SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 3, 1996
Commission file number 33-27126
PEEBLES INC.
Virginia 54-0332635
(State of incorporation) (I.R.S. Employer Identification No.)
One Peebles Street
South Hill, Virginia 23970-5001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 447-5200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant $-0- (determined by including all shares of
Peebles common stock owned by persons, (1) who hold less than 10% of the
outstanding shares of common stock and(2) are not an executive officer of the
registrant. Aggregate value is based upon the estimated fair value of common
stock as of February 3, 1996.)
As of April 1, 1996, 1,000 shares of common stock of Peebles Inc. were
outstanding.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and
the Part of the Form 10-K into which the document is incorporated: (1) Any
annual report to security holders; (2) Any proxy or information statement; and
(3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act
of 1933. The listed documents should be clearly described for identification
purposes.
NONE
<PAGE>
PART I
Item 1. Business.
General
Peebles operates 65 specialty department stores offering merchandise
for the entire family and selected decorative home accessories. Founded in 1891,
the Company operates primarily in smaller communities in ten southeastern and
mid-Atlantic states. Peebles positions itself as the leading fashion retailer in
these communities, which typically do not have a traditional mall-based
department store, and locates its stores in the primary shopping destinations in
its markets. Peebles offers its customers consistent value by providing a broad
assortment of moderately priced national brands supplemented with quality
private label merchandise. Peebles' attractive stores and visual presentation,
advertising and promotional programs further reinforce its image as the market's
fashion leader.
References to 1991, 1992, 1993, 1994 and 1995 relate to the fiscal
years of the Company ending February 1, 1992, January 30, 1993, January 29,
1994, January 28, 1995 and February 3, 1996, respectively. Fiscal years 1991,
1992, 1993 and 1994 each include 52 weeks. Results of operations for 1995
consisted of fifty-three weeks, with 17 weeks included in the four-month period
ended May 27, 1995 and 36 weeks in the eight month period ended February 3,
1996. References herein to 1995 relate to the 53-week period ended February 3,
1996.
The entire equity interest of Peebles Inc. was acquired by PHC Retail
Holding Company ("PHC Retail"), effective May 27, 1995. PHC Retail is an
affiliate of Kelso & Company ("Kelso"), an investment firm located in New York,
New York. PHC Retail has no significant assets other than the shares of Peebles
common stock, and had no operations prior to the 1995 Acquisition. The
acquisition was accounted for using the purchase method of accounting, and
accordingly, a new accounting base year was established. The acquisition has not
resulted in, and is not expected to result in any deviation from the Company's
pre-acquisition strategic plans involving store operations, except that greater
flexibility is afforded through the New Credit Agreement, as defined, and the
added financial support of Kelso as an equity owner within that agreement.
Operating Strategy
The following are key elements to Peebles operating strategy:
Focus on Small Markets. Peebles locates its stores in smaller
communities that typically do not have a traditional mall-based
department store, thereby limiting competition and allowing Peebles to
be the leading fashion retailer in these communities. The Company
believes its ability to successfully operate in markets with as few as
5,000 households is an important competitive advantage over large
department stores, which generally cannot profitably operate in such
<PAGE>
markets. Peebles has operated in small communities for over 100 years
and understands its markets and customers.
Operate Small Stores with Lower Cost Structure. Peebles, with its focus
on small communities, operates stores that are significantly smaller
than the traditional full-line department store. Peebles' stores
average 32,000 square feet and vary in size from 10,000 to 65,000
square feet. The Company operates profitably despite its smaller stores
and lower sales per square foot compared with other department store
companies due to its high gross margins, emphasis on cost control and
centralized operations.
Deliver Fashion to Small Communities. Peebles strives to provide its
customers with a shopping experience similar to that found in a
traditional mall-based department store, although with fewer
merchandise categories. The Company emphasizes a broad selection of
moderately-priced national brands and private label merchandise, which
generally is not available through other retailers in the market.
Peebles' attractive stores and visual presentation, advertising and
promotional programs further reinforce its image as the market's
fashion leader.
Offer Value to Customers. Peebles emphasizes value pricing and is less
promotional than traditional department stores. It is the Company's
strategy to use lower initial mark-ons and promote less, thereby
maintaining a high level of credibility with its customers. Peebles'
commitment to providing value to its customers is integral to creating
repeat customers, a critical ingredient for success in smaller markets.
Centralize Operations, but Tailor Merchandise Locally. Peebles believes
that centralized decision-making, controls and support functions are
critical to its cost-efficient operations and enable the Company's
store personnel to maximize the time devoted to selling. In contrast,
Peebles employs a decentralized approach in merchandising its
individual stores. The merchandise mix is tailored to individual stores
to cater to local tastes and preferences based on customer and sales
associate feedback and sales trends. Buyers and store associates work
together to optimize the use of Peebles' smaller selling spaces to meet
customer demand and maximize sales.
Adapt to Local Real Estate Opportunities. Smaller stores and a flexible
store format give the Company the ability to locate in a variety of new
or existing sites. As a result, Peebles' growth is not dependent upon
the development of new malls. Peebles attempts to position its stores
in the primary shopping destination in its markets, which are typically
strip shopping centers co-anchored by leading discount, grocery and
drug retailers. The Company also operates successfully in enclosed
malls and downtown locations.
<PAGE>
Expansion Strategy
The Company has expanded by opening new stores, acquiring and
converting stores and groups of stores, and remodeling or relocating existing
stores. The Company anticipates expanding its operations through the following:
Opening New Stores. The Company intends to open five new stores in 1996
and ten new stores in 1997. As of April 1, 1996 the Company has signed
three leases for stores scheduled to open in 1996, representing
approximately 67,000 in total square footage. The Company's new stores
will be located in existing and contiguous markets where it can realize
distribution efficiencies and where the Peebles concept and merchandise
mix will correspond to local demographics. The Company explores a wider
range of real estate options than retailers which rely only on new
shopping center development, and actively considers space vacated by
other retailers.
Remodeling and Relocating Stores. In addition to new store growth, the
Company has an ongoing remodeling program, both upgrading existing
stores and reallocating selling space to provide its customers a
pleasant, fashion-oriented shopping environment for the merchandise mix
for that market. Since January 30, 1993, the Company has remodeled
eleven stores and relocated four stores. The Company expects to
relocate selected stores in the future to the desired shopping
destination in that market.
Acquisitions. The Company believes that from time to time opportunities
may arise for the acquisition of individual stores or groups of stores.
In 1993, the Company acquired one store and in 1988, the Company
acquired ten stores in Kentucky and Tennessee, adding to its then
existing base of 38 stores. The Company is continually evaluating
acquisitions of both individual stores and groups of stores.
Peebles Stores
Peebles stores are designed and managed to create an appealing shopping
experience, foster customer convenience and maximize operating efficiency. The
Company's stores range in size from 10,000 to 65,000 square feet and average
32,000 square feet, which is significantly smaller than the traditional
full-line department store. The Company does not have a standard store format
and instead adapts its stores to existing real estate opportunities. The
Company's stores feature a bright, modern and accessible layout with an emphasis
on the visual presentation of merchandise. The store layout is designed to draw
the customer through the store, creating opportunities for cross-selling.
The Company targets communities with between 10,000 and 25,000
households. According to Company estimates, as of February 3, 1996,
approximately 60% of the Company's stores are located in markets with fewer than
20,000 households. Peebles can operate profitably in markets with as few as
5,000 households. The Company enters larger markets and suburban areas with
25,000 to 40,000 households where the customer base and competitive factors
exhibit characteristics similar to markets where the Company's operating
strategy has proven successful. The Company prefers to locate its stores in
strip shopping centers and enclosed malls where other anchors such as a leading
grocery, discount and
<PAGE>
drug retailers will create a destination shopping location. Of the 65 stores
currently in operation, 42 are located in strip shopping centers, 19 in enclosed
malls and 4 in downtown locations.
Merchandising
The Company's merchandise, approximately 80% of which is apparel, is
targeted to middle income customers shopping for their families and homes. The
Company has fewer departments than a traditional full-line department store, but
strives to carry a wide assortment of merchandise within its targeted categories
in order to appeal to a broad range of customers. To position itself as the
primary fashion retailer in the community with merchandise not found elsewhere
in the market, the Company emphasizes moderately-priced national brands,
supplemented by a limited selection of prestige brand names and a selection of
quality private label merchandise. Peebles merchandise is fashion responsive
rather than fashion forward, limiting the Company's inventory exposure. The
Company's stores carry apparel for the entire family, accessories and cosmetics,
and decorative home accessories.
Management believes that brand name merchandise is a significant
attraction to its customers and intends to continue emphasizing such merchandise
in its stores. For example, the Company carries nationally branded cosmetics in
as many of its stores as possible because Peebles is typically the only retailer
in the community where consumers can purchase that merchandise. While the gross
margins on cosmetics are typically lower than the Company's average gross
margin, the availability of this merchandise generates store traffic which
facilitates the sale of higher margin merchandise.
In 1995, a majority of the merchandise sold by the Company was
nationally branded merchandise. Key brands featured by the Company include:
Ladies........ Liz Claiborne, Etienne Aigner, Alfred Dunner, Oak Hill,
Koret, Monet, Hanes, Goodman Knitting, Playtex, Forecaster,
Byer of California, Shadowline, Pendleton, Michael Stevens,
Halmode Apparel, Stuart Alan, Fritzi of California
Men's......... Levi, Haggar, Bugle Boy, Arrow, Van Heusen, Champion, Swank
Young Men's
and Juniors.. Levi, Bugle Boy, Byer of California, B.U.M. Equipment,
Union Bay, Lee, Rampage, Bongo, Zeppelin, Gotchaco, Fritzi
of California
Children's.... Buster Brown, HealthTex, Oshkosh B'Gosh, Baby Togs, William
Carter
Shoes......... Reebok, Nike, Brown Shoe, Keds, Fila, Nunn Bush, What's
What
Home.......... Springs, Pacific Home, Arch, Whiting, World Bazaars,
Mikasa,
Cosmetics..... Estee Lauder, Elizabeth Arden, Fashion Fair, Calvin Klein,
Liz Claiborne,
<PAGE>
As a complement to its national brand merchandise, the Company offers
private label merchandise in selected departments to give its customers a wider
range of products. Management believes that its private label merchandise
provides value to the Peebles customer by offering a quality merchandise
alternative at prices lower than national brands. In addition, private label
merchandise often has higher gross margins than brand name merchandise and
allows the Company to avoid direct price competition.
In order to efficiently utilize its smaller selling space, Peebles
tailors the merchandise selection at individual stores. The Company utilizes its
knowledge of its markets and customers developed over 104 years along with input
from the store managers and sales associates to allocate merchandise to the
stores. The Company also maintains an inventory tracking system which provides
daily information as to sales and inventory levels by store, department, vendor,
class, style, size and color. Based on this information, the Company analyzes
market trends, identifies fast or slow moving merchandise and makes reordering
and pricing decisions on a daily basis.
Peebles emphasizes value pricing and is less promotional than the
traditional department store. It is the Company's pricing strategy to use lower
initial mark-ons and promote less, thereby maintaining a high level of
credibility with its customers. Peebles' commitment to providing value to its
customers is integral to creating repeat customers, a critical ingredient for
success in smaller markets. Peebles utilizes its "Our Price" program with
approximately 30% of the Company's merchandise. With this program, the Company
has even lower initial mark-ons on certain national brand name products which
are considered to be less fashion sensitive such as jeans, socks and underwear.
Products in this program are marketed through special point of sale displays and
are featured in the Company's advertising.
Advertising and Promotion
The Company's advertising and promotion strategy is designed to support
its marketing goals of providing quality merchandise at value-oriented prices
and reinforces the Company's image as the leading fashion retailer in its
markets. Peebles utilizes a direct mail program, which in part employs
information obtained from its charge card program to target mailings to its
charge card holders. The Company emphasizes newspaper advertising and mailers
rather than television and radio, due to the size and nature of the markets
served. Peebles uses both black and white advertisements and full color mailers
to highlight promotional items and events as well as products in its "Our Price"
program.
In addition, the Company's advertising and promotional staff organizes
special events at the stores and arranges for all Grand Opening and Grand
Reopening events. In 1995, the Company continued as an associate sponsor of a
racing team in the NASCAR Busch Grand National stock car racing series, which
the Company believes will increase its exposure in both existing and potential
markets.
The Company's net advertising expenses in 1993, 1994 and 1995 were
2.7%, 2.5% and 2.6% of net sales, respectively, which the Company believes is
lower than traditional department stores due to emphasis on an everyday fair
price policy and a less promotional strategy.
<PAGE>
Purchasing and Distribution
The Company employs 24 buyers and seven merchandise managers who are
responsible for most merchandising decisions including purchasing, pricing,
sales promotions, inventory allocations and markdowns. While these decisions are
made centrally, the Company endeavors to refine its merchandise assortment to
appeal to the customers in each market. Peebles' buying staff has developed
specific knowledge with regard to purchasing, inventory and promotions for the
Company's smaller sized stores. The merchandising group participates in an
incentive plan based on sales, gross margin dollars generated and inventory
turnover.
The Company places special emphasis on maintaining all merchandise in
stock, particularly advertised and basic merchandise, to build and maintain
credibility with its customers. By monitoring unit sale information by store,
buyers are able to quickly determine the styles, colors and sizes of merchandise
to be reordered and distributed to individual stores.
The Company purchases its merchandise from approximately 1,275
suppliers and is not dependent on any single source of supply. The Company is a
member of Frederick Atkins, Inc., an international cooperative buying service.
This cooperative offers members merchandise purchasing opportunities, which the
Company has taken advantage of particularly in connection with its imported
private label merchandise. During 1993, 1994 and 1995, Frederick Atkins, Inc.
was the Company's largest supplier, accounting for retail purchases totaling
approximately 17.0%, 17.7% and 17.3%, respectively. The Company believes it has
a good relationship with Frederick Atkins, Inc. and is not aware of a situation
in which Frederick Atkins, Inc. would not continue to supply the Company. In the
event such a situation arose, the Company believes that it could avoid
significant disruptions in its purchasing process or significant changes to its
merchandise mix through the use of other resources.
Virtually all merchandise is shipped directly from vendors to the
Company's distribution center where it is inspected, sorted, marked, ticketed,
packed and held in bins for each individual store. The Company does not
warehouse merchandise and has a goal of processing goods through the
distribution center in three days. Merchandise is shipped to each store an
average of twice a week on Company-owned trucks.
The Company's distribution center is located on 31 acres in South Hill,
Virginia, adjacent to the Company's headquarters and close to major interstates.
In 1992, the Company renovated and expanded the distribution center from 85,000
square feet to its current 117,000 square feet and further automated its
distribution process, including an extensive network of conveyors and recycling
equipment. The distribution center currently operates one eight hour shift
daily. In 1996, the Company plans to add an additional 30,000 square feet to the
distribution center. Management believes the cost of this expansion will be
approximately $2.5 million and that, with such expansion, the distribution
center can service 110 stores.
<PAGE>
Store Operations
The Company has structured its store operations to maintain what
management believes are key operating advantages including a thorough knowledge
of its customer base, the ability to share information between the stores, and
cost efficient operations through centralized decision making.
Peebles performs as many functions as possible at the corporate level
so that store level management and sales associates can spend most of their time
with customers. Non-sales store personnel are kept to a minimum due to control
functions performed at the corporate offices, including sales associate
scheduling, customer credit and marking merchandise. All stores utilize a
minimum 85% of their total payroll hours in a selling capacity.
Peebles encourages the participation of all store level management and
sales associates in decision making, and management regularly solicits input and
suggestions from its employees who are closest to the customer. In addition to
its management information systems, Peebles stays in close contact with store
operations through its seven regional managers. Each store manager reports to a
regional manager, who also manages a store. Regional managers visit their stores
at least once a month to review merchandise presentation, personnel training and
performance, enforcement of the Company's security procedures and adherence to
Company operating procedures. The regional managers meet quarterly to share
information.
The Company conducts a management training program, which coordinates
instruction at the Company's corporate headquarters facility with on-the-job
experience. The Company stresses promotion from within, and substantially all of
the current store managers have been selected in this manner. Approximately 45%
of the store managers have been with the Company ten or more years.
Most stores typically employ several assistant managers and
approximately 30 sales associates, a number of whom are part-time. All Peebles'
store personnel, including assistant store managers and sales associates,
participate in incentive plans. The Company uses periodic productivity reports
and personal reviews to apprise each employee of his or her performance.
Peebles Charge Card
In 1993, 1994 and 1995, 42.0%, 40.4% and 38.8%, respectively, of net
sales were made using the Company's proprietary credit card. As of February 3,
1996, the Company had approximately 592,500 credit card accounts, of which
153,100 were billed accounts.
<PAGE>
Peebles' charge card sales represent an important element in its
marketing strategy because the Company believes that Peebles charge card holders
generally constitute its most loyal and active customers. Information regarding
purchases by the Company's credit card customers is recorded at the stores'
point-of-sale terminals and transmitted directly to the Company's data
processing center. This information is used to bill accounts as well as to
provide marketing information regarding purchasing habits and merchandise
preferences. The Company uses this data to develop segmented advertising and
promotional programs to reach specific groups of customers who have established
purchasing patterns for certain brands, departments and store locations.
Peebles administers all aspects of its credit card program, and
decisions with respect to the opening of new accounts, extensions of "instant
credit," adjustments to bills and responses to customer inquiries are made by
Company-trained associates located at Peebles' headquarters. Management believes
this in-house credit program provides the Company with an important customer
relations advantage over competing retailers which administer their credit
programs from remote processing locations or contract for such services from
unrelated third parties.
The Company's credit plans provide for the option of paying in full
within 28 days of the billed date with no finance charge or with revolving
credit terms. Terms of the short-term revolving charge accounts require
customers to make minimum monthly payments in accordance with prescribed
schedules. Peebles bears the risk of the collecting its credit card receivables.
Peebles' credit card program has had a positive impact on net income.
The following table presents a summary of information relating to the
Company's charge card sales and receivables (in thousands):
Period-End Allowance
Net Bad Debt Expenses For Doubtful Accounts
----------------------- ------------------------------------------
% of Period-End Total % of Total
Years Sales Amount Sales Customer Receivables Amount Receivables
------- ------- ------ ----- -------------------- ------ -----------
1993..... 63,696 696 1.1 29,336 950 3.2
1994..... 67,651 640 1.0 29,742 930 3.1
1995..... 68,216 766 1.1 29,494 960 3.3
Management Information Systems
The Company's management information systems provide the daily
financial and merchandising information to make timely and effective pricing
decisions and for inventory control. The Company is able to allocate its
inventory effectively as a result of its management information systems and can
tailor the merchandise mix to meet the individual customer demands at each
store.
The Company maintains central management information and data
processing systems at its corporate headquarters. Each of its stores is equipped
with compatible point-of-sale registers, which are polled every evening by the
central system to gather sales, accounts receivable and inventory information.
The Company's management information and data processing systems
primarily use internally developed software. The Company believes this allows
management to more closely control the quality,
<PAGE>
suitability and expense of management information systems and data processing.
The Company continues to make selected improvements in computer hardware
technology as well as enhancements to software applications as needed.
Employees
At February 3, 1996, the Company had 961 full-time employees and 1,311
part-time employees. None of the Company's employees is covered by a collective
bargaining agreement. The Company considers its employee relations to be good.
Competition
The retail industry is highly competitive, with selection, price,
quality, service, location and store environment being the principal competitive
factors. The Company competes with national and local retail stores, specialty
apparel chains, department stores, discount stores and mail order merchandisers,
many of which have substantially greater financial and marketing resources than
the Company. Demographic changes may alter the character of the Company's
markets, which can result in increased competition from other retailers.
Trademarks
The Peebles name is registered as a trademark and a servicemark of the
Company. Additionally, the Company has registered several merchandise labels as
trademarks under which it sells quality merchandise such as Cape Classic(TM),
Private Expressions(TM), Meherrin River Outfitters(TM), Harmony Grove(TM) and
Sonoma Bay(TM).
Regulation
The Company is subject to federal, state and local laws and regulations
affecting retail department stores generally. The Company believes that it is in
substantial compliance with these laws and regulations.
Item 2. Properties.
All but one of the Company's stores are leased, and most of the leases
contain renewal options. The stores range in size from 10,000 square feet to
65,000 square feet, and average 32,000 square feet. The following table
indicates the location of the Company's stores in operation as of April 1, 1996:
Delaware Tennessee
Rehoboth Beach Columbia
Seaford Cookeville
Dyersburg
Kentucky Hermitage
Hopkinsville Humbolt
Madisonville Murfreesboro
Maryland Virginia
Bowie Ashland
Chestertown Appomattox
Easton Blackstone
Eldersburg Christiansburg
Elkton Colonial Heights
Lexington Park Covington
Prince Frederick Danville
Salisbury Emporia
Waldorf Front Royal
Hayes
New Jersey Hampton
Rio Grande Hopewell
Lawrenceville
New York Leesburg
Geneva
Auburn Virginia
Lexington
North Carolina Luray
Aberdeen Manassas
Charlotte Norfolk
Eden Onley
Jacksonville Richmond
Monroe Rocky Mount
Marion Smithfield
Roxboro South Hill
Statesville Stafford
Warrenton
Pennsylvania Waynesboro
Gettysburg Williamsburg
Woodbridge
South Carolina Woodstock
Conway Wytheville
Florence
Georgetown
Myrtle Beach
The Company owns the real estate upon which its Lawrenceville, Virginia
store is located.
Store leases provide for a base rent of between $1.00 and $6.00 per
square foot per year. Most leases also have formulas requiring the payment of
additional rent based on a percentage of net sales above specified levels. In
1993, 1994 and 1995, the Company's aggregate rental payments on operating leases
were approximately $6.0 million, $6.4 million and $7.2 million, respectively.
The Company's corporate headquarters and distribution center facilities
are located in South Hill, Virginia. The Company owns the property subject to
deeds of trust and security interests granted in connection with the Company's
credit agreement. The Company believes the location provides the Company with
adequate undeveloped space to expand the corporate headquarters, distribution
center or both to meet future growth requirements.
Item 3. Legal Proceedings.
The Company is from time to time involved in routine litigation. Based
on consultations with legal counsel, the Company believes that none of the
litigation in which it is currently involved is material to its financial
condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Market Information
All of the Company's common stock is owned by PHC Retail Holding
Company. See Item 12. "Security Ownership of Certain Beneficial Owners and
Management." There is no existing market for the Common Stock, nor is the Common
Stock listed on any exchange. All currently outstanding shares of common stock
were issued pursuant to exemptions from registration under the Securities Act of
1933, as amended (the "Act"), and any resales of such shares of Common Stock can
only be made pursuant to an effective registration statement or an exemption
from the registration requirements of the Act.
Dividends
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The Company does not currently pay any dividends on its Common Stock.
The Company's credit agreement prohibits the payment of dividends absent the
consent of the lender. Accordingly, the Company does not currently intend to
declare any dividends to the holders of the Common Stock in the foreseeable
future.
(This space intentionally left blank)
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Item 6. Selected Financial Data.
The following selected historical financial data for Peebles for the five fiscal
years ended February 3, 1996 are derived from the Company's audited financial
statements. Effective May 27, 1995, PHC Retail Holding Company ("PHC Retail")
acquired the entire equity interest of Peebles Inc. (the "1995 Acquisition").
The 1995 Acquisition was accounted for as a purchase; and accordingly, a new
basis of accounting was begun. As a result, the financial data for the
eight-month period subsequent to the 1995 Acquisition is not comparable to the
financial data for the prior periods. The Company was recapitalized effective
January 31, 1992. The data should be read in conjunction with the financial
statements, related notes and other financial information included herein.
(Dollars in thousands except per share and selected other data)
<TABLE>
<CAPTION>
Four Month Eight Month
Fiscal Years Ended Period Ended Period Ended
------------------------------------------------- ------------ -------------
February 1, January 30, January 29, January 28, May 27, February 3,
1992 (1) 1993 1994 1995 1995 1996
(Post Recapitalization) (Post 1995 Acquisition)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales ....................... $140,044 $140,943 $151,772 $167,662 $49,163 $126,501
Cost of sales ................... 85,706 84,033 91,134 98,066 29,935 72,994
-------- -------- ------- --------
Gross margin .................... 54,338 56,910 60,638 69,596 19,228 53,507
Selling, general and
administrative expenses ....... 37,977 37,717 40,320 45,205 14,639 33,275
Depreciation and
amortization .................. 5,634 5,557 6,029 6,729 2,349 4,339
Stock option settlement ......... -- -- -- -- 3,089 --
Revaluation of goodwill ......... 26,315 (2) -- -- -- -- --
-------- -------- -------- -------- ------- ---------
Operating income (loss) ......... (15,588) 13,636 14,289 17,662 (849) 15,893
Other income (expenses) ......... 135 (145) (1) 131 77 (52)
Interest expense ................ 19,277 4,981 4,248 4,569 1,414 6,565
-------- -------- -------- -------- ------- ---------
Income (loss) before
income taxes (benefit) and
extraordinary item ............ (34,730) 8,510 10,040 13,224 (2,186) 9,276
Income taxes (benefit) .......... (1,275) 3,952 4,513 5,747 (874) 4,246
======= ======= -------- -------- ------- --------
Income (loss) before
extraordinary item ............ (33,455) 4,558 5,527 7,477 (1,312) 5,030
Extraordinary item .............. 33,563 (3) -- -- -- (216) --
-------- -------- -------- -------- ------- --------
Net income (loss) ............... $ 108 $ 4,558 $ 5,527 $ 7,477 $(1,528) $ 5,030
======== ======== ======== ======== ========= ========
Net income (loss) per share ...... N/M* $ 1.56 $ 1.88 $ 2.54 $ (.52) $ 5,030
Average common stock and
common stock equivalents
outstanding ................. 18,582 2,918,352 2,932,905 2,940,281 2,942,600 1,000
<CAPTION>
Twelve Month Data
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<S> <C> <C> <C> <C> <C>
Selected Other Data: .............
Net sales per store (000's) (4) . $ 2,857 $ 2,744 $ 2,962 $ 3,189 $ 3,032
Selling sq. ft. per store (4) ... 25,000 25,000 26,000 26,000 26,300
Net sales per selling sq. ft. (5) $ 110 $ 111 $ 116 $ 117 $ 112
Comparable store net sales
increase (decrease) (4) ....... (5.0%) (2.0%) 4.3% 4.6%(8) (1.0%)
Number of stores
(end of period) ................ 50 49 54 58 65
Total selling sq. ft ............
(end of period) ............... 1,290,000 1,276,000 1,385,000 1,510,000 1,649,000
Capital expenditures (000's) .... $ 2,862 $ 6,137 $ 7,372 $ 8,454 $ 8,094
<CAPTION>
February 1, January 30, January 29, January 28, February 3,
Balance Sheet Data: 1992 1993 1994 1995 1996
-------- ---------- ----------- ---------- -----------
(Post 1995 Acquisition)
<S> <C> <C> <C> <C> <C>
Working capital $ 42,441 $ 41,226 $ 44,348 $ 49,872 $ 48,395
Net property and equipment 18,435 20,823 24,903 28,951 32,248
Total assets................. 145,565 137,543 143,727 148,954 165,553
Total debt (6)........... 60,086 44,662 46,207 41,955 76,778
Stockholders' equity (7)..... 62,938 68,537 74,530 82,234 64,338
</TABLE>
Selected Financial Data Footnote Legend
N/M*- Not meaningful.
1) On January 31, 1992, the Company was recapitalized.
2) Revaluation of goodwill is a result of the recapitalization of the
Company.
3) Reflects a gain on the exchange of debt related to the recapitalization of
the Company.
4) Only reflects data for comparable stores. Comparable stores for the
current year are those stores which were open for the entire period in the
immediately preceding year.
5) Net sales per selling square feet per store is based on stores open one
full year.
6) Includes the long-term portion of the capital lease obligations and the
current portion of long-term debt.
7) Retained earnings, included in stockholders' equity has been adjusted to
zero on February 1, 1992 and May 27, 1995. On February 1, 1992, an
accumulated deficit of $10,477 was eliminated in a quasi-reorganization
resulting from the recapitalization of the Company. On May 27, 1995,
accumulated earnings of $16,022 were eliminated in purchase accounting.
8) Comparable store net sales decreased 1% comparing the 53-week period ended
February 3, 1996 versus the 52-week period ended January 28, 1995.
Comparing the 53-week period ended February 3, 1996 to the corresponding
53-week period ended February 4, 1995, comparable store net sales
decreased 2%.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The discussion and analysis included under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
appears on page F-15 of this annual report on Form 10-K.
Recent Developments
None
Item 8. Financial Statements and Supplementary Data.
Information with respect to this Item is contained in the financial
statements indicated on the Indices on page F-0 of this annual report on Form
10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
(This space intentionally left blank)
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Company's executive officers and directors, their ages, positions
and years with the Company are as follows:
Years with
Name Age Position the Company
Michael F. Moorman 53 Chairman of the Board, President
and Chief Executive Officer 32
Ronnie W. Palmore 47 Senior Vice President, Merchandising
and Assistant Secretary 23
Russell A. Lundy, Sr. 60 Senior Vice President, Stores 42
E. Randolph Lail 40 Senior Vice President, Finance,
Chief Financial Officer,
Secretary and Treasurer 8
Marvin H. Thomas, Jr. 40 Senior Vice President, Operations 17
William C. DeRusha 46 Director 4
Malcolm S. McDonald 57 Director 4
Wellford L. Sanders, Jr. 50 Director 3
Thomas R. Wall, IV 37 Director 1
Frank T. Nickell 48 Director 1
Michael F. Moorman has been Chairman of the Board, Chief Executive
Officer, President and a Director of PHC Retail since June 9, 1995 . Mr. Moorman
has also been Chairman of the Board and a Director of the Company since
September 1989, Chief Executive Officer of the Company since May 1989 and
President of the Company since June 1988. Prior thereto, Mr. Moorman served as
Chief Financial Officer and Treasurer of the Company from August 1989 to June
1992 and Secretary of the Company from August 1989 to June 1990. Mr. Moorman has
been employed by the Company in various positions since 1964. Mr. Moorman has
been a Director of the Company since 1977.
Ronnie W. Palmore has been Senior Vice President, Merchandising of PHC
Retail since June 9, 1995 and of the Company since September 1989 and Assistant
Secretary of the Company since 1988. Mr. Palmore served as Senior Vice
President, Stores of the Company from June 1988 to August 1989 and has been
employed by the Company in various positions since 1973.
Russell A. Lundy, Sr. has been Senior Vice President, Stores of PHC
Retail since June 9, 1995 and of the Company since September 1989. Mr. Lundy
served as Vice
<PAGE>
President, Stores of the Company from 1984 to August 1989 and has been employed
by the Company in various positions since 1954.
E. Randolph Lail has been Senior Vice President, Finance, Chief
Financial Officer, Secretary and Treasurer of PHC Retail since June 9, 1995. Mr.
Lail has also been Senior Vice President, Finance of the Company since June
1993, Chief Financial Officer and Treasurer of the Company since June 1992 and
Secretary of the Company since June 1990. Mr. Lail served as Vice President,
Finance of the Company from June 1990 to June 1993 and as Controller of the
Company from January 1988 to June 1990. Mr. Lail is a Certified Public
Accountant and has been employed by the Company since January 1988.
Marvin H. Thomas, Jr. has been Senior Vice President, Operations of PHC
Retail since June 9, 1995 and of the Company since June 1993. Mr. Thomas served
as Vice President, Operations of the Company from June 1990 to June 1993 and
Vice President, Merchandise Manager of the Company from May 1988 to June 1990.
Mr. Thomas has been employed by the Company in various positions since 1979.
William C. DeRusha has been a Director of PHC Retail since June 9, 1995
and of the Company since March 1992. Mr. DeRusha is Chairman of the Board and
Chief Executive Officer of Heilig-Meyers Company. Mr. DeRusha is a director of
Heilig- Meyers Company, Best Products Co., Inc. and Signet Banking Corporation.
Malcolm S. McDonald has been a Director of PHC Retail since June 9,
1995 and of the Company since April 1992. Mr. McDonald is President and Chief
Operating Officer of Signet Banking Corporation and President and Chief
Executive Officer of Signet Bank/Virginia. From July 1988 to April 1990, Mr.
McDonald was Vice Chairman of Signet Bank/Maryland and Signet Bank/Virginia.
Prior to July 1988, Mr. McDonald was Vice Chairman of Signet Banking Corporation
and Chairman of Signet Bank, N.A. Mr. McDonald is a director of Signet Banking
Corporation and American Trading and Production Company.
Wellford L. Sanders, Jr. has been a Director of PHC Retail since June
9, 1995 and of the Company since February 1992. Mr. Sanders is a partner in the
law firm of McGuire, Woods, Battle & Boothe, L.L.P. Mr. Sanders is a director of
Catherines Stores Corporation and General Medical Corporation.
Thomas R. Wall, IV has been a Director of PHC Retail and the Company
since June 9, 1995. Mr. Wall has been Managing Director of Kelso since 1990 and
prior thereto General Partner of Kelso since 1989. From 1986 to 1989, Mr. Wall
was a Vice President of Kelso. Mr. Wall is also a director of CCA Holdings
Corp., CCT Holdings Corp., Ellis
<PAGE>
Communications, Inc., General Medical Corporation, Mitchell Supreme Fuel
Company, Mosler Inc., TransDigm, Inc. and Tyler Refrigeration Corporation.
Frank T. Nickell has been a Director of PHC Retail and the Company
since June 9, 1995. Mr. Nickell has been President and a director of Kelso since
March 1989. From 1984 to 1989, Mr. Nickell was a general partner of Kelso. He is
also a director of American Standard Companies, Inc., CCA Holdings Corp., CCT
Holdings Corp., The Bear and Stearns Companies Inc., Earle M. Jorgensen Company
and Tyler Refrigeration Corporation.
On December 23, 1992, Kelso and its chief executive officer, without
admitting or denying the findings contained therein, consented to an
administrative order in respect of a Commission inquiry relating to the 1990
acquisition of a portfolio company by a Kelso affiliate. The order found that
Kelso's tender offer filing in connection with the acquisition did not comply
fully with the Commission's tender offer reporting requirements, and required
Kelso and its chief executive officer to comply with these requirements in the
future.
Executive officers of Peebles are elected annually and serve at the
discretion of the Board of Directors.
Directors Compensation
Mr. DeRusha, Mr. McDonald and Mr. Sanders are paid an annual retainer
of $20,000, payable quarterly in arrears, and are reimbursed for expenses
incurred in attending meetings of the Board of Directors.
Agreements to Indemnify.
Peebles has entered into agreements with each of the directors and
officers of Peebles pursuant to which Peebles agrees to indemnify such director
or officer from claims, liabilities, damages, expenses, losses, costs, penalties
or amounts paid in settlement incurred by such director or officer and arising
out of his capacity as a director, officer, employee and/or agent of the
corporation of which he is a director or officer to the maximum extent provided
by applicable law. In addition, such director or officer shall be entitled to an
advance of expenses to the maximum extent authorized or permitted by law to meet
the obligations indemnified against. Such agreements also obligate the Company
to purchase and maintain insurance for the benefit and on behalf of its
directors and officers insuring against all liabilities that may be incurred by
such director or officer, in or arising out of his capacity as a director,
officer, employee and/or agent of the Company.
<PAGE>
ITEM 11. Executive Compensation
The following tables set forth a summary of compensation paid by the
Company to its five highest paid executive officers (the "Named Executives")
during 1993, 1994 and 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------- ------------------------
Awards Payout
---------- ----------
Number of
Other Annual Options/
Name and Salary Bonus Compensation Warrants Long-term Incentive
Principal Position Year ($)(1) ($) (2) ($)(3)(6)(7) Granted(4) Plan Payouts ($)(5)
- ------------------ ---- ------- ------- ------------ ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Michael F. Moorman
Chairman of the Board, 1995 $261,050 $ 17,800 $1,133,400 -- --
President and Chief 1994 248,246 189,235 - 75,000 --
Executive Officer 1993 232,777 345,282 103,010 84,327 170,569
Ronnie W. Palmore
Senior Vice President, 1995 $144,087 15,872 329,062 -- --
Merchandising and 1994 136,767 68,211 - 20,250 --
Assistant Secretary 1993 129,964 117,169 32,235 26,860 68,227
Russell A. Lundy, Sr. 1995 $115,538 8,297 224,062 -- --
Senior Vice President, 1994 109,996 49,534 - 14,250 --
Stores 1993 104,472 90,292 22,255 18,679 37,525
E. Randolph Lail
Senior Vice President, 1995 $108,721 6,653 180,681 -- --
Finance, CFO, 1994 88,544 43,961 1,998 14,250 --
Secretary and Treasurer 1993 77,588 53,207 14,837 12,107 22,174
Marvin H. Thomas, Jr. 1995 $ 90 806 10,412 159,370 -- --
Senior Vice President, 1994 81,894 28,958 1,900 10,856 --
Operations 1993 69,482 50,103 15,710 12,107 22,174
</TABLE>
- ---------------------------------------
(1) Salary amounts for 1993, 1994 and 1995 include tax-deferred
contributions of compensation to the Company's 401(K) Profit Sharing
Plan (the "401-K Plan"), adopted in October 1993. Salary compensation
contributed to the 401-K Plan during 1993, 1994 and 1995 for each of
the Named Executives is Mr. Moorman $2,207, $2,185 and $2,333; Mr.
Palmore $0, $2,129 and $1,366; Mr. Lundy $980, $1,958 and $458; Mr.
Lail $608, $1,621 and $2,168, and Mr. Thomas $666, $1,425 and $1,798.
(2) Bonus amounts for each of the Named Executives include the accrued
bonus paid under the Company's annual incentive plans in 1993, 1994 and
1995. The 1994 and 1995 bonus amounts include tax-deferred
contributions of compensation to the 401-K Plan for each of the Named
Executives as Mr. Moorman, $6,809 and $3,897, Mr. Palmore, $2,639 and
$1,364, Mr. Lundy, $1,806 and $1,075, Mr. Lail $1,033 and $879, and
Mr. Thomas $971 and $519 Additionally, bonus amounts include the fair
market value of shares granted under the Peebles Inc. 1991
Stock/Warrant plan (the "1991 Plan") in 1993.
(3) The benefits to be received by each of the Named Executives as a result
of grants of discounted warrants under the 1991 Plan were excluded in
1993 because the warrants were exchanged for stock options on June 9,
1993 under the 1993 Stock Option Plan (the "1993 Plan"). The amounts
shown for 1993 represent tax gross-up payments to cover the executive's
tax withholding obligations resulting from the corresponding stock
grants under the 1991 Plan.
<PAGE>
(4) Option/warrant grants in 1993 to the Named Executives do not
include any grants of warrants under the 1991 Plan. The warrants
granted in 1992 were exchanged for stock options under the 1993 Plan.
In 1993 and 1994, the stock options were granted to certain members of
senior management under the 1993 Plan.
(5) The cash incentive payouts under the Company's long-term incentive plan
were based upon performance versus established goals for the three year
period from 1991 to 1993.
(6) The amounts shown in 1994 reflect the current value of the benefit to
Mr. Lail and Mr. Thomas, respectively of the portion of the premium
paid by the Company with respect to a split dollar insurance
arrangements (see "Employment Agreements"). In 1995, amounts of $1,618
and $1,520 are included for Mr. Lail and Mr. Thomas respectively. The
benefit was determined for each year by calculating the time value of
money (including the applicable long term federal funds rate) of the
premium paid by the Company in 1994 and 1995 ($11,210 for Mr. Lail and
$9,650 for Mr. Thomas per year) for the appropriate period.
(7) In connection with the 1995 Acquisition, the stock options outstanding
under the 1995 Stock Option Plan vested. The 1995 Acquisition mandated
that all options be settled for cash only, either for i) the difference
between the $30 per share price paid by PHC Retail for the common stock
of Peebles Inc. and the $23.75 exercise price, or ii) as specified by
certain change of control agreements. The amounts included in 1995 are
$1,133,400, $329,062, $224,062, $179,063 and $157,850 for Mr. Moorman,
Mr. Palmore, Mr. Lundy, Mr. Lail and Mr. Thomas, respectively. These
amounts include tax-deferred contributions of compensation to the 401-K
Plan of $3,136, $6,581, $3,581 and $3,157 for Mr. Moorman, Mr. Palmore,
Mr. Lail and Mr. Thomas, respectively.
Option Grant Table. There were no options granted by the Company to the Named
Executives during 1995.
<PAGE>
Option Exercise Table. The following table sets forth information
concerning the exercise of stock options during 1995 by each of the Named
Executives and the year end value of unexercised options.
Options Exercised in 1995
<TABLE>
<CAPTION>
Individual Grants
------------------------
Number of Unexercised
Value Options at Year end Value of Unexercised In-the-
Shares Acquired Realized Exercisable/ Money Options at Year end
Name and Principal Position on Exercise (1) ($) Unexercisable (2) Exercisable/Unexercisable ($)
- --------------------------- ---------------- ------- ----------------- ------------------------------
<S> <C> <C> <C> <C>
Michael F. Moorman 0 $0 0 $0
Chairman of the Board, President
and Chief Executive Officer
Ronnie W. Palmore 0 0 0 0
Senior Vice President, Merchandising,
Assistant Secretary
Russell A. Lundy, Sr. 0 0 0 0
Senior Vice President, Stores
E. Randolph Lail 0 0 0 0
Senior Vice President, Finance
Chief Financial Officer, Secretary
and Treasurer
Marvin H. Thomas, Jr. 0 0 0 0
Senior Vice President, Operations
</TABLE>
- ---------------------------------------
(1) There were no stock options exercised by the Named Executives in 1995.
(2) There were no unexercised options at year end.
As of the fiscal year ended February 3, 1996 there were no projected
long-term incentive payouts.
Pension Plan
Peebles maintains a non-contributory qualified defined benefit pension
plan that covers all employees of Peebles who (i) complete 1,000 hours of
service during a one-year period with Peebles and (ii) attain age 21 (a
"Participant"). Contributions to the plan are determined on an actuarial basis
without allocation to individuals or groups.
Retirement benefits are based on a Participant's years of benefit
service and the earnings during the five consecutive calendar years which
produce the highest average. Earnings are limited to $150,000 in any one year
and years of benefit service are limited to 30. A Participant is fully vested
after completing five years of benefit service.
<PAGE>
Benefits are payable to vested Participants at normal retirement (age
65), early retirement (age 55), upon a vested Participant's permanent and total
disability, or upon a vested Participant's termination of employment.
The following table shows estimated annual retirement benefits payable
to Participants under the pension plan upon normal retirement at age 65 under
various assumptions as to final average annual earnings, date of retirement and
years of continuous service without regard to the current earning limit of
$150,000.
Final Years of Service
Average
Salary 15 20 25 30 35
-------- -- -- -- -- --
$ 75,000........ $11,993 $15,990 $19,988 $23,985 $ 23,985
100,000........ 16,868 22,490 28,113 33,735 33,735
125,000........ 21,743 28,990 36,238 43,485 43,485
150,000........ 26,618 35,490 44,363 53,235 53,235
175,000........ 31,493 41,990 52,488 62,985 62,985
200,000........ 36,368 48,490 60,613 72,735 72,735
225,000........ 41,243 54,990 68,738 82,485 82,485
250,000........ 46,118 61,490 76,863 92,235 92,235
300,000........ 55,868 74,490 93,113 111,735 111,735
350,000........ 65,618 87,490 109,363 131,235 131,235
400,000........ 75,368 100,490 125,613 150,735 150,735
450,000........ 85,118 113,490 141,863 170,235 170,235
As of February 3, 1996, the credited years of service for Mr. Moorman,
Mr. Palmore, Mr. Lundy, Sr., Mr. Thomas, Jr. and Mr. Lail were 32, 23, 42, 17
and 8, respectively.
Peebles reserves the right at any time by action of its Board of
Directors to terminate the plan, although it currently has no intention to do
so. If the plan is terminated and appropriately funded at such time, Peebles
will not be required to make any further contributions to the plan and each
participant shall become 100% vested in his benefit under the plan. Each
Participant's benefit will be paid to him after termination of the plan
according to the terms of the plan.
In addition, Peebles also maintains a supplemental executive retirement
plan (the "SERP") for certain designated executives. As of February 3, 1996, Mr.
Moorman, and Mr. Palmore, were participants in this plan. Retirement benefits
payable under the SERP are based
<PAGE>
on 60% of the participant's earnings (without regard to the current earnings
limit of $150,000) during the five consecutive calendar years which produce the
highest average, reduced by the sum of the participant's qualified defined
benefit pension benefit (computed with regard to the applicable earnings limit)
and the participant's social security benefits.
Benefits under the SERP are fully vested upon the earlier of (1) the
completion of five years of service with the Company beginning with the date of
participation in the SERP, (2) the participant's permanent disability, or (3)
the date on which a change of control occurs.
Retirement benefits are payable to vested participant's at normal
retirement (age 65), early retirement (age 55 with 20 years of service), upon
permanent and total disability, or upon a vested participant's termination of
employment.
Compensation Committee Interlocks and Insider Participation
During the year ended February 3, 1996 the Company established a
Compensation Committee of the Board of Directors. For 1995, the Board of
Directors established compensation for the Company's officers for such year.
Michael F. Moorman, the sole officer or employee of the Company who is also a
member of the Board of Directors, made recommendations to the Board of Directors
concerning executive compensation but did not otherwise participate in or vote
upon the executive compensation decisions made by the Board of Directors for
such year. Mr. Moorman is not a member of the Compensation Committee.
Certain Relationships
Wellford L. Sanders, Jr., a member of the Board of Directors of the
Company, is a partner in the law firm of McGuire, Woods, Battle & Boothe,
L.L.P., which rendered legal services to the Company during 1995.
Frank T. Nickell and Thomas R. Wall, IV, members of the Board of
Directors of the Company, are affiliated with Kelso, which rendered management
services to the Company during 1995.
Employment Agreements
During 1995, Peebles entered into employment agreements (the
"Employment Agreements") with twenty three officers of Peebles including Mr.
Lundy and Mr. Thomas. The Employment Agreements, which expire during 1997
provide that if the officer is terminated for any reason, other than for good
cause, he will be entitled to receive his salary at the rate in effect
immediately before such termination for the balance of the term of the
Employment Agreement. For purposes of the Employment Agreements, good cause is
<PAGE>
defined as (a) the commission of a serious crime, or (b) the officer, in
carrying out his duties under the Employment Agreements, is guilty of (i)
willful gross neglect, or (ii) willful gross misconduct resulting in either case
in material harm to the Company or any of its subsidiaries.
In addition, Mr. Lail and Mr. Thomas participate in split dollar
insurance arrangements with the Company. The executive owns, and therefore has a
vested interest in the cash surrender value of the policy in excess of the
Company's premium investment. At retirement, the executive can either use the
cash value for retirement income or keep the death benefit or a combination of
the two. The Company would recover its cost at retirement. In the event of a
change in control, the executive would have a nonforfeitable right to the
Company's share of the cash surrender value of the policy.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
All of the outstanding common stock of the Company is owned by PHC
Retail. The following table sets forth certain information regarding the
beneficial ownership of Common Stock of PHC Retail, as of April 1, 1996, by (a)
each person known by the Company to be the beneficial owner of more than 5% of
the outstanding shares of Common Stock, (b) each of the Company's directors and
Named Executives who owns shares of Common Stock and (c) all directors and Named
Executives of the Company as a group. Unless otherwise noted in the footnotes to
the table, the persons named in the table have sole voting and investing power
with respect to all shares of Common Stock indicated as being beneficially owned
by them.
Capital Stock of PHC Retail
<TABLE>
<CAPTION>
Shares of Shares of
Voting Nonvoting
Common Percent Common Percent
Name of Beneficial Owner (1) Stock of Class Stock of Class
---------------------------- ----- -------- ----- --------
<S> <C> <C> <C> <C>
Kelso Investment Associates V, L.P. (2) 1,803,693 (3) 92.38 0 0
Kelso Equity Partners V, L.P. (2) 70,155 3.59 0 0
Michael F. Moorman 35,000 1.79 0 0
Ronnie W. Palmore 9,468 * 0 0
Russell A. Lundy, Sr. 6,500 * 0 0
E. Randolph Lail 3,300 * 0 0
Marvin H. Thomas, Jr. 3,141 * 0 0
William C. DeRusha 0 0 2,000 8.17
Malcolm S. McDonald 0 0 2,000 8.17
Wellford L. Sanders, Jr. 0 0 2,500 10.22
Joseph S. Schuchert (2) 1,873,848 (3) 96.97 0 0
Frank T. Nickell (2) 1,873,848 (3) 96.97 0 0
George E. Matelich (2) 1,873,848 (3) 96.97 0 0
Thomas R. Wall, IV (2) 1,873,848 (3) 96.97 0 0
All Directors and Named Executives
as a group (10 persons) 1,931,257 98.91 6,500 26.56
</TABLE>
* Less than 1 Percent
--------------------
(1) The information as to beneficial ownership is based on statements
furnished to the Company by the beneficial owners. As used in this
table, "beneficial ownership" means the sole or shared power to vote,
or direct the voting of a security, or the sole or shared investment
power with respect to a security (i.e., the power to dispose of , or
direct the disposition of). A person is deemed as of any date to have
"beneficial ownership" of any security that such person has the right
to acquire within 60 days after such date. For purposes of computing
the percentage of outstanding shares held by each person named above,
any security that such person has the right
<PAGE>
to acquire within 60 days of the date of calculation is deemed to be
outstanding but is not deemed to be outstanding for purposes of
computing the percentage of any other person.
(2) The business address for such person(s) is C/O Kelso & Company, 320
Park Avenue, 24th Floor, New York, New York 10022.
(3) Messrs. Schuchert, Nickell, Matelich and Wall may be deemed to share
beneficial ownership of shares of PHC Common Stock owned of record by
Kelso Investment Associates V, L.P. ("KIA V") and Kelso Equity Partners
V, L.P. ("KEP V"), by virtue of their status as general partners of
such partnerships. Messrs. Schuchert, Nickell, Matelich and Wall share
investment and voting power with respect to securities owned by other
Kelso affiliates. Messrs. Schuchert, Nickell, Matelich and Wall
disclaim beneficial ownership of the shares of PHC Common Stock owned
of record by KIA V and KEP V and the securities owned by other Kelso
affiliates.
Item 13. Certain Relationships and Related Transactions.
See "Item 10. Directors and Executive Officers of the Registrant" and
"Item 11. Executive Compensation" for a description of certain arrangements with
respect to present and former executive officers and directors of Peebles.
(This space intentionally left blank.)
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial statements.
Information with respect to this Item is contained in the financial
statements indicated on the Indices on page F-0 of this annual report on Form
10-K.
2. Financial statement schedules.
Information with respect to Valuation and Qualifying Accounts appears
in Note K on page F-13 of this annual report on Form 10-K.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
3. Exhibits.
The exhibits listed on the accompanying index to exhibits are filed as
part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K.
NONE
(c) Exhibits.
2.1*** Form of Agreement and Plan of Merger dated April 3, 1995 among PHC
Retail Holding Company, Peebles Acquisition Corp. and Peebles Inc.,
exclusive of exhibits and schedules. The Registrant hereby undertakes
to furnish to the Commission supplementally upon request a copy of any
omitted exhibit or schedule.
3.1+ Form of Amended and Restated Articles of Incorporation of Peebles Inc.
3.2+ Form of Amended and Restated Bylaws of Peebles Inc.
3.3*** Amendment to Amended and Restated Articles of Incorporation dated May
3, 1993
3.4 Amendment to Amended and Restated Bylaws of Peebles Inc.dated June 9,
1995.
3.5 Amendment to Amended and Restated Articles of Incorporation dated June
9, 1995
4.2* Form of Warrant Agreement between PBL Acquisition Corp. and the Warrant
Agent
4.3* Form of Warrant Certificate (included in the Warrant Agreement filed as
Exhibit 4.2 hereto).
10.1 Credit Agreement dated June 9, 1995, by and amoung Peebles Inc. And
NatWest Bank, N.A. as Agent (the "Agent"), and the financial
institutions named therein. (the "Credit Agreement")
10.20 Form of A Term Note.
10.21 Form of B Term Note.
10.22 Form of Bridge Note.
10.23 Form of Revolving Note.
10.24 Form of Swingline Note.
10.3 Security Agreement made June 9, 1995 by and between Peebles Inc. and
the Agent.
10.4 Trademark Security Agreement made June 9, 1995 by and between Peebles
Inc. and the Agent.
10.5 Guaranty Agreement made June 9, 1995 by and between PHC Retail Holding
Company and the Agent.
10.6 Pledge Agreement made June 9, 1995 by and between PHC Retail Holding
Company and the Agent.
10.61 Equity Contribution Agreement made June 9, 1995 by and between Kelso &
Company and the Agent.
10.62 Deed of Trust made June 9, 1995 by and between Peebles Inc., the
Trustee party thereto and the Agent.
10.63 First Amendment of the Credit Agreement dated September 15, 1995.
10.64 Second Amendment and Limited Consent to the Credit Agreement dated
March 8, 1996.
10.8*** Standard Service Agreement, as amended, dated January 17, 1995 between
Frederick Atkins, Incorporated and Peebles Inc.
10.11 Form of Indemnification, Guarantee and Contribution Agreement dated as
of August 23, 1995 PHC Retail Holding Company, Peebles Inc. and each of
the directors and officers of Peebles Inc.
10.16*** Form of Employment Agreement, dated March 30, 1995 entered into by
Peebles Inc.and fourteen executives of Peebles Inc.
21 Subsidiaries of the Registrant.
27 Financial Data Schedule
----------------------------
* Incorporated by reference from the Registration Statement of
PBL and Peebles on Form S-1 (Registration No. 33-27126), which
was declared effective by the Commission on July 14, 1989.
** Incorporated by reference from the Form 10-K of PBL and the
Company for the fiscal year ended February 2, 1991.
+ Incorporated by reference from the Form 10-K of the Company
for the fiscal year ended February 1, 1992.
++ Incorporated by reference from the Form 10-K of the Company
for the fiscal year ended January 30, 1993.
+++ Incorporated by reference from the Form 10-K of the Company
for the fiscal year ended January 29, 1994.
*** Incorporated by reference from the Form 10-K of the Company
for the fiscal year ended January 28, 1995.
(d) Financial Statement Schedules
Information with respect to Valuation and Qualifying Accounts appears
in Note K on page F-13 of this annual report on Form 10-K.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PEEBLES INC.
---------------------
(Registrant)
By /s/ Michael F. Moorman Date: May 3, 1996
----------------------------------
Michael F. Moorman, President
and Chief Executive Officer
(Principal Executive Officer)
By /s/ E. Randolph Lail Date: May 3, 1996
--------------------------------------
E. Randolph Lail, Senior Vice President
Finance, CFO, (Principal Financial
and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ Wellford L. Sanders Date: May 3 , 1996
------------------------------------
Wellford L. Sanders, Jr., Director
By /s/ William C. DeRusha Date: May 3, 1996
-----------------------------------
William C. DeRusha, Director
By /s/ Malcolm S. McDonald Date: May 3, 1996
--------------------------------
Malcolm S. McDonald, Director
By /s/ Frank T. Nickell Date: May 3, 1996
---------------------------------------
Frank T. Nickell, Director
By /s/ Thomas R. Wall Date: May 3, 1996
--------------------------------------
Thomas R. Wall, IV, Director
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
No. Description Number
<S> <C> <C>
2.1*** Form of Agreement and Plan of Merger dated April 3, 1995 among PHC
Retail Holding Company, Peebles Acquisition Corp. and Peebles Inc.,
exclusive of exhibits and schedules. The Registrant hereby undertakes
to furnish to the Commission supplementally upon request a copy of any
omitted exhibit or schedule.
3.1+ Form of Amended and Restated Articles of Incorporation of Peebles Inc.
3.2+ Form of Amended and Restated Bylaws of Peebles Inc.
3.3*** Amendment to Amended and Restated Articles of Incorporation dated May
3, 1993
3.4 Amendment to Amended and Restated Bylaws of Peebles Inc.dated June 9,
1995.
3.5 Amendment to Amended and Restated Articles of Incorporation dated June
9, 1995
4.2* Form of Warrant Agreement between PBL Acquisition Corp. and the Warrant
Agent
4.3* Form of Warrant Certificate (included in the Warrant Agreement filed as
Exhibit 4.2 hereto).
10.1 Credit Agreement dated June 9, 1995, by and amoung Peebles Inc. And
NatWest Bank, N.A. as Agent (the "Agent"), and the financial
institutions named therein. (the "Credit Agreement")
10.20 Form of A Term Note.
10.21 Form of B Term Note.
10.22 Form of Bridge Note.
10.23 Form of Revolving Note.
10.24 Form of Swingline Note.
10.3 Security Agreement made June 9, 1995 by and between Peebles Inc. and
the Agent.
10.4 Trademark Security Agreement made June 9, 1995 by and between Peebles
Inc. and the Agent.
10.5 Guaranty Agreement made June 9, 1995 by and between PHC Retail Holding
Company and the Agent.
10.6 Pledge Agreement made June 9, 1995 by and between PHC Retail Holding
Company and the Agent.
10.61 Equity Contribution Agreement made June 9, 1995 by and between Kelso &
Company and the Agent.
10.62 Deed of Trust made June 9, 1995 by and between Peebles Inc., the
Trustee party thereto and the Agent.
10.63 First Amendment of the Credit Agreement dated September 15, 1995.
10.64 Second Amendment and Limited Consent to the Credit Agreement dated
March 8, 1996.
10.8*** Standard Service Agreement, as amended, dated January 17, 1995 between
Frederick Atkins, Incorporated and Peebles Inc.
10.11 Form of Indemnification, Guarantee and Contribution Agreement dated as
of August 23, 1995 PHC Retail Holding Company, Peebles Inc. and each of
the directors and officers of Peebles Inc.
10.16*** Form of Employment Agreement, dated March 30, 1995 entered into by
Peebles Inc.and fourteen executives of Peebles Inc.
21 Subsidiaries of the Registrant.
27 Financial Data Schedule
</TABLE>
----------------------------
* Incorporated by reference from the Registration Statement of
PBL and Peebles on Form S-1 (Registration No. 33-27126), which
was declared effective by the Commission on July 14, 1989.
** Incorporated by reference from the Form 10-K of PBL and the
Company for the fiscal year ended February 2, 1991.
+ Incorporated by reference from the Form 10-K of the Company
for the fiscal year ended February 1, 1992.
++ Incorporated by reference from the Form 10-K of the Company
for the fiscal year ended January 30, 1993.
+++ Incorporated by reference from the Form 10-K of the Company
for the fiscal year ended January 29, 1994.
*** Incorporated by reference from the Form 10-K of the Company
for the fiscal year ended January 28, 1995.
<PAGE>
Audited Financial Statements
PEEBLES INC.
February 3, 1996
Report of Independent Auditors.............................................F-1
Balance Sheet..............................................................F-2
Statement of Operations....................................................F-3
Statement of Changes in Stockholders' Equity...............................F-4
Statement of Cash Flows....................................................F-5
Notes to Financial Statements..............................................F-6
Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................F-15
F-0
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Board of Directors
Peebles Inc.
We have audited the accompanying balance sheet of Peebles Inc. as of February 3,
1996 and January 28, 1995, and the related statements of operations, changes in
stockholders' equity, and cash flows for the eight-month period ended February
3, 1996 and the four-month period ended May 27, 1995, and for each of the two
fiscal years in the period ended January 28, 1995. These financial statements
reflect the new basis of accounting established by the acquisition of Peebles
Inc. as described in Note A. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note A to the financial statements, the Company reflected a new
basis of accounting on May 27, 1995 as a result of the 1995 Acquisition.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Peebles Inc. at February 3,
1996 and January 28, 1995, and the results of its operations and its cash flows
for the eight-month period ended February 3, 1996 and the four-month period
ended May 27, 1995, and for each of the two fiscal years in the period ended
January 28, 1995, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Richmond, Virginia
March 11, 1996
F-1
<PAGE>
BALANCE SHEET
PEEBLES INC.
(dollars in thousands, except per share amounts)
February January
3, 1996 28, 1995
(Prior
ASSETS to 1995
Acquisition)
CURRENT ASSETS
Cash $ 193 $ 408
Accounts receivable, net 28,534 28,812
Merchandise inventories 42,684 44,703
Prepaid expenses 386 306
Refundable income taxes -- 778
Other 62 62
TOTAL CURRENT ASSETS 71,859 75,069
PROPERTY AND EQUIPMENT
Fixtures and equipment 43,089 43,991
Land and building 6,725 5,751
Leasehold improvements 1,595 368
51,409 50,110
Accumulated depreciation and amortization 19,161 21,159
32,248 28,951
Buildings under capital leases, net 1,060 1,230
OTHER ASSETS
Excess of cost over net assets acquired, net 51,129 37,111
Deferred financing costs, net 3,659 277
Beneficial leaseholds, net 2,960 3,345
Sundry 2,638 2,971
60,386 43,704
$165,553 $148,954
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,957 $ 8,722
Accrued compensation and other expenses 3,955 5,587
Income taxes payable 855 --
Deferred income taxes 2,788 4,472
Current maturities of long-term debt 5,377 5,850
Other 532 568
TOTAL CURRENT LIABILITIES 23,464 25,199
LONG-TERM DEBT 69,774 34,240
LONG-TERM CAPITAL LEASE OBLIGATIONS 1,627 1,865
DEFERRED INCOME TAXES 6,350 5,416
STOCKHOLDERS' EQUITY
Preferred stock--no par value, authorized
1,000,000 shares, none issued or outstanding -- --
Common stock--par value $.10
per share, authorized 5,000,000 shares, issued and
outstanding 1,000 and 2,942,690 respectively 1 294
Additional capital 59,307 64,390
Retained earnings: accumulated from May
27, 1995 and February 1, 1992,
respectively; $10,477 deficit eliminated
February 1, 1992. 5,030 17,550
64,338 82,234
$165,553 $148,954
See notes to financial statements.
F-2
<PAGE>
STATEMENT OF OPERATIONS
PEEBLES INC.
