UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended July 31, 1997
Commission File Number 1-4925
HARCOURT GENERAL, INC.
(Exact of name of registrant as specified in its charter)
Delaware 04-1619609
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Boylston Street, Chestnut Hill, MA 02167
(Address of principal executive offices) (Zip Code)
(617) 232-8200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
As of September 9, 1997, the number of outstanding shares of each of the
issuer's classes of common stock was:
Class Outstanding Shares
Common Stock, $1 Par Value 50,728,508
Class B Stock, $1 Par Value 20,022,146
<PAGE>
HARCOURT GENERAL, INC.
I N D E X
Part I. Financial Information Page Number
Item 1. Condensed Consolidated Balance Sheets as of
July 31, 1997 and October 31, 1996 1
Condensed Consolidated Statements of Operations for
the Nine and Three Months Ended
July 31, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended July 31, 1997 and 1996 3
Notes to Condensed Consolidated Financial Statements 4-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit 10.1 -
Exhibit 11.1 17
Exhibit 27.1 18
<PAGE>
<TABLE>
HARCOURT GENERAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
(In thousands) July 31, October 31,
1997 1996
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 67,065 $ 532,862
Short-term investments - 242,054
Undivided interests in NMG Credit
Card Master Trust 151,055 114,392
Accounts receivable, net 414,881 294,718
Inventories 706,695 592,141
Deferred income taxes 77,491 77,491
Other current assets 78,608 79,607
Total current assets 1,495,795 1,933,265
Property and equipment, net 582,938 574,926
Other assets:
Prepublication costs, net 196,945 209,519
Intangible assets, net 1,239,726 456,494
Other 191,102 152,034
Total other assets 1,627,773 818,047
Total assets $3,706,506 $3,326,238
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities of
long-term liabilities $ 14,839 $ 163,717
Accounts payable 313,322 315,108
Taxes payable 36,893 77,548
Other current liabilities 646,445 391,974
Total current liabilities 1,011,499 948,347
Long-term liabilities:
Notes and debentures 1,170,940 714,282
Other long-term liabilities 271,887 224,792
Total long-term liabilities 1,442,827 939,074
Deferred income taxes 171,665 187,632
Minority interest 228,524 217,653
Shareholders' equity:
Preferred stock 1,130 1,152
Common stock 70,749 71,119
Paid-in capital 744,595 743,947
Cumulative translation adjustments (5,510) (4,493)
Retained earnings 41,027 221,807
Total shareholders' equity 851,991 1,033,532
Total liabilities and shareholders' equity $3,706,506 $3,326,238
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
1<PAGE>
<TABLE>
HARCOURT GENERAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
(In thousands except for
per share amounts) Nine Months Three Months
Ended July 31, Ended July 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues $2,700,371 $2,421,996 $1,051,646 $879,212
Costs applicable to revenues 1,565,710 1,421,773 546,059 460,406
Selling, general and
administrative expenses 989,381 735,140 426,512 236,626
Purchased in-process research
and development 174,000 - 174,000 -
Corporate expenses 26,928 23,627 7,988 7,787
Operating earnings (loss) (55,648) 241,456 (102,913) 174,393
Investment income 26,285 20,957 4,910 5,534
Interest expense (66,239) (61,876) (24,486) (20,431)
Earnings (loss) before
income taxes (95,602) 200,537 (122,489) 159,496
Income tax expense (27,647) (68,183) (18,505) (54,229)
Net earnings (loss) $ (123,249) $ 132,354 $(140,994) $105,267
Weighted average number of
common and common equivalent
shares outstanding 70,832 72,832 70,747 72,578
Net earnings (loss) per
common share $ (1.75) $ 1.82 $ (2.00) $ 1.45
Dividends per share:
Common Stock $ .54 $ .51 $ .18 $ .17
Class B Stock $ .486 $ .459 $ .162 $ .153
Series A Stock $ .6165 $ .5835 $ .2055 $ .1945
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
2<PAGE>
<TABLE>
HARCOURT GENERAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
(In thousands)
Nine Months
Ended July 31,
1997 1996
Cash flows from operating activities:
<S> <C> <C>
Net earnings (loss) $(123,249) $132,354
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 250,674 127,706
Purchased in-process research and
development 174,000 -
Other items 9,533 3,592
Changes in current assets and liabilities:
Accounts receivable (84,394) (66,475)
Inventories (58,087) (78,633)
Other current assets 18,069 (1,410)
Current liabilities (12,301) 18,889
Net cash provided by operating activities 174,245 136,023
Cash flows from investing activities:
Capital expenditures (128,694) (184,799)
Purchases of available-for-sale investments (408,304) (140,755)
Sales of available-for-sale investments 325,767 -
Maturities of available-for-sale investments 324,591 244,470
Purchases of held-to-maturity investments (457,784) (411,754)
Maturities of held-to-maturity investments 421,121 372,911
Acquisition of NEC, net of cash acquired (839,620) -
Other acquisitions (6,148) (19,197)
Other investing activities (603) (35,619)
Net cash used for investing activities (769,674) (174,743)
Cash flows from financing activities:
Proceeds from borrowings 516,950 93,250
Repayment of debt (329,500) (1,088)
Repurchase of Common Stock (20,139) (67,150)
Dividends paid (37,844) (36,016)
Other financing activities 165 1,883
Net cash provided by (used for) financing
activities 129,632 (9,121)
Cash and equivalents:
Decrease during the period (465,797) (47,841)
Beginning balance 532,862 363,750
Ending balance $ 67,065 $315,909
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
3<PAGE>
HARCOURT GENERAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of presentation
The Condensed Consolidated Financial Statements of Harcourt General,
Inc. (the Company) are submitted in response to the requirements of Form
10-Q and should be read in conjunction with the Consolidated Financial
Statements in the Company's Annual Report on Form 10-K. In the opinion
of management, these statements contain all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation of the
results for the interim periods presented.
