SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 15, 1999
----------------------------------------------------------------------
(December 31, 1998)
------------------
Ames Department Stores, Inc.
------------------------------
(Exact Name of Registrant As Specified In Charter)
Delaware
----------
(State Or Other Jurisdiction Of Incorporation)
1-5380 04-2269444
- ------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
2418 Main Street; Rocky Hill, Connecticut 06067-2598
- ----------------------------------------- ------------
Address Of Principal Executive Offices) (Zip Code)
(860) 257-2000
---------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
----------------
(Former Name Or Former Address, If Changed Since Last Report)
Item 2: ACQUISITION OR DISPOSITION OF ASSETS
On December 31, 1998, HSC Acquisition Corp. ("HSC"), a
wholly owned subsidiary of Ames Department Stores, Inc. (the
"Company")consummated its tender offer for the equity and debt
securities of Hills Stores Company (" Hills") pursuant to
which it acquired 81.5% of the common stock and 65.3% of the
Series A preferred stock of Hills, and 73.9% of the aggregate
principal amount outstanding of the senior subordinated notes
of Hills (collectively, the "Hills Acquisition"). The Hills
Acquisition was consummated pursuant to an Agreement and Plan
of Merger, dated as of November 12, 1998, by and among the
Company, HSC, and Hills which was filed as Exhibit 99(c)(1)
to the Company's and HSC's Tender Offer Statement in a
Schedule 14D-1 filed with the Securities and Exchange
Commission on November 18, 1998 and is incorporated herein by
reference.
In consummation of the Hills acquisition, a total of
$114,002,068 was disbursed as follows: i) $12,325,578 to
tendering common shareholders; ii) $831,500 to tendering
preferred shareholders; iii) $100,844,990 to tendering holders
of the senior subordinated notes of Hills. The Hills
Acquisition was funded by cash provided by operations and by
the New Facility, as defined below.
The Hills Acquisition will be accounted for under the
purchase method of accounting, and as such, the final
calculated purchase price will be allocated to the fair value
of tangible assets and the excess of cost over net assets
acquired.
Item 5: OTHER EVENTS
(a)Certain on the Company's subsidiaries entered into a Credit
Agreement dated December 31, 1998 with BankAmerica Business
Credit, Inc., as agent, and a syndicate consisting of nineteen
other banks and financial institutions,for a secured revolving
credit facility of up to $650 million (the "New Facility").
The New Facility has a sublimit of $150 million for letters of
credit and expires June 30, 2002. A copy of the New Facility
is attached as Exhibit 10(k) and is incorporated herein by
reference.
(b) The Company entered into a post merger transition and
agency agreement (the "Gordon/Nassi Agreement") on December
31, 1998 with Gordon Brothers Retail Partners, LLC and The
Nassi Group, LLC, (collectively, the "Agent"), which provides
that the Agent shall serve for a period of time to manage
the sale of the inventory acquired in the Hills Acquisition
as well as certain other inventory identified in the Gordon/
Nassi Agreement. A copy of the Gordon/Nassi Agreement is
attached as Exhibit 10(l) and is incorporated herein by
reference.
Item 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements.
As of the date of filing this Current Report on Form
8-K, the financial statements required by this Item 7(a) are
not yet available. In accordance with Item 7(a)(4)of Form 8-K,
such financial statements shall be filed by amendment to this
Form 8-K no later than 60 days after January 15, 1999.
(b) Pro Forma Financial Information
As of the date of filing this Current Report on Form
8-K, the pro forma financial information required by this Item
7 (b)are not yet available. In accordance with Item 7(b) of
Form 8-K, such financial statements shall be filed by
amendment to this Form 8-K no later than 60 days after
January 15, 1999.
INDEX TO EXHIBITS
Exhibit No. Exhibit
2(d) Agreement and Plan of Merger, dated as of November 12, 1998,
by and among Ames Department Stores, Inc., its wholly-owned
subsidiary, HSC Acquisition Corporation, and Hills Stores
Company (Incorporated by reference to Exhibit 99(c)(1) of the
Company's Schedule 14D-1 filed on November 12, 1998)
10(k) Second Amended and Restated Credit Agreement, dated December
31, 1998, among certain financial institutions, as Lenders,
BankAmerica Business Credit, as the Administrative Agent, and
Ames FS, Inc., Ames Merchandising Corporation, and Hills
Department Store Company
10(l) Post Merger Transition and Agency Agreement by and among the
Gordon Brothers Retail Partners, LLC and The Nassi Group, LLC,
(collectively the "Agent") and Hills Stores Company, Hills
Department Stores Company, and Ames Merchandising Corporation
(collectively, and as applicable to the operator of the
particular store, the "Merchant") dated as of December 31,
1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMES DEPARTMENT STORES, INC.
Registrant
Dated: January 14, 1999 By: /s/ Joseph R. Ettore
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Joseph R. Ettore
President, Director, and
Chief Executive Officer
Dated: January 14, 1999 By: /s/ Rolando de Aguiar
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Rolando de Aguiar
Executive Vice President,
Chief Financial Officer
Dated: January 14, 1999 By: /s/ Mark von Mayrhauser
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Mark von Mayrhauser
Vice President, Controller
Exhibit 10(k)
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1998
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Administrative Agent
and
AMES FS, INC.
as Borrower
AMES MERCHANDISING CORPORATION
as Borrower
HILLS DEPARTMENT STORE COMPANY
as Borrower
and
THE OTHER CREDIT PARTIES NAMED HEREIN
<PAGE>
Section Page
TABLE OF CONTENTS
ARTICLE 1 INTERPRETATION OF THIS AGREEMENT
1.1 Definitions................................................2
1.2 Accounting Terms..........................................28
1.3 Interpretive Provisions...................................28
ARTICLE 2 LOANS AND LETTERS OF CREDIT
2.1 Total Facility............................................29
2.2 Loans.....................................................30
2.3 [Reserved]................................................37
2.4 Letters of Credit.........................................37
ARTICLE 3 INTEREST AND FEES
3.1 Interest..................................................45
3.2 Conversion and Continuation Elections.....................46
3.3 Maximum Interest Rate.....................................47
3.4 Closing Fee...............................................48
3.5 Unused Line Fee...........................................48
3.6 Letter of Credit Fee......................................48
3.7 Other Fees................................................49
3.8 Payment of Fees Under Section 3.8
of the Existing Credit Agreement .........................49
ARTICLE 4 PAYMENTS AND PREPAYMENTS
4.1 Loans.....................................................49
4.2 Termination and Reduction of Facility.....................49
4.3 Payments from Insurance and Other Proceeds................50
4.4 Payments by the Borrowers.................................52
4.5 Payments as Loans.........................................52
4.6 Apportionment, Application and Reversal of Payments.......53
4.7 Indemnity for Returned Payments...........................54
4.8 Administrative Agent's and Lenders' Books
and Records; Monthly Statements...........................54
ARTICLE 5 TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 Taxes.....................................................55
5.2 Illegality................................................56
5.3 Increased Costs and Reduction of Return...................56
5.4 Funding Losses............................................58
5.5 Inability to Determine Rates..............................58
5.6 Certificates of Lenders...................................58
5.7 Substitution of Lenders...................................59
5.8 Survival..................................................60
ARTICLE 6 COLLATERAL
6.1 Grant of Security Interest................................60
6.2 Perfection and Protection of Security Interest............61
6.3 Location of Collateral....................................62
6.4 Title to, Liens on, and Sale and Use of Collateral........63
6.5 Appraisals................................................63
6.6 Access and Examination; Confidentiality...................63
6.7 Collateral Reporting......................................65
6.8 Collection of Accounts, Inventory and Other Amounts.......66
6.9 Inventory; Cycle Counts...................................67
6.10 Equipment................................................67
6.11 Documents, Instruments, and Chattel Paper................68
6.12 Right to Cure............................................68
6.13 Power of Attorney........................................68
6.14 The Administrative Agent's and Lenders'
Rights, Duties and Liabilities...........................69
ARTICLE 7 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
7.1 Books and Records.........................................69
7.2 Financial Information.....................................70
7.3 Notices to the Administrative Agent.......................73
ARTICLE 8 GENERAL WARRANTIES AND REPRESENTATIONS
8.1 Authorization, Validity, and Enforceability
of this Agreement and the Loan Documents..................75
8.2 Validity and Priority of Security Interest................75
8.3 Organization and Qualification............................75
8.4 Corporate Name; Prior Transactions........................76
8.5 Subsidiaries and Affiliates...............................76
8.6 Financial Statements and Projections......................76
8.7 Capitalization............................................77
8.8 Solvency..................................................77
8.9 Debt......................................................77
8.10 Distributions............................................77
8.11 Title to Property........................................77
8.12 Proprietary Rights.......................................79
8.13 Trade Names..............................................79
8.14 Litigation...............................................79
8.15 Restrictive Agreements...................................80
8.16 Labor Matters............................................80
8.17 Environmental Laws.......................................80
8.18 No Violation of Law......................................81
8.19 No Default...............................................81
8.20 Employee Benefit Plans...................................81
8.21 Taxes....................................................83
8.22 Regulated Entities.......................................83
8.23 Use of Proceeds; Margin Regulations......................83
8.24 Copyrights, Patents, Trademarks and Licenses, etc........84
8.25 No Material Adverse Effect...............................84
8.26 Full Disclosure..........................................84
8.27 Material Agreements......................................85
8.28 Bank Accounts............................................85
8.29 Year 2000................................................85
ARTICLE 9 AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Taxes and Other Obligations...............................85
9.2 Corporate Existence and Good Standing.....................86
9.3 Compliance with Law; Maintenance of Licenses;
Performance of Agreements.................................86
9.4 Maintenance of Property...................................87
9.5 Insurance.................................................87
9.6 Leases; New Real Estate...................................89
9.7 Environmental Laws........................................90
9.8 Compliance with ERISA.....................................93
9.9 Mergers, Consolidations or Sales..........................94
9.10 Restricted Investments; Capital Change; Distributions....95
9.11 Transactions Affecting Collateral or Obligations.........96
9.12 Guaranties...............................................96
9.13 Debt.....................................................96
9.14 Redemptions and Other Payments...........................97
9.15 Transactions with Affiliates.............................97
9.16 Investment Banking and Finder's Fees.....................98
9.17 Management Compensation..................................98
9.18 Business Conducted.......................................98
9.19 Liens....................................................98
9.20 Sale and Leaseback Transactions..........................98
9.21 New Subsidiaries.........................................98
9.22 Fiscal Year..............................................98
9.23 [Reserved]...............................................98
9.24 [Reserved]...............................................98
9.25 Minimum EBITDA...........................................98
9.26 Fixed Charge Coverage Ratio..............................99
9.27 Minimum Combined Availability............................99
9.28 Use of Proceeds..........................................99
9.29 Modification of Material Contracts.......................99
9.30 No Negative Pledges......................................99
9.31 Supplemental Disclosure.................................100
9.32 Further Assurances......................................100
9.33 Hills Merger............................................100
ARTICLE 10 CONDITIONS OF LENDING
10.1 Conditions Precedent to Making
of Loans on the Closing Date............................101
10.2 Conditions Precedent to Each Loan.......................105
ARTICLE 11 DEFAULT; REMEDIES
11.1 Events of Default.......................................106
11.2 Remedies................................................110
ARTICLE 12 TERM AND TERMINATION
12.1 Term and Termination....................................112
ARTICLE 13 AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
13.1 No Waivers; Cumulative Remedies.........................113
13.2 Amendments and Waivers..................................113
13.3 Assignments; Participations.............................114
ARTICLE 14 THE ADMINISTRATIVE AGENT
14.1 Appointment and Authorization...........................117
14.2 Delegation of Duties....................................117
14.3 Liability of Administrative Agent.......................118
14.4 Reliance by Administrative Agent........................118
14.5 Notice of Default.......................................119
14.6 Credit Decision.........................................119
14.7 Indemnification.........................................120
14.8 Administrative Agent in Individual Capacity.............120
14.9 Successor Administrative Agent..........................120
14.10 Withholding Tax........................................121
14.11 [Reserved].............................................122
14.12 Collateral Matters.....................................123
14.13 Restrictions on Actions by Lenders;
Sharing of Payments....................................124
14.14 Agency for Perfection..................................125
14.15 Payments by Administrative Agent to Lenders............125
14.16 Concerning the Collateral and
the Related Loan Documents.............................125
14.17 Field Audit and Examination Reports;
Disclaimer by Lenders..................................125
14.18 Relation Among Lenders.................................126
ARTICLE 15 GUARANTEES
ARTICLE 16 MISCELLANEOUS
16.1 Cumulative Remedies; No Prior Recourse to Collateral....128
16.2 Severability............................................129
16.3 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.......................................129
16.4 WAIVER OF JURY TRIAL....................................130
16.5 Survival of Representations and Warranties..............130
16.6 Other Security and Guaranties...........................130
16.7 Fees and Expenses.......................................131
16.8 Notices.................................................132
16.9 Waiver of Notices.......................................134
16.10 Binding Effect.........................................134
16.11 Indemnity of the Administrative Agent
and the Lenders by the Credit Parties..................134
16.12 Limitation of Liability................................134
16.13 Final Agreement........................................135
16.14 Counterparts...........................................135
16.15 Captions...............................................135
16.16 Right of Setoff........................................135
16.17 Joint and Several Liability............................136
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBIT A - FORM OF BORROWING BASE CERTIFICATE
EXHIBIT B - LIST OF CLOSING DOCUMENTS
EXHIBIT C - NOTICE OF BORROWING
EXHIBIT D - NOTICE OF CONVERSION/CONTINUATION
EXHIBIT E - FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
EXHIBIT F - FORM OF ACCOUNTANT'S LETTER
EXHIBIT G - FORM OF NOTE
SCHEDULE A - OUTSTANDING LETTERS OF CREDIT
SCHEDULE B - [RESERVED]
SCHEDULE C - LANDLORD LIEN STATES
SCHEDULE 6.3 - LOCATIONS OF COLLATERAL
SCHEDULE 8.3 - CORPORATE ORGANIZATION AND QUALIFICATION
SCHEDULE 8.4 - CORPORATE NAME; PRIOR TRANSACTIONS
SCHEDULE 8.5 - SUBSIDIARIES AND AFFILIATES
SCHEDULE 8.7 - CAPITALIZATION
SCHEDULE 8.10 - PRIOR DISTRIBUTIONS
SCHEDULE 8.11 - REAL ESTATE; LEASES
SCHEDULE 8.12 - REGISTERED PROPRIETARY RIGHTS
SCHEDULE 8.13 - TRADE NAMES
SCHEDULE 8.14 - LITIGATION
SCHEDULE 8.16 - LABOR MATTERS
SCHEDULE 8.17 - ENVIRONMENTAL LAWS
SCHEDULE 8.20 - ERISA
SCHEDULE 8.21 - TAX MATTERS
SCHEDULE 8.27 - MATERIAL AGREEMENTS
SCHEDULE 8.28 - BANK ACCOUNTS
SCHEDULE 9.5 - INSURANCE
SCHEDULE 9.9 - ASSET SALES
SCHEDULE 9.13 - DEBT
SCHEDULE 9.19 - LIENS
SCHEDULE 10.1(q) - CERTAIN MORTGAGED PREMISES
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Second Amended and Restated Credit Agreement, dated as of December 31,
1998, among the financial institutions listed on the signature pages hereof
(such financial institutions, together with their respective successors and
assigns, are referred to hereinafter each individually as a "Lender" and
collectively as the "Lenders"), BankAmerica Business Credit, Inc., a Delaware
corporation (together with its successors and assigns, "BABC"), with an office
at 40 East 52nd Street, New York, New York 10022, as administrative agent for
the Lenders (in its capacity as administrative agent, together with any
successor in such capacity, the "Administrative Agent"), Ames FS, Inc., a
Delaware corporation, with an office at 2418 Main Street, Rocky Hill,
Connecticut 06067 ("Ames FS"), Ames Merchandising Corporation, a Delaware
corporation (formerly known as Zayre Central Corp.), with an office at 2418 Main
Street, Rocky Hill, Connecticut 06067 ("Ames Merchandising"), Hills Department
Store Company, a Delaware corporation, with an office at 2418 Main Street, Rocky
Hill, Connecticut 06067 ("Hills Department Stores" and together with Ames FS and
Ames Merchandising, each a "Borrower" and collectively, the "Borrowers") and the
other Credit Parties named herein and signatories hereto.
W I T N E S S E T H
WHEREAS, Ames FS, Ames Merchandising and certain affiliates thereof,
all or some of the Lenders (in such capacity, the "Existing Lenders"), the
Co-Agents party thereto (in such capacity, the "Existing Co-Agents") and the
Administrative Agent are parties to the Amended and Restated Credit Agreement,
dated as of December 27, 1996 (as heretofore amended, together with the Exhibits
and Schedules thereto, the "Existing Credit Agreement"), providing for loans to
be made to, and letters of credit to be issued for the account of, Ames FS and
Ames Merchandising in the aggregate principal and/or face amount not exceeding
$320,000,000 at any one time outstanding;
WHEREAS, HSC Acquisition Corp., a Delaware corporation ("HSC") is a
wholly-owned subsidiary of Ames Department Stores, Inc., a Delaware corporation
(the "Parent");
WHEREAS, the Parent and HSC have entered into an Agreement and Plan of
Merger dated as of November 12, 1998 (as in effect on the date of this Agreement
and as hereafter amended, restated, supplemented or otherwise modified from time
to time with the prior written consent of the Administrative Agent and the
Majority Lenders, the "Hills Merger Agreement") with Hills Stores Company, a
Delaware corporation ("Hills");
WHEREAS, Hills Department Stores is a wholly-owned subsidiary of Hills;
WHEREAS, pursuant to the Hills Merger Agreement HSC has made the Offer
and the Note Tender Offer (as such terms are defined in the Hills Merger
Agreement and used herein as therein defined);
<PAGE>
WHEREAS, the Credit Parties have requested that the Administrative
Agent and the Lenders amend and restate the terms and conditions of the Existing
Credit Agreement to, inter alia, terminate the existing $20,000,000 term loan
facility, increase the aggregate maximum principal amount of the credit
facilities provided from $320,000,000 to $650,000,000 at any one time
outstanding and add Hills Department Stores as a borrower hereunder; and
WHEREAS, the Parent and its Subsidiaries will each derive substantial
benefits from the execution, delivery and performance of this Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereto agree that the
Existing Credit Agreement shall be amended and restated in its entirety as
follows:
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions.
As used herein:
"Accounts" means, with respect to any Credit Party, all of such Credit Party's
now owned or hereafter acquired or arising accounts, and any other rights of
such Credit Party to payment for the sale or lease of goods or rendition of
services, whether or not they have been earned by performance.
"Account Debtor" means each Person obligated in any way on or in connection with
an Account.
"Administrative Agent" means BankAmerica Business Credit, Inc., solely in its
capacity as administrative agent for the Lenders, and any successor agent.
"Administrative Agent Advances" has the meaning specified in Section 2.2(i).
"Administrative Agent's Liens" means the Liens granted to the Administrative
Agent, for the ratable benefit of the Lenders, BABC and the Administrative Agent
pursuant to this Agreement and the other Security Documents.
"Administrative Agent-Related Persons" means the Administrative Agent and any
successor agent, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Adverse Environmental Condition" means any of the matters referred to in clause
(i), (ii) or (iii) of the definition of Environmental Claim.
<PAGE>
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person or which owns, directly or indirectly, ten percent (10%) or more of
the outstanding equity interest of such Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of the other Person, whether through the ownership of voting
securities, by contract, or otherwise.
"Agreement" means this Amended and Restated Credit Agreement.
"Amended and Restated Intercompany Security Agreements" means, collectively, the
Intercompany Security Agreement, dated as of June 22, 1994, as heretofore
amended and as amended and restated as of the Closing Date, by the Parent in
favor of Ames Merchandising, the Intercompany Security Agreement, dated as of
the Closing Date, by the Parent in favor of Ames FS and the Intercompany
Security Agreement, dated as of the Closing Date, by the Parent in favor of
Hills Department Stores.
"Amended and Restated Patent and Trademark Agreement" means the Security
Agreement and Mortgage - Trademarks, Patents and Copyrights, dated as of June
22, 1994, as heretofore amended and as amended and restated as of the Closing
Date, executed and delivered by the Credit Parties to the Administrative Agent
to evidence and perfect the Administrative Agent's Lien in the present and
future patents, trademarks, copyrights and related licenses and rights of the
Credit Parties, for the benefit of the Administrative Agent and the Lenders.
"Amended and Restated Stock Pledge Agreement" means the Pledge Agreement
(Capital Stock), dated as of June 22, 1994, as heretofore amended and as amended
and restated as of the Closing Date, by the Parent in favor of the
Administrative Agent and the Lenders.
"Amended Collateral Assignments" means (i) the Collateral Assignment of Master
Sublease, dated as of June 22, 1994, as heretofore amended and as amended and
restated as of the Closing Date, between a Credit Party and the Administrative
Agent and delivered to the Administrative Agent, and (ii) each Collateral
Assignment of Leases and Rents, dated as of June 22, 1994, as heretofore amended
and as amended and restated as of the Closing Date, between a Credit Party and
the Administrative Agent and delivered to the Administrative Agent, each of
which is listed on Exhibit B and which provides the Administrative Agent a Lien,
for the benefit of the Administrative Agent and the Lenders, on or other
interest in the property covered thereby.
"Amended Mortgages" means each Open End Mortgage, Assignment of Leases, Rents
and Profits, Security Agreement, Financing Statement and Fixture Filings, dated
as of June 22, 1994, as heretofore amended and as amended and restated as of the
Closing Date, between the Credit Party or Credit Parties named therein and the
Administrative Agent and delivered to the Administrative Agent, each of which is
listed on Exhibit B, and as from time to time further amended, spread, severed,
partially released, increased or otherwise modified, in each case, which provide
the Administrative Agent a Lien, for the benefit of the Administrative Agent and
the Lenders, on or other interest in any portion of the Premises or the Real
Estate or which relate to any such Lien or interest.
"Ames Credit Parties" shall mean and include the Parent and each Subsidiary of
the Parent existing immediately prior to consummation of the Offer.
"Ames FS" has the meaning set forth in the recitals to this Agreement.
<PAGE>
"Ames Merchandising" has the meaning set forth in the recitals to this
Agreement.
"Anniversary Date" means each anniversary of the Closing Date.
"Applicable Margin" means, with respect to any Loan, the amount set forth below
which corresponds to the Fixed Charge Coverage Ratio set forth below for the
four consecutive fiscal quarter period of the Parent ended with the most recent
fiscal quarter of the Parent for which the Administrative Agent receives the
financial statements and Fixed Charge Coverage Ratio Certificate required below,
determined and adjusted as provided herein. On the Closing Date and thereafter
until the first day of the first full calendar month after the delivery to the
Administrative Agent of the financial statements of the Parent and its
Subsidiaries required pursuant to Section 7.2(c) as at the end of and for the
fiscal quarter of the Parent ended January, 2000, together with the
corresponding Fixed Charge Coverage Ratio Certificate for the four consecutive
fiscal quarter period ended on such date, the Applicable Margin for LIBOR Rate
Loans shall be 2.25% and the Applicable Margin for Base Rate Loans shall be
0.625% and each shall thereafter be adjusted after each delivery to the
Administrative Agent of the quarterly financial statements of the Parent and its
Subsidiaries required pursuant to Section 7.2(c) for each fiscal quarter of the
Parent, together with the corresponding Fixed Charge Coverage Ratio Certificate
for the four fiscal quarter period ending on the last day of such fiscal
quarter, which Fixed Charge Coverage Ratio Certificate demonstrates that the
Fixed Charge Coverage Ratio indicated below for any such adjustment has been
achieved, each such adjustment to be effective on the first day of the first
full calendar month after the latest date on which each such delivery is
required hereunder.
Fixed Charge Applicable Margin for Applicable Margin
Coverage LIBOR Rate Loans for
Ratio Base Rate Loans
Equal to or greater than
1.50 to 1.00 1.50% zero (0)
Equal to or greater than
1.25 to 1.00 1.75% .125%
but less than 1.50 to 1.00
Equal to or greater than
1.01 to 1.00 2.00% .375%
but less than 1.25 to 1.00
Less than 1.01 to 1.00 2.25% .625%
<PAGE>
Notwithstanding anything in this definition to the contrary, (i) in the
event that the Administrative Agent shall fail to receive any such financial
statements and the related Fixed Charge Coverage Ratio Certificate for any
fiscal quarter of the Parent within forty-five (45) days following the end of
such fiscal quarter (within ninety (90) days following the end of such fiscal
quarter if such fiscal quarter is the last fiscal quarter of any Fiscal Year),
then the Applicable Margin shall, at the end of such forty-fifth or ninetieth
day, as appropriate, immediately and without notice or further action be the
highest Applicable Margin provided herein (such Applicable Margin to be in
effect until the first day of the first full calendar month after the
Administrative Agent receives the financial statements of the Parent and its
Subsidiaries required under Section 7.2(c) for the most recent fiscal quarter of
the Parent, and the related Fixed Charge Coverage Ratio Certificate); and (ii)
in the event that, with respect to any four consecutive fiscal quarter period of
the Parent which shall be a Fiscal Year, the audited financial statements of the
Parent and its Subsidiaries required under Section 7.2(a) for such Fiscal Year
shall indicate the Fixed Charge Coverage Ratio for such four consecutive fiscal
quarter period (as determined by the Administrative Agent) was less than that
reflected in the Fixed Charge Coverage Ratio Certificate delivered to the
Administrative Agent for such four consecutive fiscal quarter period, the
Applicable Margin shall be adjusted retroactively (to the effective date of the
Applicable Margin which was determined based upon the delivery of such Fixed
Charge Coverage Ratio Certificate and the related quarterly financial statements
of the Parent and its Subsidiaries delivered pursuant to Section 7.2(c) for the
fourth quarter of such four consecutive fiscal quarter period) to reflect an
Applicable Margin based upon the Fixed Charge Coverage Ratio determined from the
audited financial statements and each of the Borrowers shall make payments to
the Administrative Agent on behalf of the Lenders to reflect such adjustment.
"Assignee" has the meaning specified in Section 13.3(a).
"Assignment and Acceptance" has the meaning specified in Section 13.3(a).
"Attorney Costs" means and includes all fees, expenses and disbursements of any
law firm or other external counsel engaged by the Administrative Agent, the
allocated cost of internal legal services of the Administrative Agent and all
expenses and disbursements of internal counsel of the Administrative Agent.
"BABC" has the meaning set forth in the first paragraph of this Agreement.
"BABC Loan" and "BABC Loans" have the meanings specified in Section 2.2(h).
"Bank of America" means Bank of America National Trust and Savings Association,
a national banking association, or any successor entity thereto.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. ss. 101
et seq.).
"Base Rate" means, for any day, the rate of interest in effect for such day as
publicly announced from time to time by Bank of America in San Francisco,
California, as its "reference rate" (the "reference rate" being a rate set by
Bank of America based upon various factors including Bank of America's costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate). Any change in the reference rate announced by Bank of
America shall take effect at the opening of business on the day specified in the
public announcement of such change. Each Interest Rate based upon the Base Rate
shall be adjusted simultaneously with any change in the Base Rate.
<PAGE>
"Base Rate Loan" means a Loan during any period in which it bears interest based
on the Base Rate.
"Book Value" means at any time, as to any Inventory of a Borrower in respect of
which such amount is to be determined, the lower of (i) cost at such time
(determined in accordance with GAAP on a first-in, first-out basis) or (ii)
market value at such time.
"Borrowing" means a borrowing hereunder consisting of Loans made on the same day
by the Lenders to a Borrower (or by BABC in the case of a Borrowing funded by
BABC Loans) or by the Administrative Agent in the case of a Borrowing consisting
of an Administrative Agent Advance.
"Borrowing Base Certificate" means a certificate by a Responsible Officer of a
Borrower, substantially in the form of Exhibit A (or another form acceptable to
the Administrative Agent) setting forth the calculation of the Combined
Availability and the Individual Availability for such Borrower, including a
calculation of each component thereof, as of the close of business no more than
seven (7) Business Days prior to the date of such certificate, all in such
detail as shall be satisfactory to the Administrative Agent. All calculations of
Combined Availability and Individual Availability of a Borrower in connection
with the preparation of any Borrowing Base Certificate shall originally be made
by such Borrower and certified to the Administrative Agent; provided, that the
Administrative Agent shall have the right to review and adjust, in the exercise
of its reasonable credit judgment, any such calculation (1) to reflect its
reasonable estimate of declines in value of any of the Collateral described
therein, and (2) to the extent that such calculations are not in accordance with
this Agreement.
"Business Day" means (a) any day that is not a Saturday, Sunday, or a day on
which banks in San Francisco, California, are required or permitted to be
closed, and (b) with respect to all notices, determinations, fundings and
payments in connection with the LIBOR Rate or LIBOR Rate Loans, any day that is
a Business Day pursuant to clause (a) above and that is also a day on which
trading is carried on by and between banks in the London interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive of any
central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means, for any Person, any expenditures or costs made or
to be made by such Person for the acquisition, maintenance or repair of fixed or
capital assets (in each case, which are required to be capitalized on the
balance sheet of such Person in accordance with GAAP), including, without
limitation, the incurrence or assumption of any Debt in respect of such fixed or
capital asset, including, without limitation, those costs arising in connection
with a Capital Lease; provided, however, that the expenditure of proceeds of
casualty insurance on tangible property for any replacement, repair or
restoration of such tangible property, the loss or destruction of or damage to
which gave rise to such proceeds, shall not constitute a Capital Expenditure for
purposes of determining the Fixed Charge Coverage Ratio for any period.
<PAGE>
"Capital Lease" of any Person means any lease of any property (whether real,
personal or mixed) by that Person as lessee which, in conformity with GAAP, is,
or is required to be, accounted for as a capital lease on the balance sheet of
such Person.
"Cash Interest Expense" means, with respect to the Parent and its consolidated
Subsidiaries for any period, the aggregate amount of cash required to be paid by
the Parent and its Subsidiaries on a consolidated basis during such period in
respect of Interest Expense of the Parent and its Subsidiaries on a consolidated
basis during such period.
"Change in Control" means such time as (i) any Credit Party liquidates or
dissolves except to the extent expressly permitted under Section 9.9 hereof,
(ii) prior to consummation of the Hills Merger, the Parent shall cease to own
and control, directly or indirectly, (x) 100% of each class of capital stock or
other ownership interests (on a fully diluted basis) of each of the Ames Credit
Parties (other than the Parent) and (y) at least 75% of the voting stock or
other equivalent ownership interests (on a fully diluted basis) of each of the
Hills Credit Parties, (iii) upon and at all times following consummation of the
Hills Merger, the Parent shall cease to own and control, directly or indirectly,
100% of each class of capital stock or other ownership interests (on a fully
diluted basis) of each of the Credit Parties (other than the Parent), (iv) Hills
shall cease to own and control, directly or indirectly, 100% of each class of
capital stock or other ownership interests (on a fully diluted basis) of each of
the Hills Credit Parties (other than Hills), (v) there occurs any transaction or
series of transactions (including, without limitation, a tender offer, merger or
consolidation) the result of which is that any "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
"beneficial owner" (as defined in Rule 13(d)(3) of the Exchange Act) of more
than 25% of the total aggregate voting power of the voting capital stock of the
Parent and/or warrants or options to acquire such voting capital stock,
calculated on a fully diluted basis.
"Closing Date" means December 31, 1998.
"Closing Fee" has the meaning specified in Section 3.4.
"COBRA" has the meaning specified in Section 8.20.
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute, and regulations promulgated thereunder.
"Collateral" has the meaning specified in Section 6.1.
"Combined Availability" means at any time the aggregate of the Individual
Availability of the Borrowers at such time.
"Combined Borrowing Base" means at any time the aggregate of the Individual
Borrowing Bases of the Borrowers at such time.
"Combined Outstandings" means at any time the aggregate of the Individual
Outstandings of the Borrowers at such time.
<PAGE>
"Commitment" means, at any time with respect to a Lender, the principal amount
set forth beside such Lender's name under the heading "Commitment" on the
signature pages of this Agreement or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder in accordance
with the provisions of Section 13.3, as such Commitment may be adjusted from
time to time in accordance with the provisions of Section 13.3, and
"Commitments" means, collectively, the aggregate amount of the commitments of
all of the Lenders.
"Consent Solicitation" has the meaning set forth in the Hills Merger Agreement.
"Constrained Lender" has the meaning specified in Section 13.3(e).
"Contaminant" means all Hazardous Materials and all those substances which are
regulated by or form the basis of liability under Federal, state or local
environmental, health and safety statutes or regulations including, without
limitation, asbestos, polychlorinated biphenyls ("PCBs"), and radioactive
substances, or any other material or substance which constitutes a material
health, safety or environmental hazard to any Person or property.
"Conversion/Continuation Date" has the meaning specified in Section 3.2(b).
"Credit Parties" means and includes each Borrower, the Parent and each other
Guarantor.
"Credit Support" has the meaning specified in Section 2.4(a).
"Debt" means, as to any Person, all liabilities, obligations and indebtedness of
such Person to any other Person, of any kind or nature, now or hereafter owing,
arising, due or payable, howsoever evidenced, created, incurred, acquired or
owing, whether primary, secondary, direct, contingent, fixed or otherwise, and
including, without in any way limiting the generality of the foregoing: (i) such
Person's liabilities and obligations to trade creditors; (ii) all Obligations;
(iii) all obligations and liabilities of any Person secured by any Lien on such
Person's property, even though such Person shall not have assumed or become
liable for the payment thereof; provided, however, that all such obligations and
liabilities which are limited in recourse to such property shall be included in
Debt only to the extent of the book value of such property as would be shown on
a balance sheet of such Person prepared in accordance with GAAP; (iv) all
obligations or liabilities created or arising under any Capital Lease or
conditional sale or other title retention agreement with respect to property
used or acquired by such Person, even if the rights and remedies of the lessor,
seller or lender thereunder are limited to repossession of such property;
provided, however, that all such obligations and liabilities which are limited
in recourse to such property shall be included in Debt only to the extent of the
book value of such property as would be shown on a balance sheet of such Person
prepared in accordance with GAAP; (v) all accrued pension fund and other
employee benefit plan obligations and liabilities; (vi) all obligations and
liabilities under Guaranties; and (vii) deferred taxes.
<PAGE>
"Debt For Borrowed Money" means, as to any Person, Debt for borrowed money or as
evidenced by notes, bonds, debentures or similar evidences of any such Debt of
such Person, the deferred and unpaid purchase price of any property or business
(other than trade accounts payable incurred in the ordinary course of business
and constituting current liabilities) and all obligations under Capital Leases.
"Default" means any event or circumstance which, with the giving of notice, the
lapse of time, or both, would (if not cured or otherwise remedied during such
time) constitute an Event of Default.
"Default Rate" means a fluctuating per annum interest rate at all times equal to
the sum of (i) the otherwise applicable Interest Rate plus (ii) two percent
(2.00%). Each Default Rate shall be adjusted simultaneously with any change in
the applicable Interest Rate. In addition, with respect to Letters of Credit,
the Default Rate shall mean an increase in the Letter of Credit Fee by two
percentage points.
"Defaulting Lender" has the meaning specified in Section 2.2(g)(ii).
"Distribution" means, in respect of any corporation: (a) the payment or making
of any dividend or other distribution of property in respect of capital stock
(or any options or warrants for such stock) of such corporation, other than
distributions in capital stock (or any options or warrants for such stock) of
the same class; or (b) the redemption or other acquisition of any capital stock
(or any options or warrants for such stock) of such corporation.
"DOL" means the United States Department of Labor or any successor department or
agency.
"Dollar" and "$" mean dollars in the lawful currency of the United States.
"EBITDA" means, for the Parent and its Subsidiaries, on a consolidated basis for
any period, the sum of:
(i) the net income (or net loss) of the Parent and its Subsidiaries on
a consolidated basis (determined in accordance with GAAP except to the extent
otherwise provided in the proviso to this definition) for such period, without
giving effect to any GAAP extraordinary gains or losses; plus (or minus)
(ii) to the extent that any of the items referred to in any of clauses
(A) through (E) below were deducted (or added) in calculating such net income
(or net loss):
(A) Interest Expense of the Parent and its Subsidiaries, on a consolidated
basis for such period;
(B) income tax expense or benefit (including, without limitation, income tax
refunds pertaining to prior fiscal years) of the Parent and its Subsidiaries, on
a consolidated basis with respect to operations for such period;
<PAGE>
(C) the amount of all depreciation, amortization, LIFO inventory expense, stock
appreciation right accruals and other noncash charges in accordance with GAAP,
in each case of the Parent and its Subsidiaries on a consolidated basis for such
period;
(D) the amount of non-recurring restructuring charges in connection with the
closing of stores in an amount not to exceed the amounts set forth in the
projections of the Parent and its Subsidiaries entitled "The October 28, 1998
Projections" for the fiscal periods set forth therein (or, for any Fiscal Year
not fully set forth in such projections, the Latest Projections most recently
delivered to the Administrative Agent for such period); and
(E) in addition to charges described in clause (D) above, up to $10,000,000 in
each Fiscal Year (commencing with the Fiscal Year ending in January 2000) in
respect of non-recurring restructuring charges and incremental inventory
markdowns in connection with the closing of stores;
provided, that EBITDA shall be calculated based on the Parent's historical
treatment of inventory mark-downs in connection with store closings, consistent
with the methodology used during the term of the Existing Credit Agreement and
in the preparation of the projections of the Parent and its Subsidiaries
entitled "The October 28, 1998 Projections."
<PAGE>
"Eligible Inventory" means Inventory, valued at the lower of cost or market,
that constitutes first quality finished goods and that, unless the
Administrative Agent in its sole discretion elects: (i) is not, in the
Administrative Agent's good faith judgment, obsolete or unmerchantable; (ii) is
located at premises owned by or leased to a Credit Party or on premises
otherwise reasonably acceptable to the Administrative Agent (unless such
Inventory is in-transit and also is subject to a merchandise or documentary
Letter of Credit); provided, however, that Inventory located (x) in any
warehouse not owned by a Credit Party (or otherwise held by any bailee), (y) on
premises leased to a Credit Party in (A) any jurisdiction in which, as of the
Closing Date, no Credit Party maintains any leased premises to the extent that
the law of such jurisdiction provides for a Lien in favor of lessors on
inventory located on leased premises or (B) any jurisdiction which is listed in
Schedule C as in effect on the Closing Date or any jurisdiction which, by virtue
of any change in law enacted or effective after the Closing Date, provides a
Lien in favor of lessors on inventory located on leased premises or (z) on
premises owned by such Credit Party and subject to a mortgage the mortgagee of
which holds a Lien on inventory located on such premises by virtue of such
mortgage or possession by the mortgagee of the premises, shall in each case not
be Eligible Inventory unless (A) such Borrower shall have delivered to the
Administrative Agent a Lien Waiver Certificate for the Inventory at any such
premises or (B) a reserve has been established by the Administrative Agent for
the Inventory at all such premises in an aggregate amount of $1,843,000; (iii)
is Inventory upon which the Administrative Agent for the benefit of the Lenders
has a first priority perfected security interest; (iv) is not work-in-process,
spare parts, packaging and shipping materials, raw materials, supplies,
bill-and-hold Inventory, returned or defective Inventory, lay-away Inventory,
Inventory in-transit (other than that covered by a merchandise or documentary
Letter of Credit as provided in the definition of Individual Availability) or
Inventory delivered to a Borrower on approval or consignment ; and (v) the
Administrative Agent, in the exercise of its good faith judgment, deems eligible
as the basis for Loans based on such collateral criteria as the Administrative
Agent may from time to time in its sole discretion deem necessary or
appropriate. If any Inventory at any time ceases to be Eligible Inventory, such
Inventory shall promptly be excluded from the calculation of Eligible Inventory.
"Employee Plan" means an "employee benefit plan" as defined in Section 3(3) of
ERISA, which is maintained for, or contributions are made on behalf of,
employees of any Credit Party, and any ERISA Affiliate, other than a
Multiemployer Plan.
"Environmental Claim" means any written notice of violation, claim, demand,
abatement or order by any governmental authority or any person for personal
injury (including sickness, disease or death), property damage, damage to the
environment, nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or deed or use restrictions, resulting from
or based upon (i) the existence, or the continuation of the existence, of a
Release (including, without limitation, sudden or non-sudden, accidental or
nonaccidental Releases), of, or exposure to, any Contaminant, odor or audible
noise or other release or emission in, into or onto the environment (including,
without limitation, the air, ground, water or any surface) at, in, by or from
any of the Facilities, (ii) the environmental aspects of the transportation,
storage, treatment or disposal of Contaminants in connection with the operation
of any of the Facilities or (iii) the violation, or alleged violation by the
Parent or any of its Subsidiaries, of any statutes, ordinances, orders, rules,
regulations, Permits or licenses of or from any governmental authority, agency
or court relating to environmental matters connected with any of the Facilities,
under any applicable Environmental Law.
"Environmental Compliance Reserve" means any reserves which the Administrative
Agent, after the Closing Date, establishes from time to time for amounts that
are reasonably likely to be expended by the Borrowers in order for the Borrowers
and their respective operations and property (i) to comply with any notice from
a Governmental Authority asserting non-compliance with Environmental Laws, or
(ii) to correct any such non-compliance identified in a report delivered to the
Administrative Agent and the Lenders pursuant to Section 9.7, in either case,
the result of which could reasonably be expected to have a Material Adverse
Effect.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C.ss. 9601 et seq.), the Hazardous
Material Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Oil Pollution Act of
1990 (P.L. 101-380), the Safe Drinking Water Act (42 U.S.C. ss.300(f), et seq.),
the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control
Act, as amended ( 15 U.S.C. ss. 2601 et seq. ), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Occupational
Safety and Health Act (29 U.S.C. ss. 651 et seq.), as such laws have been and
hereafter may be amended or supplemented, and any analogous present or future
federal, state or local, statutes and regulations promulgated pursuant thereto.
<PAGE>
"Equipment" means, with respect to any Credit Party, all of such Credit Party's
now owned and hereafter acquired machinery, equipment, furniture, furnishings,
fixtures, and other tangible personal property (except Inventory), including
motor vehicles with respect to which a certificate of title has been issued,
aircraft, dies, tools, jigs, and office equipment, as well as all of such types
of property leased by such Credit Party and all of such Credit Party's rights
and interests with respect thereto under such leases (including, without
limitation, options to purchase); together with all present and future additions
and accessions thereto, replacements therefor, component and auxiliary parts and
supplies used or to be used in connection therewith, and all substitutes for any
of the foregoing, and all manuals, drawings, instructions, warranties and rights
with respect thereto; wherever any of the foregoing is located.
"ERISA" means, at any date, the Employee Retirement Income Security Act of 1974
and the applicable regulations promulgated and rulings issued thereunder, all as
the same shall be in effect at such date.
"ERISA Affiliate" means any trade or business (whether or not incorporated), any
individual, trust, firm, partnership or joint venture that for purposes of Title
I and Title IV of ERISA and Section 412 of the Code is a member of any Credit
Party's controlled group or is under common control with any Credit Party within
the meaning of Section 414(b), (c), (m) or (o) of the Code, and the applicable
regulations promulgated and rulings issued thereunder.
"ERISA Event" means, with respect to any Credit Party or any ERISA Affiliate and
with respect to any Pension Benefit Plan, (a)(i) a Reportable Event (other than
a Reportable Event not subject to the provision for 30-day notice to the PBGC
under subsection .13, .14, .15, .18 or .19 of PBGC Reg. ss. 2615) and (ii) the
requirements of Section 4043(b)(i) of ERISA are met (without regard to the
requirements of Section 4043(b)(2)), and an event described in paragraphs (9),
(10), (11) (12) or (13) of Section 4043(c) is reasonably expected to occur with
respect to any Pension Benefit Plan within the following 30 days, (b) the
withdrawal of any Credit Party or any ERISA Affiliate from a Pension Benefit
Plan during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (c) the provision of a notice of intent to
terminate a Pension Benefit Plan under Section 4041 of ERISA, (d) the
institution of proceedings to terminate a Pension Benefit Plan by the PBGC under
Section 4042 of ERISA, (e) the failure to make required contributions which
would result in the imposition of a Lien under Section 412 of the Code or
Section 302 of ERISA, or (f) any other event or condition which might reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension
Benefit Plan or to cause the imposition of any liability on any Credit Party or
any ERISA Affiliate under Title IV of ERISA.
"Event of Default" has the meaning specified in Section 11.1.
"Exchange Act" means the Securities and Exchange Act of 1934, and regulations
promulgated thereunder.
"Existing Co-Agents" has the meaning assigned to such term in the recitals
hereto.
<PAGE>
"Existing Credit Agreement" has the meaning assigned to such term in the
recitals hereto.
"Existing Hills Credit Agreement" means the Loan and Security Agreement, dated
as of September 30, 1996, among certain lenders, BABC as Agent, Hills, Hills
Department Stores, C.R.H. International, Inc. and the other loan parties
signatories hereto, as amended.
"Existing Lenders" has the meaning assigned to such term in the recitals hereto.
"Existing Letters of Credit" means letters of credit outstanding on the Closing
Date that were issued under the Existing Credit Agreement or the Existing Hills
Credit Agreement, all of which are listed on Schedule A hereto.
"Existing Loans" means the "Revolving Advances" outstanding on the Closing Date
under (and as defined in) the Existing Credit Agreement.
"Existing Security Documents" means the "Security Documents" as defined in the
Existing Credit Agreement.
"Facilities" means any and all real property owned, operated or leased by any
Credit Party.
"FDIC" means the Federal Deposit Insurance Corporation, and any Governmental
Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Administrative Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Administrative Agent.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"Financial Statements" means, according to the context in which it is used, the
financial statements referred to in Section 8.6 or any other financial
statements required to be given to the Administrative Agent and the Lenders
pursuant to this Agreement.
"Fiscal Year" means a fiscal year of the Parent and its consolidated
Subsidiaries for financial accounting purposes, which in any event shall end on
the last Saturday of January of each year.
<PAGE>
"Fixed Assets" means, with respect to any Credit Party, Equipment, Facilities
and Real Estate of such Credit Party.
"Fixed Charge Coverage Ratio" means, with respect to the Parent and its
consolidated Subsidiaries for any period, the ratio of (i) EBITDA for such
period to (ii) Fixed Charges for such period.
"Fixed Charge Coverage Ratio Certificate" means a certificate of a Responsible
Officer of the Parent setting forth the Fixed Charge Coverage Ratio for any
applicable period, together with such supporting documentation and calculations
as the Administrative Agent may reasonably request with respect to such Fixed
Charge Coverage Ratio.
"Fixed Charges" means, with respect to the Parent and its consolidated
Subsidiaries for any period, the sum of (i) Cash Interest Expense for such
period, (ii) Capital Expenditures made in such period and (iii) all payments
made in such period on account of the principal amount of Debt for Borrowed
Money (other than the Obligations).
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination; provided, that for the purposes of determining compliance with
the financial covenant contained in Section 9.26 (and the definitions contained
herein to the extent employed in determining such compliance) only, "GAAP" shall
mean generally accepted accounting principles as in effect as of the Closing
Date.
"General Intangibles" means any and all of any Credit Party's now owned or
hereafter acquired general intangibles, choses in action and causes of action
and all other intangible personal property of such Credit Party of every kind
and nature (other than Accounts), including, without limitation, all contract
rights, Proprietary Rights, corporate or other business records, inventions,
designs, blueprints, plans, specifications, patents, patent applications,
trademarks, service marks, trade names, trade secrets, goodwill, copyrights,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, any funds which may become due to such Credit Party in connection
with the termination of any Plan or other employee benefit plan or any rights
thereto and any other amounts payable to such Credit Party from any Plan or
other employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which such Credit
Party is beneficiary, and any letter of credit, guarantee, claim, security
interest or other security held by or granted to such Credit Party.
<PAGE>
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantor" means, at any time, the Parent and each present or future direct and
indirect Subsidiary thereof, or other Person, in any case, which shall have
executed and delivered a counterpart to this Agreement as a guarantor of the
Obligations under Article 15 or otherwise become a Guarantor of all or any
Obligations.
"Guaranty" means, with respect to any Person, all obligations of such Person
which in any manner directly or indirectly guarantee or assure, or in effect
guarantee or assure, the payment or performance of any indebtedness, dividend or
other obligations of any other Person (the "guaranteed obligations"), or assure
or in effect assure the holder of the guaranteed obligations against loss in
respect thereof, including, without limitation, any such obligations incurred
through an agreement, contingent or otherwise: (i) to purchase the guaranteed
obligations or any property constituting security therefor; (ii) to advance or
supply funds for the purchase or payment of the guaranteed obligations or to
maintain a working capital or other balance sheet condition; or (iii) to lease
property or to purchase any debt or equity securities or other property or
services.
"Hazardous Material" means any pollutant, contaminant, chemical, or industrial
or hazardous, toxic or dangerous waste, substance or material, defined or
regulated as such in (or for purposes of) any Environmental Law and any other
toxic, reactive, or flammable chemicals, including (without limitation) any
asbestos, any petroleum (including crude oil or any fraction), any radioactive
substance and any polychlorinated biphenyls; provided, in the event that any
Environmental Law is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment; and provided, further, to the extent that the applicable laws of
any state establish a meaning for "hazardous material," "hazardous substance,"
"hazardous waste," "solid waste" or "toxic substance" which is broader than that
specified in any Environmental Law, such broader meaning shall apply.
"Hills" has the meaning set forth in the recitals to this Agreement.
"Hills Credit Parties" shall mean and include Hills and each Subsidiary of
Hills.
"Hills Department Stores" has the meaning set forth in the first paragraph of
this Agreement.
