<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 5, 1997
------------------------
HARCOURT GENERAL, INC.
(EXACT OF NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
<TABLE>
<S> <C>
1-4925 04-1619609
(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
27 BOYLSTON STREET, CHESTNUT HILL, MA 02167
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(617) 232-8200
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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<PAGE> 2
This report on Form 8-K/A amends and supplements a report on Form 8-K filed
by Harcourt General, Inc. ("Harcourt General" or the "Company") on June 19, 1997
in connection with the merger of an indirect wholly owned subsidiary of Harcourt
General with and into National Education Corporation, a Delaware corporation
("NEC"). The disclosure required by Item 2 and Item 7(a) is included in that
report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma financial information:
See pages F-1 through F-7.
(c) Exhibits:
<TABLE>
<S> <C>
Exhibit 2.1 Agreement and Plan of Merger among Harcourt General, Inc., Nick
Acquisition Corporation and National Education Corporation, dated as of
May 12, 1997, incorporated herein by reference to Exhibit 11(c)(1) to
Amendment No. 3 to Schedule 14D-1 of Harcourt General, Inc., dated May
14, 1997 (Commission File No. 1-4925).
Exhibit 4.1 Indenture dated as of May 15, 1986 between National Education
Corporation and Continental Illinois National Bank and Trust Company of
Chicago, as Trustee, incorporated herein by reference to Exhibit 4.2 to
Amendment No. 1 to Registration Statement on Form S-3 of National
Education Corporation, dated May 16, 1986 (Registration No. 33-5552).
Exhibit 4.2 Form of Certificate of the 6 1/2% Convertible Subordinated Debenture
Due 2011, incorporated herein by reference to Exhibit 4.2 to Amendment
No. 1 to Registration Statement on Form S-3 of National Education
Corporation, dated May 16, 1986 (Registration No. 33-5552).
Exhibit 4.3 Tripartite Agreement dated as of June 1, 1990 among National Education
Corporation, IBJ Schroder Bank & Trust Company and Continental Bank,
National Association, as resigning Trustee, incorporated herein by
reference to Exhibit 4 to National Education Corporation's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1990 (Commission
File No. 1-6981).
Exhibit 4.4 First Supplemental Indenture dated as of July 21, 1997 among National
Education Corporation, Harcourt General, Inc., and IBJ Schroder Bank &
Trust Company, incorporated herein by reference to Exhibit 4 to
Registration Statement on Form 8-A of Harcourt General, Inc., dated
July 22, 1997 (Commission File No. 1-4925).
Exhibit 10.1 Credit Agreement dated as of December 16, 1994 among Harcourt General,
Inc. the Banks listed therein, Morgan Guaranty Trust Company of New
York, as documentation agent, The First National Bank of Boston, as
administrative agent, The Bank of Nova Scotia and National Westminster
Bank Plc., as co-agents, incorporated herein by reference to Exhibit
11(b) to Schedule 14D-1 of Harcourt General, Inc., dated April 21, 1997
(Commission File No. 1-4925).
Exhibit 10.2 Credit Agreement dated as of April 17, 1995 among The Neiman Marcus
Group, Inc., the Banks listed therein and Morgan Guaranty Trust Company
of New York, as Agent, incorporated herein by reference to Exhibit
10.15 to The Neiman Marcus Group, Inc.'s Annual Report on Form 10-K for
the fiscal year ended August 3, 1996 (Commission File No. 1-9659).
Exhibit 10.3 Receivables Purchase Agreement dated as of March 1, 1995 between The
Neiman Marcus Group, Inc. and Neiman Marcus Funding Corporation,
incorporated herein by reference to Exhibit 10.1 to Registration
Statement on Form S-3 of Neiman Marcus Group Credit Card Master Trust
dated March 31, 1995 (Registration No. 33-88098).
</TABLE>
2
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<TABLE>
<S> <C>
Exhibit 10.4 Pooling and Servicing Agreement, dated as of March 1, 1995, between
Neiman Marcus Funding Corporation, The Neiman Marcus Group, Inc. and
The Chase Manhattan Bank, N.A., incorporated herein by reference to
Exhibit 4.1 to Registration Statement on Form S-3 of Neiman Marcus
Group Credit Card Master Trust dated March 3, 1995 (Registration No.
33-88098).
Exhibit 10.5 Series 1995-1 Supplement to the Pooling and Servicing Agreement, dated
as of March 1, 1995, among Neiman Marcus Funding Corporation, The
Neiman Marcus Group, Inc. and The Chase Manhattan Bank, N.A.,
incorporated herein by reference to Exhibit 4.2 to Registration
Statement on Form S-3 of Neiman Marcus Group Credit Card Master Trust
dated March 3, 1995 (Registration No. 33-88098).
Exhibit 10.6 Credit Agreement dated as of July 18, 1997 among Harcourt General,
Inc., the Banks listed therein and The Chase Manhattan Bank, as
syndication agent, Morgan Guaranty Trust Company of New York, as
documentation agent, and BankBoston, N.A., as administrative agent.
</TABLE>
3
<PAGE> 4
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information presented herein gives effect
to the Company's acquisition of National Education Corporation and $300 million
of borrowings incurred by the Company in connection with the acquisition of NEC
under the Company's revolving credit agreement. The Unaudited Pro Forma
Condensed Consolidated Statements of Operations reflect adjustments as if the
acquisition of NEC had occurred on November 1, 1995. The Unaudited Pro Forma
Condensed Consolidated Balance Sheet reflects adjustments as if the acquisition
of NEC had occurred on April 30, 1997. The Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of April 30, 1997 includes the historical
financial position of NEC as of March 31, 1997. The Unaudited Pro Forma
Condensed Consolidated Statement of Operations for the year ended October 31,
1996 includes the historical results of NEC for the twelve months ended December
31, 1996. The Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the six months ended April 30, 1997 includes the historical results of NEC
for the six months ended March 31, 1997. The historical results of NEC for the
three months ended December 31, 1996 are included in both periods.
The acquisition of NEC has been accounted for using the purchase method of
accounting. Accordingly, assets acquired and liabilities assumed have been
recorded at their estimated fair values, which are subject to further
adjustment, based upon appraisals and other analyses, with appropriate
recognition given to the effect of the Company's borrowing rates and income
taxes. Management does not expect that the final allocation of the purchase
price for the acquisition of NEC will differ materially from the allocations set
forth in the unaudited pro forma financial information presented herein.
The pro forma adjustments are based upon available information and
assumptions that management believes are reasonable. The Unaudited Pro Forma
Condensed Consolidated Financial Statements do not purport to present the
financial position or results of operations of the Company had the acquisition
of NEC occurred on the dates specified, nor are they necessarily indicative of
the results of operations that may be achieved in the future. The Unaudited Pro
Forma Condensed Consolidated Statements of Operations do not reflect any
adjustments for synergies that management expects to realize commencing upon
consummation of the acquisition. No assurances can be made as to the amount of
cost savings or revenue enhancements, if any, that actually will be realized.
The unaudited pro forma financial information is based on certain
assumptions and adjustments described in the Notes to Unaudited Pro Forma
Condensed Consolidated Financial Statements and should be read in conjunction
therewith and with the consolidated financial statements and related notes of
the Company included in its Annual Report on Form 10-K for the fiscal year ended
October 31, 1996 and the consolidated financial statements of NEC incorporated
by reference in Item 7(a) of this report.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations do
not include two charges that will be taken by the Company in the fiscal quarter
ending July 31, 1997: (i) a non-recurring charge of approximately $190 million,
consisting of $169 million of purchased in-process research and development and
approximately $21 million of certain current assets (supplies and deferred
costs) and (ii) a charge in the range of $75 million to $85 million representing
the realignment, consolidation and reorganization of the Company's existing
businesses. The effect of the former charge is reflected as an adjustment to
shareholders' equity in the Unaudited Pro Forma Condensed Consolidated Balance
Sheet. The effect of the latter charge is not reflected in the Unaudited Pro
Forma Condensed Consolidated Balance Sheet, but will be reflected in the
Company's balance sheet for the fiscal quarter ending July 31, 1997.
F-1
<PAGE> 5
HARCOURT GENERAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
APRIL 30, 1997
<TABLE>
<CAPTION>
NEC
HARCOURT AS REPORTED
AS REPORTED (NOTE 1) ADJUSTMENTS NOTES PRO FORMA
----------- ----------- ----------- ----- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and equivalents.................... $ 459,389 $ 18,092 ($213,673) 2 $ 263,808
Short-term investments.................. 340,769 1,447 (340,769) 2 1,447
Undivided interests in NMG Credit Card
Master Trust.......................... 180,428 -- -- 180,428
Accounts receivable, net................ 192,388 46,724 (12,704) 2 226,408
Inventories............................. 596,435 39,445 14,133 2 650,013
Current deferred income taxes........... 77,491 (18,442) 50,000 2,7 109,049
Other current assets.................... 82,269 31,698 (29,894) 2 84,073
---------- --------- --------- ----------
Total current assets............... 1,929,169 118,964 (532,907) 1,515,226
Property and equipment, net............. 564,257 32,588 (20,412) 2 576,433
Prepublication costs, net............... 208,130 8,186 36,500 3 252,816
Goodwill and other intangibles.......... 446,907 34,312 73,188 3 554,407
Goodwill -- transaction................. -- -- 705,684 2 705,684
Other long-term assets.................. 158,076 3,816 (2,483) 2 159,409
---------- --------- --------- ----------
Total other assets................. 813,113 46,314 812,889 1,672,316
---------- --------- --------- ----------
Total assets....................... $ 3,306,539 $ 197,866 $ 259,570 $3,763,975
========== ========= ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable........................... $ 136,970 $ 5,899 $ -- $ 142,869
Accounts payable........................ 252,150 14,081 -- 266,231
Accrued liabilities..................... 326,423 32,966 95,741 2 455,130
Taxes payable........................... 25,090 -- -- 25,090
Other liabilities....................... 131,323 -- 30,000 1,2 161,323
---------- --------- --------- ----------
Total current liabilities.......... 871,956 52,946 125,741 1,050,643
Notes and debentures.................... 792,342 108,943 300,000 2,6 1,201,285
Other................................... 232,593 14,416 -- 247,009
---------- --------- --------- ----------
Total long-term liabilities........ 1,024,935 123,359 300,000 1,448,294
Deferred income taxes................... 187,632 (24,728) 58,751 2,7 221,655
Minority interest....................... 217,653 10,830 -- 228,483
SHAREHOLDERS' EQUITY:
Preferred stock......................... 1,134 -- -- 1,134
Common stock............................ 70,745 2,171 (2,171) 70,745
Treasury stock.......................... -- (5,399) 5,399 --
Paid-in capital......................... 744,217 157,959 (157,959) 744,217
Cumulative translation adjustments...... (6,363) (5,504) 5,504 (6,363)
Retained earnings (deficit)............. 194,630 (113,768) (75,695) 5,167
---------- --------- --------- ----------
Total shareholders' equity......... 1,004,363 35,459 (224,922) 1 814,900
---------- --------- --------- ----------
Total liabilities and shareholders'
equity........................... $ 3,306,539 $ 197,866 $ 259,570 $3,763,975
========== ========= ========= ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
F-2
<PAGE> 6
HARCOURT GENERAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1997
<TABLE>
<CAPTION>
HARCOURT NEC
AS REPORTED AS REPORTED ADJUSTMENTS NOTES PRO FORMA
----------- ----------- ----------- ---- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................................... $1,648,725 $142,869 $ -- $1,791,594
Costs applicable to revenues............... 1,019,652 55,263 -- 1,074,915
Selling, general and administrative
expenses................................. 562,869 68,708 22,452 3 654,029
Corporate expenses......................... 18,939 2,619 -- 21,558
---------- -------- -------- ----------
Operating earnings....................... 47,265 16,279 (22,452) 41,092
Investment income.......................... 21,375 834 (14,672) 5 7,537
Interest expense........................... (41,753) (4,217) (8,775) 6 (54,745)
---------- -------- -------- ----------
Earnings (loss) before income taxes and
minority interest........................ 26,887 12,896 (45,899) (6,116)
Income tax expense......................... (9,141) (2,028) 12,967 7 1,798
---------- -------- -------- ----------
Earnings (loss) before minority interest... 17,746 10,868 (32,932) (4,318)
Minority interest.......................... -- (298) -- (298)
---------- -------- -------- ----------
Net earnings (loss)........................ $ 17,746 $ 10,570 ($32,932) ($ 4,616)
========== ======== ======== ==========
Weighted average shares outstanding........ 72,232 8 70,874
========== ==========
Net earnings (loss) per common share....... $ 0.25 ($ 0.07)
========== ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
F-3
<PAGE> 7
HARCOURT GENERAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
HARCOURT NEC
AS REPORTED AS REPORTED ADJUSTMENTS NOTES PRO FORMA
----------- ----------- ----------- ----- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................................... $3,289,919 $288,801 $ -- $3,578,720
Costs applicable to revenues............... 1,906,974 115,856 23,860 2 2,046,690
Selling, general and administrative
expenses................................. 1,003,841 138,244 120,050 3 1,262,135
Corporate expenses......................... 34,382 5,237 -- 39,619
---------- -------- --------- ----------
Operating earnings....................... 344,722 29,464 (143,910) 230,276
Investment income.......................... 27,329 2,783 (26,775) 5 3,337
Interest expense........................... (82,882) (8,113) (20,886) 6 (111,881)
---------- -------- --------- ----------
Earnings before income taxes and minority
interest................................. 289,169 24,134 (191,571) 121,732
Income tax expense......................... (98,318) (2,236) 60,347 7 (40,207)
---------- -------- --------- ----------
Earnings before minority interest.......... 190,851 21,898 (131,224) 81,525
Minority interest.......................... -- (538) -- (538)
---------- -------- --------- ----------
Net earnings............................... $ 190,851 $ 21,360 ($131,224) $ 80,987
========== ======== ========= ==========
Weighted average shares outstanding........ 72,770 72,770
========== ==========
Net earnings per common share.............. $ 2.62 $ 1.11
========== ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
F-4
<PAGE> 8
1. BASIS OF PRESENTATION
The acquisition of NEC has been accounted for using the purchase method of
accounting. Accordingly, assets acquired and liabilities assumed have been
recorded at their estimated fair values, which are subject to further
adjustment, based upon appraisals and other analyses, with appropriate
recognition given to the effect of the Company's borrowing rates and income
taxes. Management does not expect that the final allocation of the purchase
price for the acquisition of NEC will differ materially from the allocations set
forth in the unaudited pro forma financial information presented herein.
