<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended May 4, 1996 COMMISSION FILE NO. 0-17870
LECHTERS, INC.
- ------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY No. 13-2821526
- ------------------------------------------------ ---------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
1 Cape May Street, Harrison, NEW JERSEY 07029
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (201) 481-1100
----------------
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, and (2) has been subject to such filing
requirements for the past 90 days.
YES x NO
----- -----
The number of shares of the Registrant's common stock, without par value,
outstanding at June 14, 1996: 17,155,086:
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LECHTERS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR QUARTER ENDED MAY 4, 1996
INDEX
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PAGE NO.
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PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
May 4, 1996 and February 3, 1996 1
Consolidated Statements of Income
for the Thirteen Weeks Ended
May 4, 1996 and April 29, 1995 2
Consolidated Statements of Cash Flows
for the Thirteen Weeks Ended
May 4, 1996 and April 29, 1995 3
Consolidated Statement of Shareholders'
Equity for the Thirteen Weeks Ended
May 4, 1996 4
Notes to Consolidated Financial
Statements 5-6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 7-8
PART II. Other Information
Item 6. Exhibits and Reports 9
</TABLE>
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LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
May 4, February 3,
1996 1996
----------- -----------
A S S E T S (unaudited)
-----------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 14,334 $ 4,234
Marketable Securities 22,748 37,606
Accounts Receivable 7,961 5,573
Merchandise Inventories 120,042 109,898
Prepaid Expenses 8,391 5,519
-------- --------
Total Current Assets 173,476 162,830
Property and Equipment:
Fixtures and Equipment 65,242 64,688
Leasehold Improvements 101,234 100,840
-------- --------
166,476 165,528
Less Accumulated Depreciation & Amortization 63,789 60,446
-------- --------
102,687 105,082
Other Assets 4,719 4,400
-------- --------
Total Assets $280,882 $272,312
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts Payable $ 17,150 $ 7,827
Salaries, Wages and Other Accrued Expenses 13,774 13,546
Taxes, Other Than Income Taxes 2,483 1,591
Federal and State Income Taxes 431 753
Current Portion Long-Term Debt 1,500 3,000
-------- --------
Total Current Liabilities 35,338 26,717
Long-term Debt
Senior Notes Payable 1,125 17,250
5% Convertible Subordinated Debentures
due September 27, 2001 (Net of Unamortized
Discount of $6,953 and $7,212, respectively) 58,047 57,788
-------- --------
Total Long-term Debt 59,172 75,038
Deferred Income Taxes and Other Deferred Credits 21,949 21,915
Shareholders' Equity:
Convertible Preferred Stock, $100 Par Value
Authorized 1,000,000 Shares,
Issued and Outstanding - Series A - 149,999
Shares; Series B - 50,001 Shares 20,000 --
Common Stock, Without Par Value,
Authorized 50,000,000 Shares,
Issued and Outstanding 17,155,086
and 17,155,086 Shares, Respectively 58 58
Unrealized Holding (Loss) Gain on Available
for Sales Securities (155) 38
Additional Paid-in Capital 62,273 62,773
Retained Earnings 82,247 85,773
-------- --------
Total Shareholders' Equity 164,423 148,642
-------- --------
Total Liabilities and Shareholders' Equity $280,882 $272,312
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------------------
May 4, April 29,
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
Net Sales $ 84,992 $ 80,316
Cost of Goods Sold (including occupancy
and indirect costs) 64,378 60,076
-------- --------
Gross Profit 20,614 20,240
Selling, General and Administrative
Expenses 25,508 23,288
-------- --------
Operating (Loss) (4,894) (3,048)
Other Expenses (Income):
Interest Expense 1,556 1,638
Interest Income (476) (713)
Loss on Sale of Government
Securities 3 --
-------- --------
Total Other Expenses 1,083 925
-------- --------
Loss Before Income Taxes (5,977) (3,973)
Income Tax Benefit (2,451) (1,629)
-------- --------
Net (Loss) $ (3,526) ($ 2,344)
======== ========
Net (Loss) Per Share ($0.20) ($0.13)
======== ========
Weighted Average Shares Outstanding 17,246,000 17,416,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------
May 4, April 29,
1996 1995
--------- -----------
(unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net (Loss) $ (3,526) ($2,344)
Adjustments to Reconcile Net Loss to Net
Cash (Used In) Provided By Operating
Activities:
Depreciation and Amortization 4,136 3,819
Other 136 (89)
Changes in Assets and Liabilities:
Increase in Accounts Receivable (2,388) (698)
Increase in Merchandise Inventories (10,144) (13,528)
Increase in Prepaid Expenses (2,872) (3,102)
Increase in Accounts Payable,
Accrued Expenses and Taxes Other
Than Income Taxes 10,443 8,227
Decrease in Income Taxes Payable (322) (223)
Increase in Other Assets (364) (232)
--------- ---------
Net Cash Used In
Operating Activities (4,901) (8,170)
--------- ---------
Cash Flows From Investing Activities:
Capital Expenditures (1,905) (4,700)
Decrease in Available for Sale
Securities 14,531 4,374
--------- ---------
Net Cash Provided By (Used In)
Investing Activities 12,626 (326)
--------- ---------
Cash Flows From Financing Activities:
Issuance of Preferred Stock 20,000 --
Payment of Notes Payable (17,625) --
Exercise of Stock Options -- 211
--------- ---------
Net Cash Provided by Financing
Activities 2,375 211
--------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents 10,100 (8,285)
Cash and Cash Equivalents, Beginning of
Period 4,234 14,774
--------- ---------
Cash and Cash Equivalents, End of Period $ 14,334 $ 6,489
========= =========
Supplemental Disclosure of Cash Flows
Information:
Non Cash Investing Activities:
Unrealized Holding
(Loss) Gain Adjustment on Available
for Sale Securities $ (263) $ 227
========= =========
Cash Paid During the Period for:
Interest $ 1,074 $ 481
========= =========
Taxes $ 322 $ 43
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Amounts in thousands)
<TABLE>
<CAPTION>
Common Preferred Additional Unrealized
Stock Stock Paid-In Retained Holding
Issued Issued Capital Earnings Gain(Loss) Total
-------- --------- -------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance,
February 3,
1996 $58 $ -- $62,773 $85,773 $ 38 $148,642
Net Loss Thirteen
Weeks Ended
May 4, 1996 -- -- -- (3,526) -- (3,526)
Issuance of
Preferred Stock-
Net of Issuance
Expenses -- 20,000 (500) -- -- 19,500
Unrealized
Holding Loss
Adjustment -- -- -- -- (193) (193)
--- ------- ------- ------- ------ --------
Balance, May 4,
1996 (unaudited) $58 $20,000 $62,273 $82,247 ($155) $164,423
=== ======= ======= ======= ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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LECHTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with the instructions for Form 10-Q and do not
include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation for
interim periods have been included.
The Company's results of operations for the thirteen weeks ended May
4,1996 are not necessarily indicative of the operating results for the
full year.
Certain reclassifications have been made to the financial statements
of the prior year to conform with the classification used for fiscal
1996.
2. NET LOSS PER SHARE
Net loss per share data were computed by dividing net loss by the
weighted average number of common shares and common share equivalents
outstanding during the thirteen weeks ended May 4, 1996 and April 29,
1995. Common stock equivalents include outstanding stock options.
The Company's 5% Convertible Subordinated Debentures issued in
September 1991 did not qualify as a common stock equivalent at the
time of issue and were not included in the calculation of primary net
loss per share for the periods ended May 4, 1996 and April 29, 1995.
The Company's Convertible Preferred Stock issued on April 5, 1996 also
did not qualify as a Common Stock equivalent at the time of issue. For
the purpose of computing fully diluted net loss per share, the assumed
conversion of such debentures would have an anti-dilutive effect on
the thirteen weeks ended May 4, 1996 and April 29, 1995. With respect
to the Preferred Stock, conversion of such preferred stock would have
an anti-dilutive effect on fully diluted loss per share for the
thirteen weeks ended May 4, 1996.
3. CONVERTIBLE PREFERRED STOCK
On April 5, 1996, the Company issued 149,999 shares of Series
A Convertible Preferred Stock, $100 par value ("Series A
Preferred Stock") and 50,001 shares of Series B Convertible Preferred
Stock, $100 par value ("Series B Preferred Stock") at par value. Said
shares of Convertible Preferred Stock were sold to Prudential
Private Equity Investors III, L.P. for $20,000,000. The proceeds from
the sale of the Series A and Series B Preferred Stock were used to
prepay $15,000,000 of the 10.5% Senior Notes due 1998 and $2,625,000
of the 9.53% Senior Notes due 1998. The balance of the proceeds are
being used for general corporate purposes. Expenses of the private
placement were charged to Additional Paid-in Capital. Series A
Preferred Stock and Series B Preferred Stock are convertible to Common
Stock at a conversion price of $6.25 per share. Series A Preferred
Stock is convertible to 2,399,984 shares of common stock and has
voting rights equivalent to the same number of common shares. Series B
Preferred stock is convertible to 800,016 of shares of common stock but
has no voting rights. Both Series A Preferred Stock and Series B
Preferred Stock receive a dividend of 5.05% payable annually. Series
A Preferred Stock and Series B Preferred Stock did not qualify as
common stock equivalents at the time of issue.
Robert Knox, a Director of the Company, is a limited partner in
Prudential Private Equity Investors III, L.P.
- 5 -
<PAGE> 8
4. AMENDMENT AND EXTENSION OF THE CREDIT AGREEMENT - On May 23, 1996, the
Company amended and extended its $40,000,000 unsecured credit agreement
by entering into an Amended and Restated Credit Agreement ("Credit
Agreement") with a group of banks. The Credit Agreement includes a
suballocation of $30,000,000 for letters of credit. Borrowings under
the Credit Agreement bear a base rate interest of either (1) higher of
the prime rate or Federal Funds Rate plus 1/2% or (2) an Adjusted
Eurodollar Rate based on LIBOR. The amended Credit Agreement requires
maintenance of certain earnings and fixed charge coverage ratios. The
interest rate is adjusted by from 1.4% to 2.5% depending on the ratio
of consolidated indebtedness to pre-tax cash earnings. The Credit
Agreement terminates on May 22, 1998.
5. Note 5. RECENT ACCOUNTING PRONOUNCEMENTS - In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." This statement
establishes accounting standards for the impairment of long-lived
assets, certain intangibles and goodwill related to those assets to
be held and used, and for long-lived assets and certain indentifiable
intangibles to be disposed of. The Company has adopted this new
Statement in the first quarter of Fiscal 1996 and the adoption had no
material effect on reported earnings.
In October 1995, the Financial Accounting Standards Board issued SFAS
123, "Accounting for Stock-Based Compensation," that establishes a fair
value method of accounting and reporting for stock-based employee
compensation plans. Under the fair value method, compensation cost is
recognized over the service period, which is usually the vesting
period. The statement encourages but does not require adoption of the
fair value method. As provided for in the Statement, the Company will
continue to apply the accounting provisions of Accounting Principles
Board Opinion No. 25. "Accounting for Stock Issued to Employees," and
make the appropriate disclosures in its fiscal 1996 annual report
footnotes.
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<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED MAY 4, 1996 IN COMPARISON WITH THIRTEEN WEEKS ENDED APRIL
29, 1995
Net sales for the thirteen weeks ended May 4, 1996 were $84,992,000 an
increase of $4,676,000, or 5.8% over last year's sales for the comparable
period. The increase was due to the increased number of stores open during the
period this year compared to last year. On a comparable store basis, sales
declined 0.7%. There were 641 stores open at the end of the quarter, with one
store closed during the last week of the quarter, compared to 609 stores open
at end of the first quarter last year.
Gross profit for the quarter increased $374,000 to $20,614,000, but,
at 24.3% of sales, gross profit declined 0.9% point versus the prior year
comparable period. While the mix of merchandise sold provided comparable
initial margins to last year, fixed charges associated with occupancy and other
indirect charges increased due to the addition of 32 stores. The increased
sales from the new locations were not sufficient to overcome the decline in
comparable store sales resulting in an under-absorption of occupancy and
related costs.
Selling, General and Administrative Expenses increased 9.5% to
$25,508,000, 30.0% of sales versus 29.0% for the same period in the prior year.
Store related expenses which exhibited significant year-to-year increases
included expenses associated with new locations such as payroll and benefits,
pre-opening expense write-offs, and incremental operating expenses related to
new locations such as credit card fees, bank charges and property taxes.
Additionally the Company closed 3 stores during this period resulting in an
increase in asset write-offs. Finally, the Company experienced a decline in
domestic vendor support due to the increased proportion of imported
merchandise.
Other Expense increased by $158,000 to $1,083,000, 1.3% of sales,
versus 1.2% for the same period in the prior year. Interest expense was
reduced by $82,000 due to prepayment of $17,625,000 of Senior Notes Payable
during the first quarter of Fiscal 1996 and the repayment of $3,750,000 of
Senior Notes Payable during the third quarter of Fiscal 1995. Interest Income
declined by $237,000 due to the reduction in the year-to-year average balance
of marketable securities.
LIQUIDITY, AND CAPITAL RESOURCES - Cash and cash equivalents increased
$10,100,000 during the first quarter of Fiscal 1996 versus a decrease of
$8,285,000 for the same period of Fiscal 1995. Operating activities for the
first quarter of 1996 utilized $3,269,000 less cash than the same period last
year. Although the operating loss required the use of an additional $1,182,000
in cash, the use of cash was less in other operating activities. While the
increase in receivables was $1,690,000 higher than last year due to a tax
carry-back receivable and volume driven increases in charge card receivables,
the increment in inventory was $3,384,000 less than the previous year due to
fewer new stores. Payables increased incrementally $2,216,000 more than the
prior year due to the stabilization of imports as a portion of purchases.
The issuance of Convertible Preferred Stock as disclosed in Note 3 to
the enclosed financial statements generated $20,000,000 in cash. Proceeds were
used to prepay the $15,000,000 in 10.5% Senior Notes Payable 2001 and prepay
$2,625,000 of the 9.53% Senior Notes due l998. The balance of the proceeds
will be used for general corporate purposes. Capital expenditures of
$1,905,000 consisted primarily of the cost of construction and fixtures for
three new stores and the remodeling of three existing stores. Capital
expenditures for the thirteen weeks ended April 29, 1995 totaled $4,700,000
and involved seven new stores and five remodels.
As disclosed in Note 4, on May 23, 1996, the Company entered into an
Amended and Restated Credit Agreement which provides for borrowings up to
$40,000,000. The unsecured Credit Agreement establishes a sub-allocation of
$30,000,000 for letters of credit. The term of the agreement was extended
from November 1996 to May 22, 1998.
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LECHTERS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K.
10.1 Amended and Restated Credit Agreement as of
May 23, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LECHTERS, INC.
By: /s/ JOHN W. SMOLAK
----------------------------
John W. Smolak
Senior Vice President and
Chief Financial Officer
Date: June 18, 1996
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EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
EX-10.1 Amended and Restated Credit Agreement as of
May 23, 1996.
<PAGE> 1
EXECUTION COPY
==============================================================================
$40,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of May 23, 1996
Among
LECHTERS, INC.
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF
and
BANK OF MONTREAL,
as Agent
==============================================================================
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TABLE OF CONTENTS
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Page
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ARTICLE 1
CREDIT FACILITY
Section 1.1. Commitment to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Manner of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Conversion and Continuation . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.4. Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.5. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Clean-Up Period Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . 5
(c) Excess Invested Cash Mandatory
Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.6. Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.7. Commitment to Issue Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Amounts of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Terms of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Uniform Customs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Issuing Bank's Customary Charges, etc . . . . . . . . . . . . . . . . . . . . . 6
(e) Limitation on Obligation to Issue
Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.8. Issuances of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Manner of Issuance or Amendment of
Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Acquisition by Participating Banks of
Participations in Letters of Credit
upon Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.9. Obligation of Borrower to Reimburse Issuing
Bank for Drawings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.10. Obligations of Participating Banks to Fund
Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.11. Limited Liability of the Issuing and
Participating Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.12. Provisions Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.13. Certain Provisions as to Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Rate Applicable to Certain
Other Amounts Payable . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Post-Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.14. Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<TABLE>
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Section 1.15. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(c) Agent's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(e) Issuing Bank Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(f) Fees Non-Refundable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.16. Determination and Computation of Interest
and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Determination of Applicable Margins
and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.17. Evidence of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.18. Payments by the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Time, Place and Manner . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) No Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(c) Authorization to Charge Accounts . . . . . . . . . . . . . . . . . . . . . . 16
(d) Extension of Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.19. Distribution of Payments by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.20. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(a) Taxes Payable by the Borrower . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Taxes Payable by the Agent, the
Issuing Bank or any Bank . . . . . . . . . . . . . . . . . . . . . . 17
(c) Exemption from U.S. Withholding and
Backup Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . 17
Section 1.21. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 2.
CONDITIONS TO LOANS
Section 2.1. Conditions to Effectiveness of this
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.2. Conditions to Each Credit Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 3.
CERTAIN REPRESENTATIONS AND WARRANTIES
Section 3.1. Organization; Power; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.2. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.3. Authorization; Enforceability; Required
Consents; Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.4. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.6. Burdensome Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.7. No Adverse Change or Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.8. Additional Adverse Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.9. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.10. Substance Release and Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.11. Pari Passu Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.12. Use of Proceeds of Issuance of Perpetual
Convertible Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . 24
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Section 3.13. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 4.
CERTAIN COVENANTS
Section 4.1. Preservation of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.2. Preservation of Rights and Properties . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.3. Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.4. Payment of Taxes and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.5. Compliance With Applicable Laws
and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.6. Preservation of Loan Document
Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.7. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.8. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.9. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.10. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.11. Dividends, Stock Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.12. Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.13. Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.14. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.15. Taxes of Other Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.16. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.17. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.18. Limitation on Restrictive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.19. Prepayment of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.20. Other Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.21. Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.22. Ratio of Consolidated Indebtedness to
Consolidated Indebtedness plus
Consolidated Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . 29
Section 4.23. Ratio of Consolidated EBIRTDA to
Consolidated Fixed Charges . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.24. Ratio of Consolidated Indebtedness to
Consolidated EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.25. Ratio of Consolidated Funded Debt to
Consolidated Net Tangible Assets . . . . . . . . . . . . . . . . . . . . . 29
Section 4.26. Subsidiary Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 5.
INFORMATION
Section 5.1. Information to Be Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Quarterly Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Year End Financial Statements;
Accountants' Certificate . . . . . . . . . . . . . . . . . . . . . . 30
(c) Officer's Certificate as to Financial
Statements and Defaults . . . . . . . . . . . . . . . . . . . . . . 31
(d) Reports and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) Sales Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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(f) Requested Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(g) Notice of Defaults, Material Adverse
Changes and Other Matters . . . . . . . . . . . . . . . . . . . . . 31
Section 5.2. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.3. Additional Covenants Relating to
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Accounting Methods and Financial
Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(c) Visits, Inspections and Discussions . . . . . . . . . . . . . . . . . . . . . 32
Section 5.4. Authorization of Third Parties to Deliver
Information and Discuss Affairs . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 6.
DEFAULT
Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.2. Remedies upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 7.
ADDITIONAL CREDIT FACILITY PROVISIONS
Section 7.1. Mandatory Suspension and Conversion
of Eurodollar Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.2. Regulatory Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.3. Risk Based Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.5. Certain Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.6. Change of Lending Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 8.
THE AGENT
Section 8.1. Appointment and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.2. Limitation on Agent's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.3. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.4. Rights as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.5. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.6. Non Reliance on Agent, Issuing Bank and
Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.7. Resignation of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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ARTICLE 9.
MISCELLANEOUS
Section 9.1. Notices and Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.2. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.3. Amounts Payable Due upon Request for
Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.4. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.5. Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.6. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.7. Set Off; Suspension of Payment and
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.8 Sharing of Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.9. Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(a) Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(b) Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.11. Judicial Proceedings; Waiver of Jury
Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.12. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.13. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.15. Survival of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.16. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.17. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.18 Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 10.
INTERPRETATION
Section 10.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.2. Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 10.3. Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.4. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.5. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.6. Interpretation of Related Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 76
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AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of May 23, 1996
WHEREAS, LECHTERS, INC., a New Jersey corporation, the BANKS
listed on the signature pages hereof, and BANK OF MONTREAL, as Agent, are party
to the Existing Credit Agreement (as defined below);
WHEREAS, the parties to the Existing Credit Agreement (as
defined below) desire to amend and restate the Existing Credit Agreement (as
defined below) in its entirety as set forth herein and agree that the Existing
Credit Agreement (as defined below) is hereby amended and restated in its
entirety as follows (with certain terms used herein being defined in Article
10):
ARTICLE 1
CREDIT FACILITY
Section 1.1. Commitment to Lend. Upon the terms and subject
to the conditions of this Agreement, each Bank agrees to make, from time to
time during the period from the Effective Date through but not including the
Termination Date, one or more Loans to the Borrower; provided that no Loan
shall be made if, after giving effect to the making of such Loan and the
application of the proceeds thereof, (i) the sum of (x1) the amount of the
Exposure of such Bank plus (y1) the aggregate amount of the Permitted Letter of
Credit Amounts of such Bank would exceed the amount of the Commitment of such
Bank at such time, (ii) the sum of (x2) the aggregate amount of the Exposures
of all of the Banks plus (y2) the aggregate amount of the Permitted Letter of
Credit Amounts of all Persons would exceed the aggregate amount of the
Commitments or (iii) the Excess Invested Cash would exceed $0. Subject to
Section 1.6 and the other terms and conditions of this Agreement, the Loans
may, at the option of the Borrower, be made as, and from time to time continued
as or converted into, Base Rate or Eurodollar Rate Loans of any permitted Type,
or any combination thereof. The aggregate amount of the Commitments on the
Effective Date is $40,000,000.
Section 1.2. Manner of Borrowing. (a) The Borrower shall
give the Agent notice (which shall be irrevocable) no later than 10:00 a.m.
(New York time) on, in the case of Base Rate Loans, the Business Day, and, in
the case of Eurodollar Rate
<PAGE> 8
Loans, the third Eurodollar Business Day, before the requested date for the
making of such Loans. Each such notice shall be in the form of Schedule 1.2
and shall specify (i) the requested date for the making of the requested Loans,
which shall be, in the case of Base Rate Loans, a Business Day and, in the case
of Eurodollar Rate Loans, a Eurodollar Business Day, (ii) the Type or Types of
Loans requested and (iii) the amount of each such Type of Loan, the aggregate
of which amounts for (A) all Base Rate Loans requested shall be $500,000 or a
greater integral multiple of $100,000 or the aggregate amount of the unused
Commitments and (B) all Types of Eurodollar Rate Loans shall be $2,000,000 or a
greater integral multiple of $500,000. Upon receipt of any such notice, the
Agent shall promptly notify each Bank of the contents thereof and of the amount
and Type of each Loan to be made by such Bank on the requested date specified
therein. Together with any such notice, the Borrower shall furnish to the
Agent a certificate of the Chief Financial Officer, Treasurer or Controller of
the Borrower, dated the requested date for the making of the requested Loans,
certifying that at such time, after giving effect to the making of such Loans,
the Excess Invested Cash will not exceed $0.
(b) Not later than 11:00 a.m. (New York time) on each
requested date for the making of Loans, each Bank shall, if it has received the
notice contemplated by Section 1.2(a) on or prior to its close of business on,
in the case of Base Rate Loans, the Business Day, and, in the case of
Eurodollar Rate Loans, the third Eurodollar Business Day, before such date,
make available to the Agent, in Dollars in funds immediately available to the
Agent at the Agent's Office, the Loans to be made by such Bank on such date.
Any Bank's failure to make any Loan to be made by it on the requested date
therefor shall not relieve any other Bank of its obligation to make any Loan to
be made by such other Bank on such date, but such other Bank shall not be
liable for such failure.
(c) Unless the Agent shall have received notice from a
Bank prior to 10:00 a.m. (New York time) on the requested date for the making
of any Loans that such Bank will not make available to the Agent the Loans
requested to be made by such Bank on such date, the Agent may assume that such
Bank has made such Loans available to the Agent on such date in accordance with
Section 1.2(b) and the Agent in its sole discretion may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount
on behalf of such Bank. If and to the extent such Bank shall not have so made
available to the Agent the Loans requested to be made by such Bank on such date
and the Agent shall have so made available to the Borrower a corresponding
amount on behalf of such Bank, such Bank shall, on demand, pay to the Agent
such corresponding amount together with interest thereon, for each day from the
date such amount shall have been so made available by the Agent to the Borrower
until the date such amount shall have been repaid to the Agent, at the Federal
Funds Rate until (and including) the third Business Day
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<PAGE> 9
after demand is made and thereafter at the Base Rate. If such Bank does not
pay such corresponding amount promptly upon the Agent's demand therefor, the
Agent shall promptly notify the Borrower and the Borrower shall immediately
repay such corresponding amount to the Agent together with accrued interest
thereon at the applicable rate or rates provided in Section 1.3(a).
(d) All Loans made available to the Agent in accordance
with Section 1.2(b) shall be disbursed by the Agent not later than 12:00 noon
(New York time) on the requested date therefor in Dollars in funds immediately
available to the Borrower by credit to an account of the Borrower at the
Agent's Office or in such other manner as may have been specified in the
applicable notice and as shall be acceptable to the Agent.
Section 1.3. Interest. (a) Rates. Unless an Event of
Default is continuing, (i) each Loan shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to (A) so long as it is a
Base Rate Loan, the Base Rate as in effect from time to time plus the
applicable Base Rate Margin and (B) so long as it is a Eurodollar Rate Loan,
the applicable Adjusted Eurodollar Rate plus the applicable Eurodollar Rate
Margin and (ii) interest thereon that is due and payable shall, to the maximum
extent permitted by Applicable Law, bear interest at a rate per annum equal to
the Base Rate as in effect from time to time plus the applicable Base Rate
Margin.
(b) Payment. Interest shall be payable, (i) in the case
of Base Rate Loans, on each Interest Payment Date, (ii) in the case of
Eurodollar Rate Loans, on the last day of each applicable Interest Period, and
(iii) in the case of any Loan, when such Loan shall be due (whether at
maturity, by reason of notice of prepayment or acceleration or otherwise) or
converted, but only to the extent then accrued on the amount then so due or
converted.
(c) Conversion and Continuation. (i) All or any part of
the principal amount of Loans of any Type may, on any Business Day, be
converted into any other Type or Types of Loans, except that (A) Eurodollar
Rate Loans may be converted only on the last day of an applicable Interest
Period and (B) Base Rate Loans may be converted into Eurodollar Rate Loans only
on a Eurodollar Business Day.
(ii) Base Rate Loans shall continue as Base Rate Loans
unless and until such Loans are converted into Loans of another Type.
Eurodollar Rate Loans of any Type shall continue as Loans of such Type until
the end of the then current Interest Period therefor, at which time they shall
be automatically converted into Base Rate Loans unless the Borrower shall have
given the Agent notice in accordance with Section 1.3(c)(iv) requesting either
that such Loans continue as Loans of such Type for another
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<PAGE> 10
Interest Period or that such Loans be converted into Loans of another Type at
the end of such Interest Period.
(iii) Notwithstanding anything to the contrary contained in
Section 1.3(c)(i) or (ii), during an Event of Default, the Agent may notify the
Borrower that Loans may only be converted into or continued as Loans of certain
specified Types and, thereafter, until no Default shall continue to exist,
Loans may not be converted into or continued as Loans of any Type other than
one or more of such specified Types.
(iv) The Borrower shall give the Agent notice (which shall
be irrevocable) of each conversion of Loans or continuation of Eurodollar Rate
Loans no later than 10:00 a.m. (New York time) on, in the case of a conversion
into Base Rate Loans, the Business Day, and, in the case of a conversion into
or continuation of Eurodollar Rate Loans, the third Eurodollar Business Day,
before the requested date of such conversion or continuation. Each notice of
conversion or continuation shall be in the form of Schedule 1.3(c)(iv) and
shall specify (A) the requested date of such conversion or continuation, (B)
the amount and Type and, in the case of Eurodollar Rate Loans, the last day of
the applicable Interest Period of the Loans to be converted or continued and
(C) the amount and Type or Types of Loans into which such Loans are to be
converted or as which such Loans are to be continued. Upon receipt of any such
notice, the Agent shall promptly notify each Bank of (x) the contents thereof,
(y) the amount and Type and, in the case of Eurodollar Rate Loans, the last day
of the applicable Interest Period of each Loan to be converted or continued by
such Bank and (z) the amount and Type or Types of Loans into which such Loans
are to be converted or as which such Loans are to be continued.
