SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended November 1, 1997
Commission File Number 1-9659
THE NEIMAN MARCUS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4119509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Boylston Street, Chestnut Hill, MA 02167
(Address of principal executive offices) (Zip Code)
(617) 232-0760
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
As of December 5, 1997, there were outstanding 49,920,264 shares of the
issuer's common stock, $.01 par value.
<PAGE>
THE NEIMAN MARCUS GROUP, INC.
I N D E X
Part I. Financial Information Page Number
Item 1. Condensed Consolidated Balance Sheets as of
November 1, 1997 and August 2, 1997 and Pro Forma
Condensed Consolidated Balance Sheet as of
November 2, 1996 1
Condensed Consolidated Statements of Earnings for
the Thirteen Weeks ended November 1, 1997 and
November 2, 1996 2
Condensed Consolidated Statements of Cash Flows for
the Thirteen Weeks Ended November 1, 1997 and
November 2, 1996 3
Notes to Condensed Consolidated Financial Statements 4-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
Exhibit 10.1 -
Exhibit 11.1 10
Exhibit 27.1 11
<PAGE>
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
(In thousands) Pro Forma
November 1, August 2, November 2,
1997 1997 1996
(Note 1)
<S> <C> <C> <C>
Assets
Current assets:
Cash and equivalents $ 18,537 $ 16,861 $ 16,819
Undivided interests in NMG
Credit Card Master Trust 177,268 128,341 156,944
Accounts receivable, net 64,692 55,041 61,632
Merchandise inventories 569,733 460,412 533,901
Deferred income taxes 19,049 19,049 21,666
Other current assets 47,531 54,339 44,413
Total current assets 896,810 734,043 835,375
Property and equipment, net 457,952 454,133 456,148
Other assets 97,218 99,684 105,142
Total assets $ 1,451,980 $ 1,287,860 $ 1,396,665
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 71,466 $ 8,810 $ 34,082
Accounts payable 207,643 174,952 176,725
Accrued liabilities 183,885 147,730 178,518
Total current liabilities 462,994 331,492 389,325
Long-term liabilities:
Notes and debentures 300,000 300,000 409,941
Other long-term liabilities 69,735 69,738 69,714
Total long-term liabilities 369,735 369,738 479,655
Deferred income taxes 31,902 31,902 33,329
Common stock 499 499 499
Additional paid-in capital 485,686 485,658 485,631
Retained earnings 101,164 68,571 8,226
Total liabilities and shareholders'
equity $ 1,451,980 $ 1,287,860 $ 1,396,665
See Notes to Condensed Consolidated Financial Statements
</TABLE>
1<PAGE>
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<CAPTION>
(In thousands except for Thirteen Weeks Ended
per share data) November 1, November 2,
1997 1996
<S> <C> <C>
Revenues $ 580,499 $ 544,103
Cost of goods sold including buying and
occupancy costs 376,127 350,579
Selling, general and administrative expenses 141,183 131,054
Corporate expenses 3,138 3,245
Operating earnings 60,051 59,225
Interest expense (5,729) (6,848)
Earnings before income taxes 54,322 52,377
Income taxes (21,729) (21,475)
Net earnings 32,593 30,902
Dividends and accretion on
redeemable preferred stocks - (6,201)
Loss on redemption of redeemable preferred
stocks - (22,361)
Net earnings applicable to common
shareholders $ 32,593 $ 2,340
Weighted average number of common and common
equivalent shares outstanding 50,096 39,601
Amounts per share applicable to common shareholders:
Net earnings $ .65 $ .06
See Notes to Condensed Consolidated Financial Statements
</TABLE>
2<PAGE>
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
(In thousands) Thirteen Weeks Ended
November 1, November 2,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 32,593 $ 30,902
Adjustments to reconcile net earnings
to net cash provided (used) by operating activities:
Depreciation and amortization 15,747 14,966
Other items 1,692 (645)
Changes in current assets and liabilities:
Accounts receivable (9,651) (10,582)
Merchandise inventories (109,321) (89,953)
Other current assets 6,808 955
Accounts payable and
accrued liabilities 68,846 15,251
Net cash provided (used) by operating
activities 6,714 (39,106)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (18,767) (12,570)
Purchases of held-to-maturity securities (164,817) (147,332)
Maturities of held-to-maturity securities 115,890 104,780
Net cash used by investing activities (67,694) (55,122)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 62,656 148,506
Repayment of debt - (52,000)
Issuance of common stock - 269,163
Payment on redemption of preferred stocks - (260,000)
Net cash provided by financing activities 62,656 105,669
CASH AND EQUIVALENTS
Increase during the period 1,676 11,441
Beginning balance 16,861 12,659
Ending balance $ 18,537 $ 24,100
See Notes to Consensed Consolidated Financial Statements
</TABLE>
3<PAGE>
THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of presentation
The Condensed Consolidated Financial Statements of The Neiman Marcus
Group, Inc. (the Company) are submitted in response to the requirements
of Form 10-Q and should be read in conjunction with the consolidated
financial statements included in the Company's Annual Report on Form
10-K. In the opinion of management, these statements contain all
adjustments, consisting only of normal recurring accruals, necessary for
a fair presentation of the results for the interim periods presented.
The retail industry is seasonal in nature, and the results of operations
for these periods have historically not been indicative of the results
for a full year.
The effect of the repurchase of the Company's redeemable preferred
stocks is shown on the accompanying Pro Forma Condensed Consolidated
Balance Sheet as of November 2, 1996. Had the Company's public offering
and repurchase of these preferred stocks taken place at the beginning of
the thirteen week period ended November 2, 1996, net earnings per share
applicable to common shareholders for that period would have been $.62.
2. Merchandise inventories
Inventories are stated at the lower of cost or market. Substantially
all of the Company's inventories are valued using the retail method on
the last-in, first-out (LIFO) basis. While the Company believes that
the LIFO method provides a better matching of costs and revenues, some
specialty retailers use the first-in, first-out (FIFO) method.
Accordingly, the Company has provided the following data for comparative
purposes.
If the FIFO method of inventory valuation had been used to value all
inventories, merchandise inventories would have been higher than
reported by $17.0 million at November 1, 1997, $15.0 million at August
2, 1997 and $15.5 million at November 2, 1996. The FIFO method would
have increased net earnings by $1.2 million during each of the thirteen
weeks ended November 1, 1997 and November 2, 1996.
3. Revolving credit agreement
In October 1997, the Company replaced its existing revolving credit
agreement with a new revolving credit agreement with 20 banks, pursuant
to which the Company may borrow up to $650 million. The new agreement,
which expires in October 2002, may be terminated by the Company at any
time on three business days notice. The rate of interest payable is
determined according to one of four pricing options. On November 1,
1997, borrowings of $300 million were outstanding at an interest rate of
5.91% and were classified as long-term.
4. Subsequent event
In December 1997, the Board of Directors of the Company authorized the
repurchase of up to one million shares of common stock in the open
market.
4<PAGE>
THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. Recent accounting pronouncement
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS 128). Under the new standard, which must be adopted for
periods ending after December 15, 1997, the Company will be required to
change the method used to compute earnings per share and to restate
prior periods presented. A dual presentation of basic and diluted
earnings per share will be required. The basic earnings per share
calculation, which will replace primary earnings per share, will exclude
the dilutive impact of stock options and other common share equivalents.
The diluted earnings per share calculation, which will replace fully
diluted earnings per share, will include common share equivalents.
Under SFAS 128, both basic and diluted earnings per share for the
thirteen week period ended November 1, 1997 would have been $.65.
5<PAGE>
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Thirteen Weeks Ended November 1, 1997
Compared with the Thirteen Weeks Ended November 2, 1996
Revenues in the thirteen weeks ended November 1, 1997 increased $36.4 million
or 6.7% over revenues in the thirteen weeks ended November 2, 1996. The
revenue growth was primarily attributable to comparable sales increases of
8.2% at Neiman Marcus Stores. Bergdorf Goodman revenues rose at both the main
store and Bergdorf Goodman Men, resulting in a comparable sales increase of
13.5%. NM Direct revenues decreased 8.1% in comparison to the prior year,
reflecting weaker demand in the direct mail business.
Cost of goods sold including buying and occupancy costs increased $25.5
million or 7.3% to $376.1 million compared to the same period last year,
primarily due to increased sales. As a percentage of revenues, cost of goods
sold increased to 64.8% from 64.4% in the prior year, reflecting slightly
lower gross margins at Neiman Marcus Stores which were attributable in large
part to a shift in timing of the fall markdowns taken from the second quarter
in fiscal 1997 into the first quarter in fiscal 1998.
Selling, general and administrative expenses increased 7.7% to $141.2 million
from $131.1 million in 1997. The increase is primarily attributable to higher
selling costs associated with the increased sales in the period. As a
percentage of revenues, selling, general and administrative expenses increased
to 24.3% from 24.1% in the prior year.
Interest expense decreased 16.3% to $5.7 million in the thirteen weeks ended
November 1, 1997 from $6.8 million in the prior year. The decrease resulted
from a lower effective interest rate on borrowings as well as lower average
outstanding borrowings. In fiscal 1997 the Company repaid its fixed rate
senior notes upon maturity with borrowings under its revolving credit
agreement.
6<PAGE>
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Changes in Financial Condition and Liquidity Since August 2, 1997
During the thirteen weeks ended November 1, 1997, the Company financed its
working capital needs and capital expenditures primarily with cash from its
revolving credit agreement. The following discussion analyzes liquidity and
capital resources by operating, investing and financing activities as
presented in the Company's Condensed Consolidated Statements of Cash Flows.
Net cash provided by operating activities was $6.7 million during the first
quarter of fiscal 1998. The primary items affecting working capital were
increases in merchandise inventories ($109.3 million) and accounts payable
and accrued liabilities ($68.8 million). The seasonal increases in
inventories and accounts payable are primarily due to preparation for the
holiday selling season.
Capital expenditures were $18.8 million during the thirteen week period ended
November 1, 1997 as compared to $12.6 million in the prior year period. The
Company's capital expenditures consisted principally of the construction of a
new Neiman Marcus store in Honolulu's Ala Moana Center, expected to open in
November 1998, and existing store renovations. Capital expenditures are
expected to approximate $100.0 million during fiscal 1998.
In October 1996, the Company issued 8.0 million shares of common stock to the
public at $35.00 per share. The net proceeds were used on November 12, 1996,
together with 3.9 million shares of common stock and borrowings of
approximately $20.0 million, to purchase all of its outstanding redeemable
preferred stocks and pay accrued and unpaid dividends. The repurchase of the
preferred stock resulted in a reduction of dividend payments of $21.3 million
in fiscal 1997 compared to fiscal 1996, and has eliminated all future
preferred dividend and sinking fund requirements.
The Company increased its bank borrowings by $62.7 million since August 2,
1997. At November 1, 1997 the Company had $350 million available under its
new revolving credit facility. The Company believes that it will have
sufficient resources to fund its planned capital growth, its operating
requirements and future acquisitions.
The Company declared the final aggregate quarterly dividends on its preferred
stocks in the first quarter of fiscal 1997 and paid such dividends of $5.8
million on November 12, 1996 concurrent with the repurchase of these preferred
stocks.
7<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Credit Agreement dated as of October 29, 1997 among The Neiman
Marcus Group, Inc., the Banks parties thereto, Bank of America
National Trust and Savings Association, as Syndication Agent,
The Chase Manhattan Bank, as Documentation Agent, and Morgan
Guaranty Trust Company of New York, as Administrative Agent.
11.1 Computation of weighted average number of shares outstanding
used in determining primary and fully diluted earnings per
share.
27.1 Financial data schedule.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the
thirteen week period ended November 1, 1997.
8<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
THE NEIMAN MARCUS GROUP, INC.
Signature Title Date
Principal Financial Senior Vice President and December 16, 1997
Officer: Chief Financial Officer
/s/ John R. Cook
John R. Cook
Principal Accounting Vice President and Controller December 16, 1997
Officer:
/s/ Catherine N. Janowski
Catherine N. Janowski
9<PAGE>
EXHIBIT 10.1
EXECUTION COPY
$650,000,000
CREDIT AGREEMENT
dated as of
October 29, 1997
among
The Neiman Marcus Group, Inc.
