<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 1998
OR
[ ] 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 0-11822
-----------------------------------
MICHAELS STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1943604
(State of incorporation) (I.R.S. employer
identification number)
8000 BENT BRANCH DRIVE, IRVING, TEXAS 75063
P.O. BOX 619566, DFW, TEXAS 75261-9566
(Address of principal executive offices, including zip code)
(972) 409-1300
(Registrant's telephone number, including area code)
-----------------------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<CAPTION>
SHARES OUTSTANDING AS OF
TITLE SEPTEMBER 9, 1998
----- -----------------
<S> <C>
Common stock, par value $.10 per share 29,668,794
</TABLE>
<PAGE>
MICHAELS STORES, INC
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MICHAELS STORES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
<TABLE>
<CAPTION>
August 1, 1998 January 31, 1998
-------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 42,918 $ 162,283
Merchandise inventories 553,851 385,580
Income taxes receivable and
deferred income taxes 11,292 11,291
Prepaid expenses and other 19,204 14,029
-------------- ----------------
Total current assets 627,265 573,183
-------------- ----------------
PROPERTY AND EQUIPMENT, AT COST 353,755 331,755
Less accumulated depreciation (157,245) (138,719)
-------------- ----------------
196,510 193,036
-------------- ----------------
COSTS IN EXCESS OF NET ASSETS OF
ACQUIRED OPERATIONS, NET 134,893 136,827
DEFERRED INCOME TAXES 2,694 2,695
OTHER ASSETS 2,519 2,753
-------------- ----------------
140,106 142,275
-------------- ----------------
$ 963,881 $ 908,494
-------------- ----------------
-------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 149,755 $ 109,456
Accrued liabilities and other 99,785 105,036
-------------- ----------------
Total current liabilities 249,540 214,492
-------------- ----------------
SENIOR NOTES 125,000 125,000
CONVERTIBLE SUBORDINATED NOTES 96,940 96,940
OTHER LONG-TERM LIABILITIES 28,927 30,151
-------------- ----------------
Total long-term liabilities 250,867 252,091
-------------- ----------------
500,407 466,583
-------------- ----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, 29,661,386 shares
outstanding 2,966 2,903
Additional paid-in capital 366,810 350,977
Retained earnings 93,698 88,031
-------------- ----------------
Total stockholders' equity 463,474 441,911
-------------- ----------------
$ 963,881 $ 908,494
-------------- ----------------
-------------- ----------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
MICHAELS STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------
August 1, August 2,
1998 1997
--------- ---------
<S> <C> <C>
NET SALES $314,171 $278,038
Cost of sales and occupancy expense 215,325 190,998
Selling, general and administrative
expense 90,942 85,393
Store pre-opening costs 2,283 154
--------- ---------
OPERATING INCOME 5,621 1,493
Interest expense 5,580 5,702
Other (income) and expense, net (982) 461
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 1,023 (4,670)
Provision (benefit) for income taxes 389 (1,775)
--------- ---------
NET INCOME (LOSS) $ 634 $ (2,895)
--------- ---------
--------- ---------
EARNINGS (LOSS) PER COMMON SHARE:
Basic $0.02 $(0.11)
Diluted $0.02 $(0.11)
COMMON SHARES USED IN PER SHARE CALCULATIONS:
Basic 29,602 26,299
Diluted 31,408 26,299
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MICHAELS STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
August 1, August 2,
1998 1997
--------- ---------
<S> <C> <C>
NET SALES $649,941 $599,356
Cost of sales and occupancy expense 440,199 411,126
Selling, general and administrative
expense 187,503 177,277
Store pre-opening costs 4,071 154
--------- ---------
OPERATING INCOME 18,168 10,799
Interest expense 11,283 11,444
Other income, net (3,010) (1,088)
--------- ---------
INCOME BEFORE INCOME TAXES 9,895 443
Provision for income taxes 3,760 168
--------- ---------
NET INCOME $ 6,135 $ 275
--------- ---------
--------- ---------
EARNINGS PER COMMON SHARE:
Basic $0.21 $0.01
Diluted $0.20 $0.01
COMMON SHARES USED IN PER SHARE CALCULATIONS:
Basic 29,462 25,764
Diluted 31,342 26,882
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
MICHAELS STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------
August 1, August 2,
1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 6,135 $ 275
Adjustments:
Depreciation 21,064 20,178
Amortization 2,141 2,114
Other 558 802
Change in assets and liabilities:
Merchandise inventories (168,271) (69,614)
Prepaid expenses and other (5,175) (2,657)
Deferred income taxes and other (500) 4,897
Accounts payable 40,299 (7,235)
Accrued liabilities and other (3,295) (9,573)
--------- ---------
Net change in assets and liabilities (136,942) (84,182)
--------- ---------
Net cash used in operating activities (107,044) (60,813)
--------- ---------
INVESTING ACTIVITIES:
Additions to property and equipment (41,510) (15,836)
Net proceeds from sales of property
and equipment 19,155 1,594
Net proceeds from sales of investments - 3,386
--------- ---------
Net cash used in investing activities (22,355) (10,856)
--------- ---------
FINANCING ACTIVITIES:
Payment of other long-term liabilities (2,555) (2,065)
Proceeds from stock options exercised 6,461 50,172
Proceeds from issuance of common stock
and other 6,128 --
--------- ---------
Net cash provided by financing
activities 10,034 48,107
--------- ---------
NET DECREASE IN CASH AND EQUIVALENTS (119,365) (23,562)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 162,283 59,069
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $ 42,918 $ 35,507
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
MICHAELS STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended August 1, 1998
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited (except
for the Consolidated Balance Sheet as of January 31, 1998) and have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Because of the
seasonal nature of the Company's business, the results of operations for the
three and six months ended August 1, 1998 are not indicative of the results
to be expected for the entire year. Certain fiscal 1997 amounts have been
reclassified to conform to the fiscal 1998 presentation. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year
ended January 31, 1998.
NOTE B - SUPPLEMENTAL CASH FLOW INFORMATION
Investing and financing activities not affecting cash during the six
months ended August 1, 1998 included additions to property and equipment
through capital lease obligations of $2,390,000 related to the acquisition of
new computer equipment.
NOTE C - DEBT
In August 1998, the Company replaced its Credit Agreement and entered into a
new unsecured revolving credit agreement with BankBoston, N.A. and other
lending institutions (the "Revolving Credit Agreement") providing for a
revolving loan of $100 million which may be increased to $125 million
pursuant to certain terms and conditions as set forth in the Revolving Credit
Agreement. Borrowings available under the Revolving Credit Agreement are
reduced by the aggregate amount of letters of credit outstanding. The
interest rate on the Revolving Credit Agreement is generally (a) the higher
of (i) an annual rate of interest announced from time to time by BankBoston,
N.A. or (ii) one-half of one percent (1/2%) above the Federal Funds Effective
Rate or (b) the Eurodollar Rate as defined by the Revolving Credit Agreement.
The Company is required to pay a commitment fee of up to .3% on the unused
portion of the revolving line of credit. The Revolving Credit Agreement
provides certain annual restrictions on the aggregate amount of capital
expenditures, restricts the payment of dividends and requires that the
Company maintain compliance with various financial ratios. The Revolving
Credit Agreement expires in August 2001.
NOTE D - CONTINGENCIES
A lawsuit was commenced against the Company and several other parties on
September 19, 1994 in the Superior Court of Stanislaus County, California, on
behalf of a former employee, Naomi Snyder, her child, and her husband. The
complaint alleges that the former employee and her then-unborn child were
exposed to excessive levels of carbon monoxide in one of the Company's stores
caused by a propane gas powered floor buffer which was operated by an outside
cleaning service, resulting, among other things, in severe and permanent
6
<PAGE>
injuries to the child. Plaintiffs' Statement of Damages, filed on or about
January 26, 1995, seeks $11 million. On April 10, 1995 the trial court ruled
the plaintiff's pleadings did not state a cause of action against the Company
upon which relief could be granted. However, the ruling by the trial court
was overturned by the Court of Appeals of the State of California, Fifth
Appellate District, on September 23, 1996. On October 30, 1997, the
California Supreme Court sustained the appellate court ruling and remanded
the case to the trial court. A settlement agreement has been reached by the
parties and the Company's portion of the settlement amount is expected to be
fully covered by insurance.
The Company is a defendant from time to time in lawsuits incidental to
its business. Based on currently available information, the Company believes
that resolution of all known contingencies is uncertain, and there can be no
assurance that future costs related to such litigation would not be material
to the Company's financial position or results of operations.
NOTE E - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per common share:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------------- -------------------
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
--------- --------- --------- ---------
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $ 634 $(2,895) $ 6,135 $ 275
--------- --------- --------- ---------
--------- --------- --------- ---------
Denominator:
Denominator for basic
earnings per share-weighted
average shares 29,602 26,299 29,462 25,764
Effect of dilutive securities:
Employee stock options 1,806 - 1,880 1,118
--------- --------- --------- ---------
Denominator for diluted
earnings per share-adjusted
weighted average shares and
assumed conversions 31,408 26,299 31,342 26,882
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic earnings (loss) per
common share $0.02 $(0.11) $0.21 $0.01
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted earnings (loss) per
common share $0.02 $(0.11) $0.20 $0.01
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The convertible subordinated notes were not included in the diluted
earnings per common share calculation because they were antidilutive for the
periods presented. The convertible subordinated notes could potentially
affect diluted earnings per common share in the future.
7
<PAGE>
NOTE F - STORE PRE-OPENING COSTS
In April 1998, the AICPA issued Statement of Position 98-5 ("SOP 98-5"),
REPORTING THE COSTS OF START-UP ACTIVITIES, which requires that costs related
to start-up activities be expensed as incurred. Prior to fiscal 1998, the
Company deferred store pre-opening costs until the fiscal year in which the
store opened. The Company adopted the provisions of SOP 98-5 in its
financial statements for the first quarter of fiscal 1998 and, as a result,
began expensing pre-opening costs as incurred.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Certain statements contained in this discussion and analysis which are
not historical facts are forward looking statements that involve risks and
uncertainties, including, but not limited to, customer demand and trends in
the arts and crafts industry, related inventory risks due to shifts in
customer demand, the effect of economic conditions, the impact of
competitors' locations or pricing, the effectiveness of advertising
strategies, the availability of acceptable real estate locations for new
stores, difficulties with respect to new information system technologies and
the Company's ability to address the Year 2000 Issue, supply constraints or
difficulties, the results of financing efforts, and other risks detailed in
the Company's Securities and Exchange Commission filings.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to net sales
of each line item of the Company's Consolidated Statements of Operations.
This table should be read in conjunction with the following discussion and
with the Company's Consolidated Financial Statements, including the related
notes.
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------------- --------------------
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales and occupancy
expense 68.5 68.7 67.7 68.6
Selling, general and
administrative expense 29.0 30.7 28.9 29.6
Store pre-opening costs 0.7 0.1 0.6 0.0
--------- --------- --------- ---------
Operating income 1.8 0.5 2.8 1.8
Interest expense 1.8 2.0 1.7 1.9
Other (income) and expense,
net (0.3) 0.2 (0.4) (0.2)
--------- --------- --------- ---------
Income (loss) before income
taxes 0.3 (1.7) 1.5 0.1
Provision (benefit) for income
taxes 0.1 (0.7) 0.6 0.0
--------- --------- --------- ---------
Net income (loss) 0.2% (1.0)% 0.9% 0.1%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
In the discussion below, all percentages given for expense items are
calculated as a percentage of net sales.
9
<PAGE>
QUARTER ENDED AUGUST 1, 1998 COMPARED TO THE
QUARTER ENDED AUGUST 2, 1997
Net sales in the second quarter of fiscal 1998 increased $36.1 million,
or 13%, over the second quarter of fiscal 1997. The results for the second
quarter of fiscal 1998 included sales from 33 Michaels and 4 Aaron Brothers
stores that were opened during the 12-month period ended August 1, 1998.
During the second quarter, sales at the new stores (net of 4 closures)
accounted for an increase of $18.0 million. Same-store sales increased 7% in
the second quarter of fiscal 1998 compared to the second quarter of fiscal
1997, which contributed $18.1 million to the net sales increase. The sales
increases were driven by increases in the Company's core categories of art
supplies, floral, ribbon and hobbies. By utilizing the information provided
by our point-of-sale system to continue to improve our store in-stock
position in top-selling items and properly allocating seasonal merchandise to
the stores based upon anticipated sales trends, we expect same-store sales
increases to continue.
Cost of sales and occupancy expense, as a percentage of net sales, for
the second quarter of fiscal 1998 was 68.5%, a decrease of 0.2% compared to
the second quarter of fiscal 1997. This decrease was primarily attributable
to better leveraging of occupancy expense and reduced remodel expenses
compared to the second quarter of fiscal 1997.
Selling, general and administrative expense, as a percentage of net
sales, decreased by 1.7% in the second quarter of fiscal 1998 compared to the
second quarter of fiscal 1997. This decrease was due to reduced legal and
professional fees, and to improved expense leverage in store labor and all
other categories of store operating expenses.
Store pre-opening costs, as a percentage of net sales, increased by 0.6%
in the second quarter of fiscal 1998 compared to the second quarter of fiscal
1997 as the Company adopted a change in accounting rules requiring that store
pre-opening costs be expensed as incurred. See Note F in the Notes to
Consolidated Financial Statements.
10
<PAGE>
SIX MONTHS ENDED AUGUST 1, 1998 COMPARED TO THE
SIX MONTHS ENDED AUGUST 2, 1997
Net sales in the first six months of fiscal 1998 increased $50.6
million, or 8%, over the first six months of fiscal 1997. The results for
the first six months of fiscal 1998 included sales from 33 Michaels and 4
Aaron Brothers stores that were opened during the 12-month period ended
August 1, 1998. During the first six months, sales of the new stores (net of
11 closures) accounted for an increase of $26.0 million. Same-store sales
increased 4% in the first six months of fiscal 1998 compared to the first six
months of fiscal 1997, which contributed $24.6 million to the net sales
increase. The improvement in same-store sales performance was due to a
strong performance in the Company's core categories of art supplies, ribbon,
needlecrafts and hobbies.
Cost of sales and occupancy expense, as a percentage of net sales, for
the first six months of fiscal 1998 decreased by 0.9% compared to the first
six months of fiscal 1997. This decrease was principally due to improved
gross margins, reduced remodel expenses, and an improved leveraging of fixed
occupancy costs.
Selling, general and administrative expense, as a percentage of net
sales, decreased by 0.7% in the first six months of fiscal 1998 compared to
the first six months of fiscal 1997. This decrease was due to reduced legal
and professional fees, and to improved expense leverage in store labor and
nearly all other categories of store operating expenses with the exception of
advertising, which reflects the impact of increased grand openings and higher
costs associated with production and distribution of print advertising during
the first six months of fiscal 1998 compared to the prior year.
Store pre-opening costs of $4.1 million, or 0.6% as a percentage of net
sales, were recognized in the first six months of fiscal 1998 as the Company
adopted a change in accounting rules requiring that store pre-opening costs
be expensed as incurred. See Note F in the Notes to Consolidated Financial
Statements.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow used by operating activities during the first six months of
fiscal 1998 was $107.0 million compared to $60.8 million of cash flow used by
operating activities during the first six months of fiscal 1997. These
results are consistent with the Company's plan to build inventory and open
and relocate stores early in the fiscal year. Inventories per Michaels store
increased 24% to $1,117,000 at August 1, 1998 compared to $904,000 at August
2, 1997 as a result of increasing the number of items replenished by the
Company's distribution centers from approximately 6,200 in the prior year to
approximately 11,000 in fiscal 1998, and to an earlier receipt of fall basic
product compared to the previous year.
The Company opened 28 Michaels and 1 Aaron Brothers stores and relocated
7 Michaels and 4 Aaron Brothers stores during the first six months of fiscal
1998. Capital expenditures for the newly opened stores amounted to
approximately $19.0 million. Additional capital expenditures of approximately
$22.5 million during the first six months of fiscal 1998 related primarily to
existing stores, and for interim construction costs for the relocation of the
Company's California distribution center, and various systems enhancements.
The Company completed two sale/leaseback transactions for the California
distribution facility and a portion of its equipment during the second
quarter of fiscal 1998 with gross proceeds amounting to $19.0 million. The
Company expects additional capital expenditures during the remainder of
fiscal 1998 to total approximately $38 to $43 million, relating primarily to
costs for new stores, store relocations and remodeling, merchandising and
other information systems and various other projects.
At August 1, 1998, the Company had working capital of $377.7 million
compared to $358.7 million at January 31, 1998. At August 1, 1998, the
Company had a bank credit agreement ("Credit Agreement") which provided for
an unsecured revolving line of credit of up to $100 million. There were no
borrowings outstanding on the revolving line of credit at any time during
fiscal 1997 or the first six months of fiscal 1998. In August 1998, the
Company replaced its Credit Agreement and entered into a new unsecured
revolving credit agreement with BankBoston, N.A. and other lending
institutions (the "Revolving Credit Agreement") providing for a revolving
loan of $100 million which may be increased to $125 million pursuant to
certain terms and conditions as set forth in the Revolving Credit Agreement.
Borrowings available under the Revolving Credit Agreement are reduced by the
aggregate amount of letters of credit outstanding. The interest rate on the
Revolving Credit Agreement is generally (a) the higher of (i) an annual rate
of interest announced from time to time by BankBoston, N.A. or (ii) one-half
of one percent (1/2%) above the Federal Funds Effective Rate or (b) the
Eurodollar Rate as defined by the Revolving Credit Agreement. The Company is
required to pay a commitment fee of up to .3% on the unused portion of the
revolving line of credit. The Revolving Credit Agreement provides certain
annual restrictions on the aggregate amount of capital expenditures,
restricts the payment of dividends and requires that the Company maintain
compliance with various financial ratios. The Revolving Credit Agreement
expires in August 2001. Management believes that the Company's available
cash, funds generated by operating activities, funds available under the
Revolving Credit Agreement and lease financing, should be sufficient to
finance continuing operations and sustain current growth plans. Management
believes that the Company can finance an annual store expansion at a rate of
12% to 15% (on a square footage basis) from internally generated cash flow.
12
<PAGE>
MICHAELS STORES, INC.
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of legal proceedings, see Note D to "Notes to
Consolidated Financial Statements," which description is incorporated
herein by this reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 4 - Credit Agreement dated as of August 28, 1998 among
Michaels Stores, Inc., BankBoston, N.A. and the other lenders
signatory thereto.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the period covered by
this report.
13
<PAGE>
MICHAELS STORES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICHAELS STORES, INC.
By: /s/ Bryan M. DeCordova
-----------------------------
Bryan M. DeCordova
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated: September 15, 1998
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
<C> <S> <C>
4 Credit Agreement dated as of August 28, 1998
among Michaels Stores, Inc., BankBoston, N.A.
and the other lenders signatory thereto.
27 Financial Data Schedule
</TABLE>
15
<PAGE>
REVOLVING CREDIT AGREEMENT
DATED as of August 28, 1998
between
MICHAELS STORES, INC.
and
BANKBOSTON, N.A., as Administrative Agent
and
THE BANKS
Listed on SCHEDULE 1 hereto
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION................................1
1.1. DEFINITIONS................................................1
1.2. RULES OF INTERPRETATION....................................21
2. THE REVOLVING CREDIT FACILITY..........................................22
2.1. COMMITMENT TO LEND SYNDICATED LOANS........................22
2.2. REQUESTS FOR LOANS.........................................23
2.2.1. GENERAL..........................................23
2.2.2. SWING LINE.......................................23
2.3. COMPETITIVE BID LOANS......................................24
2.3.1. COMPETITIVE BID BORROWINGS.......................24
2.3.2. MAXIMUM COMPETITIVE BID LOANS; FUNDING
LOSSES.....................................................28
2.3.3. REPAYMENT OF COMPETITIVE BID LOANS...............29
2.4. FUNDS FOR LOANS............................................29
2.4.1. FUNDING PROCEDURES...............................29
2.4.2. ADVANCES BY AGENT................................29
2.5. SETTLEMENTS................................................31
2.5.1. GENERAL..........................................31
2.5.2. FAILURE TO MAKE FUNDS AVAILABLE..................31
2.5.3. NO EFFECT ON OTHER BANKS.........................32
2.6. THE NOTES..................................................33
2.6.1. SYNDICATED NOTES.................................33
2.6.2. COMPETITIVE BID NOTES............................33
2.7. REDUCTION OF TOTAL COMMITMENT..............................34
2.8. INTEREST ON LOANS..........................................34
2.9. CONVERSION OPTIONS.........................................35
2.9.1. CONVERSION TO DIFFERENT TYPE OF SYNDICATED
LOAN.......................................................35
2.9.2. CONTINUATION OF TYPE OF SYNDICATED LOAN..........35
2.9.3. EURODOLLAR RATE LOANS............................36
2.10. LIMITED INCREASE IN TOTAL COMMITMENT.......................36
3. REPAYMENT OF THE LOANS.................................................36
3.1. MATURITY...................................................36
3.2. MANDATORY REPAYMENTS OF LOANS..............................36
3.3. OPTIONAL REPAYMENTS OF LOANS...............................37
4. LETTERS OF CREDIT......................................................38
4.1. LETTER OF CREDIT COMMITMENTS...............................38
4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT............38
4.1.2. LETTER OF CREDIT APPLICATIONS....................38
4.1.3. TERMS OF LETTERS OF CREDIT.......................38
4.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS...............38
<PAGE>
-ii-
4.1.5. PARTICIPATIONS OF BANKS..........................39
4.1.6. NOTICE TO AGENT..................................39
4.2. REIMBURSEMENT OBLIGATION OF THE BORROWER...................39
4.3. LETTER OF CREDIT PAYMENTS..................................40
4.4. OBLIGATIONS ABSOLUTE.......................................41
4.5. RELIANCE BY ISSUER.........................................41
4.6. LETTER OF CREDIT FEE.......................................42
5. CERTAIN GENERAL PROVISIONS.............................................43
5.1. CERTAIN FEES...............................................43
5.1.1. FEES PAYABLE AT CLOSING..........................43
5.1.2. AGENT AND ARRANGER FEES..........................43
5.2. FACILITY FEE...............................................43
5.3. FUNDS FOR PAYMENTS ........................................43
5.3.1. PAYMENTS TO AGENT................................43
5.3.2. NO OFFSET, ETC...................................43
5.4. COMPUTATIONS...............................................44
5.5. INABILITY TO DETERMINE EURODOLLAR RATE.....................44
5.6. ILLEGALITY.................................................45
5.7. ADDITIONAL COSTS, ETC......................................45
5.8. CAPITAL ADEQUACY...........................................47
5.9. CERTIFICATE................................................48
5.10. INDEMNITY..................................................48
5.11. INTEREST AFTER DEFAULT.....................................49
5.11.1. OVERDUE AMOUNTS..................................49
5.11.2. AMOUNTS NOT OVERDUE..............................49
5.12. BANK OBLIGATION TO MITIGATE................................49
5.13. REPLACEMENT OF BANK........................................49
6. GUARANTIES.............................................................50
7. REPRESENTATIONS AND WARRANTIES.........................................50
7.1. AUTHORITY..................................................50
7.1.1. ORGANIZATION; GOOD STANDING......................50
7.1.2. AUTHORIZATION....................................51
7.1.3. ENFORCEABILITY...................................51
7.2. GOVERNMENTAL APPROVALS ....................................52
7.3. TITLE TO PROPERTIES; LEASES................................52
7.4. FINANCIAL STATEMENTS.......................................52
7.4.1. FISCAL YEAR......................................52
7.4.2. FINANCIAL STATEMENTS.............................52
7.4.3. PROJECTIONS......................................52
7.5. NO MATERIAL CHANGES, ETC...................................53
7.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC.......................53
7.7. LITIGATION.................................................53
7.8. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC...............54
7.9. TAX STATUS.................................................54
<PAGE>
-iii-
7.10. NO EVENT OF DEFAULT........................................54
7.11. HOLDING COMPANY AND INVESTMENT COMPANY ACTS................54
7.12. EMPLOYEE BENEFIT PLANS.....................................54
7.12.1. IN GENERAL.......................................54
7.12.2. TERMINABILITY OF WELFARE PLANS...................55
7.12.3. GUARANTEED PENSION PLANS.........................55
7.12.4. MULTIEMPLOYER PLANS..............................56
7.13. USE OF PROCEEDS............................................56
7.13.1. GENERAL..........................................56
7.13.2. REGULATIONS U AND X..............................56
7.13.3. INELIGIBLE SECURITIES............................56
7.14. ENVIRONMENTAL COMPLIANCE...................................56
7.15. SUBSIDIARIES ETC...........................................57
7.16. DISCLOSURE.................................................58
7.17. YEAR 2000 PROBLEM..........................................58
8. AFFIRMATIVE COVENANTS OF THE BORROWER..................................58
8.1. PUNCTUAL PAYMENT...........................................58
8.2. MAINTENANCE OF OFFICE......................................58
8.3. RECORDS AND ACCOUNTS.......................................59
8.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION.........59
8.5. NOTICES....................................................60
8.5.1. DEFAULTS.........................................60
8.5.2. ENVIRONMENTAL EVENTS.............................61
8.5.3. NOTICE OF LITIGATION AND JUDGMENTS...............61
8.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES.............61
8.7. INSURANCE..................................................62
8.8. TAXES......................................................62
8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC....................63
8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND
PERMITS...........................................................63
8.11. EMPLOYEE BENEFIT PLANS.....................................63
8.12. USE OF PROCEEDS............................................64
8.13. ROYALTY PAYMENTS...........................................64
8.14. FURTHER ASSURANCES.........................................64
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.............................64
9.1. RESTRICTIONS ON INDEBTEDNESS...............................64
9.2. RESTRICTIONS ON LIENS......................................67
9.3. RESTRICTIONS ON INVESTMENTS................................68
9.4. DISTRIBUTIONS..............................................69
9.5. PAYMENTS AND MODIFICATIONS OF SENIOR NOTES AND
SUBORDINATED NOTES................................................70
9.6. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS............71
9.6.1. MERGERS AND ACQUISITIONS.........................71
9.6.2. DISPOSITION OF ASSETS............................72
<PAGE>
-iv-
9.7. COMPLIANCE WITH ENVIRONMENTAL LAWS.........................72
9.8. EMPLOYEE BENEFIT PLANS.....................................73
9.9. BUSINESS ACTIVITIES........................................73
9.10. TRANSACTIONS WITH AFFILIATES...............................74
9.11. CREATION AND MAINTENANCE OF SUBSIDIARIES...................74
9.12. DERIVATIVE TRANSACTIONS....................................74
9.13. SALES OF ACCOUNTS..........................................75
9.14. SYNTHETIC LEASES...........................................75
10. FINANCIAL COVENANTS OF THE BORROWER....................................75
10.1. FUNDED DEBT TO TOTAL CAPITAL...............................75
10.2. MINIMUM FIXED CHARGE COVERAGE RATIO........................75
10.3. INVENTORY TURN RATIO.......................................75
10.4. CAPITAL EXPENDITURES.......................................76
11. CLOSING CONDITIONS.....................................................76
11.1. LOAN DOCUMENTS.............................................76
11.2. CERTIFIED COPIES OF CHARTER AND DEBT DOCUMENTS.............76
11.3. CORPORATE ACTION...........................................76
11.4. INCUMBENCY CERTIFICATE.....................................77
11.5. OPINION OF COUNSEL.........................................77
11.6. PAYMENT OF FEES............................................77
11.7. PAYOFF LETTER..............................................77
11.8. ABI GUARANTY...............................................77
12. CONDITIONS TO ALL BORROWINGS...........................................77
12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT..................77
12.2. NO LEGAL IMPEDIMENT........................................78
12.3. GOVERNMENTAL REGULATION....................................78
12.4. PROCEEDINGS AND DOCUMENTS..................................78
13. EVENTS OF DEFAULT; ACCELERATION; ETC...................................78
13.1. EVENTS OF DEFAULT AND ACCELERATION.........................78
13.2. TERMINATION OF COMMITMENTS.................................82
13.3. REMEDIES...................................................82
14. SETOFF.................................................................83
15. THE AGENT..............................................................84
15.1. AUTHORIZATION..............................................84
15.2. EMPLOYEES AND AGENTS.......................................84
15.3. NO LIABILITY...............................................84
15.4. NO REPRESENTATIONS.........................................85
15.4.1. GENERAL..........................................85
15.4.2. CLOSING DOCUMENTATION, ETC.......................85
15.5. PAYMENTS...................................................86
15.5.1. PAYMENTS TO AGENT................................86
15.5.2. DISTRIBUTION BY AGENT............................86
15.5.3. DELINQUENT BANKS.................................86
15.6. HOLDERS OF NOTES...........................................87
<PAGE>
-v-
15.7. INDEMNITY..................................................87
15.8. AGENT AS BANK..............................................87
15.9. RESIGNATION................................................87
15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT.............88
16. EXPENSES AND INDEMNIFICATION...........................................88
16.1. EXPENSES...................................................88
16.2. INDEMNIFICATION............................................89
16.3. SURVIVAL...................................................89
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION..........................90
17.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY..........90
17.2. CONFIDENTIALITY............................................90
17.3. PRIOR NOTIFICATION.........................................90
17.4. OTHER......................................................91
18. SURVIVAL OF COVENANTS, ETC.............................................91
19. ASSIGNMENT AND PARTICIPATION...........................................91
19.1. CONDITIONS TO ASSIGNMENT BY BANKS..........................91
19.2. CERTAIN REPRESENTATIONS AND WARRANTIES;
LIMITATIONS; COVENANTS............................................92
19.3. REGISTER...................................................93
19.4. NEW NOTES..................................................94
19.5. PARTICIPATIONS.............................................94
19.6. DISCLOSURE.................................................94
19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE
BORROWER..........................................................95
19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS........................95
19.9. ASSIGNMENT BY BORROWER.....................................96
20. NOTICES, ETC...........................................................96
21. GOVERNING LAW..........................................................97
22. HEADINGS...............................................................97
23. COUNTERPARTS...........................................................97
24. ENTIRE AGREEMENT, ETC..................................................97
25. WAIVER OF JURY TRIAL...................................................98
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.....................................98
27. SEVERABILITY...........................................................99
</TABLE>
<PAGE>
EXHIBITS
EXHIBIT A - Loan Request
EXHIBIT B - Competitive Bid Quote Request
EXHIBIT C - Invitation For Competitive Bid Quotes
EXHIBIT D-1 - Competitive Bid Quote
EXHIBIT D-2 - Notice of Competitive Bid Borrowing
EXHIBIT D-3 - Form of Notice of Competitive Bid Loans
EXHIBIT E-1 - Syndicated Note
EXHIBIT E-2 - Competitive Bid Note
EXHIBIT F - Compliance Certificate
EXHIBIT G - Assignment and Acceptance
SCHEDULES
SCHEDULE 1 - Banks; Commitment Percentages
SCHEDULE 7.3 - Title to Property; Leases
SCHEDULE 7.7 - Litigation
SCHEDULE 7.14 - Environmental Compliance
SCHEDULE 7.15 - Subsidiaries, etc.
SCHEDULE 9.1 - Existing Indebtedness
SCHEDULE 9.2 - Existing Liens
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of August 28, 1998, by and
among MICHAELS STORES, INC. (the "Borrower"), a Delaware corporation having its
principal place of business at 8000 Bent Branch Drive, Irving, Texas 75063, and
BANKBOSTON, N.A., and the other lending institutions listed on SCHEDULE 1 and
BANKBOSTON, N.A. as administrative agent for itself and such other lending
institutions.
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. DEFINITIONS. The following terms shall have the meanings set forth
in this Section 1 or elsewhere in the provisions of this Credit Agreement
referred to below:
ABI. Aaron Brothers, Inc., a Delaware corporation and a wholly owned
Subsidiary of the Borrower.
ADJUSTMENT DATE. Each date which is the first day of the month
immediately following the month in which the Borrower's quarterly unaudited
financial statements and related Compliance Certificate are required to be
delivered by the Borrower pursuant to Section 8.4(a), Section 8.4(b) and Section
8.4(c), respectively.
AFFILIATE. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
AGENT. BankBoston, N.A., in its capacity of administrative agent for
itself and the Banks.
AGENT'S SPECIAL COUNSEL. Bingham Dana LLP or such other counsel as may
be approved by the Agent.
APPLICABLE MARGIN. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a "RATE
ADJUSTMENT PERIOD"), the Applicable Margin shall be the applicable margin or
rate (in each case per annum) set forth below with respect to the Fixed Charge
Coverage Ratio, as determined as of the end of
<PAGE>
-2-
and for the period of four consecutive fiscal quarters of the Borrower ending
immediately prior to the applicable Rate Adjustment Period and pertaining to
such Adjustment Date:
@@
<TABLE>
<CAPTION>
APPLICABLE EURODOLLAR APPLICABLE
RATE MARGIN AND DOCUMENTARY
FIXED CHARGE STANDBY LETTER OF LETTER OF CREDIT APPLICABLE
LEVEL COVERAGE RATIO CREDIT FEE FEE FACILITY FEE
<S> <C> <C> <C> <C>
I less than or
equal to 1.70 to
1.00 0.95% 0.25% 0.30%
II greater than
1.70 to 1.00 but
less than or
equal to 1.85 to
1.00 0.75% 0.25% 0.25%
III greater than
1.85 to 1.00 but
less than 2.25 to
1.00 0.55% 0.20% 0.20%
IV greater than or
equal to 2.25 to
1.00 0.425% 0.20% 0.20%
</TABLE>
@@
ARRANGER. BancBoston Securities Inc., in its capacity as exclusive
syndication agent and arranger for the credit facilities provided hereunder.
