUE PERIOD
HELD BY IT FOR THE PURCHASERS AND THE SUBORDINATED PURCHASER JOINTLY PURSUANT
TO SECTION 2.02 ABOVE TO THE PURCHASERS AND THE SUBORDINATED PURCHASER PRO
RATA BASED ON THEIR RELATIVE CAPITAL AS OF THE END OF THE SECOND PRECEDING
DUE PERIOD.
20. ON EACH DISTRIBUTION DATE, THE SERVICER SHALL FURTHER ALLOCATE AND
DISTRIBUTE ALLOCABLE FINANCE CHARGE COLLECTIONS ALLOCATED TO THE PURCHASERS
PURSUANT TO SECTION 2.03(A) IN THE FOLLOWING PRIORITY:
a) first, an amount equal to the accrued but unpaid Yield to such
Distribution Date with respect to each Purchaser Receivable Interest plus
any additional interest with respect to Yield that was due with respect to
such Purchaser Receivable Interest but not paid on a prior Distribution
Date will be deposited into the Agent's Account on behalf of the
Purchasers owning such Purchaser Receivable Interest;
b) second, an amount equal to any accrued but unpaid amounts,
fees and expenses (including amounts payable under the Fee Letter and (if
the Agent shall notify the Servicer at least two Business Days prior to
such Distribution Date) payments under Sections 1.05, 1.06, 4.01, 4.02,
4.03 and 7.04 of this Agreement) due and payable under this Agreement with
respect to each Purchaser Receivable Interest will be deposited into the
Agent's Account, for the Agent's own account or on behalf of the
Purchasers owning such Purchaser Receivable Interest, as the case may be;
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c) third, an amount equal to the Purchaser Loss Amount for such
Distribution Date shall be allocated and distributed, in accordance with
the provisions of Section 2.06 hereof, in the same manner as the portion
of Total Principal Collections allocated to the Purchasers for such
Distribution Date;
d) fourth, if the Servicer is neither Spirit nor an Affiliate of
Spirit, an amount equal to the Purchaser Servicer Fee for such
Distribution Date will be (i) paid to the Servicer, if the Servicer Escrow
Account has not been established as of such Distribution Date, or (ii)
allocated and deposited to the Servicer Escrow Account, if the Servicer
Escrow Account has been established as of such Distribution Date; and
e) fifth, the balance, if any, will constitute a portion of the
Excess Finance Charge Collections for such Distribution Date and will be
allocated as set forth in Section 2.04 hereof.
21. UPON RECEIPT OF FUNDS DEPOSITED INTO THE AGENT'S ACCOUNT PURSUANT
TO SUBSECTION (B) ABOVE, THE AGENT WILL DISTRIBUTE SUCH FUNDS TO THE RELEVANT
PURCHASERS OR RETAIN SUCH FUNDS FOR ITS OWN ACCOUNT, AS THE CASE MAY BE.
22. ON EACH DISTRIBUTION DATE, THE SERVICER SHALL FURTHER ALLOCATE AND
DISTRIBUTE ALLOCABLE FINANCE CHARGE COLLECTIONS ALLOCATED TO THE SUBORDINATED
PURCHASER PURSUANT TO SECTION 2.03(A) IN THE FOLLOWING PRIORITY:
(i) first, if the Servicer is neither Spirit nor an Affiliate of
Spirit, an amount equal to the Subordinated Purchaser Servicer Fee for
such Distribution Date will be (i) allocated and paid to the Servicer, if
the Servicer Escrow Account has not been established as of such
Distribution Date, or (ii) allocated and deposited to the Servicer Escrow
Account, if the Servicer Escrow Account has been established as of such
Distribution Date; and
(ii) second, the balance, if any, will constitute a portion of
Excess Finance Charge Collections for such Distribution Date and will be
allocated and distributed as set forth in Section 2.04 hereof.
SECTION 2.04. Allocation and Distribution of Excess Finance Charge
Collections. On each Distribution Date, the Servicer will allocate and
distribute all amounts, if any, specified pursuant to Section 2.03(b)(v) and
Section 2.03(d)(ii)
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(the "Excess Finance Charge Collections" for such Distribution Date), in the
following priority:
23. FIRST, AN AMOUNT EQUAL TO THE REQUIRED AMOUNT, IF ANY, WITH
RESPECT TO SUCH DUE PERIOD WILL BE DEPOSITED INTO THE AGENT'S ACCOUNT, AND
UPON RECEIPT OF SUCH FUNDS, THE AGENT SHALL APPLY SUCH FUNDS TO THE REQUIRED
AMOUNT, IN THE ORDER SET FORTH IN SECTION 2.05(A) HEREOF (THE PORTION OF THE
REQUIRED AMOUNT THAT RELATES TO THE PURCHASER SERVICER FEE SHALL BE (I)
ALLOCATED AND PAID TO THE SERVICER, IF THE SERVICER ESCROW ACCOUNT HAS NOT
BEEN ESTABLISHED AS OF SUCH DISTRIBUTION DATE, OR (II) ALLOCATED AND
DEPOSITED TO THE SERVICER ESCROW ACCOUNT, IF THE SERVICER ESCROW ACCOUNT HAS
BEEN ESTABLISHED AS OF SUCH DISTRIBUTION DATE);
24. SECOND, AN AMOUNT EQUAL TO THE AGGREGATE AMOUNT OF PURCHASER
CHARGE-OFFS WHICH HAVE NOT BEEN PREVIOUSLY REIMBURSED WILL BE ALLOCATED AND
DISTRIBUTED (I) DURING THE REVOLVING PERIOD, IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 2.06(A) HEREOF, IN THE SAME MANNER AS THE PORTION OF
TOTAL PRINCIPAL COLLECTIONS ALLOCATED TO THE PURCHASERS FOR SUCH DISTRIBUTION
DATE, AND (II) DURING THE AMORTIZATION PERIOD, IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 2.06(B) HEREOF, IN THE SAME MANNER AS PURCHASER
PRINCIPAL COLLECTIONS FOR SUCH DISTRIBUTION DATE;
25. THIRD, AN AMOUNT EQUAL TO THE SUBORDINATED PURCHASER LOSS AMOUNT
FOR SUCH DISTRIBUTION DATE WILL BE ALLOCATED AND DISTRIBUTED (I) DURING THE
REVOLVING PERIOD, IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2.06(A)
HEREOF, IN THE SAME MANNER AS THE PORTION OF TOTAL PRINCIPAL COLLECTIONS
ALLOCATED TO THE SUBORDINATED PURCHASER FOR SUCH DISTRIBUTION DATE, AND (II)
DURING THE AMORTIZATION PERIOD, IN ACCORDANCE WITH THE PROVISIONS OF SECTION
2.06(B) HEREOF, IN THE SAME MANNER AS THE PORTION OF TOTAL PRINCIPAL
COLLECTIONS ALLOCATED TO THE SUBORDINATED PURCHASER FOR SUCH DISTRIBUTION
DATE;
26. FOURTH, IF THE SERVICER IS SPIRIT OR AN AFFILIATE OF SPIRIT, AN
AMOUNT EQUAL TO THE SUM OF THE PURCHASER SERVICER FEE AND THE SUBORDINATED
PURCHASER SERVICER FEE FOR SUCH DISTRIBUTION DATE WILL BE (I) ALLOCATED AND
PAID TO THE SERVICER, IF THE SERVICER ESCROW ACCOUNT HAS NOT BEEN ESTABLISHED
AS OF SUCH DISTRIBUTION DATE, OR (II) ALLOCATED AND DEPOSITED TO THE SERVICER
ESCROW ACCOUNT, IF THE SERVICER ESCROW ACCOUNT HAS BEEN ESTABLISHED AS OF
SUCH DISTRIBUTION DATE;
27. FIFTH, AN AMOUNT EQUAL TO THE AGGREGATE AMOUNT BY WHICH THE
SUBORDINATED PURCHASER CAPITAL HAS BEEN REDUCED PURSUANT TO CLAUSES (C), (D)
AND (E) OF THE DEFINITION OF "SUBORDINATED PURCHASER CAPITAL" (BUT NOT IN
EXCESS OF THE
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aggregate amount of such reductions which have not been previously
reimbursed) will be allocated and distributed (i) during the Revolving
Period, in accordance with the provisions of Section 2.06(a) hereof, in the
same manner as the portion of Total Principal Collections allocated to the
Subordinated Purchaser for such Distribution Date, and (ii) during the
Amortization Period, in accordance with the provisions of Section 2.06(b)
hereof, in the same manner as the portion of Total Principal Collections
allocated to the Subordinated Purchaser for such Distribution Date;
28. sixth, an amount equal to the Subordinated Purchaser Yield will be
allocated and deposited into the Subordinated Purchaser Account; and
29. seventh, the balance, if any, will be (i) allocated to the Seller
Interest and deposited into the Seller Account if the Servicer Escrow Account
has not been established as of such Distribution Date, or (ii) allocated and
deposited to the Servicer Escrow Account, if the Servicer Escrow Account has
been established as of such Distribution Date.
SECTION 2.05. Required Amount; Subordinated Principal Collections;
Charge-Offs.
(a) On the second Business Day preceding each Distribution Date, the
Servicer will determine the amount (the "Required Amount"), if any, by which:
(i) the sum of:
(A) the accrued but unpaid Yield to such Distribution
Date,
(B) any additional interest with respect to Yield that
was due but not paid on a prior Distribution Date,
(C) the amount of any accrued but unpaid amounts, fees or
expenses due and payable to the Purchasers or the
Agent under this Agreement (including amounts payable
under the Fee Letter and (if the Agent shall have
notified the Servicer at least two Business Days
prior to such Distribution Date) payments under
Sections 1.05, 1.06, 4.01, 4.02, 4.03 and 7.04 of
this Agreement) accrued to such Distribution Date,
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(D) the Purchaser Loss Amount for the related Due Period,
and
(E) if Spirit or an Affiliate of Spirit is no longer the
Servicer, the Purchaser Servicer Fee accrued to such
Distribution Date;
exceeds:
(ii) the product of:
(A) Allocated Finance Charges, and
(B) the Purchaser Percentage.
The Servicer will give the Agent notice of the Required Amount on each such
determination date on which the Servicer determines that the Required Amount is
greater than zero.
(b) If the Required Amount is greater than zero, Excess Finance Charge
Collections for the related Distribution Date will be allocated to and used to
fund the Required Amount with respect to such Distribution Date pursuant to
Section 2.04(a) hereof.
(c) If Excess Finance Charge Collections with respect to such
Distribution Date are less than the Required Amount, an amount up to the amount
of the Subordinated Principal Collections for such Distribution Date will be
allocated to and used to fund the remaining Required Amount. The Subordinated
Purchaser Capital, if any, will be reduced by the amount of Subordinated
Principal Collections allocated to fund the Required Amount. In the event that
such reduction would cause the Subordinated Purchaser Capital to be a negative
number, the Subordinated Purchaser Capital will be reduced to zero, and the
Purchaser Capital will be reduced by the amount by which the Subordinated
Purchaser Capital would have been reduced below zero (but not by more than the
Purchaser Loss Amount for such Due Period).
(d) If Subordinated Principal Collections with respect to any Due
Period are insufficient to fund the remaining Required Amount for such Due
Period, then a portion of the Subordinated Purchaser Capital, if any, equal to
such insufficiency (but not in excess of the Purchaser Loss Amount for such Due
Period) will be allocated and distributed to the Purchasers and the Subordinated
Purchaser Capital will be reduced by the amount so allocated and distributed. In
the event that such reduction would cause the Subordinated Purchaser Capital to
be a negative number, the Subordinated Purchaser Capital will be reduced to
zero, and the Purchaser Capital will be reduced by the amount by
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which the Subordinated Purchaser Capital would have been reduced below zero (but
not by more than the Purchaser Loss Amount for such Due Period) and such amount
will be treated as a Purchaser Charge-Off.
(e) Such reductions of the Subordinated Purchaser Capital shall
thereafter be reimbursed and the Subordinated Purchaser Capital increased (but
not by an amount in excess of the aggregate reductions of the Subordinated
Purchaser Capital) on each Distribution Date by the amount of Excess Finance
Charge Collections for such Distribution Date allocated and available for that
purpose pursuant to Section 2.04(e) hereof.
(f) Purchaser Charge-Offs shall be reimbursed and the Purchaser Capital
increased (but not by an amount in excess of the aggregate Purchaser
Charge-Offs) on any Distribution Date by the amount of Excess Finance Charge
Collections allocated and available for that purpose pursuant to Section 2.04(b)
hereof.
SECTION 2.06. Allocation and Distribution of Allocable Principal
Collections.
(a) On each day during the Revolving Period on which Collections of
Pool Receivables are received by it, the Servicer will allocate Total Principal
Collections to the Purchasers and the Subordinated Purchaser pro rata based on
their relative Capital as of the end of the immediately preceding Due Period.
The Servicer shall, on each day during the Revolving Period on which Total
Principal Collections are allocated pursuant to the preceding sentence, unless
the Servicer shall then have knowledge that any of the conditions precedent set
forth in paragraph 2 of Exhibit II hereto has not been satisfied, reinvest with
the Seller, on behalf of the Purchasers and the Subordinated Purchaser,
respectively, in additional undivided percentage interests in the Pool
Receivables, the amount of the Total Principal Collections so allocated to the
Purchasers and the Subordinated Purchaser, as the case may be; provided,
however, that such reinvestment shall be effected in a manner such that the
Purchaser Capital and the Subordinated Purchaser Capital immediately following
such reinvestment are equal to the Purchaser Capital and the Subordinated
Purchaser Capital immediately prior to the allocation of Total Principal
Collections on such day pursuant to the first sentence of this Section 2.06(a).
(b) On each Distribution Date with respect to the Amortization Period,
the Servicer will allocate the Total Principal Collections received during the
preceding Due Period to the Purchasers and the Subordinated Purchaser pro rata
based on their relative Capital as of the end of the immediately preceding Due
Period. On each Distribution Date, the Servicer will
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distribute the portion of such Total Principal Collections so allocated to the
Purchasers (the "Purchaser Principal Collections") in the following priority:
(i) first, such Purchaser Principal Collections will be
allocated to the Purchaser Receivable Interests and deposited into the
Agent's Account, until Adjusted Purchaser Capital for such Distribution
Date shall have been reduced to zero, and upon receipt of such funds,
the Agent shall distribute such funds to the Purchasers;
(ii) second, the balance of such Purchaser Principal
Collections will be allocated to the Purchaser Receivable Interests and
deposited into the Agent's Account, until Purchaser Capital for such
Distribution Date shall have been reduced to zero; and
(iii) third, the balance, if any, will be allocated to the
Seller Interest and deposited into the Seller Account.
On each Distribution Date, the Servicer will distribute the portion of such
Total Principal Collections so allocated to the Subordinated Purchaser and not
used to fund any portion of the Required Amount pursuant to Section 2.05(c)
hereof in the following priority:
(x) first, such Total Principal Collections will be allocated to the
Purchaser Receivable Interests and deposited into the Agent's Account so long as
the Subordinated Purchaser Percentage (calculated after giving effect to all
reductions in Purchaser Capital to be effected on such Distribution Date
pursuant to clause (i) of this Section 2.06(b) and this clause (x)) shall not
exceed 24.5%; funds so deposited into the Agent's Account shall be distributed
by the Agent to the Purchasers in reduction of Purchaser Capital; and
(y) second, the balance, if any, will be deposited into the SP Escrow
Account.
SECTION 2.07. Dilution Amounts.
(a) On the last day of each Due Period, the aggregate amount of
Principal Receivables used to calculate the Seller Interest will be reduced by
an amount equal to the sum of the Series Dilution Amount for this Series and for
all other Receivables Purchase Series (such reduction to be in addition to the
reductions required by Section 4.3(d) of the Pooling and Servicing Agreement).
If such reduction would cause the Seller Interest to be less than the Aggregate
Minimum Seller Interest (as defined in the Pooling and Servicing Agreement) (the
amount
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by which the Seller Interest is reduced below the Aggregate Minimum Seller
Interest is referred to herein as the "Dilution Deficit"), then the Owner shall
calculate an amount (the "Series Dilution Deficit") equal to the lesser of the
Dilution Deficit and the Series Dilution Amount for this Series, and shall
promptly, but in no event later than 10 Business Days after the last day of such
Due Period, either (i) deposit into the Agent's Account in immediately available
funds an amount equal to such Series Dilution Deficit, which deposit shall be
treated as Allocable Principal Collections with respect to such Due Period and
shall be applied in accordance with this Article II, or (ii) convey Principal
Receivables arising in Additional Accounts to the Trust in an aggregate amount
at least equal to such Series Dilution Deficit; provided, that if the Owner
shall fail to either deposit the Series Dilution Deficit into the Agent's
Account or convey Principal Receivables arising in Additional Accounts in an
aggregate amount at least equal to such Series Dilution Deficit with respect to
any Due Period within ten days after the Owner shall be required to make such a
deposit or conveyance, then if such Series Dilution Deficit exceeds the Minimum
Seller Interest,(i) the Subordinated Purchaser Capital will be reduced by an
amount equal to the lesser of such excess and the Subordinated Purchaser Capital
and (ii) the positive difference, if any, between such excess and the
Subordinated Purchaser Capital will be treated as a Purchaser Charge-Off and the
Purchaser Capital will be reduced by such amount.
(b) If the Pool Receivables shall include any Discount Option
Receivables on any date when the Owner is required, pursuant to Section 2.07(a)
of this Agreement, to deposit any amount into the Agent's Account or to convey
Principal Receivables to the Trust, the Owner shall on such date make an
additional deposit into the Agent's Account or convey Principal Receivables
arising in Additional Accounts to the Trust, in each case in an amount equal to
the difference between (i) the amount the Owner would have been required to
deposit or convey on such date pursuant to Section 2.07(a) if none of the Pool
Receivables had been Discount Option Receivables, minus (ii) the amount actually
deposited or conveyed by the Owner on such date pursuant to Section 2.07(a).
ARTICLE III
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EARLY AMORTIZATION EVENTS
SECTION 3.01. Representations and Warranties; Covenants.
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(a) Each of the Trustee, the Subordinated Purchaser, the Owner and the
Servicer hereby makes the representations and warranties set forth for such
party in Exhibit III hereto.
(b) Each of the Trustee, the Subordinated Purchaser, the Owner and the
Servicer hereby agrees to perform and observe the covenants set forth for such
party in Exhibit IV hereto.
(c) In addition, the Servicer hereby agrees to perform and observe the
covenants set forth in Exhibit V hereto.
SECTION 3.02. Early Amortization Events. If any of the Early
Amortization Events set forth in Exhibit VI hereto shall occur and be
continuing, the Agent may, by notice to the Owner, the Seller and the Servicer,
declare the Facility Termination Date to have occurred (in which case the
Facility Termination Date shall be deemed to have occurred); provided that,
automatically upon the occurrence of any event (without any requirement for the
passage of time or the giving of notice) described in paragraph (g) of Exhibit
VI, the Facility Termination Date shall occur. Upon any such declaration or upon
any such automatic termination, and subject to any limitations on the
Purchasers' rights and remedies in respect of the Pool Receivables under the
Pooling and Servicing Agreement or pursuant to the other terms of this
Agreement, the Purchasers and the Agent shall have, in addition to the rights
and remedies which they may have under this Agreement, all other rights and
remedies provided under the UCC with respect to the Receivable Interests
purchased by them hereunder and under other applicable law, which rights and
remedies shall be cumulative; provided, however, that so long as any Investor
Certificates shall be outstanding, the Agent and the Purchasers shall not
exercise such other rights and remedies under the UCC and other applicable law
unless the Agent shall have obtained and delivered to the Trustee an Opinion of
Counsel to the effect that the exercise of such rights and remedies shall not
materially and adversely affect the interests of the holders of the Investor
Certificates.
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ARTICLE IV
INDEMNIFICATION; PURCHASE OF
INELIGIBLE RECEIVABLES
SECTION 4.01. Indemnities by the Owner. Without limiting any other
rights that the Agent, the Purchaser Representative, the Seller, the Trustee, or
any Purchaser or any of their respective Affiliates (each, an "Indemnified
Party") may have under this Agreement or under applicable law, the Owner hereby
agrees to indemnify each Indemnified Party from and against any and all claims,
losses and liabilities (including reasonable attorneys' fees) (all of the
foregoing being collectively referred to as "Indemnified Amounts") arising out
of or resulting from this Agreement or the use of proceeds of purchases or
reinvestments or the ownership of Purchaser Receivable Interests or in respect
of any Receivable or any Cardholder Agreement, excluding, however, (a)
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party or any of its Affiliates, (b)
recourse (except as otherwise specifically provided in this Agreement) for
uncollectible Receivables or (c) any income taxes incurred by such Indemnified
Party arising out of or as a result of this Agreement or the ownership of
Purchaser Receivable Interests or in respect of any Receivable or any Cardholder
Agreement. Without limiting or being limited by the foregoing, the Owner shall
pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from any of the following:
(i) the creation of an undivided percentage ownership interest
in any Receivable (A) which purports to be part of the Net
Receivables Pool Balance but which is not, at the date of the
creation of such interest, an Eligible RPA Receivable or (B) the
Obligor of which is an Affiliate of any of the parties hereto or is
a government or a governmental subdivision or agency;
(ii) reliance on (A) any written representation or warranty or
statement made or deemed made by the Seller or the Owner (or any of
their respective officers) on or prior to the date of this Agreement
under or in connection with this Agreement or the Insurance
Agreement, or any exhibit, certificate or report delivered pursuant
hereto or thereto or in connection herewith or therewith, which
shall have been incorrect in any material respect when made, and (B)
thereafter, any representation or warranty or statement made or
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deemed made by the Seller or the Owner (or any of their respective
officers) under or in connection with this Agreement or the
Insurance Agreement which shall have been incorrect in any material
respect when made;
(iii) the failure by the Seller or the Owner to comply with
any applicable law, rule or regulation with respect to any Pool
Receivable or the related Cardholder Agreement (including, without
limitation, Regulation Z of the Board of Governors of the Federal
Reserve System, the Federal Consumer Protection Act (including,
without limitation, the Federal Truth in Lending Act), the Fair
Credit Billing Act, and all other laws, rules and regulations
relating to usury, consumer protection, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices and privacy); or the failure of any
Pool Receivable or the related Cardholder Agreement to conform to
any such applicable law, rule or regulation;
(iv) the failure to vest in the relevant Purchaser a
perfected undivided percentage ownership interest in the Receivables
in, or purporting to be in, the Receivables Pool and the Collections
in respect thereof, free and clear of any Adverse Claim (except for
interests created therein pursuant to the Pooling and Servicing
Agreement);
(v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Receivables in, or purporting to be in, the
Receivables Pool and the Collections in respect thereof, whether at
the time of any purchase or reinvestment or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Receivable in, or purporting to be in, the
Receivables Pool (including, without limitation, a defense based on
such Receivable or the related Cardholder Agreement not being a
legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim
resulting from the sale of the merchandise or services related to
such Receivable or the furnishing or failure to furnish such
merchandise or services;
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(vii) any failure of the Seller or the Owner to perform its
duties or obligations in accordance with the provisions hereof or of
the Pooling and Servicing Agreement or to perform its duties or
obligations under the Cardholder Agreements;
(viii) any products liability or other claim arising out of or
in connection with merchandise, insurance or services which are the
subject of any Cardholder Agreement;
(ix) the commingling of Collections of Pool Receivables at
any time with other funds;
(x) any action or omission by the Owner or the Seller
reducing or impairing the rights of any Purchaser with respect to
any Pool Receivable or the value of any Pool Receivable (including,
without limitation, any cancellation, modification or netting of any
Receivable by the Owner or the Seller); or
(xi) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of purchases or reinvestments
or the ownership of Purchaser Receivable Interests or in respect of
any Receivable or Cardholder Agreement.
SECTION 4.02. Indemnities by the Servicer. Without limiting any other
rights that any Indemnified Party may have under this Agreement or under
applicable law, the Servicer hereby agrees to indemnify each Indemnified Party
from and against, and to pay on demand to each Indemnified Party any and all
amounts necessary to indemnify such Indemnified Party from and against, any and
all Indemnified Amounts relating to or resulting from any of the following:
(i) reliance on (A) any written representation or warranty
or statement made or deemed made by the Servicer (or any of its
officers) on or prior to the date of this Agreement under or in
connection with this Agreement, or any exhibit, certificate or
report delivered pursuant hereto or in connection herewith, which
shall have been incorrect in any material respect when made, and (B)
thereafter, any representation or warranty or statement made or
deemed made by the Servicer (or any of its officers) under or in
connection with this Agreement which shall have been incorrect in
any material respect when made;
(ii) the failure by the Servicer to comply with any
applicable law, rule or regulation with respect to
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any Pool Receivable or the related Cardholder Agreement (including,
without limitation, Regulation Z of the Board of Governors of the
Federal Reserve System, the Federal Consumer Protection Act
(including, without limitation, the Federal Truth in Lending Act),
the Fair Credit Billing Act, and all other laws, rules and
regulations relating to usury, consumer protection, truth in
lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy);
(iii) any claim relating to collection activities with respect
to any Pool Receivable;
(iv) any failure of the Servicer or the Administrative
Servicer to perform its duties or obligations in accordance with the
provisions hereof or of the Administrative Servicer Agreement or of
the Pooling and Servicing Agreement;
(v) any action or omission by the Servicer reducing or
impairing the rights of any Purchaser with respect to any Pool
Receivable or the value of any Pool Receivable;
excluding, however, (a) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of such Indemnified Party or any of
its Affiliates, (b) recourse (except as otherwise specifically provided in this
Agreement) for uncollectible Receivables or (c) any income taxes incurred by
such Indemnified Party arising out of or as a result of this Agreement or the
ownership of Receivable Interests or in respect of any Receivable or any
Cardholder Agreement.
SECTION 4.03. Purchase of Ineligible and Certain Other Receivables.
(a) The Owner agrees to make payment when due of all deposits which the
Owner is required to make pursuant to Section 2.4(d)(iii) and 2.4(e) of the
Pooling and Servicing Agreement. Any amount deposited by the Owner in the
Collection Account pursuant to Section 2.4(d)(iii) or 2.4(e) of the Pooling and
Servicing Agreement, which deposit is made on account of the Receivable
Interests created under this Agreement, shall be deemed to be a Collection in
respect of the related Pool Receivable as to which such deposit is made, and the
amount of each such Collection shall be applied in accordance with Article II
hereof. If any such deposit is made after the end of a Due Period but on or
prior to the first Distribution Date following the end of such Due Period, such
deposit shall be deemed to be a Collection received during such Due Period.
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(b) If the Pool Receivables shall include any Discount Option
Receivables on any date when the Owner is required, pursuant to Section
2.4(d)(iii) or 2.4(e) of the Pooling and Servicing Agreement, to deposit any
amount into the Collection Account on account of the Receivable Interests
created under this Agreement, the Owner shall make an additional deposit into
the Collection Account on such date in an amount equal to the difference between
(i) the amount the Owner would have been required to deposit into the Collection
Account on such date on account of such Receivable Interests pursuant to the
Pooling and Servicing Agreement if none of the Pool Receivables had been
Discount Option Receivables, minus (ii) the amount actually deposited by the
Owner into the Collection Account on such date on account of such Receivable
Interests pursuant to the Pooling and Servicing Agreement.
SECTION 4.04. Reassignment of Receivables and Receivable Interests.
(a) If, pursuant to Section 2.4(d) of the Pooling and Servicing
Agreement, any Receivables that are "Ineligible Receivables" (as defined in the
Pooling and Servicing Agreement) are required to be assigned by the Seller to
the Owner, each Purchaser and the Subordinated Purchaser hereby assigns such
Receivables to the extent of its Receivable Interest to the Seller, effective
upon and simultaneously with the assignment by the Seller of such Receivable to
the Owner in accordance with the Pooling and Servicing Agreement, subject to the
prior payment by the Owner of the amounts required under the Pooling and
Servicing Agreement.
(b) If, pursuant to Section 2.4(e) of the Pooling and Servicing
Agreement, all Receivable Interests are required to be assigned by the Seller to
the Owner, each Purchaser and the Subordinated Purchaser hereby assigns its
Receivable Interest to the Seller, effective upon and simultaneously with the
assignment by the Seller of the Receivables to the Owner in accordance with the
Pooling and Servicing Agreement, subject to the prior payment by the Owner of
the amounts required under the Pooling and Servicing Agreement.
(c) If, pursuant to Section 9.2 of the Pooling and Servicing Agreement,
all Receivables are to be sold by the Seller, each Purchaser and the
Subordinated Purchaser hereby assigns its Receivable Interest to the Seller,
effective upon and simultaneously with the sale by the Seller of the Receivables
in accordance with the Pooling and Servicing Agreement.
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SECTION 4.05. Repurchase of Purchaser Receivable Interests. On any
Distribution Date on or after the Facility Termination Date, the Owner may, upon
30 days' prior notice to the Agent, purchase all, but not less than all, of the
Purchaser Receivable Interests outstanding on such Distribution Date, in
accordance with the terms specified in Section 12.2(a) of the Pooling and
Servicing Agreement, provided that on such Distribution Date (a) the
Subordinated Purchaser Capital has not been reduced to zero, and (b) the sum of
the Purchaser Capital plus the Subordinated Purchaser Capital is equal to or
less than 5% of the highest Purchase Limit theretofore in effect under this
Agreement. The deposit required in connection with any such purchase shall be
made to the Agent's Account, for the account of the relevant Purchaser(s), and
shall be in an amount equal to the Purchaser Capital plus all Yield accrued
thereon through the date of such purchase. The Owner shall also pay to the
Agent, on the date of any such purchase, for the account of the Agent and the
relevant Purchaser(s), Indemnified Parties and Affected Persons as the case may
be, all accrued fees, costs and expenses and Indemnified Amounts payable
hereunder to the Agent, the Purchasers, Indemnified Parties and/or Affected
Persons.
ARTICLE V
THE SERVICER
SECTION 5.01. Designation of the Servicer; Delegation of Duties.
30. EACH OF THE SELLER, THE SUBORDINATED PURCHASER, THE PURCHASERS AND
THE AGENT HEREBY CONFIRMS THAT THE PERSON APPOINTED FROM TIME TO TIME TO ACT
AS SERVICER UNDER THE POOLING AND SERVICING AGREEMENT, INITIALLY SPIRIT,
SHALL ACT AS ITS AGENT AND AS AGENT FOR THE HOLDERS OF THE INVESTOR
CERTIFICATES IN SERVICING THE POOL RECEIVABLES AND THE COLLECTIONS. THE
PARTIES HERETO CONFIRM THAT IT IS IMPRACTICABLE TO HAVE MORE THAN ONE
SERVICER SERVICING THE POOL RECEIVABLES AND, ACCORDINGLY, ALL SERVICING
ACTIVITIES DESCRIBED IN THE POOLING AND SERVICING AGREEMENT SHALL BE THE
RESPONSIBILITY OF THE SERVICER AND SHALL BE PERFORMED IN ACCORDANCE WITH THE
POOLING AND SERVICING AGREEMENT. SPIRIT AS THE INITIAL SERVICER HEREBY
CONFIRMS, FOR THE BENEFIT OF THE PARTIES HERETO, THAT IT SHALL PERFORM THE
DUTIES AND OBLIGATIONS OF THE SERVICER PURSUANT TO THE TERMS OF THE POOLING
AND SERVICING AGREEMENT.
31. IN ACCORDANCE WITH SECTION 10.2 OF THE POOLING AND SERVICING
AGREEMENT, THE SERVICER MAY BE TERMINATED FROM TIME TO TIME. ANY SUCCESSOR
SERVICER SHALL BE APPOINTED BY THE TRUSTEE IN ACCORDANCE WITH SECTION 10.2 OF
THE POOLING AND
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SERVICING AGREEMENT AND ANY SUCCESSOR SERVICER SO APPOINTED SHALL ACT AS THE
SERVICER.
32. THE SERVICER MAY SUBCONTRACT WITH ANY OTHER PERSON, WITH THE PRIOR
CONSENT OF THE AGENT (WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD), FOR
THE ADMINISTRATION AND COLLECTION OF THE POOL RECEIVABLES; PROVIDED, HOWEVER,
THAT SUCH SUBCONTRACT SHALL NOT AFFECT THE SERVICER'S LIABILITY FOR
PERFORMANCE OF ITS DUTIES AND OBLIGATIONS PURSUANT TO THE TERMS HEREOF AND OF
THE POOLING AND SERVICING AGREEMENT. THE AGENT HEREBY ACKNOWLEDGES AND
CONSENTS TO THE CONTINUATION OF BSI BUSINESS SERVICES, INC. AS THE
ADMINISTRATIVE SERVICER PURSUANT TO THE TERMS AND CONDITIONS SET FORTH IN THE
ADMINISTRATIVE SERVICER AGREEMENT.
SECTION 5.02. Administration and Collection of the Pool Receivables. In
addition to performing the duties undertaken pursuant to the Pooling and
Servicing Agreement, the Servicer shall conduct the administration and
collection of the Pool Receivables in accordance with the provisions of Exhibit
V.
SECTION 5.03. Servicer Fee. The Servicer shall be paid a servicing fee
(the "Servicer Fee") at the per annum rate of 2.0% (the "Servicing Fee Rate") on
the average daily Purchaser Capital and Subordinated Purchaser Capital of each
Receivable Interest, from the date of purchase of such Receivable Interest until
the date on which such Purchaser Capital and Subordinated Purchaser Capital is
reduced to zero, payable on each Distribution Date for the immediately preceding
Settlement Period. The Servicer Fee shall be payable only from Collections
pursuant to, and subject to the priority of payment set forth in, Article II of
the Agreement.
SECTION 5.04. The Servicer Escrow Account
33. ESTABLISHMENT. UPON THE OCCURRENCE OF ANY EARLY AMORTIZATION EVENT
OR ANY "EARLY AMORTIZATION EVENT" (AS DEFINED IN THE PARALLEL PURCHASE
COMMITMENT), THE AGENT MAY, IN ITS DISCRETION, AND SHALL, AT THE REQUEST OF
CAPMAC, ESTABLISH AN ACCOUNT (THE "SERVICER ESCROW ACCOUNT") IN THE NAME AND
UNDER THE CONTROL OF THE AGENT WITH AN ELIGIBLE INSTITUTION (WHICH MAY BE
CITIBANK, N.A.) TITLED "CITICORP NORTH AMERICA, INC., AS AGENT, PURSUANT TO
THE RECEIVABLES PURCHASE AGREEMENTS DATED AS OF APRIL __, 1996 AMONG SPIRIT
OF AMERICA NATIONAL BANK, AS OWNER AND SERVICER, THE AGENT AND CERTAIN OTHER
PARTIES (SERVICER ESCROW ACCOUNT)." THE SERVICER ESCROW ACCOUNT SHALL BE A
FULLY SEGREGATED TRUST ACCOUNT, UNLESS THE ESCROW BANK SHALL BE (I) AN
ELIGIBLE INSTITUTION HAVING SHORT-TERM DEBT RATINGS FROM S&P AND MOODY'S NO
LOWER THAN A-1/P-1 OR (II) CITIBANK, N.A. THE SERVICER ESCROW ACCOUNT SHALL
BE UNDER THE SOLE DOMINION AND
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CONTROL OF THE AGENT, AND NEITHER THE OWNER NOR THE SERVICER, NOR ANY PERSON
CLAIMING BY, THROUGH OR UNDER THE OWNER OR THE SERVICER, SHALL HAVE ANY
RIGHT, TITLE OR INTEREST IN, OR ANY RIGHT TO WITHDRAW ANY AMOUNT FROM, THE
SERVICER ESCROW ACCOUNT.
34. DEPOSITS TO SERVICER ESCROW ACCOUNT. IN ADDITION TO THE DEPOSITS
TO THE SERVICER ESCROW ACCOUNT REQUIRED TO BE MADE PURSUANT TO SECTION 2.04
OF THIS AGREEMENT, ON EACH DISTRIBUTION DATE OCCURRING ON OR AFTER THE
ESTABLISHMENT OF THE SERVICER ESCROW ACCOUNT, (I) THE SERVICER (SO LONG AS
SPIRIT OR AN AFFILIATE OF SPIRIT IS ACTING AS THE SERVICER UNDER THE POOLING
AND SERVICING AGREEMENT) SHALL DEPOSIT TO THE SERVICER ESCROW ACCOUNT THE
"MONTHLY SERVICING FEE" (AS SUCH TERM IS DEFINED IN THE POOLING AND SERVICING
AGREEMENT) PAYABLE TO OR RECEIVABLE BY IT PURSUANT TO THE TERMS AND
CONDITIONS OF THE POOLING AND SERVICING AGREEMENT, AND (II) SPIRIT SHALL
DEPOSIT TO THE SERVICER ESCROW ACCOUNT ALL COLLECTIONS (AS DEFINED IN THE
POOLING AND SERVICING AGREEMENT) OF FINANCE CHARGE RECEIVABLES PAYABLE TO OR
RECEIVABLE BY IT, IN ITS CAPACITY AS THE HOLDER OF THE EXCHANGEABLE SELLER
CERTIFICATE, PURSUANT TO THE TERMS AND CONDITIONS OF THE POOLING AND
SERVICING AGREEMENT OR ANY SERIES (OTHER THAN THE SERIES CREATED PURSUANT TO
THIS AGREEMENT); PROVIDED, HOWEVER, THAT SPIRIT SHALL NOT BE REQUIRED BY THIS
SECTION 5.04(B) TO DEPOSIT TO THE SERVICER ESCROW ACCOUNT FUNDS (NOT IN
EXCESS OF $777,000) PAYABLE TO SPIRIT IN CONNECTION WITH SERIES 1994-2, SO
LONG AS SUCH FUNDS ARE APPLIED AS PROVIDED IN PARAGRAPH 2(R) OF EXHIBIT IV.
35. TAXATION. THE TAXPAYER IDENTIFICATION NUMBER ASSOCIATED WITH THE
SERVICER ESCROW ACCOUNT SHALL BE THAT OF THE OWNER AND THE OWNER WILL REPORT
FOR FEDERAL, STATE AND LOCAL INCOME TAX PURPOSES THE INCOME, IF ANY, EARNED
ON FUNDS IN THE SERVICER ESCROW ACCOUNT.
36. INVESTMENTS. THE OWNER IS HEREBY APPOINTED AS THE INVESTMENT
AGENT, WHICH APPOINTMENT THE OWNER HEREBY ACCEPTS, TO ACT ON BEHALF OF THE
AGENT FOR DETERMINING INVESTMENTS OF CASH AT ANY TIME ON DEPOSIT IN THE
SERVICER ESCROW ACCOUNT. ALL FUNDS ON DEPOSIT IN THE SERVICER ESCROW ACCOUNT
SHALL BE INVESTED IN ELIGIBLE INVESTMENTS (AS SHALL BE SPECIFIED BY THE
OWNER, AS INVESTMENT AGENT, IN WRITING TO THE ESCROW BANK AND THE AGENT;
PROVIDED, THAT IF THE OWNER SHALL FAIL TO SPECIFY SUCH ELIGIBLE INVESTMENTS
IN A TIMELY MANNER, THE AGENT MAY SPECIFY SUCH ELIGIBLE INVESTMENTS) WHICH
SHALL MATURE NOT LATER THAN THE BUSINESS DAY PRECEDING THE NEXT DISTRIBUTION
DATE AND SHALL BE HELD TO MATURITY. ALL SUCH INVESTMENTS SHALL BE MADE IN THE
NAME OF THE ESCROW BANK, AS AGENT, AND HELD BY THE ESCROW BANK, OR ITS
NOMINEE, FOR THE BENEFIT OF THE AGENT. THE ESCROW BANK SHALL NOT BE LIABLE
FOR ANY LOSS
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INCURRED IN CONNECTION WITH ANY INVESTMENT IN THE SERVICER ESCROW ACCOUNT,
EXCEPT FOR LOSSES IN RESPECT OF INVESTMENTS IN ANY INVESTMENT ISSUED OR
GUARANTEED BY THE ESCROW BANK. INCOME EARNED ON FUNDS DEPOSITED TO THE
SERVICER ESCROW ACCOUNT, IF ANY, SHALL BE PAID TO THE OWNER MONTHLY ON OR
ABOUT THE DATE OF DELIVERY OF EACH MONTHLY STATEMENT PURSUANT TO SECTION
5.04(F).
37. NEW SERVICER ESCROW ACCOUNT. IN THE EVENT THE ESCROW BANK CEASES
TO BE AN ELIGIBLE INSTITUTION, THE AGENT SHALL, WITHIN TEN DAYS AFTER
LEARNING THEREOF, ESTABLISH A NEW SERVICER ESCROW ACCOUNT (AND TRANSFER ANY
BALANCE AND INVESTMENTS THEN IN THE SERVICER ESCROW ACCOUNT TO SUCH NEW
SERVICER ESCROW ACCOUNT) AT ANOTHER ELIGIBLE INSTITUTION.
38. STATEMENTS FOR SERVICER ESCROW ACCOUNT. ON A MONTHLY BASIS, THE
ESCROW BANK SHALL PROVIDE THE AGENT WITH A WRITTEN STATEMENT WITH RESPECT TO
THE PRECEDING CALENDAR MONTH REGARDING THE SERVICER ESCROW ACCOUNT IN A FORM
CUSTOMARY FOR STATEMENTS PROVIDED BY THE ESCROW BANK FOR OTHER ACCOUNTS HELD
BY IT, WHICH STATEMENT SHALL INCLUDE, AT A MINIMUM, THE AMOUNT ON DEPOSIT IN
THE SERVICER ESCROW ACCOUNT, AND THE DATES AND AMOUNTS OF ALL DEPOSITS,
WITHDRAWALS AND INVESTMENT EARNINGS WITH RESPECT TO THE ESCROW ACCOUNT. THE
SERVICER BANK SHALL PROMPTLY DELIVER A COPY OF EACH SUCH STATEMENT TO THE
OWNER AND TO THE SERVICER.
39. PAYMENTS FROM SERVICER ESCROW ACCOUNT. AT LEAST THREE BUSINESS DAYS
PRIOR TO THE DUE DATE THEREOF, THE SERVICER SHALL PROVIDE THE AGENT AND
CAPMAC WITH COPIES OF STATEMENTS OR INVOICES FOR SERVICING FEES FROM THE
SERVICER (IF OTHER THAN SPIRIT OR AN AFFILIATE OF SPIRIT), THE ADMINISTRATIVE
SERVICER, AND ANY OTHER PERSON (OTHER THAN SPIRIT OR AN AFFILIATE OF SPIRIT)
WITH WHOM THE SERVICER HAS SUBCONTRACTED FOR ADMINISTRATION AND COLLECTION OF
THE POOL RECEIVABLES. IF SUCH STATEMENTS OR INVOICES APPEAR ON THEIR FACE TO
BE IN ORDER AND REASONABLY CONSISTENT WITH THE SERVICER'S PRIOR PRACTICES
(ANY SUCH DETERMINATION BY THE AGENT TO BE CONCLUSIVE AND BINDING ON SPIRIT
FOR PURPOSES OF THIS AGREEMENT WITHOUT LIMITING SPIRIT'S ABILITY TO SEEK
REIMBURSEMENT OF INCORRECT CHARGES FROM THE SERVICER OR OTHER SERVICER
PROVIDER), THE AGENT SHALL, TO THE EXTENT FUNDS ARE THEN AVAILABLE IN THE
SERVICER ESCROW ACCOUNT, PAY DIRECTLY TO THE SERVICE PROVIDERS THE AMOUNTS
SET FORTH IN SUCH STATEMENTS OR INVOICES ON THE RESPECTIVE DUE DATES
THEREFOR.
40. ADDITIONAL INTEREST RATE AGREEMENTS. IF THE PAYMENT RATIO FOR ANY
DUE PERIOD ENDING DURING THE 3-MONTH PERIOD FOLLOWING THE DATE OF THE
ESTABLISHMENT OF THE SERVICER ESCROW ACCOUNT (THE "OBSERVATION PERIOD")IS
LESS THAN 6%, THE AGENT MAY, IN ITS DISCRETION, AND SHALL, AT THE REQUEST OF
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CAPMAC, ARRANGE FOR THE PURCHASE OF ADDITIONAL INTEREST RATE CAPS WITHIN 30
DAYS AFTER THE TERMINATION OF THE OBSERVATION PERIOD, WHICH SHALL BE ASSIGNED
TO THE TRUST AS AN ENHANCEMENT FOR THE RECEIVABLES PURCHASE SERIES ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE PARALLEL PURCHASE COMMITMENT AND SHALL
HAVE SUBSTANTIALLY THE SAME TERMS AS THE EXISTING INTEREST RATE AGREEMENTS
EXCEPT THAT SUCH RATE CAPS SHALL AMORTIZE OVER A TERM OF NOT MORE THAN 24
MONTHS FROM THE COMMENCEMENT OF THE AMORTIZATION PERIOD, SUCH AMORTIZATION
SCHEDULE TO BE DETERMINED AT THE TIME OF PURCHASE OF THE RATE CAPS BY THE
AGENT AND CAPMAC, AFTER CONSULTATION WITH THE OWNER, BASED ON REASONABLE
PROJECTIONS OF PURCHASER CAPITAL OUTSTANDING IN EACH DUE PERIOD DURING THE
AMORTIZATION PERIOD DERIVED FROM THE PURCHASER CAPITAL OUTSTANDING AT THE
TIME OF PURCHASE, THE PAYMENT RATIO DURING THE OBSERVATION PERIOD AND OTHER
RELEVANT FACTORS. THE AGENT SHALL PAY THE PREMIUM FOR SUCH INTEREST RATE CAPS
FROM FUNDS THEN AVAILABLE IN THE SERVICER ESCROW ACCOUNT, AND THE AGENT SHALL
HAVE NO OBLIGATION TO PURCHASE SUCH INTEREST RATE CAPS TO THE EXTENT FUNDS
AVAILABLE IN THE SERVICER ESCROW ACCOUNT ARE INSUFFICIENT TO PAY THE PREMIUM
THEREFOR.
41. PLEDGE. THE OWNER HEREBY PLEDGES AND ASSIGNS TO THE AGENT FOR THE
BENEFIT OF THE PURCHASERS AND THE BANKS, AND HEREBY GRANTS TO THE AGENT FOR
THE BENEFIT OF THE PURCHASERS AND THE BANKS, A SECURITY INTEREST IN, ALL OF
THE OWNER'S RIGHT, TITLE AND INTEREST IN AND TO THE SERVICER ESCROW ACCOUNT,
INCLUDING, WITHOUT LIMITATION, ALL FUNDS ON DEPOSIT THEREIN, ALL INVESTMENTS
ARISING OUT OF SUCH FUNDS, ALL INTEREST AND ANY OTHER INCOME ARISING
THEREFROM, ALL CLAIMS THEREUNDER OR IN CONNECTION THEREWITH, AND ALL CASH,
INSTRUMENTS, SECURITIES, RIGHTS AND OTHER PROPERTY AT ANY TIME AND FROM TIME
TO TIME RECEIVED, RECEIVABLE OR OTHERWISE DISTRIBUTED IN RESPECT OF SUCH
ACCOUNT, SUCH FUNDS OR SUCH INVESTMENTS, AND ALL MONEY AT ANY TIME IN THE
POSSESSION OR UNDER THE CONTROL OF, OR IN TRANSIT TO SUCH ACCOUNT, OR ANY
BAILEE, NOMINEE, AGENT OR CUSTODIAN OF THE ESCROW BANK, AND ALL PROCEEDS AND
PRODUCTS OF ANY OF THE FOREGOING. EXCEPT AS PROVIDED IN THE PRECEDING
SENTENCE, NEITHER THE OWNER NOR THE SELLER MAY ASSIGN, TRANSFER OR OTHERWISE
CONVEY ITS RIGHTS UNDER THIS AGREEMENT TO RECEIVE ANY AMOUNTS FROM THE
SERVICER ESCROW ACCOUNT.
42. TERMINATION OF SERVICER ESCROW ACCOUNT. UPON THE LATER OF THE
FINAL DISTRIBUTION DATE AND THE "FINAL DISTRIBUTION DATE" UNDER THE PARALLEL
PURCHASE COMMITMENT, ALL FUNDS THEN ON DEPOSIT IN THE SERVICER ESCROW ACCOUNT
SHALL BE PAID TO THE SELLER AND DEPOSITED INTO THE SELLER ACCOUNT, AND THE
SERVICER ESCROW ACCOUNT SHALL BE CLOSED.
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ARTICLE VI
THE PURCHASER REPRESENTATIVE
SECTION 6.01. Designation of the Purchaser Representative.
43. CNAI IS HEREBY DESIGNATED AS, AND HEREBY AGREES TO PERFORM THE
DUTIES AND OBLIGATIONS OF, THE PURCHASER REPRESENTATIVE PURSUANT TO THE TERMS
HEREOF AND (WITH RESPECT TO THE RECEIVABLES PURCHASE SERIES ARISING IN
CONNECTION WITH THIS AGREEMENT) PURSUANT TO THE POOLING AND SERVICING
AGREEMENT.
44. THE SUBORDINATED PURCHASER AND THE AGENT HEREBY APPOINT THE
PURCHASER REPRESENTATIVE, FROM TIME TO TIME DESIGNATED PURSUANT TO THIS
SECTION 6.01, AS THE REPRESENTATIVE FOR THEMSELVES AND FOR THE PURCHASERS TO
PERFORM THE DUTIES AND OBLIGATIONS OF THE PURCHASER REPRESENTATIVE ON THEIR
BEHALF UNDER THE POOLING AND SERVICING AGREEMENT.
45. THE AGENT MAY, BY NOTICE TO THE SELLER, THE OWNER, THE
SUBORDINATED PURCHASER AND THE SERVICER, DESIGNATE ANOTHER PERSON (INCLUDING,
WITHOUT LIMITATION, THE AGENT ITSELF) TO SUCCEED CNAI AS THE PURCHASER
REPRESENTATIVE IF SUCH PERSON SHALL CONSENT AND AGREE TO THE TERMS HEREOF AND
OF THE POOLING AND SERVICING AGREEMENT.
SECTION 6.02. Duties of the Purchaser Representative
46. THE PURCHASER REPRESENTATIVE SHALL FURNISH TO EACH PURCHASER AND
TO THE SUBORDINATED PURCHASER A COPY OF EACH NOTICE, INSTRUMENT OR OTHER
DOCUMENT RECEIVED BY IT IN CONNECTION WITH THIS AGREEMENT OR THE POOLING AND
SERVICING AGREEMENT WITHIN A REASONABLE PERIOD OF TIME AFTER RECEIPT THEREOF.
47. THE PURCHASER REPRESENTATIVE SHALL, ON BEHALF OF THE PURCHASERS
AND THE SUBORDINATED PURCHASER, DIRECT THE TIME, METHOD AND PLACE OF
EXERCISING ANY RIGHT OR REMEDY AVAILABLE TO THE PURCHASERS AND/OR THE
SUBORDINATED PURCHASER UNDER THE POOLING AND SERVICING AGREEMENT AND TAKE
SUCH OTHER ACTIONS UNDER THE POOLING AND SERVICING AGREEMENT AS COULD BE
TAKEN BY THE PURCHASERS AND/OR THE SUBORDINATED PURCHASER AND AS ARE, IN THE
SOLE DISCRETION OF THE PURCHASER REPRESENTATIVE, NECESSARY OR DESIRABLE TO
EFFECTUATE THE PURPOSES OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT THE
PURCHASER REPRESENTATIVE SHALL NOT BE REQUIRED TO TAKE ANY ACTION WHICH
EXPOSES THE PURCHASER REPRESENTATIVE TO PERSONAL LIABILITY OR WHICH IS
CONTRARY TO THIS AGREEMENT OR APPLICABLE LAW.
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SECTION 6.03. Limitation on Purchaser Representative Liability, Etc.
48. NEITHER THE PURCHASER REPRESENTATIVE 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, EXCEPT
FOR ITS OR THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT
LIMITATION OF THE GENERALITY OF THE FOREGOING, THE PURCHASER REPRESENTATIVE:
a) may treat the Purchaser of any Purchaser Receivable Interest
as the holder thereof, and may treat the Subordinated Purchaser as the
holder of the Subordinated Receivable Interest, until the Purchaser
Representative receives written notice of the assignment or transfer
thereof signed by such Person and in form satisfactory to the Purchaser
Representative;
b) may consult with legal counsel (including counsel for the
Seller, the Owner or the Servicer), 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;
c) makes no warranty or representation to any Purchaser or to the
Subordinated Purchaser and shall not be responsible to any Purchaser or
to the Subordinated Purchaser for any statements, warranties or
representations made in or in connection with this Agreement or the
Pooling and Servicing Agreement;
d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions
of this Agreement or the Pooling and Servicing Agreement on the part of
the Seller, the Owner or the Servicer or to inspect the property
(including the books and records) of the Seller, the Owner or the
Servicer;
e) shall not be responsible to any Purchaser or the Subordinated
Purchaser for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the Pooling and
Servicing Agreement or any instrument or document furnished pursuant
hereto; and
f) shall incur no liability under or in respect of this
Agreement, the Pooling and Servicing Agreement or any such other
document or instrument by acting upon any
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notice, consent, certificate or other instrument or writing (which may
be by telegram) believed by it to be genuine and signed or sent by the
proper party or parties.
49. WITH RESPECT TO RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND AS
THE PURCHASER HEREUNDER, CXC SHALL HAVE THE SAME RIGHTS AND POWERS UNDER THIS
AGREEMENT, THE POOLING AND SERVICING AGREEMENT OR ANY SUCH OTHER DOCUMENT OR
INSTRUMENT AS ANY OTHER PURCHASER AND MAY EXERCISE THE SAME AS THOUGH CNAI
WERE NOT THE PURCHASER REPRESENTATIVE HEREUNDER. CNAI 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 SELLER, THE OWNER OR THE
SERVICER, ANY OF THEIR RESPECTIVE AFFILIATES AND ANY PERSON OR ENTITY WHO MAY
DO BUSINESS WITH OR OWN SECURITIES OF THE SELLER, THE OWNER OR THE SERVICER
OR ANY OF ITS AFFILIATES, ALL AS IF CNAI WERE NOT THE PURCHASER
REPRESENTATIVE AND WITHOUT ANY DUTY TO ACCOUNT THEREFOR TO THE PURCHASERS OR
THE SUBORDINATED PURCHASER.
50. THE SUBORDINATED PURCHASER ACKNOWLEDGES THAT IT HAS, INDEPENDENTLY
AND WITHOUT RELIANCE UPON THE PURCHASER REPRESENTATIVE AND BASED ON SUCH
FINANCIAL STATEMENTS AND OTHER DOCUMENTS AND INFORMATION AS IT HAS DEEMED
APPROPRIATE, MADE ITS OWN CREDIT ANALYSIS AND DECISION TO ENTER INTO THIS
AGREEMENT. THE SUBORDINATED PURCHASER ALSO ACKNOWLEDGES THAT IT WILL,
INDEPENDENTLY AND WITHOUT RELIANCE UPON THE PURCHASER REPRESENTATIVE OR ANY
OTHER PURCHASER 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, THE POOLING AND SERVICING
AGREEMENT AND ANY OTHER AGREEMENT OR OTHER DOCUMENT.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Waivers, Etc
(a) No amendment or waiver of any provision of this Agreement or
consent to any departure by the Seller, the Owner, the Servicer or the
Subordinated Purchaser therefrom shall be effective unless in a writing signed
by the Owner, the Seller, the Servicer, the Subordinated Purchaser and the
Agent, as agent for the Purchasers, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided that so long as any Investor Certificates shall be
outstanding, no such amendment shall become effective unless (i) the Owner shall
have delivered an Opinion of Counsel to the Agent and the Trustee to the effect
that such amendment shall not materially and adversely affect the interests of
the holders of the Investor Certificates or (ii) S&P and Moody's shall have
notified the Owner, the Servicer and the Trustee in writing that such action
will not result in a reduction or withdrawal of their respective ratings on any
Investor Certificates. In addition, and so long as any Investor Certificates
shall be outstanding, (y) if such amendment relates to any of the provisions of
Article II hereof (and regardless of whether an Opinion of Counsel has been
delivered pursuant to clause (i) of the preceding sentence), S&P shall have
notified the Owner, the Servicer and the Trustee in writing that such action
will not result in a reduction or withdrawal of its rating on any Investor
Certificates, and (z) if such amendment relates to any other provisions of this
Agreement (other than an amendment the sole effect of which is to extend the
Facility Termination Date or to modify the terms of an Enhancement which is for
the sole benefit of the Receivables Purchase Interest under this Agreement and
the "Receivables Purchase Interest" under the Parallel Purchase Commitment), S&P
shall have been given at least one Business Day's prior written notice of such
amendment and S&P shall not have advised the Owner or the Servicer at the close
of business on the Business Day following receipt of such notice that such
action would result in a reduction or withdrawal of its rating on any Investor
Certificates. Defined terms which are incorporated herein by reference from the
Pooling and Servicing Agreement shall not be altered or affected by any
subsequent amendment to the Pooling and Servicing Agreement which relates to
such terms, unless the Agent shall have consented in writing to such amendment.
(b) No failure on the part of any Purchaser, the Subordinated Purchaser
or the Agent to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right
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hereunder preclude any other or further exercise thereof or the exercise of any
other right.
SECTION 7.02. Notices, Etc.
(a) All notices and other communications hereunder shall, unless
otherwise stated herein, be in writing (which shall include facsimile
communication) and faxed or delivered, to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. Notices and communications by facsimile shall be effective when sent
(and shall be followed by hard copy sent by regular mail), and notices and
communications sent by other means shall be effective when received.
(b) So long as Spirit is the Servicer under this Agreement, any notice
required to be given to the Owner and the Servicer hereunder shall be deemed to
have been delivered to both the Owner and the Servicer if such notice is
delivered to Spirit at its address set forth below its name on the signature
page hereof.
SECTION 7.03. Assignability
(a) This Agreement and each Purchaser's rights and obligations herein
(including ownership of each Purchaser Receivable Interest) shall be assignable
by such Purchaser and its successors and assigns; provided, that no assignee
shall be entitled to compensation pursuant to Section 1.05(a) hereof at a rate
in excess of that to which the assignor Purchaser was entitled immediately prior
to such assignment; and provided, further, that, unless the assignor is CapMAC
or the proposed assignee is CNAI, a Bank or CapMAC, (i) each assignor of a
Purchaser Receivable Interest or any interest therein shall give the Agent, the
Owner, the Servicer and the Seller at least ten Business Days' notice of a
proposed assignment and shall not consummate such assignment if the Owner
notifies such assignor that the proposed assignee or any Affiliate of a proposed
assignee is a competitor of the Owner, Charming Shoppes or any of their
respective Affiliates, and (ii) the amount being assigned pursuant to each such
assignment (determined as of the date of such assignment) shall in no event be
less than the lesser of (x) $10,000,000 and (y) the assigning Purchaser's share
of the Purchase Limit. Subject to the provisions of Section 7.06(b) hereof, each
assignor of a Purchaser Receivable Interest may in connection with the
assignment or participation, disclose to the assignee or participant any
information relating to the Seller, the Servicer or the Owner, including the
Receivables, furnished to such assignor by or on behalf of the Seller, the
Servicer or the Owner or by the Agent.
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(b) This Agreement and the rights and obligations of the Agent (in its
capacity as agent hereunder) herein shall be assignable by the Agent and its
successors and assigns; provided, however, that the Agent agrees that it will
not assign of its own volition such rights and obligations to any Person other
than CapMAC or an Affiliate of CNAI unless:
(i) in the reasonable judgment of the Agent consistent with its
internal policy (including, without limitation, the internal policy of any
Affiliate of the Agent, with respect to which the manner in which conflicts
of interest are to be resolved) and legal and regulatory restrictions, the
Agent determines that it would be disadvantageous to the Agent or an
Affiliate of the Agent for it to continue as the Agent hereunder, or
(ii) the Agent's decision to assign its rights and obligations (in
its capacity as the agent hereunder) is consistent with its determination
to assign its rights and obligations as the agent in respect of a majority
of the other transactions with sellers of receivables in which it is, at
such time, the agent, which involve receivables having a tenor similar to
the tenor of the Receivables.
(c) None of the Seller or the Subordinated Purchaser, or subject to
paragraph 2(m) of Exhibit IV hereto, the Owner, or subject to Section 8.2 of the
Pooling and Servicing Agreement and paragraph 3(e) of Exhibit IV hereto, the
Servicer, may assign its rights or obligations hereunder or any interest herein
without the prior written consent of the Agent.
51. EACH PURCHASER MAY SELL PARTICIPATIONS, TO ONE OR MORE BANKS OR
OTHER FINANCIAL INSTITUTIONS, IN OR TO ALL OR A PORTION OF ITS RIGHTS AND
OBLIGATIONS UNDER THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, ANY
PURCHASER RECEIVABLE INTERESTS OR INTERESTS THEREIN OWNED BY IT); PROVIDED,
HOWEVER, THAT (I) UNLESS THE SELLER IS CAPMAC OR THE PROPOSED PARTICIPANT IS
CNAI, A BANK OR CAPMAC, EACH SELLER OF A PARTICIPATION SHALL GIVE THE AGENT,
THE OWNER, THE SERVICER AND THE SELLER AT LEAST TEN BUSINESS DAYS' NOTICE OF
A PROPOSED PARTICIPATION AND SHALL NOT CONSUMMATE SUCH PARTICIPATION IF THE
OWNER NOTIFIES SUCH SELLER THAT THE PROPOSED PARTICIPANT OR ANY AFFILIATE OF
THE PROPOSED PARTICIPANT IS A COMPETITOR OF THE OWNER, CHARMING SHOPPES OR
ANY OF THEIR RESPECTIVE AFFILIATES; (II) SUCH SELLING PURCHASER'S OBLIGATIONS
UNDER THIS AGREEMENT SHALL REMAIN UNCHANGED; (III) SUCH SELLING PURCHASER
SHALL REMAIN SOLELY RESPONSIBLE TO THE OTHER PARTIES HERETO FOR THE
PERFORMANCE OF SUCH OBLIGATIONS; AND (IV) THE AMOUNT BEING PARTICIPATED
PURSUANT TO EACH SUCH PARTICIPATION (DETERMINED AS OF THE DATE
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OF SUCH PARTICIPATION) SHALL IN NO EVENT BE LESS THAN THE LESSER OF (X)
$10,000,000 AND (Y) THE SELLING PURCHASER'S SHARE OF THE PURCHASE LIMIT. THE
PARTIES TO THIS AGREEMENT SHALL CONTINUE TO DEAL SOLELY AND DIRECTLY WITH
SUCH SELLING PURCHASER IN CONNECTION WITH SUCH PURCHASER'S RIGHTS AND
OBLIGATIONS UNDER THIS AGREEMENT.
52. NO TRANSFER (OR PURPORTED TRANSFER) OF ALL OR ANY PART OF THE
PURCHASER RECEIVABLE INTERESTS (OR ANY PARTICIPATION OR OTHER ECONOMIC
INTEREST THEREIN) OR THE SUBORDINATED RECEIVABLE INTERESTS (OR ANY
PARTICIPATION OR OTHER ECONOMIC INTEREST THEREIN), WHETHER TO ANOTHER
RECEIVABLES PURCHASER OR TO A PERSON WHO IS NOT A RECEIVABLES PURCHASER,
SHALL BE EFFECTIVE, AND ANY SUCH TRANSFER (OR PURPORTED TRANSFER) SHALL BE
VOID AB INITIO, AND NO PERSON SHALL OTHERWISE BECOME A HOLDER OF A PURCHASER
RECEIVABLE INTEREST OR A SUBORDINATED RECEIVABLE INTEREST IF (I) AT THE TIME
OF SUCH TRANSFER (OR PURPORTED TRANSFER) ANY PURCHASER RECEIVABLE INTERESTS
OR SUBORDINATED RECEIVABLE INTERESTS ARE TRADED ON AN ESTABLISHED SECURITIES
MARKET, (II) AFTER SUCH TRANSFER (OR PURPORTED TRANSFER) THE TRUST WOULD HAVE
MORE THAN 25 SUBJECT HOLDERS OF THE PURCHASER RECEIVABLE INTERESTS, THE
SUBORDINATED RECEIVABLE INTERESTS, THE "PURCHASER RECEIVABLE INTERESTS" (AS
DEFINED IN THE PARALLEL PURCHASE COMMITMENT) OR THE "SUBORDINATED RECEIVABLE
INTERESTS" (AS DEFINED IN THE PARALLEL PURCHASE COMMITMENT) (OR ANY
PARTICIPATION OR OTHER ECONOMIC INTERESTS IN ANY OF THE FOREGOING) OR (III)
THE PURCHASER RECEIVABLE INTERESTS OR SUBORDINATED RECEIVABLE INTERESTS WERE
REQUIRED TO BE REGISTERED UNDER THE SECURITIES ACT OF 1933 (OR, TO THE EXTENT
SOLD OR OFFERED PURSUANT TO REGULATION S (17 CFR 230.901 THROUGH 230.904 OR
ANY SUCCESSOR THERETO), WOULD HAVE BEEN REQUIRED TO BE REGISTERED UNDER THE
SECURITIES ACT OF 1933 IF SOLD OR OFFERED WITHIN THE UNITED STATES).
SECTION 7.04. Costs, Expenses and Taxes
(a) In addition to the rights of indemnification granted under Sections
4.01 and 4.02 hereof, the Owner agrees to pay on demand all costs and expenses
in connection with the preparation, execution, delivery and administration of
this Agreement, any asset purchase agreement or similar agreement relating to
the sale or transfer of interests in Purchaser Receivable Interests and the
other documents and agreements to be delivered hereunder, including, without
limitation, (i) the reasonable fees and out-of-pocket expenses of counsel for
the Agent, CNAI, Citicorp Securities Inc., Citibank, N.A. and CXC with respect
thereto and with respect to advising the Agent, CNAI, Citicorp Securities, Inc.,
Citibank, N.A. and CXC as to their rights and remedies under this Agreement,
(ii) the Agent's out-of-pocket costs and expenses in connection with annual
audits
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under paragraph 1(b) of Exhibit V, and (iii) all costs and expenses, if any
(including reasonable counsel fees and expenses), of the Agent, CNAI, Citicorp
Securities, Inc., Citibank, N.A., the Seller, the Trustee, or the Purchasers in
connection with the enforcement of this Agreement and the other documents and
agreements to be delivered hereunder.
(b) In addition, the Owner shall pay any and all stamp and other taxes
and fees payable in connection with the execution, delivery, filing and
recording of this Agreement or the other documents or agreements to be delivered
hereunder, and agrees to save each Indemnified Party harmless from and against
any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
SECTION 7.05. No Proceedings
(a) Each of the Seller, the Agent, the Owner, the Servicer, the
Subordinated Purchaser, each Purchaser, each assignee of a Purchaser Receivable
Interest or any interest therein and each entity which enters into a commitment
to purchase Purchaser Receivable Interests or interests therein hereby agrees
that it will not institute against CXC any proceeding of the type referred to in
paragraph (g) of Exhibit VI so long as any senior indebtedness issued by CXC
shall be outstanding or there shall not have elapsed one year plus one day since
the last day on which any such senior indebtedness shall have been outstanding.
(b) Each of the Agent, the Owner, the Servicer, each Purchaser, each
assignee of a Purchaser Receivable Interest or any interest therein and each
entity which enters into a commitment to purchase Purchaser Receivable Interests
or interests therein hereby agrees that it will not institute against the Trust
any proceeding of the type referred to in paragraph (g) of Exhibit VI so long as
any Investor Certificate shall be outstanding or there shall not have elapsed
one year plus one day since the last day on which any Investor Certificate shall
have been outstanding.
SECTION 7.06. Confidentiality
(a) Unless otherwise required by applicable law, each of the Seller,
the Owner, the Servicer and the Subordinated Purchaser agrees to maintain the
confidentiality of this Agreement (and all drafts thereof) in communications
with third parties and otherwise; provided that this Agreement may be disclosed
(i) to third parties to the extent such disclosure is made pursuant to a written
agreement of confidentiality in form and substance reasonably satisfactory to
the Agent, (ii) to independent financial rating agencies in connection with the
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rating of any Certificate Series issued or to be issued pursuant to the Pooling
and Servicing Agreement, (iii) to CapMAC and its legal counsel and auditors, and
CapMAC's reinsurers and prospective reinsurers, and (iv) to the Seller's legal
counsel and auditors, the Owner's legal counsel and auditors, the Servicer's
legal counsel and auditors, and the Subordinated Purchaser's legal counsel and
auditors if, in each case, they agree (whether or not in writing) to hold it
confidential; and provided, further, that this Agreement may be filed by
Charming Shoppes with the Securities and Exchange Commission as an exhibit to an
annual report on Form 10-K or a quarterly report on Form 10-Q under the Exchange
Act, in each case without any special confidentiality requirement.
(b) Each of the Agent, each Purchaser and, by virtue of entering into
the Insurance Agreement, CapMAC agrees (i) to maintain the confidentiality of
this Agreement (and all drafts thereof) in communications with third parties and
otherwise, (ii) to use reasonable efforts (e.g., procedures substantially
comparable to those applied by the Agent, such Purchaser or CapMAC, as the case
may be, in respect of non-public information as to its business) to maintain the
confidentiality of (x) the Owner's customer lists, the list of Stores delivered
to the Agent pursuant to paragraph 2(n) of Exhibit IV hereto, and any other
non-public information as to the Owner's business and the Servicer's business
and (y) the contents of the Administrative Servicer Agreement, in each case, to
the extent that such information is not and does not become publicly available
(other than by the filing of financing statements pursuant to this Agreement),
and (iii) not to use any of the information described in the preceding clauses
(x) and (y) for any purposes not specifically related to its business
relationship with the Owner, the Servicer and the Trust or its ownership of
Purchaser Receivable Interests or interests therein; provided, that nothing in
this subsection (b) shall affect the disclosure of this Agreement or such
non-public information (1) to the extent required by law (including statute,
rule, regulation or judicial process), (2) to the Agent's, a Purchaser's or
CapMAC's counsel or accountants, as the case may be, provided they agree
(whether or not in writing) to hold it confidential, and (3) to bank and
insurance company examiners and auditors, appropriate government examining
authorities and independent financial rating agencies, and provided, further,
that the Agent, CapMAC, each Purchaser and each assignee of Receivable Interests
may, in connection with any assignment, participation or reinsurance
transaction, or proposed assignment, participation or reinsurance transaction,
disclose this Agreement to the assignee, participant or
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reinsurer or to a proposed assignee, participant or reinsurer and any
information relating to the Owner or the Servicer furnished to such entity by or
on behalf of the Owner or the Servicer or by the Agent, if, prior to any such
disclosure, such assignee, participant or reinsurer or proposed assignee,
participant or reinsurer agrees, in a writing reasonably satisfactory to the
Owner or the Servicer, as the case may be, to preserve the confidentiality of
this Agreement and any confidential information relating to the Owner or the
Servicer received by it from any of the foregoing entities and to be bound by
the provisions of this Section 7.06(b). The Agent, each Purchaser and CapMAC
shall, as promptly as practicable after becoming aware of any disclosure of any
confidential information relating to the Owner or the Servicer, use good faith
efforts to notify the Owner and the Servicer of such disclosure; provided,
however, that the failure by the Agent, any Purchaser or CapMAC to give such
notice shall not subject it to liability.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT THAT
THE PERFECTION OF THE INTERESTS OF THE PURCHASERS OR THE SUBORDINATED PURCHASER
IN THE RECEIVABLES OR REMEDIES HEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 7.08 Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
SECTION 7.09. Survival of Termination. The provisions of Sections
1.05, 1.06, 4.01, 4.02, 4.03, 7.04, 7.05 and 7.06 shall survive any termination
of this Agreement.
SECTION 7.10. Tax Treatment. The Owner and the Seller have structured
this Agreement and the Receivable Interests with the intention that the
Receivable Interests will qualify under applicable federal, state and local tax
law as indebtedness. Except as otherwise required by law, the Seller, the
Servicer, the Agent and each Purchaser agree to treat and to take no action
inconsistent with the treatment of the Receivable Interests as indebtedness for
purposes of federal, state and local income or franchise taxes and any other tax
imposed on or measured by income.
SECTION 7.11. Duties of the Trustee. The Trustee hereby agrees to (i)
perform its duties and obligations as set forth in the Pooling and Servicing
Agreement and (ii) promptly take each action which the Agent may specify in
accordance with Section 11.14(a) or any other applicable Section of the Pooling
and Servicing Agreement to enforce the Pooling and Servicing Agreement for the
benefit of the Purchasers, any other
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receivables purchasers, and any holders of Investor Certificates, all with
reasonable care and diligence and in accordance with applicable laws, rules and
regulations and the Pooling and Servicing Agreement.
SECTION 7.12. Limitation on Seller/Trustee Liability, Etc.
53. NEITHER THE TRUSTEE, IN ITS INDIVIDUAL CAPACITY OR IN ITS CAPACITY
AS THE SELLER HEREUNDER, 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, EXCEPT FOR ITS OR THEIR
OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE
GENERALITY OF THE FOREGOING, THE TRUSTEE:
a) may consult with legal counsel (including counsel for the
Seller, the Owner or the Servicer), 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;
b) makes no warranty or representation to any Purchaser or to the
Subordinated Purchaser and shall not be responsible to any Purchaser or to
the Subordinated Purchaser for any statements, warranties or
representations made in or in connection with this Agreement or the
Pooling and Servicing Agreement;
c) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of
this Agreement or the Pooling and Servicing Agreement on the part of the
Seller, the Owner or the Servicer or to inspect the property (including
the books and records) of the Seller, the Owner or the Servicer;
d) shall not be responsible to any Purchaser or the Subordinated
Purchaser for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the Pooling and
Servicing Agreement or any instrument or document furnished pursuant
hereto; and
e) shall incur no liability under or in respect of this
Agreement, the Pooling and Servicing Agreement or any such other document
or instrument by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram) believed by it to be
genuine and signed or sent by the proper party or parties.
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SECTION 7.13. Third Party Beneficiaries
(a) Each of the Seller, the Owner and the Trustee hereby acknowledge
that the Agent, for the benefit of the Purchasers, and the Purchasers are, to
the extent of the Purchasers' rights and obligations under this Agreement,
intended to be third party beneficiaries under Section 13.14 of the Pooling and
Servicing Agreement.
(b) No "Investor Certificateholder" or "Enhancement Provider" (in each
case as defined in the Pooling and Servicing Agreement) shall be a third-party
beneficiary of this Agreement or have any benefit or any legal or equitable
right, remedy or claim under this Agreement.
SECTION 7.14. Limited Recourse
(a) In no event will any Purchaser have any right or interest in the
Trust to the extent allocated to the holder of Investor Certificates or
attributable to the receivables purchase interest of any other Receivables
Purchaser. Notwithstanding any other provision herein or in any other agreement
or instrument, the Agent, on behalf of each Purchaser, confirms that it and each
Purchaser has no interest in and will make no claim on, or otherwise interfere
with, distributions of Collections allocated to any Investor Certificates or
attributable to any other Receivables Purchasers under the Pooling and Servicing
Agreement, any Supplement or any other receivables purchase agreement.
(b) Notwithstanding any claim that any Purchaser or the Agent may have
hereunder, no such claim shall be payable from any Collections other than those
attributable to the Receivables Purchase Interest pursuant to Section 2.01 and,
as to all claims that any Purchaser or the Agent may have hereunder against the
Trust, no such claim shall be payable other than from Allocable Finance Charge
Collections, Allocable Principal Collections and the Allocation Percentage of
Recoveries of Pool Receivables attributable to the Receivables Purchase Interest
pursuant to Section 2.01. Nothing contained in this Section, however, shall
limit or affect any claim that any Purchaser or the Agent may have hereunder
against the Owner or the Servicer for any obligations under this Agreement which
are direct obligations of the Owner or the Servicer.
(c) By way of clarification of certain provisions contained in Section
6.16(a) and 12.1(c) of the Pooling and Servicing Agreement, the parties hereto
confirm and agree that the reference in the last sentence of Section 6.16(a) to
"equally and ratably" and the reference in the second sentence of Section
12.1(c) to "pro rata" means that the applicable benefits and payments will be
allocated among the different Series in
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accordance with the "Investor/Purchaser Percentages" of the relevant Series
(which, in the case of the Series created by this Agreement, is the Allocation
Percentage) and among the Receivables Purchasers within each Receivable Purchase
Series in accordance with the priorities set forth in the receivables purchase
agreement for such Series.
SECTION 7.15. Limitation on Rights of Purchasers. It is understood
and intended, and upon the purchase of each Purchaser Receivable Interest the
Agent and each Purchaser shall be deemed to have expressly covenanted and agreed
with every other Receivables Purchaser and holder of an Investor Certificate and
the Trustee, that the Purchaser Receivable Interests and the Investor
Certificates shall rank pari passu among one another and amongst themselves
(except for any Enhancement that may apply to only the Purchaser Receivable
Interests or one series of Investor Certificates) and neither the Agent nor any
Purchaser shall have any right hereunder or under the Pooling and Servicing
Agreement (i) to surrender, waive, impair, disturb or prejudice the rights of
any other Receivables Purchasers or the holders of the Investor Certificates,
(ii) to obtain or seek to obtain priority over or preference to any other
Receivables Purchaser or holder of an Investor Certificate or (iii) to enforce
any right under this Agreement or the Pooling and Servicing Agreement against
the Seller, except in the manner provided in the Pooling and Servicing Agreement
and for the equal, ratable and common benefit of all Receivables Purchasers and
holders of Investor Certificates and except (x) as otherwise expressly provided
in the Pooling and Servicing Agreement or (y) to the extent this Agreement
creates independent and non-duplicative rights against the Seller. For the
protection and enforcement of the provisions of this Section, each and every
Receivables Purchaser and holder of an Investor Certificate and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
SECTION 7.16. The SP Escrow Account
54. ESTABLISHMENT. UPON THE EARLIER OF (I) THE COMMENCEMENT OF THE
AMORTIZATION PERIOD AND (II) THE COMMENCEMENT OF THE "AMORTIZATION PERIOD" AS
DEFINED IN THE PARALLEL PURCHASE COMMITMENT) (SUCH EARLIER DATE, THE "SP
ESCROW ESTABLISHMENT DATE"), THE AGENT SHALL ESTABLISH AN ACCOUNT (THE "SP
ESCROW ACCOUNT") IN THE NAME AND UNDER THE CONTROL OF THE AGENT WITH AN
ELIGIBLE INSTITUTION (WHICH MAY BE CITIBANK, N.A.) TITLED "CITICORP NORTH
AMERICA, INC., AS AGENT, PURSUANT TO THE RECEIVABLES PURCHASE AGREEMENTS
DATED AS OF APRIL 4, 1996 AMONG SPIRIT OF AMERICA NATIONAL BANK, AS OWNER AND
SERVICER, THE AGENT AND CERTAIN OTHER PARTIES (SP ESCROW ACCOUNT)". THE SP
ESCROW ACCOUNT SHALL BE A FULLY SEGREGATED TRUST ACCOUNT, UNLESS THE ESCROW
BANK SHALL BE (I) AN ELIGIBLE INSTITUTION HAVING SHORT-TERM DEBT RATINGS FROM
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S&P AND MOODY'S NO LOWER THAN A-1/P-1 OR (II) CITIBANK, N.A. THE SP ESCROW
ACCOUNT SHALL BE UNDER THE SOLE DOMINION AND CONTROL OF THE AGENT, AND
NEITHER THE SUBORDINATED PURCHASER, NOR ANY PERSON CLAIMING BY, THROUGH OR
UNDER THE SUBORDINATED PURCHASER, SHALL HAVE ANY RIGHT, TITLE OR INTEREST IN,
OR ANY RIGHT TO WITHDRAW ANY AMOUNT FROM, THE SP ESCROW ACCOUNT.
55. TAXATION. THE TAXPAYER IDENTIFICATION NUMBER ASSOCIATED WITH THE
SP ESCROW ACCOUNT SHALL BE THAT OF THE SUBORDINATED PURCHASER AND THE
SUBORDINATED PURCHASER WILL REPORT FOR FEDERAL, STATE AND LOCAL INCOME TAX
PURPOSES THE INCOME, IF ANY, EARNED ON FUNDS IN THE SP ESCROW ACCOUNT.
56. INVESTMENTS. THE SUBORDINATED PURCHASER IS HEREBY APPOINTED AS THE
INVESTMENT AGENT, WHICH APPOINTMENT THE SUBORDINATED PURCHASER HEREBY
ACCEPTS, TO ACT ON BEHALF OF THE AGENT FOR DETERMINING INVESTMENTS OF CASH AT
ANY TIME ON DEPOSIT IN THE SP ESCROW ACCOUNT. ALL FUNDS ON DEPOSIT IN THE SP
ESCROW ACCOUNT SHALL BE INVESTED IN ELIGIBLE INVESTMENTS (AS SHALL BE
SPECIFIED BY THE SUBORDINATED PURCHASER, AS INVESTMENT AGENT, IN WRITING TO
THE ESCROW BANK AND THE AGENT; PROVIDED, THAT IF THE SUBORDINATED PURCHASER
SHALL FAIL TO SPECIFY SUCH ELIGIBLE INVESTMENTS IN A TIMELY MANNER, THE AGENT
MAY SPECIFY SUCH ELIGIBLE INVESTMENTS) WHICH SHALL MATURE NOT LATER THAN THE
BUSINESS DAY PRECEDING THE NEXT DISTRIBUTION DATE AND SHALL BE HELD TO
MATURITY. ALL SUCH INVESTMENTS SHALL BE MADE IN THE NAME OF THE ESCROW BANK,
AS AGENT, AND HELD BY THE ESCROW BANK, OR ITS NOMINEE, FOR THE BENEFIT OF THE
AGENT. THE ESCROW BANK SHALL NOT BE LIABLE FOR ANY LOSS INCURRED IN
CONNECTION WITH ANY INVESTMENT IN THE SP ESCROW ACCOUNT, EXCEPT FOR LOSSES IN
RESPECT OF INVESTMENTS IN ANY INVESTMENT ISSUED OR GUARANTEED BY THE ESCROW
BANK. INCOME EARNED ON FUNDS DEPOSITED TO THE SP ESCROW ACCOUNT, IF ANY,
SHALL BE CONSIDERED A PART OF THE SP ESCROW ACCOUNT.
57. NEW SP ESCROW ACCOUNT. IN THE EVENT THE ESCROW BANK CEASES TO BE
AN ELIGIBLE INSTITUTION, THE AGENT SHALL, WITHIN TEN DAYS AFTER LEARNING
THEREOF, ESTABLISH A NEW SP ESCROW ACCOUNT (AND TRANSFER ANY BALANCE AND
INVESTMENTS THEN IN THE SP ESCROW ACCOUNT TO SUCH NEW SP ESCROW ACCOUNT) AT
ANOTHER ELIGIBLE INSTITUTION.
58. STATEMENTS FOR SP ESCROW ACCOUNT. ON A MONTHLY BASIS, THE ESCROW
BANK SHALL PROVIDE THE AGENT WITH A WRITTEN STATEMENT WITH RESPECT TO THE
PRECEDING CALENDAR MONTH REGARDING THE SP ESCROW ACCOUNT IN A FORM CUSTOMARY
FOR STATEMENTS PROVIDED BY THE ESCROW BANK FOR OTHER ACCOUNTS HELD BY IT,
WHICH STATEMENT SHALL INCLUDE, AT A MINIMUM, THE AMOUNT ON DEPOSIT IN THE SP
ESCROW ACCOUNT, AND THE DATES AND AMOUNTS OF ALL DEPOSITS, WITHDRAWALS AND
INVESTMENT EARNINGS WITH RESPECT TO THE SP ESCROW ACCOUNT. THE ESCROW BANK
SHALL
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PROMPTLY DELIVER A COPY OF EACH SUCH STATEMENT TO THE SUBORDINATED PURCHASER
AND TO THE SERVICER.
59. PAYMENTS FROM SP ESCROW ACCOUNT. ON THE SECOND BUSINESS DAY
PRECEDING EACH DISTRIBUTION DATE, THE SERVICER WILL DETERMINE WHETHER ANY
PURCHASER CHARGE-OFFS OR "PURCHASER CHARGE-OFFS" (AS DEFINED IN THE PARALLEL
PURCHASE COMMITMENT) WILL ARISE WITH RESPECT TO THE RELATED DUE PERIOD
PURSUANT TO SECTION 2.05(D) OR SECTION 2.07(A) AND WILL GIVE THE AGENT NOTICE
OF THE AMOUNT THEREOF (SUCH AMOUNT, THE "NEW PURCHASER CHARGE-OFFS". BY 1:00
P.M. NEW YORK CITY TIME ON THE BUSINESS DAY PRIOR TO EACH DISTRIBUTION DATE
ON WHICH THE AMOUNT OF THE NEW PURCHASER CHARGE-OFFS IS GREATER THAN ZERO OR
ON WHICH ANY UNREIMBURSED PURCHASER CHARGE-OFFS OR ANY UNREIMBURSED
"PURCHASER CHARGE-OFFS" (AS DEFINED IN THE PARALLEL PURCHASE COMMITMENT)
EXIST, THE AGENT ON BEHALF OF THE OWNERS SHALL NOTIFY THE ESCROW BANK
REQUESTING PAYMENT THEREOF. TO THE EXTENT FUNDS ARE AVAILABLE IN THE SP
ESCROW ACCOUNT, THE ESCROW BANK SHALL PAY THE AMOUNT REQUESTED TO THE AGENT
BY NOON NEW YORK CITY TIME ON SUCH DISTRIBUTION DATE, AND THE AGENT SHALL
DISTRIBUTE SUCH FUNDS TO THE PURCHASERS AND THE BANKS. SUCH PAYMENT AND
DISTRIBUTION OF FUNDS FROM THE SP ESCROW ACCOUNT SHALL NOT RESULT IN ANY
REDUCTION OF PURCHASER CAPITAL OR "PURCHASER CAPITAL" (AS DEFINED IN THE
PARALLEL PURCHASE COMMITMENT).
60. PAYMENTS TO SP ESCROW ACCOUNT. UPON RECEIPT OF ANY FUNDS IN THE
AGENT'S ACCOUNT PURSUANT TO CLAUSE (II) OF SECTION 2.06(B) OF THE AGREEMENT
OR OF THE PARALLEL PURCHASE COMMITMENT, THE AGENT SHALL DEPOSIT AN AMOUNT
EQUAL TO SUCH FUNDS TO THE SP ESCROW ACCOUNT(UNLESS THE SP ESCROW ACCOUNT
SHALL THEN BE CLOSED, PURSUANT TO SECTION 7.16(I); IN WHICH CASE SUCH AMOUNT
SHALL BE PAID TO THE SUBORDINATED PURCHASER AND DEPOSITED INTO THE
SUBORDINATED PURCHASER ACCOUNT). IF, ON ANY DISTRIBUTION DATE FOLLOWING A
PAYMENT TO THE AGENT FROM THE SP ESCROW ACCOUNT PURSUANT TO SECTION 7.16(F),
THE AGENT, FOR THE ACCOUNT OF THE PURCHASERS, SHALL RECEIVE A REIMBURSEMENT
FOR SUCH PURCHASER CHARGE-OFFS FROM EXCESS FINANCE CHARGE COLLECTIONS OR
SHALL RECEIVE A REIMBURSEMENT FOR SUCH "PURCHASER CHARGE-OFFS" (AS DEFINED IN
THE PARALLEL PURCHASE COMMITMENT) FROM "EXCESS FINANCE CHARGE COLLECTIONS"
(AS DEFINED IN THE PARALLEL PURCHASE COMMITMENT), THE AGENT SHALL DEPOSIT THE
AMOUNT OF SUCH REIMBURSEMENT TO THE SP ESCROW ACCOUNT (UNLESS THE SP ESCROW
ACCOUNT SHALL THEN BE CLOSED, PURSUANT TO SECTION 7.16(I); IN WHICH CASE SUCH
AMOUNT SHALL BE PAID TO THE SUBORDINATED PURCHASER AND DEPOSITED INTO THE
SUBORDINATED PURCHASER ACCOUNT); PROVIDED THAT NO SUCH REIMBURSEMENT SHALL BE
REQUIRED TO THE EXTENT THE AGGREGATE AMOUNT OF PURCHASER CHARGE-OFFS AND
"PURCHASER CHARGE-OFFS" (AS DEFINED IN THE PARALLEL PURCHASE COMMITMENT)
EXCEEDS THE
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AGGREGATE AMOUNT OF PAYMENTS TO THE AGENT FROM THE SP ESCROW ACCOUNT PURSUANT
TO SECTION 7.16(F).
61. PLEDGE. THE SUBORDINATED PURCHASER HEREBY PLEDGES AND ASSIGNS TO
THE AGENT FOR THE BENEFIT OF THE PURCHASERS AND THE BANKS, AND HEREBY GRANTS
TO THE AGENT FOR THE BENEFIT OF THE PURCHASERS AND THE BANKS, A SECURITY
INTEREST IN, ALL OF THE SUBORDINATED PURCHASER'S RIGHT, TITLE AND INTEREST IN
AND TO THE SP ESCROW ACCOUNT, INCLUDING, WITHOUT LIMITATION, ALL FUNDS ON
DEPOSIT THEREIN, ALL INVESTMENTS ARISING OUT OF SUCH FUNDS, ALL INTEREST AND
ANY OTHER INCOME ARISING THEREFROM, ALL CLAIMS THEREUNDER OR IN CONNECTION
THEREWITH, AND ALL CASH, INSTRUMENTS, SECURITIES, RIGHTS AND OTHER PROPERTY
AT ANY TIME AND FROM TIME TO TIME RECEIVED, RECEIVABLE OR OTHERWISE
DISTRIBUTED IN RESPECT OF SUCH ACCOUNT, SUCH FUNDS OR SUCH INVESTMENTS, AND
ALL MONEY AT ANY TIME IN THE POSSESSION OR UNDER THE CONTROL OF, OR IN
TRANSIT TO SUCH ACCOUNT, OR ANY BAILEE, NOMINEE, AGENT OR CUSTODIAN OF THE
ESCROW BANK, AND ALL PROCEEDS AND PRODUCTS OF ANY OF THE FOREGOING. EXCEPT AS
PROVIDED IN THE PRECEDING SENTENCE, THE SUBORDINATED PURCHASER MAY NOT
ASSIGN, TRANSFER OR OTHERWISE CONVEY ITS RIGHTS UNDER THIS AGREEMENT TO
RECEIVE ANY AMOUNTS FROM THE SP ESCROW ACCOUNT.
62. TERMINATION OF SP ESCROW ACCOUNT. ON THE DISTRIBUTION DATE
OCCURRING ON OR IMMEDIATELY AFTER THE LATER OF (I) THE DATE ON WHICH THE
ADJUSTED PURCHASER CAPITAL IS REDUCED TO ZERO AND (II) THE DATE ON WHICH THE
"ADJUSTED PURCHASER CAPITAL" (AS DEFINED IN THE PARALLEL PURCHASE COMMITMENT)
IS REDUCED TO ZERO, ALL FUNDS THEN ON DEPOSIT IN THE SP ESCROW ACCOUNT SHALL
BE PAID TO THE SUBORDINATED PURCHASER AND DEPOSITED INTO THE SUBORDINATED
PURCHASER ACCOUNT, AND THE SP ESCROW ACCOUNT SHALL BE CLOSED.
If, on the Distribution Date immediately following the second
anniversary of the SP Escrow Establishment Date, the SP Escrow Account shall not
have been closed in accordance with the preceding sentence, then on such
Distribution Date, all funds then on deposit in the SP Escrow Account shall be
applied as follows:
(i) first, such funds, in an amount not in excess of the sum of
Adjusted Purchaser Capital for such Distribution Date plus "Adjusted
Purchaser Capital" (as defined in the Parallel Purchase Commitment) for
such Distribution Date, shall be paid to the Agent, and upon receipt of
such funds, the Agent shall distribute such funds to the Purchasers and
the Banks, and
(ii) second, the balance, if any, shall be paid to the Subordinated
Purchaser and deposited into the Subordinated Purchaser Account.
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<PAGE> 49
Upon the making of all payments described in the preceding sentence, the SP
Escrow Account shall be closed.
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<PAGE> 50
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER: FIRST UNION NATIONAL BANK,
not in its individual capacity but
solely as the Trustee for CHARMING
SHOPPES MASTER TRUST
By:
Title: Vice President
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attention: Corporate Trust Services
Facsimile Number: (201) 430-4963
with copies to:
First Union National Bank
765 Broad Street
Mail Drop C 76505
Newark, New Jersey 07102
Attention: Corporate Trust Services
Facsimile Number: (201) 430-4963
Pepper, Hamilton & Scheetz
1201 Market Street, Suite 1402
Wilmington, Delaware 19801-1163
Attention: Richard Eckman, Esq.
Facsimile Number: (302) 656-8865
SUBORDINATED
PURCHASER: FASHION SPC, INC.
By:
Title: Vice President
3411 Silverside Road
Wilmington, Delaware 19810
Attention: Kirk R. Simme
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<PAGE> 51
Facsimile Number: (302) 479-5512
OWNER/SERVICER: SPIRIT OF AMERICA NATIONAL BANK,
as the Owner and the Servicer
By:
Title: Vice President
745 Center Street
Milford, Ohio 45150
Attention: Kirk R. Simme
Facsimile No. (513) 576-5320
with copies to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Mary Fontaine, Esq.
Facsimile Number: (312) 701-7711
Colin Stern, Esq.,
General Counsel
Charming Shoppes, Inc.