The Banks Parties Hereto,
Bank of America National Trust and Savings Association,
as Syndication Agent,
The Chase Manhattan Bank,
as Documentation Agent,
and
Morgan Guaranty Trust Company of New York,
as Administrative Agent
J.P. Morgan Securities Inc.,
Arranger<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . 15
SECTION 1.03. Types of Borrowings . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.02. Notice of Committed Borrowings . . . . . . . . . . . . . . . 16
SECTION 2.03. Money Market Borrowings . . . . . . . . . . . . . . . . . . 17
SECTION 2.04. Notice to Banks; Funding of Loans . . . . . . . . . . . . . 21
SECTION 2.05. Registry; Notes . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.06. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.07. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.08. Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.09. Participation Fee . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.10. Optional Termination or Reduction of Commitments . . . . . . 26
SECTION 2.11. Scheduled Termination of Commitments . . . . . . . . . . . . 26
SECTION 2.12. Optional Prepayments . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.13. General Provisions as to Payments . . . . . . . . . . . . . 27
SECTION 2.14. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.15. Computation of Interest and Fees . . . . . . . . . . . . . . 28
SECTION 2.16. Regulation D Compensation . . . . . . . . . . . . . . . . . 28
SECTION 2.17. Replacement of Banks . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.18. Increased Commitments; Additional Banks . . . . . . . . . . 29
SECTION 2.19. Extension of Commitments . . . . . . . . . . . . . . . . . . 30
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.02. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 32
<PAGE>
PAGE
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power . . . . . . . . . . . . . . . 32
SECTION 4.02. Corporate Authorization . . . . . . . . . . . . . . . . . . 32
SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.04. Financial Information . . . . . . . . . . . . . . . . . . . 33
SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.06. Governmental and Other Approvals . . . . . . . . . . . . . . 34
SECTION 4.07. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.08. Compliance with ERISA . . . . . . . . . . . . . . . . . . . 34
SECTION 4.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.10. Environmental Matters . . . . . . . . . . . . . . . . . . . 35
ARTICLE 5
COVENANTS
SECTION 5.01. Furnishing of Financial Data and Certificates . . . . . . . 35
SECTION 5.02. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.03. Maintenance of Corporate Existence . . . . . . . . . . . . . 37
SECTION 5.04. Maintenance of Property and Leases . . . . . . . . . . . . . 37
SECTION 5.05. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.06. Accounts and Reports . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.07. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.08. Coverage of Consolidated Fixed Charges . . . . . . . . . . . 38
SECTION 5.09. Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.10. Restrictions on Liens . . . . . . . . . . . . . . . . . . . 38
SECTION 5.11. Restrictions on Sales, Consolidations and Mergers . . . . . 39
SECTION 5.12. Transactions with Affiliates . . . . . . . . . . . . . . . . 39
SECTION 5.13. Restriction on Debt of Subsidiaries . . . . . . . . . . . . 40
SECTION 5.14. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . 43
<PAGE>
PAGE
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization . . . . . . . . . . . . . . . 44
SECTION 7.02. Agents and Affiliates . . . . . . . . . . . . . . . . . . . 44
SECTION 7.03. Action by Administrative Agent . . . . . . . . . . . . . . . 44
SECTION 7.04. Consultation with Experts . . . . . . . . . . . . . . . . . 44
SECTION 7.05. Liability of Administrative Agent . . . . . . . . . . . . . 44
SECTION 7.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.08. Successor Administrative Agent . . . . . . . . . . . . . . . 45
SECTION 7.09. Agents' Fees . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.10. Documentation Agent and Syndication Agent . . . . . . . . . 46
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair . . 46
SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . 47
SECTION 8.04. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.03. Expenses; Indemnification . . . . . . . . . . . . . . . . . 52
SECTION 9.04. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . 53
SECTION 9.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . 53
SECTION 9.07. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.08. Governing Law; Submission to Jurisdiction . . . . . . . . . 55
SECTION 9.09. Counterparts; Integration . . . . . . . . . . . . . . . . . 55
SECTION 9.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . 56
SECTION 9.11. Maximum Interest Rate . . . . . . . . . . . . . . . . . . . 56
Pricing Schedule
<PAGE>
Exhibit A - Note
Exhibit B - Form of Money Market Quote Request
Exhibit C - Form of Invitation for Money Market Quotes
Exhibit D - Form of Money Market Quote
Exhibit E - Opinion of Counsel for the Borrower
Exhibit F - Opinion of Davis Polk & Wardwell, Special Counsel for the
Agents
Exhibit G - Assignment and Assumption Agreement
Exhibit H - Extension Agreement
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of October 29, 1997 among THE NEIMAN MARCUS GROUP, INC.,
the BANKS parties hereto, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Syndication Agent, THE CHASE MANHATTAN BANK, as Documentation
Agent and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Additional Bank" means any financial institution that becomes a
Bank for purposes hereof in connection with (i) an increase in the aggregate
amount of the Commitments pursuant to Section 2.18 or (ii) the replacement of
a Bank pursuant to Section 2.17 or 2.19.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Administrative Agent" means Morgan Guaranty Trust Company of New
York in its capacity as administrative agent for the Banks hereunder, and its
successors in such capacity.
"Administrative Questionnaire" means, with respect to each Bank,
an administrative questionnaire in the form prepared by the Administrative
Agent and submitted to the Administrative Agent (with a copy to the Borrower)
duly completed by such Bank.
"Affiliate" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls the Borrower (a "Controlling
Person") or (ii) any Person (other than the Borrower or a Subsidiary) which is
controlled by or is under common control with a Controlling Person. As used
herein, the term "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this Agreement no individual shall be deemed to be
an Affiliate solely by reason of the fact that such individual is a director
or officer of the Borrower.
<PAGE>
"Agent" means the Administrative Agent, the Documentation Agent or
the Syndication Agent, and "Agents" means the Administrative Agent, the
Documentation Agent and the Syndication Agent.
"Applicable Lending Office" means, with respect to any Bank, (i)
in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the
case of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank or other financial institution listed on
the signature pages hereof, each Additional Bank, each Assignee which becomes
a Bank pursuant to Section 9.06(c), and their respective successors.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a
Base Rate Loan in accordance with the applicable Notice of Committed Borrowing
or pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means The Neiman Marcus Group, Inc., a Delaware
corporation, and its successors.
"Borrower's 1996 10-K" means the Borrower s annual report on Form
10-K for 1996, as filed with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934.
"Borrowing" has the meaning set forth in Section 1.03.
<PAGE>
"Capitalized Lease" means a lease under which, in accordance with
United States generally accepted accounting principles, the liability of the
lessee is required to be capitalized on its balance sheet.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank as a CD Loan
in accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means Bank of America National Trust and
Savings Association, The Chase Manhattan Bank and Morgan Guaranty Trust
Company of New York.
"Commitment" means, (i) with respect to each Bank listed on the
signature pages hereof, the amount set forth opposite the name of such Bank on
the signature pages hereof, and (ii) with respect to each Additional Bank or
Assignee which becomes a Bank pursuant to Section 2.17, 2.18, 2.19 or 9.06(c),
the amount of the Commitment thereby assumed by it, in each case as such
amount may be reduced from time to time pursuant to Section 2.10 or 9.06(c) or
increased from time to time pursuant to Section 2.18 or 9.06(c).
"Committed Loan" means a loan made by a Bank pursuant to Section
2.01.
"Consolidated EBITDAR" means, for any fiscal period, Consolidated
Net Income for such period plus, to the extent deducted in determining
Consolidated Net Income for such period, the aggregate amount of (i)
Consolidated Fixed Charges, (ii) taxes based on or measured by income and
(iii) depreciation, amortization and other similar non-cash charges.
"Consolidated Fixed Charges" means for any period, the sum of
Consolidated Interest Expense and Consolidated Rental Expense for such period.
"Consolidated Interest Expense" means, for any period, the
interest expense of the Borrower and its Consolidated Subsidiaries less
investment and interest income of the Borrower and its Consolidated
Subsidiaries for such period, determined on a consolidated basis.
"Consolidated Net Assets" means, at any date, the consolidated
assets of the Borrower and its Consolidated Subsidiaries less the sum of (i)
the consolidated current liabilities of the Borrower and its Consolidated
Subsidiaries and (ii) all other liabilities, other than liabilities for Debt
representing obligations for borrowed money of the Borrower and its
Consolidated Subsidiaries and liabilities for deferred taxes of the Borrower
and its Consolidated Subsidiaries, which would be required to be shown as
liabilities on a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries, all determined as of such date.
<PAGE>
"Consolidated Net Income" means for any period, the aggregate of
the net income (less losses) of the Borrower and its Consolidated Subsidiaries
for such period (after eliminating all intercompany items and after provisions
for minority interests, if any), all determined in accordance with United
States generally accepted accounting principles; provided, however,
Consolidated Net Income shall not include (a) extraordinary gains or
extraordinary losses, (b) the net income or losses of any corporation or other
enterprise accrued prior to the date it becomes a Subsidiary, (c) the net
income (or loss) arising from any discontinued operation(s) of the Borrower or
any Subsidiary as so classified in the Borrower s consolidated financial
statements or (d) any amortization or write-off of goodwill or other
intangible items, or any non-cash charges, arising in connection with a
merger, consolidation or acquisition of stock or assets to which the Borrower
or a Subsidiary is a party.
"Consolidated Rental Expense" means, for any period, the Rental
Expense of the Borrower and its Consolidated Subsidiaries for such period,
determined on a consolidated basis.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Borrower in the Borrower s consolidated financial statements if such
statements were prepared as of such date.
"Consolidated Net Worth" means at any date the consolidated
stockholders equity of the Borrower and its Consolidated Subsidiaries (plus,
to the extent not otherwise reflected therein, redeemable preferred stock of
the Borrower), all determined as of such date.
"Continuing Directors" means (i) the members of the Board of
Directors of the Borrower on the date hereof and (ii) future members of such
Board of Directors who were nominated or appointed by a majority of the
Continuing Directors at the date of their nomination or appointment.
"Debt" means as applied to the Borrower and its Subsidiaries,
without duplication, (a) all obligations for borrowed money or other
extensions of credit whether secured or unsecured, absolute or contingent,
other than trade accounts payable, expense accruals, or similar liabilities
arising in the ordinary course of business, (b) all obligations evidenced by
bonds, notes, debentures or other similar instruments, (c) all obligations
secured by any Lien on property owned or acquired by the Borrower or any of
its Subsidiaries whether or not the obligations secured thereby shall have
been assumed, (d) that portion of all obligations arising under Capitalized
Leases that is required to be capitalized on the consolidated balance sheet of
the Borrower and its Subsidiaries and (e) all obligations of the type
described in clauses (a) through (d) above Guaranteed by the Borrower or any
of its Subsidiaries; provided that, a transfer of receivables, with or without
recourse, which is accounted for as a sale under United States generally
accepted accounting principles shall not give rise to Debt of the transferor
for purposes of this Agreement.
<PAGE>
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Deloitte & Touche" means Deloitte & Touche LLP, independent
certified accountants for the Borrower.
"Derivatives Obligations" of any Person means all obligations of
such Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"Documentation Agent" means The Chase Manhattan Bank in its
capacity as documentation agent for the Banks hereunder, and its successors in
such capacity.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City or Boston, Massachusetts
are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending
Office) or such other office as such Bank may hereafter designate as its
Domestic Lending Office by notice to the Borrower and the Administrative
Agent; provided that any Bank may so designate separate Domestic Lending
Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the
other hand, in which case all references herein to the Domestic Lending Office
of such Bank shall be deemed to refer to either or both of such offices, as
the context may require.
<PAGE>
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Effective Date" means the date this Agreement becomes effective
in accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes
into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes or the
clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or
any Subsidiary, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including
dealings in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.
<PAGE>
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as
a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Reference Banks" means the principal London offices
of Bank of America National Trust and Savings Association, The Chase Manhattan
Bank and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars
in respect of "Eurocurrency liabilities" (or in respect of any other category
of liabilities which includes deposits by reference to which the interest rate
on Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Agreement" means the Credit Agreement dated as of April
7, 1995, among the Borrower, the banks parties thereto and Morgan Guaranty
Trust Company of New York, as agent.
"Extension Agreement" means an agreement by a Bank extending its
Commitment as requested by the Borrower, substantially in the form of Exhibit
H hereto.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to Morgan
Guaranty Trust Company of New York on such day on such transactions as
determined by the Administrative Agent.
<PAGE>
"Fixed Charge Coverage Ratio" means the ratio of (i) Consolidated
EBITDAR for each period of four consecutive fiscal quarters, commencing with
the four quarters ending August 2, 1997, to (ii) Consolidated Fixed Charges
for each such period.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money
Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base
Rate pursuant to Section 8.01(a)) or any combination of the foregoing.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person; provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"HGI" means Harcourt General, Inc., a Delaware corporation.
"Increased Commitments" has the meaning set forth in Section
2.18(a).
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another
calendar month, in which case such Interest Period shall end
on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(c) any Interest Period applicable to a Loan made by any
Bank which would otherwise end after such Bank's Termination
Date shall end on such Bank's Termination Date.
<PAGE>
(2) with respect to each CD Borrowing, the period commencing on the
date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the
Borrower may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day;
and
(b) any Interest Period applicable to a Loan made by any
Bank which would otherwise end after such Bank's Termination
Date shall end on such Bank's Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing
on the date of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day;
and
(b) any Interest Period applicable to a Loan made by any
Bank which would otherwise end after such Bank's Termination
Date shall end on such Bank's Termination Date.
(4) with respect to each Money Market LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending such whole number of
months thereafter as the Borrower may elect in accordance with Section 2.03;
provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another
calendar month, in which case such Interest Period shall end
on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Euro-Dollar Business Day
of a calendar month; and
(c) any Interest Period applicable to a Loan made by any
Bank which would otherwise end after such Bank's Termination
Date shall end on such Bank's Termination Date.
<PAGE>
(5) with respect to each Money Market Absolute Rate Borrowing, the
period commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 5 days) as the Borrower may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to
the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period applicable to a Loan made by any
Bank which would otherwise end after such Bank s Termination
Date shall end on such Bank's Termination Date."Internal
Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means all loans, advances, extensions of credit,
guarantees, purchases of stock (other than stock of the Borrower) or other
securities, contributions to capital or otherwise, whether existing on the
date of this Agreement or hereafter made.
"Leverage Ratio" means, at any date, the percentage equivalent of
a fraction the numerator of which is Total Adjusted Debt at such date and the
denominator of which is Total Capitalization at such date.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, the Borrower or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money
Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money
Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
<PAGE>
"Material Debt" means Debt (other than the Loans) of the Borrower
and/or one or more of its Consolidated Subsidiaries, in an aggregate principal
amount exceeding $15,000,000.
"Material Financial Obligations" means a principal amount of Debt
and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Borrower and/or one or more of its Subsidiaries, exceeding
in the aggregate $15,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $15,000,000.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a
Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it
may hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Administrative Agent; provided that any Bank may from time
to time by notice to the Borrower and the Administrative Agent designate
separate Money Market Lending Offices for its Money Market LIBOR Loans, on the
one hand, and its Money Market Absolute Rate Loans, on the other hand, in
which case all references herein to the Money Market Lending Office of such
Bank shall be deemed to refer to either or both of such offices, as the
context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the
Base Rate pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.03.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
ERISA Group during such five year period.
<PAGE>
"Notes" means promissory notes of the Borrower, substantially in
the form of Exhibit A hereto, evidencing the obligation of the Borrower to
repay the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)) which may be given by the Borrower to the Administrative
Agent prior to the Effective Date or during the Revolving Credit Period.
