Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6807
FAMILY DOLLAR STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-0942963
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 1017, 10401 Old Monroe Road
Charlotte, North Carolina 28201-1017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704-847-6961
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
Common Stock, $.10 par value 56,837,862 shares
<PAGE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information
Item 1 - Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets -
May 31, 1996 and August 31, 1995 2
Consolidated Condensed Statements of Income -
Three Months Ended May 31, 1996 and 1995 3
Consolidated Condensed Statements of Income -
Nine Months Ended May 31, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended May 31, 1996 and 1995 5
Notes to Consolidated Condensed Financial
Statements 6-7
Computation of Net Income per Common Share -
Note 7 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-10
Part II - Other Information and Signatures
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 11
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<CAPTION>
May 31, August 31,
1996 1995
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2) $ 21,202,061 $ 8,852,631
Merchandise inventories 432,927,727 443,445,448
Deferred income taxes 18,156,750 16,415,749
Prepayments and other current assets 6,727,506 6,315,880
Total current assets 479,014,044 475,029,708
Property and equipment, net 174,589,995 156,640,224
Other assets 3,288,176 4,563,835
$656,892,215 $636,233,767
<PAGE>
<CAPTION>
Liabilities and Shareholders' Equity
<S> <C> <C>
Current liabilities:
Notes payable (Note 3) $ - $ -
Accounts payable and accrued
liabilities 193,555,737 207,970,292
Income taxes payable 5,200,042 2,387,562
Total current liabilities 198,755,779 210,357,854
Deferred income taxes 18,341,325 18,125,325
Contingencies (Note 4)
Shareholders' equity (Notes 5 and 7):
Preferred stock, $1 par; authorized
and unissued 500,000 shares
Common stock, $.10 par;
authorized 120,000,000 shares;
issued 60,290,684 shares at
May 31, 1996 and 60,196,664
shares at August 31, 1995 6,029,068 6,019,666
Capital in excess of par 16,767,637 15,774,431
Retained earnings 428,347,674 397,305,759
451,144,379 419,099,856
Less common stock held in treasury,
at cost (3,452,822 shares at
May 31, 1996 and August 31, 1995 -
Note 7) 11,349,268 11,349,268
Total shareholders' equity 439,795,111 407,750,588
$656,892,215 $636,233,767
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
May 31, May 31,
1996 1995
<S> <C> <C>
Net sales $427,941,427 $379,836,418
Costs and expenses:
Cost of sales 283,931,798 248,576,982
Selling, general and
administrative expenses
(Note 6) 113,522,290 104,842,114
397,454,088 353,419,096
Income before provision
for taxes on income 30,487,339 26,417,322
Provision for taxes on income 11,707,000 10,012,000
Net income $ 18,780,339 $ 16,405,322
Net income per common share
(Note 7) $0.33 $0.29
Dividends per common share $0.11 $0.10
Weighted average number of
common shares outstanding (Note 7) 56,833,405 56,717,050
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Nine Months Ended
May 31, May 31,
1996 1995
<S> <C> <C>
Net sales $1,272,380,057 $1,157,055,574
Costs and expenses
Cost of sales 851,194,529 765,976,744
Selling, general and
administrative expenses (Note 6) 340,953,676 311,320,932
1,192,148,205 1,077,297,676
Income before provision for
taxes on income 80,231,852 79,757,898
Provision for taxes on income 31,007,000 30,726,000
Net income $ 49,224,852 $ 49,031,898
Net income per common share (Note 7) $0.87 $0.87
Dividends per common share $0.32 $0.285
Weighted average number of
common shares outstanding (Note 7) 56,805,405 56,669,293
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
May 31, May 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $49,224,852 $49,031,898
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 18,230,932 16,506,746
Deferred income taxes (1,525,001) (1,377,000)
Loss (Gain) on disposition of property
and equipment 290,477 (2,030)
Changes in operating assets and liabilities:
Inventories 10,517,721 5,523,959
Income tax refund receivable - 4,569,686
Prepayments and other current assets (411,626) 151,825
Other assets 1,275,659 687,068
Accounts payable and accrued
liabilities (14,992,144) (5,773,480)
Income taxes payable 2,812,480 3,888,061
65,423,350 73,206,733
Cash flows from investing activities:
Capital expenditures (37,679,477) (21,783,944)
Proceeds from dispositions of
property and equipment 1,208,297 617,839
(36,471,180) (21,166,105)
Cash flows from financing activities:
Net notes payable repayments - (12,300,000)
Exercise of employee stock options 1,002,608 1,043,386
Payment of dividends (17,605,348) (15,300,551)
(16,602,740) (26,557,165)
Net change in cash and cash equivalents 12,349,430 25,483,463
Cash and cash equivalents at beginning
of period 8,852,631 9,882,533
Cash and cash equivalents at end of period $21,202,061 $35,365,996
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 505,389 $ 545,826
Income taxes 29,511,105 23,301,112
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of May
31, 1996, and the results of operations for the three and nine
months ended May 31, 1996, and 1995, and the cash flows for the
nine months ended May 31, 1996, and 1995.
The results of operations for the nine month period ended May
31, 1996, are not necessarily indicative of the results to be
expected for the full year.
2. The Company considers all highly liquid investments with a
maturity of three months or less to be "cash equivalents."
3. The Company has two unsecured bank lines of credit for
short-term revolving borrowings of up to $50,000,000 each, or
$100,000,000 of total borrowing capacity. The lines of credit
expire on March 31, 1999 and March 30, 1997, respectively.
Borrowings under these lines of credit are at a variable
interest rate based on short-term market interest rates. The
Company may convert up to $50,000,000 of one of the lines of
credit into either a five or seven year term loan at the bank's
variable prime rate.
4. The Internal Revenue Service has examined the Company's
consolidated 1993 and 1994 federal income tax returns and has
rendered an initial report and assessment as a result of the
examination. The Company has appealed the findings of the
report. Although the ultimate outcome of this matter cannot
presently be determined, the Company believes that any impact
on its financial statements will not be material.
5. The Company's non-qualified stock option plan provides for the
granting of options to key employees to purchase shares of
common stock at prices not less than the fair market value on
the date of grant. Options expire five years from the date of
grant and are exercisable to the extent of 40% after the second
anniversary of the grant and an additional 30% at each of the
following two anniversary dates on a cumulative basis.
<PAGE>
<TABLE>
The following is a summary of transactions under the plan during the nine
months ended May 31, 1996 and 1995.
<CAPTION>
Nine Months Ended
May 31, 1996 May 31, 1995
Number of Number of
shares Option price shares Option price
under option per share under option per share
<S> <C> <C> <C> <C>
Outstanding-beginning 1,114,960 $ 5.88-$21.25 951,290 $ 5.13-$21.25
Granted 80,050 $11.50-$18.75 388,550 $10.25-$13.00
Exercised (94,020) $ 5.88-$17.25 (132,080) $ 5.13-$ 6.13
Canceled (91,890) (56,440)
Outstanding-ending 1,009,100 $10.25-$21.25 1,151,320 $ 5.88-$21.25
At May 31, 1996, options to purchase 434,725 shares were exercisable at
prices ranging from $12.38 to $21.25 per share, and at May 31, 1995,
options to purchase 389,615 shares were exercisable at prices ranging
from $5.88 to $21.25 per share.
</TABLE>
6. Interest expense for the nine months ended May 31, 1996, was
$561,695 and for the nine months ended May 31, 1995, was $478,136.
7. Net income per common share is based on the weighted average number
of shares outstanding during each reporting period. Exercise of
outstanding stock options would have no material dilutive effect on
net income per common share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's working capital increased by $15,586,411, from
$264,671,854 at August 31, 1995 to $280,258,265 at May 31, 1996. The
principal source of new working capital continued to be the reinvestment
of a significant portion of the earnings of the Company. Changes in
working capital components during the first nine months of fiscal 1996
and 1995 included decreases in both merchandise inventories and accounts
payable and accrued liabilities. The Company's levels of purchases of
apparel merchandise take into consideration possible continued weakness
in apparel sales.
Capital expenditures for the nine months ended May 31, 1996, were
approximately $37,679,000, and are currently planned to be approximately
$48 million for fiscal 1996. The majority of capital expenditures for
fiscal 1996 is related to the Company's retail store expansion program
and to the expansion of the West Memphis, Arkansas distribution center
which is planned to be completed in the fourth quarter of fiscal 1996. In
fiscal 1996, the Company currently plans to open approximately 225 stores
and close approximately 55 stores for a net addition of approximately 170
stores, compared with the opening of 213 stores and closing of 12 stores
for a net addition of 201 stores in fiscal 1995. All stores opening in
fiscal 1996 have a new interior layout featuring wider aisles, lower
fixtures and updated signage. In addition to all new stores opening in
this layout, twelve existing stores were remodeled last fall and the
Company continues to be pleased with the customer response. Up to
approximately 250 of the Company's existing stores are expected to be
remodeled or refurbished with some or all of the features of the new
layout by the end of the fiscal year on August 31, 1996. The Company
occupies most of its stores under operating leases. New store opening,
closing, remodeling and refurbishing plans, as well as overall capital
expenditure plans, are continually reviewed and are subject to change
depending on developments in the economy and other factors.
<PAGE>
RESULTS OF OPERATIONS
NET SALES
Net sales increased 12.7% in the quarter ended May 31, 1996, as
compared with the quarter ended May 31, 1995, and increased 10.0% in the
nine month period ended May 31, 1996, as compared with the nine month
period ended May 31, 1995. The increases were attributable to increased
sales in existing stores and sales from new stores opened as part of the
Company's store expansion program. Sales in existing stores increased
5.8% in the quarter ended May 31, 1996, as compared with the same period
ended May 31, 1995, and increased 2.7% in the nine month period ended
May 31, 1996, as compared to the nine month period ended May 31, 1995.
Sales of hardlines merchandise continued to be stronger than sales of
softlines (primarily apparel and shoes). Hardlines as a percentage of
total sales increased to approximately 63% in the third quarter of
fiscal 1996 compared to approximately 60% in the third quarter of fiscal
1995, and increased to approximately 64% in the first nine months of
fiscal 1996 compared to approximately 61% in the first nine months of
fiscal 1995. While the Company is generally pleased with customer
response to its everyday low price strategy in hardlines, the response in
softlines has been disappointing. The Company intends to continue to
place more emphasis on lower priced basic apparel and on closeout and
other opportunistic purchases of apparel that offer values to the
Company's low and low-middle income customer base. Also, the new interior
store layout referred to in "Financial Condition" above offers a more
efficient fixture layout for softlines, allowing the Company to reduce the
space allocated to softlines without appreciably reducing the selection of
apparel. This space is now available for promotional and seasonal goods
as well as new hardlines categories of merchandise that are being tested.
The average number of stores open during the first nine months of
fiscal 1996 was 7.6% more than during the first nine months of fiscal
1995. The Company had 2,523 stores in operation at May 31, 1996, as
compared with 2,374 stores in operation at May 31, 1995, representing an
increase of approximately 6.3%.
COST OF SALES
Cost of sales increased 14.2% in the quarter ended May 31, 1996, as
compared with the quarter ended May 31, 1995, and increased 11.1% in the
nine months ended May 31, 1996, as compared to the nine months ended
May 31, 1995. These increases primarily reflected the additional sales
volume between years. Cost of sales, as a percentage of net sales, was
66.3% in the quarter ended May 31, 1996, compared with 65.4% in the
quarter ended May 31, 1995, and was 66.9% in the nine months ended May 31,
1996, compared with 66.2% in the nine months ended May 31, 1995. The
increase in the cost of sales percentage for the three months ended
May 31, 1996, was primarily attributable to additional promotional
markdowns taken on selected items in the Company's advertising circulars
in order to stimulate customer traffic, and also to additional markdowns
on softlines merchandise. The increase in the cost of sales percentage
for the nine months ended May 31, 1996, was due primarily to the <PAGE>
continuing effect of the merchandise price reductions that were taken as
part of the expansion of the price reduction program and shift toward an
everyday low price strategy. The shift in the sales mix more toward
hardlines merchandise referred to in "Net sales" above also contributed to
the increases in the cost of sales percentages, as hardlines typically
carry a lower gross margin than softlines.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 8.3% in the
quarter ended May 31, 1996, as compared with the quarter ended May 31,
1995, and increased 9.5% in the nine months ended May 31, 1996, as
compared with the nine months ended May 31, 1995. The increases in these
expenses were due primarily to additional costs arising from the
continued growth in the number of stores in operation. Selling, general
and administrative expenses, as a percentage of net sales, were 26.5% in
the quarter ended May 31, 1996, as compared with 27.6% in the quarter
ended May 31, 1995, and were 26.8% in the nine months ended May 31, 1996,
as compared with 26.9% in the nine months ended May 31, 1995. The
Company continues to control store labor costs and other operating costs.
The control of such costs and the 5.8% increase in existing store sales
contributed to the decrease in the percentage for the quarter ended
May 31, 1996. The decrease in the percentage for the nine months ended
May 31, 1996, was primarily due to the factors described above as well as
a decrease in the advertising expense percentage as the Company eliminated
an advertising circular in the second quarter of fiscal 1996 that had been
distributed in the last week of December 1994 and the first week of
January 1995.
The Company is monitoring legislative initiatives to increase the
federal minimum wage. An increase in the minimum wage will adversely
impact the Company's store labor costs.