ASSIGNMENT AND ACCEPTANCE. See Section 19.1.
BALANCE SHEET DATE. January 31, 1998.
BANKS. BKB and the other lending institutions listed on SCHEDULE 1
hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to Section 19.
BASE RATE. The higher of (i) the annual rate of interest announced from
time to time by BKB at its head office in Boston, Massachusetts, as its "base
rate" and (ii) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum 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, as
<PAGE>
-3-
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York and reported in
THE WALL STREET JOURNAL or other publication of national circulation selected by
the Agent, or, if such rate is not so published and reported for any day that is
a Business Day, the average of the quotations for such day on such transactions
received by the Agent from three funds brokers of recognized standing selected
by the Agent.
BASE RATE LOANS. Syndicated Loans bearing interest calculated by
reference to the Base Rate.
BKB. BankBoston, N.A., a national banking association, in its
individual capacity.
BORROWER. As defined in the preamble hereto.
BUSINESS DAY. Any day on which banking institutions in Boston,
Massachusetts and Dallas, Texas, are open for the transaction of banking
business and, in the case of Eurodollar Rate Loans, also a day which is a
Eurodollar Business Day.
CANADIAN SUBSIDIARY. Any Subsidiary of the Borrower organized under
the laws of the Dominion of Canada.
CAPITAL ASSETS. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and goodwill); PROVIDED that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
CAPITAL EXPENDITURES. Capital expenditures, as determined in
accordance with generally accepted accounting principles.
CAPITAL STOCK. As to any Person, the equity interests in such Person,
including, without limitation, the shares of each class of capital stock or
membership interest of any Person that is a corporation and partnership
interests (general and limited) in any Person that is a partnership.
CAPITALIZED LEASES. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the obligations under which are required
to be capitalized on the balance sheet of the lessee or obligor in accordance
with generally accepted accounting principles.
<PAGE>
-4-
CASH EQUIVALENTS.
(a) investments (directly or through a money market mutual
fund) in debt securities (including, without limitation, bankers'
acceptances, bearer deposit notes, loan participations, promissory
notes and medium-term notes) which have an average maturity of not more
than 365 days after the date of purchase, and
(i) for any such investment issued by a financial
institution, the issuer (A) maintains a long-term debt rating
of at least "A" (or its equivalent) according to Standard &
Poor's Ratings Group, a Division of McGraw-Hill, Inc. or a
Thompson Bankwatch rating of at least "B", and (B) has a
combined capital and surplus and undivided profits of not less
than $1,000,000 or any other financial institutions if the
amount on deposit is fully insured by the Federal Deposit
Insurance Corporation, and
(ii) for any corporate issuer, such investment is rated
"P-2" (or its then equivalent) according to Moody's Investors
Service, Inc., "A-2" (or its then equivalent) according to
Standard & Poor's Ratings Group, a Division of McGraw-Hill,
Inc., "F-2" (or its then equivalent) according to Fitch's
Investors Service, Inc. or "D-2" (or its then equivalent)
according to Duff & Phelps, or a better rating, or, which, if
unrated, are determined by the fund to be of comparable
quality to debt securities which have such ratings, and
(b) investments (directly or through a money market mutual
fund) in
(i) certificates of deposit, repurchase agreements,
and other interest bearing deposits or accounts with United
States commercial banks having a combined capital and surplus
of at least $100,000,000, whose debt obligations have one of
the three highest rating obtainable from Standard & Poor's
Ratings Group, a Division of McGraw-Hill, Inc. or Moody's
Investors Service, Inc., which certificates, repurchase
agreements, deposits, and accounts mature within one year from
the date of investment,
(ii) obligations issued or unconditionally guaranteed
by the United States government, or issued by any agency or
instrumentality thereof and backed by the full faith and
credit
<PAGE>
-5-
of the United States government, which obligations mature
within one year from the date of investment,
(iii) direct obligations issued by any state or
political subdivision of the United States, which mature one
year from the date of investment and have an A or higher
rating obtainable from Standard & Poor's Ratings Group, a
Division of McGraw-Hill, Inc., or a comparable rating
obtainable from Moody's Investors Service, Inc., or an
equivalent thereto, on the date of investment, and
(iv) commercial paper which has one of the highest
ratings obtainable from Standard & Poor's Ratings Group, a
Division of McGraw-Hill, Inc. or Moody's Investors Services,
Inc.
CERCLA. The Comprehensive Environmental Response, Compensation and
Liability Act of 1980.
CHANGE OF CONTROL. The occurrence of any of the following events with
respect to the Borrower:
(i) (A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of
more than 35% of the total voting power of the Voting Stock of the
Borrower and (B) the Permitted Holders "beneficially own" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, in the aggregate a lesser percentage of the total voting
power of the Voting Stock of the Borrower than such other person and do
not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the board of directors of
the Borrower (for the purposes of this clause, such other person shall
be deemed to beneficially own any Voting Stock of a specified
corporation held by a parent corporation, if such other person
"beneficially owns" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, more than 35% of the voting
power of the Voting Stock of such parent corporation and the Permitted
Holders "beneficially own" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of
the board of directors of such parent corporation);
<PAGE>
-6-
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the board of directors
of the Borrower (together with any new directors whose election by such
board of directors or whose nomination for election by the shareholders
of the Borrower was approved by a vote of 66-2/3% of the directors of
the Borrower then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the board of directors of the Borrower then in office;
(iii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, the assets of the Borrower to any Person or group of
Persons (other than to any wholly owned Subsidiary of the Borrower); or
(iv) the merger or consolidation of the Borrower with or into
another corporation with the effect that either (A) immediately after
such transaction any person (as defined in clause (i) above) (other
than a Permitted Holder) shall have become the "beneficial owner" (as
defined in clause (i) above) of securities of the surviving corporation
of such merger or consolidation representing a majority of the voting
power of the Voting Stock of the surviving corporation or (B) the
securities of the Borrower that are outstanding immediately prior to
such transaction and which represent 100% of the voting power of the
Voting Stock of the Borrower are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, (1) securities of the surviving corporation that
represent immediately after such transaction, at least a majority of
the voting power of the Voting Stock of the surviving corporation or
(2) securities that represent immediately after such transaction at
least a majority of the voting power of the Voting Stock of the
corporation that owns, directly or indirectly, 100% of the voting power
of the Voting Stock of the surviving corporation of that transaction.
CLOSING DATE. The first date on which the conditions set forth in
Section 11 have been satisfied and any Loans may be made or any Letter of Credit
may be issued hereunder.
CODE. The Internal Revenue Code of 1986.
COMMITMENT. With respect to each Bank, the amount set forth on SCHEDULE
1 hereto, or as adjusted or specified in any amendment to this Credit Agreement
or in any Assignment and Acceptance, as the amount of
<PAGE>
-7-
such Bank's commitment to make Loans to, and to participate in the issuance,
extension and renewal of Letters of Credit for the account of, the Borrower, as
the same may be in effect from time to time; or if such commitment is terminated
pursuant to the provisions hereof, zero. The Competitive Bid Loans of such Bank
outstanding at any time shall not affect such Bank's Commitment.
COMMITMENT PERCENTAGE. With respect to each Bank, the percentage set
forth on SCHEDULE 1 hereto, or as adjusted or specified in any amendment to this
Credit Agreement or in any Assignment and Acceptance, as such Bank's percentage
of the aggregate Commitments of all of the Banks. The Competitive Bid Loans of
such Bank outstanding at any time shall not affect such Bank's Commitment
Percentage.
COMPETITIVE BID LOAN(S). A borrowing hereunder consisting of one or
more revolving credit loans made by any of the Banks whose offer to make a
revolving credit loan as part of such borrowing has been accepted by the
Borrower under the auction bidding procedure described in Section 2.3.
COMPETITIVE BID NOTE. See Section 2.6.2.
COMPETITIVE BID QUOTE. An offer by a Bank to make a Competitive Bid
Loan in accordance with Section 2.3.
COMPETITIVE BID QUOTE REQUEST. See Section 2.3.1(b).
COMPETITIVE BID RATE. See Section 2.3.1(d)(ii)(C).
CONSOLIDATED OR CONSOLIDATED. With reference to any term defined
herein, shall mean that term as applied to the financial statements of the
Borrower and its Subsidiaries, consolidated in accordance with generally
accepted accounting principles.
CONSOLIDATED EBITDA. With respect to the Borrower and its Subsidiaries
on a consolidated basis for any period, Consolidated Net Income, but before
payment or provision for (a) any income taxes for such period, (b) Consolidated
Total Interest Expense for such period, (c) depreciation for such period, (d)
amortization for such period, and (e) all other noncash charges for such period,
all determined in accordance with generally accepted accounting principles.
CONSOLIDATED EBITDAR. For any period, the sum of (a) Consolidated
EBITDA for such period, PLUS (b) Consolidated Rental Expense for such period.
<PAGE>
-8-
CONSOLIDATED FUNDED DEBT. At any time of determination, the sum of (i)
the amount of the Loans outstanding (after giving account to any amounts
requested); PLUS (ii) the outstanding amount of any other Indebtedness for
borrowed money, in respect of Capitalized Leases or which is otherwise subject
to the payment of interest.
CONSOLIDATED NET INCOME. With respect to the Borrower and its
Subsidiaries on a consolidated basis for any period, the consolidated earnings
(or loss) from operations of the Borrower and its Subsidiaries for such period,
after eliminating therefrom all extraordinary nonrecurring items of income
(including gains on the sale of assets and earnings from the sale of
discontinued business lines), and after all expenses and other proper charges,
all determined in accordance with generally accepted accounting principles.
CONSOLIDATED NET WORTH. The excess of Consolidated Total Assets over
Consolidated Total Liabilities, LESS, to the extent otherwise includable in the
computations of Consolidated Net Worth, any subscriptions receivable.
CONSOLIDATED RENTAL EXPENSE. For any period, all rental expense of the
Borrower and its Subsidiaries during such period, determined on a consolidated
basis in accordance with generally accepted accounting principles, incurred
under any rental agreements or leases of real or personal property, including
space leases and ground leases, other than obligations in respect of any
Capitalized Leases.
CONSOLIDATED TANGIBLE NET WORTH. The excess of Consolidated Total
Assets over Consolidated Total Liabilities, and less the sum of:
(a) the total book value of all assets of the Borrower and
its Subsidiaries properly classified as intangible assets under
generally accepted accounting principles, including such items as
goodwill, the purchase price of acquired assets in excess of the fair
market value thereof, trademarks, trade names, service marks, brand
names, copyrights, patents and licenses, and rights with respect to the
foregoing; plus
(b) all amounts representing any write-up in the book value
of any assets of the Borrower or its Subsidiaries resulting from a
revaluation thereof subsequent to the Balance Sheet Date; plus
(c) to the extent otherwise includable in the computation
of Consolidated Tangible Net Worth, any subscriptions receivable.
<PAGE>
-9-
CONSOLIDATED TOTAL ASSETS. All assets of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
CONSOLIDATED TOTAL INTEREST EXPENSE. For any period, the aggregate
amount of interest required to be paid or accrued by the Borrower and its
Subsidiaries during such period on all Indebtedness of the Borrower and its
Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of any
Capitalized Lease, and including commitment fees, agency fees and facility fees,
all exclusive of investment income.
CONSOLIDATED TOTAL LIABILITIES. All liabilities of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
CONTROL OR CONTROLLED BY. Possession, directly or indirectly, of power
to direct or cause the direction of management or policies (whether through
ownership of Voting Stock, by contract or otherwise); PROVIDED, HOWEVER, that in
any event any Person which beneficially owns, directly or indirectly, 10% or
more (in number of votes) of the Voting Stock of a corporation shall be
conclusively presumed to control such corporation.
CONVERSION REQUEST. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Loan in accordance with Section
2.9.
CREDIT AGREEMENT. This Revolving Credit Agreement, including the
Schedules and Exhibits hereto.
DEFAULT. See Section 13.1.
DELINQUENT BANK See Section 15.5.3.
DERIVATIVE TRANSACTIONS. Every obligation of any Person under any
forward contract, futures contract, swap, option or other financing agreement or
arrangement (including, without limitation, caps, floors, collars and similar
agreements), the value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices.
DISTRIBUTION. The declaration or payment of any dividend on or in
respect of any shares of any class of Capital Stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of
<PAGE>
-10-
Capital Stock of the Borrower, directly or indirectly through a Subsidiary of
the Borrower or otherwise (including agreements to purchase shares in the
future); the return of capital by the Borrower to its shareholders as such; or
any other distribution on or in respect of any shares of any class of Capital
Stock of the Borrower.
DOCUMENTARY FRONTING FEE. See Section 4.6.
DOLLARS or $. Dollars in lawful currency of the United States of
America.
DOMESTIC LENDING OFFICE. Initially, the office of each Bank designated
as such in SCHEDULE 1 hereto; thereafter, upon written notice to the Borrower
and the Agent, such other office of such Bank, if any, located within the United
States that will be making or maintaining Base Rate Loans.
DRAWDOWN DATE. The date on which any Loan is made or is to be made,
and the date on which any Loan is converted or continued in accordance with
Section 2.9.
ELIGIBLE ASSIGNEE. Any of (i) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (ii)
a savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (iii) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any
such country, and having total assets in excess of $1,000,000,000, PROVIDED that
such bank is acting through a branch or agency located in the country in which
it is organized or another country which is also a member of the OECD; (iv) the
central bank of any country which is a member of the OECD; and (v) if, but only
if, any Event of Default has occurred and is continuing, any other bank,
insurance company, commercial finance company or other financial institution or
other Person approved by the Agent, such approval not to be unreasonably
withheld.
EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
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ENVIRONMENTAL LAWS. RCRA, CERCLA, SARA, the Federal Clean Water Act,
the Federal Clean Air Act, the Toxic Substances Control Act, or any state or
local statute, regulation, ordinance, order or decree relating to health, safety
or the environment.
EPA. The United States Environmental Protection Agency.
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA AFFILIATE. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA REPORTABLE EVENT. A reportable event with respect to a
Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the
regulations promulgated thereunder.
EUROCURRENCY RESERVE RATE. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in such Regulation D), if such liabilities
were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically
on and as of the effective date of any change in the Eurocurrency Reserve Rate.
EURODOLLAR BUSINESS DAY. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other Eurodollar Interbank Market as may be selected by the Agent in its sole
discretion acting in good faith.
EURODOLLAR INTERBANK MARKET. Any lawful recognized market in which
deposits of United States dollars are offered by international banking units of
United States banking institutions and by foreign, banking institutions to each
other, and where the eurodollar and foreign currency and exchange operations of
the Agent are customarily conducted.
EURODOLLAR LENDING OFFICE. Initially, the office of each Bank
designated as such in SCHEDULE 1 hereto; thereafter, upon written notice to the
Borrower and the Agent, such other office of such Bank, if any, that shall be
making or maintaining Eurodollar Rate Loans.
EURODOLLAR RATE. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate of interest equal to (i) the rate per annum (rounded upwards
to the nearest 1/16 of one percent) at which the Agent's Eurodollar
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Lending Office is offered Dollar deposits two Eurodollar Business Days prior to
the beginning of such Interest Period in the Eurodollar Interbank Market for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of the Eurodollar
Rate Loan of the Agent to which such Interest Period applies, divided by (ii) a
number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable.
EURODOLLAR RATE LOANS. Syndicated Loans bearing interest calculated by
reference to the Eurodollar Rate.
EVENT OF DEFAULT. See Section 13.1.
EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.
FEE LETTER. The letter agreement regarding fees, dated or to be dated
on or prior to the Closing Date, among the Borrower, the Agent and the Arranger
and in form and substance satisfactory to the Agent and the Arranger.
FIXED CHARGE COVERAGE RATIO. The ratio of (a) Consolidated EBITDAR
for the four fiscal quarters most recently ended to (b) the sum of (i)
Consolidated Total Interest Expense for such period PLUS, without duplication,
(ii) any scheduled amortization of principal on Indebtedness (excluding
amortization relating to Capitalized Leases) for such period PLUS (iii)
Consolidated Rental Expense for such period.
FOREIGN SUBSIDIARY. Any Subsidiary of the Borrower not organized under
the laws of the United States of America or the Dominion of Canada.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (i) When used in Section 9,
whether directly or indirectly through reference to a capitalized term used
therein, means (A) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(B) to the extent consistent with such principles, the accounting practice of
the Borrower reflected in its financial statements for the year ended on the
Balance Sheet Date, and (ii) when used in general, other than as provided above,
means principles that are (A) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time, and (B) consistently applied with past financial
statements of the Borrower adopting the same principles, provided that in each
case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
accounting principles is
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pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles) as
to financial statements in which such principles have been properly applied.
GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
GUARANTOR. Any Subsidiary which becomes a party to a Guaranty.
GUARANTY. A Guaranty, made by a Subsidiary of the Borrower in favor of
the Banks and the Agent pursuant to which such Subsidiary of the Borrower
guaranties to the Banks and the Agent the payment and performance of the
Obligations and in form and substance satisfactory to the Agent.
HAZARDOUS SUBSTANCES. Any hazardous waste, as defined by 42 U.S.C.
Section 6903(5), any hazardous substances as defined by 42 U.S.C. Section
9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33)
and any toxic substances, oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws.
INDEBTEDNESS. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(i) every obligation of such Person for money borrowed,
(ii) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or
businesses,
(iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person,
(iv) every obligation of such Person issued or assumed as
the deferred purchase price of property or services (including
securities repurchase agreements but excluding trade accounts payable
or accrued liabilities arising in the ordinary course of business which
are not overdue or which are being contested in good faith),
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(v) every obligation of such Person under any Capitalized
Lease,
(vi) every obligation of such Person (an "equity related
purchase obligation") to purchase, redeem, retire or otherwise acquire
for value any shares of capital stock of any class issued by such
Person, any warrants, options or other rights to acquire any such
shares, or any rights measured by the value of such shares, warrants,
options or other rights, excluding stock options, warrants or other
rights granted to employees under employee compensation agreements,
(vii) every obligation, contingent or otherwise, of such
Person guaranteeing, or having the economic effect of guarantying or
otherwise acting as surety for, any obligation of a type described in
any of clauses (i) through (vi) (the "primary obligation") of another
Person (the "primary obligor"), in any manner, whether directly or
indirectly, and including, without limitation, any obligation of such
Person (A) to purchase or pay (or advance or supply funds for the
purchase of) any security for the payment of such primary obligation,
(B) to purchase property, securities or services for the purpose of
assuring the payment of such primary obligation, or (C) to maintain
working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary obligor
to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (v) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (w) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, and (x) any equity related purchase obligation shall be the maximum
fixed redemption or purchase price thereof inclusive of any accrued and unpaid
dividends to be comprised in such redemption or purchase price.
INELIGIBLE SECURITIES. Securities which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of the
Banking Act of 1993 (12 U.S.C. Section 24, Seventh), as amended.
INTEREST PAYMENT DATE. (i) As to any Base Rate Loan, quarterly in
arrears on the first day of each calendar quarter for the immediately preceding
calendar quarter commencing on the first such date following the
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Closing Date with respect to interest accrued during the previous calendar
quarter, including, without limitation, the calendar quarter which includes the
Drawdown Date of such Base Rate Loan; (ii) as to any Eurodollar Rate Loan in
respect of which the Interest Period is (A) 3 months or less, the last day of
such Interest Period and (B) more than 3 months, the date that is 3 months from
the first day of such Interest Period and, in addition, the last day of such
Interest Period; and (iii) as to any Competitive Bid Loan, the last day of the
Interest Period applicable thereto.
INTEREST PERIOD. With respect to each Loan, (i) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrower in a Loan Request or
Notice of Competitive Bid Borrowing (A) for any Base Rate Loan, the last day of
the calendar quarter; (B) for any Eurodollar Rate Loan, 1, 2, 3, 4, 5, or 6
months; and (C) for any Competitive Bid Loan, a period up to 180 days; and (ii)
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Loan and ending on the last day of one of the
periods set forth above, as selected by the Borrower in a Conversion Request;
PROVIDED that all of the foregoing provisions relating to Interest Periods are
subject to the following:
(a) if any Interest Period with respect to a Eurodollar
Rate Loan would otherwise end on a day that is not a Eurodollar
Business Day, that Interest Period shall be extended to the next
succeeding Eurodollar Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately preceding
Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan
would end on a day that is not a Business Day, that Interest Period
shall end on the next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided
in Section 2.9, the Borrower shall be deemed to have requested a
conversion of the affected Eurodollar Rate Loan to a Base Rate Loan and
the continuance of all Base Rate Loans as Base Rate Loans on the last
day of the then current Interest Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate
Loan that begins on the last Eurodollar Business Day of a calendar
month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on
the last Eurodollar Business Day of a calendar month; and
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(e) any Interest Period that would otherwise extend beyond
the Revolving Credit Loan Maturity Date shall end on the Revolving
Credit Loan Maturity Date.
INVENTORY TURN RATIO. At any time, the ratio of (a) "cost of
merchandise sold" of the Borrower and its Subsidiaries for the period consisting
of the immediately preceding four consecutive fiscal quarters of the Borrower to
(b) the average book value of inventory (without giving effect to extraordinary
charges or write-downs of inventory) of the Borrower as of the end of each
fiscal quarter ending during such period.
INVESTMENTS. All expenditures made and all liabilities incurred by a
Person (contingently or otherwise) for the acquisition of stock or Indebtedness
of, or for loans, advances (excluding any loans and advances to employees made
in the ordinary course of business consistent with past practice), capital
contributions (including without limitation capital contributions consisting of
transfers of property), or in respect of any guaranties (or other commitments as
described under Indebtedness), or obligations of, any other Person. In
determining the aggregate amount of Investments outstanding at any particular
time: (i) the amount of any Investment represented by a guaranty shall be taken
at not less than the principal amount of the obligations guaranteed and still
outstanding; (ii) there shall be deducted in respect of each such Investment any
amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, dividend or distribution); and (iii) there shall not be
deducted from the aggregate amount of Investments any decrease in the value
thereof.
INVITATION FOR COMPETITIVE BID QUOTES. See Section 2.3.1(c).
ISSUING BANK. BKB or any other Bank or their agents, as issuer of a
Letter of Credit.
LETTER OF CREDIT. See Section 4.1.1.
LETTER OF CREDIT APPLICATION. See Section 4.1.1.
LETTER OF CREDIT FEE. See Section 4.6.
LETTER OF CREDIT PARTICIPATION. See Section 4.1.4.
LOAN DOCUMENTS. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit and any Guaranties.
LOAN REQUEST. See Section 2.2.1.
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LOANS. Revolving credit loans made or to be made by the Banks to the
Borrower pursuant to Section 2, whether Syndicated Loans or Competitive Bid
Loans.
MAJORITY BANKS. As of any date, the Banks holding at least fifty-one
percent (51%) of the outstanding principal amount of the Notes on such date; and
if no such principal is outstanding, the Banks whose aggregate Commitments
constitute at least fifty-one percent (51%) of the Total Commitment.
MAXIMUM COMPETITIVE BID AMOUNT. $25,000,000.
MAXIMUM DRAWING AMOUNT. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
MC. Michaels of Canada, ULC, a Nova Scotia unlimited liability company
and wholly owned Subsidiary of the Borrower.
MPR. Michaels Stores of Puerto Rico, Inc., a Delaware corporation and
wholly owned Subsidiary of the Borrower.
MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
NOTES. The Competitive Bid Notes and the Syndicated Notes.
NOTICE OF COMPETITIVE BID BORROWING. See Section 2.3.1(f).
OBLIGATIONS. All Indebtedness, obligations and liabilities of the
Borrower and any Guarantor to any of the Banks and the Agent, individually or
collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement or any of the other Loan Documents or in respect of any of the
Loans made or Reimbursement Obligations incurred or any of the Notes, Letter of
Credit Applications, Letters of Credit or other instruments at any time
evidencing any thereof.
OPERATING ACCOUNT. See Section 2.2.2.
OUTSTANDING. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
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PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
PERMITTED HOLDERS. Sam Wyly, Charles J. Wyly, Jr., Evan A. Wyly, trusts
established by or for the benefit of any such Persons or any of their lineal
descendants, entities controlled by any such trusts, and their respective
Affiliates.
PERMITTED LIENS. Liens, security interests and other encumbrances
permitted by Section 9.2.
PERSON. Any individual, corporation, partnership, trust,
unincorporated association, business, or other legal entity, and any government
or any governmental agency or political subdivision thereof.
RATE ADJUSTMENT PERIOD. See definition for Applicable Margin.
RCRA. The Resource Conservation and Recovery Act.
REAL ESTATE. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries and located within the
United States of America.
RECORD. The grid attached to a Note, or the continuation of such grid,
or any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
REGISTER. See Section 19.3.
REIMBURSEMENT OBLIGATION. The Borrower's obligation to reimburse the
Agent and the Banks on account of any drawing under any Letter of Credit as
provided in Section 4.2.
REVOLVING CREDIT LOAN MATURITY DATE. August 28, 2001.
ROYALTY PAYMENTS. Payments made to 5931, Inc. or 5931 Business Trust in
an aggregate amount not to exceed 3-1/2% of consolidated revenues of the
Borrower and its Subsidiaries on an aggregate, cumulative, consolidated basis in
accordance with generally accepted accounting principles.
SARA. The Superfund Amendments and Reauthorization Act of 1986.
SECTION 20 SUBSIDIARY. A Subsidiary of the bank holding company
controlling any Bank, which Subsidiary has been granted authority by the
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Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
SENIOR NOTES INDENTURE. That certain Indenture, dated as of June 21,
1996, between the Borrower and The Bank of New York, as Trustee, as the same
shall be amended, restated, modified, extended, renewed or replaced.
SENIOR NOTES. Those certain 10 7/8% Senior Notes due 2006, in a
maximum face amount of $125,000,000, issued pursuant to the Senior Notes
Indenture, as each shall be amended, restated, modified, extended, renewed or
replaced.
SETTLEMENT. The making or receiving of payments, in immediately
available funds, by the Banks and Agent (with respect to Syndicated Loans made
pursuant to Section 2.2.2 only), to the extent necessary to cause each Bank's
actual share of the outstanding amount of Syndicated Loans (after giving effect
to any Loan Request) to be equal to such Bank's Commitment Percentage of the
outstanding amount of such Syndicated Loans (after giving effect to any Loan
Request), in any case where, prior to such event or action, the actual share is
not so equal.
SETTLEMENT AMOUNT. See Section 2.5.1.
SETTLEMENT DATE. (a) The Drawdown Date relating to any Loan Request,
(b) Friday of each week, or if a Friday is not a Business Day, the Business Day
immediately following such Friday, (c) at the option of the Agent, on any
Business Day following a day on which the account officers of the Agent active
upon the Borrower's account become aware of the existence of an Event of
Default, (d) any Business Day on which the amount of Syndicated Loans
outstanding from BKB PLUS BKB's Commitment Percentage of the sum of the Maximum
Drawing Amount and any Unpaid Reimbursement Obligations is equal to or greater
than BKB's Commitment Percentage of the Total Commitment, (e) the Business Day
immediately following any Business Day on which the amount of Loans outstanding
increases or decreases by more than $5,000,000 as compared to the previous
Settlement Date, (f) any day on which any conversion of a Base Rate Loan to a
Eurodollar Rate Loan occurs, or (g) any Business Day on which (i) the amount of
outstanding Syndicated Loans decreases and (ii) the amount of the Agent's
Syndicated Loans outstanding equals zero Dollars ($0).
SETTLING BANK. See Section 2.5.1.
STANDBY FRONTING FEE. See Section 4.6.
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SUBORDINATION AGREEMENT. The Amended and Restated Subordination
Agreement, dated as of August 28, 1998, made by 5931 Business Trust, 5931, Inc.
and the Borrower, in favor of the Agent, for the benefit of itself and each Bank
party to the Credit Agreement and The Bank of New York, as Trustee for the
Senior Notes.
SUBORDINATED DEBT. Indebtedness of the Company pursuant to those
certain 4 3/4% / 6 3/4% Step-up Convertible Subordinated Notes Due 2003, issued
as of January 22, 1993 among Borrower as Issuer and The Bank of New York, as
Trustee, as the same shall be amended, restated, modified, extended, renewed or
replaced.
SUBORDINATED DEBT INDENTURE. That certain Indenture, dated as of
January 22, 1993 among the Borrower as Issuer and The Bank of New York, as
Trustee, as the same shall be amended, restated, modified, extended, renewed or
replaced.
SUBSIDIARY. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
SYNDICATED LOAN(S). See Section 2.1.
SYNDICATED NOTES. See Section 2.6.1.
SYNTHETIC LEASE. Every obligation of a Person under any lease treated
as an operating lease under generally accepted accounting principles and as a
loan or financing for U.S. income tax purposes to which the amount of
indebtedness at any time of determination is represented by stipulated loss
value, termination value or other equivalent amount.
TOTAL CAPITAL. For any period, an amount equal to the sum of (i)
Consolidated Net Worth for such period, PLUS (b) the aggregate outstanding
amount of Consolidated Funded Debt for such period.
TOTAL COMMITMENT. The sum of the Commitments of the Banks, as in effect
from time to time, which amount shall, as of the Closing Date, be $100,000,000,
but which may be increased to $125,000,000 upon the terms and conditions set
forth in Section 2.10.
TOTAL OUTSTANDING. The sum of (i) the outstanding aggregate principal
amount of Syndicated Loans and Competitive Bid Loans, PLUS (ii) the Maximum
Drawing Amount and Unpaid Reimbursement Obligations.
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TYPE. As to any Syndicated Loan, its nature as a Base Rate Loan or a
Eurodollar Rate Loan.
UNIFORM CUSTOMS. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto adopted
by the Agent in the ordinary course of its business as a letter of credit issuer
and in effect at the time of issuance of such Letter of Credit.
UNITED STATES SUBSIDIARY. Any Subsidiary of the Borrower organized
under the laws of the United States of America.
UNPAID REIMBURSEMENT OBLIGATION. Any Reimbursement Obligation for which
the Borrower does not reimburse the Agent and the Banks on the date specified
in, and in accordance with, Section 4.2.
VOTING STOCK. With respect to a corporation, all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
5931 BUSINESS TRUST. 5931 Business Trust, a Delaware business trust.
5931, INC. 5931, Inc., a Delaware corporation and a wholly owned
Subsidiary of the Borrower.
1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the terms of this Credit
Agreement.
(b) The singular includes the plural and the plural
includes the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting
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principles applied on a consistent basis by the accounting entity to
which they refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by
generally accepted accounting principles, which terms are defined in
the Uniform Commercial Code as in effect in the State of New York have
the meanings assigned to them therein, with the term "instrument" being
that defined under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "Section" refers to that
section of this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Credit Agreement as a whole and not to
any particular section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, in the
computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including," the words
"to" and "until" each mean "to but excluding," and the word "through"
means "to and including."
(k) This Credit Agreement and the other Loan Documents may
use several different limitations, tests or measurements to regulate
the same or similar matters. All such limitations, tests and
measurements are, however, cumulative and are to be performed in
accordance with the terms thereof.
(l) This Credit Agreement and the other Loan Documents are
the result of negotiation among, and have been reviewed by counsel to,
among others, the Agent and the Borrower and are the product of
discussions and negotiations among all parties. Accordingly, this
Credit Agreement and the other Loan Documents are not intended to be
construed against the Agent or any of the Banks merely on account of
the Agent's or any Bank's involvement in the preparation of such
documents.
2. THE REVOLVING CREDIT FACILITY.
2.1. COMMITMENT TO LEND SYNDICATED LOANS. Subject to the terms and
conditions set forth in this Credit Agreement, each of the Banks severally
agrees to lend to the Borrower and the Borrower may borrow,
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repay, and reborrow from time to time between the Closing Date and the Revolving
Credit Loan Maturity Date upon notice by the Borrower to the Agent given in
accordance with Section 2.2, such sums ("Syndicated Loans") as are requested by
the Borrower up to a maximum aggregate principal amount outstanding (after
giving effect to all amounts requested) at any one time equal to such Bank's
Commitment (without regard to any Competitive Bid Loans of such Bank outstanding
at such time) MINUS such Bank's Commitment Percentage of the sum of the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations, PROVIDED that the
Total Outstanding shall not at any time exceed the Total Commitment. Subject to
Section 2.2.2 and Section 2.5, the Syndicated Loans shall be made PRO RATA in
accordance with each Bank's Commitment Percentage. Each request for a Syndicated
Loan hereunder shall constitute a representation and warranty by the Borrower
that the conditions set forth in Section 11 and Section 12, in the case of the
initial Syndicated Loans to be made on the Closing Date, and Section 12, in the
case of all other Syndicated Loans, have been satisfied on the date of such
request.
2.2. REQUESTS FOR LOANS.
2.2.1. GENERAL. The Borrower shall give to the Agent written
notice in the form of EXHIBIT A hereto (or telephonic notice confirmed
in a writing in the form of EXHIBIT A hereto) of each Syndicated Loan
requested hereunder (a "Loan Request") by 12:00 noon (Boston time) (i)
on the proposed Drawdown Date of any Base Rate Loan and (ii) three (3)
Eurodollar Business Days prior to the proposed Drawdown Date of any
Eurodollar Rate Loan. Each Loan Request shall specify (A) the principal
amount of the Syndicated Loan requested, (B) the proposed Drawdown Date
of such Syndicated Loan, (C) the Interest Period for such Syndicated
Loan and (D) the Type of such Syndicated Loan. Promptly upon receipt of
any Loan Request, the Agent shall notify each of the Banks thereof.