450 Winks Lane
Bensalem, Pennsylvania 19020
CXC: CXC INCORPORATED
By: Citicorp North America,
Inc., as Attorney-in-Fact
By:
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: U.S. Securitization
Facsimile No. (914) 899-7890
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<PAGE> 52
AGENT: CITICORP NORTH AMERICA, INC.,
as Agent
By:
Vice President
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Attention: U.S. Securitization
Facsimile No. (914) 899-7890
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<PAGE> 53
EXHIBIT I
DEFINITIONS
1. Certain Defined Terms. As used in the Agreement (including its
Exhibits), the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"APA" means an asset purchase agreement entered into by a bank or other
financial institution and the Agent pursuant to which such bank or other
financial institution agrees to purchase Purchaser Receivables Interests or
interests therein from CXC.
"Account" means each Spirit of America National Bank revolving credit
card account (including, without limitation, accounts which have been written
off as uncollectible) issued to an Obligor pursuant to a Cardholder Agreement
between the Owner and any Person for the sole purpose of providing credit for
the purchase of merchandise or services at any Affiliate of the Owner, and which
is identified by account number, Obligor name, Obligor address and Receivable
balance as of the applicable Cut Off Date in each computer file or microfiche
list delivered to the Trustee by the Owner from time to time pursuant to Section
2.1 or Section 2.6 of the Pooling and Servicing Agreement. The term "Account"
shall include each Renumbered Account. The term "Account" shall be deemed to
refer to an Additional Account only from and after the Addition Date with
respect thereto, and the term "Account" shall be deemed to refer to any Removed
Account only prior to the Removal Date with respect thereto.
"Addition Cut Off Date" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
"Addition Date" means each date as of which Additional Accounts will be
included as Accounts for purposes of the Pooling and Servicing Agreement
pursuant to Section 2.6 thereof.
"Additional Accounts" means additional Eligible Accounts from the Bank
Portfolio to be included as Accounts under the Pooling and Servicing Agreement
pursuant to Section 2.6(a) thereof.
"Adjusted Purchaser Capital" means, as of any date, an amount equal to
(a) the aggregate Purchaser Capital of all Purchaser Receivable Interests as of
such date, plus (b) the aggregate amount of all unreimbursed Purchaser
Charge-Offs as of such date, minus (c) the total amount of payments made to the
Purchasers from the SP Escrow Account prior to such date.
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"Administrative Servicer" means, initially, BSI Business Services, Inc.
(formerly known as JC Penney Business Services, Inc.), a Delaware corporation,
and shall also include any other Person who succeeds to the functions performed
by the Administrative Servicer, as provided in the Administrative Servicer
Agreement, and/or such other Administrative Servicer, including Spirit, as the
Agent and the Owner shall reasonably and mutually agree upon.
"Administrative Servicer Agreement" means the Credit Processing
Agreement effective as of July 8, 1988, as amended as of July 26, 1991, between
Spirit of America National Bank and the Administrative Servicer, and any other
agreement with the same or any successor Administrative Servicer regarding the
performance of servicing functions for the Receivables, and all agreements,
instruments and documents attached thereto or delivered in connection therewith,
as any of the same may from time to time be hereafter amended, supplemented, or
otherwise modified in accordance with the terms of the Agreement.
"Adverse Claim" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of this
definition, a Person shall be deemed to be "controlled by" another Person if
such other Person possesses, directly or indirectly, power either to (a) vote
10% or more of the securities having ordinary voting power for the election of
directors of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Agent's Account" means the special account (account number 4060-0094)
of the Agent maintained at the office of Citibank, N.A. at 399 Park Avenue, New
York, New York. The Agent's Account is the "Series Account" referred to in the
Pooling and Servicing Agreement for the Receivables Purchase Series arising in
connection with the Agreement.
"Allocable Finance Charge Collections" means, for any Due Period, the
product of (a) the Allocation Percentage for such Due Period and (b) the amount
of Collections of Finance Charge Receivables with respect to such Due Period.
"Allocable Principal Collections" means, for any Due Period, the
product of (a) the Allocation Percentage for such Due
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Period and (b) the amount of Collections of Principal Receivables with respect
to such Due Period.
"Allocated Finance Charges" means amounts allocated pursuant to Section
2.02(a)(i) of the Agreement.
"Allocated Loss Amount" means, with respect to any Due Period, an
amount equal to the product of (a) the Allocation Percentage for such Due Period
and (b) the Loss Amount with respect to such Due Period.
"Allocation Percentage" means:
(i) for the initial Due Period, the ratio (expressed as
percentage) computed as of the date of the initial purchase under the
Agreement by dividing (A) the sum of (1) the initial Purchaser Capital, (2)
the initial Subordinated Purchaser Capital and (3) the Minimum Seller
Capital, in each case as of such date by (B) the Outstanding Balance of all
Pool Receivables on the initial Cut Off Date;
(ii) for any subsequent Due Period during the Revolving
Period, the ratio (expressed as percentage) computed as of the last day of
the immediately preceding Due Period by dividing (A) the sum of (1) the
Purchaser Capital, (2) the Subordinated Purchaser Capital and (3) the
Minimum Seller Capital, in each case as of such last day by (B) the greater
of (1) the Outstanding Balance of all Pool Receivables as of such last day
minus the total amount of Discount Option Receivables (if any) on such last
day and (2) the sum of the numerators used to calculate the
Investor/Purchaser Percentages for such subsequent Due Period for all
Certificate Series and Receivables Purchase Series outstanding; and
(iii) for any subsequent Due Period during the Amortization
Period, the ratio (expressed as percentage) computed as of the last day of
the immediately preceding Due Period by dividing (A) the sum of (1) the
Purchaser Capital, (2) the Subordinated Purchaser Capital and (3) the
Unallocated Receivables Balance, in each case as of such last day by (B) the
greater of (i) the Outstanding Balance of all Pool Receivables as of such
last day minus the total amount of Discount Option Receivables (if any) on
such last day and (2) the sum of the numerators used to calculate the
Investor/Purchaser Percentages for such subsequent Due Period for all
Certificate Series and Receivables Purchase Series outstanding.
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Notwithstanding the foregoing, with respect to any Due Period in which
an Addition Date or Removal Date occurs, the amount in (ii)(B)(1) and
(iii)(B)(1) above shall be (1) for the period from and including the first day
of such Due Period to but excluding the related Addition Date or Removal Date,
the Outstanding Balance of all Pool Receivables as of the last day of the
immediately preceding Due Period, minus the total amount of Discount Option
Receivables (if any) on such last day, and (2) for the period from and including
the related Addition Date or Removal Date to and including the last day of such
Due Period, the Outstanding Balance of all Pool Receivables at the end of the
day on the related Addition Date or Removal Date, minus the total amount of
Discount Option Receivables (if any) at the end of the day on such Addition Date
or Removal Date; provided further, that with respect to any Due Period in which
an Addition Date or Removal Date occurs and the Servicer need not make daily
deposits of Collections into the Collection Account, the amount in (ii)(B)(1)
and (iii)(B)(1) above shall be the Average Principal Balance for such Due
Period.
For purposes of this definition, "Investor/Purchaser Percentages" and
"Certificate Series" have the meanings attributed to them in the Pooling and
Servicing Agreement, and "Unallocated Receivables Balance" on any day means the
lesser of (1) the Outstanding Balance of the Pool Receivables not allocated to
the Purchaser Receivable Interests or the Subordinated Receivable Interests
pursuant to the Agreement and not allocated to any other Person other than the
Holder of the Exchangeable Seller Certificate pursuant to a supplement to the
Pooling and Servicing Agreement or pursuant to any other receivables purchase
agreement that is subject to the Pooling and Servicing Agreement and (2) the
Minimum Seller Capital as of such day. The Allocation Percentage may never be
greater than 100%. The Allocation Percentage is the "Investor/Purchaser
Percentage" referred to in the Pooling and Servicing Agreement for the
Receivables Purchase Series arising in connection with the Agreement, and for
purposes of clauses (ii)(B)(2) and (iii)(B)(2) above, the numerator used to
calculate the Investor/Purchaser Percentage for the Receivables Purchase Series
arising in connection with the Agreement is the amount set forth in clauses
(ii)(A) and (iii)(A), respectively.
"Alternate Base Rate" means a fluctuating interest rate per annum as
shall be in effect from time to time, which rate shall be at all times equal to
the interest rate per annum determined using the applicable spread specified in
the Fee Letter plus the highest of:
(a) the rate of interest announced publicly by Citibank, N.A.
in New York, New York, from time to time as Citibank, N.A.'s base rate;
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(b) 1/2 of one percent above the latest three-week moving
average of secondary market morning offering rates in the United States
for three-month certificates of deposit of major United States money
market banks, such three-week moving average being determined weekly on
each Monday (or, if such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank, N.A. on the basis of such rates reported
by certificate of deposit dealers to and published by the Federal
Reserve Bank of New York or, if such publication shall be suspended or
terminated, on the basis of quotations for such rates received by
Citibank, N.A. from three New York certificate of deposit dealers of
recognized standing selected by Citibank, N.A., in either case adjusted
to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one
percent, to the next higher 1/4 of one percent; and
(c) the Federal Funds Rate.
"Amortization Period" means the period commencing at the close of
business of the Agent on the Business Day immediately preceding the Termination
Date and ending on the Final Distribution Date.
"Assignee Rate" for any Fixed Period for any Purchaser Receivable
Interest means an interest rate per annum determined using the applicable spread
specified in the Fee Letter plus the Eurodollar Rate for such Fixed Period;
provided, however, that in the case of
(i) any Fixed Period beginning on or after the first day of
which a Purchaser shall have notified the Agent that the introduction
of or any change in or in the interpretation of any law or regulation
makes it unlawful, or any central bank or other governmental authority
asserts that it is unlawful, for such Purchaser to fund such Purchaser
Receivable Interest at the Assignee Rate set forth above (and such
Purchaser shall not have subsequently notified the Agent that such
circumstances no longer exist),
(ii) any Fixed Period of one to (and including) 29 days,
(iii) any Fixed Period as to which the Agent does not receive
notice, by no later than 12:00 noon (New York City time) on the third
Business Day preceding the
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first day of such Fixed Period, that the related Purchaser Receivable
Interest will not be funded by issuance of commercial paper, or
(iv) any Fixed Period for a Purchaser Receivable Interest the
Purchaser Capital of which is less than $500,000,
the "Assignee Rate" for each such Fixed Period shall be an interest rate per
annum equal to the Alternate Base Rate in effect on the first day of such Fixed
Period; provided further that the Agent and the Owner may agree in writing from
time to time upon a different "Assignee Rate".
"Average Principal Balance" shall mean, for a Due Period in which an
Addition Date or Removal Date occurs, the weighted average of (i) the
Outstanding Balance of all Pool Receivables at the end of the day on the last
day of the prior Due Period minus the total amount of Discount Option
Receivables (if any) on such last day and (ii) the Outstanding Balance of all
Pool Receivables at the end of the day on the related Addition Date or Removal
Date minus the total amount of Discount Option Receivables (if any) at the end
of the day on such Addition Date or Removal Date, weighted, respectively, by a
fraction, the numerator of which is the number of days from and including the
first day of such Due Period to but excluding the related Addition Date or
Removal Date, and the denominator of which is the number of days in such Due
Period, and by a fraction, the numerator of which is the number of days from and
including the related Addition Date or Removal Date to and including the last
day of such Due Period, and the denominator of which is the number of days in
such Due period.
"Bank Portfolio" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
"Banks" has the meaning attributed thereto in the Parallel Purchase
Commitment.
"Business Day" means any day on which (i) banks are not authorized or
required to close in New York City, Philadelphia, Pennsylvania or Milford, Ohio
and (ii) if this definition of "Business Day" is utilized in connection with the
Eurodollar Rate, dealings are carried out in the London interbank market.
"CapMAC" means Capital Markets Assurance Corporation, a New York stock
insurance company.
"Cardholder Agreement" means the agreement (and the related
application) for any Account, as such agreement may be
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amended, modified or otherwise changed from time to time in accordance with the
terms thereof. The "related Cardholder Agreement" means, when used with respect
to any Receivable, the Cardholder Agreement under which such Receivable arose.
"Cardholder Guidelines" means the Owner's policies and procedures
relating to the operation of its credit card business in effect on the date of
the Agreement, including, without limitation, the policies and procedures for
determining the creditworthiness of potential and existing credit card
customers, and relating to the maintenance of credit card accounts and
collection of credit card receivables, as such policies and procedures may be
amended from time to time in accordance with the Agreement.
"Charming Shoppes" means Charming Shoppes, Inc., a Pennsylvania
corporation.
"Collection" means any payment by or on behalf of Obligors received by
the Servicer in respect of the Pool Receivables, in the form of cash, checks,
wire transfers, electronic transfers, ATM transfers or any other form of payment
in accordance with a Cardholder Agreement in effect from time to time,
including, without limitation, (x) all Recoveries, (y) all payments made with
respect to Principal Receivables by deposit into the Collection Account pursuant
to Section 4.3(d) of the Pooling and Servicing Agreement or Section 2.07(b) of
the Agreement and (z) payments by the Owner with respect to the reassignment of
ineligible Receivables or the reassignment of Receivables following the breach
of certain representations, made by deposit into the Collection Account pursuant
to Section 2.4(d)(iii) or 2.4(e) of the Pooling and Servicing Agreement or
pursuant to Section 4.03(b) of the Agreement. The term "Collection" shall
include Insurance Proceeds generally, but shall exclude Insurance Proceeds and
other amounts constituting Recoveries of Pool Receivables to the extent the
aggregate Insurance Proceeds received in respect of the Pool Receivables during
any Due Period exceed the Loss Amount for such Due Period. A Collection
processed on an Account in excess of the amount of Receivables in such Account
as of the date of receipt by the Servicer of such Collection shall be deemed to
be a payment in respect of Principal Receivables to the extent of such excess.
The term "Collection" shall also include all benefits of the Owner or FSC under
and all monies due or to become due to the Owner or FSC under the Interest Rate
Agreements, and any such monies received shall be deemed a Collection of Finance
Charge Receivables and shall be considered a Collection with respect to Pool
Receivables. Notwithstanding any other provision of the Agreement to the
contrary, Collections constituting payments in respect of the Interest Rate
Agreements shall be allocated
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entirely to the Receivables Purchase Interest under the Agreement and to the
"Receivables Purchase Interest" under the Parallel Purchase Commitment, and
Collections described in clauses (y) and (z) above (to the extent allocable to
the Receivables Purchase Series arising in connection with the Agreement) shall
be allocated entirely to the Receivables Purchase Interest under the Agreement.
"Collection Account" means the segregated account established by the
Trustee pursuant to Section 4.2(a) of the Pooling and Servicing Agreement.
"Company" means each of FSC and Charming Shoppes.
"Company Agreement" means an agreement, dated as of the date hereof,
made by each of FSC and Charming Shoppes in favor of the Purchasers and the
Agent, in form and substance satisfactory to the Agent, as the same may, from
time to time, be amended, restated, modified or supplemented.
"Credit Facilities" means the credit facilities described in Schedule I
hereto to which Charming Shoppes and/or its Affiliates are parties.
"Cut Off Date" means the close of business of the Owner on February 29,
1996, or, in the case of Additional Accounts, the applicable Addition Cut Off
Date.
"CXC" means CXC Incorporated, a Delaware corporation, and any successor
or assignee of CXC that is a receivables investment company which in the
ordinary course of its business issues commercial paper or other securities to
fund its acquisition and maintenance of receivables.
"Cycle" means each billing cycle used by the Owner to bill Obligors of
the Receivables.
"Cycle Closing Date", in respect of any Account, means the last day of
each Cycle applicable to such Account.
"Defaulted Receivable" means a Principal Receivable:
(i) in respect of which the related Obligor has failed to
make the minimum monthly payment required under the terms of the
related Cardholder Agreement and such failure has continued for 180
days or seven consecutive Cycles (whichever is less) after the due date
of such payment;
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(ii) as to which the Obligor thereof or any other Person
obligated thereon has taken any action, or suffered any event to occur,
of the type described in paragraph (g) of Exhibit VI; or
(iii) which, consistent with the Cardholder Guidelines, would
be written off the Seller's books as uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage)
computed as of the last day of any Due Period by dividing (i) the average of the
aggregate Outstanding Balances of all Pool Receivables that were Delinquent
Receivables on such last day and on the last day of the two immediately
preceding Due Periods by (ii) the aggregate Outstanding Balance of all Pool
Receivables on such last day.
"Delinquent Receivable" means a Receivable that is not a Defaulted
Receivable and:
(i) in respect of which the related Obligor has failed to
make the minimum monthly payment required under the terms of the
related Cardholder Agreement and such failure has continued for 90 days
or four consecutive Cycles (whichever is less) after the due date of
such payment; or
(ii) which, consistent with the Cardholder Guidelines, would
be classified as delinquent by the Servicer. "Depositary Agreement"
means an agreement, in substantially the form of Annex B, from the
Seller to any Depositary Bank.
"Depositary Bank" means any of the banks holding one or more Initial
Depositary Accounts.
"Discount Option Receivable" has the meaning set forth in the Pooling
and Servicing Agreement.
"Distribution Date" means the fifteenth day of each month, or if such
day is not a Business Day, the next succeeding Business Day. Notwithstanding the
foregoing, in the event a Total Systems Failure exists on any Distribution Date,
the date of such Distribution Date shall mean the fourth Business Day after the
date on which the Seller or the Servicer delivers a Servicer Report; provided,
that in no event shall a Distribution Date be postponed more than 10 Business
Days due to a Total Systems Failure.
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"Due Period" means, initially, the period from the close of business on
the Cut-Off Date to the close of business on the Last Cycle Closing Date for the
month of March 1996, and thereafter, the period from the close of business on
the last day of the prior Due Period to the close of business of the next Last
Cycle Closing Date.
"Early Amortization Event" has the meaning set forth in Exhibit VI.
"Effective Date" means April 4, 1996.
"Eligible Account" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
"Eligible Institution" means any depository institution (which may not
be the Owner or its successors or assigns, or any affiliate of the Owner, or its
successors or assigns), organized under the laws of the United States or any
state, having capital and surplus in excess of $50,000,000, the deposits of
which are insured to the full extent permitted by law by the Federal Deposit
Insurance Corporation and which is subject to supervision and examination by
federal or state banking authorities; provided that such institution also must
have a rating of Baa or higher with respect to long-term deposit obligations
from Moody's and BBB or higher with respect to long-term deposit obligations
from S&P. If such depository institution publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published.
"Eligible Investments" means any "Permitted Investments" (as defined in
the Pooling and Servicing Agreement); provided, however, that Eligible
Investments shall not include any demand or time deposit or certificate of
deposit of the Owner.
"Eligible Receivable" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
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"Eligible RPA Receivable" means, at any time, an Eligible Receivable:
(i) the Obligor of which, at the time of the initial
creation of an interest therein under the Agreement, has not failed to
make, at the time of the sale of the goods or services giving rise to
such Receivable, at least the minimum monthly payment required in order
to entitle such Obligor to further extensions of credit under the terms
of the Cardholder Guidelines;
(ii) the Obligor of which, at the time of the initial
creation of an interest therein under the Agreement, has not failed to
make any such required payments for any period of two consecutive
Cycles (including the Cycle ending on the most recent Cycle Closing
Date under the related Cardholder Agreement to occur 10 Business Days
or more prior to the date of such creation); provided, however, that
this clause (ii) shall not apply to determine the eligibility of a
Receivable on the date of its purchase under the Agreement;
(iii) [intentionally omitted]
(iv) which is a "general intangible" or an "account" within
the meaning of Section 9-106 of the UCC of each jurisdiction whose law
governs the perfection of the interest created by a Purchaser
Receivable Interest;
(v) which is (A) denominated and payable only in United
States dollars in the United States, and (B) required to be paid either
by means of a check sent to the Initial Depositary Account or, until
the date on which the Store Payment Notice is delivered to the Store
managers pursuant to paragraph 2(b)(ii) of Exhibit V to the Agreement,
by means of a Store Payment;
(vi) which:
(A) arises under a Cardholder Agreement which, together
with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the
Obligor of such Receivable, except as such enforceability may
be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law
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affecting creditors' rights generally or by general principles
of equity (whether considered in a proceeding in equity or at
law),
(B) arises under a Cardholder Agreement the terms of
which require minimum monthly payments such that such
Receivable is scheduled to be paid in full within 5 years from
the date of its creation,
(C) arises from a Cardholder Agreement and either (x)
has been billed to the related Obligor on such Obligor's
Statement in accordance with the terms of such Cardholder
Agreement, or (y) will be billed to the related Obligor on such
Obligor's Statement rendered no later than the third Cycle
Closing Date after such Receivable is incurred in accordance
with the terms of such Cardholder Agreement; provided, however,
that an Eligible Receivable satisfying the requirements of this
clause (y) and all other requirements of this definition of
"Eligible RPA Receivable" (but not satisfying the preceding
clause (x)) shall be considered an Eligible RPA Receivable only
to the extent that the Outstanding Balance thereof at the time
of the initial creation of an interest therein under the
Agreement, when aggregated with the Outstanding Balance of all
other Eligible Receivables satisfying the requirements of the
preceding clause (y) and all other requirements of this
definition of "Eligible RPA Receivable" (but not satisfying the
preceding clause (x)), does not exceed 10% of the then
Outstanding Balance of all Eligible Receivables,
(D) is not subject to any dispute, offset, counterclaim
or defense whatsoever (except the potential discharge in
bankruptcy of such Obligor),
(E) has not been purchased by the Owner pursuant to
Section 2.4(d)(iii) or 2.4(e) of the Pooling and Servicing
Agreement,
(F) at the time of the initial creation of an interest
therein under the Agreement is not a Defaulted Receivable,
(G) does not arise under an Account which the Owner has
classified on its electronic records
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as counterfeit, cancelled or fraudulent, or which has been
identified as an Account with respect to which the related card
has been lost or stolen, and
(H) has not otherwise been charged off as uncollectible
pursuant to the Cardholder Guidelines;
(vii) which, together with the Cardholder Agreement related
thereto, does not contravene in any material respect any local, state
or federal laws, rules or regulations applicable thereto (including,
without limitation, Regulation Z of the Board of Governors of the
Federal Reserve System, the Federal Consumer Protection Act (including,
without limitation, the Federal Truth in Lending Act), the Fair Credit
Billing Act, and all other laws, rules and regulations relating to
usury, consumer protection, truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Cardholder Agreement related thereto is in violation of any such law,
rule or regulation in any material respect;
(viii) which satisfies all applicable requirements of the
Cardholder Guidelines;
(ix) which was not originated in or subject to the laws of a
jurisdiction whose laws would make such Receivable, the related
Cardholder Agreement or the sale of such Receivable to a Purchaser
under the Agreement unlawful, invalid or unenforceable; and
(x) which is owned solely by the Seller free and clear of
all Adverse Claims, except for (1) the interests created therein
pursuant to the Pooling and Servicing Agreement (which interests are
pari passu with the Purchasers' interests therein), and (2) the
interests therein created under the Agreement and the Parallel Purchase
Commitment.
"Established Securities Market" means a national securities exchange
that is either registered under Section 6 of the Exchange Act or exempt from
registration because of the limited volume of transactions, a foreign securities
exchange that, under the law of the jurisdiction where it is organized,
satisfies regulatory requirements that are analogous to the regulatory
requirements of the Exchange Act, a regional or local exchange, or an
interdealer quotation system that regularly
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disseminates firm buy or sell quotations by identified brokers or dealers by
electronic means or otherwise.
"Escrow Bank" means, as the context may require, the Eligible
Institution then holding the Servicer Escrow Account pursuant to Section 5.04 of
the Agreement or the Eligible Institution then holding the SP Escrow Account
pursuant to Section 7.16 of the Agreement.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate" means, for any Fixed Period, an interest rate per
annum equal to the rate per annum at which deposits in U.S. dollars are offered
by the principal office of Citibank, N.A. in London, England to prime banks in
the London interbank market at 11:00 A.M. (London time) two Business Days before
the first day of such Fixed Period in an amount substantially equal to the
Purchaser Capital associated with such Fixed Period on such first day and for a
period equal to such Fixed Period.
"Eurodollar Rate Reserve Percentage" of any Purchaser for any Fixed
Period in respect of which Yield is computed by reference to the Eurodollar Rate
means the reserve percentage applicable two Business Days before the first day
of such Fixed Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) (or if more than one
such percentage shall be applicable, the daily average of such percentages for
those days in such Fixed Period during which any such percentage shall be so
applicable) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for such Purchaser with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate on
Eurocurrency Liabilities is determined) having a term equal to such Fixed
Period.
"Excess Finance Charge Collections" has the meaning set forth in
Section 2.04 of the Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Facility Termination Date" means the earliest of (i) March 31, 1997
(or such later date as the Seller, the Subordinated Purchaser, the Owner, the
Servicer and the Agent may
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mutually agree in writing), (ii) the date determined pursuant to Section 3.02
and (iii) the date the Purchase Limit reduces to zero pursuant to Section
1.01(c).
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fee Letter" has the meaning set forth in Section 1.03 of the
Agreement.
"Final Distribution Date" means the date on which (i) the Purchaser
Capital of all Purchaser Receivable Interests and Yield thereon have been paid
in full, (ii) all other amounts payable hereunder to the Purchasers or the Agent
with respect thereto are paid in full, (iii) the Subordinated Purchaser Capital
of all Subordinated Receivable Interests have been paid in full, and (iv) the
aggregate amount of all unreimbursed Purchaser Charge-Offs with respect thereto
have been reimbursed; provided, that the Final Distribution Date shall in any
event occur one year after all amounts payable pursuant to clauses (i), (ii) and
(iii) above have been paid in full even if all unreimbursed Purchaser
Charge-Offs with respect thereto have not been reimbursed; this is the "Series
Termination Date" referred to in the Pooling and Servicing Agreement.
"Finance Charge Receivables" means all amounts billed to the Obligors
on any Account in the ordinary course of the Owner's business in respect of (a)
periodic rate finance charges, (b) late payment fees, (c) annual fees, if any,
with respect to the Accounts (excluding any fees payable with respect to the
"Fashion Bug Gold Club" which fees shall be deemed to be Principal Receivables),
(d) returned check charges, and (e) any other fees with respect to the Accounts
designated by the Owner by notice to the Agent at any time and from time to time
to be included as Finance Charge Receivables. Notwithstanding their treatment
under the Pooling and Servicing Agreement, Discount Option Receivables, shall,
for the purposes of the Agreement, be treated as Principal Receivables and not
as Finance Charge Receivables, except as otherwise expressly provided in the
Agreement.
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"Fixed Allocation Percentage" means, for each Due Period with respect
to the Amortization Period, the ratio (expressed as a percentage) (which shall
not be in excess of 100%) computed as at the close of business of the Agent on
the Business Day immediately preceding the Termination Date, by dividing (a) the
sum of the Purchaser Capital and the Subordinated Purchaser Capital on such
Business Day by (b) the product of (i) the Allocation Percentage for such Due
Period and (ii) the total amount of Principal Receivables on the last day of the
immediately preceding Due Period minus the total amount of Discount Option
Receivables (if any) on such last day.
"Fixed Period" means, with respect to any Purchaser Receivable Interest
which is not funded through the issuance of commercial paper:
(a) initially the period commencing on the date on which such
Purchaser Receivable Interest is first funded other than by the
issuance of commercial paper and ending such number of days as the
Servicer shall select and the Agent shall approve pursuant to the
proviso below; and
(b) thereafter each period commencing on the last day of the
immediately preceding Fixed Period for such Purchaser Receivable
Interest and ending such number of days as the Servicer shall select
and the Agent shall approve pursuant to the proviso below;
provided, that
(i) such Fixed Period shall be a period from one to and
including 29 days, or a period of one, two or three months, as the
Servicer may select and the agent shall approve on notice received by
the Agent (including notice by telephone, confirmed in writing) not
later than 11:00 A.M. on (A) the third Business Day before the first
day of such Fixed Period (in the case of Fixed Periods of one, two or
three months) or (B) the first day of such Fixed Period (in the case of
Fixed Periods of one to 29 days);
(ii) any Fixed Period (other than of one day) which would
otherwise end on a day which is not a Business Day shall be extended to
the next succeeding Business Day (provided, however, if Yield in
respect of such Fixed Period is computed by reference to the Eurodollar
Rate, and such Fixed Period would otherwise end on a day which is not a
Business Day, and there is no subsequent Business Day in the same
calendar month
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as such day, such Fixed Period shall end on the next preceding Business
Day);
(iii) in the case of any Fixed Period of one day, (A) if such
Fixed Period is the initial Fixed Period for a Purchaser Receivable
Interest, such Fixed Period shall be the day of purchase of such
Purchaser Receivable Interest; (B) any subsequently occurring Fixed
Period which is one day shall, if the immediately preceding Fixed
Period is more than one day, be the last day of such immediately
preceding Fixed Period, and, if the immediately preceding Fixed Period
is one day, be the day next following such immediately preceding Fixed
Period; and (C) if such Fixed Period occurs on a day immediately
preceding a day which is not a Business Day, such Fixed Period shall be
extended to the next succeeding Business Day; and
(iv) in the case of any Fixed Period for any Purchaser
Receivable Interest which commences before the Termination Date for
such Purchaser Receivable Interest and would otherwise end on a date
occurring after such Termination Date, such Fixed Period shall end on
such Termination Date and the duration of each Fixed Period which
commences on or after the Termination Date for such Purchaser
Receivable Interest shall be of such duration as shall be selected by
the Agent.
"Floating Allocation Percentage" means, for each Due Period, the ratio
(expressed as a percentage) (which shall not be in excess of 100%) computed as
of the last day of the immediately preceding Due Period by dividing (a) the sum
of the Purchaser Capital and the Subordinated Purchaser Capital as of such last
day by (b) the product of (i) the Allocation Percentage for such Due Period and
(ii) the total amount of Principal Receivables on such last day minus the total
amount of Discount Option Receivables (if any) on such day; provided, however,
that during the initial Due Period, the Floating Allocation Percentage will be
equal to the ratio (expressed as a percentage) computed by dividing (x) the sum
of the initial Purchaser Capital and the initial Subordinated Purchaser Capital
by (y) the product of (i) the Allocation Percentage for such initial Due Period
and (ii) the total amount of Principal Receivables on the initial Cut-Off Date.
"FSC" means Fashion Service Corp., a Delaware corporation.
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"Funding Rate" for any Settlement Period means (a) the rate per annum
equivalent to the weighted average of the per annum rates paid or payable by CXC
from time to time as interest on, or otherwise (by means of interest rate hedges
or otherwise) in respect of, that commercial paper issued by CXC and which is
allocated, in whole or in part, by the Agent (on behalf of CXC) to fund its
purchase or maintenance of such Purchaser Receivable Interest during such
Settlement Period, as determined by the Agent (on behalf of CXC) and reported to
the Owner and the Servicer, which rates shall reflect and give effect to the
commissions of placement agents and dealers in respect of such commercial paper,
to the extent such commissions are allocated, in whole or in part, to such
commercial paper by the Agent (on behalf of CXC); provided, however, that if any
component of such rate is a discount rate, in calculating the "Funding Rate" for
such Settlement Period, the Agent shall for such component use the rate
resulting from converting such discount rate to an interest bearing equivalent
rate per annum; provided further, that if the Agent so requests and the Servicer
consents thereto, the "Funding Rate" for any Settlement Period of one day shall
be the Assignee Rate for such period or (b) such other rate as the Agent and the
Servicer shall agree to in writing.
"GAAP" means generally accepted accounting principles in the United
States of America, applied on a consistent basis and applied to both
classification of items and amounts, and shall include but not be limited to the
official interpretations thereof by the Financial Accounting Standards Board,
its predecessors and successors.
"Holder of the Exchangeable Seller Certificate" shall have the meaning
ascribed to that term in the Pooling and Servicing Agreement.
"Initial Depositary Account" means the "Initial Depositary Account"
under the Pooling and Servicing Agreement.
"Insurance Agreement" means the Insurance Agreement, dated as of the
date hereof, among CXC, the Agent, the Seller, the Owner, the Subordinated
Purchaser and CapMAC, as the same may be amended, restated or modified from time
to time.
"Insurance Proceeds" means any amounts received pursuant to any credit
life insurance policies, credit disability or unemployment insurance policies
covering any Obligor with respect to Pool Receivables under such Obligor's
Account to the extent such amounts are used to make payments on such Account.
"Interest Rate Agreements" mean one or more interest rate cap or
interest rate swap agreements which shall (i) in the case of a cap agreement,
provide for payments to the Owner or FSC or the Seller in the event the Funding
Rate shall exceed 9.0% per annum, (ii) in the case of a swap agreement, provide
for payments
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to the Owner or FSC at the Funding Rate in exchange for payments by the Owner or
FSC at a fixed interest rate not in excess of 9.0% per annum, (iii) cover in the
aggregate (x) a notional balance of at least $150,000,000 through the Facility
Termination Date, which notional balance shall either (A) remain at least at
$150,000,000 during the ten months immediately following the Facility
Termination Date or (B) amortize on a straight-line basis to zero over not less
than 10 months immediately following the Facility Termination Date and (iv) be
with such counter-parties and contain such other terms and provisions as shall
be satisfactory to the Agent. The Interest Rate Agreements, which are limited to
those agreements specified in the Owner's officer's certificate in the form of
Annex G delivered from time to time in accordance with the Agreement, are the
"Enhancement" referred to in the Pooling and Servicing Agreement for the
Receivables Purchase Series arising in connection with the Agreement.
"Investor Certificate" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
"Last Cycle Closing Date" means, for any month, the latest-occurring
Cycle Closing Date for all Cardholder Agreements in such month.
"Liquidation Fee" means, for the Settlement Period or Fixed Period
during which the Termination Date occurs, the amount, if any, by which (i) the
additional Yield (calculated without taking into account any Liquidation Fee or
any shortened duration of such Settlement Period or Fixed Period due to the
occurrence of the Termination Date) which would have accrued during such
Settlement Period or Fixed Period on the reductions of Purchaser Capital of the
Purchaser Receivable Interests had such reductions remained as Purchaser
Capital, exceeds (ii) the income, if any, received by the Purchasers' investing
the proceeds of such reductions of Purchaser Capital.
"Loss Amount" for any Due Period means an amount (which shall not be
less than zero) equal to (a) the principal balance of any Account, or any
portion thereof, that has been written off or, consistent with the Cardholder
Guidelines, should have been written off the Seller's books as uncollectible
during such Due Period, minus (b) the amount of Recoveries received in such Due
Period with respect to Pool Receivables previously charged off as uncollectible.
"Master Trust Documents" means the Pooling and Servicing Agreement and
each other agreement, instrument or other document (other than any "supplement"
or "receivables purchase agreement" (in each case, as defined therein))
delivered in
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connection with the Pooling and Servicing Agreement, in each case as the same
may be amended, modified or supplemented in accordance with the terms thereof.
"Minimum Seller Capital" means, on any date of determination, an
aggregate Outstanding Balance of Principal Receivables that are Eligible
Receivables in the Receivables Pool on such date of determination equal to (i)
during the Revolving Period and during the Amortization Period (but only so long
during the Amortization Period as the Facility Termination Date has not occurred
and the Seller has not designated the Termination Date), the product of (a) 2.0%
and (b) the amount of the Purchaser Capital on such date of determination and
(ii) during the Amortization Period (and following the occurrence of the
Facility Termination Date or the designation of the Termination Date by the
Seller), an amount equal to (a) 102% of the amount of the Purchaser Capital at
the close of business of the Agent on the Business Day (the "MSC Fix Date")
immediately preceding the earlier to occur of the Facility Termination Date and
the designation of the Termination Date by the Seller, minus (b) the sum of (1)
the amount of the Purchaser Capital on such date of determination and (2) the
aggregate reductions, if any, in the amount of Subordinated Purchaser Capital
from the MSC Fix Date to such date of determination.
"Minimum Seller Interest" means, on any date of determination, an
aggregate Outstanding Balance of Principal Receivables that are Eligible
Receivables in the Receivables Pool on such date of determination equal to (i)
during the Revolving Period, the product of (a) 2.0% and (b) the amount of the
Purchaser Capital on such date of determination and (ii) during the Amortization
Period, an amount equal to the product of (a) 2.0% and (b) the amount of the
Purchaser Capital at the close of business of the Agent on the Business Day
immediately preceding the Termination Date.
"Monthly Charge-Off Ratio" for any Due Period means the ratio
(expressed as a percentage) computed as of the last day of such Due Period by
dividing (i) an amount equal to twelve times the remainder of (x) the aggregate
Outstanding Balance of all Pool Receivables written off the Seller's books, or
which should have been written off the Seller's books during such Due Period
minus (y) the aggregate amount of Collections of Principal Receivables in the
Receivables Pool actually received during such Due Period in respect of Pool
Receivables that had been written off the Seller's books during a prior Due
Period by (ii) the Outstanding Balance of the Receivables in the Receivables
Pool as of the first day of such Due Period.
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"Moody's" means Moody's Investors Service, Inc. or any successor
thereto.
"Net Excess Spread" means, as of the last day of each Due Period, the
Portfolio Yield for such Due Period minus the sum of (A) the weighted average
Yield Rate for such Due Period, (B) the Servicer Fee Rate for such Due Period,
(C) the fees payable under the Fee Letter for such Due Period (each expressed as
a percentage rate per annum) and (D) the Monthly Charge-Off Ratio for such Due
Period.
"Net Receivables Pool Balance" means, at any time, the Outstanding
Balance of all Eligible Receivables then in the Receivables Pool. For the
purpose of this definition, if any Receivable in any Account shall constitute a
Defaulted Receivable, the Outstanding Balance of all Receivables in the same
Account shall be deemed to be zero.
"Obligor" means, with respect to any Account, the Person or Persons
obligated to make payments with respect to such Account pursuant to a Cardholder
Agreement, including any guarantor thereof.
"Opinion of Counsel" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Parallel Purchase Commitment" means the Receivables Purchase Agreement
(Parallel Purchase Commitment), dated as of the date hereof, among the Seller,
the Servicer, the Owner, Citibank, N.A., the Subordinated Purchaser and CNAI,
individually and as Agent, as the same may, from time to time, be amended,
restated, modified or supplemented.
"Payment Ratio" means the ratio (expressed as a percentage) computed as
of the last day of any Due Period by dividing (i) the aggregate Collections
received during such Due Period (excluding Collections constituting payments in
respect of the Interest Rate Agreements) by (ii) the aggregate Outstanding
Balance of all Pool Receivables at the close of business of the Due Period
immediately preceding such Due Period.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
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"Pool Index File" means the file on the Owner's computer system that
identifies revolving credit card accounts of the Owner, which file is designated
by the Owner as its "Pool Index File".
"Pool Receivables" means all Receivables existing on the initial
Cut-Off Date and all Receivables arising in the Accounts from time to time after
the applicable Cut Off Date until the Final Distribution Date.
"Pooling and Servicing Agreement" means the Amended and Restated
Pooling and Servicing Agreement dated as of December 24, 1992 as amended and
restated as of May 4, 1994, and as amended by Amendment No. 1 dated as of
December 22, 1995 and Amendment No. 2 dated as of March 22, 1996, among Spirit,
as the seller, Spirit as the Servicer and First Union National Bank (formerly
known as First Fidelity Bank, National Association, and prior to that known as
First Fidelity Bank, N.A., Pennsylvania, and prior to that known as Fidelity
Bank, National Association), as the Trustee, as the same may, from time to time,
be amended, restated, modified or supplemented.
"Portfolio Yield" means, with respect to any Due Period, the annualized
percentage equivalent to the amount computed as of the last day of such Due
Period by dividing (i) the amount of Collections of Finance Charge Receivables
during such Due Period calculated on a cash basis by (ii) the total amount of
the Principal Receivables in the Receivables Pool as of the first day of such
Due Period.
"Principal Receivables" means (a) all amounts (other than amounts which
represent Finance Charge Receivables) billed to the Obligor on any Account in
the ordinary course of the Owner's business in respect of purchases of
merchandise or services and (b) all other fees (other than Finance Charge
Receivables) billed to Obligors on the Accounts. Notwithstanding their treatment
under the Pooling and Servicing Agreement, Discount Option Receivables, shall,
for the purposes of the Agreement, be treated as Principal Receivables and not
as Finance Charge Receivables, except as otherwise expressly provided in the
Agreement.
"Purchase Limit" means $120,000,000, as such amount may be reduced
pursuant to Section 1.01(c) or pursuant to the last sentence of this definition,
or increased pursuant to section 1.01(d). References to the unused portion of
the Purchase Limit shall mean, at any time, the Purchase Limit, as then in
effect, minus the sum of the then outstanding Purchaser Capital and the then
outstanding "Purchaser Capital" of "Purchaser Receivable
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Interests" under the Parallel Purchase Commitment. Furthermore, on each day on
which the Seller reduces the unused portion of (or terminates) the "Total
Commitment" under the Parallel Purchase Commitment, the Purchase Limit
automatically shall reduce by the same amount (or so terminate).
"Purchaser" means CXC and all other owners by assignment or otherwise
of a Purchaser Receivable Interest and, to the extent of the undivided interests
so purchased, shall include any participants.
"Purchaser Capital" for any date means an amount equal to (a) the
aggregate initial Purchaser Capital of all Purchaser Receivable Interests
purchased by the Purchasers under the Agreement prior to such date (including
pursuant to reinvestments under Section 2.06(a) of the Agreement) minus (b) the
amount of distributions on account of Purchaser Capital made to the Purchasers
prior to such date (other than distributions from the SP Escrow Account pursuant
to Section 7.16 of the Agreement) and minus (c) the excess, if any, of the
aggregate amount of Purchaser Charge-Offs for all Distribution Dates preceding
such date over the aggregate amount of Purchaser Charge-Offs reimbursed prior to
such date; provided, however, that if Purchaser Capital shall have been reduced
by any distribution and thereafter all or a portion of such distribution is
rescinded or must otherwise be returned for any reason, such Purchaser Capital
shall be increased by the amount of such rescinded or returned distribution, as
though it had not been made.
"Purchaser Charge-Off" means any amount designated as such in Section
2.05(d) or 2.07(a) of the Agreement.
"Purchaser Loss Amount" means, with respect to any Distribution Date,
the product of (a) the Floating Allocation Percentage of the Allocated Loss
Amount for the preceding Due Period and (b) the Purchaser Percentage.
"Purchaser Percentage" means, with respect to any Distribution Date, a
fraction, the numerator of which is equal to the Purchaser Capital as of the
close of business on the last day of the second preceding Due Period and the
denominator of which is equal to the sum of the Purchaser Capital and the
Subordinated Purchaser Capital as of the close of business on such day.
"Purchaser Principal Collections" has the meaning set forth in Section
2.06(b) of the Agreement.
"Purchaser Receivable Interest" means, at any time, the undivided
percentage ownership interests purchased by CXC or its respective successors and
assigns, under the Agreement, which
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shall represent an undivided percentage ownership interest in all outstanding
Pool Receivables then existing or thereafter arising and all Collections with
respect to, and other proceeds of, such Pool Receivables (including, without
limitation, Insurance Proceeds and other amounts constituting Recoveries of Pool
Receivables and payments in respect of the Interest Rate Agreements).
"Purchaser Representative" means, initially, CNAI, as the Purchaser
Representative pursuant to Section 6.01 of the Agreement, and each other Person
who shall succeed to the functions of CNAI as the Purchaser Representative
pursuant to Section 6.01(c) of the Agreement.
"Purchaser Servicer Fee", with respect to any Distribution Date, means
an amount equal to one-twelfth of the product of (a) the Servicing Fee Rate and
(b) the Purchaser Capital as of the last day of the Due Period second preceding
such Distribution Date.
"Quarterly Charge-Off Ratio" as of the last day of any Due Period means
the ratio (expressed as a percentage) computed by averaging the Monthly
Charge-Off Ratio for such Due Period with the two immediately preceding Monthly
Charge-Off Ratios.
"Receivable" has the meaning set forth in the third Preliminary
Statement to the Agreement.
"Receivable Interest" has the meaning set forth in the fourth
Preliminary Statement to the Agreement.
"Receivables Pool" means at any time the aggregation of each then
outstanding Pool Receivable.
"Receivables Purchase Interest" and "Receivables Purchase Series
Interest" means, collectively, the Purchaser Receivable Interests and the
Subordinated Receivable Interests.
"Receivables Purchase Series" has the meaning attributed thereto in the
Pooling and Servicing Agreement.
"Receivables Purchaser" has the meaning attributed thereto in the
Pooling and Servicing Agreement.
"Records" means correspondence, memoranda, computer programs, tapes,
discs, papers, books or other documents or transcribed information of any type
whether expressed in ordinary or machine readable language.
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"Recoveries" means all amounts received (net of out-of-pocket costs of
collection), including Insurance Proceeds, with respect to Pool Receivables
which were previously charged off as uncollectible.
"Removal Date" has the meaning set forth in Section 1.1 of the Pooling
and Servicing Agreement.
"Removed Accounts" means Accounts designated by the Owner for deletion
and removal from the Trust for purposes of the Pooling and Servicing Agreement
pursuant to Section 2.7 thereof.
"Renumbered Account" means an Account with respect to which a new
credit account number has been issued by the Servicer or the Owner under
circumstances resulting from a lost or stolen credit card, from the transfer
from one group to another group, from the transfer from one Obligor to another
Obligor or from the addition of any Obligor and not requiring standard
application and credit evaluation procedures under the Cardholder Guidelines;
and which in any case can be traced or identified by reference to or by way of
the computer files or microfiche or written lists delivered to the Trustee
pursuant to Section 2.1 or 2.6(c)(ii) of the Pooling and Servicing Agreement as
an Account which has been renumbered.
"Required Amount" has the meaning set forth in Section 2.05(a) of the
Agreement.
"Requirements of Law" means any law, treaty, rule or regulation, or
determination of an arbitrator or of the United States of America, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, whether federal, state or local (including any usury law, the
Federal Truth-in-Lending Act and Regulation Z of the Board of Governors of the
Federal Reserve System), and, when used with respect to any Person, the
certificate of incorporation and by-laws or other charter or other governing
documents of such Person.
"Responsible Officer" of the Seller, the Owner, the Servicer, FSC or
Charming Shoppes, as the case may be, means the chief executive officer, chief
financial officer or controller thereof, and in addition, with respect to FSC,
any Vice President.
"Revolving Period" means the period beginning on the date of the
Agreement and ending at the close of business of the Agent on the Business Day
immediately preceding the Termination Date.
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"S&P" means Standard & Poor's Corporation or any successor thereto.
"Seller Account" means, initially, the account (account number
033009128001) of the Seller maintained at the office of the Trustee located at
123 South Broad Street, Philadelphia, Pennsylvania, or, upon 10 Business Days'
written notice from the Seller to the Agent, any other account established by
the Seller with a financial institution in New York, New York or Philadelphia,
Pennsylvania for the purpose of receiving amounts allocated and distributed by
the Servicer in respect of the Seller Interest.
"Seller Interest" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
"Series" has the meaning set forth in Section 1.1 of the Pooling and
Servicing Agreement.
"Servicer" means at any time the Person then authorized pursuant to the
Agreement and the Pooling and Servicing Agreement to administer and collect Pool
Receivables.
"Servicer Escrow Account" has the meaning set forth in Section 5.04 of
the Agreement.
"Servicer Fee" has the meaning set forth in Section 5.03 of the
Agreement; this is the "Receivables Purchaser Monthly Servicing Fee" referred to
in the Pooling and Servicing Agreement.
"Servicer Report" means a report, in substantially the form of Annex A
hereto, furnished by the Servicer to the Agent pursuant to paragraph 1(f) of
Exhibit V.
"Servicing Fee Rate" has the meaning set forth in Section 5.03 of the
Agreement; this is the "Series Servicing Fee Percentage" referred to in the
Pooling and Servicing Agreement.
"SP Escrow Account" has the meaning set forth in Section 7.16 of the
Agreement.
"Settlement Period" means (a) initially, the period from and including
the date of the Agreement to but excluding the next following Distribution Date
and (b) thereafter, the period from and including a Distribution Date to but
excluding the next following Distribution Date.
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"SP Escrow Establishment Date" has the meaning set forth in Section
7.16(a) of the Agreement.
"Statement" means, in respect of any Cardholder Agreement, the periodic
written notice to the related Obligor setting forth the previous balance,
payments and credits, finance charge, charges (including sales and other
charges), new balance, and minimum payment.
"Store" means:
(i) each retail location of the Owner or any Affiliate of
the Owner that is part of the "Fashion Bug" or "Fashion Bug Plus" chain
of women's retail apparel stores,
(ii) each other retail location of a chain of women's retail
apparel stores established de novo by the Owner or any Affiliate of the
Owner the primary business of which is the retail sale of moderately
priced women's apparel, and
(iii) any other retail location the primary business of which
is the retail sale of moderately priced women's apparel that is
consented to by the Agent.
"Store Account" means each account established by a Store for the
purpose of collecting Store Payments.
"Store Payment" means any payment by an Obligor of a Pool Receivable
made by means of cash or a check delivered in person by or on behalf of such
Obligor at any Store.
"Store Payment Notice" has the meaning set forth in paragraph 1(b)(xxi)
of Exhibit II to the Agreement.
"Subject Holder" means each Person owning an interest in the Trust, and
shall include ownership directly or indirectly through a partnership (including
any entity treated as a partnership for federal income tax purposes), a grantor
trust or an S corporation (each such entity a "flow-through entity") unless the
Owner determines in its sole discretion, after consulting with qualified tax
counsel, that less than substantially all of the value of the beneficial owner's
interest in the flow-through entity is attributable to the flow-through entity's
interest (direct or indirect) in the Trust.
"Subject Instruments" means any Certificates or Receivables Purchase
Interests (as defined in the Pooling and
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<PAGE> 80
Servicing Agreement) issued by the Trust if the Owner shall not have received an
Opinion of Counsel to the effect that such Certificates or Receivables Purchase
Interests will be treated as debt for Federal income tax purposes.
"Subordinated Principal Collections" means, with respect to each
Distribution Date, (a) the product of (1) the Floating Allocation Percentage,
with respect to the Revolving Period, or the Fixed Allocation Percentage, with
respect to the Amortization Period, of Allocable Principal Collections for the
related Due Period (or any partial Due Period which occurs as the first Due
Period during the Amortization Period) and (2) the Subordinated Purchaser
Percentage for such Distribution Date, minus (b) the aggregate amount (if any)
of Total Principal Collections reinvested with the Seller on behalf of the
Subordinated Purchaser during such Due Period pursuant to Section 2.06(a) of the
Agreement; provided, that in no event shall Subordinated Principal Collections
be less than zero.
"Subordinated Purchaser Account" means the special account (account
number 033009128002) of the Subordinated Purchaser maintained at First Union
National Bank, or, upon 10 Business Days' written notice from the Subordinated
Purchaser to the Agent, any other account established by the Subordinated
Purchaser with a financial institution in New York, New York or Philadelphia,
Pennsylvania for the purpose of receiving amounts allocated and distributed by
the Servicer in respect of the Subordinated Receivable Interest.
"Subordinated Purchaser Capital" for any date means an amount equal to
(a) the aggregate initial Subordinated Purchaser Capital of all Subordinated
Receivable Interests purchased by the Subordinated Purchaser under the Agreement
prior to such date (including pursuant to reinvestments under Section 2.06(a) of
the Agreement), minus (b) the amount of Total Principal Collections allocated to
the Subordinated Purchaser on account of Subordinated Purchaser Capital which
are, prior to such date, either distributed to the Subordinated Purchaser
pursuant to Section 2.06(a) of the Agreement or deposited into the SP Escrow
Account pursuant to Section 2.06(b) of the Agreement, minus (c) an amount equal
to the aggregate amount by which the Subordinated Purchaser Capital has been
reduced as a result of Subordinated Principal Collections for prior Distribution
Dates having been used to fund the Required Amount with respect to such
Distribution Dates pursuant to Section 2.05(c) of the Agreement, minus (d) an
amount equal to the aggregate amount by which the Subordinated Purchaser Capital
has been reduced to fund the Purchaser Loss Amount on all prior Distribution
Dates pursuant to Section 2.05(d) of the Agreement, minus (e) an amount equal to
the aggregate amount by which Subordinated Purchaser Capital has
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been reduced on all prior Distribution Dates pursuant to Section 2.07(a) of the
Agreement, and plus (f) the aggregate amount of Excess Finance Charge
Collections applied on all prior Distribution Dates for the purposes of
reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e).
"Subordinated Purchaser Loss Amount" means, with respect to any
Distribution Date, the product of (a) the Floating Allocation Percentage of the
Allocated Loss Amount for the preceding Due Period and (b) the Subordinated
Purchaser Percentage as of such Distribution Date.
"Subordinated Purchaser Percentage" means, with respect to any
Distribution Date, a fraction, the numerator of which is equal to the
Subordinated Purchaser Capital as of the close of business on the last day of
the second preceding Due Period and the denominator of which is equal to the sum
of the Purchaser Capital and the Subordinated Purchaser Capital at the close of
business on such day.
"Subordinated Purchaser Rate" means, for any period, a per annum rate
equal to the Yield Rate for such period plus 0.25%.
"Subordinated Purchaser Servicer Fee", with respect to any Distribution
Date, means an amount equal to one-twelfth of the product of (a) the Servicing
Fee Rate and (b) the Subordinated Purchaser Capital as of the last day of the
Due Period second preceding such Distribution Date.
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"Subordinated Purchaser Yield" means, for each Subordinated Receivable
Interest for any Settlement Period,
SPR x SPC x ED
---
360
where:
SPR = the Subordinated Purchaser Rate for such Subordinated
Receivable Interest for such Settlement Period
SPC = the Subordinated Purchaser Capital of the Subordinated
Receivable Interests during such Settlement Period
ED = the actual number of days elapsed during such
Settlement Period;
provided that no provision of the Agreement shall require the payment or permit
the collection of Subordinated Purchaser Yield in excess of the maximum
permitted by applicable law; and provided, further that Subordinated Purchaser
Yield for any Subordinated Receivable Interest shall not be considered paid by
any distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.
"Subordinated Receivable Interest" means, at any time, the undivided
percentage ownership interests purchased by the Subordinated Purchaser under the
Agreement, which shall represent an undivided percentage ownership interest,
subordinated (to the extent set forth in Article II of the Agreement) to the
Purchaser Receivable Interests, in all outstanding Pool Receivables then
existing or thereafter arising and all Collections with respect to, and other
proceeds of, such Pool Receivables (including, without limitation, Insurance
Proceeds and other amounts constituting Recoveries of Pool Receivables and
payments in respect of the Interest Rate Agreements).
"Surety Bond" means the "Surety Bond," as defined in the Insurance
Agreement.
"Termination Date" means the earlier of (i) the Business Day which the
Seller or the Agent so designates by notice to the other (with a copy to the
Servicer) at least one Business Day in advance (including any date on which the
Agent terminates the reinvestment of Collections pursuant to paragraph 2(b)(iii)
of Exhibit II to the Agreement) and (ii) the Facility Termination Date.
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<PAGE> 83
"Total Principal Collections" has the meaning set forth in Section
2.02(b) of the Agreement.
"Total Systems Failure" means, in respect of any Distribution Date, a
total failure of the computer system (including but not limited to off-site
backup systems) of the Servicer or the Administrative Servicer which contain
Records relating to the Pool Receivables, the effect of which would make it
impossible or impracticable for the Servicer or the Administrative Servicer to
perform the acts required to be performed hereunder on or in anticipation of
such Distribution Date.
"Trust" means the trust created by the Pooling and Servicing Agreement.
"Trustee" means, initially, First Union National Bank (formerly known
as First Fidelity Bank, National Association, and prior to that known as First
Fidelity Bank, N.A., Pennsylvania, and prior to that known as Fidelity Bank,
National Association), a national banking association, as the trustee under the
Pooling and Servicing Agreement, and each other Person who shall succeed to the
functions of First Union National Bank pursuant to the terms of the Pooling and
Servicing Agreement.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
"Unallocated Net Receivables Pool Balance" means, at any time, the
Outstanding Balance of Principal Receivables that are Eligible Receivables in
the Receivables Pool that is not allocated to the Purchaser Receivable Interests
or the Subordinated Receivable Interests pursuant to the Agreement and not
allocated to any other Person other than the Holder of the Exchangeable Seller
Certificate pursuant to a supplement to the Pooling and Servicing Agreement or
pursuant to any other receivables purchase agreement that is subject to the
Pooling and Servicing Agreement.
"Yield" means:
(i) for each Purchaser Receivable Interest for any
Settlement Period to the extent the Purchaser will be funding such
Purchaser Receivable Interest on the first day of such Settlement
Period through the issuance of commercial paper,
FR x C x ED + LF
---
360
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(ii) for each Purchaser Receivable Interest for any Fixed
Period to the extent the Purchaser will not be funding such Purchaser
Receivable Interest on the first day of such Fixed Period through the
issuance of commercial paper,
AR x C x ED
---
360
where:
AR = the Assignee Rate for such Purchaser Receivable
Interest for the applicable Fixed Period
C = the Purchaser Capital of the Purchaser Receivable
Interests during the applicable Settlement Period
or Fixed Period
FR = the Funding Rate for the applicable Settlement
Period
ED = the actual number of days elapsed during the
applicable Settlement Period or Fixed Period
LF = the Liquidation Fee, if any, for such Settlement
Period;
provided that no provision of the Agreement shall require the payment or permit
the collection of Yield in excess of the maximum permitted by applicable law;
and provided, further that Yield for any Purchaser Receivable Interest shall not
be considered paid by any distribution to the extent that at any time all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason.
"Yield Rate" means, at any time, the Assignee Rate or the Funding Rate
with regard to which Yield is calculated at such time.
- - - - - -
2. Defined Terms from the Pooling and Servicing Agreement. For purposes
of the Pooling and Servicing Agreement:
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"Enhancement" means the Interest Rate Agreements and any additional
interest rate caps purchased pursuant to Section 5.04(h).
"interest" at any time means the sum of the Yield and the Subordinated
Purchaser Yield at such time.
"Investor/Purchaser Percentage" means the Allocation Percentage.
"principal" at any time means the sum of the Purchaser Capital and the
Subordinated Purchaser Capital at such time.
"Receivables Purchaser Monthly Servicing Fee" means the Servicer Fee.
"Series Servicing Fee Percentage" means the Servicing Fee Rate.
"Series Termination Date" means the Final Distribution Date.
3. Other Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. All terms used in Article 9 of the
UCC in the State of New York, and not specifically defined herein, are used
herein as defined in such Article 9.
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EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The initial purchase of a
Purchaser Receivable Interest by the Purchaser under the Agreement is subject to
the conditions precedent that:
63. ON OR BEFORE THE DATE OF SUCH PURCHASE, THE OWNER SHALL HAVE (I)
INDICATED IN THE POOL INDEX FILE MAINTAINED IN ITS COMPUTER FILES THAT
INTERESTS IN THE RECEIVABLES CREATED IN CONNECTION WITH THE ACCOUNTS HAVE
BEEN SOLD BY THE SELLER TO THE PURCHASERS PURSUANT TO THE AGREEMENT AND (II)
DELIVERED TO THE TRUSTEE, PURSUANT TO SECTION 2.1 OF THE POOLING AND
SERVICING AGREEMENT, A COMPUTER FILE OR MICROFICHE OR WRITTEN LIST CONTAINING
A TRUE AND COMPLETE LIST OF ALL ACCOUNTS, IDENTIFIED BY ACCOUNT NUMBER,
OBLIGOR NAME AND OBLIGOR ADDRESS AND SETTING FORTH THE RECEIVABLE BALANCE AS
OF THE APPLICABLE CUT OFF DATE; AND
64. THE AGENT SHALL HAVE RECEIVED ON OR BEFORE THE DATE OF SUCH
PURCHASE THE FOLLOWING, EACH (UNLESS OTHERWISE INDICATED) DATED SUCH DATE, IN
FORM AND SUBSTANCE SATISFACTORY TO THE AGENT:
a) Certified copies of any necessary corporate action of the
Trustee approving the Agreement and certified copies of all documents
evidencing other necessary governmental approvals, if any, with respect to
the Agreement.
b) A copy of (A) the Subordinated Purchaser's Certificate of
Incorporation, certified (as of a date reasonably near the date of the
initial purchase hereunder) by the Secretary of State of the State of
Delaware as being a true and correct copy thereof, (B) the Subordinated
Purchaser's By-Laws as in effect on the date of such initial purchase,
certified by the Subordinated Purchaser's President or a Vice President
and the Secretary or any Assistant Secretary of the Subordinated Purchaser
as being a true and correct copy thereof, (C) the resolutions adopted by
the Board of Directors of the Subordinated Purchaser authorizing the
Subordinated Purchaser's officers to enter into, and to perform all
necessary actions in connection with, transactions of the type
contemplated by the Agreement, certified by the Subordinated Purchaser's
Secretary or Assistant Secretary and (D) a certificate of the Secretary or
Assistant Secretary of the Subordinated Purchaser certifying the names and
true signatures of the officers of the Subordinated Purchaser authorized
to sign the Agreement on behalf of the Subordinated Purchaser and
<PAGE> 87
the other documents to be delivered by the Subordinated Purchaser
thereunder.
c) Certified copies of the resolutions of the Board of Directors
of the Servicer and the Owner approving the Agreement and certified copies
of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Agreement.
d) Certified copies of the resolutions of the Board of Directors
of each of FSC and Charming Shoppes approving the Company Agreement and
certified copies of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to the Company
Agreement.
e) A certificate of the Secretary or Assistant Secretary of the
Trustee certifying the names and true signatures of the officers of the
Trustee authorized to sign the Agreement on behalf of the Seller and the
other documents to be delivered by the Seller thereunder.
f) A certificate of the Secretary or Assistant Secretary of the
Servicer and the Owner certifying the names and true signatures of the
officers of the Servicer or the Owner, as the case may be, authorized to
sign the Agreement and the other documents to be delivered by it
thereunder.
g) A certificate of the Secretary or Assistant Secretary of each
of FSC and Charming Shoppes certifying the names and true signatures of
the officers thereof authorized to sign the Company Agreement and the
other documents to be delivered by it thereunder.
h) Acknowledgment copies, or time stamped receipt copies, of
proper financing statements, duly filed on or before the date of such
initial purchase under the UCC of all jurisdictions that the Agent may
deem necessary or desirable in order to perfect the ownership interests
contemplated by the Agreement.
i) Acknowledgment copies, or time stamped receipt copies, of
proper financing statements, if any, necessary to release all security
interests and other rights of any Person in the Receivables or Cardholder
Agreements previously granted by the Owner or the Seller (other than
Adverse Claims expressly permitted under the Agreement).
j) Completed requests for information, dated as of a date
reasonably near the date of such initial purchase,
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listing all effective financing statements (other than the financing
statements referred to in subsection (viii) above) filed in the
jurisdictions referred to in subsection (viii) above (other than
Philadelphia County, Pennsylvania) that name the Seller as debtor,
together with copies of such other financing statements (none of which
shall cover any Receivables or Cardholder Agreements).
k) A copy of each Depositary Agreement with each Depositary Bank,
duly executed by the Seller and duly acknowledged by such Depositary Bank,
and a notice to each Depositary Bank regarding the Trustee's change of
name and instructing such Depositary Bank to make all payments to the
Collection Account.
l) An instruction letter to the Administrative Servicer, in form
and substance satisfactory to the Agent, duly executed and delivered by
the Owner and duly acknowledged by the Administrative Servicer, directing
the Administrative Servicer to process Collections in accordance with the
Trustee's instructions, and a notice to the Administrative Servicer
regarding the Trustee's change of name.
m) The Company Agreement, duly executed and delivered by each of
FSC and Charming Shoppes.
n) The Fee Letter, duly executed and delivered by the Seller.
o) A certified copy of the Pooling and Servicing Agreement, duly
executed and delivered by each party thereto, and evidence satisfactory to
the Agent that each of the conditions to the execution and delivery of a
new Receivables Purchase Series set forth in Section 6.17 of the Pooling
and Servicing Agreement shall have been satisfied with respect to the
Agreement (including, without limitation, the Receivables Purchase Notice,
confirmation of the Rating Agency Condition, an Officer's Certificate of
the Owner and a Tax Opinion (as such terms are defined in the Pooling and
Servicing Agreement)).
p) A copy of the Cardholder Guidelines, certified by a
Responsible Officer of the Owner as being complete and accurate in all
material respects.
q) A favorable opinion of Pepper, Hamilton & Scheetz, counsel for
the Trustee, substantially in the form of Annex C hereto and as to such
other matters as the Agent may reasonably request.
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r) A favorable opinion of:
(1) Mayer, Brown & Platt, counsel for each of the
Servicer, the Owner, the Subordinated Purchaser, Charming Shoppes and
FSC, as to certain corporate and security interest matters
substantially in the form of Annex D-1 hereto and as to such other
matters as the Agent may reasonably request,
(2) Mayer, Brown & Platt, counsel for the Owner and the
Servicer, as to certain bank regulatory matters substantially in the
form of Annex D-2 hereto and as to such other matters as the Agent may
reasonably request,
(3) Colin Stern, Esq., General Counsel for each of the
Servicer, the Owner and the Subordinated Purchaser, substantially in
the form of Annex D-3 hereto and as to such other matters as the Agent
may reasonably request, and
(4) Mayer, Brown & Platt, counsel for each of the
Subordinated Purchaser, Charming Shoppes and FSC, as to certain Federal
Bankruptcy Code maters substantially in the form of Annex D-4 hereto
and as to such other matters as the Agent may reasonably request.
s) A favorable opinion of Colin Stern, Esq., General Counsel for
each of FSC and Charming Shoppes, substantially in the form of Annex E
hereto and as to such other matters as the Agent may reasonably request.
t) A favorable opinion of Kaye, Scholer, Fierman, Hays & Handler,
LLP, counsel for the Agent, as the Agent may reasonably request.
u) An undated notice (the "Store Payment Notice"), duly executed
by each of the Owner and Charming Shoppes, to the manager of each Store,
in substantially the form of Annex F hereto.
v) Assignments to the Seller of the benefits under each of the
Interest Rate Agreements in effect on the Effective Date, together with
any necessary consents by the counterparties to such Interest Rate
Agreements.
w) Copies of each of the Interest Rate Agreements in effect on
the Effective Date, together with a summary thereof in the form of Annex G
hereto, in each case
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certified by a Responsible Officer of the Owner as being complete and
correct.
x) The Insurance Agreement, duly executed by each of the parties
thereto, and the Surety Bond, duly issued by CapMAC and all conditions
precedent to each of the Insurance Agreement and Surety Bond shall have
been satisfied, including, without limitation, (1) an opinion of counsel
to CapMAC with respect to the enforceability of the Surety Bond and other
matters, (2) an officer's certificate of CapMAC and (3) a letter agreement
between CapMAC and the Administrative Servicer relating to termination of
the Administrative Servicer Agreement.
y) Copies of each of the Credit Facilities as in effect on the
Effective Date, certified by an officer of Charming Shoppes as being
complete and correct, accompanied by a certificate of an officer of
Charming Shoppes that (x) Charming Shoppes has duly executed and delivered
each of the Credit Facilities, (y) all conditions precedent to the
obligations of the lenders under the Credit Facilities have been satisfied
and the Credit Facilities are in full force and effect as of the date of
the initial purchase and (z) no event or condition of the type described
in paragraph (l) of Exhibit VI has occurred and is continuing.
z) Copies of the Consumer Credit Plan Agreement between Charming
Shoppes of Delaware, Inc. and FSC, the Consumer Credit Plan Operations
Agreement between FSC and Spirit and the Cardholder Agreement, each as in
effect on the Effective Date, certified by a Responsible Officer of FSC or
the Owner as being complete and correct.
aa) A copy of the Administrative Servicing Agreement or a summary
prepared by the Servicer of the provisions of the Administrative Servicing
Agreement relating to the termination thereof by either party and the
assignability thereof by the Administrative Servicer.
bb) A letter agreement between Mellon Bank, N.A. and the Trustee,
in form and substance satisfactory to the Agent, duly executed and
delivered by Mellon Bank, N.A. and the Trustee, setting forth certain
instructions with respect to the flow of funds arising out of Store
Payments and the agreement by Mellon Bank, N.A. not to assert setoffs
against such funds.
(xxix) A letter agreement between Charming Shoppes of Delaware,
Inc. and the Trustee, in form and substance satisfactory to the Agent,
duly executed and
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delivered by Charming Shoppes of Delaware, Inc. and the Trustee, setting
forth certain instructions with respect to the flow of funds arising out
of Store Payments and the agreement by Charming Shoppes of Delaware, Inc.
not to assert setoffs against such funds.
(xxx) Copies of good standing certificates for Spirit from the
Office of the Comptroller of the Currency and the Federal Deposit
Insurance Corporation.
2. Conditions Precedent to All Purchases and Reinvestments. Each
purchase (including the initial purchase) of Purchaser Receivable Interests by
the Purchaser under the Agreement and each reinvestment pursuant to Section
2.06(a) of the Agreement shall be subject to the further conditions precedent
that:
65. IN THE CASE OF EACH PURCHASE, THE SERVICER SHALL HAVE DELIVERED
(I) TO THE TRUSTEE, ON OR PRIOR TO SUCH PURCHASE, THE THEN MOST RECENT
COMPUTER FILE OR MICROFICHE OR WRITTEN LIST OF ACCOUNTS REQUIRED PURSUANT TO
SECTION 2.1 OR 2.6(D)(II) OF THE POOLING AND SERVICING AGREEMENT, AND (II) TO
THE AGENT, ON OR PRIOR TO SUCH PURCHASE, IN FORM AND SUBSTANCE SATISFACTORY
TO THE AGENT, A COMPLETED SERVICER REPORT DATED WITHIN 31 DAYS PRIOR TO THE
DATE OF SUCH PURCHASE TOGETHER WITH SUCH ADDITIONAL INFORMATION AS MAY
REASONABLY BE REQUESTED BY THE AGENT,
66. ON THE DATE OF SUCH PURCHASE OR REINVESTMENT THE FOLLOWING
STATEMENTS SHALL BE TRUE (AND ACCEPTANCE OF THE PROCEEDS OF SUCH PURCHASE OR
REINVESTMENT SHALL BE DEEMED A REPRESENTATION AND WARRANTY BY THE SELLER THAT
SUCH STATEMENTS ARE THEN TRUE):
a) The representations and warranties contained in Exhibit III
are correct on and as of the date of such purchase or reinvestment as
though made on and as of such date, and
b) No event has occurred and is continuing, or would result from
such purchase or reinvestment, that constitutes an Early Amortization
Event or that would constitute an Early Amortization Event but for the
requirement that notice be given or time elapse or both, and
c) The Agent shall not have given the Seller and the Servicer at
least one Business Day's notice that the Purchaser has terminated the
reinvestment of Collections in Purchaser Receivable Interests, and
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67. THE AGENT SHALL HAVE RECEIVED SUCH OTHER APPROVALS, OPINIONS OR
DOCUMENTS AS IT MAY REASONABLY REQUEST.
3. Additional Conditions Precedent to Each Purchase by the Purchaser.
Each purchase (including the initial purchase) of a Purchaser Receivable
Interest by the Purchaser under the Agreement is subject to the additional
conditions precedent that, after giving effect to such purchase and any
concurrent purchase of a Subordinated Receivable Interest pursuant to Section
1.02(d) of the Agreement:
68. THE AGGREGATE OUTSTANDING SUBORDINATED PURCHASER CAPITAL SHALL BE
AT LEAST EQUAL TO 14% OF THE AGGREGATE OUTSTANDING PURCHASER CAPITAL; AND
69. THE UNALLOCATED NET RECEIVABLES POOL BALANCE SHALL BE EQUAL TO OR
EXCEED THE MINIMUM SELLER CAPITAL.
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EXHIBIT III
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Trustee. The Trustee, not in
its individual capacity but solely as the trustee for the Charming Shoppes
Master Trust, represents and warrants as follows:
70. THE TRUSTEE IS A NATIONAL BANKING ASSOCIATION DULY ORGANIZED,
VALIDLY EXISTING AND IN GOOD STANDING UNDER THE FEDERAL LAW OF THE UNITED
STATES OF AMERICA WITH FULL CORPORATE TRUST POWER AND AUTHORITY TO ENTER INTO
AND PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT, THE POOLING AND SERVICING
AGREEMENT AND EACH OTHER MASTER TRUST DOCUMENT TO WHICH THE TRUSTEE WILL BE A
PARTY.
71. THE EXECUTION AND DELIVERY BY THE TRUSTEE OF, AND THE PERFORMANCE
BY THE TRUSTEE OF THE TRANSACTIONS CONTEMPLATED BY, THE AGREEMENT, THE
POOLING AND SERVICING AGREEMENT AND EACH OTHER MASTER TRUST DOCUMENT TO WHICH
THE TRUSTEE IS A PARTY, INCLUDING THE TRUSTEE'S USE OF THE PROCEEDS OF
PURCHASES AND REINVESTMENTS, ARE WITHIN THE TRUSTEE'S CORPORATE TRUST POWERS,
HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE ACTION OF THE TRUSTEE,
AND (A) DO NOT CONTRAVENE (I) THE TRUSTEE'S CHARTER OR BY-LAWS OR (II) ANY
EXISTING FEDERAL OR APPLICABLE STATE LAW GOVERNING THE TRUST POWERS OF THE
TRUSTEE.
72. EACH OF THE AGREEMENT, THE POOLING AND SERVICING AGREEMENT AND
EACH OTHER MASTER TRUST DOCUMENT TO WHICH THE TRUSTEE IS A PARTY HAS BEEN
DULY EXECUTED AND DELIVERED BY THE TRUSTEE, AS THE TRUSTEE FOR CHARMING
SHOPPES MASTER TRUST PURSUANT TO THE POOLING AND SERVICING AGREEMENT, AND
CONSTITUTES A LEGAL, VALID AND BINDING OBLIGATION OF THE TRUSTEE, ENFORCEABLE
AGAINST THE TRUSTEE IN ACCORDANCE WITH ITS TERMS, SUBJECT TO BANKRUPTCY,
INSOLVENCY OR OTHER SIMILAR LAWS AFFECTING CREDITORS' RIGHTS GENERALLY AND TO
GENERAL PRINCIPLES OF EQUITY (WHETHER CONSIDERED IN A PROCEEDING IN EQUITY OR
AT LAW).
73. NO AUTHORIZATION OR APPROVAL OR OTHER ACTION BY AND NO NOTICE TO
OR FILING WITH, ANY GOVERNMENTAL AUTHORITY OR REGULATORY BODY UNDER ANY
EXISTING FEDERAL OR PENNSYLVANIA LAW GOVERNING THE TRUST POWERS OF THE
TRUSTEE, EXCEPT SUCH AS HAVE BEEN OBTAINED, MADE OR TAKEN, IS REQUIRED FOR
THE DUE EXECUTION AND DELIVERY BY THE TRUSTEE OF, AND THE CONSUMMATION OF ANY
OF THE TRANSACTIONS BY THE TRUSTEE CONTEMPLATED BY, THE AGREEMENT, THE
POOLING AND SERVICING AGREEMENT OR EACH OTHER MASTER TRUST DOCUMENT TO WHICH
THE TRUSTEE IS A PARTY OR FOR THE PERFECTION OF OR THE EXERCISE BY THE AGENT
OR THE PURCHASERS OF THEIR RESPECTIVE RIGHTS AND REMEDIES UNDER THE
AGREEMENT.
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74. THERE ARE NO ACTIONS OR PROCEEDINGS PENDING OR, TO THE BEST
KNOWLEDGE OF THE TRUSTEE, THREATENED AGAINST THE TRUSTEE BEFORE ANY COURT,
REGULATORY BODY, ADMINISTRATIVE AGENCY OR OTHER TRIBUNAL, GOVERNMENTAL
INSTRUMENTALITY OR ARBITRATOR SEEKING TO PREVENT THE CONSUMMATION OF ANY OF
THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT, THE POOLING AND SERVICING
AGREEMENT OR ANY OTHER MASTER TRUST DOCUMENT, OR SEEKING AND DETERMINATION OR
RULING THAT, WOULD MATERIALLY AND ADVERSELY AFFECT THE PERFORMANCE BY THE
TRUSTEE OF ITS OBLIGATIONS UNDER THE AGREEMENT, THE POOLING AND SERVICING
AGREEMENT OR ANY OTHER MASTER TRUST DOCUMENT TO WHICH THE TRUSTEE IS A PARTY,
OR SEEKING ANY DETERMINATION OR RULING THAT WOULD MATERIALLY AND ADVERSELY
AFFECT THE LEGALITY, VALIDITY OR ENFORCEABILITY OF THE AGREEMENT, THE POOLING
AND SERVICING AGREEMENT OR ANY OTHER MASTER TRUST DOCUMENT.
75. THE PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE OF THE
TRUSTEE AND THE OFFICE WHERE THE TRUSTEE KEEPS ITS RECORDS CONCERNING THE
POOL RECEIVABLES ARE LOCATED AT 123 SOUTH BROAD STREET, PHILADELPHIA,
PENNSYLVANIA 19109; THE ADDRESS OF THE TRUSTEE WHERE NOTICES AND DEMANDS TO
OR UPON THE TRUSTEE IN RESPECT OF THE POOL RECEIVABLES, THE AGREEMENT OR THE
POOLING AND SERVICING AGREEMENT MAY BE SERVED IS FIRST UNION NATIONAL BANK,
765 BROAD STREET, NEWARK, NEW JERSEY 07102, ATTENTION: CORPORATE TRUST
SERVICES.
76. ALL REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE SET FORTH IN THE
POOLING AND SERVICING AGREEMENT AND EACH OTHER MASTER TRUST DOCUMENT TO WHICH
THE TRUSTEE IS A PARTY ARE TRUE AND CORRECT IN ALL MATERIAL RESPECTS (UNLESS
ANY SUCH REPRESENTATION OR WARRANTY SPEAKS AS OF A PARTICULAR DATE, IN WHICH
CASE IT IS TRUE AND CORRECT IN ALL MATERIALS RESPECTS AS OF EACH SUCH DATE).
2. Representations and Warranties of the Owner. The Owner represents
and warrants as follows:
77. THE OWNER IS A NATIONAL BANKING ASSOCIATION, DULY ORGANIZED,
VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE UNITED STATES OF
AMERICA, AND IS DULY QUALIFIED TO DO BUSINESS, AND IS IN GOOD STANDING, IN
EVERY JURISDICTION WHERE THE NATURE OF ITS BUSINESS REQUIRES IT TO BE SO
QUALIFIED.
78. THE EXECUTION, DELIVERY AND PERFORMANCE BY THE OWNER OF THE
AGREEMENT, EACH MASTER TRUST DOCUMENT TO WHICH IT IS OR WILL BE A PARTY, THE
INSURANCE AGREEMENT AND THE OTHER DOCUMENTS TO BE DELIVERED BY IT THEREUNDER,
(I) ARE WITHIN THE OWNER'S CORPORATE POWERS, (II) HAVE BEEN DULY AUTHORIZED
BY ALL NECESSARY CORPORATE ACTION, (III) DO NOT CONTRAVENE (1) THE OWNER'S
CHARTER OR BY-LAWS, (2) ANY REQUIREMENT OF LAW APPLICABLE TO THE OWNER, (3)
ANY INDENTURE, CONTRACT, AGREEMENT, MORTGAGE, DEED OF TRUST OR OTHER
INSTRUMENT TO
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WHICH THE OWNER IS A PARTY OR BY WHICH IT IS BOUND (INCLUDING, WITHOUT
LIMITATION, THE POOLING AND SERVICING AGREEMENT AND ANY OTHER MASTER TRUST
DOCUMENT TO WHICH THE OWNER IS OR WILL BE A PARTY), OR (4) ANY ORDER, WRIT,
JUDGMENT, AWARD, INJUNCTION OR DECREE BINDING ON OR AFFECTING THE OWNER OR
ITS PROPERTY, AND DO NOT RESULT IN OR REQUIRE THE CREATION OF ANY LIEN,
SECURITY INTEREST OR OTHER CHARGE OR ENCUMBRANCE UPON OR WITH RESPECT TO ANY
OF ITS PROPERTIES (OTHER THAN THE INTERESTS CREATED BY THE POOLING AND
SERVICING AGREEMENT AND THE AGREEMENT). EACH OF THE AGREEMENT, EACH MASTER
TRUST DOCUMENT TO WHICH THE OWNER IS OR WILL BE A PARTY AND THE INSURANCE
AGREEMENT HAS BEEN OR WILL BE DULY EXECUTED AND DELIVERED BY THE OWNER.
79. NO AUTHORIZATION OR APPROVAL OR OTHER ACTION BY, AND, EXCEPT FOR
THE FILING OF FINANCING STATEMENTS TO BE FILED PURSUANT TO THE POOLING AND
SERVICING AGREEMENT AND PURSUANT TO THE AGREEMENT, NO NOTICE TO OR FILING
WITH, ANY GOVERNMENTAL AUTHORITY OR REGULATORY BODY IS REQUIRED FOR THE DUE
EXECUTION, DELIVERY AND PERFORMANCE BY THE OWNER OF THE AGREEMENT, ANY MASTER
TRUST DOCUMENT TO WHICH THE OWNER IS OR WILL BE A PARTY, THE INSURANCE
AGREEMENT OR ANY OTHER DOCUMENT TO BE DELIVERED BY IT THEREUNDER.
80. EACH OF THE AGREEMENT, EACH MASTER TRUST DOCUMENT TO WHICH THE
OWNER IS OR WILL BE A PARTY AND THE INSURANCE AGREEMENT CONSTITUTES, OR UPON
DUE EXECUTION AND DELIVERY BY THE OWNER WILL CONSTITUTE, THE LEGAL, VALID AND
BINDING OBLIGATION OF THE OWNER ENFORCEABLE AGAINST THE OWNER IN ACCORDANCE
WITH ITS TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY ANY
APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR SIMILAR LAW
AFFECTING CREDITORS' RIGHTS GENERALLY OR BY GENERAL PRINCIPLES OF EQUITY
(WHETHER CONSIDERED IN A PROCEEDING IN EQUITY OR AT LAW).
81. THERE ARE NO ACTIONS OR PROCEEDINGS PENDING OR, TO THE BEST
KNOWLEDGE OF THE OWNER, THREATENED AGAINST THE OWNER BEFORE ANY COURT,
REGULATORY BODY, ADMINISTRATIVE AGENCY OR OTHER TRIBUNAL, GOVERNMENTAL
INSTRUMENTALITY OR ARBITRATOR SEEKING TO PREVENT THE CONSUMMATION OF ANY OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ANY MASTER TRUST DOCUMENT OR
THE INSURANCE AGREEMENT, OR SEEKING ANY DETERMINATION OR RULING THAT, IN THE
REASONABLE JUDGMENT OF THE OWNER, WOULD MATERIALLY AND ADVERSELY AFFECT THE
PERFORMANCE BY THE OWNER OF ITS OBLIGATIONS UNDER THIS AGREEMENT, ANY MASTER
TRUST DOCUMENT TO WHICH IT IS OR WILL BE A PARTY OR THE INSURANCE AGREEMENT,
OR SEEKING ANY DETERMINATION OR RULING THAT WOULD MATERIALLY AND ADVERSELY
AFFECT THE LEGALITY, VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, ANY MASTER
TRUST DOCUMENT OR THE INSURANCE AGREEMENT.
82. SINCE OCTOBER 28, 1995, (I) THERE HAS BEEN NO MATERIAL ADVERSE
CHANGE IN THE BUSINESS, OPERATIONS, PROPERTY
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OR FINANCIAL OR OTHER CONDITION OF THE OWNER WHICH MAY MATERIALLY ADVERSELY
AFFECT THE OWNER'S ABILITY TO COLLECT POOL RECEIVABLES PURSUANT TO THE
AGREEMENT OR THE POOLING AND SERVICING AGREEMENT OR OTHERWISE PERFORM ITS
OBLIGATIONS UNDER THE AGREEMENT OR THE MASTER TRUST DOCUMENTS TO WHICH IT IS
OR WILL BE A PARTY AND (II) THERE HAS NOT OCCURRED ANY EVENT WHICH MAY
MATERIALLY ADVERSELY AFFECT THE COLLECTIBILITY OR VALUE OF THE RECEIVABLES
POOL.
83. (i) IMMEDIATELY PRIOR TO THE PURCHASE BY THE SELLER OF AN
INTEREST THEREIN UNDER THE POOLING AND SERVICING AGREEMENT, THE OWNER IS
THE LEGAL AND BENEFICIAL OWNER OF EACH POOL RECEIVABLE FREE AND CLEAR OF
ANY ADVERSE CLAIMS;
(ii) upon each purchase by the Trustee under the Pooling and
Servicing Agreement, the Trustee will acquire a valid and perfected first
priority ownership interest in the Pool Receivables and Collections with
respect thereto;
(iii) immediately prior to the purchase by each Purchaser of an
interest therein under the Agreement, the Trustee will be the legal and
beneficial owner of each Pool Receivable free and clear of any Adverse
Claims, except for the interests created therein pursuant to the Pooling
and Servicing Agreement (which interests will be pari passu with the
Purchasers' interests therein);
(iv) upon each purchase by a Purchaser and each reinvestment on
behalf of a Purchaser under the Agreement, such Purchaser will acquire a
valid and perfected first priority undivided percentage ownership interest
to the extent of the pertinent Purchaser Receivable Interest in the Pool
Receivables and in the Collections with respect thereto, subject to the
interests therein referred to clause (iii) above;
(v) no effective financing statement or other instrument
similar in effect covering any Cardholder Agreement or any Pool Receivable
or Collections with respect thereto is on file in any recording office,
except those filed pursuant to the Pooling and Servicing Agreement and
those filed pursuant to the Agreement; and
(vi) except for the Surety Bond and any credit life insurance
policies, credit disability or unemployment insurance policies covering an
Obligor with respect to Pool Receivables under such Obligor's Account,
there are no guaranties, insurance, or other agreements, and no security
interests or liens, supporting or securing or purporting to support or
secure payment of any Receivable.
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84. THE PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE OF THE
OWNER AND THE OFFICE WHERE THE OWNER KEEPS ITS RECORDS CONCERNING THE POOL
RECEIVABLES ARE LOCATED AT THE ADDRESS OR ADDRESSES REFERRED TO IN PARAGRAPH
2(B) OF EXHIBIT IV.
85. THE NAMES AND ADDRESSES OF ALL THE DEPOSITARY BANKS, TOGETHER WITH
THE ACCOUNT NUMBERS OF THE INITIAL DEPOSITARY ACCOUNTS OF THE SELLER AT SUCH
DEPOSITARY BANKS, ARE SPECIFIED IN SCHEDULE II HERETO (OR AT SUCH OTHER
DEPOSITARY BANKS AND/OR WITH SUCH OTHER INITIAL DEPOSITARY ACCOUNTS AS HAVE
BEEN NOTIFIED TO THE AGENT IN ACCORDANCE WITH THE AGREEMENT).
86. THE OWNER IS IN COMPLIANCE WITH ITS REGULATORY CAPITAL
REQUIREMENTS UNDER APPLICABLE RULES AND REGULATIONS OF THE OFFICE OF THE
COMPTROLLER OF THE CURRENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OR OTHER APPROPRIATE
GOVERNMENTAL AUTHORITIES.
87. ALL REPRESENTATIONS AND WARRANTIES OF THE OWNER SET FORTH IN THE
POOLING AND SERVICING AGREEMENT, EACH OTHER MASTER TRUST DOCUMENT TO WHICH
THE OWNER IS A PARTY AND THE INSURANCE AGREEMENT ARE TRUE AND CORRECT IN ALL
MATERIAL RESPECTS (UNLESS ANY SUCH REPRESENTATION OR WARRANTY SPEAKS AS OF A
PARTICULAR DATE, IN WHICH CASE IT IS TRUE AND CORRECT IN ALL MATERIALS
RESPECTS AS OF EACH SUCH DATE).
88. THE TRUST IS NOT AN "INVESTMENT COMPANY" REQUIRED TO BE REGISTERED
UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED.
89. AS OF THE APPLICABLE CUT OFF DATE, SCHEDULE 1 TO THE POOLING AND
SERVICING AGREEMENT AND THE RELATED COMPUTER FILE OR MICROFICHE OR WRITTEN
LIST REFERRED TO IN PARAGRAPH 1(A) OF EXHIBIT II TO THE AGREEMENT IS AN
ACCURATE AND COMPLETE LISTING IN ALL MATERIAL RESPECTS OF ALL THE ACCOUNTS,
AND THE INFORMATION CONTAINED THEREIN WITH RESPECT TO THE IDENTITY OF SUCH
ACCOUNTS AND THE RECEIVABLES EXISTING THEREUNDER IS TRUE AND CORRECT IN ALL
MATERIAL RESPECTS AS OF SUCH CUT OFF DATE, AND AS OF THE INITIAL CUT OFF
DATE, THE AGGREGATE AMOUNT OF RECEIVABLES IN ALL THE ACCOUNTS WAS AT LEAST
$359,587,885.14, ALL OF WHICH WERE PRINCIPAL RECEIVABLES.
90. ON THE DATE OF EACH PURCHASE OF PURCHASER RECEIVABLE INTERESTS BY
THE PURCHASER UNDER THE AGREEMENT, AFTER GIVING EFFECT TO THE PURCHASE TO BE
MADE BY THE PURCHASER AND BY THE SUBORDINATED PURCHASER ON SUCH DATE, THE NET
RECEIVABLES POOL BALANCE MINUS THE SUM OF (A) THE AGGREGATE "INVESTOR
INTERESTS" (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT) FOR ALL
CERTIFICATE SERIES ISSUED
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PURSUANT TO ONE OR MORE SUPPLEMENTS TO THE POOLING AND SERVICING AGREEMENT,
(B) THE AGGREGATE "RECEIVABLES PURCHASE INTERESTS" (AS DEFINED IN THE POOLING
AND SERVICING AGREEMENT) FOR ALL RECEIVABLES PURCHASE SERIES ISSUED PURSUANT
TO ANY RECEIVABLES PURCHASE AGREEMENT THAT IS SUBJECT TO THE POOLING AND
SERVICING AGREEMENT (OTHER THAN THE AGREEMENT AND THE PARALLEL PURCHASE
COMMITMENT), (C) THE SUBORDINATED PURCHASER CAPITAL, (D) THE MINIMUM SELLER
CAPITAL, (E) THE "SUBORDINATED PURCHASER CAPITAL" UNDER THE PARALLEL PURCHASE
COMMITMENT, (F) THE "MINIMUM SELLER CAPITAL" UNDER THE PARALLEL PURCHASE
COMMITMENT, AND (G) THE TOTAL AMOUNT OF DISCOUNT OPTION RECEIVABLES, IF ANY,
WILL BE EQUAL TO OR EXCEED THE SUM OF THE AGGREGATE OUTSTANDING PURCHASER
CAPITAL OF ALL PURCHASER RECEIVABLE INTERESTS UNDER THE AGREEMENT AND THE
AGGREGATE OUTSTANDING "PURCHASER CAPITAL" OF ALL "PURCHASER RECEIVABLE
INTERESTS" UNDER THE PARALLEL PURCHASE COMMITMENT; AND THE FLOATING
ALLOCATION PERCENTAGE AS OF SUCH DAY SHALL BE LESS THAN OR EQUAL TO 98.213%.
91. NO PROCEEDS OF ANY PURCHASE OR REINVESTMENT WILL BE USED BY THE
OWNER, THE SUBORDINATED PURCHASER OR THE SELLER TO ACQUIRE ANY EQUITY
SECURITY OF A CLASS WHICH IS REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
92. AFTER GIVING EFFECT TO THE POOLING AND SERVICING AGREEMENT AND
EACH PURCHASE OF RECEIVABLES FROM THE OWNER BY THE TRUSTEE UNDER THE POOLING
AND SERVICING AGREEMENT AND THE USE OF PROCEEDS OF EACH PURCHASE BY THE
OWNER, (I) THE OWNER WILL HAVE SUFFICIENT PRESENTLY SALEABLE ASSETS, AND
SUFFICIENT CASH FLOW, TO ENABLE IT TO MEET ITS DEBTS AS THEY MATURE (IN EACH
CASE AS SUCH CONCEPTS ARE DEFINED IN APPLICABLE BANKRUPTCY AND RELATED LAWS),
AND (II) THE OWNER DOES NOT HAVE UNREASONABLY SMALL CAPITAL.
93. THE OWNER IS NOT ENTERING INTO, AND HAS NOT CAUSED ANY OTHER
PERSON TO ENTER INTO, ANY OF THE TRANSACTIONS CONTEMPLATED BY THE POOLING AND
SERVICING AGREEMENT OR THE AGREEMENT WITH THE INTENT TO HINDER, DELAY OR
DEFRAUD THE CREDITORS OF THE OWNER.
94. EACH COMPUTER FILE OR MICROFICHE LIST WHICH HAS BEEN DELIVERED TO
THE TRUSTEE BY THE OWNER PURSUANT TO SECTION 2.1 OR SECTION 2.6 OF THE
POOLING AND SERVICING AGREEMENT CONTAINS A COMPLETE AND ACCURATE LIST OF
ACCOUNTS IDENTIFIED BY ACCOUNT NUMBER, OBLIGOR NAME, OBLIGOR ADDRESS AND
RECEIVABLE BALANCE AS OF THE APPLICABLE CUT OFF DATE.