Section 1.4. Repayment. The Loans shall mature and become
due and payable, and shall be repaid by the Borrower, in full on the
Termination Date.
Section 1.5. Prepayments. (a) Optional Prepayments. The
Borrower may, at any time and from time to time, prepay the Loans in whole or
in part, without premium or penalty (but subject to Section 7.4), except that
any partial prepayment shall be in an aggregate principal amount of, in the
case of Base Rate Loans, $500,000 or any greater integral multiple of $100,000
and, in the case of any Type of Eurodollar Rate Loans, $2,000,000 or any
greater integral multiple of $500,000. The Borrower shall give the Agent
notice of each prepayment pursuant to this Section 1.5(a) no later than 10:00
a.m. (New York time) on, in the case of a prepayment of Base Rate Loans, the
Business Day, and, in the case of a prepayment of Eurodollar Rate Loans, the
third Eurodollar Business Day, before the date of such prepayment. Each such
notice of prepayment shall be in the form of Schedule 1.5(a) and shall specify
(i) the date such prepayment is to be made and (ii) the amount and Type and, in
the case of Eurodollar Rate Loans, the last day of the applicable Interest
Period of the
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<PAGE> 11
Loans to be prepaid. Upon receipt of any such notice, the Agent shall promptly
notify each Bank of the contents thereof and the amount and Type and, in the
case of Eurodollar Rate Loans, the last day of the applicable Interest Period
of each Loan of such Bank to be prepaid. Amounts to be prepaid pursuant to
this Section 1.5(a) shall irrevocably be due and payable on the date specified
in the applicable notice of prepayment, together with interest thereon as
provided in Section 1.3(b).
(b) Clean-Up Period Mandatory Prepayments. The Borrower
shall prepay all Loans on the Business Day immediately preceding each Clean-Up
Period. Amounts prepaid pursuant to this Section 1.5(b) shall be applied first
to prepay Base Rate Loans and then to prepay Eurodollar Rate Loans in the order
that the Interest Periods for such Loans end. Amounts to be prepaid pursuant
to this Section 1.5(b) shall be paid on the day or within the time period
specified therefor, whether or not such payment would require a prepayment of
Eurodollar Rate Loans prior to the last day of an applicable Interest Period or
would result in losses, costs or expenses compensable under Section 7.4.
(c) Excess Invested Cash Mandatory Prepayments. So long
as the Excess Invested Cash exceeds $0, the Borrower shall prepay the Loans in
an aggregate principal amount equal to an integral multiple of $500,000.
Amounts prepaid pursuant to this Section 1.5(c) shall be applied first to
prepay, in whole, Base Rate Loans and then to prepay, in whole, Eurodollar Rate
Loans in the order that the Interest Periods for such Loans end, starting with
the first of such Interest Periods to end. Amounts to be prepaid pursuant to
this Section 1.5(c) shall be paid on any Business Day on which the Excess
Invested Cash exceeds $0, whether or not such payment would require a
prepayment of Eurodollar Rate Loans prior to the last day of an applicable
Interest Period or would result in losses, costs or expenses compensable under
Section 7.4. Together with any prepayment pursuant to this Section 1.5(c), the
Borrower shall furnish to the Agent a certificate of the Chief Financial
Officer of the Borrower, dated the date of such prepayment, certifying that at
such time after giving effect to such prepayment (i) the Excess Invested Cash
will not exceed $0 or (ii) the sum of (x) the aggregate unpaid principal amount
of all Loans and (y) the aggregate unpaid principal amount of all Drawings will
be $0.
Section 1.6. Limitation on Types of Loans. Notwithstanding
anything to the contrary contained in this Agreement, the Borrower shall
borrow, prepay, convert and continue Loans in a manner such that (a) the
aggregate principal amount of Eurodollar Rate Loans of the same Type and having
the same Interest Period shall at all times be not less than $2,000,000, (b)
there shall not be, at any one time, more than six Interest Periods in effect
with respect to Eurodollar Rate Loans of all Types and (c) no payment of
Eurodollar Rate Loans will have to be made prior to the last day of an
applicable Interest Period in order to repay the Loans in the amounts and
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<PAGE> 12
(subject to Section 1.18(d)) on the dates specified in Section 1.4.
Section 1.7 Commitment to Issue Letters of Credit. (a)
Amounts of Letters of Credit. Upon the terms and subject to the conditions of
this Agreement, the Issuing Bank shall issue, from time to time during the
period from the Effective Date through the date which is five (5) Business Days
prior to the Termination Date, one or more Letters of Credit for the account of
the Borrower; provided that no Letter of Credit shall be issued if, after
giving effect to the issuance of such Letter of Credit, (i) the sum of (x1) the
aggregate amount of the Letter of Credit Amounts plus (y1) the aggregate amount
of the Permitted Letter of Credit Amounts of all Persons would exceed the LC
Sublimit, (ii) the sum of (x2) the aggregate amount of the Exposures of all of
the Banks plus (y2) the aggregate amount of the Permitted Letter of Credit
Amounts of all Persons would exceed the aggregate amount of the Commitments or
(iii) in the case of a Participating Bank, the sum of (x3) the Exposure of such
Participating Bank plus (y3) the aggregate amount of the Permitted Letter of
Credit Amounts of such Participating Bank would exceed the amount of the
Commitment of such Participating Bank.
(b) Terms of Letters of Credit. Each Letter of Credit: (i)
may be either (A) a documentary Letter of Credit in support of trade
obligations of the Borrower incurred in importing merchandise or (B) a standby
Letter of Credit in support of premium payments on worker's compensation
insurance carried by the Borrower, that in the case of either (A) or (B), arise
in the ordinary course of business and are in respect of general corporate
purposes of the Borrower; (ii) shall be denominated only in Dollars; (iii)
shall have an expiration date occurring not later than the earlier of (A) five
(5) Business Days before the Termination Date and, (B)(1) in the case of a
standby Letter of Credit in a stated amount not exceeding $2 million, 12 months
after the issuance thereof, or (2) otherwise, 90 days after the issuance
thereof; provided, however, that the aggregate stated amounts of all standby
Letters of Credit referred to in Section 1.7(b)(i)(B) shall not exceed $2
million; and provided further, however, that standby Letters of Credit may
provide that, absent notice to the contrary from the Issuing Bank to the
Borrower and the beneficiary thereof, the expiration date shall be
automatically extended once for one year period, but not beyond that date which
is five (5) Business Days before the Termination Date.
(c) Uniform Customs. Each Letter of Credit shall be subject
to the Uniform Customs and, to the extent not inconsistent therewith, the laws
of the State of New York.
(d) Issuing Bank's Customary Charges, etc. In addition to
any charges, fees and commissions payable under any Application, the Borrower
shall on demand pay or reimburse the
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<PAGE> 13
Issuing Bank for such normal and customary charges, fees, commissions, costs
and expenses as are incurred or charged by the Issuing Bank in issuing,
effecting payment under, amending, transferring or otherwise administering any
Letter of Credit.
(e) Limitation on Obligation to Issue Letters of Credit. The
Issuing Bank shall not at any time be obligated to issue any Letter of Credit
hereunder if such issuance would conflict with, or cause the Issuing Bank or
any Participating Bank to exceed any limits imposed by, any Applicable Law,
provided that the Issuing Bank and each Participating Bank hereby agree to use
reasonable efforts to permit such Letter of Credit to be issued within the
restrictions of such Applicable Law.
Section 1.8 Issuances of Letters of Credit. (a) Manner of
Issuance or Amendment of Letters of Credit. (i) The Borrower shall request the
issuance or amendment of a Letter of Credit by delivering to the Issuing Bank
(with a copy to the Agent), at least one Business Day before the requested date
(which shall be a Business Day) of such issuance or amendment, (A) in the case
of any such issuance or amendment, a duly completed and executed Application
for the issuance or amendment of such Letter of Credit, provided that if such
Application is transmitted to the Issuing Bank by telecopy, the original of
such Application shall be provided to the Issuing Bank as soon as practicable
thereafter but in any event prior to the requested date of issuance or
amendment of such Letter of Credit, and (B) in the case of any such issuance,
if the desired form of Letter of Credit is different from the Issuing Bank's
standard form, a copy of such desired form of Letter of Credit.
(ii) Upon receipt by the Issuing Bank of any duly completed
and executed request, and subject to the terms and conditions hereof, such
Issuing Bank will process such request and the certificates, documents and
other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue or amend a
Letter of Credit requested thereby (but in no event shall the Issuing Bank be
required to issue or amend any Letter of Credit earlier than one Business Day
after its receipt of the request therefor and all such other certificates,
documents and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise
may be agreed by such Issuing Bank and the Borrower.
(iii) The Borrower will promptly examine the copy of any
issued or amended Letter of Credit sent to it by the Issuing Bank, as well as
all other instruments and documents sent to the Borrower from time to time,
and, in the event the Borrower has any claim of noncompliance with its
instructions or of any discrepancy or other irregularity, the Borrower will
immediately notify the Issuing Bank thereof in writing, and the Borrower will
conclusively be deemed to have waived any such claim against the Issuing Bank
and its correspondents unless (x) such immediate
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<PAGE> 14
notice is given and (y) received by the Issuing Bank prior to the time that any
draft is paid by the Issuing Bank under such Letter of Credit.
(iv) The Issuing Bank shall, on the date of each issuance or
amendment of a Letter of Credit, give the Agent, each other Participating Bank
and the Borrower notice of such issuance or amendment, accompanied by a copy of
such issued or amended Letter of Credit to the Agent and to the Borrower.
(b) Acquisition by Participating Banks of Participations in
Letters of Credit upon Issuance. Upon the issuance of a Letter of Credit, the
Issuing Bank shall be deemed to have granted to each Participating Bank (other
than the Issuing Bank), and each Participating Bank (other than the Issuing
Bank) shall be deemed to have acquired from the Issuing Bank, without further
action by any party hereto for its own account and risk, an undivided interest
in the Issuing Bank's obligations and rights under such Letter of Credit, the
Contingent Reimbursement Obligations thereunder, any Drawings that may at any
time be made thereunder, and each draft paid by the Issuing Bank thereunder, in
each case to the extent of such Participating Bank's Participating Bank
Percentage thereof. A Bank that is a Participating Bank with respect to a
Letter of Credit shall remain a Participating Bank with respect to that Letter
of Credit notwithstanding its later designation, if any, as a Nonparticipating
Bank.
Section 1.9 Obligation of Borrower to Reimburse Issuing Bank
for Drawings. (a) (i) Drawings shall mature and become due and payable, and
shall be repaid to the Issuing Bank by the Borrower in full, together with all
amounts payable pursuant to Section 1.7(d) which are due to the Issuing Bank in
connection with such Drawing, no later than 1:00 p.m. on the date the Issuing
Bank notifies the Borrower of such Drawing, if such notice is given at or
before 11:00 a.m. on such date and, if not, no later than 1:00 p.m. on the next
Business Day.
(ii) Each Drawing shall bear interest on the outstanding
principal amount thereof until due at a rate per annum equal to the Base Rate
as in effect from time to time plus the applicable Base Rate Margin. Interest
on a Drawing shall be payable when such Drawing shall be due (whether at
maturity, by reason of acceleration or otherwise).
(b) The Issuing Bank shall promptly and timely notify (i)
the Borrower, the Agent and each other Participating Bank having a
Participation in such Letter of Credit of its receipt of a drawing request with
respect to such Letter of Credit, stating the date and amount of the Drawing
requested and, in the case of a Participating Bank, the amount of such
Participating Bank's Participating Bank Percentage of such Drawing, and (ii)
the Borrower of the date and amount of each Drawing made pursuant to such
request. The Issuing Bank's failure to give, or delay in
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<PAGE> 15
giving, any such notice shall not release or diminish the obligations hereunder
of the Borrower and each such Participating Bank in respect of such Drawing.
Section 1.10 Obligations of Participating Banks to Fund
Participations. (a) (i) If the Borrower fails to pay to the Issuing Bank in
full the principal amount of, together with interest accrued on, a Drawing,
each other Participating Bank that has a Participation in such Letter of Credit
shall pay to the Issuing Bank, upon demand, its Participating Bank Percentage
of such unpaid amount, in Dollars in funds immediately available to the Issuing
Bank at the Agent's Office, on, if such demand is made not later 3:00 p.m. on a
Business Day, such Business Day, and, if not, the next Business Day, together
with interest on such amount from the date of the relevant Drawing until such
amount is paid in full at, for the first three days, the Fed Funds Rate and,
thereafter, the Base Rate. Upon, but only upon, making such required payment
to the Issuing Bank, a Participating Bank shall be entitled to receive its
Participating Bank Percentage of the amounts which the Borrower subsequently
pays in respect of such unpaid amount, or in respect of interest to accrue
thereon, and until such payment in full by such Participating Bank, the Issuing
Bank shall hold such Participating Bank's Participating Bank Percentage of such
amounts as collateral for such payment.
(ii) The obligation of a Participating Bank to fund its
Participations as contemplated by Section 1.10(a)(i) shall be absolute and
unconditional.
(b) Whenever, at any time after the Issuing Bank has made
payment under any Letter of Credit and has received from any Participating Bank
such Participating Bank's Participating Bank Percentage of such payment in
accordance with Section 1.10(a), the Issuing Bank receives any payment on
account of a Drawing under such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by the
Issuing Bank), or any payment on account of interest thereon, the Issuing Bank
will promptly distribute to such Participating Bank its Participating Bank
Percentage thereof, provided, however, that in the event that any such payment
received by the Issuing Bank shall be required to be returned by the Issuing
Bank, for any reason other than by virtue of a claim of the Borrower referred
to in clause (i) or (ii) of Section 1.11(b), such Participating Bank shall
return to the Issuing Bank the portion thereof previously distributed by the
Issuing Bank to it, but without interest (unless the Issuing Bank is required
to pay interest on the amount returned, in which case the Participating Bank
shall be required to pay interest at a like rate).
(c) (i) If any Bank Nonparticipation occurs with respect to
any Bank, (A) the Agent, the Borrower and such Bank agree, if requested by the
Borrower, to attempt to locate an Eligible Assignee that will accept the
assignment of the Loans,
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<PAGE> 16
Participations, Commitments and other rights and obligations hereunder of such
Bank and (B) if such an Eligible Assignee is located, such Bank agrees to
assign its interest in its Loans, Participations, Commitments and other rights
and obligations hereunder to such Eligible Assignee in accordance with Section
9.9, for a purchase price equal to the unpaid principal amount of such Bank's
Loans, together with interest thereon and fees accrued to the date of payment
and all other amounts at the time payable to such Bank under the Loan Documents
and such Bank's Participations. If Loans to be so assigned include Eurodollar
Rate Loans, the assignment thereof shall occur on the last day of the then
current Interest Period. If no such assignment is arranged, the Borrower may,
if no Default exists, upon ten days' prior notice to such Bank, terminate such
Bank's Commitment and thereupon promptly prepay such Bank's Loans and all other
amounts payable to such Bank hereunder (including, without limitation, with
respect to its Participations and Commitments), and cash collateralize its
Participations, provided that prepayments of Eurodollar Rate Loans shall be
made on the last day of the applicable Interest Periods.
(ii) If, as a result of the existence of a Bank
Nonparticipation with respect to any Bank, availability under the LC Sublimit
is reduced, such Bank shall be deemed to have breached its Commitment and shall
be liable to the Borrower for any damages resulting from such reduction.
Section 1.11 Limited Liability of the Issuing and
Participating Banks. (a) The Borrower assumes all risks of the acts or
omissions of any beneficiary and any transferee of any Letter of Credit with
respect to its use of such Letter of Credit. The Participating Banks, the
Issuing Bank and their respective officers, directors, employees and agents
shall not be liable or responsible for (i) the use which may be made of any
Letter of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith; (ii) the validity, sufficiency or genuineness of
documents presented under any Letter of Credit, or any endorsements thereon,
even if such documents should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged; or (iii) subject, in the case of
the Issuing Bank, to Section 1.11(b), payment by the Issuing Bank against
presentation of documents to the Issuing Bank which do not comply with the
terms of any Letter of Credit, including failure of any documents to bear any
reference or adequate reference to the Letter of Credit. The Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary unless any beneficiary (or a successor beneficiary
to whom such Letter of Credit has been transferred in accordance with its
terms) and the Borrower shall have notified the Issuing Bank that such
documents do not comply with the terms and conditions of such Letter of Credit.
The Issuing Bank shall not incur any liability by acting in reliance upon any
notice, consent, certificate, statement or
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<PAGE> 17
other writing (which may be a bank wire, telex, facsimile transmission or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties.
(b) Notwithstanding Sections 1.11(a), the Borrower shall
have a claim against the Issuing Bank (but not any Participating Bank) for,
subject to Section 9.12, (i) the Issuing Bank's willful misconduct or gross
negligence in determining whether documents presented under any Letter of
Credit comply with the terms thereof or (ii) the Issuing Bank's willful failure
to pay under any Letter of Credit after the presentation to the Issuing Bank by
any beneficiary (or a successor beneficiary to whom such Letter of Credit has
been transferred in accordance with its terms) of documents strictly complying
with the terms and conditions of such Letter of Credit, provided, that,
notwithstanding any such claim, the Borrower shall make payments under Section
1.9 in the manner but with the effect contemplated by Section 1.18(b).
(c) Each Bank shall, ratably in accordance with its
Commitment, indemnify the Issuing Bank (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from the
Issuing Bank's gross negligence, willful misconduct for willful failure to pay
under a Letter of Credit) that the Issuing Bank may suffer or incur in
connection with this Agreement or any action taken or omitted by the Issuing
Bank hereunder.
Section 1.12 Provisions Not Exclusive. The rights and
remedies of the Issuing Bank, the Agent and the Banks under this Agreement in
respect of any Letters of Credit are supplemental to, and not in derogation of,
any rights and remedies of the Issuing Bank, the Agent and the Banks under the
Applications related to such Letters of Credit and under other Applicable Law.
In the event of any conflict between the terms of this Agreement and the terms
of any Application, the terms set forth in this Agreement shall control.
Section 1.13 Certain Provisions as to Interest. (a) Rate
Applicable to Certain Other Amounts Payable. Unless an Event of Default is
continuing, each amount due and payable under the Loan Documents shall, to the
maximum extent permitted by Applicable Law and unless a different rate is
specifically applicable thereunder to such amount, bear interest at a rate per
annum equal to the Base Rate as in effect from time to time plus the applicable
Base Rate Margin. Such interest shall, unless a different time is specifically
applicable to payment of such interest under the Loan Documents, be payable on
demand.
(b) Post-Default Rate. During an Event of Default (and
whether before of after judgment), each Loan (whether or not due), each Drawing
and, to the maximum extent permitted by Applicable Law, each other amount due
and payable under the Loan
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<PAGE> 18
Documents shall bear interest at a rate per annum to the applicable
Post-Default Rate. Interest at the Post-Default Rate shall be payable on
demand.
(c) Maximum Interest Rate. Nothing contained in the Loan
Documents shall require the Borrower at any time to pay interest at a rate
exceeding the Maximum Permissible Rate. If interest payable by the Borrower on
any date would exceed the maximum amount permitted by the Maximum Permissible
Rate, such interest payment shall automatically be reduced to such maximum
permitted amount, and interest for any subsequent period, to the extent less
than the maximum amount permitted for such period by the Maximum Permissible
Rate, shall be increased by the unpaid amount of such reduction. Any interest
actually received for any period in excess of such maximum amount permitted for
such period shall be deemed to have been applied as a prepayment of the Loans,
the Drawings or the other amounts in respect of which such interest was paid,
as the case may be.
Section 1.14. Reduction of Commitments. The Borrower may
reduce the Commitments by giving the Agent notice (which shall be irrevocable)
thereof no later than 10:00 a.m. (New York time) on the fifth Business Day
before the requested date of such reduction, provided that, (a) any partial
reduction of the Commitments shall be in an aggregate amount of $5,000,000 or
an integral multiple thereof, and (b) no reduction may reduce the Commitments
to less than the greater of (A) the aggregate amount of Loans and Letter of
Credit Amounts outstanding after giving effect to such reduction and (B) no
reduction may reduce the LC Sublimit to an amount less than the aggregate of
the Letters of Credit Amounts outstanding. Upon receipt of any such notice,
the Agent shall promptly notify each Bank of the contents thereof and the
amount to which such Bank's Commitment is to be reduced. Any reduction of
Commitments under this Section 1.14(a) shall permanently reduce the Commitments
then in effect. Any reduction of the Commitments shall affect a proportionate
reduction of the LC Sublimit.
Section 1.15. Fees. (a) Commitment Fees. The Borrower
shall pay to the Agent for the account of each Bank a commitment fee on the
daily unused amount of such Bank's Commitment for each day from the Effective
Date through the Termination Date at a rate per annum determined pursuant to
Section 1.16(a), payable in arrears on successive Interest Payment Dates, on
the Termination Date and on the date of any reduction of such Commitment (to
the extent accrued and unpaid on the amount of the reduction); provided that,
for purposes of this Section 1.15(a), the aggregate Permitted Letter of Credit
Amounts in respect of Third-Party Letters of Credit shall not be deemed to
reduce unused amounts of the Commitments.
(b) Letter of Credit Fees. The Borrower shall pay to the
Agent for the account of (i) the Participating Banks a Letter of Credit fee on
the average daily aggregate amount of the
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<PAGE> 19
Contingent Reimbursement Obligations under all Letters of Credit for each day
from the Effective Date through the Termination Date at a rate per annum
determined pursuant to Section 1.16(a), payable at the end of each fiscal
quarter of the Borrower in arrears and on the Termination Date and (ii) each
Bank a Letter of Credit fee on the average daily aggregate amount of the
contingent obligations of the Borrower to reimburse such Bank for any
disbursement under the Existing Letters of Credit for each day from the
Effective Date at a rate per annum determined pursuant to Section 1.16(a),
payable at the end of each calendar month of the Borrower in arrears and on the
Termination Date.
(c) Agent's Fees. The Borrower shall pay to the Agent,
for its own account, the fees payable to it under the Agent's Fee Letter. Such
fees shall be payable in the amounts and at the times provided therein.
(d) Upfront Fees. On or prior to the Effective Date, the
Borrower shall pay to the Agent for the account of each Bank an upfront fee in
an amount equal to 0.10% of such Bank's Commitment.
(e) Issuing Bank Fees. The Borrower shall pay to the
Issuing Bank for its own account an Issuing Bank fee on the average daily
aggregate amount of the Contingent Reimbursement Obligations under all Letters
of Credit for each day from the Effective Date through the Termination Date at
the rate equal to 0.10% per annum, payable at the end of each fiscal quarter of
the Borrower in arrears and on the Termination Date.
(f) Fees Non-Refundable. None of the fees payable under
this Section 1.15 shall be refundable in whole or in part.
Section 1.16. Determination and Computation of Interest and
Fees. (a) Determination of Applicable Margins and Fees. The applicable Base
Rate Margin, Eurodollar Rate Margin, commitment fee and Letter of Credit fee
for any fiscal quarter of the Borrower shall be determined on the basis of the
ratio of the average outstanding Consolidated Indebtedness as of the last day
of each of the immediately preceding four consecutive fiscal quarters of the
Borrower to Consolidated EBITDA for the period of the immediately preceding
four consecutive fiscal quarters of the Borrower as determined pursuant to the
financial statements of the Borrower delivered to the Agent pursuant to Section
5.1(a) or
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<PAGE> 20
5.1(b), as the case may be, immediately prior to the most recent Adjustment
Date, as follows:
<TABLE>
<CAPTION>
Letter
of
Euro-dollar Rate Base Rate Commitment Credit
Ratio Margin Margin Fee Fee
----- ------ ------ ---------- ------
<S> <C> <C> <C> <C> <C>
Greater than or 2.20 2.25% 0.75% 0.75% 2.25%
equal to
Greater than or 1.50 1.60% 0.25% 0.60% 1.60%
equal to
Less than 1.50 1.40% 0.00% 0.40% 1.40%
</TABLE>
Any increase or decrease in applicable margins or fees shall be effective from
the most recent Adjustment Date provided that such ratio shall be 2.07 to 1.00
during the period from the Effective Date to the first Adjustment Date to occur
thereafter, and shall be deemed to be greater than 2.20 to 1.00 (x) during such
time as an Event of Default has occurred and is continuing and (y) in the event
that the financial statements and officer's certificate required to be
delivered pursuant to Section 5.1(a) or 5.1(b), as the case may be, and Section
5.1(c) are not delivered on or prior to the date when due, during the period
from the date when due to the date which is two Business Days after such
financial statements and officer's certificate are so delivered.
(b) Computation of Interest and Fees. Interest
calculated on the basis of the Adjusted Eurodollar Rate, the Letter of Credit
fees and the Issuing Bank fees shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed. Interest calculated on
the basis of the Prime Rate or the Federal Funds Rate, and the commitment fees
shall be computed on the basis of a year of 365 or 366 days, as applicable, and
paid for the actual number of days elapsed. Interest for any period shall be
calculated from and including the first day thereof to but excluding the last
day thereof.
Section 1.17. Evidence of Indebtedness. Each Bank's Loans
and the Borrower's obligation to repay such Loans with interest in accordance
with the terms of this Agreement shall be evidenced by this Agreement, the
records of such Bank and, in the case of Base Rate Loans, a single Domestic
Note payable to the order of such Bank and, in the case of Eurodollar Rate
Loans, a single Eurodollar Note payable to the order of such Bank. Absent
manifest error the records of each Bank shall be conclusive evidence of such
Bank's Loans and accrued interest thereon and of all payments made in respect
thereof. Each Bank is hereby authorized to record the date, the amount of each
Loan made by such Bank to the Borrower, each conversion of all or a portion
thereof, the date and amount of each payment or prepayment of principal
thereof, on the schedule annexed to and constituting part of the Domestic Note
or the Eurodollar Note, as the case may
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<PAGE> 21
be, and, absent manifest error, any such recording shall be conclusive evidence
of the accuracy of the information so recorded, provided that the failure of
such Bank to make such recordation (or any error in recordation) shall not
affect the obligations of the Borrower hereunder or under such Note.
Section 1.18. Payments by the Borrower. (a) Time, Place and
Manner. All payments due to the Agent under the Loan Documents shall be made
to the Agent at the Agent's Office or at such other address as the Agent may
designate by notice to the Borrower. All payments due to the Issuing Bank
under the Borrower Loan Documents shall be made to the Issuing Bank at the
Issuing Bank's office or to such other Person or at such other address as the
Issuing Agent may designate by notice to the Borrower or any Bank. All
payments due to any Bank under the Loan Documents shall, in the case of
payments on account of principal of or interest on the Loans or fees, be made
to the Agent at the Agent's Office and, in the case of all other payments, be
made directly to such Bank at its Domestic Lending Office or at such other
address as such Bank may designate by notice to the Borrower. All payments due
to any Bank under the Loan Documents, whether made to the Agent or directly to
such Bank, shall be made for the account of, in the case of payments in respect
of Eurodollar Rate Loans, such Bank's Eurodollar Lending Office and, in the
case of all other payments, such Bank's Domestic Lending Office. A payment,
other than a payment on account of a Drawing, shall not be deemed to have been
made on any day unless such payment has been received by the required Person,
at the required place of payment, in Dollars in funds immediately available to
such Person at such place, no later than 12:00 noon (New York time) on such
day. A payment on account of a Drawing shall not be deemed to have been made
on any day unless such payment has been received by the Issuing Bank at the
required place of payment, in Dollars, in funds immediately available to the
Issuing Bank at such place, no later than, in the case of payments by the
Borrower, the times specified in Section 1.9(a)(i) and, in the case of payments
by a Bank, the times specified in Section 1.10(a).
