<PAGE> 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
------------------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JANUARY 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 0-6672
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 95-2745285
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2430 EAST DEL AMO BOULEVARD
DOMINGUEZ, CALIFORNIA 90220-6306
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 537-9220
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- --------------------------
<S> <C>
Common Stock ($.02778 Par Value) New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NOT APPLICABLE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of shares of the voting stock held by
non-affiliates of the Company, based on the closing sale price of such stock on
the New York Stock Exchange on April 22, 1994, was approximately $433,308,654.
The number of shares of Common Stock outstanding as of April 22, 1994 was
29,367,775.
Documents Incorporated by Reference
Portions of the Company's definitive proxy statement relating to the 1994
Annual Meeting of Stockholders to be filed with the Securities and Exchange
Commission are incorporated by reference into Part III hereof.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE> 2
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM NO. IN
FORM 10-K PAGE
------------ ----
<S> <C> <C>
PART I
1. BUSINESS...................................................................................... 1
General....................................................................................... 1
Merchandise and Suppliers..................................................................... 1
Warehousing and Distribution.................................................................. 2
Retail Stores................................................................................. 2
Employees..................................................................................... 3
Competition................................................................................... 3
Trademarks.................................................................................... 3
Restrictions on Imports....................................................................... 3
2. PROPERTIES.................................................................................... 4
Retail Stores................................................................................. 4
Corporate Offices and Warehouse Facilities.................................................... 5
3. LEGAL PROCEEDINGS............................................................................. 6
4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS............................................. 6
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS........................................................................... 6
6. SELECTED FINANCIAL DATA....................................................................... 7
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS......................................................................... 7
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................................... 10
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......... 11
PART III
10.-13. THE INFORMATION REQUIRED BY ITEMS 10-13 OF FORM 10-K IS INCORPORATED BY REFERENCE FROM THE
COMPANY'S DEFINITIVE PROXY MATERIALS FOR ITS ANNUAL MEETING OF STOCKHOLDERS TO BE HELD IN
1994.......................................................................................... 11
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K............................... 11
</TABLE>
<PAGE> 4
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 5
PART I
ITEM 1. BUSINESS
GENERAL
Mac Frugal's Bargains o Close-outs Inc. (collectively with its
subsidiaries, the "Company") was incorporated under the laws of the state of
Delaware in 1971 as successor to a number of entities, the first of which was
founded in 1950. The Company's principal executive offices are located at 2430
E. Del Amo Boulevard in Dominguez, California, a suburb of Los Angeles. The
Company maintains centralized buying, personnel, systems, pricing, advertising,
merchandising, real estate and accounting functions at its principal executive
offices. See ITEM 2. "Properties -- Corporate Offices and Warehouse Facilities".
The Company currently operates a chain of 237 retail stores that
specialize in the sale of new "close-out" merchandise which is purchased from
manufacturers and wholesalers at prices less than initial wholesale prices and
is sold at prices below normal retail prices. The Company's stores are operated
under the names "Pic 'N' Save" and "Mac Frugal's Bargains o Close-outs" and
collectively offer, on a self-service basis, a wide selection of close-out
merchandise, including apparel and accessories, notions, novelties, toys, games,
stationery, greeting cards, books, candles, luggage, artificial flowers, beauty
aids, candy, snacks, beverages, housewares, domestics, Christmas theme items and
giftwares. The Company targets value oriented consumers, and merchandise is
currently sold on a cash-and-carry basis, with certain credit cards accepted.
During the fall of 1993 and 1992, the Company developed a seasonal
store concept that operated under the names Christmas Close-outs and Christmas
Enchantments. The Company operated 168 and 25 of these seasonal stores in 1993
and 1992, respectively. These seasonal stores offered new Christmas theme
merchandise purchased from manufacturers at prices less than initial wholesale
prices and were sold at prices below normal retail prices. Categories of
merchandise available in these stores was similar to the Christmas seasonal
merchandise offered in the year-round stores. The Christmas Close-outs and
Christmas Enchantments stores were generally operated for the three months from
October through Christmas. The Company has put further development of this
concept on hold for the reasons discussed later in this section under "Retail
Stores".
At January 30, 1994, 141 of the Company's year-round retail stores
operated under the name "Mac Frugal's Bargains o Close-outs". The remaining 96
year-round stores, located in Southern California, operated under the name "Pic
'N' Save".
For the year ended January 30, 1994 (fiscal 1993), approximately 56%
of the Company's year-round stores were located in California and generated
approximately 64% of the sales from year-round stores. The Company believes
California entered the current recession some time in 1991. In addition to
facing some of the same factors that influence the national and global
economies, California has been challenged by reductions in aerospace and federal
defense spending which have adversely affected California unemployment rates
relative to national unemployment rates. The economic hardship felt by
unemployed individuals has led to a general reduction of retail spending in
California as measured by reduced sales tax receipts by the State of California.
This reduction has adversely impacted the Company's California sales during
fiscal 1993 and 1992.
There has also been a general decline in California commercial real
estate values and an increase in commercial vacancies since approximately 1990.
The Company has benefitted from this decline as a result of its position as
lessee or buyer of sites for additional California stores.
Seasonal fluctuations in the Company's sales have followed the
traditional trend in the retail industry, with a substantial portion of its
annual sales volume and annual earnings occurring during the fourth quarter of
its fiscal year. The Company expects this pattern to continue in the future but
with less of the extreme experienced in fiscal 1993 as a result of putting the
Christmas season store concept on hold.
MERCHANDISE AND SUPPLIERS
Close-out merchandise is new merchandise that is available to the
Company at prices less than initial wholesale prices for a variety of reasons,
including the inability of a manufacturer or wholesaler to dispose of a larger
supply of merchandise through normal channels, the discontinuance of merchandise
due to a change in style, color, shape or packaging, the insufficiency of sales
to justify continued production of an item, or the termination of business by a
manufacturer or wholesaler.
The Company purchases merchandise at prices less than initial
wholesale prices, allowing the Company to sell its merchandise to customers at
what the Company believes are below normal retail prices. Therefore, although
general categories of merchandise are usually available, specific lines, items
and manufacturers frequently change, depending upon the availability of
close-out merchandise at suitable prices. In order to ensure supply and
attractive pricing, the Company will often purchase close-out merchandise in
large quantities and some seasonal merchandise out of season.
The Company buys merchandise, including numerous national brands, from
more than 2,000 suppliers. Due to its long-term association in the close-out
industry, the Company has developed good relationships with numerous
manufacturers and wholesalers that offer some or all of their close-out
merchandise to the Company prior to attempting to dispose of it through other
channels. By selling close-out merchandise only through its own retail stores,
the Company is able to assure suppliers that close-out merchandise will not be
sold through the same channels of distribution as the supplier's current
merchandise.
The Company also special-orders and reorders merchandise from offshore
manufacturers primarily in Asia and the South Pacific at purchase prices
consistent with its general merchandising philosophy of offering merchandise to
customers at prices below normal retail prices. Purchases are made either
through a trading company or direct from the manufacturer, often early in the
purchasing season. The continuation of the Company's purchasing of such
merchandise is dependent upon the continuation of
1
<PAGE> 6
the Company's ability to obtain such advantageous pricing. Offshore purchases
did not account for more than 21% of the Company's total purchases in any year
during the three years ended January 30, 1994.
WAREHOUSING AND DISTRIBUTION
Merchandise purchased for sale through the Company's retail stores is
centrally received at either the Company's warehouse and distribution center
located in Rancho Cucamonga, California, or its warehouse and distribution
center located in New Orleans, Louisiana. The Rancho Cucamonga facility opened
in August 1984 and was expanded in 1988 from 806,000 square feet to 1,431,000
square feet. The New Orleans facility, which contains 1,100,000 square feet, was
opened in September 1991. See ITEM 2. "Properties -- Corporate Offices and
Warehouse Facilities". Merchandise is distributed to retail outlets either by
Company-operated tractors and trailers, or to locations more distant from the
warehouse, by contract carriers. Inventory control functions are conducted at
both distribution centers.
RETAIL STORES
Permanent Stores -- The Company's retail stores are principally
located in the Western, Southwestern, Southern and Southeastern United States,
with 96 stores located in Southern California at January 30, 1994. The Company
has four additional Southern California stores which are undergoing either
reconstruction and repair or relocation due to an earthquake that occurred on
January 17, 1994. Stores open for the entire year in Southern California are
currently operated under the name "Pic 'N' Save" and all other year-round stores
are operated under the name "Mac Frugal's Bargains o Close-outs". The table
below provides a state by state breakdown of the Company's year-round retail
store locations at the end of the five most recent fiscal years.
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
TOTAL NUMBER OF YEAR-ROUND STORES AT FISCAL YEAR END
1989-1993
<TABLE>
<CAPTION>
FISCAL
YEAR
END CA AZ TX NV NM UT CO ID LA NY NJ GA FL AL TOTAL
- - ------ ---- ---- ---- --- --- --- --- --- --- --- --- --- ---- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993 133 16 36 7 5 6 7 1 9 0 0 5 11 1 237
1992 109 11 36 5 5 6 7 1 9 0 0 5 10 1 205
1991 98 11 35 5 5 6 7 1 9 0 0 5 10 1 193
1990 98 11 35 4 5 6 7 1 9 0 0 5 9 1 191
1989 97 11 33 4 5 6 7 1 7 6 8 5 0 0 190
</TABLE>
During fiscal 1993, the Company opened thirty-six year-round stores,
net of stores relocated, and involuntarily closed four due to damage from an
earthquake. Additionally, three stores were relocated to better nearby
locations. Nineteen of the new stores are located in Southern California, nine
in Northern California, one in Florida, five in Arizona and two in Nevada. Two
of the relocated stores are located in Northern California and one in Southern
California.
In fiscal 1993, the Company continued to focus its expansion in the
California market. California is the Company's largest market for sales and
earnings. The Company believes that concentrating on this market at a time when
quality real estate is readily available at lower prices than in the past will
provide good growth as the California economy strengthens over time.
During the five-year period from January 1, 1989 through January 30,
1994, the Company opened or acquired the operations of 109 new stores,
permanently closed 26 stores and temporarily closed 4 stores, increasing its
chain of retail stores from 158 to 237. Fifteen of the 26 stores permanently
closed were Job Lot Pushcart stores in New York and New Jersey, which the
Company acquired in 1988 and conveyed back to the former owner in accordance
with a put provision in the original acquisition agreement. Six of the other
closed stores were replaced by upgraded facilities located in the same
geographic area; four were closed due to inability to renew the leases; and one
owned store was closed, put up for sale and subsequently reopened.
No store accounts for more than 2% of the Company's revenues.
Christmas Season Stores -- In addition to the "Pic 'N' Save" and "Mac
Frugal's Bargains o Close-outs" stores which are open year-round, the Company
opened temporary retail locations during the Christmas season for the first time
in fiscal 1992 and again in fiscal 1993. The Christmas season stores were
designed to allow the Company to generate additional revenues and profits
through sales during the peak Christmas selling season while avoiding related
costs associated with maintaining such locations on a year-round basis to a
minimum.
The table below provides a state by state breakdown of the Company's
Christmas season store locations in operation at the conclusion of the Christmas
selling season for the two most recent fiscal years.
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
TOTAL NUMBER CHRISTMAS SEASON STORES AT DECEMBER 24,
1992-1993
<TABLE>
<CAPTION>
DECEMBER 24, CA AZ TX NV UT CO LA GA FL TOTAL
- - ------------- --- --- --- --- --- --- --- --- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993 105 13 12 4 11 4 5 5 9 168
1992 25 0 0 0 0 0 0 0 0 25
</TABLE>
2
<PAGE> 7
The Company has put future development of this concept on hold. After
assessing the performance of the Christmas season stores at the completion of
the season, the Company determined that it would be difficult to earn the same
or better pre-tax profit contributions as a percentage of sales from these
stores than it can earn from its year-round stores. This difficulty is due
partially to disappointing average store sales and the inability to get higher
gross margins for these stores than for the year-round stores. Additionally,
this business carries a higher risk profile than the year-round stores because
certain fixed costs are higher as a percentage of sales than for the year-round
stores, and inventory must be purchased before store sites are under contract.
EMPLOYEES
At January 30, 1994 the Company had approximately 6,868 employees. In
addition, 1,500 people were employed by the Christmas season stores at their
peak. Temporary store personnel are also employed during the Christmas holiday
season in the Company's year-round retail stores. Management believes its
employee relations are generally good.
COMPETITION
The Company faces competition for patronage of customers in varying
degrees from national, regional and local areas in which the Company's stores
are located. Many of these retail establishments offer merchandise similar to
that available from the Company, including close-out merchandise at discount
prices, and may have resources greater than those available to the Company.
However, unlike the Company's stores, most retail outlets, including discount
stores, primarily offer continuing lines of merchandise. The Company competes
with other retail establishments, including discount stores, by offering new
close-out merchandise at significant reductions from original retail prices.
During the past few years, there have been a number of off-price
retailers entering the retail consumer market. These retailers generally carry
fashion-oriented soft goods sold at higher price points than the soft goods sold
by the Company's stores and do not generally carry lines of close-out hard
goods. Recently, stores that sell all or substantially all of their merchandise
at a single price have entered the market selling close-out goods.
Competition for close-out merchandise has increased over the years.
The Company, however, has not experienced, and does not anticipate experiencing,
any difficulty in obtaining close-out merchandise in adequate volume and at
suitable prices in the future. The Company competes for quality close-out
merchandise primarily with wholesalers and other close-out retailers, some of
which are larger than the Company. Unlike most of these wholesalers, however,
the Company disposes of the merchandise through its own retail stores, which
specialize in close-out merchandise. The Company is thus able to assure a
supplier that its close-out merchandise will not compete in the supplier's
normal channels of distribution.
In addition to competing for customers and merchandise, the Company
also competes with a wide range of other entities to obtain suitable locations
for new year-round stores.
TRADEMARKS
The Company employs the servicemarks "Pic 'N' Save" and "Mac Frugal's
Bargains o Close-outs" in connection with its stores. The Company has registered
its servicemark "Mac Frugal's Bargains o Close-outs" with the U.S. Patent and
Trademark Office and the Company has common law rights in the Southern
California area to the servicemark "Pic 'N' Save". The Company does not believe
that loss of any of the Company's servicemarks would have a material adverse
impact upon the Company.
RESTRICTIONS ON IMPORTS
The Company's operations are subject to the customary risks of doing
business abroad, including fluctuation in the value of currencies, customs
duties and related fees, import controls and trade barriers (including quotas),
restrictions on the transfer of funds, work stoppages and, in certain parts of
the world, political instability. The Company believes that it has reduced these
risks by diversifying its offshore purchases among various countries and
factories. These factors have not had a material adverse impact upon the
Company's operations to date. Imports into the United States are also affected
by the cost of transportation, the imposition of import duties and increased
competition from greater production demands abroad. The countries from which the
Company's products are imported may, from time to time, impose new quotas,
duties, tariffs or other restrictions, or adjust presently prevailing quotas,
duty or tariff levels, which could affect the Company's operations and its
ability to import products at current or increased levels. The Company cannot
predict the likelihood or frequency of any such events occurring.
The Company's imported products are subject to United States customs
duties and, in the ordinary course of its business, the Company may, from time
to time, be subject to claims for duties and other charges. United States
customs duties currently are between 3.4% and 30.0% of the customs value on the
vast majority of products imported by the Company, as classified pursuant to the
Harmonized Tariff Schedule of the United States. All goods imported by the
Company are finished products.
The United States Trade Representative ("USTR") is required by the
Trade Act of 1974, as amended by the Trade and Tariff Act of 1984 and the
Omnibus Trade and Competitiveness Act of 1988 (the "Trade Act"), to submit an
annual National Trade Estimates Report on Foreign Trade Barriers (the "NTE
Report") identifying significant restrictions or barriers on United States
access to foreign markets. On March 3, 1994, the President reinstated, by
Executive Order, the "Super 301" provisions of the Trade Act. Relying on the NTE
Report, the USTR is required to report to Congress those trade barriers and
trade distorting practices and particular countries identified as priorities for
trade liberalization. The USTR is then required to initiate an investigation of
the "priority practices" of the "priority countries" thus identified. If
negotiations initiated under "Super 301" do
3
<PAGE> 8
not result in a satisfactory conclusion, the USTR is required to retaliate,
unless a waiver is granted under the Trade Act. In addition, the "Special 301"
provisions of the Trade Act require the USTR to identify countries that fail to
provide adequate protection of intellectual property rights. Relying on the same
NTE Report, the USTR identifies priority foreign countries to be targeted for
investigation under the "Special 301" provisions. Other countries may be
included on a "priority watch list" which requires close scrutiny but not
investigation. For those "priority countries" targeted for investigation, the
USTR is required to follow the same process of investigation, negotiation and
retaliation as used under the "Super 301" provisions. The Company is unable to
predict whether China will be designated a "priority country" for the purpose of
"Super 301."
In 1993, Hong Kong was not identified by the USTR as a priority
foreign country under Special 301, and was not placed on the priority watch
list. Although the People's Republic of China was not listed as a priority
country under Special 301, it was listed on the 1993 USTR priority watch list.
In addition, the President has conditioned renewal of the People's Republic of
China's most-favored-nation ("MFN") status on certain progress in the area of
human rights. The decision whether to extend China's MFN status for another year
must be taken on June 3, 1994. The Company is unable to predict whether the
United States will revoke the People's Republic of China's MFN status, but any
such revocation of MFN status would result in significantly higher tariffs on
Chinese imports. In addition, the Company is unable to predict whether the
People's Republic of China or any other country from which the Company imports
goods will be investigated under Super 301 or Special 301 provisions, whether
the United States will retaliate against the People's Republic of China or any
such other country, or whether any such retaliation would include products
imported by the Company or otherwise result in increases in the cost or
restrictions in the supply of products imported by the Company.
ITEM 2. PROPERTIES
RETAIL STORES
Permanent Stores -- The Company leases most of the buildings and land
that comprise its retail stores. At the end of fiscal 1993, the Company owned
the buildings (but not the underlying land) occupied by two stores, and owned
the buildings and land occupied by 47 other stores, one of which is a commercial
condominium, one of which is located at the Company's corporate office facility
in Dominguez, California, one of which is located at the Company's warehousing
facility in Rancho Cucamonga, California and one of which is temporarily closed
while undergoing either earthquake repair and reconstruction or relocation. The
balance of the buildings and land which comprised the Company's 237 operating
store locations at fiscal year end were leased.
The leases for the store premises vary as to their terms, rental
provisions, expiration dates, and the existence of renewal options. The number
of years remaining on leases for the Company's stores (excluding unexercised
options) range from less than one year to 23 years. The termination of any or
all of the leases due to expire within the next two years (without renewal
options) would not have a material adverse effect on the operations of the
Company. Most of the leases are fixed minimum rentals, and some provide for
additional rental based upon a percentage of total store sales in excess of
certain amounts. Most leases also require the Company to pay all or a portion of
the real estate taxes, insurance charges and maintenance expenses relating to
the leased premises. The Company generally does not maintain earthquake
insurance for its retail stores.
The Company acquires sites for new stores by a variety of methods,
including lease, purchase, assignment or sublease of existing facilities,
build-to-suit leases, or purchase and development of sites which may be owned by
the Company or sold by the Company under leaseback arrangements. In many cases,
the Company is able to lease or sublease existing buildings that have been
previously used for other purposes, such as for supermarkets, drug stores or
home improvement centers, which are suitable for the Company's needs at a rental
within the Company's guidelines and without the need for substantial
expenditures to convert the facilities to the Company's needs. In connection
with the opening of new stores, the Company generally makes capital investments
and incurs expenses (not including land and building or purchase of a leasehold
interest) of less than $850,000 per store. These costs consist of inventory,
fixtures and equipment, signs and pre-opening costs.
The Company's retail stores are located in concrete or masonry
buildings and are mostly furnished with inexpensive store fixtures. During
fiscal 1992, the Company installed point-of-sale and scanning equipment in all
of its stores pursuant to an equipment lease entered into in 1991. The equipment
lease is for 54 months with an option to extend the term and an option to buy
the equipment. Except for this leased equipment, the Company owns all of its
store fixtures and equipment.
The majority of the Company's stores are located in or adjacent to
shopping centers of various sizes and have adjacent parking facilities. The
stores generally offer air-conditioned shopping from 9:00 a.m. to 9:00 p.m.,
Monday through Saturday, and 10:00 a.m. to 7:00 p.m. on Sunday. Particular
location schedules may vary slightly.
Selling space in the Company's stores generally is between 17,000 and
23,000 square feet, depending on the particular location. Currently, the
smallest selling area in any one store location is approximately 4,427 square
feet; the largest selling area in any one store location is approximately 30,390
square feet. For the five-year period from January 1, 1989 through January 30,
1994, gross selling space increased from 3,412,367 square feet to 4,486,953
square feet. As of the end of fiscal 1993, aggregate
4
<PAGE> 9
retail selling space at the Company's 237 operating store locations and four
temporarily closed locations was categorized according to the following real
property arrangements:
<TABLE>
<CAPTION>
RETAIL
NUMBER OF SELLING SPACE
LOCATIONS (IN SQ. FT.)
---------- -------------
<S> <C> <C>
Operating Stores
----------------
Owned................................................................ 46 846,220
Leased............................................................... 189 3,522,381
Owned, Subject to Ground Lease....................................... 2 40,450
--- -------------
Total Operating...................................................... 237 4,409,051
--- -------------
Temporarily Closed Stores
-------------------------
Owned................................................................ 1 19,720
Leased............................................................... 3 58,182
--- -------------
Total Temporarily Closed............................................. 4 77,902
--- -------------
TOTAL................................................................ 241 4,486,953
--- -------------
--- -------------
</TABLE>
Christmas Season Stores -- The Company located its Christmas season
stores in both malls and strip centers. The size of these stores varied
depending on space available during the Christmas season but generally ranged
from 3,000 to 5,000 square feet. Because these stores were temporary, the
Company minimized its fixtures and leasehold improvement investment. Merchandise
remaining unsold at these locations after the Christmas season was transferred
to the Company's year-round stores for subsequent sale, or transferred to either
of the Company's distribution centers for subsequent distribution, depending on
the type of merchandise.
CORPORATE OFFICES AND WAREHOUSE FACILITIES
The Company owns its corporate offices, located at 2430 East Del Amo
Boulevard, Dominguez, California 90220-6306. Construction of the facility was
completed in November 1973, and comprises approximately 250,000 square feet of
ground floor space and 18,000 square feet of second floor office space.
Approximately 202,000 square feet of warehouse/distribution space (formerly used
by the Company) at this facility has been leased to an unaffiliated third party
and the remainder houses the Company's corporate offices of 38,000 square feet,
a Pic 'N' Save retail store and corporate warehousing space.
The Company also leases a 3,082 square foot office in New York City to
facilitate buying operations at that supply source. The Company expects to move
this New York office to another location in the City and is presently
negotiating for new space arrangements.
The Company owns a 90 acre parcel of land in Rancho Cucamonga,
California and operates a 1,431,000 square foot central warehousing and
distribution center on this location as well as a store containing 19,000 square
feet of retail selling space.
In 1988, the Company executed a Lease Agreement with the Industrial
Development Board of the City of New Orleans, Louisiana for the construction of
a warehouse and distribution facility. The lease provides for an initial term of
10 years, eight 10-year options to extend the term of the lease and an option to
buy the land. Rent is nominal. During fiscal 1991, the Company completed
construction of this 1,100,000 square feet facility which utilizes advanced
technology to conserve space and maximize efficiency. It was completed at a net
cost of $58,617,000 of which $32,233,000 was classified as building and
improvements and $26,384,000 was classified as fixtures and equipment. In
addition, $7,406,000 of interest expense was capitalized over the
three-year construction period.
The New Orleans distribution center was completed in 1991 with a
capacity to service approximately 200 year-round stores. The Company is
currently servicing 75 stores in the South and Southeastern United States from
the New Orleans distribution center. In the third quarter of fiscal 1992, the
Company wrote-down the net book value of the New Orleans distribution center
(warehouse and equipment) by $36,646,000 to reflect a permanent impairment in
its value to the Company. Ongoing under-utilization of the warehouse capacity
because of the Company's decision to initially concentrate future expansion
plans mainly in western markets as well as management's intention to investigate
a sale/leaseback of the facility necessitated a write-down to the Company's
recoverable cost. The recoverable cost was determined by fair market value
appraisals conducted by independent nationally recognized appraisers.
In October 1993, the Company sold all its interest in the New Orleans
distribution center (both real and personal) to TriNet Corporate Realty Trust,
Inc. (TriNet) for $23,463,000, the net book value of the interest sold. TriNet
is a NYSE listed real estate investment trust. Concurrently with the sale to
TriNet, the Company leased the fully equipped distribution center from TriNet.
The initial term expires October 31, 2009. The lease contains two options to
renew, a two year option followed by a ten year option.
The Company leased approximately 75,000 square feet of the New Orleans
distribution center to an unaffiliated third party during fiscal 1991. The lease
expired in January 1994. The Company leased an additional 33,340 square feet to
an unaffiliated third party during fiscal 1992, and this was expanded to 40,940
square feet in fiscal 1993. That lease expires in 1997.
The Company maintains earthquake insurance for its corporate office
and warehouse facilities that it believes is adequate.
5
<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted for a vote of security holders during
the fourth quarter of the fiscal year ended January 30, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<S> <C> <C>
Leonard S. Williams 56 President and Chief Executive Officer since November 1990; Consultant 1989-1990;
Chief Executive Officer 1987-1989, Lion-Nathan Ltd. (retail).
Philip L. Carter 45 Executive Vice President, Chief Financial Officer since August 1993, Senior Vice
President, Chief Financial Officer since October 1991; Vice President Finance and
Distribution since 1991, Chief Executive Officer San Remo (Australia) 1987-1990.
Mark J. Miller 42 Executive Vice President, General Merchandise Manager since September 1992; Vice
President of Merchandising/General Merchandise Manager 1991-1992, The Disney
Store, Inc.; Vice President, Merchandise Manager, Hardlines 1988-1991, Pic 'N'
Save Corporation.
Richard N. Lodwick 56 Senior Vice President, Stores since February 1991; Regional Vice President,
Stores 1983-1991, Mervyn's Department Store (retail).
Patricia J. Wehner 43 Senior Vice President, Real Estate and Construction since August 1993, Vice
President, Real Estate and Construction since June 1991; Senior Vice President,
1988-1991, MAS Marketing (retail consulting).
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company commenced trading of its Common Stock on the New York
Stock Exchange effective June 11, 1992, under the symbol MFI. The Company's
Common Stock was traded in the over-the-counter market under the symbol PICN and
was reported on the NASDAQ National Market System until June 10, 1992. The
following table shows the high and low sales prices as reported on the New York
Stock Exchange, and the high and low bids on the NASDAQ National Market System,
as appropriate, for the Company's Common Stock.
<TABLE>
<CAPTION>
FISCAL YEAR QUARTER HIGH LOW
- - ----------- --------------- ------ ------
<C> <S> <C> <C>
1992 First Quarter $22.75 $16.00
Second Quarter 18.00 9.38
Third Quarter 13.38 9.63
Fourth Quarter 16.88 11.75
1993 First Quarter 18.75 13.88
Second Quarter 20.13 13.13
Third Quarter 16.75 13.25
Fourth Quarter 20.00 13.13
</TABLE>
At April 22, 1994, there were 1,106 stockholders of record.
The closing sale price of the Company's Common Stock on April 22, 1994
was $15.50 per share.
DIVIDENDS
The Company has never declared or paid cash dividends on its capital
stock. The Company currently intends to retain any earnings for use in its
business and does not anticipate paying any cash dividends in the foreseeable
future. Payment of dividends is within the discretion of the Company's Board of
Directors and will depend upon, among other factors, the Company's earnings,
financial condition and capital requirements.
6
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT FOR STORE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 2, FEBRUARY 3, DECEMBER 31,
1994 1993 1992 1991 1989
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales....................................... $627,063 $540,295 $542,578 $529,115 $475,210
Operating Income................................ $ 57,667 $ 24,268 $ 63,163 $ 37,056 $ 55,395
Earnings Before Income Taxes.................... $ 52,875 $ 17,408 $ 54,877 $ 27,682 $ 50,872
Net Earnings.................................... $ 31,937 $ 11,348 $ 34,215 $ 17,245 $ 30,876
Net Earnings per Common Share................... $ 1.07 $ 0.37 $ 1.12 $ 0.52 $ 0.87
Net Earnings as a Percent of Sales.............. 5.1% 2.1% 6.3% 3.3% 6.5%
Average Shares Outstanding...................... 29,931 30,295(1) 30,649(1) 33,480(1) 35,571(1)
Cash Dividends per Common Stock................. None None None None None
At Year End:
Total Assets.................................... $358,133 $371,757 $396,845 $344,380 $305,696
Long-Term Debt.................................. $ 3,869 $ 54,475 $ 81,567 $ 68,164 $ 14,141
Stockholders' Equity............................ $257,350 $224,447 $226,038 $190,405 $220,774
Working Capital................................. $108,323 $105,834 $104,422 $ 54,439 $ 63,239
Current Ratio................................... 2.2 2.3 2.3 1.7 2.0
Number of Stores (End of Year).................. 237 205 193 191 190
Number of Stores Opened......................... 39 12 3 20 35
Number of Stores Closed......................... 7 0 1 19 3
Sales Square Footage............................ 4,409(2) 3,869(2) 3,607 3,568 3,412
Net Sales Per Avg. Sq. Footage.................. 144(3) $ 143(3) $ 151 $ 152 $ 152
</TABLE>
- - ---------------
(1) Adjusted for the effect of shares issued pursuant to two stock purchase
agreements in 1988 assumed outstanding under the Treasury stock method.
(2) Excludes sales square footage of four stores temporarily closed on January
17, 1994 due to the Southern California earthquake for the year ended
January 30, 1994 and excludes sales square footage related to seasonal
Christmas stores.
(3) Excludes space and results related to seasonal Christmas stores but includes
sales and sales square footage of the four stores temporarily closed on
January 17, 1994 for the year ended January 30, 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL YEAR ENDED JANUARY 30, 1994 ("FISCAL 1993") COMPARED TO FISCAL YEAR ENDED
JANUARY 31, 1993 ("FISCAL 1992")
Net sales for fiscal 1993 increased $86,768,000 or 16.1% from fiscal
1992. This increase was the combined result of the opening of 36 net new stores
during the year and the full year operation of the twelve new stores opened in
the prior year, the operation of 168 seasonal Christmas stores during the third
and fourth quarters compared to 25 seasonal Christmas stores operating during
the same period of the prior year and a 0.3% increase in comparable store sales.
The seasonal Christmas stores accounted for 4.8 percentage points of the 16.1%
net sales increase. The 0.3% comparable store sales growth achieved during the
year was adversely impacted by the 2.5% decline in comparable California store
sales since 64.1% of the Company's sales from year-round stores occurred within
California. This decrease resulted from a combination of the continuing poor
economic climate in California as well as a sales transfer effect experienced in
some of those stores as a result of the Company's expansion strategy of filling
in selected Southern California markets.
Gross profit as a percentage of sales was 46.4% in fiscal 1993
compared to 47.9% in fiscal 1992. The decrease was mostly the result of a lower
initial markup on beginning store inventory in the current year as a result of
higher prices paid to purchase more brandname items in the prior year and was
partially offset by lower markdowns taken during the year. The remainder of the
decrease resulted from damaged inventory as a result of the January 1994
earthquake. Inventory shrinkage (shrinkage being the difference between the
physical inventory on hand at year end and the calculated value of inventory at
year end as determined by the retail inventory method) was 3.1% of sales in
fiscal 1993 compared to 3.2% of sales in fiscal 1992. The gross profit
percentage earned by the seasonal Christmas stores was about the same in fiscal
1993 and higher in fiscal 1992 than that earned by year-round stores during the
period of time both types of stores were open. However, the gross profit
percentage in the seasonal Christmas stores did not significantly affect the
overall gross margin of the Company due to the small percentage of overall sales
contributed by these stores in both years.
Operating expenses consist of store, warehouse and administrative
expenses. In fiscal 1993 the store expenses component of operating expenses
includes $1,179,000 of earthquake expenses from the January 17, 1994 earthquake
in Southern California. Fiscal 1992 operating expenses include a separate
$36,646,000 warehouse write-down expense which is discussed below. Operating
7
<PAGE> 12
expenses were 37.2% of sales in fiscal 1993 compared to 43.4% of sales in fiscal
1992. Operating expenses excluding the earthquake expenses and warehouse
write-down expense rose to 37.0% in fiscal 1993 from 36.6% in 1992. Store
expenses increased due to an addition to the Company's insurance reserves for
certain prior year workers' compensation and general liability claims as a
result of increasing costs to settle these claims; a full year of lease payments
for point-of-sale equipment this year compared to a partial year's payments last
year; and grew as a percentage of sales because fixed occupancy costs and
payroll expenses associated with the seasonal Christmas stores were higher as a
percentage of sales than the same expenses for the year-round stores. Partially
offsetting these increases were lower advertising expenses in the current year.
Warehouse expenses fell as a percentage of sales primarily as a result of lower
depreciation expense from the New Orleans distribution center resulting from its
write-down to fair market value last year and the subsequent sale of the
facility this year. Except for a slight increase in administrative expenses to
support the temporary Christmas stores, administrative expenses as a percentage
of sales remained about constant.
Net interest expense decreased $2,068,000 or 30.1% from fiscal 1992 to
fiscal 1993. Gross interest expense decreased due to a combination of lower debt
levels, lower interest rates and slower amortization of the remaining fees
associated with obtaining the 1991 Credit Agreement due to the extended debt
maturity of such Credit Agreement as it was amended and restated in 1993.
Interest income decreased because fiscal 1992 contained recognition of income
upon collection of a stock purchase receivable.
The Company's effective tax rate rose from 34.8% in fiscal 1992 to
39.6% in fiscal 1993. The higher rate in fiscal 1993 was due partially to a 1%
increase in the enacted federal income tax rate as well as a smaller favorable
impact on the effective tax rate from the targeted jobs tax credit which
resulted from both a lower tax credit and higher pre-tax income in fiscal 1993
than in fiscal 1992. Additionally, the fiscal 1992 effective rate was benefitted
from a favorable state income tax audit determination.
The Company adopted the Financial Accounting Standards Board Statement
No. 109 "Accounting for Income Taxes" (SFAS 109) on the first day of fiscal 1993
with no significant income statement impact. This statement supersedes APB
opinion No. 11. SFAS 109 requires a change from the income to the liability
method of computing deferred income taxes whereby deferred income taxes result
from temporary differences between the tax bases of assets and liabilities and
their reported amounts in the financial statements.
The Company believes that a meaningful assessment of its net earnings
performance requires making adjustments for certain unusual items contained in
the fiscal 1993 and 1992 results. Net earnings for fiscal 1993 excluding
earthquake related expenses would have been $33,776,000 or $1.13 per share as
compared to net earnings for fiscal 1992 excluding the warehouse write-down
expense of $35,241,000 or $1.16 per share.
FISCAL YEAR ENDED JANUARY 31, 1993 COMPARED TO FISCAL YEAR ENDED FEBRUARY 2,
1992 ("FISCAL 1991")
Net sales for fiscal 1992 decreased $2,283,000 or 0.4% from fiscal
1991. The decline resulted from a decrease in comparable store sales of 3.9%
that was partially offset by the addition of twelve new year-round stores and 25
seasonal Christmas stores which were opened, operated and closed during the
fourth quarter. Without these seasonal stores, total sales would have declined
by 1.2% from fiscal 1991. The decrease in comparable store sales of 3.9% was
largely due to a 3.3% decline in comparable sales from California stores since
63.1% of fiscal 1992 sales from year-round stores were generated within
California. This decrease was caused for similar reasons as explained for fiscal
1993 compared to fiscal 1992.
Gross profit, as a percentage of sales was 47.9% in fiscal 1992
compared to 48.8% in fiscal 1991. Reductions in inventory shrinkage from 4.8% of
sales in fiscal 1991 to 3.2% of sales in fiscal 1992 at the Company's retail
stores did not fully offset higher markdowns taken in the second half of fiscal
1992 to attract additional customer traffic and to sell off aged inventory.
Further, initial markups were reduced during portions of the year to purchase
more brandname items. Higher gross margin percentages in seasonal stores than in
year-round stores did not affect the Company's total gross margin percentage.
Operating expenses were 43.4% of sales in fiscal 1992 compared to
37.1% in fiscal 1991. Operating expenses, excluding the warehouse write-down
expense, declined to 36.6% in fiscal 1992. Store and warehouse expenses rose as
a percent of sales primarily as a result of increased advertising expense and
additional fixed costs associated with operating the New Orleans distribution
center for a full year in fiscal 1992, compared to four months in fiscal 1991.
Administrative expenses were lower as a percent of sales due largely to
reductions in general insurance expenses, professional fees and bonus expense.
The $36,646,000 warehouse write-down expense reduced the net book
value of the New Orleans distribution center (warehouse and equipment). It
reflected the permanent impairment in its value to the Company. Construction
commenced on this facility in 1988 when prior management contemplated a major
store expansion program in the eastern United States at that time. Ongoing
under-utilization of the warehouse capacity was expected because of the
Company's decision to initially concentrate future expansion plans mainly in
western markets as well as management's intention in the fall of 1992 to
investigate a sale/leaseback of the facility. A sale/leaseback was completed in
October 1993 and is discussed in the section on Liquidity and Capital Resources.
Net interest expense decreased $1,426,000 or 17.2% from fiscal 1991 to
fiscal 1992. Gross interest expense decreased in the current fiscal year due to
both lower debt levels and lower interest rates. Additionally, fiscal 1992 did
not have the benefit from capitalized interest present in fiscal 1991 as
construction on the New Orleans distribution center was completed in 1991.
Interest income rose as a result of the Company's recognizing income upon
collection of a stock purchase receivable.
The Company's effective tax rate was 34.8% and 37.7% in fiscal 1992
and 1991, respectively. The lower rate in fiscal 1992 resulted from a
combination of a favorable state income tax audit determination and greater
impact of the federal targeted jobs tax credit on the effective tax rate due to
the lower earnings before income taxes that resulted from the warehouse
write-down expense. Income taxes were provided for using the income method in
both fiscal 1992 and 1991.
8
<PAGE> 13
RETURN ON ASSETS AND STOCKHOLDERS' EQUITY
Net return on average assets and net return on average stockholders'
equity for the past three years are as follows:
<TABLE>
<CAPTION>
NET RETURN
ON AVERAGE
NET RETURN ON STOCKHOLDERS'
YEAR AVERAGE ASSETS EQUITY
---- --------------- --------------
<S> <C> <C>
Fiscal 1993..................................................... 8.8% 13.3%
Fiscal 1992..................................................... 3.0% 5.0%
Fiscal 1991..................................................... 9.2% 16.4%
</TABLE>
As shown above, net return on average assets and net return on average
stockholders' equity were 8.8% and 13.3%, respectively, for fiscal 1993.
Excluding the earthquake expenses, net return on average assets would have been
9.2% and net return on average stockholders' equity would have been 14.0% for
fiscal 1993.
Net return on average assets increased in fiscal 1993 compared to
fiscal 1992 due to both an increase in net income over the prior year and a
decrease in average assets. The decrease in average assets was primarily the
result of selling the New Orleans distribution center and using the proceeds to
reduce debt.
Net return on average assets and net return on average stockholders'
equity were 3.0% and 5.0%, respectively, for fiscal 1992. Excluding the
warehouse write-down expense, net return on average assets would have been 8.8%
and net return on average stockholders' equity would have been 14.9% for fiscal
1992.
Net return on average assets decreased in fiscal 1992 compared to
fiscal 1991 due to a relatively small increase in net income over the prior year
(excluding the warehouse write-down expense) coupled with an 8.6% increase in
average asset base (excluding the warehouse write-down expense). The small
increase in net income for fiscal 1992 over fiscal 1991 is explained in the
previous section on Results of Operations. The increase in average assets in
fiscal 1992 versus the previous year was due primarily to increased merchandise
inventories necessary to support the opening of twelve new stores in fiscal
1992.
Net return on average stockholders' equity increased in fiscal 1993
over fiscal 1992 due to the increase in net earnings as explained in the
previous section on Results of Operations.
Net return on average stockholders' equity decreased in fiscal 1992
compared to fiscal 1991 due to the warehouse write-down expense incurred in
fiscal 1992.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business generated substantial cash flows from
operations which have been sufficient to provide for all of its fiscal 1993 and
1992 capital expenditures, as well as meet all of its current liabilities in
both years. During fiscal 1993, the Company sold excess property from two of its
stores and applied the proceeds to open two new stores. Additionally, the
Company sold and leased back its New Orleans distribution center as discussed in
more detail later in this section. The Company's demand for borrowed funds is
determined, in part, by the seasonality of its inventory investment relative to
the seasonality of its sales, as well as the magnitude and timing of its capital
expenditure programs.
Working Capital was $108,323,000 at January 30, 1994 compared to
$105,834,000 at January 31, 1993. Inventory levels increased to service the
Company's store growth and cash was used to repay the term loan outstanding at
the beginning of the year. The Company's usual year end income tax payable was
eliminated as a result of selling the New Orleans distribution center in October
1993 and recognizing as an ordinary loss for income tax purposes the impairment
in value provided for in the financial statements in fiscal 1992. The sales tax
payable increased as a result of waiting until after year end to make the
payment of California sales tax collected during December.
Net cash flows from operating activities were $23,816,000 in fiscal
1993 and $25,225,000 in fiscal 1992. Part of these funds were used to acquire
ownership or leasehold interests for selected stores, to construct leasehold
improvements and acquire fixtures and equipment for the Company's new year-round
stores, 39 in fiscal 1993 and 12 in fiscal 1992, and to renovate some of the
Company's existing retail locations. The total cost to acquire, improve and
fixturize the Company's 39 fiscal 1993 new and relocation sites was
approximately $24,000,000. Of this amount, $2,607,000 was funded from the sale
of excess land at two stores. The average cost to improve and fixturize each of
these 39 sites was approximately $435,000. The cost to acquire, improve and
fixturize the twelve new sites opened in fiscal 1992 was $4,884,000 with the
average improvement and fixturization costs for each of those twelve stores
being approximately $357,000.
During fiscal 1993, the Company sold all its interest in the New
Orleans distribution center (both real and personal) for $23,463,000, the net
book value of the interests sold. The net proceeds, after transaction costs,
were used to repay term debt. The Company immediately leased back the fully
equipped distribution center. This transaction significantly reduced bank debt
and will improve the liquidity of the Company in fiscal 1994 since elimination
of the federal and state income tax payments usually made by the Company on the
original due dates of its income tax returns as explained previously in this
section will exceed the annual lease payments. Beyond fiscal 1994, the lease
creates a demand on the liquidity of the Company by the amount of the annual
lease payments which is expected to be met from operating income.
In fiscal 1993 and 1992, the Company repurchased 55,100 and 831,500
shares of its Common Stock, respectively, in open market transactions at an
average cost of $15.02 and $10.38 per share, respectively. The fiscal 1993
repurchases were part of a
9
<PAGE> 14
1,500,000 share repurchase program authorized during the fourth quarter of
fiscal 1993 by the Board of Directors. Repurchases under the 1,500,000 share
program will continue during fiscal 1994 if and when market prices warrant such
repurchases in the Board of Directors' opinion. Finally, in fiscal 1992 the
Company repurchased 250,000 shares of its Common Stock in a private transaction
at $21.50 per share, which was less than the fair market value on the date the
agreement was reached and cancelled certain option rights.
In fiscal 1994, the Company plans to open approximately 40 new stores
and expects to continue at this level of expansion in the future. The cost to
improve and fixturize these stores is expected to be similar to the $435,000 per
store spent during fiscal 1993. While the Company prefers to lease new store
locations, it is prepared to acquire ownership or leasehold interests when
necessary to acquire desirable locations. The Company cannot predict all of the
fiscal 1994 store locations that might require purchase of ownership or
leasehold interests. The cost of acquiring leasehold interests generally range
between $200,000 and $1,000,000 depending upon the terms of the underlying
lease, but the cost of acquiring an ownership interest is unique to the property
acquired. The fiscal 1994 capital expenditure program is expected to be financed
with internally generated funds and a portion of the inventories for these
stores will be financed with the Company's existing revolving lines of credit.
The Company opened 168 seasonal Christmas stores in fiscal 1993 and 25
in fiscal 1992. Capital expenditures for these stores approximated $114,000 in
fiscal 1993 and nothing in fiscal 1992. Future development of this concept has
been placed on hold because the Company believes it would be difficult to earn
greater pre-tax profit contributions as a percentage of sales from these stores
than it can from the year-round stores. There are no future liquidity needs as
the leases have all expired and staffing requirements were met with seasonal
employees.
The Company believes its present committed revolving line of credit is
adequate to meet any seasonal or temporary liquidity needs that cannot be met
with cash flows from operating activities. At January 30, 1994, $109,891,000 was
available to be borrowed under the committed revolving line of credit. The
Company uses uncommitted lines of credit, when available, to reduce its costs of
borrowing. There was $34,900,000 of outstanding revolving debt at January 30,
1994 of which $22,000,000 and $12,900,000 was outstanding under the committed
and uncommitted lines of credit, respectively, and no revolving debt was
outstanding at January 31, 1993. The $76,667,000 of term debt outstanding at
January 31, 1993 was paid off during fiscal 1993. See Note 2 to Consolidated
Financial Statements.
The Company's current ratio was 2.21 and 2.30 at January 30, 1994 and
January 31, 1993, respectively. The total debt to equity ratio was reduced by
20.9 percentage points from 36.0% at the end of fiscal 1992 to 15.1% at the end
of fiscal 1993.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Except for the following Selected Quarterly Data, the financial
statements and related financial information required to be filed hereunder are
indexed on Page F-1 of this report and are incorporated herein by reference.
SELECTED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET EARNINGS
NET (LOSS)
NET GROSS EARNINGS PER COMMON
SALES PROFIT (LOSS) SHARE
-------- -------- -------- ------------
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
1993
Quarter Ended May 2.......................................... $126,697 $ 58,564 $ 5,887 $ 0.20
August 1................................................... 116,081 54,104 2,053 0.07
October 31................................................. 140,581 65,712 3,598 0.12
January 30, 1994........................................... 243,704 112,755 20,399 0.68(1)
-------- -------- -------- ---------
$627,063 $291,135 $ 31,937 $ 1.07
-------- -------- -------- ---------
-------- -------- -------- ---------
1992
Quarter Ended May 3.......................................... $114,098 $ 55,970 $ 5,413 $ 0.18
August 2................................................... 108,783 51,922 2,711 0.09
November 1................................................. 119,976 56,857 (19,927) (0.66)(2)
January 31, 1993........................................... 197,438 94,042 23,151 0.78
-------- -------- -------- ---------
$540,295 $258,791 $ 11,348 $ 0.37(3)
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
- - ---------------
(1) A pre-tax charge of $3,046 for operating expenses and inventory write-off
related to the January 17, 1994 Southern California earthquake is included
in the quarter ended January 30, 1994. The effect of this charge was to
reduce the quarterly net earnings per share by $0.06.
(2) The loss for the quarter ended November 1, 1992 includes warehouse
write-down expense of $36,646 which represents the difference between the
net book value and the estimated net realizable value of the New Orleans
distribution center due to the Company's continued and planned
under-utilization of the facility. Net earnings, excluding this warehouse
write-down expense, would have been $2,977 or $0.10 per share.
(3) The Company repurchased 831,500 shares of its common stock in the third
quarter of fiscal 1992. This resulted in a dilution of the quarterly
weighted average shares outstanding and, as such, the sum of the quarterly
earnings per share exceeds annual earnings per share by $0.02.
10
<PAGE> 15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) to Form 10-K, the information
required by Items 10-13 of Part III of Form 10-K is incorporated herein by
reference from the Company's definitive proxy materials to be filed with the
Securities and Exchange Commission within 120 days after the close of the
Company's most recent fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS. Reference is made to the Index to Financial
Statements and Schedules of the Company on page F-1 of this Annual
Report on Form 10-K.
(a)(2) FINANCIAL STATEMENT SCHEDULES. Reference is made to the Index to
Financial Statements and Schedules of the Company on page F-1 of this
Annual Report on Form 10-K.
(a)(3) EXHIBITS. The following documents are exhibits to this Annual Report on
Form 10-K.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation of the Company, as amended, filed as Exhibit 6.1 to the
Company's Registration Statement on Form 8-A dated May 22, 1992 and incorporated herein by
this reference.
3.2 By-Laws of the Company, as amended, filed as Exhibit 6.2 to the Company's Registration
Statement on Form 8-A dated May 22, 1992 and incorporated herein by this reference.
10.1 Incentive Stock Option Plan filed as Exhibit A to the Company's definitive Proxy Statement
for 1982 and incorporated herein by this reference.
10.2 Amendment to Incentive Stock Option Plan filed as Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 2, 1992 and incorporated herein by
this reference.
10.3 Common Stock Incentive Plan filed as Appendix C to the Company's definitive Proxy Statement
for 1979 and incorporated herein by this reference.
10.4 Amendment to the Common Stock Incentive Plan filed as Exhibit 10.3(3) to the Company's
Annual Report on Form 10-K for fiscal year ended December 31, 1982 and incorporated herein
by this reference.
10.5 Amendment to the Common Stock Incentive Plan filed as Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 2, 1992 and incorporated herein by
this reference.
10.6 Non-Qualified Stock Option Agreement dated December 26, 1985 filed as Exhibit 10.3(3) to the
Company's Annual Report on Form 10-K for fiscal year ended December 31, 1985 and
incorporated herein by this reference.
10.7 Form of Amended Stock Option Agreement used in connection with the Incentive Stock Option
Plan filed as Exhibit 10.6(1) to the Company's Annual Report on Form 10-K for fiscal year
ended December 31, 1989 and transition period ended January 28, 1990 and incorporated herein
by this reference.
10.8 Form of Restricted Stock Agreement used in connection with the Incentive Stock Option Plan
filed as Exhibit 10.6(2) to the Company's Annual Report on Form 10-K for fiscal year ended
December 31, 1989 and transition period ended January 28, 1990 and incorporated herein by
this reference.
10.9 1990 Employee Stock Incentive Plan filed as Annex B to the Company's definitive Proxy
Statement for the 1990 Annual Meeting of Stockholders and incorporated herein by this
reference.
10.10 Amendments No. 1 and No. 2 to 1990 Employee Stock Incentive Plan filed as Exhibit 10.10 to
the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 1992 and
incorporated herein by this reference.
10.11 Form of Stock Option Agreement used in connection with the 1990 Employee Stock Incentive
Plan for options subject to staggered vesting filed as Exhibit 10.8 to the Company's Annual
Report on Form 10-K for fiscal year ended February 3, 1991 and incorporated herein by this
reference.
</TABLE>
11
<PAGE> 16
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------------------------
<S> <C>
10.12 Form of Stock Option Agreement used in connection with the 1990 Employee Stock Incentive
Plan for immediately exercisable options filed as Exhibit 10.9 to the Company's Annual
Report on Form 10-K for fiscal year ended February 3, 1991 and incorporated herein by this
reference.
10.13 Form of Restricted Stock Agreement used in connection with the 1990 Employee Stock Incentive
Plan filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for fiscal year
ended February 3, 1991 and incorporated herein by this reference.
10.14 Stock Option Agreement dated December 6, 1990 between the Company and Peter S. Willmott
filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for fiscal year ended
February 3, 1991 and incorporated herein by this reference.
10.15 Stock Option Plan for Non-Employee Directors filed as Annex B to the Company's definitive
Proxy Statement for the Annual Meeting of Stockholders held in 1992 and incorporated herein
by this reference.
10.16 Employment Agreement dated November 12, 1990 between the Company and Leonard S. Williams
filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for fiscal year ended
February 3, 1991 and incorporated herein by this reference.
10.17 Amendment No. 1 to Employment Agreement dated November 12, 1990 between the Company and
Leonard S. Williams dated as of February 3, 1992 filed as Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 2, 1992 and incorporated
herein by this reference.
10.18 Amendment No. 2 to Employment Agreement between the Company and Leonard S. Williams dated as
of January 31, 1994.
10.19 Employment Agreement between the Company and Richard N. Lodwick dated as of January 31,
1994
10.20 Employment Agreement dated as of September 25, 1992 between the Company and Mark J. Miller
filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for fiscal year ended
January 31, 1993 and incorporated herein by this reference.
10.21 Amendment No. 1 to the Employment Agreement between the Company and Mark J. Miller dated as
of January 31, 1994.
10.22 Promissory Note of Mark J. Miller dated September 25, 1992 in favor of the Company in the
principal amount of $30,000 filed as Exhibit 10.22 to the Company's Annual Report on Form
10-K for fiscal year ended January 31, 1993 and incorporated herein by this reference.
10.23 Employment Agreement dated as of January 31, 1994 between the Company and Philip L. Carter.
10.24 Employment Agreement dated as of August 4, 1993 between the Company and Patricia J. Wehner.
10.25 Lease dated August 1, 1988 between the Company, the City of New Orleans, State of Louisiana
Inc., and the City of New Orleans, Louisiana Industrial Development Board re New Orleans
Distribution Center filed as Exhibit 10.5(1) to the Company's Annual Report on Form 10-K for
fiscal year ended January 1, 1989 and incorporated herein by this reference.
10.26 Amended and Restated Credit Agreement dated as of October 5, 1993 among the Company, West
Coast Liquidators, Inc., PNS Stores, Inc., the lenders listed therein and Bank of America
National Trust and Savings Association, as Administrative Agent, and Continental Bank, as
Co-Agent.
10.27 Lease dated as of September 25, 1993 between TriNet Essential Facilities X, Inc. and West
Coast Liquidators, Inc.
10.28 Settlement Agreement dated August 9, 1990 among the Company, Batchelder Co., DHB Partners,
L.P., David H. Batchelder, Batchelder & Partners, Inc. and Girard Partners, L.P. filed as
Exhibit 10.25 to the Company's Annual Report on Form 10-K for the fiscal year ended February
3, 1991 and incorporated herein by this reference.
10.29 Master Lease dated December 27, 1991 between the Company and Comdisco, Inc. filed as Exhibit
10.32 to the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 1992
and incorporated herein by this reference.
22.1 Subsidiaries of Company.
24.1 Consent of Independent Auditors.
</TABLE>
(b) The Company did not file any reports on Form 8-K with the Securities and
Exchange Commission during the quarter ended January 30, 1994.
(c) Copies of Exhibits 10.18, 10.19, 10.21, 10.23, 10.24, 10.26, 10.27, 22.1
and 24.1 are attached hereto. Reference is made to the Exhibit Index for an
indication of the availability of other exhibits identified at Item
14(a)(3) above.
(d) Not applicable.
12
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 29, 1994
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
By: /s/ LEONARD S. WILLIAMS
----------------------------------------
Leonard S. Williams
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of this
registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C>
April 29, 1994 /s/ LEONARD S. WILLIAMS
----------------------------------------
Leonard S. Williams
President, Chief Executive Officer and Director
(Principal Executive Officer)
April 29, 1994 /s/ PHILIP L. CARTER
----------------------------------------
Philip L. Carter
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting
Officer)
April 29, 1994 /s/ PETER S. WILLMOTT
----------------------------------------
Peter S. Willmott
Chairman of the Board
April 29, 1994 /s/ DAVID H. BATCHELDER
----------------------------------------
David H. Batchelder
Director
April 29, 1994 /s/ BRUCE E. KARATZ
----------------------------------------
Bruce E. Karatz
Director
April 29, 1994 /s/ ANTHONY LUISO
----------------------------------------
Anthony Luiso
Director
April 29, 1994 /s/ RONALD P. SPOGLI
----------------------------------------
Ronald P. Spogli
Director
April 29, 1994 /s/ BILL M. THOMAS
----------------------------------------
Bill M. Thomas
Director
April 29, 1994 /s/ JAMES J. ZEHENTBAUER
----------------------------------------
James J. Zehentbauer
Director
</TABLE>
<PAGE> 18
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 19
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report........................................................................... F-2
Consolidated balance sheets -- January 30, 1994, and January 31, 1993.................................. F-3
Consolidated statements of earnings -- years ended January 30, 1994, January 31, 1993, and February 2,
1992................................................................................................. F-4
Consolidated statements of stockholders' equity -- years ended January 30, 1994, January 31, 1993, and
February 2, 1992..................................................................................... F-5
Consolidated statements of cash flows -- years ended January 30, 1994, January 31, 1993, and February
2, 1992.............................................................................................. F-6
Notes to consolidated financial statements............................................................. F-7
Schedule II -- Amounts Receivable From Employees Other than Related Parties............................ F-13
Schedule V -- Property, Equipment and Improvements..................................................... F-14
Schedule VI -- Accumulated Depreciation and Amortization of Property, Equipment and Improvements....... F-15
Schedule IX -- Short-Term Borrowings................................................................... F-16
Schedule X -- Supplementary Income Statement Information............................................... F-17
</TABLE>
- - ---------------
* Schedules other than those listed above have been omitted because they are not
applicable or because the required information is shown in the consolidated
financial statements or notes to consolidated financial statements.
F-1
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders of
Mac Frugal's Bargains o Close-outs Inc.
Dominguez, California
We have audited the accompanying consolidated balance sheets of Mac
Frugal's Bargains o Close-outs Inc. and subsidiaries as of January 30, 1994 and
January 31, 1993 and the related consolidated statements of earnings,
stockholders' equity and cash flows for the years ended January 30, 1994,
January 31, 1993 and February 2, 1992. Our audits also included the financial
statement schedules listed in the Index at Item 14(a)(2). These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Mac
Frugal's Bargains o Close-outs Inc. and subsidiaries at January 30, 1994 and
January 31, 1993 and the results of their operations and their cash flows for
the years ended January 30, 1994, January 31, 1993 and February 2, 1992, in
conformity with generally accepted accounting principles. Also, in our opinion,
the financial statement schedules referred to above, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
As discussed in Note 1 to the financial statements, the Company
changed its method of accounting for income taxes in 1993.
DELOITTE & TOUCHE
Los Angeles, California
March 15, 1994
F-2
<PAGE> 21
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT PAR VALUE)
ASSETS
<TABLE>
<CAPTION>
JANUARY 30, 1994 JANUARY 31, 1993
---------------- ----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.................................................. $ 1,015 $ 21,820
Merchandise inventories.................................................... 181,755 147,575
Other currents assets...................................................... 15,114 18,111
---------------- ----------------
Total current assets.................................................... 197,884 187,506
Property, Equipment and Improvements (Notes 5, 10 and 12):
Land....................................................................... 27,109 25,452
Building and improvements.................................................. 71,784 86,214
Automobiles and trucks..................................................... 2,778 2,821
Furniture, fixtures and equipment.......................................... 75,797 77,762
Leasehold improvements..................................................... 64,843 54,157
Construction in progress................................................... 1,137 167
---------------- ----------------
243,448 246,573
Less: Accumulated depreciation and amortization............................ (89,628) (81,780)
---------------- ----------------
153,820 164,793
Deferred Income Tax Asset (Note 4)......................................... 1,252 12,753
Deferred Financing Costs and Other Assets (Note 2)......................... 5,177 6,705
---------------- ----------------
Total Assets....................................................... $358,133 $371,757
---------------- ----------------
---------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Loan payable to bank (Note 2)................................................ $ 34,900 $ --
Current portion of long-term debt (Notes 2 and 5)............................ 97 26,420
Accounts payable............................................................. 13,444 10,572
Accrued expenses (Note 3).................................................... 31,726 27,772
Income taxes payable (Note 4)................................................ -- 14,717
Sales tax payable............................................................ 9,394 2,191
---------------- ----------------
Total current liabilities............................................... 89,561 81,672
Long-Term Debt (Notes 2 and 5)............................................... 3,869 54,475
Deferred Income Taxes (Note 4)............................................... 7,353 11,163
Commitments (Notes 2, 9 and 11)
Stockholders' Equity (Notes 2, 6 and 7):
Preferred stock, $1 par value; authorized, 500 shares; issued, none
Common stock, $.02778 par value; authorized, 100,000 shares; issued 29,727
shares (1993) and 30,423 shares (1992)..................................... 825 845
Additional paid-in capital................................................... 1,319 62
Retained earnings............................................................ 256,033 232,170
---------------- ----------------
258,177 233,077
Less: Treasury stock, at cost, 55 shares (1993) and 832 shares (1992)........ (827) (8,630)
---------------- ----------------
Total Stockholders' Equity.............................................. 257,350 224,447
---------------- ----------------
Total Liabilities and Stockholders' Equity......................... $358,133 $371,757
---------------- ----------------
---------------- ----------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 22
MAC FRUGALS' BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 2,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales.................................................................. $ 627,063 $ 540,295 $ 542,578
Cost of Sales.............................................................. 335,928 281,504 277,879
----------- ----------- -----------
Gross Profit............................................................... 291,135 258,791 264,699
----------- ----------- -----------
Expenses:
Store expenses........................................................... 180,008 150,304 145,328
Warehouse and administrative expenses.................................... 53,460 47,573 56,208
Warehouse write-down expense (Note 10)................................... -- 36,646 --
----------- ----------- -----------
Total Expenses................................................... 233,468 234,523 201,536
----------- ----------- -----------
Operating Income........................................................... 57,667 24,268 63,163
Interest expense, net (Note 2)............................................. 4,792 6,860 8,286
----------- ----------- -----------
Earnings Before Income Taxes............................................... 52,875 17,408 54,877
Income Taxes (Note 4)...................................................... 20,938 6,060 20,662
----------- ----------- -----------
Net Earnings............................................................... $ 31,937 $ 11,348 $ 34,215
----------- ----------- -----------
----------- ----------- -----------
Average Shares Outstanding................................................. 29,931 30,295 30,649
----------- ----------- -----------
----------- ----------- -----------
Net Earnings Per Common Share.............................................. $ 1.07 $ 0.37 $ 1.12
----------- ----------- -----------
----------- ----------- -----------
Dividends Per Common Share................................................. None None None
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 23
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK RECEIVABLE UNDER
--------------- PAID-IN RETAINED ------------------- STOCK PURCHASE
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT AGREEMENT TOTAL
------ ------ ---------- --------- ------- --------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, February 3, 1991....... 39,896 $1,109 $ 13,283 $ 287,113 9,382 $(107,315) $ (3,785) $190,405
Exercise of stock options..... 126 3 1,272 1,275
Increase in purchase price
under stock purchase
agreement.................. 357 (357)
Restricted stock amortization
and lapse of
restrictions............... 143 143
Restricted stock cancelled.... (6)
Net earnings for the year..... 34,215 34,215
------ ------ ---------- --------- ------- --------- ---------------- --------
BALANCE, February 2, 1992....... 40,016 1,112 15,055 321,328 9,382 (107,315) (4,142) 226,038
Exercise of stock options..... 42 1 539 540
Increase in purchase price
under stock purchase
agreement.................. 12 (12)
Redemption of stock issued
under September 15, 1988
stock purchase agreement... (250) (7) (5,368) 4,154 (1,221)
Cancellation of option
rights..................... (3,279) (3,279)
Recognition of interest income
upon collection of
September 15, 1988 stock
purchase receivable........ (481) (481)
Non-cash compensation
expense.................... 132 132
Restricted stock cancelled.... (3)
Treasury stock retired........ (9,382) (261) (6,548) (100,506) (9,382) 107,315
Purchase of Treasury stock, at
cost....................... 832 (8,630) (8,630)
Net earnings for the year..... 11,348 11,348
------ ------ ---------- --------- ------- --------- ---------------- --------
BALANCE, January 31, 1993....... 30,423 845 62 232,170 832 (8,630) -- 224,447
Exercise of stock options..... 136 3 1,715 1,718
Non-cash compensation
expense.................... 75 75
Treasury stock retired........ (832) (23) (533) (8,074) (832) 8,630
Purchase of Treasury stock, at
cost....................... 55 (827) (827)
Net earnings for the year..... 31,937 31,937
------ ------ ---------- --------- ------- --------- ---------------- --------
BALANCE, January 30, 1994....... 29,727 $ 825 $ 1,319 $ 256,033 55 $ (827) $ -- $257,350
------ ------ ---------- --------- ------- --------- ---------------- --------
------ ------ ---------- --------- ------- --------- ---------------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 24
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 2,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Cash received from customers........................................... $ 627,063 $ 540,295 $ 542,578
Cash paid to suppliers and employees................................... (577,081) (482,883) (487,941)
Income taxes paid...................................................... (21,091) (24,411) (7,274)
Interest paid (net of amount capitalized).............................. (5,774) (8,494) (8,814)
Interest received...................................................... 699 718 708
------------ ------------ ------------
Net cash provided by operating activities........................... 23,816 25,225 39,257
Cash flows from investing activities:
Capital expenditures................................................... (29,365) (15,264) (9,118)
Proceeds from sale of fixed assets..................................... 25,883 2,432 141
------------ ------------ ------------
Net cash used in investing activities............................... (3,482) (12,832) (8,977)
Cash flows from financing activities:
Payment of long-term debt.............................................. (76,814) (19,776) (82,863)
Repurchase of Treasury stock........................................... (827) (8,630) --
Redemption of stock subject to stock purchase agreement and
cancellation of certain option rights............................... -- (4,500) --
Proceeds from sale of stock options.................................... 1,718 540 1,275
Net borrowings (repayments) under line of credit agreement............. 34,900 -- (40,000)
Proceeds from issuance of long-term debt............................... -- 115,000
Other (net)............................................................ (116) 310 (459)
------------ ------------ ------------
Net cash used in financing activities............................... (41,139) (32,056) (7,047)
------------ ------------ ------------
(Decrease) increase in cash and cash equivalents.................... (20,805) (19,663) 23,233
Cash and cash equivalents, beginning of period........................... 21,820 41,483 18,250
------------ ------------ ------------
Cash and cash equivalents, end of period................................. $ 1,015 $ 21,820 $ 41,483
------------ ------------ ------------
------------ ------------ ------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net income............................................................... $ 31,937 $ 11,348 $ 34,215
Adjustments to reconcile net income to net cash provided by operating
activities:
Warehouse write-down expense........................................... -- 36,646 --
Depreciation and amortization.......................................... 15,380 17,293 15,208
Recognition of interest income upon collection of September 15, 1988
stock purchase receivable........................................... -- (481) --
(Gain) loss on sale of fixed assets.................................... (924) (658) 61
Non-cash compensation expense.......................................... 75 132 143
Changes in assets and liabilities:
Increase in inventory............................................... (34,180) (17,018) (28,972)
Decrease (increase) in other assets................................. 4,525 (5,253) (6,552)
Decrease (increase) in deferred income tax asset.................... 11,501 (12,753) --
Increase (decrease) in accounts payable, accrued expenses and sales
tax payable........................................................ 14,029 (4,438) 9,783
(Decrease) increase in income taxes payable......................... (14,717) 191 14,526
(Decrease) increase in deferred income taxes........................ (3,810) 216 845
------------ ------------ ------------
(8,121) 13,877 5,042
------------ ------------ ------------
$ 23,816 $ 25,225 $ 39,257
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 25
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 30, 1994, JANUARY 31, 1993 AND FEBRUARY 2, 1992
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
Mac Frugal's Bargains o Close-outs Inc. (formerly Pic 'N' Save
Corporation) and its wholly-owned subsidiaries (the Company) operate a chain of
237 retail stores which offer a broad range of new close-out merchandise on a
self-service, cash-and-carry basis.
The consolidated financial statements include the accounts of Mac
Frugal's Bargains o Close-outs Inc. and its wholly-owned subsidiaries. All
material intercompany transactions and balances have been eliminated.
Cash and Cash Equivalents
All highly liquid investments purchased with a maturity of three
months or less are considered to be cash equivalents.
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market.
Cost is determined on the first-in, first-out method for individual items of
warehouse stock and by the retail inventory method for retail stores.
Property, Equipment and Improvements
Property, equipment and improvements are recorded at cost unless the
Company determines there has been a permanent impairment in value (Note 10).
Depreciation and amortization are provided by the straight-line method over the
estimated useful lives of the property.