95. THE OWNER DID NOT (I) EXECUTE THE POOLING AND SERVICING AGREEMENT,
THE AGREEMENT OR THE PARALLEL PURCHASE COMMITMENT, (II) CONVEY THE ASSETS
DESCRIBED IN SECTION 2.1 OF THE POOLING AND SERVICING AGREEMENT, (III) CAUSE,
PERMIT, OR SUFFER THE PERFECTION OR ATTACHMENT OF AN INTEREST IN SUCH
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ASSETS, (IV) OTHERWISE EFFECTUATE OR CONSUMMATE ANY TRANSFER PURSUANT TO THE
POOLING AND SERVICING AGREEMENT, THE AGREEMENT OR THE PARALLEL PURCHASE
COMMITMENT OR (V) ACQUIRE ITS INTEREST IN THE TRUST, IN EACH CASE:
(1) IN CONTEMPLATION OF INSOLVENCY;
(2) WITH A VIEW TO PREFERRING ONE CREDITOR OVER ANOTHER OR TO
PREVENTING THE APPLICATION OF ITS ASSETS IN THE MANNER REQUIRED BY
APPLICABLE LAW OR REGULATIONS;
(3) AFTER COMMITTING AN ACT OF INSOLVENCY; OR WITH
(4) ANY INTENT TO HINDER, DELAY, OR DEFRAUD ITSELF OR ITS
CREDITORS.
96. THE TRUSTEE IS NOT AN INSIDER OR AFFILIATE OF THE OWNER.
3. Representations and Warranties of the Servicer. The Servicer
represents and warrants as follows:
97. THE SERVICER IS A NATIONAL BANKING ASSOCIATION, DULY ORGANIZED,
VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE UNITED STATES OF
AMERICA, AND IS DULY QUALIFIED TO DO BUSINESS, AND IS IN GOOD STANDING, IN
EVERY JURISDICTION WHERE THE NATURE OF ITS BUSINESS REQUIRES IT TO BE SO
QUALIFIED.
98. THE EXECUTION, DELIVERY AND PERFORMANCE BY THE SERVICER OF THE
AGREEMENT AND EACH MASTER TRUST DOCUMENT TO WHICH IT IS OR WILL BE A PARTY
AND THE OTHER DOCUMENTS TO BE DELIVERED BY IT THEREUNDER, (I) ARE WITHIN THE
SERVICER'S CORPORATE POWERS, (II) HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY
CORPORATE ACTION, (III) DO NOT CONTRAVENE (1) THE SERVICER'S CHARTER OR
BY-LAWS, (2) ANY REQUIREMENT OF LAW APPLICABLE TO THE SERVICER, (3) ANY
INDENTURE, CONTRACT, AGREEMENT, MORTGAGE, DEED OF TRUST OR OTHER INSTRUMENT
TO WHICH THE SERVICER IS A PARTY OR BY WHICH IT IS BOUND (INCLUDING, WITHOUT
LIMITATION, THE POOLING AND SERVICING AGREEMENT AND ANY OTHER MASTER TRUST
DOCUMENT TO WHICH THE SERVICER IS OR WILL BE A PARTY), OR (4) ANY ORDER,
WRIT, JUDGMENT, AWARD, INJUNCTION OR DECREE BINDING ON OR AFFECTING THE
SERVICER OR ITS PROPERTY, AND DO NOT RESULT IN OR REQUIRE THE CREATION OF ANY
LIEN, SECURITY INTEREST OR OTHER CHARGE OR ENCUMBRANCE UPON OR WITH RESPECT
TO ANY OF ITS PROPERTIES (OTHER THAN THE INTERESTS CREATED BY THE POOLING AND
SERVICING AGREEMENT AND THE AGREEMENT). EACH OF THE AGREEMENT AND EACH MASTER
TRUST DOCUMENT TO WHICH THE SERVICER IS OR WILL BE A PARTY HAS BEEN OR WILL
BE DULY EXECUTED AND DELIVERED BY THE SERVICER.
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99. NO AUTHORIZATION OR APPROVAL OR OTHER ACTION BY, AND NO NOTICE TO
OR FILING WITH, ANY GOVERNMENTAL AUTHORITY OR REGULATORY BODY IS REQUIRED FOR
THE DUE EXECUTION, DELIVERY AND PERFORMANCE BY THE SERVICER OF THE AGREEMENT
OR ANY MASTER TRUST DOCUMENT TO WHICH THE SERVICER IS OR WILL BE PARTY OR ANY
OTHER DOCUMENT TO BE DELIVERED THEREUNDER.
100. EACH OF THE AGREEMENT AND EACH MASTER TRUST DOCUMENT TO WHICH THE
SERVICER IS OR WILL BE PARTY CONSTITUTES, OR UPON DUE EXECUTION AND DELIVERY
BY THE SERVICER WILL CONSTITUTE, THE LEGAL, VALID AND BINDING OBLIGATION OF
THE SERVICER ENFORCEABLE AGAINST THE SERVICER IN ACCORDANCE WITH ITS TERMS,
EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY ANY APPLICABLE BANKRUPTCY,
INSOLVENCY, REORGANIZATION, MORATORIUM OR SIMILAR LAW AFFECTING CREDITORS'
RIGHTS GENERALLY OR BY GENERAL PRINCIPLES OF EQUITY (WHETHER CONSIDERED IN A
PROCEEDING IN EQUITY OR AT LAW).
101. THERE ARE NO ACTIONS OR PROCEEDINGS PENDING OR, TO THE BEST
KNOWLEDGE OF THE SERVICER, THREATENED AGAINST THE SERVICER BEFORE ANY COURT,
REGULATORY BODY, ADMINISTRATIVE AGENCY OR OTHER TRIBUNAL, GOVERNMENTAL
INSTRUMENTALITY OR ARBITRATOR SEEKING TO PREVENT THE CONSUMMATION OF ANY OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY MASTER TRUST DOCUMENT,
OR SEEKING ANY DETERMINATION OR RULING THAT, IN THE REASONABLE JUDGMENT OF
THE SERVICER, WOULD MATERIALLY AND ADVERSELY AFFECT THE PERFORMANCE BY THE
SERVICER OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR ANY MASTER TRUST DOCUMENT
TO WHICH IT IS OR WILL BE A PARTY, OR SEEKING ANY DETERMINATION OR RULING
THAT WOULD MATERIALLY AND ADVERSELY AFFECT THE LEGALITY, VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY MASTER TRUST DOCUMENT.
102. THE PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE OF THE
SERVICER AND THE OFFICE WHERE THE SERVICER KEEPS ITS RECORDS CONCERNING THE
POOL RECEIVABLES ARE LOCATED AT THE ADDRESS OR ADDRESSES REFERRED TO IN
PARAGRAPH 3(B) OF EXHIBIT IV.
103. ALL REPRESENTATIONS AND WARRANTIES OF THE SERVICER SET FORTH IN
THE POOLING AND SERVICING AGREEMENT AND EACH OTHER MASTER TRUST DOCUMENT TO
WHICH THE SERVICER IS A PARTY ARE TRUE AND CORRECT IN ALL MATERIAL RESPECTS
(UNLESS ANY SUCH REPRESENTATION OR WARRANTY SPEAKS AS OF A PARTICULAR DATE,
IN WHICH CASE IT IS TRUE AND CORRECT IN ALL MATERIALS RESPECTS AS OF EACH
SUCH DATE).
4. Representations and Warranties of the Subordinated Purchaser. The
Subordinated Purchaser represents and warrants as follows:
104. THE SUBORDINATED PURCHASER IS A CORPORATION DULY ORGANIZED,
VALIDLY EXISTING AND IN GOOD STANDING UNDER THE
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LAWS OF THE STATE OF DELAWARE, AND IS DULY QUALIFIED TO DO BUSINESS, AND IS
IN GOOD STANDING, IN EVERY JURISDICTION WHERE THE NATURE OF ITS BUSINESS
REQUIRES IT TO BE SO QUALIFIED.
105. THE EXECUTION, DELIVERY AND PERFORMANCE BY THE SUBORDINATED
PURCHASER OF THE AGREEMENT AND THE OTHER DOCUMENTS TO BE DELIVERED BY IT
THEREUNDER, (I) ARE WITHIN THE SUBORDINATED PURCHASER'S CORPORATE POWERS,
(II) HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE ACTION, (III) DO
NOT CONTRAVENE (1) THE SUBORDINATED PURCHASER'S CHARTER OR BY-LAWS, (2) ANY
REQUIREMENT OF LAW APPLICABLE TO THE SUBORDINATED PURCHASER, (3) ANY
INDENTURE, CONTRACT, AGREEMENT, MORTGAGE, DEED OF TRUST OR OTHER INSTRUMENT
TO WHICH THE SUBORDINATED PURCHASER IS A PARTY OR BY WHICH IT IS BOUND OR (4)
ANY ORDER, WRIT, JUDGMENT, AWARD, INJUNCTION OR DECREE BINDING ON OR
AFFECTING THE SUBORDINATED PURCHASER OR ITS PROPERTY, AND DO NOT RESULT IN OR
REQUIRE THE CREATION OF ANY LIEN, SECURITY INTEREST OR OTHER CHARGE OR
ENCUMBRANCE UPON OR WITH RESPECT TO ANY OF ITS PROPERTIES. THE AGREEMENT HAS
BEEN DULY EXECUTED AND DELIVERED BY THE SUBORDINATED PURCHASER.
106. NO AUTHORIZATION OR APPROVAL OR OTHER ACTION BY, AND NO NOTICE TO
OR FILING WITH, ANY GOVERNMENTAL AUTHORITY OR REGULATORY BODY IS REQUIRED FOR
THE DUE EXECUTION, DELIVERY AND PERFORMANCE BY THE SUBORDINATED PURCHASER OF
THE AGREEMENT OR ANY OTHER DOCUMENT TO BE DELIVERED THEREUNDER.
107. THE AGREEMENT CONSTITUTES THE LEGAL, VALID AND BINDING OBLIGATION
OF THE SUBORDINATED PURCHASER ENFORCEABLE AGAINST THE SUBORDINATED PURCHASER
IN ACCORDANCE WITH ITS TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY
ANY APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR SIMILAR
LAW AFFECTING CREDITORS' RIGHTS GENERALLY OR BY GENERAL PRINCIPLES OF EQUITY
(WHETHER CONSIDERED IN A PROCEEDING IN EQUITY OR AT LAW).
108. THERE ARE NO ACTIONS OR PROCEEDINGS PENDING OR, TO THE BEST
KNOWLEDGE OF THE SUBORDINATED PURCHASER, THREATENED AGAINST THE SUBORDINATED
PURCHASER BEFORE ANY COURT, REGULATORY BODY, ADMINISTRATIVE AGENCY OR OTHER
TRIBUNAL, GOVERNMENTAL INSTRUMENTALITY OR ARBITRATOR SEEKING TO PREVENT THE
CONSUMMATION OF ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY
MASTER TRUST DOCUMENT, OR SEEKING ANY DETERMINATION OR RULING THAT, IN THE
REASONABLE JUDGMENT OF THE SUBORDINATED PURCHASER, WOULD MATERIALLY AND
ADVERSELY AFFECT THE PERFORMANCE BY THE SUBORDINATED PURCHASER OF ITS
OBLIGATIONS UNDER THIS AGREEMENT OR ANY MASTER TRUST DOCUMENT TO WHICH IT IS
OR WILL BE A PARTY, OR SEEKING ANY DETERMINATION OR RULING THAT WOULD
MATERIALLY AND ADVERSELY AFFECT THE LEGALITY, VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR ANY MASTER TRUST DOCUMENT.
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109. THE FACTS AND ASSUMPTIONS CONTAINED IN PARAGRAPH (P) ON PAGE 10 OF
THE OPINION OF MAYER, BROWN & PLATT DELIVERED PURSUANT TO PARAGRAPH
1(B(XVIII)(4) OF EXHIBIT II TO THE AGREEMENT ARE TRUE AND CORRECT AS OF THE
TIME SPECIFIED THEREIN.
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EXHIBIT IV
COVENANTS
1. Covenants of the Trustee. The Trustee, not in its individual
capacity but solely as the trustee for the Charming Shoppes Master Trust, agrees
that, until the later of (x) the Facility Termination Date or (y) the Final
Distribution Date:
110. COMPLIANCE WITH LAWS, ETC. THE TRUSTEE WILL COMPLY IN ALL MATERIAL
RESPECTS WITH ALL APPLICABLE LAWS, RULES, REGULATIONS AND ORDERS AND PRESERVE
AND MAINTAIN ITS EXISTENCE, RIGHTS, FRANCHISES, QUALIFICATIONS, AND
PRIVILEGES EXCEPT TO THE EXTENT THAT THE FAILURE SO TO COMPLY WITH SUCH LAWS,
RULES AND REGULATIONS OR THE FAILURE SO TO PRESERVE AND MAINTAIN SUCH
EXISTENCE, RIGHTS, FRANCHISES, QUALIFICATIONS, AND PRIVILEGES WOULD NOT
MATERIALLY ADVERSELY AFFECT THE COLLECTIBILITY OF THE RECEIVABLES POOL OR THE
ABILITY OF THE TRUSTEE TO PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT OR THE
MASTER TRUST DOCUMENTS.
111. OFFICES, RECORDS AND BOOKS OF ACCOUNT. THE TRUSTEE WILL KEEP ITS
PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE AND THE OFFICE WHERE
IT KEEPS ITS RECORDS CONCERNING THE POOL RECEIVABLES AT 123 BROAD STREET,
PHILADELPHIA, PENNSYLVANIA 19109 OR, UPON 30 DAYS' PRIOR WRITTEN NOTICE TO
THE AGENT, AT ANY OTHER LOCATIONS IN JURISDICTIONS WHERE ALL ACTIONS
REASONABLY REQUESTED BY THE AGENT TO PROTECT AND PERFECT THE INTEREST IN THE
POOL RECEIVABLES HAVE BEEN TAKEN AND COMPLETED. THE TRUSTEE SHALL MAINTAIN IN
THE CITY OF NEWARK, NEW JERSEY, AN OFFICE OR OFFICES WHERE NOTICES AND
DEMANDS TO OR UPON THE TRUSTEE IN RESPECT OF THE POOL RECEIVABLES, THE
AGREEMENT OR THE POOLING AND SERVICING AGREEMENT MAY BE SERVED.
112. FURTHER ASSURANCES. THE TRUSTEE SHALL, FROM TIME TO TIME, AT THE
SERVICER'S EXPENSE, PROMPTLY EXECUTE AND DELIVER ALL FURTHER INSTRUMENTS AND
DOCUMENTS, AND TAKE ALL FURTHER ACTIONS, THAT MAY BE NECESSARY OR DESIRABLE,
OR THAT THE AGENT MAY REASONABLY REQUEST, TO PERFECT, PROTECT OR MORE FULLY
EVIDENCE THE RECEIVABLE INTERESTS PURCHASED UNDER THE AGREEMENT, OR TO ENABLE
THE PURCHASERS OR THE AGENT TO EXERCISE AND ENFORCE THEIR RESPECTIVE RIGHTS
AND REMEDIES UNDER THE AGREEMENT. WITHOUT LIMITING THE FOREGOING, THE
TRUSTEE:
a) will upon the request of the Agent (x) execute and file such
financing or continuation statements, or amendments thereto, and such
other instruments and documents, that may be necessary or desirable, or
that the Agent may reasonably request, to perfect, protect or
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evidence such Receivable Interests; (y) ensure that all Records evidencing
Pool Receivables and related Cardholder Agreements in its possession are
marked conspicuously with a legend, acceptable to the Agent, evidencing
that Receivable Interests therein have been sold in accordance with the
Agreement; and (z) ensure that any data processing records evidencing such
Pool Receivables and related Cardholder Agreements in its possession are
marked with such a legend; and
b) authorizes the Agent to file financing or continuation
statements, and amendments thereto, relating to such Receivable Interests
without the signature of the Trustee where permitted by law and agrees
that a photocopy or other reproduction of the Agreement shall be
sufficient as a financing statement where permitted by law.
Notwithstanding the foregoing, so long as any Investor Certificates shall be
outstanding, the Trustee and the Agent shall not file any financing statements
pursuant to this Section (other than continuation statements, amendments
reflecting name changes or changes of office location or financing statements
relating solely to an Enhancement for the benefit of the Receivables Purchase
Series arising in connection with the Agreement or the Parallel Purchase
Commitment) unless the Agent shall have obtained and delivered to the Trustee an
Opinion of Counsel to the effect that such filing shall not materially and
adversely affect the interests of the holders of the Investor Certificates.
113. INTEREST RATE AGREEMENTS. THE TRUSTEE SHALL NOT CONSENT TO ANY
MODIFICATION OR AMENDMENT OF THE INTEREST RATE AGREEMENTS WITHOUT THE PRIOR
WRITTEN CONSENT OF THE AGENT IN EACH INSTANCE, WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD BY THE AGENT.
114. STORE PAYMENT NOTICE. IF THE TRUSTEE SHALL BE NOTIFIED BY ANY
PERSON (OTHER THAN THE AGENT) TO DELIVER THE STORE PAYMENT NOTICE, THE
TRUSTEE SHALL PROMPTLY NOTIFY THE AGENT THEREOF.
115. BOOKS AND RECORDS. THE TRUSTEE WILL MARK ITS BOOKS AND RECORDS TO
INDICATE THAT INTERESTS IN THE POOL RECEIVABLES HAVE BEEN CONVEYED TO THE
PURCHASERS AND THE SUBORDINATED PURCHASER AND TO EVIDENCE THE INTEREST OF THE
PURCHASERS AND THE SUBORDINATED PURCHASER IN THE POOL RECEIVABLES.
116. STORE PAYMENT AGREEMENTS. THE TRUSTEE SHALL NOT CONSENT TO ANY
MODIFICATION, AMENDMENT OR TERMINATION OF THE
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LETTER AGREEMENTS DELIVERED PURSUANT TO CLAUSES (XXVIII) AND (XXIX) OF
SECTION 1(B) OF EXHIBIT II OF THE AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT
OF THE AGENT IN EACH INSTANCE.
2. Covenants of the Owner. In addition to the duties of the Servicer
set forth in Exhibit V hereto, until the later of (x) the Facility Termination
Date or (y) the Final Distribution Date:
117. COMPLIANCE WITH LAWS, ETC. THE OWNER WILL COMPLY IN ALL MATERIAL
RESPECTS WITH ALL APPLICABLE LAWS, RULES, REGULATIONS AND ORDERS AND PRESERVE
AND MAINTAIN ITS CORPORATE EXISTENCE, RIGHTS, FRANCHISES, QUALIFICATIONS, AND
PRIVILEGES EXCEPT TO THE EXTENT THAT THE FAILURE SO TO COMPLY WITH SUCH LAWS,
RULES AND REGULATIONS OR THE FAILURE SO TO PRESERVE AND MAINTAIN SUCH
EXISTENCE, RIGHTS, FRANCHISES, QUALIFICATIONS, AND PRIVILEGES WOULD NOT
MATERIALLY ADVERSELY AFFECT THE COLLECTIBILITY OF THE RECEIVABLES POOL OR THE
ABILITY OF THE OWNER TO PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT, THE
MASTER TRUST DOCUMENTS OR THE INSURANCE AGREEMENT.
118. OFFICES, RECORDS AND BOOKS OF ACCOUNT. THE OWNER WILL KEEP ITS
PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE AND THE OFFICE WHERE
IT KEEPS ITS RECORDS CONCERNING THE POOL RECEIVABLES AT 745 CENTER STREET,
MILFORD, OHIO 45150 OR, UPON 30 DAYS' PRIOR WRITTEN NOTICE TO THE AGENT, AT
ANY OTHER LOCATIONS IN JURISDICTIONS WHERE ALL ACTIONS REASONABLY REQUESTED
BY THE AGENT TO PROTECT AND PERFECT THE INTEREST IN THE POOL RECEIVABLES HAVE
BEEN TAKEN AND COMPLETED. THE OWNER ALSO WILL MAINTAIN AND IMPLEMENT
ADMINISTRATIVE AND OPERATING PROCEDURES (INCLUDING, WITHOUT LIMITATION, AN
ABILITY TO RECREATE RECORDS EVIDENCING POOL RECEIVABLES AND RELATED
CARDHOLDER AGREEMENTS IN THE EVENT OF THE DESTRUCTION OF THE ORIGINALS
THEREOF), AND KEEP AND MAINTAIN ALL DOCUMENTS, BOOKS, RECORDS AND OTHER
INFORMATION REASONABLY NECESSARY OR ADVISABLE FOR THE COLLECTION OF ALL POOL
RECEIVABLES (INCLUDING, WITHOUT LIMITATION, RECORDS ADEQUATE TO PERMIT THE
DAILY IDENTIFICATION OF EACH POOL RECEIVABLE AND ALL COLLECTIONS OF AND
ADJUSTMENTS TO EACH EXISTING POOL RECEIVABLE).
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119. CHANGE IN CARDHOLDER GUIDELINES, ETC.
a) Except (x) as otherwise required by any Requirements of Law or
(y) as is deemed by the Owner to be necessary in order for it to maintain
its credit card business on a competitive basis based on a good faith
assessment by it of the nature of the competition in the credit card
business and only if the change giving rise to such reduction is made
applicable to the comparable segment of revolving credit card accounts
owned or serviced by it which have characteristics similar to the Accounts
which are the subject of such change, it shall not at any time permit the
Portfolio Yield to be less than the Funding Rate; and
b) unless the Agent consents in writing, the Owner shall not
otherwise alter the Cardholder Guidelines in any manner which the Owner
reasonably believes might have a material adverse effect on the
collectibility or value of Pool Receivables and shall apply its Cardholder
Guidelines to each of the Pool Receivables; provided, however, that if any
such alteration made without the Agent's consent is later determined by
the Agent or the Owner to have had an adverse effect on the collectibility
or value of Pool Receivables, then the Owner shall promptly revise the
Cardholder Guidelines in order to prevent any such adverse effect from
occurring thereafter and any loss suffered by the Purchasers as a result
of such alteration shall be subject to Section 4.01 of the Agreement;
provided, however, that the Owner shall, within 10 Business Days following any
material change to the Cardholder Guidelines, give the Agent written notice of
such change; and provided, further, that the Owner (x) shall not make any
material adverse change in the minimum monthly payment required to be made by an
Obligor in respect of any Pool Receivable without the prior written consent of
the Agent (which consent will not be unreasonably withheld), (y) shall not make
any change in the duration of the Cycles used to bill Obligors of the
Receivables such that any such Cycle is more than 32 days and (z) shall ensure
that the entire principal balance of any Account any portion of which remains
unpaid for 180 days or more is written off the Seller's books as uncollectible.
120. SALES, LIENS, ETC. THE OWNER WILL NOT, PRIOR TO THE FINAL
DISTRIBUTION DATE, (I) SUFFER TO EXIST ANY ADVERSE CLAIM UPON OR WITH RESPECT
TO ANY PORTION OF THE MINIMUM SELLER CAPITAL, OR (II) SELL, ASSIGN (BY
OPERATION OF LAW OR OTHERWISE) OR OTHERWISE DISPOSE OF, OR CREATE OR SUFFER
TO EXIST ANY ADVERSE CLAIM UPON OR WITH RESPECT TO, ANY OF THE
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ACCOUNTS OR (III) ASSIGN (BY OPERATION OF LAW OR OTHERWISE) OR OTHERWISE
DISPOSE OF, OR CREATE OR SUFFER TO EXIST ANY ADVERSE CLAIM UPON OR WITH
RESPECT TO ANY ACCOUNT TO WHICH ANY COLLECTIONS OF ANY POOL RECEIVABLE ARE
SENT, OR ASSIGN ANY RIGHT TO RECEIVE INCOME IN RESPECT THEREOF, OTHER THAN
PURSUANT TO THE POOLING AND SERVICING AGREEMENT.
121. INTEREST RATE HEDGING. THE OWNER SHALL MAINTAIN, OR CAUSE TO BE
MAINTAINED, THE INTEREST RATE AGREEMENTS IN FULL FORCE AND EFFECT AND SHALL
OBTAIN, OR CAUSE TO BE OBTAINED, EXTENSIONS TO OR REPLACEMENTS FOR THE
INTEREST RATE AGREEMENTS FROM TIME TO TIME SO THAT THE THEN EFFECTIVE
INTEREST RATE AGREEMENTS ARE AT ALL TIMES IN COMPLIANCE WITH THE FIRST
SENTENCE OF THE DEFINITION OF "INTEREST RATE AGREEMENTS." WHENEVER THE OWNER
SHALL OBTAIN, OR CAUSE TO BE OBTAINED, AN EXTENSION TO OR REPLACEMENT FOR ANY
INTEREST RATE AGREEMENT, THE OWNER SHALL IMMEDIATELY FURNISH THE AGENT WITH
AN UPDATED ANNEX G INCORPORATING SUCH EXTENSION OR REPLACEMENT AND A COPY OF
SUCH EXTENSION OR REPLACEMENT, IN EACH CASE CERTIFIED BY A RESPONSIBLE
OFFICER OF THE OWNER AS BEING COMPLETE AND CORRECT. WITH RESPECT TO EACH
INTEREST RATE AGREEMENT TO WHICH THE SELLER IS NOT A PARTY, THE OWNER SHALL
CAUSE ALL MONIES DUE OR TO BECOME DUE TO THE OWNER (OR, IF APPLICABLE, FSC)
UNDER SUCH INTEREST RATE AGREEMENT TO BE ASSIGNED TO THE SELLER.
122. ADMINISTRATIVE SERVICER. (I) UNLESS THE AGENT CONSENTS IN WRITING,
THE OWNER WILL NOT AMEND, MODIFY OR SUPPLEMENT THE ADMINISTRATIVE SERVICER
AGREEMENT IN ANY MANNER WHICH THE OWNER REASONABLY BELIEVES MIGHT HAVE A
MATERIAL ADVERSE EFFECT ON THE COLLECTIBILITY OR VALUE OF POOL RECEIVABLES;
PROVIDED, HOWEVER, THAT IF ANY AMENDMENT, MODIFICATION OR AMENDMENT MADE
WITHOUT THE AGENT'S CONSENT IS LATER DETERMINED BY THE AGENT OR THE OWNER TO
HAVE HAD AN ADVERSE EFFECT ON THE COLLECTIBILITY OR VALUE OF POOL
RECEIVABLES, THEN THE OWNER SHALL USE ITS BEST EFFORTS TO PROMPTLY AMEND,
MODIFY OR SUPPLEMENT THE ADMINISTRATIVE SERVICER AGREEMENT IN ORDER TO
PREVENT ANY SUCH ADVERSE EFFECT FROM OCCURRING THEREAFTER AND ANY LOSS
SUFFERED BY THE PURCHASERS AS A RESULT OF SUCH AMENDMENT, MODIFICATION OR
SUPPLEMENT SHALL BE SUBJECT TO SECTION 4.01 OF THE AGREEMENT; AND PROVIDED,
HOWEVER, THAT THE OWNER SHALL, WITHIN 10 BUSINESS DAYS FOLLOWING ANY
AMENDMENT, MODIFICATION OR SUPPLEMENT TO THE ADMINISTRATIVE SERVICER
AGREEMENT, GIVE THE AGENT WRITTEN NOTICE THEREOF SUCH CHANGE.
(ii) The Owner will not replace the Administrative Servicer
without the prior written consent of the Agent, which consent will not be
unreasonably withheld.
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(iii) The Owner will provide to the Agent and CapMAC, as
promptly as possible, and in any event within two Business Days, after receiving
any notice from the Administrative Servicer of the Administrative Servicer's
intention to terminate the Administrative Servicer Agreement for any reason, a
statement setting forth the details of such termination (including the reasons
given by the Administrative Servicer for taking such action) and the action that
the Owner proposes to take with respect thereto.
123. INFORMATION. THE OWNER SHALL PROVIDE TO (I) THE SERVICER (IF OTHER
THAN SPIRIT) ON A TIMELY BASIS ALL INFORMATION NEEDED FOR THE ADMINISTRATION
OF THE POOL RECEIVABLES, INCLUDING NOTICE OF THE COMMENCEMENT OF THE
AMORTIZATION PERIOD AND (II) TO THE AGENT, AS SOON AS POSSIBLE AND IN ANY
EVENT WITHIN TWO BUSINESS DAYS AFTER RECEIPT THEREOF, COPIES OF ALL NOTICES,
REPORTS, INFORMATION, DOCUMENTS, INSTRUMENTS AND RECORDS DELIVERED TO THE
TRUSTEE WHICH RELATE TO THE POOL RECEIVABLES OR THE POOLING AND SERVICING
AGREEMENT.
124. FURTHER ASSURANCES. THE OWNER SHALL, FROM TIME TO TIME, AT ITS
EXPENSE, PROMPTLY EXECUTE AND DELIVER ALL FURTHER INSTRUMENTS AND DOCUMENTS,
AND TAKE ALL FURTHER ACTIONS, THAT MAY BE NECESSARY OR DESIRABLE, OR THAT THE
AGENT MAY REASONABLY REQUEST, TO PERFECT, PROTECT OR MORE FULLY EVIDENCE THE
RECEIVABLE INTERESTS PURCHASED UNDER THE AGREEMENT, OR TO ENABLE THE
PURCHASERS OR THE AGENT TO EXERCISE AND ENFORCE THEIR RESPECTIVE RIGHTS AND
REMEDIES UNDER THE AGREEMENT. WITHOUT LIMITING THE FOREGOING, THE OWNER:
a) will upon the request of the Agent (x) execute and file such
financing or continuation statements, or amendments thereto, and such
other instruments and documents, that may be necessary or desirable, or
that the Agent may reasonably request, to perfect, protect or evidence
such Receivable Interests; (y) mark conspicuously the Records evidencing
each Pool Receivable and the related Cardholder Agreement with a legend,
acceptable to the Agent, evidencing that Receivable Interests therein have
been sold in accordance with the Agreement; and (z) mark its master data
processing records evidencing such Pool Receivables and related Cardholder
Agreements with such a legend; and
b) authorizes the Agent to file financing or continuation
statements (solely with respect to the Agreement), and amendments thereto,
relating to such Receivable Interests without the signature of the Owner
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where permitted by law and agrees that a photocopy or other reproduction
of the Agreement shall be sufficient as a financing statement where
permitted by law.
Notwithstanding the foregoing, so long as any Investor Certificates shall be
outstanding, the Owner and the Agent shall not file any financing statements
pursuant to this Section (other than continuation statements, amendments
reflecting name changes or changes of office location or financing statements
relating solely to an Enhancement for the benefit of the Receivables Purchase
Series arising in connection with the Agreement or the Parallel Purchase
Commitment) unless the Agent shall have obtained and delivered to the Trustee an
Opinion of Counsel to the effect that such filing shall not materially and
adversely affect the interests of the holders of the Investor Certificates.
125. ANNUAL COMPLIANCE CERTIFICATE. THE OWNER WILL PROVIDE TO THE AGENT
(IN MULTIPLE COPIES, IF REQUESTED BY THE AGENT), AS SOON AS POSSIBLE AND IN
ANY EVENT WITHIN 30 DAYS AFTER THE CLOSE OF EACH FISCAL YEAR OF THE OWNER, A
CERTIFICATE, SIGNED BY THE PRESIDENT OR A VICE PRESIDENT OF THE OWNER,
STATING THAT (I) THE OWNER IS IN COMPLIANCE WITH ITS REGULATORY CAPITAL
REQUIREMENTS UNDER APPLICABLE RULES AND REGULATIONS OF THE OFFICE OF THE
COMPTROLLER OF THE CURRENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OR OTHER APPROPRIATE
GOVERNMENTAL AUTHORITIES AND (II) A REVIEW OF THE ACTIVITIES OF THE OWNER AND
ITS SUBSIDIARIES DURING THE FISCAL YEAR IN RESPECT OF WHICH SUCH STATEMENT
WAS DELIVERED HAS BEEN MADE UNDER HIS OR HER SUPERVISION AND THAT NO EARLY
AMORTIZATION EVENT OR CONDITION OR EVENT WHICH, WITH NOTICE OR LAPSE OF TIME
OR BOTH, WOULD CONSTITUTE AN EARLY AMORTIZATION EVENT HAS OCCURRED, OR, IF
SUCH HAS OCCURRED, SPECIFYING THE NATURE AND STATUS THEREOF.
126. NO ALTERATION OF FILE DESIGNATION. THE OWNER SHALL NOT ALTER THE
FILE DESIGNATION REFERENCED IN CLAUSE (I) OF PARAGRAPH 1(A) OF EXHIBIT II TO
THE AGREEMENT DURING THE TERM OF THIS AGREEMENT FOR ANY ACCOUNT UNLESS AND
UNTIL SUCH ACCOUNT BECOMES A REMOVED ACCOUNT.
127. POOL RECEIVABLES NOT TO BE EVIDENCED BY INSTRUMENTS, ETC. THE
OWNER WILL TAKE NO ACTION TO CAUSE ANY POOL RECEIVABLE TO BE EVIDENCED BY ANY
INSTRUMENT (AS DEFINED IN THE UCC AS IN EFFECT IN EACH OF THE STATES OF NEW
YORK, OHIO, PENNSYLVANIA). EACH POOL RECEIVABLE SHALL BE PAYABLE PURSUANT TO
A CONTRACT WHICH DOES NOT CREATE A LIEN ON ANY GOODS PURCHASED THEREUNDER.
THE OWNER WILL TAKE NO ACTION TO CAUSE ANY POOL RECEIVABLE TO BE ANYTHING
OTHER THAN AN "ACCOUNT", OR A "GENERAL INTANGIBLE" OR THE "PROCEEDS" OF
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EITHER FOR PURPOSES OF THE UCC AS IN EFFECT IN EACH OF THE STATES OF NEW
YORK, OHIO AND PENNSYLVANIA.
128. ADDITION OF ACCOUNTS. THE OWNER WILL NOT, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE AGENT, ADD TO THE TRUST PURSUANT TO SECTION 2.6 OF THE
POOLING AND SERVICING AGREEMENT ELIGIBLE ACCOUNTS WHICH HAVE BEEN ACQUIRED BY
THE OWNER FROM THIRD PARTIES (AS DISTINGUISHED FROM ACCOUNTS ORIGINATED BY
THE OWNER OR AN AFFILIATE OF THE OWNER) ("THIRD-PARTY ACCOUNTS") TO THE
EXTENT THAT:
(i) the number of such Third-Party Accounts plus the total number
of all Third-Party Accounts theretofore added to the Trust in the same
calendar year shall exceed 5% of the total number of Accounts in the Trust
as of the end of the prior calendar year; or
(ii) the sum of the Outstanding Balance of the Receivables in such
Third-Party Accounts as of the Addition Date plus the Outstanding Balance
of the Receivables in all other Third-Party Accounts theretofore added to
the Trust in the same calendar year shall exceed 5% of the Outstanding
Balance of all Receivables in the Receivables Pool as of the end of the
prior calendar year.
129. MERGER, CONSOLIDATION, ETC. THE OWNER WILL NOT CONSOLIDATE WITH OR
MERGE INTO ANY OTHER PERSON OR CONVEY OR TRANSFER ITS PROPERTIES AND ASSETS
SUBSTANTIALLY AS AN ENTIRETY TO ANY PERSON, UNLESS:
(i) the Person formed by such consolidation or into which the
Owner is merged or which acquires by conveyance or transfer the properties
of the Owner substantially as an entirety shall be a state or national
banking or savings association or other entity which is not subject to the
bankruptcy laws of the United States of America and, if the Owner is not
the surviving entity, shall expressly assume, by an agreement executed and
delivered to the Agent and in form and substance satisfactory to the
Agent, the performance of every covenant and obligation of the Owner
hereunder;
(ii) the Owner shall have delivered to the Agent (A) an officer's
certificate of a Responsible Officer of the Owner certifying that such
consolidation, merger, conveyance or transfer and such agreement comply
with this paragraph (m) and that all conditions precedent herein provided
for relating to such transaction have been complied with and (B) an
opinion of counsel, from counsel reasonably
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acceptable to the Agent and addressed to the Agent, that such agreement is
legal, valid and binding with respect to the Owner and the surviving
entity;
(iii) the Owner shall have given at least 10 Business Days'
prior notice to the Agent of such consolidation, merger, conveyance or
transfer; and
(iv) the Agent shall have consented to such consolidation,
merger, conveyance or transfer in writing (such consent not to be
unreasonably withheld).
130. LIST OF STORES. WITHIN 30 DAYS FOLLOWING THE DATE OF THE
AGREEMENT, AND ON OR PRIOR TO MAY 31 OF EACH YEAR, COMMENCING MAY 31, 1996,
THE OWNER SHALL FURNISH TO THE AGENT A COMPLETE AND ACCURATE LIST OF THE
NAMES AND ADDRESSES OF ALL OF THE STORES.
131. APPROVAL; OFFICIAL RECORD. EACH OF THE POOLING AND SERVICING
AGREEMENT, THE AGREEMENT AND THE PARALLEL PURCHASE COMMITMENT AND EACH
DOCUMENT RELATING THERETO (I) WAS APPROVED BY THE BOARD OF DIRECTORS OF THE
OWNER AND SUCH APPROVAL HAS BEEN, AND WILL BE, REFLECTED CONTINUOUSLY IN THE
MINUTES OF THE OWNER'S BOARD OF DIRECTORS, AND (II) HAS BEEN, AND WILL BE, AN
OFFICIAL RECORD OF THE OWNER CONTINUOUSLY FROM THE TIME OF ITS EXECUTION.
132. LIMIT ON CERTAIN HOLDERS. THE OWNER SHALL NOT ALLOW (I) TO BE
OUTSTANDING OVER 100 SUBJECT HOLDERS OF SUBJECT INSTRUMENTS, (II) ANY SUBJECT
INSTRUMENTS TO BE TRADED ON AN ESTABLISHED SECURITIES MARKET, REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR OFFERED OR SOLD PURSUANT TO REGULATION S
(17 CFR 230.901 THROUGH 230.904 OR ANY SUCCESSOR THERETO) IF SUCH OFFERING OR
SALE WOULD HAVE BEEN REQUIRED TO BE REGISTERED UNDER THE SECURITIES ACT OF
1933 IF THE INTERESTS SO OFFERED OR SOLD HAD BEEN OFFERED AND SOLD WITHIN THE
UNITED STATES OR (III) ANY AFFILIATE OR INSIDER OF THE OWNER TO BE A HOLDER
OF (OR A HOLDER OF ANY BENEFICIAL INTEREST IN) ANY INVESTOR CERTIFICATE, ANY
RECEIVABLES PURCHASE INTEREST (AS DEFINED IN THE POOLING AND SERVICING
AGREEMENT) OR ANY INTEREST IN ANY SERIES, IF THE INTEREST HELD BY SUCH
AFFILIATE OR INSIDER IN SUCH SERIES IS OR, PURSUANT TO THE TERMS OF THE
APPLICABLE SUPPLEMENT OR RECEIVABLES PURCHASE AGREEMENT, MAY BECOME GREATER
THAN 24.6% OF THE INVESTOR INTEREST (AS DEFINED IN THE POOLING AND SERVICING
AGREEMENT) OR RECEIVABLES PURCHASE INTEREST OF SUCH SERIES.
133. USE OF PROCEEDS. THE OWNER SHALL APPLY, AND SHALL DIRECT THE
SELLER TO APPLY, THE PROCEEDS OF THE INITIAL PURCHASE OF PURCHASER RECEIVABLE
INTERESTS HEREUNDER TO THE
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PAYMENT IN FULL ON THE EFFECTIVE DATE OF (I) THE UNPAID "PURCHASER CAPITAL"
UNDER THE RECEIVABLES PURCHASE AGREEMENT DATED AS OF DECEMBER 24, 1992, AS
AMENDED AND RESTATED AS OF MAY 4, 1994, AND AS FURTHER AMENDED (THE "EXISTING
RPA") AMONG THE OWNER, THE SERVICER, THE SELLER, THE SUBORDINATED PURCHASER,
THE AGENT AND THE PURCHASERS NAMED THEREIN, ACCRUED BUT UNPAID "YIELD"
THEREON TO THE EFFECTIVE DATE, AND ACCRUED BUT UNPAID FEES PURSUANT TO THE
"FEE LETTER" REFERRED TO IN THE EXISTING RPA, AND (II) THE UNPAID "PURCHASER
CAPITAL" UNDER THE RECEIVABLES PURCHASE AGREEMENT (PARALLEL PURCHASE
COMMITMENT) DATED AS OF DECEMBER 24, 1992, AS AMENDED (THE "EXISTING PPC")
AMONG THE OWNER, THE SERVICER, THE SELLER, THE SUBORDINATED PURCHASER, THE
AGENT AND THE PURCHASER NAMED THEREIN, ACCRUED BUT UNPAID "YIELD" THEREON TO
THE EFFECTIVE DATE, AND ACCRUED BUT UNPAID FEES PURSUANT TO THE "FEE LETTER"
REFERRED TO IN THE EXISTING PPC.
(r) Series 1994-2 Amendment. Pursuant to Amendment No. 1 dated as of
March 29, 1996 to the supplement for Series 1994-2, the Owner shall deposit (or
cause to be deposited) all of its share of Shared Excess Finance Charge
Collections (as defined in such supplement) to the cash collateral account
required by such Amendment No. 1 from the date of such Amendment No. 1 until
such time as the amount in such account equals $777,000, and shall not
thereafter make any further deposits to such account from its share of Shared
Excess Finance Charge Collections.
3. Covenants of the Servicer. In addition to the duties of the Servicer
set forth in Exhibit V hereto, until the later of (x) the Facility Termination
Date or (y) the Final Distribution Date:
134. COMPLIANCE WITH LAWS, ETC. THE SERVICER WILL COMPLY IN ALL
MATERIAL RESPECTS WITH ALL APPLICABLE LAWS, RULES, REGULATIONS AND ORDERS AND
PRESERVE AND MAINTAIN ITS CORPORATE EXISTENCE, RIGHTS, FRANCHISES,
QUALIFICATIONS, AND PRIVILEGES EXCEPT TO THE EXTENT THAT THE FAILURE SO TO
COMPLY WITH SUCH LAWS, RULES AND REGULATIONS OR THE FAILURE SO TO PRESERVE
AND MAINTAIN SUCH EXISTENCE, RIGHTS, FRANCHISES, QUALIFICATIONS, AND
PRIVILEGES WOULD NOT MATERIALLY ADVERSELY AFFECT THE COLLECTIBILITY OF THE
RECEIVABLES POOL OR THE ABILITY OF THE SERVICER TO PERFORM ITS OBLIGATIONS
UNDER THE AGREEMENT, THE POOLING AND SERVICING AGREEMENT OR THE OTHER MASTER
TRUST DOCUMENTS.
135. OFFICES, RECORDS AND BOOKS OF ACCOUNT. THE SERVICER WILL KEEP ITS
PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE AND THE OFFICE WHERE
IT KEEPS ITS RECORDS CONCERNING THE POOL RECEIVABLES AT 745 CENTER STREET,
MILFORD, OHIO 45150 OR, UPON 30 DAYS' PRIOR WRITTEN NOTICE TO THE
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AGENT, AT ANY OTHER LOCATIONS IN JURISDICTIONS WHERE ALL ACTIONS REASONABLY
REQUESTED BY THE AGENT TO PROTECT AND PERFECT THE INTEREST IN THE POOL
RECEIVABLES HAVE BEEN TAKEN AND COMPLETED. THE SERVICER ALSO WILL MAINTAIN
AND IMPLEMENT ADMINISTRATIVE AND OPERATING PROCEDURES (INCLUDING, WITHOUT
LIMITATION, AN ABILITY TO RECREATE RECORDS EVIDENCING POOL RECEIVABLES AND
RELATED CARDHOLDER AGREEMENTS IN THE EVENT OF THE DESTRUCTION OF THE
ORIGINALS THEREOF), AND KEEP AND MAINTAIN ALL DOCUMENTS, BOOKS, RECORDS AND
OTHER INFORMATION REASONABLY NECESSARY OR ADVISABLE FOR THE COLLECTION OF ALL
POOL RECEIVABLES (INCLUDING, WITHOUT LIMITATION, RECORDS ADEQUATE TO PERMIT
THE DAILY IDENTIFICATION OF EACH POOL RECEIVABLE AND ALL COLLECTIONS OF AND
ADJUSTMENTS TO EACH EXISTING POOL RECEIVABLE).
136. FURTHER ASSURANCES. THE SERVICER SHALL, FROM TIME TO TIME, AT ITS
EXPENSE, PROMPTLY EXECUTE AND DELIVER ALL FURTHER INSTRUMENTS AND DOCUMENTS,
AND TAKE ALL FURTHER ACTIONS, THAT MAY BE NECESSARY OR DESIRABLE, OR THAT THE
AGENT MAY REASONABLY REQUEST, TO PERFECT, PROTECT OR MORE FULLY EVIDENCE THE
RECEIVABLE INTERESTS PURCHASED UNDER THE AGREEMENT, OR TO ENABLE THE
PURCHASERS OR THE AGENT TO EXERCISE AND ENFORCE THEIR RESPECTIVE RIGHTS AND
REMEDIES UNDER THE AGREEMENT. WITHOUT LIMITING THE FOREGOING, THE SERVICER
WILL UPON THE REQUEST OF THE AGENT (X) EXECUTE SUCH INSTRUMENTS AND DOCUMENTS
THAT MAY BE NECESSARY OR DESIRABLE, OR THAT THE AGENT MAY REASONABLY REQUEST,
TO PERFECT, PROTECT OR EVIDENCE THE RECEIVABLE INTERESTS PURCHASED UNDER THE
AGREEMENT; (Y) MARK CONSPICUOUSLY THE RECORDS EVIDENCING EACH POOL RECEIVABLE
AND THE RELATED CARDHOLDER AGREEMENT WITH A LEGEND, ACCEPTABLE TO THE AGENT,
EVIDENCING THAT RECEIVABLE INTERESTS THEREIN HAVE BEEN SOLD IN ACCORDANCE
WITH THE AGREEMENT; AND (Z) MARK ITS MASTER DATA PROCESSING RECORDS
EVIDENCING SUCH POOL RECEIVABLES AND RELATED CARDHOLDER AGREEMENTS WITH SUCH
A LEGEND. NOTWITHSTANDING THE FOREGOING, SO LONG AS ANY INVESTOR CERTIFICATES
SHALL BE OUTSTANDING, THE SERVICER AND THE AGENT SHALL NOT FILE ANY FINANCING
STATEMENTS PURSUANT TO THIS SECTION (OTHER THAN CONTINUATION STATEMENTS,
AMENDMENTS REFLECTING NAME CHANGES OR CHANGES OF OFFICE LOCATION OR FINANCING
STATEMENTS RELATING SOLELY TO AN ENHANCEMENT FOR THE BENEFIT OF THE
RECEIVABLES PURCHASE SERIES ARISING IN CONNECTION WITH THE AGREEMENT OR THE
PARALLEL PURCHASE COMMITMENT) UNLESS THE AGENT SHALL HAVE OBTAINED AND
DELIVERED TO THE TRUSTEE AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH FILING
SHALL NOT MATERIALLY AND ADVERSELY AFFECT THE INTERESTS OF THE HOLDERS OF THE
INVESTOR CERTIFICATES.
137. SERVICER WILL NOT RESIGN. THE SERVICER SHALL NOT RESIGN FROM THE
OBLIGATIONS AND DUTIES IMPOSED BY IT UNDER THE
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AGREEMENT EXCEPT AS PERMITTED PURSUANT TO SECTION 8.5 OF THE POOLING AND
SERVICING AGREEMENT.
138. MERGER, CONSOLIDATION, ETC. THE SERVICER WILL NOT CONSOLIDATE WITH
OR MERGE INTO ANY OTHER PERSON OR CONVEY OR TRANSFER ITS PROPERTIES AND
ASSETS SUBSTANTIALLY AS AN ENTIRETY TO ANY PERSON, UNLESS:
(i) the Person formed by such consolidation or into which the
Servicer is merged or which acquires by conveyance or transfer the
properties of the Servicer substantially as an entirety shall be a state
or national banking or savings association or other entity which is not
subject to the bankruptcy laws of the Untied States of America and, if the
Servicer is not the surviving entity, shall expressly assume, by an
agreement executed and delivered to the Agent and in form and substance
satisfactory to the Agent, the performance of every covenant and
obligation of the Servicer hereunder;
(ii) the Servicer shall have delivered to the Agent (A) an
officer's certificate of a Responsible Officer of the Servicer certifying
that such consolidation, merger, conveyance or transfer and such agreement
comply with this paragraph (e) and that all conditions precedent herein
provided for relating to such transaction have been complied with and (B)
an opinion of counsel, from counsel reasonably acceptable to the Agent and
addressed to the Agent, that such agreement is legal, valid and binding
with respect to the Servicer and the surviving entity;
(iii) the Servicer shall have given at least 10 Business Days'
prior notice to the Agent of such consolidation, merger, conveyance or
transfer; and
(iv) the Agent shall have consented to such consolidation,
merger, conveyance or transfer in writing (such consent not to be
unreasonably withheld).
4. Covenants of the Subordinated Purchaser. In addition to the
undertaking of the Subordinated Purchaser set forth in Section 1.01(b) of the
Agreement, until the later of (x) the Facility Termination Date or (y) the Final
Distribution Date:
139. SALE, LIENS, ETC. THE SUBORDINATED PURCHASER SHALL NOT SELL,
ASSIGN (BY OPERATION OF LAW OR OTHERWISE) OR OTHERWISE DISPOSE OF, OR CREATE
OR SUFFER TO EXIST ANY ADVERSE CLAIM UPON OR WITH RESPECT TO, ANY
SUBORDINATED RECEIVABLE
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INTEREST, OR ASSIGN ANY RIGHT TO RECEIVE INCOME IN RESPECT THEREOF, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE AGENT.
140. OBSERVANCE OF CORPORATE PROCEDURES, ETC. THE SUBORDINATED
PURCHASER (I) SHALL OBSERVE THE CORPORATE PROCEDURES REQUIRED BY ITS
CERTIFICATE OF INCORPORATION, ITS BY-LAWS AND THE CORPORATE LAW OF THE STATE
OF DELAWARE, INCLUDING, WITHOUT LIMITATION, HOLDING SEPARATE DIRECTOR AND
SHAREHOLDER MEETINGS FROM THOSE OF ANY OTHER PERSON AND OTHERWISE ENSURE AT
ALL TIMES THAT IT IS MAINTAINED AS A SEPARATE CORPORATE ENTITY FROM ANY OTHER
PERSON AND (II) SHALL NOT AMEND OR MODIFY ANY PROVISION OF ITS CERTIFICATE OF
INCORPORATION OR BY-LAWS WITHOUT THE PRIOR WRITTEN CONSENT OF THE AGENT (SUCH
CONSENT NOT TO BE UNREASONABLY WITHHELD).
141. BOARD OF DIRECTORS' AUTHORIZATION, ETC. THE SUBORDINATED PURCHASER
SHALL (I) ENSURE THAT ITS BOARD OF DIRECTORS DULY AUTHORIZES ALL OF ITS
CORPORATE ACTIONS, AND (II) KEEP CORRECT AND COMPLETE BOOKS AND RECORDS OF
ACCOUNT SEPARATE FROM THOSE OF ANY OTHER PERSON, AND CORRECT AND COMPLETE
MINUTES OF THE MEETINGS AND OTHER PROCEEDINGS OF ITS STOCKHOLDERS AND BOARD
OF DIRECTORS, AND (III) WHERE NECESSARY, OBTAIN PROPER AUTHORIZATION FROM ITS
DIRECTORS OR STOCKHOLDERS, AS APPROPRIATE, FOR CORPORATE ACTION.
142. OPERATING EXPENSES; SEPARATE ACCOUNTS. THE SUBORDINATED PURCHASER
SHALL PROVIDE FOR ITS OPERATING EXPENSES AND LIABILITIES FROM ITS OWN FUNDS
AND MAINTAIN DEPOSIT ACCOUNTS AND OTHER BANK ACCOUNTS SEPARATE FROM THOSE OF
THE OWNER, THE SERVICER OR THE SELLER, OR ANY OF THEIR RESPECTIVE AFFILIATES.
143. CORPORATE ACTION. THE SUBORDINATED PURCHASER SHALL ACT SOLELY IN
ITS CORPORATE NAME AND THROUGH ITS DULY AUTHORIZED OFFICERS OR AGENTS IN THE
CONDUCT OF ITS BUSINESS AND ENSURE THAT NEITHER THE OWNER NOR THE SERVICER
NOR ANY OF THEIR RESPECTIVE AFFILIATES CONTROLS ANY CORPORATE DECISIONS MADE
BY IT.
144. ARM'S-LENGTH TRANSACTIONS. TO THE EXTENT IT OBTAINS ANY SERVICES
FROM THE OWNER OR THE SERVICER OR ANY OF THEIR RESPECTIVE AFFILIATES, THE
SUBORDINATED PURCHASER SHALL ENSURE THAT THE TERMS OF SUCH ARRANGEMENTS ARE
COMPARABLE TO THOSE THAT WOULD BE OBTAINED IN AN ARM'S-LENGTH TRANSACTION.
145. NO COMMINGLING. THE SUBORDINATED PURCHASER SHALL ENSURE THAT ITS
ASSETS ARE NOT COMMINGLED WITH THOSE OF THE OWNER, THE SERVICER, THE SELLER
OR ANY OTHER PERSON.
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146. SEPARATE RECORDS. THE SUBORDINATED PURCHASER SHALL MAINTAIN
SEPARATE CORPORATE RECORDS AND BOOKS OF ACCOUNT FROM THOSE OF THE OWNER, THE
SERVICER OR ANY OTHER PERSON.
147. CONDUCT OF BUSINESS. THE SUBORDINATED PURCHASER SHALL NOT CONDUCT
ANY BUSINESS OR ENGAGE IN ANY ACTIVITIES OTHER THAN (I) THE OWNERSHIP OF THE
SUBORDINATED RECEIVABLE INTEREST AND THE "SUBORDINATED RECEIVABLE INTEREST"
UNDER THE PARALLEL PURCHASE COMMITMENT, (II) THE PERFORMANCE OF ITS
OBLIGATIONS UNDER THE AGREEMENT AND THE PARALLEL PURCHASE COMMITMENT AND
(III) THE OWNERSHIP OF A "SUBORDINATED RECEIVABLE INTEREST" AND THE
PERFORMANCE OF ITS OBLIGATIONS UNDER ANY RECEIVABLES PURCHASE AGREEMENT THAT
IS SUBJECT TO THE POOLING AND SERVICING AGREEMENT.
148. SEPARATE EXISTENCE, ETC. THE SUBORDINATED PURCHASER (I) SHALL NOT
HOLD ITSELF OUT, OR PERMIT ITSELF TO BE HELD OUT, AS HAVING AGREED TO PAY, OR
AS BEING LIABLE FOR, THE DEBTS OF THE OWNER, THE SERVICER, OR ANY OTHER
PERSON; (II) SHALL MAINTAIN AN ARM'S-LENGTH RELATIONSHIP WITH THE OWNER AND
THE SERVICER AND THEIR RESPECTIVE AFFILIATES WITH RESPECT TO ANY TRANSACTIONS
BETWEEN ITSELF AND SUCH OTHER PERSON; (III) SHALL CONTINUOUSLY MAINTAIN AS
OFFICIAL RECORDS THE RESOLUTIONS, AGREEMENTS AND OTHER INSTRUMENTS UNDERLYING
THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT; AND (IV) SHALL COMPLY WITH
(AND CAUSE TO BE TRUE AND CORRECT) EACH OF THE FACTS AND ASSUMPTIONS
CONTAINED IN PARAGRAPHS (A) THROUGH (K),(N) AND (O) ON PAGES 8 TO 10 OF THE
OPINION OF MAYER, BROWN & PLATT DELIVERED PURSUANT TO PARAGRAPH
1(B)(XVIII)(4) OF EXHIBIT II TO THE AGREEMENT.
149. MERGER, CONSOLIDATION, ETC. THE SUBORDINATED PURCHASER WILL NOT
CONSOLIDATE WITH OR MERGE INTO ANY OTHER PERSON OR CONVEY OR TRANSFER ITS
PROPERTIES AND ASSETS SUBSTANTIALLY AS AN ENTIRETY TO ANY PERSON.
150. INDEPENDENT DIRECTOR. THE SUBORDINATED PURCHASER SHALL SELECT AND
AT ALL TIMES MAINTAIN AS ITS INDEPENDENT DIRECTOR A PERSON WHO MEETS THE
FOLLOWING QUALIFICATIONS (WHICH QUALIFICATIONS ARE IN ADDITION TO THOSE SET
FORTH IN THE SUBORDINATED PURCHASER'S CERTIFICATE OF INCORPORATION): THE
INDEPENDENT DIRECTOR SHALL HAVE (I) PRIOR EXPERIENCE AS AN INDEPENDENT
DIRECTOR FOR A CORPORATION WHOSE CHARTER DOCUMENTS REQUIRE THE UNANIMOUS
WRITTEN CONSENT OF ALL INDEPENDENT DIRECTORS THEREOF BEFORE SUCH CORPORATION
COULD CONSENT TO THE INSTITUTION OF BANKRUPTCY OR INSOLVENCY PROCEEDINGS
AGAINST IT OR COULD FILE A PETITION SEEKING RELIEF UNDER ANY APPLICABLE
FEDERAL OR STATE LAW RELATING TO BANKRUPTCY, AND (II) AT LEAST THREE YEARS OF
EMPLOYMENT EXPERIENCE WITH ONE OR MORE ENTITIES THAT PROVIDE, IN THE ORDINARY
COURSE OF THEIR RESPECTIVE BUSINESSES, ADVISORY, MANAGEMENT OR PLACEMENT
SERVICES TO
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ISSUERS OF SECURITIZATION OR STRUCTURED FINANCE INSTRUMENTS, AGREEMENTS OR
SECURITIES.
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EXHIBIT V
ADMINISTRATION AND COLLECTION
OF POOL RECEIVABLES
1. Duties of the Servicer. Until the later of (x) the Facility
Termination Date or (y) the Final Distribution Date:
151. IN GENERAL. THE SERVICER SHALL TAKE OR CAUSE TO BE TAKEN ALL SUCH
ACTIONS AS MAY BE NECESSARY OR ADVISABLE TO SERVICE AND ADMINISTER THE POOL
RECEIVABLES AND COLLECT ALL PAYMENTS DUE UNDER THE POOL RECEIVABLES FROM TIME
TO TIME IN ACCORDANCE WITH ITS CUSTOMARY AND USUAL SERVICING PROCEDURES FOR
SERVICING CREDIT CARD RECEIVABLES COMPARABLE TO THE POOL RECEIVABLES AND IN
ACCORDANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS, WITH REASONABLE CARE
AND DILIGENCE, AND IN ACCORDANCE WITH THE CARDHOLDER GUIDELINES, THE
AGREEMENT AND THE POOLING AND SERVICING AGREEMENT. THE SERVICER SHALL NOT BE
OBLIGATED TO USE SEPARATE SERVICING PROCEDURES, OFFICES, EMPLOYEES OR
ACCOUNTS FOR SERVICING THE POOL RECEIVABLES FROM THE PROCEDURES, OFFICES,
EMPLOYEES AND ACCOUNTS USED BY THE SERVICER IN CONNECTION WITH SERVICING
OTHER CREDIT CARD RECEIVABLES.
152. AUDITS. AT ANY REASONABLE TIME AND FROM TIME TO TIME AT THE
AGENT'S REASONABLE REQUEST UPON REASONABLE NOTICE TO THE SERVICER AND, IF
APPLICABLE, THE ADMINISTRATIVE SERVICER, THE SERVICER SHALL PERMIT THE AGENT,
CAPMAC OR THEIR AGENTS OR REPRESENTATIVES, TO VISIT THE OFFICES AND
PROPERTIES OF THE SERVICER FOR THE PURPOSE OF EXAMINING RECORDS RELATING TO
THE SERVICER'S CREDIT CARD-RELATED OPERATIONS AND/OR THE POOL RECEIVABLES,
INTERNAL CONTROLS AND PROCEDURES MAINTAINED BY THE ADMINISTRATIVE SERVICER
(INCLUDING, WITHOUT LIMITATION, ALL FILES, FILE EXTRACTS AND MASTERFILES, AS
SUCH TERMS ARE DEFINED IN THE ADMINISTRATIVE SERVICING AGREEMENT IN EFFECT
FROM TIME TO TIME) AND TO TAKE COPIES AND EXTRACTS THEREFROM, AND TO DISCUSS
THE SERVICER'S AFFAIRS WITH ITS OFFICERS, EMPLOYEES AND INDEPENDENT
ACCOUNTANTS.
153. CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. THE SERVICER WILL NOT
ADD OR TERMINATE ANY BANK AS A DEPOSITARY BANK FROM THOSE LISTED IN SCHEDULE
I TO THE AGREEMENT, OR, EXCEPT
as requested by the Trustee pursuant to the Pooling and Servicing Agreement,
make any change in its instructions to Obligors
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regarding the method by which payments are to be made in respect of Pool
Receivables, unless the Agent shall have received notice of such addition,
termination or change and the Trustee shall have received copies of Depositary
Agreements with each new Depositary Bank, duly executed by the Seller and duly
acknowledged by such Depositary Bank, or such other notice or acknowledgments as
the Trustee may reasonably request.
154. Reporting Requirements. The Servicer will provide to the Agent (in
multiple copies, if requested by the Agent) the following:
a) as soon as possible and in any event within five days after
the occurrence of each Early Amortization Event or event which, with the
giving of notice or lapse of time, or both, would constitute an Early
Amortization Event, a statement of the chief financial officer of the
Servicer setting forth details of such Early Amortization Event or event
and the action that the Servicer has taken and proposes to take with
respect thereto;
b) within 30 days after the end of each calendar year, a
certificate of a Responsible Officer of the Servicer to the effect that no
Early Amortization Event (including, without limitation, an Early
Amortization Event described in paragraph (m) of Exhibit VI), or event
which, with the giving of notice or lapse of time, or both, would
constitute an Early Amortization Event, has occurred and is continuing;
c) at least 10 Business Days prior to any change in the Seller's
name or the Servicer's name, a notice setting forth the new name and the
effective date thereof; and
d) such other information respecting the Pool Receivables or the
condition or operations, financial or otherwise, of the Seller, the
Servicer or any of their respective Affiliates required to be delivered to
the "Receivables Purchasers" under the Pooling and Servicing Agreement or
as the Agent may from time to time reasonably request.
155. CALCULATION OF ALLOCATED AMOUNTS. THE SERVICER SHALL, FROM TIME TO
TIME AT THE REASONABLE REQUEST OF THE AGENT, FURNISH TO THE AGENT (PROMPTLY
AFTER ANY SUCH REQUEST) A CALCULATION OF THE AMOUNTS SET ASIDE FOR THE
PURCHASERS PURSUANT TO ARTICLE II OF THE AGREEMENT.
156. DELIVERY OF SERVICER REPORTS. THE SERVICER SHALL PREPARE AND
FORWARD TO THE AGENT, AT LEAST 2 BUSINESS DAYS
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PRIOR TO EACH DISTRIBUTION DATE, A SERVICER REPORT RELATING TO THE PURCHASER
RECEIVABLE INTERESTS OUTSTANDING ON THE LAST DAY OF THE IMMEDIATELY PRECEDING
DUE PERIOD, TOGETHER WITH AN ANALYSIS OF THE AGING OF THE POOL RECEIVABLES
OUTSTANDING ON SUCH LAST DAY, AND EACH SUCH SERVICER REPORT WILL BE ACCURATE
IN ALL MATERIAL RESPECTS AS OF ITS DATE.
157. TOTAL SYSTEMS FAILURE. THE SERVICER SHALL PROMPTLY NOTIFY THE
AGENT OF ANY TOTAL SYSTEMS FAILURE AND SHALL ADVISE THE AGENT OF THE
ESTIMATED TIME REQUIRED IN ORDER TO REMEDY SUCH TOTAL SYSTEMS FAILURE AND OF
THE ESTIMATED DATE ON WHICH A SERVICER REPORT CAN BE DELIVERED. UNTIL A TOTAL
SYSTEMS FAILURE IS REMEDIED, THE SERVICER WILL (I) FURNISH TO THE AGENT SUCH
PERIODIC STATUS REPORTS AND OTHER INFORMATION RELATING TO SUCH TOTAL SYSTEMS
FAILURE AS THE AGENT MAY REASONABLY REQUEST AND (II) PROMPTLY NOTIFY THE
AGENT IF THE SERVICER BELIEVES THAT SUCH TOTAL SYSTEMS FAILURE CANNOT BE
REMEDIED BY THE ESTIMATED DATE, WHICH NOTICE SHALL INCLUDE A DESCRIPTION OF
THE CIRCUMSTANCES WHICH GAVE RISE TO SUCH DELAY, AND THE ACTION PROPOSED TO
BE TAKEN IN RESPONSE THERETO, AND A REVISED ESTIMATE OF THE DATE ON WHICH A
SERVICER REPORT CAN BE DELIVERED. THE SERVICER SHALL PROMPTLY NOTIFY THE
AGENT WHEN A TOTAL SYSTEMS FAILURE HAS BEEN REMEDIED.
158. SERVICER REMAINS LIABLE. THE EXERCISE BY THE AGENT AND BY ANY
PURCHASER OF THEIR RIGHTS UNDER THE AGREEMENT SHALL NOT RELEASE THE SERVICER
OR THE OWNER FROM ANY OF THEIR DUTIES OR OBLIGATIONS WITH RESPECT TO ANY POOL
RECEIVABLES OR UNDER THE RELATED CARDHOLDER AGREEMENTS. NEITHER THE AGENT NOR
ANY PURCHASER NOR THE SUBORDINATED PURCHASER SHALL HAVE ANY OBLIGATION OR
LIABILITY WITH RESPECT TO ANY POOL RECEIVABLES OR RELATED CARDHOLDER
AGREEMENTS, NOR SHALL ANY OF THEM BE OBLIGATED TO PERFORM THE OBLIGATIONS OF
ANY PARTY THEREUNDER.
2. Certain Rights of the Agent.
159. Notification of Obligors. The Agent may at any time following the
TERMINATION OR TRANSFER OF THE RIGHTS AND OBLIGATIONS OF BOTH THE SERVICER
UNDER THE POOLING AND SERVICING AGREEMENT AND THE ADMINISTRATIVE SERVICER
UNDER THE ADMINISTRATIVE SERVICER AGREEMENT, UPON TEN DAYS PRIOR WRITTEN
NOTICE TO THE OWNER AND THE SERVICER, INSTRUCT THE TRUSTEE TO, AND UPON SUCH
INSTRUCTION THE TRUSTEE SHALL, DIRECT THE SERVICER TO NOTIFY THE OBLIGORS OF
POOL RECEIVABLES, AT THE SERVICER'S EXPENSE (IF THE SERVICER IS THEN SPIRIT,
THE SELLER OR A DESIGNEE OF EITHER OF THEM), OF THE AGENT'S SECURITY INTEREST
IN THE POOL RECEIVABLES PURSUANT TO THE AGREEMENT, SUCH NOTIFICATION TO BE
MADE (I) BY MEANS OF STATEMENT TO THE
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FOREGOING EFFECT CONTAINED IN OR ENCLOSED WITH THE MONTHLY BILLING STATEMENT
SENT BY THE SERVICER TO THE OBLIGORS OF POOL RECEIVABLES AND (II) WITHIN THE
NEXT 32 DAYS. IF THE SERVICER FAILS TO NOTIFY OBLIGORS AS REQUIRED PURSUANT
TO THE FOREGOING SENTENCE, THEN THE AGENT ITSELF MAY, BY ANY MEANS REASONABLY
DETERMINED BY THE AGENT TO BE CONSISTENT WITH MARKET PRACTICE AND OTHERWISE
DESIRABLE TO ACCOMPLISH THE PURPOSE OF THIS SUBSECTION AND AT THE SERVICER'S
EXPENSE (IF THE SERVICER IS THEN SPIRIT, THE SELLER OR A DESIGNEE OF EITHER
OF THEM), SO NOTIFY SUCH OBLIGORS.
160. STORE PAYMENT NOTICE, ETC.
(i) At any time following the institution of insolvency
proceedings by or against any Store or Charming Shoppes or Charming
Shoppes of Delaware, Inc., the Agent is authorized to instruct the
Trustee to, and upon such instruction the Trustee shall, at the
Servicer's expense, date and deliver the Store Payment Notice to the
manager of each Store by or against which such a proceeding has been
instituted, or in the case of such a proceeding by or against Charming
Shoppes or Charming Shoppes of Delaware, Inc., to the managers of all
Stores.
(ii) Each of the Trustee, the Seller, the Servicer, the Owner,
CNAI and the Purchasers hereby authorizes the Agent, if appointed
Successor Servicer under the Pooling and Servicing Agreement, to take
any and all steps in the Trustee's name and on behalf of the Trustee
and the Purchasers that are necessary or desirable, in the
determination of the Agent, to collect amounts due under the Pool
Receivables, including, without limitation, indorsing the name of the
Owner or the Seller, as appropriate, on checks and other instruments
representing Collections of Pool Receivables and enforcing the Pool
Receivables and the related Cardholder Agreements.
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EXHIBIT VI
EARLY AMORTIZATION EVENTS
Each of the following (whether occurring before or after the
commencement of the Amortization Period) shall be an "Early Amortization Event":
161. (I) THE SERVICER SHALL FAIL TO PERFORM OR OBSERVE ANY TERM,
COVENANT OR AGREEMENT ON ITS PART TO BE PERFORMED OR OBSERVED UNDER THE
AGREEMENT (OTHER THAN AS REFERRED TO IN CLAUSE (II) BELOW) AND SUCH FAILURE
SHALL REMAIN UNREMEDIED FOR 10 BUSINESS DAYS AFTER WRITTEN NOTICE THEREOF
SHALL HAVE BEEN GIVEN TO THE SERVICER BY THE AGENT; OR (II) THE SERVICER
SHALL FAIL TO MAKE WHEN DUE ANY PAYMENT OR DEPOSIT TO BE MADE BY IT UNDER THE
AGREEMENT AND SUCH FAILURE SHALL REMAIN UNREMEDIED FOR 1 BUSINESS DAY AFTER
WRITTEN NOTICE THEREOF SHALL HAVE BEEN GIVEN TO THE SERVICER BY THE AGENT; OR
162. (I) THE OWNER SHALL FAIL TO MAKE ANY DEPOSIT INTO THE COLLECTION
ACCOUNT OR THE AGENT'S ACCOUNT PURSUANT TO SECTIONS 2.4(D) OR 2.4(E) OF THE
POOLING AND SERVICING AGREEMENT OR PURSUANT TO SECTION 2.07 OR 4.03(B) OF THE
AGREEMENT, OR (II) THE SELLER SHALL FAIL TO MAKE ANY OTHER PAYMENT REQUIRED
UNDER THE AGREEMENT; AND, IN THE CASE OF EITHER CLAUSE (I) OR CLAUSE (II) OF
THIS SUBSECTION (B), SUCH FAILURE SHALL REMAIN UNREMEDIED FOR ONE BUSINESS
DAY AFTER WRITTEN NOTICE THEREOF SHALL HAVE BEEN GIVEN TO THE OWNER OR THE
SELLER, AS THE CASE MAY BE, BY THE AGENT; OR
163. ANY REPRESENTATION OR WARRANTY MADE OR DEEMED MADE BY THE SELLER,
THE OWNER, THE SERVICER, FSC OR CHARMING SHOPPES (OR ANY OF THEIR RESPECTIVE
OFFICERS) UNDER OR IN CONNECTION WITH THE AGREEMENT, ANY MASTER TRUST
DOCUMENT, THE COMPANY AGREEMENT OR THE INSURANCE AGREEMENT OR ANY INFORMATION
OR REPORT (OTHER THAN ANY SERVICER REPORT) DELIVERED BY THE SELLER, THE
OWNER, THE SERVICER, FSC OR CHARMING SHOPPES PURSUANT TO THE AGREEMENT, ANY
MASTER TRUST DOCUMENT, THE COMPANY AGREEMENT OR THE INSURANCE AGREEMENT SHALL
PROVE TO HAVE BEEN INCORRECT OR UNTRUE IN ANY MATERIAL RESPECT WHEN MADE OR
DEEMED MADE OR DELIVERED; OR
164. THE SELLER, THE OWNER, FSC OR CHARMING SHOPPES SHALL FAIL TO
PERFORM OR OBSERVE ANY OTHER TERM, COVENANT OR AGREEMENT CONTAINED IN THE
AGREEMENT, ANY MASTER TRUST DOCUMENT, THE COMPANY AGREEMENT OR THE INSURANCE
AGREEMENT ON ITS PART TO BE PERFORMED OR OBSERVED AND ANY SUCH FAILURE SHALL
REMAIN UNREMEDIED FOR 10 CONTINUOUS BUSINESS DAYS AFTER WRITTEN NOTICE
THEREOF SHALL HAVE BEEN GIVEN TO THE SELLER, THE OWNER, FSC OR CHARMING
SHOPPES, AS THE CASE MAY BE, BY THE AGENT; OR
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165. (I) SPIRIT, IN ITS CAPACITY AS THE SELLER OR THE SERVICER UNDER
THE POOLING AND SERVICING AGREEMENT OR SPIRIT OR ANY AFFILIATE OF SPIRIT, IN
ANY CAPACITY UNDER ANY OTHER MASTER TRUST DOCUMENT, SHALL FAIL TO PERFORM OR
OBSERVE ANY TERM, COVENANT OR AGREEMENT CONTAINED IN THE POOLING AND
SERVICING AGREEMENT OR SUCH OTHER MASTER TRUST DOCUMENT, ON ITS PART TO BE
PERFORMED OR OBSERVED AND (A) ANY SUCH FAILURE SHALL CONTINUE FOR 10 BUSINESS
DAYS AFTER WRITTEN NOTICE THEREOF SHALL HAVE BEEN GIVEN TO THE SERVICER BY
THE TRUSTEE OR ANY PURCHASER REPRESENTATIVE (AS DEFINED IN THE POOLING AND
SERVICING AGREEMENT) OR (B) ANY SUCH FAILURE UNDER THE POOLING AND SERVICING
AGREEMENT OR OTHER MASTER TRUST DOCUMENT SHALL CONSTITUTE AN "EARLY
AMORTIZATION EVENT" OR SIMILAR EVENT UNDER ANY CERTIFICATE SERIES OR
RECEIVABLES PURCHASE SERIES (AS DEFINED IN THE POOLING AND SERVICING
AGREEMENT), OR
(ii) any "Servicer Default" shall occur under the Pooling and
Servicing Agreement, or
(iii) any other event shall occur or condition shall exist under
the Pooling and Servicing Agreement or other Master Trust Document that
constitutes an "Amortization Event" or a "Trust Early Amortization Event"
thereunder or would constitute an "Amortization Event" or a "Trust Early
Amortization Event" thereunder but for the requirement that notice be
given or time elapse or both; or
166. ANY PURCHASE OR ANY REINVESTMENT PURSUANT TO THE AGREEMENT SHALL
FOR ANY REASON (OTHER THAN PURSUANT TO THE TERMS HEREOF) CEASE TO CREATE, OR
ANY PURCHASER RECEIVABLE INTEREST SHALL FOR ANY REASON CEASE TO BE, A VALID
AND PERFECTED FIRST PRIORITY UNDIVIDED PERCENTAGE OWNERSHIP INTEREST TO THE
EXTENT OF THE PERTINENT PURCHASER RECEIVABLE INTEREST IN EACH APPLICABLE POOL
RECEIVABLE AND THE COLLECTIONS WITH RESPECT THERETO; OR
167. THE SELLER, THE OWNER, FSC OR CHARMING SHOPPES SHALL GENERALLY NOT
PAY ITS DEBTS AS SUCH DEBTS BECOME DUE, OR SHALL ADMIT IN WRITING ITS
INABILITY TO PAY ITS DEBTS GENERALLY, OR SHALL MAKE A GENERAL ASSIGNMENT FOR
THE BENEFIT OF CREDITORS; OR ANY PROCEEDING SHALL BE INSTITUTED BY OR AGAINST
THE SELLER, THE OWNER, FSC OR CHARMING SHOPPES SEEKING TO ADJUDICATE IT A
BANKRUPT OR INSOLVENT, OR SEEKING LIQUIDATION, WINDING UP, REORGANIZATION,
ARRANGEMENT, ADJUSTMENT, PROTECTION, RELIEF, CONSERVATORSHIP OR COMPOSITION
OF IT OR ITS DEBTS UNDER ANY LAW RELATING TO BANKRUPTCY, INSOLVENCY OR
REORGANIZATION OR RELIEF OF DEBTORS (INCLUDING ANY LAW RELATING TO THE
CONSERVATORSHIP OR LIQUIDATION OF NATIONAL BANKING ASSOCIATIONS), OR SEEKING
THE ENTRY OF AN
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ORDER FOR RELIEF OR THE APPOINTMENT OF A RECEIVER, TRUSTEE, CUSTODIAN,
CONSERVATOR, SEQUESTRATOR OR OTHER SIMILAR OFFICIAL FOR IT OR FOR ANY
SUBSTANTIAL PART OF ITS PROPERTY AND, IN THE CASE OF ANY SUCH PROCEEDING
INSTITUTED AGAINST IT (BUT NOT INSTITUTED BY IT), EITHER SUCH PROCEEDING
SHALL REMAIN UNDISMISSED OR UNSTAYED FOR A PERIOD OF 30 DAYS, OR ANY OF THE
ACTIONS SOUGHT IN SUCH PROCEEDING (INCLUDING, WITHOUT LIMITATION, THE ENTRY
OF AN ORDER FOR RELIEF AGAINST, OR THE APPOINTMENT OF A RECEIVER, TRUSTEE,
CUSTODIAN, CONSERVATOR, SEQUESTRATOR OR OTHER SIMILAR OFFICIAL FOR, IT OR FOR
ANY SUBSTANTIAL PART OF ITS PROPERTY) SHALL OCCUR; OR THE SELLER, THE OWNER,
FSC OR CHARMING SHOPPES SHALL TAKE ANY CORPORATE ACTION TO AUTHORIZE ANY OF
THE ACTIONS SET FORTH ABOVE IN THIS PARAGRAPH (G); OR
168. AS OF THE LAST DAY OF ANY DUE PERIOD, EITHER THE DELINQUENCY RATIO
SHALL EXCEED 10% OR THE QUARTERLY CHARGE-OFF RATIO SHALL EXCEED 12%; OR
169. THE NET RECEIVABLES POOL BALANCE MINUS THE SUM OF (A) THE
AGGREGATE "INVESTOR INTERESTS" (AS DEFINED IN THE POOLING AND SERVICING
AGREEMENT) FOR ALL CERTIFICATE SERIES ISSUED PURSUANT TO ANY SUPPLEMENT TO
THE POOLING AND SERVICING AGREEMENT, (B) THE AGGREGATE "RECEIVABLES PURCHASE
INTERESTS" (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT) FOR ALL
RECEIVABLES PURCHASE SERIES ISSUED PURSUANT TO ANY RECEIVABLES PURCHASE
AGREEMENT THAT IS SUBJECT TO THE POOLING AND SERVICING AGREEMENT (OTHER THAN
THE AGREEMENT AND THE PARALLEL PURCHASE COMMITMENT), (C) THE SUBORDINATED
PURCHASER CAPITAL, (D) THE MINIMUM SELLER CAPITAL, (E) THE "SUBORDINATED
PURCHASER CAPITAL" UNDER THE PARALLEL PURCHASE COMMITMENT, (F) THE "MINIMUM
SELLER CAPITAL" UNDER THE PARALLEL PURCHASE COMMITMENT, AND (G) THE TOTAL
AMOUNT OF DISCOUNT OPTION RECEIVABLES, IF ANY, SHALL, AS OF THE LAST DAY OF
ANY DUE PERIOD, BE LESS THAN THE SUM OF THE AGGREGATE OUTSTANDING PURCHASER
CAPITAL OF ALL PURCHASER RECEIVABLE INTERESTS UNDER THE AGREEMENT AND THE
AGGREGATE OUTSTANDING "PURCHASER CAPITAL" OF ALL "PURCHASER RECEIVABLE
INTERESTS" UNDER THE PARALLEL PURCHASE COMMITMENT; OR THE FLOATING ALLOCATION
PERCENTAGE AS OF THE LAST DAY OF ANY DUE PERIOD SHALL BE GREATER THAN
98.213%; AND, IN EITHER CASE, SUCH CONDITION SHALL CONTINUE UNTIL THE FIRST
DISTRIBUTION DATE IMMEDIATELY FOLLOWING SUCH DAY; OR
170. CHARMING SHOPPES SHALL CEASE TO OWN, DIRECTLY OR INDIRECTLY, ALL
SHARES OF EACH CLASS OF THE ISSUED AND OUTSTANDING SHARES OF CAPITAL STOCK OF
FSC; OR FSC SHALL CEASE TO OWN, DIRECTLY OR INDIRECTLY, ALL SHARES OF EACH
CLASS OF THE ISSUED AND OUTSTANDING SHARES OF CAPITAL STOCK OF SPIRIT; OR
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171. THE NET EXCESS SPREAD (AVERAGED OVER ANY THREE CONSECUTIVE DUE
PERIODS) SHALL BE LESS THAN 2.5%; OR
172. (I) CHARMING SHOPPES OR ANY OF ITS SUBSIDIARIES SHALL FAIL TO PAY
ANY PRINCIPAL OF OR PREMIUM OR INTEREST ON ANY INDEBTEDNESS ARISING UNDER ANY
OF THE CREDIT FACILITIES WHEN THE SAME BECOMES DUE AND PAYABLE (WHETHER BY
SCHEDULED MATURITY, REQUIRED PREPAYMENT, ACCELERATION, DEMAND OR OTHERWISE),
AND SUCH FAILURE SHALL CONTINUE AFTER THE APPLICABLE GRACE PERIOD, IF ANY,
SPECIFIED IN THE AGREEMENT OR INSTRUMENT RELATING TO SUCH INDEBTEDNESS
(REGARDLESS OF WHETHER SUCH FAILURE SHALL HAVE BEEN WAIVED BY THE OTHER
PARTIES TO SUCH CREDIT FACILITY); OR (II) ANY EVENT OR CONDITION LISTED IN
SCHEDULE I AS A "MATERIAL PROVISION" SHALL OCCUR OR EXIST UNDER ANY OF THE
CREDIT FACILITIES AND SHALL CONTINUE AFTER THE APPLICABLE GRACE PERIOD, IF
ANY, SPECIFIED THEREIN (REGARDLESS OF WHETHER SUCH EVENT OR CONDITION SHALL
HAVE BEEN WAIVED BY THE OTHER PARTIES TO SUCH CREDIT FACILITY); OR (III) ANY
OTHER EVENT SHALL OCCUR OR CONDITION SHALL EXIST (WHICH IS NOT REFERRED TO IN
CLAUSE (I) OR (II) OF THIS PARAGRAPH) UNDER ANY OF THE CREDIT FACILITIES OR
ANY AGREEMENT OR INSTRUMENT RELATING TO ANY SUCH INDEBTEDNESS AND SHALL (A)
CONTINUE AFTER THE APPLICABLE GRACE PERIOD, IF ANY, SPECIFIED IN SUCH
AGREEMENT OR INSTRUMENT, IF THE EFFECT OF SUCH EVENT OR CONDITION IS TO
ACCELERATE, OR TO PERMIT THE ACCELERATION OF, THE MATURITY OF SUCH
INDEBTEDNESS AND (B) CONTINUE WITHOUT WAIVER BY THE OTHER PARTIES TO SUCH
CREDIT FACILITY AFTER THE EARLIEST TO OCCUR OF (X) ACCELERATION OF THE
MATURITY OF SUCH INDEBTEDNESS, (Y) IN THE CASE OF THE CREDIT FACILITY WITH
CONGRESS FINANCIAL CORPORATION, TERMINATION OR REDUCTION OF THE "MAXIMUM
CREDIT" AS DEFINED THEREIN, OR THE REFUSAL OF THE LENDERS THEREUNDER TO MAKE
FURTHER REVOLVING LOANS OR LETTER OF CREDIT ACCOMMODATIONS TO CHARMING
SHOPPES AND ITS AFFILIATES AFTER A REQUEST THEREFOR AND (Z) THE PASSAGE OF
TEN BUSINESS DAYS FOLLOWING THE LAST DAY OF THE APPLICABLE GRACE PERIOD, IF
ANY; OR (IV) ANY SUCH INDEBTEDNESS SHALL BE DECLARED TO BE DUE AND PAYABLE,
OR REQUIRED TO BE PREPAID (OTHER THAN BY A REGULARLY SCHEDULED REQUIRED
PREPAYMENT), REDEEMED, PURCHASED OR DEFEASED, OR AN OFFER TO REPAY, REDEEM,
PURCHASE OR DEFEASE SUCH INDEBTEDNESS SHALL BE REQUIRED TO BE MADE, IN EACH
CASE PRIOR TO THE STATED MATURITY THEREOF; OR (V) THE "MAXIMUM CREDIT" AS
DEFINED IN THE CREDIT FACILITY WITH CONGRESS FINANCIAL CORPORATION SHALL BE
REDUCED TO AN AMOUNT LESS THAN $150,000,000 OR TERMINATED; OR
173. SPIRIT SHALL NOT BE IN COMPLIANCE WITH ITS REGULATORY CAPITAL
REQUIREMENTS UNDER APPLICABLE RULES AND REGULATIONS OF THE OFFICE OF THE
COMPTROLLER OF THE CURRENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
BOARD OF
VI-4
<PAGE> 126
GOVERNORS OF THE FEDERAL RESERVE SYSTEM OR OTHER APPROPRIATE GOVERNMENTAL
AUTHORITIES; OR
174. THE COMPANY AGREEMENT SHALL CEASE TO BE IN FULL FORCE AND EFFECT;
OR
175. (I) THE SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK (OR
ANY PERSON SUCCEEDING TO THE DUTIES OF SUCH SUPERINTENDENT) (FOR THE PURPOSE
OF THIS PARAGRAPH (O), THE "SUPERINTENDENT") SHALL APPLY FOR AN ORDER (A)
PURSUANT TO SECTION 7402 OF THE NEW YORK INSURANCE LAW (OR ANY SUCCESSOR
PROVISION THERETO), DIRECTING HIM TO REHABILITATE CAPMAC, (B) PURSUANT TO
SECTION 7404 OF THE NEW YORK INSURANCE LAW (OR ANY SUCCESSOR PROVISION
THERETO), DIRECTING HIM TO LIQUIDATE THE BUSINESS OF CAPMAC OR (C) PURSUANT
TO SECTION 7416 OF THE NEW YORK INSURANCE LAW (OR ANY SUCCESSOR PROVISION
THERETO), DISSOLVING THE CORPORATE EXISTENCE OF CAPMAC AND SUCH APPLICATION
SHALL NOT BE DISMISSED OR WITHDRAWN DURING A PERIOD OF 60 CONSECUTIVE DAYS OR
A COURT OF COMPETENT JURISDICTION ENTERS AN ORDER GRANTING THE RELIEF SOUGHT;
(II) THE SUPERINTENDENT SHALL DETERMINE THAT CAPMAC IS INSOLVENT WITHIN THE
MEANING OF SECTION 1309 OF THE NEW YORK INSURANCE LAW; (III) CAPMAC SHALL
COMMENCE A VOLUNTARY CASE OR OTHER PROCEEDING SEEKING REHABILITATION,
LIQUIDATION, REORGANIZATION OR OTHER RELIEF WITH RESPECT TO ITSELF OR ITS
DEBTS UNDER ANY BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR LAW NOW OR HEREAFTER
IN EFFECT OR SEEKING THE APPOINTMENT OF A TRUSTEE, RECEIVER, LIQUIDATOR,
CUSTODIAN OR OTHER SIMILAR OFFICIAL OF IT OR ANY SUBSTANTIAL PART OF ITS
PROPERTY, OR SHALL CONSENT TO ANY SUCH RELIEF OR TO THE APPOINTMENT OF OR
TAKING POSSESSION BY ANY SUCH OFFICIAL IN AN INVOLUNTARY CASE OR OTHER
PROCEEDING COMMENCED AGAINST IT, OR SHALL MAKE A GENERAL ASSIGNMENT FOR THE
BENEFIT OF CREDITORS; OR (IV) AN INVOLUNTARY CASE OR OTHER PROCEEDING SHALL
BE COMMENCED AGAINST CAPMAC SEEKING REHABILITATION, LIQUIDATION,
REORGANIZATION OR OTHER RELIEF WITH RESPECT TO IT OR ITS DEBTS UNDER A
BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT OR
SEEKING THE APPOINTMENT OF A TRUSTEE, RECEIVER, LIQUIDATOR, CUSTODIAN OR
OTHER SIMILAR OFFICIAL OF IT OR ANY SUBSTANTIAL PART OF ITS PROPERTY AND SUCH
CASE OR PROCEEDING IS NOT DISMISSED OR OTHERWISE TERMINATED WITHIN A PERIOD
OF 60 CONSECUTIVE DAYS OR A COURT OF COMPETENT JURISDICTION ENTERS AN ORDER
GRANTING THE RELIEF SOUGHT IN SUCH CASE OR PROCEEDING; OR
176. A COURT OF COMPETENT JURISDICTION SHALL HAVE DETERMINED IN A FINAL
ORDER THAT THE SURETY BOND IS NO LONGER IN FULL FORCE AND EFFECT.
VI-5
<PAGE> 127
Schedule I
Credit Facilities
1. Credit Agreement dated as of November 30, 1995 among Charming Shoppes,
Inc., certain subsidiaries of Charming Shoppes, Inc., and certain lenders
named therein, and Chemical Bank as Agent.
Material Provision: Section 7.1 (adjusted net worth covenant).
2. Amended and Restated Loan and Security Agreement dated November 30, 1995
between Charming Shoppes, Inc., certain subsidiaries of Charming Shoppes,
Inc. and Congress Financial Corporation.
Material Provision: Section 9.13 (adjusted net worth covenant).
3. Amended and Restated Note Agreement dated as of November 30, 1995 among
Winks Lane, Inc. and Charming Shoppes, Inc. and the Noteholders as defined
therein.
Material Provision: Section 4.6 (adjusted net worth covenant).
I-1
<PAGE> 128
Schedule II
Depositary Banks
NationsBank:
ABA # 11 000 025
Account # 375-0504484
II-1
<PAGE> 129
ANNEX G
Summary of Interest Rate Agreements as of [Date]
<TABLE>
<CAPTION>
Counterparty Reference No. or Type Notional Amount Fixed Rate or Cap
Date of (Swap Rate
Confirmation or Cap)
<S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Effective Date Date Amortization Termination Date
of Notional Amount
Begins
<S> <C> <C>
</TABLE>
The [Owner/FSC] is a party to each of the above Agreements.
The Index for floating rate payments for each of the above Agreements is
["USD-CP-H.15"] for one month maturities.
II-1
<PAGE> 1
EXHIBIT 10.1.10
[EXECUTION COPY]
RECEIVABLES PURCHASE AGREEMENT
(PARALLEL PURCHASE COMMITMENT)
Dated as of April 4, 1996
Among
FIRST UNION NATIONAL BANK
solely in its capacity as the trustee for
CHARMING SHOPPES MASTER TRUST
as the Seller
and
FASHION SPC, INC.
as the Subordinated Purchaser
and
SPIRIT OF AMERICA NATIONAL BANK
as the Owner and as the Servicer
and
CITIBANK, N.A.
and
CITICORP NORTH AMERICA, INC.
as the Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.01. Commitment 3
SECTION 1.02. Making Purchases 4
SECTION 1.03. Fees 6
SECTION 1.04. Incorporation by Reference 7
SECTION 1.05. Increased Costs 7
SECTION 1.06. Additional Yield on Purchaser Receivable
Interests Bearing a Eurodollar Rate;
Breakage Fee 8
ARTICLE II ALLOCATION AND DISTRIBUTIONOF COLLECTIONS
SECTIONS 2.01 through 2.07. Incorporation by Reference 9
ARTICLE III REPRESENTATIONS AND WARRANTIES; COVENANTS;
EARLY AMORTIZATION EVENTS
SECTION 3.01. Representations and Warranties; Covenants 9
SECTION 3.02. Early Amortization Events 10
ARTICLE IV INDEMNIFICATION; PURCHASE OF INELIGIBLE RECEIVABLES
SECTION 4.01. Indemnities by the Owner 10
SECTION 4.02. Indemnities by the Servicer 13
SECTION 4.03. Incorporation by Reference 14
SECTION 4.04. Incorporation by Reference 15
SECTION 4.05. Repurchase of Purchaser
Receivable Interests 15
ARTICLE V THE SERVICER
SECTIONS 5.01 through 5.04. Incorporation by Reference 15
ARTICLE VI THE PURCHASER REPRESENTATIVE AND THE AGENT
SECTION 6.01. Designation of the Purchaser
Representative 16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
SECTION 6.02. Duties of the Purchaser Representative 16
SECTION 6.03. Agent Authorization and Action 17
SECTION 6.04. Limitation on Purchaser Representative
and Agent Liability, Etc. 17
SECTION 6.05. Indemnification of Agent 19
ARTICLE VII MISCELLANEOUS
SECTION 7.01. Amendments, Waivers, Etc. 20
SECTION 7.02. Notices, Etc. 21
SECTION 7.03. Assignability 21
SECTION 7.04. Costs, Expenses and Taxes 26
SECTION 7.05. Confidentiality 26
SECTION 7.06. GOVERNING LAW 28
SECTION 7.07. Execution in Counterparts 28
SECTION 7.08. Survival of Termination 28
SECTION 7.09. Tax Treatment 28
SECTION 7.10. Duties of the Trustee 29
SECTION 7.11. Limitation on Trustee/Seller
Liability, Etc. 29
SECTION 7.12. Third Party Beneficiaries 30
SECTION 7.13. CNAI and Affiliates 30
SECTION 7.14. No Proceedings 31
SECTION 7.15. Limited Recourse 31
SECTION 7.16. Limitation on Rights of Banks 32
SECTION 7.17. Incorporation by Reference 32
</TABLE>
<PAGE> 4
EXHIBITS
Exhibit I Definitions
Exhibit II Conditions of Purchases
Exhibit III Representations and Warranties
Exhibit IV Covenants
Exhibit V Administration and Collection of Pool Receivables
Exhibit VI Early Amortization Events
ANNEXES
Annex A Incorporation by Reference
Annex B Incorporation by Reference
Annex C Incorporation by Reference
Annex D-1 Incorporation by Reference
Annex D-2 Incorporation by Reference
Annex D-3 Incorporation by Reference
Annex D-4 Incorporation by Reference
Annex E Incorporation by Reference
Annex F Incorporation by Reference
Annex G Incorporation by Reference
Annex H Form of Assignment and Acceptance
SCHEDULES
Schedule I Incorporation by Reference
Schedule II Incorporation by Reference
<PAGE> 5
RECEIVABLES PURCHASE AGREEMENT
(PARALLEL PURCHASE COMMITMENT)
Dated as of April 4, 1996
FIRST UNION NATIONAL BANK (formerly known as First Fidelity Bank,
National Association), a national banking association, solely in its capacity as
the trustee (the "Trustee") for CHARMING SHOPPES MASTER TRUST, a trust formed
pursuant to the Pooling and Servicing Agreement (defined in Exhibit I hereto)
(in such capacity, the "Seller"), SPIRIT OF AMERICA NATIONAL BANK, a national
banking association ("Spirit"), in its capacity as the originator or the owner
(prior to the sale thereof to the Seller pursuant to the Pooling and Servicing
Agreement) of the Accounts (defined in Exhibit I hereto) (in such capacity, the
"Owner") and in its capacity as the Servicer (in such capacity, the "Servicer"),
FASHION SPC, INC., a Delaware corporation (the "Subordinated Purchaser"),
CITIBANK, N.A., a national banking association ("Citibank") and CITICORP NORTH
AMERICA, INC., a Delaware corporation ("CNAI"), as agent (the "Agent") for the
Banks (as defined in Exhibit I hereto), agree as follows:
PRELIMINARY STATEMENTS. 0.0.0.0.0.1. Certain terms that are
capitalized and used throughout this Agreement are defined in Exhibit I to
this Agreement. References in the Exhibits to "the Agreement" refer to this
Agreement, as amended, modified or supplemented from time to time.