The July 31, 1997 Condensed Consolidated Financial Statements include
the May 3, 1997 Condensed Consolidated Financial Statements of The
Neiman Marcus Group, Inc. (NMG). NMG is a separate public company which
is listed on the New York Stock Exchange and is subject to the reporting
requirements of the Securities Exchange Act of 1934. The Company owns
approximately 53% of the common stock of NMG. The Company will record
100% of the earnings of NMG to the extent that the Company has
previously absorbed losses of NMG applicable to the minority interest.
In the fourth quarter of 1997 the Company will have fully recovered
previously absorbed losses attributable to the minority shareholders,
and will thereafter no longer include in its earnings that portion of
NMG earnings (currently 47%) attributable to the minority shareholders.
The Condensed Consolidated Financial Statements also include the
financial statements of Steck-Vaughn Publishing Corporation (Steck-
Vaughn). Steck-Vaughn is a separate public company which is listed on
the NASDAQ National Market and is subject to the reporting requirements
of the Securities Exchange Act of 1934. The Company owns approximately
82% of the common stock of Steck-Vaughn. The Company has completed
negotiations with the independent directors of Steck-Vaughn, who approved
a transaction in which the Company will acquire the balance of the issued
and outstanding shares of Steck-Vaughn for $14.75 per share. Completion
of the transaction is subject to finalization of a definitive merger
agreement and is expected to occur after the Company files a Transaction
Statement with the Securities and Exchange Commission and mails an
Information Statement describing the transaction to the stockholders of
Steck-Vaughn.
The Company's businesses are seasonal in nature, and historically the
results of operations for these periods have not been indicative of the
results for the full year.
2. Acquisition of NEC
In June 1997, the Company completed the acquisition of National
Education Corporation (NEC) for a cash purchase price of approximately
$854.4 million. NEC is a global provider of print and multimedia based
products and services for the education and training marketplace.
The NEC acquisition has been accounted for by the purchase method of
accounting, and accordingly, the results of operations of NEC for the
period from June 5, 1997 are included in the accompanying condensed
consolidated financial statements. Assets acquired and liabilities
4<PAGE>
HARCOURT GENERAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. Acquisition of NEC (continued)
assumed have been recorded at their estimated fair values. NEC's
accounting policies have been conformed with those of the Company with
respect to revenue recognition of certain subscription contracts and
deferred expenses.
In the opinion of management and based on an independent appraisal,
approximately $174 million of the intangible assets of NEC consisted of
in-process research and development which had no alternative future use.
Accordingly, the Company recorded a non-recurring charge for purchased
in-process research and development of $174 million in the third quarter
of 1997.
The excess of cost over the estimated fair value of net assets acquired
was allocated to goodwill. A total of $730.6 million was allocated to
goodwill, of which $302.1 million 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.
The following unaudited pro forma information presents the results of
operations of the Company as if the acquisition had taken place on
November 1, 1995 and excludes the write-off of purchased in-process
research and development of $174 million:
<TABLE>
<CAPTION>
(In thousands) Nine months ended Nine months ended
July 31, 1997 July 31, 1996
<S> <C> <C>
Revenues $ 2,885,398 $ 2,616,295
Net earnings $ 32,901 $ 132,325
Earnings per share $ .46 $ 1.82
</TABLE>
These pro forma results of operations have been prepared for comparative
purposes only and do not purport to be indicative of the results of
operations which actually would have resulted had the acquisition
occurred on the date indicated, or which may result in the future.