Deferred Expenses
The Company capitalizes costs associated with opening new store and
warehouse facilities and amortizes these over six and twenty-four months,
respectively.
Income Taxes
The Company changed its method of accounting for income taxes,
effective February 1, 1993, to conform with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes". The change had no
significant income statement impact. The Company provides for deferred income
taxes under the asset and liability method, whereby deferred income taxes result
from temporary differences between the tax bases of assets and liabilities and
their reported amounts in the financial statements. For prior years, amounts
provided for income taxes were based on income reported for financial statement
purposes. Deferred income taxes were provided for timing differences as certain
income and expense items were reported for financial statement purposes in
periods different from the periods in which such items were recognized for tax
purposes.
Capitalization of Interest
The Company has capitalized interest costs associated with the
construction of a new distribution center (Note 10) during the period of
construction in accordance with Statement of Financial Accounting Standards No.
34. Interest was capitalized using the Company's weighted average interest rate.
Capitalization of interest ceased when construction was completed in September
1991.
Fiscal Year
The Company's fiscal year ends on the Sunday nearest January 31 and
contains 52 weeks.
Earnings per Common Share
Earnings per Common Share is based on the weighted average number of
Common shares and Common Stock equivalents (stock options) outstanding, adjusted
for the effect of the shares sold under a purchase agreement (Note 7) of 58,258
shares (1992) utilizing the Treasury stock method.
Reclassifications
Certain reclassifications have been made to prior year amounts to
conform to current year presentation.
F-7
<PAGE> 26
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 30, 1994, JANUARY 31, 1993 AND FEBRUARY 2, 1992
NOTE 2 -- BANK BORROWINGS AND INTEREST:
In October 1993, the Company repaid its then outstanding term loan and
amended its credit agreement (the Current Agreement) with its syndicate of
banks. The Current Agreement includes an annually renewable unsecured three-year
$150,000,000 revolving loan for seasonal working capital needs, with a
$50,000,000 sublimit for commercial and standby letters of credit. The Current
Agreement contains certain restrictive covenants requiring the Company to
maintain certain financial ratios and limits the payment of dividends based on a
formula. At January 30, 1994, $21,171,000 of retained earnings were unrestricted
as to the declaration of cash dividends and the acquisition of Common Stock by
the Company. Interest rates are prime, LIBOR plus 5/8%, or negotiated at the
Company's option. At January 30, 1994, the Company had outstanding borrowings of
$22,000,000 under the Current Agreement.
The Company's credit agreement, before the current amendment, (the
Secured Agreement) provided for a secured five-year $115,000,000 term loan and a
secured five-year $60,000,000 revolving loan for seasonal working capital needs
and commercial and standby letters of credit. Related to the Secured Agreement,
the Company paid approximately $8,386,000 in financing fees which the Company is
amortizing over five years. At January 31, 1993, the Company had outstanding
borrowings of $76,667,000 under the term loan of the Secured Agreement (Note 5)
and had no outstanding borrowings under the revolving loan of the Secured
Agreement.
The Company also has $40,000,000 of unsecured, uncommitted short-term
line of credit facilities with three individual banks. Under the terms of the
Current Agreement, only $30,000,000 may be outstanding under these facilities at
one time. Interest rates are negotiated. At January 30, 1994 and January 31,
1993, $12,900,000 and $0 were outstanding under these facilities, respectively.
Interest rates ranged between 3.25% and 3.50% on outstanding borrowings at
January 30, 1994.
Commitments under outstanding letters of credit amounted to
$18,109,000 and $13,418,000 at January 30, 1994 and January 31, 1993,
respectively.
Net interest is summarized as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 2,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Expense................................................ $ 5,436 $ 8,059 $ 8,994
Income................................................. (644) (1,199) (708)
----------- ----------- -----------
Net Interest........................................... $ 4,792 $ 6,860 $ 8,286
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
NOTE 3 -- ACCRUED EXPENSES:
Accrued expenses are comprised of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 31,
1994 1993
----------- -----------
<S> <C> <C>
Insurance............................................................ $16,898 $15,213
Profit sharing (Note 8).............................................. 961 1,376
Percentage rent...................................................... 864 1,588
Salaries............................................................. 2,748 2,118
Other expenses....................................................... 10,255 7,477
----------- -----------
$31,726 $27,772
----------- -----------
----------- -----------
</TABLE>
F-8
<PAGE> 27
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 30, 1994, JANUARY 31, 1993 AND FEBRUARY 2, 1992
NOTE 4 -- INCOME TAXES:
The provision for income taxes includes the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 2,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal.............................................. $ 5,048 $ 18,107 $18,209
State................................................ 1,571 5,077 4,864
----------- ----------- -----------
6,619 23,184 23,073
Deferred:
Federal.............................................. 11,649 (13,247) (1,756)
State................................................ 2,670 (3,877) (655)
----------- ----------- -----------
14,319 (17,124) (2,411)
----------- ----------- -----------
$20,938 $ 6,060 $20,662
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The Company's effective tax rate differs from the statutory federal
income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 2,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Statutory federal tax rate................................ 35.0% 34.0% 34.0%
State income tax net of federal benefit................... 5.4 4.0 5.1
Rate benefit from federal targeted jobs tax credit........ (.4) (1.9) (1.0)
Other, net................................................ (.4) (1.3) (0.4)
----------- ----------- -----------
39.6% 34.8% 37.7%
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 109 "Accounting for Income Taxes", effective February 1, 1993
with no significant income statement impact. This statement supersedes APB
Opinion No. 11.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
On August 10, 1993 legislation was enacted that retroactively
increased the maximum corporate income tax rate to 35%. The increased income tax
rate was retroactive to January 1, 1993. The effect of the rate increase on the
Company's accumulated deferred income taxes are deemed immaterial.
Significant components of the Company's net deferred tax liability as
of January 30, 1994 are as follows (in thousands):
<TABLE>
<S> <C>
Deferred Tax Assets:
Inventories.............................................................. $ 5,238
State Franchise Taxes.................................................... (1,477)
Insurance Reserves....................................................... 1,020
Deferred Expenses........................................................ 965
Other.................................................................... 692
--------
6,438
--------
Deferred Tax Liability:
Excess of Tax Over Book Depreciation..................................... (15,976)
Insurance Reserves....................................................... 6,469
Other.................................................................... 2,154
--------
(7,353)
--------
Net Deferred Tax Liability................................................. $ (915)
--------
--------
</TABLE>
The Company provided no valuation allowance against the deferred tax
assets recorded as of January 30, 1994.
F-9
<PAGE> 28
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 30, 1994, JANUARY 31, 1993 AND FEBRUARY 2, 1992
Other current assets on the balance sheet at January 30, 1994 includes
current deferred tax assets of $5,186,000 and current refundable taxes of
$927,000.
NOTE 5 -- LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 31,
1994 1993
----------- -----------
<S> <C> <C>
Term loan 4.19% to 6.00%, principal and interest due in quarterly
installments beginning August 2, 1991 through May 15, 1996.......... $ -- $ 76,667
Industrial Development Revenue Bonds with interest payable quarterly
based on the current prime rate, next redeemable August 1998, due
August 2028......................................................... 2,000 2,000
Non interest-bearing construction loan, due in quarterly installments
beginning May 1, 1991 through May 1, 2006 net of discount based on
imputed interest rate of 10% ($996 in fiscal 1993, $1,144 in fiscal
1992)............................................................... 1,404 1,456
Equipment contracts, 8.375% to 12.032%, maturing through 1998,
collateralized by equipment......................................... 40 136
Other................................................................. 522 636
----------- -----------
3,966 80,895
Less current maturities............................................... (97) (26,420)
----------- -----------
Long-term debt........................................................ $ 3,869 $ 54,475
----------- -----------
----------- -----------
</TABLE>
The aggregate maturities of long-term debt for the years subsequent to
January 30, 1994 are as follows (in thousands):
<TABLE>
<S> <C>
1994......................................................... $ 97
1995......................................................... 62
1996......................................................... 69
1997......................................................... 2,076
1998......................................................... 84
Thereafter................................................... 1,578
------
$3,966
------
------
</TABLE>
NOTE 6 -- STOCK INCENTIVE PLANS:
In 1990, the Company adopted a new stock incentive plan (the 1990
Employee Stock Incentive Plan) to enable key employees to acquire shares of the
Company's Common Stock. The new plan replaced the Company's Stock Incentive Plan
and Incentive Stock Option Plan adopted previously. Under the new plan, as
amended in fiscal 1993, which provides for the grant of incentive stock options,
nonqualified stock options, stock appreciation rights and restricted stock, up
to 3,200,000 shares of Common Stock may be issued. Prior to the 1993 amendment,
up to 1,750,000 shares of Common Stock could be issued. Although stock options
and restricted stock granted under the Stock Incentive Plan and Incentive Stock
Option Plan remain outstanding, no new options or restricted shares will be
granted under such plans. Under the terms of the new plan, incentive stock
options may be granted at not less than 100% of fair market value at the date of
grant (110% in the case of 10% stockholders) and nonqualified stock options may
be granted at not less than par value (or, in the case of officers of the
Company, not less than the greater of par value or 50% of fair market value on
the date of grant). A portion of the fiscal 1992 grants under the plan were
subject to reduction based upon the level of pre-tax earnings for fiscal 1992
compared to a target level established at the date of grant.
In 1992, the Company adopted its Stock Option Plan for Non-Employee
Directors to enable non-employee directors to acquire shares of the Company's
Common Stock. Each non-employee director receives a nonqualified stock option
grant of 2,500 shares upon election or re-election to the board of directors. In
addition, each non-employee director may elect, on the date of each annual
meeting at which he or she is elected or re-elected, to receive a certain
portion of their annual retainer in the form of a nonqualified stock option
grant based on a formula. Expense is recognized ratably over the director's
term.
The Company awarded 35,830 and 41,830 shares of restricted stock under
the old plans in March 1989 and April 1990, respectively. Such shares vested
over three-year periods. No stock appreciation rights have been granted under
any of the plans to date. The Company has granted options to purchase 25,000
shares outside of these plans.
F-10
<PAGE> 29
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 30, 1994, JANUARY 31, 1993 AND FEBRUARY 2, 1992
Changes for all options are summarized as follows:
<TABLE>
<CAPTION>
STOCK OPTIONS
-----------------------------
PER SHARE
SHARES PRICE RANGE
--------- -------------
<S> <C> <C>
Outstanding, February 3, 1991.................................... 1,462,452 $ 5.54-$22.13
Granted........................................................ 453,000 $ 8.38-$23.00
Exercised...................................................... (125,558) $ 5.54-$22.13
Cancelled...................................................... (212,148) $11.63-$22.13
--------- -------------
Outstanding, February 2, 1992.................................... 1,577,746 $ 6.63-$23.00
Granted........................................................ 151,460 $10.60-$13.63
Granted subject to reduction................................... 498,000 $19.75-$19.75
Exercised...................................................... (41,918) $10.50-$16.63
Cancelled...................................................... (517,725) $10.50-$22.13
--------- -------------
Outstanding, January 31, 1993.................................... 1,667,563 $ 6.63-$23.00
Granted........................................................ 646,570 $14.25-$18.50
Exercised...................................................... (135,745) $ 9.00-$17.08
Cancelled...................................................... (772,863) $10.50-$22.13
--------- -------------
Outstanding, January 30, 1994.................................... 1,405,525 $ 6.63-$23.00
</TABLE>
At January 30, 1994, there were 1,876,590 and 110,770 shares of the
Company's Common Stock available for grant under the 1990 Employee Stock
Incentive Plan and Non-Employee Directors Plan, respectively. Options were
exercisable for 682,248 shares under all of the Company's four stock option
plans and stock option agreements, collectively, at January 30, 1994.
On March 16, 1993, options to purchase 424,250 shares of the 498,000
shares granted subject to reduction were cancelled (options to purchase 30,000
shares having already been cancelled) upon determination of the Company's fiscal
1992 pre-tax earnings.
Although most of the stock options granted under the plans are
intended to be incentive stock options, the Company will be entitled to a tax
deduction for the excess (if any) of the aggregate market price over the
aggregate exercise price at such time as nonqualified options are exercised.
In March 1992, the Company cancelled all option rights (563,700
shares) held by the Company's former president and a potential cash bonus
related to certain options was cancelled in exchange for a cash payment of
$3,729,000 (Note 7).
NOTE 7 -- STOCKHOLDERS' EQUITY:
In September 1988, the Board approved the sale of 250,000 shares of
Common Stock, at the quoted market value on the date of sale ($12 3/8 per
share), to the Company's former president under a purchase agreement in exchange
for a promissory note in which the face amount increased at 9.08% annually. The
$3,087,000 promissory note was originally due five years after issuance.
The shares were voting, collateralized the note until paid, and
dividends or other distributions, if any, were to be offset against the note.
Upon termination of the former president's employment in fiscal 1990, the
Company extended the maturity date of the promissory note to December 31, 1995.
In March 1992, the Company purchased the 250,000 shares related to the
promissory note from the former president at $21.50 per share. Of the proceeds,
$4,154,000 was applied against the outstanding balance of the promissory note.
The remaining proceeds of $1,221,000 were paid in cash to the former president
(Note 6).
NOTE 8 -- PROFIT SHARING PLAN:
The Company has a profit sharing plan covering substantially all
employees with more than one year of service. Under this plan, the Company
contributes a portion of earnings based on a formula. Profit sharing expenses
for the years ended January 30, 1994, January 31, 1993 and February 2, 1992 were
$1,038,000, $766,000 and $542,000, respectively.
F-11
<PAGE> 30
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JANUARY 30, 1994, JANUARY 31, 1993 AND FEBRUARY 2, 1992
NOTE 9 -- LEASE COMMITMENTS:
The Company has leases outstanding for retail store locations, the New
Orleans distribution center and equipment with varying initial expiration dates
through 2018; most leases include options to renew. The Company may also be
required to pay insurance, taxes and/or additional rents based on a percentage
of sales, and, in the case of the New Orleans distribution center, certain
executory payments to the ground lessor of the property. Total rental expense
was as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 2,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Base rental expense.................................. $28,707 $21,969 $19,410
Contingent rental expense............................ 102 917 921
----------- ----------- -----------
$28,809 $22,886 $20,331
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Aggregate minimum rental commitments under all leases and aggregate
minimum rental income from sublease tenants of leased buildings under all
noncancellable leases in effect as of January 30, 1994 were as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR EXPENSE INCOME NET
----------- -------- ------- --------
<S> <C> <C> <C>
1994..................................................... $ 26,239 $ 2,147 $ 24,092
1995..................................................... 25,653 2,034 23,619
1996..................................................... 24,904 1,878 23,026
1997..................................................... 22,741 1,080 21,661
1998..................................................... 21,838 813 21,025
Thereafter............................................... 184,575 6,240 178,335
-------- ------- --------
$305,950 $14,192 $291,758
-------- ------- --------
-------- ------- --------
</TABLE>
NOTE 10 -- WAREHOUSE WRITE-DOWN EXPENSE:
The Company completed construction of its New Orleans warehouse and
distribution center effective September 1991. The facility was completed at a
net cost of $58,617,000, of which $32,233,000 was classified as building and
building improvements and $26,384,000 was classified as furniture, fixtures and
equipment. Furthermore, $7,406,000 of interest expense was capitalized over the
three-year construction period.
During fiscal 1992, the Company determined that the value of the
facility was permanently impaired based on an assessment of the Company's
continued and planned future under-utilization of the facility. Additionally,
the Company had decided to pursue a sale and leaseback of the facility.
Accordingly, during fiscal 1992 a charge to operating income was
recorded for approximately $36,646,000 which represented the difference between
the net book value and the estimated net realizable value at the date of
impairment. The estimated net realizable value of the facility was based upon
appraisals received by independent nationally recognized appraisal firms.
In October 1993, the Company completed a sale and leaseback of this
facility. The sales price of $23,643,000 approximated the recorded net book
value.
NOTE 11 -- OTHER COMMITMENTS:
The Company is a defendant in certain legal actions. While management
and legal counsel are presently unable to predict the outcome or to estimate the
amount of any liability the Company may have with respect to these lawsuits, it
is not expected that these matters will have a material adverse effect on the
Company.
NOTE 12 -- NORTHRIDGE, CALIFORNIA EARTHQUAKE:
On January 17, 1994, a 6.7 magnitude earthquake occurred in the San
Fernando Valley of Southern California. Twenty-five stores experienced
relatively minor merchandise and physical damage requiring closures that varied
from a few hours to one week. Four stores experienced substantial merchandise
and physical damage and will remain closed during their reconstruction periods.
These four stores are expected to reopen during the second and third quarters of
fiscal 1994.
The Company incurred significant costs in connection with the
earthquake including approximately $1,867,000 of damaged merchandise, $744,000
of destroyed property, $258,000 of expenses to repair property and $177,000 of
other expenses, primarily labor costs associated with removing damaged
merchandise and reopening the affected stores.
F-12
<PAGE> 31
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
SCHEDULE II -- AMOUNTS RECEIVABLE FROM EMPLOYEES
OTHER THAN RELATED PARTIES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DEDUCTIONS BALANCE AT
----------------------- END OF PERIOD
BALANCE AT AMOUNTS AMOUNTS ---------------------
NAME OF DEBTOR BEGINNING OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
- - -------------- ------------------- --------- --------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mark J. Miller(1)............................. $ 130 $ 0 $70 $ 0 $45 $15
</TABLE>
- - ---------------
(1) Mr. Miller, Executive Vice President, General Merchandise Manager of the
Company, executed two promissory notes in favor of the Company in the
amounts of $100 and $30, respectively. Each of the notes bear interest at
the rate of 7% per annum. The principal amount of the $100 note was
originally due and payable in three equal annual installments on April 1,
1993, April 1, 1994 and April 1, 1995. It was amended in May 1993 to
require a payment of $70 on May 1, 1993 and the remaining $30 on April 1,
1994. The principal amount of the $30 note is due and payable in two equal
installments on April 1, 1994 and April 1, 1995.
F-13
<PAGE> 32
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
SCHEDULE V -- PROPERTY, EQUIPMENT AND IMPROVEMENTS(1)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BEGINNING ADDITIONS TRANSFERS AND ENDING
DESCRIPTION BALANCE AT COST DISPOSALS(3) OTHER ACTIVITY(2) BALANCE
----------- --------- --------- ------------ ----------------- --------
<S> <C> <C> <C> <C> <C>
Year Ended January 30, 1994
Land.............................................. $ 25,452 $ 1,531 $ (651) $ 777 $ 27,109
Building and Improvements......................... 86,214 2,043 (18,370) 1,897 71,784
Automotive Equipment.............................. 2,821 3 (47) 1 2,778
Furniture, Fixtures and Equipment................. 77,762 10,286 (12,476) 225 75,797
Leasehold Improvements............................ 54,157 2,843 (946) 8,789 64,843
Construction in Progress.......................... 167 12,659 (11,689) 1,137
--------- --------- ------------ ----------------- --------
Total..................................... $ 246,573 $29,365 $(32,490) $ 0 $243,448
--------- --------- ------------ ----------------- --------
--------- --------- ------------ ----------------- --------
Year Ended January 31, 1993
Land.............................................. $ 25,086 $ 366 $ $ $ 25,452
Building and Improvements......................... 102,820 1,523 (1,510) (16,619) 86,214
Automotive Equipment.............................. 5,204 21 (2,404) 2,821
Furniture, Fixtures and Equipment................. 89,091 6,753 (229) (17,853) 77,762
Leasehold Improvements............................ 49,747 2,492 (47) 1,965 54,157
Construction in Progress.......................... 197 4,109 (4,139) 167
--------- --------- ------------ ----------------- --------
Total..................................... $ 272,145 $15,264 $ (4,190) $ (36,646) $246,573
--------- --------- ------------ ----------------- --------
--------- --------- ------------ ----------------- --------
Year Ended February 2, 1992:
Land.............................................. $ 25,086 $ $ $ $ 25,086
Building and Improvements......................... 65,928 762 (200) 36,330 102,820
Automotive Equipment.............................. 5,324 (120) 5,204
Furniture, Fixtures and Equipment................. 56,806 2,840 (146) 29,591 89,091
Leasehold Improvements............................ 46,657 2,391 (76) 775 49,747
Construction in Progress.......................... 64,328 3,125 (67,256) 197
--------- --------- ------------ ----------------- --------
Total..................................... $ 264,129 $ 9,118 $ (542) $ (560) $272,145
--------- --------- ------------ ----------------- --------
--------- --------- ------------ ----------------- --------
</TABLE>
- - ---------------
(1) The average estimated useful lives used for depreciation purposes for
Buildings and Improvements, Automotive Equipment and Furniture, Fixtures and
Equipment are 33, 5 and 10 years, respectively. Leasehold Improvements are
depreciated over 12 years or the life of the lease, if shorter.
(2) Activity for the year ended January 31, 1993 represents a write-down of New
Orleans distribution center assets to appraised values which reflect a
permanent impairment in their values based on an assessment of the Company's
continued and planned future under-utilization of the facility.
Activity for the year ended February 2, 1992 represents net
reclassifications of certain deferred expenses related to opening the New
Orleans distribution center originally classified as Property, Equipment and
Improvements.
(3) $29,954 of the disposals made during the year ended January 30, 1994, and
which are related to the sale of the New Orleans distribution center, are
valued at appraised values which are lower than cost. See Note (2) above.
F-14
<PAGE> 33
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, EQUIPMENT AND IMPROVEMENTS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BEGINNING ENDING
DESCRIPTION BALANCE ADDITIONS DISPOSALS TRANSFERS BALANCE
----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended January 30, 1994
Building and Improvements......................... $19,492 $ 3,127 $(2,011) $(494) $ 20,114
Automotive Equipment.............................. 2,393 230 (47) 2,576
Furniture, Fixtures and Equipment................. 37,320 7,065 (4,961) 39,424
Leasehold Improvements............................ 22,575 4,958 (513) 494 27,514
----------- ----------- ----------- ----------- ---------
Total.......................................... $81,780 $15,380 $(7,532) $ 0 $ 89,628
----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ---------
Year Ended January 31, 1993
Building and Improvements......................... $15,949 $ 3,735 $ (192) $ $ 19,492
Automotive Equipment.............................. 4,250 311 (2,168) 2,393
Furniture, Fixtures and Equipment................. 28,702 8,666 (48) 37,320
Leasehold Improvements............................ 18,002 4,581 (8) 22,575
----------- ----------- ----------- ----------- ---------
Total.......................................... $66,903 $17,293 $(2,416) $ 0 $ 81,780
----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ---------
Year Ended February 2, 1992
Building and Improvements......................... $12,944 $ 3,021 $ (16) $ $ 15,949
Automotive Equipment.............................. 3,859 504 (113) 4,250
Furniture, Fixtures and Equipment................. 21,616 7,150 (88) 24 28,702
Leasehold Improvements............................ 13,529 4,533 (60) 18,002
----------- ----------- ----------- ----------- ---------
Total.......................................... $51,948 $15,208 $ (277) $ 24 $ 66,903
----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ---------
</TABLE>
F-15
<PAGE> 34
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
AVERAGE
MAXIMUM AMOUNT AVERAGE
WEIGHTED AMOUNT OUTSTANDING INTEREST
BALANCE AVERAGE OUTSTANDING DURING THE RATE DURING
CATEGORY OF AGGREGATE AT END OF INTEREST DURING THE PERIOD THE PERIOD
SHORT-TERM BORROWINGS PERIOD RATE PERIOD (1) (2)
--------------------- --------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
January 30, 1994
Borrowings under bank line of credit................ $ 34,900 3.43% $88,382 $29,775 3.96%
January 31, 1993
Borrowings under bank line of credit................ -- 4.18% $32,000 $ 9,403 5.67%
February 2, 1992
Borrowings under bank line of credit................ -- 7.71% $25,000 $ 4,705 7.87%
</TABLE>
- - ---------------
(1) Average amount outstanding during the period is computed by dividing the
total of daily outstanding principal balances by 364.
(2) Weighted average interest rate during the period is computed by dividing the
actual short-term interest expense by the average short-term debt
outstanding.
F-16
<PAGE> 35
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 2,
ITEM 1994 1993 1992
- - ---- --------------- --------------- ---------------
<S> <C> <C> <C>
Advertising Costs(1)............................................ $12,023 $12,487 $ 8,770
Repairs & Maintenance(1)........................................ $ -- $ 5,552 $ 5,824
</TABLE>
- - ---------------
(1) All other costs are less than 1% of net sales.
F-17
<PAGE> 36
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 37
INDEX TO EXHIBITS
FILED WITH THE ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED
JANUARY 30, 1994
<TABLE>
<CAPTION>
PAGE
NUMBER NUMBER
------ ------
<C> <S> <C>
3.1 Certificate of Incorporation of the Company, as amended, filed as Exhibit 6.1 to the
Company's Registration Statement on Form 8-A dated May 22, 1992........................ *
3.2 By-Laws of the Company, as amended, filed as Exhibit 6.2 to the Company's Registration
Statement on Form 8-A dated May 22, 1992............................................... *
10.1 Incentive Stock Option Plan filed as Exhibit A to the Company's definitive Proxy
Statement for 1982..................................................................... *
10.2 Amendment to Incentive Stock Option Plan filed as Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the year ended February 2, 1992................................ *
10.3 Common Stock Incentive Plan filed as Appendix C to the Company's definitive Proxy
Statement for 1979..................................................................... *
10.4 Amendment to the Common Stock Incentive Plan filed as Exhibit 10.3(3) to the Company's
Annual Report on Form 10-K for fiscal year ended December 31, 1982..................... *
10.5 Amendment to the Common Stock Incentive Plan filed as Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 2, 1992.................. *
10.6 Non-Qualified Stock Option Agreement dated December 26, 1985 filed as Exhibit 10.3(3)
to the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1985.... *
10.7 Form of Amended Stock Option Agreement used in connection with the Incentive Stock
Option Plan filed as Exhibit 10.6(1) to the Company's Annual Report on Form 10-K for
fiscal year ended December 31, 1989 and transition period ended January 28, 1990....... *
10.8 Form of Restricted Stock Agreement used in connection with the Incentive Stock Option
Plan filed as Exhibit 10.6(2) to the Company's Annual Report on Form 10-K for fiscal
year ended December 31, 1989 and transition period ended January 28, 1990.............. *
10.9 1990 Employee Stock Incentive Plan filed as Annex B to the Company's definitive Proxy
Statement for the 1990 Annual Meeting of Stockholders.................................. *
10.10 Amendments No. 1 and No. 2 to 1990 Employee Stock Incentive Plan filed as Exhibit 10.10
to the Company's Annual Report on Form 10-K for the fiscal year ended February 2,
1992................................................................................... *
10.11 Form of Stock Option Agreement used in connection with the 1990 Employee Stock
Incentive Plan for options subject to staggered vesting filed as Exhibit 10.8 to the
Company's Annual Report on Form 10-K for fiscal year ended February 3, 1991............ *
10.12 Form of Stock Option Agreement used in connection with the 1990 Employee Stock
Incentive Plan for immediately exercisable options filed as Exhibit 10.9 to the
Company's Annual Report on Form 10-K for fiscal year ended February 3, 1991............ *
10.13 Form of Restricted Stock Agreement used in connection with the 1990 Employee Stock
Incentive Plan filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for
fiscal year ended February 3, 1991..................................................... *
10.14 Stock Option Agreement dated December 6, 1990 between the Company and Peter S. Willmott
filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for fiscal year
ended February 3, 1991................................................................. *
10.15 Stock Option Plan for Non-Employee Directors filed as Annex B to the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders held in 1992......... *
10.16 Employment Agreement dated November 12, 1990 between the Company and Leonard S.
Williams filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for fiscal
year ended February 3, 1991............................................................ *
10.17 Amendment No. 1 to Employment Agreement between the Company and Leonard S. Williams
dated as of February 3, 1992 filed as Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 2, 1992................................... *
10.18 Amendment No. 2 to Employment Agreement between the Company and Leonard S. Williams
dated as of January 31, 1994...........................................................
</TABLE>
- - ---------------
* By this reference incorporated herein and made a part hereof.
I-1
<PAGE> 38
<TABLE>
<CAPTION>
PAGE
NUMBER NUMBER
------ ------
<C> <S> <C>
10.19 Employment Agreement dated as of January 31, 1994 between the Company and Richard N.
Lodwick.................................................................................
10.20 Employment Agreement dated as of September 25, 1992 between the Company and Mark J.
Miller filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for fiscal
year ended January 31, 1993............................................................ *
10.21 Amendment No. 1 to Employment Agreement between the Company and Mark J. Miller dated as
of January 31, 1994....................................................................
10.22 Promissory Note of Mark J. Miller dated September 25, 1992 in favor of the Company in
the principal amount of $30,000 filed as Exhibit 10.22 to the Company's Annual Report
on Form 10-K for the fiscal year ended January 31, 1993................................ *
10.23 Employment Agreement dated as of January 31, 1994 between the Company and Philip L.
Carter.................................................................................
10.24 Employment Agreement dated as of August 4, 1993 between the Company and Patricia J.
Wehner.................................................................................
10.25 Lease dated August 1, 1988 between the Company, the City of New Orleans, State of
Louisiana Inc., and the City of New Orleans, Louisiana Industrial Development Board re
New Orleans Distribution Center filed as Exhibit 10.5(1) to the Company's Annual Report
on Form 10-K for fiscal year ended January 1, 1989..................................... *
10.26 Amended and Restated Credit Agreement dated as of October 5, 1993 among the Company,
West Coast Liquidators, Inc., PNS Stores, Inc., the lenders listed therein and Bank of
America National Trust and Savings Association, as Administrative Agent, and
Continental Bank, as Co-Agent..........................................................
10.27 Lease dated as of September 25, 1993 between TriNet Essential Facilities X, Inc. and
West Coast Liquidators, Inc. ..........................................................
10.28 Settlement Agreement dated August 9, 1990 among the Company, Batchelder Co., DHB
Partners, L.P., David H. Batchelder, Batchelder & Partners, Inc. and Girard Partners,
L.P. filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for fiscal year
ended February 3, 1991................................................................. *
10.29 Master Lease dated December 27, 1991 between the Company and Comdisco, Inc. filed as
Exhibit 10.32 to the Company's Annual Report on Form 10-K for the fiscal year ended
February 2, 1992....................................................................... *
22.1 Subsidiaries of Company................................................................
24.1 Consent of Independent Auditors........................................................
</TABLE>
- - ---------------
* By this reference incorporated herein and made a part hereof.
I-2
<PAGE> 39
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 1
Exhibit 10.18
AMENDMENT NO. 2
---------------
TO EMPLOYMENT AGREEMENT
-----------------------
THIS AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT (this "Amendment") is made and
entered into as of the 31st day of January, 1994, by and between MacFrugal's
Bargains o Close-outs Inc., a Delaware corporation (the "Company"), and Leonard
S. Williams ("Executive"), with reference to the following facts:
RECITALS
--------
WHEREAS, the Company and Executive are parties to that certain Employment
Agreement dated as of November 12, 1990 (the "Original Agreement") pursuant to
which Executive serves as the President and Chief Executive Officer of the
Company;
WHEREAS, the Original Agreement was amended by that certain Amendment No. 1
to Employment Agreement made and entered into as of the 3rd day of February,
1992 ("Amendment No. 1") by and between the Company and Executive;
WHEREAS, the Original Agreement, as modified by Amendment No. 1, is
hereinafter referred to as the Employment Agreement; and
WHEREAS, the Company and Executive desire to amend the Employment Agreement
in certain respects as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Section 2(b) of the Employment Agreement is hereby deleted and restated
in its entirety as follows:
"(b) Performance Bonus. With respect to each full fiscal year of
the Company that this Agreement is in effect throughout and any fiscal year
of the Company in which Executive is terminated pursuant to Section 8(d)
hereof (each, a "Bonus Year"), Executive shall be entitled to participate
in a performance bonus plan approved annually for executive officers of the
Company by the Compensation Committee of the Board of Directors. The
calculation and payment to Executive of the performance bonus contemplated
by this Section 2(b) shall be made as soon as practicable in the fiscal year
of the Company immediately succeeding such Bonus Year, following preparation
of the Company's annual audited financial statements for such Bonus Year.
Any performance bonus paid to Executive under this Section 2(b) shall be
treated as an expense of the Company in determining whether such bonus is
payable."
<PAGE> 2
2. Section 2(c) of the Employment Agreement is hereby deleted in its
entirety.
3. The first sentence of Section 3 of the Employment Agreement is
hereby deleted and restated in its entirety as follows:
"In the event of the termination of Executive's employment
hereunder pursuant to Section 8(d), the Company shall continue to make
the payments provided for in Section 2(a) at the rate then being paid
to Executive and shall continue to provide Executive with the medical,
disability and life insurance benefits provided in Section 5(a) hereof:
(a) if this Agreement is so terminated after the last day of the Company's
fiscal year ending in January 1993, for eighteen (18) months after the
date of such termination; and (b) if the Company elects not to renew
Executive's employment after the expiration of the term of this Agreement,
for eighteen (18) months after the expiration of the term."
4. Section 4 of the Employment Agreement is hereby deleted and restated in
its entirety as follows:
"4. Options. Executive shall be entitled to participate in any
performance stock option plan approved annually for other executive
officers of the Company by the Compensation Committee of the Board of
Directors. To the maximum extent permitted by the Internal Revenue Code
of 1986, as amended, including the rules and regulations thereunder, all
such options shall be incentive stock options, and the remainder of such
options shall be non-qualified stock options."
5. Section 5(b) of the Employment Agreement is hereby deleted and restated
in its entirety as follows:
"(b) The Company shall furnish Executive with a motor vehicle of
his choice to use for business purposes, provided, however, that such motor
vehicle shall not have an original cost to the Company of more than
$60,000."
Page 2
<PAGE> 3
6. The last sentence of Section 8(c) of the Employment Agreement is hereby
deleted and restated in its entirety as follows:
"Without limiting the generality of the foregoing, Executive shall
have no right on or after the date of such termination to any of the
benefits set forth in Section 5 hereof (other than payment for accrued
vacation), any payment of base salary pursuant to Section 2(a), any
payment of performance bonus for the Bonus Year in which such termination
occurs or any other benefit or payment of any kind whatsoever."
7. Section 8(d) of the Employment Agreement is hereby deleted and restated
in its entirety as follows:
"Subject to the payment of amounts required by Sections 2(b) and 3,
the Company shall be entitled to terminate Executive's employment without
cause at any time upon five days written notice."
8. Except as set forth above, no other amendments or modifications are made
to the Employment Agreement and the Employment Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of the
date first written above.
The Company: MacFrugal's Bargains o Close-outs Inc.,
a Delaware corporation
By: PETER S. WILLMOTT
------------------------
Peter S. Willmott,
Chairman of the Board
Executive:
LEONARD S. WILLIAMS
------------------------
Leonard S. Williams
Page 3
<PAGE> 1
Exhibit 10.19
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into
as of the 31st day of January, 1994, by and between Mac Frugal's Bargains o
Close-outs Inc., a Delaware corporation (the "Company"), and Richard N. Lodwick
("Executive").
RECITALS
--------
WHEREAS, the Company desires to employ Executive as a Senior Vice
President on the terms and conditions set forth herein and Executive desires to
accept such employment with the Company;
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing premises, the terms
and conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment and Duties. The Company hereby engages Executive in the
capacity of Senior Vice President, Stores, of the Company. Executive shall
perform such duties and functions as shall be specified from time to time by
the Chief Executive Officer of the Company. Executive hereby accepts such
employment and agrees to perform such duties. During the term of this
Agreement, Executive shall not be required without his consent to undertake
responsibilities not commensurate with his position as an Senior Vice
President.
2. Compensation.
(a) Base Salary. For all services to be rendered by Executive
hereunder, Executive shall be paid a base salary at the rate of two hundred
sixty thousand dollars ($260,000) per year. Executive's base compensation
shall be reviewed at least annually and may be increased at the discretion of
the Board of Directors of the Company (the "Board"), but during the term of
this Agreement may not be decreased below the then-effective base salary.
Executive's salary shall be paid on such basis as is the normal payment pattern
for executive officers of the Company. The base salary payable under this
Section 2(a) shall be in addition to and exclusive of any payments to Executive
from time to time under formal or informal bonus, incentive compensation or
similar plans now in effect or which hereafter may be adopted.
<PAGE> 2
(b) Performance Bonus. With respect to each full fiscal year of the
Company that this Agreement is in effect throughout and any fiscal year of the
Company in which Executive is terminated pursuant to Section 8(d) hereof (each,
a "Bonus Year"), the Executive shall be entitled to participate in a performance
bonus plan approved annually for executive officers of the Company by the
Compensation Committee of the Board of Directors. The calculation and payment
to Executive of a performance bonus contemplated by this Section 2(b),if any,
shall be made as soon as practicable in the fiscal year of the Company
immediately succeeding such Bonus Year, following preparation of the Company's
annual audited financial statements for such Bonus Year.
(c) Bonus Treated as Expense Item. Performance Bonuses paid to
Executive under Section 2(b) hereof shall be treated as expenses of the Company
in determining whether such bonus is payable.
3. Payment in Event of Termination. In the event of the termination of
Executive's employment hereunder pursuant to Section 8(d), the Company shall
continue to make the payments provided for in Section 2(a) at the rate then
being paid to Executive and shall continue to provide Executive with the
medical, disability and life insurance benefits provided in Section 5(a) hereof
for eighteen (18) months from the date of such termination. Executive shall
not be required or obligated to obtain other employment to mitigate the
payments due hereunder. Executive may, at his sole option, terminate this
Agreement and receive the payments provided for in this Section 3 following the
occurrence of either of the following events (a "Company Breach"):
(a) Executive's authority to function as an Executive Vice President shall be
removed or limited in any material respect, unless such removal or limitation
was a result of one or more events that would permit the Board to terminate
Executive's employment For Cause (as defined in Section 8(c)), or (b) the
Company shall have breached in any material respect any of its covenants and
agreements in this Agreement. Notwithstanding the foregoing, Executive shall
not be entitled to terminate this Agreement unless Executive provides written
notice to the Company specifying in reasonable detail the nature of the Company
Breach, and the Company shall have failed to cure such Company Breach within
45 days thereafter.
4. Options. The Executive shall be entitled to participate in any
performance stock option plan approved annually implemented for other executive
officers of the Company by the Compensation Committee of the Board of Directors.
To the maximum extent permitted by the Internal Revenue Code of 1986, as
amended, including the rules and regulations thereunder, all such options shall
be incentive stock options, and the remainder of such options shall be non-
qualified stock options.
-2-
<PAGE> 3
5. Benefits.
(a) Executive shall be entitled to such fringe benefits and
perquisites as are generally made available to executive officers of the
Company, and such other fringe benefits as may be approved by the Board for
executive officers of the Company during the term hereof including, without
limitation, major medical, extended medical and extended disability insurance,
group term life insurance in face amount of the base salary payable pursuant
to Section 2(a) and annual vacation time of not less than four weeks.
(b) Every two years during the term of Executive's employment, the
Company shall furnish Executive with a motor vehicle of his choice to use for
business purposes, provided, however, that such motor vehicle shall not
have an original cost to the Company of more than $40,000.
(c) Nothing contained herein is intended or shall be deemed to be
granted to Executive in lieu of any rights or privileges to which Executive
may be entitled as an employee of the Company under any retirement, pension,
insurance, hospitalization, stock option, stock bonus or purchase, incentive
compensation or other plan of the Company which may now be in effect or which
may hereafter be adopted, it being understood that Executive shall have the
same rights and privileges to participate in such plans as any other executive
officers of the Company.
6. Reimbursement of Expenses. The Company shall reimburse Executive
for all reasonable business expenses incurred by Executive in connection with
the performance of his duties hereunder, provided that Executive furnishes to
the Company receipts and other documentation reasonably acceptable to the
Company evidencing such expenditures.
7. Performance of Duties.
(a) In consideration of the payments to be made hereunder, Executive
agrees to devote his entire business time and attention to the performance of
his duties hereunder, to serve the Company diligently and to the best of his
abilities and not to compete with the Company or any of its Affiliates (as
defined below) in any manner whatsoever. Without limiting the generality of
the foregoing, Executive shall not, during the term of his employment by the
Company, directly or indirectly (whether for compensation or otherwise),
alone or as an agent, principal, partner, officer, employee, trustee,
director, shareholder or in any other capacity, own, manage, operate, join,
control or participate in the ownership, management, operation or control of
or furnish any capital to or be connected in any manner with or provide any
services as a consultant for any business which
-3-
<PAGE> 4
competes directly or indirectly with any of the businesses of the Company or
any of its Affiliates (as defined below) as they may be conducted from time
to time; provided, however, that notwithstanding the foregoing, nothing
contained in this Agreement shall be deemed to preclude Executive from
owning not more than one percent of the publicly-traded capital stock of an
entity which is in competition with any of such businesses. Affiliate of
the Company means any person, association or entity: (a) that, in whole or
in part, owns or is owned by, or otherwise has a material interest (whether
debt, equity or otherwise) in, the Company; (b) that controls or is
controlled by the Company; (c) that is a subsidiary (whether owned in whole
or in part) of the Company; or (d) to which the Company is a "related tax
payer" as defined in Section 1313(c) of the IRC.
(b) Executive may continue his civic, educational and charitable
activities and serve on boards of directors of other companies, if consistent
with this Section 7 and if otherwise approved by the Board.
8. Term and Termination.
(a) The term of the Executive's employment with the Company
hereunder shall commence on the date hereof and shall continue until the
Executive resigns or is terminated under this Section 8 or under Section 9
of this Agreement.
(b) In the event of Executive's death or in the event of Executive's
total disability for any consecutive six-month period during the term of this
Agreement, the Company may at its sole option thereafter (unless Executive,
in the case of disability, shall have resumed his duties in full prior to
such termination) terminate this Agreement, and in such event the sole right
hereunder of Executive, Executive's widower or Executive's legal
representative, as the case may be, shall be to: (i) receive the base salary
due Executive through the last day of the twelfth full calendar month
following the month in which his death or disability shall have occurred;
(ii) have any and all previously accruing bonuses or options or other rights
vest in Executive or in his estate immediately (unless Executive or his
estate shall elect to the contrary); and (iii) in the event of termination by
reason of disability, have the Company continue to maintain in effect at its
sole expense, the major medical, extended medical, extended disability and
term life insurance referred to in Section 5(a) for the one year period
following the date of any such termination.
-4-
<PAGE> 5
(c) The Company, upon 30 days prior written notice to Executive, may
terminate this Agreement For Cause (as defined herein). For the purposes of
this Agreement, the term "For Cause" shall mean: (i) Executive's breach of
the covenants contained in Sections 7, 11 or 13(a) hereof; (ii) Executive's
conviction by, or entry of a plea of guilty or nolo contendere in, a court of
competent jurisdiction for any crime involving moral turpitude or any felony
punishable by imprisonment in the jurisdiction involved; (iii) Executive's
commission of any act of fraud or dishonesty in connection with, or related to,
his duties hereunder. Upon termination of Executive For Cause, this Agreement
shall immediately terminate, and Executive shall not be entitled to any further
rights or payments hereunder (other than payment under Section 2(a) for
services rendered prior to the date of such termination). Without limiting
the generality of the foregoing, Executive shall have no right on or after the
date of such termination to any of the benefits set forth in Section 5 hereof
(other than payment for accrued vacation), any payment of base salary pursuant
to Section 2(a), any payment of performance bonus pursuant to Section 2(b) for
the Bonus Year in which such termination occurs or any other benefit or payment
of any kind whatsoever.
(d) Subject to the payment of amounts required by Sections 2(b) and
3, the Company shall be entitled to terminate Executive's employment without
cause at any time upon thirty days written notice.
9. Change in Control. If a Change in Control (as defined below) of the
Company occurs during the term of this Agreement, the provisions of this
Section 9 shall become operative. For the purposes of this Agreement, a
Change in Control of the Company shall be deemed to have occurred if any
"person" (as defined in Section 13(d) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act")) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) directly or indirectly of
securities of the Company representing more than 35% of the combined voting
power of the Company's then outstanding securities, as a result of purchases
of the Company's securities which are not expressly approved by the Board of
Directors of the Company. For purposes of this Section 9, the Board of
Directors expressly approving the 35% or more voting power ownership must
consist of individuals who for the previous consecutive twenty-four month
period, constituted at least a majority of such Board of Directors.
For a period of two months after a Change in Control of the Company,
Executive shall have the right to terminate his employment with the Company
pursuant to this Section 9, and the Company shall pay Executive the
following amounts no later than the 15th business day after the date of
termination of Executive's employment:
-5-
<PAGE> 6
(a) A lump sum severance payment equal to 2 multiplied by the sum of
(A) Executive's base annual salary at the highest rate in effect during the
fiscal year of the Company immediately preceding the date Executive's employ-
ment terminates, and (B) the greater of the amount of any incentive, bonus or
other cash compensation that was paid to Executive during either (x) the 12
months immediately preceding the date Executive's employment terminates and
(y) the 12 months immediately preceding the Change in Control; and
(b) A cash payment equal to the amount by which the greater of
(A) the closing price of the Company's Common Stock on the day before the date
Executive's employment terminates or (B) the highest price per share actually
paid in connection with the Change in Control of the Company, exceeds the per
share exercise price of each then vested and exercisable stock option held by
Executive on the day before the date Executive's employment terminates,
multiplied by the number of shares covered by each such option. In exchange
for such payment, Executive will surrender all such options to the Company
without exercising them.
10. Deductibility of Payments to Executive. Notwith- standing anything
else to the contrary in this Agreement, in the event that the payments
to Executive under this Agreement, either alone or together with other payments
Executive has a right to receive from the Company, would be non-deductible (in
whole or in part) by the Company for Federal income tax purposes because of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
then the aggregate present value of amounts payable to Executive pursuant to
this agreement shall be reduced (but not below zero) to the "Reduced Amount."
The Reduced Amount shall be an amount expressed in present value which
maximizes the aggregate present value of all payments to be made to Executive
under this Agreement without causing any payment to be non-deductible by the
Company because of Section 280G of the Code. For purposes of this Section 10,
present value shall be determined in accordance with Section 280G(d)(4) of the
Code. The determination of the Reduced Amount shall be made exclusively by the
Company's outside auditors and in consultation with outside counsel to the
Company (each of whose fees and expenses shall be borne by the Company), and
such determination shall be conclusive and binding on the Company and
Executive.
11. Confidentiality.
(a) The Company (which for purposes of this Section 11 shall mean
the Company and its Affiliates (as defined in Section 7(a)) and Executive
recognize that during the course of Executive's employment with the Company
he will accumulate certain crucial proprietary and confidential information
and trade secrets
-6-
<PAGE> 7
for use in the Company's business and will have divulged to him certain
crucial confidential and proprietary information and trade secrets about the
business, operations and prospects of the Company, including, without
limitation, confidential and proprietary information regarding suppliers and
employees of the Company, which constitute valuable business assets providing
the Company the opportunity to obtain an advantage over competitors who do not
know or use such information or have access to it without the investment of
considerable resources. Executive hereby acknowledges and agrees that such
information (the "Proprietary Information") is confidential and proprietary
and a trade secret and that such information shall include, without
limitation:
(i) the identity and location of customers and domestic and foreign
suppliers of quality low-cost close-out merchandise that can profitably be
resold, and their buying and selling histories and creditworthiness; informa-
tion regarding the quantity, quality, frequency, pricing and marketability of
their supply offerings; and lists setting forth the same;
(ii) processes, methods and techniques, including but not limited to
primary contact points in the Company's network; methods of merchandising in
the Company's stores; processes and methods of giving directions and
instructions to the Company's stores and its employees in connection with
merchandising moves; information, techniques, formulas and judgments relating
to the appropriate bidding, pricing and marketing of close-out merchandise;
and the price ranges and techniques by which such merchandise can be profitably
resold at substantial reductions from normal retail rates; and designs, styles
and methods of packaging and distributing close-out merchandise distinctive to
the Company;
(iii) records of research, including but not limited to demographic
studies conducted by the Company and its agents which contribute to the
Company's ability to locate retail store sites;
(iv) proposals and projections, including but not limited to long-
range plans for the Company's growth, expansion, development and continued
fostering of its relationships with its employees, suppliers and customers; and
(v) files, reports, memoranda, computer software or programming and
budgets or other financial plans or information regarding the Company and its
business, properties or affairs.
-7-
<PAGE> 8
(b) Executive agrees that he shall not, at any time subsequent to
the execution of this Agreement, whether during or after the term hereof,
disclose, divulge or make known, directly or indirectly, to any person, or
otherwise use or exploit, any Proprietary Information obtained by Executive
at any time prior to or subsequent to the execution of this Agreement, except
to the extent required by his performance of his duties hereunder for the
Company. Executive agrees to disclose to the Company the identity and nature
of any contacts with any person or entity soliciting from Executive
disclosure of any Propriety Information or soliciting Executive's involvement
in any business venture competitive with the Company. Executive shall not
conceal from or fail to disclose to the Company, or divert or exploit for his
own personal profit or that of others, any business opportunity or other
opportunity to acquire an interest in or a contractual relationship with any
person or entity where such person or entity is in the Company's line of
business or where such contractual relationship involves the acquisition of
real estate and which would be considered a feasible and advantageous
opportunity or acquisition for the Company. Upon termination of this
Agreement, Executive will deliver to the Company all tangible displays and
repositories of customer and supplier lists, files, records of research,
proposals, reports, memoranda, business methods and techniques, computer
software and programming, budgets and other financial plans and information,
and other materials or records or writings of any other type (including all
copies thereof) made, used or obtained by, or provided to, Executive,
containing any Proprietary Information, whether obtained prior to or
subsequent to the execution of this Agreement.
12. Non-Solicitation of Employees.
(a) Executive hereby agrees that for the two-year period following
the date of termination of this Agreement he will not (i) authorize his name
to be used by any person, partnership, corporation or other business entity,
or (ii) engage in or carry on, directly or indirectly, whether as advisor,
principal, agent, partner, officer, director, employee, stockholder, associate
or consultant of any person, partnership, corporation or other business entity
which is in competition with the bargain close-out business carried on by the
Company or any of its Affiliates in Los Angeles, Orange, Riverside, San
Bernardino, Ventura, Santa Barbara or San Diego Counties in the State of
California, or any other county in California where business is then carried
on or conducted by the Company or any of its Affiliates, or in the States of
Arizona, Colorado, Alabama, Idaho, New Mexico, Texas, Nevada, Utah, Georgia,
Florida or Louisiana.
-8-
<PAGE> 9
(b) Executive further agrees that during the period from the date
of this Agreement until two years after the termination of the Agreement he
shall not contact any employee or supplier of the Company or any of its
Affiliates without advising the Company of such contact and he shall not
participate in any endeavor or activity which would disrupt the Company's or
any of its Affiliate's good business relationships with the employees,
suppliers and/or persons engaged in purchasing activities on behalf of the
Company or such Affiliate, and he shall not make any false, deceptive or
misleading statement or statements to any one or more of such suppliers or
such persons which would be likely to cause such disruption.
13. Miscellaneous.
(a) Executive represents and warrants to the Company that he is
not now under any obligation of a contractual or other nature to any person,
firm or corporation which is inconsistent or in conflict with this Agreement,
or which would prevent, limit or impair in any way the performance by him of
his obligations hereunder.
(b) The waiver by either party of a breach of any provision of this
Agreement must be in writing and shall not operate or be construed as a waiver
of any subsequent breach thereof.
(c) This Agreement constitutes the entire Agreement of Executive
and the Company and supersedes all prior written or oral and all contemp-
oraneous oral agreements, understandings and negotiations between the parties
with respect to the subject matter hereof.
(d) Any and all notices referred to herein shall be sufficiently
furnished if in writing, and sent by registered or certified mail, postage
prepaid, or by facsimile transmission (but only if confirmation of receipt is
subsequently received by the sender either orally or in writing), or by
overnight courier (if such overnight courier guarantees next day delivery
and such notice is sent for delivery on a day on which such courier guarantees
such overnight delivery), to the respective parties at the following addresses
or such other address as either party may from time to time designate in
writing in the manner set forth in this Section 13(d):
-9-
<PAGE> 10
The Company:
Mac Frugal's Bargains o Close-outs Inc.
2430 E. Del Amo Boulevard
Dominguez, California 90220
Attention: Board of Directors and
Chief Executive Officer
Telephone Number: (310) 761-4200
Executive:
Richard N. Lodwick
19542 Pompano Lane, #107
Huntington Beach, California 92648
(e) If any portion or provision of this Agreement shall be invalid
or unenforceable for any reason, there shall be deemed to be made such minor
changes (and only such minor changes) in such provision or portion as are
necessary to make it valid and enforceable. The invalidity or
unenforceability of any provision or portion of this Agreement shall not
affect the validity or enforceability of any other provisions or portions
of this Agreement. If any such unenforceable or invalid provision or
provisions shall be rendered enforceable and valid by changes in applicable
law, then such provision or provisions shall be deemed to read as they
presently do in this Agreement without change.
(f) The rights and obligations of the parties hereto shall inure to
and be binding upon the parties hereto and their respective heirs, successors
and assigns.
(g) The waiver by either party of a breach of a provision of this
Agreement shall not operate or be construed as a waiver of a subsequent
breach hereof.
(h) This Agreement is intended to and shall be governed by, and
interpreted under and construed in accordance with, the laws of the State of
California, without reference to any conflict of laws or principles.
(i) If any litigation, arbitration or any other proceedings is
instituted in connection with or related to this Agreement, the non-prevailing
party in such litigation, arbitration or other proceeding shall pay the
expenses, including, without limitation, the attorneys' fees and expenses of
investigation, of the prevailing party.
-10-
<PAGE> 11
(j) Arbitration.
(i) Any controversy, claim or dispute between the parties
directly or indirectly concerning this Agreement or the breach hereof, or the
subject matter hereof (except in instances where only injunctive relief is
sought by the Company), shall be finally settled by arbitration held in Los
Angeles, California. The Company and Executive shall each select an
arbitrator from a panel of seven (7) arbitrators (the "Arbitration Pool")
obtained by the Company from the Federal Mediation and Conciliation Service
within thirty (30) days of receiving written notice from either party
demanding any such proceeding. Such two chosen arbitrators shall agree on a
third arbitrator from the Arbitration Pool within fifteen days thereafter.
In the event an agreement has not been reached on the third arbitrator by the
end of such fifteen-day period, the third arbitrator shall be chosen by the
American Arbitration Association. The arbitration shall be held and a final
decision reached within 30 days thereafter. The decision of a majority of the
three chosen arbitrators shall be final and conclusive on the parties, and
there shall be no appeal therefrom. A decision of the arbitrators may be
enforced by the prevailing party in a court of competent jurisdiction. All
other issues in connection with such arbitration shall be in accordance with
the Rules of the American Arbitration Association.
(ii) The parties hereto agree that an action to compel
arbitration pursuant to this Agreement may be brought in any appropriate court
and in connection therewith the laws of the State of California shall control.
Application may also be made to such court for confirmation of any decision
or award of the arbitrators but only if necessary to effectuate such decision
or award. The parties hereto hereby consent to the jurisdiction of the
arbitrators and of such court and waive any objection to the jurisdiction of
such arbitrators or court.
(k) The Company and Executive expressly agree that the provisions
of Sections 11, 12 and 13 shall survive the termination of this Agreement.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE COMPANY: MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
By: LEONARD S. WILLIAMS
-----------------------
Leonard S. Williams
Chief Executive Officer
EXECUTIVE:
RICHARD N. LODWICK
-----------------------
Richard N. Lodwick
-12-
<PAGE> 1
Exhibit 10.21
AMENDMENT NO. 1
---------------
TO EMPLOYMENT AGREEMENT
-----------------------
THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this "Amendment") is made and
entered into as of the 31st day of January, 1994, by and between MacFrugal's
Bargains o Close-outs Inc., a Delaware corporation (the "Company"), and Mark J.
Miller ("Executive"), with reference to the following facts:
RECITALS
--------
WHEREAS, the Company and Executive are parties to that certain Employment
Agreement dated as of September 25, 1992 (the "Employment Agreement") pursuant
to which Executive serves as the Executive Vice President, General Merchandise
Manager of the Company;
WHEREAS, the Company and Executive desire to amend the Employment Agreement
in certain respects as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Section 2(b) of the Employment Agreement is hereby deleted and restated
in its entirety as follows:
"(b) Performance Bonus. With respect to each full fiscal year of
the Company that this Agreement is in effect throughout and any fiscal year
of the Company in which Executive is terminated pursuant to Section 8(d)
hereof (each, a "Bonus Year"), Executive shall be entitled to participate
in a performance bonus plan approved annually for executive officers of
the Company by the Compensation Committee of the Board of Directors. The
calculation and payment to Executive of the performance bonus contemplated
by this Section 2(b) shall be made as soon as practicable in the fiscal
year of the Company immediately succeeding such Bonus Year, following
preparation of the Company's annual audited financial statements for such
Bonus Year. At the Company's option, the Company may apply any bonus
payable pursuant to this Section 2(b) against amounts then due and payable
under that certain Promissory Note of even date herewith in the original
principal amount of $30,000 of which Executive is the maker and the Company
is the holder. Any performance bonus paid to Executive under this Section
2(b) shall be treated as an expense of the Company in determining whether
such bonus is payable."
<PAGE> 2
2. Section 2(c) of the Employment Agreement is hereby deleted in its
entirety.
3. The first sentence of Section 3 of the Employment Agreement is hereby
deleted and restated in its entirety as follows:
"In the event of the termination of Executive's employment
hereunder pursuant to Section 8(d), the Company shall continue to make the
payments provided for in Section 2(a) at the rate then being paid to
Executive and shall continue to provide Executive with the medical,
disability and life insurance benefits provided in Section 5(a) hereof:
(a) if this Agreement is so terminated on or prior to September 27, 1994,
for nine (9) months after the date of such termination; (b) if this
Agreement is so terminated on or prior to September 27, 1995, for eighteen
(18) months after the date of such termination; and (c) if the Company
elects not to renew Executive's employment after the expiration of the
term of this Agreement, for eighteen (18) months after the expiration of
the term."
4. Section 4 of the Employment Agreement is hereby deleted and restated in
its entirety as follows:
"4. Options. Executive shall be entitled to participate in any
performance stock option plan approved annually for other executive
officers of the Company by the Compensation Committee of the Board of
Directors. To the maximum extent permitted by the Internal Revenue Code
of 1986, as amended, including the rules and regulations thereunder, all
such options shall be incentive stock options, and the remainder of such
options shall be non-qualified stock options."
5. Section 5(b) of the Employment Agreement is hereby deleted and restated
in its entirety as follows:
"(b) Every two years during the term of Executive's employment, the
Company shall furnish Executive with a motor vehicle of his choice to use
for business purposes, provided, however, that such motor vehicle shall not
have an original cost to the Company of more than $50,000."
6. The second sentence of Section 8(c) of the Employment Agreement is hereby
deleted and restated in its entirety as follows:
"For the purposes of this Agreement, the term 'For Cause' shall
mean: (i) Executive's breach of the covenants contained in Sections 7, 11
or 13(a)
Page 2
<PAGE> 3
hereof; (ii) Executive's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of competent jurisdiction for any crime
involving moral turpitude or any felony punishable by imprisonment in the
jurisdiction involved; or (iii) Executive's commission of any act of fraud
or dishonesty in connection with, or related to, his duties hereunder."
7. The last sentence of Section 8(c) of the Employment Agreement is hereby
deleted and restated in its entirety as follows:
"Without limiting the generality of the foregoing, Executive shall
have no right on or after the date of such termination to any of the
benefits set forth in Section 5 hereof (other than payment for accrued
vacation), any payment of base salary pursuant to Section 2(a), any payment
of performance bonus for the Bonus Year in which such termination occurs or
any other benefit or payment of any kind whatsoever."
8. Section 8(d) of the Employment Agreement is hereby deleted and restated
in its entirety as follows:
"Subject to the payment of amounts required by Sections 2(b) and 3,
the Company shall be entitled to terminate Executive's employment without
cause at any time upon thirty days written notice."
9. Except as set forth above, no other amendments or modifications are made
to the Employment Agreement and the Employment Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of the
date first written above.
The Company: MacFrugal's Bargains o Close-outs Inc.,
a Delaware corporation
By LEONARD S. WILLIAMS
-----------------------
Leonard S. Williams
Chief Executive Officer
Executive:
MARK J. MILLER
-----------------------
Mark J. Miller
Page 3
<PAGE> 1
Exhibit 10.23
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into
as of the 31st day of January, 1994, by and between Mac Frugal's Bargains o
Close-outs Inc., a Delaware corporation (the "Company"), and Philip L. Carter
("Executive").
RECITALS
--------
WHEREAS, the Company desires to employ Executive as an Executive Vice
President on the terms and conditions set forth herein and Executive desires to
accept such employment with the Company;
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing premises, the terms
and conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment and Duties. The Company hereby engages Executive in
the capacity of Executive Vice President, Chief Financial Officer, of the
Company. Executive shall perform such duties and functions as shall be
specified from time to time by the Chief Executive Officer of the Company.
Executive hereby accepts such employment and agrees to perform such duties.
During the term of this Agreement, Executive shall not be required without his
consent to undertake responsibilities not commensurate with his position as an
Executive Vice President.
2. Compensation.
(a) Base Salary. For all services to be rendered by Executive
hereunder, Executive shall be paid a base salary at the rate of two hundred
seventy-four thousand dollars ($274,000) per year. Executive's base
compensation shall be reviewed at least annually and may be increased at the
discretion of the Board of Directors of the Company (the "Board"), but during
the term of this Agreement may not be decreased below the then-effective base
salary. Executive's salary shall be paid on such basis as is the normal
payment pattern for executive officers of the Company. The base salary payable
under this Section 2(a) shall be in addition to and exclusive of any payments
to Executive from time to time under formal or informal bonus, incentive
compensation or similar plans now in effect or which hereafter may be adopted.
<PAGE> 2
(b) Performance Bonus. With respect to each full fiscal year of the
Company that this Agreement is in effect throughout and any fiscal year of the
Company in which Executive is terminated pursuant to Section 8(d) hereof
(each, a "Bonus Year"), the Executive shall be entitled to participate in a
performance bonus plan approved annually for executive officers of the Company
by the Compensation Committee of the Board of Directors. The calculation and
payment to Executive of a performance bonus contemplated by this Section 2(b),
if any, shall be made as soon as practicable in the fiscal year of the Company
immediately succeeding such Bonus Year, following preparation of the Company's
annual audited financial statements for such Bonus Year.
(c) Bonus Treated as Expense Item. Performance Bonuses paid to
Executive under Section 2(b) hereof shall be treated as expenses of the
Company in determining whether such bonus is payable.
3. Payment in Event of Termination. In the event of the termination
of Executive's employment hereunder pursuant to Section 8(d), the Company
shall continue to make the payments provided for in Section 2(a) at the rate
then being paid to Executive and shall continue to provide Executive with the
medical, disability and life insurance benefits provided in Section 5(a)
hereof for eighteen (18) months from the date of such termination. Executive
shall not be required or obligated to obtain other employment to mitigate the
payments due hereunder. Executive may, at his sole option, terminate this
Agreement and receive the payments provided for in this Section 3 following
the occurrence of either of the following events (a "Company Breach"):
(a) Executive's authority to function as an Executive Vice President shall be
removed or limited in any material respect, unless such removal or limitation
was a result of one or more events that would permit the Board to terminate
Executive's employment For Cause (as defined in Section 8(c)), or (b) the
Company shall have breached in any material respect any of its covenants and
agreements in this Agreement. Notwithstanding the foregoing, Executive shall
not be entitled to terminate this Agreement unless Executive provides written
notice to the Company specifying in reasonable detail the nature of the
Company Breach, and the Company shall have failed to cure such Company Breach
within 45 days thereafter.
4. Options. The Executive shall be entitled to participate in any
performance stock option plan approved annually for other executive officers
of the Company by the Compensation Committee of the Board of Directors. To
the maximum extent permitted by the Internal Revenue Code of 1986, as amended,
including the rules and regulations thereunder, all such options shall be
incentive stock options, and the remainder of such options shall be non-
qualified stock options.
-2-
<PAGE> 3
5. Benefits.
(a) Executive shall be entitled to such fringe benefits and
perquisites as are generally made available to executive officers of the
Company, and such other fringe benefits as may be approved by the Board
for executive officers of the Company during the term hereof including,
without limitation, major medical, extended medical and extended disability
insurance, group term life insurance in face amount of the base salary payable
pursuant to Section 2(a) and annual vacation time of not less than four weeks.
(b) Every two years during the term of Executive's employment, the
Company shall furnish Executive with a motor vehicle of his choice to use for
business purposes, provided, however, that such motor vehicle shall not
have an original cost to the Company of more than $50,000.
(c) Nothing contained herein is intended or shall be deemed to be
granted to Executive in lieu of any rights or privileges to which Executive
may be entitled as an employee of the Company under any retirement, pension,
insurance, hospitalization, stock option, stock bonus or purchase, incentive
compensation or other plan of the Company which may now be in effect or which
may hereafter be adopted, it being understood that Executive shall have the
same rights and privileges to participate in such plans as any other executive
officers of the Company.
6. Reimbursement of Expenses. The Company shall reimburse Executive
for all reasonable business expenses incurred by Executive in connection with
the performance of his duties hereunder, provided that Executive furnishes to
the Company receipts and other documentation reasonably acceptable to the
Company evidencing such expenditures.
7. Performance of Duties.
(a) In consideration of the payments to be made hereunder, Executive
agrees to devote his entire business time and attention to the performance of
his duties hereunder, to serve the Company diligently and to the best of his
abilities and not to compete with the Company or any of its Affiliates (as
defined below) in any manner whatsoever. Without limiting the generality of
the foregoing, Executive shall not, during the term of his employment by the
Company, directly or indirectly (whether for compensation or otherwise),
alone or as an agent, principal, partner, officer, employee, trustee,
director, shareholder or in any other capacity, own, manage, operate, join,
control or participate in the ownership, management, operation or control of
or furnish any capital to or be connected in any manner with or provide any
services as a consultant for any business which
-3-
<PAGE> 4
competes directly or indirectly with any of the businesses of the Company or
any of its Affiliates (as defined below) as they may be conducted from time
to time; provided, however, that notwithstanding the foregoing, nothing
contained in this Agreement shall be deemed to preclude Executive from
owning not more than one percent of the publicly-traded capital stock of an
entity which is in competition with any of such businesses. Affiliate of
the Company means any person, association or entity: (a) that, in whole or
in part, owns or is owned by, or otherwise has a material interest (whether
debt, equity or otherwise) in, the Company; (b) that controls or is
controlled by the Company; (c) that is a subsidiary (whether owned in whole
or in part) of the Company; or (d) to which the Company is a "related tax
payer" as defined in Section 1313(c) of the IRC.
(b) Executive may continue his civic, educational and charitable
activities and serve on boards of directors of other companies, if consistent
with this Section 7 and if otherwise approved by the Board.
8. Term and Termination.
(a) The term of the Executive's employment with the Company hereunder
shall commence on the date hereof and shall continue until the Executive
resigns or is terminated under this Section 8 or under Section 9 of this
Agreement.
(b) In the event of Executive's death or in the event of Executive's
total disability for any consecutive six-month period during the term of this
Agreement, the Company may at its sole option thereafter (unless Executive,
in the case of disability, shall have resumed his duties in full prior to
such termination) terminate this Agreement, and in such event the sole right
hereunder of Executive, Executive's widower or Executive's legal
representative, as the case may be, shall be to: (i) receive the base salary
due Executive through the last day of the twelfth full calendar month
following the month in which his death or disability shall have occurred;
(ii) have any and all previously accruing bonuses or options or other rights
vest in Executive or in his estate immediately (unless Executive or his
estate shall elect to the contrary); and (iii) in the event of termination by
reason of disability, have the Company continue to maintain in effect at its
sole expense, the major medical, extended medical, extended disability and
term life insurance referred to in Section 5(a) for the one year period
following the date of any such termination.