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Eight-Month Four-Month
Period Ended Period Ended FISCAL YEARS ENDED
February May 27, January January
3, 1996 1995 28, 1995 29, 1994
(Prior to 1995 Acquisition)
<S> <C> <C> <C> <C>
NET SALES $126,501 $ 49,163 $ 167,662 $ 151,772
COSTS AND EXPENSES
Cost of sales 72,994 29,935 98,066 91,134
Selling, general and 33,275 14,639 45,205 40,320
administrative expenses
Stock option settlement -- 3,089 -- --
Depreciation and amortization 4,339 2,349 6,729 6,029
OPERATING INCOME (LOSS) 15,893 (849) 17,662 14,289
OTHER INCOME (EXPENSE) (52) 77 131 (1)
INTEREST EXPENSE 6,565 1,414 4,569 4,248
INCOME (LOSS) BEFORE INCOME
TAXES (BENEFIT) AND
EXTRAORDINARY ITEM 9,276 (2,186) 13,224 10,040
INCOME TAXES (BENEFIT)
Current 3,276 (474) 5,297 3,960
Deferred 970 (400) 450 553
4,246 (874) 5,747 4,513
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 5,030 (1,312) 7,477 5,527
EXTRAORDINARY ITEM--DEBT
REFINANCING -- (216) -- --
NET INCOME (LOSS) $ 5,030 $ (1,528) $ 7,477 $ 5,527
NET INCOME (LOSS) PER SHARE $ 5,030 $ (.52) $ 2.54 $ 1.88
Average common stock and common
stock equivalents outstanding 1,000 2,942,690 2,940,281 2,932,905
</TABLE>
See notes to financial statements.
F-3
<PAGE>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PEEBLES INC.
(dollars in thousands, except per share amounts)
Common Stock
Par Additional Retained
Shares Value Capital Earnings
Balance January 30, 1993 2,913,562 $ 291 $63,699 $ 4,547
Common stock issued in
connection with the Equity
Incentive Plan 20,000 2 475 --
Common stock warrants redemption
price adjustment -- -- -- (11)
Net income -- -- -- 5,527
Balance January 29, 1994 2,933,562 293 64,174 10,063
Common stock issued in
redemption of Common
Stock Warrants 6,391 1 151 10
Common stock issued upon
exercise of common
stock options 2,737 -- 65 --
Net income -- -- -- 7,477
Balance January 28, 1995 2,942,690 294 64,390 17,550
Net (loss) -- -- -- (1,528)
Balance May 27, 1995, prior to
1995 Acquisition 2,942,690 294 64,390 16,022
1995 Acquisition adjustments (2,941,690) (293) (5,083) (16,022)
Balance May 27, 1995, following
1995 Acquisition 1,000 1 59,307 --
Net income -- -- -- 5,030
Balance February 3, 1996 1,000 $ 1 $59,307 $ 5,030
See notes to financial statements.
F-4
<PAGE>
STATEMENT OF CASH FLOWS
PEEBLES INC.
(dollars in thousands)
Eight-Month Four-Month
Period Ended Period Ended FISCAL YEARS ENDED
February May 27, January January
3, 1996 1995 28, 1995 29, 1994
(Prior to 1995 Acquisition)
OPERATING ACTIVITIES
Net income (loss) $ 5,030 $ (1,528) $ 7,477 $ 5,527
Adjustments to reconcile net
income to net cash
provided by (used in) operating
activities:
Depreciation 2,491 1,453 3,677 3,088
Amortization 2,502 896 3,508 3,376
Deferred income taxes 970 (400) 450 553
Provision for doubtful accounts 531 265 620 546
Extraordinary loss,net -- 216 -- --
LIFO reserve adjustment (970) 1,035 (182) 1,144
Changes in operating assets and
liabilities net of
effects from acquisition
adjustments
Accounts receivable (2,199) 1,681 (1,046) (2,066)
Merchandise inventories (113) (2,217) (2,869) (5,802)
Accounts payable (658) 1,893 1,416 (2,420)
Other assets and liabilities 692 (561) 19 1,819
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 8,276 2,733 13,070 5,765
INVESTING ACTIVITIES
Acquisition of Peebles Inc. -- (90,923) -- --
Purchase of property and (5,683) (2,411) (8,454) (7,372)
equipment
Other -- 281 (257) (105)
NET CASH USED IN INVESTING
ACTIVITIES (5,683) (93,053) (8,711) (7,477)
FINANCING ACTIVITIES
Proceeds from revolving line of
credit and long-term debt 227,686 58,145 173,754 163,554
Reduction in revolving line of
credit and long-term debt (230,164) (56,129) (177,804) (161,836)
Proceeds from acquisition debt -- 76,390 -- --
Retirement of pre-acquisition debt -- (40,917) -- --
Proceeds from equity -- 59,308 -- --
Acquisition and financing fees -- (6,807) -- --
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (2,478) 89,990 (4,050) 1,718
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 115 (330) 309 6
Cash and cash equivalents
beginning of period 78 408 99 93
CASH AND CASH EQUIVALENTS END OF
PERIOD $ 193 $ 78 $ 408 $ 99
See notes to financial statements.
F-5
NOTES TO FINANCIAL STATEMENTS
PEEBLES INC.
FEBRUARY 3, 1996
(dollars in thousands, except per share amounts)
NOTE A--ACQUISITION OF PEEBLES INC.
1995 Acquisition (the "1995 Acquisition"): PHC Retail Holding Company ("PHC
Retail") acquired the entire equity interest of Peebles Inc. ("Peebles" or the
"Company") for approximately $136 million, which included acquisition related
expenses of approximately $5.6 million and the refinancing of existing debt. PHC
Retail is owned by an affiliate of Kelso & Company ("Kelso"), an investment firm
located in New York, New York and management. PHC Retail has no significant
assets other than the shares of Peebles common stock, $.10 par value (the
"Common Stock") and had no operations prior to the 1995 Acquisition.
The 1995 Acquisition has been accounted for using the purchase method of
accounting with an effective date of May 27, 1995, and accordingly, a new
accounting basis was begun. The 1995 Acquisition cost has been allocated to the
assets and liabilities of Peebles as follows:
Cash purchase price $135,558
Pre-acquisition debt refinanced (40,917)
Adjusted purchase price 94,641
Tangible net assets at historical cost (63,840)
Incremental acquisition debt 35,474
Purchase price to be allocated 66,275
Purchase price allocations:
Merchandise inventories $7,436
Buildings 1,133
Land 1,411
Beneficial leaseholds 3,232
Pension asset 533
13,745
Excess of cost over net assets acquired $ 52,530
The excess of cost over net assets acquired is being amortized on a
straight-line basis over 25 years beginning May 27, 1995. Beneficial leaseholds
are amortized on a straight-line basis over the composite useful lives of the
related leases. Buildings are amortized on a straight-line basis over their
estimated useful lives.
As a result of the debt refinancing related to the 1995 Acquisition, the Company
recorded an extraordinary loss of $216, net of $144 income tax benefit, as
financing costs capitalized in periods prior to the 1995 Acquisition were
written-off.
Pro Forma Financial Information (UNAUDITED): The following unaudited pro forma
financial information reflects the results of operations of the Company as if
the 1995 Acquisition occurred at the beginning of the respective 1994 fiscal
years. These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of what would have occurred had the
acquisition been made at the beginning of fiscal 1994 or the results of which
may occur in the future.
1995 1994
Net sales $175,664 $167,662
Operating income 18,019 17,285
Net income 3,829 4,902
Net income per share 3,829 4,902
NOTES TO CONDENSED FINANCIAL STATEMENTS-Continued
PEEBLES INC.
FEBRUARY 3, 1996
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR: The Company's fiscal year ends on the Saturday nearest January 31.
Fiscal years 1995, 1994, and 1993 ended on February 3, 1996, January 28, 1995,
and January 29, 1994, respectively. Results of operations for 1995 consisted of
fifty-three weeks, with 17 weeks included in the four-month period ended May 27,
1995 and 36 weeks in the eight-month period ended February 3, 1996. Results of
operations for 1994 and 1993 each consisted of fifty-two weeks. References to
years relate to fiscal years rather than calendar years.
NATURE OF OPERATIONS: Peebles currently operates 65 department stores offering
predominately soft-apparel, fashion merchandise for the entire family, and other
selected home accessories. The Company operates primarily in small and medium
sized communities, which typically do not have a mall-based department store, in
ten Southeastern and Mid-Atlantic States.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
QUASI-REORGANIZATION: As a result of a recapitalization of the Company completed
January 31, 1992, a quasi-reoganization was implemented as of February 1, 1992.
An accumulated deficit was transferred to additional capital on that date.
STATEMENT OF CASH FLOWS: Peebles considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents. There
were no cash equivalents at February 3,1996 or January 28, 1995. The issuance of
certain common stock and common stock warrants increased shareholders' equity by
$162 and $477 in 1994 and 1993, respectively, and accordingly, has been excluded
from the Statement of Cash Flows as a non-cash transaction.
MERCHANDISE INVENTORIES: Merchandise inventories are accounted for by the retail
inventory method applied on a last in, first out ("LIFO") basis.
PROPERTY AND EQUIPMENT: Property and equipment is stated on the basis of cost.
Depreciation of property and equipment is provided primarily by the
straight-line method over their estimated useful lives for financial reporting
purposes and by accelerated methods for income tax purposes. The cost of
leasehold improvements is amortized over the shorter of their economic lives or
the terms of the leases by the straight-line method. Amortization of buildings
under capital leases is computed by the straight-line method over the lease term
and is included in depreciation and amortization expense.
LONG-LIVED ASSETS: In March 1995, the FASB issued Statement of Financial
Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of", effective for fiscal years beginning
after December 15, 1995. Adoption of this statement is not expected to have a
material impact on the Company's financial position or results of operations.
STORE OPENING COSTS: Store opening costs are charged to selling, general and
administrative expenses as incurred.
ADVERTISING COSTS: Advertising costs, charged to selling, general and
administrative expenses as incurred, aggregated $3,075, $1,449, $4,255, and
$4,089 for the eight-month period ended February 3, 1996, the four-month period
ended May 27, 1995, and fiscal years 1994 and 1993, respectively.
EXCESS OF COST OVER NET ASSETS ACQUIRED: The excess of cost over net assets
acquired ("Goodwill") is being amortized on a straight-line basis over a
twenty-five year period. Accumulated amortization at February 3, 1996 and
January 28, 1995 was $1,401 and $5,060, respectively.
DEFERRED FINANCING COSTS: Deferred financing costs are amortized by the interest
method over a period consistent with the related financing. Amortization expense
of $585 and $68 is included in interest expense for the eight-month period ended
February 3, 1996 and the four-month period ended May 27, 1995, respectively.
Amortization expense of $457 and $435 is included in interest expense for 1994
and 1993, respectively. Accumulated amortization at February 3, 1996 and January
28, 1995 was $585 and $2,803, respectively.
NOTES TO FINANCIAL STATEMENTS--Continued
PEEBLES INC.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
BENEFICIAL LEASEHOLDS: Amortization is provided by the straight-line basis over
the estimated composite useful lives of the related leases. Accumulated
amortization at February 3, 1996 and January 28, 1995 was $2,438 and $2,117,
respectively.
INCOME TAXES: Deferred income taxes are provided for temporary differences
between income and expense for financial reporting purposes and for income tax
purposes.
NET INCOME PER SHARE: Net Income per share is based on the weighted-average
number of shares and common stock equivalents outstanding.
NOTE C--ACCOUNTS RECEIVABLE
Accounts receivable are shown net of $960 and $930 representing the allowance
for uncollectible accounts at February 3, 1996 and January 28, 1995,
respectively. The provision for doubtful accounts was $531, $265, $620 and $546
for the eight-month period ended February 3, 1996, the four-month period ended
May 27, 1995, and fiscal years 1994 and 1993, respectively. Finance charges on
credit sales, included as a reduction of selling, general and administrative
expenses, aggregated $3,175, $1,643, $4,818 and $4,576, for the eight-month
period ended February 3, 1996, the four-month period ended May 27, 1995, and
fiscal years 1994 and 1993, respectively.
As a service to its customers, the Company offers credit through the use of its
own charge card, certain major credit cards and a layaway plan. The Peebles'
customer usually resides in the local community immediately surrounding the
store location. Peebles stores serve these local customers in Virginia,
Maryland, North Carolina, South Carolina, Tennessee, Kentucky, Delaware, New
Jersey, Pennsylvania and New York. The Company does not require collateral from
its customers.
NOTE D--MERCHANDISE INVENTORIES
The 1995 Acquisition was accounted for using the purchase method of accounting
with an effective date of May 27, 1995. The normal seasonal increase in
merchandise inventory between January and May resulted in a significant LIFO
increment in the four-month period ended May 27, 1995. Consistent with the
purchase method of accounting, the LIFO reserve was eliminated, the recorded
value of merchandise inventories was increased to fair value (the "Fair Value
Adjustment") and a new LIFO base year was established at May 27, 1995. Seasonal
decreases in inventory levels and costs from May to January resulted in LIFO
cost greater than FIFO cost, and a market reserve was established.
Merchandise inventories consisted of the following:
<TABLE>
<CAPTION>
February 3, 1996 January 28, 1995 January 29, 1994
(Prior to 1995 Acquisition)
<S> <C> <C> <C>
Merchandise inventories at FIFO cost $35,662 $33,332 $30,463
Fair Value Adjustment 7,436 14,209 14,209
LIFO reserve 449 (2,838) (3,020)
Merchandise inventories at
LIFO cost 43,547 44,703 41,652
Market reserve (863) -- --
Merchandise inventories at
lower of cost or market $42,684 $44,703 $41,652
</TABLE>
NOTES TO FINANCIAL STATEMENTS--Continued
PEEBLES INC.
NOTE E--SUNDRY ASSETS
Sundry consisted of:
February 3, 1996 January 28, 1995
(Prior to 1995 Acquisition)
Advances to buying office $1,820 $1,694
Pension asset, net 284 1,032
Other 534 245
$2,638 $2,971
NOTE F--LONG-TERM DEBT
Long-term debt consisted of the following:
February 3, 1996 January 28, 1995
(prior to
1995 Acquisition)
1995 Senior Revolving Facility $25,000 $ --
Senior Term Note A 19,250 --
Senior Term Note B 27,775 --
Swingline Facility 3,126 --
Pre-Acquisition Senior Revolving Facility -- 28,550
Pre-Acquisition Senior Term Facility -- 11,340
Other -- 200
75,151 40,090
Less current maturities 5,377 5,850
$69,774 $34,240
On June 9, 1995, the Company entered into a $120 million credit facility (the
"1995 Credit Agreement") to i) refinance the existing debt under the
pre-acquisition Credit Agreement, ii) provide the additional funding necessary
to complete the 1995 Acquisition, and iii) provide working capital and funds for
capital expenditures. The 1995 Credit Agreement is secured by a first priority
security interest in substantially all the personal property and certain real
property of Peebles. The 1995 Credit Agreement provides a Senior Term Facility,
a Senior Revolving Facility (the "1995 Revolving Facility"), and a "Swingline
Facility". Restrictive covenants prohibit the payment of cash dividends in any
fiscal year.
The Senior Term Facility includes two notes, Senior Term Note A and Senior Term
Note B, with original principal balances of $20 million and $30 million,
respectively. Senior Term Note A and Senior Term Note B each require quarterly
payments, coinciding with the Company's fiscal quarters, of principal
(increasing annually from $250 and $75 per quarter, respectively) and interest
in arrears through maturity. Senior Term Note A and Senior Term Note B mature on
June 9, 2000 and 2002, respectively. On September 8, 1995 the Company reduced
the Senior Term Note B principal balance by $2 million, satisfying certain
pre-defined conditions of the 1995 Credit Agreement. Senior Term Note A and
Senior Term Note B bore interest through November, 1995 at prime plus 1-1/2% and
prime plus 2%, respectively.
The amount available under the 1995 Senior Revolving Facility is determined by a
defined asset based formula with maximum borrowings limited to $65 million less
outstanding amounts under letters of credit. The Company pays a fee of 1/2 of 1%
per annum on any unused portion of the 1995 Senior Revolving Facility. The 1995
Senior Revolving Facility matures on June 9, 2000 and has no specific paydown
provisions. Based on the anticipated operations of the Company in the succeeding
twelve-month period, $24,600 and $24,800 were considered long-term obligations
at February 3, 1996 and January 28, 1995, respectively. The 1995 Senior
Revolving Facility bore interest at prime plus 1-1/2%.
NOTES TO FINANCIAL STATEMENTS--Continued
PEEBLES INC.
NOTE F--LONG-TERM DEBT--Continued
The 1995 Credit Agreement provided for optional conversion to LIBOR-based
interest rates upon the occurrence of certain pre- defined events. These rates
are as follows: i) Senior Term Note A: LIBOR plus 2.75%; ii) Senior Term Note B:
LIBOR plus 3.25%; iii) 1995 Senior Revolving Facility: LIBOR plus 2.75%. In
November, 1995, the pre-defined conditions were satisfied. At February 3, 1996,
the entire outstanding balance of the Senior Term Facility, $47,025, and $24,000
of the 1995 Senior Revolving Facility were converted to the LIBOR-based interest
rates. In compliance with the 1995 Credit Agreement, the Company has entered
into a three-year interest rate protection agreement covering a principal amount
of $40,000 against increases in the prime rate above 7.5% per annum.
Loans under the Swingline facility are drawn and repaid daily based on the
operating activity of the Company. Aggregate amounts outstanding under the
Swingline Facility cannot exceed $5 million. Excess borrowings or funding
outside these amounts revert to the 1995 Senior Revolving Facility. The
Swingline Facility currently bears interest at prime plus 1-1/2% and has no
LIBOR conversion option.
Peebles has commitments for letters of credit with a bank which totaled $307 and
$462 at February 3, 1996 and January 28, 1995, respectively. Approximately $50
expire during 1996, and the remainder expires August 1, 1998.
Peebles made cash interest payments of $6,353, $973, $4,091, and $3,548 for the
eight-month period ended February 3, 1996, the four-month period ended May 27,
1995, and fiscal years 1994 and 1993, respectively.
Aggregate principal payments on long-term debt for the next five fiscal years
are: 1996--$5,377, 1997--$2,750, 1998-- $6,375, 1999--$10,125 ,and
2000--$36,324.
NOTE G--LEASES
The Company leases substantially all of its store locations under capital and
operating leases with initial terms ranging from 1 to 25 years and renewal
options of 1 to 5 years expiring at various dates through 2033. The following is
a summary of assets under capitalized leases:
February 3, 1996 January 28, 1995
(Prior to 1995 Acquisition)
Buildings under capital leases $ 3,018 $ 3,018
Less--accumulated
amortization (1,958) (1,788)
$ 1,060 1,230
Total rental expense under operating leases was as follows:
<TABLE>
<CAPTION>
Eight-Month Four-Month
Period Ended Period Ended FISCAL YEARS ENDED
February 3, 1996 May 27, 1995 January 28, 1995 January 29, 1994
(Prior to 1995 Acquisition)
<S> <C> <C> <C> <C>
Minimum $4,552 $2,276 $5,915 $5,479
Contingent 275 138 531 490
$4,827 2,414 6,446 5,969
</TABLE>
Contingent rentals are based upon a percentage of annual sales in excess of
specified amounts. Future minimum lease payments under capital leases and
noncancellable operating leases at February 3, 1996 were as follows:
Capital Operating
Fiscal Year Leases Leases
1996 $ 487 $ 6,363
1997 487 6,089
1998 377 5,768
1999 377 5,700
2000 377 5,266
Thereafter 782 34,503
Total minimum lease payments 2,887 $63,689
Less: amounts representing interest (1,022)
Present value of net minimum lease
payments, including current maturities
of $238, with interest rates
ranging from 11.3% to $18.1% $1,865
NOTE H--EMPLOYEE BENEFIT PLANS
The Employees Retirement Plan of Peebles Inc.: The Company provides a defined
benefit pension plan (the "Pension Plan") which covers substantially all
employees. Participation is dependent on meeting certain age and service
requirements. Benefits are based on total years of benefit service and the
employee's compensation during the five consecutive calendar years which produce
the highest average. Peebles makes annual contributions to the Pension Plan
equal to the contribution required to satisfy minimum funding standards under
ERISA.
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
Eight-Month Four-Month
Period Ended Period Ended FISCAL YEARS ENDED
February 3, 1996 May 27, 1995 January 28, 1995 January 29, 1994
(Prior to 1995 Acquisition)
<S> <C> <C> <C> <C>
Service cost-benefits earned during the period $ 207 $ 104 $ 323 $ 297
Interest cost on projected benefit obligation 332 166 448 443
Actual return on plan assets (649) (324) 177 (463)
Net amortization and deferral 275 138 (804) (129)
Net periodic pension cost $ 165 $ 84 $ 144 $ 148
</TABLE>
The following table sets forth the Pension Plan's funded status and amounts
recognized in Peebles balance sheet:
<TABLE>
<CAPTION>
February 3, 1996 January 28, 1995
(Prior to 1995 Acquisition)
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligations including
vested benefits of $5,677
and $4,385, respectively $(6,147) $(4,737)
Projected benefit obligation $(7,770) (5,856)
Plan assets at fair value,
primarily listed
stocks and U.S. Government
Treasury Bonds 7,062 6,389
Plan assets in excess
(deficient) of projected
benefit obligations (708) 533
Prior service costs -- (84)
Unrecognized net loss 992 658
Unrecognized net asset -- (75)
Net pension asset recognized
in the balance sheet $ 284 $ 1,032
</TABLE>
NOTE H--EMPLOYEE BENEFIT PLANS--Continued
In calculating the present value of projected benefit obligations for 1995 and
1994, a 5.0% weighted average rate of compensation was used, and a
weighted-average discount rate of 7.25% and 8.75%, respectively. The expected
long-term rate of return on plan assets was 9% for 1995, 1994 and 1993.
The Peebles Inc. 401 (k) Profit Sharing Plan: The Company maintains a qualified
profit sharing and retirement savings plan, which under Section 401 (k) of the
Internal Revenue Code, allows tax deferred contributions from eligible employees
of up to 12% of their annual compensation. The Company does not currently
contribute to the plan.
Supplemental Benefits Program: The Company maintains a benefits program designed
to provide certain key executives supplemental retirement income, such that
together with Social Security payments and amounts payable under the Pension
Plan, the executives will receive replacement income in retirement equal to 60%
of final average compensation, as defined in the Pension Plan. The program is
funded through life insurance contracts covering the participating executives.
At February 3, 1996, the Company had a net obligation of $65 recognized in the
balance sheet calculated based upon a discount rate of 7.5%. The Company
recognized net expense related to the program of $146 and $73 in the eight-month
period ended February 3, 1996 and the four-month period ended May 27, 1995,
respectively.
NOTE I--SETTLEMENT OF THE 1993 STOCK OPTION PLAN
The 1993 Stock Option Plan was established in April 1993 to replace the Equity
Incentive Plan, both of which were intended to provide a long-term incentive to
certain key management personnel. At May 27, 1995, 432,699 options to purchase
one share of Common Stock at an exercise price of $23.75 were issued and
outstanding. Under certain change in control provisions in the 1993 Stock Option
Plan, all outstanding options vested as a result of the 1995 Acquisition. The
1995 Acquisition mandated that all options would be settled for cash only,
either for i) the difference between the $30 per share price paid by PHC Retail
for the Common Stock and the $23.75 exercise price, or ii) as specified by
certain change of control agreements. As result of the cash settlement, $3,089
has been included as an operating expense in the four-month period ended May 27,
1995. Prior to the 1995 Acquisition, no compensation expense related to the 1993
Stock Option Plan had been incurred.
NOTE J--INCOME TAXES
The provisions for income taxes consisted of the following:
Eight-Month Four-Month
Period Ended Period Ended
February 3, 1996 May 27, 1995 1994 1993
(Prior to 1995 Acquisition)
Current: Federal $ 2,703 $ (382) 4,354 3,273
State 573 (92) 943 687
Deferred: Federal 805 (323) 371 455
State 165 (77) 79 98
$ 4,246 $ (874) 5,747 4,513
Income taxes differ from the amounts computed by applying the applicable federal
statutory rates due to the following:
Eight- Four-
Month Month
Period Period
Ended Ended
February May 27,
3, 1996 1995 1994 1993
(Prior to 1995 Acquisition)
Taxes at the federal
statutory rate $ 3,248 $(765) $4,628 $3,514
Increases (decreases):
State income taxes, net of
federal tax 469 (110) 676 518
Amortization of purchase
accounting adjustments 484 190 574 574
Other 45 (189) (131) (93)
$ 4,246 $(874) $5,747 $4,513
Significant components of deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
February 3, 1996 January 28, 1995
(Prior to 1995 Acquisition)
<S> <C> <C>
Deferred tax liabilities:
Inventory valuation $ 3,158 $ 4,830
Depreciation and amortization 6,255 5,122
Pensions 110 397
9,523 10,349
Deferred tax assets:
Doubtful accounts (370) (358)
Other (15) (103)
(385) (461)
Net deferred tax liabilities $9,138 $ 9,888
</TABLE>
Peebles made cash income tax payments of $2,782, $6,183 and $4,175 for 1995,
1994 and 1993, respectively.
NOTE K - VALUATION AND QUALIFYING ACCOUNTS
Activity related to valuation and qualifying accounts is as follows:
Allowance for Doubtful LIFO
Accounts Reserve
Balance January 30, 1993 $ 1,100 $ 1,876
Charges to expense 546 1,144
Deductions - net write-off of
uncollectible accounts (696) --
Balance January 29, 1994 950 3,020
Charges to expense 620 (182)
Deductions - net write-off of
uncollectible accounts (640) --
Balance January 28, 1995 930 2,838
Charges to expense 265 1,035
Deductions - net write-off of
uncollectible accounts (265) --
Balance May 27, 1995 930 3,873
Purchase accounting elimination -- (3,873)
Charges to expense 531 (449)
Deductions - net write-off of
uncollectible accounts (501) --
Balance February 3, 1996 $ 960 $ (449)
NOTES TO FINANCIAL STATEMENTS--Continued
PEEBLES INC.
NOTE L - QUARTERLY FINANCIAL DATA (UNAUDITED) The 1995 Acquisition was effective
May 27, 1995. As a result, the first quarter of 1995, the first fiscal month of
the second quarter of 1995, and all quarters in 1994 reflect operating results
prior to the 1995 Acquisition. Operating income in the second quarter of 1995
was reduced by $3,089 related to the settlement of the 1993 Stock Option Plan.
Net income in the second, third and fourth quarter of 1995 was affected by
greater interest expense resulting from the increased debt assumed in the 1995
Acquisition.
<TABLE>
<CAPTION>
(dollars in thousands)
FISCAL QUARTER
First Second Third Fourth
1995 1994 1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales........... $36,518 $34,767 $38,963 $36,782 $42,562 $41,025 $57,621 $55,088
Cost of Sales....... 21,585 21,091 23,508 21,461 25,093 24,843 32,743 30,671
Gross Margin........ 14,933 13,676 15,455 15,321 17,469 16,182 24,878 24,417
Operating Income
(Loss) 2,341 2,282 (875) 3,304 3,296 3,257 10,282 8,819
Net Income (Loss)
before extra-
ordinary item 837 825 (1,690) 1,331 560 1,230 4,011 4,091
Net Income (Loss)
Per Share before
extraordinary item $ .28 $ .28 $ (1.87) $ .45 $ 560 $ .42 $ 4,011 $ 1.39
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Peebles operates specialty department stores primarily in small and medium sized
communities which do not typically have a mall-based department store. The
stores, located in ten Southeastern and Mid-Atlantic states, offer customers a
broad selection of moderately-priced fashion merchandise and selected home
accessories, which is generally not available through other retailers in the
market.
The entire equity interest of Peebles was acquired by PHC Retail Holding
Company, an affiliate of Kelso & Company, effective May 27, 1995. The
acquisition was accounted for using the purchase method of accounting and a new
accounting basis was established. Accordingly, the audited financial statements
present the Peebles results of operations for the four-month period ended May
27, 1995 and the eight-month period ended February 3, 1996. Net sales and the
results of operations expressed as a percentage of net sales are presented below
for the twelve-month period ended February 3, 1996 in comparison to the 1994 and
1993 fiscal years.
(dollars in thousands)
1995 1994 1993
Net sales $175,664 $167,662 $151,772
% increase 4.8% 10.5% 7.7%
% increase (decrease) in sales
at comparable stores (1.0%) 4.6% 4.3%
Total stores 65 58 54
Operations as a Percentage of Net Sales:
Cost of sales 58.6% 58.5% 60.0%
Selling, general &
administrative expenses 27.3 27.0 26.6
Settlement of the 1993 Stock
Option Plan 1.7 -- --
Depreciation and amortization 3.8 4.0 4.0
Operating Income 8.6 10.5 9.4
Interest Expense 4.5 2.7 2.8
Other income (expense) (.1) .1 --
Provision for income taxes 1.9 3.4 3.0
Net Income 2.1% 4.5% 3.6%
Net sales in 1995 increased over 1994 due to the opening of seven new stores in
1995 and the first full year of operation in five stores opened during 1994. Net
sales at comparable stores, stores opened the entire twelve months in the
previous fiscal year, declined $1,656, or 1%, comparing fiscal 1995, comprised
of 53 weeks, to fiscal 1994, which included 52 weeks. Net sales at these
comparable stores declined $3,383, or 2% when comparing the 53-week period ended
February 3, 1996 to the 53-week period ended February 4, 1995 ("Adjusted 1994"),
The decrease is attributable to a general weakening in consumer spending on soft
apparel, especially in Metro Washington D.C., which includes Northern Virginia
and Southern Maryland, and unseasonable or severe weather. Five weeks
significantly impacted comparable store sales. Unseasonably warm weather in the
first two weeks of October 1995, which included the Company's anniversary and
Columbus day sales, resulted in a net sales decrease of $1,028 in comparable
stores. With severe snowstorms in the first two weeks, and again in the fifth
week of January 1996, net sales at comparable stores declined $1,855 in
comparison to the same weeks in Adjusted 1994. Aggregated, these five weeks
represented 85% of the comparable store decrease in comparing 1995 to Adjusted
1994.
The Company's gross margin percentage of 41.4% in 1995 is comparable to 41.5% in
1994 and up from 40.0% in 1993 as cost of sales was controlled through effective
management of inventory levels and adherence to the everyday fair pricing
strategy. Excluding the effects of LIFO inventory, cost of sales as percentage
of net sales was 58.6%, 58.6% and 59.3% in 1995, 1994 and 1993, respectively. In
1993, the Company completed an expansion of its distribution center, which
created greater flexibility in managing the flow of inventory. As such,
inventory levels can be adjusted more timely in response to the changing
economic and competitive environment affecting the Company's markets. During
1995, the Company continued to expand its pricing strategy of offering customers
a fair, consistent merchandise price rather than increasing initial markon and
offering highly-promotional, deep discounts.
Selling, general and administrative expenses increased to 27.3% of net sales, up
from 27.0% and 26.6% in 1994 and 1993, respectively. This increase is primarily
due to the opening of new stores, seven of which were opened in 1995, and five
in 1994. New stores typically have higher occupancy, payroll and advertising
expenses as a percentage of net sales as compared to mature stores. The increase
noted in 1995 was partially offset by lower compensation expense associated with
performance-based management incentive plans.
As discussed in detail in Note I to the audited financial statements, the
Company recorded compensation expense of $3,089, 1.7% of net sales, in the
settlement of the 1993 Stock Option Plan. No compensation expense related to
this plan had been recorded in either 1994 or 1993. This non-recurring expense
recognized in 1995 represents the entire liability of the Company under the 1993
Stock Option Plan.
Depreciation and amortization expense decreased to 3.8% of net sales, down from
4.0% in both 1994 and 1993. This decrease is the net result of the capital
expenditures necessary to open the seven new stores in 1995 and a full year of
depreciation on 1994 capital expenditures, offset by a reduction in the
accounting basis of certain assets related to the 1995 Acquisition.
As a result of the above factors, 1995 operating income as a percentage of net
sales was 8.6%, down from 10.5% in 1994 and 9.4% in 1993. Adjusting for the
non-recurring compensation expense related to the settlement of the 1993 Stock
Option Plan, operating income in 1995 would have totaled 10.3% as a percentage
of net sales.
Interest expense as a percentage of net sales increased from 2.7% in 1994 to
4.5% in 1995. This increase results from a combination of increased debt assumed
in connection with the 1995 Acquisition and a higher prime lending rate
throughout 1995 in comparison to 1994. In conjunction with the 1995 Acquisition,
the Company entered into the $120 million 1995 Credit Facility to refinance the
existing debt under the pre-acquisition Credit Agreement, provide the additional
funding necessary to complete the 1995 Acquisition, and provide working capital
and funds for capital expenditures. The 1995 Credit Agreement increased
outstanding borrowings at the date of acquisition by approximately $35.5
million. The pre-acquisition Credit Agreement, in place during 1994 and 1993,
bore interest based on the prime lending rate. The 1995 Credit Agreement bore
interest based on prime through November 1995, at which time the majority of
outstanding borrowings were converted to LIBOR based interest rates. The prime
lending rate averaged 7% for 1994, but had increased to 9% in 1995.
The effective tax rate increased to 47.5% in 1995 from 43.5% in 1994 and 45.0%
in 1993. The increase in the effective tax rate results from proportionately
higher non-deductible expenses related to the 1995 Acquisition. The effective
tax rate is higher than the statutory rates because of non-deductible
amortization expense.
As a result of the above factors, net income as a percentage of sales in 1995
was 2.1%, down from 4.5% in 1994 and 3.6% in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital expenditures in
connection with both the Company's new store expansion and remodeling program
and for working capital needs. The Company's primary sources of funds are cash
flow from continuing operations, borrowings under the Credit Agreement and trade
accounts payable. The Company's inventory levels typically build throughout the
fall, peaking during the Christmas selling season, while accounts receivable
peak during December and decrease during the first quarter. Capital expenditures
typically occur evenly throughout the first three quarters of each year. The net
acquisition of Peebles is included in investing activities.
Operating activities provided net cash of $11.0 million, $13.1 million and $5.8
million in 1995, 1994 and 1993, respectively. Profitable operations continued to
be the source of net cash in 1995. In settlement of the 1993 Stock Option Plan,
the Company used some $3.1 million of operating cash, which together with the
increased cash payments of interest expense primarily account for the decline in
net cash generated by operations in 1995 compared to 1994. The Company had
working capital of $48.3 million, $49.9 million and $44.3 million in 1995, 1994
and 1993 respectively. Working capital was increased by higher merchandise
inventory levels which, exclusive of the Fair Value Adjustment, increased by
$2.3 million in 1995. Working capital in 1994 had been increased by $2.9 million
due to higher inventory levels. Working capital was decreased by the collection
of certain refundable income taxes during 1995.
Net cash used in investing activities, exclusive of the 1995 Acquisition, was
$8.1 million, $8.7 million, and $7.5 million in 1995, 1994 and 1993,
respectively. These amounts reflect $4.3 million, $2.6 million and $2.6 million
of capital expenditures relating to new store openings and $1.8 million, $3.4
million and $1.7 million relating to store remodeling in 1995, 1994 and 1993,
respectively. In 1993 and 1994, the Company made capital expenditures of $2.1
million relating to the expansion of the distribution center.
Exclusive of 1995 Acquisition transactions, Peebles used cash to reduce
outstanding debt by a net of $.5 million. In the four-month period prior to the
1995 Acquisition, Peebles had funded operating and investing activities with
$2.0 million in net proceeds from revolving debt. To facilitate the 1995
Acquisition, the pre-acquisition debt was refinanced, providing the Company
$35.5 in net incremental cash and increasing debt by the same amount. In the
eight-month period following the 1995 Acquisition, the Company used cash to
reduce outstanding debt by a net $2.5 million. In 1994 and 1993, financing
activities used cash of $4.1 million and provided cash of $1.7 million,
respectively.
In 1996, the Company's capital expenditures are expected to total approximately
$10.7 million, which reflect the opening of five new store locations, the
relocation of two stores, a space reallocation/remodeling at three stores and an
expansion of the distribution center in South Hill. As of March 1996, the
Company had signed three new leases all of which are scheduled to open in 1996.
The Company expects to continue to lease its stores, and the average new store
is anticipated to average approximately 22,500 square feet but may vary
depending on the market and real estate availability . Based on historical
experience, the Company estimates that the cost of opening a new store will
include capital expenditures of approximately $425,000 for leasehold
improvements and fixtures and approximately $425,000 for initial inventory,
approximately one-third of which is normally financed through vendor credit.
Accounts receivable for new stores typically build to 15% of net sales or
approximately $300,000 within 24 months of the store opening. The Company may
also incur capital expenditures to acquire existing stores. The distribution
center expansion is expected to serve the Company's growth to 110 store
locations.
The Company finances its operations, capital expenditures, and debt service
payments with funds available under the Senior Revolving Facility. The maximum
amount available under the Senior Revolving Facility is $65 million less amounts
outstanding under letters of credit. The actual amount available is determined
by an asset based formula, adjusted for seasonal working capital requirements.
SEASONALITY AND INFLATION
As a retailer offering predominately soft-apparel and selected home accessories,
the Company's business is seasonal, although less heavily weighted in the fourth
quarter than retailers with comparable offerings of merchandise. Over the past
three fiscal years, quarterly sales as a percentage of total sales have been
consistent at 21%, 22%, 24% and 33% for the first through fourth quarters,
respectively. Peebles' positioning of its stores in small to medium sized
communities with limited competition, along with the Company's less-promotional,
every day fair value, pricing strategy, produces operations less dependent on
the fourth quarter. However, the third and fourth quarters are bolstered by the
important back-to-school and Christmas holiday selling seasons.
The Company does not believe that inflation has had a material effect on its
results of operations during the past three fiscal years. Peebles uses the
retail inventory method applied on a LIFO basis in accounting for its
inventories. Under this method, the cost of products sold reported in the
financial statements approximates current costs and thus reduces the likelihood
of a material impact that increases costs. However, there can be no assurance
that the Company's business will not be impacted by inflation in the future.
<PAGE>
Exhibit 3.4
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
BYLAWS OF PEEBLES INC.
The Amended and Restated Bylaws of Peebles Inc. (the "ByLaws") are
hereby amended as follows:
1. Article II. Section 2.2 of the Bylaws is hereby amended and restated
to read in its entirety as follows:
"The number of directors of the Corporation shall be six (6)."
2. Full Force and Effect. Except as amended hereby, the Bylaws shall
remain in full force and effect.
Exhibit 3.5
PEEBLES INC.
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
1. Name. The name of the Corporation is Peebles Inc.
2. The Amendment. The Amendment, a copy of which is attached hereto as
Exhibit "A", (i) deletes Article X to the Articles of Incorporation which
requires the provision of certain specified financial information to the
Corporation's shareholders under certain circumstances, (ii) amends and restates
Section 8.2 of the Articles of Incorporation in its entirety and (iii) amends
and restates the first sentence of Section 8.3 of the Articles of Incorporation
in its entirety.
3. Board Action. At a meeting of the Board of Directors held on June 9,
1995, the Board of Directors found the Amendment to the Articles of
Incorporation to be in the best interests of the Corporation and directed that
it be submitted to the shareholders for their approval.
<PAGE>
4. Shareholder Action. On June 9, 1995, all of the shareholders of the
Corporation executed a unanimous written consent to the adoption of the
Amendment to the Articles of Incorporation.
Dated: June 9, 1995
PEEBLES INC.
By: /s/ E. RANDOLPH LAIL
Senior VP-Finance, CFO, & Secretary
<PAGE>
Exhibit A
1. Article X of the Articles of Incorporation is hereby amended by deleting
the provisions of that Article in their entirety.
2. (a) Article VIII of the Articles of Incorporation is hereby amended by
deleting Section 8.2 in its entirety and replacing it with the following:
"8.2 Indemnification of Directors and Officers The Corporation shall, to
the fullest extent permitted from time to time by the Virginia Stock Corporation
Act, provide indemnification and make advances and reimbursements for expenses
to any individual who is, was, or is threatened to be made a party to a
proceeding because he is or was a director or officer of the Corporation, or
while a director or officer of the Corporation, is or was serving the
Corporation or any other legal entity in any capacity at the request of the
Corporation and, if authorized by general or specific action of the Board of
Directors, may contract in advance to do so."
(b) Article VIII of the Articles of Incorporation is hereby further
amended by deleting the first sentence of Section 8.3 in its entirety and
replacing it with the following:
"8.3 Indemnification of Others. The Corporation may, to the fullest extent
permitted from time to time by the Virginia Stock Corporation Act, provide
indemnification and make advances and reimbursements for expenses to its
employees, agents and shareholders, the directors, officers, employees, agents
and shareholders of its subsidiaries and predecessor entities, and any person
serving any other legal entity in any capacity at the request of the
Corporation, and, if authorized by general or specific action of the Board of
Directors, may contract in advance to do so."
CREDIT AGREEMENT
Dated as of June 9, 1995
by and among
PEEBLES INC.,
NATWEST BANK N.A.,
AS AGENT,
SOCIETE GENERALE, SOUTHWEST AGENCY,
AS CO-AGENT,
and
THE FINANCIAL INSTITUTIONS PARTY HERETO
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit............................... 1
1.01 Commitment............................................... 1
1.02 Minimum Borrowing Amounts, etc........................... 4
1.03 Notice of Borrowing...................................... 4
1.04 Disbursement of Funds.................................... 5
1.05 Notes.................................................... 6
1.06 Conversions.............................................. 7
1.07 Pro Rata Borrowings...................................... 8
1.08 Interest................................................. 8
1.09 Interest Periods......................................... 9
1.10 Increased Costs, Illegality, etc......................... 10
1.11 Compensation............................................. 12
1.12 Change of Lending Office................................. 12
1.13 Replacement of Lenders................................... 12
SECTION 2. Letters of Credit........................................ 13
2.01 Letters of Credit........................................ 13
2.02 Minimum Stated Amount.................................... 14
2.03 Letter of Credit Requests; Notices of Issuance........... 14
2.04 Agreement to Repay Letter of Credit Drawings............. 15
2.05 Letter of Credit Participations.......................... 15
2.06 Increased Costs.......................................... 18
SECTION 3. Fees; Commitments........................................ 18
3.01 Fees..................................................... 18
3.02 Voluntary Reduction of Commitments....................... 19
3.03 Mandatory Adjustments of Commitments, etc................ 19
SECTION 4. Payments................................................. 20
4.01 Voluntary Prepayments.................................... 20
4.02 Mandatory Prepayments.................................... 21
4.03 Method and Place of Payment.............................. 26
4.04 Net Payments............................................. 27
4.05 Blocked Accounts......................................... 28
SECTION 5. Conditions Precedent..................................... 29
5.01 Execution of Agreement; Notes............................ 29
5.02 No Default; Representations and Warranties............... 29
5.03 Notice of Borrowing; Letter of Credit Request; Etc....... 30
-i-
<PAGE>
Page
5.04 Officer's Certificate.................................... 30
5.05 Opinions of Counsel...................................... 30
5.06 Corporate Documents; Proceedings......................... 30
5.07 Plans; Existing Indebtedness Agreements; Shareholders'
Agreements; Management Agreements;
Employment Agreements.................................... 31
5.08 Adverse Change, etc...................................... 31
5.09 Litigation............................................... 32
5.10 Approvals................................................ 32
5.11 Consummation of the Merger............................... 32
5.12 Common Stock Issuance.................................... 32
5.13 Minimum Availability..................................... 33
5.14 Holdings Guaranty........................................ 33
5.15 Security Documents....................................... 33
5.16 Solvency................................................. 35
5.17 Insurance Policies....................................... 36
5.18 Fees..................................................... 36
5.19 Environmental Reports.................................... 36
5.20 Consent Letter........................................... 36
5.21 Initial Borrowing Base Certificate....................... 36
5.22 Projections; Pro Forma Financial Statements.............. 36
5.23 Existing Indebtedness.................................... 37
5.24 Repayment and Termination of Prior Indebtedness
and Related Liens........................................ 37
5.25 Equity Contribution Agreement............................ 37
5.26 Letter Agreement......................................... 38
5.27 Inventory Appraisal...................................... 38
5.28 Examination.............................................. 38
5.29 Letter of Direction and Flow of Funds.................... 38
5.30 Contemplated Acquisition Letter.......................... 38
5.31 Kelso Letter Agreement................................... 38
5.32 Other Documents.......................................... 38
SECTION 6. Representations, Warranties and Agreements............... 38
6.01 Corporate Status......................................... 39
6.02 Corporate Power and Authority............................ 39
6.03 No Violation............................................. 39
6.04 Litigation............................................... 39
6.05 Use of Proceeds; Margin Regulations...................... 39
6.06 Governmental Approvals................................... 40
6.07 Investment Company Act................................... 40
6.08 Public Utility Holding Company Act....................... 40
6.09 True and Complete Disclosure............................. 40
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Page
6.10 Financial Condition; Financial Statements................ 41
6.11 Security Interests....................................... 42
6.12 Representations and Warranties in Documents.............. 42
6.13 Consummation of Merger and Stock Issuances............... 42
6.14 Tax Returns and Payments................................. 43
6.15 Compliance with ERISA.................................... 43
6.16 Subsidiaries............................................. 43
6.17 Patents, etc............................................. 44
6.18 Pollution and Other Regulations.......................... 44
6.19 Properties............................................... 45
6.20 Labor Relations.......................................... 45
6.21 Existing Indebtedness.................................... 45
6.22 Capitalization........................................... 45
6.23 Compliance with Statutes, etc............................ 46
6.24 Inventory and Accounts................................... 46
SECTION 7. Affirmative Covenants.................................... 47
7.01 Information Covenants.................................... 47
7.02 Books, Records and Inspections........................... 49
7.03 Maintenance of Property; Insurance....................... 49
7.04 Payment of Taxes......................................... 49
7.05 Consolidated Corporate Franchises........................ 49
7.06 Compliance with Statutes, etc............................ 50
7.07 ERISA.................................................... 50
7.08 Good Repair.............................................. 50
7.09 End of Fiscal Years; Fiscal Quarters..................... 51
7.10 Use of Proceeds.......................................... 51
7.11 Additional Security; Further Assurances.................. 51
7.12 Interest Rate Agreement.................................. 52
SECTION 8. Negative Covenants....................................... 52
8.01 Changes in Business...................................... 52
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc... 52
8.03 Liens.................................................... 53
8.04 Indebtedness............................................. 55
8.05 Capital Expenditures..................................... 56
8.06 Advances, Investments and Loans.......................... 57
8.07 Prepayments of Indebtedness, etc......................... 61
8.08 Capital Stock and Dividends, etc......................... 61
8.09 Transactions with Affiliates............................. 63
8.10 Fixed Charge Coverage Ratio.............................. 63
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Page
8.11 Minimum Consolidated EBITDA.............................. 63
8.12 Leverage Ratio........................................... 64
8.13 Interest Coverage Ratio.................................. 65
8.14 Subsidiary Stock......................................... 66
SECTION 9. Events of Default........................................ 66
9.01 Payments................................................. 66
9.02 Representations, etc..................................... 66
9.03 Covenants................................................ 66
9.04 Default Under Other Agreements........................... 67
9.05 Bankruptcy, etc.......................................... 67
9.06 ERISA.................................................... 67
9.07 Liens.................................................... 68
9.08 Guaranties............................................... 68
9.09 Judgments................................................ 68
9.10 Change of Control........................................ 68
9.11 Equity Contribution Agreement............................ 68
SECTION 10. Definitions.............................................. 69
SECTION 11. The Agent................................................ 95
11.01 Appointment.............................................. 95
11.02 Nature of Duties......................................... 96
11.03 Lack of Reliance on the Agent............................ 96
11.04 Certain Rights of the Agent.............................. 96
11.05 Reliance................................................. 97
11.06 Indemnification.......................................... 97
11.07 The Agent in Its Individual Capacity..................... 97
11.08 Holders.................................................. 97
11.09 Resignation by the Agent................................. 97
11.10 Co-Agent................................................. 98
SECTION 12. Miscellaneous............................................ 98
12.01 Payment of Expenses, etc................................. 98
12.02 Right of Setoff.......................................... 99
12.03 Notices.................................................. 99
12.04 Benefit of Agreement..................................... 99
12.05 No Waiver; Remedies Cumulative...........................101
12.06 Payments Pro Rata........................................101
12.07 Calculations; Computations...............................102
12.08 Governing Law; Submission to Jurisdiction; Venue;
Waiver of Jury Trial.....................................102
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Page
12.09 Counterparts.............................................103
12.10 Effectiveness............................................103
12.11 Headings Descriptive.....................................103
12.12 Amendment or Waiver......................................103
12.13 Survival.................................................104
12.14 Domicile of Loans........................................104
12.15 Confidentiality..........................................105
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SCHEDULES
SCHEDULE 1.01 -- Commitments
SCHEDULE 5.24 -- Prior Indebtedness
SCHEDULE 6.06 -- Government Approvals
SCHEDULE 6.16 -- Subsidiaries
SCHEDULE 6.19 -- Properties
SCHEDULE 6.21 -- Existing Indebtedness
SCHEDULE 6.22 -- Capitalization
SCHEDULE 6.24 -- Inventory and Accounts
SCHEDULE 7.03 -- Insurance Policies
SCHEDULE 7.09 -- Fiscal Quarters and Years
SCHEDULE 8.03 -- Existing Liens
SCHEDULE 8.06 -- Investments
SCHEDULE 8.09 -- Management Fees
EXHIBITS
EXHIBIT 1.03 -- Form of Notice of Borrowing
EXHIBIT 1.05(A) -- Form of A Term Note
EXHIBIT 1.05(B) -- Form of B Term Note
EXHIBIT 1.05(C) -- Form of Bridge Note
EXHIBIT 1.05(D) -- Form of Revolving Note
EXHIBIT 1.05(E) -- Form of Swingline Note
EXHIBIT 2.01 -- Existing Letters of Credit
EXHIBIT 2.03 -- Form of Letter of Credit Request
EXHIBIT 5.05(A) -- Form of Debevoise & Plimpton Opinion
EXHIBIT 5.05(B) -- Form of McGuire Woods Battle & Boothe Opinion
EXHIBIT 5.05(C) -- Form of Winston & Strawn Opinion
EXHIBIT 5.14 -- Form of Holdings Guaranty
EXHIBIT 5.15(A) -- Form of Holdings Pledge Agreement
EXHIBIT 5.15(B) -- Form of Borrower Security Agreement
EXHIBIT 5.15(C) -- Form of Trademark Security Agreement
EXHIBIT 5.15(D) -- Real Property Collateral
EXHIBIT 5.16 -- Form of Solvency Certificate
EXHIBIT 5.21 -- Form of Borrowing Base Certificate
EXHIBIT 5.25 -- Form of Equity Contribution Agreement
EXHIBIT 7.01(e) -- Form of Compliance Certificate
EXHIBIT 7.01(i) -- Form of Inventory Schedule
EXHIBIT 12.04 -- Form of Assignment Agreement
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of June 9, 1995, is by and
among PEEBLES INC. a Virginia corporation (the "Borrower"), the lending
institutions from time to time parties hereto (each a "Lender" and,
collectively, the "Lenders"), SOCIETE GENERALE, SOUTHWEST AGENCY, as co-agent
(the "Co-Agent"), and NATWEST BANK N.A., as agent (the "Agent") for the Lenders.
Unless otherwise defined herein, all capitalized terms used herein and defined
in Section 10 are used herein as so defined.
RECITALS:
WHEREAS, PHC Retail Holding Company, a Delaware corporation
("Holdings"), and Peebles Acquisition Corp., a Delaware corporation and a
Wholly-Owned Subsidiary of Holdings ("Acquisition Corp."), were formed for the
purpose of acquiring all of the issued and outstanding capital stock of the
Borrower;
WHEREAS, the acquisition was accomplished by the merger of
Acquisition Corp. with and into the Borrower, with the Borrower as the surviving
corporation, pursuant to term and conditions of the Agreement and Plan of Merger
dated as of April 3, 1995 as amended as of June 2, 1995 (the "Merger Agreement")
by and among Holdings, Acquisition Corp. and the Borrower;
WHEREAS, the Borrower desires that Lenders extend an A Term
Facility in an aggregate principal amount of $20,000,000, a B Term Facility in
an aggregate principal amount of $30,000,000, a Bridge Facility in an aggregate
principal amount of $6,623,286 and a Revolving Facility in an aggregate
principal amount not to exceed $70,000,000, the proceeds of which will be used
by the Borrower as provided herein; and
WHEREAS, subject to and upon the terms and conditions set
forth herein, the Lenders are willing to make available to the Borrower the
credit facilities provided for herein;
NOW THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto agree as follows:
SECTION 1. Amount and Terms of Credit.
1.01 Commitment. Subject to and upon the terms and conditions
herein set forth and in reliance upon the representations and warranties set
forth herein and in the other Loan Documents, each Lender severally agrees to
make a loan or loans (each a "Loan" and, collectively, the "Loans") to the
Borrower, which Loans shall be drawn, to the extent such Lender has a commitment
under such Facility, under the A Term Facility, B Term Facility, Bridge Facility
and the Revolving Facility, as set forth below:
(a) Loans under the A Term Facility (each an "A Term
Loan" and, collectively, the "A Term Loans"), (i) shall be made
pursuant to a single drawing which shall be on the
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Initial Borrowing Date, (ii) shall be made and initially maintained as
a single Borrowing of Base Rate Loans (subject to the option to convert
such A Term Loans pursuant to Section 1.06) and (iii) shall not exceed
in aggregate principal amount for any Lender at the time of occurrence
thereof the A Term Commitment, if any, of such Lender. Once repaid, A
Term Loans borrowed hereunder may not be reborrowed.
(b) Loans under the B Term Facility (each a "B Term Loan"
and, collectively, the "B Term Loans"), (i) shall be made pursuant to a
single drawing which shall be on the Initial Borrowing Date, (ii) shall
be made and initially maintained as a single Borrowing of Base Rate
Loans (subject to the option to convert such B Term Loans pursuant to
Section 1.06) and (iii) shall not exceed in aggregate principal amount
for any Lender at the time of occurrence thereof the B Term Commitment,
if any, of such Lender. Once repaid, B Term Loans borrowed hereunder
may not be reborrowed.
(c) Loans under the Bridge Facility (each a "Bridge Loan"
and, collectively, the "Bridge Loans"), (i) shall be made pursuant to a
single drawing which shall be on the Initial Borrowing Date, (ii) shall
be made and maintained as a single Borrowing of Base Rate Loans and
(iii) shall not exceed in aggregate principal amount for any Lender at
the time of occurrence thereof the Bridge Commitment, if any, of such
Lender. Once repaid, Bridge Loans borrowed hereunder may not be
reborrowed.
(d) Loans under the Revolving Facility (each a "Revolving
Loan" and, collectively, the "Revolving Loans"), (i) shall be made at
any time and from time to time on and after the Initial Borrowing Date
and prior to the Expiry Date, (ii) except as hereinafter provided, may,
at the option of the Borrower, be incurred and maintained as, and/or
converted into, Base Rate Loans or Eurodollar Loans, provided that (A)
all Revolving Loans made as part of the same Borrowing shall, unless
otherwise specifically provided herein, consist of Loans of the same
Type and (B) Revolving Loans maintained as Eurodollar Loans may not be
incurred prior to the Syndication Date, (iii) may be repaid and
reborrowed in accordance with the provisions hereof, (iv) shall not
exceed in the aggregate for all Lenders at any time outstanding, when
combined with the aggregate principal amount of all Swingline Loans
then outstanding and all Letter of Credit Outstandings (exclusive of
Unpaid Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time, the Borrowing Base at such time and (v)
shall not exceed for any Lender at any time outstanding that aggregate
principal amount which, when combined with the aggregate outstanding
principal amount of all other Revolving Loans of such Lender and with
such Lender's Adjusted Revolving Commitment Percentage, if any, of the
sum of (A) the Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) at
such time and (B) the outstanding principal amount of Swingline Loans
(exclusive of Swingline Loans which are repaid with the proceeds of,
and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time, equals (1) if such Lender is a
Non-Defaulting Lender, the
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Adjusted Revolving Commitment, if any, of such Lender at such time and
(2) if such Lender is a Defaulting Lender, the Revolving Commitment, if
any, of such Lender at such time.
(e) Subject to and upon the terms and conditions herein
set forth, NatWest in its individual capacity agrees to make at any
time and from time to time on or after the Initial Borrowing Date and
prior to the Swingline Expiry Date, a loan or loans to the Borrower
(each a "Swingline Loan," and, collectively, the "Swingline Loans"),
which Swingline Loans (i) shall be made and maintained as Base Rate
Loans, (ii) may be repaid and reborrowed in accordance with the
provisions hereof, (iii) shall not exceed in aggregate principal amount
at any time outstanding, when combined with the aggregate principal
amount of all Revolving Loans made by Non-Defaulting Lenders then
outstanding and the Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) at
such time, an amount equal to the Adjusted Total Revolving Commitment
then in effect (after giving effect to any reductions to the Adjusted
Total Revolving Commitment on such date), (iv) shall not exceed in
aggregate principal amount at any time outstanding, when combined with
the aggregate principal amount of all Revolving Loans then outstanding
and all Letter of Credit Outstandings (exclusive of Unpaid Drawings
which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of Revolving Loans) at such
time, the Borrowing Base at such time and (v) shall not exceed in
aggregate principal amount at any time outstanding the Maximum
Swingline Amount. NatWest will not make a Swingline Loan after it has
received written notice from the Required Lenders that one or more of
the applicable conditions to Credit Events specified in Section 5 are
not then satisfied.
(f) On any Business Day, NatWest may, in its sole
discretion, give notice to the Revolving Lenders that its outstanding
Swingline Loans shall be repaid with a Borrowing of Revolving Loans
(provided that each such notice shall be deemed to have been
automatically given upon the occurrence of an Event of Default under
Section 9.05 or upon the exercise of any of the remedies provided in
the last paragraph of Section 9), in which case a Borrowing of
Revolving Loans constituting Base Rate Loans (each such Borrowing, a
"Mandatory Borrowing") shall be made on the immediately succeeding
Business Day by all Revolving Lenders pro rata based on each Revolving
Lender's Adjusted Revolving Commitment Percentage, and the proceeds
thereof shall be applied directly to repay NatWest for such outstanding
Swingline Loans. Each Revolving Lender hereby irrevocably agrees to
make Base Rate Loans upon one Business Day's notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the
preceding sentence and on the date specified in writing by NatWest
notwithstanding (i) that the amount of the Mandatory Borrowing may not
comply with the Minimum Borrowing Amount otherwise required hereunder,
(ii) whether any conditions specified in Section 5 are then satisfied,
(iii) whether a Default or an Event of Default has occurred and is
continuing, (iv) the date of such Mandatory Borrowing and (v) any
reduction in the Total Revolving Commitment, the Adjusted Total
Revolving Commitment or the Borrowing Base after any such Swingline
Loans were made. In the event that any Mandatory Borrowing cannot for
any reason be
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made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code in respect of the Borrower), each Revolving Lender
(other than NatWest) hereby agrees that it shall forthwith purchase
from NatWest (without recourse or warranty) such assignment of the
outstanding Swingline Loans as shall be necessary to cause the
Revolving Lenders to share in such Swingline Loans ratably based upon
their respective Adjusted Revolving Commitment Percentages, provided
that all interest payable on the Swingline Loans shall be for the
account of NatWest until the date the respective assignment is
purchased and, to the extent attributable to the purchased assignment,
shall be payable to the Revolving Lender purchasing same from and after
such date of purchase.
1.02 Minimum Borrowing Amounts, etc. The aggregate
principal amount of each Borrowing under a Facility shall not be less than the
Minimum Borrowing Amount for such Facility. The aggregate principal amount of
each Borrowing of Swingline Loans shall not be less than $25,000, and, if
greater, shall be in an integral multiple of $25,000. More than one Borrowing
may be incurred on any day; provided, however, that at no time shall there be
outstanding more than five (5) Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. Whenever the Borrower desires
to incur Loans under any Facility (excluding Borrowings of Swingline Loans and
Mandatory Borrowings), it shall give the Agent at its Notice Office, prior to
11:00 A.M. (New York time), at least three Business Days' prior written notice
(or telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar Loans and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate
Loans to be made hereunder. Each such notice (each a "Notice of Borrowing")
shall be in the form of Exhibit 1.03 hereto and shall be irrevocable and shall
specify (i) the Facility pursuant to which such Borrowing is being made, (ii)
the aggregate principal amount of the Loans to be made pursuant to such
Borrowing, (iii) the date of Borrowing (which shall be a Business Day) and (iv)
whether the respective Borrowing shall consist of Base Rate Loans or (to the
extent permitted) Eurodollar Loans and, if Eurodollar Loans, the Interest Period
to be initially applicable thereto. The Agent shall promptly give each Lender
written notice (or telephonic notice promptly confirmed in writing) of each
proposed Borrowing, of such Lender's proportionate share thereof and of the
other matters covered by the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to make a Borrowing
of Swingline Loans hereunder, it shall give NatWest, prior to 1:00 P.M. (New
York time) on the day such Swingline Loan is to be made, written notice (or
telephonic notice promptly confirmed in writing) of each Swingline Loan to be
made hereunder. Each such notice shall be irrevocable and shall specify in each
case (A) the date of such Borrowing (which shall be a Business Day) and (B) the
aggregate principal amount of the Swingline Loan to be made pursuant to such
Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice
specified in Section 1.01(f), with the Borrower irrevocably agreeing, by its
incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set
forth in such Section.
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(c) Without in any way limiting the obligation of the
Borrower to confirm in writing any telephonic notice permitted to be given
hereunder, the Agent or NatWest (in the case of a Borrowing of Swingline Loans),
as the case may be, may prior to receipt of written confirmation act without
liability upon the basis of such telephonic notice, believed by the Agent or
NatWest in good faith to be from an Authorized Officer of the Borrower. In each
such case, the Borrower hereby waives the right to dispute the Agent's or
NatWest's record of the terms of such telephonic notice.