The NEC acquisition was partially funded with $300 million of borrowings
under the Company s revolving credit agreement and cash and short-term
investments of approximately $554 million.
Through NEC, the Company holds approximately 82% of the issued and
outstanding shares of Steck-Vaughn. The Company has completed
negotiations with the independent directors of Steck-Vaughn, who approved
a transaction in which the Company will acquire the balance of the issued
and outstanding shares of Steck-Vaughn for $14.75 per share. Completion
of the transaction is subject to finalization of a definitive merger
agreement and is expected to occur after the Company files a Transaction
Statement with the Securities and Exchange Commission and mails an
Information Statement describing the transaction to the stockholders
of Steck-Vaughn.
5<PAGE>
HARCOURT GENERAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. Other charges
In connection with the acquisition of NEC and the integration of NEC's
businesses into those of the Company, the Company recorded a charge of
$81.7 million in the third quarter of 1997, which is included in costs
applicable to revenues ($24.6 million) and selling, general and
administrative expenses ($57.1 million). The charge reflects costs the
Company has incurred in connection with the realignment, consolidation
and reorganization of its existing businesses, and includes $23.5
million related to Drake Beam Morin. These costs consist primarily of
severance and related employee benefit obligations, consolidation of
facilities and impairment of certain existing assets.
4. Long-term debt
In June 1997, the Company repaid $125 million of its subordinated notes
at maturity with cash on hand.
In connection with the acquisition of NEC, the Company unconditionally
assumed all of the obligations of NEC under the NEC 6 1/2% Convertible
Subordinated Debentures due 2011 and the related Indenture dated May
15, 1986. The NEC Debentures are subject to a mandatory annual
redemption of $2.9 million in principal, and as a result of the
acquisition of NEC by the Company, are convertible at the option of the
holder into cash equal to the product of $21.00 and the number of common
shares of NEC into which the NEC Debentures would have been convertible
immediately prior to the merger. At July 31, 1997 approximately $54.6
million of the NEC Debentures were outstanding.
In July 1997, the Company replaced its existing revolving credit
agreement with a new revolving credit agreement with 18 banks, pursuant
to which the Company may borrow up to $750 million. The new agreement,
which expires in July 2002, may be terminated by the Company at any time
on three business days notice. The rate of interest payable is
determined according to the senior debt rating of the Company and one of
four option pricing models. On July 31, 1997, borrowings of $200
million were outstanding at an interest rate of 5.85% and are classified
as long-term, as the Company repaid the borrowings in August 1997 with a
portion of the proceeds from the issuance of senior notes and
debentures.
In August 1997, the Company issued $500 million of senior notes and
debentures to the public. The proceeds of the debt offering have been
used in part to repay borrowings outstanding on the Company's revolving
credit agreement. The debt is comprised of $150 million 6.70% senior
notes due 2007, $200 million 7.20% senior debentures due 2027 and $150
million 7.30% senior debentures due 2097. Interest on the securities is
payable semiannually in arrears beginning February 1, 1998.
In anticipation of the debt offering, the Company entered into several
forward interest rate lock agreements which established weighted average
effective interest rates of 6.83% for the 10-year notes, 7.29% for the
30-year debentures and 7.40% for the 100-year debentures. In August
1997, the Company paid $20.5 million to settle such agreements, which
6<PAGE>
HARCOURT GENERAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. Long-term debt (continued)
approximated fair value at July 31, 1997, and will be deferred and
amortized over the terms of the respective debt.
5. Stock purchase programs
The Company's Board of Directors has authorized the purchase of up to
3.5 million shares of the Company's Common Stock pursuant to its open
market stock purchase program. During the nine months ended July 31,
1997, the Company purchased approximately .4 million shares at an
average price of $45.56 per share under this buyback program.
6. Undivided interests in NMG Credit Card Master Trust
In March 1995, NMG sold all of its Neiman Marcus credit card receivables
through a subsidiary to the Neiman Marcus Group Credit Card Master Trust
(the Trust ) in exchange for certificates representing undivided
interests in such receivables. During the quarter ended April 30, 1997,
the Company began to segregate its undivided interests in the Trust from
its accounts receivable on the consolidated balance sheets and
reclassified the prior period financial statements. The undivided
interests in the Trust include the interests retained by NMG's
subsidiary which are represented by the Class C Certificate ($54.0
million) and the Seller's Certificate (the excess of the total
receivables transferred to the Trust over the portion represented by
certificates sold to investors and the Class C Certificate). The
undivided interests in the Trust represent investments which the Company
intends to hold to maturity in accordance with Statement of Financial
Accounting Standard No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." Due to the short-term revolving nature of the
credit card portfolio, the carrying value of the Company's undivided
interests in the Trust approximates fair value.