"Parent" means, with respect to any Bank, any Person controlling
such Bank.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code
and either (i) is maintained, or contributed to, by any member of the ERISA
Group for employees of any member of the ERISA Group or (ii) has at any time
within the preceding five years been maintained, or contributed to, by any
Person which was at such time a member of the ERISA Group for employees of any
Person which was at such time a member of the ERISA Group.
"Pricing Schedule" means the Schedule attached hereto identified
as such.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time
as its Prime Rate.
<PAGE>
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any
one of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Rental Expense" means the amount of minimum rentals, i.e.,
rentals paid or accrued by the Borrower or any Subsidiary other than amounts
determined by reference to income generated from the leased property
(including amounts accrued for or based on taxes, other than income taxes, to
the extent that any thereof are payable in addition to rent), under any lease
of real property excluding in any event (i) leases between the Borrower and a
Subsidiary or between a Subsidiary and another Subsidiary and (ii) Capitalized
Leases.
"Required Banks" means at any time Banks having at least 51% of
the aggregate amount of the Commitments at such time or, if the Commitments
shall have been terminated in their entirety, holding at least 51% of the
aggregate unpaid principal amount of the Loans.
"Revolving Credit Period" means, with respect to any Bank, the
period from and including the Effective Date to but not including such Bank s
Termination Date.
"Significant Subsidiary" means at any time (i) Bergdorf Goodman,
Inc. and its respective successors, and (ii) any other Subsidiary whose
consolidated assets are equal to at least 7% of the consolidated assets of the
Borrower and its Subsidiaries at such time.
"Subordinated Debt" means any unsecured Debt of the Borrower which
is by its terms subordinated in right of payment to the Notes.
"Subsidiary" means any corporation or other entity (i) of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Borrower (or, if
such term is used with reference to any other Person, by such Person) or (ii)
a majority of the equity interest in which shall at the time be owned directly
or indirectly by the Borrower and which is a Consolidated Subsidiary as of
such time.
<PAGE>
"Syndication Agent" means Bank of America National Trust and
Savings Association in its capacity as syndication agent for the Banks
hereunder, and its successors in such capacity.
"Termination Date" means, for any Bank, October 29, 2002, as such
date may be extended from time to time with respect to such Bank pursuant to
Section 2.19 or, if such day is not a Euro-Dollar Business Day, the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls
in another calendar month, in which case the Termination Date shall be the
next preceding Euro-Dollar Business Day.
"Total Adjusted Debt" means, at any date, an amount equal to (i)
the consolidated Debt of the Borrower and its Subsidiaries (excluding any such
Debt (other than short-term indebtedness for borrowed money or the current
portion of long-term Debt) which is a current liability of the Borrower or a
Subsidiary) at such date plus (ii) an amount equal to 800% of the Rental
Expense for the period of four consecutive fiscal quarters most recently ended
on or prior to such date.
"Total Capitalization" means, at any date, the sum of Total
Adjusted Debt plus Consolidated Net Worth, each determined as of such date.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined
as of the then most recent valuation date for such Plan, but only to the
extent that such excess represents a potential liability of a member of the
ERISA Group to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"Wholly-Owned Subsidiary" means any Subsidiary all of the shares
of capital stock or other ownership interests of which (except directors
qualifying shares) are at the time directly or indirectly owned by the
Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with United States generally accepted accounting principles as in
effect from time to time, applied on a basis consistent (except for changes
concurred with by the Borrower s independent public accountants) with the most
recent audited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Banks; provided that, if the
Borrower notifies the Administrative Agent that the Borrower wishes to amend
<PAGE>
any covenant in Article 5 to eliminate the effect of any change in United
States generally accepted accounting principles on the operation of such
covenant (or if the Administrative Agent notifies the Borrower that the
Required Banks wish to amend Article 5 for such purpose), then the Borrower s
compliance with such covenant shall be determined on the basis of United
States generally accepted accounting principles in effect immediately before
the relevant change in United States generally accepted accounting principles
became effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to the Borrower and the Required Banks.
Section 1.03. Types of Borrowings The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant
to Article 2 on a single date and for a single Interest Period. Borrowings are
classified for purposes of this Agreement either by reference to the pricing
of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a
Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions
of Article 2 under which participation therein is determined (i.e., a
"Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "Money Market
Borrowing" is a Borrowing under Section 2.03 in which the Bank participants
are determined on the basis of their bids in accordance therewith).
ARTICLE 2
THE CREDITS
Section 2.01. Commitments to Lend. During its Revolving Credit
Period each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower pursuant to this Section from time to
time in amounts such that the aggregate principal amount of Committed Loans by
such Bank at any one time outstanding shall not exceed the amount of its
Commitment. Each Borrowing under this Section shall be in an aggregate
principal amount of $5,000,000 or any larger multiple of $1,000,000 (except
that any such Borrowing may be in the aggregate amount available in accordance
with Section 3.02(b)) and shall be made from the several Banks ratably in
proportion to their respective Commitments. Within the foregoing limits, the
Borrower may borrow under this Section, repay, or to the extent permitted by
Section 2.12, prepay Loans and reborrow at any time under this Section.
<PAGE>
Section 2.02 Notice of Committed Borrowings. The Borrower shall
give the Administrative Agent notice (a "Notice of Committed Borrowing") not
later than 11:00 A.M. (New York City time) on (x) the date of each Base Rate
Borrowing, (y) the second Domestic Business Day before each CD Borrowing and
(z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(a) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a
Euro-Dollar Business Day in the case of a Euro-Dollar
Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be CD
Loans, Base Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.2.2Money Market Borrowings
Section 2.03. Money Market Borrowings
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in this Section,
request the Banks during their respective Revolving Credit Periods to make
offers to make Money Market Loans to the Borrower. The Banks may, but shall
have no obligation to, make such offers and the Borrower may, but shall have
no obligation to, accept any such offers in the manner set forth in this
Section.
(b) Money Market Quote Request. When the Borrower wishes to
request offers to make Money Market Loans under this Section, it shall
transmit to the Administrative Agent by telex or facsimile transmission a
Money Market Quote Request substantially in the form of Exhibit B hereto so as
to be received no later than 11:00 A.M. (New York City time) on (x) the fourth
Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in
the case of a LIBOR Auction or (y) the Domestic Business Day next preceding
the date of Borrowing proposed therein, in the case of an Absolute Rate
Auction (or, in either case, such other time or date as the Borrower and the
Administrative Agent shall have mutually agreed and shall have notified to
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective) specifying:
<PAGE>
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a
Domestic Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of Interest
Period, and
(iv) whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than
one Interest Period in a single Money Market Quote Request. No Money Market
Quote Request shall be given within five Euro-Dollar Business Days (or such
other number of days as the Borrower and the Administrative Agent may agree)
of any other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Administrative Agent shall send to the Banks
by telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto, which shall constitute an
invitation by the Borrower to each Bank to submit Money Market Quotes offering
to make the Money Market Loans to which such Money Market Quote Request
relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money
Market Quote must comply with the requirements of this subsection (d) and must
be submitted to the Administrative Agent by telex or facsimile transmission at
its offices referred to in Section 9.01 not later than (x) 4:00 P.M. (New York
City time) on the fourth Euro-Dollar Business Day prior to the proposed date
of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (New York City
time) on the proposed date of Borrowing, in the case of an Absolute Rate
Auction (or, in either case, such other time or date as the Borrower and the
Administrative Agent shall have mutually agreed and shall have notified to the
Banks not later than the date of the Money Market Quote Request for the first
LIBOR Auction or Absolute Rate Auction for which such change is to be
effective); provided that Money Market Quotes submitted by the Administrative
Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank
may be submitted, and may only be submitted, if the Administrative Agent or
such affiliate notifies the Borrower of the terms of the offer or offers
contained therein not later than (x) 3:00 P.M. (New York City time), in the
<PAGE>
case of a LIBOR Auction, or (y) 9:00 A.M. (New York City time), in the case of
an Absolute Rate Auction, each on the applicable Euro-Dollar Business Day
noted above. Subject to Articles 3 and 6, any Money Market Quote so made
shall be irrevocable except with the written consent of the Administrative
Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan
for which each such offer is being made, which
principal amount (w) may be greater than or
less than the Commitment of the quoting Bank, (x) must
be $5,000,000 or a larger multiple of $1,000,000, (y)
may not exceed the principal amount of Money
Market Loans for which offers were requested and (z)
may be subject to an aggregate limitation as to the
principal amount of Money Market Loans for which
offers being made by such quoting Bank may be
accepted,
(C) in the case of a LIBOR Auction, the margin above
or below the applicable London Interbank Offered Rate
(the "Money Market Margin") offered for each such
Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be
added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the
rate of interest per annum (specified to the nearest
1/10,000th of 1%) (the "Money Market Absolute Rate")
offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the
quoting Bank with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
<PAGE>
(A) is not substantially in conformity with Exhibit D hereto or
does not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth
in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Administrative Agent shall promptly
notify the Borrower of the terms (x) of any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) of any Money Market
Quote that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Bank with respect to the same Money Market
Quote Request. Any such subsequent Money Market Quote shall be disregarded by
the Administrative Agent unless such subsequent Money Market Quote is
submitted solely to correct a manifest error in such former Money Market
Quote. The Administrative Agent s notice to the Borrower shall specify (A)
the aggregate principal amount of Money Market Loans for which offers have
been received for each Interest Period specified in the related Money Market
Quote Request, (B) the respective principal amounts and Money Market Margins
or Money Market Absolute Rates, as the case may be, so offered and (C) if
applicable, limitations on the aggregate principal amount of Money Market
Loans for which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:00 A.M. (New
York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the
proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Borrower and the Administrative
Agent shall have mutually agreed and shall have notified to the Banks not
later than the date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be effective),
the Borrower shall notify the Administrative Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to subsection (e). In
the case of acceptance, such notice (a "Notice of Money Market Borrowing")
shall specify the aggregate principal amount of offers for each Interest
Period that are accepted. The Borrower may accept any Money Market Quote in
whole or in part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related Money
Market Quote Request,
<PAGE>
(ii) the principal amount of each Money Market Borrowing must be
$5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the case may
be, and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements of
this Agreement.
(g) Allocation by Administrative Agent. If offers are made by two or
more Banks with the same Money Market Margins or Money Market Absolute Rates,
as the case may be, for a greater aggregate principal amount than the amount
in respect of which such offers are accepted for the related Interest Period,
the principal amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Administrative Agent among such Banks as
nearly as possible (in multiples of $1,000,000, as the Administrative Agent
may deem appropriate) in proportion to the aggregate principal amounts of such
offers. Determinations by the Administrative Agent of the amounts of Money
Market Loans shall be conclusive in the absence of manifest error.
Section 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Administrative
Agent shall promptly notify each Bank of the contents thereof and of such
Bank s share (if any) of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date
of each Borrowing, each Bank participating therein shall (except as provided
in subsection (c) of this Section) make available its share of such Borrowing,
in Federal or other funds immediately available in New York City to the
Administrative Agent at its address referred to in Section 9.01. Unless the
Administrative Agent determines that any applicable condition specified in
Article 3 has not been satisfied, the Administrative Agent will make the funds
so received from the Banks available to the Borrower at the Administrative
Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Bank to
the Administrative Agent as provided in subsection (b), or remitted by the
Borrower to the Administrative Agent as provided in Section 2.13, as the case
may be.
<PAGE>
(d) Unless the Administrative Agent shall have received notice
from a Bank prior to the date of any Borrowing that such Bank will not make
available to the Administrative Agent such Bank s share of such Borrowing, the
Administrative Agent may assume that such Bank has made such share available
to the Administrative Agent on the date of such Borrowing in accordance with
subsections (b) and (c) of this Section 2.04 and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower on such date
a corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Administrative Agent, such Bank and, if such
Bank shall have failed to do so within four Domestic Business Days of demand
by the Administrative Agent therefor (a copy of which shall be simultaneously
given to the Borrower), the Borrower agrees to repay to the Administrative
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Administrative Agent, at
the Federal Funds Rate. If such Bank shall repay to the Administrative Agent
such corresponding amount, such amount so repaid shall constitute such Bank s
Loan included in such Borrowing for purposes of this Agreement.
Section 2.05. Registry; Notes (a) The Administrative Agent shall
maintain a register (the "Register") on which it will record the Commitment of
each Bank, each Loan made by such Bank and each repayment of any Loan made by
such Bank. Any such recordation by the Administrative Agent on the Register
shall be conclusive, absent manifest error. Failure to make any such
recordation, or any error in such recordation, shall not affect the Borrower's
obligations hereunder.
(b) The Borrower hereby agrees that, promptly upon the request of any
Bank at any time, the Borrower shall deliver to such Bank a duly executed Note
payable to the order of such Bank and representing the obligation of the
Borrower to pay the unpaid principal amount of the Loans made to the Borrower
by such Bank, with interest as provided herein on the unpaid principal amount
from time to time outstanding.
(c) Each Bank may, by notice to the Borrower and the Administrative
Agent, request that its Loans of a particular type be evidenced by a separate
Note in an amount equal to the aggregate unpaid principal amount of such
Loans. Each such Note shall be in substantially the form of Exhibit A hereto
with appropriate modifications to reflect the fact that it evidences solely
Loans of the relevant type. Each reference in this Agreement to the "Note"
of such Bank shall be deemed to refer to and include any or all of such
Notes, as the context may require.
<PAGE>
(d) Each Bank shall record the date, amount, type and maturity of each
Loan made by it and the date and amount of each payment of principal made by
the Borrower with respect thereto, and may, if such Bank so elects in
connection with any transfer or enforcement of its Note, endorse on the
schedule forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Loan then outstanding;
provided that the failure of such Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or
under the Notes. Each Bank is hereby irrevocably authorized by the Borrower
so to endorse its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.
