FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 27, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-10590
VENTURE STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-0914490
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 East Terra Lane, O'Fallon, Missouri 63366-0110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314)281-5500
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of July 27, 1996:
Common stock, $1 par value - 18,284,525
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Venture Stores, Inc.
Condensed Statement of Earnings
(Unaudited)
(thousands, except per share data)
13 WEEKS ENDED 26 WEEKS ENDED
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
Net Sales $ 329,423 $ 456,830 $ 680,663 $ 897,746
Costs and expenses:
Cost of merchandise
sold 246,218 348,629 506,554 680,676
Selling, general,
administrative and
other expenses 83,631 132,846 165,425 243,586
Net interest expense 6,499 4,017 12,611 7,425
Earnings (loss) before
Income taxes (6,925) (28,662) (3,927) (33,941)
Income tax provision
(benefit) (3,115) (11,321) (1,854) (13,408)
NET EARNINGS (LOSS) $ (3,810) $ (17,341) $ (2,073) $ (20,533)
Dividends on preferred
stock 625 625 1,250 1,250
NET EARNINGS (LOSS)
AVAILABLE TO COMMON
SHAREOWNERS $ (4,435) $ (17,966) $ (3,323) $ (21,783)
EARNINGS (LOSS) PER
COMMON SHARE $ (0.24) $ (1.04) $ (0.19) $ (1.26)
DIVIDENDS DECLARED PER
COMMON SHARE $ 0.000 $ 0.070 $ 0.000 $ 0.215
AVERAGE COMMON SHARES
OUTSTANDING 18,113 17,310 17,792 17,286
See accompanying Notes to Condensed Financial Statements.
Venture Stores, Inc.
Condensed Balance Sheet
(thousands)
(Unaudited) (Unaudited)
July 27, July 29, January 27,
1996 1995 1996
ASSETS
Current assets:
Cash and cash equivalents $ 20,938 $ 16,509 $ 57,465
Accounts receivable, net 13,827 10,118 14,290
Merchandise inventories 302,618 317,176 303,200
Prepaid income taxes 5,583 15,703 13,663
Other current assets 12,884 11,249 7,746
Total current assets 335,850 370,755 396,364
Property and equipment, at cost 534,552 523,285 531,763
Accumulated depreciation (161,415) (148,879) (145,212)
Property and equipment, net 373,137 374,406 386,551
Other assets 7,335 4,842 5,228
TOTAL ASSETS $ 736,322 $ 750,003 $ 788,143
LIABILITIES AND SHAREOWNERS'
INVESTMENT
Current liabilities:
Short-term debt $ 85,000 $ 35,000 $ 115,000
Current maturities of long-
term debt 4,184 3,027 3,905
Accounts payable 110,842 181,059 132,806
Accrued expenses 58,919 94,959 84,036
Total current liabilities 258,945 314,045 335,747
Long-term debt 181,292 151,195 168,529
Other liabilities 3,812 2,897 3,915
Deferred gain on sale/leaseback 19,788 21,226 20,507
Deferred income taxes 32,854 18,722 18,440
Deferred investment tax credit(ITC) - 180 56
Shareowners' investment 239,631 241,738 240,949
TOTAL LIABILITIES AND SHAREOWNERS'
INVESTMENT $ 736,322 $ 750,003 $ 788,143
See accompanying Notes to Condensed Financial Statements.
Venture Stores, Inc.
Condensed Statement of Cash Flows
(Unaudited)
(dollars in thousands, except per share)
26 WEEKS ENDED
July 27, July 29,
1996 1995
OPERATING ACTIVITIES:
Net earnings (loss) $ (2,073) $ (20,533)
Items not requiring the outlay of cash:
Depreciation and amortization 15,857 15,698
Deferred income tax and ITC 14,358 (600)
Other 279 0
Working capital and other (41,977) (52,980)
Total operating activities (13,556) (58,415)
INVESTING ACTIVITIES:
Net additions of property and equipment (5,212) (27,879)
Proceeds from sale of assets 2,617 0
Other 129 382
Total investing activities (2,466) (27,497)
FINANCING ACTIVITIES:
Repayments of long-term debt (1,958) (1,559)
Proceeds from sale/leaseback 15,000 0
Short-term borrowings (30,000) 35,000
Dividends (1,250) (4,965)
Proceeds from exercised stock options 0 571
Other (2,297) 0
Total financing activities (20,505) 29,047
DECREASE IN CASH AND CASH EQUIVALENTS (36,527) (56,865)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 57,465 73,374
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 20,938 $ 16,509
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period:
Interest $ 12,841 $ 8,015
Income taxes $ (26,382) $ 10,810
During the first quarter of 1996, the company made a non-cash contribution
of its common stock to the Venture Profit Sharing Plan, which represented
the entire 1995 company contribution. This contribution consisted of
199,985 shares of common stock with an average market price of $4.80 per
share. During the second quarter of 1996, the company granted 704,200
shares of restricted stock with a market price of $7.75 per share on the
date of grant. $472 was charged to expense in the second quarter of 1996
related to these shares of restricted stock, which will vest no later than
five years from the date of grant.
See accompanying Notes to Condensed Financial Statements.
VENTURE STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. INTERIM PRESENTATION
The accompanying unaudited condensed financial statements
should be read in conjunction with the audited financial
statements for the fiscal year ended January 27, 1996, and
the accompanying notes thereto included in the company's
1995 Annual Report to Shareowners. In the opinion of
management, this information is fairly presented and all
adjustments, of a normal, recurring nature, which are
necessary for a fair statement of the results for the
interim periods have been included; however, certain items
are included in these statements based on estimates for the
entire year. The interim operating results exclude the
Christmas season and therefore may not be indicative of the
operating results that may be expected for the full fiscal
year. Certain prior year items have been reclassified to
conform to the current year presentation.
2. Net earnings (loss) per common share are computed by
dividing net earnings (loss), after deducting preferred
dividend requirements, by the weighted average number of
common shares outstanding. Common stock equivalents had no
material dilutive effect on net earnings (loss) per common
share during the periods presented.
3. In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." This standard
requires that long-lived assets and certain intangibles and
goodwill related to those assets to be held and used be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. This standard also requires that long-lived
assets and certain identifiable intangibles to be disposed
of be reported at the lower of carrying amount or fair value
less cost to sell. In the first quarter of 1996, the
company adopted this statement and determined that no
impairment loss needs to be recognized.
4. On January 29, 1996, the company sold six store properties
for $15.0 million. Simultaneously the company entered into
a 25-year below market lease of the properties with the new
owner. The transaction was accounted for as a financing in
accordance with SFAS No. 98, "Accounting for Leases," and
the related obligation is included in long-term debt and
current maturities of long-term debt. The obligation is
being amortized over the lease term. The minimum annual
rent which the company is obligated to pay during the lease
term is $1.9 million.
5. In May 1996, the shareowners approved an amendment to the
Venture Stores, Inc. 1992 Long Term Performance Plan, to
allow for implementation of a restricted stock program for
key executives. Under the plan, incentive stock options,
nonqualified stock options, stock appreciation rights,
restricted stock, and performance awards may be granted.
Options granted under the plan will be granted at the market
price on the date of grant, have a maximum term of 10 years,
may be exercised in installments only after stated intervals
of time, and are conditioned upon continued active
employment with the company, except for periods following
retirement, disability or death. Restricted stock grants
may be issued at a purchase price less than market price on
the date of grant, or as a bonus, and may be subject to
restrictions, conditions, terms and/or performance goals
such as return on net assets, earnings per share, share
price change, return on equity, free cash flow per share and
operating earnings. A maximum of 1.5 million shares of
common stock may be issued under the plan. On May 24, 1996,
704,200 shares of restricted stock were granted under the
plan.
6. On June 28, 1996, the company terminated its unsecured
credit facility with several domestic and foreign banks and
entered into an agreement with BankAmerica Business Credit,
Inc., as agent, and a syndicate of financial institutions
for a secured revolving credit facility (the "Credit
Facility") consisting of revolving credit loans and letters
of credit of up to $225 million in the aggregate, with a
sublimit of $125 million for letters of credit. The Credit
Facility is in effect until June 27, 1999, and is secured by
the inventory, equipment, and substantially all other assets
of the company, excluding real estate and certain property
under leases. The Credit Facility requires the company to
meet certain quarterly covenants, including a fixed charge
coverage ratio. Under the terms of the Credit Facility, the
company is prohibited from paying dividends on its common
stock. As of July 27, 1996, the company was in compliance
with these covenants.
Interest on borrowings under the Credit Facility is payable
based on multiple rate options. Additionally, the company
is required to pay certain unused line fees and letter of
credit fees.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Second quarter 1996 sales were $329.4 million, down 27.9% from
$456.8 million during the same period in 1995. Comparable store
sales for the second quarter declined 23.1%. For the 26 weeks
ended July 27, 1996, sales were $680.7 million, a decrease of
24.2% from $897.7 million in the 26 weeks ended July 29, 1995.
Total sales for the second quarter and year-to-date were
negatively impacted by the closing of six stores on March 30,
1996 and the conversion of four stores to temporary chain-wide
clearance centers. The company reopened one clearance center in
Houston, Texas as a family value store on June 7, 1996, and
reopened four stores in Indianapolis (two which were operating as
clearance centers and two which were closed) on July 31, 1996.
Sales for both periods of 1996 were also negatively impacted by
the elimination or reduction of historically low-margin product
lines, including certain categories of hardware, automotive, and
sporting goods, in connection with the company's margin based
repositioning strategy. The company's plans reflect a store-for-
store sales decline for the third and fourth quarters of 1996.
Loss per common share for the second quarter and year-to-date
periods of 1996 was $0.24 and $0.19, respectively, compared with
loss per common share of $1.04 and $1.26 for the comparable 1995
periods. Net loss applicable to common shareowners was $4.4
million and $3.3 million for the second quarter and first 26
weeks of 1996, respectively, as compared with net loss applicable
to common shareowners of $18.0 million and $21.8 million for the
comparable 1995 periods. The first 26 weeks of 1996 included a
pre-tax gain from a real estate transaction of $2.1 million, or
$0.07 per share, related to the reduction of recorded reserves on
a closed store due to the property being subleased, subject to
the landlord's approval.
Second quarter of 1995 included nonrecurring charges of $16.0
million ($9.7 million after-tax or $0.56 per share) incurred in
connection with the August 1995 closing of three stores and the
company's expense reduction and repositioning programs. These
nonrecurring charges are included in selling, general,
administrative and other expenses. Year-to-date 1995 included
nonrecurring charges of $19.6 million ($11.9 million after-tax or
$0.69 per share) to complete the image builder program and for
the store closings, expense reduction, and repositioning
programs. Of the year-to-date amount, $0.3 million is included
in cost of merchandise sold and $19.3 million is included in
selling, general, administrative and other expenses.
The components of the net earnings (loss) as a percent of sales
were as follows:
13 Weeks Ended 26 Weeks Ended
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of merchandise sold
(before LIFO charge) 74.9 76.2 74.4 75.7
LIFO charge (0.2) 0.1 0.0 0.1
Gross margin 25.3 23.7 25.6 24.2
Selling, general, admin.
and other expenses 25.4 29.1 24.3 27.2
Operating income (loss) (0.1) (5.4) 1.3 (3.0)
Net interest expense 2.0 0.9 1.9 0.8
Loss before income taxes (2.1) (6.3) (0.6) (3.8)
Income tax benefit (0.9) (2.5) (0.3) (1.5)
Net earnings (loss) (1.2)% (3.8)% (0.3)% (2.3)%
Gross margin as a percent of sales increased during the second
quarter and first 26 weeks of 1996 over the same periods from the
prior year primarily due to an increase in sales of higher margin
softline items as a percentage of sales, the exiting or
downsizing of historically low-margin product lines and expansion
of merchandise assortments in home, family apparel, and leisure
categories as part of the repositioning, and reduced permanent
markdowns in the 1996 periods.