7. Other current liabilities
Other current liabilities consisted of the following:
<TABLE>
<CAPTION>
(In thousands) July 31, October 31,
1997 1996
<S> <C> <C>
Unearned subscription income $ 101,918 $ 42,290
Accrued salaries and related 79,950 63,000
Self-insurance reserves 47,967 49,569
Other 416,610 237,115
$ 646,445 $ 391,974
</TABLE>
8. Weighted average shares outstanding
For the three and nine months ended July 31, 1997, weighted average
shares outstanding do not include common stock equivalents because of
the loss for those periods.
7<PAGE>
HARCOURT GENERAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. Subsequent event
In August 1997, the Company signed a definitive agreement to acquire
Churchill Livingstone, a European English-language health sciences
publisher, for approximately $92.5 million in cash.
10. New accounting standards
On January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities (SFAS 125). This
statement provides guidance for distinguishing transfers of financial
assets (e.g. securitizations) that are sales from transfers that are
secured borrowings. The effect of adopting SFAS 125 was not material to
the Company's financial position or results of operations.
In February 1997, the Financial Accounting Standards board issued
Statement of Financial Accounting Standards No. 128, Earnings per
Share (SFAS 128). Under the new standard, which must be adopted for
periods ending after December 15, 1997, the Company will be required to
change the method used to compute earnings per share and to restate prior
periods presented. A dual presentation of basic and diluted earnings per
share will be required. The basic earnings per share calculation, which
will replace primary earnings per share, will exclude the dilutive impact
of stock options, the Series A Stock and other common share equivalents.
The diluted earnings per share calculation, which will replace fully
diluted earnings per share, will include common share equivalents. The
adoption of SFAS 128 will not have a material impact on earnings per
share for the nine month and three month periods ended July 31, 1997 and
1996.
The Company uses treasury lock agreements (a derivative) as a means of
managing interest-rate risk associated with current debt or anticipated
debt transactions. The differentials to be received or paid under
contracts designated as hedges are deferred and amortized to interest
expense over the remaining life of the associated debt. Derivative
financial instruments are not held for trading purposes.
8<PAGE>
<TABLE>
HARCOURT GENERAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The following table presents revenues and operating earnings (loss) by
business segment.
<CAPTION>
Nine Months Three Months
Ended July 31, Ended July 31,
(In thousands) 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Publishing-Harcourt Brace
operations $ 853,022 $ 739,763 $ 466,629 $377,131
Publishing-NEC operations 53,921 - 53,921 -
Total Publishing 906,943 739,76 520,550 377,131
Specialty retailing 1,712,582 1,589,381 506,532 474,059
Professional services 80,846 92,852 24,564 28,022
Total revenues $2,700,371 $2,421,996 $1,051,646 $879,212
Operating earnings
Publishing-Harcourt Brace
operations $ 126,126 $ 113,601 $ 178,664 $139,884
Publishing-NEC operations (38,119) - (38,119) -
Purchased in-process
research and development
and other charges (253,727) - (253,727) -
Total Publishing (165,720) 113,601 (113,182) 139,884
Specialty retailing 160,804 142,980 44,180 41,655
Professional services (304) 8,502 (2,422) 641
Professional services
restructuring charge (23,500) - (23,500) -
Total professional
services (23,804) 8,502 (25,922) 641
Corporate expenses (26,928) (23,627) (7,989) (7,787)
Total operating earnings
(loss) ($55,648) $241,456 ($102,913) $174,393
</TABLE>
Nine Months Ended July 31, 1997 Compared To Nine Months Ended July 31, 1996
Publishing
Publishing revenues for the nine months ended July 31, 1997 increased 22.6% to
$906.9 million from $739.8 million for the nine months ended July 31, 1996.
The Company's educational publishing group and the newly acquired NEC
operations each contributed significantly to the increase in revenues. The
educational publishing group's elementary and high school publishing revenues
rose as a result of sales in large adoption states such as California and
Texas. Revenues at the Company's international group increased primarily due
to the acquisition in the first quarter of both a Spanish language medical and
health sciences publisher and international distribution rights for Mosby-Year
Book health sciences publications. Revenues at the Company's scientific,
technical, medical and professional (STMP) publishing group increased modestly
in comparison to the prior year due to higher journal revenues at Academic
Press.
9<PAGE>
HARCOURT GENERAL, INC.
MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Publishing (continued)
The publishing segment recorded an operating loss for the nine months ended
July 31, 1997 of $165.7 million compared to operating earnings of $113.6
million the same period last year. In connection with the acquisition of NEC,
the Company recorded a charge of approximately $195.5 million consisting
primarily of the value of purchased in-process research and development. Also
during the third quarter of 1997, the publishing business recognized charges
of approximately $58.2 million related to the realignment, reorganization and
consolidation of its existing businesses. These charges consist primarily of
costs to consolidate facilities and the impairment of certain existing assets.
Despite these charges, operating earnings at the educational publishing
business increased in comparison to the prior year period due primarily to the
increased revenues in the elementary and high school publishing businesses.
Operating earnings for the STMP publishing group decreased in comparison to
the prior year due to lower book sales at W.B. Saunders and the above-
mentioned charge, offset in part by improved performance at Academic Press.
The results of operations for the NEC businesses are included in the quarter
from the date of acquisition, and include amortization of goodwill and
acquired intangible assets of approximately $41.7 million.
Specialty Retailing
Specialty retailing results are reported with a lag of one quarter.
Accordingly, the operating results of The Neiman Marcus Group, Inc. (NMG) for
the thirty-nine weeks ended May 3, 1997 are consolidated with the Company's
operating results for the nine months ended July 31, 1997.
Revenues in the thirty-nine weeks ended May 3, 1997 increased $123.2 million
or 7.8% over revenues in the thirty-nine weeks ended April 27, 1996.
Comparative sales for the period increased 4.4%. Neiman Marcus stores opened
in King of Prussia, Pennsylvania in February 1996 and in Paramus, New Jersey
in August 1996 also contributed to the overall increase in revenues.
NMG's operating earnings increased 12.5% to $160.8 million in the thirty-nine
week period ended May 3, 1997 compared to $143.0 million in 1996. The increase
resulted from both higher revenues and improved gross margins during the 1997
period.
Professional Services
Professional services revenues decreased 12.9% to $80.8 million from $92.9
million in the same period last year. The decrease is attributed to lower
volume and prices in both group and individual outplacement programs.
Professional services reported an operating loss of $23.8 million compared
with operating earnings of $8.5 million in the 1996 period. This loss
includes a restructuring charge of $23.5 recorded in the third quarter of
1997, and also reflects the impact of lower revenues in the nine month period
as compared to the prior year.
10<PAGE>
HARCOURT GENERAL, INC.
MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Investment Income
Investment income increased $5.3 million to $26.3 million compared to the same
nine month period in 1996. The increase is primarily due to a higher average
portfolio balance during the first seven months of the year resulting from the
cash proceeds received in October 1996 from NMG s sale of its common stock to
the public. The portfolio was liquidated in June 1997 in order to partially
fund the acquisition of NEC.
Interest Expense
Interest expense increased 7.1% to $66.2 million from $61.9 million in the
comparable period last year. The increase reflects higher average borrowings
by NMG and, to a lesser extent, incremental interest incurred in connection
with borrowings by the Company to partially fund the acquisition of NEC.
Minority Interest
In fiscal 1997, NMG reported net earnings of approximately $91.2 million on a
stand-alone basis. In the fourth quarter of 1997 the Company will have fully
recovered previously absorbed losses attributable to the minority
shareholders, and will thereafter no longer include in its earnings that
portion of NMG earnings (currently 47%) attributable to the minority
shareholders. Such allocation of earnings will be approximately $5.8 million
in the Company's fourth quarter.
Quarter Ended July 31, 1997 Compared to Quarter Ended July 31, 1996
Publishing
Publishing revenues increased by $143.4 million or 38.0% for the three months
ended July 31, 1997 compared to the same period last year. The educational
publishing group's revenues increased substantially in comparison to the prior
year primarily due to sales of elementary reading and social studies programs
and to the acquisition of NEC. Increased revenues at the international
publishing group as a result of acquired distribution rights were offset in
part by a decline in STMP revenues in comparison to the prior year quarter.
The publishing segment recorded an operating loss for the quarter of $113.2
million compared to operating earnings of $139.9 million the same period last
year. In connection with the acquisition of NEC, the Company recorded a charge
of approximately $195.5 million consisting primarily of the value of purchased
in-process research and development. Also during the quarter, the publishing
business recognized charges of approximately $58.2 million related to the
realignment, reorganization and consolidation of its existing businesses
11<PAGE>
HARCOURT GENERAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Quarter Ended July 31, 1997 Compared to Quarter Ended July 31, 1996
(continued)
Publishing (continued)
charges consist primarily of costs to consolidate facilities and the
impairment of certain existing assets. Despite these charges, operating
earnings at the educational publishing business increased significantly in
comparison to the prior year quarter due primarily to the increased revenues
in the elementary and high school publishing businesses. Operating earnings
for the STMP and international publishing groups decreased moderately in
comparison to the prior year quarter, due in large part to the above-mentioned
charge and to a lesser extent to lower book sales at W.B. Saunders. The
results of operations for the NEC businesses are included in the quarter from
the date of acquisition, and include amortization of goodwill and acquired
intangible assets of approximately $41.7 million.