Section 2.06. Maturity of Loans. Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on
the last day of the Interest Period applicable thereto.
Section 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to
the Base Rate for such day. Such interest shall be payable for each Interest
Period on the last day thereof. Any overdue principal of or interest on any
Base Rate Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 2% plus the rate otherwise applicable
to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
applicable Adjusted CD Rate for such Interest Period; provided that if any CD
Loan shall, as a result of clause (2)(b) of the definition of Interest
Period, have an Interest Period of less than 30 days, such CD Loan shall bear
interest during such Interest Period at the rate applicable to Base Rate Loans
during such period. Such interest shall be payable for each Interest Period
on the last day thereof and, if such Interest Period is longer than 90 days,
at intervals of 90 days after the first day thereof. Any overdue principal of
or interest on any CD Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the higher of
(i) the sum of the CD Margin for such day plus the Adjusted CD Rate applicable
to such Loan and (ii) the rate applicable to Base Rate Loans for such day.
<PAGE>
"CD Margin" means a rate per annum determined in accordance with
the Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ----- ] + AR
[ 1.00 - DRP]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
_____________
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at
face value from each CD Reference Bank of its certificates of deposit in an
amount comparable to the principal amount of the CD Loan of such CD Reference
Bank to which such Interest Period applies and having a maturity comparable to
such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation
any basic, supplemental or emergency reserves) for a member bank of the
Federal Reserve System in New York City with deposits exceeding five billion
dollars in respect of new non-personal time deposits in dollars in New York
City having a maturity comparable to the related Interest Period and in an
amount of $100,000 or more. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change in the Domestic
Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. & 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation s (or such
successor s) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
<PAGE>
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the applicable London Interbank Offered Rate for such Interest
Period. Such interest shall be payable for each Interest Period on the last
day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher
1/16 of 1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Euro-Dollar Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days
before the first day of such Interest Period in an amount approximately equal
to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference
Bank to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including the
date payment thereof was due to but excluding the date of actual payment, at a
rate per annum equal to the sum of 2% plus the higher of (i) the sum of the
Euro-Dollar Margin for such day plus the London Interbank Offered Rate
applicable to such Loan and (ii) the rate applicable to Base Rate Loans for
such day.
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of
the London Interbank Offered Rate for such Interest Period (determined in
accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing
were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market
Margin quoted by the Bank making such Loan in accordance with Section 2.03.
Each Money Market Absolute Rate Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a
rate per annum equal to the Money Market Absolute Rate quoted by the Bank
making such Loan in accordance with Section 2.03. Such interest shall be
<PAGE>
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than three months, at intervals of three months after the
first day thereof. Any overdue principal of or interest on any Money Market
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the Base Rate for such day.
(f) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence
of manifest error.
(g) Each Reference Bank agrees to use its best efforts to
furnish quotations to the Administrative Agent as contemplated by this
Section. If any Reference Bank does not furnish a timely quotation, the
Administrative Agent shall determine the relevant interest rate on the basis
of the quotation or quotations furnished by the remaining Reference Bank or
Banks or, if none of such quotations is available on a timely basis, the
provisions of Section 8.01 shall apply.
Section 2.08. Facility Fee. The Borrower shall pay to the Administrative
Agent for the account of each Bank a facility fee at a rate per annum equal to
the Facility Fee Rate (determined daily in accordance with the Pricing
Schedule). Such facility fee shall accrue (i) from and including the
Effective Date to but excluding the Termination Date of such Bank (or earlier
date of termination of the Commitment of such Bank), on the daily aggregate
amount of the Commitment of such Bank (whether used or unused) and (ii) from
and including the Termination Date of such Bank (or earlier date of
termination of the Commitment of such Bank) to but excluding the date the
Loans of such Bank shall be repaid in their entirety, on the daily average
aggregate outstanding principal amount of the Loans of such Bank. Accrued
fees under this Section shall be payable quarterly in arrears on each March 1,
June 1, September 1 and December 1 prior to the Termination Date of such Bank
and upon the date of termination of the Commitment of such Bank (and, if
later, the date the Loans of such Bank shall be repaid in their entirety).
Section 2.09. Participation Fee. The Borrower shall pay to the
Administrative Agent on the Effective Date for the account of each Bank a
participation fee in an amount equal to 0.02% of such Bank s Commitment.
<PAGE>
Section 2.10. Optional Termination or Reduction of Commitments.
During the Revolving Credit Period, the Borrower may, upon at least three
Domestic Business Days notice to the Administrative Agent, (i) terminate the
Commitments at any time, if no Loans are outstanding at such time or (ii)
ratably reduce from time to time by an aggregate amount of $10,000,000 or any
larger multiple thereof, the aggregate amount of the Commitments in excess of
the aggregate outstanding principal amount of the Loans.
Section 2.11. Scheduled Termination of CommitmentsThe Commitment of
each Bank shall terminate on such Bank s Termination Date, and any Loan of
such Bank then outstanding (together with accrued interest thereon) shall be
due and payable on such date.
Section 2.12. Optional Prepayments. (a) Subject in the case of any
Fixed Rate Borrowing to Section 2.14, the Borrower may (i) upon at least one
Domestic Business Day's notice to the Administrative Agent, prepay any
Domestic Borrowing (or any Money Market Borrowing bearing interest at the Base
Rate pursuant to Section 8.01(a)) or (ii) upon at least three Euro-Dollar
Business Days notice to the Administrative Agent, prepay any Euro-Dollar
Borrowing, in whole at any time, or from time to time in part in amounts
aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such Borrowing.
(b) Except as provided in clause (i) of Section 2.12(a), the
Borrower may not prepay all or any portion of the principal amount of any
Money Market Loan.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Administrative Agent shall promptly notify each Bank of the
contents thereof and of such Bank s ratable share (if any) of such prepayment
and such notice shall not thereafter be revocable by the Borrower.
Section 2.13. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when
due, in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address referred to in Section 9.01. The
Administrative Agent will promptly distribute to each Bank its ratable share
of each such payment received by the Administrative Agent for the account of
the Banks. Whenever any payment of principal of, or interest on, the Domestic
Loans or of fees shall be due on a day which is not a Domestic Business Day,
the date for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
<PAGE>
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls
in another calendar month, in which case the date for payment thereof shall be
the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the
Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such
due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Administrative Agent forthwith on demand such amount distributed
to such Bank together with interest thereon, for each day from the date such
amount is distributed to such Bank until the date such Bank repays such amount
to the Administrative Agent, at the Federal Funds Rate.
Section 2.14. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article 2 or 6 or
otherwise, but not including Article 8) on any day other than the last day of
the Interest Period applicable thereto, or if the Borrower fails to borrow or
prepay any Fixed Rate Loans after notice has been given to any Bank in
accordance with Section 2.04(a) or 2.12(c), the Borrower shall reimburse each
Bank within 15 days after demand for any resulting loss or expense incurred by
it (or by an existing or prospective Participant in the related Loan),
including (without limitation) any loss incurred in obtaining, liquidating or
employing deposits from third parties, but excluding loss of margin for the
period after any such payment or failure to borrow or prepay, provided that
such Bank shall have delivered to the Borrower a certificate as to the amount
of such loss or expense, which certificate shall be conclusive in the absence
of clearly demonstrable error. Each such certificate shall be accompanied by
such information as the Borrower may reasonably request as to the computation
set forth therein.
Section 2.15. Computation of Interest and Fees. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
<PAGE>
fees shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding the
last day).
Section 2.16. Regulation D Compensation. For so long as any Bank
maintains reserves against "Eurocurrency liabilities" (or any other category
of liabilities which includes deposits by reference to which the interest rate
on Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of such Bank
to United States residents), and as a result the cost to such Bank (or its
Euro-Dollar Lending Office) of making or maintaining its Euro-Dollar Loans is
increased, then such Bank may require the Borrower to pay, contemporaneously
with each payment of interest on the Euro-Dollar Loans, additional interest on
the related Euro-Dollar Loan of such Bank at a rate per annum up to but not
exceeding the excess of (i) (A) the applicable London Interbank Offered Rate
divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the rate
specified in clause (i)(A). Any Bank wishing to require payment of such
additional interest (x) shall so notify the Borrower and the Administrative
Agent, in which case such additional interest on the Euro-Dollar Loans of such
Bank shall be payable to such Bank at the place indicated in such notice with
respect to each Interest Period commencing at least three Euro-Dollar Business
Days after the giving of such notice and (y) shall furnish to the Borrower at
least three Euro-Dollar Business Days prior to each date on which interest is
payable on the Euro-Dollar Loans an officer s certificate setting forth the
amount to which such Bank is then entitled under this Section (which shall be
consistent with such Bank s good faith estimate of the level at which the
related reserves are maintained by it). Each such certificate shall be
accompanied by such information as the Borrower may reasonably request as to
the computation set forth therein.
Section 2.17. Replacement of Banks. The Borrower shall have the
right, from time to time, with the assistance of the Agents, to substitute a
bank or banks (which may be one or more of the Banks) for any Bank whose
participation hereunder the Borrower shall have determined (in its discretion)
to terminate, or which determines, in its discretion pursuant to Section 2.19,
not to extend the Termination Date applicable to its Commitment.
Section 2.18. Increased Commitments; Additional Banks. (a)
Subsequent to the Effective Date, the Borrower may, upon at least 30 days
notice to the Administrative Agent (which shall promptly provide a copy of
such notice to the Banks), propose to increase the aggregate amount of the
Commitments to an amount not to exceed $800,000,000 (the amount of any such
increase, the "Increased Commitments"). Each Bank party to this Agreement at
such time
<PAGE>
shall have the right (but no obligation), for a period of 15 days
following receipt of such notice, to elect by notice to the Borrower and the
Administrative Agent to increase its Commitment by a principal amount which
bears the same ratio to the Increased Commitments as its then existing
Commitment bears to the aggregate Commitments then existing.
(b) If any Bank party to this Agreement shall not elect to increase its
Commitment pursuant to subsection (a) of this Section, the Borrower may
designate one or more other banks or other financial institutions (which may
be, but need not be, one or more of the existing Banks) which at the time
agree, in the case of any such bank that is an existing Bank to increase its
Commitment and, in the case of any other such bank (an "Additional Bank"), to
become a party to this Agreement. The sum of the increases in the Commitments
of the existing Banks pursuant to this subsection (b) plus the Commitments of
the Additional Banks shall not in the aggregate exceed the unsubscribed amount
of the Increased Commitments.
(c) An increase in the aggregate amount of the Commitments pursuant to
this Section 2.18 shall become effective upon the receipt by the
Administrative Agent of an agreement in form and substance satisfactory to the
Administrative Agent signed by the Borrower, by each Additional Bank and by
each other Bank whose Commitment is to be increased, setting forth the new
Commitments of such Banks and setting forth the agreement of each Additional
Bank to become a party to this Agreement and to be bound by all the terms and
provisions hereof, together with such evidence of appropriate corporate
authorization on the part of the Borrower with respect to the Increased
Commitments and such opinions of counsel for the Borrower with respect to the
Increased Commitments as the Administrative Agent may reasonably request.
Section 2.19. Extension of Commitments. On no more than two separate
occasions, the Borrower may, upon not less than 30 days' notice prior to the
then current Termination Date to the Administrative Agent (which shall notify
each Bank of receipt of such request), propose to extend the Termination Dates
for one additional year measured from the Termination Dates then in effect.
Each Bank shall endeavor to respond to such request, whether affirmatively or
negatively (such determination in the sole discretion of such Bank), by notice
to the Borrower and the Administrative Agent within 15 days of receipt of such
request. Subject to the execution by the Borrower, the Administrative Agent
and such Banks of a duly completed Extension Agreement in substantially the
form of Exhibit H, the Termination Date applicable to the Commitment of each
Bank so affirmatively notifying the Borrower and the Administrative Agent
shall be extended for the period specified above; provided that no Termination
Date of any Bank shall be extended unless Banks having at least 66 2/3% in
aggregate amount of the Commitments in effect at the time any such extension
is requested shall have elected so to extend their Commitments. Any Bank which
does not give such notice to the Borrower and the Administrative Agent shall
be deemed to have elected not to extend as requested, and the Commitment of
each non-extending Bank shall terminate on its Termination Date determined
without giving effect to such requested extension. The Borrower, at its
discretion, will have the right at any time pursuant to Section 2.17 to seek a
replacement bank or other financial institution for any Bank which does not
elect to extend its Commitment.
<PAGE>
ARTICLE 3
Conditions
Section 3.01. Effectiveness. This Agreement shall become effective on
the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 9.05):
(a) receipt by the Administrative Agent of counterparts hereof
signed by each of the parties hereto (or, in the case of any party as to which
an executed counterpart shall not have been received, receipt by the
Administrative Agent in form satisfactory to it of telegraphic, telex or other
written confirmation from such party of execution of a counterpart hereof by
such party);
(b) receipt by the Administrative Agent of an opinion of the
General Counsel of the Borrower, given upon the express instruction of the
Borrower, substantially in the form of Exhibit E hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(c) receipt by the Administrative Agent of an opinion of Davis
Polk & Wardwell, special counsel for the Agents, substantially in the form of
Exhibit F hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably request;
(d) receipt by the Administrative Agent of all documents it may
reasonably request relating to the existence of the Borrower, the corporate
authority for and the validity of this Agreement and the Notes, and any other
matters relevant hereto, all in form and substance satisfactory to the
Administrative Agent;
<PAGE>
(e) receipt by the Administrative Agent of evidence satisfactory
to it of the payment of all principal of and interest on any loans outstanding
under, and of all other amounts payable under, the Existing Agreement; and
(f) receipt by the Administrative Agent of payment of the
participation fees provided for in Section 2.09;
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later
than November 12, 1997. The Administrative Agent shall promptly notify the
Borrower and the Banks of the Effective Date, and such notice shall be
conclusive and binding on all parties hereto. The Banks that are parties to
the Existing Agreement, comprising the "Required Banks" as defined therein,
and the Borrower agree that the commitments under the Existing Agreement shall
terminate in their entirety simultaneously with and subject to the
effectiveness of this Agreement and that the Borrower shall be obligated to
pay the accrued facility fees thereunder to but excluding the date of such
effectiveness. In the event that a Notice of Borrowing is given to the
Administrative Agent prior to the Effective Date, Section 2.14 shall become
effective as of the date such Notice of Borrowing is given, whether or not the
other provisions of this Agreement become effective in accordance with this
Section 3.01.