The second quarter of 1996 included a LIFO credit of $0.5
million, compared with a LIFO charge of $0.4 million in the
second quarter of 1995. For the first 26 weeks of 1996, LIFO was
$0.0 million, compared with a LIFO charge of $0.4 million for the
same period in 1995.
Selling, general, administrative and other expenses as a percent
of sales decreased in the second quarter and year-to-date periods
of 1996 compared to the second quarter and year-to-date periods
of 1995, largely due to the company's expense reduction and
stringent cost control efforts. Payroll and payroll taxes
decreased $23.7 million and $41.1 million in the second quarter
and first 26 weeks of 1996 over the same periods of 1995 as a
result of the reduction of the workforce by approximately 950
positions during the second quarter of 1995, the elimination of
390 sales support positions in connection with a realignment of
the company's store organization in the first quarter of 1996,
and the decrease in the number of stores from the quarter and
year-to-date periods of 1995 to the same periods in 1996. As
previously discussed, selling, general, administrative and other
expenses for the second quarter and year-to-date periods of 1995
included nonrecurring charges of $9.7 million and $19.3 million,
respectively. Other factors contributing to the decrease in
selling, general, administrative and other expenses were a
decrease in retirement expense as a result of the suspension of
benefit accruals under the retirement plan as of January 1, 1996
and reduction of certain previously provided benefit accruals, a
decrease in insurance expense resulting from the reduction in the
workforce and the reduction of certain insurance accruals no
longer required, the reduction of recorded reserves on a closed
store due to the property being subleased as described above, and
a decrease in credit card fees paid due to the decline in sales.
Net interest expense increased during the second quarter and
first 26 weeks of 1996 compared to the same periods in 1995 due
to the increase in short-term borrowings and the financing
obligation resulting from the sale/leaseback transactions in the
fourth quarter of 1995 and the first quarter of 1996.
FINANCIAL CONDITION
On June 28, 1996, the company terminated its unsecured credit
facility with several domestic and foreign banks and entered into
an agreement with BankAmerica Business Credit, Inc., as agent,
and a syndicate of financial institutions for a secured revolving
credit facility (the "Credit Facility") consisting of revolving
credit loans and letters of credit of up to $225 million in the
aggregate, with a sublimit of $125 million for letters of credit.
The Credit Facility is in effect until June 27, 1999, and is
secured by the inventory, equipment, and substantially all other
assets of the company, excluding real estate and certain property
under leases. The Credit Facility requires the company to meet
certain financial covenants, including a minimum fixed charge
coverage ratio. Under the terms of the Credit Facility, the
company is prohibited from paying dividends on its common stock.
As of July 27, 1996, the company was in compliance with these
covenants.
Interest on borrowings under the Credit Facility is payable based
on multiple rate options. Additionally, the company is required
to pay certain unused line fees and letter of credit fees.
The company's debt-to-capitalization ratio (including the present
value of operating leases) was 64.4% at July 27, 1996 compared to
62.0% at the end of the second quarter of 1995 and 66.3% at year-
end 1995.
During the first quarter of 1996, the company completed a
sale/leaseback of six store properties for $15.0 million. The
sale/leaseback was accounted for as a financing transaction in
accordance with Statement of Financial Accounting Standards No.
98, "Accounting for Leases", because of the below market rents.
The proceeds from the sale/leaseback were used to meet working
capital and capital expenditure needs associated with the
repositioning and for other corporate purposes. The obligation
from the sale/leaseback is included in long-term debt and current
maturities of long-term debt, causing the increase in long-term
debt between year-end 1995 and July 1996.
Long-term debt increased between the second quarters of 1995 and
1996 primarily due to obligations from the $15.0 million
sale/leaseback in the first quarter of 1996 and the $25.0 million
sale/leaseback of 10 store properties in the fourth quarter of
1995, net of a $5.0 million prepayment under the terms of an
amendment to the company's secured loan agreement with Principal
Mutual Life Insurance Company in 1995 and other regularly-
scheduled maturities of long-term debt and capital leases.
The increase in short-term debt and decrease in accounts payable
at July 27, 1996 compared with July 29, 1995 reflect the
company's greater reliance on short-term debt to fund working
capital as a result of reduced sales and the net loss. The
decrease in accounts payable is primarily due to a reduction in
receipts of merchandise in the current year compared to last year
based on the company's sales trend.
The increase in non-current deferred income taxes resulted
primarily from the sale/leaseback of 16 store properties in 1995
and 1996. For book purposes, the sale/leaseback transactions
were recorded under the financing method with no gain or loss
recognized. The properties continue to be reported as assets on
the books of the company. As future book depreciation is
recorded on the sale/leaseback assets, the related deferred
income tax liability will be reduced. The decrease in prepaid
income taxes in 1996 over year-end 1995 is primarily the result
of the company receiving a tax refund for the 1995 tax year in
the first quarter of 1996, offset by the change in deferred taxes
discussed above. The decrease in prepaid income taxes in July
1996 over July 1995 is due primarily to a larger net operating
loss in the first two quarters of 1995.
The decrease in accrued expenses in the second quarter of 1996
over year-end 1995 is largely due to a $11.8 million reduction in
the accrued liabilities for construction in process related
principally to remodeling and refixturing for the repositioning
which was completed in the first quarter of 1996 and a $6.5
million decrease in reserves related to store closings. A
decrease in accrued severance costs and a decrease in payroll,
benefit, and insurance accruals resulting from the reduced
workforce and the suspension of benefit accruals under the
retirement plan also contributed to the decrease in accrued
expenses in the second quarter of 1996 over year end 1995. The
decrease in accrued expenses in the second quarter of 1996 over
the second quarter of 1995 is primarily due to a $10.7 million
decrease in payroll, benefit, and insurance accruals resulting
from the reduced workforce and the suspension of benefit accruals
under the retirement plan, a $17.0 million decrease in reserves
related to store closings, a $4.9 million decrease in real estate
and personal property taxes, and a $1.4 million decrease in the
accrual for nonrecurring costs in connection with the image
builder program.
A $3.2 million increase in prepaid advertising expense and a $1.0
million increase in deferred preopening expenses for stores that
will reopen in 1996 contributed to most of the increase in other
current assets from year end 1995.
The capital expenditure budget totals approximately $18.0 million
for 1996, including approximately $2.5 million to open one new
store in the fall of 1996. The decline in capital expenditures
from $27.9 million in the first 26 weeks of 1995 to $5.2 million
in the first 26 weeks in 1996 is primarily due to the fact that
there were no new store openings in the first two quarters of the
current year. Two stores were opened in the first quarter of
1995 (one in Houston and one in Amarillo, Texas)and two stores
were opened during the second quarter of 1995 (one in Fort Worth
and one in Houston, Texas). Six stores were closed in the first
quarter of 1996 (three in Indianapolis, one in Chicago, one in
Houston, and one in Champaign, Illinois), and four stores (two in
Indianapolis, one in Chicago, and one in Houston) were converted
to clearance center formats temporarily to facilitate the
conversion to a family value store. During the second quarter of
1996, the company reopened the clearance center in Houston,
Texas, as a family value store. Subsequent to the second quarter
of 1996, the company reopened four stores in Indianapolis (two of
which were operating as clearance centers and two of which were
closed) as family value stores. The company plans to reopen one
store in Houston in the fall of 1996.
PART II - OTHER INFORMATION
Item 2. Changes in Securities
On June 28, 1996, the company entered into an agreement with
BankAmerica Business Credit, Inc., as agent, and a syndicate of
financial institutions for a secured revolving credit
facility,(the "Credit Facility"), which prohibits the payment of
cash dividends on the company's common stock. The credit
facility expires June 27, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 Loan and Security Agreement, dated as of June 28,
1996, between the company and BankAmerica Business
Credit, Inc. as Agent
11 Computation of Earnings per Common Share
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended July 27, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
VENTURE STORES, INC.
(Registrant)
Date: September 9, 1996 By:\s\Eugene Caldwell
Eugene Caldwell
Senior Vice President
Chief Financial Officer
Exhibit Index
Exhibit No. Description
10 Loan and Security Agreement, dated as of
June 28, 1996, between the company and and
BankAmerica Business Credit, Inc. as Agent
11 Computation of Earnings per Common Share
27 Financial Data Schedule
EXECUTION COPY
LOAN AND SECURITY AGREEMENT
Dated as of June 28, 1996
among
VENTURE STORES, INC.