"Hills Merger" means the merger pursuant to the Hills Merger Agreement of HSC
with and into Hills, whereupon HSC shall cease to exist and Hills shall remain
as the sole surviving entity.
"Hills Merger Agreement" has the meaning set forth in the recitals to this
Agreement.
<PAGE>
"Hills Merger Documents" means the Hills Merger Agreement and all agreements,
certificates, instruments and other documents executed and/or delivered in
connection therewith, in each case as amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under the terms of
this Agreement.
"Hills Offer Documents" means, collectively, the Offer Documents and the Note
Tender Offer Documents (including, without limitation, the Consent Solicitation
and the Supplemental Indenture).
"HSC" has the meaning set forth in the recitals to this Agreement.
"Indemnified Liabilities" has the meaning specified in Section 16.11.
"Indemnified Person" has the meaning specified in Section 16.11.
"Indenture" means the Indenture dated as of April 19, 1996 among Hills, the
guarantors party thereto and Fleet National Bank, as Trustee, as amended by the
Supplemental Indenture.
"Individual Availability" means at any time with respect to any Borrower (a) the
lesser of (i) the Maximum Revolver Amount minus the sum of the Individual
Outstandings of the other Borrowers at such time or (ii) the sum of (x) at any
time during each period commencing on July 1 and ending on November 30 in each
year, seventy five percent (75%), and at any other time seventy percent (70%),
of the Book Value of Eligible Inventory of such Borrower (excluding Inventory
referred to in clause (y) below), plus (y) fifty percent (50%) of the Book Value
of finished goods Inventory of such Borrower not in the possession of such
Borrower as to which a merchandise or documentary Letter of Credit has been
issued and which, if in possession of such Borrower, would be treated as
Eligible Inventory of such Borrower, but only if such Inventory is covered by
insurance with recognized insurers on terms (including, without limitation,
types of coverage, policy limits and deductible amounts) not materially
different from those of the insurance maintained by the Borrowers with respect
to such Inventory on the Closing Date or is otherwise deemed adequate by the
Administrative Agent; minus (b) the sum of (i) the unpaid balance of Loans of
such Borrower at such time, (ii) the aggregate amount of Pending Loans of such
Borrower at such time, (iii) the aggregate undrawn amount of all outstanding
Letters of Credit issued for the account of such Borrower at such time, (iv) the
aggregate amount of any unpaid reimbursement obligations of such Borrower in
respect of the Letters of Credit, (v) reserves for accrued interest on the
Obligations established with respect to such Borrower, (vi) the Environmental
Compliance Reserve established with respect to such Borrower, and (vii) all
other reserves which the Administrative Agent deems necessary or appropriate in
its sole discretion to maintain with respect to such Borrower's account,
including, without limitation, reserves for any amounts which the Administrative
Agent or any Lender may be obligated to pay in the future for the account of
such Borrower.
<PAGE>
The Administrative Agent reserves the right in good faith, based on
such collateral considerations as the Administrative Agent may in its sole
discretion deem necessary or appropriate, to adjust the Individual Borrowing
Base of any Borrower by establishing reserves, making determinations of Eligible
Inventory, revising standards of eligibility of Eligible Inventory or decreasing
from time to time the percentages set forth above, in which case the "Individual
Availability" and the "Individual Borrowing Base" of such Borrower shall be
defined to include such reserves, revisions or decreased percentages and limited
to Eligible Inventory as so determined.
"Individual Borrowing Base" means, with respect to any Borrower at any time, the
aggregate amount of clauses (a)(ii)(x) and (a)(ii)(y) of the definition of
Individual Availability at such time.
"Individual Outstandings" with respect to any Borrower at any time, means the
aggregate amount of clauses (b)(i) through (b)(vii) of the definition of
Individual Availability at such time.
"Intercompany Accounts" means all assets and liabilities, however arising, which
are due to the Parent and/or any of its Subsidiaries from, which are due from
the Parent and/or any of its Subsidiaries to, or which otherwise arise from any
transaction by the Parent and/or any of its Subsidiaries with, any Affiliate
thereof.
"Interest Expense" means, with respect to the Parent and its consolidated
Subsidiaries for any period, total interest expense (net of interest income) on
a consolidated basis during such period determined in accordance with GAAP, and
shall include in any event, without limitation, interest expense with respect to
Debt for Borrowed Money and payments under Rate Protection Agreements.
"Interest Period" means, as to any LIBOR Rate Loan, the period commencing on the
Funding Date of such Loan or on the Conversion/Continuation Date on which the
Loan is converted into or continued as a LIBOR Rate Loan, and ending on the date
one, two, three or six months thereafter as selected by a Borrower in its Notice
of Borrowing or Notice of Conversion/Continuation; provided, that:
(i) if any Interest Period would otherwise end on a day that is not a Business
Day, that Interest Period shall be extended to the following Business Day unless
the result of such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last
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 end on the last Business Day of the calendar month at the end of such
Interest Period; and
(iii) no Interest Period shall extend beyond the Stated Termination Date.
"Interest Rate" means each or any of the interest rates, including the Default
Rate, set forth in Section 3.1.
<PAGE>
"Inventory" means any and all now owned or hereafter acquired (i) inventory,
goods, merchandise, and other tangible personal property (including, without
limitation, all raw materials, work-in-process, finished goods, lay-away
inventory, returned and repossessed goods) that are intended for sale or lease
in the ordinary course of business, and (ii) materials and supplies of any kind,
nature or description which are or might be used or consumed in any Credit
Party's business or used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such inventory, goods, merchandise and such
other personal property, and all documents of title or other documents
representing them, and all books and records relating thereto, including,
without limitation, computer records, disks, tapes and other media on which any
information relating to inventory, inventory control systems or Accounts is
stored or recorded and all computer software, management information systems and
other similar systems of any kind, in the case of (i) or (ii), in the custody or
possession, actual or constructive, of any of the Credit Parties, or in transit
to any of the Credit Parties, and including, without limitation, such inventory
as is on consignment to third parties, leased to customers of any of the Credit
Parties, or otherwise temporarily out of the custody or possession of the Credit
Parties.
"IRS" means the Internal Revenue Service and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Latest Projections" means: (i) on the Closing Date and thereafter until the
Administrative Agent receives new projections pursuant to Section 7.2(e), the
projections of the financial condition, results of operations, and cash flow of
the Parent and its Subsidiaries, entitled "The October 28, 1998 Projections" and
delivered to the Administrative Agent and the Lenders prior to the Closing Date;
and (ii) thereafter, the projections most recently received by the
Administrative Agent pursuant to Section 7.2(e).
"Lender" and "Lenders" have the meanings specified in the introductory paragraph
hereof and shall include the Administrative Agent to the extent of any
Administrative Agent Advance outstanding and BABC to the extent of any BABC Loan
outstanding; provided that no such Administrative Agent Advance or BABC Loan
shall be taken into account in determining any Lender's Pro Rata Share.
"Letter of Credit" means a letter of credit issued or caused to be issued for
the account of a Borrower pursuant to Section 2.4.
"Letter of Credit Fee" has the meaning specified in Section 3.6.
"LIBOR Rate" means, for any Interest Period, with respect to LIBOR Rate Loans
comprising part of the same Borrowing, the rate of interest per annum (rounded
upward to the next 1/16th of 1.0%) determined pursuant to the following formula:
LIBOR Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
where
<PAGE>
"Eurodollar Reserve Percentage" means the maximum reserve percentage (expressed
as a decimal, rounded upward to the nearest 1/100th of 1%) in effect on the date
LIBOR for such Interest Period is determined (whether or not applicable to Bank
of America National Trust and Savings Association) under regulations issued from
time to time by the Federal Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities") having a term comparable to such Interest Period;
and
"LIBOR" means the rate of interest per annum determined by Bank of America to be
the arithmetic mean (rounded upward, if necessary, to the nearest one-hundredth
of one percent (1/100%)) of the rates of interest per annum notified to Bank of
America as the rate of interest at which dollar deposits in an amount
approximately equal to the amount of the Loan to be made or continued as, or
converted into, a LIBOR Rate Loan by the Lenders and having a maturity equal to
such Interest Period would be offered to major banks in the London interbank
market at their request at or about 11:00 a.m. (London time) on the second
Business Day before the commencement of such Interest Period.
"LIBOR Rate Loan" means a Loan during any period in which it bears interest
based on the LIBOR Rate.
"Lien" means any lien, mortgage, pledge, security interest or other type of
charge or encumbrance of any kind, or any other type of preferential
arrangement, including, without limitation, the lien or retained security title
of a conditional vendor and any easement, right of way or other encumbrance on
title to real property and any financing statement filed in respect of any of
the foregoing (other than precautionary filings in respect of true leases of
Equipment and in respect of goods which have been consigned to a Borrower as to
which such Borrower has no right, title or interest).
"Lien Waiver Certificate" means an agreement, waiver, subordination or other
certificate, in form and substance satisfactory to the Administrative Agent,
with respect to personal property of the Credit Parties that is located at a
leased Facility, stored in a public warehouse, placed on consignment, or
otherwise held by any bailee or other third party, duly executed on behalf of
the appropriate warehouseman, bailee, consignee, landlord, mortgagee or such
other third party.
"Loan Account" means, with respect to a Borrower, the loan account of such
Borrower, which account shall be maintained by the Administrative Agent.
"Loan Documents" means this Agreement, the Notes, each Security Document and the
Amended and Restated Intercompany Security Agreements, each as from time to time
amended, supplemented or modified, and any other agreements, instruments, and
documents heretofore, now or hereafter evidencing or otherwise relating to the
Obligations, the Collateral, or any other aspect of the transactions
contemplated by this Agreement.
<PAGE>
"Loans" has the meaning specified in Section 2.2 and includes each
Administrative Agent Advance and BABC Loan.
"Majority Lenders" means at any time Lenders having more than fifty percent
(50%) of the Commitments of the Lenders at such time or, if no Commitments shall
then be in effect, Lenders who hold more than fifty percent (50%) of the
aggregate principal amount of the Loans then outstanding.
"Margin Stock" means "margin stock" as such term is defined in Regulation T, U
or X of the Federal Reserve Board.
"Master Agreement" means the Master Assignment and Assumption Agreement dated as
of the Closing Date by and among the Existing Lenders, the Lenders, the Credit
Parties and BABC in its capacities as Agent hereunder and under the Existing
Credit Agreement.
"Master Sublease" means that certain sublease agreement dated as of December 28,
1992 between Ames Realty II, Inc., as sublessor and Ames FS or Ames
Merchandising (as successor to Ames Stores), as sublessee with respect to each
leased Ames FS or Ames Merchandising location, as heretofore amended, and as in
effect on the Closing Date.
"Material Adverse Effect" means a material adverse effect on (i) the business,
assets, properties, prospects, performance, operations or financial or other
condition of the Borrowers or the Credit Parties taken as a whole, (ii) the
ability of the Borrowers or the Credit Parties taken as a whole to pay the
Obligations in accordance with the terms hereof or (iii) the Administrative
Agent's Lien on any material portion of the Collateral or the priority of any
such Lien (other than by reason of acts or omissions of the Administrative Agent
or any Lender except to the extent such act or omission has occurred and is
continuing as the result or consequence of a Default or Event of Default by any
Credit Party or the failure of a Credit Party to deliver any instruments or
agreements requested by the Administrative Agent to perfect or protect the
priority of such Lien).
"Material Contracts" means the agreements listed in Schedule 8.27, including
without limitation, the Master Sublease, the Amended and Restated Intercompany
Security Agreements, the Indenture, the Hills Merger Documents and the Hills
Offer Documents, each as in effect on the Closing Date.
"Maximum Revolver Amount" means $650,000,000, as such amount may be reduced from
time to time pursuant to Section 4.2.
"Mortgage" has the meaning specified in Section 10.1(t).
"Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) in ERISA) maintained or contributed to within the preceding five
years for employees of (i) the Parent or any of its Subsidiaries; (ii) any
Credit Party; or (iii) any ERISA Affiliate.
<PAGE>
"Net Cash Proceeds" means, with respect to any sale of assets of a Credit Party,
cash (freely convertible into U.S. dollars) received by such Credit Party from
such sale (including cash received as consideration for the assumption or
incurrence of liabilities incurred in connection with or in anticipation of such
sale), after (i) provision for all title, recording or other taxes measured by
or resulting from such sale, (ii) payment of all reasonable brokerage
commissions, investment banking and legal fees and other fees and expenses
related to such sale, (iii) deduction of appropriate amounts to be provided by
such Credit Party as a reserve, in accordance with GAAP, against any liabilities
associated with the assets sold or disposed of in such transaction and retained
by such Credit Party after such transaction, including, without limitation,
pension and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such transaction and (iv) amounts paid to
satisfy Debt (other than the Obligations) which are required to be repaid in
connection with any such sale.
"Note" and "Notes" means the Notes of the Borrowers, executed and delivered as
provided in Section 4.8, in substantially the form of Exhibit G, as amended,
modified or supplemented from time to time.
"Note Tender Offer" has the meaning set forth in the Hills Merger Agreement.
"Note Tender Offer Documents" has the meaning set forth in the Hills Merger
Agreement.
"Notice of Borrowing" has the meaning specified in Section 2.2(b).
"Notice of Conversion/Continuation" has the meaning specified in Section 3.2(b).
"Obligations" means all present and future loans, advances, liabilities,
obligations, covenants, duties, and debts owing by any Borrower or other Credit
Party to the Administrative Agent and/or any Lender, arising under or pursuant
to this Agreement, the Notes or any of the other Loan Documents, whether or not
evidenced by any note, or other instrument or document, whether arising from an
extension of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment from others, and any participation by
the Administrative Agent and/or any Lender in any Borrower's debts owing to
others), absolute or contingent, due or to become due, primary or secondary, as
principal or guarantor, and including, without limitation, all principal,
interest, charges, expenses, fees, attorneys' fees, filing fees and any other
sums chargeable to any Borrower hereunder or under any of the other Loan
Documents. "Obligations" includes, without limitation, all debts, liabilities,
and obligations now or hereafter owing from any Borrower to the Administrative
Agent and/or any Lender under or in connection with the Letters of Credit.
"Offer" has the meaning set forth in the Hills Merger Agreement.
"Offer Documents" has the meaning set forth in the Hills Merger Agreement.
"Originating Lender" has the meaning specified in Section 13.3(e).
<PAGE>
"Other Taxes" means any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"Parent" has the meaning set forth in the recitals to this Agreement.
"Participating Lender" means any Person who shall have been granted the right by
any Lender in accordance with Section 13.3(e) to participate in the financing
provided by such Lender under this Agreement, and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.
"Payments" has the meaning specified in Section 6.8.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereof
under ERISA.
"PCBs" has the meaning set forth in the definition of Contaminant herein.
"Pending Loans" means, with respect to any Borrower at any time, the aggregate
principal amount of all Loans requested by such Borrower in any Notice(s) of
Borrowing received by the Administrative Agent which have not yet been advanced
and for which the related Notice of Borrowing has not been declined by the
Administrative Agent.
"Pension Benefit Plan" means any Employee Plan which is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) and which is subject to
Title IV of ERISA, other than a Multiemployer Plan.
"Permits" means any permit, approval, authorization, license or variance
required from a governmental authority having jurisdiction under an applicable
Environmental Law.
"Permitted Liens" means:
(a) the Administrative Agent's Liens;
(b) (i) Liens for taxes, assessments or governmental charges or levies, provided
payment thereof shall not at the time be required in accordance with the
provisions of Section 9.1;
(ii) deposits, Liens or pledges of cash collateral to secure payments
of workmen's compensation and other payments, unemployment and other insurance,
old age pensions or other social security obligations, or the performance of
bids, tenders, leases, contracts (other than contracts for the payment of
money), public or statutory obligations, surety, stay or appeal bonds, or other
similar obligations arising in the ordinary course of business;
<PAGE>
(iii) mechanics', workmen's, repairmen's, warehousemen's, vendors' or
carriers' Liens, or other similar Liens arising in the ordinary course of
business and securing sums which are not past due, or deposits or pledges to
obtain the release of any such Liens;
(iv) zoning restrictions, encroachments, easements, rights of way,
licenses and restrictions on the use of real property or minor irregularities in
title thereto, which do not materially impair the use of such property in the
normal operation of the business of any of the Credit Parties or any of their
respective Subsidiaries or the value of such property for the purpose of such
business; and
(v) Liens created by statute or common law in favor of landlords for
unpaid rent and related amounts as to which the Administrative Agent is entitled
to create a reserve under the definition of Individual Availability.
(c) existing Liens set forth in Schedule 9.19 hereto and any renewals thereof,
but not any increase in amount thereof and not any extension thereof to other
property;
(d) purchase money mortgages or other purchase money Liens (including, without
limitation, Capital Leases) in favor of non-Affiliates of the Credit Parties and
their respective Subsidiaries upon any fixed or capital assets hereafter
acquired by any Credit Party or any Subsidiary thereof constituting real
property interests or machinery and equipment, or purchase money mortgages
(including, without limitation, Capital Leases) on any such assets hereafter
acquired or existing at the time of acquisition of such assets by any Credit
Party or any Subsidiary thereof, whether or not assumed, so long as (i) any such
Lien does not extend to or cover any other asset of any Credit Party or any of
its Subsidiaries, (ii) such Lien secures only the obligation to pay the purchase
price of such asset (or the obligation under such Capital Leases), interest
thereon and other customary incidental obligations relating thereto only and
(iii) the Debt incurred to finance each such acquisition is permitted by Section
9.13; and
(e) Liens arising under the Amended and Restated Intercompany Security
Agreements.
"Permitted Reduction" means a permanent reduction of the Maximum Revolver Amount
of up to $200,000,000 made in accordance with the terms and conditions of this
Agreement contemporaneously with the consummation by the Parent of a public
offering of equity or unsecured debt securities in an amount and otherwise on
terms and conditions acceptable in all respects to the Administrative Agent and
the Majority Lenders.
"Person" means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, Governmental
Authority, or any other entity.
<PAGE>
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which any Credit Party sponsors or maintains or to which such Credit Party
makes, is making, or is obligated to make contributions and includes any Pension
Plan.
"Premises" means the land identified by addresses on Schedule 8.11, together
with all buildings, improvements, and fixtures thereon and all tenements,
hereditaments, and appurtenances belonging or in any way appertaining thereto,
and which constitutes all of the real property in which any Credit Party has any
interests on the Closing Date.
"Pro Rata Share" means, with respect to a Lender, a fraction (expressed as a
percentage), the numerator of which is the amount of such Lender's Commitment
and the denominator of which is the sum of the amounts of all of the Lenders'
Commitments, or if no Commitments are outstanding, a fraction (expressed as a
percentage), the numerator of which is the amount of Obligations owed to such
Lender and the denominator of which is the aggregate amount of the Obligations
owed to the Lenders.
"Proprietary Rights" means all of any Credit Party's now owned and hereafter
arising or acquired: licenses, franchises, permits, patents, patent rights,
copyrights, works which are the subject matter of copyrights, trademarks,
service marks, trade names, trade styles, patent, trademark and service mark
applications, and all licenses and rights related to any of the foregoing,
including, without limitation, those patents, trademarks, service marks, trade
names and copyrights set forth on Schedule 8.12 hereto, and all other rights
under any of the foregoing, all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing, and all rights
to sue for past, present and future infringement of any of the foregoing.
"Rate Protection Agreements" means interest rate swap, cap, collar or floor
arrangements or other similar agreements entered into by the Parent or any
Subsidiary thereof to provide protection against fluctuations in interest rates.
Each Rate Protection Agreement shall be on terms satisfactory to the
Administrative Agent with a counter party satisfactory to the Administrative
Agent.
"Real Estate" means all of the Premises now owned or hereafter acquired by any
Credit Party or any interest therein including, without limitation, those listed
on Schedule 8.11 hereto and more particularly described in the Amended Mortgages
and those more particularly described in the other Mortgages, together with the
right, title and interest of any Credit Party, if any, in and to the streets,
the land lying in the bed of any streets, roads or avenues, opened or proposed,
in front of, adjoining, or abutting the Premises to the center line thereof, the
air space and development rights pertaining to the land and right to use such
air space and development rights, all rights of way, privileges, liberties,
tenements, hereditaments, and appurtenances belonging or in any way appertaining
thereto, awards from any condemnation or eminent domain proceedings and
insurance proceeds resulting from any casualty or other damage to the buildings
and other improvements on the Premises, all fixtures, all easements now or
hereafter benefitting the Premises and all royalties and rights appertaining to
the use and enjoyment of the Premises, including, without limitation, all alley,
vault, drainage, mineral, water, oil, coal, gas, timber and other similar
rights, together with all of the buildings and other improvements now or
hereafter erected on the Premises, all fixtures and all additions thereto and
substitution and replacement thereof.
<PAGE>
"Release" means any releasing, spilling, escaping, leaking, seepage, pumping,
pouring, emitting, emptying, discharging, injecting, leaching, disposing or
dumping. The meaning of the term shall also include any threatened Release.
"Remedial Action" means all actions required to (i) clean up, remove, treat or
dispose of Contaminants in the indoor or outdoor environment; (ii) prevent the
Release or threat of Release or minimize the further Release of Contaminants so
they do not migrate or otherwise endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; or (iii) perform pre-remedial
studies and investigations and post-remedial monitoring and care in respect of
actions contemplated in the preceding clauses (i) and (ii).
"Reportable Event" has the meaning specified in Section 9.8(b)(i).
"Requirement of Law" means, as to any Person, any law (statutory or common),
treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the Chief Executive Officer, the President, the
Executive Vice President/Chief Financial Officer, the Chief Financial Officer,
the Senior Vice President-Finance, the Vice President/Controller, the Treasurer
or the Assistant Treasurer of the Parent or any Borrower, as appropriate, or any
other officer having substantially the same authority and responsibility; or,
with respect to compliance with financial covenants and the preparation of the
Borrowing Base Certificate, the Executive Vice President/Chief Financial
Officer, the Chief Financial Officer, the Senior Vice President-Finance, the
Vice President/Controller, the Treasurer or the Assistant Treasurer of the
Parent and each Borrower, or any other officer having substantially the same
authority and responsibility.
<PAGE>
"Restricted Investment" means any acquisition of property by the Parent or any
of its Subsidiaries in exchange for cash or other property, whether in the form
of an acquisition of stock, debt, or other indebtedness or obligation, or the
purchase or acquisition of any other property, or a loan, advance, capital
contribution, or subscription, except the following: (i) Equipment to be used in
the business of the Parent or any Subsidiary thereof so long as the acquisition
costs thereof constitute Capital Expenditures permitted hereunder; (ii)
Inventory of a Borrower in the ordinary course of business; (iii) current assets
arising from the sale or lease of goods or the rendition of services in the
ordinary course of business of a Borrower; (iv) direct obligations of the United
States of America, or any agency thereof, or obligations guaranteed by the
United States of America; provided that such obligations mature within one year
from the date of acquisition thereof; (v) certificates of deposit maturing
within one year from the date of acquisition, bankers' acceptances, Eurodollar
bank deposits, or overnight bank deposits, in each case issued by, created by,
or with a Lender or with a bank or trust company organized under the laws of the
United States or any state thereof having capital and surplus aggregating at
least $500,000,000, the holding company of which has outstanding commercial
paper meeting the requirements of clause (vii) of this definition; (vi)
repurchase agreements with a term of not more than seven (7) days for underlying
securities of the types described in clause (iv) or (v) of this definition;
provided, that the underlying securities of the type described in clause (iv)
may not have maturities of more than six months from the date of acquisition)
entered into with any Lender or any other bank meeting the qualifications
specified in clause (v) above or with securities dealers of recognized national
standing; provided, further, that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Institutions Examination Council
Supervisory Policy Repurchase Agreements of Depositary Institutions With
Securities Dealers and Others as adopted by the Comptroller of the Currency on
October 31, 1985 (the "Supervisory Policy"); and provided, further, that
possession or control of the underlying securities is established as provided in
the Supervisory Policy; (vii) commercial paper given a rating of "A-1" or better
by Standard & Poor's Ratings Group or "P-1" or better by Moody's Investors
Service, Inc. and maturing not more than 180 days from the date of creation
thereof; (viii) in the case of the Parent or any other Credit Party, common
equity investments existing on December 27, 1996 in the capital stock of its
Subsidiaries, but not any additional investments therein other than increases
solely by reason of increases in the retained earnings of such Subsidiary; (ix)
in the case of the Parent or any other Credit Party, common equity investments
existing on the Closing Date in the capital stock of its Subsidiaries, but not
any additional investments therein other than increases solely by reason of
increases in the retained earnings of such Subsidiary; (x) individual store
deposit accounts with local depositary banks and concentration deposit accounts,
if any, permitted by Section 6.8; (xi) investments representing stock or
obligations issued to any Credit Party or any Subsidiary thereof in settlement
of claims against any other Person by reason of a composition or readjustment of
debt or a reorganization of any debtor of any Credit Party or such Subsidiary;
(xii) the Guaranties permitted under Section 9.12 hereof; (xiii) investments in
Hills arising by virtue of consummation of the Offer and the Note Tender Offer
and other investments in Hills and its Subsidiaries to the extent expressly
permitted under the provisions of this Agreement; and (xiv) loans and advances
to senior management of up to $100,000 individually and no more than $1,700,000
in the aggregate.
"Security Documents" means this Agreement, the Amended and Restated Patent and
Trademark Agreement, the Amended Mortgages and other Mortgages, the Amended
Collateral Assignments and the Amended and Restated Stock Pledge Agreement, each
as from time to time amended, supplemented or modified, and any other
agreements, instruments, and documents heretofore, now or hereafter evidencing,
securing, guaranteeing or otherwise relating to the Collateral.
"Settlement" and "Settlement Date" have the meanings specified in Section 2.2(j)
(i).
"Shares" has the meaning set forth in the Hills Merger Agreement.
"Shipping Release Indemnity" has the meaning specified in Section 2.4(k).
"Solvent" means when used with respect to any Person that at the time of
determination:
(i) the assets of such Person, at a fair valuation, are in excess of
the total amount of its debts (including, without limitation, contingent
liabilities); and
<PAGE>
(ii) the present fair saleable value of its assets is greater than its
probable liability on its existing debts as such debts become absolute and
matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as they
mature; and
(iv) it has capital sufficient to carry on its business as conducted
and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Stated Termination Date" means June 30, 2002.
"Subsidiary" of a Person means any corporation, association, partnership, joint
venture or other business entity of which more than fifty percent (50%) of the
voting stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof. Unless
the context otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of the Parent.
"Supplemental Indenture" has the meaning set forth in the Hills Merger
Agreement.
"Taxes" means any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender and the Administrative Agent, such taxes (including
income taxes or franchise taxes) as are imposed on or measured by each Lender's
net income by the jurisdiction (or any political subdivision thereof) under the
laws of which such Lender or the Administrative Agent, as the case may be, is
organized or maintains a lending office.
"Termination Date" means the earliest to occur of (i) the Stated Termination
Date, (ii) the date the Total Facility is terminated either by the Borrowers
pursuant to Section 4.2 or by the Majority Lenders pursuant to Section 11.2, and
(iii) the date this Agreement is otherwise terminated for any reason whatsoever.
"Total Facility" has the meaning specified in Section 2.1(a).
"UCC" means the Uniform Commercial Code (or any successor statute) of the State
of New York or of any other state the laws of which are required by Section
9-103 thereof to be applied in connection with the issue of perfection of
security interests.
<PAGE>
"Unused Letter of Credit Subfacility" means an amount equal to $150,000,000
minus the sum of (i) the aggregate undrawn amount of all outstanding Letters of
Credit plus (ii) the aggregate unpaid reimbursement obligations with respect to
all Letters of Credit.
"Unused Line Fee" has the meaning specified in Section 3.5.
"Zayre Merger Documents" means the Agreement and Plan of Merger and the
Certificate of Merger of Zayre New England Corp. with and into Ames
Merchandising, each dated as of March 3, 1998, and all agreements, documents and
instruments executed and delivered pursuant thereto or in connection therewith,
including without limitations and agreements, documents and instruments
evidencing the dissolution of Ames Stores.
"Zayre Merger Transaction" means the merger of Zayre New England Corp. with and
into Ames Merchandising (formerly known as Zayre Central Corp.), whereupon Zayre
New England Corp. ceased to exist and Ames Merchandising remained as the sole
surviving entity, and the resulting dissolution of Ames Stores all pursuant to
the Zayre Merger Documents and the partnership agreement of Ames Stores.
1.2 Accounting Terms
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given in accordance with
GAAP, and all financial computations hereunder shall be computed, unless
otherwise specifically provided herein, in accordance with GAAP as consistently
applied and using the same method for inventory valuation as used in the
preparation of the Financial Statements.
1.3 Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and Subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii)The term "including" is not limiting and means "including
without limitation."
(iii)In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including," the words
"to" and "until" each mean "to but excluding" and the word "through" means "to
and including."
<PAGE>
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Administrative
Agent, the Credit Parties and the other parties, and are the products of all
parties. Accordingly, they shall not be construed against the Lenders or the
Administrative Agent merely because of the Administrative Agent's or Lenders'
involvement in their preparation.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 Total Facility.
(a) Credit Facility. Subject to all of the terms and conditions of this
Agreement, the Lenders severally agree to make available a total credit facility
of up to $650,000,000 (the "Total Facility") for the Borrowers' use from time to
time during the term of this Agreement. The Total Facility shall be comprised of
a revolving line of credit consisting of revolving loans and letters of credit
up to the Maximum Revolver Amount, as described in Sections 2.2 and 2.4.
(b) Existing Loans and Existing Letters of Credit. On the Closing Date:
(i) the Existing Loans held by each Existing Lender shall
automatically, and without any action on the part of any Person, be designated
as Loans of such Lender hereunder and any Notes (as defined in the Existing
Credit Agreement) evidencing the same shall be returned to the Administrative
Agent (to be held until the Termination Date), with any Loans then outstanding
to be reflected by the Administrative Agent on its books and records in
accordance with the terms of this Agreement;
(ii)the Existing Letters of Credit shall automatically, and
without any action on the part of any Person, be designated as Letters of Credit
issued hereunder;
(iii)the transactions contemplated to occur under the Master
Agreement shall have occurred; and
<PAGE>
(iv)all interest and fees accrued up to, but not including, the
Closing Date, under the Existing Credit Agreement shall be paid by the Borrowers
to the Administrative Agent for disbursement to the Existing Co-Agents, the
Existing Lenders and BABC, as Issuing Lender, in accordance with the terms of
(and in accordance with their pro rata shares under and as defined in) the
Existing Credit Agreement (it being understood that no termination fee is
payable under Section 4.2 of the Existing Credit Agreement by virtue of the
restatement herein contemplated); all such interest and fees may be financed by
the Lenders as a Loan to be made on the Closing Date;
in each case in such amounts (and the Lenders shall, through the Administrative
Agent, make such additional adjustments among themselves as shall be necessary)
so that after giving effect to such assignments, adjustments, revolving credit
loans and letters of credit, the Lenders shall hold the Loans and Letters of
Credit ratably in accordance with their respective Pro Rata Shares.
(c) Interest Periods.
On the Closing Date, all "Interest Periods" under and as defined
in the Existing Credit Agreement, if any, shall automatically be terminated.
(d) Continuation of Indebtedness, Etc. Except as expressly provided herein, the
indebtedness outstanding under the Existing Credit Agreement on the Closing Date
shall not be deemed to be repaid or prepaid by the amendment and restatement of
the Existing Credit Agreement provided for hereby or the other transactions
stated to occur on the Closing Date, but such indebtedness shall continue to be
outstanding hereunder on the terms and conditions hereof. Without limitation of
the foregoing, upon the satisfaction of the conditions precedent set forth in
Article 10 hereof, the Commitments and the Notes (if any) shall be in renewal
of, and substitution and replacement for, the commitments (if any) of the
Existing Lenders to lend under the Existing Credit Agreement (and each of the
Notes as defined therein and delivered thereunder).
2.2 Loans.
<PAGE>
(a) Amounts. Subject to the satisfaction of the conditions precedent set forth
in Article 10, each Lender severally agrees, upon the request of any Borrower
from time to time on any Business Day during the period from the Closing Date to
the Termination Date, to make revolving loans (the "Loans") to such Borrower, in
amounts not to exceed (except for BABC with respect to BABC Loans or
Administrative Agent Advances) such Lender's Pro Rata Share of such Borrower's
Individual Availability. The Lenders, however, in their discretion, may elect to
make Loans or participate (as provided for in Section 2.4(f)) in the credit
support or enhancement provided to such Borrower through the Administrative
Agent to the issuers of Letters of Credit in excess of such Borrower's
Individual Availability on one or more occasions, but if they do so, neither the
Administrative Agent nor the Lenders shall be deemed thereby to have changed the
limits of the Total Facility or such Borrower's Individual Availability or to be
obligated to exceed such limits on any other occasion. If the Individual
Outstandings of such Borrower exceeds the Individual Availability of such
Borrower, the Lenders may refuse to make or otherwise restrict the making of
Loans to such Borrower as the Lenders determine until such excess has been
eliminated, subject to the Administrative Agent's authority, in its sole
discretion, to make Administrative Agent Advances pursuant to the terms of
Section 2.2(i).
(b) Procedure for Borrowing. (1) Each Borrowing by a Borrower (including BABC
Loans) shall be made upon such Borrower's irrevocable written notice delivered
to the Administrative Agent in substantially the form attached hereto as Exhibit
C (a "Notice of Borrowing") together with a Borrowing Base Certificate
reflecting sufficient Individual Availability of such Borrower and no less than
$100,000,000 of Combined Availability, which must be received by the
Administrative Agent not later than 12:00 Noon New York time (i) at least three
Business Days prior to the requested Funding Date, in the case of LIBOR Rate
Loans and (ii) no later than 12:00 Noon on the requested Funding Date, in the
case of Base Rate Loans, specifying:
(A) the amount of the Borrowing;
(B) the requested Funding Date, which shall be a Business Day;
(C) whether the Loans requested are to be Base Rate Loans or LIBOR
Rate Loans; and
(D) the duration of the Interest Period if the requested Loans are
to be LIBOR Rate Loans. If the Notice of Borrowing fails to specify the duration
of the Interest Period for any Borrowing comprised of LIBOR Rate Loans, such
Interest Period shall be one month;
provided, however, that with respect to any Borrowing to be made on the Closing
Date, such Borrowing will consist of Base Rate Loans only; and provided,
further, that no Notice of Borrowing shall be required with respect to any
Borrowing pursuant to Section 2.2(i) or Section 2.4(e)(2).
(2) After giving effect to any Borrowing, there may not be more
than ten (10) different Interest Periods in effect for the Borrowers in the
aggregate.
(3) With respect to any request for Base Rate Loans, in lieu of
delivering the above-described Notice of Borrowing a Borrower may give the
Administrative Agent telephonic notice of such request by the required time,
with such telephonic notice to be confirmed in writing within 24 hours of the
giving of such notice but the Administrative Agent shall be entitled to rely on
the telephonic notice in making such Base Rate Loans.
<PAGE>
(c) Reliance upon Authority. On or prior to the Closing Date and thereafter
prior to any change with respect to any of the information contained in the
following clauses (i) and (ii), the applicable Borrower shall deliver to the
Administrative Agent a writing setting forth (i) the account of such Borrower to
which the Administrative Agent is authorized to transfer the proceeds of the
Loans requested by such Borrower pursuant to this Section 2.2, and (ii) the
names of the officers authorized to request Loans on behalf of such Borrower,
and shall provide the Administrative Agent with a specimen signature of each
such officer. The Administrative Agent shall be entitled to rely conclusively on
such officer's authority to request Loans on behalf of the applicable Borrower,
the proceeds of which are to be transferred to any of the accounts specified by
such Borrower pursuant to the immediately preceding sentence, until the
Administrative Agent receives written notice to the contrary. The Administrative
Agent shall have no duty to verify the identity of any individual representing
him or herself as one of the officers authorized by the applicable Borrower to
make such requests on its behalf.
(d) No Liability. The Administrative Agent shall not incur any liability to any
Borrower as a result of acting upon any notice referred to in Sections 2.2(b)
and (c), which notice the Administrative Agent believes in good faith to have
been given by an officer duly authorized by such Borrower to request Loans on
its behalf or for otherwise acting in good faith under this Section 2.2, and the
crediting of Loans to such Borrower's deposit account, or transmittal to such
Person as such Borrower shall direct, shall conclusively establish the
obligation of such Borrower to repay such Loans as provided herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or telephonic notice in lieu
thereof) made pursuant to Section 2.2(b) shall be irrevocable and the applicable
Borrower shall be bound to borrow the funds requested therein in accordance
therewith.
(f) Administrative Agent's Election. Promptly after receipt of a Notice of
Borrowing (or telephonic notice in lieu thereof) pursuant to Section 2.2(b), the
Administrative Agent shall elect, in its discretion, (i) to have the terms of
Section 2.2(g) apply to such requested Borrowing, or (ii) to request BABC to
make a BABC Loan pursuant to the terms of Section 2.2(h) in the amount of the
requested Borrowing; provided, however, that if BABC declines in its sole
discretion to make a BABC Loan pursuant to Section 2.2(h), the Administrative
Agent shall elect to have the terms of Section 2.2(g) apply to such requested
Borrowing.
(g) Making of Loans. (i) In the event that the Administrative Agent shall elect
to have the terms of this Section 2.2(g) apply to a requested Borrowing as
described in Section 2.2(f), then promptly after receipt of a Notice of
Borrowing or telephonic notice pursuant to Section 2.2(b), the Administrative
Agent shall notify the Lenders by telecopy, telephone or other similar form of
transmission, of the requested Borrowing. Each Lender shall make the amount of
such Lender's Pro Rata Share of the requested Borrowing available to the
Administrative Agent in same day funds, to such account of the Administrative
Agent as the Administrative Agent may designate, not later than 1:00 p.m. (New
York time) on the Funding Date applicable thereto. After the Administrative
Agent's receipt of the proceeds of such Loans, upon satisfaction of the
applicable conditions precedent set forth in Article 10, the Administrative
Agent shall make the proceeds of such Loans available to the applicable Borrower
on the applicable Funding Date by transferring same day funds equal to the
proceeds of such Loans received by the Administrative Agent to the account of
such Borrower, designated in writing by such Borrower and acceptable to the
Administrative Agent; provided, however, that the amount of Loans so made to
such Borrower on any date shall in no event exceed the Individual Availability
of such Borrower on such date.
<PAGE>
(ii)Unless the Administrative Agent receives notice from a Lender
on or prior to the Closing Date or, with respect to any Borrowing after the
Closing Date, at least one Business Day prior to the date of such Borrowing (or,
with respect to any Base Rate Loan, by 1:00 p.m. on the date of such Borrowing),
that such Lender will not make available as and when required hereunder to the
Administrative Agent for the account of applicable Borrower the amount of that
Lender's Pro Rata Share of the Borrowing, the Administrative Agent may assume
that each Lender has made such amount available to the Administrative Agent in
immediately available funds on the Funding Date and the Administrative Agent may
(but shall not be so required), in reliance upon such assumption, make available
to such Borrower on such date a corresponding amount. If and to the extent any
Lender shall not have made its full amount available to the Administrative Agent
in immediately available funds and the Administrative Agent in such
circumstances has made available to applicable Borrower such amount, that Lender
shall on the Business Day following such Funding Date make such amount available
to the Administrative Agent, together with interest at the Federal Funds Rate
for each day during such period. A notice of the Administrative Agent submitted
to any Lender with respect to amounts owing under this subsection shall be
conclusive, absent manifest error. If such amount is so made available, such
payment to the Administrative Agent shall constitute such Lender's Loan to the
applicable Borrower on the date of Borrowing for all purposes of this Agreement.
If such amount is not made available to the Administrative Agent on the Business
Day following the Funding Date, the Administrative Agent will notify the
applicable Borrower of such failure to fund and, upon demand by the
Administrative Agent, such Borrower shall pay such amount to the Administrative
Agent for the Administrative Agent's account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Loans comprising such Borrowing.
The failure of any Lender to make any Loan on any Funding Date (any such Lender,
prior to the cure of such failure, being hereinafter referred to as a
"Defaulting Lender") shall not relieve any other Lender of any obligation
hereunder to make a Loan on such Funding Date, but no Lender shall be
responsible for the failure of any other Lender to make the Loan to be made by
such other Lender on any Funding Date.
<PAGE>
(iii) The Administrative Agent shall not be obligated to transfer
to a Defaulting Lender any payments made by any Borrower to the Administrative
Agent for the Defaulting Lender's benefit; nor shall a Defaulting Lender be
entitled to the sharing of any payments hereunder. Amounts payable to a
Defaulting Lender shall instead be paid to or retained by the Administrative
Agent. The Administrative Agent may hold and, in its discretion, re-lend to the
applicable Borrower the amount of all such payments received or retained by it
for the account of such Defaulting Lender. Any amounts so re-lent to such
Borrower shall bear interest at the rate applicable to Base Rate Loans and for
all other purposes of this Agreement shall be treated as if they were Loans,
provided, however, that for purposes of voting or consenting to matters with
respect to the Loan Documents (other than with respect to increasing the
Commitment of such Lender under Section 13.2(a)) and determining Pro Rata
Shares, such Defaulting Lender shall be deemed not to be a "Lender" and such
Lender's Commitment shall be deemed to be zero (-0-). Until a Defaulting Lender
cures its failure to fund its Pro Rata Share of any Borrowing (1) such
Defaulting Lender shall not be entitled to any portion of the Unused Line Fee
and (2) the Unused Line Fee shall accrue in favor of the Lenders which have
funded their respective Pro Rata Shares of such requested Borrowing, shall be
allocated among such performing Lenders ratably based upon their relative
Commitments, and shall be calculated based upon the average amount by which the
aggregate Commitments of such performing Lenders exceeds the sum of outstanding
Loans and the undrawn face amount of all outstanding Letters of Credit. This
Section shall remain effective with respect to such Lender until such time as
the Defaulting Lender shall no longer be in default of any of its obligations
under this Agreement. The terms of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, or relieve or excuse
the performance by the applicable Borrower of its duties and obligations
hereunder.
(h) Making of BABC Loans. (i) In the event the Administrative Agent shall elect,
with the consent of BABC, to have the terms of this Section 2.2(h) apply to a
requested Borrowing as described in Section 2.2(f), BABC shall make a Loan in
the amount of such Borrowing (any such Loan made solely by BABC pursuant to this
Section 2.2(h) being referred to as a "BABC Loan" and such Loans being referred
to collectively as "BABC Loans") available to the applicable Borrower on the
Funding Date applicable thereto by transferring same day funds to an account of
such Borrower, designated in writing by such Borrower and acceptable to the
Administrative Agent. Each BABC Loan is a Loan hereunder and shall be subject to
all the terms and conditions applicable to other Loans except that all payments
thereon shall be payable to BABC solely for its own account (and for the account
of the holder of any participation interest with respect to such Loan). The
Administrative Agent shall not request BABC to make any BABC Loan if (i) the
Administrative Agent shall have received written notice from any Lender, or
otherwise has actual knowledge, that one or more of the applicable conditions
precedent set forth in Article 10 will not be satisfied on the requested Funding
Date for the applicable Borrowing, or (ii) the requested Borrowing would exceed
the Individual Availability of the applicable Borrower on such Funding Date.
BABC shall not otherwise be required to determine whether the applicable
conditions precedent set forth in Article 10 have been satisfied or the
requested Borrowing would exceed the Individual Availability of the Borrower on
the Funding Date applicable thereto prior to making, in its sole discretion, any
BABC Loan.
(ii)The BABC Loans shall be repayable on demand and secured by the
Collateral, shall constitute Loans and Obligations hereunder, and shall bear
interest at the rate applicable to the Loans from time to time.
<PAGE>
(i) Administrative Agent Advances. (i) Subject to the limitations
set forth in the provisos contained in this Section 2.2(i), the Administrative
Agent is hereby authorized by the Borrowers and the Lenders, from time to time
in the Administrative Agent's sole discretion, (1) after the occurrence of a
Default or an Event of Default, or (2) at any time that any of the other
applicable conditions precedent set forth in Article 10 have not been satisfied,
to make Loans to any Borrower on behalf of the Lenders which the Administrative
Agent, in its reasonable business judgment, deems necessary or desirable (A) to
preserve or protect the Collateral, or any portion thereof, (B) to enhance the
likelihood of, or maximize the amount of, repayment of the Loans and other
Obligations, or (C) to pay any other amount chargeable to any Borrower pursuant
to the terms of this Agreement, including, without limitation, costs, fees and
expenses as described in Section 16.7 (any of the advances described in this
Section 2.2(i) being hereinafter referred to as "Administrative Agent
Advances"); provided, that the Majority Lenders may at any time revoke the
Administrative Agent's authorization contained in this Section 2.2(i) to make
Administrative Agent Advances, any such revocation to be in writing and to
become effective prospectively upon the Administrative Agent's receipt thereof;
and provided, further, that the Administrative Agent shall not make
Administrative Agent Advances for purposes described in clauses (B) and (C)
above which would cause the sum of (w) the aggregate unpaid balance of all
outstanding Loans made to the Borrowers at such time, (x) the aggregate amount
of Pending Loans requested by the Borrowers at such time, (y) the aggregate
undrawn amount of all outstanding Letters of Credit at such time and (z) the
aggregate amount of any unpaid reimbursement obligations in respect of Letters
of Credit at such time to exceed the lesser of the Maximum Revolver Amount or
$25,000,000 in excess of the Combined Borrowing Bases at such time.
(ii)The Administrative Agent Advances shall be repayable on demand
and secured by the Collateral, shall constitute Loans and Obligations hereunder,
and shall bear interest at the rate applicable to the Loans from time to time.
The Administrative Agent shall notify each Lender in writing of each such
Administrative Agent Advance.
(j) Settlement. It is agreed that each Lender's funded portion of a Loan is
intended by the Lenders to be equal at all times to such Lender's Pro Rata Share
of the outstanding Loans. Notwithstanding such agreement, the Administrative
Agent, BABC, and the other Lenders agree (which agreement shall not be for the
benefit of or enforceable by any Borrower) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Loans, the BABC Loans and the Administrative Agent Advances shall
take place on a periodic basis in accordance with the following provisions:
(i) The Administrative Agent shall request settlement
("Settlement") with the Lenders on a weekly basis, or on a more frequent basis
if so determined by the Administrative Agent, (1) on behalf of BABC, with
respect to each outstanding BABC Loan, (2) for itself, with respect to each
Administrative Agent Advance, and (3) with respect to collections received, in
each case, by notifying the Lenders of such requested Settlement by telecopy,
telephone or other similar form of transmission, of such requested Settlement,
no later than 12:00 Noon (New York time) on the date of such requested
Settlement (the "Settlement Date"). Each Lender (other than BABC, in the case of
BABC Loans) shall make the amount of such Lender's Pro Rata Share of the
outstanding principal amount of the BABC Loans and Administrative Agent Advances
with respect to which Settlement is requested available to the Administrative
Agent, for itself or for the account of BABC, in same day funds, to such account
of the Administrative Agent as the Administrative Agent may designate, not later
than 4:00 p.m. (New York time), on the Settlement Date applicable thereto,
regardless of whether the applicable conditions precedent set forth in Article
10 have then been satisfied. Such amounts made available to the Administrative
Agent shall be applied against the amounts of the applicable BABC Loan or
Administrative Agent Advance and, together with the portion of such BABC Loan or
Administrative Agent Advance representing BABC's Pro Rata Share thereof, shall
constitute Loans of such Lenders. If any such amount is not made available to
the Administrative Agent by any Lender on the Settlement Date applicable
thereto, the Administrative Agent shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the Federal Funds Rate
for the first three (3) days from and after the Settlement Date and thereafter
at the Interest Rate then applicable to the Loans.
<PAGE>
(ii) Notwithstanding the foregoing, not more than one (1) Business
Day after demand is made by the Administrative Agent (whether before or after
the occurrence of a Default or an Event of Default and regardless of whether the
Administrative Agent has requested a Settlement with respect to a BABC Loan or
Administrative Agent Advance), each other Lender shall irrevocably and
unconditionally purchase and receive from BABC or the Administrative Agent, as
applicable, without recourse or warranty, an undivided interest and
participation in such BABC Loan or Administrative Agent Advance to the extent of
such Lender's Pro Rata Share thereof by paying to the Administrative Agent, in
same day funds, an amount equal to such Lender's Pro Rata Share of such BABC
Loan or Administrative Agent Advance. If such amount is not in fact made
available to the Administrative Agent by any Lender, the Administrative Agent
shall be entitled to recover such amount on demand from such Lender together
with interest thereon at the Federal Funds Rate for the first three (3) days
from and after such demand and thereafter at the Interest Rate then applicable
to the Loans.
(iii) From and after the date, if any, on which any Lender
purchases an undivided interest and participation in any BABC Loan or
Administrative Agent Advance pursuant to subsection (ii) above, the
Administrative Agent shall promptly distribute to such Lender at such address as
such Lender may request in writing, such Lender's Pro Rata Share of all payments
of principal and interest and all proceeds of Collateral received by the
Administrative Agent in respect of such BABC Loan or Administrative Agent
Advance.
(iv)Between Settlement Dates, the Administrative Agent, to the
extent no Administrative Agent Advances or BABC Loans are outstanding, may pay
over to BABC any payments received by the Administrative Agent, which in
accordance with the terms of this Agreement would be applied to the reduction of
the Loans, for application to BABC's other outstanding Loans. If, as of any
Settlement Date, collections received since the then immediately preceding
Settlement Date have been applied to BABC's other outstanding Loans other than
to BABC Loans or Administrative Agent Advances, as provided for in the previous
sentence, BABC shall pay to the Administrative Agent for the account of the
Lenders, to be applied to the outstanding Loans of such Lenders, an amount such
that each Lender shall, upon receipt of such amount, have, as of such Settlement
Date, its Pro Rata Share of the Loans. During the period between Settlement
Dates, BABC with respect to BABC Loans, the Administrative Agent with respect to
Administrative Agent Advances, and each Lender with respect to the Loans other
than BABC Loans and Administrative Agent Advances, shall be entitled to interest
at the applicable rate or rates payable under this Agreement on the actual
average daily amount of funds employed by BABC, the Administrative Agent and the
other Lenders.