0.0.0.0.0.2. Spirit is the owner of certain revolving credit card
accounts and expects to become the owner of certain additional credit card
accounts from time to time (collectively defined as the "Accounts" in
Exhibit I to this Agreement).
0.0.0.0.0.3. Pursuant to the Pooling and Servicing Agreement, Spirit
has sold to the Seller an ownership interest in all amounts shown on its
records as billed to the Obligor on any Account from time to time in
respect of purchases of merchandise or services, including, without
limitation, finance charges and fees payable thereon, all Insurance
Proceeds relating thereto, all rights, remedies, powers and privileges
with respect
1
<PAGE> 6
thereto, and all proceeds thereof (collectively, the "Receivables"), and
Spirit has been appointed and agreed to act as the servicer under the
Pooling and Servicing Agreement.
0.0.0.0.0.4. Pursuant to the Pooling and Servicing Agreement and
certain related agreements, the Seller may, among other things, sell
undivided ownership interests in the Receivables (referred to herein as
"Receivable Interests") to various purchasers and may sell certificates of
beneficial interest in the Receivables in the Trust to various investors.
0.0.0.0.0.5. The Subordinated Purchaser and the Banks are prepared
to purchase the Receivable Interests on the terms set forth herein.
0.0.0.0.0.6. Pursuant to the Pooling and Servicing Agreement, a
portion of all Collections of the Receivable Interests and all Loss Amounts
with respect thereto will be allocated to the Receivables Purchase Interest
based on the Allocation Percentage.
0.0.0.0.0.7. Spirit has been requested and is prepared to act as the
Servicer hereunder.
0.0.0.0.0.8. This Agreement is one of the "Receivables Purchase
Agreements" referred to in the Pooling and Servicing Agreement and creates
a Receivables Purchase Series thereunder.
0.0.0.0.0.9. Notwithstanding anything to the contrary in this
Agreement, the Agent, the Banks and the Subordinated Purchaser hereby
acknowledge that their rights and remedies hereunder, and the rights and
remedies of their respective assignees under this Agreement, may be subject
to the limitations set forth in the Pooling and Servicing Agreement. To the
extent that any provision in this Agreement or in any certificate or
document delivered in connection with this Agreement is inconsistent with
any provision under the Pooling and Servicing Agreement, or in any
circumstance in which it is unclear whether this Agreement or the Pooling
and Servicing Agreement shall control, the provisions contained in the
Pooling and Servicing Agreement shall control, except that with respect to
any such inconsistency between any such provision and
2
<PAGE> 7
Section 2 of this Agreement (including the defined terms used in such
Section 2), this Agreement shall control.
0.0.0.0.0.10. The Banks acknowledge that the purchase of the
Receivable Interests shall not include the right to sell the Owner's
customer lists, the right to use the Owner's customer lists for any purpose
other than a purpose expressly set forth in this Agreement, or the right to
use any trademarks of the Seller, the Owner or the Servicer or any of their
respective Affiliates.
Accordingly, the parties agree as follows:
ARTICLE 1.
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1. COMMITMENT.
1.1.1. On the terms and conditions hereinafter set forth, the Banks
shall, ratably in accordance with their respective Bank Commitments, purchase
Purchaser Receivable Interests from the Seller from time to time during the
period from the date hereof to the Commitment Termination Date. Under no
circumstances shall the Banks be obligated to make any such purchase on any date
if after giving effect to such purchase the aggregate outstanding Purchaser
Capital, together with the aggregate outstanding "Purchaser Capital" of
"Purchaser Receivable Interests" under the Receivables Purchase Agreement, would
exceed the Total Commitment on such date.
1.1.2. The Subordinated Purchaser shall, on the date of each
purchase of Purchaser Receivable Interests by the Banks hereunder, purchase
Subordinated Receivable Interests in the amount determined pursuant to paragraph
3 of Exhibit II hereto.
3
<PAGE> 8
1.1.3. The Seller may, upon at least 30 days' prior notice to the
Agent, terminate in whole or, from time to time, reduce in part the unused
portion of the Total Commitment; provided that each partial reduction shall be
in the amount of at least $1,000,000 or an integral multiple thereof.
4
<PAGE> 9
1.1.4. On the date of this Agreement, Citibank is entering into
Assignment and Acceptances with certain other Banks in the maximum aggregate
amount of $60,000,000. From time to time after the date hereof Citibank may
enter into one or more additional Assignment and Acceptances, and such
additional Assignment and Acceptances will result in automatic increases in the
Total Commitment calculated as follows: (x) if the maximum aggregate amount of
all Assignment and Acceptances to which Citibank is a party is greater than
$60,000,000 but not greater than $75,000,000, then the new Total Commitment will
be twice such maximum aggregate amount (but in no event greater than
$150,000,000), and (y) if the maximum aggregate amount of all Assignment and
Acceptances to which Citibank is a party is greater than $75,000,000, then the
new Total Commitment will be equal to the sum of such maximum aggregate amount
plus $75,000,000 (but in no event greater than $160,000,000); provided, however,
that no increase in the Total Commitment to an amount greater than $150,000,000
shall be effective unless the Agent shall have received, in form and substance
satisfactory to it, assignments to the Seller of Interest Rate Agreements
covering in the aggregate a notional balance at least equal to the new Total
Commitment, together with related documents substantially similar to those
delivered on the Effective Date pursuant to paragraphs 1(b)(xxii) and (xxiii) of
Exhibit II to this Agreement. At any time after the date hereof when Citibank
enters into an additional Assignment and Acceptance with a Bank which will
result in an increase in the Total Commitment, the Agent shall immediately
notify the Seller, the Subordinated Purchaser, the Owner, the Servicer, the
Banks and CapMAC thereof, and of the new Total Commitment, calculated as
aforesaid, and upon such notice (and, if the proviso in the immediately
preceding sentence is applicable, satisfaction of the conditions set forth in
such proviso), the Total Commitment shall automatically increase as provided in
such notice and the Bank Commitment of Citibank shall automatically increase to
an amount equal to the Total Commitment minus the aggregate Bank Commitments of
all the other Banks.
SECTION 1.2. Making Purchases.
5
<PAGE> 10
1.2.1. Each purchase by the Banks of Purchaser Receivable Interests
hereunder shall be made on at least three Business Days' notice from the Seller
to the Agent. Each such notice of a purchase of Purchaser Receivable Interests
shall specify (i) the amount requested to be paid to the Seller (such amount,
which shall not be less than $1,000,000, being referred to herein as the initial
"Purchaser Capital" of the Purchaser Receivable Interest then being purchased),
(ii) the proposed date of such purchase (which shall be a Distribution Date) and
(iii) the desired duration of the initial Fixed Period for the Purchaser
Receivable Interest to be purchased. The Agent shall promptly thereafter notify
the Seller whether the desired duration of the initial Fixed Period for the
Purchaser Receivable Interest to be purchased is acceptable, and the Agent shall
promptly notify the Banks of the proposed purchase. Such notice of purchase
shall be sent by telecopier, telex or cable to all Banks concurrently and shall
specify the date of such purchase, each Bank's Percentage multiplied by the
aggregate amount of Purchaser Capital of the Purchaser Receivable Interest being
purchased, the Fixed Period for such Receivable Interest and whether yield for
the Fixed Period for such Purchaser Receivable Interest is calculated based on
the Eurodollar Rate (which may be selected only if such notice is given at least
two Business Days prior to the purchase date) or the Alternate Base Rate.
1.2.2. On the date of each purchase of a Purchaser Receivable
Interest, the Banks, ratably in accordance with their respective Bank
Commitments, shall, upon satisfaction of the applicable conditions set forth in
Exhibit II hereto, make available to the Agent the amount of their respective
purchases by deposit of the applicable amount in immediately available funds to
the Agent's Account and after receipt by the Agent of such funds, the Agent will
cause such funds to be made available to the Seller in same day funds, by
deposit to the Seller Account no later than 12:00 Noon (New York City time).
1.2.3. Effective on the date of each purchase pursuant to this
Section 1.02 and each reinvestment pursuant to Section 2.06(a) hereof, the
Seller hereby sells and assigns to the Agent, for the benefit of the Banks, an
undivided percentage ownership interest, to the extent of the Purchaser
Receivable Interest then being purchased, in each Pool Receivable then existing
or thereafter arising and in the Collections with respect thereto.
6
<PAGE> 11
1.2.4. On the date of each purchase by the Banks pursuant to Section
1.02(a) above, the Subordinated Purchaser shall make available to the Seller in
same day funds, by deposit to the Seller Account no later than 12:00 Noon (New
York City time), an amount equal to the amount required under paragraph 3 of
Exhibit II hereto (such amount being referred to herein as the initial
"Subordinated Purchaser Capital" of the Subordinated Receivable Interest then
being purchased). Effective on the date of each such payment and each
reinvestment on behalf of the Subordinated Purchaser pursuant to Section 2.06(a)
hereof, the Seller hereby sells and assigns to the Subordinated Purchaser a
subordinated (to the extent set forth in Section 1.02(f) and Article II hereof)
undivided percentage ownership interest, to the extent of the Subordinated
Receivable Interest then being purchased, in each Pool Receivable then existing
or thereafter arising and in the Collections with respect thereto.
1.2.5. Notwithstanding the foregoing, a Bank shall not be obligated
to make purchases under this Section 1.02 at any time in an amount which would
exceed such Bank's Bank Commitment less the outstanding and unpaid amount of any
purchases made by such Bank under the APA. Each Bank's obligation shall be
several, such that the failure of any Bank to make available to the Seller any
funds in connection with any purchase shall not relieve any other Bank of its
obligation, if any, hereunder to make funds available on the date of such
purchase, but no Bank shall be responsible for the failure of any other Bank to
make funds available in connection with any purchase.
1.2.6. The interest of the Banks in the Pool Receivables and the
Collections with respect thereto shall be deemed to have a priority senior to
any interest of the Subordinated Purchaser therein. Such priority shall be
irrespective of the time, order or method of attachment or perfection of the
respective interests of the Banks and the Subordinated Purchaser, or the time or
order of the filing of financing statements. Until the first day after the
Commitment Termination Date on which all amounts described in clauses (i), (ii)
and (iv) of the definition of Final Distribution Date have been paid in full,
the Subordinated Purchaser agrees that it will not commence or continue any
default, foreclosure or liquidation proceedings or remedies in respect of the
Pool Receivables or the Collections.
7
<PAGE> 12
SECTION 1.3. Fees. The fees set forth in the separate fee agreement
of even date among the Seller, the Owner and the Agent, as amended or restated
from time to time (the "Fee Letter"), shall be payable to the Agent and the
Banks in the amounts and on the dates set forth therein, subject to the
allocation and priority of distribution of such Collections set forth in Article
II hereof.
SECTION 1.4. Incorporation by Reference. Section 1.04 of the
Receivables Purchase Agreement is hereby incorporated herein by this reference.
SECTION 1.5. Increased Costs.
1.5.1. If any Bank or any Affiliate of any Bank (each an "Affected
Person") determines that compliance with any law or regulation or any guideline
or request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital required
or expected to be maintained by such Affected Person and such Affected Person
determines that the amount of such capital is increased by or based upon the
existence of any commitment to make purchases of or otherwise to maintain the
investment in Pool Receivables or interests therein related to this Agreement or
to the funding thereof and other commitments of the same type, then, upon demand
by such Affected Person (with a copy to the Agent), the Owner shall immediately
pay, or cause to be paid, to the Agent, for the account of such Affected Person
(as a third-party beneficiary), from time to time as specified by such Affected
Person, additional amounts sufficient to compensate such Affected Person in the
light of such circumstances, to the extent that such Affected Person reasonably
determines such increase in capital to be allocable to the existence of any of
such commitments. Such additional amounts shall be determined by such Affected
Person and notified to the Seller through the Agent, as promptly as possible and
in any event within 90 days after such Affected Person became aware (or, in the
exercise of ordinary diligence, should have become aware) of any event which may
result in such additional amounts. A certificate as to such amounts submitted to
the Seller, the Owner, the Servicer and the Agent by such Affected Person shall
be conclusive and binding for all purposes, absent manifest error.
8
<PAGE> 13
1.5.2. If, due to either (i) the introduction of or any change
(other than any change by way of imposition or increase of reserve requirements
referred to in Section 1.06) in or in the interpretation of any law or
regulation or (ii) compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to a Bank of agreeing to purchase or
purchasing, or maintaining the ownership of Purchaser Receivable Interests in
respect of which Yield is computed by reference to the Eurodollar Rate, then,
upon demand by such Bank (with a copy to the Agent), the Owner shall immediately
pay, or cause to be paid, to the Agent, for the account of such Bank (as a third
party beneficiary), from time to time as specified by such Bank, additional
amounts sufficient to compensate such Bank for such increased costs. A
certificate as to such amounts submitted to the Seller, the Owner, the Servicer
and the Agent by such Bank shall be conclusive and binding for all purposes,
absent manifest error.
SECTION 1.6. Additional Yield on Purchaser Receivable Interests
Bearing a Eurodollar Rate; Breakage Fee.
9
<PAGE> 14
1.6.1. The Owner shall pay, or cause to be paid, to any Bank, so
long as such Bank shall be required under regulations of the Board of Governors
of the Federal Reserve System to maintain reserves with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities, additional Yield
on the unpaid Purchaser Capital of each Purchaser Receivable Interest of such
Bank during each Fixed Period in respect of which Yield is computed by reference
to the Eurodollar Rate, for such Fixed Period, at a rate per annum equal at all
times during such Fixed Period to the remainder obtained by subtracting (i) the
Eurodollar Rate for such Fixed Period from (ii) the rate obtained by dividing
such Eurodollar Rate referred to in clause (i) above by that percentage equal to
100% minus the Eurodollar Rate Reserve Percentage of such Bank for such Fixed
Period, payable on the next succeeding date on which Yield is payable on such
Purchaser Receivable Interest. Such additional Yield shall be determined by such
Bank and notified to the Seller, the Owner and the Servicer through the Agent
within 30 days after any Yield payment is made with respect to which such
additional Yield is requested. A certificate as to such additional Yield
submitted to the Seller, the Owner and the Servicer and the Agent by such Bank
shall be conclusive and binding for all purposes, absent manifest error.
10
<PAGE> 15
1.6.2. If (i) any payment of Purchaser Capital with respect to a
Purchaser Receivable Interest as to which Yield is computed by reference to the
Eurodollar Rate is made by the Seller to or for the account of any Bank(s) other
than on the last day of the Fixed Period for such Purchaser Receivable Interest,
as a result of a payment pursuant to Section 4.03, or for any other reason, or
(ii) the Termination Date shall occur during any Fixed Period, the Owner shall,
upon demand by such Bank (with a copy to the Seller, the Owner and the Agent),
immediately pay, or cause to be paid, to the Agent for the account of such Bank
(as a third-party beneficiary) any amounts required to compensate such Bank for
any additional losses, costs or expenses which it may reasonably incur as a
result of such payment, including, without limitation, any loss (including loss
of anticipated profits), costs or expenses incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Bank to fund or
maintain its interest in such Purchaser Receivable Interest. A certificate as to
such amounts submitted to the Seller, the Servicer, the Owner and the Agent by
such Bank shall be conclusive and binding for all purposes, absent manifest
error.
ARTICLE 2.
ALLOCATION AND DISTRIBUTION
OF COLLECTIONS
SECTIONS 2.01 through 2.07. Incorporation by Reference. Each of
Sections 2.01 through 2.07 of the Receivables Purchase Agreement is hereby
incorporated herein by this reference, except that each reference therein to the
"Purchasers" shall be deemed to be a reference to the Banks.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EARLY AMORTIZATION EVENTS
SECTION 3.1. Representations and Warranties; Covenants.
11
<PAGE> 16
3.1.1. Each of the Trustee, the Owner and the Servicer hereby makes
the representations and warranties set forth for such party in Exhibit III
hereto.
3.1.2. Each of the Trustee, the Owner and the Servicer hereby agrees
to perform and observe the covenants set forth for such party in Exhibit IV
hereto.
3.1.3. In addition, the Servicer hereby agrees to perform and
observe the covenants set forth in Exhibit V hereto.
SECTION 3.2. Early Amortization Events. If any of the Early
Amortization Events set forth in Exhibit VI hereto shall occur and be
continuing, the Agent may, by notice to the Owner, the Seller and the Servicer,
declare the Total Commitment to be terminated (in which case the Commitment
Termination Date shall be deemed to have occurred); provided that, automatically
upon the occurrence of any event (without any requirement for the passage of
time or the giving of notice) described in paragraph (g) of Exhibit VI, the
Total Commitment shall terminate and the Commitment Termination Date shall
occur. Upon any such declaration or upon any such automatic termination, and
subject to any limitations on the Banks' rights and remedies in respect of Pool
Receivables under the Pooling and Servicing Agreement or pursuant to the other
terms of this Agreement, the Banks and the Agent shall have, in addition to the
rights and remedies which they may have under this Agreement, all other rights
and remedies provided under the UCC with respect to the Receivable Interests
purchased by them hereunder and under other applicable law, which rights and
remedies shall be cumulative; provided, however, that so long as any Investor
Certificates shall be outstanding, the Agent and the Banks shall not exercise
such other rights and remedies under the UCC and other applicable law unless the
Agent shall have obtained and delivered to the Trustee an Opinion of Counsel to
the effect that the exercise of such rights and remedies shall not materially
and adversely affect the interests of the holders of the Investor Certificates.
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ARTICLE 4.
INDEMNIFICATION; PURCHASE OF
INELIGIBLE RECEIVABLES
SECTION 4.1. Indemnities by the Owner. Without limiting any other
rights that the Banks, the Agent, the Seller, the Trustee, the Purchaser
Representative or any of their respective Affiliates (each, an "Indemnified
Party") may have under this Agreement or under applicable law, the Owner hereby
agrees to indemnify each Indemnified Party from and against any and all claims,
losses and liabilities (including reasonable attorneys' fees) (all of the
foregoing being collectively referred to as "Indemnified Amounts") arising out
of or resulting from this Agreement or the use of proceeds of purchases or
reinvestments or the ownership of Purchaser Receivable Interests or in respect
of any Receivable or any Cardholder Agreement, excluding, however, (a)
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party or any of its Affiliates, (b)
recourse (except as otherwise specifically provided in this Agreement) for
uncollectible Receivables or (c) any income taxes incurred by such Indemnified
Party arising out of or as a result of this Agreement or the ownership of
Purchaser Receivable Interests or in respect of any Receivable or any Cardholder
Agreement. Without limiting or being limited by the foregoing, the Owner shall
pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from any of the following:
4.1.0.1. the creation of an undivided percentage ownership interest
in any Receivable (A) which purports to be part of the Net Receivables Pool
Balance but which is not, at the date of the creation of such interest, an
Eligible RPA Receivable or (B) the Obligor of which is an Affiliate of any
of the parties hereto or is a government or a governmental subdivision or
agency;
4.1.0.2. reliance on (A) any written representation or warranty or
statement made or deemed made by the Seller or the Owner (or any of their
respective officers) on or prior to the date of this
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Agreement under or in connection with this Agreement or the Insurance
Agreement, or any exhibit, certificate or report delivered pursuant hereto
or thereto or in connection herewith or therewith, which shall have been
incorrect in any material respect when made, and (B) thereafter, any
representation or warranty or statement made or deemed made by the Seller
or the Owner (or any of their respective officers) under or in connection
with this Agreement or the Insurance Agreement which shall have been
incorrect in any material respect when made;
4.1.0.3. the failure by the Seller or the Owner to comply with any
applicable law, rule or regulation with respect to any Pool Receivable or
the related Cardholder Agreement (including, without limitation, Regulation
Z of the Board of Governors of the Federal Reserve System, the Federal
Consumer Protection Act (including, without limitation, the Federal Truth
in Lending Act), the Fair Credit Billing Act, and all other laws, rules and
regulations relating to usury, consumer protection, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy); or the failure of any Pool Receivable or
the related Cardholder Agreement to conform to any such applicable law,
rule or regulation;
4.1.0.4. the failure to vest in any Bank a perfected undivided
percentage ownership interest in the Receivables in, or purporting to be
in, the Receivables Pool and the Collections in respect thereof, free and
clear of any Adverse Claim (except for interests created therein pursuant
to the Pooling and Servicing Agreement);
4.1.0.5. the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under the
UCC of any applicable jurisdiction or other applicable laws with respect to
any Receivables in, or purporting to be in, the Receivables Pool and the
Collections in respect thereof, whether at the time of any purchase or
reinvestment or at any subsequent time;
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4.1.0.6. any dispute, claim, offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool (including,
without limitation, a defense based on such Receivable or the related
Cardholder Agreement not being a legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or services related
to such Receivable or the furnishing or failure to furnish such merchandise
or services;
4.1.0.7. any failure of the Seller or the Owner to perform its
duties or obligations in accordance with the provisions hereof or of the
Pooling and Servicing Agreement or to perform its duties or obligations
under the Cardholder Agreements;
4.1.0.8. any products liability or other claim arising out of or in
connection with merchandise, insurance or services which are the subject of
any Cardholder Agreement;
4.1.0.9. the commingling of Collections of Pool Receivables at any
time with other funds;
4.1.0.10. any action or omission by the Owner or the Seller reducing
or impairing the rights of any Bank with respect to any Pool Receivable or
the value of any Pool Receivable (including, without limitation, any
cancellation, modification or netting of any Receivable by the Owner or the
Seller); or
4.1.0.11. any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of purchases or reinvestments or the
ownership of Purchaser Receivable Interests or in respect of any Receivable
or Cardholder Agreement.
SECTION 4.2. Indemnities by the Servicer. Without limiting any other
rights that any Indemnified Party may have under this Agreement or under
applicable law, the Servicer hereby agrees to indemnify each Indemnified Party
from and against, and to pay on demand to each Indemnified Party any and all
amounts
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necessary to indemnify such Indemnified Party from and against, any and all
Indemnified Amounts relating to or resulting from any of the following:
4.2.0.1. reliance on (A) any written representation or warranty or
statement made or deemed made by the Servicer (or any of its officers) on
or prior to the date of this Agreement under or in connection with this
Agreement, or any exhibit, certificate or report delivered pursuant hereto
or in connection herewith, which shall have been incorrect in any material
respect when made, and (B) thereafter, any representation or warranty or
statement made or deemed made by the Servicer (or any of its officers)
under or in connection with this Agreement which shall have been incorrect
in any material respect when made;
4.2.0.2. the failure by the Servicer to comply with any applicable
law, rule or regulation with respect to any Pool Receivable or the related
Cardholder Agreement (including, without limitation, Regulation Z of the
Board of Governors of the Federal Reserve System, the Federal Consumer
Protection Act (including, without limitation, the Federal Truth in Lending
Act), the Fair Credit Billing Act, and all other laws, rules and
regulations relating to usury, consumer protection, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy);
4.2.0.3. any claim relating to collection activities with respect to
any Pool Receivable;
4.2.0.4. any failure of the Servicer or the Administrative Servicer
to perform its duties or obligations in accordance with the provisions
hereof or of the Administrative Servicer Agreement or of the Pooling and
Servicing Agreement;
4.2.0.5. any action or omission by the Servicer reducing or
impairing the rights of any Bank with respect to any Pool Receivable or the
value of any Pool Receivable;
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excluding, however, (a) Indemnified Amounts to the extent resulting from
gross negligence or willful misconduct on the part of such Indemnified
Party or any of its Affiliates, (b) recourse (except as otherwise
specifically provided in this Agreement) for uncollectible Receivables or
(c) any income taxes incurred by such Indemnified Party arising out of or
as a result of this Agreement or the ownership of Receivable Interests or
in respect of any Receivable or any Cardholder Agreement.
SECTION 4.3. Incorporation by Reference. Section 4.03 of the
Receivables Purchase Agreement is hereby incorporated herein by this reference.
SECTION 4.4. Incorporation by Reference. Section 4.04 of the
Receivables Purchase Agreement is hereby incorporated by this reference, except
that each reference therein to a "Purchaser" shall be deemed to be a reference
to a "Bank."
SECTION 4.5. Repurchase of Purchaser Receivable Interests. On any
Distribution Date on or after the Commitment Termination Date, the Owner may,
upon 30 days' prior notice to the Agent, purchase all, but not less than all, of
the Purchaser Receivable Interests outstanding on such Distribution Date, in
accordance with the terms specified in Section 12.2(a) of the Pooling and
Servicing Agreement, provided that on such Distribution Date (a) the
Subordinated Purchaser Capital has not been reduced to zero, and (b) the sum of
the Purchaser Capital plus the Subordinated Purchaser Capital is equal to or
less than 5% of the highest Total Commitment theretofore in effect under this
Agreement. The deposit required in connection with any such purchase shall be
made to the Agent's Account, for the account of the relevant Bank(s), and shall
be in an amount equal to the Purchaser Capital plus all Yield accrued thereon
through the date of such purchase. The Owner shall also pay to the Agent, on the
date of any such purchase, for the account of the Agent and the relevant
Bank(s), Indemnified Parties and Affected Persons as the case may be, all
accrued fees, costs and expenses and Indemnified Amounts payable hereunder to
the Agent and/or the Banks, Indemnified Parties and/or Affected Persons.
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ARTICLE 5.
THE SERVICER
SECTIONS 5.01 through 5.04. Incorporation by Reference. Each of
Sections 5.01 through 5.04 of the Receivables Purchase Agreement is hereby
incorporated by this reference, except that (i) each reference therein to the
"Purchasers" shall be deemed to be a reference to the Banks and (ii) each
reference therein to the "Parallel Purchase Commitment" shall be deemed to be a
reference to the Receivables Purchase Agreement; provided, however, that if the
Servicer Escrow Account shall have been established pursuant to the Receivables
Purchase Agreement, no additional Servicer Escrow Account shall be established
as a result of the incorporation by reference herein of Section 5.04.
ARTICLE 6.
THE PURCHASER REPRESENTATIVE AND THE AGENT
SECTION 6.1. Designation of the Purchaser Representative.
6.1.1. CNAI is hereby designated as, and hereby agrees to perform
the duties and obligations of, the Purchaser Representative pursuant to the
terms hereof and (with respect to the Receivables Purchase Series arising in
connection with this Agreement) pursuant to the Pooling and Servicing Agreement.
6.1.2. The Subordinated Purchaser and the Agent hereby appoint the
Purchaser Representative, from time to time designated pursuant to this Section
6.01, as the representative for themselves and for the Banks to perform the
duties and obligations of the Purchaser Representative on their behalf under the
Pooling and Servicing Agreement.
6.1.3. The Agent may, by notice to the Seller, the Owner, the
Subordinated Purchaser and the Servicer, designate another Person (including,
without limitation, the Agent itself) to succeed CNAI as the Purchaser
Representative if such Person
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shall consent and agree to the terms hereof and of the Pooling and Servicing
Agreement.
SECTION 6.2. Duties of the Purchaser Representative.
6.2.1. The Purchaser Representative shall furnish to each Bank and
to the Subordinated Purchaser a copy of each notice, instrument or other
document received by it in connection with this Agreement or the Pooling and
Servicing Agreement within a reasonable period of time after receipt thereof.
6.2.2. The Purchaser Representative shall, on behalf of the Banks
and the Subordinated Purchaser, direct the time, method and place of exercising
any right or remedy available to the Banks and/or the Subordinated Purchaser
under the Pooling and Servicing Agreement and take such other actions under the
Pooling and Servicing Agreement as could be taken by the Banks and/or the
Subordinated Purchaser and as are, in the sole discretion of the Purchaser
Representative, necessary or desirable to effectuate the purposes of this
Agreement; provided, however, that the Purchaser Representative shall not be
required to take any action which exposes the Purchaser Representative to
personal liability or which is contrary to this Agreement or applicable law.
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SECTION 6.3. Agent Authorization and Action. Each of the Banks
hereby 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. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement of this Agreement), 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 refraining from acting) upon the instructions of the Majority
Banks, and such instructions shall be binding upon all Banks; 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.
SECTION 6.4. Limitation on Purchaser Representative and Agent
Liability, Etc.
6.4.1. Neither the Purchaser Representative nor the Agent nor any of
their respective 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, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Purchaser
Representative and the Agent:
6.4.1.1. may treat the Bank which funded any purchase of a Purchaser
Receivable Interest as the owner of such Purchaser Receivable Interest
until the Agent receives and accepts and the Purchaser Representative
receives an Assignment and Acceptance entered into by such Bank, as
assignor, and an Eligible Assignee, as assignee, as provided in Section
7.03;
6.4.1.2. may treat the Subordinated Purchaser as the holder of the
Subordinated Receivable Interest, until the Purchaser Representative
receives written notice of the assignment or transfer thereof signed by
such Person and in form satisfactory to the Purchaser Representative;
6.4.1.3. may consult with legal counsel (including counsel for the
Seller, the Owner or the Servicer), independent public accountants and
other experts selected by
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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;
6.4.1.4. makes no warranty or representation to any Bank or to the
Subordinated Purchaser and shall not be responsible to any Bank or to the
Subordinated Purchaser for any statements, warranties or representations
made in or in connection with this Agreement or the Pooling and Servicing
Agreement;
6.4.1.5. shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions
of this Agreement or the Pooling and Servicing Agreement on the part of the
Seller, the Owner or the Servicer or to inspect the property (including the
books and records) of the Seller, the Owner or the Servicer;
6.4.1.6. shall not be responsible to any Bank or the Subordinated
Purchaser for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the Pooling and
Servicing Agreement or any instrument or document furnished pursuant
hereto; and
6.4.1.7. shall incur no liability under or in respect of this
Agreement, the Pooling and Servicing Agreement or any such other document
or instrument by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram) believed by it to be
genuine and signed or sent by the proper party or parties.
6.4.2. With respect to rights and obligations under this Agreement
and as a Bank hereunder, Citibank shall have the same rights and powers under
this Agreement, the Pooling and Servicing Agreement or any such other document
or instrument as any other Bank and may exercise the same as though CNAI were
not the Purchaser Representative hereunder. CNAI 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 Seller, the Owner or the Servicer, any
of their respective Affiliates and any Person or entity who may do business with
or own securities of the Seller, the Owner or the Servicer or any of its
Affiliates, all as if CNAI were not the Purchaser
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Representative and without any duty to account therefor to the Banks or the
Subordinated Purchaser.
6.4.3. The Subordinated Purchaser and each Bank acknowledges that it
has, independently and without reliance upon the Purchaser Representative, the
Agent or any other Bank and based on such financial statements and other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. The Subordinated Purchaser
and each Bank also acknowledges that it will, independently and without reliance
upon the Purchaser Representative, 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, the Pooling and Servicing Agreement and any other agreement or other
document.
SECTION 6.5. Indemnification of Agent. The Banks agree to indemnify
the Agent (to the extent not reimbursed by the Owner, the Servicer, the
Companies, CapMAC or the Seller), ratably according to the respective amounts of
Purchaser Capital of the Purchaser Receivable Interests (or interests therein)
owned by each of them (or if no Purchaser Capital is then outstanding, the Banks
shall indemnify the Agent ratably according to the respective amounts of their
Bank 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 (a) no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or willful
misconduct, (b) no Bank shall be liable hereunder for any portion of the Agent's
ordinary administrative costs in connection with this Agreement and (c) no Bank
shall be liable hereunder for any portion of costs and expenses incurred by the
Agent to the extent such costs and expenses are not reasonable.
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ARTICLE 7.
MISCELLANEOUS
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SECTION 7.0.1. Amendments, Waivers, Etc. 7.0.1. No amendment or
waiver of any provision of this Agreement (including, without limitation any
provision of the Receivables Purchase Agreement which is incorporated herein by
reference) or consent to any departure by the Seller, the Owner, the Servicer or
the Subordinated Purchaser therefrom shall be effective unless in a writing
signed by the Owner, the Seller, the Servicer, the Subordinated Purchaser and
the Agent, as agent for the Banks, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided that so long as any Investor Certificates shall be
outstanding, no such amendment shall become effective unless (i) the Owner shall
have delivered an Opinion of Counsel to the Agent and the Trustee to the effect
that such amendment shall not materially and adversely affect the interests of
the holders of the Investor Certificates or (ii) S&P and Moody's shall have
notified the Owner, the Servicer and the Trustee in writing that such action
will not result in a reduction or withdrawal of their respective ratings on any
Investor Certificates. In addition, and so long as any Investor Certificates
shall be outstanding, (y) if such amendment relates to any of the provisions of
Article II hereof (and regardless of whether an Opinion of Counsel has been
delivered pursuant to clause (i) of the preceding sentence), S&P shall have
notified the Owner, the Servicer and the Trustee in writing that such action
will not result in a reduction or withdrawal of its rating on any Investor
Certificates, and (z) if such amendment relates to any other provisions of this
Agreement (other than an amendment the sole effect of which is to extend the
Commitment Termination Date or to modify the terms of an Enhancement which is
for the sole benefit of the Receivables Purchase Interest under this Agreement
and the "Receivables Purchase Interest" under the Receivables Purchase
Agreement), S&P shall have been given at least one Business Day's prior written
notice of such amendment and S&P shall not have advised the Owner or the
Servicer at the close of business on the Business Day following receipt of such
notice that such action would result in a reduction or withdrawal of its rating
on any Investor Certificates. Defined terms which are incorporated herein by
reference from the Pooling and Servicing Agreement shall not be altered or
affected by any subsequent amendment to the Pooling and Servicing Agreement
which relates to such terms, unless the Agent shall have consented in writing to
such amendment.
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7.0.2. No failure on the part of any Bank, the Subordinated
Purchaser or the Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
SECTION 7.0.3. Notices, Etc. 7.0.3. All notices and other
communications hereunder shall, unless otherwise stated herein, be in writing
(which shall include facsimile communication) and faxed or delivered, if to the
Seller, Citibank or to the Agent, to each such party at its address set forth
under its name on the signature pages hereof and if to any Bank other than
Citibank, to such Bank at its address specified in the Assignment and Acceptance
pursuant to which it became a Bank, or, as to each party, at such other address
as shall be designated by such party in a written notice to the other parties
hereto. Notices and communications by facsimile shall be effective when sent
(and shall be followed by hard copy sent by regular mail), and notices and
communications sent by other means shall be effective when received.
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7.0.4. So long as Spirit is the Servicer under this Agreement, any
notice required to be given to the Owner and the Servicer hereunder shall be
deemed to have been delivered to both the Owner and the Servicer if such notice
is delivered to Spirit at its address set forth below its name on the signature
page hereof.
SECTION 7.1. Assignability.
7.1.1. Each Bank may assign to any Eligible Assignee or to any other
Bank all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Bank Commitment and any
Purchaser Receivable Interests or interests therein owned by it); provided, that
no assignee shall be entitled to compensation pursuant to Section 1.05(a) hereof
at a rate in excess of that to which the assignor Bank was entitled immediately
prior to such assignment; and provided, further, that, unless the assignor is
CapMAC or the proposed assignee is CNAI, a Bank or CapMAC, each assignor of a
Purchaser Receivable Interest or any interest therein shall give the Agent, the
Owner, the Servicer and the Seller at least ten Business Days' notice of a
proposed assignment and shall not consummate such assignment if the Owner
notifies such assignor that the proposed assignee or any Affiliate of the
proposed assignee is a competitor of the Owner, Charming Shoppes or any of their
respective Affiliates; and provided, further, that in the case of any assignment
other than an assignment to CapMAC pursuant to the Insurance Agreement,
7.1.1.1. each such assignment shall be of a constant, and not a
varying, percentage of all rights and obligations under this Agreement,
7.1.1.2. the amount being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to
such assignment) shall in no event be less than the lesser of (x)
$10,000,000 and (y) the assigning Bank's Bank Commitment,
7.1.1.3. the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with a processing and recordation fee
of $2,500,
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7.1.1.4. concurrently with such assignment, if such Bank is a Bank
other than Citibank, the assignor thereunder shall assign to such Eligible
Assignee an equal percentage of its rights and obligations under the APA,
and
7.1.1.5. Citibank may not assign any portion of its Bank Commitment
to the extent it reduces such Bank Commitment below (x) 10% of the Total
Commitment minus (y) the Purchaser Capital of all Purchaser Receivable
Interests owned by CNAI or any of its Affiliates.
7.1.2. Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Bank hereunder and (y) the
Bank assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Bank's rights and obligations under this Agreement, such
Bank shall cease to be a party hereto).
7.1.3. Subject to the provisions of Section 7.06(b) hereof, each
assignor of a Purchaser Receivable Interest may in connection with the
assignment or participation, disclose to the assignee or participant any
information relating to the Seller, the Servicer or the Owner, including the
Receivables, furnished to such assignor by or on behalf of the Seller, the
Servicer or the Owner or by the Agent.
7.1.4. This Agreement and the rights and obligations of the Agent
(in its capacity as such) herein shall be assignable by the Agent and its
successors and assigns; provided, however, that the Agent agrees that it will
not of its own volition assign such rights and obligations to any Person other
than CapMAC or an Affiliate of CNAI unless:
7.1.4.1. in the reasonable judgment of the Agent consistent with its
internal policy (including, without
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limitation, the internal policy of any Affiliate of the Agent with respect
to which the manner in which conflicts of interest are to be resolved) and
legal and regulatory restrictions, the Agent determines that it would be
disadvantageous to the Agent or an Affiliate of the Agent for it to
continue as the Agent hereunder, or
7.1.4.2. the Agent's decision to assign its rights and obligations
(in its capacity as the Agent hereunder) is consistent with its
determination to assign its rights and obligations as the agent in respect
of a majority of the other transactions with sellers of receivables in
which it is, at such time, the agent, which involve receivables having a
tenor similar to the tenor of the Receivables.
7.1.5. None of the Seller or the Subordinated Purchaser, or subject
to paragraph 2(m) of Exhibit IV hereto, the Owner, or subject to Section 8.2 of
the Pooling and Servicing Agreement and paragraph 3(e) of Exhibit IV hereto, the
Servicer, may assign its rights or obligations hereunder or any interest herein
without the prior written consent of the Agent.
7.1.6. The Agent shall maintain at its address referred to in
Section 7.02 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the Banks
and the Bank Commitment of, and aggregate outstanding Purchaser Capital of
Purchaser Receivable Interests or interests therein owned by, each Bank from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Seller, the Owner,
the Servicer, the Agent and the Banks may treat each person whose name is
recorded in the Register as a Bank hereunder for all purposes of this Agreement.
The Register shall be available for inspection by the Seller, the Owner, the
Servicer, or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
7.1.7. Upon its receipt of an Assignment and Acceptance executed by
an assigning Bank and by an assignee which is an Eligible Assignee or an
existing Bank, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Annex H hereto, (i) accept such
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Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Seller, CapMAC, the Owner
and the Servicer.
7.1.8. Notwithstanding any of the other provisions of this Section
7.03, Citibank or any of its Affiliates may assign any of its rights (including,
without limitation, rights to payment of Purchaser Capital and Yield) under this
Agreement to any Federal Reserve Bank without notice to or consent of the Agent,
the Owner, the Servicer or the Seller.
7.1.9. Each Bank may sell participations, to one or more banks or
other financial institutions, in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Bank Commitment and any Purchaser Receivable Interests or
interests therein owned by it); provided, however, that (i) unless the seller is
CapMAC or the proposed participant is CNAI, a Bank or CapMAC, each seller of a
participation shall give the Agent, the Owner, the Servicer and the Seller at
least ten Business Days' notice of a proposed participation and shall not
consummate such participation if the Owner notifies such seller that the
proposed participant or any Affiliate of the proposed participant is a
competitor of the Owner, Charming Shoppes or any of their respective Affiliates;
(ii) such selling Bank's obligations under this Agreement (including, without
limitation, its Bank Commitment hereunder) shall remain unchanged; (iii) such
selling Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations; (iv) the amount being participated pursuant to
each such participation (determined as of the date of such participation) shall
in no event be less than the lesser of (x) $10,000,000 and (y) the selling
Bank's Bank Commitment; and (v) concurrently with such participation, the
selling Bank thereunder shall sell to such participant an equal percentage of
its rights and obligations under the APA. The parties to this Agreement shall
continue to deal solely and directly with such selling Bank in connection with
such Bank's rights and obligations under this Agreement.
7.1.10. No transfer (or purported transfer) of all or any part of
the Purchaser Receivable Interests (or any participation or other economic
interest therein) or the Subordinated Receivable Interests (or any participation
or other
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<PAGE> 34
economic interest therein), whether to another Receivables Purchaser or to a
person who is not a Receivables Purchaser, shall be effective, and any such
transfer (or purported transfer) shall be void ab initio, and no Person shall
otherwise become a holder of a Purchaser Receivable Interest or a Subordinated
Receivable Interest if (i) at the time of such transfer (or purported transfer)
any Purchaser Receivable Interests or Subordinated Receivable Interests are
traded on an Established Securities Market, (ii) after such transfer (or
purported transfer) the Trust would have more than 25 Subject Holders of the
Purchaser Receivable Interests, the Subordinated Receivable Interests, the
"Purchaser Receivable Interests" (as defined in the Receivables Purchase
Agreement) or the "Subordinated Receivable Interests" (as defined in the
Receivables Purchase Agreement)(or any participation or other economic interests
in any of the foregoing) or (iii) the Purchaser Receivable Interests or
Subordinated Receivable Interests were required to be registered under the
Securities Act of 1933 (or, to the extent sold or offered pursuant to Regulation
S (17 CFR 230.901 through 230.904 or any successor thereto), would have been
required to be registered under the Securities Act of 1933 if sold or offered
within the United States).
SECTION 7.2. Costs, Expenses and Taxes.
7.2.1. In addition to the rights of indemnification granted under
Sections 4.01 and 4.02 hereof, the Owner agrees to pay on demand all costs and
expenses in connection with the preparation, execution, delivery and
administration of this Agreement, any asset purchase agreement or similar
agreement relating to the sale or transfer of interests in Purchaser Receivable
Interests and the other documents and agreements to be delivered hereunder,
including, without limitation, (i) the reasonable fees and out-of-pocket
expenses of counsel for the Agent, CNAI, Citicorp Securities, Inc. and Citibank
with respect thereto and with respect to advising the Agent, CNAI, Citibank and
Citicorp Securities, Inc. as to their rights and remedies under this Agreement,
(ii) the Agent's out of pocket costs and expenses in connection with annual
audits under paragraph 1(b) of Exhibit V, and (iii) all costs and expenses, if
any (including reasonable counsel fees and expenses), of the Agent, CNAI, the
Banks, the Seller, the Trustee, or Citicorp Securities, Inc. in connection with
the enforcement of this Agreement and the other documents and agreements to be
delivered hereunder.
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7.2.2. In addition, the Owner shall pay any and all stamp and other
taxes and fees payable in connection with the execution, delivery, filing and
recording of this Agreement or the other documents or agreements to be delivered
hereunder, and agrees to save each Indemnified Party harmless from and against
any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
SECTION 7.3. Confidentiality.
7.3.1. Unless otherwise required by applicable law, each of the Seller,
the Owner, the Servicer and the Subordinated Purchaser agrees to maintain the
confidentiality of this Agreement (and all drafts thereof) in communications
with third parties and otherwise; provided that this Agreement may be disclosed
(i) to third parties to the extent such disclosure is made pursuant to a written
agreement of confidentiality in form and substance reasonably satisfactory to
the Agent, (ii) to independent financial rating agencies in connection with the
rating of any Certificate Series issued or to be issued pursuant to the Pooling
and Servicing Agreement, (iii) to CapMAC and its legal counsel and auditors, and
CapMAC's reinsurers and prospective reinsurers, (iv) to the Seller's legal
counsel and auditors, the Owner's legal counsel and auditors, and the Servicer's
legal counsel and auditors and the Subordinated Purchaser's legal counsel and
auditors if, in each case, they agree (whether or not in writing) to hold it
confidential; and provided, further, that this Agreement may be filed by
Charming Shoppes with the Securities and Exchange Commission as an exhibit to an
annual report on Form 10-K or a quarterly report on Form 10-Q under the Exchange
Act, in each case without any special confidentiality requirement.
7.3.2. Each of the Agent, each Bank and, by virtue of entering into the
Insurance Agreement, CapMAC agrees to (i) maintain the confidentiality of this
Agreement (and all drafts thereof) in communications with third parties and
otherwise, (ii) to use reasonable efforts (e.g., procedures substantially
comparable to those applied by the Agent, the Banks or CapMAC, as the case may
be, in respect of non-public information as to its business) to maintain the
confidentiality
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of (x) the Owner's customer lists, the list of Stores delivered to the Agent
pursuant to paragraph 2(n) of Exhibit IV hereto, and any other non public
information as to the Owner's business and the Servicer's business and (y) the
contents of the Administrative Servicer Agreement, in each case, to the extent
that such information is not and does not become publicly available (other than
by the filing of financing statements pursuant to this Agreement), and (iii) not
to use any of the information described in the preceding clauses (x) and (y) for
any purposes not specifically related to its business relationship with the
Owner, the Servicer and the Trust or its ownership of Purchaser Receivable
Interests or interests therein; provided, that nothing in this subsection (b)
shall affect the disclosure of this Agreement or such non public information (1)
to the extent required by law (including statute, rule, regulation or judicial
process), (2) to the Agent's, a Bank's or CapMAC's counsel or accountants, as
the case may be, provided they agree (whether or not in writing) to hold it
confidential, and (3) to bank and insurance company examiners and auditors,
appropriate government examining authorities and independent financial rating
agencies, and provided, further, that the Agent, CapMAC, the Banks and each
assignee of Receivable Interests may, in connection with any assignment,
participation or reinsurance transaction or proposed assignment, participation
or reinsurance transaction, disclose this Agreement to the assignee, participant
or reinsurer or to a proposed assignee, participant or reinsurer and any
information relating to the Owner or the Servicer furnished to such entity by or
on behalf of the Owner or the Servicer or by the Agent, if, prior to any such
disclosure, such assignee, participant or reinsurer or proposed assignee,
participant or reinsurer agrees, in a writing reasonably satisfactory to the
Owner or the Servicer, as the case may be, to preserve the confidentiality of
this Agreement and any confidential information relating to the Owner or the
Servicer received by it from any of the foregoing entities and to be bound by
the provisions of this Section 7.05(b). The Agent, each Bank and CapMAC shall,
as promptly as practicable after becoming aware of any disclosure of any
confidential information relating to the Owner or the Servicer, use good faith
efforts to notify the Owner and the Servicer of such disclosure; provided,
however, that the failure by the Agent, any Bank or CapMAC to give such notice
shall not subject it to liability.
SECTION 7.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
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STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF), EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF THE BANKS
OR THE SUBORDINATED PURCHASER IN THE RECEIVABLES OR REMEDIES HEREUNDER, IN
RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE
OF NEW YORK.
SECTION 7.5. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
SECTION 7.6. Survival of Termination. The provisions of Sections 1.05,
1.06, 4.01, 4.02, 4.03, 7.04, 7.05 and 7.14 shall survive any termination of
this Agreement.
SECTION 7.7. Tax Treatment. The Owner and the Seller have structured
this Agreement and the Receivable Interests with the intention that the
Receivable Interests will qualify under applicable federal, state and local tax
law as indebtedness. Except as otherwise required by law, the Seller, the
Servicer, the Agent and the Banks agree to treat and to take no action
inconsistent with the treatment of the Receivable Interests as indebtedness for
purposes of federal, state and local income or franchise taxes and any other tax
imposed on or measured by income.
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SECTION 7.8. Duties of the Trustee. The Trustee hereby agrees to (i)
perform its duties and obligations as set forth in the Pooling and Servicing
Agreement and (ii) promptly take each action which the Agent may specify (in
accordance with Section 11.14(a) or any other applicable Section of the Pooling
and Servicing Agreement) to enforce the Pooling and Servicing Agreement for the
benefit of the Banks, any other receivables purchasers, and any holders of
Investor Certificates, all with reasonable care and diligence and in accordance
with applicable laws, rules and regulations and the Pooling and Servicing
Agreement.
SECTION 7.9. Limitation on Trustee/Seller Liability, Etc.
7.9.1. Neither the Trustee, in its individual capacity or in its
capacity as the Seller hereunder, 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, except for its or their own
gross negligence or willful misconduct. Without limitation of the generality of
the foregoing, the Trustee:
7.9.1.1. may consult with legal counsel (including counsel for the
Seller, the Owner or the Servicer), 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;
7.9.1.2. makes no warranty or representation to any Bank or to the
Subordinated Purchaser and shall not be responsible to any Bank or to the
Subordinated Purchaser for any statements, warranties or representations
made in or in connection with this Agreement or the Pooling and Servicing
Agreement;
7.9.1.3. shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions
of this Agreement or the Pooling and Servicing Agreement on the part of the
Seller, the Owner or the Servicer or to inspect the property (including the
books and records) of the Seller, the Owner or the Servicer;
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7.9.1.4. shall not be responsible to any Bank or the Subordinated
Purchaser for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the Pooling and
Servicing Agreement or any instrument or document furnished pursuant
hereto; and
7.9.1.5. shall incur no liability under or in respect of this
Agreement, the Pooling and Servicing Agreement or any such other document
or instrument by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 7.10. Third Party Beneficiaries.
7.10.1. Each of the Seller, the Owner and the Trustee hereby
acknowledge that the Agent, for the ratable benefit of the Banks, and the Banks
are, to the extent of the Banks' rights and obligations under this Agreement,
intended to be third party beneficiaries under Section 13.14 of the Pooling and
Servicing Agreement.
7.10.2. No "Investor Certificateholder" or "Enhancement Provider" (in
each case as defined in the Pooling and Servicing Agreement) shall be a
third-party beneficiary of this Agreement or have any benefit or any legal or
equitable right, remedy or claim under this Agreement.
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SECTION 7.11. CNAI and Affiliates. Citibank's obligation to purchase
Receivable Interests under this Agreement may be satisfied by CNAI or any of its
Affiliates. With respect to any Receivable Interest or interest therein owned by
it, CNAI shall have the same rights and powers under this Agreement as any Bank
and may exercise the same as though it were not the Agent. CNAI and its
Affiliates may generally engage in any kind of business with the Seller or any
Obligor, any of their respective Affiliates and any Person who may do business
with or own securities of the Seller or any Obligor or any of their respective
Affiliates, all as if CNAI were not the Agent and without any duty to account
therefor to the Banks.
SECTION 7.12. No Proceedings. Each of the Agent, the Owner, the
Servicer, each Bank, each assignee of a Purchaser Receivable Interest or any
interest therein and each entity which enters into a commitment to purchase
Purchaser Receivable Interests or interests therein hereby agrees that it will
not institute against the Trust any proceeding of the type referred to in
paragraph (g) of Exhibit VI so long as any Investor Certificate shall be
outstanding or there shall not have elapsed one year plus one day since the last
day on which any Investor Certificate shall have been outstanding.
SECTION 7.13. Limited Recourse.
7.13.1. In no event will any Bank have any right or interest in the
Trust to the extent allocated to the holder of Investor Certificates or
attributable to the receivables purchase interest of any other Receivables
Purchaser. Notwithstanding any other provision herein or in any other agreement
or instrument, the Agent, on behalf of each Bank, confirms that it and each Bank
has no interest in and will make no claim on, or otherwise interfere with,
distributions of Collections allocated to any Investor Certificates or
attributable to any other Receivables Purchasers under the Pooling and Servicing
Agreement, any Supplement or any other receivables purchase agreement.
7.13.2. Notwithstanding any claim that any Bank or the Agent may have
hereunder, no such claim shall be payable from any Collections other than those
attributable to the Receivables Purchase Interest pursuant to Section 2.01 and,
as to all claims that any Bank or the Agent may have hereunder against the
Trust,
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no such claim shall be payable other than from Allocable Finance Charge
Collections, Allocable Principal Collections and the Allocation Percentage of
Recoveries of Pool Receivables attributable to the Receivables Purchase Interest
pursuant to Section 2.01. Nothing contained in this Section, however, shall
limit or affect any claim that any Bank or the Agent may have hereunder against
the Owner or the Servicer for any obligations under this Agreement which are
direct obligations of the Owner or the Servicer.
(c) By way of clarification of certain provisions contained in Section
6.16(a) and 12.1(c) of the Pooling and Servicing Agreement, the parties hereto
confirm and agree that the reference in the last sentence of Section 6.16(a) to
"equally and ratably" and the reference in the second sentence of Section
12.1(c) to "pro rata" means that the applicable benefits and payments will be
allocated among the different Series in accordance with the "Investor/Purchaser
Percentages" of the relevant Series (which, in the case of the Series created by
this Agreement, is the Allocation Percentage) and among the Receivables
Purchasers within each Receivable Purchase Series in accordance with the
priorities set forth in the receivables purchase agreement for such Series.
SECTION 7.14. Limitation on Rights of Banks. It is understood and
intended, and upon the purchase of each Purchaser Receivable Interest the Agent
and each Bank shall be deemed to have expressly covenanted and agreed with every
other Receivables Purchaser and holder of an Investor Certificate and the
Trustee, that the Purchaser Receivable Interests and the Investor Certificates
shall rank pari passu among one another and amongst themselves (except for any
Enhancement that may apply to only the Purchaser Receivable Interests or one
series of Investor Certificates) and neither the Agent nor any Bank shall have
any right hereunder or under the Pooling and Servicing Agreement (i) to
surrender, waive, impair, disturb or prejudice the rights of any other
Receivables Purchasers or the holders of the Investor Certificates, (ii) to
obtain or seek to obtain priority over or preference to any other Receivables
Purchaser or holder of an Investor Certificate or (iii) to enforce any right
under this Agreement or the Pooling and Servicing Agreement against the Seller,
except in the manner provided in the Pooling and Servicing Agreement and for the
equal, ratable and common benefit of all Receivables Purchasers and holders of
Investor Certificates and except (x) as otherwise expressly provided in the
Pooling and Servicing Agreement or (y) to the extent this
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Agreement creates independent and non-duplicative rights against the Seller. For
the protection and enforcement of the provisions of this Section, each and every
Receivables Purchaser and holder of an Investor Certificate and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
SECTION 7.15. Incorporation by Reference. Section 7.16 of the
Receivables Purchase Agreement is hereby incorporated herein by this reference,
except that (i) each reference therein to a "Purchaser" shall be deemed to be a
reference to a "Bank," and (ii) each reference therein to the Parallel Purchase
Commitment shall be deemed to be a reference to the Receivables Purchase
Agreement; provided, however, that if the SP Escrow Account shall have been
established pursuant to the Receivables Purchase Agreement, no additional SP
Escrow Account shall be established as a result of this incorporation by
reference.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER: FIRST UNION NATIONAL BANK,
not in its individual capacity except as
expressly provided herein but solely as the
trustee for Charming Shoppes Master Trust
By:___________________________________________
Title: Vice President
123 South Broad Street
Philadelphia, PA 19109
Attention: Corporate Trust Services
Facsimile Number: (201) 430-4963
with copies to:
First Union National Bank
765 Broad Street
Mail Drop C 76505
Newark, New Jersey 07102
Attention: Corporate Trust
Services
Facsimile Number: (201) 430-4963
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Pepper, Hamilton & Scheetz
1201 Market Street, Suite 1402
Wilmington, DE 19801-1163
Attention: Richard Eckman, Esq.
Facsimile Number: (302) 656-8865
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SUBORDINATED
PURCHASER: FASHION SPC, INC.
By:_________________________________
Title: Vice President
3411 Silverside Road
Wilmington, DE 19810
Attention: Kirk R. Simme
Facsimile Number: (302) 479-5512
OWNER/SERVICER: SPIRIT OF AMERICA NATIONAL BANK,
as the Owner and the Servicer
By:_________________________________
Title: Vice President
745 Center Street
Milford, OH 45150
Attention: Kirk R. Simme
Facsimile Number: (513) 576-5320
with copies to:
Mary Fontaine, Esq.
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Colin Stern, Esq.,
General Counsel
Charming Shoppes, Inc.
450 Winks Lane
Bensalem, PA 19020
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CITIBANK: CITIBANK, N.A.
By: Citicorp North America, Inc., as Attorney-in-Fact
By:_____________________________
Title: Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: U.S. Securitization
Facsimile Number: (914) 899-7890
Commitment: $120,000,000
Percentage Interest: 100%
AGENT: CITICORP NORTH AMERICA, INC., as Agent
By:_____________________________
Title: Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: U.S. Securitization
Facsimile Number: (914) 899-7890
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EXHIBIT I
DEFINITIONS
1. Certain Defined Terms. As used in the Agreement (including its
Exhibits), the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Agent's Account" means the special account (account number 4060-0094)
of the Agent maintained at the office of Citibank, N.A. at 399 Park Avenue, New
York, New York. The Agent's Account is the "Series Account" referred to in the
Pooling and Servicing Agreement for the Receivables Purchase Series arising in
connection with the Agreement.
"Assignment and Acceptance" means an assignment and acceptance
agreement entered into by a Bank, an Eligible Assignee and the Agent, pursuant
to which such Eligible Assignee may become a party to the Agreement, in
substantially the form of Annex H hereto.
"Bank Commitment" of any Bank means, (a) with respect to Citibank,
$120,000,000 or such amount as reduced by any Assignment and Acceptance entered
into between Citibank and other Banks or increased pursuant to Section 1.01(d);
(b) with respect to a Bank that has entered into an Assignment and Acceptance,
the amount set forth therein as such Bank's Bank Commitment or such amount as
reduced by an Assignment and Acceptance entered into between such Bank and an
Eligible Assignee, in each case as reduced (or terminated) pursuant to the next
sentence. Any reduction (or termination) of the Total Commitment pursuant to the
terms of the Agreement shall reduce ratably (or terminate) each Bank's Bank
Commitment.
"Banks" means Citibank and each Eligible Assignee that shall become a
party to the Agreement pursuant to Section 7.03.
"CapMAC" means Capital Markets Assurance Corporation, a New York stock
insurance company.
"Charming Shoppes" means Charming Shoppes, Inc., a Pennsylvania
corporation.
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"Commitment Termination Date" means the earliest of (a) March 31, 1997,
(b) the "Facility Termination Date" under the Receivables Purchase Agreement,
(c) the date determined pursuant to Section 3.02, and (d) the date the Total
Commitment reduces to zero.
"Company" means each of FSC and Charming Shoppes.
"Company Agreement" means an agreement, dated as of the date hereof,
made by each of FSC and Charming Shoppes in favor of the Bank and the Agent, in
form and substance satisfactory to the Agent, as the same may, from time to
time, be amended, restated, modified or supplemented.
"Cut Off Date" means the close of business of the Owner on February 29,
1996, or, in the case of Additional Accounts, the applicable Addition Cut Off
Date.
"Early Amortization Event" has the meaning set forth in Exhibit VI.
"Eligible Assignee" means CNAI, any of its Affiliates, any Person
managed by Citibank, CNAI or any of their Affiliates, CapMAC, or any financial
or other institution acceptable to the Agent.
"Final Distribution Date" means the date on which (i) the Purchaser
Capital of all Purchaser Receivable Interests and Yield thereon have been paid
in full, (ii) all other amounts payable hereunder to the Banks or the Agent with
respect thereto are paid in full, (iii) the Subordinated Purchaser Capital of
all Subordinated Receivable Interests have been paid in full, and (iv) the
aggregate amount of all unreimbursed Purchaser Charge Offs with respect thereto
have been reimbursed; provided, that the Final Distribution Date shall in any
event occur one year after all amounts payable pursuant to clauses (i), (ii) and
(iii) above have been paid in full even if all unreimbursed Purchaser
Charge-Offs with respect thereto have not been reimbursed; this is the "Series
Termination Date" referred to in the Pooling and Servicing Agreement.
"FSC" means Fashion Service Corp., a Delaware corporation.
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"Majority Banks" means at any time Banks holding Purchaser Receivable
Interests having Purchaser Capital equal to more than 66- % of the aggregate
outstanding Purchaser Capital of all Purchaser Receivable Interests or, if no
Purchaser Capital is then outstanding, Banks having more than 66- % of the Total
Commitment.
"Master Trust Documents" means the Pooling and Servicing Agreement and
each other agreement, instrument or other document (other than any "supplement"
or "receivables purchase agreement" (in each case, as defined therein))
delivered in connection with the Pooling and Servicing Agreement, in each case
as the same may be amended, modified or supplemented in accordance with the
terms thereof.
"Minimum Seller Capital" means, on any date of determination, an
aggregate Outstanding Balance of Principal Receivables that are Eligible
Receivables in the Receivables Pool on such date of determination equal to (i)
during the Revolving Period, the product of (a) 2.0% and (b) the amount of the
Purchaser Capital on such date of determination and (ii) during the Amortization
Period, an amount equal to (a) 102% of the amount of the Purchaser Capital on
the Termination Date minus (b) the sum of (1) the amount of the Purchaser
Capital on such date of determination and (2) the aggregate reductions, if any,
in the amount of Subordinated Purchaser Capital from the Termination Date to
such date of determination.
"Minimum Seller Interest" means, on any date of determination, an
aggregate Outstanding Balance of Principal Receivables that are Eligible
Receivables in the Receivables Pool on such date of determination equal to (i)
during the Revolving Period, the product of (a) 2.0% and (b) the amount of the
Purchaser Capital on such date of determination and (ii) during the Amortization
Period, an amount equal to the product of (a) 2.0% and (b) the amount of the
Purchaser Capital at the close of business of the Agent on the Business Day
immediately preceding the Termination Date.
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"Percentage" of any Bank means, (a) with respect to Citibank, the
percentage set forth on the signature page to the Agreement, or such amount as
reduced by any Assignment and Acceptance entered into with an Eligible Assignee,
or (b) with respect to a Bank that has entered into an Assignment and
Acceptance, the amount set forth therein as such Bank's Percentage, or such
amount as reduced by an Assignment and Acceptance entered into between such Bank
and an Eligible Assignee.
"Pooling and Servicing Agreement" means the Amended and Restated
Pooling and Servicing Agreement dated as of December 24, 1992 as amended and
restated as of May 4, 1994, and as amended by Amendment No. 1 dated as of
December 22, 1995 and Amendment No. 2 dated as of March 22, 1996, among Spirit,
as the seller, Spirit as the Servicer and First Union National Bank (formerly
known as First Fidelity Bank, National Association, and prior to that known as
First Fidelity Bank, N.A., Pennsylvania, and prior to that known as Fidelity
Bank, National Association), as the Trustee, as the same may, from time to time,
be amended, modified or supplemented.
"Purchaser Capital" for any date means an amount equal to (a) the
aggregate initial Purchaser Capital of all Purchaser Receivable Interests
purchased by the Banks under the Agreement prior to such date (including
pursuant to reinvestments under Section 2.06(a) of the Agreement) minus (b) the
amount of distributions on account of Purchaser Capital made to the Banks prior
to such date (other than distributions from the SP Escrow Account pursuant to
Section 7.17 of the Agreement) and minus (c) the excess, if any, of the
aggregate amount of Purchaser Charge Offs for all Distribution Dates preceding
such date over the aggregate amount of Purchaser Charge Offs reimbursed prior to
such date; provided, however, that if Purchaser Capital shall have been reduced
by any distribution and thereafter all or a portion of such distribution is
rescinded or must otherwise be returned for any reason, such Purchaser Capital
shall be increased by the amount of such rescinded or returned distribution, as
though it had not been made.
"Purchaser Representative" means, initially, CNAI, as the Purchaser
Representative pursuant to Section 6.01 of the
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Agreement, and each other Person who shall succeed to the functions of CNAI as
the Purchaser Representative pursuant to Section 6.01(c) of the Agreement.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement, dated as of the date hereof, among the Seller, Fashion SPC, Inc.,
Spirit of America National Bank, CXC Incorporated and Citicorp North America,
Inc., as Agent, as the same may, from time to time, be amended, restated,
modified or supplemented.
"Receivables Purchase Interest" and "Receivables Purchase Series
Interest" means, collectively, the Purchaser Receivable Interests and the
Subordinated Receivable Interests.
"Register" has the meaning set forth in Section 7.03(f).
"Servicer" means at any time the Person then authorized pursuant to the
Agreement and the Pooling and Servicing Agreement to administer and collect Pool
Receivables.
"Store Payment Notice" has the meaning set forth in paragraph 1(b)(xxi)
of Exhibit II to the Agreement.
"Subordinated Purchaser Capital" for any date means an amount equal to
(a) the aggregate initial Subordinated Purchaser Capital of all Subordinated
Receivable Interests purchased by the Subordinated Purchaser under the Agreement
prior to such date (including pursuant to reinvestments under Section 2.06(a) of
the Agreement), minus (b) the amount of Total Principal Collections allocated to
the Subordinated Purchaser on account of Subordinated Purchaser Capital which
are, prior to such date, either distributed to the Subordinated Purchaser
pursuant to Section 2.06(a) of the Agreement or deposited into the SP Escrow
Account pursuant to Section 2.06(b) of the Agreement, minus (c) an amount equal
to the aggregate amount by which the Subordinated Purchaser Capital has been
reduced as a result of Subordinated Principal Collections for prior Distribution
Dates having been used to fund the Required Amount with respect to such
Distribution Dates pursuant to Section 2.05(c) of the Agreement, minus (d) an
amount equal to the aggregate amount by which the Subordinated Purchaser Capital
has been reduced to fund the Purchaser Loss Amount on all prior Distribution
Dates pursuant to Section 2.05(d) of the Agreement, minus (e) an amount equal to
the aggregate amount by which Subordinated Purchaser Capital has been reduced on
all prior Distribution Dates pursuant to
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Section 2.07(a) of the Agreement, and plus (f) the aggregate amount of Excess
Finance Charge Collections applied on all prior Distribution Dates for the
purposes of reimbursing amounts deducted pursuant to the foregoing clauses (c),
(d) and (e).
"Termination Date" means the earlier of (i) the Business Day which the
Seller so designates by notice to the Agent (with a copy to the Servicer) at
least one Business Day in advance and (ii) the Commitment Termination Date.
"Total Commitment" means $120,000,000, as such amount may be reduced
pursuant to Section 1.01(c) or pursuant to the last sentence of this definition,
or increased pursuant to Section 1.01(d). References to the unused portion of
the Total Commitment shall mean, at any time, the Total Commitment as then in
effect, minus the sum of the then outstanding Purchaser Capital of Purchaser
Receivable Interests under the Agreement and the then outstanding "Purchaser
Capital" of "Purchaser Receivable Interests" under the Receivables Purchase
Agreement. Furthermore, on each day on which the Seller reduces the unused
portion of (or terminates) the "Purchase Limit" under the Receivables Purchase
Agreement, the Total Commitment automatically shall reduce by the same amount
(or so terminate).
"Trust" means the trust created by the Pooling and Servicing Agreement.
"Trustee" means, initially, First Union National Bank (formerly known
as First Fidelity Bank, National Association, and prior to that known as First
Fidelity Bank, N.A., Pennsylvania, and prior to that known as Fidelity Bank,
National Association), a national banking association, as the trustee under the
Pooling and Servicing Agreement, and each other Person who shall succeed to the
functions of First Union National Bank pursuant to the terms of the Pooling and
Servicing Agreement.
"Unallocated Net Receivables Pool Balance" means, at any time, the
Outstanding Balance of Principal Receivables that are Eligible Receivables in
the Receivables Pool that is not allocated to the Purchaser Receivable Interests
or the Subordinated Receivable Interests pursuant to the Agreement and
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not allocated to any other Person other than the Holder of the Exchangeable
Seller Certificate pursuant to a supplement to the Pooling and Servicing
Agreement or pursuant to any other receivables purchase agreement that is
subject to the Pooling and Servicing Agreement.
"Yield" means for each Purchaser Receivable Interest for any Fixed
Period:
AR x C x ED + LF
---
360
where:
AR = the Assignee Rate for such
Purchaser Receivable Interest for such Fixed
Period
C = the Purchaser Capital of
the Purchaser Receivable Interest during
such Fixed Period
ED = the actual number of days
elapsed during such Fixed Period
LF = the Liquidation Fee, if
any, for such Fixed Period;
provided that no provision of the Agreement shall require the payment or permit
the collection of Yield in excess of the maximum permitted by applicable law;
and provided, further, that Yield for any Purchaser Receivable Interest shall
not be considered paid by any distribution to the extent that at any time all or
a portion of such distribution is rescinded or must otherwise be returned for
any reason.
2. Defined Terms Incorporated by Reference. Unless otherwise defined in
the Agreement and subject to the modifications herein set forth, capitalized
terms used in the Agreement or in any provisions of the Receivables Purchase
Agreement incorporated in the Agreement by reference shall have the meanings
given to them in the Receivables Purchase Agreement. Without limiting the
foregoing, the defined terms "Credit Facilities", "Servicer Report", "Depositary
Agreement" and "Store Payment Notice" are hereby incorporated by reference
together
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with the related Schedule I, Annex A, Annex B and Annex F, respectively, of the
Receivables Purchase Agreement. All references to the "Agent" and "Agreement" in
provisions of the Receivables Purchase Agreement (including Exhibits and
Schedules) incorporated in the Agreement by reference shall, without further
reference, mean CNAI as Agent under the Agreement and the Agreement,
respectively. The reference to the "Parallel Purchase Commitment" in the
definition of "Collection" incorporated in the Agreement by reference shall be
deemed to be a reference to the Receivables Purchase Agreement. Furthermore, all
references in such incorporated provisions to "Collections", "Cardholder
Agreement", "Net Receivables Pool Balance", "Pool Receivable", "Receivable
Interest" and "Receivables Pool" shall mean the Collections, a Cardholder
Agreement, the Net Receivables Pool Balance, a Pool Receivable, a Receivable
Interest and the Receivables Pool under the Agreement, respectively. Unless the
context otherwise requires, all references in this Agreement and in such
incorporated provisions to "Purchaser Receivable Interests" shall mean the
Purchaser Receivable Interests purchased by the Banks pursuant to the Agreement.
To the extent any word or phrase is defined in the Agreement, any such word or
phrase appearing in provisions so incorporated by reference from the Receivables
Purchase Agreement shall have the meaning given to it in the Agreement. The
incorporation by reference into the Agreement from the Receivables Purchase
Agreement is for convenience only, and the Agreement and the Receivables
Purchase Agreement shall at all times be, and be treated as, separate and
distinct facilities. Incorporations by reference in the Agreement from the
Receivables Purchase Agreement shall not be affected or impaired by any
subsequent expiration or termination of the Receivables Purchase Agreement, nor
by any amendment thereof or waiver thereunder unless the Agent, as Agent for the
Banks, shall have consented to such amendment or waiver in writing.
3. Defined Terms from the Pooling and Servicing Agreement. For purposes
of the Pooling and Servicing Agreement:
"Enhancement" means the Interest Rate Agreements and any additional
interest rate caps purchased pursuant to Section 5.04(h).
"interest" at any time means the sum of the Yield and the Subordinated
Purchaser Yield at such time.
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<PAGE> 55
"Investor/Purchaser Percentage" means the Allocation Percentage.
"principal" at any time means the sum of the Purchaser Capital and the
Subordinated Purchaser Capital at such time.
"Receivables Purchaser Monthly Servicing Fee" means the Servicer Fee.
"Series Servicing Fee Percentage" means the Servicing Fee Rate.
"Series Termination Date" means the Final Distribution Date.
4. Other Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. All terms used in Article 9 of the
UCC in the State of New York, and not specifically defined herein, are used
herein as defined in such Article 9.
I-9
<PAGE> 56
EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The initial purchase of a
Purchaser Receivable Interest by the Banks under the Agreement is subject to the
conditions precedent that the conditions precedent to the initial purchase under
the Receivables Purchase Agreement shall have been satisfied on or prior to the
date of such purchase under the Agreement and that:
1. on or before the date of such purchase, the Owner shall have (i)
indicated in the Pool Index File maintained in its computer files that interests
in the Receivables created in connection with the Accounts have been sold by the
Seller to the Banks pursuant to the Agreement and (ii) delivered to the Trustee,
pursuant to Section 2.1 of the Pooling and Servicing Agreement, a computer file
or microfiche or written list containing a true and complete list of all
Accounts, identified by account number, Obligor name and Obligor address and
setting forth the Receivable balance as of the applicable Cut Off Date; and
2. the Agent shall have received on or before the date of such purchase
the following, each (unless otherwise indicated) dated such date, in form and
substance satisfactory to the Agent:
a) Certified copies of any necessary corporate action of the
Trustee approving the Agreement and certified copies of all documents
evidencing other necessary governmental approvals, if any, with respect to
the Agreement.
b) A copy of (A) the Subordinated Purchaser's Certificate of
Incorporation, certified (as of a date reasonably near the date of the
Agreement) by the Secretary of State of the State of Delaware as being a
true and correct copy thereof, (B) the Subordinated Purchaser's By-Laws as
in effect on the date of the Agreement, certified by the Subordinated
Purchaser's President or a Vice President and the Secretary or any
Assistant Secretary of the Subordinated Purchaser as being a true and
correct copy
II-1
<PAGE> 57
thereof, (C) the resolutions adopted by the Board of Directors of the
Subordinated Purchaser authorizing the Subordinated Purchaser's officers to
enter into, and to perform all necessary actions in connection with,
transactions of the type contemplated by the Agreement, certified by the
Subordinated Purchaser's Secretary or Assistant Secretary and (D) a
certificate of the Secretary or Assistant Secretary of the Subordinated
Purchaser certifying the names and true signatures of the officers of the
Subordinated Purchaser authorized to sign the Agreement on behalf of the
Subordinated Purchaser and the other documents to be delivered by the
Subordinated Purchaser thereunder.
c) Certified copies of the resolutions of the Board of Directors of
the Servicer and the Owner approving the Agreement and certified copies of
all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to the Agreement.
d) Certified copies of the resolutions of the Board of Directors of
each of FSC and Charming Shoppes approving the Company Agreement and
certified copies of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to the Company
Agreement.
e) A certificate of the Secretary or Assistant Secretary of the
Trustee certifying the names and true signatures of the officers of the
Trustee authorized to sign the Agreement on behalf of the Seller and the
other documents to be delivered by the Seller thereunder.
f) A certificate of the Secretary or Assistant Secretary of the
Servicer and the Owner certifying the names and true signatures of the
officers of the Servicer or the Owner, as the case may be, authorized to
sign the Agreement and the other documents to be delivered by it
thereunder.
g) A certificate of the Secretary or Assistant Secretary of each of
FSC and Charming Shoppes certifying the names and true signatures of the
officers thereof authorized to sign the Company Agreement and the other
documents to be delivered by it thereunder.
II-2
<PAGE> 58
h) Acknowledgment copies, or time stamped receipt copies, of proper
financing statements, duly filed on or before the date of such initial
purchase under the UCC of all jurisdictions that the Agent may deem
necessary or desirable in order to perfect the ownership interests
contemplated by the Agreement.
i) Acknowledgment copies, or time stamped receipt copies, of proper
financing statements, if any, necessary to release all security interests
and other rights of any Person in the Receivables or Cardholder Agreements
previously granted by the Owner or the Seller (other than Adverse Claims
expressly permitted under the Agreement).
j) Completed requests for information, dated as of a date
reasonably near the date of such initial purchase, listing all effective
financing statements (other than the financing statements referred to in
subsection (viii) above) filed in the jurisdictions referred to in
subsection (viii) above (other than Philadelphia County, Pennsylvania) that
name the Seller as debtor, together with copies of such other financing
statements (none of which shall cover any Receivables or Cardholder
Agreements).
k) A copy of each Depositary Agreement with each Depositary Bank,
duly executed by the Seller and duly acknowledged by such Depositary Bank,
and a notice to each Depositary Bank regarding the Trustee's change of name
and instructing such Depositary Bank to make all payments to the Collection
Account.
l) An instruction letter to the Administrative Servicer, duly
executed and delivered by the Owner, and duly acknowledged by the
Administrative Servicer, directing the Administrative Servicer to process
Collections in accordance with the Trustee's instructions, and a notice to
the Administrative Servicer regarding the Trustee's change of name.
m) The Company Agreement, duly executed and delivered by each of
FSC and Charming Shoppes.
n) The Fee Letter, duly executed and delivered by the Seller.
II-3
<PAGE> 59
o) A certified copy of the Pooling and Servicing Agreement, duly
executed and delivered by each party thereto, and evidence satisfactory to
the Agent that each of the conditions to the execution and delivery of a
new Receivables Purchase Series set forth in Section 6.17 of the Pooling
and Servicing Agreement shall have been satisfied with respect to the
Agreement (including, without limitation, the Receivables Purchase Notice,
confirmation of the Rating Agency Condition, an Officer's Certificate of
the Owner and a Tax Opinion (as such terms are defined in the Pooling and
Servicing Agreement)).
p) A copy of the Cardholder Guidelines, certified by a Responsible
Officer of the Owner as being complete and accurate in all material
respects.
q) A favorable opinion of Pepper, Hamilton & Scheetz, counsel for
the Trustee, substantially in the form of Annex C to the Receivables
Purchase Agreement and as to such other matters as the Agent may reasonably
request.
r) A favorable opinion of:
(a) Mayer, Brown & Platt, counsel for each of the Servicer, the
Owner, the Subordinated Purchaser, Charming Shoppes and FSC, as to
certain corporate and security interest matters substantially in the
form of Annex D-1 to the Receivables Purchase Agreement and as to such
other matters as the Agent may reasonably request,
(b) Mayer, Brown & Platt, counsel for the Owner and the
Servicer, as to certain bank regulatory matters substantially in the
form of Annex D-2 to the Receivables Purchase Agreement and as to such
other matters as the Agent may reasonably request,
(c) Colin Stern, Esq., General Counsel for each of the Servicer,
the Owner and the Subordinated Purchaser, substantially in the form of
Annex D-3 to the Receivables Purchase Agreement and as to such other
matters as the Agent may reasonably request, and
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(d) Mayer, Brown & Platt, counsel for each of the Subordinated
Purchaser, Charming Shoppes and FSC, as to certain federal Bankruptcy
Code matters substantially in the form of Annex D-4 to the Receivables
Purchase Agreement and as to such other matters as the Agent may
reasonably request.
s) A favorable opinion of Colin Stern, Esq., General Counsel for
each of FSC and Charming Shoppes, substantially in the form of Annex E to
the Receivables Purchase Agreement and as to such other matters as the
Agent may reasonably request.
t) A favorable opinion of Kaye, Scholer, Fierman, Hays & Handler,
LLP, counsel for the Agent, as the Agent may reasonably request.
u) An undated notice (the "Store Payment Notice"), duly executed by
each of the Owner and Charming Shoppes, to the manager of each Store, in
substantially the form of Annex F to the Receivables Purchase Agreement.
v) Assignments to the Seller of the benefits under each of the
Interest Rate Agreements in effect on the Effective Date, together with any
necessary consents by the counterparties to such Interest Rate Agreements;
w) Copies of each of the Interest Rate Agreements in effect on the
Effective Date, together with a summary thereof in substantially the form
of Annex G to the Receivables Purchase Agreement, in each case certified by
a Responsible Officer of the Owner as being complete and correct.
x) The Insurance Agreement, duly executed by each of the parties
thereto, and the Surety Bond, duly issued by CapMAC and all conditions
precedent to each of the Insurance Agreement and Surety Bond shall have
been satisfied, including, without limitation, (1) an opinion of counsel to
CapMAC with respect to the enforceability of the Surety Bond and other
matters, (2) an officer's certificate of CapMAC and (3) a letter agreement
between CapMAC and the Administrative Servicer relating to termination of
the Administrative Servicer Agreement.
II-5
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y) Copies of each of the Credit Facilities as in effect on the
Effective Date, certified by an officer of Charming Shoppes as being
complete and correct, accompanied by a certificate of an officer of
Charming Shoppes that (x) Charming Shoppes has duly executed and delivered
each of the Credit Facilities, (y) all conditions precedent to the
obligations of the lenders under the Credit Facilities have been satisfied
and the Credit Facilities are in full force and effect as of the date of
the Agreement and (z) no event or condition of the type described in
paragraph (l) of Exhibit VI has occurred and is continuing.
z) Copies of the Consumer Credit Plan Agreement between Charming
Shoppes of Delaware, Inc. and FSC, the Consumer Credit Plan Operations
Agreement between FSC and Spirit and the Cardholder Agreement, each as in
effect on the Effective Date, certified by a Responsible Officer of FSC or
the Owner as being complete and correct.
aa) A copy of the Administrative Servicing Agreement or a summary
prepared by the Servicer of the provisions of the Administrative Servicing
Agreement relating to the termination thereof by either party and the
assignability thereof by the Administrative Servicer.
bb) A letter agreement between Mellon Bank, N.A. and the Trustee,
in form and substance satisfactory to the Agent, duly executed and
delivered by Mellon Bank, N.A. and the Trustee, setting forth certain
instructions with respect to the flow of funds arising out of Store
Payments and the agreement by Mellon Bank, N.A. not to assert setoffs
against such funds.
cc) A letter agreement between Charming Shoppes of Delaware, Inc.
and the Trustee, in form and substance satisfactory to the Agent, duly
executed and delivered by Charming Shoppes of Delaware, Inc. and the
Trustee, setting forth certain instructions with respect to the flow of
funds arising out of Store Payments and the agreement by Charming Shoppes
of Delaware, Inc. not to assert setoffs against such funds.
II-6
<PAGE> 62
dd) Copies of good standing certificates for Spirit from the Office
of the Comptroller of the Currency and the Federal Deposit Insurance
Corporation.
2. Conditions Precedent to All Purchases and Reinvestments. Each
purchase (including the initial purchase) of Purchaser Receivable Interests by
the Banks under the Agreement and each reinvestment pursuant to Section 2.06(a)
of the Agreement shall be subject to the further conditions precedent that:
3. in the case of each purchase, the Servicer shall have delivered (i)
to the Trustee, on or prior to such purchase, the then most recent computer file
or microfiche or written list of Accounts required pursuant to Section 2.1 or
2.6(d)(ii) of the Pooling and Servicing Agreement, and (ii) to the Agent, on or
prior to such purchase, in form and substance satisfactory to the Agent, a
completed Servicer Report dated within 31 days prior to the date of such
purchase together with such additional information as may reasonably be
requested by the Agent,
4. on the date of such purchase or reinvestment the following
statements shall be true (and acceptance of the proceeds of such purchase or
reinvestment shall be deemed a representation and warranty by the Seller that
such statements are then true):
a) The representations and warranties contained in Exhibit III are
correct on and as of the date of such purchase or reinvestment as though
made on and as of such date, and
b) No event has occurred and is continuing, or would result from
such purchase or reinvestment, that constitutes an Early Amortization Event
or that would constitute an Early Amortization Event but for the
requirement that notice be given or time elapse or both, and
5. the Agent shall have received such other approvals, opinions or
documents as it may reasonably request.
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3. Additional Conditions Precedent to Each Purchase by the Banks. Each
purchase (including the initial purchase) of a Purchaser Receivable Interest by
the Banks under the Agreement is subject to the additional conditions precedent
that, after giving effect to such purchase and any concurrent purchase of a
Subordinated Receivable Interest pursuant to Section 1.02(d) of the Agreement:
6. the aggregate outstanding Subordinated Purchaser Capital shall be at
least equal to 14% of the aggregate outstanding Purchaser Capital; and
7. the Unallocated Net Receivables Pool Balance shall be equal to or
exceed the Minimum Seller Capital.
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<PAGE> 64
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
Exhibit III of the Receivables Purchase Agreement is hereby
incorporated herein by reference, except that (i) each reference therein to the
"Purchasers" shall be deemed to be a reference to the Banks and (ii) each
reference therein to the "Parallel Purchase Commitment" shall be deemed to be a
reference to the "Receivables Purchase Agreement."
III-1
<PAGE> 65
EXHIBIT IV
COVENANTS
Exhibit IV of the Receivables Purchase Agreement is hereby incorporated
herein by reference, except that (i) each reference therein to the "Purchasers"
shall be deemed to be a reference to the Banks, (ii) each reference therein to
the "Facility Termination Date" shall be deemed to be a reference to the
Commitment Termination Date, (iii) each reference therein to the "Parallel
Purchase Commitment" shall be deemed to be a reference to the "Receivables
Purchase Agreement" and (iv) paragraph 2(q) thereof shall be deemed to have been
"intentionally omitted" for purposes of the Agreement.
IV-1
<PAGE> 66
IV-2
<PAGE> 67
EXHIBIT V
ADMINISTRATION AND COLLECTION
OF POOL RECEIVABLES
Exhibit V of the Receivables Purchase Agreement is hereby incorporated
herein by reference, except that (i) each reference therein to the "Purchasers"
shall be deemed to be a reference to the Banks, and (ii) each reference therein
to the "Facility Termination Date" shall be deemed to be a reference to the
Commitment Termination Date.
V-1
<PAGE> 68
V-2
<PAGE> 69
EXHIBIT VI
EARLY AMORTIZATION EVENTS
Each of the "Early Amortization Events" set forth in Exhibit VI of the
Receivables Purchase Agreement is incorporated herein by reference, except that
the reference in subsection (i) thereof to the "Parallel Purchase Commitment"
shall be deemed to be a reference to the Receivables Purchase Agreement.
VI-1
<PAGE> 1
EXHIBIT 10.1.11
------------------------------------------------------------------------
SPIRIT OF AMERICA NATIONAL BANK
SELLER AND SERVICER
AND
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
TRUSTEE
CHARMING SHOPPES MASTER TRUST
------------------------------------------------------
AMENDMENT NO. 1
DATED AS OF DECEMBER 22, 1995
TO
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
DATED AS OF DECEMBER 24, 1992
AS AMENDED AND RESTATED AS OF
MAY 4, 1994
------------------------------------------------------------------------
<PAGE> 2
Amendment No. 1, dated as of December 22, 1995 (this "Amendment") to
the Amended and Restated Pooling and Servicing Agreement, dated as of December
24, 1992, as amended and restated as of May 4, 1994 (as amended and restated,
the "Agreement") each by and between Spirit of America National Bank, a national
banking association, as Seller and Servicer, and First Fidelity Bank, National
Association, a national banking association, as Trustee. Any capitalized term
not herein defined shall have the meaning assigned to it in the Agreement.
WHEREAS, the Seller, the Servicer and the Trustee desire to amend the
Agreement to conform to the terms of the Agreement as disclosed on page 56 of
the Preliminary Prospectus for the Charming Shoppes Master Trust ___% Asset
Backed Certificates, Series 1994-1 dated April 19, 1994, and on page 56 of the
Prospectus for the Charming Shoppes Master Trust 7.00% Asset Backed
Certificates, Series 1994-1 dated April 26, 1994;
WHEREAS, an Opinion of Counsel has been delivered to the Trustee
pursuant to Section 13.1 (a) of the Agreement;
WHEREAS, each Rating Agency has notified the Seller, the Servicer and
the Trustee in writing that such action shall not result in a reduction or
withdrawal of the rating of any outstanding Series or Class as to which it is a
Rating Agency.
NOW THEREFORE, the Agreement is hereby amended in the following manner:
Section 9.1 (a) of the Agreement shall be amended as follows:
In each case where "Seller" appears, it shall be replaced with "Seller
or Charming Shoppes, Inc."
In the third and fourth lines from the end of Section 9.1(a), the
phrase "file a petition to take advantage of any" shall be replaced with
"commence or have commenced against it (unless dismissed within thirty days) as
debtor a proceeding under any"
Section 9.2 (a) of the Agreement shall be amended as follows:
In the second line, "with respect to the Seller" shall be added before
"(an 'Insolvency Event')"
In all other respects the Agreement is confirmed and ratified and shall
continue in full force and effect. Henceforth, references in the Agreement to
"the Agreement," "this Agreement," "hereof," "hereto" or words of similar import
shall in each case be deemed to refer to the Agreement as hereby amended.
<PAGE> 3
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused this Amendment to be duly executed by their respective officers as of the
day and year first above written.
SPIRIT OF AMERICA NATIONAL BANK,
Seller and Servicer
By:___________________________________
Name: Kirk Simme
Title: Vice President
FIRST FIDELITY BANK, NATIONAL
ASSOCIATION, TRUSTEE
By:____________________________________
Name:
Tile:
<PAGE> 1
EXHIBIT 10.1.12
SPIRIT OF AMERICA NATIONAL BANK
Seller and Servicer
and
FIRST UNION NATIONAL BANK
Trustee
Charming Shoppes Master Trust
--------------------------------
AMENDMENT NO. 2
Dated as of March 22, 1996
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of December 24, 1992
As Amended and Restated as of
May 4, 1994
As Amended by Amendment No. 1 as of
December 22, 1995
<PAGE> 2
Amendment No. 2, dated as of March 22, 1996 (this "Amendment") to the
Amended and Restated Pooling and Servicing Agreement, dated as of December 22,
1992, as amended and restated as of May 4, 1994 (as amended and restated, and as
amended by the Amendment No. 1 thereto dated as of December 22, 1995, the
"Agreement") each by and between Spirit of America National Bank, a national
banking association, as Seller and Servicer, and First Union National Bank, a
national banking association, as Trustee. Any capitalized term not herein
defined shall have the meaning assigned to it in the Agreement.
WHEREAS, the Seller, the Servicer and the Trustee desire to amend the
Agreement in certain respects as set forth herein;
WHEREAS, an Opinion of Counsel for the Seller has been delivered to the
Trustee and each Purchaser Representative pursuant to Section 13.1 (a) of the
Agreement.
WHEREAS, each Rating Agency has notified the Seller, the Servicer and
the Trustee in writing that the amendments provided herein shall not result in a
reduction or withdrawal of the rating of any outstanding Series or Class as to
which it is a Rating Agency.
NOW THEREFORE, the Agreement is hereby amended in the following manner:
(a) The definition of "Trust Termination Date" in Section 1.1
of the Agreement is hereby amended by adding the Language, "and (c) December 24,
2007" to the end of such definition.
(b) Section 6.9(b) of the Agreement is hereby amended,
effective as of August 15, 1994, by replacing the last three sentences thereof
with the following three sentences:
If any Certificate Series of Receivable Purchase Series is outstanding,
it is a condition to the issuance of any newly created Series of
Investor Certificates that the Trustee and (if any such outstanding
Certificate Series is rated) each Rating Agency shall have received an
Opinion of Counsel that, (i) the issuance of such new Series of
Investor Certificates will not cause the trust to be treated as an
association (or publicly traded partnership) taxable as a corporation
and (ii) the issuance of the newly issued Series of Investor
Certificates will not adversely affect the federal income tax
characterization of any outstanding Investor Certificates or Receivable
Purchase Interests. Upon satisfaction of such condition, the Trustee
shall Handel the existing Exchangeable Seller Certificate or applicable
Investor Certificates, as the case may be, and issue, as provided
above, such Series of Investor Certificates and a new Exchangeable
Seller Certificate, dated the Exchange Date. There
<PAGE> 3
is no limit to the number of Exchanges that may be performed under this
Agreement.
(c) Section 6.17 of the Agreement is hereby amended by replacing the
last sentence thereof with the following sentence:
If any Certificate Series or Receivables Purchase Series is
outstanding, it is a condition to the creation of any Receivable
Purchase Series that the Trustee and if any such outstanding
Certificate Series is rated) each Rating Agency shall have received an
Opinion of Counsel that (i) the issuance of such Receivable Purchase
Series will not cause the Trust to be treated as an association (or
publicly traded partnership) taxable as a corporation and (ii) the
creation of such Receivable Purchase Series will not adversely affect
the federal income tax characterization of any outstanding Investor
Certificates or Receivable Purchase Interests.
