<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 30, 1994 Commission file number 1-8897
CONSOLIDATED STORES CORPORATION
A Delaware Corporation
IRS No. 06-1119097
1105 North Market Street, Suite 1300
P.O. Box 8985
Wilmington, Delaware 19899
(302) 478-4896
Indicate 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, and (2) has been subject to such filling requirements for
the past 90 days. Yes [X] No [ ]
The number of shares of Common Stock $.01 par value per share, outstanding as
of September 7, 1994, was 46,770,813 and there were no shares of Non-Voting
Common Stock, $.01 par value per share outstanding at that date.
FORM 10Q - Page 1 of 88
<PAGE> 2
CONSOLIDATED STORES CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
----- Page
----
PART I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - Other Information 9
Signatures 11
FORM 10Q - Page 2 of 88
<PAGE> 3
<TABLE>
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
July 30, January 29,
1994 1994*
=====================================================================================================================
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 11,355 $ 24,873
Accounts receivable 4,775 4,865
Inventories 346,576 252,880
Prepaid expenses and deferred income taxes 33,045 28,211
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 395,751 310,829
- ---------------------------------------------------------------------------------------------------------------------
Property and equipment - net 161,061 147,848
Other assets 8,902 9,543
- ---------------------------------------------------------------------------------------------------------------------
$565,714 $468,220
=====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 29,600 $ --
Accounts payable 98,765 81,545
Accrued liabilities and income taxes 38,417 54,755
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 166,782 136,300
- ---------------------------------------------------------------------------------------------------------------------
Long-term obligations, less current maturities 107,900 50,000
Deferred income taxes and other liabilities 23,426 23,385
Stockholders' equity:
Preferred stock - authorized 2,000,000 shares,
$.01 par value; none issued -- --
Common stock - authorized 90,000,000 shares,
$.01 par value; shares issued 46,631,773 and
46,485,428, respectively 466 465
Non-voting common stock - authorized 8,000,000
shares, $.01 par value; none issued -- --
Additional paid-in capital 91,947 89,817
Retained earnings 174,572 165,479
Other adjustments 621 2,774
- ---------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 267,606 258,535
- ---------------------------------------------------------------------------------------------------------------------
$565,714 $468,220
=====================================================================================================================
<FN>
* Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed financial statements.
</TABLE>
FORM 10Q - Page 3 of 88
<PAGE> 4
<TABLE>
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except earnings per share data)
<CAPTION>
Thirteen weeks ended Twenty-six weeks ended
-------------------- ----------------------
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
============================================================================================================
<S> <C> <C> <C> <C>
Sales $272,813 $234,430 $515,091 $444,620
Costs and expenses:
Cost of sales 155,158 131,171 295,754 252,008
Selling and administrative expenses 104,641 90,841 202,109 177,476
Interest expense 1,812 1,509 2,782 2,862
Other - net (170) (88) (966) (933)
- ------------------------------------------------------------------------------------------------------------
261,441 223,433 499,679 431,413
- ------------------------------------------------------------------------------------------------------------
Income before income taxes 11,372 10,997 15,412 13,207
Income taxes 4,663 4,402 6,319 5,286
- ------------------------------------------------------------------------------------------------------------
Net income $ 6,709 $ 6,595 $ 9,093 $ 7,921
============================================================================================================
Income per common and common
equivalent share $ .14 $ .14 $ .19 $ .17
============================================================================================================
Weighted average number of
common and common equivalent
shares outstanding 47,878 47,899 48,009 47,877
============================================================================================================
<FN>
The accompanying notes are an integral part of these condensed financial statements.
</TABLE>
FORM 10Q - Page 4 of 88
<PAGE> 5
<TABLE>
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Twenty-six weeks ended
------------------------
July 30, July 31,
1994 1993
==============================================================================================================
<S> <C> <C>
Cash provided by (used for) operations:
Net income $ 9,093 $ 7,921
Items not effecting cash:
Depreciation and amortization 11,093 10,313
Deferred income taxes (3,093) 3,016
Other 641 788
Changes in assets and liabilities (92,259) (66,645)
- --------------------------------------------------------------------------------------------------------------
Net cash used for operations (74,525) (44,607)
- --------------------------------------------------------------------------------------------------------------
Cash provided by (used for) investment activities:
Capital expenditures (25,317) (21,778)
Other (2,495) 157
- --------------------------------------------------------------------------------------------------------------
Net cash used for investment activities (27,812) (21,621)
- --------------------------------------------------------------------------------------------------------------
Cash provided by financing activities:
Net proceeds from credit agreements 87,500 39,300
Exercise of stock options 319 390
Increase in deferred credits 1,000 --
- --------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 88,819 39,690
- --------------------------------------------------------------------------------------------------------------
Decrease in cash $ (13,518) $ (26,538)
==============================================================================================================
Supplemental Data
- -----------------
Income taxes paid $ 18,760 $ 11,294
Interest paid $ 3,548 $ 2,912
<FN>
The accompanying notes are an integral part of these condensed financial statements.
</TABLE>
FORM 10Q - Page 5 of 88
<PAGE> 6
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - BASIS OF PRESENTATION
The condensed consolidated balance sheet at July 30, 1994, and the condensed
consolidated statements of income and statements of cash flows for the thirteen
and twenty-six week periods ended July 30, 1994, have been prepared by the
Company without audit. In the opinion of management, all adjustments necessary
to present fairly the financial position, results of operations, and cash flows
at July 30, 1994, and for all periods presented have been made. Such
adjustments consisted only of normal recurring items.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principals
have been omitted or condensed. It is suggested that the condensed consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report for the year ended
January 29, 1994. The results of operations for the period ended July 30, 1994,
may not necessarily be indicative of the operating results for the full year.
Note 2 - EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share are based on the weighted
average number of shares outstanding during each period which includes the
additional number of shares which would have been issued upon exercise of stock
options assuming that the Company used the proceeds received to purchase
additional shares at market value.
FORM 10Q - Page 6 of 88
<PAGE> 7
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
TRENDS. The Company is a leading retailer and wholesaler of closeout
merchandise. At July 30, 1994, retail operations were conducted through 461 ODD
LOTS/BIG LOTS and 11 ITZADEAL! specialty retail stores, 164 ALL FOR ONE
single price point retail stores and 82 TOY LIQUIDATORS/TOYS UNLIMITED STORES
(TOYS) discount toy stores. In comparison, there were 402 ODD LOTS/BIG LOTS and
170 ALL FOR ONE stores in operation at the end of the 1993 second quarter.
Wholesale operations are conducted under the name of CONSOLIDATED INTERNATIONAL
and WISCONSIN TOY. It is anticipated 55 net new ODD LOTS/BIG LOTS and 20 to 30
ITZADEAL! stores will be opened in fiscal 1994. A summary of change in the
number of stores in operation is presented below.
<TABLE>
<CAPTION>
Beginning Format End of
of Year Opened Closed Conversion* Quarter
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
ODD LOTS/BIG LOTS 432 40 (11)** -- 461
ALL FOR ONE 177 -- (8) (5) 164
iTZADEAL! -- 6 -- 5 11
TOYS*** -- 82 -- -- 82
- --------------------------------------------------------------------------------------------------------------
609 128 (19) -- 718
- --------------------------------------------------------------------------------------------------------------
1993
ODD LOTS/BIG LOTS 381 29 (8) -- 402
ALL FOR ONE 160 11 (1) -- 170
iTZADEAL! -- -- -- -- --
TOYS -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------
541 40 (9) -- 572
- --------------------------------------------------------------------------------------------------------------
<FN>
* Converted from ALL FOR ONE single price point format to ITZADEAL! merchandising concept.
** Includes one temporary store closing due to flood conditions in the south.
*** Acquired certain assets on May 18, 1994.
</TABLE>
The Company's retail business is somewhat seasonal. Due to the holiday season,
the fourth quarter generally reflects higher net sales and net income than the
other quarters. The first quarter is usually the least profitable reflecting
the traditional slow retail sales period following the holiday season.
Quarterly fluctuations in inventory balances are normal reflecting the
opportunistic purchases available at any given time and the expansion of the
Company's store base. Historically, on a per store basis, inventory levels are
lower at the end of the fiscal year and build through the remaining three
quarters of the year to a peak level in the third quarter. Accounts payable
generally follow a trend similar to inventories.
SALES. Net sales in the second quarter of 1994 increased 16.4% to $272.8
million from $234.4 million in the 1993 period. For the twenty-six weeks ended
July 30, 1994, net sales increased 15.9% to $515.1 million. Reflected in the
quarterly and year-to-date sales gains are increases in net retail sales of
15.8% and 15.5%, respectively. Second quarter 1994 retail sales were effected
by slow softline sales throughout most of the period. These sales continued to
recover toward the end of the quarter. The year-to-date sales volume reflects
the negative impact in each first quarter
FORM 10Q - Page 7 of 88
<PAGE> 8
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - (Continued)
- -----------------------------------
of severe winter storms in many of the Company's market areas and the expansion
of the Company's retail store base. For 1994 comparable store sales for stores
open two full years at the beginning of fiscal 1994 declined 1.6% in the second
quarter and 1.1% for the twenty-six week period. Comparable store sales
increased 5.0% in the second quarter 1993 and were a positive 1.4% for the
first six months of 1993.
GROSS PROFIT. Gross profit, as a percentage of net sales, was 43.1% for the
second quarter of 1994 and 42.6% for the year-to-date period. Comparable
period gross profit percentages in the preceding year were 44.0% and 43.3%,
respectively. Retail gross profit in the second quarter of 1994 and 1993 were
43.4% and 44.3%, respectively. For the first six months of 1994 retail gross
profit was 43.0% compared to 43.7% in the prior year. The decline in gross
profit percentage is primarily attributable to markdowns associated with
softlines offset slightly by benefits realized from inventory control programs.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses as a
percent of net sales were 38.4% in the second quarter of 1994 and 38.7% for the
comparable 1993 period. For the twenty-six week periods of 1994 and 1993 the
percentages were 39.2% and 39.9%, respectively. The improvement reflects the
reduction of previously recognized operating expenses, leverage from store
growth on corporate fixed expenses, the benefits of implemented cost controls,
and general operating efficiencies.
INTEREST EXPENSE. Interest expense increased $0.3 million in the second
quarter of 1994 compared to the same 1993 period. This rise reflects an
increase in the weighted average seasonal borrowings, higher effective interest
rates on seasonal borrowings, and the benefit of capitalized interest
associated with the construction of an addition to the Company's warehouse
facility.
INCOME TAXES. The Company's effective income tax rate has increased from
40.0% in fiscal 1993 to 41.0% in 1994. The increase represents higher tax rates
in certain states which the Company operates, the utilization of state
operating loss carryforwards and a reduction in the benefits from Targeted Jobs
Tax Credits.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Financing for store expansion, capital expenditure programs, and seasonal
operating requirements are financed by internally generated funds and
available credit facilities. The Company has a $90 million revolving credit
facility through June 1, 1996, and a $50 million letter of credit facility
through June 1, 1995. Seasonal increases in the revolving credit and letter of
credit facility to $110 million and $75 million, respectively are available.
Additional uncommitted credit facilities totaling $55 million are utilized as
needed. Availability under all credit agreements at July 30, 1994, totaled
$70.8 million. The Company believes that sufficient amounts of capital
resources are available, or readily obtainable, to achieve both short-term
plans and long-term goals.
FORM 10Q - Page 8 of 88
<PAGE> 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in securities. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company's Annual Meeting was held on June
7, 1994.
(b) The number of shares of voting Common Stock,
$.01 par value per share, outstanding as of
April 26, 1994, the record date, was
46,601,463.
(c) Proxies were solicited by management pursuant
to Regulation 14 under the Securities Exchange
Act of 1934. There was no solicitation in
opposition to management's nominees as listed
in the proxy statement. All of the nominee's
were elected pursuant to a vote of the
stockholders.
(d) A proposal to approve an amendment to the
Company's bylaws, creating three classes of
Directors with staggered three year terms was
turned down by a vote of the stockholders.
The vote on this proposal was:
For: 15,590,825 Against: 22,321,711
---------- ----------
Abstain: 738,418
---------
(e) A proposal to approve the Consolidated Stores
Corporation Key Executive Incentive
Compensation Plan was approved a majority vote
of the stockholders.
The vote on this proposal was:
For: 40,175,619 Against: 1,061,978
---------- ----------
Abstain: 277,993
---------
Item 5. Other Information. Not applicable.
FORM 10Q - Page 9 of 88
<PAGE> 10
PART II - OTHER INFORMATION - (CONTINUED)
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Document
--------------------------------------------------------
10 Credit Agreement dated May 27, 1994,
among Consolidated Stores Corporation and
C. S. Ross Company and National City
Bank, Columbus, NBD Bank, N. A., Bank
One, Columbus, N. A. and The Bank of
Tokyo Trust Company.
10(a) Credit Guarantee dated May 27, 1994, by
Consolidated Stores Corporation and TRO,
Inc. in favor of National City Bank,
Columbus, NBD Bank, N. A., Bank One,
Columbus, N. A. and The Bank of Tokyo
Trust Company.
10(b) Credit Guarantee dated May 27, 1994, by
subsidiaries of Consolidated Stores
Corporation jointly and severally in
favor of National City Bank, Columbus,
NBD Bank, N. A., Bank One, Columbus, N.
A. and The Bank of Tokyo Trust Company
(27) Financial Data Schedule
(b) Reports on Form 8-K. None
FORM 10Q - Page 10 of 88
<PAGE> 11
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.
CONSOLIDATED STORES CORPORATION
-------------------------------
(Registrant)
Dated: September 12, 1994 By: /s/ Michael J. Potter
--------------------------
Senior Vice President, Chief
Financial Officer and Chief
Accounting Officer
FORM 10Q - Page 11 of 88
<PAGE> 1
Exhibit 10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSOLIDATED STORES CORPORATION
C.S. ROSS COMPANY
------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of May 27, 1994
------------------------------------------------------------------
NATIONAL CITY BANK, COLUMBUS
NBD BANK, N.A.
BANK ONE, COLUMBUS, N.A.
THE BANK OF TOKYO TRUST COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM 10Q - Page 12 of 88
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Subsection 1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Subsection 1.2. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Subsection 1.3. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2 - AMOUNT AND TERMS OF COMMITMENT AND LOANS . . . . . . . . . . . . . . . . . . . . . . . . . 18
Subsection 2.1. Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Subsection 2.2. Revolving Nature of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Subsection 2.3. Types of Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . 18
Subsection 2.4. Procedures With Respect to Prime Loans and
CD Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Subsection 2.5. Conversion of Certain Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Subsection 2.6. Procedures With Respect to Negotiated Loans
and Eurodollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Subsection 2.7. Certain Matters With Respect to Loans . . . . . . . . . . . . . . . . . . . . . 21
Subsection 2.8. Conditions to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Subsection 2.9. Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Subsection 2.10. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Subsection 2.11. Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Subsection 2.12. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Subsection 2.13. Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Subsection 2.14. Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Subsection 2.15. Setting and Notice of Domestic CD Rate
(Adjusted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Subsection 2.16. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Subsection 2.17. Termination or Reduction of Commitment . . . . . . . . . . . . . . . . . . . . 23
Subsection 2.18. Optional Prepayments of Prime Loans . . . . . . . . . . . . . . . . . . . . . . 23
Subsection 2.19. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . 23
Subsection 2.20. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Subsection 2.21. Use of Proceeds of Revolving Credit Loans . . . . . . . . . . . . . . . . . . . 24
Subsection 2.22. Increased Taxes or Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Subsection 2.23. Changes in Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subsection 2.24. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3 - LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Subsection 3.1. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Subsection 3.2. Notice of Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Subsection 3.3. Payment of Amounts Drawn Under Letters of Credit . . . . . . . . . . . . . . . 27
Subsection 3.4. Payment by Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Subsection 3.5. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Subsection 3.6. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Subsection 3.7. Increased Costs and Changed Circumstances . . . . . . . . . . . . . . . . . . . 30
SECTION 4 - TERM LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Subsection 4.1. Procedure for Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Subsection 4.2. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5 - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Subsection 5.1. Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . 31
Subsection 5.2. Corporate Power; Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Subsection 5.3. No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Subsection 5.4. No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
FORM 10Q - Page 13 of 88
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Subsection 5.5. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Subsection 5.6. Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Subsection 5.7. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Subsection 5.8. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Subsection 5.9. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Subsection 5.10. No Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Subsection 5.11. Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Subsection 5.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Subsection 5.13. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Subsection 5.14. CSC Ohio Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6 - CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Subsection 6.1. Conditions to Initial Revolving Credit Loans . . . . . . . . . . . . . . . . . . 34
Subsection 6.2. Conditions to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7 - AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Subsection 7.1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Subsection 7.2. Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . 37
Subsection 7.3. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Subsection 7.4. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . 38
Subsection 7.5. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . 38
Subsection 7.6. Inspection of Property; Books and Records;
Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Subsection 7.7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8 - NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Subsection 8.1. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Subsection 8.2. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Subsection 8.3. Prohibition of Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . 40
Subsection 8.4. Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Subsection 8.5. Limitation on Advances and Dividends . . . . . . . . . . . . . . . . . . . . . . 41
Subsection 8.6. Consolidated Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Subsection 8.7. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Subsection 8.8. No Change in Fiscal-Year Period . . . . . . . . . . . . . . . . . . . . . . . . 41
Subsection 8.9. Transactions with CSC Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9 - ADDITIONAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Subsection 9.1. Sale of Stock or Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Subsection 9.2. Merger and Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Subsection 9.3. Distributions, Optional Subordinated Debt
Payments and Restricted Investments . . . . . . . . . . . . . . . . . . . . . . 45
Subsection 9.4. Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Subsection 9.5. Consolidated Adjusted Net Worth Tests . . . . . . . . . . . . . . . . . . . . . . 48
Subsection 9.6. Consolidated Adjusted Funded Debt Tests . . . . . . . . . . . . . . . . . . . . . 48
Subsection 9.7. CSC Ohio Subsidiary Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 48
Subsection 9.8. Sale and Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 49
Subsection 9.9. Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Subsection 9.10. ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Subsection 9.11. Transactions with CSC Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 10 - EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 11 - AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Subsection 11.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Subsection 11.2. Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Subsection 11.3. Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Subsection 11.4. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
FORM 10Q - Page 14 of 88
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Subsection 11.5. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Subsection 11.6. Non-Reliance on Agent and Other Banks . . . . . . . . . . . . . . . . . . . . . 54
Subsection 11.7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Subsection 11.8. Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . 54
Subsection 11.9. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 12 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Subsection 12.1. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Subsection 12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Subsection 12.3. No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 56
Subsection 12.4. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . 56
Subsection 12.5. Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 56
Subsection 12.6. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Subsection 12.7. Governing Law; No Third Party Rights . . . . . . . . . . . . . . . . . . . . . . 57
Subsection 12.8. Adjustments; Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Subsection 12.9. Joint and Several Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 58
Subsection 12.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Subsection 12.11. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Subsection 12.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SCHEDULES
Schedule 3.1 - Pre-Existing Letters of Credit
Schedule 5.11 - Exceptions to Title to Property
Schedule 5.13 - ERISA Matters
Schedule 5.14 - CSC Ohio Subsidiaries
Schedule 8.2(f) - Liens
EXHIBITS
Exhibit 1.1-1 - Form of Credit Guarantee of CSC Parent Companies
Exhibit 1.1-2 - Form of Credit Guarantee of CSC Ohio Subsidiaries
Exhibit 1.1-3 - Form of DLCF Note
Exhibit 2.10 - Form of Revolving Credit Note
Exhibit 4.1 - Form of Term Note
Exhibit 6.1(c) - Form of Legal Opinion
Exhibit 6.1(i) - Form of Borrowing Certificate
</TABLE>
FORM 10Q - Page 15 of 88
<PAGE> 5
CREDIT AGREEMENT, dated as of May 27, 1994, among (a) CONSOLIDATED
STORES CORPORATION, an Ohio corporation ("CSC Ohio"), and C.S. ROSS COMPANY, an
Ohio corporation and wholly owned subsidiary of CSC Ohio ("CSRC") (collectively,
the "Borrowers"), (b) NATIONAL CITY BANK, COLUMBUS, a national banking
association ("National City"), NBD BANK, N.A., a national banking association
("NBD"), BANK ONE, COLUMBUS, N.A., a national banking association ("Bank One"),
and THE BANK OF TOKYO TRUST COMPANY, a banking corporation organized under New
York state law ("Bank of Tokyo") (collectively, the "Banks") and (c) NATIONAL
CITY, as agent for the Banks (in such capacity, the "Agent").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
-----------
1.1. DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"ASRC PERIOD" shall mean the period from August 1 through
November 30 each year.
"ASDL PERIOD" shall mean the period from May 1 through July 31
each year.
"ADDITIONAL SEASONAL COMMITMENT" shall mean $20,000,000 or such
lesser amount as may be determined pursuant to subsection 2.17, PROVIDED
that the Additional Seasonal Commitment shall be considered to be in
effect hereunder and available for use only during the ASRC Period.
"ADDITIONAL SEASONAL DLCF LIMIT" shall mean $25,000,000,
PROVIDED that the Additional Seasonal DLCF Limit shall be considered to
be in effect hereunder and available for use only during the ASDL
Period.
"ADJUSTED FUNDED DEBT" shall mean, with respect to any Person
and without duplication:
(a) Indebtedness for borrowed money, other than Current Debt;
(b) Indebtedness secured by any Lien existing on Property
owned by such Person (whether or not such liabilities have been
assumed) other than Current Debt;
(c) The present value of all payments due under any lease,
pursuant to which such Person is directly or indirectly a lessee, or
under any other arrangement for retention of title (discounted at
the implicit rate if known or 8% PER ANNUM otherwise) if such lease
or other arrangement is in substance a Capital Lease;
(d) Such Person's liabilities under Guarantees of Indebtedness
of a type set forth in clause (a), clause (b) or clause (c) above;
and
(e) Any other obligations (other than deferred taxes) which
are required by GAAP to be shown as liabilities on such Person's
balance sheet and which are payable or remain unpaid more than one
(1) year from the creation thereof.
"ADJUSTED PERCENTAGE (RC)" shall mean, as to the Quoting Bank and each
Participating Bank (if any) participating in a Negotiated Loan as a
Shared Negotiated Loan pursuant to subsection 2.6, the percentage
determined by multiplying the Bank's Percentage (RC) by a fraction, the
numerator of which is 100% and the denominator of which is the sum of
the Percentages (RC) of the Quoting Bank and all such Participating
Banks (if any).
FORM 10Q - Page 16 of 88
<PAGE> 6
"AFFECTED BANK" shall have the meaning assigned to it in subsection
2.23(a).
"AGENT" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"AGREEMENT" shall mean this Credit Agreement, as the same may from time
to time be amended, modified or supplemented.
"APPROVED RATING COMPANY" shall mean Moody's Investors Services, Inc. or
Standard & Poor's Corporation.
"ASSET DISPOSITION DATE" shall have the meaning assigned to it in
subsection 9.1(b).
"BANK OF TOKYO" shall have the meaning assigned to it in the
introductory paragraph of this Agreement.
"BANK ONE" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"BANKS" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"BASIC COMMITMENT" shall mean $90,000,000 or such lesser amount as may
be determined pursuant to subsection 2.17.
"BASIC DLCF LIMIT" shall mean $50,000,000.
"BENEFITTED BANK" shall have the meaning assigned to it in subsection
12.8.
"BORROWERS" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"BORROWING DATE" shall mean the date of any borrowing by the Borrowers
pursuant to this Agreement.
"BUSINESS DAY" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in Columbus, Ohio are authorized or required by
law to close.
"CD LOAN" shall mean a Loan accruing interest at a rate based on the
Domestic CD Rate (Adjusted).
"CSC" shall mean Consolidated Stores Corporation, a Delaware
corporation of which TRO is a wholly owned Subsidiary.
"CSC AFFILIATE" shall mean any Person (other than a CSC Company) (a)
which directly, or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, any of the CSC
Parent/Borrower Companies, (b) which beneficially owns or holds 5% or more of
any class of the Voting Stock of any of the CSC Parent/Borrower Companies, (c)
5% or more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially owned
or held by one or more of the CSC Companies or (d) who is a director or officer
of any of the CSC Companies or any Person described in clause (a) above. For
purposes of this definition, control of a Person shall mean the power, direct
or indirect, (i) to vote 5% or more of the securities having ordinary voting
power for the election of directors of such Person or (ii) to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.
"CSC COMPANIES" shall mean the CSC Parent Companies, the Borrowers and
the CSC Subsidiaries.
FORM 10Q - Page 17 of 88
<PAGE> 7
"CSC OHIO" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"CSC OHIO COMPANIES" shall mean the Borrowers and the CSC Ohio
Subsidiaries.
"CSC OHIO SUBSIDIARIES" shall mean the Subsidiaries of the Borrowers.
"CSC PARENT/BORROWER COMPANIES" shall mean the CSC Parent Companies and
the Borrowers.
"CSC PARENT COMPANIES" shall mean CSC and TRO.
"CSC SUBSIDIARIES" shall mean the Subsidiaries of the CSC
Parent/Borrower Companies.
"CSRC" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"CAPITAL LEASE" shall mean a lease with respect to which the lessee is
required to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP and, in any event, any lease (a) pursuant to
which the lessee shall receive title to the Property subject thereto at the
expiration of such lease or shall have the right or shall have an option to
purchase the Property subject thereto at a nominal amount or an amount less
than a reasonable estimate of the Fair Market Value of such Property at the
date of such purchase, (b) with respect to which the lessor shall have filed a
financing statement (other than for informational purposes with respect to an
operating lease), (c) with respect to which the present value of all rental and
other fixed payments due under such lease is equal to or exceeds ninety percent
(90%) of the remainder of (x) the Fair Market Value of the Property subject the
reto MINUS (y) the amount of any related investment tax credit retained by the
lessor under such lease, or (d) the term of which approximates or exceeds
seventy-five percent (75%) of the reasonably estimated economic life of the
Property subject thereto.
"CLOSING DATE" shall mean the date of the first borrowing under this
Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, and all regulations
promulgated and rulings issued pursuant thereto, as amended from time to time.
"COMMITMENT" shall mean, at any point in time, the aggregate of the
Basic Commitment and, if then available hereunder, the Additional Seasonal
Commitment.
"COMMITMENT FEE" shall have the meaning assigned to it in subsection
2.16.
"COMMITMENT PERIOD" shall mean the period from and including the
Effective Date to but not including the Commitment Termination Date.
"COMMITMENT TERMINATION DATE" shall mean June 1, 1996, or such earlier
date on which the Commitment may terminate in accordance with the terms of this
Agreement.
"COMMONLY CONTROLLED ENTITY" shall mean an entity, whether or not
incorporated, which is under common control with any of the CSC Parent/Borrower
Companies within the meaning of Section 414(b) or (c) of the Code.
FORM 10Q - Page 18 of 88
<PAGE> 8
"CONSOLIDATED ADJUSTED CAPITALIZATION" shall mean the sum of
Consolidated Adjusted Funded Debt plus Consolidated Adjusted Net Worth.
"CONSOLIDATED ADJUSTED FIXED CHARGES" shall mean, with respect to any
fiscal period of CSC, the greater of (a) zero or (b) the amount payable during
such fiscal period with respect to (i) interest due on, or with respect to,
Adjusted Funded Debt and Current Debt owing by or guaranteed by any one or more
of the CSC Companies, as determined on a consolidated basis, and including
without limitation amortization of debt discount and expense and imputed
interest on any Capital Lease, plus (ii) Rentals payable by any one or more of
the CSC Companies, as determined on a consolidated basis, with respect to all
leases (other than leases constituting Capital Leases).
"CONSOLIDATED ADJUSTED FUNDED DEBT" shall mean Adjusted Funded Debt of
the CSC Companies determined on a consolidated basis.
"CONSOLIDATED ADJUSTED NET INCOME" shall mean, for any fiscal period,
net earnings (or loss) after income taxes (and, to the extent not deducted in
the determination of such net earnings or loss, after deducting therefrom any
net earnings or loss attributable to minority interests in CSC Subsidiaries) of
the CSC Companies determined on a consolidated basis, but excluding:
(a) Any gain arising from the sale of capital assets;
(b) Any gain arising from any write-up of assets;
(c) Earnings of any CSC Subsidiary accrued prior to the date
it became a CSC Subsidiary;
(d) Earnings of any Person, substantially all the assets of
which have been acquired in any manner by any of the CSC Companies,
realized by the acquired Person prior to the date of such acquisition;
(e) The net earnings of any Person (other than a CSC
Subsidiary) in which any of the CSC Companies shall have an ownership
interest unless such net earnings shall have actually been received by
such CSC Company in the form of cash distributions;
(f) The earnings of any Person to which assets of any of the
CSC Companies shall have been sold, transferred or disposed of, or into
which any of the CSC Companies shall have merged, prior to the date of
such transaction;
(g) Any gain arising from the acquisition of any Securities of
any of the CSC Companies; and
(h) Any portion of the net earnings of any of the CSC
Companies which cannot be freely converted into Dollars.
