<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2000
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-6074
Nordstrom, Inc.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Washington 91-0515058
------------------------------- ------------------
(State or other jurisdiction of (IRS employer
incorporation or organization) Identification No.)
1617 Sixth Avenue, Seattle, Washington 98101
--------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 206-628-2111
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
------------------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
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<PAGE> 2
On March 20, 2000, 130,827,260 shares of common stock were outstanding, and the
aggregate market value of those shares (based upon the closing price as reported
by NASDAQ) held by non-affiliates was approximately $1.8 billion.
Documents Incorporated by Reference:
Portions of Nordstrom, Inc. 1999 Annual Report to Shareholders
(Parts I, II and IV)
Portions of Proxy Statement for 2000 Annual Meeting of Shareholders
(Part III)
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<PAGE> 3
PART I
Item 1. Business.
Nordstrom, Inc. (the "Company") was incorporated in the State of Washington in
1946 as successor to a retail shoe business started in 1901. As of January 31,
2000, the Company operated 71 large specialty stores in Alaska, Arizona,
California, Colorado, Connecticut, Georgia, Illinois, Indiana, Kansas, Maryland,
Michigan, Minnesota, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode
Island, Texas, Utah, Virginia and Washington, selling a wide selection of
apparel, shoes and accessories for women, men and children.
The Company also operated 27 stores under the name "Nordstrom Rack" and one
clearance store. The Racks purchase merchandise directly from manufacturers, as
well as serving, in part, as outlets for clearance merchandise from the
Company's large specialty stores. The Racks are located in Arizona, California,
Colorado, Illinois, Maryland, Minnesota, New York, Oregon, Pennsylvania, Utah,
Virginia and Washington.
The Company also operated three specialty boutiques in New York and California
under the name "Faconnable", and two free-standing shoe stores located in
Hawaii.
On November 1, 1999, the Company established a new subsidiary, NORDSTROM.com, to
promote the rapid expansion of both its Internet commerce and catalog
businesses. The Company contributed assets and certain liabilities associated
with its Internet commerce and catalog businesses and $10 million in cash to the
subsidiary. Affiliates of Benchmark Capital and Madrona Investment Group,
collectively, contributed $16 million in cash to the new entity. The Company
owns approximately 81.4% of NORDSTROM.com, with Benchmark Capital and Madrona
Investment Group holding the remaining interest.
The first major endeavor in November 1999 by NORDSTROM.com was the launching of
the Internet site NORDSTROMSHOES.com, which offers on-line access to millions of
pairs of shoes. The launch was supported by a multimedia national advertising
campaign.
In March 2000, the Company opened a large specialty store in Buford, Georgia and
a new Rack store in Atlanta, Georgia. In May 2000, a new Rack store in Plano,
Texas is scheduled to open. In addition, the Company plans to open full-line
stores in Broomfield, CO; Frisco, TX; Roseville, CA; Chicago, IL; and Boca
Raton, FL, as well as Rack stores in Glendale, CA; Troy, MI; Honolulu, HI;
Spokane, WA; Los Angeles, CA; Hurst, TX; and Scottsdale, AZ, during 2000. The
Company's plans for 2000 also include the remodel of its Edison, NJ and Chicago,
IL full-line stores.
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<PAGE> 4
Item 1. Business (continued)
The west coast of the United States, and the east coast, from southern New York
to Virginia, are the markets in which the Company has the largest presence. An
economic downturn or other significant event within one of those markets may
have a material effect on the Company's operating results.
The Company purchases merchandise from many suppliers, no one of which accounted
for more than 3% of 1999 net purchases. The Company believes that it is not
dependent on any one supplier, and considers its relations with its suppliers to
be satisfactory.
The Company has approximately 100 trademarks. With the exception of the
Federally registered names "Nordstrom", "Classiques Entier", "Evergreen",
"Preview Collection" and "Preview International", the loss or abandonment of any
particular trademark would not have a significant impact on the operations of
the Company.
Due to the Company's anniversary sale in July and holidays in December, sales
are higher in the second and fourth quarters of the fiscal year than in the
first and third quarters. During the year ended January 31, 2000, the Company
regularly employed on a full or part-time basis an average of approximately
40,000 employees. Due to the seasonal nature of the Company's business,
employment increased to approximately 47,000 employees in July, and
approximately 45,000 employees in December.
The Company's business is highly competitive. Its stores compete with other
national, regional and local retail establishments within its operating areas
which carry similar lines of merchandise, including department stores, specialty
stores, boutiques, and mail order and internet businesses. The Company believes
the principal methods of competing in its industry include customer service,
value, fashion, advertising, store location and depth of selection.
Certain other information required under Item 1 is contained within the
following sections of the Company's 1999 Annual Report to Shareholders, which
sections are incorporated by reference herein from Exhibit 13.1 of this report:
Management's Discussion and Analysis
Note 1 in Notes to Consolidated Financial Statements
Note 14 in Notes to Consolidated Financial Statements
Retail Store Facilities
Executive Officers of the Registrant
<TABLE>
<CAPTION>
Officer
Name Age Title Since Family Relationship
- -------------------- --- ------------------ ------- -------------------
<S> <C> <C> <C> <C>
Jammie Baugh 46 Executive Vice 1990 None
President
Robert E. Campbell 44 Vice President and 1999 None
Treasurer
</TABLE>
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<PAGE> 5
Executive Officers of the Registrant (continued)
- ------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Gail A. Cottle 48 Executive Vice 1985 None
President
Darren R. Jackson 35 Vice President 1998 None
Kevin T. Knight 44 Vice President, 1998 None
Chairman and Chief
Executive Officer of
Nordstrom Federal
Savings Bank, and
President of Nordstrom
Credit, Inc.
Michael G. Koppel 43 Vice President 1999 None
F. Richard Lennon 59 Vice President 2000 None
Robert J. Middlemas 43 Executive Vice 1993 None
President
Blake W. Nordstrom 39 Executive Vice 1991 Brother of Erik B. and Peter E.
President Nordstrom; son of Bruce A.
Nordstrom, a Director of the
Company; and nephew of D. Wayne
Gittinger, a Director of the
Company.
Erik B. Nordstrom 36 Executive Vice 1995 Brother of Blake W. and Peter E.
President Nordstrom; son of Bruce A.
Nordstrom, a Director of the
Company; and nephew of D. Wayne
Gittinger, a Director of the
Company.
J. Daniel Nordstrom 37 President of 1995 Brother of William E. Nordstrom; and
Nordstrom.com, LLC nephew of John N. Nordstrom, a
Director of the Company
Peter E. Nordstrom 37 Executive Vice 1995 Brother of Blake W. and Erik B.
President Nordstrom; son of Bruce A.
Nordstrom, a Director of the
Company; and nephew of D. Wayne
Gittinger, a Director of the
Company.
William E. Nordstrom 36 Executive Vice 1995 Brother of J. Daniel Nordstrom; and
President nephew of John N. Nordstrom, a
Director of the Company
James R. O'Neal 41 Executive Vice 1997 None
President
Michael A. Stein 50 Executive Vice 1998 None
President and Chief
Financial Officer
</TABLE>
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<PAGE> 6
Executive Officers of the Registrant (continued)
<TABLE>
<S> <C> <C> <C> <C>
Susan A. Wilson 54 Executive Vice 1997 None
Tabor President
John J. Whitacre 47 Chairman of the 1989 None
Board of Directors
and Chief Executive
Officer
Martha S. Wikstrom 43 Executive Vice 1991 None
President
</TABLE>
Jammie Baugh was named Executive Vice President of Human Resources on February
16, 2000. Prior thereto, she served as Executive Vice President - Northwest
General Manager since 1997, Executive Vice President - General Manager Southern
California since 1991, and General Manager Southern California since 1990.
Robert E. Campbell has been Vice President and Treasurer, Strategy and Planning
since May 1999. Prior thereto, he was responsible for the Company's investor
relations function since March 1998, and as Manager of Financial Accounting
since February 1997. Prior to joining Nordstrom Inc., Mr. Campbell served in
a number of financial positions with restaurant and retail companies based on
the West Coast.
Gail A. Cottle, Executive Vice President, was named President of Nordstrom
Product Group on February 16, 2000. Prior thereto, she served as Executive Vice
President - Nordstrom Product Group General Manager since 1996, at which time
men's clothing, footwear and cosmetics were added to this group. The Faconnable
business unit was added to this group in 1999. Prior to 1996, she was Executive
Vice President of women's apparel, children's apparel, and accessories product
development since 1992.
Darren R. Jackson has been Vice President, Chief Financial Officer for Full-
line Stores since May 1999. Prior thereto, he served as Vice President and
Treasurer since January 31, 1999, as Vice President - Strategic Planning since
August 1998, and as Planning Manager from February through August 1998. Prior to
joining Nordstrom Inc., he was the Chief Financial Officer for Carson Pirie
Scott & Co. since 1994.
Kevin T. Knight, Vice President of Nordstrom, Inc., Chairman and Chief Executive
Officer of Nordstrom Federal Savings Bank, President of Nordstrom Credit, Inc.,
and, as of February 16, 2000, was named President of Nordstrom Credit Group.
Prior thereto, he served as President of Nordstrom National Credit Bank,
President of Nordstrom Credit, Inc., and General Manager of the credit business
unit since April 1998. Prior to joining Nordstrom, he was Senior Vice President
of Retailer Financial Services, a unit of General Electric Capital Corporation,
since 1995. Prior thereto, he held various positions with General Electric since
1977.
Michael G. Koppel was hired as Vice President and Corporate Controller on August
12, 1999. Prior to joining Nordstrom, he served as Chief Operating Officer of
CML Group, a specialty retail holding company. From 1997 through 1998, he was
Chief Financial Officer of Lids Corporation, a mall based specialty retailer.
From 1984 through 1997, he held a number of financial positions with the May
Department Stores, most recently as Vice President- Controller of its Filenes
division.
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<PAGE> 7
Executive Officers of the Registrant (continued)
F. Richard Lennon was hired as Vice President and Chief Information Officer on
February 16, 2000. Prior to joining Nordstrom, Inc., he served as Vice President
and Chief Technology Officer for Brown-Forman Corporation, since 1988. His
responsiblities included a broad range of systems development, technology
planning, and telecommunications support.
Robert J. Middlemas has been Executive Vice President - Central States General
Manager since 1997. Prior thereto, he served as Vice President - Central States
General Manager since 1993.
Blake W. Nordstrom was named Executive Vice President and President of Nordstrom
Rack Group on February 16, 2000. Prior thereto, he served as Co-President
responsible for credit, community relations, and Rack business unit since 1995
and as Vice President - General Manager Washington/Alaska since 1991.
Erik B. Nordstrom was named Executive Vice President - Northwest General Manager
on February 16, 2000. Prior thereto, he served as Co-President responsible for
Nordstrom Product Group since 1995 and as Store/Regional Manager - Minnesota
since 1992.
J. Daniel Nordstrom has been President of Nordstrom.com LLC since November 1999.
Prior thereto, he served as Co-President responsible for the direct sales
division since 1995 and as General Manager direct sales division since 1993.
Peter E. Nordstrom was named Executive Vice President - Director of Full-line
Store Merchandise Strategy for children's apparel, cosmetics, junior apparel,
lingerie, men's apparel and women's sportswear on February 16, 2000. Prior
thereto, he served as Co-President responsible for sales promotion, human
resources, and diversity affairs since 1995, and as Regional Manager - Orange
County since 1991.
William E. Nordstrom was named Executive Vice President - East Coast General
Manager on February 16, 2000. Prior thereto, he served as Co-President since
1995, as Corporate Merchandise Manager Accessories in 1995 and as Corporate
Merchandise Manager Nordstrom Rack from 1992 to 1995.
James R. O'Neal has been Executive Vice President - Southwest General Manager
since 1997 and served as Vice President - Northern California in 1997. Prior
thereto, he served as General Manager Northern California from 1995 to 1997, and
served as City Regional Manager from 1993 to 1995.
Michael A. Stein has been Executive Vice President and Chief Financial Officer
of the Company since October 1998. He is responsible for the Company's treasury,
corporate finance, business information technology services, real estate and
store planning, investor relations, controllership, tax, legal, and internal
audit functions. Prior to joining Nordstrom, he served as Executive Vice
President and Chief Financial Officer of Marriott International, Inc. since
October 1993; as Senior Vice President, Finance and Corporate Controller of
Marriott Corporation since 1991; and as Vice President, Finance and Chief
Accounting Officer since 1989. Prior to joining Marriott, he spent 18 years with
Arthur Andersen LLP where, since 1982, he was a partner.
Susan A. Wilson Tabor has been Executive Vice President - Rack General Manager
since 1998. Prior thereto, she served as Vice President - Rack General Manager
from 1997 to 1998, and served as Rack General Manager from 1993 to 1997.
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<PAGE> 8
Executive Officers of the Registrant (continued)
John J. Whitacre has been Chairman of the Board of Directors and Chief Executive
Officer since 1996, and served as Co-Chairman from 1995 to 1996. Prior thereto,
he served as Co-President - shoes, men's wear, operations, finance, product
development, restaurant, credit, inventory management systems and direct sales
since 1991.
Martha S. Wikstrom, Executive Vice President, was named President of Full-line
Store Group on February 16, 2000. Prior thereto, she served as Executive Vice
President - Full-line Stores since May 1999,as Executive Vice President - East
Coast General Manager since 1997 and as Vice President - General Manager Capital
since 1991.
The officers are appointed annually by the Board of Directors following each
year's Annual Meeting of Shareholders. Officers serve at the discretion of the
Board of Directors.
Item 2. Properties.
The following table summarizes the number of stores owned or operated by the
Company and the percentage of total store area represented by each listed
category at January 31, 2000:
<TABLE>
<CAPTION>
Number of % of total store
stores square footage
--------- ----------------
<S> <C> <C>
Owned stores 21 23%
Leased stores 51 32
Owned on leased land 30 43
Partly owned & partly leased 2 2
--------- ----------------
104 100%
========= ================
</TABLE>
The Company also operates nine merchandise distribution centers, six which are
owned, two which are leased, and one which is owned on leased land. The Company
owns its principal offices in Seattle, Washington, and an office building in the
Denver, Colorado metropolitan area which serves as the principal offices of
Nordstrom Credit Group.
Certain other information required under this item is included in the following
sections of the Company's 1999 Annual Report to Shareholders, which sections are
incorporated by reference herein from Exhibit 13.1 of this report:
Note 8 in Notes to Consolidated Financial Statements
Note 11 in Notes to Consolidated Financial Statements
Retail Store Facilities
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<PAGE> 9
Item 3. Legal Proceedings.
The information required under this item is included in the following section of
the Company's 1999 Annual Report to Shareholders, which section is incorporated
by reference herein from Exhibit 13.1 of this report:
Note 15 in Notes to Consolidated Financial Statements
Item 4. Submission of Matters to a Vote of Security Holders.
None
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The Company's Common Stock, without par value, is traded on the NYSE National
Market under the symbol "JWN." The approximate number of holders of Common Stock
as of March 20, 2000 was 87,000.
Certain other information required under this item with respect to stock prices
and dividends is included in the following sections of the Company's 1999 Annual
Report to Shareholders, which sections are incorporated by reference herein from
Exhibit 13.1 of this report:
Financial Highlights
Consolidated Statements of Shareholders' Equity
Note 16 in Notes to Consolidated Financial Statements
Item 6. Selected Financial Data.
The information required under this item is included in the following Sections
of the Company's 1999 Annual Report to Shareholders, which sections are
incorporated by reference herein from Exhibit 13.1 of this report:
Note 1 in Notes to Consolidated Financial Statements
Ten-Year Statistical Summary
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required under this item is included in the following section of
the Company's 1999 Annual Report to Shareholders, which section is incorporated
by reference herein from Exhibit 13.1 of this report:
Management's Discussion and Analysis
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<PAGE> 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company is subject to the risk of fluctuating interest rates in the normal
course of business, primarily as a result of its short-term borrowing and
investment activities which generally bear interest at variable rates. Because
the short-term borrowings and investments, other than the investment in
marketable equity securities, have maturities of three months or less, the
Company believes that the risk of material loss is low, and that the carrying
amount approximates fair value. The Company's investment in marketable equity
securities is classified as available-for-sale and is recorded on the balance
sheet at fair value based upon the quoted market price with unrealized gains or
loss reported as a separate component of accumulated other comprehensive income.
The table below presents principal amounts, at book value, by year of maturity,
and related weighted average interest rates. The fair value of long-term debt
(including current maturities), is calculated using quoted market prices of the
same or similar issues with the same remaining term to maturity.
<TABLE>
<CAPTION>
Total at Fair Value
January 31, January 31,
In thousands 2000 2001 2002 2003 2004 Thereafter 2000 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE RISK
LIABILITIES
Long-term debt - Fixed $ 57,776 $ 11,000 $ 76,750 -- -- $ 650,000 $ 795,526 $ 715,498 $ 893,872
Average interest
rate 7.6% 8.7% 7.3% -- -- 6.4% 6.6%
</TABLE>
Certain other information required under this item is included in the following
sections of the Company's 1999 Annual Report to Shareholders, which sections are
incorporated by reference herein from Exhibit 13.1 of this report:
Note 1 in Notes to Consolidated Financial Statements
Note 6 in Notes to Consolidated Financial Statements
Item 8. Financial Statements and Supplementary Data.
The information required under this item is included in the following sections
of the Company's 1999 Annual Report to Shareholders, which sections are
incorporated by reference herein from Exhibit 13.1 of this report:
Consolidated Statements of Earnings
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
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<PAGE> 11
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required under this item with respect to the Company's Directors
and compliance with Section 16(a) of the Exchange Act is included in the
following sections of the Company's Proxy Statement for its 2000 Annual Meeting
of Shareholders, which sections are incorporated by reference herein and will be
filed within 120 days after the end of the Company's fiscal year:
Election of Directors
Compliance with Section 16 of the Exchange Act of 1934
The information required under this item with respect to the Company's Executive
Officers is incorporated by reference from Part I, Item 1 of this report under
"Executive Officers of the Registrant."
Item 11. Executive Compensation.
The information required under this item is included in the following Sections
of the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders,
which sections are incorporated by reference herein and will be filed within 120
days after the end of the Company's fiscal year:
Compensation of Executive Officers in the Year Ended
January 31, 2000
Compensation and Stock Option Committee Report on the 1999 Fiscal
Year Executive Compensation
Stock Price Performance
Compensation of Directors
Compensation Committee Interlocks and Insider Participation
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required under this item is included in the following section of
the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders, which
section is incorporated by reference herein and will be filed within 120 days
after the end of the Company's fiscal year:
Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions.
The information required under this item is included in the following sections
of the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders,
which sections are incorporated by reference herein and will be filed within 120
days after the end of the Company's fiscal year:
Election of Directors
Compensation Committee Interlocks and Insider Participation
Certain Relationships and Related Transactions
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<PAGE> 12
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)1. Financial Statements
The following consolidated financial information and statements of Nordstrom,
Inc. and its subsidiaries and the Independent Auditors' Report are incorporated
by reference herein from Exhibit 13.1 of this report:
Consolidated Statements of Earnings
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a)2. Financial Statement Schedules
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Consent and Report on Schedule 18
Schedule II - Valuation and Qualifying Accounts 19
</TABLE>
Other schedules for which provision is made in Regulation S-X are not
required, are inapplicable, or the information is included in the
Company's 1999 Annual Report to Shareholders as incorporated by
reference herein from Exhibit 13.1 of this report.
(a)3. Exhibits
<TABLE>
<S> <C>
(3.1) Articles of Incorporation of the Registrant, as amended and
restated, are hereby incorporated by reference from the Registrant's
Form 10-Q for the quarter ended April 30, 1999, Exhibit 3.1.
(3.2) By-laws of the Registrant, as amended and restated on May 18, 1999,
are hereby incorporated by reference from the Registrant's Form 10-Q
for the quarter ended April 30, 1999, Exhibit 3.2.
(4.1) Indenture between Registrant and Norwest Bank Colorado, N.A.,
as trustee, dated March 11, 1998 is hereby incorporated by
reference from Registration No. 333-47035, Exhibit 4.1.
(4.2) Senior indenture between Registrant and Norwest Bank Colorado,
N.A., as trustee, dated January 13, 1999 is hereby incorporated
by reference from Registration No. 333-69281, Exhibit 4.3.
(4.3) Form of Subordinated Indenture between Registrant and Norwest Bank
Colorado, N.A., as trustee, dated January 13, 1999 is hereby
incorporated by reference from Registration No. 333-69281, Exhibit
4.4.
</TABLE>
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<PAGE> 13
(a)3. Exhibits (continued)
<TABLE>
<S> <C>
(10.1) Operating Agreement dated August 30, 1991 between Nordstrom
Credit, Inc. and Nordstrom National Credit Bank is hereby
incorporated by reference from the Nordstrom Credit, Inc.
Quarterly Report on Form 10-Q (SEC File No. 0-12994) for the
quarter ended July 31, 1991, Exhibit 10.1, as amended.
(10.2) Merchant Agreement dated August 30, 1991 between Registrant and
Nordstrom National Credit Bank is hereby incorporated by reference
from the Registrant's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1991, Exhibit 10.1.
(10.3) The Nordstrom Supplemental Retirement Plan is hereby incorporated by
reference from the Registrant's Form 10-K for the year ended January
31, 1993, Exhibit 10.3.
(10.4) The 1993 Non-Employee Director Stock Incentive Plan is hereby
incorporated by reference from the Registrant's Form 10-K for the
year ended January 31, 1994, Exhibit 10.4.
(10.5) Investment Agreement dated October 8, 1984 between the Registrant
and Nordstrom Credit, Inc. is hereby incorporated by reference
from the Nordstrom Credit, Inc. Form 10, Exhibit 10.1.
(10.6) Master Pooling and Servicing Agreement dated August 14, 1996 between
Nordstrom National Credit Bank and Norwest Bank Colorado, N.A., as
trustee, is hereby incorporated by reference from the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31,
1996, Exhibit 10.1.
(10.7) Series 1996-A Supplement to Master Pooling and Servicing Agreement
dated August 14, 1996 between Nordstrom National Credit Bank,
Nordstrom Credit, Inc. and Norwest Bank Colorado, N.A., as
trustee, is hereby incorporated by reference from the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31,
1996, Exhibit 10.2.
(10.8) First amendment to the Series 1996-A Supplement to Master Pooling
and Servicing Agreement dated August 14, 1996 between Nordstrom
National Credit Bank, Nordstrom Credit, Inc. and Norwest Bank
Colorado, N.A., as trustee, dated December 10, 1997 is hereby
incorporated by reference from the Nordstrom Credit, Inc. Form 10-K
for the year ended January 31, 1998, Exhibit 10.13.
(10.9) Second Amendment to the Series 1996-A Supplement to Master Pooling
and Servicing Agreement dated August 14, 1996, between Nordstrom
Credit, Inc., Nordstrom National Credit Bank and Norwest Bank
Colorado, N.A., as trustee, dated February 25, 1999, is hereby
incorporated by reference from the Nordstrom Credit, Inc. Form 10-Q
for the quarter ended April 30, 1999, Exhibit 10.1.
(10.10) Transfer and Administration Agreement dated August 14, 1996 between
Nordstrom National Credit Bank, Enterprise Funding Corporation and
Nationsbank, N.A. is hereby incorporated by reference from the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1996, Exhibit 10.3.
</TABLE>
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<PAGE> 14
(a)3. Exhibits (continued)
<TABLE>
<S> <C>
(10.11) First Amendment to the Transfer and Administration Agreement dated
August 19, 1997 between Enterprise Funding Corporation, Nordstrom
National Credit Bank, The Financial Institutions From Time to Time
Parties Thereto, and Nationsbank, N.A. is hereby incorporated by
reference from the Registrant's Form 10-Q for the quarter ended
April 30, 1999, Exhibit 10.1.
(10.12) Second Amendment to the Transfer and Administration Agreement dated
July 23, 1998 between Enterprise Funding Corporation, Nordstrom
National Credit Bank, The Financial Institutions From Time to Time
Parties Thereto, and Nationsbank, N.A. is hereby incorporated by
reference from the Registrant's Form 10-Q for the quarter ended
April 30, 1999, Exhibit 10.2.
(10.13) Receivables Purchase Agreement dated August 14, 1996 between
Registrant and Nordstrom Credit, Inc. is hereby incorporated by
reference from the Registrant's Form 10-K for the year ended January
31, 1997, Exhibit 10.12.
(10.14) The Nordstrom, Inc. 1997 Stock Option Plan is hereby incorporated
by reference from the Registrant's Report on Form S-8, Registration
No. 333-63403 filed on September 15, 1998.
(10.15) Amendment to the Nordstrom, Inc. 1997 Stock Option Plan is hereby
incorporated by reference from the Registrant's Form 10-Q for the
quarter ended April 30, 1999, Exhibit 10.4.
(10.16) The Nordstrom, Inc. Profit Sharing and Employee Deferral
Retirement Plan is hereby incorporated by reference from the
Registrant's Report on Form S-8, Registration No. 333-79791 filed
on June 2, 1999.
(10.17) Amended and Restated Revolving Credit Facility between Registrant
and a group of commercial banks, dated October 15, 1999 is hereby
incorporated by reference from the Registrant's Form 10-Q for the
quarter ended October 31, 1999, Exhibit 10.1.
(10.18) Commercial Paper Dealer Agreement dated October 2, 1997 between
Registrant and Bancamerica Securities, Inc. is hereby incorporated
by reference from the Registrant's Quarterly Report on Form 10-Q for
the quarter ended October 31, 1997, Exhibit 10.1.
(10.19) Commercial Paper Agreement dated October 2, 1997 between Registrant
and Credit Suisse First Boston Corporation is hereby incorporated by
reference from the Registrant's Quarterly Report on Form 10-Q for
the quarter ended October 31, 1997, Exhibit 10.2.
(10.20) Issuing and Paying Agency Agreement dated October 2, 1997 between
Registrant and First Trust of New York, N.A. is hereby incorporated
by reference from the Registrant's Quarterly Report on Form 10-Q for
the quarter ended October 31, 1997, Exhibit 10.3.
(10.21) Joint Venture Agreement between Nordstrom, Inc. and Nordstorm.com,
Inc. dated as of August 24, 1999 is filed herein as an Exhibit.
</TABLE>
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<PAGE> 15
(a)3. Exhibits (continued)
<TABLE>
<S> <C>
(10.22) Credit Agreement dated as of February 29, 2000, between 1700 Seventh
L.P., several lenders from time to time party thereto, with Bank of
America, N.A. as Administrative Agent and as Project Administrative
Agent, is filed herein as an Exhibit.
(10.23) Guaranty Agreement dated as of February 29, 2000, between
Registrant, Bank of America, N.A., and the Lenders party to the
Credit Agreement (described in 10.22 above), is filed herein as an
Exhibit.
(13.1) The Company's 1999 Annual Report to Shareholders is filed herein as
an Exhibit.
(21.1) List of the Registrant's Subsidiaries is filed herein as an
Exhibit.
(23.1) Independent Auditors' Consent and Report on Schedule is on page 18
of this report.
(27.1) Financial Data Schedule is filed herein as an Exhibit.
</TABLE>
All other exhibits are omitted because they are not applicable, not
required, or because the required information is included in the Company's
1999 Annual Report to Shareholders.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period for
which this report is filed.
15 of 19
<PAGE> 16
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
NORDSTROM, INC.
(Registrant)
/s/ Michael A. Stein
----------------------------------------------------
Michael A. Stein
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: April 6, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Principal Accounting Officer: Principal Executive Officer:
/s/ Michael G. Koppel /s/ John J. Whitacre
------------------------------- ----------------------------------
Michael G. Koppel John J. Whitacre
Vice President and Chairman of the Board
Corporate Controller of Directors and Director
Directors:
/s/ D. Wayne Gittinger /s/ Alfred E. Osborne, Jr.
------------------------------- ----------------------------------
D. Wayne Gittinger Alfred E. Osborne, Jr.
Director Director
/s/ Enrique Hernandez, Jr. /s/ William D. Ruckelshaus
------------------------------- ----------------------------------
Enrique Hernandez, Jr. William D. Ruckelshaus
Director Director
16 of 19
<PAGE> 17
Directors (continued):
/s/ Ann D. McLaughlin /s/ Elizabeth Crownhart Vaughan
------------------------------- ----------------------------------
Ann D. McLaughlin Elizabeth Crownhart Vaughan
Director Director
/s/ John J. Whitacre
------------------------------- ----------------------------------
John A. McMillan John J. Whitacre
Director Chairman of the Board of Directors
/s/ Bruce A. Nordstrom /s/ Bruce G. Willison
------------------------------- -----------------------------------
Bruce A. Nordstrom Bruce G. Willison
Director Director
/s/ John N. Nordstrom
-------------------------------
John N. Nordstrom
Director
Date: April 6, 2000
17 of 19
<PAGE> 18
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
Shareholders and Board of Directors
Nordstrom, Inc.
We consent to the incorporation by reference in Registration Statements Nos.
33-18321, 333-63403, and 333-79791 on Form S-8 and in Registration Statement
333-69281 on Form S-3 of Nordstrom, Inc. of our reports dated March 10, 2000
appearing in and incorporated by reference in this Annual Report on Form 10-K of
Nordstrom, Inc. and subsidiaries for the year ended January 31, 2000.
We have audited the consolidated financial statements of Nordstrom, Inc. and
subsidiaries as of January 31, 2000 and 1999, and for each of the three years in
the period ended January 31, 2000, and have issued our report thereon dated
March 10, 2000; such financial statements and report are included in your 1999
Annual Report to Shareholders and are incorporated herein by reference. Our
audits also included the consolidated financial statement schedule of Nordstrom,
Inc. and subsidiaries, listed in Item 14(a)2. This financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
Deloitte & Touche LLP
Seattle, Washington
April 6, 2000
18 of 19
<PAGE> 19
NORDSTROM, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
---------- ---------- ---------- ---------- ---------
Additions Deductions
---------- ----------
Account
Balance at Charged to write-offs Balance
beginning costs and net of at end of
Description of period expenses recoveries period
- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended:
January 31, 1998 $26,793 $40,440 $36,849 $30,384
January 31, 1999 $30,384 $23,827 $29,668 $24,543
January 31, 2000 $24,543 $11,707 $20,412 $15,838
</TABLE>
19 of 19
<PAGE> 20
NORDSTROM INC. AND SUBSIDIARIES
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Method of Filing
- ------- ----------------
<S> <C>
3.1 Articles of Incorporation Incorporated by reference from the
as amended and restated Registrant's Form 10-Q for the quarter
ended April 30, 1999, Exhibit 3.1.
3.2 By-laws, as amended and Incorporated by reference from the
restated on May 18, 1999 Registrant's Form 10-Q for the quarter
ended April 30, 1999, Exhibit 3.2.
4.1 Indenture between Registrant and Incorporated by reference from Registration
Norwest Bank Colorado, N.A., as No. 333-47035, Exhibit 4.1.
trustee, dated March 11, 1998
4.2 Senior indenture between Registrant Incorporated by reference
and Norwest Bank Colorado, N.A., from Registration No. 333-
as trustee, dated January 13, 1999 69281, Exhibit 4.3.
4.3 Form of Subordinated Indenture Incorporated by reference
between Registrant and Norwest from Registration No. 333-
Bank Colorado, N.A., as trustee, 69281, Exhibit 4.4.
dated January 13, 1999
10.1 Operating Agreement dated August 30, Incorporated by reference from the
1991 between Nordstrom Credit, Inc. Nordstrom Credit, Inc. Quarterly Report
and Nordstrom National Credit Bank on Form 10-Q (SEC File No. 0-12994) for
the quarter ended July 31, 1991,
Exhibit 10.1, as amended.
10.2 Merchant Agreement dated August 30, Incorporated by reference from the
1991 between Registrant and Registrant's Quarterly Report on Form
Nordstrom National Credit Bank 10-Q for the quarter ended
July 31, 1991, Exhibit 10.1.
10.3 Nordstrom Supplemental Retirement Plan Incorporated by reference from the
Registrant's Form 10-K for
the year ended January 31,
1993, Exhibit 10.3.
10.4 1993 Non-Employee Director Stock Incorporated by reference from the
Incentive Plan Registrant's Form 10-K for the year ended
January 31, 1994, Exhibit 10.4.
10.5 Investment Agreement dated October 8, Incorporated by reference
1984 between the Registrant and from the Nordstrom Credit,
Nordstrom Credit, Inc. Inc. Form 10, Exhibit 10.1.
10.6 Master Pooling and Servicing Incorporated by reference from the
Agreement dated August 14, 1996 Registrant's Quarterly Report on
between Nordstrom National Credit Form 10-Q for the quarter ended
Bank and Norwest Bank Colorado, October 31, 1996, Exhibit 10.1.
N.A., as trustee
</TABLE>
<PAGE> 21
<TABLE>
<S> <C>
10.7 Series 1996-A Supplement to Master Incorporated by reference
Pooling and Servicing Agreement from the Registrant's
dated August 14, 1996 between Quarterly Report on Form
Nordstrom National Credit Bank, 10-Q for the quarter ended
Nordstrom Credit, Inc. and Norwest October 31, 1996, Exhibit
Bank Colorado, N.A., as trustee 10.2.
10.8 First amendment to the Series 1996-A Incorporated by reference
Supplement to Master Pooling and from the Nordstrom Credit, Inc.
Servicing Agreement dated August Form 10-K for the year ended
14, 1996 between Nordstrom National January 31, 1998, Exhibit
Credit Bank, Nordstrom Credit, Inc. 10.13.
and Norwest Bank Colorado, N.A., as
trustee, dated December 10, 1997
10.9 Second Amendment to the Series 1996-A Incorporated by reference
Supplement to Master Pooling and from the Nordstrom Credit,
Servicing Agreement dated August Inc. Form 10-Q for the quarter
14, 1996, between Nordstrom Credit, ended April 30, 1999, Exhibit 10.1.
Inc., Nordstrom National Credit Bank
and Norwest Bank Colorado, N.A., as
trustee, dated February 25, 1999
10.10 Transfer and Administration Agreement Incorporated by reference from the
dated August 14, 1996 between Registrant's Quarterly Report on
Nordstrom National Credit Bank, Form 10-Q for the quarter ended
Enterprise Funding Corporation and October 31, 1996, Exhibit 10.3.
Nationsbank, N.A.
10.11 First Amendment to the Transfer and Incorporated by reference from the
Administration Agreement dated Registrant's Form 10-Q for the
August 19, 1997 between Enterprise quarter ended April 30, 1999,
Funding Corporation, Nordstrom Exhibit 10.1.
National Credit Bank, The Financial
Institutions From Time to Time
Parties Thereto, and Nationsbank, N.A.
10.12 Second Amendment to the Transfer and Incorporated by reference from the
Administration Agreement dated July Registrant's Form 10-Q for the
23, 1998 between Enterprise Funding quarter ended April 30, 1999,
Corporation, Nordstrom National Exhibit 10.2.
Credit Bank, The Financial
Institutions From Time to Time
Parties Thereto, and Nationsbank, N.A.
10.13 Receivables Purchase Agreement Incorporated by reference
dated August 14, 1996 between from the Registrant's Form
Registrant and Nordstrom Credit, 10-K for the year ended
Inc. January 31, 1997, Exhibit 10.12.
10.14 1997 Nordstrom Stock Option Plan Incorporated by reference from the
Registrant's Report on Form S-8,
Registration No. 333-63403 filed
on September 15, 1998.
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
10.15 Amendment to the Nordstrom, Inc. Incorporated by reference from the
1997 Stock Option Plan Registrant's Form 10-Q for the quarter
ended April 30, 1999, Exhibit 10.4.
10.16 The Nordstrom, Inc. Profit Sharing Incorporated by reference from the
and Employee Deferral Retirement Registrant's Report on Form S-8,
Plan is hereby Registration No. 333-79791 filed
on June 2, 1999.
10.17 Amended and Restated Revolving Incorporated by reference from the
Credit Facility between Registrant Registrant's Form 10-Q for the
and a group of commercial banks, quarter ended October 31, 1999,
dated October 15, 1999 Exhibit 10.1.
10.18 Commercial Paper Dealer Agreement Incorporated by reference from the
dated October 2, 1997 between Registrant's Quarterly Report on
Registrant and Bancamerica Form 10-Q for the quarter ended
Securities, Inc. October 31, 1997, Exhibit 10.1.
10.19 Commercial Paper Agreement dated Incorporated by reference from the
October 2, 1997 between Registrant Registrant's Quarterly Report on
and Credit Suisse First Boston Form 10-Q for the quarter ended
Corporation October 31, 1997, Exhibit 10.2.
10.20 Issuing and Paying Agency Agreement Incorporated by reference from the
dated October 2, 1997 between Registrant's Quarterly Report on
Registrant and First Trust of New Form 10-Q for the quarter ended
York, N.A. October 31, 1997, Exhibit 10.3.
10.21 Joint Venture Agreement between Filed herewith electronically
Nordstrom, Inc. and Nordstorm.com,
Inc. dated as of August 24, 1999
10.22 Credit Agreement dated as of Filed herewith electronically
February 29, 2000, between 1700
Seventh L.P., several lenders from
time to time party thereto, with Bank
of America, N.A. as Administrative
Agent and, as Project Administrative
Agent,
10.23 Guaranty Agreement dated as of Filed herewith electronically
February 29, 2000, between Registrant,
Bank of America, N.A., and the Lenders
party to the Credit Agreement
(described in 10.22 above),
13.1 1999 Annual Report to Shareholders Filed herewith electronically
21.1 Subsidiaries of the Registrant Filed herewith electronically
23.1 Independent Auditors' Consent
and Report on Schedule Filed as page 18 of this report
27.1 Financial Data Schedule Filed herewith electronically
</TABLE>
<PAGE> 1
EXHIBIT 10.21
JOINT VENTURE AGREEMENT
BETWEEN
NORDSTROM, INC.
AND
NORDSTROM.COM, INC.
DATED AS OF
AUGUST 24, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINED TERMS.....................................................................1
1.1 Defined Terms...................................................................1
1.2 References and Titles..........................................................10
ARTICLE II REPRESENTATIONS AND WARRANTIES..................................................10
2.1 Representations and Warranties Regarding Nordstrom.............................10
2.2 Representations and Warranties of Nordstrom.com, Inc...........................21
ARTICLE III PRE-CLOSING AGREEMENTS.........................................................24
3.1 Conduct of Business............................................................24
3.2 No Solicitation................................................................25
3.3 Expenses.......................................................................25
3.4 Approvals; Additional Documents; and Further Assurances........................25
3.5 Access and Information.........................................................26
3.6 Notification of Certain Matters................................................26
3.7 Transfer Charges...............................................................26
3.8 Brokers or Finders.............................................................26
3.9 Bulk Sales Law.................................................................26
3.10 Employee Benefit Matters......................................................26
3.11 Employee Arrangements.........................................................27
ARTICLE IV CONDITIONS PRECEDENT; CLOSING...................................................28
4.1 Conditions to Each Party's Obligation..........................................28
4.2 Conditions to Obligation of Nordstrom..........................................28
4.3 Conditions to Obligations of the Nordstrom.com, Inc............................29
4.4 Closing........................................................................30
4.5 Assumption of Liabilities and Obligations......................................30
4.6 Calculation of Assuming Working Capital Liabilities............................30
ARTICLE V POST-CLOSING COVENANTS...........................................................31
5.1 Indemnification................................................................31
5.2 Store Discounts................................................................33
5.3 Employee Benefit Plans.........................................................34
5.4 Equity Incentives..............................................................35
5.5 Employees......................................................................35
5.6 Nordstrom Holdings.............................................................35
5.7 Merger of Nordstrom.com, Inc. and Nordstrom Holdings...........................37
ARTICLE VI TERMINATION, AMENDMENT AND WAIVER...............................................38
6.1 Termination....................................................................38
6.2 Effect of Termination..........................................................39
6.3 Amendment......................................................................39
6.4 Extension; Waiver..............................................................39
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII GENERAL PROVISIONS.............................................................40
7.1 Notices........................................................................40
7.2 Entire Agreement...............................................................42
7.3 Further Assurances; Post-Closing Cooperation...................................42
7.4 Waiver.........................................................................42
7.5 Third-Party Beneficiaries......................................................42
7.6 No Assignment; Binding Effect..................................................42
7.7 Headings.......................................................................42
7.8 Invalid Provisions.............................................................42
7.9 Governing Law..................................................................43
7.10 Construction..................................................................43
7.11 Counterparts..................................................................43
7.12 Specific Performance..........................................................43
7.13 Dispute Resolution............................................................43
</TABLE>
<TABLE>
<CAPTION>
Exhibits:
<S> <C> <C>
Exhibit A -- Form of Assumption Agreement
Exhibit B -- Form of Bill of Sale and Assignment
Exhibit C -- Bylaws
Exhibit D -- Form of Investors' Rights Agreement
Exhibit E -- Form of License Agreement
Exhibit F -- Form of Operating Agreement
Exhibit G -- Form of Put Agreement
Exhibit H -- Form of Restated Certificate
Exhibit I -- Form of Right of First Refusal and Co-Sale Agreement
Exhibit J -- Form of Services Agreement
Exhibit K -- Form of Stock Purchase Agreement
Exhibit L -- Form of Supply Agreement
Schedules:
Schedule 2.1(d)(i) -- Consents Required under Contracts
Schedule 2.1(d)(ii) -- Consents Required from Governmental Entities
Schedule 2.1(f) -- Financial Statements; Absence of Certain Changes or Events
Schedule 2.1(g)(i) -- Compliance with Laws
Schedule 2.1(g)(ii) -- Licenses and Permits
Schedule 2.1(h) -- Litigation
Schedule 2.1(k) -- Leased Real Property
Schedule 2.1(l) -- Personal Property
Schedule 2.1(m) -- Liens and Encumbrances
Schedule 2.1(n) -- Environmental
Schedule 2.1(o) -- Taxes
Schedule 2.1(p) -- Certain Agreements
Schedule 2.1(q) -- Employee Benefit Plans
Schedule 2.1(r) -- Employees; Labor Relations
Schedule 2.1(s) -- Intellectual Property
Schedule 3.8 -- Brokers and Finders
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Schedule 5.3 -- Excluded Benefit Plans
</TABLE>
iii
<PAGE> 5
AMENDED AND RESTATED JOINT VENTURE AGREEMENT
This AMENDED AND RESTATED JOINT VENTURE AGREEMENT (this
"Agreement") is made and entered into as of August 24, 1999, between Nordstrom,
Inc., a Washington corporation ("Nordstrom"), and Nordstrom.com, Inc., a
Delaware corporation ("Nordstrom.com, Inc.").
RECITALS
Nordstrom, through its wholly owned subsidiary, Nordstrom.com
Holdings, Inc., a Washington corporation ("Nordstrom Holdings"), and
Nordstrom.com, Inc. plan to form Nordstrom.com, LLC, a Delaware limited
liability company ("LLC"), to engage in the Business (as defined below), subject
to the terms and conditions set forth below.
AGREEMENTS
NOW, THEREFORE, in consideration of the respective
representations, warranties, agreements, and conditions hereinafter set forth,
and other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS
1.1 Defined Terms. The following terms shall have the following
meanings in this Agreement:
"Accounts Receivable" means the rights of Nordstrom or any
Nordstrom Affiliate to payment for merchandise sold to customers pursuant to the
Business.
"Affiliate" means, with respect to any person, any other person
controlling, controlled by or under common control with such person.
"Applicable Laws" means all applicable laws, statutes, rules,
regulations, ordinances, judgments, orders, decrees, injunctions, and writs of
any Governmental Entity.
"Assets" means all the tangible and intangible assets owned,
leased, or licensed by Nordstrom or any Nordstrom Affiliate that are used or
held for use primarily in connection with the Business, but specifically
excluding therefrom the Excluded Assets. Without limiting the foregoing, the
Assets to be assigned, transferred and delivered by Nordstrom and/or Nordstrom
Holdings hereunder shall include the following:
(a) the Personal Property;
(b) the Leased Real Property;
<PAGE> 6
(c) the Licenses and Permits;
(d) the Assumed Contracts;
(e) the Intellectual Property, subject to any consents
required for transfer of such Intellectual Property;
(f) the Accounts Receivable as of the close of business on
the day immediately preceding the Closing Date;
(g) all books and records relating to the Business
(excluding those described in clause (b) of the definition of "Excluded
Assets"), including executed copies of the Assumed Contracts, or if no executed
agreement exists, summaries of such Assumed Contracts transferred pursuant to
clause (e) above;
(h) all computer programs and software, and all rights and
interests of Business in and to computer programs and software used primarily in
connection with the Business (but excluding computer programs and software
maintained and operated by Nordstrom for its entire business and not primarily
for the Business), subject to any consents required for transfer of such
computer programs and software;
(i) all rights and claims of Nordstrom or any Nordstrom
Affiliate whether mature, contingent or otherwise, against third parties that
relate primarily to the Business (other than the Excluded Assets), whether in
tort, contract, or otherwise, including, without limitation, causes of action,
unliquidated rights and claims under or pursuant to all warranties, indemnities,
representations and guarantees made by manufacturers, suppliers, vendors,
sellers, transferors or predecessors (except to the extent of any counterclaim
or defense to a claim against Nordstrom or any Nordstrom Affiliate that exists
after the Closing);
(j) all intangible assets of Nordstrom or any Nordstrom
Affiliate primarily relating to the Business not specifically described above,
including goodwill; and
(k) petty cash on hand as of the Closing Date of Nordstrom
and any Nordstrom Affiliate for use solely in the Business.
"Assumed Contracts" means (a) those Contracts set forth on
Schedule 2.1(p) that are identified as being assumed by the LLC, (b) all other
Contracts of Nordstrom or any Nordstrom Affiliate that relate primarily to the
Assets or the Business, and (c) all Contracts entered into by Nordstrom or any
Nordstrom Affiliate on or after the date of this Agreement and before the
Closing in the ordinary course of business that relate primarily to the Assets
or the Business.
"Assumed Liabilities" means the liabilities and obligations
assumed by the LLC at the Closing pursuant to Section 4.5(a).
"Assumed Working Capital Liabilities" means the following:
2
<PAGE> 7
(a) accounts payable of Nordstrom or any Nordstrom
Affiliate for goods and services primarily for the benefit of the Business
incurred in the ordinary course of business;
(b) amounts due or accrued in the ordinary course of
business for wages, salaries, profit-sharing payments, bonuses, vacations and
other employee benefits by Nordstrom or any Nordstrom Affiliate for employees
whose primary service is for the benefit of the Business as of the close of
business; and
(c) any other current liabilities of Nordstrom or any
Nordstrom Affiliate incurred in the ordinary course of business primarily for
the benefit of the Business (but excluding liabilities for product returns,
except to the extent the LLC fails to perform its obligations under the Supply
Agreement to accept returns of products sold through the Business on or before
the Closing Date or to the extent provided in the Supply Agreement).
"Assumption Agreement" means the Assumption Agreement between
Nordstrom and/or a Nordstrom Affiliate and LLC substantially in a form and
substance reasonably acceptable to Nordstrom and Nordstrom Holdings and to be
attached as Exhibit A.
"Balance Sheet" has the meaning set forth in Section 2.1(f).
"Benchmark Funds" means one or more of the following: Benchmark
Capital Partners III, L.P., Benchmark Founders' Fund III, L.P., Benchmark
Founders' Fund III-A, L.P., Benchmark Members' Fund III, L.P. and any other
affiliated venture capital funds.
"Bill of Sale and Assignment" means the Bill of Sale and
Assignment between Nordstrom and/or a Nordstrom Affiliate and the LLC
substantially in the form of Exhibit B.
"Business" shall mean the sale, supply or other distribution of
goods and services to consumers conducted by Nordstrom through (i) on-line
internet technologies, whether now known or hereafter devised, including, but
not limited to, Websites, e-mail, electronic commerce, on-line advertising and
virtual shopping, and (ii) except as provided in the following sentence, through
catalogs and other written material. Notwithstanding any other provision
contained herein, the "Business" shall exclude: (a) the sale of goods and
services to consumers making such purchases at traditional retail stores, (b)
the sale, supply or other distribution of goods and services to consumers
through catalogs, other written materials or e-mail, provided that such goods
and services are fulfilled by hand at traditional retail stores, and (c) the
supply or distribution of goods and services sold to consumers at traditional
retail stores but fulfilled at a centralized fulfillment center.
"Business Day" means any other day than (i) a Saturday or Sunday
or (ii) a day on which commercial banks in Seattle, Washington are authorized or
required to be closed.
"Closing" means the consummation of the transactions contemplated
by this Agreement in accordance with the provisions of Article IV.
"Closing Date" has the meaning set forth in Section 4.4.
3
<PAGE> 8
"Code" means the United States Internal Revenue Code of 1986, as
amended. All references to the Code, U.S. Treasury regulations or other
governmental pronouncements shall be deemed to include references to any
applicable successor regulations or amending pronouncement.
"Competing Proposed Transaction" has the meaning set forth in
Section 3.2.
"Consents" means all governmental consents and approvals, and all
consents and approvals of third parties, in each case that are necessary in
order to transfer the Assets to the LLC pursuant to the Operating Agreement and
otherwise to consummate the transactions contemplated by the Transaction
Documents.
"Contracts" means all agreements, contracts, or other binding
commitments or arrangements, written or oral (including any amendments and other
modifications thereto), to which Nordstrom or any Nordstrom Affiliate is a party
or is otherwise bound and which primarily relate to the Assets or the Business.
"Employee Benefit Plans" has the meaning set forth in Section
2.1(q).
"Environmental Laws" means all Applicable Laws and rules of
common law pertaining to the environment, natural resources, and public health
and safety including the Comprehensive Environmental Response Compensation and
Liability Act, (42 U.S.C. Section 9601 et seq.) ("CERCLA"), the Emergency
Planning and Community Right to Know Act and the Superfund Amendments and
Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the
Hazardous and Solid Waste Amendments Act of 1984, the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act, the Safe Drinking Water Act, the
Oil Pollution Act of 1990, the Hazardous Materials Transportation Act, and any
similar or analogous statutes, regulations and decisional law of any
Governmental Entity, as each of the foregoing may be amended and in effect on or
prior to the Closing.
"Environmental Permits" means Permits required pursuant to
Environmental Laws relating to the Business or the Assets.
"Equity Interests" means any interest in any other corporation,
association, joint venture, partnership or other business entity, whether or not
such interest is represented by a certificate or constitutes a security.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" means:
(a) all tangible and intangible assets owned, leased or
licensed by Nordstrom or any Nordstrom Affiliate that may relate to the Business
but are not used primarily in the Business;
4
<PAGE> 9
(b) Nordstrom's corporate books and other books and
records relating solely to internal corporate matters and any other books and
records not related to the Business;
(c) Any claims, rights and interest of Nordstrom or any
Nordstrom Affiliate in and to any (i) refunds of Taxes or fees of any nature
whatsoever relating to the Business or (ii) deposits or utility deposits
relating to the Business, in each case which relate solely to the period prior
to the Closing Date;
(d) All insurance contracts, including the cash surrender
value thereof, and all insurance proceeds or claims made by Nordstrom or any
Nordstrom Affiliate relating to the Business prior to the Closing Date;
(e) All Employee Benefit Plans and all assets or funds
held in trust, or otherwise, associated with or used in connection with the
Employee Benefit Plans;
(f) All tangible and intangible personal property disposed
of or consumed in the ordinary course of business between the date of this
Agreement and the Closing Date, or as otherwise permitted under the terms
hereof; and
(g) Any collective bargaining agreement, any other
Contract not included in the Assumed Contracts and all Contracts that have
terminated or expired prior to the Closing Date in the ordinary course of
business and as permitted hereunder.
"Executive Employee" means any employee of Nordstrom or any
Nordstrom Affiliate that (i) is a member of the executive group of the Business
or (ii) reports directly to any such member.
"Financial Statements" has the meaning set forth in Section
2.1(f).
"GAAP" means generally accepted accounting principles in the
United States.
"Governmental Entity" means any governmental department,
commission, board, bureau, agency, court, tribunal or other instrumentality of
the United States, any foreign country or any state, county, parish or
municipality, jurisdiction, or other political subdivision thereof.
"Hazardous Material" means (a) any chemical, material, substance
or waste including, containing or constituting petroleum or petroleum products,
solvents (including chlorinated solvents), nuclear or radioactive materials,
asbestos in any form that is or could become friable, radon, lead-based paint,
urea formaldehyde foam insulation or polychlorinated biphenyls, (b) any
chemicals, materials, substances or wastes which are now defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes, "toxic
substances," "toxic pollutants" or words of similar import under any
Environmental Law; or (c) any other chemical, material, substance or waste which
is regulated by any Governmental Entity or which could constitute a nuisance.
5
<PAGE> 10
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Indemnified Party" means any party entitled indemnification
pursuant to Section 5.1 hereof.
"Indemnifying Party" means any party required to indemnify
another party pursuant to Section 5.1 hereof.
"Inc. Bylaws" means the Nordstrom.com, Inc. Bylaws in the form
attached as Exhibit C.
"Inc. Plan" means any equity incentive plan proposed to be
adopted by Nordstrom.com, Inc.
"Inc. Transaction Documents" means the Restated Certificate,
Stock Purchase Agreement, Investors' Right Agreement, Put Agreement and each
Right of First Refusal and Co-Sale Agreement.
"Initial Public Offering" means an initial public offering of the
shares of common stock of Nordstrom.com, Inc. or its counterpart pursuant to a
registration statement declared effective under the Securities Act resulting in
gross proceeds of at least $20 million and underwritten by a nationally
recognized investment bank.
"Intellectual Property" means all Know-how, copyrights, copyright
registrations and applications for registration, Patents, Trademarks and all
other intellectual property rights whether registered or not, licensed to or
owned by Nordstrom or any Nordstrom Affiliate, which are reasonably necessary
for the operation of the Business, excluding the Trademarks that are licensed to
the LLC pursuant to the License Agreement and excluding licenses to Nordstrom or
any Nordstrom Affiliate of rights in software.
"Investors' Rights Agreement" means the Investors' Rights
Agreement among Nordstrom.com, Inc., Nordstrom Holdings, the Benchmark Funds and
the other investors named therein, substantially in the form of Exhibit D
attached hereto.
"Know-how" means all plans, ideas, concepts and data, research
records, all promotional literature, customer and supplier lists and similar
data and information and all other trade secrets and confidential or proprietary
technical and business information.
"Knowledge" means, with respect to a specified party hereto, the
actual knowledge of any executive officer of such party.
"Leased Real Property" means all of the leasehold interests,
easements, licenses, rights to access and rights-of-way of Nordstrom or any
Nordstrom Affiliate which are used primarily in the Business, which are
identified and described in Schedule 2.1(k), together with any addition or
permitted deletion thereto between the date hereof and the Closing Date.
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"Liabilities and Costs" means any and all damages, losses,
claims, liabilities, charges, judgments, penalties, costs and expenses
(including court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding).
"Licenses" means all other Permits issued by any Governmental
Entity to Nordstrom or any Nordstrom Affiliate and that are used primarily in
the Business.
"License Agreement" means the License Agreement to be entered
into among, LLC and Nordstrom or one or more Nordstrom Affiliates substantially
in the form of Exhibit E attached hereto.
"Liens" shall mean any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first refusal,
transfer restriction or other encumbrance of any nature whatsoever.
"LLC Transaction Documents" means the Operating Agreement, the
License Agreement, the Services Agreement and the Supply Agreement.
"LLC Shares" shall mean shares of the LLC, consisting of Series A
Preferred Shares ("LLC Series A Preferred Shares"), Series B Preferred Shares
("LLC Series B Preferred Shares") and Common Shares ("LLC Common Shares").
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties (taken as a whole), condition (financial or
otherwise), results of operations, assets (taken as a whole), liabilities, or
prospects of the Business.
"Merger" means a merger or other business combination of the LLC,
Nordstrom.com, Inc. and/or Nordstrom Holdings.
"Nordstrom Affiliate" means each Affiliate of Nordstrom (but not
Nordstrom.com, Inc.)
"Nordstrom Entities" means each of Nordstrom, Nordstrom Holdings,
and each other Nordstrom Affiliate that is a party to one of the Transaction
Documents.
"Option" has the meaning set forth in Section 2.1(b).
"Order" means any judgment, decree, order, writ, permit or
license.
"Operating Agreement" means the Limited Liability Company
Agreement of the LLC to be entered into among the LLC, Nordstrom.com, Inc. and
Nordstrom Holdings in substantially the form of Exhibit F attached hereto.
"Patents" means all patent and patent applications (including all
reissues, divisions, continuations, continuations-in-part, renewals, and
extensions of the foregoing) used primarily in the Business that are owned by
Nordstrom or any Nordstrom Affiliate.
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"Permits" means all permits, registrations, licenses, approvals,
authorizations and the like.
"Permitted Encumbrances" means (a) statutory liens for current
taxes not yet due and payable, (b) in the case of leases of real property,
agreements with, and/or conditions imposed on the issuance of land use permits,
zoning, business licenses, use permits, or other entitlements of various types
issued by city, county, state, and federal governmental bodies or agencies,
necessary or beneficial to the continued use and occupancy of the Assets or the
conduct of the Business, which do not, individually or in the aggregate,
materially impair the use of such leased real property in the Business or
operation of the Assets, (c) mechanics', carriers', workers', repairers', and
other similar liens imposed by law arising or incurred in the ordinary course of
business for obligations not yet due, which do not, individually or in the
aggregate, materially impair the Business or operation of the Assets to which
such liens relate or any part thereof, (d) in the case of leases of vehicles,
rolling stock, and other personal property, encumbrances, which do not,
individually or in the aggregate, materially impair the operation of the
Business at the facility at which such leased equipment or other Personal
Property is located, and (e) other liens, charges or encumbrances incidental to
the Business or the ownership of the Assets which were not incurred in
connection with the borrowing of money or the advance of credit which in the
aggregate do not materially detract from the value of the Assets or materially
interfere with the Business.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, or other
entity.
"Personal Property" means all of the inventory, machinery,
equipment, computer programs, computer software, tools, motor vehicles,
furniture, furnishings, leasehold improvements, office equipment, inventories,
supplies, plant, spare parts, Equity Interests, and other tangible or intangible
personal property owned or leased by Nordstrom or any Nordstrom Affiliate and
which are used or held for use primarily in the Business, including the personal
property which is listed on Schedule 2.1(1) hereto, together with any additions
thereto between the date hereof and the Closing Date less any dispositions made
in accordance with Section 3.1.
"Put Agreement" means the Put Agreement among the Benchmark
Funds, the other investors listed in the Stock Purchase Agreement and Nordstrom
in substantially the form of Exhibit G attached hereto.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of a Hazardous Material into the Environment.
"Restated Certificate" means the Amended and Restated Certificate
of Incorporation of Nordstrom.com, Inc. in substantially the form of Exhibit H
attached hereto.
"Right of First Refusal and Co-Sale Agreement" means the Right of
First Refusal and Co-Sale Agreement to be entered into between the Benchmark
Funds and the other investors
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named in the Stock Purchase Agreement, on the one hand, and Nordstrom Holdings
and certain other Persons, on the other hand, substantially in the form attached
as Exhibit I.
"Schedules" means the Schedules attached hereto.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Services Agreement" means the Services Agreement between the LLC
and Nordstrom substantially in the form of Exhibit J attached hereto.