1.04 Disbursement of Funds. (a) No later than 2:00 P.M.
(New York time) on the date specified in each Notice of Borrowing, each Lender
with a Commitment under the respective Facility will make available its pro rata
share of each Borrowing requested to be made on such date in the manner provided
below, provided that all Revolving Loans made pursuant to Section 1.01(e) to
refund outstanding Swingline Loans shall be made available to NatWest no later
than 2:00 P.M. (New York time) on the date so requested. All such amounts shall
be made available to the Agent in Dollars and immediately available funds at the
Payment Office and the Agent promptly will make available to the Borrower by
depositing to its account at the Payment Office the aggregate of the amounts so
made available in the type of funds received. Unless the Agent shall have been
notified by any Lender prior to the date of Borrowing that such Lender does not
intend to make available to the Agent its portion of the Borrowing or Borrowings
to be made on such date, the Agent may assume that such Lender has made such
amount available to the Agent on such date of Borrowing, and the Agent, in
reliance upon such assumption, may (in its sole discretion and without any
obligation to do so) make available to the Borrower a corresponding amount. If
such corresponding amount is not in fact made available to the Agent by such
Lender and the Agent has made available same to the Borrower, the Agent shall be
entitled to recover such corresponding amount from such Lender. If such Lender
does not pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Borrower, and the Borrower shall
immediately pay such corresponding amount to the Agent. The Agent shall also be
entitled to recover on demand from such Lender or the Borrower, as the case may
be, interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Agent to the Borrower to the
date such corresponding amount is recovered by the Agent, at a rate per annum
equal to (i) if paid by such Lender, the overnight Federal Funds Effective Rate
or (ii) if paid by the Borrower, the then applicable rate of interest,
calculated in accordance with Section 1.08, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Lender
from its obligation to fulfill its commitments hereunder or to prejudice any
rights which the Borrower may have against any Lender as a result of any default
by such Lender hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the
principal of, and interest on, the Loans made to it by each Lender shall be
evidenced (i) if A Term Loans, by a promissory note substantially in the form of
Exhibit 1.05(A) hereto with blanks appropriately completed in conformity
herewith (each an "A Term Note" and, collectively, the "A Term Notes"), (ii) if
B Term Loans, by a promissory note substantially in the form of Exhibit 1.05(B)
hereto with blanks appropriately completed in conformity herewith (each a "B
Term Note" and, collectively, the
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"B Term Notes"), (iii) if Bridge Loans, by a promissory note substantially in
the form of Exhibit 1.05(C) hereto with blanks appropriately completed in
conformity herewith (each "Bridge Note" and, collectively, the "Bridge Notes"),
(iv) if Revolving Loans, by a promissory note substantially in the form of
Exhibit 1.05(D) hereto with blanks appropriately completed in conformity
herewith (each a "Revolving Note" and, collectively, the "Revolving Notes") and
(v) if Swingline Loans, by a promissory note substantially in the form of
Exhibit 1.05(E) hereto with blanks appropriately completed in conformity
herewith (the "Swingline Note").
(b) The A Term Note issued to each Lender that makes any
A Term Loan shall (i) be executed by the Borrower, (ii) be payable to the order
of such Lender and be dated the Initial Borrowing Date, (iii) be in a stated
principal amount equal to the A Term Loans made by such Lender on the Initial
Borrowing Date (or subsequently purchased by such Lender) and be payable in the
principal amount of A Term Loans evidenced thereby, (iv) mature on the Expiry
Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to mandatory repayment as provided in Section
4.02 and (vii) be entitled to the benefits of this Agreement and the other Loan
Documents.
(c) The B Term Note issued to each Lender that makes any
B Term Loan shall (i) be executed by the Borrower, (ii) be payable to the order
of such Lender and be dated the Initial Borrowing Date, (iii) be in a stated
principal amount equal to the B Term Loans made by such Lender on the Initial
Borrowing Date (or subsequently purchased by such Lender) and be payable in the
principal amount of B Term Loans evidenced thereby, (iv) mature on the Final
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Loan Documents.
(d) The Bridge Note issued to each Lender that makes any
Bridge Loan shall (i) be executed by the Borrower, (ii) be payable to the order
of such Lender and be dated the Initial Borrowing Date, (iii) be in a stated
principal amount equal to the Bridge Loans made by such Lender on the Initial
Borrowing Date and be payable in the principal amount of Bridge Loans evidenced
thereby, (iv) mature on the Bridge Maturity Date, (v) bear interest as provided
in the appropriate clause of Section 1.08 in respect of the Base Rate Loans
evidenced thereby, (vi) be subject to mandatory repayment as provided in Section
4.02 and (vii) be entitled to the benefits of this Agreement and the other Loan
Documents.
(e) The Revolving Note issued to each Lender with a
Revolving Commitment shall (i) be executed by the Borrower, (ii) be payable to
the order of such Lender and be dated the Initial Borrowing Date, (iii) be in a
stated principal amount equal to the Revolving Commitment of such Lender and be
payable in the principal amount of the Revolving Loans evidenced thereby, (iv)
mature on the Expiry Date, (v) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans,
as the case may be, evidenced thereby, (vi)
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be subject to mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Loan Documents.
(f) The Swingline Note issued to NatWest shall (i) be
executed by the Borrower, (ii) be payable to the order of NatWest and be dated
the Initial Borrowing Date, (iii) be in a stated principal amount equal to the
Maximum Swingline Amount and be payable in the principal amount of Swingline
Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v) bear
interest as provided in Section 1.08 in respect of the Base Rate Loans evidenced
thereby and (vi) be entitled to the benefits of this Agreement and the other
Loan Documents.
(g) Each Lender will note on its internal records the
amount of each Loan made by it and each payment in respect thereof and will,
prior to any transfer of any of its Notes, endorse on the reverse side thereof
the outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect the Borrower's obligations in respect of such
Loans.
1.06 Conversions. The Borrower shall have the option to
convert on any Business Day occurring on and after the Syndication Date all or a
portion at least equal to the applicable Minimum Borrowing Amount of the
outstanding principal amount of the Loans owing (other than Swingline Loans and
Bridge Loans, which at all times shall be maintained as Base Rate Loans)
pursuant to a single Facility into a Borrowing or Borrowings pursuant to such
Facility of another Type of Loan, provided that (i) except as otherwise provided
in Section 1.10(b), Eurodollar Loans may be converted into Base Rate Loans only
on the last day of an Interest Period applicable thereto and no partial
conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding
principal amount of the Eurodollar Loans made pursuant to such Borrowing to less
than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may
only be converted into Eurodollar Loans if no Default or Event of Default is in
existence on the date of the conversion and (iii) Borrowings of Eurodollar Loans
resulting from this Section 1.06 shall be limited in number as provided in
Section 1.02. Each such conversion shall be effected by the Borrower giving the
Agent at its Notice Office, prior to 11:00 A.M. (New York time), at least three
Business Days' (or one Business Days', in the case of a conversion into Base
Rate Loans) prior written notice (or telephonic notice promptly confirmed in
writing) (each a "Notice of Conversion") specifying the Loans to be so
converted, the Type of Loans to be converted into and, if to be converted into a
Borrowing of Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Agent shall give each Lender prompt notice of any such proposed
conversion affecting any of its Loans.
1.07 Pro Rata Borrowings. All Loans under this Agreement
(other than Swingline Loans) shall be made by the Lenders pro rata on the basis
of their A Term Commitments, B Term Commitments, Bridge Commitments or Revolving
Commitments, as the case may be. It is understood that no Lender shall be
responsible for any default by any other Lender in its obligation to make Loans
hereunder and that each Lender shall be obligated to make the Loans provided to
be made by it hereunder, regardless of the failure of any other Lender to
fulfill its commitments hereunder.
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1.08 Interest. (a) The unpaid principal amount of each
Base Rate Loan shall bear interest from the date of the Borrowing thereof until
maturity (whether by acceleration or otherwise) at a rate per annum which shall
at all times be the Applicable Base Rate Margin plus the Base Rate in effect
from time to time.
(b) The unpaid principal amount of each Eurodollar Loan
shall bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration or otherwise) at a rate per annum which shall at all
times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by
law, overdue interest in respect of each Loan and any other overdue amount
payable hereunder shall bear interest at a rate per annum equal to the Base Rate
in effect from time to time plus the sum of (i) 2% and (ii) the Applicable Base
Rate Margin; provided, however, that no Loan shall bear interest after maturity
(whether by acceleration or otherwise) at a rate per annum less than 2% plus the
rate of interest applicable thereto at maturity.
(d) Interest shall accrue from and including the date of
any Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last
Business Day of each April, July, October and January, (ii) in respect of each
Eurodollar Loan, on the last day of each Interest Period applicable thereto and,
in the case of an Interest Period of six months, on the date occurring three
(and in respect of a 12 month interest period, if any, also six and nine) months
after the first day of such Interest Period and (iii) in respect of each Loan,
on any prepayment or conversion (other than the prepayment and conversion of
Base Rate Revolving Loans) (on the amount prepaid or converted), at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made
in accordance with Section 12.07(b).
(f) The Agent, upon determining the interest rate for any
Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify the
Borrower and the Lenders thereof.
1.09 Interest Periods. (a) At the time the Borrower gives
a Notice of Borrowing or Notice of Conversion in respect of the making of, or
conversion into, a Borrowing of Eurodollar Loans (in the case of the initial
Interest Period applicable thereto) or prior to 11:00 A.M. (New York time) on
the third Business Day prior to the expiration of an Interest Period applicable
to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving
the Agent written notice (or telephonic notice promptly confirmed in writing) of
the Interest Period applicable to such Borrowing, which Interest Period shall,
at the option of the Borrower, be a one, two, three or six month, or if
available to all Lenders, twelve month period. Notwithstanding anything to the
contrary contained above:
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(i) all Eurodollar Loans comprising a Borrowing shall at
all times have the same Interest Period;
(ii) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of Base Rate
Loans) and each Interest Period occurring thereafter in respect of such
Borrowing shall commence on the day on which the next preceding
Interest Period expires;
(iii) if any Interest Period begins on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a
day which is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day; provided, however, that if any
Interest Period would otherwise expire on a day which is not a Business
Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(v) no Interest Period shall extend beyond the Expiry
Date (in the case of A Term Loans and Revolving Loans) or the Final
Maturity Date (in the case of B Term Loans);
(vi) no Interest Period with respect to any Borrowing of
Term Loans under a Facility may be elected that would extend beyond any
date upon which a Scheduled Repayment or a mandatory repayment is
required to be made in respect of such Facility, as the case may be,
if, after giving effect to the selection of such Interest Period, the
aggregate principal amount of Term Loans maintained as Eurodollar Loans
under such Facility with Interest Periods ending after such date would
exceed the aggregate principal amount of Term Loans of such Facility
permitted to be outstanding after such Scheduled Repayment or mandatory
repayment, as the case may be; and
(vii) no Interest Period may be elected at any time when a
Default or an Event of Default is then in existence.
(b) If upon the expiration of any Interest Period, the
Borrower has failed to elect, or is not permitted to elect, a new Interest
Period to be applicable to the respective Borrowing of Eurodollar Loans as
provided above, the Borrower shall be deemed to have elected to convert such
Borrowing into a Borrowing of Base Rate Loans effective as of the expiration
date of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event
that (x) in the case of clause (i) below, the Agent or (y) in the case of
clauses (ii) and (iii) below, any Lender shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
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(i) on any date for determining the Eurodollar Rate for
any Interest Period that, by reason of any changes arising after the
date of this Agreement affecting the interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of Eurodollar
Rate; or
(ii) at any time, that such Lender shall incur increased
costs or reductions in the amounts received or receivable hereunder
with respect to any Eurodollar Loans (other than any increased cost or
reduction in the amount received or receivable resulting from the
imposition of or a change in the rate of taxes or similar charges)
because of (x) any change since the date of this Agreement in any
applicable law, governmental rule, regulation, guideline or order (or
in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, guideline
or order) (such as, for example, but not limited to, a change in
official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation
of the Eurodollar Rate) and/or (y) other circumstances affecting such
Lender, the interbank Eurodollar market or the position of such Lender
in such market since the date of this Agreement (or, if such Lender
becomes a Lender after the date hereof, since the date such Lender
becomes a Lender hereunder); or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Lender in
good faith with any law, governmental rule, regulation, guideline (or
would conflict with any such governmental rule, regulation, guideline
or order not having the force of law but with which such Lender
customarily complies even though the failure to comply therewith would
not be unlawful), or has become impracticable as a result of a
contingency occurring after the date of this Agreement which materially
and adversely affects the interbank Eurodollar market;
then, and in any such event, such Lender (or the Agent in the case of clause (i)
above) shall, (A) on such date and (B) within ten Business Days of the date on
which such event no longer exists, give notice (by telephone confirmed in
writing) to the Borrower and to the Agent of such determination (which notice
the Agent shall promptly transmit to each of the other Lenders). Thereafter (A)
in the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice by the Agent no longer exist, and any
Notice of Borrowing or Notice of Conversion given by the Borrower with respect
to Eurodollar Loans which have not yet been incurred shall be deemed rescinded
by the Borrower, (B) in the case of clause (ii) above, the Borrower shall pay to
such Lender, upon written demand therefor, such additional amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Lender in its sole discretion shall determine) as shall be
required to compensate such Lender for such increased costs or reductions in
amounts receivable hereunder (a written notice as to the additional amounts owed
to such Lender, showing the basis for the calculation thereof, submitted to the
Borrower by such Lender shall, absent manifest error, be final and conclusive
and binding upon all parties hereto) and (C) in the case of clause (iii) above,
the Borrower shall take one of the actions specified in Section 1.10(b) as
promptly as possible and, in any event, within the time period required by law.
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(b) At any time that any Eurodollar Loan is affected by
the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may
(and in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii)
the Borrower shall) either (i) if the affected Eurodollar Loan is then being
made pursuant to a Borrowing, cancel said Borrowing by giving the Agent
telephonic notice (confirmed promptly in writing) thereof on the same date that
the Borrower was notified by a Lender pursuant to Section 1.10(a)(ii) or (iii),
or (ii) if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Agent, require the affected Lender to convert each
such Eurodollar Loan into a Base Rate Loan, provided that if more than one
Lender is affected at any time, then all affected Lenders must be treated the
same pursuant to this Section 1.10(b).
(c) If any Lender shall have determined that after the
date of this Agreement, the adoption or effectiveness of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's capital or assets as a
consequence of its commitments or obligations hereunder to a level below that
which such Lender could have achieved but for such adoption, effectiveness,
change or compliance (taking into consideration such Lender's policies with
respect to capital adequacy), then from time to time, within 15 days after
demand by such Lender (with a copy to the Agent), the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction. Each Lender, upon determining in good faith that any additional
amounts will be payable pursuant to this Section 1.10(c), will give prompt
written notice thereof to the Borrower, which notice shall set forth the basis
of the calculation of such additional amounts, although the failure to give any
such notice shall not release or diminish any of the Borrower's obligations to
pay additional amounts pursuant to this Section 1.10(c) upon the subsequent
receipt of such notice, and shall, absent manifest error, be final and
conclusive and binding on all parties hereto.
1.11 Compensation. (a) The Borrower shall compensate each
Lender, upon its written request (which request shall set forth the basis for
requesting such compensation), for all losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
such Lender to fund its Eurodollar Loans) which such Lender may sustain: (i) if
for any reason (other than a default by such Lender or the Agent) a Borrowing of
Eurodollar Loans does not occur on a date specified therefor in a Notice of
Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or
deemed withdrawn pursuant to Section 1.10(a)); (ii) if any prepayment, repayment
(including any prepayment or repayment made pursuant to Section 4.01 or 4.02 or
as a result of an acceleration of the Loans pursuant to Section 9) or conversion
of any of its Eurodollar Loans occurs on the date which is not the last day of
an Interest Period applicable thereto; (iii) if any prepayment of any of its
Eurodollar Loans is not made on any date specified in a notice of prepayment
given by the Borrower; or (iv) as a consequence of (A) any other default by the
Borrower to repay its
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Eurodollar Loans when required by the terms of this Agreement or (B) an election
made pursuant to Section 1.10(b).
(b) Notwithstanding anything in this Agreement to the
contrary, to the extent any notice required by Section 1.10, 2.06 or 4.04 is
given by any Lender more than 180 days after such Lender obtained, or reasonably
should have obtained, knowledge of the occurrence of the event giving rise to
the additional costs of the type described in such Section, such Lender shall
not be entitled to compensation under Section 1.10, 2.06 or 4.04 for any amounts
incurred or accruing prior to the giving of such notice to the Borrower.
1.12 Change of Lending Office. Each Lender agrees that,
upon the occurrence of any event giving rise to the operation of Section
1.10(a)(ii) or (iii), 1.10(c), 2.06 or 4.04 with respect to such Lender, it
will, if requested by the Borrower, use reasonable efforts (subject to overall
policy considerations of such Lender) to designate another lending office for
any Loans affected by such event, provided that such designation is made on such
terms that such Lender and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such Section. Nothing in this Section
1.12 shall affect or postpone any of the obligations of the Borrower or the
right of any Lender provided in Section 1.10, 2.06 or 4.04.
1.13 Replacement of Lenders. Upon the occurrence of any
event giving rise to the operation of Section 1.10(a)(ii), Section 1.10(c),
Section 2.06 or Section 4.04 with respect to any Lender which results in such
Lender charging to the Borrower increased costs in excess of those being
generally charged by the other Lenders, or if a Lender becomes a Defaulting
Lender or, in the case of a refusal by a Lender to consent to a proposed change,
waiver, discharge or termination with respect to this Agreement which has been
approved by the Required Lenders as provided in Section 12.12, the Borrower
shall have the right, if no Default or Event of Default then exists, to replace
such Lender (the "Replaced Lender") with one or more other Eligible Transferee
or Transferees, none of whom shall constitute a Defaulting Lender at the time of
such replacement (collectively, the "Replacement Lender") reasonably acceptable
to the Agent, provided that (i) at the time of any replacement pursuant to this
Section 1.13, the Replacement Lender shall enter into one or more Assignment
Agreements pursuant to Section 12.04(b) (and with all fees payable pursuant to
said Section 12.04(b) to be paid by the Replacement Lender) pursuant to which
the Replacement Lender shall acquire all of the Commitments and outstanding
Loans of, and in each case participations in Letters of Credit by, the Replaced
Lender and, in connection therewith, shall pay to (A) the Replaced Lender in
respect thereof an amount equal to the sum of (1) an amount equal to the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Lender, (2) an amount equal to all Unpaid Drawings that have been funded by (and
not reimbursed to) such Replaced Lender, together with all then unpaid interest
with respect thereto at such time and (3) an amount equal to all accrued, but
theretofore unpaid, Fees owing to the Replaced Lender pursuant to Section 3.01
and (B) the Letter of Credit Issuer an amount equal to such Replaced Lender's
Adjusted Revolving Commitment Percentage of any Unpaid Drawing (which at such
time remains an Unpaid Drawing) to the extent such amount was not theretofore
funded by such Replaced Lender, and (ii) all obligations of the Borrower owing
to the Replaced Lender (other than those specifically
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described in clause (i) above in respect of which the assignment purchase price
has been, or is concurrently being, paid) shall be paid in full to such Replaced
Lender concurrently with such replacement. Upon the execution of the respective
Assignment Agreements, the payment of amounts referred to in clauses (i) and
(ii) above and, if so requested by the Replacement Lender, delivery to the
Replacement Lender of the appropriate Note or Notes executed by the Borrower,
the Replacement Lender shall become a Lender hereunder and the Replaced Lender
shall cease to constitute a Lender hereunder, except with respect to
indemnification provisions applicable to the Replaced Lender under this
Agreement, which shall survive as to such Replaced Lender.
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms
and conditions herein set forth, the Borrower may request that a Letter of
Credit Issuer at any time and from time to time on or after the Initial
Borrowing Date and prior to the Expiry Date to issue, for the account of the
Borrower and in support of (i) trade obligations of the Borrower and/or its
Subsidiaries (each such letter of credit a "Trade Letter of Credit" and,
collectively, the "Trade Letters of Credit") and/or (ii) such other obligations
of the Borrower that are acceptable to the Agent (each such letter of credit a
"Standby Letter of Credit" and, collectively, the "Standby Letters of Credit"
and together with the Trade Letters of Credit, the "Letters of Credit"), and
subject to and upon the terms and conditions herein set forth the Letter of
Credit Issuer agrees to issue from time to time, irrevocable letters of credit
in such form as may be approved by the Letter of Credit Issuer and the Agent.
The Borrower, the Agent and each of the Banks hereby agree that each of the
letters of credit set forth on Exhibit 2.01 hereto issued by NatWest and
outstanding on the date hereof under the Prior Credit Agreement shall be deemed
to be a Letter of Credit issued and continuing under, and governed by all of the
terms and conditions of, this Agreement, with NatWest acting as the Letter of
Credit Issuer with respect thereto.
(b) Notwithstanding the foregoing, (i) no Letter of
Credit shall be issued, the Stated Amount of which, when added to the Letter of
Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date
of, and prior to the issuance of, the respective Letter of Credit) at such time,
would exceed either (A) $7,500,000 or (B) when added to the aggregate principal
amount of all Revolving Loans made by Non-Defaulting Lenders and Swingline Loans
then outstanding, the Adjusted Total Revolving Commitment at such time; and (ii)
(A) each Standby Letter of Credit shall have an expiry date occurring not later
than one year after such Lender of Credit's date of issuance although any Letter
of Credit may be renewable for successive periods of up to 12 months, but not
beyond the Business Day next preceding the Expiry Date, on terms acceptable to
the Letter of Credit Issuer and in no event shall any Standby Letter of Credit
have an expiry date occurring later than the Business Day next preceding the
Expiry Date and (B) such Trade Letter of Credit shall have an expiry date
occurring no later than the earlier of (1) 180 days after the issuance thereof
or (2) 30 days prior to the Expiry Date.
(c) Notwithstanding the foregoing, in the event a Lender
Default exists, the Letter of Credit Issuer shall not be required to issue any
Letter of Credit unless the Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Borrower to eliminate the Letter of
Credit
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Issuer's risk with respect to the participation in Letters of Credit of the
Defaulting Lender or Lenders, including by cash collateralizing such Defaulting
Lender's or Lenders' Revolving Percentage of the Letter of Credit Outstandings.
2.02 Minimum Stated Amount. The initial Stated Amount of
each Letter of Credit shall not be less than $10,000 or such lesser amount
acceptable to the Letter of Credit Issuer and the Agent.
2.03 Letter of Credit Requests; Notices of Issuance. (a)
Whenever it desires that a Letter of Credit be issued, the Borrower shall give
the Agent and the Letter of Credit Issuer written notice (including by way of
telecopier), in the form of Exhibit 2.03 hereto, prior to 1:00 P.M. (New York
time) at least three Business Days (or such shorter period as may be acceptable
to the Letter of Credit Issuer) prior to the proposed date of issuance (which
shall be a Business Day) (each a "Letter of Credit Request"), which Letter of
Credit Request shall include an application for such Letter of Credit and any
other documents that the Letter of Credit Issuer customarily requires in
connection therewith. The Agent shall promptly notify each Lender of each Letter
of Credit Request.
(b) The Letter of Credit Issuer shall, on the date of
each issuance of a Letter of Credit by it, give the Agent, each Lender and the
Borrower written notice of the issuance of such Letter of Credit, accompanied by
a copy to the Agent of the Letter of Credit or Letters of Credit issued by it.
2.04 Agreement to Repay Letter of Credit Drawings. (a)
The Borrower hereby agrees to reimburse the Letter of Credit Issuer, by making
payment to the Agent at the Payment Office, for any payment or disbursement made
by the Letter of Credit Issuer under any Letter of Credit (each such amount so
paid or disbursed until reimbursed, an "Unpaid Drawing") immediately after, and
in any event on the date on which the Borrower is notified by the Letter of
Credit Issuer of such payment or disbursement with interest on the amount so
paid or disbursed by the Letter of Credit Issuer, to the extent not reimbursed
prior to 1:00 P.M. (New York time) on the date of such payment or disbursement,
from and including the date paid or disbursed to but not including the date the
Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall
be 1-1/2% in excess of the Base Rate as in effect from time to time (plus an
additional 2% per annum if not reimbursed by the third Business Day after the
date of such notice of payment or disbursement), such interest also to be
payable on demand.
(b) The Borrower's obligation under this Section 2.04 to
reimburse the Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against the Letter of
Credit Issuer, the Agent or any Lender, including, without limitation, any
defense based upon the failure of any drawing under a Letter of Credit to
conform to the terms of the Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such drawing; provided,
however, that the Borrower shall not be obligated to reimburse the Letter of
Credit Issuer for any
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wrongful payment made by the Letter of Credit Issuer under a Letter of Credit as
a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer.
2.05 Letter of Credit Participations. (a) Immediately
upon the issuance by the Letter of Credit Issuer of any Letter of Credit, the
Letter of Credit Issuer shall be deemed to have sold and transferred to each
other Revolving Lender, and each such Revolving Lender (each a "Participant")
shall be deemed irrevocably and unconditionally to have purchased and received
from such Letter of Credit Issuer, without recourse or warranty, an undivided
interest and participation, to the extent of such Lender's Adjusted Revolving
Commitment Percentage, in such Letter of Credit, each drawing made thereunder
and the obligations of the Borrower under this Agreement with respect thereto
(although the Letter of Credit Fee shall be payable directly to the Agent for
the account of the Lenders as provided in Section 3.01(b) and the Participants
shall have no right to receive any portion of any Facing Fees) and any security
therefor or guaranty pertaining thereto. Upon any change in the Revolving
Commitments or Adjusted Revolving Commitment Percentages of the Revolving
Lenders pursuant to Section 12.04(b) or upon a Lender Default, it is hereby
agreed that, with respect to all outstanding Letters of Credit and Unpaid
Drawings, there shall be an automatic adjustment to the participations pursuant
to this Section 2.05 to reflect the new Adjusted Revolving Commitment
Percentages of the assigning and assignee Lender or of all Revolving Lenders, as
the case may be.
(b) In determining whether to pay under any Letter of
Credit, the Letter of Credit Issuer shall not have any obligation relative to
the Participants other than to determine that any documents required to be
delivered under such Letter of Credit have been delivered and that they strictly
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by the Letter of Credit Issuer under or in
connection with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for the Letter of Credit
Issuer any resulting liability.
(c) In the event that the Letter of Credit Issuer makes
any payment under any Letter of Credit and the Borrower shall not have
reimbursed such amount in full to the Letter of Credit Issuer pursuant to
Section 2.04(a), the Letter of Credit Issuer shall promptly notify the Agent,
and the Agent shall promptly notify each Participant of such failure, and each
Participant shall promptly and unconditionally pay to the Agent for the account
of the Letter of Credit Issuer, the amount of such Participant's Adjusted
Revolving Commitment Percentage of such payment in Dollars and in same day
funds; provided, however, that no Participant shall be obligated to pay to the
Agent its Adjusted Revolving Commitment Percentage of such unreimbursed amount
for any wrongful payment made by the Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer. If the Agent so notifies
any Participant required to fund an Unpaid Drawing under a Letter of Credit
prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall
make available to the Agent for the account of the Letter of Credit Issuer such
Participant's Adjusted Revolving Commitment Percentage of the amount of such
payment on such Business Day in same day funds. If and to the extent such
Participant shall not have so made its Adjusted Revolving
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Commitment Percentage of the amount of such Unpaid Drawing available to the
Agent for the account of the Letter of Credit Issuer, such Participant agrees to
pay to the Agent for the account of the Letter of Credit Issuer, forthwith on
demand such amount, together with interest thereon, for each day from such date
until the date such amount is paid to the Agent for the account of the Letter of
Credit Issuer at the overnight Federal Funds Effective Rate. The failure of any
Participant to make available to the Agent for the account of the Letter of
Credit Issuer its Adjusted Revolving Commitment Percentage of any Unpaid Drawing
under any Letter of Credit shall not relieve any other Participant of its
obligation hereunder to make available to the Agent for the account of the
Letter of Credit Issuer its Adjusted Revolving Commitment Percentage of any
payment under any Letter of Credit on the date required, as specified above, but
no Participant shall be responsible for the failure of any other Participant to
make available to the Agent for the account of the Letter of Credit Issuer such
other Participant's Adjusted Revolving Commitment Percentage of any such
payment.
(d) Whenever the Letter of Credit Issuer receives a
payment of a reimbursement obligation as to which the Agent has received for the
account of the Letter of Credit Issuer any payments from the Participants
pursuant to clause (c) above, the Letter of Credit Issuer shall pay to the Agent
and the Agent shall promptly pay to each Participant which has paid its Adjusted
Revolving Commitment Percentage thereof, in Dollars and in same day funds, an
amount equal to such Participant's Adjusted Revolving Commitment Percentage of
the principal amount thereof and interest thereon accruing at the overnight
Federal Funds Effective Rate after the purchase of the respective
participations.
(e) The obligations of the Participants to make payments
to the Agent for the account of the Letter of Credit Issuer with respect to
Letters of Credit shall be irrevocable and not subject to counterclaim, set-off
or other defense or any other qualification or exception whatsoever (provided
that no Participant shall be required to make payments resulting from the Letter
of Credit Issuer's gross negligence or willful misconduct) and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit (or
any Person for whom any such transferee may be acting), the Agent, the
Letter of Credit Issuer, any Lender or other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transaction between the Borrower and the beneficiary named
in any such Letter of Credit);
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(iii) any draft, certificate or other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents; or
(v) the occurrence of any Default or Event of Default.
(f) To the extent the Letter of Credit Issuer is not
indemnified by the Borrower, the Participants will reimburse and indemnify the
Letter of Credit Issuer, in proportion to their respective "percentages" of the
Total Revolving Commitment, for and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, costs,
expenses or disbursements of whatsoever kind or nature which may be imposed on,
asserted against or incurred by the Letter of Credit Issuer in performing its
respective duties in any way relating to or arising out of its issuance of
Letters of Credit; provided, however, that no Participants shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Letter of Credit Issuer's gross negligence or willful misconduct.
2.06 Increased Costs. If at any time after the date of
this Agreement, the adoption or effectiveness of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Letter of Credit Issuer or any Lender with any request or directive
(whether or not having the force of law) by any such authority, central bank or
comparable agency shall either (i) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against Letters of
Credit issued by the Letter of Credit Issuer or such Lender's participation
therein, or (ii) shall impose on the Letter of Credit Issuer or any Lender any
other conditions affecting this Agreement, any Letter of Credit or such Lender's
participation therein; and the result of any of the foregoing is to increase the
cost to the Letter of Credit Issuer or such Lender of issuing, maintaining or
participating in any Letter of Credit, or to reduce the amount of any sum
received or receivable by the Letter of Credit Issuer or such Lender hereunder
(other than any increased cost or reduction in the amount received or receivable
resulting from the imposition of or a change in the rate of taxes or similar
charges), then, upon demand to the Borrower by the Letter of Credit Issuer or
such Lender (a copy of which notice shall be sent by the Letter of Credit Issuer
or such Lender to the Agent), the Borrower shall pay to the Letter of Credit
Issuer or such Lender such additional amount or amounts as will compensate the
Letter of Credit Issuer or such Lender for such increased cost or reduction. A
certificate submitted to the Borrower by the Letter of Credit Issuer or such
Lender, as the case may be (a copy of which certificate shall be sent by the
Letter of Credit Issuer or such Lender to the Agent), setting forth the basis
for the determination of such additional amount or amounts necessary to
compensate the Letter of Credit Issuer or such Lender as aforesaid shall be
conclusive and binding on the Borrower absent manifest error, although the
failure to deliver any such certificate shall not release or diminish any of the
Borrower's obligations to pay additional amounts pursuant to this Section 2.06
upon the subsequent receipt thereof.
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SECTION 3. Fees; Commitments.
3.01 Fees. (a) The Borrower agrees to pay to the Agent a
commitment fee ("Commitment Fee") for the account of each Non-Defaulting Lender
with a Revolving Commitment for the period from and including the date of this
Agreement to, but not including, the date the Total Revolving Commitment has
been terminated, computed at a rate for each day equal to 1/2 of 1% per annum on
the daily average of such Lender's Unutilized Revolving Commitment. Such
Commitment Fee shall be due and payable in arrears on the last Business Day of
each April, July, October and January and on the date upon which the Total
Revolving Commitment is terminated.
(b) The Borrower agrees to pay to the Agent for the
account of each Non-Defaulting Lender pro rata on the basis of their respective
Adjusted Revolving Commitment Percentages, a fee in respect of each Letter of
Credit (the "Letter of Credit Fee") computed at the rate equal to the Applicable
Eurodollar Margin then in effect with respect to Revolving Loans on the average
daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees
shall be due and payable quarterly in arrears on the last Business Day of each
April, July, October and January of each year and on the date upon which the
Total Revolving Commitment is terminated.
(c) The Borrower agrees to pay to the Agent for the
account of the Letter of Credit Issuer a fee in respect of each Letter of Credit
(the "Facing Fee") computed at the rate of 1/4 of 1% per annum on the average
daily Stated Amount of such Letter of Credit, provided, that in no event shall
the annual Facing Fee be less than $500. Accrued Facing Fees shall be due and
payable quarterly in arrears on the last Business Day of each April, July,
October and January of each year and on the date upon which the Total Revolving
Commitment is terminated.
(d) The Borrower agrees to pay directly to the Letter of
Credit Issuer upon each issuance of, drawing under, and/or amendment of, a
Letter of Credit such amount as shall at the time of such issuance, drawing or
amendment be the administrative charge which the Letter of Credit Issuer is
customarily charging for issuances of, drawings under or amendments of, letters
of credit issued by it.
(e) The Borrower shall pay (i) to NatWest on the
Effective Date for its own account and/or for distribution to the Lenders as
determined by NatWest in its sole discretion, such fees as heretofore separately
agreed by the Borrower and NatWest pursuant to the letter agreements dated as of
May 2, 1995 and the date hereof executed by them (the "Fee Letters") and (ii)
the Agent on the Effective Date and on each anniversary thereof for its own
account such fee as separately agreed to between the Borrower and the Agent
pursuant to the Fee Letters.
(f) All computations of Fees shall be made in accordance
with Section 12.07(b).
3.02 Voluntary Reduction of Commitments. Upon at least
three Business Days' prior written notice (or telephonic notice confirmed in
writing) to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Lenders), the Borrower shall have
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the right, without premium or penalty, to terminate or partially reduce the
Total Unutilized Revolving Commitment; provided, however, that (i) any such
termination shall apply to proportionately and permanently reduce the Revolving
Commitment of each Lender, (ii) no such reduction shall reduce any
Non-Defaulting Lender's Revolving Commitment to an amount that is less than the
sum of (A) the outstanding Revolving Loans of such Lender plus (B) such Lender's
Adjusted Revolving Commitment Percentage of outstanding Swingline Loans and of
Letter of Credit Outstandings and (iii) any partial reduction pursuant to this
Section 3.02 shall be in the amount of at least $1,000,000, and, if greater,
shall be in an integral multiple of $1,000,000.
3.03 Mandatory Adjustments of Commitments, etc. (a) The
Total Commitment (and the A Term Commitment, B Term Commitment, Bridge
Commitment and Revolving Commitment of each Lender) shall terminate on the
Expiration Date unless the Initial Borrowing Date has occurred on or before such
date.
(b) Each of the Total A Term Commitment, B Term
Commitment and Total Bridge Commitment shall terminate in its entirety on the
Initial Borrowing Date (after giving effect to the making of the A Term Loans, B
Term Loans and Bridge Loans on such date).
(c) The Total Revolving Commitment (and the Revolving
Commitment of each Revolving Lender) shall terminate on the Expiry Date.
(d) The Total Revolving Commitment shall be reduced to
$65,000,000 on the Contemplated Acquisition Termination Date if the Contemplated
Acquisition has not been consummated on or prior to such date pursuant to the
terms and conditions of this Agreement.
(e) The Total Revolving Commitment shall be reduced to
$60,000,000 beginning on the Initial Borrowing Date (and prior to giving effect
to the initial incurrence of Loans hereunder) and shall remain so reduced until
the date on which the Bridge Loans have been paid in full and are no longer
outstanding, at which time the Total Revolving Commitment shall be increased to
$70,000,000.
(f) Any partial reduction of the Total Revolving
Commitment pursuant to this Section 3.03 shall apply proportionately to the
Revolving Commitment of each Revolving Lender.
SECTION 4. Payments.
4.01 Voluntary Prepayments. The Borrower shall have the
right to prepay Loans in whole or in part, without premium or penalty, from time
to time on the following terms and conditions: (i) the Borrower shall give the
Agent at the Payment Office written notice (or telephonic notice promptly
confirmed in writing) of its intent to prepay the Loans, whether such Loans are
A Term Loans, B Term Loans, Bridge Loans, Revolving Loans or Swingline Loans,
the amount of such prepayment and (in the case of Eurodollar Loans) the specific
Borrowing(s) pursuant to which made, which notice shall be given by the Borrower
at least one Business Day prior to the date of such prepayment with respect to
Base Rate Loans (other than Swingline Loans, with respect to
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which notice shall be given by the Borrower on the day of prepayment) and two
Business Days prior to the date of such prepayment with respect to Eurodollar
Loans, which notice shall promptly be transmitted by the Agent to each of the
Lenders, provided that no notice shall be required with respect to any
prepayments made with funds received by the Agent from the Blocked Accounts
(such funds, "Blocked Account Proceeds") as provided in Section 4.05, which
funds shall be applied by the Agent on a daily basis or such other frequency as
the Agent may determine, (ii) each partial prepayment of any Borrowing (other
than any Borrowing of Swingline Loans or a Borrowing of Revolving Loans that is
prepaid solely with Blocked Account Proceeds) shall be in an aggregate principal
amount of at least $500,000 and, if greater in an integral multiple of $100,000,
provided that no partial prepayment of Eurodollar Loans made pursuant to a
Borrowing shall reduce the aggregate principal amount of the Loans outstanding
pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount
applicable thereto; (iii) at the time of any prepayment of Eurodollar Loans
pursuant to this Section 4.01 on any date other than the last day of the
Interest Period applicable thereto, the Borrower shall pay the amounts required
pursuant to Section 1.11; (iv) each prepayment in respect of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans, provided
that (A) at the Borrower's election in connection with any prepayment of
Revolving Loans pursuant to this Section 4.01, such prepayment shall not be
applied to any Revolving Loans of a Defaulting Lender, and (B) Blocked Account
Proceeds shall be applied first to prepay any outstanding Swingline Loans and
second to prepay any outstanding Revolving Loans, and, with respect to such
Revolving Loans, first to prepay any Base Rate Loans and second to prepay any
Eurodollar Loans; and (v) each prepayment of Term Loans pursuant to this Section
4.01 shall be applied to A Term Loans (in an amount equal to the A Term Loan
Percentage of such prepayment) and B Term Loans (in an amount equal to the B
Term Loan Percentage of such prepayment) and shall be applied first to reduce
the remaining Scheduled Repayments in the then current fiscal year of the
Borrower of each of the A Term Loans and B Term Loans in the direct order of
their maturity and second to reduce the remaining Scheduled Repayments of each
of the A Term Loans and the B Term Loans in the inverse order of their maturity.
4.02 Mandatory Prepayments.
(A) Requirements:
(a) (i) If on any date (i) the sum of the aggregate
outstanding principal amount of Revolving Loans made by Non-Defaulting Lenders,
Swingline Loans and the Letter of Credit Outstandings exceeds the Adjusted Total
Revolving Commitment as then in effect or (ii) the aggregate outstanding
principal amount of all Revolving Loans and of all Swingline Loans and the
Letter of Credit Outstandings shall have exceeded the Borrowing Base at such
time for any period of two consecutive Business Days, the Borrower shall repay
on such date the principal of Swingline Loans, and if no Swingline Loans are or
remain outstanding, Revolving Loans of Non-Defaulting Lenders, in an aggregate
amount equal to such excess. If, after giving effect to the repayment of all
outstanding Swingline Loans and Revolving Loans of Non-Defaulting Lenders, the
aggregate amount of Letter of Credit Outstandings exceeds the Adjusted Total
Revolving Commitment then in effect, the Borrower shall pay to the Agent an
amount in cash and/or Cash Equivalents equal to such excess (up to the aggregate
amount of the Letter of Credit Outstandings at such time) and the
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Agent shall hold such payment as security for the obligations of the Borrower
hereunder pursuant to a cash collateral agreement to be entered into in form and
substance satisfactory to the Agent (which shall permit certain investments in
Cash Equivalents satisfactory to the Agent, until the proceeds are applied to
the secured obligations).
(ii) If on any date the aggregate outstanding
principal amount of the Revolving Loans made by a Defaulting Lender exceeds the
Revolving Commitment of such Defaulting Lender, the Borrower shall repay
principal of Revolving Loans of such Defaulting Lender in an amount equal to
such excess.
(b) (i) On each date set forth below, the Borrower
shall be required to repay the principal amount of A Term Loans set forth
opposite such date (each such repayment, together with each repayment of B Term
Loans required by clause (b)(ii) below, a "Scheduled Repayment"):
Repayment Date Amount
July 31, 1995 $250,000
October 31, 1995 $250,000
January 31, 1996 $250,000
April 30, 1996 $250,000
July 31, 1996 $425,000
October 31, 1996 $425,000
January 31, 1997 $425,000
April 30, 1997 $425,000
July 31, 1997 $675,000
October 31, 1997 $675,000
January 31, 1998 $675,000
April 30, 1998 $675,000
July 31, 1998 $1,800,000
October 31, 1998 $1,800,000
January 31, 1999 $1,800,000
April 30, 1999 $1,800,000
July 31, 1999 $1,850,000
October 31, 1999 $1,850,000
January 31, 2000 $1,850,000
Expiry Date $1,850,000 or the then outstanding
principal amount of A Term Loans
(ii) The Borrower shall be required to repay the principal amount of B
Term Loans on each date set forth below as set forth opposite such date:
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Repayment Date Amount
July 31, 1995 $75,000
October 31, 1995 $75,000
January 31, 1996 $75,000
April 30, 1996 $75,000
July 31, 1996 $75,000
October 31, 1996 $75,000
January 31, 1997 $75,000
April 30, 1997 $75,000
July 31, 1997 $75,000
October 31, 1997 $75,000
January 31, 1998 $75,000
April 30, 1998 $75,000
July 31, 1998 $75,000
October 31, 1998 $75,000
January 31, 1999 $75,000
April 30, 1999 $75,000
July 31, 1999 $900,000
October 31, 1999 $900,000
January 31, 2000 $900,000
April 30, 2000 $900,000
July 31, 2000 $3,000,000
October 31, 2000 $3,000,000
January 31, 2001 $3,000,000
April 30, 2001 $3,000,000
July 31, 2001 $3,300,000
October 31, 2001 $3,300,000
January 31, 2002 $3,300,000
Final Maturity Date $3,300,000 or the then outstanding
principal amount of B Term Loans
(c) On the Business Day following the date of receipt
thereof by the Borrower and/or any of its Subsidiaries of the Cash Proceeds from
any Asset Sale, an amount equal to 100% of the Net Cash Proceeds from such Asset
Sale shall be applied first as a mandatory repayment of principal of the then
outstanding Term Loans (with the A Term Loan Percentage of such Net Cash
Proceeds applied as a prepayment of the outstanding principal amount of A Term
Loans and the B Term Loan Percentage of such Net Cash Proceeds applied as a
prepayment of the outstanding principal amount of B Term Loans) and second,
after the Term Loans have been paid in full and are no longer outstanding, as a
mandatory repayment of principal of the then outstanding Revolving Loans,
provided that up to an aggregate of $250,000 of Net Cash Proceeds from Asset
Sales shall
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not be required to be used to so repay Term Loans to the extent the Borrower
elects, as hereinafter provided, to cause such Net Cash Proceeds to be
reinvested in Reinvestment Assets (a "Reinvestment Election"). The Borrower may
exercise its Reinvestment Election (within the parameters specified in the
preceding sentence) with respect to an Asset Sale if (i) no Default or Event of
Default exists and (ii) the Borrower delivers a Reinvestment Notice to the Agent
on the Business Day following the date of the consummation of the respective
Asset Sale, with such Reinvestment Election being effective with respect to the
Net Cash Proceeds of such Asset Sale equal to the Anticipated Reinvestment
Amount specified in such Reinvestment Notice.
(d) On the date of the receipt thereof by the Borrower and/or
any of its Subsidiaries, an amount equal to 100% of the proceeds (net of
underwriting discounts and commissions and other reasonable costs associated
therewith) of the incurrence of Indebtedness by the Borrower and/or any of its
Subsidiaries (other than Indebtedness permitted by Section 8.04), shall be
applied first as a mandatory repayment of principal of the then outstanding Term
Loans (with the A Term Loan Percentage of such proceeds applied as a prepayment
of the outstanding principal amount of A Term Loans and the B Term Loan
Percentage of such proceeds applied as a prepayment of the outstanding principal
amount of B Term Loans) and second, after the Term Loans have been paid in full
and are no longer outstanding, as a mandatory repayment of principal of the then
outstanding Revolving Loans.
(e) On the date of the receipt thereof by the Borrower, an
amount equal to 100% of the proceeds (net of underwriting discounts and
commissions and other reasonable costs associated therewith) of any sale or
issuance of its equity and 100% of any amount of cash received by the Borrower
in connection with any capital contributions shall be applied as a mandatory
repayment of principal of the then outstanding Revolving Loans and Term Loans,
with 50% of such amount being applied to the outstanding Revolving Loans and 50%
of such amount being applied to the outstanding Term Loans (such amount, the
"Term Loan Portion") (with the A Term Loan Percentage of the Term Loan Portion
applied as a prepayment of the outstanding principal amount of A Term Loans and
the B Term Loan Percentage of the Term Loan Portion applied as a prepayment of
the outstanding principal amount of B Term Loans); provided, however, that
equity proceeds received by the Borrower shall first be applied as a mandatory
repayment of principal of the then outstanding Bridge Loans as required by
Section 4.02(A)(j); and provided further, that capital contributions received by
the Borrower from Holdings from proceeds of common stock of Holdings issued to
management and other employees of the Borrower and its Subsidiaries after
repayment of the Bridge Loan shall be applied as a mandatory repayment of
principal of the then outstanding Revolving Loans.
(f) On each date which is 90 days after the last day of each
fiscal year of the Borrower (commencing with the fiscal year ending on February
3, 1996), 75% of Excess Cash Flow (such amount the "ECF Prepayment Amount") of
the Borrower and its Subsidiaries for the fiscal year then last ended shall be
applied first as a mandatory repayment of principal of the then outstanding Term
Loans (with the A Term Loan Percentage of such ECF Prepayment Amount applied as
a prepayment of the outstanding principal amount of A Term Loans and the B Term
Loan Percentage of such ECF Prepayment Amount applied as a prepayment of the
outstanding principal
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amount of B Term Loans) and second, after the Term Loans have been paid in full
and are no longer outstanding, as a mandatory repayment of principal of the then
outstanding Revolving Loans.
(g) On the Reinvestment Prepayment Date with respect to a
Reinvestment Election, an amount equal to the Reinvestment Prepayment Amount, if
any, for such Reinvestment Election shall be applied first as a repayment of the
principal amount of the then outstanding Term Loans (with the A Term Loan
Percentage of such Reinvestment Prepayment Amount applied as a prepayment of the
outstanding principal amount of it A Term Loans and the B Term Loan Percentage
of such Reinvestment Prepayment Amount applied as a prepayment of the
outstanding principal amount of B Term Loans) and second, after the Term Loans
have been paid in full and are no longer outstanding, as a mandatory repayment
of principal of the then outstanding Revolving Loans.
(h) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, (i) all then outstanding Swingline Loans shall be
repaid in full on the Swingline Expiry Date and (ii) all other then outstanding
Revolving Loans shall be repaid in full on the Expiry Date.
(i) On the Contemplated Acquisition Termination Date the
Borrower shall be required to repay $2,000,000 of the principal amount of B Term
Loans if the Specified Acquisition has not been consummated on or prior to such
date pursuant to the terms and conditions of this Agreement.
(j) On the Bridge Maturity Date the Borrower shall be
required to repay the Bridge Loan in full.
(B) Application:
(a) Each mandatory repayment of A Term Loans and B Term Loans required
to be made pursuant to Sections 4.02(A) (other than pursuant to clause (b) and
(e) thereof) shall be applied to reduce the Scheduled Repayments of A Term Loans
and B Term Loans, respectively, on a pro rata basis (based upon the then
remaining outstanding principal amount of each such Scheduled Repayments of A
Term Loans and B Term Loans, respectively), with any such repayment of the A
Term Loans, and any repayment of A Term Loans under Section 4.02(A)(e), applied
to reduce the then remaining A Term Loan Scheduled Repayments in the inverse
order of their maturity, and each such repayment of B Term Loans, and any
repayment of B Term Loans under Section 4.02(A)(e), applied to reduce the then
remaining B Term Loan Scheduled Repayments in the inverse order of their
maturity.
(b) With respect to each prepayment of Loans required by Section 4.02,
the Borrower may designate the Types of Loans which are to be prepaid and the
specific Borrowing(s) under the affected Facility pursuant to which made;
provided, however, that (i) Eurodollar Loans may so be designated for prepayment
pursuant to this Section 4.02 only on the last day of an Interest Period
applicable thereto unless all Eurodollar Loans made pursuant to such Facility
with Interest Periods ending on such date of required prepayment and all Base
Rate Loans made pursuant to such
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Facility have been paid in full; (ii) if any prepayment of Eurodollar Loans made
pursuant to a single Borrowing shall reduce the outstanding Loans made pursuant
to such Borrowing to an amount less than the Minimum Borrowing Amount for such
Borrowing, such Borrowing shall be immediately converted into Base Rate Loans;
(iii) each prepayment of any Revolving Loans made by Non-Defaulting Lenders
pursuant to a Borrowing shall be applied pro rata among such Revolving Loans;
and (iv) each prepayment of any Revolving Loans made by Defaulting Lenders
pursuant to a Borrowing shall be applied pro rata among such Revolving Loans. In
the absence of a designation by the Borrower as described in the preceding
sentence, the Agent shall, subject to the above and Section 4.02(B)(c), make
such designation.
(c) In the event that the amount of any required prepayment of Loans
under Section 4.01 with respect to prepayments from Blocked Account Proceeds or
under this Section 4.02 exceeds the aggregate principal amount of the then
respective outstanding Term Loans, Revolving Loans or Swingline Loans, as the
case may be, being prepaid which consist of Base Rate Loans (the amount of any
such excess being called the "Excess Amount"), the Borrower shall have the
right, in lieu of making such prepayment in full, to prepay such outstanding
Base Rate Loans and to deposit an amount equal to the Excess Amount with the
Agent in a cash collateral account maintained by and in the sole dominion and
control of the Agent for the ratable benefit of the Lenders holding Term Loans
or Revolving Loans entitled thereto. Any amount so deposited shall be held by
the Agent as collateral for the Obligations and applied to the prepayment of
Eurodollar Loans at the end of the current Interest Period(s) applicable
thereto. On any day on which collected amounts remain on deposit in or to the
credit of such cash collateral account after giving effect to the payment made
on such day pursuant to such Section 4.01 or 4.02 and the Borrower shall have
delivered to the Agent a written request or a telephonic request (which shall be
promptly confirmed in writing) prior to 11:00 A.M. (New York time) that such
remaining collected amounts be invested in Cash Equivalents specified in such
request, the Agent shall invest such funds, to the extent the Agent is
reasonably able to do so, in such Cash Equivalents (as are acceptable to, and
with no risk to, the Agent) on an overnight basis or with maturities such that
amounts will be available to pay the Obligations secured thereby as they become
due, whether at maturity, by acceleration or otherwise; provided, however, that
any loss resulting from such investments shall be charged to and be immediately
payable by the Borrower upon demand by the Agent.
4.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
the Agent for the ratable (based on its pro rata share) account of the Lenders
entitled thereto, not later than 1:00 P.M. (New York time) on the date when due
and shall be made in immediately available funds and in Dollars at the Payment
Office, it being understood that written notice by the Borrower to the Agent to
make a payment from the funds in the Borrower's account at the Payment Office
shall constitute the making of such payment to the extent of such funds held in
such account. Any payments under this Agreement which are made later than 1:00
P.M. (New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
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4.04 Net Payments. (a) All payments made by the Borrower
hereunder, under any Note or any other Loan Document, will be made without
setoff, counterclaim or other defense. Except as provided for in Section
4.04(b), all such payments will be made free and clear of, and without deduction
or withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein (but excluding any tax imposed on or measured by the net income (or any
franchise tax) of a Lender pursuant to the laws of the jurisdiction in which the
principal office or applicable lending office of such Lender is located or under
the laws of which such Lender is organized or under the laws of any political
subdivision or taxing authority of any such jurisdiction in which the principal
office or applicable lending office of such Lender is located) and all interest,
penalties or similar liabilities with respect thereto (collectively, "Taxes").
If any Taxes are so levied or imposed or required to be withheld, the Borrower
agrees to pay the full amount of such Taxes and, if any, such additional amounts
("Additional Amounts") as may be necessary so that every payment of all amounts
due hereunder, under any Note or under any other Loan Document, after
withholding or deduction for or on account of any Taxes and such Additional
Amounts, will not be less than the amount provided for herein or in such Note or
in such other Loan Document. The Borrower will indemnify and hold harmless the
Agent and each Lender, and reimburse the Agent or such Lender upon its written
request, for the amount of any Taxes so levied or imposed and paid or withheld
by such Lender. Notwithstanding anything in this Section 4.04, the Borrower
shall only be required to pay any Additional Amounts for the account of any
Lender, if such Taxes arise by reason of changes in applicable income tax law,
regulation, governmental rule, guideline, order or income tax treaty, or in the
official interpretation of any thereof, from and after the date such Lender
becomes a "Lender" under this Agreement; provided, however, that the Borrower
shall not be required to pay any Additional Amounts, or indemnify or reimburse
any Lender, in respect of, against or for any Taxes imposed as a result of such
Lender's failure to comply with Section 4.04(b). The Borrower will furnish to
the Agent within 45 days after the date the payment of any Taxes, or any
withholding or deduction on account thereof, is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the Borrower.
(b) Each Lender, which is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes agrees to provide to the Borrower on or prior to the Initial Borrowing
Date or, in the case of a Lender that is an assignee or transferee of an
interest under this Agreement pursuant to Section 12.04 (unless the respective
Lender was already a Lender hereunder immediately prior to such assignment or
transfer), upon the date of such assignment or transfer to such Lender, two
original signed copies of Internal Revenue Service Form 4224 or Form 1001
certifying to such Lender's entitlement to a complete exemption from United
States withholding tax with respect to payments to be made under this Agreement,
under any Note and under any other Loan Document. Each Lender which so delivers
such Form 1001 or Form 4224 (or any successor forms), as the case may be,
further agrees to deliver to the Borrower and the Agent two original signed
copies of Form 1001 or Form 4224, as the case may be, before the date that the
previously delivered form expires or becomes obsolete or prior to the occurrence
of any event requiring a change in the most recent form so delivered, and such
amendment thereto or extensions or renewal thereof as may be reasonably
requested by the Borrower or the Agent, in each case,
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certifying to such Lender's entitlement to a complete exemption from, or
reduction in, United States withholding tax with respect to payments to be made
under this Agreement, under any Note and under any other Loan Document.
Notwithstanding anything to the contrary contained in Section 4.04(a), the
Borrower and the Agent shall be entitled, to the extent it is required to do so
by law, to deduct or withhold income or other similar taxes imposed by the
United States (or any political subdivision or taxing authority thereof or
therein) from interest fees or other amounts payable hereunder (without any
obligation under Section 4.04(a) to pay the respective Lender such taxes or any
additional amounts with respect thereto) for the account of any Lender which is
not a United States person (as such term is defined in Section 7701(a)(30) of
the Code) for United States federal income tax purposes and which has not
provided to the Borrower and the Agent such forms required to be provided to the
Borrower and the Agent by a Lender pursuant to the first sentence of this
Section 4.04(b), provided that if the Borrower or the Agent shall so deduct or
withhold any such taxes, it shall provide to such Lender certified copies of tax
receipts evidencing such payment by the Borrower or the Agent. Notwithstanding
anything to the contrary contained in the preceding sentence, the Borrower
agrees to indemnify each Lender in the manner set forth in Section 4.04(a) in
respect of any amounts deducted or withheld by it as described in the previous
sentence as a result of any changes after the date of this Agreement in any
applicable law, treaty, governmental rule, regulation, guideline or order, or in
the interpretation thereof, relating to the deducting or withholding of income
or similar Taxes, provided that each such Lender shall at the Borrower's
reasonable request provide to the Borrower any applicable tax form or
certificate necessary or appropriate for any exemption of the United States
withholding tax or the reduction in the rate of such withholding tax.
4.05 Blocked Accounts. At the request of the Agent which may
be made upon the occurrence and during the continuance of an Event of Default,
the Borrower shall establish blocked account arrangements and depository
accounts (collectively, the "Blocked Accounts") with such depository
institutions that receive payments or remittances with respect to the Borrower's
or any Subsidiary's Accounts, or such other depository institutions as the Agent
may determine, pursuant to blocked account agreements and subject to irrevocable
instructions in form and substance satisfactory to the Agent, and in which the
Borrower shall immediately deposit all payments made for Inventory or other
payments constituting proceeds of Collateral (including, without limitation,
remittances with respect to the Borrower's or any Subsidiary's Accounts) in the
identical form in which such payment is made, whether by cash, check or
otherwise, duly endorsed for collection, if necessary.
Pursuant to the aforementioned irrevocable instructions and blocked
account agreements, all amounts held or deposited in the Blocked Accounts, upon
collection of good funds in such Blocked Accounts, shall be wire transferred
(or, at the Agent's election, transferred via ACH) to the Agent at its Payment
Office as Agent may specify in writing and, upon becoming available funds, shall
be applied first to pay any Obligations (other than principal or interest on the
Loans) then due and payable and second to reduce the then outstanding principal
balance of Swingline Loans and Revolving Loans pursuant to Section 4.01. If at
any time the then outstanding balance of Swingline Loans and Revolving Loans
shall be zero and no other Obligations are then due and payable, the Agent
shall, on the Business Day following the Borrower's request, pay over to the
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Borrower amounts received by the Agent from the Blocked Accounts constituting
available funds in excess of Obligations then due and payable (provided, that if
a Default or an Event of Default shall have occurred and then be continuing,
such amounts shall also be in excess of all Letter of Credit Outstandings and
other outstanding Obligations, whether or not then due and payable).
Subject to the foregoing, the Borrower hereby agrees and each
depository institution shall, at the Agent's request, acknowledge that all
payments received by the Agent or any Lender, whether by cash, check, wire
transfer or any other instrument, made to such Blocked Accounts or otherwise
received by the Agent or any Lender and whether on the Accounts or as proceeds
of other Collateral or otherwise will be the sole and exclusive property of the
Agent and the Lenders and such depository institution has no right of setoff
against the Blocked Accounts. The Borrower, and any Affiliates and any
employees, agents or other Persons acting for or in concert with the Borrower or
any Affiliates, shall, acting as trustee for the Agent and the Lenders, receive,
as the sole and exclusive property of the Lenders, any monies, checks, notes,
drafts or any other payments relating to and/or proceeds of Accounts or other
Collateral which come into the possession or under the control of the Borrower
or any Affiliates, or any employees, agents or other Persons acting for or in
concert with the Borrower or any Affiliate, and immediately upon receipt
thereof, the Borrower or such Persons shall deposit the same or cause the same
to be deposited, in kind, in a Blocked Account.
SECTION 5. Conditions Precedent. The obligation of the Lenders to make
each Loan hereunder (excluding Mandatory Borrowings made after the Initial
Borrowing Date, which shall be made as provided in Section 1.01(e)), and the
obligation of the Letter of Credit Issuer to issue Letters of Credit hereunder,
is subject, at the time of each such Credit Event (except as otherwise
hereinafter indicated), to the satisfaction of each of the following conditions:
5.01 Execution of Agreement; Notes. On or prior to the
Initial Borrowing Date, (i) this Agreement shall have become effective as
provided in Section 12.10 and (ii) there shall have been delivered to the Agent
for the account of each Lender the appropriate A Term Note, B Term Note, Bridge
Note and/or Revolving Note and, in the case of NatWest, the Swingline Note, in
each case, executed by the Borrower, and in the amount, maturity and as
otherwise provided herein.
5.02 No Default; Representations and Warranties. At the time
of each Credit Event and also after giving effect thereto, (i) there shall exist
no Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Loan Documents in effect at such time shall be
true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event, except to the extent that such representations and warranties
expressly relate to a specified date.
5.03 Notice of Borrowing; Letter of Credit Request; Etc.. (a)
Prior to the making of each Loan (excluding Swingline Loans), the Agent shall
have received a Notice of Borrowing meeting the requirements of Section 1.03(a).
Prior to the making of any Swingline Loan, NatWest shall have received the
notice required by Section 1.03(b)(i).
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(b) Prior to the issuance of each Letter of Credit, the Agent and the
respective Letter of Credit Issuer shall have received a Letter of Credit
Request meeting the requirements of Section 2.03, and the respective Letter of
Credit Issuer shall have received any documentation requested by it in
connection with the issuance of the respective Letter of Credit.
5.04 Officer's Certificate. On the Initial Borrowing Date,
the Agent shall have received a certificate dated such date signed by the
President or the Chief Financial Officer of the Borrower stating that all of the
applicable conditions set forth in this Section 5 have been fully satisfied on
such date.
5.05 Opinions of Counsel. On the Initial Borrowing Date, the
Agent shall have received opinions, addressed to the Agent, and each of the
Lenders and dated the Initial Borrowing Date, from (i) Debevoise & Plimpton,
counsel to Kelso and the Credit Parties, which opinion shall cover the matters
contained in Exhibit 5.05(A) hereto, (ii) from McGuire Woods Battle & Boothe,
counsel to the Borrower, which opinion shall cover the matters contained in
Exhibit 5.05 (B) hereto, (iii) from Winston & Strawn, counsel to the Agent,
which opinion shall cover the matters contained in Exhibit 5.05(C) hereto and
(iv) from such local counsel satisfactory to the Agent as the Agent may request,
which opinions shall cover the perfection of the security interests granted
pursuant to the Security Documents and such other matters incident to the
transactions contemplated herein as the Agent may reasonably request and shall
be in form and substance satisfactory to the Agent.