Each such Loan Request from the Borrower shall be irrevocable and
binding on the Borrower and shall obligate the Borrower to accept the
Syndicated Loan requested from the Banks on the proposed Drawdown Date.
Each Loan Request shall be in a minimum aggregate principal amount of
$1,000,000 or any integral multiple of $100,000 in excess thereof.
2.2.2. SWING LINE. Notwithstanding the notice and amount
requirements set forth in Section 2.2.1 but otherwise in accordance
with the terms and conditions of this Credit Agreement, the Agent may,
in its sole discretion and without conferring with the Banks, make
Syndicated Loans to the Borrower (i) by entry of credits to the
Borrower's accounts with the Agent designated by the Agent in its
<PAGE>
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discretion for such purpose (collectively, the "OPERATING ACCOUNTS") to
cover checks or other charges which the Borrower has drawn or made
against such accounts or (ii) in an amount as otherwise requested by
the Borrower. The Borrower hereby requests and authorizes the Agent to
make from time to time such Syndicated Loans by means of appropriate
entries of such credits sufficient to cover checks and other charges
then presented for payment from the Operating Accounts or as otherwise
so requested. The Borrower acknowledges and agrees that the making of
such Syndicated Loans shall, in each case, be subject in all respects
to the provisions of this Credit Agreement as if they were Syndicated
Loans covered by a Loan Request including, without limitation, the
limitations set forth in Section 2.1 and the requirements that the
applicable provisions of Section 11 (in the case of Syndicated Loans
made on the Closing Date) and Section 12 be satisfied. All actions
taken by the Agent pursuant to the provisions of this Section 2.2.2
shall be conclusive and binding on the Borrower and the Banks absent
manifest error or the Agent's gross negligence or willful misconduct.
Syndicated Loans made pursuant to this Section 2.2.2 shall be Base Rate
Loans until converted in accordance with the provisions of this Credit
Agreement and, prior to a Settlement, such interest shall be for the
account of the Agent.
2.3. COMPETITIVE BID LOANS.
2.3.1. COMPETITIVE BID BORROWINGS. (a) THE COMPETITIVE BID
OPTION. In addition to the Syndicated Loans permitted to be made
hereunder pursuant to Section 2.1, the Borrower may, from time to time
from the Closing Date until the Revolving Credit Loan Maturity Date
pursuant to the terms of this Section 2.3, cause the Agent to request
the Banks to make offers to fund Competitive Bid Loans to the Borrower.
The Banks may, but shall have no obligation to, make such offers and
the Borrower may, but shall have no obligation to, accept such offers
in the manner set forth in this Section 2.3. Each Bank may make
Competitive Bid Loans as provided in this Section 2.3.
(b) COMPETITIVE BID QUOTE REQUEST. When the Borrower
wishes to request offers to make Competitive Bid Loans under this
Section 2.3, it shall transmit to the Agent by telex or facsimile a
Competitive Bid Quote Request substantially in the form of EXHIBIT B
attached hereto (a "Competitive Bid Quote Request") so as to be
received no later than 1:00 p.m. (Boston time) two (2) Business Days
prior to the requested Drawdown Date, specifying (i) the requested
Drawdown Date (which must be a Business Day), (ii) the principal amount
of such Competitive Bid Loan (which must be a minimum of $5,000,000
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or any greater integral multiple of $1,000,000 and may not exceed the
lesser of (A) the Maximum Competitive Bid Amount and (B) the Total
Commitment), and (iii) the Interest Period of such Competitive Bid Loan
(which may not extend beyond the Revolving Credit Loan Maturity Date).
Contemporaneously with the transmission of each Competitive Bid Quote
Request, the Borrower shall pay to the Agent, for the Agent's own
account, a work fee in the amount of $1,250. The Borrower may request
offers to make Competitive Bid Loans for one amount and three Interest
Periods in a single Competitive Bid Quote Request.
(c) INVITATION FOR COMPETITIVE BID QUOTES; ALTERNATIVE
MANNER OF AUCTION. Subsequent to timely receipt of a Competitive Bid
Quote Request, the Agent shall send to the Banks by telex or facsimile
an Invitation for Competitive Bid Quotes substantially in the form of
EXHIBIT C attached hereto (an "Invitation for Competitive Bid Quotes"),
as promptly as possible but not later than 3:00 p.m. (Boston time) on
the Business Day prior to the requested Drawdown Date which shall
constitute an invitation by the Borrower to each Bank to submit
Competitive Bid Quotes offering to make Competitive Bid Loans to which
such Competitive Bid Quote Request relates in accordance with this
Section 2.3. If, after receipt by the Agent of a Competitive Bid Quote
Request from the Borrower in accordance with subsection (b) of this
Section 2.3.1, the Agent or any Bank shall be unable to complete any
procedure of the auction process described in subsections (c) through
(f) (inclusive) of this Section 2.3.1 due to the inability of such
Person to transmit or receive communications through the means
specified therein, such Person may rely on telephonic notice for the
transmission or receipt of such communications. In any case where such
Person shall rely on telephone transmission or receipt, any
communication made by telephone shall, as soon as possible thereafter,
be followed by written confirmation thereof.
(d) SUBMISSION AND CONTENTS OF COMPETITIVE BID QUOTES.
(i) Each Bank may submit a Competitive Bid Quote
containing an offer or offers to make Competitive Bid Loans in
response to any Invitation for Competitive Bid Quotes. Each
Competitive Bid Quote must comply with the requirements of
this subsection (d) and must be submitted to the Agent by
telex or facsimile not later than 10:00 a.m. (Boston time) on
the requested Drawdown Date, PROVIDED that Competitive Bid
Quotes may be made by the Agent in its capacity as a Bank only
if it notifies the Borrower of the terms of its Competitive
<PAGE>
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Bid Quote no later than 9:30 a.m. (Boston time) on the
requested Drawdown Date. Subject to the requirements that
the applicable provisions of Section 12 be satisfied, any
Competitive Bid Quote so made shall be irrevocable except
with the written consent of the Agent given on the
instructions of the Borrower.
(ii) Each Competitive Bid Quote shall be in
substantially the form of EXHIBIT D-1 attached hereto (a
"Competitive Bid Quote") and shall in any case specify:
(A) the requested Drawdown Date and Interest
Periods relating thereto,
(B) the principal amount of the Competitive Bid
Loan for which each such offer is being made, which
principal amount (x) may be greater than the Commitment
Amount of the quoting Bank but may not exceed the
lesser of (I) the Maximum Competitive Bid Amount and
(II) the Total Commitment, (y) must be $5,000,000 or a
larger multiple of $1,000,000 and (z) may not exceed
the aggregate principal amount of Competitive Bid Loans
for which offers were requested,
(C) the rate of interest per annum (rounded to
the nearest 1/1000th of 1%) (the "Competitive Bid
Rate") offered for each such Competitive Bid Loan, and
(D) the identity of the quoting Bank.
(iii) Any Competitive Bid Quote shall be disregarded if
it:
(A) is not substantially in the form of EXHIBIT
D-1 attached hereto or does not specify all of the
information required by subsection (d)(ii) of this
Section 2.3.1;
(B) contains qualifying, conditional or similar
language (except that it may, in the case of a quote
relating to more than one Interest Period, contain the
condition that the Bank will fund any one, but not
more, of the Competitive Bid Loans offered in such
Competitive Bid Quote);
<PAGE>
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(C) proposes terms other than or in addition to
those set forth in the applicable Invitation for
Competitive Bid Quotes; or
(D) arrives after the time set forth in
subsection (d)(i) of this Section 2.3.1.
(e) NOTICE TO BORROWER. Not later than 10:30 a.m. (Boston
time) on the requested Drawdown Date, the Agent shall notify the
Borrower of the terms of all Competitive Bid Quotes submitted by the
Banks in accordance with subsection (d) of this Section 2.3.1. The
Agent's notice to the Borrower shall specify (i) the aggregate
principal amount of Competitive Bid Loans for which Competitive Bid
Quotes have been received for each Interest Period specified in the
related Competitive Bid Quote Request, (ii) the respective principal
amounts and Competitive Bid Rates so offered in each Competitive Bid
Quote, and (iii) the identity of the Bank that shall have made such
Competitive Bid Quote.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 11:00
a.m. (Boston time) on the requested Drawdown Date, the Borrower shall
notify the Agent, and the Agent shall promptly notify each Bank with
respect to its Competitive Bid Quote, of the Borrower's acceptance or
non-acceptance of the offers of which it was notified pursuant to
subsection (e) of this Section 2.3.1. In the case of an acceptance.,
such notice shall (i) be substantially in the form of EXHIBIT D-2
attached hereto (a "Notice of Competitive Bid Borrowing"), (ii) be
irrevocable by the Borrower, and (iii) specify the aggregate principal
amount of Competitive Bid Quote for each Interest Period that are
accepted. Each acceptance by the Borrower of Competitive Bid Quotes
hereunder shall constitute a representation and warranty by the
Borrower that the conditions set forth in Section 12 have been
satisfied on the date of such acceptance. The Borrower may accept any
Competitive Bid Quote in whole or in part; PROVIDED that:
(A) the aggregate principal amount of each
Competitive Bid Loan may not exceed the applicable
amount set forth in the related Competitive Bid Quote
Request,
(B) the aggregate principal amount of each
Competitive Bid Loan must be $5,000,000 or a larger
multiple of $1,000,000, and
<PAGE>
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(C) the Borrower may not accept a Competitive Bid
Quote made at a particular Competitive Bid Rate if the
Borrower rejects a Competitive Bid Quote made at a
lower Competitive Bid Rate.
(g) ALLOCATION BY AGENT. If Competitive Bid Quotes are made
by two or more Banks with the same Competitive Bid Rates, for a greater
aggregate principal amount than the amount in respect of which
Competitive Bid Quotes are accepted for the related Interest Period,
the principal amount of Competitive Bid Loans in respect of which such
offers are accepted shall be allocated by the Agent among such Banks as
nearly as possible (in such multiples, not less than $100,000 as the
Agent may deem appropriate) in proportion to the aggregate principal
amounts of such Competitive Bid Quotes. If any such Bank has indicated
a minimum acceptable Competitive Bid Loan in its Competitive Bid Quote,
and under the procedures of this subsection (g), the Agent would have
allocated to it an amount less than such minimum, such Competitive Bid
Quote will instead be deemed to have been withdrawn. Determination by
the Agent of the amounts of Competitive Bid Loans and the allocation
thereof shall be conclusive in the absence of manifest error. The
Agent shall, promptly after the funding of any Competitive Bid Loan,
notify the Banks thereof pursuant to a notice substantially in the form
of EXHIBIT D-3 attached hereto.
(h) FUNDING OF COMPETITIVE BID LOANS. If, on or prior to
the Drawdown Date of any Competitive Bid Loan, the Total Commitment has
not terminated in full and if, on such Drawdown Date, the applicable
conditions of Section 12 are satisfied, the Bank or Banks whose
Competitive Bid Quotes the Borrower has accepted will fund each
Competitive Bid Loan so accepted as provided in Section 2.4.1.
2.3.2. MAXIMUM COMPETITIVE BID LOANS: FUNDING LOSSES. (a)
Notwithstanding any other provision herein to the contrary, at no time
shall the aggregate principal amount of Competitive Bid Loans
outstanding at any time exceed the lesser of (i) the Total Commitment
MINUS Total Outstanding other than the outstanding principal amount of
Competitive Bid Loans and (ii) the Maximum Competitive Bid Amount.
(b) If after acceptance of any Competitive Bid Quote pursuant
to Section 2.3.1(f), the Borrower fails to borrow any Competitive Bid
Loan so accepted on the date specified therefor, the Borrower shall
indemnify the Bank funding such Loan against any loss or expense
incurred by
<PAGE>
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reason of the liquidation or reemployment of deposits or other funds
acquired by such Bank to fund or maintain such unborrowed Competitive
Bid Loans, as provided in Section 5.10.
2.3.3. REPAYMENT OF COMPETITIVE BID LOANS. The principal of
each Competitive Bid Loan shall become absolutely due and payable by
the Borrower on the last day of the Interest Period relating thereto,
and the Borrower hereby absolutely and unconditionally promises to pay
to the Agent, for the accounts of the relevant Banks, on the last day
of the Interest Period relating thereto the principal amount of all
such Competitive Bid Loans PLUS interest thereon at the applicable
Competitive Bid Rate. Subject to the terms of this Credit Agreement,
the Borrower may reborrow any amounts so repaid from time to time prior
to the Revolving Credit Loan Maturity Date.
2.4. FUNDS FOR LOANS.
2.4.1. FUNDING PROCEDURES. Not later than 2:00 p.m. (Boston
time) on the proposed Drawdown Date of any Syndicated Loans or
Competitive Bid Loans, each Bank will make available to the Agent, at
the Agent's Head Office, in immediately available funds, the amount of
such Bank's Commitment Percentage of the amount of the requested
Syndicated Loans and the amount of such Bank's Competitive Bid Loans
accepted by the Borrower, if any. Upon receipt from each Bank of such
amount, and upon receipt of the documents required by Sections 11 and
12 to be delivered on or prior to such Drawdown Date, to the extent
applicable, and the satisfaction of the other conditions set forth
therein, to the extent applicable, the Agent will make available to the
Borrower the aggregate amount of such Loans. The failure or refusal of
any Bank to make available to the Agent the amount of its Commitment
Percentage of the requested Syndicated Loans or the amount of its
Competitive Bid Loans accepted by the Borrower at the aforesaid time on
any Drawdown Date shall not (i) relieve any other Bank from its several
obligations hereunder to make available to the Agent the amount of
such other Bank's Commitment Percentage of any requested Syndicated
Loans or the amount of such other Bank's Competitive Bid Loans accepted
by the Borrower or (ii) impose upon any other Bank any liability with
respect to such failure or refusal or otherwise increase the Commitment
of such other Bank.
2.4.2. ADVANCES BY AGENT. The Agent may, unless notified to
the contrary by any Bank prior to a Drawdown Date, assume that such
Bank has made available to the Agent on such Drawdown Date
<PAGE>
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the amount of such Bank's Commitment Percentage of the Syndicated Loans
(or, in the case of Competitive Bid Loans, the amount of such Bank's
Competitive Bid Loans accepted by the Borrower, if any) to be made on
such Drawdown Date, and the Agent may (but it shall not be required
to), in reliance upon such assumption, make available to the Borrower a
corresponding amount. The Agent shall notify the Borrower by telephone
or telecopy to the Borrower of the failure of any Bank to make
available to the Agent the amount of its Commitment Percentage of the
Syndicated Loans or the amount of its Competitive Bid Loans accepted by
the Borrower on such Drawdown Date promptly after the Agent obtains
knowledge of such failure. If any Bank makes available to the Agent
such amount on a date after such Drawdown Date, such Bank shall pay to
the Agent on demand an amount equal to the product of (a) the average
computed for the period referred to in clause (c) below, of the
weighted average interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period, TIMES
(b) the amount of such Bank's Commitment Percentage of such Syndicated
Loans (or in the case of Competitive Bid Loans, the amount of such
Bank's Competitive Bid Loans accepted by the Borrower, if any), TIMES
(c) a fraction, the numerator of which is the number of days that
elapse from and including such Drawdown Date to the date on which the
amount of such Bank's Commitment Percentage of such Syndicated Loans or
the amount of such Bank's Competitive Bid Loans accepted by the
Borrower, as applicable, shall become immediately available to the
Agent, and the denominator of which is 360. A statement of the Agent
submitted to such Bank with respect to any amounts owing under this
Section 2.4.2 shall be PRIMA FACIE evidence of the amount due and owing
to the Agent by such Bank. If the amount of such Bank's Commitment
Percentage of the Syndicated Loans (or the amount of such Bank's
Competitive Bid Loans accepted by the Borrower, as applicable,) is not
made available to the Agent by such Bank within three (3) Business Days
following such Drawdown Date, the Agent shall be entitled to recover
such amount from the Borrower within three (3) Business Days after
demand, with interest thereon at the rate per annum applicable to the
Syndicated Loans (or Competitive Bid Loans, as applicable), made on
such Drawdown Date; PROVIDED, HOWEVER, that until and unless such
payment has been made in full by the Borrower, such Bank shall remain
liable to the Agent for the full amount of such payment, including
interest as set forth above. Subject to Section 2.1 and Section 2.3, as
applicable, the Borrower may at any time within such three-day period
submit a new Loan Request or Competitive Bid Quote Request to the Agent
pursuant to Section 2.2 or Section 2.3.1(b), as applicable, covering
the amount set forth in the Agent's
<PAGE>
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demand for payment. Any payment by the Borrower to the Agent of any
Syndicated Loans (or Competitive Bid Loans) pursuant to this Section
2.4.2 shall be deemed to be a payment of the Loans that were to be made
by the Bank that failed to make such Syndicated Loans or Competitive
Bid Loans, as applicable.
2.5. SETTLEMENTS.
2.5.1. GENERAL. On each Settlement Date, the Agent shall, not
later than 11:00 a.m. (Boston time), give telephonic or facsimile
notice (i) to the Banks and the Borrower of the respective outstanding
amount of Syndicated Loans made by the Agent on behalf of the Banks
from the immediately preceding Settlement Date through the close of
business on the prior day and (ii) to the Banks of the amount (a
"SETTLEMENT AMOUNT") that each Bank (a "SETTLING BANK") shall pay to
effect a Settlement of any Syndicated Loan. A statement of the Agent
submitted to the Banks and the Borrower or to the Banks with respect to
any amounts owing under this Section 2.5 shall be PRIMA FACIE evidence
of the amount due and owing absent manifest error. Each Settling Bank
shall, not later than 3:00 p.m. (Boston time) on such Settlement Date,
effect a wire transfer of immediately available funds to the Agent in
the amount of the Settlement Amount for such Settling Bank. All funds
advanced by any Bank as a Settling Bank pursuant to this Section 2.5
shall for all purposes be treated as a Syndicated Loan made by such
Settling Bank to the Borrower and all funds received by any Bank
pursuant to this Section 2.5 shall for all purposes (other than for
purposes of Section 5.10) be treated as repayment of amounts owed with
respect to Loans made by such Bank. In the event that any bankruptcy,
reorganization, liquidation, receivership or similar cases or
proceedings in which the Borrower is a debtor prevent a Settling Bank
from making any Syndicated Loan to effect a Settlement as contemplated
hereby, such Settling Bank will make such dispositions and arrangements
with the other Banks with respect to such Syndicated Loans, either by
way of purchase of participations, distribution, PRO TANTO assignment
of claims, subrogation or otherwise as shall result in each Bank's
share of the outstanding Syndicated Loans being equal, as nearly as may
be, to such Bank's Commitment Percentage of the outstanding amount of
the Syndicated Loans.
2.5.2. FAILURE TO MAKE FUNDS AVAILABLE. The Agent may, unless
notified to the contrary by any Settling Bank prior to a Settlement
Date, assume that such Settling Bank has made or will make available to
the Agent on such Settlement Date the amount of
<PAGE>
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such Settling Bank's Settlement Amount, and the Agent may (but it shall
not be required to), in reliance upon such assumption, make available
to the Borrower or other Banks, as applicable, a corresponding amount.
If any Settling Bank makes available to the Agent such amount on a date
after such Settlement Date, such Settling Bank shall pay to the Agent
on demand an amount equal to the product of (i) the average computed
for the period referred to in clause (iii) below, of the weighted
average interest rate paid by the Agent for federal funds acquired by
the Agent during each day included in such period, times (ii) the
amount of such Settlement Amount, times (iii) a fraction, the numerator
of which is the number of days that elapse from and including such
Settlement Date to the date on which the amount of such Settlement
Amount shall become immediately available to the Agent, and the
denominator of which is 360. A statement of the Agent submitted to such
Settling Bank with respect to any amounts owing under this Section
2.5.2 shall be prima facie evidence of the amount due and owing to the
Agent by such Settling Bank. If such Settling Bank's Settlement Amount
is not made available to the Agent by such Settling Bank within three
(3) Business Days following such Settlement Date, the Agent shall be
entitled to recover such amount from the Borrower on demand, with
interest thereon at the rate per annum applicable to the Syndicated
Loans (or Competitive Bid Loans, as applicable) for which such
Settlement Amount was not made available to the Agent; PROVIDED,
HOWEVER, that until and unless such payment has been made in full by
the Borrower, such Bank shall remain liable to the Agent for the full
amount of such payment, including interest as set forth above. Subject
to Section 2.1 and Section 2.3, as applicable, the Borrower may at any
time within such three-day period submit a new Loan Request or
Competitive Bid Quote Request to the Agent pursuant to Section 2.2 or
Section 2.3.1(b), as applicable, covering the amount set forth in the
Agent's demand for payment. Any payment by the Borrower to the Agent of
any Syndicated Loans (or Competitive Bid Loans) pursuant to this
Section 2.5.2 shall be deemed to be a payment of the Loans that were to
be made by the Settling Bank that failed to make its Settlement Amount
available to the Agent.
2.5.3. NO EFFECT ON OTHER BANKS. The failure or refusal of any
Settling Bank to make available to the Agent at the aforesaid time and
place on any Settlement Date the amount of such Settling Bank's
Settlement Amount shall not (i) relieve any other Settling Bank from
its several obligations here under to make available to the Agent the
amount of such other Settling Bank's Settlement Amount or (ii) impose
upon any Bank, other than the Settling Bank so failing
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or refusing, any liability with respect to such failure or refusal or
otherwise increase the Commitment of such other Bank.
2.6. THE NOTES.
2.6.1. SYNDICATED NOTES. The Syndicated Loans shall be
evidenced by separate promissory notes of the Borrower in substantially
the form of Exhibit E-1 attached hereto (each a "Syndicated Note"),
dated as of the Closing Date and completed with appropriate insertions.
A Syndicated Note shall be payable to the order of each Bank in a
principal amount equal to such Bank's Commitment or, if less, the
outstanding amount of all Syndicated Loans made by such Bank, plus
interest accrued thereon, as set forth below. The Borrower irrevocably
authorizes each Bank to make, at or about the time of the Drawdown Date
of any Syndicated Loan or at the time of receipt of any payment of
principal on such Bank's Syndicated Note, an appropriate notation on
the Record attached to such Bank's Syndicated Note reflecting the
making of such Syndicated Loan or (as the case may be) the receipt of
such payment. The outstanding amount of the Syndicated Loans set forth
on such Bank's Record shall be PRIMA FACIE evidence of the principal
amount thereof owing and unpaid to such Bank, but the failure to
record, or any error in so recording, any such amount on such Bank's
Record shall not limit or otherwise affect the obligations of the
Borrower here under or under any Syndicated Note to make payments of
principal of or interest on any Syndicated Note when due.
2.6.2. COMPETITIVE BID NOTES. The Competitive Bid Loans shall
be evidenced by separate promissory notes of the Borrower in
substantially the form of EXHIBIT E-2 attached hereto (each a
"Competitive Bid Note"), dated as of the Closing Date and completed
with appropriate insertions. A Competitive Bid Note shall be payable to
the order of each Bank in a principal amount equal to the Maximum
Competitive Bid Amount, or if less, the outstanding amount of all
Competitive Bid Loans made by such Bank to the Borrower hereunder, as
set forth in Section 2.3, PLUS interest accrued thereon, as set forth
below. The Borrower irrevocably authorizes each Bank to make, at or
about the time of the Drawdown Date of any Competitive Bid Loan made by
such Bank or at the time of receipt of the payment of principal of such
Competitive Bid Loan, an appropriate notation on the Record attached to
such Bank's Competitive Bid Note reflecting the making of such
Competitive Bid Loan and repayments thereof. All such notations shall
constitute PRIMA FACIE evidence of the amount of such Competitive Bid
Loans
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and the repayments thereof, but the failure to record, o# any error in
so recording such amount on such Bank's Record shall not limit or
otherwise affect the obligations of the Borrower here under or under
any Competitive Bid Note to make payments of principal or interest on
any Competitive Bid Note when due.
2.7. REDUCTION OF TOTAL COMMITMENT. The Borrower shall have the
right at any time and from time to time upon three (3) Business Days prior
written notice to the Agent to reduce by $1,000,000 or an integral multiple
thereof or terminate entirely the unborrowed portion of the Total Commitment,
whereupon the Commitments of the Banks shall be reduced PRO RATA in
accordance with their respective Commitment Percentages of the amount
specified in such notice or, as the case may be, terminated. Promptly after
receiving any notice of the Borrower delivered pursuant to this Section 2.7,
the Agent will notify the Banks of the substance thereof. Upon the effective
date of any such reduction or termination, the Borrower shall pay to the
Agent for the respective accounts of the Banks the full amount of any
commitment fee then accrued on the amount of the reduction. No reduction or
termination of the Commitments or of the Total Commitment may be reinstated.
2.8. INTEREST ON LOANS. Except as otherwise provided in Section 5.11,
the unpaid principal amount of the Loans outstanding from time to time shall
bear interest from the Drawdown Date thereof until the Revolving Credit Loan
Maturity Date at the annual rate which at all times shall be determined in
accordance with the following provisions:
(a) Each Base Rate Loan Outstanding shall bear interest for
the period commencing with the Drawdown Date thereof and ending on the
last day of the Interest Period with respect thereto at the Base Rate.
(b) Each Eurodollar Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the last
day of the Interest Period with respect thereto at a rate per annum
equal to the sum of the Applicable Margin PLUS the Eurodollar Rate
determined for such Interest Period.
(c) Each Competitive Bid Loan shall bear interest at the rate
per annum specified in the applicable Competitive Bid Quote with
respect to such Competitive Bid Loan.
(d) The Borrower promises to pay interest on each Loan in
arrears on each Interest Payment Date with respect thereto.
<PAGE>
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2.9. CONVERSION OPTIONS.
2.9.1. CONVERSION TO DIFFERENT TYPE OF SYNDICATED LOAN. The
Borrower may elect from time to time to convert any outstanding
Syndicated Loan to a Syndicated Loan of another Type, PROVIDED that (i)
with respect to any such conversion of a Eurodollar Rate Loan into a
Base Rate Loan, such conversion shall only be made on the last day of
the Interest Period with respect thereto; (ii) with respect to any such
conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower
shall give the Agent by 12:00 noon (Boston time) three (3) Eurodollar
Business Days' prior to the proposed conversion date of such Syndicated
Loan prior written notice of such election and (iii) no Syndicated Loan
may be converted into a Eurodollar Rate Loan when any Default or Event
of Default has occurred and is continuing. On the date on which such
conversion is being made, each Bank shall take such action as is
necessary to transfer its Commitment Percentage of such Syndicated
Loans to its Domestic Lending Office or its Eurodollar Lending Office,
as the case may be. All or any part of the outstanding Syndicated Loans
of any Type may be converted as provided herein, PROVIDED that partial
conversions shall be in an aggregate principal amount of $1,000,000 or
a whole multiple of $100,000 in excess thereof. Each Conversion Request
relating to the conversion of a Syndicated Loan to a Eurodollar Rate
Loan shall be irrevocable by the Borrower.
2.9.2. CONTINUATION OF TYPE OF SYNDICATED LOAN. Any
Syndicated Loan of any Type may be continued as such upon the
expiration of an Interest Period with respect thereto by compliance by
the Borrower with the notice provisions contained in Section 2.9.1;
PROVIDED that no Eurodollar Rate Loan may be continued as such when any
Default or Event of Default has occurred and is continuing, but shall
be automatically converted to a Base Rate Loan on the last day of the
first Interest Period relating thereto ending during the continuance of
any Default or Event of Default of which the officers of the Agent
active upon the Borrower's account have actual knowledge. In the event
that the Borrower fails to provide any such notice with respect to the
continuation of any Eurodollar Rate Loan or Base Rate Loan as such,
then such Eurodollar Rate Loan shall be automatically converted to a
Base Rate Loan on the last day of the first Interest Period relating
thereto, and such Base Rate Loan shall be continued as a Base Rate Loan
on the last day of the first Interest Period relating thereto. The
Agent shall notify the Banks promptly when any such automatic
conversion or continuation contemplated by this Section 2.9.2 is
scheduled to occur.
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2.9.3. EURODOLLAR RATE LOANS. Any conversion to or from
Eurodollar Rate Loans shall be in such amounts and be made pursuant to
such elections so that, after giving effect thereto, the aggregate
principal amount of all Eurodollar Rate Loans having the same Interest
Period shall not be less than $1,000,000 or a whole multiple of
$100,000 in excess thereof. The Borrower may not have more than five
(5) Eurodollar Rate Loans outstanding at any time.
2.10. LIMITED INCREASE IN TOTAL COMMITMENT. Unless a Default or Event
of Default has occurred and is continuing, the Borrower may request that the
Total Commitment be increased to not more than $125,000,000 hereunder, PROVIDED,
HOWEVER, that (i) any Bank which is a party to this Credit Agreement prior to
such increase may elect to fund a share of the increase (as allocated by the
Agent), thereby increasing its Commitment hereunder, but no Bank shall be
required to do so, (ii) in the event that it becomes necessary to include a new
Bank to provide additional funding under this Section 2.10, such new Bank must
be reasonably acceptable to the Agent, and (iii) the Banks' Commitment
Percentages shall be correspondingly adjusted and Notes issued or amended and
such other changes shall be made to the Loan Documents, as reasonably necessary,
to reflect any such increase in the Total Commitment. Any such increase
(whether to $125,000,000 or to a lesser amount) shall require, among other
things, the satisfaction of such conditions precedent similar to the conditions
precedent set forth in Section 11 as the Agent may reasonably require,
including, without limitation, the obtaining by any Bank of requisite internal
approvals, the Agent's receipt of evidence of applicable corporate authorization
and other corporate documentation from the Borrower and the legal opinion of
counsel to the Borrower, each in form and substance satisfactory to the Agent
and the Borrower.
3. REPAYMENT OF THE LOANS.
3.1. MATURITY. The Borrower promises to pay on the Revolving Credit
Loan Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Loans outstanding on such date,
together with any and all accrued and unpaid interest thereon.
3.2. MANDATORY REPAYMENTS OF LOANS. If at any time the Total
Outstanding exceeds the Total Commitment, then the Borrower shall immediately
pay the amount of such excess to the Agent for application to the Loans for the
respective accounts of the Banks. Each prepayment of Loans shall be allocated
among the Banks, in proportion, as nearly as practicable to the respective
unpaid principal amount of each Bank's
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Syndicated Note, with adjustments to the extent practicable to equalize any
prior payments or repayments not exactly in proportion, and if no Syndicated
Loans are outstanding, the Competitive Bid Loans, in proportion, as nearly as
practicable, to the unpaid principal amount of each Bank's Competitive Bid Note.
If at any time the sum of the outstanding amount of the Competitive Bid Loans
exceeds the Maximum Competitive Bid Amount, then the Borrower shall immediately
pay the amount of such excess to the Agent for application to the Competitive
Bid Loans made by the Banks, in proportion, as nearly as practicable, to the
unpaid principal amount of each Bank's Competitive Bid Note.
3.3. OPTIONAL REPAYMENTS OF LOANS.
(a) The Borrower shall have the right, at its election, to repay
the outstanding amount of the Loans, as a whole or in part, at any time without
penalty or premium, PROVIDED that all prepayments of Eurodollar Rate Loans prior
to the end of the Interest Period relating thereto shall obligate the Borrower
to pay any breakage costs associated with such Eurodollar Rate Loans in
accordance with Section 5.10. The Borrower shall give the Agent written notice,
no later than 12:00 noon, Boston time, (i) on the Business Day of any proposed
repayment pursuant to this Section 3.3 of Base Rate Loans or Competitive Bid
Loans, and (ii) three (3) Eurodollar Business Days in advance of any proposed
repayment pursuant to this Section 3.3 of Eurodollar Rate Loans, in each case,
specifying the proposed date of payment of such Loans, the principal amount to
be paid and whether the Loan being unpaid is a Syndicated Loan, Competitive
Bid Loan or both. Each such partial prepayment of the Loans shall be in a
minimum amount of $1,000,000 or an integral multiple of $100,000 in excess
thereof, shall be accompanied by the payment of accrued interest on the
principal repaid to the date of payment and shall be applied, in the absence of
instruction by the Borrower, first to the principal of Base Rate Loans, then to
the principal of Eurodollar Rate Loans, and then to the principal of Competitive
Bid Loans. Each partial prepayment shall be allocated among the Banks, in
proportion, as nearly as practicable, to the respective unpaid principal amount
of each Bank's Syndicated Note and Competitive Bid Note, with adjustments to the
extent practicable to equalize any prior repayments not exactly in proportion.
(b) Notwithstanding the foregoing, subject to the provisions of
Section 2.5, the Agent may, in its sole discretion and without consulting with
the Banks, allow the Borrower to repay Loans (i) from collections received by
the Borrower or (ii) in such other amounts requested by the Borrower.
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4. LETTERS OF CREDIT.