(d) Section 11.16 of the Agreement is hereby amended by replacing the
first two sentences thereof with the following two sentences:
The Trustee shall maintain at its expense in New York, New York or
Newark, New Jersey an office or offices, or agency or agencies, where
notices and demands to or upon the Trustee in respect of the
Certificates and this Agreement may be served. The Trustee initially
appoints First Union National Bank, 765 Broad Street, Newark, New
Jersey 07102, as its office for such purposes.
In all other respects the Agreement is confirmed and ratified and shall
continue in full force and effect. Henceforth, references in the Agreement to
"the Agreement," "this Agreement," "hereof" or words of similar import shall in
each case be deemed to refer to the Agreement as hereby amended.
<PAGE> 4
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused this Amendment to be duly executed by their respective officers as of the
day and year first above written.
SPIRIT OF AMERICA NATIONAL BANK,
Seller and Servicer
By:__________________________________
Name: Kirk Simme
Title: Vice President
FIRST UNION NATIONAL BANK,
Trustee
By:____________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.1.13
SPIRIT OF AMERICA NATIONAL BANK
Seller and Servicer
and
FIRST UNION NATIONAL BANK
Trustee
Charming Shoppes Master Trust
AMENDMENT NO. 1
Dated as of March 29, 1996
to
SERIES 1994-2 SUPPLEMENT
- --------------------------------------------------------------------------------
<PAGE> 2
Amendment No. 1, dated as of March 29, 1996 (this "Amendment")
to the Series 1994-2 Supplement, dated as of August 15, 1994 (the "Supplement")
by and between Spirit of America National Bank, a national banking association,
as Seller and Servicer, and First Union National Bank, a national banking
association, as Trustee. Any capitalized term not herein defined shall have the
meaning assigned to it in the Supplement.
WHEREAS, the Seller, the Servicer and the Trustee desire to
amend the Supplement in certain respects as set forth herein;
WHEREAS, an Opinion of Counsel for the Seller has been delivered
to the Trustee and each Purchaser Representative pursuant to Section 16 of the
Supplement and Section 13.1(a) of the Agreement.
NOW THEREFORE, the Supplement is hereby amended in the following
manner:
SECTION 1. Definitions. 1. Section 2 of the Supplement is
amended by adding the following definitions thereto, in correct alphabetical
order:
"Cash Collateral Account" shall have the meaning specified in
Section 4.15.
"Class B Escrow Account" shall have the meaning specified in
Section 4.14.
"Class Percentage" shall mean, at any time:
(i) with respect to the Class A Certificateholders, a
fraction (expressed as a percentage), the numerator of which is
the Class A Invested Amount at such time and the denominator of
which is the Invested Amount at such time; and
(ii) with respect to the Class B Certificateholders, a
fraction (expressed as a percentage), the numerator of which is
the Class B Invested Amount at such time and the denominator of
which is the Invested Amount at such time.
"Section 4.5 Draw Amount" is defined in Section 4.5.
"Section 4.5 Payment Amount" is defined in Section 4.5.
"Section 4.9 Draw Amount" is defined in Section 4.9.
"Section 4.9 Payment Amount" is defined in Section 4.9.
<PAGE> 3
2. Upon the payment by the Seller to the Class B Certificateholder of
$750,000, the Class B Invested Amount shall be reduced by $750,000, to an amount
equal to $3,250,000. In connection with such reduction, the Class B
Certificateholder shall exchange the Class B Certificate currently outstanding
(the "Current Class B Certificate") for a new Class B Certificate, in an amount
equal to $3,250,000 (the "New Class B Certificate"). In accordance with Section
6.3 of the Agreement, and upon the payment by the Seller as described above, the
Class B Certificateholder shall surrender the Current Class B Certificate at an
office or agency of the Transfer Agent and Registrar, and the Seller shall then
execute, and the Trustee shall authenticate and deliver, the New Class B
Certificate. In connection with such reduction, the definition of "Initial Class
B Invested Amount" in Section 2 of the Supplement is amended and restated to
read as follows:
"Initial Class B Invested Amount" shall mean $3,250,000.
SECTION 2. Transfer Restrictions. (a) The first sentence
of Section 4(b) of the Supplement is amended and restated to read as follows:
Anything to the contrary in this Supplement or the
Agreement notwithstanding, no Series 1994-2 Certificate may be
sold or transferred to any Person unless such sale or transfer
(i) is pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended (the
"1933 Act") and (ii) complies with the further provisions of
this Section 4.
(b) the following new subsection is added at the end of Section 4 of
the Supplement:
(e) No transfer (or purported transfer) of all or any
part of the Series 1994-2 Certificates (or any economic interest
therein), whether to another Series 1994-2 Certificateholder or
to a Person who is not a Series 1994-2 Certificateholder, shall
be effective, and any such transfer (or purported transfer)
shall be void ab initio, and no Person shall otherwise become a
holder of a Series 1994-2 Certificate (or any economic interest
therein) if (i) at the time of such transfer (or purported
transfer) any Series 1994-2 Certificates are traded on an
established securities market, (ii) after such transfer (or
purported transfer) the Trust would have more than 10 holders of
Series 1994-2 Certificates or (iii) the Series 1994-2
Certificates were issued or sold in a transaction or
transactions required to be registered under the 1933 Act or, to
the extent such offerings or sales were not required to be
registered under the 1933 Act by reason of Regulation S (17 CFR
230.901 through 230.904 or any successor thereto), such
offerings or sales would have been required to be registered
under the 1933 Act if the interests so offered or sold had been
offered and sold within the United States. For purposes of
clause (i) of the preceding sentence, an established securities
market is a national securities exchange that is either
registered under Section 6 of the Securities Exchange Act of
1934 (the "1934 Act") or exempt from registration because of the
limited volume of
<PAGE> 4
transactions, a foreign securities exchange that, under the law
of the jurisdiction where it is organized, satisfies regulatory
requirements that are analogous to the regulatory requirements
of the 1934 Act, a regional or local exchange, or an interdealer
quotation system that regularly disseminates firm buy or sell
quotations by identified brokers or dealers by electronic means
or otherwise. For purposes of determining whether the Trust will
have more than 10 holders of Series 1994-2 Certificates, each
Person indirectly owning an interest in the Trust through a
partnership (including any entity treated as a partnership for
federal income tax purposes), a grantor trust or an S
corporation (each such entity a "flow-through entity") shall be
treated as a holder of a Series 1994-2 Certificate unless the
Seller determines in its sole discretion, after consulting with
qualified tax counsel, that less than substantially all of the
value of the beneficial owner's interest in the flow-through
entity is attributable to the flow-through entity's interest
(direct or indirect) in the Trust.
SECTION 3. Loss Coverage. Section 4.5 of the Supplement is
amended and restated to read as follows:
Section 4.5. Investor Loss Amount.
On each Determination Date, the Servicer shall calculate the
Investor Loss Amount for the preceding Due Period. If on such date the
Required Amount exceeds zero on the related Distribution Date (such
deficiency, the "Shortfall"), the Servicer shall cause to be withdrawn
from the Cash Collateral Account an amount (the "Section 4.5 Payment
Amount") equal to the lesser of the Investor Loss Amount and such
Shortfall; provided that if the amount on deposit in the Cash
Collateral Account is less than the Section 4.5 Payment Amount, the
amount withdrawn will be the amount in the Cash Collateral Account. The
amount actually withdrawn is the "Section 4.5 Draw Amount," and the
funds so withdrawn shall be deposited in the Collection Account and
allocated as Principal Receivables (as defined in the Series 1994-1
Supplement) pursuant to Section 4.4 of the Series 1994-1 Supplement. If
the Section 4.5 Payment Amount exceeds the Section 4.5 Draw Amount, the
Class B Invested Amount will be reduced by the amount of such excess (a
"Class B Charge-Off"). In the event that such reduction would cause the
Class B Invested Amount to be a negative number, the Class B Invested
Amount shall be zero, and the Class A Invested Amount will be reduced
by an amount equal to the excess of such reduction over the Class B
Invested Amount prior to the reduction (a "Class A Charge-Off").
SECTION 4. Reimbursements. Clauses (d) and (e) of Section 4.6 of
the Supplement are amended and restated to read as follows:
(d) Reimbursement of Investor Charge-Offs. On each
Distribution Date, the Trustee, acting in accordance with
instructions of the Servicer, shall withdraw from the Collection
Account, to the extent of Available Funds and any Shared Excess
Finance Charge Collections allocable to the Series 1994-2
Certificates and any Excess Loan Agreement Funds on such
Distribution
<PAGE> 5
Date, after giving effect to the withdrawals pursuant to
Sections 4.6(a), (b) and (c), an amount equal to the aggregate
amount of Investor Charge-Offs and Section 4.5 Draw Amounts, if
any, which have not theretofore been reimbursed pursuant to this
Section 4.6(d), and shall during the Early Amortization Period
deposit such amount in accordance with Section 4.4(c)(ii), as if
such amounts were Collections of Principal Receivables allocable
to the Series 1994-2 Certificates. Reimbursements of Investor
Charge-Offs and Section 4.5 Draw Amounts shall be applied first
to the Class A Certificate, second, to the extent amounts are
available following the reimbursement of the Class A
Certificate, to the Class B Certificate, and third, to the
extent amounts are available following reimbursement of the
Class B Certificate, to the Section 4.5 Draw Amounts.
(e) Reimbursement of Investor Reductions. On each
Distribution Date, the Trustee, acting in accordance with
instructions of the Servicer, shall withdraw from the Collection
Account, to the extent of Available Funds and any Shared Excess
Finance Charge Collections allocable to the Series 1994-2
Certificates and any Excess Loan Agreement Funds on such
Distribution Date, after giving effect to the withdrawals
pursuant to Sections 4.6(a), (b), (c) and (d), an amount equal
to the aggregate amount of Class A Reductions, Principal
Reductions, Class B Reductions and Section 4.9 Draw Amounts, if
any, which have not theretofore been reimbursed pursuant to this
Section 4.6(e), and shall during the Early Amortization Period
deposit such amount in accordance with Section 4.4(c)(ii), as if
such amounts were Collections of Principal Receivables allocable
to the Series 1994-2 Certificates. Reimbursements of Class A
Reductions, Principal Reductions, Class B Reductions and Section
4.9 Draw Amounts shall be applied first to the Class A
Certificate and the Principal Reductions, second, to the extent
amounts are available following the reimbursement of the Class A
Certificate and the Principal Reductions, to the Class B
Certificate, and third, to the extent amounts are available
following reimbursement of the Class B Certificate, to the
Section 4.9 Draw Amounts.
SECTION 5. Allocations. Section 4.8 of the Supplement is
amended and restated to read as follows:
<PAGE> 6
Section 4.8. Payment of Certificate Principal; Excess Spread.
(a) On each Distribution Date with respect to the Scheduled
Amortization Period or Early Amortization Period the Trustee,
acting in accordance with instructions from the Servicer, shall
withdraw from the Collection Account and deposit into the
Principal Funding Account, to the extent of Available Principal
Collections for such Distribution Date, an amount up to the
Adjusted Investor Interest. On each Special Payment Date, the
Servicer shall instruct the Trustee to withdraw, and the Trustee
shall withdraw, from the Principal Funding Account all amounts
on deposit therein, provided that such withdrawal shall not
reduce the Adjusted Invested Amount below the Required Series
1994-2 Invested Amount, and distribute such amounts to the
Paying Agent. The Paying Agent shall:
(i) in accordance with Section 5.1, pay to the Class A
Certificateholders their Class Percentage of such
amounts (which payment shall result in a reduction of
the Class A Invested Amount); and
(ii) allocate to the Class B Certificateholders their
Class Percentage of such amounts (which allocation
shall result in a reduction of the Class B Invested
Amount), provided that the amount so allocated shall be
deposited in the Class B Escrow Account for
distribution in accordance with Section 4.14.
(b) If, after giving effect to the payments to the Series 1994-2
Certificateholders pursuant to Section 4.8(a) the Invested
Amount shall be zero, the Servicer shall instruct the Trustee to
withdraw, and the Trustee shall withdraw, from the Principal
Funding Account any remaining amounts on deposit therein and
distribute such amounts, if any, to the Seller.
SECTION 6. Dilution Coverage. Section 4.9 of the
Supplement is amended and restated to read as follows:
SECTION 4.9. Seller's or Servicer's Failure to Make a Deposit or
Payment.
(a) If, at the end of any Due Period, the reduction of
the Seller Interest by the Series Dilution Amount applicable to
Series 1994- 1 and Series 1994-2, if any, after giving effect to
any deposit to the Excess Funding Account or conveyance of
Receivables as provided in the second sentence of Section 4.3(d)
of the Agreement results in the Seller Interest being less than
zero, the Servicer shall calculate an amount (the "Section 4.9
Payment Amount") equal to the lesser of (x) the Series Dilution
Amount applicable to Series 1994-1 and Series 1994-2 after
giving effect to the reduction of the Seller Interest to zero
and (y) $400,000 plus the amount on deposit in the Excess
Funding Account. The Servicer shall cause to be withdrawn from
the Cash Collateral Account (the amount so withdrawn being the
"Section 4.9 Draw Amount") an amount equal
<PAGE> 7
to the Section 4.9 Payment Amount (or, if less, the amount on
deposit in the Cash Collateral Account) and the funds so
withdrawn shall be deposited in the Collection Account and
allocated as Principal Receivables (as defined in the Series
1994-1 Supplement) pursuant to Section 4.4 of the Series 1994-1
Supplement. If the Section 4.9 Payment Amount exceeds the
Section 4.9 Draw Amount, the Servicer shall cause the Trustee to
reduce the Class B Invested Amount by such excess (a "Class B
Reduction"), and such amount shall be allocated as Principal
Receivables (as defined in the Series 1994-1 Supplement)
pursuant to Section 4.4 of the Series 1994-1 Supplement. In the
event that such reduction would cause the Class B Invested
Amount to be a negative number, the Class B Invested Amount
shall be zero, and the Class A Invested Amount will be reduced
by an amount equal to (x) the Series Dilution Amount applicable
to Series 1994-1 and Series 1994-2 minus the sum of (i) the
Section 4.9 Draw Amount plus (ii) the Class B Invested Amount
prior to the reduction. In the event that such a reduction would
cause the Class B Invested Amount to be a positive number, the
Class A Invested Amount will be reduced by the excess, if any,
of (x) the Series Dilution Amount applicable to Series 1994-1
and Series 1994-2 over (y) the sum of the Section 4.9 Draw
Amount and the Class B Reduction. Each reduction to the Class A
Invested Amount referred to in this Section 4.9(a) is called a
"Class A Reduction", and the amount of such reduction shall be
allocated as Principal Receivables (as defined in the Series
1994-1 Supplement) pursuant to Section 4.4 of the Series 1994-1
Supplement. In the event that such reduction would cause the
Class A Invested Amount to be a negative number, the Class A
Invested Amount shall be zero, and the amounts on deposit in the
Principal Funding Account, if any, up to the excess of the
Series Dilution Amount applicable to Series 1994-1 and Series
1994-2 over the sum of the Class B Invested Amount and the Class
A Invested Amount prior to the reductions thereof, will be
withdrawn from the Principal Funding Account by the Trustee and
deposited in the Collection Account and allocated as Principal
Receivables (as defined in the Series 1994-1 Supplement)
pursuant to Section 4.4 of the Series 1994-1 Supplement.
(b) If the Class B Invested Amount, the Class A
Invested Amount or any amounts on deposit in the Cash Collateral
Account or Principal Funding Account are reduced pursuant to
Section 4.9(a) because of a failure of the Servicer or the
Seller to make, or give instructions to make, any payment or
deposit required to be made or given by the Seller pursuant to
Section 4.3(d) of the Agreement, the Seller shall, as
appropriate, as promptly as possible but in no event later than
five Business Days following such withdrawal, deposit or cause
to be deposited in the Principal Funding Account an amount equal
to the required payment, deposit or transfer. If, at any time,
the Seller shall deposit or cause to be deposited in the
Principal Funding Account such required payment, deposit or
transfer, the deposit shall be applied by the Trustee first to
reimburse the Class A Certificateholder for any Class A
Reductions, second to reimburse the Principal Funding Account
for any Principal Reductions, third to reimburse the Class B
Certificateholder for any Class B Reductions and fourth
<PAGE> 8
to reimburse the Cash Collateral Account for any Section 4.9
Draw Amounts. The Seller shall be obligated to deposit or cause
to be deposited in the Principal Funding Account an amount equal
to such required payment, deposit or transfer notwithstanding
any reimbursement of Class A Reductions, Principal Reductions or
Class B Reduction pursuant to Section 4.6(e).
(c) If the Servicer or the Seller fails to make, or
give instructions to make, any payment or deposit required to be
made or given by the Servicer or Seller, respectively, at the
time specified in the Agreement (including applicable grace
periods), the Trustee shall make such payment or deposit from
the applicable account without instruction from the Servicer or
Seller in an amount equal to the amount of such payment or
deposit (for amounts owing pursuant to Section 4.6). The Trustee
shall be required to make any such payment, deposit or
withdrawal hereunder only to the extent that the Trustee has
sufficient information to allow it to determine the amount
thereof; provided, however, that the Trustee shall in all cases
be deemed to have sufficient information to determine the amount
of interest payable to the Series 1994-2 Certificateholders on
each Distribution Date. The Servicer shall, upon request of the
Trustee, promptly provide the Trustee with all information
necessary to allow the Trustee to make such payment, deposit or
withdrawal. Such funds or the proceeds of such withdrawal shall
be applied by the Trustee in the manner in which such payment or
deposit should have been made by the Seller or the Servicer, as
the case may be.
SECTION 7. Class B Escrow Account. Article IV of the Supplement
is hereby amended by adding the following new Section 4.14 to the end thereof:
Section 4.14. Class B Escrow Account.
(a) The Paying Agent shall establish or shall cause to
be established and maintained with a Qualified Depository
Institution in the names of the Class A Certificateholders and
the Class B Certificateholders, a segregated escrow account (the
"Class B Escrow Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the
benefit of the Series 1994-2 Certificateholders. The Class B
Escrow Account shall be under the sole dominion and control of
the Paying Agent for the benefit of the Series 1994-2
Certificateholders as provided in Section 5.1. If, at any time,
the institution holding the Class B Escrow Account ceases to be
a Qualified Depository Institution, the Paying Agent shall,
within twenty Business Days, establish a new Class B Escrow
Account meeting the conditions specified above with a Qualified
Depository Institution and transfer any cash or any investments
to such new Class B Escrow Account, and from the date such new
Class B Escrow Account is established it shall be the "Class B
Escrow Account." Neither the Seller nor the Servicer, nor any
Person claiming by, through or under the Seller or Servicer,
shall have any right, title or interest in, or any right to
withdraw any amount from, the Class B Escrow Account.
<PAGE> 9
(b) Funds on deposit in the Class B Escrow Account
shall be invested by the Paying Agent in Permitted Investments
that will mature so that such funds will be available prior to
the Distribution Date following such investment. The Paying
Agent shall maintain possession of the negotiable instruments or
securities, if any, evidencing the Permitted Investments
described in clause (a) of the definition thereof from the time
of purchase thereof until maturity. On each Special Payment
Date, the Paying Agent shall withdraw the proceeds of such
investments from the Class B Escrow Account and pay such amounts
to the Class B Certificateholders in accordance with Section
5.1.
(c) If, on any Special Payment Date, the Class A
Invested Amount is reduced on account of a Class A Charge-Off
pursuant to Section 4.5 or a Class A Reduction pursuant to
Section 4.9, the Paying Agent shall withdraw from the Class B
Escrow Account the lesser of (i) the amount of such Class A
Charge-Off or Class A Reduction, as applicable and (ii) the
amount on deposit in the Class B Escrow Account, and shall pay
the amount so withdrawn to the Class A Certificateholders in
accordance with Section 5.1. If the Class A Certificateholders
are subsequently reimbursed for such Class A Charge-Off
(pursuant to Section 4.6(d) or otherwise) or Class A Reduction
(pursuant to Section 4.6(e) or otherwise), they shall deposit
(or cause the Trustee and the Paying Agent to deposit) such
reimbursements in the Class B Escrow Account; provided if the
aggregate amount withdrawn from the Class B Escrow Account
pursuant to this clause (c) is less than the aggregate amount of
Class A Charge-Offs or Class A Reduction, as applicable, then
the Class A Certificateholders shall be required to deposit (or
cause to be deposited) such reimbursements only to the extent
they exceed such shortfall.
(d) If on any Special Payment Date the Invested Amount
is reduced to zero, the Paying Agent shall withdraw all funds in
the Class B Escrow Account and distribute such amounts to the
Class B Certificateholders in accordance with Section 5.1.
(e) The Class B Certificateholders hereby pledge and
assign to the Class A Certificateholders, and hereby grant to
the Class A Certificateholders a security interest in, all of
the Class B Certificateholders' right, title and interest in and
to the Class B Escrow Account, including, without limitation,
all funds on deposit therein, all investments arising out of
such funds, all claims thereunder or in connection therewith,
and all cash, instruments, securities, rights and other property
at any time and from time to time received, receivable or
otherwise distributed in respect of such account, such funds or
such investments, and all money now or at any time in the
possession or under the control of, or in transit to such
account, or any bailee, agent or custodian of the Persons at
which such account is maintained.
<PAGE> 10
(f) The Paying Agent expressly acknowledges the pledge
made in clause (e) above and agrees to mark its books and
records accordingly.
SECTION 8. Cash Collateral Account. Article IV of the Supplement
is hereby amended by adding the following new Section 4.15 to the end thereof:
Section 4.15. Cash Collateral Account.
(a) The Trustee shall establish or shall cause to be
established and maintained with a Qualified Depository
Institution in the names of the Class A Certificateholders and
the Class B Certificateholders, a segregated cash deposit
account (the "Cash Collateral Account"), bearing a designation
clearly indicating that the funds deposited therein are held for
the benefit of the Series 1994-2 Certificateholders. The Cash
Collateral Account shall be under the sole dominion and control
of the Trustee for the benefit of the Series 1994-2
Certificateholders as provided below. If, at any time, the
institution holding the Cash Collateral Account ceases to be a
Qualified Depository Institution, the Trustee shall, within
twenty Business Days, establish a new Cash Collateral Account
meeting the conditions specified above with a Qualified
Depository Institution and transfer any cash or any investments
to such new Cash Collateral Account, and from the date such new
Cash Collateral Account is established it shall be the "Cash
Collateral Account." Neither the Seller nor the Servicer, nor
any Person claiming by, through or under the Seller or Servicer,
shall have any right, title or interest in, or any right to
withdraw any amount from, the Cash Collateral Account.
(b) On each Distribution Date, the Servicer shall
deposit (or cause to be deposited) the Seller's share of Shared
Excess Finance Charge Collections into the Cash Collateral
Account until such time as the amount in such account equals
$777,000.
(c) Funds on deposit in the Cash Collateral Account
shall be invested by the Trustee in Permitted Investments that
will mature so that such funds will be available prior to the
Distribution Date following such investment. The Trustee shall
maintain possession of the negotiable instruments or securities,
if any, evidencing the Permitted Investments described in clause
(a) of the definition thereof from the time of purchase thereof
until maturity. On each Distribution Date, the Trustee shall
withdraw the proceeds of such investments from the Cash
Collateral Account and pay such amounts to the Seller; provided,
that no such payment to the Seller shall be made if, after
giving effect to such payment, the amount in the Cash Collateral
Account would be less than (i) with respect to the Revolving
Period, $777,000, and (ii) with respect to the Early
Amortization Period or the Scheduled Amortization Period,
$750,000.
<PAGE> 11
(d) Funds shall be withdrawn from the Cash Collateral
Account as provided in Sections 4.5 and 4.9, and shall be
reimbursed to the Cash Collateral Account as provided in
Sections 4.6(d) and 4.6(e).
(e) Upon the commencement of an Early Amortization
Period or the Scheduled Amortization Period, the Trustee shall
withdraw from the Cash Collateral Account an amount equal to the
lesser of (i) $27,000 and (ii) the
<PAGE> 12
amount on deposit in the Cash Collateral Account, and shall pay
the amount so withdrawn to the Class A Certificateholders in
accordance with Section 5.1.
(f) If on any Special Payment Date, the Invested Amount
is reduced to an amount equal to or less than $750,000, the
Servicer shall instruct the Trustee to withdraw, and the Trustee
shall withdraw, from the Cash Collateral Account all amounts on
deposit therein and distribute such amounts in the following
manner and in the following priority:
(i) to the Class A Certificateholders, an amount equal
to the lesser of (A) the Class A Invested Amount and
(B) the amount withdrawn from the Cash Collateral
Account pursuant to this Section 4.15(e), which payment
shall in either case result in a reduction of the Class
A Invested Amount;
(ii) to the Class B Certificateholders, an amount equal
to the lesser of (A) the Class B Invested Amount and
(B) the remainder, if any, of the amount withdrawn
(after giving effect to amounts distributed to the
Class A Certificateholders pursuant to clause (i)
above), which payment shall in either case result in a
reduction of the Class B Invested Amount; and
(iii) to the Seller, the remainder, if any, of
amounts distributed to the Class B Certificateholders
pursuant to clause (ii) above.
SECTION 9. Miscellaneous. In all other respects the Supplement
is confirmed and ratified and shall continue in full force and effect.
Henceforth, references in the Supplement to "the Supplement," "this Supplement,"
"hereof," "hereto" or words of similar import shall in each case be deemed to
refer to the Supplement as hereby amended. This Amendment may be executed in any
number of counterparts, each of which shall be an original and all of which
shall constitute a single agreement.
<PAGE> 13
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee
have caused this Amendment to be duly executed by their respective officers as
of the day and year first above written.
SPIRIT OF AMERICA NATIONAL BANK,
Seller and Servicer
By:
Name: Kirk Simme
Title: President
FIRST UNION NATIONAL BANK,
Trustee and Paying Agent
By:
Name:
Title:
FASHION SPC, INC.
By:
Name:
Title:
Consented to and acknowledged:
BANQUE FRANCAISE DU COMMERCE EXTERIEUR,
NEW YORK BRANCH
By:
Name:
Title:
<PAGE> 1
EXHIBIT 10.2.10
CHARMING SHOPPES, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of this Employee Stock Purchase Plan (the
"Plan") of Charming Shoppes, Inc. (the "Company") is to encourage stock
ownership by employees of the Company and its Subsidiaries and thereby provide
employees with an incentive to contribute to the profitability and success of
the Company. The Plan, which is intended to qualify as an "employee stock
purchase plan" meeting the requirements of Section 423 of the Code, is for the
exclusive benefit of eligible employees of the Company and its Subsidiaries.
2. Definitions.
For purposes of the Plan, in addition to the terms defined in Section
1, terms are defined as set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cash Account" means the account maintained on behalf of
the Participant by the Custodian for the purpose of holding cash contributions
pending investment in Stock.
(c) "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code will be deemed to
include successor provisions thereto and regulations thereunder.
(d) "Custodian" means the broker - dealer or other financial
institution, including any successor appointed by the Board to act as custodian
under the Plan.
(e) "Discount Plan" means the Plan for any Offering Period for
which the Plan has been designated a Discount Plan in accordance with Section
3(c).
(f) "Earnings" means that portion of an Participant's salary
or wages which is designated as "regular pay" under the payroll system of the
Company and its Subsidiaries and received by a Participant for services rendered
during a specified pay period.
(g) "Enrollment Date" means the first business day of each
Offering Period.
<PAGE> 2
(h) "Fair Market Value" means the closing sale price of Stock
reported in the table entitled "NASDAQ National Market Issues" or any successor
table in the Wall Street Journal (or, if Stock is then principally traded on a
national securities exchange, in the table reporting composite transactions for
such exchange) for such date or, if no shares of Stock were traded on that date,
on the next preceding day on which there was such a trade.
(i) "Matching Plan" means the Plan for any Offering Period for
which the Plan has been designated a Matching Plan in accordance with Section
3(c).
(j) "Offering Period" means the three-month period beginning
on January 1, April 1, July 1, or October 1 of each year, except that the first
Offering Period under the Plan shall be the three-month period beginning April
1, 1995, or such other period as may be designated by the Board or the committee
specified under Section 3(a).
(k) "Participant" means an employee of the Company or a
Subsidiary who is participating in the Plan.
(l) "Purchase Date" means the fifth business day after the end
of each Offering Period.
(m) "Purchase Right" means a Participant's option to purchase
shares which is deemed to be outstanding during an Offering Period. A Purchase
Right represents an "option" as such term is used under Section 423 of the Code.
(n) "Stock" means the Common Stock, par value $.10 per share,
of the Company, and such other securities as may be substituted or resubstituted
for Stock under Section 4.
(o) "Stock Account" means the account maintained on behalf of
the Participant by the Custodian for the purpose of holding Stock acquired upon
investment under the Plan.
(p) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if each
of the corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.
3. Administration.
(a) Board Administration. The Plan will be administered by the
Board; provided, however, that the Board may delegate any administrative duties
and authority (other than authority to amend the Plan) to any Board committee or
to any officers or
<PAGE> 3
employees or committee thereof as the Board may designate (in which case
references herein to the Board will be deemed to mean the administrator to which
such duties and authority have been delegated). The Board will have full
authority to adopt, amend, suspend, waive, and rescind such rules and
regulations and appoint such agents as it may deem necessary or advisable to
administer the Plan, to correct any defect or supply any omission or reconcile
any inconsistency in the Plan and to construe and interpret the Plan and rules
and regulations thereunder, to furnish to the Custodian such information as the
Custodian may require, and to make all other decisions and determinations under
the Plan (including factual determinations and determinations relating to
eligibility). Any determination hereunder shall be final and binding on all
parties. No person acting in connection with the administration of the Plan
will, in that capacity, participate in deciding any matter relating to his or
her participation in the Plan.
(b) The Custodian. The Custodian will act as custodian under
the Plan, and will perform such duties as are set forth in the Plan and in any
agreement between the Company and the Custodian. The Custodian will establish
and maintain, as agent for Participants, Cash and Stock Accounts and any other
subaccounts as may be necessary or desirable for the administration of the Plan.
(c) Designation of Plan As Matching Plan or Discount Plan. The
Plan will be a Discount Plan for the initial Offering Period after the effective
date of the Plan. With respect to subsequent Offering Periods, the Board may
designate the Plan as either a Matching Plan or a Discount Plan for any Offering
Period that has not yet commenced; provided, however, that, in the absence of
any such designation by the Board for a particular Offering Period, the Plan
will continue to operate as the same type of Plan most recently designated in
this Section 3(c) or by the Board. Any change in the type of Plan under this
Section 3(c) must be communicated to Participants and eligible employees at
least 30 days in advance of the first Offering Period for which the change will
be effective.
(d) Waivers. The Board may waive or modify any requirement
that a notice or election be made or filed under the Plan a specified period in
advance in an individual case or by adoption of a rule or regulation under the
Plan, without the necessity of an amendment to the Plan.
(e) Other Administrative Provisions. The Company will furnish
information from its records as directed by the Board, and such records,
including as to a Participant's Earnings, will be conclusive on all persons
unless determined by the Board to be incorrect. Each Participant and other
person claiming benefits under the Plan must furnish to the Company in writing
an up-to-date mailing address and any other information as the Board or
Custodian may reasonably request. Any communication, statement, or notice mailed
with postage prepaid to any such Participant or other person at the last mailing
address filed with the Company will be deemed sufficiently given when mailed and
will be binding upon the named recipient.
<PAGE> 4
The Plan will be administered on a reasonable and nondiscriminatory basis. All
Participants will have equal rights and privileges (subject to the terms of the
Plan) with respect to Purchase Rights outstanding during any given Offering
Period.
4. Stock Subject to Plan. Subject to adjustment as hereinafter
provided, the total number of shares of Stock reserved and available for
issuance or which may be otherwise acquired upon exercise of Purchase Rights
under the Plan will be 2,000,000. Any shares of Stock delivered by the Company
under the Plan may consist, in whole or in part, of authorized and unissued
shares or treasury shares. The number and kind of such shares of Stock subject
to the Plan will be proportionately adjusted, as determined by the Board, in the
event of any extraordinary dividend or other distribution, recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event affecting the Stock.
5. Enrollment and Contributions.
(a) Eligibility. A full or part-time employee of the Company
or a Subsidiary may be enrolled in the Plan for any Offering Period if such
employee was continuously so employed during the 90 days preceding the
Enrollment Date, unless one of the following applies to the employee:
(i) Such person is at any time during the Offering Period both a
director or executive officer of the Company (i.e. any person
subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended) and a "highly
compensated employee" within the meaning of Section 414(q) of
the Code.
(ii) Such person would, immediately upon enrollment, be deemed to
own, for purposes of Section 423(b)(3) of the Code, an
aggregate of five percent or more of the total combined voting
power or value of all outstanding shares of all classes of the
Company or any Subsidiary; or
(iii) Such person is no longer employed by the Company or a Subsidiary.
The Company will notify an employee of the date as of which he or she is
eligible to enroll in the Plan, and will make available to each eligible
employee the necessary enrollment forms.
(b) Initial Enrollment. An employee who is eligible under Section
5(a) (or who will become eligible on or before a given Enrollment Date) may,
after receiving current information about the Plan, initially enroll in the Plan
by executing and filing with the Company's Human Resources Department a properly
completed enrollment form, including thereon the employee's election as to the
rate of payroll contributions for the
<PAGE> 5
Offering Period. To be effective for any Offering Period, such enrollment form
must be filed at least 15 days before the Enrollment Date for the Offering
Period.
(c) Automatic Reenrollment for Subsequent Offering Periods. A
Participant whose enrollment in and payroll contributions under the Plan
continues throughout an Offering Period will automatically be reenrolled in the
Plan for the next Offering Period unless (i) the Participant terminates
enrollment before the Enrollment Date for the next Offering Period in accordance
with Section 7(a) or (ii) on such Enrollment Date he or she is ineligible to
participate under Section 5(a). The initial rate of payroll contributions for a
Participant who is automatically reenrolled for an Offering Period will be the
same as the rate of payroll contribution in effect at the end of the preceding
Offering Period, unless the Participant files a new enrollment form at least 15
days before the Enrollment Date for the Offering Period designating a different
rate of payroll contributions.
(d) Payroll Contributions. A Participant will make contributions
under the Plan by means of payroll deductions from each payroll period which
ends during the Offering Period, at the rate elected by the Participant in his
or her enrollment form filed nearest to, but not later than, 15 days before the
Enrollment Date for the Offering Period (except that such rate may be changed
during the Offering Period to the extent permitted below). The rate of payroll
contributions elected by a Participant may not be less than one percent nor more
than ten percent of the Participant's Earnings for each payroll period, and only
whole percentages may be elected; provided, however, that the Board may specify
a lower minimum rate and higher maximum rate, subject to Section 8(c) hereof.
The foregoing and any election of a Participant notwithstanding, a Participant's
rate of payroll contributions will be adjusted downward by the Company at any
time or from time to time as necessary to ensure that the limit on the amount of
Stock purchased with respect to an Offering Period set forth in Section
6(a)(iii) or Section 4 is not exceeded. A Participant may elect to increase,
decrease, or discontinue payroll contributions for future Offering Periods by
filing a new enrollment form at least 15 days before the Enrollment Date for the
Offering Period designating a different rate of payroll contributions. In
addition, a Participant may elect to decrease or discontinue payroll
contributions during an Offering Period by filing a new enrollment form, such
change to be effective for any payroll period beginning at least 15 days after
such filing.
(e) Crediting Participant Payroll Contributions to Cash Accounts.
All payroll contributions by a Participant under the Plan will be credited to a
Cash Account maintained by the Custodian on behalf of the Participant. The
Custodian will credit payroll contributions upon receipt by the Custodian from
the Company of information, in such form as may be specified by the Custodian,
identifying the amount of payroll contribution to be deposited for each
Participant. The Company will deposit with the Custodian an amount equal to the
aggregate payroll contributions for the Offering Period (not otherwise repaid to
Participants under Section 7(b)) on or before the Purchase Date for such
Offering Period.
<PAGE> 6
(f) Crediting Company Matching Allocations to Cash Accounts. On or
before the Purchase Date for an Offering Period for which the Plan is a Matching
Plan, the Company will allocate to each Cash Account an amount equal to 15% of
the amount credited to such Cash Account during such Offering Period as payroll
contributions and then remaining in such Account to be applied to the purchase
of Stock upon exercise of the Purchase Right for such Offering Period. Such
allocation by the Company will be rounded to the nearest whole cent ($.01).
(g) No Interest on Cash Accounts. No amounts of interest will be
credited or payable by the Company on payroll contributions or by the Custodian
on cash balances in Participants' Cash Accounts pending investment in Stock.
6. Purchases of Stock
(a) Purchase Rights. Enrollment in the Plan for any Offering
Period by a Participant will constitute a grant by the Company of a Purchase
Right to such Participant for such Offering Period. Each Purchase Right will be
subject to the following terms:
(i) The purchase prices at which Stock will be purchased under a
Purchase Right will be as specified in Section 6(c).
(ii) Except as limited in (iii) below, the number of shares of Stock
that may be purchased upon exercise of the Purchase Right for an
Offering Period will equal the number of shares (including
fractional shares) that can be purchased at the purchase price
specified in Section 6(c) with the aggregate amount credited to
the Participant's Cash Account as of the Purchase Date (including,
for any Offering Period for which the Plan is a Matching Plan,
amounts credited as a result of the Company's matching allocation
under Section 5(f)).
(iii) The number of shares of Stock subject to a Participant's Purchase
Right for any Offering Period will not exceed the number derived
by dividing $6,250 by 100% of the Fair Market Value of one share
of Stock on the Enrollment Date for the Offering Period.
(iv) The Purchase Right will be automatically exercised on the Purchase
Date for the Offering Period.
(v) Payments by a Participant for Stock purchased under a Purchase
Right will be made only through payroll deduction in accordance
with Section 5(d) and (e).
<PAGE> 7
(vi) The Purchase Right will expire on the earlier of the Purchase Date
for the Offering Period or the date on which the Participant's
enrollment in the Plan terminates.
(b) Purchase of Stock. At or as promptly as practicable after the
Purchase Date for an Offering Period, amounts credited to each Participant's
Cash Account as of such Purchase Date (including, for any Offering Period for
which the Plan is a Matching Plan, amounts credited as a result of the Company's
matching allocation under Section 5(f)) will be applied by the Custodian to the
purchase of shares of Stock, in accordance with the terms of the Plan. For any
Offering Period for which the Plan is a Matching Plan, shares of Stock will be
purchased by the Custodian in transactions on the NASDAQ National Market System,
any securities exchange upon which Stock is traded, otherwise in the
over-the-counter market, or in negotiated transactions. For any Offering Period
for which the Plan is a Discount Plan, shares of Stock will be purchased by the
Custodian from the Company; shares sold by the Company may be authorized but
unissued shares or treasury shares, as permitted under Section 4 hereof. The
Custodian will aggregate the amounts in all Cash Accounts when purchasing Stock,
and shares so purchased will be allocated to each Participant's Stock Account in
proportion to the cash amounts withdrawn from such Participant's Cash Account.
Upon completion of purchases in respect of a Purchase Date (which will be
completed in not more than 30 days after the Purchase Date), all shares of Stock
so purchased for a Participant will be credited to the Participant's Stock
Account.
(c) Purchase Price. The purchase price of each share of Stock
purchased in respect of a Purchase Date will be determined as follows:
(i) For any Offering Period for which the Plan is a Matching Plan, the
purchase price of each share will equal 100% of the average cost
of all shares of Stock acquired in respect of such Purchase Date.
(ii) For any Offering Period for which the Plan is a Discount Plan, the
purchase price of each share will equal 85% of the lesser of (A)
the Fair Market Value of a share of Stock on the Enrollment Date
or (B) the Fair Market Value of a share of Stock on the Purchase
Date.
(d) Dividend Reinvestment; Other Distributions. Cash dividends on
any Stock credited to a Participant's Stock Account will be automatically
reinvested in additional shares of Stock; such amounts will not be available in
the form of cash to Participants. All cash dividends paid on Stock credited to
Participants' Stock Accounts will be paid over by the Company to the Custodian
at the dividend payment date. The Custodian will aggregate all purchases of
Stock in connection with dividend reinvestment for a given dividend payment
date. Purchases of Stock for purposes of dividend reinvestment will be made as
promptly as practicable (but not more than 30 days) after a dividend payment
date. The Custodian will make such purchases, as directed by the Board, either
(i) in transactions on the NASDAQ National Market
<PAGE> 8
System, any securities exchange upon which Stock is traded, otherwise in the
over-the-counter market, or in negotiated transactions, or (ii) directly from
the Company at 100% of the Fair Market Value of a share of Stock on the dividend
payment date. Any shares of Stock distributed as a dividend or distribution in
respect of shares of Stock or in connection with a split of the Stock credited
to a Participant's Stock Account will be credited to such Account. In the event
of any other non-cash dividend or distribution in respect of Stock credited to a
Participant's Stock Account, the Custodian will, if reasonably practicable and
at the direction of the Board, sell any property received in such dividend or
distribution as promptly as practicable and use the proceeds to purchase
additional shares of Common Stock in the same manner as cash paid over to the
Custodian for purposes of dividend reinvestment.
(e) Voting Rights. Each Participant will be entitled to vote the
number of shares of Stock credited to his or her Stock Account (including any
fractional shares credited to such account) on any matter as to which the
approval of the Company's shareholders is sought. If a Participant does not vote
or grant a valid proxy with respect to shares credited to his or her Stock
Account, such shares will not be voted. Similar procedures will apply in the
case of any consent solicitation of Company shareholders.
(f) Withdrawals and Transfers. Shares of Stock may be withdrawn
from a Participant's Stock Account, in which case one or more certificates for
whole shares may be issued in the name of, and delivered to, the Participant,
with such Participant receiving cash in lieu of fractional shares based on the
Fair Market Value of a share of Stock on the date of withdrawal. Alternatively,
whole shares of Stock may be withdrawn from a Participant's Stock Account by
means of a transfer to another broker-dealer or financial institution that
maintains an account for the Participant, together with the transfer of cash in
lieu of fractional shares based on the Fair Market Value of a share of Stock on
the date of withdrawal. Participants may not designate any other person to
receive shares of Stock withdrawn or transferred under the Plan. A Participant
seeking to withdraw or transfer shares of Stock must give instructions to the
Custodian in such manner and form as may be prescribed by the Custodian, which
instructions will be acted upon as promptly as practicable. Withdrawals and
transfers will be subject to any fees imposed in accordance with Section 8(a)
hereof.
(g) Excess Account Balances. If any amounts remain in a Cash
Account following a Purchase Date as a result of the limitation set forth in
Section 6(a)(iii), such amounts which resulted from payroll contributions will
be returned to the Participant by the Custodian as promptly as practicable, and
such amounts which resulted from matching allocations by the Company will be
returned to the Company by the Custodian as promptly as practicable.
7. Termination and Distributions.
<PAGE> 9
(a) Termination of Enrollment. A Participant's enrollment in the
Plan will terminate upon (i) the beginning of any payroll period or Offering
Period that begins after he or she files a written notice of termination of
enrollment with the Company, provided that such Participant will continue to be
deemed to enrolled with respect to any completed Offering Period for which
purchases have not been completed, (ii) such time as the Participant becomes
ineligible to participate under Section 5(a)(i) of the Plan, or (iii) the
termination of the Participant's employment by the Company and its Subsidiaries.
An employee whose enrollment in the plan terminates may again enroll in the Plan
as of any subsequent Enrollment Date that is at least 90 days after such
termination of enrollment if he or she satisfies the eligibility requirements of
Section 5(a) as of such Enrollment Date. A Participant's election to discontinue
payroll contributions will not constitute a termination of enrollment.
(b) Distributions. As soon as practicable after a Participant's
enrollment in the Plan terminates, amounts in the Participant's Cash Account
which resulted from payroll contributions will be repaid to the Participant and
amounts in the Participant's Cash Account which resulted from matching
allocations by the Company will be repaid to the Company. (If amounts credited
to the Participant's Cash Account have not yet been deposited by the Company
with the Custodian, the Company rather than the Custodian will make the
repayment to the Participant). The Custodian will continue to maintain the
Participant's Stock Account for the Participant until the earlier of such time
as the Participant directs the sale of all Stock in the Account, withdraws or
transfers all Stock in the Account, or one year after the Participant ceases to
be employed by the Company and its Subsidiaries. If a Participant's termination
of enrollment results from his or her death, all amounts payable will be paid to
his or her estate.
8. General.
(a) Costs. Costs and expenses incurred in the administration of
the Plan and maintenance of Accounts will be paid by the Company, to the extent
provided in this Section 8(a). Any brokerage fees and commissions for the
purchase of Stock under the Plan (including Stock purchased upon reinvestment of
dividends and distributions) will be paid by the Company, but any brokerage fees
and commissions for the sale of Stock under the Plan by a Participant will be
borne by such Participant. The rate at which such fees and commissions will be
charged to Participants will be determined by the Custodian or any broker-dealer
used by the Custodian (including an affiliate of the Custodian), and
communicated from time to time to Participants. In addition, the Custodian may
impose or pass through a reasonable fee for the withdrawal of Stock in the form
of stock certificates (as permitted under Section 6(f)), and reasonable fees for
other services unrelated to the purchase of Stock under the Plan, to the extent
approved in writing by the Company and communicated to Participants.
(b) Statements to Participants. The Custodian will reflect payroll
contributions, matching allocations (if any), purchases, sales, and withdrawals
and
<PAGE> 10
transfers of shares of Common Stock and other Plan transactions by appropriate
adjustments to the Participant's Accounts. The Custodian will, not less
frequently than quarterly, provide or cause to be provided a written statement
to the Participant showing the transactions in his or her Accounts and the date
thereof, the number of shares of Stock purchased or sold, the aggregate purchase
price paid or sales price received, the purchase or sales price per share, the
brokerage fees and commissions paid (if any), the total shares held for the
Participant's Stock Account (computed to at least three decimal places), and
other information.
(c) Compliance with Section 423. It is the intent of the Company
that this Plan comply in all respects with applicable requirements of Section
423 of the Code and regulations thereunder. Accordingly, if any provision of
this Plan does not comply with such requirements, such provision will be
construed or deemed amended to the extent necessary to conform to such
requirements.
9. General Provisions.
(a) Compliance With Legal and Other Requirements. The Plan, the
granting and exercising of Purchase Rights hereunder, and the other obligations
of the Company and the Custodian under the Plan will be subject to all
applicable federal and state laws, rules, and regulations, and to such approvals
by any regulatory or governmental agency as may be required. The Company may, in
its discretion, postpone the issuance or delivery of Stock upon exercise of
Purchase Rights until completion of such registration or qualification of such
Stock or other required action under any federal or state law, rule, or
regulation, listing or other required action with respect to any automated
quotation system or stock exchange upon which the Stock or other Company
securities are designated or listed, or compliance with any other contractual
obligation of the Company, as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Stock in compliance with applicable laws, rules, and regulations,
designation or listing requirements, or other contractual obligations.
(b) Limits on Encumbering Rights. No right or interest of a
Participant under the Plan, including any Purchase Right, may be pledged,
encumbered, or hypothecated to or in favor of any party, subject to any lien,
obligation, or liability of such Participant, or otherwise assigned,
transferred, or disposed of except pursuant to the laws of descent or
distribution, and any right of a Participant under the Plan will be exercisable
during the Participant's lifetime only by the Participant.
(c) No Right to Continued Employment. Neither the Plan nor any
action taken hereunder, including the grant of a Purchase Right, will be
construed as giving any employee the right to be retained in the employ of the
Company or any of its Subsidiaries, nor will it interfere in any way with the
right of the Company or any of its Subsidiaries to terminate any employee's
employment at any time.
<PAGE> 11
(d) Taxes. The Company or any Subsidiary is authorized to withhold
from any payment to be made to a Participant, including any payroll and other
payments not related to the Plan, amounts of withholding and other taxes due in
connection with any transaction under the Plan, and a Participant's enrollment
in the Plan will be deemed to constitute his or her consent to such withholding.
In addition, Participants may be required to advise the Company of sales and
other dispositions of Stock acquired under the Plan in order to permit the
Company to comply with tax laws and to claim any tax deductions to which the
Company may be entitled with respect to the Plan.
(e) Changes to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of shareholders or
Participants, except that any such action will be subject to the approval of the
Company's shareholders within one year after such Board action if such
shareholder approval is required by any federal or state law or regulation or
the rules of any automated quotation system or stock exchange on which the Stock
may then be quoted or listed, or if such shareholder approval is necessary in
order for the Plan to continue to meet the requirements of Section 423 of the
Code, and the Board may otherwise, in its discretion, determine to submit other
such actions to shareholders for approval; provided, however, that, without the
consent of an affected Participant, no amendment, alteration, suspension,
discontinuation, or termination of the Plan may materially and adversely affect
the rights of such Participant with respect to outstanding Purchase Rights
relating to any Offering Period that has been completed prior to such Board
action. The foregoing notwithstanding, upon termination of the Plan the Board
may elect to terminate all outstanding Purchase Rights at such time as the Board
may designate; in the event of such termination of any Purchase Right prior to
its exercise, all amounts contributed to the Plan which remain in a
Participant's Cash Account will be returned to the Participant (without
interest) as promptly as practicable.
(f) No Rights to Participate; No Shareholder Rights. No
Participant or employee will have any claim to participate in the Plan with
respect to Offering Periods that have not commenced, and the Company will have
no obligation to continue the Plan. No Purchase Right will confer on any
Participant any of the rights of a shareholder of the Company unless and until
Stock is duly issued or transferred and delivered to the Participant (or
credited to the Participant's Stock Account).
(g) Fractional Shares. Unless otherwise determined by the Board,
purchases of Stock under the Plan executed by the Custodian may result in the
crediting of fractional shares of Stock to the Participant's Stock Account. Such
fractional shares will be computed to at least three decimal places. Fractional
shares will not, however, be issued by the Company, and certificates
representing fractional shares will not be delivered to Participants under any
circumstances.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan
by the Board nor its submission to the shareholders of the Company for approval
will be
<PAGE> 12
construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
(i) Plan Year. The Plan will operate on a plan year which begins
on the first day of the first Offering Period and ends December 31, 1994, and
thereafter coincides with the calendar year.
(j) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan will be determined in
accordance with the Pennsylvania Business Corporation Law, to the extent
applicable, other laws (including those governing contracts) of the Commonwealth
of Pennsylvania, without giving effect to principles of conflicts of laws, and
applicable federal law.
(k) Effective Date. The Plan will become effective at such time as
the Plan has been approved by shareholders of the Company, at a meeting thereof,
by a vote sufficient to meet the requirements of Section 423(b)(2) of the Code.
AMENDMENTS
Section 2(j) amended pursuant to resolution of the Board of Directors adopted on
September 22, 1994.
Section 2(j) amended pursuant to Unanimous Written Consent of the Employee Stock
Purchase Plan Committee adopted on November 30, 1994.
Section 2(j) amended pursuant to Unanimous Written Consent of the Employee Stock
Purchase Plan Committee adopted on January 13, 1995.
Section 2(j) amended pursuant to Unanimous Written Consent of the Employee Stock
Purchase Plan Committee adopted on February 24, 1995.
<PAGE> 13
board/espplan
<PAGE> 1
EXHIBIT 10.2.11
CHARMING SHOPPES, INC.
RESTRICTED STOCK AWARD PLAN FOR ASSOCIATES
1. PURPOSE. The purpose of this Restricted Stock Award Plan for Associates (the
"Plan") is to assist Charming Shoppes, Inc. (the "Company") and its subsidiaries
in attracting, retaining, and rewarding associates, by enabling such associates
to acquire or increase a proprietary interest in the Company in order to promote
a closer identity of interests between such associates and the Company's
shareholders, and providing such associates with an increased incentive to
expend their maximum efforts for the success of the Company's business. To
accomplish this purpose, the Plan provides for discretionary awards of rights to
receive shares of Common Stock, $.10 par value per share ("Common Stock"),
issuable at the end of specified periods, and subject to a risk of forfeiture
and other conditions (including no entitlement to actual dividends, although
dividend equivalents will be paid) during such specified periods ("Restricted
Stock").
2. ADMINISTRATION.
(a) Authority of the Committee. The Plan shall be administered by a
committee (the "Committee") consisting of the Chief Executive Officer of the
Company, and such other officers of the Company as the Board of Directors (the
"Board") or Compensation Committee of the Board may from time to time designate.
The Committee shall have authority to take the following actions, in each case
subject to and consistent with the provisions of the Plan:
(i) to select associates to whom Restricted Stock shall be
awarded;
(ii) to determine the number of shares of Restricted Stock to be
awarded, the terms and conditions of such Restricted Stock
(including, but not limited to, waivers and accelerations
of the lapse of restrictions), and all other matters to be
determined in connection with Restricted Stock;
(iii) to adopt, amend, suspend, waive, and rescind such rules and
regulations, prescribe the form of each agreement
evidencing Restricted Stock (an "Agreement"), which need
not be identical for each Participant, and appoint such
agents as the Committee may deem necessary or advisable to
administer the Plan;
(iv) to correct any defect or supply any omission or reconcile
any inconsistency in the Plan and to construe and interpret
the Plan, rules and regulations, any Agreement, and any
other document hereunder; and
(v) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee
may deem necessary or advisable for the administration of
the Plan.
(b) Manner of Exercise of Committee Authority. Any action of the
Committee with respect to the Plan shall be final, conclusive, and binding on
all persons, including the Company, subsidiaries, associates awarded Restricted
Stock which has not yet been settled ("Participants"), and any person claiming
any rights under the Plan from or through any Participant, except that the Board
or the Compensation Committee thereof may take action within a reasonable time
after any such Committee action superseding or overruling such Committee action.
A memorandum signed by all members of the Committee shall constitute the act of
the Committee without the necessity, in such event, to hold a meeting. The
Committee may delegate to officers or managers of the Company or any subsidiary
the authority, subject to such terms as the Committee shall determine, to
perform administrative functions under the Plan, to the extent permitted under
applicable law.
(c) Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary or any agent or professional assisting in the administration of the
Plan. No member of the Committee, nor any officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and any officer or employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.
<PAGE> 2
3. STOCK SUBJECT TO PLAN; MAXIMUM ANNUAL AWARD. The total number of shares of
Common Stock reserved and available for issuance in settlement of Restricted
Stock under the Plan shall be 200,000, subject to adjustment as provided in
Section 9(b) of the Plan. Such shares may consist, in whole or in part, of
authorized and unissued shares or treasury shares; provided, however, that if,
at the time shares of Common Stock are to be issued to a Participant in
settlement of Restricted Stock, the Common Stock is designated for quotation in
the Nasdaq National System or listed on a national securities exchange, such
Participant has become a director or executive officer of the Company, and,
therefore, such Participant's acquisition of Common Stock originally issued by
the Company would be subject to the requirement of shareholder approval under
applicable Nasdaq National System or exchange rules, the shares to be issued to
such Participant in settlement of the Restricted Stock shall consist only of
treasury shares then held by the Company. If an award of Restricted Stock is
forfeited, the shares subject to such award will again be available for awards
of Restricted Stock under the Plan.
4. ELIGIBILITY. Any person who is, at the date Restricted Stock is to be awarded
to such person (the "Date of Award"), an associate employed by the Company or
any subsidiary of the Company shall be eligible for an award of Restricted
Stock, except that a person who is, at the Date of Award, a director or
executive officer of the Company shall not be eligible for such award of
Restricted Stock.
5. AWARDS OF RESTRICTED STOCK. The Committee may award Restricted Stock to an
associate who is eligible under Section 4, subject to the terms of the Plan.
Restricted Stock shall be subject to the terms of a Restricted Stock Agreement
executed by the Company and the Participant. The Restricted Stock Agreement, the
initial form of which is shown in Exhibit A attached hereto, shall contain such
terms and conditions not inconsistent with the Plan as the Committee may from
time to time approve (which terms and conditions may vary from those set forth
in Exhibit A), subject to the following:
(a) Consideration for Restricted Stock. Awards of Restricted Stock shall
be made for the general purposes set forth in Section 1 of the Plan, in order to
secure the benefits of the Participant's continued service to the Company during
the period the award is outstanding. A Participant shall not be required to pay
any cash consideration or other tangible or definable consideration for the
Restricted Stock, nor may a Participant choose to receive other compensation in
lieu of Restricted Stock awarded hereunder. Awards shall be granted in the
discretion of the Committee, and no negotiation shall take place between the
Company and any Participant as to the amount, timing, or other terms of an award
of Restricted Stock hereunder.
(b) Restrictions Generally; Restricted Period. Restricted Stock granted
under the Plan shall be subject to the to the risk of forfeiture under Section
5(c) and restrictions on transferability under Section 5(d) until the expiration
of the period specified under Section 5(b) and 5(c) (the "Restricted Period").
The Restricted Period shall begin at the Date of Award of the Restricted Stock
and shall expire, as to one-third of the number of shares of such Restricted
Stock (rounded to the nearest whole number of shares or including any fractional
share calculated to at least three decimal places, as determined by the
Committee) awarded to the Participant, at the close of business on each of the
first, second, and third anniversaries of the Date of Award; provided, however,
that the expiration of the Restricted Period applicable to such Restricted Stock
shall be automatically accelerated in the circumstances and to the extent
specified in Section 5(c) or in the event of a Change of Control as specified
under Section 8, and the Committee may otherwise, in its discretion, accelerate
the expiration of the Restricted Period applicable to any Restricted Stock.
(c) Termination of Participant's Employment. During the applicable
Restricted Period, if there occurs a termination of Participant's employment
immediately after which he or she is not a full or part-time employee of the
Company or any subsidiary, the following provisions relating to, in some cases,
acceleration of the expiration of the Restricted Period applicable to such
Participant's Restricted Stock and, in other cases, forfeiture of such
Restricted Stock, shall apply:
(i) Death, Disability, and Retirement. In the event termination
of employment results from the Participant's death,
Disability (as defined below), or normal retirement at age
65 or thereafter ("Normal Retirement") or early retirement
at or after age 60 and prior to age 65 with the consent of
the Company pursuant to any retirement plan ("Early
Retirement"), the Restricted Period applicable to the
Participant's Restricted Stock shall expire at the time of
such termination. For purposes of the Plan, the existence
of a "Disability" shall be determined by, or in accordance
with criteria and standards adopted by, the Committee.
<PAGE> 3
(ii) Termination of Employment for the Convenience of the
Company. In the event termination of employment results
from an involuntary termination of the Participant for the
convenience of the Company, other than a termination for
"Cause" (as defined below), any Restricted Period that
would have expired on the next anniversary of the Date of
Award after such termination shall be accelerated so as to
expire at the date of such termination, but any Restricted
Stock the Restricted Period of which is not so accelerated
and has not expired by the date of such termination shall
be forfeited. For purposes of the Plan, "Cause" shall mean
the Participant's neglect, refusal, or failure to fulfill
his or her employment duties and responsibilities, other
than for reasons of sickness, accident, or other similar
causes beyond the Participant's control. Factual
determinations regarding whether a Participant has engaged
in such neglect, refusal or failure and has therefore been
terminated for "Cause" shall be made in the sole judgment
of the Committee.
(iii) Other Terminations of Employment. In the event of
termination of the Participant's employment voluntarily by
the Participant, involuntarily by the Company for Cause, or
for any reason other than those specified in Sections
5(c)(i) and (ii) above, any Restricted Stock the Restricted
Period of which has not expired at the date of such
termination shall be forfeited.
(d) Nontransferability. During the applicable Restricted Period,
Restricted Stock and all rights relating thereto shall not be transferable or
assignable by a Participant, other than by will or the laws of descent and
distribution, and any right relating to Restricted Stock may be exercised,
during the lifetime of the Participant, only by the Participant or his or her
guardian or legal representative. In addition, during the applicable Restricted
Period such Restricted Stock shall not be pledged, hypothecated, or otherwise
encumbered in any way or subject to execution, attachment, or similar process,
except with the express written consent of the Committee.
(e) Dividend Equivalents. A participant shall be entitled to receive
dividends equivalents in respect of Restricted Stock, as follows:
(i) Relating to Regular Cash Dividends. If the Company declares
and pays any regular quarterly cash dividend or
distribution on Common Stock, the record date of which is
prior to the expiration of the Restricted Period applicable
to a Participant's Restricted Stock, the Company shall pay
to the Participant, as promptly as practicable after the
payment date of such dividend or distribution, a cash
amount equal to the amount of cash actually paid as a
dividend or distribution per share of Common Stock
multiplied by the number of the shares of such Restricted
Stock.
(ii) Relating to Extraordinary Stock Dividends and Stock Splits.
If the Company declares and pays a dividend or distribution
in the form of Common Stock payable on Common Stock, or
their occurs a forward stock split of the Common Stock, the
record date of which is prior to the expiration of the
Restricted Period applicable to a Participant's Restricted
Stock, the Company shall credit to the participant a number
of shares of additional Restricted Stock (which may either
include any fractional share, provide for cash in lieu of
any fractional share, or round off any such fractional
share to the nearest whole share without payment of cash in
lieu thereof, as determined by the Committee) equal to the
number of shares of Common Stock or distributed as a result
of the stock split per share of Common Stock multiplied by
the number of shares of such Restricted Stock.
(iii) Relating to Other Extraordinary Dividends. If the Company
declares and pays an extraordinary dividend or distribution
in the form of cash or other property (other than Common
Stock) payable on Common Stock, the record date of which is
prior to the expiration of the Restricted Period applicable
to a Participant's Restricted Stock, the Company shall, in
accordance with the determination of the Committee prior to
the payment date for such dividend or distribution, either
(A) pay to the Participant, as promptly as practicable
after the payment date of such dividend or distribution, a
cash amount equal to the amount of cash actually paid, plus
the fair market value at such record date of any property
other than Common Stock actually paid, as a dividend or
distribution per share of Common Stock multiplied by the
number of shares of such Restricted Stock of the
Participant, (B) distribute to the Participant, as promptly
as practicable
<PAGE> 4
after the payment date of such dividend or distribution,
property of the type and in the amount distributed in
respect of one share of Common Stock for each share of such
Restricted Stock of the Participant, or (C) credit to such
Participant, as of the payment date for such dividend or
distribution, the aggregate amount that would have been
payable under (A) above, which amount shall not be paid
directly but shall instead be deemed to be reinvested, as
of the dividend or distribution payment date, in a number
of shares of additional Restricted Stock (which may either
include any fractional share, provide for cash in lieu of
any fractional share, or round off any such fractional
share to the nearest whole share without payment of cash in
lieu thereof, as determined by the Committee) determined by
dividing such aggregate amount by the Fair Market Value (as
defined below) per share of Common Stock on the dividend or
distribution payment date.
(iv) Restrictions Applicable to Restricted Stock Resulting from
Stock Dividends or Stock Splits. Additional shares of
Restricted Stock credited under Section 5(e)(ii) or (iii)
will be subject to the same Restricted Period (including
forfeiture conditions under Section 5(c) and
nontransferability conditions under Section 5(d)) as
applied to the Restricted Stock with respect to which such
additional shares were credited. No such additional
Restricted Stock will be credited to a Participant in
respect of Restricted Stock forfeited under Section 5(c) on
or before the payment date for the dividend or
distribution.
A Participant shall not be entitled to receive actual dividends in
respect of Restricted Stock prior to the issuance of Common Stock in settlement
thereof.
(f) Definition of Fair Market Value. "Fair Market Value" as of a given
date means the closing sale price of Common Stock reported in the table entitled
"Nasdaq National Market Issues" or any successor table in the Wall Street
Journal (or, if Common Stock is then principally traded on a national securities
exchange, in the table reporting composite transactions for such exchange) for
such date or, if no shares of Common Stock were traded on that date, on the next
preceding day on which there was such a trade.
6. SETTLEMENT. Restricted Stock not forfeited under Section 5(c) shall be
settled by issuance and delivery, on the date on which the Restricted Period
applicable to such Restricted Stock expires or as promptly as practicable
thereafter, to the Participant, of a number of shares of Common Stock equal to
the number of shares of such Restricted Stock. The Committee may, in its
discretion, make delivery of shares hereunder by depositing such shares into an
account maintained for the Participant (or of which the Participant is a joint
owner, with the consent of the Participant) established in connection with the
Company's Employee Stock Purchase Plan or another employee stock purchase or
dividend reinvestment plan providing for investment in Common Stock and under
which the Participant's rights are similar in nature to those under a stock
brokerage account. If the Committee determines to settle Restricted Stock by
making a deposit of shares into such an account, the Committee may settle any
fractional share by means of such deposit, but the Committee may instead pay
cash in lieu of fractional shares in any settlement of Restricted Stock as to
which the Committee determines that such deposit of fractional shares is not
practicable, and in no event will the Company in fact issue fractional shares.
Upon settlement of Restricted Stock, all obligations of the Company in respect
of such Restricted Stock award shall be terminated.
7. WITHHOLDING. The Company and any subsidiary may deduct from any payment to be
made to a Participant any amount that federal, state, local, or foreign tax law
requires to be withheld with respect to the settlement of Restricted Stock. At
the election of the Committee, the Company may withhold from the shares of
Common Stock to be delivered upon expiration of the Restricted Period that
number of shares having a Fair Market Value, at the date such Restricted Period
expired, equal to the amount of such withholding taxes.
8. CHANGE OF CONTROL PROVISIONS.
(a) Acceleration of Expiration of Restrictions. Upon the occurrence of a
Change of Control after the grant of Restricted Stock and while such Restricted
Stock is outstanding, the Restricted Period applicable to such Restricted Stock
shall immediately expire.
(b) Definitions of Certain Terms. For purposes of this Plan, the
following definitions shall apply:
<PAGE> 5
(i) "Beneficial Ownership" and Related Terms. "Beneficial
Owner," "Beneficially Owns," and "Beneficial Ownership"
shall have the meanings ascribed to such terms for purposes
of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules thereunder,
except that, for purposes of this Section 8, "Beneficial
Ownership" (and the related terms) shall include Voting
Securities that a Person has the right to acquire pursuant
to any agreement, or upon exercise of conversion rights,
warrants, options or otherwise, regardless of whether any
such right is exercisable within 60 days of the date as of
which Beneficial Ownership is to be determined.
<PAGE> 6
(ii) "Change of Control." "Change of Control" means and shall be
deemed to have occurred if
(A) any Person, other than the Company or a Related Party,
acquires directly or indirectly the Beneficial Ownership of
any Voting Security of the Company and immediately after
such acquisition such Person has, directly or indirectly,
the Beneficial Ownership of Voting Securities representing
20% or more of the total voting power of all the then
outstanding Voting Securities; or
(B) those individuals who as of January 1, 1995 constitute
the Board or who thereafter are elected to the Board and
whose election, or nomination for election, to the Board
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors as
of January 1, 1995 or whose election or nomination for
election was previously so approved, cease for any reason
to constitute a majority of the members of the Board; or
(C) the shareholders of the Company approve a merger,
consolidation, recapitalization, or reorganization of the
Company, a reverse stock split of outstanding Voting
Securities, or an acquisition of securities or assets by
the Company (a "Transaction"), or consummation of such a
Transaction if shareholder approval is not obtained, other
than a Transaction which would result in the holders of
Voting Securities having at least 80% of the total voting
power represented by the Voting Securities outstanding
immediately prior thereto continuing to hold Voting
Securities or voting securities of the surviving entity
having at least 60% of the total voting power represented
by the Voting Securities or the voting securities of such
surviving entity outstanding immediately after such
Transaction and in or as a result of which the voting
rights of each Voting Security relative to the voting
rights of all other Voting Securities are not altered;
provided, however, a Change of Control shall not be deemed
to have occurred if the Committee shall have determined, by
action taken prior to the approval of the Transaction by
shareholders or consummation of the Transaction if
shareholder approval is not obtained, that such Transaction
shall not constitute a Change of Control for purposes of
all Restricted Stock then outstanding under the Plan, which
determination, if made with respect to a Transaction, shall
not be deemed to constitute a determination with respect to
any subsequent Transaction; or
(D) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially
all of the Company's assets other than any such transaction
which would result in Related Parties owning or acquiring
more than 50% of the assets owned by the Company
immediately prior to the transaction.
(iii) "Person." "Person" shall have the meaning ascribed for
purposes of Section 13(d) of the Exchange Act and the rules
thereunder.
(iv) "Related Party." "Related Party" means (A) a majority-owned
subsidiary of the Company; or (B) a trustee or other
fiduciary holding securities under an employee benefit plan
of the Company or any majority-owned subsidiary of the
Company; or (C) a corporation owned directly or indirectly
by the shareholders of the Company in substantially the
same proportion as their ownership of Voting Securities; or
(D) if, prior to any acquisition of a Voting Security which
would result in any Person Beneficially Owning more than
10% of any outstanding class of Voting Security and which
would be required to be reported on a Schedule 13D or an
amendment thereto, the Board approved the initial
transaction giving rise to an increase in Beneficial
Ownership in excess of 10% and any subsequent transaction
giving rise to any further increase in Beneficial
Ownership; provided, however, that such Person has not,
prior to obtaining Board approval of any such transaction,
publicly announced an intention to take actions which, if
consummated or successful (at a time such Person has not
been deemed a "Related Party"), would constitute a Change
of Control.
(v) "Voting Securities." "Voting Securities" means any
securities of the Company which carry the right to vote
generally in the election of directors.
<PAGE> 7
9. GENERAL PROVISIONS.
(a) Compliance With Legal and Other Requirements. The award and
settlement of Restricted Stock and other obligations of the Company under the
Plan will be subject to all applicable federal and state laws, rules, and
regulations, and to such approvals by any regulatory or governmental agency as
may be required. The Company may, in its discretion, postpone the issuance or
delivery of Common Stock upon the expiration of any Restricted Period until
completion of any required action under any federal or state law, rule, or
regulation, listing or other required action with respect to any automated
quotation system or stock exchange upon which the Common Stock or other Company
securities are designated or listed, or compliance with any other contractual
obligation of the Company, as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as the Company may consider appropriate in connection with the
issuance or delivery of Common Stock in compliance with applicable laws, rules,
and regulations, designation or listing requirements, or other contractual
obligations.
(b) Adjustments. In the event that the Committee shall determine that
any extraordinary dividend or distribution (whether in the form of cash, Common
Stock, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or event, affects the
Common Stock such that an adjustment is appropriate to carry out the purposes of
the Plan and to prevent dilution or enlargement of the rights of Participants
under the Plan (after taking into account any dividend equivalents paid or
credited and/or Restricted Stock credited under Section 5(e) to Participants as
a result of such transaction or event), then the Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and kind of shares
of Common Stock which may thereafter be issued under Section 3 in connection
with Restricted Stock, and (ii) the number and kind of shares of Common Stock
issuable in respect of then outstanding Restricted Stock. For purposes of the
Plan, the term "Common Stock" shall include any security that may be substituted
or resubstituted for Common Stock pursuant to this Section 9(b).
(c) No Right to Continued Employment. Neither the Plan nor any action
taken hereunder, including the award of Restricted Stock, will be construed as
giving any associate the right to be retained in the employ of the Company or
any of its subsidiaries, nor will it interfere in any way with the right of the
Company or any of its subsidiaries to terminate any associate's employment at
any time.
(d) No Rights to Participate; No Shareholder Rights. No Participant or
employee will have any claim to participate in the Plan, and the Company will
have no obligation to continue the Plan. An award of Restricted Stock will
confer on the Participant none of the rights of a shareholder of the Company
(including no rights to vote or receive dividends or distributions) until the
expiration of the Restricted Period applicable to such Restricted Stock, and
then only to the extent that such Restricted Stock has not otherwise been
forfeited by the Participant.
(e) Changes to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of Participants;
provided, however, that, without the consent of an affected Participant, no such
action shall materially and adversely affect the rights of such Participant with
respect to outstanding Restricted Stock.
(f) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan will be determined in
accordance with the Pennsylvania Business Corporation Law, to the extent
applicable, other laws (including those governing contracts) of the Commonwealth
of Pennsylvania, without giving effect to principles of conflicts of laws, and
applicable federal law.
10. EFFECTIVE DATE AND TERMINATION OF PLAN. The Plan shall become effective on
January 26, 1995. Unless earlier terminated by the Board under Section 9(e), the
Plan shall terminate at such time as no shares of Common Stock remain available
for delivery under the Plan and no Restricted Stock previously awarded under the
Plan remains outstanding.
<PAGE> 8
ADOPTED BY THE BOARD OF DIRECTORS: JANUARY 26, 1995
<PAGE> 1
EXHIBIT 10.2.12
CHARMING SHOPPES, INC.
1996 RESTRICTED STOCK AWARD PROGRAM
1. PURPOSE. This 1996 Restricted Stock Award Program (the "Plan") is implemented
under the Incentive Program for the fiscal year ending February 1, 1997 (the
"IP") and, to the extent specified herein, under the 1993 Employees' Stock
Incentive Plan (the "1993 Plan") of Charming Shoppes, Inc. (the "Company") in
order to provide an additional incentive to certain associates to promote the
success of the Company and otherwise to further the purposes of the IP and the
1993 Plan. The Plan provides for grants to associates of the Company and its
subsidiaries of rights to receive shares of Common Stock issuable not later than
April 15, 1997, which awards are subject to a risk of forfeiture to the extent
specified performance goals under the IP for fiscal 1997 are not met and to
other risks of forfeiture and conditions ("Restricted Stock"). Restricted Stock
is intended to constitute a supplement to the Participant's cash incentive award
under the IP. Capitalized terms used in the Plan but not defined herein shall
have the same meanings as defined in the 1993 Plan.
2. ADMINISTRATION.
(a) Authority. The Plan shall be administered by the Committee then
authorized to administer the IP (the "Committee"); provided, however, that
actions and determinations relating to Restricted Stock granted under the 1993
Plan shall be taken by such committee or other persons as may be specified under
the 1993 Plan. The Committee may delegate authority with respect to actions and
determinations under the Plan relating to persons who are not, at the time of
any such action or determination, subject to Section 16 of the Exchange Act with
respect to the Company (a "Section 16 Insider").
(b) Manner of Exercise of Authority. Any action of the Committee or its
delegatee with respect to the Plan shall be final, conclusive, and binding on
all persons, including the Company, subsidiaries, associates granted Restricted
Stock which has not yet been settled ("Participants"), and any person claiming
any rights under the Plan from or through any Participant, except that the
Committee may take action within a reasonable time after any such action
superseding or overruling a prior action.
(c) Limitation of Liability. Each member of the Committee or delegatee
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him by any officer or other employee of the Company or
any subsidiary or any agent or professional assisting in the administration of
the Plan, such member or person shall not be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and such member or person shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.
3. STOCK SUBJECT TO PLAN.
(a) Section 16 Insiders' Restricted Stock. Shares issued in settlement of a
Participant's Restricted Stock, if such Participant was a Section 16 Insider at
the time of grant or at the time of the lapse of the risk of forfeiture upon
achievement of performance objectives under the IP, shall be shares reserved and
available under the 1993 Plan, if and to the extent then required to ensure that
such Participant does not have a non-exempt purchase under Section 16 of the
Exchange Act in connection with his or her acquisition of Restricted Stock and
to the extent required so that the Plan complies with applicable stockholder
approval requirements of the Nasdaq National Market. If Restricted Stock subject
to this Section 3(a) is forfeited, the shares otherwise issuable will be
available for grants of other awards under the 1993 Plan to the extent specified
in the 1993 Plan.
(b) Other Participants' Restricted Stock. Subject to adjustment as provided
in Section 9(b) of the Plan, a total of 350,000 shares of Common Stock are
reserved and available for issuance in settlement of Restricted Stock in the
case of Participants other than those specified in Section 3(a). Such shares may
consist, in whole or in part, of authorized and unissued shares or treasury
shares. If Restricted Stock subject to this Section 3(b) is forfeited, the
shares otherwise issuable will be available for settlement of other grants of
Restricted Stock subject to this Section 3(b).
<PAGE> 2
4. ELIGIBILITY. Restricted Stock shall be granted to the associates identified
on Exhibit A hereto. Such associates are currently serving in jobs with a
designated impact level not higher than level four nor lower than level ten. In
addition, any person who, prior to January 31, 1997, becomes an associate whose
job has a designated impact level falling within such range of impact levels may
be granted Restricted Stock under the Plan, in the discretion and subject to
such additional terms as may be specified by the Committee. Such additional
associates shall be named on Exhibit A.
5. GRANTS OF RESTRICTED STOCK. Each associate named on Exhibit A hereto (a
"Participant") shall be granted the number of shares of Restricted Stock equal
to 10% of such Participant's annual salary as an associate, as in effect on
February 23, 1996, divided by $3.9375, the fair market value of Common Stock on
that date (such number of shares of Restricted Stock is set forth opposite the
name of the associate on Exhibit A). Such Restricted Stock shall be subject to
the terms and conditions set forth in the Plan and in the Restricted Stock
Agreement executed by the Company and the Participant, the general form of which
is attached hereto as Exhibit B, including the following:
(a) Consideration for Restricted Stock. Restricted Stock shall be granted
for the general purposes set forth in Section 1 of the Plan and to help secure
the benefits of the Participant's continued service to the Company during the
period the award is outstanding. A Participant shall not be required to pay any
cash consideration or other tangible or definable consideration for the
Restricted Stock, nor may a Participant choose to receive the Restricted Stock
in lieu of other compensation or other compensation in lieu of Restricted Stock.
No negotiation shall take place between the Company and any Participant as to
the amount, timing, or other terms of an award of Restricted Stock.
(b) Risks of Forfeiture. Restricted Stock granted under the Plan shall be
subject to the following risks of forfeiture, except as provided in Section 8:
(i) In the event that the Company fails to achieve at least 70% of the
corporate targeted performance goal under the IP, or if the
Participant fails to achieve at least 70% of the Participant's
individual performance goals under the IP, or if the Participant fails
to achieve at least 70% of any applicable profit center goals under
the IP, the Participant will forfeit 100% of the Restricted Stock.
(ii) In the event the Company achieves at least 70% , but less than
100%, of the corporate targeted performance goals under the IP, the
Participant achieves at least 70% of the Participant's individual
performance goals under the IP, and the Participant achieves at least
70% of any applicable profit center goal under the IP, the Participant
will forfeit a percentage of the Restricted Stock equal to 100% of the
Restricted Stock minus the weighted average of the percentages of (a)
the targeted performance goals under the IP achieved by the Company
(up to 100%), (b) the individual performance goals under the IP
achieved by the Participant (up to 100%), and (c) if applicable, any
of the profit center goals achieved by the Participant (up to 100%).
The weight given these factors will be the same as the weight
applicable under the IP.
(iii) In the event that the Participant is not continuously employed
as an associate serving in a job with a designated impact level of at
least level ten from the effective date of the Plan through the
Distribution Date (as hereinafter defined), all of the Participant's
Restricted Stock (regardless of the fact that such shares may not have
been forfeited under Section 5(b)(i) and (ii)) shall be forfeited.
The Committee will determine the extent to which targeted performance goals
have been achieved under the IP not later than April 15, 1997. Except as
provided in Section 8, the date on which the Committee makes such determination
for a given Participant shall be the "Distribution Date" for such Participant.
(c) Nontransferability. Restricted Stock and all rights relating thereto
shall not be transferable or assignable by a Participant, other than by will or
the laws of descent and distribution, and shall not be pledged, hypothecated, or
otherwise encumbered in any way or subject to execution, attachment, or similar
process.
(d) Dividend Equivalents. A Participant shall be entitled to receive
dividends equivalents in respect of Restricted Stock, as follows:
<PAGE> 3
(i) Dividends Other Than Stock Dividends. If the Company declares and
pays any dividend or distribution on Common Stock in the form of cash
or any other property other than Common Stock, the record date of
which is prior to the Participant's Distribution Date the Company
shall credit to the Participant, as of the payment date of such
dividend or distribution, a number of additional shares of Restricted
Stock determined by multiplying (A) the amount of cash actually paid
plus the fair market value at such payment date of any such property
actually paid as a dividend or distribution per share of Common Stock
times (B) the number of shares of such Restricted Stock credited to
the Participant at the record date and dividing the product by (C) the
Fair Market Value (as hereinafter defined) per share of Common Stock
on the dividend or distribution payment date.
(ii) Stock Dividends and Stock Splits. If the Company declares and
pays a dividend or distribution in the form of Common Stock payable on
Common Stock, or their occurs a forward stock split of the Common
Stock, the record date of which is prior to the Participant's
Distribution Date, the Company shall credit to the Participant a
number of shares of additional Restricted Stock equal to the number of
shares of Common Stock paid as a dividend or distribution per share of
Common Stock or distributed as a result of the stock split per share
of Common Stock multiplied by the number of shares of Restricted Stock
credited to the Participant on the record date.
(iii) Other Terms Applicable to Restricted Stock Resulting from
Dividends or Splits. Additional shares of Restricted Stock credited
under this Section 5(d) will be subject to the same terms, including
the risk of forfeiture, as other Restricted Stock. No such additional
Restricted Stock will be credited to a Participant in respect of
Restricted Stock forfeited under Section 5(b) on or before the payment
date for the dividend or distribution.
A Participant shall not be entitled to receive actual dividends in respect
of Restricted Stock prior to the issuance of Common Stock in settlement thereof.
(e) Definition of "Fair Market Value." "Fair Market Value" as of a given
date means the closing sale price of Common Stock reported in the table entitled
"Nasdaq National Market Issues" or any successor table in the Wall Street
Journal (or, if Common Stock is then principally traded on a national securities
exchange, in the table reporting composite transactions for such exchange) for
such date or, if no shares of Common Stock were traded on that date, on the next
preceding day on which there was such a trade.
(f) Crediting of Fractional Shares of Restricted Stock. If any transaction
or event under the Plan results in the Participant being credited with
fractional shares of Restricted Stock, such fractional shares will be credited
to not less than three decimal places.
(g) Additional Provisions Relating to Grants Under Section 3(a). With
respect to any grant of Restricted Stock under Section 3(a), all of the terms
and conditions of the 1993 Plan are hereby incorporated by reference, and, if
any provision of the Plan or a Restricted Stock Agreement relating thereto
conflicts with a provision of the 1993 Plan, the provision of the 1993 Plan
shall govern.
6. SETTLEMENT. Restricted Stock not forfeited under Section 5(b) shall be
settled by issuance and delivery, as promptly as practicable on or after the
Distribution Date, of a number of shares of Common Stock equal to the number of
shares of such Restricted Stock. The Committee may, in its discretion, make
delivery of shares hereunder by depositing such shares into an account
maintained for the Participant (or of which the Participant is a joint owner,
with the consent of the Participant) established in connection with the
Company's Employee Stock Purchase Plan or another plan or arrangement providing
for investment in Common Stock and under which the Participant's rights are
similar in nature to those under a stock brokerage account. If the Committee
determines to settle Restricted Stock by making a deposit of shares into such an
account, the Company may settle any fractional share of Restricted Stock by
means of such deposit. In other circumstances or if so determined by the
Committee, the Company shall instead pay cash in lieu of fractional shares, on
such basis as the Committee may determine. In no event will the Company in fact
issue fractional shares. Upon settlement of Restricted Stock, all obligations of
the Company in respect of such Restricted Stock shall be terminated, and the
shares so distributed shall not be Restricted Stock for purposes of the Plan.
7. TAX WITHHOLDING. The Company and any subsidiary may deduct from any payment
to be made to a Participant any amount that federal, state, local, or foreign
tax law requires to be withheld with respect to the settlement of Restricted
<PAGE> 4
Stock. At the election of the Committee, the Company may withhold from the
shares of Common Stock to be distributed in settlement of Restricted Stock that
number of shares having a Fair Market Value, at the Distribution Date, equal to
the amount of such withholding taxes.
<PAGE> 5
8. CHANGE IN CONTROL PROVISIONS.
(a) Acceleration of Lapse of Restrictions. In the event of a Change in
Control (as hereinafter defined) of the Company after the effective date of the
Plan and on or before the Distribution Date, the risk of forfeiture under
Sections 5(b)(i) and (ii) shall immediately lapse, and the Distribution Date for
purposes of Section 5(b)(iii) and other provisions of the Plan shall be deemed
to be the day immediately preceding the date on which the Change in Control took
place.
(b) Definitions of Certain Terms. For purposes of this Plan, the following
definitions shall apply:
(i) "Beneficial Ownership" and Related Terms. "Beneficial Owner,"
"Beneficially Owns," and "Beneficial Ownership" shall have the
meanings ascribed to such terms for purposes of Section 13(d) of the
Exchange Act, and the rules thereunder, except that, for purposes of
this Section 8, "Beneficial Ownership" (and the related terms) shall
include Voting Securities that a Person has the right to acquire
pursuant to any agreement, or upon exercise of conversion rights,
warrants, options or otherwise, regardless of whether any such right
is exercisable within 60 days of the date as of which Beneficial
Ownership is to be determined.
(ii) "Change in Control." "Change in Control" means and shall be
deemed to have occurred if:
(A) any Person, other than the Company or a Related Party,
acquires directly or indirectly the Beneficial Ownership of any
Voting Security of the Company and immediately after such
acquisition such Person has, directly or indirectly, the
Beneficial Ownership of Voting Securities representing 20% or
more of the total voting power of all the then-outstanding
Voting Securities; or
(B) those individuals who as of January 1, 1996 constitute the
Board or who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved
by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors as of January 1, 1996
or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the
members of the Board; or
(C) the shareholders of the Company approve a merger,
consolidation, recapitalization, or reorganization of the
Company, a reverse stock split of outstanding Voting Securities,
or an acquisition of securities or assets by the Company (a
"Transaction"), or consummation of such a Transaction if
shareholder approval is not obtained, other than a Transaction
which would result in the holders of Voting Securities having at
least 80% of the total voting power represented by the Voting
Securities outstanding immediately prior thereto continuing to
hold Voting Securities or voting securities of the surviving
entity having at least 60% of the total voting power represented
by the Voting Securities or the voting securities of such
surviving entity outstanding immediately after such Transaction
and in or as a result of which the voting rights of each Voting
Security relative to the voting rights of all other Voting
Securities are not altered; provided, however, a Change in
Control shall not be deemed to have occurred if the Committee
shall have determined, by action taken prior to the approval of
the Transaction by shareholders or consummation of the
Transaction if shareholder approval is not obtained, that such
Transaction shall not constitute a Change in Control for
purposes of all Restricted Stock then outstanding under the
Plan, which determination, if made with respect to a
Transaction, shall not be deemed to constitute a determination
with respect to any subsequent Transaction; or
(D) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets other than any such transaction which would
result in Related Parties owning or acquiring more than 50% of
the assets owned by the Company immediately prior to the
transaction.
(iii) "Person." "Person" shall have the meaning ascribed for purposes
of Section 13(d) of the Exchange Act and the rules thereunder.
<PAGE> 6
(iv) "Related Party." "Related Party" means (A) a majority-owned
subsidiary of the Company; or (B) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any
majority-owned subsidiary of the Company; or (C) a corporation owned
directly or indirectly by the shareholders of the Company in
substantially the same proportion as their ownership of Voting
Securities; or (D) if, prior to any acquisition of a Voting Security
which would result in any Person Beneficially Owning more than 10% of
any outstanding class of Voting Security and which would be required
to be reported on a Schedule 13D or an amendment thereto, the Board
approved the initial transaction giving rise to an increase in
Beneficial Ownership in excess of 10% and any subsequent transaction
giving rise to any further increase in Beneficial Ownership; provided,
however, that such Person has not, prior to obtaining Board approval
of any such transaction, publicly announced an intention to take
actions which, if consummated or successful (at a time such Person has
not been deemed a "Related Party"), would constitute a Change in
Control.
(v) "Voting Securities." "Voting Securities" means any securities of
the Company which carry the right to vote generally in the election of
directors.
9. GENERAL PROVISIONS.
(a) Compliance With Legal and Other Requirements. The grant and settlement
of Restricted Stock and other obligations of the Company under the Plan will be
subject to all applicable federal and state laws, rules, and regulations, and to
such approvals by any regulatory or governmental agency as may be required. The
Company may, in its discretion, postpone the issuance or delivery of Common
Stock at a Distribution Date until completion of any required action under any
federal or state law, rule, or regulation, listing or other required action with
respect to any automated quotation system or stock exchange upon which the
Common Stock or other Company securities are designated or listed, or compliance
with any other contractual obligation of the Company, as the Company may
consider appropriate, and may require any Participant to make such
representations and furnish such information as the Company may consider
appropriate in connection with the issuance or delivery of Common Stock in
compliance with applicable laws, rules, and regulations, designation or listing
requirements, or other contractual obligations.
(b) Adjustments. In the event that the Committee shall determine that any
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, extraordinary dividend or
distribution, or share exchange, or other similar corporate transaction or
event, affects the Common Stock such that an adjustment is appropriate to carry
out the purposes of the Plan and to prevent dilution or enlargement of the
rights of Participants under the Plan (after taking into account any Restricted
Stock credited under Section 5(d) to Participants as a result of such
transaction or event), then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and kind of shares of Common
Stock which may thereafter be issued under Section 3(b) in connection with
Restricted Stock, and (ii) the number and kind of shares of Common Stock
issuable in settlement of then-outstanding Restricted Stock. For purposes of the
Plan, the term "Common Stock" shall include any security that may be substituted
or resubstituted for Common Stock pursuant to this Section 9(b).
(c) No Right to Continued Employment. Neither the Plan nor any action taken
hereunder, including the grant of Restricted Stock, will be construed as giving
any associate the right to be retained in the employ of the Company or any of
its subsidiaries, nor will it interfere in any way with the right of the Company
or any of its subsidiaries to terminate any associate's employment at any time.
(d) No Rights to Participate; No Shareholder Rights. No Participant or
employee will have any claim to participate in the Plan, and the Company will
have no obligation to continue the Plan. A grant of Restricted Stock will confer
on the Participant none of the rights of a shareholder of the Company (including
no rights to vote or receive dividends or distributions) until settlement by
distribution of Common Stock, and then only to the extent that such Restricted
Stock has not otherwise been forfeited by the Participant.
(e) Changes to the Plan. The Committee may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of Participants;
provided, however, that, without the consent of an affected Participant, no such
action shall materially and adversely affect the rights of such Participant with
respect to outstanding Restricted Stock; and provided
<PAGE> 7
further, that any increase in the number of shares issuable under Section 3(b)
shall be subject to the approval by the Board of Directors.
(f) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan will be determined in accordance
with the Pennsylvania Business Corporation Law, to the extent applicable, other
laws (including those governing contracts) of the Commonwealth of Pennsylvania,
without giving effect to principles of conflicts of laws, and applicable federal
law.
10. EFFECTIVE DATE AND TERMINATION OF PLAN. The Plan shall become effective on
February 23, 1996, subject to ratification by the Board of Directors. Unless
earlier terminated under Section 9(e), the Plan shall terminate in 1997 at such
time as no Restricted Stock previously granted under the Plan remains
outstanding.
Adopted by the Committee: February 23, 1996
Approved and Ratified by the Board of Directors: March 21, 1996
<PAGE> 1
EXHIBIT 10.2.13
EXHIBIT B
CHARMING SHOPPES, INC.
1996 RESTRICTED STOCK AWARD PROGRAM
RESTRICTED STOCK AGREEMENT
Agreement, dated as of ________________________, between CHARMING
SHOPPES, INC. (the "Company") and ERROR! REFERENCE SOURCE NOT FOUND. ERROR!
REFERENCE SOURCE NOT FOUND. ("Participant").
It is agreed as follows:
1. GRANT OF RESTRICTED STOCK.
The Company hereby confirms the grant, under and pursuant to the
Company's 1996 Restricted Stock Award Program (the "Plan"), to Participant on
February 23, 1996 (the "Date of Grant") of ERROR! REFERENCE SOURCE NOT FOUND. of
Restricted Stock. Under the Plan, each share of "Restricted Stock" represents
the right to receive one share of the Company's Common Stock, issuable at a
Distribution Date not later than April 15, 1997, and subject to a risk of
forfeiture to the extent specified performance goals under the Company's
Incentive Program for the fiscal year ending February 1, 1997 (the "IP") are not
met and to other risks of forfeiture and conditions. No Common Stock will be
issued to Participant in settlement of Restricted Stock until the applicable
Distribution Date.
2. INCORPORATION OF PLAN BY REFERENCE.
The Restricted Stock has been awarded to Participant under the Plan, a
copy of which is attached hereto. All of the terms, conditions, and other
provisions of the Plan are hereby incorporated by reference into this Restricted
Stock Agreement ("Agreement"). Capitalized terms used in this Agreement but not
defined herein shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this Agreement and the provisions of the
Plan, the provisions of the Plan shall govern. Participant hereby accepts the
award of Restricted Stock, acknowledges receipt of the attached copy of the
Plan, and agrees to be bound by all the terms and provisions hereof and thereof
(as presently in effect or hereafter amended), and by all decisions and
determinations of the Committee under the Plan.
THE DATE OF GRANT OF THE RESTRICTED STOCK IS ERROR! REFERENCE SOURCE NOT FOUND.
AWARD NUMBER: ERROR! REFERENCE SOURCE NOT FOUND.
<PAGE> 2
3. TERMS AND CONDITIONS OF RESTRICTED STOCK.
The terms and conditions of the Restricted Stock awarded hereby shall
be those set forth in Section 5 and other provisions of the Plan. Under the
forfeiture provisions set forth in Sections 5(b)(i) and (ii), (i) if Participant
fails to achieve at least 70% of each of the targeted performance goals of his
or her annual incentive award under the IP for the Company's 1997 fiscal year,
Participant will forfeit all of the Restricted Stock; (ii) if Participant
achieves 100% or more of each of such targeted performance goals, Participant
will forfeit none of the Restricted Stock; and (iii) if Participant achieves at
least 70% but less than 100% of such targeted performance goals, Participant
will forfeit a percentage of the Restricted Stock equal to 100% of the
Restricted Stock minus the weighted average of the percentages of each of his or
her targeted performance goals actually achieved. Section 5(b)(iii) provides for
forfeiture if Participant is not continuously employed in a qualifying position
through the Distribution Date.