(b) No Reductions. All payments due to the Agent, the
Issuing Bank or any Bank under the Loan Documents, and all other terms,
conditions, covenants and agreements to be observed and performed by the
Borrower thereunder, and all payments due to the Issuing Bank by a Bank, shall
be made, observed or performed by the Borrower or such Bank, as the case may,
without any reduction or deduction whatsoever, including any reduction or
deduction for any set-off, recoupment, counterclaim (whether sounding in tort,
contract or otherwise) or Tax, except, in the case of payments by the Borrower,
for any withholding or deduction for Taxes required to be withheld or deducted
under Applicable Law; provided that no payment by any Person to another Person
shall constitute a waiver or release by the Person making such payment of any
right it may have against the Person receiving such payment.
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<PAGE> 22
(c) Authorization to Charge Accounts. The Borrower
hereby authorizes the Agent, the Issuing Bank and each Bank, if and to the
extent any amount payable by the Borrower under the Loan Documents (whether
payable to such Person or to any other Person that is the Agent, the Issuing
Bank or a Bank) is not otherwise paid when due, to charge such amount against
any or all of the accounts of the Borrower with such Person or any of its
Affiliates (whether maintained at a branch or office located within or without
the United States), with the Borrower remaining liable for any deficiency.
(d) Extension of Payment Dates. Whenever any payment to
the Agent, the Issuing Bank or any Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a day that is not a
Business Day, or, in the case of payments of the principal of Eurodollar Rate
Loans, a Eurodollar Business Day, such payment shall instead be due on the next
succeeding Business Day or Eurodollar Business Day, as the case may be, unless,
in the case of a payment of the principal of Eurodollar Rate Loans, such
extension would cause payment to be due in the next succeeding calendar month,
in which case such due date shall be advanced to the next preceding Eurodollar
Business Day. If the date any payment under the Loan Documents is due is
extended (whether by operation of any Loan Document, Applicable Law or
otherwise), such payment shall bear interest for such extended time at the rate
of interest applicable hereunder.
Section 1.19. Distribution of Payments by the Agent. (a)
The Agent shall promptly distribute to each Bank its ratable share of each
payment received by the Agent under the Loan Documents for the account of the
Banks by credit to an account of such Bank at the Agent's Office or by wire
transfer to an account of such Bank at an office of any other commercial bank
located in the United States.
(b) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks under the
Loan Documents that the Borrower will not make such payment in full, the Agent
may assume that the Borrower has made such payment in full to the Agent on such
date and the Agent in its sole discretion may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date a
corresponding amount with respect to the amount then due such Bank. If and to
the extent the Borrower shall not have so made such payment in full to the
Agent and the Agent shall have so distributed to any Bank a corresponding
amount, such Bank shall, on demand, repay to the Agent the amount so
distributed together with interest thereon, for each day from the date such
amount is distributed to such Bank until the date such Bank repays such amount
to the Agent, at the Federal Funds Rate until (and including) the third
Business Day after demand is made and thereafter at the Base Rate.
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Section 1.20. Taxes. (a) Taxes Payable by the Borrower. If
any Tax is required to be withheld or deducted from, or is otherwise payable by
the Borrower in connection with, any payment to the Agent, the Issuing Bank or
any Bank under the Loan Documents, the Borrower (i) shall, if required,
withhold or deduct the amount of such Tax from such payment and, in any case,
pay such Tax to the appropriate taxing authority in accordance with Applicable
Law and (ii) shall pay to the Agent or such Bank, as applicable, such
additional amounts as may be necessary so that the net amount received by the
Agent or such Bank with respect to such payment, after withholding or deducting
all Taxes required to be withheld or deducted, is equal to the full amount
payable under the Loan Documents. If any Tax is withheld or deducted from, or
is otherwise payable by the Borrower in connection with, any payment payable to
the Agent, the Issuing Bank or any Bank under the Loan Documents, the Borrower
shall, as soon as possible after the date of such payment, furnish to the Agent
or such Bank, as applicable, the original or a certified copy of a receipt for
such Tax from the applicable taxing authority. If any payment due to the
Agent, the Issuing Bank or any Bank under the Loan Documents is or is expected
to be made without withholding or deducting therefrom, or otherwise paying in
connection therewith, any Tax payable to any taxing authority, the Borrower
shall, within 30 days after any request from the Agent, the Issuing Bank or
such Bank, as applicable, furnish to the Agent, the Issuing Bank or such Bank a
certificate from such taxing authority, or an opinion of counsel acceptable to
the Agent, the Issuing Bank or such Bank, in either case stating that no Tax
payable to such taxing authority was or is, as the case may be, required to be
withheld or deducted from, or otherwise paid by the Borrower in connection
with, such payment.
(b) Taxes Payable by the Agent, the Issuing Bank or any
Bank. The Borrower shall, promptly upon request by the Agent, the Issuing Bank
or any Bank for the payment thereof, pay to the Agent, the Issuing Bank or such
Bank, as the case may be, (i) all Taxes (other than Bank Taxes) payable by the
Agent, the Issuing Bank or such Bank, as the case may be, with respect to any
payment due to the Agent, the Issuing Bank or such Bank, as the case may be,
under the Loan Documents and (ii) all Taxes (including Bank Taxes) payable by
the Agent, the Issuing Bank or such Bank, as the case may be, as a result of
payments made by the Borrower (whether made to a taxing authority or to the
Agent or the Issuing Bank or such Bank) pursuant to Section 1.20(a) or (b).
(c) Exemption from U.S. Withholding and Backup
Withholding Taxes. (i) The Issuing Bank if it is not and each Bank that is
not a "United States Person" (as such term is defined in Section 7701(a)(30) of
the Code) shall submit to the Borrower and the Agent (A) on or before the first
date that interest or fees are payable to it under the Loan Documents, (1) two
duly completed and signed copies of Internal Revenue Service Form 1001 or 4224
or any successor form, in each case entitling
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such Person to a complete exemption from withholding of any United States
federal income taxes on all amounts to be received by such Person under the
Loan Documents, or (2) a duly completed and signed copy of Internal Revenue
Service Form W-8 or W-9 or any successor form, in each case entitling such
Person to a complete exemption from United States backup withholding tax on all
amounts to be received by such Person under the Loan Documents, and (B) from
time to time thereafter, prior to the expiration or obsolescence of any
previously delivered form or upon any previously delivered form becoming
inaccurate or inapplicable, such further duly completed and signed copies of
such forms or such other forms or certificates, in each case entitling such
Bank to exemption from withholding of United States federal income taxes and
from United States backup withholding tax to the maximum extent to which such
Bank is then entitled under Applicable Law. Each Bank shall promptly notify
the Borrower and the Agent if (A) it is required to withdraw or cancel any form
or certificate previously submitted by it or any such form or certificate has
otherwise become ineffective or inaccurate or (B) payments to it are or will be
subject to withholding of United States federal income taxes or United States
backup withholding tax to a greater extent than the extent to which payments to
it were previously subject. Upon the request of the Borrower or the Agent,
each Bank that is a United States Person (as defined above) shall from time to
time submit to the Borrower and the Agent a certificate to the effect that it
is such a United States Person and a duly completed Internal Revenue Service
Form W-9.
(ii) Notwithstanding anything to the contrary contained
herein, the Borrower shall not be required to pay any additional amount in
respect of withholding of United States income taxes or United States backup
withholding tax pursuant to Section 1.20 or Section 7.2 to any Bank (A) except
to the extent United States federal income taxes or United States backup
withholding tax, as the case may be, is required to be withheld as a result of
a Regulatory Change or (B) to the extent such withholding is required because
such Bank has failed to submit any form or certificate that it is entitled to
so submit under Applicable Law.
Section 1.21. Pro Rata Treatment. Except to the extent
otherwise provided herein, (a) Loans of each Type to be made on any day shall
be made by the Banks pro rata in accordance with their respective Commitments,
(b) Loans of the Banks shall be converted and continued pro rata in accordance
with their respective amounts of Loans of the Type and, in the case of
Eurodollar Rate Loans, having the Interest Period being so converted or
continued, (c) [intentionally omitted], (d) each reduction in the Commitments
shall be made pro rata in accordance with the respective amounts thereof, (e)
each payment of the principal of or interest on the Loans or of fees (other
than Letter of Credit fees payable pursuant to Section 1.15(b)) shall be made
for the account of the Banks pro rata in accordance with
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the respective amounts thereof then due and payable and (f) each payment of
Letter of Credit fees payable with respect to Letters of Credit pursuant to
Section 1.15(b) shall be made for the account of the Participating Banks pro
rata in accordance with their respective aggregate Participations.
ARTICLE 2.
CONDITIONS TO LOANS
Section 2.1. Conditions to Effectiveness of this Agreement.
The amendment and restatement of the Existing Credit Agreement contemplated by
this Agreement is subject to the determination of each Bank, in its sole and
absolute discretion, that each of the following conditions has been fulfilled:
(a) the Agent shall have received each of the following, in form
and substance and, in the case of the materials referred to in clauses (i),
(ii), (iii), (iv), (v) and (vi), certified in a manner satisfactory to the
Agent:
(i) a certificate of the Secretary or an
Assistant Secretary of the Borrower, dated the Effective Date,
substantially in the form of Schedule 2.1(a)(i), to which shall be
attached copies of the resolutions and by-laws referred to in such
certificate;
(ii) a copy of the certificate of incorporation of
the Borrower, certified, as of a recent date, by the Secretary of
State or other appropriate official of the Borrower's jurisdiction of
incorporation;
(iii) a good standing certificate with respect to
the Borrower, issued as of a recent date by the Secretary of State or
other appropriate official of such Person's jurisdiction of
incorporation;
(iv) [omitted]
(v) a copy of each Governmental Approval and
other consent or approval listed on Schedule 3.3;
(vi) a certificate of the President or Chief
Financial Officer of the Borrower, dated the Effective Date, setting
forth the manner and degree of detail in which the Borrower will make
the calculations required by paragraph 3 of Schedule 5.1(c);
(vii) a duly executed new Domestic Note and
Eurodollar Note for each Bank, in replacement of the Domestic Note and
Eurodollar Note of such Bank issued under the Existing Credit
Agreement;
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(viii) evidence that fees payable on or prior to the
Effective Date pursuant to Section 1.16, and all amounts payable
pursuant to Section 9.2 for which invoices have been delivered to the
Borrower on or prior to such date, have been paid in full on or prior
to the Effective Date; and
(ix) such additional materials as any Bank may
have requested pursuant to Section 5.1(f);
(b) all fees payable on or prior to the Effective Date
pursuant to Section 1.15, and all amounts payable pursuant to Section 9.2 for
which invoices have been delivered to the Borrower on or prior to such date,
shall have been paid in full on or prior to the Effective Date;
(c) the Borrower has issued Perpetual Convertible Preferred
Stock in the amount of at least $20,000,000.
Section 2.2. Conditions to Each Credit Extension. The
obligation of each Bank to make each Loan requested to be made by it, including
its initial Loan, and the obligation of the Issuing Bank to issue each Letter
of Credit requested to be issued by it (including, if no Loans have been made
at such time, the initial Letter of Credit) is subject to the determination of
such Bank or the Issuing Bank, as the case may be, in its sole and absolute
discretion, that each of the following conditions has been fulfilled:
(a) the Agent and, in the case of a request for the
issuance of a Letter of Credit, the Issuing Bank, shall have received (i) in
the case of a Loan, a notice of borrowing with respect to such Loan complying
with the requirements of Section 1.2 and, in the case of a Letter of Credit, a
request for the issuance of such Letter of Credit complying with the
requirements of Section 1.8(a).
(b) each Representation and Warranty shall be true and
correct in all material respects at and as of the time of such Credit
Extension, both with and without giving effect to such Credit Extension and all
other Credit Extension to be made at such time and to the application of the
proceeds thereof;
(c) no Default shall have occurred and be continuing at
the time of such Credit Extension or would result from the making of such
Credit Extension and all other Credit Extension to be made at such time or from
the application of the proceeds thereof; and
(d) such Bank or the Issuing Bank, as the case may be,
shall have received such Information as it may have requested pursuant to
Section 5.1(f).
The Borrower shall be deemed to have made a representation and
warranty as of the time of the requested
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Credit Extension that the conditions specified in clauses (b) or (c) above have
been fulfilled as of such time.
ARTICLE 3.
CERTAIN REPRESENTATIONS AND WARRANTIES
In order to induce each Bank and the Issuing Bank to enter
into this Agreement and to make each Credit Extension requested to be made by
it, the Borrower represents and warrants as follows:
Section 3.1. Organization; Power; Qualification. The
Borrower and each Subsidiary are corporations duly organized, validly existing
and in good standing under the laws of their respective jurisdictions of
incorporation, have the corporate power and authority to own their respective
properties and to carry on their respective businesses as now being and
hereafter proposed to be conducted and are duly qualified and in good standing
as foreign corporations, and are authorized to do business, in all
jurisdictions in which the character of their respective properties or the
nature of their respective businesses requires such qualification or
authorization, except for qualifications and authorizations the lack of which,
singly or in the aggregate, has not had and will not have a Materially Adverse
Effect on the Borrower and the Consolidated Subsidiaries taken as a whole.
Section 3.2. Subsidiaries. Schedule 3.2 sets forth, as of
the Effective Date, all of the Subsidiaries, their jurisdictions of
incorporation and the percentages of the various classes of their Capital
Securities owned by the Borrower or another Subsidiary and indicates which
Subsidiaries are Consolidated Subsidiaries. The Borrower or another
Subsidiary, as the case may be, has the unrestricted right to vote, and
(subject to limitations imposed by Applicable Law) to receive dividends and
distributions on, all Capital Securities indicated on Schedule 3.2 as owned by
the Borrower or such Subsidiary. All such Capital Securities have been duly
authorized and issued and are fully paid and nonassessable.
Section 3.3. Authorization; Enforceability; Required
Consents; Absence of Conflicts. The Borrower has the power, and has taken all
necessary action (including, if a corporation, any necessary stockholder
action) to authorize it, to execute, deliver and perform in accordance with
their respective terms the Loan Documents, to borrow hereunder in the unused
amount of the Commitments and to have Letters of Credit issued for its account
in the unused amount of the LC Sublimit. This Agreement has been, and each of
the other Loan Documents when delivered to the Agent will have been, duly
executed and delivered by the Borrower and is, or when so delivered will be, a
legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in
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<PAGE> 28
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally. The execution,
delivery and performance in accordance with their respective terms by the
Borrower of the Loan Documents, each borrowing hereunder, whether or not in the
amount of the unused Commitments, and the issuance of each Letter of Credit
hereunder, whether or not in the amount of the unused LC Sublimit, do not and
(absent any change in any Applicable Law or applicable Contract) will not (a)
require any Governmental Approval or any other consent or approval, including
any consent or approval of the stockholders of the Borrower, other than
Governmental Approvals and other consents and approvals that have been
obtained, are final and not subject to review on appeal or to collateral
attack, are in full force and effect and, in the case of any such required
under any Applicable Law or Contract as in effect on the Effective Date, are
listed on Schedule 3.3, or (b) violate, conflict with, result in a breach of,
constitute a default under, or result in or require the creation of any Lien
upon any assets of the Borrower or any Subsidiary under, (i) any Contract to
which the Borrower or any Subsidiary is a party or by which the Borrower or any
Subsidiary or any of their respective properties may be bound or (ii) any
Applicable Law.
Section 3.4. Taxes. The Borrower and each Subsidiary have
(a) filed all Tax returns required to have been filed by it under Applicable
Law, (b) paid all Taxes that are due and payable by it or have been assessed
against it except for Taxes the failure to have paid which does not contravene
Section 4.4 and (c) to the extent required by generally accepted accounting
principles, reserved against all Taxes that are payable by it but are not yet
due or that are due and payable by it or have been assessed against it but have
not yet been paid.
Section 3.5. Litigation. Except as set forth on Schedule
3.5, there are not, in any court or before any arbitrator of any kind or before
or by any governmental or non-governmental body, any actions, suits or
proceedings pending or threatened (nor, to the knowledge of the Borrower and
its Subsidiaries, is there any basis therefor) against or in any other way
relating to or affecting (a) the Borrower or any Subsidiary or any of their
respective businesses or properties or (b) any Loan Document, except actions,
suits or proceedings that, if adversely determined, would not, singly or in the
aggregate, have a Materially Adverse Effect on (x) the Borrower and the
Consolidated Subsidiaries taken as a whole or (y) any Loan Document.
Section 3.6. Burdensome Provisions. Neither the Borrower nor
any Subsidiary is a party to or bound by any Contract or Applicable Law,
compliance with which could reasonably be expected to have a Materially Adverse
Effect on (a)
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<PAGE> 29
the Borrower and the Consolidated Subsidiaries taken as a whole or (b) any Loan
Document.
Section 3.7. No Adverse Change or Event. Since February 3,
1996, no change in the business, assets, Liabilities, financial condition,
results of operations or business prospects of the Borrower or any Subsidiary
has occurred, and no event has occurred or failed to occur, that has had or
could reasonably be expected to have, either alone or in conjunction with all
other such changes, events and failures, a Materially Adverse Effect on (a) the
Borrower and the Consolidated Subsidiaries taken as a whole or (b) any Loan
Document. Such an adverse change may have occurred, and such an event may have
occurred or failed to occur, at any particular time notwithstanding the fact
that at such time no Default shall have occurred and be continuing.
Section 3.8. Additional Adverse Facts. Except for facts and
circumstances disclosed on Schedule 3.5 or Schedule 3.8 or in the notes to the
financial statements for the fiscal year of the Borrower ending in February
1996 as delivered by the Borrower to the Agent and the Banks, no fact or
circumstance is known to the Borrower, as of the Effective Date, that, either
alone or in conjunction with all other such facts and circumstances, has had or
might have (so far as the Borrower and its Subsidiaries can foresee) a
Materially Adverse Effect on (a) the Borrower and the Consolidated Subsidiaries
taken as a whole or (b) any Loan Document. If a fact or circumstance disclosed
on such Schedules or in such notes should in the future have a Materially
Adverse Effect on (x) the Borrower and the Consolidated Subsidiaries taken as a
whole or (y) any Loan Document, such Materially Adverse Effect shall be a
change or event subject to Section 3.7 notwithstanding such disclosure.
Section 3.9. Investment Company Act. Neither the Borrower
nor any Subsidiary is an "investment company" or a Person "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940.
Section 3.10. Substance Release and Disposal. There have
been no releases or disposals of hazardous wastes, environmental contaminants
or other substances in quantities or locations that, singly or in the
aggregate, could result in the incurrence by the Borrower or any of its
Subsidiaries of remedial obligations under Applicable Law that could have a
Materially Adverse Effect on the Borrower and its Consolidated Subsidiaries
taken as a whole. Neither the Borrower nor any of its Subsidiaries has
received any notice or order advising it that it has or may have any remedial
obligation with respect to any such releases or disposals or that it is or may
be responsible for the costs of any remedial action taken or to be taken by any
other Persons with respect to any such releases or disposals, which obligation
or cost, if fully payable could, singly or in the aggregate, have a Materially
Adverse Effect on the Borrower and its Consolidated Subsidiaries taken as a
whole.
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Section 3.11. Pari Passu Status. The Loans and other
obligations of the Borrower to the Banks under the Loan Documents will at all
times rank at least pari passu in priority of payment with all of the
Borrower's other unsecured Indebtedness.
Section 3.12. Use of Proceeds of Issuance of Perpetual
Convertible Preferred Stock. Within 90 days of the issuance of Perpetual
Convertible Preferred Stock, the proceeds thereof have been, or will be, used
to redeem, repurchase, defease or retire all outstanding Senior Notes other
than the Unum Notes. Within 10 days of the Effective Date, the Borrower shall
escrow with the Agent an amount sufficient to redeem, repurchase, defease or
retire all Unum Notes, which amount shall include, without limitation, the
principal of such Unum Notes, together with interest thereon and any penalties
or premiums payable in respect thereof. No later than September 3, 1996, the
Borrower will redeem, repurchase, defease or retire all Unum Notes.
Section 3.13. Opinion of Counsel. Within 30 days of the
Effective Date, the Borrower shall cause an opinion of counsel for the
Borrower, dated the Effective Date, in the form of Schedule 2.1(a)(iv), with
such changes as the Agent shall approve, to be delivered to the Agent.
ARTICLE 4.
CERTAIN COVENANTS
From the Agreement Date and until the Repayment Date,
A. The Borrower shall and shall cause each Subsidiary to:
Section 4.1. Preservation of Existence. Preserve and
maintain its corporate existence, except that this Section 4.1 shall not apply
to (i) termination of its corporate existence pursuant to a merger or
consolidation to which Section 4.12 does not apply or (ii) termination of the
corporate existence of a Subsidiary, the termination of the corporate existence
of which would not, in the aggregate, have a Materially Adverse Effect on the
Borrower and its Consolidated Subsidiaries taken as a whole or otherwise be a
disadvantage in any material respect to the Banks.
Section 4.2. Preservation of Rights and Properties. (a)
Preserve and maintain all of its franchises, licenses, rights and privileges
under Contract and Applicable Law material to the proper conduct of its
business; and (b) preserve and maintain in good repair, working order and
condition, excepting ordinary wear and tear and damage due to casualty, all of
its tangible property material to the proper conduct of its business.
Section 4.3. Business Activities. Engage only in businesses
in substantially the same fields as, or directly
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related to, the businesses conducted by the Borrower and its Subsidiaries on
the Agreement Date.
Section 4.4. Payment of Taxes and Liabilities. Pay or
discharge before they become delinquent all Taxes and all Liabilities that
might become a Lien on any of its properties, except that this Section 4.4
shall not apply to Taxes and Liabilities that are being contested in good faith
by appropriate proceedings and for which adequate reserves, in an amount not
less than the amount required by generally accepted accounting principles, have
been provided.
Section 4.5. Compliance With Applicable Laws and Contracts.
Comply with all Applicable Laws and the terms of all Contracts to which it is a
party or by which it or any of its properties may be bound, except that this
Section 4.5 shall not apply to any non-compliance that (a) has been excused or
waived under the relative Applicable Law or Contract or (b) either alone or
when aggregated with all other such non-compliances, would not have a
Materially Adverse Effect on the Borrower and its Consolidated Subsidiaries
taken as a whole.
Section 4.6. Preservation of Loan Document Enforceability.
Take all actions (including obtaining and maintaining in full force and effect
consents and Governmental Approvals) that are required so that its obligations
under the Loan Documents will at all times be legal, valid and binding and
enforceable in accordance with their respective terms.
Section 4.7. Insurance. Maintain insurance with responsible
insurance companies against at least such risks and in at least such amounts as
is customarily maintained by similar businesses, or as may be required by
Applicable Law or reasonably requested by the Required Banks.
Section 4.8. Use of Proceeds. Use the proceeds of the Loans
only for general corporate purposes and use the Letters of Credit only for
purposes specified in Section 1.7(b). None of the proceeds of any of the Loans
and none of the Letters of Credit, directly or indirectly, shall be used to
purchase or carry, or to reduce or retire or refinance any credit incurred to
purchase or carry, any margin stock (within the meaning of Regulations U and X
of the Board of Governors of the Federal Reserve System) or to extend credit to
others for the purpose of purchasing or carrying any margin stock. If
requested by the Issuing Bank or any Bank, the Borrower shall complete and sign
Part I of a copy of Federal Reserve Form U-1 referred to in Regulation U and
deliver such copy to the Issuing Bank or such Bank, as the case may be.
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<PAGE> 32
B. The Borrower shall not, and shall not permit any Subsidiary to,
directly or indirectly:
Section 4.9. Guaranties. Be obligated, at any time, in
respect of any Guaranty, except that this Section 4.9 shall not apply to (a)
Existing Guaranties, (b) Letters of Credit and (c) Permitted Guaranties.
Section 4.10. Liens. Permit to exist, at any time, any Lien
upon any of its properties or assets of any character, whether now owned or
hereafter acquired, or upon any income or profits therefrom, except that this
Section 4.10 shall not apply to Permitted Liens, provided, however, that if,
notwithstanding this Section 4.10, any Lien to which this Section is applicable
shall be created or arise, the Liabilities of the Borrower under the Loan
Documents shall automatically be secured by such Lien equally and ratably with
the other Liabilities secured thereby, and the holder of such other
Liabilities, by accepting such Lien, shall be deemed to have agreed thereto and
to share with the Banks, on that basis, the proceeds of such Lien, whether or
not the Banks' security interest shall be perfected, provided further, however,
that notwithstanding such equal and ratable securing and sharing, the existence
of such Lien shall constitute a default by the Borrower in the performance or
observance of this Section 4.10.
Section 4.11. Dividends, Stock Purchases.
(a) Declare or pay any dividends, either in cash or property,
on any shares of its capital stock of any class (except dividends or
other distributions payable solely in shares of common stock of the
Borrower); or
(b) Directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of its capital stock of any
class or any warrants, rights or options to purchase or acquire any
shares of its capital stock; or
(c) Make any other payment or distribution, either directly
or indirectly or through any Subsidiary, in respect of capital stock
of the Borrower; or
(d) Make, directly or indirectly, or permit any Subsidiary to
make, any Restricted Investment;
except that the Borrower may declare and pay preferred dividends not to exceed
6% per annum in respect of the Perpetual Convertible Preferred Stock.
Section 4.12. Merger or Consolidation. Merge or consolidate
with any Person, except that, if after giving effect thereto no Default would
exist, this Section 4.12 shall not apply to (a) any merger or consolidation of
the Borrower with any one or more Persons, provided that the Borrower shall be
the
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<PAGE> 33
continuing Person, and (b) any merger or consolidation of any Subsidiary with
any one or more other Subsidiaries, provided that the continuing Person shall,
after giving effect to such merger or consolidation, be an Indebtedness-Free
Subsidiary.
Section 4.13. Disposition of Assets. Sell, lease, assign,
transfer or otherwise dispose of all or any substantial part of its business or
assets, except that this Section 4.13 shall not apply to (a) any disposition of
assets to the Borrower or (b) any disposition of assets by any Subsidiary to
any other Subsidiary.
Section 4.14. Capital Expenditures. Make or be obligated at
any time to make capital expenditures, in the aggregate for the Borrower and
its Consolidated Subsidiaries, on a consolidated basis, in excess of (i)
$15,000,000 in fiscal year of the Borrower ending in January 1997 and, (ii) in
the fiscal year of the Borrower ending in January 1998 and in any fiscal year
of the Borrower thereafter, the sum of (A) if the ratio of Consolidated
Indebtedness to Consolidated EBITDA as determined as of the last day of the
fiscal year of the Borrower ending in January 1997 for the period of the four
consecutive fiscal quarters ending on such day is less than 1.50 to 1.00,
$25,000,000, and otherwise, $20,000,000, plus (B) the lesser of (x) the excess,
if any, of the maximum amount of capital expenditures that the Borrower and its
Consolidated Subsidiaries were permitted to have made during the previous
fiscal year over the amount of capital expenditures actually made in the
previous fiscal year and (y) $2,000,000.
Section 4.15. Taxes of Other Persons. (a) File a
consolidated tax return with any other Person other than, in the case of the
Borrower, a Consolidated Subsidiary and, in the case of any such Subsidiary,
the Borrower or a Consolidated Subsidiary, or (b) except as required by
Applicable Law, pay or enter into any Contract to pay any Taxes owing by any
Person other than the Borrower or a Consolidated Subsidiary.
Section 4.16. Benefit Plans. (a) Have, or permit any of its
ERISA Affiliates to have, any Benefit Plan other than an Existing Benefit Plan
or (b) permit any Existing Benefit Plan to be amended in any manner that would
create aggregate Unfunded Benefit Liabilities under any Existing Benefit Plans.
Section 4.17. Transactions with Affiliates. Effect any
transaction with any Affiliate on a basis less favorable than would at the time
be obtainable for a comparable transaction in arms-length dealing with an
unrelated third party.