Section 3.02. Borrowings. The obligation of any Bank to make a Loan on
the occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Administrative Agent of a Notice of Borrowing
as required by Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans will not exceed the
aggregate amount of the Commitments;
(c) the fact that, immediately after such Borrowing, no Default
shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the
Borrower contained in this Agreement (other than, in the case of a Refunding
Borrowing, the representations and warranties set forth in Sections 4.04(c)
and 4.05, which need not be true if the matter which would make them untrue
has theretofore been disclosed in writing by the Borrower to the Banks) shall
be true in all material respects on and as of the date of such Borrowing.
<PAGE>
Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing as to the facts
specified in clauses (b), (c) and (d) of this Section.
ARTICLE 4
Representations and Warranties
The Borrower represents and warrants that:
Section 4.01. Corporate Existence and Power. The Borrower and each
Significant Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, has all
power and authority to carry on its business as now being conducted and to own
its properties, and is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which the failure to qualify would
materially and adversely affect the conduct of its business or the
enforceability of its contractual rights.
Section 4.02. Corporate Authorization. The execution, delivery
and performance by the Borrower of this Agreement and the Notes are within the
Borrower's corporate power, have been duly authorized by all necessary
corporate action and will not contravene, or constitute a default under, any
provision of applicable law or regulation or of the Restated Certificate of
Incorporation or By-Laws of the Borrower, or of any judgment, order, decree,
agreement or instrument binding on the Borrower or result in the creation of
any Lien upon any of its property or assets.
Section 4.03. Binding Effect. This Agreement constitutes, and the
Notes when duly executed on behalf of the Borrower and delivered in accordance
with this Agreement will constitute, the valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms.
Section 4.04. Financial Information
(a) The consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of August 3, 1996 and the related consolidated statements of
operations and cash flows for the fiscal year then ended, reported on by
Deloitte & Touche and set forth in the Borrower s 1996 Annual Report to
Shareholders and incorporated by reference in the Borrower s 1996 Form 10-K, a
copy of which has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of
such date and their consolidated results of operations and cash flows for such
fiscal year.
<PAGE>
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of May 3, 1997 and the related unaudited
consolidated statements of operations and cash flows for the 39 weeks then
ended, set forth in the Borrower s quarterly report for the fiscal quarter
ended May 3, 1997 as filed with the Securities and Exchange Commission on Form
10-Q, a copy of which has been delivered to each of the Banks, fairly present,
in conformity with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in subsection (a) of this
Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such 39-week period (subject to normal year-end
adjustments).
(c) Since May 3, 1997, there has been no material adverse change in the
business, financial position or results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
Section 4.05. Litigation. There are no actions, suits or proceedings
pending against or, to the knowledge of the Borrower, threatened against or
affecting, the Borrower or any Significant Subsidiary in any court or before
or by any governmental department, agency or instrumentality, in which there
is a reasonable possibility of an adverse decision which would materially and
adversely affect the financial condition or business of the Borrower and its
Subsidiaries, taken as a whole.
Section 4.06. Governmental and Other Approvals. No approval,
consent or authorization of or filing or registration with any governmental
authority or body is necessary for the execution, delivery or performance by
the Borrower of this Agreement or the Notes or for the performance by the
Borrower of any of the terms or conditions hereof or thereof.
Section 4.07. Full Disclosure. All financial statements and other
documents furnished by the Borrower to the Banks in connection with this
Agreement do not and will not contain any untrue statement of material fact or
omit to state a material fact necessary in order to make the statements
contained therein not misleading. The Borrower has disclosed to the Banks in
writing any and all facts which materially and adversely affect the business,
operations or condition, financial or otherwise, of the Borrower and its
Subsidiaries or the Borrower s ability to perform its obligations under this
Agreement.
<PAGE>
Section 4.08. Compliance with ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of
ERISA and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable provisions
of ERISA and the Internal Revenue Code with respect to each Plan. No member of
the ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed
to make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other
than a liability to the PBGC for premiums under Section 4007 of ERISA.
Section 4.09. Taxes. United States Federal income tax returns of
the Borrower and its Subsidiaries have been examined and closed through the
fiscal year ended July 30, 1994. The Borrower and its Subsidiaries have filed
all United States Federal income tax returns, and the Borrower and its
Significant Subsidiaries have filed all other material tax returns, which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Borrower or any
Significant Subsidiary except where the payment of any such taxes is being
contested in good faith by appropriate proceedings. The charges, accruals and
reserves on the books of the Borrower and its Consolidated Subsidiaries in
respect of taxes or other governmental charges are, in the opinion of the
Borrower, adequate.
Section 4.10. Environmental Matters. The Borrower has reasonably
concluded that the costs of compliance with Environmental Laws are unlikely to
have a material adverse effect on the business, financial condition, results
of operations or prospects of the Borrower and its Consolidated Subsidiaries,
considered as a whole.
ARTICLE 5
Covenants
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
Section 5.1. Furnishing of Financial Data and Certificates. The
Borrower will deliver to each of the Banks:
<PAGE>
(a) As soon as practicable, and in any event within 75 days after the
close of each of the first three quarters of each fiscal year of the Borrower,
(i) the condensed consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such quarter, (ii) the condensed
consolidated statement of operations of the Borrower and its Consolidated
Subsidiaries for such quarter and for the portion of such fiscal year to and
including such quarter and (iii) the condensed consolidated statements of cash
flows of the Borrower and its Consolidated Subsidiaries for the portion of
such fiscal year to and including such quarter, each of the foregoing to set
forth in comparative form the corresponding figures of the previous year and
to be in reasonable detail and certified by the principal accounting officer
of the Borrower, subject to year-end audit adjustments; delivery by the
Borrower of its Quarterly Reports on Form 10-Q shall be deemed compliance with
this provision;
(b) As soon as practicable, and in any event within 120 days after the
close of each fiscal year of the Borrower, (i) the consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal
year, (ii) the consolidated statement of operations of the Borrower and its
Consolidated Subsidiaries for such fiscal year and (iii) the consolidated
statements of cash flows of the Borrower and its Consolidated Subsidiaries for
such fiscal year, each of the foregoing to set forth in comparative form the
corresponding figures of the previous year and to be in reasonable detail and
audited and certified by Deloitte & Touche or other certified public
accountants of nationally recognized standing reasonably satisfactory to the
Banks; delivery by the Borrower of its Annual Reports on Form 10-K (together
with its annual report to shareholders, if incorporated by reference therein)
shall be deemed compliance with this provision;
(c) Promptly after sending or filing, copies of all financial
statements, reports, notices and proxy statements as it shall send to its
shareholders, and of all periodic reports filed by the Borrower with any
securities exchange or with the Securities and Exchange Commission or any
governmental authority succeeding to any of its functions; and
(d) Such other information (which is readily obtainable by the Borrower
without incurring any undue expense) regarding the financial condition of the
Borrower as any Bank may reasonably request.
Together with each delivery of financial statements required by clauses
(a) and (b) above, the Borrower will deliver to the Banks a certificate of its
principal accounting officer stating that to the best of his knowledge there
exists no Default or, if any Default exists, specifying the nature thereof,
the period of existence thereof and what action the Borrower proposes to take
with respect thereto. The certificate delivered in conjunction with each
delivery of annual and quarterly financial statements shall in addition
demonstrate in reasonable detail compliance during the preceding fiscal period
with Sections 5.08, 5.09 and 5.10(k).
<PAGE>
Each certificate of independent certified public accountants
delivered with the financial statements required by clause (b) above shall be
accompanied by a written statement of such accountants that, in conducting the
examination necessary to the giving of such certificate, they have obtained no
knowledge of the existence during the fiscal period under examination of any
condition, event or act which constitutes a Default (insofar as such a
condition, event or act relates to accounting matters), or if in the opinion
of such accountants there shall exist any Default, such statement shall
specify the nature thereof.
Section 5.02. Payment of Taxes. The Borrower will, and will cause each
Subsidiary to, promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges
or levies imposed upon the income, profits, property or business of the
Borrower or any Subsidiary, provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith and if the Borrower or a Subsidiary shall have set
aside on its books adequate reserves with respect thereto in accordance with
generally accepted accounting principles.
Section 5.03. Maintenance of Corporate Existence The Borrower will
preserve and maintain its corporate existence and will, and will cause each
Subsidiary to, conduct its affairs and carry on its business and operations in
such manner as to comply with any and all applicable laws (including, without
limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) except where the necessity of compliance therewith is being
contested in good faith.
Section 5.04. Maintenance of Property and Leases. The Borrower
will, and will cause each Subsidiary to, keep its properties, whether owned or
leased, in satisfactory repair, working order and condition.
Section 5.05. Insurance. The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable insurers
insurance against liability to persons and damage to property to the extent
and in the manner customary for companies of like size in similar businesses,
it being understood that the Borrower may self-insure against exposures which,
in the judgment of its management, are reasonable in relation to its financial
position. The Borrower will deliver to the Banks from time to time upon
request of any Bank through the Administrative Agent full information as to
the insurance so carried.
<PAGE>
Section 5.06. Accounts and Reports. The Borrower will, and will cause
each Subsidiary to, keep true records and books of account in which full, true
and correct entries will be made of all dealings or transactions in relation
to its businesses and affairs, in accordance with generally accepted
accounting principles consistently applied.
Section 5.07. Inspection. Each Bank or its designee shall have the
right, at its expense, on reasonable notice (given to a senior financial
officer of the Borrower) and at reasonable times to visit and inspect the
properties of the Borrower and its Subsidiaries and to discuss the financial
affairs of the Borrower and its Subsidiaries with the Borrower's senior
officers and will be furnished from the books of the Borrower and its
Subsidiaries such financial information as it may reasonably request and upon
such reasonable conditions relating to confidentiality of the material and
information so supplied as the Borrower might impose. Each Bank shall respect
the confidential nature of the material and information so supplied and shall
take reasonable measures to preserve such confidentiality. It is understood
that a Bank may be required to disclose such confidential material and
information or portions thereof (1) at the request of a bank regulatory agency
or in connection with an examination of the Bank by bank examiners, (2)
pursuant to subpoena or other court process, (3) at the express direction of
any other authorized government agency, (4) to its independent auditors or (5)
otherwise as required by law.
Section 5.08. Coverage of Consolidated Fixed Charges. The Fixed
Charge Coverage Ratio will not at the end of any fiscal quarter be less than
2.75 to 1.
Section 5.09. Leverage Ratio. The Leverage Ratio will at no time
exceed 65%.
Section 5.10. Restrictions on Liens. The Borrower will not, nor
will it permit any Subsidiary to, create, incur, assume or suffer to exist any
Lien upon any of its property or assets now owned or hereafter acquired,
except:
(a) Liens existing on the date hereof securing Debt
outstanding on the date hereof;
(b) Liens incidental to the conduct of its business or the
ownership of its properties and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances
or credit or the incurrence of Derivatives Obligations and which do
not materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business;
<PAGE>
(c) any Lien on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of the cost of
acquiring such asset, provided that such Lien attaches to such
asset concurrently with or within 180 days after the acquisition
thereof;
(d) Liens incurred in connection with Guarantees of bonds,
notes or other similar obligations of a state, city, town or other
governmental agency or entity which obligations are issued in order
to finance property used or to be used by the Borrower or any
Subsidiary, and Liens incurred in connection with the acquisition
of, or improvements to, real estate; provided, however, that no
such Lien shall extend to or cover any property other than the
property so acquired or improved;
(e) any Lien existing on any assets of any corporation or
other entity at the time it becomes a Subsidiary and not created in
contemplation of such corporation becoming a Subsidiary, or
existing on any assets acquired by the Borrower or any Subsidiary
through purchase, merger, consolidation, or otherwise and not
created in contemplation of such purchase, merger, consolidation or
other transaction;
(f) any Lien resulting from any order of attachment,
distraint or other legal process arising out of judicial
proceedings so long as the execution or other enforcement thereof
is effectively stayed;
(g) Liens on shares of capital stock or property of a
Subsidiary securing obligations owing by such Subsidiary to the
Borrower or to another Subsidiary;
(h) Liens arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by
this Section 5.10, provided that such Debt is not increased and is
not secured by any additional assets;
(i) Liens to banks or other institutions arising in
connection with the issuance of letters of credit or bankers
acceptances in connection with the shipment or storage of goods in
the ordinary course of business;
(j) Liens on cash and cash equivalents securing
Derivatives Obligations, provided that the aggregate amount of cash
and cash equivalents subject to such Liens may at no time exceed
$25,000,000; and
<PAGE>
(k) Liens not otherwise permitted by any of the foregoing
clauses of this Section 5.10 securing Debt in an aggregate
principal amount at any time outstanding not to exceed 15% of
Consolidated Net Assets.
Section 5.11. Restrictions on Sales, Consolidations and Mergers.
Neither the Borrower nor any Subsidiary will sell, lease or in any way dispose
of all, or substantially all, of the property or assets of the Borrower and its
Subsidiaries, taken as a whole, nor will the Borrower consolidate or merge
with or into any other Person, provided that this Section 5.11 shall not
prevent any merger involving the Borrower in which the Borrower or HGI is the
surviving corporation if, at the time of, and after giving effect to any such
merger, (i) no Default shall have occurred and be continuing and (ii) in the
case that the Borrower is not the survivor and the survivor is HGI, HGI must
expressly assume the Borrower s obligations under this Agreement in an
instrument in form and substance approved by the Administrative Agent, HGI
must execute and deliver new notes of HGI substantially in the form of Exhibit
A hereto and HGI must deliver an opinion of its general counsel substantially
in the form of Exhibit E hereto with respect to HGI.