"CONSOLIDATED ADJUSTED NET INCOME AVAILABLE FOR FIXED CHARGES" shall
mean, with respect to any fiscal period of CSC, (a) Consolidated Adjusted Net
Income for such period PLUS (b) the aggregate amount of (i) income taxes
accrued in respect of such Consolidated Adjusted Net Income PLUS (ii)
Consolidated Adjusted Fixed Charges accrued for such period (to the extent, but
only to the extent, such aggregate amount was reflected in the computation of
Consolidated Adjusted Net Income for such period).
"CONSOLIDATED ADJUSTED NET WORTH" shall mean, at any time, without
duplication, the sum of the amounts which would be set forth on the consolidated
balance sheet of the CSC Companies as of such time in respect of (a) the par
or stated value of all capital stock, (b)
FORM 10Q - Page 19 of 88
<PAGE> 9
paid-in capital and (c) retained earnings minus the sum of the amounts set
forth on such balance sheet in respect of the items which are Excluded Net Worth
Assets.
"CONSOLIDATED CURRENT ASSETS" shall mean, at a particular date, all
amounts which would be included under current assets on a consolidated
balance sheet of the CSC Companies as at such date.
"CONSOLIDATED CURRENT DEBT" shall mean Current Debt of the CSC Companies
determined on a consolidated basis.
"CONSOLIDATED CURRENT LIABILITIES" shall mean, at a particular date, all
amounts which would be included under current liabilities on a consolidated
balance sheet of the CSC Companies as at such date, including without
limitation Indebtedness incurred hereunder and under the Notes.
"CONSOLIDATED TOTAL LIABILITIES" shall mean, at a particular date, all
amounts which would be included as liabilities on a consolidated balance sheet
of the CSC Companies as at such date.
"CONTINGENT OBLIGATION" shall mean, as to any Person, any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("Primary Obligations") of any other Person
(the "Primary Obligor") in any manner, whether directly or indirectly,
including without limitation any obligation of such Person, whether or not
contingent, (a) to purchase any such Primary Obligation or any Property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such Primary Obligation or (ii)
to maintain working capital or equity capital of the Primary Obligor or
otherwise to maintain the net worth or solvency of the Primary Obligor, (c) to
purchase Property, Securities or services primarily for the purpose of assuring
the owner of any such Primary Obligation of the ability of the Primary Obligor
to make payment of such Primary Obligation or (d) otherwise to assure or hold
harmless the owner of such Primary Obligation against loss in respect thereof;
PROVIDED, HOWEVER, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course
of business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the Primary Obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"CONTRACTUAL OBLIGATION" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"CREDIT GUARANTEE" shall mean each of the Guarantees made by the CSC
Parent Companies and the CSC Ohio Subsidiaries in favor of the Agent and the
Banks, substantially in the forms of Exhibits 1.1-1 and 1.1-2, respectively,
as the same may from time to time be amended, modified or supplemented in
accordance with the terms thereof and hereof.
"CURRENT DEBT" shall mean, with respect to any Person, (a) all
liabilities for borrowed money and all liabilities secured by any Lien existing
on Property owned by such Person whether or not such liabilities have been
assumed, which liabilities, in either case, are payable on demand or within one
(1) year from the creation thereof and (b) all liabilities under Guarantees of
borrowed money owing by others, or of liabilities secured by any Lien existing
on Property owned by others, if such borrowed money or such secured liabilities
are payable on demand or within one (1) year from the creation
FORM 10Q - Page 20 of 88
<PAGE> 10
thereof, except, in the case of either clause (a) or clause (b) above, any such
borrowed money or liabilities which are renewable or extendable at the option
of such Person to a date more than one (1) year from the date of creation
thereof or which constitute the current maturities of borrowed money or
liabilities expressed to mature more than one (1) year from the creation
thereof.
"DLC FACILITY" shall mean the credit facility which supports the
issuance of DLCF Letters of Credit in an aggregate amount outstanding at any
time of up to the DLCF Limit, which facility is in addition to the amount of the
Commitment.
"DLCF LETTERS OF CREDIT" shall mean documentary trade Letters of Credit
issued under the DLCF Facility.
"DLCF LIMIT" shall mean, at any point in time, the aggregate of the
Basic DLCF Limit and, if then available hereunder, the Additional Seasonal DLCF
Limit.
"DLCF LOANS" shall mean amounts advanced and paid by the Banks under
DLCF Letters of Credit.
"DLCF NOTES" shall mean the joint and several demand promissory notes
of the Borrowers issued to each Bank to support and evidence amounts advanced
under DLCF Letters of Credit substantially in the form set forth in Exhibit
1.1-3, with appropriate insertions, dated the Effective Date, payable to the
order of the Bank in a principal amount equal to the Bank's Percentage (DLCF)
multiplied by the amount of the DLC Facility.
"DLCF PERIOD" shall mean the period from and including the Effective
Date to but not including the DLCF Termination Date.
"DLCF TERMINATION DATE" shall mean June 1, 1995, or such earlier date
as the DLC Facility may terminate in accordance with the terms of this
Agreement.
"DEFAULT" shall mean any event specified in Section 10, whether or not
any requirement for the giving of notice or the lapse of time, or both, or for
the happening of any further condition, event or act, has been satisfied.
"DISPOSITION SUBSIDIARY" shall have the meaning assigned to it in
subsection 9.1(a).
"DISPOSITION VALUE" shall mean, at any time with respect to any asset or
assets, the book value thereof determined (a) in connection with the sale of
any Subsidiary Stock pursuant to subsection 9.1(a) as of the date of the sale
of such Subsidiary Stock, and (b) in connection with the disposition of any
such assets pursuant to subsection 9.1(b) as of the date of such disposition.
"DISTRIBUTION" shall mean, in respect of any corporation:
(a) Dividends or other distributions on capital stock of the
corporation (except distributions in such stock); and
(b) The redemption or acquisition of such stock or of
warrants, rights or other options to purchase such stock (except when
solely in exchange for such stock) unless made, contemporaneously, from
the net proceeds of a sale of such stock.
"DISTRIBUTION CENTER" shall mean the distribution center and any
additions thereto located at 500 Phillipi Road, Columbus, Ohio, the land on
which it is constructed (consisting of 32.268 acres owned by CSC Ohio) and all
fixtures appurtenant thereto.
"DOLLARS" shall mean the lawful currency of the United States.
FORM 10Q - Page 21 of 88
<PAGE> 11
"DOMESTIC CD RATE (ADJUSTED)" shall mean, with respect to any Interest
Period for any CD Loan, that rate PER ANNUM which is the sum of:
(a) The quotient of (i) the PER ANNUM rate of interest
(expressed as a percentage) offered by the Agent as of 12:00 Noon
(Columbus, Ohio time) (or as soon thereafter as practicable) on the
first day of the applicable Interest Period for the purchase of its
certificates of deposit in denominations of $1,000,000 and having a
maturity comparable to such Interest Period, divided by (ii) a
percentage equal to 100% MINUS the maximum rate of all Reserve
Requirements that for the date the Domestic CD Rate (Adjusted) is being
determined would be applicable during the Interest Period to a
negotiable certificate of deposit of the Agent in an amount of
$1,000,000 and with a maturity period equal to the Interest Period; PLUS
(b) The annual assessment rate PER ANNUM (expressed as a
percentage) estimated by the Agent on the first day of the applicable
Interest Period for determining the then current annual assessment
payable by the Agent to FDIC for FDIC insuring Dollar deposits of the
Agent in the United States.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA COMPANY" shall mean any of the CSC Parent/Borrower Companies and
any Commonly Controlled Entity.
"EFFECTIVE DATE" shall mean the date as of which this Agreement shall
become effective pursuant to subsection 12.11.
"EUROCURRENCY RESERVE PERCENTAGE" shall mean, with respect to any day,
the then applicable maximum percentage (expressed as a decimal) prescribed by
the Federal Reserve Board for determining reserve requirements (including
without limitation any marginal, emergency, supplemental, special or other
reserves) applicable to any member bank of the Federal Reserve System in
respect of "Eurocurrency Liabilities" pursuant to Regulation D or any other
then applicable regulation of the Federal Reserve Board which prescribes
reserve requirements applicable to "Eurocurrency Liabilities" as presently
defined in said Regulation D.
"EURODOLLAR BUSINESS DAY" shall mean a day on which banks are open for
business in Columbus, Ohio, Detroit, Michigan and Cincinnati, Ohio and on which
dealings are carried on in the London interbank eurodollar market.
"EURODOLLAR LOAN" shall mean a Loan accruing interest at a rate based
on the Eurodollar Rate (Reserve Adjusted).
"EURODOLLAR RATE" shall mean, with respect to any Eurodollar Loan for
any Interest Period, the rate PER ANNUM equal to the average of the respective
rates at which Dollar deposits in immediately available funds are offered to
the eurodollar office of the Agent two Eurodollar Business Days prior to the
beginning of such Interest Period by major prime banks in the New York
interbank eurodollar market at or about 10:00 A.M. New York time, for delivery
on the first day of such Interest Period, for the number of days comprised
therein, and in an amount equal or comparable to the amount of the Eurodollar
Loan to which such Interest Period is to apply.
"EURODOLLAR RATE (Reserve Adjusted)" shall mean, with respect to any
Eurodollar Loan for any Interest Period, a rate PER ANNUM (rounded
FORM 10Q - Page 22 of 88
<PAGE> 12
upwards, if necessary, to the nearest 1/16%), determined pursuant to the
following formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) ---------------
1 - Eurocurrency
Reserve Percentage
"EVENT OF DEFAULT" shall mean any of the events specified in Section
10, PROVIDED that any requirement for the giving of notice or the lapse of
time, or both, or any other condition, event or act, has been satisfied.
"EXCLUDED ASSET SALES" shall have the meaning assigned to it in
subsection 9.1(b).
"EXCLUDED NET WORTH ASSETS" shall mean the following assets:
(a) Deferred assets, other than prepaid insurance and prepaid
taxes;
(b) Patents, copyrights, trademarks, trade names, franchises,
goodwill, experimental expense and other similar intangible assets;
(c) Restricted Investments;
(d) Unamortized debt discount and expense;
(e) Assets not listed in clause (a), clause (b) or clause (d)
above which would be characterized as intangible assets by GAAP; and
(f) (i) assets located outside Permitted Jurisdictions, and
(ii) notes and receivables due from obligors domiciled outside
Permitted Jurisdictions to the extent that the aggregate unpaid balance
thereof exceeds 1% of consolidated assets of the CSC Companies
determined at such time.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FAIR MARKET VALUE" shall have the meaning assigned to it subsection
9.4(a)(vi) for purposes of said subsection 9.4(a)(vi), and otherwise shall
mean, at any time with respect to any Property, the sale value of such Property
that would be realized in an arm's-length sale at such time between an informed
and willing buyer, and an informed and willing seller, under no compulsion to
buy or sell, respectively.
"FEDERAL RESERVE BOARD" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
"FOREIGN PENSION PLAN" shall mean any plan, fund or other similar
program established or maintained outside of the United States by any one or
more of the CSC Companies primarily for the benefit of the employees
(substantially all of whom are aliens not residing in the United States) of
such CSC Companies, which plan, fund or other similar program provides for
retirement income for such employees or results in a deferral of income for
such employees in contemplation of retirement.
"FUNDED DEBT PAYMENT" shall mean any payment of the principal of, or any
retirement, redemption, purchase or acquisition of, any Adjusted Funded Debt
(including without limitation Subordinated Debt) of any of the CSC Companies.
FORM 10Q - Page 23 of 88
<PAGE> 13
"GAAP" shall mean generally accepted accounting principles in the
United States in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"GUARANTEES" shall mean, with respect to any Person, any obligation of
such Person which is a Contingent Obligation.
"INDEBTEDNESS" shall mean, with respect to a Person at a particular
date, and without duplication, (a) all indebtedness of such Person for borrowed
money or for the deferred purchase price of Property including all items of
indebtedness or liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a balance
sheet of such Person as at such time, (b) the face amount of all Letters of
Credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder, (c) all liabilities secured by any Lien on any
Property owned by such Person, to the extent attributable to such Person's
interest in such Property, even though such Person has not assumed or become
liable for the payment thereof, PROVIDED that, if such indebtedness shall not
have been assumed by such Person or if such Person shall otherwise not be
personally liable in respect of such indebtedness, such indebtedness shall be
deemed, for purposes of this definition only, not to exceed the higher of the
then book value or Fair Market Value of the Property encumbered by the Lien
securing such indebtedness, (d) lease obligations of such Person under Capital
Leases, excluding any Capital Lease entered into by any of the CSC Ohio
Companies for a Retail Store, and (e) all indebtedness of such Person created
or arising under any conditional sale or other title retention agreement with
respect to Property acquired by such Person even though the rights and remedies
of the obligee thereunder in the event of default are limited to repossession
or sale of such Property; PROVIDED, HOWEVER, that any indebtedness or liability
of such Person which constitutes deferred taxes or minority interest, as
determined in accordance with GAAP, shall be excluded from this definition of
Indebtedness.
"INDEMNIFIED LIABILITIES" shall have the meaning assigned to it in
subsection 12.5.
"INITIAL PAYMENT DATE" shall mean August 31, 1994.
"INTEREST PERIOD" shall have the meaning assigned to it in subsection
2.14.
"INVESTMENTS" shall have the meaning assigned to it in the definition of
"Restricted Investments" contained in this subsection 1.1.
"ISSUING BANK" shall mean National City.
"JOINT VENTURE" shall mean an entity (other than a CSC Company) in
which any CSC Company has an ownership interest and which was formed (a) in the
ordinary course of business of any such CSC Company and (b) for the purpose of
acquiring merchandise for such CSC Company for sale in the ordinary course of
such CSC Company's business.
"LC AMOUNT" shall have the meaning assigned to it in subsection 3.1.
"LC BUSINESS DAY" shall mean a day other than a Saturday, Sunday or
other day on which commercial banks in the jurisdiction of the Issuing Bank are
authorized or required by law to close.
FORM 10Q - Page 24 of 88
<PAGE> 14
"LC PREPAYMENT (RC)" shall have the meaning assigned to it in the
definition of "Term Loan Amortization Installments" contained in this subsection
1.1.
"LC SHARE (DLCF)" shall mean, as to each Bank, its participating share
of a DLCF Letter of Credit issued pursuant to Section 3 determined by
multiplying the LC Amount for such DLCF Letter of Credit by the Bank's
Percentage (DLCF).
"LC SHARE (RC)" shall mean, as to each Bank, its participating share of
a RC Letter of Credit issued pursuant to Section 3 determined by multiplying
the LC Amount for such RC Letter of Credit by the Bank's Percentage (RC).
"LC TERMINATION DATE (DLCF)" shall mean such day as is five months
after the termination of the DLCF Period.
"LC TERMINATION DATE (RC)" shall mean such day as is 45 days prior to
the Term Loan Termination Date.
"LETTERS OF CREDIT" shall mean letters of credit (including both standby
and documentary trade letters of credit) issued by a bank.
"LIEN" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including without
limitation any mortgage, pledge, hypothecation, assignment, security interest,
lien, charge or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever. The
term Lien shall include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances (including, with respect to stock, stockholder
agreements, voting trust agreements, buy-back agreements and all similar
arrangements) affecting Property. For the purposes of this Agreement, any CSC
Company shall be deemed to be the owner of any Property which it shall have
acquired or holds subject to a conditional sale agreement, Capital Lease or
other arrangement pursuant to which title to the Property shall have been
retained by or vested in some other Person for security purposes and such
retention or vesting shall be deemed to be a Lien.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes and the Credit
Guarantees, as the same may from time to time be amended, modified or
supplemented in accordance with the terms therein and herein.
"LOANS" shall mean the Revolving Credit Loans, the DLCF Loans and the
Term Loans.
"MULTIEMPLOYER PLAN" shall mean a Plan which is a "multiemployer
pension plan" as defined in Section 4001(a)(3) of ERISA.
"MULTIPLE EMPLOYER PLAN" shall mean any "single-employer plan", as
defined in Section 4001 of ERISA, in respect of which (a) there are two (2) or
more "contributing sponsors", as such term is defined in Section 4001 of ERISA,
at least two (2) of which are not under common control, and (b) any of the
ERISA Companies.
"NBD" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"NPA DATE" shall mean August 11, 1987.
"NATIONAL CITY" shall have the meaning assigned to it in the
introductory paragraph of this Agreement.
FORM 10Q - Page 25 of 88
<PAGE> 15
"NATIONAL CITY RATE" shall mean the rate of interest in effect from
time to time which is publicly announced by National City from time to time as
its prime rate in Columbus, Ohio. Said prime rate is not necessarily nor is it
intended to be the lowest rate of interest charged by National City in
connection with extensions of credit.
"NEGOTIATED LOANS" shall mean Negotiated Loans made pursuant to
subsection 2.6.
"NEGOTIATED RATE" shall mean, with respect to any Interest Period for
any Negotiated Loan, the rate of interest determined by the Quoting Bank for a
Negotiated Loan for such Interest Period, which determination shall be made by
the Quoting Bank in its sole discretion.
"NEW LOAN" shall have the meaning assigned to it in subsection 2.5.
"NOTE PURCHASE AGREEMENT" shall mean the Note Purchase Agreement dated
as of August 1, 1987 to which CSC is a party.
"NOTES" shall mean the Revolving Credit Notes, the DLCF Notes and the
Term Notes.
"OLD LOAN" shall have the meaning assigned to it in subsection 2.5.
"ONGOING SALE AND LEASEBACK TRANSACTION" shall have the meaning
assigned to it in subsection 9.8.
"OPTIONAL SUBORDINATED DEBT PAYMENT" shall mean any payment of the
principal of, or any retirement, redemption, purchase or other acquisition of,
any Subordinated Debt prior to, in the case of a payment, the regularly
scheduled date for such payment or, in the case of a retirement, redemption,
purchase or acquisition, in an amount greater than the amount of the next
regularly scheduled sinking fund payment if CSC Ohio is permitted, pursuant to
the terms thereof, to satisfy its sinking fund obligation by delivery of notes
or debentures evidencing Subordinated Debt in lieu of making a payment in
respect thereof.
"OUTSTANDING LC AMOUNTS (DLCF)" shall mean the aggregate of all
outstanding LC Amounts for DLCF Letters of Credit.
"OUTSTANDING LC AMOUNTS (RC)" shall mean the aggregate of all
outstanding LC Amounts for RC Letters of Credit.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PARTICIPATING BANK" shall have the meaning assigned to it in
subsection 2.6.
"PENSION PLAN" shall mean any "employee pension benefit plan" (as such
term is defined in Section 3 of ERISA) maintained by any ERISA Company for
employees of such ERISA Company, excluding any Multiemployer Plan, but
including without limitation any Multiple Employer Plan.
"PERCENTAGE (ASRC)" shall mean 25% in the case of each Bank.
"PERCENTAGE (BRC)" shall mean, in the case of each Bank, the percentage
which the Bank's Share of the Basic Commitment is of the Basic Commitment.
"PERCENTAGE (DLCF)" shall mean 25% in the case of each Bank.
FORM 10Q - Page 26 of 88
<PAGE> 16
"PERCENTAGE (RC)" shall mean, in the case of each Bank, its Percentage
(BRC) in the case of a Revolving Credit Loan (BRC) and its Percentage (ASRC) in
the case of a Revolving Credit Loan (ASRC).
"PERMITTED DISTRIBUTION" shall mean any Distribution by any of the CSC
Companies to the extent, but only to the extent, that such Distribution is made
to a CSC Company.
"PERMITTED JURISDICTION" shall mean any one or more of the following:
the United States, Canada, Great Britain, France, the Federal Republic of
Germany, Belgium, the Netherlands, Denmark, Norway, Sweden, Austria,
Switzerland, Italy, Spain and Ireland, and any state, province or other
jurisdiction of any of the foregoing.
"PERMITTED OPTIONAL SUBORDINATED DEBT PAYMENT" shall mean any Optional
Subordinated Debt Payment by any of the CSC Companies to the extent, but only
to the extent, that such payment is made to a CSC Company.
"PERSON" shall mean and include an individual, a partnership, a
corporation, a business trust, a joint stock company, a trust, an unincorporated
association, a joint venture or other entity or a Governmental Authority.
"PHILLIPI PROPERTY" shall mean the buildings and real estate owned by
CSC Ohio as of the date of this Agreement and located on Phillipi Road in
Columbus, Ohio (including without limitation the Distribution Center).
"PLAN" shall have the meaning assigned to it in subsection 5.13.
"PRE-EXISTING LETTER OF CREDIT" shall have the meaning assigned to it in
subsection 3.1.
"PREFERRED STOCK" shall mean capital stock of any corporation ranking
prior to the shares of any other class of capital stock of such corporation as
to the payment of dividends or the distribution of assets in respect of any
voluntary or involuntary liquidation thereof.
"PRIMARY OBLIGATIONS" shall have the meaning assigned to it in the
definition of "Contingent Obligation" contained in this subsection 1.1.
"PRIMARY OBLIGOR" shall have the meaning assigned it in the definition
of "Contingent Obligation" contained in this subsection 1.1.
"PRIME LOAN" shall mean a Loan accruing interest at a rate determined
by reference to the National City Rate.
"PRIOR CREDIT AGREEMENT" shall have the meaning assigned to it in
subsection 6.1.(j).
"PRIOR LOAN DOCUMENTS" shall have the meaning assigned to it in
subsection 6.1(j).
"PRIOR NOTES" shall have the meaning assigned to it in subsection
6.1(j).
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"QUOTING BANK" shall mean National City.
"RC LETTERS OF CREDIT" shall mean Letters of Credit issued under the
Commitment.
FORM 10Q - Page 27 of 88
<PAGE> 17
"RI BANK" shall have the meaning assigned to it in the definition of
"Restricted Investments" contained in this subsection 1.1.
"RENTALS" shall mean, as of the date of determination, all fixed
payments which the lessee is required to make by the terms of any lease of one
(1) year or more, but shall not include amounts required to be paid in respect
of Capital Leases or of maintenance, repairs, income taxes, property taxes,
insurance, assessments or other similar charges or additional rentals (in
excess of fixed minimums) based upon a percentage of gross receipts.
"REPORTABLE EVENT" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder with respect to which the
30-day notice requirement to PBGC has not been waived.
"REQUIRED BANKS" shall mean, at any particular time, Banks having at
least 75% of the aggregate amount of the Basic Commitment, whether or not the
Borrowers have drawn all or any portion of the Basic Commitment.
"REQUIREMENTS OF LAW" shall mean, as to any Person, the certificate or
articles of incorporation and regulations or by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its Property
or to which such Person or any of its Property is subject.
"RESERVE REQUIREMENT" shall mean, with respect to any Interest Period, a
percentage (expressed as a decimal) equal to the aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves and taking into
account any transitional adjustments or other scheduled changes in reserve
requirements during such Interest Period) on the first day of such Interest
Period, as specified under Regulation D of the Federal Reserve Board, or any
other regulation of the Federal Reserve Board which prescribes reserve
requirements applicable to nonpersonal time deposits as presently defined in
Regulation D, as then in effect, as applicable to the Agent, on deposits of the
type used as a reference in determining the Domestic CD Rate (Adjusted) and
having a maturity approximately equal to such Interest Period.
"RESTRICTED INVESTMENTS" shall mean all investments, made in cash or by
delivery of Property, by any of the CSC Companies, (a) in any Person, whether
by acquisition of stock, indebtedness or other obligation or Security, or by
loan, advance or capital contribution, or otherwise, or (b) in any Property
(clauses (a) and (b) herein called "Investments"), except the following:
(i) Investments in any of the CSC Companies or any corporation
which concurrently with such investment becomes a CSC Ohio Subsidiary;
(ii) Property to be used, or purchased for sale, in the
ordinary course of business of the CSC Companies;
(iii) Current assets arising from the sale of goods and
services in the ordinary course of business of the CSC Companies;
(iv) Investments in existence on the NPA Date;
(v) Investments in direct obligations of the United States or
any agency thereof, or obligations guaranteed by the United States,
PROVIDED that such obligations mature within one (1) year from the date
of acquisition thereof;
FORM 10Q - Page 28 of 88
<PAGE> 18
(vi) Investments in certificates of deposit maturing within
one (1) year from the date of acquisition issued by a bank or trust
company (herein referred to as a "RI Bank") organized under the laws of
the United States or any state thereof having capital, surplus and
undivided profits aggregating at least $100,000,000;
(vii) Investments in commercial paper given either of the two
(2) highest ratings by an Approved Rating Company and maturing not more
than 270 days from the date of creation thereof;
(viii) Investments in so-called auction rate or money market
Preferred Stock which is given either of the two (2) highest ratings by
an Approved Rating Company;
(ix) Investments in any obligation of any Person (A) the
income in respect of which is exempt from United States federal income
taxation, (B) the interest rate of which is adjusted periodically (and,
in any case, no less frequently than monthly) in accordance with the
"prime rate" of a RI Bank, yields to maturity of short-term United
States Treasury Securities or other similar short-term interest rates
or indices, (C) which Person shall have, at the time of the issuance of
such obligations, agreed to repurchase, at par plus accrued interest,
all such obligations tendered (in accordance with the terms of such
obligations) to such Person at any one or more periodic tender dates
(which tender dates shall occur no less frequently than monthly) and
(D) the payment of which (whether at maturity or by tender,
acceleration or otherwise) is secured by an irrevocable Letter of
Credit issued by a RI Bank in favor of the holders of such obligations
or their trustee or agent;
(x) Investments in Dollar depository accounts (having a term
of not more than ninety (90) days) of foreign branches of any RI Bank,
the unsecured short-term debt securities of which shall have been given
the highest rating by an Approved Rating Company, PROVIDED that the
aggregate value of such investments outstanding at any one time shall
not exceed $5,000,000, and PROVIDED, FURTHER, that any such investment
shall have been purchased in the United States; and
(xi) Investments in any Joint Venture, PROVIDED that such
Joint Venture shall not incur any Indebtedness for borrowed money other
than Indebtedness for borrowed money (A) which is secured by a Lien on
Property acquired by such Joint Venture subsequent to the incurrence of
such Indebtedness and the creation of such Lien and (B) in respect of
which the personal liability of such Joint Venture shall not exceed at
any time the Fair Market Value of such Property determined at the time
of the acquisition thereof by such Joint Venture.
Investments shall be valued at cost less any net return of capital through the
sale or liquidation thereof or other return of capital thereon.
"RETAIL STORE" shall mean any retail store owned or leased and operated
by any of the CSC Ohio Companies.
"REVOLVING CREDIT LOANS" shall have the meaning assigned to it in
subsection 2.1 and includes both Revolving Credit Loans (BRC) and Revolving
Credit Loans (ASRC).
"REVOLVING CREDIT LOAN (ASRC)" shall mean a Revolving Credit Loan which
is applied against the Additional Seasonal Commitment during periods when it is
available.
"REVOLVING CREDIT LOAN (BRC)" shall mean a Revolving Credit Loan which
is applied against the Basic Commitment.
FORM 10Q - Page 29 of 88
<PAGE> 19
"REVOLVING CREDIT NOTE" shall have the meaning assigned to it in
subsection 2.10.
"SALE AND LEASEBACK TRANSACTION" shall mean, with respect to any
Person, the sale or other transfer by such Person, in one or more related
transactions, of any of its Property, whether now or hereafter acquired, to
another party and the renting or leasing of such sold or transferred Property,
or substantially identical Property, by such Person.
"SECURITY" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"SHARED NEGOTIATED LOAN" shall mean a Negotiated Loan with respect to
which any Bank in addition to the Quoting Bank has elected to participate as a
Participating Bank pursuant to subsection 2.6.
"SHARE OF THE ADDITIONAL SEASONAL COMMITMENT" shall mean, as to each
Bank, an amount equal to 25% of the Additional Seasonal Commitment.
"SHARE OF THE BASIC COMMITMENT" shall mean (a) $42,500,000 for National
City, (b) $17,500,000 for NBD, (c) $15,000,000 for Bank One and (d) $15,000,000
for Bank of Tokyo, reduced for each Bank by its pro rata share of any reduction
in the Basic Commitment pursuant to subsection 2.17.
"SHARE OF THE BORROWING" shall mean, as to each Bank, the amount
determined by multiplying the amount of the borrowing by the Bank's Percentage
(RC).
"SHARE OF THE COMMITMENT" shall mean, as to each Bank, at any point in
time, the aggregate of the Bank's Share of the Basic Commitment and, if the
Additional Season Commitment is then available hereunder, the Bank's Share of
the Additional Seasonal Commitment.