4.1. LETTER OF CREDIT COMMITMENTS.
4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the
terms and conditions hereof and the execution and delivery by the
Borrower or any of its Subsidiaries of a letter of credit application
on the Issuing Bank's customary form (a "Letter of Credit
Application"), the Issuing Bank on behalf of the other Banks and in
reliance upon the agreement of the other Banks set forth in Section
4.1.4 and upon the representations and warranties of the Borrower
contained herein, agrees, in its individual capacity, to issue, extend
and renew for the account of the Borrower or any of its Subsidiaries
one or more standby or documentary letters of credit (individually, a
"Letter of Credit"), in such form as may be requested from time to time
by the Borrower or any of its Subsidiaries and agreed to by the Issuing
Bank; PROVIDED, HOWEVER, that, after giving effect to such request, (a)
the sum of the aggregate Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not exceed $50,000,000 at any one time
and (b) the Total Outstanding shall not exceed the Total Commitment.
4.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the satisfaction of the Issuing Bank.
In the event that any provision of any Letter of Credit Application
shall be inconsistent with any provision of this Credit Agreement, then
the provisions of this Credit Agreement shall, to the extent of any
such inconsistency, govern.
4.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit
issued, extended or renewed hereunder shall, among other things, (i)
provide for the payment of sight drafts, or time drafts up to a maximum
tenor of 183 days, for honor thereunder when presented in accordance
with the terms thereof and when accompanied by the documents described
therein, and (ii) have an expiry date no later than the Revolving
Credit Loan Maturity Date. Each Letter of Credit so issued, extended or
renewed shall be subject to the Uniform Customs.
4.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank
severally agrees that it shall be absolutely liable, without regard to
the occurrence of any Default or Event of Default or any other
condition precedent whatsoever, to the extent of such Bank's Commitment
Percentage, to reimburse the Issuing Bank on demand for the amount of
each draft paid by the Issuing Bank under each
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Letter of Credit to the extent that such amount is not reimbursed by
the Borrower pursuant to Section 4.2 (such agreement for a Bank being
called herein the "Letter of Credit Participation" of such Bank).
4.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a
Bank shall be treated as the purchase by such Bank of a participating
interest in the Borrower's Reimbursement Obligation under Section 4.2
in an amount equal to such payment. Each Bank shall share in
accordance with its participating interest in any interest which
accrues pursuant to Section 4.2.
4.1.6. NOTICE TO AGENT. At the time of issuance of each
Letter of Credit, the Issuing Bank shall notify the Agent of Maximum
Drawing Amount of such Letter of Credit and the other terms of such
Letter of Credit.
4.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce
the Issuing Bank to issue, extend and renew each Letter of Credit and the other
Banks to participate therein, the Borrower hereby agrees to reimburse or pay to
the Agent, for the account of the Issuing Bank or (as the case may be) the
Banks, with respect to each Letter of Credit issued, extended or renewed by the
Issuing Bank hereunder,
(a) except as otherwise expressly provided in Section 4.2(b)
and (c), within one Business Day following each date that any draft
presented under such Letter of Credit is honored by the Issuing Bank
and the Issuing Bank has provided to the Borrower notice pursuant to
Section 4.3 or within one Business Day following any date on which the
Issuing Bank notifies the Borrower that the Issuing Bank has otherwise
made a payment with respect thereto, (i) the amount paid by the Issuing
Bank under or with respect to such Letter of Credit, and (ii) the
amount of any taxes, fees, charges or other reasonable costs and
expenses whatsoever incurred by the Issuing Bank or any other Bank in
connection with any payment made by the Issuing Bank or any other Bank
under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total
Commitment to an amount less than the Maximum Drawing Amount, an amount
equal to such difference, which amount shall be held by the Agent for
the benefit of the Banks and the Issuing Bank as cash collateral for
all Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all
Letters of Credit in accordance with Section 13, an amount equal to the
then
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Maximum Drawing Amount on all Letters of Credit, which amount shall be
held by the Agent for the benefit of the Banks and the Issuing Bank as
cash collateral for all Reimbursement Obligations. Upon the termination
of the Total Commitment pursuant to Section 2.7, the Agent agrees, so
long as no Default or Event of Default has occurred and is continuing,
to hold such cash collateral in an interest bearing account in the name
of the Borrower, to pay current interest on such cash collateral to the
Borrower, and upon the payment by the Borrower of any Reimbursement
Obligations or the reduction of the Maximum Drawing Amount upon the
cancellation of any Letter of Credit, the Agent agrees to return to the
Borrower an amount equal to such payment or reduction together with
unpaid interest accrued thereon through the date of such return.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid by
the Borrower under this Section 4.2 at any time from the date such amounts
become due and payable (whether as stated in this Section 4.2, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Agent on demand at the rate specified in Section 5.11 for overdue
principal on the Loans.
4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or
other demand for payment shall be made under any Letter of Credit, the Issuing
Bank shall, promptly following its receipt thereof, notify the Borrower and the
Agent of the amount of the draft presented or demand for payment and of the date
when it expects to pay such draft or honor such demand for payment. If the
Borrower fails to reimburse the Agent as provided in Section 4.2 no later than
the Business Day following the date that such draft is paid or other payment is
made by the Issuing Bank, the Issuing Bank may at any time thereafter notify the
other Banks and the Agent of the amount of any such Unpaid Reimbursement
Obligation. No later than 3:00 p.m. (Boston time) on the Business Day next
following the receipt of such notice, each Bank shall make available to the
Agent, at the Agent's Head Office, in immediately available funds, such Bank's
Commitment Percentage of such Unpaid Reimbursement Obligation, together with an
amount equal to the product of (i) the average, computed for the period referred
to in clause (iii) below, of the weighted average interest rate paid by the
Issuing Bank for federal funds acquired by the Issuing Bank during each day
included in such period, TIMES (ii) the amount equal to such Bank's Commitment
Percentage of such Unpaid Reimbursement Obligation, TIMES (iii) a fraction, the
numerator of which is the number of days that elapse from and including the date
the Issuing Bank paid the draft presented for honor or otherwise made payment to
the date on which such Bank's
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Commitment Percentage of such Unpaid Reimbursement obligation shall become
immediately available to the Agent, and the denominator of which is 360. The
responsibility of the Issuing Bank to the Borrower and the Banks shall be
only to determine that the documents (including each draft) delivered under
each Letter of Credit in connection with such presentment shall be in
conformity in all material respects with such Letter of Credit.
4.4. OBLIGATIONS ABSOLUTE. Subject to the provisions of Section 4.5,
the Borrower's obligations under this Section 4 shall be absolute and
unconditional under any and all circumstances, other than as a result of the
gross negligence or willful misconduct of the Issuing Bank, the Agent or the
other Banks, and irrespective of the occurrence of any Default or Event of
Default or any condition precedent whatsoever or any setoff, counterclaim or
defense to payment which the Borrower may have or have had against the Agent,
the Issuing Bank, any other Bank or any beneficiary of a Letter of Credit. The
Borrower further agrees with the Issuing Bank, the Agent and the other Banks
that the Issuing Bank, the Agent and the other Banks shall not be responsible
for, and the Borrower's Reimbursement Obligations under Section 4.2 shall not be
affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even if such documents should in fact prove to be in
any or all respects invalid, fraudulent or forged, or any dispute between or
among the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Issuing Bank, the Agent and the
other Banks shall not be liable for any error, omission, interruption or delay
in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Borrower agrees that
any action taken or omitted by the Issuing Bank, the Agent or any other Bank
under or in connection with each Letter of Credit and the related drafts and
documents, if done in good faith, shall be binding upon the Borrower and shall
not result in any liability on the part of the Issuing Bank, the Agent or any
other Bank to the Borrower. The Issuing Bank agrees that it will exercise and
give the same care and attention to each Letter of Credit as it gives to its
other letters of credit.
4.5. RELIANCE BY ISSUER. To the extent not inconsistent with
Section 4.4, the Issuing Bank shall be entitled to rely, and shall be fully
protected in relying upon, any Letter of Credit, draft, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel, independent
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accountants and other experts selected by the Issuing Bank. The Agent shall be
fully justified in failing or refusing to take any action under this Credit
Agreement unless it shall first have received such advice or concurrence of the
Majority Banks as it reasonably deems appropriate or it shall first be
indemnified to its reasonable satisfaction by the other Banks against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Issuing Bank shall in all cases be fully
protected in acting, or in refraining from acting, under this Credit Agreement
in accordance with a request of the Majority Banks, and such request and any
action taken or failure to act pursuant thereto shall be binding upon the Banks
and all future holders of the Notes or of a Letter of Credit Participation.
4.6. LETTER OF CREDIT FEE. The Borrower shall pay to the Agent a fee
(in each case, a "Letter of Credit Fee") (a) in respect of each standby Letter
of Credit issued pursuant to this Credit Agreement, equal to the Applicable
Margin specified for such standby Letter of Credit at the date of issuance,
extension or renewal of such Letter of Credit multiplied by the face amount of
each such Letter of Credit, PLUS an issuance fee in respect of each standby
Letter of Credit equal to an amount agreed by between the Borrower and the
Issuing Bank, for the account of the Issuing Bank only, (the "Standby Fronting
Fee"), and the Agent shall in turn remit to each Bank its PRO RATA portion of
such Letter of Credit Fee (but not the Standby Fronting Fee, which is for the
account of the Issuing Bank only) and (b) in respect of each documentary Letter
of Credit issued pursuant to this Credit Agreement, equal to the Applicable
Margin specified for such documentary Letter of Credit at the date of issuance,
extension or renewal of such Letter of Credit multiplied by the face amount of
each such Letter of Credit or any subsequent increases in the face amount, PLUS
the Applicable Margin PLUS an issuance fee in respect of each documentary Letter
of Credit equal to $125.00 (the "Documentary Fronting Fee"), and the Agent shall
in turn remit to each Bank its PRO RATA portion of such Letter of Credit Fee
(but not the Documentary Fronting Fee, which is for the account of the Issuing
Bank only). The Letter of Credit Fee for each Letter of Credit shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the Closing Date with a final payment on the Revolving Credit Maturity
Date or an earlier date on which the Commitment shall terminate, in each case to
be first preceded by a notice and invoice from the Agent specifying the amount
due and payable. In addition, the Borrower shall pay to the Issuing Bank, for
its own account, such other issuance, processing, negotiation, amendment and
administrative fees as the Issuing Bank may require.
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5. CERTAIN GENERAL PROVISIONS.
5.1. CERTAIN FEES.
5.1.1. FEES PAYABLE AT CLOSING. The Borrower agrees to pay
all fees referred to in the Fee Letter which are payable on the Closing
Date in accordance with the terms of such Fee Letter.
5.1.2. AGENT AND ARRANGER FEES. The Borrower agrees to pay
each of the Agent and the Arranger the fees described in the Fee
Letter, upon the terms and conditions set forth therein.
5.2. FACILITY FEE. The Borrower agrees to pay to the Agent for the
accounts of the Banks in accordance with their respective Commitment Percentages
a facility fee calculated at the rate of the Applicable Margin specified for
such facility fee on the average daily amount during each calendar quarter or
portion thereof from the Closing Date to the Revolving Credit Loan Maturity Date
of the Total Commitment during such calendar quarter. The facility fee shall be
payable quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the Closing Date with a final payment on the Revolving Credit Maturity
Date or any earlier date on which the Commitment shall terminate, in each case
to be first preceded by a notice and invoice from the Agent specifying the
amount due and payable.
5.3. FUNDS FOR PAYMENTS.
5.3.1. PAYMENTS TO AGENT. All payments of principal,
interest, Reimbursement Obligations, facility fees, Letter of Credit
Fees and any other fees due hereunder or under any of the other Loan
Documents shall be made to the Agent, for the respective accounts of
the Banks, the Issuing Bank and the Agent, as applicable, at the
Agent's Head Office or at such other location in the Boston,
Massachusetts, area that the Agent may from time to time designate, in
each case in immediately available funds.
5.3.2. NO OFFSET ETC. All payments by the Borrower hereunder
and under any of the other Loan Documents shall be made without setoff
or counterclaim and free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any
political subdivision thereof or taxing or other authority therein
unless the Borrower is compelled by law to make such deduction or
withholding. If any such obligation is imposed upon the
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Borrower with respect to any amount payable by it hereunder or under
any of the other Loan Documents, the Borrower will pay to the Agent,
for the account of the Banks, the Issuing Bank or the Agent, as the
case may be, on the date on which such amount is due and payable
hereunder or under such other Loan Document, such additional amount in
Dollars as shall be necessary to enable the Banks or the Agent to
receive the same net amount which the Banks or the Agent would have
received on such due date had no such obligation been imposed upon the
Borrower. The Borrower will deliver promptly to the Agent certificates
or other valid vouchers for all taxes or other charges deducted from or
paid with respect to payments made by the Borrower hereunder or under
such other Loan Document. Nothing contained in this Section 5.3.2
shall be deemed to impose upon the Borrower any obligation to pay taxes
based upon the income or profits of the Agent, the Issuing Bank or any
other Bank.
5.4. COMPUTATIONS. All computations of interest on the Eurodollar Rate
Loans shall be based on a 360-day year and paid for the actual number of days
elapsed. All computations of interest on Base Rate Loans, Competitive Bid
Loans, Letter of Credit Fees, and other fees due hereunder shall be based on a
365-day year and paid for the actual number of days elapsed. Except as
otherwise provided in the definition of the term "Interest Period" with respect
to Eurodollar Rate Loans, whenever a payment hereunder or under any of the other
Loan Documents becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension. The outstanding amount of the Loans as
reflected on the Records from time to time shall be considered correct and
binding on the Borrower unless within five (5) Business Days after receipt of
any notice by the Agent or any of the Banks of such outstanding amount to the
Borrower, the Borrower shall notify the Agent or such Bank to the contrary.
5.5. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior
to the commencement of any Interest Period relating to any Eurodollar Rate Loan,
the Agent shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the Eurodollar Rate that would
otherwise determine the rate of interest to be applicable to any Eurodollar Rate
Loan during any Interest Period, the Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrower and the
Banks) to the Borrower and the Banks. In such event (i) any Loan Request or
Conversion Request with respect to Eurodollar Rate Loans shall be automatically
withdrawn and shall be deemed a request for Base Rate Loans, (ii) each
Eurodollar Rate Loan will automatically, on the last day of the then current
Interest Period
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relating thereto, become a Base Rate Loan unless the Agent has received timely
notice of the Borrower's intent to prepay such Eurodollar Rate Loan or any
portion thereof pursuant to Section 3.3, and (iii) the obligations of the Banks
to make Eurodollar Rate Loans shall be suspended until the Agent or the Majority
Banks determine that the circumstances giving rise to such suspension no longer
exist, whereupon the Agent or, as the case may be, the Agent upon the
instruction of the Majority Banks, shall so notify the Borrower and the Banks.
5.6. ILLEGALITY. Notwithstanding any other provisions herein, if
any present or future law, regulation, treaty or directive or in the
interpretation or application thereof shall make it unlawful for any Bank to
make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice of
such circumstances to the Borrower and the other Banks and thereupon (i) the
commitment of such Bank to make Eurodollar Rate Loans or convert Base Rate Loans
to Eurodollar Rate Loans shall forthwith be suspended and (ii) such Bank's
Syndicated Loans then outstanding as Eurodollar Rate Loans, if any, shall be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such Eurodollar Rate Loans unless the Agent has received
timely notice of the Borrower's intent to prepay such Eurodollar Rate Loan or
any portion thereof pursuant to Section 3.3, or within such earlier period as
may be required by law. The Borrower hereby agrees to pay the Agent for the
account of such Bank, within thirty (30) days following demand by such Bank, any
additional amounts necessary to compensate such Bank for any costs incurred by
such Bank in making any conversion in accordance with this Section 5.6,
including any interest or fees payable by such Bank to lenders of funds obtained
by it in order to make or maintain its Eurodollar Rate Loans here under;
PROVIDED, HOWEVER, that if the Agent or such Bank shall fail to notify the
Borrower or make demand within one hundred twenty (120) days following the
occurrence of any such event, such Bank shall not be entitled to claim any
additional amounts pursuant to this Section 5.6 for any period ending on a date
which is prior to one hundred twenty (120) days before such notification or
demand.
5.7. ADDITIONAL COSTS ETC. If any present or future applicable
law, which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank or the Agent by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall:
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(a) subject any Bank or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect
to this Credit Agreement, the other Loan Documents, any Letters of
Credit, such Bank's Commitment or the Loans (other than taxes based
upon or measured by the income or profits of such Bank or the Agent),
or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Bank of the
principal of or the interest on any Loans or any other amounts payable
to any Bank or the Agent under this Credit Agreement or any of the
other Loan Documents, or
(c) impose or increase or render applicable (other than to
the extent specifically provided for elsewhere in this Credit
Agreement) any special deposit, reserve, assessment, liquidity, capital
adequacy or other similar requirements (whether or not having the force
of law) against assets held by, or deposits in or for the account of,
or loans by, or letters of credit issued by, or commitments of an
office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Commitment, or
any class of loans, letters of credit or commitments of which any of
the Loans or such Bank's Commitment forms a part, and the result of any
of the foregoing is
(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or maintaining any of
the Loans or such Bank's Commitment or any Letter of Credit,
or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such Bank
or the Agent hereunder on account of such Bank's Commitment,
any Letter of Credit or any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or Reimbursement Obligation
or other sum payable hereunder, the amount of which payment
or foregone interest or Reimbursement Obligation or other sum
is calculated by reference to the gross amount of any sum
receivable or deemed received by such Bank or the Agent from
the Borrower hereunder,
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then, and in each such case, the Borrower will, within thirty (30) days
following demand made by such Bank or (as the case may be) the Agent at any time
and from time to time and as often as the occasion therefor may arise, pay to
such Bank or the Agent such additional amounts as will be sufficient to
compensate such Bank or the Agent for such additional cost, reduction, payment
or foregone interest or Reimbursement Obligation or other sum; PROVIDED,
HOWEVER, that if such Bank or the Agent shall fail to notify the Borrower or
make demand within one hundred twenty (120) days following the occurrence of any
such event, such Bank or, as the case may be, the Agent shall not be entitled to
claim any additional amounts pursuant to this Section 5.7 for any period ending
on a date which is prior to one hundred (120) days before such notification or
demand.
5.8. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
reasonably determines that (i) the adoption of or change in any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) regarding capital requirements for banks or bank
holding companies or any change in the interpretation or application thereof by
a court or governmental authority with appropriate jurisdiction after the date
hereof, or (ii) compliance after the date hereof by such Bank or the Agent or
any corporation controlling such Bank or the Agent with any law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) of any such entity regarding capital adequacy, has the effect of
reducing the return on such Bank's or the Agent's commitment with respect to any
Loans to a level below that which such Bank or the Agent could have achieved but
for such adoption, change or compliance (taking into consideration such Bank's
or the Agent's then existing policies with respect to capital adequacy and
assuming full utilization of such entity's capital) by any amount deemed by such
Bank or (as the case may be) the Agent to be material, then such Bank or the
Agent may notify the Borrower of such fact. To the extent that the amount of
such reduction in the return on capital is not reflected in the Base Rate or
Eurodollar Rate, or in amounts paid or payable by the Borrower pursuant to
Section 5.7 or Section 5.10 hereof, the Borrower and such Bank or (as the case
may be) the Agent shall thereafter attempt to negotiate in good faith, within
thirty (30) days of the day on which the Borrower receives such notice, an
adjustment payable hereunder which will adequately compensate such Bank or the
Agent in light of these circumstances. If the Borrower and such Bank or the
Agent are unable to agree to such adjustment within thirty (30) days of the date
on which the Borrower receives such notice, then commencing on the date of such
notice (but not earlier than the effective date of any such increased capital
requirement), the fees payable hereunder shall increase by an amount that will,
in such Bank's or the Agent's reasonable determination, provide adequate
compensation. Each Bank and the Agent shall allocate
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such cost increases among its customers in good faith and on an equitable basis.
Notwithstanding anything to the contrary contained in this Section 5.8, in the
event that the Agent or any Bank shall fail to notify the Borrower of any such
costs of increased capital requirements within one hundred twenty (120) days
following the Agent's or such Bank's determination thereof, the Agent or, as the
case may be, such Bank shall not be entitled to claim any additional amounts
pursuant to this Section 5.8 for any period ending on a date which is prior to
one hundred twenty (120) days before such notification.
5.9. CERTIFICATE. A certificate signed by an officer of any Bank,
setting forth any additional amount required to be paid by the Borrower to such
Bank under Section 5.7, Section 5.8 or Section 5.10 and the computations made by
such Bank to determine such additional amount, shall be submitted by such Bank
to the Borrower in connection with each demand made at any time by such Bank
upon the Borrower under Section 5.7, Section 5.8 or Section 5.10. Without
limiting the negotiation requirements of Section 5.8 (with respect to
certificates issued on account of additional amounts required to be paid
pursuant to Section 5.8), such certificate shall constitute PRIMA FACIE evidence
as to the additional amount owed.
5.10. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of (i)
default by the Borrower in payment of the principal amount of or any interest on
any Eurodollar Rate Loans or Competitive Bid Rate Loans as and when due and
payable, including any such loss or expense arising from interest or fees
payable by such Bank to lenders of funds obtained by it in order to maintain its
Eurodollar Rate Loans or Competitive Bid Rate Loans, (ii) default by the
Borrower in making a borrowing or conversion after the Borrower has given (or is
deemed to have given) a Loan Request or a Conversion Request relating thereto in
accordance with Section 2.2 or Section 2.9 or after the Borrower has accepted a
Competitive Bid Quote pursuant to Section 2.3.1(f) or (iii) the making of any
payment of a Eurodollar Rate Loan or Competitive Bid Rate Loan or the making of
any conversion of any such Eurodollar Rate Loan to a Base Rate Loan on a day
that is not the last day of the applicable Interest Period with respect thereto,
including interest or fees payable by such Bank to lenders of funds obtained by
it in order to maintain any such Loans. In the event that the Agent or any Bank
shall fail to notify the Borrower of any such losses, costs or expenses within
one hundred twenty (120) days following the incurrence of any thereof, the Agent
or, as the case may be, such Bank shall not be entitled to claim any additional
amounts pursuant to this Section 5.10 for any period ending on a date which is
prior to one hundred twenty (120) days before such notification.
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5.11. INTEREST AFTER DEFAULT.
5.11.1. OVERDUE AMOUNTS. Overdue principal and (to the extent
permitted by applicable law) interest on the Loans and all other
overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest compounded monthly and payable on demand
at a rate per annum equal to two percent (2%) above the rate of
interest otherwise applicable to such Loans pursuant to Section 2.8.
5.11.2. AMOUNTS NOT OVERDUE. During the continuance of an
Event of Default the principal of the Loans not overdue shall, until
such Event of Default has been cured or remedied or such Event of
Default has been waived by the Majority Banks pursuant to Section 26,
bear interest at a rate per annum equal to two percent (2%) above the
rate of interest otherwise applicable to such Loans pursuant to Section
2.8.
5.12. BANK OBLIGATION TO MITIGATE. Any Bank that makes demand for
payment of additional amounts under Section 5.7 or Section 5.8 or notifies the
Agent of any circumstances pursuant to Section 5.6, shall use reasonable efforts
(consistent with its internal policies and legal and regulatory restrictions) to
change the jurisdiction of its applicable lending office so as to avoid
thereafter the circumstances that give rise to such demand or notification.
5.13. REPLACEMENT OF BANK. (a) In the event that any Bank makes a
demand for payment under Section 5.7 or Section 5.8 or notifies the Agent of any
circumstances requiring payment pursuant to Section 5.6, the Borrower may within
one hundred twenty (120) days of such demand, if no Event of Default or Default
then exists, (i) reduce the commitment in the full amount of such Bank's
Commitment Percentage of the Commitment and repay such Bank in full or (ii)
replace such Bank with an Eligible Assignee in accordance with Section 19
(including execution of an appropriate Assignment and Acceptance Agreement). If
the Borrower accomplishes the replacement or repayment of such Bank within 120
days following the demand, the Borrower shall only owe any such Bank amounts
under Section 5.6, Section 5.7 or Section 5.8, as applicable, hereof through the
date of replacement or repayment. If the Borrower does not accomplish either
replacement or repayment of such Bank within such 120 days, the Borrower shall
owe such Bank in accordance with the terms of any written agreement reached
between Bank and the Borrower, and, if no such agreement has been reached, the
Borrower shall owe such Bank in accordance with the terms and provisions of
Section 5.6, Section 5.7 or Section 5.8, as applicable. If the Commitment is
reduced by the Borrower pursuant to this Section 5.13(a), the Borrower and the
Banks agree that the Commitment Percentages of each Bank will be automatically
ratably
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adjusted to reflect such reduction of the Commitment. Each Bank agrees to the
automatic readjustment of each remaining Bank's contingent liabilities under
Section 4.1.4 according to the new (adjusted) Commitment Percentages.
(b) If any Bank is acquired by or merges with any other Person
(including any other Bank) and (i) such Bank is not the surviving Person, and
(ii) there exists no Default or Event of Default hereunder, the Borrower may
replace such Bank in whole with another Eligible Assignee acceptable to the
Agent pursuant to an Assignment and Acceptance Agreement within thirty days
following the date of consummation of any such acquisition.
(c) If (i) there exists no Default or Event of Default on any such date
and no Default or Event of Default shall be caused by the action permitted below
and (ii) any Bank refuses to consent to any amendment, waiver or consent to any
provision hereof or in any Loan Document in accordance with the terms of Section
26 (other than an amendment to increase the Commitment of such Bank), but to
which each other Bank has previously agreed, then, the Borrower may, with the
prior written consent of the Agent, within 90 days after the date of such
consent, amendment or waiver, replace such Bank in whole with another Eligible
Assignee, pursuant to an Assignment and Acceptance Agreement and otherwise in
accordance with the terms of Section 19.
6. GUARANTIES.
The payment and performance of the Obligations shall be guaranteed by
each new United States Subsidiary of the Borrower which becomes a party to a
Guaranty pursuant to Section 9.11.
7. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Banks and the Agent as
follows:
7.1. AUTHORITY.
7.1.1. ORGANIZATION; GOOD STANDING. Each of the Borrower and
its Subsidiaries (i) is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, (ii) has
all requisite power to own its property and conduct its business as now
conducted, and (iii) is in good standing and is duly authorized to do
business in each jurisdiction where the character of its properties or
the nature of the business conducted by it make such qualification
necessary, except where (A) a failure to be so qualified would not have
a materially adverse effect on the business, assets or financial
condition of the Borrower and its Subsidiaries taken as a whole or
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(B)(1) a failure to be so qualified involves a Subsidiary of the
Borrower that was acquired pursuant to Section 9.6 within thirty (30)
days prior to the date on and as of which this representation and
warranty is being made or repeated and (2) the Borrower and such
Subsidiary are using all reasonable efforts to obtain the appropriate
license, admission or qualification.
7.1.2. AUTHORIZATION. The execution, delivery and performance
of this Credit Agreement and the other Loan Documents to which the
Borrower or any of its Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby (i) are within the
authority of such Person, (ii) have been duly authorized by all
necessary proceedings (except that in the case of a Subsidiary acquired
pursuant to Section 9.6, such execution, delivery and authorization
shall have been completed no later than the later to occur of (a) the
date of such acquisition, and (b) fifteen (15) Business Days following
receipt by the Borrower or such Subsidiary of forms of the Loan
Documents, or amendments thereto, as appropriate, to which such
Subsidiary is to become a party in order to become a Subsidiary), (iii)
do not conflict with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which the Borrower or
any of its Subsidiaries is subject or any judgment, order, writ,
injunction, license or permit applicable to the Borrower or any of its
Subsidiaries, except where such conflict, breach or contravention would
not have a material adverse effect on the business, assets or financial
condition of the Borrower and its Subsidiaries taken as a whole and
would not limit the enforceability of the Loan Documents or the
ability of the Borrower and its Subsidiaries to perform their
obligations under the Loan Documents, and (iv) do not conflict with any
provision of the corporate charter or bylaws of the Borrower or any of
its Subsidiaries and (v) do not conflict with any material provision or
any agreement or other instrument binding upon, the Borrower or any of
its Subsidiaries, except where such conflict would not have a material
adverse effect on the business, assets or financial condition of the
Borrower and its Subsidiaries taken as a whole.
7.1.3. ENFORCEABILITY. The execution and delivery of this
Credit Agreement and the other Loan Documents to which the Borrower or
any of its Subsidiaries is or is to become a party will result in valid
and legally binding obligations of such Person enforceable against it
in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent
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that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
7.2. GOVERNMENTAL APPROVALS. The execution, delivery and
performance by the Borrower and any of its Subsidiaries of this Credit Agreement
and the other Loan Documents to which the Borrower or any of its Subsidiaries is
or is to become a party do not require the approval or consent of, or filing
with, any governmental agency or authority other than those already obtained.
7.3. TITLE TO PROPERTIES; LEASES. Except as indicated on SCHEDULE
7.3 hereto, the Borrower and its Subsidiaries own or lease all of the assets
reflected in the consolidated balance sheet of the Borrower and its Subsidiaries
as at the Balance Sheet Date or acquired since that date (except property and
assets sold or otherwise disposed of in the ordinary course of business or
dispositions permitted hereunder since that date), subject to no liens or other
encumbrances except Permitted Liens.
7.4. FINANCIAL STATEMENTS.
7.4.1. FISCAL YEAR. The Borrower and each of its Subsidiaries
has a fiscal year which is the fifty-two/fifty-three weeks ending on
the Saturday closest to the last day of January.
7.4.2. FINANCIAL STATEMENTS. There has been furnished to the
Agent a consolidated balance sheet of the Borrower and its Subsidiaries
as at the Balance Sheet Date, and a consolidated statement of income of
the Borrower and its Subsidiaries for the fiscal year then ended,
including the opinion thereof expressed by and signed by the Borrower's
independent certified public accountants. Such balance sheet and
statement of income and statement of cash flow have been prepared in
accordance with generally accepted accounting principles and fairly
present the financial condition of the Borrower as at the close of
business on the date thereof and the results of operations for the
fiscal year then ended. There are no contingent liabilities of the
Borrower or any of its Subsidiaries as of such date involving material
amounts, known to the Borrower, which were not disclosed in such
balance sheet and the notes related thereto.
7.4.3. PROJECTIONS. The projections of the annual operating
budgets of the Borrower and its Subsidiaries on a consolidated basis,
balance sheets and cash flow statements for period from the Closing
Date through the Borrower's fiscal year 2001, copies of which have
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been delivered to the Agent, disclose all material assumptions made
with respect to general economic, financial and market conditions used
in formulating such projections. To the knowledge of the Borrower or
its Subsidiaries, no facts exist that (individually or in the
aggregate) would result in any material adverse change in any of such
projections, as such projections may be updated from time to time
pursuant to Section 8.4(f). The projections are based upon estimates
and assumptions which the Borrower deems reasonable, have been prepared
on the basis of the assumptions stated therein and reflect the good
faith estimates of the Borrower and its Subsidiaries of the results of
operations and other information projected therein.
7.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date there
has occurred no materially adverse change in the financial condition or business
of the Borrower and its Subsidiaries taken as a whole as shown on or reflected
in the consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date, or the consolidated statement of income for the fiscal year
then ended, other than changes in the ordinary course of business that have not
had any materially adverse effect either individually or in the aggregate on the
business or financial condition of the Borrower and its Subsidiaries, taken as a
whole. Since the Balance Sheet Date, the Borrower has not made any Distribution,
other than as permitted under Section 9.4.
7.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrower and
its Subsidiaries possesses all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the foregoing,
adequate for the conduct of its business substantially as now conducted without
known conflict with any rights of others.
7.7. LITIGATION. Except as set forth in SCHEDULE 7.7 hereto, there
are no actions, suits, proceedings or investigations of any kind pending or, to
the knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries before any court, tribunal or administrative agency or board that,
if adversely determined, might, either in any case or in the aggregate,
materially adversely affect the properties, assets, financial condition or
business of the Borrower and its Subsidiaries taken as a whole or materially
impair the right of the Borrower and its Subsidiaries, considered as a whole, to
carry on business substantially as now conducted by them, or which question the
validity of this Credit Agreement or any of the other Loan Documents, or any
action taken or to be taken pursuant hereto or thereto.
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7.8. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the
Borrower nor any of its Subsidiaries is in violation of any material provision
of its charter documents, bylaws, or any agreement or instrument to which it may
be subject or by which it or any of its properties may be bound or any decree,
order, judgment, statute, license, rule or regulation, in any of the foregoing
cases in a manner that could reasonably be expected to result in a material
adverse effect on the financial condition, assets or business of the Borrower
and its Subsidiaries taken as a whole.
7.9. TAX STATUS. Each of the Borrower and, to the knowledge of the
Borrower, its Subsidiaries (i) have made or filed all United States federal and
state income and other tax returns, reports and declarations required to be
filed by it other than those returns as to which the failure to so file would
not, in the opinion of the Borrower, create an outstanding liability for taxes
due or interest and penalties thereon which would reasonably be expected
materially adversely to affect the operations or the financial condition of the
Borrower and its Subsidiaries, considered as a whole, to carry on business
substantially as now conducted by them or to result in any material liability
for which adequate reserves are not maintained on the consolidated balance sheet
of the Borrower and its Subsidiaries, and (ii) has paid, or has made reasonable
provision for payment of, all taxes and other governmental assessments and
charges shown or determined to be due on such returns, reports and declarations,
except those taxes being contested in good faith and by appropriate proceedings.
7.10. NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
7.11. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the
Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935; nor is
it an "investment company", or a company "controlled" by an "investment
company", as such terms are defined in the Investment Company Act of 1940.