"Stock Purchase Agreement" means the Preferred Stock Purchase
Agreement among Nordstrom.com, Inc., Nordstrom Holdings, the Benchmark Funds and
the other investors named therein substantially in the form attached hereto as
Exhibit K.
"Supply Agreement" means the Supply Agreement between the LLC and
Nordstrom substantially in the form of Exhibit L attached hereto.
"Subsidiary" with respect to any Person means any corporation or
other entity of which more than fifty percent (50%) of the shares of outstanding
capital stock or other interests possessing the voting power (under ordinary
circumstances) in electing the board of directors are, at the time as of which
any determination is being made, owned by such Person either directly or
indirectly through Subsidiaries.
"Target Employees" has the meaning set forth in Section
2.1(q)(ii).
"Taxes" means taxes, charges, fees, imposts, levies, interest,
penalties, additions to tax or other assessments or fees of any kind, including,
but not limited to, income, corporate, capital, excise, property, sales, use,
turnover, value added, gross receipts and franchise taxes, deductions,
withholdings and customs duties, imposed by any Taxing Authority and any
payments with respect thereto required under any tax-sharing agreement, under
any express or implied obligation to indemnify any other person, or as a result
of being a member of an affiliated, consolidated, combined, unitary or other
group for tax purposes.
"Taxing Authority" means any governmental department, commission,
board, bureau, agency, court or other instrumentality of the United States or
any other Country or of any state, county, parish, municipality, jurisdiction,
or other political subdivision of the United States or any other Country.
"Tax Returns" means any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any Governmental Entity in connection with the
determination, assessment, collection or administration of any Taxes or the
administration of any laws, regulations or administrative requirements relating
to any Taxes.
"Trademarks" means (a) trademarks, service marks, trade names,
trade dress, labels, logos, and all other names and slogans used primarily in
the Business, whether or not
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registered, and any applications or registrations therefor, and (b) any
associated goodwill incident thereto owned by Nordstrom or any Nordstrom
Affiliate.
"Transaction Documents" means this Agreement, the Inc.
Transaction Documents and the LLC Transaction Documents.
"Transfer Charges" has the meaning set forth in Section 3.7.
"Website" means any interactive site or area, including any
interactive site or area located on the World Wide Web portion of Internet or on
any commercial service or network (including services such as AOL), which is
accessed via the use of any protocols, standards or platforms (including
Internet or Internet derivative protocols, standards and platforms) for remote
access by narrowband or broadband telecommunications, including POTS, ISDN,
cable, fiber optics and hybrid CD-ROM, regardless of whether access to such site
or area is secured through cable, telephone, satellite or otherwise and
regardless of whether the same is received or operated in conjunction with a
personal computer or television, together with any successor into which any of
the foregoing may evolve.
1.2 References and Titles. All references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections,
and other subdivisions of this Agreement unless expressly provided otherwise.
Titles appearing at the beginning of any Articles, Sections, subsections, or
other subdivisions of this Agreement are for convenience only, do not constitute
any part of such Articles, Sections, subsections or other subdivisions, and
shall be disregarded in construing the language contained therein.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties Regarding Nordstrom. Nordstrom
represents and warrants to Nordstrom.com, Inc. as follows (with the
understanding that Nordstrom.com, Inc. is relying on such representations and
warranties in entering into and performing this Agreement).
(a) Organization and Qualification. Each Nordstrom Entity
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has full corporate power and
authority to conduct its business as and to the extent now conducted and to own,
use and lease its assets and properties. Each Nordstrom Entity is duly
qualified, licensed or admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary except where the failure to be so licensed or
admitted would not have a Material Adverse Effect. Nordstrom Holdings has no
Subsidiaries. Nordstrom Holdings does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
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exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity other than
the LLC.
(b) Capital Structure. As of the date hereof, 1,000 shares
of common stock of Nordstrom Holdings, par value $0.0001 per share ("Nordstrom
Holdings Common Stock") were issued and outstanding and owned of record and
beneficially by Nordstrom, free and clear of any Liens. There are not
outstanding any subscriptions, options, warrants, rights (including phantom
stock or stock appreciation rights) or preemptive rights (collectively, referred
to as "Options") or other contracts, commitments, understandings or
arrangements, including any right of conversion or exchange under any
outstanding security instrument or agreement obligating Nordstrom Holdings to
issue or sell any shares of capital stock of Nordstrom Holdings or to grant,
extend or enter into any Nordstrom Holdings Option with respect thereto.
(c) Authority Relative to this Agreement. Each Nordstrom
Entity has full corporate power and authority to enter into each Transaction
Document to which it is a party and to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by each Nordstrom Entity of each
Transaction Document to which it is a party and the consummation by each
Nordstrom Entity of the transactions contemplated hereby and thereby have been
duly and validly approved by the board of directors of such Nordstrom Entity,
and no other corporate proceedings on the part of any Nordstrom Entity are
necessary to authorize the execution, delivery and performance by such Nordstrom
Entity of each Transaction Document to which it is a party and the consummation
by such Nordstrom Entity of the transactions contemplated hereby and thereby.
(d) Non-Contravention; Approvals and Consents.
(i) The execution and delivery by each Nordstrom
Entity of each Transaction Document to which it is a party does not and will
not, as the case may be, and the performance by such Nordstrom Entity of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, result in a violation
or breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give to any person any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any Lien upon any of the assets or
proprieties of such Nordstrom Entity under any of the terms, conditions or
provisions of (i) the certificate of incorporation or bylaws (or other
comparable charter documents) of such Nordstrom Entity, or (ii) (A) any
Applicable Laws or Orders of any Governmental Entity applicable to such
Nordstrom Entity or any of its assets or properties, or (B) except as set forth
on Schedule 2.1(d)(i), any Contracts to which such Nordstrom Entity is a party
or by which such Nordstrom Entity or any of its assets or properties is bound.
(ii) Except as set forth on Schedule 2.1(d)(ii), no
Consent of any Governmental Entity or other public or private third party is
necessary or required under any of the terms, conditions or provisions of any
Applicable Law or Order of any Governmental Entity or any Contract to which any
Nordstrom Entity is a party or by which any Nordstrom Entity or any of its
assets or properties is bound for the execution and delivery by such Nordstrom
Entity
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of each Transaction Document to which it is a party for the performance by such
Nordstrom Entity of its obligations hereunder or thereunder, or for the
consummation of the transactions contemplated hereby or thereby.
(e) Assets. The Assets and the Excluded Assets include all
assets used or held for use in the Business.
(f) Financial Statements, Absence of Certain Changes or
Events.
(i) Nordstrom has delivered to Nordstrom.com, Inc.
copies of the unaudited balance sheets of the Business as of January 31, 1998
and 1999, together with the related unaudited statements of income of the
Business for the two years ended January 31, 1998, and 1999, (the unaudited
balance sheet of the Business as of January 31, 1999 is referred to as the
"Balance Sheet") (collectively, the "Financial Statements"). The Financial
Statements were prepared with accounting principles applied on a consistent
basis throughout the periods covered thereby and present fairly in all material
respects the financial position, results of operations of the Business as of
such dates and for the periods then ended.
(ii) Except as disclosed in Schedule 2.1(f), there
is no liability or obligation of any kind, whether accrued, absolute, fixed,
contingent, or otherwise, relating to the Business that is not reflected or
reserved against in the Balance Sheet, other than (A) liabilities incurred in
the ordinary course of business in a manner consistent with past practice since
January 31, 1999, or (B) any such liability or obligation which would not be
required to be presented in financial statements prepared in a manner consistent
with past practice in the preparation of the Financial Statements. Except as
disclosed in Schedule 2.1(f), there is no liability or obligation referred to in
clause (B) of the preceding sentence, except for any such liabilities or
obligations that are not reasonably expected to have a Material Adverse Effect.
(iii) Except as disclosed in Schedule 2.1(f), since
January 31, 1999, Nordstrom has conducted the Business only in the ordinary
course consistent with past practice and nothing has occurred that would have
been prohibited by Section 3.1 if the terms of such section had been in effect
as of and after January 31, 1999. From January 31, 1999 until the date of this
Agreement, there has not occurred, any event, circumstance, or fact that could
reasonably be expected to result in a Material Adverse Effect. To the Knowledge
of Nordstrom, there are no pending or proposed statutes, rules, or regulations,
nor any current or pending developments or circumstances, that could reasonably
be expected to have a Material Adverse Effect.
(g) Compliance with Applicable Laws.
(i) The Business has been conducted in compliance
with each Applicable Law, except as set forth in Schedule 2.1(g)(i) or where a
failure to do so would not have a Material Adverse Effect. No investigation or
review by any Governmental Entity with respect to the Business is pending or, to
the Knowledge of Nordstrom, threatened. In addition, Nordstrom has duly and
timely filed, or caused to be so filed, with the appropriate Governmental
Entities all reports, statements, documents, registrations, filings, or
submissions with respect to
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the operation of the Business, where the failure to duly or timely file such
reports, statements, documents, registrations, filings, or submissions would not
have a Material Adverse Effect.
(ii) Schedule 2.1(g)(ii) is a true and complete
list of all material Permits issued to Nordstrom or any Nordstrom Affiliate
primarily relating to the Business by any Governmental Entity and held by them
as of the date of this Agreement.
(h) Absence of Litigation. Except as set forth on Schedule
2.1(h), there is no claim, action, suit, inquiry, judicial, or administrative
proceeding, grievance, or arbitration pending (nor, to the Knowledge of
Nordstrom, threatened or is there any reasonable basis therefor to the Knowledge
of Nordstrom) relating to the Business or any of the Assets by or before any
arbitrator or Governmental Entity, nor are there any pending or unfunded
settlements or any investigations relating to the Business or any of the Assets
pending (nor, to the Knowledge of Nordstrom, threatened or is there any
reasonable basis therefor) by or before any arbitrator or Governmental Entity.
Except as set forth in Schedule 2.1(h), there is no Order of any Governmental
Entity or arbitrator outstanding relating to the Business or any of the Assets.
There is no action, suit, inquiry, judicial, or administrative proceeding
pending or, to the Knowledge of Nordstrom, threatened against Nordstrom or any
Nordstrom Affiliate relating to the transactions contemplated by this Agreement
or the Transaction Documents.
(i) Insurance. Nordstrom and/or the Nordstrom Affiliates
has policies of insurance and bonds of the type and in amounts customarily
carried by persons conducting a business similar to the Business. There is no
material claim pending under any of such policies or bonds related to the
Business as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and Nordstrom is otherwise in compliance
with the material terms of such policies and bonds. Nordstrom has no Knowledge
of any threatened termination of, or material premium increase with respect to,
any of such policies, notice or information or the delivery of any inaccurate or
erroneous notice or information, which limits or impairs the rights of Nordstrom
or any Nordstrom Affiliate under any such insurance policies in such a manner as
could reasonably be expected to have a Material Adverse Effect. Excluding
insurance policies that have expired and been replaced in the ordinary course of
business, no insurance policy has been canceled within the last two years prior
to the date hereof.
(j) Intentionally Omitted.
(k) Leased Real Property. Schedule 2.1(k) contains an
accurate description of all the leasehold interests relating to the Business.
Except as otherwise disclosed on Schedule 2.1(k) Nordstrom is not, and to the
Knowledge of the Nordstrom, no other party is, in material default under any
lease described in Schedule 2.1(k). Subject to obtaining the Consents disclosed
in Schedule 2.1(k), Nordstrom has the full legal power and authority to assign
its rights under the leases listed in Schedule 2.1(k) to the LLC. All leasehold
interests listed in Schedule 2.1(k) (including the improvements thereon) are
available for immediate use in the conduct of the Business as currently
conducted.
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(l) Personal Property. Except as set forth on Schedule
2.1(l), Nordstrom has good title to, or a valid leasehold or license interest in
all Personal Property and none of the Personal Property is subject to any Lien
or other encumbrances, except for Permitted Encumbrances. Nordstrom is not, and
to the Knowledge of the Nordstrom, no other party is, in material default under
any of the leases, licenses and other Contracts relating to the Personal
Property. The Personal Property (i) is in good operating condition and repair
(ordinary wear and tear excepted), and (ii) is available for immediate use in
the Business as currently conducted.
(m) Liens and Encumbrances. Except as set forth on
Schedule 2.1(m), all of the Assets, including leases, are free and clear of all
Liens, except for Permitted Encumbrances.
(n) Environmental Matters.
(i) Nordstrom or a Nordstrom Affiliate possesses
all Environmental Permits necessary to or required for the operation of the
Business, except where the failure to possess such Environmental Permits could
not reasonably be expected to have a Material Adverse Effect.
(ii) Nordstrom or a Nordstrom Affiliate is in
compliance with (i) all terms, conditions and provisions of its Environmental
Permits; and (ii) all Environmental Laws relating to the Business or the Assets,
except where the failure to so comply would not have a Material Adverse Effect.
(iii) None of Nordstrom or any Nordstrom Affiliate
nor, to the Knowledge of Nordstrom, any predecessor of Nordstrom nor any entity
previously owned by Nordstrom has received any notice of alleged, actual or
potential responsibility for, or any inquiry regarding, (i) any Release or
threatened or suspected Release of any Hazardous Material relating to the
Business or Assets, or (ii) any violation of Environmental Law relating to the
Business or Assets.
(iv) None of Nordstrom or any Nordstrom Affiliate
nor, to the Knowledge of Nordstrom, any predecessor of Nordstrom nor any entity
previously owned by Nordstrom has any obligation or liability with respect to
any Hazardous Material relating to the Business or Assets, including any Release
or threatened or suspected Release of any Hazardous Material relating to the
Business or Assets, and to the Knowledge of Nordstrom there are no events, facts
or circumstances which could reasonably be expected to form the basis of any
such obligation or liability.
(v) No Releases of Hazardous Material(s) have
occurred at, from, in, to, on, or under any Leased Real Property while Nordstrom
has occupied the Leased Real Property and, to Nordstrom's Knowledge, no
Hazardous Material is present in, on, about or migrating to or from any Leased
Real Property.
(vi) None of Nordstrom or any Nordstrom Affiliate
nor any entity previously owned by Nordstrom, has transported or arranged for
the treatment, storage, handling,
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disposal or transportation of any Hazardous Material at or to any location used
primarily in the Business.
(vii) No Leased Real Property is a current or
proposed Environmental Clean-up Site.
(viii) There are no Liens under or pursuant to any
Environmental Law on any Leased Real Property.
(ix) There is no (i) underground storage tank,
active or abandoned, (ii) polychlorinated biphenyl containing equipment, (iii)
asbestos-containing material, (iv) radon, (v) lead-based paint or (vi) urea
formaldehyde at any Leased Real Property that has a Material Adverse Effect.
(x) Except as set forth or Schedule 2.1(n), there
have been no environmental investigations, studies, audits, tests, reviews or
other analyses conducted by or for Nordstrom or any Nordstrom Affiliate or, to
the Knowledge of Nordstrom or any Nordstrom Affiliate, by or for any other
Person with respect to any Leased Real Property while Nordstrom or any Nordstrom
Affiliate has occupied the Leased Real Property, which have not been delivered
to Nordstrom.com, Inc. prior to execution of this Agreement.
(xi) Except as set forth on Schedule 2.1(n), none
of Nordstrom or any Nordstrom Affiliate is a party, whether as a direct
signatory, assignor or assignee, guarantor, successor, or third party
beneficiary, to, and is not otherwise bound by, any lease or other contract
under which Nordstrom or any Nordstrom Affiliate is obligated or may be
obligated by any representation, warranty, covenant, restriction,
indemnification or other undertaking respecting Hazardous Materials or under
which any other person is or has been released respecting Hazardous Materials
relating to the Leased Real Property.
(o) Taxes. Nordstrom has filed or caused to be filed all
Tax Returns relating to the Business or the Assets which are required to be
filed by Nordstrom, all such Tax Returns which have been filed are accurate and
complete in all material respects, and Nordstrom or a Nordstrom Affiliate has
timely paid all Taxes shown on such returns or on any Tax assessment received by
Nordstrom or a Nordstrom Affiliate to the extent that such Taxes have become
due, except for Taxes that are being contested in good faith. Except for
Permitted Encumbrances, there are no Liens for Taxes upon the Assets. Nordstrom
or a Nordstrom Affiliate has not received notice of any Tax deficiency or
delinquency of a material nature. Except as set forth on Schedule 2.1(o), no
audit by the Internal Revenue Service or a state taxing authority of Nordstrom
or a Nordstrom Affiliate relating to the Business or the Assets is pending or
threatened (nor, to the Knowledge of Nordstrom, is there any reasonable basis
therefor). All monies required to be withheld by Nordstrom or a Nordstrom
Affiliate from employees or collected from customers for Taxes and the portion
of any Taxes to be paid by Nordstrom or a Nordstrom Affiliate to governmental
agencies or set aside in accounts for such purposes relating to the Business or
the Assets have been so paid or set aside, or such monies have been reserved
against and entered upon the books and are reflected in the Financial Statements
and Balance Sheet. There is no legal, administrative, or tax proceedings
pursuant to which Nordstrom or any
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Nordstrom Affiliate is or could be made liable for any taxes, penalties,
interest, or other charges of any material nature, the liability for which could
extend to the LLC as transferee of the Assets or by operating the Business.
Nordstrom or a Nordstrom Affiliate will pay all Taxes relating to the operation
of the Business before the Closing Date when and as such Taxes are due to the
extent that such Taxes could, if unpaid, have to be paid by Nordstrom.com, Inc.
or otherwise adversely affect the Business or the Assets; provided that the
parties will pro-rate as of the Closing Date all Taxes that accrued or are
attributable to periods on or before the Closing Date.
(p) Certain Agreements. Schedule 2.1(p) hereto lists each:
(A) union Contract or any employment or consulting Contract or arrangement
providing for future compensation, written or oral, with any officer,
consultant, director or employee which is not terminable by Nordstrom or a
Nordstrom Affiliate without liability or penalty on thirty days or less notice;
(B) plan, Contract or arrangement, written or oral, providing for bonuses,
pensions, deferred compensation, severance pay or benefits, retirement payments,
profit-sharing or the like (except to the extent any such plan, Contract or
arrangement is an Employee Benefit Plan); (C) joint venture Contract or
arrangement; (D) Contract under which any party thereto remains obligated to
provide goods or services having a value, or to make payments aggregating in
excess of $50,000 per year; (E) Contract for any Leased Real Property; (F)
Contract or lease for Personal Property in which the Business is required to
make payments exceeding $50,000 on an annual basis; (G) license Contract, either
as licensor or licensee, providing for the license of Intellectual Property
(excluding non-exclusive software licenses granted to customers or end-users in
the ordinary course of business); (H) Contract containing covenants purporting
to limit the ability of Nordstrom or any Nordstrom Affiliate to operate the
Business; (I) material Contract providing for indemnification; (J) Contract or
commitment relating to capital expenditures which involves future payments in
excess of $50,000 on an annual basis; (K) Contract relating to the disposition
or acquisition of any Assets (other than the ordinary course of business); (L)
purchase order or Contract for the purchase of materials or supplies involving
payments exceeding $50,000 on an annual basis; and (M) other Contract that is
material to the operation of the Business;
in each case, only to the extent that (i) Nordstrom or a Nordstrom Affiliate is
a party thereto or the Assets are bound thereby and (ii) such Contract,
arrangement, plan, lease, commitment or purchase order relates primarily to the
Business.
Each such Contract described in Schedule 2.1(p) or required to be
so described is a valid and binding obligation of Nordstrom or a Nordstrom
Affiliate and is in full force and effect without amendment. Nordstrom and, to
the Knowledge of Nordstrom, each other party to such Contracts, has performed in
all material respects the obligations required to be performed by it under such
Contracts and is not (with or without lapse of time or the giving of notice, or
both) in material breach or default thereunder. Schedule 2.1(k) identifies, as
to each such Contract listed thereon, whether the consent of the other party
thereto is required in order for such Contract to continue in full force and
effect upon the consummation of the transactions contemplated hereby or whether
such Contract can be canceled by the other party without liability to such other
party due to the consummation of the transactions contemplated hereby. A
complete copy of each written Contract set forth in Schedule 2.1(p) will be
provided to Nordstrom.com, Inc. within three Business Days after the date
hereof.
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(q) Employee Benefit Plans; ERISA.
(i) Definition of ERISA Affiliate. The term "ERISA
Affiliate" means Nordstrom and each person (as defined in section 3(9) of ERISA)
that, together with Nordstrom, would be treated as a single employer under
section 4001(b) of ERISA or that would be deemed to be a member of the same
"controlled group" within the meaning of section 414(b) or (c) of the Code.
(ii) Employee Benefit Plans. Except for the plans
and agreements listed in Schedule 2.1(q) (collectively, the "Employee Benefit
Plans"), no ERISA Affiliate maintains, is a party to, contributes to or is
obligated to contribute to, for the benefit of any employee engaged in the
Business as of the date hereof (a "Target Employee"), and the Target Employees
or former Target Employees and their dependents or survivors do not receive
benefits under, any of the following (whether or not set forth in a written
document):
(A) Any employee benefit plan, as defined in
section 3(3) of ERISA;
(B) Any bonus, deferred compensation, incentive,
restricted stock, stock purchase, stock option, stock appreciation
right, phantom stock, supplemental pension, executive compensation,
cafeteria benefit, dependent care, director or employee loan, fringe
benefit, sabbatical, severance, termination pay or similar plan,
program, policy, agreement or arrangement;
(C) Any merchandise discount program or similar
program; or
(D) Any plan, program, agreement, policy,
commitment or other arrangement relating to the provision of any benefit
described in section 3(1) of ERISA to former employees or directors or
to their survivors, other than procedures intended to comply with the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA").
(i) Terminated Plans. No ERISA Affiliate has, since
January 1, 1993, terminated, suspended, discontinued contributions to or
withdrawn from any employee pension benefit plan, as defined in section 3(2) of
ERISA, including (without limitation) any multi-employer plan, as defined in
section 3(37) of ERISA, that covered Target Employees.
(ii) Documents. Nordstrom has made available to
Nordstrom.com, Inc. complete, accurate and current copies of each of the
following:
(A) The text (including amendments) of each of
the Employee Benefit Plans, to the extent reduced to writing;
(B) A summary of each of the Employee Benefit
Plans, to the extent not previously reduced to writing;
(C) With respect to each Employee Benefit Plan
that is an employee benefit plan (as defined in section 3(3) of ERISA),
the following:
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(I) The most recent summary plan
description, as described in section 102 of ERISA;
(II) Any summary of material modifications
that has been distributed to participants but has not been
incorporated in an updated summary plan description furnished
under Subparagraph (I) above; and
(III) The annual report, as described in
section 103 of ERISA, and (where applicable) actuarial reports,
for the three most recent plan years for which an annual report
or actuarial report has been prepared; and
(D) With respect to each Employee Benefit Plan
that is intended to qualify under section 401(a) of the Code, the most
recent determination letter concerning the plan's qualification under
section 401(a) of the Code, as issued by the Internal Revenue Service,
and any subsequent determination letter application.
(i) ERISA Compliance. With respect to each Employee
Benefit Plan that is an employee benefit plan (as defined in section 3(3) of
ERISA), the requirements of ERISA applicable to such Employee Benefit Plan have
been satisfied, except to the extent that a failure to satisfy any of such
requirements would not have a Material Adverse Effect.
(ii) COBRA Compliance. With respect to each
Employee Benefit Plan that is subject to COBRA, the requirements of COBRA
applicable to such Employee Benefit Plan have been satisfied, except to the
extent that a failure to satisfy any of such requirements would not have a
Material Adverse Effect.
(iii) FMLA Compliance. With respect to each
Employee Benefit Plan that is subject to the Family Medical Leave Act of 1993,
as amended, the requirements of such Act applicable to such Employee Benefit
Plan have been satisfied, except to the extent that a failure to satisfy any of
such requirements would not have a Material Adverse Effect.
(iv) Qualification Requirements. Each Employee
Benefit Plan that is intended to qualify under section 401(a) of the Code meets
the requirements for qualification under section 401(a) of the Code and the
regulations thereunder, except to the extent that such requirements may be
satisfied by adopting retroactive amendments under section 401(b) of the Code
and the regulations thereunder. Each such Employee Benefit Plan has been
administered in accordance with its terms (or, if applicable, such terms as will
be adopted pursuant to a retroactive amendment under section 401(b) of the Code)
and the applicable provisions of ERISA and the Code and the regulations
thereunder, except to the extent that a failure to be so administered would not
have a Material Adverse Effect.
(v) Funding. No ERISA Affiliate has any accumulated
funding deficiency under section 412 of the Code or any termination or
withdrawal liability under Title IV of ERISA, except to the extent that any such
liability would not have a Material Adverse Effect. For purposes of determining
any accumulated funding deficiency under section 412 of
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the Code, the term "ERISA Affiliate" shall include any entity that is deemed to
be a member of the same "controlled group" within the meaning of section 414(m)
or (o) of the Code.
(vi) Contributions. All contributions, premiums or
other payments due from any ERISA Affiliate to (or under) any Employee Benefit
Plan have been fully paid or adequately provided for on the books and financial
statements of such ERISA Affiliate. Except for the Assumed Working Capital
Liabilities and as elsewhere provided under this Agreement, no liability for
such contributions, premiums or other payments will attach to the assets of the
Business.
(vii) Consequences of Transactions. The Employee
Benefit Plans permit, or may prior to the Closing Date be amended to permit,
continued participation on the same terms and conditions by the Target Employees
following their transfer to the LLC, provided the LLC remains an ERISA
Affiliate.
(r) Employees; Labor Relations.
(i)Employees of Business. Within five (5) business
days from the date hereof Schedule 2.1(r) shall be completed to set forth a true
and complete list of all individuals employed in the Business as of the date
hereof and, in the case of employees with an annual base salary of $100,000 or
more, the position and base compensation payable to each such individual,
together with a description of any written or oral employment agreement,
consulting agreement or termination or severance agreement between such
individual and Nordstrom or any Nordstrom Affiliate.
(ii) Collective Bargaining. With respect to any
Target Employee, neither Nordstrom nor any Nordstrom Affiliate is a party to or
is subject to (A) a labor or collective bargaining agreement or arrangement or
(B) except as provided in Schedule 2.1(r), any labor or employment dispute.
(iii) Consequences of Transactions. Except as
disclosed on Schedule 2.1(r), or to the extent that such amounts would not
result in a Material Adverse Effect, the consummation of the transactions
contemplated herein, including (without limitation) the transfer of the Target
Employees to the LLC and/or Nordstrom.com, Inc., will not result in (A) any
additional amount becoming payable to any Target Employee or independent
contractor engaged in the Business, (B) the acceleration of payment or vesting
of any benefit, option or right to which any Target Employee or independent
contractor engaged in the Business may be entitled, (C) the forgiveness of any
indebtedness of any Target Employee or independent contractor engaged in the
Business or (D) any cost becoming due or accruing to the Business or
Nordstrom.com, Inc. with respect to any Target Employee or independent
contractor engaged in the Business, other than such costs relating to the
continued participation of the LLC in such Employee Benefit Plans pursuant to
Sections 3.11 and 5.3 hereof. Compliance with the terms of this Agreement,
including (without limitation) the transfer of the Target Employees to the LLC
and/or Nordstrom.com, Inc., will not violate any agreement with any Target
Employee.
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(iv) Parachute Payments. Except as disclosed on
Schedule 2.1(r), neither Nordstrom nor any Nordstrom Affiliate is obligated to
make any payment or transfer any property that would be considered a "parachute
payment" under section 280G(b)(2) of the Code to any Target Employee who is
employed by the LLC and/or Nordstrom.com, Inc.
(v) Injuries. To the Knowledge of Nordstrom, no
Target Employee has been injured in the work place or in the course of his or
her employment except for injuries which are covered by insurance or for which a
claim has been made under workers' compensation or similar laws.
(vi) Compliance With IRCA. With respect to the
Target Employees, Nordstrom and the Nordstrom Affiliates have complied in all
material respects with the verification requirements and the record-keeping
requirements of the Immigration Reform and Control Act of 1986 ("IRCA"); to the
Knowledge of Nordstrom, the information and documents on which Nordstrom and the
Nordstrom Affiliates relied to comply with IRCA with respect to the Target
Employees are true and correct; and there have not been any discrimination
complaints filed against Nordstrom or any Nordstrom Affiliate by the Target
Employees pursuant to IRCA, and to the Knowledge of Nordstrom, there is no basis
for the filing of such a complaint.
(vii) Employee Complaints. Except as set forth in
Schedule 2.1(r), neither Nordstrom nor any Nordstrom Affiliate has received or
been notified of any complaint by any Target Employee, applicant, union or other
party of any discrimination or other conduct related to the Business and
forbidden by law or contract nor, to the Knowledge of Nordstrom, is there a
basis for any such complaint, except such complaints as could not reasonably be
expected to have a Material Adverse Effect on the Business.
(viii) Government Filings. Nordstrom or a Nordstrom
Affiliate has filed all required reports and information with respect to the
Target Employees that are due prior to the Closing Date and otherwise has
complied in its hiring, employment, promotion, termination and other labor
practices with all applicable federal and state law and regulations, including
without limitation those within the jurisdiction of the United States Equal
Employment Opportunity Commission, United States Department of Labor and state
and local human rights or civil rights agencies, except to the extent that any
such failure to file or comply would not have a Material Adverse Effect on the
Business. Nordstrom or a Nordstrom Affiliate has filed or shall file any such
reports and information that are required to be filed prior to the Closing Date.
(s) Intellectual Property. To Nordstrom's Knowledge,
except as set forth in Schedule 2.1(s), Nordstrom and/or Nordstrom Affiliates
have sufficient title and ownership of the Intellectual Property (other than the
trademark "NORDSTROM") necessary to conduct the Business as now conducted. To
Nordstrom's best knowledge, Nordstrom has and/or Nordstrom Affiliates have
sufficient title and ownership of the trademark "NORDSTROM" to conduct the
Business as now conducted. The Intellectual Property constitutes all Know-how,
copyrights, copyright registrations and applications for registration, Patents,
Trademarks and all other intellectual property rights reasonably necessary to
conduct the Business. Except as set forth on Schedule 2.1(s), there are (i) no
Patents and (ii) no outstanding options, licenses, or agreements of any kind
relating to the Intellectual Property, nor is Nordstrom and/or any Nordstrom
Affiliate
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bound by or a party to any options, licenses or agreements of any kind with
respect to the Intellectual Property except for off-the-shelf end user software
license and support/maintenance agreements. Except as set forth in Schedule
2.1(s), neither Nordstrom nor any Nordstrom Affiliate has received any
communications alleging that Nordstrom and/or any Nordstrom Affiliate has in
connection with the Business violated or, by conducting the Business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity. Neither Nordstrom nor any Nordstrom Affiliate is aware that
any of its employees is obligated under any Contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her best efforts to promote the Business or
that would conflict with the Business. Except as set forth in Schedule 2.1(s),
neither the execution nor delivery of Transaction Documents, nor the carrying on
of the Business will, to the Knowledge of Nordstrom or any Nordstrom Affiliate,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees is now obligated. Neither Nordstrom nor any Nordstrom
Affiliate believes it is or will be necessary to utilize any inventions of any
of its employees (or people it currently intends to hire for the Business) made
prior to or outside the scope of their employment by Nordstrom or any Nordstrom
Affiliate.
(t) Affiliate. There are no Contracts or other
arrangements relating primarily to the Business in which any officer, director,
stockholder or employee of or consultant to Nordstrom or any Nordstrom Affiliate
has a material financial interest.
(u) No Dispositions. Since January 31, 1999, there has not
occurred any sale, lease, transfer, assignment, abandonment or other disposition
of any material amount of Assets other than any disposition of (i) obsolete
property, (ii) property in connection with the acquisition of replacement
property of equal value, or (iii) assets disposed of in the ordinary course of
business and consistent with past practices.
(v) Restrictions on Business. There is no material
Contract or Order (or any administrative or judicial proceeding, pending or
threatened that may result in any such agreement or Order) binding on Nordstrom
or any Nordstrom Affiliate which has or could reasonably be expected to have the
effect of prohibiting or materially impairing the operation of the Business or
the ownership or use of the Assets.
(w) Disclosure. No representation or warranty by Nordstrom
contained in this Agreement or in any certificate furnished pursuant to this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
2.2 Representations and Warranties of Nordstrom.com, Inc.
Nordstrom.com, Inc. represents and warrants to Nordstrom as follows (with the
understanding that Nordstrom is relying on such representations and warranties
in entering into and performing this Agreement):
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(a) Organization and Qualification. Nordstrom.com, Inc. is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties. Nordstrom.com, Inc. is duly qualified, licensed
or admitted to do business and is in good standing in each jurisdiction in which
the ownership, use or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary. Nordstrom.com, Inc. has no Subsidiaries. Except as contemplated by
the Transaction Documents, Nordstrom.com, Inc. does not directly or indirectly
own any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
(b) Nordstrom.com, Inc.'s Capital Stock. As of the date
hereof, Nordstrom.com, Inc.'s authorized capital stock consists solely of 10,000
shares of common stock, par value $0.0001 per share (the "Inc. Common Stock") of
which, as of the date hereof, 1,000 were issued and outstanding and none were
reserved for issuance. All the outstanding shares of the Inc. Common Stock are
owned of record and beneficially by an entity affiliated with the Benchmark
Funds, as nominee for the Benchmark Funds, free and clear of any Liens. Except
for transactions contemplated by this Agreement, there are no outstanding
Options, subscriptions, options, warrants, rights (including phantom stock or
stock appreciation rights) or preemptive rights (collectively, referred to as
"Options") or other contracts, commitments, understandings or arrangements,
including any right of conversion or exchange under any outstanding security
instrument or agreement, obligating Nordstrom.com, Inc. to issue or sell any
shares of capital stock of Nordstrom.com, Inc. or to grant, extend or enter into
any Nordstrom.com, Inc. Option with respect thereto. As of the Closing Date,
Nordstrom.com, Inc.'s authorized capital stock shall consist of 33,033,033.03
shares of Inc. Common Stock and 25,885,885.88 shares of preferred stock, par
value $0.0001 per share ("Inc. Preferred Stock"), 21,020,720.72 shares of which
shall have been designated as Series A Preferred Stock, none of which shall be
issued and outstanding, 300.30 shares of which shall have been designated as
Series B Preferred Stock, up to 300.30 shares of which may be issued and
outstanding as of the Closing Date, and 4,864,864.86 shares of which shall have
been designated as Series C Preferred Stock, up to 4,864,864.86 shares of which
may be issued and outstanding as of the Closing Date. As of the Closing Date,
[4,504,000.00] shares of Inc. Common Stock (less the number of shares of the LLC
reserved for issuance pursuant to an equity incentive plan of the LLC) shall be
reserved for issuance pursuant to the Inc. Plan.
(c) Nordstrom.com, Inc.'s Assets. Nordstrom.com, Inc. has
conducted no business since the date of its incorporation. Except for
transactions contemplated by the Transaction Documents, Nordstrom.com, Inc. has
no assets or liabilities and does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
(d) Authority Relative to this Agreement. Nordstrom.com,
Inc. has full corporate power and authority to enter into this Agreement and to
perform its obligations under the Transaction Documents and to consummate the
transactions contemplated hereby and
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thereby. The execution, delivery and performance of the Transaction Documents
and the consummation by Nordstrom.com, Inc. of the transactions contemplated
hereby and thereby have been duly and validly approved by the board of directors
of Nordstrom.com, Inc., and no other corporate proceedings on the part of
Nordstrom.com, Inc. are necessary to authorize the execution, delivery and
performance by Nordstrom.com, Inc. of the Transaction Documents to which it is a
party and the consummation by Nordstrom.com, Inc. of the transactions
contemplated hereby and thereby. This Agreement has been duly and validly
executed and delivered by Nordstrom.com, Inc. and constitutes a legal, valid and
binding obligation, enforceable against Nordstrom.com, Inc. in accordance with
its terms.
(e) Non-Contravention; Approvals and Consents.
(i) The execution and delivery of the Transaction
Documents by Nordstrom.com, Inc. does and will not, and the performance by
Nordstrom.com, Inc. of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby will not,
conflict with, result in a violation or breach of, constitute (with or without
notice or lapse of time or both) a default under, result in or give to any
person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
Lien upon any of the assets or properties of Nordstrom.com, Inc. under any of
the terms, conditions or provisions of (i) the certificate of incorporation or
bylaws of Nordstrom.com, Inc., or (ii) (x) any Applicable Laws or any Order of
any Governmental Entity applicable to Nordstrom.com, Inc. or any of its assets
or properties, or (y) any Contract to which Nordstrom.com, Inc. is a party or by
which Nordstrom.com, Inc. or any of its assets or properties is bound.
(ii) No Consent or other public or private third
party is necessary or required under any of the terms, conditions or provisions
of any Applicable Law or Order of any Governmental Entity or any Contract to
which Nordstrom.com, Inc. is a party or by which Nordstrom.com, Inc. or any of
its assets or properties is bound for the execution and delivery of the
Transaction Documents to which Nordstrom.com, Inc. is a party, the performance
by Nordstrom.com, Inc. of its obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby and thereby.
(f) Absence of Undisclosed Liabilities. Nordstrom.com,
Inc. does not have any liabilities or obligations (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due) of any nature.
(g) Disclosure. No representation or warranty made by
Nordstrom.com, Inc. contained in this Agreement or in any certificate furnished
by Nordstrom.com, Inc. pursuant to this Agreement contains or will contain an
untrue statement of material fact, or omits or will omit to state a material
fact necessary, in the light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading.
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ARTICLE III
PRE-CLOSING AGREEMENTS
3.1 Conduct of Business. Except as contemplated by this Agreement
or to the extent that Nordstrom.com, Inc. shall otherwise consent in writing,
which consent shall not be unreasonably withheld, from the date of this
Agreement until the Closing, Nordstrom covenants and agrees that it shall:
(a) conduct the Business in the ordinary course consistent
with past practice;
(b) use commercially reasonable efforts to preserve intact
the present Business organization and to keep available the services of its
present officers, employees and independent contractors used in the Business and
preserve its relationships with customers, suppliers and others having business
dealings with the Business;
(c) maintain the Assets in their current condition, except
for ordinary wear and tear;
(d) not amend in any material respect, terminate, or fail
to use all commercially reasonable efforts to renew any material Contract
(provided that Nordstrom shall not be required to renew any material Contract on
terms that are materially less favorable to Nordstrom), or default in any
material respect (or take or omit to take any action that, with or without the
giving notice or passage of time, would constitute a material default) under any
material Contract or enter into any new material Contract;
(e) not merge or consolidate the Business with or into any
other legal entity, or dissolve, or liquidate the Business;
(f) not adopt or amend any Employee Benefit Plan or
collective bargaining agreement, or increase by more than 5% in any manner the
compensation or fringe benefits of any officer, or employee used in the Business
(whether employees or independent contractors), except as required by law or
pursuant to an applicable written Contract,
(g) not terminate any Executive Employee without prior
consultation with Nordstrom.com, Inc. regarding the basis for such termination;
(h) not acquire (including, without limitation, by merger,
consolidation, or the acquisition of any equity interest or assets) or sell
(whether by merger, consolidation, or the sale of an equity interest or assets),
lease, or dispose of any material amount of Assets except in the ordinary course
of business and consistent with past practice, whether in one or more
transactions;
(i) not mortgage, pledge, or subject to any Lien, other
than Permitted Encumbrances, any of the Assets;
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(j) not change in any material respect its existing
practices and procedures with respect to the collection of Accounts Receivable
and, except with respect to good faith attempts consistent with past practice to
obtain payment of a past due receivable, or except in accordance with existing
practices, a contested receivable, offer to discount the amount of any
outstanding receivable or extend any other incentive (whether to the account
debtor or any employee or third party responsible for the collection of
receivables) to accelerate the collection thereof; or
(k) not agree to or make any commitment, orally or in
writing, to take any actions prohibited by this Agreement.
3.2 No Solicitation. Until the earlier of the Closing and the
date of termination of this Agreement pursuant to the provisions of Section 6.1
hereof, Nordstrom will not, nor will Nordstrom permit any of its directors,
officers, agents, employees, Affiliates, attorneys, accountants, financial
advisers or other representatives (collectively, "Representatives") to (directly
or indirectly): (i) solicit, encourage, initiate, entertain, review or
participate in any negotiations or discussions with respect to an offer or
proposal, oral, written, or otherwise, formal or informal to acquire all or any
part of the Business, whether by purchase of assets, exclusive license, joint
venture formation, purchase of stock, business combination or otherwise, (ii)
disclose any information not customarily disclosed to any Person concerning the
Business and which Nordstrom believes would be used for the purposes of
formulating any such offer or proposal, (iii) assist, cooperate with, facilitate
or encourage any Person to make any offer or proposal to acquire all or any part
of the Business (directly or indirectly), (iv) agree to, enter into a contract
regarding, approve, recommend or endorse any transaction involving the
acquisition of all or any part of the Business (a "Competing Proposed
Transaction"), or (v) authorize or permit any of Nordstrom's Representatives to
take any such action. Nordstrom shall notify Nordstrom.com, Inc. as promptly as
practical if any proposal or offer (formal or information, oral, written or
otherwise), or any inquiry or contact with any Persons with respect thereto,
regarding a Competing Proposed Transaction is made or is outstanding on the date
hereof, such notice to include the identity of the Person proposing such
Competing Proposed Transaction and the terms thereof, and shall keep
Nordstrom.com, Inc. apprised, on a current basis of the status of any such
Competing Proposed Transaction and of any modifications to the terms thereof.
Nordstrom.com, Inc. immediately shall cease and cause to be terminated all
existing discussions or negotiations with any parties other than Nordstrom
conducted heretofore with respect to any Competing Proposed Transaction.
3.3 Expenses. Upon consummation of the transactions contemplated
by this Agreement to be consummated at the Closing, the LLC shall pay the
reasonable fees and expenses of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP in connection with the negotiation and effectuation of the terms
and conditions of the Transaction Documents and the transactions contemplated
hereby and thereby.
3.4 Approvals; Additional Documents; and Further Assurances.
Nordstrom and Nordstrom.com, Inc. shall use their best efforts to (i) obtain all
Consents, (ii) do and perform all such other acts and things and (iii) execute
and deliver such other instruments and agreements as
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may be necessary or desirable for effecting fully the consummation of the
Transaction Documents and the transactions contemplated hereby and thereby.
3.5 Access and Information. Until the Closing, Nordstrom shall
afford to Nordstrom.com, Inc. and its representatives (including accountants and
counsel) full access, during normal business hours, upon reasonable notice and
in such manner as will not unreasonably interfere with the conduct of the
business of Nordstrom, to all properties, books, records, and Tax Returns
relating to the Business and all other information relating to the Business,
together with the opportunity to make copies of such books, records, and other
documents and to discuss the Business with such corporate officers, other
personnel, accountants, consultants, and counsel for Nordstrom as Nordstrom.com,
Inc. deems reasonably necessary or appropriate for the purposes of familiarizing
itself with the Business.
3.6 Notification of Certain Matters. Each party to this Agreement
shall give prompt written notice to the other party of (a) the occurrence, or
failure to occur, of any event of which it becomes aware that has caused or that
would be likely to cause any representation or warranty of such party contained
in this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Closing Date, (b) the failure of such party, or any
officer, director, employee, or agent of such party, to comply with or satisfy
in any material respect any covenant, condition, or agreement to be complied
with or satisfied by it hereunder, and (c) in the case of Nordstrom, the
occurrence of any threat made to Nordstrom by any Executive Employee to resign
or otherwise terminate their employment or independent contractor relationship
with Nordstrom. No such notification shall affect the representations or
warranties of the parties or the conditions to their respective obligations
hereunder.
3.7 Transfer Charges. Nordstrom and Nordstrom.com, Inc. agree to
use commercially reasonable efforts to minimize any taxes, charges, filing fees
or other assessments of any Taxing Authority or other Governmental Entity
(collectively "Transfer Charges") that will result from the transfer of the
Assets to the LLC pursuant to the Transaction Documents. The LLC agrees that it
will pay up to $175,000 of any Transfer Charges, and Nordstrom agrees that it
will pay any Transfer Charges in excess of $175,000.
3.8 Brokers or Finders. Except as set forth in Schedule 3.8, each
party represents and warrants to the other that no agent, broker, investment
banker, or other person is or will be entitled to any broker's or finder's fee
or any other commission or similar fee payable by Nordstrom or Nordstrom.com,
Inc. in connection with any of the transactions contemplated by this Agreement.
3.9 Bulk Sales Law. The parties do not believe that any bulk
sales or fraudulent conveyance statute applies to the transactions contemplated
by this Agreement. Nordstrom agrees to indemnify and hold the LLC harmless
against any claim made against LLC by any creditor of Nordstrom as a result of a
failure to comply with any such statute.
3.10 Employee Benefit Matters. Nordstrom shall take all necessary
actions to cause the Employee Benefit Plans to permit continued participation by
the Target Employees following their transfer to the LLC, provided the LLC
remains an ERISA Affiliate. Such
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participation shall be in accordance with Section 5.3 hereof and on the terms
and conditions that apply to similarly situated employees employed by Nordstrom
and the Nordstrom Affiliates. At the earlier of October 1, 2002 or at the point
in time when the LLC ceases to be a Nordstrom ERISA Affiliate, the LLC may
continue to participate in such Employee Benefit Plans only with the consent of
Nordstrom.
3.11 Employee Arrangements. Nordstrom shall use commercially
reasonable efforts to cause the Target Employees to be employed by the LLC
and/or Nordstrom.com, Inc. immediately following the Closing. Employment with
the LLC and/or Nordstrom.com, Inc. shall be offered to the Target Employees
pursuant to offer or notification letters that (a) expressly reserve the right
of the LLC and Nordstrom.com, Inc. to modify compensation levels and employee
benefit programs after December 31, 1999, including (without limitation) the
right to discontinue the participation of the Target Employees in the Employee
Benefit Plans and to substitute new employee benefit plans specific to the LLC
and/or Nordstrom.com, Inc., and (b) acknowledge that the Target Employees will
be employees at will of the LLC and/or Nordstrom.com, Inc. and that such
transfer of employment will not constitute a separation of employment with
Nordstrom for purposes of its Employee Benefit Plans. Without the prior written
consent of Nordstrom.com, Inc., neither Nordstrom nor any Nordstrom Affiliate
shall encourage or solicit any Target Employee to be employed by Nordstrom or
any Nordstrom Affiliate following the Closing. Neither Nordstrom nor any
Nordstrom Affiliate shall attempt to prevent the LLC or Nordstrom.com, Inc. from
hiring a former employee of Nordstrom or any Nordstrom Affiliate who seeks
employment with the LLC or Nordstrom.com, Inc. provided that notice is provided
to Nordstrom prior to the time any offer is made to any such former employee.
Without the prior written consent of Nordstrom, neither
Nordstrom.com, Inc. nor the LLC shall encourage or solicit any person employed
by Nordstrom or any Nordstrom Affiliate who is not engaged in the Business as of
the date hereof to be employed by Nordstrom.com, Inc. or the LLC following
Closing. Neither Nordstrom.com, Inc. nor the LLC shall attempt to prevent
Nordstrom or any Nordstrom Affiliate from hiring a former employee of
Nordstrom.com, Inc. or the LLC who seeks employment with Nordstrom or any
Nordstrom Affiliate provided that notice is provided to Nordstrom.com, Inc.
prior to the time any offer is made to any such former employee.
3.12 Delivery and Acceptance of Schedules. Nordstrom shall
deliver to Nordstrom.com, Inc. all Schedules required to be delivered by it
pursuant to this Agreement within three (3) Business Days after the date hereof.
Nordstrom.com, Inc. shall have three (3) Business Days after receipt of the
Schedules to review and approve the disclosures contained therein. The parties
shall promptly meet and attempt to negotiate in good faith any disclosures which
are the subject of dispute, but Nordstrom.com, Inc. shall not be required to
accept any such disclosures that are different in any material respect with
information furnished to Nordstrom.com, Inc. or its Affiliates on or before the
date hereof.
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ARTICLE IV
CONDITIONS PRECEDENT; CLOSING
4.1 Conditions to Each Party's Obligation. The respective
obligations of Nordstrom and Nordstrom.com, Inc. to effect the transactions
contemplated hereby are subject to the satisfaction on or prior to the Closing
Date of the following conditions:
(a) Governmental Consents. All Consents from any
Governmental Entity (if any) necessary for consummation of the transactions
contemplated by this Agreement shall have been timely obtained, and any waiting
period applicable to the consummation of such transactions under the HSR Act
shall have expired or been terminated.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other Order issued by
any Governmental Entity or other legal or regulatory restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall be in
effect; nor shall there be any action taken, or any Applicable Law or Order
enacted, entered, enforced or deemed applicable to the transactions contemplated
hereby that would prohibit the consummation of such transactions.
(c) No Action. No Governmental Entity shall have notified
either party to this Agreement that such Governmental Entity intends to commence
proceedings to restrain or prohibit the transactions contemplated hereby or
force rescission, unless such Governmental Entity shall have withdrawn such
notice and abandoned any such proceeding prior to the time which otherwise would
have been the Closing Date.
(d) Inc. Transaction Documents. The Restated Certificate
shall have been filed with the Secretary of State of the State of Delaware; the
Inc. Bylaws shall have been duly adopted by the board of directors of
Nordstrom.com, Inc; the Stock Purchase Agreement, Investors' Rights Agreement,
the Put Agreement and the Right of First Refusal and Co-Sale Agreements shall
have been executed and delivered by the parties thereto; and the Closing (as
defined in the Stock Purchase Agreement) shall have occurred.
(e) LLC Transaction Documents. Nordstrom and
Nordstrom.com, Inc. shall have executed and delivered the Operating Agreement;
the Closing (as defined in the Operating Agreement) shall have occurred;
Nordstrom and the LLC shall have executed and delivered the Bill of Sale and
Assignment, any other documents reasonably necessary to effect the transfer of
the Assets and the Assumption Agreement; and the License Agreement, the Supply
Agreement and the Service Agreement shall have been executed and delivered by
the parties thereto.
4.2 Conditions to Obligation of Nordstrom. The obligation of
Nordstrom to effect the transactions contemplated hereby is subject to the
satisfaction of the following conditions unless waived, in whole or in part, by
Nordstrom:
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(a) Representations and Warranties. The representations
and warranties of Nordstrom.com, Inc. set forth in this Agreement shall be true
and correct in all material respects (provided that any representation or
warranty of Nordstrom.com, Inc. contained herein that is qualified by a
materiality or knowledge standard shall not be further qualified hereby) as of
the date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date, and Nordstrom shall have received a certificate to such
effect signed on behalf of Nordstrom.com, Inc. by the chief executive officer
and the chief financial officer of Nordstrom.com, Inc. in their official
capacities.
(b) Performance of Obligations. Nordstrom.com, Inc. shall
have performed in all material respects all obligations required to be performed
by it under this Agreement prior to the Closing Date, and Nordstrom shall have
received a certificate to such effect signed on behalf of Nordstrom.com, Inc. by
the chief executive officer and the chief financial officer of the
Nordstrom.com, Inc.
(c) Consents. Nordstrom shall have been furnished with
evidence satisfactory to it that Nordstrom.com, Inc. has obtained each Consent
required in order to permit the consummation of the transactions contemplated
hereby (except for such Consents the failure of which to receive could not
reasonably be expected to have a Material Adverse Effect).
(d) Legal Opinion. Nordstrom shall have received from
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to
Benchmark Capital, in form and substance reasonably satisfactory to Nordstrom.
4.3 Conditions to Obligations of the Nordstrom.com, Inc.. The
obligation of Nordstrom.com, Inc. to effect the transactions contemplated hereby
is subject to the satisfaction of the following conditions unless waived, in
whole or in part, by Nordstrom.com, Inc.
(a) Representations and Warranties. The representations
and warranties of Nordstrom set forth in this Agreement shall be true and
correct in all material respects (provided that any representation or warranty
of Nordstrom contained herein that is qualified by a materiality or knowledge
standard shall not be further qualified hereby) as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date, and
Nordstrom.com, Inc. shall have received a certificate to such effect signed on
behalf of Nordstrom by the chief executive officer and the chief financial
officer of Nordstrom.
(b) Performance of Obligations of Nordstrom. Nordstrom
shall have performed in all material respects the obligations required to be
performed by it under this Agreement prior to the Closing Date, and
Nordstrom.com, Inc. shall have received a certificate to such effect signed on
behalf of Nordstrom by the chief executive officer and the chief financial
officer of Nordstrom.
(c) Legal Opinion. Nordstrom.com, Inc. shall have received
from Lane Powell Spears Lubersky LLP, counsel to Nordstrom, in form and
substance reasonably satisfactory to Nordstrom.com, Inc.
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(d) No Material Adverse Change. There shall have occurred
no material adverse change in the Business or the Assets since the date hereof.
4.4 Closing. Subject to the satisfaction or waiver of the
conditions set forth in this Article IV, the Closing will take place at the
offices of Lane Powell Spears Lubersky LLP, 1420 5th Avenue, Suite 4100,
Seattle, Washington, at 10:00 a.m., local time (or at such other place and time
as Nordstrom and Nordstrom.com, Inc. may agree) on a date selected by Nordstrom
which date shall be within two (2) business days after the date on which the
conditions set forth in this Article IV have been satisfied or waived in
accordance therewith (the "Closing Date"). The parties to this Agreement shall
use their best efforts to cause the Closing to occur no later than October 31,
1999.
4.5 Assumption of Liabilities and Obligations.
(a) As of the Closing, the LLC shall assume and undertake
to pay, discharge and perform all the obligations and liabilities of Nordstrom
or any Nordstrom Affiliate relating to (i) the Assumed Working Capital
Liabilities as of the close of business on the day immediately preceding the
Closing Date; (ii) the Assumed Contracts assumed by the LLC relating to the time
period beginning on or arising out of events occurring on or after the Closing
Date, (iii) commitments of Nordstrom or any Nordstrom Affiliate relating to the
Business entered into in the ordinary course of business which are consistent
with the past practice of Nordstrom or such Nordstrom Affiliate, to the extent
such commitments relate to goods and services to be received by the LLC after
the Closing Date and (iv) pending non-material worker's compensation claims, a
case by a former employee who worked for the Business, and a non-material EEOC
charge for age discrimination. Other than as specified in the first sentence of
this Section 4.5(a), the LLC shall assume no liabilities or obligations of
Nordstrom or such Nordstrom Affiliate as of the Closing Date that relate to the
Business and shall not be liable therefor.
(b) All other obligations and liabilities of Nordstrom or
any Nordstrom Affiliate relating to the Business, including (i) obligations or
liabilities under any contract not included in the Assumed Contracts, (ii)
obligations or liabilities under any Assumed Contract for which a Consent, if
required, has not been obtained as of the Closing, (iii) any obligations and
liabilities arising under the Assumed Contracts that relate to the time period
prior to the Closing Date or arise out of events occurring prior to the Closing
Date and (iv) any forfeiture, claim or pending litigation or proceeding relating
to the Business prior to the Closing Date, shall remain and be the obligation
and liability solely of Nordstrom.
4.6 Calculation of Assumed Working Capital Liabilities. Within
twenty (20) days after the Closing Date, Nordstrom shall notify Nordstrom.com,
Inc. of its good faith determination of the Assumed Working Capital Liabilities
and provide Nordstrom.com, Inc. with supporting documentation reasonably
necessary to evaluate such determination. If Nordstrom.com, Inc. disagrees with
such determination, Nordstrom.com, Inc. shall give prompt written notice thereof
to Nordstrom, but in no event later than ten (10) days after notice of such
determination, specifying in reasonable detail the nature and extent of such
disagreement. Any disagreement not resolved within ten (10) days after
Nordstrom.com, Inc. furnishes such notice shall be resolved pursuant to Section
7.13 hereof.
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ARTICLE V
POST-CLOSING COVENANTS
5.1 Indemnification.
(a) Subject to the provisions of this Section 5.1,
Nordstrom.com, Inc. shall indemnify and hold harmless Nordstrom and each
officer, director, employee, stockholder and Affiliate of Nordstrom and each
Nordstrom Entity (collectively the "Nordstrom Indemnitees") from and against any
and all Liabilities and Costs incurred by them that arise out of any breach or
default by Nordstrom.com, Inc. of any of the representations, warranties,
covenants or agreements under any Transaction Document to which Nordstrom.com,
Inc. is a party.
(b) Subject to the provisions of this Section 5.1,
Nordstrom shall indemnify and hold harmless Nordstrom.com, Inc. and each
officer, director, employee, stockholder and Affiliate of Nordstrom.com, Inc.
(collectively the "Nordstrom.com, Inc. Indemnitees") from and against any and
all Liabilities and Costs incurred by them that arise out of (i) any breach or
default by Nordstrom or any Nordstrom Entity of any of the representations,
warranties, covenants or agreements under any Transaction Document to which
Nordstrom or any Nordstrom Entity is a party, or (ii) any obligations or
liabilities of the Business that are not assumed by the LLC pursuant to Section
4.5 hereof.
(c) Subject to the provisions of this Section 5.1,
Nordstrom.com, Inc. and Nordstrom shall cause the LLC to indemnify and hold
harmless the Nordstrom Indemnitees from and against any and all Liabilities and
Costs incurred by them that arise out of any obligations or liabilities of the
Business that are required to be assumed by the LLC pursuant to Section 4.5
hereof and any obligations or liabilities of the Business solely to the extent
that they arise out of events occurring on or after the Closing Date that are
not otherwise the subject of indemnification in favor of Nordstrom.com, Inc. or
the LLC hereunder.
(d) Nordstrom represents and warrants to Nordstrom.com
that at the time of the Merger, Nordstrom Holdings shall have no liabilities for
Taxes other than an amount (the "Allowable Tax Amount") equal to the excess, if
any, of (i) the Taxes that Nordstrom Holdings would have incurred solely by
reason of receiving allocations and distributions from the LLC had Nordstrom
Holdings had no assets other than its membership interest in the LLC and had
Nordstrom Holdings at all times been a stand-alone corporation that was not
included in any consolidated, combined, unitary or similar group of corporations
or other entities for tax purposes over (ii) the amount of all distributions
received by Nordstrom Holdings from the LLC. Nordstrom agrees to indemnify
Nordstrom.com, Inc. for any Tax liability of Nordstrom Holdings attributable to
periods prior to the Merger (whether or not due and payable at the time of the
Merger) to the extent such Tax liability exceeds the Allowable Tax Amount.