Section 5.12. Transactions with Affiliates. The Borrower will not,
and will not permit any Subsidiary to, directly or indirectly, pay any funds
to or for the account of, make any Investment in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate
in, or effect any transaction in connection with any joint enterprise or other
joint arrangement with, any Affiliate; provided, however, that the foregoing
provisions of this Section shall not prohibit (l) the Borrower from declaring
or paying any lawful dividend so long as after giving effect thereto, no
Default shall have occurred and be continuing, (m) the Borrower or any
Subsidiary from engaging in any commercial transaction with an Affiliate so
long as such transaction is on terms and conditions at least as favorable to
the Borrower or such Subsidiary as the terms and conditions which would apply
in a similar transaction with a Person not an Affiliate, or (n) the Borrower
from making payments pursuant to the Intercompany Services Agreement between
the Borrower and HGI dated as of July 24, 1987, a copy of which has previously
been furnished to the Banks; provided, further that a transaction permitted by
this Section may nonetheless give rise to an Event of Default under another
Section of this Agreement.
Section 5.13. Restriction on Debt of Subsidiaries. The Borrower
will not permit any of its Subsidiaries to incur or at any time be liable with
respect to any Debt except (a) Debt owing to the Borrower or any Wholly-Owned
Subsidiary, (b) Debt which is secured by a Lien permitted by Section 5.10, (c)
Debt of any corporation at the time such corporation becomes a Subsidiary and
not created in contemplation of such event, (d) Debt of Subsidiaries not
otherwise permitted by any of the foregoing clauses in an aggregate principal
amount at any time outstanding not to exceed $10,000,000 and (e) Debt of
Subsidiaries outstanding on the date of this Agreement.
<PAGE>
Section 5.14. Use of Proceeds. The proceeds of the Loans made
under this Agreement will be used by the Borrower for general corporate
purposes. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or carrying any
"margin stock" within the meaning of Regulation U.
Article 6
Defaults
Section 6.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal
of any Loan, or shall fail to pay within three days of the due date
thereof any interest or fees payable hereunder;
(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 5.08 to 5.14, inclusive;
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those
covered by clause (a) or (b) above) for 30 days after notice
thereof has been given to the Borrower by the Administrative Agent
at the request of any Bank;
(d) any material representation, warranty, certification
or statement made by the Borrower in this Agreement or in any
certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been incorrect in
any material respect when made (or deemed made), and if the same
shall be susceptible of cure, such incorrectness shall not have
been cured to the reasonable satisfaction of the Required Banks
within 30 days after notice thereof has been given to the Borrower
by the Administrative Agent at the request of any Bank;
(e) the Borrower or any Subsidiary shall fail to make
payment of any Material Financial Obligation when due or within any
applicable grace period;
<PAGE>
(f) any event or condition shall occur which results in
the acceleration of the maturity of any Material Debt or enables
(or, with the giving of notice or lapse of time or both, would
enable) the holder of such Debt or any Person acting on such
holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Significant Subsidiary or any one or
more Consolidated Subsidiaries having combined assets exceeding 5%
of the consolidated assets of the Borrower and its Consolidated
Subsidiaries shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action to
authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be
commenced against the Borrower or any Significant Subsidiary or any
one or more Consolidated Subsidiaries having combined assets
exceeding 5% of the consolidated assets of the Borrower and its
Consolidated Subsidiaries seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part
of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or
an order for relief shall be entered against the Borrower or any
Significant Subsidiary or any one or more Consolidated Subsidiaries
having combined assets exceeding 5% of the consolidated assets of
the Borrower and its Consolidated Subsidiaries under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when
due an amount or amounts (other than amounts being contested in
good faith through appropriate proceedings) aggregating in excess
of $15,000,000 which it shall have become liable to pay under Title
IV of ERISA; or notice of intent to terminate a Material Plan in a
distress termination under Section 4041(c) of ERISA shall be filed
under Title IV of ERISA by any member of the ERISA Group, any plan
administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate,
to impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed to
administer any Material Plan; or a condition shall exist by reason
of which the PBGC would be entitled to obtain a decree adjudicating
that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the
meaning of Section 4219(c)(5) of ERISA, with respect to, one or
more Multiemployer Plans which could cause one or more members of
the ERISA Group to incur a current payment obligation in excess of
$15,000,000;
<PAGE>
(j) a judgment or order for the payment of money in excess
of $15,000,000 shall be rendered against the Borrower or any
Significant Subsidiary or any one or more Consolidated Subsidiaries
having combined assets exceeding 5% of the consolidated assets of
The Borrower and its Consolidated Subsidiaries and such judgment or
order shall continue unsatisfied and unstayed for a period of 30
days; or
(k)(i) HGI shall cease to hold at least 20% of the issued
and outstanding common stock of the Borrower (assuming for this
purpose conversion of all outstanding securities convertible into
common stock of the Borrower but not the exercise of any
outstanding warrants, options or other rights to purchase common
stock of the Borrower), (i) any person or group of persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), for purposes of this Section
6.01(k), a "Control Group") other than a Control Group including
HGI shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Exchange Act) of more voting stock or total
equity capital of the Borrower than that beneficially owned by HGI
or (ii) more than half of the members of the Board of Directors of
the Borrower shall be persons who are not Continuing Directors;
then, and in every such event, the Administrative Agent shall (i) if requested
by the Required Banks, by notice to the Borrower terminate the Commitments and
they shall thereupon terminate, and (ii) if requested by Banks holding more
than 66 2/3% in aggregate principal amount of the Loans, by notice to the
Borrower declare the Loans (together with accrued interest thereon) to be, and
the Loans shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; provided that in the case of any of the Events
of Default specified in clause (g) or (h) above with respect to the Borrower,
without any notice to the Borrower or any other act by the Administrative
Agent or the Banks, the Commitments shall thereupon terminate and the Loans
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower.
<PAGE>
Section 6.02 Notice of Default. The Administrative Agent shall give notice to
the Borrower under Section 6.01(c) or (d) promptly upon being requested to do
so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
The Agents
Section 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement and the Notes
as are delegated to the Administrative Agent by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto.
Section 7.02. Agents and Affiliates. Morgan Guaranty Trust Company
of New York, Bank of America National Trust and Savings Association and The
Chase Manhattan Bank, and their respective successors shall have the same
rights and powers under this Agreement as any other Bank, subject to the
provisions of Section 2.03(d), and may exercise or refrain from exercising the
same as though it were not an Agent, and Morgan Guaranty Trust Company of New
York, Bank of America National Trust and Savings Association and The Chase
Manhattan Bank and their respective successors and affiliates may accept
deposits from, lend money to, and generally engage in any kind of business
with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were
not an Agent hereunder.
Section 7.03. Action by Administrative Agent. The obligations of
the Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent
shall not be required to take any action with respect to any Default, except
as expressly provided in Article 6.
Section 7.04. Consultation with Experts. The Administrative Agent
may consult with legal counsel (who may be counsel for the Borrower),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
<PAGE>
Section 7.05. Liability of Administrative Agent. Neither the
Administrative Agent nor any of its affiliates nor any of the respective
directors, officers, agents or employees of any of the foregoing shall be
liable for any action taken or not taken by it in connection herewith (i) with
the consent or at the request of the Required Banks or (ii) in the absence of
its own gross negligence or willful misconduct. Neither the Administrative
Agent nor any of its affiliates nor any of the respective directors, officers,
agents or employees of any of the foregoing shall be responsible for or have
any duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower; (iii) the satisfaction of any condition specified
in Article 3, except receipt of items required to be delivered to such Agent;
or (iv) the validity, effectiveness (other than its own due execution and
delivery) or genuineness of this Agreement, the Notes or any other instrument
or writing furnished in connection herewith. The Administrative Agent shall
not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to
be signed by the proper party or parties.
Section 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Administrative Agent, its
affiliates and their respective directors, officers, agents and employees (to
the extent not reimbursed by the Borrower) against any cost, expense
(including counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees gross negligence or
willful misconduct) that such indemnitees may suffer or incur in connection
with this Agreement or any action taken or omitted by such indemnitees
hereunder.
Section 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon any Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon any Agent
or any other Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement.
Section 7.08 Successor Administrative Agent. The Administrative
Agent may resign at any time by giving notice thereof to the Banks and the
Borrower. Upon any such resignation, the Borrower shall have the right to
appoint a successor Administrative Agent, which shall be reasonably
satisfactory to the Required Banks. If no successor Administrative Agent
shall have been so appointed by the Borrower, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent gives
notice of resignation, then the retiring Administrative Agent may, on behalf
of the Banks, appoint a successor Administrative Agent, which shall be a
commercial bank organized or licensed under the laws of the United States of
<PAGE>
America or of any State thereof and having a combined capital and surplus of
at least $50,000,000. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After a retiring Administrative Agent s resignation
hereunder as Administrative Agent, the provisions of this Article shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was Administrative Agent.
Section 7.09. Agents' Fees. The Borrower shall pay to each Agent
for its own account fees in the amounts and at the times previously agreed
upon between the Borrower and such Agent.
Section 7.10. Documentation Agent and Syndication Agent. Nothing in this
Agreement shall impose upon the Documentation Agent or the Syndication Agent,
in their respective capacities as such, any duty or obligation whatsoever.
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any Fixed Rate
Borrowing:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, the Required Banks advise the
Administrative Agent that the Adjusted CD Rate or the London Interbank Offered
Rate, as the case may be, as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of funding their CD Loans
or Euro-Dollar Loans, as the case may be, for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower
and the Banks, whereupon until the Administrative Agent notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case
may be, shall be suspended. Unless the Borrower notifies the Administrative
Agent at least one Domestic Business Day before the date of any Fixed Rate
Borrowing for which a Notice of Borrowing has previously been given
<PAGE>
that it elects not to borrow on such date, (i) if such Fixed Rate
Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a
Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market
LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall
bear interest for each day from and including the first day to but excluding
the last day of the Interest Period applicable thereto at the Base Rate for
such day.
Section 8.02 Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, 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 any Bank (or its Euro-Dollar Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it
unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to
make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the
Administrative Agent, the Administrative Agent shall forthwith give notice
thereof to the other Banks and the Borrower, whereupon until such Bank
notifies the Borrower and the Administrative Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need
for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank or contrary to its policies.
Outstanding Euro-Dollar Loans shall be maintained to maturity unless such Bank
shall determine that it may not lawfully continue to maintain and fund any of
its outstanding Euro-Dollar Loans to maturity and shall so specify in such
notice, in which event the Borrower shall immediately prepay in full the then
outstanding principal amount of each such Euro-Dollar Loan, together with
accrued interest thereon. Concurrently with prepaying each such Euro-Dollar
Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks), and
such Bank shall make such a Base Rate Loan.
Section 8.03. Increased Cost and Reduced Return. (a) If on or after (x)
the date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Applicable
Lending Office) with any request or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency shall impose,
<PAGE>
modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding (iii) with respect to any CD Loan any such requirement
included in an applicable Domestic Reserve Percentage and (iv) with respect to
any Euro-Dollar Loan any such requirement for which such Bank is entitled to
compensation under Section 2.16 for the relevant Interest Period), special
deposit, insurance assessment (excluding, with respect to any CD Loan, any
such requirement reflected in an applicable Assessment Rate) or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or shall impose on
any Bank (or its Applicable Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Note (if any) or its obligation to make
Fixed Rate Loans and the result of any of the foregoing is to increase the
cost to such Bank (or its Applicable Lending Office) of making or maintaining
any Fixed Rate Loan, or to reduce the amount of any sum received or receivable
by such Bank (or its Applicable Lending Office) under this Agreement or under
its Note (if any) with respect thereto, by an amount deemed by such Bank to be
material, then, within 15 days after demand by such Bank, the Borrower shall
pay to such Bank such additional amount or amounts as will compensate such
Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, 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 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 capital of such Bank (or its Parent) as a consequence of such Bank s
Commitment hereunder (to the extent undrawn) to a level below that which such
Bank (or its Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank, the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank
(or its Parent) for such reduction.
<PAGE>
(c) Each Bank will promptly notify the Borrower of any event of which
it has knowledge, occurring after the date hereof, which will entitle such
Bank to compensation pursuant to this Section, and each Bank will designate a
different Applicable Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment
of such Bank, be otherwise disadvantageous to such Bank or contrary to its
policies. A certificate of any Bank claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of clearly demonstrable error. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods. Each such certificate shall be accompanied by such
information as the Borrower may reasonably request as to the computation set
forth therein. No payment made to any Bank under this Section shall duplicate
any other payments made to such Bank under any other provision of this
Agreement.
Section 8.04. Taxes. (a) Any and all payments by the Borrower to or for
the account of any Bank or the Administrative Agent hereunder or under any
Note shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Administrative Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which
such Bank or the Administrative Agent (as the case may be) is organized or any
political subdivision of such jurisdiction or any jurisdiction of which such
jurisdiction is a political subdivision and, in the case of each Bank, taxes
imposed on its income, and franchise or similar taxes imposed on it, by the
jurisdiction of such Bank s Applicable Lending Office or any political
subdivision of such jurisdiction or any jurisdiction of which such
jurisdiction is a political subdivision (all such non-excluded taxes, duties,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder or under
any Note to any Bank or the Administrative Agent, (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 8.04) such
Bank or the Administrative Agent (as the case may be) receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions, (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 9.01, the original
or a certified copy of a receipt evidencing payment thereof.