5.06 Corporate Documents; Proceedings. (a) On the Initial
Borrowing Date, the Agent shall have received from each Credit Party an
incumbency certificate, dated the Initial Borrowing Date, signed by the
President or any Vice-President of each such Credit Party, and attested to by
the Secretary of any Assistant Secretary of such Credit Party, together with
copies of the certificate of incorporation, the by-laws, or other organizational
documents of each such Credit Party and the resolutions, or such other
administrative approval, of each such Credit Party referred to in such
certificate, certified by the Secretary or any Assistant Secretary of such
Credit Party, and all of the foregoing shall be satisfactory to the Agent.
(b) On the Initial Borrowing Date, all corporate and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated by this Agreement and the other Documents shall be satisfactory in
form and substance to the Agent, and the Agent shall have received all
information and copies of all certificates, documents and papers, including good
standing certificates and any other records of corporate proceedings and
governmental approvals, if any, which the Agent may have requested in connection
therewith, such documents and papers, where appropriate, to be certified by
proper corporate or governmental authorities.
5.07 Plans; Existing Indebtedness Agreements; Shareholders'
Agreements; Management Agreements; Employment Agreements. On or prior to the
Initial Borrowing Date, there shall have been delivered to the Agent true and
correct copies of:
(i) any Plans maintained or contributed to by the
Borrower or any of its Subsidiaries, and for each Plan (x) that is a
"single-employer plan" (as defined in
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Section 4001(a)(15) of ERISA) the most recently completed actuarial
valuation prepared therefor by such Plan's regular enrolled actuary and
the Schedule B, "Actuarial Information" to the Internal Revenue Service
Form 5500 (Annual Report) most recently filed with the Internal Revenue
Service and (y) that is a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA), each of the documents referred to in clause (x)
either in the possession of the Borrower or any of its Subsidiaries, or
any ERISA Affiliate or reasonably available thereto from the sponsor or
trustees of such Plan;
(ii) all agreements evidencing or relating to Existing
Indebtedness (the "Existing Indebtedness Agreements");
(iii) all agreements entered into by the Borrower or any of
its Subsidiaries governing the terms and relative rights of its capital
stock, and any agreements entered into by members or shareholders
relating to any such entity with respect to their capital stock
(collectively, the "Shareholders' Agreements");
(iv) any agreement with members of, or with respect to,
the management of the Borrower or any of its Subsidiaries (collectively,
the "Management Agreements");
(v) any material employment agreements entered into by
the Borrower or any of its Subsidiaries (collectively, the "Employment
Agreements");
(vi) all collective bargaining agreements applying or
relating to any employee of the Borrower or any of its Subsidiaries
(collectively, the "Collective Bargaining Agreements"); and
(vii) all tax sharing, tax allocation and other similar
agreements entered into by the Borrower or any Subsidiary of the Company
(collectively, the "Tax Sharing Agreements");
all of which Plans, Existing Indebtedness Agreements, Shareholders' Agreements,
Management Agreements, Employment Agreements, Collective Bargaining Agreements
and Tax Sharing Agreements shall be in form and substance satisfactory to the
Agent.
5.08 Adverse Change, etc. From January 28, 1995 to the
Initial Borrowing Date, nothing shall have occurred (and neither the Lenders nor
the Agent shall have become aware of any facts or conditions not previously
known) which the Agent or the Required Lenders shall determine (a) has, or could
reasonably be expected to have, a material adverse effect on the rights or
remedies of the Lenders or the Agent, or on the ability of the Credit Parties to
perform their respective obligations, in each case contained in the Documents,
or (b) has, or could reasonably be expected to have, a Material Adverse Effect.
5.09 Litigation. On the Initial Borrowing Date, there shall
be no actions, suits or proceedings pending or threatened (a) with respect to
this Agreement or any other Document or the
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transactions contemplated hereby or thereby (including the Merger) or (b) which
the Agent or the Required Lenders shall determine could reasonably be expected
to (i) have a Material Adverse Effect or (ii) have a material adverse effect on
the rights or remedies of the Lenders hereunder or under any other Loan Document
or on the ability of any Credit Party to perform its respective obligations to
the Lenders hereunder or under any other Loan Document.
5.10 Approvals. On the Initial Borrowing Date, all material
necessary governmental and third party approvals and/or consents in connection
with the transactions contemplated by the Loan Documents and the other Documents
and otherwise referred to herein or therein shall have been obtained and remain
in effect, and all applicable waiting periods shall have expired without any
action being taken by any competent authority which restrains or prevents the
consummation of such transactions or imposes, in the reasonable judgment of the
Required Lenders or the Agent, materially adverse conditions upon the
consummation of such transactions. Additionally, there shall not exist any
judgment, order, injunction or other restraint issued or filed or a hearing
seeking injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon the transactions contemplated by the
Documents, the making of the Loans or the issuance of Letters of Credit.
5.11 Consummation of the Merger. On or prior to the Initial
Borrowing Date, there shall have been delivered to the Lenders true and correct
copies of the Merger Documents, and all terms of the Merger Agreement and the
other Merger Documents shall be satisfactory in form and substance to the Agent.
The Merger Documents (and the transactions contemplated thereby) shall have been
duly approved by the board of directors and the stockholders of the Borrower and
Acquisition Corp., shares of the Borrower's Common Stock which are outstanding
immediately prior to the Merger and which are held by shareholders who exercise
their right to dissent from the Merger shall not exceed 5% of the aggregate
number of shares of the Borrower's Common Stock outstanding immediately prior to
the Merger, and all Merger Documents shall have been duly executed and delivered
by the parties thereto and shall be in full force and effect. Each of the
conditions precedent to the obligations of the Borrower, Holdings and
Acquisition Corp. to consummate the Merger as set forth in the Merger Documents
shall have been satisfied, or waived, all to the satisfaction of the Agent, and
concurrently with the making of the Term Loans on the Initial Borrowing Date the
Merger shall have been consummated in accordance with the Merger Documents and
all applicable laws, rules and regulations.
5.12 Common Stock Issuance. (a) On or prior to the Initial
Borrowing Date, the Borrower shall have received cash proceeds of at least
$48,000,000 (less the amounts, which are satisfactory to the Agent, invested by
the Management Investors) in connection with the sale of Common Stock of
Holdings to the Investors (the "Stock Issuances"), which cash proceeds, when
aggregated with the Term Loans and the Revolving Loans incurred by the Borrower
on the Initial Borrowing Date, shall be sufficient to consummate the Merger and
to pay all fees, costs and expenses owing in connection therewith and herewith,
and the Lenders shall have received true and correct copies of all documents
executed and delivered in connection with such issuances, each of which shall be
in full force and effect and shall be in form and substance satisfactory to the
Agent.
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(b) On or prior to the Bridge Maturity Date, together with the
cash proceeds received by the Borrower from the sale of equity referred to in
Section 5.12(a), the Borrower shall have received cash proceeds of at least
$59,300,000 (less the amounts, which are satisfactory to the Agent, invested by
the Management Investors) in connection with the sale of Common Stock of
Holdings to the Investors.
5.13 Minimum Availability. On the Initial Borrowing Date,
after giving effect to the Borrowing of the Term Loans and any Revolving Loans
and Letters of Credit, if any, on the Initial Borrowing Date, and after giving
effect to the Borrowing Base as in effect the Initial Borrowing Date, the
Borrower shall be able to incur additional Revolving Loans in an aggregate
principal amount of not less than $10,000,000, after the payment of all fees,
costs and expenses in connection with the transactions contemplated by this
Agreement and the other Documents, and with all trade payables aged in
accordance with normal terms.
5.14 Holdings Guaranty. On the Initial Borrowing Date, Holding
shall have duly authorized, executed and delivered a Guaranty in the form of
Exhibit 5.14 hereto (as amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms hereof and thereof, the "Holdings
Guaranty"), and the Holdings Guaranty shall be in full force and effect.
5.15 Security Documents. (a) On the Initial Borrowing Date,
Holdings shall have each duly authorized, executed and delivered a Pledge
Agreement in the form of Exhibit 5.15(A) hereto (as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof, the "Holdings Pledge Agreement"), and Holdings shall
have delivered to the Agent, as pledgee thereunder, all of the certificates
representing the Pledged Securities referred to therein, accompanied by undated
stock powers executed in blank, and such Pledge Agreement shall be in full force
and effect.
(b) On the Initial Borrowing Date, the Borrower shall have
each duly authorized, executed and delivered (A) a Security Agreement in the
form of Exhibit 5.15(B) hereto (as amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof, the
"Borrower Security Agreement") and (B) a Trademark Security Agreement in the
form of Exhibit 5.15(C) hereto (as amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof, the
"Trademark Security Agreement"), covering all of the Borrower's present and
future Security Agreement Collateral, together with:
(i) executed copies of Financing Statements (Form UCC-1)
in appropriate form for filing under the UCC of each jurisdiction as may be
necessary to perfect the security interests purported to be created by such
Security Agreement;
(ii) copies of searches of financing statements filed
under the UCC, lien and judgment searches and title searches, as appropriate,
with respect to the Collateral and the Mortgaged Properties which searches are
satisfactory to the Agent;
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(iii) evidence of the completion of all other recordings
and filings of, or with respect to, such Security Agreement as may be necessary
or, in the opinion of the Agent, desirable to perfect the security interests
intended to be created by such Security Agreement; and
(iv) evidence that all other actions necessary or, in the
opinion of the Agent, desirable to perfect and protect the security interests
purported to be created by such Security Agreement have been taken.
(c) On the Initial Borrowing Date (or such other date as
referenced below), the Agent shall have received:
(i) fully executed counterparts of deeds of trust,
mortgages and similar documents in each case in form and substance satisfactory
to the Agent (each as amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms thereof and hereof, a "Mortgage"
and collectively, the "Mortgages") covering the Borrower's owned Real Property
located in South Hill, Virginia and arrangements reasonably satisfactory to the
Agent shall be in place to provide that counterparts of such Mortgages shall be
recorded on the Initial Borrowing Date or within a reasonable period thereafter
in all places to the extent necessary or desirable, in the judgment of the
Agent, effectively to create a valid and enforceable first priority Lien,
subject only to Permitted Encumbrances, on each Mortgaged Property in favor of
the Agent (or such other trustee as may be required or desired under local law)
for the benefit of the Lenders;
(ii) mortgagee title insurance policies issued by title
insurers reasonably satisfactory to the Agent (the "Mortgage Policies") in
amounts reasonably satisfactory to the Agent, not to exceed the value of such
Real Properties as reasonably determined by the Agent, and assuring the Agent
that the Mortgages in respect of the South Hill, Virginia Real Properties are
valid and enforceable first priority mortgage Liens on such Real Properties,
free and clear of all defects and encumbrances except Permitted Encumbrances.
Such Mortgage Policies shall be in form and substance satisfactory to the Agent
and shall include an endorsement for future advances under this Agreement, the
Notes and the Mortgages, for mechanics liens and for any other matter that the
Agent in its discretion may request;
(iii) within 45 days after the Initial Borrowing Date, an
appraisal, in form and substance satisfactory to the Agent, for the South Hill,
Virginia Real Properties of the Borrower from an appraiser satisfactory to the
Agent; and
(iv) a survey, in form and substance satisfactory to the
Agent, to each Mortgaged Property, each certified by a licensed professional
surveyor satisfactory to the Agent and revealing no facts which would
materially interfere with the use of such properties by the Borrower and its
Subsidiaries, or an update of an existing survey provided the title company
will delete the exception for existing facts which a current survey would
disclose.
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(d) On the Initial Borrowing Date, the Agent shall have
received:
(i) fully executed counterparts of leasehold deeds of
trust, mortgages and similar documents, in each case in form and substance
satisfactory to the Agent (each as amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof, a
"Leasehold Mortgage" and collectively, the "Leasehold Mortgages") covering the
leased Real Property of the Borrower identified on Exhibit 5.15(D) hereto, and
arrangements reasonably satisfactory to the Agent shall be in place to provide
that counterparts of such Leasehold Mortgages shall be recorded on the Initial
Borrowing Date or within a reasonable period thereafter in all places to the
extent necessary or desirable, in the judgment of the Agent effectively to
create a valid and enforceable first priority Lien, subject only to Permitted
Encumbrances, with respect to such leased Real Property in favor of the Agent
(or such other trustee as may be required or desired under local law) for the
benefit of the Lenders; and
(ii) fully executed counterparts of collateral assignments
of leases in form and substance satisfactory to the Agent (each as amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof, a "Collateral Assignment of Lease" and
collectively, the "Collateral Assignments of Leases") covering the leased Real
Property of the Borrower as identified in Exhibit 5.15(D) hereto.
(e) Within 60 days after the Initial Borrowing Date, the
Borrower shall use its reasonable best efforts to obtain and deliver to the
Agent duly executed landlord consents and waivers and similar documents with
respect to all leased Real Property of the Borrower, in form and substance
reasonably satisfactory to the Agent, and shall take all actions to obtain such
documents as the Agent may reasonably request.
5.16 Solvency. On the Initial Borrowing Date, the Borrower
shall have delivered, or shall cause to be delivered to the Agent a certificate
in the form of Exhibit 5.16 hereto, addressed to the Agent and each of the
Lenders and dated the Initial Borrowing Date, from the Chief Financial Officer
of the Borrower, providing the opinion of the Chief Financial Officer of the
Borrower that, after giving effect to the Merger and the incurrence of all
financings contemplated herein, each of the Borrower, on a stand-alone basis,
and the Borrower and its Subsidiaries taken as a whole, is not insolvent and
will not be rendered insolvent by the indebtedness incurred in connection
herewith, will not be left with unreasonably small capital with which to engage
in its business and will not have incurred debts beyond its ability to pay such
debts as they mature and become due.
5.17 Insurance Policies. On the Initial Borrowing Date, the
Agent shall have received evidence of insurance complying with the requirements
of Section 7.03 for the business and properties of the Borrower and its
Subsidiaries, in form and substance satisfactory to the Agent with respect to
all casualty insurance, naming the Agent as an additional insured, loss payee
and mortgagee.
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5.18 Fees. On the Initial Borrowing Date, the Borrower shall
have paid to the Agent and NatWest all Fees and expenses agreed upon by such
parties to be paid on or prior to such date.
5.19 Environmental Reports. Within 45 days after the Initial
Borrowing Date, the Agent shall have received Phase I environmental assessment
reports prepared by an environmental consultant acceptable to the Agent with
respect to the South Hill, Virginia Real Properties of the Borrower, which
reports shall include analyses by such consultant of their liabilities with
respect to "superfund sites" and worker safety issues, the results of which
shall be in form and substance acceptable to the Agent.
5.20 Consent Letter. On the Initial Borrowing Date, the Agent
shall have received a letter from CT Corporation System indicating its consent
to its appointment by each Credit Party as such Credit Party's agent to receive
service of process as specified in Section 12.08.
5.21 Initial Borrowing Base Certificate. On or prior to the
Initial Borrowing Date, the Agent shall have received a certificate in the form
of Exhibit 5.21 hereto (a "Borrowing Base Certificate") executed by the Chief
Financial Officer of the Borrower setting forth the Borrowing Base, determined
as of such date, in such Borrowing Base Certificate.
5.22 Projections; Pro Forma Financial Statements. On or prior
to the Initial Borrowing Date (or such other date as referenced below), the
Borrower shall have delivered to each Lender:
(i) projected financial statements for the Borrower and its
Subsidiaries for the period from the Initial Borrowing Date to and
including the seventh anniversary of the Initial Borrowing Date (the
"Projections"), which Projections (A) shall reflect the forecasted
financial condition and income and expenses of the Borrower and its
Subsidiaries after giving effect to the Merger and the related financing
thereof and the other transactions contemplated hereby and thereby, (B)
shall reflect the forecasted financial condition and income and expenses of
the Borrower and its Subsidiaries both with and without giving effect to
the consummation of the Contemplated Acquisition, (C) with respect to the
initial twelve months only, shall be prepared on a month-by-month basis
(provided that such monthly projections without giving effect to the
Contemplated Acquisition shall be delivered within 10 days after the
Initial Borrowing Date and such monthly projections after giving effect to
the Contemplated Acquisition shall be delivered within 45 days after the
Initial Borrowing Date but only if such acquisition is still being
contemplated by the Borrower at such time and negotiations with respect
thereto have not been terminated), (D) shall be certified by the Chief
Financial Officer of the Borrower and (E) shall be satisfactory in form and
substance to the Lenders; and
(ii) pro forma financial statements (including a balance sheet
and income statement) for the Borrower and its Subsidiaries for the one
year period ended on the last day of the fiscal quarter of the Borrower
last ended prior to the Initial Borrowing Date, assuming
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the Merger was effected on the first day of such one year period, and the
Agent and the Lenders shall be satisfied with such pro forma financial
statements and the accounting practices and procedures to be utilized by
the Borrower and its Subsidiaries following the consummation of the Merger.
5.23 Existing Indebtedness. On the Initial Borrowing Date,
neither the Borrower nor the Subsidiaries of the Borrower shall have any
Indebtedness outstanding except for the Loans and the Existing Indebtedness. On
the Initial Borrowing Date, the terms and conditions of the Existing
Indebtedness referred to in the immediately preceding sentence shall be on terms
and conditions satisfactory to the Agent and the Lenders.
5.24 Repayment and Termination of Prior Indebtedness and
Related Liens. The Agent shall have received a pay-off letter from each holder
of Prior Indebtedness identified on Schedule 5.24 hereto, together with duly
executed UCC-3 termination statements, mortgage releases and such other
instruments, in form and substance satisfactory to the Agent, as shall be
necessary to terminate and satisfy all Liens created pursuant to the Prior
Indebtedness and all other Liens except Permitted Liens and Permitted
Encumbrances.
5.25 Equity Contribution Agreement. On the Initial Borrowing
Date, Kelso shall have duly authorized, executed and delivered the Equity
Contribution Agreement in the form of Exhibit 5.25 hereto (as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof and thereof, the "Equity Contribution Agreement"), together with
written assurances in form and substance satisfactory to the Agent that Kelso
will have funds available to it necessary to meet its obligations under the
Equity Contribution Agreement.
5.26 Letter Agreement. On the Initial Borrowing Date, the
Borrower and the Agent shall have duly executed and delivered a letter agreement
dated as of the date hereof in form and substance satisfactory to the Agent,
authorizing the Agent to advance Swingline Loans.
5.27 Inventory Appraisal. On the Initial Borrowing Date,
the Agent shall have received an appraisal of the Borrower's inventory in form
and substance, and from an appraiser; satisfactory to the Agent.
5.28 Examination. On or prior to the Initial Borrowing Date, the
Agent shall have conducted, at the Borrower's cost and expense, an inspection
and audit of the working capital and related books and records of the Borrower,
the results of which shall be satisfactory to the Agent.
5.29 Letter of Direction and Flow of Funds. On the Initial
Borrowing Date, the Borrower shall have delivered to the Agent an executed
letter of direction together with a flow of funds detailing all transfers of
funds in connection with the Loans made on the Initial Borrowing Date and the
consummation of the Merger, all in form and substance satisfactory to the Agent.
5.30 Contemplated Acquisition Letter. On the Initial
Borrowing Date, the Borrower shall have delivered to the Agent the Contemplated
Acquisition Letter.
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5.31 Kelso Letter Agreement. On the Initial Borrowing Date,
the Borrower shall have delivered to the Agent the Kelso Letter Agreement.
5.32 Other Documents. On the Initial Borrowing Date, the
Agent shall have received such other agreements, certificates and documents as
the Agent may request.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrower to the Agent and each of the Lenders
that all of the applicable conditions specified above exist as of that time. All
of the certificates, legal opinions and other documents and papers referred to
in this Section 5, unless otherwise specified, shall be delivered to the Agent
at its Notice Office for the account of each of the Lenders and, except for the
Notes, in sufficient counterparts for each of the Lenders and shall be
satisfactory in form and substance to the Agent.
SECTION 6. Representations, Warranties and Agreements. In order to
induce the Lenders to enter into this Agreement and to make the Loans and issue
and/or participate in Letters of Credit provided for herein, the Borrower makes
the following representations and warranties to, and agreements with, the
Lenders, all of which shall survive the execution and delivery of this Agreement
and the making of the Loans (with the making of each Credit Event thereafter
being deemed to constitute a representation and warranty that the matters
specified in this Section 6 are true and correct in all material respects on and
as of the date of each such Credit Event unless such representation and warranty
expressly indicates that it is being made as of a specific date):
6.01 Corporate Status. Each of the Borrower and its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its organization and has the
corporate power and authority to own its property and assets and to transact the
business in which it is engaged and presently proposes to engage and (ii) has
duly qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified and where the failure to
be so qualified would have a Material Adverse Effect.
6.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Documents to which it is a party. Each Credit Party has duly executed and
delivered each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Person enforceable
in accordance with its terms.
6.03 No Violation. Neither the execution, delivery and
performance by any Credit Party of the Documents to which it is a party nor
compliance with the terms and provisions thereof, nor the consummation of the
transactions contemplated therein (i) will contravene any applicable provision
of any law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will conflict or be inconsistent
with or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or (other than pursuant to the
Security Documents) result in the creation or imposition of (or the obligation
to
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create or impose) any Lien upon any of the property or assets of the Borrower or
any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed
of trust, agreement or other instrument to which the Borrower or any of its
Subsidiaries is a party or by which it or any of its property or assets are
bound or to which it may be subject or (iii) will violate any provision of the
Articles or Certificate of Incorporation or By-Laws of the Borrower or any of
its Subsidiaries.
6.04 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened, with respect to the
Borrower or any of its Subsidiaries (i) that could reasonably be expected to
have a Material Adverse Effect or (ii) that could reasonably be expected to have
a material adverse effect on the ability to consummate the Merger or the Stock
Issuances.
6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of
all Term Loans and the Bridge Loans shall be used by the Borrower (i) to
finance, in whole, the repayment of the Prior Indebtedness, (ii) to pay fees,
costs and expenses in connection with this Agreement, (iii) to fund, in part,
the cash payments owing to the holders of the Borrower's Common Stock as a
result of the effectiveness of the Merger and in accordance with the terms and
conditions of the Merger Agreement, and (iv) to pay fees, costs and expenses
relating to the Merger.
(b) The proceeds of all Revolving Loans may be used (i) on the
Initial Borrowing Date for the purposes described in Section 6.05(a), (ii) to
fund any additional payments required by Section 2.2 of the Merger Agreement as
in effect on the date hereof and (iii) for the ongoing working capital and
general corporate purposes of the Borrower and its Subsidiaries; provided,
however, that in no event shall proceeds of any Revolving Loans be used to repay
any principal amount of the Bridge Loans.
(c) The proceeds of all Swingline Loans shall be used for the
ongoing working capital and general corporate purposes of the Borrower and its
Subsidiaries; provided, however, that in not event shall proceeds of any
Swingline Loans be used to repay any principal amount of the Bridge Loans.
(d) Letters of Credit shall be used for general corporate
purposes and the ordinary course of business needs of the Borrower and its
Subsidiaries.
(e) Neither the making of any Loan hereunder, nor the use of
the proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
and no part of the proceeds of any Loan will be used to purchase or carry any
Margin Stock in violation of Regulation U or to extend credit for the purpose of
purchasing or carrying any Margin Stock.
6.06 Governmental Approvals. Except for filings and recordings
in connection with the Security Documents and those items listed on Schedule
6.06 hereto, no order, consent, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, any foreign or
domestic governmental or public body or authority, or any subdivision
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thereof, is required to authorize or is required in connection with (i) the
execution, delivery and performance of any Document or (ii) the legality,
validity, binding effect or enforceability of any such Document.
6.07 Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
6.08 Public Utility Holding Company Act. Neither the Borrower
nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
6.08 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Borrower or any of its Subsidiaries in writing to the Agent or any Lender
(including, without limitation, all information contained in the Documents) for
purposes of or in connection with this Agreement or the other Loan Documents or
any transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of any such
Person in writing to the Agent or any Lender will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided. The projections and pro
forma financial information contained in such materials are based on good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results. There is no fact known to the Borrower which would have a Material
Adverse Effect, which has not been disclosed herein or in any Schedule hereto.
6.10 Financial Condition; Financial Statements. On and as of
the Initial Borrowing Date, on a pro forma basis after giving effect to the
Merger, the Stock Issuances and to all Indebtedness incurred, and to be
incurred, and Liens created, and to be created, by each Credit Party in
connection therewith, (i) the sum of the assets, at a fair valuation, of the
Borrower and its Subsidiaries taken as a whole will exceed its debts, (ii) the
Borrower and its Subsidiaries taken as a whole has not incurred, and does not
intend to incur, and does not believe that they will incur, debts beyond their
ability to pay such debts as such debts mature and (iii) the Borrower and its
Subsidiaries taken as a whole will not have unreasonably small capital with
which to conduct its business. For purposes of this Section 6.10, "debt" means
any liability on a claim, and "claim" means (A) right to payment, whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured; or (B) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
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(b) (i) The consolidated balance sheet of the Borrower at
January 28, 1995 and January 29, 1994 and the related consolidated statements of
operations and cash flows of the Borrower for the fiscal year ended as of said
dates, have been examined by Ernst & Young, independent certified public
accountants, who delivered an unqualified opinion in respect therewith, and (ii)
the pro forma consolidated balance sheet of the Borrower as of January 30, 1995,
copies of which have heretofore been furnished to each Lender, present fairly
the financial position of such entities at the dates of said statements and the
results for the period covered thereby (or, in the case of the pro forma balance
sheet, presents a good faith estimate of the consolidated pro forma financial
condition of the Borrower (after giving effect to the Merger and the related
financing thereof) at the date thereat) in accordance with GAAP, except to the
extent provided in the notes to said financial statements. All such financial
statements (other than the aforesaid pro forma balance sheet) have been prepared
in accordance with generally accepted accounting principles and practices
consistently applied except to the extent provided in the notes to said
financial statements. Except for the incurrence of indebtedness to finance the
Merger and the other transactions contemplated by the Documents, nothing has
occurred since January 28, 1995 that has had or could reasonably be expected to
have a Material Adverse Effect.
(c) Except as reflected in the financial statements and the
notes thereto described in Section 6.10(b), there were, as of the Initial
Borrowing Date, no liabilities or obligations with respect to the Borrower or
any of its Subsidiaries of a nature (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in aggregate,
would be material to the Borrower and its Subsidiaries taken as a whole, except
as incurred in the ordinary course of business consistent with past practices
subsequent to January 28, 1995.
6.11 Security Interests. On and after the Initial Borrowing
Date, each of the Security Documents creates, as security for the Obligations
purported to be secured thereby, a valid and enforceable perfected security
interest in and Lien on all of the Collateral subject thereto, superior to and
prior to the rights of all third Persons and subject to no other Liens (except
(i) that the Security Agreement Collateral may be subject to the security
interests evidenced by Permitted Liens relating thereto and (ii) the Mortgaged
Properties may be subject to Permitted Encumbrances and Permitted Liens relating
thereto), in favor of the Agent for the benefit of the Lenders. No filings or
recordings are required in order to perfect the security interests created under
any Security Document except for filings or recordings required in connection
with any such Security Document (other than the Pledge Agreements) which shall
have been made upon or prior to (or are the subject of arrangements,
satisfactory to the Agent, for filing and/or recording on or promptly after the
date of) the execution and delivery thereof.
6.12 Representations and Warranties in Documents. All
representations and warranties set forth in the Documents were true and correct
in all material respects as of the time such representations and warranties were
made and shall be true and correct in all material respects as of the Initial
Borrowing Date as if such representations and warranties were made on and as of
such date, unless stated to relate to a specific earlier date, in which case
such representations and warranties shall be true and correct in all material
respects as of such earlier date.
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6.13 Consummation of Merger and Stock Issuances. As of the
Initial Borrowing Date, the Merger and the Stock Issuances shall be or, shall
have been, consummated substantially simultaneously with the making of the Term
Loans and the initial Revolving Loan, in accordance with the terms and
conditions of the Documents and all applicable laws. All applicable waiting
periods with respect thereto have or, prior to the time when required, will
have, expired without, in all such cases, any action being taken by any
competent authority which restrains, prevents, or imposes material adverse
conditions upon the consummation of the Merger or the Stock Issuances. As of the
Initial Borrowing Date, there does not exist any judgment, order, or injunction
prohibiting the consummation of the Merger or the Stock Issuances, or the making
of Loans or the performance by any Credit Party of their respective obligations
under the Documents.
6.14 Tax Returns and Payments. Each of the Borrower and each
of its Subsidiaries has timely filed all federal income tax returns and all
other material tax returns, domestic and foreign, required to be filed by it and
has paid all material taxes and assessments payable by it which have become due,
other than those not yet delinquent and except for those contested in good
faith. The Borrower and each of its Subsidiaries have paid, or have provided
adequate reserves (in the good faith judgment of the management of the Borrower)
for the payment of, all federal, state and foreign income taxes applicable for
all prior fiscal years and for the current fiscal year to the date hereof.
6.15 Compliance with ERISA. Each Plan is in substantial
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an
Unfunded Current Liability; no Plan has an accumulated or waived funding
deficiency, has permitted decreases in its funding standard account or has
applied for an extension of any amortization period within the meaning of
Section 412 of the Code; neither the Borrower, nor any Subsidiary nor any ERISA
Affiliate has incurred any material liability to or on account of a Plan
pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204
or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code; no
proceedings have been instituted by the PBGC to terminate or appoint a trustee
to administer any Plan; no condition exists which presents a material risk to
the Borrower or any Subsidiary or any ERISA Affiliate of incurring a liability
to or on account of a Plan pursuant to the foregoing provisions of ERISA and the
Code; using actuarial assumptions and computation methods consistent with Part 1
of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower
and its Subsidiaries and its ERISA Affiliates to all Plans which are
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of
a complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Plan ended prior to the date of the most recent Credit Event, would
not exceed $250,000; no lien imposed under the Code or ERISA on the assets of
the Borrower or any Subsidiary or any ERISA Affiliate exists or is likely to
arise on account of any Plan; and the Borrower and its Subsidiaries do not
maintain or contribute to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) which provides benefits to retired employees (other than
as required by Section 601 of ERISA) or any employee pension benefit plan (as
defined in Section 3(2) of ERISA), except to the extent that all events
described in the preceding clauses of this Section 6.15 and then in existence
would not, in the aggregate, have or be likely to have a Material Adverse
Effect. With respect to Plans that are
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multiemployer plans (within the meaning of Section 4001(a)(3) of ERISA) the
representations and warranties in this Section 6.16 are made to the best
knowledge of the Borrower.
6.16 Subsidiaries. (a) Schedule 6.16 hereto lists each
Subsidiary of the Borrower (and the direct and indirect ownership interest of
the Borrower therein), in each case existing on the Effective Date. The Borrower
will at all times own directly the percentages specified in said Schedule 6.16
of the outstanding capital stock of all of said entities except to the extent
otherwise permitted pursuant to Section 8.02.
(b) There are no restrictions on the Borrower or any of its
Subsidiaries which prohibit or otherwise restrict the transfer of cash or other
assets from any Subsidiary of the Borrower to the Borrower, other than
prohibitions or restrictions existing under or by reason of (i) this Agreement
and the other Loan Documents, (ii) applicable law, (iii) customary
non-assignment provisions entered into in the ordinary course of business and
consistent with past practices, (iv) any restriction or encumbrance with respect
to a Subsidiary of the Borrower imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
capital stock or assets of such Subsidiary, so long as such sale or disposition
is permitted under this Agreement, and (v) any documents or instruments
governing the terms of any Indebtedness or other obligations secured by Liens
permitted by Section 8.03, provided that such prohibitions or restrictions apply
only to the assets subject to such Liens.
6.17 Patents, etc. The Borrower and each of its Subsidiaries
have obtained all material patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their businesses taken as a whole as
presently conducted and as proposed to be conducted.
6.18 Pollution and Other Regulations. (a) Each of the Borrower
and its Subsidiaries is in compliance with all applicable Environmental Laws
governing its business for which failure to comply could reasonably be expected
to have a Material Adverse Effect, and neither the Borrower nor any of its
Subsidiaries is liable for any material penalties, fines or forfeitures for
failure to comply with any of the foregoing in the manner set forth above. All
licenses, permits, registrations or approvals required for the business of the
Borrower and each of its Subsidiaries, as conducted as of the Initial Borrowing
Date, under any Environmental Law have been secured and the Borrower and each of
its Subsidiaries is in substantial compliance therewith, except such licenses,
permits, registrations or approvals the failure to secure or to comply therewith
could not reasonably be expected to have a Material Adverse Effect. Neither the
Borrower nor any of its Subsidiaries is in any respect in noncompliance with,
breach of or default under any applicable writ, order, judgment, injunction, or
decree to which the Borrower or such Subsidiary is a party or which would affect
the ability of the Borrower or such Subsidiary to operate any real property and
no event has occurred and is continuing which, with the passage of time or the
giving of notice or both, would constitute noncompliance, breach of or default
thereunder, except in each such case, such noncompliance, breaches or defaults
as could not reasonably be expected to have a Material Adverse Effect. There are
as of the Initial Borrowing Date no Environmental Claims pending or, to the best
knowledge of the Borrower, threatened, which (i) question the validity, term or
entitlement of the Borrower or any
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of its Subsidiaries for any permit, license, order or registration required for
the operation of any facility which the Borrower or any of its Subsidiaries
currently operates and (ii) wherein an unfavorable decision, ruling or finding
could reasonably be expected to have a Material Adverse Effect. There are no
facts, circumstances, conditions or occurrences on any owned Real Property or,
to the knowledge of the Borrower, on any property adjacent to any such owned
Real Property that could reasonably be expected (i) to form the basis of an
Environmental Claim against the Borrower, any of its Subsidiaries or any Real
Property of the Borrower or any of its Subsidiaries, or (ii) to cause such Real
Property to be subject to any restrictions on the ownership, occupancy, use or
transferability of such Real Property under any Environmental Law, except in
each such case, such Environmental Claims or restrictions that could not
reasonably be expected to have a Material Adverse Effect.
(b) Hazardous Materials have not, to the knowledge of the
Borrower, at any time been (i) generated, used, treated or stored on, or
transported to or from, any Real Property of the Borrower or any of its
Subsidiaries or (ii) released on any Real Property, in each case where such
occurrence or event could reasonably be expected to have a Material Adverse
Effect.
6.19 Properties. The Borrower and each of its Subsidiaries
have good and, with respect to Real Properties, marketable title to all
properties owned by them, including all property reflected in the consolidated
balance sheet of the Borrower and its Subsidiaries as referred to in Section
6.10(b), free and clear of all Liens, other than as permitted by Section 8.03.
Schedule 6.19 hereto contains a true and complete list of each Real Property
owned or leased by the Borrower or any of its Subsidiaries on the Effective Date
and the type of interest therein held by the Borrower or the respective
Subsidiary.
6.20 Labor Relations. No Credit Party is engaged in any unfair
labor practice that could reasonably be expected to have a Material Adverse
Effect. There is (i) no unfair labor practice complaint pending against any
Credit Party or, to the knowledge of the Borrower, threatened against any of
them, before the National Labor Relations Board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against any Credit Party or threatened against any of them, (ii) no
strike, labor dispute, slowdown or stoppage pending against any Credit Party or,
to the knowledge of the Borrower, threatened against any Credit Party and (iii)
no union representation question existing with respect to the employees of any
Credit Party and no union organizing activities are taking place, except with
respect to any matter specified in clause (i), (ii) or (iii) above such as could
not reasonably be expected to have a Material Adverse Effect.
6.21 Existing Indebtedness. Schedule 6.21 hereto sets forth a
true and complete list of all Indebtedness of the Borrower and each of its
Subsidiaries as of the Initial Borrowing Date and which is to remain outstanding
after giving effect to the Merger (excluding the Loans and the Letters of
Credit, the "Existing Indebtedness"), in each case showing the aggregate
principal amount thereof and the name of the respective borrower (or issuer) and
any other entity which directly or indirectly guaranteed such debt.
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6.22 Capitalization. On the Initial Borrowing Date, the
authorized capital stock of each Credit Party and the number of shares of
capital stock issued and outstanding as of the Initial Borrowing Date of each
Credit Party are set forth on Schedule 6.22 hereto. All such outstanding shares
have been duly and validly issued, are fully paid and non-assessable and have
been issued free of preemptive rights. Except as set forth on Schedule 6.22, no
Credit Party has outstanding any securities convertible into or exchangeable for
its capital stock or outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock, or any stock appreciation or similar
rights.
6.23 Compliance with Statutes, etc. Each of the Borrower and
its Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls and labor laws),
except such noncompliance as could not reasonably be expected to have a Material
Adverse Effect.
6.24 Inventory and Accounts.
(a) Except as specifically disclosed on Schedule 6.24 hereto
or as otherwise disclosed to and acknowledged by the Agent in writing, with
respect to all Eligible Inventory:
(i) such Inventory is located on the premises listed on
the schedules attached to the Security Agreements or is Inventory in transit
for sale in the ordinary course of business;
(ii) no such Inventory is subject to any Lien or security
interest whatsoever, except for the Liens and security interests of the Agent
and those Liens and security interests permitted by Section 8.03; and
(iii) except as specified in the Security Agreements or
otherwise permitted by this Agreement, no such Inventory is on consignment or
is now stored or shall at any time hereafter be stored with a bailee,
warehouseman, or similar party.
(b) With respect to all Eligible Accounts:
(i) no transaction giving rise to such an Account violated
or will violate any applicable federal, state or local law, rules or
ordinances, the violation of which could reasonably be expected to have a
Material Adverse Effect;
(ii) except where required by statute, none of such
Accounts is subject to terms prohibiting assignment or requires notice of or
consent to such assignment;
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(iii) the Borrower or a Subsidiary is the lawful owner of
such Accounts, free and clear of all Liens, except those in favor of the Agent
and except those permitted by Section 8.03; and
(iv) each of such Accounts represents a fully completed
bona fide transaction which requires no further act on the Borrower's or any
Subsidiary's part to make such Accounts payable by the Account Debtors, and
such Accounts are not subject to any offsets or counterclaims and do not
represent consignment sales, guaranteed sales, sale or return or other similar
understandings or an obligation of any Affiliate of Borrower.
SECTION 7. Affirmative Covenants. The Borrower covenants and agrees
that on the Initial Borrowing Date and thereafter for so long as this Agreement
is in effect and until the Commitments have terminated, no Letters of Credit or
Notes are outstanding and the Loans and Unpaid Drawings, together with interest,
Fees and all other Obligations incurred hereunder, are paid in full:
7.01 Information Covenants. The Borrower will furnish to
each Lender:
(a) Annual Financial Statements. Within 90 days after the
close of each fiscal year of the Borrower, the consolidated and consolidating
balance sheet of the Borrower and its Subsidiaries, as at the end of such
fiscal year and the related consolidated and consolidating statements of income
and retained earnings and of cash flows for such fiscal year, in each case
setting forth comparative consolidated figures for the preceding fiscal year,
and examined by independent certified public accountants of recognized national
standing whose opinion shall not be qualified as to the scope of audit and as
to the status of the Borrower or any of its Subsidiaries as a going concern,
together with a certificate of such accounting firm stating that in the course
of its regular audit of the business of the Borrower, which audit was conducted
in accordance with generally accepted auditing standards, such accounting firm
has obtained no knowledge of any Default or Event of Default which has occurred
and is continuing or, if in the opinion of such accounting firm such a Default
or Event of Default has occurred and is continuing, a statement as to the
nature thereof.
(b) Quarterly Financial Statements. As soon as available and
in any event within 45 days after the close of each of the first three
quarterly accounting periods in each fiscal year, the consolidated balance
sheet of the Borrower and its Subsidiaries, as at the end of such quarterly
period and the related consolidated statements of income and retained earnings
and of cash flows for such quarterly period and for the elapsed portion of the
fiscal year ended with the last day of such quarterly period, and in each case
setting forth comparative consolidated figures for the related periods in the
prior fiscal year, all of which shall be certified by the chief financial
officer or controller of the Borrower, subject to changes resulting from audit
and normal year-end audit adjustments.
(c) Monthly Reports. As soon as practicable, and in any event
within 30 days, after the end of each monthly accounting period of each fiscal
year (other than the last
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monthly accounting period in such fiscal year) the consolidated balance sheet
of the Borrower and its Subsidiaries, as at the end of such period, and the
related consolidated statements of income and retained earnings for such
period, setting forth comparative figures for the corresponding period of the
previous year, all of which shall be certified by the chief financial officer
or controller of the Borrower subject to changes resulting from audit and
normal year-end audit adjustments.
(d) Budget; etc. Not more than 30 days after the commencement
of each fiscal year of the Borrower, a budget of the Borrower and its
Subsidiaries in reasonable detail for each of the twelve months of such fiscal
year. Together with each delivery of consolidated financial statements pursuant
to Sections 7.01(c), a comparison of the current year to date financial results
against the budgets required to be submitted pursuant to this clause (d) shall
be presented.
(e) Compliance Certificate. At the time of the delivery of the
financial statements provided for in Sections 7.01(a) and (b), a certificate of
the chief financial officer, controller or other Authorized Officer of the
Borrower in the form of Exhibit 7.01(e) hereto (each such certificate, a
"Compliance Certificate").
(f) Notice of Default or Litigation. Promptly, and in any
event within three Business Days after the Borrower obtains knowledge thereof,
notice of (i) the occurrence of any event which constitutes a Default or Event
of Default which notice shall specify the nature thereof, the period of
existence thereof and what action the Borrower proposes to take with respect
thereto and (ii) the commencement of or any significant development in any
litigation or governmental proceeding pending against the Borrower or any of
its Subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
(g) Borrowing Base Certificates. Promptly after determining
same, and in any event within ten days following the last day of each calendar
month, a Borrowing Base Certificate executed by the chief financial officer or
controller of the Borrower setting forth the Borrowing Base determined as of
the last day of such month (together with reasonable detail as to the
computation thereof); provided, however, that at any time the Total Unutilized
Revolving Commitment is less than $10,000,000, the Borrower shall deliver a
Borrower Base Certificate as provided above on a weekly basis by the Thursday
following each week.
(h) Auditors' Reports. Promptly upon receipt thereof, a copy
of each other final report or "management letter" submitted to the Borrower by
its independent accountants in connection with any annual, interim or special
audit made by it of the books of the Borrower.
(i) Monthly Reports and Agings. Promptly, and in any event
within ten days after the end of each fiscal month, a schedule of inventory in
the form of Exhibit 7.01(i) hereto (a "Schedule of Inventory") as of the month
then ended, a completed aged schedule of Accounts and a trial balance, in form
and substance satisfactory to the Agent.
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(j) Other Information. Promptly upon transmission thereof, (i)
copies of any filings and registrations with, and reports to, the Securities
and Exchange Commission or any successor thereto (the "SEC") by the Borrower or
any of its Subsidiaries and (ii) with reasonable promptness, such other
information or documents (financial or otherwise) as the Agent on its own
behalf or on behalf of the Required Lenders may reasonably request from time to
time.
7.02 Books, Records and Inspections. The Borrower will, and
will cause its Subsidiaries to, permit, upon reasonable notice to the chief
financial officer, controller or any other Authorized Officer of the Borrower
(i) officers and designated representatives of the Agent or the Required Lenders
to visit and inspect any of the properties or assets of the Borrower and any of
its Subsidiaries in whomsoever's possession, and to examine the books of account
of the Borrower and any of its Subsidiaries and discuss the affairs, finances
and accounts of the Borrower and of any of its Subsidiaries with, and be advised
as to the same by, its and their officers and independent accountants, all at
such reasonable times and intervals and to such reasonable extent as the Agent
or the Required Lenders may desire and (ii) not more than four times per year
the Agent, or a third party designated by the Agent, to conduct, at the
Borrower's expense, an audit of the accounts receivable and inventories of the
Borrower and its Subsidiaries at such times as the Agent shall reasonably
require.
7.03 Maintenance of Property; Insurance. The Borrower will,
and will cause each of its Subsidiaries to, at all times maintain in full force
and effect with responsible insurance companies insurance in such amounts,
covering such risks and liabilities and with such deductibles or self-insured
retentions as are in accordance with normal industry practice and as is
customarily maintained by companies in similar businesses. The Borrower will,
and will cause each of its Subsidiaries to, furnish on the Initial Borrowing
Date and annually thereafter to the Agent a summary of the insurance carried
together with certificates of insurance and other evidence of such insurance, if
any, naming the Agent as an additional insured, loss payee and mortgage.
7.04 Payment of Taxes. The Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien or charge upon any properties of the Borrower or any of its
Subsidiaries; provided, however, that neither the Borrower nor any Subsidiary
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith and by proper proceedings if it has maintained
adequate reserves (in the good faith judgment of the management of the Borrower)
with respect thereto in accordance with GAAP.
7.05 Consolidated Corporate Franchises. The Borrower will do,
and will cause each Subsidiary to do, or cause to be done, all things necessary
to preserve and keep in full force and effect its existence, material rights and
authority; provided, however, that any transaction permitted by Section 8.02
will not constitute a breach of this Section 7.05.
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7.06 Compliance with Statutes, etc. The Borrower will, and
will cause each Subsidiary to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property other than those the non-compliance with which could
not reasonably be expected to have a Material Adverse Effect.
7.07 ERISA. As soon as possible and, in any event, within 10
days after the Borrower or any of its Subsidiaries knows or has reason to know
of the occurrence of any of the following, the Borrower will deliver to each of
the Lenders a certificate of the chief financial officer of the Borrower setting
forth details as to such occurrence and such action, if any, which the Borrower,
such Subsidiary or such ERISA Affiliate is required or proposes to take,
together with any notices required or proposed to be given to or filed with or
by the Borrower, the Subsidiary on the ERISA Affiliate or any notices required
or proposed to be given by the Borrower, the Subsidiary or the ERISA Affiliate
to the PBGC, a Plan participant or the Plan administrator with respect thereto:
that a Reportable Event has occurred; that an accumulated funding deficiency has
been incurred or an application is reasonably likely to be or has been made to
the Secretary of the Treasury for a waiver or modification of the minimum
funding standard (including any required installment payments) or an extension
of any amortization period under Section 412 of the Code with respect to a Plan;
that a Plan which has an Unfunded Current Liability has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability and there is a failure to
make a required contribution, which gives rise to a lien under ERISA or the
Code; that proceedings are reasonably likely to be or have been instituted by
the PBGC to terminate a Plan which has an Unfunded Current Liability; that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan; that the Borrower, any Subsidiary or any
ERISA Affiliate will or is expected to incur any material liability (including,
any contingent or secondary liability) to or on account of the termination of or
withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or with respect to a Plan under Section 401 (a)(29), 4971, 4975 or 4980
of the Code or Section 409, 502(l) or 502(l) of ERISA or that the Borrower or
any Subsidiary may incur any material liability pursuant to any employee welfare
benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to
retired employees or other former employees (other than as required by Section
601 of ERISA) or any employee pension benefit plan (as defined in Section 3(2)
of ERISA). Upon request of a Lender, the Borrower will deliver to such Lender a
complete copy of the annual report (Form 5500) of each Plan required to be filed
with the Internal Revenue Service. In addition to any certificates or notices
delivered to the Lenders pursuant to the first sentence hereof, copies of any
annual reports and any other material notices received by the Borrower or any
Subsidiary with respect to a Plan shall be delivered to the Lenders no later
than 10 days after the later of the date such notice has been filed with the
Internal Revenue Service or the PBGC, given to Plan participants (other than
notices relating to an individual participant's benefits) or received by the
Borrower or such Subsidiary.
7.08 Good Repair. The Borrower will, and will cause each of
its Subsidiaries to, ensure that its properties and equipment used or useful in
its business in whomsoever's possession they may be, are kept in good repair,
working order and condition, normal wear and tear excepted,
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and, subject to Section 8.05, that from time to time there are made in such
properties and equipment all needful and proper repairs, renewals, replacements,
extensions, additions, betterments and improvements thereto, to the extent and
in the manner useful or customary for companies in similar businesses.
7.09 End of Fiscal Years; Fiscal Quarters. The Borrower will,
for financial reporting purposes, cause each of its, and each of its
Subsidiaries' fiscal years and fiscal quarters to end on the dates set forth on
Schedule 7.09 hereto.
7.10 Use of Proceeds. All proceeds of the Loans shall be
used as provided in Section 6.05.
7.11 Additional Security; Further Assurances. (a) The Borrower
will, and will cause its Subsidiaries to, at the expense of the Borrower, grant
to the Agent security interests and mortgages (each an "Additional Mortgage") in
such owned Real Property of the Borrower and its Subsidiaries acquired after the
Effective Date as may be requested in writing from time to time by the Agent.
Such Additional Mortgages shall be granted pursuant to documentation reasonably
satisfactory in form and substance to the Agent and shall constitute valid and
enforceable Liens superior to and prior to the rights of all third Persons and
subject to no other Liens except as are permitted by Section 8.03. The
Additional Mortgages or instruments related thereto shall have been duly
recorded or filed in such manner and in such places as are required by law to
establish, perfect, preserve and protect the Liens in favor of the Agent
required to be granted pursuant to the Additional Mortgages and all taxes, fees
and other charges payable in connection therewith shall have been paid in full.
(b) If at any time after the date hereof, any Person becomes a
Subsidiary of the Borrower, the Borrower will promptly notify the Agent in
writing and will, at the expense of the Borrower and at the written request of
the Agent, cause (i) such Subsidiary to guaranty the Obligations and grant to
the Agent for the benefit of the Lenders a security interest in and lien on the
property and assets of such Subsidiary to secure its obligations under such
guaranty, and (ii) the capital stock of such Subsidiary to be pledged to the
Agent for the benefit of the Lenders. All such security interests, pledges and
guaranties shall be granted or made pursuant to documentation reasonably
satisfactory in form and substance to the Agent and shall constitute valid and
enforceable Liens superior to and prior to the rights of all third Persons and
subject to no other Liens except as are permitted by Section 8.03. All documents
or instruments related thereto shall have been duly recorded or filed in such
manner and in such places as are required by law to establish, perfect, preserve
and protect the Lien's in favor of the Agent required to be granted pursuant to
this clause (b) and all taxes, fees and other charges payable in connection
therewith shall have been paid in full.
(c) The Borrower will, and will cause its Subsidiaries to, at
the expense of the Borrower, make, execute, endorse, acknowledge, file and/or
deliver to the Agent from time to time such vouchers, invoices, schedules,
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, real property surveys, reports
and other assurances or instruments and take such further steps relating to the
collateral covered by any of the
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Security Documents as the Agent may reasonably require. Furthermore, the
Borrower shall cause to be delivered to the Agent such opinions of counsel,
title insurance and other related documents as may be requested by the Agent to
assure themselves that this Section 7.11 has been complied with.
(d) In the event that the Agent at any time after the date
hereof determines in its good faith discretion that real estate appraisals
satisfying the requirements set forth in 12 C.F.R., Part 34-Subpart C, or any
successor or similar statute, rule, regulation, guideline or order (any such
appraisal a "Required Appraisal") are or were required to be obtained, or should
be obtained, in connection with any or all of the Mortgaged Properties, then,
such Required Appraisal shall be delivered, at the expense of the Borrower, to
the Agent, which Required Appraisal, and the respective appraiser, shall be
satisfactory to the Agent.
(e) The Borrower agrees that each action required above by
this Section 7.11 shall be completed as soon as possible, but in no event later
than 60 days after such action is requested to be taken by the Agent or the
Required Lenders; provided, however, that in no event shall the Borrower be
required to take any action, other than using its reasonable commercial efforts
without any material expenditure, to obtain consents from third parties with
respect to its compliance with this Section 7.11.
7.12 Interest Rate Agreement. The Borrower will, no later than
the date occurring 120 days after the Initial Borrowing Date, enter into an
Interest Rate Agreement with a term of at least two years in respect of amounts
equal to or greater than $40,000,000, on terms satisfactory to the Agent.
SECTION 8. Negative Covenants. The Borrower hereby covenants
and agrees that as of the Initial Borrowing Date and thereafter for so long as
this Agreement is in effect and until the Commitments have terminated, no
Letters of Credit or Notes are outstanding and the Loans and Unpaid Drawings,
together with interest, Fees and all other Obligations incurred hereunder, are
paid in full:
8.01 Changes in Business. The Borrower will not, and will not
permit any of its Subsidiaries to, materially alter the character of the
business of the Borrower and its Subsidiaries from that conducted at the Initial
Borrowing Date provided that this Section 8.01 shall not restrict the making of
any investment expressly permitted by Section 8.06.
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc.
The Borrower will not, and will not permit any Subsidiary to, wind up, liquidate
or dissolve its affairs, or enter into any transaction of merger or
consolidation, sell or otherwise dispose of all or any part of its property or
assets (other than inventory or obsolete equipment or excess equipment no longer
needed in the conduct of the business in the ordinary course of business) or
purchase, lease or otherwise acquire all or any part of the property or assets
of any Person (other than purchases or other acquisitions of inventory, leases,
materials and equipment in the ordinary course of business) or agree to do any
of the foregoing at any future time, except that the following shall be
permitted:
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(a) any Subsidiary of the Borrower may be merged or
consolidated with or into, or be liquidated into, the Borrower or a Subsidiary
Guarantor (so long as the Borrower or such Subsidiary Guarantor is the
surviving corporation), or all or any part of its business, properties and
assets may be conveyed, leased, sold or transferred to the Borrower or any
Subsidiary Guarantor; provided, however, that neither the Borrower nor any
Subsidiary Guarantor may be a party to any merger, consolidation or liquidation
otherwise permitted by this clause (a) involving a Subsidiary that is not a
Wholly-Owned Subsidiary of the Borrower;
(b) capital expenditures permitted to be incurred by Section
8.05;
(c) investments and acquisitions of properties permitted
pursuant to Section 8.06;
(d) each of the Borrower and the Subsidiary Guarantors may
lease (as lessee) real or personal property in the ordinary course of business
(so long as such lease does not create a Capitalized Lease Obligation not
otherwise permitted by Section 8.04(c));
(e) other sales or dispositions of assets; provided, however,
that (i) the aggregate Net Cash Proceeds received from all such sales and
dispositions shall not exceed $500,000 in any fiscal year of the Borrower, (ii)
each such sale shall be in an amount at least equal to the fair market value
thereof and for proceeds consisting solely of not less than (A) 80% cash and
(B) seller indebtedness evidenced by promissory notes which notes shall be
pledged and delivered to the Agent pursuant to a pledge agreement in form and
substance satisfactory to the Agent, and (iii) the Net Cash Proceeds of any
such sale are applied to repay the Loans to the extent required by Section
4.02(A)(c); and, provided further, that the sale or disposition of the capital
stock of (A) the Borrower or Subsidiary Guarantor shall be prohibited and (B)
any Subsidiary of the Borrower (other than the Subsidiary Guarantor) shall be
prohibited unless it is for all of the outstanding capital stock of such
Subsidiary owned by the Borrower;
(f) other sales or dispositions of assets in each case to the
extent the Required Lenders have consented in writing thereto and subject to
such conditions as may be set forth in such consent; and
(g) any Subsidiary may be liquidated into the Borrower or a
Subsidiary Guarantor.
8.03 Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets of any kind (real or personal, tangible
or intangible) of the Borrower or any such Subsidiary whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries) or assign any
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right to receive income, or file or permit the filing of any financing statement
under the UCC or any other similar notice of Lien under any similar recording or
notice statute, except:
(a) Liens for taxes not yet due or otherwise not yet
delinquent or Liens for taxes being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment of the
management of the Borrower) have been established;
(b) Liens in respect of property or assets of the Borrower or
any of its Subsidiaries imposed by law which were incurred in the ordinary
course of business, such as carriers', warehousemen's and mechanics' Liens,
statutory landlord's Liens, and other similar Liens arising in the ordinary
course of business, and (i) which do not in the aggregate materially detract
from the value of such property or assets or materially impair the use thereof
in the operation of the business of the Borrower or any Subsidiary or (ii)
which are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the
property or asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement or the
other Loan Documents;
(d) Liens on assets of the Borrower and each Subsidiary
existing on the Initial Borrowing Date and listed on Schedule 8.03 hereto,
without giving effect to any subsequent extensions or renewals thereof;
(e) Leases or subleases granted to others not interfering in
any material respect with the business of the Borrower or any of its
Subsidiaries;
(f) Easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the business
of the Borrower or any of its Subsidiaries;
(g) Liens arising from UCC financing statements regarding
leases permitted by this Agreement;
(h) Any interest or title of a lessor under any lease
permitted by this Agreement;
(i) Liens arising pursuant to purchase money Liens relating
to, or security interests securing Indebtedness representing the purchase price
of, assets acquired by the Borrower or any Subsidiary Guarantor after the
Initial Borrowing Date, provided that any such Liens attach only to the assets
so acquired and that all Indebtedness secured by Liens created pursuant to this
clause (j) shall not exceed $500,000 at any time outstanding;
(j) Liens created pursuant to Capital Leases permitted
pursuant to Section 8.04(c);
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(k) Liens arising out of judgments or awards in circumstances
not constituting an Event of Default under Section 9.09 provided that no cash
or other property is deposited or delivered to secure any respective judgment
or award (or any appeal bond in respect thereof, except as permitted by clause
(l) below);
(l) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations incurred in the ordinary course of business
(exclusive of obligations in respect of the payment for borrowed money); and
(m) Liens securing Indebtedness not in excess of $100,000 at
any time outstanding.
8.04 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the
other Loan Documents;
(b) Indebtedness of the Borrower and any Subsidiary to each
other arising out of intercompany loans and advances;
(c) Capitalized Lease Obligations of the Borrower and each
Subsidiary Guarantor, in each case only if, after giving effect to the
incurrence thereof, the limit on Consolidated Capital Expenditures set forth in
Section 8.05 would not be breached;
(d) Indebtedness under Interest Rate Agreements to the extent
entered into after the Initial Borrowing Date in compliance with Section 7.13;
(e) Indebtedness incurred pursuant to purchase money Liens
permitted by Section 8.03(i); and
(f) additional Indebtedness of the Borrower and the Subsidiary
Guarantors not to exceed an aggregate outstanding principal amount of $500,000
at any time.
8.05 Capital Expenditures. (a) The Borrower will not, and will
not permit any of its Subsidiaries to, incur Consolidated Capital Expenditures;
provided, however, that the Borrower and the Subsidiary Guarantors may make
Consolidated Capital Expenditures for the maintenance, repair or replacement of
the Borrower's or any Subsidiary's tangible personal property (such
expenditures, "Maintenance Capital Expenditures") during each fiscal year set
forth below (taken as one accounting period, with each such period being
adjusted to correspond to the Borrower's
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actual fiscal year) so long as the aggregate amount of such Consolidated Capital
Expenditures made under this Section 8.05(a) does not exceed for any period set
forth below, the amount set forth opposite such period:
Period Amount
- ------ ------
January 29, 1995 - February 3, 1996 $3,521,000
February 4, 1996 - January 31, 1997 $4,321,000
February 1, 1997 - January 31, 1998 $5,157,000
February 1, 1998 - January 31, 1999 $4,433,000
February 1, 1999 - January 31, 2000 $4,472,000
February 1, 2000 - January 31, 2001 $3,532,000
February 1, 2001 - January 31, 2002 $5,181,000
February 1, 2002 - January 31, 2003 $7,037,000
(b) In the event that the maximum amount which is permitted to
be expended in respect of Maintenance Capital Expenditures during any fiscal
year pursuant to Section 8.05(a) (without giving effect to this clause (b)) is
not fully expended during such fiscal year, the maximum amount which may be
expended during the immediately succeeding fiscal year pursuant to Section
8.05(a) shall be increased by such unutilized amount provided that such increase
shall not exceed $1,000,000 in any fiscal year.
(c) In addition to the foregoing, the Borrower may make
additional Consolidated Capital Expenditures (other than Maintenance Capital
Expenditures), provided that the amount of such additional Consolidated Capital
Expenditures shall not exceed for any consecutive four fiscal quarters ending
during any fiscal year set forth below (taken as one accounting period, with
each such fiscal year being adjusted to correspond to the Borrower's actual
fiscal year), the amount set forth below opposite such period:
Period Amount
- ------ ------
January 29, 1995 - February 3, 1996 $5,797,000
February 4, 1996 - January 31, 1997 $6,483,000
February 1, 1997 - January 31, 1998 $6,635,000
February 1, 1998 - January 31, 1999 $7,096,000
February 1, 1999 - January 31, 2000 $7,913,000
February 1, 2000 - January 31, 2001 $9,110,000
February 1, 2001 - January 31, 2002 $10,340,000
February 1, 2002 - January 31, 2003 $13,415,000
provided, further, in the event that Consolidated EBITDA for any Test Period is
less than Projected EBITDA for such Test Period, the amount of such additional
Consolidated Capital Expenditures permitted to be made pursuant to this Section
8.05(c) during the four consecutive fiscal quarters of the Borrower commencing
on the anniversary of the last day of such Test Period shall be reduced as
follows: (i) if the EBITDA Shortfall Percentage is equal to or greater than 95%,
then no reduction
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shall occur; (ii) if the EBITDA Shortfall Percentage is equal to or greater than
90% but less than 95%, then by an amount equal to $600,000; and (iii) if the
EBITDA Shortfall Percentage is less than 90%, then by an amount equal to (x) the
EBITDA Shortfall for such Test Period multiplied by (y) 150%.