7.12. EMPLOYEE BENEFIT PLANS.
7.12.1. IN GENERAL. Each Employee Benefit Plan and each
Guaranteed Pension Plan has been maintained and operated in compliance
with the provisions of ERISA and, to the extent applicable, the Code,
including but not limited to the provisions thereunder respecting
prohibited transactions and the bonding of fiduciaries and other
persons handling plan funds as required by Section 412 of ERISA, except
where such noncompliance would not have a
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material adverse effect on the business, assets or financial condition
of the Borrower and its Subsidiaries taken as a whole.
7.12.2. TERMINABILITY OF WELFARE PLANS. No Employee Benefit
Plan, which is an employee welfare benefit plan within the meaning of
Section 3(1) or Section 3(2)(B) of ERISA, provides benefit coverage
subsequent to termination of employment, except as required by Title I,
Part 6 of ERISA or the applicable state insurance laws and except
individual employment, severance or termination agreements with
employees, directors, officers or independent contractors of the
Borrower or any ERISA Affiliate. Subject to applicable legal
requirements, the Borrower or an ERISA Affiliate, as appropriate may
terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of
the Borrower or such ERISA Affiliate without liability to any Person
other than for claims arising prior to termination.
7.12.3. GUARANTEED PENSION PLANS. Each contribution required
to be made to avoid the incurrence of an accumulated funding deficiency
or the notice or lien provisions of Section 302(f) of ERISA has been
timely made. No waiver of an accumulated funding deficiency or
extension of amortization periods has been received with respect to any
Guaranteed Pension Plan, and neither the Borrower nor any ERISA
Affiliate is obligated to or has posted security in connection with an
amendment to a Guaranteed Pension Plan pursuant to Section 307 of ERISA
or Section 401(a)(29) of the Code. As of the Closing Date, no
liability to the PBGC (other than required insurance premiums, all of
which have been paid) has been incurred by the Borrower or any ERISA
Affiliate with respect to any Guaranteed Pension Plan and there has not
been any ERISA Reportable Event (other than an ERISA Reportable Event
as to which the requirement of 30 days notice has been waived), or any
other event or condition which presents a material risk of termination
of any Guaranteed Pension Plan by the PBGC. Based on the latest
valuation of each Guaranteed Pension Plan (which in each case occurred
within twelve months of the date of this representation), and on the
actuarial methods and assumptions employed for that valuation, the
aggregate benefit liabilities of all such Guaranteed Pension Plans
within the meaning of Section 4001 of ERISA did not exceed the
aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities,
by an amount in excess of $5,000,000.
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7.12.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any
ERISA Affiliate has incurred any material liability (including
secondary liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan under
Section 4201 of ERISA or as a result of a sale of assets described in
Section 4204 of ERISA. Neither the Borrower nor any ERISA Affiliate
has been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of Section 4241 or Section 4245
of ERISA or is at risk of entering reorganization or becoming
insolvent, or that any Multiemployer Plan intends to terminate or has
been terminated under Section 4041A of ERISA.
7.13. USE OF PROCEEDS.
7.13.1. GENERAL. The proceeds of the Loans and the Letters of
Credit shall be used for working capital and general corporate
purposes.
7.13.2. REGULATIONS U AND X. No portion of any Loan is to be
used, and no portion of any Letter of Credit is to be obtained, for the
purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
7.13.3. INELIGIBLE SECURITIES. No portion of the proceeds of
any Loan is to be used, and no portion of any Letter of Credit is to be
obtained, for the purpose of (a) knowingly purchasing, or providing
credit support for the purchase of, Ineligible Securities from a
Section 20 Subsidiary during any period in which such Section 20
Subsidiary makes a market in such Ineligible Securities, (b) knowingly
purchasing, or providing credit support for the purchase of, during the
underwriting or placement period, any Ineligible Securities being
underwritten or privately placed by a Section 20 Subsidiary, or (c)
making, or providing credit support for the making of, payments of
principal or interest on Ineligible Securities underwritten or
privately placed by a Section 20 Subsidiary and issued by or for the
benefit of the Borrower or any Subsidiary or other Affiliate of the
Borrower.
7.14. ENVIRONMENTAL COMPLIANCE. To the Borrower's knowledge:
(a) none of the Borrower, its Subsidiaries or any of their
operations on the Real Estate is in violation, or alleged violation, of
any judgment, decree, order, law, license, rule or regulation
pertaining to environmental matters, including without limitation,
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those arising under Environmental Laws which violation would have a
material adverse effect on the business, assets or financial condition
of the Borrower and its Subsidiaries taken as a whole;
(b) neither the Borrower nor any of its Subsidiaries has
received notice from any third party including, without limitation, any
federal, state or local governmental authority, (i) that it has been
identified by the EPA as a potentially responsible party under CERCLA
with respect to a site listed on the National Priorities List, 40
C.F.R. Part 300 Appendix B; (ii) that any Hazardous Substances which it
has generated, transported or disposed of has been found at any site at
which a federal, state or local agency or other third party has
conducted or has ordered that any Borrower or any of its Subsidiaries
conduct a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that it is or shall be a
named party to any claim, action, cause of action, complaint, or legal
or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses
or damages of any kind whatsoever in connection with the release of
Hazardous Substances;
(c) except as set forth on SCHEDULE 7.14 attached hereto: (i)
no portion of the Real Estate has been used by any of the Borrower or
its Subsidiaries for the handling, processing, storage or disposal of
Hazardous Substances except in accordance with applicable Environmental
Laws; and (ii) in the course of any activities conducted by the
Borrower or its Subsidiaries, no Hazardous Substances have been
generated or are being used on the Real Estate except in accordance
with applicable Environmental Laws.
(d) None of the Borrower and its Subsidiaries or any of the
Real Estate is subject to any applicable Environmental Law requiring
the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of notice
to any governmental agency or the recording or delivery to other
Persons of an environmental disclosure document or statement by virtue
of the transactions set forth herein and contemplated hereby, or to the
effectiveness of any other transactions contemplated hereby.
7.15. SUBSIDIARIES ETC. SCHEDULE 7.15 sets forth all Subsidiaries of
the Borrower. Except as set forth on SCHEDULE 7.15 and as otherwise permitted
here under, neither the Borrower nor any Subsidiary of the
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Borrower is engaged in any joint venture or partnership with any other Person.
7.16. DISCLOSURE. No representation or warranty made by any of the
Borrower or its Subsidiaries in this Credit Agreement or in any of the other
Loan Documents contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements herein or
therein not misleading in light of the circumstances in which they are made.
Except as disclosed in writing to the Agent, there is no fact known to the
Borrower or, to the knowledge of the Borrower, any of its Subsidiaries, which
materially adversely affects, or which is reasonably likely in the future to
materially adversely affect, the business, assets, or financial condition of the
Borrower and its Subsidiaries, taken as a whole, exclusive of effects resulting
from changes in general economic conditions, legal standards or regulatory
conditions.
7.17. YEAR 2000 PROBLEM. The Borrower and its Subsidiaries have
reviewed the areas within their businesses and operations which could be
adversely affected by, and have developed or are developing a program to address
on a timely basis, the "Year 2000 Problem" (i.e. the risk that computer
applications used by the Borrower or 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). Based upon such review, the Borrower
reasonably believes that the "Year 2000 Problem" will not have any materially
adverse effect on the business or financial condition of the Borrower and its
Subsidiaries taken as a whole.
8. AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Issuing Bank has any obligation to
issue, extend or renew any Letters of Credit:
8.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the commitment fees, the facility fees,
the Agent's fees and all other fees provided for in this Credit Agreement and
the other Loan Documents to which the Borrower or any of its Subsidiaries is a
party, all in accordance with the terms of this Credit Agreement and such other
Loan Documents.
8.2. MAINTENANCE OF OFFICE. The Borrower will maintain its chief
executive office in Irving, Texas, or at such other place in the United States
of America as the Borrower shall designate upon written notice to the
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Agent, where notices, presentations and demands to or upon the Borrower in
respect of the Loan Documents to which the Borrower is a party may be given or
made.
8.3. RECORDS AND ACCOUNTS. The Borrower will (i) keep, and cause each
of its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will, to the extent generally accepted
accounting principles are applicable thereto, be made in accordance with
generally accepted accounting principles, (ii) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation, depletion,
obsolescence and amortization of its properties and the properties of its
Subsidiaries, contingencies, and other reserves, and (iii) at all times engage
Ernst & Young LLP or other independent certified public accountants reasonably
satisfactory to the Agent as the independent certified public accountants of the
Borrower and its Subsidiaries and will not permit more than thirty (30) days to
elapse between the cessation of such firm's (or any successor firm's) engagement
as the independent certified public accountants of the Borrower and its
Subsidiaries and the appointment in such capacity of a successor firm as shall
be reasonably satisfactory to the Agent.
8.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The
Borrower will deliver to the Agent and the Agent will then deliver to the Banks:
(a) as soon as available, but in any event not later than
ninety five (95) days after the end of each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its
Subsidiaries, each as at the end of such year, and the related
consolidated statement of income and consolidated statement of cash
flow, each setting forth in comparative form the figures for the
previous fiscal year and all such consolidated statements to be in
reasonable detail, prepared in accordance with generally accepted
accounting principles, and certified without qualification (except that
a qualification for a change in accounting principles with which such
firm of independent certified public accountants concurs shall be
permitted) by Ernst & Young L.L.P. or by other independent certified
public accountants reasonably satisfactory to the Agent;
(b) as soon as available, but in any event not later than
fifty (50) days after the end of each of the first three fiscal
quarters in each fiscal year of the Borrower, copies of the unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such quarter, and the related consolidated statement of
income and
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consolidated statement of cash flow for the portion of the Borrower's
fiscal year then elapsed, all in reasonable detail and prepared in
accordance with generally accepted accounting principles, together with
a certification by a financial officer, vice president-finance, vice
president-accounting, treasurer or controller of the Borrower that the
information contained in such financial statements fairly presents the
financial position of the Borrower and its Subsidiaries on the date
thereof (subject to year-end adjustments);
(c) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement
certified by a financial officer, vice president-finance, vice
president-accounting, treasurer or controller of the Borrower in
substantially the form of EXHIBIT F hereto (a "Compliance Certificate")
and setting forth in reasonable detail computations evidencing
compliance with (i) the covenants contained in Section 10 and (if
applicable) reconciliations to reflect changes in generally accepted
accounting principles since the Balance Sheet Date and (ii) if the
Total Commitment exceeds $100,000,000, evidence of compliance with the
provisions of the Senior Notes restricting the amount of Indebtedness
the Borrower and its Subsidiaries may incur;
(d) as soon as practicable but in any event, within (20)
Business Days after the filing or mailing thereof, copies of all
financial statements filed with the Securities and Exchange Commission
or sent to the stockholders of the Borrower as such;
(e) from time to time such other financial data and
information (including information relating to Guaranteed Pension Plans
and accountants' management letters) as the Agent or any Bank may
reasonably request; and
(f) as soon as available, but in any event not later than
sixty (60) days following the delivery of the financial statements
referred to in clause (a) above or at any other time at which the
Borrower shall desire to submit such updated projections, consolidated
projections of the Borrower and its Subsidiaries updating those
projections delivered pursuant to this Section 8.4(f).
8.5. NOTICES.
8.5.1. DEFAULTS. The Borrower will promptly notify the Agent
in writing of the occurrence of any Default or Event of Default. If any
Person shall give any notice or take any other action in respect of a
claimed default (whether or not constituting an Event of Default)
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under this Credit Agreement or any other material note, evidence of
indebtedness, indenture or other obligation to which or with respect to
which the Borrower or any of its Subsidiaries is a party or obligor,
whether as principal, guarantor, surety or otherwise, the Borrower
shall forthwith, upon becoming aware thereof, give written notice
thereof to the Agent, describing the notice or action and the nature of
the claimed default.
8.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give
notice to the Agent (i) of any violation of any Environmental Law that
the Borrower or any of its Subsidiaries reports in writing or is
reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency and (ii) upon becoming aware thereof, of any
inquiry, proceeding, investigation, or other action, including a notice
from any agency of potential environmental liability, of any federal,
state or local environmental agency or board, that has the potential to
materially affect the assets, business or financial condition of the
Borrower and its Subsidiaries taken as a whole.
8.5.3. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will,
and will cause each of its Subsidiaries to, give notice to the Agent in
writing within thirty (30) days of becoming aware of any litigation or
proceedings threatened in writing or any pending litigation and
proceedings affecting the Borrower or any of its Subsidiaries or to
which the Borrower or any of its Subsidiaries is or becomes a party
involving an uninsured claim against the Borrower or any of its
Subsidiaries that could reasonably be expected to have a materially
adverse effect on the assets, financial condition or business of the
Borrower and its Subsidiaries taken as a whole and stating the nature
and status of such litigation or proceedings. The Borrower will, and
will cause each of its Subsidiaries to, give notice to the Agent, in
writing, in form and detail reasonably satisfactory to the Agent,
within ten (10) days of any judgment not covered by insurance, final or
otherwise, against the Borrower or any of its Subsidiaries in an amount
in excess of $5,000,000.
8.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. Subject to
the actions permitted by Section 9.6, the Borrower will, and will cause each of
its Subsidiaries to, do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, rights and franchises.
Subject to the actions permitted by Section 9.6, the Borrower will, and will
cause each of its Subsidiaries to, (i) cause all of its material properties used
or useful in the conduct of its business or the business of such
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Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment, (ii) cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times,
and (iii) continue to engage primarily in the businesses now conducted by them
and in related businesses; PROVIDED that nothing in this Section 8.6 shall
prevent the Borrower or any of its Subsidiaries from discontinuing the operation
and maintenance of any of its properties if such discontinuance is, in the
judgment of the Borrower, desirable in the conduct of its or their business and
that do not in the aggregate materially adversely affect the business of the
Borrower and its Subsidiaries taken as a whole.
8.7. INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, keep adequately insured either with financially sound and
reputable insurers or pursuant to a plan of self-insurance established in
accordance with sound and appropriate practices and in accordance with
applicable law, insurance with respect to such assets, properties and business
as are customarily insured by owners of similar assets, properties and business
against such casualties and contingencies as shall be in accordance with the
general practices of businesses engaged in similar activities in similar
geographic areas and in amounts, containing such terms, in such forms and for
such period as may be reasonable and prudent.
8.8. TAXES. The Borrower will, and will cause each of its
Subsidiaries to, duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all taxes, assessments and other
governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all lawful claims for labor, materials, or supplies that if unpaid might
by law become a lien or charge upon any of its property; PROVIDED that any such
tax, assessment, charge, levy or claim need not be paid if (i) the validity or
amount thereof shall currently be contested in good faith by appropriate
proceedings and if the Borrower or such Subsidiary shall have set aside on its
books adequate reserves with respect thereto, (ii) adequate bonds have been
obtained with respect thereto, or (iii) the failure to so pay would not have a
material evidence effect on the business, assets or financial condition of the
Borrower and its Subsidiaries taken as a whole; and PROVIDED FURTHER that, with
respect to liens or charges securing an amount less than $500,000, the Borrower
and its Subsidiaries shall have thirty (30) days grace to accomplish such
discharge; and PROVIDED FURTHER the Borrower and each Subsidiary of the Borrower
will pay all such taxes, assessments, charges, levies or claims forthwith upon
the commencement of
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proceedings to foreclose any lien that may have attached as security therefor.
8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC. The Borrower shall
permit the Banks, through the Agent or any of the Banks' other designated
representatives, to visit and inspect any of the properties of the Borrower or
any of its Subsidiaries, to examine the books of account of the Borrower and its
Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss
the affairs, finances and accounts of the Borrower and its Subsidiaries with,
and to be advised as to the same by, its and their officers, all at such
reasonable times and intervals and with reasonable notice as the Agent or any
Bank may reasonably request.
8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
Borrower will, and will cause each of its Subsidiaries to, comply with (i) all
laws and regulations (including all Environmental Laws), to which it may be
subject, noncompliance with which could reasonably be expected to have a
material adverse effect on the business, operations or financial condition of
the Borrower and its Subsidiaries taken as a whole, (ii) the provisions of its
charter documents and by-laws, (iii) all agreements and instruments by which it
or any of its properties may be bound, non-compliance with which would
reasonably be expected to have a materially adverse effect on the business,
operations or financial condition of the Borrower and its Subsidiaries, taken as
a whole, and (iv) all applicable decrees, orders, and judgments, non-compliance
with which would reasonably be expected to have a materially adverse effect on
the business, operations or financial condition of the Borrower and its
Subsidiaries taken as a whole. If any authorization, consent, approval, permit
or license from any officer, agency or instrumentality of any government shall
become necessary or required in order that the Borrower or any of its
Subsidiaries may fulfill its obligations hereunder or any of the other Loan
Documents to which the Borrower or such Subsidiary is a party, the Borrower
will, or (as the case may be) will cause such Subsidiary to, immediately take or
cause to be taken all reasonable steps within the power of the Borrower or such
Subsidiary to obtain such authorization, consent, approval, permit or license.
8.11. EMPLOYEE BENEFIT PLANS. The Borrower will, promptly upon
receipt or dispatch, furnish to the Agent (i) any notice of an ERISA Reportable
Event (as to which the requirement of 30 days notice has not been waived), or
notification regarding missed contributions, sent to the PBGC in respect of a
Guaranteed Pension Plan and (ii) any other report, demand or notice from the
PBGC or a Multiemployer Plan asserting a current liability of the Borrower in
connection with, or which could
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reasonably be expected to result in a material increase in the liability of the
Borrower on, the termination of, or a withdrawal from, a Guaranteed Pension Plan
or Multiemployer Plan.
8.12. USE OF PROCEEDS. The Borrower will use the proceeds of the
Loans and will obtain Letters of Credit solely for working capital and other
general corporate purposes, including acquisitions permitted hereunder.
8.13. ROYALTY PAYMENTS. The Borrower will cause 5931, Inc. and 5931
Business Trust to make Distributions to the Borrower of substantially all
Royalty Payments within 45 days of 5931, Inc. and 5931 Business Trust receipt of
such Royalty Payments.
8.14. FURTHER ASSURANCES. The Borrower will, and will cause each of
its Subsidiaries to, execute such further instruments and documents as the Agent
shall reasonably request to carry out more effectively the purposes of this
Credit Agreement and the other Loan Documents.
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Issuing Bank has any obligations to
issue, extend or renew any Letters of Credit:
9.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will
not permit any of its Subsidiaries to, create, incur, assume or be or remain
liable, contingently or otherwise, with respect to any Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under
any of the Loan Documents;
(b) the Borrower and its Subsidiaries may permit to exist
the existing Indebtedness shown on SCHEDULE 9.1 hereto;
(c) Indebtedness under the Senior Notes and the
Subordinated Debt each as in effect on the date hereof or as modified
consistent with Section 9.5;
(d) the Borrower and its Subsidiaries that are Guarantors
may incur Indebtedness owing to and held by the Borrower or other
Subsidiaries of the Borrower;
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(e) Subsidiaries of the Borrower which are not Guarantors
may incur Indebtedness to the Borrower and other Subsidiaries of the
Borrower not to exceed $10,000,000 at any time;
(f) MC may incur unsecured Indebtedness in an aggregate
amount not to exceed an amount equal to the Canadian Dollar equivalent
of $5,000,000 outstanding at any one time;
(g) the Borrower and its Subsidiaries may incur or permit
to exist Indebtedness of the Borrower and its Subsidiaries represented
by Capitalized Lease obligations, mortgage financings or purchase money
obligations, in each case incurred for the purpose of financing or
refinancing all or any part of the purchase price or costs of
construction, repairs, renovation, remodeling, expansion or other
improvement of property, plant and equipment, including services and
equipment supporting such items used in Borrower's business or any
Subsidiary's business in an aggregate principal amount outstanding not
to exceed ten percent (10%) of Consolidated Tangible Net Worth of the
Borrower and its Subsidiaries at the time of any incurrence of such
Indebtedness;
(h) the Borrower and its Subsidiaries may incur or permit
to exist, unsecured Indebtedness consisting of commercial or stand-by
letters of credit with financial institutions that are not Lenders in a
maximum amount outstanding at any one time of $5,000,000 for the
benefit of any Person that is not an Affiliate of the Borrower;
(i) the Borrower and its Subsidiaries may incur or permit
to exist unsecured Indebtedness consisting of performance bonds,
bankers' acceptances, surety or appeal bonds provided by the Borrower
or any Subsidiary in the ordinary course of its business and which do
not secure other Indebtedness;
(j) any Subsidiary of the Borrower that is a Guarantor may
guaranty the obligations of the Borrower under the Senior Notes;
(k) the Borrower and its Subsidiaries may incur or permit
to exist Indebtedness to 5931, Inc. and 5931 Business Trust consisting
of obligations to make Royalty Payments and other Indebtedness subject
to the provisions of the Subordination Agreement;
(l) the Borrower and its Subsidiaries may incur or permit
to exist Indebtedness with respect to accounts payable and accrued
liabilities incurred in the ordinary course of business, and each of
the Subsidiaries may incur or permit to exist Indebtedness with respect
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to accounts payable to the Borrower related to the Borrower's transfer
of inventory to such Subsidiary and related to invoices representing
obligations incurred and payments required under operating leases paid
by the Borrower on behalf of such Subsidiary, each in the ordinary
course of business;
(m) the Borrower and any Subsidiary may incur or permit to
exist Indebtedness in the form of guaranties by the Borrower or
Subsidiary of the Borrower of (i) Indebtedness of any Subsidiary which
such Subsidiary is permitted to incur pursuant to this Section 9.1,
(ii) Indebtedness of MC up to the Canadian Dollar equivalent of
$5,000,000 as permitted above, (iii) investments permitted by Section
9.3(f), (iv) Indebtedness of any Subsidiary that is a Guarantor, and
(v) Indebtedness of the Borrower and any Subsidiary with respect to
operating lease obligations;
(n) the Borrower may incur or permit to exist Indebtedness
with respect to the Capitalized Leases incurred from time to time for
point-of-sale equipment and store systems, and services and equipment
supporting this equipment and systems, the obligations under which do
not exceed $32,000,000 in the aggregate throughout the term of this
Credit Agreement;
(o) the Borrower and its Subsidiaries may incur or permit
to exist Indebtedness assumed with respect to acquisitions permitted in
accordance with Section 9.6, or consisting of guaranties of such
Indebtedness, so long as such Indebtedness was not created in
anticipation of such acquisition and six months following the closing
date of such acquisition does not exceed, in the aggregate, $5,000,000;
(p) the Borrower and its Subsidiaries may permit to exist
Indebtedness consisting of letters of credit existing as of the Closing
Date aggregating approximately $8,000,000 issued by NationsBank, N.A.
for the account of the Borrower and/or any of its Subsidiaries issued
to any Person;
(q) the Borrower and its Subsidiaries may incur or permit
to exist Indebtedness under deferred compensation plans, employee
separation agreements, employee stock purchase plans and 401(k) plans
of the Borrower and/or its Subsidiaries;
(r) the Borrower may incur or permit to exist Indebtedness
with respect to stock repurchase plans of the Borrower permitted in
accordance with Section 9.4 in an aggregate amount not to exceed
$50,000,000;
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(s) the Borrower and its Subsidiaries may incur or permit
to exist Indebtedness with respect to Derivative Transactions;
(t) in addition to the Indebtedness permitted in
subsections (a)-(s) of this Section 9.1, the Borrower and its
Subsidiaries may incur or permit to exist additional Indebtedness
not to exceed at any one time five percent (5%) of the Consolidated
Tangible Net Worth of the Borrower and its Subsidiaries.
9.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit
any of its Subsidiaries to, (i) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (ii) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (iii) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (iv) suffer to
exist for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; (v) sell, assign, pledge or otherwise
transfer any "receivables" as defined in clause (vii) of the definition of the
term "Indebtedness," (and subject to the exceptions therein) with or without
recourse; PROVIDED HOWEVER, Borrower and its Subsidiaries may create, assume or
permit to exist the following liens:
(a) liens on property acquired directly or indirectly by
the Borrower in accordance with the terms and provisions of Section 9.6
so long as such liens are not securing Indebtedness of the Borrower in
excess of the fair market value of the real property;
(b) liens (other than blanket liens on the Borrower's or
its Subsidiaries' equipment, inventory, accounts or other receivables),
securing Indebtedness of the Borrower and its Subsidiaries not to
exceed five percent (5%) of the Consolidated Tangible Net Worth of the
Borrower and its Subsidiaries;
(c) liens for taxes or assessments either not yet
delinquent or the validity or amount of which is being contested in
good faith by appropriate proceedings diligently prosecuted and as to
which adequate reserves shall have been set aside in conformity with
generally accepted accounting principles;
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(d) deposits or pledges to secure the payment of workers
compensation, unemployment insurance or other social security benefits
or obligations, or to secure the performance of bids, trade contracts,
public or statutory obligations, surety or appeal bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) materialmen's, mechanic's, workmen's, repairmen's, or
other like liens arising in the ordinary course of business or by
operation of law to secure obligations not yet delinquent or which
within thirty (30) days of receipt by the Borrower or any of its
Subsidiaries of any lien filing by a lien claimant are being contested
by the Borrower or such Subsidiary in good faith and for which (a)
adequate reserves shall have been set aside in conformity with
generally accepted accounting principles or (b) as to which adequate
bonds shall have been obtained;
(f) liens securing the Indebtedness permitted under Section
9.1(g), Section 9.1(n) and Section 9.14, provided that in any case:
(i) no such lien shall extend to or cover any other
property or assets of the Borrower or of any Subsidiary, as
the case may be, and
(ii) the aggregate principal amount of the indebtedness
secured by all such liens in respect of any such property or
assets shall not exceed the greater of (A) the fair market
value of such property or assets at the time of such
acquisition, or (B) the good faith allocated purchase price
of such assets;
(g) consensual landlord's liens and landlord's liens
arising by operation of law;
(h) liens in favor of NationsBank, N.A. to collateralize
letters of credit issued by such bank that are outstanding on the date
hereof, and
(i) liens existing on the date hereof and shown on
SCHEDULE 9.2 hereto.
9.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will
not permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except:
(a) Investments in Cash Equivalents;
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(b) Investments in trade receivables incurred in the
ordinary course of business;
(c) Investments in endorsements of negotiable instruments
for collection in the ordinary course of business;
(d) Investments by the Borrower in any Subsidiary that has
executed a Guaranty and Investments by any Subsidiary of the Borrower;
(e) Investments by the Borrower or any Subsidiary in any
Foreign Subsidiary that has executed a Guaranty in an amount not to
exceed in the aggregate at any time $15,000,000;
(f) Investments by the Borrower in Subsidiaries that have
not executed a Guaranty (A) in connection with the transfer of
inventory to such Subsidiary or (B) in connection with invoices
representing obligations incurred, and payments required, under
operating leases, each in the ordinary course of business and paid by
the Borrower to Persons on behalf of such Subsidiaries;
(g) Investments by the Borrower or any Subsidiary in
Subsidiaries of the Borrower existing as of the date hereof at the
levels as of the date hereof;
(h) Investments by the Borrower in Subsidiaries consisting
of loans or Indebtedness to the extent permitted by Section 9.1;
(i) Investments in 5931, Inc. and 5931 Business Trust in
connection with Royalty Payments and payments necessary to cover
administrative costs;
(j) Investments in Subsidiaries acquired or created
pursuant to Section 9.6 or 9.11 in the amounts permitted by such
sections;
(k) Investments pursuant to deferred compensation plans for
former and current directors, officers, consultants and employees; and
(l) any other Investments not otherwise permitted in
Subsections (a)-(k) in this Section 9.3 in an aggregate amount not to
exceed ten percent (10%) of the Consolidated Tangible Net Worth of the
Borrower and its Subsidiaries.
9.4. DISTRIBUTIONS. The Borrower and its Subsidiaries will not make any
Distributions, PROVIDED, HOWEVER, (a) in addition to the Distributions permitted
by clauses (b)-(c) below, the Borrower may declare
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or pay Distributions so long as the aggregate amount of Distributions paid after
the Closing Date do not exceed in the aggregate an amount equal to the sum of
(i) $50,000,000 plus (ii) fifty percent (50%) of Consolidated Net Income of the
Borrower and its Subsidiaries for each complete fiscal year of the Borrower
ending after the Closing Date plus (iii) an amount equal to the aggregate amount
of cash proceeds received by the Borrower after May 3, 1998 in connection with
the exercise of options to acquire the Borrower's stock, (b) Subsidiaries of the
Borrower may make Distributions to the Borrower, and (c) the Borrower and its
Subsidiaries may make Distributions of stock and options to acquire stock
pursuant to the terms of their stock option plans.
9.5. PAYMENTS AND MODIFICATIONS OF SENIOR NOTES AND SUBORDINATED
NOTES. (a) The Borrower will not and will not permit any of its Subsidiaries to
amend, supplement or otherwise modify the terms of the Senior Notes or
Subordinated Debt that would result in (i) an increase in the outstanding
principal amount of the Subordinated Debt or Senior Notes, (ii) an increase in
any principal, interest, fees, or other amounts payable under the Subordinated
Debt, the Subordinated Debt Indenture, the Senior Notes Indenture or the Senior
Notes, (iii) a change in any date fixed for any payment of principal, interest,
fees, or other amounts payable under the Subordinated Debt, the Subordinated
Debt Indenture, the Senior Notes Indenture or the Senior Notes (including,
without limitation, as a result of any redemption, defeasance or otherwise),
(iv) a change in any percentage of holders of the Subordinated Debt under (A)
the Subordinated Debt Indenture and the securities issued pursuant thereto or
(B) the Senior Notes Indenture or the Senior Notes, in each case required under
the terms of such documents to take (or refrain from taking) any action, (v) a
change that grants or permits the granting of any security interest or Lien on
any asset or property of the Borrower or any Subsidiary to secure the
Subordinated Debt or the Senior Notes or (vi) it being more difficult for the
Borrower to comply with the covenants contained in such document and (b) the
Borrower will not, and will not permit any of its Subsidiaries to, make any
prepayment, redemption or repurchase of any of the Senior Notes or Subordinated
Debt; PROVIDED, HOWEVER, that prior to the occurrence of a Default or Event of
Default:
(x) Borrower may make a prepayment on the Senior Notes that
is permitted or required under the terms of the Senior Notes and the
Senior Notes Indenture, but only to the extent that (i) Borrower has
received net proceeds of one or more equity offerings from the issuance
date of the Senior Notes (which such prepayment may not be in excess of
the amount of net proceeds received from equity offerings, and, in the
aggregate over the term of this Credit Agreement, such
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prepayments may not exceed $25,000,000), or (ii) the prepayment is made
out of proceeds Borrower has received from an asset sale and Borrower
has used such proceeds in accordance with the terms of the Senior Note
Indenture (which such prepayment may reduce the outstanding Senior
Notes in an amount not in excess of the amount of the proceeds
received);
(y) Borrower may purchase Senior Notes in the open market
from time to time, so long as, in the aggregate over the term of this
Credit Agreement, the purchase price for such Senior Notes may not
exceed $25,000,000 and such purchase price reduces the permitted
prepayment from equity proceeds permitted pursuant to subsection (ii)
above Dollar for Dollar; and
(z) Borrower may redeem and/or repurchase the Subordinated
Notes, so long as the amounts paid by the Borrower to redeem and/or
repurchase the Subordinated Notes plus any other permitted
Distributions made by the Borrower does not exceed the amount of
Distributions permitted under Section 9.4.
9.6. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
9.6.1. MERGERS AND ACQUISITIONS. The Borrower will not, and
will not permit any of its Subsidiaries to, become a party to any
merger or consolidation, or agree to or effect any asset acquisition or
stock acquisition (other than the acquisition of assets in the ordinary
course of business consistent with past practices); other than
(a) the merger or consolidation of one or more of the
Subsidiaries of the Borrower;
(b) the acquisition (whether of stock or assets or by
means of a merger) of any other Person, PROVIDED that
(i) immediately after such acquisition, and after
giving effect thereto on a PRO FORMA basis, no Default
or Event of Default shall then exist;
(ii) if required by applicable law, the board of
directors and the shareholders or the equivalent, of
such other Person has approved such acquisition;
(iii) such other Person is in, or immediately
after such acquisition is converted into, the same or
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substantially similar line of business of the Borrower
and its Subsidiaries;
(iv) in connection with any such acquisition, the
aggregate consideration (including assumption of
Indebtedness) paid in connection with such acquisition
shall not exceed an amount equal to ten percent (10%)
of the Consolidated Tangible Net Worth of the Borrower
and its Subsidiaries, determined immediately prior to
such acquisition; and
(v) if the Borrower and such other Person merge
and the Borrower is the surviving entity.
9.6.2. DISPOSITION OF ASSETS. The Borrower will not, and will
not permit any of its Subsidiaries to, become a party to or agree to or
effect any disposition of assets, other than:
(a) the disposition of assets in the ordinary course
of business;
(b) disposition of obsolete equipment; and
(c) sale-leaseback transactions and other dispositions
of assets that do not have a materially adverse effect on the
business, assets or financial condition of the Borrower and
its Subsidiaries taken as a whole, PROVIDED that (i) the
aggregate net book value of the assets to be sold after the
Closing Date does not, at any time, exceed fifteen percent
(15%) of the Consolidated Total Assets of the Borrower and
its Subsidiaries, in each case determined as of the date of
the disposition of such assets and (ii) such assets are sold
in an arm's length transaction for fair market value (after
giving effect to all tax benefits, if any, associated with
such sale).