In connection with the acquisition, NEC's accounting policies have been
conformed with those of Harcourt General with respect to revenue recognition of
certain subscription contracts and deferred expenses. The Unaudited Pro Forma
Condensed Consolidated Statements of Operations do not give effect to these
changes as the amounts will not result in a material change to the information
presented herein.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
presented exclude the effects of certain non-recurring charges directly
attributable to the acquisition of NEC. The Company will incur a non-recurring
charge of approximately $190 million in the fiscal quarter ending July 31, 1997
which will be comprised of two components. One component is the value of
purchased in-process research and development of $169 million. The other
component is the value of certain current assets (supplies and deferred costs)
of approximately $21 million, which is required to be recognized in accordance
with the Company's accounting policies. This charge is reflected on the
Unaudited Pro Forma Condensed Consolidated Balance Sheet as a reduction of
shareholders' equity, together with the elimination of NEC's historical equity
of $35 million. In addition, the Unaudited Pro Forma Condensed Consolidated
Financial Statements do not reflect a charge in the range of $75 million to $85
million. See Note 4.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
reflect adjustments as if the acquisition of NEC had occurred on November 1,
1995. The Unaudited Pro Forma Condensed Consolidated Balance Sheet reflects
adjustments as if the acquisition of NEC had occurred on April 30, 1997. The
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of April 30, 1997
includes the historical financial position of NEC as of March 31, 1997. The
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year
ended October 31, 1996 include the historical results of NEC for the twelve
months ended December 31, 1996. The Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the six months ended April 30, 1997 include the
historical results of NEC for the six months ended March 31, 1997. The
historical results of NEC for the three months ended December 31, 1996 are
included in both periods.
Certain reclassifications have been made to the historical balance sheet
and statements of operations of NEC to conform to the Company's presentation.
2. DESCRIPTION OF CONSIDERATION
The pro forma cost of the acquisition of NEC has been allocated to assets
acquired and liabilities assumed at their estimated fair values as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Purchase of NEC stock and options.............................................. $801,942
Fees and other expenses........................................................ 52,500
--------
Pro forma cost of the acquisition of NEC(a).................................... 854,442
Net tangible book value of NEC................................................. 1,147
Estimated fair value of tangible and identifiable intangible assets
acquired(b).................................................................. 332,103
Estimated fair value of liabilities assumed and accrued acquisition
liabilities(b)............................................................... (184,492)
--------
Estimated fair value of net assets acquired.................................... 148,758
--------
Excess of cost over estimated fair value of net assets acquired................ $705,684
========
</TABLE>
F-5
<PAGE> 9
- ---------------
(a) The cost of acquisition was funded through $300 million of borrowings under
the Company's revolving credit agreement and cash and short-term investments
of approximately $554 million.
(b) The estimated fair value adjustments consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Purchased in-process research and development (Note 1)......................... $169,000
Purchased deferred costs and supplies (Note 1)................................. 20,463
Accounts receivable -- increase in bad debt and returns reserves............... (12,704)
Net inventory step-up to estimated fair value.................................. 14,133
Deferred income tax asset recorded (Note 7).................................... 50,000
Other current assets........................................................... (29,894)
Write-down to estimated fair value of property................................. (20,412)
Step-up of acquired prepublication rights (Note 3)............................. 36,500
Other identifiable intangible assets (Note 3).................................. 107,500
Other long term assets......................................................... (2,483)
---------
$332,103
=========
Accrued liabilities, primarily personnel and other exit costs.................. ($ 95,741)
Deferred revenue (Note 1)...................................................... (30,000)
Deferred income tax liability recorded (Note 7)................................ (58,751)
---------
($184,492)
=========
</TABLE>
The excess of cost over the estimated fair value of net assets acquired was
allocated to goodwill. Of the total $706 million allocated to goodwill, $290
million was attributed to National Education Training Group and will be
amortized on a straight-line basis over 25 years. The remaining goodwill will be
amortized on a straight-line basis over 40 years.
Through NEC, the Company holds approximately 82% of the issued and
outstanding shares of Steck-Vaughn Publishing Corporation. The Company has made
an offer to the board of directors of Steck-Vaughn to acquire the minority
interest in Steck-Vaughn. The unaudited pro forma financial information included
herein does not give effect to the acquisition of such shares, which would
result in an increase in goodwill of approximately $30 million.
3. AMORTIZATION OF IDENTIFIABLE INTANGIBLE ASSETS
The acquisition of NEC was accounted for as a purchase. Accordingly, the
total purchase price of $854 million was allocated to NEC's net assets acquired
based on their estimated fair values. Allocations and adjustments made to
certain identifiable intangible assets acquired consisted of the following:
<TABLE>
<CAPTION>
(IN
DESCRIPTION THOUSANDS)
----------------------------------------------------------------------- ------------
<S> <C>
Step-up of acquired prepublication rights.............................. $ 36,500
========
Course library......................................................... $ 23,400
Customer leads and contracts........................................... 36,500
Acquired technology.................................................... 47,600
--------
107,500
--------
Less existing NEC goodwill and other intangibles....................... (34,312)
--------
$ 73,188
========
</TABLE>
The identifiable intangible assets will be amortized using accelerated
methods over estimated lives of one to five years. The pro forma adjustments for
amortization, including amortization of goodwill, were approximately $22 million
for the six months ended April 30, 1997 and approximately $120 million for the
year ended October 31, 1996.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
give effect to the periodic amortization of all identifiable intangible assets
that would have resulted during the periods presented. Based on the allocation
of purchase price and estimated lives of the acquired identifiable intangible
assets set forth herein, the effect of this amortization, including amortization
of goodwill and the charge for purchased in-process research and development,
will be to reduce operating income by approximately $275 million in 1997, $71
million in 1998, $46 million in 1999, $26 million in 2000, $26 million in 2001
and $21 million in 2002.
F-6
<PAGE> 10
4. OTHER CHARGES
In connection with the acquisition of NEC and the integration of NEC's
businesses into those of the Company, the Company will incur a charge in the
range of $75 million to $85 million. The impact of this charge on pro forma
operating income is not presented in the Unaudited Pro Forma Condensed
Consolidated Statements of Operations. The charge reflects costs the Company
will incur in connection with the realignment, consolidation and reorganization
of its existing businesses, including Drake Beam Morin. These costs consist
primarily of severance and related employee benefit obligations, consolidation
of facilities and impairment of certain existing assets.
5. INVESTMENT INCOME
The acquisition was funded in part with the Company's existing cash and
short-term investments. Accordingly, had the acquisition occurred on November 1,
1995, the Company would have earned lower investment income as a result of the
reduction in the investment portfolio.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
give effect to the lower investment income that would have been earned during
the periods presented. Such adjustments were based on the Company's actual
weighted average yields on its cash balances and investment portfolio during
those periods.
6. INTEREST EXPENSE
In connection with the acquisition of NEC, the Company borrowed $300
million under its revolving credit agreement to fund a portion of the cash
consideration.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
give effect to the interest charges that would have been incurred during the
periods presented, assuming a weighted average borrowing rate of approximately
5.8%.
7. INCOME TAXES
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
have been adjusted to reflect the amount of income taxes that would have been
accrued had the acquisition taken place on November 1, 1995. The Unaudited Pro
Forma Condensed Consolidated Balance Sheet reflects deferred income taxes which
result from differences in the estimated fair values of net assets acquired and
liabilities assumed for financial reporting purposes and their respective tax
bases. The excess of cost over the estimated fair value of net assets acquired
and the purchased in-process research and development are not adjusted for
deferred taxes.
8. WEIGHTED AVERAGE SHARES OUTSTANDING
For the six months ended April 30, 1997, weighted average shares
outstanding on a pro forma basis do not include common stock equivalents that
became anti-dilutive due to the pro forma loss for that period.
F-7
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
HARCOURT GENERAL, INC.
By: s/ STEPHEN C. RICHARDS
STEPHEN C. RICHARDS
VICE PRESIDENT AND CONTROLLER
Date: July 25, 1997
S-1
<PAGE> 1
EXHIBIT 10.6
[EXECUTION COPY]
$750,000,000
CREDIT AGREEMENT
dated as of
July 18, 1997
among
Harcourt General, Inc.,
The Banks Parties Hereto,
The Chase Manhattan Bank,
as Syndication Agent,
Morgan Guaranty Trust Company of New York,
as Documentation Agent,
and
BankBoston, N.A.,
as Administrative Agent,
-----------------------------
Chase Securities Inc.,
Arranger
Bank of Tokyo-Mitsubishi Trust Company,
Bank of America National Trust and Savings Association,
The Bank of New York,
The Bank of Nova Scotia,
Credit Lyonnais New York Branch,
and
Fleet National Bank,
Co-Agents
Caisse Nationale de Credit Agricole,
Lead Manager
<PAGE> 2
TABLE OF CONTENTS
------------------
PAGE
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions...................................................1
SECTION 1.02. Accounting Terms and Determinations..........................14
SECTION 1.03. Types of Borrowings..........................................14
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend..........................................15
SECTION 2.02. Notice of Committed Borrowings...............................15
SECTION 2.03. Money Market Borrowings......................................15
SECTION 2.04. Notice to Banks: Funding of Loans............................19
SECTION 2.05. Registry; Notes..............................................20
SECTION 2.06. Maturity of Loans............................................21
SECTION 2.07. Interest Rates...............................................21
SECTION 2.08. Facility Fee.................................................24
SECTION 2.09. Optional Termination or Reduction of Commitments.............25
SECTION 2.10. Scheduled Termination of Commitments.........................25
SECTION 2.11. Optional Prepayments.........................................25
SECTION 2.12. General Provisions as to Payments............................25
SECTION 2.13. Funding Losses...............................................26
SECTION 2.14. Computation of Interest and Fees.............................26
SECTION 2.15. Regulation D Compensation....................................27
SECTION 2.16. Replacement of Banks.........................................27
SECTION 2.17. Increased Commitments; Additional Banks......................27
SECTION 2.18. Extension of Commitments.....................................28
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness................................................29
SECTION 3.02. Borrowings...................................................30
<PAGE> 3
PAGE
----
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power................................31
SECTION 4.02. Corporate Authorization......................................31
SECTION 4.03. Binding Effect...............................................31
SECTION 4.04. Financial Information........................................31
SECTION 4.05. Litigation...................................................32
SECTION 4.06. Governmental and Other Approvals.............................32
SECTION 4.07. Full Disclosure..............................................32
SECTION 4.08. Compliance with ERISA........................................32
SECTION 4.09. Taxes........................................................33
SECTION 4.10. Environmental Matters........................................33
ARTICLE 5
COVENANTS
SECTION 5.01. Furnishing of Financial Data and Certificates................33
SECTION 5.02. Payment of Taxes.............................................35
SECTION 5.03. Maintenance of Corporate Existence...........................35
SECTION 5.04. Maintenance of Property and Leases...........................35
SECTION 5.05. Insurance....................................................35
SECTION 5.06. Accounts and Reports.........................................35
SECTION 5.07. Inspection...................................................35
SECTION 5.08. Interest Coverage Ratio......................................36
SECTION 5.09. Leverage Ratio...............................................36
SECTION 5.10. Restrictions on Liens........................................36
SECTION 5.11. Restrictions on Sales, Consolidations and Mergers............37
SECTION 5.12. Transactions with Affiliates.................................37
SECTION 5.13. Restriction on Debt of Subsidiaries..........................38
SECTION 5.14. Use of Proceeds..............................................38
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default............................................38
SECTION 6.02. Notice of Default............................................41
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PAGE
----
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization................................41
SECTION 7.02. Agents and Affiliates........................................41
SECTION 7.03. Action by Agents.............................................41
SECTION 7.04. Consultation with Experts....................................41
SECTION 7.05. Liability of Agents..........................................42
SECTION 7.06. Indemnification..............................................42
SECTION 7.07. Credit Decision..............................................42
SECTION 7.08. Successor Agents.............................................42
SECTION 7.09. Agents' Fees.................................................43
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.....43
SECTION 8.02. Illegality...................................................44
SECTION 8.03. Increased Cost and Reduced Return............................44
SECTION 8.04. Taxes........................................................46
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans....48
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices......................................................48
SECTION 9.02. No Waivers...................................................49
SECTION 9.03. Expenses, Indemnification....................................49
SECTION 9.04. Sharing of Set-offs..........................................49
SECTION 9.05. Amendments and Waivers.......................................50
SECTION 9.06. Successors and Assigns.......................................50
SECTION 9.07. Collateral...................................................52
SECTION 9.08. Governing Law; Submission to Jurisdiction....................52
SECTION 9.09. Counterparts, Integration....................................52
SECTION 9.10. WAIVER OF JURY TRIAL.........................................52
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<PAGE> 5
Pricing Schedule
Exhibit A - Note
Exhibit B - Form of Money Market Quote Request
Exhibit C - Form of Invitation for Money Market Quotes
Exhibit D - Form of Money Market Quote
Exhibit E - Opinion of Counsel for the Borrower
Exhibit F - Opinion of Davis Polk & Wardwell, Special Counsel for the Agents
Exhibit G - Assignment and Assumption Agreement
Exhibit H - Extension Agreement
<PAGE> 6
CREDIT AGREEMENT
AGREEMENT dated as of July 18, 1997 among HARCOURT GENERAL, INC., the
BANKS parties hereto, THE CHASE MANHATTAN BANK, as Syndication Agent, MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent and BANKBOSTON, N.A.,
as Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"ADDITIONAL BANK" means any financial institution that becomes a Bank
for purposes hereof in connection with (i) an increase in the aggregate amount
of the Commitments pursuant to Section 2.17 or (ii) the replacement of a Bank
pursuant to Section 2.16 or 2.18.