8.06 Advances, Investments and Loans. The Borrower will not,
and will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to any
Person, except:
(a) the Borrower or any Subsidiary may invest in cash and Cash
Equivalents;
(b) the Borrower and any Subsidiary may acquire and hold
receivables owing to them, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(c) the intercompany Indebtedness described in Section 8.04(b)
and additional Investments in existing Subsidiaries and Subsidiary Guarantors
shall be permitted;
(d) the Borrower and each Subsidiary Guarantor may acquire and
own investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business;
(e) Interest Rate Agreements permitted by Section 8.04(d)
shall be permitted;
(f) the Borrower may make contributions to an employee stock
ownership plan provided such contributions are in the Borrower's common stock;
(g) the Borrower may own Investments set forth on Schedule
8.06 hereto;
(h) the Borrower may acquire additional retail stores,
provided that (i) after giving effect thereto, the limit on Consolidated
Capital Expenditures set forth in Section 8.05 would not be breached and (ii)
each store acquired by the Borrower shall be engaged in one or more lines of
business substantially similar to those conducted by the Borrower on the date
hereof;
(i) the Borrower may hold the promissory notes acquired in
accordance with Section 8.02(e); and
(j) the Borrower may acquire all of the assets or all of the
issued and outstanding shares of capital stock of a certain retailer (the
"Retailer") (such acquisition, the "Contemplated Acquisition") as disclosed in
a letter dated the date hereof from the Borrower
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to the Agent (the "Contemplated Acquisition Letter"), provided that each of the
following conditions shall have been satisfied:
(i) the Purchase Price for the Contemplated
Acquisition shall not exceed $10,000,000 plus the cash held by the Contemplated
Acquisition on the closing date of that transaction;
(ii) the Contemplated Acquisition shall be
consummated on or prior to ninety (90) days from the Initial Borrowing Date
(the "Contemplated Acquisition Termination Date");
(iii) no Default or Event of Default shall exist
immediately before and after giving effect to the consummation of the
Contemplated Acquisition or result therefrom;
(iv) no Indebtedness, including, without limitation,
deferred payments to be paid by the Borrower or any Subsidiary in respect of
the Contemplated Acquisition (except for deferred payments under consulting or
non-competition agreements with current officers of such retailer, in amounts
which do not cause the Purchase Price for the Contemplated Acquisition to
exceed $13,000,000, treating all such deferred payments as part of the Purchase
Price), shall have been incurred or assumed, directly or indirectly, by the
Borrower or any Subsidiary as a result of such acquisition, other than
Indebtedness otherwise permitted under Section 8.04;
(v) the Borrower shall have promptly paid in full all
of the costs and expenses (including, without limitation, reasonable costs and
expenses of counsel to the Agent) related to the review by the Agent of the
Borrower's compliance with the terms of this Agreement with respect to such
acquisition;
(vi) neither the Retailer nor any of its Subsidiaries
shall be subject to any restrictions, whether set forth in its charter or other
organizational documents, contractually imposed or otherwise, with respect to
the payment of cash dividends and distributions on its capital stock or with
respect to payment of any Indebtedness owed to the Borrower or any Subsidiary
or the making of loans or advances to the Borrower or any Subsidiary or the
transfer of any of its property or assets to the Borrower or any Subsidiary;
(vii) the board of directors and, if required under
applicable law, the stockholders of each of the Borrower and the Retailer shall
have approved the terms and conditions of such acquisition and such transaction
shall not be a "hostile" acquisition or other "hostile" transaction;
(viii) the Borrower shall have complied with the
requirements of Section 7.11;
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(ix) the Borrower shall have delivered to the Agent,
as soon as practicable prior to the proposed date of execution of any
acquisition agreement (but in no event less than ten days prior to any such
execution), true, correct and complete copies of such draft agreement and all
exhibits, schedules, documents and other agreements related thereto (as to such
exhibits, schedules, documents and other agreements, as and when available but
prior to consummation of such acquisition with sufficient time to allow the
Agent and its counsel sufficient time for review thereof), and thereafter until
the actual consummation of the acquisition, shall deliver to the Agent, on a
contemporaneous basis with others involved in the transaction, updated and
revised information and documents and such agreements shall not contain
provisions that are not within the range of provisions customarily found in
acquisitions of a similar type for a similar industry and the foregoing
deliveries to the Agent shall include, without limitation, customary opinions
of counsel to be received by the Borrower in connection with the acquisition
(with respect to which the Agent and the Lenders shall be included as
additional addressees);
(x) the Contemplated Acquisition shall be consummated
pursuant to the material terms and conditions of the acquisition agreement as
delivered to the Agent (without waiver by the Borrower of the fulfillment of
any material condition precedent set forth therein) which agreement shall set
forth the entire agreement among the parties thereto with respect to the
subject matter thereof;
(xi) the Borrower shall have no knowledge that any of
the representations or warranties with respect to the Retailer or any of its
Subsidiaries, contained in any acquisition agreement or other documents were
false or misleading when made the breach of which individually or in the
aggregate could have a material adverse effect on the Retailer as operated
before or after giving effect to the consummation of the proposed acquisition;
(xii) no material consent or approval of any Person,
and no consent, license, approval, authorization or declaration of any
governmental authority, bureau or agency, shall have been required in
connection with the Contemplated Acquisition, except as described in the
acquisition agreement delivered to the Agent in connection therewith, each of
which shall have been duly and validly obtained on or prior to the date of
consummation of such acquisition and shall be in full force and effect on such
date;
(xiii) neither the execution and delivery of any
acquisition agreement, nor the performance of any parties' obligations
thereunder, will violate any provision of law;
(xiv) not later than five Business Days prior to
consummation of the acquisition the Agent shall have received: (1) a Phase 1
environmental assessment concerning any owned Real Property (and, if deemed
reasonably necessary by the Agent, any leased Real Property) of the Retailer
and any of its Subsidiaries, which assessment shall be conducted in accordance
with the appropriate ASTM standard (and if recommended by the Phase 1
assessment, a Phase 2 environmental assessment conducted in accordance with the
appropriate ASTM standard, if any) and which shall be reasonably satisfactory
to the
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Agent in all respects, provided that no environmental assessment shall be
required in respect of any properties as to which the Agent in its sole
discretion determines that no such assessment is desirable; (2) a schedule,
with such detail as the Agent may reasonably request, concerning all material
litigation then pending or to the knowledge of the Borrower threatened and all
material contingent liabilities (including all sales and other state tax and
any other tax the liability for which may attach to transferred assets) with
respect to the Retailer and any of its Subsidiaries in each case which is not
otherwise described in adequate detail in the applicable acquisition agreement
and related exhibits and schedules whether or not purported to be retained by
the seller (all of the foregoing relating to such litigation, contingent
liabilities and tax liabilities to be reasonably satisfactory in form and
substance to the Agent and its counsel); (3) to the extent available, a
consolidated and consolidating balance sheet of the Retailer and any
Subsidiaries, and a related consolidated and consolidating statement of income
and retained earnings and statements of cash flow for each of the three (3)
fiscal years and subsequent fiscal quarters ending immediately prior to the
date of the acquisition; and (4) on a pro forma basis after giving effect to
the proposed acquisition and based on reasonable assumptions made by the
Borrower in good faith, a consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries (including the Retailer and its Subsidiaries),
and a related consolidated and consolidating statement of income and retained
earnings and statements of cash flow (A) for the four fiscal quarters ending
immediately prior to the date of such acquisition (taken as one accounting
period), and (B) for each fiscal year following the date of such acquisition
through the Final Maturity Date, each such statement (x) certified by the chief
financial officer of the Borrower as fairly presenting the Borrower's and its
Subsidiaries' and the Retailer's historical and projected financial position on
a pro forma basis after giving effect to the acquisition, (y) to show all
deferred payments which the Borrower or any Subsidiary, as applicable, directly
or indirectly, would be required to make based on the projected pro forma
results of operations, and (z) to be accompanied by a certificate of the chief
financial officer of the Borrower certifying that the Borrower (I) would have
been in compliance with all covenants set forth herein during the four fiscal
quarters ending immediately prior to the date of such acquisition had the
acquisition been consummated on the first day of such period and (II) is
projected to be in compliance with all covenants set forth herein during each
fiscal year following the date of such acquisition through the Final Maturity
Date, which certificate shall be accompanied by detailed calculations
indicating compliance with the covenants set forth in Sections 8.03, 8.04,
8.05, 8.06, 8.10, 8.11, 8.12, and 8.13; and
(xv) concurrently with the consummation of the
acquisition, the Agent shall have received, in form and substance reasonably
satisfactory to the Agent and its counsel, a Compliance Certificate dated the
effective date of such acquisition, which certificate shall also include a
certification of the chief financial officer of the Borrower (A) to the effect
that, after giving effect to the acquisition, no material adverse change shall
have occurred in the financial condition or operations of the Borrower and its
Subsidiaries taken as a whole, and (B) that the terms and conditions of Section
8.06 have been complied with and the consummation of the Contemplated
Acquisition shall be deemed to constitute a
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representation and warranty by the Borrower that the Contemplated Acquisition
has been consummated in accordance with the terms of this Agreement.
8.07 Prepayments of Indebtedness, etc. The Borrower will not,
and will not permit any of its Subsidiaries to amend, modify, or change in any
manner adverse to the interests of the Lenders the Certificate of Incorporation
(including, without limitation, by the filing of any certificate of designation)
or By-Laws of the Borrower or any Subsidiary, or any agreement entered into by
the Borrower or any Subsidiary, with respect to its capital stock, or the
Documents, or enter into any new agreement in any manner adverse to the
interests of the Lenders with respect to the capital stock of the Borrower or
any Subsidiary.
8.08 Capital Stock and Dividends, etc. (a) The Borrower will
not, and will not permit any of its Subsidiaries to, (x) issue any preferred
stock or other capital stock (other than Common Stock) or (y) declare or pay any
dividends (other than dividends payable solely in capital stock of such Person)
or return any capital to, its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for a consideration, any shares of any class of its capital stock now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights in respect of any of such shares), or set aside any funds for any of the
foregoing purposes, or permit any of its Subsidiaries to purchase or otherwise
acquire for consideration any shares of any class of the capital stock of the
Borrower or any other Subsidiary, as the case may be, now or hereafter
outstanding (or any options or warrants or stock appreciation rights issued by
such Person with respect to its capital stock) (all of the foregoing
"Dividends"), except that:
(i) any Subsidiary of the Borrower may pay dividends to the
Borrower or to a Subsidiary Guarantor;
(ii) the Borrower may pay dividends to Holdings solely for
the purpose of allowing Holdings to redeem or repurchase Common Stock (or
options to purchase such Common Stock) from (A) officers, employees and
directors (or their estates) upon the death, permanent disability, retirement
or termination of employment of any such Person or otherwise in accordance with
any stock option plan or any employee stock ownership plan, or (B) other
stockholders of Holdings so long as the purpose of such purchase is to acquire
Common Stock for reissuance to new officers, employees and directors (or their
estates) of the Borrower to the extent so reissued within 12 months of any such
purchase; provided, however, that in all such cases (x) no Default or Event of
Default is then in existence or would arise therefrom and (y) the aggregate
amount of all cash dividends paid as provided in this clause (ii) in any
calendar year does not exceed (1) $200,000 during calendar year 1995 plus
proceeds of key life insurance used for the purposes set forth in this clause,
(2) $300,000 during calendar year 1996 plus proceeds of key life insurance used
for the purposes set forth in this clause, (3) $500,000 during calendar year
1997 plus proceeds of key life insurance used for the purposes set forth in
this clause and (4) $700,000 during calendar year 1998 and during each calendar
year thereafter plus proceeds of key life insurance used for the purposes set
forth in this clause; provided, further, that the foregoing
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permitted amounts in subclauses (1) through (4) above shall be doubled in
amount if the minimum availability under the Revolving Commitments equals or
exceeds $15,000,000 for the six-month period immediately prior to the date of
any such dividend, but in no event shall the maximum amount of any such
dividends exceed $750,000 in any calendar year plus proceeds of key life
insurance used for the purposes set forth in this clause; and provided,
further, that in the event that Holdings subsequently resells to any member of
the Borrower's or any Subsidiary's management or other employees any shares
redeemed or repurchased with dividends paid to Holdings pursuant to this clause
(ii), the amount of dividends the Borrower may make to Holdings for this
purpose shall be increased by an amount equal to any cash received by the
Borrower from Holdings upon the resale of such shares, but in no event in
excess of the amounts permitted above in this clause (ii) after giving effect
to this proviso; and
(iii) the Borrower may pay dividends to Holdings in
amounts sufficient to allow Holdings to pay taxes, fees and other expenses
necessary and incurred solely with respect to the ownership by Holdings of the
Borrower and its Subsidiaries.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist any encumbrance or
restriction which prohibits or otherwise restricts (i) the ability of any
Subsidiary to (A) pay dividends or make other distributions or pay any
Indebtedness owed to the Borrower or any Subsidiary, (B) make loans or advances
to the Borrower or any Subsidiary, (C) transfer any of its properties or assets
to the Borrower or any Subsidiary or (ii) the ability of the Borrower or any
other Subsidiary of the Borrower to create, incur, assume or suffer to exist any
Lien upon its property or assets to secure the Obligations, other than
prohibitions or restrictions existing under or by reason of:
(i) this Agreement and the other Loan Documents;
(ii) applicable law;
(iii) customary non-assignment provisions entered into in
the ordinary course of business and consistent with past practices;
(iv) any restriction or encumbrance with respect to a
Subsidiary of the Borrower imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
capital stock or assets of such Subsidiary, so long as such sale or disposition
is permitted under this Agreement; and
(v) Liens permitted under Section 8.03 and any documents or
instruments governing the terms of any Indebtedness or other obligations
secured by any such Liens; provided, however, that such prohibitions or
restrictions apply only to the assets subject to such Liens.
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8.09 Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, enter into any transaction or series of
transactions after the Initial Borrowing Date whether or not in the ordinary
course of business, with any Affiliate other than on terms and conditions
substantially as favorable to the Borrower or such Subsidiary as would be
obtainable by the Borrower or such Subsidiary at the time in a comparable
arm's-length transaction with a Person other than an Affiliate; provided,
however, that the foregoing restrictions shall not apply to (i) transactions
with its Affiliates set forth in Schedule 8.09 hereto, (ii) employment
arrangements entered into in the ordinary course of business with officers of
the Borrower and its Subsidiaries, (iv) customary and reasonable fees paid to
members of the Board of Directors of the Borrower and of its Subsidiaries and
(v) the payment of consulting, advisory and other fees, reimbursements and other
charges payable to Kelso pursuant to the terms of that certain letter agreement
dated as of the date hereof (the "Kelso Letter Agreement") among Kelso, Holdings
and the Borrower as in effect on the date hereof, but in no event shall the
aggregate amounts paid by the Borrower pursuant to this clause (v) exceed
$250,000 in any fiscal year of the Borrower plus any reasonable out-of-pocket
expenses and indemnities.
8.10 Fixed Charge Coverage Ratio. The Borrower will not permit
the ratio (the "Fixed Charge Coverage Ratio") of (a) the sum of (i) Consolidated
EBITDA plus (ii) the aggregate payments (including, without limitation, any
property taxes paid as additional rent or lease payments) by the Borrower and
its Subsidiaries under agreements to rent or lease any real or personal property
(exclusive of Capitalized Lease Obligations) minus (iii) Consolidated Capital
Expenditures to (b) Consolidated Fixed Charges for any Test Period ending at the
end of any fiscal quarter of the Borrower to be less than 1.00 to 1.00.
8.11 Minimum Consolidated EBITDA. The Borrower will not permit
Consolidated EBITDA for any Test Period ending at the end of any fiscal quarter
of the Borrower on or about the dates set forth below (with each such date being
adjusted to correspond to the Borrower's actual fiscal quarter end) to be less
than the amount set forth opposite such fiscal quarter:
Fiscal Quarter Amount
- -------------- ------
Fiscal quarter ended July 31, 1995 $19,855,000
Fiscal quarter ended October 31, 1995 $20,478,000
Fiscal quarter ended January 31, 1996 $20,849,000
Fiscal quarter ended April 30, 1996 $21,301,000
Fiscal quarter ended July 31, 1996 $21,913,000
Fiscal quarter ended October 31, 1996 $22,539,000
Fiscal quarter ended January 31, 1997 $23,634,000
Fiscal quarter ended April 30, 1997 $24,500,000
Fiscal quarter ended July 31, 1997 $25,500,000
Fiscal quarter ended October 31, 1997 $26,000,000
Fiscal quarter ended January 31, 1998 $27,100,000
Fiscal quarter ended April 30, 1998 $28,100,000
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Fiscal quarter ended July 31, 1998 $29,500,000
Fiscal quarter ended October 31, 1998 $31,000,000
Fiscal quarter ended January 31, 1999 $32,800,000
Fiscal quarter ended April 30, 1999 $34,000,000
Fiscal quarter ended July 31, 1999 $35,000,000
Fiscal quarter ended October 31, 1999 $36,000,000
Fiscal quarter ended January 31, 2000 $37,700,000
Fiscal quarter ended April 30, 2000 $39,000,000
Fiscal quarter ended July 31, 2000 $40,000,000
Fiscal quarter ended October 31, 2000 $41,000,000
Fiscal quarter ended January 31, 2001 $42,800,000
Fiscal quarter ended April 30, 2001 $44,000,000
Fiscal quarter ended July 31, 2001 $45,000,000
Fiscal quarter ended October 31, 2001 $46,000,000
Fiscal quarter ended January 31, 2002 $48,100,000
Fiscal quarter ended April 30, 2002 $50,000,000
8.12 Leverage Ratio. The Borrower will not permit the Leverage
Ratio as of the end of any fiscal quarter of the Borrower on or about the dates
set forth below (with each such date being adjusted to correspond to the
Borrower's actual fiscal quarter end) to be more than the ratio set forth
opposite such fiscal quarter:
Fiscal Quarter Ratio
- -------------- -----
Fiscal quarter ended July 31, 1995 4.21 to 1.00
Fiscal quarter ended October 31, 1995 4.46 to 1.00
Fiscal quarter ended January 31, 1996 4.05 to 1.00
Fiscal quarter ended April 30, 1996 4.18 to 1.00
Fiscal quarter ended July 31, 1996 4.01 to 1.00
Fiscal quarter ended October 31, 1996 4.28 to 1.00
Fiscal quarter ended January 31, 1997 3.72 to 1.00
Fiscal quarter ended April 30, 1997 3.65 to 1.00
Fiscal quarter ended July 31, 1997 3.55 to 1.00
Fiscal quarter ended October 31, 1997 3.45 to 1.00
Fiscal quarter ended January 31, 1998 3.40 to 1.00
Fiscal quarter ended April 30, 1998 3.25 to 1.00
Fiscal quarter ended July 31, 1998 3.10 to 1.00
Fiscal quarter ended October 31, 1998 2.95 to 1.00
Fiscal quarter ended January 31, 1999 2.78 to 1.00
Fiscal quarter ended April 30, 1999 2.68 to 1.00
Fiscal quarter ended July 31, 1999 2.58 to 1.00
Fiscal quarter ended October 31, 1999 2.48 to 1.00
Fiscal quarter ended January 31, 2000 2.42 to 1.00
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Fiscal quarter ended April 30, 2000 2.33 to 1.00
Fiscal quarter ended July 31, 2000 2.24 to 1.00
Fiscal quarter ended October 31, 2000 2.15 to 1.00
Fiscal quarter ended January 31, 2001 2.07 to 1.00
Fiscal quarter ended April 30, 2001 1.98 to 1.00
Fiscal quarter ended July 31, 2001 1.89 to 1.00
Fiscal quarter ended October 31, 2001 1.80 to 1.00
Fiscal quarter ended January 31, 2002 1.71 to 1.00
Fiscal quarter ended April 30, 2002 1.61 to 1.00
8.13 Interest Coverage Ratio. The Borrower will not permit the Interest
Coverage Ratio as of the end of any fiscal quarter of the Borrower on or about
the dates set forth below (with each such date being adjusted to correspond to
the Borrower's actual fiscal quarter end) to be less than the ratio set forth
opposite such fiscal quarter:
Fiscal Quarter Ratio
- -------------- -----
Fiscal quarter ended July 31, 1995 3.57 to 1.00
Fiscal quarter ended October 31, 1995 2.95 to 1.00
Fiscal quarter ended January 31, 1996 2.56 to 1.00
Fiscal quarter ended April 30, 1996 2.22 to 1.00
Fiscal quarter ended July 31, 1996 2.26 to 1.00
Fiscal quarter ended October 31, 1996 2.29 to 1.00
Fiscal quarter ended January 31, 1997 2.38 to 1.00
Fiscal quarter ended April 30, 1997 2.44 to 1.00
Fiscal quarter ended July 31, 1997 2.50 to 1.00
Fiscal quarter ended October 31, 1997 2.56 to 1.00
Fiscal quarter ended January 31, 1998 2.61 to 1.00
Fiscal quarter ended April 30, 1998 2.72 to 1.00
Fiscal quarter ended July 31, 1998 2.83 to 1.00
Fiscal quarter ended October 31, 1998 2.94 to 1.00
Fiscal quarter ended January 31, 1999 3.06 to 1.00
Fiscal quarter ended April 30, 1999 3.18 to 1.00
Fiscal quarter ended July 31, 1999 3.30 to 1.00
Fiscal quarter ended October 31, 1999 3.42 to 1.00
Fiscal quarter ended January 31, 2000 3.55 to 1.00
Fiscal quarter ended April 30, 2000 3.67 to 1.00
Fiscal quarter ended July 31, 2000 3.79 to 1.00
Fiscal quarter ended October 31, 2000 3.91 to 1.00
Fiscal quarter ended January 31, 2001 4.03 to 1.00
Fiscal quarter ended April 30, 2001 4.19 to 1.00
Fiscal quarter ended July 31, 2001 4.35 to 1.00
Fiscal quarter ended October 31, 2001 4.51 to 1.00
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Fiscal quarter ended January 31, 2002 4.68 to 1.00
Fiscal quarter ended April 30, 2002 4.84 to 1.00
8.14 Subsidiary Stock. The Borrower will not permit any of its
Subsidiaries directly or indirectly to issue, sell, assign, pledge or otherwise
encumber or dispose of any shares of its capital stock or other securities (or
warrants, rights or options to acquire shares or other equity securities) of
such Subsidiary, except, to the extent permitted by Section 8.06, to the
Borrower or to qualify directors if required by applicable law.
SECTION 9. Events of Default. Upon the occurrence of any of
the following specified events (each an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loans or (ii) default, and such default shall
continue for two or more days, in the payment when due of any Unpaid Drawing,
any interest on the Loans or any Fees or any other amounts owing hereunder or
under any other Loan Document; or
9.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Loan Document or in
any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
9.03 Covenants. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Sections 7.11 or 8, or (b) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in Section 9.01,
9.02 or clause (a) of this Section 9.03) contained in this Agreement and such
default shall continue unremedied for a period of at least 30 days after notice
to the defaulting party by the Agent or the Required Lenders; or
9.04 Default Under Other Agreements. (a) The Borrower or any
of its Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
applicable thereto or (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity; or (b)
any such Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable, or required to be prepaid other than by a
regularly scheduled required repayment or prepayment, prior to the stated
maturity thereof; provided, however, that it shall not constitute an Event of
Default pursuant to this Section 9.04 unless the aggregate amount of all
Indebtedness referred to in clauses (a) and (b) above exceeds $250,000 at any
one time; or
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9.05 Bankruptcy, etc. Holdings, the Borrower or any of its
Subsidiaries shall commence a voluntary case concerning itself under Title 11 of
the United States Code entitled "Bankruptcy", as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against Holdings, the Borrower or any of its Subsidiaries and the
petition is not controverted within 10 days, or is not dismissed within 60 days,
after commencement of the case; or a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or substantially all of the
property of Holdings, the Borrower or any of its Subsidiaries; or Holdings, the
Borrower or any of its Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to Holdings, the Borrower or any of its
Subsidiaries; or there is commenced against Holdings, the Borrower or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days; or Holdings, the Borrower or any of its Subsidiaries is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or Holdings, the Borrower or any of its
Subsidiaries suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or Holdings, the Borrower or any of its Subsidiaries makes a
general assignment for the benefit of creditors; or any corporate action is
taken by Holdings, the Borrower or any of its Subsidiaries for the purpose of
effecting any of the foregoing; or
9.06 ERISA. (a) A single-employer plan (as defined in Section
4001 of ERISA) established by the Borrower, any of its Subsidiaries or any ERISA
Affiliate shall fail to maintain the minimum funding standard required by
Section 412 of the Code for any plan year or a waiver of such standard or
extension of any amortization period is sought or granted under Section 412 of
the Code or shall provide security to induce the issuance of such waiver or
extension, (b) any Plan is or shall have been or is likely to be terminated or
the subject of termination proceedings under ERISA or an event has occurred
entitling the PBGC to terminate a Plan under Section 4042(a) of ERISA, (c) any
Plan shall have an Unfunded Current Liability or (d) the Borrower or a
Subsidiary or any ERISA Affiliate has incurred or is likely to incur a material
liability to or on account of a termination of or a withdrawal from a Plan under
Section 515, 4062, 4063, 4064, 4201 or 4204 of ERISA; and there shall result
from any such event or events described in the preceding clauses of this Section
9.06 the imposition of a Lien upon the assets of the Borrower or any Subsidiary,
the granting of a security interest, or a liability or a material risk of
incurring a liability to the PBGC or a Plan or a trustee appointed under ERISA
or a penalty under Section 4971 of the Code, in each case which would have, in
the opinion of the Required Lenders, a Material Adverse Effect; or
9.07 Liens. Any of the Liens created and granted to the Agent
for the ratable benefit of the Lenders under the Security Documents shall cease
to be valid and perfected Liens, subject to no other Liens except as permitted
by Section 8.03; or
9.08 Guaranties. Any Guaranty or any provision thereof shall
cease to be in full force or effect, or any Guarantor or any Person acting by or
on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under such Guaranty or any Guarantor shall default in the
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due performance or observance of any material term, covenant or agreement on its
part to be performed or observed pursuant to its Guaranty; or
9.09 Judgments. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries involving a liability of
$250,000 or more (not paid or to the extent not covered by insurance) and any
such judgments or decrees shall not have been vacated, discharged or stayed or
bonded pending appeal within 60 days from the entry thereof; or
9.10 Change of Control. A Change of Control shall occur; or
9.11 Equity Contribution Agreement. The Equity Contribution
Agreement or any provision thereof shall cease to be in full force and effect,
or Kelso or any Person acting by or on behalf of Kelso shall deny or disaffirm
Kelso's obligations under the Equity Contribution Agreement or Kelso shall
default in the due performance or observance of any material term, covenant or
agreement on its part to be performed or observed pursuant to the Equity
Contribution Agreement; then, and in any such event, and at any time thereafter,
if any Event of Default shall then be continuing, the Agent shall, upon the
written request of the Required Lenders, by written notice to the Borrower, take
any or all of the following actions, without prejudice to the rights of the
Agent or any Lender to enforce its claims against the Borrower, except as
otherwise specifically provided for in this Agreement (provided that, if an
Event of Default specified in Section 9.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Agent as specified in clauses (i) and (ii) below shall occur immediately and
automatically without the giving of any such notice): (i) declare the Total
Commitment terminated, whereupon the Commitment of each Lender shall forthwith
terminate immediately and any Commitment Fee shall forthwith become due and
payable without any other notice of any kind; (ii) declare the principal of and
any accrued interest in respect of all Loans and all Obligations owing hereunder
(including Unpaid Drawings) and under any other Loan Document to be, whereupon
the same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; (iii) enforce any or all of the Liens and security interests created
pursuant to the Security Documents; (iv) terminate any Letter of Credit which
may be terminated in accordance with its terms; and (v) direct the Borrower to
pay (and the Borrower hereby agrees upon receipt of such notice, or upon the
occurrence of any Event of Default specified in Section 9.05 in respect of the
Borrower, it will pay) to the Agent at the Payment Office such additional
amounts of cash, to be held as security for the Borrower's reimbursement
obligations in respect of Letters of Credit then outstanding equal to the
aggregate Stated Amount of all Letters of Credit then outstanding.
SECTION 10. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"A Term Commitment" shall mean, with respect to each Lender, the
amount, if any, set forth opposite such Lender's name on Schedule 1.01 hereto
directly below the column entitled "A Term Commitment" as the same may be
reduced or terminated pursuant to Section 3.03.
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"A Term Facility" shall mean the Facility evidenced by the Total A Term
Commitment.
"A Term Loan" shall have the meaning provided in Section 1.01(a).
"A Term Loan Percentage" shall mean, at any time of determination
thereof, a fraction (expressed as a percentage) the numerator of which is equal
to the Total A Term Commitment at such time (or, if such commitment shall have
been terminated, the aggregate principal amount of A Term Loans outstanding at
such time) and the denominator of which is equal to the Total Term Commitment at
such time (or if such commitment shall have been terminated, the sum of the
aggregate principal amount of A Term Loans and B Term Loans, in each case,
outstanding at such time).
"A Term Note" shall have the meaning provided in Section 1.05(a)(i).
"Account" or "account" shall mean any account, as such term is defined
in the Uniform Commercial Code - Secured Transactions of New York as it may be
amended from time to time. For purposes of this Agreement, the term Account
shall also include chattel paper, instruments, notes, notes receivable, rental
receivables, amounts due or owing to the Borrower or any Subsidiary Guarantor
pursuant to clearing agreements relating to the payment or collection of Visa,
MasterCard, Discover and other bank credit card receivables, conditional sale
contracts, acceptances, drafts, documents, and other obligations for the payment
of money, books and records, general intangibles, monies, choses in action,
credits, claims and demands, credit insurance and guarantees or security for the
payment of all of the foregoing, rights of stoppage in transit, reclamation, or
replevin with respect to Inventory, returned merchandise, and all products and
proceeds (whether cash proceeds or otherwise) of the foregoing,whether now
owned, held, or hereafter acquired by the Borrower or any Subsidiary Guarantor.
"Account Debtor" shall mean with respect to any Account, the Person or
Persons obligated to make payments with respect to such Account.
"Acquisition Corp." shall have the meaning provided in the Recitals to
this Agreement.
"Additional Mortgage" shall have the meaning provided in Section 7.11.
"Adjusted Cash Flow" for any fiscal year shall mean Consolidated Net
Income for such fiscal year (after provision for taxes) plus the amount of all
net non-cash charges (including, without limitation, depreciation, deferred tax
expense, non-cash interest expense, write-downs of inventory and other non-cash
charges) that were deducted in arriving at Consolidated Net Income for such
fiscal year, minus the amount of all non-cash gains and gains from sales of
assets (other than sales of inventory and equipment in the normal course of
business) that were added in arriving at Consolidated Net Income for such fiscal
year, plus the amount of all non-cash losses and losses
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from sales of assets (other than sales of inventory and equipment in the normal
course of business) that were deducted in arriving at Consolidated Net Income
for such fiscal year.
"Adjusted Revolving Commitment" for each Non-Defaulting Lender shall
mean at any time the product of such Lender's Adjusted Revolving Commitment
Percentage and the Adjusted Total Revolving Commitment.
"Adjusted Revolving Commitment Percentage" shall mean (a) at a time
when no Lender Default exists, for each Lender such Lender's Revolving
Percentage and (b) at a time when a Lender Default exists (i) for each Lender
that is a Defaulting Lender, zero and (ii) for each Lender that is a
Non-Defaulting Lender, the percentage determined by dividing such Lender's
Revolving Commitment at such time by the Adjusted Total Revolving Commitment at
such time, it being understood that all references herein to Revolving
Commitments and the Adjusted Total Revolving Commitment at a time when the Total
Revolving Commitment or Adjusted Total Revolving Commitment, as the case may be,
has been terminated shall be references to the Revolving Loan Commitments or
Adjusted Total Revolving Commitment, as the case may be, in effect immediately
prior to such termination; provided, however, that (A) no Lender's Adjusted
Revolving Commitment Percentage shall change upon the occurrence of a Lender
Default from that in effect immediately prior to such Lender Default if, after
giving effect to such Lender Default and any repayment of Revolving Loans and
Swingline Loans at such time pursuant to Section 4.02(A)(a) or otherwise, the
sum of (1) the aggregate outstanding principal amount of Revolving Loans of all
Non-Defaulting Lenders plus (2) the aggregate outstanding principal amount of
Swingline Loans plus (3) the Letter of Credit Outstandings, exceeds the Adjusted
Total Revolving Loan Commitment; (B) the changes to the Adjusted Revolving
Commitment Percentage that would have become effective upon the occurrence of a
Lender Default but that did not become effective as a result of the preceding
clause (A) shall become effective on the first date after the occurrence of the
relevant Lender Default on which the sum of (1) the aggregate outstanding
principal amount of the Revolving Loans of all Non-Defaulting Lenders plus (2)
the aggregate outstanding principal amount of the Swingline Loans plus (3) the
Letter of Credit Outstandings is equal to or less than the Adjusted Total
Revolving Commitment; and (C) if (1) a Non-Defaulting Lender's Adjusted
Revolving Commitment Percentage is changed pursuant to the preceding clause (B)
and (2) any repayment of such Lender's Revolving Loans, or of Unpaid Drawings
with respect to Letters of Credit or of Swingline Loans, that were made during
the period commencing after the date of the relevant Lender Default and ending
on the date of such change to its Adjusted Revolving Commitment Percentage must
be returned to the Borrower as a preferential or similar payment in any
bankruptcy or similar proceeding of the Borrower, then the change to such
Non-Defaulting Lender's Adjusted Revolving Commitment Percentage effected
pursuant to said clause (B) shall be reduced to that positive change, if any, as
would have been made to its Adjusted Revolving Commitment Percentage if (x) such
repayments had not been made and (y) the maximum change to its Adjusted
Revolving Commitment Percentage would have resulted in the sum of the
outstanding principal of Revolving Loans made by such Lender plus such Lender's
new Adjusted Revolving Commitment Percentage of the outstanding principal amount
of Swingline Loans and of Letter of Credit Outstandings equalling such Lender's
Revolving Commitment at such time.
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"Adjusted Total Revolving Commitment" shall mean at any time the Total
Revolving Commitment less the aggregate Revolving Commitments of all Defaulting
Lenders.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power (i) to vote 10% or more
of the securities having ordinary voting power for the election of directors of
such corporation or (ii) to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall have the meaning provided in the first paragraph of this
Agreement and shall include any successor to the Agent appointed pursuant to
Section 11.09.
"Agreement" shall mean this Credit Agreement, as amended, restated,
supplemented or otherwise modified from time to time.
"Anticipated Reinvestment Amount" shall mean, with respect to any
Reinvestment Election, the amount specified in the Reinvestment Notice delivered
by the Borrower in connection therewith as the amount of the Net Cash Proceeds
from the related Asset Sale that the Borrower intends to use to purchase,
construct or otherwise acquire Reinvestment Assets.
"Applicable Base Rate Margin" shall mean (i) in the case of A Term
Loans and Revolving Loans, 1.50%, less the Margin Reduction Discount, if any,
(ii) in the case of B Term Loans and Bridge Loans, 2.00% and (iii) in the case
of Swingline Loans, 1.50%, less the Margin Reduction Discount, if any.
"Applicable Eurodollar Margin" shall mean (i) in the case of A Term
Loans and Revolving Loans, 2.75%, less the Margin Reduction Discount, if any,
(ii) in the case of B Term Loans, 3.25%.
"Asset Sale" shall mean the sale, transfer or other disposition by the
Borrower or any Subsidiary to any Person other than the Borrower or any
Subsidiary Guarantor of any asset of the Borrower or such Subsidiary (other than
sales, transfers or other dispositions in the ordinary course of business of
inventory and/or obsolete or excess equipment).
"Assignment Agreement" shall have the meaning provided in Section
12.04(b).
"Authorized Officer" shall mean any senior officer of the Borrower
designated as such in writing to the Agent by the Borrower in each case to the
extent acceptable to the Agent.
"B Term Commitment" shall mean, with respect to each Lender, the
amount, if any, set forth opposite such Lender's name on Schedule 1.01 hereto
directly below the column entitled "B Term Commitment" as the same may be
reduced or terminated pursuant to Section 3.03.
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"B Term Facility" shall mean the Facility evidenced by the Total B Term
Commitment.
"B Term Loan" shall have the meaning provided in Section 1.01(b).
"B Term Loan Percentage" shall mean, at any time of determination
thereof, a percentage equal to 100% minus the A Term Loan Percentage at such
time.
"B Term Note" shall have the meaning provided in Section 1.05(a).
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" at any time shall mean the higher of (i) the rate which is
1/2 of 1% in excess of the Federal Funds Effective Rate and (ii) the Prime
Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Blocked Accounts" shall have the meaning provided in Section 4.05.
"Blocked Account Proceeds" shall have the meaning provided in Section
4.01.
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrower Security Agreement" shall have the meaning provided in
Section 5.15.
"Borrowing" shall mean the incurrence of (i) Swingline Loans by the
Borrower from NatWest on a given date or (ii) one Type of Loan pursuant to a
single Facility by the Borrower from all of the Lenders having Commitments with
respect to such Facility on a pro rata basis on a given date (or resulting from
conversions on a given date), having in the case of Eurodollar Loans the same
Interest Period; provided; however, that Base Rate Loans incurred pursuant to
Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar
Loans.
"Borrowing Base" shall mean, as of any date of determination, the sum
of (i) 85% of the book value of all Eligible Accounts of the Borrower and the
Subsidiary Guarantors plus (ii) the lesser of (A) 60% of the value (determined
at the lower of cost (calculated on a first-in, first-out basis) or market) of
all Eligible Inventory of the Borrower and the Subsidiary Guarantors, or (B) 40%
of all Eligible Inventory of the Borrower and the Subsidiary Guarantors valued
at the retail price of such Eligible Inventory as then being offered to the
Borrower's customers (net of any applicable discounts) in the ordinary course of
business; provided, however, that for the period from September 20 (or September
1 for calendar year 1995) to December 20 of each year, the percentage set forth
in clause (A) above shall be 70% and the percentage set forth in clause (B)
above shall be 45%. The Borrowing Base shall be determined on a consolidated
basis in accordance with GAAP and as set forth in the last Borrowing Base
Certificate delivered by the Borrower pursuant to
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Section 5.22 or 7.01(g) as the case may be, provided that the Borrowing Base
shall be zero at any time when a Default (to the extent arising from a failure
to deliver a Borrowing Base Certificate under Section 7.01(g)) has occurred and
is continuing.
"Borrowing Base Certificate" shall have the meaning provided in Section
5.21.
"Bridge Commitment" shall mean, with respect to each Lender, the
amount, if any, set forth opposite such Lender's name on Schedule 1.01 hereto
directly below the column entitled "Bridge Commitment" as the same may be
reduced or terminated pursuant to Section 3.03.
"Bridge Facility" shall mean the Facility evidenced by the Total Bridge
Commitment.
"Bridge Loan" shall have the meaning provided in Section 1.01 (c).
"Bridge Maturity Date" shall mean June 30, 1995.
"Bridge Note" shall have the meaning provided in Section 1.05(a).
"Business Day" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall be
in the City of New York a legal holiday or a day on which banking institutions
are authorized by law or other governmental actions to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading by and between banks
in Dollar deposits in the interbank Eurodollar market.
"Capital Lease" as applied to any Person shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalization Documents" shall mean, collectively, (i) the Equity
Contribution Agreement, (ii) all stock certificates representing shares of
capital stock of Holdings and the Borrower, (iii) all documents, agreements and
instruments pursuant to which such shares were issued or sold, (iv) all
documents, agreements and instruments governing the issuance of, or setting
forth the terms of, such shares and (v) any stockholders or similar agreement
among or between the holders of any such shares.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having
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maturities of not more than six months from the date of acquisition, (ii) Dollar
denominated time deposits, certificates of deposit and bankers' acceptances of
(A) any Lender, (B) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (C) any bank (or the parent
company of such bank) whose short-term commercial paper rating from Standard &
Poor's Corporation ("S&P") is at least A-1 or the equivalent thereof or from
Moody's Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent
thereof (any such bank, an "Approved Bank"), in each case with maturities of not
more than six months from the date of acquisition, (iii) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv) commercial paper issued by
any Lender or Approved Bank or by the parent company of any Lender or Approved
Bank and commercial paper issued by, or guaranteed by, any industrial or
financial company with a short-term commercial paper rating of at least A-1 or
the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's (any such company, an "Approved Company"), or guaranteed by any
industrial company with a long term unsecured debt rating of at least A or A2,
or the equivalent of each thereof, from S&P or Moody's, as the case may be, and
in each case maturing within six months after the date of acquisition and (v)
investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (i) through (iv) above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, but only as and
when so received) received by the Borrower and/or any Subsidiary from such Asset
Sale.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601 et seq.
"Change of Control" shall mean (a) prior to the initial public offering
of the Borrower's common stock, the Permitted Holders cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of at least 66-2/3% in the aggregate of the total voting
power of the Voting Stock of the Borrower on a fully-diluted basis and which
entitles the Permitted Holders to elect a majority of the directors of the
Borrower, whether as a result of the issuance of securities of the Borrower, any
merger, consolidation, liquidation or dissolution of the Borrower, any direct or
indirect transfer of securities or otherwise (for purposes of this clause (a)
and clause (b) below, the Permitted Holders shall be deemed to beneficially own
any Voting Stock of a corporation (the "specified corporation") held by any
other corporation (the "parent corporation") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, in the aggregate a
majority of the voting power of the Voting Stock of the parent corporation on a
fully-diluted basis and which entitles the Permitted Holders to elect a majority
of the directors of the parent corporation); (b) after the initial public
offering of the Borrower's common stock, (i) any "person" (as such term is used
in Section 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial
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ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 30% of the total voting power of the Voting
Stock of the Borrower or (ii) the Permitted Holders cease to be the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of at least 30% in the aggregate of the total voting power of the
Voting Stock of the Borrower on a fully-diluted basis, whether as a result of
the issuance of securities of the Borrower, any merger, consolidation,
liquidation or dissolution of the Borrower, any direct or indirect transfer of
securities or otherwise, provided that for purposes of this clause (ii), the
Permitted Holders may become the "beneficial owner," directly or indirectly, of
less than 30% in the aggregate of the total voting power of the Voting Stock of
the Borrower on a fully-diluted basis so long as (x) no other "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the
Permitted Holders, is or becomes the beneficial owner (as defined in clause (a)
above, except that a person shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, in the aggregate of a greater percentage of the total voting power
of the Voting Stock of the Borrower than the Permitted Holders and (y) the B
Term Loan has been repaid in full; or (c) during any period of two consecutive
years individuals who at the beginning of such period constituted the Board of
Directors of the Borrower (together with any new directors whose election by
such Board of Directors or whose nomination for election by the stockholders of
the Borrower was approved by a vote of a majority of the directors of the
Borrower then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board of Directors of the
Borrower then in office.
"Co-Agent" shall have the meaning provided in the first paragraph of
this Agreement and shall include any other Lender designated as a Co-Agent
pursuant to Section 12.12.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the Effective
Date and any subsequent provisions of the Code, amendatory thereof, supplemental
thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of the
Security Documents.
"Commitment" shall mean, with respect to each Lender, such Lender's
Term Commitment, Bridge Commitment and Revolving Commitment.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Common Stock" shall mean the common stock of the Borrower.
"Compliance Certificate" shall have the meaning provided in Section
7.01(e).
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"Consolidated Capital Expenditures" shall mean, for any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including in all events all amounts expended or capitalized under Capital
Leases but excluding any amount representing capitalized interest) by the
Borrower and its Subsidiaries during that period that, in conformity with GAAP,
are or are required to be included in the property, plant or equipment reflected
in the consolidated balance sheet of the Borrower and its Subsidiaries;
provided, however, that Consolidated Capital Expenditures shall in any event
include the purchase price paid in connection with the acquisition of any Person
(including through the purchase of all of the capital stock or other ownership
interests of such Person or through merger or consolidation) to the extent
allocable to property, plant and equipment but shall only include the amount
thereof actually paid in cash during such period.
"Consolidated Cash Interest Expense" shall mean, for any period,
Consolidated Interest Expense, but excluding, however, interest expense not
payable in cash and amortization of discount and deferred issuance and financing
costs.
"Consolidated Current Assets" shall mean, as to any Person at any time,
the current assets (other than cash and Cash Equivalents) of such Person and its
Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities" shall mean, as to any Person at any
time, the current liabilities of such Person and its Subsidiaries determined on
a consolidated basis in accordance with GAAP, but excluding all short-term
Indebtedness for borrowed money and the current portion of any long-term
Indebtedness of such Person or its Subsidiaries, in each case to the extent
otherwise included therein.
"Consolidated EBIT" shall mean, for any period, (a) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) provisions for
taxes based on income, (iii) Consolidated Interest Expense, (iv) amortization or
write-off of deferred financing costs to the extent deducted in determining
Consolidated Net Income and (v) losses on sales of assets (excluding sales in
the ordinary course of business) and other extraordinary losses less (b) the
amount for such period of gains on sales of assets (excluding sales in the
ordinary course of business) and other extraordinary gains, all as determined on
a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" shall mean, for any period, the sum of the
amounts for such period of (i) Consolidated EBIT, (ii) depreciation expense,
(iii) amortization expense and (iv) all non-cash charges that were deducted in
arriving at Consolidated Net Income for such period, all as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Fixed Charges" shall mean, for any period, the sum,
without duplication, of the amounts for such period of (i) Consolidated Cash
Interest Expense, (ii) the aggregate payments (including, without limitation,
any property taxes paid as additional rent or lease payments) under agreements
to rent or lease any real or personal property (exclusive of Capitalized Lease
Obligations), (iii) taxes paid in cash and (iv) scheduled payments on the Term
Loan, all as determined on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP.
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"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases in accordance
with GAAP) of the Borrower and its Subsidiaries on a consolidated basis with
respect to all outstanding Indebtedness of the Borrower and its Subsidiaries,
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under Interest Rate Agreements.
"Consolidated Net Income" shall mean for any period, the net income (or
loss) of the Borrower and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with GAAP,
provided that there shall be excluded (i) the income (or loss) of any Person
(other than Subsidiaries of the Borrower) in which any other Person (other than
the Borrower or any of its Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Borrower or any of its Subsidiaries by such Person during such period, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of the Borrower or is merged into or consolidated with the Borrower or any of
its Subsidiaries or that Person's assets are acquired by the Borrower or any of
its Subsidiaries, (iii) the income of any Subsidiary of the Borrower to the
extent that the declaration or payment of dividends or similar distributions by
that Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, (iv)
Transaction Expenses and (v) compensation expense resulting from the issuance of
capital stock, stock options or stock appreciation rights issued to employees,
including officers, of the Borrower or any Subsidiary, or the exercise of such
options or rights, in each case to the extent the obligation (if any) associated
therewith is not expected to be settled by the payment of cash by the Borrower
or any Affiliate of the Borrower and compensation expense resulting from the
repurchase of any such capital stock, options and rights.
"Consolidated Senior Debt" shall mean, as at any date of determination,
the aggregate stated balance sheet amount of all Indebtedness of the Borrower
and its Subsidiaries on a consolidated basis as determined in accordance with
GAAP other than any Indebtedness which is subordinated in right of payment to
the Obligations.
"Contemplated Acquisition" shall have the meaning provided in Section
8.06(j).
"Contemplated Acquisition Letter" shall have the meaning provided in
Section 8.06(j).
"Contemplated Acquisition Termination Date" shall have the meaning
provided in Section 8.06(j).
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intending to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
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(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; provided however, that
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Card Agreement" shall mean with respect to each Account which
arises from a consumer revolving credit account arrangement, and collectively
with respect to all such Accounts, the agreements between the Borrower and each
Account Debtor, governing the terms and conditions of the Account, as such
agreements may be amended, modified or otherwise changed from time to time and
as distributed (including any amendments and revisions thereto) to holders of
such consumer revolving credit card accounts.
"Credit Event" shall mean and include the making of a Loan or the
issuance of a Letter of Credit.
"Credit Party" shall mean Holdings, the Borrower and the Guarantors.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with respect to which a
Lender Default is in effect.
"Dividends" shall have the meaning provided in Section 8.09.
"Documents" shall mean, collectively, (a) the Loan Documents, (b) the
Merger Documents and (c) the Capitalization Documents.
"Dollar" and "$" shall mean lawful currency of the United States of
America.
"EBITDA Ratio" shall mean, at any date of determination, the ratio of
(i) Consolidated EBITDA of the Borrower and its Subsidiaries for the Test Period
most recently ended (taken as one accounting period) and ending on such date to
(ii) the aggregate outstanding principal amount of the Term Loans on the last
day of such Test Period.
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"EBITDA Shortfall" shall mean, for any period, the positive difference,
if any, between Projected EBITDA for such period minus Consolidated EBITDA for
such period.
"EBITDA Shortfall Percentage" shall mean the quotient (expressed as a
percentage) of Consolidated EBITDA for any period divided by Projected EBITDA
for such period.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Accounts" shall mean an Account which is created by the
Borrower or any Subsidiary Guarantor, is genuine and is in all respects what it
purports to be, and:
(a) for which a Credit Card Agreement is in full force and
effect and in the custody of the Borrower;
(b) which is payable in Dollars;
(c) the Account Debtor on which has provided, as its most
recent billing address, an address located in the United States of America;
(d) no portion of which that was invoiced as a required
minimum payment shall have remained outstanding for more than sixty (60) days
past the original due date or shall have been charged off in whole or in part;
(e) the Account Debtor on which shall not have been identified
by the Borrower or a Subsidiary in its computer files as of such date as having
(i) commenced, or had commenced in respect of such Account Debtor, a case,
action or proceeding under any law of any jurisdiction relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking relief with respect to
such Account Debtor's debts, or seeking to have such Account Debtor adjudicated
bankrupt or insolvent, or to have a receiver, trustee, custodian or other
similar official appointed for such Account Debtor or for all or any substantial
part of such Account Debtor's assets or (ii) made a general assignment of such
Account Debtor's assets for the benefit of such Account Debtor's creditors,
which assignment is then in full force and effect;
(f) the card or cards for the Account Debtor on which have not
been reported lost or stolen;
(g) is not evidenced by chattel paper or an instrument of any
kind, or if the Account is evidenced by chattel paper or an instrument, the
Borrower has delivered and properly endorsed such chattel paper or instrument to
the Agent; and
(h) as to which the representations and warranties in Section
6.24 are true and correct.
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"Eligible Inventory" shall mean, as at the date of determination
thereof, all finished goods Inventory held by the Borrower or any Subsidiary
Guarantor for sale in which the Agent has a valid, perfected, first priority
security interest, subject only to the Liens permitted by Section 8.03 (and with
respect to such Liens only to the extent such Liens secure Indebtedness (other
than the Obligations) not exceeding $100,000 in the aggregate at any one time
outstanding), and which (i) are in good and readily saleable condition in the
ordinary course of business and not obsolete or unmerchantable, (ii) conform to
all standards imposed by any governmental authority or other regulatory body
having jurisdiction over such goods or the sale thereof, and (iii) as to which
the representations in Section 6.24 are true and correct. In determining
eligibility, the Agent may, but need not, rely on reports and schedules
furnished by the Borrower, but reliance by the Agent thereon from time to time
shall not be deemed to limit the right of the Agent to review eligibility of
Inventory at any time as to both present and future Inventory of the Borrower.
The aggregate value of Eligible Inventory may in the Agent's sole reasonable
discretion be reduced by appropriate reserves determined by the Agent to cover
landlord liens unless such liens shall be waived by an agreement reasonably
satisfactory to the Agent.
"Employment Agreements" shall have the meaning provided in Section
5.06(v).
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations (other than internal reports prepared
by the Borrower or any of its Subsidiaries solely in the ordinary course of such
Person's business and not in response to any third party action or request of
any kind) or proceedings relating in any way to any Environmental Law or any
permit issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials arising from alleged injury
or threat of injury to health, safety or the environment.
"Environmental Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy and rule of
common law now or hereafter in effect and in each case as amended, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety or Hazardous Materials, including, without limitation, CERCLA;
RCRA; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251 et
seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 7401 et seq.; the Clean
Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq. and any
applicable state and local or foreign counterparts or equivalents.
"Equity Contribution Agreement" shall have the meaning provided in
Section 5.26.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder.
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Section references to ERISA are to ERISA, as in effect at the Initial Borrowing
Date and any subsequent provisions of ERISA, amendatory thereof, supplemental
thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which together with the Borrower, a Subsidiary or a Credit Party would be
deemed to be a "single employer" within the meaning of Sections 414(b), (c), (m)
and (o) of the Code; provided, however, that neither Kelso, any Kelso Affiliate
nor any other portfolio company in which Kelso or any Affiliate of Kelso invests
(in each case, other that Holdings, the Borrower and its Subsidiaries) shall be
included in the definition of ERISA Affiliate.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest Period for a
Eurodollar Loan, (i) the offered quotation to first-class banks in the interbank
Eurodollar market by the Agent for dollar deposits of amounts in same day funds
comparable to the outstanding principal amount of the Eurodollar Loan of the
Agent for which an interest rate is then being determined with maturities
comparable to the Interest Period to be applicable to such Eurodollar Loan,
determined as of 10:00 A.M. (New York time) on the date which is two Business
Days prior to the commencement of such Interest Period divided (and rounded
upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to
100% minus the then stated maximum rate of all reserve requirements (including
without limitation any marginal, emergency, supplemental, special or other
reserves) applicable to any member bank of the Federal Reserve System in respect
of Eurocurrency liabilities as defined in Regulation D (or any successor
category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section 9.
"Excess Cash Flow" shall mean, for any fiscal year, the remainder of
(i) Adjusted Cash Flow for such fiscal year, plus (ii) to the extent not
included in (i) above, any amounts received by the Borrower and its Subsidiaries
in settlement of, or in payment of any judgments resulting from, actions, suits
or proceedings with respect to the Borrower and/or its Subsidiaries from the
first day to the last day of such fiscal year, plus (iii) to the extent not
included in (i) above, any amounts received by the Borrower and/or its
Subsidiaries in connection with the repayment or redemption of any long-term
promissory notes and/or preferred stock of other Persons held by them, minus
(iv) the sum of (1) the amount of Consolidated Capital Expenditures (except to
the extent financed through the incurrence of Indebtedness) made during such
fiscal year and (2) any repayments or prepayments of the principal amount of
Term Loans, except prepayments of the principal amount of Term Loans made
pursuant to Sections 4.02(A)(c), (d), (e), (f), (g) and/or (i).
"Existing Indebtedness" shall have the meaning provided in Section
6.21.
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.07(ii).
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"Expiration Date" shall mean June 30, 1995.
"Expiry Date" shall mean June 9, 2000.
"Facility" shall mean any of the credit facilities established under
this Agreement, i.e., the A Term Facility, B Term Facility, Bridge Facility or
the Revolving Facility.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Effective Rate" shall mean for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as 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 which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
"Fee Letters" shall have the meaning provided in Section 3.01(e).
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01.
"Final Maturity Date" shall mean June 9, 2002.
"Fixed Charge Coverage Ratio" shall have the meaning provided in
Section 8.10.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect on the date of this Agreement consistently
applied; it being understood and agreed that determinations in accordance with
GAAP for purposes of Section 8, including defined terms as used therein, are
subject (to the extent provided therein) to Section 12.07(a).
"Guaranties" shall mean the Subsidiary Guaranties and the Holdings
Guaranty.
"Guarantors" shall mean the Subsidiary Guarantors and Holdings.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that
contained, electric fluid containing levels of polychlorinated biphenyls, and
radon gas; (b) any chemicals, materials or substances defined as or included in
the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority.
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"Holdings" shall have the meaning provided in the Recitals to this
Agreement.
"Holdings Guaranty" shall have the meaning provided in Section 5.14.
"Holdings Pledge Agreement" shall have the meaning provided in Section
5.15.
"Indebtedness" of any Person shall mean without duplication (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease Obligations
of such Person, (vi) all obligations of such Person to pay a specified purchase
price for goods or services whether or not delivered or accepted, i.e.,
take-or-pay and similar obligations, (vii) all net obligations of such Person
under Interest Rate Agreements and (viii) all Contingent Obligations of such
Person (other than Contingent Obligations arising from the guaranty by such
Person of the obligations of the Borrower and/or its Subsidiaries to the extent
such guaranteed obligations do not constitute Indebtedness or are otherwise
permitted hereunder), provided that Indebtedness shall not include trade
payables and accrued expenses, in each case arising in the ordinary course of
business.
"Initial Borrowing Date" shall mean the date upon which the initial
Borrowing of Loans occurs.
"Interest Coverage Ratio" shall mean, at any date of determination, the
ratio of (i) Consolidated EBITDA of the Borrower and its Subsidiaries for the
Test Period most recently ended (taken as one accounting period) and ending on
such date to (ii) Consolidated Cash Interest Expense of the Borrower and its
Subsidiaries for the Test Period most recently ended (taken as one accounting
period) and ending on such date.
"Interest Period" with respect to any Loan shall mean the interest
period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Agreement" shall mean any interest rate swap agreement,
any interest rate cap agreement, any interest rate collar agreement or other
similar agreement or arrangement designed to protect the Borrower or any
Subsidiary against fluctuations in interest rates.
"Inventory" shall mean inventory, as such term is defined in the
Uniform Commercial Code - Secured Transactions of New York, as it may be amended
from time to time.
"Investors" shall mean Kelso and the Management Investors.
"Kelso" shall mean Kelso & Company, L.P., a Delaware limited
partnership.
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"Kelso Designee" shall mean any of the following individuals or
entities: Richard Cyert, Michel Rapaport, Louis and Patricia Kelso Trust,
William A. Marquard, John F. McGillicuddy, David M. Roderick, John Rutledge IRA
and George L. Shinn.
"Kelso Letter Agreement" shall have the meaning provided in Section
8.09.
"Leasehold" of any Person means all of the right, title and interest of
such Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"Lender" shall have the meaning provided in the first paragraph
of this Agreement.
"Lender Default" shall mean (i) the refusal (which has not been
retracted) of a Lender to make available its portion of any incurrence of Loans
or to fund its portion of any unreimbursed payment under Section 2.05(c) or (ii)
a Lender having notified the Agent and/or the Borrower that it does not intend
to comply with the obligations under Section 1.01 or under Section 2.05(c), in
the case of either (i) or (ii) as a result of the appointment of a receiver or
conservator with respect to such Lender at the direction or request of any
regulatory agency or authority.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean NatWest or any Lender which at the
request of the Borrower and with the consent of the Agent agrees, in such
Lender's sole discretion, to become a Letter of Credit Issuer for purposes of
issuing Letters of Credit pursuant to Section 2.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.03(a).
"Leverage Ratio" shall mean, at any date of determination, the ratio of
(i) Consolidated Senior Debt of the Borrower and its Subsidiaries on such date
to (ii) Consolidated EBITDA of the Borrower and its Subsidiaries for the Test
Period most recently ended (taken as one accounting period) and ending on such
date.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any lease
in the nature thereof).
"Loan" shall have the meaning provided in Section 1.01.
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"Loan Documents" shall mean this Agreement, the Notes, the Security
Documents and the Guaranties and any documents, instruments and agreements
executed and/or delivered in connection herewith or therewith, all as amended,
restated, supplemented or otherwise modified from time to time.
"Management Agreements" shall have the meaning provided in Section 5.07
(iv).
"Management Investors" shall mean, collectively, the executive officers
of the Borrower who, immediately following the Merger, own capital stock of
Holdings, and any persons who thereafter become executive officers of the
Borrower and acquire capital stock of Holdings.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(f).
"Margin Reduction Discount" shall mean zero, provided that the Margin
Reduction Discount shall be increased to 1/4 of 1% or 1/2 of 1%, as the case may
be, as specified in clauses (i) or (ii) below, at any time on or after the
Initial Borrowing Date, when, and for so long as, the ratio set forth in such
clause has been satisfied as at the end of the then Relevant Test Periods:
(i) the Margin Reduction Discount shall be 1/4 of 1% in
the event that as at the end of the Relevant Test
Period the EBITDA Ratio is greater than or equal to
1.00 to 1.00 but less than 1.50 to 1.00; or
(ii) the Margin Reduction Discount shall be 1/2 of 1% in
the event that as at the end of the Relevant Test
Period the EBITDA Ratio is greater than or equal to
1.50 to 1.00.
The MRD Ratios shall be determined for the Relevant Test Period, by delivery of
an officer's certificate of the Borrower to the Lenders pursuant to Section
7.01(e), which certificate shall set forth the calculation of the MRD Ratios.
The Margin Reduction Discount so determined shall apply, except as set forth
below, from five Business Days after the date on which such officer's
certificate is delivered to the Agent to the earlier of (A) the date on which
the next certificate is delivered to the Agent pursuant to Section 7.01(e) and
(B) the 45th day following the end of the fiscal quarter in which such first
certificate was delivered to the Agent. Notwithstanding anything to the contrary
contained above, the Margin Reduction Discount shall be zero (1) if no officer's
certificate has been delivered to the Lenders pursuant to Section 7.01(e) which
sets forth the MRD Ratios for the Relevant Test Period or the financial
statements upon which any such calculations are based have not been delivered,
until such a certificate and/or financial statements are delivered and (2) at
all times when there shall exist a violation of Section 9.01 or an Event of
Default. It is understood and agreed that the Margin Reduction Discount as
provided above shall in no event be cumulative and only the Margin Reduction
Discount available pursuant to either clause (i) or (ii), if any, contained in
this definition shall be applicable.
"Margin Stock" shall have the meaning provided in Regulation U.
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"Material Adverse Effect" shall mean (a) a material adverse effect on
the business, property, assets, liabilities, operations, condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a whole or (b) the
impairment of the ability of any Credit Party to perform its obligations under
any Loan Document to which it is a party or of the rights of the Agent or any
Lender to enforce or collect any of the Obligations, including the obligations
of any Credit Party to perform or of the rights of the Agent or any Lender to
enforce any Guaranty. In determining whether any individual event would result
in a Material Adverse Effect, notwithstanding that such event does not of itself
have such effect, a Material Adverse Effect shall be deemed to have occurred if
the cumulative effect of such event and all other then existing events would
result in a Material Adverse Effect.
"Maximum Swingline Amount" shall mean $5,000,000.
"Merger" shall mean the merger of Acquisition Corp. with and into the
Borrower, with the Borrower as the surviving corporation, pursuant to the terms
and conditions of the Merger Agreement.
"Merger Agreement" shall have the meaning provided in the Recitals to
this Agreement.
"Merger Documents" shall mean the Merger Agreement, and all the
documents entered into in connection with the Merger Agreement or the
consummation of the Merger.