<PAGE>
(b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes and any other excise or property taxes, or charges or
similar levies which arise from any payment made hereunder or under any Note
or from the execution or delivery of, or otherwise with respect to, this
Agreement or any Note (hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Bank and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction
on amounts payable under this Section 8.04) paid by such Bank or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
except where such liability arises from such Bank's gross negligence or
willful misconduct. This indemnification shall be made within 15 days from
the date such Bank or the Administrative Agent (as the case may be) makes
demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other
Bank, and from time to time thereafter if requested in writing by the Borrower
(but only so long as such Bank remains lawfully able to do so), shall provide
the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate,
or any successor form prescribed by the Internal Revenue Service, certifying
that such Bank is entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or business in
the United States. If the form provided by a Bank at the time such Bank first
becomes a party to this Agreement indicates a United States interest
withholding tax rate in excess of zero, withholding tax at such rate shall be
considered excluded from "Taxes" as defined in Section 8.04(a).
(e) For any period with respect to which a Bank has failed to provide
the Borrower with the appropriate form pursuant to Section 8.04(d) (unless
such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which a form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.04(a) with respect to Taxes imposed by the United States; provided, however,
that should a Bank, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Bank shall reasonably request to assist such Bank to recover such Taxes.
<PAGE>
(f) If the Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section 8.04, then such Bank will change
the jurisdiction of its Applicable Lending Office so as to eliminate or reduce
any such additional payment which may thereafter accrue if such change, in the
judgment of such Bank, is not otherwise disadvantageous to such Bank or
contrary to its policies.
(g) In the event any Bank obtains the benefit of any tax credit or
allowance which may be available to it on account of any Taxes for which it
has been indemnified by the Borrower under this Section 8.04, it will pay to
the Borrower an amount equal to the net benefit so received by such Bank, as
determined in good faith by it. Should it later develop because of loss
carrybacks, tax credit carrybacks or otherwise that such Bank in fact did not
receive the net benefit so paid over to the Borrower, the Borrower will
promptly reimburse such Bank the amount by which the payment theretofore made
to the Borrower exceeds the net benefits actually so received by such Bank, as
determined in good faith by it.
Section 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.
If (i) the obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation
under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans
and the Borrower shall, by at least five Euro-Dollar Business Days prior
notice to such Bank through the Administrative Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as CD Loans or
Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate
Loans (on which interest and principal shall be payable contemporaneously with
the related Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid, all payments of principal which would otherwise be
applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate
Loans instead.
<PAGE>
ARTICLE 9
Miscellaneous
Section 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, telex, facsimile transmission or similar writing) and shall be given to
such party: (x) in the case of the Borrower or any Agent, at its address or
telex number set forth on the signature pages hereof, (y) in the case of any
Bank, at its address or telex number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address or telex
number as such party may hereafter specify for the purpose by notice to the
Administrative Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by mail or by any other means
(including, without limitation, facsimile transmission), when received at the
address specified in this Section.
Section 9.02. No Waivers. No failure or delay by any Agent or Bank
in exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 9.03. Expenses; Indemnification. (a) The Borrower shall
pay (iii) all reasonable out-of-pocket expenses of the Agents, including
reasonable fees and disbursements of special counsel for the Agents, in
connection with the preparation and administration of this Agreement, any
waiver or consent hereunder or any amendment hereof or any Default or alleged
Default hereunder and (iv) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by each Agent and Bank, including reasonable
fees and disbursements of counsel (including the allocated cost of in-house
counsel), in connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom; and provided
further that the Banks and the Agents shall use reasonable efforts to avoid
inappropriate duplication of expense in connection with any matter for which
the Borrower is responsible under this subsection (a).
(b) The Borrower agrees to indemnify each Agent and Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought
or threatened relating to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall
<PAGE>
have the right to be indemnified or held harmless hereunder for such
Indemnitee's own gross negligence or willful misconduct as determined by a
court of competent jurisdiction; and provided further that the Banks and the
Agents shall use reasonable efforts to avoid inappropriate duplication of
expense in connection with any matter for which they are indemnified by the
Borrower under this subsection (b).
Section 9.04. Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Loan held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any Loan held by such other Bank,
the Bank receiving such proportionately greater payment shall purchase such
participations in the Loans held by the other Banks, and such other
adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Loans held by the Banks shall be
shared by the Banks pro rata; provided that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment of
indebtedness of the Borrower other than its indebtedness under the Loans. The
Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Loan acquired pursuant
to the foregoing arrangements may exercise rights of set-off or counterclaim
and other rights with respect to such participation as fully as if such holder
of a participation were a direct creditor of the Borrower in the amount of
such participation.
Section 9.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of any Agent are affected
thereby, by such Agent); provided that no such amendment or waiver shall,
unless signed by all the Banks, (v) increase or decrease the Commitment of any
Bank (except for a ratable decrease in the Commitments of all Banks) or
subject any Bank to any additional obligation (except as set forth in Section
2.18), (vi) reduce the principal of or rate of interest on any Loan or any
fees hereunder, (vii) postpone the date fixed for any payment of principal of
or interest on any Loan or any fees hereunder or for termination of any
Commitment (except as set forth in Section 2.19) or (viii) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Loans, or the number of Banks (including, without limitation, change the
definition of Required Banks) which shall be required for the Banks or any of
them to take any action under this Section or any other provision of this
Agreement.
<PAGE>
Section 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without
the prior written consent of all Banks, it being agreed that no merger
permitted by Section 5.11 shall be deemed to be an assignment or transfer for
purposes of this Section 9.06.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Bank
in connection with such Bank s rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a participating
interest shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Borrower hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement; provided that such participation agreement
may provide that such Bank will not agree to any modification, amendment or
waiver of this Agreement described in clause (i), (ii) or (iii) of Section
9.05 without the consent of the Participant. The Borrower agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Section 2.16 and Article 8 with respect to its
participating interest. An assignment or other transfer which is not permitted
by subsection (c) or (d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes (if any), and such
Assignee shall assume such rights and obligations, pursuant to an Assignment
and Assumption Agreement in substantially the form of Exhibit G hereto
executed by such Assignee and such transferor Bank, with (and subject to)
notice to the Administrative Agent and the consent of the Borrower (such
consent not to be unreasonably delayed or withheld); provided that (ix) if an
Assignee is an affiliate of such transferor Bank, such notice shall be given
to the Administrative Agent and the Borrower but no such consent shall be
required, (x) such assignment may, but need not, include rights of the
<PAGE>
transferor Bank in respect of outstanding Money Market Loans, (xi) unless the
assignment covers all rights and obligations of such assignor Bank, the
assignment shall cover the equivalent of a Commitment of not less than
$10,000,000 and (xii) the remaining Commitment (if any) of the assignor Bank
after any such assignment is at least $5,000,000. Upon execution and delivery
of such instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and
such Assignee, such Assignee shall be a Bank party to this Agreement and shall
have all the rights and obligations of a Bank with a Commitment as set forth
in such instrument of assumption, and the transferor Bank shall be released
from its obligations hereunder to a corresponding extent, and no further
consent or action by any party shall be required. Upon the consummation of any
assignment pursuant to this subsection (c), the transferor Bank, the
Administrative Agent and the Borrower shall make appropriate arrangements so
that, if required, a new Note is issued to the Assignee. In connection with
any such assignment, the transferor Bank shall pay to the Administrative Agent
an administrative fee for processing such assignment in the amount of $2,500.
If the Assignee is not incorporated under the laws of the United States of
America or a state thereof, it shall, prior to the first date on which
interest or fees are payable hereunder for its account, deliver to the
Borrower and the Administrative Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in
accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank s rights
shall be entitled to receive any greater payment under Section 8.03 or Section
8.04 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower s prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
Section 9.07. Collateral. Each of the Banks represents to each of the
Agents and the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
<PAGE>
Section 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum.
Section 9.09. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
Section 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.11. Maximum Interest Rate. (a) Nothing contained in this
Agreement or the Notes shall require any Borrower to pay interest at a rate
exceeding the maximum rate permitted by applicable law.
(b) If the amount of interest payable for the account of any Bank on
any interest payment date in respect of the immediately preceding interest
computation period would otherwise exceed the maximum amount permitted by
applicable law to be charged by such Bank, the amount of interest payable for
its account on such interest payment date shall be automatically reduced to
such maximum permissible amount.
(c) If the amount of interest payable for the account of any Bank in
respect of any interest computation period is reduced pursuant to clause (b)
of this Section and the amount of interest payable for its account in respect
of any subsequent interest computation period would otherwise be less than the
maximum amount permitted by applicable law to be charged by such Bank, then
the amount of interest payable for its account in respect of such subsequent
interest computation period shall be automatically increased to such maximum
permissible amount; provided that at no time shall the aggregate amount by
which interest paid for the account of any Bank has been increased pursuant to
this clause (c) exceed the aggregate amount by which interest paid for its
account has theretofore been reduced pursuant to clause (b) of this Section.
<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.
THE NEIMAN MARCUS GROUP, INC.
By
Title:
27 Boylston Street
Chestnut Hill, MA 02167
Attention:
Telephone No.: 617-232-0760
Telecopier number: 617-278-5397
<PAGE>
COMMITMENTS
$51,667,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By
Title:
$51,666,500 BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By
Title:
$51,666,500 THE CHASE MANHATTAN BANK
By
Title:
$35,000,000 BANKBOSTON, N.A.
By
Title:
$35,000,000 BANK OF TOKYO MITSUBISHI TRUST
COMPANY
By
Title:
<PAGE>
$35,000,000 FLEET NATIONAL BANK
By
Title:
$35,000,000 MELLON BANK, N.A.
By
Title:
$27,500,000 BANCA MONTE DEI PASCHI
DI SIENA S.P.A.
By
Title:
By
Title:
$27,500,000 CORESTATES BANK, N.A.
By
Title:
$27,500,000 CAISSE NATIONALE DE CREDIT AGRICOLE
By
Title:
<PAGE>
$27,500,000 CREDIT LYONNAIS
By
Title:
$27,500,000 FIRST HAWAIIAN BANK
By
Title:
$27,500,000 FIRST UNION NATIONAL BANK
By
Title:
$27,500,000 THE BANK OF NEW YORK
By
Title:
$27,500,000 THE DAI-ICHI KANGYO BANK, LTD.
By
Title:
<PAGE>
$27,500,000 THE FUJI BANK, LTD.
By
Title:
$27,500,000 THE SAKURA BANK, LTD.
By
Title:
$27,500,000 THE SANWA BANK LTD.
By
Title:
$27,500,000 WELLS FARGO BANK
By
Title:
$25,000,000 WACHOVIA BANK, N.A.
By
Title:
- ---------------------
TOTAL COMMITMENTS
$650,000,000
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent
By
Title:
Attention:
Telex No.:
Fax No.:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Syndication Agent
By
Title:
Attention: Syndication
Telex No.:
Fax No.:
THE CHASE MANHATTAN BANK, as Documentation Agent
By
Title:
Attention:
Telex No.:
Fax No.:
<PAGE>
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate" for any day are
the respective percentages set forth below in the applicable row under the
column corresponding to the Status that exists on such day:
Level Level Level Level
Status I II III IV
Euro Dollar
Margin .16% .20% .265% .425%
CD Margin .285% .325% .39% .55%
Facility Fee Rate .09% .10% .135% .20%
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the
Applicable Fixed Charge Coverage Ratio is greater than 5.50:1.
"Level II Status" exists at any date if, at such date, the
Applicable Fixed Charge Coverage Ratio is greater than 4.00:1 but less than or
equal to 5.50:1 and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the
Applicable Fixed Charge Coverage Ratio is equal to or greater than 3.00:1 but
less than or equal to 4.00:1 and (ii) neither Level I Status nor Level II
Status exists.
"Level IV Status" exists at any date if, at such date, no other
Status exists.
"Applicable Fixed Charge Coverage Ratio" means, for each day
during any Quarter, the Fixed Charge Coverage Ratio as at the last day of the
immediately preceding Quarter.
"Quarter" means each fiscal quarter of the Borrower.
"Status" refers to the determination of which of Level I Status,
Level II Status, Level III Status or Level IV Status exists at any date.
The Applicable Fixed Charge Coverage Ratio for each Quarter shall
be determined initially on the basis of an estimate which shall be furnished
by the Borrower to the Administrative Agent not later than the earlier of the
(i) 60th day of such Quarter and (ii) the tenth day prior to the first day (if
<PAGE>
any) during such Quarter on which interest is payable in respect of
Euro-Dollar Loans or CD Loans. If when finally determined the actual
Applicable Fixed Charge Coverage Ratio differs from the estimate, appropriate
retroactive adjustments shall be made as determined by the Administrative
Agent. Notwithstanding the foregoing, prior to the initial delivery of a
certificate pursuant to Section 5.01(c), the Applicable Fixed Charge Coverage
Ratio shall be deemed to be a ratio resulting in Level II Status.
<PAGE>
EXHIBIT A
NOTE
New York, New York
October 29, 1997
For value received, The Neiman Marcus Group, Inc. a Delaware corporation (the
"Borrower"), promises to pay to the order of (the
"Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below on the last day of the Interest Period
relating to such Loan. The Borrower promises to pay interest on the unpaid
principal amount of each such Loan on the dates and at the rate or rates
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or
other immediately available funds at the office of Morgan Guaranty Trust
Company of New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the respective types and maturities thereof
and all repayments of the principal thereof shall be recorded by the Bank and,
if the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated
as of October 29, 1997 among the Borrower, the banks parties thereto, Bank of
America National Trust and Savings Association, as Syndication Agent, The
Chase Manhattan Bank, as Documentation Agent and Morgan Guaranty Trust Company
of New York, as Administrative Agent (as the same may be amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the prepayment hereof and the acceleration of the maturity
hereof. This Note shall be governed by and construed in accordance with the
laws of the State of New York.
THE NEIMAN MARCUS GROUP, INC.