"ADJUSTED CD RATE" has the meaning set forth in Section 2.07(b).
"ADMINISTRATIVE AGENT" means BankBoston, N.A. in its capacity as
administrative agent for the Banks hereunder, and its successors in such
capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"AFFILIATE" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "CONTROLLING PERSON") or
(ii) any Person (other than the Borrower or a Subsidiary) which is controlled by
or is 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 or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise. For purposes of
this Agreement no individual
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<PAGE> 7
shall be deemed to be an Affiliate solely by reason of the fact that such
individual is a director or officer of the Borrower.
"AGENT" means the Administrative Agent, the Documentation Agent or the
Syndication Agent, and "AGENTS" means the Administrative Agent, the
Documentation Agent and the Syndication Agent.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its
Money Market Loans, its Money Market Lending Office.
"ASSESSMENT RATE" has the meaning set forth in Section 2.07(b).
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"BANK" means each bank or other financial institution listed on the
signature pages hereof, each Additional Bank, each Assignee which becomes a Bank
pursuant to Section 9.06(c), and their respective successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"BASE RATE LOAN" means a Committed Loan to be made by a Bank as a Base
Rate Loan in accordance with the applicable Notice of Committed Borrowing or
pursuant to Article VIII.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
"BORROWER" means Harcourt General, Inc., a Delaware corporation, and its
successors.
"BORROWER'S 1996 FORM 10-K" means the Borrower's annual report on Form
10-K for 1996, as filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.
"BORROWING" has the meaning set forth in Section 1.03.
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<PAGE> 8
"CAPITALIZED LEASE" means a lease under which, in accordance with
generally accepted accounting principles, the liability of the lessee is
required to be capitalized on its balance sheet.
"CD BASE RATE" has the meaning set forth in Section 2.07(b).
"CD LOAN" means a Committed Loan to be made by a Bank as a CD Loan in
accordance with the applicable Notice of Committed Borrowing.
"CD MARGIN" has the meaning set forth in Section 2.07(b).
"CD REFERENCE BANKS" means The Chase Manhattan Bank, Morgan Guaranty
Trust Company of New York and BankBoston, N.A.
"COMMITMENT" means (i) with respect to each Bank listed on the signature
pages hereof, the amount set forth opposite the name of such Bank on the
signature pages hereof, and (ii) with respect to each Additional Bank or
Assignee which becomes a Bank pursuant to Section 2.16, 2.17, 2.18 or 9.06(c),
the amount of the Commitment thereby assumed by it, in each case as such amount
may be reduced from time to time pursuant to Section 2.09 or 9.06(c) or
increased from time to time pursuant to Section 2.17 or 9.06(c).
"COMMITTED LOAN" means a loan made by a Bank pursuant to Section 2.01.
"CONSOLIDATED EBITDA" means, for any fiscal period, Consolidated Net
Income for such period plus, to the extent deducted in determining Consolidated
Net Income for such period, the aggregate amount of (i) Consolidated Interest
Expense, (ii) taxes based on or measured by income and (iii) depreciation,
amortization and other similar non-cash charges.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest
expense of the Borrower and its Subsidiaries less investment and interest income
of the Borrower and its Subsidiaries for such period, determined on a
consolidated basis.
"CONSOLIDATED NET ASSETS" means the total amount of all assets appearing
on the consolidated balance sheet of the Borrower and its Subsidiaries (at their
net book values, after deducting related depreciation, amortization and all
other valuation reserves which have been set aside in connection with the
business conducted and which are reflected on the aforementioned consolidated
balance sheet), less total current liabilities other than long-term liabilities
due within one year.
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<PAGE> 9
"CONSOLIDATED NET INCOME" means for any period, the aggregate of the net
income (less losses) of the Borrower and its Subsidiaries for such period (after
eliminating all intercompany items and after provisions for minority interests,
if any), all determined in accordance with generally accepted accounting
principles; provided, however, Consolidated Net Income shall not include (a)
extraordinary gains or extraordinary losses, (b) the net income of any
corporation or other enterprise accrued prior to the date it becomes a
Subsidiary, (c) any amortization or write-off of goodwill or other intangible
items arising in connection with a merger, consolidation or acquisition of stock
or assets to which the Borrower or a Subsidiary is a party, (d) any write-off or
restructuring charge resulting from the Borrower's acquisition in June 1997 of
National Education Corporation or (e) the net income (or loss) of NMG and its
Subsidiaries, except (in the case of income) to the extent of dividends received
by the Borrower from NMG.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date. NMG and its Subsidiaries are Consolidated Subsidiaries.
"CONTINUING DIRECTORS" means (i) the members of the board of directors
of the Borrower on the date hereof and (ii) future members of such board of
directors who were nominated or appointed by a majority of the Continuing
Directors at the date of their nomination or appointment.
"DEBT" of any Person means, at any date, all obligations of such Person
which would, in accordance with generally accepted accounting principles, be
classified as liabilities (excluding deferred tax liabilities) of such Person,
as of such date, but in any event including (i) all obligations of such Person
as lessee under Capitalized Leases and (ii) all Debt of others secured by a Lien
on any asset of such Person, whether or not such Debt is assumed by such Person
and excluding all Debt of others Guaranteed by such Person, except to the extent
the same would be reflected as a liability on a balance sheet of such Person
prepared in accordance with generally accepted accounting principles as of such
date; provided that Debt shall include Guarantees of bonds, notes or other
similar obligations of a state, city, town or other governmental agency or
entity which obligations are issued in order to finance property used or to be
used by the Borrower or any Subsidiary.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction,
4
<PAGE> 10
commodity swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.
"DOCUMENTATION AGENT" means Morgan Guaranty Trust Company of New York in
its capacity as documentation agent for the Banks hereunder, and its successors
in such capacity.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City or Boston, Massachusetts are
authorized by law to close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent; provided that any Bank may
so designate separate Domestic Lending Offices for its Base Rate Loans, on the
one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"DOMESTIC LOANS" means CD Loans or Base Rate Loans or both.
"DOMESTIC RESERVE PERCENTAGE" has the meaning set forth in Section
2.07(b).
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 3.01.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
5
<PAGE> 11
"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 or 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.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office, branch
or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.
"EURO-DOLLAR LOAN" means a Committed Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"EURO-DOLLAR MARGIN" has the meaning set forth in Section 2.07(c).
"EURO-DOLLAR REFERENCE BANKS" means the principal London offices of The
Chase Manhattan Bank, Morgan Guaranty Trust Company of New York and Bank
Boston, N.A.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXISTING CREDIT AGREEMENT" means the Credit Agreement dated as of
December 16, 1994 among the Borrower, the banks listed on the signature pages
6
<PAGE> 12
thereof, Morgan Guaranty Trust Company of New York, as documentation agent, The
First National Bank of Boston, as administrative agent and The Bank of Nova
Scotia and National Westminster Bank Plc, as co-agents, as amended to the
Effective Date.
"EXTENSION AGREEMENT" means an agreement by a Bank extending its
Commitment as requested by the Borrower, substantially in the form of Exhibit H
hereto.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to BankBoston, N.A. on such day on such
transactions as determined by the Administrative Agent.
"FIXED RATE LOANS" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01(a)) or any combination of the foregoing.
"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; provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "GUARANTEE" used as a verb has a corresponding meaning.
"INCREASED COMMITMENTS" has the meaning set forth in Section 2.17(a).
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INTEREST COVERAGE RATIO" means, at any date, the percentage equivalent
of a fraction the numerator of which is Consolidated EBITDA for the four
consecutive fiscal quarters of the Borrower most recently ended on or prior to
such date and the denominator of which is Consolidated Interest Expense for such
period.
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar Borrowing,
the period commencing on the date of such Borrowing and ending one, two, three
or six
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<PAGE> 13
months thereafter, as the Borrower may elect in the applicable Notice of
Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period applicable to a Loan made by any Bank
which would otherwise end after such Bank's Termination Date shall end
on such Bank's Termination Date.
(2) with respect to each CD Borrowing, the period commencing on the date of such
Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may
elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period applicable to a Loan made by any Bank
which would otherwise end after such Bank's Termination Date shall end
on such Bank's Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period applicable to a Loan made by any Bank
which would otherwise end after such Bank's Termination Date shall end
on such Bank's Termination Date.
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<PAGE> 14
(4) with respect to each Money Market LIBOR Borrowing, the period commencing on
the date of such Borrowing and ending such whole number of months thereafter as
the Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period applicable to a Loan made by any Bank
which would otherwise end after such Bank's Termination Date shall end
on such Bank's Termination Date.
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 15 days) as the Borrower may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period applicable to a Loan made by any Bank
which would otherwise end after such Bank's Termination Date shall end
on such Bank's Termination Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means all loans, advances, extensions of credit,
guarantees, purchases of stock (other than stock of the Borrower) or other
securities, contributions to capital or otherwise, whether existing on the date
of this Agreement or hereafter made.
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<PAGE> 15
"LEVERAGE RATIO" means, at any date, the percentage equivalent of a
fraction the numerator of which is Total Debt at such date and the denominator
of which is Consolidated EBITDA for the four consecutive fiscal quarters of the
Borrower and its Consolidated Subsidiaries most recently ended on or prior to
such date.
"LIBOR AUCTION" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"LOAN" means a Domestic Loan or a Euro-Dollar Loan or a Money Market
Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market
Loans or any combination of the foregoing.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.07(c).
"MATERIAL DEBT" means Debt (other than the Loans) of the Borrower and/or
one or more of its Consolidated Subsidiaries, in an aggregate principal amount
exceeding $15,000,000.
"MATERIAL FINANCIAL OBLIGATIONS" means a principal amount of Debt and/or
payment or collateralization obligations in respect of Derivatives Obligations
of the Borrower and/or one or more of its Subsidiaries, exceeding in the
aggregate $15,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $15,000,000.
"MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section
2.03(d).
"MONEY MARKET ABSOLUTE RATE LOAN" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"MONEY MARKET LENDING OFFICE" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
10
<PAGE> 16
hereafter designate as its Money Market Lending Office by notice to the Borrower
and the Agent; provided that any Bank may from time to time by notice to the
Borrower and the Administrative Agent designate separate Money Market Lending
Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market
Absolute Rate Loans, on the other hand, in which case all references herein to
the Money Market Lending Office of such Bank shall be deemed to refer to either
or both of such offices, as the context may require.
"MONEY MARKET LIBOR LOAN" means a loan to be made by a Bank pursuant to
a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01(a)).
"MONEY MARKET LOAN" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"MONEY MARKET MARGIN" has the meaning set forth in Section 2.03(d).
"MONEY MARKET QUOTE" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
"MOODY'S" has the meaning set forth in the Pricing Schedule.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"NMG" means The Neiman-Marcus Group, Inc., a Delaware corporation.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "NOTE" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as defined
in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section
2.03(f)) which may be given by the Borrower to the Administrative Agent prior to
the Effective Date or during the Revolving Credit Period.
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
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<PAGE> 17
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"PLAN" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"PRICING SCHEDULE" means the Schedule attached hereto identified as
such.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"REFERENCE BANKS" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "REFERENCE BANK" means any one
of such Reference Banks.
"REFUNDING BORROWING" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having at least 51% of the
aggregate amount of the Commitments at such time or, if the Commitments shall
have been terminated in their entirety, holding at least 51% of the aggregate
unpaid principal amount of the Loans.
"REVOLVING CREDIT PERIOD" means, with respect to any Bank, the period
from and including the Effective Date to but not including such Bank's
Termination Date.
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<PAGE> 18
"S&P" has the meaning set forth in the Pricing Schedule.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary or any group
of Subsidiaries having consolidated assets, individually or in the aggregate,
equal to or greater than 7% of the consolidated assets of the Borrower and its
Subsidiaries at such time.
"SMITH FAMILY GROUP" means the group of persons party to the
Smith-Lurie/Marks Stockholder Agreement dated as of December 29, 1986, as
amended (whether or not such agreement is terminated) and the progeny of each
such person.
"SUBSIDIARY" means any corporation or other entity (i) 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 (or, if such term
is used with reference to any other Person, by such Person) or (ii) a majority
of the equity interest in which shall at the time be owned directly or
indirectly by the Borrower and which is a Consolidated Subsidiary as of such
time; provided that neither NMG nor any of its Subsidiaries shall be deemed to
be a Subsidiary of the Borrower.
"SYNDICATION AGENT" means The Chase Manhattan Bank in its capacity as
syndication agent for the Banks hereunder, and its successors in such capacity.
"TERMINATION DATE" means, for any Bank, July 18, 2002, as such date may
be extended from time to time with respect to such Bank pursuant to Section 2.18
or, if such day is not a Euro-Dollar Business Day, the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the Termination Date shall be the next preceding
Euro-Dollar Business Day.