(e) An Indemnified Party shall give prompt written notice
to any Indemnifying Party of the commencement or assertion of any action,
proceeding, demand, or claim by a third party (collectively, a "third-party
action") in respect of which such Indemnified Party shall seek indemnification
hereunder. Any failure so to notify an Indemnifying Party shall
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not relieve such Indemnifying party from any liability that it, he, or she may
have to such Indemnified Party under this Section 5.1 unless the failure to give
such notice materially and adversely prejudices such Indemnifying Party. The
Indemnifying Party shall have the right to assume control of the defense of,
settle, or otherwise dispose of such third-party action on such terms as they
deem appropriate; provided, however, that:
(A) The Indemnified Party shall be entitled, at
his, her, or its own expense, to participate in the defense of such third-party
action (provided, however, that the Indemnifying Party shall pay the attorneys'
fees of the Indemnified Party if (i) the employment of separate counsel shall
have been authorized in writing by any such Indemnifying Party in connection
with the defense of such third-party action, (ii) the Indemnifying Party shall
not have employed counsel reasonably satisfactory to the Indemnified Party to
have charge of such third party action, (iii) the Indemnified Party shall have
reasonably concluded that there may be defenses available to such Indemnified
Party that are different from or additional to those available to the
Indemnifying Party, or (iv) the Indemnified Party's counsel shall have advised
the Indemnified Party in writing, with a copy to the Indemnifying Party, that
there is a conflict of interest that could make it inappropriate under
applicable standards of professional conduct to have common counsel);
(B) The Indemnifying Party shall obtain the prior
written approval of the Indemnified Party before entering into or making any
judgment, settlement, compromise, admission, or acknowledgment of the validity
of such third-party action or any liability in respect thereof if, pursuant to
or as a result of such settlement, compromise, admission, or acknowledgment,
injunctive or other equitable relief would be imposed against the Indemnified
Party or if, in the opinion of the Indemnified Party, such settlement,
compromise, admission, or acknowledgment could have a material adverse effect on
its business or, in the case of an Indemnified Party who is a natural person, on
his or her assets or interests;
(C) No Indemnifying Party shall consent to the
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to each
Indemnified Party of a release from all liability in respect of such third-party
action; and
(D) The parties hereto shall extend reasonable
cooperation in connection with the defense of any third-party action pursuant to
this Section 5.1 and, in connection therewith, shall furnish such records,
information, and testimony and attend such conferences, discovery proceedings,
hearings, trials, and appeals as may be reasonably requested.
(f) In any case in which an Indemnified Party seeks
indemnification hereunder which is not subject to Section 5.1(e) because no
third-party action is involved (a "direct cost"), the Indemnified Party shall
notify the Indemnifying Party in writing of any Liabilities and Costs which such
Indemnified Party claims are subject to indemnification under the terms hereof.
The failure of the Indemnified Party to exercise promptness in such notification
shall not amount to a waiver of such claim unless the resulting delay materially
prejudices the position of the Indemnifying Party with respect to such claim.
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(g) Notwithstanding anything to the contrary stated
herein, (i) the Nordstrom.com, Inc. Indemnities shall not be entitled to
indemnification for Liabilities and Costs pursuant to Section 5.1(b) until the
total of all Liabilities and Costs with respect to such matters exceeds $100,000
and then only to the extent of such excess; and (ii) Nordstrom's Indemnities
shall not be entitled to indemnification for Liabilities and Costs pursuant to
Sections 5.1(a) or 5.1(c) until the total of all Liabilities and Costs with
respect to such matters exceeds $100,000 and then only to the extent of such
excess.
(h) No Indemnifying Party shall be liable for any
Liabilities and Costs pursuant to this Section 5.1 unless a written claim for
indemnification in accordance with this Section 5.1 is given by the Indemnified
Party to the Indemnifying Party with respect thereto on or before the later of
the second anniversary of the Closing Date (the "Notice Termination Date"). The
Notice Termination Date shall occur sooner in the event of an Initial Public
Offering, but in no event any earlier than the first anniversary of the Closing
Date.
(i) The amount of any Liabilities and Costs to be
recovered by Nordstrom Indemnities or Nordstrom.com, Inc. Indemnities shall be
net of insurance proceeds received that mitigate the Liabilities or Costs.
(j) The parties agree that the exclusive remedies of the
parties for any Liabilities and Costs arising out of or based upon the matters
set forth in Section 5, or otherwise under this Agreement, shall be (i) the
indemnification obligations of the parties set forth in Section 5, subject to
the limitations on such obligations set forth in this Agreement or (ii) specific
performance or injunctive or declaratory relief. The parties agree that the
remedy of rescission shall not be available as a result of the breach of this
Agreement except where the conduct of the breaching party constitutes fraud.
5.2 Store Discounts. Nordstrom maintains an employee discount
program (the "Nordstrom Merchandise Discount Program") intended to qualify for
tax-favored treatment under Code Section 132 and the Regulations thereunder.
(a) Continuing Reciprocal Agreement. From the date hereof
until the LLC ceases to be an ERISA Affiliate (as defined in 2.1(q)(i) of the
Agreement), (i) employees of the LLC (and their eligible family members) shall
be entitled to receive qualified employee discounts under the Nordstrom
Merchandise Discount Program on their purchases of goods from Nordstrom and (ii)
the Nordstrom Merchandise Discount Program shall apply to the purchase of goods
from the LLC by employees of Nordstrom, the LLC and all Nordstrom ERISA
Affiliates. Neither Nordstrom nor the LLC shall be required to make any
reimbursement to the other for such discounts; provided, however, that nothing
in this paragraph shall alter the right of Nordstrom to change the terms of the
Nordstrom Merchandise Discount Program to the extent required to preserve the
tax-favored treatment of such discount program to employees under Code Section
132.
(b) Post Affiliate Status. Beginning on the date that the
LLC ceases to be an ERISA Affiliate, or on such earlier date as required by Code
Section 132, goods purchased through the LLC shall cease to be available for the
Nordstrom Merchandise Discount Program
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and the discounts available to employees of Nordstrom and its ERISA Affiliates
on purchases made through the LLC shall cease.
(c) Nature of Discount. The discounts available to
employees of the LLC on merchandise purchased through Nordstrom shall continue
on substantially similar terms and conditions as, and in percentage discounts
that are no greater than those provided under, the Nordstrom Merchandise
Discount Program, as the same may be amended from time to time, and such
discount shall continue to be made available to employees of the LLC until the
earlier of: (i) the LLC ceasing to maintain a comparable merchandise discount
program for its employees; or (ii) Nordstrom ceasing to maintain the Nordstrom
Merchandise Discount Program. The LLC shall not have any obligation to reimburse
Nordstrom for discounts provided pursuant to this paragraph; provided, however,
that the LLC shall not alter the terms or conditions of such discount program,
without the prior written consent of Nordstrom.
(d) Nordstrom Exclusive Right. Nordstrom will maintain the
exclusive right to determine all aspects of the Nordstrom Merchandise Discount
Program, including eligibility, percentage discounts and all other terms and
conditions of that program.
5.3 Employee Benefit Plans. The employees of the LLC, if
otherwise eligible, shall be permitted to participate in the Employee Benefit
Plans set forth in Schedule 2.1(q), with the exception of those Employee Benefit
Plans set forth in Schedule 5.3 from the Closing Date until such future date as
the LLC shall communicate to Nordstrom by giving not less than 60 days' advance
notice in writing, but in any event not later than the earlier of October 1,
2002, or the date the LLC is no longer an ERISA Affiliate of Nordstrom. Such
participation shall be on the terms and conditions that apply to similarly
situated employees employed by Nordstrom and the Nordstrom Affiliates. The LLC
and/or Nordstrom.com, Inc. shall make timely employer contributions to Nordstrom
or to the Employee Benefit Plans (as appropriate) for the cost of benefits
(including administrative expenses) incurred on behalf of their employees, as
required by the terms of or to provide the benefits under such Employee Benefit
Plans, and shall promptly remit any contributions made by such employees to such
Employee Benefit Plans. Except as required by law or to the extent such Employee
Benefit Plans currently provide, Nordstrom shall not amend the Employee Benefit
Plans or change such plans' cost structure in a manner that differentiates
between (a) the employees of the LLC and (b) the similarly situated employees of
Nordstrom or any Nordstrom Affiliate, division or business unit. By giving
Nordstrom not less than 60 days' advance notice in writing, the LLC and/or
Nordstrom.com, Inc. may adopt new employee benefit plans specific to the LLC
and/or Nordstrom.com, Inc., provided the design of such new plans does not cause
Nordstrom's existing plans to lose eligibility for preferential tax treatment.
Nordstrom shall use its best efforts to facilitate a transition from the
Employee Benefits Plans to such new employee benefit plans. To the extent the
LLC and/or Nordstrom.com, Inc. establishes its own employee benefit plans, LLC
and/or Nordstrom.com, Inc. shall be considered the "plan sponsor" and "plan
administrator" of such plans (as such terms are defined in ERISA), LLC and/or
Nordstrom.com, Inc. shall be solely responsible for the funding and legal
compliance of such plans in accordance with, but not limited to, the
requirements described in 2.1(q)(v) - (x), and LLC and/or Nordstrom.com, Inc.
shall indemnify and hold Nordstrom harmless from and against any liability
associated with the design, administration and funding of such plans. Subject to
the foregoing, nothing in this Section 5.3
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shall be interpreted or construed as limiting the right of Nordstrom to
otherwise alter, amend or terminate any Employee Benefit Plan, or its underlying
terms or provisions.
5.4 Equity Incentives. Following the Closing, the employees of
the LLC and/or Nordstrom.com, Inc. shall be eligible to be considered for stock
option grants as follows:
(a) The LLC shall maintain an option plan that provides
for the grant of nonstatutory options to purchase LLC shares. Such options shall
not be exercisable prior to the merger contemplated by Section 5.7.
(b) Nordstrom.com, Inc. shall maintain an option plan that
provides for the grant of nonstatutory options to purchase shares of the common
stock of Nordstrom.com, Inc. Participation in such plan shall be limited to
management-level employees of the Business who are employed by Nordstrom.com,
Inc. Such options shall be exercisable at any time.
(c) Whenever Nordstrom.com, Inc. grants an option to one
of its employees to purchase shares of is common stock, the LLC shall grant to
Nordstrom.com, Inc. an option to purchase an identical number of LLC shares.
Whenever Nordstrom.com, Inc. issues shares of its common stock to one of its
employees upon exercise of an option, Nordstrom.com, Inc. shall exercise its
option and purchase from the LLC an identical number of LLC shares.
(d) Twenty-five percent of the shares of common stock or
LLC shares subject to each option granted by Nordstrom.com, Inc. or the LLC
shall vest on the first anniversary of the date of grant, and the balance of
such shares shall vest in 36 equal monthly increments upon completion of each
month of service thereafter.
(e) The shares of common stock or LLC shares subject to
the options granted by Nordstrom.com, Inc. or the LLC shall be subject to a
customary right of first refusal in favor of Nordstrom.com, Inc. and the LLC,
respectively. Such options shall also include customary provisions relating to
lock-up agreements with underwriters.
5.5 Employees. At the discretion of the LLC, the management-level
Target Employees shall be employed jointly by the LLC and Nordstrom.com, Inc.
immediately following the Closing. The other Target Employees shall be employed
by the LLC immediately following the Closing. At the discretion of the LLC, all
newly hired management-level employees engaged in the Business shall be employed
by the LLC or jointly by the LLC and Nordstrom.com, Inc. The other newly hired
employees engaged in the Business shall be employed by the LLC. Each newly hired
employee engaged in the Business shall acknowledge in writing that (a)
compensation levels and employee benefit programs may be modified after December
31, 1999, and (b) such employee will be an employee at will.
5.6 Nordstrom Holdings. Except as contemplated by the Transaction
Documents, Nordstrom Holdings shall not engage in any business or directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint ventureship or other business association
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or entity prior to the Merger. Nordstrom shall cause Nordstrom Holdings to at
all times be a wholly owned Subsidiary of Nordstrom. Without limiting the
foregoing, Nordstrom Holdings will not take any of the following actions prior
to the Merger without the priority written consent of Nordstrom.com, Inc., which
consent shall not be unreasonably withheld:
(i) amend its certificate of incorporation or
bylaws (or other comparable corporate charter documents);
(ii) declare, set aside or pay any dividends on or
make other distributions (whether payable in cash, stock, property or otherwise)
in respect of any of its capital stock; (B) split, combine, reclassify or take
similar actions with respect to any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, (C) adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such liquidation
or a dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization or (D) directly or indirectly redeem, repurchase or
otherwise acquire any shares of its capital stock;
(iii) deliver, issue, sell, pledge or encumber or
authorize or propose the issuance, delivery, sale, pledge or encumbrance of, any
shares of its capital stock or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of its capital stock of, or any
other ownership interest in, Nordstrom Holdings, or (B) issue any stock
appreciation rights, restricted stock or similar equity based rights;
(iv) adopt any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, pension,
retirement, insurance employment or other employee or retiree benefit agreement,
trust, plan or other arrangement for the benefit of any Person;
(v) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division or make any investment in another entity, or sell,
pledge, dispose of, or encumber or authorize or propose the sale, pledge,
disposition or encumbrance of any of its assets;
(vi) authorize or propose or enter into any
contract, agreement, commitment or arrangement involving amounts in excess of
$25,000;
(vii) create, assume or incur any indebtedness for
borrowed money or guarantee any such indebtedness or assume, guarantee, endorse
or become liable on the obligation of any Person in excess of $25,000 in
aggregate;
(viii) engage in any business other than the
ownership of its membership interests in the LLC;
(ix) settle or compromise any federal, state, local
or foreign income tax, involving amounts in excess of $25,000, except to the
extent Nordstrom takes actions that affect Nordstrom Holdings as a result of a
consolidated tax return;
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(x) settle or compromise any litigation (whether or
not commenced prior to the date of this Agreement) or settle, pay or compromise
any claims not required to be paid, involving amounts in excess of $25,000;
(xi) create, assume, or incur any mortgage, lien,
pledge, charge or other security interest or encumbrance of any kind in respect
of any of its property of any character, involving amounts in excess of $25,000;
(xii) consolidate with or merge with any other
Person or sell, lease or transfer or otherwise dispose of all or any substantial
portion of its assets;
(xiii) purchase or acquire any capital assets or
make any capital expenditures;
(xiv) sell, lease, transfer, pledge, encumber or
otherwise dispose of any of its LLC Shares, including, without limitation,
through a merger or consolidation with such other Person; or
(xv) enter into any contract, agreement, commitment
or arrangement to do or engage in any of the foregoing.
5.7 Merger of Nordstrom.com, Inc. and Nordstrom Holdings. At such
time as the board of directors of Nordstrom.com, Inc. shall determine in
contemplation of an Initial Public Offering, Nordstrom Holdings shall merge with
Nordstrom.com, Inc. pursuant to an agreement and plan of merger reasonably
satisfactory to Nordstrom and Nordstrom.com, Inc. providing, among other things,
that:
(i) Nordstrom.com, Inc. shall be the surviving
corporation in the merger;
(ii) Nordstrom.com, Inc. shall succeed to and
assume all of the rights and obligations of Nordstrom Holdings pursuant to
applicable corporate law;
(iii) the certificate of incorporation and bylaws
of Nordstrom.com, Inc. in effect immediately prior to the effective time of the
merger shall be the certificate of incorporation and bylaws of the surviving
corporation;
(iv) the board of directors and officers of
Nordstrom.com, Inc. in effect immediately prior to the effective time of the
merger shall be the board of directors and bylaws of the surviving corporation;
(v) the capital stock of Nordstrom Holdings held by
Nordstrom immediately prior to the effective time of the merger shall be
converted into a number of shares of Series A Preferred Stock of Nordstrom.com,
Inc. equal to the number of Series A shares of the LLC owned by Nordstrom
Holdings immediately prior to such effective time subject to appropriate
adjustment for any stock split, stock dividend, combination, reclassification,
37
<PAGE> 42
reorganization or other similar event affecting the Series A Preferred Stock of
Nordstrom.com, Inc. or the Series A shares of the LLC);
(vi) each option to acquire a LLC Common Share
shall be assumed by Nordstrom.com, Inc. and shall become an option to purchase
one share of Common Stock of Nordstrom.com, Inc.
Notwithstanding the foregoing, if reasonably possible, Nordstrom.com, Inc. will
effect the transactions contemplated above by means of a different structure to
minimize the tax liabilities of all parties.
5.8 Nordstrom.com, Inc. Series A Preferred Stock. Until such time
as there are any outstanding shares of Series A Preferred Stock, Nordstrom.com,
Inc. shall not amend its Amended and Restated Certificate of Incorporation to
alter or change the rights, preferences or privileges of the share of such
Series A Preferred Stock, if such Series A Preferred Stock would be adversely
affected by such amendment in a manner different from other then outstanding
series of Nordstrom.com, Inc. Preferred Stock (it being understood that, without
limiting the foregoing, different series of Preferred Stock shall not be
affected differently because of proportional differences in the amounts of their
respective issue prices, liquidation preferences, and dividend preferences that
arise out of differences in the original issue price for each such series). The
foregoing covenant will terminate upon issuance of any Series A Preferred Stock
to Nordstrom. Nordstrom.com, Inc. shall reserve shares of its Series A Preferred
Stock in an amount equal to the number of shares of such preferred stock
issuable to Nordstrom in the merger described in Section 5.7.
5.9 Non-Exclusive License. Effective as of Closing,
Nordstrom.com, Inc. shall grant to Nordstrom and the Nordstrom Affiliates a
non-exclusive royalty free worldwide right and license to use such Intellectual
Property as is reasonably necessary for the operation of the business of
Nordstrom and the Nordstrom Affiliates, subject to customary and reasonable
terms.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination. Except as provided in Section 6.2 below, this
Agreement may be terminated at any time prior to the Closing:
(a) by mutual agreement of Nordstrom and Nordstrom.com,
Inc.;
(b) by Nordstrom or Nordstrom.com, Inc. if: (i) the
Closing has not occurred before 5 p.m. (Pacific Time) on October 31, 1999
(provided, however, that the right to terminate this Agreement under this
Section 6.1(b)(i) shall not be available to any party whose willful failure to
fulfill any obligation hereunder has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date); (ii) there shall be a
final nonappealable Order of a federal or state court in effect preventing
consummation of the transactions contemplated by
38
<PAGE> 43
this Agreement, or (iii) be any Applicable Law shall make consummation of the
transactions contemplated by this Agreement illegal;
(c) by Nordstrom (if it is not in breach in any material
respect of any of its representations, warranties, covenants, or agreements in
this Agreement) if (i) there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement by Nordstrom.com,
Inc. and (ii) (A) Nordstrom.com, Inc. is not using its reasonable efforts to
cure such breach, or has not cured such breach within thirty (30) days, after
notice of such breach to Nordstrom.com, Inc. (provided, however, that, no cure
period shall be required for a breach which by its nature cannot be cured) and
(B) as a result of such breach any of the conditions set forth in Section 4.1 or
Section 4.2, as the case may be, would not then be satisfied; or
(d) by the Nordstrom.com, Inc., (if it is not in breach of
any material respect of any of its representations, warranties, covenants or
agreements in this Agreement) if (i) there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement by
Nordstrom and (ii)(A) Nordstrom is not using its reasonable efforts to cure such
breach, or has not cured such breach within thirty (30) days, after notice of
such breach to Nordstrom (provided, however, that no cure period shall be
required for a breach which by its nature cannot be cured), and (B) as a result
of such breach the conditions set forth in Section 4.1 or Section 4.3, as the
case may be, would not then be satisfied; or
6.2 Effect of Termination. In the event of a valid termination of
this Agreement as provided in Section 6.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Nordstrom or
Nordstrom.com, Inc., or their respective officers, directors or shareholders or
Affiliates, provided, however, that each party shall remain liable for any
breaches of this Agreement prior to its termination.
6.3 Amendment. Except as is otherwise required by Applicable Law,
this Agreement may be amended by the parties hereto at any time by execution of
an instrument in writing signed on behalf of each of the parties hereto.
6.4 Extension; Waiver. At any time prior to the Closing,
Nordstrom and Nordstrom.com, Inc. may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations of the other party
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements, covenants or conditions for
the benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
39
<PAGE> 44
ARTICLE VII
GENERAL PROVISIONS
7.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission
against facsimile confirmation or mailed by prepaid first class certified mail,
return receipt requested, or mailed by overnight courier prepaid, to the parties
at the following addresses or facsimile numbers:
40
<PAGE> 45
If to Nordstrom to:
Nordstrom, Inc.
1617 Sixth Avenue, 10th Floor
Seattle, WA 98101
Attn: Michael A. Stein,
Executive Vice President and
Chief Financial Officer
Attn: Corporate Secretary
with a copy to:
Lane Powell Spears Lubersky LLP
1420 Fifth Avenue, Suite 4100
Seattle, WA 98101-2338
Facsimile No.: (206) 223-7107
Attn: Michael E. Morgan
If to Nordstrom.com, Inc.
Nordstrom.com, Inc.
c/o Benchmark Capital
2480 Sand Hill Road, Suite 200
Menlo Park, California 94025
Facsimile No.: (650) 854-8183
Attn: President and Chief Executive Officer
with a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, California 94025
Facsimile No.: (650) 321-2800
Attn: Brooks Stough
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section 7.1, be deemed
given upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided for in this Section 7.1, be deemed given upon
facsimile confirmation, (iii) if delivered by mail in this manner described
above to the address as provided for in this Section 7.1, be deemed given on the
earlier of the third Business Day following mailing or upon receipt and (iv) if
delivered by overnight courier to the address as provided in this Section 7.1,
be deemed given on the earlier of the first Business Day following the date sent
by such overnight courier or upon receipt (in each case regardless of whether
such notice, request or other communication is received by any other Person to
whom a
41
<PAGE> 46
copy of such notice is to be delivered pursuant to this Section 7.1). Any party
from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such change
to the other party hereto.
7.2 Entire Agreement. This Agreement and the Exhibits and
Schedules hereto constitute the entire Agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understanding, both written and oral, among the parties with respect to the
subject matter hereof.
7.3 Further Assurances; Post-Closing Cooperation. At any time or
from time to time after the Closing the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by the Transaction Documents
and otherwise to cause the other party to fulfill its obligations hereunder and
thereunder and the transactions contemplated hereby and thereby.
7.4 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
7.5 Third-Party Beneficiaries. Except as contemplated by Section
5.1 with respect to Nordstrom Indemnities and Nordstrom.com, Inc. Indemnities,
terms and provisions of this Agreement are intended solely for the benefit of
each party hereto and their respective successors or permitted assigns, and it
is not the intention of the parties to confer third-party beneficiary rights,
and this Agreement does not confer any such rights, upon any other Person.
7.6 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
7.7 Headings. The headings and table of contents used in this
Agreement have been inserted for convenience of reference only and do not define
or limit the provisions hereof.
7.8 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such
42
<PAGE> 47
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Washington,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Washington or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Washington.
7.10 Construction. The parties hereto agree that this Agreement
is the product of negotiation between sophisticated parties and individuals, all
of whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather than shall be
given a fair and reasonable construction without regard to the rule of contra
proferentem.
7.11 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
7.12 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Except where this Agreement specifically provides for
arbitration, it is agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
7.13 Dispute Resolution. The parties desire to resolve disputes
arising out of this Agreement without litigation. Accordingly, except for an
action seeking a temporary restraining order or injunction related to the
purposes of this Agreement, suit to compel compliance with this dispute
resolution process, or entry and enforcement of any judgment on any arbitration
award, the parties agree to meet and negotiate in good faith to resolve any
dispute arising under this Agreement. The location, format, frequency, duration
and conclusion of these discussions shall be left to the discretion of the
parties. The discussions will commence within fifteen (15) days after notice of
a dispute from any party.
(a) If a determination is made by any party that
continuation of the negotiation process is not warranted, the dispute shall be
first submitted to mediation by a mediator pursuant to the Commercial Mediation
Rules of the American Arbitration Association. Any party may demand such
mediation in accordance with the procedures set out in those rules, which shall
commence within thirty (30) days of such demand.
(b) If a determination is made by any party that
continuation of the mediation process is not warranted or if all of the matters
in dispute are not resolved through
43
<PAGE> 48
mediation, the dispute shall be submitted to binding arbitration by an
arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. Any party may demand such arbitration in accordance
with the procedures set out in those rules, which shall commence within thirty
(30) days of such demand. Each party to the dispute shall have the right to take
the deposition of individuals and expert witnesses designated by the other
party. Each party to the dispute shall also have the right to request production
of relevant documents, the scope and enforcement of which shall be governed by
the arbitrator. Additional discovery may be only by order of the arbitrator, and
only upon a showing of substantial need. The arbitrator shall be authorized to
issue subpoenas for the purpose of requiring attendance of witnesses at
depositions. The parties to the dispute may submit written briefs. The
arbitrator shall rule on the dispute by issuing a written opinion within thirty
(30) days after the close of hearings. The award rendered by arbitration shall
be final, binding and nonappealable judgment, and the award may be entered in
any court of competent jurisdiction in the United States. Special, consequential
or punitive damages shall not be awarded by the arbitrator.
(c) Any mediation or arbitration shall be held in Seattle,
Washington, or such other location as mutually agreed upon by the parties to the
dispute. The mediator or arbitrator shall control the scheduling so as to
process the matter expeditiously. The times specified herein may be extended
upon mutual agreement of the parties to the dispute or by the arbitrators upon a
showing of good cause.
IN WITNESS WHEREOF, Nordstrom and Nordstrom.com, Inc. have caused
this Agreement to be signed, all as of the date first written above.
NORDSTROM, INC.
------------------------------------------
Name: Michael A. Stein
Title: Executive Vice President and
Chief Financial Officer
NORDSTROM.COM, INC.
------------------------------------------
Name: Steven M. Spurlock
Title: President
44
<PAGE> 1
EXHIBIT 10.22
CREDIT AGREEMENT
Dated as of February 29, 2000
among
1700 SEVENTH L.P.
as Borrower,
AND
THE SEVERAL LENDERS
FROM TIME TO TIME PARTY HERETO
AND
BANK OF AMERICA, N.A.
as Administrative Agent
and as Project Administrative Agent
Arranged By:
BANC OF AMERICA SECURITIES LLC
as Lead Arranger and Book Manager
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 DEFINITIONS.......................................................................1
1.1 Definitions...................................................................1
1.2 Computation of Time Periods..................................................20
1.3 Accounting Terms.............................................................20
SECTION 2 CREDIT FACILITIES................................................................21
2.1 Revolving Loans..............................................................21
2.2 Extension of Maturity Date...................................................23
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES...................................24
3.1 Default Rate.................................................................24
3.2 Extension and Conversion.....................................................24
3.3 Prepayments..................................................................25
3.4 Termination and Reduction of Revolving Committed Amount......................26
3.5 Fees.........................................................................26
3.6 Capital Adequacy.............................................................27
3.7 Limitation on Eurodollar Loans...............................................27
3.8 Illegality...................................................................28
3.9 Requirements of Law..........................................................28
3.10 Treatment of Affected Loans..................................................29
3.11 Taxes........................................................................29
3.12 Compensation.................................................................31
3.13 Pro Rata Treatment...........................................................32
3.14 Sharing of Payments..........................................................33
3.15 Payments, Computations, Etc..................................................34
3.16 Evidence of Debt.............................................................36
SECTION 4 CONDITIONS.......................................................................36
4.1 Closing Conditions...........................................................36
4.2 Conditions to Initial Extension of Credit....................................41
4.3 Conditions to all Extensions of Credit.......................................42
SECTION 5 REPRESENTATIONS AND WARRANTIES...................................................44
5.1 Financial Condition..........................................................44
5.2 No Material Change...........................................................44
5.3 Organization and Good Standing...............................................44
5.4 Power; Authorization; Enforceable Obligations................................44
5.5 No Conflicts.................................................................45
5.6 No Default...................................................................45
5.7 Ownership....................................................................45
5.8 Indebtedness.................................................................45
5.9 Litigation...................................................................45
5.10 Taxes........................................................................46
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.11 Compliance with Law..........................................................46
5.12 ERISA........................................................................46
5.13 Governmental Regulations, Etc................................................47
5.14 Purpose of Loans.............................................................49
5.15 Environmental Matters........................................................49
5.16 Intellectual Property........................................................50
5.17 Location of Collateral.......................................................50
5.18 Disclosure...................................................................50
5.19 Brokers' Fees................................................................50
5.20 Labor Matters................................................................50
5.21 Year 2000 Compliance.........................................................51
SECTION 6 AFFIRMATIVE COVENANTS............................................................51
6.1 Information Covenants........................................................51
6.2 Preservation of Existence and Franchises.....................................54
6.3 Books and Records............................................................54
6.4 Compliance with Law..........................................................54
6.5 Payment of Taxes and Other Indebtedness......................................54
6.6 Insurance....................................................................55
6.7 Maintenance of Property......................................................57
6.8 Performance of Obligations...................................................57
6.9 Use of Proceeds..............................................................57
6.10 Audits/Inspections...........................................................57
6.11 Year 2000 Compliance.........................................................58
6.12 Construction.................................................................58
6.13 Eminent Domain...............................................................58
6.14. Changes in Plans and Specifications; Change Orders...........................60
6.15 Abandonment of Construction..................................................60
6.16 Alley Vacation...............................................................61
SECTION 7 NEGATIVE COVENANTS...............................................................62
7.1 Indebtedness.................................................................62
7.2 Liens........................................................................63
7.3 Nature of Business...........................................................63
7.4 Consolidation, Merger, Dissolution, etc......................................63
7.5 Asset Dispositions...........................................................63
7.6 Investments..................................................................64
7.7 Restricted Payments..........................................................64
7.8 Other Indebtedness...........................................................64
7.9 Transactions with Affiliates.................................................65
7.10 Fiscal Year; Organizational Documents........................................65
7.11 Limitation on Restricted Actions.............................................65
7.12 Subsidiaries.................................................................65
7.13 Sale Leasebacks..............................................................65
7.14 No Further Negative Pledges..................................................65
7.15 Leases.......................................................................66
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
7.16 Plans and Specifications.....................................................66
7.17 Floor Area Ratio.............................................................66
SECTION 8 EVENTS OF DEFAULT................................................................67
8.1 Events of Default............................................................67
8.2 Acceleration; Remedies.......................................................69
SECTION 9 AGENCY PROVISIONS................................................................70
9.1 Appointment, Powers and Immunities...........................................70
9.2 Reliance by Administrative Agent.............................................71
9.3 Defaults.....................................................................71
9.4 Rights as a Lender...........................................................72
9.5 Indemnification..............................................................72
9.6 Non-Reliance on Agents and Other Lenders.....................................72
9.7 Successor Agents.............................................................73
SECTION 10 MISCELLANEOUS...................................................................74
10.1 Notices......................................................................74
10.2 Right of Set-Off; Adjustments................................................75
10.3 Benefit of Agreement; Assignments............................................76
10.4 No Waiver; Remedies Cumulative...............................................78
10.5 Expenses; Indemnification....................................................78
10.6 Amendments, Waivers and Consents............................................79
10.7 Counterparts.................................................................80
10.8 Headings.....................................................................80
10.9 Survival.....................................................................81
10.10 Governing Law; Submission to Jurisdiction; Venue.............................81
10.11 Severability.................................................................81
10.12 Entirety.....................................................................82
10.13 Binding Effect...............................................................82
10.14 Confidentiality..............................................................82
10.15 Source of Funds..............................................................83
10.16 Conflict.....................................................................83
10.17 Oral Agreements Not Binding..................................................83
</TABLE>
iii
<PAGE> 5
SCHEDULES
Schedule 1.1(a) Controlling Stockholders
Schedule 1.1(b) Land and Tipp Property
Schedule 1.1(c) Permitted Liens
Schedule 2.1(a) Lenders
Schedule 4.3 Borrowing Conditions
Schedule 5.15 Environmental Matters
Schedule 5.17(a) Real Property
Schedule 5.17(b) Collateral Locations
Schedule 5.17(c) Chief Executive Offices/Principal Places
of Business
Schedule 6.6 Insurance
Schedule 7.9 Transactions with Affiliates
EXHIBITS
Exhibit 1.1(a) Form of Guaranty Agreement
Exhibit 2.1(b)(i) Form of Notice of Borrowing
Exhibit 2.1(e) Form of Revolving Note
Exhibit 2.2 Form of Estoppel Certificate
Exhibit 3.2 Form of Notice of Extension/Conversion
Exhibit 6.1(c) Form of Officer's Compliance Certificate
Exhibit 10.3(b) Form of Assignment and Acceptance
iv
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 29, 2000 (as amended,
modified, restated or supplemented from time to time, the "Credit Agreement"),
is by and among 1700 SEVENTH L.P., a Washington limited partnership (formerly
known as 700 Olive L.P.) (the "Borrower"), the Lenders (as defined herein) and
BANK OF AMERICA, N.A., as Administrative Agent for the Lenders (in such
capacity, the "Administrative Agent") and as Project Administrative Agent for
the Lenders (in such capacity, the "Project Administrative Agent").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a credit
facility in an amount of $93,000,000 (the "Credit Facility") for the purposes
hereinafter set forth; and
WHEREAS, the Lenders have agreed to make the requested Credit Facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINITIONS.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Adjusted Base Rate" means the Base Rate plus the Applicable
Percentage.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
Applicable Percentage.
"Administrative Agent" means Bank of America, N.A. or any
successor administrative agent appointed pursuant to Section 9.7.
"Administrative Agent's Fee Letter" means that certain letter
agreement, dated as of August 27, 1999, among the Administrative Agent,
BAS, the Borrower and the Guarantor, as amended, modified, restated or
supplemented from time to time.
"Administrative Agent's Fees" shall have the meaning assigned to
such term in Section 3.5(c).
<PAGE> 7
"Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
first Person. The term "control" means the possession, directly or
indirectly, of the power, whether or not exercised, to direct or cause
the direction of the management or policies of a Person, whether through
the ownership of Capital Stock by contract or otherwise, and the terms
"controlled" and "common control" have correlative meanings. Unless
otherwise indicated, "Affiliate" refers to an Affiliate of the Borrower.
Notwithstanding the foregoing, in no event shall any Lender or any
Affiliate of any Lender be deemed to be an Affiliate of the Borrower.
For avoidance of doubt, the parties agree that the Borrower is not an
Affiliate of the Guarantor.
"Agency Services Address" means Bank of America, N.A., 1850
Gateway Blvd., 5th Floor, Concord, California 94520, or such other
address as may be identified by written notice from the Administrative
Agent to the Borrower.
"Agents" means a collective reference to the Administrative
Agent and the Project Administrative Agent, and "Agent" means any one of
them.
"Applicable Lending Office" means, for each Lender, the office
of such Lender as such Lender may from time to time specify to the
Administrative Agent and the Borrower by written notice as the office by
which its Eurodollar Loans are made and maintained.
"Applicable Percentage" means, for purposes of calculating the
applicable interest rate for any day for any Loan and the applicable
rate of the Unused Fee for any day for purposes of Section 3.5(b), the
appropriate applicable percentage set forth below opposite the
applicable Senior Debt Rating then in effect as of the most recent
Ratings Date:
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGES
---------------------------------------
FOR FOR FOR
PRICING S&P MOODY'S EURODOLLAR BASE RATE UNUSED
LEVEL RATING RATING LOANS LOANS FEE
----- ------ ------ ----- ----- ---
<S> <C> <C> <C> <C> <C>
I >/= A >/= A2 .75% 0% .125%
II >/= A- >/= A3 .875% 0% .15%
III >/=BBB+ >/=Baa1 1.0% 0% .175%
IV >/=BBB >/=Baa2 1.125% 0% .225%
</TABLE>
The Applicable Percentages shall be determined based on the Senior Debt
Rating; provided, however, that (i) if the Guarantor shall not have a
rating for its Senior Debt by S&P and Moody's, then the Applicable
Percentages shall be based on Pricing Level IV and (ii) if the Guarantor
shall have a split Senior Debt Rating the higher of the two ratings
shall apply. The Applicable Percentages for the Revolving Loans and
Unused Fee shall be determined and adjusted on the date that the Senior
Debt Rating changes (each a "Ratings Date"). Each
2
<PAGE> 8
Applicable Percentage shall be effective from one Ratings Date until the
next Ratings Date. Any adjustment in the Applicable Percentages for the
Loans shall be applicable to all existing Loans as well as any new
Loans.
"Asset Disposition" means any disposition of any or all of the
Property of the Borrower whether by sale, lease, transfer or otherwise.
"Bank of America" means Bank of America, N.A.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (i) a
court or governmental agency having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
ordering the winding up or liquidation of its affairs; or (ii) there
shall be commenced against such Person an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or any case, proceeding or other action for the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its
Property or for the winding up or liquidation of its affairs, and such
involuntary case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded for a period of sixty (60)
consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment or
taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or make any general assignment for the
benefit of creditors; or (iv) such Person shall be unable to, or shall
admit in writing its inability to, pay its debts generally as they
become due.
"BAS" means Banc of America Securities LLC.
"Base Rate" means, for any day, the rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus one-half of one
percent (0.5%) and (b) the Prime Rate for such day. Any change in the
Base Rate due to a change in the Prime Rate or the Federal Funds Rate
shall be effective on the effective date of such change in the Prime
Rate or Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" means the Person identified as such in the heading
hereof, together with any permitted successors and assigns.
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<PAGE> 9
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in Seattle, Washington, San Francisco,
California or New York, New York are authorized or required by law to
close, except that, when used in connection with a Eurodollar Loan, such
day shall also be a day on which dealings between banks are carried on
in Dollar deposits in London, England.
"Businesses" means a collective reference to the businesses
operated at the Real Properties.
"Capital Lease" means, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Capital Reserve" means an amount equal to the gross leaseable
square feet of the Improvements multiplied by $.10.
"Capital Stock" means (i) in the case of a corporation, capital
stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents
(however designated) of capital stock, (iii) in the case of a
partnership, partnership interests (whether general or limited), (iv) in
the case of a limited liability company, membership interests and (v)
any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means, as at any date, (a) securities issued
or directly and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof) having
maturities of not more than twelve months from the date of acquisition,
(b) Dollar denominated time deposits and certificates of deposit of (i)
any Lender, (ii) any domestic commercial bank of recognized standing
having capital and surplus in excess of $500,000,000 or (iii) any bank
whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Bank"), in each case with
maturities of not more than 270 days from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved
Bank (or by the parent company thereof) or any variable rate notes
issued by, or guaranteed by, any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent thereof)
or better by Moody's and maturing within six months of the date of
acquisition, (d) repurchase agreements entered into by any Person with a
bank or trust company (including any of the Lenders) or recognized
securities dealer having capital and surplus in excess of $500,000,000
for direct obligations issued by or fully guaranteed by the United
States in which such Person shall have a perfected first priority
security interest (subject to no other Liens) and having, on the date of
purchase thereof, a fair market value of at least 100% of the amount of
the repurchase obligations and (e) Investments, classified in accordance
with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940, as amended, which
are administered by reputable financial institutions having capital of
at least
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<PAGE> 10
$500,000,000 and the portfolios of which are limited to Investments of
the character described in the foregoing subdivisions (a) through (d).
"Change of Control" means any of the following events: (i) any
Person or two or more Persons acting in concert (other than the
Controlling Stockholders) shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934), directly or
indirectly, of Voting Stock of the Guarantor (or other securities
convertible into such Voting Stock) representing 40% or more of the
combined voting power of all Voting Stock of the Guarantor, (ii) any
change in the ownership, membership or control of the Borrower, (iii)
Clise Venture shall cease to remain the sole general partner of the
Borrower, (iv) any change in the ownership, membership or control of
Clise Venture, or (v) any change in the ownership, membership or control
of Clise Properties.
"City" means The City of Seattle, a Washington municipal
corporation.
"Clise Properties" means Clise Properties, Inc., a Washington
corporation.
"Clise Venture" means Clise Venture One LLC, a Washington limited
liability company.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and
any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed also to
refer to any successor sections.
"Collateral" means a collective reference to the collateral which
is identified in, and at any time will be covered by, the Collateral
Documents.
"Collateral Documents" means a collective reference to the
Mortgage Instrument and such other documents executed and delivered in
connection with the attachment and perfection of the Administrative
Agent's security interests and liens arising thereunder, including
without limitation, UCC financing statements.
"Commitment" means with respect to each Lender, the Revolving
Commitment of such Lender.
"Construction Costs" shall have the meaning assigned to such
term in Section 6.14.
"Consultant" shall have the meaning assigned to such term in
Schedule 4.3.
"Controlling Stockholders" means the individuals listed on
Schedule 1.1(a) hereto and the spouse and lineal descendants of any such
individual.
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<PAGE> 11
"Credit Documents" means a collective reference to this Credit
Agreement, the Notes, the Guaranty Agreement, the Environmental
Indemnity Agreement, the Administrative Agent's Fee Letter and the
Collateral Documents (in each case as the same may be amended, modified,
restated, supplemented, extended, renewed or replaced from time to
time), and "Credit Document" means any one of them.
"Credit Parties" means a collective reference to the Borrower and
the Guarantor, and "Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (i) all of
the obligations of the Credit Parties to the Lenders and the
Administrative Agent, whenever arising, under this Credit Agreement, the
Notes, the Guaranty Agreement, the Collateral Documents or any of the
other Credit Documents (including, but not limited to, any interest
accruing after the occurrence of a Bankruptcy Event with respect to any
Credit Party, regardless of whether such interest is an allowed claim
under the Bankruptcy Code) and (ii) all liabilities and obligations,
whenever arising, owing from the Borrower to any Lender, or any
Affiliate of a Lender, arising under any Hedging Agreement.
"Debt Service" means, as of any date for the twelve month period
ending on such date, the principal and interest payments (assuming (i) a
principal amortization schedule for a loan equal to the sum of the
aggregate outstanding principal amount of Revolving Loans then
outstanding with a term of twenty-five (25) years and (ii) an interest
rate equal to the greater of (x) the then applicable Treasury Rate plus
1.50% per annum and (y) eight percent (8.0%) per annum) which would be
due and payable during such twelve month period.
"Debt Service Coverage Ratio" means, for the twelve month period
ending as of the calendar month most recently ended, the ratio of (a)
Net Operating Income for such period to (b) Debt Service for such
period.
"Default" means any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that (a) has
failed to make a Loan or purchase a Participation Interest required
pursuant to the term of this Credit Agreement within one Business Day of
when due, (b) other than as set forth in (a) above, has failed to pay to
the Administrative Agent or any Lender an amount owed by such Lender
pursuant to the terms of this Credit Agreement within one Business Day
of when due, unless such amount is subject to a good faith dispute or
(c) has been deemed insolvent or has become subject to a bankruptcy or
insolvency proceeding or with respect to which (or with respect to any
of the assets of which) a receiver, trustee or similar official has been
appointed.
"Deposit Account" shall have the meaning assigned to such term in
Section 2.1(b)(iii).
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<PAGE> 12
"Development Agreement" means that certain Development Agreement
dated as May 12, 1998 between the Borrower, Clise Development LLC, a
Washington limited liability company and Nordstrom, as amended or
modified from time to time.
"Dollars" and "$" means dollars in lawful currency of the United
States.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender that is a "United States person" (as defined in Section
7701(a)(30) of the Code); and (iii) any other Person approved by the
Administrative Agent and, unless an Event of Default has occurred and is
continuing at the time any assignment is effected in accordance with
Section 10.3, the Borrower (such approval by the Administrative Agent or
the Borrower not to be unreasonably withheld or delayed); provided,
however, that neither the Borrower nor an Affiliate of the Borrower
shall qualify as an Eligible Assignee.
"Environmental Indemnity Agreement" means that certain
Certificate and Indemnity Agreement Regarding Building Laws and
Hazardous Substances dated as of the Closing Date between the Borrower
and the Administrative Agent, as amended or modified from time to time.
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity which is under common control
with the Borrower within the meaning of Section 4001(a)(14) of ERISA, or
is a member of a group which includes the Borrower and which is treated
as a single employer under Sections 414(b) or (c) of the Code.
"ERISA Event" means (i) with respect to any Plan, the occurrence
of a Reportable Event or the substantial cessation of operations (within
the meaning of Section 4062(e) of ERISA); (ii) the withdrawal by the
Borrower or any ERISA Affiliate from a Multiple Employer Plan during a
plan year in which it was a substantial employer (as such term is
defined in Section 4001(a)(2) of ERISA), or the termination of a
Multiple Employer Plan; (iii) the distribution of a notice of intent to
terminate or the actual termination of a Plan pursuant to Section
4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to
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<PAGE> 13
terminate or the actual termination of a Plan by the PBGC under Section
4042 of ERISA; (v) any event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan; (vi) the complete or partial
withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer
Plan; (vii) the conditions for imposition of a lien under Section 302(f)
of ERISA exist with respect to any Plan; or (viii) the adoption of an
amendment to any Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA.
"Eurodollar Loan" means any Loan that bears interest at a rate
based upon the Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be
equal to the quotient obtained by dividing (a) the Interbank Offered
Rate for such Eurodollar Loan for such Interest Period by (b) 1 minus
the Eurodollar Reserve Requirement for such Eurodollar Loan for such
Interest Period.
"Eurodollar Reserve Requirement" means, at any time, the maximum
rate at which reserves (including, without limitation, any marginal,
special, supplemental, or emergency reserves) are required to be
maintained under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System with deposits exceeding $5 billion
against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Eurodollar Reserve
Requirement shall reflect any other reserves required to be maintained
by such member banks with respect to (i) any category of liabilities
which includes deposits by reference to which the Adjusted Eurodollar
Rate is to be determined, or (ii) any category of extensions of credit
or other assets which include Eurodollar Loans. The Adjusted Eurodollar
Rate shall be adjusted automatically on and as of the effective date of
any change in the Eurodollar Reserve Requirement.
"Event of Default" shall have the meaning assigned to such term
in Section 8.1.
"Executive Officer" of any Person means any of the chief
executive officer, chief operating officer, president, vice president,
chief financial officer or treasurer of such Person.
"Extension Period" shall have the meaning assigned such term in
Section 2.2.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day; provided that (a) if
such day is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the
Federal
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<PAGE> 14
Funds Rate for such day shall be the average rate charged to the
Administrative Agent (in its individual capacity) on such day on such
transactions as determined by the Administrative Agent.
"Fees" means all fees payable pursuant to Section 3.5.
"Funding Date" means the date on which the conditions set forth
in Section 4.1 and Section 4.2 have been fulfilled, provided that such
date must be on or before March 14, 2000.
"Funds" shall have the meaning assigned to such term in Schedule
4.3.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Ground Lease Agreement" means that certain ground lease
agreement dated as of September 30, 1997 by and between Stewart Avenue
Properties, a California general partnership and the Borrower (as
assignee in interest of the Guarantor), as amended or modified from time
to time.
"Guarantor" means Nordstrom, Inc., a Washington corporation.
"Guaranty Agreement" means that certain guaranty agreement dated
as of the date hereof in the form of Exhibit 1.1(a) executed by the
Guarantor, as amended, modified, restated or supplemented from time to
time.
"Guaranty Obligations" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness of
any other Person in any manner, whether direct or indirect, and
including without limitation any obligation, whether or not contingent,
(i) to purchase any such Indebtedness or any Property constituting
security therefor, (ii) to advance or provide funds or other support for
the payment or purchase of any such Indebtedness or to maintain working
capital, solvency or other balance sheet condition of such other Person
(including without limitation keep well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for
the benefit of any holder of Indebtedness of such other Person, (iii) to
lease or purchase Property, securities or services primarily for the
purpose of assuring the holder of such Indebtedness, or (iv) to
otherwise assure or hold harmless the holder of such Indebtedness
against loss in respect thereof. The amount of any Guaranty Obligation
hereunder shall (subject to any limitations set forth therein) be deemed
to be an amount equal to the outstanding principal amount (or maximum
principal amount, if larger) of the Indebtedness in respect of which
such Guaranty Obligation is made.
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<PAGE> 15
"Hedging Agreements" means any interest rate protection agreement
entered into by the Borrower in connection with the Loans.
"Housing Credits Letter of Credit" shall have the meaning
assigned to such term in Section 7.1(c).
"Housing Project" means the multifamily residential building
containing approximately sixty-five (65) units on five levels above one
street-level of retail space.
"HRG" means Housing Resources Group, a Washington nonprofit
corporation.
"Improvements" means all improvements (including, without
limitation, the Project) constructed by the Borrower on the Land.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, (b)
all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, or upon which interest payments are customarily
made, (c) all obligations of such Person under conditional sale or other
title retention agreements relating to Property purchased by such Person
(other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of
business), (d) all obligations of such Person issued or assumed as the
deferred purchase price of Property or services purchased by such Person
(other than trade debt incurred in the ordinary course of business and
due within twelve months of the incurrence thereof) which would appear
as liabilities on a balance sheet of such Person, (e) all obligations of
such Person under take-or-pay or similar arrangements or under
commodities agreements, (f) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable out
of the proceeds of production from, Property owned or acquired by such
Person, whether or not the obligations secured thereby have been
assumed, (g) all Guaranty Obligations of such Person with respect to
Indebtedness of another Person, (h) the principal portion of all
obligations of such Person under Capital Leases, (i) all obligations of
such Person under Hedging Agreements, (j) the maximum amount of all
performance and standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed),
(k) all preferred Capital Stock issued by such Person and which by the
terms thereof could be (at the request of the holders thereof or
otherwise) subject to mandatory sinking fund payments, redemption or
other acceleration at any time prior to the final Maturity Date
hereunder, (l) the principal portion of all obligations of such Person
under Synthetic Leases, (m) all obligations of such Person to repurchase
any securities which repurchase obligation is related to the issuance
thereof, including, without limitation, obligations commonly known as
residual equity appreciation potential shares, (n) the Indebtedness of
any partnership or unincorporated joint venture in which such Person is
a general partner or a joint venturer and (o) the aggregate amount of
uncollected accounts receivable of such Person subject at such time to a
sale of receivables (or similar transaction) regardless of whether such
transaction is effected without recourse to such
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<PAGE> 16
Person or in a manner that would not be reflected on the balance sheet
of such Person in accordance with GAAP.
"Interbank Offered Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750
(or any successor page) as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "Interbank Offered Rate" shall mean, for any
Eurodollar Loan for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall
be the arithmetic mean of all such rates (rounded upwards, if necessary,
to the nearest 1/100 of 1%).
"Interest Payment Date" means (a) as to Base Rate Loans, each
March 31, June 30, September 30 and December 31 and the Maturity Date,
and (b) as to Eurodollar Loans, the last day of each applicable Interest
Period, the date of repayment of principal of such Loan and the Maturity
Date, and in addition where the applicable Interest Period for a
Eurodollar Loan is greater than three months, then also the date three
months from the beginning of the Interest Period and each three months
thereafter.
"Interest Period" means, as to Eurodollar Loans, a period of one,
two, three or six months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof); provided, however, (a) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day), (b)
no Interest Period shall extend beyond the Maturity Date and (c) where
an Interest Period begins on a day for which there is no numerically
corresponding day in the calendar month in which the Interest Period is
to end, such Interest Period shall end on the last Business Day of such
calendar month.
"Investment" means (a) the acquisition (whether for cash,
property, services, assumption of Indebtedness, securities or otherwise)
of (i) all or any substantial portion of the assets of any Person or
(ii) the shares of Capital Stock, bonds, notes, debentures, partnership,
joint ventures or other ownership interests or other securities of any
Person or (b) any deposit with, or advance, loan or other extension of
credit to, any Person (other than deposits made in connection with the
purchase of equipment or other assets in the ordinary course of
business) or (c) any other capital contribution to or investment in such
Person, including, without limitation, any Guaranty Obligations
(including any support for a letter of credit issued on behalf of such
Person) incurred for the benefit of such Person.
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<PAGE> 17
"Joint Development Agreement" means that certain Joint
Development Agreement dated as of April 2, 1998 by and among the
Guarantor, Seventh & Olive, Inc. and HRG.
"Land" means the real property located at 1700 Seventh Avenue in
Seattle, Washington more particularly described as Parcels A and B in
Schedule 1.1(b).
"Lender" means any of the Persons identified as a "Lender" on the
signature pages hereto, and any Person which may become a Lender by way
of assignment in accordance with the terms hereof, together with their
successors and permitted assigns.
"Letter of Credit Agreement" means that certain Agreement
Regarding Letter of Credit to Secure Production of Low Income Housing
for Floor Area Bonus with an effective date of February 3, 2000 between
the Borrower and the City, acting through its Office of Housing.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, and
any lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans (or a portion of any
Revolving Loan bearing interest at the Adjusted Base Rate or the
Adjusted Eurodollar Rate), individually or collectively, as appropriate.
"Material Adverse Effect" means a material adverse effect on (i)
the condition (financial or otherwise), operations, business, assets,
liabilities or prospects of (a) the Borrower or (b) the Guarantor and
its Subsidiaries taken as a whole, (ii) the ability of any Credit Party
to perform any material obligation applicable to it under the Credit
Documents to which it is a party or (iii) the material rights and
remedies of the Administrative Agent and the Lenders under the Credit
Documents.
"LTV Ratio" means the ratio of (a) the Revolving Committed Amount
to (b) the fair market value of the Project, as determined in accordance
with appraisal delivered to the Agents pursuant to Section 2.2(h).
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Laws,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Maturity Date" means August 29, 2002, as such date may be
extended pursuant to Section 2.2.
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<PAGE> 18
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business of
rating securities.
"Mortgage Instrument" shall have the meaning assigned such term
in Section 4.1(e).
"Mortgage Policy" shall have the meaning assigned to such term
in Section 4.2(e).
"Multiple Employer Plan" means a Plan (other than a Multiemployer
Plan) which the Borrower or any ERISA Affiliate and at least one
employer other than the Borrower or any ERISA Affiliate are contributing
sponsors.
"Net Operating Income" means, (i) assuming the Project has been
substantially complete for twelve months on the date of determination,
for the twelve month period most recently ending, an amount equal to (A)
the income of the Borrower with respect to the operation of the
Improvements (utilizing the actual parking revenues, expense
reimbursements and lease rates so long as such parking revenues, expense
reimbursements and lease rates do not exceed fair market value) for such
period, as determined in accordance with GAAP minus (B) the Vacancy
Reserve for such period minus (C) the Capital Reserve minus (D) an
amount equal to the greater of (I) the sum of all expenses (exclusive of
interest expense, depreciation and amortization expense) incurred or
accrued by the Borrower in connection with the ownership and/or
operation of the Improvements for such period, as determined in
accordance with GAAP and (II) the operating expenses at stabilization
for such period as set forth in the appraisal provided to the Project
Administrative Agent in accordance with Section 4.1(e)(vi) (provided,
however, with respect to any space in the Improvements which has not
been occupied for the complete twelve month period in question, the
income and expenses associated with the leasing of such space during the
twelve month period in question shall be annualized for purposes of
determining Net Operating Income for such twelve month period), or (ii)
if the Project has not been substantially complete for at least twelve
months on the date of determination, for that period in which the
Project has been substantially complete, an amount equal to (A)
annualized income of the Borrower with respect to the operation of the
Improvements (utilizing the actual parking revenues, expense
reimbursements and lease rates so long as such parking revenues, expense
reimbursements and lease rates do not exceed fair market value) for such
period, as determined in accordance with GAAP minus (B) annualized
Vacancy Reserve for such period minus (C) the Capital Reserve minus (D)
an amount equal to the greater of (I) annualized expenses (exclusive of
interest expense, depreciation and amortization expense) incurred or
accrued by the Borrower in connection with the ownership and/or
operation of the Improvements for such period, as determined in
accordance with GAAP and (II) annualized operating expenses at
stabilization for such period as set forth in the appraisal provided to
the Project Administrative Agent in accordance with Section 4.1(e)(vi).
"Nordstrom Credit Agreement" means that certain Amended and
Restated Credit Agreement dated as of October 15, 1999 among the
Guarantor, the lenders named therein, Banc One, NA, as syndication
agent, Morgan Guaranty Trust Company of New York, as
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<PAGE> 19
documentation agent and Bank of America, as administrative agent, as
amended, modified, supplemented or restated from time to time.
"Nordstrom Lease Agreement" means that certain agreement of lease
dated May 12, 1998, as amended, by and between the Borrower and the
Guarantor.
"Nordstrom Loan" means that certain loan or line of credit in an
amount not to exceed $20,000,000 in principal at any one time
outstanding made by the Guarantor to the Borrower.
"Note" or "Notes" means the Revolving Notes, individually or
collectively, as appropriate.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Exhibit 2.1(b)(i), as required by Section
2.1(b)(i).
"Notice of Extension/Conversion" means the written notice of
extension or conversion in substantially the form of Exhibit 3.2, as
required by Section 3.2.
"Occupancy Rate" means, with respect to the Project, the ratio
(expressed as a percentage) equal to (i) the gross leaseable area in the
Project presently being rented by tenants pursuant to leases entered
into by the Borrower in accordance with Section 7.15 to (ii) the actual
gross leaseable area in the Project.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Other Taxes" shall have the meaning assigned to such term in
Section 3.11.
"Participation Interest" means a purchase by a Lender of a
participation in any Loans as provided in Section 3.14.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any successor thereof.
"Permitted Investments" means Investments which are (i) cash and
Cash Equivalents; (ii) accounts receivable created, acquired or made by
the Borrower in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; and (iii)
Investments consisting of Capital Stock, obligations, securities or
other property received by the Borrower in settlement of accounts
receivable (created in the ordinary course of business) from bankrupt
obligors.
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"Permitted Liens" means:
(i) Liens in favor of the Administrative Agent to secure the
Credit Party Obligations;
(ii) Liens (other than Liens created or imposed under ERISA) for
taxes, assessments or governmental charges or levies not yet due or
Liens for taxes being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such Lien is
not yet subject to foreclosure, sale or loss on account thereof);
(iii) Liens in connection with attachments or judgments
(including judgment or appeal bonds) provided that the judgments secured
shall, (a) within 30 days after the entry thereof, have been discharged,
(b) within 30 days after execution thereof have been stayed pending
appeal and have been discharged within 30 days after the expiration of
any such stay or (c) have been covered in full by insurance by an
insurance carrier who has acknowledged coverage and has the ability to
perform;
(iv) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other
similar charges or encumbrances not, in any material respect, impairing
the use of the encumbered Property for its intended purposes;
(v) statutory Liens of mechanics, materialmen and suppliers and
other Liens imposed by law or pursuant to customary reservations or
retentions of title arising in the ordinary course of business, provided
that such Liens secure only amounts not yet due and payable or, if due
and payable, (A) are unfiled and no other action has been taken to
enforce the same or are being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with
GAAP have been established (and as to which the Property subject to any
such Lien is not yet subject to foreclosure, sale or loss on account
thereof) or (B) (I) the Borrower has deposited a bond or other security
satisfactory to the Administrative Agent and the Project Administrative
Agent in an amount reasonably required by the Administrative Agent and
the Project Administrative Agent, but not more than the amounts
specified in RCW 60.04.161, as now or hereafter amended, (II) the
Borrower, to the extent the Borrower reasonably believes the Lien is
frivolous and made without reasonable cause, or is clearly excessive,
immediately commences its contest of such Lien, applies to court for a
show of cause as provided for in RCW 60.04.221(9), as now or hereafter
amended and continuously pursues the contest in good faith and with due
diligence, (III) foreclosure of the Lien is stayed and (IV) the Borrower
pays any judgment rendered for the lien claimant or other third party
within ten (10) days after the entry of the judgment;
(vi) leases or subleases granted to others not interfering in
any material respect with the business of any Credit Party;
(vii) any matters shown as an exception to title on the Mortgage
Policy as of the Closing Date;
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(viii) in order to obtain a certificate of acceptance for the
Housing Project from the City, (A) an agreement restricting the
occupancy and rents of the Housing Project consistent with the terms of
Section 4.2(b) of the Letter of Credit Agreement and (B) a deed of trust
recorded by the City against the Tipp Property to secure the owner of
the Housing Project's obligation to buyout the Housing Project in the
event such owner fails to restore or replace the Housing Project
following a casualty or condemnation; and
(ix) Liens existing on the date hereof and identified on Schedule
1.1(c); provided that no such Lien shall extend to any property other
than the property subject thereto on the Closing Date.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated) or any Governmental Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which the
Borrower or any ERISA Affiliate is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an
"employer" within the meaning of Section 3(5) of ERISA.