4. TAX WITHHOLDING.
Unless otherwise determined by the Committee prior to the Distribution
Date, the Company shall withhold from the shares of Common Stock to be issued
and delivered at the Distribution Date in settlement of Restricted Stock that
number of shares having a Fair Market Value, at the Distribution Date, equal to
the amount of withholding taxes then required to be withheld.
5. MISCELLANEOUS.
This Agreement shall be binding upon the heirs, executors,
administrators, and successors of the parties. This Agreement constitutes the
entire agreement between the parties with respect to the Restricted Stock
awarded hereby, and supersedes any prior agreements or documents with respect to
such Restricted Stock. No amendment, alteration, suspension, discontinuation, or
termination of this Agreement which may impose any additional obligation upon
the Company or materially and adversely affect the rights of Participant with
respect to the Restricted Stock shall be valid unless in each instance such
amendment, alteration, suspension, discontinuation, or termination is expressed
in a written instrument duly executed in the name and on behalf of the Company
and by Participant.
CHARMING SHOPPES, INC.
BY:
---------------------------
NAME:
PARTICIPANT:
------------------------------
ERROR! REFERENCE SOURCE NOT FOUND.
ERROR! REFERENCE SOURCE NOT FOUND.
Attachment: 1996 Restricted Stock Award Plan
- 2 -
<PAGE> 1
EXHIBIT 10.2.14
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of May 17, 1995, by and between
CHARMING SHOPPES, INC., a Pennsylvania corporation (the "Company"), and DAVID V.
WACHS ("Employee").
B A C K G R O U N D:
Employee is currently serving as a director and Chairman of the
Board and Chief Executive Officer of the Company. Employee wishes to resign from
all of his positions as an officer or director of the Company or any of its
subsidiaries and to remain as a non-officer employee of the Company. In order to
ensure that the Company will continue to have the benefits of Employee's
expertise and experience, the Company desires to continue the employment of
Employee, and Employee desires to remain in the employ of the Company, upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the facts and mutual
covenants set forth herein, and intending to be legally bound hereby, the
Company and Employee agree as follows:
1. Resignation of Current Positions; Continuation of
Employment. Employee hereby resigns all of his positions as an officer or
member of the board of directors of the Company or any of its subsidiaries,
including without limitation his positions as Chairman of the Board and Chief
Executive Officer and a member of the Board of Directors of the Company. The
Company hereby agrees to continue to employ Employee, and Employee hereby
accepts continued employment by the Company, in accordance with the terms and
conditions hereinafter set forth.
2. Term. The term of this Agreement shall commence on May 18,
1995 and shall continue until May 17, 2001, unless earlier terminated pursuant
to Section 7 hereof.
- 1 -
<PAGE> 2
3. Duties and Responsibilities. During the term of this
Agreement, Employee agrees to render such services, including without limitation
such consultation and advice, as may be reasonably requested of him by the Board
of Directors or the Chairman of the Board or Chief Executive Officer of the
Company. It is agreed that Employee's services hereunder shall normally be
performed at the Company's principal executive offices and that out-of-town
travel shall not be required, except with Employee's consent. Employee's
services hereunder shall be requested and performed only during regular business
hours on weekdays (subject to such periods when Employee shall be unavailable by
reason of illness, vacation or otherwise).
4. Compensation. For all services rendered by Employee
hereunder, the Company shall pay to Employee a salary at an annual rate of
$427,500.00 per year during the first five years of this Agreement (until May
17, 2000), and a salary at an annual rate of $200,000.00 during the final year
of this Agreement (from May 18, 2000 until May 17, 2001). Such salary, less
taxes and normal deductions, shall be paid to Employee in substantially equal
installments in accordance with the Company's regular payroll practices in
effect from time to time, but no less often than monthly.
5. Benefits.
(a) During the term of this Agreement, the Company
shall (i) continue to provide medical and dental insurance for Employee and his
spouse in accordance with the health insurance generally provided to employees
of the Company and (ii) make available such other benefits as are generally
available to employees of the Company.
(b) The Company shall continue to pay the premiums on
the split-dollar life insurance policies set forth on Exhibit A attached hereto
(the "Split-Dollar Policies") in accordance with the terms of the agreements
related to such policies and also set forth on Exhibit A (the "Collateral
Assignment Agreements").
- 2 -
<PAGE> 3
(c) During the term of this Agreement, the Company
shall furnish Employee with office space, secretarial assistance and such other
facilities and services as shall be convenient and adequate for the performance
of Employee's duties set forth herein.
6. Expenses. The Company shall reimburse Employee for all
ordinary and reasonable out-of-pocket business expenses incurred by him in
connection with his employment hereunder.
7. Termination.
(a) This Agreement shall terminate upon the death of
Employee, and all obligations of the Company to make any payments or to provide
any benefits shall terminate as of such date, except that (i) for a period of
two years from Employee's death, the Company shall continue to pay to Employee's
estate (or to such other party as may be directed by Employee's executor) the
amounts payable to Employee under Section 4 hereof (for so long as amounts are
payable under Section 4), and (ii) the Company shall continue to pay any
premiums required to be paid under the respective Collateral Assignment
Agreements related to the Split-Dollar Policies.
(b) Except as provided in Section 7(a) above, this
Agreement may be terminated by the Company only in the event of (i) Employee's
conviction of a felony or (ii) Employee's dishonesty in material respects
relating to the Company. Upon termination of this Agreement pursuant to this
Section 7(b), the Company shall have no further obligations to make any payments
or provide any benefits hereunder.
8. Stock Options. Employee has options to purchase shares of
the Company's Common Stock as set forth on Exhibit B attached hereto (the
"Options"). As of the date hereof, Employee hereby surrenders to the Company for
cancellation the following Options: (a) option to purchase 67,500 shares at
$15.125 per share granted on April 7, 1993 (Grant No. 300098); (b) option to
purchase 67,500 shares at $15.125 per share granted on
- 3 -
<PAGE> 4
April 7, 1993 (Grant No. P30006); (c) option to purchase 105,000 shares at
$11.125 per share granted on February 1, 1994 (Grant No. 300225); and (d) option
to purchase 105,000 shares at $11.125 per share granted on February 1, 1994
(Grant No. P30014). All Options not being cancelled hereby shall continue in
full force and effect according to their respective terms; provided, however,
Employee agrees that any Options not exercised prior to May 17, 2000 shall be
cancelled as of such date.
9. Contents of Agreement; Parties in Interest; Assignment; etc.
This Agreement sets forth the entire understanding of the parties hereto with
respect to the subject matter hereof. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, representatives, successors and assigns of the parties
hereto, except that the duties and responsibilities of Employee hereunder are of
a personal nature and shall neither be assigned nor transferred in whole or in
part by Employee. This Agreement shall not be amended except by written
instrument duly executed by the Company and Employee.
10. Severability. If any term or provision of this Agreement
shall be held to be invalid or unenforceable for any reason, such term or
provision shall be ineffective to the extent of such invalidity or
unenforceability without invalidating the remaining terms and provisions hereof,
and this Agreement shall be construed as if such invalid or unenforceable term
or provision had not been contained herein.
11. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the Commonwealth of Pennsylvania.
12. Notices. All notices, consents, waivers or communications
which are required or permitted hereunder shall be sufficient if given in
writing and delivered (personally, by courier service such as Federal Express,
or by messenger) or deposited in the United States mails, registered or
certified mail, return receipt requested, postage prepaid, as
- 4 -
<PAGE> 5
follows (or to such other addresses or address as shall be set forth in a notice
given in the same manner):
If to the Company:
Charming Shoppes, Inc.
450 Winks Lane
Bensalem, PA 19020
Attention: Chairman of the Board
If to Employee:
David V. Wachs
412 Sprague Road
Narberth, PA 19072
All such notices shall be deemed to have been given on the date delivered or
mailed in the manner provided above.
- 5 -
<PAGE> 6
13. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed as of the
day and year first above written.
CHARMING SHOPPES, INC.
By: /s/Ivan M. Szeftel
---------------------------------
Name: Ivan M. Szeftzel
Title: Executive Vice President -
Finance
EMPLOYEE:
/s/ David V. Wachs
-------------------------------------
David V. Wachs
- 6 -
<PAGE> 1
EXHIBIT 10.2.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made as of this 22nd day of
August, 1995, by and between Charming Shoppes, Inc., a Pennsylvania corporation
(the "Company") and Dorrit J. Bern ("Executive").
BACKGROUND
A. The Company believes that it would benefit from the application of
Executive's particular and unique skill, experience and background to the
management and operation of the Company, and wishes to employ Executive on the
terms and conditions hereinafter set forth; and
B. The parties desire to set forth the terms and conditions of the
employment relationship between the Company and Executive.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants in this Agreement, the Company and Executive, intending to be legally
bound, hereby agree as follows:
1. Employment and Duties. The Company hereby employs Executive as
President and Chief Executive Officer of the Company on the terms and conditions
provided in this Agreement and Executive agrees to accept such employment
subject to the terms and conditions of this Agreement. Executive shall perform
the duties and responsibilities reasonably determined from time to time by the
Board of Directors of the Company (the "Board") consistent with the types of
duties and responsibilities typically performed by a person serving as President
and Chief Executive Officer of businesses similar to the Company. Executive
agrees to devote her best efforts and substantially all her time, attention,
energy, and skill to performing the duties of President and Chief Executive
Officer; provided, however, that prior to September 30, 1995, Executive's
obligations shall be limited to her good faith effort to consult with the
Chairman of the Board and other executives of the Company by telephone,
facsimile or other electronic means or in Chicago and, when possible, in the
Philadelphia area. Effective on the Effective Date, the Board shall elect
Executive as a director of the
<PAGE> 2
Company and Vice Chairman of the Board of Directors and Executive shall continue
to serve as a director so long as she is duly elected by the stockholders of the
Company and employed by the Company. Executive shall be based at the Company's
principal executive offices but shall not be required to move her residence.
2. Term. The term of this Agreement shall be for five (5) years (the
"Initial Term"), commencing on such date as her current employment terminates,
which shall not be more than fourteen (14) days after the date hereof (the
"Effective Date"), and expiring on the fifth anniversary of the Effective Date,
unless extended by mutual agreement of the parties or earlier terminated in
accordance with the terms of this Agreement. This Agreement shall continue in
full force and effect from year-to year after the expiration of the Initial
Term, unless either party shall give the other party before the commencement of
any such year at least ninety (90) days' prior written notice of such party's
intention to terminate this Agreement.
3. Compensation. As compensation for performing the services required
by this Agreement for the Company and during the term of this Agreement,
Executive shall be compensated as follows:
(a) Base Compensation. The Company shall pay to Executive an annual
base salary of One Million Dollars ($1,000,000), payable in substantially equal
installments pursuant to the Company's customary payroll procedures in effect
for its executive personnel at the time of payment, subject to withholding for
applicable federal, state, and local taxes and all other items, if any, required
to be withheld. The annual base salary may be reviewed from time to time during
the term of this Agreement by the Board to determine whether, in its sole
discretion, such base salary should be increased or decreased, but in no event
will the annual base salary be less than One Million Dollars ($1,000,000).
(b) Performance Compensation.
- 2 -
<PAGE> 3
(i) In addition to annual base salary, beginning with the fiscal
year commencing February 4, 1996, Executive shall be eligible to receive
additional compensation ("Performance Compensation") within 90 days of the end
of each of the Company's fiscal years during the term of this Agreement, if the
Company achieves certain performance criteria established under the Company's
Executive Incentive Plan ("EIP"). The formula and standards for determining
Executive's Performance Compensation shall be determined by the Compensation
Committee of the Board but may not exceed 120% of Executive's annual base salary
for the applicable year. Notwithstanding the foregoing, Executive shall receive
Performance Compensation for the fiscal year commencing February 4, 1996 of not
less than 30% of Executive's annual base salary for such year.
(ii) Except where Executive has been discharged without Cause or
has terminated this Agreement for Good Reason, or this Agreement has expired
without extension pursuant to paragraph 2, Performance Compensation shall be
deemed vested at the end of each fiscal year, provided Executive is employed by
the Company on such date, and shall be payable regardless of whether Executive
is employed on the date scheduled for payment. If Executive has been discharged
without Cause or has terminated this Agreement for Good Reason, or this
Agreement has expired without extension pursuant to paragraph 2, Executive will
be entitled to receive the Performance Compensation to which she would otherwise
have been entitled for the fiscal year in which such discharge, termination or
expiration occurred, pro rated for the number of days elapsed before such
discharge, termination or expiration; provided, however, that if such
termination, discharge or expiration occurs after August 31 of any such year she
shall be entitled to such Performance Compensation without proration.
(c) Initial Bonus. Executive shall receive a cash bonus in the
amount of One Million Dollars ($1,000,000), of which Five Hundred Thousand
Dollars ($500,000) shall be paid on September 30, 1995 and Five Hundred Thousand
Dollars ($500,000) shall be paid on December 30, 1995, subject to withholding
for
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applicable federal, state and local taxes and all other items, if any, required
to be withheld.
4. Options. On the Effective Date, the Company shall issue to Executive
options (the "Options") to purchase up to one million (1,000,000) shares of the
Company's Common Stock, $.10 par value ("Common Shares") under the Company's
1993 Employees' Stock Incentive Plan (the "Plan"). Options covering Two Hundred
Thousand (200,000) Common Shares shall become exercisable (i.e., vest) on the
first anniversary of the date of grant and Options covering an additional Two
Hundred Thousand (200,000) Common Shares shall vest on each succeeding
anniversary of the date of grant until the fifth anniversary of the date of
grant at which time all Options shall be vested; provided, however, that all
Options shall be fully vested if Executive resigns for Good Reason or Executive
is discharged without Cause. The Options shall be exercisable at a price per
Common Share equal to the closing price per Common Share on the NASDAQ National
Market System on the date of grant. The Options shall be represented by the form
of option agreement typically used by the Company pursuant to the Plan with such
changes as shall be required to conform to this Agreement. The Options granted
pursuant to this paragraph 4 shall be in lieu of options which might otherwise
have been granted to Executive during the initial term of this Agreement.
5. Employee Benefits. (a) During the term of this Agreement and subject
to the limitations set forth in this paragraph 5, Executive shall have the right
to participate in any retirement plans (qualified and non qualified), 401-K
plan, pension, insurance, health, disability or other benefit plan or program
(other than any stock option plan except as described in paragraph 4) that has
been or is hereafter adopted by the Company (or in which the Company
participates), according to the terms of such plan or program, on terms similar
to the most senior executives of the Company. Company agrees that Executive
shall be eligible to participate in all insurance programs on the Effective Date
without regard to any waiting period.
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(b) Company shall purchase and during the term of this Agreement pay
the premium for a $4,000,000 split dollar life insurance policy on Executive's
life, subject to the execution of a collateral assignment split dollar insurance
agreement and Executive's insurability at normal premium rates. Subject to the
interest of the Company, Executive shall be entitled to name the beneficiary of
the death benefit of such policy. Upon termination of Executive's employment for
any reason, Executive may purchase the split dollar life insurance policy on her
life by giving Company notice of her desire to purchase such insurance within 30
days of the termination of Executive's employment and paying Company within 5
days of being informed of the amount due, the greater of: (i) the amount of all
premiums for such policy paid by Company; or (ii) the cash surrender value of
such policy.
6. Vacation. Executive shall be entitled to not less than four (4)
weeks of paid vacation in each year during the term of this Agreement, beginning
on the Effective Date of this Agreement, on dates to be mutually agreed upon by
the Company and Executive, and approval of the Company shall not be unreasonably
withheld. Any vacation days that are not taken in a given twelve (12) month
period shall not accrue and carry over from year to year.
7. Expenses. Executive shall be promptly reimbursed against
presentation of vouchers or receipts for all reasonable and necessary expenses
incurred by her in connection with the performance of business-related duties.
8. Indemnification. The Company shall (and is hereby obligated to)
indemnify Executive in each and every situation where the Company is obligated
or permitted to make such indemnification pursuant to the relevant portions of
the Company's Articles of Incorporation and By-Laws. The Company agrees that it
will not reduce the indemnification currently available to Executive hereunder.
9. Perquisites. During the term of this Agreement, in order to
facilitate the performance of Executive's duties hereunder, and otherwise for
the convenience of the Company, the
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Company shall provide Executive with a perquisite allowance equal in amount to
the perquisite allowance to which the Acting Chief Executive Officer of the
Company on the date hereof is entitled and which shall cover such things as an
automobile and related expenses, financial and tax planning and advice and
similar items.
10. Relocation. Company and Executive agree that Executive is not
required to relocate to the Philadelphia area. If Executive decides to relocate
to the Philadelphia area, Company shall pay all expenses incurred in connection
with the transportation of Executive's household goods (including packing and
unpacking) and all closing costs incurred in connection with the purchase of
Executive's new residence (including, attorney's fees, title insurance charges,
pest and radon inspection charges, recording and transfer fees, mortgage
application fees and points). Prior to Executive's relocation to the
Philadelphia area, Company shall provide an apartment for Executive in the
Philadelphia area and one round-trip airplane ticket between Philadelphia and
Chicago each week.
11. Termination of Employment. Notwithstanding any other provision of
this Agreement, Executive's employment may be terminated as set forth below:
(a) Disability or Incapacity. In the event of Executive's physical
or mental inability to perform her essential duties hereunder, with or without
reasonable accommodation, for a period of 13 consecutive weeks or for a
cumulative period of 26 weeks during the term of this Agreement.
(b) Death. In the event of Executive's death.
(c) Resignation for Good Reason. Executive may resign for "good
reason," defined below, upon 30 days' written notice by Executive to the
Company. The Company may waive Executive's obligation to work during this 30-day
notice period and terminate her employment immediately, but if the Company takes
this action in the absence of agreement by Executive, Executive shall receive
the salary which would otherwise be due through the end of the
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notice period. For purposes of this Agreement, "good reason" shall mean: (i) a
substantial change in Executive's duties and responsibilities, which change
would materially reduce Executive's stature, importance and dignity within the
Company; (ii) the appointment of an executive officer superior in rank to
Executive; (iii) the failure of the Board to nominate Executive for re-election
as a director, or the failure of the stockholders to re-elect Executive; (iv)
the failure of the Company to pay any amount due to Executive hereunder which
failure shall persist for ten (10) days after written notice of such failure
shall have been given to the Company; and/or (v) the assignment of Executive to
office space which is not commensurate with her position and title, the failure
of the Company to provide the ministerial, administrative and secretarial
support customarily associated with her title and position or the withdrawal by
the Company of any such ministerial, administrative and secretarial support.
(d) Resignation Without Good Reason. Notwithstanding any other
provision of this Agreement, Executive may resign for any or no reason, upon 90
days' written notice by Executive to the Company. The Company may waive
Executive's obligation to work during this 90-day notice period and terminate
her employment immediately, but if the Company takes this action in the absence
of agreement by Executive, Executive shall receive the base salary which would
otherwise be due through the end of the notice period.
(e) Resignation Upon A Change of Control. Notwithstanding any other
provision of this Agreement, Executive may resign upon a Change of Control (as
defined below), at any time within 12 months of such Change of Control, upon 30
days' written notice by Executive to the Company. The Company may waive
Executive's obligation to work during this 30-day notice period and terminate
her employment immediately, but if the Company takes this action in the absence
of agreement by Executive, Executive shall receive the salary which would
otherwise be due through the end of the notice period.
(f) Discharge for Cause. The Company may discharge Executive at any
time for "Cause," which shall include but not be
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limited to: Executive's chronic neglect, refusal or failure to perform her
employment duties and responsibilities, other than for reasons of sickness,
accident or other similar causes beyond Executive's control; or Executive's
commission of any dishonest act or intentional wrongdoing committed against the
Company, its agents or employees or otherwise in connection with her employment
by the Company or a conviction of a felony, whether or not in connection with
employment. Executive's discharge for Cause shall be effective upon delivery to
Executive of written notice specifying the matter or matters which the Board
deems to constitute Cause.
(g) Discharge Without Cause. Notwithstanding any other provision of
this Agreement, Executive's employment may be terminated by the Company at any
time without Cause.
(h) General.
(i) Termination of Executive's employment pursuant to this
paragraph 11 shall release the Company of all of its liabilities and obligations
under this Agreement, except as expressly provided under paragraph 12 below. The
preceding sentence shall not be deemed a release of Executive's right to contest
any matter whatsoever arising under this Agreement in any appropriate judicial
or other forum, subject to the provisions of paragraph 19 (Arbitration).
(ii) Termination of Executive's employment pursuant to this
paragraph 11 shall not release Executive from her obligations and restrictions
under paragraphs 13 through 15 of this Agreement.
(i) Definitions of Certain Terms. For purposes of this Agreement,
the following definitions shall apply:
(i) "Beneficial Owner," "Beneficially Owns," and "Beneficial
Ownership" shall have the meanings ascribed to such terms for purposes of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules thereunder, except that, for purposes of this paragraph 11,
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<PAGE> 9
"Beneficial Ownership" (and the related terms) shall include Voting Securities
that a Person has the right to acquire pursuant to any agreement, or upon
exercise of conversion rights, warrants, options or otherwise, regardless of
whether any such right is exercisable within 60 days of the date as of which
Beneficial Ownership is to be determined.
(ii) "Change of Control" means and shall be deemed to have
occurred if
(A) any Person, other than the Company or a Related Party,
acquires directly or indirectly the Beneficial Ownership of any Voting Security
of the Company and immediately after such acquisition such Person has, directly
or indirectly, the Beneficial Ownership of Voting Securities representing 20% or
more of the total voting power of all the then-outstanding Voting Securities, or
(B) those individuals who as of August 15, 1995 constitute
the Board or who thereafter are elected to the Board and whose election, or
nomination for election, to the Board was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
as of August 15, 1995 or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority of the
members of the Board; or
(C) the shareholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the Company, a reverse
stock split of outstanding Voting Securities, or an acquisition of securities or
assets by the Company (a "Transaction"), or consummation of such a Transaction
if shareholder approval is not obtained, other than a Transaction which would
result in the holders of Voting Securities having at least 80% of the total
voting power represented by the Voting Securities outstanding immediately prior
thereto continuing to hold Voting Securities or voting securities of the
surviving entity having at least 60% of the total voting power represented by
the Voting Securities or the voting securities of such surviving entity
outstanding immediately after such Transaction
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and in or as a result of which the voting rights of each Voting Security
relative to the voting rights of all other Voting Securities are not altered;
provided, however, a Change of Control shall not be deemed to have occurred if
the Board shall have determined, by action taken prior to the approval of the
Transaction by shareholders or consummation of the Transaction if shareholder
approval is not obtained, that such Transaction shall not constitute a Change of
Control for purposes of this Agreement and options then outstanding under the
Plan, which determination, if made with respect to a Transaction, shall not be
deemed to constitute a determination with respect to any subsequent Transaction;
or
(D) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets other than
any such transaction which would result in Related Parties owning or acquiring
more than 50% of the assets owned by the Company immediately prior to the
transaction.
(iii) "Person" shall have the meaning ascribed for purposes of
Section 13(d) of the Exchange Act and the rules thereunder.
(iv) "Related Party" means (A) a majority-owned subsidiary of
the Company; or (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any majority-owned subsidiary of the
Company; or (C) a corporation owned directly or indirectly by the shareholders
of the Company in substantially the same proportion as their ownership of Voting
Securities; or (D) if, prior to any acquisition of a Voting Security which would
result in any Person Beneficially Owning more than 10% of any outstanding class
of Voting Security and which would be required to be reported on a Schedule 13D
or an amendment thereto, the Board approved the initial transaction giving rise
to an increase in Beneficial ownership in excess of 10% and any subsequent
transaction giving rise to any further increase in Beneficial Ownership;
provided, however, that such Person has not, prior to obtaining Board
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approval of any such transaction, publicly announced an intention to take
actions which, if consummated or successful (at a time such Person has not been
deemed a "Related Party"), would constitute a Change of Control.
(v) "Voting Securities" means any securities of the Company
which carry the right to vote generally in the election of directors.
12. Payments Upon Termination.
(a) Discharge Without Cause or Resignation for Good Reason. If
Executive is discharged without Cause or resigns for Good Reason or this
Agreement expires at the end of the Initial Term or any renewal term without
extension pursuant to paragraph 2:
(i) Executive shall continue to receive her base salary, paid
in monthly installments, for the greater of the remaining term of this Agreement
or eighteen months. In addition, during the period in which Executive receives
post-termination salary, the Company will pay the premiums in connection with
Executive's continued participation in the Company's group health plan pursuant
to COBRA, subject to such plan's terms, conditions and restrictions. Executive
shall also receive that portion of her Performance Compensation as provided in
paragraph 3(b).
(ii) The Company's obligation for base salary under
subparagraph (i) above shall be offset by 65% of any compensation from
employment earned by Executive through self-employment or with another employer
during this period, and its obligation to continue payments on behalf of
Executive for medical insurance shall cease upon Executive's acceptance of other
employment pursuant to which comparable coverage is normally provided. Moreover,
the Company's obligations under subparagraph (i) above shall cease in the event
that Executive breaches any of the covenants or restrictions set forth in
paragraphs 13 through 15 below.
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<PAGE> 12
(iii) Except as set forth above in this paragraph 12, Executive
shall not be eligible for any payments or other benefits upon termination of her
employment without cause or resignation for Good Reason.
(b) Resignation Upon a Change of Control.
(i) If Executive resigns upon a Change of Control, Executive
shall be entitled to the payments set forth in paragraph 12(a) upon the terms
and subject to the limitations set forth in such paragraph, except that she
shall be entitled to post-termination compensation for a period of two years.
(ii) If, within 12 months following a Change of Control,
Executive's employment is terminated by Executive for Good Reason or if
Executive's employment is terminated without Cause, then, in lieu of any other
severance payments under paragraph 12(a) or 12(b)(i) of this Agreement, Company
shall pay to Executive on the Effective Date of such termination, a lump sum
amount equal to 2.5 times her "base amount" within the meaning of Section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code").
(c) Death or Disability/Incapacity.
(i) On death, Executive's estate's sole entitlement will be to
(A) base salary for any days worked prior to Executive's death, (B) that portion
of Executive's Performance Compensation as provided in paragraph 3(b), plus (C)
any amounts payable on account of Executive's death under any insurance or
benefit plans or policies maintained by the Company for the benefit of
Executive.
(ii) On termination for disability or incapacity, Executive's
sole entitlement will be to (A) base salary for any days worked prior to the
date of termination, (B) that portion of Executive's Performance Compensation,
as provided in paragraph 3(b), plus (C) amounts payable on account of disability
or incapacity under any insurance or benefit plans or policies maintained by the
Company.
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<PAGE> 13
(d) Discharge for Cause or Resignation Without Good Reason. If
Executive is discharged for Cause or Executive resigns without Good Reason,
Executive's sole entitlement will be the receipt of base salary for any days
worked through the date of termination.
13. Company Property. All advertising, sales, manufacturers' and other
materials or articles or information, including without limitation data
processing reports, customer sales or sourcing analyses, invoices, price lists
or information, samples, or any other materials or data of any kind furnished to
Executive by the Company or developed by Executive on behalf of the Company or
at the Company's direction or for the Company's use or otherwise in connection
with Executive's employment with the Company, are and shall remain the sole and
confidential property of the Company; if the Company requests the return of such
materials at any time during or at or after the termination of Executive's
employment, Executive shall immediately deliver the same to the Company.
14. Prohibited Public Statements. Executive shall not, either during or
at any time after the termination of her employment, make any public statement
(including a private statement reasonably likely to be repeated publicly)
reflecting adversely on the Company and its business prospects, except for such
statements which during Executive's employment she may be required to make in
the ordinary course of her service as President and Chief Executive Officer.
15. Noncompetition, Noninterference and Nonsolicitation.
(a) During the term of this Agreement and for a period equal to the
greater of (x) two (2) years following termination of employment for any reason
whatsoever, whether by Executive or by the Company and whether during the term
of this Agreement or subsequent to the termination or (y) the period during
which Executive is entitled to receive any payment under paragraph 12 of this
Agreement, Executive shall not directly or indirectly:
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<PAGE> 14
(i) solicit, induce or encourage any customer, employee,
consultant, independent contractor or supplier of the Company to cease to do
business with or to be employed by the Company; or
(ii) engage in (as a principal, partner, director, officer,
agent, employee, consultant, owner, independent contractor or otherwise) or be
financially interested in any business which is in competition with the Company.
For purposes hereof, only K-Mart, Target Stores, J.C. Penney, Sears Roebuck and
Company, The Limited, May Stores, Dayton Hudson Stores, Federated Stores,
Walmart Stores, or any affiliate or successor of any of the foregoing, or any
national or regional specialty chain principally offering women's clothing
similar to the clothing offered by the Company shall be deemed to be in
competition with the Company.
(b) During her employment with the Company and at all times
thereafter, Executive shall not use for her personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or company other than the Company, any material
referred to in paragraph 13 above or any information regarding the business
methods, policies, procedures, strategies or techniques, research or development
projects or results, trade secrets, or other knowledge or processes of or
developed by the Company or any names and addresses of employees, customers or
suppliers or any data on or relating to past, present or prospective customers
or suppliers or any other confidential information relating to or dealing with
the business operations or activities of the Company, made known to Executive or
learned or acquired by Executive while in the employ of the Company.
(c) Any and all writings, inventions, improvements, processes,
procedures and/or techniques which Executive may make, conceive, discover or
develop, either solely or jointly with any other person or persons, during her
employment with the Company, whether during working hours or at any other time
and whether at the request or upon the suggestion of the Company or otherwise,
which relate to or are useful in connection with any business now
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<PAGE> 15
or hereafter carried on or contemplated by the Company, including developments
or expansions of its present fields of operations, shall be the sole and
exclusive property of the Company. Executive shall make full disclosure to the
Company of all such writings, inventions, improvements, processes, procedures
and techniques, and shall do everything necessary or desirable to vest the
absolute title thereto in the Company. Executive shall write and prepare all
specifications and procedures regarding such inventions, improvements,
processes, procedures and techniques and otherwise aid and assist the Company so
that the Company can prepare and present applications for copyright or Letters
Patent therefor and can secure such copyright or Letters Patent wherever
possible, as well as reissues, renewals, and extensions thereof, and can obtain
the record title to such copyright or patents so that the Company shall be the
sole and absolute owner thereof in all countries in which it may desire to have
copyright or patent protection. Executive shall not be entitled to any
additional or special compensation or reimbursement regarding any and all such
writings, inventions, improvements, processes, procedures and techniques.
(e) Executive agrees that if any portion of the foregoing
covenants, or the application thereof, is construed to be invalid or
unenforceable, the remainder of such covenant or covenants or the application
thereof shall not be affected and the remaining covenant or covenants will then
be given full force and effect without regard to the invalid or unenforceable
portions. If any covenant is held to be unenforceable because of the area
covered, the duration thereof or the scope thereof, Executive agrees that the
court making such determination shall have the power to reduce the area and/or
the duration and/or limit the scope thereof, and the covenant shall then be
enforceable in its reduced form as is adjudged to be reasonable by the court. If
Executive violates any of the restrictions contained in the foregoing
subparagraph (a), the restrictive period shall not run in favor of Executive
from the time of the commencement of any such violation until such time as such
violation shall be cured by Employee to the satisfaction of the Company.
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(f) The provision of paragraphs 13 through 15 shall survive the
termination of Executive's employment as well as the expiration of this
Agreement at the end of its original or any renewal term or at any time prior
thereto.
(g) For purposes of paragraphs 13 through 15 of this Agreement, the
term "Company" shall include not only Charming Shoppes, Inc., but also any of
its subsidiaries or successors.
16. Specific Performance. Executive acknowledges that the obligations
undertaken by her pursuant to this Agreement are unique and that the Company
will likely have no adequate remedy at law if Executive shall fail to perform
any of her obligations hereunder. Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive and
the Company shall have the right to obtain preliminary injunctive relief to
secure specific performance and to prevent a breach or contemplated breach of
this Agreement by Executive.
17. Taxes.
(a) All payments to be made to Executive under this Agreement will
be subject to required withholding of federal, state and local income and
employment taxes and any other items required to be withheld therefrom.
(b) Notwithstanding any other provision of this Agreement, if any
of the payments provided for in this Agreement, together with any other payments
which Executive has the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in Section 1504(a) of the
Internal Revenue Code of 1986, as amended (the "Code") without regard to Section
1504(b) of the Code) of which the Company is a member, would constitute a
"parachute payment" (as defined in
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<PAGE> 17
Section 280G(b)(2) of the Code), payments pursuant to this Agreement shall be
reduced to the largest amount as will result in no portion of such payments
being subject to the excise tax imposed by Section 4999 of the Code and the
determination of which such payments are to be reduced shall be made by the
Company in its sole discretion.
18. Letter of Credit. Promptly after the execution of this Agreement
and subject to any necessary waivers or approvals of the Company's lenders, the
parties shall in good faith proceed to carry out the following steps:
(a) The Company shall obtain a one-year renewable Letter of Credit
("LC") issued by a bank chosen by the Company, having a face amount of
$2,500,000, and payable to a fiduciary to be agreed upon by the parties.
(b) The LC shall provide that if it is not renewed at least ten
days prior to its expiration, it may be presented for payment by the fiduciary
and the fiduciary shall retain the proceeds until it would otherwise be required
to make a payment to Executive pursuant to clause (f) as if it had to present
the LC at the time of payment.
(c) The LC shall be secured by any financial instrument, including
cash, acceptable to the issuing bank.
(d) Executive will have a security interest in the LC, LC proceeds
and the Trust Agreement specified below to secure the obligations of the Company
to Executive under this Agreement.
(e) The Company, Executive and the fiduciary shall enter into an
agreement ("Trust Agreement") providing that prior to the presentation of the
LC:
(i) Executive shall make a demand upon fiduciary to present the
LC to the bank, which demand shall be accompanied by a statement that any of the
following events have occurred:
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(A) (1) Executive has been terminated without Cause; or (2)
Executive has resigned for Good Reason, and the Company has failed to make any
payment due to Executive which failure has persisted for 10 days after written
notice thereof; or
(B) the Company has been the subject of a voluntary or
involuntary proceeding under the United States Bankruptcy Code;
(ii) the fiduciary shall give Company 10 days written notice
prior to the presentation of the LC; and
(iii) if during such 10-day period the Company has not served
notice upon the fiduciary that it objects to such presentation, the fiduciary
shall present the LC for payment. If the Company serves notice of objection, the
fiduciary shall not make the presentation until (A) it receives written notice
signed by the Company and Executive that they agree that the presentation shall
be made or (B) it receives a copy of an award in arbitration or by court of
competent jurisdiction that it is to make such presentation.
(f) The Trust Agreement will also provide that the fiduciary's only
obligation, after presentation of the LC as aforesaid, shall be to hold the LC
proceeds and to pay the LC proceeds (or such lesser amount as Executive shall
demand from time to time) to Executive as and when payment would be due under
this Agreement.
(g) The Trust Agreement shall contain such other terms as are
reasonable and appropriate to give effect to the intent of this paragraph.
19. Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof or otherwise arising out of
Executive's employment or the termination of that employment shall, to the
fullest extent permitted by law, be settled by arbitration in any forum agreed
upon by the parties or, in the absence of such an agreement,
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<PAGE> 19
under the auspices of the American Arbitration Association ("AAA") in
Philadelphia, Pennsylvania in accordance with the Employment Dispute Resolution
Rules of the AAA, including, but not limited to, the rules and procedures
applicable to the selection of arbitrators. The arbitration panel shall consist
of persons experienced in business affairs, including at least one person
experienced in retail business affairs. The award rendered by the arbitrator
shall include a statement of the findings of fact and the conclusions of law
which serve as the basis for the award. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
Notwithstanding the foregoing, this provision shall not preclude the Company
from pursuing a court action for the purpose of enforcing paragraph 15 hereof,
including obtaining a temporary restraining order or a preliminary or permanent
injunction in circumstances in which such relief is appropriate or damages. In
the event that the arbitration relates principally to Executive's termination
for Cause, the arbitrators shall award counsel fees and costs to Executive if
she prevails.
20. Miscellaneous.
(a) Integration: Amendment. This Agreement constitutes the entire
agreement between the parties hereto with respect to the matters set forth
herein and supersedes and renders of no force and effect all prior
understandings and agreements between the parties with respect to the matters
set forth herein. No amendments or additions to this Agreement shall be binding
unless in writing and signed by both parties.
(b) Assignment. This Agreement is personal in nature and neither of
the parties shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder. This Agreement and all of the
provisions herein shall be binding upon and inure to the benefit of, the parties
hereto and their successors (including successors by merger, consolidation or
similar transactions), permitted assigns, personal representatives, heirs,
executors and administrators.
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<PAGE> 20
(c) Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable law or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited, or invalid, but the remainder of this Agreement shall not be invalid
and shall be given full force and effect so far as possible.
(d) Waivers. The failure or delay of any party at any time to
require performance by the other party of any provision of this Agreement, even
if known, shall not affect the right of such party to require performance of
that provision or to exercise any right, power, or remedy hereunder, and any
waiver by any party of any breach of any provision of this Agreement shall not
be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of the provision itself, or a waiver of any right, power, or
remedy under this Agreement. No notice to or demand on any party in any case
shall, of itself, entitle such party to any other or further notice or demand in
similar or other circumstances.
(e) Power and Authority.
(i) The Company represents and warrants to Executive that it
has the requisite power to enter into this Agreement and perform the terms
hereof; and that the execution, delivery and performance of this Agreement by it
has been duly authorized by all appropriate action; and this Agreement
represents the valid and legally binding obligation of the Company and is
enforceable against it in accordance with its terms.
(ii) Executive represents and warrants to the Company that she
has full power to enter into this Agreement and perform her duties hereunder;
that the execution and delivery of this Agreement and her performance of her
duties hereunder shall not result in a breach of, or constitute a default under,
any agreement or understanding, oral or written, to which she is a party or by
which she may be bound; and this Agreement represents the valid and legally
binding obligation of Executive and is enforceable against her in accordance
with its terms.
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(f) Burden and Benefit: Survival. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
executors, personal and legal representatives, successors and, subject to
paragraph 18(b) above, assigns. In addition to, and not in limitation of
anything contained in this Agreement, it is expressly understood and agreed that
the Company's obligation to pay termination compensation set forth herein and
the provisions of paragraphs 13 through 17 shall survive any termination of this
Agreement.
(g) Governing Law: Headings. This Agreement and its construction,
performance, and enforceability shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Pennsylvania. Headings and
titles herein are included solely for convenience and shall not affect, or be
used in connection with, the interpretation of this Agreement.
(h) Notices. All notices called for under this Agreement shall be
in writing and shall be deemed given upon receipt if delivered personally or by
facsimile transmission and followed promptly by mail, or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof):
If to Executive:
Dorrit J. Bern
100 Lois Lane
Barrington, Illinois 60010
with a copy to:
David A. Rosen, Esquire
Holtzmann, Wise & Shepard
1271 Avenue of the Americas
New York, NY 10020
Telecopy: 212-554-8181
- 21 -
<PAGE> 22
If to the Company:
Charming Shoppes, Inc.
450 Winks Lane
Bensalem, PA 19020
Telecopy: 215-638-6648
Attention: Chairman of the Board
with a copy to:
Charming Shoppes, Inc.
450 Winks Lane
Bensalem, PA 19020
Telecopy: 215-638-6648
Attention: General Counsel
or to any other address or addressee as any party entitled to receive notice
under this Agreement shall designate, from time to time, to the other in the
manner provided in this paragraph 18(h) for the service of notices. Any notice
delivered to the party hereto to whom it is addressed shall be deemed to have
been given and received on the day it was received; provided,
however, that if such day is not a business day then the notice shall be
deemed to have been given and received on the business day next following such
day.
(i) Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile, each of which counterparts and/or facsimiles
shall be deemed to be an original, and all such counterparts and facsimiles
shall constitute one and the same instrument.
(j) Expenses. The Company agrees to pay all legal fees and expenses
which Executive incurs in connection with the negotiation of this Agreement.
(k) Inconsistent Documents. If any provision of this Agreement
would conflict with any policy, procedure, manual,
- 22 -
<PAGE> 23
program, practice or other Company document (collectively "Plan") which would
otherwise apply to Executive (including, without limitation, the provisions of
any compensation, bonus, option or severance Plan) then the provisions of this
Agreement shall apply and shall supersede any such Plan.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
ATTEST: CHARMING SHOPPES, INC.
By:
- -------------------------------- ---------------------------
Philip Wachs, Chairman
WITNESS:
- --------------------------------
Dorrit J. Bern
- 23 -
<PAGE> 1
EXHIBIT 10.2.16
CHARMING SHOPPES, INC.
1993 EMPLOYEES' STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
Agreement dated as of August 23, 1995 between CHARMING SHOPPES, INC.
(the "Company") and DORRIT J. BERN (the "Employee").
It is agreed as follows:
1. GRANT OF OPTION; CONSIDERATION
The Company hereby confirms the grant, under and pursuant to the
Company's 1993 Employees' Stock Incentive Plan (the "Plan"), to the Employee on
August 23, 1995 of a stock option to purchase up to 1,000,000 shares of the
Company's common stock, par value $.10 per share (the "Shares"), at an exercise
price of four dollars and sixty-two and one-half cents ($4.625) per share (the
"Option"). The Option granted hereunder is intended to constitute a
nonqualified stock option.
The Employee shall be required to pay no consideration for the grant of
the Option except for her agreement to provide services to the Company prior to
exercise and other agreements set forth herein.
2. INCORPORATION OF PLAN BY REFERENCE
The Option has been granted to the Employee under the Plan, a copy of
which is attached hereto. All of the terms, conditions and other provisions of
the Plan are hereby incorporated by reference into this Employee Stock Option
Agreement (the "Agreement"). Capitalized terms used in this Agreement but not
defined herein shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this Agreement and the provisions of the
Plan, the provisions of the Plan shall govern.
3. DATE WHEN EXERCISABLE
(a) This Option may not be exercised unless and only to the extent
that it has become exercisable as specified in this Agreement. Subject to
acceleration as provided in Sections 7 and 8 below, limitations on
exercisability imposed in Section 8 below, and all other terms and conditions
of this Agreement, this Option shall become exercisable as follows: The
Employee may purchase up to one-fifth of the total number of shares granted
hereunder commencing on August 23, 1996, an additional one-fifth commencing on
August 23, 1997, an additional one-fifth commencing on August 23, 1998, an
additional one-fifth commencing on August 23, 1999, and the remaining shares
granted hereunder commencing on August 23, 2000. Except as otherwise
specifically provided herein, the Option to purchase any and all Shares covered
by this Agreement shall expire at 5:00 p.m. Eastern Daylight Savings Time on
the date ten (10) years after the date of grant of this Option.
(b) The number of Shares with respect to which the Option may be
exercised shall be cumulative so that if, in any of the aforementioned periods,
the full number of Shares shall not have been purchased, any such unpurchased
Shares shall continue to be included in the number of Shares with respect to
which this Option shall then be exercisable along with any other Shares as to
which this Option may become exercisable in accordance with its terms.
4. METHOD OF EXERCISE
The Option may be exercised as to any part of the Shares which may then
be purchased by delivery to and receipt by the Secretary of the Company at 450
Winks Lane, Bensalem, Pennsylvania 19020, of a written notice, signed by the
Employee, specifying the number of Shares which the Employee wishes to purchase
and accompanied by payment in full of the exercise price therefor in accordance
with Section 5. As soon as practicable after the receipt of such notice and
payment, the Company shall deliver to the Employee a stock certificate for the
Shares so purchased, with any requisite legend affixed. Subject to the
provisions of the Plan, such exercise may include instructions to the Company
to deliver Shares due upon exercise of the Option to any registered broker or
dealer designated by the Committee (a "Designated
<PAGE> 2
Broker") in lieu of delivery to the Employee. Such instructions must designate
the account into which the Shares are to be deposited. The Employee may tender
this notice of exercise, which has been properly executed by the Employee, and
the aforementioned delivery instructions to any Designated Broker together with
irrevocable instructions to the Designated Broker to promptly deliver to the
Company the cash amount of sale or loan proceeds from the Shares sufficient to
pay the exercise price, and thereupon the Company may issue Shares and deliver
them to such Designated Broker.
5. PAYMENT OF EXERCISE PRICE
The exercise price of the Option shall be payable in cash or by
certified or bank cashier's check, provided, however, that, in lieu of payment
in full in cash or by such check, the exercise price may, with the approval of
the Committee, upon written request of the Employee, be paid in full or in part
by delivery and transfer to the Company of that number of shares of the
Company's common stock otherwise owned by the Employee with an aggregate fair
market value (determined in accordance with procedures for valuing shares as
set forth in rules and regulations adopted by the Committee and in effect at
the time the Employee's notice of exercise is received by the Company) equal to
the aggregate exercise price of that number of Shares for which the Option is
being exercised or such lesser portion of the aggregate purchase price as may
be specified by the Employee (in which case the balance must be paid in cash or
by certified or bank cashier's check).
6. TAX WITHHOLDING
Whenever Shares are to be delivered upon exercise of the Option, the
Company shall be entitled to require as a condition of delivery that the
Employee remit or, in appropriate cases, agree to remit when due an amount
sufficient to satisfy all federal, state and local withholding tax requirements
relating thereto. Subject to the approval of the Committee, the Employee will
be entitled to elect to have the Company withhold from the Shares to be
delivered upon the exercise of the Option, or to elect to deliver to the
Company from shares of the Company's common stock owned separately by the
Employee, a sufficient number of such shares to satisfy the Employee's federal,
state and local tax obligations relating to the Option exercise (and the
Company's withholding obligations), to the extent, if any, permitted under
rules and regulations adopted by the Committee and in effect at the time of the
exercise of the Option. In such case, the Shares withheld or the shares
surrendered will be valued at the fair market value determined in accordance
with procedures for valuing shares as set forth in rules and regulations
adopted by the Committee and otherwise in effect at the time of the exercise of
the Option.
7. CHANGE OF CONTROL PROVISIONS
(a) Acceleration of Exercisability. In the event of a Change of
Control at a time that the Employee is employed by the Company or any of its
subsidiaries, this Option shall become immediately and fully exercisable upon
the occurrence of such Change of Control.
(b) Definitions of Certain Terms. For purposes of this Agreement,
the following definitions shall apply:
(1) "Beneficial Owner," "Beneficially Owns," and
"Beneficial Ownership" shall have the meanings ascribed to such terms
for purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the rules thereunder, except that, for
purposes of this Section 7, "Beneficial Ownership" (and the related
terms) shall include Voting Securities that a Person has the right to
acquire pursuant to any agreement, or upon exercise of conversion
rights, warrants, options or otherwise, regardless of whether any such
right is exercisable within 60 days of the date as of which Beneficial
Ownership is to be determined.
(2) "Change of Control" means and shall be deemed to
have occurred if
(i) any Person, other than the Company or a
Related Party, acquires directly or indirectly the Beneficial
Ownership of any Voting Security of the Company and
immediately after such acquisition such Person has, directly
or indirectly, the Beneficial Ownership of Voting Securities
representing 20 percent or more of the total voting power of
all the then-outstanding Voting Securities; or
<PAGE> 3
(ii) those individuals who as of August 15, 1995
constitute the Board or who thereafter are elected to the
Board and whose election, or nomination for election, to the
Board was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors
as of August 15, 1995 or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority of the members of the Board; or
(iii) the shareholders of the Company approve a
merger, consolidation, recapitalization or reorganization of
the Company, a reverse stock split of outstanding Voting
Securities, or an acquisition of securities or assets by the
Company (a "Transaction"), or consummation of such a
Transaction if shareholder approval is not obtained, other
than a Transaction which would result in the holders of Voting
Securities having at least 80 percent of the total voting
power represented by the Voting Securities outstanding
immediately prior thereto continuing to hold Voting Securities
or voting securities of the surviving entity having at least
60 percent of the total voting power represented by the Voting
Securities or the voting securities of such surviving entity
outstanding immediately after such Transaction and in or as a
result of which the voting rights of each Voting Security
relative to the voting rights of all other Voting Securities
are not altered; provided, however, a Change of Control shall
not be deemed to have occurred if the Committee shall have
determined, by action taken prior to the approval of the
Transaction by shareholders or consummation of the Transaction
if shareholder approval is not obtained, that such Transaction
shall not constitute a Change of Control for purposes of this
Agreement (provided that the Committee shall make no such
determination unless the Board shall have determined that
such Transaction shall not constitute a Change of Control for
purposes of Employee's Employment Agreement with the Company
made as of August 22, 1995 (the "Employment Agreement")) and
all options then outstanding under the Plan, which
determination, if made with respect to a Transaction, shall
not be deemed to constitute a determination with respect to
any subsequent Transaction; or
(iv) the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all of the Company's assets other than any such
transaction which would result in Related Parties owning or
acquiring more than 50 percent of the assets owned by the
Company immediately prior to the transaction.
(3) "Person" shall have the meaning ascribed for purposes
of Section 13(d) of the Exchange Act and the rules thereunder.
(4) "Related Party" means (i) a majority-owned subsidiary
of the Company; or (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any majority-owned
subsidiary of the Company; or (iii) a corporation owned directly or
indirectly by the shareholders of the Company in substantially the same
proportion as their ownership of Voting Securities; or (iv) if, prior to
any acquisition of a Voting Security which would result in any Person
Beneficially Owning more than ten percent of any outstanding class of
Voting Security and which would be required to be reported on a Schedule
13D or an amendment thereto, the Board approved the initial transaction
giving rise to an increase in Beneficial Ownership in excess of ten
percent and any subsequent transaction giving rise to any further
increase in Beneficial Ownership; provided, however, that such Person
has not, prior to obtaining Board approval of any such transaction,
publicly announced an intention to take actions which, if consummated or
successful (at a time such Person has not been deemed a "Related
Party"), would constitute a Change of Control.
(5) "Voting Securities" means any securities of the
Company which carry the right to vote generally in the election of
directors.
8. TERMINATION OF EMPLOYMENT
(a) This Option shall terminate and no longer be exercisable (except,
to the extent, if any, otherwise hereinafter provided) at the earlier of the
scheduled expiration date of this Option or the date or dates set forth below:
<PAGE> 4
(1) at the expiration of three months after the voluntary
termination of the Employee's employment with the Company or any of its
subsidiaries (other than for "Good Reason"), or, if for "Cause", the
involuntary termination of the Employee's employment with the Company or
any of its subsidiaries, in either case (A) except as may be otherwise
provided in Section 8(a)(4) below, during which three-month period this
Option shall be exercisable only to the extent that it was exercisable
at the date of the Employee's termination of employment, or (B) after a
Change of Control, except as may be otherwise provided in Section
8(a)(4) below, during which three-month period this Option shall be
exercisable in full; or
(2) at the expiration of three months after (A) the
voluntary termination of the Employee's employment for "Good Reason" or
(B) the involuntary termination of the Employee's employment, other than
for reasons of "Cause," death or disability, with the Company or any of
its subsidiaries at any time except as may be otherwise provided in
Section 8(a)(4) below, during which three-month period this Option shall
be exercisable in full; or
(3) at the expiration of one year after the Employee's
death if the Employee dies while employed by the Company or any of its
subsidiaries, during which one-year period this Option shall be
exercisable in full; or
(4) at the expiration of one year after the Employee's
death if the Employee dies during the three-month period referred to in
Sections 8(a)(1) or (2) above, during which one-year period this Option
shall be exercisable to the same extent provided in Section 8(a)(1) or
(2) above (whichever was applicable prior to the Employee's death); or
(5) at the expiration of one year after the termination
of the Employee's employment with the Company or any of its subsidiaries
by reason of the Employee's permanent disability if the Employee becomes
permanently disabled while employed by the Company or any of its
subsidiaries, during which one-year period this Option shall be
exercisable in full.
(b) For purposes hereof, "Cause" and "Good Reason" shall have the
meanings ascribed to such terms in Employee's Employment Agreement. The
Committee shall not make a determination that "Cause" exists unless such
determination has been made by the Board of Directors pursuant to the
Employment Agreement.
(c) For purposes hereof, the existence of a "disability" shall be
determined by, or in accordance with criteria and standards adopted by, the
Committee.
9. LIMITS ON TRANSFER OF OPTION; BENEFICIARIES
No right or interest of a participant in this Option shall be pledged,
encumbered or hypothecated to or in favor of any third party or shall be
subject to any lien, obligation or liability of the Employee to any third
party. This Option shall not be transferable to any third party by the
Employee otherwise than by will or the laws of descent and distribution, and
this Option shall be exercisable, during the lifetime of the Employee, only by
the Employee; provided, however, that the Employee will be entitled to
designate a beneficiary or beneficiaries to exercise her rights under this
Option upon the death of Employee, in the manner and to the extent permitted by
the Committee under rules and regulations adopted by the Committee under the
Plan.
10. INVESTMENT REPRESENTATION
Unless, at the time of any exercise of this Option, the issuance and
delivery of Shares hereunder to the Employee is registered under a
then-effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), and complies with all applicable registration
requirements under state securities laws, the Employee shall provide to the
Company, as a condition to the valid exercise of this Option and the delivery
of any certificates representing Shares, appropriate evidence, satisfactory in
form and substance to the Company, that she is acquiring the Shares for
investment and not with a view to the distribution of the Shares or any
interest in the Shares, and a representation to the effect that the Employee
shall make no sale or other disposition of the Shares unless (i) the Company
shall have received an opinion of counsel satisfactory to it in form and
substance that such sale or other disposition may be made without registration
under the then-applicable provisions of the Securities Act, the related rules
and regulations of the Securities and Exchange Commission, and applicable state
securities laws and regulations, or (ii) the sale or other disposition of the
Shares shall be registered under a currently effective registration statement
under the Securities Act and complies with all applicable registration
requirements under state securities laws. The certificates representing the
Shares may bear an appropriate legend giving notice of the foregoing
restriction on transfer of the Shares, and any other restrictive legend deemed
necessary or appropriate by the Committee.
<PAGE> 5
11. EMPLOYEE BOUND BY PLAN
The Employee hereby acknowledges receipt of the attached copy of the
Plan and agrees to be bound by all the terms and provisions thereof (as
presently in effect or hereafter amended), and by all decisions and
determinations of the Committee thereunder.
12. MISCELLANEOUS
This Agreement shall be binding upon the heirs, executors,
administrators and successors of the parties. This Agreement and the
Employment Agreement constitute the entire agreement between the parties with
respect to the Option, and supersedes any prior agreements or documents with
respect to the Option. No amendment, alteration, suspension, discontinuation
or termination of this Agreement which may impose any additional obligation
upon the Company or impair the rights of the Employee with respect to the
Option shall be valid unless in each instance such amendment, alteration,
suspension, discontinuation or termination is expressed in a written instrument
duly executed in the name and on behalf of the Company and by the Employee.
CHARMING SHOPPES, INC.
BY:
----------------------------------
Eric M. Specter
Vice President and
Chief Financial Officer
EMPLOYEE:
------------------------------------
Dorrit J. Bern
<PAGE> 1
EXHIBIT 10.2.17
CHARMING SHOPPES, INC.
1993 EMPLOYEES' STOCK INCENTIVE PLAN
RESTRICTED STOCK AND STOCK BONUS AGREEMENT
Agreement dated as of March 20, 1996 between CHARMING SHOPPES, INC.
(the "Company") and DORRIT J. BERN ("Employee").
It is agreed as follows:
1. GRANT OF RESTRICTED STOCK; CONSIDERATION
The Company hereby confirms the grant, under and pursuant to the
Company's 1993 Employees' Stock Incentive Plan (the "Plan"), to Employee on
March 20, 1996 (the "Date of Grant") of 400,000 shares of the Company's common
stock, par value $0.10 per share ("Shares"), consisting of 240,000 Shares
granted pursuant to Section 6(d) of the Plan and subject to restrictions as set
forth herein and therein ("Restricted Stock") and 160,000 Shares granted
pursuant to Section 6(f) of the Plan and subject to the limitation on transfer
set forth herein ("Bonus Stock" and, together with the Restricted Stock, the
"Stock Award"). Employee shall be required to pay no cash consideration for
the grant of the Stock Award, but Employee's prior services to the Company,
performance of services to the Company prior to the expiration of applicable
restrictions relating to the Stock Award and otherwise during the term of her
employment agreement, and her agreement to abide by the terms set forth in the
Plan and this Restricted Stock and Bonus Stock Agreement (the "Agreement")
shall be deemed to be consideration for the Stock Award.
2. INCORPORATION OF PLAN BY REFERENCE
The Stock Award has been granted to Employee under the Plan, a copy of
which is attached hereto. All of the terms, conditions and other provisions of
the Plan are hereby incorporated by reference into this Agreement. Capitalized
terms used in this Agreement but not defined herein shall have the same
meanings as in the Plan. If there is any conflict between the provisions of
this Agreement and the provisions of the Plan, the provisions of the Plan shall
govern.
THE DATE OF GRANT OF THE STOCK IS MARCH 20, 1996
GRANT NUMBER:________
<PAGE> 2
3. RESTRICTIONS ON RESTRICTED STOCK AND RELATED TERMS
(a) Restrictions Generally. Until they expire in accordance with
Section 3(b), 3(c), or 6(a), the following restrictions (the "Restrictions")
shall apply to the Restricted Stock: (1) Employee shall have no right to sell,
transfer, assign, pledge, or otherwise encumber or dispose of the Restricted
Stock (except for transfers and forfeitures to the Company); and (2) the
Restricted Stock shall be subject to the risk of forfeiture as set forth in
Section 3(b). Employee shall be entitled to receive dividends on the
Restricted Stock when, as, and if dividends are declared and paid on Shares,
shall be entitled to vote Restricted Stock on any matter submitted to a vote of
holders of Common Stock, and shall have all other rights of a shareholder of
the Company except as otherwise expressly provided under this Section 3.
(b) Forfeiture. Unless otherwise determined by the Committee, if
Employee's employment terminates and she thereafter is not an employee by the
Company or any of its subsidiaries (a "Termination") prior to the expiration of
the Restrictions for any reason other than due to death, permanent disability,
involuntary termination by the Company for reasons other than "Cause," or
voluntary termination by Employee for "Good Reason," the Restricted Stock as to
which Restrictions have not previously expired shall be forfeited at the time
of such Termination. In the event of a Termination due to death, permanent
disability, involuntary termination by the Company for reasons other than
"Cause," or a voluntary termination by Employee for "Good Reason," the
Restrictions on the Restricted Stock shall expire at the time of such
Termination. For purposes of this Agreement, "Cause" and "Good Reason" shall
have the meanings ascribed to such terms in the Employment Agreement between
Employee and the Company, as in effect at the Date of Grant. The foregoing
notwithstanding, the Committee shall independently make any determination that
"Cause" exists, but only if the Board of Directors previously has made such
determination pursuant to the Employment Agreement. For purposes of this
Agreement, the existence of a "permanent disability" shall be determined by, or
in accordance with criteria and standards adopted by, the Committee.
(c) Expiration of Restrictions. Unless the Restrictions on
Restricted Stock expire earlier under Section 3(b) or 6(a), the Restrictions
shall expire as to 60,000 shares of Restricted Stock on each of the third and
fourth anniversaries of the Date of Grant and 120,000 shares of Restricted
Stock on the fifth anniversary of the Date of Grant. Upon expiration of the
Restrictions on any Restricted Stock, the Company shall promptly deliver to
Employee one or more certificates representing such Shares (which shall no
longer be deemed to be Restricted Stock), with any legend referring to the
Restrictions removed from such certificate(s), or shall cause such Shares to be
delivered to a broker or bank which maintains an account for Employee or
Employee's designee, for deposit to such account.
(d) Certificates Representing Restricted Stock. Restricted Stock
shall be evidenced by issuance of one or more certificates in the name of
Employee, bearing an appropriate legend referring to the terms, conditions, and
Restrictions applicable
- 2 -
<PAGE> 3
hereunder, and shall remain in the physical custody of the General Counsel of
the Company or his designee until such time as the Restrictions on such shares
have expired. In addition, Restricted Stock shall be subject to such
stop-transfer orders and other restrictive measures as the General Counsel of
the Company shall deem advisable under federal or state securities laws, rules
and regulations thereunder, and the rules of the Nasdaq National Market System
or any national securities exchange on which Common Stock is then quoted or
listed, or to implement the Restrictions, and the General Counsel may cause a
legend or legends to be placed on any such certificates to make appropriate
reference to the Restrictions.
(e) Stock Powers. Employee agrees to execute and deliver to the
Company one or more stock powers, in such form as may be specified by the
General Counsel, authorizing the transfer of the Restricted Stock to the
Company, at the Date of Grant of the Restricted Stock or upon request at any
time thereafter.
4. LIMITATION ON BONUS STOCK AND RELATED TERMS
Until the earlier of September 20, 1996 or the time specified in
Section 6(a), the following limitation shall apply to the Bonus Stock:
Employee shall have no right to sell, transfer, assign, pledge, or otherwise
encumber or dispose of the Bonus Stock (except for transfers and forfeitures to
the Company), unless such transaction, in the opinion of the General Counsel of
the Company, should not result in short-swing profit liability under Section
16(b) of the Exchange Act, considering the grant of the Stock Award and any
other earlier transaction by Employee. Employee shall be entitled to receive
dividends on the Bonus Stock when, as, and if dividends are declared and paid
on Shares, shall be entitled to vote Bonus Stock on any matter submitted to a
vote of holders of Common Stock, and shall have all other rights of a
shareholder of the Company except as otherwise expressly provided under this
Section 3. Prior to the expiration of the limitation set forth in this Section
4, the General Counsel may retain the certificate or certificates representing
the Bonus Stock, but such certificate or certificates shall be delivered to
Employee, free of any restrictive legend, not later than the time at which the
limitation expires.
5. TAX WITHHOLDING
Employee agrees to remit to the Company and any subsidiary, and
authorizes the Company and any subsidiary to deduct from any payment to be made
to Employee hereunder if such remittance has not been made, any amount that
federal, state, local, or foreign tax law requires to be withheld with respect
to the grant of Restricted Stock or Bonus Stock or delivery of Shares
hereunder. At the election of the Committee, the Company may withhold from the
number of Shares to be delivered upon expiration of Restrictions on Restricted
Stock a number of whole shares up to but not exceeding that
- 3 -
<PAGE> 4
number which has a Fair Market Value nearest to but not exceeding the amount of
taxes required to be withheld with respect to such expiration of Restrictions;
provided, however, no such withholding shall be permitted if Employee elects to
be taxed on the grant of Restricted Stock, under Section 83(b) of the Code,
prior to expiration of Restrictions.
6. CHANGE OF CONTROL PROVISIONS
(a) Acceleration of Expiration of Restrictions. In the event of a
Change of Control at any time after the date of grant of the Restricted Stock,
the Restrictions on the Restricted Stock and limitations on the Bonus Stock
shall immediately expire.
(b) Definitions of Certain Terms. For purposes of this Agreement,
the following definitions shall apply:
(1) "Beneficial Owner," "Beneficially Owns," and
"Beneficial Ownership" shall have the meanings ascribed to such terms
for purposes of Section 13(d) of the Exchange Act and the rules
thereunder, except that, for purposes of this Section 6, "Beneficial
Ownership" (and the related terms) shall include Voting Securities
that a Person has the right to acquire pursuant to any agreement, or
upon exercise of conversion rights, warrants, options, or otherwise,
regardless of whether any such right is exercisable within 60 days of
the date as of which Beneficial Ownership is to be determined.
(2) "Change of Control" means and shall be
deemed to have occurred if
(i) any Person, other than the Company or a
Related Party, acquires directly or indirectly the Beneficial
Ownership of any Voting Security of the Company and
immediately after such acquisition such Person has, directly
or indirectly, the Beneficial Ownership of Voting Securities
representing 20 percent or more of the total voting power of
all the then-outstanding Voting Securities; or
(ii) those individuals who as of March
20, 1996 constitute the Board or who thereafter are elected to
the Board and whose election, or nomination for election, to
the Board was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors as of March 20, 1996 or whose election or nomination
for election was previously so approved, cease for any reason
to constitute a majority of the members of the Board; or
(iii) the shareholders of the Company
approve a merger, consolidation, recapitalization, or
reorganization of the Company, a
- 4 -
<PAGE> 5
reverse stock split of outstanding Voting Securities, or an
acquisition of securities or assets by the Company (a
"Transaction"), or consummation of such a Transaction if
shareholder approval is not obtained, other than a Transaction
which would result in the holders of Voting Securities having
at least 80 percent of the total voting power represented by
the Voting Securities outstanding immediately prior thereto
continuing to hold Voting Securities or voting securities of
the surviving entity having at least 60 percent of the total
voting power represented by the Voting Securities or the
voting securities of such surviving entity outstanding
immediately after such Transaction and in or as a result of
which the voting rights of each Voting Security relative to
the voting rights of all other Voting Securities are not
altered; provided, however, a Change of Control shall not be
deemed to have occurred if the Committee shall have
determined, by action taken prior to the approval of the
Transaction by shareholders or consummation of the Transaction
if shareholder approval is not obtained, that such Transaction
shall not constitute a Change of Control for purposes of this
Agreement (provided that the Committee shall make no such
determination unless the Board shall have determined that such
Transaction shall not constitute a Change of Control for
purposes of Employee's Employment Agreement with the Company
made as of August 22, 1995) and all other Awards then
outstanding under the Plan, which determination, if made with
respect to a Transaction, shall not be deemed to constitute a
determination with respect to any subsequent Transaction; or
(iv) the shareholders of the Company approve
a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all of the Company's assets other than any such
transaction which would result in Related Parties owning or
acquiring more than 50 percent of the assets owned by the
Company immediately prior to the transaction.
(3) "Person" shall have the meaning ascribed for
purposes of Section 13(d) of the Exchange Act and the rules
thereunder.
(4) "Related Party" means (i) a majority-owned
subsidiary of the Company; or (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or
any majority-owned subsidiary of the Company; or (iii) a corporation
owned directly or indirectly by the shareholders of the Company in
substantially the same proportion as their ownership of Voting
Securities; or (iv) if, prior to any acquisition of a Voting Security
which would result in any Person Beneficially Owning more than ten
percent of any outstanding class of Voting Security and which would be
required to be reported on a Schedule 13D or an amendment thereto, the
Board approved the initial transaction giving rise to an increase in
- 5 -
<PAGE> 6
Beneficial Ownership in excess of ten percent and any subsequent
transaction giving rise to any further increase in Beneficial
Ownership; provided, however, that such Person has not, prior to
obtaining Board approval of any such transaction, publicly announced
an intention to take actions which, if consummated or successful (at a
time such Person has not been deemed a "Related Party"), would
constitute a Change of Control.
(5) "Voting Securities" means any securities of
the Company which carry the right to vote generally in the election of
directors.
7. EMPLOYEE BOUND BY PLAN
Employee hereby acknowledges receipt of the attached copy of the Plan
and agrees to be bound by all the terms and provisions thereof (as presently in
effect or hereafter amended), and by all decisions and determinations of the
Committee thereunder.
8. MISCELLANEOUS
This Agreement shall be binding upon the heirs, executors,
administrators, and successors of the parties. This Agreement constitutes the
entire agreement between the parties with respect to the Stock Award, and
supersedes any prior agreements or documents with respect to the Stock Award.
No amendment, alteration, suspension, discontinuation, or termination of this
Agreement which may impose any additional obligation upon the Company or
materially impair the rights of Employee with respect to the Stock Award shall
be valid unless in each instance such amendment, alteration, suspension,
discontinuation, or termination is expressed in a written instrument duly
executed in the name and on behalf of the Company and by Employee.
CHARMING SHOPPES, INC.
BY:
---------------------------
Eric M. Specter
Vice President and
Chief Financial Officer
EMPLOYEE:
------------------------------
Dorrit J. Bern
(3-96)
- 6 -
<PAGE> 7
STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto Charming Shoppes, Inc. ____________________ shares of Common
Stock, $0.10 par value per share, of Charming Shoppes, Inc., a Pennsylvania
corporation (the "Corporation"), registered in the name of the undersigned on
the books and records of the Corporation, and does hereby irrevocably
constitute and appoint Colin D. Stern and Anthony A. DeSabato, and each of
them, attorneys, to transfer the Common Stock on the books of the Corporation,
with full power of substitution in the premises.
---------------------
Signed
(Signature should be in exact form
as on Stock certificate)
Date
<PAGE> 1
EXHIBIT 10.2.18
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (hereinafter referred to as the
"Agreement") is made and entered into this 7th day of December, 1995 by and
between CHARMING SHOPPES, INC. (hereinafter Charming Shoppes, Inc and its
subsidiaries are referred to collectively as the "Company") and Mordechai Kafry
(hereinafter referred to as the "Employee").
WITNESSETH:
WHEREAS, the Company and the Employee have decided to terminate the employment
relationship between the Employee and the Company no later than March 1, 1996
and whereas Employee has resigned as a Director of the Company effective
November 27, 1995 and whereas the Company and Employee have decided that the
Company will remove Employee from the position of Executive Vice President -
Merchandise Procurement no later than March 1, 1996; and
WHEREAS, the parties hereto are desirous of amicably resolving and settling any
and all disputes, differences and allegations arising either out of the
aforementioned decisions and/or out of the Employee's employment with, or
termination of employment from, the Company and/or claims regarding the
Company's actions and/or inactions toward the Employee with respect to said
employment or termination;
NOW, THEREFORE, in consideration of the premises and mutual promises herein
contained, the sufficiency of which mutual consideration is hereby acknowledged
and which is expressly acknowledged to be in addition to anything of value which
Employee is already entitled to receive, the Company and the Employee agree as
follows:
1. Neither this settlement nor this Agreement shall constitute or be
construed as an adjudication of liability by the Company or by the
Employee on the merits of any claims, allegations, or disputes by the
Employee or any disputes between the Company and the Employee, all
liability and wrongdoing being expressly denied by the Company and by
the Employee.
2. Neither this settlement nor this Agreement shall in any way be
construed as an admission by the Company or by the Employee of any
liability whatsoever, nor as an admission by the Employee of any
wrongdoing, nor an admission by the Company of any acts of wrongdoing
and/or discrimination against the Employee on the part of either the
Company or the officers, directors, employees, attorneys, or agents of
the Company, such being expressly denied.
<PAGE> 2
KAFRY, PAGE 2
3. The Employee represents that he has not filed any Complaints or Charges
of discrimination, breach of contract or unjust termination against the
Company with any United States local, state, or federal agency or
Court, or any non-United States local, state, or national agency,
tribunal, or Court, that he will not do so at any time hereafter, and
that if any such agency, tribunal, or Court assumes jurisdiction of any
Complaint or Charge on behalf of the Employee, he will formally
petition such agency, tribunal, or Court to withdraw from the matter,
if he initiated such action.
4. As a material inducement to the Company to enter into this Agreement,
the Employee, on behalf of himself and his heirs, legatees,
representatives, transferees and assigns,
A. Does hereby release, remise and forever discharge the Company
and all of its affiliated and subsidiary companies, and any of
its, or their, past, current or future directors, officers,
agents, employees, representatives, successors and assigns in
their personal and professional capacities of and (i) from any
and all claims, counts, charges, actions, causes of action,
suits, debts, contracts or petitions alleging a violation of
the Age Discrimination in Employment Act, Title VII of the
Civil Rights Act of 1964, or of any violation of any United
States or foreign, including but not limited to the laws of
Hong Kong, federal, state or local law creating a cause of
action in an employee, or former employee, or his
representative, against his employer, or former employer and
(ii) from all claims, counts, charges, actions, causes of
action, suits, debts, contracts or petitions, controversies,
grievances, claims and demands, whatsoever, arising out of, or
related to Employee's employment with, or agreed upon
termination of employment no later than March 1, 1996 from,
the Company. Expressly excluded from this release, however,
are the following: (i) all obligations required of the
Company, and/or its officers, directors, employees, agents,
and/or representatives, which are expressly referred to or
created by this Agreement; (ii) Employee's right to receive
accrued benefits under any employee benefit plan maintained by
the Company; and (iii) Employee's rights to be indemnified,
defended, and held harmless under any indemnification
provision applicable generally to past or present directors
and officers of the Company. This release and discharge of the
Company is made in exchange for consideration listed below and
in addition to anything of value for which Employee is already
entitled to receive; and
B. Agrees to execute and return to the Executive Vice President -
Human Resources the release attached hereto as Exhibit A, upon
the agreed upon termination of employment.
<PAGE> 3
KAFRY, PAGE 3
5. The Company shall continue to (and is hereby obligated to) indemnify
Employee in each and every situation where the Company is obligated or
permitted to make such indemnification pursuant to the relevant
portions of the Company's Articles of Incorporation and By-Laws
regarding conduct engaged in by Employee in his capacity as an Officer
of the Company.
6. In consideration of the promises and obligations contained herein, the
parties agree as follows:
A. Continuation as Employee, Removal as Officer, Transition
Period: From the date hereof until a date to be determined by
the Company, such date to be no later than the close of
business on Friday, March 1, 1996, Employee will continue as
an employee of the Company under the terms and conditions now
in effect. Employee will be removed from the position of
Executive Vice President and as an Officer of the Company at a
time to be determined by the Company, such time to be no later
than March 1, 1996. Should the Company remove Employee as an
employee prior to March 1, 1996, the Company will continue
Employee's compensation and benefits in effect as of the
effective date of this Agreement until March 1, 1996.
1. During the transition period, the Company will
promptly notify Employee of its plans for future
sourcing operation, and any other issues Employee is
to address through the transition period;
2. During the transition period, Employee will provide
the Company's Chief Executive Officer and Chief
Operating Officer with suggestions on operating the
sourcing division of the Company with a suggested
schedule for implementation;
3. During the transition period, Employee will carry out
the reasonable directions of the Chief Executive
Officer regarding the sourcing division;
4. During the transition period, the Company will
appoint up to two Company representatives, not
outsearch consultants, to serve as transition
representatives;
5. During the transition period, the Company will follow
the operating procedures in the sourcing division as
of September 1, 1995;
6. Between March 1, 1996 and March 8, 1996 the Company
will pay to each of those employees listed on Exhibit
B hereof, who remain continuously at work for the
Company's subsidiary through March 1, 1996, two
months pay at their November 25, 1995 salary;
provided, however, that if the Company terminates the
employment of any such employee, the employee will
nevertheless be paid the aforementioned amount.
<PAGE> 4
KAFRY, PAGE 4
B. Severance and Damages: The Company will pay the Employee as
severance the sum of three hundred sixty-five thousand two
hundred dollars ($365,200.00), minus required tax
withholdings, and as settlement of disputed claims of pain and
suffering, mental anguish and distress, humiliation, injury to
reputation, counsel fees and costs of one million four hundred
sixty thousand eight hundred dollars ($1,460,800.00) [total
payments equal one million eight hundred twenty-six thousand
dollars ($1,826,000.00), minus required tax withholdings].
Said sum shall be paid based on the following schedule:
1. within eight (8) days of the effective date of this
Agreement - eight hundred eighty-eight thousand
dollars ($888,000.00);
2. within eight (8) days of the effective date of this
Agreement - fifty thousand dollars ($50,000.00)
payable to Raynes, McCarty, Binder, Ross & Mundy;
3. on or before March 31, 1996 - two hundred twenty-two
thousand dollars ($222,000.00), minus required tax
withholdings;
4. on or before June 30, 1996 - two hundred twenty-two
thousand dollars ($222,000.00), minus required tax
withholdings;
5. on or before September 30, 1996 - two hundred
twenty-two thousand dollars ($222,000.00), minus
required tax withholdings;
6. on or before December 31, 1996 - two hundred
twenty-two thousand dollars ($222,000.00), minus
required tax withholdings;
C. Health Benefits: The Company will continue to provide health
benefits to Employee and his eligible dependents until
November 30, 1998 as if he were actively employed during that
period.
D. Life Insurance: The Company shall continue in effect
Employee's Split Dollar Life Insurance coverage pursuant to
Manufacturer's Life Insurance Company (policy nos. 3778285-1
and 4023012-0), hereafter "Split Dollar Insurance", so as to
provide the coverage provided for in the aforementioned
policies so long as the Company continues to maintain or
provide similar types of coverage for any other persons who
are, or become employed by the Company at the level of
Executive Vice President or below or who immediately prior to
the end of their employment by the Company were employed at
the level of Executive Vice President or below. If the Company
should at any time elect to terminate the Split Dollar
Insurance for Employee and all other persons referred to in
the preceding sentence, then the Company shall notify Employee
in advance and Employee shall have the right to acquire
ownership of the insurance policies listed above, subject to
the terms and conditions of the policies; and
<PAGE> 5
KAFRY, PAGE 5
E. Car: The Company shall continue to provide insurance coverage
at the level currently in effect on Employee's automobile
through November 30, 1998. Should Employee decide to
substitute a vehicle that is comparable, under the Company's
practice with respect to the automobiles of executives, he may
make a request to do so to Anthony A. DeSabato. Provided that
the substituting vehicle is comparable to the previous
vehicle, the Company will allow for that substitution. The
Company shall continue to pay Employee for repairs and
maintenance on said vehicle in accordance with the practice in
effect as of the date of this Agreement through November 30,
1998; and
F. Stock Options: The Company and Employee hereby acknowledge
that Employee was granted options to purchase (i) 75,000
shares of the Company's common stock at the exercise price of
$5.8125 per share under the Company's 1986 Employees' Stock
Option Plan and pursuant to an Employee Stock Option Agreement
dated January 25, 1988 between the Company and Employee (Grant
No. 100184); (ii) 40,000 shares of the Company's common stock
at the exercise price of $.50 per share under the Company's
1988 Key Employee Stock Option Plan and pursuant to a Key
Employee Stock Option Agreement dated February 27, 1989
between the Company and Employee (Grant No. 900497); (iii)
25,000 shares of the Company's common stock at the exercise
price of $4.50 per share under the Company' 1990 Employees'
Stock Incentive Plan and pursuant to an Employee Stock Option
Agreement dated March 29, 1990 between the Company and
Employee (Grant No. 200035); (iv) 380,000 shares of the
Company's common stock at the exercise price of $4.50 per
share under the Company' 1990 Employees' Stock Incentive Plan
and pursuant to an Employee Stock Option Agreement dated March
29, 1990 between the Company and Employee (Grant No. 200086);
(v) 80,000 shares of the Company's common stock at the
exercise price of $6.1875 per share under the Company's 1990
Employees' Stock Incentive Plan and pursuant to an Employee
Stock Option Agreement dated February 4, 1991 between the
Company and Employee (Grant No. 200188); (vi) 40,000 shares of
the Company's common stock at the exercise price of $.50 per
share under the 1988 Key Employee Stock Option Plan and
pursuant to a Key Employee Stock Option Agreement dated
February 4, 1991 between the Company and Employee (Grant No.
900806); (vii) 70,000 shares of the Company's common stock at
the exercise price of $.50 per share under the Company's 1988
Key Employee Stock Option Plan and pursuant to a Key Employee
Stock Option Agreement dated December 5, 1991 between the
Company and Employee (Grant No. 900835); (viii) 70,000 shares
of the Company's common stock at the exercise price of $13.50
per share under the 1990 Employees' Stock Incentive Plan and
pursuant to an Employee Stock Option Agreement dated February
3, 1992 between
<PAGE> 6
KAFRY, PAGE 6
the Company and Employee (Grant No. 200238); (ix) 54,000
shares of the Company's common stock at the exercise price of
$15.125 per share under the Company's 1993 Employees' Stock
Incentive Plan and pursuant to a Stock Option Agreement dated
April 7, 1993 between the Company and Employee (Grant No.
300100); (x) 61,800 shares of the Company's common stock at
the exercise price of $15.125 per share under the Company's
1993 Employees' Stock Incentive Plan and pursuant to a
Performance-Accelerated Stock Option Agreement dated April 7,
1993 between the Company and Employee (Grant No. (P30001);
(xi) 80,000 shares of the Company's common stock at the
exercise price of $11.125 per share under the Company's 1993
Employees' Stock Incentive Plan and pursuant to a Stock Option
Agreement dated February 1, 1994 between the Company and
Employee (Grant No. 300214); (xii) 93,700 shares of the
Company's common stock at the exercise price of $11.125 per
share under the Company's 1993 Employees' Stock Incentive Plan
and pursuant to a Performance-Accelerated Stock Option
Agreement dated February 1, 1994 between the Company and
Employee (Grant No. P30010); (xiii) 90,000 shares of the
Company's common stock at the exercise price of $6.00 per
share under the Company's 1993 Employees' Stock Incentive Plan
and pursuant to a Stock Option Agreement dated February 6,
1995 between the Company and Employee (Grant No. 300505);
(xiv) 95,000 shares of the Company's common stock at the
exercise price of $6.00 per share under the Company's 1993
Employees' Stock Incentive Plan and pursuant to a
Performance-Accelerated Stock Option Agreement dated February
6, 1995 between the Company and Employee (Grant No. P30019);
Pursuant to said plans and agreements [set forth above as
items (i) through (xiv)] the Employee has options to purchase
stock which, by reason of the termination of employment as of
March 1, 1996, will be exercisable, including application of
the Option Formula, as follows:
(a) Grant No. 100184 - - 57,000 shares at $5.8125 per share
(b) Grant No. 900497 - - 26,668 shares at $.50 per share
(c) Grant No. 200035 - - 25,000 shares at $4.50 per share
(d) Grant No. 200086 - - 380,000 shares at $4.50 per share
(e) Grant No. 200188 - - 80,000 shares at $6.1875 per share
(f) Grant No. 900806 - - 40,000 shares at $.50 per share
(g) Grant No. 900835 - - 70,000 shares at $.50 per share
(h) Grant No. 200238 - - 70,000 shares at $13.50 per share
(i) Grant No. 300100 - - 32,400 shares at $15.125 per share
(j) Grant No. 300214 - - 48,000 shares at $11.125 per share
(k) Grant No. 300505 - - 36,000 shares at $6.00 per share
<PAGE> 7
KAFRY, PAGE 7
Under the terms of the respective stock plans and the stock
option agreements, if Employee fails to exercise those options
which will be exercisable as of March 1, 1996, set forth above
as items (a) through (k), within 90 days of Employee's
termination on a date no later than March 1, 1996, said
options shall lapse. The Company agrees to extend the exercise
date of the options which will be exercisable as of March 1,
1996 set forth above as item (a) until January 25, 1998
provided Employee timely executes an amendment to the stock
option agreement to effectuate said extension. The Company
agrees to extend the exercise date of the options which will
be exercisable as of March 1, 1996 set forth above as items
(b) through (k) until November 30, 1998, provided Employee
timely executes amendments to the stock option agreements to
effectuate said extension.
Pursuant to said plans and agreements [set forth above as
items (i) through (xiv)] the Employee has options to purchase
stock which are scheduled to become exercisable as follows,
provided Employee continued to be employed by the Company on
the exercise date:
(1) Grant No. 300100 - - 10,800 shares at $15.1250 per share
on April 4, 1997
(2) Grant No. 300100 - - 10,800 shares at $15.1250 per share
on April 4, 1998
(3) Grant No. P30001 - - 12,360 shares at $15.1250 per share
on April 7, 1998
(4) Grant No. P30001 - - 12,360 shares at $15.1250 per share
on April 7, 1999
(5) Grant No. P30001 - - 12,360 shares at $15.1250 per share
on April 7, 2000
(6) Grant No. P30001 - - 12,360 shares at $15.1250 per share
on April 7, 2001
(7) Grant No. P30001 - - 12,360 shares at $15.1250 per share
on April 7, 2002
(8) Grant No. 300214 - - 16,000 shares at $11.125 per share on
February 1, 1998
(9) Grant No. 300214 - - 16,000 shares at $11.125 per share on
February 1, 1999
(10) Grant No. P30010 - - 18,000 shares at $11.125 per share
on Feb. 1, 1999
(11) Grant No. P30010 - - 18,000 shares at $11.125 per share
on Feb. 1, 2000
(12) Grant No. P30010 - - 18,000 shares at $11.125 per share
on Feb. 1, 2001
(13) Grant No. P30010 - - 18,000 shares at $11.125 per share
on Feb. 1, 2002
(14) Grant No. P30010 - - 18,000 shares at $11.125 per share
on Feb. 1, 2003
(15) Grant No. 300505 - - 18,000 shares at $6.00 per share on
February 6, 1998
(16) Grant No. 300505 - - 18,000 shares at $6.00 per share on
February 6, 1999
(17) Grant No. 300505 - - 18,000 shares at $6.00 per share on
February 6, 2000
(18) Grant No. P30019 - - 19,000 shares at $6.00 per share on
February 6, 2000
(19) Grant No. P30019 - - 19,000 shares at $6.00 per share on
February 6, 2001
(20) Grant No. P30019 - - 19,000 shares at $6.00 per share on
February 6, 2002
(21) Grant No. P30019 - - 19,000 shares at $6.00 per share on
February 6, 2003
(22) Grant No. P30019 - - 19,000 shares at $6.00 per share on
February 6, 2004
The options listed in items (1) through (22) will be forfeited
and not exercisable by Employee.
<PAGE> 8
KAFRY, PAGE 8
G. Expenses: The Company further agrees to provide the Employee
with reimbursement of those expenses that Employee has
actually incurred in performing his duties as an employee of
the Company through the close of business on the date of his
termination which have not previously been reimbursed provided
that Employee submits a final expense report to Anthony A.
DeSabato on a date no later than April 1, 1996.
H. Airline Tickets: In 1996, 1997 and 1998 the Company will
provide Employee with one set of round trip airline tickets
per year for Employee and Employee's immediate family to fly
to and from Israel.
7. The Employee, upon execution of this Agreement, and for and in
consideration of the promises and obligations contained herein, agrees
as follows:
A. The Employee hereby acknowledges the Company shall remove him
as an officer and shall terminate his employment by the
Company on a date or dates to be determined by the Company,
such date or dates to be no later than March 1, 1996 and
Employee expressly and specifically waives any claim for, and
agrees not to seek employment, reemployment, or reinstatement
with the Company and Employee expressly and specifically
waives and agrees not to seek any costs or attorney's fees
from the Company in connection with his termination of
employment other than the amount set forth above in paragraph
6.B.2.; and
B. The Employee agrees that, on or before the close of business
on March 1, 1996, he will return to the Company all company
property in his possession other than minor or incidental
items; and
C. The Employee agrees that, on or before the close of business
on March 1, 1996, he will return to the Company any and all
Company credit cards in his possession; and
D. The Employee further agrees not to use or cause to be used for
the Employee's personal benefit, or disclose, communicate or
divulge, or use for direct or indirect benefit of any person,
firm, association or company other than the Company, any
material or article of information including without
limitation data processing reports, customer sales or sourcing
analyses, invoices, price lists or information, samples, or
any other materials or date of any kind furnished to Employee
by the Company or developed by Employee on behalf of the
Company or at the Company's direction or for the Company's use
or otherwise in connection with Employee's employment with the
Company, or any information regarding the business methods,
policies, procedures, strategies or techniques, research or
development projects or results, trade secrets, confidential
or proprietary information, or other knowledge or processes of
or
<PAGE> 9
KAFRY, PAGE 9
developed by the Company or any names and addresses or
compensation of employees, customers or suppliers or any data
on or relating to past, present or prospective customers or
suppliers or any other confidential information relating to or
dealing with the business operations or activities of the
Company, made known to Employee or learned or acquired by
Employee while in the employ of the Company, without the prior
written consent of the Chairman of the Board of Directors of
the Company; and
E. The Employee further agrees that from the effective date
hereof through the close of business November 30, 1998, he
will not, within 60 days after the severance of their
employment by the Company, contact or cause to be contacted,
directly or indirectly, any individual employed by the Company
as of December 1, 1995, regarding their employment, offer,
solicit, or cause to be offered or solicited for employment or
to solicit or induce him or them to cease to be employed by
the Company without prior written consent of the Executive
Vice President of Human Resources; and
F. Employee acknowledges that any rights he has to purchase stock
pursuant to any stock option agreement with the Company are
hereby terminated and shall no longer be of any force or
effect as of the date hereof, except with respect to those
options set forth in paragraph 6.F. above which are
exercisable as of February 9, 1996 by Employee. Employee
agrees to execute all documents necessary to effectuate the
provisions of this paragraph 7.F.and paragraph 6.F. above; and
G. Employee further agrees and covenants that neither he nor any
person, organization or any other entity acting on his behalf
will file, charge, claim, sue, participate in, join or cause
or permit to be filed, charged or claimed any action for
damages or other relief (including injunctive, declaratory,
monetary or other) against Releasees, with respect to any
matter arising from or related to his employment with or
termination of that employment and/or any action or claim
which is subject of the General Release set forth in the
foregoing paragraph of this Agreement; and
H. Employee further agrees not to disclose the terms or
conditions hereof to any person, other than to members of his
immediate family, to his accountant, and to his attorney and
to them only with instructions that they are not to disclose
the terms or conditions of this hereof to any other person;
and
8. The parties hereto agree and acknowledge that this Agreement shall not
be interpreted to render either party to be a prevailing party for any
purpose, including but not limited to, an award of attorney's fees
under any statute or otherwise.
<PAGE> 10
KAFRY, PAGE 10
9. The parties hereto agree that, should the Employee become deceased
prior to the satisfaction of all obligations to him, and of him, under
this Agreement, the remaining obligations due to and of Employee shall
inure to his spouse, or if he is not survived by his spouse, then to
his estate.
10. The parties agree that any claim of a breach of any paragraph of this
Agreement must be brought before a Court of competent jurisdiction in
the United States.
11. The parties hereto acknowledge that this Agreement constitutes the
entire Agreement between the parties, and that it fully supersedes any
and all prior agreements or understandings pertaining to Employee's
employment with, and termination of employment from, the Company, and
that the consideration set forth in paragraphs six and seven above
constitutes the entire consideration, financial or otherwise, to be
made by the Company to the Employee including salary, severance, bonus,
vacation, benefits, costs, stock grants or grants of stock options, or
any other payments, other than distribution of any funds in Employee's
401(k) and Profit Sharing Plan.
12. The parties acknowledge that they have not been induced to enter into
this Agreement as to any representations or statements, oral or
written, not expressly contained herein, nor expressly incorporated by
reference. The parties further agree that they have freely and
voluntarily entered into this Agreement.
13. No waiver, alterations, or modifications of any of the provisions of
this Agreement shall be binding unless made in writing and signed by
both the Employee and a duly authorized representative of the Company.
14. If any non-economic provision of this Agreement is held by a Court of
competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force and
effect without being impaired or invalidated in any way.
15. Notwithstanding any language herein to the contrary, the release and
discharge of rights and claims arising under the Age Discrimination in
Employment Act of 1967 does not include any waiver of rights or claims
that may arise after the date this Agreement is executed.
16. Both the Employee and the Company agree that the Employee has been
advised in writing to consult with an attorney prior to executing this
Agreement and the Employee acknowledges that he has done so to the
extent that he deems to be appropriate.
<PAGE> 11
KAFRY, PAGE 11
17. The Employee acknowledges that he has been given a period of twenty-one
(21) days within which to consider whether he wishes to enter into this
Agreement before signing it and that should the Company not receive
this Settlement Agreement and Release executed by Employee by December
27, 1995 this Settlement Agreement and Release shall be null and void,
except that the termination of Employee's employment by the Company and
his removal as an officer will nevertheless be effective no later than
March 1, 1996.
18. Within seven (7) days following the execution of this Agreement,
Employee may revoke this Agreement by providing written notice to the
Company, and until revocation period has expired, this Agreement shall
not become effective or enforceable. Any written notice required under
this Agreement shall be effective if delivered personally or mailed by
registered or certified mail, return receipt requested, postage
prepaid, as follows:
If to the Company: Charming Shoppes, Inc.
3750 State Road
Bensalem, PA 19020
Attn: Anthony A. DeSabato
Executive Vice President
If to the Employee: Mordechai Kafry
c/o Elegant Crown LTD
Harbour Centre
11 FLR, Block A, Tower 1
1 Hok Cheung Street
Hunghom Kowloon Hong Kong
Either party may change the address to which notice is required to be
given under this Agreement by giving notice thereof in the manner
required hereinabove.
19. In the event that Employee revokes this Agreement in the manner
provided herein, Employee will immediately return to the Company all
consideration which may have been paid pursuant to this Agreement prior
to the date of its revocation.
20. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
<PAGE> 12
KAFRY, PAGE 12
21. The Company represents to the Employee that the person executing this
Agreement on behalf of the Company has the authority to do so and that
the terms hereof have been approved by the Stock Option Committee and
Compensation Committee of the Board of Directors of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year written beneath their respective signatures.