"TOTAL DEBT" means, at any date, an amount equal to the Debt of the
Borrower and its Subsidiaries (excluding any such Debt (other than short-term
indebtedness for borrowed money or the current portion of long-term Debt) which
is a current liability of the Borrower or a Subsidiary) determined on a
consolidated basis as of such date.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential
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liability of a member of the ERISA Group to the PBGC or any other Person under
Title IV of ERISA.
"UNITED STATES" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
"WHOLLY-OWNED 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
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred with by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks; provided that, if the Borrower notifies the Documentation Agent
that the Borrower wishes to amend any covenant in Article 5 to eliminate the
effect of any change in generally accepted accounting principles on the
operation of such covenant (or if the Documentation Agent notifies the Borrower
that the Required Banks wish to amend Article 5 for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "BORROWING" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article 2 on a single date and for a single Interest Period. Borrowings are
classified for purposes of this Agreement either by reference to the pricing of
Loans comprising such Borrowing (e.g., a "EURO-DOLLAR BORROWING" is a Borrowing
comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2
under which participation therein is determined (i.e., a "COMMITTED BORROWING"
is a Borrowing under Section 2.01 in which all Banks participate in proportion
to their Commitments, while a "MONEY MARKET BORROWING" is a Borrowing under
Section 2.03 in which the Bank participants are determined on the basis of their
bids in accordance therewith).
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ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. During its Revolving Credit Period
each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower pursuant to this Section from time to
time in amounts such that the aggregate principal amount of Committed Loans by
such Bank at any one time outstanding shall not exceed the amount of its
Commitment. Each Borrowing under this Section shall be in an aggregate principal
amount of $5,000,000 or any larger multiple of $1,000,000 (except that any such
Borrowing may be in the aggregate amount available in accordance with Section
3.02(b)) and shall be made from the several Banks ratably in proportion to their
respective Commitments. Within the foregoing limits, the Borrower may borrow
under this Section, repay, or to the extent permitted by Section 2.11, prepay
Loans and reborrow at any time under this Section.
SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give
the Administrative Agent notice (a "NOTICE OF COMMITTED BORROWING") not later
than 11:00 A.M. (Boston, Massachusetts time) on (x) the date of each Base Rate
Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z)
the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day in
the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a
Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be CD Loans, Base
Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of the Interest
Period applicable thereto, subject to the provisions of the definition of
Interest Period.
SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In
addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as
set forth in this Section, request the Banks during the Revolving Credit Period
to make offers to make Money Market Loans to the Borrower. The Banks may, but
shall have no obligation to, make such offers and the Borrower may, but shall
have no obligation to, accept any such offers in the manner set forth in this
Section.
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(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Administrative Agent by telex or facsimile transmission a Money Market Quote
Request substantially in the form of Exhibit B hereto so as to be received no
later than 11:00 A.M. (Boston, Massachusetts time) on (x) the fourth Euro-Dollar
Business Day prior to the date of Borrowing proposed therein, in the case of a
LIBOR Auction or (y) the Domestic Business Day next preceding the date of
Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Borrower and the Administrative
Agent shall have mutually agreed and shall have notified to the Banks not later
than the date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Administrative Agent may agree) of any
other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a Money
Market Quote Request, the Administrative Agent shall send to the Banks by telex
or facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
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<PAGE> 22
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Administrative Agent by telex or facsimile transmission at its
offices referred to in Section 9.01 not later than (x) 4:00 P.M. (Boston,
Massachusetts time) on the fourth Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (Boston,
Massachusetts time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective); provided that Money Market Quotes submitted by the Administrative
Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank
may be submitted, and may only be submitted, if the Administrative Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) 3:00 P.M. (Boston, Massachusetts time), in the case
of a LIBOR Auction or (y) 9:00 A.M. (Boston, Massachusetts time), in the case of
an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote
so made shall be irrevocable except with the written consent of the
Administrative Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form
of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater than
or less than the Commitment of the quoting Bank, (x) must be $5,000,000
or a larger multiple of $1,000,000, (y) may not exceed the principal
amount of Money Market Loans for which offers were requested and (z) may
be subject to an aggregate limitation as to the principal amount of
Money Market Loans for which offers being made by such quoting Bank may
be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "MONEY MARKET MARGIN")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%) (the "MONEY MARKET
ABSOLUTE RATE") offered for each such Money Market Loan, and
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(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or
does not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth
in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Administrative Agent shall promptly notify
the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that
is in accordance with subsection (d) and (y) of any Money Market Quote that
amends, modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Administrative
Agent unless such subsequent Money Market Quote is submitted solely to correct a
manifest error in such former Money Market Quote. The Administrative Agent's
notice to the Borrower shall specify (A) the aggregate principal amount of Money
Market Loans for which offers have been received for each Interest Period
specified in the related Money Market Quote Request, (B) the respective
principal amounts and Money Market Margins or Money Market Absolute Rates, as
the case may be, so offered and (C) if applicable, limitations on the aggregate
principal amount of Money Market Loans for which offers in any single Money
Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:00 A.M. (Boston,
Massachusetts time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Administrative Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective), the Borrower shall notify the
Administrative Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to subsection (e). In the case of acceptance, such
notice (a "NOTICE OF MONEY MARKET BORROWING")
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shall specify the aggregate principal amount of offers for each Interest Period
that are accepted. The Borrower may accept any Money Market Quote in whole or in
part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be, and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) Allocation by Administrative Agent. If offers are made by two or more
Banks with the same Money Market Margins or Money Market Absolute Rates, as the
case may be, for a greater aggregate principal amount than the amount in respect
of which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted shall
be allocated by the Administrative Agent among such Banks as nearly as possible
(in multiples of $1,000,000, as the Administrative Agent may deem appropriate)
in proportion to the aggregate principal amounts of such offers. Determinations
by the Administrative Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks: Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of
the contents thereof and of such Bank's share (if any) of such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (Boston, Massachusetts time) on the date of
each Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in Boston, Massachusetts to the
Administrative Agent at its address referred to in Section 9.01. Unless the
Administrative Agent determines that any applicable condition specified in
Article 3 has not been satisfied, the Administrative Agent will make the funds
so received from the Banks available to the Borrower at the Administrative
Agent's aforesaid address.
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(c) If any Bank makes a new Loan hereunder on a day on which the Borrower
is to repay all or any part of an outstanding Loan from such Bank, such Bank
shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the
Administrative Agent as provided in subsection (b), or remitted by the Borrower
to the Administrative Agent as provided in Section 2.12, as the case may be.
(d) Unless the Administrative Agent shall have received notice from a
Bank prior to the date of any Borrowing that such Bank will not make available
to the Administrative Agent such Bank's share of such Borrowing, the
Administrative Agent may assume that such Bank has made such share available to
the Administrative Agent on the date of such Borrowing in accordance with
subsections (b) and (c) of this Section 2.04 and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Administrative Agent, such Bank and, if such Bank
shall have failed to do so within four Domestic Business Days of demand by the
Administrative Agent therefor (a copy of which shall be simultaneously given to
the Borrower), the Borrower severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Administrative Agent, at the Federal Funds
Rate. If such Bank shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement.
SECTION 2.05. Registry; Notes. (a) The Administrative Agent shall
maintain a register (the "REGISTER") on which it will record the Commitment of
each Bank, each Loan made by such Bank and each repayment of any Loan made by
such Bank. Any such recordation by the Administrative Agent on the Register
shall be conclusive, absent manifest error. Failure to make any such
recordation, or any error in such recordation, shall not affect the Borrower's
obligations hereunder.
(b) The Borrower hereby agrees that, promptly upon the request of any
Bank at any time, the Borrower shall deliver to such Bank a duly executed Note
payable to the order of such Bank and representing the obligation of the
Borrower to pay the unpaid principal amount of the Loans made to the Borrower by
such Bank, with interest as provided herein on the unpaid principal amount from
time to time outstanding.
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(c) Each Bank shall record the date, amount, type and maturity of each
Loan made by it and the date and amount of each payment of principal made by the
Borrower with respect thereto, and may, if such Bank so elects in connection
with any transfer or enforcement of its Note, endorse on the schedule forming a
part thereof appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding; provided that the failure of such
Bank to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Such Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach to
and make a part of its Note a continuation of any such schedule as and when
required.
SECTION 2.06. Maturity of Loans. Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable thereto.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of or interest on any Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate
Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal amount
thereof, for each day during the Interest Period applicable thereto, at a rate
per annum equal to the sum of the CD Margin for such day plus the applicable
Adjusted CD Rate for such Interest Period; provided that if any CD Loan shall,
as a result of clause (2)(b) of the definition of Interest Period, have an
Interest Period of less than 30 days, such CD Loan shall bear interest during
such Interest Period at the rate applicable to Base Rate Loans during such
period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than 90 days, at intervals of 90
days after the first day thereof. Any overdue principal of or interest on any CD
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin
for such day plus the Adjusted CD Rate applicable to such Loan and (ii) the rate
applicable to Base Rate Loans for such day.
"CD MARGIN" means a rate per annum determined in accordance with the
Pricing Schedule.
The "ADJUSTED CD RATE" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
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[ CDBR ]*
ACDR = [ -----------] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
-------------
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/100 of 1%
The "CD BASE RATE" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (Boston, Massachusetts time) (or as soon thereafter
as practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at face
value from each CD Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of such CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"DOMESTIC RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in Boston, Massachusetts with deposits exceeding five billion
dollars in respect of new non-personal time deposits in dollars in Boston,
Massachusetts having a maturity comparable to the related Interest Period and in
an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change in the Domestic
Reserve Percentage.
"ASSESSMENT RATE" means for any day the annual assessment rate in effect
on such day which is payable by a member of the Bank Insurance Fund classified
as adequately capitalized and within supervisory subgroup "A" (or a comparable
successor assessment risk classification) within the meaning of 12 C.F.R.
Section 327.4(a) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the United States. The
Adjusted CD Rate shall be adjusted automatically on and as of the effective date
of any change in the Assessment Rate.
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(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the applicable London Interbank Offered Rate for such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"EURO-DOLLAR MARGIN" means a rate per annum determined in accordance
with the Pricing Schedule.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London inter-bank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day from and including the date
payment thereof was due to but excluding the date of actual payment, at a rate
per annum equal to the sum of 2% plus the higher of (i) the sum of the
Euro-Dollar Margin for such day plus the London Interbank Offered Rate
applicable to such Loan and (ii) the rate applicable to Base Rate Loans for such
day.
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the Base Rate for such day.
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(f) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section. If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.08. Facility Fee. The Borrower shall pay to the Administrative
Agent for the account of the Banks ratably in proportion to their respective
Commitments a facility fee at a rate per annum equal to the Facility Fee Rate
(determined daily in accordance with the Pricing Schedule). Such facility fee
shall accrue (i) from and including the Effective Date to but excluding the
Termination Date (or earlier date of termination of the Commitments in their
entirety), on the daily aggregate amount of the Commitments (whether used or
unused) and (ii) from and including the Termination Date (or earlier date of
termination of the Commitments in their entirety) to but excluding the date the
Loans shall be repaid in their entirety, on the daily average aggregate
outstanding principal amount of the Loans. Accrued fees under this Section shall
be payable quarterly on each March 1, June 1, September 1 and December 1 prior
to the Termination Date and upon the date of termination of the Commitments in
their entirety (and, if later, the date the Loans shall be repaid in their
entirety).
SECTION 2.09. Optional Termination or Reduction of Commitments. During
the Revolving Credit Period, the Borrower may, upon at least three Domestic
Business Days' notice to the Administrative Agent, (i) terminate the Commitments
at any time, if no Loans are outstanding at such time or (ii) ratably reduce
from time to time by an aggregate amount of $10,000,000 or any larger multiple
thereof, the aggregate amount of the Commitments in excess of the aggregate
outstanding principal amount of the Loans.
SECTION 2.10. Scheduled Termination of Commitments. The Commitments
shall terminate on the Termination Date, and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such date.
SECTION 2.11. Optional Prepayments. (a) The Borrower may (i) upon at
least one Domestic Business Day's notice to the Administrative Agent, prepay any
Domestic Borrowing (or any Money Market Borrowing bearing interest at the Base
Rate pursuant to Section 8.01(a)) or (ii) subject to Section 2.13, upon at least
three
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Euro-Business Days' notice to the Administrative Agent, prepay any Euro-Dollar
Borrowing, in whole at any time, or from time to time in part in amounts
aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such Borrowing.
(b) Except as provided in clause (i) of Section 2.11(a), the Borrower may
not prepay all or any portion of the principal amount of any Money Market Loan
prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share (if any) of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (Boston, Massachusetts time) on the date
when due, in Federal or other funds immediately available in Boston,
Massachusetts, to the Administrative Agent at its address referred to in Section
9.01. The Administrative Agent will promptly distribute to each Bank its ratable
share of each such payment received by the Administrative Agent for the account
of the Banks. Whenever any payment of principal of, or interest on, the Domestic
Loans or of fees shall be due on a day which is not a Domestic Business Day, the
date for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day,
the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. Whenever any payment of principal of, or
interest on, the Money Market Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an amount
equal to the amount
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then due such Bank. If and to the extent that the Borrower shall not have so
made such payment, each Bank shall repay to the Administrative Agent forthwith
on demand such amount distributed to such Bank together with interest thereon,
for each day from the date such amount is distributed to such Bank until the
date such Bank repays such amount to the Administrative Agent, at the Federal
Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article 2 or 6 or
otherwise, but not including Article 8) on any day other than the last day of
the Interest Period applicable thereto, or if the Borrower fails to borrow or
prepay any Fixed Rate Loans after notice has been given to any Bank in
accordance with Section 2.04(a) or 2.11(c), the Borrower shall reimburse each
Bank within 15 days after demand for any resulting loss or expense incurred by
it (or by an existing or prospective Participant in the related Loan), including
(without limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin for the period after
any such payment or failure to borrow or prepay, provided that such Bank shall
have delivered to the Borrower a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of clearly
demonstrable error. Each such certificate shall be accompanied by such
information as the Borrower may reasonably request as to the computation set
forth therein.