Section 4.18. Limitation on Restrictive Covenants. Permit to
exist, at any time, any consensual restriction limiting the ability (whether by
covenant, event of default, subordination or otherwise) of any Subsidiary to
(a) pay dividends or make any other distributions on shares of its capital
stock held by the
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Borrower or any other Subsidiary, (b) pay any obligation owed to the Borrower
or any other Subsidiary, (c) make any loans or advances to or investments in
the Borrower or in any other Subsidiary, (d) transfer any of its property or
assets to the Borrower or any other Subsidiary or (e) create any Lien upon its
property or assets whether now owned or hereafter acquired or upon any income
or profits therefrom, except that this Section 4.18 shall not apply to
Permitted Restrictive Covenants.
Section 4.19. Prepayment of Indebtedness. (a) Prepay,
redeem, purchase, defease, retire or otherwise satisfy in any manner prior to
the scheduled maturity thereof any Indebtedness, other than the Senior Notes or
Indebtedness under this Agreement or (b) amend, modify or change in any manner
any term or condition of Indebtedness, or permit any of its Subsidiaries to do
any of the foregoing other than to prepay any Indebtedness payable to the
Borrower.
Section 4.20. Other Letters of Credit. Request or permit the
issuance or amendment of any letter of credit for the account of the Borrower
or any Subsidiary other than (i) the Letters of Credit or (ii) the Third-Party
Letters of Credit; provided that the issuance or amendment of any Third-Party
Letter of Credit shall not be requested or permitted if, after giving effect to
the issuance or amendment of such Third-Party Letter of Credit, (i) the sum of
(x1) the aggregate amount of the Letter of Credit Amounts plus (y1) the
aggregate amount of the Permitted Letter of Credit Amounts of all Persons would
exceed the LC Sublimit, (ii) the sum of (x2) the aggregate amount of the
Exposures of all of the Banks plus (y2) the aggregate amount of the Permitted
Letter of Credit Amounts of all Persons would exceed the aggregate amount of
the Commitments or (iii) in the case of any Bank, the sum of (x3) the Exposure
of such Bank plus (y3) the aggregate amount of the Permitted Letter of Credit
Amounts of such Bank would exceed the amount of the Commitment of such Bank.
C. The Borrower shall not:
Section 4.21. Other Indebtedness. Have any Indebtedness, at
any time, except that this Section 4.21 shall not apply to (a) the Loans, (b)
the Letters of Credit, (c) Guaranties to which Section 4.9 is not applicable,
(d) the Permitted Letters of Credit, (e) the Unum Notes, (f) Indebtedness
subordinated to Indebtedness of the Borrower under the Loan Documents on terms
acceptable to the Banks, (g) Permitted Repos which in the aggregate do not
exceed $15,000,000 at any one time outstanding and (h) Indebtedness, the
scheduled maturity of which is after the Termination Date, which is not secured
by any Lien other than a Lien which under Section 4.10 automatically secures
the Liabilities of the Borrower under the Loan Documents ratably and equally
with the other Liabilities secured thereby.
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Section 4.22. Ratio of Consolidated Indebtedness to
Consolidated Indebtedness plus Consolidated Stockholders' Equity. Permit the
ratio of Consolidated Indebtedness to Consolidated Indebtedness plus
consolidated stockholders' equity of the Borrower and its Consolidated
Subsidiaries to exceed 0.35 to 1.00 at any time.
Section 4.23. Ratio of Consolidated EBIRTDA to Consolidated
Fixed Charges. Permit the ratio of Consolidated EBIRTDA to Consolidated Fixed
Charges to be less than: (i) 0.96 to 1.00, as determined as of the last day of
the first fiscal quarter of the fiscal year of the Borrower ending in January
1997 for the period of the four consecutive fiscal quarters ending on such day,
(ii) 0.97 to 1.00, as determined as of the last day of the second fiscal
quarter of the fiscal year of the Borrower ending in January 1997 for the
period of the four consecutive fiscal quarters ending on such day, and (iii)
1.00 to 1.00, as determined on the last day of each fiscal quarter of the
Borrower thereafter for the period of four consecutive fiscal quarters ending
on such day.
Section 4.24. Ratio of Consolidated Indebtedness to
Consolidated EBITDA. Permit the ratio of Consolidated Indebtedness to
Consolidated EBITDA to be greater than, or equal to, 2.80 to 1.00, as
determined as of the last day of each fiscal quarter for the period of the four
consecutive fiscal quarters ending on such day.
Section 4.25. Ratio of Consolidated Funded Debt to
Consolidated Net Tangible Assets. Permit the ratio of Consolidated Funded Debt
to Consolidated Net Tangible Assets to exceed 0.55 to 1.00 at any time.
D. The Borrower shall not permit any Subsidiary to:
Section 4.26. Subsidiary Indebtedness. Have any indebtedness
(other than to the Borrower) or trade account payable (other than in the
ordinary course of business in connection with the leasing, operating or
maintaining of the leased property and assets but in any event excluding trade
account payables relating to inventory), at any time.
ARTICLE 5.
INFORMATION
Section 5.1. Information to Be Furnished. From the Agreement
Date and until the Repayment Date, the Borrower shall furnish to each Bank and
the Issuing Bank:
(a) Quarterly Financial Statements. As soon as available
and in any event within 60 days after the close of each of the first three
quarterly accounting periods in each fiscal
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year of the Borrower, commencing with the quarterly period ending October 30,
1993 the consolidated balance sheet of the Borrower and the Consolidated
Subsidiaries (together with the related consolidating work papers for such
Consolidated Subsidiaries) as at the end of such quarterly period and the
related consolidated statements of income, retained earnings and cash flows of
the Borrower and the Consolidated Subsidiaries (together with the related
consolidating work papers for such Consolidated Subsidiaries) for such
quarterly period and for the elapsed portion of the fiscal year ended with the
last day of such quarterly period, setting forth in each case in comparative
form the figures for the corresponding periods of the previous fiscal year.
(b) Year-End Financial Statements; Accountants'
Certificate. As soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, commencing with the fiscal year ending
January 29, 1994:
(i) the consolidated balance sheet of the
Borrower and the Consolidated Subsidiaries (together with the related
consolidating work papers for such Consolidated Subsidiaries) as at
the end of such fiscal year and the related consolidated statements of
income, retained earnings and cash flows of the Borrower and the
Consolidated Subsidiaries (together with the related consolidating
work papers for such Consolidated Subsidiaries) for such fiscal year,
setting forth in comparative form the figures as at the end of and for
the previous fiscal year;
(ii) an audit report of Deloitte & Touche, or
other independent certified public accountants of recognized standing
satisfactory to the Required Banks, on such of the financial
statements referred to in clause (i) as are consolidated financial
statements, which report shall be in scope and substance satisfactory
to the Required Banks; and
(iii) a certificate of such accountants addressed
to the Banks and the Issuing Bank and in form and substance
satisfactory to the Required Banks (A) confirming that (1) the
Borrower is authorized to deliver their report referred to in clause
(ii) to the Banks pursuant to this Agreement and (2) it is their
understanding that the Banks are relying on such report and such
certificate, (B) stating that they have caused this Agreement to be
reviewed and that, in making the examination necessary for their
report on such consolidated financial statements, nothing came to
their attention that caused them to believe that, as of the date of
such financial statements, any Default exists or, if such is not the
case, specifying such Default and its nature, when it occurred and
whether it is continuing and (C) having attached the calculations
required to establish whether or not the Borrower was in compliance
with the covenants contained in Sections 4.14, 4.22, 4.23, 4.24 and
4.25.
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(c) Officer's Certificate as to Financial Statements and
Defaults. At the time that financial statements are furnished pursuant to
Section 5.1(a) or (b), a certificate of the president or chief financial
officer of the Borrower in the form of Schedule 5.1(c).
(d) Reports and Filings. (i) Promptly upon receipt
thereof, copies of all reports, if any, submitted to the Borrower or any
Subsidiary, or the Board of Directors of the Borrower or any Subsidiary, by its
independent certified public accountants, including any management letter; (ii)
as soon as practicable, copies of all such financial statements and reports as
the Borrower or any Subsidiary shall send to its stockholders and of all
registration statements and all regular or periodic reports that the Borrower
or any Subsidiary shall file, or may be required to file, with the Securities
and Exchange Commission or any successor commission.
(e) Sales Information. As soon as available and in any
event within 30 days after the end of each fiscal month of the Borrower, the
monthly Sales information, with the information regarding relineared and
remerchandised stores set forth separately.
(f) Requested Information. From time to time and
promptly upon request of any Bank, such Information regarding the Loan
Documents, the Loans, the Letters of Credit or the business, assets,
Liabilities, financial condition, results of operations or business prospects
of the Borrower and the Subsidiaries as such Bank may request, in each case in
form and substance and certified in a manner satisfactory to the requesting
Bank.
(g) Notice of Defaults, Material Adverse Changes and
Other Matters. Prompt notice of:
(i) any Default,
(ii) the threatening or commencement of, or the
occurrence or nonoccurrence of any change or event relating to, any
action, suit or proceeding that would cause the Representation and
Warranty contained in Section 3.5 to be incorrect if made at such
time,
(iii) the occurrence or nonoccurrence of any change
or event that would cause the Representation and Warranty contained in
Section 3.7 to be incorrect if made at such time, and
(iv) any event or condition referred to in clauses
(i) through (vii) of Section 6.1(h), whether or not such event or
condition shall constitute an Event of Default.
Each notice pursuant to Section 5.1(g)(i) shall be accompanied
by a statement of the president or chief financial
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officer of the Borrower setting forth the details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.
Section 5.2. Information. The Borrower hereby represents and
warrants that the Information furnished to the Agent, the Issuing Bank or the
Banks by or on behalf of the Borrower on or prior to the Effective Date does
not, and the Information furnished to Agent, the Issuing Bank or the Banks by
or on behalf of the Borrower after the Effective Date will not, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading in the light
of the circumstances under which they were made.
Section 5.3. Additional Covenants Relating to Disclosure.
From the Agreement Date and until the Repayment Date, the Borrower shall and
shall cause each Subsidiary to:
(a) Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete), as may be required or necessary to permit (i) the
preparation of financial statements required to be delivered pursuant to
Section 5.1(a) and (b) and (ii) the determination of the compliance of the
Borrower with the terms of the Loan Documents.
(b) Fiscal Year. Maintain the same opening and closing
dates for each fiscal year as for the fiscal year reflected in the Base
Financial Statements or, if the opening and closing dates for the fiscal year
reflected in the Base Financial Statements were determined pursuant to a
formula, determine the opening and closing dates for each fiscal year pursuant
to the same formula.
(c) Visits, Inspections and Discussions. Permit
representatives of any Bank, from time to time, as often as may be reasonably
requested, to visit and inspect its properties and its books and records, and
discuss with any Person its business, assets, Liabilities, financial condition,
results of operation and business prospects.
Section 5.4. Authorization of Third Parties to Deliver
Information and Discuss Affairs. The Borrower hereby authorizes and directs
each Person whose preparation or delivery to the Agent, the Issuing Bank or the
Banks of any opinion, report or other Information is a condition or covenant
under the Loan Documents (including under Article 2 or this Article 5) to so
prepare or deliver such Information for the benefit of the Agent, the Issuing
Bank and the Banks. The Borrower further authorizes and directs all Persons
(a) to furnish to the Banks and the Issuing Bank any Information regarding the
matters referred to in Section 5.1(f) that any Bank may request, (b) to permit
representatives of any Bank to make the visits and inspections of
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property, books and records within their possession and control contemplated by
Section 5.3(c) and (c) to discuss with representatives of any Bank the matters
referred to in Section 5.3(c). The Borrower agrees to promptly execute and
deliver from time to time such further authorizations to effect the purposes of
this Section 5.4 as the Agent, the Issuing Bank or any Bank may reasonably
request.
ARTICLE 6.
DEFAULT
Section 6.1. Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary, or within or without the control of the
Borrower or any Subsidiary, or be effected by operation of law or pursuant to
any judgment or order of any court or any order, rule or regulation of any
governmental or nongovernmental body:
(a) Any payment of principal of or interest on any of the
Loans, the Notes or the Drawings or of fees, or any cash collateralization of
Contingent Reimbursement Obligations, shall not be made when and as due
(whether at maturity, by reason of notice of prepayment or acceleration or
otherwise) and in accordance with the terms of this Agreement, the Notes and
each other Loan Document;
(b) Any Representation and Warranty shall at any time
prove to have been incorrect in any material respect when made;
(c) The Borrower shall default in the performance or
observance of:
(i) any term, covenant, condition or agreement
contained in Section 4.1 (insofar as such Section requires the
preservation of the corporate existence of the Borrower), 4.6, 4.8
through 4.26, 5.1(g)(i), 5.3(b) or 5.3(c); or
(ii) any term, covenant, condition or agreement
contained in this Agreement (other than a term, covenant, condition or
agreement a default in the performance or observance of which is
elsewhere in this Section specifically dealt with) and, if capable of
being remedied, such default shall continue unremedied for a period of
30 days;
(d) (i) The Borrower or any Subsidiary shall fail to
pay, in accordance with its terms and when due and payable, any of the
principal of or interest on any of its Indebtedness (other than the Loans)
having a then outstanding principal amount in excess of $100,000, (ii) the
maturity of any such Indebtedness
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shall, in whole or in part, have been accelerated, or any such Indebtedness
shall, in whole or in part, have been required to be prepaid prior to the
stated maturity thereof, in accordance with the provisions of any Contract
evidencing, providing for the creation of or concerning such Indebtedness, or
(iii) (A) any event shall have occurred and be continuing that permits (or,
with the giving of notice would permit) any holder or holders of such
Indebtedness, any trustee or agent acting on behalf of such holder or holders
or any other Person so to accelerate such maturity or require any such
prepayment and (B) if the Contract evidencing, providing for the creation of or
concerning such Indebtedness provides for a cure period for such event, such
event shall not be cured prior to the end of such cure period;
(e) A default shall be continuing under any Contract
(other than a Contract relating to Indebtedness to which clause (d) of this
Section 6.1 is applicable) binding upon the Borrower or any Subsidiary, except
a default that, together with all other such defaults, has not had and will not
have a Materially Adverse Effect on (i) the Borrower and the Consolidated
Subsidiaries taken as a whole or (ii) any Loan Document;
(f) (i) The Borrower or any Subsidiary shall (A)
commence a voluntary case under the Federal bankruptcy laws (as now or
hereafter in effect), (B) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts, (C) consent
to or fail to contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or other laws, (D)
apply for, or consent to, or fail to contest in a timely and appropriate
manner, the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or the like of itself or of a substantial part
of its assets, domestic or foreign, (E) admit in writing its inability to pay,
or generally not be paying, its debts (other than those that are the subject of
bona fide disputes) as they become due, (F) make a general assignment for the
benefit of creditors, or (G) take any corporate action for the purpose of
effecting any of the foregoing;
(ii) (A) A case or other proceeding shall be
commenced against the Borrower or any Subsidiary seeking (1) relief under the
Federal bankruptcy laws (as now or hereafter in effect) or under any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts, or (2) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower or any
Subsidiary, or of all or any substantial part of the assets, domestic or
foreign, of the Borrower or any Subsidiary, and such case or proceeding shall
continue undismissed and unstayed for a period of 60 days, or (B) an order
granting the relief requested in such case or proceeding against the Borrower
or any Subsidiary
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(including an order for relief under such Federal bankruptcy laws) shall be
entered;
(g) A judgment or order shall be entered against the
Borrower or any Subsidiary by any court, and (i) in the case of a judgment or
order for the payment of money, either (A) such judgment or order shall
continue undischarged and unstayed for a period of 10 days in which the
aggregate amount of all such judgments and orders exceeds $5,000,000 or (B)
enforcement proceedings shall have been commenced upon such judgment or order
and (ii) in the case of any judgment or order for other than the payment of
money, such judgment or order could, in the reasonable judgment of the Required
Banks, together with all other such judgments or orders, have a Materially
Adverse Effect on the Borrower and the Consolidated Subsidiaries taken as a
whole; or
(h) (i) Any Termination Event shall occur with respect
to any Benefit Plan of the Borrower, any Subsidiary or any of their respective
ERISA Affiliates, (ii) any Accumulated Funding Deficiency, whether or not
waived, shall exist with respect to any such Benefit Plan, (iii) any Person
shall engage in any Prohibited Transaction involving any such Benefit Plan,
(iv) the Borrower, any Subsidiary or any of their respective ERISA Affiliates
shall be in "default" (as defined in ERISA Section 4219(c)(5)) with respect to
payments owing to any such Benefit Plan that is a Multiemployer Benefit Plan as
a result of such Person's complete or partial withdrawal (as described in ERISA
Section 4203 or 4205) therefrom, (v) the Borrower, any Subsidiary or any of
their respective ERISA Affiliates shall fail to pay when due an amount that is
payable by it to the PBGC or to any such Benefit Plan under Title IV of ERISA,
(vi) a proceeding shall be instituted by a fiduciary of any such Benefit Plan
against the Borrower, any Subsidiary or any of their respective ERISA
Affiliates to enforce ERISA Section 515 and such proceeding shall not have been
dismissed within 30 days thereafter, or (vii) any other event or condition
shall occur or exist with respect to any such Benefit Plan, except that no
event or condition referred to in clauses (i) through (vii) shall constitute an
Event of Default if it, together with all other such events or conditions at
the time existing, has not subjected, and in the reasonable determination of
the Required Banks will not subject, the Borrower or any Subsidiary to any
Liability that, alone or in the aggregate with all such Liabilities for all
such Persons, exceeds $100,000.
Section 6.2. Remedies upon Event of Default. During the
continuance of any Event of Default (other than one specified in Section
6.1(f)) and in every such event, the Agent, upon notice to the Borrower, may do
either or both of the following: (a) declare, in whole or, from time to time,
in part, the principal of and interest on the Loans, the Notes and the Drawings
and all other amounts owing under the Loan Documents to be, and the Loans, the
Notes and the Drawings and all such other amounts shall thereupon and to that
extent become, due and
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payable, (b) terminate, in whole or, from time to time, in part, the
Commitments and the LC Sublimit and (c) demand that the Borrower deliver cash
collateral to the Agent in an amount equal to the aggregate amount of
Contingent Reimbursement Obligations then outstanding to be held in accordance
with Section 9.18 and thereupon such amount shall become so due and payable to
the Agent. Upon the occurrence of an Event of Default specified in Section
6.1(f), automatically and without any notice to the Borrower, (a) the principal
of and interest on the Loans, the Notes and the Drawings and all other amounts
owing under the Loan Documents shall be due and payable, (b) the Commitments
and the LC Sublimit shall terminate and (c) an amount equal to the aggregate
amount of Contingent Reimbursement Obligations then outstanding shall be due
and payable to the Agent to be held in accordance with Section 9.18.
Presentment, demand, protest or notice of any kind (other than the notice
provided for in the first sentence of this Section 6.2) are hereby expressly
waived.
ARTICLE 7.
ADDITIONAL CREDIT FACILITY PROVISIONS
Section 7.1. Mandatory Suspension and Conversion of
Eurodollar Rate Loans. A Bank's obligations to make, continue or convert into
Eurodollar Rate Loans of any Type shall be suspended, all such Bank's
outstanding Loans of that Type shall be converted on the last day of their
applicable Interest Periods (or, if earlier, in the case of clause (c) below,
on the last day such Bank may lawfully continue to maintain Loans of that Type
or, in the case of clause (d) below, on the day determined by such Bank to be
the last Business Day before the effective date of the applicable restriction)
into, and all pending requests for the making or continuation of or conversion
into Loans of such Type by such Bank shall be deemed requests for, Base Rate
Loans, and, in the case of clause (c) below, the Issuing Bank's obligation to
issue Letters of Credit shall be suspended, if:
(a) on or prior to the determination of an interest rate
for a Eurodollar Rate Loan of that Type for any Interest Period, the Agent
determines that for any reason appropriate information is not available to it
for purposes of determining the Adjusted Eurodollar Rate for such Interest
Period;
(b) on or prior to the first day of any Interest Period
for a Eurodollar Rate Loan of that Type, such Bank determines that the Adjusted
Eurodollar Rate as determined by the Agent for such Interest Period would not
accurately reflect the cost to such Bank of making, continuing or converting
into a Eurodollar Rate Loan of such Type for such Interest Period;
(c) at any time any Regulatory Change (i) in the
determination of any Bank, makes it unlawful or impracticable for such Bank or
its applicable Lending Office to make, continue or
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convert into any Eurodollar Rate Loan of that Type, or to comply with its
obligations hereunder in respect thereof or (ii) in the determination of the
Issuing Bank, makes it unlawful or impracticable for the Issuing Bank to issue
any Letter of Credit or to comply with its obligations hereunder in respect
thereof; or
(d) such Bank determines that, by reason of any
Regulatory Change, such Bank or its applicable Lending Office is restricted,
directly or indirectly, in the amount that it may hold of (i) a category of
liabilities that includes deposits by reference to which, or on the basis of
which, the interest rate applicable to Eurodollar Rate Loans of that Type is
directly or indirectly determined or (ii) the category of assets that includes
Eurodollar Rate Loans of that Type.
If, as a result of this Section 7.1, any Loan of any Bank that would otherwise
be made or maintained as or converted into a Eurodollar Rate Loan of any Type
for any Interest Period is instead made or maintained as or converted into a
Base Rate Loan, then, unless the corresponding Loan of each of the other Banks
is also to be made or maintained as or converted into a Base Rate Loan, such
Loan shall be treated as being a Eurodollar Rate Loan of such Type for such
Interest Period for all purposes of this Agreement (including the timing,
application and proration among the Banks of interest payments, conversions and
prepayments) except for the calculation of the interest rate borne by such
Loan. The Agent shall promptly notify the Borrower and each Bank of the
existence or occurrence of any condition or circumstance specified in clause
(a) above, and each Bank and the Issuing Bank shall promptly notify the
Borrower and the Agent of the existence or occurrence of any condition or
circumstance specified in clause (b), (c) or (d) above applicable to such
Bank's Loans or, in the case of the Issuing Bank, clause (c) above applicable
to the Issuing Bank's obligation to issue Letters of Credit, but the failure by
the Agent, the Issuing Bank or such Bank to give any such notice shall not
affect such Bank's or the Issuing Bank's rights hereunder.
Section 7.2. Regulatory Changes. If (a) any Regulatory
Change shall directly or indirectly (i)(A) in the determination of any Bank,
reduce the amount of any sum received or receivable by such Bank with respect
to any Loan or Participation or the return to be earned by such Bank on any
Loan or Participation or (B) in the determination of the Issuing Bank, reduce
the amount of any sum received or receivable by the Issuing Bank with respect
to any Letter of Credit, Drawing or Contingent Reimbursement Obligation or the
return to be earned by the Issuing Bank on any Letter of Credit, Drawing or
Contingent Reimbursement Obligation, (ii)(A) in the determination of any Bank,
impose a cost on such Bank or any Affiliate of such Bank that is attributable
to the making or maintaining of, or such Bank's commitment to make or acquire,
any Loan or Participation, or (B) in the determination of the Issuing Bank,
impose a cost on
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the Issuing Bank or any of its Affiliates that is attributable to the issuance
or maintaining of, or the commitment to issue, any Letter of Credit or the
making or maintaining of any Drawing or Contingent Reimbursement Obligation,
(iii)(A) in the determination of any Bank, require such Bank or any Affiliate
of such Bank to make any payment on or calculated by reference to the gross
amount of any amount received by such Bank under any Loan Document or (B) in
the determination of the Issuing Bank, require the Issuing Bank or any of its
Affiliates to make any payment on or calculated by reference to the gross
amount of any amount received by the Issuing Bank or any of its Affiliates in
respect of (1) any Letter of Credit, or its commitment to issue any Letter of
Credit, or (2) any Drawing or Contingent Reimbursement Obligation or (iv)(A) in
the determination of any Bank, reduce, or have the effect of reducing, the rate
of return on the capital of such Bank or any Affiliate of such Bank allocable
to any Loan or Participation or such Bank's commitment to make any Loan or
acquire any Participation or (B) in the determination of the Issuing Bank,
reduce, or have the effect of reducing, the rate of return on the capital of
the Issuing Bank or any of its Affiliates allocable to (1) any Letter of
Credit, or its commitment to issue any Letter of Credit, or (2) any Drawing or
Contingent Reimbursement Obligation, and (b) such reduction, increased cost or
payment shall not be fully compensated for by an adjustment in the applicable
rates of interest payable under the Loan Documents, then the Borrower shall pay
to such Bank or the Issuing Bank, as the case may be, such additional amounts
as such Bank or the Issuing Bank, as the case may be, determines will, together
with any adjustment in the applicable rates of interest payable hereunder,
fully compensate for such reduction, increased cost or payment. Such
additional amounts shall be payable, in the case of those applicable to prior
periods, within 15 days after request by such Bank or the Issuing Bank, as the
case may be, for such payment and, in the case of those applicable to future
periods, on the dates specified, or determined in accordance with a method
specified, by such Bank or the Issuing Bank, as the case may be. Each Bank and
the Issuing Bank will promptly notify the Borrower of any determination made by
them referred to in clauses (a) and (b) above, but the failure to give such
notice shall not affect the right of such Bank or the Issuing Bank, as the case
may be, to compensation.
Section 7.3. Risk-Based Capital Requirements. If, under
Applicable Law, interpretations, directives, requests and guidelines (whether
or not having the force of law) enacted, adopted or issued pursuant to the
framework for risk-based capital requirements adopted July 11, 1988 by the
Basle Committee on Banking Regulation and Supervisory Practices, (a) in the
determination of any Bank, such Bank or any of its Affiliates is required to
maintain capital on account of any Loan or Participation or such Bank's
commitment to make any Loan or acquire any Participation in a greater amount
than such Bank or such Affiliate would otherwise have been so required to
maintain
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on account thereof, or (b) in the determination of the Issuing Bank, the
Issuing Bank or any of its Affiliates is required to maintain capital on
account of (i) any Letter of Credit or its commitment to issue any Letter of
Credit or (ii) any Drawing or Contingent Reimbursement Obligation in a greater
amount than the Issuing Bank or such Affiliate otherwise would have been so
required to maintain on account thereof, then, upon request by such Bank or the
Issuing Bank, as the case may be, the Borrower shall from time to time
thereafter pay to such Bank or the Issuing Bank, as the case may be, such
additional amounts as such Bank or the Issuing Bank, as the case may be,
determines will fully compensate for any reduction in the rate of return on the
additional capital that such Bank, or its Affiliate, or the Issuing Bank, or
its Affiliate, as the case may be, is so required to maintain. Such additional
amounts shall be payable, in the case of those applicable to prior periods,
within 15 days after request by such Bank or the Issuing Bank, as the case may
be, for such payment and, in the case of those relating to future periods, on
the dates specified, or determined in accordance with a method specified, by
such Bank or the Issuing Bank, as the case may be.
Section 7.4. Funding Losses. The Borrower shall pay to each
Bank, upon request, such amount or amounts as such Bank determines are
necessary to compensate it for any loss, cost or expense incurred by it as a
result of (a) any payment, prepayment or conversion of a Eurodollar Rate Loan
on a date other than the last day of an Interest Period for such Eurodollar
Rate Loan or (b) a Eurodollar Rate Loan for any reason not being made or
converted, or any payment of principal thereof or interest thereon not being
made, on the date therefor determined in accordance with the applicable
provisions of this Agreement. At the election of such Bank, and without
limiting the generality of the foregoing, but without duplication, such
compensation on account of losses may include an amount equal to the excess of
(i) the interest that would have been received from the Borrower under this
Agreement on any amounts to be reemployed during an Interest Period or its
remaining portion over (ii) the interest component of the return that such Bank
determines it could have obtained had it placed such amount on deposit in the
interbank Dollar market selected by it for a period equal to such Interest
Period or its remaining portion.