9.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. Other than in compliance
with Environmental Laws, the Borrower will not, and will not permit any of its
Subsidiaries to, (i) use any of the Real Estate or any portion thereof for the
handling, processing, storage or disposal of Hazardous Substances, (ii) cause or
permit to be located on any of the Real Estate any underground tank or other
underground storage receptacle for Hazardous Substances, (iii) generate any
Hazardous Substances on any of the Real Estate, or (iv) conduct any activity at
any Real Estate or use any Real Estate in any manner so as to cause a release
(i.e. releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting,
<PAGE>
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escaping, leaching, disposing or dumping) or threatened release of Hazardous
Substances on, upon or into the Real Estate, and the Borrower will not, and will
not permit any of its Subsidiaries to, otherwise conduct any activity at any
Real Estate or use any Real Estate in any manner that would violate any
Environmental Law or bring such Real Estate in violation of any Environmental
Law.
9.8. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
Affiliate will
(a) engage in any "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Code which could result
in a material liability for the Borrower or any of its Subsidiaries,
which is not covered by a prohibition transaction exemption granted by
the Department of Labor; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in Section
302 of ERISA in an amount which would reasonably be expected to have a
material adverse effect on the business, assets or financial condition
of the Borrower and its Subsidiaries taken as a whole, whether or not
such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Borrower or any of its Subsidiaries pursuant to Section
302(f) or Section 4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances
requiring the posting of security pursuant to Section 307 of ERISA or
Section 401(a)(29) of the Code; or
(e) permit or take any action which would result in the
aggregate benefit liabilities (within the meaning of Section 4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess
of benefit liabilities, by an amount in excess of $5,000,000.
9.9. BUSINESS ACTIVITIES. The Borrower will not, and will not
permit any of its Subsidiaries to, engage directly or indirectly (whether
through Subsidiaries or otherwise) in any type of business other than the
businesses conducted by them on the Closing Date and in related businesses.
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9.10. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit any of its Subsidiaries to, engage in any transaction with any Affiliate
(other than the Borrower or any other Subsidiary of the Borrower, and other than
for services as employees, officers and directors, for Royalty Payments or loans
to the Borrower from the recipient of such Royalty Payments and for transactions
with officers and directors of the Borrower or any Subsidiary in their capacity
as such or in their capacity as a consultant, including, without limitation,
salary, bonuses, stock options, fees and other forms of compensation), including
any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such Affiliate, except (a) to the
extent that all such transactions do not exceed an amount equal to $5,000,000
per annum or (b) on terms no less favorable to the Borrower or such Subsidiary
than would have been obtainable on an arm's-length basis with a third party.
9.11. CREATION AND MAINTENANCE OF SUBSIDIARIES. The Borrower will not,
and will not permit any of its Subsidiaries to create or acquire, in any manner
whatsoever, any new Subsidiaries; PROVIDED, HOWEVER, the Borrower and its
Subsidiaries may create or acquire Subsidiaries, so long as:
(i) there exists no Default or Event of Default and immediately
after such creation, giving effect thereto on a PRO FORMA basis, no
Default or Event of Default shall then exist;
(ii) each new Subsidiary which is an "unrestricted subsidiary"
(as such term is defined in the Senior Note Indenture) shall execute a
Guaranty of the Obligations hereunder;
(iii) the Borrower and each new United States Subsidiary shall
execute and deliver such certificates, agreements and documents as
Agent or Banks may reasonably require; and
(iv) no United States Subsidiary shall issue any new stock of any
classification without Majority Banks' prior written consent, except
issuance to the Borrower or any other Subsidiary.
9.12. DERIVATIVE TRANSACTIONS. The Borrower will not, and will not
permit any of its Subsidiaries to, incur or permit to exist any Derivative
Transactions, other than Derivative Transactions incurred in the ordinary
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course of business, PROVIDED, HOWEVER, such Derivative Transactions do not
increase the Indebtedness of the Borrower outstanding at any time (net of assets
received) other than as a result of fluctuations in foreign currency exchange
rates or interest rates or by reason of fees, indemnities and compensation
payable thereunder.
9.13. SALES OF ACCOUNTS. The Borrower will not, and will not permit any
of its Subsidiaries to, enter into any securitization facilities involving any
(a) accounts or general intangibles for money due or to become due, (b) chattel
paper, instruments or documents creating or evidencing a right to payment of
money or (c) other receivables.
9.14. SYNTHETIC LEASES. The Borrower will not, and will not permit any
of its Subsidiaries to, incur or permit to exist any Synthetic Lease obligations
which exceed $50,000,000 in the aggregate, at any time.
10. FINANCIAL COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letters of Credit:
10.1. FUNDED DEBT TO TOTAL CAPITAL. The Borrower will not permit the
ratio of Consolidated Funded Debt to Total Capital at any time to be greater
than 45%.
10.2. MINIMUM FIXED CHARGE COVERAGE RATIO. The Borrower will not permit
as of the end of any fiscal quarter the Fixed Charge Coverage Ratio to be less
than 1.50 to 1.00.
10.3. INVENTORY TURN RATIO. If as of the end of any fiscal quarter the
Fixed Charge Coverage Ratio is less than or equal to 1.60 to 1.00 the Borrower
will not permit the Inventory Turn Ratio to be less than 1.60 to 1.00 as of the
end of such fiscal quarter.
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10.4. CAPITAL EXPENDITURES. The Borrower will not make, or permit any
Subsidiary of the Borrower to make, Capital Expenditures in any fiscal year set
forth in the table below that exceed, in the aggregate, the amount set forth
opposite such fiscal year in such table:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
------------ ------
<S> <C>
1998 $70,000,000
1999 $80,000,000
2000 $95,000,000
2001 $120,000,000
</TABLE>
PROVIDED, HOWEVER, that, if during any fiscal year the amount of Capital
Expenditures permitted for that fiscal year in the table above is not so
utilized, twenty five percent (25%) of such unutilized amount may be utilized in
the next succeeding fiscal year but not in any subsequent fiscal year.
Notwithstanding the foregoing, the Borrower may make additional Capital
Expenditures in connection with the replacement of the Lexington, Kentucky
distribution center in an amount not to exceed $35,000,000.
11. CLOSING CONDITIONS.
The obligations of the Banks to make the initial Loans and of the Agent to
issue any initial Letters of Credit shall be subject to the satisfaction of the
following conditions precedent on or prior to the Closing Date:
11.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
executed and delivered to the Agent by the Borrower, shall be in full force and
effect and shall be in form and substance satisfactory to each of the Banks.
11.2. CERTIFIED COPIES OF CHARTER AND DEBT DOCUMENTS. The Agent shall
have received from the Borrower a copy, certified by a duly authorized officer
of the Borrower to be true and complete on the Closing Date, in form and
substance satisfactory to the Agent of each of (i) its charter or other
incorporation documents as in effect on such date of certification, (ii) its
by-laws as in effect on such date, (iii) the Senior Notes and Senior Note
Indenture, (iv) the Subordinated Notes and the Subordinated Note Indenture and
(v) the documents relating to the Royalty Payments.
11.3. CORPORATE ACTION. All corporate action necessary for the valid
execution, delivery and performance by the Borrower of this Credit Agreement and
the other Loan Documents shall have been duly taken, and
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evidence thereof satisfactory to the Agent shall have been provided to the
Agent.
11.4. INCUMBENCY CERTIFICATE. The Agent shall have received from the
Borrower an incumbency certificate, dated as of the Closing Date, signed by a
duly authorized officer of the Borrower, and giving the name and bearing a
specimen signature of each individual who shall be authorized: (i) to sign, in
the name and on behalf of the Borrower, the Loan Documents to make Loan Requests
and Conversion Requests and to apply for Letters of Credit and (ii) to give
notices and to take other action on its behalf under the Loan Documents.
11.5. OPINION OF COUNSEL. The Agent shall have received a favorable
legal opinion addressed to the Banks and the Agent, dated as of the Closing
Date, in form and substance reasonably satisfactory to the Agent, from Jones Day
Reavis & Pogue, counsel to the Borrower.
11.6. PAYMENT OF FEES. The Borrower shall have paid to the Banks or the
Agent, as appropriate, the fees described in the Fee Letters pursuant to
Sections 5.1 and 5.1.2.
11.7. PAYOFF LETTER. The Agent shall have received a payoff letter from
NationsBank, N.A., indicating the amount of the loan but not the letter of
credit obligations of the Borrower to NationsBank, N.A. to be discharged on the
Closing Date and an acknowledgment by NationsBank, N.A. that the existing Credit
Facility with NationsBank, N.A. has been terminated with respect to loans, but
not letters of credit thereunder upon receipt of such funds.
11.8. ABI GUARANTY. ABI shall have executed and delivered to the Agent
for the benefit of the Banks its guaranty of the obligations of the Borrower
hereunder; PROVIDED, HOWEVER, in the event of a sale of all or substantially all
of the assets of ABI or distribution of all or substantially all of the stock of
ABI permitted under Section 9.4 or Section 9.6, the Agent and the Banks hereby
agree to release and discharge such guaranty of ABI.
12. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan, and of the Issuing Bank to
issue, extend or renew any Letter of Credit, in each case whether on or after
the Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of the Borrower and its Subsidiaries
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contained in this Credit Agreement, the other Loan Documents or in any document
or instrument delivered pursuant to or in connection with this Credit Agreement
shall be true and correct in all material respects as of the date as of which
they were made and shall also be true and correct in all material respects at
and as of the time of the making of such Loan or the issuance, extension or
renewal of such Letter of Credit, with the same effect as if made at and as of
that time (except to the extent of changes resulting from transactions
contemplated or permitted by this Credit Agreement and the other Loan Documents
and changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing.
12.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Issuing Bank would make it illegal for the Issuing
Bank to issue, extend or renew such Letter of Credit.
12.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
statements from the Borrower in substance and form reasonably satisfactory to
such Bank as such Bank shall require from the Borrower for the purpose of
compliance with any applicable regulations of the Comptroller of the Currency or
the Board of Governors of the Federal Reserve System.
12.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be reasonably satisfactory in
substance and in form to the Agent and the Agent's Special Counsel, the Agent
and such counsel shall have received all such counterpart originals or certified
or other copies of such documents as the Agent may reasonably request.
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
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(a) the Borrower shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment;
(b) the Borrower or any of its Subsidiaries shall fail to pay any
interest on the Loans, the commitment fee, any Letter of Credit Fee, the
Agent's fee, or other sums due hereunder or under any of the other Loan
Documents, within five (5) days following receipt of written notice from
the Agent, on which date the same shall become due and payable, whether at
the stated date of maturity or any accelerated date of maturity or at any
other date fixed for payment;
(c) the Borrower shall fail to comply with any of its covenants
contained in Section 9 or Section 10;
(d) the Borrower or any of its Subsidiaries shall fail to perform any
term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified elsewhere in this Section 13.1) for
fifteen (15) days after written notice of such failure has been given to
the Borrower by the Agent;
(e) any representation or warranty of the Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan Documents or
in any other document or instrument delivered pursuant to or in connection
with this Credit Agreement shall prove to have been false in any material
respect upon the date when made or deemed to have been made or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligation for
borrowed money or credit received or in respect of any Capitalized Leases,
which obligations exceed $5,000,000 in the aggregate, or fail to observe or
perform in any material respect any material term, covenant or agreement
contained in any agreement by which it is bound, evidencing or securing
borrowed money or credit received or in respect of any Capitalized Leases,
which exceed $5,000,000 in the aggregate, for such period of time as would
permit (assuming the giving of appropriate notice if required) the holder
or holders thereof or of any obligations issued thereunder to accelerate
the maturity thereof;
(g) the Borrower or any of its Subsidiaries shall make an assignment
for the benefit of creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or
<PAGE>
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become due, or shall petition or apply for the appointment of a trustee or
other custodian, liquidator or receiver of the Borrower or any of its
Subsidiaries or of any substantial part of the assets of the Borrower or
any of its Subsidiaries or shall commence any case or other proceeding
relating to the Borrower or any of its Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in furtherance of any of
the foregoing, or if any such petition or application shall be filed or any
such case or other proceeding shall be commenced against the Borrower or
any of its Subsidiaries and the Borrower or any of its Subsidiaries shall
indicate its approval thereof, consent thereto or acquiescence therein or
such petition or application shall not have been dismissed within sixty
(60) days following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any of
its Subsidiaries bankrupt or insolvent, or approving a petition in any such
case or other proceeding, or a decree or order for relief is entered in
respect of the Borrower or any Subsidiary of the Borrower in an involuntary
case under federal bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than sixty days, whether or not consecutive, any final
judgment against the Borrower or any of its Subsidiaries that, with other
outstanding final judgments, undischarged, against the Borrower or any of
its Subsidiaries exceeds in the aggregate $5,000,000;
(j) if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded, in each case otherwise than in accordance with the
terms thereof or with the express prior written agreement, consent or
approval of the Banks, or any action at law, suit or in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of the Borrower or any of its
Subsidiaries party thereto or any of their respective stockholders, or any
court or any other governmental or regulatory authority or agency of
competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of
the Loan Documents is illegal, invalid or unenforceable in accordance with
the terms thereof;
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(k) the Borrower or any ERISA Affiliate incurs any liability in
connection with a termination of a Guaranteed Pension Plan to the PBGC or a
Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate
amount exceeding $5,000,000, or the Borrower or any ERISA Affiliate is
assessed withdrawal liability pursuant to Title IV of ERISA by a
Multiemployer Plan requiring aggregate annual payments exceeding
$5,000,000, or any of the following occurs with respect to a Guaranteed
Pension Plan: (i) an ERISA Reportable Event, or a failure to make a
required installment or other payment (within the meaning of Section
302(f)(1) of ERISA), PROVIDED that the Agent determines in its reasonable
discretion that such event (A) could reasonably be expected to result in
liability of the Borrower or any of its Subsidiaries to the PBGC or such
Guaranteed Pension Plan in an aggregate amount exceeding $5,000,000 and (B)
would present a material risk for the termination of such Guaranteed
Pension Plan by the PBGC, for the appointment by the appropriate United
States District Court of a trustee to administer such Guaranteed Pension
Plan or for the imposition of a lien in favor of such Guaranteed Pension
Plan; or (ii) the appointment by a United States District Court of a
trustee to administer such Guaranteed Pension Plan; or (iii) the
institution by the PBGC of proceedings to terminate such Guaranteed Pension
Plan and such proceedings have not been dismissed within sixty (60) days
following the date of such institution;
(l) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of
its business and such order shall continue in effect for more than thirty
(30) days;
(m) there shall occur any material damage to, or loss, theft or
destruction of, any assets of the Borrower or its Subsidiaries, whether or
not insured, or any strike, lockout, labor dispute, embargo, condemnation,
act of God or public enemy, or other casualty, which in any such case
causes, for more than thirty (30) consecutive days, the cessation or
substantial curtailment of revenue producing activities at any facility of
the Borrower or any of its Subsidiaries if such event or circumstance is
not covered by business interruption insurance and would have a material
adverse effect on the business or financial condition of the Borrower and
its Subsidiaries taken as a whole;
(n) there shall occur any Change in Control of the Borrower;
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then, and in any such event, so long as the same may be continuing, the
Agent may, and upon the request of the Majority Banks shall, by notice in
writing to the Borrower declare all amounts owing with respect to this
Credit Agreement, the Notes and the other Loan Documents and all
Reimbursement Obligations to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the
Borrower; PROVIDED that in the event of any Event of Default specified in
Sections 13.1(g), 13.1(h) or 13.1(j), all such amounts shall become
immediately due and payable automatically and without any requirement of
notice from the Agent or any Bank.
13.2. TERMINATION OF COMMITMENTS. If any one or more of the Events
of Default specified in Section 13.1(g) or Section 13.1(h) shall occur, any
unused portion of the Total Commitment shall automatically terminate and
each of the Banks shall be relieved of all further obligations to make
Loans to the Borrower and the Issuing Bank shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. If any other Event
of Default shall have occurred and be continuing, the Agent may and, upon
the request of the Majority Banks, shall, by notice to the Borrower,
terminate the unused portion of the Total Commitment, and upon such notice
being given such unused portion of the Total Commitment hereunder shall
terminate immediately and each of the Banks shall be relieved of all
further obligations to make Loans and the Issuing Bank shall be relieved of
all further obligations to issue, extend or renew Letters of Credit. No
termination of the Total Commitment shall relieve the Borrower or any of
its Subsidiaries of any of its existing Obligations.
13.3. REMEDIES. In case any one or more of the Events of Default
shall have occurred and be continuing, and whether or not the Banks shall
have accelerated the maturity of the Loans pursuant to Section 13.1, each
Bank, if owed any amount with respect to the Loans or the Reimbursement
Obligations, may, with the consent of the Majority Banks but not otherwise,
proceed to protect and enforce its rights by suit in equity, action at law
or other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Credit Agreement and the other
Loan Documents or any instrument pursuant to which the Obligations to such
Bank are evidenced, including as permitted by applicable law the obtaining
of the EX PARTE appointment of a receiver, and, if such amount shall have
become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of such Bank. No remedy
herein conferred upon any Bank or the Agent or the holder of any Note or
purchaser of any Letter of Credit Participation is intended to be exclusive
of any other remedy and each and every remedy shall be
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cumulative and shall be in addition to every other remedy given hereunder
or now or hereafter existing at law or in equity or by statute or any other
provision of law.
14. SETOFF.
During the continuance of any Event of Default, any deposits or other
sums credited by or due from any of the Banks to the Borrower and any
securities or other property of the Borrower (but excluding accounts held
in custody by any Bank in the investment group of such Bank for investment
services provided to the Borrower) in the possession of such Bank may be
applied to or set off by such Bank against the payment of Obligations and
any and all other liabilities, direct, or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising, of the Borrower to
such Bank. Each of the Banks agrees with each other Bank that (i) if an
amount to be set off is to be applied to Indebtedness of the Borrower to
such Bank, other than Indebtedness evidenced by the Notes held by such Bank
or constituting such Reimbursement Obligations owed to such Bank, such
amount shall be applied ratably to such other Indebtedness and to the
Indebtedness evidenced by all such Notes held by such Bank or constituting
Reimbursement Obligations owed to such Bank, and (ii) if such Bank shall
receive from the Borrower, whether by voluntary payment, exercise of the
right of setoff, counterclaim, cross action, enforcement of the claim
evidenced by the Notes held by, or constituting Reimbursement Obligations
owed to, such Bank by proceedings against the Borrower at law or in equity
or by proof thereof in bankruptcy, reorganization, liquidation,
receivership or similar proceedings, or otherwise, and shall retain and
apply to the payment of the Note or Notes held by, or Reimbursement
Obligations owed to, such Bank any amount in excess of its ratable portion
of the payments received by all of the Banks with respect to the Notes held
by, and Reimbursement Obligations owed to, all of the Banks, such Bank will
make such disposition and arrangements with the other Banks with respect to
such excess, either by way of distribution, PRO TANTO assignment of claims,
subrogation or otherwise as shall result in each Bank receiving in respect
of the Notes held by it or Reimbursement obligations owed it, its
proportionate payment as contemplated by this Credit Agreement; PROVIDED
that if all or any part of such excess payment is thereafter recovered from
such Bank, such disposition and arrangements shall be rescinded and the
amount restored to the extent of such recovery, but without interest.
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15. THE AGENT.
15.1. AUTHORIZATION.
(a) The Agent is authorized to take such action on behalf of each of
the Banks and to exercise all such powers as are hereunder and under any
of the other Loan Documents and any related documents delegated to the
Agent, together with such powers as are reasonably incident thereto,
PROVIDED that no duties or responsibilities not expressly assumed herein
or therein shall be implied to have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that
of an independent contractor. The use of the term "Agent" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between the Agent and each of the
Banks. Nothing contained in this Credit Agreement nor the other Loan
Documents shall be construed to create an agency, trust or other fiduciary
relationship between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, the Agent is nevertheless a
"representative" of the Banks, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the
Banks and the Agent with respect to any collateral security and guaranties
contemplated by the Loan Documents.
15.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Credit Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of any
such Persons shall be paid by the Borrower.
15.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that
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the Agent or such other Person, as the case may be, may be liable for losses due
to its willful misconduct or gross negligence.
15.4. NO REPRESENTATIONS.
15.4.1. GENERAL. The Agent shall not be responsible for the execution
or validity or enforceability of this Credit Agreement, the Notes, the
Letters of Credit, any of the other Loan Documents or any instrument at any
time constituting, or intended to constitute, collateral security for the
Notes, or for the value of any such collateral security or for the
validity, enforceability or collectability of any such amounts owing with
respect to the Notes, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or instrument hereafter furnished to it by or on behalf of the
Borrower or any of its Subsidiaries, or be bound to ascertain or inquire as
to the performance or observance of any of the terms, conditions, covenants
or agreements herein or in any instrument at any time constituting, or
intended to constitute, collateral security for the Notes or to inspect any
of the properties, books or records of the Borrower or any of its
Subsidiaries. The Agent shall not be bound to ascertain whether any
notice, consent, waiver or request delivered to it by the Borrower or any
holder of any of the Notes shall have been duly authorized or is true,
accurate and complete. The Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Banks, with respect to the credit worthiness or financial
conditions of the Borrower or any of its Subsidiaries. Each Bank
acknowledges that it has, independently and without reliance upon the Agent
or any other Bank, and based upon such information and documents as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Credit Agreement.
15.4.2. CLOSING DOCUMENTATION, ETC. For purposes of determining
compliance with the conditions set forth in Section 11, each Bank that has
executed this Credit Agreement shall be deemed to have consented to,
approved or accepted, or to be satisfied with, each document and matter
either sent, or made available, by the Agent or the Arranger to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder
to be to be consent to or approved by or acceptable or satisfactory to such
Bank, unless an officer of the Agent or the Arranger active upon the
Borrower's account shall have received notice from such Bank prior to the
Closing Date specifying such Bank's objection thereto and such objection
shall not have been
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withdrawn by notice to the Agent or the Arranger to such effect on or prior
to the Closing Date.
15.5. PAYMENTS.
15.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the Agent
hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's PRO RATA share of payments received
by the Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.
15.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder,
under the Notes or under any of the other Loan Documents might involve it
in liability, it may refrain from making distribution until its right to
make distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person
to whom any such distribution shall have been made shall either repay to
the Agent its proportionate share of the amount so adjudged to be repaid or
shall pay over the same in such manner and to such Persons as shall be
determined by such court.
15.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary
contained in this Credit Agreement or any of the other Loan Documents, any
Bank that fails (i) to make available to the Agent its PRO RATA share of
any Loan or to purchase any Letter of Credit Participation or (ii) to
comply with the provisions of Section 14 with respect to making
dispositions and arrangements with the other Banks, where such Bank's share
of any payment received, whether by setoff or otherwise, is in excess of
its PRO RATA share of such payments due and payable to all of the Banks, in
each case as, when and to the full extent required by the provisions of
this Credit Agreement, shall be deemed delinquent (a "Delinquent Bank")
and shall be deemed a Delinquent Bank until such time as such delinquency
is satisfied. A Delinquent Bank shall be deemed to have assigned any and
all payments due to it from the Borrower, whether on account of outstanding
Loans, Unpaid Reimbursement Obligations, interest, fees or otherwise, to
the remaining nondelinquent Banks for application to, and reduction of,
their respective PRO RATA shares of all outstanding Loans and Unpaid
Reimbursement Obligations. The Delinquent Bank hereby authorizes the Agent
to distribute such
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payments to the nondelinquent Banks in proportion to their respective PRO
RATA shares of all outstanding Loans and Unpaid Reimbursement Obligations.
A Delinquent Bank shall be deemed to have satisfied in full a delinquency
when and if, as a result of application of the assigned payments to all
outstanding Loans and Unpaid Reimbursement Obligations of the nondelinquent
Banks, the Banks' respective PRO RATA shares of all outstanding Loans and
Unpaid Reimbursement Obligations have returned to those in effect
immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
15.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any
Note or the purchaser of any Letter of Credit Participation as the absolute
owner or purchaser thereof for all purposes hereof until it shall have been
furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.
15.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent or such affiliate has not
been reimbursed by the Borrower as required by Section 16), and liabilities of
every nature and character arising out of or related to this Credit Agreement,
the Notes, or any of the other Loan Documents or the transactions contemplated
or evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence.
15.8. AGENT AS BANK. In its individual capacity, BKB shall have the
same obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes and
as the purchaser of any Letter of Credit Participations, as it would have were
it not also the Agent.
15.9. RESIGNATION. The Agent may resign at any time by giving sixty
(60) days prior written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Majority Banks shall have the right to appoint a successor
Agent from among the Banks. Unless a Default or Event of Default shall have
occurred and be continuing, such successor Agent shall be reasonably acceptable
to the Borrower. If no successor Agent shall have been so appointed by the
Majority Banks and shall have accepted such appointment within thirty (30) days
after the retiring Agent's giving of notice of resignation, then the retiring
Agent may, on behalf of the Banks,
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appoint a successor Agent, which shall be any Bank or a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's
Corporation. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement and the other Loan Documents 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 Agent.
15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this Section 15.10 it shall promptly notify the
other Banks of the existence of such Default or Event of Default.
16. EXPENSES AND INDEMNIFICATION.
16.1. EXPENSES. The Borrower agrees to pay (i) the reasonable costs of
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (ii) any taxes (including
any interest and penalties in respect thereto) payable by the Agent or any of
the Banks (other than taxes based upon the Agent's or any Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement (the
Borrower hereby agreeing to indemnify the Agent and each Bank with respect
thereto), (iii) the reasonable fees, expenses and disbursements of the Agent's
Special Counsel incurred in connection with the preparation, syndication,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, each closing hereunder, any amendments, modifications,
approvals, consents or waivers hereto or hereunder, or the cancellation of any
Loan Document upon payment in full in cash of all of the Obligations or pursuant
to any terms of such Loan Document for providing for such cancellation, (iv) the
reasonable fees, expenses and disbursements of the Agent or any of its
affiliates incurred by the Agent or such affiliate in connection with the
preparation, syndication, administration or interpretation of the Loan Documents
and other instruments mentioned herein, (v) all reasonable out-of-pocket
expenses (including without limitation reasonable attorneys' fees and costs,
which attorneys may be employees of any Bank or the Agent, and reasonable
consulting, accounting, appraisal investment banking and similar professional
fees and charges) incurred by any Bank or the Agent in connection with (A) the
enforcement of or preservation of rights under any
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of the Loan Documents against the Borrower or any of its Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default and
(B) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Bank's or the Agent's relationship with the
Borrower or any of its Subsidiaries and (vii) all reasonable fees, expenses and
disbursements of the Agent incurred in connection with UCC searches.
16.2. INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Agent, its affiliates and the Banks from and against any and all
claims, actions and suits whether groundless or otherwise, and from and against
any and all liabilities, losses, damages and expenses of every nature and
character arising out of this Credit Agreement or any of the other Loan
Documents or the transactions contemplated hereby including, without limitation,
(i) any actual or proposed use by the Borrower or any of its Subsidiaries of the
proceeds of any of the Loans or Letters of Credit, (ii) the Borrower or any of
its Subsidiaries entering into or performing this Credit Agreement or any of the
other Loan Documents, or (iii) with respect to the Borrower and its Subsidiaries
and their respective properties and assets, the violation of any Environmental
Law, the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threatened release of any Hazardous Substances or any
action, suit, proceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding except to the extent that such
claims, actions, suits, liabilities, losses or damages arise solely as a result
of the Agent or any Bank's gross negligence or willful misconduct. In
litigation, or the preparation therefor, the Banks and the Agent and its
affiliates shall be entitled to select their own counsel and, in addition to the
foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and
expenses of such counsel. If, and to the extent that the obligations of the
Borrower under this Section 16.2 are unenforceable for any reason, the Borrower
hereby agrees to make the maximum contribution to the payment in satisfaction of
such obligations which is permissible under applicable law.
16.3. SURVIVAL. The covenants contained in this Section 16 shall
survive payment or satisfaction in full of all other Obligations.
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17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
17.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. The Borrower
acknowledges that from time to time financial advisory, investment banking and
other services may be offered or provided to the Borrower or one or more of its
Subsidiaries, in connection with this Credit Agreement or otherwise, by a
Section 20 Subsidiary. The Borrower, for itself and each of its Subsidiaries,
hereby authorizes (a) such Section 20 Subsidiary to share with the Agent and
each Bank any information delivered to such Section 20 Subsidiary by the
Borrower or any of its Subsidiaries, and (b) the Agent and each Bank to share
with such Section 20 Subsidiary any information delivered to the Agent or such
Bank by the Borrower or any of its Subsidiaries pursuant to this Credit
Agreement, or in connection with the decision of such Bank to enter into this
Credit Agreement; it being understood, in each case, that any such Section 20
Subsidiary receiving such information shall be bound by the confidentiality
provisions of this Credit Agreement. Such authorization shall survive the
payment and satisfaction in full of all of Obligations.
17.2. CONFIDENTIALITY. Each of the Banks and the Agent agrees, on
behalf of itself and each of its affiliates, directors, officers, employees and
representatives, including any Section 20 Subsidiary, to use reasonable
precautions to keep confidential, in accordance with their customary procedures
for handling confidential information of the same nature and in accordance with
safe and sound banking practices, any non-public information supplied to it by
the Borrower or any of its Subsidiaries pursuant to this Credit Agreement or by
any Section 20 Subsidiary, PROVIDED that nothing herein shall limit the
disclosure of any such information (a) after such information shall have become
public other than through a violation of this Section 17, (b) to the extent
required by statute, rule, regulation or judicial process, (c) to counsel for
any of the Banks or the Agent, (d) to bank examiners or any other regulatory
authority having jurisdiction over any Bank, the Agent, Section 20 Subsidiary or
to auditors or accountants, (e) to the Agent, any Bank or any Section 20
Subsidiary, (f) in connection with any litigation to which any one or more of
the Banks, the Agent or any Section 20 Subsidiary is a party, or in connection
with the enforcement of rights or remedies hereunder or under any other Loan
Document, (g) to a Section 20 Subsidiary of such Bank as provided in Section
17.1 or (h) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant agrees to be bound by the
provisions of Section 19.6.
17.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable
law or court order, each of the Banks and the Agent shall, prior
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to disclosure thereof, notify the Borrower of any request for disclosure of any
such non-public information by any governmental agency or representative thereof
(other than any such request in connection with an examination of the financial
condition of such Bank by such governmental agency) or pursuant to legal
process.
17.4. OTHER. In no event shall any Bank or the Agent be obligated or
required to return any materials furnished to it or any Section 20 Subsidiary by
the Borrower or any of its Subsidiaries. The obligations of each Bank under this
Section 17 shall supersede and replace the obligations of such Bank under any
confidentiality letter in respect of this financing signed and delivered by such
Bank to the Borrower prior to the date hereof and shall be binding upon any
assignee of, or purchaser of any participation in; any interest in any of the
Loans or Reimbursement Obligations from any Bank.
18. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries
pursuant hereto shall be deemed to have been relied upon by the Banks and the
Agent, notwithstanding any investigation heretofore or hereafter made by any of
them, and shall survive the making by the Banks of any of the Loans and the
issuance, extension or renewal of any Letters of Credit, as herein contemplated,
and shall continue in full force and effect so long as any Letter of Credit or
any amount due under this Credit Agreement or the Notes or any of the other Loan
Documents remains outstanding or any Bank has any obligation to make any Loans
or the Agent has any obligation to issue, extend or renew any Letter of Credit,
and for such further time as may be otherwise expressly specified in this Credit
Agreement. All statements contained in any certificate or other paper delivered
to any Bank or the Agent at any time by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the
Borrower or such Subsidiary hereunder.
19. ASSIGNMENT AND PARTICIPATION.
19.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein,
each Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it, the Notes held by it and its participating
interest in the risk relating to any Letters of Credit);
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PROVIDED that (i) each of the Agent and, unless a Default or Event of Default
shall have occurred and be continuing, the Borrower shall have given its prior
written consent to such assignment, which consent, in the case of each of the
Agent and the Borrower, will not be unreasonably withheld, (ii) each such
assignment shall be of a constant, and not a varying, percentage of all the
assigning Bank's rights and obligations under this Credit Agreement, (iii) each
assignment shall be in an amount that is a whole multiple of $500,000 and in an
amount not less than $5,000,000 or 100% of such assigning Bank's remaining
Commitment, and (iv) the parties to such assignment shall execute and deliver to
the Agent, for recording in the Register (as hereinafter defined), an Assignment
and Acceptance, substantially in the form of EXHIBIT G hereto (an "Assignment
and Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank
hereunder, and (ii) the assigning Bank shall, to the extent provided in such
assignment and upon payment to the Agent of the registration fee referred to
in Section 19.3, be released from its obligations under this Credit Agreement.
19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS.
By executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other
parties hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto,
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations, or the performance or
observance by the Borrower and its Subsidiaries or
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any other Person primarily or secondarily liable in respect of any of the
Obligations of any of their obligations under this Credit Agreement or any
of the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
referred to in Section 7.4 and Section 8.4 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Credit
Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Credit
Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements with the
assigning Bank satisfactory to such assignee with respect to its PRO RATA
share of Letter of Credit Fees in respect of outstanding Letters of Credit.
19.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Loans owing to and Letter of Credit
Participations purchased by, the Banks from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Agent and the Banks may treat each Person
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whose name is recorded in the Register as a Bank hereunder for all purposes of
this Credit Agreement. The Register shall be available for inspection by the
Borrower and the Banks at any reasonable time and from time to time upon
reasonable prior notice. Upon each such recordation, the assigning Bank agrees
to pay to the Agent a registration fee in the sum of $3,500.