-4-
<PAGE> 5
(c) The Company, upon 30 days prior written notice to Executive, may
terminate this Agreement For Cause (as defined herein). For the purposes of
this Agreement, the term "For Cause" shall mean: (i) Executive's breach of the
covenants contained in Sections 7, 11 or 13(a) hereof; (ii) Executive's
conviction by, or entry of a plea of guilty or nolo contendere in, a court of
competent jurisdiction for any crime involving moral turpitude or any felony
punishable by imprisonment in the jurisdiction involved; (iii) Executive's
commission of any act of fraud or dishonesty in connection with, or related
to, his duties hereunder. Upon termination of Executive For Cause, this
Agreement shall immediately terminate, and Executive shall not be entitled to
any further rights or payments hereunder (other than payment under Section
2(a) for services rendered prior to the date of such termination). Without
limiting the generality of the foregoing, Executive shall have no right on or
after the date of such termination to any of the benefits set forth in Section
5 hereof (other than payment for accrued vacation), any payment of base salary
pursuant to Section 2(a), any payment of performance bonus pursuant to Section
2(b) for the Bonus Year in which such termination occurs or any other benefit
or payment of any kind whatsoever.
(d) Subject to the payment of amounts required by Sections 2(b) and
3, the Company shall be entitled to terminate Executive's employment without
cause at any time upon thirty days written notice.
9. Change in Control. If a Change in Control (as defined below) of
the Company occurs during the term of this Agreement, the provisions of this
Section 9 shall become operative. For the purposes of this Agreement, a
Change in Control of the Company shall be deemed to have occurred if any
"person" (as defined in Section 13(d) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act")) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) directly or indirectly of
securities of the Company representing more than 35% of the combined voting
power of the Company's then outstanding securities, as a result of purchases
of the Company's securities which are not expressly approved by the Board of
Directors of the Company. For purposes of this Section 9, the Board of
Directors expressly approving the 35% or more voting power ownership
must consist of individuals who for the previous consecutive twenty-four month
period, constituted at least a majority of such Board of Directors.
For a period of two months after a Change in Control of the
Company, Executive shall have the right to terminate his employment with the
Company pursuant to this Section 9, and the Company shall pay Executive the
following amounts no later than the 15th business day after the date of
termination of Executive's employment:
-5-
<PAGE> 6
(a) A lump sum severance payment equal to 2 multiplied by the sum of
(A) Executive's base annual salary at the highest rate in effect during the
fiscal year of the Company immediately preceding the date Executive's
employment terminates, and (B) the greater of the amount of any incentive,
bonus or other cash compensation that was paid to Executive during either (x)
the 12 months immediately preceding the date Executive's employment terminates
and (y) the 12 months immediately preceding the Change in Control; and
(b) A cash payment equal to the amount by which the greater of (A)
the closing price of the Company's Common Stock on the day before the date
Executive's employment terminates or (B) the highest price per share actually
paid in connection with the Change in Control of the Company, exceeds the per
share exercise price of each then vested and exercisable stock option held by
Executive on the day before the date Executive's employment terminates,
multiplied by the number of shares covered by each such option. In exchange
for such payment, Executive will surrender all such options to the Company
without exercising them.
10. Deductibility of Payments to Executive. Notwithstanding
anything else to the contrary in this Agreement, in the event that the payments
to Executive under this Agreement, either alone or together with other payments
Executive has a right to receive from the Company, would be non-deductible (in
whole or in part) by the Company for Federal income tax purposes because of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
then the aggregate present value of amounts payable to Executive pursuant to
this agreement shall be reduced (but not below zero) to the "Reduced Amount."
The Reduced Amount shall be an amount expressed in present value which
maximizes the aggregate present value of all payments to be made to Executive
under this Agreement without causing any payment to be non-deductible by the
Company because of Section 280G of the Code. For purposes of this Section 10,
present value shall be determined in accordance with Section 280G(d)(4) of the
Code. The determination of the Reduced Amount shall be made exclusively by the
Company's outside auditors and in consultation with outside counsel to the
Company (each of whose fees and expenses shall be borne by the Company), and
such determination shall be conclusive and binding on the Company and
Executive.
11. Confidentiality.
(a) The Company (which for purposes of this Section 11 shall mean
the Company and its Affiliates (as defined in Section 7(a)) and Executive
recognize that during the course of Executive's employment with the Company
he will accumulate certain crucial proprietary and confidential information
and trade secrets
-6-
<PAGE> 7
for use in the Company's business and will have divulged to him certain
crucial confidential and proprietary information and trade secrets about the
business, operations and prospects of the Company, including, without
limitation, confidential and proprietary information regarding suppliers and
employees of the Company, which constitute valuable business assets providing
the Company the opportunity to obtain an advantage over competitors who do not
know or use such information or have access to it without the investment of
considerable resources. Executive hereby acknowledges and agrees that such
information (the "Proprietary Information") is confidential and proprietary
and a trade secret and that such information shall include, without
limitation:
(i) the identity and location of customers and domestic and foreign
suppliers of quality low-cost close-out merchandise that can profitably be
resold, and their buying and selling histories and creditworthiness;
information regarding the quantity, quality, frequency, pricing and
marketability of their supply offerings; and lists setting forth the same;
(ii) processes, methods and techniques, including but not limited to
primary contact points in the Company's network; methods of merchandising in
the Company's stores; processes and methods of giving directions and instruc-
tions to the Company's stores and its employees in connection with
merchandising moves; information, techniques, formulas and judgments relating
to the appropriate bidding, pricing and marketing of close-out merchandise;
and the price ranges and techniques by which such merchandise can be profitably
resold at substantial reductions from normal retail rates; and designs, styles
and methods of packaging and distributing close-out merchandise distinctive to
the Company;
(iii) records of research, including but not limited to demographic
studies conducted by the Company and its agents which contribute to the
Company's ability to locate retail store sites;
(iv) proposals and projections, including but not limited to long-
range plans for the Company's growth, expansion, development and continued
fostering of its relationships with its employees, suppliers and customers; and
(v) files, reports, memoranda, computer software or programming and
budgets or other financial plans or information regarding the Company and its
business, properties or affairs.
-7-
<PAGE> 8
(b) Executive agrees that he shall not, at any time subsequent to the
execution of this Agreement, whether during or after the term hereof,
disclose, divulge or make known, directly or indirectly, to any person, or
otherwise use or exploit, any Proprietary Information obtained by Executive
at any time prior to or subsequent to the execution of this Agreement, except
to the extent required by his performance of his duties hereunder for the
Company. Executive agrees to disclose to the Company the identity and nature
of any contacts with any person or entity soliciting from Executive
disclosure of any Propriety Information or soliciting Executive's involvement
in any business venture competitive with the Company. Executive shall not
conceal from or fail to disclose to the Company, or divert or exploit for his
own personal profit or that of others, any business opportunity or other
opportunity to acquire an interest in or a contractual relationship with any
person or entity where such person or entity is in the Company's line of
business or where such contractual relationship involves the acquisition of
real estate and which would be considered a feasible and advantageous
opportunity or acquisition for the Company. Upon termination of this
Agreement, Executive will deliver to the Company all tangible displays and
repositories of customer and supplier lists, files, records of research,
proposals, reports, memoranda, business methods and techniques, computer
software and programming, budgets and other financial plans and information,
and other materials or records or writings of any other type (including all
copies thereof) made, used or obtained by, or provided to, Executive,
containing any Proprietary Information, whether obtained prior to or
subsequent to the execution of this Agreement.
12. Non-Solicitation of Employees.
(a) Executive hereby agrees that for the two-year period following
the date of termination of this Agreement he will not (i) authorize his name
to be used by any person, partnership, corporation or other business entity,
or (ii) engage in or carry on, directly or indirectly, whether as advisor,
principal, agent, partner, officer, director, employee, stockholder, associate
or consultant of any person, partnership, corporation or other business entity
which is in competition with the bargain close-out business carried on by the
Company or any of its Affiliates in Los Angeles, Orange, Riverside, San
Bernardino, Ventura, Santa Barbara or San Diego Counties in the State of
California, or any other county in California where business is then carried
on or conducted by the Company or any of its Affiliates, or in the States of
Arizona, Colorado, Alabama, Idaho, New Mexico, Texas, Nevada, Utah, Georgia,
Florida or Louisiana.
-8-
<PAGE> 9
(b) Executive further agrees that during the period from the date of
this Agreement until two years after the termination of the Agreement he shall
not contact any employee or supplier of the Company or any of its Affiliates
without advising the Company of such contact and he shall not participate in
any endeavor or activity which would disrupt the Company's or any of its
Affiliate's good business relationships with the employees, suppliers and/or
persons engaged in purchasing activities on behalf of the Company or such
Affiliate, and he shall not make any false, deceptive or misleading statement
or statements to any one or more of such suppliers or such persons which
would be likely to cause such disruption.
13. Miscellaneous.
(a) Executive represents and warrants to the Company that he is not
now under any obligation of a contractual or other nature to any person, firm
or corporation which is inconsistent or in conflict with this Agreement, or
which would prevent, limit or impair in any way the performance by him of
his obligations hereunder.
(b) The waiver by either party of a breach of any provision of this
Agreement must be in writing and shall not operate or be construed as a waiver
of any subsequent breach thereof.
(c) This Agreement constitutes the entire Agreement of Executive and
the Company and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations between the parties with
respect to the subject matter hereof.
(d) Any and all notices referred to herein shall be sufficiently
furnished if in writing, and sent by registered or certified mail, postage
prepaid, or by facsimile transmission (but only if confirmation of receipt is
subsequently received by the sender either orally or in writing), or by
overnight courier (if such overnight courier guarantees next day delivery and
such notice is sent for delivery on a day on which such courier guarantees such
overnight delivery), to the respective parties at the following addresses or
such other address as either party may from time to time designate in writing
in the manner set forth in this Section 13(d):
-9-
<PAGE> 10
The Company:
Mac Frugal's Bargains o Close-outs Inc.
2430 E. Del Amo Boulevard
Dominguez, California 90220
Attention: Board of Directors and
Chief Executive Officer
Telephone Number: (310) 761-4200
Executive:
Philip L. Carter
10520 Wilshire Blvd., #702
Los Angeles, California 90024
(e) If any portion or provision of this Agreement shall be invalid or
unenforceable for any reason, there shall be deemed to be made such minor
changes (and only such minor changes) in such provision or portion as are
necessary to make it valid and enforceable. The invalidity or
unenforceability of any provision or portion of this Agreement shall not
affect the validity or enforceability of any other provisions or portions
of this Agreement. If any such unenforceable or invalid provision or
provisions shall be rendered enforceable and valid by changes in applicable
law, then such provision or provisions shall be deemed to read as they
presently do in this Agreement without change.
(f) The rights and obligations of the parties hereto shall inure to
and be binding upon the parties hereto and their respective heirs, successors
and assigns.
(g) The waiver by either party of a breach of a provision of this
Agreement shall not operate or be construed as a waiver of a subsequent breach
hereof.
(h) This Agreement is intended to and shall be governed by, and
interpreted under and construed in accordance with, the laws of the State
of California, without reference to any conflict of laws or principles.
(i) If any litigation, arbitration or any other proceedings is
instituted in connection with or related to this Agreement, the non-prevailing
party in such litigation, arbitration or other proceeding shall pay the
expenses, including, without limitation, the attorneys' fees and expenses of
investigation, of the prevailing party.
-10-
<PAGE> 11
(j) Arbitration.
(i) Any controversy, claim or dispute between the parties
directly or indirectly concerning this Agreement or the breach hereof, or the
subject matter hereof (except in instances where only injunctive relief is
sought by the Company), shall be finally settled by arbitration held in
Los Angeles, California. The Company and Executive shall each select an
arbitrator from a panel of seven (7) arbitrators (the "Arbitration Pool")
obtained by the Company from the Federal Mediation and Conciliation Service
within thirty (30) days of receiving written notice from either party
demanding any such proceeding. Such two chosen arbitrators shall agree on a
third arbitrator from the Arbitration Pool within fifteen days thereafter.
In the event an agreement has not been reached on the third arbitrator by the
end of such fifteen-day period, the third arbitrator shall be chosen by the
American Arbitration Association. The arbitration shall be held and a final
decision reached within 30 days thereafter. The decision of a majority of the
three chosen arbitrators shall be final and conclusive on the parties, and
there shall be no appeal therefrom. A decision of the arbitrators may be
enforced by the prevailing party in a court of competent jurisdiction.
All other issues in connection with such arbitration shall be in accordance
with the Rules of the American Arbitration Association.
(ii) The parties hereto agree that an action to compel
arbitration pursuant to this Agreement may be brought in any appropriate court
and in connection therewith the laws of the State of California shall control.
Application may also be made to such court for confirmation of any decision or
award of the arbitrators but only if necessary to effectuate such decision or
award. The parties hereto hereby consent to the jurisdiction of the
arbitrators and of such court and waive any objection to the jurisdiction of
such arbitrators or court.
(k) The Company and Executive expressly agree that the provisions of
Sections 11, 12 and 13 shall survive the termination of this Agreement.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE COMPANY: MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
By: LEONARD S. WILLIAMS
-------------------------
Leonard S. Williams
Chief Executive Officer
EXECUTIVE:
PHILIP L. CARTER
-------------------------
Philip L. Carter
-12-
<PAGE> 1
Exhibit 10.24
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into
as of the 2nd day of August, 1993, by and between Mac Frugal's Bargains o
Close-outs Inc., a Delaware corporation (the "Company"), and Patricia J. Wehner
("Executive").
RECITALS
--------
WHEREAS, the Company desires to employ Executive as a Senior Vice
President on the terms and conditions set forth herein and Executive desires to
accept such employment with the Company;
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing premises, the terms
and conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment and Duties. The Company hereby engages Executive in
the capacity of Senior Vice President, Real Estate and Construction, of the
Company. Executive shall perform such duties and functions as shall be
specified from time to time by the Chief Executive Officer of the Company.
Executive hereby accepts such employment and agrees to perform such duties.
During the term of this Agreement, Executive shall not be required without her
consent to undertake responsibilities not commensurate with her position as a
Senior Vice President.
2. Compensation.
(a) Base Salary. For all services to be rendered by Executive
hereunder, Executive shall be paid a base salary at the rate of one hundred
eighty-six thousand Dollars ($186,000) per year. Executive's base compensation
shall be reviewed at least annually and may be increased at the discretion of
the Board of Directors of the Company (the "Board"), but during the term of
this Agreement may not be decreased below the then-effective base salary.
Executive's salary shall be paid on such basis as is the normal payment pattern
for executive officers of the Company. The base salary payable under this
Section 2(a) shall be in addition to and exclusive of any payments to Executive
from time to time under formal or informal bonus, incentive compensation or
similar plans now in effect or which hereafter may be adopted.
<PAGE> 2
(b) Performance Bonus. With respect to each full fiscal year of the
Company that this Agreement is in effect throughout and any fiscal year of the
Company in which Executive is terminated pursuant to Section 8(d) hereof (each,
a "Bonus Year"), the Executive shall be entitled to participate in a
performance bonus plan approved annually for executive officers of the Company
by the Compensation Committee of the Board of Directors. The calculation and
payment to Executive of a performance bonus contemplated by this Section 2(b),
if any, shall be made as soon as practicable in the fiscal year of the Company
immediately succeeding such Bonus Year, following preparation of the Company's
annual audited financial statements for such Bonus Year.
(c) Bonus Treated as Expense Item. Performance Bonuses paid to
Executive under Section 2(b) hereof shall be treated as expenses of the Company
in determining whether such bonus is payable.
3. Payment in Event of Termination. In the event of the termination
of Executive's employment hereunder pursuant to Section 8(d), the Company
shall continue to make the payments provided for in Section 2(a) at the rate
then being paid to Executive and shall continue to provide Executive with the
medical, disability and life insurance benefits provided in Section 5(a) hereof
for one (1) year from the date of such termination. Executive shall not be
required or obligated to obtain other employment to mitigate the payments due
hereunder. Executive may, at her sole option, terminate this Agreement and
receive the payments provided for in this Section 3 following the occurrence of
either of the following events (a "Company Breach"): (a) Executive's authority
to function as a Senior Vice President shall be removed or limited in any
material respect, unless such removal or limitation was a result of one or more
events that would permit the Board to terminate Executive's employment For
Cause (as defined in Section 8(c)), or (b) the Company shall have breached in
any material respect any of its covenants and agreements in this Agreement.
Notwithstanding the foregoing, Executive shall not be entitled to terminate
this Agreement unless Executive provides written notice to the Company
specifying in reasonable detail the nature of the Company Breach, and the
Company shall have failed to cure such Company Breach within 45 days
thereafter.
4. Options. The Executive shall be entitled to participate in any
performance stock option plan approved annually for other executive officers
of the Company by the Compensation Committee of the Board of Directors. To
the maximum extent permitted by the Internal Revenue Code of 1986, as amended,
including the rules and regulations thereunder, all such options shall be
incentive stock options, and the remainder of such options shall be non-
qualified stock options.
-2-
<PAGE> 3
5. Benefits.
(a) Executive shall be entitled to such fringe benefits and
perquisites as are generally made available to executive officers of the
Company, and such other fringe benefits as may be approved by the Board
for executive officers of the Company during the term hereof including, without
limitation, major medical, extended medical and extended disability insurance,
group term life insurance in face amount of the base salary payable pursuant to
Section 2(a) and annual vacation time of not less than four weeks.
(b) Every two years during the term of Executive's employment, the
Company shall furnish Executive with a motor vehicle of her choice to use for
business purposes, provided, however, that such motor vehicle shall not have
an original cost to the Company of more than $40,000.
(c) Nothing contained herein is intended or shall be deemed to be
granted to Executive in lieu of any rights or privileges to which Executive
may be entitled as an employee of the Company under any retirement, pension,
insurance, hospitalization, stock option, stock bonus or purchase, incentive
compensation or other plan of the Company which may now be in effect or which
may hereafter be adopted, it being understood that Executive shall have the
same rights and privileges to participate in such plans as any other executive
officers of the Company.
6. Reimbursement of Expenses. The Company shall reimburse Executive
for all reasonable business expenses incurred by Executive in connection with
the performance of her duties hereunder, provided that Executive furnishes to
the Company receipts and other documentation reasonably acceptable to the
Company evidencing such expenditures.
7. Performance of Duties.
(a) In consideration of the payments to be made hereunder, Executive
agrees to devote her entire business time and attention to the performance of
her duties hereunder, to serve the Company diligently and to the best of her
abilities and not to compete with the Company or any of its Affiliates (as
defined below) in any manner whatsoever. Without limiting the generality of
the foregoing, Executive shall not, during the term of her employment by the
Company, directly or indirectly (whether for compensation or otherwise),
alone or as an agent, principal, partner, officer, employee, trustee,
director, shareholder or in any other capacity, own, manage, operate, join,
control or
-3-
<PAGE> 4
participate in the ownership, management, operation or control of or furnish
any capital to or be connected in any manner with or provide any services
as a consultant for any business which competes directly or indirectly
with any of the businesses of the Company or any of its Affiliates (as
defined below) as they may be conducted from time to time; provided,
however, that notwithstanding the foregoing, nothing contained in this
Agreement shall be deemed to preclude Executive from owning not more than
one percent of the publicly-traded capital stock of an entity which is in
competition with any of such businesses. Affiliate of the Company means
any person, association or entity: (a) that, in whole or in part, owns or
is owned by, or otherwise has a material interest (whether debt, equity or
otherwise) in, the Company; (b) that controls or is controlled by the
Company; (c) that is a subsidiary (whether owned in whole or in part) of
the Company; or (d) to which the Company is a "related tax payer" as
defined in Section 1313(c) of the IRC.
(b) Executive may continue her civic, educational and charitable
activities and serve on boards of directors of other companies, if consistent
with this Section 7 and if otherwise approved by the Board.
8. Term and Termination.
(a) The term of Executive's employment with the Company hereunder
shall commence on the date hereof and shall continue until the Executive
resigns or is terminated under this Section 8 or under Section 9 of this
Agreement.
(b) In the event of Executive's death or in the event of Executive's
total disability for any consecutive six-month period during the term of this
Agreement, the Company may at its sole option thereafter (unless Executive,
in the case of disability, shall have resumed her duties in full prior to
such termination) terminate this Agreement, and in such event the sole right
hereunder of Executive, Executive's widower or Executive's legal
representative, as the case may be, shall be to: (i) receive the base salary
due Executive through the last day of the twelfth full calendar month
following the month in which her death or disability shall have occurred;
(ii) have any and all previously accruing bonuses or options or other rights
vest in Executive or in her estate immediately (unless Executive or her
estate shall elect to the contrary); and (iii) in the event of termination by
reason of disability, have the Company continue to maintain in effect at its
sole expense, the major medical, extended medical, extended disability and
term life insurance referred to in Section 5(a) for the one year period
following the date of any such termination.
-4-
<PAGE> 5
(c) The Company, upon 30 days prior written notice to Executive, may
terminate this Agreement For Cause (as defined herein). For the purposes of
this Agreement, the term "For Cause" shall mean: (i) Executive's breach of the
covenants contained in Sections 7, 11 or 13(a) hereof; (ii) Executive's
conviction by, or entry of a plea of guilty or nolo contendere in, a court of
competent jurisdiction for any crime involving moral turpitude or any felony
punishable by imprisonment in the jurisdiction involved; or (iii) Executive's
commission of any act of fraud or dishonesty in connection with, or related
to, her duties hereunder. Upon termination of Executive For Cause, this
Agreement shall immediately terminate, and Executive shall not be entitled to
any further rights or payments hereunder (other than payment under Section
2(a) for services rendered prior to the date of such termination). Without
limiting the generality of the foregoing, Executive shall have no right on or
after the date of such termination to any of the benefits set forth in Section
5 hereof (other than payment for accrued vacation), any payment of base salary
pursuant to Section 2(a), any payment of performance bonus pursuant to Section
2(b) for the Bonus Year in which such termination occurs or any other benefit
or payment of any kind whatsoever.
(d) Subject to the payment of amounts required by Sections 2(b) and
3, the Company shall be entitled to terminate Executive's employment without
cause at any time upon thirty days written notice.
9. Change in Control. If a Change in Control (as defined below) of
the Company occurs during the term of this Agreement, the provisions of this
Section 9 shall become operative. For the purposes of this Agreement, a Change
in Control of the Company shall be deemed to have occurred if any "person" (as
defined in Section 13(d) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act")) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) directly or indirectly of securities of the Company
representing more than 35% of the combined voting power of the Company's then
outstanding securities, as a result of purchases of the Company's securities
which are not expressly approved by the Board of Directors of the Company.
For purposes of this Section 9, the Board of Directors expressly approving
the 35% or more voting power ownership must consist of individuals who for the
previous consecutive twenty-four month period, constituted at least a majority
of such Board of Directors.
For a period of two months after a Change in Control of the Company,
Executive shall have the right to terminate her employment with the Company
pursuant to this Section 9, and the Company shall pay Executive the
following amounts no later than the 15th business day after the date of
termination of Executive's employment:
-5-
<PAGE> 6
(a) A lump sum severance payment equal to 2 multiplied by the sum of
(A) Executive's base annual salary at the highest rate in effect during the
fiscal year of the Company immediately preceding the date Executive's employ-
ment terminates, and (B) the greater of the amount of any incentive, bonus or
other cash compensation that was paid to Executive during either (x) the 12
months immediately preceding the date Executive's employment terminates and
(y) the 12 months immediately preceding the Change in Control; and
(b) A cash payment equal to the amount by which the greater of
(A) the closing price of the Company's Common Stock on the day before the
date Executive's employment terminates or (B) the highest price per share
actually paid in connection with the Change in Control of the Company, exceeds
the per share exercise price of each then vested and exercisable stock option
held by Executive on the day before the date Executive's employment terminates,
multiplied by the number of shares covered by each such option. In exchange
for such payment, Executive will surrender all such options to the Company
without exercising them.
10. Deductibility of Payments to Executive. Notwithstanding
anything else to the contrary in this Agreement, in the event that the payments
to Executive under this Agreement, either alone or together with other payments
Executive has a right to receive from the Company, would be non-deductible (in
whole or in part) by the Company for Federal income tax purposes because of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
then the aggregate present value of amounts payable to Executive pursuant to
this agreement shall be reduced (but not below zero) to the "Reduced Amount."
The Reduced Amount shall be an amount expressed in present value which
maximizes the aggregate present value of all payments to be made to Executive
under this Agreement without causing any payment to be non-deductible by the
Company because of Section 280G of the Code. For purposes of this Section 10,
present value shall be determined in accordance with Section 280G(d)(4) of the
Code. The determination of the Reduced Amount shall be made exclusively by the
Company's outside auditors and in consultation with outside counsel to the
Company (each of whose fees and expenses shall be borne by the Company), and
such determination shall be conclusive and binding on the Company and
Executive.
-6-
<PAGE> 7
11. Confidentiality.
(a) The Company (which for purposes of this Section 11 shall mean
the Company and its Affiliates (as defined in Section 7(a)) and Executive
recognize that during the course of Executive's employment with the Company
she will accumulate certain crucial proprietary and confidential information
and trade secrets for use in the Company's business and will have divulged to
her certain crucial confidential and proprietary information and trade secrets
about the business, operations and prospects of the Company, including,
without limitation, confidential and proprietary information regarding
suppliers and employees of the Company, which constitute valuable business
assets providing the Company the opportunity to obtain an advantage over
competitors who do not know or use such information or have access to it
without the investment of considerable resources. Executive hereby
acknowledges and agrees that such information (the "Proprietary Information")
is confidential and proprietary and a trade secret and that such information
shall include, without limitation:
(i) the identity and location of customers and domestic and foreign
suppliers of quality low-cost close-out merchandise that can profitably be
resold, and their buying and selling histories and creditworthiness;
information regarding the quantity, quality, frequency, pricing and market-
ability of their supply offerings; and lists setting forth the same;
(ii) processes, methods and techniques, including but not limited to
primary contact points in the Company's network; methods of merchandising in
the Company's stores; processes and methods of giving directions and instruc-
tions to the Company's stores and its employees in connection with merchandis-
ing moves; information, techniques, formulas and judgments relating to the
appropriate bidding, pricing and marketing of close-out merchandise; and the
price ranges and techniques by which such merchandise can be profitably resold
at substantial reductions from normal retail rates; and designs, styles and
methods of packaging and distributing close-out merchandise distinctive to
the Company;
(iii) records of research, including but not limited to demographic
studies conducted by the Company and its agents which contribute to the
Company's ability to locate retail store sites;
(iv) proposals and projections, including but not limited to long-
range plans for the Company's growth, expansion, development and continued
fostering of its relationships with its employees, suppliers and customers; and
(v) files, reports, memoranda, computer software or programming and
budgets or other financial plans or information regarding the Company and its
business, properties or affairs.
-7-
<PAGE> 8
(b) Executive agrees that she shall not, at any time subsequent to
the execution of this Agreement, whether during or after the term hereof,
disclose, divulge or make known, directly or indirectly, to any person, or
otherwise use or exploit, any Proprietary Information obtained by Executive
at any time prior to or subsequent to the execution of this Agreement, except
to the extent required by her performance of her duties hereunder for the
Company. Executive agrees to disclose to the Company the identity and nature
of any contacts with any person or entity soliciting from Executive
disclosure of any Propriety Information or soliciting Executive's involvement
in any business venture competitive with the Company. Executive shall not
conceal from or fail to disclose to the Company, or divert or exploit for her
own personal profit or that of others, any business opportunity or other
opportunity to acquire an interest in or a contractual relationship with any
person or entity where such person or entity is in the Company's line of
business or where such contractual relationship involves the acquisition of
real estate and which would be considered a feasible and advantageous
opportunity or acquisition for the Company. Upon termination of this
Agreement, Executive will deliver to the Company all tangible displays and
repositories of customer and supplier lists, files, records of research,
proposals, reports, memoranda, business methods and techniques, computer
software and programming, budgets and other financial plans and information,
and other materials or records or writings of any other type (including all
copies thereof) made, used or obtained by, or provided to, Executive,
containing any Proprietary Information, whether obtained prior to or
subsequent to the execution of this Agreement.
12. Non-Solicitation of Employees.
(a) Executive hereby agrees that for the two-year period following
the date of termination of this Agreement she will not (i) authorize her name
to be used by any person, partnership, corporation or other business entity,
or (ii) engage in or carry on, directly or indirectly, whether as advisor,
principal, agent, partner, officer, director, employee, stockholder,
associate or consultant of any person, partnership, corporation or other
business entity whose primary business is close-out retailing and is in
competition with the bargain close-out business carried on by the Company
or any of its Affiliates in Los Angeles, Orange, Riverside, San Bernardino,
Ventura, Santa Barbara or San Diego Counties in the State of California, or
any other county in California where business is then carried on or
conducted by the Company or any of its Affiliates, or in the States of
Arizona, Colorado, Alabama, Idaho, New Mexico, Texas, Nevada, Utah,
Georgia, Florida or Louisiana.
-8-
<PAGE> 9
(b) Executive further agrees that during the period from the date of
this Agreement until two years after the termination of the Agreement she shall
not contact any employees of the Company or supplier of merchandise to the
Company without advising the Company of such contact and she shall not
participate in any endeavor or activity which would disrupt the Company's or
any of its Affiliate's good business relationships with the employees,
suppliers and/or persons engaged in purchasing activities on behalf of the
Company or such Affiliate, and she shall not make any false, deceptive or
misleading statement or statements to any one or more of such suppliers or
such persons which would be likely to cause such disruptions.
(c) Any and all active and inactive real estate transactions,
involving the leasing of retail space or the purchase of land and/or
buildings, are the property of the Company. Within two years after the
termination of the Agreement, the Executive cannot attempt to stop or
interfere with the Company concluding these transactions and agreements.
13. Miscellaneous.
(a) Executive represents and warrants to the Company that she is not
now under any obligation of a contractual or other nature to any person, firm
or corporation which is inconsistent or in conflict with this Agreement, or
which would prevent, limit or impair in any way the performance by her of
her obligations hereunder.
(b) The waiver by either party of a breach of any provision of this
Agreement must be in writing and shall not operate or be construed as a waiver
of any subsequent breach thereof.
(c) This Agreement constitutes the entire Agreement of Executive and
the Company and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations between the parties with
respect to the subject matter hereof.
(d) Any and all notices referred to herein shall be sufficiently
furnished if in writing, and sent by registered or certified mail, postage
prepaid, or by facsimile transmission (but only if confirmation of receipt is
subsequently received by the sender either orally or in writing), or by
overnight courier (if such overnight courier guarantees next day delivery and
such notice is sent for delivery on a day on which such courier guarantees
such overnight delivery), to the respective parties at the following addresses
or such other address as either party may from time to time designate in
writing in the manner set forth in this Section 13(d):
-9-
<PAGE> 10
The Company:
Mac Frugal's Bargains o Close-outs Inc.
2430 E. Del Amo Boulevard
Dominguez, California 90220
Attention: Board of Directors and
Chief Executive Officer
Telephone Number: (310) 761-4200
Executive:
Patricia J. Wehner
803 Loma Drive
Hermosa Beach, California 90254
(e) If any portion or provision of this Agreement shall be invalid
or unenforceable for any reason, there shall be deemed to be made such minor
changes (and only such minor changes) in such provision or portion as are
necessary to make it valid and enforceable. The invalidity or
unenforceability of any provision or portion of this Agreement shall not
affect the validity or enforceability of any other provisions or portions
of this Agreement. If any such unenforceable or invalid provision or
provisions shall be rendered enforceable and valid by changes in applicable
law, then such provision or provisions shall be deemed to read as they
presently do in this Agreement without change.
(f) The rights and obligations of the parties hereto shall inure
to and be binding upon the parties hereto and their respective heirs,
successors and assigns.
(g) The waiver by either party of a breach of a provision of this
Agreement shall not operate or be construed as a waiver of a subsequent breach
hereof.
(h) This Agreement is intended to and shall be governed by, and
interpreted under and construed in accordance with, the laws of the State of
California, without reference to any conflict of laws or principles.
(i) If any litigation, arbitration or any other proceedings is
instituted in connection with or related to this Agreement, the non-prevailing
party in such litigation, arbitration or other proceeding shall pay the
expenses, including, without limitation, the attorneys' fees and expenses of
investigation, of the prevailing party.
-10-
<PAGE> 11
(j) Arbitration.
(i) Any controversy, claim or dispute between the parties
directly or indirectly concerning this Agreement or the breach hereof, or the
subject matter hereof (except in instances where only injunctive relief is
sought by the Company), shall be finally settled by arbitration held in Los
Angeles, California. The Company and Executive shall each select an
arbitrator from a panel of seven (7) arbitrators (the "Arbitration Pool")
obtained by the Company from the Federal Mediation and Conciliation Service
within thirty (30) days of receiving written notice from either party
demanding any such proceeding. Such two chosen arbitrators shall agree on a
third arbitrator from the Arbitration Pool within fifteen days thereafter.
In the event an agreement has not been reached on the third arbitrator by the
end of such fifteen-day period, the third arbitrator shall be chosen by the
American Arbitration Association. The arbitration shall be held and a final
decision reached within 30 days thereafter. The decision of a majority of the
three chosen arbitrators shall be final and conclusive on the parties, and there
shall be no appeal therefrom. A decision of the arbitrators may be enforced
by the prevailing party in a court of competent jurisdiction. All other
issues in connection with such arbitration shall be in accordance with the
Rules of the American Arbitration Association.
(ii) The parties hereto agree that an action to compel
arbitration pursuant to this Agreement may be brought in any appropriate court
and in connection therewith the laws of the State of California shall control.
Application may also be made to such court for confirmation of any decision or
award of the arbitrators but only if necessary to effectuate such decision or
award. The parties hereto hereby consent to the jurisdiction of the
arbitrators and of such court and waive any objection to the jurisdiction of
such arbitrators or court.
(k) The Company and Executive expressly agree that the provisions of
Sections 11, 12 and 13 shall survive the termination of this Agreement.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE COMPANY: MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
By: LEONARD S. WILLIAMS
------------------------------
Leonard S. Williams
Chief Executive Officer
EXECUTIVE:
PATRICIA J. WEHNER
------------------------------
Patricia J. Wehner
-12-
<PAGE> 1
Exhibit 10.26
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of October 5, 1993
among
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.,
WEST COAST LIQUIDATORS, INC.,
PNS STORES, INC.,
THE LENDERS LISTED HEREIN,
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as Administrative Agent
and
CONTINENTAL BANK N.A.
as Co-Agent
<PAGE> 2
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
WEST COAST LIQUIDATORS, INC.
PNS STORES, INC.
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of October 5, 1993
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1. DEFINITIONS 2
1.1 Certain Defined Terms 2
1.2 Computation of Time Periods 27
1.3 Accounting Terms 28
1.4 Other Definitional Provisions 28
Section 2. AMOUNT AND TERMS OF COMMITMENTS
AND LOANS 28
2.1 Loans 28
2.2 Making the Loan 32
2.3 Fees 40
2.4 Voluntary Reductions of Commitments 40
2.5 Repayment 41
2.6 Optional and Mandatory Prepayments 41
2.7 Interest 43
2.8 Interest Rate Determination and Protection 44
2.9 Voluntary Conversion or Continuation of Loans 45
2.10 Increased Costs and Funding Losses 47
2.11 Payments and Computations 49
2.12 Taxes 50
2.13 Sharing of Payments, Etc. 53
2.14 Use of Proceeds 54
2.15 Illegality 54
2.16 Letters of Credit 55
2.17 Evidence of Debt; Bid Notes 63
2.18 Obligations Joint and Several 64
2.19 Contribution Among Borrowers 65
2.20 Financial Condition of Borrowers 65
2.21 Extension of Revolver Maturity Date 66
2.22 Existing Loans and Existing Letters of Credit 66
Section 3. CONDITIONS WITH RESPECT TO LOANS
AND LETTERS OF CREDIT 67
3.1 Conditions to Initial Loans 67
3.2 Conditions to All Loans 69
3.3 Conditions to All Letters of Credit 70
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 4. REPRESENTATIONS AND WARRANTIES 71
4.1 Organization, Powers, Good Standing and
Subsidiaries 71
4.2 Authorization of Borrowing, etc. 72
4.3 Financial Condition 73
4.4 Changes, Etc. 73
4.5 Litigation; Adverse Facts 73
4.6 Payment of Tax 74
4.7 Materially Adverse Agreements; Performance 74
4.8 Governmental Regulation 75
4.9 Securities Activities 75
4.10 Employee Benefit Plans 75
4.11 Patents, Trademarks and Licenses 75
4.12 Title to Properties; Liens 76
4.13 Environmental Protection 76
4.14 Labor Matters 78
4.15 Disclosure 78
4.16 No Partnerships or Joint Ventures 79
Section 5. AFFIRMATIVE COVENANTS 79
5.1 Financial Statements and Other Reports 79
5.2 Corporate Existence, etc. 84
5.3 Payment of Taxes and Claims; Tax Consolidation 84
5.4 Maintenance of Properties; Insurance 85
5.5 Equal Security for Obligations; No Further
Negative Pledges 85
5.6 Inspection; Records, etc. 86
5.7 Compliance with Laws, etc. 86
5.8 Further Assurances 86
5.9 Environmental Notice and Inspection 87
Section 6. NEGATIVE COVENANTS 89
6.1 Indebtedness 89
6.2 Liens 90
6.3 Investments 91
6.4 Contingent Obligations 92
6.5 Restricted Junior Payments 92
6.6 Financial Covenants 93
6.7 Restriction on Fundamental Changes 93
6.8 Restriction on Asset Sales 94
6.9 Sales and Lease-Backs 95
6.10 Sale or Discount of Receivables 95
6.11 Transactions with Stockholders and Affiliates 95
6.12 Disposal of Subsidiary Stock 96
6.13 Limitation on Consolidated Capital Expenditures 96
6.14 Conduct of Business 96
6.15 Independence of Covenants 97
6.16 Use of Proceeds 97
Section 7. EVENTS OF DEFAULT 97
7.1 Failure to Make Payments When Due 97
7.2 Breach of Warranty 97
7.3 Breach of Covenants 97
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
7.4 Breach of Other Agreements 98
7.5 Bankruptcy 98
7.6 Judgments 99
7.7 Dissolution 99
7.8 ERISA 100
7.9 Control of the Borrowers 101
Section 8. THE ADMINISTRATIVE AGENT; CO-AGENTS 104
8.1 Appointment and Authorization 104
8.2 Delegation of Duties 104
8.3 Liability of Administrative Agent 104
8.4 Reliance by Administrative Agent 105
8.5 Notice of Default 106
8.6 Credit Decision 106
8.7 Indemnification 107
8.8 Administrative Agent in Individual Capacity 108
8.9 Successor Administrative Agent 108
8.10 Co-Agents 109
Section 9. THE LENDERS' REPRESENTATIONS 109
Section 10. MISCELLANEOUS 109
10.1 Amendments, Etc. 109
10.2 Notices, Etc. 110
10.3 No Waiver; Remedies 111
10.4 Costs and Expenses 111
10.5 Right of Set-off 111
10.6 Indemnification 112
10.7 Binding Effect 113
10.8 Assignments and Participations 113
10.9 Severability 117
10.10 Survival of Warranties and Certain Agreements 117
10.11 Headings 117
10.12 Applicable Law; Jurisdiction; Waiver of Jury
Trial 117
10.13 Termination of Collateral Documents; Release of
Security 118
10.14 Execution in Counterparts; Effectiveness 119
10.15 Obligations Several 119
10.16 Complete Agreement 119
SIGNATURE PAGES
</TABLE>
iii
<PAGE> 5
EXHIBITS
I FORM OF NOTICE OF BORROWING (1.1)
II FORM OF NOTICE OF CONVERSION/CONTINUATION (1.1)
III FORM OF BID NOTE (1.1)
IV FORM OF COMPETITIVE BID REQUEST (2.2E)
V FORM OF COMPETITIVE BID (2.2E)
VI FORM OF COMPLIANCE CERTIFICATE (1.1)
VII FORM OF OPINIONS OF COUNSEL TO BORROWERS (3.1)
VIII FORM OF OPINION OF O'MELVENY & MYERS (3.1)
IX FORM OF ASSIGNMENT AND ACCEPTANCE (1.1)
iv
<PAGE> 6
SCHEDULES
A APPLICABLE LENDING OFFICES
B SUBSIDIARIES
C PATENT, TRADEMARK AND COPYRIGHT DISCLOSURE
D ENVIRONMENTAL DISCLOSURE
E RESTRICTED JUNIOR PAYMENTS
F EXISTING INDEBTEDNESS AND LIENS
G EXISTING INVESTMENTS
H EXISTING CONTINGENT OBLIGATIONS
I CONFLICTS DISCLOSURE
J LITIGATION DISCLOSURE
K SPECIFIED TRADEMARKS
v
<PAGE> 7
MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC.
WEST COAST LIQUIDATORS, INC.
PNS STORES, INC.
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of October 5, 1993
This Amended and Restated Credit Agreement is
dated as of October 5, 1993, and is entered into by and
among MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC., a Delaware
corporation (the "Company"), WEST COAST LIQUIDATORS, INC., a
California corporation ("WCL"), PNS STORES, INC., a
California corporation ("PNS") (the Company, WCL and PNS are
sometimes referred to herein individually as a "Borrower"
and collectively as the "Borrowers"), the LENDERS listed on
the signature pages hereof (such lenders, together with each
Person that may become a party hereto pursuant to subsection
10.8 hereof, are referred to herein individually as a
"LENDER" and collectively as the "LENDERS"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as
administrative agent for the Lenders and the Issuing Banks
(in such capacity, the "ADMINISTRATIVE AGENT") and
CONTINENTAL BANK N.A. as co-agent (in such capacity, the
"CO-AGENT").
PRELIMINARY STATEMENTS
A. As of May 15, 1991, the Borrowers entered
into a Credit Agreement with certain lenders (the "EXISTING
LENDERS"), BofA (as successor by merger to Security Pacific
National Bank), as agent and The First National Bank of
Chicago, as co-agent (as amended to the date hereof, the
"EXISTING CREDIT AGREEMENT").
B. The Borrowers desire to amend and restate the
Existing Credit Agreement to provide, among other things,
(i) that the Lenders extend certain credit facilities to the
Borrowers and that the Issuing Banks issue Letters of Credit
for the account of the Borrowers, (ii) for a bid loan
option, (iii) for performance-based pricing, and (iv) for
certain other changes and amendments.
C. Concurrently with the effectiveness of this
Agreement, the Collateral Documents (as defined in the
Existing Credit Agreement) shall be terminated and all Liens
pursuant to the Collateral Documents in favor of the agent
under the Existing Credit Agreement, in such capacity, or in
favor of any Existing Lender, in such capacity, shall be
terminated and released.
1
<PAGE> 8
NOW, THEREFORE, in consideration of the premises
and the agreements, provisions and covenants herein
contained, the Borrowers, the Lenders, the Administrative
Agent, the Co-Agent and the Issuing Banks agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS
The following terms used in this Agreement shall
have the following meanings:
"ABSOLUTE RATE" has the meaning assigned to
such term in subsection 2.2E(iii)(b)(IV).
"ABSOLUTE RATE AUCTION" means a solicitation
of Competitive Bids setting forth Absolute Rates
pursuant to subsection 2.2E.
"ABSOLUTE RATE BID LOAN" means a Bid Loan
that bears interest at a rate determined with
reference to the Absolute Rate.
"ADJUSTED EURODOLLAR RATE" means, for the Interest
Period for each Eurodollar Rate Loan comprising part of
the same Borrowing, an interest rate per annum equal to
the rate per annum obtained by dividing (a) the rate of
interest determined by the Administrative Agent to be
the arithmetic average of the rates per annum (rounded
upward to the nearest whole multiple of 1/100 of 1%
annum) at which deposits in U.S. dollars are offered by
each Reference Bank in London, England to prime banks
in the London interbank market at 11:00 A.M. (London
time) two Business Days before the first day of such
Interest Period in an amount substantially equal to the
Eurodollar Rate Loan comprising part of such Borrowing
and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage (as defined below) for such Interest
Period. If any Reference Bank fails to provide its
offered rate to the Administrative Agent, the Adjusted
Eurodollar Rate shall be determined on the basis of the
average of the offered rate(s) of the other Reference
Bank(s). The "EURODOLLAR RATE RESERVE PERCENTAGE" for
the Interest Period for each Eurodollar Rate Loan
comprising part of the same Borrowing means the reserve
percentage applicable two Business Days before the
first day of such Interest Period under regulations
issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including,
but not limited to, any emergency, supplemental or
2
<PAGE> 9
other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York City with
respect to liabilities or assets consisting of or
including eurocurrency liabilities (or with respect to
any other category of liabilities which includes
deposits by reference to which the interest rate on a
Eurodollar Rate Loan is determined) having a term equal
to such Interest Period. The Adjusted Eurodollar Rate
shall be adjusted automatically as of the effective
date of any change in the Eurodollar Rate Reserve
Percentage.
"ADMINISTRATIVE AGENT" means BofA, and any
successor thereto appointed pursuant to subsection 8.9.
"AFFILIATE", as applied to any Person, means any
other Person directly or indirectly controlling,
controlled by, or under common control with, that
Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms
"controlling", "controlled by" and "under common
control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to
direct or cause the direction of the management and
policies of that Person, whether through the ownership
of voting securities or by contract or otherwise.
"AGENT-RELATED PERSONS" means BofA and any
successor agent arising under subsection 8.9, together
with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of
such Persons and Affiliates.
"AGREED UPON CHARGE" has the meaning assigned to
that term in subsection 2.16E.
"AGREEMENT" means this Amended and Restated Credit
Agreement dated as of October 5, 1993, as it may
hereafter be amended, supplemented, restated or
otherwise modified from time to time.
"APPLICABLE LENDING OFFICE" means, with respect to
any Lender, such Lender's Domestic Lending Office in
the case of a Base Rate Loan and such Lender's
Eurodollar Lending Office in the case of a Eurodollar
Rate Loan.
"APPLICABLE MARGIN" means with respect to
Eurodollar Rate Loans and the fees payable with respect
to Standby Letters of Credit pursuant to subsection
2.16E(2), the relevant percentage per annum set forth
below:
3
<PAGE> 10
<TABLE>
<CAPTION>
Fixed Charge Coverage Ratio Applicable Margin
<S> <C>
Less than or equal to 1.25 0.750%
Greater than 1.25 but
less than 2.00 0.625%
Greater than or equal to 2.00 0.500%
</TABLE>
The Applicable Margin shall be determined by the
Fixed Charge Coverage Ratio set forth in the relevant
Applicable Margin Certificate for the four-fiscal
quarter period covered by such Applicable Margin
Certificate. The Applicable Margin shall become
effective (including with respect to outstanding
Eurodollar Rate Loans) upon delivery of an Applicable
Margin Certificate and shall remain effective until the
delivery of the next Applicable Margin Certificate;
provided that if such Applicable Margin Certificate is
not delivered at the time required pursuant to
subsection 5.1(iii), the Applicable Margin shall equal
0.750% until the date such Applicable Margin
Certificate is delivered. Notwithstanding the
foregoing, from the Closing Date until delivery of the
Applicable Margin Certificate covering the four-fiscal
quarter period ending January 30, 1994, the Applicable
Margin shall equal 0.625%.
"APPLICABLE MARGIN CERTIFICATE" means an Officers'
Certificate delivered with the financial statements
required pursuant to subsection 5.1(i) and (ii) setting
forth in reasonable detail calculation of the Fixed
Charge Coverage Ratio for the four-fiscal quarter
period ending as of the Fiscal Quarter End of the last
fiscal quarter covered by such financial statements.
"ASSET SALE" means the sale, transfer or other
disposition by any Borrower or any of its Subsidiaries
to any Person of any asset of any such Borrower or any
such Subsidiary (other than sales, transfers or other
dispositions of Inventory in the ordinary course of
business and obsolete equipment in the ordinary course
of business for which aggregate consideration for all
such sales, transfers and dispositions of such
equipment does not exceed $1,000,000 per Fiscal Year).
"ASSIGNMENT AND ACCEPTANCE" means an assignment
and acceptance entered into by a Lender and an Eligible
Assignee, and accepted by the Administrative Agent, in
substantially the form of Exhibit IX hereto.
"ATTORNEY COSTS" means and includes all reasonable
fees and disbursements of any law firm or other
external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
4
<PAGE> 11
"AUTHORIZED PERSON" means an officer or employee
of a Borrower designated by the President, an Executive
Vice President or a Senior Vice President of the
Borrower making such designation, in a certificate
delivered to the Administrative Agent on the Closing
Date as being authorized to give Notices of Borrowing,
Notices of Continuation/Conversion or requests for
Letters of Credit, which certificate may be amended
from time to time by the President, any Executive Vice
President or any Senior Vice President of such Borrower
to add or subtract names therefrom.
"BANKRUPTCY CODE" means Title 11 of the United
States Code entitled "Bankruptcy" as now and hereafter
in effect, or any successor statute.
"BASE RATE" means, for any period, a fluctuating
interest rate per annum as shall be in effect from time
to time which rate per annum shall at all times be
equal to the higher of:
(a) the rate of interest announced publicly
by BofA in San Francisco, California, from time to
time, as BofA's "reference rate". It is a rate
set by BofA based upon various factors including
BofA's costs and desired return, general economic
conditions and other factors, and is used as a
reference point for pricing some loans, which may
be priced at, above, or below such announced rate;
and
(b) 0.50% per annum above the latest Federal
Funds Rate.
Any change in the reference rate announced by
BofA shall take effect at the opening of business
on the day specified in the public announcement of
such change.
"BASE RATE LOAN" means a Committed Loan which
bears interest as provided in subsection 2.7A.
"BID BORROWING" means a Borrowing hereunder
consisting of one or more Bid Loans made to the
Borrowers on the same day by one or more Lenders.
"BID LOAN" means a Loan by a Lender to the
Borrowers under subsection 2.1C, which may be a
LIBOR Bid Loan or an Absolute Rate Bid Loan.
"BID LOAN LENDER" means, in respect of any
Bid Loan, the Lender making such Loan to the
Borrowers.
5
<PAGE> 12
"BID NOTE" means a promissory note issued pursuant
to subsection 2.17D payable to the order of a Lender in
substantially the form of Exhibit III annexed hereto.
"BOfA" means Bank of America National Trust and
Savings Association, a national banking association.
"BORROWER" means any one or more of the Company,
WCL or PNS.
"BORROWING" means a borrowing consisting of Loans
made on the same day, and may be a Bid Borrowing or a
Committed Borrowing.
"BUSINESS DAY" means (i) for all purposes other
than as covered by clause (ii) below, any day excluding
Saturday, Sunday and any day which is a legal holiday
under the laws of the State of New York or the State of
California or is a day on which banking institutions
located in either state are authorized by law or other
governmental action to close and (ii) with respect to
all notices, determinations, fundings and payments in
connection with Eurodollar Rate Loans and LIBOR Bid
Loans, any day which is a Business Day described in
clause (i) and which is also a day for trading by and
between banks in Dollar deposits in the Eurodollar
market.
"CAPITAL ADEQUACY REGULATION" means any guideline,
request or directive of any central bank or other
Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in
each case, regarding capital adequacy of any bank or of
any corporation controlling a bank.
"CAPITAL LEASE", as applied to any Person, means
any lease of any property (whether real, personal or
mixed) by that Person as a lessee that, in conformity
with GAAP, should be accounted for as a capital lease
on the balance sheet of that Person.
"CASH" means money, currency or a credit balance
in a deposit account.
"CASH COLLATERAL ACCOUNT" has the meaning assigned
to that term in the penultimate paragraph of Section 7.
"CASH EQUIVALENTS" means (i) marketable direct
obligations issued or unconditionally guarantied by the
United States Government or issued by any agency
thereof and backed by the full faith and credit of the
United States, in each case maturing within one year
from the date of acquisition thereof; (ii) marketable
6
<PAGE> 13
direct obligations issued by any state of the United
States of America or any political subdivision of any
such state or any public instrumentality thereof
maturing within one year from the date of acquisition
thereof and, at the time of acquisition, either (a)
having a rating of at least "A2" by Standard & Poor's
Corporation or at least "P2" by Moody's Investors
Service, Inc. or an equivalent long-term debt rating or
(b) supported by standby letters of credit issued by
any Lender; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at
the time of acquisition, having a rating of at least
"A2" by Standard & Poor's Corporation and at least "P2"
by Moody's Investors Service, Inc.; (iv) certificates
of deposit or bankers' acceptances maturing within one
year from the date of acquisition thereof issued by any
Lender or by any other commercial bank organized under
the laws of the United States of America or any state
thereof or the District of Columbia having combined
capital and surplus of not less than $200,000,000;
(v) repurchase agreements with any commercial bank
organized under the laws of the United States of
America or any state thereof or the District of
Columbia having combined capital and surplus of not
less than $200,000,000, with any Lender or with any
primary dealer or investment bank with its long-term
debt rated at least "A-" by Standard & Poor's
Corporation and at least "A3" by Moody's Investors
Service, Inc. and having combined capital and surplus
of not less than $200,000,000, in each case relating to
marketable direct obligations issued or unconditionally
guarantied by the United States Government or issued by
any agency thereof and backed by the full faith and
credit of the United States; provided, that the terms
of such agreements comply with the guidelines set forth
in the Federal Financial Institutions Examination
Council Supervisory Policy-Repurchase Agreements of
Depository Institutions With Securities Dealers and
Others as adopted by the Comptroller of the Currency on
October 31, 1985; and (vi) money market mutual funds
organized under the laws of the United States of
America or any state thereof or the District of
Columbia that invest primarily in any of the types of
Cash Equivalents defined in clauses (i) through (v) of
this definition; provided, that in each case any
investment in such mutual funds by its terms requires,
or permits the holder of such investment at its option
to require, repayment, redemption or repurchase thereof
on an overnight basis from the date of acquisition
thereof.
"CO-AGENT" has the meaning assigned to such term
in the first paragraph of this Agreement.
7
<PAGE> 14
"CLEAN-DOWN DEBT" means, as at any date of
determination, the sum of (i) the outstanding Loans,
(ii) that portion of the Letter of Credit Usage
consisting of Unreimbursed drawings under Letters of
Credit, and (iii) outstanding Indebtedness of the
Borrowers permitted under subsection 6.1(x).
"CLEAN-DOWN PERIOD" has the meaning assigned to
such term in subsection 2.1A.
"CLOSING DATE" means the date on or before
October 15, 1993 that is the date under this Agreement
on which the initial Loans are made and the conditions
set forth in subsection 3.1 are satisfied or waived.
"COLLATERAL DOCUMENTS" means the Collateral
Documents (as such term is defined in the Existing
Credit Agreement) outstanding immediately prior to the
Closing Date.
"COMMERCIAL LETTERS OF CREDIT" means Letters of
Credit issued in favor of the Borrowers for the purpose
of providing the principal payment mechanism in
connection with the purchase of Inventory by the
Borrowers in the ordinary course of business.
"COMMITMENT" of any Lender means such Lender's
Revolving Commitment and with respect to the Swing Line
Lender, its Swing Line Commitment, and the
"Commitments" of any Lender means the total of all the
Commitments of such Lender.
"COMMITTED BORROWING" means a Borrowing hereunder
consisting of Committed Loans made on the same day and,
in the case of Eurodollar Rate Loans, having the same
Interest Periods.
"COMMITTED LOAN" means a Revolving Loan made by a
Lender under subsection 2.1A, or a Swing Line Loan made
by the Swing Line Lender under subsection 2.1B and may
be a Eurodollar Rate Loan or a Base Rate Loan (each of
which shall be a "TYPE" of Loan).
"COMPANY" means Mac Frugal's Bargains o Close-Outs
Inc.
"COMPETITIVE BID" means an offer by a Lender
to make a Bid Loan in accordance with subsection
2.2E(ii).
"COMPETITIVE BID REQUEST" has the meaning
assigned to such term in subsection 2.2E(i).
8
<PAGE> 15
"COMPLIANCE CERTIFICATE" means a certificate
substantially in the form of Exhibit VI annexed hereto,
delivered to the Lenders by the Borrowers pursuant to
subsection 5.1(iii).
"CONSOLIDATED", when used with respect to any of
the terms defined herein, refers to such terms as
reflected in a consolidation of the accounts of the
Company and its Subsidiaries in conformity with GAAP
(including giving effect to the elimination of all
intercompany items in conformity with GAAP).
"CONSOLIDATED ADJUSTED CASH FLOW" means, for any
period, the sum of the amounts for such period of
(i) Consolidated Net Income, (ii) depreciation expense,
(iii) amortization expense with respect to all
intangibles of the Company and its Subsidiaries
(determined on a Consolidated basis in conformity with
GAAP), (iv) Consolidated Interest Expense (net of
interest income), (v) Consolidated Operating Lease
Payments actually paid during such period,
(vi) increases in deferred income taxes, (vii) non-cash
extraordinary losses and non-cash charges reducing
Consolidated Net Income, minus the sum of (x) decreases
in any deferred income taxes for such period,
(y) Consolidated Capital Expenditures for such period,
and (z) non-cash extraordinary gains increasing
Consolidated Net Income for such period.
"CONSOLIDATED ASSETS" means, as at any date of
determination, the total assets of the Company and the
Subsidiaries on a Consolidated basis determined in
conformity with GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any
period, the expenditures (excluding capitalized
interest), whether paid in cash or accrued as a
liability, including the portion of Capital Leases that
is capitalized on the Consolidated balance sheet of the
Company and its Subsidiaries (but excluding Capital
Leases resulting from sale and leasebacks consummated
within the same 12 month period in which the underlying
property has been acquired), by the Company and its
Subsidiaries during that period that are or should be
included in "capital expenditures", "additions to
property, plant or equipment" or comparable items in
the Consolidated cash flow statement of the Company and
its Subsidiaries; provided, however, that expenditures
of insurance or condemnation proceeds used to rebuild
or replace destroyed or lost properties relating to
such insurance or condemnation proceeds shall not be
included as Consolidated Capital Expenditures.
9
<PAGE> 16
"CONSOLIDATED CURRENT ASSETS" means, as at any
date of determination, the Current Assets of the
Company and its Subsidiaries on a Consolidated basis
determined in conformity with GAAP.
"CONSOLIDATED CURRENT LIABILITIES" means, as at
any date of determination, the current liabilities of
the Company and its Subsidiaries on a Consolidated
basis determined in conformity with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means,
for any period, the ratio of (A) Consolidated Adjusted
Cash Flow for such period to (B) Consolidated Fixed
Charges for such period.
"CONSOLIDATED FIXED CHARGES" means, for any
period, the sum of (i) Consolidated Interest Expense
(net of interest income) for such period, (ii) the
aggregate regularly scheduled principal installments of
all Consolidated Funded Debt paid or payable during
such period, and (iii) Consolidated Operating Lease
Payments paid or payable during such period.
"CONSOLIDATED FUNDED DEBT" means, as at any date
of determination, the sum of (i) the outstanding Bid
Loans, (ii) the outstanding Revolving Loans, (iii) the
outstanding Swing Line Loans, (iv) that portion of the
Letter of Credit Usage consisting of unreimbursed
drawings under Letters of Credit, (v) the portion of
obligations with respect to Capital Leases which is
properly classified as a liability on the Consolidated
balance sheet of the Borrowers in conformity with GAAP,
(vi) Indebtedness of the Borrowers secured by real
property determined on a Consolidated basis in
conformity with GAAP and (vii) other Consolidated Long
Term Indebtedness.
"CONSOLIDATED INTEREST EXPENSE" means, for any
period, total interest expense (including that portion
attributable to Capital Leases in conformity with GAAP)
of the Company and its Subsidiaries for such period on
a Consolidated basis, including, without limitation,
net costs under Interest Rate Agreements and fees
payable to the Administrative Agent and the Lenders in
connection with the Loans (including, without
limitation, the commitment fees referred to in
subsection 2.3A and the fees referred to subsection
2.3B, other than fees paid on or prior to the Closing
Date).
"CONSOLIDATED LIABILITIES" means, as at any date
of determination, the total liabilities of the Company
and its Subsidiaries on a Consolidated basis determined
10
<PAGE> 17
in conformity with GAAP, including, without limitation,
(i) any balance sheet liability with respect to a
Pension Plan recognized pursuant to Financial
Accounting Standards Board Statements 87 or 88 and
(ii) any withdrawal liability under Section 4201 of
ERISA with respect to a withdrawal from a Multiemployer
Plan, as such liability may be set forth in a notice of
withdrawal liability under Section 4219 (and as
adjusted from time to time subsequent to the date of
such notice).
"CONSOLIDATED LONG TERM INDEBTEDNESS" means, at
any date of determination, (i) all Indebtedness
maturing one year or more from the date of creation
thereof, (ii) all Indebtedness directly or indirectly
renewable or extendible, at the option of the debtor,
by its terms or by the terms of any instrument or
agreement relating thereto, to a date one year or more
from the date of creation thereof and (iii) all
Indebtedness under a revolving credit or similar
agreement obligating the lender or lenders to extend
credit over a period of one year or more even though
such Indebtedness might otherwise conform to the
definition of Consolidated Current Liabilities.
"CONSOLIDATED NET INCOME" means, for any period,
the net income (or loss) of the Company and its
Subsidiaries on a Consolidated basis determined in
conformity with GAAP for such period taken as a single
accounting period; provided that there shall be
excluded (i) the income (or loss) of any Person (other
than a Subsidiary of the Company) in which any other
Person (other than the Company or any of its
Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other
distributions actually paid to the Company or any of
its Subsidiaries by such Person during such period,
(ii) the income (or loss) of any Person accrued prior
to the date it becomes a Subsidiary of the Company or
is merged into or consolidated with the Company or any
of its Subsidiaries or that Person's assets are
acquired by the Company or any of its Subsidiaries, and
(iii) the income of any Subsidiary (other than PNS and
WCL) of the Company to the extent that the declaration
or payment of dividends or similar distributions by
that Subsidiary of that income is not at the time
permitted by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to
that Subsidiary.
"CONSOLIDATED OPERATING LEASE PAYMENTS" means, for
any period, all rental payments and other amounts due
11
<PAGE> 18
under all Operating Leases of the Company and its
Subsidiaries during such period.
"CONSOLIDATED TANGIBLE ASSETS" means, at any date
of determination, (i) Consolidated Assets minus
(ii) goodwill, patents, trademarks and other
intellectual property, organizational expense, deferred
research and development costs, deferred marketing
expenses and other intangible assets of the Company and
its Subsidiaries (determined on a Consolidated basis in
conformity with GAAP) for the period commencing on the
Closing Date and ending on the date of such
determination.
"CONSOLIDATED TANGIBLE NET WORTH" means, at any
date of determination, the excess of Consolidated
Tangible Assets over Consolidated Liabilities.
"CONTINGENT OBLIGATION", as applied to any Person,
means any direct or indirect liability, contingent or
otherwise, of that Person with respect to any
Indebtedness, lease, dividend, letter of credit or
other obligation of another, including, without
limitation, any such obligation directly or indirectly
guarantied, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made,
or discounted or sold with recourse by that Person, or
in respect of which that Person is otherwise directly
or indirectly liable, including, without limitation,
any such obligation for which that Person is in effect
liable through any agreement (contingent or otherwise)
to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to
maintain the solvency or any balance sheet item, level
of income or other financial condition of the obligor
of such obligation, or to make payment for any
products, materials or supplies or for any
transportation, services or lease regardless of the
non-delivery or non-furnishing thereof, in any case if
the purpose or intent of such agreement is to provide
assurance that such obligation will be paid or
discharged, or that any agreements relating thereto
will be complied with, or that the holders of such
obligation will be protected (in whole or in part)
against loss in respect thereof. The amount of any
Contingent Obligation shall be equal to the amount of
the obligation so guarantied or otherwise supported.
"CONTRACTUAL OBLIGATION", as applied to any
Person, means any provision of any material indenture,
12
<PAGE> 19
mortgage, deed of trust, contract, undertaking,
agreement or other instrument to which that Person is a
party or by which it or any of its properties is bound
or to which it or any of its properties is subject.
"CONVERSION" and "CONVERT" and "CONVERTED" each
refers to a conversion of Eurodollar Rate Loans into
Base Rate Loans, or vice versa, in accordance with the
terms of this Agreement.
"CURRENT ASSETS" as applied to any Person, means,
at any date of determination, the total assets of such
Person that may be properly classified as current
assets in conformity with GAAP.
"DOLLARS" or the sign "$" means the lawful money
of the United States of America.
"DOMESTIC LENDING OFFICE" means, with respect to
any Lender, the office of such Lender specified as its
"Domestic Lending Office" opposite its name on Schedule
A hereto or in the Assignment and Acceptance pursuant
to which it became a Lender, or such other office of
such Lender as such Lender may from time to time
specify to the Borrowers and the Administrative Agent.
"ELIGIBLE ASSIGNEE" means (i) a commercial bank
organized under the laws of the United States, or any
State thereof and having a combined capital and surplus
of at least $500,000,000; (ii) a commercial bank
organized under the laws of any other country, or a
political subdivision thereof, and having a combined
capital and surplus of at least $500,000,000 provided
that (x) such bank is acting through a branch or agency
located in the United States or (y) such bank is
organized under the laws of a country that is a member
of the OECD or a political subdivision of such country;
and (iii) any Affiliate of a Lender, in each case that
is reasonably acceptable to the Administrative Agent;
provided, however, that no Affiliate of any Loan Party
shall be an Eligible Assignee.
"EMPLOYEE BENEFIT PLAN" means any Pension Plan,
any employee welfare benefit plan, or any other
employee benefit plan which is described in Section
3(3) of ERISA and which is maintained for employees of
the Borrowers or any ERISA Affiliate of the Borrowers.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all
liabilities, obligations, responsibilities, Remedial
Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and
expenses (including all reasonable fees, disbursements
13
<PAGE> 20
and expenses of counsel, expert and consulting fees and
costs of investigation and feasibility studies), fines,
penalties, sanctions and interest, incurred as a result
of any claim or demand, by any Person, whether based in
contract, tort, implied or express warranty, strict
liability, criminal or civil statute, including any
Hazardous Materials Law, permit, law, rule, regulation,
order or agreement with a governmental authority or
other Person, arising from environmental, health or
safety conditions related to, or the Release or
threatened Release by reason of, the past, present or
future operations of the Company or any of its
Subsidiaries.
"ENVIRONMENTAL LIEN" means any Lien in favor of
any Governmental Authority for Environmental
Liabilities and Costs.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and
any successor statute.
"ERISA AFFILIATE", as applied to any Person, means
(i) any corporation which is a member of a controlled
group of corporations within the meaning of Section
414(b) of the Internal Revenue Code of which that
Person is a member; (ii) any trade or business (whether
or not incorporated) which is a member of a group of
trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code
of which that Person is a member; and (iii) any member
of an affiliated service group within the meaning of
Section 414(m) or (o) of the Internal Revenue Code of
which that Person, any corporation described in clause
(i) above or any trade or business described in clause
(ii) above is a member.
"EURODOLLAR LENDING OFFICE" means, with respect to
any Lender, the office of such Lender specified as its
"Eurodollar Lending Office" opposite its name on
Schedule A hereto or in the Assignment and Acceptance
pursuant to which it became a Lender (or, if no such
office is specified, its Domestic Lending Office) or
such other office of such Lender as such Lender may
from time to time specify to the Borrowers and the
Administrative Agent.
"EURODOLLAR RATE LOAN" means a Committed Loan
which bears interest as provided in subsection 2.7B.
"EVENT OF DEFAULT" means each of the events set
forth in Section 7.
14
<PAGE> 21
"EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended from time to time, and any
successor statute.
"EXISTING CREDIT AGREEMENT" has the meaning
assigned to such term in the Preliminary Statements to
this Agreement.
"EXISTING LENDERS" has the meaning assigned to
such term in the Preliminary Statements to this
Agreement.
"EXISTING LETTERS OF CREDIT" has the meaning
assigned to such term in subsection 2.22.
"EXISTING LOANS" has the meaning assigned to such
term in subsection 2.22.