Section 7.5. Certain Determinations. In making the
determinations contemplated by Sections 7.1, 7.2, 7.3 and 7.4, each Bank and
the Issuing Bank may make such estimates, assumptions, allocations and the like
that such Person in good faith determines to be appropriate, and such Person's
selection thereof in accordance with this Section 7.5, and the determinations
made by such Person on the basis thereof, shall be final, binding and
conclusive upon the Borrower, except, in the case of such determinations, for
manifest errors in computation or transmission. Each Bank and the Issuing Bank
shall furnish to the Borrower upon request a certificate outlining in
reasonable
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detail the computation of any amounts claimed by it under Sections 7.2, 7.3 and
7.4 and the assumptions underlying such computations.
Section 7.6. Change of Lending Office. If an event occurs
with respect to a Lending Office of any Bank or the Issuing Bank that obligates
the Borrower to pay any amount under Section 1.13, makes operable the
provisions of clause (c) or (d) of Section 7.1 or entitles such Person to make
a claim under Section 7.2 or 7.3, such Person shall, if requested by the
Borrower, use reasonable efforts to designate another Lending Office or Offices
the designation of which will reduce the amount the Borrower is so obligated to
pay, eliminate such operability or reduce the amount such Person is so entitled
to claim, provided that such designation would not, in the sole and absolute
discretion of such Person, be disadvantageous to such Person in any manner or
contrary to such Person's policies. Each Bank or the Issuing Bank may at any
time and from time to time change any Lending Office and shall give notice of
any such change to the Agent and the Borrower. Except in the case of a change
in Lending Offices made at the request of the Borrower, the designation of a
new Lending Office by any Bank or the Issuing Bank shall not obligate the
Borrower to pay any amount to such Person under Section 1.13, make operable the
provisions of clause (c) or (d) of Section 7.1 or entitle such Person to make a
claim under Section 7.2 or 7.3 if such obligation, the operability of such
clause or such claim results solely from such designation and not from a
subsequent Regulatory Change.
ARTICLE 8.
THE AGENT
Section 8.1. Appointment and Powers. Each Bank and the
Issuing Bank hereby irrevocably appoints and authorizes Bank of Montreal, and
Bank of Montreal hereby agrees, to act as the agent for such Person under the
Loan Documents with such powers as are delegated to the Agent by the terms
thereof, together with such other powers as are reasonably incidental thereto.
The Agent's duties shall be purely ministerial and it shall have no duties or
responsibilities except those expressly set forth in the Loan Documents. The
Agent shall not be required under any circumstances to take any action that, in
its judgment, (a) is contrary to any provision of the Loan Documents or
Applicable Law or (b) would expose it to any Liability or expense against which
it has not been indemnified to its satisfaction. The Agent shall not, by
reason of its serving as the Agent, be a trustee or other fiduciary for any
Bank or the Issuing Bank.
Section 8.2. Limitation on Agent's Liability. Neither the
Agent nor any of its directors, officers, employees or agents shall be liable
or responsible for any action taken or omitted to be taken by it or them under
or in connection with the Loan
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Documents, except for its or their own gross negligence, willful misconduct or
knowing violations of law. The Agent shall not be responsible to any Bank or
the Issuing Bank for (a) any recitals, statements, representations or
warranties contained in the Loan Documents or in any certificate or other
document referred to or provided for in, or received by any of the Banks or the
Issuing Bank under, the Loan Documents, (b) the validity, effectiveness or
enforceability of the Loan Documents or any such certificate or other document
or (c) any failure by the Borrower to perform any of its obligations under the
Loan Documents. The Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact so long as the Agent was not grossly negligent in selecting
or directing such agents or attorneys-in-fact. The Agent shall be entitled to
rely upon any certification, notice or other communication (including any
thereof by telephone, telex, telecopier, telegram or cable) believed by it to
be genuine and correct and to have been signed or given by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent. As to any
matters not expressly provided for by the Loan Documents, the Agent shall in
all cases be fully protected in acting, or in refraining from acting, under the
Loan Documents in accordance with instructions signed by the Required Banks,
and such instructions of the Required Banks and any action taken or failure to
act pursuant thereto shall be binding on all of the Banks and the Issuing Bank.
Section 8.3. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment to it of
principal of or interest on Loans or fees) unless the Agent has received notice
from a Bank, the Issuing Bank or the Borrower specifying such Default and
stating that such notice is a "Notice of Default". In the event that the Agent
has knowledge of such a non-payment or receives such a notice of the occurrence
of a Default, the Agent shall give prompt notice thereof to the Banks. In the
event of any Default, the Agent shall (a) in the case of a Default that
constitutes an Event of Default, take either or both of the actions referred to
in clauses (a) and (b) of the first sentence of Section 6.2 if so directed by
the Required Banks and (b) in the case of any Default, take such other action
with respect to such Default as shall be reasonably directed by the Required
Banks. Unless and until the Agent shall have received such directions, in the
event of any Default, the Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default as it
shall deem advisable in the best interests of the Banks and the Issuing Bank.
Section 8.4. Rights as a Bank. Each Person acting as the
Agent that is also a Bank shall, in its capacity as a Bank, have the same
rights and powers under the Loan Documents as any other Bank and may exercise
the same as though it were not acting as the Agent, and the term "Bank" or
"Banks" shall include such
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Person in its individual capacity. Each Person acting as the Agent (whether or
not such Person is a Bank) and its Affiliates may (without having to account
therefor to any Bank) accept deposits from, lend money to and generally engage
in any kind of banking, trust or other business with the Borrower and its
Affiliates as if it were not acting as the Agent, and such Person and its
Affiliates may accept fees and other consideration from the Borrower and its
Affiliates for services in connection with the Loan Documents or otherwise
without having to account for the same to the Banks.
Section 8.5. Indemnification. The Banks agree to indemnify
the Agent (to the extent not reimbursed by the Borrower hereunder), ratably on
the basis of the respective principal amounts of the Exposures of the Banks
(or, if no Exposures are at the time outstanding, ratably on the basis of their
respective Commitments), for any and all Liabilities, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Agent (including the costs and expenses that the Borrower is
obligated to pay hereunder) in any way relating to or arising out of the Loan
Documents or any other documents contemplated thereby or referred to therein or
the transactions contemplated thereby or the enforcement of any of the terms
thereof or of any such other documents, provided that no Bank shall be liable
for any of the foregoing to the extent (a) they are subject to the indemnity
contemplated by the last sentence of Section 9.9(b) or (b) they arise from
gross negligence, willful misconduct or knowing violations of law by the Agent.
Section 8.6. Non-Reliance on Agent, Issuing Bank and Other
Banks. Each Bank and the Issuing Bank agree that it has made and will continue
to make, independently and without reliance on the Agent, the Issuing Bank or
any other Bank, and based on such documents and information as it deems
appropriate, its own credit analysis of the Borrower and its own decision to
enter into the Loan Documents and to take or refrain from taking any action in
connection therewith. The Agent shall not be required to keep itself informed
as to the performance or observance by the Borrower of the Loan Documents or
any other document referred to or provided for therein or to inspect the
properties or books of the Borrower or any Subsidiary. Except for notices,
reports and other documents and information expressly required to be furnished
to the Banks and the Issuing Bank by the Agent under the Loan Documents, the
Agent shall have no obligation to provide any Bank or the Issuing Bank with any
information concerning the business, status or condition of the Borrower or any
Subsidiary or the Loan Documents that may come into the possession of the Agent
or any of its Affiliates.
Section 8.7. Resignation of the Agent. The Agent may at any
time give notice of its resignation to the Banks, the Issuing Bank and the
Borrower. The Agent may at any time be
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removed by the Required Banks for willful misconduct or gross negligence. Upon
receipt of any such notice of resignation or such removal, as the case may be,
the Required Banks may, after consultation with the Borrower, appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Banks and shall have accepted such appointment within 30 days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Banks and the Issuing Bank and after consultation with
the Borrower, appoint a successor Agent. Upon the acceptance by any Person of
its appointment as a successor Agent, such Person shall thereupon succeed to
and become vested with all the rights, powers, privileges, duties and
obligations of the retiring Agent and the retiring Agent shall be discharged
from its duties and obligations as Agent under the Loan Documents. After any
retiring Agent's resignation as Agent, the provisions of this Article 8 shall
continue in effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was acting as the Agent.
ARTICLE 9.
MISCELLANEOUS
Section 9.1. Notices and Deliveries. Except as otherwise
expressly provided, all notices, communications and materials to be given or
delivered pursuant to the Loan Documents shall be given or delivered in writing
(which shall include telex and telecopy transmissions) at the following
respective addresses and telex and telecopier numbers and to the attention of
the following individuals or departments or at such other address or telex,
telecopier or telephone number or to the attention of such other individual or
department as the party to which such information pertains may hereafter
specify:
(a) if to the Borrower, to it at:
Lechters, Inc.
1 Cape May Street
Harrison, New Jersey 07029
Telecopier No.: 201-481-4479
Attention: Chief Financial Officer
and
LeBoeuf, Lamb, Greene & MacRae
125 West 55th Street
New York, NY 10019-5389
Telecopier No.: 212-424-8500
Attention: Alayne Serle, Esq.
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(b) if to the Agent, to it at:
Bank of Montreal
430 Park Avenue
New York, New York 10022
Telecopier No.: 212-308-9147/0373
Attention: John H. Darrow
Notices, communications and materials shall be deemed given or delivered when
delivered or received at the appropriate address or telex or telecopy number to
the attention of the appropriate individual or department except that notices
to be given (i) to the Agent or any Bank pursuant to Sections 1.2, 1.3(c), 1.5,
1.8, 1.9(b), 1.14 and 1.19(b) shall not be deemed given until received by the
officer of the Agent or such Bank responsible, at the time, for the
administration of this Agreement and (ii) the Issuing Bank pursuant to Section
1.08(a) shall not be deemed given or delivered until received by the officer of
the Issuing Bank responsible, at the time, for the administration of the
Issuing Bank's commitment hereunder to issue Letters of Credit.
(c) if to any Bank, to it at the address or telex or
telecopier number and to the attention of the individual or department, set
forth below such Bank's name under the heading "Notice Address" on Annex A or,
in the case of a Bank that becomes a Bank pursuant to an assignment, set forth
under the heading "Notice Address" in the Notice of Assignment given to the
Borrower and the Agent with respect to such assignment.
(d) if to the Issuing Bank at an address or telecopier number
different from that determined in accordance with clause (c) above with respect
to the Bank that is the Issuing Bank, to it at:
[_____________________________]
[_____________________________]
[_____________________________]
[Telecopier No.:______________]
[Attention:___________________]
Section 9.2. Expenses; Indemnification. Whether or not any
Credit Extensions are made hereunder, the Borrower shall:
(a) pay or reimburse the Agent and the Issuing Bank and
each Bank for all transfer, documentary, stamp and similar taxes, and all
recording and filing fees and taxes,
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payable in connection with, arising out of, or in any way related to, the
execution, delivery and performance of the Loan Documents or the making of the
Loans or the Drawings or the issuance of Letters of Credit;
(b) pay or reimburse the Agent and the Issuing Bank for
all reasonable costs and expenses (including fees and disbursements of legal
counsel, appraisers, accountants and other experts employed or retained by such
Person) incurred by such Person in connection with, arising out of, or in any
way related to (i) the negotiation, preparation, execution and delivery of (A)
the Loan Documents and (B) whether or not executed, any waiver, amendment or
consent thereunder or thereto, (ii) the administration of and any operations
under the Loan Documents, (iii) consulting with respect to any matter in any
way arising out of, related to, or connected with, the Loan Documents,
including (A) the protection, preservation, exercise or enforcement of any of
the rights of the Agent, the Issuing Bank or the Banks under or related to the
Loan Documents or (B) the performance of any of the obligations of the Agent,
the Issuing Bank or the Banks under or related to the Loan Documents or (iv)
protecting, preserving, exercising or enforcing any of the rights of the Agent,
the Issuing Bank or the Banks under or related to the Loan Documents;
(c) pay or reimburse each Bank and the Issuing Bank for
all costs and expenses (including fees and disbursements of legal counsel and
other experts employed or retained by such Person) incurred by such Person in
connection with, arising out of, or in any way related to protecting,
preserving, exercising or enforcing during a Default any of its rights under or
related to the Loan Documents; and
(d) indemnify and hold each Indemnified Person harmless
from and against all losses (including judgments, penalties and fines)
suffered, and pay or reimburse each Indemnified Person for all costs and
expenses (including fees and disbursements of legal counsel and other experts
employed or retained by such Indemnified Person) incurred, by such Indemnified
Person in connection with, arising out of, or in any way related to (i) any
Loan Document Related Claim (whether asserted by such Indemnified Person or the
Borrower or any other Person), including the prosecution or defense thereof and
any litigation or proceeding with respect thereto (whether or not, in the case
of any such litigation or proceeding, such Indemnified Person is a party
thereto), or (ii) any investigation, governmental or otherwise, arising out of,
related to, or in any way connected with, the Loan Documents or the
relationships established thereunder, except that the foregoing indemnity shall
not be applicable to any loss suffered by any Indemnified Person to the extent
such loss is the result of acts or omissions on the part of such
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Indemnified Person constituting (x) gross negligence or (y) willful misconduct
or (z) knowing violations of law.
Section 9.3. Amounts Payable Due upon Request for Payment.
All amounts payable by the Borrower under Section 9.2 and under the other
provisions of the Loan Documents shall, except as otherwise expressly provided,
be immediately due upon request for the payment thereof.
Section 9.4. Rights Cumulative. Each of the rights and
remedies of the Agent, the Issuing Bank and the Banks under the Loan Documents
shall be in addition to all of their other rights and remedies under the Loan
Documents and Applicable Law, and nothing in the Loan Documents shall be
construed as limiting any such rights or remedies.
Section 9.5. Disclosures. The Agent, the Issuing Bank and
the Banks may disclose to, and exchange and discuss with, any other Person (the
Agent, the Issuing Bank, the Banks and each such other Person being hereby
authorized to do so) any information concerning the Borrower or any Subsidiary
(whether received by the Agent, the Issuing Bank, the Banks or such other
Person in connection with or pursuant to the Loan Documents or otherwise) for
the purpose of (a) complying with Applicable Law, (b) protecting, preserving,
exercising or enforcing any of their rights under or related to the Loan
Documents, (c) performing any of their obligations under or related to the Loan
Documents or (d) consulting with respect to any of the foregoing matters.
Section 9.6. Amendments; Waivers. Any term, covenant,
agreement or condition of the Loan Documents may be amended, and any right
under the Loan Documents may be waived, if, but only if, such amendment or
waiver is in writing and is signed by the Required Banks and, if the rights and
duties of the Agent or the Issuing Bank are affected thereby, by the Agent or
the Issuing Bank, as the case may be, and, in the case of an amendment, by the
Borrower; provided, however, that no amendment or waiver shall be effective,
unless in writing and signed by each Bank affected thereby, to the extent it
(i) changes the amount of such Bank's Commitment, (ii) reduces (A) the
principal of or the rate of interest on (1) such Bank's Loans or Notes or (2)
any of the Drawings or (B) the fees payable to such Bank hereunder, (iii)
postpones any date fixed for (A) any payment of (1) principal of or interest on
(aa) such Bank's Loans or Notes or (bb) any of the Drawings or (2) the fees
payable to such Bank hereunder or (B) the expiration of any Letter of Credit if
such postponement would extend the expiration date of such Letter of Credit
beyond the Termination Date or (iv) amends the definition "Required Banks",
Section 1.21, this Section 9.6 or any other provision of this Agreement
requiring the consent or other action of all of the Banks. Unless otherwise
specified in such waiver, a waiver of any
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right under the Loan Documents shall be effective only in the specific instance
and for the specific purpose for which given. No election not to exercise,
failure to exercise or delay in exercising any right, nor any course of dealing
or performance, shall operate as a waiver of any right of the Agent, the
Issuing Bank or any Bank under the Loan Documents or Applicable Law, 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 of the Agent, the Issuing
Bank or any Bank under the Loan Documents or Applicable Law.
Section 9.7. Set-Off; Suspension of Payment and Performance.
The Agent, the Issuing Bank and each Bank is hereby authorized by the Borrower,
at any time and from time to time, without notice, during any Event of Default,
to set off against, and to appropriate and apply to the payment of, the
Liabilities of the Borrower under the Loan Documents (whether owing to such
Person or to any other Person that is the Agent, the Issuing Bank or a Bank and
whether matured or unmatured, fixed or contingent or liquidated or
unliquidated) any and all Liabilities owing by such Person or any of its
Affiliates to the Borrower (whether payable in Dollars or any other currency,
whether matured or unmatured and, in the case of Liabilities that are deposits,
whether general or special, time or demand and however evidenced and whether
maintained at a branch or office located within or without the United States).
Section 9.8 Sharing of Recoveries. (a) Each Bank agrees
that, if, for any reason, including as a result of (i) the exercise of any
right of counterclaim, set-off, banker's lien or similar right, (ii) its claim
in any applicable bankruptcy, insolvency or other similar law being deemed
secured by a Debt owed by it to the Borrower, including a claim deemed secured
under Section 506 of the Bankruptcy Code, or (iii) the allocation of payments
by the Agent or the Borrower in a manner contrary to the provisions of Section
1.21, such Bank shall receive payment of a proportion of the aggregate amount
due and payable to it hereunder as principal, interest or facility fees that is
greater than the proportion received by any other Bank in respect of the
aggregate of such amounts due and payable to such other Bank hereunder, then
the Bank receiving such proportionately greater payment shall purchase
participations (which it shall be deemed to have done simultaneously upon the
receipt of such payment) in the rights of the other Banks hereunder so that all
such recoveries with respect to such amounts due and payable hereunder (net of
costs of collection) shall be pro rata; provided that if all or part of such
proportionately greater payment received by the purchasing Bank is thereafter
recovered by or on behalf of the Borrower from such Bank, such purchases shall
be rescinded and the purchase prices paid for such
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participations shall be returned to such Bank to the extent of such recovery,
but without interest (unless the purchasing Bank is required to pay interest on
the amount recovered to the Person recovering such amount, in which case the
selling Bank shall be required to pay interest at a like rate). The Borrower
expressly consents to the foregoing arrangements and agrees that any holder of
a participation in any rights hereunder so purchased or acquired pursuant to
this Section 9.8(a) shall, with respect to such participation, be entitled to
all of the rights of a Bank under Sections 7.2, 9.2 and 9.7 and may exercise
any and all rights of set-off with respect to such participation as fully as
though the Borrower were directly indebted to the holder of such participation
for Loans in the amount of such participation.
(b) Each Bank agrees to exercise any right of
counterclaim, set-off, banker's lien or similar right that it may have in
respect of the Borrower in a manner so as to apportion the amount subject to
such exercise, on a pro rata basis, between (i) obligations of the Borrower for
amounts subject to the sharing provisions of Section 9.8(a) and (ii) other
Liabilities of the Borrower.
Section 9.9. Assignments and Participations. (a)
Assignments. (i) The Borrower may not assign any of its rights or obligations
under the Loan Documents without the prior written consent of the Issuing Bank
and each Bank, and no assignment of any such obligation shall release the
Borrower therefrom unless the Issuing Bank and each Bank shall have consented
to such release in a writing specifically referring to the obligation from
which the Borrower is to be released.
(ii) Each Bank may from time to time assign any or all of
its rights and obligations under the Loan Documents to one or more Eligible
Assignees; provided that, except in the case of the grant of a security
interest to a Federal Reserve Bank (which may be made without condition or
restriction), no such assignment shall be effective unless the assignment is
consented to (unless an Event of Default specified in Section 6.1(f) with
respect to the Borrower exists) by the Agent whose such consent shall not be
unreasonably withheld and (unless an Event of Default exists) by the Borrower
whose consent shall not unreasonably be withheld. The assigning Bank shall
deliver, or cause to be delivered, a Notice of Assignment to the Borrower and
the Agent, which Notice of Assignment shall set forth the Notice Address, the
Domestic Lending Office and the Eurodollar Lending Office of the assignee Bank.
In the event of any effective assignment by a Bank, the Borrower shall, against
receipt of the existing Notes of the assignor Bank, issue new Notes to the
assignee Bank and, in the case of a partial assignment, to the assignor Bank,
appropriately reflecting such assignment.
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(b) Participations. Each Bank may from time to time sell
or otherwise grant participations in any or all of its rights and obligations
under the Loan Documents without the consent of the Borrower, the Agent, the
Issuing Bank or any other Bank. In the event of any such grant by a Bank of a
participation, such Bank's obligations under the Loan Documents to the other
parties thereto shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, and the Borrower, the Agent and the
other Banks may continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations thereunder. A Bank may not
grant to any holder of a participation the right to require such Bank to take
or omit to take any action under the Loan Documents, except that a Bank may
grant to any such holder the right to require such holder's consent to (i)
reduce (A) the principal of or the rate of interest on (1) such Bank's Loans or
Notes or (2) any of the Drawings or (B) the fees payable to such Bank
hereunder, (ii) postpone any date fixed for (A) any payment of (1) principal of
or interest on (aa) such Bank's Loans or Notes or (bb) any of the Drawings or
(2) the fees payable to such Bank hereunder or (B) the expiration of any Letter
of Credit if such postponement would extend the expiration date of such Letter
of Credit beyond the Termination Date, (iii) permit the Borrower to assign any
of its obligations under the Loan Documents to any other Person. Each holder
of a participation in any rights under the Loan Documents, if and to the extent
the applicable participation agreement so provides, shall, with respect to such
participation, be entitled to all of the rights of a Bank as fully as though it
were a Bank under Sections 1.20, 7.2, 7.3, 7.4, 9.2(d) and 9.6 (subject to any
conditions imposed on a Bank hereunder with respect thereto, including delivery
of the forms and certificates required under Section 1.20(c)) and may exercise
any and all rights of set-off with respect to such participation as fully as
though the Borrower were directly indebted to the holder of such participation
for Loans in the amount of such participation; provided, however, that no
holder of a participation shall be entitled to any amounts that would otherwise
be payable to it with respect to its participation under Section 1.20 or 7.2
unless (x) such amounts are payable in respect of Regulatory Changes that are
enacted, adopted or issued after the date the applicable participation
agreement was executed or (y) such amounts would have been payable to the Bank
that granted such participation if such participation had not been granted.
Each Bank selling or granting a participation shall indemnify the Borrower and
the Agent for any Taxes and Liabilities that they may sustain as a result of
such Bank's failure to withhold and pay any Taxes applicable to payments by
such Bank to its participant in respect of such participation.
Section 9.10. Governing Law. This Agreement and the Notes
(including matters relating to the Maximum
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Permissible Rate) shall be construed in accordance with and governed by the law
of the State of New York (without giving effect to its choice of law
principles).
Section 9.11. Judicial Proceedings; Waiver of Jury Trial.
The Borrower agrees that any judicial proceeding brought against it with
respect to any Loan Document Related Claim may be brought in any court of
competent jurisdiction in the City of New York and irrevocably waives any
objection it may now or hereafter have as to the venue of any such proceeding
brought in such a court or that such a court is an inconvenient forum. The
Borrower waives personal service of process and consents that service of
process upon it may be made by certified or registered mail, return receipt
requested, at its address specified or determined in accordance with the
provisions of Section 9.1, and service so made shall be deemed completed on the
third Business Day after such service is deposited in the mail. Any judicial
proceeding by the Borrower against the Agent, the Issuing Bank or any Bank
involving any Loan Document Related Claim shall be brought only in a court
located in, in the case of the Agent, the City and State of New York and, in
the case of a Bank or the Issuing Bank, the jurisdiction in which such Person's
principal United States office is located. THE BORROWER, THE AGENT, THE
ISSUING BANK AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING ANY LOAN DOCUMENT RELATED CLAIM.
Section 9.12. LIMITATION OF LIABILITY. NEITHER THE AGENT NOR
THE ISSUING BANK NOR THE BANKS NOR ANY OTHER INDEMNIFIED PERSON SHALL HAVE ANY
LIABILITY WITH RESPECT TO, AND THE BORROWER HEREBY WAIVES, RELEASES AND AGREES
NOT TO SUE FOR, ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY THE
BORROWER IN CONNECTION WITH ANY LOAN DOCUMENT RELATED CLAIM.
Section 9.13. Severability of Provisions. Any provision of
the Loan Documents that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
thereof or affecting the validity or enforceability of such provision in any
other jurisdiction. To the extent permitted by Applicable Law, the Borrower
hereby waives any provision of Applicable Law that renders any provision of the
Loan Documents prohibited or unenforceable in any respect.
Section 9.14. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto were upon the same instrument.
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Section 9.15. Survival of Obligations. Except as otherwise
expressly provided therein, the rights and obligations of the Borrower, the
Agent, the Issuing Bank, the Banks and the other Indemnified Persons under the
Loan Documents shall survive the Repayment Date.
Section 9.16. Entire Agreement. This Agreement and the Notes
embody the entire agreement among the Borrower, the Agent, the Issuing Bank and
the Banks relating to the subject matter hereof and supersede all prior
agreements, representations and understandings, if any, relating to the subject
matter hereof.
Section 9.17. Successors and Assigns. All of the provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
Section 9.18 Cash Collateral. If, at any time, cash
collateralization of Contingent Reimbursement Obligations shall be required
pursuant to any provision of any of the Loan Documents, such cash
collateralization shall be made by deposit of funds in Dollars, in the amount
of such payment or prepayment, into an interest bearing cash collateral account
at the Agent's Office, which account shall be under the dominion and control of
the Agent and is hereby pledged to the Banks and the Issuing Bank as security
for the payment of the Contingent Reimbursement Obligations and any other
amounts that may become payable hereunder. Funds deposited in such account,
and any income thereon, may be applied by the Agent against amounts payable
under the Loan Documents as such amounts become due. Any funds remaining in
such account when all Contingent Reimbursement Obligations and other amounts
payable under the Loan Documents have been paid shall be returned to the
Borrower.
ARTICLE 10.
INTERPRETATION
Section 10.1. Defined Terms. For the purposes of this
Agreement:
"Accumulated Funding Deficiency" has the meaning ascribed to
that term in Section 302 of ERISA.
"Adjusted Eurodollar Rate" means, for any Interest Period, a
rate per annum (rounded upward, if necessary, to the next higher 1/16 of 1%)
equal to the rate obtained by dividing (a) the Eurodollar Rate for such
Interest Period by (b) a percentage equal to 1 minus the Reserve Requirement in
effect from time to time during such Interest Period.
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"Adjustment Date" means the date which is two Business Days
after the earlier to occur of (a) the date upon which the financial statements
required pursuant to Section 5.1(a) or 5.1(b), as the case may be, and the
accompanying officer's certificate required pursuant to Section 5.1(c), for the
fiscal period most recently ended are delivered and (b) the date upon which
such financial statements and officer's certificate for such fiscal period were
required to be delivered; provided that, in the event that such financial
statements and officer's certificate are not delivered on or prior to the date
when due, the date which is two Business Days after such financial statements
and officer's certificate are actually delivered also shall constitute an
"Adjustment Date".
"Affiliate" means, with respect to a Person, any other Person
that, directly or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, such first Person; unless
otherwise specified, "Affiliate" means an Affiliate of the Borrower.
"Agent" means Bank of Montreal, as agent for the Banks under
the Loan Documents, and any successor Agent appointed pursuant to Section 8.7.
"Agent's Fee Letter" means the letter agreement dated
September 16, 1993 between the Borrower and Bank of Montreal.
"Agent's Office" means the address of the Agent specified in
or determined in accordance with the provisions of Section 9.1.
"Agreement" means this Agreement, including all schedules,
annexes and exhibits hereto.
"Agreement Date" means November 19, 1993.
"Applicable Law" means, anything in Section 9.10 to the
contrary notwithstanding, (a) all applicable common law and principles of
equity and (b) all applicable provisions of all (i) constitutions, statutes,
rules, regulations and orders of governmental bodies, (ii) Governmental
Approvals and (iii) orders, decisions, judgments and decrees of all courts
(whether at law or in equity or admiralty) and arbitrators.
"Application" means a request for the issuance or amendment of
a Letter of Credit either (a) in the form of Schedule 1.8 or (b) in such other
form as the Issuing Bank shall require.
"Bank" means (a) any Person listed on the signature pages
hereof following the Agent and (b) any Person that has
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been assigned any or all of the rights or obligations of a Bank pursuant to
Section 9.9(a).