19.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
such assignment, the Agent shall (i) record the information contained therein in
the Register, and (ii) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Bank in an amount equal to the amount retained by it
hereunder. Such new Notes shall provide that they are replacements for the
surrendered Notes, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Notes, shall be dated the
effective date of such in Assignment and Acceptance and shall otherwise be
substantially the form of the assigned Notes. The surrendered Notes shall be
canceled and returned to the Borrower.
19.5. PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; PROVIDED
that (i) each such participation shall be in an amount of not less than
$5,000,000, (ii) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (iii) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the Commitment of such Bank as it relates to such participant, reduce
the amount of any commitment fees or Letter of Credit Fees to which such
participant is entitled or extend any regularly scheduled payment date for
principal or interest.
19.6. DISCLOSURE. The Borrower agrees that in addition to disclosures
made in accordance with standard and customary banking
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practices any Bank may disclose information obtained by such Bank pursuant to
this Credit Agreement to assignees or participants and potential assignees or
participants hereunder; PROVIDED that such assignees or participants or
potential assignees or participants shall agree (i) to treat in confidence such
information unless such information otherwise becomes public knowledge, (ii) to
be bound by Section 17, (iii) not to disclose such information to a third party,
except as required by law or legal process and (iv) not to make use of such
information for purposes of transactions unrelated to such contemplated
assignment or participation.
19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Agent pursuant to Section 15.1 or Section
15.2, and the determination of the Majority Banks shall for all purposes of this
Credit Agreement and the other Loan Documents be made without regard to such
assignee Bank's interest in any of the Loans or Reimbursement Obligations. If
any Bank sells a participating interest in any of the Loans or Reimbursement
Obligations to a participant, and such participant is the Borrower or an
Affiliate of the Borrower, then such transferor Bank shall promptly notify the
Agent of the sale of such participation. A transferor Bank shall have no right
to vote as a Bank hereunder or under any of the other Loan Documents for
purposes of granting consents or waivers or for purposes of agreeing to
amendments or modifications to any of the Loan Documents or for purposes of
making requests to the Agent pursuant to Section 15.1 or Section 15.2 to the
extent that such participation is beneficially owned by the Borrower or any
Affiliate of the Borrower, and the determination of the Majority Banks shall for
all purposes of this Credit Agreement and the other Loan Documents be made
without regard to the interest of such transferor Bank in the Loans or
Reimbursement Obligations to the extent of such participation.
19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
retain its rights to be indemnified pursuant to Section 16.2 with respect to any
claims or actions arising prior to the date of such assignment. If any assignee
Bank is not incorporated under the laws of the United States of America or any
state thereof, it shall, prior to the date on which any interest or fees are
payable hereunder or under any of the other Loan Documents for its account,
deliver to the Borrower and the Agent certification as to its exemption from
deduction or withholding of any United States federal income taxes. Anything
contained in this Section 19 to the contrary notwithstanding, any Bank may at
any time pledge all or any
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portion of its interest and rights under this Credit Agreement (including all or
any portion of its Notes) to any of the twelve Federal Reserve Banks organized
under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such
pledge or the enforcement thereof shall release the pledgor Bank from its
obligations hereunder or under any of the other Loan Documents.
19.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Banks.
20. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:
(a) if to the Borrower, at Michaels Stores, Inc., 8000 Bent Branch
Drive, Irving, Texas 75063, Attention: Christopher J. Holland, Vice
President, and Mark Beasley, Esq., or at such other address for notice as
the Borrower shall last have furnished in writing to the Person giving the
notice;
(b) if to the Agent, at BankBoston, N.A., 100 Federal Street, Boston,
Massachusetts 02110, USA, Attention: Judith Kelly, Vice President, or such
other address for notice as the Agent shall last have furnished in writing
to the Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on SCHEDULE 1
hereto, or such other address for notice as such Bank shall last have
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
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21. GOVERNING LAW.
THIS CREDIT AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS
UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE OF NEW YORK (EXCLUDING
THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT
ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL
COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY
MAIL AT THE ADDRESS SPECIFIED IN Section 20. THE BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
22. HEADINGS.
The captions in this Credit Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
23. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
24. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
Section 26.
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25. WAIVER OF JURY TRIAL.
Each of the Borrower, the Banks and the Agent hereby waives its right to a
jury trial with respect to any action or claim arising out of any dispute in
connection with this Credit Agreement, the Notes or any of the other Loan
Documents, any rights or obligations hereunder or thereunder or the
performance of which rights and obligations. Except as prohibited by law, each
of the Borrower, the Banks and the Agent hereby waives any right it may have to
claim or recover in any litigation referred to in the preceding sentence any
special, exemplary, punitive or consequential damages or any damages other than,
or in addition to, actual damages. The Borrower (i) certifies that no
representative, agent or attorney of any Bank or the Agent has represented,
expressly or otherwise, that such Bank or the Agent would not, in the event of
litigation, seek to enforce the foregoing waivers and (ii) acknowledges that the
Agent and the Banks have been induced to enter into this Credit Agreement, the
other Loan Documents to which it is a party by, among other things, the waivers
and certifications contained herein.
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any consent or approval required or permitted by this Credit Agreement to
be given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower or any of its
Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or
such other instrument or the continuance of any Default or Event of Default may
be waived (either generally or in a particular instance and either retroactively
or prospectively) with, but only with, the written consent of the Borrower and
the written consent of the Majority Banks. Notwithstanding the foregoing, the
rate of interest on the Notes (other than interest accruing pursuant to Section
5.11 following the effective date of any waiver by the Majority Banks of the
Default or Event of Default relating thereto), may not be decreased, the term of
the Notes may not be extended, the amount of the Commitments of the Banks
(except to the extent permitted by Section 2.10) may not be increased, and the
amount of commitment fee, facility fee or Letter of Credit Fees or other fees
due hereunder may not be decreased without the written consent of the Borrower
and the written consent of each Bank affected thereby; this Section 26 and the
definition of Majority Banks may not be amended, without the written consent of
all of the Banks; and the amount of the Agent's fees payable for the Agent's
account and Section 15 may not be amended without the written consent of the
Agent. No waiver shall extend to or affect any obligation not expressly waived
or impair any right consequent thereon. No course of dealing or delay or
omission on the part of the Agent or any Bank
<PAGE>
-99-
in exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Borrower shall entitle the
Borrower to other or further notice or demand in similar or other circumstances.
27. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
MICHAELS STORES, INC.
By: /s/ Christopher J. Holland
-----------------------------------------
Name: Christopher J. Holland
Title: Vice President - Finance
BANKBOSTON, N.A., individually
and as Agent
By: /s/ Linda H. Thomas
-----------------------------------------
Name: Linda H. Thomas
Title: Managing Director
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ Robert Ivosevich
-----------------------------------------
Name: ROBERT IVOSEVICH
Title: SENIOR VICE PRESIDENT
GUARANTY FEDERAL BANK, F.S.B.
By: /s/ Robert S. Hays
-----------------------------------------
Name: Robert S. Hays
Title: Vice President
WELLS FARGO BANK (TEXAS), N.A.
By: /s/ MaryJo Hoch
-----------------------------------------
Name: MaryJo Hoch
Title: Vice President
<PAGE>
THE BANK OF NEW YORK
By: /s/ Charlotte Sohn
-----------------------------------------
Name: Charlotte Sohn
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Thomas J. Bullard
-----------------------------------------
Name: THOMAS J. BULLARD
Title: VICE PRESIDENT
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Terry Rocha
-----------------------------------------
Name: Terry Rocha
Title: Vice President
<PAGE>
EXHIBIT A
FORM OF LOAN REQUEST
[Date]
BankBoston, N.A., as Agent
100 Federal Street
Boston, MA 02110
Attn: Judith Kelly, Vice President
Re: LOAN REQUEST
Ladies and Gentlemen:
Reference is hereby made to that certain Revolving Credit Agreement, dated
as of August ___, 1998 (as amended and in effect from time to time the "Credit
Agreement"), by and among Michaels Stores, Inc. (the "Borrower"), the lending
institutions listed on SCHEDULE 1 thereto (the "Banks") and BankBoston, N.A. as
agent for the Banks (the "Agent"). Capitalized terms which are used herein
without definition and which are defined in the Credit Agreement shall have the
same meanings herein as in the Credit Agreement.
Pursuant to Section 2.2.1 of the Credit Agreement, we hereby request that
a Syndicated Loan consisting of [a Base Rate Loan in the principal amount of
$________, or a Eurodollar Rate Loan in the principal amount of $_______ with an
Interest Period of __________] be made on ________ , 199_/200_. We understand
that this request is irrevocable and binding on us and obligates us to accept
the requested Syndicated Loan on such date.
We hereby certify (a) that the aggregate principal amount of the
outstanding Syndicated Loans and all outstanding Letters of Credit on today's
date is $_________, (b) that we will use the proceeds of the requested
Syndicated Loan in accordance with the provisions of the Credit Agreement, (c)
that each of the representations and warranties contained in the Credit
Agreement or in any document or instrument delivered pursuant to or in
connection with the Credit Agreement was true and correct in all material
respects as of the date as of which it was made and is true and correct in all
material respects at and as of the date hereof (except from transactions
contemplated or permitted by the Loan Department and changes occurring in the
ordinary course of business that singly or in the aggregate are not materially
<PAGE>
BankBoston, N.A., as Agent
Page 2
adverse, and to the extent that such representations and warranties related
expressly to an earlier date) and (d) that no Default or Event of Default has
occurred and is continuing.
Very truly yours,
MICHAELS STORES, INC.
By:
-----------------------------------------
<PAGE>
EXHIBIT B
FORM OF COMPETITIVE BID QUOTE REQUEST
[Date]
To: BankBoston, N.A., as Agent (the "AGENT")
From: Michaels Stores, Inc. (the "BORROWER")
Re: Revolving Credit Agreement, dated as of August ___, 1998 (as the same
may be amended and in effect from time to time, the "CREDIT
AGREEMENT"), among the Borrower, the Agent, and certain other lending
institutions which are parties thereto (collectively, the "BANKS").
We hereby give notice pursuant to Section 2.3.1(b) of the Credit Agreement
that we request Competitive Bid Quotes for the following proposed Competitive
Bid Loan(s):
Requested Drawdown Date:__________
<TABLE>
<CAPTION>
Principal Amount Interest Period(s) Maturity Date
- ---------------- -------------------- -------------
<S> <C> <C>
$
</TABLE>
Capitalized terms which are used herein without definition shall have the
same meanings herein as in the Credit Agreement.
MICHAELS STORES, INC.
By:
-----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT C
FORM OF INVITATION FOR COMPETITIVE BID QUOTES
To: [Name of Bank]
Pursuant to Section 2.3.1(c) of the Revolving Credit Agreement, dated as of
August __, 1998 (as the same may be amended and in effect from time to time, the
"CREDIT AGREEMENT"), among Michaels Stores, Inc. (the "BORROWER"), BankBoston,
N.A., as Agent (the "AGENT"), and certain other lending institutions which are
parties thereto (collectively, the "BANKS"), we are pleased on behalf of the
Borrower to invite you to submit Competitive Bid Quotes to the Borrower for the
following proposed Competitive Bid Loan(s):
Requested Drawdown Date:__________________
<TABLE>
<CAPTION>
Principal Amount Interest Period(s) Maturity Date
- ---------------- ----------------- -------------
<S> <C> <C>
$
</TABLE>
Capitalized terms which are used herein without definition and which are
defined in the Credit Agreement shall have the same meanings herein as in the
Credit Agreement.
Please respond to this invitation by no later than 3:00 p.m. (Boston time)
on the Business Day prior to the requested Drawdown Date to the attention of
[_____] at facsimile number [_____].
BANKBOSTON, N.A., AS AGENT
By:
-----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT D-1
FORM OF COMPETITIVE BID QUOTE
BankBoston, N.A., as Agent
100 Federal Street
Boston, Massachusetts 02110
Attention: Judith Kelly, Vice President
Re: COMPETITIVE BID QUOTE TO MICHAELS STORES, INC. (THE "BORROWER")
In response to your Invitation for Competitive Bid Quotes on behalf of the
Borrower dated _______________, 19/20__, the undersigned hereby makes the
following Competitive Bid Quote on the following terms:
1. Quoting Bank: _____________________________________________
2. Person to contact at quoting Bank: ________________________
3. Drawdown Date: ____________________________________________
4. We hereby offer to make Competitive Bid Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
<TABLE>
<CAPTION>
Principal Interest Competitive Bid
Amount Period(s) Rate(s)
--------- --------- ---------------
<S> <C> <C>
$
$
</TABLE>
5. Aggregate Principal Amount $
<PAGE>
-2-
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Revolving Credit
Agreement, dated as of August __, 1998 (as the same may be amended and in effect
from time to time, the "CREDIT AGREEMENT"), among the Borrower, BankBoston,
N.A., as Agent (the "AGENT"), and certain other lending institutions which are
parties thereto (collectively, the "BANKS"), irrevocably obligates us to make
the Competitive Bid Loan(s) for which any offer(s) are accepted in whole or in
part by the Borrower.
Capitalized terms which are used herein without definition and which are
defined in the Credit Agreement shall have the same meanings herein as in the
Credit Agreement.
Very truly yours,
[NAME OF BANK]
Dated: By:
-------------------------- ------------------------------
Name:
Title:
<PAGE>
EXHIBIT D-2
FORM OF NOTICE OF COMPETITIVE BID BORROWING
BankBoston, N.A., as Agent
100 Federal Street
Boston, Massachusetts 02110
Attention: Judith Kelly, Vice President
Re: Revolving Credit Agreement, dated as of August ____, 1998 (as
the same may be amended and in effect from time to time, the
"CREDIT AGREEMENT"), among Michaels Stores, Inc. (the
"BORROWER"), BankBoston, N.A., as Agent (the "AGENT"), and
certain other lending institutions which are parties thereto
(collectively, the "BANKS").
We hereby give notice pursuant to Section 2.3.1(f) of the Credit
Agreement of our acceptance of the following Competitive Bid Quote(s):
1. Bank: __________________________________________
2. Drawdown Date:__________________________________
3. In the following principal amounts, for the following Interest Periods
and at the following rates:
<TABLE>
<CAPTION>
Principal Interest Competitive Bid
Amount Period(s) Rate(s)
------ --------- -------
<S> <C> <C>
$
$
</TABLE>
[Repeat for each Bank as necessary]
4. The aggregate principal amount for each Interest Period is:
<TABLE>
<CAPTION>
Interest Aggregate
Period Principal Amount
------ ----------------
<S> <C>
$
$
</TABLE>
<PAGE>
-2-
We hereby certify (a) that we will use the proceeds of the requested
Competitive Bid Loan in accordance with the provisions of the Credit Agreement,
(b) that each of the representations and warranties contained in the Credit
Agreement or in any document or instrument delivered pursuant to or in
connection with the Credit Agreement was true and correct in all material
respects as of the date as of which it was made and is true and correct in all
material respects at and as of the date hereof (except to the extent of changes
resulting from transactions contemplated or permitted by the Loan Documents and
changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, and to the extent that such
representations and warranties related expressly to an earlier date) and (c)
that no Default or Event of Default has occurred and is continuing.
Capitalized terms which are used herein without definition and which
are defined in the Credit Agreement shall have the same meanings herein as in
the Credit Agreement.
Very truly yours,
MICHAELS STORES, INC.
Dated: By:
------------------------ ---------------------------
Name:
Title:
<PAGE>
EXHIBIT D-3
FORM OF NOTICE OF COMPETITIVE BID LOANS
[Date]
To: Each of the Banks referred to below
From: BankBoston, N.A., as Agent
Reference is made to the Revolving Credit Agreement, dated as of
August ___, 1998 (as the same may be amended and in effect from time to time,
the "CREDIT AGREEMENT"), among Michaels Stores, Inc. (the "BORROWER"),
BankBoston, N.A., as Agent (the "AGENT"), and certain other lending
institutions which are parties thereto (collectively, the "BANKS").
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Credit Agreement.
Under Section 2.3 of the Credit Agreement, the Borrower borrowed
$_____________ in Competitive Bid Loans on _________ __, ___ with an Interest
Period of _____________. The Competitive Bid Rate for the period is ________%.
A range of Competitive Bid Quotes were submitted. The bids ranged from
[insert highest bid] to [insert lowest bid].
BANKBOSTON, N.A., AS AGENT
By:
--------------------------
Name:
Title:
<PAGE>
EXHIBIT E-1
FORM OF SYNDICATED NOTE
$______________ August ____, 1998
FOR VALUE RECEIVED, the undersigned, MICHAELS STORES, INC., a Delaware
corporation (the "BORROWER"), hereby promises to pay to the order of [INSERT
NAME OF PAYEE BANK] (the "BANK"), at the Agent's Head Office:
(a) prior to or on the Revolving Credit Loan Maturity Date the
principal amount of _____________________________ DOLLARS
($____________________) or, if less, the aggregate unpaid principal
amount of Syndicated Loans advanced by the Bank to the Borrower
pursuant to the Revolving Credit Agreement, dated as of August __, 1998
(as the same may be amended and in effect from time to time, the
"CREDIT AGREEMENT"), among the Borrower, the Bank, BankBoston, N.A., as
Agent (the "AGENT"), and certain other lending institutions parties
thereto; and
(b) interest on the principal balance hereof from time to time
outstanding from the Closing Date through and including the date on
which the principal amount hereof is paid in full at the times and the
rates provided in the Credit Agreement.
This Note evidences borrowings under and has been issued by the
Borrower in accordance with the terms of the Credit Agreement. The Bank and any
holder hereof are entitled to the benefits of the Credit Agreement and the other
Loan Documents, and may enforce the agreements of the Borrower contained
therein, and any holder hereof may exercise the respective remedies provided for
thereby or otherwise available in respect thereof, all in accordance with the
respective terms thereof. All capitalized terms used in this Note and not
otherwise defined herein shall have the same meanings herein as in the Credit
Agreement.
The Borrower irrevocably authorizes the Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Syndicated Loan or at the
time of receipt of any payment of principal of this Note, an appropriate
notation on the grid attached to this Note, or the continuation of such grid, or
any other similar record, including computer records, reflecting the making of
such Syndicated Loan or (as the case may be) the receipt of such payment. The
outstanding amount of the Syndicated Loan set forth on the grid attached to this
Note, or the continuation of such grid, or any other similar record, including
computer records, maintained by the Bank with respect to any Syndicated Loan
shall be PRIMA FACIE evidence of the principal amount thereof owing and unpaid
to the Bank, but the failure to record, or any error in so recording, any such
amount on any such grid, continuation or other record shall not limit or
otherwise affect the obligation of the Borrower hereunder or under the Credit
Agreement to make payments of principal of and interest on this Note when due.
<PAGE>
-2-
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to prepay the whole or part of the principal
of this Note on the terms and conditions specified in the Credit Agreement.
This Note is a revolving note, and it is contemplated that by reason of
prepayments hereon, there may be times when no indebtedness is owing hereunder;
notwithstanding any such occurrence, the Note shall remain valid and shall be in
full force and effect as to each principal advance made hereunder subsequent to
each such occurrence.
If any one or more Events of Default shall occur, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon may
become or be declared due and payable in the manner and with the effect provided
in the Credit Agreement.
No delay or omission on the part of the Agent, the Bank or any holder
hereof in exercising any right hereunder shall operate as a waiver of such right
or of any other rights of the Agent, the Banks or such holder, nor shall any
delay, omission or waiver on any one occasion be deemed a bar or waiver of the
same or any other right on any further occasion.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note and assent to any extension or
postponement of the time of payment or any other indulgence, and to the addition
or release of any other party or person primarily or secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND THE
CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESSES
SPECIFIED IN Section 20(a) OF THE CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR
ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
<PAGE>
-3-
IN WITNESS WHEREOF, the undersigned has caused this Syndicated Note to
be signed in its corporate name by its duly authorized officer as of the day and
year first above written.
MICHAELS STORES, INC.
By:
--------------------------
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Amount of Balance of
Amount Principal Paid Principal Notation
Date of Loan or Prepaid Unpaid Made By:
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT E-2
FORM OF COMPETITIVE BID NOTE
[$___________] August ____, 1998
FOR VALUE RECEIVED, the undersigned, MICHAELS STORES, INC., a Delaware
corporation (the "BORROWER"), hereby promises to pay to the order of [INSERT
NAME OF PAYEE BANK] (the "BANK") at the Agent's Head Office (a) on the Revolving
Credit Loan Maturity Date, or such earlier date as may be required pursuant to
the terms of the Credit Agreement (defined below), the principal amount of
[_________] MILLION DOLLARS ([$___________]) or, if less, the aggregate unpaid
principal amount of Competitive Bid Loans advanced by the Bank to the Borrower
pursuant to the Revolving Credit Agreement, dated as of August ___, 1998 (as the
same may be amended and in effect from time to time, the "CREDIT AGREEMENT"),
among the Borrower, the Bank, BankBoston, N.A., as Agent (the "AGENT"), and
certain other lending institutions parties thereto and (b) interest on the
outstanding principal balance hereof through and including the date on which
such principal amount is paid in full, at the times and at the rates provided in
the Credit Agreement.
This Competitive Bid Note evidences borrowings under and has been
issued by the Borrower in accordance with the terms of the Credit Agreement. The
Bank and any holder hereof are entitled to the benefits of the Credit Agreement
and the other Loan Documents, and may enforce the agreements of the Borrower
contained therein, including, without limitation, the Borrower's promise to
repay each Competitive Bid Loan advanced hereunder on the last day of the
applicable Interest Period with respect thereto. All capitalized terms used in
this Competitive Bid Note and not otherwise defined herein shall have the same
meanings herein as in the Credit Agreement.
The Bank shall, and is hereby irrevocably authorized by the Borrower
to, endorse on the schedule attached to this Competitive Bid Note or a
continuation of such schedule attached hereto and made a part hereof, an
appropriate notation evidencing advances and repayments of principal of this
Competitive Bid Note. The outstanding amount of the Competitive Bid Note set
forth on such Bank's Record shall be PRIMA FACIE evidence of the principal
amount thereof owing and unpaid to such Bank, but failure by the Bank to make
any such notations shall not affect any of the Borrower's obligations in respect
of this Competitive Bid Note.
The Borrower has the right in certain circumstances and the obligation
in certain other circumstances to prepay the whole or part of the principal of
this Competitive Bid Note on the terms and conditions specified in the Credit
Agreement.
If any one or more Events of Default shall occur, the entire unpaid
principal amount of this Competitive Bid Note and all of the unpaid interest
accrued thereon may become or be declared due and payable in the manner and with
the effect provided in the Credit Agreement.
The Borrower and every endorser of this Competitive Bid Note, or the
obligation represented hereby, waive presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Competitive Bid Note, assent to any
extension or postponement of the time of payment or any other indulgence and to
the addition or release of any other party or person primarily or secondarily
liable.
<PAGE>
-2-
No delay or omission on the part of the Agent, the Bank or any holder
hereof in exercising any right hereunder shall operate as a waiver of such right
or of any other rights of the Agent, the Bank or such holder, nor shall any
delay, omission or waiver on any one occasion be deemed a bar or waiver of the
same or any other right on any further occasion.
THIS COMPETITIVE BID NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER
SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE
OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
COMPETITIVE BID NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
ANY FEDERAL COURT SITTING THEREIN AND THE CONSENT TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING
MADE UPON THE BORROWER BY MAIL AT THE ADDRESSES SPECIFIED IN SECTION 20 OF THE
CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
IS BROUGHT IN AN INCONVENIENT COURT.
IN WITNESS WHEREOF, the undersigned has caused this Competitive Bid
Note to be signed in its corporate name by its duly authorized officer as of the
day and year first above written.
MICHAELS STORES, INC.
By:
--------------------------
Name:
Title:
<PAGE>
-3-
<TABLE>
<CAPTION>
Amount of Balance of
Amount Competitive Principal Paid Principal Notation
Date of Loan Bid Rate on Prepaid Unpaid Made By
---- ------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT F
FORM OF
COMPLIANCE CERTIFICATE
MICHAELS STORES, INC.
COMPLIANCE CERTIFICATE DATED _______________
I _______________________, solely in my capacity as
____________________ of Michaels Stores, Inc. (the "Borrower"), certify that the
Borrower is in compliance with the terms of the Revolving Credit Agreement,
dated as of August ___, 1998, as amended and in effect from time to time (the
"Credit Agreement"), among the Borrower, BankBoston, N.A. as Agent, and certain
other lending institutions which are parties thereto, as of the end of the
quarter dated ________ , ____. The Borrower represents that it is in compliance
with the terms of Section 9.6.2. Computations to evidence the Borrower's
compliance with additional terms contained in Section 9 and Section 10 of the
Credit Agreement are detailed on the attached APPENDIX I.
Capitalized terms which are used herein without definition and which
are defined in the Credit Agreement shall have the same meanings herein as in
the Credit Agreement.
MICHAELS STORES, INC.
By:
-----------------------------------
Name:
Title:
---------------------------
<PAGE>
MICHAELS STORES, INC.
COMPLIANCE CERTIFICATE WORKSHEET
AS OF__________________
<TABLE>
<CAPTION>
Section Calculation
- ------- -----------
<S> <C> <C>
10.1 FUNDED DEBT TO TOTAL CAPITAL
A. Consolidated Funded Debt (sum of (1) through (3)) $__________
(1) Outstanding principal amount of the Loans $__________
(2) PLUS Indebtedness with respect to Capitalized Leases $__________
(3) PLUS all other Indebtedness subject to payment of
interest $__________
B. Total Capital (Item (1) plus Item (2) below) $__________
(1) Consolidated Net Worth (Item (a) minus Item (b)) $__________
(a) Consolidated Total Assets $__________
(b) Consolidated Total Liabilities $__________
(MINUS any subscriptions receivable)
(2) Consolidated Funded Debt (Item A. above) $__________
C. Ratio of A. to B. ___________%
RATIO NOT TO EXCEED 45% AT ANY TIME.
10.2 FIXED CHARGE COVERAGE RATIO
A. Consolidated EBITDAR (sum of (1) through (6))
(all amounts calculated for the trailing 4 quarters period) $__________
(1) Consolidated Net Income of the Borrower and its
Subsidiaries $__________
(2) PLUS Income Taxes $__________
(3) PLUS Consolidated Total Interest Expense $__________
(4) PLUS depreciation and amortization $__________
(5) PLUS Consolidated Rental Expense $__________
(6) PLUS noncash charges
<PAGE>
B. Fixed Charges (sum of (1) through (3))
(all amounts calculated for the trailing 4 quarters period) $__________
(1) Consolidated Total Interest Expense $__________
(2) PLUS scheduled principal amortization on Indebtedness
(excluding amortization related to Capitalized Leases) $__________
(3) PLUS Consolidated Rental Expense $__________
c. Ratio of A. to B. :1
----------
RATIO MUST BE AT LEAST 1.50:1.
10.3 INVENTORY TURN RATIO
Is the Fixed Charge Coverage Ratio (as calculated in
Section 10.2 above) less than or equal to 1.60:1? __________
(Yes/No)
If yes, proceed to item A., if no, proceed to Section 10.4.
A. The cost of merchandise sold of the Borrower and its
Subsidiaries for the period of four consecutive fiscal
quarters then ended $__________
B. The average book value of inventory (without giving
effect to xtraordinary charges or write-downs) as of
the end of each fiscal quarter ending during such period $__________
C. Ratio of Item A. to B. :1
----------
ITEM C. MUST BE AT LEAST 1.60:1 WHEN THE FIXED CHARGE
COVERAGE RATIO FALLS BELOW 1.60:1
10.4 CAPITAL EXPENDITURES
A. Aggregate Capital Expenditures of Borrower and its
Subsidiaries made year-to-date $__________
B. Capital Expenditures Permitted in current fiscal year
(see table below) $__________
C. Capital Expenditures permitted but not spent in prior
fiscal year (carryover amount) $__________
D. Item C. MULTIPLIED BY .25 $__________
<PAGE>
E. Capital Expenditures made for replacement of
Lexington, KY distribution center in an amount not to
exceed $35 million $__________
AMOUNT IN LINE A. NOT TO EXCEED SUM OF LINES B., D. AND E.
(Note: Line E. is one-time expenditure only and is not
part of carryover amount.)
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------
Fiscal Year Capital Expenditures
-----------------------------------------
<S> <C>
1998 $70,000,000
-----------------------------------------
1999 $80,000,000
-----------------------------------------
2000 $95,000,000
-----------------------------------------
2001 $120,000,000
-----------------------------------------
</TABLE>
<TABLE>
<S><C> <C>
9.4 DISTRIBUTIONS
A. Aggregate distributions made by the Borrower after the
Closing Date $__________
B. $50,000,000 $50,000.000
----------
C. Consolidated Net Income for fiscal year ended ____________ $__________*
D. Item C. MULTIPLIED BY .50 $__________
E. Aggregate amount of cash proceeds received by the Borrower
after May 3, 1998 in connection with the exercise of stock
options $__________
F. Item B. PLUS Item D. PLUS Item E. $__________
ITEM A. NOT TO EXCEED ITEM F. FOR COMPLIANCE
9.14 SYNTHETIC LEASES
A. Aggregate Synthetic Lease obligations of Borrower and its
Subsidiaries as of most recent fiscal quarter end $__________
B. $50,000,000 $50.000.000
----------
ITEM A. NOT TO EXCEED ITEM B. FOR COMPLIANCE
</TABLE>
- ---------------------
* Calculation based on the sum of the Consolidated Net Income
of the Borrower for each complete fiscal year of the Borrower ending after the
Closing Date.
<PAGE>
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Dated as of [Insert Date]
Reference is made to the Revolving Credit Agreement, dated as of August
___, 1998 (as from time to time amended and in effect, the "Credit Agreement"),
by and among Michaels Stores, Inc., a Delaware corporation (the "Borrower"), the
lending institutions referred to therein (collectively, the "Banks"), and
BankBoston, N.A., as agent (in such capacity, the "Agent") for the Banks.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Credit Agreement.
_________________ (the "Assignor") and _________________ (the
"Assignee") hereby agree as follows:
1. ASSIGNMENT. Subject to the terms and conditions of this
Assignment and Acceptance, the Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes without recourse to
the Assignor, a $______ interest in and to the rights, benefits, indemnities
and obligations of the Assignor under the Credit Agreement equal to __.00% in
respect of the Total Commitment immediately prior to the Effective Date (as
hereinafter defined).
2. ASSIGNOR'S REPRESENTATIONS. The Assignor (i) represents and
warrants that (A) it is legally authorized to enter into this Assignment and
Acceptance, (B) as of the date hereof, its Commitment is $_____, its Commitment
Percentage is____.00%, the aggregate outstanding principal balance of its Loans
equals $_____ and the aggregate amount of its Letter of Credit Participations
equals $_____ (in each case after giving effect to the assignment contemplated
hereby but without giving effect to any contemplated assignments which have not
yet become effective), and (C) immediately after giving effect to all
assignments which have not yet become effective, the Assignor's Commitment
Percentage will be sufficient to give effect to this Assignment and Acceptance,
(ii) makes no representation or warranty, express or implied, and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any of the other Loan
Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, the other Loan Documents or any
other instrument or document furnished
<PAGE>
-2-
pursuant thereto, other than that it is the legal and beneficial owner of the
interest being assigned by it here under free and clear of any adverse claim or
encumbrance; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any of
its Subsidiaries or any other Person primarily or secondarily liable in respect
of any of the Obligations, or the performance or observance by the Borrower or
any of its Subsidiaries or any other Person primarily or secondarily liable in
respect of any of the Obligations of any of its obligations under the Credit
Agreement or any of the other Loan Documents or any other instrument or document
delivered or executed pursuant thereto; and (iv) attaches hereto the Note
delivered to it under the Credit Agreement.
The Assignor requests that the Borrower exchange the Assignor's Note
for new Notes payable to the Assignor and the Assignee as follows:
<TABLE>
<CAPTION>
Notes Payable to Amount of Note
the Order of: --------------
- -----------------
<S> <C>
Assignor $
Assignee $
</TABLE>
3. ASSIGNEE'S REPRESENTATIONS. The Assignee (i) represents and
warrants that (A) it is duly and legally authorized to enter into this
Assignment and Acceptance, (B) the execution, delivery and performance of this
Assignment and Acceptance do not conflict with any provision of law or of the
charter or by-laws of the Assignee, or of any agreement binding on the Assignee,
(C) all acts, conditions and things required to be done and performed and to
have occurred prior to the execution, delivery and performance of this
Assignment and Acceptance, and to render the same the legal, valid and binding
obligation of the Assignee, enforceable against it in accordance with its terms,
have been done and performed and have occurred in due and strict compliance with
all applicable laws; (ii) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 7.4 and Section 8.4 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (iii) agrees
that it will, independently and without reliance upon the Assignor, the Agent or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iv) represents and warrants that
it is an Eligible Assignee; (v) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such
<PAGE>
-3-
powers under the Credit Agreement and the other Loan Documents as are delegated
to the Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (vi) agrees that it will perform in accordance with their
terms all the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Bank; and (vii) acknowledges that it has
made arrangements with the Assignor satisfactory to the Assignee with respect to
its PRO RATA share of Letter of Credit Fees in respect of outstanding Letters of
Credit.