"Plans and Specifications" shall have the meaning assigned to
such term in Section 4.1(g).
"Prime Rate" means the per annum rate of interest established
from time to time by Bank of America as its prime rate, which rate may
not be the lowest rate of interest charged by Bank of America to its
customers.
"Project" means the approximately 572,000 square foot office
building and 198,000 square foot parking garage located on the Land as
described in the Plans and Specifications.
"Project Administrative Agent" means Bank of America, N.A. or
any successor project administrative agent appointed pursuant to Section
9.7.
"Project Budget" shall have the meaning assigned to such term in
Section 6.14.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Ratings Date" shall have the meaning assigned to such term in
the definition of "Applicable Percentage" set forth in this Section 1.1.
"Real Properties" means the collective reference to (a) the Land
and the Improvements and (b) the Tipp Property.
"Register" shall have the meaning assigned to such term in
Section 11.3(c).
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"Regulation D, T, U, or X" means Regulation D, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System as
from time to time in effect and any successor to all or a portion
thereof.
"Reportable Event" means any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the notice
requirement has been waived by regulation.
"Required Lenders" means, at any time, Lenders other than
Defaulting Lenders which are then in compliance with their obligations
hereunder (as determined by the Administrative Agent) and holding in the
aggregate more than 66 2/3% of (i) the Revolving Commitments (and
Participation Interests therein) or (ii) if the Revolving Commitments
have been terminated, the outstanding Loans and Participation Interests.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation or determination
of an arbitrator or a court or other Governmental Authority, in each
case applicable to or binding upon such Person or to which any of its
material property is subject.
"Restricted Payment" means (i) any dividend or other payment or
distribution, direct or indirect, on account of any shares of any class
of Capital Stock of the Borrower or any of its Subsidiaries, now or
hereafter outstanding, (ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any class of Capital Stock of the Borrower or
any of its Subsidiaries, now or hereafter outstanding or (iii) any
payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of
Capital Stock of the Borrower or any of its Subsidiaries, now or
hereafter outstanding.
"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender in an aggregate principal amount at any time
outstanding of up to such Lender's Revolving Commitment Percentage of
the Revolving Committed Amount to make Revolving Loans in accordance
with the provisions of Section 2.1(a).
"Revolving Commitment Percentage" means, for any Lender, the
percentage identified as its Revolving Commitment Percentage on Schedule
2.1(a), as such percentage may be modified in connection with any
assignment made in accordance with the provisions of Section 10.3.
"Revolving Committed Amount" shall have the meaning assigned to
such term in Section 2.1(a).
"Revolving Loans" shall have the meaning assigned to such term
in Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory notes
of the Borrower in favor of each Lender provided pursuant to Section
2.1(e) and evidencing the Revolving Loans of such Lender, individually
or collectively, as appropriate, as such
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promissory notes may be amended, modified, restated, supplemented,
extended, renewed or replaced from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw Hill Companies, Inc., or any successor or assignee of the
business of such division in the business of rating securities.
"Sale and Leaseback Transaction" means any arrangement pursuant
to which the Borrower, directly or indirectly, becomes liable as lessee,
guarantor or other surety with respect to any lease, whether an
Operating Lease or a Capital Lease, of any Property (a) which the
Borrower has sold or transferred (or is to sell or transfer) to a Person
which is not the Borrower or (b) which the Borrower intends to use for
substantially the same purpose as any other Property which has been sold
or transferred (or is to be sold or transferred) by the Borrower to
another Person which is not the Borrower in connection with such lease.
"SCIDPDA TDR Agreement" means that certain Agreement for Purchase
and Sale of Transferable Development Rights dated as of December 28,
1999 by and between Seattle Chinatown International District
Preservation and Development Authority and the Borrower.
"Securities Exchange Act" means the Securities Exchange Act of
1934.
"Senior Debt" shall have the meaning given such term in the
definition of Senior Debt Rating.
"Senior Debt Rating" means the publicly announced ratings by S&P
and Moody's for the senior unsecured (non-credit enhanced) long term
debt of the Guarantor ("Senior Debt").
"Seventh and Stewart" means Seventh and Stewart LLC, a Washington
limited liability company.
"Single Employer Plan" means any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
"Solvent" means, with respect to any Person on a particular date,
that on such date (i) the property of such Person, at a fair valuation,
is greater than the total amount of such Person's absolute and matured
debts, and (b) such Person is generally paying his, her or its debts as
they become due.
"Stabilization" means, with respect to the Project, the condition
where (i) the Project has an Occupancy Rate of at least 90% for two
consecutive fiscal quarters and (ii) the Borrower has received a
certificate of occupancy from the appropriate Governmental Authority
with respect to the Project (in form and substance satisfactory to the
Project Administrative Agent).
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"Subordinated Debt" shall have the meaning assigned to such term
in Section 7.1(h).
"Subsidiary" means, as to any Person at any time, (a) any
corporation more than 50% of whose Capital Stock of any class or classes
having by the terms thereof ordinary voting power to elect a majority of
the directors of such corporation (irrespective of whether or not at
such time, any class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at
such time owned by such Person directly or indirectly through
Subsidiaries, and (b) any partnership, association, joint venture or
other entity of which such Person directly or indirectly through
Subsidiaries owns at such time more than 50% of the Capital Stock. The
Borrower is not a Subsidiary of the Guarantor.
"Synthetic Lease" means any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an Operating Lease
under GAAP.
"Taxes" shall have the meaning assigned to such term in Section
3.11.
"Tipp Property" means the real property described as Parcel C in
Schedule 1.1(b).
"Title Insurance Company" shall have the meaning assigned to such
term in Section 4.2(d).
"Transferable Development Rights Agreements" means a collective
reference to the SCIDPDA TDR Agreement and the YMCA TDR Agreement.
"Treasury Rate" means, for any day, a rate of interest equal to
the yield for actively traded U.S. Treasury securities having a ten (10)
year maturity as determined by the Administrative Agent prior to 9:00
a.m. (San Francisco, California time).
"Unused Fee" shall have the meaning assigned to such term in
Section 3.5(b).
"Unused Fee Calculation Period" shall have the meaning assigned
to such term in Section 3.5(b).
"Unused Revolving Committed Amount" means, for any period, the
amount by which (a) the then applicable Revolving Committed Amount
exceeds (b) the daily average sum for such period of the outstanding
aggregate principal amount of all Revolving Loans.
"Upfront Fee" shall have the meaning assigned to such term in
Section 3.5(a).
"Vacancy Reserve" means an amount equal to 2.6% of the income
generated by the Borrower from the operation of the Improvements for the
applicable period.
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"Voting Stock" means, with respect to any Person, Capital Stock
issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of directors
(or persons performing similar functions) of such Person, even though
the right so to vote has been suspended by the happening of such a
contingency.
"Wholly Owned Subsidiary" of any Person means any Subsidiary 100%
of whose Voting Stock is at the time owned by such Person directly or
indirectly through other Wholly Owned Subsidiaries.
"Year 2000 Problem" shall have the meaning assigned to such term
in Section 5.21.
"YMCA TDR Agreement" means that certain Agreement for Purchase
and Sale of Transferable Development Rights dated as of December 3, 1999
by and among Young Men's Christian Association of Greater Seattle, 909
4th YMCA Limited Partnership and the Borrower.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
1.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Administrative
Agent and/or the Lenders hereunder shall be prepared, in accordance with GAAP
applied on a consistent basis. All calculations made for the purposes of
determining compliance with this Credit Agreement shall (except as otherwise
expressly provided herein) be made by application of GAAP applied on a basis
consistent with the most recent annual or quarterly financial statements
delivered pursuant to Section 6.1 (or, prior to the delivery of the first
financial statements pursuant to Section 6.1, consistent with the financial
statements as at December 31, 1998); provided, however, if (a) the Borrower
shall object to determining such compliance on such basis at the time of
delivery of such financial statements due to any change in GAAP or the rules
promulgated with respect thereto or (b) the Administrative Agent or the Required
Lenders shall so object in writing within 60 days after delivery of such
financial statements, then such calculations shall be made on a basis consistent
with the most recent financial statements delivered by the Borrower to the
Lenders as to which no such objection shall have been made.
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SECTION 2
CREDIT FACILITIES
2.1 REVOLVING LOANS.
(a) Revolving Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set forth
herein, each Lender severally agrees to make available to the Borrower
such Lender's Revolving Commitment Percentage of revolving credit loans
requested by the Borrower in Dollars ("Revolving Loans") from time to
time from the Funding Date until the Maturity Date, or such earlier date
as the Revolving Commitments shall have been terminated as provided
herein; provided, however, that the sum of the aggregate outstanding
principal amount of Revolving Loans shall not exceed NINETY THREE
MILLION DOLLARS ($93,000,000) (as such aggregate maximum amount may be
reduced from time to time as provided in Section 3.4, the "Revolving
Committed Amount"); provided, further, (A) with regard to each Lender
individually, such Lender's outstanding Revolving Loans shall not exceed
such Lender's Revolving Commitment Percentage of the Revolving Committed
Amount, (B) the sum of the aggregate outstanding principal amount of
Revolving Loans shall not exceed the Revolving Committed Amount, (C) a
Revolving Loan borrowing shall only be made available once per calendar
month and (D) each Revolving Loan borrowing is subject to the conditions
set forth in Schedule 4.3. Revolving Loans may consist of Base Rate
Loans or Eurodollar Loans, or a combination thereof, as the Borrower may
request; provided, however, that no more than six Eurodollar Loans shall
be outstanding hereunder at any time (it being understood that, for
purposes hereof, Eurodollar Loans with different Interest Periods shall
be considered as separate Eurodollar Loans, even if they begin on the
same date, although borrowings, extensions and conversions may, in
accordance with the provisions hereof, be combined at the end of
existing Interest Periods to constitute a new Eurodollar Loan with a
single Interest Period). Once repaid, the Revolving Loans cannot be
reborrowed. No Revolving Loans shall be made available during the
Extension Period.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. After having satisfied the
terms and conditions of Schedule 4.3 hereof with respect to any
request for the disbursement of Funds, the Borrower may then
make a request for a Revolving Loan in the amount approved by
the Project Administrative Agent with respect to such a request
for Funds in accordance with the terms of Schedule 4.3;
provided, however, if the Borrower submits a Notice of Borrowing
to the Administrative Agent prior to having satisfied the terms
and conditions of Schedule 4.3, the parties hereto agree that
the Administrative Agent shall not accept such Notice of
Borrowing, and the Borrower shall have to re-submit such Notice
of Borrowing after the Project Administrative Agent has
confirmed that the terms and conditions of Schedule 4.3 with
respect to such borrowing have been satisfied. The Borrower
shall request a Revolving Loan borrowing by written notice (or
telephonic notice promptly confirmed in writing) to the
Administrative Agent not later than 10:00 A.M. (San
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Francisco, California time) on the Business Day prior to the
date of the requested borrowing in the case of Base Rate Loans,
and on the third Business Day prior to the date of the requested
borrowing in the case of Eurodollar Loans. Each such request for
borrowing shall be irrevocable and shall specify (A) that a
Revolving Loan is requested, (B) the date of the requested
borrowing (which shall be a Business Day), (C) the aggregate
principal amount to be borrowed, and (D) whether the borrowing
shall be comprised of Base Rate Loans, Eurodollar Loans or a
combination thereof, and if Eurodollar Loans are requested, the
Interest Period(s) therefor. If the Borrower shall fail to
specify in any such Notice of Borrowing (I) an applicable
Interest Period in the case of a Eurodollar Loan, then such
notice shall be deemed to be a request for an Interest Period of
one month, or (II) the type of Revolving Loan requested, then
such notice shall be deemed to be a request for a Base Rate Loan
hereunder. The Administrative Agent shall give notice to each
affected Lender promptly upon receipt of each Notice of
Borrowing pursuant to this Section 2.1(b)(i), the contents
thereof and each such Lender's share of any borrowing to be made
pursuant thereto.
(ii) Minimum Amounts. (a) Each Eurodollar Loan shall be
in a minimum aggregate principal amount of $2,000,000 and
integral multiples of $100,000 in excess thereof (or the
remaining amount of the Revolving Committed Amount, if less),
and (b) each Base Rate Loan shall be in a minimum aggregate
principal amount of $100,000 (or the remaining amount of the
Revolving Committed Amount, if less).
(iii) Advances. Each Lender will make its Revolving
Commitment Percentage of each Revolving Loan borrowing available
to the Administrative Agent for the account of the Borrower as
specified in Section 3.15(a), or in such other manner as the
Administrative Agent may specify in writing, by 8:00 A.M. (San
Francisco, California time) on the date specified in the
applicable Notice of Borrowing in Dollars and in funds
immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by the
Administrative Agent by crediting the account of the Borrower
with Bank of America (the "Deposit Account") with the aggregate
of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative
Agent.
(c) Repayment. The principal amount of all Revolving Loans shall
be due and payable in full on the Maturity Date, unless accelerated
sooner pursuant to Section 8.2.
(d) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as Revolving
Loans shall be comprised in whole or in part of Base Rate Loans,
such Base Rate Loans shall bear interest at a per annum rate
equal to the Adjusted Base Rate.
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(ii) Eurodollar Loans. During such periods as Revolving
Loans shall be comprised in whole or in part of Eurodollar
Loans, such Eurodollar Loans shall bear interest at a per annum
rate equal to the Adjusted Eurodollar Rate.
Interest on Revolving Loans shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(e) Revolving Notes. The Revolving Loans made by each Lender
shall be evidenced by a duly executed promissory note of the Borrower to
such Lender in an original principal amount equal to such Lender's
Revolving Commitment Percentage of the Revolving Committed Amount and in
substantially the form of Exhibit 2.1(e).
2.2 EXTENSION OF MATURITY DATE.
Not more than 120 days and not less than 60 days prior to August 29,
2002 (the "Extension Date"), the Borrower may request in writing that the
Lenders extend the Maturity Date for an additional one year period (the
"Extension Period"). The Maturity Date shall be extended for an additional one
year period if, on the Extension Date, the following conditions are satisfied:
(a) no Default or Event of Default then exists;
(b) payment by the Borrower to each Lender of an extension fee
in an amount equal to 0.25% of such Lender's outstanding Revolving Loans
on the Extension Date;
(c) the Guarantor shall have a Senior Debt Rating of no less
than A- from S&P and A3 from Moody's;
(d) certificates of occupancy with respect to the Project (in
form and substance reasonably satisfactory to the Project Administrative
Agent) shall have been issued by the appropriate Governmental Authority;
(e) the Guarantor shall not be in default under any agreement
governing Indebtedness of the Guarantor for borrowed money;
(f) (i) the Nordstrom Lease Agreement shall be in full force and
effect and (ii) the Administrative Agent shall have received from the
Guarantor an estoppel certificate, in a form attached hereto as Exhibit
2.2;
(g) the Debt Service Coverage Ratio, as of the calendar month
most recently ended, for the twelve month period ending on such date,
shall be greater than or equal to 1.25 to 1.0;
(h) the Administrative Agent and the Project Administrative
Agent shall have received an appraisal of the Project prepared by a
qualified appraiser designated by and satisfactory to the Administrative
Agent and the Project Administrative Agent and otherwise satisfactory in
form and substance to the Administrative Agent and the Project
Administrative Agent, demonstrating an LTV Ratio less than or equal to
0.75 to 1.0;
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(i) the construction of the Project has been substantially
completed in accordance with the Plans and Specifications and a
certificate (in form and substance satisfactory to the Project
Administrative Agent) as to such completion shall have been issued by
the project architect;
(j) the Administrative Agent and the Project Administrative
Agent shall have received an updated title report for the Project
containing no exceptions not approved by the Administrative Agent and
the Project Administrative Agent and otherwise in form and substance
satisfactory to the Administrative Agent and the Project Administrative
Agent; and
(k) the Administrative Agent and the Project Administrative
Agent shall have received an as-built survey of the Project, certified
to the Administrative Agent by an independent professional licensed land
surveyor showing all improvements in place on the Land and otherwise in
form and substance satisfactory to the Administrative Agent and the
Project Administrative Agent, together with any endorsements to the
Title Policy reasonably requested by the Administrative Agent or the
Project Administrative Agent to address changes in the state of title
disclosed in such as-built survey.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 DEFAULT RATE.
Upon the occurrence, and during the continuance, of an Event of Default,
the principal of and, to the extent permitted by law, interest on the Loans and
any other amounts owing hereunder or under the other Credit Documents shall bear
interest, payable on demand, at a per annum rate 2% greater than the rate which
would otherwise be applicable (or if no rate is applicable, whether in respect
of interest, fees or other amounts, then the Adjusted Base Rate plus 2%).
3.2 EXTENSION AND CONVERSION.
The Borrower shall have the option, on any Business Day, to extend
existing Loans into a subsequent permissible Interest Period or to convert Loans
into Loans of another interest rate type; provided, however, that (i) except as
provided in Section 3.8, Eurodollar Loans may be converted into Base Rate Loans
or extended as Eurodollar Loans for new Interest Periods only on the last day of
the Interest Period applicable thereto, (ii) without the consent of the Required
Lenders, Eurodollar Loans may be extended, and Base Rate Loans may be converted
into Eurodollar Loans, only if the conditions precedent set forth in Section 4.3
are satisfied on the date of extension or conversion, (iii) Loans extended as,
or converted into, Eurodollar Loans shall be subject to the terms of the
definition of "Interest Period" set forth in Section 1.1 and shall be in such
minimum amounts as provided in, with respect to Revolving Loans, Section
2.1(b)(ii), (iv) no more than six Eurodollar Loans shall be outstanding
hereunder at any time (it being understood that, for purposes hereof, Eurodollar
Loans with different Interest Periods shall be considered as separate Eurodollar
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Loans, even if they begin on the same date, although borrowings, extensions and
conversions may, in accordance with the provisions hereof, be combined at the
end of existing Interest Periods to constitute a new Eurodollar Loan with a
single Interest Period) and (v) any request for extension or conversion of a
Eurodollar Loan which shall fail to specify an Interest Period shall be deemed
to be a request for an Interest Period of one month. Each such extension or
conversion shall be effected by the Borrower by giving a Notice of
Extension/Conversion (or telephonic notice promptly confirmed in writing) to the
office of the Administrative Agent specified in Schedule 2.1(a), or at such
other office as the Administrative Agent may designate in writing, prior to
10:00 A.M. (San Francisco, California time) on the Business Day of, in the case
of the conversion of a Eurodollar Loan into a Base Rate Loan, and on the third
Business Day prior to, in the case of the extension of a Eurodollar Loan as, or
conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed
extension or conversion, specifying the date of the proposed extension or
conversion, the Loans to be so extended or converted, the types of Loans into
which such Loans are to be converted and, if appropriate, the applicable
Interest Periods with respect thereto. Each request for extension or conversion
shall be irrevocable and shall constitute a representation and warranty by the
Borrower of the matters specified in subsections (b), (c), (d), (e), (g) and (h)
of Section 4.3. In the event the Borrower fails to request extension or
conversion of any Eurodollar Loan in accordance with this Section, or any such
conversion or extension is not permitted or required by this Section, then such
Eurodollar Loan shall be automatically converted into a Base Rate Loan at the
end of the Interest Period applicable thereto. The Administrative Agent shall
give each Lender notice as promptly as practicable of any such proposed
extension or conversion affecting any Loan.
3.3 PREPAYMENTS.
(a) Voluntary Prepayments. The Borrower shall have the right to
prepay Loans in whole or in part from time to time; provided, however,
that (i) each partial prepayment of Eurodollar Loans shall be in a
minimum principal amount of $2,000,000 and integral multiples of
$100,000 in excess thereof (or the then remaining principal balance of
the Revolving Loans, if less) and (ii) each partial prepayment of Base
Rate Loans shall be in a minimum principal amount of $100,000 and
integral multiples of $100,000 in excess thereof (or the remaining
principal balance of Base Rate Loans, if less). Subject to the foregoing
terms, amounts prepaid under this Section 3.3(a) shall be applied as the
Borrower may elect; provided that if the Borrower fails to specify a
voluntary prepayment then such prepayment shall be applied to Revolving
Loans, in each case first to Base Rate Loans and then to Eurodollar
Loans in direct order of Interest Period maturities. All prepayments
under this Section 3.3(a) shall be subject to Section 3.12, but
otherwise without premium or penalty, and shall be accompanied by
interest on the principal amount prepaid through the date of prepayment.
(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If at any time, the sum
of the aggregate outstanding principal amount of Revolving Loans
shall exceed the Revolving Committed Amount, the Borrower
immediately shall prepay the Revolving Loans in an amount
sufficient to eliminate such excess.
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(ii) Application of Mandatory Prepayments. All amounts
required to be paid pursuant to this Section 3.3(b) shall be
applied to the Revolving Loans. Within the parameters of the
applications set forth above, prepayments shall be applied first
to Base Rate Loans and then to Eurodollar Loans in direct order
of Interest Period maturities. All prepayments under this
Section 3.3(b) shall be subject to Section 3.12, but otherwise
without premium or penalty, and shall be accompanied by interest
on the principal amount prepaid through the date of prepayment.
3.4 TERMINATION AND REDUCTION OF REVOLVING COMMITTED AMOUNT.
(a) Voluntary Reductions. The Borrower may from time to time
permanently reduce or terminate the Revolving Committed Amount in whole
or in part (in minimum aggregate amounts of $5,000,000 or in integral
multiples of $1,000,000 in excess thereof (or, if less, the full
remaining amount of the then applicable Revolving Committed Amount))
upon five Business Days' prior written notice to the Administrative
Agent; provided, however, no such termination or reduction shall be made
which would cause the sum of the aggregate outstanding principal amount
of Revolving Loans to exceed the Revolving Committed Amount, unless,
concurrently with such termination or reduction, the Revolving Loans are
repaid to the extent necessary to eliminate such excess. The
Administrative Agent shall promptly notify each affected Lender of
receipt by the Administrative Agent of any notice from the Borrower
pursuant to this Section 3.4(a).
(b) Maturity Date. The Revolving Commitments of the Lenders
shall automatically terminate on the Maturity Date.
(c) General. The Borrower shall pay to the Administrative Agent
for the account of the Lenders in accordance with the terms of Section
3.5(b), on the date of each termination or reduction of the Revolving
Committed Amount, the Unused Fee accrued through the date of such
termination or reduction on the amount of the Revolving Committed Amount
so terminated or reduced.
3.5 FEES.
(a) Upfront Fees. The Borrower agrees to pay to the
Administrative Agent for the benefit of the Lenders in immediately
available funds on or before the Closing Date an upfront fee (the
"Upfront Fee") in the amount provided in the Administrative Agent's Fee
Letter.
(b) Unused Fee. In consideration of the Revolving Commitments of
the Lenders hereunder, the Borrower agrees to pay to the Administrative
Agent for the account of each Lender a fee (the "Unused Fee") on the
Unused Revolving Committed Amount computed at a per annum rate for each
day during the applicable Unused Fee Calculation Period (hereinafter
defined) at a rate equal to the Applicable Percentage in effect from
time to time. The Unused Fee shall commence to accrue on the Funding
Date and shall be due and payable in arrears on the last Business Day of
each March, June, September and December (and on any date that the
Revolving Committed Amount is reduced and on the
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Maturity Date) for the immediately preceding quarter (or portion
thereof) (each such quarter or portion thereof for which the Unused Fee
is payable hereunder being herein referred to as an "Unused Fee
Calculation Period"), beginning with the first of such dates to occur
after the Funding Date.
(c) Administrative Fees. The Borrower agrees to pay to the
Administrative Agent, for its own account, and for the account of BAS,
as applicable, the fees referred to in the Administrative Agent's Fee
Letter (collectively, the "Administrative Agent's Fees").
3.6 CAPITAL ADEQUACY.
If after the date hereof, the adoption or the becoming effective of, or
any change in, or any change by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof in
the interpretation or administration of, any applicable law, rule or regulation
regarding capital adequacy, or compliance by any Lender with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's capital or assets as a
consequence of its commitments or obligations hereunder to a level below that
which such Lender could have achieved but for such adoption, effectiveness,
change or compliance (taking into consideration such Lender's policies with
respect to capital adequacy), then, upon notice from such Lender to the
Borrower, the Borrower shall be obligated to pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction. Each
determination by any such Lender of amounts owing under this Section shall be
prima facie evidence of such amounts.
3.7 LIMITATION ON EURODOLLAR LOANS.
If on or prior to the first day of any Interest Period for any
Eurodollar Loan:
(a) the Administrative Agent determines (which determination
shall be conclusive) that by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify the Administrative Agent that the Eurodollar Rate
will not adequately and fairly reflect the cost to the Lenders of
funding Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Borrower prompt notice thereof, and
so long as such condition remains in effect, the Lenders shall be under no
obligation to make additional Eurodollar Loans, continue Eurodollar Loans, or to
convert Base Rate Loans into Eurodollar Loans and the Borrower shall, on the
last day(s) of the then current Interest Period(s) for the outstanding
Eurodollar Loans, either prepay such Eurodollar Loans or convert such Eurodollar
Loans into Base Rate Loans in accordance with the terms of this Credit
Agreement.
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3.8 ILLEGALITY.
Notwithstanding any other provision of this Credit Agreement, in the
event that it becomes unlawful for any Lender or its Applicable Lending Office
to make, maintain, or fund Eurodollar Loans hereunder, then such Lender shall
promptly notify the Borrower thereof and such Lender's obligation to make or
continue Eurodollar Loans and to convert Base Rate Loans into Eurodollar Loans
shall be suspended until such time as such Lender may again make, maintain, and
fund Eurodollar Loans (in which case the provisions of Section 3.10 shall be
applicable).
3.9 REQUIREMENTS OF LAW.
If, after the date hereof, the adoption of any applicable law, rule, or
regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such Governmental Authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any
Eurodollar Loans, its Notes, or its obligation to make
Eurodollar Loans, or change the basis of taxation of any amounts
payable to such Lender (or its Applicable Lending Office) under
this Credit Agreement or its Notes in respect of any Eurodollar
Loans (other than taxes imposed on the overall net income of
such Lender by the jurisdiction in which such Lender has its
principal office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than the Eurodollar Reserve Requirement utilized in the
determination of the Adjusted Eurodollar Rate) relating to any
extensions of credit or other assets of, or any deposits with or
other liabilities or commitments of, such Lender (or its
Applicable Lending Office), including the Commitment of such
Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable
Lending Office) or the London interbank market any other
condition affecting this Credit Agreement or its Notes or any of
such extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, converting into, continuing, or
maintaining any Eurodollar Loans or to reduce any sum received or receivable by
such Lender (or its Applicable Lending Office) under this Credit Agreement or
its Notes with respect to any Eurodollar Loans, then the Borrower shall pay to
such Lender on demand such amount or amounts as will compensate such Lender for
such increased cost or reduction. If any Lender requests compensation by the
Borrower under this Section 3.9, the Borrower may, by notice to such Lender
(with a copy to the Administrative Agent), suspend the obligation of such Lender
to make or continue Eurodollar Loans, or to convert Base Rate Loans into
Eurodollar Loans, until the event or condition giving rise to such request
ceases to
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be in effect (in which case the provisions of Section 3.10 shall be applicable);
provided that such suspension shall not affect the right of such Lender to
receive the compensation so requested. Each Lender shall promptly notify the
Borrower and the Administrative Agent of any event of which it has knowledge,
occurring after the date hereof, which will entitle such Lender to compensation
pursuant to this Section 3.9 and will designate a different Applicable Lending
Office if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the reasonable judgment of such Lender, be
otherwise disadvantageous to it. Any Lender claiming compensation under this
Section 3.9 shall furnish to the Borrower and the Administrative Agent a
statement setting forth the additional amount or amounts to be paid to it
hereunder which shall be prima facie evidence of such amount or amounts. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.
3.10 TREATMENT OF AFFECTED LOANS.
If the obligation of any Lender to make any Eurodollar Loan or to
continue, or to convert Base Rate Loans into, Eurodollar Loans shall be
suspended pursuant to Section 3.7, 3.8 or 3.9 hereof, such Lender's Eurodollar
Loans shall be automatically converted into Base Rate Loans on the last day(s)
of the then current Interest Period(s) for such Eurodollar Loans (or, in the
case of a conversion, on such earlier date as such Lender may specify to the
Borrower with a copy to the Administrative Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 3.7, 3.8 or 3.9 hereof that gave rise to such conversion no longer
exist:
(a) to the extent that such Lender's Eurodollar Loans have been
so converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or continued by such
Lender as Eurodollar Loans shall be made or continued instead as Base
Rate Loans, and all Base Rate Loans of such Lender that would otherwise
be converted into Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Administrative
Agent) that the circumstances specified in Section 3.7, 3.8 or 3.9 hereof that
gave rise to the conversion of such Lender's Eurodollar Loans pursuant to this
Section 3.10 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Eurodollar Loans, to the extent necessary so that, after giving
effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by
such Lender are held pro rata (as to principal amounts, interest rate basis, and
Interest Periods) in accordance with their respective Commitments....
3.11 TAXES.
(a) Any and all payments by any Credit Party to or for the
account of any Lender or the Administrative Agent hereunder or under any
other Credit Document shall be
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made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender and the Administrative Agent, taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction under
the laws of which such Lender (or its Applicable Lending Office) or the
Administrative Agent (as the case may be) is organized or any political
subdivision thereof (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, withholdings, and liabilities being
hereinafter referred to as "Taxes"). If any Credit Party shall be
required by law to deduct any Taxes from or in respect of any sum
payable under this Credit Agreement or any other Credit Document to any
Lender or the Administrative Agent, (i) the sum payable shall be
increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 3.11) such Lender or the Administrative Agent receives an amount
equal to the sum it would have received had no such deductions been
made, (ii) such Credit Party shall make such deductions, (iii) such
Credit Party shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, and (iv)
such Credit Party shall furnish to the Administrative Agent, at its
address referred to in Section 11.1, the original or a certified copy of
a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present
or future stamp or documentary taxes and any other excise or property
taxes or charges or similar levies which arise from any payment made
under this Credit Agreement or any other Credit Document or from the
execution or delivery of, or otherwise with respect to, this Credit
Agreement or any other Credit Document (hereinafter referred to as
"Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section 3.11)
paid by such Lender or the Administrative Agent (as the case may be) and
any liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto.
(d) Each Lender that is not a United States Person under Section
7701(a)(30) of the Code, on or prior to the date of its execution and
delivery of this Credit Agreement in the case of each Lender listed on
the signature pages hereof and on or prior to the date on which it
becomes a Lender in the case of each other Lender, and from time to time
thereafter if requested in writing by the Borrower or the Administrative
Agent (but only so long as such Lender remains lawfully able to do so),
shall provide the Borrower and the Administrative Agent with (i)
Internal Revenue Service Form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying
that such Lender is entitled to benefits under an income tax treaty to
which the United States is a party which reduces the rate of withholding
tax on payments of interest or certifying that the income receivable
pursuant to this Credit Agreement is effectively connected with the
conduct of a trade or business in the United States, (ii) Internal
Revenue Service Form W-8 or W-9, as appropriate, or any successor form
prescribed by the Internal Revenue Service, and/or (iii) any other form
or certificate required by any taxing authority (including any
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certificate required by Sections 871(h) and 881(c) of the Internal
Revenue Code), certifying that such Lender is entitled to an exemption
from or a reduced rate of tax on payments pursuant to this Credit
Agreement or any of the other Credit Documents.
(e) For any period with respect to which a Lender has failed to
provide the Borrower and the Administrative Agent with the appropriate
form pursuant to Section 3.11(d) (unless such failure is due to a change
in treaty, law, or regulation occurring subsequent to the date on which
a form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 3.11(a) or 3.11(b) with
respect to Taxes imposed by the United States; provided, however, that
should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure
to deliver a form required hereunder, the Borrower shall take such steps
as such Lender shall reasonably request to assist such Lender to recover
such Taxes.
(f) If any Credit Party is required to pay additional amounts to
or for the account of any Lender pursuant to this Section 3.11 or
Section 7.11 of the Guaranty Agreement, then such Lender will agree to
use reasonable efforts to change the jurisdiction of its Applicable
Lending Office so as to eliminate or reduce any such additional payment
which may thereafter accrue if such change, in the reasonable judgment
of such Lender, is not otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of
Taxes, the applicable Credit Party shall furnish to the Administrative
Agent the original or a certified copy of a receipt evidencing such
payment.
(h) Without prejudice to the survival of any other agreement of
the Credit Parties hereunder, the agreements and obligations of the
Credit Parties contained in this Section 3.11 shall survive the
repayment of the Loans and other obligations under the Credit Documents
and the termination of the Commitments hereunder.
3.12 COMPENSATION.
Upon the request of any Lender, the Borrower shall pay to such Lender
such amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss, cost, or expense incurred by it as a
result of:
(a) any payment, prepayment (other than a prepayment to the
Administrative Agent which is caused by the wrongful failure of a Lender
to fund a Eurodollar Loan), or conversion of a Eurodollar Loan for any
reason (including, without limitation, the acceleration of the Loans
pursuant to Section 8.2) on a date other than the last day of the
Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any condition precedent specified in
Section 4 and Schedule 4.3 to be satisfied) to borrow, convert,
continue, or prepay a Eurodollar Loan on the date for such borrowing,
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conversion, continuation, or prepayment specified in the relevant notice
of borrowing, prepayment, continuation, or conversion under this Credit
Agreement; or
(c) any Eurodollar Loan for any reason not being made (other
than a wrongful failure to fund by such Lender).
With respect to Eurodollar Loans, such indemnification may include an amount
equal to the excess, if any, of (a) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or of such failure to borrow,
convert or continue to the last day of the applicable Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Eurodollar Loans provided for herein (excluding,
however, the Applicable Percentage included therein, if any) over (b) the amount
of interest (as reasonably determined by such Lender) which would have accrued
to such Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank Eurodollar market. The covenants of
the Borrower set forth in this Section 3.12 shall survive the repayment of the
Loans and other obligations under the Credit Documents and the termination of
the Commitments hereunder. Notwithstanding the foregoing, the Borrower shall not
be responsible to any Lender for any costs hereunder that result from the
application of Section 3.8.
3.13 PRO RATA TREATMENT.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan, each payment or (subject to the terms of
Section 3.3) prepayment of principal of any Loan, each payment of
interest on the Loans, each payment of Unused Fees, each reduction of
the Revolving Committed Amount and each conversion or extension of any
Loan, shall be allocated pro rata among the Lenders in accordance with
the respective principal amounts of their outstanding Loans and
Participation Interests.
(b) Advances. No Lender shall be responsible for the failure or
delay by any other Lender in its obligation to make its ratable share of
a borrowing hereunder; provided, however, that the failure of any Lender
to fulfill its obligations hereunder shall not relieve any other Lender
of its obligations hereunder. Unless the Administrative Agent shall have
been notified by any Lender prior to the date of any requested borrowing
that such Lender does not intend to make available to the Administrative
Agent its ratable share of such borrowing to be made on such date, the
Administrative Agent may assume that such Lender has made such amount
available to the Administrative Agent on the date of such borrowing, and
the Administrative Agent in reliance upon such assumption, may (in its
sole discretion but without any obligation to do so) make available to
the Borrower a corresponding amount. If such corresponding amount is not
in fact made available to the Administrative Agent, the Administrative
Agent shall be able to recover such corresponding amount from such
Lender. If such Lender does not pay such corresponding amount forthwith
upon the Administrative Agent's demand therefor, the Administrative
Agent will promptly notify the Borrower, and the Borrower shall
immediately pay such corresponding amount to the
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Administrative Agent; provided, however, the Borrower shall maintain any
claims against such Lender provided hereunder or under applicable law
due to the failure of such Lender to pay such corresponding amount. The
Administrative Agent shall also be entitled to recover from the Lender
or the Borrower, as the case may be, interest on such corresponding
amount in respect of each day from the date such corresponding amount
was made available by the Administrative Agent to the Borrower to the
date such corresponding amount is recovered by the Administrative Agent
at a per annum rate equal to (i) from the Borrower at the applicable
rate for the applicable borrowing pursuant to the Notice of Borrowing
and (ii) from a Lender at the Federal Funds Rate.
3.14 SHARING OF PAYMENTS.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan or any other obligation owing to
such Lender under this Credit Agreement through the exercise of a right of
setoff, banker's lien or counterclaim, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, in excess of its pro rata share of such payment as provided for
in this Credit Agreement, such Lender shall promptly purchase from the other
Lenders a Participation Interest in such Loans and other obligations in such
amounts, and make such other adjustments from time to time, as shall be
equitable to the end that all Lenders share such payment in accordance with
their respective ratable shares as provided for in this Credit Agreement. The
Lenders further agree among themselves that if payment to a Lender obtained by
such Lender through the exercise of a right of setoff, banker's lien,
counterclaim or other event as aforesaid shall be rescinded or must otherwise be
restored, each Lender which shall have shared the benefit of such payment shall,
by repurchase of a Participation Interest theretofore sold, return its share of
that benefit (together with its share of any accrued interest payable with
respect thereto) to each Lender whose payment shall have been rescinded or
otherwise restored. The Borrower agrees that any Lender so purchasing such a
Participation Interest may, to the fullest extent permitted by law, exercise all
rights of payment, including setoff, banker's lien or counterclaim, with respect
to such Participation Interest as fully as if such Lender were a holder of such
Loan or other obligation in the amount of such Participation Interest. Except as
otherwise expressly provided in this Credit Agreement, if any Lender or the
Administrative Agent shall fail to remit to the Administrative Agent or any
other Lender an amount payable by such Lender or the Administrative Agent to the
Administrative Agent or such other Lender pursuant to this Credit Agreement on
the date when such amount is due, such payments shall be made together with
interest thereon for each date from the date such amount is due until the date
such amount is paid to the Administrative Agent or such other Lender at a rate
per annum equal to the Federal Funds Rate. If under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section 3.14 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders under this Section 3.14 to share in
the benefits of any recovery on such secured claim.
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3.15 PAYMENTS, COMPUTATIONS, ETC.
(a) Generally. Except as otherwise specifically provided herein,
all payments hereunder shall be made to the Administrative Agent in
Dollars in immediately available funds, without setoff, deduction,
counterclaim or withholding of any kind, at the Administrative Agent's
office specified in Schedule 2.1(a) not later than 9:00 A.M. (San
Francisco, California time) on the date when due. Payments received
after such time shall be deemed to have been received on the next
succeeding Business Day. The Administrative Agent may (but shall not be
obligated to) debit the amount of any such payment which is not made by
such time to any ordinary deposit account of the Borrower maintained
with the Administrative Agent (with notice to the Borrower). The
Borrower shall, at the time it makes any payment under this Credit
Agreement, specify to the Administrative Agent the Loans, Fees, interest
or other amounts payable by the Borrower hereunder to which such payment
is to be applied (and in the event that it fails so to specify, or if
such application would be inconsistent with the terms hereof, the
Administrative Agent shall distribute such payment to the Lenders in
such manner as the Administrative Agent may determine to be appropriate
in respect of obligations owing by the Borrower hereunder, subject to
the terms of Section 3.13(a)). The Administrative Agent will distribute
such payments to such Lenders, if any such payment is received prior to
9:00 A.M. (San Francisco, California time) on a Business Day in like
funds as received prior to the end of such Business Day and otherwise
the Administrative Agent will distribute such payment to such Lenders on
the next succeeding Business Day. Whenever any payment hereunder shall
be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day (subject
to accrual of interest and Fees for the period of such extension),
except that in the case of Eurodollar Loans, if the extension would
cause the payment to be made in the next following calendar month, then
such payment shall instead be made on the next preceding Business Day.
Unless the Administrative Agent receives notice from the Borrower prior
to the date on which any payment is due to the Lenders that the Borrower
will not make such payment in full as and when required, the
Administrative Agent may assume that the Borrower has made 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 date an amount equal to the amount then due such Lender. If and
to the extent the Borrower has not made 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. Except
as expressly provided otherwise herein, all computations of interest and
fees shall be made on the basis of actual number of days elapsed over a
year of 360 days, except with respect to computation of interest on Base
Rate Loans which shall be calculated based on a year of 365 or 366 days,
as appropriate. Interest shall accrue from and include the date of
borrowing, but exclude the date of payment.
(b) Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement to the
contrary, after the occurrence and during the continuance of an Event of
Default, all amounts collected or received by the Administrative
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Agent or any Lender on account of the Credit Party Obligations or any
other amounts outstanding under any of the Credit Documents or in
respect of the Collateral shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation reasonable attorneys' fees) of
the Administrative Agent in connection with enforcing the rights of the
Lenders under the Credit Documents which have accrued as of the date of
payment and any protective advances made by the Administrative Agent
with respect to the Collateral under or pursuant to the terms of the
Collateral Documents;
SECOND, to payment of any fees owed to the Administrative Agent
which have accrued as of the date of payment;
THIRD, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation, reasonable attorneys' fees) of
the Administrative Agent in connection with enforcing its rights under
the Credit Documents or otherwise with respect to the Credit Party
Obligations which have accrued as of the date of payment;
FOURTH, to the payment of all of the Credit Party Obligations
consisting of accrued fees and interest;
FIFTH, to the payment of the outstanding principal amount of the
Credit Party Obligations;
SIXTH, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation, reasonable attorneys' fees) of
each of the Lenders in connection with enforcing its rights under the
Credit Documents or otherwise with respect to the Credit Party
Obligations owing to such Lender which have accrued as of the date of
payment;
SEVENTH, to all other Credit Party Obligations and other
obligations which shall have become due and payable under the Credit
Documents or otherwise and not repaid pursuant to clauses "FIRST"
through "SIXTH" above; and
EIGHTH, to the payment of the surplus, if any, to whoever may be
lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in
the numerical order provided until exhausted prior to application to the
next succeeding category and (ii) each of the Lenders shall receive an
amount equal to its pro rata share (based on the proportion that the
then outstanding Loans held by such Lender bears to the aggregate then
outstanding Loans) of amounts available to be applied pursuant to
clauses "FOURTH", "FIFTH", "SIXTH" and "SEVENTH" above.
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3.16 EVIDENCE OF DEBT.
(a) Each Lender shall maintain an account or accounts evidencing
each Loan made by such Lender to the Borrower from time to time,
including the amounts of principal and interest payable and paid to such
Lender from time to time under this Credit Agreement. Each Lender will
make reasonable efforts to maintain the accuracy of its account or
accounts and to promptly update its account or accounts from time to
time, as necessary.
(b) The Administrative Agent shall maintain the Register
pursuant to Section 11.3(c), and a subaccount for each Lender, in which
Register and subaccounts (taken together) shall be recorded (i) the
amount, type and Interest Period of each such Loan hereunder, (ii) the
amount of any principal or interest due and payable or to become due and
payable to each Lender hereunder and (iii) the amount of any sum
received by the Administrative Agent hereunder from or for the account
of any Credit Party and each Lender's share thereof. The Administrative
Agent will make reasonable efforts to maintain the accuracy of the
subaccounts referred to in the preceding sentence and to promptly update
such subaccounts from time to time, as necessary.
(c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.16 (and, if
consistent with the entries of the Administrative Agent, subsection (a))
shall be prima facie evidence of the existence and amounts of the
obligations of the Credit Parties therein recorded; provided, however,
that the failure of any Lender or the Administrative Agent to maintain
any such account, such Register or such subaccount, as applicable, or
any error therein, shall not in any manner affect the obligation of the
Credit Parties to repay the Credit Party Obligations owing to such
Lender.
SECTION 4
CONDITIONS
4.1 CLOSING CONDITIONS.
The obligation of the Lenders to enter into this Credit Agreement shall
be subject to satisfaction of the following conditions:
(a) Executed Credit Documents. Receipt by the Administrative
Agent of duly executed copies of: (i) this Credit Agreement, (ii) the
Guaranty Agreement, (iii) the Notes, (iv) the Environmental Indemnity
Agreement, (v) the Collateral Documents and (vi) all other Credit
Documents, each in form and substance acceptable to the Lenders.
(b) Corporate Documents. Receipt by the Administrative Agent of
the following:
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(i) Charter Documents. Copies of the articles or
certificates of incorporation or other charter documents of the
Credit Parties certified to be true and complete as of a recent
date by the appropriate Governmental Authority of the state or
other jurisdiction of its incorporation or organization and
certified by a secretary, assistant secretary or general partner
of such Credit Party, to be true and correct as of the Closing
Date.
(ii) Bylaws. A copy of the partnership agreement or
bylaws of the Credit Parties certified by a secretary, assistant
secretary or general partner of such Credit Party to be true and
correct as of the Closing Date.
(iii) Resolutions. Copies of resolutions of the Credit
Parties approving and adopting the Credit Documents to which it
is a party, the transactions contemplated therein and
authorizing execution and delivery thereof, certified by a
secretary, assistant secretary or general partner of such Credit
Party to be true and correct and in force and effect as of the
Closing Date.
(iv) Good Standing. Copies of certificates of good
standing, existence or its equivalent with respect to the Credit
Parties certified as of a recent date by the appropriate
Governmental Authorities of the state or other jurisdiction of
organization or incorporation.
(v) Incumbency. An incumbency certificate of the Credit
Parties certified by a secretary, assistant secretary or general
partner of such Credit Party, to be true and correct as of the
Closing Date.
(c) Opinions of Counsel. The Administrative Agent shall have
received an opinion, or opinions, in form and substance satisfactory to
the Administrative Agent dated as of the Closing Date from counsel to
the Credit Parties.
(d) Personal Property Collateral. The Administrative Agent shall
have received (in form and substance satisfactory to the Administrative
Agent):
(i) searches of Uniform Commercial Code filings in the
jurisdiction of the chief executive office of the Borrower and
each jurisdiction where any Collateral is located or where a
filing would need to be made in order to perfect the
Administrative Agent's security interest, for the benefit of the
Lenders in the Collateral, copies of the financing statements on
file in such jurisdictions and evidence that no Liens exist with
respect to the Collateral other than (A) Permitted Liens and (B)
the Guarantor's Lien against the Collateral (which Lien will be
terminated on or before the Funding Date);
(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Administrative
Agent's sole discretion, to perfect the Administrative Agent's
security interest, for the benefit of the Lenders, in the
Collateral which may be perfected under the UCC;
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(iii) duly executed consents as are necessary, in the
Administrative Agent's sole discretion, to perfect the
Administrative Agent's security interest, for the benefit of the
Lenders, in the Collateral.
(e) Real Property Collateral. The Administrative Agent shall
have received, in form and substance reasonably satisfactory to the
Administrative Agent:
(i) a fully executed and notarized deed of trust and
security agreement (as the same may be amended, modified,
restated or supplemented from time to time, the "Mortgage
Instrument") encumbering the Land and the Improvements, the
leasehold interest of the Borrower in the Tipp Property, the
personal property and fixtures more particularly described
therein and the transferable development rights and low income
housing credits or other such credits described therein;
(ii) a survey of the Land and the Tipp Property
certified to the Administrative Agent, the Borrower and the
Title Insurance Company in a manner reasonably satisfactory to
each of the Administrative Agent and the Title Insurance
Company, dated a date reasonably satisfactory to each of the
Administrative Agent and the Title Insurance Company by an
independent professional licensed land surveyor, which survey
shall show all boundaries of the Land and the Tipp Property with
courses and distances indicated and be sufficient to delete any
standard printed survey exception contained in the applicable
title policy and be made in accordance with the Minimum Standard
Detail Requirements for Land Title Surveys jointly established
and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992, and, without
limiting the generality of the foregoing, there shall be
surveyed and shown on such survey the following: (A) the
locations on such sites of all the buildings, structures and
other improvements and the established building setback lines;
(B) the lines of streets abutting the sites and width thereof;
(C) all access and other easements appurtenant to the sites
necessary to use the sites; (D) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar
encumbrances affecting the site, whether recorded, apparent from
a physical inspection of the sites or otherwise known to the
surveyor; and (E) any encroachments on any adjoining property by
the building structures and improvements on the sites;
(iii) evidence as to (A) whether the Land and the Tipp
Property are in an area designated by the Federal Emergency
Management Agency as having special flood or mud slide hazards
(a "Flood Hazard Property") and (B) if the Land and the Tipp
Property are a Flood Hazard Property, (1) whether the community
in which the Land and the Tipp Property are located is
participating in the National Flood Insurance Program, (2) the
Borrower's written acknowledgment of receipt of written
notification from the Administrative Agent (a) as to the fact
that the Land and the Tipp Property are a Flood Hazard Property
and (b) as to whether the community in which the Flood Hazard
Property is
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located is participating in the National Flood Insurance Program
and (3) copies of insurance policy or certificate of insurance
of the Borrower evidencing flood insurance satisfactory to the
Administrative Agent and naming the Administrative Agent as sole
loss payee on behalf of the Lenders;
(iv) evidence satisfactory to the Administrative Agent
that the Project, and the uses of the Project, are in compliance
in all material respects with all applicable laws, regulations
and ordinances including without limitation health and
environmental protection laws, erosion control ordinances, storm
drainage control laws, doing business and/or licensing laws,
zoning laws (the evidence submitted as to zoning should include
the zoning designation made for the Project, the permitted uses
of the Project under such zoning designation and zoning
requirements as to parking, lot size, ingress, egress and
building setbacks) and laws regarding access and facilities for
disabled persons including, but not limited to, the federal
Architectural Barriers Act, the Fair Housing Amendments Act of
1988, the Rehabilitation Act of 1973 and the Americans With
Disabilities Act of 1990;
(v) an appraisal (in form and substance satisfactory to
the Administrative Agent and the Project Administrative Agent)
with respect to the Project from a qualified appraiser
satisfactory to the Administrative Agent and Project
Administrative Agent; and
(vi) with respect to the Tipp Property, (A) consent from
the landlord of the Tipp Property (which consent shall be in
form and substance satisfactory to the Administrative Agent) to
the execution and recordation of the Mortgage Instrument and (B)
evidence that a memorandum of lease with respect to the Tipp
Property has been recorded to the extent necessary in the
judgment of the Administrative Agent so as to enable the
Mortgage Instrument to effectively create a valid and
enforceable lien (subject only to Permitted Liens) on the
leasehold interest of the Borrower in the Tipp Property.
(f) Environmental Reports. The Administrative Agent shall have
received, in form and substance satisfactory to the Administrative
Agent, an environmental site assessment report with respect to the Land.
(g) Plans. Receipt by the Administrative Agent and the Project
Administrative Agent and the Consultant of the following (in form and
substance satisfactory to the Administrative Agent, the Project
Administrative Agent and the Consultant): (i) a set of the plans and
specifications for the construction of the Improvements (the "Plans and
Specifications"), (ii) a soil report made at the Land, such report to
include the recommendations of the soil testing firm as to the
preparation of the soil needed in order to adequately support the
Project, (iii) a construction budget for the Improvements and (iv) the
guaranteed maximum fixed price construction contract for the Project
with a general contractor satisfactory to the Administrative Agent and
the Project Administrative Agent.
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(h) Certified Copies. The Administrative Agent shall have
received a copy of (i) the Development Agreement, (ii) the Ground Lease
Agreement, (iii) the Nordstrom Lease Agreement and (iv) the Joint
Development Agreement, each such contract in form and substance
satisfactory to the Administrative Agent and the Project Administrative
Agent and certified as a true and correct copy by the Borrower.
(i) Consent of General Contractor. The Administrative Agent
shall have received the consent of general contractor (in form and
substance satisfactory to the Administrative Agent) to the Borrower's
assignment to the Administrative Agent, for the benefit of the Lenders,
of the Borrower's interests in the construction contract for the
Improvements. In addition, the Administrative Agent shall have received
the consent of the design architect (in form and substance satisfactory
to the Administrative Agent) to the Borrower's assignment to the
Administrative Agent, for the benefit of the Lenders, of the Borrower's
interests in the plans and specifications for the construction of the
Improvements.
(j) Evidence of Insurance. Receipt by the Administrative Agent
of copies of insurance policies or certificates of insurance of the
Borrower evidencing liability, casualty and builder's risk insurance
issued by companies satisfactory to the Lenders in their sole discretion
and otherwise meeting the requirements set forth in the Credit
Documents, including, but not limited to, naming the Administrative
Agent as additional insured (in the case of liability insurance) and
sole loss payee (in the case of hazard insurance and builder's risk
insurance) on behalf of the Lenders.
(k) Compliance with Laws. Receipt by the Project Administrative
Agent of evidence that the Land, and the intended uses of the Land are
in compliance with all applicable laws, regulations and ordinances. Such
evidence may include letters, licenses, permits, certificates and other
correspondence from the appropriate Governmental Authorities and such
other evidence reasonably requested by the Project Administrative Agent.
(l) Equity Investment. Receipt by the Administrative Agent of
evidence that (i) a cash equity investment of at least $2,800,000 shall
have been made by the Guarantor in the Borrower on terms that are
satisfactory to the Administrative Agent and (ii) an equity investment
by Seventh and Stewart shall have been made in the Borrower through the
contribution of real estate (satisfactory to the Project Administrative
Agent) valued at $12,500,000.
(m) Material Adverse Effect. No material adverse change shall
have occurred since January 31, 1999 in the business, assets,
liabilities (actual or contingent), operations, condition (financial or
otherwise), business, management or prospects of (i) the Borrower or
(ii) the Guarantor.
(n) Litigation. There shall not exist any pending or threatened
action, suit, investigation or proceeding against the Borrower that
could have a Material Adverse Effect. Except as disclosed on Schedule
3.5 to the Guaranty Agreement, there shall not exist any
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pending or threatened action, suit, investigation or proceeding against
the Guarantor or any of its Subsidiaries that could have a Material
Adverse Effect.
(o) Officer's Certificates.
(i) The Administrative Agent shall have received a
certificate executed by an Executive Officer of Clise Properties
as of the Closing Date, in form and substance satisfactory to
the Administrative Agent, stating that (A) the Borrower is in
material compliance with all existing financial obligations, (B)
all governmental, shareholder and third party consents and
approvals, if any, with respect to the Credit Documents and the
transactions contemplated thereby have been obtained, (C) no
action, suit, investigation or proceeding is pending or
threatened in any court or before any arbitrator or governmental
instrumentality that purports to affect the Borrower or any
transaction contemplated by the Credit Documents, if such
action, suit, investigation or proceeding could have a Material
Adverse Effect, (D) no Default or Event of Default exists, and
(E) all representations and warranties of the Borrower contained
herein and in the other Credit Documents are true and correct in
all material respects.
(ii) The Administrative Agent shall have received a
certificate executed by an Executive Officer of the Guarantor as
of the Closing Date, in form and substance satisfactory to the
Administrative Agent, stating that (A) the Guarantor is in
material compliance with all existing financial obligations, (B)
immediately after giving effect to this Credit Agreement, the
Credit Documents and all transactions contemplated therein, the
Guarantor is Solvent and (C) the Guarantor is in compliance with
each of the financial covenants set forth in the Guaranty
Agreement.
(p) Fees and Expenses. Payment by the Borrower of all fees and
expenses owed by it to the Lenders, the Administrative Agent and the
Project Administrative Agent with respect to the Loans and the Credit
Documents, including, without limitation, payment to the Administrative
Agent of the fees set forth in the Administrative Agent's Fee Letter.
(q) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by the
Administrative Agent on behalf of any Lender, including, but not limited
to, information regarding litigation, tax, accounting, labor, insurance,
pension liabilities (actual or contingent), real estate leases, material
contracts, debt agreements, property ownership and contingent
liabilities of the Borrower and the Guarantor.
4.2 CONDITIONS TO INITIAL EXTENSION OF CREDIT.
The obligations of each Lender to make the initial Loans are subject to
(i) satisfaction of the following conditions in addition to satisfaction on the
Closing Date of the conditions set forth in Section 4.1 and (ii) satisfaction of
the conditions set forth in Section 4.3:
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(a) Permits. The Project Administrative Agent shall have
received evidence (in form and substance satisfactory to the Project
Administrative Agent) that the Borrower has received all permits deemed
reasonably necessary (including without limitation, the Master Use
Permit Project No. 9606528 and foundation permit) by the Project
Administrative Agent for the applicable stage of construction; and
(b) Transferable Development Rights. Receipt by Project
Administrative Agent on or before March 14, 2000 of certified copies of
the fully executed Transferable Rights Development Agreements, each with
terms and conditions acceptable to the Project Administrative Agent
(including without limitation, approval of the City of the purchase
price set forth therein), pursuant to which the Borrower will acquire
the transferable development rights necessary for the Borrower to
construct the Project; and
(c) Low Income Housing Bonus Credits. Receipt by the Project
Administrative Agent on or before March 14, 2000 of (i) a certified copy
of the fully executed Letter of Credit Agreement with terms and
conditions acceptable to the Project Administrative Agent and (ii)
evidence that the Housing Credits Letter of Credit (in substantially the
form of Exhibit C to the Letter of Credit Agreement) has been delivered
to the City;
(d) Title. The Administrative Agent shall have received on or
before March 14, 2000 in form and substance satisfactory to the
Administrative Agent, an ALTA mortgagee title insurance policy (the
"Mortgage Policy") issued by a title insurer satisfactory to the
Administrative Agent (the "Title Insurance Company"), in an amount
satisfactory to the Administrative Agent, assuring the Administrative
Agent that the Mortgage Instrument creates a valid and enforceable first
priority mortgage lien on the Real Properties and the transferable
development rights described therein, free and clear of all defects and
encumbrances except Permitted Liens, which Mortgage Policy shall be in
form and substance reasonably satisfactory to the Administrative Agent
and shall provide for affirmative insurance and such reinsurance as the
Administrative Agent may reasonably request; and
(e) Refinancing. Receipt by the Administrative Agent on or
before March 14, 2000 of evidence (satisfactory in form and substance to
the Administrative Agent) that the Nordstrom Loan has been paid in full
or will be so repaid from the proceeds of such Loans.
4.3 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The obligations of each Lender to make, convert or extend any Loan
(including the initial Loans) are subject to (i) satisfaction of the following
conditions in addition to satisfaction on the Closing Date of the conditions set
forth in Section 4.1 and (ii) satisfaction of the conditions set forth in
Section 4.2:
(a) The Borrower shall have delivered an appropriate Notice of
Borrowing or Notice of Extension/Conversion (each such Notice of
Borrowing to include an update to the budget for the Improvements and a
representation that the remaining availability under the
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Revolving Committed Amount is sufficient to finance the completion of
the construction of the Improvements);
(b) The representations and warranties made by the Credit
Parties herein or in any other Credit Documents or which are contained
in any certificate furnished at any time under or in connection herewith
shall, subject to the limitations set forth therein, be true and correct
in all material respects as of such date (except for those which
expressly relate to an earlier date);
(c) There shall not have been commenced against any Credit Party
an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or any case, proceeding or other
action for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or for the winding up or
liquidation of its affairs, and such involuntary case or other case,
proceeding or other action shall remain undismissed, undischarged or
unbonded;
(d) No Default or Event of Default shall exist and be continuing
either prior to or after giving effect thereto;
(e) No development or event which has had or could have a
Material Adverse Effect shall have occurred since January 31, 1999;
(f) All of the conditions set forth in Schedule 4.3 shall have
been satisfied in a manner acceptable to the Administrative Agent and
the Project Administrative Agent;
(g) No action, suit or proceeding against the Guarantor or any
of its Subsidiaries has resulted in or caused a Material Adverse Effect.
(h) Immediately after giving effect to the making of such Loan
(and the application of the proceeds thereof), the sum of the aggregate
outstanding principal amount of Revolving Loans shall not exceed the
Revolving Committed Amount.