"Bank Nonparticipation" means (a) the inability of any Bank to
acquire any Participation pursuant to Section 1.8(b) or to make any payment
required by it under Section 1.10(a) because of such Bank's having been subject
to receivership, insolvency or other similar laws, (ii) the refusal of any Bank
to acquire any Participation pursuant to Section 1.8(b) or to make any payment
required by it under Section 1.10(a) or (iii) the giving by any Bank to the
Issuing Bank of any notice (which has not been retracted) of its intention not
to so acquire any Participation or to make any such required payment.
"Bank Tax" means any income or franchise tax imposed upon any
Bank by any jurisdiction (or political subdivision thereof) in which such Bank
or any of its Lending Offices is located.
"Base Financial Statements" means the audited, consolidated
balance sheet of the Borrower and the Consolidated Subsidiaries for 1992 and
the related statements of income, retained earnings and, as applicable, changes
in financial position or cash flows for the fiscal year ended with the date of
such balance sheet.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (a) the Prime Rate in effect on such day and (b) the sum of the
Federal Funds Rate in effect on such day plus 1/2%.
"Base Rate Loan" means any Loan the interest on which is, or
is to be, as the context may require, computed on the basis of the Base Rate.
"Base Rate Margin" means the amount determined as such
pursuant to Section 1.16(a).
"Benefit Plan" of any Person, means, at any time, any employee
benefit plan (including a Multiemployer Benefit Plan), the funding requirements
of which (under Section 302 of ERISA or Section 412 of the Code) are, or at any
time within six years immediately preceding the time in question were, in whole
or in part, the responsibility of such Person.
"Borrower" means Lechters, Inc., a New Jersey corporation.
"Business Day" means any day other than a Saturday, Sunday or
other day on which banks in New York City are authorized to close.
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"Capital Security" means, with respect to any Person, (a) any
share of capital stock of such Person or (b) any security convertible into, or
any option, warrant or other right to acquire, any share of capital stock of
such Person.
"Capitalized Lease" means any lease the obligation for Rentals
with respect to which is required to be capitalized on a balance sheet of the
lessee in accordance with GAAP.
"Capitalized Rentals" means as of the date of any
determination the amount determined in accordance with GAAP at which the
aggregate Rentals due and to become due under all Capitalized Leases under
which the Borrower or any Subsidiary is a lessee would be reflected as a
liability on a consolidated balance sheet of the Borrower and its Subsidiaries,
but excluding industrial revenue bond financing and pollution control bond
financing.
"Clean-Up Period" means with respect to any calendar year, the
period of ninety consecutive days, which period shall end not later than May 30
of such year, that the Borrower shall specify as the Clean-Up Period for such
year by notice to the Agent.
"Code" means the Internal Revenue Code of 1986.
"Commitment" of any Bank means the amount set forth opposite
such Bank's name under the heading "Commitment" on Annex A or, in the case of a
Bank that becomes a Bank pursuant to an assignment, the amount of the
assignor's Commitment assigned to such Bank, in either case, as the same may be
reduced from time to time pursuant to Section 1.14 or increased or reduced from
time to time pursuant to assignments in accordance with Section 9.9(a).
"Consolidated Current Assets" means, at any time, the
consolidated current assets of the Borrower and the Consolidated Subsidiaries
as of such time.
"Consolidated Current Liabilities" means, at any time, the
consolidated current liabilities of the Borrower and the Consolidated
Subsidiaries as of such time; provided that in any event "Consolidated Current
Liabilities" shall include all Indebtedness for borrowed money other than
Funded Debt.
"Consolidated EBIRTDA" means, for any period, the sum of (a)
Consolidated Net Income for such period and (b) to the extent deducted in
determining Consolidated Net Income for such period, interest expense, rent
expense, income tax expense, depreciation expense and amortization expense.
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"Consolidated EBITDA" means, for any period, the sum of (a)
Consolidated Net Income for such period and (b) to the extent deducted in
determining Consolidated Net Income for such period, interest expense, income
tax expense, depreciation expense and amortization expense.
"Consolidated Fixed Charges" means, for any period, the sum of
(a) the aggregate amount of principal payments of Indebtedness scheduled to
have been made by the Borrower and the Consolidated Subsidiaries during such
period, determined on a consolidated basis, (b) to the extent deducted in
determining Consolidated Net Income for such period, interest expense and rent
expense and (c) capital expenditures.
"Consolidated Indebtedness" means, at any time, the
consolidated Indebtedness of the Borrower and the Consolidated Subsidiaries as
of such time.
"Consolidated Net Income" means, for any period, the amount of
consolidated net income of the Borrower and the Consolidated Subsidiaries for
such period (taken as a cumulative whole) provided that there shall be
excluded: (a) any net income (or net loss) of a Consolidated Subsidiary (i)
for any period during which it was not a Consolidated Subsidiary or (ii), in
case of any such net income, to the extent that the declaration or payment of
dividends or similar distributions by that Consolidated Subsidiary is not at
the time permitted by operation of the terms of any Contract or Applicable Law;
(b) any net income (or net loss) of any Person (other than a Consolidated
Subsidiary) in which the Borrower or any Consolidated Subsidiary has an
ownership interest, except to the extent that any such income has actually been
received by the Borrower or such Subsidiary in the form of cash dividends or
similar distributions; (c) any restoration of any contingency reserve, except
to the extent that provision for such reserve was made out of income during
such period; (d) any net gains or losses on the sale or other disposition, not
in the ordinary course of business, of investments and other capital assets,
provided that there shall also be excluded any related charges for taxes
thereon; (e) any net gain arising from the collection of the proceeds of any
insurance policy; (f) any write-up of any asset; (g) any net gains resulting
from the extinguishment or defeasance of any Indebtedness; (h) any earnings
from discontinued businesses; and (i) any extraordinary gains or losses. For
the purpose of calculating Consolidated Net Income for any period, no deduction
shall be taken for the creation of the reserve in an aggregate amount of up to
$15,000,000 anticipated to be taken by the Borrower prior to the end of the
Borrower's fiscal year ending in January 1994 in respect of losses, costs and
expenses to be incurred by the Borrower in connection with the closing,
relocation or rehabilitation of certain stores but such losses, costs and
expenses shall constitute a deduction from Consolidated Net Income in the
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period and to the extent such items would constitute a deduction without giving
effect to the creation of such reserve.
For the purposes of Sections 4.23 and 4.24, in calculating
Consolidated Net Income for any period, no deduction shall be taken for the
creation of the reserve in an aggregate amount of up to $11,000,000 (on pre-tax
basis) to be taken by the Borrower prior to the end of the Borrower's fiscal
quarter ending in July 1994 in respect of Restructuring Charges. For purposes
of this definition, "Restructuring Charges" means markdowns related to
discontinued product lines, losses incurred in connection with the closing of
stores and personnel severance costs.
"Consolidated Net Tangible Assets" means as of the date of
determination thereof, the total amount of all assets of the Borrower and its
Subsidiaries less the sum (without duplication) of (a) the amount, if any, at
which intangible assets (including goodwill, trade names, trademarks, patents,
organization expense and other similar assets which are property classified as
"intangible assets" in accordance with GAAP) and unamortized debt discount and
expense appear on a consolidated balance sheet, (b) any write-up of fixed
assets after May 1, 1991, (c) all items which in accordance with GAAP would be
included on the liability side of a consolidated balance sheet other than
Minority Interests, deferred taxes and Consolidated Funded Debt, (d) Restricted
Investments, (e) receivables payable in other than United States funds if such
funds are not freely convertible into United States funds, and (f) Foreign
Assets of the Borrower and its Subsidiaries other than receivables described in
clause (e) of this definition to the extent that the amount of such Foreign
Assets exceeds 10% of Consolidated Net Tangible Assets (computed with the
inclusion therein of any such Foreign Assets).
"Consolidated Subsidiary" means, with respect to any Person at
any time, any Subsidiary or other Person the accounts of which would be
consolidated with those of such first Person in its consolidated financial
statements as of such time; unless otherwise specified, "Consolidated
Subsidiary" means a Consolidated Subsidiary of the Borrower.
"Consolidated Tangible Net Worth" means, at any time, the
consolidated stockholders' equity of the Borrower and the Consolidated
Subsidiaries less Intangible Assets (to the extent included in determining such
consolidated stockholders' equity) and less their consolidated Mandatorily
Redeemable Stock (except to the extent deducted in determining such
consolidated stockholders' equity), in each case, as of such time. For this
purpose "Intangible Assets" means the amounts of (a) all write-ups (other than
write-ups resulting from foreign currency transactions and write-ups of
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assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to January 30, 1993 in the book value of any asset
owned by the Borrower or a Consolidated Subsidiary, (b) all investments in
Subsidiaries that are not Consolidated Subsidiaries and all equity investments
in Persons that are not Subsidiaries, and (c) all unamortized debt discount and
expense, unamortized deferred charges, goodwill, Intellectual Property,
organizational or research and developmental expenses and other intangible
items.
"Contingent Reimbursement Obligation" means, with respect to a
Letter of Credit, at any time, the amount of the contingent obligation of the
Borrower, at such time, to reimburse the Issuing Bank for any Drawing that may
be made under such Letter of Credit.
"Contract" means (a) any agreement (whether bi-lateral or
uni-lateral or executory or non-executory and whether a Person entitled to
rights thereunder is so entitled directly or as a third-party beneficiary),
including an indenture, lease or license, (b) any deed or other instrument of
conveyance, (c) any certificate of incorporation or charter and (d) any by-law.
"Credit Extension" means (a) the making by any Bank of any
Loan or (b) the issuance by the Issuing Bank of any Letter of Credit.
"Debt" means any Liability that constitutes "debt" or "Debt"
under section 101(11) of the Bankruptcy Code or under the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any analogous Applicable
Law.
"Default" means any condition or event that constitutes an
Event of Default or that with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Dollars" and the sign "$" mean lawful money of the United
States of America.
"Domestic Lending Office" means (a) as applied to a Bank, (i)
the branch or office of such Bank set forth below such Bank's name under the
heading "Domestic Lending Office" on Annex A or, in the case of a Bank that
becomes a Bank pursuant to an assignment, the branch or office of such Bank set
forth under the heading "Domestic Lending Office" in the Notice of Assignment
given to the Borrower and the Agent with respect to such assignment or (ii)
such other branch or office of such Bank designated by such Bank from time to
time as the branch or office at which its Base Rate Loans and Participations
are to be made or maintained and (b) as applied to the Issuing Bank, if such
branch or office is
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different from the Domestic Lending Office of the Bank that is the Issuing
Bank, (i) the branch or office of the Issuing Bank set forth below the name of
the Bank that is the Issuing Bank under the heading "Issuing Bank Domestic
Lending Office" on Annex A or (ii) such other branch or office of such Bank
designated by the Issuing Bank from time to time as the branch or office at
which Contingent Reimbursement Obligations and Drawings are to be made or
maintained.
"Domestic Note" means any promissory note in the form of
Exhibit A-1.
"Drawing" means (a) any amount disbursed by the Issuing Bank
under a Letter of Credit or (b) as the context may require, the obligation of
the Borrower to reimburse the Issuing Bank for such disbursement.
"Effective Date" means the date set forth as such on the last
signature page hereof.
"Eligible Assignee" means (a) any commercial bank, savings and
loan institution or savings bank organized under the laws of the United States,
or any State thereof, and having combined capital and surplus in excess of
$100,000,000, (b) any commercial bank organized under the laws of any other
country that is a member of the Organization for Economic Cooperation and
Development ("OECD"), or a political subdivision of any such country, and
having combined capital and surplus (or the equivalent thereof under the
accounting principles applicable thereto) in excess of $100,000,000, provided
that such bank is acting through a branch, agency or Affiliate located in the
country in which it is organized or another country that is also a member of
the OECD, or (c) the central bank of any country that is a member of the OECD.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA Affiliate" means, with respect to any Person, any other
Person, including a Subsidiary or other Affiliate of such first Person, that is
a member of any group of organizations within the meaning of Code Sections
414(b), (c), (m) or (o) of which such first Person is a member.
"Eurodollar Business Day" means any Business Day on which
dealings in Dollar deposits are carried on in the London interbank market and
on which commercial banks are open for domestic and international business
(including dealings in Dollar deposits) in London, England.
"Eurodollar Lending Office" means (a) as applied to any Bank
(i) the branch or office of such Bank set forth below such Bank's name under
the heading "Eurodollar Lending
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Office" on Annex A or, in the case of a Bank that becomes a Bank pursuant to an
assignment, the branch or office of such Bank set forth under the heading
"Eurodollar Lending Office" in the Notice of Assignment given to the Borrower
and the Agent with respect to such assignment or (ii) such other branch or
office of such Bank designated by such Bank from time to time as the branch or
office at which its Eurodollar Rate Loans and Participations are to be made or
maintained and (b) as applied to the Issuing Bank, if such branch or office is
different from the Eurodollar Lending Office of the Bank that is the Issuing
Bank, (i) the branch or office of the Issuing Bank set forth below the name of
the Bank that is the Issuing Bank under the heading "Issuing Bank Eurodollar
Lending Office" on Annex A or (ii) such other branch or office of such Bank
designated by the Issuing Bank from time to time as the branch or office at
which Contingent Reimbursement Obligations and Drawings are to be made or
maintained.
"Eurodollar Note" means any promissory note in the form of
Exhibit A-2.
"Eurodollar Rate" means, for any Interest Period, the rate per
annum determined by the Agent to be the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the rates per annum determined, respectively,
by each Reference Bank to be the rate at which such Reference Bank offered or
would have offered to place with first-class banks in the London interbank
market deposits in Dollars in amounts comparable to the Eurodollar Rate Loan of
such Reference Bank to which such Interest Period applies, for a period equal
to such Interest Period, at 11:00 a.m. (London time) on the second Eurodollar
Business Day before the first day of such Interest Period. If any Reference
Bank is unable or otherwise fails to furnish the Agent with appropriate rate
information in a timely manner, the Agent shall determine the Eurodollar Rate
based on the rate information furnished by the remaining Reference Banks.
"Eurodollar Rate Loan" means any Loan the interest on which
is, or is to be, as the context may require, computed on the basis of the
Adjusted Eurodollar Rate.
"Eurodollar Rate Margin" means the amount determined as such
pursuant to Section 1.16(a).
"Event of Default" means any of the events specified in
Section 6.1.
"Excess Invested Cash" means, at any time, an amount equal to
the difference between (i) the amount of Invested Cash at such time and (ii)
(x) during the Holiday Build-Up Period, $35,000,000, and (y) otherwise,
$15,000,000.
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"Existing Benefit Plan" means any Benefit Plan listed on
Schedule 4.16.
"Existing Credit Agreement" means the Credit Agreement, dated
as of November 19, 1993, among Lechters, Inc., the Banks listed on the
signature pages thereof, and Bank of Montreal, as Agent, as amended by
Amendment No. 1, dated as of September 6, 1994 and Amendment No. 2, dated as of
July 28, 1995.
"Existing Guaranty" means (a) any Guaranty outstanding on the
Agreement Date, to the extent set forth on Schedule 4.9, and (b) any Guaranty
that constitutes a renewal, extension or replacement of an Existing Guaranty,
but only if (i) at the time such Guaranty is entered into and immediately after
giving effect thereto, no Default would exist, (ii) such Guaranty is binding
only on the obligor or obligors under the Guaranty so renewed, extended or
replaced, (iii) the principal amount of the obligations Guaranteed by such
Guaranty does not exceed the principal amount of the obligations Guaranteed by
the Guaranty so renewed, extended or replaced at the time of such renewal,
extension or replacement and (iv) the obligations Guaranteed by such Guaranty
bear interest at a rate per annum not exceeding the rate borne by the
obligations Guaranteed by the Guaranty so renewed, extended or replaced except
for any increase that is commercially reasonable at the time of such increase.
"Existing Letter of Credit" means, to the extent set forth on
Schedule 4.21, any letter of credit for the account of the Borrower or any
Subsidiary which has not expired, terminated or been fully drawn upon prior to
the Effective Date and the final expiration date of which is not later than 60
days after the Effective Date.
"Exposure" of a Bank means, at any time, an amount equal to
the sum of (a) the aggregate unpaid principal amount at such time of the Loans
of such Bank, plus (b) the aggregate at such time of the Letter of Credit
Amounts of such Bank.
"Federal Funds Rate" means, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business
Day) by the Federal Reserve Bank of New York or, if such rate is not so
published for any day that is a Business Day, the average of quotations for
such day on such transactions received by Bank of Montreal from three Federal
funds brokers of recognized standing selected by such bank.
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"Foreign Assets" of any Person means assets located outside
(including amounts payable by obligors located outside) the United States and
Canada, except foreign receivables payable in United States dollars or in
currencies which are freely convertible into United States dollars and which
are due within twelve months from obligors located in countries which do not
restrict the transfer of funds for the payment of such receivables.
"Funded Debt" of any Person means (i) all Indebtedness for
borrowed money having a final maturity of more than one year from the date of
origin thereof (or which is renewable or extendible at the option of the
obligor for a period or periods more than one year from the date of origin),
including all payments in respect thereof that are required to be made within
one year from the date of any determination of Funded Debt, whether or not
included in Consolidated Current Liabilities, (ii) all Capitalized Rentals and
(iii) all guaranties by such Person of Funded Debt of others described in
clauses (i) or (ii) of this definition. "Consolidated" when used as a prefix
to any Funded Debt means the aggregate amount of all such Funded Debt of the
Borrower and its Subsidiaries on a consolidated basis eliminating inter-company
items.
"Generally Accepted Accounting Principles" or "GAAP" means (a)
in the case of the Base Financial Statements, generally accepted accounting
principles at the time of the issuance of the Base Financial Statements and (b)
in all other cases, the accounting principles followed in the preparation of
the Base Financial Statements.
"Governmental Approval" means any authorization, consent,
approval, license or exemption of, registration or filing with, or report or
notice to, any governmental unit.
"Guaranty" of any Person means any obligation, contingent or
otherwise, of such Person (a) to pay any Liability of any other Person or to
otherwise protect, or having the practical effect of protecting, the holder of
any such Liability against loss (whether such obligation arises by virtue of
such Person being a partner of a partnership or participant in a joint venture
or by agreement to pay, to keep well, to purchase assets, goods, securities or
services or to take or pay, or otherwise) or (b) incurred in connection with
the issuance by a third Person of a Guaranty of any Liability of any other
Person (whether such obligation arises by agreement to reimburse or indemnify
such third Person or otherwise). The word "Guarantee" when used as a verb has
the correlative meaning.
"Holiday Build-Up Period" means with respect to any fiscal
year, a period of thirty consecutive days that the
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Borrower shall specify as the Holiday Build-Up Period for such year by notice
to the Agent.
"Indebtedness" of any Person means (in each case, whether such
obligation is with full or limited recourse) (a) any obligation of such Person
for borrowed money, (b) any obligation of such Person evidenced by a bond,
debenture, note or other similar instrument, (c) any obligation of such Person
to pay the deferred purchase price of property or services, except a trade
account payable that arises in the ordinary course of business but only if and
so long as the same is payable on customary trade terms, (d) any obligation of
such Person as lessee under a capital lease, (e) any Mandatorily Redeemable
Stock of such Person owned by any Person other than such Person or an
Indebtedness-Free Subsidiary of such Person (the amount of such Mandatorily
Redeemable Stock to be determined for this purpose as the higher of the
liquidation preference of and the amount payable upon redemption of such
Mandatorily Redeemable Stock), (f) any obligation of such Person to purchase
securities or other property that arises out of or in connection with the sale
of the same or substantially similar securities or property, (g) any
non-contingent obligation of such Person to reimburse any other Person in
respect of amounts paid under a letter of credit or other Guaranty issued by
such other Person to the extent that such reimbursement obligation remains
outstanding after it becomes non-contingent, (h) any obligation with respect to
an interest rate or currency swap or similar obligation obligating such Person
to make payments, whether periodically or upon the happening of a contingency,
except that if any agreement relating to such obligation provides for the
netting of amounts payable by and to such Person thereunder or if any such
agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount thereof, (i) any Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) a Lien on any asset of such Person and (j) any Indebtedness of
others Guaranteed by such Person.
"Indebtedness-Free Subsidiary" means a Subsidiary (a) all of
the Capital Securities, other ownership interests and rights to acquire
ownership interests of which are owned or controlled by the Borrower, by one or
more other Indebtedness-Free Subsidiaries or by the Borrower and one or more
other Indebtedness-Free Subsidiaries and (b) that has no Indebtedness other
than the Loans and Indebtedness owing to the Borrower or another
Indebtedness-Free Subsidiary.
"Indemnified Person" means any Person that is, or at any time
was, the Agent, the Issuing Bank, a Bank, an
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Affiliate of any such Person or a director, officer, employee or agent of any
such Person.
"Information" means data, certificates, reports, statements
(including financial statements), opinions of counsel, documents and other
information.
"Intellectual Property" means (a) (i) patents and patent
rights, (ii) trademarks, trademark rights, trade names, trade name rights,
corporate names, business names, trade styles, service marks, logos and general
intangibles of like nature and (iii) copyrights, in each case whether
registered, unregistered or under pending registration and, in the case of any
such that are registered or under pending registration, whether registered or
under pending registration under the laws of the United States or any other
country, (b) reissues, continuations, continuations-in-part and extensions of
any Intellectual Property referred to in clause (a), and (c) rights relating to
any Intellectual Property referred to in clause (a) or (b), including rights
under applications (whether pending under the laws of the United States or any
other country) or licenses relating thereto.
"Interest Payment Date" means the last day of January, April,
May and October of each year.
"Interest Period" means a period commencing, in the case of
the first Interest Period applicable to a Eurodollar Rate Loan, on the date of
the making of, or conversion into, such Loan, and, in the case of each
subsequent, successive Interest Period applicable thereto, on the last day of
the immediately preceding Interest Period, and ending, depending on the Type of
Loan on the same day in the first, second or third calendar month thereafter,
except that (a) any Interest Period that would otherwise end on a day that is
not a Eurodollar Business Day shall be extended to the next succeeding
Eurodollar Business Day unless such Eurodollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Eurodollar Business Day and (b) any Interest Period that begins on
the last Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month in which such
Interest Period ends) shall end on the last Eurodollar Business Day of a
calendar month.
"Invested Cash" means all cash and securities (other than (i)
any Capital Securities of the Borrower and (ii) any securities to be
repurchased by the Borrower pursuant to any Permitted Repo, the aggregate
amount of which obligations to repurchase does not exceed $15,000,000 at any
one time outstanding) owned or held by the Borrower,
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excluding, however, the amount (not exceeding $2,800,000) escrowed with the
Agent pursuant to Section 3.12.
"Investment" of any Person means (a) any Capital Security,
evidence of Indebtedness or other security or instrument issued by any other
Person, (b) any loan, advance or extension of credit to, or any contribution to
the capital of, any other Person and (c) any other investment in any other
Person. An Investment shall be deemed to be "outstanding", except to the
extent that it has been paid or otherwise satisfied in cash or the Person
making such Investment has received cash in consideration for the sale thereof,
notwithstanding the fact that such Investment may otherwise have been forgiven,
released, canceled or otherwise nullified.
"Issuing Bank" means the Bank that, with its consent and the
consent of each existing Issuing Bank, if any, is designated as such by the
Borrower; provided that the Issuing Bank may execute any of its duties under
this Agreement or the other Loan Documents by or through agents. On the
Effective Date such Bank is Bank of Montreal.
"LC Sublimit" means an amount equal to $30,000,000, as such
amount may be reduced from time to time pursuant to Section 1.14.
"Lending Office" of any Bank or the Issuing Bank means the
Domestic Lending Office or the Eurodollar Lending Office of such Bank.
"Letter of Credit" means a letter of credit issued by the
Issuing Bank pursuant to Section 1.7(a).
"Letter of Credit Amount" of a Participating Bank in a Letter
of Credit in which it has a Participation means, at any time, an amount equal
to the product of (a) the sum of (i) the aggregate unpaid principal amount of
all Drawings under such Letter of Credit at such time and (ii) the amount of
the Contingent Reimbursement Obligation with respect to such Letter of Credit
at such time multiplied by (b) such Participating Bank's Participating Bank
Percentage with respect to such Letter of Credit.
"Liability" of any Person means (in each case, whether with
full or limited recourse) any indebtedness, liability, obligation, covenant or
duty of or binding upon, or any term or condition to be observed by or binding
upon, such Person or any of its assets, of any kind, nature or description,
direct or indirect, absolute or contingent, due or not due, contractual or
tortious, liquidated or unliquidated, whether arising under Contract,
Applicable Law, or otherwise, whether now existing or hereafter arising, and
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whether for the payment of money or the performance or non-performance of any
act.
"Lien" means, with respect to any property or asset (or any
income or profits therefrom) of any Person (in each case whether the same is
consensual or nonconsensual or arises by Contract, operation of law, legal
process or otherwise) (a) any mortgage, lien, pledge, attachment, levy or other
security interest of any kind thereupon or in respect thereof or (b) any other
arrangement, express or implied, under which the same is subordinated,
transferred, sequestered or otherwise identified so as to subject the same to,
or make the same available for, the payment or performance of any Liability in
priority to the payment of the ordinary, unsecured Liabilities of such Person.
For the purposes of this Agreement, a Person shall be deemed to own subject to
a Lien any asset that it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" means any amount advanced by a Bank pursuant to Section
1.1.
"Loan Document Related Claim" means any claim or dispute
(whether arising under Applicable Law, including any "environmental" or similar
law, under Contract or otherwise and, in the case of any proceeding relating to
any such claim or dispute, whether civil, criminal, administrative or
otherwise) in any way arising out of, related to, or connected with, the Loan
Documents, the relationships established thereunder or any actions or conduct
thereunder or with respect thereto, whether such claim or dispute arises or is
asserted before or after the Effective Date or before or after the Repayment
Date.
"Loan Documents" means (a) this Agreement, the Notes, the
Letters of Credit and the Applications and (b) all other agreements, documents
and instruments relating to, arising out of, or in any way connected with (i)
any agreement, document or instrument referred to in clause (a), (ii) any other
agreement, document or instrument referred to in this clause (b) or (iii) any
of the transactions contemplated by any agreement, document or instrument
referred to in clause (a) or in this clause (b).
"Mandatorily Redeemable Stock" means, with respect to any
Person, any share of such Person's capital stock to the extent that it is (a)
redeemable, payable or required to be purchased or otherwise retired or
extinguished, or convertible into any Indebtedness or other Liability of such
Person, (i) at a fixed or determinable date, whether by operation of a sinking
fund or otherwise, (ii) at the option of any Person other than such Person or
(iii) upon the
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occurrence of a condition not solely within the control of such Person, such as
a redemption required to be made out of future earnings or (b) convertible into
Mandatorily Redeemable Stock.
"Materially Adverse Effect" means, (a) with respect to any
Person, any materially adverse effect on such Person's business, assets,
Liabilities, financial condition, results of operations or business prospects,
(b) with respect to a group of Persons "taken as a whole", any materially
adverse effect on such Persons' business, assets, Liabilities, financial
conditions, results of operations or business prospects taken as a whole on,
where appropriate, a consolidated basis in accordance with Generally Accepted
Accounting Principles and (c) with respect to any Loan Document, any adverse
effect, WHETHER OR NOT MATERIAL, on the binding nature, validity or
enforceability thereof as an obligation of the Borrower.
"Maximum Permissible Rate" means, with respect to interest
payable on any amount, the rate of interest on such amount that, if exceeded,
could, under Applicable Law, result in (a) civil or criminal penalties being
imposed on the payee or (b) the payee's being unable to enforce payment of (or,
if collected, to retain) all or any part of such amount or the interest payable
thereon.
"Minority Interests" means any shares of stock of any class of
a Subsidiary (other than directors' qualifying shares as required by law) that
are not owned by the Borrower and/or one or more of its Subsidiaries. Minority
Interests shall be valued by valuing Minority Interests constituting preferred
stock at the voluntary or involuntary liquidating value of such preferred
stock, whichever is greater, and by valuing Minority Interests constituting
common stock at the book value of capital and surplus applicable thereto
adjusted, if necessary, to reflect any changes form the book value of such
common stock required by the foregoing method of valuing Minority Interests in
preferred stock.