"FEDERAL FUNDS RATE" means, for any period, the
rate set forth in the weekly statistical release
designated as H.15(519), or any successor publication,
published by the Federal Reserve Board (including any
such successor, "H.15(519)") for such day opposite the
caption "Federal Funds (Effective)". If on any
relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set
forth in the daily statistical release designated as
the Composite 3:30 p.m. Quotations for U.S. Government
Securities, or any successor publication, published by
the Federal Reserve Bank of New York (including any
such successor, the "COMPOSITE 3:30 P.M. QUOTATION")
for such day under the caption "Federal Funds Effective
Rate". If on any relevant day the appropriate rate for
such previous day is not yet published in either
H.15(519) or the Composite 3:30 p.m. Quotations, the
rate for such day will be the arithmetic mean of the
rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York time) on
that day be each of three leading brokers of Federal
funds transactions in New York City selected by the
Administrative Agent.
"FEDERAL RESERVE BOARD" means the Board of
Governors of the Federal Reserve System.
"FISCAL QUARTER END" means for any fiscal quarter
in a Fiscal Year of the Borrowers, the last day of such
fiscal quarter which shall be determined in accordance
with GAAP applied on a consistent basis.
"FISCAL YEAR" means the fiscal year of the
Borrowers, which shall be the 52 or 53 week period
ending on the Sunday closest to January 31 in each year
15
<PAGE> 22
or such other period as the Borrowers may designate and
the Requisite Lenders may approve in writing, such
approval not to be unreasonably withheld and, if such
approval is withheld, with notice to the Borrowers
specifying the basis therefor.
"FUNDING DATE" means the date of the funding of a
Loan.
"GAAP" means generally accepted accounting
principles set forth in the opinions and pronouncements
of the Accounting Principles Board of the American
Institute of Certified Public Accountants and
statements and pronouncements of the Financial
Accounting Standards Board or in such other statements
by such other entity as may be approved by a
significant segment of the accounting profession, which
are applicable to the circumstances as of the date of
determination.
"GOVERNMENTAL AUTHORITY" means any nation or
government, any state or other political subdivision
thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or
administrative functions of or pertaining to
government, and any corporation or other entity owned
or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"HAZARDOUS MATERIALS" means (i) any chemical,
material or substance defined as or included in the
definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous
waste," "restricted hazardous waste," or "toxic
substances" or words of similar import under any
applicable local, state or federal law or under the
regulations adopted or promulgated pursuant thereto,
including, without limitation, Hazardous Materials
Laws, (ii) any oil, petroleum or petroleum derived
substance, any drilling fluids, produced waters and
other wastes associated with the exploration,
development or production of crude oil, any flammable
substances or explosives, any radioactive materials,
(iii) asbestos in any form which is or could become
friable, urea formaldehyde foam insulation, electrical
equipment which contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in
excess of fifty parts per million, and (iv) any other
chemical, material or substance, exposure to which may
or could pose a hazard to the health and safety of the
owners or occupants of or any Persons surrounding any
16
<PAGE> 23
of the properties of the Company or any of its
Subsidiaries.
"HAZARDOUS MATERIALS LAWS" means all statutes,
ordinances, orders, rules, regulations, plans or
decrees and the like relating to health or welfare or
protection of the environment, including, without
limitation, those relating to fines, orders,
injunctions, penalties, damages, contribution, cost
recovery compensation, losses or injuries resulting
from the Release or threatened Release of Hazardous
Materials and to the generation, use, storage,
transportation, or disposal of Hazardous Materials, in
any manner applicable to the Company or any of its
Subsidiaries or any of their respective properties,
including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act
(42 U.S.C. Section 9601 et seq.), the Hazardous Material
Transportation Act (49 U.S.C. Section 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Federal Water Pollution Control
Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42
U.S.C. Section 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. Section 2601 et seq.), the Occupational Safety
and Health Act (29 U.S.C. Section 651 et seq.), and the
Emergency Planning and Community Right-to-Know Act (42
U.S.C. Section 11001 et seq.), each as amended or
supplemented, and any analogous future or present
local, state and federal statutes and regulations
promulgated pursuant thereto, each as in effect as of
the date of determination.
"INDEBTEDNESS", as applied to any Person, means
(i) all indebtedness for borrowed money, (ii) that
portion of obligations with respect to Capital Leases
which is properly classified as a liability on a
balance sheet in conformity with GAAP, (iii) notes
payable and drafts accepted representing extensions of
credit whether or not representing obligations for
borrowed money, (iv) any obligation owed for all or any
part of the deferred purchase price of property or
services which purchase price is due more than six
months from the date of incurrence of the obligation in
respect thereof or evidenced by a note or similar
written instrument, and (v) all similar indebtedness
secured by any Lien existing on any property or asset
owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by
that Person or is non-recourse to the credit of that
Person.
"INTEREST PAYMENT DATE" means, with respect to any
Eurodollar Rate Loan, or Bid Loan, the last day of each
17
<PAGE> 24
Interest Period applicable to such Loan and, with
respect to Base Rate Loans, the last Business Day of
each fiscal quarter, provided, however, that (a) if any
Interest Period for a Eurodollar Rate Loan or Bid Loan
exceeds three months, the date which falls three months
after the beginning of such Interest Period shall also
be an "Interest Payment Date" and (b) in respect of any
Bid Loan, such intervening days prior to the maturity
thereof as may be agreed between the Borrowers and the
applicable Bid Loan Lender shall also be "Interest
Payment Dates".
"INTEREST PERIOD" means, (a) with respect to each
Eurodollar Rate Loan comprising part of the same
Borrowing, the period commencing on the Funding Date of
such Eurodollar Rate Loan or the date of the Conversion
of any Base Rate Loan into such a Eurodollar Rate Loan
and ending on the last day of the period selected by
the Borrowers pursuant to the provisions below and,
thereafter, each subsequent period commencing on the
last day of the immediately preceding Interest Period
and ending on the last day of the period selected by
the Borrowers pursuant to the provisions below and
(b) with respect to any Bid Loan, a period commencing
on the Funding Date of such Bid Loan and ending on the
last day of the period selected by the Borrowers
pursuant to the provisions below. The duration of each
such Interest Period with respect to a Eurodollar Rate
Loan shall be one, two, three or six months (if
available), as the Borrowers may, upon notice received
by the Administrative Agent not later than 9:00 A.M.
(San Francisco time) on the third Business Day prior to
the first day of such Interest Period, select;
provided, however, that:
(i) no Interest Period with respect to any
Bid Loan shall exceed 183 days in the case of an
Absolute Rate Bid Loan and six months in the case
of a LIBOR Bid Loan;
(ii) whenever the last day of any Interest
Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding
Business Day; provided, however, that if such
extension would cause the last day of such
Interest Period to occur in the next following
calendar month, the last day of such Interest
Period shall occur on the next preceding Business
Day;
(iii) there shall be no more than fifteen
Interest Periods outstanding at any one time; and
18
<PAGE> 25
(iv) no Interest Period shall extend beyond
the Revolver Maturity Date.
"INTEREST RATE AGREEMENT" means any interest rate
swap agreement, interest rate cap agreement, interest
rate collar agreement or other similar agreement,
evidenced by an International Swap Dealers Association
form agreement, designed to protect the Borrowers
against fluctuations in interest rates; provided that
the counterparty to any such agreement shall be a
Lender or an Affiliate of a Lender.
"INTERNAL REVENUE CODE" means the Internal Revenue
Code of 1986, as amended from time to time, and any
successor statute.
"INVENTORY" means all of the Borrowers' now owned
and hereafter acquired goods, merchandise and other
personal property (including freight and handling costs
capitalized under GAAP), wherever located, to be
furnished under any contract of service or held for
sale or lease, all raw materials, work in process,
finished goods and materials and supplies of any kind,
nature or description which are or might be used or
consumed in a person's business or used in connection
with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, merchandise and
other personal property, and all documents of title or
other documents representing them.
"INVESTMENT", as applied to any Person, means any
direct or indirect purchase or other acquisition by
that Person of, or a beneficial interest in, stock or
other securities of any other Person, or any direct or
indirect loan, advance (other than advances to
employees or consultants for moving and travel
expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital
contribution by that Person to any other Person,
including all Indebtedness and accounts receivable from
that other Person which are not Current Assets or did
not arise from sales to that other Person in the
ordinary course of business. The amount of any
Investment (for purposes of the Dollar limitations set
forth in subsection 6.3) shall be the original cost of
such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with
respect to such Investment.
"INVITATION FOR COMPETITIVE BIDS" means a
solicitation for Competitive Bids and has the meaning
specified in subsection 2.2E(ii).
19
<PAGE> 26
"ISSUING BANK" means, with respect to a Letter of
Credit, the Lender selected by the applicable Borrower
to issue such Letter of Credit under this Agreement.
"LENDERS" means the Lenders listed on the
signature pages hereof and each Eligible Assignee that
shall become a party hereto pursuant to subsection
10.8.
"LETTER OF CREDIT" means any Commercial Letter of
Credit or Standby Letter of Credit which is hereafter
issued pursuant to this Agreement at the request of and
for the account of the Borrowers by an Issuing Bank.
"LETTER OF CREDIT USAGE" means, as at any date of
determination, the sum of (i) the maximum aggregate
amount that is or at any time thereafter may become
available for drawing under all Letters of Credit then
issued and outstanding plus (ii) the aggregate amount
of all drawings under Letters of Credit honored by the
Issuing Bank and not theretofore reimbursed by the
Borrowers.
"LEVERAGE RATIO" means, at any date of
determination, the ratio of (A) Consolidated
Liabilities to (B) Consolidated Tangible Assets.
"LIBOR" means the rate of interest per annum
determined by the Administrative Agent to be the
arithmetic mean (if such percentage is not a
multiple of 1/100th of one percent, rounded upward
to the nearest 1/100th of one percent) of the
rates of interest per annum notified to the
Administrative Agent by each Reference Bank as the
rate of interest (rounded upward to the nearest
1/100th of one-percent) at which dollar deposits
in an amount approximately equal to the aggregate
amount of LIBOR Bid Loans requested to be
borrowed, and having a maturity equal to such
Interest Period are offered to major banks in the
London interbank market at their request at or
about 11:00 a.m. (London time) on the second
Business Day before the commencement of such
Interest Period. If one of the Reference Banks
shall be unable or shall otherwise fail to notify
the Administrative Agent of such a rate, LIBOR
shall be determined on the basis of the rates as
notified by the remaining Reference Banks.
"LIBOR AUCTION" means a solicitation of
Competitive Bids setting forth a LIBOR Bid Margin
pursuant to subsection 2.2E.
20
<PAGE> 27
"LIBOR BID LOAN" means any Bid Loan that
bears interest at a rate determined with reference
to LIBOR.
"LIBOR BID MARGIN" has the meaning specified
in subsection 2.2E(iii)(b)(III).
"LIEN" means any lien, mortgage, pledge, security
interest, charge or encumbrance of any kind (including
any conditional sale or other title retention
agreement, any lease in the nature thereof, and any
agreement to give any security interest).
"LOAN" or "LOANS" means one or more of the Loans
made by the Lenders pursuant to subsection 2.1 and may
be a Committed Loan or a Bid Loan.
"LOAN DOCUMENTS" means this Agreement and the Bid
Notes.
"LOAN PARTIES" means the Borrowers.
"MARGIN STOCK" has the meaning assigned to that
term in Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material
adverse effect upon the business, operations,
properties, assets, business prospects or condition
(financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, or (ii) the material
impairment of the ability of any Loan Party to perform
or of the Lenders to enforce the Obligations.
"MULTIEMPLOYER PLAN" means a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA which is
maintained for employees of the Borrowers or any ERISA
Affiliate of the Borrowers.
"NET CASH PROCEEDS" means, in the case of any
Asset Sale, cash payments received (including any cash
received by way of deferred payment pursuant to a note
receivable or otherwise, but only as and when so
received) by any Loan Party from any Asset Sale (other
than liabilities assumed directly or indirectly by the
buyer) less (i) the amount of actual liabilities for
taxes (net of any amount of tax benefits) reasonably
anticipated by the Borrowers to be attributable to such
sale or other disposition, (ii) the amount of any
reserves against any liabilities associated with such
sale required to be retained by any Loan Party after
such sale or other disposition in conformity with GAAP
(but only for the period required to be retained as a
21
<PAGE> 28
reserve), (iii) the amount of Indebtedness secured
solely by the assets sold required to be repaid under
the terms thereof in connection with such Asset Sale
and (iv) the amount of fees and commissions payable to
persons other than any Loan Party or any Affiliate of
any Loan Party, and other costs and expenses related to
such sale or other disposition that are to be paid in
cash, in each case only to the extent customarily borne
by a seller in an arm's-length transaction or
reasonable in light of the applicable circumstances.
"NEW ORLEANS DISTRIBUTION CENTER" means WCL's
interest in the real property and improvements thereon
located at 3501 Jourdan Road, New Orleans, Louisiana.
"NOTICE OF BORROWING" means a notice substantially
in the form of EXHIBIT I annexed hereto with respect to
a proposed Borrowing.
"NOTICE OF CONVERSION/CONTINUATION" means a notice
substantially in the form of EXHIBIT II annexed hereto
delivered by the Borrowers to the Administrative Agent
pursuant to subsection 2.9.
"OBLIGATIONS" means all loans, advances, debts,
reimbursement obligations, liabilities, obligations,
covenants and duties owing by any Loan Party to any
Lender, the Administrative Agent, the Issuing Bank, any
Affiliate of any Lender or the Administrative Agent, or
Person entitled to indemnification pursuant to
subsection 10.6 of this Agreement, of any kind or
nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, and arising
under this Agreement, under any other Loan Document or
under any Interest Rate Agreements (other than interest
rate cap agreements), whether or not for the payment of
money, whether arising by reason of an extension of
credit, loan, guaranty, indemnification, foreign
exchange or interest rate swap transactions or in any
other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising
and however acquired. The term includes, without
limitation, all interest, charges, expenses, fees,
attorneys' fees and disbursements and any other sum
chargeable to any Loan Party under this Agreement, any
other Loan Document or any Interest Rate Agreements
(other than interest rate cap agreements).
"OECD" means the Organization for Economic
Cooperation and Development.
22
<PAGE> 29
"OFFICERS' CERTIFICATE" means a certificate
executed on behalf of any Loan Party, by its President,
its Chief Executive Officer, any Executive Vice
President or any Senior Vice President and by its Chief
Financial Officer, or its Treasurer or Controller, in
each case acting in such capacity.
"OPERATING LEASE" means, as applied to any Person,
any lease (including, without limitation, leases that
may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not
a Capital Lease other than any such lease under which
that Person is the lessor.
"PBGC" means the Pension Benefit Guaranty Corporation
(or any successor thereto).
"PENSION PLAN" means any employee plan which is
subject to Section 412 of the Internal Revenue Code and
which is maintained for employees of the Borrowers or
any ERISA Affiliate of the Borrowers, other than a
Multiemployer Plan.
"PERMITTED LIENS" means
(i) Liens for taxes, assessments or governmental
charges or claims the payment of which is not at the
time required by the covenant on payment of taxes;
(ii) Statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and
other similar Persons and other Liens imposed by law
incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith, if
such reserve or other appropriate provisions, if any,
as shall be required by GAAP shall have been made
therefor;
(iii) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social
security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-
of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);
(iv) Any attachment or judgment Lien, unless the
judgment it secures (a) shall not, within 30 days after
the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been
discharged within 30 days after the expiration of any
23
<PAGE> 30
such stay or (b) shall be in effect and a period of 10
days or less remains prior to any proposed sale
thereunder; and
(v) Easements, rights of way, servitudes or
zoning or building restrictions and other minor
encumbrances on real property which do not in the
aggregate materially interfere with or impair the
operation of such property for the purposes for which
it is or may reasonably be expected to be used.
"PERSON" means and includes natural persons,
corporations, limited partnerships, general
partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other
organizations, whether or not legal entities, and
governments and agencies and political subdivisions
thereof.
"PNS" means PNS Stores, Inc., a California
corporation and a wholly owned Subsidiary of the
Company.
"POTENTIAL EVENT OF DEFAULT" means a condition or
event which, after notice or lapse of time or both,
would constitute an Event of Default if that condition
or event were not cured or waived within any applicable
grace or cure period.
"PRO RATA SHARE" means, with respect to any of the
Commitments of each Lender (other than the Swing Line
Commitment of the Swing Line Lender), or, if such
Commitment has terminated, the Loans or participations
held by such Lender with respect to such Commitment,
the percentage designated as such Lender's Pro Rata
Share under the name of such Lender on the applicable
signature page of this Agreement with respect to such
Commitment, in each case as such percentage may be
adjusted as a result of assignments permitted under
subsection 10.8 and evidenced as provided in subsection
2.17.
"REFERENCE BANKS" means BofA and Continental Bank N.A.
"REFUNDED SWING LINE LOANS" has the meaning
specified in subsection 2.1B.
"REGISTER" has the meaning specified in subsection
10.8.
24
<PAGE> 31
"RELEASE" means any release, spill, emission,
leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration of any
Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the
abandonment or disposal of any barrels, containers or
other closed receptacles containing any Hazardous
Materials) or into or out of any property owned, used
or operated by the Company or any of its Subsidiaries,
including the movement of any Hazardous Materials
through or in the air, soil, surface water, groundwater
or property.
"REMEDIAL ACTION" means all actions required to
(i) clean up, remove, treat or in any other way address
Hazardous Materials in the indoor or outdoor
environment; (ii) prevent the Release or threat of
Release or minimize the further Release of Hazardous
Materials so they do not migrate or endanger or
threaten to endanger public health or welfare or the
indoor or outdoor environment; or (iii) perform pre-
remedial studies and investigations and post-remedial
monitoring and care.
"REQUISITE LENDERS" means Persons holding at any
time more than sixty-six and two-thirds percent
(66-2/3%) of the sum of the aggregate Commitments or,
in the event that the Commitments have terminated, the
Total Utilization of Revolving Commitments.
"RESPONSIBLE OFFICER" means any of the Chief
Executive Officer, any Senior Vice President, any
Executive Vice President, the Chief Financial Officer
or the Controller.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend
or other distribution, direct or indirect, on account
of any shares of any class of stock of the Company or
any of its Subsidiaries now or hereafter outstanding,
except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any
repurchase, redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class
of stock of the Company or any of its Subsidiaries now
or hereafter outstanding, (iii) any payment or
prepayment of principal of, premium, if any, or
interest on, redemption, purchase, retirement,
defeasance, sinking fund or similar payment with
respect to, any Indebtedness owed to shareholders of
the Company or any of its Subsidiaries, and (iv) any
payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to
25
<PAGE> 32
acquire shares of any class of stock of the Company or
any of its Subsidiaries now or hereafter outstanding.
"REVOLVER MATURITY DATE" means the earlier of
(i) October 5, 1996 (or such other date as the Lenders
may consent to pursuant to subsection 2.21), or if such
date is not a Business Day, the Business Day next
succeeding such date, and (ii) the date upon which the
Revolving Commitments terminate in accordance with
subsection 2.4 or any other provision contained in this
Agreement.
"REVOLVING COMMITMENT" means the commitment or
commitments of a Lender or the Lenders to make
Revolving Loans as set forth in subsection 2.1A. The
amount of the original Commitment of each Lender is set
forth on the applicable signature page of this
Agreement.
"REVOLVING LOAN" means a Loan made by a Lender to
the Borrowers pursuant to subsection 2.1A, which Loan
may be a Base Rate Loan or a Eurodollar Rate Loan.
"SEC" means the Securities and Exchange
Commission, and any successor thereto.
"SECURITIES ACT" means the Securities Act of 1933
as amended from time to time, and any successor
statute.
"SPECIFIED TRADEMARKS" means the trademarks of the
Borrowers identified on Schedule K, as such Schedule K
may be amended from time to time.
"STANDBY LETTERS OF CREDIT" means any Letter of
Credit which is not a Commercial Letter of Credit.
"SUBSIDIARY", with respect to any Person, means
any corporation, association or other business entity
of which more than 50% of the total voting power of
shares of stock entitled to vote in the election of
directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"SWING LINE COMMITMENT" means the commitment of
the Swing Line Lender to make Swing Line Loans as set
forth in subsection 2.1B.
"SWING LINE LENDER" means BofA, or any successor
Swing Line Lender appointed in accordance with
subsection 2.1B.
26
<PAGE> 33
"SWING LINE LOAN" means a Loan made by the Swing
Line Lender to the Borrowers pursuant to subsection
2.1B, which Swing Line Loan shall be a Base Rate Loan.
"TERMINATION EVENT" means (i) a "Reportable Event"
described in Section 4043 of ERISA and the regulations
issued thereunder (other than a "Reportable Event" not
subject to the provision for 30-day notice to the PBGC
under such regulations), or (ii) the withdrawal of any
Borrower or any of its ERISA Affiliates from a Pension
Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or
(iii) the distribution of a notice of intent to
terminate a Pension Plan or the treatment of a Pension
Plan amendment as a termination under Section 4041 of
ERISA, or (iv) the institution of proceedings by the
PBGC to terminate, or to appoint a trustee to
administer, a Pension Plan or (v) any other event or
condition which might reasonably be expected to
constitute grounds under ERISA for the termination of,
or the appointment of a trustee to administer, any
Pension Plan, or (vi) the complete or partial
withdrawal from a Multiemployer Plan by any Borrower or
any ERISA Affiliate that results in liability under
Section 4201 of ERISA or the receipt by any Borrower or
any ERISA Affiliate of notice from a Multiemployer Plan
that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of
ERISA, or (vii) the imposition of a lien pursuant to
Section 412(n) of the Internal Revenue Code.
"TOTAL UTILIZATION OF REVOLVING COMMITMENTS"
means, as at any date of determination, the sum of
(i) the aggregate principal amount of Revolving Loans
outstanding plus (ii) the aggregate principal amount of
Swing Line Loans outstanding plus (iii) the aggregate
principal amount of Bid Loans outstanding plus (iv) the
Letter of Credit Usage.
"TYPE" has the meaning specified in the definition
of "Committed Loans".
"WCL" means West Coast Liquidators, Inc., a
California corporation and a wholly owned Subsidiary of
the Company.
1.2 COMPUTATION OF TIME PERIODS
In this Agreement, in the computation of periods
of time from a specified date to a later specified date,
unless otherwise specifically provided, the word "from"
27
<PAGE> 34
means "from and including" and the words "to" and "until"
each means "to but excluding".
1.3 ACCOUNTING TERMS
All accounting terms not specifically defined
herein shall be construed in accordance with GAAP.
1.4 OTHER DEFINITIONAL PROVISIONS
References to "Sections" and "subsections" shall
be to Sections and subsections, respectively, of this
Agreement unless otherwise specifically provided. Any of
the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural
depending on the reference. Unless otherwise expressly
provided herein, references to agreements and other
contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications
are not prohibited by the terms of any Loan Document.
References to any statute or regulation are to be construed
as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS
2.1 LOANS
A. REVOLVING COMMITMENTS. Each Lender severally
agrees, on the terms and conditions hereinafter set forth,
to make Revolving Loans to the Borrowers from time to time
on any Business Day during the period from the date hereof
until the Revolver Maturity Date in an aggregate amount not
to exceed at any time outstanding the amount set forth
opposite such Lender's name on the signature pages hereof,
or, if such Lender has entered into one or more Assignments
and Acceptances, set forth for such Lender in the Register
maintained by the Administrative Agent, as such amount may
be reduced pursuant to subsection 2.4 or any other provision
contained in this Agreement (such Lender's "Revolving
Commitment"). The aggregate original amount of the
Revolving Commitments is $150,000,000. Each Borrowing shall
be in an aggregate amount not less than $3,000,000 or an
integral multiple of $1,000,000 in excess thereof, except in
the case of Borrowings made to repay Swing Line Loans
pursuant to subsection 2.1B. Each Committed Borrowing of
Revolving Loans shall be made by the Lenders proportionately
to their Pro Rata Shares of the Revolving Commitments.
Within the limits of each Lender's Revolving Commitments,
28
<PAGE> 35
the Borrowers may from time to time, borrow under this
subsection 2.1A, repay and reborrow under this subsection
2.1A. The Lenders' Revolving Commitments shall expire on
the Revolver Maturity Date.
Notwithstanding the foregoing provisions of this
subsection 2.1A, (i) at no time shall the Total Utilization
of Revolving Commitments exceed the aggregate Revolving
Commitments then in effect, and (ii) for 45 consecutive days
during each twelve consecutive month period (a "Clean-Down
Period") set forth below, the aggregate principal amount of
Clean-Down Debt shall not exceed the correlative amounts
indicated below:
<TABLE>
<CAPTION>
12-month Period Ending Amount
<S> <C>
September 30, 1994 $60,000,000
September 30, 1995 55,000,000
September 30, 1996 50,000,000
</TABLE>
; provided, that if the sale of the New Orleans Distribution
Center has been consummated during any of the aforementioned
12-month periods, on and from the date of consummation of
such sale, for each subsequent Clean-Down Period, the
aggregate principal amount of Clean-Down Debt shall not
exceed the correlative amounts indicated below:
<TABLE>
<CAPTION>
12-month Period Ending Amount
<S> <C>
September 30, 1994 $35,000,000
September 30, 1995 30,000,000
September 30, 1996 25,000,000
</TABLE>
B. SWING LINE COMMITMENT. The Swing Line Lender
severally agrees, on the terms and conditions hereinafter
set forth, to make Swing Line Loans to the Borrowers from
time to time on any Business Day during the period from the
date hereof until the Revolver Maturity Date in an aggregate
amount not to exceed at any time outstanding $10,000,000
(the "Swing Line Commitment"). Each Borrowing shall be in
an aggregate amount not less than $100,000 or an integral
multiple of $25,000 in excess thereof. Within the limits of
the Swing Line Commitment, the Borrowers may, from time to
time, borrow under this subsection 2.1B, repay and reborrow
under this subsection 2.1B. The Swing Line Commitment shall
expire on the Revolver Maturity Date.
Notwithstanding the foregoing provisions of this
subsection 2.1B, (i) at no time shall the aggregate
principal amount of Swing Line Loans outstanding exceed the
Swing Line Commitment and (ii) at no time shall the Total
Utilization of Revolving Commitments exceed the aggregate
Revolving Commitments then in effect.
29
<PAGE> 36
The Swing Line Lender, in its sole and absolute
discretion may, on and after the fifth Business Day after
the making of a Swing Line Loan which has not been
voluntarily prepaid by the Borrowers pursuant to subsection
2.6A, on one Business Day's notice to the Administrative
Agent and the Borrowers, so long as amounts are available to
be borrowed under the Revolving Commitments, require each
Lender, including the Swing Line Lender, and each Lender
hereby agrees, subject to this subsection 2.1B, to make a
Revolving Loan in an amount equal to such Lender's Pro Rata
Share of the amount of the Swing Line Loans (the "Refunded
Swing Line Loans") outstanding on the date notice is given
which the Swing Line Lender requests the Lenders to prepay;
provided that the obligation of each Lender to make any such
Revolving Loan is unconditional so long as one of the
following is true and applicable: (i) the Swing Line Lender
believed in good faith that all conditions under Section 3
to the making of the Swing Line Loan were satisfied at the
time such Swing Line Loan was made, or (ii) such Lender had
actual knowledge, by receipt of the statements required
pursuant to subsection 5.1 or otherwise, that any such
condition had not been satisfied and failed to notify the
Administrative Agent and the Swing Line Lender in writing
that it had no obligation to make Revolving Loans until such
condition was satisfied (which notice shall be effective as
of the date of receipt by the Administrative Agent and the
Swing Line Lender), or (iii) the satisfaction of any such
condition not satisfied had been waived by Requisite Lenders
prior to or at the time such Swing Line Loan was made. In
the case of Revolving Loans made by Lenders other than the
Swing Line Lender under the immediately preceding sentence,
each such Lender shall, before 10:00 A.M. (San Francisco
time) on the Business Day next succeeding the date such
notice is given, make available for the account of its
Applicable Lending Office to the Administrative Agent the
amount of its Revolving Loan by depositing same day funds
with the Administrative Agent. The proceeds of such
Revolving Loans shall be immediately delivered to the Swing
Line Lender (and not to the Borrowers) and applied to repay
the Refunded Swing Line Loans. On the day such Revolving
Loans are made, the Swing Line Lender's Pro Rata Share of
the Refunded Swing Line Loans shall be deemed to be paid
with the proceeds of a Revolving Loan made by the Swing Line
Lender and such portion of the Swing Line Loan deemed to be
so paid shall no longer be outstanding as Swing Line Loans
and shall only be outstanding as a Revolving Loan. The
Borrowers authorize the Swing Line Lender to charge the
Borrowers' accounts with the Swing Line Lender (up to the
amount available in each such account) in order to
immediately pay the Swing Line Lender the amount of such
Refunded Swing Line Loans to the extent that amounts
received from the Lenders, including amounts deemed to be
received from the Swing Line Lender, are not sufficient to
30
<PAGE> 37
repay in full such Refunded Swing Line Loans, and the Swing
Line Lender agrees to give notice to the Borrowers of any
such charge concurrently with the making of such charge. If
any portion of any such amount paid (or deemed to be paid)
to the Swing Line Lender should be recovered by or on behalf
of the Borrowers from the Swing Line Lender in bankruptcy,
by assignment for the benefit of creditors or otherwise, the
loss of the amount so recovered shall be ratably shared
among all Lenders that have made Refunded Swing Line Loans
in the manner contemplated by subsection 2.13. Subject to
the proviso contained in the first sentence of this
paragraph, each Lender's obligation to make the Revolving
Loans referred to in this paragraph shall be absolute and
unconditional and shall not be affected by any circumstance,
including, without limitation (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may
have against the Swing Line Lender, the Borrowers or anyone
else for any reason whatsoever, (ii) the occurrence or
continuance of an Event of Default or Potential Event of
Default; (iii) the occurrence of any Material Adverse
Effect; (iv) any breach of this Agreement by any of the
Borrowers or any other Lender; or (v) any other
circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing. A copy of each notice
given by the Swing Line Lender to the Administrative Agent
pursuant to this paragraph shall promptly be delivered by
the Administrative Agent to the Borrowers and the Lenders.
Notwithstanding anything herein to the contrary,
the Swing Line Lender shall not be obligated to make any
Swing Line Loans if it has elected after the occurrence and
during the continuation of a Potential Event of Default or
Event of Default not to make Swing Line Loans and has
notified the Borrowers in writing or by telephone of such
election. The Swing Line Lender shall promptly give notice
to the Administrative Agent of such election not to make
Swing Line Loans.
The Swing Line Lender may resign, effective as set
forth below, at any time by giving written notice thereof to
the Administrative Agent and the Borrowers. Upon any such
resignation, Requisite Lenders shall have the right to
appoint one of the Lenders as successor Swing Line Lender.
If no successor Swing Line Lender shall have been so
appointed by Requisite Lenders, and shall have accepted such
appointment within 30 days after the retiring Swing Line
Lender's giving of notice of resignation, then the retiring
Swing Line Lender may appoint a successor Swing Line Lender
from among the Lenders. Upon the acceptance of any
appointment as Swing Line Lender hereunder by a successor
Swing Line Lender, the resignation of the retiring Swing
Line Lender shall become effective and such successor Swing
Line Lender shall thereupon succeed to and become vested
31
<PAGE> 38
with all the rights, powers, privileges and duties of the
retiring Swing Line Lender, and the retiring Swing Line
Lender shall be discharged from its duties and obligations
as Swing Line Lender under this Agreement.
C. BID BORROWINGS. In addition to Committed
Borrowings pursuant to subsections 2.1A and 2.1B, each
Lender severally agrees that the Borrowers may, as set forth
in subsection 2.2E, from time to time request the Lenders
prior to the Revolver Maturity Date to submit offers to make
Bid Loans to the Borrowers; provided, however, that the
Lenders may, but shall have no obligation to, submit such
offers and the Borrowers may, but shall have no obligation
to, accept any such offers; and provided, further, that (i)
at no time shall the Total Utilization of Revolving
Commitments exceed the aggregate Revolving Commitments; and
(ii) at no time shall the outstanding aggregate principal
amount of all Bid Loans made by all Lenders exceed the
lesser of (a) 50% of the aggregate Revolving Commitments and
(b) $75,000,000.
2.2 MAKING THE LOAN
A. PROCEDURE FOR COMMITTED BORROWING. Each
Committed Borrowing shall be made on notice, given, in the
case of Base Rate Loans, not later than 9:00 A.M. (San
Francisco time) on the Business Day prior to the date of
such proposed Borrowing, in the case of Swing Line Loans,
not later than 11:00 A.M. (San Francisco time) on the date
of the proposed Borrowing and in the case of Eurodollar Rate
Loans, not later than 9:00 A.M. (San Francisco time) on the
third Business Day prior to the date of the proposed
Borrowing, by the Borrowers to the Administrative Agent,
which shall give to the Swing Line Lender or each Lender, as
the case may be, prompt notice thereof by telecopy, telex or
cable. Each such notice of a Committed Borrowing (a "Notice
of Borrowing") shall be by telecopy, telex or cable,
confirmed immediately in writing, in substantially the form
of EXHIBIT I hereto, specifying therein (i) whether such
Borrowing is to consist of a Swing Line Loan or Revolving
Loans, (ii) the requested Funding Date (which shall be a
Business Day), (iii) whether such Committed Borrowing is to
consist of Base Rate Loans or Eurodollar Rate Loans, (iv) in
the case of Eurodollar Rate Loans, the requested Interest
Period therefor, (v) the requested aggregate amount of such
Committed Borrowing, (vi) the Borrower that is to receive
the proceeds of such Borrowing and (vii) the amount of
proceeds to be received by each such Borrower. In addition,
a Notice of Borrowing shall certify that the amount of the
proposed Borrowing, when added to the Total Utilization of
Revolving Loan Commitments immediately prior to such
Borrowing, will not exceed the aggregate Revolving
Commitments then in effect. Each Lender shall, before
32
<PAGE> 39
10:00 A.M. (San Francisco time) on the date of such
Committed Borrowing of Revolving Loans, make available for
the account of its Applicable Lending Office to the
Administrative Agent, such Lender's Pro Rata Share (with
respect to the applicable Commitment) of such Borrowing by
depositing same day funds in the Administrative Agent's
Account No. 12332-15414 re: Mac Frugal's Bargains o Close-
Outs Inc. Attention: Global Agency #5596, maintained at
Bank of America National Trust and Savings Association, ABA
No. 1210-0035-8 or in such other account as the
Administrative Agent may from time to time specify in
writing to the Lenders. The Swing Line Lender shall, before
2:00 P.M. (San Francisco time) on the date of such Borrowing
of Swing Line Loans, make available to the Administrative
Agent, the amount of such Borrowing by depositing same day
funds with the Administrative Agent as described in the
immediately preceding sentence. Upon fulfillment of the
applicable conditions set forth in Section 3, the
Administrative Agent will make the proceeds of the Loans
received by it available to the Borrowers, that, in
accordance with the related Notice of Borrowing, are to
receive such proceeds, by crediting such Borrowers' accounts
maintained at such office of the Administrative Agent or any
other account of any Borrower with the Administrative Agent
as such Borrower shall advise the Administrative Agent in
writing.
With respect to any Committed Borrowing, in lieu
of delivering the above described Notice of Borrowing,
Authorized Persons, on behalf of the Borrowers, may give the
Administrative Agent telephonic notice by the required time
of any proposed borrowing under this subsection 2.2;
provided, however, that such notice shall be promptly
confirmed in writing by delivery of a Notice of Borrowing to
the Administrative Agent. The Administrative Agent shall
incur no liability to the Borrowers in acting upon any
telephonic notice referred to above (or with respect to any
other Borrowing hereunder) which the Administrative Agent
believes in good faith to have been given by an Authorized
Person or Authorized Persons of the Borrowers or for
otherwise acting in good faith under this subsection 2.2 and
in making any Loans in accordance with this Agreement
pursuant to any telephonic notice.
B. NOTICE OF BORROWING. Each Notice of
Borrowing shall be irrevocable and binding on the Borrowers.
The Borrowers shall indemnify each Lender against any loss,
cost or expense incurred by such Lender as a result of any
failure by the Borrowers to fulfill on or before the date
specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Section 3 (other than
conditions that have been waived by the Lenders in
accordance with subsection 10.1), including, without
33
<PAGE> 40
limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds
acquired by such Lender to fund the Loan to be made by such
Lender as a part of such Borrowing when such Loan, as a
result of such failure, is not made on such date.
C. PAYMENTS BY LENDERS. Unless the
Administrative Agent shall have received notice from a
Lender (i) prior to the date of any such Borrowing
(including without limitation Borrowings made pursuant to
subsection 2.1B) that such Lender will not make available to
the Administrative Agent such Lender's Pro Rata Share (with
respect to the applicable Commitment) of such Borrowing or
(ii) prior to the date of the issuance of any Letter of
Credit that such Lender will not purchase a participation in
such Letter of Credit, in each case because of an existence
of an Event of Default or a Potential Event of Default, the
Administrative Agent may assume that such Lender has made
such amount available to the Administrative Agent on the
date of such Borrowing in accordance with subsection 2.2A
(or otherwise in accordance with subsection 2.1B) or that
such Lender will purchase a participation in such Letter of
Credit in accordance with subsection 2.16, as the case may
be, and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrowers (or in the case
of a Revolving Loan made pursuant to subsection 2.1B, to the
Swing Line Lender) on such date a corresponding amount and
the Issuing Bank may, in reliance upon such assumption,
issue the Letter of Credit, as the case may be. If and to
the extent that a Lender not providing such notice shall not
have so made its Pro Rata Share (with respect to the
applicable Commitment) available to the Administrative
Agent, such Lender and the Borrowers severally agree to
repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for
each day from the date such amount is made available to the
Borrowers or the Swing Line Lender (as the case may be)
until the date such amount is repaid to the Administrative
Agent, at (i) in the case of the Borrowers, the interest
rate applicable at the time to Loans comprising such
Borrowing and (ii) in the case of such Lender, the Federal
Funds Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount
so repaid shall constitute such Lender's Loan as part of
such Borrowing for purposes of this Agreement. The
Borrowers reserve all of their rights against any defaulting
Lender.
D. SEVERAL OBLIGATIONS OF LENDERS. The failure
of any Lender to make the Loan to be made by it as part of
any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan on the date
34
<PAGE> 41
of such Borrowing, but no Lender shall be responsible for
the failure of any other Lender to make the Loan to be made
by such other Lender on the date of any Borrowing.
E. PROCEDURE FOR BID BORROWINGS.
(i) When the Borrowers wish to request the
Lenders to submit offers to make Bid Loans hereunder, they
shall transmit to the Administrative Agent by telephone call
followed promptly by written transmission a notice in
substantially the form of EXHIBIT IV (a "Competitive Bid
Request") so as to be received no later than 9:00 A.M. (San
Francisco time) (x) four Business Days prior to the date of
a proposed Bid Borrowing in the case of a LIBOR Auction, or
(y) one Business Day prior to the date of a proposed Bid
Borrowing in the case of an Absolute Rate Auction,
specifying:
(a) the Funding Date for such
Borrowing, which shall be a Business Day;
(b) the aggregate amount of such
Borrowing, which shall be a minimum amount of
$5,000,000 or in multiples of $1,000,000 in excess
thereof;
(c) whether the Competitive Bids
requested are to be for LIBOR Bid Loans or
Absolute Rate Bid Loans;
(d) the duration of the Interest Period
applicable thereto, subject to the provisions of
the definition of "Interest Period;" and
(e) the Borrower that is to receive the
proceeds of such Borrowing.
Subject to subsection 2.2E(iii), the Borrowers may not
request Competitive Bids more than twice in any period of
five consecutive Business Days.
(ii) Upon receipt of a Competitive Bid Request
and a bid fee of $400 in respect thereof, the Administrative
Agent will promptly send to the Lenders by telex or
facsimile transmission an invitation by the Borrowers to
each Lender to submit Competitive Bids offering to make the
Bid Loans to which such Competitive Bid Request relates in
accordance with this subsection 2.2E (an "Invitation for
Competitive Bids").
(iii)(a) Each Lender may at its discretion
submit a Competitive Bid containing an offer or
offers to make Bid Loans in response to any
35
<PAGE> 42
Invitation for Competitive Bids. Each Competitive
Bid must comply with the requirements of this
subsection 2.2E(iii) and must be submitted to the
Administrative Agent by telex or facsimile
transmission at the Administrative Agent's office
specified in the Invitation for Competitive Bids
not later than (1) 7:30 A.M. (San Francisco time)
three Business Days prior to the proposed Funding
Date, in the case of a LIBOR Auction or
(2) 7:30 A.M. (San Francisco time) on the proposed
Funding Date, in the case of an Absolute Rate
Auction; provided that Competitive Bids submitted
by BofA (or any Affiliate of BofA) in the capacity
of a Lender may be submitted, and may only be
submitted, if BofA or such Affiliate notifies the
Borrowers of the terms of the offer or offers
contained therein not later than (A) 7:15 A.M.
(San Francisco time) three Business Days prior to
the proposed Funding Date, in the case of a LIBOR
Auction or (B) 7:15 A.M. (San Francisco time) on
the proposed Funding Date, in the case of an
Absolute Rate Auction.
(b) Each Competitive Bid shall be in
substantially the form of EXHIBIT V, specifying
therein:
(I) the proposed Funding Date;
(II) the principal amount of each
Bid Loan for which such Competitive Bid is
being made, which principal amount (x) may be
equal to, greater than or less than the
Revolving Commitment of the quoting Lender,
(y) must be $5,000,000 or in multiples of
$1,000,000 in excess thereof, and (z) may not
exceed the principal amount of Bid Loans for
which Competitive Bids were requested;
(III) in case the Borrowers elect
a LIBOR Auction, the margin above or below
LIBOR (the "LIBOR Bid Margin") offered for
each such Bid Loan, expressed as a percentage
(rounded to the nearest 1/100th of 1%) to be
added to or subtracted from the applicable
LIBOR and the Interest Period applicable
thereto;
(IV) in case the Borrowers elect
an Absolute Rate Auction, the rate of
interest per annum (rounded upward to the
nearest 1/100th of 1%) (the "Absolute Rate")
offered for each such Bid Loan;
36
<PAGE> 43
(V) the identity of the quoting
Lender; and
(VI) any Interest Payment Dates
other than the last day of the Interest
Period applicable thereto.
A Competitive Bid may contain up to three separate
offers by the quoting Lender with respect to each
Interest Period specified in the related
Invitation for Competitive Bids.
(c) Any Competitive Bid shall be
disregarded if it:
(I) is not substantially in
conformity with EXHIBIT V or does not specify
all of the information required by subsection
(iii)(b) of this subsection;
(II) contains qualifying,
conditional or similar language;
(III) proposes terms other than or
in addition to those set forth in the
applicable Invitation for Competitive Bids;
or
(IV) arrives after the time set
forth in subsection (iii)(a).
(iv) Promptly on receipt and not later than
8:00 A.M. (San Francisco time) three Business Days prior to
the proposed Funding Date in the case of a LIBOR Auction, or
8:00 A.M. (San Francisco time) on the proposed Funding Date,
in the case of an Absolute Rate Auction, the Administrative
Agent will notify the Borrowers of the terms (a) of any
Competitive Bid submitted by a Lender that is in accordance
with subsection 2.2E(iii), and (b) of any Competitive Bid
that amends, modifies or is otherwise inconsistent with a
previous Competitive Bid submitted by such Lender with
respect to the same Competitive Bid Request. Any such
subsequent Competitive Bid shall be disregarded by the
Administrative Agent unless such subsequent Competitive Bid
is submitted solely to correct a manifest error in such
former Competitive Bid and only if received within the times
set forth in subsection 2.2E(iii). The Administrative
Agent's notice to the Borrowers shall specify (1) the aggre-
gate principal amount of Bid Loans for which offers have
been received for each Interest Period specified in the
related Competitive Bid Request; and (2) the respective
principal amounts and LIBOR Bid Margins or Absolute Rates,
as the case may be, so offered. Subject only to the
37
<PAGE> 44
provisions of subsection 3.2 hereof and the provisions of
this subsection (iv), any Competitive Bid shall be
irrevocable except with the written consent of the
Administrative Agent given on the written instructions of
the Borrowers.
(v) Not later than 8:45 A.M. (San Francisco time)
three Business Days prior to the proposed Funding Date, in
the case of a LIBOR Auction, or 8:45 A.M. (San Francisco
time) on the proposed Funding Date, in the case of an
Absolute Rate Auction, the Borrowers shall notify the
Administrative Agent of their acceptance or non-acceptance
of the offers so notified to them pursuant to subsection
2.2E(iv). The Borrowers shall be under no obligation to
accept any offer and may choose to reject all offers. In
the case of acceptance, such notice shall specify the
aggregate principal amount of offers for each Interest
Period that is accepted. The Borrowers may accept any
Competitive Bid in whole or in part; provided that:
(a) the aggregate principal amount of
each Bid Borrowing may not exceed the applicable
amount set forth in the related Competitive Bid
Request;
(b) the principal amount of each Bid
Borrowing must be $5,000,000 or in any multiple of
$1,000,000 in excess thereof;
(c) acceptance of offers may only be
made on the basis of ascending LIBOR Bid Margins
or Absolute Rates within each Interest Period, as
the case may be; and
(d) the Borrowers may not accept any
offer that is described in subsection 2.2E(iii)(c)
or that otherwise fails to comply with the
requirements of this Agreement.
(vi) If offers are made by two or more Lenders
with the same LIBOR Bid Margins or Absolute Rates, as the
case may be, for a greater aggregate principal amount than
the amount in respect of which such offers are accepted for
the related Interest Period, the principal amount of Bid
Loans in respect of which such offers are accepted shall be
allocated by the Administrative Agent among such Lenders as
nearly as possible (in such multiples, not less than
$1,000,000, as the Administrative Agent may deem
appropriate) in proportion to the aggregate principal
amounts of such offers. Determination by the Administrative
Agent of the amounts of Bid Loans shall be conclusive in the
absence of manifest error.
38
<PAGE> 45
(vii) (a) The Administrative Agent will promptly
by no later than 9:15 A.M. notify each Lender having
submitted a Competitive Bid if its offer has been
accepted and, if its offer has been accepted, of the
amount of the Bid Loan or Bid Loans to be made by it on
the Funding Date.
(b) Each Lender, which has received
notice pursuant to subsection 2.2E(vii)(a) that
its Competitive Bid has been accepted, shall make
the amounts of such Bid Loans available to the
Administrative Agent for the account of the
Borrowers at the Administrative Agent's payment
office, by 12:00 Noon (San Francisco time) in the
case of Absolute Rate Bid Loans, and by 12:00 Noon
(San Francisco time) in the case of LIBOR Bid
Loans, on such Funding Date, in funds immediately
available to the Administrative Agent for the
account of the Borrowers at the Administrative
Agent's payment office.
(c) Promptly following each Bid
Borrowing, the Administrative Agent shall notify
each Lender of the ranges of bids submitted and
the highest and lowest Competitive Bids accepted
for each Interest Period requested by the
Borrowers and the aggregate amount borrowed
pursuant to such Bid Borrowing.
(d) From time to time, the Borrowers
and the Lenders shall furnish such information to
the Administrative Agent as the Administrative
Agent may request relating to the making of Bid
Loans, including the amounts, interest rates,
dates of borrowings and maturities thereof, for
purposes of the allocation of amounts received
from the Borrowers for payment of all amounts
owing hereunder.
(viii) If, on or prior to the proposed Funding
Date, the Revolving Commitments have not been terminated and
if, on such proposed Funding Date all applicable conditions
to funding referenced in subsection 3.2 hereof are
satisfied, the Lender or Lenders whose offers the Borrowers
have accepted will fund each Bid Loan so accepted. Nothing
in this subsection 2.2E shall be construed as a right of
first offer in favor of the Lenders or to otherwise limit
the ability of the Borrowers to request and accept credit
facilities from any Person (including any of the Lenders),
provided that no Potential Event of Default or Event of
Default would otherwise arise or exist as a result of the
Borrower executing, delivering or performing under such
credit facilities.
39
<PAGE> 46
(ix) Each outstanding Bid Loan shall reduce pro
tanto the available Revolving Commitments, but shall not
reduce or affect the Bid Loan Lender's available Revolving
Commitment or its Pro Rata Share.
2.3 FEES
A. COMMITMENT FEES.
(i) The Borrowers agree to pay a commitment fee
to each Lender on the average daily unused portion of such
Lender's Pro Rata Share of the Revolving Commitments at the
rate of 0.250% per annum, from the Closing Date, and from
the effective date specified in the Assignment and
Acceptance pursuant to which it became a Lender in the case
of each other Lender, until the Revolver Maturity Date.
Such commitment fee shall be payable on the last Business
Day of each fiscal quarter in arrears for such fiscal
quarter (or portion thereof).
(ii) Anything contained in this Agreement to the
contrary notwithstanding, for purposes of calculating the
commitment fees payable by the Borrowers hereunder, (a) the
"unused portion" of the Revolving Commitments, as of any
date of determination, shall be an amount equal to the
aggregate amount of the Revolving Commitments in effect on
such date of determination minus the sum of (1) the
Revolving Loans outstanding on such date of determination
and (2) the Letter of Credit Usage as of such date of
determination and (b) such calculation shall not give effect
to any limitation on the amount available for borrowing set
forth in subsection 2.1A but shall give effect to any
voluntary reduction pursuant to subsection 2.4.
B. OTHER FEES. The Borrowers agree to pay all
other fees, including without limitation the arrangement fee
and the annual agency fee, referred to in the fee letter
dated August 30, 1993 between the Company and the
Administrative Agent and the letter dated August 24, 1993
between Company and the Co-Agent at the times and in the
amounts specified in such letters.
C. AMENDMENT FEE. The Borrowers agree to pay on
the Closing Date an amendment fee to each Lender in amount
equal to such Lender's Pro Rata Share of 0.10% of the
aggregate Revolving Commitments.
2.4 VOLUNTARY REDUCTIONS OF COMMITMENTS
The Borrowers, acting together, shall have the
right, at any time and from time to time, to terminate in
whole or permanently reduce ratably in part, without premium
or penalty, the unused portions of the Lenders' respective
40
<PAGE> 47
Commitments, by giving not less than five Business Days'
prior written notice to the Administrative Agent or
telephonic notice promptly confirmed in writing designating
that the Commitments are to be reduced, the date (which
shall be a Business Day) of any such termination or
reduction and the amount of any partial reduction. Such
termination or partial reduction of the Commitments shall be
effective on the dates specified in such notice and shall
reduce the respective Commitment of each Lender
proportionately to its Pro Rata Share for such Commitment.
Any such partial reduction of the Commitments shall be in an
aggregate minimum amount of $5,000,000 and integral
multiples of $1,000,000 in excess of that amount. Any
reduction of the aggregate Revolving Commitments to an
amount below the then current amount of the Swing Line
Commitment shall result in an automatic corresponding
reduction of the Swing Line Commitment to the amount of the
Revolving Commitments, as so reduced.
2.5 REPAYMENT
A. Each Bid Loan shall mature, and the principal
amount thereof shall be due and payable, on the last day of
the Interest Period applicable thereto. Subject to
subsection 10.1, the Borrowers may not voluntarily prepay
all or any portion of the principal amount of any Bid Loan
prior to the maturity thereof.
B. The Borrowers shall repay to the
Administrative Agent the principal amount of each Revolving
Loan owing to each Lender for the account of each Lender and
all other amounts owing hereunder with respect to the
Revolving Commitments on the Revolver Maturity Date for the
account of each Lender.
C. The Borrowers shall repay to the
Administrative Agent the principal amount of each Swing Line
Loan for the account of the Swing Line Lender and all other
amounts owing hereunder with respect to the Swing Line
Commitment on the Revolver Maturity Date for the account of
the Swing Line Lender.
2.6 OPTIONAL AND MANDATORY PREPAYMENTS
A. OPTIONAL PREPAYMENTS. The Borrowers may,
upon written notice to the Administrative Agent stating the
Type of the Loans to be prepaid and the Committed Borrowing
of which such Loans were a part, and the proposed date and
aggregate principal amount of the prepayment (provided that
such notice shall be given not later than 10:00 A.M. (San
Francisco time) (a) on the proposed date of such prepayment
in the case of a Swing Line Loan, (b) at least one Business
Day prior to the proposed date of such prepayment, in the
41
<PAGE> 48
case of a prepayment of Revolving Loans that are Base Rate
Loans and (c) at least four Business Days prior to the
proposed date of such prepayment, in the case of Revolving
Loans that are Eurodollar Rate Loans prepaid on other than
the last day of the Interest Period applicable thereto), and
if such notice is given, the Borrowers shall, prepay without
premium or penalty the outstanding principal amounts of the
Loans of the Type specified comprising part of the same
Borrowing in whole or ratably in part; provided, however,
that any prepayment of any Eurodollar Rate Loans on other
than the last day of an Interest Period for such Loans shall
be subject to subsection 2.10; and provided, further, that
each partial prepayment of the Loans shall be in an
aggregate principal amount not less than $3,000,000 or an
integral multiple of $1,000,000 in excess thereof. In lieu
of delivering the above described notice, Authorized
Persons, on behalf of the Borrowers, may give the
Administrative Agent telephonic notice by the required time
of any proposed prepayments; provided, however that such
notice shall be promptly confirmed in writing. The
Administrative Agent shall incur no liability to the
Borrowers in acting upon any such telephonic notice which
the Administrative Agent believes in good faith to have been
given by an Authorized Person or Authorized Persons of the
Borrowers or for otherwise acting in good faith under this
subsection 2.6A. Notice of prepayment having been given as
aforesaid, the principal amount of the Loans specified in
such notice, and, in the case of Eurodollar Loans, all
interest accrued thereon through the date of prepayment,
shall become due and payable on the prepayment date.
B. MANDATORY PREPAYMENTS. At any time the Total
Utilization of Revolving Commitments outstanding exceeds the
aggregate Revolving Commitments then in effect the Borrowers
shall immediately prepay the Loans in an amount equal to the
applicable excess. In addition, at the commencement of and
during the 45 consecutive day period set forth in clause
(ii) of the last paragraph of subsection 2.1A, the Borrowers
shall immediately prepay the Loans in an amount necessary to
reduce and maintain the aggregate principal amount of Clean-
Down Debt to the level required thereby.
C. APPLICATION OF MANDATORY PREPAYMENTS.
(i) Application to Loans. Mandatory
prepayments of Loans shall be applied first to repay
outstanding Swing Line Loans, to the full extent
thereof, second to repay outstanding Revolving Loans,
to the full extent thereof, and third to cash
collateralize all Letters of Credit and to repay
amounts to become due thereunder.
42
<PAGE> 49
(ii) Application by Type of Loan. Subject to
clause (i) above, any mandatory prepayment shall be
applied first to Base Rate Loans to the full extent
thereof before application to Eurodollar Rate Loans.
(iii) Application to Principal and Interest of
Loans. All mandatory prepayments of Eurodollar Rate
Loans shall include payment of accrued interest on the
principal amount so prepaid and shall be applied to
payment of interest before application to principal.
2.7 INTEREST
The Borrowers shall pay interest on the unpaid
principal amount of each Loan made by each Lender from the
date of each such Loan until such principal amount shall be
paid in full, at the applicable rate set forth below:
A. BASE RATE LOANS. During such periods as
a Committed Loan is a Base Rate Loan, at a rate per
annum equal at all times to the Base Rate in effect
from time to time, payable in arrears on each Interest
Payment Date with respect to such Loan during such
periods and on the date such Loan shall be paid in
full; provided, however, that after the occurrence and
during the continuance of any Event of Default, the
Base Rate Loans shall bear interest, payable on demand,
at a rate per annum equal at all times to 2.00% per
annum above the rate of interest otherwise payable
under this Agreement;
B. EURODOLLAR RATE LOANS. During such
periods as a Committed Loan is a Eurodollar Rate Loan,
at a rate per annum equal at all times during each
Interest Period for such Loan to the sum of the
Adjusted Eurodollar Rate for such Interest Period plus
the Applicable Margin, payable in arrears on each
Interest Payment Date with respect to such Loan during
such Interest Period, and on the date such Loan shall
be paid in full; provided, however, that after the
occurrence and during the continuation of any Event of
Default, the Eurodollar Rate Loans shall bear interest,
payable on demand, at a rate per annum equal at all
times to 2.00% per annum above the rate of interest
otherwise payable under this Agreement. Anything
herein to the contrary notwithstanding, (w) none of the
Loans made pursuant to subsection 2.1A shall constitute
a Eurodollar Rate Loan (or shall bear interest at the
rate provided in this subsection 2.7B) unless the
Borrowers shall so request by notice given pursuant to
subsection 2.2 or 2.9; (x) in the absence of such
request by the Borrower, or if an Event of Default or
Potential Event of Default occurs and is continuing,
43
<PAGE> 50
none of the Loans made pursuant to subsection 2.1A
shall constitute a Eurodollar Rate Loan (or shall bear
interest at the rate provided in this subsection 2.7B)
and with respect to an outstanding Eurodollar Rate
Loan, at the end of the Interest Period in effect at
the time of such Event of Default or Potential Event of
Default, such Loan shall constitute a Base Rate Loan
and shall bear interest at the rate provided in
subsection 2.7A above; (y) none of the Swing Line Loans
shall constitute a Eurodollar Rate Loan; and (z) none
of the Loans made pursuant to subsection 2.1A on the
Closing Date shall constitute a Eurodollar Rate Loan
(or shall bear interest as provided in this subsection
2.7B).
C. LIBOR BID LOANS. During such period as
a Bid Loan is a LIBOR Bid Loan, at a rate per annum
equal at all times to LIBOR plus (or minus) the LIBOR
Bid Margin, payable in arrears on each Interest Payment
Date with respect to such Loan during the applicable
Interest Period and on the date such Loan is paid in
full; provided, however, that after the occurrence and
during the continuance of any Event of Default, the
LIBOR Bid Loans shall bear interest, payable on demand,
at a rate per annum equal at all times to 2.00% per
annum above the rate of interest otherwise payable
under this Agreement.
D. ABSOLUTE RATE BID LOANS. During such
period as a Bid Loan is an Absolute Rate Bid Loan, at a
rate per annum equal at all times to the Absolute Rate,
payable in arrears on each Interest Payment Date with
respect to such Loan during the applicable Interest
Period and on the date such Loan is paid in full;
provided, however, that after the occurrence and during
the continuance of any Event of Default, the Absolute
Bid Rate Loans shall bear interest, payable on demand ,
at a rate per annum equal at all times to 2.00% per
annum above the rate of interest otherwise payable
under this Agreement.
2.8 INTEREST RATE DETERMINATION AND PROTECTION
A. The Administrative Agent shall give prompt
notice to the Borrowers and the Lenders of the applicable
interest rate determined by the Administrative Agent for
purposes of subsection 2.7.
B. If, with respect to any Eurodollar Rate Loans
or LIBOR Bid Loans, any Lender notifies (and provides a
certificate in reasonable detail as to the reasons and
amounts relating thereto) the Borrowers with a copy to the
Administrative Agent that, as a result of circumstances
44
<PAGE> 51
affecting Eurodollar markets, the Adjusted Eurodollar Rate
or LIBOR, as the case may be for any Interest Period for
such Loans will not adequately reflect the cost to such
Lender of making, funding or maintaining its Eurodollar Rate
Loans or LIBOR Bid Loans for such Interest Period,
whereupon:
(i) the Borrowers shall from time to time
pay to the Administrative Agent for the account of such
Lender all amounts payable under subsection 2.10A and
2.10B,
(ii) each such Eurodollar Rate Loan by such
Lender will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base
Rate Loan (or, if such Loan is then a Base Rate Loan,
will continue as a Base Rate Loan), and
(iii) the obligations of such Lender to make,
or to Convert Loans into, Eurodollar Rate Loans shall
be suspended until the Administrative Agent shall
notify the Borrowers that the circumstances causing
such suspension by such Lender no longer exist (and
such Lender shall make all of its Loans as Base Rate
Loans notwithstanding any election by the Borrowers to
have the Lenders make, or to Convert any Loans into,
Eurodollar Rate Loans).
C. If the Borrower shall fail to select the
duration of any Interest Period for any Eurodollar Rate
Loans in accordance with the provisions contained in the
definition of "Interest Period" in subsection 1.1, the
Administrative Agent will forthwith so notify the Borrowers
and the Lenders and such Loans will automatically, on the
last day of the then existing Interest Period therefor,
Convert into Base Rate Loans.
2.9 VOLUNTARY CONVERSION OR CONTINUATION OF LOANS
The Borrowers may, subject to the provisions of
subsections 2.8 and 2.15, (i) Convert all or any portion of
the Base Rate Loans (other than Swing Line Loans) into
Eurodollar Rate Loans, and vice versa and (ii) upon the
expiration of any Interest Period applicable to a Eurodollar
Rate Loan, continue all or any portion of such Loan as a
Eurodollar Rate Loan; provided, however, that any such
Conversion of any Eurodollar Rate Loans into Base Rate Loans
shall be made on, and only on, the last day of an Interest
Period for such Eurodollar Rate Loans, and any such
Conversion of Base Rate Loans into Eurodollar Rate Loans
shall (i) be in an amount not less than the minimum amount
specified in subsection 2.1 for a Borrowing of the relevant
45
<PAGE> 52
type and (ii) not be made if an Event of Default or
Potential Event of Default has occurred and is continuing.
The Borrowers shall deliver a Notice of
Conversion/Continuation (executed by an Authorized Person from each
Borrower) to the Administrative Agent no later than 9:00 A.M. (San
Francisco time) at least three Business Days in advance of the
proposed conversion/continuation date (in the case of a Conversion
to, or a continuation of, a Eurodollar Rate Loan). A Notice of
Conversion/Continuation shall certify (i) the proposed
conversion/continuation date (which shall be a Business Day), (ii)
the type and amount of the Loan to be converted/continued, (iii)
the nature of the proposed conversion/continuation, (iv) in the
case of a Conversion to, or a continuation of, a Eurodollar Rate
Loan, the requested Interest Period, and (v) that no Potential
Event of Default or Event of Default has occurred and is continuing
or would result from the proposed conversion/continuation. In lieu
of delivering the above described Notice of
Conversion/Continuation, Authorized Persons of the Borrowers may
give the Administrative Agent telephonic notice by the required
time of any proposed conversion/continuation under this subsection
2.9; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Conversion/Continuation to the
Administrative Agent on or before the proposed
conversion/continuation date.
Neither the Administrative Agent nor any Lender shall
incur any liability to the Borrowers in acting upon any telephonic
notice referred to above that the Administrative Agent believes in
good faith to have been given by an Authorized Person or Authorized
Persons on behalf of the Borrowers or for otherwise acting in good
faith under this subsection 2.9 and upon conversion/continuation by
the Administrative Agent in accordance with this Agreement pursuant
to any telephonic notice, the Borrowers shall have effected the
conversion/continuation of Loans hereunder.
A Notice of Conversion/Continuation for Conversion
to, or continuation of, a Eurodollar Rate Loan (or
telephonic notice in lieu thereof) shall be irrevocable on
and after such notice is given and the Borrowers shall be
bound to Convert or continue in accordance therewith.
Notwithstanding anything herein to the contrary,
the Borrowers shall not have any right to
Convert outstanding Swing Line Loans which are Base Rate
Loans into Eurodollar Rate Loans.
After the occurrence of and during the continuance
of a Potential Event of Default or Event of Default, the
46
<PAGE> 53
Borrowers may not elect to have a Loan be made or continued
as, or Converted to, a Eurodollar Rate Loan, in each case
after the expiration of any Interest Period then in effect
for that Loan.
2.10 INCREASED COSTS AND FUNDING LOSSES
A. If, due to either (i) the introduction of or
any change after the date hereof (other than any change by
way of imposition or increase of reserve requirements
included in the Eurodollar Rate Reserve Percentage) in or in
the interpretation of any law or regulation by any
Governmental Authority or (ii) the compliance with any
guideline or request issued or made after the date hereof
from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any
increase in the cost to any Lender or any Issuing Bank of
agreeing to make or making, funding or maintaining
Eurodollar Rate Loans, LIBOR Bid Loans, or the Letters of
Credit under this Agreement, then the Borrowers shall from
time to time, upon demand by such Lender or Issuing Bank
(with a copy of such demand to the Administrative Agent),
pay to the Administrative Agent for the account of such
Lender or Issuing Bank additional amounts sufficient to
compensate such Lender or Issuing Bank for such increased
cost. A certificate specifying in reasonable detail the
amount of such increased cost, the calculation thereof, and
the basis therefor submitted to the Borrowers and the
Administrative Agent by such Lender or Issuing Bank, shall
be conclusive and binding for all purposes, absent manifest
error. If the Borrowers so notify the Administrative Agent
within five Business Days after any Lender notifies the
Borrowers of any increased cost pursuant to the foregoing
provisions of this subsection 2.10, the Borrowers may
Convert all Eurodollar Rate Loans of such Lender then
outstanding into Base Rate Loans in accordance with
subsection 2.8 and, additionally, shall reimburse such
Lender for such increased cost in accordance with this
subsection 2.10.
B. If any Lender or Issuing Bank determines that
(i) the introduction of any Capital Adequacy Regulation
after the date hereof, (ii) any change in any Capital
Adequacy Regulation after the date hereof, (iii) any change
after the date hereof in the interpretation or
administration of any Capital Adequacy Regulation by any
central bank or other Governmental Authority charged with
the interpretation or administration thereof, or
(iv) compliance by such Lender or Issuing Bank (or its
Applicable Lending Office) or any corporation controlling
such Lender or Issuing Bank with any of the foregoing,
affects or would affect the amount of capital required or
expected by any Governmental Authority to be maintained by
47
<PAGE> 54
such Lender or Issuing Bank or any corporation controlling
such Lender or Issuing Bank and (taking into consideration
such Lender's or Issuing Bank's or such corporation's
policies with respect to capital adequacy and such Lender's
or Issuing Bank's desired return on capital) reasonably
determines that the amount of such capital is increased as a
consequence of its commitments, loans, credits or
obligations or the existence of Letters of Credit under this
Agreement, then, within five Business Days of a demand by
such Lender or Issuing Bank to the Borrowers (with a copy of
such demand to the Administrative Agent), the Borrowers
shall pay to the Administrative Agent for the account of
such Lender or Issuing Bank, from time to time as specified
by such Lender or Issuing Bank, additional amounts
sufficient to compensate such Lender, Issuing Bank or other
corporation for such increase. A certificate specifying in
reasonable detail the amounts, the calculation of such
amounts and the basis therefor submitted to the Borrowers
and the Administrative Agent by such Lender or Issuing Bank
shall be conclusive and binding for all purposes, absent
manifest error. Each Lender and each Issuing Bank agrees
promptly to notify the Borrowers and the Administrative
Agent of any circumstances that would cause the Borrowers to
pay additional amounts pursuant to this subsection; provided
that the failure to give such notice shall not affect the
Borrowers' obligation to pay such additional amounts
hereunder.
C. The Borrowers shall compensate each Lender, upon
written request by that Lender (which request shall set forth in
reasonable detail the basis for requesting such amounts), for all
losses, expenses and liabilities (including, without limitation,
any loss or expense arising from interest or fees paid or payable
by that Lender to lenders of funds borrowed by it to make or carry
its Eurodollar Rate Loans or Bid Loans and any loss sustained by
that Lender in connection with the re-employment of such funds),
that such Lender may sustain: (i) if for any reason (other than a
default or error by that Lender) a borrowing of any Eurodollar Rate
Loan or Bid Loan does not occur on a date specified therefor in a
Notice of Borrowing, a Notice of Conversion/Continuation,
Invitation for Competitive Bids or a telephonic request for
borrowing or conversion/continuation or a successive Interest
Period does not commence after notice therefor is given pursuant to
subsection 2.9, (ii) if any payment or prepayment (by acceleration
of maturity, mandatory prepayments or otherwise) of any of its
Eurodollar Rate Loans or Bid Loan occurs on a date that is not the
last day of an Interest Period applicable to that Loan, (iii) if
any payment or prepayment (by acceleration of maturity, mandatory
prepayments or otherwise) of any of its Eurodollar Rate Loans or
Bid Loans is not made on any date specified in a
48
<PAGE> 55
notice of prepayment given by the Borrowers, or (iv) as a
consequence of any other default by the Borrowers to repay
its Eurodollar Rate Loans or Bid Loans when required by the
terms of this Agreement. Such written determination of such
amount by such Lender shall be conclusive and binding in all
matters in the absence of manifest error. This covenant
shall survive termination of this Agreement and payment of
the outstanding Obligations.