"Minimum Borrowing Amount" shall mean (i) for A Term Loans, B Term
Loans and Revolving Loans maintained as Base Rate Loans, $1,000,000 and (ii) for
A Term Loans, B Term Loans and Revolving Loans maintained as Eurodollar Loans,
$1,000,000.
"Mortgages" shall have the meaning provided in Section 5.15(c)(i).
"Mortgage Policies" shall have the meaning provided in Section
5.15(c)(ii).
"Mortgaged Properties" shall mean, collectively, all of the properties
of the Borrower and the Subsidiaries of the Borrower defined as "Mortgaged
Property" in each of the respective Mortgages and Additional Mortgages.
"MRD Ratio" shall mean at any time the ratio that is correctly
specified in the then latest officer's certificate delivered to the Lenders
pursuant to Section 7.01(e) as the EBITDA Ratio, as at the end of the Test
Period ended as of the last day of the fiscal quarter or year with respect to
which such officer's certificate has been delivered.
"NatWest" shall mean NatWest Bank N.A.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
Cash Proceeds resulting therefrom net of expenses of sale (including payment of
principal, premium and interest
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of Indebtedness secured by the assets the subject of the Asset Sale and required
to be, and which is, repaid under the terms thereof as a result of such Asset
Sale), and incremental taxes paid or payable as a result thereof.
"Non-Defaulting Lender" shall mean each Lender other than a Defaulting
Lender.
"Note" shall mean and include each A Term Note, each B Term Note, each
Bridge Note, each Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section 1.03.
"Notice of Conversion" shall have the meaning provided in Section 1.06.
"Notice Office" shall mean the office of the Agent at 175 Water Street,
New York, New York 10038 or such other office as the Agent may designate to the
Borrower from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Agent or any Lender pursuant to the terms of this Agreement or any other Loan
Document.
"Participant" shall have the meaning provided in Section 2.05(a).
"Payment Office" shall mean the office of the Agent at 175 Water
Street, New York, New York 10038 or such other office as the Agent may designate
to the Borrower from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Encumbrances" shall mean, with respect to the Mortgaged
Properties, such exceptions to title as are set forth in the title insurance
policies or title commitments delivered with respect thereto, all of which
exceptions must be reasonably acceptable to the Agent.
"Permitted Holders" means, collectively, (i) Kelso and its Affiliates,
(ii) any Kelso Designee, (iii) any Permitted Transferee of Kelso and its
Affiliates (other than Kelso or an Affiliate of Kelso), (iv) the Management
Investors and (v) any employee stock ownership plan established by Holdings or
the Borrower for the benefit of the employees of Holdings, the Borrower or any
Subsidiary, provided that any Persons described in clauses (ii) through (v)
above shall only constitute Permitted Holders to the extent that the total
aggregate voting power of the Voting Stock of the Borrower owned by such Persons
does not exceed 10% of the total aggregate voting power of the Voting Stock of
the Borrower owned by Kelso and its Affiliates.
"Permitted Liens" shall mean Liens described in clauses (a) through (l)
of Section 8.03.
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"Permitted Transferees" shall mean (i) any Affiliate of Kelso (other
than any corporation or other Person controlled or managed by Kelso), (ii) any
managing director, general partner, limited partner, director, officer or
employee of Kelso or any Affiliate thereof (collectively, "Kelso Associates"),
(iii) the heirs, executors, administrators, testamentary trustees, legatees of
beneficiaries of any Kelso Associate and (iv) any trust, the beneficiaries of
which, or a corporation or partnership, the stockholders or partners of which,
include only a Kelso Associate, his/her spouse, parents, siblings, or direct
lineal descendants.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multi-employer or single-employer plan as defined
in Section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute of) the Borrower, a Subsidiary or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which the Borrower, a Subsidiary, or an ERISA Affiliate
maintained, contributed to or had an obligation to contribute to such plan.
"Pledge Agreements" shall mean the Holdings Pledge Agreement and any
pledge agreement executed and delivered by the Borrower or any Subsidiary of the
Borrower at any time after the date hereof pursuant to Section 7.11.
"Pledged Securities" shall mean all the Pledged Securities as defined
in the relevant Pledge Agreement.
"Prime Lending Rate" shall mean the rate which NatWest announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. NatWest may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"Prior Credit Agreement" shall mean that certain Second Amended and
Restated Credit Agreement by and between the Borrower and NatWest USA Credit
Corp., as amended, supplemented or otherwise modified from time to time.
"Prior Indebtedness" shall mean the Indebtedness of the Borrower and
its Subsidiaries identified on Schedule 5.24 hereto, which is to be paid in full
on the Initial Borrowing Date.
"Projected EBITDA" shall mean, for any period, Consolidated EBITDA for
such period as set forth on the Projections.
"Projections" shall have the meaning provided in Section 5.22(i).
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"Purchase Price" means, with respect to the Contemplated Acquisition,
collectively, (i) all Cash paid by the Borrower or any of its Subsidiaries in
connection with such acquisition, including in respect of transaction costs,
fees and other expenses incurred by the Borrower or any of its Subsidiaries in
connection with such acquisition, (ii) all direct or indirect liabilities
assumed by the Borrower or any of its Subsidiaries in connection with such
acquisition, (iii) the value of all capital stock issued by the Borrower or any
of its Subsidiaries in connection with such acquisition and (iv) any deferred
portion of the purchase price or any other costs paid by the Borrower or any of
its Subsidiaries in connection with such acquisition.
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. ss. 6901 et seq.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Reinvestment Assets" shall mean any assets to be employed in the
business of the Borrower and its Subsidiaries as described in Section 8.01.
"Reinvestment Election" shall have the meaning provided in Section
4.02(A)(c).
"Reinvestment Notice" shall mean a written notice signed by an
Authorized Officer of the Borrower stating that the Borrower, in good faith,
intends and expects to use all or a specified portion of the Net Cash Proceeds
of an Asset Sale to purchase, construct or otherwise acquire Reinvestment
Assets.
"Reinvestment Prepayment Amount" shall mean, with respect to any
Reinvestment Election, the amount, if any, on the Reinvestment Prepayment Date
relating thereto by which (i) the Anticipated Reinvestment Amount in respect of
such Reinvestment Election exceeds (ii) the aggregate amount thereof expended by
the Borrower and its Subsidiaries to acquire Reinvestment Assets.
"Reinvestment Prepayment Date" shall mean, with respect to any
Reinvestment Election, the earliest of (i) the date, if any, upon which the
Agent, on behalf of the Required Lenders, shall have delivered a written
termination notice to the Borrower, provided that such notice may only be given
while an Event of Default exists, (ii) the date occurring one year after such
Reinvestment Election and (iii) the date on which the Borrower shall have
determined not to, or shall
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have otherwise ceased to, proceed with the purchase, construction or other
acquisition of Reinvestment Assets with the related Anticipated Reinvestment
Amount.
"Relevant Test Period" shall mean, at any time, the Test Period ending
on the last day of the then most recently ended fiscal quarter of the Borrower
with respect to which an officer's certificate has been delivered to the Lenders
pursuant to Section 7.01(e).
"Reportable Event" shall mean an event described in Section 4043(b) of
ERISA with respect to a Plan as to which the 30-day notice requirement has not
been waived by the PBGC.
"Required Lenders" shall mean Non-Defaulting Lenders whose outstanding
Term Loans (or, if prior to the Initial Borrowing Date, Term Commitments),
outstanding Bridge Loans (or, if prior to the Initial Borrowing Date, Bridge
Commitments) and Revolving Commitments (or, if after the Total Revolving
Commitment has been terminated, outstanding Revolving Loans and Adjusted
Revolving Commitment Percentage of outstanding Swingline Loans and Letter of
Credit Outstandings) constitute greater than 50% of the sum of (i) the total
outstanding Term Loans of Non-Defaulting Lenders (or, if prior to the Initial
Borrowing Date, the Total Term Commitment), (ii) the total outstanding Bridge
Loans of Non-Defaulting Lenders (or, if prior to the Initial Borrowing Date, the
Total Bridge Commitments) and (iii) the Adjusted Total Revolving Commitment (or,
if after the Total Revolving Commitment has been terminated, the total
outstanding Revolving Loans of Non-Defaulting Lenders and the aggregate Adjusted
Revolving Commitment Percentages of all Non-Defaulting Lenders of the total
outstanding Swingline Loans and Letter of Credit Outstandings at such time).
"Retailer" shall have the meaning provided in Section 8.06(j).
"Revolving Commitment" shall mean, with respect to each Lender, the
amount set forth opposite such Lender's name on Schedule 1.01 hereto directly
below the column entitled "Revolving Commitment," as the same may be reduced
from time to time pursuant to Section 3.02, 3.03 and/or 9 or adjusted from time
to time as a result of assignments to or from such Lender pursuant to Section
12.04.
"Revolving Facility" shall mean the Facility evidenced by the Total
Revolving Commitment.
"Revolving Lenders" shall mean each Lender with Revolving Commitment.
"Revolving Loan" shall have the meaning provided in Section 1.01(d).
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"Revolving Percentage" shall mean at any time for each Lender with a
Revolving Commitment, the percentage obtained by dividing such Lender's
Revolving Commitment by the Total Revolving Commitment; provided; however, that
if the Total Revolving Commitment has been terminated, the Revolving Percentage
of each Lender shall be determined by dividing such Lender's
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Revolving Commitment immediately prior to such termination by the
Total Revolving Commitment immediately prior to such termination.
"Scheduled Repayment" shall have the meaning provided in Section
4.02(A)(b).
"SEC" shall have the meaning provided in Section 7.01(i).
"SEC Regulation D" shall mean Regulation D as promulgated under the
Securities Act of 1933, as amended, as the same may be in effect from time to
time.
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the relevant Security Agreement.
"Security Agreements" shall mean the Borrower Security Agreement, the
Trademark Security Agreement and any security agreement executed and delivered
by any Subsidiary of the Borrower at any time after the date hereof pursuant to
Section 7.11.
"Security Documents" shall mean the Pledge Agreements, the
Guaranties, the Security Agreements, the Mortgages and the Additional Mortgages,
if any.
"Shareholders' Agreements" shall have the meaning provided in Section
5.07(iii).
"Stated Amount" of each Letter of Credit shall mean the maximum
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Stock Issuances" shall have the meaning provided in Section 5.11.
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise
expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Subsidiary Guarantors" shall mean any Subsidiary of the Borrower
that executes and delivers a Subsidiary Guaranty at any time after the date
hereof.
"Subsidiary Guaranty" shall mean any guaranty executed and delivered
by any Subsidiary of the Borrower at any time after the date hereof pursuant to
Section 7.11.
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"Swingline Expiry Date" shall mean the date which is five Business Days
prior to the Expiry Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(e).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Syndication Date" shall mean the earlier of (x) the date which is 90
days after the Effective Date and (y) the date upon which the Agent determines
in its sole discretion (and notifies the Borrower) that the primary syndication
(and the resulting addition of institutions as Lenders pursuant to Section
12.04) has been completed.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Commitment" shall mean for any Lender the sum of its A Term
Commitment and its B Term Commitment.
"Term Loans" shall mean, collectively the A Term Loans and B Term
Loans.
"Test Period" shall mean for any determination the four consecutive
fiscal quarters of the Borrower then last ended (taken as one accounting
period).
"Total A Term Commitment" shall mean the sum of the A Term Commitments
of each of the Lenders.
"Total B Term Commitment" shall mean the sum of the B Term Commitments
of each of the Lenders.
"Total Commitment" shall mean the sum of the Total Term Commitment and
the Total Revolving Commitment.
"Total Revolving Commitment" shall mean the sum of the Revolving
Commitments of each of the Lenders.
"Total Term Commitment" shall mean the sum of the Total A Term
Commitment and the Total B Term Commitment.
"Total Unutilized Revolving Commitment" shall mean, at any time, (i)
the Total Revolving Commitment at such time less (ii) the sum of the aggregate
principal amount of all Revolving Loans and Swingline Loans at such time plus
the Letter of Credit Outstandings at such time.
"Trademark Security Agreement" shall have the meaning provided in
Section 5.15(b).
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"Transaction Expenses" shall mean all fees and expenses incurred in
connection with, and payable prior to or substantially concurrently with the
closing of, the Merger and the Stock Issuances and the transactions contemplated
in connection with the Documents including the financing of the Merger, and
including all fees paid to any of the Lenders and the Agent hereunder, fees paid
to Kelso & Company, Inc. or its Affiliates permitted hereunder; attorney's fees,
accountants' fees, placement agents' fees, discounts and commissions and
brokerage, and consultant fees. Transaction Expenses shall include the
amortization of any such fees and expenses that are capitalized and not
classified as an expense on the date incurred.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan shall mean the amount, if any,
by which the actuarial present value of the accumulated plan benefits under the
Plan as of the close of its most recent plan year determined in accordance with
Statement of Financial Accounting Standards No. 35, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan, exceeds the fair market value of the assets thereof, determined in
accordance with Section 412 of the Code.
"Unpaid Drawing" shall have the meaning provided in Section 2.04(a).
"Unutilized Revolving Commitment" for any Lender with a Revolving
Commitment at any time shall mean the sum of (i) the Revolving Commitment of
such Lender minus (ii) the sum of (A) the aggregate outstanding principal amount
of Revolving Loans made by such Lender plus (B) an amount equal to such Lender's
Revolving Percentage of the Letter of Credit Outstandings at such time.
"Utilized Revolving Commitment" for any Lender with a Revolving
Commitment at any time shall mean the sum of (i) the aggregate outstanding
principal amount of Revolving Loans made by such Lender plus (ii) an amount
equal to such Lender's Revolving Percentage of the Letter of Credit Outstandings
at such time.
"Voting Stock" shall mean, with respect to any corporation, the
outstanding stock of all classes (or equivalent interests) which ordinarily, in
the absence of contingencies, entitles holders thereof to vote for the election
of directors (or Persons performing similar functions) of such corporation, even
though the right so to vote has been suspended by the happening of such a
contingency.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of
such Person to the extent all of the capital stock or other ownership interests
in such Subsidiary, other than directors' qualifying shares, is owned directly
or indirectly by such Person.
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"Working Capital" shall mean the excess of Consolidated Current Assets
over Consolidated Current Liabilities.
"Written" or "in writing" shall mean any form of written communication
or a communication by means of telex, facsimile transmission, telegraph or
cable.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. The words "herein", "hereof" and
words of similar import as used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision in this Agreement. Unless
specifically stated to the contrary, all references to "Sections,"
"subsections," "paragraphs," "Exhibits" and "Schedules" in this Agreement shall
refer to Sections, subsections, paragraphs, Exhibits and Schedules of this
Agreement unless otherwise expressly provided; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
SECTION 11. The Agent.
11.01 Appointment. The Lenders hereby designate NatWest Bank
N.A. as Agent (for purposes of this Section 11, the term "Agent" shall include
NatWest in its capacity as Agent pursuant to the Security Documents) to act as
specified herein and in the other Loan Documents. Each Lender hereby irrevocably
authorizes, and each holder of any Note by the acceptance of such Note shall be
deemed irrevocably to authorize, the Agent to take such action on its behalf
under the provisions of this Agreement, the other Loan Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Agent may perform any of
its duties hereunder by or through its respective officers, directors, agents,
employees or affiliates.
11.02 Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and the
Security Documents. Neither the Agent nor any of its respective officers,
directors, agents, employees or affiliates shall be liable for any action taken
or omitted by it or them hereunder or under any other Loan Document or in
connection herewith or therewith, unless caused by its or their gross negligence
or willful misconduct. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement
or any other Loan Document a fiduciary relationship in respect of any Lender or
the holder of any Note; and nothing in this Agreement or any other Loan
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement or any other
Loan Document except as expressly set forth herein or therein.
11.03 Lack of Reliance on the Agent. Independently and without
reliance upon the Agent, each Lender and the holder of each Note, to the extent
it deems appropriate, has made and
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shall continue to make (i) its own independent investigation of the financial
condition and affairs of the Borrower and its Subsidiaries in connection with
the making and the continuance of the Loans and the taking or not taking of any
action in connection herewith and (ii) its own appraisal of the creditworthiness
of the Borrower and its Subsidiaries and, except as expressly provided in this
Agreement, the Agent shall not have any duty, or responsibility, either
initially or on a continuing basis, to provide any Lender or the holder of any
Note with any credit or other information with respect thereto, whether coming
into its possession before the making of the Loans or at any time or times
thereafter. The Agent shall not be responsible to any Lender or the holder of
any Note for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or any other Loan Document or the financial condition of the Borrower
and its Subsidiaries or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Loan Document, or the financial condition of the Borrower
and its Subsidiaries or the existence or possible existence of any Default or
Event of Default.
11.04 Certain Rights of the Agent. If the Agent shall request
instructions from the Required Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Loan
Document, the Agent shall be entitled to refrain from such act or taking such
action unless and until the Agent shall have received instructions from the
Required Lenders; and the Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, neither any Lender nor
the holder of any Note shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting hereunder or
under any other Loan Document in accordance with the instructions of the
Required Lenders.
11.05 Reliance. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that the Agent believed to be the proper Person, and, with respect to
all legal matters pertaining to this Agreement and any other Loan Document and
its duties hereunder and thereunder, upon advice of counsel selected by the
Agent.
11.06 Indemnification. To the extent the Agent is not
reimbursed and indemnified by the Borrower, the Lenders will reimburse and
indemnify the Agent, in proportion to their respective "percentages" as used in
determining the Required Lenders, for and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, costs,
expenses or disbursements of whatsoever kind or nature which may be imposed on,
asserted against or incurred by the Agent in performing its respective duties
hereunder or under any other Loan Document, in any way relating to or arising
out of this Agreement or any other Loan Document; provided; however, that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct.
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11.07 The Agent in Its Individual Capacity. With respect to
its obligation to make Loans under this Agreement, the Agent shall have the
rights and powers specified herein for a "Lender" and may exercise the same
rights and powers as though it were not performing the duties specified herein;
and the term "Lenders," "Required Lenders," "holders of Notes" or any similar
terms shall, unless the context clearly otherwise indicates, include the Agent
in its individual capacity. The Agent may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other business with any
Credit Party or any Affiliate of any Credit Party as if it were not performing
the duties specified herein, and may accept fees and other consideration from
the Borrower or any other Credit Party for services in connection with this
Agreement and otherwise without having to account for the same to the Lenders.
11.08 Holders. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Agent. Any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
11.09 Resignation by the Agent. (a) The Agent may resign from
the performance of all its functions and duties hereunder and/or under the other
Loan Documents at any time by giving 15 Business Days' prior written notice to
the Borrower and the Lenders. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Lenders shall
appoint a successor Agent hereunder or thereunder who shall be a commercial bank
or trust company reasonably acceptable to the Borrower.
(c) If a successor Agent shall not have been so appointed
within such 15 Business Day period, the Agent, with the consent of the Borrower,
shall then appoint a successor Agent who shall serve as Agent hereunder or
thereunder until such time, if any, as the Lenders appoint a successor Agent as
provided above.
(d) If no successor Agent has been appointed pursuant to
clause (b) or (c) above by the 20th Business Day after the date such notice of
resignation was given by the Agent, the Agent's resignation shall become
effective and the Required Lenders shall thereafter perform all the duties of
the Agent hereunder and/or under any other Loan Document until such time, if
any, as the Lenders appoint a successor Agent as provided above.
11.10 Co-Agent. None of the Lenders identified in this
Agreement or any amendment or supplement hereto as a "Co-Agent" shall have any
right, power, obligation, liability, responsibility or duty under this Agreement
or any other Loan Document other than those applicable to all Lenders as such.
Each Lender acknowledges that it has not relied, and will not rely, on any
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of the Lenders identified as Co-Agents in deciding to enter into this Agreement
or in taking or refraining from taking any action hereunder or pursuant hereto.
SECTION 12. Miscellaneous.
12.01 Payment of Expenses, etc. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agent in connection with the
negotiation, preparation, execution and delivery of the Loan Documents and the
documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements of Winston & Strawn) and of the Agent and each of the Lenders in
connection with the enforcement of the Loan Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and disbursements of counsel for the Agent and for each of the Lenders);
(ii) pay and hold each of the Lenders harmless from and against any and all
present and future stamp and other similar taxes with respect to the foregoing
matters and save each of the Lenders harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to such Lender) to pay such taxes; and (iii)
indemnity each Lender (including in its capacity as the Agent or a Letter of
Credit Issuer), its officers, directors, employees, representatives and agents
from and hold each of them harmless against any and all losses, liabilities,
claims, damages or expenses incurred by any of them as a result of, or arising
out of, or in any way related to, or by reason of, any investigation, litigation
or other proceeding (whether or not any Lender is a party thereto) related to
the entering into and/or performance of any Document or the use of the proceeds
of any Loans hereunder or the Merger or the consummation of any transactions
contemplated in any Loan Document, including, without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified).
12.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law, or otherwise, and not by way of
limitation of any such rights, if an Event of Default then exists, each Lender
is hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to any Credit Party or to any other
Person any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by such Lender (including without
limitation by branches and agencies of such Lender wherever located) to or for
the credit or the account of any Credit Party against and on account of the
Obligations and liabilities of such Credit Party to such Lender under this
Agreement or under any of the other Loan Documents, including, without
limitation, all interests in Obligations of such Credit Party purchased by such
Lender pursuant to Section 12.06(b), and all other claims of any nature or
description arising out of or connected with this Agreement or any other Loan
Document, irrespective of whether or not such Lender shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any of them,
shall be contingent or unmatured.
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12.03 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to a Credit Party, at
the address specified opposite its signature below or in the other relevant Loan
Documents, as the case may be; if to any Lender, at its address specified
opposite its signature below or, at such other address as shall be designated by
any party in a written notice to the other parties hereto. All such notices and
communications shall be mailed, telegraphed, telexed, telecopied, or cabled or
sent by overnight courier, and shall be effective when received.
12.04 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Borrower may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Lenders. Each Lender may at any time grant participations
in any of its rights hereunder or under any of the Notes to another financial
institution, provided that in the case of any such participation, (i) the
participant shall not have any rights under this Agreement or any of the other
Loan Documents (the participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed by such Lender in
favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Lender had not sold such
participation, except that the participant shall be entitled to the benefits of
Sections 1.10 and 4.04 of this Agreement to the extent that such Lender would be
entitled to such benefits if the participation had not been entered into or
sold, (ii) the Borrower and the Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement and the other Loan Documents, and (iii) such Lender shall be
solely responsible for any withholding taxes, and, provided further that no
Lender shall transfer, grant or assign any participation under which the
participant shall have rights to approve any amendment to or waiver of this
Agreement or any other Loan Document except to the extent such amendment or
waiver would (i) extend the final scheduled maturity of any Loan or Note in
which such participant is participating (it being understood that any waiver of
the application of any prepayment or the method of any application of any
prepayment to, the amortization of the Term Loans shall not constitute an
extension of the final maturity date), or reduce the rate or extend the time of
payment of interest or Fees thereon (except in connection with a waiver of the
applicability of any post-default increase in interest rates), or reduce the
principal amount thereof, or increase such participant's participating interest
in any Commitment over the amount thereof then in effect (it being understood
that a waiver of any Default or Event of Default or of a mandatory reduction in
the Total Commitment, or a mandatory prepayment, shall not constitute a change
in the terms of any Commitment), (ii) release any Guarantor from its obligations
under its Guaranty except in accordance with the terms thereof, (iii) release
all or substantially all of the Collateral or (iv) consent to the assignment or
transfer by any Credit Party of any of its rights and obligations under this
Agreement or any other Loan Document.
(b) Notwithstanding the foregoing, (i) any Lender may assign
all or a portion of its outstanding A Term Loans and/or B Term Loans and/or
Revolving Commitment (or, if prior to the Initial Borrowing Date, its A Term
Commitment and/or B Term Commitment) and its rights and obligations hereunder to
another Lender, and (ii) with the consent of the Agent and the Borrower
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(which consents shall not be unreasonably withheld), any Lender may assign all
or a portion of its outstanding A Term Loans and/or B Term Loans and/or
Revolving Commitment and its rights and obligations hereunder to one or more
commercial banks or other financial institutions (including one or more
Lenders). No assignment pursuant to the immediately preceding sentence shall to
the extent such assignment represents an assignment to an institution other than
one or more Lenders hereunder, be in an aggregate amount less than $5,000,000
unless the entire Commitment of the assigning Lender is so assigned. If any
Lender so sells or assigns all or a part of its rights hereunder or under the
Notes, any reference in this Agreement or the Notes to such assigning Lender
shall thereafter refer to such Lender and to the respective assignee to the
extent of their respective interests and the respective assignee shall have, to
the extent of such assignment (unless otherwise provided therein), the same
rights and benefits as it would if it were such assigning Lender. Each
assignment pursuant to this Section 12.04(b) shall be effected by the execution
and delivery of an assignment agreement substantially in the form of Exhibit
12.04 hereto (an "Assignment Agreement"). In the event of any such assignment
(A) to a commercial bank or other financial institution not previously a Lender
hereunder, either the assigning or the assignee Lender shall pay to the Agent a
nonrefundable assignment fee of $3,500 and (B) to a Lender, either the assigning
or assignee Lender shall pay to Agent a nonrefundable assignment fee of $1,500,
and at the time of any assignment pursuant to this Section 12.04(b), (1)
Schedule 1.01 shall be deemed to be amended to reflect the Commitment of the
respective assignee (which shall result in a direct reduction to the Commitment
of the assigning Lender) and of the other Lenders, (2) such assignee shall
become a party to this Agreement as a Lender and such assignee shall have, to
the extent of such assignment, the rights, benefits and obligations of a Lender
hereunder and under the other Loan Documents, and (3) if any such assignment
occurs after the Initial Borrowing Date, the Borrower will issue new Notes to
the respective assignee and to the assigning Lender in conformity with the
requirements of Section 1.05. Each Lender and the Borrower agree to execute such
documents (including without limitation amendments to this Agreement and the
other Loan Documents) as shall be necessary to effect the foregoing. Nothing in
this clause (b) shall prevent or prohibit any Lender from pledging its Notes or
Loans to a Federal Reserve Bank in support of borrowings made by such Lender
from such Federal Reserve Bank.
(c) Notwithstanding any other provisions of this Section
12.04, no transfer or assignment of the interests or obligations of any Lender
hereunder or any grant of participation therein shall be permitted if such
transfer, assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
State.
(d) Each Lender initially party to this Agreement hereby
represents, and each Person that became a Lender pursuant to an assignment
permitted by this Section 12 will, upon its becoming party to this Agreement,
represent that it is a commercial lender, other financial institution or other
"accredited" investor (as defined in SEC Regulation D) which makes loans in the
ordinary course of its business and that it will make or acquire Loans for its
own account in the ordinary course of such business, provided that subject to
the preceding clauses (a) and (b), the disposition of any promissory notes or
other evidences of or interests in Indebtedness held by such Lender shall at all
times be within its exclusive control.
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12.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Agent or any Lender in exercising any right, power or privilege
hereunder or under any other Loan Document and no course of dealing between any
Credit Party and the Agent or any Lender shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or under any other Loan Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder or thereunder.
The rights and remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies which the Agent or any Lender would
otherwise have. No notice to or demand on any Credit Party in any case shall
entitle any Credit Party to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent or the
Lenders to any other or further action in any circumstances without notice or
demand.
12.06 Payments Pro Rata. (a) The Agent agrees that promptly
after its receipt of each payment from or on behalf of any Credit Party in
respect of any Obligations of such Credit Party hereunder, it shall distribute
such payment to the Lenders (other than any Lender that has expressly waived its
right to receive its pro rata share thereof) pro rata based upon their
respective shares, if any, of the Obligations with respect to which such payment
was received.
(b) Each of the Lenders agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Loan Documents, or otherwise)
which is applicable to the payment of the principal of, or interest on, the
Loans or Fees, of a sum which with respect to the related sum or sums received
by other Lenders is in a greater proportion than the total of such Obligation
then owed and due to such Lender bears to the total of such Obligation then owed
and due to all of the Lenders immediately prior to such receipt, then such
Lender receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the respective
Credit Party to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount, provided that if all or any
portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of the preceding Sections 12.06(a) and (b) shall be subject to
the express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.
12.07 Calculations; Computations. (a) The financial statements
to be furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Lenders); provided, however, that (i) except as otherwise
specifically provided herein, all computations determining compliance with
Section 8, including definitions used therein, shall utilize accounting
principles and policies in effect at the time of the preparation of, and in
conformity with those used to prepare, the January 28, 1995 historical
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financial statements of the Borrower delivered to the Lenders pursuant to
Section 6.10(b), and (ii) that if at any time the computations determining
compliance with Section 8 utilize accounting principles different from those
utilized in the financial statements furnished to the Lenders, such financial
statements shall be accompanied by reconciliation work-sheets.
(b) All computations of interest and Fees hereunder shall be
made on the actual number of days elapsed over a year of 360 days.
12.08 Governing Law; Submission to Jurisdiction; Venue; Waiver
of Jury Trial. (a) This Agreement and the other Loan Documents and the rights
and obligations of the parties hereunder and thereunder shall be construed in
accordance with and be governed by the law of the State of New York. Any legal
action or proceeding with respect to this Agreement or any other Loan Document
may be brought in the courts of the State of New York or of the United States
for the Southern District of New York, and, by execution and delivery of this
Agreement, each Credit Party hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each Credit Party further irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to each Credit Party located outside New York City and by hand
delivery to each Credit Party located within New York City, at its address for
notices pursuant to Section 12.03, such service to become effective 30 days
after such mailing. Each Credit Party hereby irrevocably designates appoints and
empowers CT Corporation System as its agent for service of process in respect of
any such action or proceeding. Nothing herein shall affect the right of the
Agent, any Lender to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any Credit Party in any
other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Loan Document brought in the courts referred to in clause
(a) above and hereby further irrevocably waives and agrees not to plead or claim
in any such court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.
(c) Each of the parties to this agreement hereby irrevocably
waives all right to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this agreement, the other credit documents or the
transactions contemplated hereby or thereby.
12.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
-99-
<PAGE>
12.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which the Borrower and each of the Lenders
shall have signed a copy hereof (whether the same or different copies) and shall
have delivered the same to the Agent at the Payment Office of the Agent or, in
the case of the Lenders, shall have given to the Agent telephonic (confirmed in
writing), written telex or facsimile transmission notice (actually received) at
such office that the same has been signal and mailed to it.
12.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
12.12 Amendment or Waiver. Neither this Agreement nor any
other Loan Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower and the Required Lenders; provided, however,
that no such change, waiver, discharge or termination shall, without the consent
of each Lender (other than a Defaulting Lender) affected thereby, (i) extend the
Final Maturity Date or Expiry Date, as the case may be, (it being understood
that any waiver of the application of any prepayment of or the method of
application of any prepayment to the amortization of, the Loans shall not
constitute any such extension), or reduce the rate or extend the time of payment
of interest (other than as a result of waiving the applicability of any
post-default increase in interest rates) or Fees thereon, or reduce the
principal amount thereof, or increase the Commitment of any Lender over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default or of a mandatory reduction in the Total Commitment shall
not constitute a change in the terms of any Commitment of any Lender), (ii)
release or permit the release of all or substantially all of the Collateral or
release any Guarantor from its Guaranty (in each case except as expressly
provided in the Loan Documents), (iii) amend, modify or waive any provision of
this Section, (iv) reduce the percentage specified in, or otherwise modify, the
definition of Required Lenders or (v) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement; provided
further, that no such change, waiver, discharge or termination shall: (A) reduce
the amount or extend the payment date for the mandatory prepayments of A Term
Loans required under Section 4.02 without the consent of each Lender (other than
a Defaulting Lender) which has an A Term Loan then outstanding; (B) reduce the
amount or extend the payment date for the mandatory prepayments of B Term Loans
required under Section 4.02 without the consent of each Lender (other than a
Defaulting Lender) which has a B Term Loan then outstanding; (C) reduce the
amount or extend the payment date for the mandatory prepayments of Bridge Loans
required under Section 4.02 without the consent of each Lender (other than a
Defaulting Lender) which has a Bridge Loan then outstanding; or (D) reduce the
amount of, or extend the date for, any mandatory reduction in the Revolving
Commitments required under Section 3.03(d), or reduce the amount or extend the
payment date for the mandatory prepayments of Revolving Loans required under
Section 4.02, without the consent of each Lender (other than a Defaulting
Lender) which has a Revolving Commitment at such time (or, if after the Total
Revolving Commitment has been terminated, each Lender (other than a Defaulting
Lender) which has any Revolving Loans then outstanding); and provided further,
that the Agent and the Borrower may amend this Agreement without the consent of
any Lender solely for the purpose of designating
-100-
<PAGE>
any Person that becomes a Lender as a Co-Agent hereunder. No provision of
Section 2 or 11 may be amended without the consent of the Letter of Credit
Issuer or the Agent, respectively.
12.13 Survival. All indemnities set forth herein including,
without limitation, in Sections 1.10, 1.11, 4.04, 11.07 and 12.01 shall survive
the execution and delivery of this Agreement and the making and repayment of the
Loans.
12.14 Domicile of Loans. Each Lender may transfer and carry
its Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Lender, provided that the Borrower shall not be responsible
for costs arising under Section 1.10 or 4.04 resulting from any such transfer
(other than a transfer pursuant to Section 1.12) to the extent not otherwise
applicable to such Lender prior to such transfer.
12.15 Confidentiality. Subject to Section 12.04, the Lenders
shall hold all non-public information obtained pursuant to the requirements of
this Agreement which has been identified as such by the Borrower in accordance
with its customary procedure for handling confidential information of this
nature and in accordance with safe and sound banking practices and in any event
may make disclosure reasonably required by any bona fide transferee or
participant in connection with the contemplated transfer of any Loans or
participation therein (so long as such transferee or participant agrees in
writing to be bound by the provisions of this Section 12.15) or as required or
requested by any governmental agency or representative thereof or pursuant to
legal process, provided that, unless specifically prohibited by applicable law
or court order, each Lender shall notify the Borrower of any request by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental agency) for disclosure of any such non-public information prior to
disclosure of such information, and provided further that in no event shall any
Lender be obligated or required to return any materials furnished by the
Borrower or any Subsidiary.
* * *
-101-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Agreement to be duly executed and delivered as of the date first above
written.
Address: PEEBLES INC.,
One Peebles Street as Borrower
South Hill, Virginia 23970 By: _____________________
Attention: E. Randolph Lail
Vice President Name:____________________
Tel. No.: (804) 447-5218 Title:___________________
Fax No.: (804) 447-2387
Address: NATWEST BANK N.A.
175 Water Street Individually and as Agent
New York, New York 10038 By: _____________________
Attention: Michael Richmond
Vice President Name:____________________
Tel. No.: (212) 602-3505
Fax No.: (212) 602-3393 Title:___________________
With a copy (other than Notices of
Borrowing and Financial statements,
reports and related certificates
delivered pursuant to Section 7.01) to:
WINSTON & STRAWN
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Bruce A. Toth, Esq.
Tel. No.: (312) 558-5723
Fax No.: (312) 558-5700
Address: SOCIETE GENERALE, SOUTHWEST
Trammell Crow Center AGENCY
Suite 4800 By: _____________________
2001 Ross Avenue
Dallas, Texas 75201 Name:____________________
Attention: Louis P. Laville, III
Vice President Title:___________________
Tel. No.: (214) 979-2777
Fax No.: (214) 979-1104
-105-
SCHEDULE 1.01
COMMITMENTS
<TABLE>
<CAPTION>
A Term B Term Bridge Revolving
Lender Commitment Commitment Commitment Commitment
<S> <C> <C> <C> <C>
NatWest Bank N.A. $13,333,333.33 $20,000,000.00 $6,623,286.00 $46,666,666.67
Societe Generale $ 6,666,666.67 $10,000,000.00 $0.00 $23,333,333.33
-------------- -------------- ----- --------------
Total: $20,000,000.00 $30,000,000.00 $6,623,286.00 $70,000,000.00
============== ============== ============= ==============
</TABLE>
-102-
<PAGE>
A TERM NOTE
$_________________ New York, New York
June 9, 1995
FOR VALUE RECEIVED, the undersigned, PEEBLES INC., a Virginia
corporation ("Borrower"), hereby unconditionally promises to pay to the order of
______________________, a _________ _________ ("Lender"), at the office of Agent
(as defined in the Credit Agreement referred to below) located at 175 Water
Street, New York, New York 10038, or at such other place as the holder of this A
Term Note may from time to time designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal sum
of ____________________ ($_____________).
This A Term Note is payable in periodic installments on the
dates and in the amounts set forth in the Credit Agreement. This A Term Note is
one of the Notes referred to in, was executed and delivered pursuant to, and
evidences obligations of Borrower under, that certain Credit Agreement dated as
of June 9, 1995 by and among Borrower, Agent and Lenders (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), to which reference is hereby made for a statement of the
terms and conditions under which the loan evidenced hereby is made and is to be
repaid and for a statement of Agent's and Lenders' rights and remedies. The
Credit Agreement is incorporated herein by reference in its entirety.
Capitalized terms used but not otherwise defined herein are used in this A Term
Note as defined in the Credit Agreement.
Borrower further promises to pay interest on the outstanding
unpaid principal amount hereof from the date hereof until payment in full hereof
at the rate from time to time applicable to the A Term Loan as determined in
accordance with the Credit Agreement. Interest charges shall be computed on the
daily principal balance of the A Term Loan and shall be computed on the basis of
a three hundred sixty (360) day year for the actual number of days elapsed in
the period during which it accrues. In computing interest on this A Term Note,
the date of funding of the A Term Loan shall be included and the date of actual
payment in full of the A Term Loan shall be excluded; provided however, that if
the A Term Loan is repaid on the same day on which it is made, one day's
interest shall be paid on the A Term Loan. Interest on this A Term Note shall be
payable at the rates, at the times and from the dates specified in the Credit
Agreement, on the date of any prepayment hereof, at maturity, whether due by
acceleration or otherwise, and as otherwise provided in the Credit Agreement.
From and after the date when the principal balance hereof becomes due and
payable, whether by acceleration or otherwise, interest hereon shall be payable
on demand.
<PAGE>
This A Term Note is secured pursuant to the Credit Agreement
and the Loan Documents referred to therein, and reference is made thereto for a
statement of the terms and conditions of such security.
If a payment hereunder becomes due and payable hereunder other
than on a Business Day, the due date thereof shall be extended to the next
succeeding Business Day, and interest shall be payable thereon during such
extension at the applicable rate specified in the Credit Agreement. Credit for
any payments made by Borrower shall, for the purpose of computing interest
earned by Lender, be given in accordance with the Credit Agreement. In no
contingency or event whatsoever shall interest charged hereunder, however such
interest may be characterized or computed, exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that Lender has received interest hereunder in excess of the highest rate
applicable hereto, such excess shall be applied in accordance with the terms of
the Credit Agreement.
Agent shall have the continuing exclusive right to apply and
to reapply any and all payments hereunder against the Obligations as provided in
the Credit Agreement and the Loan Documents.
Borrower hereby waives demand, presentment and protest and
notice of demand, presentment, protest and nonpayment. Borrower also waives all
rights to notice and hearing of any kind upon the occurrence and continuance of
an Event of Default prior to the exercise by Lenders, or Agent on behalf of
Lenders, of their right to repossess the Collateral without judicial process or
to replevy, attach or levy upon the Collateral without notice or hearing.
THIS A TERM NOTE SHALL BE DEEMED TO HAVE BEEN DELIVERED AND
MADE AT NEW YORK, NEW YORK AND SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) AND JUDICIAL DECISIONS OF THE
STATE OF NEW YORK.
Whenever possible each provision of this A Term Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this A Term Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this A Term Note. Whenever in this A Term Note
reference is made to Agent, Lenders or Borrower, such reference shall be deemed
to include, as applicable, a reference to their respective permitted successors
and assigns and, in the case of any Lender, any financial institutions to which
it has sold or assigned all or any part of its commitment to make the A Term
Loan as permitted under the Credit Agreement. The provisions of this A Term Note
shall be binding upon and shall inure to the benefit of such permitted
successors and assigns. Borrower's successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for Borrower.
-2-
<PAGE>
PEEBLES INC.,
a Virginia corporation
By: ________________________________
Name: _______________________________
Title: ______________________________
-3-
B TERM NOTE
$_________________ New York, New York
June 9, 1995
FOR VALUE RECEIVED, the undersigned, PEEBLES INC., a Virginia
corporation ("Borrower"), hereby unconditionally promises to pay to the order of
______________________, a _________ _________ ("Lender"), at the office of Agent
(as defined in the Credit Agreement referred to below) located at 175 Water
Street, New York, New York 10038, or at such other place as the holder of this
Term Note may from time to time designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal sum
of ______________________________ ($_______________).
This B Term Note is payable in periodic installments on the
dates and in the amounts set forth in the Credit Agreement. This B Term Note is
one of the Notes referred to in, was executed and delivered pursuant to, and
evidences obligations of Borrower under, that certain Credit Agreement dated as
of June 9, 1995 by and among Borrower, Agent and Lenders (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), to which reference is hereby made for a statement of the
terms and conditions under which the loan evidenced hereby is made and is to be
repaid and for a statement of Agent's and Lenders' rights and remedies. The
Credit Agreement is incorporated herein by reference in its entirety.
Capitalized terms used but not otherwise defined herein are used in this B Term
Note as defined in the Credit Agreement.
Borrower further promises to pay interest on the outstanding
unpaid principal amount hereof from the date hereof until payment in full hereof
at the rate from time to time applicable to the B Term Loan as determined in
accordance with the Credit Agreement. Interest charges shall be computed on the
daily principal balance of the B Term Loan and shall be computed on the basis of
a three hundred sixty (360) day year for the actual number of days elapsed in
the period during which it accrues. In computing interest on this B Term Note,
the date of funding of the B Term Loan shall be included and the date of actual
payment in full of the B Term Loan shall be excluded; provided however, that if
the B Term Loan is repaid on the same day on which it is made, one day's
interest shall be paid on the B Term Loan. Interest on this B Term Note shall be
payable at the rates, at the times and from the dates specified in the Credit
Agreement, on the date of any prepayment hereof, at maturity, whether due by
acceleration or otherwise, and as otherwise provided in the Credit Agreement.
From and after the date when the principal balance hereof becomes due and
payable, whether by acceleration or otherwise, interest hereon shall be payable
on demand.
<PAGE>
This B Term Note is secured pursuant to the Credit Agreement
and the Loan Documents referred to therein, and reference is made thereto for a
statement of the terms and conditions of such security.
If a payment hereunder becomes due and payable hereunder other
than on a Business Day, the due date thereof shall be extended to the next
succeeding Business Day, and interest shall be payable thereon during such
extension at the applicable rate specified in the Credit Agreement. Credit for
any payments made by Borrower shall, for the purpose of computing interest
earned by Lender, be given in accordance with the Credit Agreement. In no
contingency or event whatsoever shall interest charged hereunder, however such
interest may be characterized or computed, exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that Lender has received interest hereunder in excess of the highest rate
applicable hereto, such excess shall be applied in accordance with the terms of
the Credit Agreement.
Agent shall have the continuing exclusive right to apply and
to reapply any and all payments hereunder against the Obligations as provided in
the Credit Agreement and the Loan Documents.
Borrower hereby waives demand, presentment and protest and
notice of demand, presentment, protest and nonpayment. Borrower also waives all
rights to notice and hearing of any kind upon the occurrence and continuance of
an Event of Default prior to the exercise by Lenders, or Agent on behalf of
Lenders, of their right to repossess the Collateral without judicial process or
to replevy, attach or levy upon the Collateral without notice or hearing.
THIS B TERM NOTE SHALL BE DEEMED TO HAVE BEEN DELIVERED AND
MADE AT NEW YORK, NEW YORK AND SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) AND JUDICIAL DECISIONS OF THE
STATE OF NEW YORK.
Whenever possible each provision of this B Term Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this B Term Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this B Term Note. Whenever in this B Term Note
reference is made to Agent, Lenders or Borrower, such reference shall be deemed
to include, as applicable, a reference to their respective permitted successors
and assigns and, in the case of any Lender, any financial institutions to which
it has sold or assigned all or any part of its commitment to make the B Term
Loan as permitted under the Credit Agreement. The provisions of this B Term Note
shall be binding upon and shall inure to the benefit of such permitted
successors and assigns. Borrower's successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for Borrower.
-2-
<PAGE>
PEEBLES INC.,
a Virginia corporation
By: _______________________________
Name: ______________________________
Title: _____________________________
-3-
BRIDGE NOTE
$6,623,286 New York, New York
June 9, 1995
FOR VALUE RECEIVED, the undersigned, PEEBLES INC., a Virginia
corporation ("Borrower"), hereby unconditionally promises to pay to the order of
NatWest Bank N.A., a national banking association ("NatWest"), at its office at
175 Water Street, New York, New York 10038, or at such other place as the holder
of this Bridge Note may from time to time designate in writing, in lawful money
of the United States of America and in immediately available funds, the
principal sum of SIX MILLION SIX HUNDRED TWENTY-THREE THOUSAND TWO HUNDRED
EIGHTY- SIX DOLLARS ($6,623,286).
This Bridge Note is payable in full on the Bridge Maturity
Date as set forth in the Credit Agreement defined below. This Bridge Note is one
of the Notes referred to in, was executed and delivered pursuant to, and
evidences obligations of Borrower under, that certain Credit Agreement dated as
of June 9, 1995 by and among Borrower, NatWest and Lenders (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), to which reference is hereby made for a statement of the
terms and conditions under which the loan evidenced hereby is made and is to be
repaid and for a statement of NatWest's rights and remedies. The Credit
Agreement is incorporated herein by reference in its entirety. Capitalized terms
used but not otherwise defined herein are used in this Bridge Note as defined in
the Credit Agreement.
Borrower further promises to pay interest on the outstanding
unpaid principal amount hereof from the date hereof until payment in full hereof
at the rate from time to time applicable to the Bridge Loan as determined in
accordance with the Credit Agreement. Interest charges shall be computed on the
daily principal balance of the Bridge Loan and shall be computed on the basis of
a three hundred sixty (360) day year for the actual number of days elapsed in
the period during which it accrues. In computing interest on this Bridge Note,
the date of funding of the Bridge Loan shall be included and the date of actual
payment in full of the Bridge Loan shall be excluded; provided however, that if
a Loan is repaid on the same day on which it is made, one day's interest shall
be paid on such Loan. Interest on this Bridge Note shall be payable at the
rates, at the times and from the dates specified in the Credit Agreement, on the
date of any prepayment hereof, at maturity, whether due by acceleration or
otherwise, and as otherwise provided in the Credit
<PAGE>
Agreement. From and after the date when the principal balance hereof becomes due
and payable, whether by acceleration or otherwise, interest hereon shall be
payable on demand.
This Bridge Note is secured pursuant to the Credit Agreement
and the Loan Documents referred to therein, and reference is made thereto for a
statement of the terms and conditions of such security.
If a payment hereunder becomes due and payable hereunder other
than on a Business Day, the due date thereof shall be extended to the next
succeeding Business Day, and interest shall be payable thereon during such
extension at the applicable rate specified in the Credit Agreement. Credit for
any payments made by Borrower shall, for the purpose of computing interest
earned by NatWest, be given in accordance with the Credit Agreement. In no
contingency or event whatsoever shall interest charged hereunder, however such
interest may be characterized or computed, exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that NatWest has received interest hereunder in excess of the highest rate
applicable hereto, such excess shall be applied in accordance with the terms of
the Credit Agreement.
NatWest shall have the continuing exclusive right to apply and
to reapply any and all payments hereunder against the Obligations as provided in
the Credit Agreement and the Loan Documents.
Borrower hereby waives demand, presentment and protest and
notice of demand, presentment, protest and nonpayment. Borrower also waives all
rights to notice and hearing of any kind upon the occurrence and continuance of
an Event of Default prior to the exercise by NatWest of its right to repossess
the Collateral without judicial process or to replevy, attach or levy upon the
Collateral without notice or hearing.
THIS BRIDGE NOTE SHALL BE DEEMED TO HAVE BEEN DELIVERED AND
MADE AT NEW YORK, NEW YORK AND SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) AND JUDICIAL DECISIONS OF THE
STATE OF NEW YORK.
Whenever possible each provision of this Bridge Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Bridge Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Bridge Note. Whenever in this Bridge Note
reference is made to NatWest or Borrower, such reference shall be deemed to
include, as applicable, a reference to their respective permitted successors and
assigns and, in the case of NatWest, any financial institutions to which it has
sold or assigned all or any part of its commitment to make the Bridge Loan as
permitted under the Credit Agreement. The provisions of this Bridge Note shall
be binding upon and shall inure to the benefit of such permitted successors and
assigns. Borrower's successors and assigns shall include, without limitation, a
receiver, trustee or debtor in possession of or for Borrower.
-2-
<PAGE>
PEEBLES INC.,
a Virginia corporation
By: ______________________________
Name: _____________________________
Title: ____________________________
-3-
REVOLVING NOTE
$_________________ New York, New York
June 9, 1995
FOR VALUE RECEIVED, the undersigned, PEEBLES INC., a Virginia
corporation ("Borrower"), hereby unconditionally promises to pay to the order of
______________________, a _________ _________ ("Lender"), at the office of Agent
(as defined in the Credit Agreement referred to below) located at 175 Water
Street, New York, New York 10038, or at such other place as the holder of this
Revolving Note may from time to time designate in writing, in lawful money of
the United States of America and in immediately available funds, the principal
sum of ______________________________ ($_____________), or, if less, the
aggregate unpaid principal amount of all advances made to Borrower by Lender
pursuant to Section 1.01(d) of the Credit Agreement (as hereinafter defined), at
such times as are specified in, and in accordance with, the provisions of the
Credit Agreement.
This Revolving Note is one of the Notes referred to in, was
executed and delivered pursuant to, and evidences obligations of Borrower under,
that certain Credit Agreement dated as of June 9, 1995 by and among Borrower,
Agent and Lenders (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), to which
reference is hereby made for a statement of the terms and conditions under which
the loan evidenced hereby is made and is to be repaid and for a statement of
Agent's and Lenders' rights and remedies. The Credit Agreement is incorporated
herein by reference in its entirety. Capitalized terms used but not otherwise
defined herein are used in this Revolving Note as defined in the Credit
Agreement.
Borrower further promises to pay interest on the outstanding
unpaid principal amount hereof from the date hereof until payment in full hereof
at the rate from time to time applicable to the Revolving Loans as determined in
accordance with the Credit Agreement. Interest charges shall be computed on the
daily principal balance of the Revolving Loan and shall be computed on the basis
of a three hundred sixty (360) day year for the actual number of days elapsed in
the period during which it accrues. In computing interest on this Revolving
Note, the date of funding of the Revolving Loan shall be included and the date
of actual payment in full of the Revolving Loan shall be excluded; provided
however, that if a Loan is repaid on the same day on which it is made, one day's
interest shall be paid on such Loan. Interest on this Revolving Note shall be
payable at the rates, at the times and from the dates specified in the Credit
Agreement, on the date of any prepayment hereof, at maturity, whether due by
acceleration or otherwise, and as otherwise provided in the Credit Agreement.
From and after the date when the principal balance hereof becomes due and
payable, whether by acceleration or otherwise, interest hereon shall be payable
on demand.
<PAGE>
This Revolving Note is secured pursuant to the Credit
Agreement and the Loan Documents referred to therein, and reference is made
thereto for a statement of the terms and conditions of such security.
If a payment hereunder becomes due and payable hereunder other
than on a Business Day, the due date thereof shall be extended to the next
succeeding Business Day, and interest shall be payable thereon during such
extension at the applicable rate specified in the Credit Agreement. Credit for
any payments made by Borrower shall, for the purpose of computing interest
earned by Lender, be given in accordance with the Credit Agreement. In no
contingency or event whatsoever shall interest charged hereunder, however such
interest may be characterized or computed, exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that Lender has received interest hereunder in excess of the highest rate
applicable hereto, such excess shall be applied in accordance with the terms of
the Credit Agreement.
Agent shall have the continuing exclusive right to apply and
to reapply any and all payments hereunder against the Obligations as provided in
the Credit Agreement and the Loan Documents.
Borrower hereby waives demand, presentment and protest and
notice of demand, presentment, protest and nonpayment. Borrower also waives all
rights to notice and hearing of any kind upon the occurrence and continuance of
an Event of Default prior to the exercise by Lenders, or Agent on behalf of
Lenders, of their right to repossess the Collateral without judicial process or
to replevy, attach or levy upon the Collateral without notice or hearing.
THIS REVOLVING NOTE SHALL BE DEEMED TO HAVE BEEN DELIVERED AND
MADE AT NEW YORK, NEW YORK AND SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) AND JUDICIAL DECISIONS OF THE
STATE OF NEW YORK.
Whenever possible each provision of this Revolving Note shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Revolving Note shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Revolving Note. Whenever in this Revolving
Note reference is made to Agent, Lenders or Borrower, such reference shall be
deemed to include, as applicable, a reference to their respective permitted
successors and assigns and, in the case of any Lender, any financial
institutions to which it has sold or assigned all or any part of its commitment
to make the Revolving Loan as permitted under the Credit Agreement. The
provisions of this Revolving Note shall be binding upon and shall inure to the
benefit of such permitted successors and assigns. Borrower's successors and
assigns shall include, without limitation, a receiver, trustee or debtor in
possession of or for Borrower.
-2-
<PAGE>
PEEBLES INC.,
a Virginia corporation
By: _________________________________
Name: ________________________________
Title: _______________________________
-3-
Exhibit 10.24
SWINGLINE NOTE
$5,000,000 New York, New York
June 9, 1995
FOR VALUE RECEIVED, the undersigned, PEEBLES INC., a Virginia corporation
("Borrower"), hereby unconditionally promises to pay to the order of NatWest
Bank N.A., a national banking association ("NatWest"), at its office at 175
Water Street, New York, New York 10038, or at such other place as the holder of
this Swingline Note may from time to time designate in writing, in lawful money
of the United States of America and in immediately available funds, the
principal sum of FIVE MILLION DOLLARS ($5,000,000), or, if less, the aggregate
unpaid principal amount of all advances made to Borrower by NatWest pursuant to
Section 1.01(e) of the Credit Agreement (as hereinafter defined), at such times
as are specified in, and in accordance with, the provisions of the Credit
Agreement.
This Swingline Note is one of the Notes to in, was executed and delivered
pursuant to, and evidences obligations of Borrower under, that certain Credit
Agreement dated as of June 9, 1995 by and among Borrower, NatWest and Lenders
(as the same may be amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"), to which reference is hereby made for a
statement of the terms and conditions under which the loan evidenced hereby is
made and is to be repaid and for a statement of NatWest's rights and remedies.
The Credit Agreement is incorporated herein by reference in its entirety.
Capitalized terms used but not otherwise defined herein are used in this
Swingline Note as defined in the Credit Agreement.
Borrower further promises to pay interest on the outstanding unpaid
principal amount hereof from the date hereof until payment in full hereof at the
rate from time to time applicable to the Swingline Loans as determined in
accordance with the Credit Agreement. Interest charges shall be computed on the
daily principal balance of the Swingline Loan and shall be computed on the basis
of a three hundred sixty (360) day year for the actual number of days elapsed in
the period during which it accrues. In computing interest on this Swingline
Note, the date of funding of the Swingline Loan shall be included and the date
of the actual payment in full of the Swingline Loan shall be excluded; provided
however, that if a Loan is repaid on the same day on which it is made, one day's
interest shall be paid on such Loan. Interest on this Swingline Note shall be
payable at the rates, at the times and from the dates specified in the Credit
Agreement, on the date of any prepayment hereof, at maturity, whether due by
acceleration or otherwise, and as otherwise provided in the Credit Agreement.
From and after the date when the principal balance hereof becomes due and
payable, whether by acceleration or otherwise, interest hereon shall be payable
on demand.
This Swingline Note is secured pursuant to the Credit Agreement and the
Loan Documents referred to therein, and reference is made thereto for a
statement of the terms and conditions of such security.
If a payment hereunder becomes due and payable hereunder other than on a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
applicable rate specified in the Credit Agreement. Credit for any payments made
by Borrower shall, for the purpose of computing interest earned by NatWest, be
given in accordance with the Credit Agreement. In no contingency or event
whatsoever shall interest charged hereunder, however such interest may be
characterized or computed, exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that NatWest has
received interest hereunder in excess of the highest rate applicable hereto,
such excess shall be applied in accordance with the terms of the Credit
Agreement.
NatWest shall have the continuing exclusive right to apply and to reapply
any and all payments hereunder against the Obligations as provided in the Credit
Agreement and the Loan Documents.
Borrower hereby waives demand, presentment and protest and notice of
demand, presentment, protest and nonpayment. Borrower also waives all rights to
notice and hearing of any kind upon the occurrence and continuance of an Event
of Default prior to the exercise by NatWest of its right to repossess the
Collateral without judicial process or to replevy, attach or levy upon the
Collateral without notice or hearing.
THIS SWINGLINE NOTE SHALL BE DEEMED TO HAVE BEEN DELIVERED AND MADE AT NEW
YORK, NEW YORK AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) AND JUDICIAL DECISIONS OF THE STATE OF NEW YORK.
Whenever possible each provision of this Swingline Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Swingline Note shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Swingline Note. Whenever in this Swingline
Note reference is made to NatWest or Borrower, such reference shall be deemed to
include, as applicable, a reference to their respective permitted successors and
assigns and, in the case of NatWest any financial institutions to which it has
sold or assigned all of any part to its commitment to make the Swingline Loan as
permitted under the Credit Agreement. The provisions of this Swingline Note
shall be binding upon and shall inure to the benefit of such permitted
successors and assigns. Borrower's successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for Borrower.
PEEBLES INC.
a Virginia corporation
By:_____________________________
Name:___________________________
Title:___________________________
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of June 9, 1995 (this "Agreement"),
is by and between:
PEEBLES INC., a Virginia corporation, having an office at One Peebles
Street, South Hill, Virginia 23970 (the "Borrower"); and
NATWEST BANK N.A., a national banking association, as agent (the
"Agent") for the benefit of the Lenders under the Credit Agreement referred to
below, having an office at 175 Water Street, New York, New York 10038.
R E C I T A L S:
WHEREAS, the Borrower has entered into that certain Credit Agreement of
even date herewith (as amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement") with the Agent and the Lenders
providing for Loans and Letters of Credit to be made or issued to the Borrower
by the Agent and the Lenders;
WHEREAS, it is a condition precedent to the making of the initial Loans
and the issuance of any Letters of Credit under the Credit Agreement that the
Borrower shall have executed and delivered this Agreement; and
WHEREAS, all capitalized terms used herein but not otherwise defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement;
NOW, THEREFORE, in consideration of the premises herein and in order to
induce the Agent and the Lenders to make the Loans and issue the Letters of
Credit provided for in the Credit Agreement, the Borrower agrees with the Agent
for its benefit and the benefit of the Lenders as follows:
1. SECURITY INTEREST.
To secure the due payment and performance of the Obligations
and all indebtedness and other liabilities and obligations, whether now existing
or hereafter arising and whether or not currently contemplated, of the Borrower
to the Agent or any Lender under, arising out of or in any way connected with
the Credit Agreement, and all instruments, agreements and documents executed,
issued and delivered pursuant thereto, including, without limitation, this
Agreement and the other Loan Documents, and to secure any other obligations of
the Borrower to the Agent or any Lender, whether now existing or hereafter
arising (all such debts, obligations and liabilities of the Borrower being
collectively referred to as the "Secured Obligations"), the Borrower hereby
assigns, conveys,
<PAGE>
mortgages, pledges, hypothecates, transfers and sets over to the Agent and
grants to the Agent, for its benefit and for the benefit of the Lenders, a first
priority lien upon and security interest in all assets of the Borrower set
forth, referred to, or listed on Schedule I annexed hereto and made a part
hereof and in any and all proceeds thereof and substitutions therefor
(collectively, the "Collateral").
2. BORROWER'S TITLE; LIENS AND ENCUMBRANCES.
The Borrower represents and warrants that the Borrower is, or
to the extent that this Agreement states that the Collateral is to be acquired
after the date hereof, will be, the owner of the Collateral, having good and
legal title thereto, free from any and all Liens, other than Permitted Liens and
Permitted Encumbrances. The Borrower will not create or assume or permit to
exist any such Lien on or against the Collateral except as created by this
Agreement and as permitted by the Credit Agreement, and the Borrower will
promptly notify the Agent of any such other Lien made or asserted against the
Collateral and will defend the Collateral against any such Lien.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO
COLLATERAL.
(a) The Borrower represents and warrants that its chief
executive office, chief place of business and the office where the Borrower's
books of account and records are kept is located at the address first specified
above for the Borrower and that all the places where the Collateral (excluding
rolling stock, goods in transit between the point of delivery by the vendor
thereof and goods in transit between the locations set forth on Schedule II
annexed hereto) is used, stored or located, are set forth on Schedule II and
that it has no trade or billing names except as set forth on Schedule II. The
Borrower covenants that it shall not change the location of its chief executive
office or where its books and records are maintained, or the names currently
used by it for billing or other business purposes, or the places where
Collateral is used, stored or located, without the Agent's prior written
consent, unless (i) the Borrower shall have given the Agent thirty (30) days'
prior written notice of such change and (ii) the Agent shall have received such
instruments or documents as the Agent may reasonably request so that such change
will not impair or negatively affect the Liens granted to the Agent hereunder.
(b) The Borrower represents and warrants that it has
complied and is in compliance with the provisions of the Fair Labor Standards
Act, including without limitation, the minimum wage and overtime rules of that
Act, and covenants that the Borrower will continue to comply with the provisions
of such Act.
4. PERFECTION OF SECURITY INTEREST.
The Borrower will join with the Agent in executing one or more
financing statements pursuant to the UCC or other similar notices appropriate
under applicable law in form satisfactory to the Agent and will pay all filing
or recording costs with respect thereto, and all costs of filing or recording
this Agreement or any other instrument, agreement or document executed and
delivered pursuant hereto (including the cost of all federal, state or local
mortgage, documentary, stamp or
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<PAGE>
other similar taxes), in each case, in all public offices where filing or
recording is deemed by the Agent to be necessary or desirable. The Borrower
hereby authorizes the Agent to take all action (including, without limitation,
the filing of any UCC Financing Statements or amendments thereto without the
signature of the Borrower) which the Agent may deem necessary or desirable to
perfect or otherwise protect the liens and security interests created hereunder
and to obtain the benefits of this Agreement.