as the Borrower
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Agent
TABLE OF CONTENTS
Section Page
ARTICLE 1 INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . .1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . 21
1.3 Other Terms. . . . . . . . . . . . . . . . . . . . . 21
1.4 Computation of Time Periods. . . . . . . . . . . . . 22
ARTICLE 2 LOANS AND LETTERS OF CREDIT
2.1 Revolving Loans. . . . . . . . . . . . . . . . . . . 22
2.2 Letters of Credit. . . . . . . . . . . . . . . . . . 30
ARTICLE 3 INTEREST AND FEES
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . 38
3.2 Conversion or Continuation . . . . . . . . . . . . . 39
3.3 Special Provisions Governing LIBOR Loans . . . . . . 40
3.4 Maximum Interest Rate. . . . . . . . . . . . . . . . 43
3.5 Closing Fee. . . . . . . . . . . . . . . . . . . . . 44
3.6 Unused Line Fee. . . . . . . . . . . . . . . . . . . 44
3.7 Letter of Credit Fee . . . . . . . . . . . . . . . . 44
3.8 Agency Fee . . . . . . . . . . . . . . . . . . . . . 45
3.9 Audit Fees . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 4 PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans. . . . . . . . . . . . . . . . . . . 45
4.2 Termination of Revolver Facility . . . . . . . . . . 45
4.3 Reduction of Revolver Facility . . . . . . . . . . . 46
4.4 Place and Form of Payments; Extension of Time. . . . 46
4.5 Payments as Revolving Loans. . . . . . . . . . . . . 46
4.6 Apportionment, Application and Reversal of Payments. 47
4.7 Indemnity for Returned Payments. . . . . . . . . . . 48
4.8 Increased Capital. . . . . . . . . . . . . . . . . . 48
4.9 Register; Agent's and Lenders' Books and Records;
Monthly Statements . . . . . . . . . . . . . . . . . 49
ARTICLE 5 COLLATERAL
5.1 Grant of Security Interest . . . . . . . . . . . . . 49
5.2 Perfection and Protection of Security Interest . . . 51
5.3 Location of Collateral . . . . . . . . . . . . . . . 52
5.4 Title to, Liens on, and Sale and Use of Collateral . 52
5.5 Appraisals . . . . . . . . . . . . . . . . . . . . . 53
5.6 Access and Examination; Confidentiality. . . . . . . 53
5.8 Collection of Accounts; Payments . . . . . . . . . . 55
5.9 Inventory. . . . . . . . . . . . . . . . . . . . . . 56
5.10 Equipment . . . . . . . . . . . . . . . . . . . . . 56
5.11 Assigned Contracts. . . . . . . . . . . . . . . . . 57
5.12 Documents, Instruments, and Chattel Paper . . . . . 58
5.13 Right to Cure . . . . . . . . . . . . . . . . . . . 58
5.14 Power of Attorney . . . . . . . . . . . . . . . . . 59
5.15 The Agent's and Lenders' Rights, Duties and
Liabilities 59
ARTICLE 6 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
6.1 Books and Records. . . . . . . . . . . . . . . . . . 60
6.2 Financial Information. . . . . . . . . . . . . . . . 60
6.3 Notices to the Lenders . . . . . . . . . . . . . . . 63
ARTICLE 7 GENERAL WARRANTIES AND REPRESENTATIONS
7.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents . . . . . . . . . . 66
7.2 Validity and Priority of Security Interest . . . . . 67
7.3 Organization and Qualification . . . . . . . . . . . 67
7.4 Corporate Name; Prior Transactions . . . . . . . . . 67
7.5 Affiliates . . . . . . . . . . . . . . . . . . . . . 67
7.6 Financial Statements and Projections . . . . . . . . 67
7.7 Capitalization . . . . . . . . . . . . . . . . . . . 68
7.8 Solvency . . . . . . . . . . . . . . . . . . . . . . 68
7.9 Debt . . . . . . . . . . . . . . . . . . . . . . . . 68
7.10 Distributions . . . . . . . . . . . . . . . . . . . 68
7.11 Title to Property . . . . . . . . . . . . . . . . . 68
7.12 Real Estate; Leases . . . . . . . . . . . . . . . . 69
7.13 Proprietary Rights. . . . . . . . . . . . . . . . . 69
7.14 Trade Names . . . . . . . . . . . . . . . . . . . . 69
7.15 Litigation. . . . . . . . . . . . . . . . . . . . . 69
7.16 Restrictive Agreements. . . . . . . . . . . . . . . 69
7.17 Labor Disputes. . . . . . . . . . . . . . . . . . . 70
7.18 Environmental Laws. . . . . . . . . . . . . . . . . 70
7.19 No Violation of Law . . . . . . . . . . . . . . . . 72
7.20 No Default. . . . . . . . . . . . . . . . . . . . . 72
7.21 ERISA . . . . . . . . . . . . . . . . . . . . . . . 72
7.22 Taxes . . . . . . . . . . . . . . . . . . . . . . . 74
7.23 Investment Company Act, etc.. . . . . . . . . . . . 74
7.24 Public Utility Holding Company. . . . . . . . . . . 75
7.25 Margin Securities . . . . . . . . . . . . . . . . . 75
7.26 Broker's Fees . . . . . . . . . . . . . . . . . . . 75
7.27 No Material Adverse Change. . . . . . . . . . . . . 75
7.28 Bank Accounts . . . . . . . . . . . . . . . . . . . 75
ARTICLE 8 AFFIRMATIVE AND NEGATIVE COVENANTS
8.1 Taxes and Other Obligations. . . . . . . . . . . . . 75
8.2 Corporate Existence and Good Standing. . . . . . . . 76
8.3 Compliance with Law and Agreements . . . . . . . . . 76
8.4 Maintenance of Property. . . . . . . . . . . . . . . 76
8.5 Insurance. . . . . . . . . . . . . . . . . . . . . . 76
8.6 Condemnation . . . . . . . . . . . . . . . . . . . . 77
8.7 Environmental Laws . . . . . . . . . . . . . . . . . 77
8.8 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 78
8.9 Mergers, Consolidations, Acquisitions, or Sales. . . 79
8.10 Distributions; Capital Change . . . . . . . . . . . 79
8.11 Transactions Affecting Collateral or Obligations. . 79
8.12 Guaranties. . . . . . . . . . . . . . . . . . . . . 79
8.13 Debt. . . . . . . . . . . . . . . . . . . . . . . . 79
8.14 Prepayment. . . . . . . . . . . . . . . . . . . . . 80
8.15 Transactions with Affiliates. . . . . . . . . . . . 80
8.16 Investment Banking and Finder's Fees. . . . . . . . 80
8.17 Business Conducted. . . . . . . . . . . . . . . . . 81
8.18 Liens . . . . . . . . . . . . . . . . . . . . . . . 81
8.19 Subsidiaries. . . . . . . . . . . . . . . . . . . . 81
8.20 Restricted Investments. . . . . . . . . . . . . . . 81
8.21 Fixed Charge Coverage Ratio . . . . . . . . . . . . 81
8.22 Fiscal Year . . . . . . . . . . . . . . . . . . . . 82
8.23 Further Assurances. . . . . . . . . . . . . . . . . 82
ARTICLE 9 CONDITIONS OF LENDING
9.1 Conditions Precedent to Making of Loans on the Closing
Date . . . . . . . . . . . . . . . . . . . . . . . . 82
9.2 Conditions Precedent to Each Loan. . . . . . . . . . 84
ARTICLE 10 DEFAULT; REMEDIES
10.1 Events of Default . . . . . . . . . . . . . . . . . 85
10.2 Remedies. . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE 11 TERM AND TERMINATION
11.1 Term and Termination. . . . . . . . . . . . . . . . 90
ARTICLE 12 AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS;
SUCCESSORS
12.1 No Implied Waivers. . . . . . . . . . . . . . . . . 91
12.2 Amendments and Waivers. . . . . . . . . . . . . . . 91
12.3 Assignments; Participations . . . . . . . . . . . . 92
12.4 Binding Effect; Assignment. . . . . . . . . . . . . 95
ARTICLE 13 THE AGENT
13.1 Appointment . . . . . . . . . . . . . . . . . . . . 96
13.2 Nature of Duties. . . . . . . . . . . . . . . . . . 96
13.3 Rights, Exculpation, Etc. . . . . . . . . . . . . . 97
13.4 Reliance. . . . . . . . . . . . . . . . . . . . . . 98
13.5 Indemnification of the Agent by the Lenders . . . . 98
13.6 Agent in Individual Capacity. . . . . . . . . . . . 98
13.7 Successor Agent . . . . . . . . . . . . . . . . . . 98
13.8 Collateral Matters. . . . . . . . . . . . . . . . . 99
13.9 Restrictions on Actions by Lenders; Sharing of
Payments . . . . . . . . . . . . . . . . . . . . . .100
13.10 Agency for Perfection. . . . . . . . . . . . . . .101
13.11 Payments by Agent to Lenders.. . . . . . . . . . .101
13.12 Concerning the Collateral and the Related Loan
Documents. . . . . . . . . . . . . . . . . . . . . .102
13.13 Field Audit Reports; Disclaimers by Lenders. . . .102
13.14 Relations Among Lenders. . . . . . . . . . . . . .103
ARTICLE 14 MISCELLANEOUS
14.1 Cumulative Remedies; No Prior Recourse to
Collateral . . . . . . . . . . . . . . . . . . . .103
14.2 Severability. . . . . . . . . . . . . . . . . . . .103
14.3 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver. . . . . . . . . . . . . . . . . .103
14.4 Survival of Representations and Warranties. . . . .105
14.5 Other Security and Guaranties . . . . . . . . . . .105
14.6 Fees and Expenses . . . . . . . . . . . . . . . . .105
14.7 Notices . . . . . . . . . . . . . . . . . . . . . .106
14.8 Indemnity of the Agent and the Lenders by the
Borrower 106
14.9 Limitation of Liability . . . . . . . . . . . . . .107
14.10 Waiver of Notices. . . . . . . . . . . . . . . . .107
14.11 Final Agreement; No Strict Construction. . . . . .108
14.12 Counterparts . . . . . . . . . . . . . . . . . . .108
14.13 Captions . . . . . . . . . . . . . . . . . . . . .108
14.14 Right of Set-Off . . . . . . . . . . . . . . . . .108
14.15 Taxes. . . . . . . . . . . . . . . . . . . . . . .108
EXHIBITS AND SCHEDULES
EXHIBIT A - Form of Borrowing Base Certificate
EXHIBIT B-1 - Financial Statements
EXHIBIT B-2 - Latest Projections
EXHIBIT C - List of Closing Documents
EXHIBIT D - Form of Notice of Borrowing
EXHIBIT E - Form of Notice of
Conversion/Continuation
EXHIBIT F - Form of Assignment and Acceptance
EXHIBIT G - Form of Shipper Guaranty Letter
SCHEDULE 2.1 - Accounts for Revolving Loans; Authorized
Officers
SCHEDULE 5.3 - Locations of Collateral
SCHEDULE 7.2 - Permitted Liens
SCHEDULE 7.4 - Trade Names
SCHEDULE 7.5 - Affiliates
SCHEDULE 7.9 - Debt
SCHEDULE 7.12 - Real Property and Leases; Permitted
Sales
SCHEDULE 7.12(a) - Lease Defaults
SCHEDULE 7.13 - Proprietary Rights
SCHEDULE 7.15 - Material Litigation
SCHEDULE 7.17 - Labor Contracts and Disputes
SCHEDULE 7.18 - Environmental Matters
SCHEDULE 7.21 - Employee Benefit Plans
SCHEDULE 7.22 - Taxes
SCHEDULE 7.28 - Bank Accounts
SCHEDULE 13.11 - Lender' Payment Instructions
SCHEDULE 14.7 - Notice Addresses
This LOAN AND SECURITY AGREEMENT (the "Agreement") is
dated as of June 28, 1996 among VENTURE STORES, INC., a Delaware
corporation, with an office at 2001 East Terra Lane, O'Fallon,
Missouri 63366-0110 (the "Borrower"), the financial institutions
named on the signature pages of this Agreement as "Lenders" (such
financial institutions and their respective successors and
assigns being sometimes hereinafter referred to collectively as
the "Lenders" and each of such financial institutions and its
successors and assigns being sometimes hereinafter referred to
individually as a "Lender"), and BANKAMERICA BUSINESS CREDIT,
INC., a Delaware corporation ("BABC"), with an office located at
55 West Monroe Street, Chicago, Illinois 60603, as agent for the
Lenders (in such capacity as agent, the "Agent"). In
consideration of the mutual conditions and agreements set forth
in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the Borrower, the
Lenders and the Agent hereby agree as follows:
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
"Accounts" means all of the Borrower's now owned or
hereafter acquired or arising accounts, contract rights, and any
other rights to payment for the sale or lease of goods or
rendition of services, whether or not they have been earned by
performance, excluding any such accounts, contract rights, or
rights to payment arising under leases or subleases of real
property and any other interest in real property.
"Adjusted Net Earnings from Operations" means, with
respect to any fiscal period of the Borrower, the net income of
the Borrower after provision for income taxes for such fiscal
period, as determined in accordance with GAAP and reported on the
Financial Statements for such fiscal period, less any and all of
the following included in such net income: (a) gain or loss
arising from the sale of any capital asset; (b) gain arising from
any write-up in the book value of any asset; (c) earnings of any
corporation, substantially all the assets of which have been
acquired in any manner, or which has merged or otherwise
consolidated with and into the Borrower to the extent realized by
such other corporation prior to the date of such acquisition,
merger or consolidation; (d) earnings of any business entity in
which the Borrower has an ownership interest unless (and only to
the extent) such earnings shall actually have been received by
the Borrower in the form of cash distributions; (e) earnings of
any Person to which assets of the Borrower shall have been sold,
transferred or disposed of, or into which the Borrower shall have
been merged, or which has been a party with the Borrower to any
consolidation or other form of reorganization in which the
Borrower is not the surviving entity, after the date of such
transaction; (f) gain arising from the acquisition of debt or
equity Securities of the Borrower or from cancellation or
forgiveness of Debt; and (g) gain arising from extraordinary
items, as determined in accordance with GAAP.
"Affiliate" means: (a) any Person which, directly or
indirectly, controls, is controlled by or is under common control
with, the Borrower; (b) any Person which beneficially owns or
holds, directly or indirectly, five percent (5.0%) or more of any
class of Voting Stock of the Borrower; or (c) any Person, five
percent (5.0%) or more of any class of the Voting Stock (or if
such Person is not a corporation, five percent (5.0%) or more of
the equity interest) of which is beneficially owned or held,
directly or indirectly, by the Borrower. Control (including,
with correlative meanings, the terms "controlled by" and "under
common control with"), as used herein, means the possession,
directly or indirectly, of the power in any form to direct or
cause the direction of the management and policies of the Person
in question.