2.11 PAYMENTS AND COMPUTATIONS
A. MANNER AND TIME OF PAYMENT. The Borrowers
shall make each payment hereunder irrespective of and
without condition or deduction for any counterclaim,
defense, recoupment or setoff in U.S. dollars and in same
day funds delivered to the Administrative Agent not later
than 11:00 A.M. (San Francisco time) on the date when due by
deposit of such funds to the Administrative Agent's Account
No. 12332-15414, re: Mac Frugal's Bargains o Close-Outs
Inc., Attention: Global Agency #5596, maintained at Bank of
America National Trust and Savings Association, ABA No.
1210-0035-8, or at such other account as the Administrative
Agent may from time to time designate by notice to the
Borrowers. The Administrative Agent will promptly
thereafter cause to be distributed like funds relating to
(i) the payment of principal or interest relating to the Bid
Loans to the Bid Loan Lenders for the account of their
respective Applicable Lending Offices, (ii) the payment of
principal, interest or commitment fees relating to the
Revolving Loans ratably (other than amounts payable pursuant
to subsection 2.10 or 2.12) to the Lenders for the account
of their respective Applicable Lending Offices, and
(iii) the payment of any other amount payable to any Lender
to such Lender for the account of its Applicable Lending
Office, in each case to be applied in accordance with the
terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to subsection
10.8D, from and after the effective date specified in such
Assignment and Acceptance, the Administrative Agent shall
make all payments hereunder in respect of the interest
assigned thereby to the Lender assignee thereunder, and the
parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior
to such effective date directly between themselves.
B. AUTHORIZATION TO CHARGE ACCOUNTS. The
Borrowers hereby authorize each Lender and Issuing Bank, if
and to the extent payment owed to such Lender or Issuing
Bank is not made to the Administrative Agent when due
hereunder, to charge from time to time against any or all of
the Borrowers' accounts with such Lender or Issuing Bank any
49
<PAGE> 56
amount so due; provided that no such charge shall be deemed
a set-off by the Administrative Agent.
C. COMPUTATIONS. All computations of interest
and commitment fees shall be made by the Administrative
Agent, and all computations of interest pursuant to
subsection 2.10 shall be made by a Lender, on the basis of a
year of 365 or 366 days, as the case may be, with respect to
interest on Base Rate Loans and a year of 360 days in all
other cases, in each case for the actual number of days
(including the first day but excluding the last day)
occurring in the period for which such interest or
commitment fees are payable; provided, that if a Loan is
repaid on the same day on which it is made, one day's
interest shall be paid on that Loan. Each determination by
the Administrative Agent (or, in the case of subsection
2.10, by a Lender) of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest
error.
D. PAYMENT ON NON-BUSINESS DAYS. Whenever any
payment hereunder shall be stated to be due on a day other
than a Business Day, such payment shall be made by the next
succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of
interest or commitment fee, as the case may be; provided,
however, that if such extension would cause payment of
interest on or principal of Eurodollar Rate Loans or LIBOR
Bid Loans to be made in the next following calendar month,
such payment shall be made on the next preceding Business
Day.
2.12 TAXES
A. Any and all payments by the Borrowers
hereunder shall be made, in accordance with subsection 2.11,
free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender, each Issuing
Bank, and the Administrative Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Lender, each
Issuing Bank, or the Administrative Agent (as the case may
be) is organized or any political subdivision thereof and,
in the case of each Lender or Issuing Bank, taxes imposed on
its income, and franchise taxes imposed on it, by the
jurisdiction of such Lender's or Issuing Bank's Applicable
Lending Office or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrowers shall be required
by law to deduct any Taxes from or in respect of any sum
50
<PAGE> 57
payable hereunder to any Lender, any Issuing Bank, or the
Administrative Agent, (i) the sum payable shall be increased
as may be necessary so that after making all required
deductions (including deductions applicable to additional
sums payable under this subsection 2.12) such Lender, such
Issuing Bank, or the Administrative Agent, as the case may
be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the
Borrowers shall make such deductions and (iii) the Borrowers
shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable
law; provided that the Borrowers shall not be required
pursuant to clause (i) above to increase the sum payable to
any Lender, any Issuing Bank, or the Administrative Agent
organized under the laws of a jurisdiction outside of the
United States if such Lender, such Issuing Bank, or the
Administrative Agent shall have failed to provide either the
forms or documents referred to in subsection 2.12E or a
letter from such Lender, such Issuing Bank, or the
Administrative Agent stating that it is not legally entitled
to provide such forms or documents.
B. In addition, the Borrowers agree to pay any
present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to,
this Agreement (hereinafter referred to as "Other Taxes").
C. The Borrowers will indemnify each Lender,
each Issuing Bank and the Administrative Agent for the full
amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this subsection 2.12)
paid by such Lender, such Issuing Bank or the Administrative
Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes
were correctly or legally asserted; provided, in the case of
Taxes or Other Taxes imposed by jurisdictions outside of the
United States of America, the Borrowers shall not be
required to indemnify any Lender, any Issuing Bank or the
Administrative Agent for any liability resulting from the
failure of such Lender, such Issuing Bank or the
Administrative Agent to notify the Borrowers on a timely
basis of the assertion of such Taxes or Other Taxes. This
indemnification shall be made within 30 days from the date
such Lender, such Issuing Bank or the Administrative Agent
(as the case may be) makes written demand therefor. Each
Lender, each Issuing Bank and the Administrative Agent
agrees to reimburse the Borrowers for amounts paid by the
Borrowers pursuant to this subsection 2.12 to the extent
that such Lender, such Issuing Bank or the Administrative
51
<PAGE> 58
Agent actually recovers all or any portion of such amounts
from the applicable taxing authority.
D. Within 60 days after the date of any payment
of Taxes, the Borrowers will furnish to the Administrative
Agent, at its address referred to in subsection 10.2, the
original or a certified copy of a receipt evidencing payment
thereof or other evidence of the payment thereof reasonably
satisfactory to the Administrative Agent.
E. Prior to the date of the initial Borrowing in
the case of each Lender listed on the signature pages
hereof, and on the date of the Assignment and Acceptance
pursuant to which it became a Lender in the case of each
other Lender, (and from time to time thereafter if requested
by the Borrowers or the Administrative Agent) organized
under the laws of a jurisdiction outside the United States
shall provide the Administrative Agent and the Borrowers
with the forms prescribed by the Internal Revenue Service of
the United States certifying as to such Lender's status for
purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to
such Lender hereunder or other documents satisfactory to the
Borrowers and the Administrative Agent indicating that all
payments to be made to such Lender hereunder are subject to
such taxes at a rate reduced by an applicable tax treaty.
Unless the Borrowers and the Administrative Agent have
received forms or other documents satisfactory to them
indicating that payments hereunder are not subject to United
States withholding tax or are subject to such tax at a rate
reduced by an applicable tax treaty, the Borrowers or the
Administrative Agent shall withhold taxes from such payments
at the applicable statutory rate in the case of payments to
or for any Lender organized under the laws of a jurisdiction
outside the United States.
F. Any Lender or any Issuing Bank claiming any
additional amounts payable pursuant to this subsection 2.12
shall use its reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to
change the jurisdiction of its Applicable Lending Office if
the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may
thereafter accrue and would not, in the reasonable judgment
of such Lender or Issuing Bank, be otherwise disadvantageous
to such Lender or Issuing Bank.
G. Without prejudice to the survival of any
other agreement of the Borrowers hereunder, the agreements
and obligations of the Borrowers contained in this
subsection 2.12 shall survive the payment in full of
principal and interest hereunder.
52
<PAGE> 59
H. In the event that any Lender shall give
notice to the Borrowers that such Lender is entitled to
compensation under this subsection 2.12, and such requested
compensation materially exceeds the requests, if any, for
compensation made by the other Lenders under this
subsection, and unless the change or circumstance giving
rise to such compensation is no longer in effect and is not
reasonably likely to reoccur, the Borrowers may (upon 30
days' prior written notice to the Administrative Agent and
such Lender) elect to cause such Lender to assign its Loans
and Commitments in full first, if requested by the
Administrative Agent and agreed to by the Lenders to whom
such Loans and Commitments are being assigned, to the
Lenders on a pro rata basis in accordance with their Pro
Rata Shares then in effect or in such other proportions as
otherwise allocated by the Administrative Agent in its sole
discretion and agreed to by the Lender or Lenders to whom
such Loans and Commitments are being assigned and, second to
an Eligible Assignee agreeing thereto acceptable to the
Administrative Agent and the Borrowers in their sole
discretion, in each case in accordance with the provisions
of subsection 10.8 (so long as such Lender received payment
in full of the principal amount of all Loans outstanding,
together with all interest on such Loans and other amounts
payable to such Lender hereunder to the date of such
assignment).
2.13 SHARING OF PAYMENTS, ETC.
If any Lender shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Committed Loans
owing to it (other than a payment on account of Revolving
Loans and Letters of Credit provided for herein, as to which
the payments relating thereto are to be shared ratably among
the Lenders and other than payments pursuant to subsection
2.10 or 2.12) in excess of its ratable share of payments on
account of the Committed Loans obtained by all the Lenders
such Lender shall forthwith purchase from the other Lenders
such participations in the Committed Loans owing to them as
shall be necessary to cause such purchasing Lender to share
the excess payment ratably with each of them, provided,
however, that if all or any portion of such excess payment
is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender
shall repay to the purchasing Lender the purchase price to
the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of
(i) the amount of such Lender's required repayment to
(ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so
recovered. The Borrowers agree that any Lender so
53
<PAGE> 60
purchasing a participation from another Lender pursuant to
this subsection 2.13 or any other provision of this
Agreement may, to the fullest extent permitted by law,
exercise all of its rights of payment (including the right
to set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrowers in
the amount of such participation.
2.14 USE OF PROCEEDS
A. LOANS AND LETTERS OF CREDIT. The proceeds of
the Loans made by the Lenders and the Letters of Credit
issued hereunder to the Borrowers shall be used by the
Borrowers (i) to repay the Existing Loans, (ii) to continue
the Existing Letters of Credit, (iii) for working capital
purposes of the Borrowers, (iv) for other letter of credit
requirements incurred in the ordinary course of business of
the Borrowers, (v) for refinancing of indebtedness and the
payment of Restricted Junior Payments to the extent
permitted under and subject to the restrictions of this
Agreement, (vi) for acquisitions permitted under subsection
6.7, and (vii) for the general corporate purposes of the
Borrowers.
B. PROHIBITED USES. No portion of the proceeds
of any Borrowing under this Agreement shall be used by the
Borrowers in any manner which might cause the Borrowing or
the application of such proceeds to violate Regulation G,
Regulation U, Regulation T, or Regulation X of the Board of
Governors of the Federal Reserve System or any other
regulation of the Board or to violate the Exchange Act, in
each case as in effect on the date or dates of such
Borrowing and such use of proceeds.
C. ACKNOWLEDGEMENT. The Borrowers hereby
acknowledge and agree that the restrictions on the use of
proceeds set forth herein are commercially reasonable and
made in good faith.
2.15 ILLEGALITY
Notwithstanding any other provision of this
Agreement, if the introduction of or any change in or in the
interpretation of any law or regulation shall make it
unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender
or its Eurodollar Lending Office to make Eurodollar Rate
Loans or LIBOR Bid Loans or to continue to fund or maintain
Eurodollar Rate Loans or LIBOR Bid Loans hereunder (any such
introduction, change or assertion being an "Event of
Illegality"), then, on notice thereof (which notice shall
specify the basis therefor) and demand therefor by such
Lender to the Borrowers through the Administrative Agent,
54
<PAGE> 61
(a) the obligation of such Lender to make Eurodollar Rate
Loans or LIBOR Bid Loans and to Convert Base Rate Loans into
Eurodollar Rate Loans shall terminate (and such Lender shall
make all of its Loans as Base Rate Loans notwithstanding any
election by the Borrowers to have the Lenders make, or to
Convert any Loans into, Eurodollar Rate Loans) and (b) the
Borrowers shall within five Business Days of such notice and
demand, Convert all Eurodollar Rate Loans of such Lender
then outstanding into Base Rate Loans in accordance with
subsection 2.9; provided, however, that, before making any
such demand, such Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and
regulatory restrictions) to designate a different Eurodollar
Lending Office if the making of such a designation would
allow such Lender or its Eurodollar Lending office to
continue to perform its obligations to make Eurodollar Rate
Loans or to continue to fund or maintain Eurodollar Rate
Loans and would not, in the judgment of such Lender, be
otherwise disadvantageous to such Lender; and provided
further, however, that if at any time after such Conversion
no such Event of Illegality shall be continuing, such Lender
shall promptly so notify the Administrative Agent and the
Borrowers, and the obligation of such Lender to make
Eurodollar Rate Loans shall be reinstated; and provided
further, however, that neither the Administrative Agent nor
such Lender shall have any liability for the manner or
timeliness of such notice.
2.16 LETTERS OF CREDIT
A. LETTERS OF CREDIT. In addition to the
Borrowers requesting that the Lenders make Revolving Loans
pursuant to subsection 2.1, the Borrowers may request, in
accordance with the provisions of this subsection 2.16A,
that on and after the Closing Date an Issuing Bank issue
Letters of Credit for the account of the Borrowers; provided
that: (i) the Borrowers shall not request that any Issuing
Bank issue any Letter of Credit if, after giving effect to
such issuance, the Total Utilization of Revolving
Commitments would exceed the aggregate Revolving Commitments
then available, as the amount available under the Revolving
Commitments may be reduced from time to time pursuant to
subsection 2.4 or limited from time to time pursuant to
subsection 2.1A; (ii) in no event shall any Issuing Bank
issue (x) any Letter of Credit having an expiration date
later than the Revolver Maturity Date, (y) any Commercial
Letter of Credit having an expiration date more than 180
days after its date of issuance; provided that the Issuing
Bank may issue Commercial Letters of Credit having
expiration dates between 181 days and 270 days after the
date of issuance so long as, after giving effect to the
issuance thereof the aggregate face amount of all such
Commercial Letters of Credit outstanding does not exceed
55
<PAGE> 62
$7,500,000, or (z) any Standby Letter of Credit having an
expiration date more than one year after its date of
issuance; and (iii) the Borrowers shall not request that any
Issuing Bank issue any Letter of Credit if, after giving
effect to such issuance, the Letter of Credit Usage in
respect of all Letters of Credit would exceed the lesser of
$50,000,000 or the Revolving Commitments. The issuance of
any Letter of Credit in accordance with the provisions of
this subsection 2.16 shall be given effect in the
calculation of the Total Utilization of Revolving
Commitments and shall require the satisfaction of each
condition set forth in subsection 3.3.
Immediately upon the issuance of each Letter of
Credit by the Issuing Bank, each Lender shall be deemed to,
and hereby agrees to, have irrevocably purchased from the
Issuing Bank a participation in such Letter of Credit and
drawings thereunder in an amount equal to such Lender's Pro
Rata Share (with respect to the Revolving Commitments) of
the maximum amount that is or at any time may become
available to be drawn thereunder.
B. NOTICE OF ISSUANCE. Whenever the Borrowers
desire the issuance of a Letter of Credit, they shall make
request therefor to the Issuing Bank at least two 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, specifying (i) the proposed date
of issuance (which shall be a business day under the laws of
the jurisdiction of the Issuing Bank), (ii) the face amount
of the Letter of Credit, (iii) the expiration date of the
Letter of Credit, (iv) the name and address of the
beneficiary and (v) whether the Letter of Credit requested
is a Standby Letter of Credit or a Commercial Letter of
Credit.
Together with such request for the issuance of a
Letter of Credit, the Borrowers shall deliver to the Issuing
Bank and the Administrative Agent a notice which shall
certify that (i) the Letter of Credit requested to be
issued, when added to the then Total Utilization of
Revolving Commitments, will not exceed the aggregate
Revolving Commitments therein available, as the amount
available under the Revolving Commitments may be reduced
from time to time pursuant to subsection 2.4 or limited from
time to time pursuant to subsection 2.1A and (ii) subsection
3.2B is satisfied on and as of the date of delivery of such
notice to the same extent as though the issuance of such
Letter of Credit were the making of a Loan, and shall
deliver to the Issuing Bank an executed application for such
Letter of Credit in the form customarily required by the
Issuing Bank for the issuance of commercial letters of
credit or standby letters of credit, as the case may be, and
56
<PAGE> 63
specify a precise description of the documents and the
verbatim text of any certificate to be presented by the
beneficiary which, if presented by the 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 reasonable judgment,
may require changes in any such documents and certificates.
In determining whether to pay under any 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.
Upon receipt by the Issuing Bank of such notice
and such other documents from the Borrowers requesting the
issuance of a Letter of Credit, if the Issuing Bank elects
to issue such Letter of Credit, it shall so notify the
Borrowers and the Administrative Agent of the proposed
issuance and the Issuing Bank shall issue such Letter of
Credit. If the Issuing Bank, in its sole discretion, elects
not to issue such Letter of Credit because issuance of such
Letter of Credit may violate any applicable laws or any
applicable policies of the Issuing Bank or any Lender, the
Issuing Bank shall promptly so notify the Borrowers and the
Administrative Agent and no Letter of Credit will be issued.
Upon the issuance, negotiation, amendment or expiration of a
Letter of Credit, each Issuing Bank shall notify the
Administrative Agent of such activity and on no less than a
semi-monthly basis, the Administrative Agent shall notify
each Lender of such activity and the aggregate face amount
of all outstanding Letters of Credit.
C. 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 immediately notify the Borrowers and the
Administrative Agent, and the Borrowers shall reimburse such
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. If the Borrowers shall fail to reimburse such
Issuing Bank on the date of any drawing under a Letter of
Credit issued by it in an amount equal to the amount of such
drawing, (i) the Borrowers shall be deemed to have given a
Notice of Borrowing to the Administrative Agent requesting
the Lenders to make Revolving Loans that are Base Rate Loans
on the date on which such drawing is honored in an amount
equal to the amount of such drawing, and (ii) subject to
satisfaction or waiver of the conditions specified in
subsections 2.1A and 3.2, the Lenders shall, on the Business
Day next following the date of such drawing, make Revolving
Loans that are Base Rate Loans in the amount of such drawing
together with accrued interest thereon at the rate for Base
57
<PAGE> 64
Rate Loans from the date of drawing to the date of such
Loans (and shall make such amounts available to the
Administrative Agent), the proceeds of which shall be
applied directly by the Administrative Agent to reimburse
such Issuing Bank for the amount of such drawing together
with such accrued interest thereon; provided, that, if for
any reason proceeds of Revolving Loans are not received by
such Issuing Bank on such date in an amount equal to the
amount of such drawing together with accrued interest
thereon, the Borrowers shall reimburse such Issuing Bank,
within three Business Days of 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 Revolving
Loans, if any, that are so received, plus accrued interest
thereon. Interest on all amounts not reimbursed to such
Issuing Bank on the date of such drawing shall accrue at the
rates set forth in the proviso to subsection 2.7A.
D. PAYMENT BY LENDERS. If the Borrowers shall
fail to reimburse an Issuing Bank as provided in subsection
2.16C in an amount equal to the amount of any drawing
honored by such Issuing Bank under a Letter of Credit issued
by it together with accrued interest thereon, such Issuing
Bank shall promptly notify the Administrative Agent of the
unreimbursed amount of such drawing together with accrued
interest thereon and the Administrative Agent shall notify
each Lender of such Lender's respective participation
therein based on such Lender's Pro Rata Share of the
Revolving Commitments. Each Lender shall make available to
the Administrative Agent for the account of such Issuing
Bank an amount equal to its respective participation, in
same day funds, at the office of the Administrative Agent,
not later than 9:00 A.M. (San Francisco time) on the
Business Day next following the date notified by the
Administrative Agent. The day of payment by each Lender to
the Administrative Agent and the day of notice by the
Administrative Agent to each Lender shall be both a Business
Day and a business day under the laws of the jurisdiction of
each such Lender. If any Lender fails to make available to
the Administrative Agent the amount of such Lender's
participation in such Letter of Credit as provided in this
subsection 2.16D, such Issuing Bank shall be entitled to
recover such amount on demand from such Lender, together
with interest (to the extent such interest is not received
from the Borrowers) until such amount is recovered at the
Federal Funds Rate. Nothing in this subsection 2.16 shall
be deemed to prejudice the right of any Lender to recover
from an Issuing Bank any amounts made available by such
Lender to such Issuing Bank pursuant to this subsection
2.16D if it is determined by a judgment of a court of
competent jurisdiction that the payment with respect to a
Letter of Credit by such Issuing Bank in respect of which
payment was made by such Lender constituted gross negligence
58
<PAGE> 65
or willful misconduct on the part of such Issuing Bank.
Each Issuing Bank shall distribute through the
Administrative Agent to each other Lender which has paid all
amounts payable by it under this subsection 2.16D with
respect to any Letter of Credit issued by such Issuing Bank
such other Lender's Pro Rata Share (with respect to the
Revolving Commitments) of all payments received by such
Issuing Bank from any Loan Party in reimbursement of
drawings honored by such Issuing Bank under such Letter of
Credit when such payments are received. The Borrowers shall
be liable to the Lenders for all of the principal and
interest made available by the Lenders to any Issuing Bank
pursuant to this subsection 2.16D and interest on all
amounts made available by Lenders to any Issuing Bank shall
accrue at the rates set forth in the proviso to subsection
2.7A. All such principal and interest amounts shall be part
of the Obligations.
E. COMPENSATION. The Borrowers agree to pay the
following amounts to the Issuing Bank with respect to each
Letter of Credit issued by it:
(1) if a Commercial Letter of Credit, a
Commercial Letter of Credit fee equal to the greater of
the Dollar amount or the percentage set forth below
opposite the corresponding tenor of the maximum amount
available to be drawn under such Commercial Letter of
Credit, payable on the date of issuance:
Tenor Fee (the greater of)
----- --------------------
Up to 180 days 1/4% or $150
181 - 270 days 3/8% or $300
(2) if a Standby Letter of Credit, a Standby
Letter of Credit fee equal to the Applicable Margin
(plus an additional charge as mutually agreed upon by
the Borrowers and the Issuing Bank (the "Agreed Upon
Charge")) of the maximum amount available to be drawn
under such Standby Letter of Credit on the basis of the
actual number of days elapsed in a (360-day) year,
payable quarterly in arrears on the last Business Day
of each fiscal quarter; provided, however, that after
the occurrence and during the continuance of any Event
of Default, such Standby Letter of Credit fee shall
increase, from the date on which such Event of Default
shall have occurred until the expiration of such
Standby Letter of Credit, payable on demand, 2.00% per
annum above the Standby Letter of Credit fee otherwise
payable under this Agreement;
(3) with respect to drawings made under any
Letter of Credit which have not been immediately
59
<PAGE> 66
reimbursed by the Borrowers as provided in subsection
2.16C, 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 at a rate equal
to the Base Rate in effect from time to time; provided,
however, that after the occurrence and during the
continuance of an Event of Default, such unreimbursed
drawing shall bear interest, from the date on which
such Event of Default shall have occurred until such
amount is paid in full, payable on demand, at a rate
per annum equal at all times to 2.00% per annum above
the rate of interest otherwise payable under this
Agreement; and
(4) negotiation, amendment, presentation,
administrative, documentary and processing charges and
other charges in accordance with the Issuing Bank's
standard schedule for such charges from time to time in
effect or as otherwise mutually agreed.
Promptly upon receipt by the Issuing Bank of any
amount described in clauses (1), (2) and (3) of this
subsection 2.16E, the Issuing Bank shall deliver to the
Administrative Agent for distribution to each Lender of its
Pro Rata Share of such amount, which amount shall be
distributed to the Lenders no less than quarterly in
arrears; provided, that (x) with respect to any amount
described in clause (1), the Issuing Bank shall retain a
reasonable and customary servicing charge for its own
account prior to making the foregoing delivery to the
Administrative Agent and (y) with respect to any amount
described in clause (2), the Issuing Bank shall retain the
Agreed Upon Charge for its own account prior to making the
foregoing delivery to the Administrative Agent. All amounts
provided for by this subsection 2.16E are payable
notwithstanding any cancellation or prepayment of any Letter
of Credit issued hereunder.
F. OBLIGATIONS ABSOLUTE. The obligation of the
Borrowers to reimburse each Issuing Bank for drawings made
under the Letters of Credit issued by it and, subject to
subsection 2.2C, the obligations of the Lenders under
subsection 2.16D shall 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:
(i) any lack of validity or enforceability of any
Letter of Credit;
(ii) the existence of any claim, set-off,
recoupment, defense or other right that any Loan Party
60
<PAGE> 67
or any Lender may have at any time against any
beneficiary or any transferee of any Letter of Credit
(or any persons or entities for whom any such
transferee may be acting), any Lender or any other
Person, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated
transaction (including any underlying transaction
between any Borrower or any of its Subsidiaries and the
beneficiary for which the Letter of Credit was
procured);
(iii) 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;
(iv) payment by the Issuing Bank under any Letter
of Credit against presentation of a demand, draft or
certificate or other document that does not comply with
the terms of such Letter of Credit; provided that such
payment does not constitute gross negligence or willful
misconduct of the Issuing Bank, as determined by a
judgment of a court of competent jurisdiction;
(v) the occurrence of any Material Adverse
Effect;
(vi) any breach of this Agreement or any other
Loan Document by any Loan Party, the Administrative
Agent or any Lender;
(vii) the fact that an Event of Default or a
Potential Event of Default shall have occurred and be
continuing; or
(viii) any other circumstance or happening
whatsoever that is similar to any of the foregoing.
G. INDEMNIFICATION; NATURE OF ISSUING BANK'S
DUTIES. In addition to amounts payable as elsewhere
provided in this subsection 2.16, the Borrowers hereby agree
to protect, indemnify, pay and hold each Issuing Bank
harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses
(including reasonable out-of-pocket attorneys' fees and
costs) that such Issuing Bank may incur or be subject to as
a consequence, direct or indirect, of (i) the issuance of
any Letter of Credit, or (ii) the failure of such Issuing
Bank to honor a drawing under any Letter of Credit as a
result of any act or omission, whether rightful or wrongful,
of any present or future de jure or de facto government or
61
<PAGE> 68
governmental authority (all such acts or omissions are
herein called "Government Acts").
As between the Borrowers and any Issuing Bank, the
Borrowers assume all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Bank
by, the respective beneficiaries of such Letters of Credit.
In furtherance and not in limitation of the foregoing,
subject to the last paragraph of this subsection 2.16G, the
Issuing Bank shall not be responsible: (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with
the application for and issuance of such Letters of Credit,
even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or
assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason or for
the identity of any purported transferee or assignee of any
beneficiary thereof; (iii) for failure of the beneficiary of
any such Letter of Credit to comply fully with conditions
required in order to draw upon such Letter of Credit;
(iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in
cipher; (v) for errors in interpretation of technical terms;
(vi) for any loss or delay in the transmission or otherwise
of any document required in order to make a drawing under
any such Letter of Credit or of the proceeds thereof;
(vii) for the misapplication by the beneficiary of any such
Letter of Credit of the proceeds of any drawing under such
Letter of Credit; and (viii) for any consequences arising
from causes beyond the control of the Issuing Bank,
including, without limitation, any Government Acts. None of
the above shall affect, impair, or prevent the vesting of
any of the Issuing Bank's rights or powers hereunder.
In furtherance and extension and not in limitation
of the specific provisions hereinabove set forth, any action
taken or omitted to be taken by the Issuing Bank under or in
connection with the Letters of Credit issued by it or the
related certificates, if taken or omitted in good faith, and
to the extent not with gross negligence or willful
misconduct as determined by a judgment of a court of
competent jurisdiction, shall not put such Issuing Bank
under any resulting liability to any Borrower or any of its
Subsidiaries.
Notwithstanding anything to the contrary contained
in this subsection 2.16G, the Borrowers shall have no
obligation to indemnify any Issuing Bank in respect of any
62
<PAGE> 69
liability incurred by such Issuing Bank arising out of the
gross negligence or willful misconduct of such Issuing Bank,
as determined by a judgment of a court of competent
jurisdiction.
H. COMPUTATION OF INTEREST. Interest payable
pursuant to this subsection 2.16 shall be computed on the
basis of a 360-day year and the actual number of days
elapsed in the period during which it accrues.
2.17 EVIDENCE OF DEBT; BID NOTES
A. Each Lender shall maintain in accordance with
its usual practice an account or accounts evidencing the
indebtedness of the Borrowers to such Lender resulting from
each Committed Loan owing to such Lender from time to time,
including the amounts of principal and interest payable and
paid to such Lender from time to time hereunder.
B. The Register maintained by the Administrative
Agent pursuant to subsection 10.8C shall include a control
account and a subsidiary account for each Lender, in which
accounts (taken together) shall be recorded (i) the date and
amount of each Borrowing made hereunder, (ii) the terms of
each Assignment and Acceptance delivered to and accepted by
it, (iii) the amount of any principal or interest due and
payable or to become due and payable from the Borrowers to
each Lender hereunder, and (iv) the amount of any sum
received by the Administrative Agent from the Borrowers
hereunder and each Lender's share thereof.
C. The entries made in the Register shall be
conclusive and binding for all purposes, absent manifest
error.
D. The Bid Loans made by each Lender shall be
evidenced by a Bid Note payable to the order of such Lender.
Each Lender shall endorse on the schedules annexed to its
Bid Note the date, amount and maturity of each Bid Loan made
by it and the amount of each payment of principal made by
the Borrowers with respect thereto. Each Lender is
irrevocably authorized by the Borrowers to endorse its Bid
Note and each Lender's record shall constitute prima facie
evidence of the accuracy of the information so recorded;
provided, however, that the failure of a Lender to make, or
an error in making, a notation thereon with respect to any
Bid Loan shall not limit or otherwise affect the obligations
of the Borrowers hereunder or under any such Bid Note to
such Lender.
63
<PAGE> 70
2.18 OBLIGATIONS JOINT AND SEVERAL
Anything herein to the contrary notwithstanding,
each Borrower hereby agrees and acknowledges that the
obligation of each Borrower for payment of the Obligations
shall be joint and several with the obligations of each
other Borrower hereunder.
Each Borrower agrees that its joint and several
obligation to pay all Obligations hereunder is irrevocable,
absolute, independent and unconditional and shall not be
affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than the
indefeasible payment in full of the Obligations, and the
liability of each Borrower with respect to the Obligations
shall not be affected, reduced or impaired by
(i) consideration of the amount of proceeds of the Loans
received by any Borrower relative to the aggregate amount of
the Loans, (ii) consideration of the face amount of Letters
of Credit issued for the account of any Borrower relative to
the aggregate face amount of all Letters of Credit issued
hereunder, (iii) the dissolution or termination of or any
increase, decrease or change in personnel of, any other
Borrower, (iv) the insolvency or business failure of, or any
assignment for the benefit of creditors by, or the
commencement of any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceedings by or against
any other Borrower or (v) the appointment of a receiver for,
or the attachment, restraint of or making or levying of any
order of court or legal process affecting, the property of
any other Borrower. Each Borrower agrees that a separate
action or actions may be brought and prosecuted against such
Borrower whether or not action is brought against any other
Borrower and whether or not any other Borrower is joined in
any such action or actions. Any Borrower's payment of a
portion, but not all, of the Obligations shall in no way
limit, affect, modify or abridge such Borrower's liability
for that portion of the Obligations which is not paid.
Each Borrower hereby waives any right to require
the Administrative Agent or any Lender, as a condition of
payment or performance of the Obligations by such Borrower,
to proceed against any other Borrower or any other Person,
to exhaust any security held from any Borrower, or pursue
any other remedy in the power of the Administrative Agent or
any Lender. Each Borrower hereby waives any defense arising
by reason of incapacity, lack of authority or any disability
or other defense that may be available to any other Borrower
and any defenses or benefits that may be derived or afforded
by law which would limit the liability of or exonerate any
guarantor or surety with respect to the Obligations, or
which may conflict with the terms and provisions of this
Agreement.
64
<PAGE> 71
2.19 CONTRIBUTION AMONG BORROWERS
In order to provide for just and equitable
contribution among Borrowers, each Borrower hereby agrees
that if any Borrower shall make payments on the Obligations
in an amount in excess of the net value of the benefits
received by such Borrower and its Subsidiaries from
extensions of credit hereunder (including receipt of the
proceeds of Loans and any Letters of Credit), it shall have
a right of contribution against each other Borrower for such
excess; provided, that such right of contribution shall be
subordinate to the Lenders' right to receive indefeasible
payment in full of the Obligations. The parties hereto
acknowledge that the right to contribution hereunder shall
constitute an asset of any Borrower to which such
contribution is owing.
For the purposes of this subsection 2.19, the "net
value of the benefits" received by any Borrower from
extensions of credit hereunder shall include benefits of
funds constituting proceeds of Loans advanced by the Lenders
to such Borrower or its Subsidiaries and benefits consisting
of any drawings under Letters of Credit issued for the
account or benefit of such Borrower or its Subsidiaries.
Nothing in this subsection 2.19 shall impair the
absolute and unconditional obligation of the Borrowers
jointly and severally to pay all Obligations when the same
shall become due in accordance with the terms of this
Agreement.
2.20 FINANCIAL CONDITION OF BORROWERS
Neither the Administrative Agent nor any Lender
shall have any obligation to any Borrower to disclose or
discuss with such Borrower the Administrative Agent's or any
Lender's assessment of the financial condition of any
Borrower, and each Borrower hereby waives any obligation of
any Lender to disclose any matter, fact or thing relating to
the business, operations or conditions of any Borrower now
or hereafter known by the Administrative Agent or any
Lender. Each Borrower assumes the responsibility for being
and keeping informed of the financial condition of each
other Borrower and of all circumstances bearing upon the
risk of nonpayment of the Obligations by any other Borrower.
No Lender shall have any obligation to any Borrower arising
from any Lender's assessment of, or failure to assess, any
Borrower's financial condition in connection with the
granting of any Loans or other extensions of credit
hereunder.
65
<PAGE> 72
2.21 EXTENSION OF REVOLVER MATURITY DATE
Not later than 60 days nor earlier than 90 days
prior to September 30, 1994 or any subsequent anniversary
thereof, the Borrowers may request a one-year extension of
the Revolver Maturity Date by written notice to the
Administrative Agent, which shall promptly notify the
Lenders of such request, and the Lenders agree to respond to
the Borrowers' request for an extension within 45 days of
receipt of such written notice from the Administrative
Agent; provided, however, that the consent of 100% of the
Lenders shall be required to extend the Revolver Maturity
Date and the failure of any Lender to respond to such
request within such 45-day period shall be deemed a
rejection of such request and shall not in any manner
constitute an extension of the Revolver Maturity Date. Each
Lender's decision with respect to any requested extension of
the Revolver Maturity Date shall be in its sole discretion.
If all of the Lenders consent to such extension, the
Revolver Maturity Date then in effect shall automatically be
extended by one year without any further action on the part
of the Administrative Agent, the Lenders or the Borrowers.
2.22 EXISTING LOANS AND EXISTING LETTERS OF CREDIT
Notwithstanding anything to the contrary in this
Agreement, subject to the terms and conditions of this
Agreement and in reliance upon the representations and
warranties of the Borrowers herein set forth, as of the
Closing Date, all loans outstanding under the Existing
Credit Agreement on the Closing Date (the "Existing Loans")
shall be assigned by the Existing Lenders to the Lenders
proportionately to their Pro Rata Shares, and shall be
repaid in full with the proceeds of the initial Loans
hereunder. All letters of credit issued pursuant to the
Existing Credit Agreement that are outstanding on the
Closing Date or with respect to which an unpaid
reimbursement obligation is outstanding on the Closing Date
("Existing Letters of Credit") for all purposes of this
Agreement shall be deemed to have been issued under and
pursuant to the terms of this Agreement as Letters of
Credit. Any amounts of accrued interest, commitment fees,
letter of credit fees or other amounts (including, without
limitation, any Eurodollar Loan breakage costs payable with
respect to the assignment and repayment of the Existing
Loans) owed (whether or not presently due and payable) by
the Borrowers to the Existing Lenders under or in respect of
the Existing Loans and Existing Letters of Credit shall be
due and payable to the Existing Lenders on the Closing Date.
66
<PAGE> 73
Section 3. CONDITIONS WITH RESPECT TO LOANS AND
LETTERS OF CREDIT
3.1 CONDITIONS TO INITIAL LOANS
The obligation of each Lender to make its initial
Revolving Loan, the obligation of the Swing Line Lender to
make the initial Swing Line Loan and the obligation of the
Issuing Bank to issue the initial Letter of Credit are in
addition to the conditions precedent specified in
subsections 3.2 and 3.3, subject to the prior or concurrent
fulfillment to its satisfaction of the following conditions:
A. DELIVERY OF THE BORROWER DOCUMENTS. On or
before the Closing Date, each Borrower shall deliver the
following to the Administrative Agent for the Lenders with
sufficient originally executed copies for each Lender, the
Administrative Agent and its counsel each, unless otherwise
noted, dated the Closing Date:
(i) Certified copies of the Articles of
Incorporation of each Borrower, together with good
standing certificates and telegrams, if available, from
the Secretary of State of the State of its
incorporation, and good standing certificates from each
state in which such Borrower is required to be
qualified to transact business as a foreign
corporation, each to be dated a recent date prior to
the Closing Date;
(ii) Copies of each Borrower's Bylaws certified by
its corporate secretary or an assistant secretary;
(iii) Resolutions of each Borrower's Board of
Directors approving and authorizing the execution,
delivery and performance of this Agreement and the
issuance and payment of the Bid Notes to which it is a
party, and any other documents, instruments and
certificates required to be executed by such Borrower
in connection herewith or therewith, each certified by
its corporate secretary or an assistant secretary;
(iv) Signature and incumbency certificates of each
Borrower's officers executing this Agreement, the other
Loan Documents to which it is a party and any other
documents, instruments and certificates required to be
executed by such Borrower in connection herewith or
therewith;
(v) Executed copies of this Agreement, the Bid
Notes payable to the Lenders with appropriate
insertions and any other Loan Documents to which any
Borrower is a party; and
67
<PAGE> 74
(vi) Such other documents as the Administrative
Agent or the Lenders may reasonably request.
B. DELIVERY OF OPINIONS OF COUNSEL TO THE
BORROWERS. On the Closing Date, the Administrative Agent
shall have received originally executed copies (with
sufficient copies for the Lenders, the Administrative Agent
and its counsel) of one or more favorable written opinions
of (i) Gibson, Dunn & Crutcher, counsel for the Company and
(ii) Dan Zuckerman, counsel for WCL and PNS, substantially
in the form of Exhibit VII annexed hereto, and as to such
other matters as the Administrative Agent or the Lenders may
reasonably request.
C. OPINION OF THE ADMINISTRATIVE AGENT'S
COUNSEL. On the Closing Date, the Administrative Agent
shall have received originally executed copies (with
sufficient copies for the Lenders, the Administrative Agent
and its counsel) of one or more favorable written opinions
of O'Melveny & Myers, counsel to the Administrative Agent,
dated as of the Closing Date, substantially in the form of
EXHIBIT VIII annexed hereto and as to such other matters as
the Lenders or the Administrative Agent may reasonably
request.
D. PERFORMANCE OF AGREEMENTS. On or before the
Closing Date, each Loan Party shall have performed in all
material respects all agreements which this Agreement
provides shall be performed on the part of such Loan Party
on or before the Closing Date.
E. FEES. On or before the Closing Date, the
Borrowers shall have paid to the Administrative Agent and
the Co-Agent the fees payable on the Closing Date to the
Administrative Agent and the Co-Agent on behalf of
themselves and the Lenders pursuant to subsections 2.3B and
2.3C, and the Attorney Costs of the Administrative Agent's
counsel incurred through the Closing Date.
F. OTHER CORPORATE ACTIONS. On or before the
Closing Date, all corporate and other proceedings taken or
to be taken in connection with the transactions contemplated
hereby and all documents incidental thereto not previously
found acceptable by the Lenders or the Administrative Agent,
acting on behalf of the Lenders, and its counsel shall be
reasonably satisfactory in form and substance to the
Administrative Agent and such counsel, and the
Administrative Agent and such counsel shall have received
all such counterpart originals or certified copies of such
documents as the Administrative Agent may reasonably
request.
68
<PAGE> 75
G. NO CHANGE IN MARKET CONDITIONS. From
August 30, 1993 to the Closing Date, there shall have
occurred, in the reasonable judgment of the Administrative
Agent, no material adverse change in the loan syndication or
capital markets.
H. On or before the Closing Date, the Borrowers
shall have delivered to the Administrative Agent (with
sufficient copies for the Lenders, the Administrative Agent
and its counsel) such other documents as the Lenders may
reasonably request.
3.2 CONDITIONS TO ALL LOANS
The obligation of each Bid Loan Lender to make
each Bid Loan on each Funding Date, the obligation of the
Swing Line Lender to make each Swing Line Loan on each
Funding Date (including the initial Funding Date) and the
obligation of each Lender to make each Revolving Loan on
each Funding Date (including the initial Funding Date) are
subject to prior or concurrent fulfillment to such Lender's
satisfaction, as the case may be, of the following further
conditions precedent:
A. DELIVERY OF NOTICE. Prior to each such
Funding Date with respect to a Committed Loan, the
Administrative Agent shall have received, in accordance with
the provisions of subsection 2.2, an originally executed
Notice of Borrowing signed by an Authorized Person of each
of the Borrowers. The giving of such Notice of Borrowing
shall be deemed to be a representation by the Borrowers that
all of the conditions to borrowing set forth in this
subsection 3.2 shall have been satisfied as of the date of
such Notice of Borrowing.
B. OTHER REQUIREMENTS.
(i) The representations and warranties of the
Borrowers contained herein and in the other Loan
Documents shall be true, correct and complete on and as
of each Funding Date to the same extent as though made
on and as of that date;
(ii) No event shall have occurred and be
continuing or would result from the consummation of the
Borrowing contemplated by the applicable Notice of
Borrowing that would constitute an Event of Default or
a Potential Event of Default;
(iii) The making of any Loan and the use of the
proceeds thereof, shall not violate Regulation U,
Regulation G, Regulation T or Regulation X of the Board
of Governors of the Federal Reserve System, and the
69
<PAGE> 76
Administrative Agent shall on each Funding Date have
received from the Borrowers such documents and
information as it may request (including but not
limited to opinions of counsel) relating to the
satisfaction of such conditions;
(iv) There shall not be pending or, to the
knowledge of any Borrower threatened, any action, suit,
proceeding, governmental investigation or arbitration
against or affecting any Loan Party or any property of
any Loan Party that has not been disclosed by the
Borrowers in writing prior to the execution of this
Agreement and there shall have occurred no development
not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed,
which, in either event, in the opinion of the Lenders,
(as communicated by Requisite Lenders to the
Administrative Agent and evidenced by a written notice
from the Administrative Agent to the Borrowers), could
be expected to prohibit the making of the Loans
hereunder or extensions of credit under the other
financing agreements contemplated hereby or otherwise
result in a Material Adverse Effect. No injunction or
other restraining order shall have been issued and no
hearing to cause an injunction or other restraining
order to be issued shall be pending or noticed with
respect to any action, suit or proceeding seeking to
enjoin or otherwise prevent the consummation of, or to
recover any damages or obtain relief as a result of, or
that could otherwise prohibit the making of Loans
hereunder, the application of the proceeds thereof as
contemplated hereby, the extensions of credit under any
of the other financing agreements contemplated hereby
or any of the transactions contemplated by the
foregoing.
3.3 CONDITIONS TO ALL LETTERS OF CREDIT
The issuance of any Letter of Credit by an Issuing
Bank hereunder and the participation therein by the Lenders
are subject to prior or concurrent satisfaction of all of
the following conditions:
A. On or before the date of issuance of such
Letter of Credit, each of the conditions set forth in
subsection 3.1 shall have been satisfied or waived and the
initial Loans shall have been made.
B. The Issuing Bank (and, to the extent
applicable, the Administrative Agent) shall have received,
in accordance with the provisions of subsection 2.16B, a
notice requesting the issuance of such Letter of Credit, an
executed application for such Letter of Credit in the form
70
<PAGE> 77
customarily required by the Issuing Bank for the issuance of
letters of credit, all other information specified in
subsection 2.16B and such other documents as the Issuing
Bank may reasonably require in connection with the issuance
of such Letter of Credit.
C. Each of the other conditions to the issuance
of such Letter of Credit set forth in subsection 2.16 shall
have been satisfied.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this
Agreement and to make the Loans and to induce the Issuing
Banks to issue the Letters of Credit, each Borrower
represents and warrants to the Lenders that the following
statements are true, correct and complete.
4.1 ORGANIZATION, POWERS, GOOD STANDING AND
SUBSIDIARIES
A. ORGANIZATION AND POWERS. Each Loan Party is
a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation
and has all requisite corporate power and authority to own
and operate its properties and to carry on its business as
now conducted and proposed to be conducted. Each Loan Party
has all requisite corporate power and authority to enter
into this Agreement, each other Loan Document to which it is
a party, and to carry out the transactions contemplated
hereby and thereby. PNS Eastern, Inc. is an inactive
corporation with total assets of not more than $500,000.
B. GOOD STANDING. Each Loan Party is in good
standing wherever necessary to carry on its present business
and operations, except in jurisdictions where the failure to
be in good standing has not and will not have a Material
Adverse Effect.
C. SUBSIDIARIES. All of the Subsidiaries of each
Loan Party as of the Closing Date are identified in Schedule
B annexed hereto. The capital stock of each Person
identified in Schedule B is duly authorized, validly issued,
fully paid and nonassessable and such shares of capital
stock are free and clear of any claim, lien, encumbrance or
agreement with respect thereto. Except as set forth on
Schedule B, no capital stock (or any securities,
instruments, warrants, option or purchase rights, conversion
or exchange rights, calls, commitments or claims of any
character convertible into or exercisable for capital stock)
of any Person identified in Schedule B is subject to
issuance under any security instrument, warrant, option or
71
<PAGE> 78
purchase right, conversion or exchange right, call,
commitment or claim of any right, title or interest therein
or thereto. Except as otherwise indicated on Schedule B,
the capital stock of each Person identified on Schedule B is
not Margin Stock. Schedule B correctly sets forth as of the
Closing Date the ownership interest of each Loan Party in
each of its Subsidiaries.
4.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION. The execution, delivery and
performance by each Loan Party of each Loan Document to
which it is a party, have been duly authorized by all
necessary corporate action.
B. NO CONFLICT. The execution, delivery and
performance by each Loan Party of each Loan Document to
which it is a party, the application of the proceeds of the
Loans and the consummation of any other transactions
contemplated by the Loan Documents do not and will not
(i) violate any provision of law applicable to any Loan
Party, the Certificate or Articles of Incorporation or
Bylaws (or other charter documents) of, or any order,
judgment or decree of any court or other agency of
government binding on, such Loan Party, (ii) except as
disclosed on Schedule I annexed hereto, conflict with,
result in a breach of or constitute (with due notice or
lapse of time or both) a default under any Contractual
Obligation of any Loan Party, (iii) result in or require the
creation or imposition of any Lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets
of any Loan Party or (iv) require any approval of
stockholders or any approval or consent of any Person under
any Contractual Obligation of any Loan Party, other than
such approvals or consents which have been previously
obtained and described in a writing and delivered to the
Lenders no later than five Business Days prior to the
Closing Date and which are identified as being delivered
pursuant to this subsection 4.2B.
C. GOVERNMENTAL CONSENTS. The execution,
delivery and performance by each Loan Party of each Loan
Document to which it is a party and, the application of the
proceeds of the Loans and the consummation of any other
transactions contemplated by the Loan Documents do not and
will not require any registration with, consent or approval
of, or notice to, or other action with or by, any federal,
state or other governmental authority or regulatory body or
other Person except for filings, consents or notices
required by federal or state securities laws, all of which
filings, recordings, consents and notices have been obtained
or made and all applicable waiting periods relating thereto
have expired.
72
<PAGE> 79
D. BINDING OBLIGATION. This Agreement is and the
other Loan Documents when executed and delivered will be,
the legally valid and binding obligations of the applicable
Loan Party, enforceable against the applicable Loan Party in
accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors
rights generally and subject to the availability of
equitable remedies.
4.3 FINANCIAL CONDITION
The Borrowers have heretofore delivered to the
Lenders, at the Lenders' request, (i) a Consolidated balance
sheet of the Company and its Subsidiaries for the Fiscal
Year ending January 31, 1993 and the related Consolidated
statements of income, retained earnings and cash flows for
such Fiscal Year and (ii) the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended August 2, 1993. None
of the Loan Parties has any material Contingent Obligation,
contingent liability or liability for taxes, long term lease
or unusual forward or long term commitment, which is not
reflected in the foregoing financial statements or the notes
thereto.
4.4 CHANGES, ETC.
There has been no change in the business,
operations, properties, assets, liabilities, business
condition (financial or otherwise) or business prospects of
the Company or any of its Subsidiaries since January 31,
1993, which has been, either in any case or in the
aggregate, materially adverse to the Company and its
Subsidiaries, taken as a whole. Since January 31, 1993,
none of the Company or any of its Subsidiaries, has directly
or indirectly declared, ordered, paid or made or set apart
any payment (whether in cash or securities) for any
Restricted Junior Payment or agreed to do so except as
described in Schedule E.
4.5 LITIGATION; ADVERSE FACTS
Except as otherwise set forth in Schedule J
annexed hereto, there is no action, suit, proceeding or
arbitration (whether or not purportedly on behalf of any
Loan Party) at law or in equity or before or by any federal,
state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality,
domestic or foreign, pending against any Loan Party or, to
the knowledge of any Borrower, threatened against or
affecting any Loan Party or any property of any Loan Party
which is reasonably likely to result in a Material Adverse
Effect, and there is no basis known to any Borrower for any
73
<PAGE> 80
such action, suit or proceeding. No Loan Party is (i) in
violation of any applicable law in a manner which materially
adversely affects or is reasonably likely to materially
adversely affect the business, operations, properties,
assets, business prospects or condition (financial or
otherwise) of such Loan Party, or (ii) subject to or in
default with respect to any final judgment, writ,
injunction, decree, rule or regulation of any court or
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality,
domestic or foreign, in a manner which is reasonably likely
to have a Material Adverse Effect. There is no action,
suit, proceeding or investigation pending or, to the best
knowledge of any Borrower, threatened against or affecting
any Loan Party which questions the validity or the
enforceability of any Loan Document.
4.6 PAYMENT OF TAX
All tax returns and reports of each Loan Party
required to be filed by such Loan Party have been timely
filed (after giving effect to any extensions for filing
obtained), and all taxes, assessments, fees and other
governmental charges upon each Loan Party and their
respective properties, assets, income and franchises (if
any) which are due and payable have been paid when due and
payable, except (i) to the extent contemplated by the
proviso in subsection 5.3A hereof or (ii) to the extent that
such taxes, assessments, fees and other governmental charges
or the failure to pay the same would not be material to the
condition of such Loan Party. The Borrowers know of no
proposed tax assessment against any Loan Party that would be
material to the condition (financial or otherwise) of such
Loan Party.
4.7 MATERIALLY ADVERSE AGREEMENTS; PERFORMANCE
A. AGREEMENTS. No Loan Party is a party to or
subject to any material agreement or instrument or charter
or other internal restriction materially adversely affecting
the business, properties, assets, operations, business
prospects or condition (financial or otherwise) of such Loan
Party.
B. PERFORMANCE. No Loan Party is in default in
the performance, observance or fulfillment of any of the
material obligations, covenants or conditions contained in
any of its Contractual Obligations, and no condition exists
which, with the giving of notice or the lapse of time or
both, would constitute such a default, except where the
consequences, direct or indirect, of such default or
defaults, if any, would not have a Material Adverse Effect.
74
<PAGE> 81
4.8 GOVERNMENTAL REGULATION
No Loan Party is subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act or the Investment
Company Act of 1940 or to any United States federal or state
statute or regulation limiting its ability to incur
Indebtedness for money borrowed or to become contingently
liable for the Indebtedness of another.
4.9 SECURITIES ACTIVITIES
No Loan Party is engaged principally, or as one of
its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin
Stock.
4.10 EMPLOYEE BENEFIT PLANS
A. Each Loan Party and each of its ERISA
Affiliates is in compliance in all material respects with
any applicable provisions of ERISA and the regulations and
published interpretations thereunder with respect to all
Employee Benefit Plans.
B. No Termination Event has occurred or is
reasonably expected to occur with respect to any Pension
Plan that could reasonably be expected to result in a
liability of any Loan Party or its ERISA Affiliates in
excess of $1,000,000.
C. The actuarial present value of all benefit
liabilities under all Pension Plans (excluding in such
computation Pension Plans with assets greater than benefit
liabilities) does not exceed the fair market value of the
assets allocable to such benefit liabilities. For purposes
of the preceding sentence, the terms "actuarial present
value" and "benefit liabilities" shall have the meanings
specified in Section 4001 of ERISA.
4.11 PATENTS, TRADEMARKS AND LICENSES
Except as disclosed on Schedule C annexed hereto,
each Loan Party possesses all of the licenses, patents,
patent applications, copyrights, service marks, trademarks
and trade names necessary to continue to conduct its
business as heretofore conducted by it, all of which are set
forth in Schedule K. The Borrowers own all of the Specified
Trademarks free and clear of all Liens, claims, licenses and
interests. All information furnished any or all of the
Lenders concerning the Specified Trademarks is, or will be
at the time the same is furnished, accurate and correct in
all material respects. To the best of any Borrower's
75
<PAGE> 82
knowledge and belief after due inquiry, no material
infringement or unauthorized use is presently made of any of
the Specified Trademarks. Except as disclosed on Schedule
C, there has not been to the Closing Date any claim or
litigation pending, or to the best of any Borrower's
knowledge after diligent inquiry, threatened by or against
any Borrower relating to any of the Specified Trademarks.
Except as disclosed in Schedule C, there are no agreements,
licenses or understandings permitting the use by any Person
of any of the Specified Trademarks or restricting in any
manner any Borrower's use thereof. The consummation of the
transactions contemplated by this Agreement and the other
Loan Documents will not in any manner or to any extent
materially impair the ownership of or the license to use, as
the case may be, any of the Specified Trademarks.
4.12 TITLE TO PROPERTIES; LIENS
Each of the Company and its Subsidiaries has good,
sufficient and legal title to all of its properties and
assets reflected in the Consolidated balance sheet of the
Company and its Subsidiaries as of January 31, 1993 or in
the most recent financial statements delivered pursuant to
subsection 5.1, except for assets acquired or disposed of
since the date of such financial statements and Capital
Leases of which the Company or its Subsidiaries is a lessee
shown as being owned by the Company or its Subsidiaries.
Except for Permitted Liens and as permitted by this
Agreement, all such properties and assets are free and clear
of Liens. Each Borrower enjoys peaceful and undisturbed
possession under all the leases to which it is lessee. All
of the material leases under which the Company or its
Subsidiaries is a lessee are valid and subsisting, no
default of any Borrower exists under any of them and, to the
knowledge of the Borrowers, no default of any other party
exists under any of them.
4.13 ENVIRONMENTAL PROTECTION
Except as disclosed in Schedule D annexed hereto:
(i) The operations of the Company and its
Subsidiaries comply in all material respects with all
Hazardous Materials Laws;
(ii) The Company and its Subsidiaries have
obtained all permits, licenses and approvals under all
Hazardous Materials Laws necessary for their respective
operations, and all such permits, licenses and
approvals are in good standing and the Company and its
Subsidiaries are in compliance with all material terms
and conditions of such permits, licenses and approvals;
76
<PAGE> 83
(iii) The Company and its Subsidiaries and all of
their present property or operations, and to the best
of any Borrower's knowledge, their past property or
operations, are not subject to any outstanding written
order from or agreement with any Governmental Authority
or other Person and are not subject to any judicial or
docketed administrative proceeding or investigation,
respecting (a) any specific existing, potential or
alleged violation of any Hazardous Materials Laws,
(b) any Remedial Action which has or could reasonably
be expected to have a Material Adverse Effect or
(c) any material Environmental Liabilities and Costs;
(iv) None of the Company or any of its
Subsidiaries has ever been or is now a treatment,
storage or disposal facility requiring a permit under
the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., related regulations or any other state
equivalent;
(v) None of the Company or any of its
Subsidiaries has filed or should have filed any notice
required under any Hazardous Materials Laws reporting a
Release into the environment which Release has or would
have any reasonable likelihood of having a Material
Adverse Effect and none of the Company or any of its
Subsidiaries has filed or should have filed any notice
pursuant to Section 103(a) or (c) of the Comprehensive
Environmental Response, Compensation, and Liability Act
("CERCLA");
(vi) There is not now on or in any property of the
Company or any of its Subsidiaries:
(a) any underground storage tanks or surface
impoundments,
(b) any Hazardous Materials, or
(c) any polychlorinated biphenyls (PCBs)
used in electrical or other equipment,
the presence of which has any reasonable likelihood of
having a Material Adverse Effect;
(vii) None of the Company or any of its
Subsidiaries has received (i) any notice or claim to
the effect that it is or may be liable to any Person as
a result of a Release or threatened Release which
Release or threatened Release has any reasonable
likelihood of having a Material Adverse Effect, or
(ii) any letter or request for information under
Section 104 of CERCLA or comparable State laws;
77
<PAGE> 84
(viii) To the best knowledge of the Company and its
Subsidiaries, there are no past or present conditions
or circumstances which may give rise to any
Environmental Liabilities or Costs arising from the
operations of the Company or any Subsidiary of the
Company, including but not limited to off-site disposal
of any Hazardous Materials by or on behalf of the
Company or any of its Subsidiaries, which in the
aggregate have any reasonable likelihood of having a
Material Adverse Effect;
(ix) No Environmental Lien (whether recorded or
unrecorded) has attached to any real or personal
property owned, used or operated by the Company or any
of its Subsidiaries which individually or in the
aggregate has a reasonable likelihood of having a
Material Adverse Effect; and
(x) The Company and each of its Subsidiaries is
in compliance in all material respects with any
applicable financial responsibility requirements of all
Hazardous Materials Laws, including without limitation
those contained in 40 C.F.R., parts 264 and 265,
subpart H, and any state equivalents.
4.14 LABOR MATTERS
There are no strikes or other labor disputes or
grievances pending or, to the knowledge of any Borrower,
threatened against any Borrower or its Subsidiaries that
could reasonably be expected to have a Material Adverse
Effect.
4.15 DISCLOSURE
As of the Closing Date and as of any date
thereafter on which representations and warranties are made,
no representation or warranty of any Loan Party contained in
this Agreement or any other document, certificate or written
statement furnished to the Administrative Agent or the
Lenders, or any of them, by or on behalf of such Loan Party
for use in connection with the transactions contemplated by
this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state
a material fact (known to any Borrower in the case of any
document not furnished by it) necessary in order to make the
statements contained herein or therein not misleading. The
projections and pro forma financial information contained in
such materials are based upon good faith estimates and
assumptions believed by such Persons to be reasonable at the
time made, it being recognized by the Lenders that such
projections as to future events are not to be viewed as
facts or guarantees and that actual results during the
78
<PAGE> 85
period or periods covered by any such projections may differ
from the projected results. There is no fact known to any
Borrower (other than matters of a general economic nature)
which could have a Material Adverse Effect, which has not
been disclosed herein or in such other documents,
certificates and statements furnished to the Lenders for use
in connection with the transactions contemplated hereby.
4.16 NO PARTNERSHIPS OR JOINT VENTURES
No Loan Party has any interest in or is party to
any partnership, joint venture or similar arrangement,
whether in corporate, partnership or other legal form.
SECTION 5. AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that, so long
as any portion of the aggregate Commitments hereunder shall
be in effect and until payment in full of all of the Loans,
and all other amounts owing hereunder and the expiration of
all Letters of Credit, unless Requisite Lenders shall
otherwise give prior written consent in accordance with
subsection 10.1 of this Agreement, the Borrowers shall
perform all covenants in this Section 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS
The Borrowers will maintain a system of accounting
established and administered in accordance with sound
business practices to permit preparation of financial
statements in conformity with GAAP applied on a consistent
basis. The Borrowers will deliver to the Administrative
Agent with sufficient copies for the Lenders and the
Administrative Agent:
(i) as soon as practicable and in any event
within 45 days (or 60 days if an extension from the SEC
for the filing of the Company's Quarterly Report on
Form 10-Q has been obtained; provided that the Company
shall give the Administrative Agent prompt written
notice of any such extension requested) (in the case of
the first three fiscal quarters) after the end of each
of the first three fiscal quarters in each Fiscal Year,
the Consolidated balance sheets of the Company as at
the end of such period and the related Consolidated
statements of income and retained earnings of the
Company for such fiscal quarter and the related
statement of cash flow for the period from the
beginning of the then current Fiscal Year to the end of
such fiscal quarter, setting forth in comparative form
the corresponding figures for the corresponding periods
of the previous Fiscal Year and the corresponding
79
<PAGE> 86
figures from the Consolidated plan for such fiscal
quarter, all in reasonable detail and certified by the
chief financial officer, the controller or the
treasurer of the Company, that they fairly present the
financial condition of the Company and its
Subsidiaries, as at the dates indicated and the results
of their operations and changes in their financial
position for the periods indicated, subject to changes
resulting from audit and normal year-end adjustment;
(ii) as soon as practicable and in any event
within 90 days (or 105 days if an extension from the
SEC for the filing of the Company's Annual Report on
Form 10-K has been obtained; provided that the Company
shall give the Administrative Agent prompt written
notice of any such extension requested) after the end
of each Fiscal Year, (a) the Consolidated balance sheet
of the Company as at the end of such year and the
related Consolidated statements of income, retained
earnings and cash flow of the Company for such Fiscal
Year, setting forth in comparative form the
corresponding figures from the Consolidated plan and
the audited financial statements from the previous
Fiscal Year, all in reasonable detail, and (b) in the
case of such Consolidated financial statements,
accompanied by a report thereon of an independent
certified public accountant of recognized national
standing selected by the Company, which report shall be
unqualified as to going concern and scope of audit and
shall state that such Consolidated financial statements
present fairly the financial position of the Company
and its Subsidiaries as at the dates indicated and the
results of their operations and changes in their
financial position for the periods indicated in
conformity with GAAP applied on a basis consistent with
prior years (except as otherwise stated therein) and
that the examination by such accountants in connection
with such Consolidated financial statements has been
made in accordance with generally accepted auditing
standards;
(iii) together with each delivery of financial
statements of the Company and its Subsidiaries pursuant
to subsections (i) and (ii) above, (a) an Officers'
Certificate of the Borrowers stating that the signers
have reviewed the terms of this Agreement and have
made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and
condition of the Company and its Subsidiaries during
the accounting period covered by such financial
statements and that such review has not disclosed the
existence during or at the end of such accounting
period, and that the signers do not have knowledge of
80
<PAGE> 87
the existence as at the date of the Officers'
Certificate, of any condition or event that constitutes
an Event of Default or Potential Event of Default, or,
if any such condition or event existed or exists,
specifying the nature and period of existence thereof
and what action the Borrowers have taken, are taking
and propose to take with respect thereto; (b) a
Compliance Certificate demonstrating in reasonable
detail compliance by the Borrowers at the end of such
accounting periods with the restrictions contained in
subsections 6.1, 6.3, 6.5, 6.6, 6.7, 6.8, 6.9 and 6.13
and, if not specified in the financial statements
delivered pursuant to subdivision (i) or (ii) above, as
the case may be, specifying the aggregate amount of
interest paid or accrued by the Company and its
Subsidiaries, and the aggregate amount of depreciation,
depletion and amortization charged on the books of the
Company and its Subsidiaries during such accounting
period; and (c) an Applicable Margin Certificate.
(iv) together with each delivery of audited
financial statements of the Company and its
Subsidiaries pursuant to subdivision (ii) above, a
written statement by the independent public accountants
of recognized national standing giving the report
thereon (a) stating that their audit examination has
included a review of the terms of this Agreement as
they relate to accounting matters, (b) stating whether,
in connection with their audit examination, any
condition or event that constitutes an Event of Default
or Potential Event of Default has come to their
attention, and if such a condition or event has come to
their attention, specifying the nature and period of
existence thereof; provided that such accountants shall
not be liable by reason of any failure to obtain
knowledge of any such Event of Default or Potential
Event of Default with respect to accounting matters
that would not be disclosed in the course of their
audit examination, and (c) stating that based on their
audit examination nothing has come to their attention
that causes them to believe that the information
contained in the certificate delivered therewith
pursuant to subdivision (iii) above is not correct;
(v) promptly upon receipt thereof, copies of all
significant reports submitted to any of the Company and
its Subsidiaries by independent public accountants of
recognized national standing in connection with each
annual, interim or special audit or review of the
financial statements or practices of the Company and
its Subsidiaries, made by such accountants, including,
without limitation, the comment letter submitted by
81
<PAGE> 88
such accountants to management in connection with their
annual audit;
(vi) promptly upon their becoming available but no
later than 15 days after any filing hereof with any
regulatory agency, copies of (a) all financial
statements, reports, notices and proxy statements sent
or made available generally by any of the Company and
its Subsidiaries to their security holders, (b) all
regular and periodic reports and all registration
statements and prospectuses, if any, filed by any of
the Company and its Subsidiaries with any securities
exchange or with the SEC or any governmental or private
regulatory authority and (c) all press releases and
other statements regarding management or financial
matters made available generally by any of the Company
and its Subsidiaries to the public concerning material
developments in the business of any Loan Party;
(vii) promptly upon any officer of any Borrower
obtaining knowledge (a) that a condition or event has
occurred and is continuing that constitutes an Event of
Default or Potential Event of Default, or becoming
aware that any Lender or the Agent has given any notice
or taken any other action with respect to a claimed
Event of Default or Potential Event of Default under
this Agreement, (b) that any Person has given any
notice to any Borrower or any of its Subsidiaries or
taken any other action with respect to a claimed
default or event or condition of the type referred to
in subsection 7.4, or (c) of a material adverse change
in the business, operations, properties, assets or
condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole, an Officers'
Certificate specifying the nature and period of
existence of such condition or event, or specifying the
notice given or action taken by such holder or Person
and the nature of such claimed default, Event of
Default, Potential Event of Default, event or
condition, and what action the Borrowers have taken,
are taking and propose to take with respect thereto;
(viii) promptly upon any officer of any Borrower
obtaining knowledge of (a) the institution of, or
nonfrivolous threat of, any action, suit, proceeding,
governmental investigation or arbitration against or
affecting any Borrower or any of its Subsidiaries or
any property of any Borrower or any of its Subsidiaries
not previously disclosed by the Borrowers to the
Lenders, or (b) any material development in any such
action, suit, proceeding, governmental investigation or
arbitration, that, in either case:
82
<PAGE> 89
(y) creates a reasonable possibility of a
Material Adverse Effect; or
(z) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages in
excess of $1,000,000 or obtain relief as a result
of, the Loans;
the Borrowers shall promptly give notice thereof to the
Administrative Agent and the Lenders and provide such
other information as may be reasonably available to it
to enable the Lenders and their counsel to evaluate
such matters;
(ix) promptly upon becoming aware that one of the
following has occurred or is about to occur:
(a) Termination Event, or (b) "prohibited transaction,"
as such terms are defined in Section 4975 of the
Internal Revenue Code or Section 406 of ERISA, in
connection with any Employee Benefit Plan or any trust
created thereunder, a written notice specifying the
nature thereof, what action the Borrowers have taken,
are taking or propose to take with respect thereto,
and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor, or
the PBGC with respect thereto;
(x) with reasonable promptness copies of (a) all
notices received by any Borrower or any of its ERISA
Affiliates of the PBGC's intent to terminate any
Pension Plan or to have a trustee appointed to
administer any Pension Plan; (b) each Schedule B
(Actuarial Information) to the annual report (Form 5500
Series) filed by any Borrower or any of its ERISA
Affiliates with the Internal Revenue Service with
respect to each Pension Plan; and (c) all notices
received by any Borrower or any of its ERISA Affiliates
from a Multiemployer Plan sponsor concerning the
imposition or amount of withdrawal liability pursuant
to Section 4202 of ERISA;
(xi) as soon as practicable and in any event
within 90 days after the beginning of each Fiscal Year,
a Consolidated plan and financial forecast for the
Company and its Subsidiaries for the then current
Fiscal Year and each subsequent Fiscal Year through the
Fiscal Year in which the Revolver Maturity Date occurs,
including without limitation, a forecasted Consolidated
balance sheet and Consolidated statements of income and
cash flow for each such Fiscal Year, each such plan and
forecast to be in form similar to the plans and
forecasts delivered to the Administrative Agent and the
Lenders prior to the Closing Date;
83
<PAGE> 90
(xii) within 10 Business Days of the end of any
Clean-Down Period, an Officers' Certificate identifying
the beginning and ending dates of such Clean-Down
Period and certifying that Clean-Down Debt outstanding
during such Clean-Down Period did not at any time
exceed the level required pursuant to subsection 2.1A;
(xiii) as soon as practicable, and in any event
within 90 days after the last day of each Fiscal Year,
a statement of Inventory for each of PNS and WCL in
form and substance reasonably satisfactory to the
Lenders and the Administrative Agent;
(xiv) with reasonable promptness, such other
information and data with respect to any of the Company
and its Subsidiaries as from time to time may be
reasonably requested by any Lender or the
Administrative Agent.