PROVISION FOR TAXES ON INCOME
The provision for taxes on income for the quarter ended May 31, 1996,
increased 16.9%, as compared with the quarter ended May 31, 1995, and
increased 0.9% in the nine months ended May 31, 1996, as compared with the
nine months ended May 31, 1995. The variance between the periods is
primarily due to the increase in income before the provision for income
taxes. The effective tax rate was 38.4% for the quarter ended May 31,
1996, as compared to 37.9% for the quarter ended May 31, 1995, and was
38.6% for the nine months ended May 31, 1996, as compared to 38.5% for the
nine months ended May 31, 1995.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed herewith:
10 Credit Agreement dated as of March 31, 1996, between the
Company and Nationsbank, N.A.
11 Statements Re: Computations of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FAMILY DOLLAR STORES, INC.
(Registrant)
Date: July 3, 1996 JOHN D. REIER
JOHN D. REIER
(President)
Date: July 3, 1996 C. MARTIN SOWERS
C. MARTIN SOWERS
(Senior Vice President-Finance)
Date: July 3, 1995 KENNETH T. SMITH
KENNETH T. SMITH
(Vice President-Controller
Principal Accounting Officer)
<TABLE>
<CAPTION>
EXHIBIT 11
PAGE 1 OF 2
FAMILY DOLLAR STORES, INC.
STATEMENT RE COMPUTATIONS OF PER SHARE EARNINGS
THREE MONTHS ENDED THREE MONTHS ENDED
MAY 31, 1996 MAY 31, 1995
PRIMARY FULLY DILUTED PRIMARY FULLY
DILUTED
AS PRESENTED
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING FOR
THE THREE MONTHS ENDED 56,833,405 56,833,405 56,717,050 56,717,050
NET INCOME $18,780,339 $18,780,339 $16,405,322 $16,405,322
EARNINGS PER SHARE $ .33 $ .33 $ .29 $ .29
PRO FORMA DILUTION IMPACT OF COMMON STOCK EQUIVALENTS
ADDITIONAL WEIGHTED AVERAGE
SHARES FROM ASSUMED EXERCISE AT
THE BEGINNING OF THE YEAR OF
DILUTIVE STOCK OPTIONS 397,840 788,200 189,733 189,733
WEIGHTED AVERAGE SHARES ASSUMED
REPURCHASED FROM ASSUMED PROCEEDS
OF EXERCISES USING TREASURY STOCK
METHOD (AVERAGE MARKET PRICE FOR
PRIMARY AND, IF GREATER, ENDING
MARKET PRICE FOR FULLY DILUTED) (355,131) (721,723) (156,728) (156,728)
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
NET PRO FORMA COMMON STOCK
EQUIVALENT INCREMENTAL SHARES 42,709 66,477 33,005 33,005
PERCENTAGE DILUTION FROM PRO FORMA
COMMON STOCK EQUIVALENT
INCREMENTAL SHARES 0.08% 0.12% 0.06% 0.06%
TOTAL COMMON STOCK AND COMMON
STOCK EQUIVALENTS 56,876,114 56,899,882 56,750,055 56,750,055
NET INCOME $18,780,339 $18,780,339 $16,405,322 $16,405,322
PRO FORMA EARNINGS PER SHARE (INCLUDING
DILUTIVE COMMON STOCK EQUIVALENTS $.33 $.33 $.29 $.29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
PAGE 2 OF 2
FAMILY DOLLAR STORES, INC.
STATEMENT RE COMPUTATIONS OF PER SHARE EARNINGS
NINE MONTHS ENDED NINE MONTHS ENDED
AS PRESENTED MAY 31, 1996 MAY 31, 1995
PRIMARY FULLY DILUTED PRIMARY FULLY DILUTED
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING FOR THE
NINE MONTHS ENDED 56,805,405 56,805,405 56,669,293 56,669,293
NET INCOME $49,224,852 $49,224,852 $49,031,898 $49,031,898
EARNINGS PER SHARE
$ .87 $ .87 $ .87 $ .87
PRO FORMA DILUTION IMPACT OF COMMON STOCK EQUIVALENTS
ADDITIONAL WEIGHTED AVERAGE SHARES FROM
ASSUMED EXERCISE AT THE BEGINNING
OF THE YEAR OF DILUTIVE STOCK OPTIONS 394,612 785,039 216,396 216,396
WEIGHTED AVERAGE SHARES ASSUMED REPURCHASED FROM
ASSUMED PROCEEDS OF EXERCISES USING TREASURY STOCK
METHOD (AVERAGE MARKET PRICE FOR PRIMARY AND, IF
GREATER, ENDING MARKET PRICE FOR FULLY DILULTED) (343,534) (711,790) (165,348) (164,796)
NET PRO FORMA COMMON STOCK
EQUIVALENT INCREMENTAL SHARES 51,078 73,249 51,048 51,600
PERCENTAGE DILUTION FROM PRO FORMA COMMON
STOCK EQUIVALENT INCREMENTAL SHARES 0.09% 0.13% 0.09% 0.09%
TOTAL COMMON STOCK AND COMMON
STOCK EQUIVALENTS 56,856,483 56,878,654 56,720,341 56,720,893
NET INCOME $49,224,852 $49,224,852 $49,031,898 $49,031,898
PRO FORMA EARNINGS PER SHARE (INCLUDING DILUTIVE
COMMON STOCK EQUIVALENTS) $ .87 $ .87 $ .87 $ .87
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF FAMILY DOLLAR STORES, INC.
AND SUBSIDIARIES FOR THE PERIOD ENDED MAY 31, 1996, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000034408
<NAME> FAMILY DOLLAR STORES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<EXCHANGE-RATE> 1
<CASH> 21,202,061
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 432,927,727
<CURRENT-ASSETS> 479,014,044
<PP&E> 293,051,453
<DEPRECIATION> 118,461,458
<TOTAL-ASSETS> 656,892,215
<CURRENT-LIABILITIES> 198,755,779
<BONDS> 0
0
0
<COMMON> 6,029,068
<OTHER-SE> 433,766,043
<TOTAL-LIABILITY-AND-EQUITY> 656,892,215
<SALES> 1,272,380,057
<TOTAL-REVENUES> 1,272,380,057
<CGS> 851,194,529
<TOTAL-COSTS> 1,192,148,205
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 80,231,852
<INCOME-TAX> 31,007,000
<INCOME-CONTINUING> 49,224,852
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,224,852
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
CREDIT AGREEMENT
Dated as of March 31, 1996
Between
FAMILY DOLLAR STORES, INC.
as
Borrower
and
NATIONSBANK, N.A.
as Lender
U.S.$100,000,000
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it
is attached but is for convenience of reference.
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Accounting Terms and Determinations 9
SECTION 1.03. Classes and Types of Loans 9
ARTICLE II
LOANS
SECTION 2.01. Commitments 10
SECTION 2.02. Notes 10
SECTION 2.03. Repayment of Loans 11
SECTION 2.04. Interest 12
SECTION 2.05. Borrowing Procedure 13
SECTION 2.06. Prepayments, Conversions, and
Continuations of Loans 13
SECTION 2.07. Minimum Amounts 13
SECTION 2.08. Certain Notices 13
SECTION 2.09. Use of Proceeds 14
SECTION 2.10. Facility Fee 14
SECTION 2.11. Computation 14
SECTION 2.12. Reduction or Termination of Commitments 15
SECTION 2.13. Payments 15
SECTION 2.14. Extension of Tranche A Termination Date 15
SECTION 2.15. Extension of Tranche B Termination Date 15
SECTION 2.16. Lending Office 15
ARTICLE III
CHANGE IN CIRCUMSTANCES
SECTION 3.01. Increased Cost and Reduced Return 15
SECTION 3.02. Limitation on Eurodollar Loans 17
SECTION 3.03. Illegality 17
SECTION 3.04. Compensation 17
ARTICLE IV
CONDITIONS
SECTION 4.01. Initial Tranche A Loan or Tranche B Loan 18
SECTION 4.02. Each Tranche A Loan or Tranche B Loan 18
SECTION 4.03. Term Loan 19
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Existence 20
SECTION 5.02. Financial Statements 20
SECTION 5.03. Authorization; No Breach 20
SECTION 5.04. Litigation 20
SECTION 5.05. Enforceability 20
SECTION 5.06. Approvals 21
SECTION 5.07. Compliance with Laws 21
<PAGE>
ARTICLE VI
COVENANTS
SECTION 6.01. Information 21
SECTION 6.02. Fundamental Obligations 22
SECTION 6.03. Current Ratio 22
SECTION 6.04. Ratio of Consolidated Net Worth to
Consolidated Total Liabilities 22
SECTION 6.05. Consolidated Tangible Net Worth 22
SECTION 6.06. Consolidated Capital Expenditures 23
SECTION 6.07. Consolidated Fixed Charges Coverage Ratio 24
SECTION 6.08. Disposition of Property 24
SECTION 6.09. Mergers, Consolidations, Etc. 24
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default 25
SECTION 7.02. Remedies 27
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Right of Set-Off 27
SECTION 8.02. No Waiver; Cumulative Remedies 28
SECTION 8.03. Successors and Assigns 28
SECTION 8.04. Amendments 28
SECTION 8.05. Notices 28
SECTION 8.06. Counterparts 28
SECTION 8.07. Severability 28
SECTION 8.08. Controlling Agreement 28
SECTION 8.09. Survival 29
SECTION 8. 10. Governing Law 29
SECTION 8.11. WAIVER OF JURY TRIAL 29
SECTION 8.12. ENTIRE AGREEMENT 29
SECTION 8.13. Confidentiality 29
SECTION 8.14. Restatement 30
Exhibit A - Tranche A Note
Exhibit B - Tranche B Note
Exhibit C - Tenn Note
Exhibit D - Guaranty
CREDIT AGREEMENT
CREDIT AGREEMENT (the "Agreement") dated as of March 31,
1996, between FAMILY DOLLAR STORES, INC., a Delaware corporation
(the "Borrower"), and NATIONSBANK, N.A., a national banking
association (the "Bank").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
<PAGE>
SECTION 1.01. Definitions. As used in this Agreement, the
following terms have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the
terms defined):
"Adjusted CD Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Bank to be equal to the sum of (a) the CD Rate
for such day divided by 1 minus the Domestic Reserve Percentage
plus (b) the Assessment Rate.
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan
for any Interest Period therefor, the rate per anum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined by
the Bank to be equal to the quotient obtained by dividing (a) the
Eurodollar Rate for such Eurodollar Loan for such Interest Period
by (b) 1 minus the Eurodollar Reserve Percentage for such
Eurodollar Loan for such Interest Period.
"Affiliate" means, with respect to any Person, (i) any
Person that directly, or indirectly through one or more
intermediaries, controls such Person (a "Controlling Person") or
(ii) any Person that is controlled by or under common control
with a Controlling Person. As used herein, the term "control"
means possession, directly or indirectly, of the power to direct
or cause the direction of the management of a Person by voting
securities, by contract, or otherwise.
"Applicable Lending Office" means, for each Type of Loan,
the "Lending Office" of the Bank (or of an Affiliate of the Bank)
designated for such Type of Loan on the signature pages hereof or
such other office of the Bank (or of an Affiliate of the Bank) as
the Bank may from time to time specify to the Borrower as the
office by which its Loans of such Type are to be made and
maintained.
"Applicable Margin" means .275%.
"Assessment Rate" means, for any day, the annual assessment
rate (rounded upwards, if necessary, to the nearest 1/100 of 1%)
which is payable by the Bank to the Federal Deposit Insurance
Corporation (or any successor) for deposit insurance for Dollar
time deposits with the Bank at its Principal Office as determined
by the Bank. The Adjusted CD Rate shall be adjusted automatically
on and as of the effective date of any change in the Assessment
Rate.
"Business Day" means any day except a Saturday, Sunday, or
other day on which banks in Charlotte, North Carolina, are
authorized by law to close and, if the applicable Business Day
relates to Eurodollar Loans, on which commercial banks in London
are open for international business (including dealings in Dollar
deposits in the London interbank market).
<PAGE>
"CD Loans" means Tranche A Loans and Tranche B Loans that
bear interest at rates based upon the Adjusted CD Rate.
"CD Rate" means, for any day, the rate per annum equal to
the interest rate for certificates of deposit in the secondary
market with maturities of three (3) months as published for such
day in Federal Reserve Statistical Release H.15 (519) or any
successor publication, or if such day is not a Business Day, the
rate published for the preceding Business Day.
"Class" shall have the meaning specified in Section 1.03.
"Commitments" means the Tranche A Commitment and the Tranche
B Commitment.
"Consolidated Capital Expenditures" means, for any period,
all expenditures (including the aggregate amount of capital lease
obligations payable during such period) made by the Borrower or
any of its Subsidiaries to acquire or construct fixed assets,
plant, and equipment during such period that are required to be
capitalized in accordance with GAAP.
"Consolidated Current Assets" means, at any time, the total
assets of the Borrower and its Subsidiaries which would be shown
as current assets on a consolidated balance sheet of the Borrower
and its Subsidiaries prepared in accordance with GAAP.
"Consolidated Current Liabilities" means, at any time, the
total liabilities of the Borrower and its Subsidiaries which
would be shown as current liabilities on a consolidated balance
sheet of the Borrower and its Subsidiaries prepared in accordance
with GAAP.