"SHARE OF THE NEGOTIATED BORROWING" shall mean, as to the Quoting Bank
and each Participating Bank (if any) which has elected to participate in a
Negotiated Loan as a Shared Negotiated Loan pursuant to subsection 2.6, the
amount determined by multiplying the amount of the borrowing for the Negotiated
Loan by the Bank's Adjusted Percentage (RC).
"SHARE OF THE OUTSTANDING LC AMOUNTS (DLCF)" shall mean, as to each
Bank, the amount determined by multiplying the Outstanding LC Amounts (DLCF) by
the Bank's Percentage (DLCF).
"SHARE OF THE OUTSTANDING LC AMOUNTS (RC)" shall mean, as to each Bank,
the amount determined by multiplying the Outstanding LC Amounts (RC) by the
Bank's Percentage (RC).
"SHORT TERM REAL PROPERTY" shall mean any real estate acquired by any of
the CSC Companies as part of a transaction in which such Person acquires
so-called "close-out merchandise", which real estate is sold or leased
(pursuant to a lease of not less than five (5) years duration) to a Person
other than a CSC Company within one (1) year after the time of such acquisition.
"SIGNIFICANT SUBSIDIARY" shall mean, with respect to a Person, a
Subsidiary of such Person which qualifies as a "Significant Subsidiary" under
Regulation S-X promulgated by the Securities and Exchange Commission as in
effect from time to time.
"SINGLE EMPLOYER PLAN" shall mean any Plan which is not a
Multi-employer Plan.
FORM 10Q - Page 30 of 88
<PAGE> 20
"STANDBY LC LIMIT" shall mean the aggregate maximum amount of standby
Letters of Credit which may be issued and outstanding hereunder at any time,
which aggregate maximum amount is $7,500,000.
"STOCK DISPOSITION DATE" shall have the meaning assigned to it in
subsection 9.1(a).
"SUBORDINATED DEBT" shall mean Indebtedness which is subordinated in
right of payment in any respect to the Notes on terms acceptable to the Banks.
"SUBSIDIARY" of a Person shall mean a corporation with respect to which
more than 50% of the outstanding shares of stock of each class having ordinary
voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned by such Person or by one or
more Subsidiaries of such Person or by such Person and one or more Subsidiaries
of such Person.
"SUBSIDIARY STOCK" shall have the meaning assigned to it in subsection
9.1(a).
"SURVIVING CORPORATION" shall have the meaning assigned to it in
subsection 9.2.
"TERM LOAN" shall have the meaning assigned to it in subsection 4.1.
"TERM LOAN AMORTIZATION INSTALLMENTS" shall mean and be, for each Term
Note, four installments of principal paid on a quarterly basis which reduce the
amount of the Term Loan Exposure to 75% of the Term Loan Commitment upon the
first installment payment, 50% of the Term Loan Commitment upon the second
installment payment, 25% of the Term Loan Commitment upon the third installment
payment and 0% of the Term Loan Commitment upon the fourth and final installment
payment, with each such installment being applied first in payment of any
outstanding principal under the Term Note and then, if any excess installment
payment amount remains, as a prepayment of the Borrowers' obligation to repay
the applicable Bank's Share of the Outstanding LC Amounts (RC) when payment is
made by the Issuing Bank under the outstanding RC Letters of Credit in their
inverse order of maturity (a "LC Prepayment (RC)").
"TERM LOAN COMMENCEMENT DATE" shall mean the same day as the Commitment
Termination Date.
"TERM LOAN COMMITMENT" shall mean for each Bank the sum of (a) the
unpaid principal amount owing to such Bank on the Term Loan Commencement Date
under the Revolving Credit Note payable to such Bank and (b) such Bank's Share
of the Outstanding LC Amounts (RC) on the Term Loan Commencement Date, PROVIDED
that in no event shall such sum exceed the amount of each Bank's Share of the
Basic Commitment.
"TERM LOAN EXPOSURE" shall mean at a particular point in time for each
Bank the sum of (a) the unpaid principal amount then outstanding which will be
payable to such Bank under its Term Note and (b) such Bank's then Share of the
Outstanding LC Amounts (RC).
"TERM LOAN INITIAL PAYMENT DATE" shall mean the day immediately
preceding the day which is three (3) months after the Term Loan Commencement
Date (thus, if the Term Loan Commencement Date is June 1 of a particular year,
this day would be August 31 of the same year).
"TERM LOAN NOTICE DATE" shall mean the day which is thirty (30) days
before the Term Loan Commencement Date.
"TERM LOAN TERMINATION DATE" shall mean the day which immediately
precedes the first anniversary of the Term Loan Commencement Date
FORM 10Q - Page 31 of 88
<PAGE> 21
(thus, if the Term Loan Commencement Date is June 1 of a particular
year, this day would be May 31 of the next year).
"TERM NOTE" shall have the meaning assigned to it in
subsection 4.1.
"TRANSFEREE" shall have the meaning assigned to it in
subsection 12.6.
"TRO" shall mean TRO, Inc., a Delaware corporation of which
CSC Ohio is a wholly owned Subsidiary.
"UNITED STATES" shall mean the United States of America.
"VOTING STOCK" shall mean capital stock of any class or
classes of a corporation the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the
corporate directors or Persons performing similar functions
(irrespective of whether at the time stock of any other class or
classes shall have or might have voting power by reason of the
happening of any contingency).
1.2. ACCOUNTING TERMS. As used in this Agreement, in the Notes and in
any certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1 to the extent not defined, shall have the
respective meanings given to them under GAAP.
1.3. OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise defined therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes and the other
Loan Documents and in any other certificate, report or document made or
delivered pursuant to this Agreement.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
SECTION 2. AMOUNT AND TERMS OF COMMITMENT AND LOANS.
----------------------------------------
2.1. COMMITMENT. Subject to the terms and conditions of this Agreement
each Bank severally agrees to make loans to the Borrowers on a revolving basis,
from time to time during the Commitment Period, in such amounts as the
Borrowers may from time to time request in accordance with subsection 2.4,
subsection 2.5 or subsection 2.6 (such loans are herein called "Revolving
Credit Loans"); PROVIDED that all such Revolving Credit Loans shall be
Revolving Credit Loans (BRC) so long as the full amount of the Basic Commitment
is not then in use and thereafter during the ASRC Period only shall be
Revolving Credit Loans (ASRC) and PROVIDED FURTHER that the aggregate principal
amount which any Bank shall have outstanding hereunder on loan to the
Borrowers (including for this purpose such Bank's Share of the Outstanding LC
Amounts (RC)) shall not at any time exceed such Bank's Share of the Commitment.
2.2. REVOLVING NATURE OF CREDIT. The Revolving Credit Loans are
revolving in nature and, within the limits set forth in subsection 2.1 and
subject to the other terms and conditions of this Agreement, the Borrowers may
borrow under subsection 2.1, prepay and reborrow at any time prior to the
Commitment Termination Date.
2.3. TYPES OF REVOLVING CREDIT LOANS. Each Revolving Credit Loan
shall be a Prime Loan, a CD Loan, a Eurodollar Loan or a Negotiated Loan
(whether or not it is a Shared Negotiated Loan), it being understood that:
(a) each Prime Loan shall be made by each Bank PRO RATA according to its
respective Percentage (RC) of such Prime Loan, (b) CD Loans shall be made by
FORM 10Q - Page 32 of 88
<PAGE> 22
each Bank PRO RATA according to its respective Percentage (RC) of all such CD
Loans, (c) Eurodollar Loans shall be made by each Bank PRO RATA according to
its respective Percentage (RC) of all such Eurodollar Loans, (d) each Shared
Negotiated Loan shall be made by the Quoting Bank and each Participating Bank
PRO RATA according to its respective Adjusted Percentage (RC) of such Shared
Negotiated Loan, (e) Prime Loans and CD Loans shall be made as provided in
subsections 2.4 and 2.7, (f) Eurodollar Loans and Negotiated Loans shall be
made as provided in subsections 2.6 and 2.7 and (g) Revolving Credit Loans
(ASRC) shall be either Prime Loans or Negotiated Loans. The remaining
provisions of this Section 2, excluding subsection 2.6 except as it applies to
Eurodollar Loans and excluding subsections 2.10, 2.16, 2.17, 2.18 and 2.21,
shall also apply with respect to any DLCF Loans and the Term Loans.
2.4. PROCEDURES WITH RESPECT TO PRIME LOANS AND CD LOANS. For Prime
Loans and CD Loans, the Borrowers shall give the Agent notice (which notice must
be received by the Agent prior to 12:00 noon Columbus, Ohio time on the
requested Borrowing Date), which notice shall state:
(a) Whether the Loan comprising such borrowing is to be a Prime Loan
or a CD Loan;
(b) The date of such requested borrowing, which shall be a Business
Day;
(c) The aggregate principal amount of such borrowing, which shall be
in an amount equal to an integral multiple of $50,000 for a Prime Loan or
$100,000 for a CD Loan but shall not, for any CD Loan, be less than $1,000,000;
and
(d) In the case of a CD Loan borrowing, the duration of the Interest
Period with respect thereto, PROVIDED that the maturity of any such CD Loan
shall not extend past the Term Loan Termination Date.
The Agent shall promptly advise each Bank of any such notice. Upon fulfillment
of the applicable conditions set forth in subsection 6.2, each Bank shall
provide to the Borrowers, at such Bank's office at the address applicable for
notices under subsection 12.2, immediately available funds covering such Bank's
Share of the Borrowing. No notice of borrowing given pursuant to this
subsection 2.4 shall be revocable by the Borrowers at any time after its
receipt by the Agent, PROVIDED that the Agent may, in its discretion, consent
to any revocation given before the Agent has notified the other Banks of such
notice.
2.5. CONVERSION OF CERTAIN LOANS. The Borrowers may convert all or
any part of any outstanding Prime Loan, CD Loan or Eurodollar Loan (herein in
this subsection 2.5 called an "Old Loan") into another Prime Loan, CD Loan or
Eurodollar Loan of the same type or of another of such types (herein in this
subsection 2.5 called a "New Loan"), by giving advance notice thereof in
accordance with the procedures set forth in subsection 2.4 or subsection 2.6,
whichever is applicable (which notice shall, in addition to the matters
specified in subsection 2.4 or subsection 2.6, specify the type and amount of
the Old Loan that is to be converted into the New Loan which is requested
pursuant to subsection 2.4 or subsection 2.6); PROVIDED that: (a) no CD Loan
or Eurodollar Loan shall be converted on any day other than the last day of the
then-current Interest Period relating to such Loan, (b) no CD Loan or
Eurodollar Loan shall in any event have (and the Borrowers shall not in any
event designate) an Interest Period ending after (i) in the case of the Term
Loans, the Term Loan Termination Date, and (ii) in the case of the Revolving
Credit Loans, the Commitment Termination Date, (c) no New Loan of a particular
type shall be less than the amount specified in subsection 2.4(c) or subsection
2.6(b)(iii) applicable to such type, (d) all New Loans shall be Revolving
Credit Loans (BRC) so long as the full amount of the Basic Commitment is not
then in use and thereafter during the ASRC Period only shall be Revolving
Credit Loans (ASRC) and (e) no conversion shall be permitted hereunder when an
Event of Default or a Default has occurred and is continuing. If, with
respect to any Old Loan which is a CD Loan or Eurodollar Loan, the Borrowers
do not give the notice provided for above in this subsection 2.5, or no
conversion with respect thereto shall be permitted
FORM 10Q - Page 33 of 88
<PAGE> 23
pursuant to the preceding sentence, the Borrowers shall be deemed to have
requested that such Old Loan be converted to a Prime Loan in the same principal
amount. In effecting each conversion, each Bank shall, on the Borrowers'
behalf, directly apply the proceeds of the New Loan to the payment of the Old
Loan, and only the excess (if any) of the proceeds of the New Loan over the
amount being repaid shall be directly paid over to the Borrowers.
2.6. PROCEDURES WITH RESPECT TO NEGOTIATED LOANS AND EURODOLLAR LOANS.
"Negotiated Loans" (as described in subsection 2.6(a)) may only be made from
and after the date hereof and prior to the Commitment Termination Date,
PROVIDED that the maturity of any such Negotiated Loans shall not extend past
(i) the Commitment Termination Date in any event or (ii) the end of the ASRC
Period immediately following the date of the Negotiated Loan if it is a
Revolving Credit Loan (ASRC). Eurodollar Loans may be made from and after the
date hereof in accordance with the terms of this Agreement, PROVIDED that the
maturity of any such Eurodollar Loans shall not extend past the Term Loan
Termination Date in any event.
(a) For a Negotiated Loan, the Borrowers may from time to time request
the Quoting Bank to quote a Negotiated Rate for a specified Interest Period and
amount, PROVIDED that the Quoting Bank may elect at any time and from time to
time not to furnish any such requested quote to the Borrowers by so notifying
the Borrowers at or promptly after the time the Borrowers make any such
request. After receiving any such quote the Borrowers may accept the same by
giving both the Agent and the Quoting Bank notice on or before the Borrowing
Date of each requested Negotiated Loan (PROVIDED that such notice shall not be
given later than 12:00 Noon Columbus, Ohio time on the Borrowing Date), which
notice shall repeat the quoted rate given by the Quoting Bank and shall further
state:
(i) That the Loan comprising such borrowing is to be a
Negotiated Loan;
(ii) The date of such requested borrowing, which shall be a
Business Day;
(iii) The aggregate principal amount of such borrowing, which
shall be in an amount equal to an integral multiple of $100,000 but
shall not, in any event, be less than $1,000,000; and
(iv) The Interest Period with respect thereto, which shall
not in any event extend over a period longer than 180 calendar days
(subject however to the provisions of subsection 2.14(b)), and shall
not end after (A) the Commitment Termination Date in any event or (B)
the end of the ASRC Period immediately following the date of the
Negotiated Loan if it is a Revolving Credit Loan (ASRC).
The Agent shall promptly advise each Bank of any such Negotiated Loan notice.
If any Bank other than the Quoting Bank wishes to participate in the Negotiated
Loan and have it treated as a Shared Negotiated Loan, such Bank (a
"Participating Bank") must so inform the Agent at the time it is so advised.
Upon fulfillment of the applicable conditions set forth in subsection 6.2, the
Quoting Bank, and each Participating Bank in the case of a Shared Negotiated
Loan, shall provide to the Borrowers, at each such Bank's office at the address
applicable for notices under subsection 12.2, immediately available funds
covering such Bank's Share of the Negotiated Borrowing.
(b) For a Eurodollar Loan, the Borrowers shall give the Agent
notice (which notice must be received at least three Eurodollar Business Days
before each requested Eurodollar Loan borrowing), which notice shall state:
(i) That the Loan comprising such borrowing is to be a
Eurodollar Loan;
(ii) The date of such requested borrowing, which shall be a
Eurodollar Business Day;
FORM 10Q - Page 34 of 88
<PAGE> 24
(iii) The aggregate principal amount of such borrowing, which
shall be in an amount equal to an integral multiple of $100,000 but
shall not, in any event, be less than $1,000,000; and
(iv) The duration of the Interest Period with respect
thereto, which shall not end after the Term Loan Termination Date in
any event.
The Agent shall promptly advise each Bank of any such Eurodollar Loan notice.
Upon fulfillment of the applicable conditions set forth in subsection 6.2, each
Bank shall provide to the Borrowers, at such Bank's office at the address
applicable for notices under subsection 12.2, immediately available funds
covering such Bank's Share of the Borrowing.
No notice of borrowing given pursuant to this subsection 2.6 shall be
revocable by the Borrowers at any time after its receipt by the Agent.
2.7. CERTAIN MATTERS WITH RESPECT TO LOANS.
(a) All borrowings, conversions and repayments of Prime Loans, CD
Loans, Shared Negotiated Loans and Eurodollar Loans shall be effected so that,
after giving effect thereto, each type and all types of Prime Loans, CD Loans,
Shared Negotiated Loans and Eurodollar Loans shall be in existence PRO RATA
among the Banks (limited to the Quoting Bank and the Participating Banks in the
case of Shared Negotiated Loans) according to their respective Percentages (RC)
(Adjusted Percentages (RC) in the case of Shared Negotiated Loans).
(b) It is understood that the Borrowers may request a Negotiated Loan
only from the Quoting Bank. It is also understood that the Quoting Bank shall
not be obligated to offer and no Bank shall be obligated to make a Negotiated
Loan.
(c) The Borrowers shall not request and no Bank shall make any
Revolving Credit Loan of any type if, as a result of the making of such
Revolving Credit Loan, the aggregate principal amount of all Revolving Credit
Loans of any Bank outstanding hereunder (including for this purpose the Bank's
Share of the Outstanding LC Amounts (RC)) would exceed such Bank's Share of the
Commitment.
(d) All repayments of Loans shall be applied first to Revolving Credit
Loans (ASRC), and no Revolving Credit Loans (ASRC) may be outstanding except
during the ASRC Period, it being understood that any Revolving Credit Loans
(ASRC) outstanding at the end of an ASRC Period shall be repaid by the
Borrowers at the end of the ASRC Period.
2.8. CONDITIONS TO EACH LOAN. No Bank shall have any obligation to
make (whether initially, pursuant to subsection 2.4, pursuant to subsection
2.5, pursuant to subsection 2.6 or otherwise) any Loan if the conditions
precedent to the making of such Loan specified in subsection 6.2 shall have
not been satisfied or if an Event of Default or a Default shall have occurred
and be continuing or will result therefrom.
2.9. WARRANTY. Each notice of borrowing referred to in subsection 2.4,
subsection 2.5 or subsection 2.6 shall constitute a representation and warranty
by the Borrowers to the Agent and each Bank that on the requested Borrowing
Date no Event of Default or Default shall have then occurred and be continuing
or will result therefrom.
2.10. NOTES. The Revolving Credit Loans of each Bank shall be
evidenced by a joint and several promissory note of the Borrowers (a "Revolving
Credit Note") substantially in the form set forth in Exhibit 2.10, with
appropriate insertions, dated the Effective Date, payable to the order of such
Bank in a principal amount equal to such Bank's Share of the Commitment, it
being expressly agreed that all principal and all interest shall be payable at
maturity (whether by acceleration or otherwise).
2.11. RECORDKEEPING. Each Bank may record on the schedule attached to
its Note or elsewhere in its records the date and amount of each Loan made
FORM 10Q - Page 35 of 88
<PAGE> 25
by such Bank, each repayment thereof and, in the case of each Loan other than a
Prime Loan, the dates on which the Interest Period for such Loan shall begin
and end. The amounts so recorded shall be rebuttable presumptive evidence of
the amounts owing and unpaid on such Note. The failure to so record any such
amount or any error in so recording any such amount shall not, however, limit
or otherwise affect the obligations of the Borrowers hereunder or under any
Note to repay the principal amount of the Loans together with all interest
accruing thereon.
2.12. INTEREST RATES. The unpaid principal amount from time to time
outstanding of each Note shall bear interest as follows:
(a) As to any unpaid principal amount representing Prime Loans: on
and from the Effective Date to the Commitment Termination Date, at a rate PER
ANNUM equal to the National City Rate, and from and after the Commitment
Termination Date to the Term Loan Termination Date, at a rate PER ANNUM equal
to the National City Rate PLUS 1/8%;
(b) As to any unpaid principal amount representing CD Loans: during
each applicable Interest Period, at a rate PER ANNUM equal to the sum of (i) the
Domestic CD Rate (Adjusted) applicable to such Interest Period, PLUS (ii) .70%
during the Commitment Period and .95% thereafter;
(c) As to any unpaid principal amount representing Eurodollar Loans:
during each applicable Interest Period, at a rate PER ANNUM equal to the sum of
(i) the Eurodollar Rate (Reserve Adjusted) applicable to such Interest Period,
PLUS (ii) .55% during the Commitment Period and .80% thereafter;
(d) As to any unpaid principal amount representing Negotiated Loans:
during each applicable Interest Period, at a rate PER ANNUM equal to the
Negotiated Rate for such Interest Period; and
(e) Notwithstanding the provisions of the preceding clauses (a), (b),
(c) or (d), all unpaid principal of any Loan shall bear interest after maturity
(whether by acceleration or otherwise) at a rate PER ANNUM equal to the higher
of the rate in effect prior to such maturity or the sum of (i) the National
City Rate PLUS (ii) 2% (but not in any event less than the National City Rate
in effect as at such maturity).
2.13. INTEREST PAYMENT DATES. Subject to subsection 2.20, all
accrued interest on all Prime Loans shall be payable quarterly, on the last
days of August, November, February and May and at maturity (whether by
acceleration or otherwise) commencing with the Initial Payment Date. Subject
to subsection 2.20, all accrued interest on each CD Loan, each Eurodollar Loan
and each Negotiated Loan shall be payable on the last day of each Interest
Period relating to such Loan (PROVIDED that, with respect to any such CD Loan
or Eurodollar Loan having an Interest Period greater than 90 days or three
months, as the case may be, all interest accrued thereon shall be payable every
90 days in the case of a CD Loan and every three months in the case of a
Eurodollar Loan) and at maturity (whether by acceleration or otherwise).
2.14. INTEREST PERIODS.
(a) Except as is hereinafter provided in this subsection 2.14, each
period for the payment of interest on a Loan (the "Interest Period") shall
commence on the date the Loan is made, continued or converted and shall end on
the date which (i) in the case of a CD Loan is 30, 60, 90, 120, 150 or 180
calendar days thereafter, or (ii) in the case of a Eurodollar Loan is one, two,
three, four, five or six months (if available) thereafter, in each case as the
Borrowers shall have specified in the Borrowers' related notice of borrowing
given pursuant to subsection 2.4, subsection 2.5 or subsection 2.6.
(b) Each Interest Period which would otherwise end on a day which is
not a Business Day or Eurodollar Business Day, as the case may be, shall end
on the next succeeding Business Day in the case of a CD Loan or Eurodollar
Business Day in the case of a Eurodollar Loan (unless the result of the
foregoing would be to extend the Interest Period of a Eurodollar Loan to the
FORM 10Q - Page 36 of 88
<PAGE> 26
next succeeding calendar month, in which case with respect to such Eurodollar
Loan such Interest Period shall end on the next preceding Eurodollar Business
Day).
2.15. SETTING AND NOTICE OF DOMESTIC CD RATE (ADJUSTED). The
applicable Domestic CD Rate (Adjusted) for each Interest Period shall be
determined solely by the Agent, and notice thereof shall be given by the Agent
to the Borrowers and each Bank. Each determination of the applicable rate by
the Agent shall be conclusive and binding upon the parties hereto in the
absence of manifest error.
2.16. COMMITMENT FEE. The Borrowers agree to pay to the Agent for
the account of each Bank a commitment fee (the "Commitment Fee") accruing from
the Effective Date computed at the rate of .125% PER ANNUM on the average daily
unused portion of the Share of the Commitment of each Bank, it being understood
that the portion of such Commitment Fee relating to the unused portion of the
Share of the Additional Seasonal Commitment of each Bank shall accrue and be
payable only during and with respect to each ASRC Period. In computing the
Commitment Fee, the unused portion shall not be reduced by a Bank's Share of
the Outstanding LC Amounts (RC). The Commitment Fee shall be payable
quarterly in arrears on the last day of each August, November, February and
May, commencing with the Initial Payment Date and ending on the Commitment
Termination Date, on the basis of a year of 360 days for the actual days
elapsed.
2.17. TERMINATION OR REDUCTION OF COMMITMENT. The Borrowers shall
have the right, upon not less than three Business Days' prior notice to the
Agent, to terminate, or from time to time ratably reduce, the Commitment,
PROVIDED that (a) any reduction shall be applied first against the Additional
Seasonal Commitment until it has been reduced to zero and then against the
Basic Commitment, (b) any reduction shall be accompanied by the ratable
prepayment of the Revolving Credit Notes, together with accrued interest
thereon to the date of such prepayment, to the extent, if any, that the
aggregate unpaid principal amount thereof then outstanding (including for this
purpose any necessary LC Prepayment (RC)) exceeds the amount of the Commitment
as then reduced, together with the payment of any unpaid Commitment Fee then
accrued hereunder in respect of the Commitment, and (c) any termination shall
be accompanied by prepayment in full of the unpaid principal amount of the
Revolving Credit Notes (including LC Prepayment (RC) of all Outstanding LC
Amounts (RC)), together with accrued interest thereon to the date of such
prepayment and the payment of any unpaid Commitment Fee then accrued hereunder
in respect of the Commitment. Any such reduction of the Commitment shall be
in an aggregate amount of $500,000, or a whole multiple thereof. Any such
reduction shall ratably reduce permanently the Share of the Basic Commitment or
the Share of the Additional Seasonal Commitment, whichever is the case, and
correspondingly the Share of the Commitment, allocable to each Bank then in
effect. If not terminated earlier, the Commitment shall automatically
terminate on the Commitment Termination Date.
2.18. OPTIONAL PREPAYMENTS OF PRIME LOANS. The Borrowers may, at
their option, ratably prepay the Prime Loans, without premium or penalty, in
whole or in part, upon notice to the Agent, not later than 2:00 P.M. Columbus,
Ohio time on the date of prepayment, specifying the amount of prepayment. Upon
receipt of such notice the Agent shall promptly notify each Bank thereof. Such
notice shall be irrevocable and the payment amount specified in such notice
shall be due and payable on the date specified, together with accrued interest
to such date on the amount prepaid. Partial optional prepayments of the Prime
Loans shall be in an aggregate principal amount of at least $50,000 or a whole
multiple thereof.
2.19. COMPUTATION OF INTEREST AND FEES. Interest on the Loans and
the Notes and all fees payable pursuant hereto shall be calculated on the basis
of a year of 360 days for the actual days elapsed. Any change in the interest
rate on the Loans resulting from a change in the National City Rate shall
become effective as of the opening of business on the day on which such change
in the National City Rate shall become effective. The Agent shall as
FORM 10Q - Page 37 of 88
<PAGE> 27
soon as practicable notify the Borrowers and the Banks of the effective date
and the amount of each such change in the National City Rate.
2.20. PAYMENTS. All payments (including prepayments) to be made by
the Borrowers on account of principal of and interest on the Notes and fees
payable pursuant hereto shall be made without set-off or counterclaim and shall
be made to the Agent at its office located at 155 East Broad Street, Columbus,
Ohio 43251, Attention: Ralph A. Kaparos, Senior Vice President, or at such
other office as designated from time to time by notice from the Agent to the
Borrowers, in each case in Dollars and in immediately available funds and for
the ratable account of each Bank. If any payment hereunder becomes due and
payable on a day other than a Business Day or Eurodollar Business Day,
whichever is applicable, the due date for such payment shall be extended to
the next succeeding Business Day or Eurodollar Business Day, whichever is
applicable, and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension, unless the
result of the foregoing would be to extend the due date of a Eurodollar Loan
to the next succeeding calendar month, in which case, with respect to such
Eurodollar Loan, such due date shall end on the next preceding Eurodollar
Business Day.
2.21. USE OF PROCEEDS OF REVOLVING CREDIT LOANS. The proceeds of the
Revolving Credit Loans shall be used by the Borrowers initially to repay in
full all revolving credit loan amounts outstanding under the Prior Credit
Agreement (if any) and thereafter for their working capital requirements,
capital expenditures and other general corporate purposes.
2.22. INCREASED TAXES OR COSTS. If any Bank shall have determined
that (a) Regulation D of the Federal Reserve Board, (b) the adoption of any
applicable law, rule or regulation, whether domestic or foreign, after the
Effective Date, (c) any change after the Effective Date in any applicable law,
rule or regulation, whether domestic or foreign, whether now or hereafter in
effect, and whether or not presently applicable to any Bank, or any change
after the Effective Date in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or (d) compliance by any Bank with
any request or directive issued after the Effective Date including any such
request or directive regarding capital adequacy (whether or not having the
force of law) of any such Governmental Authority, central bank or comparable
agency:
(i) Shall subject any Bank to any tax, duty or other charge with
respect to its Loans, its Note or its obligation to make or maintain Loans, or
shall change the basis of taxation of payments to any Bank of the principal of
or interest on its Loans or any other amounts due under this Agreement in
respect of its Loans or its obligation to make or maintain Loans (except for a
change in the rate of tax on the overall net income of such Bank);
(ii) Shall impose, modify or deem applicable any reserve (including
without limitation any reserve imposed by the Federal Reserve Board), special
deposit, minimum capital, capital ratio or similar requirement against assets
of, deposits with or for the account of, or credit extended by, any Bank or its
holding company; or
(iii) Shall impose on any Bank any other condition affecting its
Loans, its Note or its obligation to make or maintain Loans; and the result of
any of the foregoing is to increase the cost to or impose a cost on such Bank
of making or maintaining any Loan (other than Prime Loans) or its Share of the
Commitment, or reduce the amount of any rate of return on such Bank's capital
as a consequence thereof or any sum received or receivable by such Bank under
this Agreement or under its Note with respect thereto, by an amount deemed by
such Bank to be material, then from time to time, within 30 days after demand
by such Bank (with a copy to the Agent), the Borrowers shall pay to such Bank
such additional amount or amounts as will compensate such Bank for such costs,
increased costs or reduction less the amount, if any, of such costs, increased
costs or reduction that is reasonably
FORM 10Q - Page 38 of 88
<PAGE> 28
attributable to unsafe or unsound banking practices of such Bank. Each Bank
shall promptly notify the Borrowers and the Agent of any event of which it has
knowledge, occurring after the Effective Date, which shall entitle such Bank to
compensation pursuant to this subsection 2.22. In determining such amount,
such Bank may use any reasonable averaging and attribution methods.