5.2 CORPORATE EXISTENCE, ETC.
Each Borrower will, and will cause each of its
Subsidiaries to, at all times preserve and keep in full
force and effect its corporate existence, licenses, bonds,
franchises, leases, patents, trademarks, contracts and other
rights material to its business. Each of PNS and WCL will
at all times be a wholly-owned Subsidiary of the Company.
PNS and WCL will preserve and retain at all times their
separate corporate existence and keep separate books,
records and accounts identifying their respective assets and
liabilities.
5.3 PAYMENT OF TAXES AND CLAIMS; TAX
CONSOLIDATION
A. PAYMENT OF TAXES AND CLAIMS. Each Borrower
will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed
upon it or any of its material properties or assets or in
respect of any of its franchises, business, income or
property before any penalty or interest accrues thereon, and
all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become
due and payable and which by law have or may become a Lien
upon any of its material properties or assets, prior to the
time when any penalty or fine shall be incurred with respect
thereto; provided that no such tax, assessment, charge or
claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently
conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with
GAAP shall have been made therefor.
84
<PAGE> 91
B. TAX CONSOLIDATION. No Borrower will, nor
will it permit any of its Subsidiaries to, file or consent
to the filing of any consolidated income tax return with any
Person (other than the Company or any of its Subsidiaries)
unless that other Person shall have agreed in writing with
the Borrowers that the Borrowers' liability with respect to
taxes as a result of the filing of any such consolidated
income tax return with such Person shall not be greater, nor
the receipt of any tax benefits less, than they would have
been had the Borrowers continued to file an unconsolidated
income tax return.
5.4 MAINTENANCE OF PROPERTIES; INSURANCE
Each Borrower will maintain or cause to be
maintained in good repair, working order and condition all
material properties used or useful in the business of the
Company and its Subsidiaries and from time to time will make
or cause to be made all appropriate repairs, renewals and
replacements thereof. Each Borrower will maintain or cause
to be maintained, with financially sound and reputable
insurers, insurance with respect to its properties and
business and the properties and business of its Subsidiaries
against loss or damage of the kinds customarily insured
against by corporations of established reputation engaged in
the same or similar businesses and similarly situated, of
such types and in such amounts as are customarily carried
under similar circumstances by such other corporations. On
or before the end of the first fiscal quarter of each Fiscal
Year, the Borrowers shall submit to the Administrative Agent
(i) an Officers' Certificate setting forth in detail the
type and amount of insurance maintained pursuant to this
subsection 5.4 and (ii) a certificate from an independent
insurance brokerage confirming the insurance coverage
required to be maintained by the preceding sentence.
5.5 EQUAL SECURITY FOR OBLIGATIONS; NO FURTHER
NEGATIVE PLEDGES
A. If any Borrower or any of its Subsidiaries
shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than
Liens excepted by the provisions of subsection 6.2, it shall
make or cause to be made effective provision whereby the
Obligations will be secured by such Lien equally and ratably
with any and all other Indebtedness thereby secured as long
as any such Indebtedness shall be secured; provided that,
notwithstanding the foregoing, this covenant shall not be
construed as a consent by the Requisite Lenders to any
creation or assumption of any such Lien not permitted by the
provisions of subsection 6.2.
85
<PAGE> 92
B. Except with respect to (i) lease provisions
prohibiting the creation or assumption of Liens upon the
particular property subject to such leases and (ii) specific
property encumbered to secure payment of particular
Indebtedness, none of the Borrowers and any of their
respective Subsidiaries shall enter into any agreement
(other than the Loan Documents) prohibiting the creation or
assumption of any Lien upon its properties or assets,
whether now owned or hereafter acquired.
5.6 INSPECTION; RECORDS, ETC.
The Borrowers will permit any Persons designated
by the Administrative Agent or by any Lender to visit and
inspect any of the properties of the Company and its
Subsidiaries including the Company and its Subsidiaries'
financial and accounting records, and to make copies and
take extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective
officers and independent public accountants, all during
regular business hours, upon reasonable notice to the office
of the chief financial officer or controller of the Company
and as often as may be reasonably requested.
5.7 COMPLIANCE WITH LAWS, ETC.
Each Borrower shall, and shall cause its
Subsidiaries to, (i) comply with all applicable laws, rules,
regulations and orders of all governmental authority,
noncompliance of which could materially adversely affect or
impair the Lenders' rights, remedies or privileges under or
enforceability of any of the Loan Documents, including,
without limitation, the Fair Labor Standards Act, and
(ii) exercise all due diligence in order to comply with the
requirements of all other applicable laws, rules,
regulations and orders of any governmental authority
(including without limitation, all Hazardous Materials
Laws), noncompliance with which could reasonably be expected
to result in a Material Adverse Effect.
5.8 FURTHER ASSURANCES
At any time or from time to time upon the request
of any Lender, each Borrower shall execute and deliver such
further documents and do such other acts and things as any
Lender or the Administrative Agent may reasonably request in
order to effect fully the purposes of this Agreement and to
provide for payment of the Loans and interest thereon, in
accordance with the terms of this Agreement.
86
<PAGE> 93
5.9 ENVIRONMENTAL NOTICE AND INSPECTION
Each Borrower shall:
(i) Exercise, and shall cause each of its
Subsidiaries to exercise, all due diligence in order to
comply and cause (a) all tenants under any lease or
occupancy agreement affecting any portion of any property
owned, used, leased or operated by the Company or any of its
Subsidiaries and (b) all other Persons on or occupying such
property, to comply with all Hazardous Materials Laws;
(ii) Notify the Lenders and the Administrative
Agent in writing and in reasonable detail, promptly, and in
any event within 30 days of the Company or any of its
Subsidiaries receiving any of the following:
(a) written notice or claim to the effect that
the Company or any of its Subsidiaries is or may be
liable to any Person as a result of the Release or
threatened Release or has or is in violation of any
Hazardous Materials Laws, in each case if the same has
any reasonable likelihood of having a Material Adverse
Effect;
(b) written notice that any real or personal
property of the Company or any of its Subsidiaries is
subject to an Environmental Lien; and
(c) written notice of the commencement of any
judicial or administrative proceeding or investigation
alleging a violation of any Hazardous Materials Laws or
subjecting the Company or any of its Subsidiaries to
Environmental Liabilities and Costs, in each case if
the same has any reasonable likelihood of having a
Material Adverse Effect;
(iii) Notify the Lenders and the Administrative
Agent promptly and in any event within 30 days, of:
(a) any Release required to be reported to any
federal, state or local governmental or regulatory
agency under any applicable Hazardous Materials Laws;
(b) any and all written communications with
respect to any Environmental Liabilities and Costs that
are reasonably likely to have a Material Adverse Effect
or any Release required to be reported to any federal,
state or local governmental or regulatory agency;
(c) any Remedial Action taken by the Company, any
of its Subsidiaries or any other Person in response to
(1) any Hazardous Materials on, under or about any
87
<PAGE> 94
property owned, used or operated by the Company or any
of its Subsidiaries, the existence of which is
reasonably likely to result in a Material Adverse
Effect or (2) any Environmental Liabilities and Costs
that are reasonably likely to result in a Material
Adverse Effect;
(d) The Company's or any of its Subsidiaries'
discovery of any occurrence or condition on any real
property adjoining or in the vicinity of any facility
owned, used or operated by the Company or any of its
Subsidiaries that could reasonably be expected to cause
such property to be subject to any restrictions on the
ownership, occupancy, transferability or use thereof
under any Hazardous Materials Laws which restrictions,
individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect;
(e) any request for information from any
governmental agency that suggests that such agency is
investigating whether the Company or any of its
Subsidiaries may be potentially responsible for a
Release;
(f) any proposed acquisition of stock, assets,
real estate, or leasing of property by the Company or
any of its Subsidiaries that could reasonably be
expected to subject the Company or any of its
Subsidiaries to a Material Adverse Effect resulting
from Environmental Liabilities and Costs;
(g) any proposed action taken by the Company or
any of its Subsidiaries to commence manufacturing,
industrial, or other operations that could reasonably
be expected to subject the Company or any of its
Subsidiaries to additional laws, rules or regulations,
including but not limited to the obtaining of
environmental, health, or safety permits, licenses or
approvals or Environmental Liabilities and Costs, that
could reasonably be expected to have a Material Adverse
Effect.
(iv) Submit, upon written request by the
Administrative Agent, a report providing an update of the
status of any environmental, health or safety compliance,
hazard or liability issue identified in any notice or report
required pursuant to this Section 5.9 and any other
environmental, health or safety compliance obligation,
remedial obligation or liability that could have a Material
Adverse Effect.
88
<PAGE> 95
SECTION 6. NEGATIVE COVENANTS
Each Borrower agrees that, so long as any portion
of the aggregate Commitments shall be in effect and until
payment in full of all of the Loans and all other amounts
owing hereunder and the expiration of all Letters of Credit,
unless the Lenders shall otherwise give prior written
consent in accordance with subsection 10.1 of this
Agreement, the Borrowers shall perform all covenants in this
Section 6.
6.1 INDEBTEDNESS
Each Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur,
assume, guaranty, or otherwise become or remain directly or
indirectly liable with respect to, any Indebtedness, except:
(i) The Borrowers may become and remain
liable with respect to Capital Leases permitted by
subsections 6.9 and 6.13;
(ii) The Borrowers may become and remain
liable with respect to Contingent Obligations permitted
by subsection 6.4 and, upon any obligations actually
arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so
extinguished;
(iii) The Borrowers may remain liable with
respect to the Existing Indebtedness described in
Schedule F annexed hereto and any renewals or
extensions thereof; provided that any such renewal or
extension does not (a) increase the principal amount of
Indebtedness outstanding immediately prior to such
renewal or extension and (b) have terms and conditions
more onerous to the Borrowers than those terms and
conditions in existence immediately prior to such
renewal or extension;
(iv) The Borrowers may become and remain
liable with respect to the Obligations;
(v) Each Borrower may become and remain
liable with respect to Indebtedness owing to any other
Borrower, provided that such Indebtedness is hereby
subordinated in right of payment to the payment in full
of the Obligations on terms and conditions satisfactory
to the Lenders;
(vi) The Borrowers may become and remain
liable with respect to Indebtedness assumed or incurred
in connection with the acquisition of property
89
<PAGE> 96
permitted under subsections 6.7 and 6.13; provided that
the amount of Indebtedness assumed or incurred in
connection with any such acquisition does not exceed
(a) 100% of the purchase price of such acquired
property in the case of equipment acquisitions and (b)
85% of the purchase price of such acquired property in
the case of real property acquisitions; provided,
further, that in connection with acquisitions of up to
four stores per Fiscal Year, up to 100% of the purchase
price thereof may be assumed or incurred in connection
with such acquisitions so long as the aggregate
principal amount of such Indebtedness does not exceed
$8,000,000;
(vii) The Borrowers may become and remain
liable with respect to interest rate protection
agreements, including without limitation, Interest Rate
Agreements;
(viii) The Borrowers may become and remain
liable with respect to Indebtedness in connection with
the financing of insurance premiums of the Borrowers in
an aggregate amount not to exceed $1,000,000 at any
time outstanding;
(ix) The Borrowers may become and remain
liable with respect to Indebtedness consisting of
promissory notes payable to insurance companies or
their subsidiaries in connection with workers'
compensation insurance; provided that the aggregate
principal amount of such notes shall not exceed the
aggregate face amount of all Letters of Credit issued
for the benefit of such insurance companies or their
subsidiaries in connection with such workers'
compensation; and
(x) In addition to the foregoing
Indebtedness permitted by clauses (i)-(ix) above, the
Borrowers may become and remain liable with respect to
unsecured Indebtedness not exceeding $30,000,000 in the
aggregate at any time outstanding.
6.2 LIENS
Each Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur,
assume or permit to exist any Lien on or with respect to any
property or asset of a Borrower or any of its Subsidiaries,
whether now owned or hereafter acquired, or any income or
profits therefrom, except:
(i) Permitted Liens;
90
<PAGE> 97
(ii) Purchase money Liens securing
Indebtedness permitted pursuant to subsection 6.1(vi);
provided that such Liens shall extend only to the
property financed; and
(iii) Liens existing on the date hereof
described in Schedule F annexed hereto securing
Indebtedness permitted pursuant to subsection 6.1(iii).
6.3 INVESTMENTS
Each Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, make or own any
Investment in any Person, except:
(i) The Borrowers may make and own
Investments in Cash and Cash Equivalents;
(ii) The Borrowers may make and own
Investments described in Schedule G annexed hereto
existing on the date hereof;
(iii) The Borrowers may make and own
Investments consisting of the intercompany Indebtedness
permitted by subsection 6.1(v);
(iv) The Company may own all of the
outstanding capital stock of PNS, WCL and PNS Eastern,
Inc.;
(v) The Borrowers may make and own
Investments received in connection with the bankruptcy
or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other
disputes with, customers and suppliers arising in the
ordinary course of business;
(vi) The Borrowers may make advances secured
by Liens on residential real estate to their respective
officers and employees in the ordinary course of
business in an aggregate amount not exceeding $750,000
at any time; provided that up to $250,000 of such
advances may be unsecured;
(vii) The Borrowers may make and own
Investments to the extent such Investments are
acquisitions permitted under subsection 6.7; and
(viii) In addition to the foregoing Investments
permitted by clauses (i) - (vii) above, the Borrowers
may make and own Investments not exceeding $1,000,000
at any time outstanding.
91
<PAGE> 98
6.4 CONTINGENT OBLIGATIONS
Each Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create or
become or be liable with respect to any Contingent
Obligation except:
(i) The Borrowers may be liable with respect
to guaranties resulting from endorsement of negotiable
instruments for collection in the ordinary course of
business;
(ii) The Borrowers may be liable with respect
to contingent reimbursement obligations with respect to
Letters of Credit issued pursuant hereto;
(iii) The Borrowers may be liable with respect
to Contingent Obligations existing on the date hereof
described in Schedule H annexed hereto;
(iv) Each Borrower may be liable with respect
to guaranties of Indebtedness of another Borrower;
provided that such Indebtedness is permitted under
subsection 6.1;
(v) The Borrowers may be liable with respect
to forward purchase contracts or similar hedging
instruments in connection with the purchase of up to
one year's supply of commodities used in the ordinary
course of the business of the Borrowers; and
(vi) The Borrowers may be liable with respect
to percentage rents incurred under leases permitted
hereunder.
6.5 RESTRICTED JUNIOR PAYMENTS
The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, declare, order,
pay, make or set apart any sum for (by way of defeasance or
otherwise) any Restricted Junior Payment; provided, that so
long as no Event of Default or Potential Event of Default
has occurred and is continuing, (i) the Subsidiaries of the
Company may make Restricted Junior Payments to the Company
and (ii) the Company may make Restricted Junior Payments to
purchase outstanding capital stock of the Company in open
market purchases or otherwise or to pay cash dividends to
its shareholders so long as after giving effect to such
proposed Restricted Junior Payment the aggregate of all such
Restricted Junior Payments made pursuant to this clause (ii)
since the Closing Date does not exceed the sum of (x)
$10,000,000 plus (y) on a cumulative basis from August 2,
1993 to the date of such proposed Restricted Junior Payment
92
<PAGE> 99
(the "Cumulative Period"), 50% of all positive Consolidated
Net Income for each fiscal quarter during the Cumulative
Period less 100% of all negative Consolidated Net Income for
each fiscal quarter during the Cumulative Period.
6.6 FINANCIAL COVENANTS
A. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. The
Borrowers will not permit, on any Fiscal Quarter End during
the period from the Closing Date until the Revolver Maturity
Date, commencing with the fiscal quarter ending on
October 31, 1993, Consolidated Tangible Net Worth to be less
than the sum of $215,000,000 plus 50% of Consolidated Net
Income (with no deduction for losses) determined on a fiscal
quarter basis for the period from August 2, 1993 to such
Fiscal Quarter End.
B. MINIMUM CONSOLIDATED FIXED CHARGE COVERAGE
RATIO. The Borrowers will not permit, on any Fiscal Quarter
End during the period from the Closing Date until the
Revolver Maturity Date, commencing with the fiscal quarter
ending on October 31, 1993, the Consolidated Fixed Charge
Coverage Ratio for the four fiscal quarters ending on such
Fiscal Quarter End to be less than 1.10 to 1.00 on the
Fiscal Quarter End of October 31, 1993 and 1.15 to 1.00 on
each Fiscal Quarter End thereafter.
C. MAXIMUM LEVERAGE RATIO. The Borrowers will
not permit, on any Fiscal Quarter End occurring during the
period from the Closing Date to the Revolver Maturity Date,
commencing with the fiscal quarter ending on October 31,
1993, the Leverage Ratio to be more than 0.50 to 1.00.
6.7 RESTRICTION ON FUNDAMENTAL CHANGES
None of the Borrowers or any of their respective
Subsidiaries will enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or
suffer any liquidation or dissolution), or acquire by
purchase or otherwise all or substantially all the business,
property or fixed assets of, or stock or other evidence of
beneficial ownership of, any Person, in each case, without
the prior written consent of Requisite Lenders; provided
that (a) PNS Eastern, Inc. may be merged with and into
Company and (b) the Borrowers may make acquisitions (whether
by asset purchase, stock purchase or otherwise) of all or
substantially all of the assets or stock or other evidence
of beneficial ownership of a Person so long as (i) no Event
of Default or Potential Event of Default has occurred and is
continuing or would result therefrom, (ii) the aggregate
consideration paid for all such acquisitions consummated in
any Fiscal Year does not exceed $15,000,000, (iii) the
aggregate consideration paid for all such acquisitions
93
<PAGE> 100
consummated since the Closing Date does not exceed
$30,000,000 and (iv) each such acquisition is a permitted
capital expenditure under subsection 6.13.
6.8 RESTRICTION ON ASSET SALES
None of the Borrowers or any of their respective
Subsidiaries will convey, sell, lease, sublease, transfer or
otherwise dispose of, any of its business, property or fixed
assets, whether now owned or hereafter acquired; except that
each Borrower and its Subsidiaries may:
(i) sell or dispose of Inventory and worn-
out or obsolete equipment in the ordinary course of
business;
(ii) consummate any Asset Sale (other than
with respect to the New Orleans Distribution Center) in
a single transaction or a series of related
transactions so long as (a) such Asset Sale is an arms-
length transaction, (b) the sales price equals or
exceeds the estimated fair market value of the assets
sold as determined in good faith by the selling
Borrower and (c) after giving effect to such Asset
Sale, the aggregate sales price for all such Asset
Sales consummated during the then current Fiscal Year
does not exceed $7,500,000; provided that if, after
giving effect to such Asset Sale, the aggregate sales
prices for all such Asset Sales consummated in the then
current Fiscal Year exceeds $3,000,000, the Borrowers
shall give notice to the Administrative Agent of all
such Asset Sales and each other Asset Sale thereafter
consummated during such Fiscal Year;
(iii) enter into sale-leaseback transactions
permitted by subsection 6.9;
(iv) lease or sublease to a third Person
buildings or portions thereof (and any related parking
lots) for use in a manner substantially similar to the
Company's past use of such property or other uses
customarily found in shopping centers;
(v) renew, extend or replace the real
property leases existing on the Closing Date; provided
that any property subject to any such replacement lease
shall not be used in any manner not substantially
similar to the use of such property by the previous
lessee or for any use not customarily found in shopping
centers; and
(vi) sell the New Orleans Distribution Center
so long as (a) such sale is an arms-length transaction
94
<PAGE> 101
and (b) the sales price equals or exceeds the estimated
fair market value thereof as determined in good faith
by the selling Borrower.
6.9 SALES AND LEASE-BACKS
Other than with respect to the New Orleans
Distribution Center, each Borrower will not, and will not
permit any of its Subsidiaries, directly or indirectly, to
become or remain liable as lessee or as guarantor or other
surety with respect to any lease with any Person, whether an
Operating Lease or a Capital Lease, of any property (whether
real or personal or mixed) whether now owned or hereafter
acquired, (i) which a Borrower or any of its Subsidiaries
has sold or transferred or is to sell or transfer to such
Person or such Person's Affiliate, or (ii) which a Borrower
or any such Subsidiary intends to use for substantially the
same purpose as any other property which has been or is to
be sold or transferred by the Company or any such Subsidiary
to such Person or such Person's Affiliate in connection
with such lease; provided that Borrowers may enter into any
sale and leaseback of real property, improvements thereon
and equipment of the Borrowers entered into to finance or
refinance the purchase price or construction of such real
property, improvements and equipment; provided that the Net
Cash Proceeds (plus the related amounts described in clauses
(i) and (iii) of the definition of Net Cash Proceeds) of
each such Asset Sale during any Fiscal Year together with
aggregate Net Cash Proceeds from other Asset Sales
consisting of sale and leasebacks consummated during such
Fiscal Year do not exceed $15,000,000.
6.10 SALE OR DISCOUNT OF RECEIVABLES
Each Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, (i) sell with
recourse, or discount or otherwise sell for less than the
face value thereof, notes or accounts receivable or
(ii) sell, assign, pledge, hypothecate, transfer or
otherwise dispose of any of their rights and claims to the
payment or receipt of money or other forms of consideration
of any kind other than pursuant to the Loan Documents.
6.11 TRANSACTIONS WITH STOCKHOLDERS AND AFFILIATES
Each Borrower will not, and will not permit any of
its Subsidiaries to, enter into any transaction (including,
without limitation, the purchase, sale, lease or exchange of
any property or the rendering of any service) with any
holder of 5% or more of any class of equity securities of a
Borrower or with any Affiliate of a Borrower or any such
holder on terms that are less favorable to a Borrower or any
95
<PAGE> 102
such Subsidiary than those which might be obtained at the
time from Persons who are not such a holder or Affiliate.
6.12 DISPOSAL OF SUBSIDIARY STOCK
Except as permitted by subsection 6.7 and 6.8, the
Company will not,
(i) directly or indirectly sell, assign, pledge
or otherwise encumber or dispose of any shares of
capital stock or other equity securities of (or
warrants, rights or options to acquire shares or other
equity securities of) any of its Subsidiaries, except
to qualify directors if required by applicable law; or
(ii) permit any of its Subsidiaries directly or
indirectly to sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or
other securities of (or warrants, rights or options to
acquire shares or other securities of) any of its
Subsidiaries, except to the Company, another Subsidiary
of the Company, pursuant to the Collateral Documents or
to qualify directors if required by applicable law.
6.13 LIMITATION ON CONSOLIDATED CAPITAL
EXPENDITURES
Each Borrower will not, and will not permit its
Subsidiaries to, incur aggregate Consolidated Capital
Expenditures during the following Fiscal Years in excess of
the correlative amounts indicated below:
Maximum Consolidated
Fiscal Year Capital Expenditures
----------- --------------------
1993 $40,000,000
1994 50,000,000
1995 50,000,000
1996 60,000,000
; provided that any amounts not used in one Fiscal Year may
be carried forward and used during the first six months of
the succeeding Fiscal Year in addition to the amount set
forth above for such succeeding Fiscal Year.
6.14 CONDUCT OF BUSINESS
Each Borrower will not, and will not permit any of
its Subsidiaries to, engage in any business other than the
business engaged in by it on the date hereof and any
businesses or activities substantially similar or related
thereto; provided, that PNS will not engage in any business
other than that of a retail merchant and WCL will not engage
96
<PAGE> 103
in any business other than that of a wholesaler and PNS
Eastern, Inc. will remain inactive. The Company will not
engage in any business other than owning the outstanding
capital stock of its wholly owned Subsidiaries.
6.15 INDEPENDENCE OF COVENANTS
All covenants hereunder shall be given independent
effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would
be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of
Default if such action is taken or condition exists.
6.16 USE OF PROCEEDS
The Borrowers will not use all or any portion of
the proceeds of any Loan or Letter of Credit for any purpose
other than the purposes set forth in subsection 2.14.
SECTION 7. EVENTS OF DEFAULT
If any of the following conditions or events
("Events of Default") shall occur and be continuing:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE
The Borrowers shall fail to pay any principal of
any Loan or shall fail to pay any other amount due under
this Agreement (other than interest on the Loans and fees
due to the Lenders hereunder) when the same becomes due and
payable; or the Borrowers shall fail to pay any interest on
any Loan or any fees due to the Lenders under this Agreement
within five days after the same becomes due and payable; or
7.2 BREACH OF WARRANTY
Any representation or warranty made or deemed made
by any Loan Party (or any of its officers) in any Loan
Document or certificate or other writing delivered pursuant
thereto shall prove to have been incorrect or misleading in
any material respect when made or deemed made; or
7.3 BREACH OF COVENANTS
Any Loan Party shall fail to perform or observe
any term, covenant or agreement contained in Section 5 or
Section 6; or any Loan Party shall fail to perform or
observe any other term, covenant or agreement contained in
this Agreement or any other Loan Document on its part to be
performed or observed if such failure shall remain
97
<PAGE> 104
unremedied or unwaived for 10 days after the earlier of (a)
the date upon which any Responsible Officer of any of the
Borrowers knew of such failure or (b) the date upon which
written notice thereof shall have been given to such Loan
Party by the Administrative Agent; or
7.4 BREACH OF OTHER AGREEMENTS
Any Loan Party shall fail to pay any portion of
principal of or premium or interest on any Indebtedness,
which Indebtedness is in an aggregate principal amount
greater than $1,000,000 (but excluding Indebtedness
outstanding hereunder) or shall fail to pay any portion of a
Contingent Obligation, which Contingent Obligation is in an
aggregate principal amount of greater than $1,000,000, when
the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue unwaived after
the applicable grace period, if any, specified in the
agreement or instrument relating to such Indebtedness or
Contingent Obligation; or any other event shall occur or
condition shall exist under any agreement or instrument
relating to any such Indebtedness or Contingent Obligation
and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the
effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such
Indebtedness or Contingent Obligation; or any such
Indebtedness or Contingent Obligation shall be declared to
be due and payable, or required to be prepaid (other than by
a regularly scheduled required prepayment), prior to the
stated maturity thereof; or
7.5 BANKRUPTCY
(i) A court having jurisdiction in the
premises shall enter a decree or order for relief in
respect of any Loan Party or any of its Subsidiaries in
an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in
effect, which decree or order is not stayed; or any
other similar relief shall be granted under any
applicable federal or state law; or
(ii) An involuntary case is commenced against
any Loan Party or any of its Subsidiaries under any
applicable bankruptcy, insolvency or other similar law
now or hereafter in effect; or a decree or order of a
court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar
powers over any Loan Party or any of its Subsidiaries,
or over all or a substantial part of its property,
98
<PAGE> 105
shall have been entered; or there shall be the
involuntary appointment of an interim receiver, trustee
or other custodian of any Loan Party or any of its
Subsidiaries for all or a substantial part of its
property; or there shall be the issuance of a warrant
of attachment, execution or similar process against any
substantial part of the property of any Loan Party or
any of its Subsidiaries, and the continuance of any
such event referred to in this clause (ii) for 60 days
unless dismissed, bonded or discharged; or
(iii) Any Loan Party or any of its
Subsidiaries shall have an order for relief entered
with respect to it or commence a voluntary case under
any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or shall consent to the
entry of an order for relief in an involuntary case, or
to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the
appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial
part of its property or shall make any assignment for
the benefit of creditors; or
(iv) Any Loan Party or any of its
Subsidiaries shall fail, be unable, or admit its
inability to pay its debts as such debts become due; or
the Board of Directors of any Loan Party or any of its
Subsidiaries (or any committee thereof) adopts any
resolution to approve or otherwise authorizes any of
the actions referred to in clause (iii) above or this
clause (iv); or
7.6 JUDGMENTS
Any unpaid judgments, orders for the payment of
money (other than judgments and orders covered by insurance,
but only if the insurer has admitted liability with respect
to such judgments and orders), writs or warrants of
attachment involving amounts in excess of $1,000,000 in the
aggregate shall be entered or filed against any of the
Borrowers or any of their respective Subsidiaries and shall
remain undischarged, unvacated, unbonded or unstayed for a
period of 30 days or in any event later than 30 days prior
to any sale under any such judgment, order, writ or warrant;
or
7.7 DISSOLUTION
Any order, judgment or decree shall be entered
against any Loan Party or any of its Subsidiaries decreeing
the dissolution or split up of any Loan Party or any of its
99
<PAGE> 106
Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
7.8 ERISA
(i) Any Borrower or any of its ERISA
Affiliates fails to make full payment when due of all
amounts in excess of $1,000,000 in the aggregate which,
under the provisions of any Pension Plan, Multiemployer
Plan or Section 412 of the Internal Revenue Code, such
Borrower or any of its ERISA Affiliates is required to
pay as contributions thereto;
(ii) Any accumulated funding deficiency in
excess of $1,000,000 in the aggregate occurs or exists,
whether or not waived, with respect to any Pension
Plan;
(iii) The excess of the actuarial present
value of all benefit liabilities under all Pension
Plans over the fair market value of the assets of such
Pension Plans (excluding in such computation Pension
Plans with assets greater than benefit liabilities)
allocable to such benefit liabilities is greater than
$1,000,000;
(iv) Any Borrower or any of its ERISA
Affiliates enters into any transaction which has as its
principal purpose the evasion of liability under
Subtitle D or E of Title IV of ERISA;
(v) (A) Any Pension Plan maintained by any
Borrower or any of its ERISA Affiliates shall be
terminated within the meaning of Title IV of ERISA, or
(B) a trustee shall be appointed by an appropriate
United States district court to administer any Pension
Plan, or (C) the PBGC shall institute proceedings to
terminate, or to appoint a trustee to administer any
Pension Plan or Multiemployer Plan, or (D) any Borrower
or any of its ERISA Affiliates shall withdraw (under
Section 4063 of ERISA) from a Pension Plan or under
Sections 4203 or 4205 from a Multiemployer Plan, if as
of the date of the event listed in subclauses (A)-(D)
above or any subsequent date, any Borrower or any of
its ERISA Affiliates have incurred or are reasonably
likely to incur any liability in excess of $1,000,000
(such liability to include, without limitation, any
liability to any Pension Plan, Multiemployer Plan, or
the PBGC, or to any other part under Sections 4062,
4063 or 4064 of ERISA or any other provision of law)
resulting from or otherwise associated with the events
listed in subclause (A)-(D) above;
100
<PAGE> 107
As used in this subsection 7.8 the term
"accumulated funding deficiency" has the meaning specified
in Section 412 of the Internal Revenue Code, and the terms
"actuarial present value" and "benefit liabilities" have the
meanings specified in Section 4001 of ERISA; or
7.9 CONTROL OF THE BORROWERS
(i) Any Person or two or more Persons acting in
concert shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities and Exchange Act of 1934, as
amended), directly or indirectly, of securities of any
Borrower (or other securities convertible into such
securities) representing 50% or more of the combined voting
power of all securities of such Borrower entitled to vote in
the election of directors, other than securities having such
power only by reason of the happening of a contingency; or
(ii) Any Person or two or more Persons acting in
concert shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement which upon
consummation will result in its or their acquisition of, the
power to exercise, directly or indirectly, control over
securities of any Borrower (or other securities convertible
into such securities) representing 50% or more of the
combined voting power of all securities of such Borrower
entitled to vote in the election of directors, other than
securities having such power only by reason of the happening
of a contingency; or
(iii) Any Person or two or more Persons acting in
concert shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities and Exchange Act of 1934, as
amended), directly or indirectly, of securities of any
Borrower (or other securities convertible into such
securities) representing 35% or more of the combined voting
power of all securities of such Borrower entitled to vote in
the election of directors, other than by reason of the
happening of a contingency and during any period commencing
with the acquisition of such securities and ending with the
next stockholders' meeting at which (a) a majority of
individuals constituting the board of directors of such
Borrower will be elected, and (b) the Person acquiring such
securities shall have the right to vote, individuals who
prior to such election were directors of such Borrower shall
cease for any reason (other than death or incapacity) to
constitute 50% of the board of directors of such Borrower;
or
(iv) Any Person or two or more Persons acting in
concert shall have acquired by contract or otherwise, or
101
<PAGE> 108
shall have entered into a contract or arrangement which upon
consummation will result in its or their acquisition of, the
power to exercise, directly or indirectly, control over
securities of any Borrower (or other securities convertible
into such securities) representing 35% or more of the
combined voting power of all securities of such Borrower
entitled to vote in the election of directors, other than by
reason of the happening of a contingency and during any
period commencing with the acquisition of such securities
and ending with the next stockholders' meeting at which
(a) a majority of individuals constituting the board of
directors of such Borrower will be elected, and (b) the
Person acquiring such securities shall have the right to
vote, individuals who prior to such election were directors
of such Borrower shall cease for any reason (other than
death or incapacity) to constitute 50% of the board of
directors of such Borrower; or
(v) The Company shall cease to own 100% of the
issued and outstanding capital stock of PNS and WCL;
then, and in any such event, the Administrative Agent shall
at the request, or may with the consent, of the Requisite
Lenders, (i) by notice to the Borrowers, declare the
obligation of each Lender to make Loans and the obligation
of the Issuing Banks to issue Letters of Credit to be
terminated, whereupon the same shall forthwith terminate,
(ii) shall at the request, or may with the consent, of
Requisite Lenders, by notice to the Borrowers, declare
(x) the Loans and all interest thereon, (y) an amount equal
to the maximum amount that may at any time be drawn under
all Letters of Credit then outstanding (whether or not any
beneficiary under any Letter of Credit shall have presented,
or shall be entitled at such time to present, the drafts and
other documents required to draw under such Letter of
Credit), and (z) all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the
Loans, all such interest and all such amounts shall become
and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrowers; (iii) exercise
any other remedies provided under this Agreement and the
other Loan Documents or by law; provided, however, that in
the event of an actual or deemed entry of an order for
relief with respect to the Company or any of its
Subsidiaries under the Bankruptcy Code, (A) the obligation
of each Lender to make Loans and the obligation of the
Issuing Banks to issue Letters of Credit shall automatically
be terminated and (B) the Loans, the amount set forth in
clause (y) above, all such interest and all such amounts
shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all
of which are hereby expressly waived by the Borrowers;
102
<PAGE> 109
provided further that the foregoing shall not affect in any
way the obligations of the Revolving Lenders to purchase
from any Issuing Bank participations in the unreimbursed
amount of any drawings under any Letters of Credit as
provided in subsection 2.16E. So long as any Letters of
Credit shall remain outstanding, any amounts described in
clause (y) above with respect to Letters of Credit, when
received by the Administrative Agent, shall be held by the
Administrative Agent as cash collateral for the obligation
of the Borrowers to reimburse the Issuing Banks in the event
of any drawing under outstanding Letters of Credit, and upon
any drawing under any outstanding Letter of Credit in
respect of which the Administrative Agent has deposited in a
cash collateral account (the "Cash Collateral Account") any
amounts described in clause (y) above, the Administrative
Agent shall apply such amounts to reimburse the Issuing Bank
with respect to such Letter of Credit for the amount of such
drawing. In the event of the cancellation or expiration of
any Letter of Credit in respect of which the Administrative
Agent has deposited in Cash Collateral Account any amounts
described in clause (y) above or in the event of any
reduction in the maximum amount available at any time for
drawing under Letters of Credit ("Maximum Available
Amount"), the Administrative Agent shall apply the amount
then in the Cash Collateral Account less the Maximum
Available Amount immediately after such cancellation,
expiration or reduction, if any, first to reimburse the
Issuing Banks for any drawings under outstanding Letters of
Credit, second to the payment in full of the Obligations,
and third to whomsoever shall be lawfully entitled to
receive such funds.
Upon acceleration, the Lenders and the
Administrative Agent, or any of them, without notice to or
demand upon the Borrowers which are expressly waived by the
Borrowers, may proceed (but only with the consent of
Requisite Lenders) to protect, exercise, and enforce their
rights and remedies under the Loan Documents and such other
rights and remedies as are provided by law or equity.
Requisite Lenders may determine in their sole discretion the
order and manner in which the Lenders' rights and remedies
are to be exercised, and all payments received by the
Administrative Agent or the Lenders, or any one or more of
them, shall be applied as follows (regardless of how each
Lender may treat the payments for the purpose of its own
accounting); first, to all costs and expenses (including,
without limitation, attorneys' fees, costs of maintaining,
preserving and/or disposing of any real, personal or mixed
property of the Company and its Subsidiaries which secures
the Obligations to the Lenders and costs of settlement)
incurred by the Administrative Agent or the Lenders, or any
of them, in enforcing any Obligations of, or in collecting
any payments due from, the Borrowers hereunder by reason of
103
<PAGE> 110
such Event of Default; second, to all fees and expenses due
and owing to the Administrative Agent or the Lenders, third,
ratably to accrued interest; fourth, ratably to principal
amounts outstanding; fifth, to other Obligations then due
and owing under any of the Loan Documents; and sixth to
whomsoever shall be lawfully entitled to receive such funds.
SECTION 8. THE ADMINISTRATIVE AGENT; CO-AGENTS
8.1 APPOINTMENT AND AUTHORIZATION
Each Lender hereby irrevocably appoints,
designates and authorizes the Administrative Agent to take
such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to
it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably
incidental thereto. Notwithstanding any provision to the
contrary contained elsewhere in this Agreement or in any
other Loan Document, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set
forth herein, nor shall the Administrative Agent have or be
deemed to have any fiduciary relationship with any Lender,
and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist
against the Administrative Agent.
8.2 DELEGATION OF DUTIES
The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters
pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects with reasonable
care.
8.3 LIABILITY OF ADMINISTRATIVE AGENT
None of the Agent-Related Persons shall (a) be
liable for any action taken or omitted to be taken by any of
them under or in connection with this Agreement or any other
Loan Document (except for its own gross negligence or
willful misconduct), or (b) be responsible in any manner to
any of the Lenders for any recital, statement, representa-
tion or warranty made by any Borrower or any Subsidiary or
Affiliate of any Borrower, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to
104
<PAGE> 111
or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document,
or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document,
or for any failure of any Borrower or any other party to any
Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other
Loan Document, or to inspect the properties, books or
records of any Borrower or any of the Borrowers'
Subsidiaries or Affiliates.
8.4 RELIANCE BY ADMINISTRATIVE AGENT
(a) The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate,
affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation
believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons, and
upon advice and statements of legal counsel (including
counsel to the Borrowers), independent accountants and other
experts selected by the Administrative Agent. The
Administrative Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such
advice or concurrence of the Requisite Lenders as it deems
appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Lenders against any
and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a
request or consent of the Requisite Lenders and such request
and any action taken or failure to act pursuant thereto
shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with
the conditions specified in subsections 3.1 and 3.2, each
Lender that has executed this Agreement shall be deemed to
have consented to, approved or accepted or to be satisfied
with each document or other matter either sent by the
Administrative Agent to such Lender for consent, approval,
acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to
the Lender, unless an officer of the Administrative Agent
responsible for the transactions contemplated by the Loan
Documents shall have received notice from the Lender prior
to the applicable Borrowing specifying its objection thereto
105
<PAGE> 112
and either such objection shall not have been withdrawn by
notice to the Administrative Agent to that effect or the
Lender shall not have made available to the Administrative
Agent the Lender's ratable portion of such Committed
Borrowing.
8.5 NOTICE OF DEFAULT
The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the
payment of principal, interest and fees required to be paid
to the Administrative Agent for the account of the Lenders,
unless the Administrative Agent shall have received written
notice from a Lender or the Borrowers referring to this
Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice,
the Administrative Agent shall give notice thereof to the
Lenders. The Administrative Agent shall take such action
with respect to such Default or Event of Default as shall be
requested by the Requisite Lenders in accordance with
Section 7; provided, however, that unless and until the
Administrative Agent shall have received any such request,
the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem
advisable or in the best interest of the Lenders.
8.6 CREDIT DECISION
Each Lender expressly acknowledges that none of
the Agent-Related Persons has made any representation or
warranty to it and that no act by the Administrative Agent
hereinafter taken, including any review of the affairs of
the Company and its Subsidiaries shall be deemed to
constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents
to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent and based on
such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the
business, prospects, operations, property, financial and
other condition and creditworthiness of the Company and its
Subsidiaries, and all applicable bank regulatory laws
relating to the transactions contemplated thereby, and made
its own decision to enter into this Agreement and extend
credit to the Borrowers hereunder. Each Lender also
represents that it will, independently and without reliance
upon the Administrative Agent and based on such documents
and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this
106
<PAGE> 113
Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to
the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrowers.
Except for notices, reports and other documents expressly
herein required to be furnished to the Lenders by the
Administrative Agent, the Administrative Agent shall not
have any duty or responsibility to provide any Lender with
any credit or other information concerning the business,
prospects, operations, property, financial and other
condition or creditworthiness of the Borrowers which may
come into the possession of any of the Agent-Related
Persons.
8.7 INDEMNIFICATION
Whether or not the transactions contemplated
hereby shall be consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not
reimbursed by or on behalf of the Borrowers and without
limiting the obligation of the Borrowers to do so), ratably
from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind whatsoever
which may at any time (including at any time following the
repayment of the Loans and the termination or resignation of
the related Administrative Agent) be imposed on, incurred by
or asserted against any such Person any way relating to or
arising out of this Agreement or any document contemplated
by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or
omitted by any such Person under or in connection with any
of the foregoing; provided, however, that no Lender shall be
liable for the payment to the Agent-Related Persons of any
portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse the Administrative
Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred
by the Administrative Agent in connection with the
preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this
Agreement, any other Loan Document, or any document
contemplated by or referred to herein to the extent that the
Administrative Agent is not reimbursed for such expenses by
or on behalf of the Borrowers. Without limiting the
generality of the foregoing, if the Internal Revenue Service
or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Administrative
107
<PAGE> 114
Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate form
was not delivered, was not properly executed, or because
such Lender failed to notify the Administrative Agent of a
change in circumstances which rendered the exemption from,
or reduction of, withholding tax ineffective, or for any
other reason) such Lender shall indemnify the Administrative
Agent fully for all amounts paid, directly or indirectly, by
the Administrative Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to the
Administrative Agent under this Section, together with all
costs and expenses (including Attorney Costs). The
obligation of the Lenders in this Section shall survive the
payment of all Obligations hereunder.
8.8 ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY
BofA and its Affiliates may make loans to, issue
letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind
of banking, trust, financial advisory or other business with
the Company and its Subsidiaries and Affiliates as though
BofA were not the Administrative Agent hereunder and without
notice to or consent of the Lenders. With respect to its
Loans, BofA shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as
though it were not the Administrative Agent, and the terms
"Lender" and "Lenders" shall include BofA in its individual
capacity.
8.9 SUCCESSOR ADMINISTRATIVE AGENT
The Administrative Agent may, and at the request
of the Requisite Lenders shall, resign as Administrative
Agent upon 30 days' notice to the Lenders and the Borrowers.
If the Administrative Agent shall resign as Administrative
Agent under this Agreement, the Requisite Lenders shall
appoint from among the Lenders a successor agent for the
Lenders, which successor agent shall be reasonably
acceptable to the Borrowers. If no successor agent shall
have been appointed by the Requisite Lenders and shall have
accepted such appointment within 10 days prior to the
effective date of the resignation of the Administrative
Agent, the Administrative Agent may appoint, after
consulting with the Lenders and the Borrowers, a successor
agent from among the Lenders. If no successor agent shall
have been so appointed by the Administrative Agent and shall
have accepted such appointment prior to the effective date
of the resignation of the Administrative Agent, the
Administrative Agent may appoint a successor agent which
shall be a commercial bank organized under the laws of the
United States or any state thereof having a combined capital
108
<PAGE> 115
and surplus of at least $500,000,000. Upon the acceptance
of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent and the term
"Administrative Agent" shall mean such successor agent and
the retiring Administrative Agent's appointment, powers and
duties as Administrative Agent shall be terminated. After
any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Section 8 and
subsections 10.4 and 10.6 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
8.10 CO-AGENTS
None of the Lenders identified on the facing page
or signature pages of this Agreement as a Co-Agent shall
have any right, power, obligation, liability, responsibility
or duty under this Agreement other than those applicable to
all Lenders as such. Each Lender acknowledges that it has
not relied, and will not rely, on any of the Lenders so
identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.
SECTION 9. THE LENDERS' REPRESENTATIONS
Each Lender hereby represents that it is a
commercial lender or financial institution which makes loans
in the ordinary course of its business and that it will make
each Loan hereunder and participate in each Letter of Credit
issued hereunder in the ordinary course of such business;
provided, however, that the disposition of any evidence of
indebtedness held by such Lender shall at all times be
within its exclusive control subject to subsection 10.8.
SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS, ETC.
No amendment or waiver of any provision of this
Agreement or any other Loan Document nor consent to any
departure by any Loan Party therefrom, shall in any event be
effective unless the same shall be in writing and signed by
Requisite Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given; provided, however, that no
amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following:
(a) increase the Commitments of the Lenders or subject the
Lenders to any additional obligations, (b) reduce the
principal of, or interest on, the Loans or any fees or other
109
<PAGE> 116
amounts payable hereunder, (c) postpone any date fixed for
any scheduled payment of principal of, or interest on, the
Loans or any fees or other amounts payable hereunder,
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans, or the
number of Lenders, which shall be required for the Lenders
or any of them to take any action hereunder or (e) amend
this subsection 10.1 or subsection 2.13; and provided,
further, that no amendment, waiver or consent shall, unless
in writing and signed by the Administrative Agent in
addition to the Lenders required above to take such action,
shall affect the rights or duties of the Administrative
Agent under this Agreement or any other Loan Document. No
notice to or demand on the Borrowers in any case shall
entitle the Borrowers to any other or further notice or
demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in
accordance with this subsection 10.1 shall be binding upon
each holder of any indebtedness resulting from the making of
Loans hereunder at the time outstanding, each future holder
of any such indebtedness, and if signed by the Borrowers, on
the Borrowers. Notwithstanding the foregoing, each Bid Loan
Lender may, in its sole discretion, if there exists no
Potential Event of Default or Event of Default, and without
the consent or signature of the Administrative Agent or any
other Lender (provided, however, that prompt notice thereof
is provided by such Bid Loan Lender to the Administrative
Agent), accept any prepayment on account of any such Bid
Loan Lender's Bid Loans.
10.2 NOTICES, ETC.
All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telex,
facsimile transmission or cable communication) and mailed,
telegraphed, telexed, cabled or delivered. For the purposes
hereof, the addresses of the parties named on the signature
pages hereto shall be as set forth under each party's name
on the signature pages hereto (or with respect to any Lender
not listed on the signature pages hereto, at the address
specified for such Lender in the Assignment and Acceptance
pursuant to which it became a Lender) or, as to the
Borrowers, the Co-Agent or the Administrative Agent, at such
other address as shall be designated by such party in a
written notice to the other parties and, as to each other
party, at such other address as shall be designated by such
party in a written notice to the Borrowers and the
Administrative Agent. All such notices and communications
shall, when delivered, mailed, telegraphed, telexed,
telecopied or cabled, be effective when delivered, three
days after mailing, when delivered to the telegraph company,
when confirmed by telecopy response, when confirmed by telex
answerback or when delivered to the cable company,
110
<PAGE> 117
respectively, except that notices and communications to the
Administrative Agent pursuant to Section 2 or 8 shall not be
effective until received by the Administrative Agent.
10.3 NO WAIVER; REMEDIES
No failure on the part of any Lender, the Co-Agent
or the Administrative Agent to exercise, and no delay in
exercising, any right hereunder or under any Loan Document
shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.
The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
10.4 COSTS AND EXPENSES
Whether or not the transactions contemplated
hereby shall be consummated, the Borrowers agree to pay on
demand all reasonable costs and expenses incurred by the
Administrative Agent in connection with the administration,
development, preparation, execution, delivery, syndication,
filing, recording, modification, supplement, waiver and
amendment of (whether or not consummated), and searching or
filing or recording of files in respect of, the Loan
Documents and the other documents (including without
limitation, legal, appraisal, environmental, valuation,
audit, insurance and travel costs and expenses) to be
delivered under the Loan Documents, including, without
limitation, independent accounting firms for the
Administrative Agent, and Attorney Costs with respect
thereto and with respect to advising the Administrative
Agent as to its rights and responsibilities under the Loan
Documents. In addition, the Borrowers agree to pay on
demand, all reasonable costs and expenses of the Lenders,
the Co-Agent and the Administrative Agent, if any
(including, without limitation, legal, appraisal,
environmental, valuation, audit, consulting, travel costs
and expenses, Attorney Costs and the fees and expenses of
independent accounting firms or other experts for the
Administrative Agent or the Lenders) in connection with the
enforcement (whether through negotiations, legal proceedings
or otherwise) of the Loan Documents and the other documents
to be delivered under the Loan Documents, or in connection
with any refinancing or restructuring of the credit
arrangement provided under the Loan Documents in the nature
of a "workout" or of any insolvency or bankruptcy
proceeding.
10.5 RIGHT OF SET-OFF
Upon (i) the occurrence and during the continuance
of any Event of Default and (ii) the making of the request
111
<PAGE> 118
or the granting of the consent specified by Section 7 to
authorize the Administrative Agent to declare the Loans and
other amounts due and payable pursuant to the provisions of
Section 7, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law,
to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender
to or for the credit or the account of any Borrower against
any and all of the Obligations of the now or hereafter
existing under any Loan Document, irrespective of whether or
not such Lender shall have made any demand under such Loan
Document and although such Obligations may be unmatured.
Each Lender agrees promptly to notify such Borrower after
any such set-off and application made by such Lender,
provided that the failure to give such notice shall not
affect the validity of such set-off and application. The
rights of each Lender under this subsection 10.5 are in
addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may
have.
10.6 INDEMNIFICATION
Each Borrower jointly and severally agrees to pay,
and on demand to indemnify and hold harmless the
Administrative Agent, the Co-Agent and each Lender and their
respective Affiliates, and each of their respective
successors, assigns, directors, officers, employees,
servants, attorneys and agents (collectively, the
"Indemnitees") from and against any and all claims,
including claims based on strict liability in tort, damages,
losses, liabilities, demands, suits, judgments, causes of
action and all legal proceedings, whether civil, criminal,
administrative or in arbitration, whether or not such
Indemnitee is a party thereto, penalties, fines and other
sanctions and expenses, including, without limitation
Attorney Costs, which may be imposed on, incurred by or
asserted against any Indemnitee:
(a) by reason of any inaccuracy in any material
respect, or any untrue statement or alleged untrue
statement of any material fact, made in any report,
exhibit or publication in connection with the
effectiveness of this Agreement, the incurrence of the
Indebtedness hereunder and the transactions
contemplated hereby, or by reason of the omission or
alleged omission to state therein a material fact
necessary to make such statements, in the light of the
circumstances under which they were made, not
misleading; or
112
<PAGE> 119
(b) by reason of or in connection with the
execution, delivery, performance, administration or
enforcement of any Loan Document or any proposal, fee,
or commitment letter relating thereto, or any
transaction contemplated by any Loan Document; or
(c) arising under or pursuant to activities of
any Loan Party that violate Hazardous Materials Laws;
(d) arising out of or relating to the use of
proceeds of the Loans or the Letters of Credit;
provided, however, that the Borrowers shall not be liable to
any Indemnitee for (i) any portion of such claims, damages,
liabilities and expenses that a court of competent
jurisdiction shall have determined by a judgment to have
directly resulted from such Indemnitee's gross negligence or
willful misconduct or (ii) any settlement by such Indemnitee
of any claim or action involving the payment of monetary
damages effected without the consent of the Borrowers, which
consent shall not be unreasonably withheld; provided,
further, that such consent shall not be required if such
Indemnitee determines in good faith on advice of counsel
that such settlement is advisable to avoid fines or other
penalties (whether or not monetary) adverse to the interests
of such Indemnitee. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the
immediately preceding sentence may be unenforceable because
it is violative of any law or public policy, the Borrowers
shall contribute the maximum portion which they are
permitted to pay and satisfy under applicable law to the
payment and satisfaction of all indemnified liabilities
incurred by the Indemnitees or any of them.
10.7 BINDING EFFECT
This Agreement shall become effective when it
shall have been executed by the Borrowers, the
Administrative Agent, the Co-Agent and the Lenders and
thereafter shall be binding upon and inure to the benefit of
each Borrower, the Administrative Agent, each Lender and
their respective successors and assigns permitted under
subsection 10.8, except that no Borrower shall have the
right to assign its rights hereunder or any interest herein
without the prior written consent of the Lenders.
10.8 ASSIGNMENTS AND PARTICIPATIONS
A. Each Lender may assign to one or more
Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including, without
limitation, all or a portion of its Commitment), the Loans
and its participations in the Letters of Credit owing to
113
<PAGE> 120
it); provided, however, that (i) no assignment shall,
without the consent of the Borrowers, require the Borrowers
to file a registration statement with the Securities and
Exchange Commission or apply to qualify the Loans under the
blue sky laws of any state, (ii) each such assignment by a
Lender shall be of a constant, and not a varying, percentage
of all of the assigning Lender's rights and obligations
under this Agreement with respect to the Loans and
Commitments, (iii) the amount of the Commitments or Loans of
the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no
event be less than $10,000,000; provided, however, that the
amount of the Commitments and Loans of the assigning Lender
being assigned may be in an amount equal to such assigned
Lender's entire Commitments and outstanding Loans, (iv) each
such assignment shall be to an Eligible Assignee and, in the
case of an Eligible Assignee that is not a Lender or an
Affiliate of a Lender, shall be consented to in advance in
writing by the Administrative Agent and the Borrowers (which
consent shall not be unreasonably withheld), and (v) the
parties to each such assignment shall execute and deliver to
the Administrative Agent (with a copy to the Borrowers), for
its acceptance and recording in the Register, an Assignment
and Acceptance, together with a processing and recordation
fee of $2,500. Upon such execution, delivery, acceptance
and recording, from and after the effective date specified
in each Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder and (y) the Lender
assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to
such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to
be a party hereto).
B. By executing and delivering an Assignment and
Acceptance, the Lender assignor thereunder and the assignee
thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender
makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement
or any other Loan Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes
114
<PAGE> 121
no representation or warranty and assumes no responsibility
with respect to the financial condition of any Loan Party or
the performance or observance by any Loan Party of any of
its obligations under this Agreement or any other Loan
Document or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of
the financial statements referred to in subsection 4.3 and
such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the
Administrative Agent, such assigning Lender or any other
Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this
Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent or co-
agent, respectively, on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as
are delegated to the Administrative Agent by the terms
hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it
will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are
required to be performed by it as a Lender.
C. The Administrative Agent shall maintain at
its address referred to in subsection 10.2 a copy of each
Assignment and Acceptance delivered to and accepted by it
and records for the recordation of the names and addresses
of the Lenders and the Commitments of, and principal amount
of the Revolving Loans owing to, each Lender from time to
time (collectively, such records are the "Register"). The
entries in the Register shall be conclusive and binding for
all purposes, absent manifest error, and the Borrowers, the
Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be
available for inspection by the Borrowers, the
Administrative Agent or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
D. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an assignee
representing that it is an Eligible Assignee, the
Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the
form of Exhibit IX hereto, and subject to receipt of the
written consent of the Borrowers and the Administrative
Agent, if required hereby, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in
115
<PAGE> 122
the Register and (iii) give prompt notice thereof to the
Borrowers.
E. Each Lender may sell participations to one or
more banks or other entities in or to all or a portion of
its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitments, the
Loans owing to it and its participations in Letters of
Credit issued hereunder); provided, however, that (i) no
participation shall, without the consent of the Borrowers,
require the Borrowers to file a registration statement with
the Securities and Exchange Commission or apply to qualify
the Loans under the blue sky laws of any state, (ii) such
Lender's obligations under this Agreement (including,
without limitation, its Commitment to the Borrowers
hereunder) shall remain unchanged, (iii) such Lender shall
remain solely responsible to the other parties hereto for
the performance of such obligations, (iv) the Borrowers, the
Administrative Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement,
and (v) no Lender shall sell any participation under which
the participant shall have rights to approve any amendment
or waiver of any Loan Document except to the extent such
amendment or waiver would (a) postpone any date fixed for
any scheduled payments of principal of or interest with
respect to the Loans or any fees or other amounts payable
hereunder or (b) reduce the principal of, or interest on,
the Loans or any fees or other amounts payable hereunder.
F. Any Lender may, in connection with any
assignment or participation or proposed assignment or
participation pursuant to this subsection 10.8, disclose to
the assignee or participant or proposed assignee or
participant, any information relating to the Borrowers
furnished to such Lender by or on behalf of the Borrowers;
provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree
to preserve the confidentiality of any confidential
information relating to the Borrowers received by it from
such Lender.
G. Notwithstanding any other provision contained
in this Agreement or any other Loan Document to the
contrary, any Lender may assign all or any portion of the
Loans held by it to any Federal Reserve Bank or the United
States Treasury as collateral security pursuant to
Regulation A of the Board of Governors of the Federal
Reserve System and any Operating Circular issued by such
Federal Reserve Bank, provided that any payment in respect
of such assigned Loans made by the Borrowers to or for the
account of the assigning and/or pledging Lender in
accordance with the terms of this Agreement shall satisfy
116
<PAGE> 123
the Borrowers' obligations hereunder in respect to such
assigned Loans to the extent of such payment. No such
assignment shall release the assigning Lender from its
obligations hereunder.
10.9 SEVERABILITY
In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.
10.10 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS
A. All agreements, representations and
warranties made herein shall survive the execution and
delivery of this Agreement, the making of the Loans
hereunder and the issuance of the Letters of Credit
hereunder and, except as set forth in subsection 10.10B,
terminate upon the indefeasible payment in full of the
Obligations.
B. Notwithstanding anything in this Agreement or
implied by law to the contrary, the agreements of the
Borrowers set forth in subsections 2.10, 2.12, 10.4, 10.5
and 10.6 shall survive the payment of the Loans, the
expiration of the Letters of Credit and the termination of
this Agreement.
10.11 HEADINGS
Section and subsection headings in this Agreement
are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other
purpose or be given any substantive effect.
10.12 APPLICABLE LAW; JURISDICTION; WAIVER OF JURY
TRIAL
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES. The Lenders retain all of their rights under
federal law, including those relating to interest rates.
Each Borrower and each Lender hereby submits to the non-
exclusive jurisdiction of the state courts of the State of
New York and the federal courts located in the State of New
York for all matters arising under this Agreement and
related documents. Service of process sufficient for
personal jurisdiction in any action against any Borrower in
New York may be made by registered or certified mail, return
117
<PAGE> 124
receipt requested, to the address specified pursuant to
subsection 10.2.
THE BORROWERS, THE ADMINISTRATIVE AGENT, THE CO-
AGENT, THE LENDERS AND THE ISSUING BANK HEREBY AGREE TO
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN
TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS
BEING ESTABLISHED. The scope of this waiver is intended to
be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of
this transaction, including without limitation, contract
claims, tort claims, breach of duty claims, and all other
common law and statutory claims. The Administrative Agent,
the Co-Agent, the Lenders, the Issuing Banks and the
Borrowers each acknowledge that this waiver is a material
inducement to enter into a business relationship, that each
has already relied on the waiver in entering into this
Agreement, and that each will continue to rely on the waiver
in their related future dealings. The Administrative Agent,
the Co-Agent, the Lenders, the Issuing Banks and the
Borrowers further warrant and represent that each has
reviewed this waiver with its legal counsel, and that each
knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. In
the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
10.13 TERMINATION OF COLLATERAL DOCUMENTS; RELEASE
OF SECURITY
On the Closing Date, each of the Collateral
Documents is hereby terminated and of no further force and
effect except as to provisions therein expressly intended to
survive such termination and all Liens on the collateral
described therein are hereby released. All releases,
termination statements, assignment documents and other
documents deemed necessary or advisable to terminate the
Liens created pursuant to the Collateral Documents shall be
executed, delivered, filed and/or recorded and all other
action deemed necessary or advisable to so terminate such
Liens shall be taken promptly following the Closing Date.
At any time or from time to time upon the request of the
Borrowers, the Administrative Agent shall cause to be
executed and delivered such further documents and to be done
such other acts as the Borrowers may reasonably request in
118
<PAGE> 125
order to effect fully the release of the Collateral
Documents and the Liens granted thereby.
10.14 EXECUTION IN COUNTERPARTS; EFFECTIVENESS
This Agreement and any amendments, waivers,
consents, or supplements may be executed in any number of
counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
10.15 OBLIGATIONS SEVERAL
The obligation of each Lender hereunder is
several, and no Lender shall be responsible for the
obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement and no action taken by
the Lenders pursuant hereto shall be deemed to constitute
the Lenders to be a partnership, an association, a joint
venture or any other kind of entity.
10.16 COMPLETE AGREEMENT
This written Agreement, together with the exhibits
to this Agreement and other documents described herein is
intended by the parties as a final expression of their
agreement and is intended as a complete statement of the
terms and conditions of their agreement.
119
<PAGE> 126
WITNESS the due execution hereof by the respective
duly authorized officers of the undersigned as of the date
first written above.
THE COMPANY:
MAC FRUGAL'S BARGAINS o CLOSE-OUTS
INC.
By: LEONARD S. WILLIAMS
------------------------------
Title: President
---------------------------
Notice Address:
Mac Frugal's Bargains o Close-Outs
Inc.
2430 East Del Amo Boulevard
Dominguez, California 90220
Attention: Philip L. Carter
Telecopy No.: (310) 632-4477
Attention: Dan Felsenthal
Telecopy No.: (310) 762-2364
WCL:
WEST COAST LIQUIDATORS, INC.
By: LEONARD S. WILLIAMS
------------------------------
Title: President
---------------------------
Notice Address:
c/o Mac Frugal's Bargains o Close-
Outs Inc.
2430 East Del Amo Boulevard
Dominguez, California 90220
Attention: Philip L. Carter
Telecopy No.: (310) 632-4477
Attention: Dan Felsenthal
Telecopy No.: (310) 762-2364
S-1
<PAGE> 127
PNS:
PNS STORES, INC.
By: LEONARD S. WILLIAMS
------------------------------
Title: President
---------------------------
Notice Address:
c/o Mac Frugal's Bargains o Close-
Outs Inc.
2430 East Del Amo Boulevard
Dominguez, California 90220
Attention: Philip L. Carter
Telecopy No.: (310) 632-4477
Attention: Dan Felsenthal
Telecopy No.: (310) 762-2364
THE ADMINISTRATIVE AGENT:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Administrative Agent
By: KAY S. WARREN
------------------------------
Title: Vice President
---------------------------
Notice Address:
Bank of America National Trust and
Savings Association
Global Agency #5596
1455 Market Street
San Francisco, California 94103
Attention: Kay Warren
Telecopy No.: (415) 622-4894
S-2
<PAGE> 128
THE CO-AGENT AND LENDER:
CONTINENTAL BANK N.A., INDIVIDUALLY
AND AS CO-AGENT
By: JOSEPH TYLER
------------------------------
Title: Vice President
---------------------------
Notice Address:
Continental Bank N.A.
231 South La Salle Street
Chicago, Illinois 60697
Attention: Joseph Tyler
Telecopy No.: (312) 765-2080
Revolving Commitment:
$30,000,000
Pro Rata Share:
20.0000000%
THE LENDERS:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: DENNIS V. ARRIOLA
------------------------------
Title: Vice President
---------------------------
Notice Address:
Bank of America National Trust and
Savings Association
555 South Flower Street, #5618
Los Angeles, California 90071
Attention: Dennis V. Arriola
Telecopy No.: (213) 228-2756
Revolving Commitment:
$30,000,000
Pro Rata Share:
20.0000000%
S-3
<PAGE> 129
PNC BANK, N.A.
By: TED A. DUNN
-----------------------
Title: Commercial Banking Officer
-----------------------
Notice Address:
PNC Bank, N.A.
Suite #650
55 South Lake Avenue
Pasadena, California 91104
Attention: Ted A. Dunn
Telecopy No.: (818) 568-0653
Revolving Commitment:
$15,000,000
Pro Rata Share:
10.0000000%
THE BANK OF CALIFORNIA, N.A.
By: SCOTT LANE
-----------------------
Title: Vice President
--------------------
Notice Address:
The Bank of California, N.A.
P.O. Box 2330
5th Floor
5550 South Hope Street
Los Angeles, California 90071
Attention: Scott M. Lane
Telecopy No.: (213) 243-3552
629-0147
Revolving Commitment:
$15,000,000
Pro Rata Share:
10.0000000%
S-4
<PAGE> 130
THE LONG-TERM CREDIT BANK
OF JAPAN,LIMITED
LOS ANGELES AGENCY
By: CURT BIREN
------------------------------
Title: Vice President
---------------------------
Notice Address:
The Long-Term Credit Bank of Japan,
Limited
Los Angeles Agency
444 South Flower Street
Suite 3700
Los Angeles, California 90071
Attention: Jan Hanssen
Telecopy No.: (213) 622-6908
Revolving Commitment:
$15,000,000
Pro Rata Share:
10.0000000%
UNITED STATES NATIONAL BANK OF
OREGON
By: TIMOTHY A. MILLER
------------------------------
Title: Corporate Credit Officer
---------------------------
Notice Address:
United States National Bank of
Oregon
Note Department, BB-10th Floor
309 S.W. 6th Avenue
Portland, Oregon 97204
Attention: Janet Jordan
Telecopy No.: (503) 275-5428
Revolving Commitment:
$15,000,000
Pro Rata Share:
10.0000000%
S-5
<PAGE> 131
BANQUE PARIBAS
By: JULIE B. KULAS
------------------------
Title: Senior Vice President
---------------------
By: ETHEL YAMAMOTO
-----------------------
Title: Senior Credit Officer
---------------------
Notice Address:
Banque Paribas
2029 Century Park East
Los Angeles, California 90067
Attention: Steve Li
Telecopy No.: (310) 556-8759
556-0924
Revolving Commitment:
$10,000,000
Pro Rata Share:
6.6666667%
MELLON BANK, N.A.
By: EDWIN WIEST
-----------------------
Title: First Vice President
--------------------
Notice Address:
Mellon Bank, N.A.
Suite #1200
300 South Grand Avenue
Los Angeles, California 90071
Attention: Robert Harkins
Telecopy No.: (213) 626-3745
Revolving Commitment:
$10,000,000
Pro Rata Share:
6.6666667%
S-6
<PAGE> 132
UNION BANK
By: ANN M. YASUDA
-------------------------
Title: Vice President
----------------------
Notice Address:
Union Bank
G12-224
445 South Figueroa Street
Los Angeles, California 90071
Attention: Ann Yasuda
Telecopy No.: (213) 629-5328
Revolving Commitment:
$10,000,000
Pro Rata Share:
6.6666667%
S-7
<PAGE> 1
Exhibit 10.27
BASIC LEASE INFORMATION
LEASE DATED AS OF SEPTEMBER 25, 1993
Lessor: TriNet Essential Facilities X, Inc.