SECTION 2.14. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.15. Regulation D Compensation. For so long as any Bank
maintains reserves against "Eurocurrency liabilities" (or any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of such Bank to United
States residents), and as a result the cost to such Bank (or its Euro-Dollar
Lending Office) of making or maintaining its Euro-Dollar Loans is increased,
then such Bank may require the Borrower to pay, contemporaneously with each
payment of interest on the Euro-Dollar Loans, additional interest on the related
Euro-Dollar Loan of such Bank at a rate per annum up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one minus the Euro-Dollar Reserve Percentage over (ii) the rate specified in
clause (i)(A). Any Bank wishing to require payment of such additional interest
(x) shall so notify the Borrower and the Administrative Agent, in which case
such additional interest on the Euro-Dollar Loans of such Bank shall be payable
to such Bank at the place indicated in such
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notice with respect to each Interest Period commencing at least three
Euro-Dollar Business Days after the giving of such notice and (y) shall furnish
to the Borrower at least three Euro-Dollar Business Days prior to each date on
which interest is payable on the Euro-Dollar Loans an officer's certificate
setting forth the amount to which such Bank is then entitled under this Section
(which shall be consistent with such Bank's good faith estimate of the level at
which the related reserves are maintained by it). Each such certificate shall be
accompanied by such information as the Borrower may reasonably request as to the
computation set forth therein.
SECTION 2.16. Replacement of Banks. The Borrower shall have the right,
from time to time, with the assistance of the Agents, to substitute a bank or
banks (which may be one or more of the Banks) for any Bank whose participation
hereunder the Borrower shall have determined (in its discretion) to terminate.
SECTION 2.17. Increased Commitments; Additional Banks. (a) Subsequent to
the Effective Date, the Borrower may, upon at least 30 days' notice to the
Administrative Agent (which shall promptly provide a copy of such notice to the
Banks), propose to increase the aggregate amount of the Commitments to an amount
not to exceed $1,000,000,000 (the amount of any such increase, the "INCREASED
COMMITMENTS"). Each Bank party to this Agreement at such time shall have the
right (but no obligation), for a period of 15 days following receipt of such
notice, to elect by notice to the Borrower and the Administrative Agent to
increase its Commitment by a principal amount which bears the same ratio to the
Increased Commitments as its then Commitment bears to the aggregate Commitments
then existing.
(b) If any Bank party to this Agreement shall not elect to increase its
Commitment pursuant to subsection (a) of this Section, the Borrower may
designate one or more other banks or other financial institutions (which may be,
but need not be, one or more of the existing Banks) which at the time agree in
the case of any such bank that is an existing Bank to increase its Commitment
and, in the case of any other such bank (an "ADDITIONAL BANK"), to become a
party to this Agreement. The sum of the increases in the Commitments of the
existing Banks pursuant to this subsection (b) plus the Commitments of the
Additional Banks shall not in the aggregate exceed the unsubscribed amount of
the Increased Commitments.
(c) An increase in the aggregate amount of the Commitments pursuant to
this Section 2.17 shall become effective upon the receipt by the Administrative
Agent of an agreement in form and substance satisfactory to the Administrative
Agent signed by the Borrower, by each Additional Bank and by each other Bank
whose Commitment is to be increased, setting forth the new Commitments of such
Banks and setting forth the agreement of each Additional Bank to become a party
to this Agreement and to be bound by all the terms and provisions hereof,
together with such evidence of appropriate corporate authorization on the part
of the Borrower with
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respect to the Increased Commitments and such opinions of counsel for the
Borrower with respect to the Increased Commitments as the Administrative Agent
may reasonably request.
SECTION 2.18. Extension of Commitments. (a) On no more than two separate
occasions, the Borrower may, upon not less than 30 days notice prior to the then
current Termination Date to the Administrative Agent (which shall notify each
Bank of receipt of such request), propose to extend the Termination Dates for
one additional year measured from the Termination Dates then in effect. Each
Bank shall endeavor to respond to such request, whether affirmatively or
negatively (such determination in the sole discretion of such Bank), by notice
to the Borrower and the Administrative Agent within 15 days of receipt of such
request. Subject to the execution by the Borrower, the Administrative Agent and
such Banks of a duly completed Extension Agreement in substantially the form of
Exhibit H, the Termination Date applicable to the Commitment of each Bank so
affirmatively notifying the Borrower and the Administrative Agent shall be
extended for the period specified above; provided that no Termination Date of
any Bank shall be extended unless Banks having at least 66 2/3% in aggregate
amount of the Commitments in effect at the time any such extension is requested
shall have elected so to extend their Commitments. Any Bank which does not give
such notice to the Borrower and the Administrative Agent shall be deemed to have
elected not to extend as requested, and the Commitment of each non-extending
Bank shall terminate on its Termination Date determined without giving effect to
such requested extension. The Borrower, at its discretion, will have the right
at any time pursuant to Section 2.16 to seek a replacement bank or other
financial institution for any Bank which does not elect to extend its
Commitment.
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective on
the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 9.05):
(a) receipt by the Syndication Agent of counterparts hereof signed by
each of the parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Syndication Agent in
form satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Syndication Agent of an opinion of the General Counsel
of the Borrower, given upon the express instruction of the Borrower,
substantially in the
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form of Exhibit E hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably request;
(c) receipt by the Syndication Agent of an opinion of Davis Polk &
Wardwell, special counsel for the Agents, substantially in the form of Exhibit F
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(d) receipt by the Syndication Agent of all documents it may reasonably
request relating to the existence of the Borrower, the corporate authority for
and the validity of this Agreement and the Notes, and any other matters relevant
hereto, all in form and substance satisfactory to the Syndication Agent;
(e) receipt by the Syndication Agent of evidence satisfactory to it of
the payment of all principal of and interest on any loans outstanding under, and
of all other amounts payable under, the Existing Credit Agreement; and
(f) receipt by the Syndication Agent of evidence satisfactory to it that
all participation fees have been paid to the Banks in such amounts previously
agreed;
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later than
July 31, 1997. The Syndication Agent shall promptly notify the Borrower and the
Banks of the Effective Date, and such notice shall be conclusive and binding on
all parties hereto. The Banks that are parties to the Existing Credit Agreement,
comprising the "Required Banks" as defined therein, and the Borrower agree that
the commitments under the Existing Credit Agreement shall terminate in their
entirety simultaneously with and subject to the effectiveness of this Agreement
and that the Borrower shall be obligated to pay the accrued facility fees
thereunder to but excluding the date of such effectiveness.
In the event that a Notice of Borrowing is given to the Administrative Agent
prior to the Effective Date, Section 2.13 shall become effective as of the date
such Notice of Borrowing is given, whether or not the other provisions of this
Agreement become effective in accordance with this Section 3.01.
SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on
the occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02 or 2.03, as the case may be;
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(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate amount
of the Commitments;
(c) the fact that, immediately after such Borrowing, no Default shall
have occurred and be continuing; and
(d) the fact that the representations and warranties of the Borrower
contained in this Agreement (other than, in the case of a Refunding Borrowing,
the representations and warranties set forth in Sections 4.04(c) and 4.05, which
need not be true if the matter which would make them untrue has theretofore been
disclosed in writing by the Borrower to the Banks) shall be true in all material
respects on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower and each
Significant Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, has all power
and authority to carry on its business as now being conducted and to own its
properties, and is duly qualified and in good standing as a foreign corporation
in each other jurisdiction in which the failure to qualify would materially and
adversely affect the conduct of its business or the enforceability of its
contractual rights.
SECTION 4.02. Corporate Authorization. The execution, delivery and
performance by the Borrower of this Agreement and the Notes are within the
Borrower's corporate power, have been duly authorized by all necessary corporate
action and will not contravene, or constitute a default under, any provision of
applicable law or regulation or of the Restated Certificate of Incorporation or
By-Laws of the Borrower, or of any judgment, order, decree, agreement or
instrument binding on the Borrower or result in the creation of any Lien upon
any of its property or assets.
SECTION 4.03. Binding Effect. This Agreement constitutes, and the Notes
when duly executed on behalf of the Borrower and delivered in accordance with
this
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Agreement will constitute, the valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms.
SECTION 4.04. Financial Information. (a) The consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of October 31, 1996 and the
related consolidated statements of income and cash flows for the fiscal year
then ended, reported on by Deloitte & Touche and set forth in the Borrower's
1996 Form 10-K, a copy of which has been delivered to each of the Banks, fairly
present, in conformity with generally accepted accounting principles, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of April 30, 1997 and the related unaudited
consolidated statements of income and cash flows for the six months then ended,
set forth in the Borrower's quarterly report for the fiscal quarter ended April
30, 1997 as filed with the Securities and Exchange Commission on Form 10-Q, a
copy of which has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in subsection (a) of this
Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such six-month period (subject to normal year-end
adjustments).
(c) Since October 31, 1996, there has been no material adverse change in
the business, financial position or results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. There are no actions, suits or proceedings
pending against or, to the knowledge of the Borrower, threatened against or
affecting, the Borrower or any Significant Subsidiary in any court or before or
by any governmental department, agency or instrumentality, in which there is a
reasonable possibility of an adverse decision which would materially and
adversely affect the financial condition or business of the Borrower and its
Subsidiaries, taken as a whole.
SECTION 4.06. Governmental and Other Approvals. No approval, consent or
authorization of or filing or registration with any governmental authority or
body is necessary for the execution, delivery or performance by the Borrower of
this Agreement or the Notes or for the performance by the Borrower of any of the
terms or conditions hereof or thereof.
SECTION 4.07. Full Disclosure. All financial statements and other
documents furnished by the Borrower to the Banks in connection with this
Agreement do not and
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will not contain any untrue statement of material fact or omit to state a
material fact necessary in order to make the statements contained therein not
misleading. The Borrower has disclosed to the Banks in writing any and all facts
which materially and adversely affect the business, operations or condition,
financial or otherwise, of the Borrower and its Subsidiaries or the Borrower's
ability to perform its obligations under this Agreement.
SECTION 4.08. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 4.09. Taxes. United States Federal income tax returns of the
Borrower have been examined and closed through the fiscal year ended October 31,
1994. The Borrower and its Subsidiaries have filed all United States Federal
income tax returns, and the Borrower and its Significant Subsidiaries have filed
all other material tax returns, which are required to be filed by them and have
paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower or any Significant Subsidiary except where the payment
of any such taxes is being contested in good faith by appropriate proceedings.
The charges, accruals and reserves on the books of the Borrower and its
Consolidated Subsidiaries in respect of taxes or other governmental charges are,
in the opinion of the Borrower, adequate.
SECTION 4.10. Environmental Matters. The Borrower has reasonably
concluded that the costs of compliance with Environmental Laws are unlikely to
have a material adverse effect on the business, financial condition, results of
operations or prospects of the Borrower and its Consolidated Subsidiaries,
considered as a whole.
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ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable hereunder remains unpaid:
SECTION 5.01. Furnishing of Financial Data and Certificates. The
Borrower will deliver to each of the Banks:
(a) As soon as practicable, and in any event within 75 days after the
close of each of the first three quarters of each fiscal year of the Borrower,
(i) the consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as at the end of such quarter, (ii) the consolidated statement of
income and retained earnings of the Borrower and its Consolidated Subsidiaries
for such quarter and for the portion of such fiscal year to and including such
quarter and (iii) the consolidated statement of cash flows of the Borrower and
its Consolidated Subsidiaries for the portion of such fiscal year to and
including such quarter, each of the foregoing to set forth in comparative form
the corresponding figures of the previous year and to be in reasonable detail
and certified by the principal accounting officer of the Borrower, subject to
year-end audit adjustments; delivery by the Borrower of its Quarterly Reports on
Form 10-Q shall be deemed compliance with this provision;
(b) As soon as practicable, and in any event within 120 days after the
close of each fiscal year of the Borrower, (i) the consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as at the end of such fiscal
year, (ii) the consolidated statement of income and retained earnings of the
Borrower and its Consolidated Subsidiaries for such fiscal year and (iii) the
consolidated statement of cash flows of the Borrower and its Consolidated
Subsidiaries for such fiscal year, each of the foregoing to set forth in
comparative form the corresponding figures of the previous year and to be in
reasonable detail and audited and certified by Deloitte & Touche or other
certified public accountants of nationally recognized standing reasonably
satisfactory to the Banks; delivery by the Borrower of its Annual Reports on
Form 10-K (together with its annual report to shareholders, if incorporated by
reference therein) shall be deemed compliance with this provision;
(c) Promptly after sending or filing, copies of all financial statements,
reports, notices and proxy statements as it shall send to its shareholders, and
of all periodic reports filed by the Borrower with any securities exchange or
with the Securities and Exchange Commission or any governmental authority
succeeding to any of its functions; and
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(d) Such other information (which is readily obtainable by the Borrower
without incurring any undue expense) regarding the financial condition of the
Borrower as any Bank may reasonably request.
Together with each delivery of financial statements required by clauses
(a) and (b) above, the Borrower will deliver to the Banks a certificate of its
principal accounting officer stating that to the best of his knowledge there
exists no Default or, if any Default exists, specifying the nature thereof, the
period of existence thereof and what action the Borrower proposes to take with
respect thereto. The certificate delivered in conjunction with each delivery of
annual and quarterly financial statements shall in addition demonstrate in
reasonable detail compliance during the preceding fiscal period with Sections
5.08, 5.09 and 5.10(l).