(k) Notation. The Administrative Agent shall record on its books the principal
amount of the Loans owing by each Borrower to each Lender, including the BABC
Loans owing by each Borrower to BABC, and the Administrative Agent Advances
owing by each Borrower to the Administrative Agent, from time to time. In
addition, each Lender is authorized, at such Lender's option, to note the date
and amount of each payment or prepayment of principal by each Borrower of such
Lender's Loans in its books and records, including computer records, such books
and records constituting rebuttably presumptive evidence, absent manifest error,
of the accuracy of the information contained therein.
<PAGE>
(l) Lenders' Failure to Perform. All Loans (other than BABC Loans and
Administrative Agent Advances) shall be made by the Lenders simultaneously and
in accordance with their Pro Rata Shares. It is understood that (a) no Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make any Loans hereunder, nor shall any Commitment of any Lender
be increased or decreased as a result of any failure by any other Lender to
perform its obligation to make any Loans hereunder, (b) no failure by any Lender
to perform its obligation to make any Loans hereunder shall excuse any other
Lender from its obligation to make any Loans hereunder, and (c) the obligations
of each Lender hereunder shall be several, not joint and several.
2.3 [Reserved].
2.4 Letters of Credit.
(a) Agreement to Cause Issuance. Subject to the terms and conditions of this
Agreement, and in reliance upon the representations and warranties of the Credit
Parties herein set forth, the Administrative Agent agrees to take reasonable
steps (i) to cause to be issued, for the account of any Borrower, Letters of
Credit and (ii) to provide credit support or other enhancement to banks,
acceptable to the Administrative Agent, which issue Letters of Credit for the
account of any Borrower (any such credit support or enhancement being herein
referred to as "Credit Support") in accordance with this Section 2.4 from time
to time during the term of this Agreement.
(b) Amounts; Outside Expiration Date. The Administrative Agent shall not have
any obligation to take steps to cause to be issued any Letter of Credit or to
provide Credit Support for any Letter of Credit at any time if: (1) the maximum
undrawn amount of the requested Letter of Credit is greater than the Unused
Letter of Credit Subfacility at such time; (2) the maximum undrawn amount of the
requested Letter of Credit and all commissions, fees, and charges due from the
applicable Borrower in connection with the opening thereof exceed the Individual
Availability of such Borrower at such time; or (3) such (a) merchandise or other
documentary Letter of Credit has an expiration date later than the Stated
Termination Date or more than one hundred and eighty (180) days from the date of
issuance or (b) standby Letter of Credit has an expiration date later than the
Stated Termination Date or more than twelve (12) months from the date of
issuance; provided, however, that standby Letters of Credit may have "evergreen"
clauses providing for automatic renewals (which renewals shall have an
expiration date not later than the Stated Termination Date) unless terminated by
the Administrative Agent or issuer of the Letter of Credit at the request of the
Administrative Agent by written notice to the beneficiary of such standby Letter
of Credit no less than thirty (30) days prior to a renewal date.
(c) Other Conditions. In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Article 10, the obligation of the
Administrative Agent to take reasonable steps to cause to be issued any Letter
of Credit or to provide Credit Support for any Letter of Credit is subject to
the following conditions precedent having been satisfied in a manner
satisfactory to the Administrative Agent:
<PAGE>
(1) The applicable Borrower shall have delivered to the proposed
issuer of such Letter of Credit, at such times and in such manner as such
proposed issuer may prescribe, an application in form and substance satisfactory
to such proposed issuer and the Administrative Agent for the issuance of the
Letter of Credit and such other documents as may be required pursuant to the
terms thereof, and the form and terms of the proposed Letter of Credit shall be
satisfactory to the Administrative Agent and such proposed issuer; and
(2) As of the date of issuance, no order of any court, arbitrator
or Governmental Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in the
amount of the proposed Letter of Credit, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Governmental Authority with
jurisdiction over money center banks generally shall prohibit, or request that
the proposed issuer of such Letter of Credit refrain from, the issuance of
letters of credit generally or the issuance of such Letters of Credit.
(d) Issuance of Letters of Credit.
(1) Request for Issuance. The Borrower for whose account the
Letter of Credit is to be issued shall give the Administrative Agent one (1)
Business Day's prior written notice of such Borrower's request for the issuance
of a Letter of Credit. Such notice shall be irrevocable and shall specify the
original face amount of the Letter of Credit requested, the Closing Date (which
date shall be a Business Day) of issuance of such requested Letter of Credit,
whether such Letter of Credit may be drawn in a single or in partial draws, the
date on which such requested Letter of Credit is to expire (which date shall be
a Business Day), the purpose for which such Letter of Credit is to be issued,
and the beneficiary of the requested Letter of Credit. The Borrower for whose
account the Letter of Credit is to be issued shall attach to such notice the
proposed form of the Letter of Credit.
(2) Responsibilities of the Administrative Agent; Issuance. The
Administrative Agent shall determine, as of the Business Day immediately
preceding the requested issuance date of the Letter of Credit set forth in the
notice from the applicable Borrower pursuant to Section 2.4(d)(1), (i) the
amount of the applicable Unused Letter of Credit Subfacility and (ii) the
Combined Availability as of such date and the Individual Availability of such
Borrower as of such date. If (i) the undrawn amount of the requested Letter of
Credit is not greater than the applicable Unused Letter of Credit Subfacility
and (ii) the issuance of such requested Letter of Credit and all commissions,
fees, and charges due from the Borrower in connection with the opening thereof
would not exceed the Individual Availability of the applicable Borrower or cause
the Combined Availability to be less than $100,000,000, the Administrative Agent
shall take reasonable steps to cause such issuer to issue the requested Letter
of Credit on such requested Closing Date of issuance.
(3) Notice of Issuance. On each Settlement Date, the
Administrative Agent shall give notice to each Lender of the issuance of all
Letters of Credit issued since the last Settlement Date.
<PAGE>
(4) No Extensions or Amendment. The Administrative Agent shall not
be obligated to cause any Letter of Credit to be extended or amended unless the
requirements of this Section 2.4(d) are met as though a new Letter of Credit
were being requested and issued. With respect to any Letter of Credit which
contains any "evergreen" or automatic renewal provision, each Lender shall be
deemed to have consented to any such extension or renewal unless any such Lender
shall have provided to the Administrative Agent, not less than 30 days prior to
the last date on which the applicable issuer can in accordance with the terms of
the applicable Letter of Credit decline to extend or renew such Letter of
Credit, written notice that it declines to consent to any such extension or
renewal; provided, that if all of the requirements of this Section 2.4 are met
and no Default or Event of Default exists, no Lender shall decline to consent to
any such extension or renewal.
(e) Payments Pursuant to Letters of Credit.
(1) Payment of Letter of Credit Obligations. Each Borrower agrees
to reimburse the issuer for any draw under any Letter of Credit issued for such
Borrower's account and the Administrative Agent for the account of the Lenders
upon any payment pursuant to any Credit Support issued for such Borrower's
account immediately upon demand, and to pay the issuer of such Letter of Credit
the amount of all other obligations and other amounts payable to such issuer
under or in connection with any Letter of Credit issued for such Borrower's
account immediately when due, irrespective of any claim, setoff, defense or
other right which such Borrower may have at any time against such issuer or any
other Person.
(2) Loans to Satisfy Reimbursement Obligations. In the event that
the issuer of any Letter of Credit honors a draw under such Letter of Credit or
makes any payment with respect to a Shipping Release Indemnity or the
Administrative Agent shall have made any payment pursuant to any Credit Support
or Shipping Release Indemnity and the applicable Borrower shall not have repaid
such amount to the issuer of such Letter of Credit or Shipping Release Indemnity
or the Administrative Agent, as applicable, pursuant to Section 2.4(e)(1) or
Section 2.4(k)(2), as appropriate, the Administrative Agent shall, upon
receiving notice of such failure, notify each Lender of such failure, and each
Lender shall unconditionally and immediately pay to the Administrative Agent,
for the account of such issuer or the Administrative Agent, as applicable, an
amount equal to such Lender's Pro Rata Share of the amount of such payment in
Dollars and in same day funds. Such amounts paid by the Lenders to the
Administrative Agent shall constitute Loans which shall be deemed to have been
requested by the applicable Borrower pursuant to Section 2.2 as set forth in
Section 4.5.
(f) Participations.
<PAGE>
(1) Purchase of Participations. Immediately upon issuance of any
Letter of Credit in accordance with Section 2.4(d) or of any Shipping Release
Indemnity in accordance with Section 2.4(k), each Lender shall be deemed to have
irrevocably and unconditionally purchased and received without recourse or
warranty, an undivided interest and participation in the Letter of Credit or the
Credit Support provided through the Administrative Agent to such issuer in
connection with the issuance of such Letter of Credit or the Shipping Release
Indemnity, as appropriate, equal to such Lender's Pro Rata Share of the face
amount of such Letter of Credit or the amount of such Credit Support or the
liability under or with respect to such Shipping Release Indemnity (including,
without limitation, all obligations of the applicable Borrower with respect
thereto, and any security therefor or guaranty pertaining thereto).
(2) Sharing of Reimbursement Obligation Payments. Whenever the
Administrative Agent receives a payment from any Borrower on account of
reimbursement obligations in respect of a Letter of Credit, Credit Support or
Shipping Release Indemnity as to which the Administrative Agent has previously
received for the account of the issuer thereof payment from a Lender pursuant to
Section 2.4(e)(2), the Administrative Agent shall promptly pay to such Lender
such Lender's Pro Rata Share of such payment from such Borrower in Dollars. Each
such payment shall be made by the Administrative Agent on the Business Day on
which the Administrative Agent receives immediately available funds paid to such
Person pursuant to the immediately preceding sentence, if received prior to
12:00 Noon (New York City time) on such Business Day and otherwise on the next
succeeding Business Day.
(3) Documentation. Upon the request of any Lender, the
Administrative Agent shall furnish to such Lender copies of any Letter of
Credit, reimbursement agreements executed in connection therewith, application
for any Letter of Credit and credit support or enhancement provided through the
Administrative Agent in connection with the issuance of any Letter of Credit,
copies of any Shipping Release Indemnity and such other documentation as may
reasonably be requested by such Lender.
(4) Obligations Irrevocable. The obligations of each Lender to
make payments to the Administrative Agent with respect to any Letter of Credit,
with respect to any Credit Support provided through the Administrative Agent
with respect to a Letter of Credit or with respect to any Shipping Release
Indemnity, and the obligations of the Borrowers to make payments to the
Administrative Agent, for the account of the Lenders, shall be irrevocable, not
subject to any qualification or exception whatsoever , including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
<PAGE>
(ii)the existence of any claim, setoff, defense or other right
which any Borrower may have at any time against a beneficiary named in a Letter
of Credit or any transferee of any Letter of Credit or Shipping Release
Indemnity (or any Person for whom any such transferee may be acting), any
Lender, the Administrative Agent, the issuer of such Letter of Credit or
Shipping Release Indemnity, or any other Person, whether in connection with this
Agreement, any Letter of Credit or Shipping Release Indemnity, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between any Borrower or any other Person and the beneficiary named
in any Letter of Credit);
(iii) any draft, certificate or any other document presented under
the Letter of Credit or with respect to any Shipping Release Indemnity proving
to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv)the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents; or
(v) the occurrence of any Default or Event of Default.
(g) Recovery or Avoidance of Payments. In the event any payment by or on behalf
of any Borrower received by the Administrative Agent with respect to any Letter
of Credit or Shipping Release Indemnity or Credit Support provided for any
Letter of Credit (or any guaranty by any Borrower or reimbursement obligation of
any Borrower relating thereto) and distributed by the Administrative Agent to
the Lenders on account of their respective participations therein is thereafter
set aside, avoided or recovered from the Administrative Agent in connection with
any receivership, liquidation or bankruptcy proceeding, the Lenders shall, upon
demand by the Administrative Agent, pay to the Administrative Agent their
respective Pro Rata Shares of such amount set aside, avoided or recovered,
together with interest at the rate required to be paid by the Administrative
Agent upon the amount required to be repaid by it.
(h) Compensation for Letters of Credit.
(1) Letter of Credit Fee. Each Borrower agrees to pay to the
Administrative Agent with respect to each Letter of Credit issued for such
Borrower's account, for the account of the Lenders, the Letter of Credit Fee
specified in, and in accordance with the terms of, Section 3.6.
(2) Issuer Fees and Charges. Each Borrower shall pay to the issuer
of any Letter of Credit issued for such Borrower's account, or to the
Administrative Agent, for the account of the issuer of any such Letter of
Credit, solely for such issuer's account, such fees and other charges as are
charged by such issuer for letters of credit issued by it, including, without
limitation, its standard fees for issuing, administering, amending, renewing,
paying and canceling letters of credit and all other fees associated with
issuing or servicing letters of credit, as and when assessed. Each Borrower
hereby acknowledges that Bank of America has provided to such Borrower a
schedule of Bank of America's fees and charges for opening, amending,
transferring or negotiating a letter of credit and the like, which fees and
charges may change from time to time based on Bank of America's desired return
and other factors, including, without limitation, volume of letter of credit
business and reserve requirements.
<PAGE>
(i) Indemnification; Exoneration; Power of Attorney
(1) Indemnification. In addition to amounts payable as elsewhere
provided in this Section 2.4, each Borrower hereby agrees to protect, indemnify,
pay and save the Lenders and the Administrative Agent harmless from and against
any and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) which any Lender or the
Administrative Agent may incur or be subject to as a consequence, direct or
indirect, of the issuance of any Letter of Credit for the account of such
Borrower or the provision of any Credit Support in connection therewith;
provided, that the Borrowers shall have no obligation to the Agent or any Lender
under this clause (1) with respect to any such claims, demands, liabilities,
damages, losses, costs, charges and expenses to the extent resulting from the
gross negligence or wilful misconduct of such Lender or the Administrative
Agent. The agreement in this Section 2.4(i)(1) shall survive payments of all
Obligations.
(2) Assumption of Risk by the Borrowers. As among the Borrowers,
the Lenders, and the Administrative Agent, each Borrower assumes all risks of
the acts and omissions of, or misuse of any of the Letters of Credit by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, the Lenders and the Administrative Agent shall not
be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any Person in connection with the
application for and issuance of and presentation of drafts with respect to any
of the Letters of Credit, even if it should prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (C) the failure of the beneficiary of any Letter of
Credit to comply duly with conditions required in order to draw upon such Letter
of Credit; (D) errors, omissions, interruptions, or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (E) errors in interpretation of technical terms; (F)
any loss or delay in the transmission or otherwise of any document required in
order make a drawing under any Letter of Credit or of the proceeds thereof; (G)
the misapplication by the beneficiary of any Letter of Credit of the proceeds of
any drawing under such Letter of Credit; or (H) any consequences arising from
causes beyond the control of the Lenders or the Administrative Agent, including,
without limitation, any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto Governmental Authority. None of the
foregoing shall affect, impair or prevent the vesting of any rights or powers of
the Administrative Agent or any Lender under this Section 2.4(i).
(3) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action taken or
omitted by the Administrative Agent or any Lender under or in connection with
any of the Letters of Credit or any related certificates, if taken or omitted in
the absence of gross negligence or willful misconduct, shall not put the
Administrative Agent or any Lender under any resulting liability to any Borrower
or relieve any Borrower of any of its obligations hereunder to any such Person.
<PAGE>
(4) Power of Attorney. In connection with all Inventory financed
by Letters of Credit, each Borrower hereby appoints the Administrative Agent, or
the Administrative Agent's designee, as its attorney, with full power and
authority: (a) to sign and/or endorse such Borrower's name upon any warehouse or
other receipts; (b) to sign such Borrower's name on bills of lading and other
negotiable and non-negotiable documents; (c) to clear Inventory through customs
in the Administrative Agent's or such Borrower's name, and to sign and deliver
to customs officials powers of attorney in such Borrower's name for such
purpose; (d) to complete in such Borrower's or the Administrative Agent's name,
any order, sale, or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof; and (e) to do such other acts and
things as are necessary in order to enable the Administrative Agent to obtain
possession of the Inventory and to obtain payment of the Obligations. Neither
the Administrative Agent nor its designee, as any Borrower's attorney, will be
liable for any acts or omissions, or for any error of judgement or mistakes of
fact or law. This power, being coupled with an interest, is irrevocable until
all Obligations have been paid and satisfied and this Agreement has been
terminated.
(5) Account Party. Each Borrower hereby authorizes and directs any
issuer of a Letter of Credit issued for the account of such Borrower to name
such Borrower as the "Account Party" therein and to deliver to the
Administrative Agent all instruments, documents and other writings and property
received by the issuer pursuant to the Letter of Credit, and to accept and rely
upon the Administrative Agent's instructions and agreements with respect to all
matters arising in connection with the Letter of Credit or the application
therefor.
(6) Control of Inventory. In connection with all Inventory
financed by Letters of Credit, each Borrower will, at the Administrative Agent's
request, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in which
the Administrative Agent holds a security interest to deliver them to the
Administrative Agent and/or subject to the Administrative Agent's order, and if
they shall come into such Borrower's possession, to deliver them, upon request,
to the Administrative Agent in their original form. Each Borrower shall also, at
the Administrative Agent's request, designate the Administrative Agent as the
consignee on all bills of lading and other negotiable and non-negotiable
documents.
<PAGE>
(j) Supporting Letter of Credit; Cash Collateral. If,
notwithstanding the provisions of Section 2.4(b) and Section 12.1 any Letter of
Credit is outstanding upon the termination of this Agreement, then upon such
termination the applicable Borrower shall deposit with the Administrative Agent,
for the ratable benefit of the Administrative Agent and the Lenders, with
respect to each Letter of Credit issued for the account of such Borrower then
outstanding, as the Majority Lenders, in their discretion shall specify, either
(A) a standby letter of credit (a "Supporting Letter of Credit") in form and
substance satisfactory to the Administrative Agent, issued by an issuer
satisfactory to the Administrative Agent in an amount equal to the greatest
amount for which such Letter of Credit may be drawn plus any fees and expenses
associated with such Letter of Credit, under which Supporting Letter of Credit
the Administrative Agent is entitled to draw amounts necessary to reimburse the
Administrative Agent and the Lenders for payments made by the Administrative
Agent and the Lenders under such Letter of Credit or under any credit support or
enhancement provided through the Administrative Agent with respect thereto and
any fees and expenses associated with such Letter of Credit, or (B) cash in
amounts necessary to reimburse the Administrative Agent and the Lenders for
payments made by the Administrative Agent or the Lenders under such Letter of
Credit or under any credit support or enhancement provided through the
Administrative Agent with respect thereto and any fees and expenses associated
with such Letter of Credit. Such Supporting Letter of Credit or deposit of cash
shall be held by the Administrative Agent, for the ratable benefit of the
Administrative Agent and the Lenders, as security for, and to provide for the
payment of, the aggregate undrawn amount of such Letters of Credit remaining
outstanding.
(k) Airway Bills, Etc. Each Borrower hereby confirms and agrees that (i) from
time to time such Borrower may request the Administrative Agent to issue or
cause to be issued Letters of Credit providing for direct consignment of goods
to the Administrative Agent or the issuer of a Letter of Credit and providing
that the original bills of lading, airway bills and other documents be forwarded
directly to the Administrative Agent or any such issuer, (ii) such Borrower may
request that the Administrative Agent or any such issuer from time to time
endorse the bills of lading or other shipping documents and deliver them to such
Borrower so as to permit such Borrower to obtain the goods covered by the
Letters of Credit without first waiting for the bank that issued the Letter of
Credit to examine the documents to be submitted by the beneficiary of the Letter
of Credit to determine whether the documents conform to the terms of the Letter
of Credit, and (iii) such Borrower may request that the Administrative Agent or
the issuer of a Letter of Credit from time to time issue letters of indemnity,
guarantees, air releases, and/or other documents (each a "Shipping Release
Indemnity") to steamship companies, air freight companies and other shippers in
order to permit such Borrower to take possession of the goods covered by Letters
of Credit without production and surrender to the shipper of the original bill
of lading, airway bill or other shipping documents. In connection with the
foregoing, each Borrower hereby expressly and irrevocably:
(1) represents and warrants that it is otherwise entitled to the
delivery of the goods and no other person or entity has any claim to its
delivery;
<PAGE>
(2) agrees to indemnify the Administrative Agent, the Lenders and
any issuer of a Shipping Release Indemnity and to hold the Administrative Agent,
the Lenders and any such issuer harmless from and against any and all claims,
actions and suits, whether groundless or otherwise, and from and against all
liabilities, losses, damages, judgments, attorney fees (including any in-house
counsel costs and expenses) and other expenses of every nature and character, by
reason of the Administrative Agent or any such issuer of a Shipping Release
Indemnity (i) issuing its Shipping Release Indemnities to steamship companies,
freight companies or other shippers and (ii) endorsing and/or delivering to such
Borrower the bills of lading and other documents so as to permit such Borrower
to obtain possession of the goods covered by the Letters of Credit; agrees to
reimburse the Administrative Agent, the Lenders and each issuer of a Shipping
Release Indemnity on demand for any and all payments of or with respect to the
foregoing which the Administrative Agent or any issuer of a Shipping Release
Indemnity is required to make by any of such actions or in accordance with the
terms or provisions of said Shipping Release Indemnities, regardless of any
offsets, counterclaims or other defenses thereto which the Administrative Agent,
any Lender or any issuer of a Shipping Release Indemnity might have or be
entitled to assert, all of which offsets, counterclaims or other defenses the
Administrative Agent, each Lender and each issuer of a Shipping Release
Indemnity is hereby expressly and irrevocably authorized to waive at its
discretion; and further agrees that upon the Administrative Agent's request,
such Borrower shall appear and defend, represented by counsel satisfactory to
the Administrative Agent and at such Borrower's cost and expense, any action or
proceeding which may be commenced against the Administrative Agent, any Lender
or the issuer in connection with any of the aforementioned actions; provided,
that the Borrowers shall have no obligation to the Agent, any Lender or any
issuer of a Shipping Release Indemnity under this clause (2) with respect to any
such liabilities, losses, damages, judgments, attorneys' fees and other expenses
to the extent resulting from the gross negligence or wilful misconduct of the
Administrative Agent, such Lender or such issuer.
(3) authorizes and requests the Administrative Agent and the
issuer of any Letters of Credit to honor and pay any drawing under the Letters
of Credit covering the shipment notwithstanding the absence of any or all
documents required thereunder or any discrepancy, defect or omission which may
exist at the time of presentment in any of the required documents, all of which
deficiencies, discrepancies, defects and omissions such Borrower hereby
expressly and irrevocably waives; such Borrower further authorizes the
Administrative Agent to charge its Loan Account for all amounts drawn plus any
applicable charges;
(4) agrees to pay on demand or to reimburse to the Administrative
Agent, each Lender and each issuer of a Shipping Release Indemnity upon demand
all freight and other charges which may be due or may appear to be due and
chargeable to the said goods;
(5) agrees to procure and to subsequently surrender to the
Administrative Agent all original bills of lading and other negotiable documents
relating to the shipment of goods properly endorsed; and
(6) agrees to execute such other documents and indemnities
relating to the foregoing as the Administrative Agent may from time to time
reasonably request.
ARTICLE 3
INTEREST AND FEES
3.1 Interest.
<PAGE>
(a) Interest Rates. All outstanding Obligations shall bear interest on the
unpaid principal amount thereof (including, to the extent permitted by law, on
interest thereon not paid when due) from the date made until paid in full in
cash at a rate determined by reference to the Base Rate or the LIBOR Rate and
Sections 3.1(a)(i) or (ii), as applicable, but not to exceed the Maximum Rate
described in Section 3.3. Subject to the provisions of Section 3.2, any of the
Loans may be converted into, or continued as, Base Rate Loans or LIBOR Rate
Loans in the manner provided in Section 3.2. If at any time Loans are
outstanding with respect to which notice has not been delivered to the
Administrative Agent in accordance with the terms of this Agreement specifying
the basis for determining the interest rate applicable thereto, then those Loans
shall be Base Rate Loans and shall bear interest at a rate determined by
reference to the Base Rate until notice to the contrary has been given to the
Administrative Agent in accordance with this Agreement and such notice has
become effective. Except as otherwise provided herein, the outstanding
Obligations shall bear interest as follows:
(i) For all Base Rate Loans and other Obligations (other than
LIBOR Rate Loans) at a fluctuating per annum rate equal to the Base Rate plus
the Applicable Margin; and
(ii)For all LIBOR Rate Loans at a per annum rate equal to the
LIBOR Rate plus the Applicable Margin.
Each change in the Base Rate shall be reflected in the interest rate described
in (i) above as of the effective date of such change. All interest charges shall
be computed on the basis of a year of 360 days and actual days elapsed (which
results in more interest being paid than if computed on the basis of a 365-day
year). Interest accrued on all Loans will be payable in arrears on the first day
of each month hereafter.
(b) Default Rate. If any Default or Event of Default occurs and is continuing
and the Majority Lenders in their discretion so elect, then, while any such
Default or Event of Default is outstanding, all of the Obligations shall bear
interest at the Default Rate applicable thereto.
3.2 Conversion and Continuation Elections.
(a) Any Borrower may, upon irrevocable written notice to the Administrative
Agent in accordance with Subsection 3.2(b):
(i) elect, as of any Business Day, in the case of Base Rate Loans
made to it to convert any such Loans (or any part thereof in an amount not less
than $5,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof) into LIBOR Rate Loans;
(ii)elect, as of the last day of the applicable Interest Period,
to continue any LIBOR Rate Loans made to it having Interest Periods expiring on
such day (or any part thereof in an amount not less than $5,000,000, or that is
in an integral multiple of $1,000,000 in excess thereof);
<PAGE>
provided, that if at any time the aggregate amount of LIBOR Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $5,000,000, such LIBOR Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the applicable Borrower to continue such Loans as, and convert such Loans
into, LIBOR Rate Loans, as the case may be, shall terminate. Notwithstanding the
foregoing, a Loan may only be continued as a, or converted into another type of,
Loan.
(b) The applicable Borrower shall deliver a Notice of Conversion/Continuation in
substantially the form attached hereto as Exhibit D (a "Notice of
Conversion/Continuation") to be received by the Administrative Agent not later
than 12:00 Noon (New York time) at least three (3) Business Days in advance of
the conversion/continuation date (the "Conversion/Continuation Date"), if the
Loans are to be converted into or continued as LIBOR Rate Loans and specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Loans owing by such Borrower to be
converted or renewed;
(iii) the type of Loans resulting from the proposed conversion or
continuation; and
(iv) the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to LIBOR Rate
Loans, the applicable Borrower has failed to select timely a new Interest Period
to be applicable to LIBOR Rate Loans or if any Default or Event of Default then
exists, the applicable Borrower shall be deemed to have elected to convert such
LIBOR Rate Loans into Base Rate Loans effective as of the expiration date of
such Interest Period.
(d) The Administrative Agent will promptly notify each Lender of its receipt of
a Notice of Conversion/Continuation. All conversions and continuations shall be
made ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Lender.
(e) During the existence of a Default or Event of Default, the applicable
Borrower may not elect to have a Loan converted into or continued as a LIBOR
Rate Loan.
(f) After giving effect to any conversion or continuation of Loans, there may
not be more than ten (10) different Interest Periods in effect for the Borrowers
in the aggregate.
<PAGE>
3.3 Maximum Interest Rate.
In no event shall any interest rate provided for hereunder exceed the
maximum rate legally chargeable by the Lenders under applicable law for loans of
the type provided for hereunder (the "Maximum Rate"). If, in any month, any
interest rate, absent such limitation, would have exceeded the Maximum Rate,
then the interest rate for that month shall be the Maximum Rate, and, if in
future months, that interest rate would otherwise be less than the Maximum Rate,
then that interest rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest which would have
been paid if the same had not been limited by the Maximum Rate. In the event
that, upon payment in full of the Obligations and the termination of this
Agreement, the total amount of interest paid or accrued under the terms of this
Agreement is less than the total amount of interest which would, but for this
Section 3.3, have been paid or accrued if the interest rates otherwise set forth
in this Agreement had at all times been in effect, then the applicable Borrower
shall, to the extent permitted by applicable law, pay the Administrative Agent,
for the account of the Lenders, an amount equal to the difference between (a)
the lesser of (i) the amount of interest which would have been charged to such
Borrower if the Maximum Rate had, at all times, been in effect or (ii) the
amount of interest owing by such Borrower which would have accrued had the
interest rates otherwise set forth in this Agreement, at all times, been in
effect and (b) the amount of interest actually paid or accrued by such Borrower
under this Agreement. In the event that a court determines that the
Administrative Agent and/or any Lender has received interest and other charges
hereunder in excess of the Maximum Rate, such excess shall be deemed received on
account of, and shall automatically be applied to reduce, the Obligations other
than interest, in the inverse order of maturity, and if there are no Obligations
outstanding, the Administrative Agent and/or such Lender shall refund to the
applicable Borrower such excess.
3.4 Closing Fee.
The Borrowers agree, jointly and severally, to pay to the Administrative Agent,
for the account of the Lenders to be allocated to each Lender in accordance with
existing, separate letter agreements between the Administrative Agent and each
of the Lenders, on the Closing Date a closing fee (the "Closing Fee") in the
amount of $9,425,000 (less $250,000 paid by the Borrowers prior to the Closing
Date in respect of a commitment fee pursuant to the letter agreement dated
November 6, 1998 among the Administrative Agent, the Parent, Ames Merchandising
and Ames FS), which Closing Fee shall be fully earned by the Lenders on the
Closing Date. The Administrative Agent, the Lenders and the Borrowers agree that
the Closing Fee may be financed by the Lenders as a Loan to be made on the
Closing Date.
3.5 Unused Line Fee.
Until the Obligations have been paid in full and the Agreement
terminated, the Borrowers agree, jointly and severally, to pay, on the first day
of each month and on the Termination Date, to the Administrative Agent, for the
ratable account of the Lenders, an unused line fee equal to (i) three-eighths of
one percent (0.375%) per annum on the average daily amount by which the Maximum
Revolver Amount exceeded the sum of the average daily outstanding amount of
Loans and the undrawn face amount of all outstanding Letters of Credit. The
unused line fee payable hereunder shall be computed on the basis of a 360-day
year for the actual number of days elapsed. All payments received by the
Administrative Agent on account of Accounts or as proceeds of other Collateral
shall be deemed to be credited to the Borrowers' Loan Accounts immediately upon
receipt for purposes of calculating the unused line fee payable pursuant to this
Section 3.5.
<PAGE>
3.6 Letter of Credit Fee.
The Borrowers agree, jointly and severally, to pay to the
Administrative Agent, for the ratable account of the Lenders, for each Letter of
Credit, a fee (the "Letter of Credit Fee") equal to one and three-eighths
percent (1.375%) per annum of the undrawn face amount of each Letter of Credit
issued for any Borrower's account at such Borrower's request, plus all fees and
expenses specified in Section 2.4(h)(2). The Letter of Credit Fee shall be
payable monthly in arrears on the first day of each month following any month in
which a Letter of Credit was issued and/or in which a Letter of Credit remains
outstanding. The Letter of Credit Fee shall be computed on the basis of a
360-day year for the actual number of days elapsed.
3.7 Other Fees.
The Borrowers hereby agree, jointly and severally, to pay to the
Administrative Agent for its own account the fees described in the letter
agreement dated November 6, 1998 among the Administrative Agent, the Parent,
Ames Merchandising and Ames FS at the times set forth therein.
3.8 Payment of Fees Under Section 3.8 of the Existing Credit Agreement.
The Credit Parties hereby acknowledge and confirm that immediately
prior to the funding of the initial Loans made on the Closing Date one or more
Revolving Loans under and as defined in the Existing Credit Agreement in the
aggregate amount of $525,000 was/were made to Ames Merchandising and/or Ames FS,
and the proceeds thereof were applied to the payment of all remaining
syndication fees payable to the Administrative Agent under Section 3.8 thereof.
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Loans.
The Borrowers shall repay the outstanding principal balance of the
Loans, plus all accrued but unpaid interest thereon, on the Termination Date.
The Borrowers may prepay Loans at any time, and re-borrow subject to the terms
of this Agreement; provided, however, that with respect to any LIBOR Rate Loans
prepaid by the Borrowers prior to the expiration date of the Interest Period
applicable thereto, the Borrowers promise to pay to the Administrative Agent for
account of the Lenders the amounts described in Section 5.4. In addition, and
without limiting the generality of the foregoing, upon demand from time to time
the Borrowers hereby promise to pay to the Administrative Agent, for account of
the Lenders, such amounts, without duplication, as are required to ensure that
at all times (i) the Individual Availability of each Borrower equals or exceeds
zero ($0) and (ii) the Combined Availability equals or exceeds $100,000,000.
<PAGE>
4.2 Termination and Reduction of Facility.
The Borrowers may jointly (but not individually) terminate this
Agreement upon at least thirty (30) Business Days' joint notice to the
Administrative Agent and the Lenders, upon (w) the payment in full of all
outstanding Loans, together with accrued interest thereon, and the cancellation
of all outstanding Letters of Credit, (x) the payment of the early termination
fee set forth in the second succeeding sentence (if applicable), (y) the payment
in full in cash of all other Obligations (including, without limitation, all
fees under Sections 3.4, 3.5, 3.6 and 3.7) together with accrued interest
thereon, and (z) with respect to any LIBOR Rate Loans prepaid in connection with
such termination prior to the expiration date of the Interest Period applicable
thereto, the payment of the amounts described in Section 5.4. In addition, the
Borrowers may from time to time permanently reduce the Maximum Revolver Amount,
ratably among the Lenders in accordance with their respective Commitments, upon
(a) the payment in full of all outstanding Loans, together with accrued interest
thereon, and the cancellation of all outstanding Letters of Credit, in each case
in excess of the Maximum Revolver Amount so reduced, (b) the payment of the
early reduction fee set forth in the next sentence (if applicable), (c) the
payment in full in cash of the unused line fees due and owing through and
including the date of such reduction, and (d) with respect to any LIBOR Rate
Loans prepaid in connection with such reduction prior to the expiration date of
the Interest Period applicable thereto, the payment of the amounts described in
Section 5.4. If this Agreement is terminated or the Maximum Revolver Amount is
permanently reduced at any time prior to the third Anniversary Date other than
pursuant to a Permitted Reduction, whether pursuant to this Section or pursuant
to Section 11.2, the Borrowers shall pay to the Administrative Agent, for the
ratable account of the Lenders, an early termination fee or an early reduction
fee, as applicable, determined inaccordance with the following table:
Period During Which Early
Termination Occurs Early Termination Fee
- ----------------------------- ----------------------------------
On or prior to the first Anniversary Date 0.5% of the Maximum Revolver Amount.
Following the first Anniversary Date
and on or prior to the third Aniversary .25% of the Maximum Revolver Amount.
Date
Period During Which
Early Reduction Occurs Early Reduction Fee
- ------------------------- ----------------------------------
On or prior to the first Anniversary Date 0.5% of the Maximum Revolver Amount
reduction.
Following the first Anniversary Date and .25% of the Maximum Revolver Amount
on or prior to the third Anniversary Date reduction.
<PAGE>
4.3 Payments from Insurance and Other Proceeds.
(a) Except as provided in Section 4.3(b), not later than the fifteenth (15th)
calendar day following the receipt by the Administrative Agent or any Credit
Party of any proceeds of any insurance required to be maintained pursuant to any
Loan Document on account of each separate loss, damage or injury in excess of
$1,000,000 (or, if there shall be continuing an Event of Default, of any amount
of proceeds) with respect to any tangible property of such Credit Party in which
the Credit Parties are required hereunder to provide a Lien in favor of the
Administrative Agent, such Credit Party shall notify the Administrative Agent of
any such receipt by such Credit Party in writing or by telephone promptly
confirmed in writing, and not later than the fifteenth (15th) calendar day
following receipt of such proceeds by the Administrative Agent or such Credit
Party, there shall become due and payable a prepayment of principal in an amount
equal to such proceeds. Each prepayment from such proceeds shall be applied in
the manner and order provided in Section 4.6 hereof and shall be accompanied by
the payment of interest accrued and unpaid on the amount of such prepayment
through the date of such prepayment. Any such prepayment of the Loans shall be
made without penalty or premium but shall be subject to payment of any
applicable indemnity obligations pursuant to Section 5.3, 5.4 or 16.11.
(b) (i) In the case of the receipt of proceeds described in Section 4.3(a) in
respect of tangible property of a Credit Party other than Inventory, such Credit
Party may elect, by written notice delivered to the Administrative Agent not
later than the day on which a prepayment would otherwise be required, to apply
all or a portion of such Net Cash Proceeds for the purpose of replacing,
repairing, restoring or rebuilding the relevant tangible property, and, in such
event, any required prepayment under the first sentence of Section 4.3(a), shall
be reduced dollar for dollar by the amount of such election. An election under
this Section 4.3(b)(i) shall not be effective unless:
(A) at the time of such election no Default or Event of Default is
continuing;
(B) such Credit Party shall have certified to the Administrative Agent
that:
(x) the proceeds of the insurance adjustment for such loss, damage or
injury, together with other funds available to such Credit Party (including
proceeds of Loans) and which such Credit Party is permitted to utilize for such
purpose, shall be sufficient to completely effect such replacement, repair,
restoration or rebuilding in accordance with all applicable laws, regulations
and ordinances; and
(y) to the best knowledge of such Credit Party, no Default or Event of
Default will arise as a result of such loss, damage, injury, replacement, repair
or rebuilding.
<PAGE>
(ii) In the event of an election by a Credit Party under Section
4.3(b)(i) hereof, such Credit Party shall nonetheless apply the proceeds of any
insurance received in respect of the applicable tangible property to the
repayment of the Loans at the time required under Section 4.3(a) hereof, and the
Administrative Agent shall create a reserve against the Individual Borrowing
Base of each Borrower (as allocated by the Administrative Agent), which reserve
shall be reduced, dollar for dollar, by the amount expended by or on behalf of
such Credit Party from time to time for the replacement (which shall include
rebuilding within the same geographical area), repair, restoration or rebuilding
of such tangible property. In addition, the Administrative Agent shall be
entitled to require proof, as a condition to the making of any reduction in such
reserve, that the proceeds of such withdrawal or advance are being applied to
the purposes permitted hereunder and that no Default or Event of Default shall
have occurred and be continuing.
(c) In the event that any Credit Party receives any proceeds of any
condemnation, confiscation, taking or similar award in an amount exceeding
$1,000,000 (or, if an Event of Default is then continuing, of any amount), in
respect of property of any Credit Party in which the Credit Parties are required
hereunder to provide a Lien in favor of the Administrative Agent, then such
proceeds shall be treated in the same manner and subject to the same prepayment
provisions as proceeds of insurance on property other than Inventory under this
Section 4.3.
4.4 Payments by the Borrowers.
(a) All payments to be made by any Borrower shall be made without set-off,
recoupment or counterclaim. Except as otherwise expressly provided herein, all
payments by any Borrower shall be made to the Administrative Agent for the
account of the Lenders at the Administrative Agent's address set forth in
Section 16.8, and shall be made in Dollars and in immediately available funds,
no later than 12:00 Noon (New York time) on the date specified herein. Any
payment received by the Administrative Agent later than 12:00 Noon (New York
time) shall be deemed to have been received on the following Business Day and
any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of "Interest Period"
herein, whenever any payment is due on a day other than a Business Day, such
payment shall be made on the following Business Day, and such extension of time
shall in such case be included in the computation of interest or fees, as the
case may be.
(c) Unless the Administrative Agent receives notice from the applicable Borrower
prior to the date on which any payment is due to the Lenders that such Borrower
will not make such payment in full as and when required, the Administrative
Agent may assume that such Borrower shall make such payment in full to the
Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent any Borrower does not make
such payment in full to the Administrative Agent, each Lender shall repay to the
Administrative Agent on demand such amount distributed to such Lender, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
<PAGE>
4.5 Payments as Loans.
All payments of principal, interest, reimbursement obligations in
connection with Letters of Credit, fees, premiums and other sums payable
hereunder, including all reimbursement for expenses pursuant to Section 16.7,
may, at the option of the Administrative Agent, in its sole discretion, subject
only to the terms of this Section 4.5, be paid from the proceeds of Loans made
hereunder, whether made following a request by a Borrower pursuant to Section
2.2 or a deemed request as provided in this Section 4.5. Each Borrower hereby
irrevocably authorizes the Administrative Agent to charge the relevant Loan
Account for the purpose of paying principal, interest, reimbursement obligations
in connection with Letters of Credit, fees, premiums and other sums payable
hereunder, including reimbursing expenses pursuant to Section 16.7, and agrees
that all such amounts charged shall constitute Loans (including BABC Loans and
Administrative Agent Advances) and that all such Loans so made shall be deemed
to have been requested by a Borrower pursuant to Section 2.2. The Administrative
Agent agrees to promptly provide the relevant Borrower with notice of any such
charges, but the failure to provide such notice shall not affect the validity of
any such charge.
4.6 Apportionment, Application and Reversal of Payments.
Aggregate principal and interest payments shall be apportioned ratably
among the Lenders (according to the unpaid principal balance of the Loans to
which such payments relate held by each Lender) and payments of the fees shall,
as applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to the Administrative Agent and all such payments not relating to
principal or interest of specific Loans, or not constituting payment of specific
fees, and all proceeds of Accounts or other Collateral received by the
Administrative Agent, shall be applied, ratably, subject to the provisions of
this Agreement, first, to pay any fees, indemnities or expense reimbursements
then due to the Administrative Agent from the Borrowers; second, to pay any fees
or expense reimbursements then due to the Lenders from the Borrowers; third, to
pay interest due in respect of all Loans, including BABC Loans and
Administrative Agent Advances; fourth, to pay or prepay principal of the BABC
Loans and Administrative Agent Advances; fifth, to pay or prepay principal of
the Loans (other than BABC Loans and Administrative Agent Advances) and unpaid
reimbursement obligations in respect of Letters of Credit; and sixth, to the
payment of any other Obligation due to the Administrative Agent or any Lender by
any Borrower. Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by the Borrowers, or unless an Event of Default is
outstanding, neither the Administrative Agent nor any Lender shall apply any
payments which it receives to any LIBOR Rate Loan, except (a) on the expiration
date of the Interest Period applicable to any such LIBOR Rate Loan, or (b) in
the event, and only to the extent, that there are no outstanding Base Rate
Loans. The Administrative Agent shall promptly distribute to each Lender,
pursuant to the applicable wire transfer instructions received from each Lender
in writing, such funds as it may be entitled to receive, subject to a Settlement
delay as provided for in Section 2.2(j). The Administrative Agent and the
Lenders shall have the continuing and exclusive right to apply and reverse and
reapply any and all such proceeds and payments to any portion of the
Obligations.
<PAGE>
4.7 Indemnity for Returned Payments.
If, after receipt of any payment of, or proceeds applied to the payment
of, all or any part of the Obligations, the Administrative Agent or any Lender
is for any reason compelled to surrender such payment or proceeds to any Person,
because such payment or application of proceeds is invalidated, declared
fraudulent, set aside, determined to be void or voidable as a preference,
impermissible setoff, or a diversion of trust funds, or for any other reason,
then the Obligations or part thereof intended to be satisfied shall be revived
and continue and this Agreement shall continue in full force and effect as if
such payment or proceeds had not been received by the Administrative Agent or
such Lender, and the Borrowers shall be liable to pay to the Administrative
Agent, and hereby do indemnify the Administrative Agent and the Lenders and hold
the Administrative Agent and the Lenders harmless for, the amount of such
payment or proceeds surrendered. The provisions of this Section 4.7 shall be and
remain effective notwithstanding any contrary action which may have been taken
by the Administrative Agent or any Lender in reliance upon such payment or
application of proceeds, and any such contrary action so taken shall be without
prejudice to the Administrative Agent's and/or the Lenders' rights under this
Agreement and shall be deemed to have been conditioned upon such payment or
application of proceeds having become final and irrevocable. The provisions of
this Section 4.7 shall survive the termination of this Agreement.
4.8 Administrative Agent's and Lenders' Books and Records; Monthly Statements.
Each Borrower agrees that the Administrative Agent's and each Lender's
books and records showing the Obligations and the transactions pursuant to this
Agreement and the other Loan Documents shall be admissible in any action or
proceeding arising therefrom, and shall constitute rebuttably presumptive proof
thereof, irrespective of whether any Obligation is also evidenced by a
promissory note or other instrument. The Administrative Agent will provide to
the Borrowers a monthly statement of Loans, payments, and other transactions
pursuant to this Agreement. Such statement shall be deemed correct, accurate,
and binding on the Borrowers and an account stated (except for reversals and
re-applications of payments made as provided in Section 4.6 and corrections of
errors discovered by the Administrative Agent), unless the Borrowers notify the
Administrative Agent in writing to the contrary within thirty (30) days after
such statement is rendered. In the event a timely written notice of objections
is given by the Borrowers, only the items to which exception is expressly made
will be considered to be disputed by the Borrowers. At the request of a Lender,
the Commitments of such Lender shall be evidenced by a single promissory note
issued by the Borrowers payable to the order of such Lender, which shall be in
the maximum principal amount of such Lender's Commitment. Each Note shall be
dated the Closing Date and be duly completed, executed and delivered by the
Borrowers. Each of the Notes shall mature on the Termination Date (or earlier as
hereinafter provided), and shall be subject to payment and prepayment as
provided in this Agreement.
<PAGE>
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 Taxes.
(a) Any and all payments by any Borrower to each Lender or the Administrative
Agent under this Agreement and any other Loan Document shall be made free and
clear of, and without deduction or withholding for any Taxes. In addition, the
Borrowers shall pay all Other Taxes.
(b) Each Borrower agrees to indemnify and hold harmless each Lender and the
Administrative Agent for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by the Lender or the Administrative Agent and any liability
(including penalties, interest, additions to tax and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Lender or the Administrative Agent makes written demand
therefor.
(c) If any Borrower shall be required by law to deduct or withhold any Taxes or
Other Taxes from or in respect of any sum payable hereunder to any Lender or the
Administrative Agent, then:
(i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Lender or the Administrative Agent, as the case may be, receives an amount equal
to the sum it would have received had no such deductions or withholdings been
made;
(ii) such Borrower shall make such deductions and withholdings;
(iii) such Borrower shall pay the full amount deducted or withheld to
the relevant taxing authority or other authority in accordance with applicable
law; and
(iv) such Borrower shall also pay to each Lender or the Administrative
Agent for the account of such Lender, at the time interest is paid, all
additional amounts which the respective Lender specifies as necessary to
preserve the after-tax yield the Lender would have received if such Taxes or
Other Taxes had not been imposed.
<PAGE>
(d) Within 30 days after the date of any payment by any Borrower of Taxes or
Other Taxes, such Borrower shall furnish the Administrative Agent the original
or a certified copy of a receipt evidencing payment thereof, or other evidence
of payment satisfactory to the Administrative Agent.
(e) If any Borrower is required to pay additional amounts to any Lender or the
Administrative Agent pursuant to subsection (c) of this Section, then such
Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its lending office so as to
eliminate any such additional payment by such Borrower which may thereafter
accrue, if such change in the judgment of such Lender is not otherwise
disadvantageous to such Lender.
5.2 Illegality.
(a) If any Lender determines that the introduction of any Requirement of Law
which has been adopted, issued or become effective after the Closing Date, or
any change in any Requirement of Law from that in effect on the Closing Date, or
in the interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Lender or its applicable lending office to make
LIBOR Rate Loans, then, on notice thereof by the Lender to the Borrower through
the Administrative Agent, any obligation of that Lender to make LIBOR Rate Loans
shall be suspended until the Lender notifies the Administrative Agent and the
Borrower that the circumstances giving rise to such determination no longer
exist.
(b) If a Lender determines that it is unlawful to maintain any LIBOR Rate Loan,
the Borrowers shall, upon its receipt of notice of such fact and demand from
such Lender (with a copy to the Administrative Agent), prepay in full such LIBOR
Rate Loans of that Lender then outstanding, together with interest accrued
thereon and amounts required under Section 5.4, either on the last day of the
Interest Period thereof, if the Lender may lawfully continue to maintain such
LIBOR Rate Loans to such day, or immediately, if the Lender may not lawfully
continue to maintain such LIBOR Rate Loan. If the Borrowers are required to so
prepay any LIBOR Rate Loan, then concurrently with such prepayment, the
Borrowers shall borrow from the affected Lender, in the amount of such
repayment, a Base Rate Loan.
<PAGE>
5.3 Increased Costs and Reduction of Return.
(a) If any Lender determines that, due to either (i) the introduction of or any
change in the interpretation of any law or regulation or (ii) the compliance by
that Lender with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted, issued or becoming effective after the Closing Date (or in the event of
any change in any law or regulation, from that in effect on the Closing Date),
there shall be any increase in the cost to such Lender of agreeing to make or
making, funding or maintaining any LIBOR Rate Loans, and the result of any of
the foregoing is to increase the actual cost by an amount such Lender deems to
be material to such Lender or any branch or Affiliate of such Lender of making,
funding or maintaining such share of such Loan, or to reduce the amount of any
payment (whether of principal, interest, or otherwise) received or receivable by
such Lender or any branch or Affiliate of such Lender, or to require such Lender
or any branch or Affiliate of such Lender to make any payment, in each case by
or in an amount which such Lender in its reasonable judgment deems material and,
in any case, is not compensated for by the Eurodollar Reserve Percentage, then
and in any such case: (1) such Lender shall promptly notify the Borrowers, the
Administrative Agent and the other Lenders in writing of the happening of such
event; (2) such Lender shall promptly deliver to the Borrowers, the
Administrative Agent and the other Lenders a certificate stating the change
which has occurred, or the reserve requirements or other conditions which have
been imposed on such Lender or branch or Affiliate of such Lender, or the
request, directive or requirement with which it has complied, together with the
date thereof, the amount of such increased cost, reduction or payment and the
way in which such amount has been calculated; and (3) upon demand of such Lender
to the Borrowers through the Administrative Agent (with a notice of such demand
to be sent by such Lender to the Administrative Agent), the Borrowers shall pay
to the Lender, from time to time as specified by the Lender, additional amounts
sufficient to compensate the Lender for such increase. The protection of this
Section 5.3(a) shall be available to such Lender regardless of any possible
contention of invalidity or inapplicability of the law, regulation, treaty,
order, directive, interpretation or condition which has been imposed.