4. EFFECTIVE DATE. The effective date for this Assignment and
Acceptance shall be _____ (the "Effective Date"). Following the execution of
this Assignment and Acceptance and the consent of the Borrower hereto having
been obtained, each party hereto shall deliver its duly executed counterpart
hereof to the Agent for acceptance by the Agent and recording in the Register by
the Agent. Upon the Agent's acceptance of this Assignment and Acceptance and
the Agent's receipt of the registration fee in the amount of $3,500, the Agent
shall record this Assignment and SCHEDULE 1 to the Credit Agreement shall
thereupon be replaced as of the Effective Date by the SCHEDULE 1 annexed hereto.
5. RIGHTS UNDER CREDIT AGREEMENT. Upon such acceptance and
recording, from and after the Effective Date, (i) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Bank thereunder, and (ii) the
Assignor shall, with respect to that portion of its interest under the Credit
Agreement assigned hereunder, relinquish its rights and be released from its
obligations under the Credit Agreement; PROVIDED, HOWEVER, that the Assignor
shall retain its rights to be indemnified pursuant to Section 16.2 of the Credit
Agreement with respect to any claims or actions arising prior to the Effective
Date.
6. PAYMENTS. Upon such acceptance of this Assignment and
Acceptance by the Agent and such recording, from and after the Effective Date,
the Agent shall make all payments in respect of the rights and interests
assigned hereby (including payments of principal, interest, fees and other
amounts) to the Assignee. The Assignor and the Assignee shall make any
appropriate adjustments in payments for periods prior to the Effective Date by
the Agent or with respect to the making of this assignment directly between
themselves.
7. GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE IS INTENDED TO
TAKE EFFECT AS AN INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE
<PAGE>
-4-
LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS).
8. COUNTERPARTS. This Assignment and Acceptance may be executed
in any number of counterparts which shall together constitute but one and the
same agreement.
IN WITNESS WHEREOF, intending to be legally bound, each of the
undersigned has caused this Assignment and Acceptance to be executed on its
behalf by its officer thereunto duly authorized, as of the date first above
written.
[ASSIGNOR]
By:
----------------------------
Title:
[ASSIGNEE]
By:
----------------------------
Title:
CONSENTED TO:
MICHAELS STORES, INC.
By:
----------------------
Title:
BANKBOSTON, N.A., as
Agent
By:
----------------------
Title:
<PAGE>
SCHEDULE 1
BANKS: COMMITMENT PERCENTAGES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Bank Address of Lending Office Commitment $100,000,000
(Domestic and Eurodollar) Percentage Revolving Credit
Facility
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
BankBoston, N.A. 100 Federal Street 20.00000000% $20,000,000
Boston, MA 02110
Fax No: (617) 434-0637
- ----------------------------------------------------------------------------------------
The Bank of New York One Wall Street, 8th Floor 10.00000000% $10,000,000
New York, NY 10286
Fax No: (212) 635-1483
- ---------------------------------------------------------------------------------------
Credit Lyonnais New 2200 Ross Avenue 18.00000000% $18,000,000
York Branch Suite 4400 West
Dallas, TX 75201
Fax No: (214) 220-2323
- ----------------------------------------------------------------------------------------
Guaranty Federal 8333 Douglas Avenue 16.00000000% $16,000,000
Bank, F.S.B. Dallas, TX 75225
Fax No: (214) 360-2760
- ----------------------------------------------------------------------------------------
Fleet National Bank 1 Federal Street 10.00000000% $10,000,000
Boston, MA 02110
Fax No: (617) 346-0689
- ----------------------------------------------------------------------------------------
Union Bank of 350 California Street, 6th 10.00000000% $10,000,000
California, N.A. Floor
San Francisco, CA 94104
Fax No: (415) 705-7085
- ----------------------------------------------------------------------------------------
Wells Fargo Bank 1445 Ross Avenue, 3rd 16.00000000% $16,000,000
(Texas), N.A. Floor
Dallas, TX 75202
Fax No.: (214) 740-1543
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 7.3
TITLE TO PROPERTY: LEASES
None
<PAGE>
SCHEDULE 7.7
LITIGATION
LEON PINK V. AARON BROTHERS, INC., ET AL.; Case No. BC161692; Superior Court of
California, County of Los Angeles
ARAM HAMPARTSUMIAN V. MICHAELS STORES, INC., ET AL.; Case No. 787721; Superior
Court of the State of California, County of Orange
CARRIE E. SALISBURY, ET AL. V. MICHAELS STORES, INC.; Case No. 720923; Superior
Court of the State of California, County of San Diego
MIKAYLA SNYDER, ET UX. V. MICHAELS STORES, INC.; Case No. 312598; Superior Court
of the State of California, County of Stanislaus
<PAGE>
SCHEDULE 7.14
ENVIRONMENTAL COMPLIANCE
The former Leewards Distribution Center was previously affected
by environmental conditions including but not limited to prior disposal of
hazardous materials at various landfills, underground storage tanks ("USTs"),
onsite dumping of excavation material from the removal of USTs and solid waste
disposal areas. Remediation efforts have been completed and a Corrective Action
Completion Report has been filed with the Illinois Environmental Protection
Agency.
<PAGE>
SCHEDULE 7.15
SUBSIDIARIES
Aaron Brothers, Inc., a Delaware corporation
Michaels of Canada, ULC, a Nova Scotia unlimited liability company
Michaels Stores of Puerto Rico, Inc., a Delaware corporation
5931, Inc., a Delaware corporation
5931 Business Trust, a Delaware business trust
<PAGE>
SCHEDULE 9.1
MICHAELS STORES, INC. AND SUBSIDIARIES
EXISTING DEBT
AS OF AUGUST 27, 1998
<TABLE>
<CAPTION>
DESCRIPTION OF DEBT OUTSTANDING BALANCE
- -------------------- -------------------
<S> <C>
Letters of Credit $ 2,502,974
Convertible Subordinated Notes $ 96,940,000
Senior Notes $ 125,000,000
Capital Equipment Lease - IBM $ 16,673,352
Capital Equipment Lease - Ryder $ 772,976
</TABLE>
The above debt is covered by various baskets permitted under Section 9.1 of the
Credit Agreement.
<PAGE>
SCHEDULE 9.2
EXISTING LIENS
FOR
MICHAEL STORES, INC.
AND
SUBSIDIARIES
I. MICHAELS STORES, INC.
A. UCC-1 FINANCING STATEMENTS
<TABLE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. NCNB Texas National Montgomery 12-17-90 301620 Accounts, chattel paper, contract
Bank, as Administrative County, AL rights, instruments, inventory,
Lender equipment and proceeds
Michaels Stores, Inc. NCNB Texas National Montgomery 12-17-90 301621 Accounts, chattel paper, contract
Bank, as Administrative County, AL rights, instruments, inventory,
Lender equipment and proceeds
Michaels Stores, Inc. IBM Credit Corporation AR 03-27-96 1009390 Equipment
Michaels Stores, Inc. IBM Credit Corporation AR 03-27-96 1009391 Equipment
Michaels Stores, Inc. IBM Credit Corporation Sebastian 03-29-96 96-389 Equipment
County, AR
Michaels Stores, Inc. IBM Credit Corporation Sebastian 03-29-96 96-399 Equipment
County, AR
Michaels Stores, Inc. IBM Credit Corporation AZ 03-18-96 889425 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-27-96 890615 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-27-96 890616 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-27-96 890617 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-27-96 890618 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-27-96 890619 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-27-96 890631 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-27-96 890682 Equipment
Michaels Stores, Inc. IBM Credit corporation AZ 03-27-96 890683 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-29-96 891191 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-29-96 891192 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-29-96 891193 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-29-96 891194 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-29-96 891203 Equipment
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. IBM Credit Corporation AZ 03-29-96 891204 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-29-96 891205 Equipment
Michaels Stores, Inc. IBM Credit Corporation AZ 03-29-96 891206 Equipment
Michaels Stores, Inc. BancBoston Leasing Inc. CA 07-28-98 9821160761 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. CA 09-02-93 93177830 Model CP-2102 Compactor, S/N:
93063545, voltage: 208, paint color:
Beige, main controls remote on 15'
cable, adv. full load indicator set
at 90% , rear loading power unit
(side saddle), UL certified panel, PU
cover, access panels both sides.
Model C-2242 Compaction Container,
S/N: 33505, Paint color: Beige. Lease
executed 7-15-93.
Michaels Stores, Inc. Diamond Rentals, Inc. CA 09-02-93 93177831 Model VB-60 Baler S/N: 93060399,
Paint color: Diamond Brown, bundle be
wire, UL certified panel. Lease
executed 7-15-93.
Michaels Stores, Inc. Diamond Rentals, Inc. CA 09-02-93 93177832 Model CP-2002 Compactor, S/N:
93033468, voltage: 460, paint color:
Diamond Brown, doghouse enclosure
with interlock door (RH), PU cover,
90% full light. Model C-1630 30 CU.
YD. Receiver/Container, S/N: 33158,
Paint color: Diamond Brown. Lease
executed 4-1-93.
Michaels Stores, Inc. Diamond Rentals, Inc. CA 09-21-93 93191393 Model CP-2102 Compactor, S/N:
93073598, Paint Color: Beige, Main
controls on 15' cable, adv. full load
indicator set at 90%, UL certified
panel, power unit cover, rear load
chute, Model C-2242 Compaction
Container S/N: 269, Paint Color:
Beige. Lease executed 9-1-93.
Michaels Stores, Inc. Diamond Rentals, Inc. CA 09-21-93 93191394 Model CP-2102 Compactor, S/N:
93063560, voltage: 460, paint
color: Beige, main controls mounted
on 15' cable, adv. full load
indicator set at 90%, UL certified
panel, PU cover, side load chute,
Model C-2242 Compaction Container
S/N: 263, Paint color:
Beige. Lease executed 9-1-93.
-2-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. Diamond Rentals, Inc. CA 12-16-93 93252838 Model CP-2102 Compactor, S/N:
92123342, voltage: 208. 3 phase paint
color: Beige, main controls on 15'
remote cable, adv. full load
indicator @ 90%, UL certified pane,
PU cable, access panels both sides,
power unit saddle (Bolt-on), rear-
loading chute, deodorizer Model
C-2241 container. Std.
understructure, container co!or:
beige. Lease executed 11-23-92.
Michaels Stores, Inc. Diamond Rentals, Inc. CA 02-25-94 94033419 Model VB60 Baler: Lease executed
1-15-94.
Michaels Stores, Inc. Diamond Rentals, Inc. CA 11-22-94 9434260541 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. CA 11-22-94 9434260560 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-27-96 9608960280 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-28-96 9608961142 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-29-96 9609260548 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-29-96 9609260562 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-29-96 9609260570 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-29-96 9609260588 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-29-96 9609260679 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-29-96 9609260723 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-29-96 9609260726 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-29-96 9609260729 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-29-96 9609260738 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 03-29-96 9609260741 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 04-01-96 9609360708 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 08-13-96 9622860790 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 08-11-97 9722760074 Equipment
Michaels Stores, Inc. IBM Credit Corporation CA 06-11-98 9816661262 Equipment
Michaels Stores, Inc. Taylor Made Office CA 04-10-95 9510360093 Equipment
Systems, Inc.
Michaels Stores, Inc. IBM Credit Corporation CO 12-23-97 19972120518 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 12-23-97 19972120519 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 12-23-97 19972120520 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 12-23-97 19972120522 Equipment
-3-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. IBM Credit Corporation CO 12-23-97 19972120554 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 03-29-96 962023983 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 03-29-96 962023985 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 03-29-96 962024041 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 03-29-96 962024042 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 03-29-96 962024045 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 03-29-96 962024052 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 03-29-96 962024074 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 03-29-96 962024079 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 03-29-96 962024083 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 03-29-96 962024085 Equipment
Michaels Stores, Inc. IBM Credit Corporation CO 08-16-96 962061838 Equipment
Michaels Stores, Inc. Associates Commercial FL 03-24-97 970000061822 Equipment
Corporation
Michaels Stores, Inc. First United Leasing FL 07-21-95 950000144427 Equipment
Michaels Stores, Inc. IBM Credit Corporation FL 05-30-96 960000111187 Equipment
Michaels Stores, Inc. IBM Credit Corporation FL 09-26-96 960000202281 Equipment
Michaels Stores, Inc. IBM Credit Corporation FL 02-11-98 980000031217 Equipment
Michaels Stores, Inc. NationsBank of Texas, Duval 02-21-95 95032521 Equipment under that certain
WA County, FL Amended and Restated Master Lease
Agreement, dated as of December 18,
1995, between Jacksonville Funding
Enterprises, LLC, as Lessor and
successor-in-interest to
Jacksonville Funding Corporation, and
Debtor, as Lessee; as amended by File
Nos. 95075439 and 96173749.
Michaels Stores, Inc. Cordova Collected Escambia 03-04-92 Book 3140, Memorandum of Shopping Center
Limited Partnership County, FL Page 196: Book Lease relating to Lease Agreement,
3308, Page 306 dated as of March 4, 1992, between
Debtor and Secured Party
Michaels Stores, Inc. NationsBank of Texas, FL 02-23-95 950000036906 Equipment
N.A.
Michaels Stores, Inc. IBM Credit Corporation Barrow 03-26-96 007-96-001101 Equipment
County, GA
Michaels Stores, Inc. IBM Credit Corporation Barrow 03-27-96 007-96-001115 Equipment
County, GA
Michaels Stores, Inc. IBM Credit Corporation Barrow 03-27-96 007-96-001116 Equipment
County, GA
-4-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. IBM Credit Corporation Barrow 03-27-96 007-96-001118 Equipment
County, GA
Michaels Stores, Inc. IBM Credit Corporation Barrow 03-27-96 007-96-001121 Equipment
County, GA
Michaels Stores. Inc. IBM Credit Corporation Barrow 03-27-96 007-96-001122 Equipment
County, GA
Michaels Stores, Inc. Diamond Rentals, Inc. IA 09-02-93 K486772 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. IA 02-02-94 K520920 Equipment
Michaels Stores, Inc. IBM Credit Corporation IL 06-07-96 3549934 Equipment
Michaels Stores, Inc. IBM Credit Corporation IL 08-20-96 3579223 Equipment
Michaels Stores, Inc. IBM Credit Corporation IL 08-20-96 3579225 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. IN 09-21-93 1868940 Equipment
Michaels Stores, Inc. IBM Credit Corporation IN 06-26-96 2063508 Equipment
Michaels Stores, Inc. IBM Credit Corporation KS 03-29-96 2232427 Equipment
Michaels Stores, Inc. IBM Credit Corporation KS 03-29-96 2232428 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. KY 09-22-93 134049 Equipment
Michaels Stores, Inc. IBM Credit Corporation Fayette 08-13-97 9702995 Equipment
County, KY
Michaels Stores, Inc. Diamond Rentals, Inc. East Baton 04-07-94 17-1095071 Equipment
Rouge
Parish:
Caddo Parish,
LA
Michaels Stores, Inc. NCNB Texas National LaFayette 09-22-88 325658 Goods, equipment, furnishings and
Bank, as agent Parish, LA other personal property which are,
or ever become, fixtures on the land
described on SCHEDULE A thereto or
the building and improvements on
such land.
Michaels Stores, Inc. Diamond Rentals, Inc. MI 09-21-93 35250B Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. MI 09-21-93 35251B Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. MI 09-21-93 35252B Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. MI 09-21-93 35253B Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. MI 09-21-93 35254B Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. MI 09-23-93 35329B Equipment
Michaels Stores, Inc. IBM Credit Corp. MO 03-29-96 2648035 Equipment
Michaels Stores, Inc. IBM Credit Corp. MO 03-29-96 2648036 Equipment
-5-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. NCNB Texas National Boone 09-23-88 111431 Equipment, goods, furnishings
Bank, as County, MO and inventory
Administrative Lender
Michaels Stores, Inc. IBM Credit Corporation Clay County, 04-01-96 H162422 Equipment
MO
Michaels Stores, Inc. IBM Credit Corporation Clay County, 04-01-96 H162425 Equipment
MO
Michaels Stores, Inc. IBM Credit Corporation Greene 07-05-96 2770 Equipment
County, NC
Michaels Stores, Inc. Diamond Rentals, Inc. NC 01-04-94 1064640 Equipment
Michaels Stores, Inc. IBM Credit corporation NC 03-29-96 1324387 Equipment
Michaels Stores, Inc. IBM Credit Corporation NC 03-29-96 1324386 Equipment
Michaels Stores, Inc. IBM Credit Corporation Wake 04-11-96 96002291 Equipment
County, NC
Michaels Stores, Inc. IBM Credit Corporation Wake 04-11-96 96002294 Equipment
County, NC
Michaels Stores, Inc. IBM Credit Corp. NJ 07-15-96 1710823 Equipment
Michaels Stores, Inc. Advance Acceptance NM 10-18-93 931018047 (1) Kent KF2500BE Buffer,
Corporation (1) Kent KA201BST Auto Scrubber
Michaels Stores, Inc. Diamond Rentals, Inc. NY 02-02-94 021060 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. NY 09-14-93 195407 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. NY 09-14-93 195408 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. NY 09-14-93 195409 Equipment
Michaels Stores, Inc. North Shore Leasing and NY 10-28-97 222220 Equipment (Water Filtration
Funding, Inc. System)
Michaels Stores, Inc. North Shore Leasing and NY 10-28-97 222221 Equipment (Water Filtration
Funding, Inc. System)
Michaels Stores, Inc. North Shore Leasing and NY 10-28-97 222222 Equipment (Water Filtration
Funding, Inc. System)
Michaels Stores, Inc. Diamond Rentals, Inc. OH 09-02-93 AK43586 Model CP-2102 Compactor S/N:
93063540: Model C-2242
Compaction Container, S/N: 231
Michaels Stores, Inc. Diamond Rentals, Inc. OH 09-02-93 AK43587 Model CP-2102 Compactor S/N:
93063559: Model C-2242
Compaction Container, S/N: 208
Michaels Stores, Inc. Diamond Rentals, Inc. OH 09-02-93 AK43588 Model TVB60 Vertical Baler, S/N:
04933619, Voltage: 230, Paint
Color: Diamond Brown, Front Bale
Wire Feed System
-6-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. Diamond Rentals, Inc. OH 09-02-93 AK43589 Model CP-2102 Compactor, S/N:
93033490, Voltage: 208, Paint
Color: Diamond Brown, Model C-
2242 Rt Compaction Container,
S/N: 170, Paint Color: Diamond
Brown
Michaels Stores, Inc. Diamond Rentals, Inc. OH 09-21-93 AK47177 Model CP-2102 Compactor, S/N:
93033492, Paint Color: Diamond
Brown, Model C-2242, S/N: 179,
Rt Compaction Container, Paint
Color: Diamond Brown
Michaels Stores, Inc. Diamond Rentals, Inc. OH 09-21-93 AK47178 Model CP-2102 Compactor, S/N:
93073604, Paint Color: Beige,
Model C-2242 Compaction
Container S/N: 33599, Paint Color:
Beige
Michaels Stores, Inc. Diamond Rentals, Inc. OH 12-13-93 AK64959 Model CP-2102 Compactor, S/N:
92123345, Voltage: 208 3 Phase
Paint Color: Beige, Model C-2242
Container, with: STD
Understructure Container Color:
Beige
Michaels Stores, Inc. IBM Credit Corporation OR 04-01-96 305133 Equipment
Michaels Stores, Inc. IBM Credit Corporation OR 04-01-96 305134 Equipment
Michaels Stores, Inc. IBM Credit Corporation SC 08-16-96 960816- Equipment
120438A
Michaels Stores, Inc. NCNB Texas National Davidson 12-19-88 D51773 All equipment and fixtures,
Bank, as Administrative County, TN furnishings, improvements and
Lender proceeds
Michaels Stores, Inc. American Business Credit TX 04-11-94 94-068828 Equipment
Corp.
Michaels Stores, Inc. American Business Credit TX 09-12-94 94-178425 Equipment
Corp.
Michaels Stores, Inc. American Business Credit TX 01-30-95 95-018131 Equipment
Corporation
Michaels Stores, Inc. BancBoston Leasing, Inc. TX 06-19-98 98-125373 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. TX 09-21-93 93-181189 Equipment covered under lease
between Debtor and Secured Party
dated 8-15-93, including Model CP
2102 beige compactor, S/N:
93063547; Model C-2242 beige
compaction container S/N: 33497.
-7-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. Diamond Rentals, Inc. TX 09-21-93 93-181190 Equipment covered under lease
between Debtor and Secured Party
dated 9-1-93, including Model CP-
2102 Diamond Brown compactor, S/N:
93083642; Model C-2242 beige
compaction container S/N: 33879.
Michaels Stores, Inc. Diamond Rentals, Inc. TX 09-21-93 93-181191 Equipment covered under lease
between Debtor and Secured Party
dated 9-1-93, including Model CP-
2102 beige, S/N: 93073570; Model
C-2242 beige compaction container
S/N: 33601.
Michaels Stores, Inc. Diamond Rentals, Inc. TX 09-27-94 94-187958 Equipment
Michaels Stores, Inc. IBM Corporation TX 07-31-95 95-148709 Equipment
Michaels Stores, Inc. IBM Corporation TX 12-08-95 95-234977 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 01-03-96 96-002242 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 02-20-96 96-032164 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-01-96 96-040298 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051077 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051079 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051080 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051081 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051082 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051083 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051084 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051085 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051086 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051087 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-15-96 96-051088 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-26-96 96-058531 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-29-96 96-060785 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 03-29-96 96-060786 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 04-12-96 96-071862 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 04-19-96 96-077043 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 04-19-96 96-077044 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 04-19-96 96-077045 Equipment
-8-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. IBM Credit Corporation TX 04-19-96 96-077046 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 04-19-96 96-077084 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 04-19-96 96-077085 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 04-19-96 96-077086 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 05-01-96 96-085973 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 05-17-96 96-098085 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 06-12-96 96-0116085 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 07-03-96 96-0131344 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 07-26-96 96-0147362 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 07-26-96 96-0147363 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 07-26-96 96-0147364 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 08-13-96 96-0159672 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 08-13-96 96-0159673 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 08-16-96 96-0162317 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 08-16-96 96-0162324 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 08-26-96 96-0168957 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 08-26-96 96-0168958 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 09-06-96 96-0176384 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 09-06-96 96-0176427 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 09-10-96 96-0179391 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 09-10-96 96-0179392 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 10-16-96 96-0205782 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 12-27-96 96-0254058 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 01-31-97 97-0018378 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 04-01-97 97-0064764 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 04-01-97 97-0064765 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 04-22-97 97-0082802 Equipment
Michaels Stores, Inc. IBM Credit Corporation TX 07-28-97 97-0158119 Equipment
Michaels Stores, Inc. NationsBank of Texas, TX 02-21-95 95-033321 Equipment, as amended by File
N.A., as agent Nos. 648571 and 698464
-9-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. New England Capital TX 06-26-89 89-144503 Equipment covered by Equipment
Corp. Lease Agreement dated 06-09-89.
Including various 3-cold only NSA
Water Coolers and 3-100s Filters, 4-
H/C NSA Water Coolers - 100s
Michaels Stores, Inc. OLE Printing Systems TX 06-18-98 98-0124732 Equipment
USA
Michaels Stores, Inc. SafeCo Credit Co., Inc. TX 05-02-97 97-0091050 Equipment
Michaels Stores, Inc. NationsBank N.A., as Dallas 02-20-95 796 Equipment, as amended on
agent County, TX 04-20-95, 04-05-96 and as further
amended on 08-13-96
Michaels Stores, Inc. Diamond Rentals, Inc. UT 09-07-93 371765 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. UT 09-22-93 373216 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. VA 09-24-93 9309247800 Model CP-2102 S/N: 93073605,
Paint Color: Beige, Model C-2242
Compaction Container S/N: 262,
Paint Color: Beige
Michaels Stores, Inc. Diamond Rentals, Inc. WA 09-07-93 932500429 Equipment
Michaels Stores, Inc. Diamond Rentals, Inc. WA 09-07-93 932500430 Equipment
B. FEDERAL/STATE TAX LIENS
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. State of Indiana Marion 02-10-94 2256683 State of Indiana Tax Lien -
County, IN $3,266.00 (Copy of Tax Lien not
available)
Michaels Stores, Inc. State of Indiana Marion 10-20-95 2589318 State of Indiana Tax Lien -
County, IN $1,044.68 (Copy of Tax Lien not
available)
Michaels Stores, Inc. State of Kansas Dept of Johnson 10-11-93 2307205 State of Kansas' Department of
Human Resources County, KS Human Resources placed lien on all
of Debtor's real and personal
property for contributions, payments
in lieu of contributions or benefit
cost payments, including interest and
penalties; total amount of lien
$203.83
-10-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. State of Missouri Boone 04-14-97 970156 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $28,032.92
Michaels Stores, Inc. State of Missouri Boone 03-28-98 980099 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $26,154.25
Michaels Stores, Inc. State of Missouri Greene 03-24-98 001260 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $26,154.25
Michaels Stores, Inc. State of Missouri Greene 04-14-97 001603 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $28,032.92
Michaels Stores, Inc. State of Missouri Jackson 03-18-97 K2975P362 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $1,836.69
Michaels Stores, Inc. State of Missouri Jackson 04-14-97 K2987P598 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $28,032.92
Michaels Stores, Inc. State of Missouri Jackson 04-23-98 K3181P2198 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $26,154.25
Michaels Stores, Inc. State of Missouri St. Charles 03-17-97 13972 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $1,836.39
-11-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. State of Missouri St. Charles 04-15-97 19759 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $28,032.92
Michaels Stores, Inc. State of Missouri St. Charles 03-24-98 20454 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $26,154.25
Michaels Stores, Inc. State of Missouri St. Louis 04-17-97 73012 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $28,032.92
Michaels Stores, Inc. State of Missouri St. Louis 03-27-98 76946 State of Missouri's Director of
County, MO Revenue placed lien on all of
Debtor's personal and real property
for failure to pay State of
Missouri's sales/use tax; total
amount of lien - $26,154.25
</TABLE>
C. JUDGMENT LIENS
<TABLE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. Donald R. Frantz Ramsey 06-01-96 2938072 Notice of Lis Pendens filed in
Concrete Construction, County, MN connection with lawsuit filed by
Inc. Secured Party against several
defendants, including Michaels
Stores, Inc., which involves suit to
enforce and foreclose a mechanic's
lien in the amount $21,084 with
interest for labor, skill and
material provided by Secured Party in
connection with the improvement of
the property described in EXHIBIT A
attached thereto.
-12-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. Floor Design, Inc. Ramsey 02-16-96 2912649 Notice of Lis Pendens filed in
County, MN connection with lawsuit filed by
Secured Party against several
defendants, including Michaels
Stores, Inc., which involves suit to
enforce and foreclose a mechanic's
lien in the amount $21,084 with
interest for labor, skill and
material provided by Secured Party in
connection with the improvement of
the property described in EXHIBIT A
attached thereto.
Michaels Stores, Inc. State of Nevada, Clark 01-08-92 92010800763 Memorandum of Judgment;
Employment Security County, NV judgment entered against Debtor in
Department the amount of $2,671.29 plus
interest (interest rate prescribed by
Chapter 612 of the Nevada Revised
Statutes) due to the State of
Nevada's Employment Security
Department for contributions to both
the Nevada Unemployment Compensation
Fund and the Claimant Employment
Fund.
D. MECHANICS'/MATERIALMEN'S LIENS
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. Fire Protection Los Angeles 10-03-88 88-1588103 Mechanics' lien covering fire
Fabricators, Inc. County, CA sprinkler system - $6,546.57
Michaels Stores, Inc. C.V. Industries d/b/a Los Angeles 09-29-98 88-1569999 Mechanics' Lien covering fire
Mark-Well Fire County, CA sprinkler system - $805.09
Protection Supplies Co.
Michaels Stores, Inc. Capitol Materials, Fulton 11-22-95 Book-20304 Materialmen's lien covering Debtor's
Incorporated County, GA Page-341 leasehold interest or real estate on
which improvements were erected as
described in (*EXHIBIT A to the Claim
of Lien EXHIBIT A not attached) -
$855.74
Michaels Stores, Inc. Thomas Concrete of Fulton 11-30-95 Book-20347 Materialmen's Lien covering the
Georgia, Inc. County, GA Page-347 building and the premises or real
estate on which the improvements
were erected of The Mutual Life
Insurance of New York and Debtor,
as their interests may appear, as
described in EXHIBIT A to the Claim
of Lien (*EXHIBIT A not attached) -
$3,520.00.
-13-
<PAGE>
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Michaels Stores, Inc. Thomas Concrete of Fulton 09-25-96 Book-21618 Notice of Filing of Action for Claim
Georgia, Inc. County, GA Page-87 on Mechanics' and Materialmen's
Liens - provides notice that Thomas
Concrete of Georgia, Inc. filed an
action in Superior Court of Fayette
County, styled Thomas Concrete of
Georgia, Inc. v. Danfor Corporation,
Civil Action No. 96V-1353(W) on
September 24, 1996, in order to
recover the amount of the Claim of
Lien recorded in the Office of the
Clerk of the Superior Court of Fulton
County at Deed Book 20347, page
347 (See filing immediately above).
Michaels Stores, Inc. Doors Incorporated Polk 07-26-93 ML23-138 Mechanics' Lien covering
County, IA improvement and real estate on
which such improvement is situated -
$4,336.60 with interest thereon @
18% per annum; Michaels Store, Inc.
is listed as the tenant and Menards,
Inc. is listed as the owner of the
real estate.
Michaels Stores, Inc. Southside Floors, Inc. McLean 05-08-95 95-8509 Materialmen's Lien covering real
County, IL estate and appurtenances described
therein for improvements thereto -
$17,390.00
Michaels Stores, Inc. Consolidated Electrical Allen 08-15-95 Volume 22, Amended Affidavit of (Mechanics')
Distributors, Inc. County, OH Page 283 Lien covering improvement of the
real property described on EXHIBIT A
thereto (*EXHIBIT A not attached);
said property being more commonly
known as Michael's Craft Store;
amount of lien - $17,18137.
Michaels Stores, Inc. Daniel G. Kamin Allen 04-05-95 Volume 22, Notice of Commencement of
County, OH Page 105 Mechanics' Lien for improvement of
real property described therein with
a physical address of Lima Plaza,
2154 Elida Road, Lima, Ohio.
Michaels Stores, Inc. Tennessee Tool and Williamson 05-19-98 Book - 1669 Mechanics' and Materialmen's Lien
Supply, Inc. County, TN Page - 712 covering improvements constructed
on real estate described on EXHIBIT A
to Notice of Claim of Lien pursuant
to a contract between Tennessee
Tool and Supply, Inc. and Hatcher
d/b/a Hatcher Excavating -
$24,600.34 plus interest and
recording costs.
-14-
<PAGE>
II. AARON BROTHERS, INC.
A. UCC-1 FINANCING STATEMENTS
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Aaron Brothers SalePoint, Inc. CA 10-15-96 9629261146 Equipment
Aaron Brothers Inc. AEL Leasing Co. d/b/a CA 04-07-97 9710260463 Equipment
American Equipment
Leasing
Aaron Brothers, Inc. Bank of America N.T. & CA 04-04-96 9609660189 Equipment
S.A.
Aaron Brothers Xerox Corporation CA 02-02-94 94021498 Equipment
B. FEDERAL/STATE TAX LIENS -- None
C. JUDGMENT LIENS
<CAPTION>
STATE/
COUNTY DATE
OF OF
DEBTOR SECURED PARTY FILING FILING FILE NO. COLLATERAL
- ------- ------------------ ----------- -------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Aaron Brothers Inc. Maricopa County, Flood Maricopa 03-15-88 CV-88-06614 Notice of Lis Pendens: Flood Control
Control District County, AZ District of Maricopa County filed a
suit in condemnation against
Westcor, Inc. and several other
defendants, including Aaron
Brothers, Inc.
</TABLE>
D. MECHANICS'/MATERIALMEN'S LIENS -- None
III. 5931 BUSINESS TRUST -- No UCC financing statements, federal/state
tax liens, judgment liens or
mechanics'/materialmen's liens.
IV. 5931, INC. -- No UCC financing statements, federal/state tax liens,
judgment liens or mechanics'/ materialmen's liens.
-15-
<PAGE>
V. MICHAELS OF CANADA, ULC -- No UCC financing statements, federal/state
tax liens, judgment liens or
mechanics'/materialmen's liens.
VI. MICHAELS OF PUERTO RICO, INC. -- No UCC financing statements,
federal/state tax liens, judgment
liens or mechanics'/materialmen's
liens.
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-30-1999 JAN-30-1999
<PERIOD-START> MAY-03-1998 FEB-01-1998
<PERIOD-END> AUG-01-1998 AUG-01-1998
<CASH> 42,918 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 553,851 0
<CURRENT-ASSETS> 627,265 0
<PP&E> 353,755 0
<DEPRECIATION> 157,245 0
<TOTAL-ASSETS> 963,881 0
<CURRENT-LIABILITIES> 249,540 0
<BONDS> 221,940 0
0 0
0 0
<COMMON> 2,966 0
<OTHER-SE> 460,508 0
<TOTAL-LIABILITY-AND-EQUITY> 963,881 0
<SALES> 314,171 649,941
<TOTAL-REVENUES> 314,171 649,941
<CGS> 215,325 440,199
<TOTAL-COSTS> 308,550 631,773
<OTHER-EXPENSES> (982) (3,010)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,580 11,283
<INCOME-PRETAX> 1,023 9,895
<INCOME-TAX> 389 3,760
<INCOME-CONTINUING> 634 6,135
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 634 6,135
<EPS-PRIMARY> .02 .21
<EPS-DILUTED> .02 .20
</TABLE>