2.23. CHANGES IN CIRCUMSTANCES.
(a) If any of the matters described in clause (b), (c) or (d) of the
introductory portion of subsection 2.22 shall make it unlawful or impossible
for a Bank (the "Affected Bank") to make, maintain or fund a type of Loan, then
(i) the Affected Bank shall promptly notify each of the other parties hereto of
that fact (which notification shall be accompanied by a statement from the
Affected Bank setting forth the basis therefor), (ii) the obligation of all
Banks to make or effect conversions into the type of Loans made unlawful for
the Affected Bank shall, upon the effectiveness of such event, be suspended
for the duration of such unlawfulness, and (iii) on the last day of the
current Interest Period for Loans of such type or, in any event, if the
Affected Bank so requests, on such earlier date as may be required by the
relevant law, regulation or interpretation, the Loans of such type then made
by the Affected Bank shall, unless then repaid in full, together with accrued
interest thereon, automatically convert to Prime Loans.
(b) If, with respect to any Interest Period relating to a Loan:
(i) The Agent determines that deposits in Dollars in the
applicable amounts are not being offered in the relevant market for
such Interest Period; or
(ii) Any Bank determines that the interest rate applicable to
its Loan or Loans relating to such Interest Period will not
adequately and fairly reflect the cost to such Bank of maintaining or
funding such Loan or Loans;
the Agent or such Bank shall give notice thereof to the other parties hereto
(which notice shall be accompanied by a statement from such affected Bank or
Banks setting forth the basis therefor), whereupon the obligations of the
affected Bank or Banks to make Loans of the affected type shall be suspended
until it notifies the other parties hereto that the circumstances giving rise
to such suspension no longer exist.
2.24. FUNDING LOSSES. The Borrowers hereby agree that, upon demand
by the Agent (which demand shall be accompanied by a statement from the Bank or
Banks in question setting forth the basis for such demand), the Borrowers shall
indemnify any Bank furnishing such statement against any reasonable amount of
loss or expense which such Bank may reasonably sustain or incur (including
without limitation lost profits or any loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Bank to fund or maintain CD Loans, Eurodollar Loans or Negotiated Loans), as
reasonably determined by such Bank, as a result of (a) any prepayment or
conversion of any such Loan of such Bank on a date other than the last day of
an Interest Period for such Loan, or (b) any failure of the Borrowers to borrow
or convert any such Loan on the date specified therefor in a notice of borrowing
or conversion pursuant to this Agreement; PROVIDED, HOWEVER, that the
Borrowers shall indemnify the Banks against lost profits only if such loss
occurred as a result of an action or failure to act of the Borrowers, and not
if such loss occurred as a result of any change in the law rendering certain
such Loans unlawful. Prepayment of such Loans may be negotiated with the
Banks with respect to premium and payment of verified lost profits.
SECTION 3. LETTERS OF CREDIT.
3.1. LETTERS OF CREDIT. The Borrowers may request, in accordance with
the provisions of this subsection 3.1, that the Issuing Bank issue Letters of
Credit for the account of the Borrowers. With respect to such
FORM 10Q - Page 39 of 88
<PAGE> 29
requested Letters of Credit, (a) all requested documentary trade Letters of
Credit shall be issued as DLCF Letters of Credit under the DLC Facility if
issued during the DLCF Period with an expiration date no later than the LC
Termination Date (DLCF) and if such issuance would not cause either (i) the
aggregate of the then Outstanding LC Amounts (DLCF) to exceed the amount of the
DLC Facility then in effect or (ii) if such issuance is to be made during an
ASDL Period, the aggregate of the then Outstanding LC Amounts (DLCF) which may
by their terms be outstanding immediately after the end of the ASDL Period to
exceed the amount of the DLC Facility which will be in effect immediately after
the end of the ASDL Period, (b) all requested standby Letters of Credit
(PROVIDED that the outstanding standby Letters of Credit may not at any time
exceed the Standby LC Limit) and all other requested documentary trade Letters
of Credit shall be issued as RC Letters of Credit if issued during the
Commitment Period with an expiration date no later than the LC Termination Date
(RC) and if such issuance would not cause either (i) the aggregate of the
principal amount of the Revolving Credit Loans outstanding from any Bank
(including the Bank's Share of the Outstanding LC Amounts (RC)) to exceed the
Bank's Share of the Commitment then in effect or (ii) if such issuance is to be
made during an ASRC Period, the aggregate of the principal amount of the
Revolving Credit Loans outstanding from any Bank (including in the Bank's
Share of the Outstanding LC Amounts (RC) only those RC Letters of Credit which
may by their terms be outstanding immediately after the end of the ASRC Period)
to exceed the Bank's Share of the Commitment which will be in effect immediately
after the end of the ASRC Period, (c) no RC Letters of Credit may be issued
under the Additional Seasonal Commitment unless by their terms they expire at
or before the end of the then ASRC Period and (d) no Letters of Credit shall be
issued other than as provided in clauses (a), (b) and (c) above. The issuance
of any RC Letter of Credit in accordance with the provisions of this subsection
3.1 shall be given effect in the calculation of and thereby reduce the
remaining Commitment available for Revolving Credit Loans (but shall not be
given effect in the calculation of and thus shall not reduce the amount of the
Commitment Fee payable pursuant to subsection 2.16), with each Bank's Share of
the Commitment available for Revolving Credit Loans being reduced by such
Bank's LC Share (RC) of such Letter of Credit due to the participation in such
Letters of Credit provided for below, and shall require the satisfaction of
each condition set forth in subsection 6.2 as if such issuance were the making
of a Loan. The issuance of any DLCF Letter of Credit in accordance with the
provisions of this subsection 3.1 shall be given effect in the calculation of
and reduce the remaining DLC Facility available for DLCF Letters of Credit (but
shall not be given effect in the calculation of and thus shall not reduce the
amount of the facility fee for the DLC Facility payable pursuant to subsection
3.5(c)), and shall require the satisfaction of each condition set forth in
subsection 6.2 as if such issuance were the making of a Loan.
Immediately upon the issuance of each Letter of Credit, each Bank hereby
agrees to irrevocably purchase, and shall be deemed to have irrevocably
purchased, from the Issuing Bank a participation in such Letter of Credit and
drawing thereunder in an amount equal to such Bank's LC Share (DLCF) (in the
case of a DLCF Letter of Credit) or LC Share (RC) (in the case of a RC Letter
of Credit) determined on the maximum amount which is or at any time may become
available to be drawn thereunder (the "LC Amount"). Further, and consistent
therewith, as of the Effective Date each pre-existing Letter of Credit then
outstanding issued by the Issuing Bank and listed on Schedule 3.1 (a
"Pre-Existing Letter of Credit") shall become and thereafter be deemed a
Letter of Credit (and a DLCF Letter of Credit unless specifically identified
on such Schedule as a RC Letter of Credit) issued hereunder with each Bank
hereby agreeing to irrevocably purchase, and being deemed to have irrevocably
purchased, from the Issuing Bank a participation in each such Letter of Credit
and drawing thereunder in an amount equal to such Bank's LC Share (DLCF) or LC
Share (RC), whichever is applicable.
Each Letter of Credit may provide that the Issuing Bank may (but shall
not be required to) pay the beneficiary thereof upon the occurrence of an
Event of Default and the acceleration of the maturity of the Loans or, if
payment is not then due to the beneficiary, provide for the deposit of funds
in an account to secure payment to the beneficiary and that any funds so
FORM 10Q - Page 40 of 88
<PAGE> 30
deposited shall be paid to the beneficiary of the Letter of Credit if
conditions to such payment are satisfied or returned to the Issuing Bank for
distribution to the Banks (or, if all obligations of the Borrowers under this
Agreement and the Notes shall have been indefeasibly paid in full, to the
Borrowers) if no payment to the beneficiary has been made and the final date
available for drawings under the Letter of Credit has passed. Each payment or
deposit of funds by the Issuing Bank as provided in this paragraph shall be
treated for all purposes of this Agreement as a drawing duly honored by the
Issuing Bank under the related Letter of Credit.
3.2. NOTICE OF ISSUANCE. Whenever the Borrowers desire the issuance
of a Letter of Credit, they shall deliver to the Agent and to the Issuing Bank a
written notice no later than 1:00 P.M. Columbus, Ohio time at least three
Business Days, or such shorter period as may be agreed to by the Issuing Bank
in any particular instance, in advance of the proposed date of issuance. That
notice shall specify (a) the type of Letter of Credit (documentary trade or
standby), (b) the proposed date of issuance (which shall be an LC Business
Day), (c) the face amount of the Letter of Credit, (d) the expiration date of
the Letter of Credit and (e) the name and address of the beneficiary. Prior to
the date of issuance, the Borrowers shall specify a precise description of the
documents and the verbatim text of any certificate to be presented by the
beneficiary of such Letter of Credit which, if presented by such beneficiary
prior to the expiration date of the Letter of Credit, would require the Issuing
Bank to make payment under the Letter of Credit; PROVIDED that the Issuing
Bank, in its sole reasonable judgment, may require changes in any such
documents and certificates; and PROVIDED, FURTHER, that no Letter of Credit
shall require payment against a conforming draft to be made thereunder on the
same LC Business Day that such draft is presented if such presentation is made
after 11:00 A.M. in the time zone of the Issuing Bank on such LC Business Day.
In determining whether to pay under a Letter of Credit, the Issuing Bank shall
be responsible only to determine that the documents and certificates required
to be delivered under that Letter of Credit have been delivered and that they
comply on their face with the requirements of that Letter of Credit. On a
monthly basis, following receipt of each notice of issuance of a Letter of
Credit, the Agent shall notify each Bank of each such issuance and the amount
of each Bank's respective participation therein determined in accordance with
subsection 3.1. Each Bank may also request such information more frequently
than monthly if needed.
3.3. PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. In the event
of any request for drawing under any Letter of Credit by the beneficiary
thereof, the Issuing Bank shall notify the Borrowers and the Agent on or before
the date on which the Issuing Bank intends to honor such drawing, and the
Borrowers shall reimburse the Issuing Bank on the day on which such drawing is
honored in an amount in same day funds equal to the amount of such drawing;
PROVIDED that, anything contained in this Agreement to the contrary
notwithstanding, in the case of a drawing under a RC Letter of Credit only, (a)
unless the Borrowers shall have notified the Agent and the Issuing Bank prior to
11:00 A.M. Columbus, Ohio time on the Business Day immediately prior to the date
of such drawing that the Borrowers intend to reimburse the Issuing Bank for the
amount of such drawing with funds other than the proceeds of Loans, the
Borrowers shall be deemed to have timely given a notice of borrowing to the
Agent pursuant to subsection 2.4 requesting the Banks to make Loans which are
Prime Loans on the date on which such drawing is honored in an amount equal to
the amount of such drawing, and (b) subject to satisfaction or waiver of the
conditions specified in subsection 6.2, the Banks shall, on the date of such
drawing, make Loans which are Prime Loans on the date on which such drawing is
honored in amount equal to the amount of such drawing, the proceeds of which
shall be applied directly by the Agent to reimburse the Issuing Bank for the
amount of such drawing; and PROVIDED, FURTHER, that, in such case, if for any
reason proceeds of Loans are not received by the Issuing Bank on such date in an
amount equal to the amount of such drawing, the Borrowers shall reimburse the
Issuing Bank, on the LC Business Day immediately following the date of such
drawing, in an amount in same day funds equal to the excess of the amount of
such drawing over the amount of such Loans, if any, which are so received, PLUS
accrued interest on such amount at the rate set forth in subsection 3.5(a)(ii).
FORM 10Q - Page 41 of 88
<PAGE> 31
3.4. PAYMENT BY BANKS. In the event that the Borrowers shall fail to
reimburse the Issuing Bank as provided in subsection 3.3 in an amount equal to
the amount of any drawing honored by the Issuing Bank under a Letter of Credit
issued by it, the Issuing Bank shall promptly notify each Bank of the
unreimbursed amount of such drawing and of such Bank's respective participation
therein. Each Bank shall make available to the Issuing Bank an amount equal to
its respective participation in same day funds, at the office of the Issuing
Bank specified in such notice, not later than 1:00 P.M. Columbus, Ohio time on
the LC Business Day after the date notified by the Issuing Bank. In the event
that any Bank fails to make available to the Issuing Bank the amount of such
Bank's participation in such Letter of Credit as provided in this subsection
3.4, the Issuing Bank shall be entitled to recover such amount on demand from
such Bank together with interest at the customary rate set by the Agent for the
correction of errors among banks for three Business Days and thereafter at the
National City Rate. Nothing in this subsection 3.4 shall be deemed to prejudice
the right of any Bank to recover from the Issuing Bank any amounts made
available by such Bank to the Issuing Bank pursuant to this subsection 3.4 in
the event that it is determined by a court of competent jurisdiction that the
payment with respect to a Letter of Credit by the Issuing Bank in respect of
which payment was made by such Bank constituted gross negligence or willful
misconduct on the part of the Issuing Bank. The Issuing Bank shall distribute
to each other Bank which has paid all amounts payable by it under this
subsection 3.4 with respect to any Letter of Credit issued by the Issuing Bank
such other Bank's pro rata share (determined based on the Bank's Percentage (RC)
or Percentage (DLCF), whichever is applicable) of all payments received by the
Issuing Bank from the Borrowers in reimbursement of drawings honored by the
Issuing Bank under such Letter of Credit when such payments are received.
3.5. COMPENSATION.
(a) The Borrowers agree to pay the following amount to the Issuing
Bank with respect to Letters of Credit issued by it:
(i) With respect to each Letter of Credit, an
administrative fee established by the Issuing Bank, payable upon the
issuance of the Letter of Credit or at such other time established by
the Issuing Bank;
(ii) With respect to drawings made under any Letter of Credit,
interest, payable on demand, on the amount paid by the Issuing Bank in
respect of each such drawing from the date of the drawing through the
date such amount is reimbursed by the Borrowers (including any such
reimbursement in the case of RC Letters of Credit out of the proceeds
of Loans pursuant to subsection 3.3) at a rate which is at all times
equal to 2% PER ANNUM in excess of the rate of interest otherwise
payable under this Agreement for Prime Loans;
(iii) With respect to the issuance, amendment or transfer of
each Letter of Credit and each drawing made thereunder, negotiating,
documentary and processing charges in accordance with the Issuing Bank's
standard schedule for such charges in effect at the time of such
issuance, amendment, transfer or drawing, as the case may be;
(iv) From and after the Term Loan Commencement Date, a fee
accruing from the Term Loan Commencement Date computed at .25% PER ANNUM
on the average daily balance of (A) the Outstanding LC Amounts (RC) less
(B) the aggregate amount of any LC Prepayments (RC), which fee shall be
payable on the same dates as the Term Loan Amortization Installments are
payable and on the basis of a year of 360 days for the actual days
elapsed; and
(v) From and after the last day of the DLCF Period, a fee
accruing from the last day of the DLCF Period, computed at 1/8% PER
ANNUM on the average daily balance of the Outstanding LC Amounts (DLCF),
which fee shall be payable on the same dates as the Commitment
FORM 10Q - Page 42 of 88
<PAGE> 32
Fee under subsection 2.16 or the Term Loan Amortization
Installments (whichever is applicable) are payable on the basis of a
year of 360 days for the actual days elapsed.
(b) The Borrowers agree to pay to the Agent at the time of issuance,
for distribution to each Bank in respect of each standby Letter of Credit
issued, such Bank's pro rata share (determined based on the Bank's Percentage
(RC)) of a commission equal to 7/8% PER ANNUM of the LC Amount for such standby
Letter of Credit.
(c) The Borrowers agree to pay to the Agent for distribution to the
Banks in respect of the DLC Facility a facility fee during the DLCF Period
computed at 1/8% PER ANNUM on the amount of the DLC Facility (it being
understood that the portion of such facility fee relating to the Additional
Seasonal DLCF Limit shall accrue and be payable only during and with respect to
each ASDL Period), which facility fee shall be payable quarterly in advance on
the same dates as the Commitment Fee is payable as provided in subsection 2.16
and on the basis of a year of 360 days for the actual days elapsed.
Promptly upon receipt by the Issuing Bank or the Agent of any amount
described in clause (a)(ii), (a)(iv), (a)(v), (b) or (c) of this subsection 3.5,
the Issuing Bank or the Agent, as the case may be, shall distribute to each Bank
its share of such amount (in the case of Pre-Existing Letters of Credit, only
the pro-rated portion based on the portion of the term of each Pre-Existing
Letter of Credit which falls from and after the Effective Date shall be so
shared). Amounts payable under clause (a)(i) or (a)(iii) of this subsection 3.5
shall be paid directly to, and for the sole benefit of, the Issuing Bank.
3.6. OBLIGATIONS ABSOLUTE. The obligations of the Borrowers to
reimburse the Issuing Bank for drawings made under the Letters of Credit issued
by it and the obligations by the Banks under subsection 3.4 shall, other than in
the case of gross negligence or willful misconduct on the part of the Issuing
Bank, be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances including without
limitation the following circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit;
(b) The existence of any claim, set-off, defense or other right which
any of the CSC Companies may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons or entities for whom any such
beneficiary or transferee may be acting), the Issuing Bank, any Bank or any
other Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction;
(c) Any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(d) Payment by the Issuing Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of the Letter of Credit;
(e) Any other circumstance or happening whatsoever which is similar to
any of the foregoing; or
(f) The fact that an Event of Default or a Default shall have occurred
and be continuing.
3.7. INCREASED COSTS AND CHANGED CIRCUMSTANCES. The provisions of
subsection 2.22 and subsection 2.23 shall apply to the issuance and maintenance
of Letters of Credit the same as if such Letters of Credit themselves were Loans
hereunder.
FORM 10Q - Page 43 of 88
<PAGE> 33
SECTION 4. TERM LOANS.
4.1. PROCEDURE FOR BORROWING. By written notice given on or before
the Term Loan Notice Date by the Borrowers to the Agent and each Bank (which
notice shall be deemed to have been given, whether or not actually given,
if on the Term Loan Commencement Date there are any outstanding Loans or
RC Letters of Credit hereunder having a maturity date which is after the
Term Loan Commencement Date), on the Term Loan Commencement Date the
Borrowers shall borrow from each Bank and each Bank shall lend to the
Borrowers, subject to the terms hereof, as a term loan (a "Term Loan") up to the
Term Loan Commitment of such Bank. The Term Loan of each Bank shall be
evidenced by a joint and several promissory note of the Borrowers substantially
in the form of Exhibit 4.1 (a "Term Note") which shall be payable to the order
of such Bank and shall represent the obligation of the Borrowers to pay the
amount of the Term Loan made by such Bank with interest thereon as prescribed in
this subsection 4.1. The Term Notes shall (a) be dated the Term Loan
Commencement Date, (b) be in a principal amount equal to the Term Loan
Commitment of the payee Bank, (c) be stated to mature on the Term Loan
Termination Date, (d) provide for payment of principal in Term Loan Amortization
Installments beginning on the Term Loan Initial Payment Date and (e) bear
interest on the unpaid principal amount thereof from time to time outstanding at
such rate or rates set forth in subsection 2.12 for a Term Loan as shall be
selected by the Borrowers and set forth in the initial notice of Term Loan
borrowing and subsequent notices given in accordance with the procedure set
forth in subsection 2.5. The Borrowers may select Interest Periods that would
extend beyond a Term Loan Amortization Installment payment date provided that
the aggregate principal of the Loans with such Interest Periods shall not exceed
the amount of the permissible Term Loan Exposure after giving effect to such
Term Loan Amortization Installment. Interest on the Term Notes shall be payable
quarterly commencing on the Term Loan Initial Payment Date, on the last day of
each Interest Period (in the case of each CD Loan or Eurodollar Loan) and upon
payment (including prepayment) in full thereof. After any unpaid principal
amount of the Term Notes shall become due, such principal amount shall bear
interest until paid in full (both before and after judgment) as provided in
subsection 2.12(e). At the time of the Term Loan borrowing, the Banks shall
deliver the Revolving Credit Notes held by them to the Borrowers against
delivery to the Banks of the Term Notes, together with (i) any accrued interest
on such Revolving Credit Notes and any accrued Commitment Fee under subsection
2.16 and (ii) if less than the amount then owing on the Revolving Credit Notes
is then being borrowed, the principal amount of the Revolving Credit Notes in
excess of the amount then being borrowed as Term Loans. No Term Loan may be
made or maintained as a Negotiated Loan.
4.2. OPTIONAL PREPAYMENTS. The Borrowers may, at their option,
prepay the portion of the Term Notes that bears interest at the National City
Rate PLUS 1/8%, without premium or penalty, in whole or in part, upon at least
one Business Day's prior notice to the Agent, specifying the date and amount of
prepayment. Upon receipt of such notice the Agent shall promptly notify each
Bank thereof. Such notice shall be irrevocable and the payment amount
specified in such notice shall be due and payable on the date specified,
together with accrued interest to such date on the amount prepaid. Partial
optional prepayments of the Term Notes shall be in an aggregate principal
amount of at least $250,000 or a whole multiple of $100,000 in excess thereof
and shall be applied to the unpaid installments thereof in the same manner that
Term Loan Amortization Installments are applied and in the inverse order of
their maturities.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
In order to induce each Bank to enter into this Agreement and to make
the Loans (including any issuances of Letters of Credit pursuant to Section 3),
the Borrowers hereby jointly and severally represent and warrant to the Agent
and the Banks that:
5.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the CSC Ohio
Companies (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (b) has the corporate power
FORM 10Q - Page 44 of 88
<PAGE> 34
and authority and the legal right to own or lease and operate its Property, and
to conduct the business in which it is currently engaged, (c) is duly qualified
as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of Property or the conduct
of its business requires such qualification and the failure to qualify would
have a material adverse effect on the business, operations, Property or
financial or other condition of such CSC Ohio Company and (d) is in compliance
with all Requirements of Law, except to the extent that the failure to comply
therewith could not, in the aggregate, have a material adverse effect on the
business, operations, Property or financial or other condition of the CSC Ohio
Companies taken as a whole, and could not materially adversely affect the
ability of the Borrowers to perform their obligations under and in respect of
this Agreement and the Notes.
5.2. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each
of the Borrowers has the corporate power and authority to make, deliver and
perform the Loan Documents to which it is a party and to borrow hereunder and
each of the Borrowers has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and the other such
Loan Documents. No consent or authorization of, filing with or other act by or
in respect of any other Person is required in connection with the borrowings
hereunder or with the execution, delivery or performance by the Borrowers, or
the validity or enforceability against the Borrowers, of the Loan Documents to
which the Borrowers are a party. All consents and authorizations of, filings
with and other acts by or in respect of any other Person required in connection
with the execution, delivery or performance by the Borrowers, or the validity
or enforceability against the Borrowers, of the Loan Documents to which the
Borrowers are a party have been obtained or performed and are in full force and
effect. This Agreement has been, and the Notes will be, duly executed and
delivered on behalf of the Borrowers. This Agreement constitutes, and the
Notes when executed and delivered will constitute, a legal, valid and binding
obligation of the Borrowers, enforceable against the Borrowers in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally and except as enforceability may be limited by
general principles of equity (whether considered in a suit at law or in
equity).
5.3. NO LEGAL BAR. The execution, delivery and performance by the
Borrowers of the Loan Documents to which they are a party will not violate any
Requirements of Law or any Contractual Obligation applicable to or binding upon
any of the CSC Ohio Companies or any of its respective Properties or assets and
will not result in the creation or imposition of any Lien on any of its
respective Properties or assets pursuant to the provisions of any Requirements
of Law applicable to it or any of its respective Contractual Obligations,
except to the extent that such violation or the creation or imposition of any
such Lien would not, in the aggregate, have a material adverse effect on the
business, operations, Property or financial or other condition of the CSC
Companies taken as a whole, and could not materially adversely affect the
ability of the Borrowers to perform their obligations under and in respect to
this Agreement and the Notes.
5.4. NO MATERIAL LITIGATION. No litigation or proceeding or, to the
knowledge of the Borrowers, investigation of or before any arbitrator or
Governmental Authority, is pending or, to the knowledge of the Borrowers,
threatened by or against any of the CSC Companies or against any of its
respective properties or revenues (a) with respect to this Agreement or any of
the other Loan Documents or any of the transactions contemplated hereby or
thereby or (b) which, if adversely determined, would have a material adverse
effect on the business, operations, assets or condition, financial or
otherwise, of the CSC Companies taken as a whole.
5.5. NO DEFAULT. None of the CSC Ohio Companies is in default in
the payment or performance of any of its Contractual Obligations (except as to
such default which would not have a material adverse effect upon the business,
operations, Property or financial or other condition of the CSC Companies taken
as a whole), and no Default or Event of Default has occurred and is
FORM 10Q - Page 45 of 88
<PAGE> 35
continuing. None of the CSC Ohio Companies is in default under any order,
award or decree of any Governmental Authority or arbitrator binding upon or
affecting it or by which any of its Properties or assets may be bound or
affected (except as to such default which would not have a material adverse
effect upon the business, operations, Property or financial or other condition
of the CSC Companies taken as a whole).
5.6. FEDERAL REGULATIONS. None of the CSC Ohio Companies is
engaged, nor will any of the CSC Ohio Companies engage, principally or as one
of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Federal Reserve
Board as now and from time to time hereafter in effect. No part of the
proceeds of any Loans will be used for any purpose which violates, or which
would be inconsistent with, the provisions of Regulation U of the Federal
Reserve Board. No part of the proceeds of any Loans will be used for
"purchasing" or "carrying" "margin stock" as so defined or for any purpose
which violates, or which would be inconsistent with, the provisions of the
Regulations of the Federal Reserve Board.
5.7. INVESTMENT COMPANY ACT. None of the CSC Ohio Companies is an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
5.8. DISCLOSURE. No representation or warranty made by any of the
CSC Companies in the Loan Documents or in any other document furnished to the
Agent or any of the Banks from time to time in connection herewith or
therewith, as of the date of such document, contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading.
5.9. FINANCIAL CONDITION. The consolidated balance sheet of the CSC
Companies as at January 29, 1994, and the related consolidated statements of
income, stockholders' equity and cash flows for the year then ended, certified
by Deloitte & Touche, copies of which have been furnished to the Banks, present
fairly the consolidated financial position of the CSC Companies as at such date
and the results of their operations for such period. All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the period
involved.
5.10. NO CHANGE. Since January 29, 1994, there has been no material
adverse change in the business, operations, assets or financial or other
condition of the CSC Companies taken as a whole.
5.11. OWNERSHIP OF PROPERTY; LIENS. Except as set forth on Schedule
5.11, except for Liens that are not material and except for any changes which
have occurred in the ordinary course of business of the CSC Ohio Companies,
each of the CSC Ohio Companies has good record title in fee simple to, or valid
and subsisting leasehold interests in, all of their respective real Property,
and good title to all their respective other Property, reflected on the balance
sheets referred to in subsection 5.9.
5.12. TAXES. Each of the CSC Ohio Companies has filed or caused to
be filed all tax returns which, to the knowledge of the Borrowers, are required
to have been filed, and has paid all taxes shown to be due and payable on said
returns, all assessments made against it or any of its Property and all other
taxes, fees or other charges imposed on it or any of its Property by any
Governmental Authority (other than those the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in accordance with GAAP have been provided on the
books of the appropriate CSC Ohio Company); and no tax liens have been filed
and, to the knowledge of the Borrowers, no claims are being asserted with
respect to any such taxes, fees or other charges.