"Consolidated Income Available for Fixed Charges" means,
with respect to any period, Consolidated Net Income for such
period plus all amounts deducted in the computation thereof on
account of (a) Fixed Charges, and (b) taxes.
"Consolidated Net Income" means, with respect to any period,
the net income (or loss) of the Borrower and its Subsidiaries for
such period (taken as a cumulative whole), as determined in
accordance with GAAP, after eliminating all offsetting debits and
credits between the Borrower and its Subsidiaries and all other
items required to be eliminated in the course of the preparation
of consolidated financial statements of the Borrower and its
Subsidiaries in accordance with GAAP.
"Consolidated Net Worth" means, at any time,
(a) the total assets o the Borrower and its Subsidiaries
which would be shown as assets on a consolidated balance sheet of
the Borrower and its Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and
surplus of Subsidiaries, minus
<PAGE>
(b) the total liabilities of the Borrower and its
Subsidiaries which would be shown as liabilities on a
consolidated balance sheet of the Borrower and its Subsidiaries
as of such time prepared in accordance with GAAP.
"Consolidated Tangible Net Worth" means, at any time,
(a) the total assets of the Borrower and its Subsidiaries
which would be shown as assets on a consolidated balance sheet of
the Borrower and its Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and
surplus of Subsidiaries, minus
(b) the total liabilities of the Borrower and its
Subsidiaries which would be shown as liabilities on a
consolidated balance sheet of the Borrower and its Subsidiaries
as of such time prepared in accordance with GAAP, minus
(c) the net book value of all assets of the Borrower and
its Subsidiaries which would be shown as intangible assets on a
consolidated balance sheet of the Borrower and its Subsidiaries
as of such time prepared in accordance with GAAP.
"Consolidated Total Liabilities" means, at any time, the
total liabilities of the Borrower and its Subsidiaries which
would be shown as liabilities on a consolidated balance sheet of
the Borrower and its Subsidiaries prepared in accordance with
GAAP at such time.
"Continue", "Continuation", and "Continued" shall refer to a
continuation pursuant to Section 2.06 of a Eurodollar Loan as a
Eurodollar Loan from one Interest Period to the next Interest
Period.
"Convert", "Conversion", and "Converted" shall refer to the
conversion pursuant to Section 2.06 or Article III of one Type of
Tranche A Loan or Tranche B Loan into another Type of Tranche A
Loan or Tranche B Loan, as the case may be.
<PAGE>
"Debt" means as to any Person at any time (without
duplication): (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds,
notes, debentures, or other similar instruments, (c) all
obligations of such Person to pay the deferred purchase price of
Property or services, except trade accounts payable of such
Person arising in the ordinary course of business that are not
past due by more than ninety (90) days, (d) all capital lease
obligations of such Person, (e) all Debt or other obligations of
others Guaranteed by such Person, (f) all obligations secured by
a Lien existing on Property owned by such Person whether or not
the obligations secured thereby have been assumed by such Person
or are non-recourse to the credit of such Person, (g) all
reimbursement obligations of such Person (whether contingent or
otherwise) in respect of letters of credit, bankers' acceptances,
surety or other bonds and similar instruments, (h) all
obligations of such Person to redeem or retire shares of capital
stock or other equity securities of such Person, and (i) all
obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements, commodity
purchase or option agreements, or other interest or exchange rate
or price hedging agreements.
"Debtor Relief Laws" means the Bankruptcy Code of the United
States of America and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments,
or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally.
"Default" means an Event of Default or the occurrence of an
event or condition that with notice or lapse of time or both
would become an Event of Default.
"Default Rate" means, with respect to any principal of any
Loan or any other amount payable by the Borrower under this
Agreement or any other Loan Document that is not paid when due
(whether at stated maturity, by acceleration, or otherwise), a
rate per annum during the period from and including the due date
to but excluding the date on which such amount is paid in full
equal to two percent (2%) plus the rate of interest that would
otherwise be applicable pursuant to this Agreement.
"Dollars" and "$" mean lawful money of the United States of
America.
<PAGE>
"Domestic Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the actual
reserve requirement (including, without limitation any basic,
supplemental, or emergency reserves) for the Bank in respect of
certificates of deposit having a maturity of three (3) months and
in an amount of $100,000 or more. In the event that the
foregoing reserve requirement is required by law to be determined
on the basis of the aggregate of such deposits of the Bank, the
Bank may use any reasonable allocation or attribution methods in
determining the Domestic Reserve Percentage. The Adjusted CD
Rate shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Equity Issuance" means (a) any issuance or sale by the
Borrower or any of its Subsidiaries after the date hereof of (i)
any capital stock of such issuing or selling Person, (ii) any
warrants or stock options exercisable in respect of any capital
stock of such issuing or selling Person or (iii) any other
security or instrument representing an equity interest (or other
right to obtain an equity interest) in the issuing or selling
Person, or (b) the receipt by the Borrower or any of its
Subsidiaries after the date hereof of any capital contribution
received (whether or not evidenced by any equity security issued
by the recipient of such contribution); provided, however, that
the term "Equity Issuance" shall not include (x) any such
issuance or sale by any Subsidiary of the Borrower to the
Borrower or any Wholly-Owned Subsidiary of the Borrower or (y)
any capital contribution by the Borrower or any Wholly-Owned
Subsidiary of the Borrower to any Subsidiary of the Borrower.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary, and all
members of a controlled group of corporations and all trades and
businesses (whether or not incorporated) under common control
which, together with the Borrower or any Subsidiary, are treated
as a single employer under Section 414 of the Internal Revenue
Code.
"Eurodollar Loans" means Tranche A Loans and Tranche B Loans
that bear interest at rates based upon the Adjusted Eurodollar
Rate.
<PAGE>
"Eurodollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the actual
reserve requirement for the Bank in respect of "Eurocurrency
Liabilities" which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined or any category
of extensions of credit or other assets which includes loans by a
non-United States office of the Bank to United States residents.
In the event that the foregoing reserve requirement is required
by law to be determined on the basis of the aggregate of such
Eurocurrency Liabilities, extensions of credit, or other assets
of the Bank, the Bank may use any reasonable allocation or
attribution methods in determining the Eurodollar Reserve
Percentage. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in
the Eurodollar Reserve Percentage.
"Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum appearing on
Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest
Period. If for any reason such rate is not available, the term
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum appearing on Reuters
Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for
a term comparable to such Interest Period; provided, however, if
more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"Event of Default" has the meaning specified in Section
7.01.
"Existing Credit Agreement" means that certain Amended and
Restated Revolving/Term Loan Agreement dated as of February 28,
1993, between the Borrower and the Bank.
"Family Member" means, with respect to Mr. Leon Levine, his
spouse and/or lineal descendants and any trusts created for the
benefit of his spouse and/or lineal descendants.
"Financial Statements" means the consolidated financial
statements of the Borrower and the Subsidiaries dated February
29, 1996.
"First Anniversary" means, with respect to any Term Loan,
the date of the first anniversary of the Term Loan Conversion
Date for such Loan.
<PAGE>
"Fixed Charm" means, with respect to any period, the sum of
(a) Interest Charges for such period, (b) Lease Rentals for such
period, and (c) the amount of the current portion of long term
debt of the Borrower and its Subsidiaries as of the last day of
such period multiplied by two (2).
"GAAP" means at any time generally accepted accounting
principles as then in affect in the United States, applied on a
basis consistent with the most recent audited consolidated
financial statements of the Borrower and its Subsidiaries
theretofore delivered to the Bank.
"Governmental Authority" means any nation or government, any
state or political subdivision thereof, any central bank (or
similar monetary or regulatory authority), and any entity
exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government.
"Guarantee" by any Person means any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing
any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation direct
or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds from the purchase or
payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities, or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or
(b) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment
thereof or to protect the obligee against loss in respect thereof
(in whole or in part), provided that the term Guarantee shall not
include endorsements for collection or deposit in the ordinary
course of business.
"Guarantors" means Family Dollar Services, Inc., a North
Carolina corporation, Family Dollar Operations, Inc., a North
Carolina corporation, and Family Dollar Trucking, Inc., a North
Carolina corporation.
"Guaranty" means the Guaranty of the Guarantors in favor of
the Bank, in substantially the form of Exhibit D, as the same may
be amended, modified, or supplemented.
<PAGE>
"Interest Charges" means, with respect to any period, the
sum (without duplication) of the following (in each case
eliminating all offsetting debits and credits between the
Borrower and its Subsidiaries and all other items required to be
eliminated in the preparation of the consolidated financial
statements of the Borrower and its Subsidiaries in accordance
with GAAP): (a) all interest in respect of debt of Borrower and
its Subsidiaries (including imputed interest on capital lease
obligations) deducted in determining Consolidated Net Income for
such period, together with all interest capitalized or deferred
during such period and not deducted in determining Consolidated
Net Income for such period, and (b) all debt discount and expense
amortized or required to be amortized in the determination of
Consolidated Net Income for such period.
"Interest Period" means with respect to any Eurodollar Loan,
each period commencing on the date such Loan is made or Converted
from a CD Loan or the last day of the next preceding Interest
Period with respect to such Loan, and ending on the numerically
corresponding day in the first calendar month thereafter; except
that each such Interest Period which commences on the last
Business Day of a calendar month (or on any day for which there
is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month. Notwithstanding the
foregoing: (a) each Interest Period which would otherwise end on
a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such succeeding Business Day
falls in the next succeeding calendar month, on the next
preceding Business Day); (b) any Interest Period which would
otherwise extend beyond the Maturity Date shall end on the
Maturity Date; and (c) no Interest Period for any Eurodollar Loan
shall have a duration of less than 1 month, and if the Interest
Period for any Eurodollar Loan would otherwise be a shorter
period, such Loan shall not be available hereunder.
"Internal Revenue Code" means the Internal Revenue Code of
1980, as amended, or any successor statute.
"Lease Rentals" means, with respect to any period, the sum
of the rental and other obligations required to be paid during
such period by the Borrower or any Subsidiary as lessee under all
leases of real or personal Property that would be treated as
lease or rental expense under GAAP.
"Loan Documents" means this Agreement, the Notes, and the
Guaranty, as the same may be amended, modified, renewed,
extended, or supplemented.
"Loan Party" means the Borrower, each Guarantor, or any
other Person that guaranties or secures any or all of the
Borrower's obligations under the Loan Documents.
<PAGE>
"Loans" means Tranche A Loans, Tranche B Loans, and the Term
Loans.
"Material Adverse Effect" means a material adverse effect on
(a) financial condition of the Borrower and the Subsidiaries
taken as a whole, (b) the ability of any Loan Party to pay and
perform its obligations under any Loan Document, or (c) the
validity or enforceability of any Loan Document or the rights and
remedies of the Bank thereunder.
"Material Subsidiaries" means, at any time, Subsidiaries of
the Borrower the total assets of which exceed $10,000,000.
"Material Subsidiary" means, at any time, any Subsidiary the
total assets of which exceed $10,000,000.
"Maturity Date" means (i) in the case of Tranche A Loans,
the Tranche A Termination Date, (ii) in the case of Tranche B
Loans, the Tranche B Termination Date, and (iii) in the case of
any Term Loan, the date that the last installment of principal of
such Loan is payable in accordance with Section 2.03(c).
"Multiemployer Plan" means, at any time, an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to
which any member of the ERISA Group is then making or accruing an
obligation to make contributions or has within the preceding five
plan years made contributions, including for these purposes any
Person that has ceased to be a member of the ERISA Group during
such five year period.
"Notes" means the Tranche A Note, the Tranche B Note, and
the Term Notes.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means any individual, corporation, company, joint
venture, association, partnership, trust, unincorporated
organization, Governmental Authority, or other entity.
"Prime Rate" means the per annum rate of interest
established from time to time by the Bank as its prime rate,
which rate may not be the lowest rate of interest charged by the
Bank to its customers. Any change in the Prime Rate shall be
effective on the date of such change.
"Principal Office" means the office of the Bank located at
100 N. Tryon Street, Charlotte, North Carolina 28255.
"Property" means property of all kinds, real, personal, or
mixed, tangible, or intangible (including, without limitation,
all rights relating thereto), whether owned or acquired after the
date of this Agreement.
<PAGE>
"Quarterly Date" means the last day of each March, June,
September, and December of each year, the first of which shall be
the first such day after the date of this Agreement.
"Second Anniversary" means, with respect to any Term Loan,
the date of the second anniversary of the Tenn Loan Conversion
Date for such Loan.
"Subsidiary" means, any corporation or other entity of which
securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other
Persons performing similar functions are at the time directly or
indirectly owned by the Borrower.
"Term Loan" has the meaning specified in Section 2.01(c).
"Term Loan Conversion Date" has the meaning specified in
Section 2.01(c).
"Term Note" means any promissory note provided for in
Section 2.02(c) and any and all extensions, renewals,
modifications, and restatements thereof.
"Tranche A Commitment" means the obligation of the Bank to
make Tranche A Loans hereunder in an aggregate principal amount
up to but not exceeding Fifty Million Dollars ($50,000,000.00),
as the same may be reduced pursuant to Sections 2.01(c) and 2.12
or terminated pursuant to Section 2.12.
"Tranche A Loan" has the meaning specified in Section
2.01(a).