The delivery of each Notice of Borrowing and each Notice of Extension/Conversion
shall constitute a representation and warranty by the Credit Parties of the
correctness of the matters specified in subsections (b), (c), (d), (e), (g) and
(h) above.
Furthermore, the Lenders shall not be obligated to make any Loans subsequent to
the Funding Date until such time as the Title Insurance Company shall have
agreed to issue to the Administrative Agent an endorsement (in form and
substance satisfactory to the Administrative Agent) to the Mortgage Policy or
have otherwise agreed to insure that since the last Loan, there has been no
change in the state of title to the Land and the Improvements and the Tipp
Property (superior or subordinate to the interest of the Administrative Agent,
for the benefit of the Lenders, under the Mortgage Instrument) and there are no
liens (other than Permitted Liens) or other interests which have been permitted
to attach to the Land, the Improvements and/or the Tipp Property.
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SECTION 5
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents to the Administrative Agent and each
Lender that:
5.1 FINANCIAL CONDITION.
The financial statements delivered to the Administrative Agent pursuant
to Section 6.1(a) and (b) have been prepared in accordance with GAAP and present
fairly in all material respects (on the basis disclosed in the footnotes to such
financial statements) the financial condition, results of operations and cash
flows of the applicable parties as of such date and for such periods. As of the
Closing Date and the Funding Date (as applicable), the Borrower has no material
liabilities (contingent or otherwise) that are not reflected in the financial
statements or in the notes thereto provided to the Administrative Agent on or
prior to the Closing Date or Funding Date (as applicable) (other than the
Nordstrom Loan which will be outstanding as of the Closing Date).
5.2 NO MATERIAL CHANGE.
Since January 31, 1999, (a) there has been no development or event
relating to or affecting the Borrower which has had or could have a Material
Adverse Effect and (b) except as otherwise permitted under this Credit
Agreement, no dividends or other distributions have been declared, paid or made
upon the Capital Stock in the Borrower, nor has any of the Capital Stock in the
Borrower been redeemed, retired, purchased or otherwise acquired for value.
5.3 ORGANIZATION AND GOOD STANDING.
The Borrower (a) is duly organized, validly existing and is in good
standing under the laws of the State of Washington and (b) has the power and
authority, and the legal right, to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged.
5.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
The Borrower has the power and authority, and the legal right, to make,
deliver and perform the Credit Documents to which it is a party, and to obtain
extensions of credit hereunder, and has taken all necessary action to authorize
the borrowings and other extensions of credit on the terms and conditions of
this Credit Agreement and to authorize the execution, delivery and performance
of the Credit Documents to which it is a party. No consent or authorization of,
filing with, notice to or other similar act by or in respect of, any
Governmental Authority or any other Person is required to be obtained or made by
or on behalf of the Borrower in connection with the borrowings or other
extensions of credit hereunder or with the execution, delivery, performance,
validity or enforceability of the Credit Documents to which the Borrower is a
party. This Credit Agreement has been, and each other Credit Document to which
the Borrower is a party will be, duly executed and delivered on behalf of the
Borrower. This Credit Agreement constitutes, and each other Credit Document to
which the Borrower is a party when executed and delivered will constitute, a
legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with
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its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
5.5 NO CONFLICTS.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by the Borrower will (a)
violate or conflict with any provision of its partnership agreement or other
organizational or governing documents, (b) violate, contravene or materially
conflict with any Requirement of Law or any other law, regulation (including,
without limitation, Regulation U or Regulation X), order, writ, judgment,
injunction, decree or permit applicable to it, (c) violate, contravene or
conflict with contractual provisions of, or cause an event of default under, any
agreement or instrument to which it is a party or by which it may be bound, the
violation of which could have a Material Adverse Effect, or (d) result in or
require the creation of any Lien (other than those contemplated in or created in
connection with the Credit Documents) upon or with respect to its properties.
5.6 NO DEFAULT.
The Borrower is not in default in any respect under any contract, lease
or other agreement or obligation to which it is a party or by which any of its
properties is bound which default could have a Material Adverse Effect. No
Default or Event of Default has occurred or exists except as previously
disclosed in writing to the Lenders.
5.7 OWNERSHIP.
The Borrower is the owner of, and has good and marketable title to, all
of its respective assets and none of such assets is subject to any Lien other
than (i) the Permitted Liens and (ii) prior to the funding of the Loans
hereunder on the Funding Date, the Guarantor's Liens against the Collateral.
5.8 INDEBTEDNESS.
Except as otherwise permitted under Section 7.1, the Borrower has no
Indebtedness.
5.9 LITIGATION.
There are no actions, suits or legal, equitable, arbitration or
administrative proceedings, pending or, to the knowledge of any Executive
Officer of the Borrower, the general partner of the Borrower or of the managing
member of the general partner of the Borrower, threatened against the Borrower
which could be reasonably expected to have a Material Adverse Effect.
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5.10 TAXES.
The Borrower has filed, or caused to be filed, all tax returns (federal,
state, local and foreign) required to be filed and paid (a) all amounts of taxes
shown thereon to be due (including interest and penalties) and (b) all other
taxes, fees, assessments and other governmental charges (including mortgage
recording taxes, documentary stamp taxes and intangibles taxes) owing by it,
except for such taxes (i) which are not yet delinquent or (ii) that are being
contested in good faith and by proper proceedings, and against which adequate
reserves are being maintained in accordance with GAAP. The Borrower is not aware
as of the Closing Date and the Funding Date (as applicable) of any proposed tax
assessments against it.
5.11 COMPLIANCE WITH LAW.
The Borrower is in compliance with all Requirements of Law and all other
laws, rules, regulations, orders and decrees (including without limitation
Environmental Laws) applicable to it, or to its properties, unless such failure
to comply could not reasonably be expected to have a Material Adverse Effect.
5.12 ERISA.
(a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred,
and, to the best knowledge of the Executive Officers of the Borrower,
the general partner of the Borrower and the managing member of the
general partner of the Borrower, no event or condition has occurred or
exists as a result of which any ERISA Event could reasonably be expected
to occur, with respect to any Plan; (ii) no "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA and Section
412 of the Code, whether or not waived, has occurred with respect to any
Plan; (iii) each Plan has been maintained, operated, and funded in
compliance with its own terms and in material compliance with the
provisions of ERISA, the Code, and any other applicable federal or state
laws; and (iv) no lien in favor of the PBGC or a Plan has arisen or is
reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA), whether or not vested, under
each Single Employer Plan, as of the last annual valuation date prior to
the date on which this representation is made or deemed made
(determined, in each case, in accordance with Financial Accounting
Standards Board Statement 87, utilizing the actuarial assumptions used
in such Plan's most recent actuarial valuation report), did not exceed
as of such valuation date the fair market value of the assets of such
Plan.
(c) Neither the Borrower nor any ERISA Affiliate has incurred,
or, to the best knowledge of the Executive Officers of the Borrower, the
general partner of the Borrower and the managing member of the general
partner of the Borrower, could be reasonably expected to incur, any
withdrawal liability under ERISA to any Multiemployer Plan or Multiple
Employer Plan. Neither the Borrower nor any ERISA Affiliate would become
subject to any withdrawal liability under ERISA if the Borrower or any
ERISA Affiliate
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were to withdraw completely from all Multiemployer Plans and Multiple
Employer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made. Neither the
Borrower nor any ERISA Affiliate has received any notification that any
Multiemployer Plan is in reorganization (within the meaning of Section
4241 of ERISA), is insolvent (within the meaning of Section 4245 of
ERISA), or has been terminated (within the meaning of Title IV of
ERISA), and no Multiemployer Plan is, to the best knowledge of the
Executive Officers of the Borrower, the general partner of the Borrower
and the managing member of the general partner of the Borrower,
reasonably expected to be in reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject the Borrower or any ERISA Affiliate to any liability
under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of
the Code, or under any agreement or other instrument pursuant to which
the Borrower or any ERISA Affiliate has agreed or is required to
indemnify any Person against any such liability.
(e) Neither the Borrower nor any ERISA Affiliates has any
material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards
Board Statement 106. Each Plan which is a welfare plan (as defined in
Section 3(1) of ERISA) to which Sections 601-609 of ERISA and Section
4980B of the Code apply has been administered in compliance in all
material respects of such sections.
(f) Neither the execution and delivery of this Credit Agreement
nor the consummation of the financing transactions contemplated
thereunder will involve any transaction which is subject to the
prohibitions of Sections 404, 406 or 407 of ERISA or in connection with
which a tax could be imposed pursuant to Section 4975 of the Code. The
representation by the Borrower in the preceding sentence is made in
reliance upon and subject to the accuracy of the Lenders' representation
in Section 11.15 with respect to their source of funds and is subject,
in the event that the source of the funds used by the Lenders in
connection with this transaction is an insurance company's general asset
account, to the application of Prohibited Transaction Class Exemption
95-60, 60 Fed. Reg. 35,925 (1995), compliance with the regulations
issued under Section 401(c)(1)(A) of ERISA, or the issuance of any other
prohibited transaction exemption or similar relief, to the effect that
assets in an insurance company's general asset account do not constitute
assets of an "employee benefit plan" within the meaning of Section 3(3)
of ERISA of a "plan" within the meaning of Section 4975(e)(1) of the
Code.
5.13 GOVERNMENTAL REGULATIONS, ETC.
(a) No proceeds of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any "margin stock"
within the meaning of Regulation U, or for the purpose of purchasing or
carrying or trading in any securities. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative
Agent and each Lender a statement to the foregoing effect in conformity
with the requirements of FR Form
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U-1 referred to in Regulation U. No indebtedness being reduced or
retired out of the proceeds of the Loans was or will be incurred for the
purpose of purchasing or carrying any margin stock within the meaning of
Regulation U or any "margin security" within the meaning of Regulation
T. "Margin stock" within the meaning of Regulation U does not constitute
more than 25% of the value of the consolidated assets of the Borrower.
None of the transactions contemplated by this Credit Agreement
(including, without limitation, the direct or indirect use of the
proceeds of the Loans) will violate or result in a violation of the
Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, or regulations issued pursuant thereto, or Regulation
T, U or X.
(b) The Borrower is not subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or the
Investment Company Act of 1940, each as amended. In addition, the
Borrower is not (i) an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, and is
not controlled by such a company, or (ii) a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(c) No director, executive officer, principal shareholder or
partner of the Borrower is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms "director",
"executive officer" and "principal shareholder" (when used with
reference to any lender) have the respective meanings assigned thereto
in Regulation O issued by the Board of Governors of the Federal Reserve
System.
(d) The Borrower has obtained and holds in full force and
effect, all franchises, licenses, permits, certificates, authorizations,
qualifications, accreditations, easements, rights of way and other
rights, consents and approvals which are necessary for the ownership of
its respective Property and to the conduct of its respective businesses
as presently conducted.
(e) The Borrower is not in violation of any applicable statute,
regulation or ordinance of the United States, or of any state, city,
town, municipality, county or any other jurisdiction, or of any agency
thereof (including without limitation, environmental laws and
regulations), which violation could reasonably be expected to have a
Material Adverse Effect.
(f) The Borrower is current with all material reports and
documents, if any, required to be filed with any state or federal
securities commission or similar agency and is in full compliance in all
material respects with all applicable rules and regulations of such
commissions.
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5.14 PURPOSE OF LOANS.
The proceeds of the Loans hereunder shall be used solely by the Borrower
to (a) finance the Construction Costs, (b) pay other costs included in the
Project Budget and otherwise approved by the Project Administrative Agent in
accordance with the terms of (c)(ii) of Schedule 4.3 and (c) refinance existing
Indebtedness.
5.15 ENVIRONMENTAL MATTERS.
Except as set forth on Schedule 5.15:
(a) The Real Properties and all operations at the Real
Properties are in compliance with all applicable Environmental Laws, and
there is no violation of any Environmental Law with respect to the Real
Properties or the Businesses, and there are no conditions relating to
the Businesses or Real Properties that could give rise to liability
under any applicable Environmental Laws.
(b) None of the Real Properties contains, or has previously
contained, any Materials of Environmental Concern at, on or under the
Real Properties in amounts or concentrations that constitute or
constituted a violation of, or could give rise to liability under,
Environmental Laws.
(c) The Borrower has not received any written or verbal notice
of, or inquiry from any Governmental Authority regarding, any violation,
alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws
with regard to any of the Real Properties or the Businesses, nor does
any Executive Officer of the Borrower, the general partner of the
Borrower or the managing member of the general partner of the Borrower
have knowledge or reason to believe that any such notice will be
received or is being threatened.
(d) Materials of Environmental Concern have not been transported
or disposed of from the Real Properties, or generated, treated, stored
or disposed of at, on or under any of the Real Properties or any other
location, in each case by or on behalf of the Borrower in violation of,
or in a manner that could reasonably be expected to give rise to
liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the best knowledge of any Executive Officer of
the Borrower, the general partner of the Borrower and the managing
member of the general partner of the Borrower, threatened, under any
Environmental Law to which the Borrower is or will be named as a party,
nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with
respect to the Real Properties or the Businesses.
(f) There has been no release, or threat of release, of
Materials of Environmental Concern at or from the Real Properties, or
arising from or related to the
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operations (including, without limitation, disposal) of the Borrower in
connection with the Real Properties or otherwise in connection with the
Businesses, in violation of or in amounts or in a manner that could give
rise to liability under Environmental Laws.
5.16 INTELLECTUAL PROPERTY.
The Borrower owns, or has the legal right to use, all trademarks,
tradenames, copyrights, patents, technology, know-how and processes (the
"Intellectual Property") necessary for it to conduct its business as currently
conducted except for those the failure to own or have such legal right to use
could not reasonably be expected to have a Material Adverse Effect. No claim has
been asserted and is pending by any Person challenging or questioning the use of
any such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does the Borrower know of any such claim, and, to the
knowledge of the Executive Officers of the Borrower, the general partner of the
Borrower and the managing member of the general partner of the Borrower, the use
of such Intellectual Property by Borrower does not infringe on the rights of any
Person, except for such claims and infringements that, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
5.17 LOCATION OF COLLATERAL.
Set forth on Schedule 5.17(a) is a list of all real property located in
the United States and owned or leased by the Borrower with street address and
state where located. Set forth on Schedule 5.17(b) is a list of all locations
where any tangible personal property of the Borrower is located, including
street address and state where located. Set forth on Schedule 5.17(c) is the
chief executive office and principal place of business of the Borrower.
5.18 DISCLOSURE.
Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of the Borrower in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein not misleading.
5.19 BROKERS' FEES.
The Borrower has no obligation to any Person (other than the
Administrative Agent and the Project Administrative Agent) in respect of any
finder's, broker's, investment banking or other similar fee in connection with
any of the transactions contemplated under the Credit Documents.
5.20 LABOR MATTERS.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Borrower, and the Borrower has not suffered any
strikes, walkouts, work stoppages or other material labor difficulty within the
last five years.
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5.21 YEAR 2000 COMPLIANCE.
The Borrower has (i) completed a review and assessment of all areas
within its businesses and operations (including those affected by suppliers,
vendors and customers) that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications may be unable to
recognize and properly perform date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (iii)
substantially completed implementation of that plan in accordance with that
timetable. The Year 2000 Problem has not resulted in, and the Borrower
reasonably believes that the Year 2000 Problem will not result in, a Material
Adverse Effect.
SECTION 6
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that, so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
6.1 INFORMATION COVENANTS.
The Borrower will furnish, or cause to be furnished, to the
Administrative Agent (which shall promptly provide copies to each Lender), for
the benefit of the Lenders:
(a) Annual Financial Statements. As soon as available, and in
any event within 120 days after the close of each fiscal year of the
Borrower, a balance sheet and income statement of the Borrower as of the
end of such fiscal year, together with related statements of operations
and retained earnings and of cash flows for such fiscal year, in each
case setting forth in comparative form figures for the preceding fiscal
year, all such financial information described above to be in reasonable
form and detail and audited by independent certified public accountants
of recognized national standing reasonably acceptable to the
Administrative Agent and whose opinion shall be to the effect that such
financial statements have been prepared in accordance with GAAP (except
for changes with which such accountants concur) and shall not be limited
as to the scope of the audit or qualified as to the status of the
Borrower as a going concern or any other material qualifications or
exceptions.
(b) Quarterly Financial Statements. As soon as available, and in
any event within 45 days after the close of each fiscal quarter of the
Borrower (other than the fourth fiscal quarter, in which case 90 days
after the end thereof) a balance sheet and income statement of the
Borrower as of the end of such fiscal quarter, together with related
statements of operations and retained earnings and of cash flows for
such fiscal quarter, in each case setting forth in comparative form
figures for the corresponding period of the preceding fiscal year, all
such financial information described above to be in reasonable
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form and detail and reasonably acceptable to the Administrative Agent,
and accompanied by a certificate of an Executive Officer of Clise
Properties to the effect that such quarterly financial statements fairly
present in all material respects the financial condition of the Borrower
and have been prepared in accordance with GAAP, subject to changes
resulting from audit and normal year-end audit adjustments.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 6.1(a) and 6.1(b) above, a
certificate of an officer of the authorized member of the general
partner of the Borrower substantially in the form of Exhibit 6.1(c),
stating that no Default or Event of Default exists, or if any Default or
Event of Default does exist, specifying the nature and extent thereof
and what action the Credit Parties propose to take with respect thereto.
(d) Accountant's Certificate. Within the period for delivery of
the annual financial statements provided in Section 6.1(a), a
certificate of the accountants conducting the annual audit stating that
they have reviewed this Credit Agreement and stating further whether, in
the course of their audit, they have become aware of any Default or
Event of Default and, if any such Default or Event of Default exists,
specifying the nature and extent thereof.
(e) Auditor's Reports. Promptly upon receipt thereof, a copy of
any other report or "management letter" submitted by independent
accountants to the Borrower in connection with any annual, interim or
special audit of the books of such Person.
(f) Reports. Promptly upon transmission or receipt thereof, (i)
copies of any filings and registrations with, and reports to or from,
the Securities and Exchange Commission, or any successor agency, and
copies of all financial statements, proxy statements, notices and
reports as the Borrower shall send to its shareholders and (ii) upon the
request of the Administrative Agent, all reports and written information
with respect to the Project to and from the United States Environmental
Protection Agency, or any state or local agency responsible for
environmental matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and
safety matters, or any successor agencies or authorities concerning
environmental, health or safety matters.
(g) Notices. Upon any Executive Officer of the Borrower, the
general partner of the Borrower or the managing member of the general
partner of the Borrower obtaining knowledge thereof, the Borrower will
give written notice to the Administrative Agent (i) immediately of the
occurrence of an event or condition consisting of a Default or Event of
Default, specifying the nature and existence thereof and what action the
Borrower proposes to take with respect thereto, and (ii) promptly of the
occurrence of any of the following with respect to the Borrower (A) the
pendency or commencement of any litigation, arbitral or governmental
proceeding against such Person which if adversely determined is likely
to have a Material Adverse Effect or (B) the institution of any
proceedings against such Person with respect to, or the receipt of
notice by such Person of potential liability or responsibility for
violation, or alleged violation of any federal, state or local law, rule
or regulation,
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including but not limited to, Environmental Laws, the violation of which
could have a Material Adverse Effect.
(h) ERISA. Upon any Executive Officer of the Borrower, the
general partner of the Borrower or the managing member of the general
partner of the Borrower obtaining knowledge thereof, the Borrower will
give written notice to the Administrative Agent promptly (and in any
event within five Business Days) of: (i) any event or condition,
including, but not limited to, any Reportable Event, that constitutes,
or might reasonably lead to, an ERISA Event; (ii) with respect to any
Multiemployer Plan, the receipt of notice as prescribed in ERISA or
otherwise of any withdrawal liability assessed against the Borrower or
any ERISA Affiliates, or of a determination that any Multiemployer Plan
is in reorganization or insolvent (both within the meaning of Title IV
of ERISA); (iii) the failure to make full payment on or before the due
date (including extensions) thereof of all amounts which the Borrower or
any ERISA Affiliate is required to contribute to each Plan pursuant to
its terms and as required to meet the minimum funding standard set forth
in ERISA and the Code with respect thereto; or (iv) any change in the
funding status of any Plan that could have a Material Adverse Effect,
together with a description of any such event or condition or a copy of
any such notice and a statement by an Executive Officer of Clise
Properties briefly setting forth the details regarding such event,
condition, or notice, and the action, if any, which has been or is being
taken or is proposed to be taken by the Borrower with respect thereto.
Promptly upon request, the Borrower shall furnish the Administrative
Agent and the Lenders with such additional information concerning any
Plan as may be reasonably requested, including, but not limited to,
copies of each annual report/return (Form 5500 series), as well as all
schedules and attachments thereto required to be filed with the
Department of Labor and/or the Internal Revenue Service pursuant to
ERISA and the Code, respectively, for each "plan year" (within the
meaning of Section 3(39) of ERISA).
(i) Environmental.
(i) Subsequent to a receipt of notice by the
Administrative Agent or the occurrence of an event where the
subject matter of such notice or circumstances of such event
would reasonably cause concern that a material environmental
problem existed at the Real Properties, upon the written request
of the Administrative Agent, the Borrower will furnish or cause
to be furnished to the Administrative Agent, at the Borrower's
expense, a report of an environmental assessment of reasonable
scope, form and depth, (including, where appropriate, invasive
soil or groundwater sampling) by a consultant reasonably
acceptable to the Administrative Agent as to the nature and
extent of the presence of any Materials of Environmental Concern
on the Real Properties (as defined in Section 5.16) and as to
the compliance by the Borrower with Environmental Laws at such
Real Properties. If the Borrower fails to deliver such an
environmental report within seventy-five (75) days after receipt
of such written request then the Administrative Agent may
arrange for same, and the Borrower hereby grants to the
Administrative Agent and their representatives access to the
Real Properties to reasonably undertake such an assessment
(including, where appropriate, invasive soil or groundwater
sampling). The reasonable cost of any
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assessment arranged for by the Administrative Agent pursuant to
this provision will be payable by the Borrower on demand and
added to the obligations secured by the Collateral Documents.
(ii) The Borrower will conduct and complete all
investigations, studies, sampling, and testing and all remedial,
removal, and other actions necessary to address all Materials of
Environmental Concern on, from or affecting any of the Real
Properties to the extent necessary to be in compliance with all
Environmental Laws and with the validly issued orders and
directives of all Governmental Authorities with jurisdiction
over such Real Properties to the extent any failure could
reasonably be expected to have a Material Adverse Effect.
(j) Leases. Promptly upon consummation thereof, copies of each
lease entered into by the Borrower with respect to the Improvements.
(k) Other Information. With reasonable promptness upon any such
request, such other information regarding the business, properties or
financial condition of any Credit Party as the Administrative Agent, on
behalf of any Lender, may reasonably request.
6.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
The Borrower will do all things necessary to preserve and keep in full
force and effect its existence, rights, franchises and authority.
6.3 BOOKS AND RECORDS.
The Borrower will keep complete and accurate books and records of its
transactions in accordance with good accounting practices on the basis of GAAP
(including the establishment and maintenance of appropriate reserves).
6.4 COMPLIANCE WITH LAW.
The Borrower will comply with all laws, rules, regulations and orders,
and all applicable restrictions imposed by all Governmental Authorities,
applicable to it and its Property if noncompliance with any such law, rule,
regulation, order or restriction could reasonably be expected to have a Material
Adverse Effect.
6.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
The Borrower will pay and discharge (a) all taxes, assessments and
governmental charges or levies imposed upon it, or upon its income or profits,
or upon any of its properties, before they shall become delinquent, (b) all
lawful claims (including claims for labor, materials and supplies) which, if
unpaid, might give rise to a Lien upon any of its properties, and (c) except as
prohibited hereunder, all of its other Indebtedness as it shall become due;
provided, however, that the Borrower shall not be required to pay any such tax,
assessment, charge, levy, claim or Indebtedness which is being contested in good
faith by appropriate proceedings and as to which adequate reserves therefor have
been established in accordance with GAAP, unless the failure to make any
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such payment (i) could give rise to an immediate right to foreclose on a Lien
securing such amounts or (ii) could reasonably be expected to have a Material
Adverse Effect.
6.6 INSURANCE.
(a) The Borrower hereby agrees that it will at all times
maintain in full force and effect insurance (including, but not limited
to, liability insurance, casualty insurance and builders risk insurance)
in such amounts and covering such risks and liabilities and with such
deductibles as are in accordance with normal industry practice and the
provisions set forth below:
(i) The builder's risk insurance policy with respect to
the Land and the Improvements shall be an "all-risk" completed
value, non-reporting builder's risk insurance policy and shall
contain (A) coverage for vandalism and malicious mischief, (B)
provisions for a minimum 45-day advance written notice to the
Administrative Agent and the Project Administrative Agent of any
intended policy cancellation or non-renewal and provide for
copies of any notices of any policy cancellation or non-renewal
to be delivered to the Project Administrative Agent and the
Administrative Agent, (C) a standard mortgagee endorsement
designating the Administrative Agent, for the benefit of the
Lenders, as mortgagee and loss payee, (D) provisions sufficient
to avoid the application of any co-insurance provisions and (E)
a soft cost coverage endorsement.
(ii) The general accident and public liability insurance
maintained by each of the Borrower and the general contractor
with respect to the Land and the Improvements shall (A) be
sufficient to insure against all claims for bodily injury, death
or property damage occurring upon, in or about the Project and
(B) include worker's compensation coverage in an amount
sufficient to satisfy statutory requirements.
(iii) Following completion of the Project, the
"all-risk" special form replacement cost insurance policy with
agreed amount endorsement with respect to the Land and the
Improvements must (i) eliminate all co-insurance provisions and
replace such provisions with a replacement cost endorsement,
(ii) include provisions for a minimum 30-day advance written
notice to the Administrative Agent of any intended policy
cancellation or non-renewal and (iii) designate the
Administrative Agent, for the benefit of the Lenders, as
mortgagee and loss payee in a standard mortgagee endorsement, as
its interest may appear.
(iv) A commercial general liability insurance policy
with respect to the Land and the Improvements insuring against
claims of bodily injury, death or property damage, in an amount
not less than $1,000,000, each occurrence form, naming the
Administrative Agent as additional insured for the benefit of
the Lenders.
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(b) In the event the Borrower fails to maintain insurance as
required hereunder, the Administrative Agent shall have the right to
procure such insurance whether or not the Borrower's failure to maintain
such insurance constitutes a Default or an Event of Default. Any amounts
paid by the Administrative Agent for insurance shall be due and payable
to the Administrative Agent upon demand and shall be secured by the
Collateral Documents.
(c) In the event of any material loss, the Borrower shall
promptly give written notice thereof to the Administrative Agent and the
insurance carrier describing the nature and extent of such damage or
destruction. The Administrative Agent may make proof of loss if not made
promptly by the Borrower. The Administrative Agent is hereby authorized,
upon the request and direction of the Required Lenders, to adjust,
compromise and collect the proceeds of any insurance claims. The
Borrower hereby assigns to the Administrative Agent, for the benefit of
the Lenders, the proceeds of any such insurance policies and hereby
directs and authorizes each insurance company to make payment for such
loss directly to the Administrative Agent. In the event the Borrower
shall receive any such insurance proceeds as a result of any loss,
damage or destruction with respect to the Collateral, the Borrower shall
immediately pay over such proceeds to the Administrative Agent as cash
collateral for the Credit Party Obligations. The Administrative Agent
agrees to release such insurance proceeds to the Borrower for
restoration or repair of the Collateral damaged provided the following
conditions are met:
(i) there exists no Default or Event of Default;
(ii) the Borrower presents sufficient evidence to the
Administrative Agent that there are sufficient funds from the
insurance proceeds and from equity funds, if needed, to
completely restore or repair the damaged collateral;
(iii) parties having existing or expected leasehold
interests in the Project constituting 75% of the gross leaseable
square footage in the Project agree in a manner satisfactory to
the Administrative Agent that they will continue or extend their
interests and arrangements for the contract terms then in effect
following the restoration or repair;
(iv) the Borrower presents sufficient evidence to the
Administrative Agent that the damaged Collateral will be
restored at least six (6) months prior to the Maturity Date;
(v) all parties having operating, management of
franchise interests in, and arrangements concerning the Land and
the Improvements agree that they will continue their interests
and arrangements for the contract terms then in effect following
the restoration;
(vi) the Administrative Agent and the Lenders will not
incur any liability to any other Person as a result of such use
or release of insurance proceeds;
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(vii) the insurance proceeds shall be held by the
Administrative Agent and disbursed as the repair or restoration
work progresses substantially in accordance with the
disbursement procedures of Sections 2.1 and 4.3 of this Credit
Agreement as if such proceeds were Loans; provided however that
insurance proceeds of $100,000 or less will be disbursed
directly to the Borrower for restoration or repair;
(viii) the plans and specifications, cost breakdown,
construction contract, construction schedule, contractor and
payment and performance bond for the work of repair or
reconstruction must all be acceptable to the Administrative
Agent and the Project Administrative Agent; and
(ix) the Nordstrom Lease Agreement shall not have been
terminated.
If the above-referenced conditions of this Section 6.6(c)(i), (ii),
(iii), (iv), (v), (vi), (vii), (viii) and (ix) are not satisfied within one
hundred twenty (120) days of loss, then the Administrative Agent may, at its
option, apply any insurance proceeds to the payment of the Revolving Loans. The
insurance coverage of the Borrower is outlined as to carrier, policy number,
expiration date, type and amount on Schedule 6.6.
6.7 MAINTENANCE OF PROPERTY.
The Borrower will maintain and preserve its properties and equipment
material to the conduct of its business in good repair, working order and
condition, normal wear and tear and casualty and condemnation excepted, and will
make, or cause to be made, in such properties and equipment from time to time
all repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto as may be needed or proper, to the extent and in the manner
customary for companies in similar businesses.
6.8 PERFORMANCE OF OBLIGATIONS.
The Borrower will perform in all material respects all of its
obligations under the terms of all material agreements, indentures, mortgages,
security agreements or other debt instruments to which it is a party or by which
it is bound.
6.9 USE OF PROCEEDS.
The Borrower will use the proceeds of the Loans solely for the purposes
set forth in Section 5.14.
6.10 AUDITS/INSPECTIONS.
(a) Upon reasonable notice and during normal business hours, the
Borrower will permit representatives appointed by the Administrative Agent,
including, without limitation, independent accountants, agents, attorneys, and
appraisers to visit and inspect its property, including its books and records,
its accounts receivable and inventory, its facilities and its other business
assets, and to make photocopies or photographs thereof and to write down and
record any information such
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representative obtains and shall permit the Administrative Agent or its
representatives to investigate and verify the accuracy of information provided
to the Lenders and to discuss all such matters with the officers, employees and
representatives of such Person. The Borrower agrees that the Administrative
Agent may enter upon the Land at any time for the purpose of inspecting the
construction of the Project. The Borrower agrees that the Administrative Agent
may order appraisals or reappraisals of the Project and/or the Improvements (at
the Borrower's expense) if the Administrative Agent has a reasonable belief that
there has been a material change to the Project. Such appraisals shall be by a
qualified appraiser designated by and satisfactory to the Administrative Agent
and must be satisfactory to the Administrative Agent in form and substance.
(b) The Borrower will permit the Project Administrative Agent and its
authorized agents to enter upon the Land during normal working hours and as
often as the Project Administrative Agent desires, for the purpose of inspecting
the construction of the Project. Failure of the Project Administrative Agent or
its authorized agents to discover or to reject materials or workmanship shall
not make it liable to the Borrower or to any other person on account of such
deficiency, nor shall any prior failure constitute a waiver of the Project
Administrative Agent's right to subsequently reject any such workmanship or
materials.
6.11 YEAR 2000 COMPLIANCE.
The Borrower will promptly notify the Administrative Agent in the event
the Borrower discovers or determines that the Year 2000 Problem has resulted in,
or is reasonably expected to result in, a Material Adverse Effect.
6.12 CONSTRUCTION.
The Borrower hereby agrees that the Project shall be substantially
complete on or before October 31, 2001 in accordance with (a) the Plans and
Specifications and (b) all building, zoning and other applicable laws,
ordinances, codes, rules and regulations and requirements of all Federal, State
and municipal governments.
6.13 EMINENT DOMAIN.
(a) The Borrower hereby agrees that it will promptly notify the
Administrative Agent of any actual or threatened initiation of any eminent
domain proceeding as to any part of the Project and shall deliver to the
Administrative Agent copies of any and all papers served or received in
connection with such proceedings, and the Administrative Agent shall have the
right, upon the request and direction of the Required Lenders, to participate in
such proceedings at the expense of the Borrower (including, without limitation,
the Administrative Agent's attorney's fees) and the Borrower will execute such
documents and take such other steps as required to permit such participation.
The Administrative Agent is hereby authorized, upon the request and direction of
the Required Lenders, to adjust, compromise and collect any eminent domain award
or settle a claim for damages and to apply the same to the payment of the
Revolving Loans, subject to the provisions of subsection (b) below.
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(b) The Borrower assigns to the Administrative Agent, for the benefit of
the Lenders, any proceeds or awards which may become due by reason of any
condemnation or other taking for public use of the whole or any part of the Land
and the Improvements or any rights appurtenant thereto. The Administrative Agent
agrees to release the proceeds of any such condemnation award to the Borrower
for restoration or repair of the Collateral if the following conditions are met:
(i) there exists no Default or Event of Default;
(ii) the Borrower presents sufficient evidence to the
Administrative Agent that there are sufficient funds
from the condemnation proceeds and equity funds, if
needed, to completely restore or repair the damaged
Collateral;
(iii) parties having existing or expected leasehold interests
in the Project constituting 75% of the gross leaseable
square footage in the Project agree in a manner
satisfactory to the Administrative Agent that they will
continue to extend their interests and arrangements for
the contract terms then in effect following the
restoration or repair;
(iv) all parties having operating, management or franchise
interests in, and arrangements concerning, the Land and
the Improvements agree that they will continue their
interests and arrangements for the contract terms then
in effect following the restoration;
(v) the Borrower presents sufficient evidence to the
Administrative Agent that the damaged Collateral will be
restored at least six (6) months prior to the Maturity
Date;
(vi) the Administrative Agent and the Lenders will not incur
any liability to any other Person as a result of such
release of proceeds;
(vii) the condemnation award or proceeds shall be held by the
Administrative Agent and disbursed as the restoration
work progresses substantially in accordance with the
disbursement procedures of Sections 2.1 and 4.3 of the
Credit Agreement as if such proceeds were Loans;
provided, however, that condemnation awards or proceeds
of $100,000 or less will be disbursed directly to the
Borrower for restoration or repair;
(viii) the plans and specifications, cost breakdown,
construction contract, construction schedule, contractor
and payment and performance bond for the work of repair
or restoration work must all be acceptable to the
Administrative Agent and the Project Administrative
Agent; and
(ix) the Nordstrom Lease Agreement shall not have been
terminated.
If the above-referenced conditions of this Section 6.13(b)(i), (ii),
(iii), (iv), (v), (vi), (vii), (viii) and (ix) are not satisfied within one
hundred twenty (120) days of the date of the taking,
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then the Administrative Agent may, at its option, apply any condemnation
proceeds or award to the payment of the Revolving Loans.
(c) The Borrower agrees to execute such further assignments and
agreements as may be reasonably required by the Administrative Agent to assure
the effectiveness of this Section 6.13.
6.14. CHANGES IN PLANS AND SPECIFICATIONS; CHANGE ORDERS.
The Borrower shall provide the Project Administrative Agent with notice
of all changes in the Plans and Specifications, changes to the terms of the
construction contract for the Improvements, orders for extra work, or other
changes to the Project. All changes to the Plans and Specifications or the
Project (other than minor changes which do not affect the cost of the Project or
the scheduled completion date) shall be made by a written change order signed by
the Borrower and its general contractor. The Project Administrative Agent's
prior written approval (such approval not to be unreasonably withheld, delayed
or conditioned) shall be required for (a) any single change order or
modification which will result in an increase or decrease of more than $500,000
of the direct construction costs ("Construction Costs") specified in the
construction budget for the Project approved by the Project Administrative Agent
(the "Project Budget"); (b) any change order or modification which together with
the aggregate of all previous change orders or modifications (whether or not
previously approved by the Project Administrative Agent) will result in a net
cumulative increase or decrease in the Construction Costs of more than
$1,500,000; or any change order or modification or any amendment or modification
to the construction contract or the Plans and Specifications which will affect
the scheduled completion date of the Project. The Borrower will not permit the
performance of any work pursuant to any change order unless and until the
Borrower has received the approval of the Project Administrative Agent (such
approval not to be unreasonably withheld, delayed or conditioned), if such
approval is required pursuant to this Section 6.14. The Borrower shall provide
the Project Administrative Agent with copies of all change orders and
modifications, irrespective of amount, whether or not the Project Administrative
Agent's prior approval is required pursuant to this Section 6.14. Each of the
parties hereto agrees that the terms of this Section 6.14 shall not restrict or
otherwise impair the Borrower's right to receive insurance proceeds from the
Administrative Agent in accordance with Section 6.6 or condemnation proceeds
from the Administrative Agent in accordance with Section 6.13 nor shall receipt
of such proceeds in accordance with the respective sections be included in the
cumulative increase or decrease for purposes of required approvals under this
Section 6.14.
6.15 ABANDONMENT OF CONSTRUCTION.
The Borrower agrees if construction of the Improvements is at any time
abandoned or discontinued for fifteen (15) consecutive days or more, or if the
Project Administrative Agent in good faith determines the work is not being
performed in accordance with the approved Plans and Specifications and the
approved construction contract, the Project Administrative Agent, on behalf of
Lenders, may enter onto the Project (or designate a third party to enter onto
the Project) to complete the construction or correct any work improperly done or
replace any defective material. If the Project Administrative Agent exercise the
foregoing option, it may employ such workmen and furnish such materials as it
believes are necessary or appropriate to complete the Improvements or
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correct any errors or defects in construction or workmanship. All costs incurred
by the Project Administrative Agent pursuant to this Section 6.15, including
reasonable sums for supervision, attorneys' fees and all related costs and
expenses, shall be deemed additional advances to the Borrower and secured by the
Mortgage Instrument. On demand, the Borrower shall pay all costs and expenses
expended by the Project Administrative Agent pursuant to this Section 6.15. The
fifteen (15) day period set forth above shall be extended one (1) day for each
day that the abandonment or discontinuation of construction is caused by fire,
earthquake or other acts of God, strikes, lockout, acts of public enemy, riot,
insurrection or governmental regulation of the sale or transportation of
materials, supplies or labor, or any other cause beyond the reasonable control
of the Borrower; provided, in no event shall such fifteen (15) day period be
extended to a period of more than sixty (60) days, unless otherwise agreed in
writing by the Project Administrative Agent.
6.16 ALLEY VACATION.
At such time as the City vacates the alley abutting the Land, the
Borrower shall (i) promptly (and in any event within five (5) Business Days
thereafter) provide the Administrative Agent and the Project Administrative
Agent with notice of such vacation, (ii) (to the extent the Ground Lease
Agreement is still in effect), use commercially reasonable best efforts to,
enter into an amendment to the Ground Lease Agreement (in form and substance
reasonably satisfactory to the Administrative Agent) ground leasing to the
Borrower that portion of the alley vacated by the City to Stewart Avenue
Properties (or its successor or assignee, as ground lessor), (iii) within thirty
(30) days of the notice referenced in subclause (i) above, enter into an
amendment to the Mortgage Instrument which grants to the Administrative Agent,
for the benefit of the Lenders, a lien on and security interest in that portion
of the alley vacated to the Borrower and which is otherwise reasonably
satisfactory in form and substance to the Administrative Agent and (iv) within
thirty (30) days of the notice referenced in subclause (i) above, provide the
Administrative Agent with an endorsement to the Mortgage Policy (in form and
substance reasonably satisfactory to the Administrative Agent) with respect to
such alley vacation and amendment to Mortgage Instrument. If the Borrower enters
into the amendment to the Ground Lease Agreement referenced in subclause (ii)
above, the Borrower shall (within thirty (30) days of such amendment) provide
the Administrative Agent (a) with an amendment to the Mortgage Instrument (in
form and substance reasonably satisfactory to the Administrative Agent) which
grants to the Administrative Agent, for the benefit of the Lenders, a lien on
and security interest in all of the Borrower's rights and interests under the
Ground Lease Agreement (as amended pursuant to the amendment described in
subclause (ii) above) and (b) with an endorsement to the Mortgage Policy (in
form and substance reasonably satisfactory to the Administrative Agent) with
respect to such amendment to Ground Lease Agreement.
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SECTION 7
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that, so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
7.1 INDEBTEDNESS.
The Borrower will not contract, create, incur, assume or permit to exist
any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
(b) obligations of the Borrower in respect of Hedging Agreements
entered into in order to manage existing or anticipated interest rate or
exchange rate risks and not for speculative purposes;
(c) Indebtedness of the Borrower with respect to that certain
letter of credit issued by Bank of America in the amount of $1,328,340
to secure the Borrower's obligations to construct the Housing Project
and satisfy other conditions to qualification for additional square feet
of floor area through the housing bonus (the "Housing Credits Letter of
Credit").
(d) obligation of the Borrower to pay (a) HRG $1,250,000 pursuant
to the Joint Development Agreement on account of HRG's construction,
development, ownership and operation of the Housing Project or (b) any
other Person reasonably acceptable to the Project Administrative Agent
up to $1,250,000 on account of such Person's construction, development,
ownership and operation of the Housing Project;
(e) obligation of the Borrower to purchase the Tipp Property in
the amount of up to $2,000,000 following (i) the exercise by the Ground
Lessor (as defined in the Ground Lease Agreement) of its right to sell
pursuant to the Ground Lease Agreement or (ii) the exercise by the
Borrower of its right to purchase pursuant to the Ground Lease Agreement
or any other arrangement under which the Borrower may purchase the Tipp
Property;
(f) obligation of the Borrower to guarantee each third party
lease on each retail space (at a triple net rent and on other market
terms) located below the Housing Project for the life of the tax exempt
bonds issued to finance the Housing Project, as required by (i) the
Joint Development Agreement or (ii) any other agreement entered into by
the Borrower with a Person reasonably acceptable to the Project
Administrative Agent regarding the construction, development, ownership
and operation of the Housing Project;
(g) such other obligations of the Borrower to HRG under the Joint
Development Agreement or any other Person reasonably acceptable to the
Project Administrative Agent
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under any other agreement entered into by the Borrower regarding the
construction, development, ownership and operation of the Housing
Project, including the Borrower's obligation to reimburse such Person
for out-of-pocket expenses related to the transfer of any unused housing
bonus to a third party and to reimburse such Person for hard costs and
soft costs related to the construction of the truck parking area on the
Tipp Property;
(h) additional unsecured subordinated Indebtedness of the
Borrower, provided that (a) such Indebtedness shall be subordinated to
the Loans pursuant to subordination terms satisfactory to the
Administrative Agent, (b) such Indebtedness shall not exceed $15,000,000
in the aggregate principal amount at any time outstanding, (c) no part
of the principal amount of such Indebtedness shall have a maturity date
earlier than the Maturity Date and (d) the Borrower shall not be
required to make any payments of principal or interest with respect to
such Indebtedness other than payments of interest in kind or made
through additional borrowings under such Indebtedness rather than direct
cash payments (collectively, the "Subordinated Debt"); and
(i) prior to the funding of the Loans hereunder on the Funding
Date, the Nordstrom Loan.
7.2 LIENS.
The Borrower will not contract, create, incur, assume or permit to exist
any Lien with respect to any of its Property, whether now owned or after
acquired, except for (i) Permitted Liens and (ii) prior to the funding of the
Loans hereunder on the Funding Date, the Guarantor's Liens against the
Collateral.
7.3 NATURE OF BUSINESS.
The Borrower will not substantively alter the character or conduct of
the business conducted by the Borrower as of the Closing Date, which shall be
limited to the ownership, development, improvement, leasing, operation and
management of the Project.
7.4 CONSOLIDATION, MERGER, DISSOLUTION, ETC.
The Borrower will not enter into any transaction of merger or
consolidation or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution).
7.5 ASSET DISPOSITIONS.
The Borrower will not make any Asset Disposition (including without
limitation any Sale and Leaseback Transaction) other than (i) the sale of assets
in the ordinary course of business (ii) the sale or disposition of assets no
longer used or useful in the conduct of such Person's business, and (iii) the
transfer of the Tipp Property to HRG or any other Person reasonably acceptable
to the Project Administrative Agent; provided that, (a) use restrictions
(satisfactory in form and substance to the Project Administrative Agent) shall
have been placed on the Tipp Property such that the only permitted use of the
Tipp Property will be the construction and operation of the Housing Project and
construction of a truck parking area to serve the Project, (b) HRG or such other
Person shall
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have agreed to construct the Housing Project and such truck parking area in
accordance with all applicable permits, declarations, ordinances and laws and
otherwise on terms reasonably satisfactory to the Project Administrative Agent,
and (c) a permanent easement shall have been granted to the Borrower (in form
and substance satisfactory to the Project Administrative Agent) providing for
the Borrower's unlimited use and maintenance of such truck parking area on the
Tipp Property.
Upon the transfer of the Tipp Property permitted by this Section 7.5,
the Administrative Agent shall deliver to the Borrower, upon the Borrower's
request and at the Borrower's expense, such documentation as is reasonably
necessary to evidence the release of the Administrative Agent's Lien on the
Ground Lease Agreement or the Tipp Property (if the Borrower has purchased the
Tipp Property).
7.6 INVESTMENTS.
The Borrower will not make Investments in or to any Person, except for
Permitted Investments.
7.7 RESTRICTED PAYMENTS.
The Borrower will not directly or indirectly, declare, order, make or
set apart any sum for or pay any Restricted Payment, except (i) to make
dividends payable solely in the same class of Capital Stock of such Person, (ii)
for so long as the Borrower is not subject to federal, state or local taxes, the
Borrower shall be permitted to distribute from time to time such amounts as
Clise Venture reasonably determines are sufficient to enable each partner of the
Borrower to pay any federal, state or local tax liability attributable to its
distributive share of the income and gain of the Borrower and (iii) so long as
(a) the Project has achieved Stabilization and (b) no Default or Event of
Default exists or would result therefrom, the Borrower may make cash dividends
or distributions to its members not more than once per quarter; provided, that,
(x) the Debt Service Coverage Ratio, as of the end of the fiscal quarter
immediately preceding such cash dividend or distribution, for the twelve month
period ending on such date, shall be greater than 1.25 to 1.0 and (y) the
Borrower shall have provided advance written notice to the Administrative Agent
of the date and amount of such cash dividend or distribution.
7.8 OTHER INDEBTEDNESS.
The Borrower will not (i) after the issuance thereof, amend or modify
(or permit the amendment or modification of) any of the terms of any other
Indebtedness of the Borrower (including without limitation the Subordinated
Debt) if such amendment or modification would add or change any terms in a
manner adverse to the Borrower, or shorten the final maturity or average life to
maturity or require any payment to be made sooner than originally scheduled or
increase the interest rate applicable thereto or change any subordination
provision thereof, or (ii) make (or give any notice with respect thereto) any
voluntary or optional payment or prepayment or redemption or acquisition for
value of (including without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of paying when
due), refund, refinance or
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exchange of any other Indebtedness of the Borrower (including without limitation
the Subordinated Debt) other than the Nordstrom Loan.
7.9 TRANSACTIONS WITH AFFILIATES.
Except for the agreements set forth on Schedule 7.9, the Borrower will
not enter into or permit to exist any transaction or series of transactions with
any officer, director, shareholder, Subsidiary or Affiliate of the Borrower
other than (a) normal compensation and reimbursement of expenses of officers and
directors and (b) except as otherwise specifically limited in this Credit
Agreement, other transactions which are entered into in the ordinary course of
the Borrower's business on terms and conditions substantially as favorable to
the Borrower as would be obtainable by it in a comparable arms-length
transaction with a Person other than an officer, director, shareholder,
Subsidiary or Affiliate.
7.10 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.
The Borrower will not change its fiscal year or amend, modify or change
its partnership agreement (or other similar organizational document).
7.11 LIMITATION ON RESTRICTED ACTIONS.
The Borrower will not directly or indirectly, create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of the Borrower to (a) pay dividends or make any other distributions to
any Credit Party on its Capital Stock or with respect to any other interest or
participation in, or measured by, its profits, (b) pay any Indebtedness or other
obligation owed to any Credit Party, (c) make loans or advances to any Credit
Party or (d) sell, lease or transfer any of its properties or assets to any
Credit Party, except (in respect of any of the matters referred to in clauses
(a)-(d) above) for such encumbrances or restrictions existing under or by reason
of (i) this Credit Agreement and the other Credit Documents or (ii) applicable
law.
7.12 SUBSIDIARIES.
The Borrower agrees that it shall not form any Subsidiaries.
7.13 SALE LEASEBACKS.
The Borrower will not enter into any Sale and Leaseback Transaction.
7.14 NO FURTHER NEGATIVE PLEDGES.
The Borrower will not enter into, assume or become subject to any
agreement prohibiting or otherwise restricting the creation or assumption of any
Lien upon its properties or assets, whether now owned or hereafter acquired, or
requiring the grant of any security for any obligation if security is given for
any other obligation, except pursuant to this Credit Agreement and the other
Credit Documents.
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7.15 LEASES.
The Borrower will not enter into any lease with respect to office space
in the Project which (i) is on a form of lease not previously approved by the
Project Administrative Agent, (ii) is for a term of more than five (5) years,
not including renewal periods, or more than ten (10) years including renewal
periods, (iii) contains an option or right to purchase all or any part of the
Project, (iv) covers more than a full floor of space in the Project, (v) is with
an Affiliate of the Borrower or (vi) is for a base rental rate less than ninety
percent (90%) of the pro forma base rental rate of $34.50 per square foot for
office space in the Project, or provides for a tenant improvement allowance or
for tenant improvements costing more than one hundred ten percent (110%) of the
pro forma tenant allowance of $35.00 per square foot for office space in the
Project unless the Borrower has notified the Project Administrative Agent of
such lease and provided the Project Administrative Agent seven (7) Business Days
to review such lease. Furthermore, with respect to any lease of the Project
requiring the review of the Project Administrative Agent pursuant to the terms
of the preceding sentence, the Borrower shall not (i) permit the assignment or
subletting of all or any part of the lessee's rights under such lease unless the
right to assign or sublet is expressly reserved by the lessee under such lease,
(ii) amend or modify such lease or (iii) accept surrender of such lease or
terminate such lease except in accordance with the terms of such lease unless
the Borrower has notified the Project Administrative Agent of such assignment,
amendment or termination, as applicable, and provided the Project Administrative
Agent seven (7) Business Days to review such assignment, amendment or
termination, as applicable. The Project Administrative Agent agrees that it will
review each lease, assignment of lease, or amendment to lease, as applicable,
within seven (7) Business Days of receipt of such lease, assignment or
amendment, as applicable. Nothing contained in this Section 7.15 shall prohibit
the Borrower from entering into any lease, consenting to the assignment or
subletting of any lease, or accepting the surrender or termination of any lease
so long as the Administrative Agent is provided the notice and review period
required by this Section 7.15.
7.16 PLANS AND SPECIFICATIONS.
The Borrower will not make any material amendments or material
modifications to any of (i) the Plans and Specifications, (ii) the Development
Agreement, (iii) the construction contract for the Improvements, (iv) the
architect's contract for the Improvements, (v) the Transferable Development
Agreements or (vi) the Letter of Credit Agreement without the prior written
consent of the Administrative Agent.
7.17 FLOOR AREA RATIO.
The Borrower shall not permit the floor area ratio for the Land to drop
below that necessary to construct and operate the Project to its intended height
size and dimensions and in accordance with the Plans and Specifications.
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SECTION 8
EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. The Borrower shall
(i) default in the payment when due of any principal of any
of the Loans, or
(ii) default, and such default shall continue for three (3)
or more Business Days, in the payment when due of any interest on
the Loans, or of any Fees or other amounts owing hereunder, under
any of the other Credit Documents or in connection herewith or
therewith; or
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was deemed to have
been made; or
(c) Covenants. The Borrower shall
(i) default in the due performance or observance of any term,
covenant or agreement contained in Sections 6.2, 6.4, 6.9, 6.11
or 7.1, 7.3, 7.4, 7.5, 7.8, 7.10, 7.11, 7.12, 7.13, 7.16 or 7.17;
(ii) default in the due performance or observance of any
term, covenant or agreement contained in Sections 6.1(a), (b) (c)
or (d), 6.12, 6.13, 6.16, 7.2, 7.6, 7.9, 7.14 or 7.15 and such
default shall continue unremedied for a period of at least 5
Business Days after the earlier of any Executive Officer of the
Borrower, the general partner of the Borrower or the managing
member of the general partner of the Borrower becoming aware of
such default or notice thereof by the Administrative Agent; or
(iii) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in
subsections (a), (b), (c)(i) or (c)(ii) of this Section 8.1)
contained in this Credit Agreement or any other Credit Document
and such default shall continue unremedied for a period of at
least 30 days after the earlier of any Executive Officer of the
Borrower, the general partner of the Borrower or the managing
member of the general partner of the Borrower becoming aware of
such default or notice thereof by the Administrative Agent,
except for a default of Section 6.7 of this Credit Agreement or a
default of
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Section 2.8 of the Mortgage Instrument which cannot be cured
within such 30 day period in which case if the Credit Parties
have begun a cure within such 30 day period and are pursuing it
with all due diligence, the Credit Parties shall have an
additional 30 days to cure such default; or
(d) Other Credit Documents. Any Credit Document shall fail to be
in full force and effect or to give the Administrative Agent and/or the
Lenders the Liens, rights, powers and privileges purported to be created
thereby, or any Credit Party shall so state in writing; or
(e) Guaranties. The guaranty given by the Guarantor under the
Guaranty Agreement or any provision thereof shall cease to be in full
force and effect, or the Guarantor under the Guaranty Agreement or any
Person acting by or on behalf of the Guarantor shall deny or disaffirm
the Guarantor's obligations under the Guaranty Agreement, or the
Guarantor shall default in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed
pursuant to the Guaranty Agreement; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with
respect to the Borrower; or
(g) Defaults under Other Indebtedness.
(i) The Borrower shall default in the performance or
observance (beyond the applicable grace period with respect
thereto, if any) of any material obligation or condition of any
contract or lease material to the Borrower; or
(ii) With respect to any Indebtedness (other than
Indebtedness outstanding under this Credit Agreement) of the
Borrower in an aggregate principal amount in excess of $500,000,
(A) the Borrower shall (1) default in any payment (beyond the
applicable grace period with respect thereto, if any) with
respect to any such Indebtedness, or (2) default in the
observance or performance relating to such Indebtedness or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event or condition shall occur or
condition exist, the effect of which default or other event or
condition is to cause, or permit, the holder or holders of such
Indebtedness (or trustee or Administrative Agent on behalf of
such holders) to cause (determined without regard to whether any
notice or lapse of time is required), any such Indebtedness to
become due prior to its stated maturity; or (B) any such
Indebtedness shall be declared due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall be entered
against the Borrower involving a liability of $500,000 or more in the
aggregate (to the extent not paid or fully covered by insurance provided
by a carrier who has acknowledged coverage and has
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the ability to perform) and any such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 30
days from the entry thereof; or
(i) ERISA. Any of the following events or conditions, if such
event or condition could have a Material Adverse Effect: (i) any
"accumulated funding deficiency," as such term is defined in Section 302
of ERISA and Section 412 of the Code, whether or not waived, shall exist
with respect to any Plan, or any lien shall arise on the assets of the
Borrower or any ERISA Affiliate in favor of the PBGC or a Plan; (ii) an
ERISA Event shall occur with respect to a Single Employer Plan, which
is, in the reasonable opinion of the Administrative Agent, likely to
result in the termination of such Plan for purposes of Title IV of
ERISA; (iii) an ERISA Event shall occur with respect to a Multiemployer
Plan or Multiple Employer Plan, which is, in the reasonable opinion of
the Administrative Agent, likely to result in (A) the termination of
such Plan for purposes of Title IV of ERISA, or (B) the Borrower or any
ERISA Affiliate incurring any liability in connection with a withdrawal
from, reorganization of (within the meaning of Section 4241 of ERISA),
or insolvency (within the meaning of Section 4245 of ERISA) of such
Plan; or (iv) any prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility shall occur which may subject the Borrower or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of
ERISA or Section 4975 of the Code, or under any agreement or other
instrument pursuant to which the Borrower or any ERISA Affiliate has
agreed or is required to indemnify any person against any such
liability; or
(j) Ownership. There shall occur a Change of Control; or
(k) Nordstrom Credit Agreement. There shall occur an Event of
Default (as defined in the Nordstrom Credit Agreement) under the
Nordstrom Credit Agreement; or
(l) Cross Default. There shall occur a default or event of
default under (i) the Development Agreement, (ii) the Letter of Credit
Agreement, (iii) the Guaranty Agreement, (iv) the Ground Lease Agreement
or (v) any of the Transferable Development Rights Agreements.
8.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the requisite Lenders
(pursuant to the voting requirements of Section 10.6) or cured to the
satisfaction of the requisite Lenders (pursuant to the voting procedures in
Section 10.6), the Administrative Agent shall, upon the request and direction of
the Required Lenders, by written notice to the Borrower take any of the
following actions:
(a) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(b) Acceleration. Declare the unpaid principal of and any accrued
interest in respect of all Loans and any and all other indebtedness or
obligations of any and every kind
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owing by the Borrower to the Administrative Agent and/or any of the
Lenders hereunder to be due whereupon the same shall be immediately due
and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
(c) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents including,
without limitation, all rights and remedies existing under the
Collateral Documents, all rights and remedies against the Guarantor and
all rights of set-off.
Notwithstanding the foregoing, (i) if an Event of Default specified in
Section 8.1(f) shall occur with respect to the Borrower or (ii) if an Event of
Default (as defined in the Guaranty Agreement) specified in Section 6.1(e) of
the Guaranty Agreement shall occur with respect to the Guarantor, then the
Commitments shall automatically terminate and all Loans, all accrued interest in
respect thereof, all accrued and unpaid Fees and other indebtedness or
obligations owing to the Administrative Agent and/or any of the Lenders
hereunder automatically shall immediately become due and payable without the
giving of any notice or other action by the Administrative Agent or the Lenders.
SECTION 9
AGENCY PROVISIONS
9.1 APPOINTMENT, POWERS AND IMMUNITIES.
(a) Each Lender hereby irrevocably appoints and authorizes (i) the
Administrative Agent to act as its Administrative Agent under this Credit
Agreement and the other Credit Documents and (ii) the Project Administrative
Agent to act as its project administrative agent under this Credit Agreement and
the other Credit Documents with such powers and discretion as are specifically
delegated to the Administrative Agent and the Project Administrative Agent
respectively by the terms of this Credit Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent (which term as used in this sentence and in Section 9.5
and the first sentence of Section 9.6 hereof shall include its Affiliates and
its own and its Affiliates' officers, directors, employees, and Administrative
Agents) and the Project Administrative Agent: (a) shall not have any duties or
responsibilities except those expressly set forth in this Credit Agreement and
shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible
to the Lenders for any recital, statement, representation, or warranty (whether
written or oral) made in or in connection with any Credit Document or any
certificate or other document referred to or provided for in, or received by any
of them under, any Credit Document, or for the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of any Credit Document, or any other
document referred to or provided for therein or for any failure by any Credit
Party or any other Person to perform any of its obligations thereunder; (c)
shall not be responsible for or have any duty to ascertain, inquire into, or
verify the performance or observance of any covenants or agreements by any
Credit Party or the satisfaction of any condition or to inspect the property
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(including the books and records) of any Credit Party or any of its Subsidiaries
or Affiliates; (d) shall not be required to initiate or conduct any litigation
or collection proceedings under any Credit Document; and (e) shall not be
responsible for any action taken or omitted to be taken by it under or in
connection with any Credit Document, except for its own gross negligence or
willful misconduct. The Agents may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
(b) Each Lender hereby consents to and approves the terms of the
Guaranty Agreement. By execution hereof, the Lenders authorize and direct the
Administrative Agent to enter into the Guaranty Agreement on behalf of the
Lenders.