Tenant: West Coast Liquidators, Inc.
Guarantor: MacFrugal's Bargains*Close-outs Inc.
Commencement Date: October 4, 1993 (Interim Term)
November 1, 1993 (Initial Term)
Lease Expiration Date: October 31, 2009 unless extended pursuant to
Paragraph 3(c) of the Lease.
Purchase Price: $23,462,625.00
Primary Term Fixed Rent: The annual Fixed Rent during the Preliminary and
Initial Term of the Lease shall be payable monthly in advance as
follows:
(a) From the delivery of the Lease through October 31, 1997: 10.35% of
Purchase Price per annum, 1/12 of which shall be payable on the first day
of each month, commencing November 1, 1993.
(b) On November 1 in each of 1997, 2001 and 2005, the dollar amount of Fixed
Rent specified in clause (a) shall be increased (but not decreased) by a
dollar amount equivalent to the product of the Fixed Rent payable during
the immediately preceding period and 85% of the percentage increase in the
All Urban Consumer Price Index ("CPI") over the preceding four-year
period, but in no event, however, shall any such increase in Fixed Rent
exceed 12% of the Fixed Rent payable in such prior period.
Renewal Term Rents: The annual Fixed Rent during any Renewal Term shall be
payable monthly in advance, determined on the first day of the first year of
each Renewal Term and on the first day of the sixth year of the Second Renewal
Term. The annual Fixed Rent shall be payable (i) in the First Renewal Term at
a rate equal to the annual Fixed Rent payable during the immediately prior 4
year period, increased (but not decreased) by a dollar amount equivalent to the
product of such prior period Fixed Rent and 85% of the percentage increase in
the CPI over the preceding four year period, but such increase shall not exceed
12% of the
<PAGE> 2
Fixed Rent payable in such prior period, (ii) in the first five
years of the Second Renewal Term at a rate equal to the annual Fixed Rent
payable during the immediately prior 2 year period, increased (but not
decreased) by a dollar amount equivalent to the product of such prior period
Fixed Rent and 85% of the percentage increase in the CPI over the preceding two
year period, but such increase shall not exceed 6% of the Fixed Rent payable in
such prior period and (iii) in the second five years of the Second Renewal Term
at a rate equal to the annual Fixed Rent payable during the immediately prior 5
year period, increased (but not decreased) by a dollar amount equivalent to the
product of such prior period Fixed Rent and 85% of the percentage increase in
the CPI over the preceding five year period, but such increase shall not exceed
15% of the Fixed Rent payable in such prior period.
Fixed Rent calculated as set forth above is subject to adjustment in the event
Landlord purchases the fee title to either the Improvements alone or the Land
and the Improvements together, as follows: annual Fixed Rent shall thereafter
be the sum of (i) annual Fixed Rent as calculated above, (ii) annual payments
of $500,000 under the PILOT Agreement, whether or not the PILOT Agreement is
then in effect and (iii) annual rent that would then be payable (as adjusted,
if applicable) under the Master Lease if the Master Lease had continued to be
in effect, increased by any amounts required to be paid under Clause D of
Section 9.1 or 9.2 of the Master Lease and not theretofore paid.
Landlord Address TriNet Essential Facilities X, Inc.
for Payment: c/o TriNet Corporate Realty Trust, Inc.
4 Embarcadero Center, Suite 3150
San Francisco, California 94111
Attention: Mark S. Whiting
Tenant Address: West Coast Liquidators, Inc.
2430 E. Del Amo Boulevard
Dominguez, California 90220
Attention: Real Property Administration
<PAGE> 3
LEASE AGREEMENT
Between
TRINET ESSENTIAL FACILITIES X, INC.
as Landlord
and
WEST COAST LIQUIDATORS, INC.
as Tenant
Dated as of September 25, 1993
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEMISE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2. USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. RENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. NET LEASE; NON-TERMINABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. QUIET ENJOYMENT: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7. UTILITY BILLS; MASTER LEASE; PILOT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. REPAIRS AND MAINTENANCE; REPLACEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. IMPOSITIONS; PERMITTED CONTEST; LANDLORD CURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10. DESTRUCTION OF OR DAMAGE TO PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11. INSURANCE, HOLD HARMLESS AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12. GOVERNMENTAL ORDERS; COVENANTS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13. PARTIAL TAKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
14. TERMINATION OF LEASE FOR SUBSTANTIAL TAKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
15. DEFAULT: Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
16. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
17. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
18. LANDLORD'S RIGHT OF ENTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
19. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
20. STATUS OF LEASE; FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
21. MECHANICS' LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22. END OF TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
23. ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
24. MEMORANDUM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
25. SUBLETTING/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
26. HAZARDOUS MATERIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
27. LANDLORD'S RIGHT TO REQUIRE PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
28. LANDLORD'S ACQUISITION OF FEE TITLE TO THE PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
29. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
EXHIBITS
A. LEGAL DESCRIPTION - REAL ESTATE
B. DESCRIPTION OF PERSONAL PROPERTY AND FIXTURES
C. STATUS REPORT
D. PERMITTED ENCUMBRANCES
E. FORM OF SUBORDINATION AGREEMENT
</TABLE>
<PAGE> 6
THIS LEASE, made and entered into as of September 25, 1993 (together with all
amendments and supplements hereto, this "Lease"), by and between TRINET
ESSENTIAL FACILITIES X, INC., a Maryland corporation with offices at Four
Embarcadero Center, # 3150 San Francisco, California 94111 (together, with any
successor or assigns, hereinafter called the "Landlord") and WEST COAST
LIQUIDATORS, INC., a California corporation, with offices at 2430 E. Del Amo
Boulevard, Dominguez, California 90220 (together with any permitted successor
or assigns, hereinafter called the "Tenant"). Capitalized terms used herein
not otherwise defined shall have the meanings specified in the following
recitals and definitions.
RECITALS
Tenant developed a high-tech warehouse facility at 3501 Jourdan Road in New
Orleans, Louisiana on land owned by the Industrial Development Board of the
City of New Orleans of Louisiana, Inc. (the "IDB") and caused the IDB to issue
$2,000,000 of its bonds secured by a first lien on the Land and by amounts
payable by Tenant under the Master Lease hereinafter mentioned. Record fee
simple title to the warehouse is vested in the IDB, leasehold ownership resided
in Tenant, which had paid for the construction of the warehouse and which held,
pursuant to the Master Lease, an option to acquire fee title to the warehouse
for the payment of certain amounts and certain encumbrances, as provided in the
Master Lease. Tenant and Landlord entered into a sale and lease back
transaction in which Tenant assigned to Landlord Tenant's interest under the
Master Lease and its leasehold interest in the Land, the warehouse and certain
equipment contained therein. This Lease constitutes a sublease of the
Premises.
Now, therefore, in consideration of the covenants and agreements herein
contained, the parties hereby mutually agree as follows:
As used in this Lease, the following terms have the meanings specified:
DEFINITIONS
The following terms shall have the following meanings for all purposes of
this Lease and shall be equally applicable to both the singular and plural
forms of the terms herein defined.
"Additional Rent" means all amounts, liabilities and obligations other than
Fixed Rent which Tenant assumes or agrees to pay under this Lease to Landlord
or others.
-1-
<PAGE> 7
"Basic Lease Information" means the pages preceding this Lease which are
hereby incorporated by reference.
"Certificates" is defined in paragraph 11(d) of this Lease.
"Commencement Date" is defined in paragraph 3(b) of this Lease.
"CPI" is defined in the Basic Lease Information section of this Lease.
"Environmental Laws" is defined in paragraph 26(b) of this Lease.
"Essential Equipment" means those items described on Exhibit B hereto with an
asterisk next to its name.
"Event of Default" is defined in paragraph 15 of this Lease.
"First Mortgage" or "Mortgage" shall mean a first mortgage on the Premises
given by Landlord to the Mortgagee to secure a loan financing or refinancing
the acquisition of Landlord's interest in the Premises.
"First Renewal Term" is defined in paragraph 3(c) of this Lease.
"Fixed Rent" is defined in paragraph 4 of this Lease.
"Guarantor" means MacFrugal's Bargains*Close-outs Inc., a Delaware
corporation, and its successors by merger, consolidation or purchase of
substantially all its assets.
"IDB" is defined in the Recitals section of this Lease.
"Imposition" means the various tax and other charges referred to in paragraph
9(a) and the present and future governmental laws and regulations more
specifically described in paragraph 12.
"Improvements" means all of the buildings, structures and improvements
(including, without limitation, parking areas and driveways) now or hereafter
located on the Land.
"Incidental Equipment" means those items described on Exhibit B hereto
without an asterisk next to its name.
"Initial Term" is defined in paragraph 3(a) of this Lease.
-2-
<PAGE> 8
"Land" means the land, but none of the Improvements thereon, described in
Exhibit A hereto.
"Landlord" is defined in the first paragraph of this Lease.
"Landlord Group" is defined in paragraph 11(g) of this Lease.
"Lease" is defined in the first sentence of this Lease.
"Lease Expiration Date" is defined in paragraph 3(a) of this Lease.
"Master Lease" means the Lease Agreement, dated as of August 1, 1988 among
Industrial Development Board of the City of New Orleans, Louisiana, Inc., as
landlord, the City of New Orleans and Tenant, as tenant; Landlord has succeeded
to the interest of the tenant thereunder.
"Mortgagee" shall mean any first mortgagee with respect to the Premises.
"Overdue Rate" means a rate equal to the prevailing prime rate as shown in
the Wall Street Journal or any equivalent publication, plus 300 basis points.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, trustee(s) of a trust, unincorporated
organization, or government or governmental authority, agency or political
subdivision thereof.
"Permitted Encumbrances" means:
(a) Any liens for taxes, assessments and other governmental charges and any
liens of mechanics, materialmen and laborers for work or services
performed or materials furnished in connection with the Premises, which
are not due and payable;
(b) The easements, rights-of-way, encroachments, encumbrances, restrictive
covenants or other matters in the title set forth in Schedule B to the
policy of owners title insurance (or commitments therefor) delivered to
and accepted by Landlord with respect to the Premises in connection with
the delivery of this Lease as shown on Exhibit D attached hereto;
(c) The Lease and the rights of Tenant under this Lease;
-3-
<PAGE> 9
"PILOT Agreement" means the Payment in Lieu of Tax Agreement, dated as of
August 1, 1988, among City of New Orleans, Louisiana, The Industrial
Development Board of the City of New Orleans, Louisiana, Inc., The Director of
Finance of the City of New Orleans, Louisiana, The Tax Assessor of the 3rd
Municipal District of the Parish of Orleans, Louisiana and West Coast
Liquidators, Inc.
"Preliminary Term" is defined in paragraph 3(a) of this Lease.
"Premises" is defined in paragraph 1 of this Lease.
"Purchase Agreement" means the Purchase and Sale Agreement, dated as of July
15, 1993, by and between, Tenant, as seller, and Landlord as purchaser.
"Purchase Price" is defined in the Basic Lease Information.
"Railroad Crossing Agreement" is defined in paragraph 7(b) of this Lease.
"Rent" means Fixed Rent and Additional Rent.
"Renewal Term" is defined in paragraph 3(c) of this Lease.
"Renewal Term Commencement Date" is defined in paragraph 3(c) of this Lease.
"Renewal Term Expiration Date" is defined in paragraph 3(c) of this Lease.
"Second Renewal Term" is defined in paragraph 3(c) of this Lease.
"Servitude of Passage" is defined in paragraph 7(b) of this Lease.
"Site Assessments" is defined in paragraph 26(d) of this Lease.
"Site Reviewers" is defined in paragraph 26(d) of this Lease.
"Switch Track Contract" is defined in paragraph 7(b) of this Lease.
-4-
<PAGE> 10
"Tenant's Trade Fixtures" means all personal property of Tenant in or on the
Premises which is not described on Exhibit B.
"Term" means the Preliminary Term and Initial Term, together with any Renewal
Terms.
1. DEMISE OF PREMISES: Landlord hereby demises and leases to Tenant and
Tenant hereby leases and rents from Landlord the Premises, IN ITS "AS IS"
CONDITION, SUBJECT TO THE EXISTING STATE OF TITLE (WITHOUT EXPRESS OR IMPLIED
WARRANTY OF LANDLORD WITH RESPECT TO THE CONDITION, QUALITY, REPAIR OR FITNESS
OF THE PREMISES FOR A PARTICULAR USE OR TITLE THERETO, ALL SUCH WARRANTIES
BEING HEREBY WAIVED AND RENOUNCED BY TENANT), consisting of Landlord's
leasehold interest in the Land, the Improvements and Landlord's leasehold or
ownership title to the fixtures and equipment described on Exhibit B hereto
(including, without limitation, racking, conveyor, sorting and computer
systems), together with any easements, rights, and appurtenances in connection
therewith or belonging to said Land, Improvements, fixtures and equipment, and
(except with respect to Incidental Equipment) all replacements thereof, all
being collectively hereinafter referred to as "the Premises". No easement for
light, air or view is included with or appurtenant to the Premises. Any
diminution or shutting off of light, air or view by any structure which may
hereafter be erected (whether or not constructed by Landlord) shall in no way
affect this Lease or impose any liability on Landlord. Except as herein
expressly set forth, Tenant shall not have any rights of Landlord in its
capacity as Tenant under the Master Lease.
2. USE: Tenant may use and occupy the Premises for any lawful nonresidential
purposes so long as such use does not reduce the fair market value of the
Premises, considered as unencumbered by this Lease. Tenant shall not use or
occupy the same, or knowingly permit them to be used or occupied, contrary to
any statute, rule, order, ordinance, requirement or regulation applicable
thereto, or in any manner which would violate any certificate of occupancy
affecting the same or which would make void or voidable any insurance then in
force with respect thereto or which would make it impossible to obtain fire or
other insurance thereon required to be furnished hereunder by Tenant, or which
would cause structural injury to the Premises or cause the value or usefulness
of the Premises, or any portion thereof, to substantially diminish, or which
would constitute a public or private nuisance or waste, and Tenant agrees that
it will promptly, upon discovery of any such use, take all necessary steps to
compel the discontinuance of such use. Tenant shall not use, suffer or permit
the Premises, or any portion thereof, to be
-5-
<PAGE> 11
used by Tenant, any third party or the public, as such, without
restriction or in such manner as might impair Landlord's title to the Premises,
or in such manner as might reasonably make possible a claim or claims of
adverse usage or adverse possession by the public, as such, or third Persons,
or of implied dedication of the Premises, or any portion thereof. Nothing
contained in this Lease and no action by Landlord shall be construed to mean
that Landlord has granted to Tenant any authority to do any act or make any
agreement that may create any such third party or public right, title,
interest, lien, charge or other encumbrance upon the estate of the Landlord in
the Premises. The preceding sentence does not limit Tenant's right to assign
or sublet its interest hereunder, as provided in paragraph 25.
3. TERM:
(a) The preliminary term of this Lease ("Preliminary Term") shall commence
on October 4, 1993 and end on October 31, 1993. The initial term of this Lease
(the "Initial Term") shall be for a period of sixteen (16) years, beginning on
the Commencement Date and ending on October 31, 2009 (the "Lease Expiration
Date").
(b) The term "Commencement Date" shall mean November 1, 1993.
(c) Tenant shall have the right, at its option, to renew the Initial Term
of this Lease, for two (2) renewal terms (each, a "Renewal Term"), the first of
which shall renew the Initial Term for two (2) years and the second of which
shall renew the Initial Term for an additional ten (10) years (individually,
the First and Second Renewal Terms). The First Renewal Term shall commence on
the day after the Lease Expiration Date and shall expire on the second (2nd)
anniversary of the Lease Expiration Date. The Second Renewal Term shall
commence on the day after the date of expiration of the First Renewal Term and
shall expire on the tenth (10th) anniversary of the expiration of the First
Renewal Term. (Each such Renewal Term commencement date shall be referred to
herein as the "Renewal Term Commencement Date" with respect to the related
Renewal Term and each such Renewal Term expiration date shall be referred to
herein as the "Renewal Term Expiration Date" with respect to the related
Renewal Term.) Each option to renew the Term of this Lease as described above
shall be exercised by written notice to Landlord at least 18 months but not
more than 24 months prior to the Lease Expiration Date or the Renewal Term
Expiration Date, as the case may be. Subject to the provisions of paragraph 4,
the terms and conditions of this Lease shall apply to any Renewal Term with the
same force and effect as if such Renewal Term had
-6-
<PAGE> 12
originally been included in the Initial Term of the Lease. The right of
Tenant to exercise any Renewal Term shall be conditioned upon Tenant not being
in default under this Lease on the date of such exercise and upon this Lease
being in full force and effect as of the Renewal Term Commencement Date. The
Preliminary Term, Initial Term, together with any Renewal Terms, shall
constitute the "Term" of this Lease.
(d) It is recognized that, if Tenant elects to renew the Term of this Lease
for one or more Renewal Terms, the term of the Master Lease must be extended
for a corresponding period. Accordingly, if Tenant shall have given timely
notice of renewal pursuant to paragraph 3(c), Landlord agrees not to give
notice of termination of the Master Lease relating to the period of such
renewal pursuant to Sections 5.5 or 5.6 thereof, except in connection with
Landlord's purchase of the Land and Improvements or the Improvements from the
IDB.
4. RENTAL: Tenant agrees to pay fixed rent ("Fixed Rent") to Landlord
without notice, by wire transfer or other electronic means (or otherwise so
there are collected funds available to Landlord on the due date) to Landlord at
such address as shall be provided by Landlord to Tenant, or to such other
Persons or place as may be provided by written notice from the Person then
entitled to receive the Fixed Rent, in equal installments in advance on or
before the first day of each month commencing on the date and in the amount
specified in the Basic Lease Information (or, if the first day of the month is
not a business day in California, then on the next business day).
If Fixed Rent is not paid when due, interest shall accrue thereon at the
Overdue Rate until payment is made. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Fixed Rent, Additional Rent and other sums due
under this Lease will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges
and late charges which may be imposed on Landlord by the terms of any mortgage
or trust deed covering the Premises. Accordingly, if any installment of Fixed
Rent or any other sum due to Landlord from Tenant shall not have been received
by Landlord or Landlord's designee within ten (10) days after notice to Tenant
that such amount shall be due, then, without any requirement for further notice
to Tenant, Tenant shall pay to Landlord a late charge equal to two percent (2%)
of such overdue amount, together with interest on such overdue amount at the
Overdue Rate. The parties agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of late payment
by Tenant.
-7-
<PAGE> 13
5. NET LEASE; NON-TERMINABILITY: (a) This is an absolutely net lease and the
Fixed Rent, Additional Rent and all other sums payable hereunder by Tenant,
including the purchase price for the Premises payable pursuant to paragraphs 14
or 27, shall be paid without notice (except as expressly provided herein),
demand, set-off, counterclaim, abatement, suspension, deduction or defense.
(b) This Lease shall not terminate, nor shall Tenant have any right to
terminate this Lease, nor shall Tenant be entitled to any abatement or (except
as otherwise expressly provided in paragraph 13(b)) reduction of Rent
hereunder, nor shall the obligations of Tenant under this Lease be affected, by
reason of (i) any damage to or destruction of all or any part of the Premises
from whatever cause, (ii) subject to paragraph 14, the taking of the Premises
or any portion thereof by condemnation, requisition or otherwise, (iii) the
prohibition, limitation or restriction of Tenant's use of all or any part of
the Premises, or any interference with such use, (iv) any eviction by paramount
title, termination of the Master Lease or otherwise, (v) Tenant's acquisition
or ownership of all or any part of the Premises otherwise than as expressly
provided herein, (vi) any default on the part of Landlord under this Lease, or
under any other agreement to which Landlord and Tenant may be parties or under
the Master Lease, (vii) the failure of Landlord to deliver possession of the
Premises on the commencement of the term hereof or (viii) any other cause
whether similar or dissimilar to the foregoing, any present or future law to
the contrary notwithstanding. It is the intention of the parties hereto that
the obligations of Tenant hereunder shall be separate and independent covenants
and agreements, that the Fixed Rent, the Additional Rent and all other sums
payable by Tenant hereunder shall continue to be payable in all events and that
the obligations of Tenant hereunder shall continue unaffected unless the
requirement to pay or perform the same shall have been terminated pursuant to
any express provision of this Lease.
(c) Tenant agrees that it will remain obligated under this Lease in
accordance with its terms, and that it will not take any action to terminate,
rescind or avoid this Lease, notwithstanding (i) the bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution or
winding-up or other proceeding affecting Landlord or its successor in interest,
or (ii) any action with respect to this Lease which may be taken by any trustee
or receiver of Landlord or its successor in interest or by any court in any
such proceeding.
-8-
<PAGE> 14
(d) Tenant waives all rights which may now or hereafter be conferred by law
(i) to quit, terminate or surrender this Lease or the Premises or any part
thereof, or (ii) to any abatement, suspension, deferment or (except as provided
in paragraph 13(b)) reduction of the Fixed Rent, Additional Rent or any other
sums payable under this Lease, except as otherwise expressly provided herein.
6. QUIET ENJOYMENT:
Landlord covenants with Tenant, that upon the payment of the Fixed Rent
and Additional Rent and the performance in all material respects of all the
terms of this Lease, Tenant shall at all times during the Term, peaceably and
quietly enjoy the Premises without any disturbance from Landlord or from any
person claiming by, through, or under Landlord.
7. UTILITY BILLS; MASTER LEASE; PILOT AGREEMENT:
(a) Tenant shall pay as Additional Rent before they become delinquent any
water, sewer, gas, fuel, electricity, light, heat, power and all other utility
bills for the Premises and the business conducted thereon.
(b) Tenant will duly and punctually make all payments required to be made
by the tenant under the Master Lease, when and as the same shall become due and
payable. Tenant's obligation to make payments under the Master Lease includes,
without limitation, the obligation to make all payments of rent payable
thereunder, when and as the same shall become due and payable. Notwithstanding
the foregoing, Tenant shall not be required to make any payment of purchase
price in connection with Landlord's purchase of the Improvements, or the Land
and the Improvements, pursuant to the Master Lease, including amounts described
in clauses A, B or C of Sections 9.1 or 9.2 of the Master Lease (which shall be
the sole obligation of Landlord to pay); provided, however, that Tenant shall
be obligated to pay amounts described in clause D of Sections 9.1 and 9.2 of
the Master Lease. Except as set forth above in this paragraph 7(b), Tenant
will also observe and perform at its own cost and expense all the covenants,
terms and conditions imposed by the Master Lease upon the tenant under the
Master Lease, including without limitation, all obligations (i) of "West Coast"
under the Grant of Servitude of Passage and Right of Use, dated March 29, 1990
(the "Servitude of Passage") by and between Sewerage and Water Board of New
Orleans ("S&WB") and West Coast Liquidators, Inc. ("West Coast"), (ii) of
"Licensee" under the Railroad Crossing Agreement - Pic 'N' Save, dated May 10,
1989 (the "Railroad Crossing Agreement") by and between the Public Belt
Railroad
-9-
<PAGE> 15
Commission for the City of New Orleans ("Railroad") and West Coast
Liquidators, Inc. ("License") and (iii) of the "Company" under the Switch Track
Contract, dated September 27, 1990 (the "Switch Track Contract") by and between
the City of New Orleans, acting through the Public Belt Railroad Commission of
the City of New Orleans ("Railroad") and West Coast Liquidators, Inc. (the
"Company"), to the end that Landlord shall not have any responsibility for
compliance with the provisions of the Master Lease and shall be indemnified by
Tenant against all liability thereunder. If any event (other than the
expiration of any period provided in the Master Lease for the exercise
of a right to extend the term of the Master Lease) shall occur which, pursuant
to the terms of the Master Lease, with or without the passage of time, shall
enable the tenant under the Master Lease to terminate the same, the party
discovering such event shall notify the other party thereof within 5 business
days after obtaining knowledge of the occurrence thereof. Notwithstanding any
such right of termination, Tenant shall take no action to terminate the Master
Lease and shall take all such action, if any, as shall be necessary to maintain
the estate of Landlord in the Leased Premises subject to the Master Lease
during the term demised by the Master Lease. During the Term, Landlord shall
not amend the Master Lease in a way that would increase the obligation or
restrict the rights of Tenant hereunder, nor shall Landlord take any action to
terminate the Master Lease or consent to any termination of the Master Lease as
otherwise permitted in the Master Lease, except in connection with Landlord's
acquisition of fee title to the Land and Improvements.
(c) So long as the Premises are subject to the PILOT Agreement, Tenant shall
comply with the terms thereof and make all payments required thereby in a
timely manner. Tenant shall, upon written request, provide Landlord with
evidence of the payment of the prior year's obligations under the PILOT
Agreement.
8. REPAIRS AND MAINTENANCE; REPLACEMENT:
(a) Tenant shall, at its own sole cost and expense, keep the Premises in
good order and condition, at all times on and after commencement of the Term to
and including the date of the termination of the Term, by lapse of time or
otherwise. Tenant shall promptly and adequately repair the Premises and all
its component parts, and replace or repair all landscaping and all damaged or
broken fixtures, other than Tenant's Trade Fixtures and Incidental Equipment,
and appurtenances.
In addition, Tenant shall timely and properly maintain repair and replace all
of the Premises including, but not
-10-
<PAGE> 16
necessarily limited to, Essential Equipment, mechanical systems,
electrical systems, racking, conveyor system, computer system, plumbing and
sewage systems, foundations and floor slabs, glazing systems, structural steel,
masonry walls and wall enclosures, and water tightness of all curtain walls by
a qualified stationary engineer or otherwise, in accordance with the greater
standard of
(i) the customary maintenance by prudent operators in the industry;
(ii) that which is necessary so as not to void, diminish, or impair
any warranty for such component from time to time in effect; and
(iii) that which is necessary to preserve and protect the useful life
of such component.
Notwithstanding the foregoing, Tenant shall have no obligation to replace any
Tenant Trade Fixtures or Incidental Equipment and Tenant shall not be obligated
to replace any Essential Equipment with an identical item, but may substitute a
functionally equivalent item with like utility, so long as no degradation in
utilization of the building as a high tech warehouse occurs as a result of such
substitution. In addition, Tenant shall maintain and repair or replace, or
cause others to maintain and repair or replace, as the case may be, the roof,
and repair or replace any material defect in materials or workmanship relating
to the foundation, columns, and structural steel which comprise a part of the
Premises. If any of the items listed on Exhibit B (or their replacements)
shall become obsolete or, in Tenant's judgment, uneconomic to repair, Tenant
shall remove such item from the Premises and, except in the case of Tenant's
Trade Fixtures or Incidental Equipment, promptly replace it with an item of
comparable initial value and function. Tenant shall, upon Landlord's request,
no more frequently than once per year, unless reasonably required more
frequently by a third party in Landlord's normal business operations, such as
mortgagees or rating agencies, deliver to Landlord a written statement showing
all removals and replacements of Essential Equipment during the preceding
calendar year, including manufacturers, model numbers, and serial numbers;
Landlord shall have 30 days after delivery of such statement to object to any
item therein, and such statement shall thereafter be conclusive as to all items
not objected to. Landlord, not more frequently than annually during the Term
(except in the event of an emergency or extraordinary condition), may upon 10
days' prior notice cause independent private inspectors, qualified in the
specific discipline, to make inspections of any building and building systems
on the Premises
-11-
<PAGE> 17
or segments thereof to determine Tenant's compliance under this
paragraph 8.
Landlord may, but is not required to, after twenty (20) days' notice to
Tenant (except in the case of emergency, in which case Tenant shall be given
notice contemporaneously with entry), enter the Premises and make such repairs,
alterations, improvements, additions, replacements or maintenance as Landlord
deems reasonably necessary and which Tenant failed to do as required in this
Lease, in a diligent fashion, and Tenant shall pay Landlord as Additional Rent
forthwith upon being billed for same by Landlord the cost thereof plus
reasonable overhead, fees and other costs or expenses arising from Landlord's
involvement with such repairs, alterations, improvements, additions,
replacements and maintenance.
Landlord may, but shall not be required to, enter the Premises personally or
through independent contractors at all reasonable times upon twenty (20) days'
notice (except in the case of an emergency, in which case Tenant shall be given
notice contemporaneously with entry) to inspect the Premises.
(b) It is intended by Tenant and Landlord that Landlord shall have
no obligation, in any manner whatsoever, to repair or maintain the Premises (or
the equipment therein), whether structural or nonstructural, all of which
obligations are intended, as between Landlord and Tenant, to be those of
Tenant. Tenant expressly waives the benefit of any statute now or in the
future in effect which would otherwise afford Tenant the right to make repairs
at Landlord's expense or to terminate this Lease because of Landlord's failure
to keep the Premises in good order, condition and repair.
(c) Tenant shall maintain on the Premises, and turn over to Landlord
upon expiration or termination of this Lease, current operating manuals for the
equipment (other than Incidental Equipment) on the Premises (including, without
limitation, the computer system, sorting system, conveyor system and Lansing
loaders).
(d) Tenant covenants not to install any underground storage tank on
the Land without Landlord's prior written consent, which may be conditioned on
Tenant's agreement to remove the tank at the end of the Term.
(e) Tenant hereby agrees (i) to assume the obligations of "West
Coast" under that certain Grant of Servitude of Passage and Right of Use, dated
March 29, 1990 (the "Servitude of Passage"), by and between Sewerage and Water
Board of New Orleans
-12-
<PAGE> 18
and West Coast Liquidators, Inc. ("West Coast") and (ii) to be
responsible for all maintenance of any and all "Bridges" (as defined in the
Servitude of Passage).
9. IMPOSITIONS; PERMITTED CONTEST; LANDLORD CURE: (a) Subject to
paragraph 9(e), Tenant covenants and agrees to pay, during the Term, as
Additional Rent, before any fine, penalty, interest or cost may be added
thereto for the nonpayment thereof, all real estate taxes, special assessments,
utility bills referred to in paragraph 7, street lighting, excise levies,
licenses, permits, inspection fees, other governmental charges
(including payments required under the PILOT Agreement pursuant to paragraph
7), and all other charges or burdens of whatsoever kind and nature (including
costs, fees, and expenses of complying with any restrictive covenants or
similar agreements to which the Premises are subject incurred in the use,
occupancy, operation, leasing or possession of the Premises (excluding any
income taxes on the Fixed Rent imposed on Landlord, it being the intent of the
parties hereto that any tax on the net income derived from the Fixed Rent
payable in respect to the Premises imposed by any governmental authority shall
be paid by Landlord), without particularizing by any known name or by whatever
name hereafter called, and whether any of the foregoing be general or special,
ordinary or extraordinary, foreseen or unforseen, which at any time during the
Term may be payable. Tenant shall pay all special (or similar) assessments or
installments thereof (including interest thereon) for public improvements or
benefits which, during the Term shall be laid, assessed, levied or imposed upon
or become a lien upon the Premises and which are payable during the Term, or
any portion thereof; provided, however, that if by law any special assessment
is payable or, at the option of the party obligated to make such payment, may
be paid in installments (whether or not interest shall accrue on the unpaid
balance of such special assessment), Tenant may pay the same, together with any
interest accrued on the unpaid balance of such special assessment in
installments as the same respectively become payable and before any fine,
penalty, interest or cost may be added thereto for the nonpayment of any such
installment and the interest thereon. Tenant shall pay all real estate taxes,
whether heretofore or hereafter levied or assessed upon the Premises, or any
portion thereof, which are due and payable during the Term. At the end of the
Term of the Lease, Tenant's obligation to pay such taxes shall be prorated in
the event the tax period and the Term are not coextensive.
(b) Except for any tax on the net income derived from the Fixed Rent, if at
any time during the Term, any method of taxation shall be such that there shall
be levied, assessed or imposed on the Landlord, or on the Fixed Rent or
Additional Rent,
-13-
<PAGE> 19
or on the Premises, or any portion thereof, a capital levy, gross
receipts tax, occupational license tax or other tax on the rents received
therefrom, or a franchise tax, or an assessment, gross levy or charge measured
by or based in whole or in part upon such gross Rents, Tenant, to the extent
permitted by law, covenants to pay and discharge the same, it being the
intention of the parties hereto that the Fixed Rent to be paid hereunder shall
be paid to Landlord absolutely net without deduction or charge of any nature
whatsoever, foreseeable or unforeseeable, ordinary or extraordinary, or of any
nature, kind, or description, except as otherwise expressly provided in this
Lease.
(c) Tenant covenants to furnish Landlord, within thirty (30) days after
request by Landlord, official receipts of the appropriate taxing authority, if
any, or other appropriate proof reasonably satisfactory to Landlord,
evidencing the payment of the same. The certificate, advice or bill of the
appropriate official designated by law to make or issue the same or to receive
payment of any Imposition may be relied upon by Landlord as sufficient evidence
that such Imposition is due and unpaid at the time of making or issuance of
such certificate, advice or bill.
(d) Upon the occurrence of an Event of Default hereunder, Tenant shall pay
to Landlord, at Landlord's written demand until the expiration of 18 months
during which no Event of Default has occurred hereunder, the known or estimated
yearly payments under the PILOT Agreement or real estate taxes and assessments,
payable with respect to the Premises in monthly payments equal to one-twelfth
(1/12) of the known or estimated yearly payments under the PILOT Agreement or
real estate taxes and assessments, next payable with respect to the Premises.
From time to time, after a default hereunder and termination of the PILOT
Agreement, Landlord may re-estimate the amount of real estate taxes and
assessments, and in such event Landlord shall notify Tenant, in writing, of
such re-estimate and fix future monthly installments for the remaining period
prior to the next tax and assessment due date in an amount sufficient to pay
the re-estimated amount over the balance of such period after giving credit for
payments made by Tenant on the previous estimate.
If the total monthly payments made by Tenant pursuant to this paragraph shall
exceed the amount of payments necessary for said taxes and assessments, such
excess over $1,000.00 shall be promptly paid to the Tenant and the balance
shall be credited on subsequent monthly payments of the same nature. However,
if the total of such monthly payments so made under this paragraph shall be
insufficient to pay such taxes and assessments when due, then Tenant shall pay
to Landlord such amount as may be necessary to
-14-
<PAGE> 20
make up the deficiency. All payments made by Tenant pursuant to this
paragraph 9(d) shall be deposited in a federally insured institution reasonably
satisfactory to Landlord and Tenant, and all interest earned thereon shall
accrue to the benefit of Tenant. Payment by Tenant of estimated amounts
required under the PILOT Agreement or for real estate taxes and assessments
under this paragraph 9(d) shall be considered as performance of such obligation
under the provisions of paragraph 9(a) hereof.
(e) If Tenant desires to contest the validity, amount, propriety, or
accuracy of any Imposition, Tenant shall notify Landlord of same which notice
shall state the nature of the Imposition being contested and the general
grounds, with reasonable specificity, for such contest. Within fifteen (15)
days of Landlord's receipt of such notice Landlord will notify Tenant that (i)
Landlord will contest the Imposition in question, or (ii) that Landlord
consents to the contest by Tenant. If Landlord fails to so notify Tenant, it
shall be presumed that Landlord has elected (ii). If Landlord elects to
contest the Imposition, it may do so on the grounds described in Tenant's
notice, and all the reasonable costs, expenses, fees or other obligations
incurred by Landlord in conducting such challenge shall be deemed Additional
Rent hereunder. If Landlord, either actively or by default, elects (ii) above,
Tenant shall have the right, at its own expense, to contest the amount,
propriety, accuracy, or validity, in whole or in part, of any Imposition by
appropriate proceedings diligently conducted in good faith, but only after
payment of such Imposition, unless non-payment would not cause a lien to be
filed against the Premises or would not otherwise jeopardize title to the
Premises or Landlord's interest therein; in which event, notwithstanding the
provisions of Paragraph 9(a) hereof, Tenant may postpone or defer payment of
such Imposition. However, if Tenant's tangible net worth, determined in
accordance with generally accepted accounting principles, is less than
$100,000,000, Landlord may require Tenant to, and in such event Tenant shall,
deposit with Landlord cash or a certificate of deposit payable to Landlord
issued by a national bank or Federal savings and loan association in the amount
of the Impositions so contested and unpaid, together with all interest and
penalties which may accrue, in Landlord's reasonable judgment, in connection
therewith, and all charges that may or might be assessed against or become a
charge on the Premises, or any portion thereof, during the pendency of such
proceedings. If, during the continuance of such proceedings, Landlord shall,
from time to time, reasonably deem the amount deposited, as aforesaid,
insufficient, Tenant shall, upon demand of Landlord, make additional deposits
of such additional sums of money or such additional certificates of deposit as
Landlord may reasonably request. Upon failure of Tenant to make such
-15-
<PAGE> 21
additional deposits, the amount theretofore deposited may be applied by
Landlord to the payment, removal and discharge of such Imposition, and the
interest, fines and penalties in connection therewith, and any costs, fees
(including reasonable attorney's fees) and other liability (including
reasonable costs incurred by Landlord) accruing in any such proceedings.
Upon the termination of any such proceedings, Tenant shall pay the amount of
such Imposition or part thereof, if any, as finally determined in such
proceedings, the payment of which may have been deferred during the prosecution
of such proceedings, together with any costs, fees, including attorney's fees,
interest, penalties, fines and other liability incurred by Tenant in connection
therewith. Upon such payment, Landlord shall return all amounts or
certificates of deposit deposited with it in respect to the contest of such
Imposition, as aforesaid, along with any interest earned thereon as a result of
an investment thereof, at Tenant's request and expense, in a Federally insured
security or account. However, at the written direction of Tenant, Landlord
shall make such payment out of the funds on deposit with Landlord and the
balance, if any, shall be returned to Tenant. Tenant shall be entitled to the
refund of any Imposition, penalty, fine and interest thereon received by
Landlord which has been paid by Tenant or which has been paid by Landlord but
for which Landlord has been previously reimbursed in full by Tenant.
Landlord shall not be required to join in any proceedings referred to in this
paragraph 9 unless either (i) the provisions of any law, rule or regulations at
the time in effect shall require that such proceedings be brought by or in the
name of Landlord, in which event Landlord shall join in such proceedings or
permit the same to be brought in Landlord's name upon compliance with such
conditions as Landlord may reasonably require or (ii) Tenant provides Landlord
with reasonable security for the payment of all expenses (including reasonable
compensation for the time of Landlord's officers) to be incurred by Landlord in
connection with such proceedings. Landlord shall not ultimately be subject to
any liability for the payment of any fees, including attorney's fees, costs and
expenses in connection with such proceedings and Tenant agrees to bear the
entire obligation therefor. Tenant agrees to pay all such fees (including
reasonable attorney's fees), costs and expenses or, on demand, to make
reimbursement to Landlord for such payment. During the time when any such
certificate of deposit is on deposit with Landlord, and prior to the time when
the same is returned to Tenant or applied against the payment, removal or
discharge of Impositions, as above provided, Tenant shall be entitled to
receive any interest paid thereon.
-16-
<PAGE> 22
(f) If Tenant shall at any time fail to pay any Imposition in
accordance with the provisions of paragraph 9, or to take out, pay for,
maintain and deliver any of the insurance policies or certificates of insurance
provided for in paragraph 11, or shall fail to make any other payment or
perform any other act on its part to be made or performed hereunder, then
Landlord, after ten (10) days prior written notice to Tenant (or without notice
in situations where Landlord determines that delay is likely to cause harm to
Landlord's interest in the Premises), and without waiving or releasing Tenant
from any obligation of Tenant contained in this Lease, may, but shall be under
no obligation to do so,
(i) pay after said ten (10) days' written notice to Tenant, any
Imposition payable by Tenant pursuant to the provisions of this
paragraph 9;
(ii) take out, pay for and maintain any of the insurance policies
provided for in paragraph 11; or
(iii) make any other payment or perform any other act on Tenant's
part to be paid or performed hereunder, except that any time
permitted to Tenant to perform any act required to be
performed by Tenant hereunder shall be extended for such
period as may be necessary to effectuate such performance,
provided Tenant is continuously, diligently and in good faith
prosecuting such performance.
Landlord may enter upon the Premises for any such purpose and take all such
action therein or thereon as may be necessary therefor and all such action
taken by Landlord shall be in a reasonably diligent fashion. All sums,
reasonable under the circumstances, actually so paid by Landlord and all costs
and expenses, including reasonable attorney's fees, incurred by Landlord in
connection with the performance of any such act, together with interest thereon
at the Overdue Rate, shall be paid by Tenant to Landlord on demand and
submission of reasonable evidence of such expenditures. Landlord shall not be
limited in the proof of any damages which Landlord may claim against Tenant
arising out of or by reason of Tenant's failure to provide and keep in force
insurance as aforesaid, to the amount of the insurance premium or premiums not
paid or incurred by Tenant, and
-17-
<PAGE> 23
which would have been payable upon such insurance, but Landlord shall
also be entitled to recover, as damages for such breach, the uninsured amount
of any loss (to the extent of any deficiency between the dollar limits of
insurance required by the provisions of this Lease and the dollar limits of the
insurance actually carried by Tenant), damages, costs and expenses of
suit,including reasonable attorney's fees, suffered or incurred by reason of
damage to or destruction of the Premises, or any portion thereof or other
damage or loss which Tenant is required to insure against hereunder, occurring
during any period when Tenant shall have failed or neglected to provide
insurance as aforesaid.
10. DESTRUCTION OF OR DAMAGE TO PREMISES:
Tenant covenants that in case of damage to or destruction of any or all of
the Improvements and Essential Equipment by fire or any other cause, insured or
uninsured, Tenant will promptly, at its sole cost and expense, restore, repair,
replace or rebuild the Improvements, and repair or replace the Essential
Equipment, so damaged or destroyed as nearly as practicable to the condition,
quality and class thereof immediately prior to such damage or destruction,
without regard to the adequacy of any insurance proceeds for such purpose;
provided, however, that Essential Equipment may be replaced by a functionally
equivalent item with like utility, rather than an identical item, so long as no
degradation in utilization of the building as a high tech warehouse occurs as a
result of such substitution. This Lease shall continue, with Fixed Rent and
Additional Rent unabated and Landlord shall not terminate the Master Lease
pursuant to paragraph 17.2 thereof. In performing its obligations under this
paragraph 10, Tenant shall be entitled to insurance proceeds under the terms
and conditions set forth in paragraph 11 hereof, notwithstanding the terms of
any mortgage given by Landlord to the contrary. Landlord shall have the right
to approve the plans and specifications for the work of repair, replacement or
rebuilding, such approval not to be unreasonably withheld or delayed. Tenant
shall diligently obtain all necessary permits for such work or repair and shall
maintain builder risk insurance in amounts reasonably satisfactory to Landlord
until completion of such work. Such restoration, repairs, replacement or
rebuilding shall be commenced promptly and prosecuted with diligence, subject
to unavoidable delays and force majeure.
-18-
<PAGE> 24
11. INSURANCE, HOLD HARMLESS AND INDEMNIFICATION:
(a) Tenant at its sole cost and expense shall obtain and continuously
maintain in full force and effect during the Term "All-Risk" policies of
property insurance including damage by fire and the perils commonly covered
under the special causes of loss, and also including the perils of flood and at
the sole discretion of Tenant also including the perils of earthquake, covering
real and personal property and loss of business income, including all of the
Improvements, alterations, additions and changes on or at the Premises, which
insurance shall be for the benefit of Landlord (as an additional insured and
loss payee) and Tenant, as their interests may appear, and also protecting the
insurable interests of any other entity the Landlord may designate from time to
time, including but not limited to mortgagee(s), additional insured(s), loss
payee(s), or others (hereinafter referred to as "Property Insurance").
Such Property Insurance shall:
(i) be written with companies licensed to do business in the
State where the Premises are located, having a current
A.M. Best rating of A- or better and a current A.M. Best
Financial Size Category of VII or better and (at the
discretion of Landlord) a current Standard & Poor's
Claim-Paying Ability Rating of A or better;
(ii) be maintained continuously throughout the Term hereof; and
(iii) for all perils other than windstorm and earthquake, provide
for a deductible or self-insured retention per occurrence
no greater than (i) $250,000, at any time when Lessee's
tangible net worth, determined in accordance with generally
accepted accounting principles, is less than $100,000,000, or
(ii) $250,000, increased annually on the anniversary of the
Commencement Date by the corresponding annual percentage
increase in the CPI, or if such index is not available, then
the most comparable index then made available by the U.S.
government, such increase not to exceed 3% per annum, so long
as Lessee's tangible net worth, determined in accordance with
generally accepted accounting principles, is at least
$100,000,000. For losses caused by windstorm, a deductible or
self-insured retention no greater than 2% of the value of the
property insured at the Premises, per
-19-
<PAGE> 25
policy valuation, shall apply. For losses caused by
earthquake, the deductible or self-insured retention shall be
at the sole discretion of the Tenant, in accordance with the
coverage requirements of paragraph 11(a) above. In any event,
any and all co-insurance penalties, deductibles, or
self-insured retention shall be the responsibility of, and
shall be paid by, Tenant.
At all times, the Property Insurance coverage shall be in an amount
equal to one hundred percent (100%) of the then "Full Replacement Cost" of the
Improvements, alterations, additions and changes on or at the Premises. Full
Replacement Cost shall be interpreted to mean the cost of repairing or
replacing the improvements, alterations, additions and changes on or at the
Premises with property of like kind and quality, determined at the time of
loss, without deduction for depreciation or wear and tear, and it shall include
a reasonable sum for architectural, engineering, legal, interest charges,
permit fees, administrative and supervisory fees connected with the restoration
or replacement of such Improvements in the event of damage thereto or
destruction thereof. Any co-insurance penalty, deductible, or self-insured
retention applicable shall be the sole responsibility of, and shall be paid by,
Tenant.
(b) During the Term, Tenant, at its sole cost and expense, but for the
benefit of Landlord (as an additional insured), and also protecting the
insurable interests of any other entity the Landlord may designate from time to
time, including but not limited to Landlord's mortgagee(s), additional
insured(s), loss payee(s), or other entities Landlord may designate from time
to time, and as required by the Master Lease, shall obtain and continuously
maintain, in full force and effect, the following insurance coverage written
with companies licensed to do business in the State where the Premises are
located, having a current A.M. Best Rating of A- or better and a current A.M.
Best Financial Size Category of VII or better and (at the discretion of
Landlord), a Standard & Poor's Claim-Paying Ability Rating of A or better:
(i) Commercial general liability insurance or comprehensive general
liability insurance with broad form comprehensive liability
endorsement, applying to Premises and operations (including
coverage for property damage resulting from the explosion
collapse, and underground hazards), products and
-20-
<PAGE> 26
completed operations, contractual liability, broad form
property damage, and personal injury, all with a minimum
combined single limit of $3,000,000.00 each occurrence and
$3,000,000.00 general aggregate per location.
(ii) Automobile liability applying to any owned, hired and non-owned
automobiles, with a minimum combined single limit of
$1,000,000.00 each accident.
(iii) Following form umbrella liability with a minimum combined single
limit of $25,000,000.00 each occurrence and a minimum aggregate
limit per location of $25,000,000.00.
(iv) if required by Landlord, such other insurance which is deemed
to be prudent and commercially available at a logical cost,
against other insurable hazards or occurrences and in such
amounts which at the time are reasonable and commonly insured
against in the case of premises, operations, and/or buildings or
improvements similar in nature, construction, design, general
location, use, and/or occupancy, to those on the Premises.
Any co-insurance penalty, deductible, or self-insured retention applicable with
respect to general liability, automobile liability, or umbrella liability,
shall be the sole responsibility of, and shall be paid by, Tenant.
(c) Tenant shall maintain a policy or policies of statutory workers'
compensation insurance covering all employees in amounts required by applicable
state law and employers' liability with minimum limits of $100,000.00 each
accident, $100,000.00 disease-each employee, and $100,000.00 disease-policy
limit or the minimum underlying insurance requirements of Tenant's umbrella
liability policy, whichever is greater.
(d) The aforementioned commercial general liability insurance or
comprehensive general liability insurance, automobile liability insurance,
umbrella liability insurance, workers' compensation insurance and employers'
liability insurance shall not include deductibles or self-insured retention in
excess of 1/4 of 1% of Tenant's tangible net worth, determined in accordance
with generally accepted accounting
-21-
<PAGE> 27
principles. Any co-insurance penalty, deductible, or self-insured
retention applicable with respect to general liability, automobile liability,
umbrella liability, worker's compensation or employers' liability shall be the
sole responsibility of, and shall be paid by, Tenant.
(e) Each policy of insurance required under this paragraph 11 shall have
attached thereto:
(i) an endorsement that such policy shall not be cancelled or
materially changed without at least thirty (30) days prior
written notice to Landlord, except in the case of
non-payment of premium, in which case there shall be at
least ten (10) days prior written notice; and
(ii) A Lender's Loss Payable Endorsement Form 438BFU (with respect
to insurance described in paragraph 11(a)).
To the extent the foregoing endorsements are not obtainable in precisely the
form prescribed, Tenant shall obtain reasonably similar endorsements.
Certificates of Insurance (ACORD 25-S) and
-22-
<PAGE> 28
Evidence of Property Insurance (ACORD 27) (collectively, the "Certificates")
shall be delivered to Landlord accompanied by, or Tenant shall provide, as
appropriate, evidence satisfactory to Landlord that the premiums thereon have
been paid currently. Such Certificates and evidence of payment shall be
delivered to Landlord on or before the Commencement Date. Prior to the
expiration of such policies, Certificates of all renewal or replacement
policies, plus reasonable evidence of current premium payment, shall be
delivered to Landlord not less than thirty (30) days prior to the expiration of
the then current policy term. Insurance binders evidencing the binding of
policies of insurance or the renewals thereof for the coverage specified shall
be accepted in the event such Certificates are not available at the time in
question, for a temporary duration, pending policy issuance. Within thirty
(30) days of written request, Tenant shall cause Certificates to be delivered
to Landlord, or deliver a letter to Landlord from the underwriter(s) stating
the reasons for the delay, and stipulating when Certificates will be available.
In no event shall the insurance for the coverage specified be allowed to lapse.
On two business days' prior notice to Tenant, copies of Tenant's insurance
policies shall be made available for inspection by Landlord or its designee or
Mortgagee or Mortgagee's designee during normal business hours at Tenant's
address.
Nothing in this paragraph 11 shall prevent Tenant from taking out insurance
of the kind and in the amount provided for under the preceding paragraphs under
a blanket insurance policy or policies which may cover other properties owned,
operated, leased or occupied by Tenant as well as the Premises. Such policy
of blanket insurance shall specify the amount exclusively allocated to the
Premises, or in lieu thereof, Tenant shall furnish Landlord and the holder of
any mortgage with a written statement from the insurer's authorized
representative or broker specifying the values reported for the Premises at
inception for premium determination purposes. Further, such policies of
blanket insurance shall, as respects the Premises, contain the various
provisions required of such an insurance policy by the foregoing provisions of
this paragraph 11.
(f) In the event of loss or damage to the Premises which exceeds the
deductible or self-insured retention described in paragraph 11(a)(iii), or in
the event of any claim in connection with the injury to any person or the
damage of any property (other than the Premises) arising out of or occurring at
the Premises or arising out of operations at the Premises which exceeds the
deductible or self-insured retention described in paragraph 11(c), or in the
event of the death of any person arising out of or occurring at the Premises,
Tenant shall
-23-
<PAGE> 29
promptly notify Landlord thereof in writing, and shall prepare and present
timely claims to the appropriate insurers on behalf of Tenant, Landlord and any
assignee or mortgagee of Landlord.
(g) The proceeds of any property claim for damage to the Premises, net of
any collection expenses, shall (subject to the terms of the Master Lease) be
paid to Tenant for use in restoring the Premises, unless such proceeds exceed
$50,000, in which case such proceeds shall be deposited with either a bank or
trust company having an office in the State of Louisiana and designated by
Landlord and reasonably satisfactory to Tenant (herein called the "Proceeds
Trustee") in the name of the Proceeds Trustee as trustee for Landlord and
Tenant and (subject to the terms of the Master Lease) disbursed in the manner
hereinafter provided. In the event Landlord mortgages the Premises with a
first mortgage, the mortgagee thereunder (regardless of its location) may, at
its option, be appointed Proceeds Trustee for so long as such first mortgage
remains outstanding. Insurance proceeds shall be deposited in an interest
bearing account (if available) and interest shall be distributed to Tenant upon
completion of said installation, repair, replacement or rebuilding, provided no
default has occurred and is continuing hereunder. All checks drawn on said
account shall be co-signed by the Proceeds Trustee and Tenant. Insurance
proceeds shall be disbursed to Tenant by the Proceeds Trustee upon receipt by
Landlord and Proceeds Trustee of the following:
(i) A certificate signed by a licensed architect or engineer selected by
Tenant, subject to the approval of Landlord (such approval not to be
unreasonably withheld or delayed) and also signed by Tenant, dated not
more than thirty (30) days prior to the application for such
disbursement, setting forth in substance the following:
a. that the sum then requested to be disbursed either has been
been paid by Tenant or is justly due to contractors,
subcontractors, materialmen, engineers, architects or other
Persons (whose names and addresses shall be stated) who have
rendered and furnished certain labor and materials for the work;
giving a brief description of such services rendered and
materials placed in use on the Premises and the principal
subdivisions or categories thereof and the amounts so paid or
due to each of said Persons in respect thereof, and stating the
progress of the work up to the date of said certificate;
-24-
<PAGE> 30
b. that the sum then requested to be disbursed, plus all sums
sums previously disbursed, does not exceed the cost of
the work as actually accomplished up to the date of such
certificate (less ten percent (10%) of such cost which shall be
retained by the Proceeds Trustee to be disbursed following
completion of the work to be done by the named contractor);
c. that, to the best of their knowledge, except for the amounts
the amounts, if any, stated in said certificate pursuant
to the foregoing clause (i) of this paragraph to be due for
services or materials, there is no outstanding indebtedness
known to the Person signing the certificate, after due
inquiry, which is then due and payable for work, labor,
services and materials in connection with the work, which, if
unpaid, might become the basis of a vendor's, mechanic's,
laborer's or materialman's statutory or similar lien upon
Tenant's leasehold estate or Tenant's or Landlord's interest in
the Premises or any part thereof; and
d. that the amount remaining in the possession of the Proceeds
Proceeds Trustee after disbursement of the sum then
requested at least equals the estimated unpaid costs to
complete the work (and if insufficient funds remain, Tenant
shall deposit additional funds with the Proceeds Trustee
sufficient to enable the architect or engineer to make the
foregoing certification).
(ii) A certificate signed by Tenant, dated not more than thirty (30) days
prior to the application for such disbursement, setting forth in substance
that, to the best knowledge of Tenant, after due inquiry:
a. all materials and all property described in the
certificate are free and clear of all liens and
encumbrances, except such as may secure indebtedness
due to Persons (whose names and addresses and the
several amounts due them shall be stated) specified in
said certificate, which liens and encumbrances will be
discharged upon payment of such indebtedness and
encumbrances to which this Lease is subject; and
-25-
<PAGE> 31
b. that no default hereunder has occurred which has
not been remedied.
(iii) Evidence reasonably satisfactory to the Proceeds Trustee and
Landlord showing that there has not been filed or recorded with respect to
Tenant's leasehold estate or Tenant's or Landlord's interest in the Premises or
any part thereof any vendor's, mechanic's, design professional's, laborer's or
materialman's statutory or similar lien which has not been discharged of
record, except such as will be discharged upon payment of the amount then
requested to be disbursed.
(iv) Conditional lien waivers from each Person entitled to a
mechanics' or materialmen's lien against the Premises by reason of such work.
(v) Upon compliance with the foregoing provisions, the Proceeds
Trustee shall, out of the deposited sums, disburse to the Persons named in the
certificate the respective amounts stated in said certificate to be due to them
and/or shall disburse to Tenant the amount stated in said certificate to have
been paid by Tenant.
(vi) At any time after the completion in full of the work, the whole
balance of the deposited sums not theretofore disbursed pursuant to the
foregoing provisions of this paragraph 11(g) shall be disbursed to or upon the
order of Tenant, upon receipt by the Proceeds Trustee of:
a. a certificate signed by Tenant, dated not more than thirty
(30) days prior to the application for such disbursement,
setting forth in substance the following:
(1) that the work has been completed in full;
(2) that all amounts which Tenant is or may be
entitled to have disbursed under the foregoing
provisions of this Paragraph 11(g) on account of
services rendered or materials furnished in
connection with the work and placed in use on the
Premises have been disbursed under said
provisions;
(3) that all amounts for whose payment Tenant is or
may become liable in respect of the work have
been paid in full except to the extent, if any,
of any retainage and which retainage
-26-
<PAGE> 32
shall be applied to the final payments of the
amounts due; and
(4) that no default has occurred hereunder which has
not been remedied;
b. if the work resulted in any change to the plans and
specifications of the Premises, a copy of the final
plans and specifications of the improvements on the
Premises, which plans and specifications shall be
delivered to Landlord;
c. subject to paragraph 21(a), an official search or a
certificate of a title company reasonably satisfactory
to the Proceeds Trustee showing that there has not
been filed with respect to Tenant's leasehold estate
or Tenant's or Landlord's interest in the Premises or
any part thereof, any vendor's, mechanic's, laborer's
or materialman's statutory or similar lien which has
not been discharged of record;
d. a certificate of completion signed by the supervising
architect or engineer referred to in Paragraph
11(g)(i) above; and
e. if legally required, a certificate of occupancy or
equivalent governmental approval.
No such damage or destruction shall release Tenant from any
obligation hereunder for Fixed Rent, Additional Rent or other sums payable
under this Lease.
Any insurance proceeds remaining after completion of the
reconstruction as specified in Paragraph 11(g)(vi) above shall be paid to
Tenant.
(h) To the fullest extent permitted by law, but subject to the last
sentence of this subparagraph (h), Tenant shall protect, defend, indemnify and
hold Landlord, its direct or indirect partners, and any and all respective
members, partners, executive officers, directors, stockholders, agents and
employees of the aforementioned, any mortgagee and their respective successors
and assigns and any other individual or entity to whom a duty is owed
(collectively, the Landlord Group) harmless from and against any and all
claims, losses, and judgments, liabilities, damages, causes of action, costs
and expenses (including, without limitation, reasonable attorney's fees and
reasonable investigative and discovery costs), arising from Tenant's use of
-27-
<PAGE> 33
the Premises (including all common areas) and the ways adjoining the Premises,
or from the conduct of Tenant's business or from any activity, work or things
done, permitted or suffered by Tenant in or about the Premises (including all
common areas) and the ways adjoining the Premises and including any and all
liability arising under the Servitude of Passage, the Switch Track Agreement or
the Railroad Crossing Agreement. Subject to the last sentence of this
subparagraph (h), Tenant shall further protect, defend, indemnify and hold
Landlord Group harmless from and against any and all claims, losses, judgments,
liabilities, damages, causes of action, costs and expenses (including, without
limitation, reasonable attorney's fees and reasonable investigative and
discovery costs), arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under the terms of this Lease, or
arising from any negligence (active, passive, or otherwise), willful
misconduct, acts, or omissions of Tenant, or any of Tenant's agents,
contractors or subcontractors, employees, servants, customers, invitees,
subtenants, any other individual or entity, and from and against all costs and
expenses (including, without limitation, reasonable attorney's fees and
reasonable investigative and discovery costs) actually incurred, in the defense
of any such claim or any action or proceeding brought thereon; and in case any
action or proceeding be brought against a member of Landlord Group by reason of
any such claim, Tenant upon notice from any member of Landlord Group shall
defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord Group or selected by the insurance carrier. Tenant, as a material
part of the consideration to Landlord, assumes all risk of damage to property
or injury to or death of persons, in, upon or about the Premises arising from
any cause and Tenant waives all claims in respect thereof against Landlord
except to the extent any such cause or claim is attributable to the willful act
or negligent act of Landlord. Nothing in this paragraph shall require Tenant
to protect, defend, indemnify or hold harmless a Person to the extent of such
Person's negligence or willful misconduct.
12. GOVERNMENTAL ORDERS; COVENANTS:
Tenant shall throughout the Term promptly comply or cause compliance
with or remove or cure any violation of any and all present and future laws,
including, without limitation, the Americans with Disabilities Act of 1990, as
the same may be amended from time to time, ordinances (zoning or otherwise),
orders, rules, regulations and requirements of all Federal, State, municipal
and other governmental bodies having jurisdiction over the Premises and the
appropriate departments, commissions, boards and officers thereof, and the
orders, rules
-28-
<PAGE> 34
and regulations of the Board of Fire Underwriters where the Premises are
situated, or any other body now or hereafter constituted exercising lawful or
valid authority over the Premises, or any portion thereof, or the sidewalks,
curbs, roadways, alleys or entrances adjacent or appurtenant thereto, or
exercising authority with respect to the use or manner of use of the Premises,
or such adjacent or appurtenant facilities, and whether the compliance, curing
or removal of any such violation and the costs and expenses necessitated
thereby shall have been foreseen or unforeseen, ordinary or extraordinary, and
whether or not the same shall be presently within the contemplation of Landlord
or Tenant or shall involve any change in governmental policy, or require
structural or extraordinary repairs, alterations or additions by Tenant and
irrespective of the amount of the costs thereof. Tenant, at its sole cost and
expense, shall comply with all agreements, contracts, easements, restrictions,
reservations or covenants, if any, running with the land, or hereafter created
by Tenant or consented to, in writing, by Tenant or requested, in writing, by
Tenant. Tenant shall also comply with, observe and perform all provisions and
requirements of all policies of insurance at any time in force with respect to
the Premises and required to be obtained and maintained under the terms of
paragraph 11 hereof and shall comply with all development permits issued by
governmental authorities issued in connection with development of the Premises.
13. PARTIAL TAKING:
(a) If less than substantially all of the Premises shall be
taken for public or quasi-public purposes, Tenant will promptly, at its sole
cost and expense, restore, repair, replace or rebuild the improvements so taken
in conformity with the requirements of paragraph 11 as nearly as practicable to
the condition, size, quality of workmanship and market value thereof
immediately prior to such taking, without regard to the adequacy of any
condemnation award for such purpose. In performing its obligations, Tenant
shall be entitled to all condemnation proceeds available to Landlord under the
terms of the Master Lease under the same terms and conditions for disbursement
set forth for casualty proceeds in paragraph 11 hereof, notwithstanding the
terms of any mortgage given by Landlord to the contrary (except that the
mortgagee under any such mortgage may be the custodian of the proceeds pending
their disbursement in accordance with the disbursement provisions of paragraph
11). Any condemnation proceeds in excess of the amounts as are made available
to Tenant for restoration or repair of the Premises, shall be the sole and
exclusive property of Landlord. Tenant shall have the right to participate in
condemnation proceedings with Landlord, and shall be entitled to receive any
award made by
-29-
<PAGE> 35
the condemning authority in respect of business loss or, if available, business
relocation and any other claim permitted by law which does not, in any such
case, diminish Landlord's recovery.
(b) If the Landlord is entitled to condemnation proceeds as
described in the next to last sentence of Paragraph 13(a), each installment of
Fixed Rent thereafter payable hereunder shall be reduced by a fraction thereof,
the numerator of which shall be the proceeds retained by Landlord and the
denominator of which shall be the Purchase Price specified in the Basic Lease
Information.
14. TERMINATION OF LEASE FOR SUBSTANTIAL TAKING:
If all or substantially all of the Premises are taken for
public or quasi-public purposes, and the Premises are therefore rendered
unsuitable for continued use and occupancy in Tenant's business, then Tenant
shall, not later than twenty (20) days after such occurrence, deliver to
Landlord (i) notice of its desire to terminate this Lease with respect to the
Premises on the next due date for the Fixed Rent payment, (the "Termination
Date") which occurs not less than 45 days after the delivery of such notice and
(ii) a certificate of the President or Vice President of Tenant describing the
event giving rise to such termination and stating that Tenant has determined
that such event has rendered the Premises unsuitable for continued use and
occupancy in Tenant's business, and (iii) a certificate signed by the Tenant to
the effect that termination of this Lease with respect to the Premises will not
be in violation of any operating or similar agreement then in effect. Such
notice to Landlord shall be accompanied by (1) an undertaking of Tenant to pay
any amounts payable under the terms of the Master Lease upon a termination
thereof (including the payment of the Bonds referred to therein), and (2) an
irrevocable offer by Tenant to purchase on the Termination Date any remaining
portion of the Premises at a price equal to the Purchase Price specified in the
Basic Lease Information. The costs associated with such conveyance, including
transfer taxes and recording fees, shall be paid by Tenant. Landlord may
reject such offer by notice given to Tenant not later than thirty (30) days
after receipt of Tenant's notice (which offer Landlord may not reject without
the first mortgagee's consent if there is a mortgage then on the Premises).
Unless Landlord shall have rejected such offer in accordance with this
paragraph (with the mortgagee's consent as aforesaid), Landlord shall be
conclusively presumed to have accepted such offer, and, on the Termination
Date, shall convey by special warranty deed to Tenant any remaining portion of
the Premises free of liens and encumbrances (except those existing on
-30-
<PAGE> 36
the Commencement Date or thereafter created with the written consent of
the Tenant) but excluding encumbrances created by Landlord securing the
repayment of borrowed money, along with the right to receive any condemnation
award to which Landlord is entitled under the Master Lease.
15. DEFAULT: Events of Default.
The following events, following the expiration of the
applicable cure periods, in this Paragraph are sometimes referred to as an
"Event of Default":
(a) If default shall be made in the payment of Fixed Rent and such
default shall continue for 5 days after receipt of notice,
provided that such notice and cure period shall apply only once
in any twelve month period and after one such notice in any
such period, an Event of Default shall exist upon failure to
pay Fixed Rent when due;
(b) If default shall be made in the payment of Additional Rent or
in the payment of any other sum required to be paid by Tenant
under this Lease and such default shall continue for 5 days
after receipt of notice thereof;
(c) If default shall be made in the observance or performance of
any of the other covenants in this Lease which Tenant is
required to observe and perform and such default shall continue
for thirty (30) days after written notice to Tenant, provided
however, that if such default cannot be cured simply by the
payment of money and cannot reasonably be cured in such 30 day
period, an Event of Default shall not exist as long as Tenant
promptly commences and thereafter diligently prosecutes the
cure of such default, provided that such cure period shall in
no event extend beyond 270 days after the notice of such
default;
(d) If any representation or warranty made by Tenant herein or by
Tenant or Guarantor in any certificate, demand or request
proves to be incorrect in any material respect when made;
(e) If the interest of Tenant in this Lease shall be attached,
levied on under execution or other legal process and same is
not vacated within sixty (60) days;
-31-
<PAGE> 37
(f) If a case shall be commenced under the United States Bankruptcy
Code by Tenant or Guarantor;
(g) If any involuntary petition in bankruptcy shall be filed
against Tenant or Guarantor under any Federal or State
bankruptcy or insolvency act and shall not have been dismissed
within sixty (60) days of the filing thereof;
(h) If a receiver or similar official shall be appointed for Tenant
or Guarantor or any substantial portion of the property of
Tenant or Guarantor by any court and any such receiver shall
not have been discharged within thirty (30) days from the date
of his appointment;
(i) If Tenant shall abandon the Premises; or
(j) If the consolidated tangible net worth of Guarantor determined
in accordance with generally accepted accounting principles
shall be less than $100,000,000 and Tenant does not comply with
paragraph 27;
Landlord may treat the occurrence of any one or more of the
foregoing Events of Default as a breach of this Lease. For so long as such
Event of Default continues, Landlord, at its option and with or without notice
or demand of any kind to Tenant or any other person, may have any one or more
of the remedies provided in this Lease, in addition to all other remedies and
rights provided at law or in equity.