Specialty Retailing
Results of NMG are reported with a lag of one quarter. Accordingly, NMG's
operating results for its quarter ended May 3, 1997 are consolidated with the
Company's operating results for the quarter ended July 31, 1997.
Revenues in the thirteen weeks ended May 3, 1997 increased 6.8% over revenues
in the thirteen weeks ended April 27, 1996. The primary factors contributing
to the revenue increase were the opening of a new Neiman Marcus store in
Paramus, New Jersey in August 1996 and a 9.9% increase in revenues at NM
Direct. Comparative sales for the period increased 4.5%.
Operating earnings increased 6.1% to $44.2 million in the thirteen week period
ended May 3, 1997 compared to $41.7 million in 1996. This increase was
primarily due to higher sales, offset slightly by an increase in markdowns in
1997.
Professional Services
Professional services revenues decreased 12.3% to $24.6 million in the 1997
third quarter from $28.0 million in the 1996 third quarter. The decrease in
comparison to the prior year quarter resulted primarily from lower volume, as
market conditions continue to be competitive.
The professional services segment reported an operating loss of $25.9 million
in the 1997 quarter, which includes a restructuring charge of $23.5 million,
as compared to operating earnings of $.6 million in the same period in the
prior year.
Investment Income
Investment income decreased $0.6 million to $4.9 million compared with the
same period last year, due primarily to a lower average portfolio balance
resulting from the use of approximately $554 million in cash and short-term
investments to partially fund the acquisition of NEC.
12<PAGE>
HARCOURT GENERAL, INC.
MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Quarter Ended July 31, 1997 Compared to Quarter Ended July 31, 1996
(continued)
Interest Expense
Interest expense increased 19.8% to $24.5 million compared to $20.4 million in
last year's third quarter. The increase is primarily due to interest incurred
on outstanding borrowings on the Company's revolving credit agreement which
were used to partially fund the acquisition of NEC.
13<PAGE>
HARCOURT GENERAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The following discussion analyzes liquidity and capital resources by
operating, investing and financing activities as presented in the Company's
Condensed Consolidated Statement of Cash Flows.
Cash provided by operating activities for the nine months ended July 31, 1997
was $174.2 million. The publishing and professional services business
segments provided $117.5 million of cash from operations and NMG's operations
provided $56.7 million. During the nine months ended July 31, 1997, the
Company had sufficient cash flows and debt capacity to fund the acquisition of
NEC, as well as its working capital, capital expenditure and dividend
requirements.
The primary items affecting working capital were decreases in accounts
receivable ($84.4 million), inventories ($58.1 million), current liabilities
($12.3 million) and an increase in other current assets of $18.1 million.
The Company paid approximately $854.4 million to acquire NEC in June, 1997.
The purchase price was funded with cash and equivalents and short-term
investments, in addition to $300 million in borrowings under the Company's
revolving credit agreement. The Company's capital expenditures totaled $128.7
million in the nine months ended July 31, 1997. Publishing capital
expenditures were $93.6 million and related principally to expenditures for
prepublication costs. The Company expects capital expenditures in the
publishing business to approximate $150.0 million in fiscal 1997. Specialty
retailing capital expenditures in the 1997 period totaled $35.1 million and
primarily related to existing store renovations. NMG's capital expenditures
in fiscal 1997 were $53.0 million.
In October 1996, NMG sold 8.0 million shares of its common stock to the public
at $35.00 per share. The net proceeds were used, together with a additional
3.9 million shares of NMG common stock and bank borrowings, to repurchase all
of NMG's outstanding preferred stock from the Company. The Company will no
longer receive the annual dividends of approximately $27.1 million from such
preferred stock.
Financing activities primarily reflect the proceeds from borrowings by the
Company of $316.5 million, used to partially fund the acquisition of NEC, and
borrowings by NMG of $200.0 million under their respective revolving credit
agreements and uncommitted lines. NMG used the proceeds of its borrowings to
fund working capital requirements and to repay $132.0 million of senior notes
at maturity. In June 1997, the Company repaid $125 million of its senior debt
at maturity and repaid $46 million of outstanding borrowings on NEC's line of
credit. Financing activities also include the payment of $37.8 million in
dividends and the purchase of approximately .4 million shares of the Company's
Common Stock for $20.1 million on the open market at an average price of
$45.56 per share.