FORM 10Q - Page 46 of 88
<PAGE> 36
5.13. ERISA.
(a) Except as set forth on Schedule 5.13, none of the CSC Ohio
Companies is a party to, makes or is required to make employer contributions
to, or has any current or future obligation or liability with respect to, any
pension, profit-sharing, retirement, deferred compensation, bonus, stock
purchase, severance, hospitalization, medical insurance, life insurance,
vacation policy or other employee benefit plan, agreement, arrangement or
understanding maintained for the benefit of its current or former employees (a
"Plan"). Each Plan set forth or described on Schedule 5.13 is, except to the
extent stated therein, in full force and effect in accordance with its terms
and complies in all material respects with all applicable laws. None of the
CSC Ohio Companies is in default under any Plan and, except as set forth on
Schedule 5.13, to the knowledge of the CSC Ohio Companies, no other party is in
default thereunder. The CSC Ohio Companies have made or provided for all
payments due under or with respect to each Plan to date, and all amounts
properly accrued to date as liabilities of the CSC Ohio Companies under each
Plan in the current plan years have been recorded on the books of the CSC Ohio
Companies. Each Plan listed on Schedule 5.13 that is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service and each trust established under a Plan that is
intended to be exempt from taxation under Section 501(a) or (c) of the Code has
been determined by the Internal Revenue Service to be so exempt, and nothing
has occurred which would cause the loss of such qualifications or exemptions.
None of the Plans is a Multiple Employer Plan or a Multiemployer Plan, and none
of the CSC Ohio Companies has made any contributions to or participated in any
Multiple Employer Plan or Multiemployer Plan within the last five years.
(b) Except as set forth on Schedule 5.13, to the knowledge of the
CSC Ohio Companies, the CSC Ohio Companies have satisfied all material
reporting and disclosure requirements and all other material requirements
applicable to them under the Code or ERISA, and the Department of Labor and the
Internal Revenue Service regulations promulgated thereunder, with respect to
the Plans. There are no material actions, suits or asserted claims pending and
served on any of the CSC Ohio Companies (other than routine claims for
benefits) or, except as set forth on Schedule 5.13, to the knowledge of any of
the CSC Ohio Companies, threatened, against any Plan or against the assets of
any Plan. No Plan which is subject to Part III of Subtitle B of Title I of
ERISA or Section 412 of the Code has incurred any "accumulated funding
deficiency" (as defined in ERISA), whether or not waived. No Plan that is or
was subject to Title IV of ERISA has been terminated, no proceeding has been
initiated to terminate any such Plan, and none of the CSC Ohio Companies has
incurred, nor reasonably expects to incur, any liability to PBGC, except for
required premium payments, none of which payments is overdue.
(c) The present value of all accrued benefits (whether or not
vested) under each Plan subject to Title IV of ERISA did not exceed, as of
January 1, 1993, and does not exceed as of the Effective Date, the then current
Fair Market Value of the assets of such Plan by more than the amount set forth
on Schedule 5.13. For purposes of determining the present value of accrued
benefits under the Plans, the actuarial assumptions and methods used under each
Plan for the most recent Plan valuation shall be used.
(d) With respect to each Plan that is an "employee benefit plan",
within the meaning of Section 3(3) of ERISA, true and complete copies of (i)
the documents embodying the Plan, any related trust and all amendments thereto,
(ii) the summary plan description and all modifications thereto, (iii) the last
filed Annual Report (Form 5500 Series) and Schedules A and B thereto, (iv) the
most recent Internal Revenue Service determination letter, if applicable, (v)
the most recent actuarial valuation report, if any, and (vi) the most recent
annual and periodic financial statements, have been delivered or made available
to the Agent and are correct in all material respects.
FORM 10Q - Page 47 of 88
<PAGE> 37
5.14. CSC OHIO SUBSIDIARIES. Unless otherwise disclosed to the
Agent and the Banks in writing, the only CSC Ohio Subsidiaries are those listed
in Schedule 5.14.
SECTION 6. CONDITIONS PRECEDENT.
6.1. CONDITIONS TO INITIAL REVOLVING CREDIT LOANS. The obligation
of each Bank to make its initial Revolving Credit Loan shall be subject to the
fulfillment prior to or contemporaneously with the making of such Revolving
Credit Loan of the following conditions to the satisfaction of such Bank:
(a) REVOLVING CREDIT NOTE. The Agent shall have received for the
account of the Banks each Bank's Revolving Credit Note conforming to the
requirements hereof and duly executed by the duly authorized officers of the
Borrowers.
(b) CREDIT GUARANTEES. The Agent shall have received, with a
counterpart for each Bank, a Credit Guarantee of each of the CSC Companies
other than the Borrowers, duly executed by a duly authorized officer of each
such CSC Company in substantially the forms of Exhibit 1.1-1 (for the CSC
Parent Companies) and Exhibit 1.1-2 (for the CSC Ohio Subsidiaries).
(c) LEGAL OPINION OF COUNSEL. The Agent shall have received, with a
counterpart for each Bank, the opinion, dated the Closing Date, of Albert J.
Bell, general counsel to the CSC Parent/Borrower Companies, in substantially
the form of Exhibit 6.1(c).
(d) CORPORATE PROCEEDINGS. The Agent shall have received, with a
counterpart for each Bank, a copy of the resolutions of the Board of Directors
of each of the CSC Companies authorizing (i) the execution, delivery and
performance by each of the CSC Companies of the Loan Documents to which it is
a party, (ii) the consummation of the transactions contemplated thereby and
hereby and (iii) the borrowings provided for herein, certified by the
appropriate Secretary or Assistant Secretary of each of the CSC Companies on
the Closing Date. Such certificate shall state that the resolutions set forth
therein have not been amended, modified, revoked or rescinded as of the date
of such certificate.
(e) INCUMBENCY CERTIFICATES. The Agent shall have received, with a
counterpart for each Bank, a certificate of the Secretary or an Assistant
Secretary of each of the CSC Companies dated the Closing Date, as to the
incumbency and signature of the officer or officers signing the Loan Documents
to which it is a party and any certificate or other document to be delivered
pursuant thereto or hereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary.
(f) NO LEGAL RESTRAINTS. There shall be no injunction, writ,
preliminary restraining order or any order of any nature issued by any
Governmental Authority directing that the transactions provided for in the Loan
Documents or any of them not be consummated as herein or therein provided.
(g) FINANCIAL INFORMATION. The Agent shall have received, with a
photocopy for each Bank, copies of the financial statements referred to in
subsection 5.9.
(h) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by (i) the Borrowers in the Loan Documents, (ii) each of the
CSC Parent Companies in its respective Credit Guarantee and (iii) each CSC Ohio
Subsidiary in its respective Credit Guarantee, and the representations and
warranties made by any of the CSC Companies which are contained in any
certificate, document or financial or other statement furnished in connection
therewith or herewith, shall be true and correct in all material respects on
and as of the Closing Date after giving effect to the initial Loan.
FORM 10Q - Page 48 of 88
<PAGE> 38
(i) BORROWING CERTIFICATE. The Agent shall have received a
borrowing certificate, with an executed counterpart for each Bank, dated the
Closing Date, substantially in the form of Exhibit 6.1(i), executed by the duly
authorized officers of the Borrowers.
(j) PRIOR CREDIT AGREEMENT, LOAN DOCUMENTS AND NOTE. The Borrowers
shall have repaid in full, or shall repay in full as of the time of the initial
Revolving Credit Loan with proceeds of the initial Revolving Credit Loan, all
outstanding loans and any other amounts owing under the Credit Agreement dated
June 10, 1993 among the parties hereto including all amendments thereto (the
"Prior Credit Agreement") and all "Loan Documents" (as defined in such Prior
Credit Agreement) (the "Prior Loan Documents") and under all promissory notes
from the Borrowers to the Banks issued pursuant thereto (the "Prior Notes").
The parties agree that such Prior Credit Agreement, such Prior Loan Documents
and such Prior Notes are, concurrently with such initial Revolving Credit Loan
and repayment in full, terminated by them and shall thereafter be of no further
force or effect.
(k) ADDITIONAL MATTERS. All corporate and other proceedings and all
other documents and legal matters in connection with the transactions
contemplated by the Loan Documents shall be satisfactory in form and substance
to each Bank and its counsel.
6.2. CONDITIONS TO ALL LOANS. The obligation of each Bank to make
any Loan (including the Revolving Credit Loan on the Closing Date) is subject
to fulfillment of the following conditions precedent to the satisfaction of
such Bank:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by (i) the Borrowers in the Loan Documents, (ii) each of the
CSC Parent Companies in its respective Credit Guarantee and (iii) each CSC Ohio
Subsidiary in its respective Credit Guarantee, and the representations and
warranties made by any of the CSC Companies which are contained in any
certificate, document or financial or other statement furnished at any time
under or in connection therewith or herewith, shall be true and correct in all
material respects on and as of the Borrowing Date for such Loan after giving
effect to such Loan, as if made on and as of such date unless stated to relate
to a specific earlier date.
(b) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing on such Borrowing Date or after giving
effect to each Loan to be made on such Borrowing Date.
(c) LITIGATION. No suit, action, investigation, inquiry or other
proceeding by any Governmental Authority or other Person or any other legal or
administrative proceeding shall be pending or threatened which questions the
validity or legality of the transactions contemplated by the Loan Documents, or
seeks damages in connection therewith.
(d) ADDITIONAL CREDIT GUARANTEES. The Agent shall have received,
with a counterpart for each Bank, a Credit Guarantee of each CSC Subsidiary
created subsequent to the Closing Date, duly executed by a duly authorized
officer of such CSC Subsidiary, substantially in the form of Exhibit 1.1-2,
together with certified resolutions and an incumbency certificate for such CSC
Subsidiary comparable to those required by subsections 6.1(d) and 6.1(e).
Each borrowing hereunder shall be deemed a representation and warranty jointly
and severally by the Borrowers to the effect that the conditions set forth in
paragraphs (a), (b), (c) and (d) above are satisfied.
SECTION 7. AFFIRMATIVE COVENANTS.
The Borrowers hereby jointly and severally agree that, so long as the
Commitment remains in effect or any Note or Letter of Credit issued hereunder
remains outstanding and unpaid or any other amount is owing to the Agent or any
Bank hereunder, the Borrowers shall, and in the case of the agreements set
FORM 10Q - Page 49 of 88
<PAGE> 39
forth in subsections 7.3, 7.4, 7.5, 7.6 and 7.7 shall cause the CSC Ohio
Subsidiaries to:
7.1. FINANCIAL STATEMENTS. Furnish to each Bank:
(a) As soon as available, but in any event not later than 90 days
after the end of each fiscal year of CSC, (i) a copy of the consolidated
balance sheet of the CSC Companies as at the end of such fiscal year and the
related consolidated statements of income and stockholders' equity and cash
flows of the CSC Companies for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, reported on without a
"going concern" or like qualification or exception, or qualification arising
out of the scope of the audit, by Deloitte & Touche or other independent
certified public accountants of nationally recognized standing acceptable to
the Banks, and (ii) a consolidating balance sheet of the CSC Companies as at
the end of such fiscal year showing the assets and liabilities of each of CSC
and TRO separately and of all of the other CSC Companies on a consolidated
basis; and also, as soon as available, but in any event not later the due date
for filing the federal tax return for each fiscal year of CSC, (iii) a
consolidating statement of income for such fiscal year showing the income of
each of CSC and TRO separately and all of the other CSC Companies on a
consolidated basis.
(b) As soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal year
of CSC, (i) a copy of the unaudited consolidated balance sheet of the CSC
Companies as at the end of each such quarter and the related unaudited
consolidated statement of income of the CSC Companies for such quarterly period
and the portion of the fiscal year through the end of such quarter, setting
forth in each case in the form required by Form 10-Q under the Securities
Exchange Act of 1934, as amended, the figures for the corresponding period of
the previous year, and certified by the chief financial officer of CSC as being
fairly stated in all material respects, (ii) a consolidating balance sheet of
the CSC Companies as at the end of each such quarter, showing the assets and
liabilities of each of CSC and TRO separately and of all of the other CSC
Companies on a consolidated basis, and (iii) such other financial information
with respect to the Borrowers, certified by the chief financial officer of the
Borrowers as being fairly stated in all material respects, as the Bank may
request, such information not to be unreasonably withheld by the Borrowers; and
(c) Any other financial statements or other financial information
which any of the CSC Companies is obligated to provide under the Note Purchase
Agreement, at the same time and on the same basis as such CSC Companies are
obligated to provide the same under the Note Purchase Agreement.
All such financial statements referred to in clauses (a) and (b) of this
subsection 7.1 shall present fairly the consolidated or consolidating (as the
case may be) financial position of the CSC Companies as at such date (subject,
in the case of interim statements, to normal year-end audit adjustments) and
shall be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein (except as concurred in
by such accountants or officer, as the case may be, and disclosed therein).
7.2. CERTIFICATES; OTHER INFORMATION. Furnish to each Bank:
(a) Concurrently with the delivery of the financial statements
referred to in clause (a) of subsection 7.1, a certificate of such accountants
who certify such financial statements, stating that they have reviewed this
Agreement and stating further, whether, in making their audit, such accountants
have become aware of any condition or event which then constitutes a Default or
an Event of Default and, if such accountants are aware that any such condition
or event then exists, specifying the nature and period of existence thereof;
(b) Concurrently with the delivery of the financial statements
referred to in clauses (a) and (b) of subsection 7.1, a certificate of the
FORM 10Q - Page 50 of 88
<PAGE> 40
chief financial officer of each of the Borrowers (i) stating that, to the best
of such officer's knowledge, such Borrower during such period has observed or
performed all of its covenants and other agreements, and satisfied every
condition, contained in the Loan Documents to be observed, performed or
satisfied by it, and that such officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate, (ii) showing in
detail as of the end of the related fiscal period the calculations supporting
such statement in respect of subsections 8.4 and 8.5 and subsections 9.5, 9.6
and 9.9 and (iii) stating that all such consolidated and consolidating
financial statements present fairly the consolidated and consolidating
financial position of the CSC Companies (subject, in the case of interim
statements, to normal year-end audit adjustments) and have been prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein (except as disclosed therein);
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by CSC to its security holders, all regular and periodic reports and
all final registration statements and final prospectuses, if any, filed by the
CSC Companies with any securities exchange or with the Securities and Exchange
Commission or any Governmental Authority succeeding to any of its functions;
and
(d) Promptly, such additional financial and other information as the
Agent or any Bank may from time to time reasonably request.
7.3. PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all of
their obligations and liabilities of whatever nature, except when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the appropriate CSC Ohio Company.
7.4. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as conducted by them, and preserve,
renew and keep in full force and effect their corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary
or desirable in the normal conduct of their business, except as otherwise
permitted by subsection 8.3; and comply with all material applicable
Requirements of Law except to the extent that the failure to comply therewith
would not, in the aggregate, have a material adverse effect on the business,
operations, Property or financial or other condition of the CSC Ohio Companies
taken as a whole.
7.5. MAINTENANCE OF PROPERTY; INSURANCE. Keep all Property useful
and necessary in their business in good working order and condition (ordinary
wear and tear excepted); maintain with financially sound and reputable
insurance companies insurance on all their Property in at least such amounts
and against at least such risks as are usually insured against in the same
general area by companies engaged in the same or a similar business and furnish
to each Bank, upon written request, full information as to the insurance
carried.
7.6. INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of record and account in which entries in conformity with GAAP and
all Requirements of Law shall be made of all dealings and transactions in
relation to their business and activities; and permit representatives of the
Agent or any Bank to visit and inspect any of their Properties and examine and
make abstracts from any of their books and records at any reasonable time and
as often as may reasonably be desired, and to discuss the business, operations,
Properties and financial and other condition of the CSC Ohio Companies with
officers and employees of the CSC Ohio Companies and with their independent
certified public accountants.
7.7. NOTICES. Promptly give notice to the Agent and each Bank:
(a) Of the occurrence of any Default or Event of Default;
FORM 10Q - Page 51 of 88
<PAGE> 41
(b) Of any (i) default or event of default under any instrument or
other agreement of any of the CSC Ohio Companies which default or event of
default could have a material adverse effect on the business, operations,
Property or financial or other condition of the CSC Ohio Companies taken as a
whole or (ii) litigation, investigation or proceeding which may exist at any
time between any of the CSC Ohio Companies and any Governmental Authority,
which in any such case, if adversely determined, would have a material adverse
effect on the business, operations, Property or financial or other condition of
the CSC Ohio Companies taken as a whole;
(c) Of any litigation or proceeding affecting any of the CSC Ohio
Companies (i) in which the amount claimed is $100,000 or more and not covered
by insurance or (ii) in which injunctive or similar relief is sought which, if
obtained, would have a material adverse effect on the business, operations,
Property or financial or other condition of the CSC Ohio Companies taken as a
whole; and
(d) Of the following events, as soon as practicable after, and in
any event within 30 days after, either of the Borrowers knows or has reason to
know thereof: (i) the occurrence of any Reportable Event with respect to any
Single Employer Plan which Reportable Event could have a material adverse
effect on the business, operations, Property or financial or other condition of
the CSC Ohio Companies taken as a whole, or (ii) the institution of proceedings
or the taking or expected taking of any other action by PBGC or either of the
Borrowers or any Commonly Controlled Entity to terminate, withdraw or partially
withdraw from any Plan and, with respect to a Multiemployer Plan, the
"reorganization" or "insolvency" of the Plan (as those terms are defined in
Sections 4241 and 4245 of ERISA, respectively) in each of the foregoing cases
which could have a material adverse effect on the business, operations,
Property, financial or other condition of the CSC Ohio Companies taken as a
whole, and, in addition to such notice, deliver to the Agent and each Bank
whichever of the following may be applicable: (A) a certificate of the chief
financial officer of each of the Borrowers setting forth details as to such
Reportable Event and the action that each of the Borrowers or such Commonly
Controlled Entity proposes to take with respect thereto, together with a copy
of any notice of such Reportable Event that may be required to be filed with
PBGC, or (B) any notice delivered by PBGC evidencing its intent to institute
such proceedings or any notice to PBGC that such Plan is to be terminated, as
the case may be.
Each notice given pursuant to this subsection 7.7 shall be accompanied by a
statement of the chief executive officer or chief financial officer of each of
the Borrowers setting forth details of the occurrence referred to therein and
stating what action each of the Borrowers proposes to take with respect
thereto.
SECTION 8. NEGATIVE COVENANTS.
The Borrowers hereby jointly and severally agree that, so long as the
Commitment remains in effect or any Note or Letter of Credit issued hereunder
remains outstanding and unpaid or any other amount is owing to the Agent or any
Bank hereunder, the Borrowers shall not, nor shall the Borrowers permit any of
the CSC Ohio Subsidiaries to, directly or indirectly:
8.1. INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness under the Notes;
(b) Unsecured Indebtedness other than Indebtedness under the Notes
(including all Letters of Credit) to all banks including the Banks not
exceeding the aggregate amount of $50,000,000 at any one time outstanding;
FORM 10Q - Page 52 of 88
<PAGE> 42
(c) Indebtedness incurred in connection with trade and other
accounts payable in the ordinary course of business and in accordance with
customary trade terms;
(d) Indebtedness under Capital Leases (including any Capital Lease
entered into by any of the CSC Ohio Companies for a Retail Store), conditional
sale agreements and other purchase money financing agreements entered into to
finance capital expenditures;
(e) Indebtedness to other CSC Companies; or
(f) Indebtedness incurred in connection with the Liens permitted
pursuant to subsection 8.2.
8.2. LIMITATION ON LIENS. Create, incur, assume or suffer to exist
any Lien upon any of its Property, assets, income or profits, whether now owned
or hereafter acquired, except:
(a) Liens for taxes not yet due or, in the case of real estate
taxes, not yet the subject of interest and penalties for the nonpayment
thereof, or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the appropriate CSC Ohio Company in accordance with GAAP;
(b) Carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's, vendors' or other like Liens arising in the
ordinary course of business (i) which are not overdue for a period of more than
60 days or (ii) which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the appropriate CSC Ohio Company in accordance with GAAP, and in
addition thereto any such Liens arising in the ordinary course of business
other than those described in clauses (i) and (ii) which do not in the
aggregate exceed $1,000,000;
(c) Pledges or deposits in connection with workmen's compensation,
unemployment insurance and other social security legislation;
(d) Deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(e) Easements, rights-of-way, landlords' liens, zoning and similar
restrictions and other similar encumbrances or title defects incurred in the
ordinary course of business which, in the aggregate, are not substantial in
amount, and which do not in any case materially detract from the value of the
Property subject thereto or interfere with the ordinary conduct of the business
of any of the CSC Ohio Companies;
(f) Liens in existence on the Effective Date and disclosed in
Schedule 8.2(f), PROVIDED that such Liens are not spread to cover any
additional Property and the principal amount of Indebtedness secured thereby is
not increased;
(g) Liens for Capital Leases, conditional sale agreements and other
purchase money financing agreements entered into to finance capital
expenditures;
(h) Liens in favor of the Banks;
(i) Mortgage Liens on real Property to secure financing for the
acquisition or development of or construction of improvements on such real
Property; and
(j) Purchase money Liens granted to the seller of Property to
finance all or part of the purchase price therefor.
FORM 10Q - Page 53 of 88
<PAGE> 43
8.3. PROHIBITION OF FUNDAMENTAL CHANGES. Enter into any transaction
of sale, acquisition or merger or consolidation or amalgamation, or liquidate
in one transaction or in a series of transactions, wind up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, in a single transaction or in a series of
related transactions, all or substantially all of its Property or assets, or
make any fundamental change in the present method of conducting business
except:
(a) The sale of inventory or interests in Joint Ventures in the
ordinary course of business of the CSC Ohio Companies consistent with the
current practices of the CSC Ohio Companies;
(b) Any CSC Ohio Subsidiary may be merged or consolidated with or
into the Borrower of which it is a Subsidiary (PROVIDED that such Borrower
shall be the continuing or surviving corporation) or with or into any one or
more wholly owned Subsidiaries of such Borrower (PROVIDED that a wholly owned
Subsidiary of a Borrower shall be the continuing or surviving corporation); and
(c) Any CSC Ohio Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise)
to any of the CSC Ohio Companies.
8.4. CURRENT RATIO. Permit the ratio of Consolidated Current Assets
to Consolidated Current Liabilities at any time to be less than 1.50 to 1.00.
8.5. LIMITATION ON ADVANCES AND DIVIDENDS. Declare or pay any
dividends on any shares of any class of stock of the Borrowers, or make any
payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, retirement or other acquisition of any
shares of any class of stock of the Borrowers, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or Property or in obligations of any of the CSC
Ohio Companies, or make any loan, advance or extension of credit to the CSC
Parent Companies, except that the Borrowers may make any Distributions
permitted under the provisions of subsection 9.3.
8.6. CONSOLIDATED ASSETS. At least eighty percent (80%) of the
value of the consolidated assets of the CSC Companies shall at all times be
owned by the CSC Parent/Borrower Companies, and no assets shall be transferred
by the CSC Parent/Borrower Companies to any of the CSC Ohio Subsidiaries except
in the ordinary course of business.
8.7. COMPLIANCE WITH ERISA. (a) Terminate any Plan so as to result
in any material liability to PBGC, (b) engage in any "prohibited transaction"
(as defined in Section 4975 of the Code) involving any Plan which would result
in a material liability for an excise tax or civil penalty in connection
therewith, (c) incur or suffer to exist any material "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived,
involving any Plan, or (d) allow or suffer to exist any event or condition
which presents a material risk of incurring a material liability to PBGC by
reason of termination of any such Plan.
8.8. NO CHANGE IN FISCAL-YEAR PERIOD. Change its fiscal year period
without the prior written consent of the Agent.
8.9. TRANSACTIONS WITH CSC AFFILIATES. Enter into any transaction,
including without limitation any purchase, sale, lease or exchange of Property
or the rendering of any service, with any CSC Affiliate unless such transaction
is otherwise permitted under this Agreement, is in the ordinary course of
business and is upon fair and reasonable terms no less favorable to the
affected CSC Ohio Company than it would obtain in a comparable arm's-length
transaction with a Person not a CSC Affiliate.
FORM 10Q - Page 54 of 88
<PAGE> 44
SECTION 9. ADDITIONAL PROVISIONS.
The Borrowers hereby jointly and severally agree that, in addition to
and/or duplication of other provisions contained herein, so long as the
Commitment remains in effect or any Note or Letter of Credit issued hereunder
remains outstanding and unpaid or any other amount is owing to the Agent or any
Bank hereunder, the following provisions must be complied with and satisfied in
order for the Borrowers to avoid a Default hereunder:
9.1. SALE OF STOCK OR ASSETS.
(a) SALE OF SUBSIDIARY STOCK. None of the CSC Parent/Borrower
Companies shall at any time sell or otherwise dispose of any shares of the
stock (or any options or warrants to purchase stock or other Securities
exchangeable for or convertible into stock) of any CSC Subsidiary including the
Borrowers (said stock, stock options, warrants and other Securities herein
called "Subsidiary Stock"), and none of the CSC Parent/Borrower Companies shall
at any time permit any CSC Subsidiary to issue its own Subsidiary Stock, or to
sell or otherwise dispose of any shares of Subsidiary Stock issued by any other
CSC Subsidiary, if the effect of the transaction would be to reduce the
proportionate interest of the CSC Parent/Borrower Companies (taken as a whole),
whether held directly or indirectly, in the outstanding Subsidiary Stock of the
CSC Subsidiary (the "Disposition Subsidiary") whose shares are the subject of
the transaction, PROVIDED that the foregoing restrictions do not apply to:
(i) The issue of directors' qualifying shares;
(ii) Any such sale, other disposition or issuance if the
proceeds thereof are not used, directly or indirectly, by any of the
CSC Companies to make a Funded Debt Payment, Restricted Investment or
Distribution (other than a Permitted Distribution); and
(iii) The sale for a cash consideration at one time (the
"Stock Disposition Date") to a Person (other than directly or
indirectly to a CSC Affiliate) of the entire investment (whether
represented by stock, debt, claims or otherwise) of the CSC Companies
in such Disposition Subsidiary, if all of the following conditions
shall have been satisfied:
(A) The sum of:
(I) The Disposition Value of the assets of the
Disposition Subsidiary; PLUS
(II) The Disposition Value of the assets of all
CSC Subsidiaries whose Subsidiary Stock was subject to
a disposition pursuant to this subsection 9.1(a)
(except dispositions to which subsection 9.1(a)(i) or
subsection 9.1(a)(ii) is applicable) during the period
ending on the Stock Disposition Date and commencing on
the first day of the fiscal year of CSC in which the
Stock Disposition Date falls, inclusive; PLUS
(III) The aggregate Disposition Value of assets
(excluding assets disposed of in Excluded Asset Sales)
owned by the CSC Companies the disposition of which was
made pursuant to subsection 9.1(b) and consummated
during the period ending on the Stock Disposition Date
and commencing on the first day of the fiscal year of
CSC in which the Stock Disposition Date falls,
inclusive;
shall not exceed ten percent (10%) of the consolidated assets
of the CSC Companies, as determined (immediately prior to such
sale) as of the Stock Disposition Date;
(B) The sum of:
FORM 10Q - Page 55 of 88
<PAGE> 45
(I) The Disposition Value of the assets of the
Disposition Subsidiary; PLUS
(II) The Disposition Value of the assets of all
CSC Subsidiaries whose Subsidiary Stock was subject to
a disposition pursuant to this subsection 9.1(a)
(except dispositions to which subsection 9.1(a)(i) or
subsection 9.1(a)(ii) is applicable) during the period
ending on the Stock Disposition Date and commencing on
the NPA Date, inclusive; PLUS
(III) The aggregate Disposition Value of assets
(excluding assets disposed of in Excluded Asset Sales)
owned by the CSC Companies the disposition of which was
made pursuant to subsection 9.1(b) and consummated
during theperiod ending on the Stock Disposition Date
and commencing on the NPA Date, inclusive;
shall not exceed twenty-five percent (25%) of the consolidated
assets of the CSC Companies, as determined (immediately prior
to such sale) as of the Stock Disposition Date;
(C) In the opinion of the board of directors of the
appropriate CSC Parent/Borrower Company, the sale is for Fair
Market Value and is in the best interests of the appropriate
CSC Parent/Borrower Company;
(D) The Disposition Subsidiary shall have no
continuing investment in any of the CSC Companies not being
simultaneously disposed of; and
(E) Immediately after the consummation of the
transaction and after giving effect thereto, no Default or
Event of Default would exist and no Default or Event of
Default would have existed in respect of subsection 9.5 and
subsection 9.6 if the full effect of such transaction had been
reflected in the consolidated balance sheet of the CSC
Companies as of the last day of the then most recently ended
fiscal month of CSC.