"Agent" means BABC, in its capacity as agent for the
Lenders, and shall include any successor Agent appointed pursuant
to Section 13.7.
"Agent Advances" has the meaning specified in Section
2.1(i).
"Agent's Liens" means the Liens granted to the Agent,
for the ratable benefit of the Agent and the Lenders, pursuant to
this Agreement and the other Loan Documents.
"Aggregate Revolver Outstandings" means, at any time:
the sum of (a) the unpaid balance of Revolving Loans, (b) the
aggregate amount of Pending Revolving Loans, (c) one hundred
percent (100%) of the aggregate undrawn face amount of all
outstanding Letters of Credit, and (d) the aggregate amount of
any unpaid reimbursement obligations in respect of Letters of
Credit.
"Anniversary Date" means each anniversary of the
Closing Date.
"Applicable LIBOR Margin" means at any date of
determination, the rate per annum set forth in the chart below
which corresponds to the Leverage Ratio below as at the end of
the most recently ended fiscal quarter for which Financial
Statements have been provided:
Applicable
Leverage Ratio LIBOR Margin
Greater than 5.50 to 1 2.25%
Equal to or less than
5.50 to 1, but greater
than or equal to 4.50 to 1 2.125%
Less than 4.50 to 1 2.00%
The Applicable LIBOR Margin initially shall be 2.25%, and after
each fiscal quarter, commencing with the fiscal quarter ending
nearest to July 31, 1997, shall be adjusted, if applicable, as
provided in Section 3.01(b) by reference to the table set forth
above on the basis of the Leverage Ratio.
"Applicable Margins" means the Applicable LIBOR Margin
and the Applicable Reference Rate Margin.
"Applicable Reference Rate Margin" mean, at any date of
determination, the rate per annum set forth in the chart below
which corresponds to the Leverage Ratio below as at the end of
the most recently ended fiscal quarter for which Financial
Statements have been provided:
Applicable Reference
Ratio Rate Margin
Greater than 5.50 to 1 0.50%
Equal to or less than 5.50
to, but greater than or
equal to 4.50 to 1 0.375%
Less than 4.50 to 1 0.25%
The Applicable Reference Rate Margin initially shall be .50%, and
after each fiscal quarter, commencing with the fiscal quarter
ending nearest to July 31, 1997, shall be adjusted, if
applicable, as provided in Section 3.1(b) by reference to the
table set forth above on the basis of the Leverage Ratio.
"Assigned Contracts" means, collectively, all of the
Borrower's rights and remedies under, and all moneys and claims
for money due or to become due to the Borrower under, any
material contracts to which it is a party or otherwise has rights
and any and all amendments, supplements, extensions, and renewals
thereof including, without limitation, all rights and claims of
the Borrower now or hereafter existing: (i) under any insurance,
indemnities, warranties, and guarantees provided for or arising
out of or in connection with any of the foregoing agreements;
(ii) for any damages arising out of or for breach or default
under or in connection with any of the foregoing agreements;
(iii) to all other amounts from time to time paid or payable
under or in connection with any of the foregoing agreements; or
(iv) to exercise or enforce any and all covenants, remedies,
powers and privileges thereunder; provided, that notwithstanding
the foregoing, the Assigned Contracts shall not include any of
the Borrower's claims, rights and remedies under, or any interest
in, a contract if the assignment of such rights as contemplated
by this Agreement would result or could result with the giving of
notice or the passage of time, in a breach or termination of such
contract or a related contract, and any claims, rights or
remedies under, or any interest in, any contract for the
purchase, sale, lease, sublease or license of real property.
"Assignment and Acceptance" has the meaning specified
in Section 12.3(a).
"Availability" means, at any time, (a) the Maximum
Revolver Amount at such time minus (b) the Aggregate Revolver
Outstandings at such time. In determining pursuant to Sections
2.1(a), 2.1(g) or 2.1(h) whether Revolving Loans to be made on
any date would exceed Availability on such date, such proposed
Revolving Loans shall be counted as either Revolving Loans or
Pending Revolving Loans for purposes of calculating Availability
on such date, but shall not be counted as both Revolving Loans
and Pending Revolving Loans.
"BABC Revolving Loan" and "BABC Revolving Loans" have
the meanings specified in Section 2.1(h).
"Bank of America" means Bank of America National Trust
and Savings Association, a national banking association, or any
successor entity thereto.
"Bankruptcy Code" means Title 11 of the United States
Code (11 U.S.C. Section 101 et seq.).
"Base LIBO Rate" means, during any Interest Period, the
rate of interest per annum (rounded upward to the nearest whole
multiple of 1/16 of 1%, if such rate is not such a multiple)
equal to the rate of interest notified to the Agent by Bank of
America at which Dollar deposits in the approximate amount of the
Loans to be made or continued as, or converted into, LIBOR Loans
for such Interest Period and having a maturity comparable to such
Interest Period would be offered by the London lending office of
Bank of America in the London interbank market at approximately
11:00 a.m. (London time) two (2) Business Days prior to the
commencement of such Interest Period.
"Benefit Plan" means a defined benefit plan as defined
in Section 3(35) of ERISA (other than a Multiemployer Plan) in
respect of which the Borrower or an ERISA Affiliate is, or within
the immediately preceding six (6) years was, an "employer" as
defined in Section 3(5) of ERISA; provided, however that solely
for purposes of the disclosures required on Schedule 7.21,
"Benefit Plan" shall mean any such defined benefit plan in
respect of which the Borrower or an ERISA Affiliate is, or within
the immediately preceding five (5) years was, such an "employer".
"Blocked Account" means each blocked bank account
established pursuant to Section 5.8, to which funds of the
Borrower (including without limitation, proceeds of Accounts and
other Collateral) are deposited or credited, and the terms of
which are governed by a Blocked Account Agreement.
"Blocked Account Agreement" means a collection account
agreement or similar agreement between the Borrower and a Blocked
Account Bank, or among the Borrower, a Blocked Account Bank and
the Agent, which governs the terms of the Blocked Account on
terms acceptable to the Agent, and which provides that upon
notice from the Agent, all amounts deposited or otherwise
credited to such Blocked Account shall be wire transferred on a
daily basis to, or at the direction of, the Agent.
"Blocked Account Bank" means each bank at which a
Blocked Account is maintained.
"Borrowing" means a borrowing consisting of Reference
Rate Loans or LIBOR Loans made on the same day by the Lenders (or
by BABC in the case of a Borrowing funded by BABC Revolving
Loans) or by the Agent in the case of a Borrowing consisting of
an Agent Advance.
"Borrowing Base" means, at any time, (a) the lesser of
(1) sixty percent (60%) and (2) the GOB Percentage, of the amount
of Eligible Inventory at such time, minus (b) the advertising
load and transfer freight relating to inventory reflected on the
books of the Borrower at such time.
"Borrowing Base Certificate" means a certificate of the
chief financial officer of the Borrower substantially in the form
of Exhibit A (or another form mutually acceptable to the Agent
and the Borrower) setting forth calculations of the Borrowing
Base, including a calculation of each component thereof, as of
the close of business of the immediately preceding week, all in
such detail as shall be satisfactory to the Agent. All
calculations of the Borrowing Base in connection with the
preparation of any Borrowing Base Certificate shall originally be
made by the Borrower and certified to the Agent; provided, that
the Agent shall have the right to review and adjust, in the
exercise of its credit judgment, any such calculation (1) to
reflect its reasonable estimate of declines in value of any of
the Collateral described therein, and (2) to the extent that such
calculation is not in accordance with this Agreement.
"Business Day" means (a) any day that is not a
Saturday, Sunday, or a day on which banks in Chicago, Illinois
are required or permitted to be closed, and (b) with respect to
all notices, determinations, fundings and payments in connection
with the LIBO Rate or LIBOR Loans, any day that is a Business Day
pursuant to clause (a) above and that is also a day on which
trading is carried on by and between banks in the London
interbank market.
"Capital Expenditures" means, for any fiscal period,
the cost of any fixed asset or improvement, or replacement,
substitution, or addition thereto, acquired during such period
having a useful life of more than one year and which, in
accordance with GAAP, is or should be reflected as a capital
expenditure on the financial statements of the Borrower,
including, without limitation, those costs arising in connection
with the direct or indirect acquisition of such assets by way of
increased product or service charges or offset items or in
connection with a Capital Lease.
"Capital Lease" means any lease of property by the
Borrower which, in accordance with GAAP, is or should be
reflected as a capital lease on the balance sheet of the
Borrower.
"Closing Date" means the date on which the initial
Revolving Loans are made hereunder.
"Closing Fee" has the meaning specified in Section 3.5.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute.
"Collateral" has the meaning specified in Section 5.1.
"Commitment" means, at any time with respect to a
Lender, the principal amount set forth beside such Lender's name
under the heading "Commitment" on the signature pages of this
Agreement or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 12.3, as
such Commitment may be adjusted from time to time in accordance
with the provisions of Section 12.3, and "Commitments" means,
collectively, the aggregate amount of the commitments of all of
the Lenders.
"Compliance Certificate" has the meaning specified in
Section 6.2(e).
"Contaminant" means any pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or
petroleum-derived substance or waste, asbestos in any form or
condition or polychlorinated biphenyls ("PCBs").
"Copyright and Trademark Agreements" means the
Copyright Security Agreement and the Trademark Security
Agreement, each dated as of the date hereof, executed and
delivered by the Borrower to the Agent pursuant to Section 5.2 to
evidence and perfect the Agent's security interest in the
Borrower's present and future copyrights, trademarks, and related
licenses and rights, for the benefit of the Agent and the
Lenders.
"Credit Support" has the meaning specified in
Section 2.2(a).
"Debt" means all liabilities, obligations and indebted-
ness of the Borrower to any Person, of any kind or nature, now or
hereafter owing, arising, due or payable, howsoever evidenced,
created, incurred, acquired or owing, whether primary, secondary
or direct, and including, without in any way limiting the
generality of the foregoing: (i) the Borrower's liabilities and
obligations to trade creditors; (ii) all of the Obligations;
(iii) all of the Borrower's obligations for borrowed money;
(iv) all obligations and liabilities of any Person secured by any
Lien on the Borrower's property, even though the Borrower shall
not have assumed or become liable for the payment thereof;
(v) all obligations or liabilities created or arising under any
Capital Lease or conditional sale or other title retention
agreement with respect to property used or acquired by the
Borrower, even if the rights and remedies of the lessor, seller
or lender thereunder are limited to repossession of such
property; and (vi) all obligations and liabilities under
Guaranties.
"Default" means any event or condition which would
constitute an Event of Default if any requirement in connection
therewith for the giving of notice or the lapse of time, or both,
had been satisfied.
"Default Rate" means a fluctuating per annum interest
rate at all times equal to the sum of (a) the Reference Rate plus
(b) two and one-half percent (2.50%). The Default Rate shall be
adjusted simultaneously with any change in the Reference Rate.
"Defaulting Lender" has the meaning specified in
Section 2.1(g)(ii).
"Distribution" means, in respect of any corporation:
(a) the payment or making of any dividend or other distribution
of property in respect of capital stock (or any options or
warrants for such stock) of such corporation, other than
distributions in capital stock (or any options or warrants for
such stock) of the same class; or (b) the redemption or other
acquisition of any capital stock (or any options or warrants for
such stock) of such corporation.
"DOL" means the United States Department of Labor or
any successor department or agency.
"Dollar" and "$" means dollars in the lawful currency
of the United States.
"EBITDA" means, with respect to any fiscal period of
the Borrower, Adjusted Net Earnings from Operations for such
period, plus, to the extent deducted in computing such Adjusted
Net Earnings from Operations, (1) net interest expense, (2) any
provision for income taxes, (3) depreciation expense, (4)
amortization expense, and (5) any other non-cash expense, and
minus to the extent included in computing such Adjusted Net
Earnings from Operations, any non-cash income.