"Multiemployer Benefit Plan" means any Benefit Plan that is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Nonparticipating Bank" means a Bank designated by the Issuing
Bank as a Bank with respect to which a Bank Nonparticipation has occurred. The
designation of a Bank by the Issuing Bank as a "Nonparticipating Bank" shall
not affect the status of such Bank as a Participating Bank in respect of
Letters of Credit issued prior to such designation.
"Note" means any Domestic Note or Eurodollar Note.
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"Notice of Assignment" means any notice to the Borrower and
the Agent with respect to an assignment pursuant to Section 9.9(a).
"Participating Bank" means a Bank that is not a
Nonparticipating Bank.
"Participating Bank Percentage" means, as applied to a
Participating Bank with respect to a Letter of Credit, the percentage obtained
by dividing such Participating Bank's Commitment at the time of the issuance of
such Letter of Credit by the sum of the Commitments at such time of all of the
Banks that are Participating Banks with respect to such Letter of Credit.
"Participation" in a Letter of Credit means, in the case of a
Participating Bank that is not the Issuing Bank, the participation interest in
such Letter of Credit acquired by such Participating Bank pursuant to Section
1.08(b) and, in the case of a Participating Bank that is the Issuing Bank, the
Issuing Bank's retained interest in such Letter of Credit.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Guaranty" means any Guaranty that is (a) an
endorsement of a check for collection in the ordinary course of business, (b)
any Guaranty of any liability of any Wholly Owned Subsidiary other than a
Guaranty of Indebtedness of such Subsidiary, or (c) a Guaranty of and only of
the obligations of the Borrower under the Loan Documents.
"Permitted Letter of Credit" means an Existing Letter of
Credit or a Third-Party Letter of Credit.
"Permitted Letter of Credit Amount" of a Person in a Permitted
Letter of Credit at any time means an amount equal to the amount of the
obligation, contingent or otherwise, of the Borrower to reimburse such Person
for any disbursement under such Permitted Letter of Credit.
"Permitted Lien" means (a) any Lien securing and only securing
the obligations of the Borrower under the Loan Documents; (b) any Lien (i)
securing a tax, assessment or other governmental charge or levy or the claim of
a materialman, mechanic, carrier or warehouseman for labor, materials or
supplies or (ii) incidental to the lease of properties and assets (including
statutory landlords' liens), in each case, incurred in the ordinary course of
business, but only if payment thereof or the obligation secured thereby shall
not at the time be required to be made in accordance with Section 4.4 and
foreclosure, distraint, sale or other similar proceedings shall not have been
commenced; (c) any
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Lien on the properties and assets of a Subsidiary of the Borrower securing an
obligation owing to the Borrower; (d) any Lien consisting of a deposit or
pledge made in the ordinary course of business in connection with, or to secure
payment of, obligations under worker's compensation, unemployment insurance or
similar legislation; (e) any Lien arising pursuant to an order of attachment,
distraint or similar legal process arising in connection with legal
proceedings, but only if and so long as the execution or other enforcement
thereof is not unstayed for more than 20 days; (f) any Lien existing on (i) any
property or asset of any Person at the time such Person becomes a Subsidiary or
(ii) any property or asset at the time such property or asset is acquired by
the Borrower or a Subsidiary, but only, in the case of either (i) or (ii), if
and so long as (A) such Lien was not created in contemplation of such Person
becoming a Subsidiary or such property or asset being acquired, (B) such Lien
is and will remain confined to the property or asset subject to it at the time
such Person becomes a Subsidiary or such property or asset is acquired and to
fixed improvements thereafter erected on such property or asset, (C) such Lien
secures only the obligation secured thereby at the time such Person becomes a
Subsidiary or such property or asset is acquired and (D) the obligation secured
by such Lien is not in default; (g) any Lien in existence on the Agreement Date
to the extent set forth on Schedule 4.10, but only, in the case of each such
Lien, to the extent it secures an obligation outstanding on the Agreement Date
to the extent set forth on such Schedule; (h) any Lien securing Purchase Money
Indebtedness but only if, in the case of each such Lien, (i) such Lien shall at
all times be confined solely to the property or asset the purchase price of
which was financed through the incurrence of the Purchase Money Indebtedness
secured by such Lien and to fixed improvements thereafter erected on such
property or asset and (ii) such Lien attached to such property or asset within
30 days of the acquisition of such property or asset; or (i) any Lien
constituting a renewal, extension or replacement of a Lien constituting a
Permitted Lien by virtue of clause (f), (g), (h) or (i) of this definition, but
only if (i) at the time such Lien is granted and immediately after giving
effect thereto, no Default would exist, (ii) such Lien is limited to all or a
part of the property or asset that was subject to the Lien so renewed, extended
or replaced and to fixed improvements thereafter erected on such property or
asset, (iii) the principal amount of the obligations secured by such Lien does
not exceed the principal amount of the obligations secured by the Lien so
renewed, extended or replaced and (iv) the obligations secured by such Lien
bear interest at a rate per annum not exceeding the rate borne by the
obligations secured by the Lien so renewed, extended or replaced except for any
increase that is commercially reasonable at the time of such increase.
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"Permitted Repo" means any obligation of the Borrower to
repurchase securities that arises out of or in connection with the sale of the
same or substantially similar securities; provided that (i) the securities to
be repurchased shall be issued or directly and fully guaranteed or insured by
the United States Government or any agency or instrumentality thereof having
maturities of not more than three years from the date of their respective sale
by the Borrower and (ii) the obligation to repurchase any such securities shall
mature within two weeks of the sale of such securities.
"Permitted Restrictive Covenant" means (a) any covenant or
restriction contained in any Loan Document, (b) any covenant or restriction
binding upon any Person at the time such Person becomes a Subsidiary of the
Borrower if the same is not created in contemplation thereof, (c) any covenant
or restriction of the type contained in Section 4.10 that is contained in any
Contract evidencing or providing for the creation of or concerning Purchase
Money Indebtedness so long as such covenant or restriction is limited to the
property purchased therewith, (d) any covenant or restriction described in
Schedule 4.18, but only to the extent such covenant or restriction is there
identified by specific reference to the provision of the Contract in which such
covenant or restriction is contained, or (e) any covenant or restriction that
(i) is not more burdensome than an existing Permitted Restrictive Covenant that
is such by virtue of clause (b), (c), (d) or (e), (ii) is contained in a
Contract constituting a renewal, extension or replacement of the Contract in
which such existing Permitted Restrictive Covenant is contained and (iii) is
binding only on the Person or Persons bound by such existing Permitted
Restrictive Covenant.
"Perpetual Convertible Preferred Stock" means any perpetual,
convertible preferred stock of the Borrower issued on or about April 5, 1996 in
the amount of at least $20,000,000, the proceeds of which have been used, or
will be used, to redeem, repurchase, defease or retire all outstanding Senior
Notes, which stock is convertible only into capital stock of the Borrower.
"Person" means any individual, sole proprietorship,
corporation, partnership, trust, unincorporated organization, mutual company,
joint stock company, estate, union, employee organization, government or any
agency or political subdivision thereof or, for the purpose of the definition
of "ERISA Affiliate", any trade or business.
"Post-Default Rate" means the rate otherwise applicable under
Section 1.13(a) plus 2.0%.
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"Prime Rate" means the prime commercial lending rate of Bank
of Montreal, as publicly announced to be in effect from time to time. The
Prime Rate shall be adjusted automatically, without notice, on the effective
date of any change in such prime commercial lending rate. The Prime Rate is
not necessarily Bank of Montreal's lowest rate of interest.
"Prohibited Transaction" means any transaction that is
prohibited under Code Section 4975 or ERISA Section 406 and not exempt under
Code Section 4975 or ERISA Section 408.
"Purchase Money Indebtedness" means (a) Indebtedness of the
Borrower that is incurred to finance part or all of (but not more than) the
purchase price of a tangible asset, provided that (i) neither the Borrower nor
any Subsidiary had at any time prior to such purchase any interest in such
asset other than a security interest or an interest as lessee under an
operating lease and (ii) such Indebtedness is incurred within 30 days after
such purchase, or (b) Indebtedness that (i) constitutes a renewal, extension or
refunding of, but not an increase in the principal amount of, Purchase Money
Indebtedness that is such by virtue of clause (a) or (b) and (ii) bears
interest at a rate per annum that is commercially reasonable at the time such
Indebtedness is incurred.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System.
"Regulatory Change" means any Applicable Law, interpretation,
directive, request or guideline (whether or not having the force of law), or
any change therein or in the administration or enforcement thereof, that
becomes effective or is implemented or first required or expected to be
complied with after the Agreement Date, whether the same is (a) the result of
an enactment by a government or any agency or political subdivision thereof, a
determination of a court or regulatory authority, or otherwise or (b) enacted,
adopted, issued or proposed before or after the Agreement Date, including any
such that imposes, increases or modifies any Tax, reserve requirement,
insurance charge, special deposit requirement, assessment or capital adequacy
requirement, but excluding any such that imposes, increases or modifies any
Bank Tax.
"Rentals" means and includes all fixed rents (including as
such all payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the property) payable by the Borrower
or a Subsidiary, as lessee or sublessee under a lease of real or
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personal property, but is exclusive of any amounts required to be paid by the
Borrower or a Subsidiary (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes and similar
charges. Fixed rents under any so-called "percentage leases" shall be computed
solely on the basis of the minimum rents, if any, required to be paid by the
lessee regardless of sales volume or gross revenues.
"Repayment Date" means the later of (a) the termination of the
Commitments (whether as a result of the occurrence of the Termination Date,
reduction to zero pursuant to Section 1.14 or termination pursuant to Section
6.2) and (b) the payment in full of the Loans and all other amounts payable or
accrued hereunder.
"Reportable Event" means, with respect to any Benefit Plan of
any Person, (a) the occurrence of any of the events set forth in ERISA Sections
4043(c) (other than a Reportable Event as to which the provision of 30 days'
notice to the PBGC is waived under applicable regulations), 4062(e) or 4063(a)
or the regulations thereunder with respect to such Benefit Plan, (b) any event
requiring such Person or any of its ERISA Affiliates to provide security to
such Benefit Plan under Code Section 401(a)(29) or (c) any failure to make a
payment required by Code Section 412(m) with respect to such Benefit Plan.
"Representation and Warranty" means any representation or
warranty made pursuant to or under (a) Section 2.2, Article 3 or any other
provision of this Agreement or (b) any amendment to, or waiver of rights under,
this Agreement, WHETHER OR NOT, IN THE CASE OF ANY REPRESENTATION OR WARRANTY
REFERRED TO IN CLAUSE (a) OR (b) OF THIS DEFINITION (EXCEPT, IN EACH CASE, TO
THE EXTENT OTHERWISE EXPRESSLY PROVIDED), THE INFORMATION THAT IS THE SUBJECT
MATTER THEREOF IS WITHIN THE KNOWLEDGE OF THE BORROWER.
"Required Banks" means, at any time, Banks having more than 66
2/3% of the Exposures outstanding or, if there are no Exposures outstanding,
more than 66 2/3% of the aggregate amount of the Commitments.
"Reserve Requirement" means, at any time, the then current
maximum rate for which reserves (including any marginal, supplemental or
emergency reserve) are required to be maintained under Regulation D by member
banks of the Federal Reserve System in New York City with deposits exceeding
five billion Dollars against "Eurocurrency liabilities", as that term is used
in Regulation D. The Adjusted Eurodollar Rate shall be adjusted automatically
on and as of the effective date of any change in the Reserve Requirement.
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"Restricted Investment" means all investments in or loans,
advances or extensions of credit to any Person by the Borrower or its
Subsidiaries except the following:
(a) investments, loans and advances by the Borrower and its
Subsidiaries in and to Subsidiaries, including any investment in a
corporation which, after giving effect thereto, will become a
Subsidiary;
(b) investments in property to be used in the ordinary course
of business of the Borrower and its Subsidiaries;
(c) investment in direct obligations of, or obligations
guaranteed by, the United States of America or an agency thereof,
maturing within three years from the date of acquisition thereof;
(d) (x) investments in municipal securities, maturing within
three years from the date of acquisition thereof, which are rated in
one of the top two rating classifications by Standard & Poor's
Corporation, Moody's Investors Services, Inc. or other nationally
recognized credit rating agency of similar standing, and (y)
investments in debt securities of corporations which are headquartered
in the United States, the senior debt securities of which are rated at
or above A- by Standard & Poor's Corporation or at A3 or above by
Moody's Investors Services, Inc. (or another nationally recognized
credit rating agency of similar standing if neither of such two named
agencies shall rate such securities);
(e) investments in certificates of deposit, eurodollar time
deposits or banker's acceptances maturing within one year from the
date of origin, issued by, and bank accounts with, commercial banks
organized under the laws of the United States or any state thereof or
Canada or any province thereof, and having capital, surplus and
undivided profits aggregating at least $100,000,000;
(f) investments in commercial paper maturing within 270 days
or less from the date of issuance and rated in one of the top two
rating classifications by Standard & Poor's Corporation, Moody's
Investors Services, Inc. or other nationally recognized credit rating
agency of similar standing;
(g) investments in any investment company having (at the time
of investment) assets of not less than $500,000,000 and a substantial
portion of the assets of which are limited to investments of a
character which would be permitted to be made by the Borrower pursuant
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to the provisions of paragraphs (c), (d), (e) and (f) of this
definition and which shares under GAAP are classified as current
assets;
(h) investments in certain issues of preferred stock known by
various terms such as "dutch-auction preferred", "capital-market
preferred", "remarketed preferred", and "variable rate preferred", or
similar terms which, at the time of acquisition by the Borrower or any
Subsidiary is rated in one of the top two rating classifications by
Standard & Poor's Corporation or Moody's Investors Services, Inc.; and
(i) other investments existing as of May 16, 1991, provided
that any such investments which are not described in the foregoing
paragraphs of this definition are disclosed to the Agent in writing on
or prior to the Agreement Date.
"Restricted Payment" means any payment with respect to or on
account of any of the Borrower's Capital Securities, including any dividend or
other distribution on, any payment of interest on or principal of, and any
payment on account of any purchase, redemption, retirement, exchange,
defeasance or conversion of, or on account of any claim relating to or arising
out of the offer, sale or purchase of, any such Capital Securities. For the
purposes of this definition, a "payment" shall include the transfer of any
asset or the incurrence of any Indebtedness or other Liability (the amount of
any such payment to be the fair market value of such asset or the amount of
such obligation, respectively) but shall not include the issuance of any
capital stock of the Borrower other than Mandatorily Redeemable Stock.
"Senior Notes" mean the Senior Notes 1998 and the Senior Notes
2001.
"Senior Notes 1998" mean the 10.50% Senior Notes due September
1, 1998 issued under the Note Agreement dated as of September 1, 1988.
"Senior Notes 2001" mean the 9.53% Senior Notes due May 1,
2001 issued under the Note Agreement dated as of May 1, 1991.
"Subsidiary" means, with respect to any Person, any other
Person (a) securities of which having ordinary voting power to elect a majority
of the board of directors (or other persons having similar functions) or (b)
other ownership interests of which ordinarily constituting a majority voting
interest, are at the time, directly or indirectly, owned or controlled by such
first Person, or by one or more of its Subsidiaries, or by such first Person
and
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one or more of its Subsidiaries; unless otherwise specified, "Subsidiary" means
a Subsidiary of the Borrower.
"Tax" means any Federal, State or foreign tax, assessment or
other governmental charge or levy (including any withholding tax) upon a Person
or upon its assets, revenues, income or profits.
"Termination Date" means May 22, 1998.
"Termination Event" means, with respect to any Benefit Plan,
(a) any Reportable Event with respect to such Benefit Plan, (b) the termination
of such Benefit Plan, or the filing of a notice of intent to terminate such
Benefit Plan, or the treatment of any amendment to such Benefit Plan as a
termination under ERISA Section 4041(c), (c) the institution of proceedings to
terminate such Benefit Plan under ERISA Section 4042 or (d) the appointment of
a trustee to administer such Benefit Plan under ERISA Section 4042.
"Third-Party Letter of Credit" means any letter of credit
(other than Letter of Credit) for the account of the Borrower or any Subsidiary
issued by any Person (i) if the Agent has notified the Borrower or the Borrower
has notified the Agent that the Termination Date shall not be extended or
postponed, within 60 days of the Termination Date, or (ii) in lieu of a Letter
of Credit, the issuance of which has been requested by the Borrower, which has
not been issued because the Issuing Bank has notified the Borrower in writing
that the issuance of such Letter of Credit by the Issuing Bank is unlawful by
reason of any Regulatory Change, provided that the stated amount of such
Third-Party Letter of Credit shall not exceed the requested stated amount of
the such Letter of Credit.
"Type" means, with respect to Loans, any of the following,
each of which shall be deemed to be a different "Type" of Loan: Base Rate
Loans, Eurodollar Rate Loans having a one-month Interest Period, Eurodollar
Rate Loans having a two-month Interest Period, Eurodollar Rate Loans having a
three-month Interest Period and Eurodollar Rate Loans having a six-month
Interest Period. Any Eurodollar Rate Loan having an Interest Period with a
duration that differs from the duration specified for a Type of Eurodollar Rate
Loan listed above solely as a result of the operation of clauses (a) and (b) of
the definition of "Interest Period" shall be deemed to be a Loan of such
above-listed Type notwithstanding such difference in duration of Interest
Periods.
"Unfunded Benefit Liabilities" means, with respect to any
Benefit Plan at any time, the amount of unfunded benefit liabilities of such
Benefit Plan at such time as determined under ERISA Section 4001(a)(18).
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"Uniform Customs" means, the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500.
"Unum Notes" mean all of the outstanding Senior Notes 1998
owned or held by each of Unum Life Insurance Company and First Unum Life
Insurance Company as of the Effective Date.
"Wholly Owned Subsidiary" means, with respect to any Person,
any Subsidiary of such Person all of the Capital Securities and all other
ownership interests and rights to acquire ownership interests of which (except
directors' qualifying shares) are, directly or indirectly, owned or controlled
by such Person or one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more of such Subsidiaries; unless otherwise specified,
"Wholly Owned Subsidiary" means a Wholly Owned Subsidiary of the Borrower.
Section 10.2. Other Interpretive Provisions. (a) Except as
otherwise specified herein, all references herein (i) to any Person shall be
deemed to include such Person's successors and assigns, (ii) to any Applicable
Law defined or referred to herein shall be deemed references to such Applicable
Law or any successor Applicable Law as the same may have been or may be amended
or supplemented from time to time and (iii) to any Loan Document or Contract
defined or referred to herein shall be deemed references to such Loan Document
or Contract (and, in the case of any Note or any other instrument, any
instrument issued in substitution therefor) as the terms thereof may have been
or may be amended, supplemented, waived or otherwise modified from time to
time.
(b) When used in this Agreement, the words "herein",
"hereof" and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any provision of this Agreement, and the words
"Article", "Section", "Annex", "Schedule" and "Exhibit" shall refer to Articles
and Sections of, and Annexes, Schedules and Exhibits to, this Agreement unless
otherwise specified.
(c) Whenever the context so requires, the neuter gender
includes the masculine or feminine, the masculine gender includes the feminine,
and the singular number includes the plural, and vice versa.
(d) Any item or list of items set forth following the
word "including", "include" or "includes" is set forth only for the purpose of
indicating that, regardless of whatever other items are in the category in
which such item or items are "included", such item or items are in such
category, and shall not be construed as indicating that the
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items in the category in which such item or items are "included" are limited to
such items or to items similar to such items.
(e) Each authorization in favor of the Agent, the Banks
or any other Person granted by or pursuant to this Agreement shall be deemed to
be irrevocable and coupled with an interest.
Section 10.3. Accounting Matters. Unless otherwise specified
herein, all accounting determinations hereunder and all computations utilized
by the Borrower in complying with the covenants contained herein shall be made,
all accounting terms used herein shall be interpreted, and all financial
statements required to be delivered hereunder shall be prepared, in accordance
with Generally Accepted Accounting Principles, except, in the case of such
financial statements, for departures from Generally Accepted Accounting
Principles that may from time to time be approved in writing by the independent
certified public accountants who are at the time, in accordance with Section
5.1(b), reporting on the Borrower's financial statements.
Section 10.4. Representations and Warranties. All
Representations and Warranties shall be deemed made (a) in the case of any
Representation and Warranty contained in this Agreement at the time of its
initial execution and delivery, at and as of the Effective Date, (b) in the
case of any Representation and Warranty contained in this Agreement or any
other document at the time any Loan is made, at and as of such time and (c) in
the case of any particular Representation and Warranty, wherever contained, at
such other time or times as such Representation and Warranty is made or deemed
made in accordance with the provisions of this Agreement or the document
pursuant to, under or in connection with which such Representation and Warranty
is made or deemed made.
Section 10.5. Captions. Captions to Articles, Sections and
subsections of, and Annexes, Schedules and Exhibits to, this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose or in any way affect the meaning or
construction of any provision of this Agreement.
Section 10.6. Interpretation of Related Documents. Except as
otherwise specified therein, terms that are defined herein that are used in
Notes, certificates, opinions and other documents delivered in connection
herewith shall have the meanings ascribed to them herein and such documents
shall be otherwise interpreted in accordance with the provisions of this
Article 10.
-76-
<PAGE> 83
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their duly authorized officers all as of the
Effective Date.
LECHTERS, INC.
By /s/ JOHN SUDAK
---------------------------
Name: John Sudak
Title: SVP & CEO
BANK OF MONTREAL,
as Agent and as a Bank
By /s/ JACK DARROW
---------------------------
Name: Jack Darrow
Title: DIRECTOR
CHEMICAL BANK
By /s/ R. C. RYGIEL
---------------------------
Name: R. C. Rygiel
Title: VICE PRESIDENT
Effective Date: May 23, 1996
<PAGE> 84
ANNEX A
Banks, Lending Offices
and Notice Addresses Commitments
- ---------------------- -----------
BANK OF MONTREAL $27,500,000
Domestic Lending Office:
Bank of Montreal
115 South LaSalle Street
Chicago, IL 60603
Attn: Loan Accounting
Eurodollar Lending Office:
Bank of Montreal
115 South LaSalle Street
Chicago, IL 60603
Attn: Loan Accounting
Notice Address:
FUNDING REQUESTS:
Bank of Montreal
430 Park Avenue
New York, NY 10022
Telecopy No.: (212) 605-1618
Attention: John Decoufle
OTHER NOTICES:
Bank of Montreal
430 Park Avenue
New York, NY 10022
Telecopy No.: (212) 605-1454
Attention: Jack Darrow
<PAGE> 85
Banks, Lending Offices
and Notice Addresses Commitments
- ---------------------- -----------
CHEMICAL BANK $12,500,000
Domestic Lending Office:
Chemical Bank
270 Park Avenue
New York, NY 10017-2070
Eurodollar Lending Office:
Chemical Bank
270 Park Avenue
New York, NY 10017-2070
Notice Address:
FUNDING REQUESTS:
Chemical Bank
E. 36 Midland Avenue
Paramus, NJ 07652
Telecopy No.: 201-599-6672
Attention: Catherine Frasco
OTHER NOTICES:
Chemical Bank
E. 36 Midland Avenue
Paramus, NJ 07652
Telecopy No.: 201-599-6755
Attention: Kathryn T. Murphy
<PAGE> 86
Issuing Bank, Lending Offices
and Notice Addresses
BANK OF MONTREAL
Domestic Lending Office:
Bank of Montreal
115 South LaSalle Street
Chicago, IL 60603
Attn: Loan Accounting
Eurodollar Lending Office:
Bank of Montreal
115 South LaSalle Street
Chicago, IL 60603
Attn: Loan Accounting
Notice Address:
LETTER OF CREDIT REQUESTS:
Bank of Montreal
c/o Harris Bank International Corporation
430 Park Avenue, 9th Floor
New York, NY 10022
Telecopy No.: (212) 605-9847
Attention: Barry Catherwood
OTHER NOTICES:
Bank of Montreal
430 Park Avenue
New York, NY 10022
Telecopy No.: (212) 605-1454
Attention: Jack Darrow
<PAGE> 87
Schedule 1.2
NOTICE OF BORROWING
Bank of Montreal
430 Park Avenue
New York, New York 10022
Attn: John Decoufle
Date:
Gentlemen:
Reference is made to the Amended and Restated Credit
Agreement, dated as of May 23, 1996 among Lechters, Inc., the Banks listed on
the signature pages thereof and Bank of Montreal, as Agent (the "Credit
Agreement"). The undersigned hereby gives notice pursuant to Section 1.2 of
the Credit Agreement of its request to have the following Loans made to it on
[insert requested date of borrowing]:
<TABLE>
<CAPTION>
Type of Loan(1) Amount
------------ ------
<S> <C>
--------------------------------- --------------
--------------------------------- --------------
--------------------------------- --------------
</TABLE>
[Please disburse the proceeds of the Loans by [insert
requested method of disbursement].](2)
The undersigned represents and warrants that (a) the
borrowing requested hereby complies with the requirements of Section 1.2 of the
Credit Agreement and (b) each Representation and Warranty is true and correct
at and as of the date hereof and will be true and correct at and as of the time
the Loans are made, in each case both with and without giving effect to the
Loans and the application of the proceeds thereof, and (c) no Default has
occurred and is continuing as of the date hereof or would result from the
making of the Loans or from the application of the proceeds thereof if the
Loans were made on the date hereof, and no Default will have occurred and be
continuing at the time the
<PAGE> 88
Loans are to be made or would result from the making of the Loans or from the
application of the proceeds thereof.
LECHTERS, INC.
By
----------------------
Name:
Title:
- ---------------------
1. Be sure to specify the duration of the Interest Period in the case of
Eurodollar Rate Loans (e.g., one-month Eurodollar Rate).
2. Include and complete this sentence if the proceeds of the requested
Loans are to be disbursed in a manner other than by credit to an account
of the Borrower at the Agent's Office.
-2-
<PAGE> 89
Schedule 1.3(c)(iv)
NOTICE OF CONVERSION OR CONTINUATION
Bank of Montreal
430 Park Avenue
New York, New York 10022
Attn: John H. Decoufle
Date:
Gentlemen:
Reference is made to the Amended and Restated Credit
Agreement, dated as of May 23, 1996 among Lechters, Inc., the Banks listed on
the signature pages thereof and Bank of Montreal, as Agent (the "Credit
Agreement"). The undersigned hereby gives notice pursuant to Section
1.3(c)(iv) of the Credit Agreement of its desire to convert or continue the
Loans specified below into or as Loans of the Types and in the amounts
specified below on [insert date of conversion or continuation]:
<TABLE>
<CAPTION>
Converted
Loans to be Converted or Continued or Continued Loans
- ---------------------------------- ------------------
Last Day of
Type Current Type
of Loan(1) Interest Period Amount of Loan(1) Amount
- ------- --------------- ------ ------- ------
<S> <C> <C> <C> <C>
- ------- --------------- ------ ------- ------
- ------- --------------- ------ ------- ------
- ------- --------------- ------ ------- ------
</TABLE>
The undersigned represents and warrants that conversions
and continuations requested hereby comply with the requirements of Section
1.3(c) of the Credit Agreement.
LECHTERS, INC.
By
------------------------
Name:
Title:
- --------------------
1. Be sure to specify the duration of the Interest Period in the
case of Eurodollar Rate Loans (e.g., one-month Eurodollar
Rate).