14<PAGE>
HARCOURT GENERAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (continued)
At July 31, 1997, the Company had available $550 million under its revolving
credit agreement, which expires in July 2002. Subsequent to quarter end, the
Company issued $500 million in senior notes and debentures to the public.
Steck-Vaughn had available $3 million under its $20 million revolving credit
agreement, which expires in April 1999. At May 3, 1997, NMG had $140 million
available under its revolving credit facility, which expires in April 2000.
The Company believes its cash on hand, cash generated from operations and its
current and future debt capacity will be sufficient to fund its planned
capital growth, the Churchill Livingstone and Steck-Vaughn merger agreements
as well as its operating and dividend requirements.
15<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Credit Agreement dated as of July 18, 1997 among the
Company, 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.
11.1 Computation of weighted average number of shares
outstanding used in determining primary and fully
diluted earnings per share.
27.1 Financial data schedule
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K on June 19, 1997, as
amended by a Form 8-K/A filed on July 25, 1997, describing in
Item 2 (Acquisition or Disposition of Assets) of Form 8-K its
acquisition of National Education Corporation and including
financial statements and exhibits and pro forma financial
information.
16<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HARCOURT GENERAL, INC.
Date: September 15, 1997 s/John R. Cook
John R. Cook
Senior Vice President and
Chief Financial Officer
Date: September 15, 1997 s/Stephen C. Richards
Stephen C. Richards
Vice President and Controller
Principal Accounting Officer
17<PAGE>
EXHIBIT 10.1
[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>
TABLE OF CONTENTS
PAGE
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
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
<PAGE>
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
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 Unfair43
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
ii<PAGE>
PAGE
SECTION 9.08. Governing Law; Submission to Jurisdiction . . . . . . 52
SECTION 9.09. Counterparts, Integration . . . . . . . . . . . . . . 52
SECTION 9.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . 52
iii<PAGE>
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>
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 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.
1<PAGE>
"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.
"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.
2<PAGE>
"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.
"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.
3<PAGE>
"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, 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.
4<PAGE>
"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
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.
5<PAGE>
"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 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.
6<PAGE>
(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.
(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
7<PAGE>
(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.
"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.
8<PAGE>
"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 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.
"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.
9<PAGE>
"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.
"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
10<PAGE>
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 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).
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,
12<PAGE>
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.
(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 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
13<PAGE>
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
(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
14<PAGE>
(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")
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
15<PAGE>
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.
(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.
16<PAGE>
(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.
(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 t
he 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:
17<PAGE>
[ 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. & 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.
(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.
18<PAGE>
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.
(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
19<PAGE>
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 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
20<PAGE>
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 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
21<PAGE>
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 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 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.
22<PAGE>
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 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;
23<PAGE>
(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;
(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
24<PAGE>
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 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.
25<PAGE>
SECTION 4.06. Governmental and Other ApprovalsNo 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 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.
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
(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).
27<PAGE>
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 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
28<PAGE>
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 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;
29<PAGE>
(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
(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.
30<PAGE>
SECTION 5.14 use of ProceedsThe 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.
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 official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors, or shall
31<PAGE>
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 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
33<PAGE>
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 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
33<PAGE>
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.
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.
34<PAGE>
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
(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
35<PAGE>
Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan 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 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 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
36<PAGE>
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 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
37<PAGE>
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 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
38<PAGE>
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.
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
39<PAGE>
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 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 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.
40<PAGE>
(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 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 paych 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
41<PAGE>
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 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.
42<PAGE>
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:
Name:
Title:
Address:
Attn:
Facsimile:
43<PAGE>
COMMITMENTS
$70,000,000 THE CHASE MANHATTAN BANK
By:
Name:
Title:
$70,000,000 MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:
Name:
Title:
$70,000,000 BANKBOSTON, N.A.
By:
Name:
Title:
$50,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By:
Name:
Title:
$50,000,000 THE BANK OF NEW YORK
By:
Name:
Title:
$50,000,000 THE BANK OF NOVA SCOTIA
By:
Name:
Title:
$50,000,000 BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
44<PAGE>
By:
Name:
Title:
$50,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By:
Name:
Title:
$50,000,000 FLEET NATIONAL BANK
By:
Name:
Title:
$40,000,000 CAISSE NATIONALE DE CREDIT AGRICOLE
By:
Name:
Title:
45<PAGE>
$25,000,000 THE DAI-ICHI KANGYO BANK, LTD.
By:
Name:
Title:
$25,000,000 FIRST UNION NATIONAL BANK
By:
Name:
Title:
$25,000,000 THE FUJI BANK, LTD.
By:
Name:
Title:
$25,000,000 MELLON BANK, N.A.