"Eligible Inventory" means finished goods Inventory,
determined on a first-in-first-out basis and valued at the lower
of cost or market value, which the Agent, in its reasonable
discretion, deems eligible as the basis for Revolving Loans,
based on criteria which the Agent establishes in its credit
judgment (which criteria, or any change in such criteria, the
Agent agrees to share with any Lender upon the request of such
Lender); provided, however, upon the reasonable request of the
Borrower, the Agent will notify the Borrower of the reason for
deeming Inventory not to be Eligible Inventory. Without limiting
the foregoing, no Inventory shall be Eligible Inventory, unless
the Agent in its sole discretion otherwise elects, if: (a) it is
obsolete, slow-moving, or discontinued; (b) it is located at
premises not owned or leased by the Borrower, unless the Borrower
has obtained a bailee letter or landlord's waiver and/or
mortgagee waiver, as applicable, reasonably acceptable to the
Agent, or has established a rent reserve or similar reserve
against the Borrowing Base with respect to such Premises for two
months' rent (in the case of Premises in a state which does not
provide statutory lien rights for landlords) and for such other
amount as the Agent determines with respect to Premises located
in a state which does provide for such statutory lien rights;
(c) it is not subject to a first priority perfected security
interest in favor of the Agent; (d) it is raw material, work-in-
process, spare parts, packaging or shipping materials, or
supplies; (e) it is bill-and-hold Inventory, defective Inventory,
returned Inventory not in good saleable condition, or Inventory
delivered to the Borrower on consignment; (f) it is seasonal
over-stocked inventory; or (g) it is Inventory which in any way
fails to meet or violates any applicable representation, warranty
or covenant contained in this Agreement relating directly or
indirectly to such Inventory. Notwithstanding clause (b) above,
Inventory that is being imported or has been imported and that is
payable by presentment of a Letter of Credit issued pursuant to
this Agreement, and that would be Eligible Inventory except for
the terms of such clause (b), will be Eligible Inventory if the
Agent is named as consignee on the applicable bill of lading or
other similar document of title, such bill of lading or document
has been delivered to the Agent, and the Inventory is covered by
insurance acceptable to the Agent.
If any Inventory at any time ceases to be Eligible
Inventory by reason of any of the foregoing exclusions or any
failure to meet any other eligibility criteria established by the
Agent in its credit judgment upon notice to the Borrower, such
Inventory shall promptly be excluded from the calculation of
Eligible Inventory.
"Environmental Laws" means all federal, state and local
laws, rules, regulations, ordinances, permits, orders and consent
decrees or other determinations binding on the Borrower of any
Public Authority relating to health, safety, hazardous
substances, and environmental matters applicable to the Borrower
and/or its business and facilities (whether or not owned by it).
Such laws and regulations include but are not limited to the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.,
as amended; the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq., as amended; the Clean Water Act, 42 U.S.C. Section 466 et seq.,
as amended; the Clean Air Act, 46 U.S.C. Section 7401 et seq., as
amended; state and federal environmental lien programs; and the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq., each
as from time to time hereafter in effect.
"Environmental Lien" means a Lien in favor of any
Public Authority for (1) any liability under any Environmental
Laws, or (2) damages arising from, or costs incurred by such
Public Authority in response to, a Release or threatened Release
of a Contaminant into the environment.
"Environmental Property Transfer Act" means any
applicable requirement of law that conditions, restricts,
prohibits or requires any notification or disclosure triggered by
the closure of any property or the transfer, sale or lease of any
property or deed or title for any property for environmental
reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible
Property Transfer Acts."
"Equipment" means all of the Borrower's now owned and
hereafter acquired machinery, equipment, furniture, furnishings,
trade fixtures, and other tangible personal property (except
Inventory), including, without limitation, motor vehicles,
aircraft, dies, tools, jigs, and office equipment; together with
all present and future additions and accessions thereto,
replacements therefor, component and auxiliary parts and supplies
used or to be used in connection therewith, and all substitutes
for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto;
wherever any of the foregoing is located. Equipment shall not
include (a) equipment which has become so related to particular
real property that an interest in it arises under real estate
law, (b) any "Building Equipment," as defined in the Principal
Mutual Loan Documents as in effect on the Closing Date, which are
subject to a negative pledge provision under the Principal Mutual
Loan Documents, or (c) any equipment "equipping" the "Project"
(as such terms are defined in that certain Loan Agreement dated
as of August 1, 1991 between the Borrower and The Industrial
Development Authority of St. Charles County, Missouri), which
"Project" constitutes the regional distribution center of the
Borrower located in O'Fallon, Missouri.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and any successor
statute.
"ERISA Affiliate" means (i) any corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Borrower; (ii) a
partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of Section
414(c) of the Code) with the Borrower; or (iii) a member of the
same affiliated service group (within the meaning of Section
414(m) of the Code) as the Borrower, any corporation described in
clause (i) above or any partnership, trade or business described
in clause (ii) above.
"Eurocurrency Liabilities" has the meaning assigned to
that term in Regulation D of the Federal Reserve Board, as in
effect from time to time.
"Event of Default" has the meaning specified in Sec-
tion 10.1.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Funds Rate" means, for any period, a
fluctuating interest rate per annum equal for each day during
such period to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three (3) federal funds
brokers of recognized standing selected by the Agent.
"Federal Reserve Board" means the Board of Governors of
the Federal Reserve System or any successor thereto.
"Financial Statements" means, according to the context
in which it is used, the financial statements attached hereto as
Exhibit B-1, or any financial statements required to be given to
the Lenders pursuant to Sections 6.2(a), (b), and (c), or any
combination thereof.
"Fiscal Year" means the Borrower's fiscal year for
financial accounting purposes, each of which shall end on the
last Saturday of each January. The 1995 Fiscal Year of the
Borrower ended on January 27, 1996, and the 1996 Fiscal Year of
the Borrower will end on January 25, 1997.
"Former Credit Agreement" means that certain credit
agreement dated as of September 4, 1992, as amended, among the
Borrower, the lenders party thereto, The First National Bank of
Chicago, as the agent for such lenders and Citibank, N.A., as co-
agent.
"Funding Date" means the date any Revolving Loans
(including BABC Revolving Loans and Agent Advances) are to be
made hereunder.
"GAAP" means at any particular time with respect to the
Borrower, generally accepted accounting principles as in effect
at such time, consistently applied.
"General Intangibles" means all of the Borrower's now
owned or hereafter acquired general intangibles, choses in action
and causes of action and all other intangible personal property
of the Borrower of every kind and nature (other than Accounts),
including, without limitation, all Proprietary Rights (other than
Proprietary Rights the assignment of which requires a consent
which has not been obtained), corporate or other business
records, inventions, designs, blueprints, plans, specifications,
patents, patent applications, trademarks, service marks, trade
names, trade secrets, goodwill, copyrights, computer software,
customer lists, registrations, licenses, franchises, tax refund
claims, any funds which may become due to the Borrower in
connection with the termination of any Plan or other employee
benefit plan or any rights thereto and any other amounts payable
to the Borrower from any Plan or other employee benefit plan,
rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds
thereof, property, casualty or any similar type of insurance and
any proceeds thereof, proceeds of insurance covering the lives of
key employees on which the Borrower is beneficiary, and any
letter of credit, guarantee, claim, security interest or other
security held by or granted to the Borrower (other than claims,
rights and remedies under contracts for the purchase, sale,
lease, sublease or license of real property).
"GOB Percentage" means, at any time, a percentage equal
to 83.5% of the going-out-of-business appraised value of the
Borrower's inventory, net of liquidating expenses, expressed as a
percentage of inventory cost, as reflected on the then most
recently completed appraisal pursuant to Section 5.5. By way of
example, if the most recent appraisal pursuant to Section 5.5
showed that the going-out-of-business appraised value of the
Borrower's inventory, net of liquidating expenses, was 70% of
inventory cost, then the GOB Percentage would be 83.5% times 70%,
or 58.45%.
"Guaranty" means, with respect to any Person, all
obligations of such Person which in any manner directly or
indirectly guarantee or assure, or in effect guarantee or assure,
the payment or performance of any indebtedness, dividend or other
obligation of any other Person (the "guaranteed obligations"), or
assure or in effect assure the holder of the guaranteed obli-
gations against loss in respect thereof, including, without
limitation, any such obligations incurred through an agreement,
contingent or otherwise: (a) to purchase the guaranteed obliga-
tions or any property constituting security therefor; (b) to
advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other
balance sheet condition; or (c) to lease property or to purchase
any debt or equity securities or other property or services.
Indemnification provisions of a type customarily made in
connection with real estate construction contracts, real estate
leases or reciprocal easement agreements shall not constitute
Guaranties for purposes of this Agreement.
"Initial Stated Termination Date" has the meaning
specified in Section 11.1.
"Interest Period" means, with respect to each LIBOR
Loan, the interest period applicable to such LIBOR Loan as
determined pursuant to Section 3.3(b).
"Interest Rate" means each or any of the interest
rates, including the Default Rate, set forth in Section 3.1.
"Inventory" means all of the Borrower's now owned and
hereafter acquired inventory, goods, and merchandise, wherever
located, to be furnished under any contract of service or held
for sale or lease, all returned goods, raw materials, other
materials and supplies of any kind, nature or description which
are or might be consumed in the Borrower's business or used in
connection with the packing, shipping, advertising, selling or
finishing of such goods and merchandise, and all documents of
title or other documents representing them.
"IRS" means the Internal Revenue Service or any
successor agency.
"Latest Projections" means: (a) on the Closing Date
and thereafter until the Lenders receive new projections pursuant
to Section 6.2(f), the projections of the Borrower's financial
condition, results of operations, and cash flow on a monthly
basis for the 1996 Fiscal Year, and on an annual basis for the
1997 and 1998 Fiscal Years, attached hereto as Exhibit B-2; and
(b) thereafter, the projections most recently received by the
Lenders pursuant to Section 6.2(f).
"Lender" and "Lenders" have the meanings specified in
the introductory paragraph hereof.
"Letter of Credit" means a letter of credit issued or
caused to be issued for the account of the Borrower pursuant to
Section 2.2.
"Letter of Credit Fee" has the meaning specified in
Section 3.7.
"Leverage Ratio" means, as of the end of any fiscal
period of the Borrower, the ratio of (a) the aggregate
outstanding liabilities of the Borrower as of such date,
determined in accordance with GAAP, but also including the face
amount of all outstanding letters of credit, to (b) EBITDA for
the one year period ending on such date.
"LIBO Rate" means, for any Interest Period with respect
to LIBOR Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward to the next 1/1000th of 1.0%)
determined by the Agent as follows:
LIBO Rate = Base LIBO Rate
-------------------------------
1.00 - LIBOR Reserve Percentage
"LIBOR Interest Rate Determination Date" means each
date of calculating the LIBO Rate for purposes of determining the
interest rate with respect to an Interest Period. The LIBOR
Interest Rate Determination Date for any LIBOR Loan shall be the
second Business Day prior to the first day of the related
Interest Period for such LIBOR Loan.
"LIBOR Loan" means a Revolving Loan during any period
in which it bears interest at the rate provided in Section
3.1(a)(2).
"LIBOR Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1.0%) in effect on
such day (whether or not applicable to any Lender) under
regulations issued from time to time by the Federal Reserve Board
for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency Liabilities having a term comparable
to such Interest Period.
"Lien" means any interest in Collateral securing an
obligation owed to, or a claim by, a Person other than the owner
of the Collateral, whether such interest is based on the common
law, statute, or contract, and including without limitation, a
security interest, charge, claim, or lien arising from a mort-
gage, deed of trust, encumbrance, pledge, hypothecation, assign-
ment, deposit arrangement, agreement, security agreement, condi-
tional sale or trust receipt or a lease, consignment or bailment
for security purposes.