9.2 RELIANCE BY ADMINISTRATIVE AGENT.
The Agents shall be entitled to rely upon any certification, notice,
instrument, writing, or other communication (including, without limitation, any
thereof by telephone or telecopy) believed by it to be genuine and correct and
to have been signed, sent or made by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel (including counsel for
any Credit Party), independent accountants, and other experts selected by the
Agents. The Administrative Agent may deem and treat the payee of any Note as the
holder thereof for all purposes hereof unless and until the Administrative Agent
receives and accepts an Assignment and Acceptance executed in accordance with
Section 10.3(b) hereof. As to any matters not expressly provided for by this
Credit Agreement, the Agents shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding on
all of the Lenders; provided, however, that the Agents shall not be required to
take any action that exposes the Agents to personal liability or that is
contrary to any Credit Document or applicable law or unless 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 any such action.
9.3 DEFAULTS.
An Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or Event of Default unless such Agent has received
written notice from a Lender or a Credit Party specifying such Default or Event
of Default and stating that such notice is a "Notice of Default". In the event
that the Administrative Agent receives such a notice of the occurrence of a
Default or Event of Default, the Administrative Agent shall give prompt notice
thereof to the Lenders. The Administrative Agent shall (subject to Section 8.2
hereof) take such action with respect to such Default or Event of Default as
shall reasonably be directed by the Required Lenders (or such other Lenders as
required by Section 10.6), provided that, unless and until the Administrative
Agent shall have received such directions, 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 in
the best interest of the Lenders.
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9.4 RIGHTS AS A LENDER.
With respect to its Commitment and the Loans made by it, Bank of America
(and any successor acting as the Administrative Agent) in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as the
Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. Bank of America (and any successor acting as Administrative Agent) and
its Affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any
Credit Party or any of its Subsidiaries or Affiliates as if it were not acting
as Administrative Agent, and Bank of America (and any successor acting as
Administrative Agent) and its Affiliates may accept fees and other consideration
from any Credit Party or any of its Subsidiaries or Affiliates for services in
connection with this Credit Agreement or otherwise without having to account for
the same to the Lenders.
9.5 INDEMNIFICATION.
The Lenders agree to indemnify the Agents (to the extent not reimbursed
under Section 10.5 hereof, but without limiting the obligations of the Credit
Parties under such Section) ratably (in accordance with their respective (i)
Revolving Commitments (or, if the Revolving Commitments have been terminated,
the outstanding Revolving Loans) for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including attorneys' fees), or disbursements of any kind and nature whatsoever
that may be imposed on, incurred by or asserted against an Agent (including by
any Lender) in any way relating to or arising out of any Credit Document or the
transactions contemplated thereby or any action taken or omitted by an Agent
under any Credit Document: provided that no Lender shall be liable for any of
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the Person to be indemnified. Without limitation of the foregoing,
each Lender agrees to reimburse an Agent promptly upon demand for its ratable
share of any costs or expenses payable by the Credit Parties under Section 10.5
and Section 6.6, to the extent that such Agent is not promptly reimbursed for
such costs and expenses by the Credit Parties. The agreements in this Section
9.5 shall survive the repayment of the Loans and other obligations under the
Credit Documents and the termination of the Commitments hereunder.
9.6 NON-RELIANCE ON AGENTS AND OTHER LENDERS.
Each Lender agrees that it has, independently and without reliance on
the Agents or any other Lender, and based on such documents and information as
it has deemed appropriate, made its own credit analysis of the Credit Parties
and their Subsidiaries and decision to enter into this Credit Agreement and that
it will, independently and without reliance upon the Agents or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under the Credit Documents. Except for notices, reports, and other
documents and information expressly required to be furnished to the Lenders by
an Agent hereunder, the Agents shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the
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affairs, financial condition, or business of any Credit Party or any of its
Subsidiaries or Affiliates that may come into the possession of any Agent or any
of its Affiliates.
9.7 SUCCESSOR AGENTS.
An Agent may resign at any time by giving notice thereof to the Lenders
and the Credit Parties. An Agent may be removed at any time for cause by written
action of the Required Lenders delivered to such Agent. Upon any such
resignation or removal, the Required Lenders and, unless a Default or Event of
Default has occurred and is continuing, the Borrower shall have the right to
appoint a successor Administrative Agent or Project Administrative Agent, as
applicable. If no successor Administrative Agent shall have been so appointed
within thirty (30) days after the retiring Administrative Agent's giving of
notice of resignation or removal of the Administrative Agent, then the retiring
or removed Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent which shall be a commercial bank organized under
the laws of the United States having combined capital and surplus of at least
$100,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor, such successor shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges, and duties of the
retiring or removed Administrative Agent, and the retiring or removed
Administrative Agent shall be discharged from its duties and obligations
hereunder. If no successor Administrative Agent has accepted appointment as
Administrative Agent within thirty (30) days after the retiring Administrative
Agent's giving notice of resignation or removal of the Administrative Agent, the
retiring Administrative Agent's resignation or removal shall nevertheless become
effective, and the Lenders shall perform all duties of the Administrative Agent
hereunder until such time, if any, as the Required Lenders and, unless a Default
or Event of Default has occurred and is continuing, the Borrower appoint a
successor Administrative Agent as provided above. If no successor Project
Administrative Agent shall have been so appointed by the Required Lenders within
thirty (30) days after the retiring Project Administrative Agent's giving of
notice of resignation or removal of the Project Administrative Agent, then the
retiring or removed Project Administrative Agent may, on behalf of the Lenders,
appoint a successor Project Administrative Agent which shall be a commercial
bank organized under the laws of the United States having combined capital and
surplus of at least $100,000,000. Upon the acceptance of any appointment as
Project Administrative Agent hereunder by a successor, such successor shall
thereupon succeed to and become vested with all the rights, powers, discretion
and duties of the retiring or removed Project Administrative Agent, and the
retiring or removed Project Administrative Agent shall be discharged from its
duties and obligations hereunder. If no successor Project Administrative Agent
has accepted appointment as Project Administrative Agent within thirty (30) days
after the retiring Project Administrative Agent's giving notice of resignation
or removal of the Project Administrative Agent, the retiring Project
Administrative Agent's resignation or removal shall nevertheless become
effective, and the Lenders shall perform all duties of the Project
Administrative Agent hereunder until such time, if any, as the Required Lenders
and, unless a Default or Event of Default has occurred and is continuing, the
Borrower shall appoint a successor Project Administrative Agent as provided
above. Upon any retiring Agent's resignation or removal, the provisions of this
Section 9 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as an Agent.
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SECTION 10
MISCELLANEOUS
10.1 NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address, in the case of the Credit Parties and the
Administrative Agent, set forth below, and, in the case of the Lenders, set
forth on Schedule 2.1(a), or at such other address as such party may specify by
written notice to the other parties hereto:
if to the Borrower:
1700 Seventh L.P.
c/o Clise Venture One LLC
1904 Third Avenue, Suite #200
Seattle, Washington 98101
Attn: A.M. Clise
Telephone: (206) 623-7500
Telecopy: (206) 624-8379
with a copy to:
Nordstrom, Inc.
1617 6th Avenue
Seattle, Washington 98101
Attn: Chief Financial Officer
Telephone: (206) 373-4090
Telecopy: (206) 373-4055
if to the Guarantor:
Nordstrom, Inc.
1617 6th Avenue
Seattle, Washington 98101
Attn: Chief Financial Officer
Telephone: (206) 373-4090
Telecopy: (206) 373-4055
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if to the Project Administrative Agent:
Bank of America, N.A.
701 Fifth Avenue, 15th Floor
Mail Code WA1-102-15-01
Seattle, Washington 98104
Attn: Laura Raynolds
Telephone: (206) 358-3668
Facsimile: (206) 358-3487
if to the Administrative Agent:
Bank of America, N.A.
1850 Gateway Blvd., 5th Floor
Mail Code CA4-706-05-09
Concord, California 94520
Attn: Josephine T. Flores
Telephone: (925) 675-8374
Facsimile: (925) 969-2812
with a copy to:
Bank of America, N.A.
555 California Street, 41st Floor
Mail Code: CA5-705-41-89
San Francisco, California 94104
Attn: James Johnson
Telephone: (415) 622-6177
Facsimile: (415) 622-4585
10.2 RIGHT OF SET-OFF; ADJUSTMENTS.
Upon the occurrence and during the continuance of any Event of Default,
each Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender (or any of its Affiliates)
to or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Credit
Agreement, under the Notes, under any other Credit Document or otherwise,
irrespective of whether such Lender shall have made any demand hereunder or
thereunder and although such obligations may be unmatured. Each Lender agrees
promptly to notify the Borrower 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. The rights of each Lender
under this Section 10.2 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) that such Lender may have.
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10.3 BENEFIT OF AGREEMENT; ASSIGNMENTS.
(a) This Credit Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns
of the parties hereto; provided that the Borrower may not assign or
transfer any of its interests and obligations without prior written
consent of each of the Lenders; provided further that the rights of each
Lender to transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth in this Section
10.3.
(b) Each Lender may assign to one or more Eligible Assignees all
or a portion of its rights and obligations under this Credit Agreement
(including, without limitation, all or a portion of its Loans, its
Notes, and its Commitment); provided, however, that
(i) each such assignment shall be to an Eligible Assignee and
subject to the restrictions contained in the definition of
"Eligible Assignee";
(ii) except in the case of an assignment to another Lender,
an Affiliate of an existing Lender or any fund that invests in
bank loans and is advised or managed by an investment advisor to
an existing Lender or an assignment of all of a Lender's rights
and obligations under this Credit Agreement, any such partial
assignment shall be in an amount at least equal to $5,000,000
(or, if less, the remaining amount of the Commitment being
assigned by such Lender) or an integral multiple of $1,000,000 in
excess thereof; and
(iii) the parties to such assignment shall execute and
deliver to the Administrative Agent for its acceptance an
Assignment and Acceptance in the form of Exhibit 10.3(b) hereto,
together with any Note subject to such assignment and a
processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, rights, and benefits of
a Lender hereunder and the assigning Lender shall, to the extent of such
assignment, relinquish its rights and be released from its obligations
under this Credit Agreement. Upon the consummation of any assignment
pursuant to this Section 10.3(b), the assignor, the Administrative Agent
and the Borrower shall make appropriate arrangements so that, if
required, new Notes are issued to the assignor and the assignee. If the
assignee is not a United States person under Section 7701(a)(30) of the
Code, it shall deliver to the Borrower and the Administrative Agent
certification as to exemption from deduction or withholding of Taxes in
accordance with Section 3.11.
(c) The Administrative Agent shall maintain at its address
referred to in Section 10.1 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to time
(the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Credit Parties,
the Administrative Agent and the
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Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Credit Agreement. The
Register shall be available for inspection by the Credit Parties or any
Lender at any reasonable time and from time to time upon reasonable
prior notice. Any assignment of any Loan or other Credit Party
Obligations shall be effective only upon an entry with respect thereto
being made in the Register.
(d) Upon its receipt of an Assignment and Acceptance executed by
the parties thereto, together with any Note subject to such assignment
and payment of the processing fee, the Administrative Agent shall, if
such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit 10.3(b) hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein
in the Register and (iii) give prompt notice thereof to the parties
thereto.
(e) Each Lender may sell participations to one or more Persons in
all or a portion of its rights, obligations or rights and obligations
under this Credit Agreement (including all or a portion of its
Commitment or its Loans); provided, however, that (i) such Lender's
obligations under this Credit Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations, (iii) the participant shall be
entitled to the benefit of the yield protection provisions contained in
Sections 3.7 through 3.12, inclusive (but only to the extent that the
costs of the Borrower resulting from such benefit does not exceed the
costs which the Borrower would have incurred in respect of such Lender
absent the participation), and the right of set-off contained in Section
10.2, and (iv) the Credit Parties shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Credit Agreement, and such Lender shall retain
the sole right to enforce the obligations of the Credit Parties relating
to the Credit Party Obligations owing to such Lender and to approve any
amendment, modification, or waiver of any provision of this Credit
Agreement (other than amendments, modifications, or waivers decreasing
the amount of principal of or the rate at which interest is payable on
such Loans or Notes, extending any scheduled principal payment date or
date fixed for the payment of interest on such Loans or Notes, or
extending its Commitment).
(f) Notwithstanding any other provision set forth in this Credit
Agreement, any Lender may at any time assign and pledge all or any
portion of its Loans and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
(g) Any Lender may furnish any information concerning the Credit
Parties in the possession of such Lender from time to time to assignees
and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 10.14 hereof.
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10.4 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Administrative Agent or any
Lender in exercising any right, power or privilege hereunder or under any other
Credit Document and no course of dealing between the Administrative Agent or any
Lender and any of the Credit Parties shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or under any other Credit Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies provided herein are cumulative and not
exclusive of any rights or remedies which the Administrative Agent or any Lender
would otherwise have. No notice to or demand on any Credit Party in any case
shall entitle the Credit Parties to any other or further notice or demand in
similar or other circumstances (except as specifically required by the Credit
Documents), or constitute a waiver of the rights of the Administrative Agent or
the Lenders to any other or further action in any circumstances without notice
or demand.
10.5 EXPENSES; INDEMNIFICATION.
(a) The Borrower agrees to pay on demand all costs and expenses
of the Agents in connection with the syndication, preparation,
execution, delivery, administration, modification, and amendment of this
Credit Agreement, the other Credit Documents, and the other documents to
be delivered hereunder, including, without limitation, the reasonable
fees and expenses of counsel for the Agents (including the cost of
internal counsel) with respect thereto and with respect to advising the
Agents as to their rights and responsibilities under the Credit
Documents. The Borrower further agrees to pay on demand all costs and
expenses of the Agents and the Lenders, if any (including, without
limitation, reasonable attorneys' fees and expenses and the cost of
internal counsel), in connection with the enforcement (whether through
negotiations, legal proceedings, or otherwise) of the Credit Documents
and the other documents to be delivered hereunder.
(b) The Borrower shall indemnity, defend and hold harmless the
Agents and each Lender and each of their Affiliates and the officers,
directors, employees, agents, attorneys, affiliates, successors and
assigns of the Agents and each Lender and each of their Affiliates
(collectively, the "Indemnitees") from and against (i) any and all
transfer taxes, documentary taxes, assessments or charges made by any
Governmental Authority by reason of the execution and delivery of the
Credit Documents or the making of the Loans (provided that any Lender
claiming any additional amounts payable pursuant to this Section
10.5(b)(i) shall use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction
of its Applicable Lending Office if the making of such a change would
avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of
such Lender, be otherwise disadvantageous to such Lender), and (ii) any
and all liabilities, losses, damages, penalties, judgments, claims,
costs and expenses of any kind or nature whatsoever (including
reasonable attorneys' fees, including allocated costs of in-house
counsel, and disbursements in connection with any actual or threatened
investigative, administrative or judicial proceeding, whether or not
such Indemnitee shall
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be designated a party thereto) that may be imposed on, incurred by or
asserted against such Indemnitee, in any manner relating to or arising
out of the Credit Documents, the Loans, or the use or intended use of
the proceeds of the Loans (the "Indemnified Liabilities"); provided that
no Indemnitee shall have the right to be indemnified or held harmless
hereunder for its own gross negligence, or willful misconduct, as
determined by a final judgment of a court of competent jurisdiction. The
Borrower agrees not to assert any claim against the Agents, any Lender,
any of their Affiliates, or any of their respective directors, officers,
employees, attorneys, agents, and advisers, on any theory of liability,
for special, indirect, consequential, or punitive damages arising out of
or otherwise relating to the Credit Documents, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the
Loans.
(c) To the extent that the undertaking to indemnify and hold
harmless set forth in this Section 10.5 may be unenforceable as
violative of any applicable law or public policy, the Borrower shall
make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities that is permissible under applicable law.
All Indemnified Liabilities shall be payable on demand.
(d) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 10.5 shall survive the repayment of the Loans
and other obligations under the Credit Documents and the termination of
the Commitments hereunder.
10.6 AMENDMENTS, WAIVERS AND CONSENTS.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Credit Parties, provided, however, that:
(a) without the consent of each Lender affected thereby, neither
this Credit Agreement nor any other Credit Document may be amended to
(i) extend the final maturity of any Loan or any portion
thereof,
(ii) reduce the rate or extend the time of payment of
interest (other than as a result of waiving the applicability of
any post-default increase in interest rates) thereon or Fees
hereunder,
(iii) reduce or waive the principal amount of any Loan,
(iv) increase the Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a waiver
of any Default or Event of Default or mandatory reduction in the
Commitments shall not constitute a change in the terms of any
Commitment of any Lender),
(v) release all or substantially all of the Collateral;
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(vi) release the Borrower or the Guarantor from its or their
obligations under the Credit Documents,
(vii) amend, modify or waive any provision of this Section
10.6 or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14,
3.15, 8.1(a), 10.2, 10.3, 10.5 or 10.9,
(viii) reduce any percentage specified in, or otherwise
modify, the definition of Required Lenders, or
(ix) consent to the assignment or transfer by the Borrower or
the Guarantor of any of its or their rights and obligations under
(or in respect of) the Credit Documents except as permitted
thereby; and
(b) without the consent of the Administrative Agent, no provision
of Section 10 may be amended.
Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans, and each Lender acknowledges that the provisions of Section 1126(c) of
the Bankruptcy Code supersedes the unanimous consent provisions set forth herein
and (y) the Required Lenders may consent to allow a Credit Party to use cash
collateral in the context of a bankruptcy or insolvency proceeding.
10.7 COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart for each of the parties hereto. Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.
10.8 HEADINGS.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
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10.9 SURVIVAL.
All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.11, 3.12, 9.5 or 10.5 shall survive the execution and delivery
of this Credit Agreement, the making of the Loans, the repayment of the Loans
and other obligations under the Credit Documents and the termination of the
Commitments hereunder, and all representations and warranties made by the Credit
Parties herein or in any of the other Credit Documents shall survive delivery of
the Notes and the making of the Loans hereunder.
10.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS CREDIT AGREEMENT AND, UNLESS OTHERWISE EXPRESSLY
PROVIDED THEREIN, THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF WASHINGTON. Any legal action or proceeding with respect to this
Credit Agreement or any other Credit Document may be brought in the
courts of the State of Washington in King County, or of the United
States for the Western District of Washington, and, by execution and
delivery of this Credit Agreement, the Borrower hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the nonexclusive jurisdiction of such courts. Nothing
herein shall affect the right of the Administrative Agent or any Lender
to serve process in any manner permitted by law or to commence legal
proceedings or to otherwise proceed against the Borrower in any other
jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Credit
Agreement or any other Credit Document brought in the courts referred to
in subsection (a) above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient
forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE ADMINISTRATIVE
AGENT, THE LENDERS, AND THE BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.11 SEVERABILITY.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
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10.12 ENTIRETY.
This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.
10.13 BINDING EFFECT.
This Credit Agreement shall become effective at such time on or after
the Closing Date when it shall have been executed by the Borrower and the
Administrative Agent, and the Administrative Agent shall have received copies
hereof (telefaxed or otherwise) which, when taken together, bear the signatures
of each Lender, and thereafter this Credit Agreement shall be binding upon and
inure to the benefit of the Borrower, the Administrative Agent and each Lender
and their respective successors and assigns; provided, however, unless the
conditions set forth in Section 4.2 have been satisfied by the Borrower on or
before March 14, 2000, none of the Administrative Agent, the Project
Administrative Agent or the Lenders shall have any obligations under the Credit
Agreement.
10.14 CONFIDENTIALITY.
The Administrative Agent and each Lender (each, a "Lending Party")
agrees to keep confidential any information furnished or made available to it by
the Credit Parties pursuant to this Credit Agreement that is marked
confidential; provided that nothing herein shall prevent any Lending Party from
disclosing such information (a) to any other Lending Party or any Affiliate of
any Lending Party, or any officer, director, employee, Administrative Agent, or
advisor of any Lending Party or Affiliate of any Lending Party, (b) to any other
Person if reasonably incidental to the administration of the Loans, (c) as
required by any law, rule, or regulation, (d) upon the order of any court or
administrative agency, (e) upon the request or demand of any regulatory agency
or authority, (f) that is or becomes available to the public or that is or
becomes available to any Lending Party other than as a result of a disclosure by
any Lending Party prohibited by this Credit Agreement, (g) in connection with
any litigation to which such Lending Party or any of its Affiliates may be a
party, (h) to the extent necessary in connection with the exercise of any remedy
under this Credit Agreement or any other Credit Document, (i) to the National
Association of Insurance Commissioners or any similar organization or any
nationally recognized rating agency that requires access to information about a
Lender's investment portfolio in connection with ratings issued with respect to
such Lender, (j) to any direct or indirect contractual counterparty in swap
agreements or such contractual counterparty's professional advisor (so long as
such contractual counterparty or professional advisor to such contractual
counterparty (i) has been approved in writing by the Borrower and (ii) agrees in
a writing enforceable by the Borrower to be bound by the provisions of this
Section 10.14) and (k) subject to provisions substantially similar to those
contained in this Section 10.14, to any actual or proposed participant or
assignee.
82
<PAGE> 88
10.15 SOURCE OF FUNDS.
Each of the Lenders hereby represents and warrants to the Borrower that
at least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to any
separate account maintained by such Lender in which any employee benefit
plan (or its related trust) has any interest;
(b) to the extent that any part of such funds constitutes assets
allocated to any separate account maintained by such Lender, such Lender
has disclosed to the Borrower the name of each employee benefit plan
whose assets in such account exceed 10% of the total assets of such
account as of the date of such purchase (and, for purposes of this
subsection (b), all employee benefit plans maintained by the same
employer or employee organization are deemed to be a single plan);
(c) to the extent that any part of such funds constitutes assets
of an insurance company's general account, such insurance company has
complied with all of the requirements of the regulations issued under
Section 401(c)(1)(A) of ERISA; or
(d) such funds constitute assets of one or more specific benefit
plans which such Lender has identified in writing to the Borrower.
As used in this Section 10.15, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA. Nothing contained in this Section 10.15 shall be deemed a consent by
the Borrower to an assignment by a Lender of its rights and obligations under
this Credit Agreement.
10.16 CONFLICT.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
10.17 ORAL AGREEMENTS NOT BINDING.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
[Signature Page to Follow]
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<PAGE> 89
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: 1700 SEVENTH L.P., a Washington limited partnership
- --------
By: CLISE VENTURE ONE LLC, a Washington limited
liability company, its sole general partner
By: CLISE PROPERTIES, INC., a Washington
corporation, its authorized member
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
LENDERS: BANK OF AMERICA, N.A., individually in its
capacity as a Lender, in its capacity as
Administrative Agent and in its capacity as Project
Administrative Agent
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
BANK ONE, NA (MAIN OFFICE-CHICAGO)
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
<PAGE> 90
U.S. BANK
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
KEYBANK NATIONAL ASSOCIATION
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
<PAGE> 91
SCHEDULE 4.3
Capitalized terms used in this Schedule 4.3 and not otherwise defined
shall have the meanings given to them in the Credit Agreement. In addition to
the terms of Section 2.1 and Section 4.3 of the Credit Agreement, each Revolving
Loan advance under the Credit Agreement, and the disbursement of any equity or
other funds deposited with the Project Administrative Agent pursuant to the
terms of this Schedule 4.3 (collectively the "Funds") shall be subject to the
following terms and provisions:
(a) General Conditions to Disbursements. Each disbursement of Funds at
the request of the Borrower is subject to the following general conditions:
(i) Neither the Improvements nor any other part of the Project shall
have been materially damaged by fire or other casualty, and there shall be no
eminent domain or condemnation proceeding pending or threatened against the
Project. This condition shall be deemed satisfied if the Borrower has satisfied
the conditions to the use of insurance and condemnation proceeds set forth in
Sections 6.6 and 6.13 of the Credit Agreement.
(ii) Upon completion of the foundations of the Improvements, the
Administrative Agent shall have received a foundation endorsement to the
Mortgage Policy, in form and content acceptable to the Administrative Agent,
showing no encroachments of the foundations onto other property.
(iii) The Project Administrative Agent must be satisfied that the
Revolving Loans are "in balance" pursuant to subparagraph (e) below, or the
Borrower must have deposited the additional Funds with the Project
Administrative Agent required pursuant to such subparagraph (e).
(iv) The Lenders are not prohibited from disbursing Funds under any
applicable lien laws or stop notice statutes or otherwise except to the extent
that such Funds are withheld as provided in subparagraph (b) below.
(v) No legal or administrative proceeding challenging the validity
of or seeking to enjoin, set aside, review or otherwise challenge any
governmental permit or approval applicable to the Project shall be pending or
threatened.
Unless all the foregoing conditions of subsection (a) are met to the
Project Administrative Agent's satisfaction, neither the Lenders, nor the
Administrative Agent, nor the Project Administrative Agent shall have any
obligation to make any disbursement of Funds requested by the Borrower; however,
the Required Lenders may elect to make an advance of the Funds notwithstanding
that any one or more of the foregoing conditions is not satisfied, and by doing
so they shall not be deemed to have waived the right to require the satisfaction
of any such conditions with respect to any other advance of the Funds. The
proceeds of the Revolving Loans and other Funds will be deposited in the Deposit
Account and from which any payments that the Borrower is required to make will
be automatically withdrawn.
<PAGE> 92
(b) Disbursements for Construction Costs.
(i) The Borrower may request disbursements of Funds to pay direct
construction costs provided for in the Project Budget once a month. All requests
for payment of the Construction Costs specified in the Project Budget shall be
pursuant to a draw request ("Draw Request") submitted to the Project
Administrative Agent. Each Draw Request shall be on an AIA form of Application
and Certificate for Payment (or other form approved by the Project
Administrative Agent), signed by the general contractor, the Borrower and the
project architect, as required by the Project Administrative Agent. Subject to
the conditions set forth in Sections 2.1 and 4.3 of the Credit Agreement, and
the other conditions to disbursement set forth in this Schedule 4.3, Revolving
Loan advances shall be made after the Project Administrative Agent's receipt and
approval of the Draw Request and any supplementary documentation or information
required by the Project Administrative Agent in accordance with the terms of the
Credit Agreement and this Schedule 4.3. The Project Administrative Agent agrees
that it will review the Draw Request and any supplemental documentation or
information required by the Project Administrative Agent and make a
determination as to whether such Draw Request and other documentation or
information are acceptable to the Project Administrative Agent within seven (7)
Business Days of receipt of such items. The Project Administrative Agent
additionally agrees that it will immediately notify the Borrower of its approval
of any Draw Request and related materials. The Project Administrative Agent
agrees that it will provide copies of any Draw Request or any other supplemental
documentation or information provided to the Project Administrative Agent in
accordance with this Schedule 4.3 to any Lender which requests copies of any
such Draw Request, documentation or information. The Project Administrative
Agent also agrees to provide a copy of the Project Budget to any Lender which
requests a copy of the Project Budget.
(ii) Unless otherwise agreed in writing by the Project
Administrative Agent, each Draw Request shall be accompanied by the following,
all of which must be acceptable to the Project Administrative Agent in its
reasonable discretion (l) a Certificate of Job Progress signed by the Borrower
and the general contractor stating the percentage of the Project completed
through the date payment is requested; (2) if requested by the Project
Administrative Agent, invoices (or other reasonable evidence) substantiating the
Construction Costs covered by the Draw Request; and (3) executed acknowledgments
of payment and releases of liens (through the date covered by the immediately
preceding monthly advance) from the general contractor and, if required by the
Project Administrative Agent, from all laborers, subcontractors and materialmen
performing labor or services or supplying materials in connection with the
Project ("Subcontractors").
(iii) The Project Administrative Agent will withhold from each
advance for Construction Costs an amount (the "Retention") equal to five percent
(5%) of the amount of the Construction Costs for which disbursement is
requested. The amount of the Retention shall be held by the Project
Administrative Agent until the conditions for final advance set forth below are
satisfied. If a disbursement is requested to pay for materials stored off-site,
prior to making the disbursement, the Project Administrative Agent must receive
(1) a copy of a bill of sale or other acceptable evidence establishing that such
materials were purchased free and clear of liens and encumbrances and not
pursuant to a conditional sales contract, (2) evidence the materials are
<PAGE> 93
stored at a suitable location acceptable to the Project Administrative Agent,
and are insured against damage or destruction for the full insurable value under
a policy of insurance which names the Administrative Agent as an additional loss
payee on behalf of the Lenders, and (3) evidence the materials are segregated
from materials and equipment not intended to be incorporated into the Project.
(iv) In the event the Project Administrative Agent receives a notice
of a potential lien pursuant to RCW 60.04.221, to the extent there is not bond
in place for such item pursuant to either RCW 60.04.161 or RCW 60.04.221, the
Project Administrative Agent shall withhold from the next and subsequent draws
the amount claimed to be due as stated in the notice. Sums so withheld shall not
be disbursed by the Project Administrative Agent, except by the written
agreement of the potential lien claimant owner, and prime contractor in such
form as may be prescribed by the Project Administrative Agent, or the order of a
court of competent jurisdiction, but the Project Administrative Agent shall not
otherwise refuse to allow a Draw Request on the basis of such a notice.
(v) The Project Administrative Agent shall have no obligation to
approve a Draw Request for the payment of Construction Costs if (a) the
percentage of Construction Costs in the Project Budget which has already been
disbursed is greater than the percentage of completion of the Project, as
certified to the Project Administrative Agent in any Certificate of Job Progress
and verified by the Project Administrative Agent or the Consultant; or (b) the
percentage of any Construction Cost line item in the then current Project Budget
which is already paid out is greater than the percentage of completion of that
line item.
(c) Disbursements for Other Costs.
(i) Interest. If there is an interest reserve in the Project Budget,
prior to completion of Improvements (and after completion of the Improvements to
the extent the Net Operating Income is insufficient to pay interest due on the
Revolving Loans), the Project Administrative Agent will make monthly
disbursements of Funds from the interest reserve set forth in the Project Budget
to pay interest on the Revolving Loans. If in the Project Administrative Agent's
reasonable opinion, the undisbursed amount of the interest reserve in the
Project Budget (plus any anticipated Net Operating Income) is not sufficient to
pay interest on the Revolving Loans as it comes due under the Credit Agreement,
the Borrower shall pay the interest from its own monies (not Revolving Loan
proceeds or other Funds) in accordance with Section 2.1 of the Credit Agreement
or shall deposit additional funds with the Project Administrative Agent to be
added to the interest reserve, at the Project Administrative Agent's option. The
foregoing is not intended to alter or limit the Borrower's obligation to make
the interest payments on the Revolving Loans as required by Section 2.1 of the
Credit Agreement if the interest reserve is not adequate or if the Project
Administrative Agent otherwise is not required to make such disbursements.
(ii) Non-Construction Costs. The Borrower may from time to time
request the disbursement of Funds to pay costs other than Construction Costs if
such other costs are included in the Project Budget, and the disbursement
request is otherwise approved by the Project Administrative Agent. With each
request, the Borrower will provide the Project Administrative
<PAGE> 94
Agent with such evidence as the Project Administrative Agent may require
verifying the amount and purpose of the costs for which disbursement is
requested. Prior to disbursing Funds for any Project management or development
fees, real estate fees or commissions or otherwise, the Project Administrative
Agent shall have received, reviewed and approved executed copies of the
applicable agreement providing for the payment of such fees or commissions, and
the Project Administrative Agent shall be reasonably satisfied the Person to be
paid has duly performed the services for which payment is requested.
(d) Inspections by Project Administrative Agent. The Project
Administrative Agent may retain, at the Borrower's expense, an architect,
structural engineer or other construction consultant (the "Consultant") to
inspect the Project, review Draw Requests, the construction contract, the Plans
and Specifications, the Project Budget and such other documents or information
as the Project Administrative Agent may require, visit the Project and perform
such other duties as the Project Administrative Agent deems necessary or
desirable. The Project Administrative Agent shall instruct the Consultant and
shall otherwise take reasonable steps to cause the Consultant to provide such
services in a timely manner so as not to delay and reasonably complete the Draw
Request. The Consultant may make periodic inspections of the Improvements during
construction to review and comment on construction progress and percentage of
completion, conformity of the work with the Plans and Specifications, activity
and coordination among trades and quality of workmanship, and the accuracy of
the statement of percentage of completion reflected in any Certificate of Job
Progress submitted to the Project Administrative Agent. Any inspections by the
Project Administrative Agent or the Consultant shall be solely for the purpose
of protecting the interests of the Project Administrative Agent, the
Administrative Agent and the Lenders, and such inspections shall not be
construed as a representation to the Borrower or any other Person that there has
been or will be strict compliance on the part of any contractors or
subcontractors with the Plans and specifications or that construction of the
Improvements is or will be free from faulty materials or workmanship. If the
Consultant does not approve a Certificate of Job Progress, or any other
materials or information submitted to the Project Administrative Agent with a
Draw Request, the Project Administrative Agent will have no obligation to
approve the requested advance in an amount greater than the amount approved by
the Consultant.
(e) Loan Balancing. The Lenders shall have no obligation to make a
Revolving Loan advances and the Project Administrative Agent has no obligation
to disburse any Funds if in the Project Administrative Agent's reasonable
opinion the Revolving Loans are not "in balance"; i.e., the undisbursed balance
of the Revolving Loans, plus any undisbursed Funds previously deposited by the
Borrower with the Project Administrative Agent, if any, are not sufficient to
pay all costs necessary to complete the Project (including without limitation
the payment of interest on the Revolving Loans) in accordance with the approved
Plans and Specifications and the Project Budget, free and clear of all liens,
encumbrances and conditional sales contracts, whether the deficiency is
attributable to changes in the work or in the Plans and Specifications or to any
other cause. If at any time the Project Administrative Agent determines the
Revolving Loans are not in balance, within five (5) days after demand, the
Borrower will deposit with the Project Administrative Agent the amount necessary
to "balance" the Revolving Loans, and all Funds so deposited with the Project
Administrative Agent shall be held and disbursed by the Project Administrative
Agent in accordance with this Schedule 4.3 prior to
<PAGE> 95
making any additional disbursement of Funds. If the Project Administrative Agent
makes such demand, the Lenders shall have no obligation to make further
Revolving Loan advances and the Project Administrative Agent shall have no
obligation to disburse any Funds until such additional funds are deposited with
the Project Administrative Agent by the Borrower. Each Draw Request or other
request for disbursement submitted to the Project Administrative Agent will
constitute the Borrower's representation and warranty to the Project
Administrative Agent and the Lenders that the Revolving Loans are "in balance".
(f) Use and Application of Funds. The Project Administrative Agent shall
have no obligation to assure that Funds advanced to the Borrower or others are
applied against the cost of the Project. The Borrower accepts full
responsibility for the proper application of all Funds advanced at the
Borrower's request. The Project Administrative Agent may rely solely on Draw
Requests or other disbursement requests submitted by the Borrower or its agents
and upon other affidavits, statements or reports submitted by the Borrower or
its agents in making advances of Funds. The Borrower shall defend, indemnify and
hold the Project Administrative Agent, the Administrative Agent and the Lenders
harmless from any losses, demands, claims, attorneys' fees and expenses which
may arise out of the misapplication or misuse of Revolving Loans (or other
Funds) by the Borrower or by any other person paid at the Borrower's direction.
(g) Final Disbursement. The final disbursement of Funds, including the
Retention, shall be made only if the conditions set forth below are met to the
Project Administrative Agent's satisfaction:
(i) The Improvements and the Project are completed in accordance
with the Plans and Specifications as confirmed by the project architect and the
Project Administrative Agent or the Consultant, and the Project Administrative
Agent shall have received as-built Plans and Specifications for the Project.
(ii) The Administrative Agent shall have received, at the
Borrower's expense, an endorsement (in form and substance satisfactory to the
Administrative Agent) to the Mortgage Policy insuring the lien-free completion
of the Project, without exceptions other than those previously approved by the
Administrative Agent.
(iii) The Project Administrative Agent and the Administrative
Agent shall have received an as-built survey of the Project and an endorsement
to the Title Policy eliminating title exceptions regarding possible
encroachments and/or violations of easement rights.
(iv) The Project Administrative Agent shall have received copies
of all licenses, permits and certificates necessary for the lawful use and
occupancy of the Project, including but not limited to a copy of the final
certificate of occupancy for the Project, which shall be unconditional unless
otherwise agreed by the Project Administrative Agent, or other evidence
acceptable to the Project Administrative Agent that the Project is completed and
accepted by all necessary governmental authorities.
<PAGE> 96
(v) If requested by the Project Administrative Agent, the
Project Administrative Agent shall have received a final accounting of Project
costs from the Borrower and/or its general contractor.
(vi) The Project Administrative Agent shall have received fully
executed lien releases from General Contractor and, if required by the Project
Administrative Agent, the Subcontractors, or the Borrower shall have provided
the Administrative Agent on behalf of the Lenders with an appropriate surety
bond from a surety acceptable to the Project Administrative Agent or affirmative
title insurance coverage with respect to potential laborers', mechanics' or
materialmen's liens.
(h) Expenses, Fees and Interest. Notwithstanding any other provision of
this Schedule 4.3 or the Credit Agreement, the Project Administrative Agent may
elect (after having provided notice to the Borrower) to use Funds to pay when
due expenses of the Project Administrative Agent, the Administrative Agent or
the Lenders which are the Borrower's responsibility under the Credit Agreement
or any of the other Credit Documents, and such other sums as may be payable from
time to time by the Borrower to the Project Administrative Agent, the
Administrative Agent or the Lenders with respect to the Revolving Loans. Such
payments at the option of the Project Administrative Agent may be made by
debiting or charging the Funds in the amount of such payments without first
disbursing such amounts to Borrower. In addition, the Borrower hereby authorizes
the Administrative Agent, at its option, to make such other payments as the
Administrative Agent deems necessary or desirable to maintain the validity and
priority of the Mortgage Instrument, including the following, unless the
Borrower makes the payment within ten (10) days after written notice from
Administrative Agent: (i) pay delinquent assessments and taxes on the Project;
(ii) pay title insurance premiums, recording fees, and hazard, liability and
flood insurance premiums; (iii) pay contractor's liens or claims of liens
against the Project, subject to any right the Borrower may have to contest such
liens pursuant to the terms of the Mortgage Instrument or the other Credit
Documents, and (iv) pay judgments affecting the Project, subject to any right
the Borrower may have to contest such judgment's pursuant to the terms of the
Mortgage Instrument or the other Credit Documents.
<PAGE> 1
EXHIBIT 10.23
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT dated as of February 29, 2000 (the "Guaranty")
is given by NORDSTROM, INC., a Washington corporation (the "Guarantor"), in
favor of BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the
"Administrative Agent") and the Lenders party to the Credit Agreement described
below.
W I T N E S S E T H
WHEREAS, 1700 Seventh L.P., a Washington limited partnership (the
"Borrower"), the Lenders and the Administrative Agent have entered into that
certain Credit Agreement dated as of the date hereof (as amended, modified,
restated or supplemented from time to time, the "Credit Agreement"); and
WHEREAS, this Guaranty is a condition precedent to the effectiveness of
the Credit Agreement and the obligations of the Lenders to make loans and
extensions of credit to the Borrower under the Credit Agreement.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Guarantor hereby agrees as follows:
SECTION 1
DEFINITIONS
1.1 CERTAIN DEFINITIONS.
Unless otherwise defined herein, capitalized terms used herein
(including those in the preamble and recitals) shall have the meanings ascribed
to such terms in the Credit Agreement.
"Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
first Person. The term "control" means the possession, directly or
indirectly, of the power, whether or not exercised, to direct or cause
the direction of the management or policies of a Person, whether through
the ownership of Capital Stock by contract or otherwise, and the terms
"controlled" and "common control" have correlative meanings. Unless
otherwise indicated, "Affiliate" refers to an Affiliate of the
Guarantor. Notwithstanding the foregoing, in no event shall any Lender
or any Affiliate of a Lender be deemed to be an Affiliate of the
Guarantor. For avoidance of doubt, the parties agree that the Borrower
is not an Affiliate of the Guarantor.
"Applicable Law" means all applicable provisions of all (i)
constitutions, treaties, statutes, laws, rules, regulations and
ordinances of any Governmental Authority, (ii)
<PAGE> 2
Governmental Approvals and (iii) orders, decisions, judgments, awards
and decrees of any Governmental Authority.
"Capital Stock" means, with respect to any Person, all (i)
shares, interests, participations or other equivalents (howsoever
designated) of capital stock and other equity interests of such Person
and (ii) rights (other than debt securities convertible into capital
stock or other equity interests), warrants or options to acquire any
such capital stock or other equity interests.
"Capitalized Leases" means, as to any Person, all leases of such
Person of real or personal property that are required to be capitalized
on the balance sheet of such Persons. The amount of any Capitalized
Lease shall be the capitalized amount thereof.
"Change of Control" means any Person or two or more Persons
acting in concert (other than the Controlling Stockholders) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Act of 1934),
directly or indirectly, of Voting Stock of the Guarantor (or other
Securities convertible into such Voting Stock) representing 40% or more
of the combined voting power of all Voting Stock of the Guarantor.
"Closing Date" means the date hereof.
"Contingent Obligation" means, as to any Person, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) with
respect to any Debt or other obligation of another Person, including any
direct or indirect guarantee of such Debt (other than any endorsement
for collection in the ordinary course of business) or any other direct
or indirect obligation, by agreement or otherwise, to purchase or
repurchase any such Debt or obligation or any security therefor, or to
provide funds for the payment or discharge of any such Debt or
obligation (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), (ii) to provide funds to maintain
the financial condition of any other Person, or (iii) otherwise to
assure or hold harmless the holders of Debt or other obligations of
another Person against loss in respect thereof. The amount of any
Contingent Obligation under clause (i) or (ii) shall be the greater of
(a) the amount of the Debt or obligation guaranteed or otherwise
supported thereby, or (b) the maximum amount guarantied or supported by
the Contingent Obligation. The term "Contingent Obligation," as used
with respect to the Guarantor, shall not include (i) the obligations of
the Guarantor under any obligation which the Guarantor does or may have
to sell to, repurchase from or indemnify the purchaser with respect to
accounts discounted or sold by the Guarantor in the ordinary course of
its business (but any such other obligation shall be excluded only to
the extent that such other obligation is not for the benefit, directly
or indirectly, of any Person that is not a wholly owned Subsidiary
(direct or indirect) of the Guarantor) or (ii) any obligation which a
Subsidiary does or may have to sell to, repurchase from or indemnify the
purchaser with respect to accounts discounted or sold by the Subsidiary
in the ordinary course of its business (but any such other obligation
shall be excluded only to the extent that such obligation is not for the
benefit,
2
<PAGE> 3
directly or indirectly, of any Person that is not a wholly owned
Subsidiary (direct or indirect) of the Guarantor); or (iii) supply,
service or licensing agreements between or among Nordstrom.com, LLC, a
Delaware limited liability company, and its successors on the one hand,
and the Guarantor and its other Subsidiaries, on the other hand, so long
as such agreements are fair and reasonable to the Guarantor and such
other Subsidiaries under the circumstances.
"Contractual Obligation" means, as applied to any Person, any
provision of any security issued by that Person or any indenture,
agreement or other instrument to which that Person is a party or by
which it or any of the properties owned or leased by it is bound or
otherwise subject.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (irrespective of whether
incorporated) that, together with the Guarantor or any Subsidiary, are
or were treated as a single employer under Section 414 of the Code.
"Controlling Stockholders" means the individuals listed on
Schedule 1 hereto and the spouse and lineal descendents of any such
individual.
"Debt" means, with respect to any Person, the aggregate amount
of, without duplication: (i) all obligations for borrowed money; (ii)
all obligations evidenced by bonds, debentures, notes or other similar
instruments; (iii) all obligations to pay the deferred purchase price of
property or services, except trade accounts payable not overdue arising
in the ordinary course of business; (iv) all Capitalized Leases; (v) all
obligations of others secured by a Lien on any asset owned by such
Person or Persons whether or not such obligation or liability is
assumed; (vi) all obligations of such Person or Persons, contingent or
otherwise, in respect of any letters of credit or bankers' acceptances;
and (vii) all Contingent Obligations.
"Default" means any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"EBITDAR" means, for any period, net income (or net loss) plus,
to the extent deducted in determining such net income (or net loss), the
sum of (a) interest expense, (b) income tax expense, (c) depreciation
expense, (d) amortization expense and (e) rent expense, in each case
determined in accordance with GAAP for such period.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to rime.
"ERISA Event" means (i) (a) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC (provided that a reportable event arising from the
disqualification of a Plan or the distress termination of a
3
<PAGE> 4
Plan under ERISA Section 4041(c) shall be deemed to be an ERISA Event
without regard to the waiver of notice provided by the PBGC by
regulation or otherwise), or (b) the requirements of subsection (1) of
Section 4043(b) of ERISA (without regard to subsection (2) of such
Section) are met with respect to a contributing sponsor, as defined in
Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to such Plan within the
following 30 days; (ii) an application is filed with the Internal
Revenue Service for a minimum funding waiver under Section 412 of the
Internal Revenue Code with respect to a Plan; (iii) the provision by the
administrator of any Plan of a notice of intent to terminate such Plan
pursuant to Section 4041(a)(2) of ERISA (including any such notice with
respect to a plan amendment referred to in Section 4041(e) of ERISA);
(iv) the cessation of operations at a facility of the Guarantor or any
member of the Controlled Group in the circumstances described in Section
4062(e) of ERISA; (v) the withdrawal by the Guarantor or any member of
the Controlled Group from a Multiple Employer Plan during a plan year
for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (vi) the conditions for the imposition of a lien
under Section 302(f) of ERISA shall have been met with respect to any
Plan; (vii) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA; or
(viii) the institution by the PBGC of proceedings to terminate a Plan
pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that constitutes grounds
for the termination of, or the appointment of a trustee to administer, a
Plan.
"Existing Liens" means the Liens described on Schedule 5.1.1.
"Fiscal Year" means the fiscal year of the Guarantor, which shall
be the 12 month-period ending on January 31 in each year or such other
period as the Guarantor may designate and the Agent may approve in
writing. "Fiscal Quarter" or "fiscal quarter" means any quarter of a
Fiscal Year.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3.
"Governmental Approval" means an authorization, consent,
approval, permit or license issued by, or a registration or filing with,
any Governmental Authority.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guaranteed Obligations" means, without duplication, (i) all of
the obligations of the Borrower to the Lenders, the Administrative Agent
and the Project Administrative Agent, whenever arising, under the Credit
Agreement, the Notes, the Environmental Indemnity Agreement, the
Collateral Documents or any of the other Credit Documents (including,
but not limited to, any interest accruing after the occurrence of a
Bankruptcy Event with respect to any Credit Party, regardless of whether
such interest is an allowed
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claim under the Bankruptcy Code) and (ii) all liabilities and
obligations, whenever arising, owing from the Borrower to any Lender, or
any Affiliate of a Lender, arising under any Hedging Agreement.
"Investment Agreement" means the Investment Agreement, dated as
of October 8, 1994, between the Guarantor and Nordstrom Credit, as
amended from time to time.
"Lien" means any lien, mortgage, pledge, security interest,
charge, or encumbrance of any kind (including any conditional sale or
other title retention agreement or any lease in the nature thereof) and
any agreement to give any lien, mortgage, pledge, security interest,
charge, or other encumbrance of any kind.
"Margin Regulations" means Regulations T, U and X of the Federal
Reserve Board, as amended from time to time.
"Margin Stock" means "margin stock" as defined in the Margin
Regulations.
"Material Adverse Effect" or "Material Adverse Change" means (i)
a material adverse effect on or (ii) a material adverse change in, as
the case may be, any one or more of the following: (A) the business,
assets, results of operations or financial condition of the Guarantor
and its Subsidiaries taken as a whole or (B) the ability of the
Guarantor to perform its obligations under any Credit Document to which
it is a party or (C) the actual material rights and remedies of any
Lender under any Credit Document.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA.
"Nordstrom Credit" means Nordstrom Credit, Inc., a Colorado
corporation, and any successor.
"Nordstrom.com Loan Agreement" means that certain loan agreement
to be entered into between the Guarantor and Nordstrom.com, LLC, as
amended or modified from time to time.
"Permitted Liens" means, with respect to any asset, the Liens (if
any) permitted to exist on such asset under Section 5.1.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated) or any Governmental Authority.
"Plan" means, at any time, any employee pension benefit plan that
is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and that is either (i)
maintained by the Guarantor or any member of a Controlled Group for
employees of the Guarantor or such Controlled Group or was formerly so
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maintained and in respect of which the Guarantor or any member of the
Controlled Group could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated or (ii) maintained for
employees of the Guarantor or any member of the Controlled Group and at
least one Person other than the Guarantor and the members of the
Controlled Group or was formerly so maintained and in respect of which
the Guarantor or any member of the Controlled Group could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or
were to be terminated.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any Capital Stock of the
Guarantor or any Subsidiary, now or hereafter outstanding except (a) a
dividend or other distribution payable solely in shares or equivalents
of Capital Stock of the same class as the Capital Stock on account of
which the dividend or distribution is being paid or made and (b) the
issuance of equity interests upon the exercise of outstanding warrants,
options or other rights, or (ii) any redemption, retirement, sinking
fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any Capital Stock of the Guarantor or any Subsidiary,
now or hereafter outstanding.
"Subsidiary" means, with respect to any Person, any other Person
of which more than 50% of the total voting power of the Capital Stock
entitled to vote in the election of the board of directors (or other
Persons performing similar functions) are at the time directly or
indirectly owned by such first Person. Unless otherwise indicated,
"Subsidiary" refers to a Subsidiary of the Guarantor.
"Taxes" means any present or future income, stamp and other
taxes, charges, fees, levies, duties, imposts, withholdings or other
assessments, together with any interest and penalties, additions to tax
and additional amounts imposed by any federal, state, local or foreign
taxing authority upon any Person.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies. entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even though the right to so vote has been suspended by the
happening of such a contingency.
"Wholly-Owned" means, with respect to any Subsidiary, that all
the Capital Stock (except for directors' qualifying shares) of such
Subsidiary are directly or indirectly owned by the Guarantor.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
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1.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Administrative
Agent or the Lenders hereunder shall be prepared, in accordance with GAAP
applied on a consistent basis. All calculations made for the purposes of
determining compliance with this Guaranty shall (except for changes concurred in
by the relevant independent public accountants) be made by application of GAAP
applied on a basis consistent with the audited financial statements of the
Guarantor referred to in Section 3.1.
SECTION 2
GUARANTY
2.1 THE GUARANTY.
The Guarantor hereby guarantees to each Lender, each Affiliate of a
Lender that enters into a Hedging Agreement, and the Administrative Agent as
hereafter provided, as primary obligor and not as surety, the prompt payment of
the Guaranteed Obligations in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration, as a mandatory cash collateralization or
otherwise) strictly in accordance with the terms thereof. The Guarantor hereby
further agrees that if any of the Guaranteed Obligations are not paid in full
when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise), the Guarantor
will promptly pay the same, without any demand or notice whatsoever (except for
any such notice required by the Credit Agreement), and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise) in accordance with the terms of such extension
or renewal.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents or Hedging Agreements, the obligations of the
Guarantor hereunder and the other Credit Documents shall be limited to an
aggregate amount equal to the largest amount that would not render such
obligations subject to avoidance under Section 548 of the Bankruptcy Code or any
comparable provisions of any applicable state law.
2.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Guarantor under Section 2.1 are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of any of the Credit Documents or Hedging Agreements, or any
other agreement or instrument referred to therein, or any substitution,
compromise, release, impairment or exchange of any other guarantee of or
security for any of the Guaranteed Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 2.2 that the
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obligations of the Guarantor hereunder shall be absolute and unconditional under
any and all circumstances. The Guarantor agrees that it shall have no right of
subrogation, indemnity, reimbursement or contribution against the Borrower or
any other guarantor for amounts paid under this Section 2 until such time as the
Lenders (and any Affiliates of Lenders entering into Hedging Agreements) have
been paid in full, all Commitments under the Credit Agreement have been
terminated and no Person or Governmental Authority shall have any right to
request any return or reimbursement of funds from the Lenders in connection with
monies received under the Credit Documents or Hedging Agreements. Without
limiting the generality of the foregoing, it is agreed that, to the fullest
extent permitted by law, the occurrence of any one or more of the following
shall not alter or impair the liability of the Guarantor hereunder which shall
remain absolute and unconditional as described above:
(a) at any time or from time to time, without notice to the
Guarantor, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any of
the Credit Documents or Hedging Agreements or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements
shall be done or omitted;
(c) (i) the maturity of any of the Guaranteed Obligations shall
be accelerated, or (ii) any of the Guaranteed Obligations shall be
modified, supplemented or amended in any respect with the consent of the
Guarantor, or (iii) any right under any of the Credit Documents or
Hedging Agreements or any other agreement or instrument referred to in
the Credit Documents or Hedging Agreements shall be waived, or (iv) any
other guarantee of any of the Guaranteed Obligations or any security
therefor shall be released, impaired or exchanged in whole or in part or
otherwise dealt with;
(d) any Lien granted to, or in favor of, the Administrative Agent
or any Lender or Lenders as security for any of the Guaranteed
Obligations shall fail to attach or be perfected; or
(e) any of the Guaranteed Obligations shall be determined to be
void or voidable (including, without limitation, for the benefit of any
creditor of the Guarantor) or shall be subordinated to the claims of any
Person (including, without limitation, any creditor of the Guarantor).
With respect to its obligations hereunder, the Guarantor hereby expressly waives
diligence, presentment, demand of payment, protest, notice of acceptance of this
Guaranty and of extensions of credit which may constitute Guaranteed
Obligations, notice of amendments, waivers or supplements to the Credit
Documents (except for any such notice required by the Credit Agreement) or
Hedging Agreements or the compromise, release or exchange of collateral or
security and all other notices whatsoever, and any requirement that the
Administrative Agent or any Lender exhaust any right, power or remedy or proceed
against any Person under any of the Credit Documents or Hedging Agreements or
any other agreement or instrument referred to in the Credit
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Documents or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations.
2.3 REINSTATEMENT.
Neither the Guarantor's obligations hereunder nor any remedy for the
enforcement thereof shall be impaired, modified, changed or released in any
manner whatsoever by an impairment, modification, change, release or limitation
of the liability of the Borrower, by reason of the Borrower's bankruptcy or
insolvency or by reason of the invalidity or unenforceability of all or any
portion of the Guaranteed Obligations. The obligations of the Guarantor under
this Guaranty shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of any Person in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Guarantor agrees that it will
indemnify the Administrative Agent and each Lender on demand for all reasonable
costs and expenses (including, without limitation, reasonable fees and expenses
of counsel) incurred by the Administrative Agent or such Lender in connection
with such rescission or restoration, including any such costs and expenses
incurred in defending against any claim alleging that such payment constituted a
preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.
2.4 CERTAIN ADDITIONAL WAIVERS.
The Guarantor agrees that this Guaranty may be enforced by the
Administrative Agent and the Lenders without the necessity of resorting to or
exhausting any other security or collateral and without the necessity at any
time of having recourse to the Borrower under the Credit Agreement, any Hedging
Agreement or any collateral securing the Guaranteed Obligations or otherwise,
and the Guarantor agrees not to assert any right to require the Administrative
Agent and the Lenders to proceed against the Borrower or any other Person
(including any co-guarantor) or to require the Administrative Agent and the
Lenders to pursue any other remedy or enforce any other right. The Guarantor
further acknowledges and agrees that nothing contained in this Guaranty shall
prevent the Administrative Agent or the Lenders from suing the Borrower in
respect of its obligations under the Credit Agreement, any Hedging Agreement and
the other Credit Documents or foreclosing on any security interest or lien on
any collateral securing the Guaranteed Obligations or from exercising any other
rights available to the Administrative Agent and the Lenders under the Credit
Documents or Hedging Agreements if neither the Borrower nor the Guarantor timely
perform their obligations, and the exercise of any of such rights and completion
of any such foreclosure proceedings shall not constitute a discharge of any of
the Guarantor's obligations hereunder unless as a result thereof the Guaranteed
Obligations shall have been paid in full and all of the Commitments shall have
terminated or expired, it being the purpose and intent that the Guarantor's
obligations hereunder be absolute, irrevocable, independent and unconditional
under all circumstances.
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2.5 REMEDIES.
The Guarantor agrees that, to the fullest extent permitted by law, as
between the Guarantor, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, the Guaranteed Obligations may be declared to be
forthwith due and payable as provided in Section 8.2 of the Credit Agreement
(and shall be deemed to have become automatically due and payable in the
circumstances provided in said Section 8.2 of the Credit Agreement) for purposes
of Section 2.1 notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing such Guaranteed Obligations from
becoming automatically due and payable) as against any other Person and that, in
the event of such declaration (or such Guaranteed Obligations being deemed to
have become automatically due and payable), such Guaranteed Obligations (whether
or not due and payable by any other Person) shall forthwith become due and
payable by the Guarantor for purposes of Section 2.1.
2.6 FURTHER REPRESENTATIONS AND WARRANTIES.
The Guarantor agrees that the Administrative Agent and the Lenders will
have no obligation to investigate the financial condition or affairs of the
Borrower for the benefit of the Guarantor nor to advise the Guarantor of any
fact respecting, or any change in, the financial condition or affairs of the
Borrower which might come to the knowledge of the Administrative Agent or any
Lender at any time, whether or not the Administrative Agent or any Lender knows
or believes or has reason to know or believe that any such fact or change is
unknown to the Guarantor or might (or does) materially increase the risk of the
Guarantor as Guarantor or might (or would) affect the willingness of the
Guarantor to continue as a guarantor with respect to the Guaranteed Obligations.
2.7 ADDITIONAL LIABILITY OF GUARANTOR.
If the Guarantor is or becomes liable for any indebtedness owing by the
Guarantor to the Administrative Agent or any Lender by endorsement or otherwise
other than under this Guaranty, such liability shall not be in any manner
impaired or reduced hereby but shall have all and the same force and effect it
would have had if this Guaranty had not existed and the Guarantor's liability
hereunder shall not be in any manner impaired or reduced thereby.
2.8 GUARANTEE OF PAYMENT; CONTINUING GUARANTEE.
The guaranty in this Section 2 is a guaranty of payment and not of
collection, is a continuing guaranty, and shall apply to all Guaranteed
Obligations whenever owing.