(b) SALE OF ASSETS. None of the CSC Parent/Borrower Companies
shall, nor shall any of them permit any CSC Subsidiary to, at any time, sell,
lease as lessor, transfer or otherwise dispose of assets, except (i) in the
ordinary course of business, (ii) pursuant to subsection 9.8, (iii) for any
such sale, lease, transfer or disposition the only parties to which are any one
or more of the CSC Companies (except that Subsidiary Stock may only be sold or
disposed of pursuant to subsection 9.1(a)), (iv) for any such sale, transfer or
disposition otherwise permitted by subsection 9.1(a), and (v) for any such
sale, lease, transfer or other disposition of the Phillipi Property or Short
Term Real Property if the proceeds thereof are not used, directly or
indirectly, by any of the CSC Companies to make a Funded Debt Payment,
Restricted Investment or Distribution other than a Permitted Distribution (such
excepted transactions being herein referred to, collectively, as "Excluded
Asset Sales"), PROVIDED that the foregoing restrictions do not apply to the
sale of such assets for cash consideration at one time (the "Asset Disposition
Date") to a Person other than a CSC Affiliate if all of the following
conditions shall have been satisfied:
(A) The sum of:
(I) The Disposition Value of such assets; PLUS
(II) The Disposition Value of all assets
(excluding assets disposed of in Excluded Asset Sales)
of the CSC Companies sold during the period ending on
the Asset Disposition Date and commencing on the first
day of the
FORM 10Q - Page 56 of 88
<PAGE> 46
fiscal year of CSC in which the Asset Disposition Date
falls, inclusive; PLUS
(III) The Disposition Value of the assets of all
Disposition Subsidiaries disposed of pursuant to
subsection 9.1(a) (except dispositions to which
subsection 9.1(a)(i) or subsection 9.1(a)(ii) is
applicable) during the period ending on the Asset
Disposition Date and commencing on the first day of the
fiscal year of CSC in which the Asset Disposition Date
falls, inclusive;
shall not exceed ten percent (10%) of the consolidated assets
of the CSC Companies, as determined (immediately prior to such
sale) as of the Asset Disposition Date;
(B) The sum of:
(I) The Disposition Value of such assets; PLUS
(II) The Disposition Value of all assets
(excluding assets disposed of in Excluded Asset Sales)
of the CSC Companies sold during the period ending on
the Asset Disposition Date and commencing on the NPA
Date, inclusive; PLUS
(III) The Disposition Value of the assets of all
Disposition Subsidiaries disposed of pursuant to
subsection 9.1(a) (except dispositions to which
subsection 9.1(a)(i) or subsection 9.1(a)(ii) is
applicable) during the period ending on the Asset
Disposition Date and commencing on the NPA Date,
inclusive;
shall not exceed twenty-five percent (25%) of the consolidated
assets of the CSC Companies, as determined (immediately prior
to such sale) as of the Asset Disposition Date;
(C) In the opinion of the board of directors of the
appropriate CSC Parent/Borrower Company, the sale is for Fair
Market Value and is in the best interests of the appropriate
CSC Parent/Borrower Company; and
(D) Immediately after the consummation of the
transaction, and after giving effect thereto, no Default or
Event of Default would exist and no Default or Event of
Default would have existed in respect of subsection 9.5 and
subsection 9.6 if the full effect of such transaction had been
reflected in the consolidated balance sheet of the CSC
Companies as of the last day of the then most recently ended
fiscal month of CSC.
(c) SALE OF TRO AND BORROWERS STOCK. Notwithstanding the above
provisions of this subsection 9.1, neither of the CSC Parent Companies shall at
any time sell or otherwise dispose of any shares of the stock (or any options
or warrants to purchase stock or other Securities exchangeable for or
convertible into stock) of TRO or either of the Borrowers.
9.2. MERGER AND CONSOLIDATION. None of the CSC Parent/Borrower
Companies shall, nor shall any of them permit any CSC Subsidiary to, at any
time, consolidate with or merge into any other Person or permit any other
Person to consolidate with or merge into it (except that (a) the CSC
Parent/Borrower Companies may merge with or consolidate into each other as long
as the surviving corporation assumes (in case either of the CSC Parent
Companies shall be the surviving corporation), or reaffirms (in case either of
the Borrowers shall be the surviving corporation), in writing the due and
punctual payment of the principal of and premium and interest on all Notes
(according to their tenor) and the due and punctual performance and observance
of all the covenants in this Agreement and in the Notes and (b) any CSC
Subsidiary may consolidate with or merge into (i) any other CSC Subsidiary and
FORM 10Q - Page 57 of 88
<PAGE> 47
(ii) any of the CSC Parent/Borrower Companies if the CSC Parent/Borrower
Company is the corporation which results from such merger or consolidation);
PROVIDED, HOWEVER, that the foregoing restriction shall not apply to the merger
or consolidation of any of the CSC Companies with another corporation if:
(A) The corporation which results from such merger or
consolidation (the "Surviving Corporation") is organized under
the laws of the United States or any jurisdiction thereof;
(B) In the case of a merger or consolidation involving
either of the Borrowers, the due and punctual payment of the
principal of and premium, if any, and interest on all of the
Notes, according to their tenor, and the due and punctual
performance and observance of all the covenants in the Notes
and this Agreement to be performed or observed by the
Borrowers, and/or, in the case of a merger or consolidation
involving either of the CSC Parent Companies, the due and
punctual performance and observance of all the covenants in
this Agreement and the Credit Guarantee to be performed or
observed by such CSC Parent Company are expressly reaffirmed
in writing by the Surviving Corporation; and
(C) Immediately after the consummation of the
transaction, and after giving effect thereto, no Default or
Event of Default would exist and no Default or Event of
Default would have existed in respect of subsection 9.5 and
subsection 9.6 if the full effect of such transaction had been
reflected in the consolidated balance sheet of the CSC
Companies as of the last day of the then most recently ended
fiscal month of CSC.
9.3. DISTRIBUTIONS, OPTIONAL SUBORDINATED DEBT PAYMENTS AND
RESTRICTED INVESTMENTS.
(a) LIMITS. Subject to subsection 9.3(c), none of the CSC
Parent/Borrower Companies shall, nor shall any of them permit any CSC
Subsidiary to, at any time, declare or make or incur any liability to declare
or make any Distribution (other than a Permitted Distribution) in respect of
the capital stock of any such Person, make or authorize any Restricted
Investment or make any Optional Subordinated Debt Payment (other than a
Permitted Optional Subordinated Debt Payment) unless, immediately after giving
effect to the proposed Distribution, Restricted Investment or Optional
Subordinated Debt Payment:
(i) The sum of (A) the aggregate amount of Restricted
Investments (valued immediately after such action), PLUS (B) the
aggregate amount of Distributions (other than Permitted
Distributions) in respect of the capital stock of any such Person
made during the period commencing on January 31, 1987 and ending on
the date of such proposed Distribution, Restricted Investment or
Optional Subordinated Debt Payment, PLUS (C) the aggregate principal
amount of all Optional Subordinated Debt Payments (other than
Permitted Optional Subordinated Debt Payments) made by any of the CSC
Companies during the period commencing on January 31, 1987 and ending
on the date of such proposed Distribution, Restricted Investment or
Optional Subordinated Debt Payment, would not exceed the result of
(1) $9,500,000, PLUS (2) the net proceeds from any sale of capital
stock of CSC received by CSC subsequent to January 31, 1987, PLUS (3)
75% of Consolidated Adjusted Net Income for the period commencing on
January 31, 1987 and ending on the last day of the then most recently
ended fiscal quarter of CSC (MINUS 100% of Consolidated Adjusted Net
Income for such period if Consolidated Adjusted Net Income for such
period is a loss); and
(ii) No Default or Event of Default would exist and no
Default or Event of Default would have existed in respect of
subsection 9.5 and subsection 9.6 if the full effect of such proposed
Distribution,
FORM 10Q - Page 58 of 88
<PAGE> 48
Restricted Investment or Optional Subordinated Debt Payment had been
reflected in the consolidated balance sheet of the CSC Companies as
of the last day of the then most recently ended fiscal month of CSC.
For the purpose of making computations under this subsection 9.3(a), there
shall be excluded each Restricted Investment made solely by issuance of common
stock of the CSC Parent/Borrower Companies. Any corporation which becomes a
CSC Subsidiary after January 31, 1987 shall be deemed to have made, at the time
it becomes a CSC Subsidiary, all Restricted Investments of such corporation
existing immediately after it becomes a CSC Subsidiary.
(b) TIME OF PAYMENT. CSC shall not at any time authorize a
Distribution on its capital stock which is not payable within sixty (60) days
of authorization.
(c) DECLARATION AND PAYMENT. Any Distribution by any of the CSC
Companies which would be permissible under the provisions of subsection 9.3 if
made on the date of declaration shall be permissible if made within sixty (60)
days after such date.
9.4. LIENS AND ENCUMBRANCES.
(a) NEGATIVE PLEDGE. None of the CSC Parent/Borrower Companies
shall at any time, nor shall any of them permit at any time any CSC Subsidiary
to, cause or permit, or agree or consent to cause or permit in the future (upon
the happening of a contingency or otherwise), any of their Property, whether
now owned or hereafter acquired, to be subject to a Lien except:
(i) Liens securing taxes, assessments or governmental charges
or levies or the claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, PROVIDED
the payment thereof is not at the time required by subsection 7.3;
(ii) Liens incurred or deposits made in the ordinary course
of business (A) in connection with workmen's compensation,
unemployment insurance, social security and other like laws, (B) to
secure appeal bonds, supersedeas bonds and other similar Liens
arising in connection with court proceedings (including without
limitation surety bonds and Letters of Credit) or any other
instrument serving a similar purpose, PROVIDED that the aggregate
amount so secured, together with all amounts secured by the Liens
referred to in subsection 9.4(a)(iii), shall not at any time exceed
$1,000,000, or (C) to secure the performance of Letters of Credit,
bids, tenders, sales contracts, leases, statutory obligations, surety
and performance bonds (of a type other than set forth in clause (B)
of this subsection 9.4(a)(ii)); PROVIDED that such obligations, and
other similar obligations, are not incurred in connection with the
borrowing of money, the obtaining of advances or the payment of the
deferred purchase price of Property and do not in the aggregate
materially detract from the value of the Properties subject thereto
or materially interfere with their use in the ordinary conduct of the
owning Person's business;
(iii) Attachments, judgments and other similar Liens arising
in connection with court proceedings, PROVIDED that the execution or
other enforcement of such Liens is effectively stayed and the claims
secured thereby are being actively contested in good faith and by
appropriate proceedings, and PROVIDED, FURTHER, that the aggregate
amount so secured, together with all amounts secured by the Liens
referred to in subsection 9.4(a)(ii)(B), shall not at any time
exceed $1,000,000;
(iv) Liens on Property of a CSC Subsidiary, PROVIDED that
such Liens secure only obligations owing to another CSC Company;
(v) Reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other
similar title exceptions or encumbrances affecting real Property,
PROVIDED that they do not in the aggregate materially detract from
the
FORM 10Q - Page 59 of 88
<PAGE> 49
value of said Properties or materially interfere with their use in
the ordinary conduct of the owning Person's business;
(vi) (A) Liens on Property acquired or constructed by any of
the CSC Companies after the NPA Date, which Liens secure all or a
portion of the related purchase price or construction costs of such
Property; PROVIDED the such Liens shall have attached
contemporaneously with, or within one hundred twenty (120) days
after, such acquisition or the commencement of such construction;
(B) Liens on Property existing at the time of the
acquisition thereof by any of the CSC Companies (whether or
not the Indebtedness secured by such Liens shall have been
assumed by any of them), including without limitation any
Property acquired in connection with the sale or other
transfer of all or substantially all of the Property of any
Person to any of the CSC Companies; and
(C) Liens on Property of any corporation existing at
the time it becomes a CSC Subsidiary or at the time it is
merged or consolidated with any of the CSC Parent/Borrower
Companies;
PROVIDED that, in each case, (1) no such Lien (x) secures an amount
exceeding 100% of the Fair Market Value of the Property encumbered
thereby or (y) extends to any other Property of any of the CSC
Companies and (2) immediately after giving effect to the creation of
such Lien, the acquisition of such Property or the acquisition,
merger or consolidation of any such corporation, no Default or Event
of Default would exist. As used in the immediately preceding
proviso, "Fair Market Value" shall mean the purchase price in any
case in which the Property encumbered by any such Lien was itself
acquired by any of the CSC Companies in an arm's-length sale for a
stated price from a Person other than any of the CSC Companies or
any CSC Affiliate, and, in all other cases, "Fair Market Value" shall
mean Fair Market Value as established by a written appraisal
prepared by a professional appraiser unaffiliated with any of the
CSC Companies or CSC Affiliate;
(vii) Liens existing as of the NPA Date and described on
Schedule II to the Note Purchase Agreement, securing Indebtedness
outstanding on the NPA Date, or extensions or refundings thereof,
PROVIDED that the amount secured by any such Lien shall not exceed
the amount outstanding immediately prior to any such extension or
refunding; and PROVIDED, FURTHER, that such Liens shall not encumber
any Property other than Property encumbered thereby on the NPA Date;
(viii) Liens on the Distribution Center securing an original
principal amount of Indebtedness not in excess of $10,000,000, and
any extensions or refundings thereof, PROVIDED that (i) the original
principal amount of Indebtedness so secured shall be borrowed by the
Borrowers at one time, (ii) the principal amount of Indebtedness
outstanding immediately after any extension or refunding of such
Indebtedness shall not exceed the principal amount outstanding
immediately prior thereto and (iii) such Liens shall not encumber any
Property other than the Distribution Center;
(ix) Liens arising out of any Sale and Leaseback Transaction
permitted by subsection 9.8;
(x) Liens securing Adjusted Funded Debt or Current Debt of
any of the CSC Companies, to the extent not otherwise permitted
pursuant to subsection 9.4(a)(i) through subsection 9.4(a)(ix),
inclusive, PROVIDED that (A) the sum of (x) Consolidated Adjusted
Funded Debt and Consolidated Current Debt (after giving effect to
such Adjusted Funded Debt and Current Debt) secured pursuant to this
subsection 9.4(a)(x), PLUS (y) all unsecured Adjusted Funded Debt and
Current Debt secured by Liens permitted by subsection 9.4(a)(vii),
shall not exceed 15% of Consolidated Adjusted Net Worth determined
immediately prior to the
FORM 10Q - Page 60 of 88
<PAGE> 50
incurrence of such Adjusted Funded Debt or Current Debt and (B)
immediately after the incurrence of such Adjusted Funded Debt or
Current Debt, no Default or Event of Default would exist and no
Default or Event of Default would have existed in respect of
subsection 9.5 and subsection 9.6 if such Adjusted Funded Debt or
Current Debt had been incurred on the last day of the then most
recently ended fiscal month; and
(xi) Liens in respect of which any of the CSC Companies shall
have made, or caused to have been made, provision, satisfactory to
all of the Banks, whereby the Notes shall be secured equally and
ratably with all obligations secured by all such Liens and shall be
entitled to share in any of the benefits thereunder (including
without limitation any of the proceeds realized therefrom) without
first exhausting any other right created by this Agreement and,
without limiting the generality of the foregoing, shall be entitled
to share in such benefits and proceeds from such Liens irrespective
of the fact that the obligations secured by such Liens shall mature
normally or by acceleration prior to the maturity of the Notes.
(b) EQUAL AND RATABLE LIEN; EQUITABLE LIEN. In case any Property
shall be subjected to a Lien in violation of subsection 9.4(a), the CSC
Parent/Borrower Companies shall make or cause to be made provision,
satisfactory to all of the Banks, whereby the Notes shall be secured equally
and ratably, in the manner provided in subsection 9.4(a)(xi), with all other
obligations secured by such Property, and in any such case the Notes shall
have the benefit, to the full extent that, and with such priority as, the
holders may be entitled thereto under applicable law, of an equitable Lien on
such Property securing the Notes. Until such provision shall be made, such
violation of subsection 9.4(a) shall constitute an Event of Default hereunder.
(c) FINANCING STATEMENTS. None of the CSC Parent/Borrower
Companies shall, nor shall any of them permit any CSC Subsidiary to, sign or
file a financing statement under the Uniform Commercial Code of any
jurisdiction which names any of the CSC Companies as debtor, or sign any
security agreement authorizing any secured party thereunder to file any such
financing statement, except, in any such case, a financing statement filed or
to be filed to perfect or protect a security interest which any of the CSC
Companies is entitled to create, assume or incur, or permit to exist, under the
foregoing provisions of subsection 9.4(a), or to evidence for informational
purposes a lessor's interest in Property leased to any of the CSC Companies.
9.5. CONSOLIDATED ADJUSTED NET WORTH TESTS. None of the CSC
Parent/Borrower Companies shall, nor shall any of the CSC Parent/Borrower
Companies permit any of the CSC Subsidiaries to, (a) permit Consolidated
Adjusted Net Worth at any time to be less than $200,000,000 plus an amount
equal to any net proceeds to the CSC Parent Companies of any offering of equity
securities of the CSC Parent Companies, or (b) permit the ratio of Consolidated
Total Liabilities to Consolidated Adjusted Net Worth at any time to be greater
than 2.00 to 1.00.
9.6. CONSOLIDATED ADJUSTED FUNDED DEBT TEST. None of the CSC
Parent/Borrower Companies shall, nor shall any of the CSC Parent/Borrower
Companies permit any of the CSC Subsidiaries to, permit Consolidated Adjusted
Funded Debt to exceed 50% of Consolidated Adjusted Capitalization, as
determined as of the end of the most recent fiscal month of CSC.
9.7. CSC OHIO SUBSIDIARY INDEBTEDNESS. The CSC Parent/Borrower
Companies shall not permit any CSC Ohio Subsidiary, at any time, to incur any
Adjusted Funded Debt or Current Debt, except Adjusted Funded Debt or Current
Debt owing to any of the CSC Companies, unless, immediately after giving effect
thereto, (A) the sum of:
(i) Consolidated Adjusted Funded Debt and Consolidated
Current Debt secured pursuant to subsection 9.4(a)(x); PLUS
FORM 10Q - Page 61 of 88
<PAGE> 51
(ii) All unsecured Adjusted Funded Debt and Current Debt of
the CSC Ohio Subsidiaries owing to Persons other than any of the CSC
Companies; PLUS
(iii) Consolidated Adjusted Funded Debt and Consolidated
Current Debt secured by Liens permitted by subsection 9.4(a)(vii);
would not exceed 15% of Consolidated Adjusted Net Worth, determined at such
time, and (B) no Default or Event of Default would exist. The CSC
Parent/Borrower Companies shall not permit any CSC Ohio Subsidiary, at any
time, to issue or have outstanding any Preferred Stock, except Preferred Stock
owned by any of the CSC Companies.
9.8. SALE AND LEASEBACK TRANSACTIONS. None of the CSC
Parent/Borrower Companies shall, nor shall any of them permit any CSC
Subsidiary to, at any time, enter into any proposed Sale and Leaseback
Transaction if, immediately after giving effect thereto, the aggregate net cash
proceeds received by the CSC Companies in respect to all Ongoing Sale and
Leaseback Transactions consummated subsequent to the NPA Date and at or prior
to the time of such proposed Sale and Leaseback Transaction (including without
limitation such proposed Sale and Leaseback Transaction) would exceed 15% of
Consolidated Adjusted Net Worth, determined at such time. "Ongoing Sale and
Leaseback Transaction" means, at any time, a previously consummated Sale and
Leaseback Transaction with respect to which the Property which was sold in
connection therewith remains subject to the lease entered into at the time of
consummation of such Sale and Leaseback Transaction.
9.9. FIXED CHARGE COVERAGE.
(a) The CSC Parent/Borrower Companies shall at all times maintain
Consolidated Adjusted Net Income Available for Fixed Charges, for the
immediately preceding period of four consecutive fiscal quarters of CSC, at not
less than 175% of Consolidated Adjusted Fixed Charges for such period.
9.10. ERISA COMPLIANCE.
(a) COMPLIANCE. Each of the ERISA Companies shall, at all times
with respect to each Pension Plan, (i) except to the extent waived pursuant to
Section 303 of ERISA or Section 412 of the Code, as the case may be, make
timely payment of contributions required (A) to meet the minimum funding
standard set forth in ERISA or the Code with respect thereto or (B) to be paid
as provided for by Section 515 of ERISA, and (ii) comply with all other
applicable provisions of ERISA.
(b) RELATIONSHIP OF VESTED BENEFITS TO PENSION PLAN ASSETS. Without
limiting the undertakings of the CSC Parent/Borrower Companies under subsection
9.10(a), the CSC Parent/Borrower Companies shall not at any time permit the
present value of all employee benefits vested under any Pension Plan to be more
than 133 1/3% of the assets allocable to such vested benefits at such time, in
each case as determined pursuant to subsection 9.10(c); PROVIDED, HOWEVER, that
this requirement of subsection 9.10(b) shall terminate if and at such time as
such a requirement is no longer in effect under the terms of the Note Purchase
Agreement.
(c) VALUATIONS. All assumptions and methods used to determine the
actuarial valuation of vested employee benefits under Pension Plans and the
present value of assets of Pension Plans shall be reasonable in the good faith
judgment of the CSC Parent/Borrower Companies and shall comply with all
Requirements of Law.
(d) PROHIBITED ACTIONS. None of the ERISA Companies shall:
(i) Engage in any "prohibited transaction" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code);
(ii) Incur with respect to any Pension Plan any "accumulated
funding deficiency" (as such term is defined in Section 302 of ERISA),
whether or not waived;
FORM 10Q - Page 62 of 88
<PAGE> 52
(iii) Terminate any Pension Plan in a manner which could
result in (A) the imposition of a Lien on the Property of any of the
CSC Companies pursuant to Section 4068 of ERISA or (B) the creation
of any liability under Section 4062 of ERISA;
(iv) Fail to make any payment required by Section 515 of
ERISA; or
(v) Except as disclosed in Annex 3 to the Note Purchase
Agreement, be an "employer" (as such term is defined in Section 3 of
ERISA) required to contribute to any Multiemployer Plan or a
"substantial employer" (as such term is defined in Section 4001 of
ERISA) required to contribute to any Multiple Employer Plan.
(e) FOREIGN PENSION PLANS. The CSC Parent/Borrower Companies shall,
and shall cause the CSC Subsidiaries responsible therefor to, make all required
payments in respect of funding of any Foreign Pension Plan and otherwise comply
in all material respects with all applicable laws, statutes, rules and
regulations governing or affecting any Foreign Pension Plan.
9.11. TRANSACTIONS WITH CSC AFFILIATES. None of the CSC
Parent/Borrower Companies shall, nor shall any of them permit any CSC
Subsidiary to, enter into any transaction, including without limitation the
purchase, sale or exchange of Property or the rendering of any service, with
any CSC Affiliate except in the ordinary course of and pursuant to the
reasonable requirements of such CSC Company's business and upon fair and
reasonable terms no less favorable to such CSC Company than would obtain in a
comparable arm's-length transaction with a Person not a CSC Affiliate.
SECTION 10. EVENTS OF DEFAULT.
Upon the occurrence of any of the following events (an "Event of
Default"):
(a) The Borrowers shall fail to pay (i) any principal of any Loan
when due (whether at the stated maturity, by acceleration or otherwise) in
accordance with the terms hereof or of any Note or (ii) any interest on any
Note, any fee or any other amount payable hereunder within five days after any
such amount becomes due;
(b) Any representation or warranty made or deemed made by any one or
more of the CSC Companies in any Loan Document or contained in any certificate,
document or financial or other statement furnished at any time under or in
connection herewith or therewith shall prove to have been incorrect in any
material respect on or as of the date made or deemed made;
(c) Any one or more of the CSC Ohio Companies shall default in the
observance or performance of any covenant or agreement contained in Section 7
and such default shall continue unremedied for a period of 30 days;
(d) Any one or more of the CSC Ohio Companies shall default in the
observance or performance of any provision contained in Section 8 or Section 9
or any other covenant or agreement contained in any Loan Document and such
default shall continue unremedied for a period of 30 days after notice from any
Bank or the Agent;
(e) Either of the CSC Parent Companies shall default in the
observance or performance of any covenant or agreement contained in its Credit
Guarantee which default shall continue unremedied for a period of 30 days after
notice from any Bank or the Agent;
(f) Any Credit Guarantee of either of the CSC Parent Companies or a
Significant Subsidiary shall cease, for any reason (other than by reason of any
applicable law concerning the enforceability of a Guarantee by a subsidiary of
an obligation of its parent), to be in full force and effect or
FORM 10Q - Page 63 of 88
<PAGE> 53
either of the CSC Parent Companies or any Significant Subsidiary party thereto
shall so assert in writing, or any such Guarantee shall cease to fully
guarantee the obligations of the Borrowers under and in respect of this
Agreement and the Notes, unless such event is the result of any transaction
permitted pursuant to clause (c) of subsection 8.3;
(g) Either of the CSC Parent Companies or either of the Borrowers or
any Significant Subsidiary (i) shall default in any payment of principal of or
interest on any Indebtedness exceeding in the aggregate $1,000,000 (other than
the Notes) or in the payment of any Contingent Obligations exceeding in the
aggregate $1,000,000 beyond the period of grace (not to exceed 30 days), if
any, provided in the instrument or agreement under which such Indebtedness or
Contingent Obligation was created; or (ii) shall default in the observance or
performance of any agreement or condition relating to any such Indebtedness or
Contingent Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, any such Indebtedness or Contingent Obligation to
become due prior to its stated maturity (any applicable grace period having
expired);
(h) (i) Any of the CSC Parent/Borrower Companies or any of their
Significant Subsidiaries shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or any of the CSC Parent/Borrower Companies or
any of their Significant Subsidiaries shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against any of the
CSC Parent/Borrower Companies or any of their Significant Subsidiaries any
case, proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such adjudication
or appointment or (B) is not dismissed, discharged, stayed or bonded within 90
days; or (iii) there shall be commenced against any of the CSC Parent/Borrower
Companies or any of their Significant Subsidiaries any case, proceeding or
other action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of its assets, which
results in the entry of an order for any such relief which shall not have been
vacated, discharged, stayed or bonded pending appeal within 90 days from the
entry thereof and which shall involve in the aggregate a liability (to the
extent not paid or covered by insurance) of more than $500,000 at any one time
outstanding; or (iv) any of the CSC Parent/Borrower Companies or any of their
Significant Subsidiaries shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii) or (iii) above; or (v) any of the CSC Parent/Borrower
Companies or any of their Significant Subsidiaries shall generally not pay its
debts as they become due;
(i) (i) Any one or more of the CSC Ohio Companies (or any officer or
director thereof) shall engage in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) shall
exist with respect to any Single Employer Plan, (iii) with respect to any
Multiemployer Plan, any ERISA Company fails to make a contribution required to
be made thereto, or withdraws therefrom, where in either event the liability of
any ERISA Company is in excess of $1,000,000, (iv) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or institution of proceedings is,
in the reasonable opinion of the Agent or any Bank, likely to result in the
FORM 10Q - Page 64 of 88
<PAGE> 54
termination of such Plan for purposes of Title IV of ERISA, and, in the case of
a Reportable Event, the continuance of such Reportable Event unremedied for ten
days after notice of such Reportable Event pursuant to Section 4043(a), (c) or
(d) of ERISA is given or the continuance of such proceedings for ten days after
commencement thereof, as the case may be, (v) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, or (vi) any other similar event or
condition shall occur or exist with respect to any Plan; and in each case in
clauses (i) through (vi) above, in the opinion of the Agent or any Bank, such
event or condition, together with all other such events or conditions in
clauses (i) through (vi) above, if any, would subject any one or more of the
CSC Ohio Companies to any tax, penalty or other liabilities under ERISA in the
aggregate material in relation to the business, operations, Property or
financial or other condition of the CSC Ohio Companies taken as a whole;
(j) One or more judgments or decrees shall be entered against any
one or more of the CSC Companies and shall not be dismissed, discharged, stayed
or bonded within a period of 60 days and shall involve in the aggregate a
liability (to the extent not paid or covered by insurance) of more than
$500,000 at any one time outstanding; or
(k) (i) Any one or more of the CSC Ohio Companies shall fail to make
any payment (beyond any applicable grace period with respect thereto) due on
any Indebtedness or Security in an aggregate amount in excess of $1,000,000 or
(ii) any event shall occur or any condition shall exist in respect of any such
Indebtedness or Security of the CSC Companies, or under any agreement securing
or relating to such Indebtedness or Security, the effect of which is (A) to
cause (or permit any holder of such Indebtedness or Security or a trustee to
cause) such Indebtedness or Security, or a portion thereof, to become due
prior to its stated maturity or prior to its regularly scheduled date or dates
of payment, or (B) to permit the holder of any Security (other than common
stock of any one or more of the CSC Companies) or a trustee to elect a majority
of the directors on the board of directors of any such CSC Company;
then, and in any such event, (a) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (h) above, automatically the Commitment
shall immediately terminate and the Loans (with accrued interest thereon) and
all other amounts owing under and in respect of this Agreement and the Notes
shall immediately become due and payable, and (b) if such event is any other
Event of Default, so long as any such Event of Default shall be continuing,
either of the following actions may be taken: (i) the Agent shall at the
request of or with the consent of all of the Banks, by notice to the Borrowers,
declare the Commitment to be terminated forthwith, whereupon the Commitment
shall immediately terminate; and (ii) the Agent shall at the request of or with
the consent of all of the Banks, by notice of default to the Borrowers, declare
the Loans (with accrued interest thereon) and all other amounts owing under and
in respect of this Agreement and the Notes to be due and payable forthwith,
whereupon the same shall immediately become due and payable. Except as
expressly provided above in this Section 10, presentment, demand, protest and
all other notices of any kind are hereby expressly waived.