<PAGE> 90
Schedule 1.5(a)
NOTICE OF PREPAYMENT
Bank of Montreal
430 Park Avenue
New York, New York 10022
Attn: John H. Decoufle
Date:
Gentlemen:
Reference is made to the Amended and Restated Credit
Agreement, dated as of May 23, 1996 among Lechters, Inc., the Banks listed on
the signature pages thereof and Bank of Montreal, as Agent (the "Credit
Agreement"). The undersigned hereby gives notice pursuant to Section 1.5(a) of
the Credit Agreement that it will prepay the Loans specified below on [insert
date of prepayment]:
<TABLE>
<CAPTION>
Last Day of
Current
Type of Loan(1) Interest Period Amount
------------ --------------- ------
<S> <C> <C>
- -------------------- --------------- ------------
- -------------------- --------------- ------------
- -------------------- --------------- ------------
</TABLE>
The undersigned represents and warrants that the prepayment
requested hereby complies with the requirements of Section 1.5(a) of the Credit
Agreement.
LECHTERS, INC.
By
-------------------------
Name:
Title:
- ---------------------
1. Be sure to specify the duration of the Interest Period in the case of
Eurodollar Rate Loans (e.g., one-month Eurodollar Rate).
<PAGE> 91
Schedule 1.8
REQUEST FOR LETTER OF CREDIT
[Name and address of
Issuing Bank in accordance
with Section 9.01(a)(ii)]
Date:
Gentlemen:
Reference is made to the Amended and Restated Credit
Agreement, dated as of May 23, 1996 among Lechters, Inc., the Banks listed on
the signature pages thereof and Bank of Montreal, as Agent (the "Credit
Agreement").
The Borrower requests you to issue and transmit
- by teletransmission - by mail
an irrevocable letter of credit (the "Credit") in favor of the Beneficiary
shown below as follows:
PLEASE TYPE OR PRINT
==============================================================================
Beneficiary LETTER OF
CREDIT NO. DATE
----------------------------------------------
CURRENCY
AMOUNT
----------------------------------------------
EXPIRY
DATE
----------------------------------------------
==============================================================================
Available, at your counters, by draft(s) at sight to be drawn on you (or on a
correspondent selected by you if the Credit is in a currency other than
Dollars), when accompanied by the following documents:
<TABLE>
<S> <C>
- - Beneficiary's statement signed or purporting to be signed by or on behalf of Beneficiary reading
(please state below the exact wording to appear on the statement to be presented with the draft):
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
- - Other documents:
-----------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
- - Additional instructions, if any:
-------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE> 92
The Borrower represents and warrants that (a) the Letter of Credit requested
hereby complies with the requirements of the Credit Agreement and (b) [except
to the extent set forth on Annex A hereto,]1 (i) each Loan Document
Representation and Warranty is true and correct at and as of the date hereof
and (except to the extent the undersigned gives notice to the Issuing Bank and
the Agent to the contrary prior to 5:00 p.m. (New York time) on the Business
Day before the requested date for the issuance of the Letter of Credit) will be
true and correct at and as of the time of such issuance, in each case both with
and without giving effect to such issuance, and (ii) no Default has occurred
and is continuing as of the date hereof or would result from the issuance of
the Letter of Credit if the Letter of Credit was issued on the date hereof, and
(except to the extent the undersigned gives notice to the Issuing Bank and the
Agent to the contrary prior to 5:00 p.m. (New York time) on the Business Day
before the requested date for the issuance of the Letter of Credit) no Default
will have occurred and be continuing at the time the Letter of Credit is issued
or would result from its issuance.
LECHTERS, INC.
By
----------------------------------
Name:
Title:
- ----------------------
1. If the representation and warranty in either clause (b)(i) or (b)(ii)
would be incorrect, include the material in brackets and set forth the
reasons such representation and warranty would be incorrect on an
attachment labeled Annex A.
-3-
<PAGE> 93
Schedule 2.1(a)(i)
LECHTERS, INC.
CERTIFICATE AS TO RESOLUTIONS, ETC.
I, __________, [Assistant] Secretary of Lechters, Inc., a New
Jersey corporation (the "Borrower"), hereby certify, pursuant to Section
2.1(a)(i) of the Amended and Restated Credit Agreement (the "Credit Agreement")
dated as of May 23, 1996 among Lechters, Inc., the Banks listed on the
signature pages thereof and Bank of Montreal, as Agent, that:
1. The below named persons have been duly elected (or
appointed) and have duly qualified as, and on this day are, officers
of the Borrower holding their respective offices below set opposite
their names, and the signatures below set opposite their names are
their genuine signatures:
<TABLE>
<CAPTION>
Name Office Signature
---- ------ ---------
<S> <C> <C>
[Insert names and offices
---------------------
of persons authorized to sign the
---------------------
Loan Documents]
---------------------
</TABLE>
2. Attached as Annex A is a true and correct copy of
resolutions duly adopted by [unanimous written consent of] the Board
of Directors of the Borrower. Such resolutions have not been
amended, modified or revoked and are in full force and effect on
the date hereof.
3. The Credit Agreement and the related Notes in each case
as executed and delivered on behalf of the Borrower, are in the
forms thereof approved by [unanimous written consent of] the Board
of Directors of the Borrower.
4. There has been no amendment to the Certificate of
Incorporation of the Borrower since __________, 19__(1)
5. Attached as Annex B is a true and correct copy of the
By-laws of the Borrower as in effect on __________, 19__(2) and at
all subsequent times to and including the date hereof.
<PAGE> 94
IN WITNESS WHEREOF, I have signed this certificate this __
day of __________, 1996.
----------------------------
[Assistant] Secretary
I, __________, [title] of the Borrower, hereby
certify that [name of the above [Assistant] Secretary] has been duly elected or
appointed and has been duly qualified as, and on this day is, [Assistant]
Secretary of the Borrower, and the signature in paragraph 1 above is his
genuine signature.
IN WITNESS WHEREOF, I have signed this certificate
this __ day of __________, 1996.
---------------------------
[Title]
- --------------------
1. Insert date of the Secretary of State's Certificate of Incorporation
required by Section 2.1(a)(ii).
2. Insert date of the Board of Directors' meeting adopting the resolutions
referred to in paragraph 2(a).
-2-
<PAGE> 95
Schedule 2.1(a)(iv)
[Letterhead of LeBouef, Lamb]
May [__], 1996
To the Agent and each Bank
party to the Credit Agreement
referred to below
Ladies and Gentlemen:
We have acted as counsel for Lechters, Inc. in
connection with the negotiation, execution and delivery of the Amended and
Restated Credit Agreement, dated as of May 23, 1996, among Lechters, Inc., the
banks listed on the signature pages thereof and Bank of Montreal, as Agent (the
"Credit Agreement"). Terms defined in the Credit Agreement that are not
otherwise defined herein are used herein with the meanings therein ascribed to
them.
For purposes of rendering the opinions contained
in this letter, we have examined and reviewed the following:
(1) an executed copy of the Credit Agreement and an
executed copy of the Notes delivered on the date hereof;
(2) the Certificate of Incorporation of the Borrower
and all amendments thereto;
(3) the by-laws of the Borrower and all amendments thereto;
(4) a certificate of the Secretary of State of New Jersey
dated [__________], 1996, attesting to the continued corporate
existence and good standing of the Borrower in that State;
(5) certificate of the Secretary of State of New York
dated [__________], 1996, attesting to the fact that the Borrower is
duly qualified, in good standing as a foreign corporation, and
authorized to do business, in New York; and
<PAGE> 96
(6) such other documents and records as we have deemed
necessary in order to render the opinions set forth herein.
As to questions of fact material to our opinions
that we did not independently establish, we have relied upon certificates of
the Borrower or its officers.
The opinions expressed below are limited to the laws of
the States of New York and New Jersey and the Federal laws of the United
States.
For purposes of this opinion, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted
to us as originals and the conformity to authentic originals of all documents
submitted to us as certified or photostatic copies. We have also assumed the
due authorization, execution and delivery of the Credit Agreement by the Agent
and the Banks.
Based upon the foregoing, we are of the opinion that:
1. The Borrower and each Subsidiary are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation, have the corporate
power and authority to own their respective properties and to carry on their
respective businesses as now being and hereafter proposed to be conducted and
are duly qualified and in good standing as foreign corporations, and are
authorized to do business, in all jurisdictions in which the character of their
respective properties or the nature of their respective businesses require such
qualification or authorization, except for qualifications and authorizations
the lack of which, singly or in the aggregate, has not had and will not have a
Materially Adverse Effect upon the Borrower and the Consolidated Subsidiaries
taken as a whole.
2. To the best of our knowledge, after due
inquiry, (a) Schedule 3.2 to the Credit Agreement sets forth, as of the
Effective Date, all of the Subsidiaries, their jurisdictions of incorporation
and the percentages of the various classes of their Capital Securities owned by
the Borrower or another Subsidiary and indicates which Subsidiaries are
Consolidated Subsidiaries, (b) the Borrower or another Subsidiary, as the case
may be, has the unrestricted right to vote, and (subject to limitations imposed
by Applicable Law) to receive dividends and distributions on, all Capital
Securities indicated on such Schedule as owned by the Borrower or such
Subsidiary and (c) such Capital Securities have been duly authorized and issued
and are fully paid and nonassessable.
3. The Borrower has the power, and has taken
all necessary action (including any necessary stockholder action) to authorize
it, to execute, deliver and perform in accordance with their respective terms
the Credit Agreement and the Notes and to
-2-
<PAGE> 97
borrow under the Credit Agreement in the unused amount of the Commitments.
4. The Credit Agreement and the Notes have been duly
executed and delivered by the Borrower.
5. The choice of the law of the State of New York
as the law in accordance with which the Credit Agreement and the Notes
shall be governed, interpreted and enforced (including the usury laws of the
State of New York) is an effective choice of law under the laws of New Jersey,
and adherence to existing judicial precedents under the laws of such
jurisdiction would require courts sitting in such jurisdiction to abide by such
choice of law. The Credit Agreement and the Notes are legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance
with their respective terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium and other laws relating to, or
affecting, creditors' rights and remedies generally and general principles of
equity (regardless of whether the same are considered in a proceeding at law or
equity).
6. The execution, delivery and performance in accordance
with their respective terms by the Borrower of the Credit Agreement and
the Notes and each borrowing under the Credit Agreement, whether or not in
the amount of the unused Commitments, do not and (absent any change in any
Applicable Law or applicable Contract) will not:
(a) require any Government Approval, any consent or
approval of any Subsidiary, any consent or approval of the
stockholders of the Borrower or any Subsidiary or, to the best of our
knowledge, any other consent or approval, other than Governmental
Approvals and other consents and approvals that have been obtained,
are final and not subject to review on appeal or, to the best of our
knowledge, to collateral attack, are in full force and effect and are
listed on Schedule 3.3 to the Credit Agreement; or
(b) violate, conflict with, result in a breach of,
constitute a default under, or result in or require the creation of
any Lien upon any assets of the Borrower under, (i) the certificate of
incorporation or by-laws of the Borrower, (ii) to the best of our
knowledge, after due inquiry, any other Contract to which the Borrower
is a party or by which the Borrower or any of its property may be
bound, (iii) any Applicable Law referred to in clause (a) or (b)(i)
of the definition thereof or (iv) to the best of our knowledge, after
due inquiry, any other Applicable Law.
7. Except as set forth in Schedule 3.5 to the
Credit Agreement, to the best of our knowledge, after due inquiry, there are
not, in any court or before any arbitrator of any kind or before or by any
governmental or non-governmental body, any
-3-
<PAGE> 98
actions, suits or proceedings pending or threatened (nor, to the best of our
knowledge, after due inquiry, is there any basis therefor) against or in any
other way relating to or affecting (a) the Borrower or any Subsidiary or their
respective businesses or properties or (b) the Credit Agreement or the Notes,
except actions, suits or proceedings that, if adversely determined, would not,
singly or in the aggregate, have a Materially Adverse Effect on (x) the
Borrower and the Consolidated Subsidiaries taken as a whole or (y) the Credit
Agreement or the Notes.
In giving our opinions set forth in paragraph[s] __ we
have relied [upon an opinion of special New Jersey counsel, [name of
special counsel], and/or upon the opinion of the General Counsel of the
Company, [name]], attached hereto.
Very truly yours,
-4-
<PAGE> 99
SCHEDULE 3.2
Subsidiaries
Lechters, Inc. owns 100% of the common stock of its subsidiaries.
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF INCORPORATION
- ------------------ ----------------------
<S> <C>
Lechters Alabama, Inc. Alabama
Lechters Arizona, Inc. Arizona
Lechters Arkansas, Inc. Arkansas
Lechters California, Inc. California
Lechters Colorado, Inc. Colorado
Lechters Connecticut, Inc. Connecticut
Lechters Delaware, Inc. Delaware
Lechters Florida, Inc. Florida
Lechters Georgia, Inc. Georgia
Lechters Hawaii, Inc. Hawaii
Lechters Idaho, Inc. Idaho
Lechters Illinois, Inc. Illinois
Lechters Indiana, Inc. Indiana
Lechters Iowa, Inc. Iowa
Lechters Kansas, Inc. Kansas
Lechters Kentucky, Inc. Kentucky
Lechters Louisiana, Inc. Louisiana
Lechters Maine, Inc. Maine
Lechters Baltimore, Inc. Maryland
Lechters Holyoke, Inc. Massachusetts
Lechters Michigan, Inc. Michigan
Lechters Minnesota, Inc. Minnesota
Lechters Missouri, Inc. Missouri
</TABLE>
<PAGE> 100
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF INCORPORATION
- ------------------ ----------------------
<S> <C>
Lechters Nebraska, Inc. Nebraska
Lechters Nevada, Inc. Nevada
Lechters New Hampshire, Inc. New Hampshire
Lechters New Jersey, Inc. New Jersey
Lechters New Mexico, Inc. New Mexico
Lechters New York, Inc. New York
Lechters N.Y.C., Inc. New York
Lechters North Carolina, Inc. North Carolina
Lechters Ohio, Inc. Ohio
Lechters Oklahoma, Inc. Oklahoma
Lechters Oregon, Inc. Oregon
Lechters Pennsylvania, Inc. Pennsylvania
Lechters Rhode Island, Inc. Rhode Island
Lechters South Carolina, Inc. South Carolina
Lechters Tennessee, Inc. Tennessee
Lechters Texas, Inc. Texas
Lechters Utah, Inc. Utah
Lechters Vermont, Inc. Vermont
Lechters Springfield, Inc. Virginia
Lechters Washington, Inc. Washington
Lechters West Virginia, Inc. West Virginia
Lechters Wisconsin, Inc. Wisconsin
Cooks Club, Inc. New Jersey
Regent Gallery, Inc. New Jersey
Simple Solutions of NJ, Inc. New Jersey
Harrison Investment Corp. Delaware
</TABLE>
<PAGE> 101
Schedule 3.3
Required Consents
None.
<PAGE> 102
Schedule 3.5
Material Litigation
None.
<PAGE> 103
Schedule 3.8
Additional Material Adverse Facts
None.
<PAGE> 104
Schedule 4.9
Existing Guaranties
Lechters, Inc. is the guarantor of the approximately 640
leases entered into by its Subsidiaries in the ordinary course of business.
<PAGE> 105
Schedule 4.10
Existing Liens
None, except for liens statutorily imposed by state law in various states on
the property of tenants in favor of the landlord.
<PAGE> 106
Schedule 4.16
Existing Benefit Plans
Group Insurance Plan (major medical, prescription drug, life insurance,
dental care, accidental death and dismemberment, long term disability)
401(K) Savings Plan
Various Bonus Plans
Stock Option Plan
Severance Plan (proposed)
<PAGE> 107
Schedule 4.18
Restrictive Covenants
None.
<PAGE> 108
SCHEDULE 4.21
Existing Letters of Credit
A. Issued by Chemical Bank
<TABLE>
<CAPTION>
Number Amount
------ ------
<S> <C>
P903812 941.16
P903813 1,974.63
P903816 25.58
P903817 31.47
P903822 62.05
P903823 24,734.05
P903830 1,440.00
P903831 5,040.00
P903832 1,680.00
P903833 1,128.00
P903836 5,255.04
P903837 1,468.32
P903838 19,048.20
P903840 1,848.00
P903841 10,070.88
P903842 61,680.00
P903843 49,590.72
P903844 3,769.60
P903845 14,508.00
P903848 20,834.88
P903849 22,320.48
P903850 27,369.12
P905825 10,327.68
P905826 11,927.88
P905827 48,629.64
P905829 193.94
P905830 279.05
P905831 14,919.00
P905833 11,952.00
P905835 936.72
P905836 4,151.26
P905837 44,768.34
P905838 526.50
P905839 19,828.80
P905840 5,856.00
P905841 21,939.00
P905842 5,568.00
P905843 17,736.00
</TABLE>
<PAGE> 109
<TABLE>
<CAPTION>
Number Amount
------ ------
<S> <C>
P905844 34,419.26
P905847 9,012.00
P905848 23,230.80
P905849 7,422.00
P905850 11,204.00
P905851 16,008.00
P905852 32,369.76
P906361 30,527.04
P906362 139,835.53
P906363 7,047.19
P906364 77,882.36
P906368 20,741.40
P906369 27,566.52
P906372 4,676.33
P906375 267,647.76
P906377 139,923.60
P906380 132,094.32
P906381 54,381.11
P906382 83,496.00
P906383 68,920.52
P906384 239,029.91
P906385 18,135.07
P906386 3,024.28
P906387 84,700.80
P906388 125,405.28
P906389 59,361.12
P906390 107,714.88
P906391 25,552.80
P906392 142,000.00
P906393 83,727.00
P906394 23,273.52
P906395 41,742.00
P906396 13,914.00
P906397 6,528.00
P906398 3,060.00
P906399 3,034.56
P906530 9,166.32
P906531 32,028.12
P906532 29,213.16
P906533 17,945.28
6255189 6,949.44
6906534 23,202.68
6906535 12,796.80
6906536 32,522.64
6906537 120,561.41
6906538 40,273.45
</TABLE>
-2-
<PAGE> 110
<TABLE>
<CAPTION>
Number Amount
------ ------
<S> <C>
6906539 102,682.00
6906540 34,150.35
6906541 22,106.88
6906543 29,846.88
6906544 7,715.52
6906545 28,222.56
6906546 7,512.48
6906547 69,454.00
6906548 5,137.51
6906549 18,072.00
</TABLE>
B. Issued by Harris Bank
<TABLE>
<CAPTION>
Number Amount
------ ------
<S> <C>
236900 3,760.56
236903 191.83
236932 25,341.76
236963 145.36
236968 2,155.16
236975 723.60
237344 23,801.62
237350 36,966.39
237376 1.90
239527 6,336.72
239607 6,803.76
239610 9,085.64
239621 21,939.24
239638 16,185.60
239650 8,271.84
239653 43,657.64
239689 30,839.36
239693 44,950.08
239696 3,470.43
239700 120,463.78
239702 12,782.40
239709 3,579.90
239715 3,445.20
241031 410,934.85
241036 131,623.34
241038 40,075.91
241040 207,529.20
241042 23,996.74
241161 109,624.24
241169 72,356.94
241188 216,437.14
241205 29,080.88
241208 2,541.60
</TABLE>
-3-
<PAGE> 111
<TABLE>
<CAPTION>
Number Amount
------ ------
<S> <C>
241215 72,168.48
241219 9,717.60
241226 11,047.80
241242 18,441.36
241248 9,247.80
241250 44,308.20
242940 12,420.00
242995 24,788.16
243037 6,292.80
243040 50,090.32
243047 22,245.84
243048 63,380.16
243660 86,569.02
243665 487,452.64
243666 20,048.76
243672 85,950.08
243678 27,418.92
243682 167,079.78
</TABLE>
-4-
<PAGE> 112
Schedule 5.1(c)
LECHTERS, INC.
CERTIFICATE AS TO FINANCIAL STATEMENTS AND DEFAULTS
I, __________, [President, Chief Financial Officer] of
Lechters, Inc., a New Jersey corporation (the "Borrower"), hereby certify,
pursuant to Section 5.1(c) of the Amended and Restated Credit Agreement dated
as of May 23, 1996 among the Borrower, the Banks listed on the signature pages
thereof and Bank of Montreal, as Agent, that:
1. (a) The accompanying [unaudited](1) consolidated and
consolidating financial statements of the Borrower and the Consolidated
Subsidiaries as at __________ and for the [fiscal year][quarterly accounting
period](2) ending __________, 19__, are complete and correct and present fairly,
in accordance with Generally Accepted Accounting Principles (except for changes
therein or departures therefrom described below that have been approved in
writing by Messrs. Deloitte & Touche, the Borrower's current independent
certified public accountants), the consolidated and consolidating financial
position of the Borrower and the Consolidated Subsidiaries as at the end of
such [fiscal year][quarterly period](2), and the consolidated and consolidating
results of operations and cash flows for such quarterly period, and for the
elapsed portion of the fiscal year ended with the last day of [fiscal
year][such quarterly period](2), in each case on the basis presented [and
subject only to normal year-end auditing adjustments](1).
(b) Except as disclosed or reflected in such financial
statements, as at __________, neither the Borrower nor any Subsidiary had any
Liability, contingent or otherwise, or any unrealized or anticipated loss,
that, singly or in the aggregate, have had or might have a Materially Adverse
Effect on the Borrower and the Consolidated Subsidiaries taken as a whole.
2. (a) The changes in and departures from Generally Accepted
Accounting Principles are as follows:
All such changes have been approved in writing by Messrs. Deloitte & Touche.
<PAGE> 113
[[(b) Attached as Annex A are [unaudited](1) consolidated and
consolidating financial statements of the Borrower and the Consolidated
Subsidiaries as at __________ and for the [fiscal year][quarterly accounting
period](2) ending __________, 19__, which have been prepared in accordance with
Generally Accepted Accounting Principles without giving effect to the changes
referred to in Paragraph 2(a) of this Certificate or any previous Certificate.
Such financial statements are complete and correct and present fairly, in
accordance with Generally Accepted Accounting Principles, the consolidated and
consolidating financial position of the Borrower and the Consolidated
Subsidiaries as at the end of such [fiscal year][quarterly period](2), and the
consolidated and consolidating results of operations and cash flows for such
quarterly period, and for the elapsed portion of the fiscal year ending with
the last day of such [fiscal year][quarterly period](2), in each case on the
basis presented [and subject only to normal year-end auditing adjustments](1)
.](3)
3. There follow the calculations required to establish
whether or not the Borrower was in compliance with the following Sections of
the Agreement:(4)
(a) Section 4.14.
(b) Section 4.22.
(c) Section 4.23.
(d) Section 4.24.
(e) Section 4.25.
4. Based on an examination sufficient to enable me to make an
informed statement, no Default exists, including, in particular, any such
arising under the provisions of Article 4, except the following:
[If none such exist, insert "None"; if any do exist,
specify the same by Section, give the date the same occurred,
-2-
<PAGE> 114
and the steps being taken by the Borrower or a Subsidiary with respect
thereto.]
Dated: -----------------------
[President, Chief
Financial Officer]
- ---------------
1. Include only in the case of a certificate to be delivered with respect
to quarterly financial statements.
2. Include first alternative in the case of a certificate to be delivered
with respect to year-end financial statements; include second
alternative in the case of a certificate to be delivered with respect
to quarterly financial statements.
3. Paragraph (b) should be included in, and Annex A attached to, the
Certificate only if changes from Generally Accepted Accounting
Principles are specified in Paragraph 2(a) of this or any previous
Certificate.
4. The calculations should be made in the same manner and with the same
degree of detail as the calculations set forth in the certificate
delivered by the Borrower pursuant to Section 2.1(a)(vii).
-3-
<PAGE> 115
EXHIBIT A-1
LECHTERS, INC.
DOMESTIC NOTE
May [__], 1996
FOR VALUE RECEIVED, LECHTERS, INC. (the "Borrower") hereby
promises to pay to the order of __________ (the "Bank") the principal amount of
__________ Dollars ($__________), or, if less, the principal amount of the Base
Rate Loans of the Bank outstanding, on the dates and in the amounts specified
in Section 1.4 of the Amended and Restated Credit Agreement referred to below,
and to pay interest on such principal amount on the dates and at the rates
specified in Section 1.3 of such Amended and Restated Credit Agreement. All
payments due the Bank hereunder shall be made to the Bank at the place, in the
type of money and funds and in the manner specified in Section 1.18 of such
Amended and Restated Credit Agreement.
In accordance with Section 1.17 of the Amended and Restated
Credit Agreement, each holder hereof is authorized to endorse on the grid
attached hereto, or on a continuation thereof, each Base Rate Loan of the Bank
and each payment, prepayment or conversion with respect thereto.
Presentment, demand, protest, notice of dishonor and notice of
intent to accelerate are hereby waived by the undersigned.
This Domestic Note evidences Loans made under, and is entitled
to the benefits of, the Amended and Restated Credit Agreement, dated as of May
23, 1996, among the Borrower, the Banks listed on the signature pages thereof
and Bank of Montreal, as Agent, as the same may be amended from time to time.
Reference is made to such Amended and Restated Credit Agreement, as so amended,
for provisions relating to the prepayment and the acceleration of the maturity
hereof.
This Domestic Note shall be construed in accordance with and
governed by the law of the State of New York (without giving effect to its
choice of law principles).
LECHTERS, INC.
By
------------------------
Name:
Title:
<PAGE> 116
GRID
DOMESTIC NOTE
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount of
Amount of Principal Paid, Unpaid Principal
Base Prepaid or Amount of Notation
Date Rate Loan Converted Domestic Note Made By
- ---- --------- --------------- ---------------- --------
<S> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 117
EXHIBIT A-2
LECHTERS, INC.
EURODOLLAR NOTE
May [__], 1996
FOR VALUE RECEIVED, LECHTERS, INC. (the "Borrower") hereby
promises to pay to the order of __________ (the "Bank") the principal amount of
__________ Dollars ($__________), or, if less, the principal amount of the
Eurodollar Rate Loans of the Bank outstanding, on the dates and in the amounts
specified in Section 1.4 of the Amended and Restated Credit Agreement referred
to below, and to pay interest on such principal amount on the dates and at the
rates specified in Section 1.3 of such Amended and Restated Credit Agreement.
All payments due the Bank hereunder shall be made to the Bank at the place, in
the type of money and funds and in the manner specified in Section 1.18 of such
Amended and Restated Credit Agreement.
In accordance with Section 1.17 of the Amended and Restated
Credit Agreement, each holder hereof is authorized to endorse on the grid
attached hereto, or on a continuation thereof, each Eurodollar Rate Loan of the
Bank and each payment, prepayment or conversion with respect thereto.
Presentment, demand, protest, notice of dishonor and notice of
intent to accelerate are hereby waived by the undersigned.
This Eurodollar Note evidences Loans made under, and is
entitled to the benefits of, the Amended and Restated Credit Agreement, dated
as of May 23, 1996, among the Borrower, the Banks listed on the signature pages
thereof and Bank of Montreal, as Agent, as the same may be amended from time to
time. Reference is made to such Credit Agreement, as so amended, for
provisions relating to the prepayment and the acceleration of the maturity
hereof.
This Eurodollar Note shall be construed in accordance with and
governed by the law of the State of New York (without giving effect to its
choice of law principles).
LECHTERS, INC.
By
-------------------------
Name:
Title:
<PAGE> 118
GRID
EURODOLLAR NOTE
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount of
Amount of Principal Paid, Unpaid Principal
Eurodollar Prepaid or Amount of Notation
Date Rate Loan Converted Eurodollar Note Made By
- ---- ---------- -------------- --------------- --------
<S> <C>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 14,334
<SECURITIES> 22,748
<RECEIVABLES> 7,961
<ALLOWANCES> 0
<INVENTORY> 120,042
<CURRENT-ASSETS> 173,476
<PP&E> 166,476
<DEPRECIATION> 63,789
<TOTAL-ASSETS> 280,882
<CURRENT-LIABILITIES> 35,338
<BONDS> 59,172
0
20,000
<COMMON> 58
<OTHER-SE> 144,365
<TOTAL-LIABILITY-AND-EQUITY> 280,882
<SALES> 84,992
<TOTAL-REVENUES> 84,992
<CGS> 64,378
<TOTAL-COSTS> 25,508
<OTHER-EXPENSES> 1,083
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,556
<INCOME-PRETAX> (5,977)
<INCOME-TAX> (2,451)
<INCOME-CONTINUING> (5,977)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,526)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