<PAGE>
(b) If any Lender shall have determined that (i) the introduction of any Capital
Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii)
any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Lender or
any corporation or other entity controlling the Lender with any Capital Adequacy
Regulation, in each case adopted, issued or becoming effective after the Closing
Date (or in the event of any change in any Capital Adequacy Regulation, from
that in effect on the Closing Date), affects or would affect the amount of
capital required or expected to be maintained by the Lender or any corporation
or other entity controlling the Lender and (taking into consideration such
Lender's or such corporation's or other entity's policies with respect to
capital adequacy and such Lender's desired return on capital) determines that
the amount of such capital is increased as a consequence of its Commitments,
loans, credits or obligations under this Agreement and the result of any of the
foregoing is to increase the actual cost by an amount such Lender deems to be
material to such Lender or any branch or Affiliate of such Lender of making,
funding or maintaining such share of such Loan, or to reduce the amount of any
payment (whether of principal, interest, or otherwise) received or receivable by
such Lender or any branch or Affiliate of such Lender, or to require such Lender
or any branch or Affiliate of such Lender to make any payment, in each case by
or in an amount which such Lender in its reasonable judgment deems material and,
in case of any LIBOR Rate Loan, is not compensated for by the Eurodollar Reserve
Percentage, then and in any such case: (1) such Lender shall promptly notify the
Borrowers, the Administrative Agent and the other Lenders in writing of the
happening of such event; (2) such Lender shall promptly deliver to the
Borrowers, the Administrative Agent and the other Lenders a certificate stating
the change which has occurred, or the reserve requirements or other conditions
which have been imposed on such Lender or branch or Affiliate of such Lender, or
the request, directive or requirement with which it has complied, together with
the date thereof, the amount of such increased cost, reduction or payment and
the way in which such amount has been calculated; and (3) upon demand of such
Lender to the Borrowers through the Administrative Agent (with a notice of such
demand to be sent by such Lender to the Administrative Agent), the Borrowers
shall pay to the Lender, from time to time as specified by the Lender,
additional amounts sufficient to compensate the Lender for such increase. The
protection of this Section 5.3 shall be available to such Lender regardless of
any possible contention of invalidity or inapplicability of the law, regulation,
treaty, order, directive, interpretation or condition which has been imposed.
5.4 Funding Losses.
Each Borrower shall reimburse each Lender and hold each Lender harmless
from any loss or expense which the Lender may sustain or incur as a consequence
of:
(a) the failure of any Borrower to make on a timely basis any payment of
principal of any LIBOR Rate Loan;
(b) the failure of any Borrower to borrow, continue or convert a Loan after the
Borrower has given (or is deemed to have given) a Notice of Borrowing or a
Notice of Conversion/ Continuation;
(c) the prepayment or other payment (including after acceleration thereof) of an
LIBOR Rate Loan on a day that is not the last day of the relevant Interest
Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans or from fees payable to
terminate the deposits from which such funds were obtained.
5.5 Inability to Determine Rates.
If the Administrative Agent determines that for any reason adequate and
reasonable means do not exist for determining the LIBOR Rate for any requested
Interest Period with respect to a proposed LIBOR Rate Loan, or that the LIBOR
Rate for any requested Interest Period with respect to a proposed LIBOR Rate
Loan does not adequately and fairly reflect the cost to the Lenders of funding
such Loan, the Administrative Agent will promptly so notify the Borrowers and
each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR
Rate Loans hereunder shall be suspended until the Administrative Agent revokes
such notice in writing. Upon receipt of such notice, the Borrowers may revoke
any Notice of Borrowing or Notice of Conversion/Continuation then submitted by
it. If the Borrowers do not revoke such Notice, the Lenders shall make, convert
or continue the Loans, as proposed by the Borrowers, in the amount specified in
the applicable notice submitted by the Borrowers, but such Loans shall be made,
converted or continued as Base Rate Loans instead of LIBOR Rate Loans.
<PAGE>
5.6 Certificates of Lenders.
Any Lender claiming reimbursement or compensation under this Article 5
shall deliver to the Borrowers (with a copy to the Administrative Agent) a
certificate setting forth in reasonable detail the amount payable to the Lender
hereunder and such certificate shall be conclusive and binding on the Borrowers
in the absence of manifest error.
5.7 Substitution of Lenders.
(a) In the event that any Lender claims any increased costs under Section 5.3 or
Section 5.4, and (i) as a consequence of such increased costs the effective rate
of interest payable to such Lender under this Agreement with respect to its Pro
Rata Share of the Loans is more than 20 basis points per annum in excess of the
effective average annual rate of interest payable to the Majority Lenders under
this Agreement and (ii) Lenders holding at least 75% of the Commitments are not
subject to such increased costs (any such Lender, an "Affected Lender"), the
Borrowers may give not less than 30 days prior written notice (which written
notice must be given within 90 days following the receipt by the Borrowers of
such claim) to the Administrative Agent and the Affected Lender that the
Borrowers intend to substitute another financial institution, which substitute
financial institution must be reasonably acceptable to the Administrative Agent
and the Majority Lenders; provided, that if more than one Lender claims
increased costs arising from the same act or condition and such claims are
received by a Borrower within 60 days of each other then the Borrowers may
substitute all, but not less than all, Lenders making such claims. In the event
that the proposed substitute financial institution is reasonably acceptable to
the Administrative Agent and the Majority Lenders and the written notice was
properly issued under this Section 5.7, the Affected Lender shall sell at par
plus accrued interest and the substitute financial institution shall purchase,
pursuant to assignment documentation that is reasonably acceptable to the
Affected Lender (and in any event provides that such assignment shall be without
recourse, representation or warranty to the Affected Lender), all rights and
claims of such Affected Lender under the Loan Documents and the substitute
financial institution shall assume and the Affected Lender shall be relieved of
its Commitment and all other theretofore unperformed obligations of the Affected
Lender under the Loan Documents. Upon the effectiveness of such sale, purchase
and assumption (which, in any event shall be conditioned upon the payment in
full by the Borrowers to the Affected Lender in cash of all fees, unreimbursed
costs and expenses and indemnities accrued and unpaid through such effective
date), the substitute financial institution shall become a "Lender" hereunder
for all purposes of this Agreement having a Commitment in the amount of such
Affected Lender's Commitment assumed by it and such Commitment of the Affected
Lender shall be terminated; provided, that all indemnities under the Loan
Documents shall continue in favor of such Affected Lender.
<PAGE>
(b) In the event that the Affected Lender as to which the requirements of
paragraph (a) above apply is a participant which, under Section 13.13(e), is
treated as a Lender, except as provided below, the Lender which created such
participation shall, subject to the last sentence of this paragraph, be
obligated to repurchase such participation from such Affected Lender and at the
option of such Affected Lender either sell an equivalent interest in the
Commitment (or a like participation) to the substitute financial institution (or
to another financial institution selected by the Lender who granted such
participation which other financial institution will not require reimbursement
for such higher costs as triggered the application of this Section 5.7) or
retain such participation for its own account and the claim by such Affected
Lender for increased costs under Section 5.3 or Section 5.4 shall constitute an
offer by such Affected Lender to sell to the Lender creating such participation
the participation of such Affected Lender in the event such sale becomes
required under this Section 5.7. Notwithstanding anything to the contrary
contained in this Section 5.7, no Lender creating such participation shall be
obligated to effect any such purchase of a participation under this Section 5.7
until such Lender shall have been provided good collected funds therefor by the
substitute financial institution and until the Borrowers have made all payments
required under this Section 5.7.
5.8 Survival.
The agreements and obligations of the Borrowers in this Article 5 shall
survive the payment of all Obligations and the termination of this Agreement.
ARTICLE 6
COLLATERAL
6.1 Grant of Security Interest.
(a) As security for all present and future Obligations, each Credit Party hereby
grants to the Administrative Agent, for the ratable benefit of the
Administrative Agent and the Lenders, a continuing first (subject to Liens on
equipment existing on the Closing Date and described in Schedule 9.19 hereto and
Liens permitted to exist under clause (d) of the definition of "Permitted Liens"
contained in Section 1.1) priority security interest in, lien on, and right of
set-off against, all of the following property of such Credit Party, whether now
owned or existing or hereafter acquired or arising, regardless of where located:
(i) all Accounts;
(ii) all Inventory;
(iii) all contract rights, letters of credit, chattel paper,
instruments, notes, documents, and documents of title;
(iv) all General Intangibles;
(v) all Equipment;
<PAGE>
(vi) all money, investment property, securities and other property of
any kind of such Credit Party in the possession or under the control of the
Administrative Agent or any Lender, any assignee of or participant in the
Obligations, or a bailee of any such party or such party's affiliates;
(vii) all deposit accounts, credits and balances with and other claims
against the Administrative Agent or any Lender or any of its affiliates or any
other financial institution in which such Credit Party maintains deposits;
(viii) all books, records and other property related to or referring to
any of the foregoing, including, without limitation, books, records, account
ledgers, data processing records, computer software and other property and
General Intangibles at any time evidencing or relating to any of the foregoing;
and
(ix) all accessions to, substitutions for and replacements, products
and proceeds of any of the foregoing, including, but not limited to, proceeds of
any insurance policies, claims against third parties, and condemnation or
requisition payments with respect to all or any of the foregoing.
All of the foregoing, together with the Real Estate covered by the Amended
Mortgages and the other Mortgages and the property covered by the other Security
Documents, and all other property of any Credit Party in which the
Administrative Agent or any Lender may at any time be granted a Lien (including,
without limitation, the Real Estate covered by the Mortgages, if any), is herein
collectively referred to as the "Collateral."
(b) As security for all Obligations, the relevant Credit Parties shall
simultaneously herewith execute and deliver to the Administrative Agent, the
Security Documents listed on Exhibit B to grant to the Administrative Agent, for
the ratable benefit of the Administrative Agent and the Lenders, a continuing
Lien on the Real Estate and Premises and the other property covered thereby.
(c) All of the Obligations shall be secured by all of the Collateral.
<PAGE>
6.2 Perfection and Protection of Security Interest.
(a) Each Credit Party shall, at its expense, perform all steps requested by the
Administrative Agent at any time to perfect, maintain, protect, and enforce the
Administrative Agent's Liens, including, without limitation: (i) executing,
delivering and/or filing and recording of the Amended Mortgages and the other
Mortgages, the Amended Collateral Assignments and the Amended and Restated
Patent and Trademark Agreements and executing and filing financing or
continuation statements, and amendments thereof, in form and substance
satisfactory to the Administrative Agent; (ii) delivering to the Administrative
Agent the originals of all instruments, documents, and chattel paper, and all
other Collateral of which the Administrative Agent determines it should have
physical possession in order to perfect and protect the Administrative Agent's
security interest therein, duly pledged, endorsed or assigned to the
Administrative Agent without restriction; (iii) delivering to the Administrative
Agent warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued; and (iv) taking such
other steps as are deemed necessary or desirable by the Administrative Agent to
maintain and protect the Administrative Agent's Liens. To the extent permitted
by applicable law, the Administrative Agent may file, without any Credit Party's
signature, one or more financing statements disclosing the Administrative
Agent's Liens. Each Credit Party agrees that a carbon, photographic,
photostatic, or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement.
(b) If any Collateral is at any time in the possession or control of any
warehouseman, bailee or any Credit Party's agents or processors, then such
Credit Party shall notify the Administrative Agent thereof and shall notify such
Person of the Administrative Agent's security interest in such Collateral and,
upon the Administrative Agent's request, instruct such Person to hold all such
Collateral for the Administrative Agent's account subject to the Administrative
Agent's instructions.
(c) From time to time, each Credit Party shall, upon the Administrative Agent's
request, execute and deliver confirmatory written instruments pledging to the
Administrative Agent, for the ratable benefit of the Administrative Agent and
the Lenders, the Collateral with respect to such Credit Party, but such Credit
Party's failure to do so shall not affect or limit the Administrative Agent's
security interest or the Administrative Agent's other rights in and to the
Collateral with respect to such Credit Party. So long as this Agreement is in
effect and until all Obligations have been fully satisfied, the Administrative
Agent's Liens shall continue in full force and effect in all Collateral (whether
or not deemed eligible for the purpose of calculating the Individual
Availability or the Combined Availability or as the basis for any advance, loan,
extension of credit, or other financial accommodation).
<PAGE>
6.3 Location of Collateral.
Each Credit Party represents and warrants to the Administrative Agent
and the Lenders that: (a) Schedule 6.3 is a correct and complete list of such
Credit Party's chief executive office, the location of its books and records,
the locations of the Collateral, and the locations of all of its other places of
business; and (b) Schedule 6.3 correctly identifies any of such facilities and
locations that are not owned by such Credit Party and sets forth the names of
the owners and lessors or sublessors of and, to the best of such Credit Party's
knowledge, the holders of any mortgages on, such facilities and locations. Each
Credit Party covenants and agrees that it will not (i) maintain any Collateral
at any location other than those locations listed on Schedule 6.3, (ii)
otherwise change or add to any of such locations, or (iii) change the location
of its chief executive office from the location identified in Schedule 6.3,
unless, in each case, it gives the Administrative Agent at least ten (10) days'
prior written notice thereof and executes any and all financing statements and
other documents that the Administrative Agent requests in connection therewith.
Without limiting the foregoing, each Credit Party represents that all of its
Inventory (other than Inventory in transit) is, and covenants that all of its
Inventory will be, located either (a) on premises owned by a Credit Party, (b)
on premises leased by a Credit Party, or (c) in a public warehouse (or otherwise
held by a bailee).
6.4 Title to, Liens on, and Sale and Use of Collateral.
Each Credit Party represents and warrants to the Administrative Agent
and the Lenders and agrees with the Administrative Agent and the Lenders that:
(a) all of the Collateral is and will continue to be owned by such Credit Party
free and clear of all Liens whatsoever, except for Permitted Liens; (b) the
Administrative Agent's Liens in the Collateral will not be subject to any prior
Lien; (c) such Credit Party will use, store, and maintain the Collateral with
all reasonable care and will use such Collateral for lawful purposes only; and
(d) such Credit Party will not, without the Administrative Agent's prior written
approval, sell, or dispose of or permit the sale or disposition of any of the
Collateral except for sales of Inventory in the ordinary course of business and
other asset sales permitted by Section 9.9. The inclusion of proceeds in the
Collateral shall not be deemed to constitute the Administrative Agent's or any
Lender's consent to any sale or other disposition of the Collateral except as
expressly permitted herein.
6.5 Appraisals.
Whenever a Default or Event of Default exists, or at any time that
EBITDA for any Fiscal Year is less than 80% of EBITDA for such period as set
forth in the projections of the Parent and its Subsidiaries entitled "The
October 28, 1998 Projections" (or, for any Fiscal Year not fully set forth in
such projections, the Latest Projections most recently delivered to the
Administrative Agent for such period), the Borrowers shall, at their expense and
upon the Administrative Agent's request (to be made during the twelve-month
period following delivery to the Administrative Agent of the financial
statements required pursuant to Section 7.2(a) and upon notice (which may be
telephonic) to a Responsible Officer of each Borrower), provide the
Administrative Agent with appraisals or updates thereof of any or all of the
Collateral from an appraiser, and prepared on a basis, satisfactory to the
Administrative Agent, such appraisals and updates to include, without
limitation, information required by applicable law and regulation and by the
internal policies of the Lenders. In addition, the Borrowers shall, not more
frequently than once a year as the Administrative Agent requests upon notice
(which may be telephonic) to a Responsible Officer of each Borrower, allow the
Administrative Agent and its designees to perform, and shall assist the
Administrative Agent and its designees in performing, appraisals or updates
thereof of any or all of the Collateral, at the Lenders' expense, as the
Administrative Agent shall direct from time to time.
<PAGE>
6.6 Access and Examination; Confidentiality.
(a) The Administrative Agent, accompanied by any Lender which so elects, may at
all reasonable times during regular business hours (and at any time when a
Default or Event of Default exists) have access to, examine, audit, make
extracts from or copies of and inspect any or all of any Credit Party's records,
files, and books of account and the Collateral, and discuss any Credit Party's
affairs with such Credit Party's officers, management and upon prior notice
(which may be telephonic) to a Responsible Officer of such Credit Party,
independent accountants (and each of the Credit Parties hereby irrevocably
authorizes the independent accountants of the Credit Parties to discuss with the
Administrative Agent the financial affairs of the Parent and its Subsidiaries),
and the Credit Parties shall, to the extent reasonably requested by the
Administrative Agent, confirm such authorization by sending to such independent
accountants a letter substantially in the form attached hereto as Exhibit F. The
Administrative Agent will use its best efforts to promptly give each of the
Lenders notice of any inspection it intends to make pursuant to this Section
6.6. Each Credit Party will deliver to the Administrative Agent any instrument
necessary for the Administrative Agent to obtain records from any service bureau
maintaining records for such Credit Party. The Administrative Agent may, and at
the direction of the Majority Lenders shall, at any time when a Default or Event
of Default exists, and at the Borrowers' expense, make copies of all of the
books and records of any Credit Party, or require each Credit Party to deliver
such copies to the Administrative Agent. The Administrative Agent may, without
expense to the Administrative Agent, use such of the Borrower's respective
personnel, supplies, and premises as may be reasonably necessary for maintaining
or enforcing the Administrative Agent's Liens. The Administrative Agent shall
have the right, at any time, in the Administrative Agent's name or in the name
of a nominee of the Administrative Agent, to verify the validity, amount or any
other matter relating to the Accounts, Inventory, or other Collateral, by mail,
telephone, or otherwise.
<PAGE>
(b) Each Credit Party agrees that, subject to such Credit Party's prior consent
for uses other than in a traditional tombstone, which consent shall not be
unreasonably withheld or delayed, the Administrative Agent and each Lender may
use such Credit Party's name in advertising and promotional material and in
conjunction therewith disclose the general terms of this Agreement. The
Administrative Agent and each Lender agree to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by any Credit Party and
provided to the Administrative Agent or such Lender by or on behalf of such
Credit Party, under this Agreement or any other Loan Document, and neither the
Administrative Agent, nor such Lender nor any of their respective Affiliates
shall use any such information other than in connection with or in enforcement
of this Agreement and the other Loan Documents, except to the extent that such
information (i) was or becomes generally available to the public other than as a
result of disclosure by the Administrative Agent or such Lender, or (ii) was or
becomes available on a nonconfidential basis from a source other than a Credit
Party, provided that the Administrative Agent or such Lender does not have
reason to believe that such source is bound by a confidentiality agreement with
a Credit Party known to the Administrative Agent or such Lender; provided,
however, that the Administrative Agent and any Lender may disclose such
information (1) at the request or pursuant to any requirement of any
Governmental Authority to which the Administrative Agent or such Lender is
subject or in connection with an examination of the Administrative Agent or such
Lender by any such Governmental Authority; (2) pursuant to subpoena or other
court process; (3) when required to do so in accordance with the provisions of
any applicable requirement of law; (4) to the extent reasonably required in
connection with any litigation or proceeding (including, but not limited to, any
bankruptcy proceeding) to which the Administrative Agent, any Lender or their
respective Affiliates may be party; (5) to the extent reasonably required in
connection with the exercise of any remedy hereunder or under any other Loan
Document; (6) to the Administrative Agent's or such Lender's independent
auditors, accountants, attorneys and other professional advisors; (7) to any
prospective Participating Lender or assignee under any Assignment and
Acceptance, actual or potential; provided, that such prospective Participating
Lender or assignee agrees to keep such information confidential to the same
extent required of the Administrative Agent and the Lenders hereunder; (8) as
expressly permitted under the terms of any other document or agreement regarding
confidentiality to which a Credit Party is party or is deemed party with the
Administrative Agent or such Lender; and (9) to its Affiliates. A Lender
disclosing information under clause (2) or (4) of the immediately preceding
sentence shall give reasonable prior notice to the Borrowers thereof, to the
extent practicable and not prohibited by applicable law; provided, that no
Lender shall be liable to any Person for failure to give any such notice.
6.7 Collateral Reporting.
Each Borrower shall provide the Administrative Agent with the following
documents at the following times in form satisfactory to the Administrative
Agent: (a) on Friday of each week, or more frequently if requested by the
Administrative Agent, a Borrowing Base Certificate for the seven-day period
ending Saturday of the prior week; (b) on a monthly basis (or more frequently if
requested by the Administrative Agent), Inventory reports by department and by
store, with additional detail showing additions to and deletions from the
Inventory; (c) at the request of the Administrative Agent, on a quarterly basis,
within thirty (30) days after the end of each fiscal quarter of the Parent, a
reconciliation report in form and substance satisfactory to the Administrative
Agent and the Lenders with respect to variances discovered during the cycle
inventory count for the immediately preceding fiscal quarter required under
Section 6.9(b) hereof; (d) upon request, copies of invoices in connection with
such Borrower's Accounts, customer statements, credit memos, remittance advices
and reports, deposit slips, shipping and delivery documents in connection with
such Borrower's Accounts and for Inventory and Equipment acquired by such
Borrower, purchase orders and invoices; (e) upon request, a statement of the
balance of each of the Intercompany Accounts; (f) such other reports as to the
Collateral of such Borrower or any Credit Party as the Administrative Agent
shall reasonably request from time to time; and (g) with the delivery of each of
the foregoing, a certificate of such Borrower executed by an officer thereof
certifying as to the accuracy and completeness of the foregoing. If any
Borrower's records or reports of the Collateral are prepared by an accounting
service or other agent, such Borrower hereby authorizes such service or agent to
deliver such records, reports, and related documents to the Administrative
Agent, for distribution to the Lenders.
<PAGE>
6.8 Collection of Accounts, Inventory and Other Amounts.
(a) Each Borrower will, at its own cost and expense, cause all payments received
by such Borrower on account of Accounts, Inventory and other Collateral and all
other payments received by any Borrower from whatever source (other than cash
needed to operate such Borrower's stores in the ordinary course of business
consistent with past practice), whether in the form of cash, checks, notes,
drafts, bills of exchange, money orders or otherwise (referred to herein as
"Payments"), (i) to be deposited not less often than once each Business Day in
one or more bank accounts maintained by such Borrower at a creditworthy
financial institution (consistent with such Borrower's historical practices) or
otherwise meeting criteria acceptable to the Administrative Agent and (ii) to be
transferred on each Business Day from the accounts referred to in clause (i) to
one or more concentration accounts designated by a Borrower with a bank which
meets criteria acceptable to the Administrative Agent. Each bank requested by
the Administrative Agent at which an account referred to in clause (i) of the
first sentence of this Section 6.8(a) is maintained and each bank at which a
concentration account referred to in clause (ii) of such sentence shall execute
and deliver to the Administrative Agent such agreements, in form and substance
satisfactory to the Administrative Agent, as the Administrative Agent shall
request with respect to such accounts, including, without limitation, with
respect to prohibitions on such Borrower, upon notice from the Administrative
Agent to the bank, withdrawing funds from such accounts or otherwise directing
or modifying actions with respect to such accounts. Each agreement with a bank
at which a concentration account is established shall provide, among other
things, that, upon notice from the Administrative Agent to such bank, all funds
deposited into such account shall be transferred directly to the Administrative
Agent, for its benefit and for the ratable benefit of the Lenders, on a daily
basis (it being agreed that the Administrative Agent may give such notice if (x)
a Default or Event of Default is continuing, (y) Combined Availability is less
than $100,000,000 for a period of ten (10) consecutive Business Days or (z) a
Material Adverse Effect has occurred). Notwithstanding the foregoing, each
Borrower shall be entitled to maintain up to $20,000 in cash in the aggregate at
each store operated by such Borrower (or the respective operating bank accounts
for each such store). The Administrative Agent or the Administrative Agent's
designee may, at any time after the occurrence of a Default or an Event of
Default, notify Account Debtors that the Accounts have been assigned to the
Administrative Agent and of the Administrative Agent's security interest
therein, and may collect them directly and charge the collection costs and
expenses to the applicable Borrower's Loan Account as a Loan. Upon the written
request of the Administrative Agent, the Credit Parties agree to provide to the
Administrative Agent a complete and accurate list of all bank accounts
maintained by any Credit Party with any bank or other financial institution.
<PAGE>
(b) All payments, including immediately available funds received by the
Administrative Agent at a bank designated by it, received by the Administrative
Agent on account of Accounts or as proceeds of other Collateral will be the
Administrative Agent's sole property for its benefit and the benefit of the
Lenders and will be credited to the applicable Borrower's Loan Account
(conditional upon final collection) after allowing one (1) Business Day for
collection (except that collected funds received by the Administrative Agent on
or prior to 12:00 Noon (New York City time) on any Business Day will be credited
to the applicable Borrower's Loan Account on such Business Day); provided,
however, that such payments shall be deemed to be credited to the applicable
Borrower's Loan Account immediately upon receipt for purposes of (i) determining
the Combined Availability or the Individual Availability of any Borrower, (ii)
calculating the unused line fee pursuant to Section 3.5, and (iii) calculating
the amount of interest to be distributed by the Administrative Agent to the
Lenders (but not the amount of interest payable by the Borrowers).
(c) In the event the Borrowers repay all of the Obligations upon the termination
of this Agreement or upon acceleration of the Obligations, other than through
the Administrative Agent's receipt of payments on account of the Accounts or
proceeds of the other Collateral, such payment will be credited (conditional
upon final collection) to the Borrowers' Loan Account one (1) Business Day after
the Administrative Agent's receipt of such funds.
6.9 Inventory; Cycle Counts.
(a) Each Borrower represents and warrants to the Administrative Agent and the
Lenders and agrees with the Administrative Agent and the Lenders that all of the
Inventory owned by such Borrower is and will be held for sale or lease, or to be
furnished in connection with the rendition of services, in the ordinary course
of such Borrower's business, and is and will be fit for such purposes. Each
Borrower will keep its Inventory in good and marketable condition, at its own
expense. Each Borrower agrees that it will require of all vendors that all
Inventory produced in the United States will be produced in accordance with the
Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations, and orders thereunder. Each Borrower will conduct a physical count
of the Inventory at such times and in such manner as is consistent with such
Borrower's historical practices, and after and during the continuation of an
Event of Default, at such other times as the Administrative Agent requests, and
each Borrower shall promptly upon the request of the Administrative Agent
provide to the Administrative Agent one or more written reports in form and
substance satisfactory to the Administrative Agent describing the results of
each such physical count. Each Borrower will maintain a perpetual inventory
reporting system at all times.
(b) Each Borrower shall, and shall engage one or more Persons acceptable to the
Administrative Agent (it being understood that each of Washington Inventory
Service and RGIS Inventory Service is acceptable to the Administrative Agent)
to, conduct cycle counts of its Inventory at such times and in such manner as is
consistent with such Borrower's historical practices.
<PAGE>
6.10 Equipment.
(a) Each Borrower represents and warrants to the Administrative Agent and the
Lenders and agrees with the Administrative Agent and the Lenders that all of the
Equipment owned by such Borrower is and will be used or held for use in the
Borrower's business, and is and will be fit for such purposes. Each Borrower
shall keep and maintain its Equipment in good operating condition and repair
(ordinary wear and tear excepted) and shall make all necessary replacements
thereof.
(b) Each Borrower shall promptly inform the Administrative Agent of any material
additions to or deletions from the Equipment. No Borrower will, without the
Administrative Agent's prior written consent, alter or remove any identifying
symbol or number on any of such Borrower's Equipment consisting of Collateral.
6.11 Documents, Instruments, and Chattel Paper.
Each Credit Party represents and warrants to the Administrative Agent
and the Lenders that (a) all documents, instruments and chattel paper
describing, evidencing, or constituting Collateral, and to the extent that any
such documents, instruments and chattel paper cover Eligible Inventory, all
signatures and endorsements thereon, are and will be complete, valid, and
genuine, and (b) all goods evidenced by such documents, instruments, and chattel
paper are and will be owned by such Credit Party, free and clear of all Liens
other than Permitted Liens.
6.12 Right to Cure.
The Administrative Agent may, in its discretion, and shall, at the
direction of the Majority Lenders, pay any amount or do any act required of any
Credit Party hereunder or under any other Loan Document in order to preserve,
protect, maintain or enforce the Obligations, the Collateral or the
Administrative Agent's Liens therein, and which such Credit Party fails to pay
or do, including, without limitation, payment of any judgment against such
Credit Party, any insurance premium, any warehouse charge, any finishing or
processing charge, any landlord's claim, and any other Lien upon or with respect
to the Collateral. All payments that the Administrative Agent makes under this
Section 6.12 and all out-of-pocket costs and expenses that the Administrative
Agent pays or incurs in connection with any action taken by it hereunder shall
be charged to the Borrowers' Loan Accounts as a Loan. Any payment made or other
action taken by the Administrative Agent under this Section 6.12 shall be
without prejudice to any right to assert an Event of Default hereunder and to
proceed thereafter as herein provided.
<PAGE>
6.13 Power of Attorney.
Each Credit Party hereby appoints the Administrative Agent and the
Administrative Agent's designee as such Credit Party's attorney, with power: (a)
to endorse such Credit Party's name on any checks, notes, acceptances, money
orders, instruments or other evidences of Collateral that come into the
Administrative Agent's or any Lender's possession; (b) to sign such Credit
Party's name on any invoice, bill of lading, warehouse receipt or other document
of title relating to any Collateral, on drafts against customers, on assignments
and requests for verification of Accounts, on financing statements and other
public records and to file any such financing statements by electronic means
with or without a signature as authorized or required by applicable law or
filing procedure; (c) so long as any Event of Default has occurred and is
continuing, to execute proofs of claim and loss; (d) so long as any Event of
Default has occurred and is continuing, to execute endorsements, assignments or
other instruments of conveyance or transfer in respect of the Collateral; (e) so
long as any Event of Default has occurred and is continuing, to adjust and
compromise any claims under insurance policies or otherwise execute releases;
and (f) to do all things necessary or advisable to carry out and enforce this
Agreement or the Obligations. Each Credit Party ratifies and approves all acts
of such attorney. None of the Lenders or the Administrative Agent nor their
attorneys will be liable for any acts or omissions or for any error of judgment
or mistake of fact or law. This power, being coupled with an interest, is
irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.
6.14 The Administrative Agent's and Lenders' Rights, Duties and Liabilities.
The Credit Parties assume all responsibility and liability arising from
or relating to the use, sale or other disposition of the Collateral. The
Obligations shall not be affected by any failure of the Administrative Agent or
any Lender to take any steps to perfect the Administrative Agent's Liens or to
collect or realize upon the Collateral, nor shall loss of or damage to the
Collateral release any Credit Party from any of the Obligations. Following the
occurrence and continuation of an Event of Default, the Administrative Agent may
(but shall not be required to), and at the direction of the Majority Lenders
shall, without notice to or consent from any Credit Party, sue upon or otherwise
collect, extend the time for payment of, modify or amend the terms of,
compromise or settle for cash, credit, or otherwise upon any terms, grant other
indulgences, extensions, renewals, compositions, or releases, and take or omit
to take any other action with respect to the Collateral, any security therefor,
any agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of the Borrower for the
Obligations or under this Agreement or any other agreement now or hereafter
existing between the Administrative Agent and/or any Lender and any Credit
Party.
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
<PAGE>
7.1 Books and Records.
Each Credit Party shall maintain, at all times, correct and complete
books, records and accounts in which complete, correct and timely entries are
made of its transactions in accordance with GAAP applied consistently with the
audited Financial Statements required to be delivered pursuant to Section
7.2(a). Each Credit Party shall, by means of appropriate entries, reflect in
such accounts and in all Financial Statements proper liabilities and reserves
for all taxes and proper provision for depreciation and amortization of property
and bad debts, all in accordance with GAAP. Each Credit Party shall maintain at
all times books and records pertaining to the Collateral in such detail, form
and scope as the Administrative Agent or any Lender shall reasonably require,
including, but not limited to, records of (a) all payments received and all
credits and extensions granted with respect to the Accounts; (b) the return,
rejections, repossession, stoppage in transit, loss, damage, or destruction of
any Inventory; and (c) all other dealings affecting the Collateral.
7.2 Financial Information.
Each Credit Party shall promptly furnish to each Lender, all such
financial information as the Administrative Agent or any Lender shall reasonably
request, and notify its auditors and accountants that the Administrative Agent,
on behalf of the Lenders, is authorized to obtain such information directly from
them. Without limiting the foregoing, the Parent and the Borrowers will furnish
to the Administrative Agent, in sufficient copies for distribution by the
Administrative Agent to each Lender, in such detail as the Administrative Agent
or the Lenders shall request, the following:
(a) As soon as available, but in any event not later than ninety (90) days after
the close of each Fiscal Year, consolidated audited balance sheets, and
statements of income and expense, cash flow and of stockholders' equity for the
Parent and its Subsidiaries for such Fiscal Year, and the accompanying notes
thereto, setting forth in each case in comparative form figures for the previous
Fiscal Year, all in reasonable detail, fairly presenting the financial position
and the results of operations of the Parent and its consolidated Subsidiaries as
at the date thereof and for the Fiscal Year then ended, and prepared in
accordance with GAAP. Such statements shall be examined in accordance with
generally accepted auditing standards by and, in the case of such statements
performed on a consolidated basis, accompanied by a report thereon unqualified
as to scope of a so-called "Big 5" accounting firm selected by the Parent or
other independent certified public accountants selected by the Parent and
reasonably satisfactory to the Administrative Agent. The Parent, simultaneously
with retaining such independent public accountants to conduct such annual audit,
shall send a letter to such accountants, with a copy to the Administrative Agent
and the Lenders, substantially in the form attached hereto as Exhibit F. The
Parent hereby authorizes the Administrative Agent to communicate directly with
its certified public accountants and, by this provision, authorizes those
accountants to disclose to the Administrative Agent any and all financial
statements and other supporting financial documents and schedules relating to
the Parent and its Subsidiaries and to discuss directly with the Administrative
Agent the finances and affairs of the Parent and its Subsidiaries.
<PAGE>
(b) As soon as available, but in any event not later than thirty (30) days after
the end of each fiscal month or forty-five (45) days in the case of a fiscal
month that is the last month of a fiscal quarter, consolidated unaudited balance
sheets of the Parent and its consolidated Subsidiaries as at the end of such
month, and consolidated unaudited statements of income and expense and cash flow
for the Parent and its consolidated Subsidiaries for such month and for the
period from the beginning of the Fiscal Year to the end of such month, setting
forth in comparative form in each case, actual figures for such period as
against budgeted figures for such period in the current Fiscal Year and actual
figures as against actual figures for the comparable period during the prior
Fiscal Year, all in reasonable detail, fairly presenting the financial position
and results of operations of the Parent and its consolidated Subsidiaries as at
the date thereof and for such periods, and prepared in accordance with GAAP
applied consistently with the audited Financial Statements required to be
delivered pursuant to Section 7.2(a). The Parent shall certify by a certificate
signed by an authorized financial officer that all such statements have been
prepared in accordance with GAAP and present fairly, subject to normal year-end
adjustments, the financial position of the Parent and its consolidated
Subsidiaries as at the dates thereof and its results of operations for the
periods then ended.
(c) As soon as available, but in any event not later than forty-five (45) days
after the close of each fiscal quarter or ninety (90) days in the case of a
fiscal quarter that is the fourth quarter of a Fiscal Year, consolidated
unaudited balance sheets of the Parent and its consolidated Subsidiaries as at
the end of such quarter, and consolidated unaudited statements of income and
expense and statement of cash flows for the Parent and its Subsidiaries for such
quarter (which shall be satisfied for each of the first three fiscal quarters of
a Fiscal Year by the delivery of a Form 10-Q for the relevant quarter pursuant
to Section 7.2(f)), all in reasonable detail, fairly presenting the financial
position and results of operation of the Parent and its Subsidiaries as at the
date thereof and for such period, prepared in accordance with GAAP consistent
with the audited Financial Statements required to be delivered pursuant to
Section 7.2(a).
<PAGE>
(d) With each of the annual audited Financial Statements delivered pursuant to
Section 7.2(a), and within forty-five (45) days after the end of each fiscal
quarter (or ninety (90) days in the case of the fourth quarter), a certificate
of the chief financial officer of the Parent (i) setting forth in reasonable
detail the calculations required to establish that the Credit Parties were in
compliance with the covenants set forth in Section 9.26 during the period
covered in such Financial Statements and as at the end thereof and setting the
calculation of the Fixed Charge Coverage Ratio for the one-, two-, three- or
four-quarter fiscal period of the Parent ended with such fiscal quarter or
Fiscal Year, as appropriate, (ii) stating that, except as explained in
reasonable detail in such certificate, (A) all of the representations and
warranties of the Credit Parties contained in this Agreement and the other Loan
Documents are correct and complete in all material respects as at the date of
such certificate as if made at such time, (B) each Credit Party is, at the date
of such certificate, in compliance in all material respects with all of its
respective covenants and agreements in this Agreement and the other Loan
Documents, (C) no Default or Event of Default then exists or existed during the
period covered by such Financial Statements, and (D) describing and analyzing in
reasonable detail all material trends, changes, and developments in each and all
Financial Statements, and (iii) with respect to the financial statements
delivered for each fiscal quarter, stating that all such statements have been
prepared in accordance with GAAP and present fairly, subject to normal year-end
adjustments, the financial position of the Parent and its consolidated
Subsidiaries as at the dates thereof and their results of operations for the
periods then ended. If such certificate discloses that a representation or
warranty is not correct or complete, or that a covenant has not been complied
with, or that a Default or Event of Default existed or exists, such certificate
shall set forth what action the Parent has taken or proposes to take with
respect thereto.
(e) Within thirty (30) days (or, in the case of the Fiscal Year ending in
January 2000, sixty (60) days) after the beginning of each Fiscal Year an annual
operating plan (to include forecasted consolidated balance sheets, statements of
income and expenses and statements of cash flow, in each case consistent with
the Borrowers' past practices) for the Parent and its Subsidiaries as at the end
of and for each month of such Fiscal Year, together with (x) forecasts of the
nature requested in this Subsection, computed on an annual basis for each Fiscal
Year remaining until the Termination Date and (y) appropriate supporting details
as reasonably requested by the Administrative Agent. The annual operating plan
delivered in connection with this Section 7.2(e) shall be accompanied by
evidence satisfactory to the Administrative Agent that such plan shall have been
approved by the board of directors of the Parent.
(f) Promptly and, in the any event not later than 10 Business Days following the
filing thereof, copies of all reports, if any, to or other documents filed by
the Parent or any of its Subsidiaries with the Securities and Exchange
Commission under the Exchange Act (including, without limitation, copies of all
periodic reports on Forms 10-K, 10-Q and 8-K), and all reports, notices, or
statements sent or received by the Parent or any of its Subsidiaries to or from
the holders of any equity interests of the Parent (other than routine
non-material correspondence sent by shareholders of the Parent to the Parent) or
any such Subsidiary or of any Debt For Borrowed Money of the Borrower or any of
its Subsidiaries registered under the Securities Act of 1933 or to or from the
trustee under any indenture under which the same is issued.
(g) As soon as available, but in any event not later than 15 days after any
Credit Party's receipt thereof, a copy of all management reports and management
letters prepared by the independent certified public accountants of any Credit
Party.
(h) Promptly and in any event not later than 15 days after the end of each
month, copies of all reports and returns (including evidence of payment) in
respect of sales, use or like taxes with respect to the Parent or any of its
Subsidiaries.
(i) Promptly after their preparation, copies of any and all proxy statements,
financial statements, and reports which the Parent makes available to its
shareholders.
(j) If requested by the Administrative Agent or any Lender, copies of all
federal, state, local and foreign tax returns and reports in respect of income,
franchise or other taxes on or measured by income filed by the Parent or any of
its Subsidiaries.
<PAGE>
(k) Such additional information as the Administrative Agent and/or any Lender
may from time to time reasonably request regarding the financial and business
affairs of the Parent or any Subsidiary thereof.
7.3 Notices to the Administrative Agent.
The Credit Parties shall notify the Administrative Agent, in writing of
the following matters at the following times:
(a) Promptly and in any event not later than two Business Days after becoming
aware of any Default or Event of Default.
(b) Promptly and in any event not later than two Business Days after becoming
aware of the assertion by the holder of any capital stock of any Credit Party or
Subsidiary thereof or of any Debt For Borrowed Money in excess of $500,000 that
a default exists with respect thereto or that any Credit Party is not in
compliance with the terms thereof, or the threat or commencement by such holder
of any enforcement action because of such asserted default or non-compliance.
(c) Promptly and in any event not later than two Business Days after becoming
aware of any material adverse change in any Credit Party's or any Subsidiary's
property, business, operations, or condition (financial or otherwise).
(d) Promptly and in any event not later than ten (10) Business Days after
becoming aware of any pending or threatened action, suit, proceeding, or
counterclaim by any Person, or any pending or threatened investigation by a
Governmental Authority, or which may materially and adversely affect the
Collateral, the repayment of the Obligations, the Administrative Agent's or any
Lender's rights under the Loan Documents, or any Credit Party's or any
Subsidiary's property, business, operations, or condition (financial or
otherwise).
(e) Promptly and in any event not later than ten (10) Business Days after
becoming aware of any pending or threatened strike, work stoppage, unfair labor
practice claim, or other labor dispute affecting the Parent or any of its
Subsidiaries in a manner which could reasonably be expected to have a Material
Adverse Effect.
(f) Promptly and in any event not later than ten (10) Business Days after
becoming aware of any violation of any law, statute, regulation, or ordinance of
a Governmental Authority affecting any Credit Party which could reasonably be
expected to have a Material Adverse Effect.
(g) Promptly, and in any event within ten (10) Business Days thereof, notice:
<PAGE>
(i) of any Environmental Claim or Adverse Environmental Condition of
which any Credit Party or any Subsidiary thereof has knowledge or any written
notice of an allegation which may reasonably give rise to an Environmental Claim
or Adverse Environmental Condition, or a copy of any order, notice, permit,
report or other written communication received by any Credit Party in connection
with an Adverse Environmental Condition or Environmental Claim or any allegation
that could reasonably be expected to give rise to any Adverse Environmental
Condition or Environmental Claim, in each case where such Environmental Claim or
Adverse Environmental Condition could reasonably be expected to exceed $500,000;
(ii) of the occurrence of a spill or other Release of a Hazardous
Material upon, under or affecting any Facilities, or Hazardous Materials at
levels or in amounts that may have to be reported, remedied or responded to
under any Environmental Law or that have been detected on or in the soil or
groundwater, provided, that the cost to the Parent or its Subsidiaries of
investigating, remedying, or responding to such Release could reasonably be
expected to exceed $500,000;
(iii) that a Credit Party or Subsidiary thereof is or may be liable for
any costs of cleaning up or otherwise responding to a Release of Hazardous
Materials, provided the cost of cleanup or response could reasonably be expected
to exceed $500,000;
(iv) that written notice has been received that any part of the
Facilities is or may be subject to a Lien under any Environmental Law; and
(v) that a Credit Party or Subsidiary will undertake or has undertaken
any cleanup or other response action with respect to any Hazardous Material,
provided the cost of cleanup or response could reasonably be expected to exceed
$500,000.
(h) Any change in any Credit Party's name, state of incorporation, or form of
organization, trade names or styles under which any Credit Party will sell
Inventory or create Accounts, or to which instruments in payment of Accounts may
be made payable, in each case at least thirty (30) days prior thereto.
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
Each of the Credit Parties warrants and represents to the
Administrative Agent and the Lenders that except as hereafter disclosed to and
accepted by the Administrative Agent and the Majority Lenders in writing:
<PAGE>
8.1 Authorization, Validity, and Enforceability of this Agreement and the Loan
Documents.
Each of the Credit Parties has the corporate or partnership power and
authority to execute, deliver and perform this Agreement and the other Loan
Documents to which it is a party, to incur the Obligations, and to grant to the
Administrative Agent Liens upon and security interests in the Collateral. Each
of the Credit Parties has taken all necessary corporate or partnership action
(including without limitation, obtaining approval of its stockholders if
necessary) to authorize its execution, delivery, and performance of this
Agreement and the other Loan Documents to which it is a party. No consent,
approval, or authorization of, or declaration or filing with, any Governmental
Authority, and no consent of any other Person, is required in connection with
any of the Credit Parties' execution, delivery and performance of this Agreement
and the other Loan Documents to which it is a party, except for those already
duly obtained. This Agreement and the other Loan Documents have been duly
executed and delivered by each of the Credit Parties party thereto, and
constitute the legal, valid and binding obligations of each of the Credit
Parties party thereto, enforceable against each such Credit Party in accordance
with their respective terms without defense, setoff or counterclaim. Each of the
Credit Parties' execution, delivery, and performance of this Agreement and the
other Loan Documents to which it is a party do not and will not conflict with,
or constitute a violation or breach of, or constitute a default under, or except
for Liens created under the Security Documents, result in the creation or
imposition of any Lien upon the property of the Parent or any of its
Subsidiaries by reason of the terms of (a) any contract, mortgage, Lien, lease,
agreement, indenture, or instrument to which any Credit Party is a party or
which is binding upon it, (b) any Requirement of Law applicable to the Parent or
any of its Subsidiaries, or (c) the certificate or articles of incorporation or
by-laws of the Parent or any of its Subsidiaries.
8.2 Validity and Priority of Security Interest.
The Administrative Agent has (and each of the Credit Parties confirms
the pledge and grant to the Administrative Agent, for the ratable benefit of the
Administrative Agent and the Lenders, under the Existing Security Documents of a
security interest in the Collateral therein described) a legal, valid and
perfected security interest in and Lien on all of the Collateral. Without
limitation of the foregoing, the provisions of this Agreement, the Amended
Mortgages and the other Security Documents create legal and valid Liens on all
the Collateral in favor of the Administrative Agent, for the ratable benefit of
the Administrative Agent and the Lenders, and such Liens constitute perfected
and continuing Liens on all the Collateral constituting personal property other
than fixtures (to the extent that a security interest in such property, in
accordance with Article 9 of the UCC, can be perfected by filing UCC financing
statements), having priority over all other Liens on the Collateral (other than
Permitted Liens), securing all the Obligations, and enforceable against each
Credit Party and all third parties.
<PAGE>
8.3 Organization and Qualification.
Each Credit Party (a) is duly incorporated and organized and validly
existing in good standing under the laws of the state of its incorporation, (b)
is qualified to do business as a foreign corporation and is in good standing in
the jurisdictions set forth on Schedule 8.3 which are the only jurisdictions in
which qualification is necessary in order for it to own or lease its property
and conduct its business and (c) has all requisite power and authority to
conduct its business and to own its property.
8.4 Corporate Name; Prior Transactions.
Except as set forth on Schedule 8.4, since October 4, 1993 no Credit
Party has been known by or used any other corporate or fictitious name, or been
a party to any merger or consolidation other than the Hills Merger or the Zayre
Merger Transaction, or acquired all or substantially all of the assets of any
Person, or acquired any of its property outside of the ordinary course of
business.
8.5 Subsidiaries and Affiliates.
Schedule 8.5 is a correct and complete list of the name and
relationship to the Parent of each and all of the Parent's Subsidiaries and
other Affiliates. Each Subsidiary is (a) duly incorporated or organized and
validly existing in good standing under the laws of its state of incorporation
or organization as set forth on Schedule 8.5, (b) qualified to do business as a
foreign corporation or organization and in good standing in each jurisdiction in
which the failure to so qualify or be in good standing could reasonably be
expected to have a material adverse effect on any such Subsidiary's business,
operations, prospects, property, or condition (financial or otherwise) and (c)
has all requisite power and authority to conduct its business and own its
property.
8.6 Financial Statements and Projections.
(a) The Parent has delivered to the Administrative Agent and the Lenders the
audited balance sheet and related statements of income, retained earnings, cash
flows, and changes in stockholders equity for the Parent and its consolidated
Subsidiaries as of January 31, 1998, and for the Fiscal Year then ended,
accompanied by the report thereon of the Parent's independent certified public
accountants. The Parent has also delivered to the Administrative Agent and the
Lenders the unaudited balance sheet and related statements of income and cash
flows for the Parent and its consolidated Subsidiaries as of October 3, 1998.
All such financial statements have been prepared in accordance with GAAP and
present accurately and fairly the financial position of the Parent and its
consolidated Subsidiaries as at the dates thereof and their results of
operations for the periods then ended.
(b) The Latest Projections when submitted to the Lenders as required herein
represent the Parent's best estimate of the future financial performance of the
Parent and its consolidated Subsidiaries for the periods set forth therein. The
Latest Projections have been prepared on the basis of the assumptions set forth
therein, which the Parent believes are fair and reasonable in light of current
and reasonably foreseeable business conditions at the time submitted to the
Lenders.
<PAGE>
8.7 Capitalization.
Schedule 8.7 sets forth the name of the Parent, the Borrowers and each
other Credit Party and a statement of its outstanding capitalization and
ownership of capital stock or partnership interests of such Credit Party. All
such shares of the Parent, the Borrowers and each other Credit Party are validly
issued, fully paid and nonassessable.