SECTION 11. AGENT.
11.1. APPOINTMENT. Each Bank hereby irrevocably designates and
appoints the Agent as agent of such Bank under this Agreement and each of the
Loan Documents, and each such Bank hereby irrevocably authorizes the Agent, as
agent for such Bank, to take such action on its behalf under the provisions of
this Agreement and the Loan Documents, and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or any of the Loan Documents, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein,
or any fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
FORM 10Q - Page 65 of 88
<PAGE> 55
into this Agreement or any of the Loan Documents, or otherwise exist against
the Agent.
11.2. DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
11.3. EXCULPATORY PROVISIONS. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall
be (a) liable for any action lawfully taken or omitted to be taken by it or
such person under or in connection with this Agreement or any of the Loan
Documents (except for its or such person's own gross negligence or willful
misconduct) or (b) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by the Borrowers or
any officer thereof contained in this Agreement or any of the Loan Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection with, this Agreement or
any of the Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Loan
Documents, or for any failure of the Borrowers to perform their obligations
hereunder or thereunder. The Agent shall be under no obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or the Loan
Documents, or to inspect the properties, books or records of the Borrowers.
11.4. RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, guaranty, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, facsimile, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or persons and upon advice
and statements of legal counsel (including without limitation counsel to the
Borrowers), independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any note as the owner thereof for all
purposes. The Agent shall be fully justified in failing or refusing to take
any action under this Agreement or the Loan Documents unless it shall first
receive such advice or concurrence of the Required Banks as it deems
appropriate or it shall first be indemnified to its satisfaction by all 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 Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this
Agreement and the Loan Documents in accordance with a request of the Required
Banks, and such request and any action taken or failure to act pursuant thereto
shall be binding upon all Banks and all future holders of the Notes.
11.5. NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from any Bank or the Borrowers
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." If the Agent receives such
a notice, the Agent shall give notice thereto to the Banks. The Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Banks; PROVIDED that, unless and until the
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Banks.
11.6. NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrowers, shall be deemed
FORM 10Q - Page 66 of 88
<PAGE> 56
to constitute any representation or warranty by the Agent to any Bank. Each
Bank represents to the Agent that it has, independently and without reliance
upon the Agent or any other Bank, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Borrowers. Except for notices, reports and other
documents expressly required to be furnished to the Banks by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Borrowers
which may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
11.7. INDEMNIFICATION. Each Bank agrees to indemnify the Agent in
its capacity as such (to the extent not reimbursed by the Borrowers and without
limiting the obligation of the Borrowers to do so), ratably according to the
respective amounts of its Percentage (DLCF) if the indemnification matter
relates specifically to a DLCF Letter of Credit or a DLCF Loan, Percentage
(ASRC) if the indemnification matter relates specifically to a Revolving Credit
Loan (ASRC) and Percentage (BRC) if the indemnification matter relates to
anything else, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following the payment of the Notes) be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement, the Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Agent under or in connection with any of the
foregoing; PROVIDED that no Bank shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
Agent's gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of the Notes and all other amounts payable
hereunder.
11.8. AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrowers as though the Agent were not the agent
hereunder. With respect to its loans made or renewed by it and any Note issued
to it and with respect to any Letters of Credit issued by it, the Agent shall
have the same rights and powers under this Agreement as any Bank and may
exercise the same as though it were not the Agent, and the terms "Bank" and
"Banks" shall include the Agent in its individual capacity.
11.9. SUCCESSOR AGENT. The Agent may resign as agent upon ten days'
notice to the Banks. If the Agent shall resign as agent under this Agreement,
then the Required Banks shall appoint from among the Banks a successor agent
for the Banks, whereupon such successor agent shall succeed to the rights,
powers and duties of the Agent, and the term "Agent" shall mean such successor
agent effective upon its appointment, and the former Agent's rights, powers and
duties as the Agent shall be terminated, without any other or further act or
deed on the part of such former Agent or any of the parties to this Agreement
or any holders of the Notes. After any retiring Agent's resignation hereunder
as the Agent, the provisions of this Section 11 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was the Agent under
this Agreement.
SECTION 12. MISCELLANEOUS.
12.1. AMENDMENTS AND WAIVERS. The Loan Documents to which the
Borrowers are parties may not be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in writing signed by
the Borrowers and each of the Banks or by the Borrowers and the Agent with the
written consent of each of the Banks. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Banks and shall
be binding upon the Borrowers, the Banks and all future holders of any Note.
FORM 10Q - Page 67 of 88
<PAGE> 57
In the case of any waiver, the Borrowers and the Banks shall be restored to
their former position and rights hereunder and under the Notes, and any Default
or Event of Default waived shall be deemed to be cured and not continuing; but
no such waiver shall extend to any subsequent or other Default or Event of
Default, or impair any right consequent thereon.
12.2. NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including telex
or facsimile) and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered by hand, or three Business Days
after being deposited in the mail, postage prepaid, or, in the case of telex or
facsimile notice, when sent, answerback received, addressed as follows, or to
such other address as may be hereafter notified by the respective parties
hereto and any future holders of any Note:
Borrowers: Consolidated Stores Corporation and
C.S. Ross Company
300 Phillipi Road
Columbus, Ohio 43228
Attention: James A. McGrady
Vice President and Treasurer
With copy to: Consolidated Stores Corporation and
C.S. Ross Company
300 Phillipi Road
Columbus, Ohio 43228
Attention: Albert Bell, Senior Vice
President, General Counsel
and Secretary
Agent and National City Bank, Columbus
National City: 155 East Broad Street
Columbus, Ohio 43251
Attention: Ralph A. Kaparos
Senior Vice President
NBD: NBD Bank, N.A.
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Michael C. Mahoney
Second Vice President
Bank One: Bank One, Columbus, N.A.
100 East Broad Street
Columbus, Ohio 43271
Attention: Thomas E. Redmond
Vice President
Bank of Tokyo: The Bank of Tokyo Trust Company
Exxon Building, 12th Floor
1251 Avenue of the Americas
New York, New York 10116
Attention: National Banking Department
PROVIDED that any notice, request or demand to or upon the Agent or any Bank
pursuant to Sections 2 and 3 shall not be effective until received.
12.3. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and
FORM 10Q - Page 68 of 88
<PAGE> 58
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
12.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of the Loan Documents.
12.5. PAYMENT OF EXPENSES AND TAXES. The Borrowers agree (a) to pay
or reimburse the Agent and each Bank for all its out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, the Loan Documents and
any other documents prepared in connection therewith, and the consummation of
the transactions contemplated hereby and thereby, including without limitation
the reasonable fees and disbursements of counsel to the Agent and of counsel
(including in-house counsel) to each of the Banks, (b) to pay or reimburse the
Agent and each of the Banks for all its costs and expenses incurred in
connection with, and to pay, indemnify and hold harmless the Agent and each of
the Banks against and from, any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever arising out of or in connection
with the enforcement or preservation of any rights under the Loan Documents and
any such other documents, including without limitation reasonable fees and
disbursements of counsel to the Agent and of counsel (including in-house
counsel) to each of the Banks, (c) to pay, indemnify and hold harmless the
Agent and each of the Banks against and from any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay
in paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes and any such other documents, and (d) to pay,
indemnify and hold harmless the Agent and each of the Banks against and from
any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever arising out of or in connection with the use or the proposed
use of the proceeds of the Loans (all of the foregoing, collectively, the
"Indemnified Liabilities"), PROVIDED that the Borrowers shall have no
obligation hereunder for Indemnified Liabilities with respect to the Agent or
any Bank arising from (i) the gross negligence or willful misconduct of the
Agent or such Bank, (ii) legal proceedings commenced against the Agent or such
Bank, as the case may be, by any Security holder or creditor of the Agent or
such Bank, arising out of and based upon rights afforded any such Security
holder or creditor solely in its capacity as such, or (iii) legal proceedings
commenced against the Agent or such Bank, as the case may be, by any other Bank
or any Transferee. The agreements in this subsection 12.5 shall survive
repayment of the Notes and all other amounts payable hereunder.
12.6. SUCCESSORS AND ASSIGNS. This Agreement and each document and
certificate delivered pursuant hereto shall be binding upon and inure to the
benefit of the Borrowers, the Banks, the Agent, all future holders of the Notes
and their respective successors and assigns, except that the Borrowers may not
assign or transfer any of their rights under this Agreement without the prior
written consent of the Banks. The Borrowers acknowledge that the Agent and the
Banks may at any time sell, assign, transfer or grant participations in the
Loans to other financial institutions (each a "Transferee"). The Borrowers
agree that each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of the Loans
held by it as fully as if such Transferee were the direct holder thereof.
12.7. GOVERNING LAW; NO THIRD PARTY RIGHTS. This Agreement, the
Notes and the rights and obligations of the parties under this Agreement and
the Notes shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Ohio. This Agreement is solely for the benefit
of the parties hereto and their respective successors and assigns, and no
FORM 10Q - Page 69 of 88
<PAGE> 59
other Person shall have any right, benefit, priority or interest under, or
because of the existence of, this Agreement.
12.8. ADJUSTMENTS; SET-OFF. If any Bank (a "Benefitted Bank") shall
at any time receive any payment of all or part of its Loans, or interest
thereon, or under a Guarantee receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in clause (h) of Section 10, or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Banks in respect of such other Banks' Loans and interest
thereon, or Guarantee, such Benefitted Bank shall (unless such greater
proportionate payment is expressly permitted hereunder) purchase for cash from
such other Banks a participation in such portion of any such other Banks' Loans
or Guarantee, or shall provide any such other Banks with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause such
Benefitted Bank to share the excess payment or benefits of such collateral or
proceeds ratably with such other Banks; PROVIDED, HOWEVER, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
Benefitted Bank, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. The
Borrowers agree that the Benefitted Bank so purchasing a participation in a
portion of any other Bank's Loans may exercise all rights of payment (including
without limitation rights of set-off) with respect to such portion as fully as
if such Benefitted Bank were the direct holder of such portion. In addition to
any rights or remedies of the Agent and each of the Banks provided by law, upon
the occurrence of any Event of Default or upon all of the Loans becoming or
being declared to be due pursuant to Section 10, the Agent and each of the
Banks are hereby irrevocably authorized without notice to the Borrowers (any
such notice being expressly waived) to set-off and appropriate and apply all
deposits (general and special, time or demand, provisional or final) in any
currency and other indebtedness at any time held or owing by the Agent and each
of the Banks to or for the credit or the account of the Borrowers against and
on account of any obligations, liabilities and claims of the Borrowers to the
Agent or such Bank, as the case may be, and in such amounts as the Agent or
such Bank, as the case may be, may elect, although such obligations,
liabilities and claims may be contingent or unmatured, PROVIDED that any such
application of deposits shall be made first against obligations, liabilities
and claims under the Loan Documents with each of the Banks benefitting
therefrom as provided above in this subsection 12.8. The Agent and each Bank,
as the case may be, shall promptly give the Borrowers notice of any set-off,
PROVIDED that the failure to give such notice shall not affect the validity of
such set-off.
12.9. JOINT AND SEVERAL OBLIGATIONS. All indebtedness, liabilities
and obligations of the Borrowers under this Agreement or the Notes, including
without limitation all principal, interest, fees and costs and expenses, shall
be joint and several, regardless of whether they are referred to as joint and
several herein, and each Borrower shall be liable for all such indebtedness,
liabilities and obligations of such Borrower and of all of the other
Borrowers, and the Banks shall have the right, in their sole discretion, to
pursue their remedies against any Borrower without the need to pursue their
remedies against any other Borrower. Notwithstanding anything herein to the
contrary, indebtedness, obligations and liabilities of any Borrower referred to
herein or in the Notes shall be interpreted to be the joint and several
indebtedness, obligations and liabilities of all Borrowers. Notwithstanding
anything to the contrary contained in this subsection or in this Agreement or
otherwise to the contrary, no liability or obligation of any Borrower for
contribution that shall accrue shall be paid nor shall it be deemed owed until
all indebtedness, obligations and liabilities of all Borrowers to the Banks
have been paid in full and the Borrowers have performed all of their other
obligations under this Agreement and the Loan Documents.
12.10. COUNTERPARTS. This Agreement may be executed by one or more
of the parties to this Agreement in any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrowers, the Agent and each Bank.
FORM 10Q - Page 70 of 88
<PAGE> 60
12.11. EFFECTIVENESS. This Agreement shall become effective and
binding upon the Borrowers, the Agent and the Banks as of the date of this
Agreement.
12.12. SEVERABILITY. Any provision of this Agreement which is
prohibited, invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, invalidity or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition, invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction or
any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CONSOLIDATED STORES CORPORATION, NATIONAL CITY BANK, COLUMBUS, as
an Ohio Corporation Agent and as a Bank
By: By:
Name: James A. McGrady Ralph A. Kaparos
Title: Vice President and Treasurer Senior Vice President
C.S. ROSS COMPANY, an Ohio NBD BANK, N.A.
Corporation
By: By:
Name: James A. McGrady Name:
Title: Vice President and Treasurer Title:
By:
Name:
Title:
BANK ONE, COLUMBUS, N.A.
By:
Name: Thomas E. Redmond
Title: Vice President
THE BANK OF TOKYO TRUST COMPANY
By:
Rodney J. Carson
Vice President
FORM 10Q - Page 71 of 88
<PAGE> 1
Exhibit 10(a)
CREDIT GUARANTEE
----------------
CREDIT GUARANTEE, dated as of May 27, 1994, by CONSOLIDATED
STORES CORPORATION, a Delaware corporation ("CSC"), and TRO, INC., a Delaware
corporation ("TRO") (collectively, the "Guarantors"), jointly and severally, in
favor of NATIONAL CITY BANK, COLUMBUS, a national banking association,
individually and as agent (in such capacity, the "Agent"), NBD BANK, N.A., a
national banking association, BANK ONE, COLUMBUS, N.A., a national banking
association, and THE BANK OF TOKYO TRUST COMPANY, a banking corporation
organized under New York state law (collectively, the "Banks").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, CSC is the legal and beneficial owner of all of the
issued and outstanding shares of capital stock of all classes of TRO, TRO is
the legal and beneficial owner of all of the issued and outstanding shares of
capital stock of all classes of Consolidated Stores Corporation, an Ohio
corporation ("CSC Ohio"), and CSC Ohio is the legal and beneficial owner of all
of the issued and outstanding shares of capital stock of all classes of C.S.
Ross Company ("CSRC");
WHEREAS, pursuant to that certain Credit Agreement, dated as of
May_27, 1994, among CSC Ohio, CSRC, the Banks and the Agent (hereinafter, as
the same may from time to time be amended, modified or supplemented, the
"Credit Agreement"), the Banks have agreed to make certain Loans and provide
the DLC Facility to CSC Ohio and CSRC (the "Borrowers"); and
WHEREAS, each of the Guarantors acknowledges the direct and
indirect benefits to be derived by it by reason of the Loans made and the DLC
Facility provided by the Banks to the Borrowers under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligations of the
Banks to make the Loans and provide the DLC Facility to the Borrowers under the
Credit Agreement that each of the Guarantors shall have jointly and severally
executed and delivered this Credit Guarantee to the Agent and the Banks;
NOW, THEREFORE, in consideration of the premises and in order to
induce the Banks to make the Loans and provide the DLC Facility provided for
under the Credit Agreement and for other good and valuable consideration,
receipt of which is hereby acknowledged, each of the Guarantors jointly and
severally hereby agrees with the Agent and the Banks as follows:
1. DEFINED TERMS. Capitalized terms used herein shall have the
same meanings as set forth in the Credit Agreement, unless otherwise defined
herein.
2. GUARANTEE. Each of the Guarantors jointly and severally
hereby unconditionally and irrevocably guarantees to the Banks and the Agent,
and their respective successors, indorsees, transferees and assigns, the
prompt and complete payment when due (whether at the stated maturity, by
acceleration or otherwise) of all indebtedness, obligations and liabilities of
the Borrowers to the Banks and the Agent now existing or hereafter incurred
under or arising out of or in connection with the Credit Agreement, the Notes
and the other Loan Documents, whether for principal, interest, fees, expenses
or otherwise (all such indebtedness, obligations and liabilities being herein
called the "Obligations"), and each of the Guarantors further jointly and
severally hereby agrees to pay any and all reasonable expenses which may be
paid or incurred by the Banks and the Agent in collecting any or all of the
Obligations and/or enforcing any rights under this Credit Guarantee or under
the Obligations.
FORM 10Q - Page 72 of 88
<PAGE> 2
3. SET-OFF. The Agent and the Banks, and each of them, is
hereby irrevocably authorized at any time and from time to time without notice
to either of the Guarantors, any such notice being expressly waived by each of
the Guarantors, to set off and appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), in any currency,
and any other credits, indebtedness or claims, in any currency, in each case
whether direct or indirect or contingent or matured or unmatured, at any time
held or owing by the Agent or any Bank to or for the credit or the account of
either of the Guarantors, or any part thereof, in such amounts as the Agent or
such Bank, as the case may be, may elect, against and on account of the
obligations and liabilities of either of the Guarantors to the Agent and the
Banks, and each of them, hereunder and claims of every nature and description
of the Agent and the Banks, and each of them, against either of the Guarantors,
in any currency, whether arising hereunder, under the Credit Agreement, the
Notes or any other Loan Document, as the Agent or such Bank, as the case may
be, may elect, whether or not the Agent or such Bank, as the case may be, has
made any demand for payment and although such obligations, liabilities and
claims may be contingent or unmatured. The Agent or the Bank which has
set-off, as the case may be, agrees to notify the affected Guarantor or
Guarantors and the Agent promptly of any set-off and the application made by
the Agent or such Bank, as the case may be, PROVIDED that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Agent and the Banks under this Paragraph 3 are in addition to
other rights and remedies (including without limitation other rights of
set-off) which the Agent and the Banks, and each of them, may have, and are
subject to the provisions of subsection 12.8 of the Credit Agreement.
4. SUBROGATION. Notwithstanding any payment or payments made by
either Guarantor hereunder or any set-off or application of funds of either
Guarantor by the Agent or any Bank, neither Guarantor shall be entitled to be
subrogated to any of the rights of the Agent or any Bank against either of the
Borrowers or any collateral security or guarantee or right of set-off held by
the Agent or any Bank for the payment of the Obligations, nor shall either
Guarantor seek any reimbursement from either of the Borrowers in respect of
payments made by such Guarantor hereunder, until all amounts owing to the Agent
and the Banks, and each of them, by the Borrowers for or on account of the
Obligations are paid in full. In the event that either of the Borrowers is now
or hereafter shall become indebted to either of the Guarantors, the amount of
such indebtedness and all interest thereon shall at all times be subject and
subordinate as to priority of Lien, time of payment and in all other respects
to all sums at any time owing to the Agent and the Banks, and each of them,
under any of the Loan Documents, and neither Guarantor shall be entitled to
enforce or receive payment on account of such other indebtedness until all
Obligations owing to the Agent and the Banks, and each of them, shall have been
irrevocably paid in full and the Commitment and the DLC Facility shall have
been terminated, and any sums so received shall be held in trust for the Agent
and the Banks, and each of them, and shall be paid over to the Agent.
5. CONSENT. Each of the Guarantors hereby consents that,
without the necessity of any reservation of rights against such Guarantor and
without notice to or further assent by such Guarantor, any demand for payment
of any of the Obligations made by the Agent and the exercise by the Agent of
any right or remedy may be rescinded by the Agent and any of the Obligations
continued, and the Obligations, or the liability of either of the Borrowers or
any other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of set-off with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Banks, and the
Credit Agreement, any Note, any other Loan Document and any other collateral
security document or other guarantee or document executed in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the Banks may deem advisable from time to time, and any collateral
security or guarantee or right of set-off at any time held by the Agent or any
Bank for the payment of the Obligations may be sold, exchanged,
FORM 10Q - Page 73 of 88
<PAGE> 3
waived, surrendered or released, all without the necessity of any reservation
of rights against such Guarantor and without notice to or further assent by
such Guarantor which will remain bound hereunder notwithstanding any such
renewal, extension, modification, acceleration, compromise, amendment,
supplement, termination, sale, exchange, waiver, surrender or release. The
Agent and the Banks shall have no obligation to protect, secure, perfect or
insure any collateral security document or property subject thereto at any time
held as security for the Obligations or this Credit Guarantee. Neither the
Agent nor any Bank shall be liable for failure to collect or realize upon the
Obligations or any collateral security or guarantee therefor, or any part
thereof, or for any delay in so doing, nor shall any of them be under any
obligation to take any action whatsoever with regard thereto. When making any
demand hereunder against either of the Guarantors, the Agent and the Banks may,
but shall be under no obligation to, make a similar demand on any other
guarantor (including the other Guarantor hereunder) or either of the Borrowers,
and any failure by the Agent or any Bank to make any such demand or to collect
any payments from any such other guarantor (including the other Guarantor
hereunder) or either of the Borrowers or any release of such other guarantor
(including the other Guarantor hereunder) or either of the Borrowers shall not
relieve such Guarantor of its obligations or liabilities hereunder, and shall
not impair or affect the rights and remedies, express or implied, or as a
matter of law, of the Agent and the Banks against such Guarantor. For the
purpose hereof, "demand" shall include the commencement and continuance of any
legal proceedings.
6. WAIVERS. Each of the Guarantors waives any and all notice of
the creation, renewal, extension or accrual of any of the Obligations and
notice of or proof of reliance by the Agent or any Bank upon this Credit
Guarantee or acceptance of this Credit Guarantee, and the Obligations, and each
of them, shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Credit Guarantee, and all dealings between
either of the Borrowers or either of the Guarantors and the Agent or any of the
Banks shall likewise be conclusively presumed to have been had or consummated
in reliance upon this Credit Guarantee. Each of the Guarantors waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon either of the Borrowers or either of the Guarantors with
respect to the Obligations. This Credit Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
the validity, regularity or enforceability of the Credit Agreement, any Note,
any other Loan Document, any of the Obligations or any collateral security or
guarantee therefor or right of set-off with respect thereto at any time or from
time to time held by the Agent or any Bank and without regard to any defense,
set-off or counterclaim which may at any time be available to or be asserted by
either of the Borrowers against the Agent or any Bank, or by any other
circumstance whatsoever (with or without notice to or knowledge of either of
the Borrowers or either of the Guarantors) which constitutes, or might be
construed to constitute, an equitable or legal discharge of either of the
Borrowers for the Obligations, or of either of the Guarantors under this Credit
Guarantee, in bankruptcy or in any other instance, and the obligations and
liabilities of either of the Guarantors hereunder shall not be conditioned or
contingent upon the pursuit by the Agent, any Bank or any other Person at any
time of any right or remedy against either of the Borrowers or against any
other Person which may be or become liable in respect of all or any part of the
Obligations or against any collateral security or guarantee therefor or right
of set-off with respect thereto. This Credit Guarantee shall remain in full
force and effect and be binding in accordance with and to the extent of its
terms upon each of the Guarantors, jointly and severally, and their respective
successors and assigns, and shall inure to the benefit of the Agent and the
Banks, and each of them, and their respective successors, indorsees,
transferees and assigns, until all of the Obligations and the obligations of
each of the Guarantors under this Credit Guarantee shall have been satisfied by
payment in full, notwithstanding that from time to time during the term of the
Credit Agreement either of the Borrowers may be free from any Obligations.
7. EFFECTIVENESS. This Credit Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or
FORM 10Q - Page 74 of 88
<PAGE> 4
any part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Agent or any Bank upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of either of the Borrowers, or upon
or as a result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, either of the Borrowers or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
8. CURRENCY AND PLACE OF PAYMENTS. Each of the Guarantors
jointly and severally hereby guarantees that the Obligations will be paid to
the Agent for the ratable account of each Bank without set-off or counterclaim
in lawful currency of the United States of America in immediately available
funds at the office of the Agent specified in the Credit Agreement.
9. REPRESENTATIONS AND WARRANTIES. Each of the Guarantors represents
and warrants as follows:
(a) CORPORATE EXISTENCE AND POWER. Such Guarantor is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has full
power, authority and legal right to own (or lease) its property
and assets and to transact the business in which it is engaged.
(b) CORPORATE AUTHORITY. Such Guarantor has full power,
authority and legal right to execute and deliver, and to perform
its obligations under, this Credit Guarantee, and has taken all
necessary corporate and legal action to authorize the guarantee
hereunder on the terms and conditions of this Credit Guarantee
and to authorize the execution, delivery and performance of this
Credit Guarantee.
(c) BINDING EFFECT. This Credit Guarantee has been duly
authorized, executed and delivered by such Guarantor and
constitutes a legal, valid and binding obligation of such
Guarantor enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally, and except as
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(d) CONSENTS, APPROVALS, AUTHORIZATIONS. No consent or
authorization of, or filing with, any other Person (including
without limitation any Governmental Authority) is required in
connection with the execution, delivery, performance, validity
or enforceability of this Credit Guarantee.
(e) NO VIOLATIONS. The execution, delivery and
performance of this Credit Guarantee will not violate any
Requirement of Law or any Contractual Obligation of such
Guarantor and will not result in the creation or imposition of
any Lien on any of the property or revenues of such Guarantor
pursuant to the provisions of any Requirement of Law or any
Contractual Obligation of such Guarantor.
(f) NO LITIGATION. No litigation, arbitration,
investigation or administrative proceeding of or before any
court, arbitrator or Governmental Authority is currently
pending or, to the best knowledge of such Guarantor, threatened
by or against such Guarantor or any of its property or revenues
(i) with respect to this Credit Guarantee or (ii) which, if adversely
determined, would have a material adverse effect on the business,
operations, assets or condition, financial or otherwise, of such
Guarantor.
(g) OWNERSHIP, LIENS. Such Guarantor has good and
marketable title to, or valid leasehold interests in, all of its
properties and assets, real and personal, and none of such properties
and assets is subject to any Liens of any nature whatsoever except such
FORM 10Q - Page 75 of 88
<PAGE> 5
FORM 10Q of 88
as are disclosed in the financial statements referred to in
subparagraph (i) of this Paragraph 9.
(h) TAXES. Such Guarantor has filed or caused to be filed
all tax returns required to be filed by it and has paid all
taxes due on said returns or on any assessments made against it
(other than those being contested in good faith by appropriate
proceedings for which adequate reserves have been provided on
its books).
(i) FINANCIAL STATEMENTS. (A) The consolidated balance
sheet of the CSC Companies as at January 29, 1994, and the
related consolidated statements of income, stockholders' equity
and cash flows for the fiscal year then ended (copies of which
have heretofore been furnished to the Agent and the Banks), have
been prepared in accordance with GAAP applied on a basis
consistently maintained throughout the period involved and prior
periods, and present fairly the financial condition (including
without limitation all material obligations, liabilities,
liabilities for taxes and long-term or forward commitments,
whether direct or contingent) of the CSC Companies as at such
dates and the results of their operations for such periods; and
since such dates there have been no material adverse changes in
the business, operations, assets or condition, financial or
otherwise, of such Guarantor or of the CSC Companies taken as a
whole. None of the aforesaid financial statements or
certificates or statements furnished to the Agent and the Banks
by or on behalf of such Guarantor in connection with the
transactions contemplated hereby and none of the representations
and warranties contained herein, as of the date such statement
or certificate was furnished to the Agent and the Banks or such
representation or warranty was made, 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;
(B) As soon as available, but in any event within 90 days
after the end of each fiscal year of CSC, the Guarantors shall
furnish to each Bank (i) a copy of the consolidated balance
sheet of the CSC Companies as at the end of such fiscal year and
the related consolidated statements of income and stockholders'
equity and cash flows of the CSC Companies for such fiscal year,
setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the
scope of the audit, by Deloitte & Touche or other independent
certified public accountants of nationally recognized standing
acceptable to the Banks, and (ii) a consolidating balance sheet
of the CSC Companies as at the end of such fiscal year showing
the assets and liabilities of each of CSC and TRO separately and
of all of the other CSC Companies on a consolidated basis; and
also, as soon as available, but in any event not later the due
date for filing the federal tax return for each fiscal year of
CSC, (iii) a consolidating statement of income for such fiscal
year showing the income of each of CSC and TRO separately and
all of the other CSC Companies on a consolidated basis.