Each certificate of independent certified public accountants delivered
with the financial statements required by clause (b) above shall be accompanied
by a written statement of such accountants that, in conducting the examination
necessary to the giving of such certificate, they have obtained no knowledge of
the existence during the fiscal period under examination of any condition, event
or act which constitutes a Default (insofar as such a condition, event or act
relates to accounting matters), or if in the opinion of such accountants there
shall exist any Default, such statement shall specify the nature thereof.
SECTION 5.02. Payment of Taxes. The Borrower will, and will cause each
Subsidiary to, promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Borrower or
any Subsidiary, provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith and if the Borrower or a Subsidiary shall have set aside on its books
adequate reserves with respect thereto in accordance with generally accepted
accounting principles.
SECTION 5.03. Maintenance of Corporate Existence. The Borrower will
preserve and maintain its corporate existence and will, and will cause each
Subsidiary to, conduct its affairs and carry on its business and operations in
such manner as to comply with any and all applicable laws not being contested in
good faith.
SECTION 5.04. Maintenance of Property and Leases. The Borrower will, and
will cause each Subsidiary to, keep its properties, whether owned or leased, in
satisfactory repair, working order and condition.
SECTION 5.05. Insurance. The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable insurers insurance
against liability to persons and damage to property to the extent and in the
manner customary for
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companies of like size in similar businesses, it being understood that the
Borrower may self-insure against exposures which, in the judgment of its
management, are reasonable in relation to its financial position. The Borrower
will deliver to the Banks from time to time upon request of any Bank through the
Administrative Agent full information as to the insurance so carried.
SECTION 5.06. Accounts and Reports. The Borrower will, and will cause
each Subsidiary to, keep true records and books of account in which full, true
and correct entries will be made of all dealings or transactions in relation to
its businesses and affairs, in accordance with generally accepted accounting
principles consistently applied.
SECTION 5.07. Inspection. Each Bank or its designee shall have the
right, at its expense, on reasonable notice (given to a senior financial officer
of the Borrower) and at reasonable times to visit and inspect the properties of
the Borrower and its Subsidiaries and to discuss the financial affairs of the
Borrower and its Subsidiaries with the Borrower's senior officers and will be
furnished from the books of the Borrower and its Subsidiaries such financial
information as it may reasonably request and upon such reasonable conditions
relating to confidentiality of the material and information so supplied as the
Borrower might impose. Each Bank shall respect the confidential nature of the
material and information so supplied and shall take reasonable measures to
preserve such confidentiality. It is understood that a Bank may be required to
disclose such confidential material and information or portions thereof (1) at
the request of a bank regulatory agency or in connection with an examination of
the Bank by bank examiners, (2) pursuant to subpoena or other court process, (3)
at the express direction of any other authorized government agency, (4) to its
independent auditors or (5) otherwise as required by law.
SECTION 5.08. Interest Coverage Ratio. The Interest Coverage Ratio will
at no time be less than 300%.
SECTION 5.09. Leverage Ratio. The Leverage Ratio will at no time exceed
400%.
SECTION 5.10. Restrictions on Liens. The Borrower will not, nor will it
permit any Subsidiary to, create, incur, either voluntarily or involuntarily, or
assume any Lien upon any of its property or assets now owned or hereafter
acquired, except:
(a) Liens existing on the date hereof securing Debt outstanding on the
date hereof;
(b) Liens incidental to the conduct of its business or the ownership of
its properties and assets which were not incurred in connection with the
borrowing of
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money or the obtaining of advances or credit or the incurrence of Derivatives
Obligations and which do not materially detract from the value of its property
or assets or materially impair the use thereof in the operation of its business;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
provided that such Lien attaches to such asset concurrently with or within 180
days before or after the acquisition thereof;
(d) Liens incurred in connection with Guarantees of the type described in
the proviso to the definition of Debt and Liens incurred in connection with the
acquisition of, or improvements to, real estate; provided, however, that no such
Lien shall extend to or cover any property other than the property so acquired
or improved;
(e) any Lien existing on any assets of any corporation or other entity at
the time it becomes a Subsidiary and not created in contemplation of such
corporation becoming a Subsidiary, or existing on any assets acquired by the
Borrower or any Subsidiary through purchase, merger, consolidation, or otherwise
and not created in contemplation of such purchase, merger, consolidation or
other transaction;
(f) any Lien resulting from any order of attachment, distraint or other
legal process arising out of judicial proceedings so long as the execution or
other enforcement thereof is effectively stayed;
(g) Liens on shares of capital stock or property of a Subsidiary securing
obligations owing by such Subsidiary to the Borrower or to another Subsidiary;
(h) Liens arising out of the refinancing, extension, renewal or refunding
of any Debt secured by any Lien permitted by this Section 5.10, provided that
such Debt is not increased and is not secured by any additional assets;
(i) Liens to banks or other institutions arising in connection with the
issuance of letters of credit or bankers' acceptances in connection with the
shipment or storage of goods in the ordinary course of business;
(j) any Lien which may be deemed to result from an agreement or
commitment to exchange securities of a Subsidiary for other securities of the
Borrower, whether or not such securities of a Subsidiary are placed in escrow
for such purpose;
(k) Liens on cash and cash equivalents securing Derivatives Obligations,
provided that the aggregate amount of cash and cash equivalents subject to such
Liens may at no time exceed $50,000,000; and
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(l) Liens not otherwise permitted by any of the foregoing clauses of this
Section 5.10 securing Debt in an aggregate principal amount at any time
outstanding not to exceed 15% of Consolidated Net Assets.
SECTION 5.11. Restrictions on Sales, Consolidations and Mergers.
Neither the Borrower nor any Subsidiary will sell, lease or in any way dispose
of all, or substantially all, of the property or assets of the Borrower and its
Subsidiaries, taken as a whole, nor will the Borrower consolidate or merge with
or into any other Person, provided that this Section 5.11 shall not prevent any
merger involving the Borrower in which the Borrower is the surviving corporation
if, at the time of, and after giving effect to any such merger, no Default shall
have occurred and be continuing.
SECTION 5.12. Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, pay any funds to or
for the account of, make any Investment in, lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to, or participate in, or effect
any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate; provided, however, that the foregoing
provisions of this Section shall not prohibit (a) the Borrower from declaring or
paying any lawful dividend so long as, after giving effect thereto, no Default
shall have occurred and be continuing or (b) the Borrower or any Subsidiary from
engaging in any commercial transaction with an Affiliate so long as such
transaction is on terms and conditions at least as favorable to the Borrower or
such Subsidiary as the terms and conditions which would apply in a similar
transaction with a Person not an Affiliate.
SECTION 5.13. Restriction on Debt of Subsidiaries. The Borrower will not
permit any of its Subsidiaries to incur or at any time be liable with respect to
any Debt except (a) Debt owing to the Borrower or any Wholly-Owned Subsidiary,
(b) Debt which is secured by a Lien permitted by Section 5.10, (c) Debt of any
corporation at the time such corporation becomes a Subsidiary and not created in
contemplation of such event, (d) Debt of Subsidiaries not otherwise permitted by
any of the foregoing clauses in an aggregate principal amount at any time
outstanding not to exceed $25,000,000 and (e) Debt of Subsidiaries outstanding
on the date of this Agreement.
SECTION 5.14. Use of Proceeds. The proceeds of the Loans made under this
Agreement will be used by the Borrower for general corporate purposes, including
refinancing of existing debt and acquisitions. None of such proceeds will be
used in violation of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
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ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan, or
shall fail to pay within three days of the due date thereof any interest or fees
payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant contained
in Sections 5.08 to 5.14, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a) or
(b) above) for 30 days after notice thereof has been given to the Borrower by
the Administrative Agent at the request of any Bank;
(d) any material representation, warranty, certification or statement
made by the Borrower in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall prove to
have been incorrect in any material respect when made (or deemed made), and if
the same shall be susceptible of cure, such incorrectness shall not have been
cured to the reasonable satisfaction of the Required Banks within 30 days after
notice thereof has been given to the Borrower by the Administrative Agent at the
request of any Bank;
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligation when due or within any applicable
grace period;
(f) any event or condition shall occur which results in the acceleration
of the maturity of any Material Debt or enables (or, with the giving of notice
or lapse of time or both, would enable) the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Significant Subsidiary or any one or more
Consolidated Subsidiaries having combined assets exceeding 5% of the
consolidated assets of the Borrower and its Consolidated Subsidiaries shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking possession by any such
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official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Borrower or any Significant Subsidiary or any one or more Consolidated
Subsidiaries having combined assets exceeding 5% of the consolidated assets of
the Borrower and its Consolidated Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 days; or an order for relief shall be entered against the Borrower
or any Significant Subsidiary or any one or more Consolidated Subsidiaries
having combined assets exceeding 5% of the consolidated assets of the Borrower
and its Consolidated Subsidiaries under the federal bankruptcy laws as now or
hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount or
amounts (other than amounts being contested in good faith through appropriate
proceedings) aggregating in excess of $15,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan in a distress termination under Section 4041(c) of ERISA shall be
filed under Title IV of ERISA by any member of the ERISA Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current payment
obligation in excess of $15,000,000;
(j) a judgment or order for the payment of money in excess of $15,000,000
shall be rendered against the Borrower or any Significant Subsidiary or any one
or more Consolidated Subsidiaries having combined assets exceeding 5% of the
consolidated assets of the Borrower and its Consolidated Subsidiaries and such
judgment or order shall continue unsatisfied and unstayed for a period of 30
days; or
(k) (i) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
other
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than a member of the Smith Family Group shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act) of more voting stock or
total equity capital of the Borrower than that beneficially owned by the Smith
Family Group, if such person or group of persons is also the beneficial owner
(within the meaning of Rule 13d-3 of the Exchange Act) of at least 30% of either
the voting stock or total equity capital of the Borrower or (ii) more than half
of the members of the Board of Directors of the Borrower shall be persons who
are not Continuing Directors;
then, and in every such event, the Administrative Agent shall (i) if requested
by the Required Banks, by notice to the Borrower terminate the Commitments and
they shall thereupon terminate, and (ii) if requested by Banks having more than
51% in aggregate principal amount of the Loans, by notice to the Borrower
declare the Loans (together with accrued interest thereon) to be, and the Loans
shall thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; provided that in the case of any of the Events of Default specified in
clause (g) or (h) above with respect to the Borrower, without any notice to the
Borrower or any other act by the Administrative Agent or the Banks, the
Commitments shall thereupon terminate and the Loans (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower.
SECTION 6.02. Notice of Default. The Administrative Agent shall give
notice to the Borrower under Section 6.01(c) or (d) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes each Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the Notes as are delegated
to such Agent by the terms hereof or thereof, together with all such powers as
are reasonably incidental thereto.
SECTION 7.02. Agents and Affiliates. Morgan Guaranty Trust Company of
New York, BankBoston, N.A. and The Chase Manhattan Bank and their respective
successors shall have the same rights and powers under this Agreement as any
other Bank, subject to the provisions of Section 2.03(d), and may exercise or
refrain from
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exercising the same as though it were not an Agent, and Morgan Guaranty Trust
Company of New York , BankBoston, N.A. and The Chase Manhattan Bank and their
respective successors and affiliates may accept deposits from, lend money to,
and generally engage in any kind of business with the Borrower or any Subsidiary
or Affiliate of the Borrower as if it were not an Agent hereunder.
SECTION 7.03. Action by Agents. The obligations of the Agents hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agents shall not be required to take any action with respect
to any Default, except as expressly provided in Article 6.
SECTION 7.04. Consultation with Experts. Each Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agents. No Agent nor any of their respective
affiliates nor any of the directors, officers, agents or employees of any of the
foregoing shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks or (ii) in
the absence of its own gross negligence or willful misconduct. No Agent nor any
of their respective affiliates nor any of the directors, officers, agents or
employees of any of the foregoing shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement, warranty or representation
made in connection with this Agreement or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of the Borrower;
(iii) the satisfaction of any condition specified in Article 3, except receipt
of items required to be delivered to such Agent; or (iv) the validity,
effectiveness (other than its own due execution and delivery) or genuineness of
this Agreement, the Notes or any other instrument or writing furnished in
connection herewith. No Agent shall incur any liability by acting in reliance
upon any notice, consent, certificate, statement, or other writing (which may be
a bank wire, telex, facsimile transmission or similar writing) believed by it to
be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify each Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with this Agreement or any action taken or omitted
by such indemnitees hereunder.
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SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon any Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon any Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agents. Any Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Borrower shall have the right to appoint a successor Agent, which shall be
reasonably satisfactory to the Required Banks. If no successor Agent shall have
been so appointed by the Borrower, and shall have accepted such appointment,
within 30 days after the retiring Agent gives notice of resignation, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be a commercial bank organized or licensed under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent.