8.8 Solvency.
Both prior to and after giving effect to the making of the Loans to be
made (or deemed made) on the Closing Date, the issuance of the Letters of Credit
to be issued (or deemed issued) on the Closing Date and consummation of the
Offer and Note Tender Offer, each of the Ames Credit Parties is Solvent. After
giving effect to the making of the Loans to be made (or deemed made) on the
Closing Date, the issuance of the Letters of Credit to be issued (or deemed
issued) on the Closing Date and consummation of the Offer and Note Tender Offer,
each of the Hills Credit Parties is Solvent. Each of the Credit Parties shall
remain Solvent at all times during the term of this Agreement.
8.9 Debt.
After giving effect to the making of the Loans to be made (or deemed
made) on the Closing Date and the issuance of the Letters of Credit to be issued
(or deemed issued) on the Closing Date, the Parent and its Subsidiaries have no
Debt, except (a) the Obligations, (b) Debt described on Schedule 9.13, and (c)
the other Debt permitted by Section 9.13.
8.10 Distributions.
Except as otherwise set forth on Schedule 8.10 and except as permitted
pursuant to Section 9.10, since February 3, 1996, no Distribution has been
declared, paid, or made upon or in respect of any capital stock or other
securities of the Parent or any of its Subsidiaries.
8.11 Title to Property.
(a) Schedule 8.11 hereto correctly identifies, categorized by each Credit Party
or Subsidiary of any Credit Party, (x) each parcel of real estate owned by any
Credit Party or any Subsidiary of any Credit Party, together in each case with
an accurate street address and description of the use of such parcel, (y) each
parcel of real estate leased by or to any Credit Party or any Subsidiary of any
Credit Party, together in each case with an accurate street address and
description of the use of such parcel, and (z) each other interest in real
property owned, leased or granted to or held by any Credit Party or any
Subsidiary of any Credit Party. Each of the Credit Parties and their respective
Subsidiaries owns good and marketable, indefeasible fee simple title to all of
the real estate described on Schedule 8.11 as being owned by such Credit Party
or Subsidiary thereof free and clear of all Liens or other encumbrances of any
kind, except Permitted Liens. Except as set forth on Schedule 8.11:
(i) to such Credit Party's knowledge, no structure owned or leased by
any Credit Party or any Subsidiary thereof fails to conform with applicable
ordinances, regulations, zoning laws and restrictive covenants nor encroaches
upon property of others, nor is any such real property encroached upon by
structures of others in any case in any manner that could reasonably be expected
to have a Material Adverse Effect;
<PAGE>
(ii) no charges or violations have been filed, served, made or
threatened, to the knowledge of any Credit Party against or relating to any such
property or structure or any of the operations conducted at any such property or
structure, as a result of any violation or alleged violation of any applicable
ordinances, requirements, regulations, zoning laws or restrictive covenants or
as a result of any encroachment on the property of others where the effect of
same could reasonably be expected to have a Material Adverse Effect;
(iii) other than pursuant to applicable laws, rules, regulations or
ordinances, covenants that run with the land, Permitted Liens or provisions in
the applicable leases or matters described on Schedule 8.11, there exists no
restriction on the use, transfer or mortgaging of any such property;
(iv) each Credit Party and each of its Subsidiaries has adequate
permanent rights of ingress to and egress from any such property used by it for
the operations conducted thereon;
(v) there are no developments affecting any of the real property or
interests therein identified in Schedule 8.11 pending or threatened that could
reasonably be expected to have a Material Adverse Effect;
(vi) neither any Credit Party nor any Subsidiary thereof has any option
(other than under any lease disclosed in Schedule 8.11) in, or any right or
obligation to acquire any interest in, any real property;
(vii) all permits, licenses and approvals from governmental bodies,
agencies or authorities having jurisdiction over each such property which are
necessary or required to permit the use and occupancy of such property for the
purposes for which it is now used have been duly and validly issued and are in
full force and effect, except for permits, licenses or approvals which, if not
in full force and effect could not reasonably be expected to have a Material
Adverse Effect;
<PAGE>
(viii) the Credit Parties or their respective Subsidiaries have all the
right, title and interest of the lessee in each such lease and presently occupy
the property leased by them as lessee under each such lease to the extent not
subleased; no consent under any such lease is necessary for the consummation of
the transactions contemplated hereby; no event has occurred which (with the
giving of notice or passage of time or both) would impair any right of such
party to exercise and obtain the benefits of any options contained in any such
lease; and there is no default under or any reasonable basis for acceleration or
termination of, nor has any event occurred which (with the giving of notice or
passage of time or both) would constitute a default under, any such lease,
except for any such default which could not reasonably be expected to have a
Material Adverse Effect; and
(ix) municipal water service, storm sewer, sanitary sewer facilities, and
telephone, electric and gas service are available to serve all parcels of real
property identified in Schedule 8.11 at the lot lines of such parcels, except
where the failure to have such availability could not reasonably be expected to
have a Material Adverse Effect.
(b) Except as set forth on Schedule 8.11, the buildings, improvements and
fixtures of each Credit Party and their respective Subsidiaries are in all
material respects structurally sound with no known material defects and are in
good operating condition and repair, normal wear and tear excepted.
(c) Neither the whole nor any material portion of the property hereto or
leaseholds of the Credit Parties or any of their Subsidiaries described on
Schedule 8.11 is subject to any governmental decree or order to be sold or is
being condemned, expropriated or otherwise taken by any governmental body or
other entity with or without payment of compensation therefor, nor has any such
condemnation, expropriation or taking been proposed to any Credit Party or any
Subsidiary thereof.
(d) Each of the Credit Parties and their respective Subsidiaries owns good and
marketable title to, or valid leasehold interests in or license rights in, all
of the material property and assets necessary to properly conduct its business
subject to no Liens except the Permitted Liens.
8.12 Proprietary Rights.
Schedule 8.12 sets forth a correct and complete list of all of the
Credit Parties' Proprietary Rights. None of the Proprietary Rights is subject to
any licensing agreement or similar arrangement except as set forth on Schedule
8.12. To the best of the Credit Parties' knowledge, none of the Proprietary
Rights infringes on or conflicts with any other Person's property, and no other
Person's property infringes on or conflicts with the Proprietary Rights. The
Proprietary Rights described on Schedule 8.12 constitute all of the property of
such type necessary to the current and anticipated future conduct of the Credit
Parties' business.
8.13 Trade Names.
All trade names or styles under which the Parent or any of its
Subsidiaries will sell Inventory or create Accounts, or to which instruments in
payment of Accounts may be made payable, are listed on Schedule 8.13.
8.14 Litigation.
Except as set forth on Schedule 8.14, there is no pending or (to the
best of the Credit Parties' knowledge) threatened action, suit, proceeding, or
counterclaim by any Person, or investigation by any Governmental Authority, or
any basis for any of the foregoing, which could reasonably be expected to cause
a Material Adverse Effect.
<PAGE>
8.15 Restrictive Agreements.
Neither the Parent nor any of its Subsidiaries is a party to any
contract or agreement, or subject to any charter or other corporate restriction,
which affects its ability to execute, deliver, and perform the Loan Documents
and repay the Obligations or which materially and adversely affects or, insofar
as the Credit Parties can reasonably foresee, could reasonably be expected to
materially and adversely affect, the property, business, operations, profits,
prospects or condition (financial or otherwise) of the Credit Parties or such
Subsidiary, or would in any respect cause a Material Adverse Effect.
8.16 Labor Matters.
Except as set forth on Schedule 8.16, (a) there is no collective
bargaining agreement or other labor contract covering employees of the Parent or
any of its Subsidiaries, (b) no such collective bargaining agreement or other
labor contract is scheduled to expire during the term of this Agreement, (c) to
the best of the Credit Parties' knowledge, no union or other labor organization
is seeking to organize, or to be recognized as, a collective bargaining unit of
employees of the Parent or any of its Subsidiaries or for any similar purpose,
and (d) there is no pending or threatened strike, work stoppage, material unfair
labor practice claim, or other material labor dispute against or affecting the
Parent or its Subsidiaries or their employees.
<PAGE>
8.17 Environmental Laws.
Except as disclosed on Schedule 8.17 , (i) the operations of each of
the Credit Parties and each of their respective Subsidiaries comply in all
material respects with all applicable Environmental Laws; (ii) each of the
Credit Parties and each of their respective Subsidiaries have obtained all
material environmental, health and safety Permits necessary for their operation,
and all such Permits are valid, and in good standing and each of the Credit
Parties and each of their respective Subsidiaries are in compliance in all
material respects with all terms and conditions of such Permits; (iii) each of
the Credit Parties and each of their respective Subsidiaries and all of their
present Facilities or operations, as well as to the knowledge of each of the
Credit Parties and their respective Subsidiaries their past Facilities or
operations, are not subject to any material outstanding written order or
agreement with any governmental authority or private party respecting (a) any
Environmental Laws, (b) any Remedial Action, or (c) any Environmental Claims
arising from the Release of a Contaminant into the environment; (iv) none of the
operations of any Credit Party or any of their respective Subsidiaries is
subject to any material judicial or administrative proceeding under any
Environmental Law; (v) to the best of the knowledge of the Credit Parties, none
of the operations of any Credit Party or any of their respective Subsidiaries is
the subject of any Federal or state investigation evaluating whether any
material Remedial Action is needed to respond to a Release of any Contaminant
into the environment; (vi) neither any Credit Party nor any Subsidiary thereof
or to the knowledge of the Credit Parties any predecessor of any Credit Party or
any Subsidiary thereof has filed any notice under Federal or state law
indicating past or present treatment, storage, or disposal of a hazardous waste
or reporting a spill or Release of a Contaminant into the environment where such
treatment, storage and disposal would result in a material liability; (vii) to
the best of the knowledge of the Borrowers, neither any Credit Party nor any of
their respective Subsidiaries has any material contingent liability in
connection with any Release of any Contaminant into the environment; (viii) none
of the Credit Parties' or any of their respective Subsidiaries' operations
involve the generation, transportation, treatment or disposal of hazardous
waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent, other
than in material compliance with Environmental Law; (ix) neither any Credit
Party nor any of their respective Subsidiaries has disposed of any Contaminant
by placing it in or on the ground or waters of any premises owned, leased or
used by any Credit Party or such Subsidiary and to the knowledge of the Credit
Parties neither has any lessee, prior owner, or other person where such disposal
could reasonably be expected to result in a material liability; (x) no
underground storage tanks or surface impoundments are on the Facilities of any
Credit Party or any Subsidiary thereof, other than in material compliance with
Environmental Law; and (xi) no Lien in favor of any governmental authority for
(A) any liability under Environmental Laws or regulations, or (B) damages
arising from or costs incurred by such governmental authority in response to a
Release of a Contaminant into the environment, has been filed or attached to the
Facilities of any Credit Party or any subsidiary thereof; provided that a breach
of a representation under this Section 8.17 by any Credit Party or any of their
respective current or former Subsidiaries shall not constitute an Event of
Default under Section 11.1 unless such breach could reasonably be expected to
result in a Material Adverse Effect. The foregoing representations and
warranties shall survive the expiration or earlier termination of this Agreement
until such time as the environmental indemnity referred to in Section 9.7 is
terminated.
8.18 No Violation of Law.
Neither the Parent nor any of its Subsidiaries is in violation of any
law, statute, regulation, ordinance, judgment, order, or decree applicable to it
which violation could reasonably be expected to have a Material Adverse Effect.
8.19 No Default.
Neither the Parent nor any of its Subsidiaries is in default with
respect to any note, indenture, loan agreement, mortgage, lease, deed, or other
agreement to which the Parent or such Subsidiary is a party or by which it is
bound, which default could reasonably be expected to have a Material Adverse
Effect.
<PAGE>
8.20 Employee Benefit Plans.
Neither any Credit Party nor any ERISA Affiliate maintains or
contributes to any Employee Plan or any Multiemployer Plan other than those
listed on Schedule 8.20. Each Employee Plan of any Credit Party or any ERISA
Affiliate, which is not a Multiemployer Plan and which is intended to be tax
qualified under Code Section 401(a) has been determined by the Internal Revenue
Service to qualify under Code Section 401, and the trusts created thereunder
have been determined to be exempt from tax under the provisions of Code Section
501. Nothing has occurred which would cause the loss of such qualification or
the imposition of any Code or ERISA material tax liability or penalty to any
Credit Party, or any ERISA Affiliate. With respect to each Employee Plan, all
reports required under ERISA or any other applicable law or regulation to be
filed by any Credit Party or any ERISA Affiliate with the relevant governmental
authority have been duly filed and all such reports are true and correct in all
material respects as of the date given. Neither any Credit Party nor any ERISA
Affiliate has engaged in a "prohibited transaction," as such term is defined in
Code Section 4975 and Title I of ERISA, in connection with any Employee Plan
which would subject any Credit Party or any ERISA Affiliate (after giving effect
to any exemption) to a material tax or penalty on prohibited transactions
imposed by Code Section 4975 or Section 502 of ERISA. No Pension Benefit Plan
has incurred, or is reasonably expected to incur, an ERISA Event, nor has any
accumulated funding deficiency (as defined in Code Section 412(a)) been
incurred, nor has any funding waiver from the Internal Revenue Service been
received or requested with respect to any Pension Benefit Plan. The value of the
assets of each Pension Benefit Plan subject to Title IV of ERISA equaled or
exceeded the present value of the "benefit liabilities," as defined in Title IV
of ERISA of each such Plan as of the end of the preceding plan year using Plan
actuarial assumptions as in effect for such plan year. The funding methods used
in connection with each Pension Benefit Plan are acceptable under ERISA and the
actuarial assumptions and methods used in connection with such funding are
reasonable. There are no claims (other than claims for benefits in the normal
course), actions or lawsuits asserted or instituted against, and neither any
Credit Party nor any ERISA Affiliate has knowledge of any threatened litigation
or claims against (i) the assets of any Pension Benefit Plan or against any
fiduciary of such Plan with respect to the operation of such Plan or (ii) the
assets of any employee welfare benefit plan within the meaning of ERISA Section
3(l) or against any fiduciary thereof with respect to the operation of any such
plan. Neither any Credit Party nor any ERISA Affiliate has incurred (a) any
liability to the PBGC (other than routine claims and premium payments), (b) any
withdrawal liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Section 4201
of ERISA as a result of a complete or partial withdrawal (within the meaning of
Section 4203 or 4205 of ERISA) from a Multiemployer Plan or (c) any liability
under ERISA Section 4062 to the PBGC, or to a trustee appointed under ERISA
Section 4042. No Credit Party or ERISA Affiliate has been notified or otherwise
has knowledge that any Multiemployer Plan is insolvent or in reorganization
within the meanings of Sections 4245 and 4241 of ERISA. Neither any Credit Party
nor any ERISA Affiliate nor any organization to which any Credit Party or any
such ERISA Affiliate is a successor or parent corporation within the meaning of
ERISA Section 4069(b) has engaged in a transaction within the meaning of ERISA
Section 4069. Neither any Credit Party nor any ERISA Affiliate maintains a
welfare benefit plan within the meaning of Section 3(1) of ERISA, other than
those listed on Schedule 8.20, which provides for continuing benefits or
coverage for any participant or any beneficiary of a participant after such
participant's termination of employment except as may be required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
and the regulations thereunder or by applicable state statutory law. Each Credit
Party and each ERISA Affiliate maintaining a welfare benefit plan within the
meaning of Section 3(1) of ERISA has complied with the notice and continuation
coverage requirements of COBRA and the regulations thereunder so as not to
result in any material loss of deduction under Section 162 of the Code or any
material tax, penalty or liability to any such Credit Party or any such ERISA
Affiliate.
8.21 Taxes.
Except as described on Schedule 8.21 hereto, the Parent and its
Subsidiaries have filed all Federal and other tax returns and reports required
to be filed, and have paid all Federal and other taxes, assessments, fees and
other governmental charges levied or imposed upon them or their properties,
income or assets otherwise due and payable (except for the non-payment of any
such taxes, assessments, fees and other governmental charges permitted by
Section 9.1). Schedule 8.21 sets forth, for each of the Parent and its
Subsidiaries (and each such Affiliate), those taxable years for which its tax
returns have been audited within the twelve (12) month period preceding the
Closing Date or are being audited as of the Closing Date by the IRS or, in the
case of any material Tax, any other Governmental Authority. No issue has been
raised in writing or, if not in writing, to any Credit Party's knowledge, in any
such examination that, by application of similar principles, reasonably may be
expected to result in assertion of a material deficiency for any other taxable
year not so examined that has not been accrued on the Financial Statements that
would be required to be so accrued in accordance with GAAP. Except as described
on Schedule 8.21 hereto, neither the Parent nor any of its Subsidiaries has, as
of the Closing Date, executed or filed with the IRS or, to its knowledge, any
other Governmental Authority, any agreement or other document extending, or
having the effect of extending, the period for assessment or collection of any
charges, fines, penalties or assessments. Except as described on Schedule 8.21
hereto, neither the Parent nor any of its Subsidiaries has agreed or has been
requested to make any adjustment under Code Section 481(a) by reason of a change
in accounting method initiated by the Parent or any of its Subsidiaries. Except
as described on Schedule 8.21, neither the Parent nor any Subsidiary thereof has
any obligation under a tax sharing agreement.
8.22 Regulated Entities.
None of the Parent, any Person controlling the Parent, or any
Subsidiary of the Parent, is an "investment company" within the meaning of the
Investment Company Act of 1940. Neither the Parent nor any of its Subsidiaries
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act, any state public utilities
code, or any other Federal or state statute or regulation limiting its ability
to incur indebtedness.
8.23 Use of Proceeds; Margin Regulations.
(a) The proceeds of the Loans are to be used solely to refinance indebtedness
under the Existing Credit Agreement and the Existing Hills Credit Agreement, to
fund working capital and Capital Expenditures and other general corporate
purposes of the Parent and its Subsidiaries not prohibited hereby (including,
without limitation, to finance intercompany loans made to HSC in accordance with
Section 9.10(d)).
<PAGE>
(b) None of the proceeds of any Loan (other than the proceeds of Loans that are
advanced to HSC in accordance with Section 9.10(d)) shall be used directly or
indirectly (w) to purchase or carry Margin Stock, (x) to repay or otherwise
refinance indebtedness of any Borrower or others incurred to purchase or carry
Margin Stock, (y) to extend credit for the purpose of purchasing or carrying any
Margin Stock or (z) to acquire any security in any transaction that is subject
to Section 13 or 14 of the Exchange Act.
(c) Neither the Parent nor any Subsidiary thereof is engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock. Neither the making of any Loans nor the use
of the proceeds thereof nor the extension of any other credit pursuant to any
Loan Document will violate or be inconsistent with the provisions of Regulation
U, T or X of the Board of Governors of the Federal Reserve System.
8.24 Copyrights, Patents, Trademarks and Licenses, etc.
Each Credit Party owns or is licensed or otherwise has the right to use
all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of its businesses, without material conflict with
the rights of any other Person. To the best knowledge of each Credit Party, no
slogan or other advertising device, product, process, method, substance, part or
other material now employed, or now contemplated to be employed, by the Parent
or any Subsidiary thereof infringes upon any rights held by any other Person,
which could reasonably be expected to have a Material Adverse Effect. No claim
or litigation regarding any of the foregoing is pending or threatened, and no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of any Credit
Party, proposed, which, in either case, could reasonably be expected to have a
Material Adverse Effect.
8.25 No Material Adverse Effect.
No event has occurred since October 3, 1998 that has had or could
reasonably be expected to result in a Material Adverse Effect.
8.26 Full Disclosure.
None of the representations or warranties made by the Parent or any
Subsidiary thereof in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of the
Parent or any Subsidiary thereof in connection with the Loan Documents
(including the offering and disclosure materials delivered by or on behalf of
any Credit Party to the Lenders prior to the Closing Date), contains any untrue
statement of a material fact or omits any material fact (known to any such
Person in the case of any document not furnished to it) required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
<PAGE>
8.27 Material Agreements.
Schedule 8.27 hereto sets forth all material agreements and contracts
to which each of the Credit Parties or any Subsidiary thereof is a party or is
bound as of the Closing Date (including, without limitation, all Material
Contracts).
8.28 Bank Accounts.
Schedule 8.28 contains a complete and accurate list of all bank
accounts maintained by each of the Credit Parties with any bank or other
financial institution.
8.29 Year 2000.
The Credit Parties (other than Hills and its Subsidiaries) have
completed a review and assessment of each Credit Party's systems and
applications and have formally communicated with their material suppliers and
vendors. The Credit Parties reasonably believe that the "Year 2000 problem"
(that is, the inability of computers, as well as embedded microchips in
non-computing devices, to perform properly date sensitive functions with respect
to certain dates prior to and after December 31, 1999), including costs of
remediation, will not result in or have a Material Adverse Effect. The Credit
Parties are currently developing contingency plans to ensure uninterrupted and
unimpaired business operation in the event of failure of their own or a third
party's systems or equipment due to the Year 2000 problem, including those of
vendors and suppliers.
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
Each of the Credit Parties covenants to the Administrative Agent and
each Lender that, so long as any of the Obligations remain outstanding or this
Agreement is in effect:
<PAGE>
9.1 Taxes and Other Obligations.
The Parent shall, and shall cause each of its Subsidiaries to, (a) file
when due all tax returns and other reports which it is required to file; (b)
pay, or provide for the payment, when due, of all taxes, fees, assessments and
other governmental charges against it or upon its property, income and
franchises, make all required withholding and other tax deposits, and establish
adequate reserves in accordance with GAAP for the payment of all such items, and
provide to the Administrative Agent and the Lenders, upon request, satisfactory
evidence of its timely compliance with the foregoing; and (c) pay when due all
Debt owed by it and all claims of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons, and all other indebtedness owed
by it and trade payables and rent payable under leases of real property and
perform and discharge in a timely manner all other material obligations
undertaken by it; provided, however, neither the Parent nor any of its
Subsidiaries need pay any tax, fee, assessment, or governmental charge, if, in
each case, (i) it is contesting the validity or amount thereof in good faith by
appropriate proceedings diligently pursued, (ii) the Parent or its Subsidiary,
as the case may be, has established proper reserves for as provided in GAAP, and
(iii) Liens securing an aggregate amount of $3,000,000 or more and arising from
the non-payment thereof when due have not attached to any Collateral in a manner
which could have priority over the Lien of the Administrative Agent thereon and
there is no imminent risk of the sale of or foreclosure on any property or
assets of any Credit Party by the holder of any Liens arising from the
non-payment thereof when due. Each Credit Party shall, and shall cause each of
its Subsidiaries to remit when due, all sales, use or like taxes collected by
such Credit Party or Subsidiary to the appropriate governmental authority.
9.2 Corporate Existence and Good Standing.
The Parent shall, and shall cause each of its Subsidiaries to, maintain
its corporate or partnership existence (except as otherwise permitted under
Section 9.9) and its qualification and good standing in all jurisdictions in
which the failure to maintain such qualification or good standing could
reasonably be expected to have a Material Adverse Effect.
9.3 Compliance with Law; Maintenance of Licenses; Performance of
Agreements.
(a) The Parent shall comply, and shall cause each of its Subsidiaries to comply,
with all Requirements of Law of any Governmental Authority having jurisdiction
over it or its business, the failure to comply with which could reasonably be
expected to have a Material Adverse Effect. The Parent shall, and shall cause
each of its Subsidiaries to, obtain and maintain all licenses, permits,
franchises, and governmental authorizations determined by the Parent or its
Subsidiary, in their respective good faith reasonable business judgment, to be
material to the ownership of its property and to the conduct of its business as
conducted on the Closing Date. The Parent shall not, and shall not permit any of
its Subsidiaries to, modify, amend or alter its charter or by-laws other than in
a manner which does not adversely affect the rights of the Lenders or the
Administrative Agent.
(b) Each Credit Party shall, and shall cause each of its Subsidiaries to,
perform, within all required time periods (after giving effect to any applicable
grace periods), all of its obligations and enforce all of its rights under each
agreement to which it is a party, including, without limitation, any leases to
which any such Credit Party is a party, where the failure to so perform and
enforce could reasonably be expected to have a Material Adverse Effect. No
Credit Party shall, or shall suffer or permit any of its Subsidiaries to, enter
into, or terminate or modify in any manner adverse to any such Person, any
agreement if the effect thereof could reasonably be expected to have a Material
Adverse Effect.
9.4 Maintenance of Property.
The Parent shall, and shall cause each of its Subsidiaries to, maintain
all of its property necessary and useful in the conduct of its business, in good
operating condition and repair, ordinary wear and tear excepted.
<PAGE>
9.5 Insurance.
(a) Schedule 9.5 lists all insurance of any nature maintained by the Parent and
its Subsidiaries (other than any insurance plans described in Schedule 8.20).
The Credit Parties shall, at their sole cost and expense, maintain "All Risk"
physical damage insurance on all real and personal property of the Credit
Parties including, but not limited to, fire and extended coverage, boiler and
machinery coverage, coverage as to flood, theft, explosion, collapse, and all
other hazards and risks ordinarily insured against by owners or users of such
properties in similar businesses. All policies of insurance on such real and
personal property as well as all other insurance required under this Section 9.5
shall be in form acceptable to the Administrative Agent and shall be provided by
recognized insurers reasonably acceptable to the Administrative Agent. All
insurance on such real and personal property shall contain an endorsement, in
form and substance reasonably acceptable to the Administrative Agent, showing
the Administrative Agent as loss payee, additional insured and/or mortgagee as
its interests may appear. Such endorsement, or an independent instrument
furnished to the Administrative Agent, shall provide that the insurance
companies name the Administrative Agent as an additional insured (to the extent
of any liability coverage contained therein) and give the Administrative Agent
at least thirty (30) (or, in the case of nonpayment of premium, ten (10)) days'
prior written notice of any cancellation, or material decrease in amount of, or
other material change in, coverage provided by or cancellation of such policy or
policies of insurance, and that no act, omission or default of the Parent or any
of its Subsidiaries or any other Person shall affect the right of the
Administrative Agent or any Lender to recover under such policy or policies of
insurance in case of loss or damages.
(b) The Credit Parties shall, at their sole cost and expense, maintain
comprehensive general liability insurance (with insurers and on terms
(including, without limitation, types of coverage, policy limits and deductible
amounts) not materially different from the terms of the insurance maintained by
the Credit Parties on the Closing Date) covering themselves and their
Subsidiaries on an "occurrence basis" (unless such insurance cannot be
reasonably obtained at commercially reasonable rates, in which case such
insurance shall be on a "claims made" basis) against claims for personal injury,
bodily injury and property damage with a minimum limit of $1,000,000 per
occurrence with excess coverage under umbrella liability insurance policies with
a minimum limit of $100,000,000 per occurrence and $100,000,000 in the
aggregate. Such coverage shall include but not be limited to
premises/operations, broad form contractual liability, underground, explosion
and collapse hazard, independent contractors, broad form property coverage,
products and completed operations liability.
(c) The Credit Parties shall, at their sole cost and expense, maintain workers'
compensation insurance covering themselves and their Subsidiaries including
employer's liability in the minimum amount required by applicable law.
<PAGE>
(d) The Credit Parties shall, at their sole cost and expense, maintain
automobile liability insurance covering themselves and their Subsidiaries for
all owned, non-owned or hired automobiles against claims for personal injury,
bodily injury and property damage with a minimum combined single limit of
$1,000,000 per occurrence with excess coverage under umbrella liability
insurance policies with a minimum limit of $100,000,000 per occurrence and
$100,000,000 in the aggregate.
(e) The Credit Parties shall, at their sole cost and expense, maintain business
interruption insurance covering themselves and their Subsidiaries with the
policy limits not less than those as in effect immediately prior to the Closing
Date. All such policies shall contain an endorsement in form and substance
acceptable to the Administrative Agent showing loss payable to the
Administrative Agent as its interest appears, and all such policies shall be
collaterally assigned to the Administrative Agent for the benefit of the
Administrative Agent and the ratable benefit of the Lenders pursuant to one or
more assignment agreements acceptable in form and substance to the
Administrative Agent.
<PAGE>
(f) All policies of liability insurance required to be maintained under this
Agreement shall name the Administrative Agent and shall cover each Lender as an
additional insured as its interests may appear, contain a requirement for thirty
(30) (or, in the case of nonpayment of premium, ten (10)) day notice of any
cancellation, or material decrease in amount of, or other material change in,
coverage provided by or cancellation of such policy or policies of insurance,
and be in form and with insurers recognized as adequate by the Administrative
Agent and, except as required hereby, all such policies shall be in such amounts
as may be reasonably satisfactory to the Administrative Agent. Each Credit Party
shall deliver to the Administrative Agent a copy of each policy of insurance
and, at the Administrative Agent's request, evidence of payment of all premiums
when and as due and of compliance with all provisions of this Agreement. In
addition, each Credit Party shall notify the Administrative Agent promptly of
any occurrence (it being understood that a general decline in the real estate
market shall not constitute such an occurrence) causing a material loss or
decline in value of any real or personal property and the estimated (or actual,
if available) amount of such loss or decline. Each Credit Party each irrevocably
makes, constitutes and appoints the Administrative Agent (and all officers,
employees or agents designated by the Administrative Agent) as the and lawful
attorney (and agent-in-fact), acting at any time after the occurrence and during
the continuance of an Event of Default, for the purpose of making, settling and
adjusting claims under such policies of insurance, endorsing the name of such
Credit Party on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance, and for making all determinations and
decisions with respect to such policies of insurance. In the event any Credit
Party thereof at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above or to pay any premium in whole
or in part relating thereto, the Administrative Agent, without waiving or
releasing any obligations or default of any Person hereunder, may at any time or
times thereafter (but shall not be obligated to) obtain and maintain such
policies of insurance and pay such premium and take any other action with
respect thereto which the Administrative Agent deems advisable. All sums so
incurred by the Administrative Agent, including reasonable attorneys' fees,
allocated costs and expenses of in-house counsel, court costs, expenses and
other charges relating thereto, shall be payable, on demand, by the Parent or
any of its Subsidiaries to the Administrative Agent and shall be additional
Obligations hereunder secured by the Collateral.
(g) The Administrative Agent reserves the right at any time, upon a material
change of the Parent's or any of its Subsidiaries' risk profile, to require
additional forms and limits of insurance which, in the Administrative Agent's
reasonable opinion, will adequately protect any rights and interests of the
Administrative Agent or any Lender in or to the Collateral, the Obligations or
any Loan Documents.
(h) All insurance policy minimum amounts set forth in this Section 9.5 are
subject to the continuing availability of such insurance at commercially
reasonable rates, and to the extent such policy minimum amounts are not so
available, the Credit Parties shall obtain policies with the maximum amounts of
coverage then available at commercially reasonable rates.
9.6 Leases; New Real Estate
Upon the request of the Administrative Agent or any Lender, each Credit
Party shall provide, and shall cause each of its Subsidiaries to provide, the
Administrative Agent with copies of all leases of real property or similar
agreements (and all amendments thereto) to which such Credit Party or such
Subsidiary is a party, whether as lessor or lessee. Each Credit Party shall
comply and shall cause each of its Subsidiaries to comply in all material
respects with all of its and their obligations under all Leases now existing or
hereafter entered into by it or them with respect to real property including,
without limitation, the Master Sublease and all leases listed on Schedule 8.11.
Each Credit Party shall, and shall cause each of its Subsidiaries to, (i)
provide the Administrative Agent with a copy of each notice of any payment
default or other material default received by such Credit Party or such
Subsidiary under any such lease immediately upon receipt of any such notice,
which default, in either case, could reasonably be expected to result in the
termination of such lease or could reasonably be expected to have a Material
Adverse Effect; and (ii) notify the Administrative Agent promptly (or within the
stated time period otherwise expressly required by the terms of this Agreement
or any Security Document) after it opens any new Facility.
9.7 Environmental Laws.
(a) Each Credit Party shall and shall cause each of its Subsidiaries to (i)
comply in all material respects with the Environmental Laws applicable to it.
<PAGE>
(b) Each Credit Party shall fully and promptly pay, discharge, defend, indemnify
and hold harmless each Indemnified Person from and against any action, claim,
loss, liability, damage, cost, deficiency, fine, penalty or expense (including,
without limitation, reasonable attorneys' fees, disbursements, investigation,
removal, cleanup and remedial costs and reasonable modification costs incurred
to permit continued or resumed normal operation of the Facilities) suffered or
incurred by such Indemnified Person, whether as mortgagee pursuant to any
Amended Mortgage, as mortgagee in possession, or as successor in interest to
such Credit Party or any of its Subsidiaries as owner, operator or lessee of any
Facilities by virtue of foreclosure or acceptance in lieu of foreclosure or
otherwise: (i) under or on account of the Environmental Laws as they may apply
to any Credit Party, any of its Subsidiaries or the Facilities, including the
assertion of any Lien thereunder; and (ii) with respect to any Environmental
Claim, Release or Contaminant affecting such Facilities, whether or not the same
originates or emanates from such Facilities or any contiguous real estate,
including any loss of value of such Facilities as a result of a Release of any
Contaminant. The foregoing indemnity shall survive the expiration or earlier
termination of this Agreement and the satisfaction of the Obligations under the
Loan Documents. Further, the foregoing indemnity shall not be available with
respect to matters arising solely out of an act of an Indemnified Person
involving a release of Contaminant at, on, in or under an affected Facility by
such Indemnified Person, or out of the gross negligence or willful misconduct of
an Indemnified Person. The indemnification rights provided by this Section 9.7
shall constitute the sole indemnity available to Indemnified Parties with
respect to the matters addressed under this Section.
<PAGE>
(c) The Administrative Agent and each Lender agree that in the event any
investigation, litigation or proceeding is asserted or threatened in writing or
instituted against it or any Indemnified Person, or any Remedial Action is
requested of it or any Indemnified Person, for which indemnity is available
under Section 9.7(b) hereof and the Administrative Agent or any Lender may
desire indemnity or defense hereunder, the Administrative Agent or such Lender
shall promptly notify the Credit Parties in writing, setting forth a description
of those elements of which it has knowledge, but any failure to so notify the
Credit Parties shall not relieve the Credit Parties of any of their obligations
hereunder, except to the extent such failure materially interferes with the
ability of the Credit Parties to defend the investigation, litigation,
proceeding or requested Remedial Action. The Credit Parties at the request of
the Administrative Agent or any Lender shall have the obligation to defend
against such investigation, litigation or proceeding or requested Remedial
Action, and the Credit Parties in any event may participate in the defense or
settlement thereof with legal counsel of its choice; provided, however, that the
Credit Parties shall not be entitled to control the defense described above. The
Administrative Agent or such Lender shall have the right to participate in such
defense, at such party's expense, with legal counsel of its choice, and shall
cooperate with the Credit Parties in the conduct of such defense, provided, that
so long as no Event of Default is continuing, no Indemnified Person shall settle
any such investigation, litigation or proceeding or requested Remedial Action
without the consent of the Credit Parties, which consent shall not be
unreasonably withheld or delayed. No action taken by legal counsel chosen by the
Administrative Agent or any Lender in defending against any such investigation,
litigation or proceeding or requested Remedial Action shall vitiate or impair
the obligation of the Credit Parties and duty hereunder to indemnify and hold
harmless the Indemnified Parties. Any and all amounts payable by the Credit
Parties (or any of them) as indemnification under this Section 9.7(c), together
with interest thereon at the interest rate set forth in Section 3.1(a)(i) (and,
if applicable, Section 3.1(b)), shall be due and payable upon receipt of written
notice to the Credit Parties and, until paid, shall be added to the Obligations.
(d) In the event of any Adverse Environmental Condition affecting any
Facilities, whether or not the same originates or emanates from such Facilities
or any contiguous real estate, and if any Credit Party or any Subsidiary thereof
shall fail to remedy such condition in a manner that complies in all respects
with any of the material requirements of the applicable Environmental Laws, or,
in the case of a leasehold, if required to do so under the applicable lease, the
Administrative Agent (at the direction of the Majority Lenders) may, but shall
not be obligated to, cause such work to be performed or take actions reasonably
necessary to remedy such Adverse Environmental Condition or cure such failure to
comply after providing Written Notice to the Credit Parties of an intent to do
so, allowing a reasonable time after receipt of such notice for the Credit
Parties to cure such failure and in no event less than 60 days; provided,
however, that such work or action shall not interfere unreasonably with such
Credit Party or Subsidiary. Any amounts paid by the Administrative Agent as a
result thereof, together with interest thereon at the interest rate set forth in
Section 3.1(a)(i) (and, if applicable, Section 3.1(b)), shall be immediately due
and payable by the Credit Parties and, until paid, shall be added to the
Obligations. Nothing in this Agreement shall be construed as limiting or
impeding the rights or obligations of any of the Credit Parties to take any and
all actions necessary or desirable to remedy any Adverse Environmental
Condition. Any partial exercise by the Administrative Agent of the remedies
hereinabove set forth or any partial undertaking on the part of the
Administrative Agent to cure any Credit Party's failure or the failure of any
Subsidiary thereof to comply with the Environmental Laws, shall not obligate the
Administrative Agent to complete the actions taken or require the Administrative
Agent to expend further sums to cure noncompliance by any Credit Party or any
Subsidiary thereof; neither shall the exercise of any such remedy operate to
place upon the Administrative Agent or any Lender any additional responsibility
for the operation, control, care, management or repair of the Facilities or make
the Administrative Agent or any Lender the "owner" or "operator" of the
Facilities or "owner" or "generator" of Contaminants within the meaning of the
Environmental Laws.
<PAGE>
(e) If an Event of Default occurs as the result of any Adverse Environmental
Condition or Environmental Claim, the Administrative Agent (at its option or at
the direction of the Majority Lenders) in the reasonable exercise of its
discretion and with reasonable notice under the circumstances, may at any time,
and at the sole cost and expense of the Credit Parties (which shall be added to
the Obligations), take such actions and incur such expenses as are reasonably
necessary to investigate the condition or claim involved, including without
limitation, to cause one or more environmental assessments of the Facilities to
be undertaken. Environmental assessments may include a detailed visual
inspection of the Facilities, including, without limiting the generality of the
foregoing, all storage areas, storage tanks, drains, dry wells, and leaching
areas, as well as the taking of soil samples, surface water samples, and ground
water samples, and such other investigation or analysis as is reasonably
necessary or appropriate for a complete assessment of the compliance of the
Facilities and the use and operation thereof with all Environmental Laws;
provided, however, any such inspection and sampling shall be performed by a
qualified, and if necessary licensed, environmental consultant, retained by
Agent; and provided further that no such inspection and sampling shall take
place on any real property leased to any Credit Party or any of its Subsidiaries
that requires the consent of the landlord for such inspection and sampling
without first obtaining such consent (each Credit Party agreeing to use
commercially reasonable efforts to obtain such consent); provided, however, that
such inspection shall not interfere unreasonably with the business operations of
such Credit Party or Subsidiary. The Credit Parties shall be given the
opportunity to review and comment upon the scope of work and work plan developed
by the consultant for the environmental assessment prior to such assessment;
provided that such review and comments shall not be unreasonably withheld or
delayed. The Administrative Agent shall give the Credit Parties ten (10)
Business Days' advance notice that the consultant intends to enter the
Facilities for the purpose of conducting an environmental assessment. A
representative of the Credit Parties shall have the right to accompany the
consultant as the consultant performs any portion of the environmental
assessment, provided such representative is reasonably available, and the
consultant shall provide split samples to the representative of the Credit
Parties upon request. The consultant shall take all reasonable measures to
restore the property to the condition in which the property was found prior to
the environmental assessment.
<PAGE>
The Administrative Agent promptly shall provide the Borrowers with a
copy of any reports (including draft reports) and analytical data prepared or
gathered by the consultant relating to the environmental assessment of the
Facilities; provided, however, that with respect to any such reports and other
data provided by the Administrative Agent to the Borrowers: (i) the
Administrative Agent makes no representation or warranty as to the accuracy
thereof, and shall not be liable for any information or lack of information
(including, without limitation, errors or omissions) contained therein; (ii) the
Borrowers expressly disclaim any reliance upon (A) any information contained
therein or (B) the Administrative Agent's selection of any consultant(s)
preparing such reports; and (iii) without limiting the generality of any other
indemnification provision contained in this Section 9.7, the Borrowers agree to
pay and protect, and defend, indemnify and hold the Administrative harmless from
and against, any claims, damages, actions, suits, proceedings, costs, expenses
and other amounts (including, without limitation, the reasonable fees, costs and
expenses of the Administrative Agent's outside and in-house counsel) incurred by
the Administrative Agent as a result of the any Credit Party's or any other
party's reliance upon any information contained therein or the selection of the
consultant(s) preparing such reports.
(f) Each Credit Party shall, and shall cause each of its Subsidiaries to,
without regard to whether any such Person is in default, and at such party's
sole cost and expense, cause one or more "phase I" environmental assessments to
be undertaken by an environmental consultant satisfactory to the Administrative
Agent (and in any event, in form and substance sufficient to entitle the
Administrative Agent and the Lenders to an exemption under any applicable state
or federal law for lenders or financial institutions holding a lien or security
interest) before any such party shall (i) enter into a contract for the purchase
of any real property or (ii) enter into any lease with a term in excess of one
year; provided, however, that no such "phase I" environmental assessments shall
be required prior to entry into a lease of real property to be used solely for
retail or office purposes. If any such "phase I" environmental assessment shall
identify any Adverse Environmental Condition or Environmental Claim with respect
to such real property, such party shall refrain from entering into such contract
or lease, as the case may be, unless such party shall ensure to the satisfaction
of the Administrative Agent that such further Remedial Action as any Lender may
reasonably request is undertaken at the sole expense of such party or a third
party.
9.8 Compliance with ERISA.
(a) Each Credit Party shall pay and discharge, and shall cause each ERISA
Affiliate to pay and discharge, when due (including any permissible extensions)
any liability imposed upon it pursuant to the provisions of Title IV of ERISA.
(b) Each Credit Party shall deliver to the Administrative Agent promptly, and in
any event within ten (10) days, after
(i) such party knows, or has reason to know, of the occurrence of any
Reportable Event (as defined in Section 4043 of ERISA) with respect to any
Pension Benefit Plan ("Reportable Event"), a copy of the materials that are
filed by the applicable plan administrator with the PBGC, or the materials that
would have been filed if the PBGC had not waived the notice requirements;
(ii) the receipt of notice by such Credit Party or any ERISA Affiliate
or any administrator of any Pension Benefit Plan who is an employee of such
Credit Party or any ERISA Affiliate from the PBGC of the PBGC's intention to
terminate any such Pension Benefit Plan or to appoint a trustee to administer
any such Pension Benefit Plan, a copy of such notice;
<PAGE>
(iii) the filing thereof with the Internal Revenue Service, copies of
each annual report that is filed on Treasury Form 5500 with respect to any
Pension Benefit Plan, together with any actuarial statements on Schedule B to
such Form 5500;
(iv) such Credit Party or any ERISA Affiliate or any administrator of
any Pension Benefit Plan who is an employee of such Credit Party, or any ERISA
Affiliate files with participants, beneficiaries or the PBGC a notice of intent
to terminate any Pension Benefit Plan, a copy of any such notice;
(v) such Credit Party or any ERISA Affiliate knows or has reason to
know of any event or condition which might constitute grounds under the
provisions of Section 4042 of ERISA for the termination of (or the appointment
of a trustee to administer) any Pension Benefit Plan, an explanation of such
event or condition;
(vi) an application has been made to the Secretary of the Treasury for
a waiver of the minimum funding standard under the provisions of Section 412 of
the Code with respect to any Pension Benefit Plan, a copy of such application;
(vii) the receipt by such Credit Party or any ERISA Affiliate of an
assessment of withdrawal liability under Section 4201 of ERISA from a
Multiemployer Plan, a copy of such assessment;
(viii) the receipt by such Credit Party or ERISA Affiliate that any
Multiemployer Plan is in reorganization, is insolvent or has been terminated, a
copy of such notice or notice of the amount of a liability incurred or that may
be incurred by any Credit Party or ERISA Affiliate in connection with any event
described in the foregoing clause (vii) or this clause (viii); and
in each case described above, together with a statement signed by an appropriate
officer of such Credit Party or ERISA Affiliate setting forth details as to such
Reportable Event, filing, notice, event or condition, assessment or application
and the action that will be taken with respect thereto.
<PAGE>
9.9 Mergers, Consolidations or Sales.
Neither the Parent nor any of its Subsidiaries shall enter into any
transaction of merger, reorganization, or consolidation, or transfer, sell,
assign, lease, or otherwise dispose of all or any part of its property, or wind
up, liquidate or dissolve, or agree to do any of the foregoing, except (i) for
sales of Inventory in the ordinary course of its business and (ii) if at the
time thereof and immediately after giving effect thereto no Event of Default or
Default shall have occurred and be continuing: (a) sales for fair consideration
of assets (other than Inventory or Real Estate) in the ordinary course of
business that constitute (1) worn out or obsolete personal property of such
Credit Party or any Subsidiary thereof or (2) properties of any Credit Party or
any Subsidiary thereof no longer necessary for the proper conduct of their
respective businesses, having a value in the case of (1) and (2) taken together,
together with the value of all other such property of the Credit Parties and
their respective Subsidiaries so sold in the same Fiscal Year, of not greater
than $5,000,000; (b) sales for fair consideration of properties (other than
Facilities that are distribution centers and other than Inventory held for sale
outside the ordinary course of business) owned or leased by any Credit Party or
any Subsidiary thereof; provided, that the aggregate value (based on the greater
of cost and fair market value) of all properties permitted to be sold pursuant
to this clause (b) shall not exceed, together with assets sold under clause (c)
below, $20,000,000 during the term of this Agreement; (c) sales of assets set
forth in Schedule 9.9; (d) the merger of a wholly-owned Subsidiary of any Credit
Party (other than any Subsidiary that is a Borrower) with such Credit Party (so
long as such Credit Party is the sole survivor of such merger) or with another
wholly-owned Subsidiary of such Credit Party (other than any Subsidiary that is
a Borrower); (e) subject to compliance with Section 9.33, the Hills Merger; (f)
the Parent may make a capital contribution of all of the capital stock of a
Borrower to another wholly-owned Subsidiary of the Parent (and in connection
therewith, the Parent shall execute and deliver to the Administrative Agent such
amendments, updated schedules, stock certificates and other documents as the
Administrative Agent shall reasonably request in connection therewith); and (g)
store closures and sales of leaseholds for such closed stores not to exceed 23
locations (including both "Hills" stores and "Ames" stores) in connection with
the acquisition transaction contemplated by the Hills Merger Agreement.
<PAGE>
9.10 Restricted Investments; Capital Change; Distributions.
Neither the Parent nor any of its Subsidiaries shall (i) make any
change in its capital structure which could have a Material Adverse Effect, (ii)
make any Restricted Investment or (iii) directly or indirectly declare or make,
or incur any liability to make, any Distribution, except (a) any Subsidiary of a
Borrower or the Parent may declare and pay dividends or make other distributions
to such Borrower or the Parent; (b) the Parent may make required payments in
respect of stock appreciation rights which were outstanding on the Closing Date
and additional stock appreciation rights in respect of up to 100,000 shares of
its common stock; (c) for the making (and repayment) of intercompany advances
between and among (x) wholly-owned Subsidiaries of the Parent (other than HSC)
and/or (y) the Parent and its wholly-owned Subsidiaries (other than HSC) and/or
(z) the Borrowers; (d) for the making (and repayment) of intercompany advances
by Ames Merchandising and/or Ames FS to HSC on or after the Closing Date in
order to finance payment by HSC of the cash portion of the consideration payable
in connection with the Offer and the Note Tender Offer and reasonable fees and
expenses incurred in connection with consummation of the Offer, Note Tender
Offer and the Hills Merger; (e) amounts payable under the Master Sublease may be
made; and (f) payments by any Credit Party which is not a Borrower may be made
to the Parent or a Borrower. In addition, the Parent may repurchase shares of
its publicly traded common stock at market prices in one or more transactions;
provided, however, that the aggregate repurchase price of the shares does not
exceed $2,500,000 (or $25,000,000 in the event that the Maximum Revolver Amount
is permanently reduced by at least $150,000,000 in accordance with the terms and
conditions of this Agreement contemporaneously with the consummation by the
Parent of a public offering of equity or unsecured debt securities on terms and
conditions acceptable in all respects to the Administrative Agent and the
Majority Lenders).
9.11 Transactions Affecting Collateral or Obligations.
Neither the Parent nor any of its Subsidiaries shall enter into any
transaction which could be reasonably expected to have a Material Adverse
Effect.
9.12 Guaranties.
Neither the Parent nor any of its Subsidiaries shall make, issue, or
become liable on any Guaranty, except (i) Guaranties of the Obligations in favor
of the Administrative Agent and (ii) Guaranties by any Credit Party (other than
a Borrower) of Debt of any other Credit Party, but only to the extent such Debt
is permitted by Section 9.13(k).
9.13 Debt.
Neither the Parent nor any of its Subsidiaries shall incur, maintain
or guarantee any Debt, other than:
(a) the Obligations;
(b) trade payables and contractual obligations to suppliers and
customers incurred in the ordinary course of business;
(c) Debt For Borrowed Money outstanding on the Closing Date and listed
on Schedule 9.13, but not any increase in or refinancings, extensions, renewals,
exchanges or replacements of such Debt;
(d) intercompany Debt described in clauses (c), (d) and (e) of Section
9.10;
(e) [reserved];
(f) Debt under or in respect of Rate Protection Agreements;
(g) [reserved];
(h) Debt secured by Liens described in clause (b), (c) or (d) of the
definition of Permitted Liens, subject to the limitations set forth therein;
(i) Debt incurred in connection with any Permitted Reduction;
(j) [reserved]; and
<PAGE>
(k) Guaranties by any Credit Party (other than any Borrower) of Debt of
any other Credit Party, but only to the extent that such Debt is permitted under
any other clause of this Section 9.13.