(C) As soon as available, but in any event not later than
45 days after the end of each of the first three quarterly
periods of each fiscal year of CSC, the Guarantors shall furnish
to each Bank (i) a copy of the unaudited consolidated balance
sheet of the CSC Companies as at the end of each such quarter
and the related unaudited consolidated statements of income and
cash flows of the CSC Companies for such quarterly period and
the portion of the fiscal year through the end of such quarter,
setting forth in each case in the form required by Form 10-Q
under the Securities Exchange Act of 1934, as amended, the
figures for the corresponding period of the previous year, and
(ii) a consolidating balance sheet of the CSC Companies as at
the end of each such quarter, showing
FORM 10Q - Page 76 of 88
<PAGE> 6
the assets and liabilities of each of CSC and TRO separately and
of all of the other CSC Companies on a consolidated basis.
(D) All such financial statements referred to in clauses
(B) and (C) of this subparagraph 9(i) shall present fairly the
consolidated or consolidating (as the case may be) financial
position of the CSC Companies as at the applicable date
(subject, in the case of interim statements, to normal year-end
audit adjustments) and shall be prepared in reasonable detail
and in accordance with GAAP applied consistently throughout the
periods reflected therein (except as concurred in by such
accountants or officer, as the case may be, and disclosed
therein); and
(E) Concurrently with the delivery of the financial
statements referred to in clauses (B) and (C) of this
subparagraph 9(i), such Guarantor shall furnish to each Bank a
certificate of the chief financial officer of such Guarantor (i)
stating that, to the best of such officer's knowledge, such
Guarantor during such period has observed or performed all of
its covenants and other agreements, and satisfied every
condition, contained in this Credit Guarantee to be observed,
performed or satisfied by it, and that such officer has obtained
no knowledge of any default hereunder except as specified in
such certificate, and (ii) stating that all such consolidated
and consolidating financial statements present fairly the
consolidated and consolidating financial position of the CSC
Companies (subject, in the case of interim statements, to normal
year-end audit adjustments) and have been prepared in reasonable
detail and in accordance with GAAP applied consistently
throughout the periods reflected therein (except as disclosed
therein).
(j) COMMON BUSINESS ENTERPRISE. Such Guarantor and the
Borrowers are engaged as an integrated group in a common
business enterprise; the integrated operation requires financing
on such a basis that credit supplied to the Borrowers can from
time to time be made available to or applied for the benefit
of such Guarantor and other affiliated parties, as required for
the continued successful operation of such Guarantor and the
integrated operation as a whole; and such Guarantor has
requested the Banks to continue to lend and to make credit
available to the Borrowers primarily for the purpose of
financing the integrated operations of the Borrowers and such
Guarantor, with such Guarantor expecting to derive benefit,
directly or indirectly, from the loans and other credit
extended by the Banks to the Borrowers, both in such Guarantor's
separate capacity and as a member of the integrated group,
inasmuch as the successful operation and condition of such
Guarantor is dependent upon the continued successful
performance of the functions of the integrated group as a whole.
(k) EFFECT OF CREDIT GUARANTEE. Such Guarantor is
entering into this Credit Guarantee without any intent to
hinder, delay or defraud any Person or to incur indebtedness
beyond its ability to repay such indebtedness in accordance with
the terms thereof.
(l) DISCLOSURE. No representation or warranty made by any
of the CSC Companies in the Loan Documents or in any other
document furnished to the Agent or any Bank from time to time in
connection herewith or therewith, as of the date of such
document, contains any untrue statement of a material fact or
omits to state any material fact necessary to make the
statements herein or therein not misleading.
Each of the Guarantors agrees that the foregoing representations and warranties
shall be deemed to have been made by such Guarantor on and as of the date of
each borrowing by either of the Borrowers under the Credit Agreement as though
made hereunder on and as of such date.
FORM 10Q - Page 77 of 88
<PAGE> 7
10. LIMITATION ON DIVIDENDS. Neither of the Guarantors shall
declare any dividends on any shares of any class of stock of either of the
Guarantors, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, retirement or
other acquisition of any shares of any class of stock of either of the
Guarantors, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of either of the Guarantors or any CSC
Subsidiary, except that the Guarantors may make any Distributions permitted
under the provisions of subsection 9.3 of the Credit Agreement.
11. GUARANTEE OF FINANCIAL COVENANTS. Each of the Guarantors
jointly and severally hereby unconditionally and irrevocably guarantees to the
Agent and the Banks and their respective successors, indorsees, transferees and
assigns the performance of each of the Borrower's covenants contained in
subsections 8.4, 9.5, 9.6 and 9.9 of the Credit Agreement.
12. PROHIBITION OF FUNDAMENTAL CHANGES. Neither of the
Guarantors shall, nor shall either of the Guarantors permit any of the CSC
Subsidiaries to, directly or indirectly, enter into any transaction of sale,
acquisition or merger or consolidation or amalgamation, or liquidate in one
transaction or in a series of transactions, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, in a single transaction or in a series of
related transactions, all or substantially all of its property or assets, or
make any fundamental change in the present method of conducting business,
except:
(a) the sale of inventory or interests in Joint Ventures
in the ordinary course of business of the Borrowers and the CSC
Ohio Subsidiaries consistent with the current practices of the
Borrowers and the CSC Ohio Subsidiaries;
(b) any CSC Ohio Subsidiary of either of the Borrowers may
be merged or consolidated with or into such Borrower (PROVIDED
that such Borrower shall be the continuing or surviving
corporation) or with or into any one or more CSC Ohio
Subsidiaries wholly owned by either of the Borrowers (PROVIDED
that the wholly owned CSC Ohio Subsidiary shall be the
continuing or surviving corporation);
(c) any CSC Ohio Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to either of the Borrowers or a CSC
Ohio Subsidiary wholly owned by either of the Borrowers; and
FORM 10Q - Page 78 of 88
<PAGE> 8
(d) either of the Guarantors may be merged or consolidated
with or into the other Guarantor (PROVIDED that one of the
Guarantors shall be the continuing or surviving corporation).
13. NO WAIVERS; CUMULATIVE REMEDIES. Neither the Agent nor any
Bank shall by any act, delay, omission or otherwise be deemed to have waived
any of its respective rights or remedies hereunder. A waiver by the Agent or
any Bank of any right or remedy on any one occasion shall not be construed as a
bar to any right or remedy which the Agent or any Bank would otherwise have on
any future occasion. No failure to exercise and no delay in exercising, on the
part of the Agent or any Bank, any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege preclude any other or further exercise thereof, or
the exercise of any other right, power or privilege. The rights and remedies
herein provided are cumulative and may be exercised singly or concurrently and
are not exclusive of any rights or remedies provided by law.
14. SEVERABILITY. Any provision of this Credit Guarantee which
is prohibited, invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, invalidity or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition, invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction or
any other provision of this Credit Guarantee. Each of the Guarantors shall
negotiate in good faith to replace any prohibited, invalid or unenforceable
provision with a valid provision or provisions the economic effect of which
shall reflect the economic bargain manifested in the prohibited, invalid or
unenforceable provision. If at any time all or any portion of the obligation
of any Guarantor under this Credit Guarantee would otherwise be determined by a
court of competent jurisdiction to be invalid, unenforceable or avoidable under
Section 548 of the federal Bankruptcy Code or under a similar applicable law of
any jurisdiction, then notwithstanding any other provisions of this Credit
Guarantee to the contrary such obligation or portion thereof of such Guarantor
under this Credit Guarantee shall be limited to the greatest of (i) the value
of any quantifiable economic benefits accruing to such Guarantor as
FORM 10Q - Page 79 of 88
<PAGE> 9
a result of this Credit Guarantee, (ii) an amount equal to 95% of the excess on
the date the relevant liabilities were incurred of the present fair saleable
value of the assets of such Guarantor over the amount of all liabilities of
such Guarantor, contingent or otherwise, and (iii) the maximum amount for which
this Credit Guarantee is determined to be enforceable.
15. MODIFICATIONS. No provision of this Credit Guarantee shall
be waived, amended or supplemented except by a written instrument executed by
each of the Guarantors and each of the Banks or by each of the Guarantors and
the Agent with the written consent of each of the Banks.
16. GOVERNING LAW. This Credit Guarantee shall be governed by
and construed and interpreted in accordance with the laws of the State of Ohio.
17. CAPTIONS. The captions in this Credit Guarantee have been
inserted for convenience of reference only and in no way limit or amplify the
provisions hereof.
IN WITNESS WHEREOF, each of the undersigned has caused this
Credit Guarantee to be duly executed and delivered by its duly authorized
officers on the day and year first above written.
CONSOLIDATED STORES CORPORATION,
a Delaware corporation
By:
Name: James A. McGrady
Title: Vice President and Treasurer
[SEAL]
Attest:
By:______________________________
James E. Eggenschwiler
Assistant Secretary
TRO, INC., a Delaware corporation
By:
Name: James A. McGrady
Title: Vice President and Treasurer
[SEAL]
Attest:
By:_______________________________
James E. Eggenschwiler
Assistant Secretary
FORM 10Q - Page 80 of 88
<PAGE> 1
Exhibit 10(b)
CREDIT GUARANTEE
----------------
CREDIT GUARANTEE, dated as of May 27, 1994, by the undersigned
corporations who are listed on the attached Schedule I (collectively, the
"Guarantors"), jointly and severally, in favor of NATIONAL CITY BANK, COLUMBUS,
a national banking association, individually and as agent (in such capacity,
the "Agent"), NBD BANK, N.A., a national banking association, BANK ONE,
COLUMBUS, N.A., a national banking association, and THE BANK OF TOKYO TRUST
COMPANY, a banking corporation organized under New York state law
(collectivelv. the "Banks").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, each of the Guarantors is a wholly owned subsidiary of
Consolidated Stores Corporation, an Ohio corporation ("CSC Ohio"), or another
one of the Guarantors;
WHEREAS, pursuant to that certain Credit Agreement, dated as of May
27, 1994, among CSC Ohio, C.S. Ross Company ("CSRC"), the Banks and the Agent
(hereinafter, as the same may from time to time be amended, modified or
supplemented, the "Credit Agreement"), the Banks have agreed to make certain
Loans and provide the DLC Facility to CSC Ohio and CSRC (the "Borrowers"); and
WHEREAS, each of the Guarantors acknowledges the direct and indirect
benefits to be derived by it by reason of the Loans made and the DLC Facility
provided by the Banks to the Borrowers under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligations of the Banks
to make the Loans and provide the DLC Facility to the Borrowers under the Credit
Agreement that each of the Guarantors shall have jointly and severally executed
and delivered this Credit Guarantee to the Agent and the Banks:
NOW, THEREFORE, in consideration of the premises and in order to
induce the Banks to make the Loans and provide the DLC Facility provided for
under the Credit Agreement and for other good and valuable consideration,
receipt of which is hereby acknowledged, each of the Guarantors jointly and
severally hereby agrees with the Agent and the Banks as follows:
1. DEFINED TERMS. Capitalized terms used herein shall have the same
meanings as set forth in the Credit Agreement, unless otherwise defined herein.
2. GUARANTEE. Each of the Guarantors jointly and severally
hereby unconditionally and irrevocably guarantees to the Banks and the Agent,
and their respective successors, endorsees, transferees and assigns, the prompt
and complete payment when due (whether at the stated maturity, by acceleration
or otherwise) of all indebtedness, obligations and liabilities of the Borrowers
to the Banks and the Agent now existing or hereafter incurred under or arising
out of or in connection with the Credit Agreement, the Notes and the other Loan
Documents, whether for principal, interest, fees, expenses or otherwise (all
such indebtedness, obligations and liabilities being herein called the
"Obligations"), and each of the Guarantors further jointly and severally hereby
agrees to pay any and all reasonable expenses which may be paid or incurred by
the Banks and the Agent in collecting any or all of the Obligations and/or
enforcing any rights under this Credit Guarantee or under the Obligations.
3. SET-OFF. The Agent and the Banks, and each of them, is hereby
irrevocably authorized at any time and from time to time without notice to any
of the Guarantors, any such notice being expressly waived by each of the
Guarantors, to set off and appropriate and apply any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect or contingent or matured or unmatured,
FORM 10Q - Page 81 of 88
<PAGE> 2
at any time held or owing by the Agent or any Bank to or for the credit or the
account of any of the Guarantors, or any part thereof, in such amounts as the
Agent or such Bank, as the case may be, may elect, against and on account of
the obligations and liabilities of any of the Guarantors to the Agent and the
Banks, and each of them, hereunder and claims of every nature and description
of the Agent and the Banks, and each of them, against any of the Guarantors, in
any currency, whether arising hereunder, under the Credit Agreement, the Notes
or any other Loan Document, as the Agent or such Bank, as the case may be, may
elect, whether or not the Agent or such Bank, as the case may be, has made any
demand for payment and although such obligations, liabilities and claims may be
contingent or unmatured. The Agent or the Bank which has set-off, as the case
may be, agrees to notify the affected Guarantor or Guarantors and the Agent
promptly of any set-off and the application made by the Agent or such Bank, as
the case may be, provided that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of the Agent and the
Banks under this Paragraph 3 are in addition to other rights and remedies
(including without limitation other rights of set-off) which the Agent and the
Banks, and each of them, may have, and are subject to the provisions of
subsection 12.8 of the Credit Agreement.
4. SUBROGATION. Notwithstanding any payment or payments made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Agent or any Bank, no Guarantor shall be entitled to be subrogated to any of
the rights of the Agent or any Bank against either of the Borrowers or any
collateral security or guarantee or right of set-off held by the Agent or any
Bank for the payment of the Obligations, nor shall any Guarantor seek any
reimbursement from either of the Borrowers in respect of payments made by any
Guarantor hereunder, until all amounts owing to the Agent and the Banks, and
each of them, by the Borrowers for or on account of the Obligations are paid in
full. In the event that either of the Borrowers is now or hereafter shall
become indebted to any Guarantor, the amount of such indebtedness and all
interest thereon shall at all times be subject and subordinate as to priority
of Lien, time of payment and in all other respects to all sums at any time
owing to the Agent and the Banks, and each of them, under any of the Loan
Documents, and no Guarantor shall be entitled to enforce or receive payment on
account of such other indebtedness until all Obligations owing to the Agent and
the Banks, and each of them, shall have been irrevocably paid in full and the
Commitment and the DLC Facility shall have been terminated and any sums so
received shall be held in trust for the Agent and the Banks, and each of them,
and shall be paid over to the Agent.
5. CONSENT. Each of the Guarantors hereby consents that, without the
necessity of any reservation of rights against such Guarantor and without notice
to or further assent by such Guarantor, any demand for payment of any of the
Obligations made by the Agent and the exercise by the Agent of any right or
remedy may be rescinded by the Agent and any of the Obligations continued, and
the Obligations, or the liability of either of the Borrowers or any other Person
upon or for any part thereof, or any collateral security or guarantee therefore
or right of set-off with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Banks, and the Credit
Agreement, any Note, any other Loan Document and any other collateral security
document or other guarantee or document executed in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the Banks
may deem advisable from time to time, and any collateral security or guarantee
or right of set-off at any time held by the Agent or any Bank for the payment
of the Obligations may be sold, exchanged, waived, surrendered or released, all
without the necessity of any reservation of rights against such Guarantor and
without notice to or further assent by such Guarantor which will remain bound
hereunder notwithstanding any such renewal, extension, modification,
acceleration, compromise, amendment, supplement, termination, sale, exchange,
waiver, surrender or release. The Agent and the Banks shall have no obligation
to protect, secure, perfect or insure any collateral security document or
property subject thereto at any time held as security for the Obligations or
FORM 10Q - Page 82 of 88
<PAGE> 3
this Credit Guarantee Neither the Agent nor any Bank shall be liable for
failure to collect or realize upon the Obligations or any collateral security
or guarantee therefore, or any part thereof, or for any delay in so doing, nor
shall any of them be under any obligation to take any action whatsoever with
regard thereto. When making any demand hereunder against any Guarantor, the
Agent and the Banks may, but shall be under no obligation to, make a similar
demand on any other guarantor (including any of the other Guarantors hereunder)
or either of the Borrowers, and any failure by the Agent or any Bank to make
any such demand or to collect any payments from any such other guarantor
(including any of the other Guarantors hereunder) or either of the Borrowers or
any release of such other guarantor (including any of the other Guarantors
hereunder) or either of the Borrowers shall not relieve such Guarantor of its
obligations or liabilities hereunder, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of the Agent and the
Banks against such Guarantor. For the purpose hereof, "demand" shall include
the commencement and continuance of any legal proceedings.
6. WAIVERS. Each of the Guarantors waives any and all notice of the
creation, renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by the Agent or any Bank upon this Credit Guarantee or
acceptance of this Credit Guarantee, and the Obligations, and each of them,
shall conclusively be deemed to have been created, contracted or incurred in
reliance upon this Credit Guarantee, and all dealings between either of the
Borrowers or any Guarantor and the Agent or any of the Banks shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Credit Guarantee. Each of the Guarantors waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon
either of the Borrowers or any Guarantor with respect to the Obligations. This
Credit Guarantee shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to the validity, regularity or
enforceability of the Credit Agreement, any Note, any other Loan Document, any
of the Obligations or any collateral security or guarantee therefor or right of
set-off with respect thereto at any time or from time to time held by the Agent
or any Bank and without regard to any defense, set- off or counterclaim which
may at any time be available to or be asserted by either of the Borrowers
against the Agent or any Bank, or by any other circumstance whatsoever (with or
without notice to or knowledge of either of the Borrowers or any Guarantor)
which constitutes; or might be construed to constitute, an equitable or legal
discharge of either of the Borrowers for the Obligations, or of any Guarantor
under this Credit Guarantee, in bankruptcy or in any other instance, and the
obligations and liabilities of each of the Guarantors hereunder shall not be
conditioned or contingent upon the pursuit by the Agent, any Bank or any other
Person at any time of any right or remedy against either of the Borrowers or
against any other Person which may be or become liable in respect of all or any
part of the Obligations or against any collateral security or guarantee therefor
or right of set-off with respect thereto. This Credit Guarantee shall remain in
full force and effect and be binding in accordance with and to the extent of its
terms upon each of the Guarantors, jointly and severally, and their respective
successors and assigns, and shall inure to the benefit of the Agent and the
Banks, and each of them, and their respective successors, indorsees, transferees
and assigns, until all of the Obligations and the obligations of each of the
Guarantors under this Credit Guarantee shall have been satisfied by payment in
full, notwithstanding that from time to time during the term of the Credit
Agreement either of the Borrowers may be free from any Obligations.
7. EFFECTIVENESS. This Credit Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Agent or any Bank upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of either of the
Borrowers, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, either of the Borrowers
or any substantial part of its property, or otherwise, all as though such
payments had not been made.
FORM 10Q - Page 83 of 88
<PAGE> 4
8. CURRENCY AND PLACE OF PAYMENTS. Each of the Guarantors jointly and
severally hereby guarantees that the Obligations will be paid to the Agent
for the ratable account of each Bank without set-off or counterclaim in lawful
currency of the United States of America in immediately available funds at the
office of the Agent specified in the Credit Agreement.
9. REPRESENTATIONS AND WARRANTIES. Each of the Guarantors represents
and warrants as follows:
(a) CORPORATE EXISTENCE AND POWER. Such Guarantor is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has full power, authority and
legal right to own (or lease) its property and assets and to transact
the business in which it is engaged.
(b) CORPORATE AUTHORITY. Such Guarantor has full power,
authority and legal right to execute and deliver, and to perform its
obligations under, this Credit Guarantee, and has taken all necessary
corporate and legal action to authorize the guarantee hereunder on the
terms and conditions of this Credit Guarantee and to authorize the
execution, delivery and performance of this Credit Guarantee.
(c) BINDING EFFECT. This Credit Guarantee has been duly
authorized, executed and delivered by such Guarantor and constitutes a
legal, valid and binding obligation of such Guarantor enforceable in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally,
and except as enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity).
(d) CONSENTS, APPROVALS, AUTHORIZATIONS. No consent (or
authorization of, or filing with, any other Person (including without
limitation any Governmental Authority) is required in connection with
the execution, delivery performance, validity or enforceability of this
Credit Guarantee.
(e) NO VIOLATIONS. The execution, delivery and performance of
this Credit Guarantee will not violate any Requirement of Law or any
Contractual Obligation of such Guarantor and will not result in the
creation or imposition of any Lien on any of the property or revenues
of such Guarantor pursuant to the provisions of any Law or any
Contractual Obligation of such Guarantor.
(f) NO LITIGATION. No litigation, arbitration, investigation
or administrative proceeding of or before any court, arbitrator or
Governmental Authority is currently pending or, to the best knowledge
of such Guarantor, threatened by or against such Guarantor or any of
its property or revenues (i) with respect to this Credit Guarantee or
(ii) which, if adversely determined, would have a material adverse
effect on the business, operations, assets or condition, financial or
otherwise, of such Guarantor.
(g) OWNERSHIP, LIENS. Such Guarantor has good and marketable
title to, or valid leasehold interests in, all of its properties and
assets, real and personal, and none of such properties and assets is
subject to any Liens of any nature whatsoever except such as are
disclosed in the financial
FORM 10Q - Page 84 of 88
<PAGE> 5
statements referred to in subsection 5.9 of the Credit Agreement.
(h) TAXES. Such Guarantor has filed or caused to be filed
all tax returns required to be filed by it and has paid all taxes due
on said returns or on any assessments made against it (other than those
being contested in good faith by appropriate proceedings for which
adequate reserves have been provide on its books).
(i) COMMON BUSINESS ENTERPRISE. Such Guarantor and the
Borrowers are engaged as an integrated group in a common business
enterprise; the integrated operation requires financing on such a basis
that credit supplied to the Borrowers can from time to time be made
available to or applied for the benefit of such Guarantor and other
affiliated parties, as required for the continued successful operation
of such Guarantor and the integrated operation as a whole; and such
Guarantor has requested the Banks to continue to lend and to make
credit available to the Borrowers primarily for the purpose of
financing the integrated operations of the Borrowers and such Guarantor
with Guarantor expecting to derive benefit, directly or indirectly,
from the loans and other credit extended by the Banks to the Borrowers,
both in such Guarantor's separate capacity and as a member of the
integrated group, inasmuch as the successful operation and condition of
such Guarantor is dependent upon the continued successful performance
of the functions of the integrated group as a whole.
(j) EFFECT OF CREDIT GUARANTEE. Such Guarantor is entering
into this Credit Guarantee without any intent to hinder, delay or
defraud any Person or to incur indebtedness beyond its ability to repay
such indebtedness in accordance with the terms thereof.
(k) DISCLOSURE. No representation or warranty made by any
of the CSC Companies in the Loan Documents or in any other document
furnished to the Agent or any Bank from time to time in connection
herewith or therewith, as of the date of such document, contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading.
Each of the Guarantors agrees that the foregoing representations and
warranties shall be deemed to have been made by such Guarantor on and as of
the date of each borrowing by either of the Borrowers under the Credit
Agreement as though made hereunder on and as of such date.
10. NEGATIVE COVENANTS. So long as any of the Obligations remain
outstanding, each of the Guarantors hereby covenants and agrees that it will
not, without the prior written consent of all of the Banks:
(a) ASSIGNMENT. Assign or transfer any of the obligations of
such Guarantor under this Credit Guarantee to any Person except in any
transaction permitted by subparagraph 10(b); or
(b) MERGER, CONSOLIDATION, SALE OF ASSETS. Except as
permitted in the Credit Agreement, become a party to any
merger or consolidation or take any action looking to such Guarantor's
dissolution or liquidation, or sell, lease or otherwise dispose of a
substantial part of its assets.
11. NO WAIVERS; CUMULATIVE REMEDIES. Neither the Agent nor any Bank
shall by any act, delay, omission or otherwise be deemed to have waived any of
its respective rights or remedies hereunder. A waiver by the Agent or any Bank
of any right or remedy on any one occasion shall not be
FORM 10Q - Page 85 of 88
<PAGE> 6
construed as a bar to any right or remedy which the Agent or any Bank
would otherwise have on any future occasion. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other or further
exercise thereof, or the exercise of any other right, power or privilege. The
rights and remedies herein provided are cumulative and may be exercised singly
or concurrently and are not exclusive of any rights or remedies provided by
law.
12. SEVERABILITY. Any provision of this Credit Guarantee which is
prohibited, invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, invalidity or
unenforceability without invalidating the remaining provisions hereof and any
such prohibition, invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction or
any other provision of this Credit Guarantee. Each of the Guarantors shall
negotiate in good faith to replace any prohibited, invalid or unenforceable
provision with a valid provision or provisions the economic effect of which
shall reflect the economic bargain manifested in the prohibited, invalid or
unenforceable provision. If at any time all or any portion of the obligation
of any Guarantor under this Credit Guarantee would otherwise be determined by a
court of competent jurisdiction to be invalid, unenforceable or avoidable under
Section 548 of the federal Bankruptcy Code or under a similar applicable law of
any jurisdiction, then notwithstanding any other provisions of this Credit
Guarantee to the contrary such obligation or portion thereof of such Guarantor
under this Credit Guarantee shall be limited to the greatest of (i) the value
of this Credit Guarantee (ii) an amount equal to 95% of the excess on the date
the relevant liabilities were incurred of the present fair saleable value of
the assets of such Guarantor over the amount of all liabilities of such
Guarantor contingent or otherwise, and (iii) the maximum amount for which this
Credit Guarantee is determined to be enforsvshlp.
13. MODIFICATIONS. No provision of this Credit Guarantee shall be
waived, amended or supplemented except by a written instrument executed by each
of the Guarantors and each of the Banks or by each of the Guarantors and the
Agent with the written consent of each of the Banks.
14. GOVERNING LAW. This Credit Guarantee shall be governed by and
construed and interpreted in accordance with the laws of the State of Ohio.
15. CAPTIONS. The captions in this Credit Guarantee have been inserted
for convenience of reference only and in no way limit or amplify the provisions
hereof.
FORM 10Q - Page 86 of 88
<PAGE> 7
Form 10Q of 88
IN WITNESS WHEREOF, each of the undersigned has caused this Credit Guarantee
to be duly executed and delivered by its duly authorized officers on the day
and year first above written.
GUARANTORS*
By:
-------------------------------------
Name: James A. McGrady
Title: Vice President and Treasurer
[SEAL]
Attest:
By:_________________________
James E. Eggenschwiler
Assistant Secretary
*Signature is as an officer of an on behalf of and for each of the Guarantors
listed on Schedule I attached hereto.
FORM 10Q - Page 87 of 88
<PAGE> 8
SCHEDULE I
LIST OF GUARANTORS
------------------
CSIC VENTURE, INC. (DELAWARE)
MIDWESTERN HOME PRODUCTS, INC. (DELAWARE)
TOOL & SUPPLY OF NEW ENGLAND, INC. (DELAWARE)
CONSOLIDATED INTERNATIONAL EXPORT CORP. (BARBADOS)
INDUSTRIAL PRODUCTS OF NEW ENGLAND, INC. (MAINE)
S.S. INVESTMENT CORP. (DELAWARE)
S.S. ACQUISITION CORP. (DELAWARE)
BARN ACQUISITION CORP. (DELAWARE)
FASHION BARN, INC. (NEW YORK)
FASHION BARN OF NEW JERSEY, INC.
FASHION BARN OF FLORIDA, INC.
FASHION BARN OF INDIANA, INC.
FASHION BARN OF PENNSYLVANIA, INC.
FASHION BARN OF OKLAHOMA, INC.
FASHION BARN OF CALIFORNIA, INC.
FASHION BARN OF TEXAS, INC.
FASHION BARN OF OHIO, INC.
FASHION BARN OF VERMONT, INC.
FASHION BARN OF VIRGINIA, INC.
FASHION BARN OF SOUTH CAROLINA, INC.
FASHION BARN OF NORTH CAROLINA, INC.
FASHION BARN OF WEST VIRGINIA, INC.
FASHION BARN OF MISSOURI, INC.
FASHION BARN, INC. (MA)
DTS, INC. (NY) (TN)
SADDLE BROOK DISTRIBUTORS, INC. (NY) (NJ)
ROGERS FASHION INDUSTRIES, INC. (NY) (NJ)
FASHION OUTLETS CORP. (NY)
FASHION BONANZA, INC. (NY)
FORM 10Q - Page 88 of 88
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> JAN-30-1994
<PERIOD-END> JUL-30-1994
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<RECEIVABLES> 4,775
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<INVENTORY> 346,576
<CURRENT-ASSETS> 395,751
<PP&E> 266,435
<DEPRECIATION> 105,374
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<CURRENT-LIABILITIES> 166,782
<BONDS> 107,900
<COMMON> 466
0
0
<OTHER-SE> 267,140
<TOTAL-LIABILITY-AND-EQUITY> 565,714
<SALES> 515,091
<TOTAL-REVENUES> 515,091
<CGS> 295,754
<TOTAL-COSTS> 295,754
<OTHER-EXPENSES> (966)
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 15,412
<INCOME-TAX> 6,319
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