5. GENERAL COVENANTS.
The Borrower shall:
(a) furnish the Agent from time to time at the Agent's
request written statements and schedules further identifying and describing the
Collateral in such detail as the Agent may reasonably require;
(b) mark its books and records to evidence the Agent's
security interest in such part of the Collateral, if any, in which the Agent 's
security interest cannot be perfected by filing;
(c) comply in all material respects with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official applicable to the Collateral or any part thereof or to the operation of
the Borrower's business, provided that the Borrower may, subject to the terms
and conditions of the Credit Agreement, contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will not, in the Agent's opinion, adversely affect its rights or the priority of
its security interest in the Collateral;
(d) advise the Agent promptly, in sufficient detail, of any
changes in, additions to or deletions from the corporate or business names used
by the Borrower in the operation of its business, including, without limitation,
any names used by the Borrower for billing purposes;
(e) promptly notify the Agent of all disputes with account
debtors of the Borrower in excess of $20,000; and
(f) promptly execute and deliver to the Agent such further
deeds, mortgages, assignments, security agreements or other instruments,
documents, certificates and assurances and take such further action as the Agent
may from time to time in its sole discretion deem necessary to perfect, protect
or enforce its security interest in the Collateral or otherwise to effectuate
the intent of this Agreement and the Credit Agreement.
6. ASSIGNMENT OF INSURANCE.
At or prior to the closing of the transactions provided for in
the Credit Agreement, the Borrower shall deliver to the Agent copies of, or
certificates of the issuing companies with respect to, endorsements of any and
all policies of insurance owned by the Borrower covering or in any manner
relating to the Collateral, in form and substance satisfactory to the Agent,
naming the Agent as loss payee, mortgagee and an additional insured party as its
interest may appear, without
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<PAGE>
any liability for the payment of premiums, calls or assessments, and indicating
that such policies will not be terminated, or reduced in coverage or amount,
without at least thirty (30) days' prior written notice from the insurers to the
Agent. As further security for the due payment and performance of the Secured
Obligations, the Borrower hereby assigns to the Agent all sums, including
returned or unearned premiums, which may become payable under or in respect of
any policy of insurance owned by the Borrower covering or in any manner relating
to the Collateral. The Borrower hereby appoints the Agent as the Borrower's
attorney-in-fact to act in the Borrower's or in the Agent's name, upon the
occurrence and during the continuance of an Event of Default, to endorse any
check or draft representing any such payment and to execute any proof of claim,
subrogation receipt and any other document required by such insurance company as
a condition to or otherwise in connection with such payment, and to cancel,
assign or surrender any such policies. All such sums received by the Agent shall
be applied by the Agent to satisfaction of the Secured Obligations or as
otherwise required by applicable law, and, to the extent not so applied, shall
be paid over to the Borrower or such other Persons as required by applicable
law. The Agent shall have no liability for failure to apply any such sums toward
payment for similar insurance.
7. FIXTURES.
If the Collateral or any part thereof is or is to become
attached or affixed to any real estate, the Borrower will, upon request, furnish
the Agent with the names and addresses of the record owners of, and (to the
extent the Borrower has knowledge thereof) all other persons having interest in,
and a general description of, such real estate.
8. COLLECTIONS.
The provisions of Section 4.05 of the Credit Agreement are
incorporated herein by reference, and the Agent shall have all of the rights and
remedies granted thereunder.
9. RIGHTS AND REMEDIES ON DEFAULT.
After the occurrence and during the continuance of an Event of
Default, the Agent shall at any time thereafter have the right, with or without
notice to the Borrower, as to any or all of the Collateral, by any available
judicial procedure, or without judicial process (to the extent not prohibited by
applicable law), to take possession of the Collateral and without liability for
trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral, and, generally, to
exercise any and all rights afforded to a secured party under the UCC or other
applicable law. Without limiting the generality of the foregoing, the Borrower
agrees that the Agent shall have the right to sell, lease, or otherwise dispose
of all or any part of the Collateral, whether in its then condition or after
further preparation or processing, either at public or private sale or at any
broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such terms and conditions, all as the
Agent may deem to be commercially reasonable, as such term is used in the
Uniform Commercial Code-Secured Transactions of New York, and it shall have the
right to purchase at any such sale; and, if any Collateral shall require
rebuilding, repairing, maintenance, preparation, or is in process or other
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<PAGE>
unfinished state, the Agent shall have the right, at its option, to do such
rebuilding, repairing, preparation, processing or completion or manufacturing,
for the purpose of putting the Collateral in such saleable or disposable form as
it shall deem appropriate. At the Agent's request, the Borrower shall assemble
the Collateral and make it available to the Agent at places which the Agent
shall select, whether at the Borrower's premises or elsewhere, and make
available to the Agent, without rent, all of the Borrower's premises and
facilities for the purpose of the Agent's taking possession of, removing or
putting the Collateral in saleable or disposable form. The proceeds of any such
sale, lease or other disposition of the Collateral shall be applied first, to
the expenses of retaking, holding, storing, processing and preparing for sale,
selling, and the like, and to the reasonable attorneys' fees and legal expenses
incurred by the Agent, and then to satisfaction of the Secured Obligations, and
to the payment of any other amounts required by applicable law, after which the
Agent shall pay and account to the Borrower or any other Person for any surplus
proceeds as required by applicable law. If, upon the sale, lease or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Agent or any Lender is legally entitled, the Borrower will
be liable for the deficiency, together with interest thereon, at the rate
prescribed in the Credit Agreement, and the reasonable fees of any attorneys
employed by the Agent to collect such deficiency. To the extent permitted by
applicable law, the Borrower waives all claims, damages and demands against the
Agent or any Lender arising out of the repossession, removal, retention or sale
of the Collateral.
10. COSTS AND EXPENSES.
The Borrower will upon demand pay to the Agent any and all
fees, costs and expenses, including reasonable attorneys' fees and legal
expenses incurred by the Agent in connection with the payment or discharge of
any taxes, insurance premiums, encumbrances with respect to the Collateral or
for protecting, maintaining or preserving the Collateral, or the enforcing,
foreclosing, retaking, holding, storing, processing, selling or otherwise
realizing upon the Collateral and the Agent's security interest therein, whether
through judicial proceedings or otherwise, and until so paid such amounts shall
be added to the principal amount of the Obligations and shall bear interest at
the rate prescribed in the Credit Agreement.
11. POWER OF ATTORNEY.
The Borrower authorizes the Agent and does hereby make,
constitute and appoint the Agent, and any officer or agent of the Agent, with
full power of substitution, as the Borrower's true and lawful attorney-in-fact,
with power, in its own name or in the name of the Borrower, to take any action
and to execute any instruments which the Agent may deem necessary or advisable
to accomplish the purposes of this Agreement, including: (a) upon the occurrence
and during the continuance of a Default or an Event of Default, to endorse any
notes, checks, drafts, money orders, or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in respect of
the Collateral that may come into possession of the Agent; (b) upon the
occurrence and during the continuance of a Default or an Event of Default, to
sign and endorse any invoice, freight or express bill, bill of lading, storage
or warehouse receipts, drafts against debtors,
-5-
<PAGE>
assignments, verifications and notices in connection with accounts, and other
documents relating to Collateral; (c) to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; (d) upon the occurrence and during the continuance of a
Default or an Event of Default, to demand, collect, receipt for, compromise,
settle and sue for monies due in respect of the Collateral; and (e) generally,
to do, at the Agent's option and at the Borrower's expense, at any time, or from
time to time, all acts and things which the Agent deems necessary to protect,
preserve and, upon the occurrence of an Event of Default, realize upon the
Collateral and the Agent's security interest therein in order to effect the
intent of this Agreement and of the Credit Agreement all as fully and
effectually as the Borrower might or could do; and the Borrower hereby ratifies
all that said attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney shall be irrevocable for the term of this Agreement and
thereafter as long as any of the obligations shall be outstanding.
12. NOTICES.
Any notice required hereunder shall be deemed duly given if
sent in the manner required by the Credit Agreement.
13. OTHER SECURITY.
To the extent that the Secured Obligations are now or
hereafter secured by property other than the Collateral or by the guaranty,
endorsement or property of any person, firm, corporation or other entity, then
the Agent shall have the right in its sole discretion to pursue, relinquish,
subordinate, modify or take any other action with respect thereto, without in
any way modifying or affecting any of the Agent's rights and remedies hereunder.
14. ADDITIONAL RIGHTS OF THE AGENT.
The liability of the Borrower under this Agreement and the
Liens granted by it hereunder, and the rights of the Agent hereunder, shall not
in any way be impaired notwithstanding the fact that the Agent may, in its sole
discretion at any time and from time to time, without the consent of or notice
to the Borrower, upon or without any terms or conditions and in whole or in
part:
(i) waive, in whole or in part, compliance with, or
any defaults under, or grant any other indulgences with respect to, or act or
fail to act with respect to the Secured Obligations or any instrument or
document now or hereafter in effect evidencing or relating to the Secured
Obligations, including, without limitation, the Loan Documents or any collateral
given to secure the obligations or given pursuant to the Loan Documents;
(ii) grant extensions, continuations or renewals of
or with respect to the Secured Obligations, in whole or in part, and/or effect
any release, subordination, compromise or settlement in connection with the
Secured Obligations;
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<PAGE>
(iii) assign or otherwise transfer any of the Secured
Obligations, together with its rights hereunder in respect of the Secured
Obligations and the Collateral;
(iv) consent to the substitution, exchange or release
of all or any part of the Collateral whether or not the Collateral, if any,
received by the Agent upon any such substitution, exchange or release shall be
of the same or of a different character or value as that part of the Collateral
surrendered by the Agent; and
(v) waive any provisions of the Loan Documents.
15. DEPOSITS.
Any and all deposits or other sums at any time credited by or
due from the Agent or any Lender to the Borrower, whether in regular or special
depository accounts or otherwise, shall at all times constitute additional
collateral for the obligations, and may be set-off by the Agent or any Lender
against any Secured Obligations at any time after the occurrence and during the
continuance of an Event of Default and whether or not other collateral held by
the Agent or such Lender is considered to be adequate.
16. MISCELLANEOUS.
(a) Beyond the safe custody thereof, the Agent shall have
no duty as to the collection of any Collateral in its possession or control or
in the possession or control of any agent or nominee of the Agent, or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto.
(b) No course of dealing between the Borrower and the
Agent, nor any failure to exercise, nor any delay in exercising, on the part of
the Agent, any right, power or privilege hereunder or under the Loan Documents
shall operate as a waiver thereon; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
(c) All of the Agent's rights and remedies with respect to
the Collateral, whether established hereby or by the other Loan Documents, or by
any other agreements, instruments or documents or by law shall be cumulative and
may be exercised singly or concurrently.
(d) The provisions of this Agreement are severable, and if
any clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Agreement in any jurisdiction.
(e) This Agreement is subject to modification only by a
writing signed by the parties hereto.
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<PAGE>
(f) The benefits and burdens of this Agreement shall inure
to the benefit of and be binding upon the respective successors and assigns of
the parties; provided, however, that the rights and obligations of the Borrower
under this Agreement shall not be assigned or delegated without the prior
written consent of the Agent, and any purported assignment or delegation without
such consent shall be void.
(g) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York.
17. TERM OF AGREEMENT.
The term of this Agreement shall commence on the date hereof
and this Agreement shall continue in full force and effect, and be binding upon
the Borrower, until all of the Secured Obligations have been fully paid and
performed and the Credit Agreement shall have terminated.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the Borrower and the Agent have caused this
Agreement to be executed by their officers thereunto duly authorized on the day
and year first above written.
PEEBLES INC.
By:______________________________
Name:____________________________
Title:___________________________
NATWEST BANK N.A.,
as Agent for the Lenders
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
SCHEDULE I
TO
SECURITY AGREEMENT
COLLATERAL DESCRIPTION
(a) All personal property and fixtures of the Borrower, whether now or
hereafter existing or now owned or hereafter acquired, and wherever located, of
every kind and description, tangible or intangible, including, without
limitation, the balance of every deposit account now or hereafter existing of
the Borrower with NatWest Bank N.A. and any claim of the Borrower against
NatWest Bank N.A., now or hereafter existing, and all goods, machinery,
equipment, fixtures, tools, dies, molds, furniture, inventory (including,
without limitation, finished goods, in process and raw materials), accounts,
contract rights, and all products and proceeds thereof, chattel paper, notes
receivable, instruments, documents, including, without limitation, documents of
title, warehouse receipts, and all other shipping documents and instruments of
whatever kind whatsoever, whether relating to goods in transit or otherwise,
general intangibles, credits, claims, demands, and any other obligations of any
kind, the Borrower's books and records, and any other property, rights and
interests of the Borrower, including, without limitation, all assets of the
business of the Borrower and all supplies used in the business of the Borrower,
whether now or hereafter existing or now owned or hereafter acquired, all
contracts of the Borrower with all existing and future customers of the
Borrower, and all revenues, rentals, proceeds and other sums of money due and to
become due thereunder, and any and all additions and accessions to any of the
foregoing, all substitutions and replacements therefor and all products and
proceeds thereof and proceeds of insurance thereon.
The term "inventory" shall include all inventory, whether raw,
in process or finished, including, without limitation, inventory returned to or
repossessed or stopped-in-transit by the Borrower, and all documents of title
covering any inventory.
The term "accounts" shall mean, without limiting the
generality of the foregoing, any right to payment held by the Borrower, whether
in the form of accounts receivable, notes, drafts, acceptances or other forms of
obligations and receivables now or hereafter received by or belonging to the
Borrower: (a) for inventory sold or leased by it or for services rendered by it
whether or not earned by performance; (b) for advances or loans made by the
Borrower to customers, together with all guarantees and security therefor and
all proceeds thereof, whether cash proceeds or otherwise, including, without
limitation, all right, title and interest of the Borrower in the inventory which
gave rise to any such accounts including, without limitation, the right to
stoppage in transit and all returned, rejected, rerouted or repossessed
inventory; and (c) with respect to all amounts due or owing to the Borrower
pursuant to clearing agreements relating to the payment or collection of Visa,
MasterCard, Discover and other bank credit card receivables.
(b) All choses in action, all rights arising under any
judgment, statute or rule, all corporate and business records, customer lists,
credit files, computer program print-outs, and other computer materials and
records, trademarks, trade names, trade styles, designs, patents, copyrights,
licenses, license agreements, royalties, and any applications for patents and/or
trademarks; as to all of the foregoing used by, or relating to the business of,
the Borrower.
<PAGE>
(c) Any and all additions and accessions to the foregoing
Collateral, all substitutions and replacements therefor and all products and
proceeds thereof and proceeds of insurance thereon.
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<PAGE>
SCHEDULE II
TO
SECURITY AGREEMENT
A. Trade or Billing Names:
Peebles Inc.
B. Locations Where Collateral
Is Stored, Used or Located
<PAGE>
Peebles Department Store
205 Main Street
Lawrenceville, VA 23868
Peebles Department Store
Rio Grande Plaza
1500 Rte. 47 South
Rio Grande, NJ 08242
Peebles Department Store
201 E. Meadow Road
Eden, NC 27288
Peebles Department Store
Mercury Plaza Shopping Center
902 Mercury Blvd.
Murfreesboro, TN 37130
Peebles Department Store
Dyersburg Mall
2700 Nichols Ave
Dyersburg, TN 38024
Peebles Department Store
Cookeville Mall
400 Dubois Road
Cookeville, TN 38501
Peebles Department Store
Parkway Plaza Mall
455 Madison Square Drive
Madisonville, KY 42431
Peebles Department Store
Shady Brook Mall
800 Campbell Blvd.
Columbia, TN 38401
Peebles Department Store
Pennyrile Mall
4000 Ft. Campbell Blvd.
Hopkinsville, KY 42240
Peebles Department Store
#18 Kent Plaza
Chestertown, MD 21620
Peebles Department Store
Salisbury Mall
Civic & Glenn Avenues
Salisbury, MD 21801
Peebles Department Store
201 S. Main Street
Blackstone, VA 23824
Peebles Department Store
Oakwood Commons
4724 Lebanon Road
Hermitage, TN 37076
Peebles Department Store
Emporia Market Place
236 Market Drive
Emporia, VA 23847
Peebles Department Store
711 East Atlantic Street
South Hill, VA 23970
Peebles Department Store
P. O. Box 369
Onley, VA 23418-0369
Peebles Department Store
3A Rehoboth Mall
4493 Highway #1
Rehoboth Beach, DE 19971
Peebles Department Store
1945 West Palmetto
Florence, S.C. 29502
Peebles Department Store
732 North Madison Boulevard
Roxboro, NC 27573
Peebles Department Store
College Square Shopping Center
Lexington, VA 24450
Peebles Department Store
210 Marlborough Avenue
Easton, MD 21601
Peebles Department Store
161 Monticello Avenue
Williamsburg, VA 23185
Peebles Department Store
9018 Mathis Avenue
Manassas, VA 22110
Peebles Department Store
1022 West Stein Highway
Seaford, DE 19973
Peebles Department Store
Marumsco Plaza Shopping Center
13957 Jefferson Davis Highway
Woodbridge, VA 22191
Peebles Department Store
Free State Mall Shopping Center
15500 Annapolis Road
Bowie, MD 20715
Peebles Department Store
23 St. Mary's Square Shopping Center
Lexington Park, MD 20653
Peebles Department Store
3326 Crain Highway
Waldorf, MD 20601
Peebles Department Store
314 Cavalier Square Shopping Center
Hopewell, VA 23860
Peebles Department Store
133 Big Elk Mall
Elkton, MD 21921
Peebles Department Store
Town & Country Shopping Center
Aberdeen, NC 28315
Peebles Department Store
2501 North Kings Highway
Myrtle Beach, SC 29577
Peebles Department Store
Willow Oaks Mall
227-19 Fox Hill Road
Hampton, VA 23669
Peebles Department Store
22 Colonial Square Shopping Center
Colonial Heights, VA 23834
Peebles Department Store
425 South Street
Front Royal, VA 22630
Peebles Department Store
650 Warrenton Center
Warrenton, VA 22186
Peebles Department Store
Smithfield Plaza
Route 10 & Cypress Run Drive
Smithfield, VA 23430
Peebles Department Store
205 North Washington Highway
Ashland, VA 23005
Peebles Department Store
3205 Freedom Drive Mall
Charlotte, NC 28208
Peebles Department Store
2115-111 West Roosevelt Boulevard
Monroe, NC 28110
Peebles Department Store
1243 North Hargett Street
Jacksonville, NC 28540
Peebles Department Store
Coastal Mall Shopping Center
Conway, SC 29526
Peebles Corporate Office
One Peebles Street
South Hill, VA 23970
Peebles Department Store
325 Piedmont Drive
Piedmont Mall
Danville, VA 24112
Peebles Department Store
York River Crossing Shopping Center
Box 627
Hayes, VA 23072
Peebles Department Store
Leesburg Plaza Shopping Center
548 East Market Street
Leesburg, VA 22075
Peebles Department Store
6464 Ridge Road
Eldersburg, MD 21784
Peebles Department Store
Humboldt Center
2220 North Central Avenue
Humboldt, TN 38343
-2-
<PAGE>
Peebles Department Store
765 Solomons Island Road North
Prince Frederick, MD 20678
Peebles Department Store
Evansham Square Shopping Center
1104 North 4th Street
Wytheville, VA 24382
Peebles Department Store
901G West Broad Street
Waynesboro, VA 22980
Peebles Department Store
782 New River Road, Box 450
Christiansburg, VA 24073
Peebles Department Store
214 Franklin Street
Rocky Mount, VA 24151
Peebles Department Store
410 West Main Street
Covington, VA 24426
Peebles Department Store
14 East Luray Shopping Center
Luray, VA 22835
Peebles Department Store
Southern Shopping Center
7525 Tidewater Drive
Norfolk, VA 23505
Peebles Department Store
North Stafford Plaza
263 Garrisonville Road, Suite 112
Stafford, VA 22554
Peebles Department Store
Signal Hill Mall
1647 East Broad Street
Statesville, NC 23505
Peebles Department Store
4939 Nine Mile Road
Richmond, VA 23223
Peebles Department Store
The Shoppes at Appomattox
Highway 450
Appomattox, VA 24522
Peebles Department Store
Peebles Festival Shopping Center
1275 York Road
Gettysburg, PA 17325
Peebles Department Store
McDowell Square Shopping Center
1238 Highway 70 West
Marion, NC 28752
Peebles Department Store
1257 North Fraser Street
Georgetown, SC 29577
Peebles Department Store
Town and Country Plaza
Geneva, NY 14456
Peebles Department Store
1383 Fort Williams Shopping Center
Sylacauga, AL 35150
-3-
<PAGE>
Peebles Department Store
Fingerlakes Mall Shopping Center
Routes 5 & 20 (Genessee Street)
Auburn, New York 13021
Distribution Center
Three Peebles Street
South Hill, VA 23970
-4-
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT, dated as of June 9, 1995
(this "Agreement"), is by and between PEEBLES INC., a Virginia corporation (the
"Borrower"), with its principal place of business located at One Peebles Street,
South Hill, Virginia 23970, and NATWEST BANK N.A., a national banking
association, as agent (the "Agent") for the benefit of the Lenders under the
Credit Agreement referred to below, with its principal place of business located
at 175 Water Street, New York, New York 10038.
R E C I T A L S:
WHEREAS, the Borrower has entered into that certain Credit
Agreement of even date herewith (as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement") with the Agent and the
Lenders pursuant to which the Agent and the Lenders have agreed to make Loans
and issue Letters of Credit to the Borrower;
WHEREAS, pursuant to the terms and conditions of that certain
Security Agreement of even date herewith between the Borrower and the Agent (as
amended, restated, supplemented or otherwise modified from time to time, the
"Security Agreement"), the Borrower has granted to the Agent for its benefit and
the benefit of the Lenders a security interest in all right, title and interest
of the Borrower in, to and under all now owned and hereafter acquired
trademarks, trademark registrations, trademark applications and trademark
licenses, together with the goodwill of the business symbolized by the
Borrower's trademarks, and all proceeds thereof, to secure the payment of all
amounts owing by the Borrower under the Credit Agreement;
WHEREAS, it is a condition precedent to the obligations of the
Agent and the Lenders to make Loans and issue Letters of Credit to the Borrower
that the Borrower shall have executed and delivered this Agreement; and
WHEREAS, all capitalized terms used herein but not otherwise
defined herein shall have the respective meanings ascribed thereto in the Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and subject to the terms and conditions set forth in the Security
Agreement, the parties hereto hereby agree as follows:
1. To secure the due payment and performance of all of the
Secured Obligations (as defined in the Security Agreement), the Borrower hereby
assigns, mortgages, pledges, hypothecates, conveys and transfers unto the Agent,
for its benefit and the benefit of the Lenders, on the terms and conditions
contained in the Security Agreement, which are incorporated herein by reference
and made a part hereof, and as additional security for the Secured Obligations,
a first lien
<PAGE>
on and first priority security interest in, to and under the trademarks or
service marks listed on Schedule I annexed hereto (the "Trademarks").
2. The Borrower shall take all action, under both statutory
and common law, which may be necessary to perfect title to the Trademarks, to
maintain and/or defend the Trademarks, and/or to obtain the registrations of the
Trademarks applied for, including, without limitation, the defense of any of the
Trademarks, surveillance of marks owned and/or used by third parties which may
be related to the Trademarks, and/or prosecuting with diligence applications for
registration of the Trademarks before the U.S. Patent and Trademark Office.
3. This Agreement and the power of attorney granted in
paragraph 10 hereof shall terminate when the Secured Obligations secured hereby
have been fully paid and performed and, upon such termination, all rights in the
Trademarks granted hereunder shall be reconveyed by the Agent to the Borrower
and the Agent shall promptly execute and deliver to the Borrower such documents
or instruments as the Borrower may reasonably request in furtherance and in
evidence of such termination.
4. This Agreement shall be binding upon the Borrower, its
successors and assigns and shall inure to the benefit of the Agent, its
successors and assigns.
5. This Agreement may not be amended or modified except with
the written consent of the Agent and the Borrower.
6. The Borrower will provide any additional documentation
requested by the Agent to support or confirm the security interest created under
this Agreement.
7. Until the occurrence and continuance of an Event of
Default, and subject to the provisions of the Credit Agreement and the Security
Agreement, the Agent hereby acknowledges the Borrower's exclusive right to use
the Trademarks for the Borrower's own benefit and account, to grant licenses and
sublicenses with respect to the Trademarks and to generally deal in the ordinary
course of the Borrower's business with the Trademarks. The foregoing grant of
authority shall not permit the Borrower to take any actions prohibited
hereunder.
8. The Borrower shall not, without the written consent of the
Agent (which shall not be unreasonably withheld), permit the Trademarks to lapse
or otherwise abandon the Trademarks.
9. In addition to the rights and remedies granted to the Agent
under the Security Agreement, in the event of the occurrence and during the
continuance of an Event of Default, upon written notice from the Agent to the
Borrower:
-2-
<PAGE>
(a) All of the Borrower's right, title and interest
in, to and under the Trademarks, together with the goodwill of the business
symbolized by the Trademarks, shall pass to the Agent; and
(b) the Agent may prepare, and the Borrower shall
execute, any additional documents as the Agent or its counsel may deem necessary
or desirable to effect passage of title of, or to prove the Agent's title to and
ownership of, the Trademarks.
10. The Borrower authorizes the Agent and does hereby make,
constitute and appoint the Agent, and any officer or agent of the Agent, with
full power of substitution, as the Borrower's true and lawful attorney-in-fact,
with power, in its own name or in the name of the Borrower, to do, at the
Agent's option and at the Borrower's expense, at any time, or from time to time,
all acts and things, and execute all documents, which the Agent or its counsel
deems necessary or desirable to protect, preserve and realize upon the
Trademarks and the Agent's security interest therein in order to effect the
intent of this Agreement all as fully and effectually as the Borrower might or
could do; and the Borrower hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof. This power of attorney shall be
irrevocable for the term of this Agreement and thereafter as long as any of the
obligations shall be outstanding.
[signature page follows]
-3-
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Agent have caused
this Agreement to be executed by their officers thereunto duly authorized on the
day and year first above written.
PEEBLES INC.
By:_______________________________
Name:_____________________________
Title:____________________________
NATWEST BANK N.A.,
as Agent for the Lenders
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 9th day of June, 1995, before me personally came
__________________, to me known, who, being by me duly sworn, did depose and say
that he resides at ____________________________; that he is the
______________________ of PEEBLES INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of said corporation.
----------------------------------
Notary Public
My commission expires:
- -----------------------------------
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 9th day of June, 1995, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he resides at ________________________; that he is the ________________of
NATWEST BANK N.A., the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the board of
directors of said corporation.
-----------------------------------
Notary Public
My commission expires:
- -----------------------------------
<PAGE>
SCHEDULE I TO
TRADEMARK SECURITY AGREEMENT
BETWEEN
PEEBLES INC.
AND
NATWEST BANK N.A.
Trademarks
Registration Date of
Trademark Number Registration
Peebles 1,492,322 6/16/88
Cape Classic 1,775,908
Cape Classic 1,724,693
Harmony Grove 1,842,267
Meherrin River Outfitters 1,693,131
Private Expressions 1,769,352
Sonoma Bay 1,734,069
Cape Classic Ltd. 1,684,402
Harmony Grove 74/484978
Where Quality and Value
Are Always In Style 74/547409
[BORROWER TO REVISE AND UPDATE]
GUARANTY
THIS GUARANTY, dated as of June 9, 1995 (this "Guaranty"), is
made by PHC RETAIL HOLDING COMPANY, a Delaware corporation (the "Guarantor"),
having an office at One Peebles Street, South Hill, Virginia 23970, in favor of
NATWEST BANK N.A., a national banking association, as agent (the "Agent"), and
each of the Lenders from time to time parties to the hereinafter defined Credit
Agreement.
R E C I T A L S:
WHEREAS, PEEBLES INC., a Virginia corporation (the
"Borrower"), the Agent and the Lenders are parties to that certain Credit
Agreement dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") providing for
loans and extensions of credit to be made to the Borrower by the Agent and the
Lenders;
WHEREAS, the Guarantor legally and beneficially owns all of
the issued and outstanding shares of capital stock of the Borrower and as such,
will derive direct and indirect economic benefits from the making of the Loans;
and
WHEREAS, in connection with the making of the Loans under the
Credit Agreement and as a condition precedent thereto, the Agent and the Lenders
require that the Guarantor shall have executed and delivered this Guaranty;
NOW, THEREFORE, in consideration of the premises and in order
to induce the Agent and the Lenders to make the Loans and to issue the Letters
of Credit under the Credit Agreement, the Guarantor hereby agrees with the Agent
and the Lenders as follows:
1. DEFINED TERMS.
Capitalized terms used herein which are not otherwise defined
herein are used with the meanings ascribed to such terms in the Credit
Agreement.
2. GUARANTY OF PAYMENT.
(a) The Guarantor hereby unconditionally guarantees the full
and prompt payment to the Agent, for its benefit and the benefit of the Lenders,
upon demand, at maturity or by reason of acceleration or otherwise and at all
times thereafter, of any and all of the Obligations.
(b) The Guarantor acknowledges that valuable consideration
supports this Guaranty, including, without limitation, the consideration set
forth in the recitals above.
<PAGE>
(c) The Guarantor agrees that all payments under this Guaranty
shall be made in Dollars and in the same manner as provided for the Obligations.
3. COSTS AND EXPENSES.
The Guarantor agrees to pay on demand, if not paid by the
Borrower, all costs and expenses of every kind incurred by the Agent or any
Lender: (a) in enforcing this Guaranty; (b) in collecting any of the Obligations
due and payable from the Borrower or the Guarantor; and (c) in realizing upon or
protecting any collateral for this Guaranty or for payment of any of the
Obligations. "Costs and expenses" as used in the preceding sentence shall
include, without limitation, the attorneys' fees incurred by the Agent or any
Lender in retaining counsel for advice, suit, appeal, any insolvency or other
proceedings under the Bankruptcy Code or (as defined below) otherwise, or for
any purpose specified in the preceding sentence.
4. NATURE OF GUARANTY: CONTINUING, ABSOLUTE AND
UNCONDITIONAL.
(a) This Guaranty is and is intended to be a continuing
guaranty of payment of the Obligations, independent of and in addition to any
other guaranty, indorsement, collateral or other agreement held by the Agent or
any Lender therefor or with respect thereto, whether or not furnished by the
Guarantor. The obligations of the Guarantor to repay the Obligations hereunder
shall be unlimited. Until payment in full of all of the Obligations and the
termination of the Credit Agreement, the Guarantor shall have no right of
subrogation with respect to the Obligations or any payments made by the
Guarantor hereunder and hereby waives any right to enforce any remedy which the
Agent or any Lender now has or may hereafter have against Borrower or any
endorser or any other guarantor of all or any part of the Obligations. The
Guarantor hereby waives any benefit of, and any right to participate in, any
security or collateral given to the Agent and the Lenders to secure payment of
Obligations or any part thereof, and the Guarantor agrees that it will not take
any action to enforce any obligations of the Borrower to the Guarantor prior to
the Obligations being paid in full; provided that, in the event of the
bankruptcy or insolvency of the Borrower, the Agent and the Lenders shall be
entitled notwithstanding the foregoing, to file in the name of the Guarantor or
in their own name a claim for any and all indebtedness owing to the Guarantor by
the Borrower (exclusive of this Guaranty), to vote such claim and to apply the
proceeds of any such claim to the Obligations.
(b) For the further security of the Agent, for its benefit and
the benefit of the Lenders, and without in any way diminishing the liability of
the Guarantor, until all of the Obligations have been paid in full, all debts
and liabilities, present or future of the Borrower to the Guarantor and all
monies received from the Borrower or for its account by the Guarantor in respect
thereof shall, except as such payments are otherwise permitted under the Credit
Agreement, be received in trust for the Agent, for its benefit and the benefit
of the Lenders, and forthwith upon receipt shall be paid over to the Agent, for
its benefit and the benefit of the Lenders, to be credited and applied, whether
the Obligations are matured or unmatured, in accordance with the terms of the
Credit Agreement. This assignment and postponement is independent of and
severable from this Guaranty and shall remain in full effect whether or not the
Guarantor is liable for any amount under this Guaranty.
-2-
<PAGE>
(c) This Guaranty is absolute and unconditional and shall not
be changed or affected by any representation, oral agreement, act or thing
whatsoever, except as herein provided. This Guaranty is intended by the
Guarantor to be the final, complete and exclusive expression of the guaranty
agreement between the Guarantor, the Agent and the Lenders. No modification or
amendment of any provision of this Guaranty shall be effective unless in writing
and signed by a duly authorized officer of the Agent and by the Guarantor.
5. CERTAIN RIGHTS AND OBLIGATIONS.
(a) The Guarantor authorizes the Agent, for its benefit and
the benefit of the Lenders, without notice, demand or any reservation of rights
against the Guarantor and without affecting the Guarantor's obligations
hereunder, from time to time:
(i) to renew, extend, increase, accelerate or otherwise change
the time for payment of, the terms of or the interest on the
Obligations or any part thereof or grant other indulgences to the
Borrower or others;
(ii) to accept from any Person and hold collateral for the
payment of the Obligations or any part thereof, and to modify,
exchange, enforce or refrain from enforcing, or release, compromise,
settle, waive, subordinate or surrender, with or without consideration,
such collateral or any part thereof;
(iii) to accept and hold any indorsement or guaranty of
payment of the Obligations or any part thereof, and to discharge,
release or substitute any such obligation of any such indorser or
guarantor, or any Person who has given any security interest in any
collateral as security for the payment of the Obligations or any part
thereof, or any other Person in any way obligated to pay the
Obligations or any part thereof, and to enforce or refrain from
enforcing, or compromise or modify, the terms of any obligation of any
such indorser, guarantor or Person;
(iv) to dispose of any and all collateral securing the
Obligations in any manner as the Agent in its sole discretion may deem
appropriate, and to direct the order or manner of such disposition and
the enforcement of any and all endorsements and guaranties relating to
the Obligations or any part thereof as the Agent in its sole discretion
may determine;
(v) except as otherwise provided in the Credit Agreement, to
determine the manner, amount and time of application of payments and
credits, if any, to be made on all or any part of any component or
components of the Obligations (whether principal, interest, fees, costs
and expenses, or otherwise); and
(vi) to take advantage or refrain from taking advantage of any
security or accept or make or refrain from accepting or making any
compositions or arrangements when and in such manner as the Agent in
its sole discretion may deem appropriate;
-3-
<PAGE>
and generally to do or refrain from doing any act or thing which might
otherwise, at law or in equity, release the liability of the Guarantor as a
guarantor or surety in whole or in part, and in no case shall the Agent be
responsible or shall the Guarantor be released either in whole or in part for
any act or omission in connection with the Agent or any Lender having sold any
security at under value.
(b) If any default shall be made in the payment of any of the
Obligations and any grace period has expired with respect thereto as provided in
the Credit Agreement, the Guarantor hereby agrees to pay the same in full to the
extent hereinafter provided:
(i) without deduction by reason of any setoff, defense
(other than payment) or counterclaim of the Borrower;
(ii) without requiring presentment, protest or notice of
nonpayment or notice of default to the Guarantor, to the Borrower or to
any other Person;
(iii) without demand for payment or proof of such demand or
filing of claims with a court in the event of receivership, bankruptcy
or reorganization of the Borrower;
(iv) without requiring the Agent or any Lender to resort first
to the Borrower (this being a guaranty of payment and not of
collection) or to any other guaranty or any collateral which the Agent
or any Lender may hold;
(v) without requiring notice of acceptance hereof or
assent hereto by the Agent; and
(vi) without requiring notice that any of the Obligations have
been incurred, extended or continued or of the reliance by the Agent or
any Lender upon this Guaranty;
all of the foregoing which the Guarantor hereby waives.
(c) The Guarantor's obligation hereunder shall not be affected
by any of the following, all of which, to the greatest extent permitted by
applicable law, the Guarantor hereby waives:
(i) any failure to perfect or continue the perfection of
any security interest in or other lien on any collateral securing
payment of any of the Obligations or the Guarantor's obligation
hereunder;
(ii) the invalidity, unenforceability, propriety of manner
of enforcement of, or loss or change in priority of, any such security
interest or other lien or guaranty of the Obligations;
(iii) any failure to protect, preserve or insure any such
collateral;
-4-
<PAGE>
(iv) failure of the Guarantor to receive notice of any
intended disposition of such collateral;
(v) any defense arising by reason of the cessation from any
cause whatsoever of the liability of the Borrower (other than payment
in full of all of the Obligations) including, without limitation, any
failure, negligence or omission (other than gross negligence or wilful
misconduct as determined by a court of competent jurisdiction) by the
Agent or any Lender in enforcing their claims against the Borrower;
(vi) any release, settlement or compromise of any
obligation of the Borrower;
(vii) the invalidity or unenforceability of any of the
Obligations;
(viii) any change of ownership of the Borrower or the
insolvency, bankruptcy or any other change in the legal status of the
Borrower;
(ix) any change in, or the imposition of, any law, decree,
regulation or other governmental act which does or might impair, delay
or in any way affect the validity, enforceability or the payment when
due of the Obligations;
(x) the existence of any claim, setoff or other right which
the Guarantor may have at any time against the Agent or any Lender or
the Borrower in connection herewith or any other transaction, related
or unrelated;
(xi) the Agent's or any Lender's election, in any case
instituted under chapter 11 of the Bankruptcy Code, of the application
of section 1111(b)(2) of the Bankruptcy Code;
(xii) any borrowing, use of cash collateral, or grant of a
security interest by Borrower, as debtor in possession, under sections
363 or 364 of the Bankruptcy Code;
(xiii) the disallowance of all or any portion of any of the
Agent's or any Lender's claims for repayment of the Obligations under
sections 502 or 506 of the Bankruptcy Code; or
(xiv) any other fact or circumstance which might otherwise
constitute grounds at law or equity for the discharge or release of the
Guarantor from its obligations hereunder, all whether or not the
Guarantor shall have had notice or knowledge of any act or omission
referred to in the foregoing clauses (i) through (xiii) of this
subsection 5(c).
6. REPRESENTATIONS AND WARRANTIES.
The Guarantor further represents and warrants to the Agent and
the Lenders that:
-5-
<PAGE>
(a) The Guarantor is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has full power, authority and
legal right to own its property and assets and to transact the business
in which it is engaged.
(b) The Guarantor has full power, authority and legal right to
execute and deliver, and to perform its obligations under, this
Guaranty and each other Loan Document to which it is a party, and all
necessary corporate action to authorize the guaranty hereunder on the
terms and conditions of this Guaranty and such other Loan Documents and
to authorize the execution, delivery and performance of this Guaranty
and such other Loan Documents has been duly taken.
(c) This Guaranty and the other Loan Documents to which the
Guarantor is a party have been duly executed and delivered by the
Guarantor and constitute legal, valid and binding obligations of the
Guarantor enforceable against the Guarantor in accordance with their
respective terms, except to the extent that such enforceability is
subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance and moratorium laws and other laws of general
application affecting enforcement of creditors' rights generally, or
the availability of equitable remedies, which are subject to the
discretion of the court before which an action may be brought.
(d) The authorized capital stock of the Guarantor is as set
forth on Schedule A hereto. All issued and outstanding shares of the
capital stock of the Guarantor are duly authorized and validly issued,
fully paid and nonassessable, and such shares were issued in compliance
with all applicable state and federal laws concerning the issuance of
securities, and are owned by the stockholders in the amounts set forth
on Schedule A hereto. No shares of the capital stock of the Guarantor,
other than those set forth on Schedule A hereto, are issued and
outstanding, and, other than as set forth on Schedule A hereto, there
are no preemptive or other outstanding rights, options, warrants,
conversion rights or similar agreements or understandings for the
purchase or acquisition from the Guarantor of any share of capital
stock or other securities of the Guarantor. The Guarantor is not
subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any
convertible securities, rights or options of the type described in the
preceding sentence other than as set forth on Schedule A hereto.
(e) The Guarantor is duly qualified and in good standing
wherever necessary to carry on its present businesses and operations,
except in jurisdictions in which the failure to be qualified and in
good standing could not reasonably be expected to have a material
adverse effect on the business, property, assets, liabilities,
operations, condition (financial or otherwise) or prospects of the
Guarantor (collectively, a "Material Adverse Effect"). All such
jurisdictions for the Guarantor are listed on Schedule B hereto.
(f) All of the Subsidiaries of the Guarantor are identified on
Schedule C hereto. The direct ownership by the Guarantor of the capital
stock of each Subsidiary is identified on Schedule C, and all such
capital stock owned directly or indirectly by the Guarantor is duly
authorized, validly issued, fully paid and nonassessable and free and
clear of all Liens other than Liens in favor of the Agent, for its
benefit and the benefit of the Lenders.
-6-
<PAGE>
(g) The execution, delivery and performance by the Guarantor
of this Guaranty and each other Loan Document to which the Guarantor is
a party, and the consummation of the transactions contemplated by this
Guaranty and each of the Loan Documents, do not and will not violate,
conflict with, result in a breach of, or constitute a default (with due
notice of lapse of time or both) under any contract of the Guarantor,
except if such violations, conflicts, breaches or defaults could not
reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
7. NEGATIVE COVENANTS.
The Guarantor covenants with the Agent and the Lenders that:
(a) The Guarantor shall not grant any security interest in or
permit any lien, claim or encumbrance upon any of its assets in favor
of any third party other than non-consensual statutory Permitted Liens.
(b) The Guarantor will not engage in any type of business
activity other than its ownership of the capital stock of the Borrower
and the performance of the Guarantor's obligations under this Guaranty
and the other Loan Documents to which it is a party, the Capitalization
Documents to which it is a party and any other instruments, documents
or agreements entered into by the Guarantor in favor of the Agent and
the Lenders, or any activities reasonably necessary to comply with any
of the foregoing.
(c) The Guarantor shall not, nor shall the Guarantor permit
any of its Subsidiaries to, enter into any indenture, agreement,
instrument or other arrangement which, (i) directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or
restraining, or imposes materially adverse conditions upon, the
incurrence of the obligations of the Guarantor hereunder, or (ii)
contains any provisions which would be violated or breached by the
performance by the Guarantor of its obligations hereunder.
(d) The Guarantor hereby assumes and adopts and agrees to
perform, comply with and be bound by all of the terms and conditions
set forth in the Credit Agreement which apply to the Guarantor or
relate to the relationship between the Borrower and the Guarantor, with
such terms and conditions being incorporated in this Guaranty by
reference.
(e) The Guarantor will not create, incur, assume, guaranty, or
otherwise become or remain directly or indirectly liable with respect
to any Indebtedness or any Contingent Obligation except for (i)
Contingent Obligations with respect to this Guaranty and the other Loan
Documents to which the Guarantor is a party and (ii) Indebtedness of
the Guarantor represented by the obligations of the Guarantor to make
payments with respect to the cancellation or repurchase of certain
stock of officers, employees and directors (or their estates) of the
Borrower and its Subsidiaries.
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<PAGE>
8. TERMINATION.
This Guaranty shall remain in full force and effect until all
of the Obligations shall be finally and irrevocably paid in full and the
Commitments of the Agent and the Lenders under the Credit Agreement shall have
been terminated. Thereafter, but subject to the following, the Agent shall take
such action and execute such documents as the Guarantor may request (and at the
Guarantor's cost and expense) in order to evidence the termination of this
Guaranty. Payment of all of the Obligations from time to time shall not operate
as a discontinuance of this Guaranty. The Guarantor further agrees that, to the
extent that the Borrower makes a payment or payments to the Agent or any Lender
on the Obligations, or the Agent or any Lender receives any proceeds of
collateral securing the Obligations which payment or receipt of proceeds or any
part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be returned or repaid to the Borrower,
its estate, trustee, receiver, debtor in possession or any other Person,
including, without limitation, the Guarantor, under any insolvency or bankruptcy
law, state or federal law, common law or equitable cause, then to the extent of
such payment, return or repayment, the obligation or part thereof which has been
paid, reduced or satisfied by such amount shall be reinstated and continued in
full force and effect as of the date when such initial payment, reduction or
satisfaction occurred, and this Guaranty shall continue in full force
notwithstanding any contrary action which may have been taken by the Agent or
any Lender in reliance upon such payment, and any such contrary action so taken
shall be without prejudice to the Agent's or any Lender's rights under this
Guaranty and shall be deemed to have been conditioned upon such payment having
become final and irrevocable.
9. GUARANTY OF PERFORMANCE.
The Guarantor also guarantees the full, prompt and
unconditional performance of all obligations and agreements of every kind owed
or hereafter to be owed by the Borrower to the Agent or any Lender under the
Credit Agreement and the other Loan Documents to which the Borrower is a party.
Every provision for the benefit of the Agent and the Lenders contained in this
Guaranty shall apply to the guaranty of performance given in this Section 9.
10. ASSUMPTION OF LIENS AND OBLIGATIONS.
To the extent that the Guarantor has received or shall
hereafter receive distributions or transfers from the Borrower of property or
cash that are subject, at the time of such distribution or transfer, to liens
and security interests in favor of the Agent and the Lenders in accordance with
the Credit Agreement or the other Loan Documents, the Guarantor hereby expressly
agrees that:
(a) it shall hold such assets subject to such liens and
security interests and subject to the terms of the Credit Agreement and
the other Loan Documents; and
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<PAGE>
(b) it shall be liable for the payment of the Obligations
secured thereby.
The Guarantor's obligations under this Section 10 shall be in addition to its
obligations as set forth in other sections of this Guaranty and not in
substitution therefor or in lieu thereof.
11. TAXES.
All payments hereunder shall be made without any counter-claim
or set-off, free and clear of, and without reduction by reason of, any taxes,
levies, imposts, charges and withholdings, restrictions or conditions of any
nature ("Taxes"), which are now or may hereafter be imposed, levied or assessed
by any country, political subdivision or taxing authority, all of which will be
for the account of and paid by the Guarantor (but excluding any tax imposed on
or measured by the net income (or any franchise tax) of a Lender pursuant to the
laws of the jurisdiction in which the principal office or applicable lending
office of such Lender is located or under the laws of which such Lender is
organized or under the laws of any political subdivision or taxing authority of
any such jurisdiction in which the principal office or applicable lending office
of such Lender is located). If for any reason, any such reduction is made or any
Taxes are paid by the Agent or any Lender, the Guarantor will pay to the Agent
or such Lender such additional amounts as may be necessary to ensure that the
Agent or such Lender receives the same net amount which they would have received
had not reduction been made or Taxes paid. Notwithstanding the foregoing, the
provisions of Section 4.04 of the Credit Agreement shall apply to all payments
by the Guarantor hereunder to the same extent applicable to payments by the
Borrower under the Credit Agreement and the other Loan Documents.
12. MISCELLANEOUS.
(a) The terms "Borrower" and "Guarantor" as used in this
Guaranty shall include: (i) any successor individual or individuals,
association, partnership or corporation to which all or substantially all of the
business or assets of Borrower or the Guarantor shall have been transferred; and
(ii) any other corporation or other entity into or with which the Borrower or
the Guarantor shall have been merged, consolidated, reorganized or absorbed.
(b) Without limiting any other right of the Agent or any
Lender, whenever the Agent or any Lender has the right to declare any of the
Obligations to be immediately due and payable (whether or not it has been so
declared), the Agent or any Lender at its sole election without notice to the
undersigned, may appropriate and set off against the Obligations:
(i) any and all indebtedness or other moneys due or to
become due to the Guarantor by the Agent or such Lender in any
capacity; and
(ii) any credits or other property belonging to the Guarantor
(including all account balances, whether provisional or final and
whether or not collected or available) at any time held by or coming
into the possession of the Agent or any Lender, or any affiliate of the
Agent or any Lender, whether for deposit or otherwise;
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<PAGE>
whether or not the Obligations are, or the obligation to pay such moneys owed by
the Agent or any Lender is, then due, and the Agent or any Lender shall be
deemed to have exercised such right of setoff immediately at the time of such
election even though any charge therefor is made or entered on the Agent's or
such Lender's records subsequent thereto. The Agent and each Lender agree to
notify the Guarantor in a reasonably practicable time of any such setoff;
provided, however, that failure to so notify the Guarantor shall not affect the
validity of any setoff.
(c) The Guarantor's obligation hereunder is to pay the
Obligations in full when due according to the Credit Agreement to the extent
provided herein and shall not be affected by any stay or extension of time for
payment by the Borrower resulting from any proceeding under the Bankruptcy Code
or any similar law.
(d) No course of dealing between the Borrower or the Guarantor
and the Agent or any Lender and no act, delay or omission by the Agent in
exercising any right or remedy hereunder or with respect to any of the
Obligations shall operate as a waiver thereof or of any other right or remedy,
and no single or partial exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or remedy. The Agent may
remedy any default by the Borrower under any agreement with the Borrower or with
respect to any of the Obligations in any reasonable manner without waiving the
default remedied and without waiving any other prior or subsequent default by
the Borrower. All rights and remedies of the Agent hereunder are cumulative.
(e) This Guaranty shall inure to the benefit of the Agent and
the Lenders and their successors and assigns under the Credit Agreement.
(f) Captions of the sections of this Guaranty are solely for
the convenience of the Agent, the Lenders and the Guarantor, and are not an aid
in the interpretation of this Guaranty, and do not constitute part of the
agreement of the parties set forth herein.
(g) If any provision of this Guaranty is unenforceable in
whole or in part for any reason, the remaining provisions shall continue to be
effective.
(h) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND THE GUARANTOR IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT ITS ADDRESS FOR NOTICES
PURSUANT TO SECTION 12.03 OF THE CREDIT AGREEMENT, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE GUARANTY HEREBY IRREVOCABLY DESIGNATES
APPOINTS AND EMPOWERS CT CORPORATION SYSTEM AS ITS THE AGENT FOR SERVICE OF
PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF THE AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE GUARANTOR IN ANY OTHER JURISDICTION.
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<PAGE>
(i) THE GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
GUARANTY BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (H) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(j) THIS GUARANTY AND THE TRANSACTIONS EVIDENCED HEREBY SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
13. WAIVERS.
THE GUARANTOR, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY
WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS GUARANTY AND THE TRANSACTIONS EVIDENCED
HEREBY.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guaranty
to be duly executed and delivered by its duly authorized officer on the date
first above written.
PHC RETAIL HOLDING COMPANY
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
SCHEDULE B
JURISDICTIONS IN WHICH THE GUARANTOR IS QUALIFIED
AND IN GOOD STANDING
Guarantor is incorporated in the State of Delaware and is not
otherwise qualified to do business in any state.
<PAGE>
SCHEDULE A
AUTHORIZED CAPITAL STOCK OF THE GUARANTOR
2,300,000 shares of Common Stock, par value $.01
40,000 shares of non-voting Common Stock, par value $.01
<PAGE>
SCHEDULE C
SUBSIDIARIES OF THE GUARANTOR AND DIRECT OWNERSHIP
BY THE GUARANTOR OF THE CAPITAL STOCK OF EACH SUBSIDIARY
Peebles Inc. is a wholly-owned subsidiary of Guarantor.
Guarantor owns 1,000 shares of Common Stock, par value $.10, of Peebles Inc.
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of June 9, 1995 (this "Agreement"), is
by and between:
PHC RETAIL HOLDING COMPANY, a Delaware corporation, having an office at
One Peebles Street, South Hill, Virginia 23970 (the "Pledgor"); and
NATWEST BANK N.A., a national banking association, as agent (the
"Agent") for the benefit of the Lenders under the Credit Agreement referred to
below, having an office at 175 Water Street, New York, New York 10038.
R E C I T A L S:
WHEREAS, PEEBLES INC., a Virginia corporation (the "Borrower") has
entered into that certain Credit Agreement of even date herewith (as amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement") with the Agent and the Lenders pursuant to which the Agent and the
Lenders have agreed to make Loans and issue Letters of Credit to the Borrower,
upon and subject to the terms and conditions of the Credit Agreement;
WHEREAS, the Pledgor is the sole shareholder of the Borrower and by
virtue thereof, and otherwise, will derive benefits as a result of Loans to be
made and Letters of Credit to be issued by the Agent and the Lenders to the
Borrower pursuant to the Credit Agreement;
WHEREAS, the Pledgor has guaranteed to the Agent and the Lenders the
full payment and performance by the Borrower of all of the Obligations by the
execution and delivery to the Agent of a Guaranty of even date herewith (as
amended, restated, supplemented or otherwise modified from time to time, the
"Guaranty");
WHEREAS, in order to induce the Agent and the Lenders to execute and
deliver the Credit Agreement, the Pledgor has agreed to pledge all of the issued
and outstanding shares of capital stock of the Borrower owned by it as
collateral security for the payment and performance of all of the Obligations;
WHEREAS, it is a condition precedent to the obligations of the Agent
and the Lenders under the Credit Agreement that the Pledgor shall have executed
and delivered this Agreement; and
WHEREAS, all capitalized terms used herein but not otherwise defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises herein and in order to
induce the Agent and the Lenders to make the Loans and issue the Letters of
Credit provided for in the Credit Agreement, the Pledgor hereby agrees with the
Agent as follows:
1. The term "Pledged Stock" as used herein shall mean and include all
of the issued and outstanding shares, whether now owned or hereafter acquired by
the Pledgor, of the capital stock of the Borrower, including, without
limitation, all of the issued and outstanding stock of the Borrower listed on
Schedule A hereto, and, also, any shares, stock certificates, options or rights
issued by the Borrower as an addition to, in substitution of, or in exchange for
any such shares, and any and all proceeds thereof, now or hereafter owned or
acquired by the Pledgor.
2. (a) As collateral security for the due payment and
performance of all of the Obligations and the due payment and performance by the
Pledgor of its obligations and liabilities under, arising out of or in any way
connected with this Agreement and the Guaranty (all of the foregoing being
referred to collectively as the "Liabilities"), the Pledgor hereby pledges,
assigns, hypothecates, delivers and sets over to the Agent, and hereby grants to
the Agent, for its benefit and the benefit of the Lenders, a first lien on and
first security interest in all of the Pledged Stock, all other property
hereafter delivered to, or in the possession or in the custody of, the Pledgor
in substitution or exchange for, or in addition to, the Pledged Stock and in all
proceeds thereof.
(b) If the Pledgor shall become entitled to receive or shall
receive any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital), option or rights, whether
as an addition to, in substitution of, or in exchange for any shares of the
Pledged Stock, or otherwise, the Pledgor shall accept any such instruments as
the Agent's agent, shall hold them in trust for the Agent, and shall deliver
them forthwith to the Agent in the exact form received, with the Pledgor's
endorsement when necessary and/or appropriate stock powers duly executed in
blank and undated, to be held by the Agent, subject to the terms hereof, as
further collateral security for the Obligations.
(c) Upon the occurrence and during the continuance of any
Event of Default, any or all shares of the Pledged Stock held by the Agent
hereunder may, at the option of the Agent or its nominee, be registered in the
name of the Agent or its nominee. The Agent or its nominee may thereafter upon
the occurrence and during the continuance of any Event of Default and after
giving written notice of its intent to exercise such rights to the Pledgor,
exercise all voting and corporate rights at any meeting of any corporation
issuing any of the shares included in the Pledged Stock and exercise any and all
rights of conversion, exchange, subscription or any other rights, privileges or
options pertaining to any shares of the Pledged Stock as if it were the absolute
owner thereof, including, without limitation, the right to receive dividends
payable thereon, and the right to exchange, at its discretion, any and all of
the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other readjustment of any corporation issuing any of such
shares or upon the
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<PAGE>
exercise by any such issuer of any right, privilege or option pertaining to any
shares of the Pledged Stock, and in connection therewith, to deposit and deliver
any and all of the Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as it may
determine, all without liability except to account for property actually
received by it, but the Agent shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible for any
failure to do so or delay in so doing.
(d) Upon the occurrence and during the continuance of any
Event of Default, the Agent shall have the right to require that all cash
dividends payable with respect to any part of the Pledged Stock be paid to the
Agent to be held by the Agent as additional security hereunder until applied to
the Liabilities.
(e) Upon the occurrence and during the continuance of any
Event of Default, the Agent without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Pledgor or any other Person
(all and each of which demands, advertisements and/or notices are, to the extent
permitted by law, hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Pledged Stock, or any part thereof, and/or may
forthwith sell, assign, give an option or options to purchase, contract to sell
or otherwise dispose of and deliver the Pledged Stock, or any part thereof, in
one or more parcels at public or private sale or sales, at any exchange,
broker's board or at any of the Agent's offices or elsewhere at such prices and
on such terms (including, without limitation, a requirement that any purchaser
of all or any part of the Pledged Stock shall be required to purchase the shares
constituting the Pledged Stock for investment and without any intention to make
a distribution thereof) as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk, with the right to the Agent or
any purchaser upon any such sale or sales, whether public or private, to
purchase the whole or any part of the Pledged Stock so sold, free of any right
or equity of redemption in the Pledgor, which right or equity is hereby
expressly waived and released.
(f) The proceeds of any collection, recovery, receipt,
appropriation, realization or sale as aforesaid, shall be applied as follows:
(i) First, to the costs and expenses of every kind
incurred in connection therewith or incidental to the care, safekeeping or
otherwise of any and all of the Pledged Stock or in any way relating to the
rights of the Agent hereunder, including attorneys' fees and legal expenses;
(ii) Second, to the satisfaction of the Liabilities;
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<PAGE>
(iii) Third, to the payment of any other amounts
required by applicable law (including, without limitation, Section 9-504(l)(c)
of the UCC); and
(iv) Fourth, to the Pledgor or such other Person as
required by applicable law, to the extent of the surplus proceeds, if any.
(g) The Agent need not give more than five (5) days' notice of
the time and place of any public sale or of the time after which a private sale
may take place and such notice shall be deemed to be reasonable notification of
such matters.
(h) In the event that the proceeds of any collection,
recovery, receipt, appropriation, realization or sale as aforesaid are
insufficient to pay all amounts to which the Agent or any Lender is legally
entitled, the Pledgor will be liable for the deficiency, together with interest
thereon, at the rate prescribed in the Credit Agreement, and the fees of any
attorneys employed by the Agent to collect such deficiency, pursuant to the
Credit Agreement.
3. The Pledgor represents and warrants that:
(a) The Pledged Stock is owned directly and beneficially and
of record by the Pledgor in the amount set forth on Schedule A hereto;
(b) The shares of the Pledged Stock constitute 100% of all of
the issued and outstanding shares of capital stock of the Borrower;
(c) All of the shares of the Pledged Stock have been duly and
validly issued, are fully paid and non-assessable and are owned by the Pledgor
free and clear of any pledge, mortgage, hypothecation, lien, charge, encumbrance
or any security interest in such shares or the proceeds thereof except for the
security interest granted to the Agent hereunder; and
(d) Upon delivery of the Pledged Stock to the Agent or an
agent for the Agent, this Agreement creates and grants a valid first lien on and
first perfected security interest in the Pledged Stock and the proceeds thereof,
subject to no prior security interest, lien, charge or encumbrance or to any
agreement purporting to grant to any third party a security interest in the
property or assets of the Pledgor that would include the Pledged Stock.
4. (a) The Pledgor hereby covenants that so long as the
Liabilities shall be outstanding and unpaid, in whole or in part, the Pledgor
will not:
(i) sell, convey or otherwise dispose of any shares
of the Pledged Stock or any interest therein, nor will the Pledgor create, incur
or permit to exist any pledge, mortgage, lien, charge, encumbrance or any
security interest whatsoever with respect to any of the Pledged Stock or the
proceeds thereof other than that created hereby or non-consensual statutory
Permitted Liens; or
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<PAGE>
(ii) consent to or approve the issuance of any
additional shares of any class of the issuer of the Pledged Stock.
(b) The Pledgor warrants and will defend the Agent's right,
title, special property and security interest in and to the Pledged Stock
against the claims of any Person, firm, corporation or other entity.
5. (a) If the Agent shall determine to exercise its right to sell all
or any part of the Pledged Stock during the continuance of an Event of Default,
and if in the opinion of counsel for the Agent it is necessary to have the
Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act of l933, as amended (the "Securities Act"), the
Pledgor will use its best efforts to cause each issuer of shares included in the
Pledged Stock contemplated to be sold to execute and deliver, and cause the
directors and officers of each such issuer to execute and deliver, all at the
Pledgor's expense, all such instruments and documents, and to do or cause to be
done all such other acts and things as may be necessary to register the Pledged
Stock, or that portion thereof to be sold, under the provisions of the
Securities Act and to cause the registration statement relating thereto to
become effective and to remain effective for a period of one year from the date
of the first public offering of the Pledged Stock, or that portion thereof so to
be sold, and to make all amendments thereto and/or to the related prospectus
that, in the opinion of the Agent or its counsel, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto; to
cause each such issuer to comply with the provisions of the "Blue Sky" law of
any jurisdiction that the Agent shall designate; and to cause each such issuer
to make available to its security holders, as soon as practicable, an earnings
statement (that need not be audited) covering a period of twelve months, but not
more than eighteen months, beginning with the first month after the effective
date of any such registration statement, which earnings statement will satisfy
the provisions of Section 11(a) of the Securities Act.
(b) The Pledgor acknowledges that a breach of any of the
covenants contained in subparagraph 5(a) above will cause irreparable injury to
the Agent and the Lenders, that the Agent and the Lenders shall have no adequate
remedy at law in respect of such breach and, as a consequence, the covenants of
the Pledgor contained in subparagraph 5(a) above shall be specifically
enforceable against the Pledgor, and the Pledgor hereby waives, and shall not
assert, any defenses against an action for specific performance of such
covenants, except for a defense that no Event of Default has occurred or is
continuing.
(c) Notwithstanding the foregoing, the Pledgor recognizes that
the Agent may be unable to effect a public sale of all or a part of the Pledged
Stock, and may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges that
any such private sales may be at places and on terms less favorable to the
seller than if sold at public sales and agrees that such
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<PAGE>
private sales shall be deemed to have been made in a commercially reasonable
manner, and that the Agent has no obligation to delay sale of any such
securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities Act.