"Tranche A Note" means the promissory note provided for in
Section 2.02(a) and any and all extensions, renewals,
modifications, and restatements thereof.
"Tranche A Termination Date" means March 31, 1999, or such
earlier date as the Tranche A Commitment is terminated pursuant
to this Agreement.
"Tranche B Commitment" means the obligation of the Bank to
make Tranche B Loans hereunder in an aggregate principal amount
up to but not exceeding Fifty Million Dollars ($50,000,000.00),
as the same may be reduced or terminated pursuant to Section
2.12.
"Tranche B Loan" has the meaning specified in Section
2.01(b).
"Tranche B Note" means the promissory note as referred to in
Section 2.02(b) and any and all extensions, renewals,
modifications, and restatements thereof.
"Tranche B Termination Date" means March 30, 1997, or such
earlier date as the Tranche B Commitment is terminated pursuant
to this Agreement.
<PAGE>
"Type" shall have the meaning specified in Section 1.03.
"Wholly Owned Subsidiary" means any Subsidiary all of the
shares of capital stock or other ownership interests of which
(except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be
delivered hereunder shall be prepared in accordance with GAAP as
in effect from time to time; provided that, if the Borrower
notifies the Bank that the Borrower wishes to amend any covenant
in Article VI to eliminate the effect of any change in GAAP on
the operation of such covenant (or if the Bank notifies the
Borrower that the Bank wishes to amend any such covenant for such
purpose), then the Borrower's compliance with such covenant shall
be determined on the basis of GAAP as in effect immediately
before the relevant change in GAAP became effective, until either
such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Bank.
SECTION 1.03. Classes and Types of Loans. Loans hereunder
are distinguished by "Class" and "Type". The "Class" of a Loan
(or of a Commitment to make such a Loan) refers to the
determination whether such Loan is a Tranche A Loan, a Tranche B
Loan, or a Tenn Loan, each of which constitutes a Class. The
"Type" of a Tranche A Loan or a Tranche B Loan refers to the
determination whether such Loan is a CD Loan or a Eurodollar
Loan.
ARTICLE II
LOANS
SECTION 2.01. Commitments.
(a) Subject to the terms and conditions of this Agreement,
the Bank agrees to make one or more loans (the "Tranche A Loans")
to the Borrower from time to time from and including the date
hereof to but excluding the Tranche A Termination Date, provided
that the aggregate principal amount of the Tranche A Loans at any
time outstanding shall not exceed the amount of the Tranche A
Commitment. Subject to the foregoing limitations, and the other
terms and provisions of this Agreement, the Borrower may borrow,
repay, and reborrow hereunder the amount of the Tranche A
Commitment by means of CD Loans and Eurodollar Loans.
<PAGE>
(b) Subject to the terms and conditions of this Agreement,
the Bank agrees to make one or more loans (the "Tranche B Loans")
to the Borrower from time to time from and including the date
hereof to but excluding the Tranche B Termination Date, provided
that the aggregate principal amount of the Tranche B Loans at any
time outstanding shall not exceed the amount of the Tranche B
Commitment. Subject to the foregoing limitations, and the other
terms and provisions of this Agreement, the Borrower may borrow,
repay, and reborrow hereunder the amount of the Tranche B
Commitment by means of CD Loans and Eurodollar Loans.
(c) Subject to the terms and conditions of this Agreement,
at any time and from time to time on any Business Day on or
before the Tranche A Termination Date, the Borrower may convert
all or a portion of the Tranche A Loans then outstanding into a
Term Loan (each a "Term Loan") with a maturity of five (5) years
or seven (7) years. The Borrower shall give the Bank at least
five (5) Business Days prior written notice of each such
conversion specifying the date of the conversion (the "Term Loan
Conversion Date"), the principal amount of the Term Loan, whether
installments of principal of the Loan will be payable quarterly
or semiannually after the Second Anniversary for such Term Loan
and the term of such Term Loan. Each Term Loan shall be in a
minimum principal amount of $5,000,000 or increments of $100,000
above such amount, except for the last Term Loan which may be
less than such amount. Effective as of each Term Loan Conversion
Date, the Tranche A Commitment shall be irrevocably reduced by
the aggregate principal amount of the Tranche A Loans converted
into a Term Loan on such date.
SECTION 2.02. Notes.
(a) The Tranche A Loans made by the Bank shall be evidenced
by a single promissory note of the Borrower in substantially the
form of Exhibit A, dated the date hereof, payable to the order of
the Bank in a principal amount equal to the Tranche A Commitment
as originally in effect, and otherwise duly completed.
(b) The Tranche B Loans made by the Bank shall be evidenced
by a single promissory note of the Borrower in substantially the
form of Exhibit B, dated the date hereof, payable to the order of
the Bank in a principal amount equal to the Tranche B Commitment
as originally in effect, and otherwise duly completed. In the
event that a portion (but not all) of the Tranche A Loans are
converted to a Term Loan pursuant to Section 2.01(c), the
Borrower shall on or before the Term Loan Conversion Date for
such Term Loan, execute and deliver to the Bank a new Tranche A
Note in a principal amount equal to the Tranche A Commitment
after giving effect to such conversion, and dated the Term Loan
Conversion Date for such Term Loan. If the Bank shall have
received the new Tranche A Note duly executed by the Borrower as
aforesaid, the Bank shall promptly return the existing Tranche A
Note to the Borrower marked "restructured".
<PAGE>
(c) Each Term Loan shall be evidenced by a separate
promissory note of the Borrower in substantially the form of
Exhibit C, dated the Term Loan Conversion Date for such Term
Loan, payable to the order of the Bank in a principal amount
equal to the amount specified by the Borrower pursuant to Section
2.01(c) for such Term Loan, and otherwise duly completed.
SECTION 2.03. Repayment of Loans.
(a) The Borrower shall pay to the Bank the outstanding
principal amount of the Tranche A Loans on the Tranche A
Termination Date.
(b) The Borrower shall pay to the Bank the outstanding
principal amount of the Tranche B Loans on the Tranche B
Termination Date.
(c) In the event that the Borrower converts all or a
portion of the Tranche A Loans into a Term Loan in accordance
with Section 2.01(c), the Borrower shall pay to the Bank the
entire principal amount of such Term Loan as follows:
(i) if such Term Loan will have a term of five (5)
years, (A) installments of principal each in an amount equal to
one-fifth of the original principal amount of such Term Loan
shall be payable on the First Anniversary and Second Anniversary
of such Term Loan, and (B) thereafter (x) if the Borrower has
notified the Bank pursuant to Section 2.01(c) that after the
Second Anniversary installments of principal will be payable
quarterly, installments of principal shall be payable in twelve
(12) equal, consecutive quarterly installments each in a
principal amount equal to one twelfth (1/12th) of the then
outstanding principal amount of such Term Loan on the Second
Anniversary after giving effect to the scheduled payment of
principal on such date, with the first such quarterly installment
being payable on the date occurring three (3) months after the
Second Anniversary and subsequent like installments being payable
every three (3) months thereafter, or (y) if the Borrower has
notified the Bank pursuant to Section 2.01(c) that after the
Second Anniversary installments of principal will be payable
semiannually, installments of principal shall be payable in six
(6) equal, consecutive semiannual installments each in a
principal amount equal to one sixth (1/6th) of the then
outstanding principal amount of such Term Loan on the Second
Anniversary after giving effect to the scheduled payment of
principal on such date, with the first such semiannual
installment being payable on the date occurring six (6) months
after the Second Anniversary and subsequent like installments
being payable every six (6) months thereafter; or
<PAGE>
(ii) if the Term Loan will have a term of seven (7)
years, (A) installments of principal each in an amount equal to
one-seventh of the original principal amount of such Term Loan
shall be payable on the First Anniversary of such Term Loan and
the Second Anniversary of such Term Loan, and (B) thereafter (x)
if the Borrower has notified the Bank pursuant to Section 2.01(c)
that after the Second Anniversary installments of principal of
such Loan will be payable quarterly, installments of principal
shall be payable in twenty (20) equal, consecutive quarterly
installments each in a principal amount equal to one twentieth
(1/20th) of the then outstanding principal amount of such Term
Loan on the Second Anniversary after giving effect to the
scheduled payment of principal on such date, with the first such
quarterly installment being payable on the date occurring three
(3) months after the Second Anniversary and subsequent like
installments being payable every three (3) months thereafter, or
(y) if the Borrower has notified the Bank pursuant to Section
2.01(c) that after the Second Anniversary installments of
principal will be payable semiannually, installments of principal
shall be payable in ten (10) equal, consecutive semiannual
installments each in a principal amount equal to one tenth
(1/10th) of the then outstanding principal amount of such Term
Loan on the Second Anniversary after giving effect to the
scheduled payment of principal on such date, with the first such
semiannual installment being payable six (6) months after the
Second Anniversary and subsequent like installments being payable
on the dates occurring every six (6) months thereafter.
SECTION 2.04. Interest.
(a) The Borrower shall pay to the Bank interest on the
unpaid principal amount of each Tranche A Loan and each Tranche B
Loan for the period commencing on the date of each such Loan to
but excluding the date such Loan or portion thereof shall be paid
in full, at the following rates per anum:
(i) during the periods such Loan is a CD Loan,
the Adjusted CD Rate the Applicable Margin; and
(ii) during the periods such Loan is a Eurodollar
Loan, the Adjusted Eurodollar Rate au the Applicable Margin.
(b) The Borrower shall pay to the Bank interest on the
unpaid principal amount of the Term Loans at a rate per anum
equal to the Prime Rate.
(c) Notwithstanding the foregoing, the Borrower shall
pay to the Bank interest at the Default Rate on any principal of
any Loan and (to the fullest extent permitted by law) on any
other amount payable by the Borrower under this Agreement or any
other Loan Document which is not paid in full when due (whether
at stated maturity, by acceleration, or otherwise), for the
period from and including the due date thereof to but excluding
the date the same is paid in full.
<PAGE>
(d) Accrued interest on the Loans shall be due and
payable in arrears as follows: in the case of CD Loans, on each
Quarterly Date; (ii) in the case of each Eurodollar Loan, on the
last day of the Interest Period with respect thereto; (iii) in
the case of each Term Loan, every three (3) months after the Term
Loan Conversion Date for such Loan; (iv) upon the payment or
prepayment of any Term Loan or any Eurodollar Loan or the
Conversion of any Eurodollar Loan to a CD Loan (but only on the
principal amount so paid, prepaid, or Converted); and (v) on the
Maturity Date; provided that interest payable at the Default Rate
shall be payable from time to time on demand.
SECTION 2.05. Borrowing Procedure. The Borrower shall give
the Bank notice of each borrowing of a Tranche A Loan or Tranche
B Loan hereunder in accordance with Section 2.08. Not later than
3:00 p.m. (Charlotte time) on the date specified for each such
borrowing hereunder, the Bank will make available the amount of
the Tranche A Loan or Tranche B Loan to be made by it on such
date to the Borrower by depositing the same, in immediately
available funds, in an account of the Borrower (designated by the
Borrower) maintained with the Bank at the Principal Office or as
otherwise directed by the Borrower.
SECTION 2.06. Prepayments, Conversions, and Continuations
of Loans. Subject to Section 2.07, the Borrower shall have the
right from time to time to prepay all or part of the Loans, or to
Convert all or part of any Tranche A Loan or Tranche B Loan of
one Type into a Loan of another Type (but of the same Class) or
to Continue Tranche A Loans or Tranche B Loans as Eurodollar
Loans, provided that: (a) the Borrower shall give the Bank notice
of each such prepayment, Conversion, or Continuation as provided
in Section 2.08, (b) Eurodollar Loans may only be Converted on
the last day of the Interest Period, and (c) except for
Conversions into CD Loans, no Conversions or Continuations shall
be made while a Default has occurred and is continuing.
Prepayments of any Term Loan shall, at the election of the
Borrower (with notice to the Bank), be applied either (i) to
installments of principal of such Loan in inverse order of
maturity, or (ii) to the then remaining installments of principal
of such Loan pro rata. Principal of the Term Loans paid or
prepaid may not be reborrowed.
SECTION 2.07. Minimum Amounts. Except for Conversions and
prepayments pursuant to Article III, each borrowing, each
Conversion, and each prepayment of principal of the Loans shall
be in an amount at least equal to $100,000.
<PAGE>
SECTION 2.08. Certain Notices. Notices by the Borrower to
the Bank of a termination or reduction of the Commitments, of
borrowings, Conversions, Continuations and optional prepayments
of Loans shall be irrevocable and shall be effective only if
received by the Bank not later than 1:00 p.m. (Charlotte time) on
the number of Business Days prior to the date of the relevant
termination, reduction, borrowing, Conversion, Continuation, or
prepayment specified below:
Notice Number of Business
Days Prior
Termination or reduction of
Commitments 3
Borrowing or prepayment of, or
Conversions into, CD Loans same day
Borrowing or prepayment of,
Conversions into, or Continuations
as, Eurodollar Loans 3
Each such notice of termination or reduction shall specify the
amount of the Commitments to be terminated or reduced. Each such
notice of borrowing, Conversion, Continuation, or optional
prepayment shall specify (a) the Class, amount, and Type of the
Loan to be borrowed, Converted, Continued, or prepaid (and, in
the case of a Conversion, the Type of Loan to result from such
Conversion), and (b) the date of borrowing, Conversion,
Continuation, or prepayment (which shall be a Business Day). In
the event the Borrower fails to select the Type of Loan, within
the time period and otherwise as provided in this Section 2.08,
such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a CD Loan on the last day of the
preceding Interest Period for such Loan or (if outstanding as a
CD Loan) will remain as, or (if not then outstanding) will be
made as, a CD Loan. Notices pursuant to this Section 2.08 may be
verbal provided that they are promptly confirmed in writing by
facsimile.