16. REMEDIES: In the event of any Event of Default, Landlord may,
in addition to, and not in derogation of any remedies for any preceding breach,
with or without notice of demand (except as otherwise expressly provided
herein) and without limiting Landlord in the exercise of any right or remedy
which Landlord may have by reason of such Event of Default:
(a) Immediately or at any time thereafter while such Event of
Default continues, mail a notice of termination addressed to Tenant and proceed
pursuant to and with due process of law, to repossess the Premises without
prejudice to any remedies which might otherwise be used for arrears of rent,
and upon such notice as aforesaid this Lease shall terminate, but Tenant shall
remain liable for its default hereunder as hereinafter provided. Tenant shall
have the right to cure any default until the expiration of the applicable cure
period, if any, following notice by Landlord, as specified above. Where
Landlord has given notice as provided for above, no further
-32-
<PAGE> 38
notice shall be required to effectuate a termination of the Lease,
which termination shall occur automatically.
(b) Terminate Tenant's right to possession of the Premises by
court order or any lawful means, in which case Tenant's right to possession
under this Lease shall terminate, and Tenant shall immediately surrender
possession of the Premises to Landlord. In such event, Landlord shall be
entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant's default, including, but not limited to, the cost of recovering
possession of the Premises; reasonable expenses of reletting, including
necessary renovation and alteration of the Premises (which reletting shall be
restricted to operations similar to Tenant's operations, or to warehouse or
distribution center facilities); reasonable attorney's fees and any reasonable
real estate commissions actually paid; the worth at the time of award by the
court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the Term (not including any unexercised Renewal Terms) after the
time of such award exceeds the amount of such rental loss for the same period
that Tenant proves could be reasonably avoided; and that portion of any leasing
commissions paid by Landlord applicable to the unexpired Term of this Lease
(not including any unexercised Renewal Terms). The discount rate to be used in
determining present value shall be the discount rate then in effect at the
Federal Reserve Bank of San Francisco, plus 1%.
(c) Maintain Tenant's right to possession, in which case this
Lease shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
the Rent as it becomes due hereunder.
(d) Accelerate all rentals payable hereunder for the remainder
of the existing Term, and be entitled to the payment of the present value of
such sums, each discounted at the discount rate then in effect at the Federal
Reserve Bank of San Francisco, plus 1%, together with all rentals theretofore
accrued and unpaid and interest thereon at the Overdue Rate from the date due
until paid.
(e) Pursue any other remedy now or hereafter available to
Landlord under the laws or judicial decisions of the State of Louisiana.
Unpaid installments of Rent and other unpaid monetary obligations of Tenant
under the terms of this Lease shall bear interest from the date due until paid
at the Overdue Rate.
-33-
<PAGE> 39
(f) Subject to the last sentence of this paragraph, at any time
after any such termination of this Lease or re-entry or repossession of the
Premises or any part thereof by reason of the occurrence of an Event of
Default, whether or not Landlord shall have collected any current damages
pursuant to paragraph 16(b), Landlord shall have the option to require payment
from Tenant, and Tenant will pay to Landlord on demand, as and for liquidated
and agreed final damages for Tenant's default and in lieu of all current
damages beyond the date of such demand (it being agreed that it would be
impracticable or extremely difficult to fix the actual damages), whichever
amount Landlord shall select:
(i) an amount equal to the Fixed Rent reserved in this
Lease and/or covenanted to be paid for the remainder of the Term
(excluding unexercised Renewal Terms), discounted to present worth at
the discount rate then in effect at the Federal Reserve Bank of San
Francisco, plus 1%;
(ii) 110% of the Purchase Price specified in the Basic
Lease Information.
Landlord shall at the time of such payment under this paragraph 16(f) assign
and convey the Premises to Tenant free of liens and encumbrances (except those
existing on the Commencement Date or thereafter created with the express
written consent of Tenant, but excluding encumbrances created by Landlord
securing the repayment of borrowed money), without further consideration. The
costs of such transfer, including recording fees and transfer taxes shall be
paid by Tenant, except that, if Landlord receives more than 110% of such
Purchase Price, Landlord shall pay the portion of such costs, if any, which
result in Landlord receiving at least 110% of such Purchase Price. If the only
Event of Default hereunder is under paragraph 15(j), the damages under this
paragraph shall be the price applicable to a sale under paragraph 27; if there
is an Event of Default under paragraph 15(j) and under another provision of
this Lease, the damages under this paragraph shall be the greater of the amount
selected pursuant to this paragraph or the price applicable to a sale under
paragraph 27.
17. SUBORDINATION:
(a) Subordination, Non-Disturbance. Tenant agrees at any time
hereafter, and from time to time within twenty (20) days of written request of
Landlord's lender, to execute and deliver to Landlord an instrument in the form
attached hereto as Exhibit E, with such changes therein as may be requested by
Landlord and approved, in the exercise of reasonable judgment, by Tenant
subjecting and subordinating this Lease to the lien of any
-34-
<PAGE> 40
mortgage, deed of trust, security instrument, ground or underlying
lease or other document of like nature (hereinafter collectively referred to as
"Mortgage") which at any time may be placed upon the Premises, or any portion
thereof, by Landlord and to any replacements, renewals, amendments,
modifications, extensions or refinancing thereof, and to each and every advance
made under any Mortgage. It is agreed, nevertheless, that so long as there
exists no Event of Default, such subordination agreement or other instrument,
release or document (herein "Subordination Agreement") shall not interfere
with, hinder or reduce Tenant's right to quiet enjoyment under this Lease, nor
the right of Tenant to continue to occupy the Premises, and all portions
thereof, and to conduct its business thereon in accordance with the covenants,
conditions, provisions, terms and agreements of this Lease. The lien of any
such Mortgage shall not encumber Tenant's Trade Fixtures, and insurance
proceeds and condemnation awards shall be made available to Tenant in
accordance with the terms of this Lease (subject to the Master Lease). The
costs of preparing and recording such document shall be borne by Landlord, but
Tenant shall be responsible for its own counsel fees.
(b) Mortgagee Protection Clause. In the event of any act or
omission of Landlord constituting a default by Landlord, Tenant shall not
exercise any remedy until Tenant has given Landlord and any mortgagee of the
Premises written notice of such act or omission, and until a reasonable period
of time (not to exceed 5 business days) to allow Landlord or the mortgagee to
remedy such act or omission shall have elapsed following receipt of such
notice. However, if such act or omission cannot, with due diligence and in
good faith, be remedied within such period or cannot be cured simply by the
payment of money, the Landlord and the mortgagee shall be allowed such further
period of time as may be reasonably necessary provided that it commences
remedying the same with due diligence and in good faith and thereafter
diligently prosecutes such cure, provided such cure period shall not extend
beyond 270 days after the notice of such default. Nothing herein contained
shall be construed or interpreted as requiring any mortgagee receiving such
notice to remedy such act or omission.
(c) Attornment. If any mortgagee shall succeed to the rights of
Landlord under this Lease or to ownership of the Premises, whether through
possession or foreclosure or the delivery of a deed to the Premises in lieu of
foreclosure, then such mortgagee shall automatically be deemed to have
recognized this Lease and to assume the obligations of Landlord hereunder
(including, without limitation, the provisions of paragraph 6 hereof) accruing
on and after the date such mortgagee acquired
-35-
<PAGE> 41
title to the Premises, and Tenant shall attorn to and recognize such
mortgagee as Tenant's landlord under this Lease and shall promptly execute and
deliver any instrument that such mortgagee may reasonably request to evidence
such attornment (whether before or after making of the Mortgage). In the event
of any other transfer of Landlord's interest hereunder, such transferee shall
automatically be deemed to have recognized this Lease and to assume the
obligations of Landlord hereunder accruing on and after the date of such
transfer, Tenant shall attorn to and recognize such transferee as Tenant's
landlord under this Lease and shall promptly execute and deliver any instrument
that such transferee and Landlord may reasonably request to evidence such
attornment.
(d) Upon twenty days' advance written notice, Tenant agrees to
execute, acknowledge and deliver a document consenting to the assignment by
Landlord of this Lease and the Rent to a Mortgagee in a form then in use among
institutional lenders, with such changes therein as may be reasonably requested
by the Mortgagee, provided no such document alters the rights of Tenant
hereunder.
18. LANDLORD'S RIGHT OF ENTRY: Upon reasonable notice, from time
to time during normal business hours, such persons as Landlord or any assignee
of Landlord shall designate shall have the right to enter upon the Premises and
to inspect same, exhibit the Premises to prospective purchasers and mortgagees,
and examine Tenant's books and records pertaining to the Premises, insurance
policies, certificates of occupancy and other documents, records and permits in
Tenant's possession with respect to the Premises, all of which shall be
customary and adequate and reasonably satisfactory to Landlord, provided,
however, that such activities by Landlord shall be conducted in such a manner
as not to interfere with the conduct of business by Tenant at the Premises. If
no Event of Default exists hereunder, any such inspections shall be at the
expense of Landlord. If an Event of Default exists hereunder, such inspections
shall be at the reasonable expense of Tenant. During the final 18 months of the
Term, Landlord shall be entitled to place customary "For Rent" or "For Sale"
signs on the Premises. Such persons as Landlord or any assignee of Landlord
shall designate shall also have the right, upon three business days' notice, to
enter upon the Premises for the purpose of making repairs which Landlord is
authorized to make under the provisions of this Lease.
19. NOTICES: Notices, statements, demands, or other communications
required or permitted to be given, rendered or made by either party to the
other pursuant to this Lease or
-36-
<PAGE> 42
pursuant to any applicable law or requirement of public authority,
shall be in writing (whether or not so stated elsewhere in this Lease) and
shall be deemed to have been properly given, rendered or made, when received by
overnight delivery or overnight courier delivery or facsimile transmission
with a confirmation copy sent by overnight delivery or by overnight courier
delivery addressed to the other parties as follows:
To Landlord:
TriNet Essential Facilities X, Inc.
c/o TriNet Corporate Realty Trust, Inc.
Four Embarcadero Center, Suite 3150
San Francisco, California 94111
Attention: Mr. Mark S. Whiting
With a copy to:
Day, Berry & Howard
260 Franklin Street
Boston, Massachusetts 02110
Attention: Lewis A. Burleigh, Esq.
To Tenant:
West Coast Liquidators, Inc.
2430 E. Del Amo Boulevard
Dominguez, California 90220
Attention: Vice President of Real Estate and Construction
With a copy to the Attention of the General Counsel
Any party listed in this paragraph 19 may, by notices as aforesaid, designate a
different address for addresses for notice, statements, demands or other
communications intended for it.
20. STATUS OF LEASE; FINANCIAL DATA:
(a) Upon written request of either party, the other party
agrees, within twenty (20) days, to deliver a written status report of this
Lease, in the form provided on attached Exhibit C, provided that neither party
shall be obligated to provide more than four (4) such status reports per year.
-37-
<PAGE> 43
(b) Tenant agrees to deliver to Landlord and to any lender or
purchaser designated by Landlord copies of the Guarantor's Form 10K, 10Q and
Annual Report, promptly upon their filing with the Securities and Exchange
Commission. If Guarantor ceases to be a reporting company under the Securities
Exchange Act of 1934, Tenant shall deliver to Landlord and to any lender or
purchaser designated by Landlord the following information: within 120 days
after the end of each fiscal year of Guarantor, an audited balance sheet of
Guarantor and its consolidated subsidiaries as at the end of such year, an
audited statement of profits and losses of Guarantor and its consolidated
subsidiaries for such year, and an audited statement of cash flows of Guarantor
and its consolidated subsidiaries for such year, setting forth in each case, in
comparative form, the corresponding figures for the preceding fiscal year in
reasonable detail and scope and certified by independent certified public
accountants of recognized national standing selected by Guarantor; and within
60 days after the end of each of the first three fiscal quarters of Guarantor a
balance sheet of Guarantor and its consolidated subsidiaries as at the end of
such quarter, statements of profits and losses of Guarantor and its
consolidated subsidiaries for such quarter and a statement of cash flows of
Guarantor and its consolidated subsidiaries for such quarter, setting forth in
each case, in comparative form, the corresponding figures for the similar
quarter of the preceding year, in reasonable detail and scope, and certified to
be true and complete by a financial officer of Guarantor having knowledge
thereof; the foregoing financial statements all being prepared in accordance
with generally accepted accounting principles, consistently applied.
(c) Upon ten (10) days' prior notice, Tenant will permit
Landlord and its professional representatives to visit Tenant's offices, at
Landlord's expense, and discuss Tenant's affairs and finances (insofar as they
relate to the Premises or this Lease) with appropriate officers, and will make
available such information as Landlord may reasonably request bearing on the
Tenant, Premises or this Lease, provided that Tenant shall not be required to
disclose information in violation of federal securities laws.
-38-
<PAGE> 44
21. MECHANICS' LIENS:
Liens and Right of Contest. (a) Tenant shall not suffer or
permit any mechanic's lien or other lien to be filed or recorded against the
Premises, equipment or materials supplied or claimed to have been supplied to
the Premises at the request of Tenant, or anyone holding the Premises, or any
portion thereof, through or under Tenant. If any such mechanic's lien or other
lien shall at any time be filed or recorded against the Premises, or any
portion thereof, Tenant shall cause the same to be discharged of record within
thirty (30) days after the date of filing or recording of the same. However,
in the event Tenant desires to contest the validity of any lien it shall (i) on
or before thirty (30) days prior to the due date thereof (but in no
event later than 30 days after the filing or recording thereof), notify
Landlord, in writing, that Tenant intends to so contest same; (ii) on or before
the due date thereof, if Tenant's tangible net worth, determined in accordance
with generally accepted accounting principles, is less than $100,000,000, or if
such lien involves an amount in excess of 1/4 of 1% of Tenant's tangible net
worth so determined and any Mortgagee so requires, deposit with Landlord
security (in form and content reasonably satisfactory to Landlord or Mortgagee)
for the payment of the full amount of such lien and, from time to time, deposit
additional security or indemnity so that, at all times, adequate security or
indemnity will be available for the payment of the full amount of the lien
together with all interest, penalties, costs and charges accrued or accumulated
thereon.
If Tenant complies with the foregoing, and Tenant continues, in good
faith, to contest the validity of such lien by appropriate legal proceedings
which shall operate to prevent the collection thereof and the sale or
forfeiture of the Premises, or any part thereof, to satisfy the same, Tenant
shall be under no obligation to pay such lien until such time as the same has
been decreed, by court order, to be a valid lien on the Premises. Any surplus
deposit retained by Landlord, after the payment of the lien shall be repaid to
Tenant. Provided that nonpayment of such lien does not cause Landlord to be in
violation of any of its contractual undertakings, Landlord agrees not to pay
such lien during the period of Tenant's contest. However, if Landlord pays for
the discharge of a lien or any part thereof from funds of Landlord, any amount
paid by Landlord, together with all costs, fees and expenses in connection
therewith (including reasonable attorney's fees of Landlord), together with
interest thereon at the Overdue Rate, shall be repaid by Tenant to Landlord on
demand by Landlord. Tenant shall
-39-
<PAGE> 45
indemnify and defend Landlord against and save Landlord and the
Premises, and any portion thereof, harmless from and against all losses, costs,
damages, expenses, liabilities, suits, penalties, claims, demands and
obligations, including, without limitation, reasonable attorney's fees,
resulting from the assertion, filing, foreclosure or other legal proceedings
with respect to any such mechanic's lien or other lien or the attempt by Tenant
to discharge same as above provided.
(b) All materialmen, contractors, artisans, engineers, mechanics,
laborers and any other Person now or hereafter furnishing any labor, services,
materials, supplies or equipment to Tenant with respect to the Premises, or any
portion thereof, are hereby charged with notice that they must look
exclusively to Tenant to obtain payment for the same. Notice is hereby given
that Landlord shall not be liable for any labor, services, materials, supplies,
skill, machinery, fixtures or equipment furnished or to be furnished to Tenant
upon credit, and that no mechanic's lien or other lien for any such labor,
services, materials, supplies, machinery, fixtures or equipment shall attach to
or affect the estate or interest of Landlord in and to the Premises, or any
portion thereof.
(c) Tenant shall not create, permit or suffer, and, subject to the
provisions of paragraph 21(a) hereof, shall promptly discharge and satisfy of
record, any other lien, encumbrance, charge, security interest, or other right
or interest which, as a result of Tenant's action or inaction contrary to the
provisions hereof, shall be or become a lien, encumbrance, charge or security
interest upon the Premises, or any portion thereof, or the income therefrom,
other than Permitted Encumbrances.
22. END OF TERM: (a) Upon the expiration or earlier termination of
the Term of this Lease, Tenant shall surrender the Premises to Landlord in the
same condition and suitable for the same use in which the Premises was
originally received from Landlord except as repaired, rebuilt or altered as
required or permitted by this Lease, and subject to normal wear and tear
consistent with the maintenance required by paragraph 8 hereof and shall
surrender all keys to the Premises to Landlord at the place then fixed for
notices to Landlord and shall inform Landlord of all combinations on locks,
safes and vaults, if any. Except as otherwise provided herein, Tenant shall at
such time remove all of its property (including Tenant's Trade Fixtures)
therefrom and all alterations and improvements placed thereon by Tenant and not
consented to by Landlord, if so requested by Landlord. Tenant shall repair any
damage to the Premises caused
-40-
<PAGE> 46
by such removal, and any and all such property not so removed when
required shall, at Landlord's option, become the exclusive property of Landlord
or be disposed of by Landlord, at Tenant's cost and expense, without further
notice to or demand upon Tenant. Notwithstanding the foregoing, Tenant shall
have no obligation to surrender any of Tenant's Trade Fixtures or any
Incidental Equipment.
(b) If the Premises are not surrendered as above set forth,
Tenant shall indemnify, defend and hold Landlord harmless from and against loss
or liability resulting from the delay by Tenant in so surrendering Premises,
including, without limitation any claim made by any succeeding occupant founded
on such delay. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this Lease. In addition to the
foregoing, and in addition to the Additional Rent, Tenant shall pay to Landlord
a sum equal to 150% of the Fixed Rent herein provided during each month or
portion thereof for which Tenant shall remain in possession of the Premises or
any part thereof after the termination of the Term or of Tenant's rights of
possession, whether by lapse of time or otherwise. The provisions of this
paragraph 22(b) shall not be deemed to limit or constitute a waiver of any
other rights or remedies of Landlord provided herein at law or at equity.
(c) All property of Tenant not removed on or before the last
day of the Term of this Lease shall be deemed abandoned. Tenant hereby appoints
Landlord its agent to remove all property of Tenant, including Tenant's Trade
Fixtures, from the Premises upon termination of this Lease and to cause its
transportation and storage for Tenant's benefit, all at the sole cost and risk
of Tenant and Landlord shall not be liable for damage, theft, misappropriation
or loss thereof and Landlord shall not be liable in any manner in respect
thereto. Tenant shall pay all costs and expenses of such removal,
transportation and storage. Tenant shall reimburse Landlord upon demand for
any expenses reasonably and actually incurred by Landlord with respect to
removal or storage of abandoned property and with respect to restoring said
Premises to good order, condition and repair.
(d) Except for surrender upon the expiration or earlier
termination of the Term hereof, no surrender to Landlord of this Lease or of
the Leased Property shall be valid or effective unless agreed to and accepted
in writing by Landlord.
-41-
<PAGE> 47
23. ALTERATIONS:
(a) At any time during the Term of this Lease, Tenant shall
have the right to make alterations in and to the Premises, provided such
alterations are in compliance with all applicable codes, laws, ordinances,
rules and regulations, and do not materially reduce the then unencumbered fair
market value of the Premises or cause the Premises to violate any terms of the
Master Lease, this Lease or compromise the structural integrity of the
Improvements.
(b) Prior to making any structural alteration the cost of which
is estimated to exceed $500,000 (increased from the Commencement Date by a
dollar amount equivalent to the product of the percentage increase in the CPI
and $500,000), Tenant shall submit to Landlord a plan showing the nature and
extent of such alterations and shall not proceed with such alterations without
Landlord's written consent, which shall not be unreasonably withheld or
delayed. If Landlord has not responded to such plan after 15 days, Tenant may
then send a second notice to Landlord prominently stating that the Landlord's
failure to object to the proposed plans within 5 business days after receipt of
such second notice shall be deemed Landlord's consent thereto.
24. MEMORANDUM OF LEASE: The parties agree to promptly execute a
Memorandum of Lease in recordable form and either of the parties shall have the
right, without notice to the other party, to record such Memorandum of Lease.
25. SUBLETTING/ASSIGNMENT: (a) Tenant shall have the right to
sublease all or any part of the Premises or assign its interest hereunder,
without Landlord's consent, provided that Tenant shall remain primarily liable
under this Lease without regard to any sublease or assignment, and provided
further that any profit realized upon subletting or assignment shall be the
property of Tenant. Tenant shall not mortgage its interest hereunder and any
purported mortgage thereof shall be void. Tenant may request that Landlord
enter into a non-disturbance, attornment and recognition agreement with any
such assignee or subtenant, and Landlord agrees to consider such request in
good faith, although Landlord may at its sole discretion agree or refuse to
agree to enter into such agreement with any assignee or subtenant.
(b) Tenant shall have a one-time right to assign its interest
under this Lease and be relieved of all liability accruing hereunder after such
assignment, provided (1) the
-42-
<PAGE> 48
assignee delivers a written assumption of all of Tenant's obligations
hereunder, and (ii) the assignee both (x) has a tangible net worth, determined
in accordance with generally accepted accounting principles, of at least
$100,000,000, and (y) has a Standard and Poor's Corporation BBB- and Moody's
Investors Services Baa rating (or better) on its debt.
26. HAZARDOUS MATERIAL:
(a) Tenant (i) shall comply, and cause the Premises to comply,
with all Environmental Laws (as hereinafter defined) applicable to the Premises
(including the making of all submissions to governmental authorities required
by Environmental Laws and the carrying out of any remediation program specified
by such authority), (ii) shall prohibit the use of the Premises for the
generation, manufacture, refinement, production, or processing of any
Hazardous Material (as hereinafter defined) or for the storage,
handling, transfer or transportation of any Hazardous Material (other
than in connection with the operation, business and maintenance of the Premises
and in commercially reasonable quantities as a consumer thereof and supplier of
consumer products and in compliance with Environmental Laws), (iii) shall not
permit to remain, install or permit the installation on the Premises of any
surface impoundments, underground storage tanks, or asbestos-containing
materials, except for such impoundments, tanks and asbestos containing material
as was on the Premises at the Commencement Date as disclosed to Landlord by an
environmental engineer's written report, provided such pre-existing items
continue to be in compliance with applicable laws and, to the extent required
by Paragraph 22, removed at the end of the Term, and (iv) shall cause any
alterations of the Premises to be done in a way so as to not expose in an
unsafe manner the persons working on or visiting the Premises to Hazardous
Materials and in connection with any such alterations shall remove any
Hazardous Materials present upon the Premises which are not in compliance with
Environmental Laws or which present a danger to persons working on or visiting
the Premises.
(b) "Environmental Laws" means the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. Sections 6901, et seq. (RCRA),
the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. Section Section 9601 et seq. (CERCLA), the Toxic Substance
Control Act, as amended, 15 U.S.C. Sections 2601 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C. Sections 136
et
-43-
<PAGE> 49
seq., and all applicable federal, state and local environmental laws,
ordinances, rules and regulations, as any of the foregoing may have been or may
be from time to time amended, supplemented or supplanted, and any other
federal, state or local laws, ordinances, rules and regulations, now or
hereafter existing relating to regulations or control of Hazardous Material or
materials. The term "Hazardous Materials" as used in this Lease shall mean
substances defined as "hazardous substances", "hazardous materials", "hazardous
wastes" or "toxic substances" in any applicable federal, state or local
statute, rule, regulation or determination, including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. Sections 9601, et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801, et seq.; the Resource,
Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901, et seq.; and,
asbestos, pcb's, radioactive substances, methane, volatile hydrocarbons,
petroleum or petroleum-derived substances or wastes, radon, industrial solvents
or any other material as may be specified in applicable law or regulations.
(c) Except to the extent of liability resulting from or
arising out of the negligent or willful act of Landlord or its Mortgagee or
their agents or their successors and assigns on or about the Premises, Tenant
agrees to protect, defend, indemnify and hold harmless Landlord, its directors,
officers, employees and agents, and any successors to Landlord's interest in
the chain of title to the Premises, their direct or indirect partners,
directors, officers, employees, and agents, from and against any and all
liability, including all foreseeable and all unforeseeable damages including
but not limited to attorney's and consultant's fees, fines, penalties and civil
or criminal damages, directly or indirectly arising out of the use, generation,
storage, treatment, release, threatened release, presence or disposal of
Hazardous Materials from, on, at, to or under the Premises prior to or during
the Term of this Lease, and including, without limitation, the cost of any
required or necessary repair, response action, remediation, investigation,
cleanup or detoxification and the preparation of any closure or other required
plans, whether such action is required or necessary prior to or following
transfer of title to the Premises. This agreement to indemnify and hold
harmless shall be in addition to any other obligations or liabilities Tenant
may have to Landlord at common law under all statutes and ordinances or
otherwise, and shall survive following the date of expiration or earlier
termination of this Lease for five years, except where the event giving rise to
the liability for which indemnity is sought arises out of Tenant's acts, in
which case the agreement
-44-
<PAGE> 50
to indemnify shall survive the expiration or termination of this Lease
without limit of time. Tenant expressly agrees that the representations,
warranties and covenants made and the indemnities stated in this Lease are not
personal to Landlord, and the benefits under this Lease may be assigned to
subsequent parties in interest to the chain of title to the Premises, which
subsequent parties in interest may proceed directly against Tenant to recover
pursuant to this Lease. Tenant, at its expense, may institute appropriate
legal proceedings with respect to environmental matters of the type specified
in this paragraph 26(c) or lien for such environmental matters, not involving
Landlord or its Mortgagee as a defendant (unless Landlord or its mortgagee is
the alleged cause of the damage), conducted in good faith and with due
diligence, provided that such proceedings shall not in any way impair the
interests of Landlord or its mortgagee under this Lease or contravene the
provisions of any first mortgage. Counsel to Tenant in such proceedings shall
be reasonably approved by Landlord if Landlord is a defendant in the same
proceeding. Landlord shall have the right to appoint co-counsel, which
co-counsel will cooperate with Tenant's counsel in such proceedings. The fees
and expenses of such co-counsel shall be paid by Landlord, unless such
co-counsel are appointed because the interests of Landlord and Tenant in such
proceedings, in such counsel's opinion, are or have become adverse, or Tenant
or Tenant's counsel is not conducting such proceedings in good faith or with
due diligence.
(d) Tenant, promptly upon the written request of Landlord from
time to time, but not more than once in any calendar year unless an Event of
Default has occurred and is continuing, shall permit such persons as Landlord
or any assignee of Landlord may designate and (unless an Event of Default has
occurred and is continuing) approved by Tenant, which approval shall not be
unreasonably withheld or delayed ("Site Reviewers") to visit the Premises from
time to time and perform Environmental site investigations and assessments
("Site Assessments") on the Premises for the purpose of determining whether
there exists on the Premises any environmental condition which may result in
any liability, cost or expense to Landlord or any other owner or occupier of
the Premises relating to Hazardous Material. Such Site Assessments may include
both above and below the ground testing for environmental damage or the
presence of Hazardous Material on the Premises and such other tests on the
Premises as may be necessary to conduct the Site Assessments in the reasonable
opinion of the Site Reviewers. Tenant shall supply to the Site Reviewers such
historical and operational information regarding the Premises as may be
reasonably requested
-45-
<PAGE> 51
by the Site Reviewers to facilitate the Site Assessments (other than
information previously supplied in writing to Landlord by Tenant) and
shall make available for meetings with the Site Reviewers appropriate personnel
having knowledge of such matters. The cost of performing and reporting all
Site Assessments shall be paid by Landlord unless an Event of Default has
occurred and is continuing or unless the Site Reviewers discover an
environmental condition causing the Premises to be in noncompliance with
applicable Environmental Laws, in either of which events such cost will be paid
by Tenant within thirty (30) days after demand by Landlord with interest to
accrue at the Overdue Rate. Landlord, promptly after written request by Tenant
and payment by Tenant to the extent required as aforesaid, shall deliver to
Tenant copies of reports, summaries or other compilations of the results of
such Site Assessments. Tenant's sole remedy for Landlord's breach of the
preceding sentence shall be a mandatory injunction, and not a termination of
this Lease or a withholding or reduction of rent. If a Site Assessment
conducted under this paragraph 26(d) indicates that the Premises are in
violation of Environmental Laws or otherwise do not conform to the requirements
of this paragraph 26 at the time the Term is expiring or being terminated, the
term shall be automatically extended for the period of remediation of such
violation or nonconformity. All of the terms, covenants and conditions of this
Lease shall continue in full force and effect during the period of any such
extension, except that the annual Fixed Rent shall be the fair market rental
for the Premises assuming no such violation or nonconformity has occurred.
Such fair market rental shall be mutually agreed upon by the Landlord and
Tenant. In the event that the Landlord and Tenant are unable in good faith to
agree on such fair market rental, the annual Fixed Rent during the period of
any such extension shall be determined by an independent appraiser chosen
jointly by Landlord and Tenant without regard to any remaining Renewal Term.
Upon completion of such remediation, Landlord shall either purchase the fee
title to the Land in accordance with paragraph 28(b) and Tenant shall make the
payments contemplated thereby or, if Landlord does not exercise such right
within 60 days after completion of remediation, this Lease and the obligations
of Tenant hereunder (except those that accrued prior to such date) shall
terminate.
E. Tenant shall notify Landlord in writing, promptly upon
Tenant's learning thereof, of any:
(a) notice or claim to the effect that Tenant is or may be
liable to any Person as a result of the release or
-46-
<PAGE> 52
threatened release of any Hazardous Material into the environment from
the Premises;
(b) notice that Tenant is subject to investigation by any
governmental authority evaluating whether any remedial action is needed to
respond to the release or threatened release of any Hazardous Material into the
environment from the Premises;
(c) notice that the Premises is subject to an environmental
lien; and
(d) notice of violation to Tenant or awareness by Tenant of a
condition which might reasonably result in a notice of violation of any
applicable Environmental Law that could have a material adverse effect upon the
Premises.
27. LANDLORD'S RIGHT TO REQUIRE PURCHASE:
(a) If Guarantor's tangible net worth, determined in
accordance with generally accepted accounting principles, shall fall below
$100,000,000, Landlord shall have the right until a financial statement
delivered pursuant to paragraph 20(b) shows such tangible net worth to be in
excess of $100,000,000, to require Tenant to purchase the Premises on 90 days'
notice for a price equal to the greater of (x) the value (determined as
described in paragraph 27(b) below) of the Premises and, if applicable, Land
considered as encumbered by this Lease calculated on the basis of the value of
future rent and future residual value (as opposed to the basis of comparable
sales or replacement cost) and adjusted upward by any transfer tax, brokerage
commission, title insurance premium or other closing costs paid by Landlord in
connection with its acquisition of fee title to the Land or (y) the sum of the
Purchase Price specified in the Basic Lease Information plus any premium
payable to the holder of a mortgage on the Premises upon the prepayment of such
mortgage plus Landlord's reasonable out-of-pocket expenses incurred in
connection with such transfer. Landlord shall convey the Premises to Tenant by
special warranty deed, free of liens and encumbrances (except those existing on
the Commencement Date or thereafter created with the written consent of the
Tenant, but excluding encumbrances created by Landlord securing the repayment
of borrowed money). The Tenant shall be responsible for all costs including
transfer taxes and recording fees, in connection with the transfer of the
Premises.
-47-
<PAGE> 53
(b) The value described in paragraph 27(a) above shall be
determined by an appraisal, which shall be performed by an appraiser selected
by Landlord and paid by Tenant. Any appraiser selected by Landlord shall have
qualifications that include a minimum of five (5) years of experience in the
appraisal of industrial real estate in the City of New Orleans and shall use
the methodology described in paragraph 27(a) above to calculate "value". He
shall be disinterested, and shall be a member of a nationally recognized
appraisal association. Further, any such appraiser shall comply with the
Louisiana licensing law then in effect for appraisers authorized to perform
general appraisals within the State of Louisiana. If there are then any
existing United States laws governing appraisers, said appraiser shall be in
compliance with the then applicable Federal laws for appraisers performing
appraisals of industrial real estate. In the event that Tenant disputes an
appraised value determined by an appraiser (hereinafter the "First Appraiser"),
who performed an appraisal pursuant to this paragraph 27, it shall so notify
Lessee within five (5) days after receipt of such written determination by the
First Appraiser, and the disagreement shall be resolved as follows:
(i) Within five (5) days after the service of such
notice by Tenant to Landlord, Tenant shall designate a second
appraiser (the "Second Appraiser"), who shall appraise the
Premises in accordance with the requirements of this paragraph
27. This Second Appraiser shall render his opinion of the
appraised value no later than thirty (30) days after the
service of notice by Tenant stated above. In the event that
the higher of the two appraised values rendered herein is not
more than ten percent (10%) greater than the lower of the two
appraised values, then the mean between the two appraised
values shall be utilized to fix the appraised value.
(ii) In the event that the higher of the two appraised
values is more than ten percent (10%) higher than the lower of
the two appraised values, then the First Appraiser and the
Second Appraiser will meet within five (5) days after receipt
and acceptance of the Second Appraisal by Tenant, to attempt to
agree upon the appraised value. If the First Appraiser and
Second Appraiser do not agree upon the appraised value after
such meeting, then they shall appoint a third appraiser (the
"Third Appraiser").
-48-
<PAGE> 54
(iii) If the First and Second Appraiser shall be unable
to agree upon the appointment of the Third Appraiser within
five (5) days after the time specified in subsection "B" above,
then the Third Appraiser shall be selected by the Tenant and
Landlord themselves. If the Tenant and Landlord cannot agree
thereon, within a further period of five (5) days, then either,
on behalf of both, may apply to the person who is, at the time,
the most senior in service, active Judge of the United States
District Court for the Eastern District of Louisiana, for the
selection of the Third Appraiser. If that Judge cannot or will
not make the appointment, then the application will be made to
the next most senior Judge, and so on down the line of
seniority. The fees and costs of the Second Appraiser will be
borne by Tenant, and the fees and costs of the Third Appraiser,
will be divided equally between Tenant and Landlord.
The cost of application to the Judge of the United States
District Court shall be divided equally between Tenant
and Landlord. In the event of the failure, refusal or
inability of any appraiser to act, a new appraiser
shall be appointed in his stead, which appointment shall be
made in the same manner as provided herein; e.g., if the Second
Appraiser must be replaced, then Tenant will have the right to
designate his replacement. In the event that a Third Appraiser
is selected in the manner aforesaid, he shall perform an
appraisal of the Premises in accordance with the terms of this
paragraph 27 within thirty (30) days after his appointment. In
the event that the appraised value rendered by the Third
Appraiser is higher than the lower appraised value, but lower
than the higher appraised value, as rendered by the First
Appraiser and the Second Appraiser, then the appraised value
rendered by the Third Appraiser shall become the appraised
value. In the event that the appraised value rendered by the
Third Appraiser is lower than the lower appraised value or
higher than the higher appraised value, as rendered by the
First Appraiser and Second Appraiser, then an Appraisal Panel
shall be convened.
The "Appraisal Panel," consisting of the First, Second and Third
Appraisers, shall convene within (5) days after submission of a written
appraisal to Landlord and Tenant by the Third Appraiser (which Third Appraisal
does not resolve the appraised value question in accordance with this paragraph
27). The purpose of the formation of the Appraisal Panel will be to
-49-
<PAGE> 55
attempt to reach a decision by two members of the Appraisal Panel on
the appraised value. A decision joined in by any two of the appraisers of the
Appraisal Panel shall be the decision of the Appraisal Panel, and shall be
binding upon the parties hereto. If no two members of the Appraisal Panel can
concur in a decision of the appraised value within ten (10) days after the
submission of the appraisal by the Third Appraiser to the parties, then the
parties shall go to a neutral arbitrator for arbitration. If the Appraisal
Panel is able to concur upon a decision for the appraised value, then written
notice thereof shall be given to the parties hereto, which notice shall state
the appraised value of the Premises.
28. LANDLORD'S ACQUISITION OF FEE TITLE TO THE PREMISES
(a) If at any time Landlord wishes to continue the term of the
Master Lease beyond the Term of this Lease, then Landlord shall purchase
the fee title to the Land and the Improvements thereon in accordance with
the Master Lease.
(b) Whenever Landlord acquires title to the Land in accordance
with subparagraph (a) above or otherwise in accordance with the Master Lease,
it is agreed that Landlord shall pay the purchase price described in Section
9.1 A, B, and C of the Master Lease or Section 9.2 A, B and C of the Master
Lease. It is agreed the Tenant shall simultaneously pay the outstanding amount
of the "Bonds" (as defined in the Master Lease), pursuant to Section 9.1 D or
9.2 D of the Master Lease, as the case may be. Landlord will give 60 days'
notice to Tenant of its intended acquisition of fee title to the Land. If
Tenant fails to retire the Bonds, Landlord shall have the right to retire them
and Tenant shall thereupon owe the sum paid by Landlord to retire the Bonds as
Additional Rent hereunder. In the alternative, if Tenant fails to retire the
Bonds, Landlord shall have the right to rescind its proposed acquisition of the
Land, and any guarantees of the Bonds or the Master Lease by Tenant or any of
its affiliates shall continue.
29. MISCELLANEOUS PROVISIONS:
(a) This Lease and all of the covenants and provisions hereof
shall inure to the benefit of, and be binding upon, the parties hereto and the
heirs, personal representatives, successors and assigns of the parties.
(b) The titles and headings appearing in this Lease are for
reference only and shall not be considered a part of this
-50-
<PAGE> 56
lease or in any way to modify, amend or affect the provisions thereof.
(c) This Lease contains the complete agreement of the parties
with reference to the leasing of the Premises.
(d) Any provision or provisions of this Lease which shall
prove to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provision hereof, and the remaining provisions hereof
shall nevertheless remain in full force and effect.
(e) This Lease may be executed in one or more counterparts,
each of which shall be an original, and all of which shall constitute one and
same instrument.
(f) The term "Landlord" as used in this Lease shall mean only
the owner or owners at the time in question of the leasehold interest created
by the Master Lease (or, if the Master Lease no longer exists, the owner of the
fee interest in the Premises) and in the event of any transfer of such title or
interest, Landlord named in this Lease (and in case of any subsequent
transfers, then the grantor) shall be relieved from and after the date of such
transfer of all liability as respects Landlord's obligations thereafter to be
performed hereunder, provided that any funds in the hands of Landlord or the
then grantor at the time of such transfer, in which Tenant has an interest,
shall be delivered to the grantee. The obligations contained in this Lease to
be performed by Landlord shall, subject as aforesaid, be binding on Landlord's
successors and assigns, only during their respective periods of ownership.
(g) This Lease shall be governed by and construed and enforced
in accordance with and subject to the laws of the State of Louisiana.
(h) Any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Premises and not
against any other assets, properties or funds of (1) Landlord or any director,
officer, shareholder, general partner, limited partner, or direct or indirect
partners, employee or agent of Landlord or its general partners (or any legal
representative, heir, estate, successor or assign of any thereof), (2) any
predecessor or successor partnership or corporation (or other entity) of
Landlord or its general partners, either directly or through Landlord or its
predecessor
-51-
<PAGE> 57
or successor partnership or corporation (or other Person) of Landlord or
its general partners, and (3) any other person.
(i) Without the written approval of Landlord and Tenant, no
Person other than Landlord (including its direct and indirect partners),
Mortgagee, Tenant and their respective successors and assigns shall have any
rights under this Lease.
(j) There shall be no merger of the leasehold estate created
hereby by reason of the fact that the same Person may own directly or
indirectly, (1) the leasehold estate created hereby or any interest in this
Lease or such leasehold estate, (2) the leasehold interest created by the
Master Lease and/or (3) the fee estate in the Premises. Notwithstanding any
such combined ownership, this Lease shall continue in full force and effect
until terminated by an instrument executed by both Landlord and Tenant.
-52-
<PAGE> 58
IN WITNESS WHEREOF, the parties have hereunto set their hands under
seal on the day and year first above written.
TRINET ESSENTIAL FACILITIES X, INC.
Landlord
By: MARK S. WHITING
-----------------------------
Name: Mark S. Whiting
Title: President
By: CHARLES S. SWANSON
-----------------------------
Name: Charles S. Swanson
Title: Senior Vice President
WEST COAST LIQUIDATORS, INC.
Tenant
By: LEONARD S. WILLIAMS
-----------------------------
Name: Leonard S. Williams
Title: President
By: PHILIP L. CARTER
-----------------------------
Name: Philip L. Carter
Title: Senior Vice President
and Chief Financial Officer
<PAGE> 59
ACKNOWLEDGMENT
STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
BE IT KNOWN that on this 24th day of September, 1993, before me, the
undersigned Notary Public, personally came and appeared Mark S. Whiting,
____________ ____________ to me personally known, and after being by me duly
sworn, did depose and say that he is the President of TriNet Essential
Facilities X, Inc. ____________ and that the seal affixed to the foregoing
Lease Agreement is the corporate seal of said corporation, that they signed and
sealed said document on behalf of the corporation by authority of its Board of
Directors, as the free act and deed of the corporation, for the uses and
purposes therein set forth.
XENIA M. TAN
-----------------------------------
Notary Public
My Commission Expires:
Feb. 28, 1994
[OFFICIAL SEAL]
<PAGE> 60
ACKNOWLEDGMENT
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
BE IT KNOWN that on this 28th day of September, 1993, before me, the
undersigned Notary Public, personally came and appeared Philip L. Carter and
Leonard S. Williams, to me personally known, and after being by me duly sworn,
did depose and say that they are the Chief Financial Officer and the Chief
Executive Officer, respectively, of West Coast Liquidators, Inc. and that the
seal affixed to the foregoing Lease Agreement is the corporate seal of said
corporation, that they signed and sealed said document on behalf of the
corporation by authority of its Board of Directors, as the free act and deed of
the corporation, for the uses and purposes therein set forth.
KAY L. DUKEMAN
------------------------------
Notary Public
My Commission Expires:
6-11-97
- - ------------------------------
[OFFICIAL SEAL]
<PAGE> 61
EXHIBIT A
LEGAL
DESCRIPTION
All that certain tract or parcel of land being located in the Third Municipal
District, City of New Orleans, Section 39 of Township 12 South, Range 12 East,
Southeastern District of Louisiana, as per plan of resubdivision prepared by
Fromherz Engineers, Inc., Dwg. No. WCL1, dated August 15, 1988, approved by the
City Planning Commission on October 4, 1988, subdivision Docket No. 68/88,
registered as Declaration of Title Change on November 1, 1988, COB 823-D, folio
243 identified as Lot PS 1, according to a survey by Fromherz Engineers, Inc.,
Drawing No. WCL1B, dated June 8, 1993, and is more particularly described as
follows:
Commencing at the intersection of the eastern right-of-way line of Jourdan Road
South (formerly the eastern boundary line of the Industrial Canal Reservation)
with the southern right-of-way line of Almonaster Avenue extension; thence
S16'10'30"E, along the eastern right-of-way of Jourdan Road South, for a
distance of 200.83' to a point, said point being the point of beginning.
Thence, from said point of beginning S86'07'08"E for a distance of 2194.11' to
a point of curve; thence along a curve to the right, having a radius of
322.17', for an arc distance of 401.15' to a point of tangency; thence
S14'46'35"E for a distance of 833.85 to a point located on the north line of
the Board of Commissioners Port of New Orleans property; thence along a
non-tangent curve to the left, having a radius of 5780.65', for an arc distance
of 109.83' to a point of tangency; thence S73'49'30"W along the north line of
the Board of Commissioners Port of New Orleans property, for a distance of
1562.67' to a point of curve; thence along a curve to the right having a radius
of 664.18' for an arc distance of 704.81' to a point located on the eastern
right-of-way of Jourdan Road South; thence N16'10'30"W for a distance of 61.49'
to a point; thence, continuing along the eastern right-of-way of Jourdan Road
South, N16'10'30"W for a distance of 1493.85' to a point, said point being the
point of beginning.
The above described tract or parcel of land comprises a portion of the ground
formerly designated as lot PS, including any and all servitudes, appurtenances
and advantages thereunto belonging, and is designated as lot PS1, containing
75.533 acres, all as is more fully shown on the drawing number WCL1B by
Fromherz Engineers, Inc., dated June 8, 1993.
<PAGE> 62
Together with all improvements located thereon and all rights, ways,
privileges, and servitudes thereunto belonging or appertaining; and
Together with those "Incorporeal Rights" created as follows:
1. COB 856, folio 479, N.A. No. 874450 - Grant of Servitude of
Passage and Right of Use by the Sewerage and Water Board of New Orleans in
favor of West Coast Liquidators dated March 29, 1990 creating a cross-over of
Lot PS2.
2. COI No. 28404, N.A. No. 866084 - Switch Track Agreement between
the New Orleans Public Belt Railroad Commission and West Coast Liquidators,
Ltd. as created by Agreement dated September 27, 1990 and filed November 2,
1990.
3. COB 855, folio 243-245, COI No. 30531, N.A. No. 872064 -
Railroad Crossing Agreement between Public Belt Railroad Commission for the
City of New Orleans and West Coast Liquidators, Inc. dated May 10, 1989.
<PAGE> 63
EXHIBIT B Page 1 of 2
<TABLE>
<S> <C> <C>
WEST COAST LIQUIDATORS, INC. RUN DATE: 28-Sep.-93
N.O.D.C. NET BOOK VALUE REPORT TIME: 10:39 AM
FOR THE SEVEN MONTHS ENDING AUGUST 1993 PREP BY: TENEROWICZ
===============================================================================================================
PROP
SYS NO LOC CL UNIT ASSET DESCRIPTION VENDOR NAME NET BOOK VALUE
- - ----------------------------------------------------------------------------------------------------------------
1901 B 1015 Parking, paving curbs 1,585,674.60
1901 B 1025 Landscaping 91,411.06
1901 B 1030 Site utilities 737,215.68
1901 B 1040 Guard house 11,987.97
1901 B 1050 Fencing 29,384.42
1901 B 1200 Foundation and floors 3,594,833.53
1901 B 1201 Piles 473,756.08
1901 B 1210 Structural framing 4,172,747.76
1901 B 1220 Exterior walls 982,348.10
1901 B 1230 Roofing and waterproofing 1,185,956.69
1901 B 1240 Doors, windows, glazing 234,029.98
1901 B 1250 Interior partitions 237,960.53
1901 B 1260 Interior finishes 301,460.60
1901 B 1500 Fire protection services 860,731.48
1901 B 1700 HVAC 885,095.36
1901 B 1800 Electrical 648,910.56
1901 B 2000 Elevators 13,809.96
172 1901 B 9999 Alarm system 12,797.24
168 1901 B 9999 Contractors fee Broadmoor Corporatio 5,913.26
180 1901 B 9999 Valuation adjustment F.N.D. Electronics (159.30)
174 1901 B 9999 Alarm system Simplex Time Recorde 2,643.03
179 1901 B 9999 Sales use tax refund State of Louisiana (95,182.86)
170 1901 B 9999 Valuation Research 1,351.06
--------------
B TOTAL BUILDING (13200) 15,974,676.79
--------------
264 1901 BI 9999 F.N.D. Electronics 355.49
266 1901 BI 9999 F.N.D. Electronics 535.26
268 1901 BI 9999 F.N.D. Electronics 416.46
270 1901 BI 9999 F.N.D. Electronics 499.49
272 1901 BI 9999 F.N.D. Electronics 146.51
274 1901 BI 9999 Install frost proof hose KAM Mechanical Contr 3,711.79
276 1901 BI 9999 Install cable to guard sh F.N.D. Electronics 908.02
278 1901 BI 9999 Install sunshields, prog F.N.D. Electronics 1,239.22
280 1901 BI 9999 Install key locks and cable, reprog F.N.D. Electronics 292.28
3828 1901 BI 9999 Payless Equipment 179.39
3829 1901 BI 9999 Bartolo Supply 11,561.80
-------------
BI TOTAL BUILDING IMPROVEMENTS (13220) 19,845.71
-------------
</TABLE>
<PAGE> 64
EXHIBIT B Page 2 of 2
<TABLE>
<S> <C> <C>
WEST COAST LIQUIDATORS, INC. RUN DATE: 28-Sep.-93
N.O.D.C. NET BOOK VALUE REPORT TIME: 10:39 AM
FOR THE SEVEN MONTHS ENDING AUGUST 1993 PREP BY: TENEROWICZ
===============================================================================================================
PROP
SYS NO LOC CL UNIT ASSET DESCRIPTION VENDOR NAME NET BOOK VALUE
- - ----------------------------------------------------------------------------------------------------------------
1901 DE 3000 Restroom accessories 5,585.99
1901 DE 3001 Restroom accessories 7,294.51
1901 DE 3003 Mirrors 2,470.31
1901 DE 3005 Signs and sign hook-ups 6,002.84
1901 DE 3015 Splash blocks 676.25
1901 DE 3035 Exit directional signs 9,418.95
1901 DE 3085 Exterior wall wash 19,757.39
1901 DE 4040 Carpeting 33,565.58
1901 DE 4045 Cabinets, counters, shelves 40,406.38
1901 DE 4050 Small item protections 1,152.35
1901 DE 4080 Public address system 95,505.58
--------------
DE TOTAL OFFICE EQUIPMENT (12800) 221,836.13
--------------
1901 WE 3020 Railroad siding and access 10,245.94
1901 WE 3030 Control gates 5,979.54
1901 WE 3060 Conveyor and accessories 1,338,732.72
1901 WE 3065 Rack and accessories 3,137,576.48
1901 WE 4000 Door lift connections 55,211.63
-------------
WE TOTAL WAREHOUSE EQUIPMENT (13110) 4,547,746.31
-------------
TOTAL N.O.D.C. 20,764,104.94
=============
</TABLE>
<PAGE> 65
EXHIBIT C
STATUS REPORT
The undersigned, __________________________, a ____________ corporation is the
___________________ under a Lease Agreement (the "Lease"), dated as of
September 25, 1993, between West Coast Liquidators, Inc., a California
corporation, (the "Tenant") and TriNet Essential Facilities X, Inc., a Maryland
corporation, as landlord (the "Landlord") of certain real property located on
Jourdan Road in New Orleans, Louisiana as described on attached Exhibit A (the
"Land Parcel"). Capitalized terms used but not defined herein shall have the
same meanings ascribed to them in the Lease. The undersigned hereby represents
and certifies as follows:
1. The Lease constitutes the entire agreement between the
parties with respect to the demise of the Premises and is in full force and
effect and has not been modified, supplemented, canceled or amended in any
respect.
2. The term of the Lease commenced on October 4, 1993 and ends
on September 30, 2009. The Lease provides Tenant the right to extend the term
of the Lease for two (2) renewal terms, the first of which extends the Initial
Term for two (2) years and the second of which extends the Initial Term for an
additional ten (10) years. The Tenant is currently obligated to pay Fixed Rent
in monthly installments in an amount equal to $____________ per month, which
Fixed Rent obligation is continuing and is not past due or delinquent in any
respect. No payment of Fixed Rent has been prepaid more than one month in
advance.
3. No event has occurred or is continuing which would
constitute a default by either the Tenant or Landlord under the Lease or would
constitute such a default but for the requirement that notice be given or that
a period of time elapse or both. No offset exists with respect to any Rent or
other sums payable or to become payable by the Tenant under the Lease.
<PAGE> 66
IN WITNESS WHEREOF, this Certificate has been duly executed and
delivered by the authorized officers of the undersigned as of _______________
___, ______.
_________________________________
By: ____________________________
Name:
Title:
<PAGE> 67
EXHIBIT D
PERMITTED ENCUMBRANCES
1. General and special taxes or assessments for 1994 and subsequent
years not yet due and payable, as modified by the Payment in Lieu of
Tax Agreement ("Pilot"), dated August 1, 1988, by and among the City
of New Orleans, State of Louisiana, The Industrial Development Board
of the City of New Orleans, Louisiana, Inc., the Director of Finance
of the City of New Orleans, Louisiana, the Tax Assessor of the Third
Municipal District of the Parish of Orleans, Louisiana, and West
Coast Liquidators, Inc.
2. Servitude in favor of the Sewerage & Water Board ("S&WB"), as shown
on the Survey, Exhibit No. 5, which was granted by the City to the
S&WB pursuant to Ordinance No. 8804 Mayor Council Series, approved
on October 15, 1982.
3. COB 813C, folio 621 - Servitude in favor of New Orleans Public
Service, Inc., ("NOPSI") for overhead electrical distribution
facilities and underground electrical distribution facilities.
4. COB 839, folio 499-503; COI No. 14998 - Servitude Agreement for
natural gas service between New Orleans Public Service, Inc. and the
Industrial Development Board of the City of New Orleans ("Owner"),
and West Coast Liquidators, Inc., a California corporation
("Lessee"), dated December 12, 1989, registered as N.A. No. 8229772.
5. COB 839, folio 504-508; COI No. 14972 - Servitude Agreement for
overhead electric service between New Orleans Public Service, Inc.
and the Industrial Development Board of the City of New Orleans
("Owner") and West Coast Liquidators, Inc., a California corporation
("Lessee") dated December 12, 1989, filed December 29, 1989 under
N.A. No. 829773.
6. COB 843, folio 488-490; COI No.16891 - Servitude Agreement for
underground electric service between New Orleans Public Service,
Inc. and the Industrial Development Board of the City of New
Orleans ("Owner") and West Coast Liquidators, Inc., a California
corporation ("Lessee") dated March 30, 1990, filed April 5, 1990
under N.A. No. 840685.
<PAGE> 68
7. COI No. 19336 - Right of Way and Servitude between South Central
Bell and West Coast Liquidators, Inc., as Lessee for service poles,
guys, anchors, aerial cables and wires, etc., as per agreement dated
April 13, 1990, N.A. No. 842389, which has been corrected to show
the right of way and servitude in favor of South Central Bell by
Industrial Development Board of the City of New Orleans, Louisiana,
Inc., as of August 15, 1990, recorded as COI 29955, N.A. No. 871021,
which is exactly the same as the right of way previously granted by
West Coast Liquidators, Inc.
8. Encroachment of concrete roadway ramp owned by the Louisiana State
Department of Transportation onto the insured land parcel on the
Jourdan Road side as shown on a survey by Fromherz Engineers, Inc.,
dated June 8, 1993, Dwg. No. WCL1B.
9. Terms, conditions and obligations of the Master Lease.
10. Terms, conditions and obligations creating the following incorporeal
rights:
a. COB 856, folio 479, N.A. No. 874450 - Grant of Servitude of
Passage and Right of Use by the Sewerage and Water Board of New
Orleans in favor of West Coast Liquidators dated March 29, 1990
creating a cross-over of Lot PS2.
b. COI No. 28404, N.A. No. 866084 - Switch Track Agreement
between the New Orleans Public Belt Railroad Commission and West
Coast Liquidators, Ltd. as created by Agreement dated September 27,
1990 and filed November 2, 1990.
c. COB 855, folio 243-245, COI No. 30531, N.A. No. 872064 -
Railroad Crossing Agreement between Public Belt Railroad Commission
for the City of New Orleans and West Coast Liquidators, Inc. dated
May 10, 1989.
11. Permitted Encumbrances subordinate to this Lease:
a. Lease dated September 30, 1991, between West Coast
Liquidators, Inc., as landlord and The Spectrum Network, as tenant,
as amended by letter agreements dated October 18, 1991 and January
6, 1993.
b. Standard Industrial Lease - Multi-Tenant dated November 9,
1992, between West Coast Liquidators, Inc., as landlord and Tano
Corporation, as tenant, as amended by Amendment No. 1 to Standard
Industrial Lease - Multi-
<PAGE> 69
Tenant, dated as of November 9, 1992 and as further amended by Amendment No. 2
to Standard Industrial Lease - Multi-Tenant, dated as of February 1, 1993.
<PAGE> 70
EXHIBIT E
FORM OF SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT
THIS AGREEMENT is made as of __________, ____, by and among TRINET
ESSENTIAL FACILITIES X, INC., (Lessor) whose address is _______________, WEST
COAST LIQUIDATORS, INC. (Lessee), whose address is _______________ and
_____________ (the Beneficiary), whose address is __________________________.
A. THE PROPERTY. The term "Property", as used herein, shall mean
the real property situated in the Parish of Orleans, State of Louisiana,
legally described in Exhibit A attached hereto and by this reference
made a part hereof, together with all buildings, structures,
improvements and fixtures now or hereafter located thereon, and
together with all easements and other rights appurtenant thereto.
B. THE LEASE. The property has been leased to Lessee pursuant to the
terms and provisions of a lease agreement dated as of ___________ ___,
1993, between Lessor and Lessee (the Lease), for a term of 16 years with
four ten-year optional renewal terms.
C. THE LOAN; SECURITY DOCUMENTS; MORTGAGE. Lessor proposes to borrow
certain sums from Beneficiary to be evidenced by a promissory note.
Lessor proposes to encumber the Property as security for payment of its
obligations to Beneficiary and, for such purpose, shall enter into
various instruments and documents (collectively the Security Documents),
including without limitation, a [Mortgage and Security Agreement]
(the Mortgage) from Lessor for the use and benefit of the Beneficiary
and [an Assignment of Lessor's Interest in Lease and Rents] (the
Assignment), which Mortgage and Assignment will be recorded in the
real property records of Orleans Parish, Louisiana.
D. PURPOSES. In connection with the above-mentioned transactions,
Lessor and Lessee have agreed to offer certain assurances and
representations to the Beneficiary, and all parties agree to provide
for (i) the subordination of the Lease to the Security Documents;
(ii) the continuation of the Lease notwithstanding any foreclosure of
the Mortgage, subject to certain conditions; and (iii) Lessee's
attornment to the Beneficiary or to such other parties as may acquire
<PAGE> 71
-2-
title to the Property as the result of any foreclosure or any
conveyance of the Property in lieu of foreclosure.
NOW, THEREFORE, in consideration of the mutual terms and provisions
hereinafter contained and other good and valuable consideration received by any
party from any other, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Notices of Default to Beneficiary. Notwithstanding anything to
the contrary in the Lease, Lessee shall personally deliver or mail to
Beneficiary, at Beneficiary's address set forth above, a copy of any
written notice of any default under the Lease by Lessor which may be
given by Lessee, and if within the time provided in the Lease for the
cure thereof by Lessor, Beneficiary performs or causes to be performed
all such obligations with respect to which Lessor is in default which
can be cured by the payment of money, any right of Lessee to terminate
the Lease by reason of such default shall cease and be null and void.
2. Subordination of Lease to Security Documents. Lessee hereby
subordinates its leasehold estate in the Property and all of Lessee's
right under the Lease to the Security Documents and replacements
thereof, to the full extent of all obligations secured or to be secured
thereby including interest thereon, provided however, that the
provisions of the Lease relating to insurance proceeds and condemnation
proceeds shall control over any conflicting provisions of the Security
Documents.
3. Non-Disturbance of Lessee. Beneficiary agrees that, for so
long as Lessee shall not be in default under the terms of the Lease
after applicable notice and beyond any applicable cure period, neither
the Lease nor Lessee's rights pursuant thereto shall be disturbed or
affected by any exercise by Beneficiary of any rights or remedies
available to Beneficiary under the Security Documents. Beneficiary's
obligations under this Section 3 shall continue throughout the full
term of the Lease, including any extensions thereof with respect to
which Lessee has exercised its option. Beneficiary's obligations under
this Section 3 shall be null and void if Lessee shall, at any time,
default in the timely performance of the Lessee's obligations under the
Lease after receipt of any applicable notice and not cure such default
within the time, if any, allowed in the Lease, unless such default
occurred and was cured prior to the foreclosure of the Mortgage or
conveyance in lieu of foreclosure or a dation en paiment.
<PAGE> 72
4. Beneficiary as Landlord after Foreclosure. In the event that Beneficiary
(or any other party) shall acquire fee title to the Property or shall succeed
to Lessor's interest in the Lease, whether through foreclosure of the Mortgage,
conveyance of the Property in lieu of foreclosure, dation en paiment, or
otherwise (including any exercise by Beneficiary of any rights or remedies
available to Beneficiary under the Security Documents), Beneficiary (or such
other party) shall thereupon, and without the necessity of attornment or other
act or agreement, be substituted as Lessee's landlord under the Lease, and
shall be entitled to the rights and benefits (including the benefit of
Guarantor's guaranty) and subject to the obligations thereof, provided that
neither Beneficiary nor any other party shall be:
(a) liable for any act or omission of any prior landlord under the Lease
(including Lessor); or
(b) subject to any offsets or defenses which Lessee might have against
any prior landlord (including Lessor); or
(c) bound by Lessee's payment of any rent or additional rent for more
than ninety (90) days beyond the then current rate period to any prior
landlord under the Lease (including Lessor); or
(d) bound by any material amendment, modification, extension, or
supplement of the Lease made without Beneficiary's prior written consent,
which shall not be unreasonably withheld, delayed or conditioned;
and Lessee hereby agrees to attorn to and recognize such Beneficiary (or other
party) as Lessee's landlord.
5. Payment of Rent Upon Default. Lessee is hereby advised that the Security
Documents give Beneficiary the right to collect rent and other sums payable
under the Lease directly from Lessee upon the occurrence of a default under the
Security Documents. Upon receipt by Lessee or Guarantor of notice from
Beneficiary of any such default, Lessor agrees Lessee or Guarantor will
thereafter pay all rent and other sums payable under the Lease directly to
Beneficiary (or as Beneficiary shall direct) as they become due and payable.
Lessor hereby waives any cause of action and releases any and all claims it may
have against Lessee arising out of Lessee's compliance with the preceding
sentence.
<PAGE> 73
-4-
6. Binding Effect. The provisions of this Agreement shall be covenants
running with the Property, and shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and assigns.
7. No Waiver. No party hereto shall by any act of omission or commission be
deemed to waive any of its rights or remedies hereunder unless such waiver be
in writing and signed by such party, and then only to the extent specifically
set forth therein; a waiver on one event shall not be construed as continuing
or as a bar to or waiver of such right or remedy on a subsequent event.
8. Notices. All notices, demands, requests, approvals, or consents made
pursuant to, under or by virtue of this Agreement must be in writing and mailed
to the party to which the notice, demand, request, approval or consent is being
sent by certified or registered mail, return receipt requested, or by overnight
courier delivery, addressed as follows, or at such other address as such party
may designate by notice to the other parties:
To Guarantor:
MacFrugal's Bargains*Close-outs Inc.
2430 East Del Amo Boulevard
Dominguez, California 90220
Attention: Vice President--Real Estate and Construction
with a copy to:
MacFrugal's Bargains*Close-outs Inc.
2430 East Del Amo Boulevard
Dominguez, California 90220
Attention: General Counsel
To Lessee:
West Coast Liquidators, Inc.
2430 East Del Amo Boulevard
Dominguez, California 90220
Attention: Vice President--Real Estate and Construction
with a copy to:
West Coast Liquidators, Inc.
2430 East Del Amo Boulevard
<PAGE> 74
-5-
Dominguez, California 90220
Attention: General Counsel
To Lessor:
TriNet Essential Facilities X, Inc.
c/o Trinet Corporate Realty Trust, Inc.
Four Embarcadero Center, Suite 3150
San Francisco, California 94111
Attention: Mr. Mark S. Whiting
with a copy to:
Day, Berry & Howard
260 Franklin Street
Boston, Massachusetts 02110
Attention: Lewis A. Burleigh, Esq.
To Beneficiary:
_________________
_________________
_________________
Attention: _________________
Any notice, demand, request, approval, or consent given in accordance
with the provisions of this Paragraph 8 shall be effective on the date
of receipt or delivery or when proper delivery is refused by the
addressee.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Louisiana.
10. Miscellaneous. This Agreement may not be modified or amended
except by a written agreement duly executed by Lessee, Lessor and
Beneficiary with the consent in writing of Guarantor. This Agreement
shall be binding upon Lessee and Guarantor and shall inure to the
benefit of Beneficiary and its successors and assigns. In the event any
one or more of the provisions contained in this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had
never been contained herein. In the event of litigation concerning
this Agreement, the prevailing party shall be entitled to reimbursement
of reasonable attorneys' fees and expenses by the losing party or
parties.
<PAGE> 75
-6-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESSES AS TO BOTH: LESSOR:
TRINET ESSENTIAL FACILITIES X, INC.
______________________________
Name:
By:_______________________________
______________________________ Name:
Name: Title:
By:_______________________________
Name:
Title:
WITNESSES: LESSEE:
WEST COAST LIQUIDATORS, INC.
______________________________
Name:
By:_______________________________
______________________________ Name:
Name: Title:
By:_______________________________
Name:
Title:
WITNESSES: BENEFICIARY:
______________________________ By:_______________________________
Name: Name:
Title:
______________________________
Name:
<PAGE> 76
-7-
WITNESSES AS TO BOTH: CONSENTED TO:
MACFRUGAL'S BARGAINS*
______________________________ CLOSE-OUTS, INC.,
Name: Lease Guarantor
______________________________ By:____________________________
Name: Name:
Title:
By:____________________________
Name:
Title:
<PAGE> 77
-8-
STATE OF _______________:
COUNTY OF ______________:
BE IT KNOWN that on this ______ day of __________, _____, before me,
the undersigned Notary Public, personally came and appeared ________________
[and _______________], to me personally known, and after being by me duly
sworn, did depose and say that he is [they are] the _________________ [and
________________, respectively], of TriNet and that the seal affixed to the
foregoing Subordination, Attornment and Non-Disturbance Agreement is the
corporate seal of said corporation [or that said corporation has no seal],
that he [they] signed and sealed said document on behalf of the corporation
by authority of its Board of Directors, as the free act and deed of
the corporation, for the purposes therein set forth.
___________________________
Notary Public
My Commission Expires:
___________________________
<PAGE> 78
-9-
STATE OF ________________:
COUNTY OF _______________:
BE IT KNOWN that on this ______ day of _____, ____, before me, the
undersigned Notary Public, personally came and appeared ____________________
[and ____________________], to me personally known, and after being by me duly
sworn, did depose and say that he is [they are] the ____________________ [and
____________________, respectively], of [Beneficiary] and that the seal affixed
to the foregoing Subordination, Attornment and Non-Disturbance Agreement is the
corporate seal of said corporation [or that said corporation has no seal], that
he [they] signed and sealed said document on behalf of the corporation by
authority of its Board of Directors, as the free act and deed of the
corporation, for the purposes therein set forth.
______________________________
Notary Public
My Commission Expires:
______________________________
<PAGE> 79
-10-
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES:
BE IT KNOWN that on this ______ day of ______, ______, before me, the
undersigned Notary Public, personally came and appeared Philip L. Carter and
Leonard S. Williams, to me personally known, and after being by me duly sworn,
did depose and say that they are the Chief Financial Officer and Chief
Executive Officer, respectively, of West Coast Liquidators, Inc., and that the
seal affixed to the foregoing Subordination, Attornment and Non-Disturbance
Agreement is the corporate seal of said corporation [or that said corporation
has no seal], that they signed and sealed said document on behalf of the
corporation by authority of its Board of Directors, as the free act and deed of
the corporation, for the uses and purposes therein set forth.
________________________________
Notary Public
My Commission Expires:
________________________________
<PAGE> 1
EXHIBIT 22.1
Subsidiaries of Mac Frugal's Bargains - Close-outs Inc.
1. PNS Stores, Inc.
State of Incorporation: California
Business Names: Pic 'N' Save
Mac Frugal's Bargains - Close-outs
2. West Coast Liquidators, Inc.
State of Incorporation: California
Business Names: None
<PAGE> 1
EXHIBIT 24.1
INDEPENDENT AUDITOR'S CONSENT
To the Board of Directors and Stockholders of
Mac Frugal's Bargains o Close-outs Inc.
Dominguez, California:
We consent to the incorporation by reference in Registration Statement
No. 33-43661 on Form S-8 and Registration Statement No. 33-55130 on
Form S-8 of our report dated March 15, 1994, appearing in this Annual
Report on Form 10-K of Mac Frugal's Bargains o Close-outs Inc. and
subsidiaries for the year ended January 30, 1994.
DELOITTE & TOUCHE
Los Angeles, California
April 29, 1994