6. The Pledgor shall at any time and from time to time upon the written
request of the Agent, execute and deliver such further documents and do such
further acts and things as the Agent may reasonably request in order to effect
the purposes of this Agreement, including, without limitation, delivering to the
Agent on the date hereof or at any time hereafter irrevocable proxies in respect
of the Pledged Stock in the form of Exhibit A hereto.
7. (a) Beyond the exercise of reasonable care to assure the safe
custody of the Pledged Stock while held hereunder, the Agent shall have no duty
or liability to preserve rights pertaining thereto, and shall be relieved of all
responsibility for the Pledged Stock upon surrendering it to the Pledgor or in
accordance with the Pledgor's instructions.
(b) No course of dealing between the Pledgor and the Agent,
nor any failure to exercise, nor any delay in exercising, on the part of the
Agent, any right, power or privilege hereunder or under the Guaranty, the Credit
Agreement or the other Loan Documents shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
(c) The rights and remedies herein provided, and provided in
the Guaranty, the Credit Agreement and the other Loan Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law including, without limitation, the rights and remedies of a secured party
under the UCC.
(d) The provisions of this Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision in this Agreement in any jurisdiction.
8. All notices and other communications pursuant to this
Agreement shall be made in accordance with Section 12.03 of the Credit
Agreement.
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<PAGE>
9. This Agreement shall be binding upon the Pledgor and its
successors and assigns and shall inure to the benefit of the Agent and its
successors and assigns.
10. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
RULES PERTAINING TO CONFLICTS OF LAWS.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered the day and year first above written.
PHC RETAIL HOLDING COMPANY
By:_______________________________
Name:_____________________________
Title:____________________________
NATWEST BANK N.A.,
as Agent for the Lenders
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
EXHIBIT A
TO
PLEDGE AGREEMENT
IRREVOCABLE PROXY COUPLED WITH AN INTEREST
KNOW ALL MEN BY THESE PRESENTS that the undersigned does
hereby make, constitute and appoint NATWEST BANK N.A. (the "Agent"), and each of
the Agent's officers and employees, its true and lawful attorneys, for it and in
its name, place and stead, to act as its proxy in respect of all of the shares
of capital stock of PEEBLES INC., a Virginia corporation (the "Corporation"),
that it now or hereafter may own or hold, including, without limitation, the
right, on its behalf, to demand the call by any proper officer of the
Corporation pursuant to the provisions of its Certificate of Incorporation or
By-Laws and as permitted by law of a meeting of its shareholders and at any such
meeting of shareholders, annual, general or special, to vote for the transaction
of any and all business that may come before such meeting, or at any adjournment
thereof, including, without limitation, the right to vote for the sale of all or
any part of the assets of the Corporation and/or the liquidation and dissolution
of the Corporation; giving and granting to its said attorneys full power and
authority to do and perform each and every act and thing whether necessary or
desirable to be done in and about the premises, as fully as it might or could do
if personally present with full power of substitution, appointment and
revocation, hereby ratifying and confirming all that its said attorneys shall do
or cause to be done by virtue hereof.
This Proxy is given to the Agent and to its officers and
employees in consideration of the loans to be made by the Agent and the Lenders
to the Corporation and in order to carry out the covenant of the undersigned
contained in a certain Pledge Agreement of even date herewith between it and the
Agent, and this Proxy shall be irrevocable and is coupled with an interest,
shall be binding upon the undersigned and its successors and assigns until the
payment in full of all of the Liabilities (as defined in the aforesaid Pledge
Agreement) and may be exercised only after, and during the continuance of, an
Event of Default under the Credit Agreement (as such terms are defined in the
aforesaid Pledge Agreement).
IN WITNESS WHEREOF, the undersigned has executed this
Irrevocable Proxy Coupled with an Interest this 9th day of June, 1995.
PHC RETAIL HOLDING COMPANY
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 9th day of June, 1995, before me personally came
_______________, to me known, who being by me duly sworn, did depose and say
that he resides at _____________________________, that he is the
__________________ of PHC RETAIL HOLDING COMPANY, the corporation described in
and which executed the foregoing instrument; that he signed his name thereto by
order of the board of directors of said corporation.
--------------------------------
Notary Public
My commission expires:
- ----------------------------------
<PAGE>
SCHEDULE A
TO PLEDGE AGREEMENT
PLEDGED STOCK OF
PEEBLES INC.
NUMBER OF
SHARES OF NUMBER OF SHARES NUMBER OF
COMMON STOCK ISSUED AND SHARES OWNED CERTIFICATE
AUTHORIZED OUTSTANDING BY PLEDGOR NUMBER
5,000,000 1,000 1,000 383
EQUITY CONTRIBUTION AGREEMENT
THIS EQUITY CONTRIBUTION AGREEMENT, dated as of June 9, 1995 (this
"Agreement"), is by and among Kelso & Company, L.P., a Delaware limited
partnership ("Kelso"), PHC Retail Holding Company, a Delaware corporation
("Holdings"), Peebles Inc., a Virginia corporation (the "Borrower"), and NatWest
Bank N.A., a national banking association, as agent (the "Agent") for the
benefit of the Lenders party to the Credit Agreement defined below.
RECITALS:
WHEREAS, the Borrower, the Agent and the Lenders have entered into that
certain Credit Agreement dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
pursuant to the terms and conditions of which the Lenders and the Agent have
agreed to make Loans and issue Letters of Credit to the Borrower;
WHEREAS, Kelso or its Affiliates legally and beneficially owns more
than 80% of the issued and outstanding shares of capital stock of Holdings and
Holdings legally and beneficially owns all of the issued and outstanding shares
of capital stock of the Borrower, and, as such, Kelso will derive direct and
indirect economic benefits from the making of Loans and the issuance of Letters
of Credit to the Borrower;
WHEREAS, Kelso wishes to grant further assurance to the Agent and the
Lenders under the terms and conditions hereof to secure the performance by the
Borrower of its Obligations under the Credit Agreement and the other Loan
Documents; and
WHEREAS, it is a condition precedent to the making of Loans and the
issuance of Letters of Credit that Kelso shall have executed and delivered this
Agreement;
NOW, THEREFORE, in consideration of the premises and to induce the
Agent and the Lenders to make the Loans and issue Letters of Credit under the
Credit Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Defined Terms. Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings assigned to them in the
Credit Agreement. In addition, the following terms, as used herein, shall have
the meanings set forth below:
"Borrower Common Stock" shall mean the common stock of the Borrower,
$.01 per share.
"Call Amount" is defined in Section 2(a) hereof.
<PAGE>
"Call Notice" shall mean a notice from the Agent to Kelso notifying
Kelso of the requirement to pay the capital contribution to the Agent in
accordance with the terms of this Agreement.
"Holdings Common Stock" shall mean the common stock of Holdings, $.01
per share.
"Payment Default" shall mean an Event of Default under Section 9.01 of
the Credit Agreement.
Section 2. Contributions of Capital.
(a) In the event that as of the end of each of the three
fiscal years of the Borrower ending on or about January 31 in 1996, 1997 and
1998, the Borrower's Fixed Charge Coverage Ratio is less than 1.00 to 1.00,
then, within fifteen (15) Business Days of receipt of a Call Notice provided by
the Agent to Kelso in accordance with Section 2(g) hereof, Kelso shall, or shall
cause an Affiliate of Kelso (or such other Person as shall be acceptable to the
Agent) to, make a contribution of capital to Holdings and Holdings shall make a
contribution of capital to the Borrower in an amount equal to the difference
between (i) the amount of Consolidated EBITDA for such fiscal year that would be
necessary to achieve a Fixed Charge Coverage Ratio of 1.00 to 1.00 for such
fiscal year minus (ii) the actual amount of Consolidated EBITDA of the Borrower
for such fiscal year (such amount, the "Call Amount"); provided, however, that
in the event that the Call Amount for any fiscal year is less than $250,000,
then no capital contribution shall be required under this Section 2(a) for such
fiscal year; and provided, further, that the aggregate amount of all Call
Amounts required to be made by Kelso under this Section 2(a) shall not exceed
$10,000,000.
(b) In the event that as of the end the fiscal year of the
Borrower ending on or about January 31, 1998 either (i) the cumulative amount of
Consolidated EBITDA of the Borrower for the three fiscal years ending on or
about January 31 in 1996, 1997 and 1998 is less than $89,503,000 or (ii) the
amount of Consolidated EBITDA of the Borrower for the fiscal year ending on or
about January 31, 1998 is less than $32,205,000, then, within fifteen (15)
Business Days of receipt of a Call Notice provided by the Agent to Kelso in
accordance with Section 2(g) hereof, Kelso shall, or shall cause an Affiliate of
Kelso (or such other Person as shall be acceptable to the Agent) to, make a
contribution of capital to Holdings and Holdings shall make a contribution of
capital to the Borrower in an amount equal to the difference between (i)
$10,000,000 minus (ii) the aggregate amount of all Call Amounts previously made
by Kelso pursuant to Section 2(a) hereof; provided, however, that no such
contribution shall be required if the Borrower's EBITDA Ratio as of and for the
fiscal year ending on or about January 31, 1998 is equal to or greater than 0.95
to 1.00.
(c) Kelso may, or may cause an Affiliate of Kelso (or such
other Person as shall be acceptable to the Agent) to, make voluntary capital
contributions in advance of any Call Amounts or any capital contributions
required under Section 2(b) hereof which voluntary capital contributions shall
reduce the aggregate amount of all Call Amounts and other capital contributions
required to be made hereunder.
-2-
<PAGE>
(d) In the event that a Payment Default occurs, then, within
fifteen (15) Business Days of receipt of a Call Notice provided by the Agent to
Kelso in accordance with Section 2(g) hereof, Kelso shall, or shall cause an
Affiliate of Kelso (or such other Person as shall be acceptable to the Agent)
to, make a contribution of capital to Holdings and Holdings shall make a
contribution of capital to the Borrower in an amount equal to the sum of (i)
$10,000,000 minus (ii) the aggregate amount of capital contributions previously
made by Kelso pursuant to Sections 2(a), (b) and (c) hereof.
(e) On or before June 30, 1995, Kelso shall, or shall cause an
Affiliate of Kelso (or such other Person as shall be acceptable to the Agent)
to, make a contribution of capital to Holdings and Holdings shall make a
contribution of capital to the Borrower in an amount equal to $6,623,286.
(f) Kelso hereby agrees and Holdings and the Borrower hereby
direct Kelso to pay, or to cause to be paid, all such capital contributions to
be made directly to the Agent for application to the Obligations as set forth in
Section 4.02(A)(e) of the Credit Agreement and such other relevant Sections of
the Credit Agreement. Any such additional contributions of capital by Holdings
shall be made with respect to the Borrower Common Stock owned as of the date
hereof by Holdings. The Borrower hereby covenants and agrees with the Agent that
it shall not issue any share certificates or enter into any other agreement or
contract pertaining to or otherwise evidencing such additional contributions of
capital made by Holdings.
(g) Within ninety (90) days following the end of each fiscal
year of the Borrower ending in 1996, 1997 and 1998, Kelso or the Borrower shall
deliver to the Agent a certificate setting forth the calculation of the Fixed
Charge Coverage Ratio and Consolidated EBITDA of the Borrower for such fiscal
year and, with respect to the certificate to be delivered in 1998, the EBITDA
Ratio as of the end of the most recently completed fiscal year and the
cumulative amount of Consolidated EBITDA of the Borrower for the three fiscal
years ending in 1996, 1997 and 1998, in each case based on the financial
statements delivered to the Lenders in accordance with Section 7.01(a) of the
Credit Agreement. Within thirty (30) days following receipt of such financial
statements and certificate, the Agent may deliver to Kelso a Call Notice
containing notice of the requirement to deliver the proceeds of a capital
contribution to the Agent pursuant to this Agreement.
(h) Kelso hereby agrees that it will reserve, or caused to be
reserved, funds of an Affiliate of Kelso in an aggregate amount sufficient to
meet its obligations hereunder to make all future capital contributions under
the terms and conditions hereof.
Section 3. Representations and Warranties. Each of Kelso, Holdings
and the Borrower represents and warrants to the Agent and to the Lenders that:
(a) each of Kelso, Holdings and the Borrower has all requisite
corporate or partnership power and authority to own its assets and to carry on
its business as presently conducted and as proposed to be conducted;
-3-
<PAGE>
(b) each of Kelso, Holdings and the Borrower has full
corporate or partnership power, authority and legal right to execute this
Agreement;
(c) this Agreement has been duly authorized, executed and
delivered by Kelso, Holdings and the Borrower and constitutes a legal, valid and
binding obligation of Kelso, Holdings and the Borrower enforceable in accordance
with its terms subject, as to enforcement, to bankruptcy, reorganization,
insolvency, moratorium and other similar laws affecting creditor's rights
generally;
(d) no consent, approval or authorization of or designation or
filing with any authority on the part of Kelso, Holdings or the Borrower
(including, without limitation, any consent, approval or authorization of any
shareholder of or partner or investor in Kelso, Holdings or the Borrower) is
required in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby; and
(e) the execution, delivery and performance of this Agreement
will not violate any provision of any material applicable law or regulation or
of any material order, judgment, writ, award or decree of any court, arbitrator
or governmental authority, domestic or foreign, or of the charter or by-laws, or
partnership agreement, of Kelso, Holdings or the Borrower or of any securities
issued by Kelso, Holdings or the Borrower or of any material mortgage,
indenture, lease, contract, or other agreement, instrument or undertaking to
which Kelso, Holdings or the Borrower is a party or which purports to be binding
upon Kelso, Holdings or the Borrower or upon any of their respective assets, and
will not result in the creation or imposition of any Lien, charge or encumbrance
on or security interest in any of the assets of Kelso, Holdings or the Borrower
except as contemplated hereunder or by the Credit Agreement.
Section 4. Waiver and Amendment. Any failure by any party hereto, at
any time or times hereafter, to require strict performance by the other parties
of any provision of this Agreement shall not waive, affect of diminish any right
of any party thereafter to demand strict compliance and performance therewith.
None of the agreements contained in this Agreement shall be deemed to have been
suspended or waived by any party hereto unless such suspension or waiver is in
writing. No provision of this Agreement shall be modified, amended, waived, or
suspended, except in a written agreement signed by all of the parties hereto and
consented to by the Required Lenders.
The obligation to provide capital contributions to Holdings and the
Borrower is terminable only as set forth herein. Each of Kelso and Holdings
hereby waives any and all rights to offset amounts owing by Holdings or the
Borrower to either of them against amounts owing by them to Holdings or the
Borrower hereunder.
Section 5. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
-4-
<PAGE>
Section 6. Submission to Jurisdiction; Waiver of Jury Trial.
(a) Any legal action or proceeding with respect to this
Agreement may be brought in the court of the State of New York or of the United
States for the Southern District of New York, and, by execution and delivery of
this Agreement, each of Kelso, Holdings and the Borrower hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each of Kelso,
Holdings and the Borrower further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
each such Person located outside New York City and by hand delivery to each such
Person located within New York City, at its address for notices pursuant to
Section 12 hereof, such service to become effective three (3) days after such
mailing. Each of Kelso, Holdings and the Borrower hereby irrevocably designates,
appoints and empowers CT Corporation System as its agent for service of process
in respect of any such action or proceeding. Nothing herein shall affect the
right of the Agent or any Lender to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against Kelso,
Holdings or the Borrower in any other jurisdiction.
(b) Each of Kelso, Holdings and the Borrower hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement brought in the courts referred to in clause
(a) above and hereby further irrevocably waives and agrees not to plead or claim
in any such court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.
(c) Each of the parties to this agreement hereby irrevocably
waives all right to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement or the transactions contemplated
hereby.
Section 7. Section Titles. The section titles contained in this
Agreement shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
Section 8. Benefit of Agreement. The provisions of this Agreement shall
inure to the benefit of the Agent and the Lenders and their successors and
assigns under the Credit Agreement and shall be binding upon the parties hereto
and their respective successors and assigns; provided, however, that neither
Kelso nor the Borrower may assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Lenders.
Section 9. Exclusive Rights. The Agent, the Lenders, Holdings and the
Borrower shall have the exclusive benefit of this Agreement and the exclusive
rights to enforce the obligations of Kelso and Holdings under Section 2 hereof
and under all other provisions of this Agreement. No Person which is not a party
to this Agreement and no present or future creditor of Holdings or the Borrower
(other than the Agent and the Lenders) shall be entitled to the benefit of this
Agreement or have any legal or equitable right (direct or indirect, contingent
or otherwise), remedy or claim under this Agreement.
-5-
<PAGE>
Section 10. Election of Remedies. This Agreement may be enforced by
the Agent or the Required Lenders at any time and from time to time as often as
the occasion therefor may arise and without any requirement on the part of the
Agent or any of the Lenders first to exercise any rights against Holdings, the
Borrower, any Subsidiary or any other Person, or to exhaust any remedies
available to the Agent or any of the Lenders against Holdings, the Borrower, any
Subsidiary or any other Person, or to resort to any collateral or security for
any of the Obligations which is at any time in the possession or under the
control of the Agent or any of the Lenders or to resort to any source or means
of obtaining payment or enforcing performance of the Obligations or any of them.
Section 11. Termination. This Agreement shall remain in effect and
shall not be terminated until the earlier to occur of (i) all of the Obligations
has been discharged or otherwise fully satisfied and the Credit Agreement has
terminated or (ii) August 1, 1998, unless, at such time, Kelso, Holdings or the
Borrower shall have failed to observe any agreement on its part to be performed
hereunder.
Section 12. Notices. All notices and other communications pursuant to
this Agreement shall be in writing, either by letter (delivered by hand or
commercial messenger service or sent by registered or certified mail, return
receipt requested) or telecopy, addressed as follows:
(a) If to Kelso:
Kelso & Company
350 Park Avenue
New York, New York 10022
Attention: James J. Connors, II
Vice President and General Counsel
Telecopier No.: (212) 223-2379
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Richard D. Bohm, Esq.
Telecopier No.: (212) 909-6836
(b) If to Agent or the Borrower, as provided in the
Credit Agreement.
Any notice or other communication hereunder shall be deemed to have been given
on the day on which it is telecopied to such party at its telecopier number
specified above or delivered by hand or such commercial messenger service to
such party at its address specified above, or, if sent by mail, on the third
Business Day after the day deposited in the mail, postage prepaid. Any party
hereto may change the Person, address or telecopier number to whom or which
notices are to be given hereunder, by notice duly given hereunder; provided,
however, that any such notice shall be deemed to have been given hereunder only
when actually received by the party to which it is addressed.
-6-
<PAGE>
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO ITS RULES PERTAINING TO CONFLICTS OF LAWS.
Section 14. Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
Section 15. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all other understandings, oral or written, with respect to the
subject matter hereof.
Section 16. Third Party Beneficiaries. Kelso, Holdings and the Borrower
acknowledge and agree that the Agent and the Lenders are third party
beneficiaries of this Agreement and shall have the right to enforce this
Agreement in accordance with the terms hereof. Each of the parties agrees to
promptly send to the Agent copies of all notices sent or received by such party
in connection herewith.
Section 17. Period in Force. If at any time any payment hereunder is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of Kelso, Holdings or the Borrower or otherwise,
each of Kelso's, Holdings' or the Borrower's obligations, as the case may be,
under this Agreement with respect to such payment shall be revived and continued
in full force and effect.
[signature page follows]
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
KELSO & COMPANY, L.P.
By: Kelso & Companies, Inc.
Its: General Partner
By:___________________________
Name:_________________________
Title:________________________
PHC RETAIL HOLDING COMPANY
By:___________________________
Name:_________________________
Title:________________________
PEEBLES INC.
By:___________________________
Name:_________________________
Title:________________________
NATWEST BANK N.A.,
as Agent for the Lenders
By:___________________________
Name:_________________________
Title:________________________
-8-
To be filed by Amendment
FIRST AMENDMENT
OF CREDIT AGREEMENT
THIS FIRST AMENDMENT OF CREDIT AGREEMENT (this "Amendment"), dated as
of September 15, 1995 (this "Agreement"), is by and among Peebles Inc., a
Virginia corporation (the "Borrower"), the undersigned financial institutions in
their capacities as lenders (collectively, the "Lenders," and each individually,
a "Lender"), Societe Generale, Southwest Agency and Internationale Nederlanden
(U.S.) Capital Corporation, as co-agents (the "Co-Agents"), and NatWest Bank
N.A., as agent (the "Agent") for the Lenders.
RECITALS:
WHEREAS, the Borrower, the Agent, the Co-Agents and the Lenders are
parties to that certain Credit Agreement dated as of June 9, 1995 (the "Credit
Agreement"); and
WHEREAS, the Borrower, the Agent, the Co-Agents and the Lenders desire
to amend certain provisions of the Credit Agreement on the terms and conditions
set forth herein;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings given them in the Credit
Agreement.
SECTION 2. Amendments to the Credit Agreement. The Credit Agreement is,
as of the Effective Date (as defined below), hereby amended as follows:
(a) The definition of "Consolidated EBIT" appearing in Section
10 of the Credit Agreement is amended by adding the following sentence
at the end thereof:
"For purposes of computing Consolidated Net Income in clause
(i) above with respect to the Borrower's fiscal quarter ended
July 29, 1995, there shall be excluded from the computation
thereof, without duplication and to the extent not otherwise
excluded from the computation thereof, payments to certain
management employees of the Borrower and related tax payments
recognized by the Borrower as an expense in such fiscal
quarter in an aggregate amount of $3,089,294, representing (i)
an aggregate payment of $1,372,994 to management consisting of
a payment of $6.25 per option for 219,679 options to purchase
common stock at an exercise price of $23.75 per share, granted
in connection with the Borrower's 1993 Stock Option Plan, (ii)
an aggregate cash payment to management of $1,649,250 for the
exchange of 213,020 stock options granted under the Borrower's
1993 Stock Option Plan and (iii) the payment by the Borrower
of FICA and Medicare taxes in the aggregate amount of $67,050
with respect to the compensation payments described in clauses
(i) and (ii) of this sentence."
-1-
<PAGE>
(b) Schedule 1.01 of the Credit Agreement is amended by
deleting such Schedule in its entirety and replacing it with Schedule
1.01 attached to this Amendment.
(c) Exhibit 12.04 of the Credit Agreement is amended by
deleting such Exhibit in its entirety and replacing it with Exhibit
12.04 attached to this Amendment.
SECTION 3. Conditions Precedent to Effectiveness of Amendment. This
Amendment shall become effective upon the date (the "Effective Date") each of
the following conditions are satisfied:
(a) the Borrower, the Agent, the Co-Agents and the Lenders
shall have executed and delivered this Amendment; and
(b) the Borrower shall have executed and delivered to the Agent
new Notes for each Lender in the principal amounts reflected on
Schedule 1.01 attached to this Amendment.
Promptly following the Effective Date and receipt of new Notes, each
Lender shall deliver its original Notes to the Agent for cancellation and, upon
receipt and cancellation thereof, the Agent shall return such Notes to the
Borrower.
SECTION 4. Representations and Warranties of the Borrower. The Borrower
represents and warrants to the Lenders, the Co-Agents and the Agent as follows:
(a) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all
material respects at and as of the date hereof as though made on and as
of the date hereof (except to the extent specifically made with regard
to a particular date).
(b) No Event of Default or Default has occurred and is
continuing.
(c) The execution, delivery and performance of this Amendment
has been duly authorized by all necessary action on the part of, and
duly executed and delivered by, the Borrower and this Amendment is a
legal, valid and binding obligation of the Borrower enforceable against
the Borrower in accordance with its terms, except as the enforcement
thereof may be subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law).
(d) The execution, delivery and performance of this Amendment
do not conflict with or result in a breach by the Borrower of any term
of any material contract, loan agreement, indenture or other agreement
or instrument to which the Borrower is a party or is subject.
-2-
<PAGE>
SECTION 5. Execution in Counterparts. This Amendment may be executed in
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. This Amendment shall be binding upon the respective parties
hereto upon the execution and delivery of this Amendment by the Borrower, the
Agent, the Co-Agents and the Lenders.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
Section 7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized as of the
date above first written.
PEEBLES INC.
By: ________________________
Name: ______________________
Title: _____________________
NATWEST BANK N.A., individually and as
Agent
By: ________________________
Name: ______________________
Title: _____________________
SOCIETE GENERALE, SOUTHWEST
AGENCY, individually and as Co-Agent
By: ________________________
Name: ______________________
Title: _____________________
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION,
individually and as Co-Agent
By: ________________________
Name: ______________________
Title: _____________________
-4-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1.01
COMMITMENTS
-----------
A Term B Term Bridge Revolving
Lender Commitment Commitment Commitment Commitment
- --------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Internationale $ 6,666,000.00 $ 9,999,000.00 $21,664,500.00
Nederlanden (U.S.)
Capital Corporation
NatWest Bank N.A. $ 6,668,000.00 $10,002,000.00 $6,623.286.00 $21,671,000.00
Societe Generale $ 6,666,000.00 $ 9,999,000.00 $21,664,500.00
------------- ------------- ------------- --------------
Total: $20,000,000.00 $30,000,000.00 $6,623,286.00 $65,000,000.00
============== ============== ============= ==============
</TABLE>
<PAGE>
EXHIBIT 12.04
ASSIGNMENT AGREEMENT
Dated , 19
Reference is made to the Credit Agreement described in Item 2
of Annex I hereto (as such Credit Agreement may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Unless otherwise defined in Annex I hereto, terms defined in the Credit
Agreement are used herein as therein defined. ________ (the "Assignor") and
__________ (the "Assignee") hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee
without recourse and without representation or warranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obligations
under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I hereto (the "Assigned Share") of all of
the outstanding rights and obligations under the Credit Agreement relating to
the facilities listed in Item 4 of Annex I hereto, including, without
limitation, (x) in the case of any assignment of all or any portion of
outstanding A Term Loans, all rights and obligations with respect to the
Assigned Share of such A Term Loans, (y) in the case of any assignment of all or
any portion of outstanding B Term Loans, all rights and obligations with respect
to the Assigned Share of such B Term Loans, (z) in the case of any assignment of
all or any portion of the Revolving Commitment, all rights and obligations with
respect to the Assigned Share of such Revolving Commitment and of any Revolving
Loans and Letters of Credit. After giving effect to such sale and assignment,
the Assignee's Revolving Commitment and the amount of the outstanding A Term
Loans and B Term Loans owing to the Assignee will be as set forth in Item 4 of
Annex I hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the other Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Loan Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any of its Subsidiaries or the performance or observance by the
Borrower or any of its Subsidiaries of any of their obligations under the Credit
Agreement or the other Loan Documents to which they are a party or any other
instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement and the other Loan Documents, together with copies of the
financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions
<PAGE>
in taking or not taking action under the Credit Agreement; (iii) appoints and
authorizes the Agent to take such action as the Agent on its behalf and to
exercise such powers under the Credit Agreement and the other Loan Documents as
are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto; [and] (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender[; and (v) to the
extent required by Section 4.04(b) of the Credit Agreement, attaches the forms
described in Section 4.04(b) of the Credit Agreement] (1/).
4. Following the execution of this Assignment Agreement by the
Assignor and the Assignee, an executed original hereof (together with all
attachments) will be delivered to the Agent. The effective date of this
Assignment Agreement shall be the date of execution hereof by the Assignor and
the Assignee and the receipt of the consent of the Agent and the Borrower and
receipt by the Agent of the administrative fee referred to in Section 12.04(b)
of the Credit Agreement, or such later date, if any, which may be specified in
Item 5 of Annex I hereto (the "Settlement Date").
5. Upon the delivery of a fully executed original hereof to
the Agent, as of the Settlement Date, (i) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Assignment Agreement, have
the rights and obligations of a Lender thereunder and under the other Loan
Documents [and] (ii) the Assignor shall, to the extent provided in this
Assignment Agreement, relinquish its rights and be released from its obligations
under the Credit Agreement and the other Loan Documents [and (iii) the Assignor
shall be a Co-Agent under the Credit Agreement].
6. It is agreed that the Assignee shall be entitled to (x) all
interest on the Assigned Share of the Loans at the rates specified in Item 6 of
Annex I; (y) all Commitment Fees (if applicable) on the Assigned Share of the
Revolving Commitment at the rate specified in Item 7 of Annex I hereto; (z) all
Letter of Credit Fees and Facing Fees (if applicable) on the Assignee's
participation in all Letters of Credit at the rate specified in Item 8 of Annex
I hereto; which, in each case, accrue on and after the Settlement Date, such
interest and, if applicable, Commitment Fees, Letter of Credit Fees and Facing
Fees, to be paid by the Agent directly to the Assignee. It is further agreed
that all payments of principal made on the Assigned Share of the Loans which
occur on and after the Settlement Date will be paid directly by the Agent to the
Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor an
amount specified by the Assignor in writing which represents the Assigned Share
of the principal amount of the respective Loans made by the Assignor pursuant to
the Credit Agreement which are outstanding on the Settlement Date, net of any
closing costs, and which are being assigned hereunder. The Assignor and the
Assignee shall make all appropriate adjustments in payments under the Credit
Agreement for periods prior to the Settlement Date directly between themselves
on the Settlement Date.
- --------
(1/) Include if the Assignee is organized under the laws of a jurisdiction
outside of the United States.
-2-
<PAGE>
7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being made on
Annex I hereto.
Accepted this ____ day [NAME OF ASSIGNOR]
of ___________, 19 as Assignor
By ________________
Title:
[NAME OF ASSIGNEE]
as Assignee
By ________________
Title:
Consented to as of , 19 :
--------- --- --
NATWEST BANK N.A., as Agent
By ____________________
Title:
PEEBLES INC.
By ____________________
Title:
-3-
<PAGE>
ANNEX I TO ASSIGNMENT AGREEMENT
1. Borrower: Peebles Inc.
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of June 9, 1995, among Peebles Inc., the
Lenders and Co-Agents from time to time parties thereto, and NatWest
Bank N.A., as Agent, as amended, restated, supplemented or otherwise
modified to the date hereof.
3. Date of Assignment Agreement:
4. Amounts (as of date of item #3 above):
Outstanding Outstanding Revolving
A Term B Term Commitment
Loans Loans
a. Aggregate Amount for _________ __________ $________
all Lenders
b. Assigned Share (2/) _________ __________ ________%
c. Amount of Assigned Share __________ __________ $________
5. Settlement Date:
6. Rate of Interest
to the Assignee: As set forth in Section 1.08 of the Credit
Agreement (unless otherwise agreed to by the
Assignor and the Assignee)(3/)
- --------
(2/) Percentage taken to 4 decimal places.
(3/) The Borrower and the Agent shall direct the entire amount of the
interest to the Assignee at the rate set forth in Section 1.08 of the Credit
Agreement, with the Assignor and Assignee effecting the agreed upon sharing of
the interest, if any, through payments by the Assignee to the Assignor.
<PAGE>
Annex I
Page 2
7. Commitment
Fee: As set forth in Section 3.01(a) of the Credit
Agreement (unless otherwise agreed to by the
Assignor and the Assignee)(4/)
8. Letter of Credit
Fees and Facing
Fees to the
Assignee: As set forth in Sections 3.01(b) and (c) of the
Credit Agreement (unless other- wise agreed to
by the Assignor and the Assignee)(5/)
9. Notice:
ASSIGNOR:
______________________
______________________
______________________
______________________
Attention:
Telephone:
Telecopier:
Reference:
- --------
(4/) Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Commitment is being assigned. Otherwise, the Borrower and the Agent
shall direct the entire amount of the Commitment Fee to the Assignee at the rate
set forth in Section 3.01(a) of the Credit Agreement, with the Assignor and the
Assignee effecting the agreed upon sharing of the Commitment Fee through payment
by the Assignee to the Assignor.
(5/) Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Commitment is being assigned. Otherwise, the Borrower and the Agent
shall direct the entire amount of the Letter of Credit Fees and Facing Fees to
the Assignee at the rate set forth in Sections 3.01(b) and (c) of the Credit
Agreement, with the Assignor and the Assignee effecting the agreed upon sharing
of Letter of Credit Fees and Facing Fees through payment by the Assignee to the
Assignor.
<PAGE>
Annex I
Page 3
ASSIGNEE:
________________________
________________________
________________________
________________________
Attention:
Telephone:
Telecopier:
Reference:
Payment Instructions:
ASSIGNOR:
________________________
________________________
________________________
________________________
Attention:
Reference:
ASSIGNEE:
________________________
________________________
________________________
________________________
Attention:
Reference:
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By ____________________ By ___________________
____________________ ___________________
(Print Name and Title) (Print Name and Title)
SECOND AMENDMENT AND LIMITED CONSENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT AND LIMITED CONSENT TO CREDIT AGREEMENT, dated as
of March 8, 1996 (this "Amendment"), is by and among Peebles Inc., a Virginia
corporation (the "Borrower"), the undersigned financial institutions in their
capacities as lenders (the "Lenders"), Societe Generale, Southwest Agency and
Internationale Nederlanden (U.S.) Capital Corporation, as co-agents (the
"Co-Agents"), and NatWest Bank N.A., as agent (the "Agent") for the Lenders.
RECITALS:
WHEREAS, the Borrower, the Agent, the Co-Agents and the Lenders are
parties to that certain Credit Agreement, dated as of June 9, 1995, as amended
by that certain First Amendment of Credit Agreement, dated as of September 15,
1995 (and as further amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"); and
WHEREAS, the Borrower, the Agent, the Co-Agents and the Lenders desire
to amend certain provisions of the Credit Agreement on the terms and conditions
set forth herein; and
WHEREAS, the Borrower requests that the Agent, the Co-Agents and the
Lenders consent to a certain action under the Credit Agreement on the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, all
capitalized terms used herein have the meanings assigned to such terms in the
Credit Agreement.
SECTION 2. Amendments to the Credit Agreement. The Credit Agreement is,
as of the Closing Date (as defined below), hereby amended as follows:
(a) The definition of "Consolidated Capital Expenditures"
appearing in Section 10 of the Credit Agreement is hereby amended by
adding the following proviso at the end thereof:
"; provided further, that Consolidated Capital Expenditures shall not
in any event include (a) the purchase price paid or other obligations
assumed in connection with the acquisition by the Borrower of Carlisle
Retailers, Inc., an Ohio corporation ("Carlisle"), through the merger
of Peebles Acquisition Subsidiary Inc., an Ohio corporation and a
Wholly-Owned Subsidiary of the Borrower ("PAS"), into Carlisle
<PAGE>
pursuant to that certain Merger Agreement, dated as of February 14,
1996, by and among Carlisle, the Borrower and PAS and (b) costs
incurred during the fiscal year ending January 31, 1997 for the
improvement of certain assets of Carlisle, including, without
limitation, the replacement of cash registers and signs, in an
aggregate amount not to exceed $1,000,000."
(b) Section 8.05(b) of the Credit Agreement is hereby deleted
in its entirety and the following is hereby inserted in lieu thereof:
"(b) In the event that the maximum amount which is permitted
to be expended in respect of Consolidated Capital Expenditures
(including Maintenance Capital Expenditures) during any fiscal year
pursuant to Section 8.05(a) and/or (c) (without giving effect to this
clause (b)) is not fully expended during such fiscal year, the maximum
amount which may be expended in respect of Consolidated Capital
Expenditures (including Maintenance Capital Expenditures) during the
immediately succeeding fiscal year pursuant to Section 8.05(a) and/or
(c) shall be increased by such unutilized amount provided that such
increase shall not exceed $1,000,000 in any fiscal year."
SECTION 3. Limited Consent. The Agent, the Co-Agents and the Lenders
hereby consent to the acquisition by the Borrower of Carlisle Retailers, Inc.,
an Ohio corporation ("Carlisle"), through the merger of Peebles Acquisition
Subsidiary, Inc., an Ohio corporation and a Wholly-Owned Subsidiary of the
Borrower ("PAS"), into Carlisle (the "Merger") on the following terms and
conditions, all of which must be met on or prior to the effective date of the
Merger (the "Closing Date"):
(a) the purchase price to be paid for the acquisition of
Carlisle by the Borrower shall be determined in accordance with the
terms and conditions of the Merger Agreement, dated as of February 14,
1996, by and among Carlisle, the Borrower and PAS, attached hereto as
Exhibit A (the "Merger Agreement");
(b) the Merger shall be consummated on or prior to June 30,
1996;
(c) no Default or Event of Default shall exist immediately
before and after giving effect to the consummation of the Merger or
result therefrom;
(d) no Indebtedness, including, without limitation, deferred
payments to be paid by the Borrower or any Subsidiary in respect of the
Merger, shall have been incurred or assumed, directly or indirectly, by
the Borrower or any Subsidiary as
-2-
<PAGE>
a result of the Merger, other than Indebtedness identified on
Exhibit B attached hereto;
(e) the Borrower shall have promptly paid in full all of the
costs and expenses (including, without limitation, reasonable costs and
expenses of counsel to the Agent) related to the review by the Agent of
the Borrower's compliance with the terms of the Credit Agreement with
respect to the Merger;
(f) neither Carlisle nor any of its Subsidiaries shall be
subject to any restrictions, whether set forth in its charter or other
organizational documents, contractually imposed or otherwise, with
respect to the payment of cash dividends and distributions on its
capital stock or with respect to payment of any Indebtedness owed to
the Borrower or any Subsidiary or the making of loans or advances to
the Borrower or any Subsidiary or the transfer of any of its property
or assets to the Borrower or any Subsidiary;
(g) the board of directors and, if required under applicable
law, the stockholders of each of the Borrower and Carlisle shall have
approved the terms and conditions of the Merger;
(h) the Borrower shall have satisfied the requirements of
Section 7.11 of the Credit Agreement and shall have executed and
delivered such documents, instruments, agreements and legal opinions
required thereunder;
(i) the Borrower shall have delivered to the Agent on or prior
to the Closing Date, a certified copy of the true, correct and complete
Merger Agreement and all exhibits, schedules, documents and other
agreements related thereto;
(j) the Merger shall be consummated pursuant to the terms and
conditions of the Merger Agreement in the form attached hereto as
Exhibit A (without amendment or waiver by the Borrower of the
fulfillment of any condition precedent set forth therein), which
agreement shall set forth the entire agreement among the parties
thereto with respect to the subject matter thereof;
(k) the Borrower shall have no knowledge that any of the
representations or warranties with respect to Carlisle or any of its
Subsidiaries contained in the Merger Agreement or other related
documents were false or misleading when made the breach of which
individually or in the aggregate could have a material adverse effect
on Carlisle as operated before or after giving effect to the
consummation of the Merger;
(l) no material consent or approval of any Person, and no
consent, license, approval, authorization or declaration of
-3-
<PAGE>
any governmental authority, bureau or agency, shall have been required
in connection with the Merger, except as described in the Merger
Agreement delivered to the Agent in connection therewith, each of which
shall have been duly and validly obtained on or prior to the Closing
Date and shall be in full force and effect on such date;
(m) neither the execution and delivery of the Merger
Agreement, nor the performance of any parties' obligations thereunder,
will violate any provision of law;
(n) not later than five Business Days prior to consummation of
the Merger, the Agent shall have received: (i) a Phase 1 environmental
assessment concerning any owned Real Property (and, if deemed
reasonably necessary by the Agent, any leased Real Property) of
Carlisle and any of its Subsidiaries, which assessment shall be
conducted in accordance with the appropriate ASTM standard (and if
recommended by the Phase 1 assessment, a Phase 2 environmental
assessment conducted in accordance with the appropriate ASTM standard,
if any) and which shall be reasonably satisfactory to the Agent in all
respects, provided that no environmental assessment shall be required
in respect of any properties as to which the Agent in its sole
discretion determines that no such assessment is desirable; (ii) a
schedule, with such detail as the Agent may reasonably request,
concerning all material litigation then pending or to the knowledge of
the Borrower threatened and all material contingent liabilities
(including all sales and other state tax and any other tax the
liability for which may attach to transferred assets) with respect to
Carlisle and any of its Subsidiaries in each case which is not
otherwise described in adequate detail in the Merger Agreement and
related exhibits and schedules whether or not purported to be retained
by Carlisle (all of the foregoing relating to such litigation,
contingent liabilities and tax liabilities to be reasonably
satisfactory in form and substance to the Agent and its counsel); (iii)
to the extent available, a consolidated and consolidating balance sheet
of Carlisle and any of its Subsidiaries, and a related consolidated and
consolidating statement of income and retained earnings and statements
of cash flow for each of the three (3) fiscal years and subsequent
fiscal quarters ending immediately prior to the Closing Date; and (iv)
on a pro forma basis after giving effect to the Merger and based on
reasonable assumptions made by the Borrower in good faith, a
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries (including Carlisle and its Subsidiaries), and a related
consolidated and consolidating statement of income and retained
earnings and statements of cash flow for each fiscal year following the
Closing Date through the Final Maturity Date, each such statement (x)
certified by the chief financial officer of the Borrower as
-4-
<PAGE>
fairly presenting the Borrower's and its Subsidiaries' and Carlisle's
historical and projected financial position on a pro forma basis after
giving effect to the Merger, (y) to show all deferred payments which
the Borrower or any Subsidiary, as applicable, directly or indirectly,
would be required to make based on the projected pro forma results of
operations, and (z) to be accompanied by a certificate of the chief
financial officer of the Borrower certifying that the Borrower is
projected to be in compliance with all covenants set forth in the
Credit Agreement during each fiscal year following the Closing Date
through the Final Maturity Date, which certificate shall be accompanied
by detailed calculations indicating compliance with the covenants set
forth herein and in Sections 8.03, 8.04, 8.05, 8.10, 8.11, 8.12, and
8.13 of the Credit Agreement;
(o) concurrently with the consummation of the Merger, the
Agent shall have received, in form and substance reasonably
satisfactory to the Agent and its counsel, a Compliance Certificate
dated the Closing Date, which certificate shall also include a
certification of the chief financial officer of the Borrower (i) to the
effect that, after giving effect to the Merger, no material adverse
change shall have occurred in the financial condition or operations of
the Borrower and its Subsidiaries taken as a whole, and (ii) that the
terms and conditions of this Amendment have been complied with and the
consummation of the Merger shall be deemed to constitute a
representation and warranty by the Borrower that the Merger has been
consummated in accordance with the terms of the Credit Agreement;
(p) after giving effect to the Borrowing of any Revolving
Loans on the Closing Date, and after giving effect to the Borrowing
Base in effect on the Closing Date as evidenced in a Borrowing Base
Certificate delivered to the Agent on or prior to the Closing Date, the
Borrower shall be able to incur additional Revolving Loans in an
aggregate principal amount of not less than $10,000,000 after the
payment of all fees, costs and expenses incurred in connection with the
consummation of the Merger; and
(q) the Borrower shall have delivered to the Agent a
certificate from the Chief Financial Officer of the Borrower dated the
Closing Date, in form and substance satisfactory to the Agent and its
counsel, providing the opinion of the Chief Financial Officer of the
Borrower as to the solvency of Carlisle both immediately prior to and
after giving effect to the Merger.
-5-
<PAGE>
The consent by the Agent, the Co-Agents and the Lenders as described
above shall not operate as a consent or waiver of (a) any other right, power or
remedy of the Agent, the Co-Agents or the Lenders under the Loan Documents or
(b) any Event of Default under the Credit Agreement. Such consent is only
applicable and shall only be effective in the specific instance and for the
specific purpose for which made or given.
SECTION 4. Representations and Warranties of the Borrower. The Borrower
represents and warrants to the Agent, the Co-Agents and the Lenders:
(a) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all
material respects at and as of the date hereof as though made on and as
of the date hereof (except to the extent specifically made with regard
to a particular date).
(b) No Event of Default or Default has occurred and is
continuing.
(c) The execution, delivery and performance of this Amendment
has been duly authorized by all necessary action on the part of, and
duly executed and delivered by, the Borrower and this Amendment is a
legal, valid and binding obligation of the Borrower enforceable against
the Borrower in accordance with its terms, except as the enforcement
thereof may be subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law).
(d) The execution, delivery and performance of this Amendment
do not conflict with or result in a breach by the Borrower of any term
of any material contract, loan agreement, indenture or other agreement
or instrument to which the Borrower is a party or is subject.
SECTION 5. Execution in Counterparts. This Amendment may be executed in
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized as of the
date above first written.
PEEBLES INC.
By:_______________________
Name:_____________________
Title:____________________
NATWEST BANK N.A., individually
and as Agent
By:_______________________
Name:_____________________
Title:____________________
SOCIETE GENERALE, SOUTHWEST
AGENCY, individually and as Co-
Agent
By:_______________________
Name:_____________________
Title:____________________
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION,
individually and as Co-Agent
By:_______________________
Name:_____________________
Title:____________________
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By:_______________________
Name:_____________________
Title:____________________
THE SUMITOMO BANK, LTD.,
CHICAGO BRANCH
By:_______________________
Name:_____________________
Title:____________________
-7-
<PAGE>
EXHIBIT A
MERGER AGREEMENT
See Attached.
<PAGE>
EXHIBIT B
INDEBTEDNESS ASSUMED IN THE MERGER
1. Deferred payments pursuant to that certain Severance Agreement by and
between Carlisle and Lorenzo T. Carlisle, III in substantially the form
of Exhibit B to the Merger Agreement.
2. Deferred payments pursuant to that certain Noncompetition Agreement by
and between Carlisle and Lorenzo T. Carlisle, III in substantially the
form of Exhibit C to the Merger Agreement.
Exhibit 10.11
INDEMNIFICATION AND CONTRIBUTION AGREEMENT
THIS INDEMNIFICATION AND CONTRIBUTION AGREEMENT is made and entered
into as of August 23, 1995 by and between PHC RETAIL HOLDING COMPANY, a Delaware
corporation (the "Company"), which term shall mean the Company only and no
predecessor entity or other legal entity, and ^F1^ (the "Indemnitee").
RECITALS
WHEREAS the Company has determined that it is in its best interest
contractually to obligate itself to indemnify the directors and officers of the
Company against inordinate risks of claims and actions against such directors
and officers arising out of their services to and activities on behalf of the
Company; and
WHEREAS the Indemnitee, in his capacity as a director, officer,
employee and/or agent of the Company, provides valuable services essential to
the business and operations of the Company, and the Indemnitee is willing to
serve or continue to serve as a director, officer, employee and/or agent of the
Company on the condition that he or she is so indemnified; and
WHEREAS the Company's Certificate of Incorporation, as amended (the
"Company Certificate"), and by-laws, as amended, provide for the indemnification
of the directors, officers, employees and agents of the Company to the maximum
extent permitted by Delaware General Corporation Law and for the elimination of
the liability to the Company or its stockholders of a director or officer of the
Company for monetary damages for breach of his fiduciary duty as a director
except (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) under Section
174 of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit; and
WHEREAS Section 145(f) of the Delaware General Corporation Law
specifically provides that the indemnification and advancement of expenses
provided by or granted pursuant to Section 145 of the Delaware General
Corporation Law are not exclusive and contemplates that corporations
incorporated in Delaware, such as the Company, may enter into contracts with
directors and officers with respect to indemnification of such persons; and
WHEREAS the Company wishes to avail itself of opportunities under
applicable law to enter into such a contract of indemnification and
contribution; and
<PAGE>
WHEREAS the Company presently maintains a policy or policies of
directors and officers liability insurance covering certain liabilities which
may be incurred by the respective directors and officers of the Company in the
performance of their duties; and
WHEREAS developments with respect to the terms and availability of
directors and officers liability insurance and with respect to the application,
amendment and enforcement of statutory, certificate of incorporation and by-law
indemnification provisions generally have raised questions concerning the
adequacy and reliability of the protection afforded thereby to directors and
officers; and
WHEREAS in order to resolve such questions and thereby induce the
Indemnitee to continue to serve as a director, officer, employee and/or agent,
as the case may be, of the Company without undue concern for possible
liabilities that may be alleged to exist as a result of his acting as such, the
Company has determined and agreed to enter into this Agreement with the
Indemnitee.
NOW, THEREFORE, for and in consideration of the Indemnitee's continued
service as a director, officer, employee and/or agent, as the case may be, of
the Company after the date hereof, and other good and valuable considerations,
the receipt and sufficiency of which have hereby been acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS FOR PURPOSES OF THIS AGREEMENT.
(a) "Legal Entity" shall mean a corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise.
(b) "Proceeding" shall mean any threatened, pending, or
completed action, suit, proceeding or appeal whether civil, criminal,
administrative or investigative and whether formal or informal.
2. INDEMNIFICATION BY THE COMPANY. The Company hereby agrees to
indemnify the Indemnitee against and hold the Indemnitee harmless from any
claims, liabilities, damages, expenses (including without limitation attorneys'
fees and expert witnesses' fees), losses, costs, judgments, fines, penalties,
awards or amounts paid in settlement incurred by the Indemnitee and arising out
of his capacity as a director, officer, employee and/or agent of the Company, to
the maximum extent authorized or permitted by applicable law. Furthermore, the
Company shall advance expenses to the Indemnitee to the maximum extent
authorized or permitted by applicable law to meet the obligations set forth
herein, subject to
-2-
<PAGE>
Section 5 below. The Company represents that the Company Certificate and the
Company's by-laws provide for indemnification of its directors and officers to
the maximum extent authorized or permitted by applicable law.
3. LIMITATION ON LIABILITY OF THE COMPANY'S DIRECTORS AND OFFICERS. The
Company hereby represents that the Company Certificate eliminates the liability
to the Company or its stockholders of a director or officer of the Company for
monetary damages for breach of his fiduciary duty as a director except (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, (iii) under Section 174 of the
General Corporation Law of the State of Delaware, or (iv) for any transaction
from which the director derived an improper personal benefit.
4. NO AMENDMENT WITHOUT NOTICE. Except as otherwise directed by the
stockholders of the Company, the Company hereby agrees that it will not amend or
consent to the amendment of the Company Certificate or the Company's by-laws to
in any manner limit or eliminate the provisions therein which provide for the
indemnification of any director, officer, employee or agent or which limit the
personal liability of directors and officers of the Company to the Company or
its stockholders for monetary damages without first providing written notice to
the Indemnitee.
5. ADVANCEMENT OF EXPENSES. The obligations of the Company to make
advances under Section 2 above shall in each case be contingent upon an
undertaking from the Indemnitee to repay the same if it is ultimately determined
that the Indemnitee is not entitled to indemnification. Such undertaking shall
be an unlimited, unsecured general obligation of the Indemnitee and shall be
accepted without reference to the Indemnitee's ability to make repayment.
6. DETERMINATION THAT INDEMNIFICATION IS NOT PERMISSIBLE. With respect
to the Company's indemnification obligations under Section 2 above, a
determination that such indemnification is not permissible in the specific case
may be made, if the Indemnitee is a director, as provided by applicable law (or,
if applicable law does not otherwise provide, in the same manner as for a person
not a director, as set forth below), and if the Indemnitee is not a director, by
general or specific action of the Board of Directors of the Company, which
action may be taken before or after a claim for indemnification is made, or as
otherwise provided by applicable law. No such determination may be made later
than 90 days after the Indemnitee's liability in a specific case has been
finally determined. If a majority of the directors of the Company shall
-3-
<PAGE>
have changed after the date of the alleged conduct giving rise to a claim for
indemnification, such determination may, at the option of the Indemnitee, be
made only by special legal counsel agreed upon by such Board of Directors and
the Indemnitee.
7. EFFECT OF TERMINATION OF PROCEEDING. Determination of a Proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere,
or its equivalent, shall not of itself create a presumption that the Indemnitee
acted in such a manner as to make the Indemnitee ineligible for indemnification.
8. INSURANCE. The Company hereby represents and warrants that it has
purchased and maintained in effect for the benefit and on behalf of the
Indemnitee, and covenants that it will purchase and maintain in effect for the
benefit and on behalf of the Indemnitee so long as the Indemnitee shall continue
to serve as a director, officer, employee and/or agent of the Company (or shall
continue at the request of the Company to serve as a director, officer, employee
and/or agent of another Legal Entity) and thereafter so long as the Indemnitee
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal or investigative, by reason
of the fact that the Indemnitee was a director, officer, employee and/or agent
of the Company (or served in any other capacity), one or more valid, binding and
enforceable policies of insurance against all liabilities that may be incurred
by the Indemnitee in or arising out of his capacity as a director, officer,
employee and/or agent of the Company, without regard to the power of the Company
to indemnify the Indemnitee against any such liability under applicable law.
Such insurance shall specifically protect and insure the Indemnitee against,
without limitation, to the extent available, any liabilities arising out of any
act or omission to act by the Indemnitee in his capacity as a director, officer,
employee and/or agent of the Company or otherwise on behalf of the Company. Such
insurance shall provide coverage in the maximum amount that is commercially
feasible as determined by the Board of Directors of the Company, but not less
than $5,000,000, and shall be placed with a reputable insurance company.
Evidence of such insurance and the terms, provisions, restrictions and
exclusions thereof shall be provided to the Indemnitee on his request. In the
event the Company does not purchase and maintain in effect any such policy or
any of such policies, as the case may be, of insurance pursuant to the
provisions of this Agreement, the Company agrees to hold harmless and indemnify
the Indemnitee to the full extent of the coverage which would have otherwise
been provided for the benefit of the Indemnitee pursuant to such policy or
policies, unless the Company shall have used its best efforts throughout in
seeking to purchase and maintain in effect such policy or policies.
-4-
<PAGE>
9. CONTRIBUTION. In order to provide for just and equitable
contribution in any case in which the Indemnitee makes claim for indemnification
pursuant to this Agreement and in which it is judicially determined (by entry of
a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the fact
that the provisions of this Agreement so provide for indemnification in such
case, then, and in each such case, (i) the Company and (ii) the Indemnitee and
all other directors, officers, employees and agents of the Company seeking
indemnification in such case, in the aggregate, shall contribute to the
aggregate losses, claims, damages, or liabilities to which the Indemnitee and
all other such persons seeking indemnification may be subject (after
contribution from all others) in such proportion so that the Company is
responsible for the portion represented by the percentage that the aggregate
revenues of the Company since January 28, 1995 bear to the sum of (y) such
aggregate revenues and (z) the aggregate compensation received since January 28,
1995 by the Indemnitee and all other such persons seeking indemnification, and
the Indemnitee and such other persons shall be responsible for the remaining
portion; provided, however, that in no event shall the amount to be contributed
by the Indemnitee exceed the aggregate compensation received by the Indemnitee
from the Company since January 28, 1995.
Only in the event that all of the above alternatives shall
fail, then the parties shall be responsible according to the relative fault of
the Company and the Indemnitee in connection with the statements, actions or
omissions which resulted in such damages, and other relevant equitable
considerations shall also be considered. The Company and the Indemnitee agree
that it would not be just and equitable if the respective obligations of the
Company and the Indemnitee to contribute pursuant to this Section 9 were to be
determined by pro rata or per capita allocation of the aggregate damages (even
if the Indemnitee and the other directors, officers, employees and agents of the
Company were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in this Section 9. For purposes of this Section 9, the term "damages" shall
include, without limitation, any legal or other expenses reasonably incurred by
the indemnified party in connection with investigating or defending against or
appearing as a third party witness in any action or claim that is the subject of
the contribution provisions of this Section 9.
10. FURTHER ACTION. The Company hereby agrees to use its best
efforts to take all action necessary to modify the rights provided to the
Indemnitee under this Agreement to the extent that additional indemnification or
contribution rights or rights limiting or eliminating liability may be obtained
from time to time under applicable law.
-5-
<PAGE>
11. RELEASE OF CLAIMS. The Company hereby releases the Indemnitee from
any claim, and agrees and covenants that it will not make any claim, against the
Indemnitee for any act or omission to act, to the maximum extent permitted by
applicable law. The Company hereby agrees to indemnify the Indemnitee against
and hold the Indemnitee harmless from any and all claims, liabilities, damages,
expenses, losses or costs, including without limitation attorneys' fees and
expert witnesses' fees, arising out of or in any way relating to any claim that
the Company or any of its subsidiaries may have or assert against the
Indemnitee, to the maximum extent permitted by applicable law.
12. CONTINUING EFFECT. All agreements for indemnification or
contribution by the Company contained herein shall continue during the period
the Indemnitee is or was a director, officer, employee and/or agent of the
Company (or is or was serving at the request of the Company as a director,
officer, employee and/or agent of another Legal Entity) and continue thereafter
so long as the Indemnitee shall be subject to any possible claim or threatened,
pending or completed action, suit or proceeding, whether civil, criminal or
investigative, by reason of the fact that the Indemnitee was a director,
officer, employee and/or agent of the Company or serving in any other capacity
referred to herein.
13. ACKNOWLEDGEMENT OF RELIANCE BY INDEMNITEE; AUTHORITY. The Company
expressly confirms and agrees that it has entered into this Agreement and
assumed the obligations imposed on it hereby in order to induce the Indemnitee
to continue to serve as a director, officer, employee and/or agent of the
Company after the date hereof without undue concern for risks of claims and
actions against him arising out of his services to and activities on behalf of
the Company. The Company represents that it has been duly incorporated and is an
existing corporation in good standing under the laws of the State of Delaware;
that it has full power and authority to enter into this Agreement and to perform
its obligations hereunder; and that this Agreement has been duly authorized,
executed and delivered and, assuming due execution and delivery by the
Indemnitee, constitutes the valid and legally binding obligation of the Company
enforceable in accordance with its terms.
14. ENFORCEMENT EXPENSES. In the event the Indemnitee is required
to bring any action to enforce any right or collect any money due under this
Agreement and is successful in such action, the Company agrees to reimburse the
Indemnitee for all of the Indemnitee's fees and expenses, including without
limitation
-6-
<PAGE>
attorneys' fees and expert witnesses' fees, in bringing or pursuing such action.
In the event the Indemnitee brings any such action but is not successful, the
Company agrees to reimburse the Indemnitee for all of the Indemnitee's
reasonable fees and expenses, including without limitation attorneys' fees and
expert witnesses' fees, in bringing or pursuing such action; provided, however,
that the Company shall not have any reimbursement obligation under this sentence
if, in connection with such action, a court of competent jurisdiction determines
that each of the material assertions made by the Indemnitee as a basis for such
action were not made in good faith or were frivolous.
15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Indemnitee and upon the Company and its subsidiaries, successors and
assigns, and shall inure to the benefit of the Indemnitee, his heirs, personal
representatives and assigns, and to the benefit of the Company and its
subsidiaries, successors and assigns.
16. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof. In particular, if any
indemnification or contribution right provided to the Indemnitee hereunder shall
be held to be invalid or unenforceable, such invalidity or unenforceability
shall not affect other indemnification or contribution required to be provided
to the Indemnitee hereunder.
17. NON-EXCLUSIVITY. It is the intent of the parties to this
Agreement to provide the maximum possible indemnification and contribution
rights to the Indemnitee, and this Agreement shall be interpreted accordingly.
The indemnification and other rights provided to the Indemnitee hereunder are in
addition to, and not exclusive of, any other rights the Indemnitee may have.
18. APPLICABLE LAW. This Agreement shall be interpreted and
enforced in accordance with the laws of the Commonwealth of Virginia applicable
to contracts made and to be performed entirely within the Commonwealth.
19. JURISDICTION AND VENUE. Each of the Company and the Indemnitee
hereby irrevocably submits in any suit, action or proceeding arising out of or
relating to this Agreement to the jurisdiction and venue of the United States
District Court for the Eastern District of Virginia and the jurisdiction and
venue of any court of the Commonwealth of Virginia located in South Hill,
Virginia or Richmond, Virginia and waives any and all objections to
-7-
<PAGE>
jurisdiction and review or to venue that it or the Indemnitee, as the case may
be, may have under the laws of the United States or any state thereof, except
that if the Indemnitee shall so designate, the jurisdiction and review of
another federal court or of the state courts of Delaware shall apply.
20. NOTICE BY THE INDEMNITEE. The Indemnitee shall promptly notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or any other matter which may be subject to indemnification, contribution or the
advancement of expenses covered hereunder; provided, however, that the failure
to give any such notice shall not result in a waiver or forfeiture of any of the
Indemnitee's rights hereunder.
21. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly received (1)
on the date given if delivered personally or by cable, telegram or telex or (2)
on the date received if mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or such other address for
a party as such party shall specify by like notice):
If to the Company: PHC Retail Holding Company
c/o Peebles Inc.
One Peebles Street
South Hill, Va. 23970-5001
Attn.: E. Randolph Lail
If to the Indemnitee:
22. MODIFICATION AND WAIVER. This Agreement may be amended or
modified only by a written instrument duly executed by all of the parties hereto
and may be waived only by a written instrument duly executed by the party
against whom such waiver is to be enforced.
23. CAPTIONS. The captions used in this Agreement are for the
convenience of reference only and do not constitute a part of this Agreement.
24. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but both of which shall
together constitute one and the same instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PHC RETAIL HOLDING COMPANY
BY:_____________________________________
MICHAEL F. MOORMAN,
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
INDEMNITEE
BY:_____________________________________
^F6^
-9-
EXHIBIT 21
Subsidiaries of the Registrant
None
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> FEB-03-1996
<CASH> 193
<SECURITIES> 0
<RECEIVABLES> 29,494
<ALLOWANCES> 960
<INVENTORY> 42,684
<CURRENT-ASSETS> 71,859
<PP&E> 51,409
<DEPRECIATION> 19,161
<TOTAL-ASSETS> 165,553
<CURRENT-LIABILITIES> 23,464
<BONDS> 71,401
0
0
<COMMON> 1
<OTHER-SE> 64,337
<TOTAL-LIABILITY-AND-EQUITY> 165,553
<SALES> 175,664
<TOTAL-REVENUES> 175,664
<CGS> 102,929
<TOTAL-COSTS> 102,929
<OTHER-EXPENSES> (25)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,979
<INCOME-PRETAX> 7,090
<INCOME-TAX> 3,372
<INCOME-CONTINUING> 3,718
<DISCONTINUED> 0
<EXTRAORDINARY> (216)
<CHANGES> 0
<NET-INCOME> 3,502
<EPS-PRIMARY> 5,030
<EPS-DILUTED> 5,030
</TABLE>