SECTION 2.09. Use of Proceeds.
(a) The proceeds of the Tranche A Loans and Tranche B Loans
shall be used by the Borrower for general corporate purposes
including, but not limited to, the financing of capital
expenditures and the purchase of shares of common stock of the
Borrower.
<PAGE>
(b) The Borrower will not, directly or indirectly, use any
part of the proceeds of the Loans for the purpose of purchasing
or carrying any margin stock within the meaning of Regulations G,
U, T, or X of the Board of Governors of the Federal Reserve
System, except for purchases of common stock of the Borrower.
SECTION 2.10. Facility Fee. The Borrower shall pay to the
Bank a facility fee (the "Facility Fee") of $57,500 per annum
with respect to the Tranche A Commitment, payable quarterly in
arrears on each Quarterly Date and on the Tranche A Termination
Date. If the amount of the Tranche A Commitment is reduced, the
amount of the Facility Fee that accrues thereafter shall be
reduced in the same proportion as the amount of the reduction of
the Tranche A Commitment. The Facility Fee shall not accrue
after the Tranche A Termination Date.
SECTION 2.11. Computation. Interest payable by the
Borrower hereunder and under the other Loan Documents shall be
computed on the basis of a year of 360 days and the actual number
of days elapsed (including the first day but excluding the last
day) occurring in the period for which payable.
SECTION 2.12. Reduction or Termination of Commitments. The
Borrower shall have the right to irrevocably terminate or reduce
in part the unused portion of the Commitments at any time and
from time to time, provided that: (a) the Borrower shall give
notice of each such termination or reduction as provided in
Section 2.08; and (b) each partial reduction shall be in an
aggregate amount at least equal to $1,000,000.
SECTION 2.13. Payments. All payments of principal,
interest, and other amounts to be made by the Borrower under this
Agreement and other Loan Documents shall be made to the Bank at
the Principal Office in Dollars. Whenever any payment under this
Agreement or any other Loan Document shall be stated to be due on
a day that is not a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time in such
case shall be included in the computation of interest.
SECTION 2.14. Extension of Tranche A Termination Date.
Within ninety (90) days prior to the date occurring one year
prior to the Tranche A Termination Date then in effect, the
Borrower may submit a written request to the Bank for an
extension of the Tranche A Termination Date for an additional
period of one year. Within thirty (30) days after receipt by the
Bank of such notice, the Bank shall give written notice to the
Borrower of its agreement or refusal to extend the Tranche A
Termination Date; provided, however, any failure by the Bank to
respond to any such request in a timely manner shall be deemed to
be a refusal by the Bank to extend the Tranche A Termination
Date.
<PAGE>
SECTION 2.15. Extension of Tranche B Termination Date.
Within ninety (90) days prior to the Tranche B Termination Date
then in effect, the Borrower may submit a written request of the
Bank for an extension of the Tranche B Termination Date for an
additional period of 364 days. Within thirty (30) days after
receipt by the Bank of such notice, the Bank shall give written
notice to the Borrower of its agreement or refusal to extend the
Tranche B Termination Date; provided, however, any failure by the
Bank to respond to any such request in a timely manner shall be
deemed to be a refusal to extend the Tranche B Termination Date.
SECTION 2.16. Lending Office. The Loans of each Class and
Type made by the Bank shall be made and maintained at the Bank's
Applicable Lending Office for Loans of such Class and Type.
ARTICLE III
CHANGE IN CIRCUMSTANCES
SECTION 3.01. Increased Cost and Reduced Return.
(a) If on or after the date hereof, the Bank shall have
reasonably determined that the adoption on or after the date
hereof of any applicable law, rule, or regulation, or any change
in any applicable law, rule, or regulation, or any change on or
after the date hereof in the interpretation or administration
thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by the
Bank with any request or directive on or after the date hereof
(whether or not having the force of law) of any such Governmental
Authority:
(i) shall change the basis of taxation of any amounts
payable to the Bank under this Agreement or the Tranche A Note or
Tranche B Note in respect of any Eurodollar Loans (other than
taxes imposed on the overall net income of the Bank or its
Applicable Lending Office by the jurisdiction in which the Bank
has its Principal Office or such Applicable Lending Office);
(ii) shall impose or modify any reserve, special
deposit, or similar requirement (other than the Eurodollar
Reserve Percentage utilized in the determination of the Adjusted
Eurodollar Rate) relating to any extensions of credit or other
assets of, or any deposits with or other liabilities or
commitments of, the Bank (including the Commitments); or
<PAGE>
(iii) shall impose on the Bank (or its Applicable
Lending Office) or the London interbank market any other
condition affecting this Agreement or the Tranche A Note or
Tranche B Note or any of such extensions of credit or liabilities
or commitments;
and the result of any of the foregoing is to increase the cost to
the Bank (or its Applicable Lending Office) of making or
maintaining any Eurodollar Loans or to reduce any sum received or
receivable by the Bank under this Agreement or the Tranche A Note
or Tranche B Note with respect to Eurodollar Loans, then the
Borrower shall pay to the Bank on demand such amount or amounts
as will compensate the Bank for such increased cost or reduction.
(b) If on or after the date hereof, the Bank shall have
reasonably determined that the adoption on or after the date
hereof of any applicable law, rule, or regulation regarding
capital adequacy or any change therein on or after the date
hereof or in the interpretation or administration thereof on or
after the date hereof by any Governmental Authority charged with
the interpretation or administration thereof, or any request or
directive on or after the date hereof regarding capital adequacy
(whether or not having the force of law) of any such Governmental
Authority, has the effect of reducing the rate of return on the
capital of the Bank as a consequence of the Bank's obligations
hereunder to a level below that which the Bank could have
achieved but for such adoption, change, request, or directive by
an amount deemed by the Bank to be material, then from time to
time upon demand the Borrower shall pay to the Bank such
additional amount or amounts as will compensate the Bank for such
reduction.
(c) The Bank will promptly notify the Borrower of any event
or circumstance of which it has knowledge, occurring after the
date hereof, which will entitle the Bank to compensation pursuant
to Section 3.01(a) or Section 3.01(b) and will designate a
different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation
and will not, in the reasonable judgment of the Bank, be
otherwise disadvantageous to the Bank. A certificate of the Bank
claiming compensation under this Section and setting forth in
reasonable detail the basis for the claim shall be provided to
the Borrower with such notice. In determining such amount, the
Bank may use any reasonable averaging and attribution methods.
(d) The Bank shall not be entitled to claim compensation
pursuant to Section 3.01(a) or Section 3.01(b) for any increased
cost, reduction in amounts received or receivable, or reduction
in rate of return (i) incurred or accrued on or before the
ninetieth (90th) day following the date that the Bank first
notifies the Borrower of the change in law or other circumstances
on which such claim is based, or (ii) incurred as a result of the
fault of the Bank.
<PAGE>
SECTION 3.02. Limitation on Eurodollar Loans. If on or
prior to the first day of any Interest Period for any Eurodollar
Loan:
(a) the Bank reasonably determines that by reason of
circumstances affecting the London interbank market, adequate and
reasonable means do not exist for ascertaining the Eurodollar
Rate for such Interest Period; or
(b) the Bank reasonably determines that the Adjusted
Eurodollar Rate will not adequately and fairly reflect the cost
to the Bank of funding Eurodollar Loans for such Interest Period;
then the Bank shall give the Borrower prompt notice thereof
setting forth in reasonable detail the basis for the Bank's
determination and so long as such condition remains in effect,
the Bank shall be under no obligation to make additional
Eurodollar Loans, Continue Eurodollar Loans, or to Convert CD
Loans into Eurodollar Loans and the Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding
Eurodollar Loans, either prepay such Loans or Convert such Loans
into CD Loans in accordance with the terms of this Agreement.
SECTION 3.03. Illegality. Notwithstanding any other
provision of this Agreement, in the event that it becomes
unlawful for the Bank to make, maintain, or fund Eurodollar Loans
hereunder, then the Bank shall promptly notify the Borrower
thereof and the Bank's obligation to make or Continue Eurodollar
Loans and to Convert CD Loans into Eurodollar Loans shall be
suspended until such time as the Bank may again make, maintain,
and fund Eurodollar Loans and the Borrower shall, on the last day
of the Interest Period for each outstanding Eurodollar Loan (or
earlier, if required by law), either prepay such Loans or Convert
such Loans into CD Loans in accordance with the terms of this
Agreement. In the event that it becomes lawful for the Bank to
make, maintain, or fund Eurodollar Loans, the Bank shall give the
Borrower prompt notice thereof.
SECTION 3.04. Compensation. Upon the request of the Bank,
the Borrower shall pay to the Bank such amount or amounts as
shall be sufficient (in the reasonable opinion of the Bank) to
compensate it for any cost or expense incurred by it as a result
of:
(a) any payment, prepayment or Conversion of a
Eurodollar Loan for any reason (including, without limitation,
the acceleration of the Loans pursuant to Section 7.02) not the
fault of the Bank on a date other than the last day of an
Interest Period for such Loan, provided, that the Borrower shall
not be required to compensate the Bank if the reason for such
payment, prepayment or Conversion relates to any of the
circumstances described in Sections 3.01 or 3.03; or
<PAGE>
(b) any failure by the Borrower for any reason
(including, without limitation, the failure of any conditions
precedent specified in Article IV to be satisfied) not the fault
of the Bank to borrow, Convert, Continue, or prepay a Eurodollar
Loan on the date for such borrowing, Conversion, Continuation, or
prepayment specified in the relevant notice of borrowing,
prepayment, Continuation, or Conversion under this Agreement,
provided, that the Borrower shall not be required to compensate
the Bank if the reason for such failure to borrow, Convert,
Continue, or prepay relates to any of the circumstances described
in Sections 3.01, 3.02 or 3.03.
Without limiting the effect of the preceding sentence, such
compensation shall include any cost or expense incurred by the
Bank in obtaining, liquidating, or employing deposits from third
parties.
ARTICLE IV
CONDITIONS
SECTION 4.01. Initial Tranche A Loan or Tranche B Loan.
The effectiveness of this Agreement and the obligation of the
Bank to make the initial Tranche A Loan or Tranche B Loan
hereunder are subject to the satisfaction of the following
conditions:
(a) receipt by the Bank of the duly executed Tranche A
Note, complying with the provisions of Section 2.02(a);
(b) receipt by the Bank of the duly executed Tranche B
Note, complying with the provisions of Section 2.02(b);
(c) receipt by the Bank of the Guaranty duly executed
by the Guarantors; and
(d) receipt by the Bank of a certificate of the
Secretary or Assistant Secretary of each Loan Party, dated the
date hereof and certifying (i) that attached thereto is a true
and complete copy of the corporate charter of such Person and all
amendments thereto, (ii) that attached thereto is a true and
complete copy of the by-laws of such Person and all amendments
thereto, (iii) that attached thereto is a true and complete copy
of resolutions duly adopted by the board of directors of such
<PAGE>
Person authorizing the execution, delivery, and performance of
the Loan Documents to which such Person is or is intended to be a
party, and that such resolutions have not been modified,
rescinded, or amended and are in full force and effect, and (iv)
as to the incumbency and specimen signature of each officer of
such Person executing the Loan Documents to which such Person is
or is intended to be a party and each other document to be
delivered by such Person from time to time in connection
therewith (and the Bank may conclusively rely on each such
certificate until it receives notice in writing from such
Person).
SECTION 4.02. Each Tranche A Loan or Tranche B Loan. The
obligation of the Bank to make any Tranche A Loan or Tranche B
Loan (including the initial Tranche A Loan or Tranche B Loan) is
subject to the satisfaction of the following conditions
precedent:
(a) receipt by the Bank of a notice of borrowing in
accordance with Section 2.08;
(b) the fact that immediately after the making of such
Tranche A Loan or Tranche B Loan, the aggregate outstanding
principal amount of the Tranche A Loans or Tranche B Loans (as
the case may be) will not exceed the amount of the Tranche A
Commitment or the Tranche B Commitment (as the case may be);
(c) the fact that, immediately before and after such
Loan, no Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties
of the Loan Parties contained in this Agreement and the other
Loan Documents shall be true and correct on and as of the date of
such Loan.
Each borrowing hereunder shall be deemed to be a representation
and warranty by the Borrower on the date of such borrowing that
the conditions precedent specified in clauses (b), (c), and (d)
of this Section have been satisfied.
SECTION 4.03. Term Loan. The obligation of the Bank to
convert all or a portion of the Tranche A Loan to a Term Loan
pursuant to Section 2.01(c) is subject to the satisfaction of the
following conditions precedent:
(a) receipt by the Bank of a notice of conversion
pursuant to Section 2.01(c);
(b) receipt by the Bank of a duly executed Term Note
for such Loan, dated the Term Loan Conversion Date for such Loan,
complying with the provisions of Section 2.02(c);
<PAGE>
(c) if any Tranche A Loans will be outstanding after
such conversion, receipt by the Bank of a duly executed Tranche A
Note, dated the Term Loan Conversion Date for such Loan,
complying with the provisions of Section 2.02(b);
(d) the fact that immediately before and after the
conversion of all or part of the Tranche A Loans to a Term Loan,
no Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties
of the Loan Parties contained in this Agreement and the other
Loan Documents shall be true and correct on and as of the date of
such conversion.