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SECTION 3
REPRESENTATIONS AND WARRANTIES
The Guarantor hereby represents and warrants to the Administrative Agent
and each Lender that:
3.1 FINANCIAL INFORMATION.
(a) The balance sheets of the Guarantor as of January 31, 1999
and the statements of earnings, stockholder's equity and cash flow of
the Guarantor for the Fiscal year then ended, certified by the
Guarantor's independent certified public accountants, which are included
in the Guarantor's Annual Report on Form 10-K for the Fiscal Year ended
January 31, 1999, were prepared in accordance with GAAP consistently
applied and fairly present the financial position of the Guarantor, as
of the respective dates thereof and the results of operations and cash
flow of the Guarantor for the periods then ended. The Guarantor on such
dates had no Contingent Obligations, liabilities for taxes or long-term
leases, forward or long-term commitments or unrealized losses from any
unfavorable commitments that are not reflected in the foregoing
statements or in the notes thereto and that, individually or in the
aggregate, are material.
(b) The unaudited balance sheet of the Guarantor as of October
31, 1999 and the related statements of earnings, stockholder's equity
and cash flow for the periods then ended, certified by the chief
financial officer of the Guarantor, which are included in the Borrower's
Quarterly Report on Form 10-Q for the Fiscal Quarter ended October 31,
1999, were prepared in accordance with GAAP consistently applied (except
to the extent noted therein) and fairly present the financial position
of the Guarantor as of such date and the results of operations and cash
flow for the periods covered thereby, subject to normal year-end audit
adjustments. The Guarantor on such date had no Contingent Obligations,
liabilities for taxes or long-term leases, forward or long-term
commitments or unrealized losses from any unfavorable commitments that
are not reflected in the foregoing statements or in the notes thereto
and that, individually or in the aggregate, are material.
3.2 NO MATERIAL CHANGE.
Since January 31, 1997, there has been no Material Adverse Change.
3.3 ORGANIZATION AND GOOD STANDING.
Each of the Guarantor and, except as would not reasonably be expected to
have a Material Adverse Effect, its Subsidiaries (a) is duly organized, validly
existing and is in good standing under the laws of the jurisdiction of its
incorporation or organization and (b) has the corporate or other necessary power
and authority, and the legal right, to own and operate its property, to carry on
its business as heretofore conducted, to enter into this Guaranty and to carry
out the transactions contemplated thereby. Except as would not reasonably be
expected to have a Material Adverse Effect, each of the Guarantor and the
Subsidiaries possesses all Governmental Approvals, in full
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force and effect, free from burdensome restrictions, that are necessary for the
ownership, maintenance and operation of its properties and conduct of its
business as now conducted, and is not in violation thereof. Each of the
Guarantor and the Subsidiaries is duly qualified and in good standing authorized
to do business in each state or other jurisdiction where the nature of its
business activities conducted or properties owned or leased requires it to be so
qualified and where any failure to be so qualified, individually or in the
aggregate, could have a Material Adverse Effect.
3.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
3.4.1 Authorization, Binding Effect, Etc. The execution, delivery
and performance by the Guarantor of this Guaranty has been duly
authorized by all necessary corporate action on the part of the
Guarantor; and this Guaranty has been duly executed and delivered by the
Guarantor and is the legal, valid and binding obligation of the
Guarantor, enforceable against it in accordance with its terms, except
as enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to
creditors' rights generally.
3.4.2 No Conflict. The execution, delivery and performance by the
Guarantor of this Guaranty, and the consummation of the transactions
contemplated thereby, do not and will not (a) violate any provision of
the charter or other organizational documents of the Guarantor, (b)
except for consents that have been obtained and are in full force and
effect, conflict with, result in a breach of, or constitute (or, with
the giving of notice or lapse of time or both, would constitute) a
default under, or require the approval or consent of any Person pursuant
to any Contractual Obligation of the Guarantor, (c) violate any
Applicable Law binding on the Guarantor, or (d) result in or require the
creation or imposition of any Lien on any assets or properties of the
Guarantor or any of its Subsidiaries.
3.4.3 Governmental Approvals. No Governmental Approval is or will
be required in connection with the execution, delivery and performance
by the Guarantor of this Guaranty or the transactions contemplated
thereby.
3.5 LITIGATION.
Except as disclosed on Schedule 3.5, there are no actions, suits or
proceedings pending or, to the best knowledge of the Guarantor, threatened
against or affecting the Guarantor, any Subsidiary or any of its properties
before any Governmental Authority (a) in which there is a reasonable possibility
of an adverse determination that could result in a material liability or have a
Material Adverse Effect or (b) that in any manner draws into question the
validity, legality or enforceability of any Credit Document or any transaction
contemplated thereby.
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3.6 TAXES.
All United States Federal income tax returns and all other material tax
returns required to be filed by the Guarantor or any Subsidiary have been filed
and all Taxes due pursuant to such returns have been paid, except such Taxes, if
any, as are being contested in good faith and as to which adequate reserves have
been established in accordance with GAAP. To the best knowledge of the
Guarantor, there has not been asserted or proposed to be asserted any Tax
deficiency against the Guarantor or any Subsidiary that would be material to the
Guarantor and its Subsidiaries taken as a whole and that is not reserved against
on the financial books of the Guarantor.
3.7 COMPLIANCE WITH LAW.
Neither the Guarantor nor any Subsidiary is in violation of any
Applicable Law, or in default under its charter documents, bylaws or any of its
Contractual Obligations except for such violations or defaults as do not result
in a Material Adverse Effect.
3.8 ERISA.
(a) The Guarantor and all members of the Controlled Group have
fulfilled their obligations under the minimum funding standards of ERISA
with respect to each Plan to which they are party and have not incurred
any liability to the PBGC in connection with any Plan established or
maintained by the Guarantor or any member of the Controlled Group.
(b) No ERISA Event has occurred and is continuing with respect to
any Plan (whether or not terminated). Neither Guarantor nor any member
of the Controlled Group is required to make or accrue a contribution or
has within any of the preceding five plan years made or accrued an
obligation to make contributions to any Multiemployer Plan. The fair
market value of the assets of each Plan is at least equal to the present
value of the "benefit liabilities" (within the meaning of Section
4001(a)(16) of ERISA) under such Plan determined using the actuarial
assumptions and method used by the actuary to such Plan in its valuation
of such Plan.
3.9 GOVERNMENTAL REGULATIONS, ETC.
The Guarantor is neither an "investment company" registered or required
to be registered under the Investment Company Act of 1940, as amended, or a
company controlled by such a company, nor subject to any Federal or state,
statute or regulation limiting its ability to incur Debt for money borrowed
(other than the Margin Regulations).
3.10 MARGIN RELATIONS.
Neither the Guarantor nor any Subsidiary is engaged principally, or as
one of its important activities, in the business of extending credit for the
purposes of purchasing or carrying
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Margin Stock. The value of all Margin Stock held by the Guarantor and the
Subsidiaries constitutes less than 25% of the value, as determined in accordance
with the Margin Regulations, of all assets of the Guarantor.
3.11 SOLVENCY.
The Guarantor is, after consummation of the transactions contemplated by
the Credit Agreement and this Guaranty, individually and together with its
Subsidiaries, Solvent.
3.12 DISCLOSURE.
All information in any document, certificate or written statement
furnished to the Lenders by or on behalf of the Guarantor with respect to the
business, assets, prospects, results of operation or financial condition of the
Guarantor or any Subsidiary for use in connection with the transactions
contemplated by this Agreement has been true and correct in all material
respects. There is no fact known to the Guarantor (other than matters of a
general economic nature) that has had or could reasonably be expected to have a
Material Adverse Effect and that has not been disclosed herein or in such other
documents, certificates or statements.
3.13 YEAR 2000 COMPLIANCE.
The Guarantor has (i) completed a review and assessment of all areas
within its and each of its Subsidiaries' business and operations that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Guarantor or any of its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (iii)
substantially completed implementation of that plan in accordance with the
timetable. The Year 2000 Problem has not resulted in, and the Guarantor
reasonably believes that the Year 2000 Problem will not result in, a Material
Adverse Effect.
SECTION 4
AFFIRMATIVE COVENANTS
The Guarantor hereby covenants and agrees that, so long as the Credit
Agreement is in effect or any amounts payable thereunder or under any other
Credit Document shall remain outstanding, and until all of the Commitments
thereunder shall have terminated:
4.1 INFORMATION COVENANTS.
The Guarantor will furnish to the Administrative Agent, for the benefit
of the Lenders:
(a) Annual Financial Statements. As soon as available, and in any
event within 120 days after the close of each Fiscal Year, the
consolidated balance sheet of the
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Guarantor and its consolidated Subsidiaries as of the end of such year
and the related statements of earnings, stockholder's equity and cash
flow of the Guarantor for such Fiscal Year, setting forth in each case
in comparative form the figures for the previous Fiscal Year, all in
reasonable detail and, accompanied by an unqualified report thereon of
Deloitte & Touche LLP or other independent certified public accountants
of recognized national standing selected by the Guarantor and reasonably
satisfactory to the Required Lenders, which report shall state that such
financial statements fairly present the financial position of the
Guarantor as of the date indicated and its results of operations and
cash flows for the periods indicated in conformity with GAAP (except as
otherwise stated therein) and that the examination by such accountants
in connection with such financial statements has been made in accordance
with generally accepted auditing standards;
(b) Quarterly Financial Statements. As soon as available, and in
any event within 60 days after the close of each Fiscal Quarter (other
than the last Fiscal Quarter of any Fiscal Year, in which case 120 days
after the end thereof) a consolidated balance sheet of the Guarantor and
its consolidated Subsidiaries as of the end of such quarter and the
related statements of earnings, stockholder's equity and cash flow for
such quarter and the portion of the Fiscal Year ended at the end of such
quarter, setting forth in each case in comparative form the figures for
the corresponding periods of the prior Fiscal Year, all in reasonable
detail and certified by the Guarantor's chief financial officer as
fairly presenting the financial condition of the Guarantor as of the
dates indicated and its results of operations and cash flows for the
periods indicated, subject to normal year-end adjustments;
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Section 4.1(a) and 4.1(b) above, a
certificate of an chief financial officer or president of the Guarantor,
(i) demonstrating compliance with the financial covenants contained in
Section 4.10 by calculation thereof as of the end of each such fiscal
period and (ii) stating that no Default or Event of Default exists, or
if any Default or Event of Default does exist, specifying the nature and
extent thereof and what action the Guarantor proposes to take with
respect thereto.
(d) Reports. Promptly upon their becoming available, copies of
all material reports, notices and proxy statements sent or made
available by the Guarantor to its security holders, and all material
registration statements (other than the exhibits thereto) and annual,
quarterly or monthly reports, if any, filed by the Guarantor with the
United States Securities and Exchange Commission.
(e) Notices. Within five Business Days after the Guarantor
obtains knowledge thereof, the Guarantor will give written notice to the
Administrative Agent of (i) the occurrence of an event or condition
consisting of a Default or Event of Default, specifying the nature and
existence thereof and what action the Guarantor proposes to take with
respect thereto, (ii) the occurrence of any of the following with
respect to the Guarantor or any of its Subsidiaries (A) the pendency or
commencement of any litigation, arbitral or governmental proceeding
against such Person which if adversely determined is likely to have a
Material
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Adverse Effect, or (B) an ERISA Event, together with a statement setting
forth the details thereof and the action that the Guarantor is taking or
proposes to take with respect thereto, together with a copy of the
notice, if any, of such event given or required to be given to the PBGC;
within five days of the date the Guarantor or any member of the
Controlled Group becomes obliged to make or accrue a contribution to a
Multiemployer Plan, a statement of the Guarantor setting forth the
details thereof and the action that the Guarantor is taking or proposes
to take with respect thereto.
(f) Other Information. With reasonable promptness upon any such
request, such other information regarding the business, properties or
financial condition of the Guarantor and its Subsidiaries as the
Administrative Agent or any Lender (through the Administrative Agent)
may reasonably request.
4.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
The Guarantor will, and will (except as otherwise permitted under
Section 5.3) cause each of its Subsidiaries to, at all times preserve and keep
in full force and effect its corporate existence and all rights and franchises
material to the Guarantor and its Subsidiaries taken as a whole.
4.3 BOOKS AND RECORDS.
The Guarantor shall, and shall cause each Subsidiary to, maintain
adequate books, records and accounts as may be required or necessary to permit
the preparation of financial statements required to be delivered hereunder in
accordance with sound business practices and GAAP. The Guarantor shall, and
shall cause each Subsidiary to, permit such Persons as the Administrative Agent
may designate, at reasonable times during the Guarantor's regular office hours
as often as may reasonably be requested and under reasonable circumstances, to
(a) visit and inspect any of its properties, (b) inspect and copy its books and
records, and (c) discuss with its officers and its independent accountants, its
business, assets, liabilities, results of operation or financial condition.
4.4 CONDUCT OF BUSINESS; COMPLIANCE WITH LAW.
The Guarantor shall not change the general character of its business as
conducted at the Closing Date or engage, directly or through a Subsidiary, in
any type of business not reasonably related to its business as normally
conducted. The Guarantor shall maintain its right to carry on business in any
jurisdiction where it is doing business at such time and remain in and
continuously operate the same lines of business presently engaged in except for
periodic shutdown in the ordinary course of business and interruptions caused by
strike, labor dispute, catastrophe or any other events over which it has no
control. The Guarantor shall, and shall cause each of its Subsidiaries to,
conduct its business in compliance in all material respects with all Applicable
Law and all its Contractual Obligation except where failure to do so does not
result in a Material Adverse Effect.
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4.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
The Guarantor shall, and shall cause each Subsidiary to, pay and
discharge (a) all Taxes imposed upon it or any of its properties or in respect
of any of its franchises, business, income or property before any material
penalty shall be incurred with respect to such Taxes, and (b) all claims of any
kind (including claims for labor, material and supplies) that, if unpaid, might
by Applicable Law become a Lien upon any material portion of the property of the
Guarantor and its Subsidiaries; provided, however, that, unless and until
foreclosure, distraint, levy, sale or similar proceedings shall have commenced,
the Guarantor need not pay or discharge any such Tax or claim so long as the
validity or amount thereof is being contested in good faith and by appropriate
proceedings and so long as any reserves or other appropriate provisions as may
be required by GAAP shall have been made therefor.
4.6 INSURANCE.
The Guarantor shall, and shall cause each Subsidiary to, maintain with
financially sound and reputable insurance companies insurance (or adequate self
insurance) in at least such amounts, of such character and against at least such
risks as is usually maintained by companies of established repute engaged in the
same or a similar business in the same general area.
4.7 MAINTENANCE OF PROPERTY.
The Guarantor shall, and shall cause each Subsidiary to, maintain or
cause to be maintained in good repair, working order and condition (ordinary
wear and tear excepted), all properties and other assets useful or necessary to
its business, and from time to time the Guarantor shall make or cause to be made
all appropriate repairs, renewals and replacements thereto except, in each case,
to the extent the failure to do so could not reasonably be expected to have a
Material Adverse Effect. The Guarantor shall, and shall cause each of its
Subsidiaries to, use reasonable efforts to prevent offsets of and defenses to
its receivables and other rights to payment.
4.8 FURTHER ASSURANCES.
At any time and from time to time, upon the request of the
Administrative Agent, the Guarantor shall execute and deliver such further
documents and do such other acts and things as the Administrative Agent may
reasonably request in order to effect fully the purposes of this Guaranty and
any other agreement contemplated hereby and to provide for payment and
performance of the Guaranteed Obligations in accordance with the terms of the
Credit Documents.
4.9 FUTURE INFORMATION.
All data, certificates, reports, statements, documents and other
information the Guarantor shall furnish to the Lenders in connection with the
Credit Documents shall, at the time the information is furnished, not contain
any untrue statement of a material fact shall be complete
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and correct in all material respects to the extent necessary to give the Lenders
sufficient and accurate knowledge of the subject matter thereof, and shall not
omit to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which such
information is furnished.
4.10 FINANCIAL COVENANTS.
(a) Consolidated Net Worth. The consolidated Net Worth of the
Guarantor and its Subsidiaries shall, as of the last day of any Fiscal
Quarter, be not less than $750,000,000.
(b) Coverage Ratio. As of the last day of any period of four
consecutive Fiscal Quarters, the Guarantor shall maintain the ratio of
EBITDAR for such period to the sum of interest expense (including
capitalized interest) and rent expense for such period greater than or
equal to 2.0 to 1.0.
4.11 YEAR 2000 COMPLIANCE.
The Guarantor will promptly notify the Administrative Agent in the event
it discovers or determines that the Year 2000 Problem has resulted in, or is
reasonably expected to result in, a Material Adverse Effect.
SECTION 5
NEGATIVE COVENANTS
The Guarantor hereby covenants and agrees that, so long as the Credit
Agreement is in effect or any amounts payable thereunder or under any other
Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
5.1 LIENS.
The Guarantor shall not, and shall not permit any Subsidiary to,
directly or indirectly, create, incur, assume or permit to exist any Lien on or
with respect to any asset of the Guarantor or any Subsidiary, whether now owned
or hereafter acquired, except:
5.1.1. Liens securing the Obligations (as defined in the Nordstrom
Credit Agreement) and Existing Liens;
5.1.2. (a) Liens for Taxes, assessments or charges of any
Governmental Authority for claims that are not material and are not yet due or
are being contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being maintained in
accordance with GAAP; (b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen, bankers and other Liens imposed by law and
created in the ordinary course of business for amounts that are not material and
are not yet due or being contested in good faith by appropriate proceedings and
with respect to which
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adequate reserves or other appropriate provisions are being maintained in
accordance with GAAP; (c) Liens incurred and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance (including by way of surety bonds or appeal bonds) of tenders, bids,
leases, contracts, statutory obligations or similar obligations or arising as a
result of progress payments under contracts, in each case in the ordinary course
of business and not relating to the repayment of Debt; (d) easements,
rights-of-way, covenants, consents, reservations, encroachments, variations and
other restrictions, charges or encumbrances (whether or not recorded) that do
not materially interfere with the ordinary conduct of the Guarantor's business;
(e) building restrictions, zoning laws and other statutes, laws, rules,
regulations, ordinances and restrictions; and (f) leases, subleases or easements
granted in the ordinary course of business to others not materially interfering
with the business of, and consistent with past practices of, the Guarantor;
5.1.3. any attachment or judgment Lien, not otherwise constituting
an Event of Default, in existence less than 30 days after the entry thereof or
with respect to which (a) execution has been stayed, (b) payment is covered in
full by insurance, or (c) the Guarantor is in good faith prosecuting an appeal
or other appropriate proceedings for review and has set aside on its books such
reserves as may be required by GAAP with respect to such judgment or award;
5.1.4. Liens securing Debt of the Guarantor or any Subsidiary,
including Capitalized Leases, used to finance the acquisition of fixed assets of
the Guarantor or such Subsidiary, the construction of additional buildings or
the expansion otherwise of their respective facilities, provided that such Debt
(a) does not exceed the cost to the Guarantor or such Subsidiary of the assets
acquired with the proceeds of such Debt, (b) in the case of new construction or
expansion of existing facilities, is either a construction or permanent loan
secured by the facilities constructed and the real property on which such
facilities are located, and (c) in the case of other asset financing, is
incurred within twelve months following the date of the acquisition, provided
that any such Lien does not encumber any property other than the assets acquired
with the proceeds of such Debt;
5.1.5. Liens existing on assets of any Person at the time such
assets are acquired, provided such Lien does not encumber any assets other than
the assets subject to such Lien at the time such assets are acquired;
5.1.6. Liens arising from the securitization of receivables, to the
extent the Debt arising from such securitization is permitted hereunder;
5.1.7. any Lien constituting a renewal, extension or replacement of
any Existing Lien or any Lien permitted by Section 5.1.4 or 5.1.5., provided
such Lien is limited to all or a part of the property subject to the Lien
extended, renewed or replaced;
5.1.8. Liens on any or all of the assets of Nordstrom.com, LLC
securing Debt owing by Nordstrom.com, LLC under the Nordstrom.com Loan
Agreement; and
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5.1.9. other Liens incidental to the conduct of the business or the
ownership of the assets of the Guarantor or any Subsidiary that (a) were not
incurred in connection with borrowed money, (b) do not in the aggregate
materially detract from the value of the assets subject thereto or materially
impair the use thereof in the operation of such business and (c) do not secure
obligations aggregating in excess of $10,000,000.
5.2 RESTRICTED PAYMENTS.
The Guarantor shall not, and shall not permit any Subsidiary to,
declare, pay or make, or agree to declare, pay or make, any Restricted Payment,
except (a) dividends, distributions or payments by any Subsidiary to the
Guarantor, or (b) if no Default or Event of Default then exists or would result
therefrom (assuming for this purpose that compliance with Section 4.10, is being
measured as of the end of the immediately preceding Fiscal Quarter giving pro
forma effect to the Restricted Payment).
5.3 RESTRICTION ON FUNDAMENTAL CHANGES
The Guarantor shall not, and shall not permit any Subsidiary to, enter
into any merger, consolidation, reorganization or recapitalization, liquidate,
wind up or dissolve or sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or substantially all of its or
their business or assets, whether now owned or hereafter acquired, provided that
as long as no Default or Event of Default shall exist after giving effect
thereto (a) any Solvent Subsidiary or other Solvent Person (other than the
Guarantor) may be merged or consolidated with or into the Guarantor (so long as
the Guarantor is the surviving entity) or any Subsidiary, (b) any Subsidiary may
be liquidated, wound up or dissolved, and (c) in addition to transactions
permitted under Section 5.4 (which permitted transactions shall not be
restricted by this Section 5.3), all or substantially all of any Subsidiary's
business or assets may be sold, leased, transferred or otherwise disposed of, in
one transaction or a series of transactions, to the Guarantor or another
Subsidiary.
5.4 ASSET DISPOSITIONS
The Guarantor shall not, and shall not (except as permitted by Section
5.3(c)) permit any Subsidiary to, sell, lease or otherwise dispose of during any
Fiscal Year property or other assets (other than sales of inventory in the
ordinary course of business) constituting, in the aggregate, 10% or more of the
Guarantor's and its Subsidiaries' assets, taken as a whole, in terms of book
value. Notwithstanding the foregoing limitation, the Guarantor and its
Subsidiaries shall be permitted to sell their receivables in a transaction to
securitize such receivables.
5.5 TRANSACTIONS WITH AFFILIATES
The Guarantor shall not, and shall not permit any Subsidiary to, directly or
indirectly, enter into any transaction (including the purchase, sale, lease, or
exchange of any property or the
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rendering of any service) with any Affiliate of the Guarantor, unless (a) such
transaction is not otherwise prohibited by this Guaranty, (b) such transaction
is in the ordinary course of business and (c) if such transaction is other than
with a Wholly-Owned Subsidiary, such transaction is on fair and reasonable terms
no less favorable to the Guarantor or its Subsidiary, as the case may be, than
those terms which might be obtained at the time in a comparable arm's length
transaction with a Person who is not an Affiliate or, if such transaction is not
one which by its nature could be obtained from such other Person, is on fair and
reasonable terms and was negotiated in good faith, provided that this Section
shall not restrict (i) dividends, distributions and other payments and transfers
on account of any shares of Capital Stock of the Guarantor or any Subsidiary
otherwise permissible hereunder, (ii) transactions pursuant to (x) the
Investment Agreement and (y) any agreement between the Guarantor and any
Affiliate of the Guarantor pursuant to which the Guarantor sells or discounts
accounts receivable in the ordinary course of its business (including agreements
under which the Guarantor has an obligation to repurchase from or indemnify the
purchaser with respect to accounts discounted or sold by the Guarantor) and
(iii) supply, service or licensing agreements between or among Nordstrom.com,
LLC, a Delaware limited liability company, and its successors on the one hand,
and the Guarantor and its other Subsidiaries, on the other hand, so long as such
agreements are fair and reasonable to the Guarantor and such other Subsidiaries
under the circumstances.
SECTION 6
EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Guaranty. The guaranty given by the Guarantor hereunder shall
cease to be in full force and effect, or the Guarantor or any Person
acting by or on behalf of the Guarantor shall deny or disaffirm the
Guarantor's obligations under this Guaranty; or
(b) Representations. Any representation, warranty or
certification made or furnished by the Guarantor herein or in any of the
other Credit Documents shall prove to have been false or incorrect in
any material respect when made (or deemed made); or
(c) Covenants. The Guarantor shall
(i) default in the due performance or observance of any term,
covenant or agreement contained in Sections 4.1(e)(i) or 4.2
(insofar as it requires the preservation of the corporate
existence of the Guarantor) or 5.1 through 5.5, inclusive;
(ii) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in
subsections (a), (b) or (c)(i) of
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this Section 6.1) contained in this Guaranty and such default shall
continue unremedied for a period of at least 30 days after
written notice thereof by the Administrative Agent to the
Guarantor; or
(d) Other Credit Documents. (i) The Guarantor shall default in
the due performance or observance of any term, covenant or agreement in
this Guaranty (subject to applicable grace or cure periods, if any), or
(ii) any Credit Document shall fail to be in full force and effect or to
give the Administrative Agent and/or the Lenders the Liens, rights,
powers and privileges purported to be created thereby, or the Guarantor
shall so state in writing; or
(e) Bankruptcy, etc.
(i) There shall be commenced against the Guarantor or any of
its Subsidiaries, an involuntary case seeking the liquidation or
reorganization of the Guarantor or any of its Subsidiaries under
Chapter 7 or Chapter 11, respectively, of the Bankruptcy Code or
any similar proceeding under any other Applicable Law or an
involuntary case or proceeding seeking the appointment of a
receiver, liquidator, sequestrator, custodian, trustee or other
officer having similar powers of the Guarantor or any of its
Subsidiaries or to take possession of all or a substantial
portion of its property or to operate all or a substantial
portion of its business, and any of the following events occur:
(a) the Guarantor or any of its Subsidiaries consents to the
institution of the involuntary case or proceeding; (b) the
petition commencing the involuntary case or proceeding is not
timely controverted; (c) the petition commencing the involuntary
case or proceeding remains undismissed and unstayed for a period
of 60 days; or (d) an order for relief shall have been issued or
entered therein; or
(ii) The Guarantor or any of its Subsidiaries shall institute
a voluntary case seeking liquidation or reorganization under
Chapter 7 or Chapter 11, respectively, of the Bankruptcy Code or
any similar proceeding under any other Applicable Law, or shall
consent thereto; or shall consent to the conversion of an
involuntary case to a voluntary case; or shall file a petition,
answer a complaint or otherwise institute any proceeding seeking,
or shall consent to or acquiesce in the appointment of, a
receiver, liquidator, sequestrator, custodian, trustee or other
officer with similar powers of it or to take possession of all or
a substantial portion of its property or to operate all or a
substantial portion of its business; or shall make a general
assignment for the benefit of creditors; or shall generally not
pay its debts as they become due; or the Board of Directors of
the Guarantor or any of its Subsidiaries (or any committee
thereof) adopts any resolution or otherwise authorizes action to
approve any of the foregoing; or
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(f) Defaults under Other Agreements.
(i) The occurrence of an "Event of Default" under the Credit
Agreement;
(ii) (a) The Guarantor or any Subsidiary shall default in the
payment (whether at stated maturity, upon acceleration, upon
required prepayment or otherwise), beyond any period of grace
provided therefor, of any principal of or interest on any other
Debt with a principal amount (individually or in the aggregate)
in excess of $10,000,000, or (b) any other breach or default (or
other event or condition), beyond any period of grace provided
therefor, shall occur under any agreement, indenture or
instrument relating to any such other Debt with a principal
amount (individually or in the aggregate) in excess of
$10,000,000, if the effect of such breach or default (or such
other event or condition) is to cause, or to permit the holder or
holders of the other Debt (or a Person on behalf of such holder
or holders) to cause (upon the giving of notice or otherwise),
such other Debt to become or be declared due and payable, or
required to be prepaid, redeemed, purchased or defeased (or an
offer of prepayment, redemption, purchase or defeasance be made),
prior to its stated maturity (other than by a scheduled mandatory
prepayment); provided, however, that if any such breach or
default described in this Section 6.1(f)(ii) is cured or waived
prior to any action being taken pursuant to Section 6.2, the
Event of Default under this Guaranty in respect of such breach or
default shall be deemed cured to the extent of such cure or
waiver; or
(g) Judgments. The Guarantor or any Subsidiary shall suffer any
money judgments, writs or warrants of attachment or similar processes
that, individually or in the aggregate, involve an amount or value in
excess of $10,000,000 and such judgments, writs, warrants or other
orders shall continue unsatisfied and unstayed for a period of 60 days;
or
(h) ERISA. The Guarantor or any member of the Controlled Group
shall fail to pay when due any material amount or amounts that it shall
have become liable to pay to the PBGC or to a Plan under Title IV of
ERISA; or a proceeding shall be instituted by a fiduciary of any such
Plan or Plans against the Guarantor or any member of the Controlled
Group to enforce Section 515 of ERISA; or any ERISA Event shall occur
which could reasonably be expected to have a Material Adverse Effect; or
the Guarantor or any member of the Controlled Group shall partially or
completely withdraw from any Multiemployer Plan; or any Multiemployer
Plan to which Guarantor or any member of its Controlled Group becomes
obliged to make or accrue a contribution is placed in reorganization or
terminates; or
(i) Ownership. There shall occur a Change of Control.
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6.2 REMEDIES.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the requisite Lenders
(pursuant to the voting requirements of Section 10.6 of the Credit Agreement) or
cured to the satisfaction of the requisite Lenders (pursuant to the voting
procedures in Section 10.6 of the Credit Agreement), the Administrative Agent
may, or shall, upon the request and direction of the Required Lenders, by
written notice to the Credit Parties, enforce any and all rights and interests
created and existing under the Credit Documents including, without limitation,
all rights and remedies existing under the Collateral Documents (including,
without limitation, this Guaranty), all rights and remedies against the
Guarantor and all rights of set-off.
SECTION 7
MISCELLANEOUS
7.1 CUMULATIVE RIGHTS.
All rights of the Administrative Agent and the Lenders hereunder or
otherwise arising under any documents executed in connection with or as security
for the Guaranteed Obligations are separate and cumulative and may be pursued
separately, successively or concurrently, or not pursued, without affecting or
limiting any other right of the Administrative Agent or any Lender and without
affecting or impairing the liability of the Guarantor.
7.2 USURY.
Notwithstanding any other provisions herein contained, no provision of
this Guaranty shall require or permit the collection from the Guarantor of
interest in excess of the maximum rate or amount that the Guarantor may be
required or permitted to pay pursuant to any applicable law. In the event any
such interest is collected, it shall be applied in reduction of the Guarantor's
obligations hereunder, and the remainder of such excess collected shall be
returned to the Guarantor once such obligations have been fully satisfied.
7.3 EXPENSES; INDEMNIFICATION.
(a) The Guarantor agrees that the Guaranteed Obligations include
any obligation of the Borrower to pay all costs and expenses of the
Administrative Agent in connection with the syndication, preparation,
execution, delivery, administration, modification, and amendment of the
Credit Agreement, the other Credit Documents (including, without
limitation, this Guaranty), and the other documents to be delivered
thereunder, including, without limitation, the reasonable fees and
expenses of counsel for the Administrative Agent with respect hereto and
thereto and with respect to advising the Administrative Agent as to its
rights and responsibilities under the Credit Documents. The Guarantor
further agrees that the Guaranteed Obligations include any obligation of
the Borrower to pay all costs and expenses of the Administrative Agent
and the Lenders,
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if any (including, without limitation, reasonable attorneys' fees and
expenses), in connection with the enforcement (whether through
negotiations, legal proceedings, or otherwise) of the Credit Documents
(including, without limitation, this Guaranty) and the other documents
to be delivered pursuant thereto. In the event the Administrative Agent
and/or the Lenders seek enforcement of this Section 7.3(a) against the
Guarantor, such costs and expenses shall be payable on demand.
(b) The Guarantor agrees to indemnify, defend and hold harmless
the Administrative Agent and each Lender and each of their Affiliates
and the officers, directors, employees, agents, attorneys, affiliates,
successors and assigns of the Administrative Agent, each Lender and
their Affiliates (collectively, the "Indemnitees") from and against (i)
any and all transfer taxes, documentary taxes, assessments or charges
made by any Governmental Authority by reason of the execution and
delivery of the Credit Documents or the making of the Loans (provided
that any Lender claiming any additional amounts payable pursuant to this
Section 7.3(b)(i) shall use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office if the making of such a
change would avoid the need for, or reduce the amount of, any such
additional amounts that may thereafter accrue and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender), and (ii) any and all liabilities, losses, damages, penalties,
judgments, claims, costs and expenses of any kind or nature whatsoever
(including reasonable attorneys' fees, including allocated costs of
in-house counsel, and disbursements in connection with any actual or
threatened investigative, administrative or judicial proceeding, whether
or not such Indemnitee shall be designated a party thereto) that may be
imposed on, incurred by or asserted against such Indemnitee, in any
manner relating to or arising out of the Credit Documents, the Loans, or
the use or intended use of the proceeds of the Loans (the "Indemnified
Liabilities"); provided that no Indemnitee shall have the right to be
indemnified or held harmless hereunder for its own gross negligence, or
willful misconduct, as determined by a final judgment of a court of
competent jurisdiction. The Guarantor agrees not to assert any claim
against the Administrative Agent, any Lender, any of their Affiliates,
or any of their respective directors, officers, employees, attorneys,
agents, and advisers, on any theory of liability, for special, indirect,
consequential, or punitive damages arising out of or otherwise relating
to the Credit Documents (including, without limitation, this Guaranty),
any of the transactions contemplated herein or the actual or proposed
use of the proceeds of the Loans.
(c) To the extent that the undertaking to indemnify and hold
harmless set forth in this Section 7.3 may be unenforceable as violative
of any applicable law or public policy, the Guarantor shall make the
maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities that is permissible under applicable law. All
Indemnified Liabilities shall be payable on demand.
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(d) Without prejudice to the survival of any other agreement of
the Guarantor hereunder, the agreements and obligations of the Guarantor
contained in this Section 7.3 shall survive the repayment of the
Guaranteed Obligations.
7.4 RIGHT OF SET-OFF.
After the occurrence of an Event of Default, any Lender may set-off any
matured obligation owed by the Guarantor under this Guaranty (to the extent
beneficially owned or held by such Lender) against any obligation (whether or
not matured) owed by such Lender to the Guarantor, regardless of the place of
payment.
7.5 TERM OF GUARANTEE.
This Guaranty shall continue in full force and effect until the
Guaranteed Obligations are fully and indefeasibly paid, performed and discharged
and all Commitments have expired or been terminated. This Guaranty covers the
Guaranteed Obligations whether presently outstanding or arising subsequent to
the date hereof including all amounts advanced by the Administrative Agent or
any Lender in stages or installments.
7.6 THE ADMINISTRATIVE AGENT.
In acting under or by virtue of this Guaranty, the Administrative Agent
shall be entitled to all the rights, authority, privileges and immunities
provided in the Credit Agreement, all of which provisions are incorporated by
reference herein with the same force and effect as if set forth herein.
7.7 SUCCESSORS AND ASSIGNS.
This Guaranty shall be binding on and enforceable against the Guarantor
and its successors and assigns; provided that, the Guarantor may not assign or
transfer any of its obligations hereunder without prior written consent of the
Lenders. This Guaranty is intended for and shall inure to the benefit of the
Administrative Agent and each Lender and each and every person who shall from
time to time be or become the owner or holder of any of the Guaranteed
Obligations, and each and every reference herein to "Administrative Agent" or
"Lender" shall include and refer to each and every successor or assignee of the
Administrative Agent or any Lender at any time holding or owning any part of or
interest in any part of the Guaranteed Obligations. This Guaranty shall be
transferable and negotiable with the same force and effect, and to the same
extent, that the Guaranteed Obligations are transferable and negotiable, it
being understood and stipulated that upon assignment or transfer by the
Administrative Agent or any Lender of any of the Guaranteed Obligations the
legal holder or owner of the Guaranteed Obligations (or a part thereof or
interest therein thus transferred or assigned by the Administrative Agent or any
Lender) shall (except as otherwise stipulated by the Administrative Agent or any
such Lender in its assignment) have and may exercise all of the rights granted
to the Administrative Agent or such Lender under this Guaranty to the extent of
that part of or interest in the Guaranteed Obligations thus assigned or
transferred to said person. The Guarantor
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expressly waives notice of transfer or assignment by the Lenders of the
Guaranteed Obligations, or any part thereof, or of the rights of the
Administrative Agent or any Lender hereunder. Failure to give notice will not
affect the liabilities of the Guarantor hereunder.
7.8 APPLICATION OF PAYMENTS.
Each of the Administrative Agent and the Lenders may apply any payments
received by it from any source against that portion of the Guaranteed
Obligations (principal, interest, court costs, attorneys' fees or other) in such
priority and fashion as it may deem appropriate.
7.9 MODIFICATIONS.
Subject to the terms of the Credit Agreement, this Guaranty and the
provisions hereof may be changed, discharged or terminated only by an instrument
in writing signed by the Guarantor and the Administrative Agent.
7.10 NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case to the respective parties at
the address set forth below or at such other address as such party may specify
by written notice to the other parties hereto:
if to the Guarantor:
Nordstrom, Inc.
1617 6th Avenue
Seattle, Washington 98101
Attn: Chief Financial Officer
Telephone: (206) 373-4090
Telecopy: (206) 373-4055
if to the Administrative Agent:
Bank of America, N.A.
1850 Gateway Blvd., 5th Floor
Mail Code CA4-706-05-09
Concord, California 94520
Attn: Josephine T. Flores
Telephone: (925) 675-8374
Telecopy: (925) 969-2812
27
<PAGE> 28
with a copy to:
Bank of America, N. A.
555 California Street, 41st Floor
Mail Code: CA5-705-41-89
San Francisco, California 94194
Attn: James Johnson
Telephone: (415) 622-6177
Telecopy: (415) 622-4585
7.11 TAXES.
All payments made by the Guarantor under this Guaranty and any other
Credit Documents shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any court, or
governmental body, agency or other official, excluding taxes measured by or
imposed upon the overall net income of any Lender or its applicable lending
office, or any branch or affiliate thereof, and all franchise taxes, branch
taxes, taxes on doing business or taxes on the overall capital or net worth of
any Lender or its applicable lending office, or any branch or affiliate thereof,
in each case imposed in lieu of net income taxes, imposed: (i) by the
jurisdiction under the laws of which such Lender, applicable lending office,
branch or affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such jurisdiction is
located or any political subdivision thereof; or (ii) by reason of any
connection between the jurisdiction imposing such tax and such Lender,
applicable lending office, branch or affiliate other than a connection arising
solely from such Lender having executed, delivered or performed its obligations,
or received payment under or enforced, this Guaranty or any other Credit
Document. If any such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions or withholdings ("Non-Excluded Taxes") are required to be
withheld from any amounts payable to the Administrative Agent or any Lender
under this Guaranty or under any other Credit Document, (A) the amounts so
payable to the Administrative Agent or such Lender shall be increased to the
extent necessary to yield to the Administrative Agent or such Lender (after
payment of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Guaranty and any
other Credit Document, and (B) as promptly as possible thereafter the Guarantor
shall send to the Administrative Agent for its own account or for the account of
such Lender, as the case may be, a certified copy of an original official
receipt received by the Guarantor showing payment thereof. If the Guarantor
fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority
or fails to remit to the Administrative Agent the required receipts or other
required documentary evidence, the Guarantor shall indemnify the Administrative
Agent and the Lenders for any incremental taxes, interest or penalties that may
become payable by the Administrative Agent or any Lender as a result of any such
failure. The agreements in this subsection shall survive the termination of this
Guaranty and the other Credit Documents. If the Guarantor is required to pay
additional amounts to or for the account of any Lender pursuant to this Section
7.11, such Lender has agreed in Section 3.11(f) of the Credit Agreement to use
reasonable efforts to change its
28
<PAGE> 29
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the reasonable judgment
of such Lender, is not otherwise disadvantageous to such Lender.
7.12 SEVERABILITY.
If any provision of this Guaranty is determined to be illegal, invalid
or unenforceable, such provision shall be fully severable and the remaining
provisions shall remain in full force and effect and shall be construed without
giving effect to the illegal, invalid or unenforceable provisions.
7.13 GOVERNING LAW.
This Guaranty and the rights and obligations of the parties hereto shall
be construed in accordance with and governed by the laws of the State of
Washington.
7.14 WAIVER OF JURY TRIAL.
To the extent permitted by law, each of the Administrative Agent and the
Guarantor hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim arising out of or relating to this Guaranty or the
transactions contemplated hereby.
7.15 CONSENT TO JURISDICTION.
(a) Any legal action or proceeding with respect to this Guaranty may be
brought in the courts of the State of Washington in King County, or of the
United States for the Western District of Washington, and, by execution and
delivery of this Guaranty, the Guarantor hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the nonexclusive
jurisdiction of such courts. Nothing herein shall affect the right of the
Administrative Agent or any Lender to serve process in any manner permitted by
law or to commence legal proceedings or to otherwise proceed against the
Guarantor in any other jurisdiction.
(b) The Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Guaranty in the courts referred to in Section
7.15(a). Each of the parties hereto hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
(c) Each party to this Guaranty irrevocably consents to service of
process in the manner provided for notices in Section 7.10. Nothing in this
Guaranty will affect the right of any party to this Guaranty to serve process in
any other manner permitted by law.
29
<PAGE> 30
7.16 HEADINGS.
The headings in this instrument are for convenience of reference only
and shall not limit or otherwise affect the meaning of any provisions hereof.
7.17 COUNTERPARTS.
This Guaranty may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each constituting an
original, but all together one and the same instrument.
7.18 RIGHTS OF THE REQUIRED LENDERS.
All rights of the Administrative Agent hereunder, if not exercised by
the Administrative Agent, may be exercised by the Required Lenders.
7.19 ORAL AGREEMENTS NOT BINDING.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
30
<PAGE> 31
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered as of the day and year first above written.
GUARANTOR: NORDSTROM, INC.,
a Washington corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
ACCEPTED:
BANK OF AMERICA, N.A.,
as Administrative Agent, on behalf of the Lenders
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 1
EXHIBIT 13.1
Dear Shareholders,
The 1999 fiscal year was one of transition for Nordstrom, designed to position
us to compete successfully in the future. Transition was, and is, necessary.
Competition has never been more intense, whether from specialty retailers or
big-box department stores. Our industry is consolidating, making existing
competitors even more formidable. Additionally, the playing field is expanding
to include new ways of reaching customers. This letter and the accompanying
annual report will highlight the progress made during the year and outline our
plans for the future.
New stores propel sales growth.
Our sales growth was fueled by the opening of full-line stores in Norfolk,
Virginia; Providence, Rhode Island; Mission Viejo, California; and Columbia,
Maryland; plus three new Rack stores, and the relocation of our Spokane
Nordstrom and Alderwood Rack stores into new, larger facilities. We are well
positioned for future growth. There are a number of attractive markets within
the United States that we have not yet penetrated, or in which we are not fully
represented.
We added 6.6 percent to our stores' gross square footage in 1999, and expect
upper single-digit percentage growth annually over the next several years. Our
comparable store sales in 1999 declined 1.1 percent. In recent years we had
allowed inventory levels to expand at a rate in excess of our growth in sales,
and have taken steps to better align these two measures. While some of the
shortfall in sales was offset by improvements achieved in gross margin, we fully
recognize the need to generate sales growth from existing stores -- as well as
from new stores. However, we want to ensure that it is quality sales growth, and
later in this letter I'll describe several initiatives directed to accomplish
this.
Streamlined structure strengthens buying process.
In 1999 we realigned the buying structure to promote clarity and accountability,
to gain increased leverage in market, and to facilitate stronger partnerships
with vendors through fewer and more focused points of contact. We want our most
experienced merchants to have the greatest influence over our merchandise buying
decisions. Our aim is to quickly take advantage of emerging national trends,
while maintaining awareness of local competitive factors and customer
preference.
New subsidiary expands Internet presence.
In fall of 1999 we formed a subsidiary company called NORDSTROM.com, which
consists of our catalog and e-commerce businesses. Since the Web site was
launched in October of 1998, it has evolved significantly in terms of its look,
ease of navigation, and the merchandise offered. We believe we have the brand,
technology, strategic alliances and people to become leaders in online apparel
retailing, and that the timing is right for us to aggressively expand in this
growing channel. We also believe it is complementary to our traditional,
store-based business and will enhance and broaden the power of our brand. Our
subsidiary's first major project, NORDSTROMshoes.com, emerged as the world's
biggest shoe store, offering millions of pairs of shoes for sale online. We are
pleased with the sales performance thus far, and look forward to continuing to
expand this channel as we seek to be wherever our customers want us to be.
"There are risks and costs to a program of action. But they are far less than
the long-range risks and costs of comfortable inaction." -- JOHN F. KENNEDY
Key Initiatives.
We are focused on several key initiatives that we believe will have significant
and long-term impacts on our business:
o Improving our merchandise
o Building our brand
o Strengthening our information resources and processes
<PAGE> 2
Reinvigorating women's business with better merchandise.
While each key initiative is vitally important, nothing is as critical as
ensuring that we have the right merchandise -- in the right quantities, sizes,
styles and colors -- in every one of our stores. Our initial focus is on women's
merchandise, which represents the largest single category for us and also has
been our greatest challenge in recent years. Specifically, we want to
reinvigorate our women's business by injecting more fashion into the mix.
Fashion transcends age and cuts across all segments of women's merchandise. With
classic styles, it can be timeless fashion; with mainstream styles, it's
everyday fashion; with modern styles, it's contemporary fashion; and with
forward styles, it's cutting-edge fashion. The point is that in each of these
segments, our objective is to have an updated, fresh and evolving collection of
merchandise that represents more of what our customers want to buy.
"Excellence is to do a common thing in an uncommon way."-- BOOKER T. WASHINGTON
Building a world-class brand.
To a great extent, our brand is the "Nordstrom shopping experience" -- defined
primarily through our people and products. We want to couple the right
merchandise with compelling presentation as we strive to deliver a satisfying,
unforgettable experience for our customers. Through improved in-store signage,
merchandise and window displays, and other visual aids, we also want to make our
stores easier and more fun to shop.
Part of our brand includes our communication with customers. We hope you enjoyed
the national television spots we ran in launching NORDSTROMshoes.com in November
of 1999, and more recently, the national media campaign and other promotional
activities for our full-line stores. As we invite our customers to reinvent
themselves, we want to convey that change is positive, and accepting some level
of risk can be rewarding.
Better technology enables better service.
Our effort to strengthen our information resources represents a major
competitive step forward. Over time, our people will have the necessary tools to
better perform our customer-intensive style of retailing. Whether it's
information needed in developing more effective partnerships with our vendors,
moving merchandise more quickly from point of manufacture to the sales floor, or
responding more quickly to sales trends and retaining better balance in
inventory levels, our ultimate objective is to better serve our customers.
"We must recognize the full human equality of all our people." -- ROBERT F.
KENNEDY
People build our future.
As you can sense, there is a lot going on at Nordstrom. Much of the work is
long-term in nature, designed to deliver enduring benefits. None of it is easy,
but all of it is necessary in order for Nordstrom to compete and win in the
years ahead.
Simply stated, we want to be better. We're proud of our 99-year heritage of
striving to provide outstanding service to every customer. We're proud of our
people, who are the lifeblood of our company and the vital link between our
products and our customers. During 1999 we were honored to be included among:
o Fortune magazine's "100 Best Companies to Work For in America"
o Working Woman's "Top 25 Companies for Executive Women"
o Fortune's "50 Best Workplaces for Blacks, Asians, and Hispanics"
<PAGE> 3
Yet we cannot stand still. Our goal is to achieve total shareholder return among
the top quartile of our peers, and that requires that we continue to build --
stores, systems, capabilities and people. The 21st century is sure to bring new
opportunities for growth. As we expand, the key will be to impart a distinct,
consistent message across all channels, in every customer interaction, that is
uniquely one Nordstrom.
Thank you for your continued support as we work to better serve our customers,
employees, communities and shareholders.
Sincerely,
/s/ John Whitacre
John Whitacre
Chairman and Chief Executive Officer
<PAGE> 4
<TABLE>
<CAPTION>
Dollars in thousands except per share amounts
- ---------------------------------------------------------------------------------------------
Fiscal Year 1999 1998 % Change
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $5,124,223 $5,027,890 1.9
Earnings before income taxes 332,057 337,723 (1.7)
Net earnings 202,557 206,723 (2.0)
Basic earnings per share 1.47 1.41 4.3
Diluted earnings per share 1.46 1.41 3.5
Cash dividends paid per share .32 .30 6.7
</TABLE>
Stock Prices
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Fiscal Year 1999 1998
- -----------------------------------------------------------------------------------------------------
high low high low
<S> <C> <C> <C> <C>
First Quarter 44 13/16 34 5/8 33 9/16 25 1/8
Second Quarter 39 3/8 30 3/8 40 3/8 30 1/8
Third Quarter 33 1/8 23 1/8 39 1/2 22
Fourth Quarter 28 21 15/16 44 1/8 27 1/16
</TABLE>
Nordstrom, Inc. common stock is traded on the New York Stock Exchange and quoted
daily in leading financial publications. NYSE symbol -- JWN
Graph - Net Sales
The vertical bar graph compares net sales for the past ten years. Beginning with
the oldest fiscal year on the left, net sales (dollars are in millions) were as
follows: 1990-$2,892; 1991-$3,175; 1992-$3,416; 1993-$3,591; 1994-$3,893;
1995-$4,107; 1996-$4,448; 1997-$4,852; 1998-$5,028; 1999-$5,124;
Graph - Diluted Earnings Per Share
The vertical bar graph compares diluted earnings per share for the past ten
years. Beginning with the oldest fiscal year on the left, diluted earnings per
share were as follows: 1990-$0.71; 1991-$0.82; 1992-$0.82; 1993-$0.86;
1994-$1.23; 1995-$1.00; 1996-$0.90; 1997-$1.20; 1998-$1.41; 1999-$1.46;
Management's Discussion and Analysis
The following discussion and analysis reviews the past three years, as well as
additional information on future expectations and trends. Some of the
information in this annual report, including anticipated store openings, planned
capital expenditures and trends in company operations, are forward-looking
statements, which are subject to risks and uncertainties. Actual future results
and trends may differ materially depending upon a variety of factors, including,
but not limited to, the Company's ability to predict fashion trends, consumer
apparel buying patterns, the Company's ability to control costs and expenses,
trends in personal bankruptcies and bad debt write-offs, employee relations,
adverse weather conditions and other hazards of nature such as earthquakes and
floods, the Company's ability to continue its expansion plans, and the impact of
ongoing competitive market factors. This discussion and analysis should be read
in conjunction with the basic consolidated financial statements and the Ten-Year
Statistical Summary.
Overview
During 1999 (the fiscal year ended January 31, 2000), Nordstrom, Inc. and its
subsidiaries (collectively, the "Company") achieved record sales and an
improvement in gross margin. These improvements were offset by third quarter
1999 charges of approximately $10 million (pre-tax), primarily associated with
the restructuring of the Company's information technology services area in order
to improve efficiency and effectiveness. The Company also experienced
substantially increased operating expenses associated with the accelerated
development of NORDSTROM.com and NORDSTROMshoes.com.
On November 1, 1999, the Company established a new subsidiary, NORDSTROM.com, to
promote the rapid expansion of both its Internet commerce and catalog
businesses. The Company contributed the assets and certain liabilities
associated with its Internet commerce and catalog businesses and $10 million in
cash to the subsidiary. Affiliates of Benchmark Capital and Madrona Investment
Group, collectively, contributed $16 million in cash to the new entity. The
Company owns approximately 81.4% of NORDSTROM.com, with Benchmark Capital and
Madrona Investment Group holding the remaining interest.
The first major endeavor in November 1999 by NORDSTROM.com was the launching of
the Internet site NORDSTROMshoes.com, which offers online access to millions of
pairs of shoes. The launch was supported by a multimedia national advertising
campaign.
Also during 1999, the Company opened four new full-line stores in Providence,
Rhode Island; Mission Viejo, California; Columbia, Maryland; and Norfolk,
Virginia. The Company also opened three new Rack stores in Sacramento,
California; Brea, California; and Gaithersburg, Maryland.
1
<PAGE> 5
Results of Operations
Sales
The Company achieved a 1.9% sales increase in 1999. Certain components of the
percentage change in sales by year are as follows:
<TABLE>
<CAPTION>
Fiscal Year 1999 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C>
Sales in comparable stores (1.1%) (2.7%) 4.0%
NORDSTROM.com 8.3% 33.0% 49.8%
Total increase 1.9% 3.6% 9.1%
</TABLE>
Comparable store sales (sales in stores open at least one full fiscal year at
the beginning of the fiscal year) decreased in 1999 primarily due to missed
fashion product offering opportunities in the women's, kids' and juniors'
apparel divisions. The decrease in comparable store sales in 1998 was
attributable to management's focus on controlling inventory levels, which
resulted in lower, but more profitable, sales. In 1997, comparable store sales
growth reflected the strong economic environment and a positive reaction to
changes in the merchandise mix in the women's apparel departments, which
occurred in mid-1996.
In addition to the aforementioned new full-line and Rack stores, the Company
opened a replacement full-line store and a replacement Rack store in 1999. New
stores are generally not as productive as "comparable stores" because the
customer base and traffic patterns of each store are developed over time.
Sales at NORDSTROM.com continued to contribute to the Company's sales growth
with sales of $210 million, $194 million and $146 million in 1999, 1998 and
1997, respectively.
The Company's average price point has varied slightly over the past three years,
due primarily to changes in the merchandise mix. Inflation in overall
merchandise costs and prices has not been significant during the past three
years.
Graph - Percentage of 1999 Sales by Merchandise Category
The pie chart depicts each merchandise category and its percent of total sales.
Clockwise: Children's Apparel and Accessories - 4%; Men's Apparel and
Furnishings - 18%; Shoes - 19%; Women's Accessories - 21%; Women's Apparel -
36%; and Other - 2%.
Gross Margin
Gross margin (net sales less cost of sales and related buying and occupancy
expenses) as a percentage of net sales improved to 34.5% in 1999, as compared to
33.5% in 1998, and 32.1% in 1997.
The 1999 improvement reflects changes in the Company's buying processes and
vendor programs. The 1998 improvement was principally due to favorable pricing
strategies and the Company's increased focus on managing inventory levels, which
resulted in lower markdowns. A decrease in buying costs, due to efficiencies
gained through restructuring of certain buying responsibilities, also
contributed to the improvement in 1998. The improvement in gross margin
percentage in both 1999 and 1998 was partially offset by increased occupancy
costs related to new stores and remodeling projects.
Selling, General, and Administrative
Selling, general, and administrative expenses as a percentage of net sales were
29.1% in 1999, 28.0% in 1998, and 27.3% in 1997.
The 1999 increase, as a percentage of net sales, was due to the aforementioned
$10 million of pre-tax restructuring charges. In addition, the Company incurred
substantial additional costs associated with the accelerated development of
NORDSTROM.com and NORDSTROMshoes.com. In August 1999, the Company announced
that, compared to its plan prior thereto, NORDSTROM.com would increase operating
expenses by approximately $22 million over the balance of the year, in order to
accelerate growth and development of its Internet business channel. The actual
increase for 1999 was $23 million. These increases were partially offset by
lower bad debt expense due to the improved credit quality of the Company's
credit card receivables.
The 1998 increase in selling, general, and administrative expenses, as a
percentage of net sales, was due to higher sales promotion costs for the
Company's direct sales catalog division, and spending on Year 2000 compliance
and other information system operational costs. The increase was partially
offset by decreases in bad debt expenses associated with the Company's credit
card business and lower selling expenses, as a percentage of sales.
Interest Expense, Net
Interest expense, net increased 7% in 1999 and 37% in 1998 as a result of higher
average borrowings to finance share repurchases. The Company repurchased 10.2
million shares and 11.2 million shares at an aggregate cost of $303 million and
$346 million in 1999 and 1998, respectively.
2
<PAGE> 6
Service Charge Income and Other, Net
Service charge income and other, net primarily represents income from the
Company's credit card operations, offset by miscellaneous expenses.
Service charge income and other, net was flat in 1999 and 1998, both in dollars
and as a percent of sales.
Net Earnings
Net earnings for 1999 were slightly lower than 1998 as the Company's record
sales and gross margin were offset by increases in selling, general, and
administrative expenses. Net earnings for 1998 increased as compared to 1997
primarily due to gross margin improvements.
Liquidity and Capital Resources
The Company finances its working capital needs, capital expenditures and share
repurchase activity with cash provided by operations and borrowings.
For the fiscal year ended January 31, 2000, net cash provided by operating
activities decreased approximately $223 million compared to the fiscal year
ended January 31, 1999, primarily due to the non-recurring benefit of prior year
reductions in inventories and customer receivable account balances. Net cash
provided by operating activities for the fiscal year ended January 31, 1999
increased by approximately $301 million as compared to the fiscal year ended
January 31, 1998, primarily due to a reduction in merchandise inventories
resulting from management's focus on managing inventory levels and a decrease in
customer receivable balances.
For the fiscal year ended January 31, 2000, net cash used in investing
activities decreased approximately $68 million compared to the fiscal year ended
January 31, 1999, primarily due to an increase in funds provided by developers
to defray part of the Company's costs of constructing new stores. The Company's
capital expenditures aggregated approximately $700 million over the last three
years, net of deferred lease credits, principally to add new stores and
facilities and to improve existing stores and facilities. Over 2.7 million
square feet of retail store space has been added during this time period,
representing an increase of 23% since January 31, 1997.
The Company plans to spend approximately $1.0 billion, net of deferred lease
credits, on capital projects during the next three years, including new stores,
the remodeling of existing stores, new systems and technology, and other items.
At January 31, 2000, approximately $80 million has been contractually committed
for the construction of new stores or remodel of existing stores. Although the
Company has made commitments for stores opening in 2000 and beyond, it is
possible that some stores may not be opened as scheduled because of delays
inherent in the development process, or for other reasons. In addition to its
cash flow from operations, the Company has funds available under its revolving
credit facility. Management believes that the Company's current financial
strength and credit position enable it to maintain its existing stores and to
take advantage of attractive new opportunities.
The Board of Directors has authorized an aggregate of $1.1 billion of share
repurchases since May 1995. As of January 31, 2000, the Company had purchased
approximately 35 million shares of its common stock for approximately $931
million pursuant to these authorizations, and had remaining share repurchase
authority of $169 million. Share repurchases have been financed, in part,
through additional borrowings, resulting in a planned increase in the Company's
debt to capital (debt plus shareholders' equity) ratio. At January 31, 2000, the
Company's debt to capital ratio was .42.
In March 1998, the Company issued $300 million of 6.95% Senior Debentures due in
2028. The proceeds were used to repay commercial paper and current maturities of
long-term debt. In January 1999, the Company issued $250 million of 5.625%
Senior Notes due in 2009, the proceeds of which were used to repay short-term
debt and for general corporate purposes. A substantial portion of the Company's
total debt of $876 million at January 31, 2000, finances the Company's credit
card portfolio, which aggregated $612 million at that date.
Year 2000
The Company transitioned into the Year 2000 without any material negative
effects on its business, operations or financial condition. The Company's
accumulative Year 2000 expenses, through January 31, 2000, were $17 million.
Approximately $4 million of expense was incurred in 1999, $7 million in 1998 and
$5 million in 1997.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which will require an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Adoption of this standard,
as amended by the Company, beginning February 1, 2001, is not expected to have a
material impact on the Company's consolidated financial statements.
3
<PAGE> 7
Graph - Square Footage by Market Segment at January 31, 2000
The pie chart shows the percent of total square feet in each region and also
gives the number of square feet for that region. Clockwise; Rack, 8.1%,
1,174,000; Central States, 14.4%, 2,086,000; Northwest, 19.1%, 2.770,000; East
Coast, 25.3%, 3,671,000; Southwest, 32.7%, 4,729,000; and Other, 0.4%, 57,000.