By
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
__________________________________________________________________
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
<PAGE>
EXHIBIT B
Form of Money Market Quote Request
______________, 19__
To: Morgan Guaranty Trust Company of New York (the "Administrative
Agent")
From: The Neiman Marcus Group, Inc.
Re: Credit Agreement (the "Credit Agreement") dated as of October 29,
1997 among the Borrower, the Banks parties thereto, Bank of
America National Trust and Savings Association, as Syndication
Agent, The Chase Manhattan Bank, as Documentation Agent and Morgan
Guaranty Trust Company of New York, as Administrative Agent.
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following
proposed Money Market Borrowing(s):
Date of Borrowing: _______________
Principal Amount* Interest Period**
$
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the London
Interbank Offered Rate.]
Terms used herein have the meanings assigned to them in the Credit
Agreement.
THE NEIMAN MARCUS GROUP, INC.
By
Title:
- ---------------
*Amount must be $5,000,000 or a larger multiple of $1,000,000.
**Not less than one month (LIBOR Auction) or not less than 5 days
(Absolute Rate Auction), subject to the provisions of the definition
of Interest Period.
<PAGE>
EXHIBIT C
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes
to The Neiman Marcus Group, Inc. (the "Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated as of October 29,
1997 among the Borrower, the Banks parties thereto, Bank of America National
Trust and Savings Association, as Syndication Agent, The Chase Manhattan Bank,
as Documentation Agent and Morgan Guaranty Trust Company of New York, as
Administrative Agent, we are pleased on behalf of the Borrower to invite you
to submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing: ________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [4:00 P.M.] [9:15 A.M.]
(New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By
Authorized Officer
<PAGE>
EXHIBIT D
Form of Money Market Quote
To: MORGAN GUARANTY TRUST COMPANY OF NEW YORK
(the "Administrative Agent")
Attention:
Re: Money Market Quote to
The Neiman Marcus Group, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank:_____________________
2. Person to contact at Quoting Bank:
____________________________
3. Date of Borrowing:______________1
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the following
rates:
- ---------------
1 As specified in the related Invitation.
<PAGE>
Principal Interest Money Market [Absolute
Amount1 Period 2 [Margin 3] Rate 4]
$
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed
$________________.]
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit
Agreement dated as of October 29, 1997 among the Borrower, the Banks parties
thereto, Bank of America National Trust and Savings Association, as
Syndication Agent, The Chase Manhattan Bank, as Documentation Agent and
yourselves, as Administrative Agent, as irrevocably obligates us to make the
Money Market Loan(s) for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:__________________ By:___________________________
Authorized Officer
- ---------------
1 Principal amount bid for each Interest Period may not exceed
principal amount requested. Specify aggregate limitation if the
sum of the individual offers exceeds the amount the Bank is willing
to lend. Bids must be made for $5,000,000 or a larger multiple
of $1,000,000.
2 Not less than one month or not less than 5 days, as specified in
the related Invitation. No more than five bids are permitted for
each Interest Period.
3 Margin over or under the London Interbank Offered Rate determined
for the applicable Interest Period. Specify percentage (to the
nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS".
4 Specify rate of interest per annum (to the nearest 1/10,000th of
1%).
<PAGE>
EXHIBIT E
OPINION OF
COUNSEL FOR THE BORROWER
[Effective Date]
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company of New York, as Administrative Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
In my capacity as Senior Vice President and General Counsel of The
Neiman Marcus Group, Inc. (the "Borrower"), I, together with
_____________________, have acted as counsel to the Borrower in connection
with the preparation, execution and delivery of the Credit Agreement dated as
of October 29, 1997 among the Borrower, the Banks parties thereto, Bank of
America National Trust and Savings Association, as Syndication Agent, The
Chase Manhattan Bank, as Documentation Agent and Morgan Guaranty Trust Company
of New York, as Administrative Agent (the "Credit Agreement"). Capitalized
terms used in this opinion which are not defined herein shall have the same
meaning as in the Credit Agreement.
I have examined the originals, or copies certified to my
satisfaction, of the Credit Agreement, the Notes, the charter documents and
the By-Laws of the Borrower and the Significant Subsidiaries, records of the
Borrower's corporate proceedings, all Debt instruments and other material
agreements and instruments to which the Borrower or a Significant Subsidiary
is a party and of which I have knowledge, certificates of public officials and
such other documents, agreements, certificates and records as I have deemed
necessary to examine as a basis for the opinions hereinafter expressed.
I am an attorney admitted to practice in the Commonwealth of
Massachusetts. I am not, and do not purport to be, an expert in or qualified
to express opinions concerning the laws of any jurisdiction other than
Massachusetts, the United States of America and the corporate laws of the
State of Delaware to the extent necessary to express the opinions hereinafter
set forth. For the purposes of this opinion, I have assumed without
investigation that the laws of the State of New York are the same as those of
the Commonwealth of Massachusetts.
<PAGE>
Based upon the foregoing, and having regard for such legal
considerations as I have deemed relevant, I am of the opinion that:
1. The Borrower and each Significant Subsidiary (i) is a
corporation duly organized, validly existing and in good standing under the
laws of its respective state of incorporation, (ii) has all requisite
corporate power and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted and
as presently contemplated and (iii) is in good standing as a foreign
corporation and is duly qualified to conduct business in each jurisdiction in
which its property or business as presently conducted or contemplated makes
such qualification necessary, except in those jurisdictions in which the
failure to be so qualified would not have a material adverse effect upon the
business or financial condition of the Borrower or such Significant Subsidiary
and would not (after qualification) preclude the Borrower or such Significant
Subsidiary from enforcing claims against any party in the courts of such
jurisdictions.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower s corporate powers,
have been duly authorized by all necessary corporate action, require no action
by or in respect of, or filing with, any governmental body, agency or
official, except for the filing of the Agreement with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended, and the Credit Agreement and the Notes do not contravene, or
constitute a default under, any provision of applicable law or of the Restated
Certificate of Incorporation or By-Laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower or any Significant Subsidiary.
3. The Credit Agreement has been duly and validly executed and
delivered by authorized officers of the Borrower. The Credit Agreement
constitutes, and each Note, if and when issued in accordance with the Credit
Agreement, will constitute a valid and binding obligation of the Borrower, in
each case enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting generally the enforcement of creditors
rights and except to the extent that the availability of the remedy of
specific enforcement or injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought.
<PAGE>
4. Various suits and claims arising in the ordinary course of
business, some of which involve substantial amounts, are pending against the
Borrower and its Subsidiaries. While the ultimate effect of such litigation
cannot be ascertained at this time, in my opinion, there are no actions,
suits, proceedings or investigations pending, or to my knowledge threatened,
against the Borrower or any Subsidiary in which there is a reasonable
possibility of an adverse decision which would materially adversely affect the
business, assets or financial condition of the Borrower and its Subsidiaries,
taken as a whole.
Very truly yours,
<PAGE>
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENTS
[Effective Date]
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company of New York, as Administrative Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of October 29, 1997 among The Neiman Marcus
Group, Inc., a Delaware corporation (the "Borrower"), the banks parties
thereto, (the "Banks") Bank of America National Trust and Savings Association,
as Syndication Agent, The Chase Manhattan Bank, as Documentation Agent and
Morgan Guaranty Trust Company of New York, as Administrative Agent, and have
acted as special counsel for the Agents for the purpose of rendering this
opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in
the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower s corporate powers and
have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement
of the Borrower and each Note, if and when issued in accordance with the
Credit Agreement, constitutes a valid and binding obligation of the Borrower,
in each case enforceable in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and by general principles of equity.
<PAGE>
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware. In giving the foregoing opinion, we express no opinion as
to the effect (if any) of any law of any jurisdiction (except the State of New
York) in which any Bank is located which limits the rate of interest that such
Bank may charge or collect.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other
purpose or relied upon by any other person without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of __________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee") and The Neiman Marcus Group, Inc.
(the "Borrower").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Credit Agreement dated as of October 29, 1997 among the
Borrower, the Assignor and the other Banks party thereto, as Banks, Bank of
America National Trust and Savings Association, as Syndication Agent, The
Chase Manhattan Bank, as Documentation Agent and Morgan Guaranty Trust Company
of New York, as Administrative Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has
a Commitment to make Loans to the Borrower in an aggregate principal amount at
any time outstanding not to exceed $_________;
WHEREAS, Committed Loans made to the Borrower by the Assignor
under the Credit Agreement in the aggregate principal amount of $_______ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of
the rights of the Assignor under the Credit Agreement in respect of a portion
of its Commitment thereunder in an amount equal to $___________ (the
"Assigned Amount"), together with a corresponding portion of its outstanding
Committed Loans, and the Assignee proposes to accept assignment of such rights
and assume the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
Section 1 Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
Section 2 Assignment. The Assignor hereby assigns and sells to
the Assignee all of the rights of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the
Assignor under the Credit Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of the
principal amount of the
<PAGE>
ommitted Loans made by the Assignor outstanding at the date hereof.
Upon the execution and delivery hereof by the Assignor, the Assignee [and the
Borrower] and the payment of the amounts specified in Section 3 required to be
paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed
to the rights and be obligated to perform the obligations of a Bank under the
Credit Agreement with a Commitment in an amount equal to the Assigned Amount,
and (ii) the Commitment of the Assignor shall, as of the date hereof, be
reduced by a like amount and the Assignor released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee. The assignment provided for herein shall be without recourse to the
Assignor.
Section 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds the amount heretofore mutually agreed between
them.1 It is understood that facility fees in respect of the Assigned Amount
accrued to the date hereof are for the account of the Assignor and such fees
accruing from and including the date hereof are for the account of the
Assignee. Each of the Assignor and the Assignee hereby agrees that if it
receives any amount under the Credit Agreement which is for the account of the
other party hereto, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
[Section 4. Consent of the Borrower. This Agreement is conditioned upon
the consent of the Borrower pursuant to Section 9.06(c) of the Credit
Agreement. The execution of this Agreement by the Borrower and the Agents is
evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to
execute and deliver a Note payable to the order of the Assignee to evidence
the assignment and assumption provided for herein.]
Section 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition, or
statements of the Borrower, or the validity and enforceability of the
obligations of the Borrower in respect of the Credit Agreement or any Note.
The Assignee acknowledges that it has, independently and without reliance on
the Assignor, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and will continue to be responsible for making its own independent
appraisal of the business, affairs and financial condition of the Borrower.
- ---------------
1 Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of
any portion of any upfront fee to be paid by the Assignor to the
Assignee. It may be preferable in an appropriate case to
specify these amounts generically or by formula rather than as a
fixed sum.
<PAGE>
Section 6. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
Section 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By________________________
Title:
[ASSIGNEE]
By________________________
Title:
The Neiman Marcus Group, Inc.
By________________________
Title:
<PAGE>
EXHIBIT H
EXTENSION AGREEMENT
Morgan Guaranty Trust Company of New York,
as Administrative Agent under the
Credit Agreement referred to below
60 Wall Street
New York, NY 10260-0060
Ladies and Gentlemen:
The undersigned hereby agrees to extend, effective ___________, ____,
its Commitment and Termination Date under the Credit Agreement dated as of
October 29, 1997 among The Neiman Marcus Group, Inc., (the "Borrower"), the
banks parties thereto, Bank of America National Trust and Savings Association,
as Syndication Agent, The Chase Manhattan Bank, as Documentation Agent and
Morgan Guaranty Trust Company of New York, as Administrative Agent (the
"Credit Agreement") for one year to [date to which the Termination Date is
extended] pursuant to Section 2.19 of the Credit Agreement. Terms defined in
the Credit Agreement are used herein as therein defined.
This Extension Agreement shall be construed in accordance with and
governed by the law of the State of New York. This Extension Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
[NAME OF BANK]
By__________________________
Title:
<PAGE>
Agreed and Accepted:
THE NEIMAN MARCUS GROUP, INC. as Borrower
By _______________________________
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent
By _______________________________
Title:
<PAGE>
<TABLE>
EXHIBIT 11.1
THE NEIMAN MARCUS GROUP, INC.
Computation of weighted average number of shares outstanding used in determining
primary and fully diluted earnings per share:
<CAPTION>
Thirteen Weeks Ended
(Shares in 000's) November 1, November 2,
1997 1996
Primary
<S> <C> <C>
1. Weighted average number of
common shares outstanding 49,905 39,413
2. Assumed exercise of certain
stock options based on average
market value 191 188
3. Weighted average number of
shares used in primary per
share computations 50,096 39,601
Fully diluted (A)
1. Weighted average number of
common shares outstanding 49,905 39,413
2. Assumed exercise of all dilutive
options based on higher of average
or closing market value 194 190
3. Weighted average number of
shares used in fully diluted
per share computations 50,099 39,603
(A) This calculation is submitted in accordance with the Securities Exchange Act
of 1934 Release No. 9083 although not required by Footnote 2 to Paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains a summary of financial information extracted
from the Condensed Consolidated Balance Sheet and Condensed Consolidated
Statement of Operations and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-2-1998
<PERIOD-END> NOV-1-1997
<CASH> 18,537
<SECURITIES> 0
<RECEIVABLES> 71,271
<ALLOWANCES> 6,579
<INVENTORY> 569,733
<CURRENT-ASSETS> 896,810
<PP&E> 764,686
<DEPRECIATION> 306,734
<TOTAL-ASSETS> 1,451,980
<CURRENT-LIABILITIES> 462,994
<BONDS> 300,000
0
0
<COMMON> 499
<OTHER-SE> 586,850
<TOTAL-LIABILITY-AND-EQUITY> 1,451,980
<SALES> 580,499
<TOTAL-REVENUES> 580,499
<CGS> 376,127
<TOTAL-COSTS> 520,448
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 194
<INTEREST-EXPENSE> 5,729
<INCOME-PRETAX> 54,322
<INCOME-TAX> 21,729
<INCOME-CONTINUING> 32,593
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,593
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