The conversion of all or part of the Tranche A Loans to a Term
Loan pursuant to Section 2.01(a) shall be deemed a representation
and warranty by the Borrower on the Term Loan Conversion Date for
such Loan that the conditions precedent specified in clauses (d)
and (e) of this Section have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, the
Borrower represents and warrants to the Bank that:
SECTION 5.01. Existence. The Borrower (a) is duly
organized, validly existing, and in good standing under the laws
of the jurisdiction of its organization; and (b) has the
requisite power and authority and legal right to own its assets
and carry on its business as now being or as proposed to be
conducted. The Borrower has the power, authority, and legal
right to execute, deliver, and perform its obligations under the
Loan Documents.
SECTION 5.02. Financial Statements. The Financial
Statements have been prepared in accordance with GAAP, and fairly
and accurately present the financial condition of the Borrower
and the Subsidiaries as of the respective dates indicated therein
and the results of operations for the respective periods
indicated therein. Since the effective date of the Financial
Statements, no event or condition has occurred that the Borrower
expects will have a Material Adverse Effect.
<PAGE>
SECTION 5.03. Authorization; No Breach. The execution,
delivery, and performance by the Borrower of the Loan Documents
to which it is a party and compliance with the terms and
provisions thereof have been duly authorized by all requisite
action on the part of the Borrower and do not (a) violate or
conflict with, or result in a breach of, or require any consent
under (i) the articles of incorporation, bylaws, or other
organizational documents of the Borrower or any of the Material
Subsidiaries, (ii) to the best of the Borrower's knowledge, any
applicable law, rule, or regulation or any order, writ,
injunction, or decree of any Governmental Authority or
arbitrator, or (iii) any agreement or instrument to which the
Borrower or any of the Material Subsidiaries is a party or by
which any of them or any of their Property is bound or subject,
or (b) constitute a default under any such agreement or
instrument. Neither the Borrower nor any Subsidiary is in
default under any indenture, mortgage, deed of trust, agreement,
or instrument to which it is a party or by which it may be bound
and which is material to the financial condition of the Borrower
and its Subsidiaries on a consolidated basis.
SECTION 5.04. Litigation. There is no action, suit,
investigation, or proceeding before or by any Governmental
Authority or arbitrator pending, or to the knowledge of the
Borrower, threatened against or affecting the Borrower or any
Subsidiary, that the Borrower expects will have a Material
Adverse Effect.
SECTION 5.05. Enforceability. This Agreement constitutes,
and the other Loan Documents when executed and delivered by the
Borrower shall constitute, the legal, valid, and binding
obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms, except as limited by
applicable Debtor Relief Laws and general principles of equity.
SECTION 5.06. Approvals. No authorization, approval, or
consent of, and no filing or registration with, any Governmental
Authority or third party is or will be necessary for the
execution, delivery, or performance by the Borrower of any of the
Loan Documents to which it is a party or for the validity or
enforceability thereof.
SECTION 5.07. Compliance with Laws. The Borrower and its
Subsidiaries are in compliance in all material respects with all
applicable laws, rules, and regulations, other than such laws,
rules, and regulations (i) the validity or applicability of which
the Borrower or such Subsidiary is contesting in good faith by
appropriate proceedings or (ii) failures to comply which the
Borrower expects will not have a Material Adverse Effect.
<PAGE>
ARTICLE VI
COVENANTS
The Borrower agrees that so long as the Bank has any
Commitments hereunder or any amount payable under the Notes
remains unpaid:
SECTION 6.01. Information. The Borrower shall deliver to
the Bank:
(a) within 90 days after the end of each fiscal year
of the Borrower, the Borrower's consolidated financial statements
as of the end of such fiscal year unless approval is granted by
the Securities and Exchange Commission for later filing of the
Borrower's financial statements. Such financial statements shall
contain a consolidated balance sheet and related consolidated
statements of income and cash flows for such fiscal year setting
forth in each case in comparative form the figures for the
previous fiscal year, all prepared in accordance with GAAP and
certified by the independent public accountants then engaged by
the Borrower.
(b) within 45 days after the end of the first three
quarters of each fiscal year of the Borrower, those financial
reports which are required to be submitted to the Securities and
Exchange Commission quarterly unless approval is granted by the
Securities and Exchange Commission for later filing of the
Borrower's reports. Such quarterly reports shall contain a
consolidated balance sheet and related consolidated statements of
income and cash flows and shall be signed by the principal
accounting officer of the Borrower as having been prepared in
accordance with GAAP (subject to normal year-end adjustments).
(c) within three (3) days after any executive officer
of the Borrower obtains knowledge of any Default, a certificate
of the chief financial officer of the Borrower setting forth the
details thereof and any action which the Borrower is taking or
proposes to take with respect thereto.
(d) within three (3) days after the occurrence
thereof, notice to the Bank of any change in the individuals
holding the positions of Chairman of the Board or President of
the Borrower.
(e) from time to time such additional information
regarding the financial condition or business of the Borrower and
the Subsidiaries as the Bank may reasonably request.
SECTION 6.02. Fundamental Obligations. The Borrower shall,
and shall cause each of the Subsidiaries to:
<PAGE>
(i) preserve and maintain all of its rights,
privileges, and franchises necessary or desirable in the normal
conduct of its business, except where failure to do the same
could not reasonably be expected to have a Material Adverse
Effect.
(ii) comply with the requirements of all applicable
laws, rules, regulations, and orders of Governmental Authorities
except for instances of non-compliance that could not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(iii) pay and discharge when due all taxes,
assessments, and governmental charges or levies imposed on it or
on its income or profits or any of its Property, except for any
such tax, assessment, charge, or levy the payment of which is
being contested in good faith and by proper proceedings and
against which adequate reserves are being maintained and except
where failure to do so could not reasonably be expected to have a
Material Adverse Effect.
(iv) maintain all of its Properties owned or used in
its business in good working order and condition ordinary wear
and tear excepted, except where failure to so maintain such
Properties could not reasonably be expected to have a Material
Adverse Effect.
(v) permit representatives of the Bank, during normal
business hours, and upon reasonable prior notice to the Borrower,
to inspect its Properties, and to discuss its business and
affairs with its officers, directors, and accountants.
(vi) maintain insurance (which may include self
insurance) in such amounts, with such deductibles, and against
such risks as is customary for similarly situated businesses,
except where failure to so maintain insurance could not
reasonably be expected to have a Material Adverse Effect.
SECTION 6.03. Current Ratio. The Borrower will not permit
the ratio, calculated at the end of each fiscal quarter of the
Borrower, of Consolidated Current Assets to Consolidated Current
Liabilities to be less than 1.25 to 1.0.
SECTION 6.04. Ratio of Consolidated Net Worth to
Consolidated Total Liabilities. The Borrower will not permit the
ratio, calculated at the end of each fiscal quarter of the
Borrower, of Consolidated Net Worth to Consolidated Total
Liabilities (exclusive of any outstanding indebtedness of the
Borrower to the Bank pursuant to this Agreement) to be less than
.90 to 1.0.
<PAGE>
SECTION 6.05. Consolidated Tangible Net Worth. The
Borrower will not permit Consolidated Net Worth, calculated at
the end of each fiscal quarter of the Borrower, to be less than
the sum of (a) $300,000,000 plus (b) 50% of Consolidated Net
Income (but, in each case, only if a positive number) for each
completed fiscal quarter of the Borrower beginning with the
fiscal quarter ended February 29, 1996, plus (c) the net proceeds
of each Equity Issuance on or after the date hereof.
<PAGE>
SECTION 6.06. Consolidated Capital Expenditures. (a) The
Borrower will not permit the aggregate amount of Consolidated
Capital Expenditures to exceed the amounts set forth below for
the fiscal years of the Borrower set forth below:
<TABLE>
<CAPTION>
Fiscal
Year
Ending
August 31 Amount
<S> <C>
1996 $60,000,000
1997 $65,000,000
1998 $70,000,000
1999 $75,000,000
2000 $80,000,000
2001 $85,000,000
2002 $90,000,000
2003 $95,000,000
2004 $100,000,000
2005 $105,000,000
2006 $110,000,000
Thereafter $115,000,000 plus $5,000,000 for
each fiscal year of the Borrower after
fiscal year 2006
</TABLE>
<PAGE>
(b) In addition to the Consolidated Capital Expenditures
permitted above, Consolidated Capital Expenditures up to the
following aggregate amounts may be incurred during the periods
set forth below for the purpose of purchasing or constructing new
distribution facilities (including land, buildings, improvements,
fleet, and equipment):
<TABLE>
<CAPTION>
Period Amount
<S> <C>
From September 1, $40,000,000
1995 through
August 31, 1998
From September 1, $40,000,000
1998 - August 31,
2001
From September 1, $40,000,000
2001 - August 31,
2004
From September 1, $40,000,000
2004 - August 31,
2007
For every three (3) $40,000,000
year period after
August 31, 2007
</TABLE>
SECTION 6.07. Consolidated Fixed Charges Coverage Ratio.
The Borrower will not permit the ratio of Consolidated Fixed
Charges to Consolidated Income Available for Fixed Charges,
calculated as of the end of each fiscal quarter of the Borrower
for the eight fiscal quarters of the Borrower then most recently
ended, to exceed .75 to 1.0.
SECTION 6.08. Disposition of Property. The Borrower will
not, and will not permit any of its Subsidiaries to, sell, lease,
assign, transfer, or otherwise dispose of all or substantially
all of its Properties (including the stock of any Subsidiaries),
whether in one transaction or a series of transactions; provided
that:
<PAGE>
(i) the Borrower and its Subsidiaries may sell
inventory in the ordinary course of business;
(ii) the Borrower and its Subsidiaries may sell, open,
close, or lease stores and distribution facilities and their
related assets and may enter into sale and leaseback transactions
with respect to their stores and distribution facilities and
their related assets;
(iii) any Subsidiary (other than a Guarantor) may
transfer Property to another Subsidiary or the Borrower; and
(iv) any Guarantor may transfer Property to another
Guarantor or the Borrower.
SECTION 6.09. Mergers, Consolidations, Etc.
(a) The Borrower shall not (i) merge or consolidate
with or into any other Person unless the Borrower is the
surviving corporation and no Default shall exist immediately
prior to or after giving effect to such merger or consolidation,
or (ii) dissolve, liquidate, or terminate its legal existence.
(b) The Borrower shall not (i) permit any Guarantor to
merge or consolidate with or into any Person unless a Guarantor
or the Borrower is the surviving corporation and no Default shall
exist immediately prior to or after giving effect to such merger
or consolidation, or (ii) permit any Guarantor to dissolve,
liquidate, or terminate its legal existence (except as permitted
in clause (a)(i) or (b)(i) of this Section 6.09).
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default. Each of the following
shall constitute an "Event of Default":
(a) the Borrower shall fail to pay when due any
principal of any Loan and such failure shall continue for a
period of ten (10) days after notice thereof to the Borrower by
the Bank.
(b) the Borrower shall fail to pay when due any
interest on any Loan, any fee, or any other amount payable under
this Agreement and such failure shall continue for a period of
ten (10) days after notice thereof to the Borrower by the Bank.
<PAGE>
(c) any representation or warranty made (or deemed
made pursuant to Section 4.02 or 4.03) in any Loan Document or in
any certificate or financial statement delivered pursuant hereto
shall be false, misleading, or erroneous in any material respect
when made or so deemed made and such deficiency shall remain
unremedied for a period of ten (10) days after notice thereof
shall have been given by the Bank to the Borrower, or such
additional periods as shall be necessary to remedy such
deficiency if the Borrower is proceeding in good faith to remedy
such deficiency and if the failure to remedy the deficiency
within said period of ten (10) days will not, in the reasonable
determination of the Bank, have a Material Adverse Effect.
(d) the Borrower shall fail to comply with Section
6.01(c).
(e) any Loan Party shall fail to perform, observe, or
comply with any other covenant, agreement, or term contained in
any Loan Document (other than a failure covered elsewhere in this
Section 7.01) and such failure shall continue for a period of
thirty (30) days after notice thereof to such Loan Party by the
Bank.
(f) any Loan Party or any Material Subsidiary or
Material Subsidiaries shall admit in writing its or their
inability to, or be generally unable to, pay its or their debts
as such debts become due.
(g) any voluntary or involuntary proceeding under any
Debtor Relief Law shall be commenced by or against any Loan Party
or any Material Subsidiary or Material Subsidiaries or any of
their respective assets, and if an involuntary proceeding is
commenced, such proceeding shall not be dismissed within sixty
(60) days after the commencement thereof.
(h) any Loan Party or any Material Subsidiary or
Material Subsidiaries shall fail to pay when due any principal of
or interest on any Debt (other than the Notes) having an
outstanding principal amount greater than $10,000,000 and such
failure shall continue for a period of ten (10) days, whether as
principal obligor, guarantor, or otherwise, or any event shall
have occurred that permits (after the passage of any applicable
grace period) any holder or holders of such Debt or any Person
acting on behalf of such holder or holders to accelerate the
maturity thereof and such event shall continue for a period of
ten (10) days.