9.14 Redemptions and Other Payments.
Neither the Parent nor any of its Subsidiaries shall make any payment
or prepayment of principal or interest on account of, or purchase, defease,
acquire or redeem, any Debt For Borrowed Money (or give any notice thereof or
establish a sinking fund, reserve or like set aside of funds or other property
therefor), except (i) the prepayment of Obligations in accordance with the terms
of this Agreement, (ii) payments (other than (x) prepayments, except to the
extent that Net Cash Proceeds with respect to any asset sales permitted by
Section 9.9 are available therefor, (y) prepayments in connection with the
termination in the ordinary course of business of any real or personal property
leases listed on Schedule 9.13 of Debt of any Credit Party permitted under
clause (b), (d), (g), (h) or (i) of Section 9.13, in each case, to the extent
due and payable) and (iii) regularly scheduled payments of Debt of any Credit
Party permitted under clause (c) of Section 9.13, in each case to the extent due
and payable and permitted to be paid by the terms thereof.
9.15 Transactions with Affiliates.
Except as set forth below, neither the Parent nor any of its
Subsidiaries shall sell, transfer, distribute, or pay any money or property,
including, but not limited to, any fees or expenses of any nature (including,
but not limited to, any fees or expenses for management services), to any
Affiliate, or lend or advance money or property to any Affiliate, or invest in
(by capital contribution or otherwise) or purchase or repurchase any stock or
indebtedness, or any property, of any Affiliate, or become liable on any
Guaranty of the indebtedness, dividends, or other obligations of any Affiliate.
Notwithstanding the foregoing, so long as no Default or Event of Default shall
have occurred and be continuing, the Parent and its Subsidiaries may enter into
transactions and agreements with Affiliates in the ordinary course of business,
in amounts and upon terms fully disclosed to the Administrative Agent and the
Lenders, and no less favorable to the Parent and its Subsidiaries than would be
obtained in a comparable arm's-length transaction with a third party that is not
an Affiliate. Notwithstanding the foregoing, the Parent and its Subsidiaries may
engage in transactions that are not prohibited to occur under the other
provisions of this Agreement, but neither the Parent nor any of its Subsidiaries
may engage in any transactions permitted under this Section 9.15 unless such
transaction is also permitted by the other provisions of this Agreement.
<PAGE>
9.16 Investment Banking and Finder's Fees.
Neither the Parent nor any of its Subsidiaries shall pay or agree to
pay, or reimburse any other party with respect to, any investment banking or
similar or related fee, underwriter's fee, finder's fee, or broker's fee to any
Person in connection with this Agreement. The Credit Parties shall defend and
indemnify the Administrative Agent and the Lenders against and hold them
harmless from all claims of any Person that the Parent or any of its
Subsidiaries is obligated to pay for any such fees, and all costs and expenses
(including without limitation, attorneys' fees) incurred by the Administrative
Agent and/or any Lender in connection therewith.
9.17 Management Compensation.
Neither the Parent nor any of its Subsidiaries shall, directly or
indirectly, pay any compensation in any form (including, without limitation,
salary, bonuses, commissions, fees, and incentive compensation) to employees of
the Parent or any Subsidiary thereof, other than (i) in the ordinary course of
business and consistent with the historical practices of the Parent or such
Subsidiary; (ii) payments to employees pursuant to severance arrangements
existing on the Closing Date; and (iii) payments to the extent permitted by
Section 9.10(b).
9.18 Business Conducted.
The Parent shall not and shall not permit any of its Subsidiaries to
engage, directly or indirectly, in any line of business other than the
businesses in which the Parent or such Subsidiary is engaged on the Closing
Date.
9.19 Liens.
Neither the Parent nor any of its Subsidiaries shall create, incur,
assume, or permit to exist any Lien on any property now owned or hereafter
acquired by any of them, except Permitted Liens.
9.20 Sale and Leaseback Transactions.
Neither the Parent nor any of its Subsidiaries shall, directly or
indirectly, enter into any arrangement with any Person providing for the Parent
or such Subsidiary to lease or rent property that the Parent or such Subsidiary
has sold or will sell or otherwise transfer to such Person.
9.21 New Subsidiaries.
The Parent shall not, directly or indirectly, organize, create, acquire
or permit to exist any Subsidiary other than those listed on Schedule 8.5.
9.22 Fiscal Year.
The Parent shall not change, and shall not permit any of its
Subsidiaries to change, its Fiscal Year.
9.23 [Reserved].
9.24 [Reserved].
9.25 Minimum EBITDA.
The Parent shall not permit EBITDA for its fiscal quarter ending April,
2000 to be less than ($35,000,000).
9.26 Fixed Charge Coverage Ratio.
The Parent shall maintain a Fixed Charge Coverage Ratio of not less
than (a) .30:1.00 for the two fiscal quarter period ending July, 2000, (b)
.50:1.00 for the three fiscal quarter period ending October, 2000 and (c)
1.00:1.00 for the four fiscal quarter period ending January, 2001 and for each
four fiscal quarter period thereafter.
<PAGE>
9.27 Minimum Combined Availability.
The Credit Parties shall not suffer or permit the Combined Availability
to be less than (i) $200,000,000 on the Closing Date immediately after giving
effect to the initial Loans made hereunder and consummation of the Offer and the
Note Tender Offer or (ii) $100,000,000 at any time thereafter.
9.28 Use of Proceeds.
The Parent shall not, and shall not suffer or permit any Subsidiary to,
use any portion of the Loan proceeds, directly or indirectly, other than as
described in Section 8.23.
9.29 Modification of Material Contracts.
(a) Neither the Parent nor any Credit Party shall directly or indirectly, amend,
modify, supplement, waive compliance with, seek a waiver under, or assent to
noncompliance with, any material term (which, in the case of any debt agreement
shall include, without limitation, all payment terms and the timing thereof),
provision or condition of any Material Contract, or the articles or certificate
of incorporation or by-laws or partnership agreement of any Credit Party or any
Subsidiary thereof or any certificate of designation of preferred stock of any
thereof or suffer or permit any of the foregoing to lapse or terminate.
(b) Neither the Parent nor any Credit Party shall directly or indirectly, amend,
modify, supplement, waive compliance with, seek a waiver under, or assent to
noncompliance with, any material term or provision of any other agreement,
instrument or document to which any Credit Party or any Subsidiary thereof is a
party in a manner that could reasonably be expected to have a Material Adverse
Effect.
9.30 No Negative Pledges.
After the Closing Date, neither the Parent nor any Credit Party shall
enter into or be subject to, directly or indirectly, including, without
limitation, as a non-party Subsidiary of a party to any agreement, any agreement
(including, without limitation, any agreement existing on the date of this
Agreement) prohibiting or restricting, in any manner (including, without
limitation, by way of covenant, representation or event of default), (i) the
incurrence, creation or assumption of any Debt, or any Lien upon any property of
any Credit Party, except restrictions in a Capital Lease or other purchase money
financing agreement permitted hereunder relating to the asset financed
thereunder, (ii) the sale, disposition or pledge of any asset of any Credit
Party, except restrictions in a Capital Lease or other purchase money financing
agreement permitted hereunder relating to the asset financed thereunder, (iii)
any Capital Expenditures by any Credit Party or (iv) any amendment or supplement
to or waiver under this Agreement or any other Loan Document or other document
relating to the Obligations.
<PAGE>
9.31 Supplemental Disclosure.
From time to time as may be necessary (in the event that such
information is not otherwise delivered by the Borrowers to the Administrative
Agent and the Lenders pursuant to this Agreement), the Borrowers will promptly
supplement or amend each Schedule or representation attached or contained herein
or in any other Loan Document with respect to any matter hereafter arising
which, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described in such Schedule or as an exception to
such representation or which is necessary to correct any information in such
Schedule or representation which has been rendered inaccurate thereby in any
material respect. No such supplement or amendment shall cure any Default arising
from any misrepresentation being corrected, unless such supplement or amendment
has been approved by the Majority Lenders.
9.32 Further Assurances.
The Credit Parties shall execute and deliver, or cause to be executed
and delivered, to the Administrative Agent and/or the Lenders such documents and
agreements, and shall take or cause to be taken such actions, as the
Administrative Agent or any Lender may, from time to time, request to carry out
the terms and conditions of this Agreement and the other Loan Documents.
9.33 Hills Merger.
(a) On or prior to May 31, 1999, the Hills Merger shall be consummated in
accordance with the Hills Merger Agreement and in compliance in all respects
with the articles of incorporation and bylaws of HSC and Hills and all
applicable laws and regulations of the United States of America, any state
thereof and any subdivision of any such state, including, without limitation,
federal and state securities laws and blue sky laws and the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended. All requisite consents, filings
and approvals required by applicable law or the articles of incorporation or
bylaws of HSC or Hills in connection with the Hills Merger shall have been
obtained prior to consummation thereof.
(b) Without limiting the provisions of Sections 9.31 and 9.32, on the earlier of
May 31, 1999 and the date that the Hills Merger is consummated (and after giving
effect thereto), the Credit Parties shall confirm to the satisfaction of the
Administrative Agent that after giving effect to the Hills Merger each
representation or warranty made or deemed made by any Credit Party in this
Agreement or by any Credit Party in any of the other Loan Documents is true and
correct in all material respects as of such date and no Default or Event of
Default has occurred and is continuing.
(c) On or prior to the date that the Hills Merger is consummated, the
Administrative Agent shall have received copies of each of the Hills Merger
Documents certified by a Responsible Officer of the Parent to be true and
complete, and shall have determined same to be in form and substance
satisfactory. In addition, the Credit Parties shall deliver to the
Administrative Agent such legal opinions, certificates and copies of
governmental filings and consents as and when the Administrative Agent shall
reasonably request with respect to the matters referred to in this Section 9.33.
<PAGE>
ARTICLE 10
CONDITIONS OF LENDING
10.1 Conditions Precedent to Making of Loans on the Closing Date
The obligation of the Lenders to make the initial Loans on the Closing
Date, and the obligation of the Administrative Agent to cause to be issued or
provide Credit Support for any Letter of Credit on the Closing Date and the
obligation of the Lenders to participate in Letters of Credit issued on the
Closing Date or in Credit Support for any Letters of Credit, are subject to the
following conditions precedent having been satisfied in a manner satisfactory to
the Administrative Agent and each Lender:
(a) This Agreement and the other Loan Documents have been executed by each party
thereto and the Credit Parties shall have performed and complied with all
covenants, agreements and conditions contained herein and the other Loan
Documents which are required to be performed or complied with by the Credit
Parties before or on such Closing Date.
(b) All representations and warranties made hereunder and in the other Loan
Documents shall be true and correct as of the Closing Date as if made on such
date.
(c) No Default or Event of Default shall exist on the Closing Date, or would
exist after giving effect to the Loans to be made on such date.
(d) The Administrative Agent and the Lenders shall have received such opinions
of counsel for the Parent and its Subsidiaries as the Administrative Agent or
any Lender shall request, each such opinion to be in a form, scope, and
substance satisfactory to the Administrative Agent, the Lenders, and their
respective counsel.
(e) The Borrowers shall have paid all fees and expenses of the Administrative
Agent and BABC and the Attorney Costs incurred in connection with any of the
Loan Documents and the transactions contemplated thereby.
(f) The Administrative Agent shall have received evidence, in form, scope, and
substance, reasonably satisfactory to the Administrative Agent, of all insurance
coverage as required by this Agreement.
(g) All proceedings taken in connection with the execution of this Agreement,
all other Loan Documents and all documents and papers relating thereto shall be
satisfactory in form, scope, and substance to the Administrative Agent and the
Lenders.
<PAGE>
(h) In the judgment of the Administrative Agent and the Lenders, (i) no Material
Adverse Effect shall have occurred since October 3, 1998 and (ii) no "Material
Adverse Effect" as defined in the Hills Merger Agreement shall have occurred.
(i) The Administrative Agent and the Lenders shall have received the agreements,
instruments and other documents set forth or referred to on Exhibit B, and such
agreements, instruments and documents shall be in form and substance
satisfactory to the Administrative Agent and the Lenders.
(j) The Administrative Agent and the Lenders shall have received (i) one or more
mortgagee title insurance policies, in form, substance and amount satisfactory
to the Administrative Agent and the Lenders, insuring that each of the Amended
Mortgages and the other Mortgages executed and delivered by it hereunder
(including, without limitation, with respect to the Leesport, Pennsylvania
facility) is a valid and perfected first priority Lien in favor of the
Administrative Agent for the benefit of the Administrative Agent and the ratable
benefit of the Lenders on the fee interest of such Credit Party (subject only to
Permitted Liens), in the Premises described therein, and that such Credit Party
has good and marketable title thereto (subject to customary exceptions), issued
by a title insurance company reasonably satisfactory to the Administrative
Agent, together with satisfactory evidence that all title insurance premiums
have been fully paid; and (ii) such consents of third parties to the Amended
Mortgages and the other Mortgages and the Amended Collateral Assignments
executed and delivered by it, and such non-disturbance agreements, estoppel
certificates and waivers as the Administrative Agent shall reasonably request
(in each case in form and substance satisfactory to the Administrative Agent).
(k) The Administrative Agent and the Lenders shall have received evidence in
form and substance satisfactory to them that:
(i) all obligations, indebtedness and liabilities under the
Existing Hills Credit Agreement (other than in respect of Existing Letters of
Credit) shall be satisfied in full utilizing proceeds from the initial Loans
made under this Agreement, and upon such satisfaction the Existing Hills Credit
Agreement and all related agreements, instruments and other documents shall be
terminated; and
(ii) there is no outstanding indebtedness under the Existing
Credit Agreement, and the Administrative Agent shall be satisfied in all
respects with the arrangements with respect to the continued validity,
perfection and priority of all Liens and security interests granted to the
Administrative Agent under the Existing Credit Agreement.
(l) The Administrative Agent shall have received:
<PAGE>
(i) financing statements duly executed by the appropriate Credit
Parties in form appropriate for filing under the UCC of all jurisdictions that
the Administrative Agent may deem necessary or desirable in order to perfect the
Administrative Agent's Lien on the Collateral;
(ii)duly executed UCC-3 Termination Statements and such other
instruments, in form and substance satisfactory to the Administrative Agent, as
shall be necessary to terminate and satisfy all Liens on the property of the
Parent and its Subsidiaries except Permitted Liens; and
(iii) the certificates representing all shares of capital stock
pledged under the relevant Security Documents, accompanied by undated stock
powers endorsed in blank and the instruments pledged under the relevant Security
Documents, duly endorsed to the Administrative Agent.
(m) The Credit Parties shall have entered into blocked account and other cash
management arrangements pursuant to documentation satisfactory in form and
substance to the Administrative Agent as contemplated by Section 6.8.
(n) The Administrative Agent shall have received copies of the Hills Merger
Agreement, each of the Hills Offer Documents and the Indenture, in each case
certified by a Responsible Officer of the Parent to be true and complete, and
shall have determined same to be in form and substance satisfactory.
<PAGE>
(o) The Offer and the Note Tender Offer shall have been consummated in
accordance with the Hills Offer Documents, and pursuant thereto HSC shall
(utilizing proceeds of advances made by the Borrowers in accordance with Section
9.10(d)) have acquired not less than (i) 60% of the outstanding Shares, in each
case for a per share cash price not in excess of $1.50 per Share, plus deferred
contingent cash rights and (ii) 66-2/3% in the aggregate principal amount of the
outstanding Notes (as defined in the Hills Merger Agreement) for an aggregate
cash price not in excess of 70% of the principal amount of such Notes acquired,
plus deferred contingent cash rights.
(p) The Indenture shall have been amended in accordance with the Consent
Solicitation, and pursuant thereto the Supplemental Indenture shall have been
executed and delivered by all requisite parties in order to give effect to the
Proposed Amendments (as defined in the Hills Merger Agreement).
(q) (i) Each of Ames Merchandising and the Parent shall cause the owners of the
Premises to duly execute and deliver to the Administrative Agent mortgages or
deeds of trust with respect to the Premises described in Schedule 10.1(q) hereto
(each such mortgage or deed of trust, as it may be amended, modified or
supplemented from time to time in accordance with its terms, a "Mortgage"), that
is owned by such Credit Party so as to create in the Administrative Agent's
favor, for the benefit of the Administrative Agent and the ratable benefit of
the Lenders, upon recordation thereof, a valid, perfected and enforceable
(subject to bankruptcy, insolvency, moratorium and other similar laws affecting
the enforcement of creditors' rights generally and by general equity principles)
first priority Lien on the Premises described therein (subject only to Permitted
Liens), such Mortgage, and related UCC financing statements, to be in form,
scope and substance reasonably satisfactory to the Administrative Agent and the
Lenders;
(ii) Each of Ames Merchandising and the Parent shall cause the
Amended Mortgages and the other Mortgages, the Amended Collateral Assignments
and UCC financing statements with respect to personal property security
agreements to be duly recorded in the appropriate recording office or offices,
or provision satisfactory to the Administrative Agent shall have been made
therefor, and shall pay all fees and taxes payable in connection therewith;
(iii) Each of Ames Merchandising and the Parent shall furnish, or
cause to be furnished, to the Administrative Agent, in sufficient copies for
each Lender, for the benefit of the Administrative Agent and the Lenders, at
such Credit Party's expense, one or more policies of mortgagee title insurance
or marked and executed commitments, in form, substance and amount reasonably
satisfactory to the Administrative Agent and the Lenders, insuring that each
Amended Mortgage and each other Mortgage executed and delivered by it pursuant
to this Section is a valid and perfected first priority Lien in favor of the
Administrative Agent for the benefit of the Administrative Agent and the ratable
benefit of the Lenders on the fee interest of such Credit Party (subject only to
Permitted Liens), in the Premises described therein, and that such Credit Party
has good and marketable title thereto (subject to customary exceptions), issued
by a title insurance company reasonably satisfactory to the Administrative
Agent, together with satisfactory evidence that all title insurance premiums
have been fully paid; and
<PAGE>
(iv)Each of Ames Merchandising and the Parent shall promptly
execute and deliver to the Administrative Agent or cause to be executed and
delivered to the Administrative Agent, as the Administrative Agent shall
reasonably request, such other documents, certificates, required consents of
third parties (if any), opinions of counsel and the like with respect to such
Premises as the Administrative Agent shall reasonably request in connection
therewith, in form and substance satisfactory to the Administrative Agent and
the Lenders, such that the Administrative Agent shall receive valid and
perfected first priority Liens (subject only to Permitted Liens) on all such
property for the benefit of the Administrative Agent and the ratable benefit of
the Lenders.
(r) The Administrative Agent shall have received and shall be satisfied with the
results of one or more written appraisals of the Inventory of each Borrower from
an appraiser, and prepared on a basis, satisfactory to the Administrative Agent,
which appraisals shall include all information required by the internal policies
of the Administrative Agent and shall confirm that (i) the orderly liquidation
value (on a percentage of cost basis) of all Eligible Inventory of the Borrowers
net of costs and expenses projected to be incurred in connection with such a
liquidation (including, without limitation, operating expenses and liquidation
commissions) exceeds (ii) the highest advance rates with respect thereto set
forth in the definition of "Individual Availability" contained in Section 1.1.
The acceptance by any Borrower of any Loans made on the Closing
Date shall be deemed to be a representation and warranty made by the Credit
Parties to the effect that all of the conditions precedent to the making of such
Loans have been satisfied, with the same effect as delivery to the
Administrative Agent and the Lenders of a certificate signed by a Responsible
Officer of the Parent or the Borrowers, dated the Closing Date, to such effect.
Execution and delivery to the Administrative Agent by a Lender of
a counterpart of this Agreement shall be deemed confirmation by such Lender that
(i) all conditions precedent in this Section 10.1 have been fulfilled to the
satisfaction of such Lender and (ii) the decision of such Lender to execute and
deliver to the Administrative Agent an executed counterpart of this Agreement
was made by such Lender independently and without reliance on the Administrative
Agent or any other Lender as to the satisfaction of any condition precedent set
forth in this Section 10.1.
<PAGE>
10.2 Conditions Precedent to Each Loan.
The obligation of the Lenders to make each Loan, including the
initial Loans on the Closing Date, and the obligation of the Administrative
Agent to take reasonable steps to cause to be issued or to provide Credit
Support for any Letter of Credit and the obligation of the Lenders to
participate in Letters of Credit or Credit Support for Letters of Credit, shall
be subject to the further conditions precedent that on and as of the date of any
such extension of credit and after giving effect thereto:
(a) the following statements shall be true, and the acceptance by any Borrower
of any extension of credit shall be deemed to be a statement to the effect set
forth in clauses (i) and (ii), with the same effect as the delivery to the
Administrative Agent and the Lenders of a certificate signed by a Responsible
Officer of the applicable Borrower, dated the date of such extension of credit,
stating that:
(i) the representations and warranties contained in Articles 6 and
8 of this Agreement are correct in all material respects on and as of the date
of such extension of credit as though made on and as of such date, other than
any such representation or warranty which relates to a specified prior date; and
(ii)no event has occurred and is continuing, or would result from
such extension of credit, which constitutes a Default or an Event of Default;
and
(b) the Combined Availability shall equal or exceed $100,000,000 and the amount
of the Individual Availability of the relevant Borrower shall equal or exceed
the amount of such Loan or cause the issuance or provision of such Letter of
Credit or Credit Support; provided, however, that the foregoing conditions
precedent are not conditions to each Lender participating in or reimbursing BABC
or the Administrative Agent for such Lenders' Pro Rata Share of any BABC Loan or
Administrative Agent Advance as provided in Sections 2.2(h), (i) and (j).
ARTICLE 11
DEFAULT; REMEDIES
11.1 Events of Default.
It shall constitute an event of default ("Event of Default") if
any one or more of the following shall occur for any reason:
(a) (i) any failure to pay the principal of any of the Obligations when due,
whether upon demand or otherwise or (ii) any failure to pay any interest or
premium on any of the Obligations, or any fee or other amount owing hereunder or
under any other Loan Document, when due, and such failure shall continue for
five (5) consecutive days;
(b) any representation or warranty made or deemed made by any Credit Party in
this Agreement or by any Credit Party in any of the other Loan Documents, any
Financial Statement, or any certificate furnished by any Credit Party at any
time to the Administrative Agent or any Lender shall prove to be untrue in any
material respect as of the date on which made, deemed made, or furnished;
<PAGE>
(c) any default shall occur in the observance or performance of any of the
covenants and agreements contained in Section 6.7(c), 6.8 or 6.9(b) or in
Article 9 (other than Section 9.4, 9.6, 9.7 and 9.31);
(d) (i) any default shall occur in the observance or performance of any of the
covenants, representations, warranties and agreements contained in this
Agreement, any other Loan Documents, or any other agreement entered into at any
time to which any Credit Party and the Administrative Agent or any Lender are
party (other than as specified in clauses (a), (b) and (c) above) and such
default shall continue unremedied for a period of thirty (30) days (or (I) one
(1) Business Day in the case of Section 6.6(a) or 6.7(a), (II) three (3)
Business Days in the case of any of Section 7.2(a), 7.2(b), 7.2(c), 7.2 (e), 7.2
(f), 7.2 (h), 7.3(a), 7.3 (d) or 7.3(g), (III) five (5) Business Days in the
case of Section 6.7(b) or (IV) ten (10) days in the case of Section 6.5) after
the earlier to occur of (x) notice thereof from the Administrative Agent or any
Lender to the Parent or any Borrower and (y) the Parent's or any Borrower's
receipt of actual knowledge thereof, or (ii) if any such agreement or document
shall terminate (other than in accordance with its terms or the terms hereof or
with the written consent of the Administrative Agent and the Majority Lenders)
or become void or unenforceable, without the written consent of the
Administrative Agent and the Majority Lenders;
(e) (i) one or more defaults shall occur in the payment of any principal,
interest or premium with respect to any Debt For Borrowed Money (including,
without limitation, obligations under conditional sales contracts, Capital
Leases and the like) of which any Credit Party is principal, guarantor or other
surety, and such default shall continue for more than the period of grace, if
any, specified therefor in the documents governing same, or (ii) one or more
defaults shall occur under any agreement or instrument under or pursuant to
which any such Debt For Borrowed Money or obligation may have been issued,
created, assumed, guaranteed or secured by any Credit Party and, in the case of
clause (ii) of this Subsection 11.1(e), such default shall continue for more
than the period of grace, if any, therein specified, or (iii) any such Debt For
Borrowed Money or obligation shall be declared due and payable prior to the
stated maturity thereof; and the aggregate principal amount of all such Debt For
Borrowed Money and obligations as to which any such matters under clause (i),
(ii) or (iii) occur shall exceed $3,000,000; or
<PAGE>
(f) any Credit Party shall (i) file a voluntary petition in bankruptcy or file a
voluntary petition or an answer or otherwise commence any action or proceeding
seeking reorganization, arrangement or readjustment of its debts or for any
other relief under the federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter
existing, or consent to, approve of, or acquiesce in, any such petition, action
or proceeding; (ii) apply for or acquiesce in the appointment of a receiver,
assignee, liquidator, sequestrator, custodian, monitor, trustee or similar
officer for it or for all or any part of its property; (iii) make an assignment
for the benefit of creditors; or (iv) be unable generally to pay its debts as
they become due;
(g) an involuntary petition or proposal shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement,
consolidation or readjustment of the debts of any Credit Party or for any other
relief under the federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter existing
and either (i) such petition, proposal, action or proceeding shall not have been
dismissed within a period of sixty (60) days after its commencement or (ii) an
order for relief against any Credit Party shall have been entered in such
proceeding;
(h) a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee
or similar officer for any Credit Party or for all or any part of its property
shall be appointed or a warrant of attachment, execution or similar process
shall be issued against any part of the property of any Credit Party;
(i) any guaranty of the Obligations shall be terminated, revoked or declared
void or invalid;
(j) (i) a final judgment shall be rendered against a Credit Party which, by
itself or with other outstanding final judgments against such or any other
Credit Party, exceeds in the aggregate $1,500,000 unless, within thirty (30)
days after entry thereof, such judgment shall not have been discharged or
execution thereof stayed pending appeal, or unless, within thirty (30) days
after the expiration of any such stay, such judgment shall not have been
discharged; or (ii) any of the assets of a Credit Party shall be attached,
seized, levied upon or subject to an injunction, execution, writ or distress
warrant and shall remain unstayed or undismissed for a period of thirty (30)
days, which by itself or together with all other attachments, seizures, levies,
injunctions, executions, writs or distress warrants against properties of such
Credit Party remaining unstayed or undismissed for a period of thirty (30) days,
is for an amount in excess of $1,500,000; or (iii) any final non-monetary
judgment or order shall be rendered against a Credit Party that could reasonably
be expected to have a Material Adverse Effect and if, within thirty (30) days
after entry thereof, such non-monetary judgment or order shall not have been
discharged or execution thereof stayed pending appeal, or if, within thirty (30)
days after the expiration of any such stay, such judgment or order shall not
have been discharged;
<PAGE>
(k) any Credit Party shall suspend the operation of a material portion of its
business as presently conducted or there shall occur the loss, theft,
substantial damage to, condemnation of, exercise of right of eminent domain with
respect to or destruction of, any Collateral not fully covered by insurance
(except for deductibles and self-insured retention), which by itself or with
other such losses, thefts, damage, condemnation or destruction of, or exercise
of right of eminent domain with respect to, Collateral, shall constitute a
Material Adverse Effect;
(l) for any reason other than the failure of the Administrative Agent to take
any action available to it to maintain perfection of the Administrative Agent's
Liens, pursuant to the Loan Documents, any Loan Document ceases to be in full
force and effect or any Lien with respect to any material portion of the
Collateral intended to be secured thereby ceases to be, or is not, valid,
perfected and prior to all other Liens (other than Permitted Liens) or is
terminated, revoked or declared void;
(m) (i) a Reportable Event shall have occurred with respect to a
Pension Benefit Plan other than a Reportable Event as to which the provision of
30 days' notice to the PBGC is waived under applicable provisions;
(ii) any Credit Party or any ERISA Affiliate or an administrator
of any Pension Benefit Plan that is subject to Title IV of ERISA shall have
terminated or filed a notice of intent to terminate a Pension Benefit Plan under
the provisions of Section 4041(c) of ERISA;
(iii) any Credit Party or any ERISA Affiliate or an administrator
of a Pension Benefit Plan shall have received a notice that the PBGC has
instituted proceedings to terminate (or appoint a trustee to administer) a
Pension Benefit Plan;
(iv) any other event or condition exists which might reasonably be
expected, in the reasonable opinion of the Majority Lenders, to constitute
grounds under the provisions of Section 4042(a)(1) or (2) of ERISA for the
termination of (or the appointment of a trustee to administer) any Pension
Benefit Plan by the PBGC;
(v) any Credit Party or any ERISA Affiliate has incurred or is
likely to incur a liability under the provisions of Section 4063, 4064 or 4201
of ERISA;
(vi) any Person shall engage in any transaction in connection with
which any Credit Party or any ERISA Affiliate could be subject to either a civil
penalty assessed pursuant to the provisions of Section 502(i) of ERISA or a tax
imposed under the provisions of Section 4975 of the Code;
<PAGE>
(vii) any Credit Party or any ERISA Affiliate fails to pay the
full amount of any payment which, under the provisions of any Employee Plan or
Multiemployer Plan, it is required to pay as contributions thereto or as
premiums to the PBGC, or with respect to any Pension Benefit Plans or any
installment due under Section 412(m) of the Code or any "accumulated funding
deficiency" (within the meaning of Section 302 of ERISA and Section 412 of the
Code) shall exist with respect to any Pension Benefit Plan;
(viii) any Person shall adopt an amendment to any Pension Benefit
Plan requiring the provision of security under Section 307 of ERISA or Section
401(a)(29) of the Code;
(ix) any Person shall enter into an agreement that would obligate
a Credit Party or an ERISA Affiliate to make contributions to a Multiemployer
Plan or to create, extend or increase an obligation to provide health or medical
benefits for retirees (other than at retiree's sole expense) of a Credit Party
or an ERISA Affiliate;
(x) any Credit Party or ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization, is insolvent, or is being terminated within the meaning of Title
IV of ERISA, and as a result, the aggregate annual contributions by the Credit
Party and any ERISA Affiliates to such Plan have been or will be increased over
the amounts contributed for the immediately preceding Plan year by an amount
exceeding $1,500,000;
and in each case in clauses (i) through (x) above, in the opinion of the
Majority Lenders, such event or condition, together with all other such events
or conditions, could subject a Credit Party or any ERISA Affiliate to any tax,
penalty or other liabilities which in the aggregate would be material in
relation to the business, operations, liabilities, assets, properties, prospects
or condition (financial or otherwise) of such Credit Party or such ERISA
Affiliate;
(n) there occurs a Change in Control; or
(o) one or more defaults shall occur under (i) any Material Contract and in each
case such default(s) shall continue for more than the period of grace, if any,
therein specified;
<PAGE>
11.2 Remedies.
(a) If a Default or an Event of Default exists, the Administrative Agent may, in
its discretion, and shall, at the direction of the Majority Lenders, do one or
more of the following at any time or times and in any order, without notice to
or demand on any Credit Party: (i) reduce the Maximum Revolver Amount, or the
advance rates against Eligible Inventory and/or goods covered by merchandise or
documentary Letters of Credit used in computing the Combined Availability or any
Borrower's Individual Availability or reduce one or more of the other elements
used in computing the Combined Availability or any Borrower's Individual
Availability; (ii) restrict the amount of or refuse to make Loans; and (iii)
restrict or refuse to arrange for or provide Letters of Credit or Credit
Support. If an Event of Default exists, the Administrative Agent shall, at the
direction of the Majority Lenders, do one or more of the following, in addition
to the actions described in the preceding sentence, at any time or times and in
any order, without notice to or demand on any Credit Party: (a) terminate the
Commitments and this Agreement; (b) declare any or all Obligations to be
immediately due and payable; provided, however, that upon the occurrence of any
Event of Default described in Section 11.1(f), 11.1(g) or 11.1(h), the
Commitments shall automatically and immediately expire and all Obligations shall
automatically become immediately due and payable without notice or demand of any
kind; and (c) pursue its other rights and remedies under the Loan Documents and
applicable law. The Administrative Agent agrees promptly to notify the Borrowers
and the Lenders after any action taken by the Administrative Agent pursuant to
this Section 11.2 (other than with respect to clause (b) or clause (c) of the
preceding sentence); provided, however, that the failure to give such notice
shall not affect the validity of any such action or result in any liability to
the Administrative Agent.
<PAGE>
(b) If an Event of Default exists: (i) the Administrative Agent shall have for
the benefit of the Administrative Agent and the Lenders, in addition to all
other rights of the Administrative Agent and the Lenders, the rights and
remedies of a secured party under the UCC; (ii) the Administrative Agent may, at
any time, take possession of the Collateral and keep it on any Credit Party's
premises, at no cost to the Administrative Agent or any Lender, or remove any
part of it to such other place or places as the Administrative Agent may desire,
or the Credit Parties shall, upon the Administrative Agent's demand, at the
Credit Parties' cost, assemble the Collateral and make it available to the
Administrative Agent at a place reasonably convenient to the Administrative
Agent; and (iii) the Administrative Agent may sell and deliver any Collateral at
public or private sales, for cash, upon credit or otherwise, at such prices and
upon such terms as the Administrative Agent deems advisable, in its sole
discretion, and may, if the Administrative Agent deems it reasonable, postpone
or adjourn any sale of the Collateral by an announcement at the time and place
of sale or of such postponed or adjourned sale without giving a new notice of
sale. Without in any way requiring notice to be given in the following manner,
each Credit Party agrees that any notice by the Administrative Agent of sale,
disposition or other intended action hereunder or in connection herewith,
whether required by the UCC or otherwise, shall constitute reasonable notice to
the Credit Parties if such notice is mailed by registered or certified mail,
return receipt requested, postage prepaid, or is delivered personally against
receipt, at least five (5) Business Days prior to such action to the applicable
Credit Party's address specified in or pursuant to Section 16.8. If any
Collateral is sold on terms other than payment in full at the time of sale, no
credit shall be given against the Obligations until the Administrative Agent or
the Lenders receive payment, and if the buyer defaults in payment, the
Administrative Agent may resell the Collateral without further notice to any
Credit Party. In the event the Administrative Agent seeks to take possession of
all or any portion of the Collateral by judicial process, each Credit Party
irrevocably waives: (a) the posting of any bond, surety or security with respect
thereto which might otherwise be required; (b) any demand for possession prior
to the commencement of any suit or action to recover the Collateral; and (c) any
requirement that the Administrative Agent retain possession and not dispose of
any Collateral until after trial or final judgment. Each Credit Party agrees
that the Administrative Agent has no obligation to preserve rights to the
Collateral or marshal any Collateral for the benefit of any Person. The
Administrative Agent is hereby granted a license or other right to use, without
charge, each Credit Party's labels, patents, copyrights, name, trade secrets,
trade names, trademarks, and advertising matter, or any similar property, in
completing production of, advertising or selling any Collateral, and each Credit
Party's rights under all licenses and all franchise agreements shall inure to
the Administrative Agent's benefit for such purpose. The proceeds of sale shall
be applied first to all expenses of sale, including attorneys' fees, and then to
the Obligations in whatever order the Administrative Agent elects, subject to
Section 4.6. The Administrative Agent will return any excess to the applicable
Credit Party and the Credit Parties shall remain liable for any deficiency.
(c) If an Event of Default occurs, each Credit Party hereby waives, to the
fullest extent permitted by applicable law, all rights to notice and hearing
prior to the exercise by the Administrative Agent of the Administrative Agent's
rights to repossess the Collateral without judicial process or to replevy,
attach or levy upon the Collateral without notice or hearing.
ARTICLE 12
TERM AND TERMINATION
12.1 Term and Termination.
The term of this Agreement shall end on the Stated Termination
Date. The Administrative Agent upon direction from the Majority Lenders may
terminate this Agreement upon the occurrence of an Event of Default as set forth
in Section 11.2. Upon the date of termination of this Agreement for any reason
whatsoever, all Obligations (including, without limitation, all unpaid
principal, accrued interest and any early termination or prepayment fees or
penalties) shall become immediately due and payable and the Borrowers shall
immediately arrange for the cancellation of Letters of Credit then outstanding.
Notwithstanding the termination of this Agreement, until all Obligations are
indefeasibly paid and performed in full in cash, the Credit Parties shall remain
bound by the terms of this Agreement and shall not be relieved of any of their
respective Obligations hereunder, and the Administrative Agent and the Lenders
shall retain all their rights and remedies hereunder (including, without
limitation, the Administrative Agent's Liens in and all rights and remedies with
respect to all then existing and after-arising Collateral).
<PAGE>
ARTICLE 13
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
13.1 No Waivers; Cumulative Remedies.
No failure by the Administrative Agent or any Lender to exercise
any right, remedy, or option under this Agreement or any present or future
supplement thereto, or in any other agreement between or among any Credit Party
and the Administrative Agent and/or any Lender, or delay by the Administrative
Agent or any Lender in exercising the same, will operate as a waiver thereof. No
waiver by the Administrative Agent or any Lender will be effective unless it is
in writing, and then only to the extent specifically stated. No waiver by the
Administrative Agent or the Lenders on any occasion shall affect or diminish the
Administrative Agent's and each Lender's rights thereafter to require strict
performance by the Credit Parties of any provision of this Agreement. The
Administrative Agent's and each Lender's rights under this Agreement will be
cumulative and not exclusive of any other right or remedy which the
Administrative Agent or any Lender may have.
13.2 Amendments and Waivers.
No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no consent with respect to any departure by the Credit
Parties therefrom, shall be effective unless the same shall be in writing and
signed by the Majority Lenders (or by the Administrative Agent at the written
request of the Majority Lenders) and the Credit Parties party thereto and then
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no such
waiver, amendment, or consent shall, unless in writing and signed by all the
Lenders and the Credit Parties and acknowledged by the Administrative Agent, do
any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees or other amounts due to
the Lenders (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein on any
Loan, or any fees or other amounts payable hereunder or under any other Loan
Document;
(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Lenders or any of them
to take any action hereunder;
(e) increase any of the percentages set forth in the definition of Individual
Availability;
<PAGE>
(f) amend this Section, Section 9.27 or any provision of this Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by Section 14.12 or release any
Credit Party of its guaranty obligations under Article 15;
(h) change the definition of "Majority Lenders";
and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent, affect the rights or duties of
the Administrative Agent under this Agreement or any other Loan Document.
13.3 Assignments; Participations.
(a) Any Lender may, with the written consent of the Administrative Agent, assign
and delegate to one or more assignees (provided that no written consent of the
Administrative Agent shall be required in connection with any assignment and
delegation by a Lender to an Affiliate of such Lender) (each an "Assignee") all,
or any ratable part of all, of the Loans, the Commitments and the other rights
and obligations of such Lender hereunder, in a minimum amount of $15,000,000 or
if less the entire amount of such Lender's Commitment (provided, that, unless an
assignor Lender has assigned and delegated all its Loans and Commitment, no such
assignment and/or delegation shall be permitted unless, after giving effect to
such assignment and/or delegation, such assignor Lender retains a Commitment in
a minimum amount of $15,000,000); provided, however, that the Credit Parties and
the Administrative Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions, addresses
and related information with respect to the Assignee, shall have been given to
the Credit Parties and the Administrative Agent by such Lender and the Assignee;
(ii) such Lender and its Assignee shall have delivered to the Credit Parties and
the Administrative Agent an Assignment and Acceptance in the form of Exhibit E
("Assignment and Acceptance") and (iii) the assignor Lender or Assignee has paid
to the Administrative Agent a processing fee in the amount of $5,000.
<PAGE>
(b) From and after the date that the Administrative Agent notifies the assignor
Lender that it has received an executed Assignment and Acceptance and payment of
the above-referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations, including, but not
limited to, the obligation to participate in Letters of Credit and Credit
Support have been assigned to it pursuant to such Assignment and Acceptance,
shall have the rights and obligations of a Lender under the Loan Documents, and
(ii) the assignor Lender shall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (1) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan Document
furnished pursuant hereto; (2) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Credit Parties or the performance or observance by the Credit Parties of
any of their respective obligations under this Agreement or any other Loan
Document furnished pursuant hereto; (3) such Assignee confirms that it has
received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (4) such Assignee will,
independently and without reliance upon the Administrative Agent, such assigning
Lender or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (5) such Assignee appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (6) such Assignee agrees that it will perform
in accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) Immediately upon each Assignee's or assigning Lender's making its processing
fee payment under the Assignment and Acceptance, this Agreement shall be deemed
to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
<PAGE>
(e) Any Lender may at any time sell to one or more commercial banks, financial
institutions, or other Persons not Affiliates of the Credit Parties (a
"Participant") participating interests in any Loans, the Commitment of that
Lender and the other interests of that Lender (the "Originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) the
Originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the Originating Lender shall remain solely responsible for the performance
of such obligations, (iii) the Credit Parties and the Administrative Agent shall
continue to deal solely and directly with the Originating Lender in connection
with the Originating Lender's rights and obligations under this Agreement and
the other Loan Documents, and (iv) no Lender shall transfer or grant any
participating interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, and all amounts payable by any Credit Party hereunder shall
be determined as if such Lender had not sold such participation; except that,
(A) if amounts outstanding under this Agreement are due and unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement, (B) in the case of a
participation by any Lender that is not the Administrative Agent, the
participant shall not have any rights under this Agreement or any other Loan
Document (the participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed by such Lender in
favor of the participant relating thereto which agreement shall not, in any
event, grant to the participant the right of consent as to any matters under the
Loan Documents other than those which require the consent of all Lenders except
that the participant shall, solely for the purposes of Section 5.3, 5.4 and
16.11 and in any event subject to Section 5.7, be deemed to be a Lender with all
applicable rights and obligations of a Lender under such Sections), and (C) in
the case of a participation by any Lender that is the Administrative Agent, the
participant shall not have any rights under this Agreement or any other Loan
Document (the participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed by such Lender in
favor of the participant relating thereto which agreement shall not prevent such
Lender from complying with the proviso to this clause (C) below and shall
require that the voting rights granted to the participant under such agreement
shall be subject to the proviso to this clause (C)), except that the participant
shall, solely for the purposes of Section 5.3, 5.4 and 16.11 and in any event
subject to Section 5.7, be deemed to be a Lender with all applicable rights and
obligations of a Lender under such Sections; provided, that if, in connection
with any proposed action or inaction for which the consent of the Majority
Lenders is required hereunder or for which a direction by the Majority Lenders
may be given hereunder, a Lender that is the Administrative Agent that would
otherwise vote in favor of such consent or direction is required to withhold its
consent or direction by virtue of voting rights granted to one or more of its
participants (each such Lender being referred to as a "Constrained Lender"),
then, such Constrained Lender shall cast its vote in respect of such proposed
consent or direction by apportioning its vote (on a ratable basis based on the
relative percentages of beneficial interests in such Constrained Lender's
Commitment) with respect thereto. .
<PAGE>
(f) Notwithstanding any other provision in this Agreement, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 C.F.R.
ss.203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
ARTICLE 14
THE ADMINISTRATIVE AGENT
14.1 Appointment and Authorization.
Each Lender hereby designates and appoints BankAmerica Business Credit, Inc.
as its Administrative Agent under this Agreement and the other Loan Documents
and each Lender hereby irrevocably authorizes the Administrative Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. The
Administrative Agent agrees to act as such on the express conditions contained
in this Article 14. The provisions of this Article 14 are solely for the benefit
of the Administrative Agent and the Lenders and the Credit Parties shall have no
rights as a third party beneficiary of any of the provisions contained herein.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein, nor
shall the Administrative Agent have or be deemed to have any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent. Without limiting the generality of the foregoing sentence,
the use of the term "agent" in this Agreement with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties. Except as expressly otherwise provided in this Agreement,
the Administrative Agent shall have and may use its sole discretion with respect
to exercising or refraining from exercising any discretionary rights or taking
or refraining from taking any actions which the Administrative Agent is
expressly entitled to take or assert under this Agreement and the other Loan
Documents, including, without limitation, (a) the determination of the
applicability of ineligibility criteria with respect to the calculation of the
Individual Availability, (b) the making of Administrative Agent Advances
pursuant to Section 2.2(i), and (c) the exercise of remedies pursuant to Section
11.2, and any action so taken or not taken shall be deemed consented to by the
Lenders.
<PAGE>
14.2 Delegation of Duties.
The Administrative Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects as long as such selection was made without gross negligence or
willful misconduct.
14.3 Liability of Administrative Agent.
None of the Administrative Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by any Credit Party or any Subsidiary
or Affiliate of any Credit Party, or any officer thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
any Credit Party or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Administrative Agent-Related Person
shall be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Credit Party or any Credit Party's Subsidiaries or
Affiliates.
14.4 Reliance by Administrative Agent.
(a) The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the Credit
Parties), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Lenders or all Lenders, as applicable, as it deems appropriate and, if
it so requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a request or
consent of the Majority Lenders or all Lenders, as applicable, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all of the Lenders.
<PAGE>
(b) For purposes of determining compliance with the conditions specified in
Section 10.1, each Lender that has executed this Agreement shall be deemed to
have consented to, approved or accepted or to be satisfied with, each document
or other matter either sent by the Administrative Agent to such Lender for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lender.
14.5 Notice of Default.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default, except with respect
to defaults in the payment of principal, interest and fees required to be paid
to the Administrative Agent for the account of the Lenders, unless the
Administrative Agent shall have received written notice from a Lender or the
Borrowers referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." The
Administrative Agent will promptly notify the Lenders of its receipt of any such
notice. The Administrative Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Majority Lenders in
accordance with Section 11; provided, however, that unless and until the
Administrative Agent has received any such request, the Administrative Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable.
14.6 Credit Decision.
Each Lender acknowledges that none of the Administrative
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Administrative Agent hereinafter taken, including any review of the
affairs of the Parent and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Administrative Agent-Related Person to any
Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon any Administrative Agent-Related Person
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Parent and
its Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Borrowers. Each Lender also represents
that it will, independently and without reliance upon any Administrative
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Borrowers and other Credit
Parties. Except for notices, reports and other documents expressly herein
required to be furnished to the Lenders by the Administrative Agent, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of any
Credit Party which may come into the possession of any of the Administrative
Agent-Related Persons.
<PAGE>
14.7 Indemnification.
Whether or not the transactions contemplated hereby are
consummated, the Lenders shall indemnify upon demand the Administrative
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Credit Parties and without limiting the obligation of the Credit Parties to do
so), pro rata, from and against any and all Indemnified Liabilities as such term
is defined in Section 16.11; provided, however, that no Lender shall be liable
for the payment to the Administrative Agent-Related Persons of any portion of
such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender shall reimburse the Administrative Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney Costs) incurred
by the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that the Administrative Agent is not reimbursed for such expenses by or on
behalf of the Credit Parties. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of the
Administrative Agent.
14.8 Administrative Agent in Individual Capacity.
BABC and its Affiliates may make loans to, issue letters of credit
for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with the Credit Parties and their Subsidiaries and Affiliates
as though BABC were not the Administrative Agent hereunder and without notice to
or consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, BABC or its Affiliates may receive information regarding the Credit
Parties or their Affiliates (including information that may be subject to
confidentiality obligations in favor of the Credit Parties or such Subsidiary)
and acknowledge that the Administrative Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BABC shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Administrative Agent, and the terms "Lender"
and "Lenders" include BABC in its individual capacity.
<PAGE>
14.9 Successor Administrative Agent.
(a) The Administrative Agent may resign as Administrative Agent upon 30 days'
notice to the Lenders and the Borrowers. If the Administrative Agent resigns
under this Agreement, the Majority Lenders shall appoint from among the Lenders
a successor agent for the Lenders. If no successor agent is appointed prior to
the effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and the
Borrowers, a successor agent from among the Lenders. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Administrative Agent and the
term "Administrative Agent" shall mean such successor agent and the retiring
Administrative Agent's appointment, powers and duties as Administrative Agent
shall upon such acceptance be terminated. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 14 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement. If no
successor agent has accepted appointment as Administrative Agent by the date
which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Administrative Agent hereunder until such time, if any, as the Majority
Lenders appoint a successor agent as provided for above.
(b) Notwithstanding the foregoing, in the event that BABC assigns all of its
Loans to an Affiliate, such Affiliate shall automatically become the successor
Administrative Agent hereunder upon the effective date of such assignment.
14.10 Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or trust" within the
meaning of the Code and such Lender claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the Code, such Lender agrees
with and in favor of the Administrative Agent, to deliver to the Administrative
Agent:
(i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS Forms
1001 and W-8 before the payment of any interest in the first calendar year and
before the payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this Agreement is
exempt from United States withholding tax because it is effectively connected
with a United States trade or business of such Lender, two properly completed
and executed copies of IRS Form 4224 before the payment of any interest is due
in the first taxable year of such Lender and in each succeeding taxable year of
such Lender during which interest may be paid under this Agreement, and IRS Form
W-9; and
(iii) such other form or forms as may be required under the Code or
other laws of the United States as a condition to exemption from, or reduction
of, United States withholding tax.
<PAGE>
Such Lender agrees to promptly notify the Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding tax under
a United States tax treaty by providing IRS Form 1001 and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations owing to such Lender, such Lender agrees to notify the
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations owing to such Lender. To the extent of such
percentage amount, the Administrative Agent will treat such Lender's IRS Form
1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding tax by
filing IRS Form 4224 with the Administrative Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations owing to
such Lender, such Lender agrees to undertake sole responsibility for complying
with the withholding tax requirements imposed by Sections 1441 and 1442 of the
Code.