FOR THE COMPANY: FOR THE EMPLOYEE:
- ---------------------------------------------------------------------------
Anthony A. DeSabato, Esquire Mordechai Kafry
Executive Vice President/
Corporate Director Human Resources
/ / / /
- ------------------------------------------------------
Date Date
TDS/rej
<PAGE> 13
KAFRY, PAGE 13
EXHIBIT B
Ada Fan
Joseph Ip
Katherine Li
Anita Wong
Dennis Fung
Haydn Wong
Annie Tsui
Andy Lin
Peter Ho
Stella Yung
Barry Wai
Yosh Gewurtz
Denny Szeto
Daniel Chu
James Wong
Nancy Shum
Lydia Chow
Iris Lam
David Kirkman
Patrick Sit
Andrew So
John Wan
Johnico Wu
Edmond Chan
Joseph Choi
Doris Cheung
Eyal Vardi
Frances Pan
Windgo Poon
PW Kim
Ajit Thomas
Rami Wiersh
Uday Naik
Rajesh Srivastav
Kitty Wong
Neerja Vaish
Danny Clayman
Karen Rasof
<PAGE> 14
KAFRY, PAGE 14
Suleyman Coruh
Eran Efrat
Monica Wong
<PAGE> 15
KAFRY, PAGE 15
EXHIBIT A
In consideration of the payments to me and agreements by the Company in the
Settlement Agreement and Release attached hereto as Exhibit A, I, Mordechai
Kafry, hereby release, remise and forever discharge the Company, as defined in
Exhibit A attached hereto, and all of its affiliated and subsidiary companies,
and any of its, or their, past, current or future directors, officers, agents,
employees, representatives, successors and assigns in their personal and
professional capacities of and (i) from any and all claims, counts, charges,
actions, causes of action, suits, debts, contracts or petitions alleging a
violation of the Age Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964, or of any violation of any United States or foreign,
including but not limited to the laws of Hong Kong, federal, state or local law
creating a cause of action in an employee, or former employee, or his
representative, against his employer, or former employer and (ii) from all
claims, counts, charges, actions, causes of action, suits, debts, contracts or
petitions, controversies, grievances, claims and demands, whatsoever, arising
out of, or related to my employment with, or termination of my employment from,
the Company. Expressly excluded from this release, however, are the following:
(i) all obligations required of the Company, and/or its officers, directors,
employees, agents, and/or representatives, which are expressly referred to or
created by this Exhibit A; (ii) my right to receive accrued benefits under any
employee benefit plan maintained by the Company; and (iii) my rights to be
indemnified, defended, and held harmless under any indemnification provision
applicable generally to past or present directors and officers of the Company.
This release and discharge of the Company is made in exchange for consideration
which is in addition to anything of value for which I am already entitled to
receive
/ /
- -------------------------------------------------
Mordechai Kafry Date
TDS/rej
<PAGE> 1
EXHIBIT 10.2.19
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (hereinafter referred to as the
"Agreement") is made and entered into this 7th day of December, 1995 by and
between CHARMING SHOPPES, INC. (hereinafter Charming Shoppes, Inc and its
subsidiaries are referred to collectively as the "Company") and Ivan M. Szeftel
(hereinafter referred to as the "Employee").
WITNESSETH:
WHEREAS, the Company and the Employee have decided to terminate the employment
relationship between the Employee and the Company effective as of February 9,
1996 and the Company has informed Employee that it will remove Employee from the
position of Executive Vice President - Finance and Chief Financial Officer as of
December 22, 1995; and
WHEREAS, the parties hereto are desirous of amicably resolving and settling any
and all disputes, differences and allegations arising either out of the
aforementioned decisions and/or out of the Employee's employment with, or
termination of employment from, the Company and/or claims regarding the
Company's actions and/or inactions toward the Employee with respect to said
employment or termination;
NOW, THEREFORE, in consideration of the premises and mutual promises herein
contained, the sufficiency of which mutual consideration is hereby acknowledged
and which is expressly acknowledged to be in addition to anything of value which
Employee is already entitled to receive, the Company and the Employee agree as
follows:
1. Neither this settlement nor this Agreement shall constitute or be
construed as an adjudication of liability by the Company or by the
Employee on the merits of any claims, allegations, or disputes by the
Employee or any disputes between the Company and the Employee, all
liability and wrongdoing being expressly denied by the Company and by
the Employee.
2. Neither this settlement nor this Agreement shall in any way be
construed as an admission by the Company or by the Employee of any
liability whatsoever, nor as an admission by the Employee of any
wrongdoing, nor an admission by the Company of any acts of wrongdoing
and/or discrimination against the Employee on the part of either the
Company or the officers, directors, employees, attorneys, or agents of
the Company, such being expressly denied.
<PAGE> 2
SZEFTEL (12/04/95), PAGE 2
3. The Employee represents that he has not filed any Complaints or Charges
of discrimination, breach of contract or unjust termination against the
Company with any local, state, or federal agency or Court, that he will
not do so at any time hereafter, and that if any agency or Court
assumes jurisdiction of any Complaint or Charge on behalf of the
Employee, he will formally petition such agency or Court to withdraw
from the matter, if he initiated such action.
4. As a material inducement to the Company to enter into this Agreement,
the Employee, on behalf of himself and his heirs, legatees,
representatives, transferees and assigns, does hereby release, remise
and forever discharge the Company and all of its affiliated and
subsidiary companies, and any of its, or their, past, current or future
directors, officers, agents, employees, representatives, successors and
assigns in their personal and professional capacities of and (i) from
any and all claims, counts, charges, actions, causes of action, suits,
debts, contracts or petitions alleging a violation of the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of
1964, or of any violation of any federal, state or municipal law
creating a cause of action in an employee, or former employee, or his
representative, against his employer, or former employer and (ii) from
all claims, counts, charges, actions, causes of action, suits, debts,
contracts or petitions, controversies, grievances, claims and demands,
whatsoever, arising out of, or related to Employee's employment with,
or termination of employment from, the Company. Expressly excluded from
this release, however, are the following: (i) all obligations required
of the Company, and/or its officers, directors, employees, agents,
and/or representatives, which are expressly referred to or created by
this Agreement; (ii) Employee's right to receive accrued benefits under
any employee benefit plan maintained by the Company; and (iii)
Employee's rights to be indemnified, defended, and held harmless under
any indemnification provision applicable generally to past or present
directors and officers of the Company. This release and discharge of
the Company is made in exchange for consideration listed below and in
addition to anything of value for which Employee is already entitled to
receive.
5. The Company shall continue to (and is hereby obligated to) indemnify
Employee in each and every situation where the Company is obligated or
permitted to make such indemnification pursuant to the relevant
portions of the Company's Articles of Incorporation and By-Laws
regarding conduct engaged in by Employee in his capacity as an Officer
of the Company.
6. In consideration of the promises and obligations contained herein, the
parties agree as follows:
<PAGE> 3
SZEFTEL (12/04/95), PAGE 3
A. Continuation as Employee and Removal as Officer: From the date
hereof until the close of business on Friday, February 9,
1996, Employee will continue as an employee of the Company
under the terms and conditions now in effect. Employee's
employment will not be terminated during this period. As of
the close of business December 22, 1995, Employee will be
removed from the position of Executive Vice President -
Finance and Chief Financial Officer. After the close of
business December 22, 1995 Employee shall not be required to
engage in professional activities on behalf of the Company in
the Company's offices or elsewhere, except that during the
time period between the close of business December 22, 1995
and close of business February 9, 1996 Employee shall make
himself available at reasonable times for telephone
conferences to address transition and emergency matters.
B. Severance/Salary Continuation: The Company will pay the
Employee, as severance, the sum of eighty-one thousand two
hundred fifty dollars ($81,250.00), minus legal and authorized
withholdings, in thirteen (13) equal weekly installments of
six thousand two hundred fifty dollars ($6,250.00), minus
required tax and sufficient withholdings to pay the employee
contribution for medical benefits as set forth in paragraph E
of this paragraph 6, such payments to commence on February 16,
1996 and continuing through May 10, 1996.
C. Vacation: The Company will pay the Employee the amount
represented by unused, accrued vacation for 1995, said amount
to be paid in one installment prior to January 31, 1996, minus
legal and authorized withholdings.
D. Damages: The Company will pay the Employee the sum of two
hundred ninety-seven thousand seven hundred fifty dollars
($297,750.00) as settlement of disputed claims of pain and
suffering, mental anguish and distress, humiliation, injury to
reputation, counsel fees and costs; therefore, there shall be
no withholding or deductions for state or federal taxes, FICA
or any other deduction from this amount. Such payment shall be
excluded from gross income pursuant to applicable IRS
regulations and accordingly, shall not create or file any IRS
form W-2, 1099 or other similar reporting form with any
agency. The parties agree that any tax liability or penalties
with respect to said, should it later be determined that said
amount is taxable, shall be paid wholly and exclusively by
Employee; and
Said sum shall be paid based on the following schedule:
1. no later than December 14, 1995 - twenty thousand
dollars ($20,000.00) payable to Raynes, McCarty,
Binder, Ross & Mundy
2. between May 13 and May 17, 1996 - one hundred
thousand dollars ($100,000.00)
<PAGE> 4
SZEFTEL (12/04/95), PAGE 4
3. between August 5 and August 9, 1996 - ninety thousand
two hundred fifty dollars ($90,250.00)
4. between November 4 and November 8, 1996 -
eighty-seven thousand five hundred dollars
($87,500.00)
E. Benefits: The Company shall continue to provide to the
Employee and his eligible dependents only those applicable
benefits under the Company's health care insurance programs
through February 14, 1997 as if he had continued to be
employed by the Company through that time, including medical
insurance, dental insurance, vision insurance and prescription
insurance. Effective as of the close of business on February
9, 1996 all other benefits will be terminated with respect to
the Employee except for Employee's Split Dollar Life Insurance
coverage pursuant to Manufacturer's Life Insurance Company
(policy nos. 3778284-4 and 4023004-7), hereafter "Split Dollar
Insurance", which shall continue in effect so as to provide
the coverage provided for in the aforementioned policies so
long as the Company continues to maintain or provide similar
types of coverage for any other persons who are, or become
employed by the Company at the level of Executive Vice
President or below or who immediately prior to the end of
their employment by the Company were employed at the level of
Executive Vice President or below. If the Company should at
any time elect to terminate the Split Dollar Insurance for
Employee and all other persons referred to in the preceding
sentence, then the Company shall notify Employee in advance
and Employee shall have the right to acquire ownership of the
insurance policies listed above, subject to the terms and
conditions of the policies. It is understood by both the
Employee and the Company that all benefits requiring employee
contributions shall be continued through February 14, 1997 in
accordance with the terms of applicable plans, provided
further that Employee hereby authorizes employee contributions
to be withheld from the severance set forth in subsection B
above and from the damages set forth in subsections D.2.
through D.4. above in sufficient amounts to maintain benefit
coverage through February 14, 1997 in accordance with the plan
provisions; and Effective February 15, 1997 all such employee
benefits, except Split Dollar Insurance, shall be discontinued
in accordance with the terms of said plans. However, Employee
may be entitled to continue medical/dental insurance coverage
pursuant to the terms of said plans and as specifically
required under the provisions of C.O.B.R.A. Employee
understands that he should contact the Company's Benefits
Department if additional information is desired regarding
continuation of the medical/dental plan as required under the
provisions of C.O.B.R.A. Appropriate C.O.B.R.A. notifications
shall be sent to the Employee at a future date; and
<PAGE> 5
SZEFTEL (12/04/95), PAGE 5
F. Car Allowance: The Company shall continue to provide insurance
coverage at the level currently in effect on Employee's
automobile from March 1, 1996 through February 28, 1997.
Should Employee decide to substitute a vehicle that is
comparable, under the Company's practice with respect to the
automobiles of executives, he may make a request to do so to
Anthony A. DeSabato. Provided that the substituting vehicle is
comparable to the previous vehicle, the Company will allow for
that substitution; and
G. Stock Options: The Company and Employee hereby acknowledge
that Employee was granted options to purchase (i) 75,000
shares of the Company's common stock at the exercise price of
$5.8125 per share under the Company's 1986 Employees' Stock
Option Plan and pursuant to an Employee Stock Option Agreement
dated January 25, 1988 between the Company and Employee (Grant
No. 100216); (ii) 40,000 shares of the Company's common stock
at the exercise price of $.50 per share under the Company's
1988 Key Employee Stock Option Plan and pursuant to a Key
Employee Stock Option Agreement dated February 27, 1989
between the Company and Employee (Grant No. 900498); (iii)
25,000 shares of the Company's common stock at the exercise
price of $4.50 per share under the Company' 1990 Employees'
Stock Incentive Plan and pursuant to an Employee Stock Option
Agreement dated March 29, 1990 between the Company and
Employee (Grant No. 200074); (iv) 350,000 shares of the
Company's common stock at the exercise price of $4.50 per
share under the Company' 1990 Employees' Stock Incentive Plan
and pursuant to an Employee Stock Option Agreement dated March
29, 1990 between the Company and Employee (Grant No. 200087);
(v) 60,000 shares of the Company's common stock at the
exercise price of $6.1875 per share under the Company's 1990
Employees' Stock Incentive Plan and pursuant to an Employee
Stock Option Agreement dated February 4, 1991 between the
Company and Employee (Grant No. 200189); (vi) 30,000 shares of
the Company's common stock at the exercise price of $.50 per
share under the 1988 Key Employee Stock Option Plan and
pursuant to a Key Employee Stock Option Agreement dated
February 4, 1991 between the Company and Employee (Grant No.
900807); (vii) 70,000 shares of the Company's common stock at
the exercise price of $.50 per share under the Company's 1988
Key Employee Stock Option Plan and pursuant to a Key Employee
Stock Option Agreement dated December 5, 1991 between the
Company and Employee (Grant No. 900840); (viii) 50,000 shares
of the Company's common stock at the exercise price of $13.50
per share under the 1990 Employees' Stock Incentive Plan and
pursuant to an Employee Stock Option Agreement dated February
3, 1992 between the Company and Employee (Grant No. 200244);
(ix) 54,000 shares of the Company's common stock at the
exercise price of $15.125 per share under the Company's 1993
Employees' Stock Incentive Plan and pursuant to a Stock Option
Agreement dated April 7, 1993 between the Company and Employee
(Grant No. 300102); (x) 50,700 shares of the Company's common
stock at the exercise price of $15.125 per share under the
Company's 1993
<PAGE> 6
SZEFTEL (12/04/95), PAGE 6
Employees' Stock Incentive Plan and pursuant to a
Performance-Accelerated Stock Option Agreement dated April 7,
1993 between the Company and Employee (Grant No. (P30005);
(xi) 80,000 shares of the Company's common stock at the
exercise price of $11.125 per share under the Company's 1993
Employees' Stock Incentive Plan and pursuant to a Stock Option
Agreement dated February 1, 1994 between the Company and
Employee (Grant No. 300224); (xii) 77,500 shares of the
Company's common stock at the exercise price of $11.125 per
share under the Company's 1993 Employees' Stock Incentive Plan
and pursuant to a Performance-Accelerated Stock Option
Agreement dated February 1, 1994 between the Company and
Employee (Grant No. P30013); (xiii) 85,000 shares of the
Company's common stock at the exercise price of $6.00 per
share under the Company's 1993 Employees' Stock Incentive Plan
and pursuant to a Stock Option Agreement dated February 6,
1995 between the Company and Employee (Grant No. 300508);
(xiv) 80,000 shares of the Company's common stock at the
exercise price of $6.00 per share under the Company's 1993
Employees' Stock Incentive Plan and pursuant to a
Performance-Accelerated Stock Option Agreement dated February
6, 1995 between the Company and Employee (Grant No. P30022);
Pursuant to said plans and agreements [set forth above as
items (i) through (xiv)] the Employee has options to purchase
stock which, by reason of the involuntary termination of
employment under paragraph 7.A. as of February 9, 1996, will
be exercisable, including application of the Option Formula,
as follows:
(a) Grant No. 100216 - - 60,000 shares at $5.8125 per share
(b) Grant No. 900498 - - 26,668 shares at $.50 per share
(c) Grant No. 200074 - - 18,750 shares at $4.50 per share
(d) Grant No. 200087 - - 310,000 shares at $4.50 per share
(e) Grant No. 200189 - - 60,000 shares at $6.1875 per share
(f) Grant No. 900807 - - 30,000 shares at $.50 per share
(g) Grant No. 900840 - - 70,000 shares at $.50 per share
(h) Grant No. 200244 - - 50,000 shares at $13.50 per share
(i) Grant No. 300102 - - 32,400 shares at $15.125 per share
(j) Grant No. 300224 - - 48,000 shares at $11.125 per share
(k) Grant No. 300508 - - 34,000 shares at $6.00 per share
Under the terms of the respective stock plans and the stock
option agreements, if Employee fails to exercise those options
which will be exercisable as of February 9,
<PAGE> 7
SZEFTEL (12/04/95), PAGE 7
1996, set forth above as items (a) through (k), within 90 days
of Employee's termination on February 9, 1996, said options
shall lapse. The Company agrees to extend the exercise date of
the options which will be exercisable as of February 9, 1996
set forth above as item (a) until January 25, 1998 provided
Employee timely executes an amendment to the stock option
agreement to effectuate said extension. The Company agrees to
extend the exercise date of the options which will be
exercisable as of February 9, 1996 set forth above as items
(b) through (k) until February 13, 1998, provided Employee
timely executes amendments to the stock option agreements to
effectuate said extension.
Pursuant to said plans and agreements [set forth above as
items (i) through (xiv)] the Employee has options to purchase
stock which are scheduled to become exercisable as follows,
provided Employee continued to be employed by the Company on
the exercise date:
(1) Grant No. 300102 -- 10,800 shares at $15.1250 per
share on April 4, 1997
(2) Grant No. 300102 -- 10,800 shares at $15.1250 per
share on April 4, 1998
(3) Grant No. P30005 -- 10,140 shares at $15.1250 per
share on April 7, 1998
(4) Grant No. P30005 -- 10,140 shares at $15.1250 per
share on April 7, 1999
(5) Grant No. P30005 -- 10,140 shares at $15.1250 per
share on April 7, 2000
(6) Grant No. P30005 -- 10,140 shares at $15.1250 per
share on April 7, 2001
(7) Grant No. P30005 -- 10,140 shares at $15.1250 per
share on April 7, 2002
(8) Grant No. 300224 -- 16,000 shares at $11.125 per share
on February 1, 1998
(9) Grant No. 300224 -- 16,000 shares at $11.125 per share
on February 1, 1999
(10) Grant No. P30013 -- 15,500 shares at $11.125 per share
on Feb. 1, 1999
(11) Grant No. P30013 -- 15,500 shares at $11.125 per share
on Feb. 1, 2000
(12) Grant No. P30013 -- 15,500 shares at $11.125 per share
on Feb. 1, 2001
(13) Grant No. P30013 -- 15,500 shares at $11.125 per share
on Feb. 1, 2002
(14) Grant No. P30013 -- 15,500 shares at $11.125 per share
on Feb. 1, 2003
(15) Grant No. 300508 -- 17,000 shares at $6.00 per share
on February 6, 1998
(16) Grant No. 300508 -- 17,000 shares at $6.00 per share
on February 6, 1999
(17) Grant No. 300508 -- 17,000 shares at $6.00 per share
on February 6, 2000
(18) Grant No. P30022 -- 16,000 shares at $6.00 per share
on February 6, 2000
(19) Grant No. P30022 -- 16,000 shares at $6.00 per share
on February 6, 2001
(20) Grant No. P30022 -- 16,000 shares at $6.00 per share
on February 6, 2002
(21) Grant No. P30022 -- 16,000 shares at $6.00 per share
on February 6, 2003
(22) Grant No. P30022 -- 16,000 shares at $6.00 per share
on February 6, 2004
The options listed in items (1) through (22) will be forfeited
and not exercisable by Employee.
H. Expenses: The Company further agrees to provide the Employee
with reimbursement of those expenses that Employee has
actually incurred in performing his duties as an employee of
the Company through the close of business on February 9, 1996
which
<PAGE> 8
SZEFTEL (12/04/95), PAGE 8
have not previously been reimbursed provided that Employee
submits a final expense report to Anthony A. DeSabato on a
date no later than March 1, 1996.
I. Associate Discount: Employee shall retain the right to utilize
the Company's associate discount on purchases at Company
stores through February 14, 1997.
7. The Employee, upon execution of this Agreement, and for and in
consideration of the promises and obligations contained herein, agrees
as follows:
A. The Employee hereby acknowledges his removal as an officer
upon the effective date of this Agreement and his termination
effective close of business February 9, 1996 as an employee of
the Company and Employee expressly and specifically waives any
claim for, and agrees not to seek employment, reemployment, or
reinstatement with the Company and Employee expressly and
specifically waives and agrees not to seek any costs or
attorney's fees from the Company in connection with his
termination of employment other than the amount set forth
above in paragraph 6.D.1.; and
B. The Employee agrees that, on or before the close of business
on December 22, 1995, he will return to the Company all
company property in his possession other than minor or
incidental items; and
C. The Employee agrees that, on or before the close of business
on December 22, 1995, he will return to the Company any and
all Company credit cards in his possession; and
D. The Employee further agrees not to use or cause to be used for
the Employee's personal benefit, or disclose, communicate or
divulge, or use for direct or indirect benefit of any person,
firm, association or company other than the Company, any
material or article of information including without
limitation data processing reports, customer sales or sourcing
analyses, invoices, price lists or information, samples, or
any other materials or date of any kind furnished to Employee
by the Company or developed by Employee on behalf of the
Company or at the Company's direction or for the Company's use
or otherwise in connection with Employee's employment with the
Company, or any information regarding the business methods,
policies, procedures, strategies or techniques, research or
development projects or results, trade secrets, confidential
or proprietary information, or other knowledge or processes of
or developed by the Company or any names and addresses or
compensation of employees, customers or suppliers or any data
on or relating to past, present or prospective customers or
suppliers or any other confidential information relating to or
dealing with the business operations or activities of the
Company, made known to Employee or
<PAGE> 9
SZEFTEL (12/04/95), PAGE 9
learned or acquired by Employee while in the employ of the
Company, without the prior written consent of the Chairman of
the Board of Directors of the Company; and
E. The Employee further agrees that from the effective date
hereof through the close of business February 15, 1998, he
will not, within 60 days after the severance of their
employment by the Company, contact or cause to be contacted,
directly or indirectly, any individual employed by the Company
as of February 6, 1996, regarding their employment, offer,
solicit, or cause to be offered or solicited for employment or
to solicit or induce him or them to cease to be employed by
the Company without prior written consent of the Executive
Vice President of Human Resources; and
F. The Employee further agrees that from the effective date
hereof through the close of business February 14, 1997, he
will not, directly or indirectly, solicit, induce or encourage
any customer, consultant, independent contractor or supplier
of the Company to cease to do business with the Company; or
directly engage in employment either as an employee or as a
full time or substantially full time independent contractor in
any business in competition with the Company; provided,
however, that nothing herein prohibits Employee from engaging
in activities as a consultant for any such business under the
auspices of a bona fide consulting arrangement. For purposes
of this provision only women's apparel specialty chains
selling similar merchandise at similar prices shall be deemed
to be in competition with the company.
G. Employee acknowledges that any rights he has to purchase stock
pursuant to any stock option agreement with the Company are
hereby terminated and shall no longer be of any force or
effect as of the date hereof, except with respect to those
options set forth in paragraph 6.G. above which are
exercisable as of February 9, 1996 by Employee. Employee
agrees to execute all documents necessary to effectuate the
provisions of this paragraph 7.G.and paragraph 6.G. above; and
H. Employee further agrees and covenants that neither he nor any
person, organization or any other entity acting on his behalf
will file, charge, claim, sue, participate in, join or cause
or permit to be filed, charged or claimed any action for
damages or other relief (including injunctive, declaratory,
monetary or other) against Releasees, with respect to any
matter arising from or related to his employment with or
termination of that employment and/or any action or claim
which is subject of the General Release set forth in the
foregoing paragraph of this Agreement; and
I. Employee further agrees not to disclose the terms or
conditions hereof to any person, other than to members of his
immediate family, to his accountant, and to his attorney and
to them only with instructions that they are not to disclose
the terms or conditions of this hereof to any other person;
and
<PAGE> 10
SZEFTEL (12/04/95), PAGE 10
J. Employee further agrees to be responsible for the reporting
and the payment of all income taxes as my later be determined
payable with respect to the amounts set forth in paragraph
6.D. hereof. The Employee also agrees to indemnify the Company
and hold it harmless from and against any damages, penalties,
and expenses relating to any actions or claims brought by any
federal, state or local tax authority for monies paid pursuant
to paragraph 6.D. of this Agreement, provided, however, the
Employee shall have the right to contest at his sole expense,
any such actions or claims. However, this paragraph, in
addition to other remedies available, shall be void should the
Company violate paragraph 6.D. of this Agreement by issuing a
W-2 or 1099 to the Employee for the monies described in
paragraph 6.D.
8. The parties hereto agree and acknowledge that this Agreement shall not
be interpreted to render either party to be a prevailing party for any
purpose, including but not limited to, an award of attorney's fees
under any statute or otherwise.
9. The parties hereto agree that, should the Employee become deceased
prior to the satisfaction of all obligations to him, and of him, under
this Agreement, the remaining obligations due to and of Employee shall
inure to his spouse, or if he is not survived by his spouse, then to
his estate.
10. The parties agree that any claim of a breach of any paragraph of this
Agreement must be brought before a Court of competent jurisdiction.
11. The parties hereto acknowledge that this Agreement constitutes the
entire Agreement between the parties, and that it fully supersedes any
and all prior agreements or understandings pertaining to Employee's
employment with, and termination of employment from, the Company, and
that the consideration set forth in paragraphs five and six above
constitutes the entire consideration, financial or otherwise, to be
made by the Company to the Employee including salary, severance, bonus,
vacation, benefits, costs, stock grants or grants of stock options, or
any other payments, other than distribution of any funds in Employee's
401(k) and Profit Sharing Plan.
12. The parties acknowledge that they have not been induced to enter into
this Agreement as to any representations or statements, oral or
written, not expressly contained herein, nor expressly incorporated by
reference. The parties further agree that they have freely and
voluntarily entered into this Agreement.
<PAGE> 11
SZEFTEL (12/04/95), PAGE 11
13. No waiver, alterations, or modifications of any of the provisions of
this Agreement shall be binding unless made in writing and signed by
both the Employee and a duly authorized representative of the Company.
14. If any non-economic provision of this Agreement is held by a Court of
competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force and
effect without being impaired or invalidated in any way.
15. Notwithstanding any language herein to the contrary, the release and
discharge of rights and claims arising under the Age Discrimination in
Employment Act of 1967 does not include any waiver of rights or claims
that may arise after the date this Agreement is executed.
16. Both the Employee and the Company agree that the Employee has been
advised in writing to consult with an attorney prior to executing this
Agreement and the Employee acknowledges that he has done so to the
extent that he deems to be appropriate.
17. The Employee acknowledges that he has been given a period of twenty-one
(21) days within which to consider whether he wishes to enter into this
Agreement before signing it and that should the Company not receive
this Settlement Agreement and Release executed by Employee by December
16, 1995 this Settlement Agreement and Release shall be null and void,
except that the termination of Employee's employment by the Company and
his removal as an officer and Chief Financial Officer will nevertheless
be effective no later than February 9, 1996.
18. Within seven (7) days following the execution of this Agreement,
Employee may revoke this Agreement by providing written notice to the
Company, and until revocation period has expired, this Agreement shall
not become effective or enforceable. Any written notice required under
this Agreement shall be effective if delivered personally or mailed by
registered or certified mail, return receipt requested, postage
prepaid, as follows:
If to the Company: Charming Shoppes, Inc.
3750 State Road
Bensalem, PA 19020
Attn: Anthony A. DeSabato
Executive Vice President
If to the Employee: Ivan M. Szeftel
1318 Flat Rock Road
Penn Valley, PA 19072
<PAGE> 12
SZEFTEL (12/04/95), PAGE 12
Either party may change the address to which notice is required to be
given under this Agreement by giving notice thereof in the manner
required hereinabove.
19. In the event that Employee revokes this Agreement in the manner
provided herein, Employee will immediately return to the Company all
consideration which may have been paid pursuant to this Agreement prior
to the date of its revocation.
20. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
21. The Company represents to the Employee that the person executing this
Agreement on behalf of the Company has the authority to do so and that
the terms hereof have been approved by the Stock Option Committee and
Compensation Committee of the Board of Directors of the Company.
<PAGE> 13
SZEFTEL (12/04/95), PAGE 13
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year written beneath their respective signatures.
FOR THE COMPANY: FOR THE EMPLOYEE:
- ---------------------------------- ----------------------------------
Anthony A. DeSabato, Esquire Ivan Szeftel
Executive Vice President/
Corporate Director Human Resources
/ / / /
- ------------------------ ------------------------
Date Date
TDS/rej
<PAGE> 1
EXHIBIT 10.2.20
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (hereinafter referred to as the
"Agreement") is made and entered into as of this 9th day of February, 1996 (the
"Effective Date") by and between CHARMING SHOPPES, INC. (hereinafter Charming
Shoppes, Inc. and its subsidiaries are referred to collectively as the
"Company") and Philip Wachs (hereinafter referred to as the "Employee").
WITNESSETH:
WHEREAS, the Company and the Employee have decided to terminate the employment
relationship between the Employee and the Company effective as of February 9,
1996 and Employee has informed the Company that he will resign as Chief
Operating Officer and as Chairman of the Board of Directors of the Company as
of that date; and
WHEREAS, the parties hereto desire to resolve and settle amicably any and all
disputes, differences and allegations arising either out of the aforementioned
decisions and/or out of the Employee's employment with, or separation of
employment from, the Company and/or claims regarding the Company's actions
and/or inactions toward the Employee with respect to said employment or
separation of employment:
NOW, THEREFORE, in consideration of the premises and mutual promises herein
contained, the sufficiency of which is hereby acknowledged and which is
expressly acknowledged to be in addition to anything of value which Employee is
already entitled to
<PAGE> 2
receive, the Company and the Employee agree as follows:
1. This Agreement shall not constitute or be construed as a
determination of liability of either the Company or the Employee on
the merits of any claims, allegations, or disputes by or between
the Company and the Employee, any such liability being expressly
denied by the Company and by the Employee.
2. This Agreement shall not be construed as an admission by the
Company or by the Employee of any liability whatsoever, nor as an
admission by the Employee of any act of wrongdoing, nor an
admission by the Company of any acts of wrongdoing and/or
discrimination against the Employee on the part of either the
Company or the officers, directors, employees, attorneys, or agents
of the Company, any such acts by either party being expressly
denied.
3. The Employee represents that he has not filed any Complaint or
Charge of discrimination, breach of contract or unjust termination
against the Company with any local, state, or federal agency or
Court, that he will not do so at any time hereafter, and that if
any agency or Court assumes jurisdiction of any Complaint or Charge
on behalf of the Employee, he will formally petition such agency or
Court to withdraw from the matter, if he initiated such action.
The foregoing sentence shall not be applicable with respect to any
action of any kind whatsoever taken by or on behalf of the Employee
to enforce the provisions of this Agreement.
<PAGE> 3
4. As material inducement to the parties to enter into this Agreement,
the Employee, on behalf of himself, and his heirs, legatees,
representatives, transferees and assigns, and the Company, on
behalf of itself, successors and assigns, do hereby release,
remise, and forever discharge the other, and, in the case of the
Company, all of its affiliated and subsidiary companies, and any of
its, or their, directors, officers, agents, employees,
representatives, successors and assigns with respect to the
following:
(i) Any and all claims, liabilities, causes of actions of
any kind whatsoever which either party may have against the other
through and including the Effective Date. This general release is
intended by both parties to be complete and comprehensive and shall
be limited only by the specific provisions set forth in
subparagraph (iii) below.
(ii) In addition to the foregoing general release, the
Employee specifically releases the Company from any and all claims,
accounts, charges, actions, causes of actions, suits, debts,
contracts or petitions alleging a violation of the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act
of 1964, or any violation of any federal, state or municipal law
creating
<PAGE> 4
a cause of action in an employee, or former employee, or his
representative, against his employer, or former employer.
(iii) Notwithstanding the foregoing provisions of this
paragraph 4, the following are specifically excluded from the scope
of the release contained herein:
A. All obligations required of the Employee or the Company
which are specifically provided for under this
Agreement;
B. The Employee's right to receive accrued but unpaid
benefits under any employee benefit plan maintained by
the Company.
C. The Employee's right to be indemnified, defended and
held harmless under any indemnification provision
applicable generally to past or present directors and
officers of the Company.
<PAGE> 5
5. The parties further agree as follows:
A. Resignation as Chief Operating Officer and Chairman of
the Board of Directors: Upon the Effective Date,
Employee resigns as Chief Operating Officer, Chairman
of the Board of Directors, and as an Officer of the
Company. Employee shall remain as a member of the
Board of Directors of the Company for the remainder of
his current term and shall be entitled to all of the
rights and privileges customarily provided to Directors
of the Company, provided that Employee shall not
receive compensation for service on the Board of
Directors during such period of time as he is receiving
salary continuation payments in accordance with
subparagraph 5.B. hereof.
B. Salary Continuation: The Company will pay the Employee
a sum of Two Million One Hundred Sixty Thousand Dollars
and Ninety Six Cents ($2,160,000.96) in three hundred
twelve (312) equal weekly installments of Six Thousand
Nine Hundred Twenty-Three Dollars and Eight cents
($6,923.08). All such payments shall be reduced by
withholding for the Employee's share of tax liabilities
and the employee contribution for medical benefits as
set forth in subparagraph 5.C. Payments under this
subparagraph B. shall commence on the first
<PAGE> 6
Friday after the Effective Date and such payments to
cease after the 312th weekly payment. In the event
there is a change in the frequency with which senior
Executives of the Company are paid, salary continuation
payments to the Employee will be changed in accordance
therewith.
C. Benefits: (1) The Company shall continue to provide to
the Employee and his eligible dependents those benefits
made available, from time to time, under the Company's
health care insurance programs through February 28,
2002 as if Employee remained employed by the Company
through such date, including, without limitation,
medical insurance, dental insurance, vision insurance
and prescription insurance. The parties acknowledge
that Employee's rights arising under COBRA shall be
unaffected by the provisions of this Agreement, and
such rights shall be applicable commencing February 28,
2002. (2) The Company shall provide Employee through
February 28, 2002 the benefits made available to other
senior Executives of the Company under the "Perk Plan".
(3) The Company shall maintain, in full force and
effect, the following split dollar life insurance
policies: Manufacturer's Life Insurance Company
(policy no. 5838216-9), Canada Life Assurance Company
(policy no. 2635197), Chubb Life Insurance Company of
America (policy no. 2119744) and Pacific Mutual Life
Insurance Company (policy no. IA2283983-0). The
Company agrees that it shall pay all premiums to
maintain the same death benefit in effect on the
Effective Date and in accordance with the Split Dollar
Agreements executed between
<PAGE> 7
Company and Employee or his designee, and that Company
shall take no action with respect to any of the
aforesaid insurance policies without the written
permission of the Employee. The Company agrees that
any other life insurance provided to Employee on the
Effective Date, other than group term and life and
group travel and accident insurance, shall be continued
to be provided by the Company on the same terms and
conditions as the aforesaid split dollar life insurance
policies.
D. Car: The Company will provide Employee with
use of a Company car including insurance in
accordance with the Company's Executive car
policy in effect as of the Effective Date
until February 28, 2002. Employee shall have
the right to purchase from the Company the
car he is using on February 28, 2002, at the
average wholesale value of the car; and
E. Stock Options: (1) The Company and Employee
hereby acknowledge that Employee was granted
options to purchase (i) 60,000 shares of the
Company's common stock at the exercise price
of $.3333 per share under the Company's 1988
Key Employee Stock Option Plan and pursuant
to a KESIP Exchange Stock Option Agreement
dated January 10, 1989 between the Company
and Employee (Grant No. 900071); (ii) 40,000
shares of the Company's common stock at the
exercise price of $.50 per share under the
Company's 1988 Key Employee Stock Option Plan
and pursuant to a Key Employee Stock Option
Agreement dated June 23, 1989 between the
Company and Employee (Grant No. 900505);
<PAGE> 8
(iii) 480,000 shares of the Company's common
stock at the exercise price of $4.50 per
share under the Company' 1990 Employees'
Stock Incentive Plan and pursuant to an
Employee Stock Option Agreement dated March
29, 1990 between the Company and Employee
(Grant No. 200085); (iv) 100,000 shares of
the Company's common stock at the exercise
price of $6.1875 per share under the
Company's 1990 Employees' Stock Incentive
Plan and pursuant to an Employee Stock Option
Agreement dated February 4,1991 between the
Company and Employee (Grant No. 200187); (v)
90,000 shares of the Company's common stock
at the exercise price of $.50 per share under
the Company's 1988 Key Employee Stock Option
Plan and pursuant to a Key Employee Stock
Option Agreement dated December 5, 1991
between the Company and Employee (Grant No.
900843); (vi) 70,000 shares of the Company's
common stock at the exercise price of $13.50
per share under the 1990 Employees' Stock
Incentive Plan and pursuant to an Employee
Stock Option Agreement dated February 3, 1992
between the Company and Employee (Grant No.
200246); (vii) 67,500 shares of the Company's
common stock at the exercise price of $15.125
per share under the Company's 1993 Employees'
Stock Incentive Plan and pursuant to a Stock
Option Agreement dated April 7, 1993 between
the Company and Employee (Grant No. 300099);
(viii) 67,500 shares of the Company's common
stock at the exercise price of $15.125 per
share under the
<PAGE> 9
Company's 1993 Employees' Stock Incentive
Plan and pursuant to a
Performance-Accelerated Stock Option
Agreement dated April 7, 1993 between the
Company and Employee (Grant No. (P30008);
(ix) 105,000 shares of the Company's common
stock at the exercise price of $11.125 per
share under the Company's 1993 Employees'
Stock Incentive Plan and pursuant to a Stock
Option Agreement dated February 1, 1994
between the Company and Employee (Grant No.
300227); (x) 105,000 shares of the Company's
common stock at the exercise price of $11.125
per share under the Company's 1993 Employees'
Stock Incentive Plan and pursuant to a
Performance- Accelerated Stock Option
Agreement dated February 1, 1994 between the
Company and Employee (Grant No. P30016);
(xi) 115,000 shares of the Company's common
stock at the exercise price of $6.00 per
share under the Company's 1993 Employees'
Stock Incentive Plan and pursuant to a Stock
Option Agreement dated February 6, 1995
between the Company and Employee (Grant No.
300504); (xii) 115,000 shares of the
Company's common stock at the exercise price
of $6.00 per share under the Company's 1993
Employees' Stock Incentive Plan and pursuant
to a Performance-Accelerated Stock Option
Agreement dated February 6, 1995 between the
Company and Employee (Grant No. P30018);
<PAGE> 10
(2) Pursuant to said plans and agreements [set forth above as items (i) through
(xii)] the Employee has options to purchase stock which are exercisable as of
the Effective Date as follows:
Grant Expiration Date
(a) Grant No. 900071 -- 60,000 shares at
$.3333 per share -- November 28, 1998
(b) Grant No. 900505 -- 40,000 shares
at $.50 per share -- June 7, 1999
(c) Grant No. 200085 -- 480,000
shares at $4.50 per share -- March 29, 2000
(d) Grant No. 200187 -- 100,000
shares at $6.1875 per share -- February 4,
2001
(e) Grant No. 900843-- 60,000 shares
at $.50 per share -- February 9, 2001
(f) Grant No. 200246 -- 70,000 shares
at $13.50 per share -- Canceled
(g) Grant No. 300099 -- 27,000 shares
at $15.125 per share -- Canceled
(h) Grant No. 300227 -- 42,000 shares
at $11.125 per share -- Canceled
(i) Grant No. 300504 -- 23,000 shares
at $6.00 per share -- February 6, 2005
Under the terms of the respective plans and agreements, the options set forth
above as items (a) through (i) shall expire if not exercised by the Employee
within 90 days of the Effective Date. The Company agrees to extend until the
earlier of February 28, 2002 and the dates set forth beside each option grant
under the caption "Grant Expiration Date", the time during which the options
set forth above as items (a), (b), (c), (d), (e) and (i), shall be exercisable
provided Employee timely executes amendments (to be prepared by the Company) to
the respective stock option agreements to
<PAGE> 11
effectuate said extensions. The options set forth above as items (f), (g) and
(h) are forfeited by Employee upon the Effective Date.
Pursuant to said plans and agreements [set forth above
as items (i) through (xii)] the Employee has options to
purchase stock which are scheduled to become
exercisable as follows, provided Employee continued to
be employed by the Company on the exercise date:
(1) Grant No. 900843 -- 30,000 shares at
$.50 per share on December 5, 1996
(2) Grant No. 300099 -- 13,500 shares at $15.1250 per share on April 7, 1996
(3) Grant No. 300099 -- 13,500 shares at $15.1250 per share on April 7, 1997
(4) Grant No. 300099 -- 13,500 shares at $15.1250 per share on April 7, 1998
(5) Grant No. P30008 -- 13,500 shares at $15.1250 per share on April 7, 1998
(6) Grant No. P30008 -- 13,500 shares at $15.1250 per share on April 7, 1999
(7) Grant No. P30008 -- 13,500 shares at $15.1250 per share on April 7, 2000
(8) Grant No. P30008 -- 13,500 shares at $15.1250 per share on April 7, 2001
(9) Grant No. P30008 -- 13,500 shares at $15.1250 per share on April 7, 2002
(10) Grant No.
300227 -- 21,000 shares at
$11.125 per share on
February 1, 1998
(11) Grant No. 300227 --
21,000 shares at $11.125
per share on February 1,
1999
(12) Grant No. P30016 --
21,000 shares at $11.125
per share on February 1,
1999
(13) Grant No. P30016 --
21,000 shares at $11.125
per share on February 1,
2000
(14) Grant No. P30016 -
-21,000 shares at $11.125
per share on February 1,
2001
(15) Grant No. P30016 --
21,000 shares at $11.125
per share on February 1,
2002
<PAGE> 12
(16) Grant No. P30016 --
21,000 shares at $11.125
per share on February 1,
2003
(17) Grant No. 300504 --
23,000 shares at $6.00 per
share on February 6, 1997
(18) Grant No. 300504 --
23,000 shares at $6.00 per
share on February 6, 1998
(19) Grant No. 300504 --
23,000 shares at $6.00 per
share on February 6, 1999
(20) Grant No. 300504 --
23,000 shares at $6.00 per
share on February 6, 2000
(21) Grant No. P30018 --
23,000 shares at $6.00 per
share on February 6, 2000
(22) Grant No. P30018 --
23,000 shares at $6.00 per
share on February 6, 2001
(23) Grant No. P30018 --
23,000 shares at $6.00 per
share on February 6, 2002
(24) Grant No. P30018 --
23,000 shares at $6.00 per
share on February 6, 2003
(25) Grant No. P30018 --
23,000 shares at $6.00 per
share on February 6,2004
The options listed in items (2), (3), (4), (5), (6),
(7), (8), (9), (10), (11), (12), (13), (14), (15), (16), (21), (22), (23), (24)
and (25) are forfeited upon the Effective Date.
<PAGE> 13
The Company agrees to allow the options listed in items
(1), (17), (18), (19) and (20) to become exercisable on
the dates on which they were scheduled and all such
grants shall be exercisable under the conditions they
were exercisable in accordance with the original option
agreements pursuant to which said grants were issued
and to extend the said exercise date until February
28, 2002 with respect to the options listed in items
(17), (18), (19) and (20) and until February 9, 2001
with respect to the options listed in item (1) above
provided Employee timely executes amendments (to be
prepared by the Company) to the respective stock option
agreements to effectuate said extensions. Employee
acknowledges that while he remains a member of the
Company's Board of Directors he will be subject to the
Company's various policies that generally apply to
members of the Company's Board of Directors and that
should he cease to be a member of the Company's Board
of Directors he will nevertheless contact the Company's
General Counsel prior to the sale of stock subject to
this Agreement so that the General Counsel can advise
Employee on the possible impact on the Company of said
sale at that time.
F. Expenses: The Company further agrees to provide the
Employee with reimbursement of those expenses that
Employee has actually incurred in performing his duties
as an employee of the Company through the close of
business on the last day of Employee's employment by
the Company
<PAGE> 14
which have not previously been reimbursed provided that
Employee submits a final expense report to Anthony A.
DeSabato on a date no later than April 1, 1996.
G. Associate Discount: Employee shall retain the right to
utilize the Company's associate discount on purchases
at Company stores through February 28, 2002.
6. The Employee, upon execution of this Agreement, and for and in
consideration of the promises and obligations contained herein,
agrees as follows:
A. The Employee hereby acknowledges his resignation as an
employee, as an officer, as Chief Operating Officer, and as
Chairman of the Board of Directors effective close of
business on the effective date of this Agreement and
Employee expressly and specifically waives any claim for,
and agrees not to seek employment, reemployment, or
reinstatement with the Company and Employee expressly and
specifically waives and agrees not to seek any costs or
attorney's fees from the Company in connection with his
termination of employment except that Company shall
reimburse Employee a sum, not to exceed Three Thousand
Dollars ($3,000), for fees paid to Employee's attorney in
connection with the preparation of this Agreement; and
<PAGE> 15
B. The Employee agrees that, on or before the close of business
on the effective date of this Agreement, he will return to
the Company all company property in his possession other
than minor or incidental items and other than the Company
car which he will be permitted to use in accordance with the
provisions of subparagraph 6.D.; and
C. The Employee agrees that, on or before the close of business
on the effective date of this Agreement, he will return to
the Company any and all Company credit cards in his
possession; and
D. The Employee further agrees not to use or cause to be used
for the Employee's own benefit or for the benefit of any
third parties or to disclose to any third party in any
manner, directly or indirectly without the express prior
written consent of the Chief Executive Officer of the
Company, any confidential or proprietary information or
trade secrets of or relating to the business of the Company
except that which is public knowledge or has been released
by the Company to third parties; and
E. The Employee further agrees that prior to February 28, 2002,
he will not contact or cause to be contacted regarding their
employment, discuss their employment with, solicit for or
cause to be solicited for their employment, any individual
who was a employee of the Company on the Effective Date
without prior written consent of the Executive Vice
President of Human Resources.
<PAGE> 16
7. The parties hereto agree and acknowledge that this Agreement shall
not be interpreted to render either party to be a prevailing party
for any purpose, including but not limited to, an award of
attorney's fees under any statute or otherwise.
8. The parties hereto agree that, if the Employee dies prior to
February 28, 2002, any amounts payable to him or any other benefits
accruing to him under this Agreement including, without limitation,
the stock options referred to under subparagraph 5.E., shall be
paid to or inure to the personal representatives of his estate.
9. The parties hereto acknowledge that this Agreement constitutes the
entire Agreement between the parties, and that it fully supersedes
any and all prior agreements or understandings (other than the
aforesaid split dollar agreements and stock option agreements which
shall remain in full force and effect) pertaining to Employee's
employment with, and termination of employment from, the Company,
and that the consideration set forth in this Agreement constitutes
the entire consideration, financial or otherwise, to be made by the
Company to the Employee including salary, severance, bonus,
vacation, benefits, costs, stock grants or grants of stock options,
or any other payments, other than: (1) payment of Employee's
regular pay through the last day of his employment by the Company
which will be paid in accordance with the Company's regular payroll
procedures, and (ii) other than distribution of any funds in
Employee's 401(k) and Profit Sharing Plan.
10. The parties acknowledge that they have not been induced to enter
into this Agreement as to any representations or statements, oral
or written, not expressly contained herein, nor
<PAGE> 17
expressly incorporated by reference. The parties further agree that
they have freely and voluntarily entered into this Agreement, and
have done so after having consulted with an attorney.
11. No waiver, alterations, or modifications of any of the provisions
of this Agreement shall be binding unless made in writing and
signed by both the Employee and a duly authorized representative of
the Company.
12. If any provision of this Agreement is held by a Court of competent
jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect
without being impaired or invalidated in any way.
13. Notwithstanding any language herein to the contrary, the release
and discharge of rights and claims arising under the Age
Discrimination in Employment Act of 1967 does not include any
waiver of rights or claims that may arise after the date this
Agreement is executed.
14. Both the Employee and the Company agree that the Employee has been
advised in writing to consult with an attorney prior to executing
this Agreement and the Employee acknowledges that he has done so to
the extent that he deems to be appropriate.
15. Employee acknowledges that he has been given a period of twenty-one
(21) days within which to consider whether he wishes to enter into
this Agreement before signing it.
<PAGE> 18
16. Within seven (7) days following the execution of this Agreement,
Employee may revoke this Agreement by providing written notice to
the Company, and until the revocation period has expired, this
Agreement shall not become effective or enforceable. Any written
notice required under this Agreement shall be effective if
delivered personally or mailed by registered or certified mail,
return receipt requested, postage prepaid, as follows:
If to the Company: Charming Shoppes, Inc.
3750 State Road
Bensalem, PA 19020
Attn: Anthony A. DeSabato
Executive Vice President
If to the Employee:
Philip Wachs
464 Conshohocken State Road
Bala Cynwyd, PA 19004
With a copy to: Matthew H. Kamens, Esquire
Wolf, Block, Schorr and Solis-Cohen
111 South 15th Street
Philadelphia, PA 19102
Either party may change the address to which notice is required to
be given under this Agreement by giving notice thereof in the
manner required hereinabove.
17. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania.
18. The Company represents to the Employee that the person executing
this Agreement on behalf of the Company has the authority to do so.
<PAGE> 19
19. The subject matter of this Agreement shall remain strictly
confidential and may be disclosed only on a "need to know basis" to
those agents of the parties required for its implementation or for
tax or financial reporting purposes or as may be required by any
laws or regulations. The Company agrees to review with Employee,
in advance of its release, any press release regarding Employee's
termination of employment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day ad
year written beneath their respective signatures.
FOR THE C0MPANY: FOR THE EMPLOYEE:
- ---------------------------- ----------------------------
Anthony A. DeSabato, Esquire Philip Wachs
Executive Vice President/
Corporate Director Human Resources
As of 2/9/96 As of 2/9/96
Date Date
TDS/rej
<PAGE> 1
EXHIBIT 10.2.21
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (hereinafter referred to as the
"Agreement") is made and entered into on this 25th day of April, 1996 by and
between CHARMING SHOPPES, INC. (hereinafter Charming Shoppes, Inc and its
subsidiaries are referred to collectively as the "Company") and Samuel
Sidewater (hereinafter referred to as the "Employee").
WITNESSETH:
WHEREAS, the Company and the Employee have mutually decided to terminate the
employment relationship between the Employee and the Company effective as of
April 26, 1996 and in connection therewith the Employee will voluntarily resign
from the position of Executive Vice President and as a member of the Board of
Directors as of April 26, 1996; and
WHEREAS, the parties hereto are desirous of amicably resolving and settling any
and all disputes, differences and allegations arising either out of the
aforementioned decisions and/or out of the Employee's employment with, or
termination of employment from, the Company and/or claims regarding the
Company's actions and/or inactions toward the Employee with respect to said
employment or termination;
NOW, THEREFORE, in consideration of the premises and mutual promises herein
contained, the sufficiency of which mutual consideration is hereby acknowledged
and which is expressly acknowledged to be in addition to anything of value
which Employee is already entitled to receive, the Company and the Employee
agree as follows:
1. Neither this settlement nor this Agreement shall constitute or be
construed as an adjudication of liability by the Company or by the
Employee on the merits of any claims, allegations, or disputes by the
Employee or any disputes between the Company and the Employee, all
liability and wrongdoing being expressly denied by the Company and by
the Employee.
2. Neither this settlement nor this Agreement shall in any way be
construed as an admission by the Company or by the Employee of any
liability whatsoever, nor as an admission by the Employee of any
wrongdoing, nor an admission by the Company of any acts of wrongdoing
and/or discrimination against the Employee on the part of either the
Company or the officers, directors, employees, attorneys, or agents of
the Company, such being expressly denied.
<PAGE> 2
SIDEWATER, PAGE 2
3. The Employee represents that he has not filed any Complaints or
Charges of discrimination, breach of contract or unjust termination
against the Company with any local, state, or federal agency or Court,
that he will not do so at any time hereafter, and that if any agency
or Court assumes jurisdiction of any Complaint or Charge on behalf of
the Employee, he will formally petition such agency or Court to
withdraw from the matter, if he initiated such action.
Notwithstanding the foregoing provisions of this paragraph 3, Employee
shall not be precluded from bringing an action against the Company in
the event of its breach of its obligations under any paragraph of this
Agreement.
4. As a material inducement to the Company to enter into this Agreement,
the Employee, on behalf of himself and his heirs, legatees,
representatives, transferees and assigns, does hereby release, remise
and forever discharge the Company and all of its affiliated and
subsidiary companies, and any of its, or their, directors, officers,
agents, employees, representatives, successors and assigns of and (i)
from any and all claims, counts, charges, actions, causes of action,
suits, debts, contracts or petitions alleging a violation of the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of
1964, or of any violation of any federal, state or municipal law
creating a cause of action in an employee, or former employee, or his
representative, against his employer, or former employer and (ii) from
all claims, counts, charges, actions, causes of action, suits, debts,
contracts or petitions, controversies, grievances, claims and demands,
whatsoever, arising out of, or related to Employee's employment with,
or termination of employment from, the Company. Expressly excluded
from this release, however, are the following: (i) all obligations
required of the Company, and/or its officers, directors, employees,
agents, and/or representatives, which are expressly referred to or
created by this Agreement; (ii) Employee's right to receive accrued
benefits under any employee benefit plan maintained by the Company;
and (iii) Employee's rights to be indemnified, defended, and held
harmless under any indemnification provision applicable generally to
past or present directors and officers of the Company. This release
and discharge of the Company is made in exchange for consideration
listed below and in addition to anything of value for which Employee
is already entitled to receive.
5. The Company and its officers, directors, and shareholders, employees,
agents, assigns and successors (collectively, the "Company Parties")
hereby release and discharge Employee from any and all claims,
liabilities, demands, actions and causes of action, including
attorneys' fees and costs, known or unknown, fixed or contingent, that
any of them may have or claim to have against Employee and do hereby
covenant not to file a lawsuit or to participate in any class action
lawsuit to assert such claims. Moreover, the Company Parties hereby
agree not to
<PAGE> 3
SIDEWATER, PAGE 3
disparage Employee, publicly or privately. Finally, the Company
agrees to continue to indemnify Employee as an officer and/or director
of the Company, to the same extent and under the same terms, as
Employee is currently indemnified under any contractual arrangement or
under any charter, articles or certificate of incorporation or by-laws
of the Company.
6. In consideration of the promises and obligations contained herein, the
parties agree as follows:
A. Salary Continuation: The Company will pay the Employee a sum
of five hundred fifty-five thousand and one dollars and twenty
cents ($555,001.20), in one hundred fifty-six (156) equal
weekly installments of three thousand five hundred fifty-seven
dollars and seventy cents ($3,557.70) each, minus required tax
withholdings and sufficient authorized withholdings to pay the
employee contribution for medical benefits as set forth in
paragraph 5.B. hereof, such payments to commence on May 3,
1996 and such payments to continue to be made until April 23,
1999. In the event there is a change in the frequency with
which senior executives of the Company are paid, salary
continuation payments to the Employee will be changed in
accordance therewith, provided that in no event shall the then
dollar obligation of the Company be changed as a result of any
such change in the payment schedule.
B. Benefits: The Company shall continue to provide to the
Employee and his eligible dependents only those applicable
benefits under the Company's health care insurance programs,
as such programs may be changed or amended in the future,
through November 30, 1998, as if he had continued to be
employed by the Company through that time, including without
limitation, medical insurance, dental insurance, vision
insurance and prescription insurance. Effective as of the
close of business on April 26, 1996 all other benefits will be
terminated with respect to the Employee, except for the
associate discount and Employee's Split Dollar Life Insurance
coverage pursuant to Manufacturer's Life Insurance Company
(policy nos. 3778289-5 and 4023010-4), Bankers Life of Iowa
Insurance Company (policy no. 2553265), Equitable Life
Insurance Company (policy 78227954), and Phoenix Mutual Life
Insurance Company (policy no. 2093539), hereafter "Split
Dollar Insurance", which shall continue in effect so long as
the Company continues to maintain similar coverage for all
other persons covered by similar split dollar insurance
arrangements. If the Company
<PAGE> 4
SIDEWATER, PAGE 4
should at any time terminate the Split Dollar Insurance for
Employee and for all other persons covered by similar split
dollar insurance arrangements, then the Company shall notify
Employee at least 60 days in advance and Employee shall have
the right to acquire ownership of the insurance policies
listed above, without the payment of any consideration
therefor, subject to the continuation of the beneficiary
designation in favor of the Company, as in existence on April
26, 1996. In that event, the Company shall promptly take all
actions necessary in order to cause ownership of the Split
Dollar Insurance to be assigned to Employee. Effective
December 1, 1998 all health care insurance benefits shall be
discontinued in accordance with the terms of said plans and
only the associate discount and the Split Dollar Insurance
shall continue in effect after that date. Following November
30, 1998 Employee and his qualified beneficiaries shall be
entitled to receive continuation coverage pursuant to the
terms of said plans and as specifically required under Part 6
of Title I of ERISA ("COBRA Benefits"), treating November 30,
1998 as the date of Employee's termination of employment
(other than for gross misconduct). Employee understands that
he should contact the Company's Benefits Department if
additional information is desired regarding his COBRA
Benefits. Appropriate COBRA notifications shall be sent to
Employee and his qualified beneficiaries at the time and in
the manner required by law.
C. Car Allowance: The Company shall provide Employee with a
monthly car allowance of seven hundred fifty dollars ($750)
from May 1, 1996 through November 30, 1998 and will continue
coverage on Employee's car under the Company's insurance
policy through November 30, 1998. Employee shall be
responsible for all repairs and maintenance on Employee's car;
and
D. Stock Options: The Company and Employee hereby acknowledge
that Employee was granted options to purchase (i) 20,000
shares of the Company's common stock at the exercise price of
$.50 per share under the Company's 1988 Key Employee Stock
Option Plan and pursuant to a KESIP Exchange Stock Option
Agreement dated June 7, 1989 between the Company and Employee
(Grant No. 900504); (ii) 100,000 shares of the Company's
common stock at the exercise price of $4.50 per share under
the Company' 1990 Employees' Stock Incentive Plan and pursuant
to an Employee Stock Option Agreement dated March 29, 1990
between the Company and Employee (Grant No. 200093); (iii)
6,700 shares of the Company's common stock at the exercise
price
<PAGE> 5
SIDEWATER, PAGE 5
of $15.125 per share under the Company's 1993 Employees' Stock
Incentive Plan and pursuant to a Stock Option Agreement dated
April 7, 1993 between the Company and Employee (Grant No.
300070); (iv) 7,500 shares of the Company's common stock at
the exercise price of $11.125 per share under the Company's
1993 Employees' Stock Incentive Plan and pursuant to a Stock
Option Agreement dated February 1, 1994 between the Company
and Employee (Grant No. 300218); (v) 20,000 shares of the
Company's common stock at the exercise price of $6.00 per
share under the Company's 1993 Employees' Stock Incentive Plan
and pursuant to a Stock Option Agreement dated February 6,
1995 between the Company and Employee (Grant No. 300514);
Pursuant to said plans and agreements [set forth above as
items (i) through (v) above] Employee has options to purchase
stock which, by reason of the termination of his employment
under paragraph 6.A. hereof as of April 26, 1996, will be
exercisable, including application of the Option Formula, as
follows:
(a) Grant No. 900504 - - 20,000 shares at $.50 per share
(b) Grant No. 200093 - - 100,000 shares at $4.50 per share
(c) Grant No. 300070 - - 5,360 shares at $15.125 per share
(d) Grant No. 300218 - - 4,500 shares at $11.125 per share
(e) Grant No. 300514 - - 8,000 shares at $6.00 per share
Under the terms of the respective stock plans and the Stock
Option Agreements, if Employee fails to exercise those options
which will be exercisable as of April 26, 1996, set forth
above as items (a) through (e), within 90 days of Employee's
termination on April 26, 1996, said options shall lapse. The
Company agrees to extend the exercise date of the options
which will be exercisable as of April 26, 1996 and which are
set forth above as items (a), (b) and (e) until November 30,
1998, provided Employee and the Company timely execute an
amendment to each affected stock option agreement to
effectuate said extension. Employee acknowledges that by
entering into said amended stock option agreements, Employee
will not be permitted to exercise said options [items (a), (b)
and (e)] from April 26, 1996 until after November 26, 1996.
The options set forth above as items (c) and (d) are forfeited
by the Employee upon the effective date of this Agreement.
Pursuant to said plans and agreements [set forth above as
items (i) through (iv)] the Employee has options to purchase
stock which are scheduled to become exercisable as
<PAGE> 6
SIDEWATER, PAGE 6
follows, provided Employee continued to be employed by the
Company on the exercise date:
(1) Grant No. 300070 - - 1,340 shares at $15.1250 per share on April 4, 1998
(2) Grant No. 300218 - - 1,500 shares at $11.125 per share on February 1, 1998
(3) Grant No. 300218 - - 1,500 shares at $11.125 per share on February 1, 1999
(4) Grant No. 300514 - - 4,000 shares at $6.00 per share on February 6, 1998
(5) Grant No. 300514 - - 4,000 shares at $6.00 per share on February 6, 1999
(6) Grant No. 300514 - - 4,000 shares at $6.00 per share on February 6, 2000
The options listed in items (1), (2) and (3), above, will be
forfeited and will not be exercisable by Employee. The
Company agrees to accelerate the exercise date on the options
listed as items (4), (5) and (6), above, to become exercisable
on or after October 28, 1996 even though Employee will no
longer be employed by the Company on that date and to extend
the exercise date of the options listed as items (4), (5) and
(6), above, until November 30, 1998, provided Employee and the
Company timely execute amended stock option agreements to
effectuate said extension.
E. Expenses: The Company further agrees to provide the Employee
with reimbursement of those expenses that Employee has
actually incurred in performing his duties as an employee of
the Company through the close of business on April 26, 1996
which have not previously been reimbursed provided that
Employee submits a final expense report to Anthony A. DeSabato
on a date no later than June 1, 1996.
F. Associate Discount: Employee shall retain the right to
utilize the Company's associate discount, if any, on purchases
at Company stores for Employee's life.
G. Retirement Plan: Employee shall be able to obtain a direct
transfer or other distribution of the balance of his accounts
in the Company's 401(k) and Profit Sharing Plan, as he may
elect, as soon as administratively possible following the date
of his termination of employment.
7. The Employee, upon execution of this Agreement, and for and in
consideration of the promises and obligations contained herein, agrees
as follows:
A. The Employee hereby acknowledges his voluntary resignation as
an officer of the Company, and as a member of the Board of
Directors, and the termination of his employment with the
Company, effective on the close of business on April 26, 1996
<PAGE> 7
SIDEWATER, PAGE 7
and Employee expressly and specifically waives any claim for,
and agrees not to seek employment, reemployment, or
reinstatement with the Company and Employee expressly and
except as otherwise provided in paragraph 6.E. hereof,
specifically waives and agrees not to seek any costs or
attorney's fees from the Company in connection with his
termination of employment; and
B. The Employee agrees that, on or before the close of business
on April 26, 1996, he will return to the Company all company
property in his possession, other than minor or incidental
items; and
C. The Employee agrees that, on or before the close of business
on April 26, 1996, he will return to the Company any and all
Company credit cards in his possession; and
D. The Employee further agrees not to use or cause to be used for
the Employee's own benefit or for the benefit of any third
parties or to disclose to any third party in any manner,
directly or indirectly without the express prior written
consent of the Chairman of the Board of the Company, any
confidential or proprietary information or trade secrets of or
relating to the business of the Company. The provisions of
this paragraph 7.D. shall not apply to information which (i)
is or becomes generally available to the public other than as
a result of a disclosure by Employee, (ii) was available to
Employee on a non- confidential basis prior to its disclosure
to Employee, (iii) becomes available to Employee on a
non-confidential basis from a source other than the Company,
(iv) must be disclosed by law or by order of a court or
governmental authority, or (v) is used to enforce Employee's
rights with the Company; and
E. The Employee further agrees that he will not contact or cause
to be contacted regarding their employment, discuss their
employment with, solicit for or cause to be solicited for
their employment, or offer, or cause to be offered employment
to any individual who was an employee of the Company as of
April 26, 1996 without prior written consent of the Executive
Vice President of Human Resources until April 30, 1999; and
F. Employee acknowledges that any rights he has to purchase stock
pursuant to any stock option agreement with the Company are
hereby terminated and shall no longer be of any force or
effect as of the date hereof, except as set forth in paragraph
6.D., above. The Company and Employee agree to execute all
documents necessary to effectuate the provisions of this
paragraph 7.F.and of paragraph 6.D. above.
<PAGE> 8
SIDEWATER, PAGE 8
8. The parties hereto agree and acknowledge that this Agreement shall not
be interpreted to render either party to be a prevailing party for any
purpose, including but not limited to, an award of attorney's fees
under any statute or otherwise.
9. The parties hereto agree that, should Employee become deceased prior
to the satisfaction of all obligations to him, and of him, under this
Agreement, the remaining obligations due to and of Employee shall
inure to the beneficiary which he has designated in writing and which
written designation has been transmitted to the Chief Financial
Officer of the Company. In the absence of an effective written
beneficiary designation or if the designated beneficiary has
predeceased Employee, his estate shall be deemed to be Employee's
beneficiary.
10. The parties agree that any claim of a breach of any paragraph of this
Agreement must be brought before a Court of competent jurisdiction.
11. The parties hereto acknowledge that this Agreement constitutes the
entire Agreement between the pares, and that it fully supersedes any
and all prior agreements or understandings pertaining to Employee's
employment with, and termination of employment from, the Company, and
that the consideration set forth in paragraphs 6 and 7 hereof
constitutes the entire consideration, financial or otherwise, to be
made by the Company to the Employee including salary, severance,
bonus, vacation, benefits, costs, stock grants or grants of stock
options, or any other payments, other than distribution of any funds
in Employee's 401(k) and Profit Sharing Plan.
12. The parties acknowledge that they have not been induced to enter into
this Agreement as to any representations or statements, oral or
written, not expressly contained herein, nor expressly incorporated by
reference. The parties further agree that they have freely and
voluntarily entered into this Agreement, and have done so after having
consulted with an attorney.
13. No waiver, alterations, or modifications of any of the provisions of
this Agreement shall be binding unless made in writing and signed by
both the Employee and a duly authorized representative of the Company.
<PAGE> 9
SIDEWATER, PAGE 9
14. If any provision of this Agreement is held by a Court of competent
jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect
without being impaired or invalidated in any way.
15. Notwithstanding any language herein to the contrary, the release and
discharge of rights and claims arising under the Age Discrimination in
Employment Act of 1967 does not include any waiver of rights or claims
that may arise after the date this Agreement is executed.
16. Both the Employee and the Company agree that the Employee has been
advised in writing to consult with an attorney prior to executing this
Agreement and the Employee acknowledges that he has done so to the
extent that he deems to be appropriate.
17. The Employee acknowledges that he has been given a period of
twenty-one (21) days or until May 13, 1996 within which to consider
whether he wishes to enter into this Agreement before signing it and
that should the Company not receive this Settlement Agreement and
Release executed by Employee by May 14, 1996 this Settlement Agreement
and Release shall be null and void except that the termination of
Employee's employment by the Company will nevertheless be effective as
of April 26, 1996.
18. Within the seven (7) days following the execution of this Agreement,
the Employee may revoke this Agreement by providing written notice to
the Company, and until the revocation period has expired, this
Agreement shall not become effective or enforceable. Any written
notice required under this Agreement shall be effective if delivered
personally or mailed by registered or certified mail, return receipt
requested, postage prepaid, as follows:
If to the Company: Charming Shoppes, Inc.
3750 State Road
Bensalem, PA 19020
Attn: Anthony A. DeSabato
Executive Vice President
If to the Employee: Samuel Sidewater
2532 NW 53rd. Street
Boca Raton, FL 333496
With a copy to: Sheldon M. Bonovitz
<PAGE> 10
SIDEWATER, PAGE 10
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103-7396
Either party may change the address to which notice is required to be
given under this Agreement by giving notice thereof in the manner
required hereinabove.
19. In the event the Employee revokes this Agreement in the manner
provided in paragraph 17 hereof, then each party will immediately
return to the other party all consideration which may have been paid
pursuant to this Settlement Agreement and Release prior to the date of
its revocation.
20. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
21. The Company represents to the Employee that the person executing this
Agreement on behalf of the Company has the authority to do so.
<PAGE> 11
SIDEWATER, PAGE 11
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year written beneath their respective signatures.
FOR THE COMPANY: FOR THE EMPLOYEE:
- --------------------------------------- -----------------------------------
Anthony A. DeSabato, Esquire Samuel Sidewater
Executive Vice President/
Corporate Director Human Resources
/ /96 / /96
----------------- ----------------
Date Date
TDS/rej
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
The following are the company's subsidiaries, each of which is directly and
wholly owned by its immediate parent, Charming Shoppes, Inc. All subsidiaries
are included in the consolidated financial statements of Charming Shoppes, Inc.,
and subsidiaries, except as noted.