(i) any judgment or order for the payment of money
(not covered by insurance where the insurer has confirmed
coverage) in excess of $10,000,000 shall be rendered against any
Loan Party or any Material Subsidiary or Material Subsidiaries
and such judgment or order shall continue unsatisfied and
unstayed for a period of thirty (30) days.
<PAGE>
(j) any Guarantor repudiates its obligations under the
Guaranty or asserts that the Guaranty is unenforceable, or the
Guaranty ceases for any reason to be enforceable and in full
force and effect.
(k) each of the following events shall have occurred:
(i) any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of
1934, as amended) (other than Mr. Leon Levine and his Family
Members or an investment manager acceptable to Bank in its sole
discretion) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under said Act) of 40% or more of the outstanding
shares of common stock of the Borrower;
(ii) Mr. Leon Levine and his Family Members
collectively shall own less than 20% of the outstanding shares of
common stock of the Borrower; and
(iii) one hundred fifty (150) days shall have
elapsed from the date that the events specified in clauses (i)
and (ii) of this paragraph (k) shall have occurred.
(1) any of the following events shall occur or exist
with respect to any member of the ERISA Group: (i) any prohibited
transaction (as defined in Sections 406 and 408 of ERISA and
Section 4975 of the Internal Revenue Code) involving any Plan;
(ii) any reportable event (as defined in Section 4043 of ERISA)
with respect to any Plan; (iii) the filing under Section 4041
of ERISA of a notice of intent to terminate any Plan or the
termination of any Plan; (iv) any event or circumstance that
might constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the termination of,
or for the appointment of a trustee to administer, any Plan, or
the institution by the PBGC of any such proceedings; (v) any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived; or (vi) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency, or
termination of any Multiemployer Plan; and in each case above,
such event or condition, together with all other events or
conditions, if any, have subjected or could in the reasonable
opinion of the Bank subject the Borrower and its Subsidiaries to
any tax, penalty, or other liability to a Plan, a Multiemployer
Plan, the PBGC, or otherwise (or any combination thereof) which
in the aggregate exceed or could reasonably be expected to exceed
$10,000,000.
SECTION 7.02. Remedies. If any Event of Default shall
occur and be continuing, the Bank may do any one or more of the
following:
<PAGE>
(a) Acceleration. Declare all outstanding principal
of and accrued and unpaid interest on the Notes and all other
amounts payable by the Borrower under the Loan Documents
immediately due and payable, and the same shall thereupon become
immediately due and payable, without presentment, demand,
protest, notice of acceleration, notice of intent to accelerate,
or other notices or formalities of any kind, all of which are
hereby expressly waived by the Borrower.
(b) Termination of Commitments. Terminate the
Commitments without notice to the Borrower.
(c) Rights. Exercise any and all rights and remedies
afforded by applicable law or otherwise.
Notwithstanding the foregoing, upon the occurrence of an Event of
Default under Section 7.01(g), the Commitments shall
automatically terminate, and the outstanding principal of and
accrued and unpaid interest on the Notes and all other amounts
payable by the Borrower under the Loan Documents shall thereupon
become immediately due and payable without presentment, demand,
protest, notice of acceleration, notice of intent to accelerate,
or other notices or formalities of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Right of Set-Off. Upon the occurrence and
during the continuance of any Event of Default, the Bank is
hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing
by the Bank (or any of its Affiliates) to or for the credit or
the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under the
Loan Documents, irrespective of whether the Bank shall have made
any demand under the Loan Documents and although such obligations
may be unmatured. The Bank agrees promptly to notify the
Borrower after any such set-off and application made by the Bank;
provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights
of the Bank under this Section are in addition to other rights
and remedies (including, without limitation, other rights of
set-off) that the Bank may have.
<PAGE>
SECTION 8.02. No Waiver; Cumulative Remedies. No failure
on the part of the Bank to exercise and no delay in exercising,
and no course of dealing with respect to, any right, power, or
privilege under any Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right,
power, or privilege under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right,
power, or privilege. The rights and remedies provided for in the
Loan Documents are cumulative and not exclusive of any rights and
remedies provided by law.
SECTION 8.03. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the
Bank. The Bank may at any time and from time to time (a) grant
participating interests in the Commitments and the Loans to any
Person(s), and (b) assign all or any portion of its rights and/or
obligations under the Loan Documents to any Person(s); provided,
that the Bank may not assign its Commitments to any Person (other
than an Affiliate of the Bank) without the prior written consent
of the Borrower. All information provided by the Borrower to the
Bank may be furnished by the Bank to its Affiliates and to any
actual or proposed assignee or participant, provided that any
actual or proposed assignee or participant agrees to be bound by
the provisions of Section 8.13.
SECTION 8.04. Amendments. No amendment or waiver of any
provision of any Loan Document to which the Borrower is a party,
nor any consent to any departure by the Borrower therefrom, shall
be effective unless the same shall be agreed or consented to in
writing by the Bank and the Borrower, and each such waiver or
consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 8.05. Notices. All notices, requests, and other
communications to either party hereunder shall be in writing
(including bank wire, facsimile transmission, or similar writing)
and shall be given to such party at its address or facsimile
number set forth on the signature pages hereof. Each such
notice, request, or other communication shall be effective when
received.
SECTION 8.06. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
SECTION 8.07. Severability. Any provision of this
Agreement held by a court of competent jurisdiction to be invalid
or unenforceable shall not impair or invalidate the remainder of
this Agreement and the effect thereof shall be conformed to the
provision held to be invalid or illegal.
<PAGE>
SECTION 8.08. Controlling Agreement. Notwithstanding
anything to the contrary contained in any Loan Document, the
interest paid or agreed to be paid under the Loan Documents shall
not exceed the maximum rate of non-usurious interest permitted by
applicable law (the "Maximum Rate"). If the Bank shall receive
interest in an amount that exceeds the Maximum Rate, the
excessive interest shall be applied to the principal of the Loans
or, if it exceeds the unpaid principal, refunded to the Borrower.
SECTION 8.09. Survival. All representations and warranties
made or deemed made by the Borrower in the Loan Documents shall
survive the execution and delivery thereof and the making of the
Loans, and no investigation by the Bank or any closing shall
affect the representations and warranties by the Borrower or the
right of the Bank to rely upon them. Without prejudice to the
survival of any other obligation of the Borrower hereunder, the
obligations of the Borrower and the Bank under Article III shall
survive repayment of the Notes and termination of the
Commitments.
SECTION 8. 10. Governing Law. This Agreement and the Notes
shall be governed by and construed in accordance with, the law of
the State of North Carolina and the applicable laws of the United
States of America. The Borrower and the Bank hereby submit to
the nonexclusive jurisdiction of the United States District Court
and each state court in Charlotte, North Carolina for the
purposes of all legal proceedings arising out of or relating to
any of the Loan Documents or the transactions contemplated
thereby. The Borrower and the Bank irrevocably consent to the
service of any and all process in any such action or proceeding
by the mailing of copies of such process to the Borrower or the
Bank, as the case may be, at its address set forth underneath its
signature hereto. The Borrower and the Bank irrevocably waive,
to the fullest extent permitted by law, any objection which
either of them may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
SECTION 8.11. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY
LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY OR
THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
SECTION 8.12. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE>
SECTION 8.13. Confidentiality. The Bank agrees, with
respect to any non-public information delivered or made available
by the Borrower to the Bank, to maintain the confidentiality of
such information. Nothing herein shall prevent the Bank from
disclosing such information (i) to its Affiliates, officers,
directors, employees, agents, attorneys, and accountants,
provided that each such Person shall be informed of, and directed
to abide by, the terms of this Section 8.13, (ii) upon the order,
request, or demand of any court or other Governmental Authority
(other than bank regulatory authorities having jurisdiction over
the Bank), provided that the Bank will furnish to the Borrower
prompt notice of any such request or demand as far in advance of
such disclosure as may be reasonably practicable so that the
Borrower may, at the Borrower's expense, seek an appropriate
protective order, (iii) to bank regulatory authorities having
jurisdiction over the Bank, (iv) which has been publicly
disclosed, (v) to the extent reasonably required in connection
with any litigation to which the Bank, the Borrower, or their
respective Affiliates may be a party, provided that the Bank
shall give the Borrower reasonable prior notice of such
disclosure by the Bank or any of its Affiliates, (vi) to the
extent reasonably required in connection with the exercise by the
Bank of any remedy hereunder, provided that the Bank shall give
the Borrower reasonable prior notice of such disclosure, and
(vii) with the prior written consent of Borrower.
SECTION 8.14. Restatement. This Agreement amends and
restates in its entirety the Existing Credit Agreement. The
Tranche A Note shall renew and extend but not extinguish the
indebtedness evidenced by the Tranche A Revolving Note (as such
term is defined in the Existing Credit Agreement). The Tranche B
Note shall renew and extend but not extinguish the indebtedness
evidenced by the Tranche B Revolving Note (as such term is
defined in the Existing Credit Agreement).
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first above written.
BORROWER:
FAMILY DOLLAR STORES, INC.
By: LEON LEVINE
LEON LEVINE
Title: Chairman of the Board
Address for Notices:
Family Dollar Stores, Inc.
P. 0. Box 1017
Charlotte, N. C. 28201-1017
Facsimile No.: (704) 841-1401
Attention: Senior Vice President - Finance
BANK:
NATIONSBANK, N.A.
By: MARK D. HALMRAST
MARK D. HALMRAST
Title: Vice President
Lending Office for CD Loans and Eurodollar Loans:
NationsBank, N.A.
100 N. Tryon Street
Charlotte, N. C. 28255-0065
Address for Notices:
NationsBank, N.A.
100 N. Tryon Street
NCl-007-08-08
Charlotte, N. C. 28255-0065
Facsimile No.: (704) 386-1270
Attention: Mr. Loy D. Thompson, III
<PAGE>
EXHIBIT A
TRANCHE A NOTE
$50,000,000.00 March 31, 1996
FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR STORES,
INC., a Delaware corporation (the "Borrower"), hereby promises to
pay to the order of NATIONSBANK, N.A. (the "Bank"), at the
Principal Office, in lawful money of the United States of
America, the principal amount of Fifty Million Dollars
($50,000,000) or such lesser amount as shall equal the aggregate
unpaid principal amount of the Tranche A Loans made by the Bank
to the Borrower under the Credit Agreement referred to below, on
the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of
each such Tranche A Loan, at such office, in like money, for the
period commencing on the date of such Tranche A Loan until such
Tranche A Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
The books and records of the Bank shall be prima facie
evidence of all amounts outstanding hereunder.
This Note is the Tranche A Note referred to in the Credit
Agreement of even date herewith, between the Borrower and the
Bank (such Credit Agreement, as the same may be amended,
modified, or supplemented from time to time, being referred to
herein as the "Credit Agreement"), and evidences Tranche A Loans
made by the Bank thereunder. The Credit Agreement, among other
things, contains provisions for acceleration of the maturity of
this Note upon the happening of certain stated events and for
prepayments of Tranche A Loans prior to the maturity of this Note
upon the terms and conditions specified in the Credit Agreement.
Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of North Carolina and the applicable
laws of the United States of America.
FAMILY DOLLAR STORES, INC.
By: LEON LEVINE
LEON LEVINE
Title: Chairman of the Board
<PAGE>
EXHIBIT B
TRANCHE B NOTE
$50,000,000.00 March 31, 1996
FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR STORES,
INC., a Delaware corporation (the "Borrower"), hereby promises to
pay to the order of NATIONSBANK, N.A. (the "Bank"), at the
Principal Office, in lawful money of the United States of
America, the principal amount of Fifty Million Dollars
($50,000,000) or such lesser amount as shall equal the aggregate
unpaid principal amount of the Tranche B Loans made by the Bank
to the Borrower under the Credit Agreement referred to below, on
the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of
each such Tranche B Loan, at such office, in like money, for the
period commencing on the date of such Tranche B Loan until such
Tranche B Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
The books and records of the Bank shall be prima facie
evidence of all amounts outstanding hereunder.
This Note is the Tranche B Note referred to in the Credit
Agreement of even date herewith, between the Borrower and the
Bank (such Credit Agreement, as the same may be amended,
modified, or supplemented from time to time, being referred to
herein as the "Credit Agreement"), and evidences Tranche B Loans
made by the Bank thereunder. The Credit Agreement, among other
things, contains provisions for acceleration of the maturity of
this Note upon the happening of certain stated events and for
prepayments of Tranche B Loans prior to the maturity of this Note
upon the terms and conditions specified in the Credit Agreement.
Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of North Carolina and the applicable
laws of the United States of America.
FAMILY DOLLAR STORES, INC.
By: LEON LEVINE
LEON LEVINE
Title: Chairman of the Board
<PAGE>
EXHIBIT C
TERM NOTE
$_____________________ [Date]
FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR STORES,
INC., a Delaware corporation (the "Borrower"), hereby promises to
pay to the order of NATIONSBANK, N.A. (the "Bank "), at the
Principal Office, in lawful money of the United States of
America, the principal amount of ________________________ Dollars
($_________), together with interest on the outstanding principal
balance as specified herein.