(d) If any Lender is entitled to a reduction in the applicable withholding tax,
the Administrative Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to the Administrative Agent, then the
Administrative Agent may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that the Administrative Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify the Administrative Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Lender shall indemnify the Administrative Agent
fully for all amounts paid, directly or indirectly, by the Administrative Agent
as tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to the Administrative Agent
under this Section, together with all costs and expenses (including Attorney
Costs). The obligation of the Lenders under this subsection shall survive the
payment of all Obligations and the resignation or replacement of the
Administrative Agent.
14.11 [Reserved].
<PAGE>
14.12 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Administrative Agent, at its
option and in its sole discretion, to release any Administrative Agent's Lien
upon any Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by the Borrowers of all Loans and reimbursement obligations
in respect of Letters of Credit and Credit Support, and the termination of all
outstanding Letters of Credit (whether or not any of such obligations are due)
and all other Obligations; (ii) constituting property (other than Inventory)
being sold or disposed of or used as collateral in connection with a borrowing
if a Borrower certifies to the Administrative Agent that the sale, disposition
or borrowing is made in compliance with Section 9.9, 9.13 or 9.20, as
appropriate (and the Administrative Agent may rely conclusively on any such
certificate, without further inquiry); (iii) constituting property in which a
Credit Party owned no interest at the time the Lien was granted or at any time
thereafter; or (iv) constituting property leased to a Credit Party under a lease
which has expired or been terminated in a transaction permitted under this
Agreement. Except as provided above, the Administrative Agent will not release
any of the Administrative Agent's Liens without the prior written authorization
of the Lenders; provided that the Administrative Agent may, in its discretion,
release the Administrative Agent's Liens on Collateral valued in the aggregate
not in excess of $10,000,000 without the prior written authorization of the
Lenders; and provided, further, that the Administrative Agent shall be permitted
and is authorized to release Collateral which a Credit Party is permitted to
sell or otherwise transfer or has obtained consent or does not require consent
to sell or otherwise transfer under Section 9.9 (unless such Collateral is
Inventory sold outside the ordinary course of business, in which case there
shall be no such release unless all Lenders shall have consented to such sale).
In connection with any such release, the Administrative Agent shall, at the
Borrowers' expense, execute and deliver UCC-3 partial releases and/or
termination statements, satisfactions of mortgage and/or such other documents
and instruments as the applicable Credit Parties may reasonably request to
evidence such release. Upon request by the Administrative Agent or the Borrowers
at any time, the Lenders will confirm in writing the Administrative Agent's
authority to release any Administrative Agent's Liens upon particular types or
items of Collateral pursuant to this Section 14.12.
<PAGE>
(b) Upon receipt by the Administrative Agent of any authorization required
pursuant to Section 14.12(a) from the Lenders of the Administrative Agent's
authority to release the Administrative Agent's Liens upon particular types or
items of Collateral, and upon at least five (5) Business Days' prior written
request by the Borrowers, the Administrative Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of the Administrative Agent's Liens upon such
Collateral; provided, however, that (i) the Administrative Agent shall not be
required to execute any such document on terms which, in the Administrative
Agent's opinion, would expose the Administrative Agent to liability or create
any obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of the Credit Parties in respect
of) all interests retained by any Credit Party, including (without limitation)
the proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
(c) The Administrative Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by any Credit Party or
is cared for, protected or insured or has been encumbered, or that the
Administrative Agent's Liens have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular
priority, or to exercise at all or in any particular manner or under any duty of
care, disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the Administrative Agent pursuant
to any of the Loan Documents, it being understood and agreed that in respect of
the Collateral, or any act, omission or event related thereto, the
Administrative Agent may act in any manner it may deem appropriate, in its sole
discretion given the Administrative Agent's own interest in the Collateral in
its capacity as one of the Lenders and that the Administrative Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing.
14.13 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express consent of
all Lenders, and that it shall, to the extent it is lawfully entitled to do so,
upon the request of all Lenders, set off against the Obligations, any amounts
owing by such Lender to any Credit Party or any accounts of any Credit Party now
or hereafter maintained with such Lender. Each of the Lenders further agrees
that it shall not, unless specifically requested to do so by the Administrative
Agent, take or cause to be taken any action to enforce its rights under this
Agreement or against any Credit Party, including, without limitation, the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral.
<PAGE>
(b) If at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations owing to such Lender arising under, or relating
to, this Agreement or the other Loan Documents, except for any such proceeds or
payments received by such Lender from the Administrative Agent pursuant to the
terms of this Agreement, or (ii) payments from the Administrative Agent in
excess of such Lender's ratable portion of all such distributions by the
Administrative Agent, such Lender shall promptly (1) turn the same over to the
Administrative Agent, in kind, and with such endorsements as may be required to
negotiate the same to the Administrative Agent, or in same day funds, as
applicable, for the account of all of the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or
(2) purchase, without recourse or warranty, an undivided interest and
participation in the Obligations owed to the other Lenders so that such excess
payment received shall be applied ratably as among the Lenders in accordance
with their Pro Rata Shares; provided, however, that if all or part of such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor shall
be returned to such purchasing party, but without interest except to the extent
that such purchasing party is required to pay interest in connection with the
recovery of the excess payment.
14.14 Agency for Perfection.
Each Lender hereby appoints each other Lender as agent for the
purpose of perfecting the Lenders' security interest in assets which, in
accordance with Article 9 of the UCC can be perfected only by possession. Should
any Lender (other than the Administrative Agent) obtain possession of any such
Collateral, such Lender shall notify the Administrative Agent thereof, and,
promptly upon the Administrative Agent's request therefor shall deliver such
Collateral to the Administrative Agent or in accordance with the Administrative
Agent's instructions.
14.15 Payments by Administrative Agent to Lenders.
All payments to be made by the Administrative Agent to the Lenders
shall be made by bank wire transfer or internal transfer of immediately
available funds to each Lender pursuant to such transfer instructions for such
Lender set forth on Schedule B (or, with respect to a Lender which was an
Assignee, on the applicable Assignment and Acceptance pursuant to which such
Assignee became a Lender) or pursuant to such other wire transfer instructions
as each party may designate for itself by written notice to the Administrative
Agent. Concurrently with each such payment, the Administrative Agent shall
identify whether such payment (or any portion thereof) represents principal,
premium or interest on the Loans, the Term Loans or otherwise.
14.16 Concerning the Collateral and the Related Loan Documents.
Each Lender authorizes and directs the Administrative Agent to
enter into this Agreement and the other Loan Documents relating to the
Collateral, for the ratable benefit of the Administrative Agent and the Lenders.
Each Lender agrees that any action taken by the Administrative Agent, Majority
Lenders or all Lenders, as applicable, in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral, and the
exercise by the Administrative Agent, the Majority Lenders, or all Lenders, as
applicable, of their respective powers set forth therein or herein, together
with such other powers that are reasonably incidental thereto, shall be binding
upon all of the Lenders.
14.17 Field Audit and Examination Reports; Disclaimer by Lenders.
(a) is deemed to have requested that the Administrative Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by the
Administrative Agent;
(b) expressly agrees and acknowledges that neither BABC nor the Administrative
Agent (i) makes any representation or warranty as to the accuracy of any Report,
or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that the Administrative Agent or other party performing
any audit or examination will inspect only specific information regarding the
Borrowers and other Credit Parties and will rely significantly upon each Credit
Party's books and records, as well as on representations of each Credit Party's
personnel;
(d) agrees to keep all Reports confidential and strictly for its internal use,
and not to distribute except to its participants, or use any Report in any other
manner; provided, that any Lender may disclose such information (1) pursuant to
any requirement of any Governmental Authority to which such Lender is subject or
in connection with an examination of such Lender by any such Governmental
Authority; (2) pursuant to subpoena or other court process; (3) when required to
do so in accordance with the provisions of any applicable requirement of law.
(e) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold the Administrative Agent and
any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to the Borrowers, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of the Borrowers; and (ii) to pay and protect, and
indemnify, defend and hold the Administrative Agent and any such other Lender
preparing a Report harmless from and against, the claims, actions, proceedings,
damages, costs, expenses and other amounts (including, without limitation
reasonable attorney costs) incurred by the Administrative Agent and any such
other Lender preparing a Report as the direct or indirect result of any third
parties who might obtain all or part of any Report through the indemnifying
Lender.
14.18 Relation Among Lenders.
The Lenders are not partners or co-venturers, and no Lender shall
be liable for the acts or omissions of, or (except as otherwise set forth herein
in case of the Administrative Agent) authorized to act for, any other Lender.
<PAGE>
ARTICLE 15
GUARANTEES
Each Guarantor unconditionally guarantees, as a primary obligor and not
merely as a surety, jointly and severally with each other Guarantor, the due and
punctual payment of the principal of and interest on the Loans and of all other
Obligations, when and as due, whether at maturity, by acceleration, by notice or
prepayment or otherwise. Each Guarantor further agrees that the Obligations may
be extended and renewed, in whole or in part, without notice to or further
assent from it, and that it will remain bound upon its guarantee notwithstanding
any extension or renewal of any Obligations.
To the fullest extent permitted by law, each Guarantor waives
presentment to, demand of payment from and protest to the Borrowers or any other
Person of any of the Obligations, and also waives notice of acceptance of its
guarantee and notice of protest for nonpayment. To the fullest extent permitted
by law, the obligations of a Guarantor hereunder shall not be affected by (a)
the failure of the Administrative Agent or any Lender to assert any claim or
demand or to enforce any right or remedy against any Borrower or any other
Guarantor under the provisions of this Agreement or any of the other Loan
Documents or otherwise; (b) any rescission, waiver, amendment or modification of
any of the terms or provisions of this Agreement, any of the other Loan
Documents, any guarantee or any other agreement; (c) the release of any security
held by the Administrative Agent or any Lender for the Obligations or any of
them; (d) the failure of the Administrative Agent or any Lender to exercise any
right or remedy against any other Guarantor of the Obligations; or (e) the
delivery to the Administrative Agent on the Closing Date of the Amended and
Restated Guarantees.
Each Guarantor further agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by the Administrative Agent or any Lender to any
security (if any) held for payment of the Obligations or to any balance of any
deposit account or credit on the books of the Administrative Agent or any Lender
in favor of any Borrower or any other Person.
<PAGE>
To the fullest extent permitted by law, the obligations of each
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including, without limitation, any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, to
the fullest extent permitted by law, the obligations of each Guarantor hereunder
shall not be discharged or impaired or otherwise affected by the failure of the
Administrative Agent or any Lender to assert any claim or demand or to enforce
any remedy under this Agreement or under any other Loan Document, any guarantee
or any other agreement, by any waiver or modification of any provision thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the Obligations, or by any other act or omission which may or might in any
manner or to any extent vary the risk of such Guarantor or otherwise operate as
a discharge of such Guarantor as a matter of law or equity.
Each Guarantor further agrees that its guarantee shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal or of interest on any Obligation is rescinded or
must otherwise be returned by the Administrative Agent or any Lender upon the
bankruptcy or reorganization of any Borrower or otherwise.
Each Guarantor hereby waives and releases all rights of
subrogation against each Credit Party and its property and all rights of
indemnification, contribution and reimbursement from each Credit Party and its
property, in each case in connection with this guarantee and any payments made
hereunder, and regardless of whether such rights arise by operation of law,
pursuant to contract or otherwise.
ARTICLE 16
MISCELLANEOUS
16.1 Cumulative Remedies; No Prior Recourse to Collateral.
The enumeration herein of the Administrative Agent's and each
Lender's rights and remedies is not intended to be exclusive, and such rights
and remedies are in addition to and not by way of limitation of any other rights
or remedies that the Administrative Agent and the Lenders may have under the UCC
or other applicable law. The Administrative Agent and the Lenders shall have the
right, in their sole discretion, to determine which rights and remedies are to
be exercised and in which order. The exercise of one right or remedy shall not
preclude the exercise of any others, all of which shall be cumulative. The
Administrative Agent and the Lenders may, without limitation, proceed directly
against any or all of the Credit Parties to collect the Obligations without any
prior recourse to the Collateral. No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
<PAGE>
16.2 Severability.
The illegality or unenforceability of any provision of this
Agreement or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the remaining provisions of
this Agreement or any instrument or agreement required hereunder.
16.3 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(A) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO
ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW
RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF NEW YORK; PROVIDED THAT
THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH CREDIT PARTY, THE ADMINISTRATIVE AGENT AND THE
LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH CREDIT PARTY, THE
ADMINISTRATIVE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. NOTWITHSTANDING THE FOREGOING: (1) THE ADMINISTRATIVE AGENT AND
THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY
CREDIT PARTY OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE
ADMINISTRATIVE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO
REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF
THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN
THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE THOSE JURISDICTIONS.
<PAGE>
(C) EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL
(RETURN RECEIPT REQUESTED) DIRECTED TO SUCH CREDIT PARTY AT ITS ADDRESS SET
FORTH IN SECTION 16.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE
(5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS. NOTHING
CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS TO SERVE LEGAL
PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
16.4 WAIVER OF JURY TRIAL.
EACH CREDIT PARTY, LENDER AND THE ADMINISTRATIVE AGENT WAIVES ITS
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY ADMINISTRATIVE AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH CREDIT PARTY, LENDER
AND THE ADMINISTRATIVE AGENT AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
16.5 Survival of Representations and Warranties.
All of each Credit Party's representations and warranties
contained in this Agreement shall survive the execution, delivery, and
acceptance thereof by the parties, notwithstanding any investigation by the
Administrative Agent or the Lenders or their respective agents.
16.6 Other Security and Guaranties.
The Administrative Agent, may, without notice or demand and
without affecting the Credit Parties' obligations hereunder, from time to time:
(a) take from any Person and hold collateral (other than the Collateral) for the
payment of all or any part of the Obligations and exchange, enforce or release
such collateral or any part thereof; and (b) accept and hold any endorsement or
guaranty of payment of all or any part of the Obligations and release or
substitute any such endorser or guarantor, or any Person who has given any Lien
in any other collateral as security for the payment of all or any part of the
Obligations, or any other Person in any way obligated to pay all or any part of
the Obligations.
<PAGE>
16.7 Fees and Expenses.
(a) Each Borrower agrees, jointly and severally, to pay to the Administrative
Agent, for its benefit, on demand, all reasonable costs and expenses paid or
incurred by the Administrative Agent in connection with the Loan Documents and
the financing contemplated thereunder, including but not limited to reasonable
appraisal fees, title insurance fees, audit fees, recording fees, travel and
transportation fees, search and filing fees, and the reasonable fees and
expenses of Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP, special counsel
to the Administrative Agent, all local counsel to the Administrative Agent and
allocated costs and expenses of in-house counsel to the Administrative Agent,
and of any industry, environmental, tax, accounting and other consultants
retained by the Administrative Agent in connection with the discharge of its
duties under the Loan Documents. Such expenses shall also include, without
limitation, any reasonable costs paid or incurred by the Agent (including,
without limitation, reasonable fees and disbursements of respective special
counsel to the Administrative Agent as well as the allocated costs and expenses
of in-house counsel to the Administrative Agent) in connection with (i) the
administration of the financial accommodations herein provided (including,
without limitation, appraisals, audits, inspections and verifications of the
Collateral, including, without limitation, customary per diem charges for field
examinations and audits and the preparation of reports thereof (such charge is
currently $750 per day (or portion thereof) for each agent or employee of the
Administrative Agent with respect to each field examination or audit)), (ii)
preserving and protecting the Collateral, (iii) any waivers, amendments,
modifications, extensions, renewals, renegotiations or "work-outs" of this
Agreement or any instrument or document delivered in connection herewith and
(iv) any consents or approvals provided hereunder or otherwise requested by any
Credit Party. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include recording costs, appraisal costs, paralegal
fees, costs and expenses; accountants' fees, costs and expenses; photocopying
and duplicating expenses; long distance telephone charges; air express charges;
telegram charges; telecopier charges; secretarial overtime charges; and expenses
for travel, lodging and food paid or incurred in connection with any of the
foregoing. In addition, in the event that the Administrative Agent requests an
appraisal of the Leesport, Pennsylvania facility (which appraisal may be
requested by the Administrative Agent at any time during the term of this
Agreement), the Borrowers shall pay all appraisal fees and expenses with respect
thereto (but not more frequently than once during the term of this Agreement).
<PAGE>
(b) If an Event of Default occurs, the Borrowers shall pay all court costs and
costs of collection paid or incurred by the Administrative Agent and any Lender
in connection with the Obligations, the Collateral and the Loan Documents,
including, without limitation, reasonable fees, expenses and disbursements of
counsel (including the allocated costs and expenses of in-house counsel)
employed in connection with any and all collection efforts. The attorney's fees
arising from such services, including those of any appellate proceedings, and
all expenses, costs, charges and other fees incurred by such counsel in any way
or with respect to or arising out of or in connection with or relating to any of
the events or actions described in this Section 16.7 shall be payable by the
Borrowers to the Administrative Agent or the Lenders, as the case may be, on
demand, and shall be additional Obligations under this Agreement. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
may include: recording costs, appraisal costs, paralegal fees, costs and
expenses; accountants' fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram charges;
telecopier charges; secretarial overtime charges; and expenses for travel,
lodging and food paid or incurred in connection with any of the foregoing.
(c) The foregoing Section 16.7(a) and Section 16.7(b) shall not be construed to
limit any other provisions of the Loan Documents regarding costs and expenses to
be paid by any Borrower or other Credit Party. All of the foregoing costs and
expenses shall be charged to the Borrowers' Loan Account as Loans as described
in Section 4.5.
16.8 Notices.
Except as otherwise provided herein, all notices, demands and
requests that any party is required or elects to give to any other shall be in
writing, or by a telecommunications device capable of creating a written record,
and any such notice shall become effective (a) upon personal delivery thereof,
including, but not limited to, delivery by overnight mail and courier service,
or (b) in the case of notice by such a telecommunications device, when properly
transmitted:
If to the Administrative Agent or to BABC:
BankAmerica Business Credit, Inc.
40 East 52nd St.
New York, New York 10022
Attention: Division Manager
Telecopy No. (212) 836-5167
with copies to:
Bank of America NT & SA
10124 Old Grove Road
San Diego, California 92131
Attention: Legal Department
Telecopy No. (619) 549-7518
If to any Lender (other than BABC): at such address for such Lender as set forth
on the signature pages hereto (or, with respect to a Lender which was an
Assignee, on the applicable Assignment and Acceptance pursuant to which such
Assignee became a Lender);
<PAGE>
If to any Credit Party:
c/o Ames Department Stores, Inc.
2418 Main Street
Rocky Hill, Connecticut 06067
Attention: Rolando de Aguiar
Telecopy No.: (860) 563-8560
with copies to:
c/o Ames Department Stores, Inc.
2418 Main Street
Rocky Hill, Connecticut 06067
Attention: David H. Lissy, Esq.
Telecopy No.: (860) 257-5160
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Warren T. Buhle, Esq.
Telecopy No.: (212) 310-8007
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
16.9 Waiver of Notices.
Unless otherwise expressly provided herein, each Credit Party
waives presentment, protest and notice of demand or dishonor and protest as to
any instrument, notice of intent to accelerate the Obligations and notice of
acceleration of the Obligations, as well as any and all other notices to which
it might otherwise be entitled. No notice to or demand on any Credit Party which
the Administrative Agent or any Lender may elect to give shall entitle any
Credit Party to any or further notice or demand in the same, similar or other
circumstances.
16.10 Binding Effect.
The provisions of this Agreement shall be binding upon and inure
to the benefit of the respective representatives, successors, and assigns of the
parties hereto; provided, however, that no interest herein may be assigned by
any Credit Party without prior written consent of the Administrative Agent and
each Lender. The rights and benefits of the Administrative Agent and the Lenders
hereunder shall, if such Persons so agree, inure to any party acquiring any
interest in the Obligations or any part thereof.
<PAGE>
16.11 Indemnity of the Administrative Agent and the Lenders by the Credit
Parties.
Each Credit Party agrees, jointly and severally, to defend,
indemnify and hold the Administrative Agent-Related Persons, and each Lender and
each of its respective officers, directors, employees, Affiliates, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements (including
Attorney Costs) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans and the termination,
resignation or replacement of the Administrative Agent or replacement of any
Lender) be imposed on, incurred by or asserted against any such Person in any
way relating to or arising out of this Agreement or any document contemplated by
or referred to herein, or the transactions contemplated hereby, or any action
taken or omitted by any such Person under or in connection with any of the
foregoing, including with respect to any investigation, litigation or proceeding
(including any insolvency proceeding or appellate proceeding) related to or
arising out of this Agreement, any other Loan Document, or the Loans or the use
of the proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Credit Parties shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities to the extent
resulting from the gross negligence or willful misconduct of such Indemnified
Person. The agreements in this Section shall survive payment of all other
Obligations.
16.12 Limitation of Liability.
No claim may be made by any Credit Party, any Lender or other
Person against the Administrative Agent, any Lender, or the affiliates,
directors, officers, officers, employees, or agents of any of them for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement or any other Loan Document, or
any act, omission or event occurring in connection therewith, and each Credit
Party and each Lender hereby waive, release and agree not to sue upon any claim
for such damages, whether or not accrued and whether or not know or suspected to
exist in its favor.
16.13 Final Agreement.
This Agreement and the other Loan Documents are intended by each
Credit Party, the Administrative Agent and the Lenders to be the final,
complete, and exclusive expression of the agreement among them. This Agreement
supersedes any and all prior oral or written agreements relating to the subject
matter hereof. No modification, rescission, waiver, release, or amendment of any
provision of this Agreement or any other Loan Document shall be made, except by
a written agreement signed by the Credit Parties and a duly authorized officer
of each of the Administrative Agent and the requisite Lenders.
<PAGE>
16.14 Counterparts.
This Agreement may be executed in any number of counterparts, and by the
Administrative Agent, each Lender and each Credit Party in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
16.15 Captions.
The captions contained in this Agreement are for convenience of reference
only, are without substantive meaning and should not be construed to modify,
enlarge, or restrict any provision.
16.16 Right of Setoff.
In addition to any rights and remedies of the Lenders provided by law, if an
Event of Default exists or the Loans have been accelerated, each Lender is
authorized at any time and from time to time, without prior notice to any Credit
Party, any such notice being waived by the Credit Parties to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Lender to or for the credit or the
account of any Credit Party against any and all Obligations owing to such
Lender, now or hereafter existing, irrespective of whether or not the
Administrative Agent or such Lender shall have made demand under this Agreement
or any Loan Document and although such Obligations may be contingent or
unmatured. Each Lender agrees promptly to notify the Borrowers and the
Administrative Agent after any such set-off and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. NOTWITHSTANDING THE FOREGOING, NO
LENDER SHALL EXERCISE ANY RIGHT OF SET-OFF, BANKER'S LIEN, OR THE LIKE AGAINST
ANY DEPOSIT ACCOUNT OR PROPERTY OF ANY CREDIT PARTY HELD OR MAINTAINED BY SUCH
LENDER WITHOUT THE PRIOR WRITTEN UNANIMOUS CONSENT OF THE LENDERS.
16.17 Joint and Several Liability.
The Borrowers shall be liable for all amounts due to the
Administrative Agent and/or any Lender under this Agreement, regardless of which
Borrower actually receives Loans or other extensions of credit hereunder or the
amount of such Loans received or the manner in which the Administrative Agent
and/or such Lender accounts for such Loans or other extensions of credit on its
books and records. Each Borrower's Obligations with respect to Loans made to it,
and each Borrower's Obligations arising as a result of the joint and several
liability of the Borrowers hereunder, with respect to Loans made to the other
Borrower hereunder, shall be separate and distinct obligations, but all such
Obligations shall be primary obligations of each Borrower.
<PAGE>
The Borrower's Obligations arising as a result of the joint and
several liability of the Borrowers hereunder with respect to Loans or other
extensions of credit made to the other Borrower hereunder shall, to the fullest
extent permitted by law, be unconditional irrespective of (i) the validity or
enforceability, avoidance or subordination of the Obligations of the other
Borrower or of any promissory note or other document evidencing all or any part
of the Obligations of the other Borrower, (ii) the absence of any attempt to
collect the Obligations from the other Borrower, any other guarantor, or any
other security therefor, or the absence of any other action to enforce the same,
(iii) the waiver, consent, extension, forbearance or granting of any indulgence
by the Administrative Agent and/or any Lender with respect to any provision of
any instrument evidencing the Obligations of the other Borrower, or any part
thereof, or any other agreement now or hereafter executed by the other Borrower
and delivered to the Administrative Agent and/or any Lender, (iv) the failure by
the Administrative Agent and/or any Lender to take any steps to perfect and
maintain its security interest in, or to preserve its rights to, any security or
collateral for the Obligations of the other Borrower, (v) the Administrative
Agent's and/or any Lender's election, in any proceeding instituted under the
Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, (vi) any borrowing or grant of a security interest by the other Borrower,
as debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the
disallowance of all or any portion of the Administrative Agent's and/or any
Lender's claim(s) for the repayment of the Obligations of the other Borrower
under Section 502 of the Bankruptcy Code, or (viii) any other circumstances
which might constitute a legal or equitable discharge or defense of a guarantor
or of the other Borrower. With respect to the Borrower's Obligations arising as
a result of the joint and several liability of the Borrowers hereunder with
respect to Loans or other extensions of credit made to the other Borrower
hereunder, each Borrower waives, until the Obligations shall have been paid in
full and this Agreement shall have been terminated, any right to enforce any
right of subrogation or any remedy which the Administrative Agent and/or any
Lender now has or may hereafter have against any Borrower, any endorser or any
guarantor of all or any part of the Obligations, and any benefit of, and any
right to participate in, any security or collateral given to the Administrative
Agent and/or any Lender to secure payment of the Obligations or any other
liability of any Borrower to the Administrative Agent and/or any Lender.
Upon any Event of Default, the Administrative Agent may proceed
directly and at once, without notice, against any Borrower to collect and
recover the full amount, or any portion of the Obligations, without first
proceeding against the other Borrower or any other Person, or against any
security or collateral for the Obligations. Each Borrower consents and agrees
that the Administrative Agent shall be under no obligation to marshal any assets
in favor of any Borrower or against or in payment of any or all of the
Obligations.
[The remainder of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on the date
first above written.
BANKAMERICA BUSINESS CREDIT, INC.,
as the Administrative Agent
By:______________________________
Name:
Title:
Address: 40 East 52nd Street
New York, New York 10022
Attn: Division Manager
Telecopy No.: (212) 836-5167
AMES MERCHANDISING CORPORATION, as a Borrower and Guarantor
By:_____________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
AMES FS, INC., as a Borrower and Guarantor
By:_____________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
<PAGE>
HILLS DEPARTMENT STORE COMPANY, as a Borrower and Guarantor
By:_____________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
AMES DEPARTMENT STORES, INC., as a Guarantor
By:______________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
HSC ACQUISITION CORP., as a Guarantor
By:______________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
<PAGE>
HILLS STORES COMPANY, as a Guarantor
By:______________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
AMD, INC., as a Guarantor
By:______________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
AMES REALTY II, INC., as a Guarantor
By:______________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
<PAGE>
AMES TRANSPORTATION SYSTEMS, INC.,
as a Guarantor
By:______________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
CANTON ADVERTISING, INC.,
as a Guarantor
By:______________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
HDS TRANSPORT, INC.,
as a Guarantor
By:______________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
<PAGE>
CORPORATE VISION INC.,
as a Guarantor
By:______________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
HILLS DISTRIBUTING COMPANY,
as a Guarantor
By:______________________________
Name:
Title:
Address: 2418 Main Street
Rocky Hill, Connecticut 06067
Attn: Rolando de Aguiar
Telecopy No.: (860) 563-8560
<PAGE>
Commitment: $50,000,000 BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By:______________________________
Name:
Title:
Address: 40 East 52nd Street
New York, New York 10022
Attn: Division Manager
Telecopy No.: (212) 836-5167
<PAGE>
Commitment: $50,000,000 CONGRESS FINANCIAL CORPORATION,
as a Lender
By:_______________________________
Name:
Title
Address: 1133 Avenue of the Americas
New York, New York 10036
Attn: Ms. Cindy Dennbaum
Telecopy No.: (212) 545-4283
<PAGE>
Commitment: $50,000,000 GENERAL ELECTRIC CAPITAL CORPORATION,
as a Lender
By:______________________________
Name:
Title:
Address: 201 High Ridge Road
Stamford, Connecticut 06927
Attn: Vice President - Portfolio
Telecopy No.: (203) 316-7893
<PAGE>
Commitment: $50,000,000 TRANSAMERICA BUSINESS CREDIT CORPORATION,
as a Lender
By:_____________________________________
Name:
Title:
Address: 555 Theodore Fremd Avenue
Suite 301
Rye, New York 10580
Attn: Mr. Jon Oldham
Telecopy No.: (914) 921-0110
<PAGE>
Commitment: $30,000,000 THE CHASE MANHATTAN BANK,
as a Lender
By:________________________________
Name:
Title:
Address: 633 Third Avenue
New York, New York 10017
Attn: Credit Deputy
Telecopy No.: (212) 622-5218
<PAGE>
Commitment: $25,000,000 SANWA BUSINESS CREDIT CORPORATION,
as a Lender
By:_________________________________
Name:
Title:
Address: 500 Glenpointe Centre West
Teaneck, New Jersey 07666
Attn: Mr. Peter Skavla
Telecopy No.: (201) 836-4744
<PAGE>
Commitment: $25,000,000 LASALLE BUSINESS CREDIT, INC.,
as a Lender
By:_________________________________
Name:
Title:
Address: 477 Madison Avenue
12th Floor
New York, New York 10022
Attn: Mr. Corey Sclar
Telecopy No.: (212) 371-2966
<PAGE>
Commitment: $25,000,000 FLEET NATIONAL BANK, as a Lender
By:_____________________________________
Name:
Title:
Address: 777 Main Street
MSN 240
Hartford, Connecticut 06115
Attn: Linda Smyth
Telecopy No.: (860) 986-6919
<PAGE>
Commitment: $25,000,000 NATIONAL CITY CORPORATION, as a Lender
By:_____________________________________
Name:
Title:
Address:1965 East 6th Street, Suite 400
Cleveland, Ohio 44114
Attn: Ms. Carla Kehres
Telecopy No.: (216) 575-9486
<PAGE>
Commitment: $25,000,000 PNC BANK, NATIONAL ASSOCIATION, as a Lender
By:_____________________________________
Name:
Title:
Address: 1600 Market Street
31st Floor F2-F070-31-2
Philadelphia, Pennsylvania 19103
Attn: Ms. Jane Anne Frehle
Telecopy No.: (215) 585-4749
<PAGE>
Commitment: $20,000,000 CITIZENS BANK, as a Lender
By:_________________________________
Name:
Title:
Address: 237 Main Street
Middletown, Connecticut
Attn: Mr. William Creaser
Telecopy No.: (860) 368-4444
<PAGE>
Commitment: $30,000,000 FOOTHILL CAPITAL CORPORATION, as a Lender
By:_____________________________________
Name:
Title:
Address: 11111 Santa Monica Blvd.
Los Angeles, California 90025
Attn: Mr. Todd Nakamoto
Telecopy No.: (310) 479-8952
<PAGE>
Commitment: $20,000,000 AMSOUTH BANK, as a Lender
By:_____________________________________
Name:
Title:
Address: c/o AmSouth Capital Corp.
350 Park Avenue
19th Floor
New York, New York 10022
Attn: Mr. Joseph B. Huston
Telecopy No.: (212) 935-7548
<PAGE>
Commitment: $15,000,000 IBJ SCHRODER BUSINESS CREDIT CORPORATION,
as a Lender
By:_____________________________________
Name:
Title:
Address: One State Street
New York, New York 10004
Attn: Mr. Wing Louie
Telecopy No.: (212) 858-2151
<PAGE>
Commitment: $50,000,000 BANKBOSTON RETAIL FINANCE INC., as a Lender
By:_____________________________________
Name:
Title:
Address: 40 Broad Street
11th Floor
Boston, Massachusetts 02109
Attn: Ms. Betsy Ratto
Telecopy No.: (617) 434-4339
<PAGE>
Commitment: $50,000,000 CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By:__________________________________
Name:
Title:
Address: 1211 Avenue of the Americas
New York, New York 10036
Attn: Mr. Kevin O'Hara
Telecopy No.: (212) 536-1295
<PAGE>
Commitment: $25,000,000 TEXTRON FINANCIAL CORPORATION,
as a Lender
By:__________________________________
Name:
Title:
Address: 4550 North Point
Suite 400
Alpharetta, Georgia 30022
Attn: Ms. Christine MacKay
Telecopy No.: (770) 360-1672
<PAGE>
Commitment: $50,000,000 HELLER FINANCIAL, INC., as a Lender
By:_________________________________
Name:
Title:
Address: 150 East 42nd Street
7th Floor
New York, New York 10017
Attn: Mr. Thomas Bukowski
Telecopy No.: (212) 880-2960
<PAGE>
Commitment: $10,000,000 FREMONT FINANCIAL CORPORATION,
as a Lender
By:__________________________________
Name:
Title:
Address: 2020 Santa Monica Boulevard
Suite 500
Santa Monica, California 90404
Attn: Mr. John Nehr
Telecopy No.: (310) 264-7401
<PAGE>
Commitment: $25,000,000 BNY FINANCIAL CORPORATION,
as a Lender
By:_________________________________
Name:
Title:
Address: 1290 Avenue of the Americas
3rd Floor
New York, New York 10004
Attn: Mr. Charles Suthar
Telecopy No.: (212) 408-4317
Exhibit 10(l)
POST MERGER TRANSITION AND AGENCY AGREEMENT
This Agency Agreement is made as of this 31st day of December 1998
by and among (i) GORDON BROTHERS RETAIL PARTNERS, LLC ("Gordon Brothers"), a
Delaware limited liability company with a principal place of business at 40
Broad Street, Boston, Massachusetts 02109 and THE NASSI GROUP, LLC ("Nassi"), a
California limited liability company with a principal place of business at 23622
Calabasas Road, Suite 333, Calabasas, California 91302 (Gordon Brothers and
Nassi, collectively, the "Agent") and (ii) HILLS STORES COMPANY ("HSC"), a
Delaware corporation, having principal offices at 2418 Main Street, Rocky Hill,
Connecticut 06067, HILLS DEPARTMENT STORES COMPANY ("HDSC"), a Delaware
corporation, having principal offices at 2418 Main Street, Rocky Hill,
Connecticut 06067 and AMES MERCHANDISING CORPORATION (formerly known as Zayre's
Central Corp.) ("Ames"), a Delaware corporation, having principal offices at
2418 Main Street, Rocky Hill, Connecticut 06067 (collectively, and as applicable
to the operator of the particular Store, the "Merchant").
R E C I T A L S
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
November 12, 1998 (the "Merger Agreement"), among Ames Department Stores, Inc.
("Ames"), HSC Acquisition Corp. ("Purchaser") and HSC, it is contemplated that
upon the Effective Time (as defined in the Merger Agreement), Purchaser will
merge with and into HSC (the "Merger"), with HSC as the surviving corporation;
and
WHEREAS, the Merchant operates certain retail stores in various
states under the trade name "Hills" and "Ames" and, in connection with the
Merger, (i) will cease operating stores under the "Hills" trade name and will
remodel and restock the store locations as "Ames" stores and (ii) may close
certain stores currently operating under the "Ames'" trade name (the "Ames
Stores") as identified from time to time; and
WHEREAS Merchant desires that, in the joint interests of the
parties, the Agent assist Merchant in the orderly transition of store locations
from "Hills" to "Ames" stores and, in connection therewith, act as the
Merchant's exclusive sales agent for the limited purpose of conducting the Sale
(as defined below) at the Stores (as defined below) upon the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth hereinafter and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Agent and the
Merchant hereby agree as follows:
1. Agency Appointment
(a) The Agent shall serve as the Merchant's exclusive agent to conduct sales
(the "Sale") of all Merchandise (as defined below), inclusive of such
Merchandise held by the Merchant in its Warehouse (as defined below) and, such
additional On Order Goods (as defined below) that may be received by the
Merchant during the course of the Sale as provided for herein. The Merchandise
is located at said Warehouse and at approximately one hundred and fifty-five
(155) Hills stores previously operated by HSC and HDSC, plus up to fifteen (15)
Ames stores, all of which are identified on Exhibit 1(a) hereto (collectively
the "Stores"). After the Sale Commencement Date, Merchant may amend Exhibit 1(a)
to move not more than eight (8) stores between "Group Two" and "Group Three" (as
such store Groups are identified on Exhibit 1(a)); provided however, that
Merchant can not move more than six (6) such stores from "Group Two" to "Group
Three". In addition, Merchant shall have the right to amend Exhibit 1(a) in
order to add or delete Ames stores at any time on or before May 15, 1999. The
Sale shall only be conducted at the Stores.
2. Matters Relative to the Merchandise
(a) Physical Inventory Taking
(i) At the Stores. In connection with the Merger, the Merchant
will be taking a physical inventory of Merchandise in approximately 100 Stores
and the Warehouse in accordance with a schedule annexed hereto as Exhibit
2(a)(i), which inventory will be taken by Washington Inventory Service ("WIS")
and/or RGIS (the "Inventory Service"). Additionally, a physical inventory of the
remaining Stores will be taken in accordance with a schedule to be agreed upon
between Merchant and Agent (the inventory taking at all of the Stores and the
Warehouse shall be referred to herein collectively as the "Inventory Taking").
The Inventory Taking shall be a departmental inventory and shall be both a
Retail Price (as defined in subsection 2(b) hereof) physical inventory and SKU
of the Merchandise located at the Stores and the Warehouse. (The date of the
inventory taking at each Store and at the Warehouse shall be the "Inventory
Date"). Unless otherwise agreed between Merchant and Agent, each Store shall be
closed, and no sales transacted, during the taking of the inventory in such
Store. The costs and fees of such Inventory Service, including, without
limitation, travel costs, the hourly rate negotiated by Merchant with the
Inventory Service, and the costs of any special report from the Inventory
Service jointly requested by Merchant and Agent, shall be allocated fifty
percent (50%) to the Merchant and fifty percent (50%) to the Agent; provided
however, that Agent shall pay all increased costs of inventory taking relating
to a SKU inventory. Other than such costs and fees of the Inventory Service,
each of Merchant and Agent shall bear their own costs relative to the Inventory
Taking. Merchant and Agent shall each have representatives present during the
Inventory Taking and each shall have the right to review and verify the listing
and tabulation of the inventory count as provided by the Inventory Service. The
procedures to perform the Inventory Taking and its verifications are set forth
in Exhibit 2(a)(i). Prior to the Inventory Taking, Agent shall have reasonable
access to all pricing and cost files of inventories, style runs and all other
readily available documents of Merchant necessary to taking the physical
inventory, provided that such documents are currently in existence. Until the
Inventory Taking shall have been completed at a Store or the Warehouse, the
Agent shall not be permitted to transfer Merchandise to or from such Store or
the Warehouse, except as otherwise may be mutually agreed by Merchant and Agent.
(ii) On Order Goods. Merchant shall provide Agent with a list ("On
Order Goods List") of goods to be received in the Stores or the Warehouse after
the Sale Commencement Date ("On Order Goods"), which shall be included in the
Sale. The On Order Goods must be received in the Stores or the Warehouse no
later than June 1, 1999, except for goods scheduled to be delivered in June,
1999 as provided for on the On Order Goods List. On Order Goods delivered in May
1999 shall not exceed $15 million. With respect to any On Order Goods included
in the Sale, such On Order Goods shall be included at the Retail Price for the
comparable Merchandise already in the Warehouse or Stores. On Order Goods shall
be included in the Guaranteed Amount on the actual date of delivery to the
Stores or the Warehouse as the case may be. Agent shall be responsible for
checking the deliveries of all such On Order Goods against receipts, bills,
manifests and other shipping/delivery documentation accompanying such inventory.
Agent shall promptly notify Merchant when On Order Goods are received. Agent
shall be responsible for and direct deliveries of the On Order Goods included in
the Sale to the Stores, including method of shipment. Merchant may undertake to
cancel orders for all or a portion of the On Order Goods provided that any On
Order Goods that are not so cancelled shall be included in the Sale. Merchant
shall use its best efforts to arrange for the delivery of On Order Goods within
the time frames identified on the On Order Goods List.
(b) Valuation of Merchandise
For purposes of this Agreement, with respect to Merchandise other
than Defective Goods, Display Goods and Holiday Seasonal Goods, "Retail Price"
shall mean the lower of (i) the retail selling price of each item of Merchandise
as sold at the Stores on the Sale Commencement Date less any permanent markdowns
on such Merchandise, in each case as such price is indicated on the tickets for
such Merchandise (which price shall be exclusive of (x) any "point of sale"
markdowns and sales, and (y) sales, excise and gross receipts taxes) or (ii) the
SKU or "Scan" price of each such item of Merchandise (which price shall be
exclusive of (x) any "point of sale" markdowns and sales, and (y) sales, excise
and gross receipts taxes). With respect to Merchandise constituting Defective
Goods, Display Goods and Holiday Seasonal Goods, "Retail Price" shall be
determined in the manner provided in Section 2(c)(i)(E) of this Agreement.
(c) Merchandise Subject to this Agreement
(i) For purposes hereof,
(A) "Merchandise" shall mean:
(1) all goods that are owned by Merchant and located at the Stores on the Sale
Commencement Date (as defined in Section 3(a) hereof); provided however, that in
determining the inventory physically counted at the Stores on the Inventory
Date, the inventory count shall be increased by the inventory that is sold by
the Agent at a Store for the period from the Sale Commencement Date to the
Inventory Date. Agent and Merchant shall jointly keep a strict count of gross
register receipts (including any discounts offered by Agent) and cash reports to
determine what inventory, if any, was sold before the completion of the
Inventory Taking as provided for in the immediately preceding sentence ("Gross
Sales"); provided that such inventory shall be included in Merchandise using the
Gross Sales method plus three percent (3%) shrink provision.
(2) all goods used in connection with the stores and owned by Merchant and
located in those certain warehouse facilities used by Merchant which are located
at (i) 33 Urban Crest Industrial Drive, Grove City, Ohio 43123, (ii) 4200
Westward Avenue, Columbus, Ohio 43228, and (iii) 4300 Janitrol Road, Columbus,
Ohio 43228 (collectively, the "Warehouse"); provided however that Merchandise
shall not include any new inventory that may arrive at the Warehouse which will
be used by Merchant going-forward in the Stores operating under the "Ames" trade
name; provided further that Agent shall vacate and transfer (or sufficiently
segregate to Merchant's satisfaction) any remaining goods in the Warehouse
located at (i) 33 Urban Crest Industrial Drive by no later than May 31, 1999,
(ii) 4200 Westward Avenue by no later than March 31, 1999 and (iii) 4300
Janitrol Road, which shall be vacated as follows: (x) the A building shall be
vacated by no later than June 30, 1999; (y) the B and C buildings shall be
vacated by no later than March 31, 1999; and (z) the D building shall be vacated
by no later than February 15, 1999.
(3) On Order Goods;
(4) Defective Goods;
(5) Display Goods; and
(6) Holiday Seasonal Goods.
(B) "Defective Goods" are goods reasonably agreed upon by Merchant and Agent (in
the manner provided for below) as defective or otherwise not salable in the
ordinary course because they are ripped, torn, worn, soiled, missing parts
(other than those reasonably substituted parts which may be provided by
Merchant), dented, scratched or contain other similar damaging characteristics .
Display merchandise shall not be deemed defective per se. Defective Goods shall
not include goods which have minor dents in the product packaging that do not
affect the salability of the product contained inside the package.
(C) "Display Goods" are those items of Merchandise used in the ordinary course
of business as displays or floor models and not customarily sold by Merchant at
the same selling price as other such items of Merchandise.
(D) "Holiday Seasonal Goods" are those items of Merchandise specifically
identifiable as holiday Merchandise for Christmas, Halloween or Thanksgiving.
(E) In order to determine the extent to which there are Defective Goods, Display
Goods and Holiday Seasonal Goods, during the Inventory Taking, Merchant and
Agent shall select and inspect twenty-five (25) "Hills" Stores for the purpose
of jointly identifying the Defective Goods, Display Goods and Holiday Seasonal
Goods respectively in such Stores, which shall form the basis for determining,
(i) as a percentage of all Merchandise in all Stores, the extent to which there
are Defective Goods, Display Goods and Holiday Seasonal Goods to be included in
the Sale and (ii) the adjustment (if any) required to the Retail Price for such
Merchandise (the "Adjusted Retail Price").
(ii) Merchandise shall not include (x) goods retained by Merchant
as bailee, held on consignment, or subject to leased or licensed departments in
the Stores or other agreement requiring the return of goods to vendors (except,
in each such instance, if the third party with an interest in the goods consents
to the inclusion of such goods in the Sale); (y) Fixtures (which are otherwise
provided for below in Section 11 hereof); and (z) goods held for repair or
layaway for customers resulting from pre-Sale Commencement Date transactions.
Agent shall be responsible for processing and handling all goods subject to this
paragraph, and contracts relating thereto, as an Expense; provided however that
Merchant shall fully cooperate with Agent in administering such excluded goods.
All amounts paid by the customers for any such goods shall be paid to and
constitute funds of Merchant, which shall be collected by Agent during the Sale
for Merchant's benefit. Agent shall account for all such sums on each Wednesday
for the prior week's (i.e. Sunday through Saturday) payments, which shall be
turned over to Merchant on a daily basis.
(iii) Except as approved by Merchant in advance, Agent shall not
augment and bring any additional merchandise or goods into the Stores, which
merchandise or goods are not owned by Merchant, to sell at the Sale.
(iv) During the Sale Term, all Merchandise shall remain the
property of Merchant, subject to Agent's rights under Section 5(c).
(d) Supplies
Merchant does not represent that adequate stocks of supplies
(e.g., tickets, boxes, bags, twine) are or will be available at the Stores or
the Warehouse as of the Sale Commencement Date, and Merchant shall have no
obligation to provide additional supplies. Agent shall have the right to obtain
additional supplies from Merchant's suppliers at Merchant's actual cost plus
freight charges.
3. Conduct of the Sale
(a) Sale Term
The Sale shall commence at all of the Stores as of January 2, 1999
(the "Sale Commencement Date"); provided however that the Sale shall not
commence until the conditions set forth in Section 6 hereof have been satisfied
or waived; provided further however that the "Sale Commencement Date" for any
Ames Store shall be the date that such Store is included in the Sale in
accordance with the terms of this Agreement. With respect to each Store, the
Agent shall complete the Sale at such Store, and shall vacate the Store
premises, prior to the "remodel start date" listed for such Store on Exhibit
1(a) (with respect to each Store, the "End Date"). Unless Merchant agrees in
writing, the Agent shall not have the right to terminate the Sale at any Store,
and the Store may not "go dark", prior to the End Date. In the event that the
Agent fails to vacate the Store premises in "broom clean" condition by not later
than the normal close of business for such Store on the End Date, then the Agent
shall continue to pay any and all costs and expenses of the Sale, including,
without limitation, Occupancy Charges for the Stores, for the period of time
after the End Date during which the Sale continues and until the Agent
surrenders the Stores in "broom clean" condition on or after the Sale
Termination Date (as defined below), in addition to such other amounts as
provided for below. Unless expressly agreed to in writing by the Merchant, time
is of the essence with respect to the End Dates listed on Exhibit 1(a) for each
Store and nothing herein constitutes a consent by Merchant to extend such End
Dates. The date the Agent ceases to operate a Sale at a Store shall be the "Sale
Termination Date." The period from the Sale Commencement Date to the Sale
Termination Date as to each Store shall be hereinafter referred to as the "Sale
Term."
(b) Rights of Agent; Final Sales
(i) The Agent shall conduct the Sale during the Sale Term in the
name of and on behalf of the Merchant and shall conduct the Sale in a
commercially reasonable manner and in compliance with (x) all applicable laws,
regulations and ordinances, including the GOB Laws (as defined in Section 3(c)
(vii)), and (y) the terms of the Leases (as defined in Section 3(c)(vii)) and
other applicable agreements. Subject to the foregoing, during the Sale Term, the
Agent, in the exercise of its reasonable discretion, shall be entitled:
(A) subject to the prior approval of Merchant as provided for in
Section 3(b)(iii), to establish and implement advertising and promotion programs
as "clearance," "sale on everything," "entire store," "everything must go,"
"total blow-out," "unrestricted public sale" or similar such sales; provided
however, that Agent shall not be entitled to conduct the Sale as a "Going Out of
Business" sale without obtaining Merchant's prior approval. If Agent obtains all
applicable licenses and approvals under the GOB Laws with respect to one or more
of the Stores, then the Agent may, subject to Merchant's prior approval,
establish and implement advertising and promotion programs for such Store(s)
consistent with the GOB Laws, subject, however, to (i) the terms of the Leases
(as discussed more fully in Section 3(c)(vii) hereof), which may prohibit such
sales under the GOB Laws, and (ii) in Merchant's sole discretion, the consent of
the lessors to such Leases. To the extent requested by Agent with respect to a
Store, Merchant agrees to make (in a manner determined appropriate by Merchant)
an initial inquiry of its lessor at such Store to determine if any lessor has an
objection to conducting such sales under the GOB Laws at such Store; provided
however, that Merchant shall not be obligated to take any additional action to
obtain landlord consent. Notwithstanding anything herein to the contrary, if
Merchant or Agent receives an objection from a landlord for a Store regarding
the form or substance of in-Store advertising (including, without limitation, as
it relates to signage, content, etc.), Agent shall immediately modify such
advertising (including, without limitation, as it relates to signage, content,
etc.) in a manner Merchant deems necessary, in its sole discretion, in order to
resolve any concerns or objections by such landlord;
(B) to establish Sale prices;
(C) to use, without charge, and for the sole purpose of the Sale,
all furniture, fixtures, equipment, advertising materials and existing supplies
that are located at the Stores, intangible assets (including Merchant's name,
logo, and tax I.D. numbers), and other assets of Merchant that are located at
the Stores (whether owned leased, or licensed, subject, however, to the terms of
any such lease or license agreements to the extent applicable) which will be
returned to Merchant at the end of the Sale Term in the same condition as at the
date hereof, ordinary wear and tear excepted, to the extent the same (1) have
not been used in the ordinary course of business relating to the Sale (e.g.
supplies) and (2) otherwise have not been disposed of through no fault or
negligence of Agent;
(D) to use the Merchant's personnel at the Stores and the
Warehouse to the extent that the Agent, in the exercise of its reasonable
discretion, shall deem appropriate (as provided for more fully below); provided
however that Agent shall coordinate with Merchant's Human Resource Department;
(E) upon the date that Purchaser shall have accepted for payment
Shares (as defined in the Merger Agreement) tendered pursuant to the Offer (as
defined in the Merger Agreement), to have reasonable access to the Stores to
prepare for the Sale in a manner so as not to disrupt Merchant's business
operations, and during the Sale Term to use all Stores keys, case keys, security
codes, and safe and lock combinations to gain access to and to operate the
Stores;
(F) to transfer Merchandise between Stores; provided however that
Agent shall maintain detailed records, in accordance with Merchant's customary
and historic practices, of all Merchandise transferred into or from the Stores
setting forth (i) the specific Merchandise transferred, (ii) the Store or
Warehouse from which such Merchandise was transferred, (iii) the Store or
Warehouse to which such Merchandise was transferred; and
(G) upon the date that Purchaser shall have accepted for payment
Shares (as defined in the Merger Agreement) tendered pursuant to the Offer (as
defined in the Merger Agreement), to have reasonable access to and use of
Merchant's central office personnel, facilities, and services for MIS, payroll
processing, data processing and other administrative services necessary for the
Sale, and to the extent set forth Exhibit 3(b)(i)(G), so long as such access
does not unreasonably disrupt the business operations of Merchant.