"Loan" means each Revolving Loan, including each BABC
Revolving Loan and each Agent Advance.
"Loan Documents" means this Agreement, the Copyright
and Trademark Agreements, the Shipper Guaranty Letter, the
Blocked Account Agreement, and any other agreements, instruments,
and documents heretofore, now or hereafter evidencing, securing,
guaranteeing or otherwise relating to the Obligations or the
Collateral.
"Majority Lenders" means, at any time, Lenders whose
Pro Rata Shares aggregate at least sixty six and two-thirds
percent (66-2/3%) as such percentage is determined under the
definition of Pro Rata Share set forth herein.
"Maximum Revolver Amount" means, at any time, (a) the
lesser of (1) the Revolver Facility; or (2) the Borrowing Base at
such time; minus (b) the sum of (i) reserves for accrued interest
on the Obligations; (ii) reserves in the amount equal to two (2)
months rent at any premises leased by the Borrower where any
Eligible Inventory is located, unless the Borrower has obtained a
landlord's waiver reasonably acceptable to the Agent with respect
to such premises; (iii) reserves covering equipment excluded from
the definition of "Equipment" pursuant to clause (c) of the last
sentence of such definition; and (iv) all other reserves which
the Agent reasonably deems necessary or desirable to maintain
with respect to the Borrower's account, including, without
limitation, any reserves for any amounts which the Agent or any
Lender may be obligated to pay in the future for the account of
the Borrower.
"Medium Term Note Indenture" means the Indenture dated
as of October 1, 1994 between the Borrower and Fleet National
Bank, as successor trustee (succeeding The First National Bank of
Chicago, the original trustee).
"Medium Term Notes" means the Borrower's Medium Term
Notes, Series A, issued under the Medium Term Note Indenture.
"Mortgage Notes" means the notes issued to Principal
Mutual Life, with an aggregate outstanding balance on the Closing
Date of $67,081,991.30, which notes are secured by liens on
certain of the Borrower's Real Estate.
"Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is or was at any
time during the current year or the immediately preceding six (6)
years contributed to by the Borrower or any ERISA Affiliate;
provided, however that solely for purposes of the disclosures
required on Schedule 7.21, "Multiemployer Plan" shall mean any
such multiemployer plan which is or within the immediately
preceding five (5) years contributed to by the Borrower or an
ERISA Affiliate.
"Notice of Borrowing" has the meaning specified in
Section 2.1(b).
"Notice of Conversion/Continuation" has the meaning
specified in Section 3.2(b).
"Obligations" means all present and future loans,
advances, liabilities, obligations, covenants, duties, and debts
owing by the Borrower to the Agent and/or any Lender, arising
under or pursuant to this Agreement, whether or not evidenced by
any note, instrument or document, whether arising from an
extension of credit, opening of a letter of credit, acceptance,
loan, guaranty, indemnification or otherwise, whether direct or
indirect (including, without limitation, those acquired by
assignment from others, and any participation by the Agent and/or
any Lender in the Borrower's debts owing to others), absolute or
contingent, due or to become due, primary or secondary, as
principal or guarantor, and including, without limitation, all
principal, interest, charges, expenses, fees, attorneys' fees,
filing fees and any other sums chargeable to the Borrower
hereunder or under another Loan Document. "Obligations"
includes, without limitation, all debts, liabilities, and
obligations now or hereafter owing from the Borrower to the Agent
and/or any Lender under or in connection with the Letters of
Credit.
"Participating Lender" means any Person who shall have
been granted the right by any Lender to participate in the
financing provided by such Lender under this Agreement pursuant
to Section 12.3(e), and who shall have entered into a
participation agreement in form and substance satisfactory to
such Lender.
"PBGC" means the Pension Benefit Guaranty Corporation
or any Person succeeding to the functions thereof.
"Pending Revolving Loans" means, at any time, the
aggregate principal amount of all Revolving Loans requested in
any Notice(s) of Borrowing received by the Agent but which
Revolving Loans have not yet been advanced at such time.
"Permitted Liens" means:
(a) Liens for taxes not yet due and payable or Liens
for taxes in an amount not to exceed $10,000,000 provided that
the payment of such taxes which are due and payable is being con-
tested in good faith and by proper proceedings diligently
pursued, and that reserves or other appropriate provision, if
any, as shall be required by GAAP shall have been made therefor
and that a stay of enforcement of any such Lien is in effect;
(b) the Agent's Liens;
(c) Liens upon Equipment granted in connection with
the acquisition of such Equipment by the Borrower after the
Closing Date (including, without limitation, pursuant to Capital
Leases), provided that (i) the Debt incurred to finance each such
acquisition is permitted by Section 8.13, and (ii) each such Lien
attaches only to the Equipment acquired with the Debt secured
thereby;
(d) Liens upon Equipment leased to the Borrower after
the Closing Date (including, without limitation, pursuant to
Capital Leases), to the extent such leases constitute Liens
hereunder, provided that (i) the Debt incurred to finance each
such acquisition is permitted by Section 8.13, and (ii) each such
Lien attaches only to the Equipment leased thereunder;
(e) deposits under worker's compensation, unemployment
insurance, social security and other similar laws, or to secure
the performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure indemnity, performance
or other similar bonds for the performance of bids, tenders or
contracts (other than for the repayment of borrowed money) or to
secure statutory obligations (other than liens arising under
ERISA or Environmental Liens) or surety or appeal bonds, or to
secure indemnity, performance or other similar bonds in the
ordinary course of business;
(f) Liens which arise by operation of law under Arti-
cle 2 of the Uniform Commercial Code in favor of unpaid sellers
of goods or prepaying buyers of goods, or liens in items of any
accompanying documents or proceeds of either arising by operation
of law under Article 4 of the Uniform Commercial Code in favor of
a collecting bank;
(g) Liens securing the claims or demands of material-
men, mechanics, carriers, warehousemen, landlords and other like
Persons; provided that if any such Lien arises from the
nonpayment of such claims or demands when due, such claims or
demands do not exceed $2,500,000 in the aggregate;
(h) Liens in favor of any Public Authority to secure
customs and revenue duties in connection with the importation of
goods, inventory or merchandise;
(i) Judgment Liens to the extent the attachment or
enforcement of such Liens would not result in an Event of Default
hereunder; and
(j) Liens in existence on the Closing Date and
reflected on Schedule 7.2 and Liens replacing such Liens to
secure refinancing Debt permitted by Section 8.13(j).
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, Public Authority, or any other entity.
"Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Borrower or any
ERISA Affiliate is, or within the immediately preceding [five
(5)] years was, an "employer" as defined in Section 3(5) of
ERISA.
"Premises" means the land identified by addresses on
Schedule 7.12, together with all buildings, improvements, and
fixtures thereon and all tenements, hereditament, and appur-
tenances belonging or in any way appertaining thereto, and which
constitutes all of the real property in which the Borrower has
any interests on the Closing Date.
"Principal Mutual" means Principal Mutual Life
Insurance Company, an Iowa corporation.
"Principal Mutual Loan Documents" means, collectively,
the Loan Agreement between Principal Mutual and the Borrower
dated as of July 3, 1990, and the mortgages, leasehold mortgages,
assignments of leases and rents and financing statements executed
pursuant to such Loan Agreement, in each case, as amended from
time to time.
"Pro Rata Share" means, with respect to a Lender, a
fraction (expressed as a percentage), the numerator of which is
the amount of such Lender's Commitment and the denominator of
which is the sum of the amounts of all of the Lenders'
Commitments, or if no Commitments are outstanding, a fraction
(expressed as a percentage), the numerator of which is the amount
of Obligations owed to such Lender and the denominator of which
is the aggregate amount of the Obligations owed to the Lenders.
"Proprietary Rights" means all of the Borrower's now
owned and hereafter arising or acquired: licenses, franchises,
permits, patents, patent rights, copyrights, works which are the
subject matter of copyrights, trademarks, service marks, trade
names, trade styles, patent, trademark and service mark applica-
tions, and all licenses and rights related to any of the fore-
going, including, without limitation, those patents, trademarks,
service marks and copyrights set forth on Schedule 7.13 hereto,
and all other rights under any of the foregoing, all extensions,
renewals, reissues, divisions, continuations, and continuations-
in-part of any of the foregoing, and all rights to sue for past,
present and future infringement of any of the foregoing.
"Public Authority" means the government of any country
or sovereign state, or of any state, province, municipality, or
other political subdivision thereof, or any department, agency,
public corporation or other instrumentality of any of the fore-
going.
"Real Estate" means all of the present and future
interests of the Borrower, as fee simple owner of any Premises.
"Reference Rate" means, for any day, the rate of
interest in effect for such day as publicly announced from time
to time by Bank of America in San Francisco, California, as its
"reference rate." The "reference rate" is a rate set by Bank of
America based upon various factors including Bank of America's
costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans,
which may be priced at, above, or below such announced rate.
Any change in the reference rate announced by Bank of America
shall take effect at the opening of business on the day specified
in the public announcement of such change. Each Interest Rate
based upon the Reference Rate shall be adjusted simultaneously
with any change in the Reference Rate.
"Reference Rate Loans" means a Loan, or portion
thereof, during which it bears interest at a rate determined by
reference to the Reference Rate as provided in Section 3.1(a).
"Register" has the meaning specified in
Section 12.3(c).
"Release" means a release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration of a Contaminant into the indoor or outdoor
environment or into or out of any Real Estate or other property
of the Borrower, including the movement of Contaminants through
or in the air, soil, surface water, groundwater or Real Estate or
other property.
"Reportable Event" means any of the events described in
Section 4043 of ERISA for which the reporting requirement has not
been waived, and any of the events described in ERISA Sections
4043(c)(1) and 4043(c)(5).
"Required Lenders" means, at any time, Lenders whose
Pro Rata Shares aggregate at least fifty-one percent (51%) as
such percentage is determined under the definition of Pro Rata
Share set forth herein.
"Restricted Investment" means any acquisition of pro-
perty by the Borrower in exchange for cash or other property,
whether in the form of an acquisition of stock, debt Security, or
other indebtedness or obligation, or the purchase or acquisition
of any other property, or a loan, advance, capital contribution,
or subscription, except acquisitions of the following: (a) fixed
assets, Equipment, supplies or General Intangibles to be used in
the business of the Borrower; (b) goods held for sale or lease or
to be used in the provision of services by the Borrower in the
ordinary course of business; (c) current assets arising from the
sale or lease of goods or the rendition of services in the
ordinary course of business of the Borrower; (d) direct obliga-
tions of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided
that such obligations mature within one year from the date of
acquisition thereof; (e) certificates of deposit maturing within
one year from the date of acquisition, bankers' acceptances,
Eurodollar bank deposits, or overnight bank deposits, in each
case issued by, created by, or with a bank or trust company
organized under the laws of the United States or any state
thereof having capital and surplus aggregating at least
$100,000,000; and (f) commercial paper given the highest rating
by a nationally recognized credit rating agency and maturing not
more than 270 days from the date of creation thereof.
"Revolver Facility" means, as the context may require,
either $225,000,000 or the agreement by the Lenders to provide
Revolving Loans and Letters of Credit up to such amount subject
to the terms of this Agreement.
"Revolving Loans" has the meaning specified in Sec-
tion 2.1.
"Security" has the meaning specified in Section 2(1) of
the Securities Act of 1933, as amended.
"Settlement" and "Settlement Date" have the meanings
specified in Section 2.1(j)(1).