The outstanding principal of this Note shall be payable in
_______________ (______) installments of principal as follows:
(a) two (2) installments of principal each in the
amount of $___________ shall be payable on __________, and
____________;
(b) ___________ (_____) installments of principal each
in the amount of ________________ Dollars (______), shall be due
and payable, the first such installment to be due and payable on
___________, with like successive installments of principal to be
due and payable on the last day of each [insert dates] thereafter
until and including ___________; and thereafter
(c) a final installment in the amount of all
outstanding principal of this Note shall be due and payable on
______________.
The outstanding principal of this Note shall bear interest
at the rates per annum provided in the Credit Agreement. Accrued
and unpaid interest on this Note shall be payable on each
_______________, ______________, ____________, and ______________
of each year, commencing on _______________, and at maturity.
The books and records of the Bank shall be prima facie
evidence of all amounts outstanding hereunder.
<PAGE>
This Note is a Term Note referred to in the Credit Agreement
dated March 31, 1996, between the Borrower and the Bank (such
Credit Agreement, as the same may be amended, modified, or
supplemented from time to time, being referred to herein as the
"Credit Agreement"), and evidences a Term Loan thereunder. The
Credit Agreement, among other things, contains provisions for
acceleration of the maturity of this Note upon the happening of
certain stated events and for prepayments of the Term Loan
evidenced hereby prior to the maturity of this Note upon the
terms and conditions specified in the Credit Agreement.
Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of North Carolina and the applicable
laws of the United States of America.
FAMILY DOLLAR STORES, INC.
By:
Title:
<PAGE>
EXHIBIT D
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of March 31, 1996, is executed
by Family Dollar Services, Inc., a North Carolina corporation,
Family Dollar Operations, Inc., a North Carolina corporation, and
Family Dollar Trucking, Inc., a North Carolina corporation (each
a "Guarantor" and collectively the "Guarantors") in favor of
NationsBank, N.A., a national banking association (the "Bank").
WHEREAS, Family Dollar Stores, Inc., a Delaware corporation
(the "Borrower"), wishes to arrange bank financing in a total
amount of up to $100,000,000 with the Bank pursuant to the Credit
Agreement, dated as of March 31, 1996, between the Borrower and
the Bank (such Credit Agreement, as the same may be amended,
modified, or supplemented, being hereinafter referred to as the
"Credit Agreement"); and
WHEREAS, in order to induce the Bank to enter into the
Credit Agreement, the Guarantors are willing to guarantee the
obligations of the Borrower under the Loan Documents (as defined
in the Credit Agreement); and
WHEREAS, the execution and delivery of this Agreement by the
Guarantors is a condition to the willingness of the Bank to enter
into the Credit Agreement; and
WHEREAS, the ability of the Borrower to borrow from time to
time under the Credit Agreement will benefit the Guarantors
directly and indirectly; and
WHEREAS, each Guarantor has determined, reasonably and in
good faith, that it is solvent, it has adequate capital to
conduct its business as presently conducted and as proposed to be
conducted, and that it will be able to meet its obligations
hereunder and in respect of its other existing and future
indebtedness and liabilities as and when the same shall be due
and payable; and
WHEREAS, each Guarantor has determined that the execution
and delivery of this Agreement are to its advantage and benefit,
having regard to all relevant facts and circumstances;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Terms defined in the Credit Agreement and not otherwise
defined herein are used herein as therein defined.
<PAGE>
2. The Guarantors hereby jointly, severally,
unconditionally, and irrevocably guarantee to the Bank and its
successors and assigns, the full and punctual payment of all
present and future amounts payable by the Borrower pursuant to
the Loan Documents, including, but not limited to, the full and
punctual payment of all principal of and interest on the Notes
(whether at maturity, by declaration or otherwise). The
indebtedness guaranteed hereunder shall include any and all
post-petition interest (including reasonable attorneys' fees)
whether or not allowed under any bankruptcy, insolvency, or other
similar law. Upon any failure by the Borrower to pay when due
any amount guaranteed hereunder, the Guarantors hereby jointly,
severally and unconditionally agree to forthwith on demand pay
such amount as and when the same shall become due and payable,
whether at maturity or by declaration or otherwise.
3. Each Guarantor's obligations hereunder shall be
unconditional and absolute and, without limiting the generality
of the foregoing shall not be released, discharged, impaired, or
otherwise affected by any of the following, whether or not with
notice to or the consent of such Guarantor:
(a) any extension, renewal, settlement, compromise,
indulgence, waiver or release in respect of any obligation of the
Borrower or any other Loan Party under any of the Loan Documents,
by operation of law or otherwise;
(b) any modification or amendment of or supplement to
any of the Loan Documents;
(c) any release, exchange, impairment, non-perfection
or invalidity of any direct or indirect security, or of any
guarantee or other liability of any third party for any
obligation of the Borrower or any other Loan Party under any of
the Loan Documents;
(d) any change in the corporate existence, structure
or ownership of the Borrower or any other Loan Party, or any
insolvency, bankruptcy or other similar proceeding affecting the
Borrower or any other Loan Party or any of their respective
assets or any resulting release or discharge of any obligation of
the Borrower or any other Loan Party contained in the Loan
Documents;
(e) the existence of any claim, set-off or other
rights which such Guarantor may have at any time against the
Bank, the Borrower, any other Loan Party or any other Person
whether in connection herewith or any unrelated transactions;
provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;
(f) the invalidity or unenforceability of any Loan
Document; or
<PAGE>
(g) any other act or omission to act or delay of any
kind by the Bank, the Borrower, any other Loan Party, or any
other Person or any other circumstance whatsoever which might,
but for the provisions of this paragraph, constitute a legal or
equitable discharge of such Guarantor's obligations hereunder.
Each Guarantor hereby waives the benefits of North Carolina
General Statutes, Sections 26-7 through 26-9 inclusive.
4. The obligations of each Guarantor hereunder shall be
limited to an aggregate amount equal to the largest amount that
would not render its obligations hereunder subject to avoidance
under Section 548 of the United States Bankruptcy Code or to
being set aside or annulled under any applicable state law
relating to fraud on creditors.
5. Each Guarantor's obligations hereunder shall remain in
full force and effect until the Commitments shall have terminated
and all principal of and interest on the Notes and all other
amounts payable by the Borrower under the Loan Documents shall
have been paid in full.
6. If at any time any payment of any amount payable by the
Borrower is rescinded or must be otherwise restored or returned
upon the insolvency, bankruptcy or reorganization of the Borrower
or otherwise, each Guarantor's obligations hereunder with respect
to such payment shall be reinstated as though such payment had
been due but not made at such time.
7. The Guarantors irrevocably waive acceptance hereof,
presentment, demand, protest, notice of the incurring by the
Borrower of indebtedness under the Loan Documents, and any notice
not expressly provided for herein, as well as any requirement
that at any time any action be taken against the Borrower, any
other Loan Party, or any other Person or against any direct or
indirect security for any obligation or liability of the Borrower
under the Loan Documents.
8. Upon making any payment with respect to the Borrower
under the Loan Documents, the relevant Guarantor shall be
subrogated to the rights of the Bank against the Borrower with
respect to such payment; provided that such Guarantor shall not
enforce any payment by way of subrogation, contribution,
indemnity, or otherwise until the Commitments have terminated and
all principal of and interest on the Notes and all other amounts
payable by the Borrower under the Loan Documents have been paid
in full.
<PAGE>
9. If acceleration of the time for payment of any amount
that is guaranteed hereunder is stayed or demand for payment of
any such amount is precluded upon the insolvency, bankruptcy or
reorganization of the Borrower (determined without regard to
whether a court might act favorably on a request for relief from
any such stay or other preclusion), all such amounts otherwise
subject to acceleration under the terms of the Loan Documents
shall nonetheless be payable by each Guarantor hereunder
forthwith on demand by the Bank.
10. Each Guarantor hereby represents and warrants to the
Bank that:
(a) such Guarantor is duly organized, validly
existing, and in good standing under the laws of the jurisdiction
of its organization; and (b) has the requisite power and
authority and legal right to own its assets and carry on its
business as now being or as proposed to be conducted. Such
Guarantor has the power, authority, and legal right to execute,
deliver, and perform its obligations under this Agreement.
(b) the execution, delivery, and performance by such
Guarantor of this Agreement and compliance with the terms and
provisions hereof have been duly authorized by all requisite
action on the part of such Guarantor and do not (a) violate or
conflict with, or result in a breach of, or require any consent
under (i) the articles of incorporation, bylaws, or other
organizational documents of such Guarantor, (ii) to the best of
such Guarantor's knowledge, any applicable law, rule, or
regulation or any order, writ, injunction, or decree of any
Governmental Authority or arbitrator, or (iii) any agreement or
instrument to which such Guarantor is a party or by which it or
any of its Property is bound or subject, or (b) constitute a
default under any such agreement or instrument.
(c) this Agreement constitutes the legal, valid, and
binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms, except as limited by
applicable Debtor Relief Laws and general principles of equity.
(d) no authorization, approval, or consent of, and no
filing or registration with, any Governmental Authority or third
party is or will be necessary for the execution, delivery, or
performance by such Guarantor of this Agreement or for the
validity or enforceability thereof.
(e) the statements set forth in the recitals hereto
are true and correct with respect to such Guarantor.
<PAGE>
11. Effective upon the occurrence and during the existence
of an Event of Default, any and all indebtedness of the Borrower
to the Guarantors, or any of them, now or hereafter existing,
together with any interest thereon, shall be, and such
indebtedness is, hereby deferred, postponed and subordinated to
the prior payment in full of all amounts guaranteed hereunder.
If an Event of Default shall exist, the Guarantors agree not to
accept any payment or satisfaction of any kind of indebtedness of
the Borrower to the Guarantors, or any of them, and hereby assign
all such indebtedness to the Bank, including the right to file
proof of claim and to vote thereon in connection with any case by
or against the Borrower under the United States Bankruptcy Code
and the right to vote on any plan of reorganization thereunder.
12. All notices, requests, demands and other communications
to or from the parties hereto shall be in writing (including
telecopy or similar writing) and shall be given to such party:
(x) in the case of any Guarantor, at the address or telecopier
number set forth on the signature pages hereof, and (y) in the
case of the Bank, at its address or telecopy number set forth on
the signature pages of the Credit Agreement. Each such notice,
request or other communication shall be effective when received.
13. This Agreement shall be binding upon each of the
Guarantors and their respective successors and assigns, and shall
inure to the benefit of the Bank and its successors and assigns.
No Guarantor may assign or otherwise transfer any of its rights
or obligations hereunder without the prior written consent of the
Bank.
14. None of the terms of this Agreement may be waived,
altered or amended except by an instrument in writing duly
executed by each Guarantor and the Bank. No failure or delay on
the part of the Bank in exercising any right, power, or privilege
under any of Loan Documents shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power, or
privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right,
power, or privilege. The rights and remedies provided in and
contemplated by this Agreement are cumulative and not exclusive
of any rights or remedies provided by law.
15. This Agreement shall be construed in accordance with
and governed by the laws of the State of North Carolina.
<PAGE>
16. Each Guarantor and the Bank hereby submits to the
nonexclusive jurisdiction of the United States District Court or
any North Carolina State court sitting in Charlotte, North
Carolina for purposes of all legal proceedings arising out of or
relating to the Loan Documents or the transactions contemplated
hereby. Each Guarantor and the Bank irrevocably waives, to the
fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an
inconvenient forum. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW EACH OF THE GUARANTORS AND THE BANK HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY.
17. This Agreement is an absolute, present and continuing
guarantee of payment and not of collection. Each Guarantor
agrees that the Bank may enforce this Agreement without the
necessity of resorting to or exhausting any security or
collateral and without the necessity of proceeding against the
Borrower or any other Loan Party.
18. Each Guarantor agrees that nothing contained herein
shall prevent the Bank from suing on the Loan Documents or from
exercising any rights available to the Bank, thereunder and that
the exercise of any of the aforesaid rights shall not constitute
a legal or equitable discharge of any Guarantor. Each Guarantor
hereby authorizes and empowers the Bank to exercise, in its sole
discretion, any rights and remedies, or any combination thereof,
which may then be available to the Bank, since it is the intent
and purpose of each Guarantor that its obligations hereunder
shall be absolute, independent and unconditional under any and
all circumstances.
19. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have caused this
Guarantee Agreement to be duly executed by their respective
authorized officers as of the day and year first above written
FAMILY DOLLAR SERVICES, INC.
By: LEON LEVINE
Name: LEON LEVINE
Title: Chairman of the Board
Address for Notices:
Family Dollar Services, Inc.
P. 0. Box 1017
Charlotte, N. C. 28201-1017
Facsimile No.: (704) 841-1401
Attention: Senior Vice President-Finance
FAMILY DOLLAR OPERATIONS, INC.
By: LEON LEVINE
Name: LEON LEVINE
Title: Chairman of the Board
Address for Notices:
Family Dollar Operations, Inc.
Family Dollar Services, Inc.
P. 0. Box 1017
Charlotte, N. C. 28201-1017
Facsimile No.: (704) 841-1401
Attention: Senior Vice President-Finance
FAMILY DOLLAR TRUCKING, INC.
By: LEON LEVINE
Name: LEON LEVINE
Title: Chairman of the Board
Address for Notices:
Family Dollar Trucking, Inc.
P. 0. Box 1017
Charlotte, N. C. 28201-1017
Facsimile No.: (704) 841-1401
Attention: Senior Vice President-Finance