SECTION 7.09. Agents' Fees. The Borrower shall pay to each Agent for its
own account fees in the amounts and at the times previously agreed upon between
the Borrower and such Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any Fixed Rate
Borrowing:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Interest Period, or
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(b) in the case of a Committed Borrowing, the Required Banks advise the
Administrative Agent that the Adjusted CD Rate or the London Interbank Offered
Rate, as the case may be, as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of funding their CD Loans
or Euro-Dollar Loans, as the case may be, for such Interest Period, the
Administrative Agent shall forthwith give notice thereof to the Borrower and the
Banks, whereupon until the Administrative Agent notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the obligations of
the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, shall be
suspended. Unless the Borrower notifies the Administrative Agent at least one
Domestic Business Day before the date of any Fixed Rate Borrowing for which a
Notice of Borrowing has previously been given that it elects not to borrow on
such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such
Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed
Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans
comprising such Borrowing shall bear interest for each day from and including
the first day to but excluding the last day of the Interest Period applicable
thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Agent, the Administrative Agent shall forthwith
give notice thereof to the other Banks and the Borrower, whereupon until such
Bank notifies the Borrower and the Administrative Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank or contrary to its policies. Outstanding
Euro-Dollar Loans shall be maintained to maturity unless such Bank shall
determine that it may not lawfully continue to maintain and fund any of its
outstanding Euro-Dollar Loans to maturity and shall so specify in such notice,
in which event the Borrower shall immediately prepay in full the then
outstanding principal amount of each such Euro-Dollar Loan, together with
accrued interest thereon. Concurrently with prepaying each such Euro-Dollar
Loan, the Borrower shall borrow a Base Rate Loan
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in an equal principal amount from such Bank (on which interest and principal
shall be payable contemporaneously with the related Euro-Dollar Loans of the
other Banks), and such Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x)
the date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall impose, modify or
deem applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
(i) with respect to any CD Loan any such requirement included in an applicable
Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any
such requirement for which such Bank is entitled to compensation under Section
2.15 for the relevant Interest Period), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in an
applicable Assessment Rate) or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Bank (or its Applicable
Lending Office) or shall impose on any Bank (or its Applicable Lending Office)
or on the United States market for certificates of deposit or the London
interbank market any other condition affecting its Fixed Rate Loans, its Note
(if any) or its obligation to make Fixed Rate Loans and the result of any of the
foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of
any sum received or receivable by such Bank (or its Applicable Lending Office)
under this Agreement or under its Note (if any) with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank, the Borrower shall pay to such Bank such additional amount or amounts
as will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Bank (or its Parent) as a consequence of such Bank's Commitment
hereunder (to the extent undrawn) to a level below that
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which such Bank (or its Parent) could have achieved but for such adoption,
change, request or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, within 15 days after demand by such Bank, the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower of any event of which it
has knowledge, occurring after the date hereof, which will entitle such Bank to
compensation pursuant to this Section and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank or contrary to its policies. A certificate of any
Bank claiming compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the absence
of clearly demonstrable error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods. Each such certificate shall be
accompanied by such information as the Borrower may reasonably request as to the
computation set forth therein. No payment made to any Bank under this Section
shall duplicate any other payments made to such Bank under any other provision
of this Agreement.
SECTION 8.04. Taxes. (a) Any and all payments by the Borrower to or for
the account of any Bank or the Administrative Agent hereunder or under any Note
shall be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, excluding, in the case of each Bank and
the Administrative Agent, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such Bank or the
Administrative Agent (as the case may be) is organized or any political
subdivision of such jurisdiction or any jurisdiction of which such jurisdiction
is a political subdivision and, in the case of each Bank, taxes imposed on its
income, and franchise or similar taxes imposed on it, by the jurisdiction of
such Bank's Applicable Lending Office or any political subdivision of such
jurisdiction or any jurisdiction of which such jurisdiction is a political
subdivision (all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to any Bank or the Administrative
Agent, (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 8.04) such Bank or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions, (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance
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with applicable law and (iv) the Borrower shall furnish to the Administrative
Agent, at its address referred to in Section 9.01, the original or a certified
copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes and any other excise or property taxes, or charges or
similar levies which arise from any payment made hereunder or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any Note (hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Bank and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 8.04) paid by such Bank or the Administrative
Agent (as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, except where such liability
arises from such Bank's gross negligence or willful misconduct. This
indemnification shall be made within 15 days from the date such Bank or the
Administrative Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Bank is entitled to benefits under an income tax treaty to which the United
States is a party which reduces the rate of withholding tax on payments of
interest or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States. If the form provided by a Bank at the time such Bank first becomes a
party to this Agreement indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from "Taxes" as defined in Section 8.04(a).
(e) For any period with respect to which a Bank has failed to provide the
Borrower with the appropriate form pursuant to Section 8.04(d) (unless such
failure is due to a change in treaty, law or regulation occurring subsequent to
the date on which a form originally was required to be provided), such Bank
shall not be entitled to indemnification under Section 8.04(a) with respect to
Taxes imposed by the United States; provided, however, that should a Bank, which
is otherwise exempt from or subject to a reduced rate of withholding tax, become
subject to Taxes because of its
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failure to deliver a form required hereunder, the Borrower shall take such steps
as such Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section 8.04, then such Bank will change
the jurisdiction of its Applicable Lending Office so as to eliminate or reduce
any such additional payment which may thereafter accrue if such change, in the
judgment of such Bank, is not otherwise disadvantageous to such Bank or contrary
to its policies.
(g) In the event any Bank obtains the benefit of any tax credit or
allowance which may be available to it on account of any Taxes for which it has
been indemnified by the Borrower under this Section 8.04, it will pay to the
Borrower an amount equal to the net benefit so received by such Bank, as
determined in good faith by it. Should it later develop because of loss
carrybacks, tax credit carrybacks or otherwise that such Bank in fact did not
receive the net benefit so paid over to the Borrower, the Borrower will promptly
reimburse such Bank the amount by which the payment theretofore made to the
Borrower exceeds the net benefits actually so received by such Bank, as
determined in good faith by it.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.
If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended
pursuant to Section 8.02 or (ii) any Bank has demanded compensation under
Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans and the
Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such
Bank through the Administrative Agent, have elected that the provisions of this
Section shall apply to such Bank, then, unless and until such Bank notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as CD Loans or
Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate Loans
(on which interest and principal shall be payable contemporaneously with the
related Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may be,
has been repaid, all payments of principal which would otherwise be applied to
repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans
instead.
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ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to such party: (x) in the
case of the Borrower or any Agent, at its address or telex number set forth on
the signature pages hereof, (y) in the case of any Bank, at its address or telex
number set forth in its Administrative Questionnaire or (z) in the case of any
party, such other address or telex number as such party may hereafter specify
for the purpose by notice to the Agents and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by mail or by any other means
(including, without limitation, facsimile transmission), when received at the
address specified in this Section.
SECTION 9.02. No Waivers. No failure or delay by any Agent or Bank in
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses, Indemnification. (a) The Borrower shall pay (i)
all reasonable out-of-pocket expenses of the Agents, including reasonable fees
and disbursements of special counsel for the Agents, in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses
incurred by each Agent and Bank, including reasonable fees and disbursements of
counsel (including the allocated cost of in-house counsel), in connection with
such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided
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that no Indemnitee shall have the right to be indemnified or held harmless
hereunder for such Indemnitee's own gross negligence or willful misconduct as
determined by a court of competent jurisdiction; and provided further that the
Banks and the Agents shall use reasonable efforts to avoid inappropriate
duplication of expense in connection with any matter for which they are
indemnified by the Borrower under this subsection (b).
SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest due with respect
to any Loan held by it which is greater than the proportion received by any
other Bank in respect of the aggregate amount of principal and interest due with
respect to any Loan held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Loans
held by the other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Loans held by the Banks shall be shared by the Banks pro rata; provided that
nothing in this Section shall impair the right of any Bank to exercise any right
of set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness under the Loans. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Loan acquired pursuant to the foregoing arrangements may exercise rights of
set-off or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of any Agent are affected thereby, by such Agent); provided
that no such amendment or waiver shall, unless signed by all the Banks, (i)
increase or decrease the Commitment of any Bank (except for a ratable decrease
in the Commitments of all Banks) or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for or termination of any
Commitment or (iv) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans, or the number of Banks, which shall be
required for the Banks or any of them to take any action under this Section or
any other provision of this Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or
49
<PAGE> 55
otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks, it being agreed that no merger permitted by
Section 5.11 shall be deemed to be an assignment or transfer for purposes of
this Section 9.06.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the Agent
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement. Any agreement pursuant
to which any Bank may grant such a participating interest shall provide that
such Bank shall retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without limitation, the right
to approve any amendment, modification or waiver of any provision of this
Agreement; provided that such participation agreement may provide that such Bank
will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii) or (iii) of Section 9.05 without the consent of
the Participant. The Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of Section
2.15 and Article 8 with respect to its participating interest. An assignment or
other transfer which is not permitted by subsection (c) or (d) below shall be
given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes (if any), and such
Assignee shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit G hereto executed by
such Assignee and such transferor Bank, with (and subject to) notice to the
Administrative Agent and the consent of the Borrower (such consent not to be
unreasonably delayed or withheld); provided that (i) if an Assignee is an
affiliate of such transferor Bank, such notice shall be given to the
Administrative Agent and the Borrower but no such consent shall be required,
(ii) such assignment may, but need not, include rights of the transferor Bank in
respect of outstanding Money Market Loans, (iii) unless the assignment covers
all rights and obligations of such assignor Bank, the assignment shall cover the
equivalent of a Commitment of not less than $5,000,000 and (iv) the remaining
Commitment (if any) of the assignor Bank after any such assignment is at least
$5,000,000. Upon execution and delivery of such instrument and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price agreed
between such transferor Bank and such Assignee, such Assignee shall be a Bank
party to this Agreement and shall have all the rights and obligations of a Bank
with a Commitment as set forth in such instrument of assumption, and the
transferor
50
<PAGE> 56
Bank shall be released from its obligations hereunder to a corresponding extent,
and no further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection (c), the transferor
Bank, the Agents and the Borrower shall make appropriate arrangements so that,
if required or requested by the Assignee, a new Note is issued to the Assignee.
In connection with any such assignment, the transferor Bank shall pay to the
Administrative Agent an administrative fee for processing such assignment in the
amount of $2,500. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall, prior to the first date
on which interest or fees are payable hereunder for its account, deliver to the
Borrower and the Administrative Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in accordance
with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 or Section
8.04 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the Agents and
each of the other Banks that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
SECTION 9.09. Counterparts, Integration. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect
51
<PAGE> 57
as if the signatures thereto and hereto were upon the same instrument. This
Agreement constitutes the entire agreement and understanding among the parties
hereto and supersedes any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENTS AND
THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
52
<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
HARCOURT GENERAL, INC.
By: s/
-----------------------------------------
Name:
Title:
Address:
Attn:
Facsimile:
53
<PAGE> 59
COMMITMENTS
$70,000,000 THE CHASE MANHATTAN BANK
By: s/
--------------------------------------------
Name:
Title:
$70,000,000 MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: s/
--------------------------------------------
Name:
Title:
$70,000,000 BANKBOSTON, N.A.
By: s/
--------------------------------------------
Name:
Title:
$50,000,000 BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: s/
--------------------------------------------
Name:
Title:
$50,000,000 THE BANK OF NEW YORK
By: s/
--------------------------------------------
Name:
Title:
54
<PAGE> 60
$50,000,000 THE BANK OF NOVA SCOTIA
By: s/
--------------------------------------------
Name:
Title:
$50,000,000 BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: s/
--------------------------------------------
Name:
Title:
$50,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By: s/
--------------------------------------------
Name:
Title:
$50,000,000 FLEET NATIONAL BANK
By: s/
--------------------------------------------
Name:
Title:
$40,000,000 CAISSE NATIONALE DE CREDIT AGRICOLE
By: s/
--------------------------------------------
Name:
Title:
55
<PAGE> 61
$25,000,000 THE DAI-ICHI KANGYO BANK, LTD.
By: s/
--------------------------------------------
Name:
Title:
$25,000,000 FIRST UNION NATIONAL BANK
By: s/
--------------------------------------------
Name:
Title:
$25,000,000 THE FUJI BANK, LTD.
By: s/
--------------------------------------------
Name:
Title:
$25,000,000 MELLON BANK, N.A.
By: s/
--------------------------------------------
Name:
Title:
$25,000,000 ROYAL BANK OF CANADA
By: s/
--------------------------------------------
Name:
Title:
$25,000,000 THE SAKURA BANK, LTD.
56
<PAGE> 62
By: s/
--------------------------------------------
Name:
Title:
$25,000,000 THE SANWA BANK, LTD.
By: s/
--------------------------------------------
Name:
Title:
$25,000,000 WACHOVIA BANK, N.A.
By: s/
--------------------------------------------
Name:
Title:
- -----------------------------
TOTAL COMMITMENTS
$750,000,000
=============================
57
<PAGE> 63
THE CHASE MANHATTAN BANK,
as Syndication Agent
By: s/
--------------------------------------------
Name:
Title:
Address:
Attn:
Facsimile:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Documentation Agent
By: s/
--------------------------------------------
Name:
Title:
Address:
Attn:
Facsimile:
BANKBOSTON, N.A., as Administrative Agent
By: s/
--------------------------------------------
Name:
Title:
Address:
Attn:
Facsimile:
58
<PAGE> 64
PRICING SCHEDULE
The "EURO-DOLLAR MARGIN", "CD MARGIN" and "FACILITY FEE RATE" for any
day are the respective percentages set forth below in the applicable row under
the column corresponding to the Status that exists on such day:
<TABLE>
<CAPTION>
Level Level Level Level Level Level
Status I II III IV V VI
<S> <C> <C> <C> <C> <C> <C>
Euro-Dollar
Margin 0.140 0.150 0.165 0.200 0.250 0.325
CD Margin 0.265 0.275 0.290 0.325 0.375 0.450
Facility Fee Rate 0.060 0.075 0.085 0.100 0.150 0.175
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"LEVEL I STATUS" exists at any date if, at such date, the Borrower's
long-term debt is rated A or higher by S&P or A2 or higher by Moody's.
"LEVEL II STATUS" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated A- or higher by S&P or A3 or higher by
Moody's and (ii) Level I Status does not exist.
"LEVEL III STATUS" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by
Moody's and (ii) neither Level I Status nor Level II Status exists.
"LEVEL IV STATUS" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB or higher by S&P or Baa2 or higher by
Moody's and (ii) none of Level I Status, Level II Status and Level III Status
exists.
"LEVEL V STATUS" exists at any date if, at such date, (i) the Borrower's
long-term debt is rated BBB- or higher by S&P or Baa3 or higher by Moody's and
(ii) none of Level I Status, Level II Status, Level III Status and Level IV
Status exists.