"Shipper Guaranty" means any guaranty, indemnity, air
release or other similar document or undertaking executed or
provided by the Agent to a shipper of inventory that is covered
by a merchandise Letter of Credit and is subject to a bill of
lading, airway bill or shipping document on which the Agent is
named as consignee, which guaranty, indemnity, air release,
document or undertaking permits the Borrower to obtain possession
of such inventory without production of the applicable bill of
lading, airway bill or other shipping document.
"Shipper Guaranty Letter" means that certain letter
agreement dated as of the date hereof executed by the Borrower in
favor of the Agent with respect to indemnities and related
matters in connection with Shipper Guaranty, substantially in the
form of Exhibit G.
"Solvent" means, when used with respect to any Person,
that at the time of determination:
(i) the assets of such Person, at a fair valuation,
are in excess of the total amount of its debts (including,
without limitation, contingent liabilities); and
(ii) the present fair saleable value of its assets is
greater than its probable liability on its existing debts as
such debts become absolute and matured; and
(iii) it is then able and expects to be able to pay its
debts (including, without limitation, contingent debts and
other commitments) as they mature; and
(iv) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the
amount of any contingent liability shall be computed as the
amount that, in light of all the facts and circumstances existing
at such time, represents the amount that can reasonably be
expected to become an actual or matured liability.
"Stated Termination Date" has the meaning specified in
Section 11.1.
"Subsidiary" means any corporation of which more than
fifty percent (50.0%) of the outstanding Securities of any class
or classes, the holders of which are ordinarily, in the absence
of contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions), is at the
time, directly or indirectly through one or more intermediaries,
owned by the Borrower and/or one or more of its Subsidiaries.
"Supporting Letter of Credit" has the meaning specified
in Section 2.2(j).
"Termination Date" means the earliest to occur of (i)
the Stated Termination Date, (ii) the date the Revolver Facility
is terminated either by the Borrower pursuant to Section 4.2 or
by the Majority Lenders pursuant to Section 10.2, and (iii) the
date this Agreement is otherwise terminated for any reason
whatsoever.
"Termination Event" means: (1) a Reportable Event with
respect to any Benefit Plan; (2) the withdrawal of the Borrower
or any ERISA Affiliate from a Benefit Plan during a plan year in
which the Borrower or such ERISA Affiliate was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA; (3) the
imposition of an obligation on the Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties
written notice of intent to terminate a Benefit Plan in a
distress termination described in Section 4041(c) of ERISA; (4)
the institution by the PBGC of proceedings to terminate a Benefit
Plan; (5) any event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan; (6) the
partial or complete withdrawal of the Borrower or any ERISA
Affiliate from a Multiemployer Plan; or (7) the cessation of
operations which results in the termination of employment of
twenty percent (20.0%) of Benefit Plan participants who are
employees of the Borrower and its ERISA Affiliates.
"Triggering Event" means either (a) the occurrence of
an Event of Default or (b) Availability being $50,000,000 or
less. Solely for purposes of determining Availability for
determining whether a Triggering Event has occurred, reserves
against the Maximum Revolver Amount for letters of credit issued
pursuant to the Former Credit Agreement which cover Inventory
which would be Eligible Inventory hereunder shall be calculated
at 40% of the undrawn face amount of such letters of credit.
"UCC" means the Uniform Commercial Code (or any
successor statute) of the State of Illinois or of any other state
the laws of which are required by Section 9-103 thereof to be
applied in connection with the issue of perfection of security
interests.
"Unused Letter of Credit Subfacility" means the amount
equal to $125,000,000 minus the sum of (a) the aggregate undrawn
face amount of all outstanding Letters of Credit plus (b) the
aggregate unpaid reimbursement obligations with respect to all
Letters of Credit.
"Unused Line Fee" has the meaning specified in
Section 3.6.
"Voting Stock" means Securities of any class or classes
of a corporation, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the
corporate directors (or Persons performing similar functions).
1.2 Accounting Terms. Any accounting term used in
this Agreement shall have, unless otherwise specifically provided
herein, the meaning customarily given in accordance with GAAP,
and all financial computations hereunder shall be computed,
unless otherwise specifically provided herein, in accordance with
GAAP as consistently applied and using the same method for inven-
tory valuation as used in the preparation of the Financial State-
ments.
1.3 Other Terms. All other undefined terms contained
in this Agreement shall, unless the context indicates otherwise,
have the meanings provided for by the UCC to the extent the same
are used or defined therein. Any references herein to exhibits,
schedules, sections or articles are references to exhibits,
schedules, sections or articles of this Agreement, unless
otherwise specified. Wherever appropriate in the context, terms
used herein in the singular also include the plural, and vice
versa, and each masculine, feminine, or neuter pronoun shall also
include the other genders.
1.4 Computation of Time Periods. In this Agreement,
in the computation of periods of time from a specified date to a
later specified date, the word "from" shall mean "from and
including" and the words "to" and "until" shall each mean "to but
excluding". Periods of days referred to in this Agreement shall
be counted in calendar days unless Business Days are expressly
prescribed and references in this Agreement to months and years
shall be to calendar months and calendar years unless otherwise
specified.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 Revolving Loans. (a) Amounts. Subject to the
satisfaction of the conditions precedent set forth in Article 9,
each Lender severally agrees, upon the Borrower's request from
time to time, to make revolving loans (the "Revolving Loans") to
the Borrower, in an amount not to exceed such Lender's Pro Rata
Share of Availability at such time (except with respect to BABC
Revolving Loans). The Lenders, however, in their discretion, may
elect (any such election being made by all of the Lenders) to
make Revolving Loans, or participate (as provided for in Section
2.2(f)) in Letters of Credit or in the Credit Support provided
through the Agent to the issuers of Letters of Credit, in excess
of Availability on one or more occasions, but if they do so,
neither the Agent nor the Lenders shall be deemed thereby to have
changed the limits of the Maximum Revolver Amount or to be
obligated to exceed the limits of the Maximum Revolver Amount on
any other occasion. If the Aggregate Revolver Outstandings
exceed the Maximum Revolver Amount, the Lenders may refuse to
make or otherwise restrict the making of Revolving Loans on such
terms as the Lenders determine until such excess has been
eliminated, subject to the Agent's authority, in its discretion,
to make Agent Advances pursuant and subject to the terms of
Section 2.1(i).
(b) Notice of Borrowing. Whenever the Borrower
desires to borrow Revolving Loans under this Section 2.1, the
Borrower shall deliver to the Agent a written request
substantially in the form of Exhibit D hereto (a "Notice of
Borrowing") signed by an authorized officer of the Borrower, no
later than (i) 10:00 a.m. (Chicago, Illinois time) on the
requested Funding Date, in the case of requests for Revolving
Loans that are Reference Rate Loans, or (ii) 10:00 a.m. (Chicago,
Illinois time) three (3) Business Days in advance of the
requested Funding Date, in the case of requests for LIBOR
Revolving Loans. The Notice of Borrowing shall, with respect to
any Revolving Loans requested, specify (i) the requested Funding
Date (which shall be a Business Day), (ii) the aggregate amount
of the requested Revolving Loans, (iii) whether the Revolving
Loans requested are to be Reference Rate Loans or LIBOR Loans,
(iv) if the requested Revolving Loans are to be LIBOR Loans, the
requested Interest Period, and (v) the account to which the
proceeds of such Revolving Loans are to be transferred, which
account shall be one of the accounts specified by the Borrower
pursuant to the first sentence of Section 2.1(c). With respect
to any request for Revolving Loans that are Reference Rate Loans,
in lieu of delivering the above-described Notice of Borrowing the
Borrower may give the Agent telephonic notice of such request by
the required time; provided, however, that such telephonic notice
shall be confirmed in writing by delivery to the Agent (A)
immediately of a telecopy of a Notice of Borrowing which has been
signed by an authorized officer of the Borrower, and (B) promptly
of a Notice of Borrowing containing the original signature of an
authorized officer of the Borrower mailed by the Borrower to the
Agent via United States mail on the date such notice is given.
In the event that the terms of any confirmatory Notice of
Borrowing referred to in the proviso contained in the immediately
preceding sentence shall conflict with the telephonic notice with
respect to which it was delivered, the terms of such telephonic
notice shall govern. Notwithstanding anything in this Section
2.1(b) to the contrary, any Revolving Loans to be made to the
Borrower on the Closing Date shall initially be Reference Rate
Loans.
(c) Reliance upon Authority. Schedule 2.1 sets forth
(i) the accounts to which the Agent is authorized to transfer the
proceeds of the Revolving Loans requested pursuant to this
Section 2.1, and (ii) the names of the officers authorized to
request Revolving Loans on behalf of the Borrower. On or prior
to the Closing Date, the Borrower shall provide the Agent with a
specimen signature of each such officer. The Agent shall be
entitled to rely conclusively on such officer's authority to
request Revolving Loans on behalf of the Borrower, the proceeds
of which are to be transferred to any of the accounts specified
by the Borrower pursuant to the immediately preceding sentence,
until the Agent receives written notice from any such authorized
officer to the contrary. The Agent shall have no duty to verify
the identity of any individual representing himself as one of the
officers authorized by the Borrower to make such requests on its
behalf.
(d) No Liability. The Agent shall not incur any
liability to the Borrower as a result of acting upon any notice
referred to in Sections 2.1(b) and (c), which notice the Agent
believes in good faith to have been given by an officer duly
authorized by the Borrower to request Revolving Loans on its
behalf or for otherwise acting in good faith under this Section
2.1, and the crediting of Revolving Loans to the Borrower's
deposit account, or transmittal to such Person as the Borrower
shall direct, shall conclusively establish the obligation of the
Borrower to repay such Revolving Loans as provided herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or
telephonic notice in lieu thereof) made pursuant to
Section 2.1(b) shall be irrevocable and the Borrower shall be
bound to borrow the funds requested therein in accordance
therewith.
(f) Agent's Election. Promptly after receipt of a
Notice of Borrowing pursuant to Section 2.1(b), the Agent shall
elect, in its discretion, (i) to have the terms of Section 2.1(g)
apply to such requested Borrowing, or (ii) to request BABC to
make a BABC Revolving Loan pursuant to the terms of Section
2.1(h) in the amount of the requested Borrowing; provided,
however, that if BABC declines in its sole discretion to make a
BABC Revolving Loan pursuant to Section 2.1(h), the Agent shall
elect to have the terms of Section 2.1(g) apply to such requested
Borrowing.
(g) Making of Revolving Loans. (i) In the event that
the Agent shall elect to have the terms of Section 2.1(g) apply
to a requested Borrowing as described in Section 2.1(f), then
promptly after receipt of a Notice of Borrowing pursuant to
Section 2.1(b), the Agent shall notify the Lenders by telecopy,
telephone or other similar form of transmission, of the requested
Borrowing not later than 11:00 a.m. (Chicago, Illinois time).
Each Lender shall make the amount of such Lender's Pro Rata Share
of the requested Borrowing available to the Agent in same day
funds, to such account of the Agent as the Agent may designate,
not later than 12:00 Noon (Chicago, Illinois time) on the Funding
Date applicable thereto. After the Agent's receipt of the
proceeds of such Revolving Loans, upon satisfaction of the
applicable conditions precedent set forth in Article 9, the Agent
shall make the proceeds of such Revolving Loans available to the
Borrower on the applicable Funding Date by transferring same day
funds equal to the proceeds of such Revolving Loans received by
the Agent to the account of the Borrower, designated in writing
by the Borrower; provided, however, that the amount of Revolving
Loans so made on any date shall in no event exceed the amount of
Availability on such date.