By:
Name:
Title:
$25,000,000 ROYAL BANK OF CANADA
By:
Name:
Title:
$25,000,000 THE SAKURA BANK, LTD.
By:
Name:
Title:
$25,000,000 THE SANWA BANK, LTD.
By:
Name:
Title:
46<PAGE>
$25,000,000 WACHOVIA BANK, N.A.
By:
Name:
Title:
TOTAL COMMITMENTS
$750,000,000
47<PAGE>
THE CHASE MANHATTAN BANK,
as Syndication Agent
By:
Name:
Title:
Address:
Attn:
Facsimile:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Documentation Agent
By:
Name:
Title:
Address:
Attn:
Facsimile:
BANKBOSTON, N.A., as Administrative Agent
By:
Name:
Title:
Address:
Attn:
Facsimile:
48<PAGE>
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
Level Level Level Level Level Level
Status I II III IV V VI
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 0.060 0.075 0.085 0.100 0.150 0.175
Rate
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.
"Moody's" means Moody's Investors Service, Inc.
"S&P" means Standard & Poor's Corporation.
49<PAGE>
"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.
50<PAGE>
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>
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>
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.]
Terms used herein have the meanings assigned to them in the
Credit Agreement.
HARCOURT GENERAL, INC.
By
Title:
___________________________
*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>
EXHIBIT C
Form of Invitation for Money Market Quotes
_________, 19__
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>
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>
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]
Dated: By:
Authorized Officer
___________________
*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>
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 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
1<PAGE>
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 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,
2<PAGE>
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.
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)
1<PAGE>
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>
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 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
1<PAGE>
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 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]
- ----------------------------------------
* Amount should combine principle 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 and Assignee. It may be preferable in
an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
2<PAGE>
By
Title:
[ASSIGNEE]
By
Title:
HARCOURT GENERAL, INC.
By
Title:
3<PAGE>
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:
4<PAGE>
Agreed and Accepted:
HARCOURT GENERAL, INC., as Borrower
By_____________________
Title:
BANKBOSTON, N.A., as Administrative
Agent
By_____________________
Title:
5<PAGE>
<TABLE>
EXHIBIT 11.1
HARCOURT GENERAL, INC.
Computation of weighted average number of shares outstanding used in determining
primary and fully diluted earnings per share:
<CAPTION>
(In thousands) Nine Months Three Months
Ended July 31, Ended July 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Earnings (Loss) ($123,249) $132,354 ($140,994) $105,267
Less Preferred Dividends (701) - (232) -
Net Earnings (Loss) for
Calculation of Earnings
Per Share ($123,950) $132,354 ($141,226) $105,267
PRIMARY
1. Weighted average number of common
shares outstanding 70,832 71,332 70,747 71,104
2. Assumed conversion of Series A
Cumulative Convertible Stock - 1,298 - 1,281
3. Assumed exercise of certain stock
options based on average market
value - 202 - 193
4. Weighted average number of shares
used in primary per share
computations 70,832 72,832 70,747 72,578
FULLY DILUTED (A)
1. Weighted average number of common
shares outstanding 70,832 71,332 70,747 71,104
2. Assumed conversion of Series A
Cumulative Convertible Stock - 1,298 - 1,281
3. Assumed exercise of all dilutive
options based on higher of
average or closing market value - 203 - 193
4. Weighted average number of shares
used in fully diluted per share
computations 70,832 72,833 70,747 72,578
(A) This calculation is submitted in accordance with Securities Exchange
Act of 1934 Release No. 9083 although not required by Footnote 2 to
Paragraph 14 of APB Opinion No. 15 because it results in dilution of
less than 3%.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains a summary of financial information extracted from the
Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of
Operations and is qualifed in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 67,065
<SECURITIES> 151,055
<RECEIVABLES> 452,667
<ALLOWANCES> 37,786
<INVENTORY> 706,695
<CURRENT-ASSETS> 1,495,795
<PP&E> 1,014,405
<DEPRECIATION> 431,467
<TOTAL-ASSETS> 3,706,506
<CURRENT-LIABILITIES> 1,011,499
<BONDS> 1,170,940
0
1,130
<COMMON> 70,749
<OTHER-SE> 780,112
<TOTAL-LIABILITY-AND-EQUITY> 3,706,506
<SALES> 2,700,371
<TOTAL-REVENUES> 2,700,371
<CGS> 1,565,710
<TOTAL-COSTS> 2,756,019
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 87,819
<INTEREST-EXPENSE> 66,239
<INCOME-PRETAX> (95,602)
<INCOME-TAX> 27,647
<INCOME-CONTINUING> (123,249)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (123,249)
<EPS-PRIMARY> (1.75)
<EPS-DILUTED> (1.75)
</TABLE>