"LEVEL VI STATUS" exists at any date if, at such date, no other Status
exists.
59
<PAGE> 65
"MOODY'S" means Moody's Investors Service, Inc.
"S&P" means Standard & Poor's Corporation.
"STATUS" refers to the determination of which of Level I Status, Level
II Status, Level III Status, Level IV Status, Level V Status or Level VI Status
exists at any date.
The credit ratings to be utilized for purposes of determining a Status
are those assigned to the senior unsecured long-term debt of the Borrower
without third-party credit enhancement, and any rating assigned to any other
debt of the Borrower shall be disregarded; provided that if the Borrower's
senior unsecured long-term debt is not rated by S&P and Moody's but the
Borrower's subordinated unsecured long-term debt, without third party credit
enhancement, is so rated, then Status shall be determined upon the basis of the
ratings for such subordinated debt and the rating threshold for each Status
shall be adjusted downward by one whole rating category (i.e., Level I Status
shall exist if such subordinated debt is rated A- or higher by S&P or A3 or
higher by Moody's). The rating in effect at any date is that in effect at the
close of business on such date.
60
<PAGE> 66
EXHIBIT A
NOTE
New York, New York
-------------, 1997
For value received, Harcourt General, Inc., a Delaware corporation (the
"Borrower"), promises to pay to the order of (the "Bank"), for the account of
its Applicable Lending Office, the unpaid principal amount of each Loan made by
the Bank to the Borrower pursuant to the Credit Agreement referred to below on
the last day of the Interest Period relating to such Loan. The Borrower promises
to pay interest on the unpaid principal amount of each such Loan on the dates
and at the rate or rates provided for in the Credit Agreement. All such payments
of principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of BankBoston, N.A.,
100 Federal Street, Boston, Massachusetts 02110.
All Loans made by the Bank, the respective types and maturities thereof
and all repayments of the principal thereof shall be recorded by the Bank and,
if the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated
as of July 18, 1997 among the Borrower, the banks parties thereto, The Chase
Manhattan Bank, as Syndication Agent, Morgan Guaranty Trust Company of New York,
as Documentation Agent and BankBoston, N.A., as Administrative Agent (as the
same may be amended from time to time, the "Credit Agreement"). Terms defined in
the Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof. This Note shall be governed by and
construed in accordance with the laws of the State of New York.
HARCOURT GENERAL, INC.
By
------------------------------------------
Title:
1
<PAGE> 67
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE> 68
EXHIBIT B
Form of Money Market Quote Request
--------------, 19--
To: BankBoston, N.A.
(the "Administrative Agent")
From: Harcourt General, Inc.
Re: Credit Agreement (the "Credit Agreement") dated as of July 18, 1997
among the Borrower, the Banks parties thereto, The Chase Manhattan Bank,
as Syndication Agent, Morgan Guaranty Trust Company of New York, as
Documentation Agent and BankBoston, N.A., as Administrative Agent.
We hereby give notice pursuant to Section 2.03 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing:
-----------------------------
Principal Amount* Interest Period**
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
- --------
*Amount must be $5,000,000 or a larger multiple of $1,000,000.
**Not less than one month (LIBOR Auction) or not less than 15
days (Absolute Rate Auction), subject to the provisions of the definition of
Interest Period.
1
<PAGE> 69
Terms used herein have the meanings assigned to them in the Credit
Agreement.
HARCOURT GENERAL, INC.
By
------------------------------------------
Title:
2
<PAGE> 70
EXHIBIT C
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes
to Harcourt General, Inc. (the "Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated as of July 18,
1997 among the Borrower, the Banks parties thereto, The Chase Manhattan Bank, as
Syndication Agent, Morgan Guaranty Trust Company of New York, as Documentation
Agent and the undersigned, as Administrative Agent, we are pleased on behalf of
the Borrower to invite you to submit Money Market Quotes to the Borrower for the
following proposed Money Market Borrowing(s):
Date of Borrowing:
------------------------------------
Principal Amount Interest Period
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [4:00 P.M.] [9:15
A.M.] (Boston, Massachusetts time) on [date].
BANKBOSTON, N.A.
By
------------------------------------------
Authorized Officer
1
<PAGE> 71
EXHIBIT D
Form of Money Market Quote
To: BANKBOSTON, N.A.
(the "Administrative Agent")
Attention:
Re: Money Market Quote to
Harcourt General, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
, 19 , we hereby make the following Money Market Quote on the
- ------------ --
following terms:
1. Quoting Bank:
---------------------
2. Person to contact at Quoting Bank:
--------------------------------------------
3. Date of Borrowing: *
------------------------------------
- --------
*As specified in the related Invitation.
1
<PAGE> 72
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the following
rates:
Principal Interest Money Market
Amount* Period** [Margin***] [Absolute Rate****]
--------- -------- ----------- -------------------
$
$
[Provided, that the aggregate principal amount of Money Market
Loans for which the above offers may be accepted shall not exceed
$ .]**
----------------
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of July 18, 1997 among the Borrower, the Banks parties thereto, The
Chase Manhattan Bank, as Syndication Agent, Morgan Guaranty Trust Company of New
York, as Documentation Agent and yourselves, as Administrative Agent irrevocably
obligates us to make the Money Market Loan(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
- --------
*Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be made for
$5,000,000 or a larger multiple of $1,000,000.
**Not less than one month or not less than 15 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
***Margin over or under the London Interbank Offered Rate determined for
the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of
1%) and specify whether "PLUS" or "MINUS".
****Specify rate of interest per annum (to the nearest 1/10,000th of
1%).
2
<PAGE> 73
Dated: By
------------------------------- ------------------------------------
Authorized Officer
3
<PAGE> 74
EXHIBIT E
OPINION OF
COUNSEL FOR THE BORROWER
[Effective Date]
To the Banks and the Agents
Referred to Below
c/o The Chase Manhattan Bank,
as Syndication Agent
270 Park Avenue
New York, New York 10017
Dear Sirs:
In my capacity as Senior Vice President and General Counsel of Harcourt
General, Inc. (the "BORROWER"), I, together with ___________________________,
have acted as counsel to the Borrower in connection with the preparation,
execution and delivery of the Credit Agreement dated as of July 18, 1997 among
the Borrower, the Banks parties thereto, The Chase Manhattan Bank, as
Syndication Agent, Morgan Guaranty Trust Company of New York, as Documentation
Agent and BankBoston, N.A., as Administrative Agent (the "AGREEMENT").
Capitalized terms used in this opinion which are not defined herein shall have
the same meaning as in the Agreement.
I have examined the originals, or copies certified to my satisfaction,
of the Agreement, the charter documents and the By-Laws of the Borrower and the
Significant Subsidiaries, records of the Borrower's corporate proceedings, all
Debt instruments and other material agreements and instruments to which the
Borrower or a Significant Subsidiary is a party and of which I have knowledge,
certificates of public officials and such other documents, agreements,
certificates and records as I have deemed necessary to examine as a basis for
the opinions hereinafter expressed.
I am an attorney admitted to practice in the Commonwealth of
Massachusetts. I am not, and do not purport to be, an expert in or qualified to
express opinions concerning the laws of any jurisdiction other than
Massachusetts, the United States of America and the corporate laws of the State
of Delaware to the extent necessary to express the opinions hereinafter set
forth. For the purposes of this opinion, I have
1
<PAGE> 75
assumed without investigation that the laws of the State of New York are the
same as those of the Commonwealth of Massachusetts.
Based upon the foregoing, and having regard for such legal
considerations as I have deemed relevant, I am of the opinion that:
1. The Borrower and each Significant Subsidiary (i) is a corporation
duly organized, validly existing and in good standing under the laws of its
respective state of incorporation, (ii) has all requisite corporate power and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted and as presently contemplated
and (iii) is in good standing as a foreign corporation and is duly qualified to
conduct business in each jurisdiction in which its property or business as
presently conducted or contemplated makes such qualification necessary, except
in those jurisdictions in which the failure to be so qualified would not have a
material adverse effect upon the business or financial condition of the Borrower
or such Significant Subsidiary and would not (after qualification) preclude the
Borrower or such Significant Subsidiary from enforcing claims against any party
in the courts of such jurisdictions.
2. The execution, delivery and performance by the Borrower of the
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official except for
the filing of the Agreement with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended, and the Agreement and the
Notes do not contravene, or constitute a default under, any provision of
applicable law or of the Restated Certificate of Incorporation or By-Laws of the
Borrower or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or any Significant Subsidiary.
3. The Agreement has been duly and validly executed and delivered by
authorized officers of the Borrower. The Agreement constitutes, and each Note,
if and when issued in accordance with the Agreement, will constitute a valid and
binding obligation of the Borrower in each case enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent that the
availability of the remedy of specific enforcement or injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
4. Various suits and claims arising in the ordinary course of business,
some of which involve substantial amounts, are pending against the Borrower and
its Subsidiaries. While the ultimate effect of such litigation cannot be
ascertained at this
2
<PAGE> 76
time, in my opinion, there are no actions, suits, proceedings or investigations
pending, or to my knowledge threatened, against the Borrower or any Subsidiary
in which there is a reasonable possibility of an adverse decision which would
materially adversely affect the business, assets or financial condition of the
Borrower and its Subsidiaries, taken as a whole.
Very truly yours,
3
<PAGE> 77
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENTS
[Effective Date]
To the Banks and the Agents
Referred to Below
c/o The Chase Manhattan Bank,
as Syndication Agent
270 Park Avenue
New York, New York 10017
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"CREDIT AGREEMENT") dated as of July 18, 1997 among Harcourt General, Inc., a
Delaware corporation (the "BORROWER"), the banks parties thereto (the "BANKS"),
The Chase Manhattan Bank, as Syndication Agent, Morgan Guaranty Trust Company of
New York, as Documentation Agent and BankBoston, N.A., as Administrative Agent
have acted as special counsel for the Agents for the purpose of rendering this
opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in
the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the Credit
Agreement and the Notes are within the Borrower's corporate powers and have been
duly authorized by all necessary corporate action.
1
<PAGE> 78
2. The Credit Agreement constitutes a valid and binding agreement of the
Borrower enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 79
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of __________, 19__ among [ASSIGNOR] (the
"ASSIGNOR"), [ASSIGNEE] (the "ASSIGNEE") and HARCOURT GENERAL, INC.
(the "BORROWER").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT")
relates to the Credit Agreement dated as of July 18, 1997 among the Borrower,
the Assignor and the other Banks party thereto, as Banks, The Chase Manhattan
Bank, as Syndication Agent, Morgan Guaranty Trust Company of New York, as
Documentation Agent and BankBoston, N.A., as Administrative Agent (the "CREDIT
AGREEMENT");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower in an aggregate principal amount at any
time outstanding not to exceed $_________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under the
Credit Agreement in the aggregate principal amount of $_______ are outstanding
at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $___________ (the "ASSIGNED
AMOUNT"), together with a corresponding portion of its outstanding Committed
Loans, and the Assignee proposes to accept assignment of such rights and assume
the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of
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the Assigned Amount, and the Assignee hereby accepts such assignment from the
Assignor and assumes all of the obligations of the Assignor under the Credit
Agreement to the extent of the Assigned Amount, including the purchase from the
Assignor of the corresponding portion of the principal amount of the Committed
Loans made by the Assignor outstanding at the date hereof. Upon the execution
and delivery hereof by the Assignor, the Assignee [and the Borrower] and the
payment of the amounts specified in Section 3 required to be paid on the date
hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and
be obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by a like
amount and the Assignor released from its obligations under the Credit Agreement
to the extent such obligations have been assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore mutually agreed between
them.* It is understood that facility fees in respect of the Assigned Amount
accrued to the date hereof are for the account of the Assignor and such fees
accruing from and including the date hereof are for the account of the Assignee.
Each of the Assignor and the Assignee hereby agrees that if it receives any
amount under the Credit Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such other party to the
extent of such other party's interest therein and shall promptly pay the same to
such other party.
[SECTION 4. Consent of the Borrower. This Agreement is conditioned upon
the consent of the Borrower pursuant to Section 9.06(c) of the Credit Agreement.
The execution of this Agreement by the Borrower and the Agent is evidence of
this consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and
deliver a Note payable to the order of the Assignee to evidence the assignment
and assumption provided for herein.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with
- --------
*Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
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respect to, the solvency, financial condition, or statements of the Borrower, or
the validity and enforceability of the obligations of the Borrower in respect of
the Credit Agreement or any Note. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By
-----------------------------------------
Title:
[ASSIGNEE]
By
----------------------------------------
Title:
HARCOURT GENERAL, INC.
By
-----------------------------------------
Title:
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EXHIBIT H
EXTENSION AGREEMENT
BankBoston, N.A., as Administrative
Agent under the Credit Agreement
referred to below
100 Federal Street
Boston, MA 02110
Ladies and Gentlemen:
The undersigned hereby agrees to extend, effective ___________, ____,
its Commitment and Termination Date under the Credit Agreement dated as of July
18, 1997 among Harcourt General, Inc., (the "Borrower"), the banks parties
thereto, The Chase Manhattan Bank, as Syndication Agent, Morgan Guaranty Trust
Company of New York, as Documentation Agent and BankBoston, N.A., as
Administrative Agent (the "CREDIT AGREEMENT") for one year to [date to which the
Termination Date is extended] pursuant to Section 2.18 of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein defined.
This Extension Agreement shall be construed in accordance with and
governed by the law of the State of New York. This Extension 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.
[NAME OF BANK]
By__________________________
Title:
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Agreed and Accepted:
HARCOURT GENERAL, INC., as Borrower
By_____________________
Title:
BANKBOSTON, N.A., as Administrative
Agent
By_____________________
Title:
5