4
<PAGE> 8
Consolidated Statements
of Earnings
<TABLE>
<CAPTION>
Dollars in thousands except per share amounts
- -----------------------------------------------------------------------------------------------------------------
Year ended January 31, 2000 % of sales 1999 % of sales 1998 % of sales
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 5,124,223 100.0 $ 5,027,890 100.0 $ 4,851,624 100.0
Costs and expenses:
Cost of sales and related
buying and occupancy 3,359,760 65.5 3,344,945 66.5 3,295,813 67.9
Selling, general, and
administrative 1,491,040 29.1 1,405,270 28.0 1,322,929 27.3
Interest, net 50,396 1.0 47,091 0.9 34,250 0.7
Service charge income and
other, net (109,030) (2.1) (107,139) (2.1) (108,581) (2.2)
- -----------------------------------------------------------------------------------------------------------------
4,792,166 93.5 4,690,167 93.3 4,544,411 93.7
Earnings before income taxes 332,057 6.5 337,723 6.7 307,213 6.3
Income taxes 129,500 2.5 131,000 2.6 121,000 2.5
- -----------------------------------------------------------------------------------------------------------------
Net earnings $ 202,557 4.0 $ 206,723 4.1 $ 186,213 3.8
- -----------------------------------------------------------------------------------------------------------------
Basic earnings per share $1.47 $1.41 $1.20
Diluted earnings per share $1.46 $1.41 $1.20
Cash dividends paid per share $ .32 $ .30 $.265
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
5
<PAGE> 9
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Dollars in thousands
- --------------------------------------------------------------------------------
January 31, 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 27,042 $ 241,431
Short-term investment 25,527 --
Accounts receivable, net 616,989 587,135
Merchandise inventories 797,845 750,269
Prepaid income taxes and other 97,245 74,228
- --------------------------------------------------------------------------------
Total current assets 1,564,648 1,653,063
Land, buildings and equipment, net 1,429,492 1,378,006
Available-for-sale investment 35,251 --
Other assets 32,690 56,994
- --------------------------------------------------------------------------------
Total assets $ 3,062,081 $ 3,088,063
- --------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 70,934 $ 78,783
Accounts payable 390,688 339,635
Accrued salaries, wages and related benefits 211,308 196,366
Income taxes and other accruals 135,388 100,739
Current portion of long-term debt 58,191 63,341
- --------------------------------------------------------------------------------
Total current liabilities 866,509 778,864
Long-term debt 746,791 804,893
Deferred lease credits 194,995 147,188
Other liabilities 68,172 56,573
Shareholders' equity:
Common stock, no par:
250,000,000 shares authorized;
132,279,988 and 142,114,167
shares issued and outstanding 247,559 230,761
Unearned stock compensation (8,593) (4,703)
Retained earnings 929,616 1,074,487
Accumulated other comprehensive income 17,032 --
- --------------------------------------------------------------------------------
Total shareholders' equity 1,185,614 1,300,545
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 3,062,081 $ 3,088,063
- --------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
6
<PAGE> 10
Consolidated Statements
of Shareholders' Equity
<TABLE>
<CAPTION>
Dollars in thousands except per share amounts
- ----------------------------------------------------------------------------------------------------------------------------
Accum. Other
Common Stock Unearned Retained Comprehensive
Shares Amount Compensation Earnings Income Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 1, 1997,
as previously reported 159,269,954 $ 183,398 -- $ 1,289,794 -- $ 1,473,192
Adjustment for sales returns
reserve, net of taxes (16,108) (16,108)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at February 1, 1997,
as adjusted 159,269,954 183,398 -- 1,273,686 -- 1,457,084
Net earnings -- -- -- 186,213 -- 186,213
Cash dividends paid
($.265 per share) -- -- -- (41,168) -- (41,168)
Issuance of common stock 838,478 17,406 -- -- -- 17,406
Stock compensation 4,672 246 246
Purchase and retirement of
common stock (7,595,000) -- -- (160,831) -- (160,831)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 1998 152,518,104 201,050 -- 1,257,900 -- 1,458,950
Net earnings -- -- -- 206,723 -- 206,723
Cash dividends paid
($.30 per share) -- -- -- (44,059) -- (44,059)
Issuance of common stock 599,593 14,971 -- -- -- 14,971
Stock compensation 194,070 14,740 $(4,703) -- -- 10,037
Purchase and retirement
of common stock (11,197,600) -- -- (346,077) -- (346,077)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 1999 142,114,167 230,761 (4,703) 1,074,487 -- 1,300,545
Net earnings -- -- -- 202,557 -- 202,557
Unrealized gain on investment -- -- -- -- $17,032 17,032
-------------
Comprehensive net earnings -- -- -- -- -- 219,589
Cash dividends paid -- -- -- (44,463) -- (44,463)
($.32 per share)
Issuance of common stock 341,947 9,577 -- -- -- 9,577
Stock compensation 40,274 7,221 (3,890) -- -- 3,331
Purchase and retirement
of common stock (10,216,400) -- -- (302,965) -- (302,965)
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE AT JANUARY 31, 2000 132,279,988 $ 247,559 $(8,593) $ 929,616 $17,032 $ 1,185,614
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
7
<PAGE> 11
Consolidated Statements
of Cash Flows
<TABLE>
<CAPTION>
Dollars in thousands
- -----------------------------------------------------------------------------------------------------
Year ended January 31, 2000 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net earnings $ 202,557 $ 206,723 $ 186,213
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 193,718 180,655 158,969
Amortization of deferred lease credits and
other, net (6,387) (3,501) (2,092)
Stock-based compensation expense 3,331 10,037 246
Change in:
Accounts receivable, net (29,854) 77,313 50,141
Merchandise inventories (47,576) 75,776 (106,126)
Prepaid income taxes and other (23,017) 30,983 (11,616)
Accounts payable 51,053 18,324 10,881
Accrued salaries, wages and related benefits 14,942 17,156 9,635
Income tax liabilities and other accruals 12,205 (20,454) 2,104
Other liabilities 7,154 8,296 2,301
- ------------------------------------------------------------------------------------------------
Net cash provided by operating activities 378,126 601,308 300,656
- ------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (305,052) (306,737) (259,935)
Additions to deferred lease credits 114,910 74,264 --
Investments in unconsolidated affiliates -- (32,857) --
Other, net (9,332) (2,251) (49)
- ------------------------------------------------------------------------------------------------
Net cash used in investing activities (199,474) (267,581) (259,984)
- ------------------------------------------------------------------------------------------------
Financing Activities
(Decrease) increase in notes payable (7,849) (184,984) 99,997
Proceeds from issuance of long-term debt -- 544,165 91,644
Principal payments on long-term debt (63,341) (101,106) (51,210)
Capital contribution to subsidiary from
minority shareholders 16,000 -- --
Proceeds from issuance of common stock 9,577 14,971 17,406
Cash dividends paid (44,463) (44,059) (41,168)
Purchase and retirement of common stock (302,965) (346,077) (160,831)
- ------------------------------------------------------------------------------------------------
Net cash used in financing activities (393,041) (117,090) (44,162)
- ------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (214,389) 216,637 (3,490)
Cash and cash equivalents at beginning of year 241,431 24,794 28,284
- ------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 27,042 $ 241,431 $ 24,794
- ------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
8
<PAGE> 12
Notes to Consolidated
Financial Statements
Dollars in thousands except per share amounts
Note 1: Summary of Significant Accounting Policies
The Company: Nordstrom, Inc. is a fashion specialty retailer offering a wide
selection of high-quality apparel, shoes and accessories for women, men and
children, principally through 71 large specialty stores and 28 clearance stores.
All of the Company's stores are located in the United States, with approximately
34% of its retail square footage located in the state of California.
The Company purchases a significant percentage of its merchandise from foreign
countries, principally in the Far East. An event causing a disruption in imports
from the Far East could have a material adverse impact on the Company's
operations. In connection with the purchase of foreign merchandise, the Company
has outstanding letters of credit totaling $60,038 at January 31, 2000.
On November 1, 1999 the Company established a subsidiary to operate its Internet
commerce and catalog businesses, NORDSTROM.com LLC. The Company contributed
certain assets and liabilities associated with its Internet commerce and catalog
businesses, and $10 million in cash. Funds associated with Benchmark Capital and
Madrona Investment Group collectively contributed $16 million in cash to the new
entity. At January 31, 2000 the Company owns approximately 81.4% of
NORDSTROM.com LLC, with Benchmark Capital and Madrona Investment Group holding
the remaining minority interest. The minority interest holders have the right to
put their shares of NORDSTROM.com LLC to the Company at a multiple of their
original investment in the event that certain events do not occur. This put
right will expire if the Company provides additional funding to NORDSTROM.com
LLC prior to September 2002.
Basis of Presentation: The consolidated financial statements include the
accounts of Nordstrom, Inc. and its subsidiaries, the most significant of which
are Nordstrom Credit, Inc., Nordstrom National Credit Bank and NORDSTROM.com
LLC. All significant intercompany transactions and balances are eliminated in
consolidation. The presentation of these financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from those estimates.
Prior to 1999, the Company did not record sales returns on the accrual basis of
accounting because the difference between the cash and accrual basis of
accounting was not material. In 1999, the Company began accruing sales returns.
Accordingly, the Company recorded the cumulative effect of this change on prior
periods, which resulted in an increase in current assets of $9,840, an increase
in current liabilities of $25,948 and a corresponding decrease in retained
earnings of $16,108 as of February 1, 1997. Because the effects of this change
were insignificant in 1997 and 1998, the Company recorded such amounts in 1999
as a reduction in net income of $1,313, or $.01 per share.
Merchandise Inventories: Merchandise inventories are stated at the lower of cost
(first-in, first-out basis) or market, using the retail method.
Advertising: Costs for newspaper, television, radio and other media are
generally expensed as incurred. Direct response advertising costs, consisting
primarily of catalog book production and printing costs, are capitalized and
amortized over the expected life of the catalog, not to exceed six months. Net
capitalized direct response advertising costs were $3,938 and $3,436 at January
31, 2000 and 1999, and are included in prepaid income taxes and other on the
consolidated balance sheets. Total advertising expenses were $160,957, $145,841
and $115,272 in 1999, 1998 and 1997.
Land, Buildings and Equipment: For buildings and equipment acquired prior to
February 1, 1999, depreciation is computed using a combination of accelerated
and straight-line methods. The straight-line method was adopted for all property
placed into service after February 1, 1999 in order to better reflect the
utilization of the assets over time. The effect of this change on net earnings
for 1999 was not material. Lives used for calculating depreciation and
amortization rates for the principal asset classifications are as follows:
buildings, five to 40 years; store fixtures and equipment, three to 15 years;
leasehold improvements, life of lease or applicable shorter period; software,
three to seven years.
Store Preopening Costs: Store opening and preopening costs are charged to
expense when incurred.
Capitalization of Interest: The interest-carrying costs of capital assets under
development or construction are capitalized based on the Company's weighted
average borrowing rate.
9
<PAGE> 13
Cash Equivalents: The Company considers all short-term investments with a
maturity at date of purchase of three months or less to be cash equivalents.
Investments: Short-term and available-for-sale investments consist of
available-for-sale equity securities which are recorded at market value based on
quoted market prices using the specific identification method. Unrealized gains
(and losses) from changes in market value are reflected in accumulated other
comprehensive income, net of related deferred taxes. All other investments are
recorded at cost and included in other assets.
Customer Accounts Receivable: In accordance with industry practices,
installments maturing in more than one year or deferred payment accounts
receivable are included in current assets.
Net Sales: Revenues are recorded net of estimated returns and exclude sales tax.
Cash Management: The Company's cash management system provides for the
reimbursement of all major bank disbursement accounts on a daily basis. Accounts
payable at January 31, 2000 and 1999 include $7,605 and $10,189 of checks not
yet presented for payment drawn in excess of cash balances.
Deferred Lease Credits: Deferred lease credits are amortized on a straight-line
basis primarily over the life of the applicable lease.
Fair Value of Financial Instruments: The carrying amount of cash equivalents and
notes payable approximates fair value because of the short maturity of these
instruments. The fair value of the Company's investment in marketable equity
securities is based upon the quoted market price and is approximately $60,778 at
January 31, 2000. The fair value of long-term debt (including current
maturities), using quoted market prices of the same or similar issues with the
same remaining term to maturity, is approximately $715,500 and $894,000 at
January 31, 2000 and 1999.
Derivatives Policy: The Company limits its use of derivative financial
instruments to the management of foreign currency and interest rate risks. The
effect of these activities is not material to the Company's financial condition
or results of operations. The Company has no material off-balance sheet credit
risk, and the fair value of derivative financial instruments at January 31, 2000
and 1999 is not material.
Statement of Financial Accounting Standards No. 133, "Accounting For Derivative
Instruments and Hedging Activities," as amended, requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company is currently
reviewing the impact of this statement; however, based on the Company's minimal
use of derivatives, management expects that adoption of this standard, in its
fiscal year beginning February 1, 2001, will not have a material impact on the
Company's consolidated financial statements.
Reclassifications: Certain reclassifications of prior year balances have been
made for consistent presentation with the current year.
Note 2: Employee Benefits
The Company provides a profit sharing plan for employees. The plan is fully
funded by the Company and is non-contributory except for employee contributions
made under Section 401(k) of the Internal Revenue Code. Under this provision of
the plan, the Company provides matching contributions up to a stipulated
percentage of employee contributions. Company contributions to the profit
sharing portion of the plan vest over a seven-year period. The Company
contribution is established each year by the Board of Directors and totaled
$47,500, $50,000 and $45,000 in 1999, 1998 and 1997.
Note 3: Interest, Net
The components of interest, net are as follows:
<TABLE>
<CAPTION>
Year ended January 31, 2000 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-term debt $ 2,584 $ 10,707 $ 10,931
Long-term debt 56,831 43,601 32,887
- -------------------------------------------------------------------------------
Total interest cost 59,415 54,308 43,818
Less: Interest income (3,521) (1,883) (1,221)
Capitalized interest (5,498) (5,334) (8,347)
- -------------------------------------------------------------------------------
Interest, net $50,396 $47,091 $34,250
- -------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 14
Note 4: Income Taxes
Income taxes consist of the following:
<TABLE>
<CAPTION>
Year ended January 31, 2000 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current income taxes:
Federal $ 130,524 $ 113,270 $ 98,464
State and local 21,835 19,672 18,679
- -------------------------------------------------------------------------------
Total current
income taxes 152,359 132,942 117,143
Deferred income taxes:
Current (18,367) (1,357) (4,614)
Non-current (4,492) (585) 8,471
- -------------------------------------------------------------------------------
Total deferred
income taxes (22,859) (1,942) 3,857
- -------------------------------------------------------------------------------
Total income taxes $ 129,500 $ 131,000 $ 121,000
- -------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 15
A reconciliation of the statutory Federal income tax rate to the effective tax
rate is as follows:
<TABLE>
<CAPTION>
Year ended January 31, 2000 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.00% 35.00% 35.00%
State and local
income taxes, net of
federal income taxes 4.06 4.03 4.17
Other, net (.06) (0.24) 0.21
- -------------------------------------------------------------------------------
Effective tax rate 39.00% 38.79% 39.38%
- -------------------------------------------------------------------------------
</TABLE>
Deferred income tax assets and liabilities result from temporary differences in
the timing of recognition of revenue and expenses for tax and financial
reporting purposes. Significant deferred tax assets and liabilities, by nature
of the temporary differences giving rise thereto, are as follows:
<TABLE>
<CAPTION>
January 31, 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Accrued expenses $ 29,276 $ 30,071
Compensation and
benefits accruals 35,651 30,404
Merchandise inventories 24,461 18,801
Land, buildings and
equipment basis and
depreciation differences (22,982) (34,519)
Employee benefits (11,008) (10,659)
Unrealized gain on investment (10,889) --
Other 12,570 11,011
- -------------------------------------------------------------------------------
Net deferred tax assets $ 57,079 $ 45,109
- -------------------------------------------------------------------------------
</TABLE>
Note 5: Earnings Per Share
Basic earnings per share are computed on the basis of the weighted average
number of common shares outstanding during the year. Average shares outstanding
were 137,814,589, 146,241,091 and 154,972,560 in 1999, 1998 and 1997.
Diluted earnings per share are computed on the basis of the weighted average
number of common shares outstanding during the year plus dilutive common stock
equivalents (primarily stock options). Weighted average diluted shares
outstanding were 138,424,844, 146,858,271 and 155,350,296 in 1999, 1998 and
1997.
Options with an exercise price greater than the average market price were not
included in the computation of diluted earnings per share. These options totaled
2,798,966, 1,146,113 and 303,622 shares in 1999, 1998 and 1997.
Note 6: Investment
In September 1998, the Company purchased non-voting convertible preferred stock
in a private company. In June 1999, this company completed an initial public
offering of common stock. Upon completion of the offering, the Company's
investment was converted to common stock, which has been categorized as
available-for-sale. In January 2000, this public company merged with a private
company in a pooling-of-interests transaction. The Company had an investment in
the preferred stock of the acquired private company since October 1998. The
Company's available-for-sale investment has been increased to reflect the
consummation of the merger. A portion of the investment is reported as
short-term because the Company intends to sell it within one year. Accumulated
other comprehensive income includes the increase in the fair market value of the
investment based on its quoted market value at January 31, 2000, net of
applicable taxes of $10.9 million.
Note 7: Accounts Receivable
The components of accounts receivable are as follows:
12
<PAGE> 16
<TABLE>
<CAPTION>
January 31, 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Customers $ 611,858 $ 592,204
Other 20,969 19,474
Allowance for doubtful accounts (15,838) (24,543)
- -------------------------------------------------------------------------------
Accounts receivable, net $ 616,989 $ 587,135
- -------------------------------------------------------------------------------
</TABLE>
Credit risk with respect to accounts receivable is concentrated in the
geographic regions in which the Company operates stores. At January 31, 2000 and
1999, approximately 38% of the Company's receivables were obligations of
customers residing in California. Concentration of the remaining receivables is
considered to be limited due to their geographical dispersion.
Bad debt expense totaled $11,707, $23,828 and $40,440 in 1999, 1998 and 1997.
Nordstrom National Credit Bank, a wholly owned subsidiary of the Company, issues
both a proprietary and VISA credit card. In 1996, the Company transferred
substantially all of its VISA credit card receivables (approximately $203,000)
to a trust in exchange for certificates representing undivided interests in the
trust. A Class A certificate with a market value of $186,600 was sold to a third
party, and a Class B certificate, which is subordinated to the Class A
certificate, was retained by the Company. The Company owns the remaining
undivided interests in the trust not represented by the Class A and Class B
certificates (the "Seller's Interest").
Cash flows generated from the receivables in the trust are, to the extent
allocable to the investors, applied to the payment of interest on the Class A
and Class B certificates, absorption of credit losses, and payment of servicing
fees to the Company, which services the receivables for the trust. Excess cash
flows revert to the Company. The Company's investment in the Class B certificate
and the Seller's Interest totals $42,754 and $8,208 at January 31, 2000 and
1999, and is included in customer accounts receivable.
Pursuant to the terms of operative documents of the trust, in certain events the
Company may be required to fund certain amounts pursuant to a recourse
obligation for credit losses. Based on current cash flow projections, the
Company does not believe any additional funding will be required.
Note 8: Land, Buildings and Equipment
Land, buildings and equipment consist of the following (at cost):
<TABLE>
<CAPTION>
January 31, 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 59,237 $ 57,337
Buildings 650,414 500,831
Leasehold improvements 870,821 957,877
Capitalized software 20,150 7,603
Store fixtures and equipment 1,037,936 944,202
- -------------------------------------------------------------------------------
2,638,558 2,467,850
Less accumulated depreciation
and amortization (1,370,726) (1,235,410)
- -------------------------------------------------------------------------------
1,267,832 1,232,440
Construction in progress 161,660 145,566
- -------------------------------------------------------------------------------
Land, buildings and
equipment, net $ 1,429,492 $ 1,378,006
- -------------------------------------------------------------------------------
</TABLE>
At January 31, 2000, the net book value of property located in California is
approximately $335,000. The Company does not carry earthquake insurance in
California because of its high cost.
At January 31, 2000, the Company has contractual commitments of approximately
$80 million for the construction of new stores or remodel of existing stores.
Note 9: Notes Payable
A summary of notes payable is as follows:
13
<PAGE> 17
<TABLE>
<CAPTION>
Year ended January 31, 2000 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Average daily short-term borrowings $ 45,030 $195,596 $193,811
Maximum amount
outstanding 178,533 385,734 278,471
Weighted average interest rate:
During the year 5.8% 5.5% 5.6%
At year-end 6.0% 5.2% 5.5%
</TABLE>
At January 31, 2000, the Company has an unsecured line of credit with a group of
commercial banks totaling $500,000 which is available as liquidity support for
the Company's commercial paper program, and expires in July 2002. The line of
credit agreement contains restrictive covenants which, among other things,
require the Company to maintain a certain minimum level of net worth and a
coverage ratio (as defined) of no less than 2 to 1. The Company pays a
commitment fee for the line based on the Company's debt rating.
Note 10: Long-Term Debt
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
January 31, 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Senior debentures, 6.95%,
due 2028 $ 300,000 $ 300,000
Senior notes, 5.625%, due 2009 250,000 250,000
Medium-term notes, payable by
Nordstrom Credit, Inc.,
7.0%-8.67%, due 2000-2002 145,350 203,350
Notes payable, of
Nordstrom Credit, Inc.,
6.7%, due 2005 100,000 100,000
Other 9,632 14,884
- -------------------------------------------------------------------------------
Total long-term debt 804,982 868,234
Less current portion (58,191) (63,341)
- -------------------------------------------------------------------------------
Total due beyond one year $ 746,791 $ 804,893
- -------------------------------------------------------------------------------
</TABLE>
Aggregate principal payments on long-term debt are as follows: 2000-$58,191;
2001-$11,454; 2002-$77,247; 2003-$319; 2004-$350; and thereafter-$657,421.
Note 11: Leases
The Company leases land, buildings and equipment under noncancelable lease
agreements with expiration dates ranging from 2000 to 2080. Certain leases
include renewal provisions at the Company's option. Most of the leases provide
for additional rentals based upon specific percentages of sales and require the
Company to pay for certain other costs.
Future minimum lease payments as of January 31, 2000 are as follows:
2000-$52,940; 2001-$52,762; 2002-$44,050; 2003-$42,092; 2004-$41,010; and
thereafter-$326,281.
The following is a schedule of rent expense:
14
<PAGE> 18
<TABLE>
<CAPTION>
Year ended January 31, 2000 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rent:
Store locations $18,794 $19,167 $16,869
Offices, warehouses
and equipment 19,926 19,208 17,811
Store locations
percentage rent 7,441 8,603 12,542
- --------------------------------------------------------------------------------
Total rent expense $46,161 $46,978 $47,222
- --------------------------------------------------------------------------------
</TABLE>
Note 12: Stock-Based Compensation
The Company has a stock option plan (the "Plan") administered by the
Compensation Committee of the Board of Directors (the "Committee") under which
stock options, performance share units and restricted stock may be granted to
key employees of the Company. Stock options are issued at the fair market value
of the stock at the date of grant. Options vest over periods ranging from four
to eight years, and expire ten years after the date of grant. In certain
circumstances, vesting of some options may be accelerated.
In addition to option grants each year, in 1999 and 1998 the Committee granted
272,970 and 185,201 performance share units, respectively, which will vest over
three years if certain financial goals are attained. Employees may elect to
receive common stock or cash upon vesting of these performance shares. The
Committee also granted 30,069 and 180,000 shares of restricted stock in 1999 and
1998 with weighted average fair values of $32.09 and $27.75, respectively, which
vest over five years. No monetary consideration is paid by employees who receive
performance share units or restricted stock.
The Company applies Accounting Principles Board Opinion No. 25 ("APB 25") in
measuring compensation costs under the Plan. Accordingly, no compensation cost
has been recognized for stock options because the option price equals the market
price on the date of grant. For performance share units, compensation expense is
recorded over the performance period based on the fair market value of the stock
at the date it is determined that such shares have been earned. For restricted
stock grants, compensation expense is based on the market price on the date of
grant and is recorded over the vesting period. Stock-based compensation expense
for 1999, 1998 and 1997 was $3,331, $10,037 and $246, respectively.
In addition to the above, in the fourth quarter of 1999, NORDSTROM.com
established an option plan under which 3.4 million options were granted at an
option price of $1.67 per share. Pursuant to APB 25, no compensation cost has
been recognized for the options because the option price was equal to, or in
excess of, the fair value of NORDSTROM.com's stock on the date of grant. The
options vest over a period of two and one-half to four years and must be
exercised within ten years of the grant date.
If the Company had elected to follow the measurement provisions of SFAS No. 123
in accounting for its stock options, compensation expense would be recognized
based on the fair value of the options at the date of grant. To estimate
compensation expense which would be recognized under SFAS 123, the Company used
the modified Black-Scholes option-pricing model with the following
weighted-average assumptions for options granted in 1999, 1998 and 1997,
respectively: risk-free interest rates of 5.7%, 5.2% and 5.4%; expected
volatility factors of .61, .46 and .32; expected dividend yield of 1% for all
years; and expected lives of 5 years for all years.
If SFAS 123 were used to account for the Company's stock-based compensation
programs, the pro forma net earnings and earnings per share would be as follows:
<TABLE>
<CAPTION>
Year ended January 31, 2000 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net earnings $192,936 $201,499 $183,618
Pro forma basic earnings per share $1.40 $1.38 $1.18
Pro forma diluted earnings per share $1.39 $1.37 $1.18
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts as awards prior to 1995 are not included, and additional
awards in future years are anticipated.
The number of shares reserved for future stock option grants pursuant to the
Plan is 3,212,879 at January 31, 2000.
Stock option activity for the Plan was as follows:
15
<PAGE> 19
<TABLE>
<CAPTION>
Year ended January 31, 2000 1999 1998
- --------------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of year 5,893,632 $27 3,401,602 $21 3,719,506 $19
Granted 2,926,368 31 3,252,217 31 692,764 26
Exercised (341,947) 23 (599,593) 18 (838,478) 17
Cancelled (342,752) 30 (160,594) 27 (172,190) 22
- --------------------------------------------------------------------------------------------------------
Outstanding, end of year 8,135,301 $28 5,893,632 $27 3,401,602 $21
- --------------------------------------------------------------------------------------------------------
Options exercisable at
end of year 3,145,393 $25 2,544,092 $23 1,759,464 $19
Weighted-average fair value of
options granted during the year $17 $14 $ 9
</TABLE>
16
<PAGE> 20
The following table summarizes information about stock options outstanding for
the Plan as of January 31, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Contractual Exercise Exercise
Exercise Prices Shares Life (Years) Price Shares Price
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$11 - $23 2,807,518 7 $21 1,487,867 $20
$24 - $33 2,919,777 8 $29 1,457,294 $29
$34 - $40 2,408,006 9 $37 200,232 $34
- -------------------------------------------------------------------------------
8,135,301 8 $28 3,145,393 $25
- -------------------------------------------------------------------------------
</TABLE>
Note 13: Supplementary Cash Flow Information
Supplementary cash flow information includes the following:
<TABLE>
<CAPTION>
Year ended January 31, 2000 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest (net of capitalized interest) $ 54,195 $ 44,418 $ 35,351
Income taxes 129,566 126,157 126,606
</TABLE>
Note 14: Segment Reporting
The Company has three reportable segments which have been identified based on
differences in products and services offered and regulatory conditions: the
Retail Stores, Credit Operations, and Catalog/Internet segments. The Retail
Stores segment derives its sales from high-quality apparel, shoes and
accessories for women, men and children, sold through retail store locations. It
includes the Company's Product Development Group which coordinates the design
and production of private label merchandise sold in the Company's retail stores.
Credit Operations segment revenues consist primarily of finance charges earned
through issuance of the Nordstrom proprietary and VISA credit cards. The
Catalog/Internet segment generates revenues from direct mail catalogs and the
NORDSTROM.com and NORDSTROMshoes.com Web sites.
The Company's senior management utilizes various measurements to assess segment
performance and to allocate resources to segments. The measurements used to
compute net earnings for reportable segments are consistent with those used to
compute net earnings for the Company.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies in Note 1. Corporate
and Other includes certain expenses and a portion of interest expense which are
not allocated to the operating segments. Intersegment revenues primarily consist
of fees for credit card services and are based on fees charged by third party
cards.
17
<PAGE> 21
The following tables set forth the information for the Company's reportable
segments and a reconciliation to the consolidated totals:
<TABLE>
<CAPTION>
Retail Credit Catalog/ Corporate
Year ended January 31, 2000 Stores Operations Internet and Other Eliminations Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales and revenues to
external customers $4,914,293 -- $ 209,930 -- -- $5,124,223
Service charge income -- $117,974 -- -- -- 117,974
Intersegment revenues 20,285 25,963 -- -- $(46,248) --
Interest, net 728 26,933 (167) $ 22,902 -- 50,396
Depreciation and amortization 170,765 1,424 6,313 15,216 -- 193,718
Income tax expense (benefit) 191,790 19,450 -- (81,740) -- 129,500
Net earnings (loss) 300,009 30,417 (35,685) (92,184) -- 202,557
Assets(a) 2,051,327 601,320 95,241 314,193 -- 3,062,081
Capital expenditures 263,352 2,792 5,206 33,702 -- 305,052
</TABLE>
<TABLE>
<CAPTION>
Retail Credit Catalog/ Corporate
Year ended January 31, 1999 Stores Operations Internet and Other Eliminations Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales and revenues to
external customers $4,834,049 -- $ 193,841 -- -- $5,027,890
Service charge income -- $119,926 -- -- -- 119,926
Intersegment revenues 23,748 26,736 -- -- $(50,484) --
Interest, net -- 31,139 -- $ 16,488 (536) 47,091
Depreciation and amortization 166,099 806 4,613 9,137 -- 180,655
Income tax expense (benefit) 182,800 16,200 -- (68,000) -- 131,000
Net earnings (loss) 288,503 25,606 (17,681) (89,705) -- 206,723
Assets(a) 2,040,938 607,255 57,803 382,067 -- 3,088,063
Capital expenditures 273,906 2,191 4,121 26,519 -- 306,737
</TABLE>
<TABLE>
<CAPTION>
Retail Credit Catalog/ Corporate
Year ended January 31, 1998 Stores Operations Internet and Other Eliminations Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales and revenues to
external customers $4,705,875 -- $ 145,749 -- -- $4,851,624
Service charge income -- $122,026 -- -- -- 122,026
Intersegment revenues 35,529 27,400 -- -- $(62,929) --
Interest, net -- 36,187 -- $ (1,170) (767) 34,250
Depreciation and amortization 147,847 667 3,082 7,373 -- 158,969
Income tax expense (benefit) 152,700 10,300 -- (42,000) -- 121,000
Net earnings (loss) 235,122 15,895 (12,936) (51,868) -- 186,213
Assets(a) 1,956,527 681,391 73,790 178,956 -- 2,890,664
Capital expenditures 221,384 242 17,390 20,919 -- 259,935
</TABLE>
(a) Segment assets in Corporate and Other include unallocated assets in
corporate headquarters, consisting primarily of land, buildings and
equipment, and deferred tax assets.
18
<PAGE> 22
Note 15: Contingent Liabilities
Because the cosmetics and Nine West lawsuits described below are still in their
preliminary stages, the Company is not in a position at this time to quantify
the amount or range of any possible losses related to those claims. The Company
intends to vigorously defend itself in those cases. While no assurance can be
given as to the ultimate outcomes of these lawsuits, based on preliminary
investigations, management currently believes that resolving these matters will
not have a material adverse effect on the Company's financial position.
Cosmetics. The Company is a defendant along with other department stores in nine
separate but virtually identical lawsuits filed in various Superior Courts of
the State of California in May, June and July 1998 that have now been
consolidated in Marin County state court. The plaintiffs seek to represent a
class of all California residents who purchased cosmetics and fragrances for
personal use from any of the defendants during the period May 1994 through May
1998. Plaintiffs' consolidated complaint alleges that the Company and other
department stores agreed to charge identical prices for cosmetics and
fragrances, not to discount such prices, and to urge manufacturers to refuse to
sell to retailers who sell cosmetics and fragrances at discount prices,
resulting in artificially inflated retail prices paid by the class in violation
of California state law. The plaintiffs seek treble damages in an unspecified
amount, attorneys' fees and prejudgment interest. Defendants, including the
Company, have answered the consolidated complaint denying the allegations.
Discovery has commenced and defendants are nearing completion of the initial
phase of producing documents and responding to plaintiffs' other discovery
requests. Plaintiffs have not yet moved for class certification.
Nine West. The Company was named as a defendant in a number of substantially
identical lawsuits filed in federal district courts in New York and elsewhere
beginning in January and February 1999. In addition to Nine West, a leading
manufacturer and retailer of men's, women's and children's non-athletic footwear
and accessories, which has subsequently been acquired by Jones Apparel, other
defendants include various department store and specialty retailers. The
lawsuits have now been consolidated in federal district court in New York and
purport to be brought on behalf of a class of persons who purchased Nine West
footwear from the defendants during the period January 1988 to mid-February
1999. Plaintiffs' consolidated complaint alleges that the retailer defendants
agreed with Nine West and with each other on the minimum prices to be charged
for Nine West shoes. The plaintiffs seek treble damages in an unspecified
amount, attorneys' fees and prejudgment interest. Defendants moved to dismiss
the consolidated complaint, and the court denied the motion on January 7, 2000.
The Court had stayed discovery pending its decision on the motion to dismiss,
and defendants have now begun the process of producing documents and responding
to plaintiffs' other discovery requests. Plaintiffs have not yet moved for class
certification.
Vacation Policy. The Company has reached a settlement in its previously
described lawsuit relating to its vacation policy. The settlement is subject to
the execution of a definitive settlement agreement and court approval. A final
approval hearing has been set for April 28, 2000.
Saipan. The Company has reached a settlement in its previously described
lawsuits relating to its sourcing of clothing products from independent garment
manufacturers in Saipan (Commonwealth of Northern Mariana Islands). The
settlement is subject to court approval. No hearing has been set to date.
Other. The Company is also subject to other ordinary routine litigation
incidental to its business and with respect to which no material liability is
expected.
Note 16: Selected Quarterly Data (unaudited)
<TABLE>
<CAPTION>
Year ended January 31, 2000 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $1,039,105 $1,443,395 $1,110,114 $1,531,609 $5,124,223
Gross profit 350,909 500,047 392,270 521,237 1,764,463
Earnings before income taxes 51,688 116,189 55,033 109,147 332,057
Net earnings 31,538 70,839 33,633 66,547 202,557
Basic earnings per share .22 .51 .25 .50 1.47
Diluted earnings per share .22 .51 .25 .50 1.46
Dividends per share .08 .08 .08 .08 .32
</TABLE>
19
<PAGE> 23
<TABLE>
<CAPTION>
Year ended January 31, 1999 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $1,040,215 $1,447,284 $1,094,349 $1,446,042 $5,027,890
Gross profit 341,915 476,041 377,249 487,740 1,682,945
Earnings before income taxes 52,837 113,062 63,175 108,649 337,723
Net earnings 32,337 69,162 38,675 66,549 206,723
Basic earnings per share .22 .47 .27 .47 1.41
Diluted earnings per share .21 .47 .27 .47 1.41
Dividends per share .07 .07 .08 .08 .30
</TABLE>
20
<PAGE> 24
Management and Independent Auditors' Reports
Management Report
The accompanying consolidated financial statements, including the notes thereto,
and the other financial information presented in this Annual Report have been
prepared by management. The financial statements have been prepared in
accordance with generally accepted accounting principles and include amounts
that are based upon our best estimates and judgments. Management is responsible
for the consolidated financial statements, as well as the other financial
information in this Annual Report.
The Company maintains an effective system of internal accounting control. We
believe that this system provides reasonable assurance that transactions are
executed in accordance with management authorization, and that they are
appropriately recorded, in order to permit preparation of financial statements
in conformity with generally accepted accounting principles and to adequately
safeguard, verify and maintain accountability for assets. The concept of
reasonable assurance is based on the recognition that the cost of a system of
internal control should not exceed the benefits derived.
The consolidated financial statements and related notes have been audited by
Deloitte & Touche LLP, independent certified public accountants. The
accompanying auditors' report expresses an independent professional opinion on
the fairness of presentation of management's financial statements.
The Audit Committee of the Board of Directors is composed of the outside
directors, and is responsible for recommending the independent certified public
accounting firm to be retained for the coming year, subject to shareholder
approval. The Audit Committee meets periodically with the independent auditors,
as well as with management and the internal auditors, to review accounting,
auditing, internal accounting controls and financial reporting matters. The
independent auditors and the internal auditors also meet privately with the
Audit Committee.
Michael A. Stein
Executive Vice President and Chief Financial Officer
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of Nordstrom, Inc.
and subsidiaries (the "Company") as of January 31, 2000 and 1999, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended January 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of Nordstrom, Inc. and
subsidiaries as of January 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 2000, in conformity with generally accepted accounting principles.
As discussed in Note 1, the accompanying financial statements have been restated
to reflect an accrual for sales returns.
Deloitte & Touche LLP
Seattle, Washington; March 10, 2000
21
<PAGE> 25
Ten-Year Statistical Summary
Dollars in thousands except square footage and per share amounts
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Year ended January 31, 2000 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financial Position
Customer accounts receivable, net $596,020 $567,661 $641,862
Merchandise inventories 797,845 750,269 826,045
Current assets 1,564,648 1,653,063 1,613,492
Current liabilities 866,509 778,864 979,031
Working capital 698,139 874,199 634,461
Working capital ratio 1.81 2.12 1.65
Land, buildings and equipment, net 1,429,492 1,378,006 1,252,513
Long-term debt, including current portion 804,982 868,234 420,865
Debt/capital ratio .4249 .4214 .3194
Shareholders' equity 1,185,614 1,300,545 1,458,950
Shares outstanding 132,279,988 142,114,167 152,518,104
Book value per share 8.96 9.15 9.57
Total assets 3,062,081 3,088,063 2,890,664
Operations
Net sales 5,124,223 5,027,890 4,851,624
Costs and expenses:
Cost of sales and related buying and occupancy 3,359,760 3,344,945 3,295,813
Selling, general, and administrative 1,491,040 1,405,270 1,322,929
Interest, net 50,396 47,091 34,250
Service charge income and other, net (109,030) (107,139) (108,581)
Total costs and expenses 4,792,166 4,690,167 4,544,411
Earnings before income taxes 332,057 337,723 307,213
Income taxes 129,500 131,000 121,000
Net earnings 202,557 206,723 186,213
Basic earnings per share 1.47 1.41 1.20
Diluted earnings per share 1.46 1.41 1.20
Dividends per share .32 .30 .265
Comparable store sales percentage increase (decrease) (1.1%) (2.7%) 4.0%
Net earnings as a percent of net sales 3.95% 4.11% 3.84%
Return on average shareholders' equity 16.29% 14.98% 12.77%
Sales per square foot for Company-operated stores 350 362 384
Stores 104 97 92
Total square footage 14,487,000 13,593,000 12,614,000
</TABLE>
22
<PAGE> 26
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$693,123 $874,103 $655,715 $565,151 $584,379 $585,490 $558,573
719,919 626,303 627,930 585,602 536,739 506,632 448,344
1,549,819 1,612,776 1,397,713 1,314,914 1,219,844 1,177,638 1,090,379
795,321 833,443 693,015 631,064 516,397 558,768 556,394
754,498 779,333 704,698 683,850 703,447 618,870 533,985
1.95 1.94 2.02 2.08 2.36 2.11 1.96
1,152,454 1,103,298 984,195 845,596 824,142 856,404 806,191
380,632 439,943 373,910 438,574 481,945 491,076 468,148
.2720 .3232 .2575 .2934 .3337 .4029 .4308
1,457,084 1,408,053 1,330,437 1,153,594 1,038,649 927,465 816,100
159,269,954 162,226,288 164,488,196 164,118,256 163,949,594 163,688,454 163,475,820
9.15 8.68 8.09 7.03 6.34 5.67 4.99
2,726,495 2,732,619 2,396,783 2,177,481 2,053,170 2,041,875 1,902,589
4,448,019 4,106,817 3,892,614 3,591,228 3,415,613 3,174,822 2,891,856
3,079,459 2,802,786 2,598,624 2,469,689 2,336,005 2,167,268 1,999,251
1,217,086 1,120,120 1,023,161 940,708 901,446 831,005 747,565
39,400 39,295 30,664 37,646 44,810 49,106 52,228
(129,469) (125,130) (94,644) (88,509) (86,140) (87,443) (84,660)
4,206,476 3,837,071 3,557,805 3,359,534 3,196,121 2,959,936 2,714,384
241,543 269,746 334,809 231,694 219,492 214,886 177,472
95,227 106,190 132,304 90,804 84,489 80,527 62,204
146,316 163,556 202,505 140,890 135,003 134,359 115,268
.90 1.00 1.23 .86 .82 .82 .71
.90 1.00 1.23 .86 .82 .82 .71
.25 .25 .1925 .17 .16 .155 .15
0.6% (0.7%) 4.4% 2.7% 1.4% 1.4% 0%
3.29% 3.98% 5.20% 3.92% 3.95% 4.23% 3.99%
10.21% 11.94% 16.30% 12.85% 13.73% 15.41% 14.97%
377 382 395 383 381 388 391
83 78 76 74 72 68 63
11,754,000 10,713,000 9,998,000 9,282,000 9,224,000 8,590,000 7,655,000
</TABLE>
23
<PAGE> 27
Officers of Nordstrom, Inc.
Jammie Baugh, 46
Executive Vice President, Human Resources
Laurie M. Black, 40
Vice President, Accessories, Gifts, Women's Specialized, Northwest Region,
Full-Line Stores
Robert E. Campbell, 44
Vice President, Strategy and Planning, and Treasurer
Gail A. Cottle, 48
Executive Vice President and President,
Nordstrom Product Group
Dale C. Crichton, 51
Executive Vice President, Cosmetics, Full-Line Stores
Joseph V. Demarte, 48
Vice President, Human Resources
Annette S. Dresser, 39
Vice President, Women's Contemporary, Full-Line Stores
Linda Toschi Finn, 52
Vice President, Marketing Director, Full-Line Stores
Tamela J. Hickel, 39
Vice President, Southeast Regional Manager
Darrel J. Hume, 52
Vice President, Regional Manager of Stores, Central States
Darren R. Jackson, 35
Vice President and Chief Financial Officer,
Full-Line Stores
Bonnie M. Junell, 43
Vice President, Brass Plum/Kids, Northwest, Full-Line Stores
Kevin T. Knight, 44
Vice President and President, Nordstrom Credit Group
Michael G. Koppel, 43
Vice President, Corporate Controller
Llynn (Len) A. Kuntz, 39
Vice President and Executive Vice President, Full-Line Store Strategy
F. Richard Lennon, 59
Vice President, Chief Information Officer
David P. Lindsey, 50
Vice President, Store Planning
David L. Mackie, 51
Vice President, Real Estate
Robert J. Middlemas, 43
Executive Vice President, General Manager, Central States
24
<PAGE> 28
Jack H. Minuk, 45
Vice President, Women's Shoes, Full-Line Stores
Blake W. Nordstrom, 39
Executive Vice President and President, Nordstrom Rack Group
Erik B. Nordstrom, 36
Executive Vice President, Northwest General Manager
Peter E. Nordstrom, 37
Executive Vice President,
Director of Full-Line Store Merchandising Strategy
William E. Nordstrom, 36
Executive Vice President, East Coast General Manager
James R. O'Neal, 41
Executive Vice President, Southwest General Manager
Suzanne R. Patneaude, 53
Vice President, Designer Apparel, Full-Line Stores
N. Claire Stack, 38
Corporate Secretary and Director of Legal Affairs
Michael A. Stein, 50
Executive Vice President and Chief Financial Officer
Joel T. Stinson, 50
Vice President, Operations
Dana K. Summers, 40
Vice President, Business Information and Planning,
Full-Line Stores
Delena M. Sunday, 39
Vice President, Diversity Affairs
Susan A. Wilson Tabor, 54
Executive Vice President, General Manager,
Nordstrom Rack Group
Geevy S. K. Thomas, 35
Vice President and Executive Vice President, Merchandising Strategy,
Full-Line Stores
John J. Whitacre, 47
Chairman and Chief Executive Officer
Martha S. Wikstrom, 43
Executive Vice President and President, Full-Line Store Group
NORDSTROM.com, LLC
Victoria B. Dellinger, 40
Executive Vice President, Merchandising
Kimberly Jaderholm, 39
Vice President, Human Resources
J. Daniel Nordstrom, 37
Chief Executive Officer and President, NORDSTROM.com, LLC
25
<PAGE> 29
Kathryn E. Olson, 41
Executive Vice President, Marketing
Paul Onnen, 37
Vice President, Chief Technology Officer
Michael Sato, 33
Vice President, Fulfillment Operations
Robert A. Schwartz, 39
Executive Vice President, E-Commerce
Kurt D. Whitesel, 38
Executive Vice President, Chief Operating Officer and
Chief Financial Officer
Divisional Vice Presidents
Nordstrom Full-Line Stores
Mark S. Brashear, 38
Vice President, General Execution Manager, Southwest Region
Martine Burkel, 40
Vice President, Accessories, Gifts, Women's Specialized,
East Coast Region
Nora M. Cummings, 45
Vice President, San Diego/Arizona Regional Manager
Sherry E. Eversaul, 52
Vice President, Women's Apparel, Contemporary Forward Bridge/Better, Halogen
Kathleen V. Ferguson, 40
Vice President, Customer Relationship Marketing
Margaret (Peggy) Mansur, 41
Vice President, East Coast/Central States, Cosmetics
Vicki McWilliams, 42
Vice President, Northern California Regional Manager
Margaret Myers, 52
Vice President, Accessories and Women's Specialized, Southwest Region
Lisa S. O'Neal, 42
Vice President, Women's Apparel, Classic/Mainstream, Better/Moderate
David M. Witman, 41
Vice President, East Coast/Central States, Men's Wear
Nordstrom Credit Group
Karen Bowman Roesler, 44
Vice President, Credit Marketing and Risk
Carol R. Simonson, 48
Vice President, Finance, Strategy and Planning
26
<PAGE> 30
(Divisional Vice Presidents continued)
Nordstrom Product Group
Margaret Desmond Fortescue, 38
Vice President, Director of Information Technology
Kathleen M. Gersch, 31
Vice President, Director of Finance and Strategic Planning
Kent S. Grimes, 47
Vice President, Director of Product Groups
Dean A. Holly, 47
Vice President, Director of Sourcing and Production
James Mahan, 37
Vice President, Director of Human Resources
Patrick C. Smith, 41
Vice President, Director of Operations
Michael A. Tam, 42
Vice President, Director of Brands
Nordstrom Rack Group
Timothy J. Bean, 43
Vice President, Merchandise Manager, Shoes
Kelly Cole Berka, 44
Vice President, Southwest Regional Manager
Janet Meiser Blasquez, 42
Vice President, Merchandise Manager, Women's Apparel
Marsha Savery, 49
Vice President, Marketing Director
Marcia A. Scott, 39
Vice President, Merchandise Manager for Accessories, Cosmetics, Lingerie, Kids
and Gifts
K. C. Shaffer, 45
Vice President, Northwest Regional Manager
Dean H. White, 44
Vice President, Merchandise Manager, Men's Apparel
27
<PAGE> 31
Corporate Service Center
Mary D. Amundson, 46
Vice President, Compensation and Benefits
Jon M. Anastasio, 48
Vice President, Executive and Organizational Development
D. Wayne Howard, 44
Vice President, Supply Chain Strategy
W. Drew Murphy, 54
Vice President, Risk Management and Loss Prevention
R. Michael Richardson, 43
Vice President, Systems Development and Enterprise Technologies
Linda Gail Schantz, 46
Vice President, Logistics
Janis M. Walsh, 47
Vice President, Information Technology Services
Brooke F. White, 37
Vice President, Public Relations
Directors and Committees
Directors
D. Wayne Gittinger, 67
Director; Partner, Lane Powell Spears Lubersky LLP
Seattle, Washington
Enrique Hernandez, Jr., 44
Director; President and CEO,
Inter-Con Security Systems, Inc.
Pasadena, California
Ann D. McLaughlin, 58
Director; Chairman, The Aspen Institute
Aspen, Colorado
John A. McMillan, 68
Director
Bruce A. Nordstrom, 66
Director
John N. Nordstrom, 62
Director
Alfred E. Osborne, Jr., 55
Director; Director of the Harold Price Center
for Entrepreneurial Studies and
Associate Professor of Business Economics,
The Anderson School at UCLA
Los Angeles, California
William D. Ruckelshaus, 67
Director; A Principal in Madrona Investment
28
<PAGE> 32
Group, LLC
Seattle, Washington
Elizabeth Crownhart Vaughan, 71
Director; President, Salar Enterprises
Portland, Oregon
John J. Whitacre, 47
Chairman of the Board of Directors
Bruce G. Willison, 51
Director; Dean, The Anderson School at UCLA
Los Angeles, California
29
<PAGE> 33
Committees
Executive
John A. McMillan
Bruce A. Nordstrom
John N. Nordstrom
John J. Whitacre
Audit
Enrique Hernandez, Jr.
Ann D. McLaughlin, Chair
Alfred E. Osborne, Jr.
William D. Ruckelshaus
Elizabeth Crownhart Vaughan
Bruce G. Willison
Compensation and Stock Option
Enrique Hernandez, Jr.
Ann D. McLaughlin
Alfred E. Osborne, Jr.
William D. Ruckelshaus, Chair
Elizabeth Crownhart Vaughan
Finance
D. Wayne Gittinger
Enrique Hernandez, Jr.
John A. McMillan
John N. Nordstrom
Alfred E. Osborne, Jr., Chair
Bruce G. Willison
Corporate Governance and Nominating
D. Wayne Gittinger, Chair
Ann D. McLaughlin
Alfred E. Osborne, Jr.
William D. Ruckelshaus
Elizabeth Crownhart Vaughan
Profit Sharing and Benefits
Mary D. Amundson
Joseph V. Demarte, Chair
D. Wayne Gittinger
Peter E. Nordstrom
Michael A. Stein
John J. Whitacre
30
<PAGE> 34
Retail Store Facilities
The following table sets forth certain information with respect to each of the
stores operated by the Company. The Company also operates seven distribution
centers and owns or leases other space for administrative functions.
<TABLE>
<CAPTION>
Year Present
opened or total store
Location Store Name acquired area/sq. ft.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Southwest Group
Arizona
Scottsdale Fashion Square 1998 235,000
California
Arcadia Santa Anita Fashion Park 1994 151,000
Brea Brea Mall 1979 195,000
Canoga Park Topanga Plaza 1984 154,000
Cerritos Los Cerritos Center 1981 122,000
Corte Madera The Village at Corte Madera 1985 116,000
Costa Mesa South Coast Plaza 1978 235,000
Escondido North County Fair 1986 156,000
Glendale Glendale Galleria 1983 147,000
Los Angeles Westside Pavilion 1985 150,000
Mission Viejo The Shops at Mission Viejo 1999 172,000
Montclair Montclair Plaza 1986 134,000
Palo Alto Stanford Shopping Center 1984 187,000
Pleasanton Stoneridge Mall 1990 173,000
Redondo Beach The Galleria at South Bay 1985 161,000
Riverside The Galleria at Tyler 1991 164,000
Sacramento Arden Fair Mall 1989 190,000
San Diego Fashion Valley Center 1981 220,000
San Diego Horton Plaza 1985 151,000
San Diego University Towne Centre 1984 130,000
San Francisco Stonestown Galleria 1988 174,000
San Francisco San Francisco Centre 1988 350,000
San Mateo Hillsdale Shopping Center 1982 149,000
Santa Ana MainPlace Mall 1987 169,000
Santa Barbara Paseo Nuevo Mall 1990 186,000
Santa Clara Valley Fair 1987 165,000
Walnut Creek Broadway Plaza 1984 193,000
East Coast Group
Connecticut
Farmington Westfarms Mall 1997 189,000
Georgia
Atlanta Perimeter Mall 1998 243,000
Maryland
Annapolis Annapolis Mall 1994 162,000
Bethesda Montgomery Mall 1991 225,000
Columbia The Mall in Columbia 1999 173,000
Towson Towson Town Center 1992 205,000
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
Year Present
opened or total store
Location Store Name acquired area/sq. ft.
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
East Coast Group (continued)
New Jersey
Edison Menlo Park Mall 1991 266,000
Freehold Freehold Raceway Mall 1992 174,000
Millburn The Mall at Short Hills 1995 188,000
Paramus Garden State Plaza 1990 282,000
New York
Garden City Roosevelt Field Mall 1997 241,000
White Plains The Westchester Mall 1995 219,000
Pennsylvania
King of Prussia King of Prussia Plaza 1996 238,000
Rhode Island
Providence Providence Place 1999 206,000
Virginia
Arlington The Fashion Centre 1989 241,000
at Pentagon City
McLean Tysons Corner Center 1988 253,000
Norfolk MacArthur Center 1999 166,000
Central States Group
Illinois
Oakbrook Oakbrook Center 1991 249,000
Schaumburg Woodfield Shopping Center 1995 215,000
Skokie Old Orchard Center 1994 209,000
Indiana
Indianapolis Circle Centre Mall 1995 216,000
Kansas
Overland Park Oak Park Mall 1998 219,000
Michigan
Troy Somerset Collection North 1996 258,000
Minnesota
Bloomington Mall of America 1992 240,000
Ohio
Beachwood Beachwood Place 1997 231,000
Texas
Dallas Dallas Galleria 1996 249,000
</TABLE>
<TABLE>
<CAPTION>
Year Present
opened or total store
Location Store Name acquired area/sq. ft.
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Northwest Group
Alaska
Anchorage Anchorage 5th Avenue Mall 1975 97,000
Colorado
Denver Park Meadows Mall 1996 245,000
Oregon
Portland Clackamas Town Center 1981 121,000
Portland Downtown Portland 1966 174,000
</TABLE>
32
<PAGE> 36
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Portland Lloyd Center 1963 150,000
Salem Salem Center 1980 71,000
Tigard Washington Square 1974 189,000
Utah
Murray Fashion Place Mall 1981 110,000
Salt Lake City Crossroads Plaza 1980 140,000
Washington
Bellevue Bellevue Square 1967 285,000
Lynnwood Alderwood Mall 1979 127,000
Seattle Downtown Seattle (1) 1998 383,000
Seattle Northgate Mall 1965 122,000
Spokane River Park Square 1999 137,000
Tacoma Tacoma Mall 1966 134,000
Tukwila Southcenter Mall 1968 170,000
Vancouver Vancouver Mall 1977 71,000
Yakima Downtown Yakima 1972 44,000
Other
Faconnable
Beverly Hills, CA 1997 17,000
Costa Mesa, CA 1997 8,000
New York, NY 1993 10,000
Women's Ala Moana
Honolulu, HI 1997 14,000
Men's Ala Moana
Honolulu, HI 1997 8,000
</TABLE>
(1) Excludes approximately 278,000 square feet of corporate and administrative
offices.
33
<PAGE> 37
<TABLE>
<CAPTION>
Year Present
opened or total store
Location Store Name acquired area/sq. ft.
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
RACK GROUP
Phoenix, AZ Last Chance 1992 48,000
Brea, CA Brea Union Plaza Rack 1999 45,000
Chino, CA Chino Town Square Rack 1987 30,000
Colma, CA 280 Metro Center Rack 1987 31,000
Costa Mesa, CA Metro Point Rack 1983 50,000
Sacramento, CA Howe Bout Arden Rack 1999 54,000
San Diego, CA Mission Valley Rack 1985 57,000
San Jose, CA Westgate Mall Rack 1998 48,000
San Leandro, CA Marina Square Rack 1990 44,000
Woodland Hills, CA Woodland Hills Rack 1984 48,000
Littleton, CO Meadows Market Place Rack 1998 34,000
Northbrook, IL Village Square Rack 1996 40,000
Schaumburg, IL Woodfield Rack 1994 45,000
Gaithersburg, MD Shady Grove Boulevard Rack 1999 49,000
Silver Spring, MD City Place Rack 1992 37,000
Towson, MD Towson Rack 1992 31,000
Bloomington, MN Mall of America Rack 1998 41,000
Hempstead, NY The Mall at the Source Rack 1997 48,000
Beaverton,OR Tanasbourne Rack 1998 53,000
Portland, OR Clackamas Rack 1983 28,000
Portland, OR Downtown Portland Rack 1986 19,000
Philadelphia, PA Franklin Mills Rack 1993 43,000
Salt Lake City, UT Sugarhouse Center Rack 1991 31,000
Woodbridge, VA Potomac Mills Rack 1990 46,000
Auburn, WA SuperMall Rack 1995 48,000
Bellevue, WA Factoria Square Rack 1997 46,000
Lynnwood, WA Golde Creek Plaza Rack 1999 38,000
Seattle, WA Downtown Seattle Rack 1987 42,000
</TABLE>
34
<PAGE> 38
Shareholder Information
Independent Auditors
Deloitte & Touche LLP
Counsel
Lane Powell Spears Lubersky LLP
Transfer Agent and Registrar
ChaseMellon Shareholder Services
Telephone (800) 318-7045
General Offices
1617 Sixth Avenue
Seattle, Washington 98101-1742
Telephone (206) 628-2111
Annual Meeting
May 16, 2000 at 11:00 a.m. Pacific Daylight Time
Westin Hotel
1900 Fifth Avenue
Seattle, Washington
Form 10-K
The Company's Annual Report to the Securities
and Exchange Commission on Form 10-K for the year
ended January 31, 2000 will be provided to shareholders upon written request to:
Nordstrom, Inc. Investor Relations
P.O. Box 2737
Seattle, Washington 98111
or by calling (206) 233-6301.
Shareholder Information
Please visit our www.NORDSTROM.com Web site to obtain the latest available
information. In addition, the Company is always willing to discuss matters of
concern to shareholders, including its vendor standards compliance mechanisms
and progress in achieving compliance.
35
<PAGE> 1
EXHIBIT 21.1
NORDSTROM, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation
- ------------------ ----------------------
<S> <C>
Nordstrom Credit, Inc. Colorado
Nordstrom Federal Savings Bank N/A
Nordstrom.com Holding, Inc. Delaware
Nordstrom.com, LLC Delaware
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 27,042
<SECURITIES> 0
<RECEIVABLES> 632,827
<ALLOWANCES> 15,838
<INVENTORY> 797,845
<CURRENT-ASSETS> 1,564,648
<PP&E> 2,800,218
<DEPRECIATION> 1,370,726
<TOTAL-ASSETS> 3,062,81
<CURRENT-LIABILITIES> 866,509
<BONDS> 746,791
0
0
<COMMON> 247,559
<OTHER-SE> 938,055
<TOTAL-LIABILITY-AND-EQUITY> 3,062,081
<SALES> 5,124,223
<TOTAL-REVENUES> 5,124,223
<CGS> 3,359,760
<TOTAL-COSTS> 4,741,770
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,396
<INCOME-PRETAX> 332,057
<INCOME-TAX> 129,500
<INCOME-CONTINUING> 202,557
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202,557
<EPS-BASIC> 1.47
<EPS-DILUTED> 1.46
</TABLE>