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
BENTON #3015 DEVELOPMENT CO.,INC. (1) (2) AR
BURLESON #3012 DEVELOPMENT CO.,INC (1) (2) TX
CHARM-FIN STORES,INC. (2) DE
CHARMING SHOPPES OF CHESTER,INC. (2) PA
CHARMING SHOPPES OF COLONIAL PARK,INC. PA
CHARMING SHOPPES OF CUMBERLAND,INC. PA
CHARMING SHOPPES OF DELAWARE,INC. (2) PA
CHARMING SHOPPES OF ECHELON,INC. NJ
CHARMING SHOPPES OF FRANKFORD,INC (2) PA
CHARMING SHOPPES OF NORRISTOWN,INC. (2) PA
CHARMING SHOPPES OF TRENTON,INC. NJ
CHARMING SHOPPES OF WOODBURY,INC NJ
CHARMING SHOPPES,INC. (2) PA
CHARMING SHOPPES/FASHION BUG OF OLEAN,INC. (2) NY
COLUMBIA DEVELOPMENT CO.,INC. (2) TN
COLUMBIA #2589 DEVOLPMENT CO,INC. (2) TN
COLUMBIA #3054 DEVELOPMENT CO.,INC. (2) SC
CS INSURANCE LTD. (2)
CSBC, INC. (2) DE
CSI CHARITIES (2) PA
CSI INDUSTRIES, INC. (2) DE
CSI INDUSTRIES,INC. (2) PA
CSI INDUSTRIES,INC. (2) DE
CSI-DR,INC. (2) DR
C.S.A.C.,INC. (2) DE
C.S.F.CORP. (2) DE
C.S.I.C.,INC. (2) DE
DIVERSIFIED FASHIONS,INC. (2) PA
ERICOOL CO LTD. (2) HK
EVATONE TRADING LTD. (2) HK
EXECUTIVE FLIGHTS,INC. (2) DE
FASHIOM BUG #3075 OF GENEVA,INC. (2) NY
FASHION ACCEPTANCE CORP (2) DE
FASHION BUG OF 640 PLAZA,INC. TN
FASHION BUG OF AKRON,INC. (2) OH
FASHION BUG OF ALEXANDRIA,INC. (2) VA
FASHION BUG OF ALIQUIPPA,INC. (2) PA
FASHION BUG OF ALLENTOWN,INC. PA
FASHION BUG OF ALLIANCE,INC. OH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 2
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG OF ALPENA,INC. MI
FASHION BUG OF ALTOONA,INC. PA
FASHION BUG OF AMHERST PLAZA,INC. (2) NY
FASHION BUG OF AMHERST,INC. NY
FASHION BUG OF ANDORRA,INC. PA
FASHION BUG OF APPLE VALLEY SQUARE,INC. VA
FASHION BUG OF ARAMINGO,INC. (2) PA
FASHION BUG OF ARLINGTON HEIGHTS,INC. (2) IL
FASHION BUG OF ASBURY PARK,INC. NJ
FASHION BUG OF ASHEVILLE,INC. (2) NC
FASHION BUG OF ASH-HAN,INC. (2) VA
FASHION BUG OF ASHLAND,INC. (2) KY
FASHION BUG OF ASHTABULA,INC. (2) OH
FASHION BUG OF ATHENS,INC. (2) OH
FASHION BUG OF AUDUBON,INC. NJ
FASHION BUG OF AURORA,INC. IL
FASHION BUG OF BARBERTON,INC. OH
FASHION BUG OF BEAVER FALLS,INC. (2) PA
FASHION BUG OF BECKLEY,INC. WV
FASHION BUG OF BELDEN VILLAGE,INC. (2) OH
FASHION BUG OF BELLEVILLE,INC. MI
FASHION BUG OF BELMONT,INC. MI
FASHION BUG OF BELVEDERE PLAZA,INC. (2) GA
FASHION BUG OF BETHLEHEM,INC. PA
FASHION BUG OF BINGHAMTON,INC. (2) NY
FASHION BUG OF BIRMINGHAM,INC. AL
FASHION BUG OF BLOOMSBURG,INC. PA
FASHION BUG OF BLUE ASH,INC. OH
FASHION BUG OF BLUEFIELD,INC. WV
FASHION BUG OF BOARDMAN PLAZA,INC. (2) OH
FASHION BUG OF BOLINGBROOK,INC. IL
FASHION BUG OF BOND,INC. PA
FASHION BUG OF BORDENTOWN,INC. NJ
FASHION BUG OF BOWLING GREEN,INC. (2) OH
FASHION BUG OF BRADFORD,INC. PA
FASHION BUG OF BRICKTOWN PLAZA,INC. NJ
FASHION BUG OF BRIDGEVIEW,INC. IL
FASHION BUG OF BRIDGEVILLE,INC. (2) PA
FASHION BUG OF BRISTOL, CT,INC. CT
FASHION BUG OF BRISTOL,INC. PA
FASHION BUG OF BRUNSWICK,INC. NJ
FASHION BUG OF BUCYRUS,INC. OH
FASHION BUG OF BUFFALO,INC. (2) NY
FASHION BUG OF BUTLER,INC. (2) PA
FASHION BUG OF CALIFORNIA, INC. (1) (2) CA
FASHION BUG OF CAMBRIDGE,INC. MD
FASHION BUG OF CAPE MAY,INC. NJ
FASHION BUG OF CARLISLE,INC. PA
FASHION BUG OF CARROLLTON,INC. (2) MD
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 3
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG OF CASSELBERRY,INC. FL
FASHION BUG OF CASTOR AVENUE,INC. PA
FASHION BUG OF CENTURY III MALL PA
FASHION BUG OF CHAMBERSBURG,INC. (2) PA
FASHION BUG OF CHARLOTTESVILLE,INC. VA
FASHION BUG OF CHESTER SPRINGS,INC. (2) NJ
FASHION BUG OF CHESTERTOWN,INC. MD
FASHION BUG OF CHICOPEE,INC. (2) MA
FASHION BUG OF CHILLICOTHE,INC. OH
FASHION BUG OF CLARION,INC. PA
FASHION BUG OF CLARKSBURG,INC. WV
FASHION BUG OF CLEARFIELD,INC. PA
FASHION BUG OF CLEARVIEW MALL,INC. PA
FASHION BUG OF CLEVELAND,INC. OH
FASHION BUG OF CLINTON,INC. (2) MD
FASHION BUG OF COCKEYSVILLE,INC. (2) MD
FASHION BUG OF COLLEGE SQUARE,INC. DE
FASHION BUG OF COLUMBIA,INC. (2) MD
FASHION BUG OF COLUMBUS OHIO,INC. (2) OH
FASHION BUG OF CONCORD,INC. (2) DE
FASHION BUG OF CONNELLSVILLE,INC. (2) PA
FASHION BUG OF CONNERSVILLE,INC. (2) IN
FASHION BUG OF CORBIN,INC. (2) KY
FASHION BUG OF CORTLAND,INC. (2) NY
FASHION BUG OF COSHOCTON,INC. (2) OH
FASHION BUG OF COTTMAN,INC. PA
FASHION BUG OF COUNTRYSIDE,INC. PA
FASHION BUG OF COVENTRY MALL,INC. (2) PA
FASHION BUG OF COVINGTON,INC. (2) KY
FASHION BUG OF CRANBERRY,INC. PA
FASHION BUG OF CREST HILL,INC. (2) IL
FASHION BUG OF CROMWELL FIELD,INC. MD
FASHION BUG OF CRYSTAL LAKE,INC. IL
FASHION BUG OF CULPEPPER,INC. VA
FASHION BUG OF CUMBERLAND MALL,INC. (2) GA
FASHION BUG OF CUYAHOGA FALLS,INC. OH
FASHION BUG OF DADE CITY,INC. (2) FL
FASHION BUG OF DANBURY,INC. CT
FASHION BUG OF DANVILLE,INC. IL
FASHION BUG OF DAYTON MALL,INC. (2) OH
FASHION BUG OF DAYTON,INC. (2) OH
FASHION BUG OF DEARBORN,INC. MI
FASHION BUG OF DECATUR,INC. (2) GA
FASHION BUG OF DEKALB,INC. IL
FASHION BUG OF DELAWARE SQUARE,INC. (2) OH
FASHION BUG OF DES PLAINES,INC. IL
FASHION BUG OF DEVON,INC. CT
FASHION BUG OF DIXIE MANOR,INC. (2) KY
FASHION BUG OF DOVER PLAZA,INC. NJ
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 4
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG OF DOVER,INC. (2) DE
FASHION BUG OF DUBOIS,INC. PA
FASHION BUG OF DUNBAR,INC. WV
FASHION BUG OF EAST HANOVER,INC. (2) NJ
FASHION BUG OF EAST HARTFORD,INC. CT
FASHION BUG OF EAST MANSFIELD,INC. OH
FASHION BUG OF EAST PARK,INC. MD
FASHION BUG OF EAST WASHINGTON,INC. (2) IN
FASHION BUG OF EAST WINDSOR,INC. NJ
FASHION BUG OF EASTON,INC. (2) MD
FASHION BUG OF EASTSIDE PLAZA,INC. IL
FASHION BUG OF EASTWOOD MALL,INC. OH
FASHION BUG OF EDGEWOOD,INC. MD
FASHION BUG OF EDWARDSVILLE,INC. PA
FASHION BUG OF EGG HARBOR,INC. (2) NJ
FASHION BUG OF ELDERSBURG,INC. MD
FASHION BUG OF ELGIN,INC. (2) IL
FASHION BUG OF ELIZABETHTOWN,INC. (2) KY
FASHION BUG OF ELKIN,INC. (2) WV
FASHION BUG OF ELKTON,INC. MD
FASHION BUG OF ELSTON PLAZA,INC. IL
FASHION BUG OF ELWOOD CITY,INC. PA
FASHION BUG OF ENGLISHTOWN,INC. (2) NJ
FASHION BUG OF EVANSVILLE,INC. IN
FASHION BUG OF EXTON,INC. (2) PA
FASHION BUG OF FAIR PLAZA,INC. (2) OH
FASHION BUG OF FAIRFIELD,INC. CT
FASHION BUG OF FAIRMONT,INC. WV
FASHION BUG OF FALL RIVER,INC. MA
FASHION BUG OF FALLS CHURCH,INC. VA
FASHION BUG OF FITCHBURG,INC. (2) MA
FASHION BUG OF FLEMINGTON,INC. NJ
FASHION BUG OF FLINT,INC. MI
FASHION BUG OF FOREST PARK MALL,INC. IL
FASHION BUG OF FOREST PLAZA,INC. IL
FASHION BUG OF FOREST SQUARE,INC. (2) GA
FASHION BUG OF FORESTVILLE,INC. (2) MD
FASHION BUG OF FORT LAUDERDALE,INC. (2) FL
FASHION BUG OF FORT SAGINAW,INC. (2) MI
FASHION BUG OF FOSTORIA,INC. OH
FASHION BUG OF FRACKVILLE,INC. PA
FASHION BUG OF FRANKFORT,INC. KY
FASHION BUG OF FRANKLIN COUNTY,INC. PA
FASHION BUG OF FRANKLIN,INC. PA
FASHION BUG OF FREDERICKSBURG,INC. VA
FASHION BUG OF FREEHOLD,INC. NJ
FASHION BUG OF FREEPORT,INC. (2) IL
FASHION BUG OF FRONT ROYAL,INC. VA
FASHION BUG OF FT. FINDLAY,INC. OH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 5
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG OF FT. MYERS,INC. FL
FASHION BUG OF FULLERTON,INC. MD
FASHION BUG OF GARFIELD HEIGHTS,INC. OH
FASHION BUG OF GEORIA SQUARE,INC. (2) GA
FASHION BUG OF GIBBSTOWN,INC. NJ
FASHION BUG OF GLEN BURNIE,INC. MD
FASHION BUG OF GLEN ELLYN,INC. IL
FASHION BUG OF GORHAM,INC. NH
FASHION BUG OF GREENBRIAR,INC. (2) GA
FASHION BUG OF GREENVILLE PLAZA,INC. PA
FASHION BUG OF GREENVILLE,INC. (2) SC
FASHION BUG OF GROVE CITY,INC. PA
FASHION BUG OF HACKENSACK,INC. NJ
FASHION BUG OF HACKETTSTOWN,INC. NJ
FASHION BUG OF HAGERSTOWN,INC. MD
FASHION BUG OF HAMDEN,INC. (2) CT
FASHION BUG OF HAMILTON SQUARE,INC. NJ
FASHION BUG OF HAMPTON,INC. VA
FASHION BUG OF HANNIBAL,INC. MO
FASHION BUG OF HANOVER,INC. PA
FASHION BUG OF HARFORD,INC. MD
FASHION BUG OF HARRISBURG, ILL,INC. (2) IL
FASHION BUG OF HARRISBURG,INC. PA
FASHION BUG OF HAZARD,INC. (2) KY
FASHION BUG OF HAZELTON,INC. PA
FASHION BUG OF HAZLET,INC. (2) NJ
FASHION BUG OF HENRIETTA,INC. (2) NY
FASHION BUG OF HERSHEY,INC. PA
FASHION BUG OF HIGHLAND HEIGHTS,INC. (2) KY
FASHION BUG OF HIGHLAND RIDGE,INC. OH
FASHION BUG OF HIGHLAND,INC. (2) IN
FASHION BUG OF HILLSIDE,INC. (2) IL
FASHION BUG OF HINESVILLE,INC. GA
FASHION BUG OF HOFFMAN ESTATES,INC. (2) IL
FASHION BUG OF HOLYOKE,INC. MA
FASHION BUG OF HOMEWOOD,INC. (2) IL
FASHION BUG OF HONESDALE,INC. PA
FASHION BUG OF HOUGHTON,INC. MI
FASHION BUG OF HOWELL,INC. NJ
FASHION BUG OF HUNTINGTON PLAZA,INC. IN
FASHION BUG OF HUNTINGTON,INC. WV
FASHION BUG OF INDIANA,INC. (2) PA
FASHION BUG OF IROQUOIS MANOR,INC. KY
FASHION BUG OF JACKSONVILLE,INC. (2) IL
FASHION BUG OF JACKSON,INC. (2) TN
FASHION BUG OF JASPER,INC. IN
FASHION BUG OF JERSEY CITY,INC. (2) NJ
FASHION BUG OF JOHNSTON,INC. RI
FASHION BUG OF JOHNSTOWN,INC. (2) PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 6
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG OF JOLIET,INC. IL
FASHION BUG OF KALAMAZOO,INC. (2) MI
FASHION BUG OF KANKAKEE,INC. (2) IL
FASHION BUG OF KEDZIE,INC. IL
FASHION BUG OF KENT,INC. OH
FASHION BUG OF KING OF PRUSSIA,INC. (2) PA
FASHION BUG OF KITTANING,INC. (2) PA
FASHION BUG OF KNOXVILLE,INC. (2) TN
FASHION BUG OF KOKOMO,INC. (2) IN
FASHION BUG OF KUTZTOWN,INC. PA
FASHION BUG OF LAKE WALES,INC. (2) FL
FASHION BUG OF LAKELAND,INC. FL
FASHION BUG OF LAKEMORE PLAZA,INC. OH
FASHION BUG OF LAKEWOOD,INC. (2) CO
FASHION BUG OF LANCASTER OHIO,INC. (2) OH
FASHION BUG OF LANCASTER,INC. PA
FASHION BUG OF LANGLEY PARK,INC. MD
FASHION BUG OF LANSING,INC. MI
FASHION BUG OF LATROBE,INC. (2) PA
FASHION BUG OF LAUREL,INC. MD
FASHION BUG OF LAVALE,INC. MD
FASHION BUG OF LAWRENCEVILLE,INC. NJ
FASHION BUG OF LEBANON,INC. PA
FASHION BUG OF LEDGEWOOD,INC. NJ
FASHION BUG OF LEESBURG,INC. (2) VA
FASHION BUG OF LEETSDALE,INC. (2) PA
FASHION BUG OF LENOIR,INC. (2) NC
FASHION BUG OF LENOX SQUARE,INC. (2) GA
FASHION BUG OF LEWISBURG,INC. PA
FASHION BUG OF LEWISTON,INC. ME
FASHION BUG OF LEWISTOWN,INC. (2) PA
FASHION BUG OF LEXINGTON,INC. KY
FASHION BUG OF LIMA,INC. (2) OH
FASHION BUG OF LINCOLN KNOLLS,INC. (2) OH
FASHION BUG OF LINCOLN,INC. (2) IL
FASHION BUG OF LIVONIA,INC. MI
FASHION BUG OF LOCK HAVEN,INC. (2) PA
FASHION BUG OF LOCKPORT,INC. NY
FASHION BUG OF LOGAN,INC. WV
FASHION BUG OF LONGMONT,INC. (2) CO
FASHION BUG OF LORAIN,INC. OH
FASHION BUG OF LOUISVILLE,INC. KY
FASHION BUG OF LOWER BURRELL,INC. PA
FASHION BUG OF LYNCHBURG,INC. VA
FASHION BUG OF LYNN,INC. MA
FASHION BUG OF MACDADE,INC. PA
FASHION BUG OF MANAHAWKIN,INC. NJ
FASHION BUG OF MANASSAS,INC. (2) VA
FASHION BUG OF MANCHESTER, N.H.,INC. NH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 7
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG OF MANCHESTER,INC. (2) CT
FASHION BUG OF MANSFIELD,INC. (2) OH
FASHION BUG OF MAPLE HEIGHTS,INC. OH
FASHION BUG OF MARQUETTE,INC. MI
FASHION BUG OF MARTIN PLAZA,INC. MD
FASHION BUG OF MASON CITY,INC. IA
FASHION BUG OF MASSILLON,INC. OH
FASHION BUG OF MATTESON,INC. (2) IL
FASHION BUG OF MAULDIN,INC. SC
FASHION BUG OF MAYFAIR,INC. PA
FASHION BUG OF MAYFIELD HEIGHTS,INC. OH
FASHION BUG OF MCKEESPORT (2) PA
FASHION BUG OF MEADVILLE,INC. PA
FASHION BUG OF MEDFORD,INC. NJ
FASHION BUG OF MELROSE PARK,INC. (2) IL
FASHION BUG OF MERRILLVILLE,INC. (2) IN
FASHION BUG OF MERRITT ISLAND,INC. FL
FASHION BUG OF MICHIGAN CITY,INC. (2) IN
FASHION BUG OF MIDDLESBORO,INC. KY
FASHION BUG OF MIDDLETOWN PLAZA,INC. NJ
FASHION BUG OF MIDDLETOWN,INC. (2) OH
FASHION BUG OF MIDLAND PLAZA,INC. MI
FASHION BUG OF MIDWAY,INC. MN
FASHION BUG OF MOBILE,INC. (2) AL
FASHION BUG OF MONROEVILLE (2) PA
FASHION BUG OF MONROEVILLE,INC. PA
FASHION BUG OF MONROE,INC. NC
FASHION BUG OF MONTGOMERYVILLE,INC. PA
FASHION BUG OF MONTGOMERY,INC. (2) AL
FASHION BUG OF MONTPELIER,INC. VT
FASHION BUG OF MOORESTOWN MALL,INC. NJ
FASHION BUG OF MOOSIC,INC. PA
FASHION BUG OF MOREHEAD,INC. KY
FASHION BUG OF MORGANTOWN,INC. (2) WV
FASHION BUG OF MORRIS COUNTY,INC. NJ
FASHION BUG OF MOUNT PLEASANT,INC. MI
FASHION BUG OF MOUNT VERNON,INC. IL
FASHION BUG OF MT. CLEMENS,INC. MI
FASHION BUG OF MUNDELEIN,INC. IL
FASHION BUG OF MURRAY,INC. KY
FASHION BUG OF MUSKEGON,INC. (2) MI
FASHION BUG OF NANTICOKE,INC. PA
FASHION BUG OF NASHVILLE,INC. TN
FASHION BUG OF NATRONA,INC. PA
FASHION BUG OF NESHAMINY,INC. (2) PA
FASHION BUG OF NEW BRITIAN,INC. CT
FASHION BUG OF NEW CASTLE,INC. PA
FASHION BUG OF NEW HAVEN,INC. (1) (2) CT
FASHION BUG OF NEW HOLLAND,INC. PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 8
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG OF NEW LONDON,INC. CT
FASHION BUG OF NEW MARTINSVILLE,INC. (2) WV
FASHION BUG OF NEW PHILADELPHIA,INC. OH
FASHION BUG OF NEWARK,INC. (2) OH
FASHION BUG OF NILES,INC. (2) OH
FASHION BUG OF NORA,INC. (2) IN
FASHION BUG OF NORFOLK,INC. (2) VA
FASHION BUG OF NORMAL,INC. (2) IL
FASHION BUG OF NORTH ADAMS,INC. MA
FASHION BUG OF NORTH AVENUE,INC. (2) IL
FASHION BUG OF NORTH BRUNSWICK,INC. NJ
FASHION BUG OF NORTH CICERO,INC. (2) IL
FASHION BUG OF NORTH EAST,INC. MD
FASHION BUG OF NORTH POINT,INC. MD
FASHION BUG OF NORTH TOWNE MALL,INC. (2) IL
FASHION BUG OF NORTH VERSAILLES,INC. (2) PA
FASHION BUG OF NORTHLAKE MALL,INC. (2) GA
FASHION BUG OF NORTHWEST PLAZA,INC. (2) OH
FASHION BUG OF NORWELL,INC. MA
FASHION BUG OF NORWIN,INC. PA
FASHION BUG OF NOVI,INC. (2) MI
FASHION BUG OF N. ROANOKE,INC. VA
FASHION BUG OF OAK RIDGE,INC. TN
FASHION BUG OF OIL CITY,INC. PA
FASHION BUG OF OLD COLONY SQUARE,INC. (2) NJ
FASHION BUG OF OLEAN,INC. NY
FASHION BUG OF OPELIKA,INC. (2) AL
FASHION BUG OF ORLAND PARK,INC. (2) IL
FASHION BUG OF OSHKOSH, INC. (2) WI
FASHION BUG OF OTTAWA,INC. (2) IL
FASHION BUG OF OXON HILL,INC. (2) MD
FASHION BUG OF PADUCAH,INC. KY
FASHION BUG OF PAINTSVILLE,INC. KY
FASHION BUG OF PAKA PLAZA,INC. MI
FASHION BUG OF PALM HARBOR,INC. FL
FASHION BUG OF PANAMA CITY,INC. FL
FASHION BUG OF PARKERSBURG,INC. WV
FASHION BUG OF PARKSIDE,INC. (2) MD
FASHION BUG OF PARLIN,INC. (2) NJ
FASHION BUG OF PATCHOQUE,INC. NY
FASHION BUG OF PENDLETON PIKE,INC. (2) IN
FASHION BUG OF PENNSVILLE,INC. NJ
FASHION BUG OF PEORIA,INC. IL
FASHION BUG OF PERIMETER MALL,INC. (2) GA
FASHION BUG OF PERRING,INC. MD
FASHION BUG OF PETERSBURG,INC. (2) VA
FASHION BUG OF PHILLIPSBURG,INC. NJ
FASHION BUG OF PIKEVILLE,INC. KY
FASHION BUG OF PIQUA,INC. (2) OH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 9
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG OF PITTSTON,INC. PA
FASHION BUG OF PLYMOUTH MEETING,INC. (2) PA
FASHION BUG OF PONTIAC,INC. (2) MI
FASHION BUG OF PORTSMOUTH,INC. OH
FASHION BUG OF POTTSVILLE,INC. PA
FASHION BUG OF QUAKERTOWN,INC. (2) PA
FASHION BUG OF RACINE,INC. (2) WI
FASHION BUG OF RADCLIFF,INC. (2) KY
FASHION BUG OF RAVENSWOOD,INC. WV
FASHION BUG OF RAYNHAM,INC. MA
FASHION BUG OF READING MALL,INC. (2) PA
FASHION BUG OF REDFORD,INC. (2) MI
FASHION BUG OF REISTERTOWN,INC. MD
FASHION BUG OF REVERE,INC. MA
FASHION BUG OF REYNOLDSBURG,INC. OH
FASHION BUG OF RICHLAND,INC. (2) PA
FASHION BUG OF RICHMOND IND,INC. (2) IN
FASHION BUG OF RICHMOND,INC. (2) VA
FASHION BUG OF RIDGE VILLAGE,INC. (2) CO
FASHION BUG OF RISING SUN,INC. PA
FASHION BUG OF RIVERHEAD,INC. NY
FASHION BUG OF RIVERSIDE SQUARE,INC. IL
FASHION BUG OF RIVERTOWNE COMMONS,INC. MD
FASHION BUG OF ROANOKE RAPIDS,INC. NC
FASHION BUG OF ROCKFORD,INC. (2) IL
FASHION BUG OF ROGERS PLAZA,INC. MI
FASHION BUG OF ROME,INC. (2) GA
FASHION BUG OF ROSWELL,INC. (2) GA
FASHION BUG OF ROYAL OAK,INC. MI
FASHION BUG OF RUMFORD,INC. (2) RI
FASHION BUG OF SAGINAW,INC. MI
FASHION BUG OF SALEM,INC. MA
FASHION BUG OF SALISBURY,INC. (2) MD
FASHION BUG OF SAUGUS,INC. (2) MA
FASHION BUG OF SAUGUS,INC. MA
FASHION BUG OF SAVANNAH,INC. (2) GA
FASHION BUG OF SCOTTSDALE,INC. (2) IL
FASHION BUG OF SCRANTON,INC. PA
FASHION BUG OF SEAFORD,INC. DE
FASHION BUG OF SECURITY,INC. MD
FASHION BUG OF SEVERNA PARK,INC. (2) MD
FASHION BUG OF SHADY BROOK,INC. (2) TN
FASHION BUG OF SHARONVILLE,INC. OH
FASHION BUG OF SHARON,INC. PA
FASHION BUG OF SMYRNA,INC. GA
FASHION BUG OF SOLON,INC. OH
FASHION BUG OF SOMERS POINT,INC. NJ
FASHION BUG OF SOMERSET,INC. (2) KY
FASHION BUG OF SOUTH BEND,INC. (2) IN
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 10
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG OF SOUTH FLINT,INC. MI
FASHION BUG OF SOUTH HILLS VILLAGE (2) PA
FASHION BUG OF SOUTH PLAINFIELD,INC. NJ
FASHION BUG OF SOUTHFIELD,INC. MI
FASHION BUG OF SOUTHGATE PLAZA,INC. (2) NH
FASHION BUG OF SOUTHGATE,INC. MI
FASHION BUG OF SOUTHLAKE MALL,INC. (2) GA
FASHION BUG OF SOUTHLAND,INC. (2) OH
FASHION BUG OF SPEEDWAY SHOPPING CENTER,INC. IN
FASHION BUG OF SPOTSYLVANIA,INC. VA
FASHION BUG OF SPRINGFIELD PLAZA,INC. MA
FASHION BUG OF SPRINGFIELD,INC. (2) PA
FASHION BUG OF STATE COLLEGE,INC. PA
FASHION BUG OF STATEN ISLAND,INC. (2) NY
FASHION BUG OF STRATFORD,INC. CT
FASHION BUG OF STREAMWOOD,INC. (2) IL
FASHION BUG OF STROUDSBURG,INC. PA
FASHION BUG OF STRUTHERS,INC. OH
FASHION BUG OF STURGIS,INC. MI
FASHION BUG OF ST. ALBANS,INC. WV
FASHION BUG OF ST. CLAIR SHORES,INC. MI
FASHION BUG OF SUN RAY,INC. MN
FASHION BUG OF SUNBURY PLAZA,INC. (2) PA
FASHION BUG OF TALLAHASSEE MALL,INC. (2) FL
FASHION BUG OF TAYLOR,INC. MI
FASHION BUG OF TECH PLAZA,INC. MI
FASHION BUG OF THE CITADEL,INC. (2) CO
FASHION BUG OF THE GALLERY,INC. (2) PA
FASHION BUG OF THE MARKET PLACE,INC. TN
FASHION BUG OF THE PALISADES OF BIRMINGHAM,INC. (2) AL
FASHION BUG OF THORNDALE,INC. PA
FASHION BUG OF TIFFIN,INC. OH
FASHION BUG OF TITUSVILLE,INC. (2) FL
FASHION BUG OF TOLEDO,INC. (2) OH
FASHION BUG OF TOMS RIVER,INC. NJ
FASHION BUG OF TOPSHAM,INC. ME
FASHION BUG OF TOTOWA,INC. NJ
FASHION BUG OF TOWN & COUNTRY,INC. (2) OH
FASHION BUG OF TROY,INC. NY
FASHION BUG OF TRUMBULL PLAZA,INC. OH
FASHION BUG OF TUNKHANNOCK,INC. PA
FASHION BUG OF TURNERSVILLE,INC. (2) NJ
FASHION BUG OF UNIONTOWN,INC. PA
FASHION BUG OF UNION,INC. NJ
FASHION BUG OF UNIVERSITY MALL,INC. OH
FASHION BUG OF UNIVERSITY PLAZA,INC. TN
FASHION BUG OF UPPER ARLINGTON,INC. (2) OH
FASHION BUG OF VALLEY PLAZA, INC. PA
FASHION BUG OF VAN BUREN,INC. OH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 11
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG OF VINELAND,INC. NJ
FASHION BUG OF VIRGINIA BEACH,INC. VA
FASHION BUG OF WALNUTPORT,INC. PA
FASHION BUG OF WARREN PLAZA,INC. OH
FASHION BUG OF WARRENTON,INC. VA
FASHION BUG OF WARREN,INC. PA
FASHION BUG OF WARSAW,INC. IN
FASHION BUG OF WATERBURY, INC. CT
FASHION BUG OF WATERWORKS,INC. (2) PA
FASHION BUG OF WAUKEGAN,INC. IL
FASHION BUG OF WAYNESBURG,INC. PA
FASHION BUG OF WEBSTER,INC. MA
FASHION BUG OF WEIRTON,INC. WV
FASHION BUG OF WEST DEVON,INC. (2) IL
FASHION BUG OF WEST FRANKFORT,INC. IL
FASHION BUG OF WEST MANCHESTER,INC. PA
FASHION BUG OF WEST MIFFLIN,INC. PA
FASHION BUG OF WEST SPRINGFIELD,INC. (2) MA
FASHION BUG OF WEST ST. PAUL,INC. (2) MN
FASHION BUG OF WEST TOWN,INC. (2) IL
FASHION BUG OF WESTERNPORT,INC. (2) MD
FASHION BUG OF WESTMINSTER,INC. (2) CO
FASHION BUG OF WESTWOOD,INC. OH
FASHION BUG OF WHARTON SQUARE,INC. PA
FASHION BUG OF WHEATON,INC. (2) MI
FASHION BUG OF WHITMAN PLAZA,INC. PA
FASHION BUG OF WILKES BARRE,INC. PA
FASHION BUG OF WILLIAMSON,INC. KY
FASHION BUG OF WILLIAMSPORT,INC. PA
FASHION BUG OF WILLIAMSTOWN,INC. NJ
FASHION BUG OF WILLINGBORO,INC. (2) NJ
FASHION BUG OF WILMINGTON,INC. MA
FASHION BUG OF WINSTON-SALEM,INC. (2) NC
FASHION BUG OF WISCONSIN RAPIDS,INC. WI
FASHION BUG OF WOODBRIDGE,INC. NJ
FASHION BUG OF WOODHAVEN,INC. (2) PA
FASHION BUG OF WOODLYN,INC. PA
FASHION BUG OF WYNCOTE,INC. (2) PA
FASHION BUG OF XENIA,INC. (2) OH
FASHION BUG OF YORKSHIRE PLAZA,INC. (2) IL
FASHION BUG OF YORK,INC. (2) PA
FASHION BUG OF YOUNGSTOWN,INC. OH
FASHION BUG OF ZANESVILLE,INC. OH
FASHION BUG PLUS OF ADRIAN,INC. (2) MI
FASHION BUG PLUS OF AMERICAN MALL,INC. OH
FASHION BUG PLUS OF ANN ARBOR,INC. (2) MI
FASHION BUG PLUS OF APPLETON,INC. WI
FASHION BUG PLUS OF ASHTABULA PLAZA,INC. (2) OH
FASHION BUG PLUS OF AURORA,INC. (2) IL
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 12
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG PLUS OF BALTIMORE,INC. MD
FASHION BUG PLUS OF BARTOW,INC. (2) FL
FASHION BUG PLUS OF BEAVER VALLEY,INC. (2) PA
FASHION BUG PLUS OF BECKLEY,INC. (2) WV
FASHION BUG PLUS OF BELOIT,INC. WI
FASHION BUG PLUS OF BLOOMINGTON,INC. (2) MN
FASHION BUG PLUS OF BRADFORD,INC. (2) PA
FASHION BUG PLUS OF BRICKTOWN,INC. (2) NJ
FASHION BUG PLUS OF BRIDGEVILLE,INC. (2) PA
FASHION BUG PLUS OF BUCKINGHAM SQUARE,INC. (2) CO
FASHION BUG PLUS OF CAPITAL HEIGHTS,INC. (2) MD
FASHION BUG PLUS OF CAPITAL PLAZA,INC. (2) MD
FASHION BUG PLUS OF CARROLLTON,INC. (2) MD
FASHION BUG PLUS OF CENTERVILLE,INC. (2) OH
FASHION BUG PLUS OF CHAMPAIGN,INC. (2) IL
FASHION BUG PLUS OF CHARLESTON,INC. WV
FASHION BUG PLUS OF CINDERELLA CITY,INC. (2) CO
FASHION BUG PLUS OF CLARION,INC. (2) PA
FASHION BUG PLUS OF CLEVELAND HEIGHTS,INC. (2) OH
FASHION BUG PLUS OF CLEVELAND,INC. (2) OH
FASHION BUG PLUS OF COCOA,INC. (2) FL
FASHION BUG PLUS OF COLLEGE PLAZA,INC. (2) OH
FASHION BUG PLUS OF DEFIANCE,INC. (2) OH
FASHION BUG PLUS OF DERBY,INC. (2) CT
FASHION BUG PLUS OF DETROIT,INC. (2) MI
FASHION BUG PLUS OF DUBOIS,INC. PA
FASHION BUG PLUS OF DUNBAR,INC. (2) WV
FASHION BUG PLUS OF EAU CLAIRE,INC. (2) WI
FASHION BUG PLUS OF EDGEWOOD,INC. (2) MD
FASHION BUG PLUS OF ELKTON,INC. (2) MD
FASHION BUG PLUS OF ELLWOOD CITY,INC. (2) PA
FASHION BUG PLUS OF ERIE,INC. PA
FASHION BUG PLUS OF ESSEXVILLE,INC. MI
FASHION BUG PLUS OF FAIRMONT,INC. (2) WV
FASHION BUG PLUS OF FLINT,INC. MI
FASHION BUG PLUS OF FOND DU LAC,INC. (2) WI
FASHION BUG PLUS OF FORESTVILLE,INC. (2) MD
FASHION BUG PLUS OF FORT LAUDERDALE,INC. (2) FL
FASHION BUG PLUS OF FORT WAYNE,INC. (2) IN
FASHION BUG PLUS OF FREDERICK,INC. MD
FASHION BUG PLUS OF GALESBURG,INC. (2) IL
FASHION BUG PLUS OF GRAFTON,INC. (2) WI
FASHION BUG PLUS OF GREENFIELD,INC. (2) WI
FASHION BUG PLUS OF HACKETTSTOWN,INC. (2) NJ
FASHION BUG PLUS OF HADLEY,INC. MA
FASHION BUG PLUS OF HAGERSTOWN,INC. MD
FASHION BUG PLUS OF HARRISBURG,INC. PA
FASHION BUG PLUS OF HARVARD SQUARE,INC. MI
FASHION BUG PLUS OF HAZLET,INC. (2) NJ
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 13
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG PLUS OF HICKORY POINT,INC. (2) IL
FASHION BUG PLUS OF HIGHLAND RIDGE,INC. (2) OH
FASHION BUG PLUS OF HOMEWOOD,INC. (2) IL
FASHION BUG PLUS OF HUNT VALLEY,INC. MD
FASHION BUG PLUS OF HUNTINGTON,INC. (2) NY
FASHION BUG PLUS OF HUTCHINSON,INC. (2) MN
FASHION BUG PLUS OF HYATTSVILLE,INC. MD
FASHION BUG PLUS OF JANESVILLE,INC. (2) WI
FASHION BUG PLUS OF LAKESIDE MALL,INC. (2) CO
FASHION BUG PLUS OF LANCASTER PLAZA,INC. PA
FASHION BUG PLUS OF LANCASTER,INC. (2) OH
FASHION BUG PLUS OF LAWNSIDE,INC. NJ
FASHION BUG PLUS OF LEO MALL,INC. (2) PA
FASHION BUG PLUS OF LINCOLN MALL,INC. (2) RI
FASHION BUG PLUS OF LIVONIA MALL,INC. MI
FASHION BUG PLUS OF LIVONIA,INC. (2) MI
FASHION BUG PLUS OF MANASSAS,INC. (2) VA
FASHION BUG PLUS OF MANCHESTER,INC. (2) NH
FASHION BUG PLUS OF MANITOWOC,INC. (2) WI
FASHION BUG PLUS OF MARION,INC. OH
FASHION BUG PLUS OF MARION,IND.,INC. (2) IN
FASHION BUG PLUS OF MARTIN PLAZA,INC. MD
FASHION BUG PLUS OF MEADVILLE,INC. (2) PA
FASHION BUG PLUS OF MELBOURNE,INC. (2) FL
FASHION BUG PLUS OF MELROSE PARK,INC. IL
FASHION BUG PLUS OF MEMPHIS,INC. (2) TN
FASHION BUG PLUS OF MICHIGAN CITY,INC. (2) IN
FASHION BUG PLUS OF MONROEVILLE,INC. PA
FASHION BUG PLUS OF MT PLEASANT,INC. (2) MI
FASHION BUG PLUS OF MT. GREENWOOD,INC. IL
FASHION BUG PLUS OF MUNCIE,INC. (2) IN
FASHION BUG PLUS OF NATRONA HEIGHTS,INC. (2) PA
FASHION BUG PLUS OF NEW BEDFORD,INC. (2) MA
FASHION BUG PLUS OF NEW HAVEN,INC. (2) CT
FASHION BUG PLUS OF NEW PHILADELPHIA,INC. (2) OH
FASHION BUG PLUS OF NORTH CICERO,INC. (2) IL
FASHION BUG PLUS OF NORTH FT MYERS,INC. FL
FASHION BUG PLUS OF NORTH VERSAILLES,INC. (2) PA
FASHION BUG PLUS OF NORTHWEST PLAZA,INC. OH
FASHION BUG PLUS OF ORLANDO,INC. FL
FASHION BUG PLUS OF OWENSBORO,INC. KY
FASHION BUG PLUS OF PEKIN,INC, IL
FASHION BUG PLUS OF PERU,INC. (2) IL
FASHION BUG PLUS OF PHILLIPSBURG,INC. (2) NJ
FASHION BUG PLUS OF PITTSFIELD,INC. (2) MA
FASHION BUG PLUS OF PITTSTON,INC. (2) PA
FASHION BUG PLUS OF PONTIAC,INC. MI
FASHION BUG PLUS OF PORTSMOUTH,INC. (2) OH
FASHION BUG PLUS OF RADCLIFF,INC. (2) KY
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 14
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG PLUS OF RAINBOW CENTRE,INC. (2) NY
FASHION BUG PLUS OF RANDOLPH,INC. (2) MA
FASHION BUG PLUS OF ROCKLAND,INC. MA
FASHION BUG PLUS OF ROSEVILLE,INC. (2) MI
FASHION BUG PLUS OF SANDUSKY,INC. (2) OH
FASHION BUG PLUS OF SCRANTON,INC. (2) PA
FASHION BUG PLUS OF SHARON HILL,INC. PA
FASHION BUG PLUS OF SHARON,INC. (2) PA
FASHION BUG PLUS OF SHEBOYGAN,INC. WI
FASHION BUG PLUS OF SKOKIE,INC. (2) IL
FASHION BUG PLUS OF SOUTH ATTLEBORO,INC. (2) MA
FASHION BUG PLUS OF SOUTH MALL,INC. (2) PA
FASHION BUG PLUS OF SOUTH STREET,INC. (2) PA
FASHION BUG PLUS OF SOUTHINGTON,INC. (2) CT
FASHION BUG PLUS OF SPRINGFIELD,INC. (2) MA
FASHION BUG PLUS OF ST AUGUSTINE,INC. (2) FL
FASHION BUG PLUS OF ST CLAIRSVILLE,INC. (2) OH
FASHION BUG PLUS OF ST. ALBANS,INC. (2) WV
FASHION BUG PLUS OF TECH PLAZA,INC. (2) MI
FASHION BUG PLUS OF THORNTON,INC. (2) CO
FASHION BUG PLUS OF TUNKHANNOCK,INC. (2) PA
FASHION BUG PLUS OF TURFLAND MALL,INC. KY
FASHION BUG PLUS OF VILLAGE MALL,INC. MA
FASHION BUG PLUS OF WALLKILL,INC. NY
FASHION BUG PLUS OF WASHINGTON,INC. PA
FASHION BUG PLUS OF WEST END MALL,INC. (2) GA
FASHION BUG PLUS OF WESTWOOD PLAZA,INC. PA
FASHION BUG PLUS OF WHITEHAVEN,INC. TN
FASHION BUG PLUS OF WILKES BARRE,INC. (2) PA
FASHION BUG PLUS OF WORCESTER,INC. MA
FASHION BUG PLUS OF YOUNGSTOWN,INC. (2) OH
FASHION BUG PLUS #8001,INC. (1) (2) ND
FASHION BUG PLUS #8002,INC. (1) (2) SD
FASHION BUG PLUS #8003,INC. (1) (2) NE
FASHION BUG PLUS #8004,INC. (1) (2) NC
FASHION BUG PLUS #8005,INC. (2) NJ
FASHION BUG PLUS #8006,INC. (2) NJ
FASHION BUG PLUS #8007,INC. PA
FASHION BUG PLUS #8008,INC. (2) PA
FASHION BUG PLUS #8009,INC. (2) ME
FASHION BUG PLUS #8010 OF ROCKY POINT,INC. NY
FASHION BUG PLUS #8011,INC. (2) NJ
FASHION BUG PLUS #8012,INC. (2) IL
FASHION BUG PLUS #8013,INC. (2) IN
FASHION BUG PLUS #8014,INC. PA
FASHION BUG PLUS #8015 OF MEDFORD,INC. (1) (2) NY
FASHION BUG PLUS #8016,INC. (2) MN
FASHION BUG PLUS #8017 OF RIVERHEAD,INC. (2) NY
FASHION BUG PLUS #8018 OF NORTH BABYLON,INC. (2) NY
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 15
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG PLUS #8019,INC. PA
FASHION BUG PLUS #8020,INC. (1) (2) IN
FASHION BUG PLUS #8021,INC. (2) FL
FASHION BUG PLUS #8023,INC. VA
FASHION BUG PLUS #8024,INC. NJ
FASHION BUG PLUS #8025,INC. (2) IA
FASHION BUG PLUS #8026,INC. (2) MD
FASHION BUG PLUS #8027,INC. (1) (2) OH
FASHION BUG PLUS #8028,INC. CT
FASHION BUG PLUS #8029,INC. (2) MI
FASHION BUG PLUS #8030,INC. (2) MD
FASHION BUG PLUS #8031,INC. (2) MI
FASHION BUG PLUS #8032,INC. (2) PA
FASHION BUG PLUS #8033,INC. (1) (2) IL
FASHION BUG PLUS #8034,INC. PA
FASHION BUG PLUS #8036,INC. (1) (2) NJ
FASHION BUG PLUS #8037,INC. (1) (2) NJ
FASHION BUG PLUS #8038,INC. MD
FASHION BUG PLUS #8039,INC. (1) (2) OH
FASHION BUG PLUS #8040,INC. PA
FASHION BUG PLUS #811,INC. MI
FASHION BUG PLUS #818 OF AUBURN,INC. NY
FASHION BUG PLUS #819,INC. (2) IN
FASHION BUG PLUS #824,INC. (1) (2) NJ
FASHION BUG PLUS #881,INC. MI
FASHION BUG PLUS #904,INC. FL
FASHION BUG PLUS #932,INC. KY
FASHION BUG PLUS #941,INC. (2) NJ
FASHION BUG PLUS #942,INC. (2) OH
FASHION BUG PLUS #950,INC. (2) MN
FASHION BUG PLUS #952,INC. (1) (2) WI
FASHION BUG PLUS #954,INC. (2) KY
FASHION BUG PLUS #955 OF FLUSHING,INC. (1) (2) NY
FASHION BUG PLUS #956,INC. (2) OH
FASHION BUG PLUS #957,INC. PA
FASHION BUG PLUS #958,INC. (2) SD
FASHION BUG PLUS #960,INC. (2) IA
FASHION BUG PLUS #961,INC. (1) (2) IN
FASHION BUG PLUS #962,INC. (2) WV
FASHION BUG PLUS #963,INC. MI
FASHION BUG PLUS #964,INC. OH
FASHION BUG PLUS #966,INC. WV
FASHION BUG PLUS #968,INC. (2) MI
FASHION BUG PLUS #969,INC. (2) MN
FASHION BUG PLUS #970,INC. GA
FASHION BUG PLUS #971,INC. (2) NJ
FASHION BUG PLUS #972,INC. (2) IL
FASHION BUG PLUS #973,INC. (2) WI
FASHION BUG PLUS #974 OF E. ROCHESTER,INC. (2) NY
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 16
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG PLUS #975 OF HORSEHEADS,INC. NY
FASHION BUG PLUS #976,INC. (2) WI
FASHION BUG PLUS #977,INC. (2) CT
FASHION BUG PLUS #978,INC. (2) MN
FASHION BUG PLUS #979,INC. MO
FASHION BUG PLUS #980,INC. ME
FASHION BUG PLUS #981,INC. PA
FASHION BUG PLUS #982,INC. (2) KY
FASHION BUG PLUS #983,INC. (2) NJ
FASHION BUG PLUS #984,INC. (2) IA
FASHION BUG PLUS #985,INC. MN
FASHION BUG PLUS #986,INC. (2) SD
FASHION BUG PLUS #987,INC. PA
FASHION BUG PLUS #990,INC. (2) MD
FASHION BUG PLUS #991,INC. IA
FASHION BUG PLUS #992,INC. (2) IN
FASHION BUG PLUS #993,INC. (1) (2) NJ
FASHION BUG #108,INC. MI
FASHION BUG #123,INC. (2) NJ
FASHION BUG #131,INC. (2) OH
FASHION BUG #138,INC. IN
FASHION BUG #139,INC. IN
FASHION BUG #141,INC. NJ
FASHION BUG #142,INC. (2) VA
FASHION BUG #142,INC.(RE-OPENED DUE TO TORNADO) (2) VA
FASHION BUG #144,INC. IN
FASHION BUG #149,INC. (2) OH
FASHION BUG #157,INC. OH
FASHION BUG #168,INC. IN
FASHION BUG #2002 OF FISHKILL,INC. (2) NY
FASHION BUG #2003,INC. OH
FASHION BUG #2004,INC. MI
FASHION BUG #2005,INC. (2) MI
FASHION BUG #2006,INC. KY
FASHION BUG #2007,INC. (1) (2) LA
FASHION BUG #2008,INC. PA
FASHION BUG #2009,INC. PA
FASHION BUG #2010,INC. MI
FASHION BUG #2011,INC. MD
FASHION BUG #2012,INC. (1) (2) DE
FASHION BUG #2014,INC. MI
FASHION BUG #2015,INC. IN
FASHION BUG #2017,INC. (1) (2) OK
FASHION BUG #2018,INC. MI
FASHION BUG #2019,INC. ND
FASHION BUG #2020,INC. VA
FASHION BUG #2021,INC. OH
FASHION BUG #2022,INC. IN
FASHION BUG #2023,INC. PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 17
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2024,INC. MA
FASHION BUG #2026,INC. PA
FASHION BUG #2027,INC. NE
FASHION BUG #2028,INC. GA
FASHION BUG #2029,INC. NH
FASHION BUG #2030,INC. PA
FASHION BUG #2031,INC. KS
FASHION BUG #2032,INC. MI
FASHION BUG #2033,INC. (1) (2) DE
FASHION BUG #2034,INC. MO
FASHION BUG #2035,INC. MA
FASHION BUG #2036,INC. OH
FASHION BUG #2037,INC. MI
FASHION BUG #2038,INC. (1) (2) KY
FASHION BUG #2038,INC. AL
FASHION BUG #2039,INC. OH
FASHION BUG #2040,INC. KY
FASHION BUG #2040,INC. (1) (2) OH
FASHION BUG #2042,INC. (1) (2) ND
FASHION BUG #2043,INC. IN
FASHION BUG #2044,INC. NC
FASHION BUG #2045 OF EAST GREENBUSH,INC. NY
FASHION BUG #2046 OF ONONDAGA PLAZA,INC. (2) NY
FASHION BUG #2047,INC. MA
FASHION BUG #2048,INC. KY
FASHION BUG #2049,INC. MD
FASHION BUG #204,INC. (2) MI
FASHION BUG #2050 OF MASSENA,INC. NY
FASHION BUG #2051,INC. IL
FASHION BUG #2052,INC. MN
FASHION BUG #2053,INC. MO
FASHION BUG #2054,INC. OH
FASHION BUG #2055,INC. NC
FASHION BUG #2055,INC. (1) (2) MA
FASHION BUG #2056,INC. (1) (2) AL
FASHION BUG #2056,INC. (1) (2) OH
FASHION BUG #2057,INC. CT
FASHION BUG #2058,INC. MA
FASHION BUG #2059,INC. (1) (2) NJ
FASHION BUG #2060,INC. (2) MN
FASHION BUG #2061,INC. (1) (2) DE
FASHION BUG #2062 OF RONKONKOMA,INC. (1) (2) NY
FASHION BUG #2063,INC. KS
FASHION BUG #2064,INC. (1) (2) KY
FASHION BUG #2064,INC. (2) OH
FASHION BUG #2065,INC. GA
FASHION BUG #2066,INC. (2) GA
FASHION BUG #2067,INC. TN
FASHION BUG #2068,INC. ME
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 18
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2069,INC. AR
FASHION BUG #2070 OF BROOKLYN,INC. NY
FASHION BUG #2071 OF FREEPORT,INC. (2) NY
FASHION BUG #2072 OF ISLANDIA,INC. NY
FASHION BUG #2073,INC. (2) MD
FASHION BUG #2074,INC. KY
FASHION BUG #2075,INC. IL
FASHION BUG #2076,INC. (2) IL
FASHION BUG #2077,INC. MI
FASHION BUG #2078,INC. MI
FASHION BUG #2079,INC, OH
FASHION BUG #2080,INC. OH
FASHION BUG #2081 OF OGDENSBURG,INC. NY
FASHION BUG #2082,INC. NJ
FASHION BUG #2083,INC. (2) GA
FASHION BUG #2084,INC. OH
FASHION BUG #2085,INC. KS
FASHION BUG #2086,INC. IL
FASHION BUG #2087,INC. (2) MI
FASHION BUG #2088,INC. CT
FASHION BUG #2089,INC. (2) TN
FASHION BUG #2090,INC. FL
FASHION BUG #2091,INC. FL
FASHION BUG #2092,INC. WI
FASHION BUG #2093,INC. IL
FASHION BUG #2094,INC. (2) IL
FASHION BUG #2095,INC. OH
FASHION BUG #2096,INC. MI
FASHION BUG #2097,INC. NJ
FASHION BUG #2099,INC. FL
FASHION BUG #2100 OF BATAVIA,INC. NY
FASHION BUG #2101,INC. PA
FASHION BUG #2102,INC. WA
FASHION BUG #2103,INC. WA
FASHION BUG #2104,INC. (1) (2) MI
FASHION BUG #2105,INC. NH
FASHION BUG #2106 OF DEPEW,INC. NY
FASHION BUG #2107,INC. (2) OH
FASHION BUG #2108,INC. (2) MI
FASHION BUG #2109,INC. GA
FASHION BUG #210,INC. (1) (2) KY
FASHION BUG #2110,INC. (1) (2) NJ
FASHION BUG #2111,INC. NJ
FASHION BUG #2112,INC. FL
FASHION BUG #2113,INC. GA
FASHION BUG #2114,INC. (2) MO
FASHION BUG #2115,INC. WI
FASHION BUG #2116,INC. (2) FL
FASHION BUG #2117,INC. (2) NJ
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 19
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2117,INC. (1) (2) OH
FASHION BUG #2118 OF NEWBURGH,INC. NY
FASHION BUG #2119,INC. OH
FASHION BUG #211,INC. (1) (2) MN
FASHION BUG #2120,INC. OH
FASHION BUG #2121,INC. IN
FASHION BUG #2122,INC. (2) WA
FASHION BUG #2123,INC. VA
FASHION BUG #2124,INC. PA
FASHION BUG #2125,INC. WA
FASHION BUG #2126,INC. MI
FASHION BUG #2127,INC. MI
FASHION BUG #2128,INC. CT
FASHION BUG #2129,INC. OH
FASHION BUG #2130,INC. IL
FASHION BUG #2131,INC. WI
FASHION BUG #2132,INC. MO
FASHION BUG #2133,INC. WI
FASHION BUG #2134,INC. IL
FASHION BUG #2135,INC. VT
FASHION BUG #2136,INC. (1) (2) FL
FASHION BUG #2137,INC. IN
FASHION BUG #2138,INC. OH
FASHION BUG #2139,INC. OR
FASHION BUG #2140,INC. VA
FASHION BUG #2141,INC. MI
FASHION BUG #2142,INC. (2) CT
FASHION BUG #2143,INC. NE
FASHION BUG #2144,INC. VA
FASHION BUG #2145,INC. MI
FASHION BUG #2146,INC. (2) WI
FASHION BUG #2147,INC. WI
FASHION BUG #2148,INC. WI
FASHION BUG #2149,INC. MA
FASHION BUG #2150,INC. NH
FASHION BUG #2151,INC. NH
FASHION BUG #2152,INC. VA
FASHION BUG #2153,INC. TN
FASHION BUG #2154,INC. WI
FASHION BUG #2155,INC. OH
FASHION BUG #2156,INC. RI
FASHION BUG #2157 OF ONEIDA,INC. NY
FASHION BUG #2158,INC. MO
FASHION BUG #2159,INC. FL
FASHION BUG #2160,INC. (2) WI
FASHION BUG #2161,INC. (1) (2) NE
FASHION BUG #2162,INC. NC
FASHION BUG #2163,INC. NC
FASHION BUG #2164,INC. FL
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 20
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2165,INC. FL
FASHION BUG #2166,INC. IA
FASHION BUG #2167,INC. WA
FASHION BUG #2168,INC. (2) WA
FASHION BUG #2169,INC. WA
FASHION BUG #2170,INC. WA
FASHION BUG #2171,INC. PA
FASHION BUG #2172,INC. KY
FASHION BUG #2173,INC. IN
FASHION BUG #2174,INC. MI
FASHION BUG #2175,INC. CA
FASHION BUG #2176,INC. (2) PA
FASHION BUG #2177,INC. PA
FASHION BUG #2180,INC. FL
FASHION BUG #2181,INC. CA
FASHION BUG #2182,INC. CA
FASHION BUG #2183,INC. OH
FASHION BUG #2184 of WEBSTER,INC. NY
FASHION BUG #2185,INC. OH
FASHION BUG #2186,INC. OR
FASHION BUG #2187,INC. MN
FASHION BUG #2188,INC. (2) MN
FASHION BUG #2189,INC. IN
FASHION BUG #2190,INC. WI
FASHION BUG #2191,INC. (2) PA
FASHION BUG #2192,INC. OH
FASHION BUG #2193,INC. MA
FASHION BUG #2194,INC. WI
FASHION BUG #2195,INC. WV
FASHION BUG #2196 OF NEWARK,INC. NY
FASHION BUG #2197,INC. OH
FASHION BUG #2198,INC. IN
FASHION BUG #2199,INC. MD
FASHION BUG #2200,INC. (2) OR
FASHION BUG #2201,INC. WA
FASHION BUG #2202,INC. CA
FASHION BUG #2203,INC. ME
FASHION BUG #2204 OF HORNELL,INC. NY
FASHION BUG #2204,INC. (1) (2) WI
FASHION BUG #2205,INC. MN
FASHION BUG #2206,INC. NH
FASHION BUG #2207,INC. (2) VA
FASHION BUG #2208,INC. VA
FASHION BUG #2209,INC. IL
FASHION BUG #2210 OF KINGSTON,INC. NY
FASHION BUG #2211,INC. MD
FASHION BUG #2212,INC. WI
FASHION BUG #2213,INC. (2) FL
FASHION BUG #2214,INC. MN
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 21
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2215,INC. FL
FASHION BUG #2215,INC. (1) (2) MA
FASHION BUG #2216,INC. (2) CA
FASHION BUG #2217,INC. ID
FASHION BUG #2218,INC. MN
FASHION BUG #2219,INC. WA
FASHION BUG #2220,INC. OH
FASHION BUG #2221,INC. OH
FASHION BUG #2222,INC. KY
FASHION BUG #2223,INC. ID
FASHION BUG #2224,INC. WA
FASHION BUG #2225,INC. (2) VT
FASHION BUG #2226,INC. MI
FASHION BUG #2227,INC. MI
FASHION BUG #2228,INC. WI
FASHION BUG #2229,INC. MI
FASHION BUG #2230,INC. MI
FASHION BUG #2231,INC. MI
FASHION BUG #2232,INC. MI
FASHION BUG #2233,INC. ME
FASHION BUG #2234,INC. (2) MA
FASHION BUG #2235,INC. IN
FASHION BUG #2236,INC. MN
FASHION BUG #2237,INC. PA
FASHION BUG #2238,INC. MA
FASHION BUG #2239,INC. OR
FASHION BUG #2240,INC. ID
FASHION BUG #2241,INC. (2) ID
FASHION BUG #2242,INC. PA
FASHION BUG #2243,INC. WA
FASHION BUG #2244 OF CANANDAIGUA,INC. NY
FASHION BUG #2245,INC. MD
FASHION BUG #2246,INC. MD
FASHION BUG #2247,INC. OH
FASHION BUG #2248,INC. MN
FASHION BUG #2249,INC. OH
FASHION BUG #2250,INC. OH
FASHION BUG #2251,INC. CA
FASHION BUG #2252 OF BAYSHORE,INC. NY
FASHION BUG #2253,INC. (2) CA
FASHION BUG #2254,INC. WI
FASHION BUG #2255,INC. MD
FASHION BUG #2256,INC. CA
FASHION BUG #2257,INC. IL
FASHION BUG #2258,INC. IL
FASHION BUG #2259,INC. IL
FASHION BUG #2260,INC. IL
FASHION BUG #2261,INC. (1) (2) MD
FASHION BUG #2262,INC. WV
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 22
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2263,INC. IN
FASHION BUG #2264,INC. OH
FASHION BUG #2265 OF STATEN ISLAND,INC. NY
FASHION BUG #2266,INC. IL
FASHION BUG #2268,INC. (1) (2) CA
FASHION BUG #2269 OF PLATTSBURGH,INC. (2) NY
FASHION BUG #2270,INC. OR
FASHION BUG #2271,INC. (1) (2) TX
FASHION BUG #2272,INC. (1) (2) TX
FASHION BUG #2273,INC. (1) (2) TX
FASHION BUG #2274,INC. CA
FASHION BUG #2275,INC. MI
FASHION BUG #2276,INC. MI
FASHION BUG #2277,INC. (1) (2) VA
FASHION BUG #2278,INC. NC
FASHION BUG #2279,INC. WI
FASHION BUG #2280,INC. WI
FASHION BUG #2281,INC. OH
FASHION BUG #2282,INC. (2) IL
FASHION BUG #2283,INC. OH
FASHION BUG #2284,INC. OH
FASHION BUG #2285,INC. CA
FASHION BUG #2286,INC. WI
FASHION BUG #2287,INC. (1) (2) WI
FASHION BUG #2288,INC. WA
FASHION BUG #2289 OF GARDEN CITY,INC. NY
FASHION BUG #2290,INC. RI
FASHION BUG #2291,INC. IN
FASHION BUG #2292,INC. MI
FASHION BUG #2293,INC. OH
FASHION BUG #2295,INC. WI
FASHION BUG #2296,INC. MA
FASHION BUG #2297,INC. MI
FASHION BUG #2298,INC. (1) (2) WV
FASHION BUG #2299,INC. WV
FASHION BUG #229,INC. (2) MD
FASHION BUG #2300,INC. FL
FASHION BUG #2301,INC. FL
FASHION BUG #2302,INC. NC
FASHION BUG #2303,INC. (1) (2) NJ
FASHION BUG #2304,INC. VA
FASHION BUG #2305,INC. PA
FASHION BUG #2306,INC. CA
FASHION BUG #2308,INC. MI
FASHION BUG #2309,INC. IN
FASHION BUG #2310,INC. (1) (2) CA
FASHION BUG #2311,INC. GA
FASHION BUG #2313,INC. WA
FASHION BUG #2314,INC. IN
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 23
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2315,INC. WI
FASHION BUG #2316,INC. (2) VA
FASHION BUG #2317,INC. (2) PA
FASHION BUG #2318,INC. DE
FASHION BUG #2320,INC. TN
FASHION BUG #2321,INC. CA
FASHION BUG #2322,INC. ME
FASHION BUG #2323,INC. CA
FASHION BUG #2324,INC. CA
FASHION BUG #2325,INC. MI
FASHION BUG #2326,INC. PA
FASHION BUG #2327,INC. (1) (2) KY
FASHION BUG #2328,INC. MN
FASHION BUG #2329,INC. (2) CA
FASHION BUG #2330,INC. PA
FASHION BUG #2331,INC. (2) VT
FASHION BUG #2332,INC. VA
FASHION BUG #2333,INC. FL
FASHION BUG #2334,INC. CA
FASHION BUG #2335,INC. CA
FASHION BUG #2336,INC. CA
FASHION BUG #2337,INC. OH
FASHION BUG #2338,INC. WI
FASHION BUG #2339,INC. RI
FASHION BUG #2340,INC. MI
FASHION BUG #2341,INC. (2) MI
FASHION BUG #2342 OF LONG ISLAND CITY,INC. (2) NY
FASHION BUG #2343,INC. WI
FASHION BUG #2344,INC. (2) FL
FASHION BUG #2345,INC. PA
FASHION BUG #2346,INC. CT
FASHION BUG #2347,INC. NH
FASHION BUG #2348,INC. WA
FASHION BUG #2349,INC. IN
FASHION BUG #2350,INC. NH
FASHION BUG #2351,INC. MN
FASHION BUG #2352,INC. WV
FASHION BUG #2353,INC. MI
FASHION BUG #2354,INC. CA
FASHION BUG #2355,INC. PA
FASHION BUG #2356,INC. GA
FASHION BUG #2357,INC. MI
FASHION BUG #2358,INC. ME
FASHION BUG #2359,INC. PA
FASHION BUG #2360,INC. PA
FASHION BUG #2361,INC. (1) (2) NJ
FASHION BUG #2362,INC. PA
FASHION BUG #2363,INC. (2) FL
FASHION BUG #2364, OF NORTH TONAWANDA,INC. NY
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 24
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2365,INC. (2) CA
FASHION BUG #2366,INC. NV
FASHION BUG #2367,INC. (1) (2) NJ
FASHION BUG #2368,INC. OH
FASHION BUG #2369,INC. SC
FASHION BUG #2370 OF MALONE,INC. NY
FASHION BUG #2371 OF POUGHKEEPSIE,INC. NY
FASHION BUG #2372,INC. (1) (2) CA
FASHION BUG #2373,INC. ME
FASHION BUG #2374,INC. WI
FASHION BUG #2375,INC. IL
FASHION BUG #2376,INC. IL
FASHION BUG #2377,INC. NH
FASHION BUG #2378,INC. NV
FASHION BUG #2379,INC. MA
FASHION BUG #2380,INC. NC
FASHION BUG #2381,INC. (1) (2) CA
FASHION BUG #2382,INC. TN
FASHION BUG #2383,INC. WI
FASHION BUG #2384 OF ROCHESTER,INC. NY
FASHION BUG #2385,INC. ME
FASHION BUG #2386 OF BROOKLYN,INC. (2) NY
FASHION BUG #2387,INC. PA
FASHION BUG #2388,INC. OR
FASHION BUG #2389,INC. PA
FASHION BUG #2390,INC. ND
FASHION BUG #2391,INC. VA
FASHION BUG #2392,INC. NJ
FASHION BUG #2393,INC. VT
FASHION BUG #2394,INC. IN
FASHION BUG #2395,INC. MD
FASHION BUG #2396 OF BIG FLATS,INC. NY
FASHION BUG #2397,INC. CT
FASHION BUG #2398,INC. NH
FASHION BUG #2399,INC. MI
FASHION BUG #2400,INC. (1) (2) CA
FASHION BUG #2401,INC. (1) (2) CA
FASHION BUG #2402,INC. CA
FASHION BUG #2403,INC. CT
FASHION BUG #2404,INC. MD
FASHION BUG #2405,INC. NC
FASHION BUG #2406,INC. MO
FASHION BUG #2407,INC. NH
FASHION BUG #2409,INC. PA
FASHION BUG #2410,INC. (1) (2) VA
FASHION BUG #2411,INC. MA
FASHION BUG #2412,INC. MA
FASHION BUG #2413,INC. CT
FASHION BUG #2414,INC. GA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 25
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2415,INC. PA
FASHION BUG #2416,INC. MA
FASHION BUG #2417,INC. (1) (2) MD
FASHION BUG #2418,INC. SC
FASHION BUG #2419,INC. NJ
FASHION BUG #2420,INC. MO
FASHION BUG #2421,INC. NV
FASHION BUG #2422,INC. WA
FASHION BUG #2423,INC. MA
FASHION BUG #2424,INC. MN
FASHION BUG #2425,INC. CT
FASHION BUG #2426 OF EAST AURORA,INC. NY
FASHION BUG #2427 OF GLENS FALLS,INC. (1) (2) NY
FASHION BUG #2428,INC. (1) (2) KY
FASHION BUG #2429,INC. IN
FASHION BUG #2430,INC. MN
FASHION BUG #2431,INC. SD
FASHION BUG #2432,INC. PA
FASHION BUG #2433,INC. (2) FL
FASHION BUG #2434,INC. NC
FASHION BUG #2435,INC. OH
FASHION BUG #2436,INC. ME
FASHION BUG #2437,INC. PA
FASHION BUG #2438,INC. (2) MA
FASHION BUG #2439,INC. MA
FASHION BUG #2440,INC. PA
FASHION BUG #2441,INC. (2) CA
FASHION BUG #2442,INC. (2) CA
FASHION BUG #2443,INC. MN
FASHION BUG #2444,INC. MN
FASHION BUG #2445,INC. SD
FASHION BUG #2446,INC. PA
FASHION BUG #2447,INC. (1) (2) ME
FASHION BUG #2448,INC. OH
FASHION BUG #2449,INC. NV
FASHION BUG #2450,INC. AL
FASHION BUG #2451,INC. (1) (2) AL
FASHION BUG #2452,INC. CT
FASHION BUG #2453,INC. MA
FASHION BUG #2454 OF SCHENECTADY,INC. NY
FASHION BUG #2455 OF WILTON,INC. NY
FASHION BUG #2456,INC. (2) WA
FASHION BUG #2457,INC. VA
FASHION BUG #2458,INC. NH
FASHION BUG #2459,INC. MI
FASHION BUG #2460,INC. MA
FASHION BUG #2461,INC. (2) SC
FASHION BUG #2461,INC. SC
FASHION BUG #2461,INC. (1) (2) GA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 26
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2462,INC. OR
FASHION BUG #2463,INC. (1) (2) VA
FASHION BUG #2464,INC. (2) WI
FASHION BUG #2466,INC. PA
FASHION BUG #2467,INC. KY
FASHION BUG #2468 OF BATH,INC. NY
FASHION BUG #2469,INC. (1) (2) IN
FASHION BUG #2470 OF BINGHAMPTON,INC. NY
FASHION BUG #2471,INC. (2) MA
FASHION BUG #2472,INC. CT
FASHION BUG #2473,INC. MI
FASHION BUG #2474,INC. OH
FASHION BUG #2475,INC. (2) MN
FASHION BUG #2476 OF MIDDLE ISLAND,INC. NY
FASHION BUG #2477,INC. MI
FASHION BUG #2478,INC. GA
FASHION BUG #2479,INC. IA
FASHION BUG #2480,INC. MN
FASHION BUG #2482,INC. IA
FASHION BUG #2483,INC. PA
FASHION BUG #2484,INC. WA
FASHION BUG #2485,INC. MD
FASHION BUG #2486,INC. IA
FASHION BUG #2487,INC. IN
FASHION BUG #2488,INC. MN
FASHION BUG #2489,INC. (2) MN
FASHION BUG #2490 OF NEW HARTFORD,INC. (1) (2) NY
FASHION BUG #2491,INC. (2) MI
FASHION BUG #2492,INC. PA
FASHION BUG #2493,INC. WI
FASHION BUG #2494,INC. MN
FASHION BUG #2495 OF IRONDEQUIOT,INC. (2) NY
FASHION BUG #2496,INC. (2) MA
FASHION BUG #2497,INC. MA
FASHION BUG #2498,INC. CA
FASHION BUG #2499,INC. (1) (2) NV
FASHION BUG #2500,INC. NE
FASHION BUG #2501,INC. MI
FASHION BUG #2502,INC. WI
FASHION BUG #2503,INC. IL
FASHION BUG #2504,INC. VA
FASHION BUG #2505 OF HUDSON,INC. NY
FASHION BUG #2506,INC. ID
FASHION BUG #2507,INC. (1) (2) PA
FASHION BUG #2508,INC. MO
FASHION BUG #2509,INC. (1) (2) NJ
FASHION BUG #2510,INC. OH
FASHION BUG #2511,INC. IN
FASHION BUG #2512,INC. NH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 27
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2513,INC. ME
FASHION BUG #2514,INC. PA
FASHION BUG #2515,INC. (1) (2) SC
FASHION BUG #2516,INC. NJ
FASHION BUG #2517,INC. (1) (2) CT
FASHION BUG #2518,INC. NH
FASHION BUG #2519 OF FULTON,INC. NY
FASHION BUG #2520,INC. MA
FASHION BUG #2521,INC. GA
FASHION BUG #2522,INC. FL
FASHION BUG #2523,INC. FL
FASHION BUG #2524,INC. CA
FASHION BUG #2525,INC. (2) AZ
FASHION BUG #2526,INC. (2) CA
FASHION BUG #2527,INC. AZ
FASHION BUG #2528,INC. (1) (2) AZ
FASHION BUG #2529,INC. AZ
FASHION BUG #2530,INC. AZ
FASHION BUG #2531,INC. GA
FASHION BUG #2531,INC. (1) (2) FL
FASHION BUG #2532,INC. (2) MN
FASHION BUG #2533,INC. NJ
FASHION BUG #2534,INC. NJ
FASHION BUG #2535,INC. (1) (2) PA
FASHION BUG #2536,INC. PA
FASHION BUG #2537,INC. KY
FASHION BUG #2538,INC. VA
FASHION BUG #2539,INC. (1) (2) FL
FASHION BUG #2540,INC. FL
FASHION BUG #2541,INC. NC
FASHION BUG #2542,INC. PA
FASHION BUG #2543,INC. CT
FASHION BUG #2544,INC. (1) (2) VA
FASHION BUG #2545,INC. (2) SC
FASHION BUG #2546,INC. (1) (2) NJ
FASHION BUG #2547,INC. VA
FASHION BUG #2548,INC. PA
FASHION BUG #2549,INC. NE
FASHION BUG #2550,INC. VA
FASHION BUG #2551 OF CLAY,INC. NY
FASHION BUG #2552,INC. (2) NH
FASHION BUG #2553,INC. OH
FASHION BUG #2554,INC. IL
FASHION BUG #2555,INC. ME
FASHION BUG #2556,INC. OH
FASHION BUG #2557,INC. UT
FASHION BUG #2558,INC. UT
FASHION BUG #2559,INC. UT
FASHION BUG #255,INC. ME
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 28
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2560,INC. UT
FASHION BUG #2561,INC. OH
FASHION BUG #2562,INC. OH
FASHION BUG #2563,INC. (1) (2) WI
FASHION BUG #2564,INC. KY
FASHION BUG #2565,INC. KY
FASHION BUG #2566,INC. ND
FASHION BUG #2567,INC. ND
FASHION BUG #2568,INC. FL
FASHION BUG #2569,INC. (1) (2) CA
FASHION BUG #2570,INC. (1) (2) AZ
FASHION BUG #2571,INC. OH
FASHION BUG #2572,INC. (1) (2) NJ
FASHION BUG #2573,INC. WI
FASHION BUG #2574,INC. NH
FASHION BUG #2575,INC. TN
FASHION BUG #2576,INC. (2) NC
FASHION BUG #2577,INC. KY
FASHION BUG #2578,INC. OH
FASHION BUG #2579,INC. PA
FASHION BUG #2580,INC. OH
FASHION BUG #2581,INC. NE
FASHION BUG #2582,INC. SC
FASHION BUG #2583,INC. (1) (2) WV
FASHION BUG #2584 OF CORTLAND,INC. NY
FASHION BUG #2585,INC MD
FASHION BUG #2586,INC. OH
FASHION BUG #2587,INC. OH
FASHION BUG #2588,INC. RI
FASHION BUG #2589,INC. TN
FASHION BUG #258,INC. TN
FASHION BUG #2590,INC. TN
FASHION BUG #2591,INC. (1) (2) CA
FASHION BUG #2592,INC. CA
FASHION BUG #2593,INC. AZ
FASHION BUG #2594,INC. CA
FASHION BUG #2595,INC. (1) (2) AZ
FASHION BUG #2596,INC. (2) NE
FASHION BUG #2597 OF COLONIE,INC. NY
FASHION BUG #2598,INC. CA
FASHION BUG #2599,INC. (1) (2) CA
FASHION BUG #2600,INC. (1) (2) ME
FASHION BUG #2601,INC. IN
FASHION BUG #2602,INC. (2) IA
FASHION BUG #2603,INC. KY
FASHION BUG #2604 OF VESTAL,INC. NY
FASHION BUG #2605,INC. MD
FASHION BUG #2606,INC. OH
FASHION BUG #2607,INC. NJ
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 29
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2608,INC. WI
FASHION BUG #2609,INC. WI
FASHION BUG #2610,INC. MI
FASHION BUG #2611,INC. (1) (2) MI
FASHION BUG #2612,INC. AL
FASHION BUG #2613,INC. (1) (2) WV
FASHION BUG #2614,INC. (2) MS
FASHION BUG #2615,INC. (1) (2) CT
FASHION BUG #2616,INC. MA
FASHION BUG #2617,INC. WA
FASHION BUG #2618,INC. VA
FASHION BUG #2619,INC. IL
FASHION BUG #2620,INC. GA
FASHION BUG #2621,INC. PA
FASHION BUG #2622,INC. (1) (2) MA
FASHION BUG #2623,INC. ID
FASHION BUG #2624,INC. (1) (2) IL
FASHION BUG #2625 OF PLATTSBURG,INC. NY
FASHION BUG #2626,INC. IL
FASHION BUG #2627 OF WEST SENECA,INC. NY
FASHION BUG #2628 OF NIAGRA FALLS,INC. NY
FASHION BUG #2629,INC. MI
FASHION BUG #2630,INC. (1) (2) NC
FASHION BUG #2631,INC. TN
FASHION BUG #2632,INC. (2) FL
FASHION BUG #2633,INC. (2) MN
FASHION BUG #2634,INC. CA
FASHION BUG #2635 OF GENESEO,INC. NY
FASHION BUG #2636,INC. NH
FASHION BUG #2637,INC. IA
FASHION BUG #2638,INC. RI
FASHION BUG #2639,INC. AZ
FASHION BUG #263,INC. OH
FASHION BUG #2640,INC. (1) (2) ID
FASHION BUG #2641,INC. (1) (2) MI
FASHION BUG #2642,INC. MN
FASHION BUG #2643,INC. OH
FASHION BUG #2644,INC. (2) UT
FASHION BUG #2645,INC. MA
FASHION BUG #2646,INC. CA
FASHION BUG #2647,INC. CA
FASHION BUG #2648,INC. (1) (2) CA
FASHION BUG #2649,INC. NM
FASHION BUG #2650,INC. (1) (2) IA
FASHION BUG #2650,INC. IA
FASHION BUG #2651,INC. MN
FASHION BUG #2652,INC. (2) PA
FASHION BUG #2653,INC. (1) (2) TN
FASHION BUG #2654,INC. (2) CT
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 30
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2655,INC. (1) (2) WI
FASHION BUG #2656,INC. (2) WI
FASHION BUG #2657,INC. (1) (2) PA
FASHION BUG #2658,INC. PA
FASHION BUG #2659,INC VT
FASHION BUG #265,INC. ME
FASHION BUG #2660,INC. (2) OH
FASHION BUG #2661 OF LAKEWOOD,INC. NY
FASHION BUG #2662,INC. (1) (2) NJ
FASHION BUG #2663,INC. PA
FASHION BUG #2664,INC. VA
FASHION BUG #2665,INC. WI
FASHION BUG #2666,INC. VA
FASHION BUG #2667,INC. (DUE TO TORNATO) (2) VA
FASHION BUG #2667,INC. (REOPENED) VA
FASHION BUG #2668,INC. (1) (2) IL
FASHION BUG #2669,INC. (2) FL
FASHION BUG #2670,INC. MD
FASHION BUG #2671,INC. MI
FASHION BUG #2672,INC. (1) (2) MI
FASHION BUG #2673,INC. NC
FASHION BUG #2674,INC. MA
FASHION BUG #2675,INC. CO
FASHION BUG #2676,INC. OH
FASHION BUG #2677,INC. IL
FASHION BUG #2678,INC. (2) FL
FASHION BUG #2679,INC. CA
FASHION BUG #2680,INC. IA
FASHION BUG #2681,INC. OH
FASHION BUG #2682,INC. CO
FASHION BUG #2684,INC. (2) UT
FASHION BUG #2685,INC. MO
FASHION BUG #2687,INC. (2) TN
FASHION BUG #2688,INC. KY
FASHION BUG #2689,INC. UT
FASHION BUG #2690,INC. DE
FASHION BUG #2691,INC. (1) (2) OH
FASHION BUG #2692,INC. OH
FASHION BUG #2693,INC. (2) GA
FASHION BUG #2694,INC. CT
FASHION BUG #2695,INC. WI
FASHION BUG #2696,INC. CA
FASHION BUG #2697,INC. MA
FASHION BUG #2698,INC. (1) (2) MA
FASHION BUG #2699,INC. MA
FASHION BUG #2700 OF PORT JEFFERSON,INC. NY
FASHION BUG #2701,INC. CA
FASHION BUG #2702,INC. IN
FASHION BUG #2703,INC. (1) (2) KY
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 31
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2704,INC. (2) MD
FASHION BUG #2705,INC. OH
FASHION BUG #2706,INC. TX
FASHION BUG #2707,INC. MD
FASHION BUG #2708,INC. OH
FASHION BUG #2709,INC. OH
FASHION BUG #2710,INC. (2) MA
FASHION BUG #2711,INC. MI
FASHION BUG #2712,INC. (1) (2) MI
FASHION BUG #2713,INC. IA
FASHION BUG #2714,INC. GA
FASHION BUG #2715 OF SYRACUSE,INC. NY
FASHION BUG #2716,INC. IN
FASHION BUG #2717,INC. WI
FASHION BUG #2718,INC. GA
FASHION BUG #2719,INC. IA
FASHION BUG #2720,INC. WV
FASHION BUG #2721,INC. PA
FASHION BUG #2722,INC. IN
FASHION BUG #2723,INC. (2) OH
FASHION BUG #2724,INC. IN
FASHION BUG #2725,INC. (1) (2) CT
FASHION BUG #2726,INC. (1) (2) CA
FASHION BUG #2727,INC. CA
FASHION BUG #2728,INC. MN
FASHION BUG #2729,INC. WI
FASHION BUG #2730,INC. DE
FASHION BUG #2731,INC. DE
FASHION BUG #2732,INC. GA
FASHION BUG #2733,INC. MO
FASHION BUG #2734,INC. (1) (2) IA
FASHION BUG #2735,INC. (1) (2) SD
FASHION BUG #2736,INC. MO
FASHION BUG #2737,INC. MI
FASHION BUG #2738,INC. KY
FASHION BUG #2739 OF ROTTERDAM,INC. NY
FASHION BUG #2740,INC KS
FASHION BUG #2741,INC. OH
FASHION BUG #2742,INC. (1) (2) MA
FASHION BUG #2743,INC. (1) (2) CA
FASHION BUG #2744,INC. MA
FASHION BUG #2745,INC. (2) MD
FASHION BUG #2748,INC. (1) (2) IL
FASHION BUG #2748,INC. (2) IL
FASHION BUG #2749,INC. MN
FASHION BUG #2750,INC. PA
FASHION BUG #2751,INC. IN
FASHION BUG #2752,INC. AL
FASHION BUG #2753,INC. MS
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 32
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2754,INC. TN
FASHION BUG #2755,INC. (1) (2) MO
FASHION BUG #2755,INC. (1) (2) MO
FASHION BUG #2756,INC. ME
FASHION BUG #2757,INC. SC
FASHION BUG #2758,INC. (2) GA
FASHION BUG #2759,INC. PA
FASHION BUG #2760,INC. NC
FASHION BUG #2761,INC. KY
FASHION BUG #2762,INC. NJ
FASHION BUG #2763,INC. PA
FASHION BUG #2764,INC. (1) (2) KY
FASHION BUG #2765,INC. (1) (2) WA
FASHION BUG #2766,INC. OH
FASHION BUG #2767,INC. PA
FASHION BUG #2768,INC. IN
FASHION BUG #2769,INC. WY
FASHION BUG #2770,INC. (2) UT
FASHION BUG #2771,INC. (2) ID
FASHION BUG #2772,INC. (1) (2) OR
FASHION BUG #2773,INC. ID
FASHION BUG #2774,INC. (1) (2) NV
FASHION BUG #2775,INC. (2) IN
FASHION BUG #2775,INC. (1) (2) IN
FASHION BUG #2777,INC. MI
FASHION BUG #2778,INC. (1) (2) GA
FASHION BUG #2778,INC. GA
FASHION BUG #2779,INC. OH
FASHION BUG #2780,INC. (1) (2) MI
FASHION BUG #2781,INC. NC
FASHION BUG #2782,INC. (2) TX
FASHION BUG #2783,INC. MN
FASHION BUG #2784,INC. (1) (2) MO
FASHION BUG #2785,INC. (1) (2) AL
FASHION BUG #2786,INC. NH
FASHION BUG #2787,INC. ME
FASHION BUG #2788,INC. (2) CA
FASHION BUG #2789,INC. VA
FASHION BUG #2790,INC. WA
FASHION BUG #2791,INC. OH
FASHION BUG #2792,INC. CA
FASHION BUG #2793,INC. CA
FASHION BUG #2794,INC. NV
FASHION BUG #2795,INC. WI
FASHION BUG #2796 OF COBLESKILL,INC. NY
FASHION BUG #2797,INC. NJ
FASHION BUG #2798,INC. FL
FASHION BUG #2799,INC. (1) (2) FL
FASHION BUG #2799,INC. (1) (2) FL
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 33
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #279,INC. OH
FASHION BUG #2800,INC. (1) (2) NC
FASHION BUG #2800,INC. (2) NC
FASHION BUG #2802,INC. PA
FASHION BUG #2803,INC. TX
FASHION BUG #2804,INC. TX
FASHION BUG #2805,INC. TX
FASHION BUG #2806,INC. (1) (2) VT
FASHION BUG #2807,INC. IN
FASHION BUG #2807,INC. (1) (2) IN
FASHION BUG #2808,INC. KS
FASHION BUG #2809,INC. IN
FASHION BUG #2810,INC. OH
FASHION BUG #2811,INC. NJ
FASHION BUG #2812,INC. (1) (2) TX
FASHION BUG #2813,INC. (1) (2) NJ
FASHION BUG #2814,INC. WY
FASHION BUG #2815,INC. (1) (2) FL
FASHION BUG #2816,INC. MA
FASHION BUG #2817,INC. (1) (2) MO
FASHION BUG #2818,INC. IL
FASHION BUG #2819,INC. (1) (2) IL
FASHION BUG #2820,INC. CT
FASHION BUG #2821,INC. VA
FASHION BUG #2822,INC. (1) (2) MI
FASHION BUG #2822,INC. MI
FASHION BUG #2823,INC. (1) (2) CA
FASHION BUG #2824,INC. AZ
FASHION BUG #2825,INC. (1) (2) CT
FASHION BUG #2826,INC. RI
FASHION BUG #2827,INC. (1) (2) KY
FASHION BUG #2828,INC. OH
FASHION BUG #2829,INC. OH
FASHION BUG #2830,INC. WA
FASHION BUG #2831,INC. (1) (2) ME
FASHION BUG #2832,INC. (1) (2) ME
FASHION BUG #2833,INC. IA
FASHION BUG #2834,INC. (1) (2) MI
FASHION BUG #2835,INC. NE
FASHION BUG #2836,INC. (1) (2) UT
FASHION BUG #2836,INC. UT
FASHION BUG #2837,INC. (1) (2) GA
FASHION BUG #2837,INC. (1) (2) GA
FASHION BUG #2838,INC. OR
FASHION BUG #2839,INC. (1) (2) CA
FASHION BUG #2840,INC. (1) (2) NV
FASHION BUG #2841,INC. IN
FASHION BUG #2842,INC. IL
FASHION BUG #2843,INC. TX
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 34
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2844,INC. PA
FASHION BUG #2845,INC. CA
FASHION BUG #2846,INC. (1) (2) NM
FASHION BUG #2848,INC. (2) NJ
FASHION BUG #2849,INC. (2) RI
FASHION BUG #2850,INC. MI
FASHION BUG #2851,INC. NJ
FASHION BUG #2852,INC. CO
FASHION BUG #2853 OF ROME,INC. NY
FASHION BUG #2854,INC. CO
FASHION BUG #2855,INC. IL
FASHION BUG #2856,INC. WI
FASHION BUG #2857,INC. OH
FASHION BUG #2858,INC. CA
FASHION BUG #2859,INC. (1) (2) GA
FASHION BUG #2860,INC. (1) (2) CA
FASHION BUG #2861,INC. AL
FASHION BUG #2862,INC. (1) (2) CA
FASHION BUG #2863,INC. MA
FASHION BUG #2864,INC. OH
FASHION BUG #2865,INC. (1) (2) TX
FASHION BUG #2866,INC. (1) (2) IA
FASHION BUG #2867,INC. (1) (2) AZ
FASHION BUG #2868,INC. AZ
FASHION BUG #2869,INC. MD
FASHION BUG #2870,INC. CA
FASHION BUG #2871 OF ALBANY,INC. NY
FASHION BUG #2872,INC. WI
FASHION BUG #2873,INC. (1) (2) GA
FASHION BUG #2874,INC. IN
FASHION BUG #2876,INC. IA
FASHION BUG #2877,INC. AL
FASHION BUG #2878,INC. (1) (2) OH
FASHION BUG #2879,INC. OR
FASHION BUG #2880,INC. CA
FASHION BUG #2881,INC. NH
FASHION BUG #2882,INC. (1) (2) NH
FASHION BUG #2883,INC. (1) (2) WV
FASHION BUG #2884,INC. (2) TX
FASHION BUG #2885,INC. (1) (2) TX
FASHION BUG #2886,INC. IL
FASHION BUG #2887,INC. (2) TX
FASHION BUG #2888,INC. TX
FASHION BUG #2889,INC. (1) (2) VT
FASHION BUG #2890,INC. TN
FASHION BUG #2891,INC. TX
FASHION BUG #2892,INC. ID
FASHION BUG #2893,INC. MT
FASHION BUG #2894,INC. IL
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 35
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2895,INC. TN
FASHION BUG #2896,INC. (1) (2) UT
FASHION BUG #2897,INC. FL
FASHION BUG #2898,INC. CA
FASHION BUG #2899,INC. WA
FASHION BUG #2900,INC. (1) (2) CA
FASHION BUG #2901,INC (1) (2) CA
FASHION BUG #2902,INC. IA
FASHION BUG #2903,INC. NE
FASHION BUG #2904,INC. (1) (2) SD
FASHION BUG #2905,INC. IN
FASHION BUG #2906,INC. IN
FASHION BUG #2907,INC. IL
FASHION BUG #2908,INC. (1) (2) PA
FASHION BUG #2909,INC. PA
FASHION BUG #2910 OF POUGHKEEPSIE,INC. (1) (2) NY
FASHION BUG #2911,INC. TN
FASHION BUG #2912 OF VICTOR,INC. NY
FASHION BUG #2913,INC. PA
FASHION BUG #2914,INC. (1) (2) PA
FASHION BUG #2915,INC. MA
FASHION BUG #2916,INC. (1) (2) NJ
FASHION BUG #2917,INC. (2) GA
FASHION BUG #2918,INC. (2) FL
FASHION BUG #2919,INC. FL
FASHION BUG #2920,INC. WA
FASHION BUG #2921,INC. TX
FASHION BUG #2922,INC. PA
FASHION BUG #2923 OF AMSTERDAM,INC. NY
FASHION BUG #2924,INC. WI
FASHION BUG #2925,INC. (1) (2) KS
FASHION BUG #2926,INC. KS
FASHION BUG #2927,INC. NJ
FASHION BUG #2928,INC. RI
FASHION BUG #2929,INC. (2) MA
FASHION BUG #2930,INC. IL
FASHION BUG #2931,INC. (1) (2) IN
FASHION BUG #2932,INC. MA
FASHION BUG #2934,INC. CA
FASHION BUG #2936,INC. (2) NC
FASHION BUG #2937,INC. GA
FASHION BUG #2940,INC (1) (2) TX
FASHION BUG #2941,INC. DE
FASHION BUG #2942,INC. (2) UT
FASHION BUG #2943,INC. (1) (2) UT
FASHION BUG #2944,INC. CA
FASHION BUG #2945 OF MEDIA,INC. NY
FASHION BUG #2946 OF EAST AURORA,INC. (1) (2) NY
FASHION BUG #2947,INC. (1) (2) GA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 36
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2948,INC. FL
FASHION BUG #2949,INC. (1) (2) MI
FASHION BUG #2950,INC. CA
FASHION BUG #2951,INC. NC
FASHION BUG #2952,INC. OH
FASHION BUG #2953,INC. (2) IL
FASHION BUG #2954,INC. MI
FASHION BUG #2955,INC. (1) (2) VA
FASHION BUG #2956,INC. MI
FASHION BUG #2957,INC. MA
FASHION BUG #2958,INC. MI
FASHION BUG #2959 OF BUFFALO,INC. NY
FASHION BUG #2960 OF HENRIETTA,INC. NY
FASHION BUG #2961 OF LOCKPORT,INC. (1) (2) NY
FASHION BUG #2962 OF HAMBURG,INC. (1) (2) NY
FASHION BUG #2963 OF BUFFALO,INC. (1) (2) NY
FASHION BUG #2964,INC. (1) (2) CA
FASHION BUG #2965,INC. (1) (2) TN
FASHION BUG #2966,INC. (1) (2) IN
FASHION BUG #2967,INC. (1) (2) MN
FASHION BUG #2968,INC. OR
FASHION BUG #2969,INC. WY
FASHION BUG #2970,INC. (1) (2) PA
FASHION BUG #2971,INC. CT
FASHION BUG #2972,INC. (2) TX
FASHION BUG #2973,INC. (2) TX
FASHION BUG #2974,INC. MI
FASHION BUG #2975,INC. (1) (2) MO
FASHION BUG #2976,INC. (1) (2) KY
FASHION BUG #2977,INC. (1) (2) TX
FASHION BUG #2978,INC. OH
FASHION BUG #2979,INC. (1) (2) TX
FASHION BUG #2980,INC. FL
FASHION BUG #2981,INC. (1) (2) FL
FASHION BUG #2982,INC. VT
FASHION BUG #2983,INC. ME
FASHION BUG #2984,INC. (1) (2) TX
FASHION BUG #2985,INC. (2) TX
FASHION BUG #2986,INC. TX
FASHION BUG #2987,INC. IN
FASHION BUG #2988,INC. IN
FASHION BUG #2989,INC. IN
FASHION BUG #2990,INC. WI
FASHION BUG #2991,INC. (1) (2) MD
FASHION BUG #2992,INC. CO
FASHION BUG #2993,INC. (1) (2) IN
FASHION BUG #2994,INC. VA
FASHION BUG #2995,INC. OH
FASHION BUG #2996,INC. (1) (2) MD
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 37
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #2997,INC. (1) (2) SC
FASHION BUG #2998,INC. (1) (2) PA
FASHION BUG #2999,INC. NC
FASHION BUG #3000,INC. KS
FASHION BUG #3001,INC. VA
FASHION BUG #3002,INC. (1) (2) NH
FASHION BUG #3003,INC. MT
FASHION BUG #3004,INC. (1) (2) PA
FASHION BUG #3005,INC. OH
FASHION BUG #3006,INC. AZ
FASHION BUG #3007,INC (1) (2) IL
FASHION BUG #3008,INC. MA
FASHION BUG #3009,INC. WI
FASHION BUG #3010,INC. (1) (2) NM
FASHION BUG #3011,INC. PA
FASHION BUG #3012,INC. (1) (2) MO
FASHION BUG #3013,INC. (1) (2) IA
FASHION BUG #3014,INC. (1) (2) NC
FASHION BUG #3016,INC. OH
FASHION BUG #3017 OF ROCKY POINT,INC. (1) (2) NY
FASHION BUG #3018,INC. WV
FASHION BUG #3019,INC. (1) (2) WA
FASHION BUG #3020,INC. MA
FASHION BUG #3021,INC. (1) (2) CA
FASHION BUG #3022,INC. IL
FASHION BUG #3023,INC. WI
FASHION BUG #3024,INC. IL
FASHION BUG #3025,INC. (1) (2) IN
FASHION BUG #3026,INC. WV
FASHION BUG #3027,INC. (1) (2) UT
FASHION BUG #3028,INC. (1) (2) FL
FASHION BUG #3029,INC. (1) (2) IL
FASHION BUG #3030,INC. AZ
FASHION BUG #3031,INC. (1) (2) CA
FASHION BUG #3032,INC. (1) (2) TX
FASHION BUG #3033,INC. NH
FASHION BUG #3034,INC. MO
FASHION BUG #3035,INC. (1) (2) KY
FASHION BUG #3036,INC. (1) (2) AZ
FASHION BUG #3037,INC. (1) (2) CT
FASHION BUG #3038,INC. VT
FASHION BUG #3039,INC. (1) (2) PA
FASHION BUG #3040,INC. MO
FASHION BUG #3041,INC. (1) (2) OR
FASHION BUG #3042,INC. IN
FASHION BUG #3043,INC. (1) (2) WI
FASHION BUG #3044,INC. GA
FASHION BUG #3045,INC. (1) (2) AL
FASHION BUG #3046,INC. GA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 38
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #3047,INC. TN
FASHION BUG #3048 OF WELLSVILLE,INC. NY
FASHION BUG #3049,INC. CT
FASHION BUG #3050,INC. MA
FASHION BUG #3051,INC. (1) (2) CA
FASHION BUG #3052,INC. MO
FASHION BUG #3053,INC. (1) (2) OH
FASHION BUG #3054,INC. IL
FASHION BUG #3055,INC. (1) (2) WI
FASHION BUG #3056,INC. GA
FASHION BUG #3057,INC. PA
FASHION BUG #3058,INC. CT
FASHION BUG #3059,INC. (1) (2) MA
FASHION BUG #3060,INC. SD
FASHION BUG #3061,INC. DE
FASHION BUG #3062,INC. GA
FASHION BUG #3063,INC. (1) (2) VA
FASHION BUG #3064,INC. (1) (2) MI
FASHION BUG #3065,INC. (1) (2) TN
FASHION BUG #3066,INC. (1) (2) MI
FASHION BUG #3067,INC (1) (2) TX
FASHION BUG #3068,INC. (1) (2) MN
FASHION BUG #3069,INC. NJ
FASHION BUG #3070,INC. (1) (2) MO
FASHION BUG #3071,INC. (1) (2) WA
FASHION BUG #3072,INC. (1) (2) AR
FASHION BUG #3073,INC. (1) (2) WA
FASHION BUG #3074,INC. (1) (2) PA
FASHION BUG #3076,INC. (1) (2) MI
FASHION BUG #3077,INC. (1) (2) IL
FASHION BUG #3078,INC. IL
FASHION BUG #3079,INC. MO
FASHION BUG #3080,INC. (1) (2) ME
FASHION BUG #3081,INC. (1) (2) PA
FASHION BUG #3082,INC. (1) (2) CT
FASHION BUG #3083,INC. (1) (2) VT
FASHION BUG #3084,INC. (1) (2) NJ
FASHION BUG #3085,INC. (1) (2) NJ
FASHION BUG #3086,INC. (1) (2) MO
FASHION BUG #3087,INC. (1) (2) NJ
FASHION BUG #3088,INC. (1) (2) WA
FASHION BUG #3089,INC. (1) (2) NJ
FASHION BUG #3090,INC. (1) (2) PA
FASHION BUG #3091,INC. (1) (2) PA
FASHION BUG #3092,INC. WI
FASHION BUG #3093,INC. (1) (2) MA
FASHION BUG #3095,INC. (1) (2) NJ
FASHION BUG #3096,INC. (1) (2) NJ
FASHION BUG #3097,INC. (1) (2) NJ
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 39
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #336,INC. IN
FASHION BUG #3906,INC. (1) (2) NJ
FASHION BUG #3907,INC. (1) (2) NJ
FASHION BUG #418,INC. NJ
FASHION BUG #429,INC. (2) MN
FASHION BUG #42,INC. (1) (2) MO
FASHION BUG #44,INC. (2) PA
FASHION BUG #461,INC. (2) OK
FASHION BUG #467 OF LEVITTOWN,INC. (2) NY
FASHION BUG #471,INC. MN
FASHION BUG #47,INC. IN
FASHION BUG #47,INC. (1) (2) IN
FASHION BUG #507,INC. (2) NY
FASHION BUG #508,INC. IL
FASHION BUG #519,INC. WV
FASHION BUG #520,INC. MA
FASHION BUG #527,INC. KS
FASHION BUG #529 OF HAMBURG,INC. NY
FASHION BUG #533,INC. (2) MI
FASHION BUG #534,INC. IN
FASHION BUG #535,INC. (2) MI
FASHION BUG #538,INC. ME
FASHION BUG #544,INC. (2) OH
FASHION BUG #545,INC. VT
FASHION BUG #548,INC. ME
FASHION BUG #554,INC. PA
FASHION BUG #558,INC. TN
FASHION BUG #560 OF GLOVERSVILLE,INC. NY
FASHION BUG #561,INC. FL
FASHION BUG #562,INC. NJ
FASHION BUG #563,INC. IL
FASHION BUG #564,INC. MO
FASHION BUG #565,INC. MI
FASHION BUG #566,INC. IN
FASHION BUG #567,INC. IL
FASHION BUG #568,INC. (2) WI
FASHION BUG #569,INC. (2) IL
FASHION BUG #570 OF CLIFTON PARK,INC. (2) NY
FASHION BUG #571,INC. TN
FASHION BUG #572,INC. (2) LA
FASHION BUG #573,INC. PA
FASHION BUG #574 OF SYRACUSE,INC. NY
FASHION BUG #575,INC. MN
FASHION BUG #576,INC. NJ
FASHION BUG #577,INC. (2) MI
FASHION BUG #578,INC. (2) PA
FASHION BUG #579,INC. (2) ME
FASHION BUG #580,INC. ME
FASHION BUG #581,INC. NH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 40
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #582,INC. (2) VA
FASHION BUG #583,INC. KY
FASHION BUG #584 OF YONKERS,INC. NY
FASHION BUG #585,INC. NJ
FASHION BUG #586,INC. NJ
FASHION BUG #587,INC. (2) MI
FASHION BUG #588,INC. IL
FASHION BUG #589,INC. IL
FASHION BUG #591,INC. (2) MO
FASHION BUG #592,INC. IL
FASHION BUG #593 OF SELDEN,INC. NY
FASHION BUG #594,INC. KS
FASHION BUG #595,INC. IN
FASHION BUG #596,INC. CT
FASHION BUG #597,INC. MN
FASHION BUG #599,INC. (2) MA
FASHION BUG #600,INC. PA
FASHION BUG #601,INC. SC
FASHION BUG #602,INC. PA
FASHION BUG #603 OF HUDSON AVENUE,INC. (1) (2) NY
FASHION BUG #604,INC. (1) (2) IA
FASHION BUG #605,INC. MI
FASHION BUG #606,INC. MI
FASHION BUG #607,INC. MI
FASHION BUG #608,INC. (2) FL
FASHION BUG #609,INC. (2) MA
FASHION BUG #610,INC. (1) (2) RI
FASHION BUG #611,INC. (1) (2) AL
FASHION BUG #612,INC. OH
FASHION BUG #613,INC. PA
FASHION BUG #614,INC. MA
FASHION BUG #615,INC. PA
FASHION BUG #616,INC. (2) CT
FASHION BUG #617,INC. MA
FASHION BUG #618,INC. SC
FASHION BUG #619,INC. (2) PA
FASHION BUG #620,INC. (1) (2) IL
FASHION BUG #621,INC. (2) PA
FASHION BUG #622,INC. WI
FASHION BUG #623,INC. IL
FASHION BUG #624,INC. MO
FASHION BUG #625,INC. (2) PA
FASHION BUG #626,INC. MD
FASHION BUG #627,INC. OH
FASHION BUG #628,INC. (2) MI
FASHION BUG #629,INC. NJ
FASHION BUG #630,INC. IN
FASHION BUG #631,INC. PA
FASHION BUG #632,INC. (2) KY
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 41
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #633 OF DEWITT,INC. (2) NY
FASHION BUG #634,INC. (2) VA
FASHION BUG #635,INC. PA
FASHION BUG #636,INC. IL
FASHION BUG #637,INC. (2) TN
FASHION BUG #638,INC. MI
FASHION BUG #639,INC. MD
FASHION BUG #640,INC. (1) (2) NJ
FASHION BUG #641,INC. NJ
FASHION BUG #642,INC. PA
FASHION BUG #643,INC. PA
FASHION BUG #644,INC. GA
FASHION BUG #645,INC. MI
FASHION BUG #646,INC. OH
FASHION BUG #647,INC. ME
FASHION BUG #648,INC. (2) OH
FASHION BUG #649,INC. PA
FASHION BUG #650,INC. VA
FASHION BUG #651,INC. MI
FASHION BUG #652,INC. (2) LA
FASHION BUG #653,INC. NJ
FASHION BUG #654,INC. AL
FASHION BUG #655,INC. (1) (2) WA
FASHION BUG #656,INC. FL
FASHION BUG #657,INC. MO
FASHION BUG #658,INC. MA
FASHION BUG #659,INC. (2) MN
FASHION BUG #660 OF ALBANY,INC. NY
FASHION BUG #661,INC. WV
FASHION BUG #662,INC. PA
FASHION BUG #663,INC. PA
FASHION BUG #664,INC. CO
FASHION BUG #665,INC. (2) CO
FASHION BUG #666,INC. (1) (2) MI
FASHION BUG #667,INC. MI
FASHION BUG #668 OF SHIRLEY,INC. NY
FASHION BUG #669,INC. (2) MI
FASHION BUG #670,INC. MA
FASHION BUG #671,INC. (1) (2) VA
FASHION BUG #672,INC. MI
FASHION BUG #673,INC. KY
FASHION BUG #674,INC. IL
FASHION BUG #675,INC. (2) LA
FASHION BUG #676 OF OZONE PARK,INC. NY
FASHION BUG #677,INC. (2) FL
FASHION BUG #678,INC. OH
FASHION BUG #679 OF WATERTOWN,INC. NY
FASHION BUG #680,INC. (2) PA
FASHION BUG #681,INC. IN
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 42
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #682,INC. (2) GA
FASHION BUG #683,INC. (2) WI
FASHION BUG #684,INC. NC
FASHION BUG #685,INC. (2) OH
FASHION BUG #686,INC. IL
FASHION BUG #687,INC. IL
FASHION BUG #688,INC. (2) PA
FASHION BUG #689,INC. PA
FASHION BUG #690,INC. (2) OH
FASHION BUG #691,INC. MD
FASHION BUG #692,INC. (2) MO
FASHION BUG #693,INC. MI
FASHION BUG #694,INC. MI
FASHION BUG #695,INC. (2) OH
FASHION BUG #696,INC. VA
FASHION BUG #697,INC. OH
FASHION BUG #698,INC. OH
FASHION BUG #699,INC. (2) NJ
FASHION BUG #712,INC. (2) IA
FASHION BUG #716,INC. RI
FASHION BUG #717,INC. (2) MI
FASHION BUG #718,INC. (2) IL
FASHION BUG #719,INC. OH
FASHION BUG #720 OF OSWEGO,INC. NY
FASHION BUG #721,INC. MA
FASHION BUG #722,INC. (2) LA
FASHION BUG #723,INC. (2) AL
FASHION BUG #724,INC. NH
FASHION BUG #725,INC. (1) (2) FL
FASHION BUG #726,INC. KS
FASHION BUG #727,INC. ME
FASHION BUG #728,INC. (2) AL
FASHION BUG #729,INC. MI
FASHION BUG #730,INC. OH
FASHION BUG #731,INC. IL
FASHION BUG #732,INC. MI
FASHION BUG #733,INC. IN
FASHION BUG #734 OF DUNKIRK,INC. NY
FASHION BUG #735,INC. (2) TN
FASHION BUG #736,INC. (2) MO
FASHION BUG #737,INC. MA
FASHION BUG #738,INC. NC
FASHION BUG #739,INC. OH
FASHION BUG #740,INC. WI
FASHION BUG #741,INC. OH
FASHION BUG #742,INC. OH
FASHION BUG #743,INC. OH
FASHION BUG #744,INC. (1) (2) FL
FASHION BUG #745,INC. MI
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 43
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #746,INC. (2) LA
FASHION BUG #747,INC. (2) LA
FASHION BUG #748,INC. OH
FASHION BUG #749,INC. (2) CT
FASHION BUG #750,INC. (2) ME
FASHION BUG #751,INC. MI
FASHION BUG #752,INC. VT
FASHION BUG #753 OF RIDGEMONT PLAZA,INC. (2) NY
FASHION BUG #754,INC. PA
FASHION BUG #755,INC. ME
FASHION BUG #756,INC. CT
FASHION BUG #757 OF BROCKPORT,INC. NY
FASHION BUG #758,INC. WI
FASHION BUG #759,INC. MI
FASHION BUG #760 OF PINE PLAZA,INC. NY
FASHION BUG #761,INC. MO
FASHION BUG #762,INC. MO
FASHION BUG #763,INC. MO
FASHION BUG #764,INC. IL
FASHION BUG #765 OF LACKAWANNA,INC. (2) NY
FASHION BUG #766,INC. OH
FASHION BUG #767,INC. (2) WV
FASHION BUG #768,INC. VA
FASHION BUG #769,INC. OH
FASHION BUG #770,INC. (1) (2) MI
FASHION BUG #771,INC. MI
FASHION BUG #772 OF MIDDLETOWN,INC. NY
FASHION BUG #773,INC. TN
FASHION BUG #774,INC. PA
FASHION BUG #775,INC. VT
FASHION BUG #776,INC. KY
FASHION BUG #778,INC. PA
FASHION BUG #779,INC. KY
FASHION BUG #780,INC. (2) VA
FASHION BUG #781,INC. OH
FASHION BUG #782,INC. (2) IN
FASHION BUG #784,INC. VA
FASHION BUG #785,INC. MI
FASHION BUG #786,INC. CT
FASHION BUG #787,INC. RI
FASHION BUG #788,INC. MA
FASHION BUG #789,INC. (2) MO
FASHION BUG #790,INC. OH
FASHION BUG #791,INC. (2) IL
FASHION BUG #792,INC. NC
FASHION BUG #793,INC. VA
FASHION BUG #794,INC. (2) OK
FASHION BUG #795,INC. MI
FASHION BUG #796,INC. (2) OH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 44
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
FASHION BUG #797,INC. KS
FASHION BUG #798,INC. (2) OH
FASHION BUG #799,INC. VA
FASHION BUG #84 OF QUEENS,INC. NY
FASHION BUG #863,INC. IN
FASHION BUG #95,INC.(907) MD
FASHION BUG & FASHION BUG PLUS #2179,INC. FL
FASHOIN BUG #2408 OF BRUNSWICK,INC. (1) (2) NY
FASHION SERVICE CORP (2) DE
FB APPAREL (2) IN
FB CLOTHING,INC. (2) IN
FB DISTRO (2) IN
FESTUS DEVELOPMENT CO.,INC. (2) MO
FESTUS #2733 DEVELOPMENT CO.,INC. (2) MO
FSC SERVICE CORP. (2) PA
FSHC,INC. (2) DE
F.B. PLUS WOMEN'S APPAREL OF JOHNSON CITY,INC. NY
F.B. PLUS WOMEN'S APPAREL OF KINGSTON,INC. NY
F.B. PLUS WOMEN'S APPAREL OF PINE PLAZA,INC. (2) NY
F.B. PLUS WOMEN'S APPAREL OF RIVERSIDE,INC. (2) NY
F.B. PLUS WOMEN'S APPAREL OF RIVERSIDE,INC. (2) NY
F.B. PLUS WOMEN'S APPAREL OF WEST SENECA,INC. (2) NY
F.B. WOMEN'S APPAREL OF AMSTERDAM,INC. (2) NY
F.B. WOMEN'S APPAREL OF CAMILLUS,INC. (2) NY
F.B. WOMEN'S APPAREL OF CLAY,INC. (2) NY
F.B. WOMEN'S APPAREL OF COLONIE,INC. (2) NY
F.B. WOMEN'S APPAREL OF DELMAR,INC. NY
F.B. WOMEN'S APPAREL OF DEPEW,INC. NY
F.B. WOMEN'S APPAREL OF ONEONTA,INC. NY
F.B. WOMEN'S APPAREL OF PANORAMA PLAZA,INC. NY
F.B. WOMEN'S APPAREL OF RIVERSIDE,INC. (2) NY
F.B. WOMEN'S APPAREL OF SARATOGA SPRINGS,INC. (2) NY
F.B. WOMEN'S APPAREL OF SCHENECTADY,INC. (2) NY
F.B. WOMEN'S APPAREL OF SHOP CITY,INC. (2) NY
F.B. WOMEN'S APPAREL OF UTICA,INC. (2) NY
F.B. WOMEN'S APPAREL OF YORKTOWN HEIGHTS,INC. NY
F.B. WOMEN'S APPAREL #2481 OF RIVERSIDE,INC. NY
HOUGHTON LAKE #2611 DEVELOPMENT CO.,INC. (2) MI
INTERNATIONAL APPAREL, INC. (2) PA
J.G.RYCE OF LEVITTOWN,INC. (2) PA
J.G.RYCE OF SANDY PLAZA,INC. (2) NY
J.M. BALTER CO (2) PA
J.P.A. CLOTHING COMPANY (2) GA
J.P.A. SERVICE CO. (2) GA
KAFCO DEVELOPMENT CO., INC. (2) PA
KIRKSTONE LTD (2) HK
LEWISVILLE #2782 DEVELOPMENT CO.,INC. (2) TX
MACOMB #2619 DEVELOPMENT CO., INC. (2) IL
ORLE (2) DE
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 45
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
OWENSBORO #2976 DEVELOPMENT CO.,INC. (2) KY
PRESQUE ISLE #2756 DEVELOPMENT CO.,INC. (2) ME
PRICE APPEAL #5000,INC. (2) NJ
PRICE APPEAL #5001 OF STATEN ISLAND,INC. (1) (2) NY
PRICE APPEAL #5002,INC. (2) PA
PRICE APPEAL #5003,INC. (2) DE
PRICE APPEAL #5004,INC. (2) NJ
PRICE APPEAL #5005,INC. (2) MD
PRICE APPEAL #5006,INC. (2) MA
PRICE APPEAL #5007,INC. (2) MA
PRICE APPEAL #5008,INC. (2) MD
PRICE APPEAL #5009,INC. (2) VA
PRICE APPEAL #5010,INC. (2) MD
PRICE APPEAL #5011,INC. (2) NY
PRICE APPEAL #5012,INC. (2) MD
PRICE APPEAL #5013,INC. (2) PA
PRICE APPEAL #5014,INC. (2) CT
PRICE APPEAL #5015,INC. (1) (2) NJ
PRICE APPEAL #5016,INC. (2) PA
PRICE APPEAL #5017,INC. (2) NJ
PRICE APPEAL #5018,INC. (2) NJ
PRICE APPEAL #5019,INC. (1) (2) NJ
PRICE APPEAL #5020,INC. (1) (2) OH
PRICE APPEAL #5021,INC. (1) (2) NJ
PRICE APPEAL #5022,INC. (1) (2) OH
PRICE APPEAL #5023,INC. (2) OH
PRICE APPEAL #5024,INC. (1) (2) NJ
PRICE APPEAL #5025,INC. (1) (2) OH
PRICE APPEAL #5026,INC. (1) (2) VA
PRICE APPEAL #5027,INC. (1) (2) PA
PRICE APPEAL #5028,INC. (1) (2) NJ
PRICE APPEAL #5029,INC. (1) (2) PA
PRICE APPEAL #5030,INC. (2) NJ
PRICE APPEAL #5031,INC. (2) IL
PRICE APPEAL #5032,INC. (2) IL
PRICE APPEAL #5033,INC. (2) OH
PRICE APPEAL #5034,INC. (2) IL
PRICE APPEAL #5035,INC. (2) IL
PRICE APPEAL #5037,INC. (2) PA
PRICE APPEAL #5038,INC. (2) NJ
PRICE APPEAL #5039,INC. (2) PA
PRICE APPEAL #5041,INC. (2) VA
PRICE APPEAL #5042,INC. (2) MD
PRICE APPEAL #5043,INC. (2) MD
PRICE APPEAL #5044,INC. (2) MD
PRICE APPEAL #5045,INC. (2) OH
PRICE APPEAL #5046,INC. (2) PA
PRICE APPEAL #5047,INC. (2) MD
PRICE APPEAL #5048,INC. (2) MI
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 46
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
---- ------------
<S> <C> <C> <C>
PRICE APPEAL #5049,INC. (2) MI
PRICE APPEAL #5050,INC. (2) MI
PRICE APPEAL #5051,INC. (2) MA
PRICE APPEAL #5052,INC. (1) (2) DC
PRICE APPEAL #5053,INC. (1) (2) MD
PRICE APPEAL #5054,INC. (1) (2) MD
PRICE APPEAL #5055,INC. (1) (2) OH
PRICE APPEAL #5056,INC. (1) (2) MD
PRICE APPEAL #5057,INC. (1) (2) MD
PRICE APPEAL #5058,INC. (2) OH
PRICE APPEAL #5059,INC. (2) OH
PRICE APPEAL #5060,INC. (1) (2) MI
PRICE APPEAL #5061,INC. (2) DC
P'ZAZZ FASHIONS OF BARBOURSVILLE,INC. (2) WV
P'ZAZZ FASHIONS OF FRANKLIN,INC. (1) (2) PA
P'ZAZZ FASHIONS OF FT LAUDERDALE,INC. (2) FL
P'ZAZZ FASHIONS OF HAGERSTOWN,INC. (2) MD
P'ZAZZ FASHIONS OF HARRISBURG EAST MALL,INC. (1) (2) PA
P'ZAZZ FASHIONS OF KALAMAZOO,INC. (2) MI
P'ZAZZ FASHIONS OF OZONE,INC. (2) NY
P'ZAZZ FASHIONS OF SCRANTON,INC. (2) PA
P'ZAZZ FASHIONS OF SEAFORD,INC. (2) DE
P'ZAZZ FASHIONS OF ST ALBANS,INC. (2) WV
P'ZAZZ FASHIONS OF TOWER MALL,INC. (2) VA
P'ZAZZ FASHIONS OF TOWER MALL,INC. (2) VA
P'ZAZZ FASHIONS OF UNIONTOWN,INC. (2) PA
P'ZAZZ FASHIONS OF WYNCOTE,INC. (2) PA
ROLLA DEVELOPMENT CO.,INC. (2) MO
ROLLA #2685 DEVELOPMENT CO.,INC. (2) MO
S A FUNDING,INC. (2) DE
SALINA #2926 DEVELOPMENT CO.,INC. (2) KS
SAN ANGELO #2973 DEVELOPMENT CO.,INC. (2) TX
SENTANI TRADING LTD. (2) HK
SIKESTON #2736 DEVELOPMENT CO.,INC. (2) MO
SPECIALTY FIXTURES, INC. (2) DE
SPECIALTY FIXTURES,INC. (2) PA
SPIRIT OF AMERICA NATIONAL BANK (2) PA
ST JOSEPH #2784 DEVELOPMENT CO.,INC. (2) MO
VICTORIA #2972 DEVELOPMENT CO.,INC. (2) TX
WINDHAM #3037 DEVELOPMENT CO,INC. (2) CT
WINKS LANE,INC. (2) PA
W.L. DISTRIBUTORS,INC. (2) PA
YARDARM TRADING LTD. (2) HK
YUCCA #2524 DEVELOPMENT CO.,INC. (2) CA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended February 3, 1996, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement (Form
S-8, No. 33-56145) and Registration Statement (Form S-8, No. 33-56147), dated
October 25, 1994, Registration Statement (Form S-8, No. 33-39558), dated March
25, 1991, Registration Statement (Form S-8 No. 2-92975) dated September 17,
1984 and Registration Statement (Form S-3, No. 33-00074) dated September 25,
1985 of our report dated March 20, 1996 with respect to the consolidated
financial statements and schedules of Charming Shoppes, Inc. included in this
Annual Report (Form 10-K) for the year ended February 3, 1996.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
May 1, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
CHARMING SHOPPES, INC.
FINANCIAL DATA SCHEDULE
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> FEB-03-1996
<CASH> 25,117
<SECURITIES> 34,054
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 220,850
<CURRENT-ASSETS> 405,561
<PP&E> 435,531
<DEPRECIATION> 200,943
<TOTAL-ASSETS> 681,746
<CURRENT-LIABILITIES> 206,104
<BONDS> 38,102
0
0
<COMMON> 10,325
<OTHER-SE> 408,704
<TOTAL-LIABILITY-AND-EQUITY> 681,746
<SALES> 1,102,384
<TOTAL-REVENUES> 1,102,384
<CGS> 917,064
<TOTAL-COSTS> 917,064
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,666
<INCOME-PRETAX> (214,988)
<INCOME-TAX> (75,747)
<INCOME-CONTINUING> (139,241)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (139,241)
<EPS-PRIMARY> (1.35)
<EPS-DILUTED> 0
</TABLE>