(ii) Except as otherwise provided for herein for the Ordinary
Course Transition Operations, all sales of Merchandise will be "final sales" and
"as is" and no returns shall be accepted and all advertisements and sales
receipts will reflect the same and shall comply with all applicable laws,
regulations and ordinances, and the terms of the Leases. Agent shall not warrant
the Merchandise in any manner, but will pass manufacturers' warranties to the
customers, to the extent transferable.
(iii) Attached hereto as Exhibit 3(b)(iii) is the form of
advertising jointly agreed to by Merchant and Agent that shall be used in
connection with the Sale. Agent shall submit all modifications to such
advertising for the Sale to the Merchant for prior approval, which shall be sent
to Eugene Bankers and Beth Keegan via facsimile (at facsimile number (860)
257-5820). In addition, Agent may send direct mailings to Merchant's customers
subject to (i) Merchant's absolute approval of the form and substance of such
mailings and (ii) if requested by Merchant, the inclusion of promotional
materials or information by Merchant. All references to "advertising" in this
Agreement shall include all in-Store signage and other promotions.
(iv) Agent recognizes that Merchant's name and its various
trade names (including "Hills" and "Ames") have an established reputation for
quality in the community and shall use best efforts to conduct the Sale in a
manner consistent with Merchant's reputation.
(v) Agent shall post signs in each of the Stores, near the
cash registers, advising customers that they should receive cash register
receipts for Merchandise purchased during the Sale, which receipts shall be
imprinted with the "Hills" trade name (with the exception of any Stores that are
"Ames" Stores, which receipts shall reflect the "Ames" trade name and Store
location).
(vi) Agent shall not conduct an auction at any of the Stores
at any time.
(c) Obligations of the Agent
(i) Sales Taxes. During the Sale Term, the Agent shall collect
from sales at the Stores all Sale-related sales, excise and gross receipts taxes
payable to any taxing authorities having jurisdiction over such sums, which
taxes shall be added to the sales price and shall be paid by the customer. From
Proceeds, Merchant shall draw checks payable to the taxing authorities or
implement federal funds wire transfers of designated funds in the amounts that
are required to be collected from sales proceeds (including such taxes actually
collected by Agent or which should have been collected by Agent at the time of
the Sale), which amounts shall be delivered with appropriate accompanying
schedules prepared by Merchant, with Agent's full cooperation, on a weekly basis
for payment of taxes when due to the taxing authorities. Merchant shall prepare,
with Agent's full cooperation, a weekly internal audit report of sales, excise
and gross receipts taxes collected (or which should have been collected) by
Agent to determine that the appropriate amount of such taxes have been paid. The
Agent shall cooperate fully with Merchant in connection with compliance with all
state and local sales and other similar taxes applicable to the transactions
contemplated by this Agreement. It is acknowledged that Agent is acting as
Merchant's agent, and is not purchasing the Merchandise but only guaranteeing
Agent's performance hereunder as hereinafter described, except as provided in
Section 5(c) hereof. If and only if Agent complies with the provisions of this
subsection regarding the collection of taxes, the Merchant shall defend,
indemnify and hold harmless the Agent from and against any and all costs
including, but not limited to, reasonable attorneys' fees, assessments, fines or
penalties which the Agent sustains or incurs as a result or consequence of the
failure by the Merchant to promptly pay such taxes to the proper taxing
authorities and or the failure by the Merchant to promptly file with such taxing
authorities any and all reports and other documents required, by applicable law,
to be filed with or delivered to such taxing authorities. If and only if
Merchant complies with its obligation to pay taxes collected by Agent, the Agent
shall defend, indemnify and hold Merchant and its affiliates and their officers,
directors and other "responsible persons" (as such term or similar term is
defined under the law of the applicable taxing jurisdiction) harmless from and
against any and all costs including, but not limited to, reasonable attorney's
fees, assessments, fines or penalties which Merchant and its affiliates and
their officers, directors and other "responsible persons" (as such term or
similar term is defined under the law of the applicable taxing jurisdiction)
sustain or incur as a result or consequence of the failure by the Agent to
fulfill its obligations under this Section 3(c)(i).
(ii)Expenses of Sale
(A) The Agent shall pay, or if paid by Merchant, reimburse Merchant for, (x)
damage or loss to the Fixtures (as provided for in Section 11 below), other than
immaterial loss or damage to Fixtures, and any real or personal property owned
or leased by Merchant (including, without limitation, structural damage to the
Store premises) arising out of the wrongful acts or negligence (including
omissions) of the Agent or its employees or representatives or Merchant's
employees acting under the direction of Agent; and (y) all Store-level and other
operating expenses directly incurred in connection with and attributable to the
Sale (collectively, the "Expenses"), including, without limitation:
(1) (a) base payroll of Merchant's employees used in connection
with the Sale and (b) an amount not to exceed nineteen percent (19%) of such
base payroll for the payment of all related payroll taxes, workers' compensation
and benefits of Merchant's employees used in connection with the Sale
(including, without limitation, medical and dental benefits, group life
insurance, accidental death and dismemberment insurance, short and long term
disability, accrual for sick pay, and accrual for vacation and holiday pay),
plus costs payable to third party payroll processors, for all such employees
used, which are either due or accrued during the period of the Sale;
(2) costs of all security in the Stores including, without
limitation, security systems, courier and guard service if applicable;
(3) fifty percent (50%) of the fees and costs of the Inventory
Service for taking the inventory in the Stores and the Warehouse plus the
additional costs relating to a SKU inventory;
(4) retention or performance bonuses for employees as may be paid
by Agent (subject to Merchant's prior approval) as hereinafter provided;
provided however that Agent may not modify or otherwise change such retention or
performance bonus program without the prior written approval of Merchant;
(5)property insurance and comprehensive public liability insurance;
(6) advertising, signage and direct mailings relating to the Sale;
(7) local and long-distance telephone expenses;
(8) credit card fees, chargebacks and discounts;
(9) bank service charges (for Store and corporate accounts), check
guarantee fees, and bad check expenses;
(10) costs for additional supplies;
(11) all fees and charges required to comply with all laws and
regulations, including GOB Laws, applicable to the Sale;
(12) Store cash theft and other cash shortfalls in the registers;
(13) any and all costs, including delivery and freight costs,
related to the transfer and consolidation of Merchandise among the Stores and/or
the Warehouse;
(14) housekeeping and cleaning expenses related to the Stores,
which housekeeping and cleaning services shall be performed by Agent in a manner
(including cleanliness and frequency) at least consistent with Merchant's
present practices;
(15) all travel expenses payable to Merchant's employees relating
to travel by such employees at the direction of Agent, which shall include,
without limitation, the costs of transferring Merchant's employees between
Stores;
(16) Store trash removal;
(17) on-site supervision, including base fees and bonuses of
Agent's field personnel;
(18) all costs and expenses of providing such additional
Store-level services, including, without limitation, the employment of temporary
help, which the Agent in its discretion considers appropriate, and other
miscellaneous Store-level expenses incurred by Agent;
(19) costs for Merchant's music contracts for the Stores;
(20) reimbursement to Merchant for any incremental costs relating
to the preparation of any reports or accountings generated at Agent's request or
as otherwise required hereunder, which reports or accountings are inconsistent
with the reports or accountings otherwise prepared by Merchant for its own use
in the ordinary course of business;
(21) [intentionally deleted];
(22) [intentionally deleted];
(23) postage, courier and overnight mail charges to and from or
among the Stores and central office or otherwise relating to the Sale;
(24) all expenses directly relating to the operation of
restaurants and food services in the Stores;
(25) Occupancy Charges;
(26) costs and expenses for those parts of Merchant's Warehouse
used by Agent for the Sale and only for the period of time actually so used; and
(27) any other expense directly incurred by Agent in connection
with the Sale.
(B) "Occupancy Charges" shall consist of rent, percentage rent, CAM, building
maintenance, real estate taxes, merchant association dues, personal property
leases (including, without limitation, point of sale equipment) and utilities
relating to the Stores during the Sale and until the End Date; provided however
that (i) Occupancy Costs for "minimum rent," "other rent," "CAM," and "real
estate taxes" only shall not exceed the aggregate of the per diem charges (for
each day that Agent is responsible for paying Occupancy Costs) as set forth on
Exhibit 3(c)(ii)(B) and (ii) no other components of Occupancy Costs shall be
capped.
(C) Agent shall be responsible for the payment of all Expenses whether or not
there are sufficient Proceeds (as defined below) collected to pay such Expenses
after the payment of the Guaranteed Amount (as defined below). Nevertheless,
without limiting Agent's obligations hereunder to pay all Expenses, Expenses
incurred on a weekly basis shall be paid from Proceeds for such week, to the
extent sufficient, in the ordinary course of business; provided however that,
until Merchant shall have received the Guaranteed Amount, Agent shall not be
permitted to reimburse itself from Proceeds for any Expenses paid directly by
Agent or otherwise payable directly to Agent. To the extent that the cumulative
Proceeds are insufficient to cover the cost of Expenses, the Agent will remain
responsible for the timely payment of such Expenses as and when due. The Agent
shall provide on each Wednesday an accounting to Merchant of the prior week's
Expenses, which Merchant may review or audit at its expense at any time. If a
final, aggregate audit of the Expenses by an independent accounting firm
retained by Merchant uncovers an aggregate discrepancy in Expenses of more than
three percent (3%), then the Agent shall pay for the reasonable cost of such
audit.
(D) Except as expressly provided for above or otherwise included as Expenses as
set forth herein, "Expenses" specifically excludes Merchant's central
administrative services necessary for the Sale, including, but not limited to,
MIS services, payroll processing, processing and handling, data processing and
standard reporting, all of which Merchant shall provide to Agent, solely to the
extent provided for above.
(E) To the extent that any Expenses are advanced by Merchant, Agent shall
promptly reimburse Merchant.
(iii) Employees.
(A) Agent shall use Merchant's employees during the Sale. Notwithstanding the
foregoing, Merchant's employees shall at all times remain employees of Merchant;
provided, however, that Agent shall be responsible for supervising all such
employees used by Agent during the Sale and shall be responsible for the conduct
or actions of such employees during the Sale resulting from Agent's failure to
supervise such employees. Agent's selection and scheduling of Merchant's
employees shall at all times comply with all applicable laws and regulations.
Notwithstanding anything herein to the contrary, Agent shall be required to use
all of Merchant's employees (including, without limitation, store managers,
assistant store managers and sales associates) located at a Store through the
End Date for such Store on the same terms and conditions (including, without
limitation, scheduled work hours, scheduled salary increases, and
responsibilities) as such employees are employed by Merchant on the date hereof.
(B) The Merchant shall process the base payroll for all of Merchant's employees
utilized by the Agent at the Stores and the Warehouse used by Agent. Agent may
only stop using the Merchant's employees "for cause" reasons, based upon such
employee's dishonesty, fraud or breach of employee duties, failure to follow
reasonable instructions or directions of Agent, in accordance with Merchant's
human resources policies; provided however that any determination by Agent to
cease using an employee "for cause" shall be coordinated in advance with
Merchant's Human Resources Department. Notwithstanding the foregoing, it is
understood that the Agent shall not have any right to hire or terminate the
actual employment by Merchant of its employees.
(C) Each week until the End Date, Merchant shall pay, from Proceeds, the base
payroll plus all amounts necessary to cover related payroll taxes, workers'
compensation and benefits (including, without limitation, all amounts necessary
for the payment of employee-related insurance).
(D) After the Sale Commencement Date, Merchant shall be permitted to interview
and offer Store employees positions and, after consultation with Agent, to
transfer Store employees to other stores or responsibilities without Agent's
consent, provided that such activities do not unreasonably interfere with the
conduct of the Sale; provided however that Merchant shall be responsible, at its
sole costs, for any incremental expense associated with any promotions of
employees, other than promotions for employees necessary to replace another
employee who is no longer being used in connection with the Sale.
(E) After the Sale Commencement Date, Merchant shall have the right to remove
temporarily (e.g., eight (8) person days), management employees located at the
Stores to retrain such employees in connection with the transitioning of the
Stores; provided however, that Merchant shall not remove more then two (2)
management employees per Store at any one time and Agent must at all times have
at least three (3) management employees per Store; provided further however,
that Agent shall not be responsible for the salaries and benefits of such
management employees for the period of time that they are temporarily removed.
(F) Except for Agent's obligations to reimburse Merchant for wages and benefits
as provided for in this Agreement, the Agent shall not be responsible for
reimbursement or payment of any other compensation or costs due to employees,
including but not limited to vacation pay, severance pay, sick pay,
leave-of-absence pay, pension benefits or amounts required to be paid by statute
or law (e.g. WARN Act liability).
(G) Nothing herein shall make Agent directly liable under any employment
agreement, nor shall Agent be deemed a joint or successor employer.
(H) Agent shall fund through Merchant's payroll, as an Expense, retention and
performance bonuses to Store employees who work during the Sale and do not
voluntarily leave employment or are not terminated "for cause". The allocation
of such retention or performance bonuses among such Store employees at the end
of the Sale shall be jointly agreed upon by Merchant and Agent. Agent shall
obtain Merchant's prior approval of any communication with the affected
employees setting forth the terms and conditions of such plan.
(I) Agent shall defend, indemnify and hold harmless Merchant for claims of
Merchant's employees in the Stores arising with respect to the period of the
Sale and arising out of the negligence or wrongful acts or omissions of Agent or
its representatives. During the Sale, Agent shall maintain a safe working
environment consistent with the working conditions maintained by Merchant in the
Stores prior to the Sale.
(J) Agent shall not be permitted to solicit for employment, offer to employ, or
employ any of Merchant's employees during the term of this Agreement and for a
period of two years after the date of termination of this Agreement.
(iv) No Assumption of Merchant's Liability. Except as specifically
set forth in this Agreement, the Agent shall not assume, nor shall its actions
be construed as an assumption of, any of the Merchant's liabilities or
obligations. Without limiting the foregoing, Agent is solely acting as
Merchant's Agent for the purpose of the Sale and nothing herein should
constitute an assignment or sublease of the Leases or other agreements of the
Merchant.
(v) Vacating Premises. The Agent shall use its due diligence and
reasonable care in the conduct of the Sale. At the conclusion of the Sale at
each Store, Agent shall leave the Store in "broom clean" condition (including
the removal of all unsold Merchandise by Agent but not the removal of furniture,
fixtures, equipment and remaining supplies) and to leave the Store in the same
condition as on the date hereof, ordinary wear and tear excepted. Agent shall
vacate, surrender and deliver each of the Store premises and keys thereto to
Merchant, or as otherwise directed by Merchant, as the Sale therein is completed
and by not later than the normal close of business for such Store on the End
Date. The End Dates have been selected on a predetermined schedule essential to
Merchant's continued business operations, and, thus, time is of the essence for
the performance of the Agent's obligations hereunder and the surrender of the
Store premises. Agent's failure to comply will result in extreme prejudice to
Merchant and, thus, Agent shall defend, indemnify and hold harmless Merchant for
any and all such damages, liabilities and/or costs actually incurred by Merchant
and resulting from Agent's failure to vacate and surrender the Stores on their
respective End Dates as provided for herein, including, but not limited to,
extra costs incurred in connection with a shorter time period for Store
remodeling and restocking. If Agent fails to vacate and surrender any Store
premises on the End Date, Agent shall pay to Merchant an amount equal to one (1)
year's rent (the "One Year Rent Payment") under the Lease for such Store plus
the per diem Occupancy Costs for such Store until the Agent actually vacates and
surrenders the Store premises as required herein; provided however, that Agent
shall not be required to make the One Year Rent Payment for any "Group One"
Store (as identified on Exhibit 1(a)) solely if its failure to timely vacate and
surrender such Store on the End Date is beyond Agent's control due to severe
weather conditions. Such payment shall be in addition to Merchant's other rights
and claims against Agent. Agent shall not be permitted to conduct the Sale after
the scheduled End Date.
(vi) Indemnification. In addition to any other indemnification
provided for hereunder, the Agent shall defend, indemnify and hold the Merchant,
its affiliates and their respective officers, directors and employees harmless
from and against any and all damages, claims, costs, expenses and attorneys'
fees sustained or incurred as a result of the Agent's negligence or breach of
its obligations hereunder, including, without limitation, Agent's obligation to
conduct the Sale in all respects in accordance with all applicable laws and
regulations and ordinances, including the GOB Laws, and the terms of the Leases.
(vii) Compliance With GOB Laws. Except as expressly provided for
herein in accordance with the GOB Laws and during the Ordinary Course Transition
Operations (as defined below), Agent shall conduct the Sale as "clearance,"
"sale on everything," "entire store," "total blow-out," "everything must go,"
"unrestricted public sale" or similar such sales (provided however, that Agent
shall not be entitled to conduct the Sale as a "Going out of Business" sale
without obtaining Merchants prior approval). Agent shall be entitled to conduct
and advertise the Sale consistent with Merchant's prior approval as to the
content and form of said advertising, as provided for below; provided however
that Agent shall conduct and advertise the Sale in accordance with (i) all
applicable laws, rules and regulations, including without limitation, any and
all federal, state and local laws regulating "going out of business" or similar
consumer protection sales (collectively, the "GOB Laws") and (ii) the terms and
conditions of the leases and other lease instruments covering the Stores
(collectively, the "Leases"). Agent, with Merchant's assistance and full
cooperation (including promptly signing any documents reasonably requested by
Agent in connection therewith), shall be responsible for obtaining any and all
applicable licenses and approvals under the GOB Laws or otherwise to conduct the
Sale in accordance therewith, and as all such licenses and approvals are
obtained, Agent shall promptly notify Merchant. Promptly upon obtaining such
licenses and approvals to the extent required, and, in any event, subject to the
terms of the Leases, Agent may conduct a "store closing sale," "liquidation" or
similar sale at the Stores for which all such required licenses and the
approvals referenced in this Section 3(c)(vii) have been obtained and are in
effect; provided however, and subject to the other terms and provisions hereof,
that as a general matter any such advertising for such sale shall include
language reasonably acceptable to the Merchant regarding the transitioning of
the Stores from "Hills" to "Ames" locations.
(d) Force Majeure.
If any casualty or act of God prevents the conduct of business in
the ordinary course at any Store for a period in excess of five (5) consecutive
business days, such Store and the Merchandise located at such Store shall be
eliminated from the Sale and considered to be deleted from this Agreement as of
the first date of such event, and Agent and Merchant shall have no further
rights or obligations hereunder with respect thereto; provided however, that (i)
the proceeds of any insurance attributable to such Merchandise shall constitute
Proceeds hereunder, and (ii) the Guaranteed Amount shall be reduced to account
for any Merchandise eliminated from the Sale which is not the subject of
insurance proceeds or consolidated by Agent (as an Expense into another Store or
Stores), and Merchant to the extent actually received shall reimburse Agent for
the amount the Guaranteed Amount is so reduced prior to the end of the Sale
Term. As noted in the preceding sentence, Agent will use its best efforts to
consolidate and transfer all Merchandise which is not the subject of insurance
proceeds and include said Merchandise in the Sale in other Stores.
(e) Operation of Restaurants.
Until the End Date, and subject to applicable law, Agent, in its
capacity as Merchant's agent, shall continue operation of the restaurants
located in the Stores. All revenues received by Agent, in connection with
Agent's operation of such restaurants, shall constitute Proceeds. All of the
costs incurred in connection with the operation of such restaurants, including,
but not limited to, employees, food and supplies, shall constitute an Expense of
the Sale.
(f) Operation of Leased Shoe Departments.
During the Sale Term and subject to applicable law and any
applicable agreements, Agent, in its capacity as Merchant's agent, shall use its
best efforts to continue the operation of the Leased Shoe Departments in the
Stores. License fees payable to Merchant in connection with Agent's operation of
the Leased Shoe Departments shall constitute Proceeds. All of the costs incurred
in connection with the operation of such Leased Shoe Departments, shall
constitute an Expense of the Sale.
(g) Ordinary Course Transition Operations.
It is expressly understood that Agent, as Merchant's agent, will
be operating certain of the Stores, to be identified by Merchant, in a manner
consistent with the ordinary course of Merchant's business operations in order
to effectuate an orderly transition of these Stores from "Hills" to "Ames"
stores (such operations, the "Ordinary Course Transition Operations"). These
Stores shall be operated in such a manner until the Agent commences "clearance,"
"sale on everything," "entire store," "total blow-out," "everything must go" or
"unrestricted public sale" sales or, if applicable, sales under the GOB Laws.
During the Sale Term and the Ordinary Course Transition Operations, Agent shall
continue to honor and maintain all of Merchant's customer programs and policies,
including, but not limited to, sale of Merchandise on "layaway," issuance of
gift certificates and store credits, and acceptances of merchandise returns. No
adjustments will be made under the Agreement for Merchandise sold or returned,
or customer credits or gift certificates issued, in each instance after the Sale
Commencement Date.
4. Proceeds; Returned Merchandise; Bank Accounts
(a) Proceeds. For purposes of this Agreement, "Proceeds" shall mean the total
amount (in dollars) of all sales of Merchandise made under this Agreement
(exclusive of sales, excise and gross receipt taxes, customer credits and
layaway redemptions), plus the proceeds of Agent's insurance, if any, for loss
or damage to the Merchandise or robbery of cash to the extent of insurance
coverage of Agent, plus all revenues received in connection with Agent's
operation of the restaurants, plus license fees payable to Merchant in
connection with Agent's operation of the Leased Shoe Departments. All sales will
be made only for cash, checks and by credit cards currently accepted by
Merchant.
(b) Pre-Sale Credits; Pre-Sale Returned Goods. The Agent shall accept Merchant's
gift certificates and Store credits issued prior to the Sale Commencement Date
("Pre-Sale Credits") in exchange for Merchandise (and the amount of such
Pre-Sale Credits will not be included in the calculation of Proceeds)
conditioned upon arrangements satisfactory to Agent that such amounts will be
reimbursed to Agent by Merchant. Agent also shall accept returns of goods sold
prior to the Sale Commencement Date ("Pre-Sale Returned Goods") in accordance
with Merchant's return policy that was in effect at the time of the sale of such
merchandise, conditioned upon arrangements satisfactory to Agent that amounts
reimbursed to the customer for returns will be paid by Merchant to Agent. If
requested by Merchant, Agent shall purchase such returned goods that are
resalable as provided for in Section 5(a) hereof. Any such Pre-Sale Returned
Goods which is not included in Merchandise shall be disposed of by Agent in
accordance with instructions received from Merchant, at Merchant's expense. All
returns must be noted and described in a detailed log (the "Returned Merchandise
Log") to be maintained by Agent which shall be in a form acceptable to Merchant.
Agent shall provide Merchant with a copy of the Returned Merchandise Log on a
weekly basis during the Sale. Agent shall not be entitled to any adjustment,
credit or payment for Pre-Sale Returned Goods which is not properly noted and
described in the Returned Merchandise Log.
(c) Bank Accounts. All cash Proceeds shall be deposited in Merchant's accounts,
which Proceeds will be transferred, on a daily basis, into Merchant's existing
concentration account. To the extent Merchant's credit card facilities are used,
all credit card Proceeds will be settled daily and netted against Expenses and
reimbursed weekly (less credit card fees) upon such procedures mutually accepted
by Agent and Merchant. Merchant shall have the right to audit and review all
entries, records, and other documents relating to such bank and credit card
accounts.
5. Guaranteed Amount and Other Payments
(a) Guaranteed Amount
As a guarantee of performance by Agent hereunder, and irrespective of the actual
Proceeds (if any) realized from the Sale, Merchant shall receive from Agent
forty percent (40%) of the Retail Price of the Merchandise and Adjusted Retail
Price of Defective Goods, Display Goods and Holiday Seasonal Goods. Except as
otherwise provided for in the following sentence, with respect to non-Defective
Pre-Sale Returned Goods to be included in the Sale pursuant to Section 4(b)
hereof, Agent also shall pay for such non-Defective Pre-Sale Returned Goods in
an amount determined by multiplying the Retail Price by the product of the
following: .40 by a fraction, (x) the numerator of which is the price payable by
the consumer for that item or type of good when the non-Defective Pre-Sale
Returned Goods is returned to the Store, and (y) the denominator of which is the
price payable by the consumer for the item or type of good on the Sale
Commencement Date. Notwithstanding the foregoing, with respect to all
non-Defective Pre-Sale Returned Goods for which Merchant exercises the option to
include in the Sale, which are delivered to the Agent on or before January 15,
1999, then the Merchant shall receive from the Agent the sum of forty percent
(40%) of the Retail Price of such goods. All of the foregoing payments by Agent
to the Merchant in respect of Merchandise, including the non-Defective Pre-Sale
Returned Goods, are hereinafter collectively referred to as the "Guaranteed
Amount". In addition, to the extent that Proceeds from the Sale exceeds
sixty-two percent (62.00%) of the Retail Price of Merchandise and Adjusted
Retail Price of Defective Goods, Display Goods and Holiday Seasonal Goods (such
excess Proceeds, the "Excess Proceeds"), then Merchant shall receive from Agent
(i) forty-five percent (45%) of such Excess Proceeds between sixty-two percent
(62%) and sixty-three percent (63%) and (ii) fifty-five percent (55%) of such
Excess Proceeds in excess of sixty-three percent (63%) (such additional payment
to Merchant, the "Recovery Amount.")
(b) Time of Payment
(i) All Proceeds shall be collected through Merchant's accounts
and applied to payment of the Guaranteed Amount (without offset or other
deduction other than expressly provided for above for the payment of Expenses)
and the Recovery Amount (if any, after a final reconciliation). Merchant shall
receive weekly payments of that portion of the Guaranteed Amount relative to
Pre-Sale Returned Goods upon reconciliation by Agent and Merchant of the
quantities and Retail Price thereof, which reconciliations shall be done by each
Wednesday for deliveries to the Stores during the prior week. In addition to the
Guaranteed Amount, Agent shall reimburse Merchant as of the start of business on
the Sale Commencement Date for all cash in the Stores. Agent shall purchase, on
a dollar for dollar basis, all cash located in Merchant's bank accounts which
are used by Agent hereunder, which shall be determined, and paid for, as of the
Sale Commencement Date.
(ii)All amounts required to be paid by Agent or Merchant under any
provision of this Agreement shall be made by wire transfer of immediately
available funds which shall be wired by Agent or Merchant, as applicable, no
later than 2:00 p.m. (Eastern Time) on the date that such payment is due;
providing, however, that all of the information necessary to complete the wire
transfer has been received by Agent or Merchant, as applicable, by 9:00 a.m.
(Eastern Time) on the date that such payment is due. In the event that the date
on which any such payment is due is not a business day then such payment shall
be made by wire transfer on the next business day.
(iii) Merchant and Agent shall establish mutually agreeable
procedures to track all Sale receipts (inclusive of cash, credit card and credit
sales) from and after the Sale Commencement Date. The aggregate of all such Sale
receipts at the Stores (less sales tax) shall be considered Proceeds for all
purposes of this Agreement.
(iv)In order to secure all of Agent's obligations under this
Agreement, including the unpaid portion of the Guaranteed Amount, payment of
Expenses and other obligations hereunder, and in addition to Agent's
indemnification obligations under this Agreement, the Agent shall furnish to
Merchant, within two (2) Business Days of the Sale Commencement Date, an
irrevocable standby Letter of Credit in the original face amount equal to $50
million ($50,000,000), and substantially in the form of Exhibit 5(b)(iv) hereof
(the "Letter of Credit"), for the benefit of Merchant and its officers,
directors and other "responsible persons" (as such term or similar term is
defined under the law of the applicable taxing jurisdiction), issued by a
national bank acceptable to Merchant. The Letter of Credit shall have an expiry
date of no earlier than October 15, 1999. At Agent's request (which request
shall not be made more frequently than bi-weekly and shall not be made by Agent
until Merchant has received an amount equal to the difference between the
Guaranteed Amount and the original face amount of the Letter of Credit),
Merchant shall take all actions reasonably required to reduce the amount
available to be drawn under the Letter of Credit by amounts credited against the
Guaranteed Amount; provided however that the Letter of Credit shall not be
reduced below twenty million dollars ($20,000,000).
(c) Agent's Payments. The Merchant shall not be entitled to the payment of any
other monies from the Sale or otherwise, except as specified in this Agreement.
All remaining Proceeds (after payment of sales, excise and gross receipts taxes,
Expenses, the Guaranteed Amount, and all other payments due to Merchant
hereunder, including the Recovery Amount) shall belong to Agent in consideration
of goods and services provided by Agent hereunder. If the Agent has been unable
to sell any Merchandise during the Sale Term, all Merchandise remaining at the
conclusion of the Sale shall become the property of Agent, and Agent shall
promptly remove all such remaining Merchandise from the Stores and the
Warehouse; provided however that any unsold Merchandise sold by Agent to a third
party after the conclusion of the Sale shall constitute "Proceeds" hereunder.
(d) Final Accounting. Merchant and Agent shall jointly prepare a final
accounting within thirty (30) days of the Sale Termination Date for all Stores,
on a Store by Store basis, of (i) all Proceeds from the Sale, (ii) all sales,
excise and gross receipts taxes, collected during the Sale, and (iii) any other
accountings required hereunder, including the Expenses and whether there is any
Recovery Amount.
6. Conditions and Covenants
The Agent's and Merchant's willingness to enter into the
transaction contemplated hereunder and Agent's and Merchant's obligations
hereunder are directly conditioned upon the satisfaction, compliance, and
completion of the following at the time or during the time periods indicated
unless specifically waived in writing by both parties:
(a) The Merchant having received the Letter of Credit on or before
the Sale Commencement Date.
(b) The Merchant, by the Sale Commencement Date, having full and
complete title to the Merchandise, free and clear of liens, other than the liens
of Bank America Business Credit, Inc. (as agent) ("BABC").
(c) The Merchant, by the Sale Commencement Date, having obtained
all consents and approvals for Merchant to execute and perform this Agreement
and it being understood that Merchant shall not be obligated to seek any consent
of any landlord that would be required under any Lease.
(d) Purchaser shall have accepted for payment Shares (as defined
in the Merger Agreement) tendered pursuant to the Offer (as defined in the
Merger Agreement).
(e) The aggregate Retail Price of the Merchandise (including the
Adjusted Retail Price for Defective Goods, Display Goods and Holiday Seasonal
Goods), but excluding any Merchandise in the Ames Stores, is at least $625
million; provided however that, if the aggregate Retail Price of such
Merchandise is less than $625 million, then the percentage applicable to the
Guaranteed Amount shall be adjusted as provided for on Exhibit 6(e).
(f) Merchant shall maintain, consistent with its ordinary course
of business and past practices, its systems in and relating to the Warehouse for
processing and accounting for delivery of the On Order Goods.
7. Representations and Warranties
(a) Merchant hereby makes the following representations and warranties to the
Agent, which shall survive the execution and delivery of this Agreement:
(i) Merchant is a corporation, duly organized, validly existing and in
good standing under the laws of the State of its incorporation, and Merchant has
the corporate power and authority to own, lease and operate its assets,
properties and business in its Stores and to carry on its business in its Stores
as now being conducted.
(ii) Merchant has the right, power and authority required to execute,
deliver and perform fully its obligations hereunder, subject to the terms of its
Leases. This Agreement has been duly executed and delivered by Merchant and
constitutes the valid and binding obligation of Merchant enforceable in
accordance with its terms. No court order or decree of any federal, state, or
local government authority or regulatory body is in effect that would prevent or
impair consummation of the transactions contemplated by this Agreement.
(iii) Merchant is authorized to conduct business in all states in
which the Stores are located and to its knowledge has all licenses, permits and
authorizations of governmental bodies necessary therefor other than those which,
if not possessed, would not have a material adverse affect on Merchant's
business.
(iv) No actions or proceedings have been instituted by or against the
Merchant, or have been threatened, which question the validity of this Agreement
or any action taken or to be taken by the Merchant in connection with this
Agreement or that, if adversely determined, would have a material adverse effect
upon the Merchant's ability to perform its obligations under this Agreement.
(v) Merchant has the right, subject to the terms of applicable Leases,
to the unencumbered use and occupancy of, and peaceful and quiet possession of,
each of the Stores and the Warehouses; provided however that, to the extent that
the failure to comply with this representation does not have a materially
adverse impact on the Sale, such failure to comply will not constitute a breach
of this representation.
(vi) The following representations shall only apply to Ames if and to
the extent such an Ames Store is included in the Sale (at Ames' option to
include such Ames' Stores in the Sale):
(A) From and after the Sale Commencement Date, Ames (i) will have operated the
applicable Ames Stores in the ordinary course of business consistent with Ames'
past practices, and (ii) will not have conducted any promotions or advertised
sales at the Stores except promotions and sales in the ordinary course of
business consistent with past practice and sales for comparable periods last
year, and (iii) will not transfer inventory in or out of the Ames Store other
than in the ordinary course of business consistent with Ames' past practices.
(B) As of the Inventory Date for such Ames Store when included in the Sale, all
normal course permanent markdowns on inventory located at the Ames' Stores will
have been taken on a basis consistent with Ames' past practices and policies.
(C) From and after the Sale Commencement Date, Ames will not have marked up or
raised the price of any items of Merchandise, or removed or altered any tickets
or any indicia of clearance merchandise, except in the ordinary course of
business and except for the effects of the termination of promotional events.
(D) Prior to the inclusion of an Ames Store in the Sale, Ames shall continue to
operate such Ames Stores in the normal and ordinary course and in a manner
consistent with past practices and the practices at Ames' stores which are not
included in the Sale.
(b) The Agent represents and warrants to Merchant as follows, which
representations and warranties shall survive the execution of this Agreement:
(i) Gordon Brothers is a limited liability company duly organized,
validly existing and in good standing under the laws of the state of Delaware,
and Nassi is a limited liability company, duly organized, validly existing and
in good standing under the laws of the state of California, and each has the
power and authority to consummate the transactions contemplated hereby.
(ii) The Agent has the right, power and authority to execute and
deliver this Agreement and perform its obligations hereunder and has taken all
necessary action required to authorize the execution, delivery, and performance
of this Agreement and no further approval is required for the Agent to enter
into and deliver this Agreement and to perform its obligations hereunder.
(iii) This Agreement has been duly executed and delivered by the Agent
and constitutes the legal, valid and binding obligation of the Agent enforceable
against the Agent in accordance with its terms. No court order or decree of any
federal, state, or local governmental authority or regulatory body is in effect
that would prevent or impair or is required for the Agent's consummation of the
transactions contemplated by this Agreement and no consent of any third party is
required therefor. No contract or other agreement to which the Agent is a party
or by which the Agent is otherwise bound will prevent or impair the consummation
of the transactions contemplated by this Agreement.
(iv) To its knowledge, Agent has or will have all licenses, permits and
authorizations of governmental bodies necessary therefor other than those which,
if not possessed, would not have a material adverse affect on the Agent's
business.
(v) No actions or proceedings have been instituted by or against the
Agent, or have been threatened, which question the validity of this Agreement or
any action taken or to be taken by the Agent in connection with this Agreement
or that, if adversely determined, would have a material adverse effect upon the
Agent's ability to perform its obligations under this Agreement.
(vi) Any rights conferred upon or granted to Agent hereunder, including
the right to establish and implement advertising and promotion programs subject
to this Agreement, shall be exercised by Agent in compliance with all federal,
state and local laws, including the GOB Laws, and the terms of the Leases,
subject to Merchant's reasonable cooperation if such cooperation is needed to
comply with such laws and Lease terms.
(vii) No broker contributed to the transaction contemplated by this
Agreement, nor is any broker entitled to any commission thereon. Agent shall
hold Merchant harmless from and against all claims, demands, suits and judgments
for brokers fees arising out of this Agreement and attributable to the actions
of Agent.
8. Insurance
(a) Until the expiration of the End Date, the Merchant shall continue in force
the insurance coverages it currently has with respect to the Merchandise and the
Stores. The Agent shall reimburse the Merchant for costs of inventory insurance,
as an Expense, during the Sale upon receipt of an invoice therefor from the
Merchant. The Agent shall be named as an additional named insured and loss payee
as its interests may appear. Agent shall be responsible for the payment of all
deductibles, retentions or self-insured amounts under such policies.
(b) Until the End Date, the Agent shall maintain, at its cost, comprehensive
public liability insurance for injury to persons and property in accordance with
Exhibit 8(b) hereto, naming Merchant as additional named insured and loss payee
as its interests may appear. Such insurance shall have limits in the amount of
one million dollars ($1,000,000) per occurrence, two million dollars
($2,000,000) general aggregate per location, with excess umbrella coverage with
limits of six million dollars ($6,000,000), which shall include, but not be
limited to, comprehensive public liability policies covering injuries to persons
and property in or in connection with Agent's operation of the Stores. No later
than two days after the Sale Commencement Date, Agent shall deliver to Merchant
certificates evidencing such insurance policies, setting forth the duration
thereof and the naming of Merchant as an additional named insured and loss
payee, as its interests may appear, in accordance with the provisions hereof,
all in form and substance reasonably satisfactory to Merchant.
9. Defaults
The following shall be "Events of Default" hereunder:
(a) The Merchant or Agent shall fail to perform any material obligation
hereunder if such failure remains uncured seven days after receipt of written
notice thereof; or
(b) Any representation or warranty made by Merchant or Agent proves untrue in
any material respect as of the date made and, to the extent curable, shall
continue uncured seven (7) days after written notice to the defaulting party.
Any party's damages or entitlement to equitable relief on account
of an Event of Default shall be determined by a court of competent jurisdiction
in the State of New York.
10. Reporting; Right of Access. Agent shall furnish Merchant with weekly reports
including, without limitation, reports that comply with the Merchant's current
weekly cash reporting to its central office, reflecting the progress of the Sale
which shall specify the Proceeds received to date and shall furnish Merchant
with such other information regarding the Sale as Merchant reasonably requests.
The Agent will maintain and provide to Merchant sales records to permit
calculation of and compliance with any percentage rent obligations under Leases.
During the course of the Sale, Merchant shall have the right to have
representatives continually act as observers of the Sale in the Stores so long
as they do not interfere with the conduct of the Sale. In addition, Merchant
shall have access to the Stores during the Sale to commence renovations and
remodeling of the Stores so long as such access does not unreasonably interfere
with the conduct of the Sale. The Agent shall cooperate in facilitating such
access, including relocating Merchandise in the Stores to permit such
renovations and remodeling as may reasonably be requested by Merchant.
11. Fixtures. If requested by Merchant at its sole option, Agent agrees to sell
the Fixtures in one or more of the Stores for a commission of twenty percent
(20%) of the sales price, not including sales, excise and gross receipts taxes.
Agent's right to the use of Fixtures during the Sale shall be subject to the
sale of such Fixtures in accordance with this Section 11.
12. Miscellaneous
(a) Agent shall have the right to direct the transfer of all Merchandise
included in the Sale among the Stores and between the Stores and the Warehouse,
subject to the provisions of this Agreement.
(b) All communications provided for pursuant to this Agreement must be in
writing, and mailed by Federal Express or other overnight delivery services, as
follows:
If to the Agent: Gordon Brothers Retail Partners, LLC
40 Broad Street
Boston, MA 02109
Attn: Robert Sager
Bradley Snyder, Esq.
Telecopy No. (617) 422-6288
AND
The Nassi Group LLC
23622 Calabasas Road
Suite 333
Calabasas, California 91302
Attn: Albert Nassi
Dan Kane
Telecopy No. (818) 591-8437
With copies to:
Wachtell Lipton Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Scott Charles, Esq.
Telecopy No. (212) 403-2000
If to the Merchant: Ames Department Stores Inc.
2418 Main Street
Rocky Hill, Connecticut 06067
Attn: David Lissy, Esq.
Telecopy No. (860) 257-5160
With copies to:
Weil, Gotshal & Manges, LLP
Attorneys for the Merchant
767 Fifth Avenue
New York, New York 10153
Attn: Jeffrey J. Weinberg, Esq.
Adam C. Rogoff, Esq.
Telecopy No. (212) 310-8007
Merchant reserves the right to notify Agent, as provided for in this Section
12(b), of a change of the address for notices to be sent to Merchant.
(c) Agent may not contact any of the landlords for the Leases without
Merchant's prior approval and must coordinate any such discussions with
Merchant's authorized representative.
(d) This Agreement shall not inure to the benefit of, nor shall it be assignable
to, any person or entity other than Merchant or Agent.
(e) Each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any Federal court located in the State of New York or any New
York state court in the event any dispute arises out of this Agreement or any of
the transactions contemplated hereby, (b) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it will not bring any action relating to
this Agreement or any of such transactions in any court other than a Federal or
state court sitting in the State of New York.
(f) This Agreement contains the entire agreement between the parties hereto, and
no variations shall be binding upon any party unless set forth in a document
duly executed by and on behalf of such party.
(g) The headings of the sections of this Agreement are inserted for convenience
only and shall not be considered for the purpose of determining the meaning or
legal effect of any of the provisions of this Agreement.
(h) No consent or waiver, express or implied, by any party, to or of any breach
or default by the other in the performance by the other of its obligations
hereunder shall be deemed or construed to be a consent or a waiver to or of any
other breach or default in the performance by such other party of the same or
any other obligations of such party. Failure on the part of any party to
complain of any act or failure to act by the other party or to declare the other
party in default, irrespective of how long such failure continues, shall not
constitute a waiver by such party of its rights hereunder (except as expressly
provided for herein).
(i) This Agreement may be executed in any number of counterparts and by the
different parties hereto, by facsimile signature, in separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument.
(j) All references to "Agent" hereunder shall mean Gordon Brothers and Nassi
jointly and severally.
(k) All reference to "Group" Stores means those Stores scheduled to be turned
over to Merchant in three groups (e.g., one, two or three) as identified on
Exhibit 1(a).
<PAGE>
IN WITNESS WHEREOF, the Agent and Merchant hereby execute this Agreement by
their duly authorized representative as a sealed Instrument as of the day and
year first written above.
GORDON BROTHERS RETAIL PARTNERS, LLC
By:_______________________________
Name:
Its:
THE NASSI GROUP, LLC
By:_______________________________
Name:
Its:
HILLS STORES COMPANY
By:_______________________________
Name:
Its:
HILL DEPARTMENT STORES COMPANY
By:_______________________________
Name:
Its:
<PAGE>
AMES MERCHANDISING CORPORATION
By:_______________________________
Name:
Its:
<PAGE>
[NAME OF ISSUING BANK]
[ADDRESS]
Date: January __, 1999
Irrevocable Standby Letter of Credit Number: _____________
BENEFICIARY: Hills Stores Company,
Hills Department Stores Company and
Ames Merchandising Corporation
2418 Main Street
Rocky Hill, Connecticut 06067
Credit Number:
Opener's Reference No:
Gentlemen:
BY ORDER OF: Gordon Brothers Retail Partners, LLC
40 Broad Street
Boston, MA 02109
And
The Nassi Group LLC
23622 Calabasas Road
Suite 333
Calabasas, California 91302
We hereby open in your favor our Irrevocable Standby Letter of Credit for the
account of Gordon Brother Retail Partners, LLC and The Nassi Group, LLC for a
sum or sums not exceeding a total of $_________ U.S. Dollars (_____ Million
Dollars) available by your draft(s) at SIGHT on OURSELVES effective immediately
and expiring at OUR COUNTERS on _______ __, 1999, or such earlier date on which
the beneficiary shall notify us in writing that this Standby Letter of Credit
shall be terminated accompanied by the original Letter of Credit (the "Expiry
Date").
Draft(s) must be accompanied by a signed statement in the form attached as
Exhibit A, and the original Letter of Credit.
The face amount of this letter of credit may be reduced upon delivery of the
beneficiary's signed statement in the form of Exhibit B.
Partial and/or multiple drawings are permitted.
Each draft must bear upon its face the clause "Drawn under Letter of Credit No.
__________ dated ___________ 1999 of [NAME AND ADDRESS OF ISSUING BANK]."
Except so far as otherwise expressly stated herein, this Letter of Credit is
subject to the "Uniform Customs and Practices for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500".
We hereby agree that drafts drawn under and in compliance with the terms of this
letter of credit will be duly honored if presented to the above mentioned drawee
bank on or before the Expiry Date.
We hereby engage with drawers and/or bona fide holders that drafts and documents
drawn and negotiated in accordance with the terms of this Letter of Credit will
be duly honored on presentation to us.
Kindly address all correspondence regarding this letter of credit to the
attention of our Letter of Credit Operations, [ADDRESS OF L/C DEPARTMENT OF
ISSUING BANK] attention ________, mention our reference number as it appears
above. Telephone inquiries can be made to ________ at _________________.
Very truly yours,
Authorized official
<PAGE>
EXHIBIT A
TO IRREVOCABLE STANDBY LETTER OF CREDIT NO. ___________
Re: Drawing for Amounts Due to:
Hills Stores Company,
Hills Department Stores Company and
Ames Merchandising Corporation
2418 Main Street
Rocky Hill, Connecticut 06067
Ladies and Gentlemen:
I refer to your Letter of Credit No. _______ (the "Letter of Credit"). The
undersigned, duly authorized officers of Hills Stores Company, Hills Department
Stores Company and Ames Merchandising Corporation (collectively the "Merchant")
hereby certifies to you that:
(i) Gordon Brother Retail Partners, LLC and The Nassi Group, LLC
(the "Agent") has not made a payment when due of or for the Guaranteed Amount,
Expenses of Sale, or any other amounts due by Agent to Merchant pursuant to, and
as such terms are defined in, that certain Agency Agreement dated as of April 8,
1997 between the Merchant and Agent.
(ii)The amount to be drawn is $_________ (the "Amount Owing").
(iii) Payment is hereby demanded in an amount equal to the lesser
of (a) the Amount Owing and (b) the amount available on the date hereof to be
drawn under the Letter of Credit.
(iv)The Letter of Credit has not expired prior to the delivery of
this letter and the accompanying sight draft.
(v) The payment hereby demanded is requested to be made no later
than two (2) business days after the date of delivery of this certificate, by
wire transfer to the following account:
[Bank Name]
[Bank Address]
ABA No: _______
Further Credit to: [Account Title]
[Account No.]
<PAGE>
IN WITNESS WHEREOF, I have executed and delivered this certificate as of this
day of ________ 199_.
Very truly yours,
HILLS STORES COMPANY
By:
Title: ___________________________
HILL DEPARTMENT STORES COMPANY
By:
Title: _____________________________
AMES MERCHANDISING CORPORATION
By:
Title: _____________________________
<PAGE>
EXHIBIT B
TO IRREVOCABLE LETTER OF CREDIT NO. ___________
Re: Reduction of Face Amount:
Hills Stores Company,
Hills Department Stores Company and
Ames Merchandising Corporation
2418 Main Street
Rocky Hill, Connecticut 06067
Ladies and Gentlemen:
I refer to your Letter of Credit No. ________ (the "Letter of Credit"). The
undersigned, duly authorized officers of Hills Stores Company, Hills Department
Stores Company and Ames Merchandising Corporation hereby certifies to you that
the face amount of the Letter of Credit No. _______________ hereby shall be
reduced from its original face amount to a new face amount of $________.
IN WITNESS WHEREOF, I have executed and delivered this letter as of this ___ day
of ______, 199_.
Very truly yours,
HILLS STORES COMPANY
By:
Title: ____________________________
HILL DEPARTMENT STORES COMPANY
By:
Title: ______________________________
AMES MERCHANDISING CORPORATION
By:
Title: _______________________________
EXHIBIT 3(b)(i)(G)
Central Administrative Services
1. Daily sales information, including:
* Net sales and discount by category
* sales tax reporting
* sales by store and by week only for comparable periods last year
2. Daily cash reporting, including:
* cash management on a daily basis
* credit card processing (if applicable)
* daily deposit reporting from POS information
3. Weekly payroll processing.
4. Management of POS to manage the sales process, including downloading of
discounts (by SKU and/or by department) throughout the term of the Sale.
5. Access of current SKU, price and cost files, including all information on
which reports are based.