(ii) On any Funding Date in respect of a Borrowing,
the Agent shall be entitled to assume that each Lender has made
the amount of such Lender's Revolving Loan available to the Agent
on such Funding Date, unless such Lender shall have notified the
Agent to the contrary. The Agent, in its sole discretion, based
upon such assumption, may make available to the Borrower a
corresponding amount on such Funding Date. If such corresponding
amount had not in fact been made available to the Agent by any
Lender, such Lender and the Borrower severally agree to repay to
the Agent forthwith, on demand, such corresponding amount,
together with interest thereon for each day during the period
commencing on the date such amount is made available to the
Borrower and ending on the date such amount is repaid to the
Agent, at (1) in the case of the Borrower, the interest rate
applicable from time to time to such Borrowing, and (2) in the
case of a Lender, the Federal Funds Rate. If such Lender repays
to the Agent such corresponding amount, such amount so repaid
shall constitute a Revolving Loan, and if both such Lender and
the Borrower shall have repaid such corresponding amount, the
Agent shall promptly return to the Borrower such corresponding
amount in same day funds. The failure of any Lender to make any
Revolving Loan on any Funding Date (any such Lender, prior to the
cure of such failure, being hereinafter referred to as a
"Defaulting Lender") shall not relieve any other Lender of its
obligation, if any, hereunder to make its Revolving Loan on such
Funding Date, but no Lender shall be responsible for such failure
of any such Defaulting Lender. The terms of this Section
2.1(g)(ii) or Section 2.1(g)(iii) shall not be construed to
relieve or excuse the performance by any Lender of any of its
duties or obligations hereunder.
(iii) In the event that a Defaulting Lender fails to
fund its Pro Rata Share of any Borrowing requested or deemed
requested by the Borrower which such Defaulting Lender is
obligated to fund under the terms of this Agreement (the funded
portion of such Borrowing being hereinafter referred to as a "Non
Pro Rata Loan"), until such Defaulting Lender's cure of such
failure, the proceeds of all amounts thereafter repaid to the
Agent by the Borrower and otherwise required to be applied to
such Defaulting Lender's share of all other Obligations pursuant
to the terms of this Agreement shall be advanced to the Borrower
by the Agent on behalf of such Defaulting Lender to cure, in full
or in part, such failure by such Defaulting Lender, but shall
nevertheless be deemed to have been paid to such Defaulting
Lender in satisfaction of such other Obligations.
Notwithstanding anything in this Agreement to the contrary:
(A) The foregoing provisions of the Section
2.1(g)(iii) shall apply only with respect to the proceeds of
payments of Obligations and shall not affect the conversion
or continuation of Loans pursuant to Section 3.2;
(B) any such Defaulting Lender shall be deemed to have
cured its failure to fund its Pro Rata Share of any
Borrowing at such time as an amount equal to such Defaulting
Lender's original Pro Rata Share of the requested principal
portion of such Borrowing is fully funded to the Borrower,
whether made by such Lender itself or by operation of the
terms of this Section 2.1(g)(iii), and whether or not the
Non Pro Rata Loan with respect thereto has been repaid,
converted or continued;
(C) amounts advanced to the Borrower to cure, in full
or in part, any such Defaulting Lender's failure to fund its
Pro Rata Share of any Borrowing ("Cure Loans") shall bear
interest at the rate applicable to Reference Rate Loans in
effect from time to time, and for all other purposes of this
Agreement shall be treated as if they were Reference Rate
Loans;
(D) regardless of whether or not an Event of Default
has occurred or is continuing, and notwithstanding the
instructions of the Borrower as to its desired application,
all repayments of principal which, in accordance with the
terms of Section 4.6, would be applied to the outstanding
Reference Rate Loans shall be applied first, ratably to all
Reference Rate Loans constituting Non Pro Rata Loans,
second, ratably to Reference Rate Loans other than those
constituting Non Pro Rata Loans or Cure Loans and, third,
ratably to Reference Rate Loans constituting Cure Loans;
(E) until any such Defaulting Lender's cure of the
failure to fund its Pro Rata Share of any Borrowing, for
purposes of voting or consenting to matters with respect to
this Agreement or the other Loan Documents requiring the
consent of all the Lenders, the Majority Lenders, or the
Required Lenders, such Defaulting Lender shall be deemed not
to be a "Lender" and its Commitment shall be deemed to be
zero; and
(F) until any such Defaulting Lender's cure of the
failure to fund its Pro Rata Share of any Borrowing, (1)
such Lender shall not be entitled to any portion of the
Unused Line Fees, and (2) the Unused Line Fee shall accrue
in favor of the Lenders which have funded their respective
Pro Rata Shares of such requested Borrowing, shall be
allocated among such performing Lenders ratably based upon
their relative Commitments, and shall be calculated based
upon the average amount by which the aggregate Commitments
of such performing Lenders exceeds the sum of outstanding
Revolving Loans and the undrawn face amount of all
outstanding Letters of Credit.
The terms of this Section 2.1(g)(iii) shall not be
construed to increase or otherwise affect the Commitment of any
other Lender, or relieve or excuse the performance by the
Borrower of any of its duties or obligations hereunder.
(h) Making of BABC Revolving Loans. In the event the
Agent shall elect, with the consent of BABC, to have the terms of
this Section 2.1(h) apply to a requested Borrowing as described
in Section 2.1(f), BABC shall make a Revolving Loan in the amount
of such Borrowing (any such Revolving Loan made solely by BABC
pursuant to this Section 2.1(h) being referred to as a "BABC
Revolving Loan" and such Revolving Loans being referred to
collectively as "BABC Revolving Loans") available to the Borrower
on the Funding Date applicable thereto by transferring same day
funds to an account of the Borrower, designated in writing by the
Borrower. Each BABC Revolving Loan is a Revolving Loan hereunder
and shall be subject to all the terms and conditions applicable
to other Revolving Loans except that all payments thereon shall
be payable to BABC solely for its own account (and for the
account of the holder of any participation interest with respect
to such Revolving Loan created pursuant to subsection (2) of
Section 2.1(j)). The Agent shall not request BABC to make any
BABC Revolving Loan if the Agent shall have received written
notice from any Lender that one or more of the applicable
conditions precedent set forth in Article 9 will not be satisfied
on the requested Funding Date for the applicable Borrowing, or if
the requested Borrowing would exceed the amount of Availability
on the Funding Date. BABC shall not otherwise be required to
determine whether the applicable conditions precedent set forth
in Article 9 have been satisfied or the requested Borrowing would
exceed the amount of Availability on the Funding Date applicable
thereto, prior to making, in its sole discretion, any BABC
Revolving Loan.
(i) Agent Advances. (1) Subject to the limitations
set forth in the provisos contained in this Section 2.1(i), the
Agent is hereby authorized by the Borrower and the Lenders, from
time to time in the Agent's discretion, (A) after the occurrence
of a Default or an Event of Default, or (B) at any time that any
of the other applicable conditions precedent set forth in Article
9 have not been satisfied, to make Revolving Loans to the
Borrower on behalf of the Lenders which the Agent, in its
reasonable business judgment, deems necessary or desirable (a) to
preserve or protect the Collateral, or any portion thereof, (b)
to enhance the likelihood of, or maximize the amount of,
repayment of the Loans and other Obligations, or (c) to pay any
other amount chargeable to the Borrower pursuant to the terms of
this Agreement, including, without limitation, costs, fees and
expenses as described in Section 14.6 (any of the advances
described in this Section 2.1(i) being hereinafter referred to as
"Agent Advances"); provided, that the Required Lenders may at any
time revoke the Agent's authorization contained in this Section
2.1(i) to make Agent Advances, any such revocation to be in
writing and to become effective upon the Agent's receipt thereof;
and, provided further, that the Agent shall not, without the
consent of all the Lenders, make Agent Advances for purposes
described in clauses (b) and (c) above which would cause
Aggregate Revolver Outstandings to exceed the Maximum Revolver
Amount by more than $2,500,000.
(2) The Agent Advances shall be repayable on demand
and secured by the Collateral, shall constitute Revolving Loans
and Obligations hereunder, and shall bear interest at the rate
applicable to the Revolving Loans from time to time. The Agent
shall notify each Lender and the Borrower in writing of each such
Agent Advance, which notice shall include a description of the
purpose of such Agent Advance.
(j) Settlement. The Agent and the Lenders hereby agree
that, except in the case of Loans consisting of BABC Revolving
Loans or Agent Advances, each Lender's funded portion of the
Loans is intended to be equal at all times to such Lender's Pro
Rata Share of the outstanding Loans. The Agent and the Lenders
agree (which agreement shall not be for the benefit of or
enforceable by the Borrower) that in order to facilitate the
administration of this Agreement and the other Loan Documents,
settlement among them as to the BABC Revolving Loans, Agent
Advances and other Loans shall take place on a periodic basis in
accordance with the following provisions:
(1) The Agent shall request settlement ("Settlement")
with the Lenders on a weekly basis, or on a more frequent basis
if so determined by the Agent, with respect to (A) each
outstanding BABC Revolving Loan, (B) each outstanding Agent
Advance, and (C) payments received, by notifying the other
Lenders by telecopy, telephone or other similar form of
transmission, of such requested Settlement, no later than 10:00
a.m. (Chicago, Illinois time) on the date of such requested
Settlement (the "Settlement Date"). Each Lender (other than
BABC, in the case of BABC Revolving Loans) shall make the amount
of such Lender's Pro Rata Share of the outstanding principal
amount of the BABC Revolving Loans and Agent Advances with
respect to which Settlement is requested available to the Agent,
for itself or for the account of BABC, in same day funds, to such
account of the Agent as the Agent may designate, on the
Settlement Date applicable thereto, regardless of whether the
applicable conditions precedent set forth in Article 9 have then
been satisfied. Such amounts made available to the Agent shall
be applied against the amounts of the applicable BABC Revolving
Loan or Agent Advance and, together with the portion of such BABC
Revolving Loan or Agent Advance representing BABC's Pro Rata
Share thereof, shall constitute Loans of such Lenders. If any
such amount is not made available to the Agent by any Lender on
the Settlement Date applicable thereto, the Agent shall be
entitled to recover such amount on demand from such Lender
together with interest thereon at the Federal Funds Rate for the
first three (3) days from and after the Settlement Date and
thereafter at the Interest Rate then applicable to the Loans with
respect to which Settlement is to be made.
(2) Notwithstanding the foregoing, not more than one
(1) Business Day after demand is made by the Agent (whether
before or after the occurrence of a Default or an Event of
Default and regardless of whether the Agent has requested a
Settlement with respect to a BABC Revolving Loan or Agent
Advance), each other Lender shall irrevocably and unconditionally
purchase and receive from BABC or the Agent, as applicable,
without recourse or warranty (except as to such BABC Revolving
Loan or Agent Advance being free of any liens or encumbrances
created by or through BABC or the Agent, as applicable), an
undivided interest and participation in such BABC Revolving Loan
or Agent Advance to the extent of such Lender's Pro Rata Share
thereof by paying to the Agent, in same day funds, an amount
equal to such Lender's Pro Rata Share of such BABC Revolving Loan
or Agent Advance. If such amount is not in fact made available
to the Agent by any Lender, the Agent shall be entitled to
recover such amount on demand from such Lender together with
interest thereon at the Federal Funds Rate for the first three
(3) days from and after such demand and thereafter at the
Interest Rate then applicable to the Loans in which the
participation is to be purchased.
(3) From and after the date, if any, on which any
Lender purchases an undivided interest and participation in any
BABC Revolving Loan or Agent Advance pursuant to subsection (2)
above, the Agent shall promptly distribute to such Lender at its
address provided pursuant to Section 13.11, such Lender's Pro
Rata Share of all payments of principal and interest and all
proceeds of Collateral received by the Agent in respect of such
BABC Revolving Loan or Agent Advance.
(4) If any payments are received by the Agent which,
in accordance with the terms of this Agreement would be applied
to the reduction of the Revolving Loans, and no BABC Revolving
Loans or Agent Advances are then outstanding, the Agent may pay
over such amounts to BABC for application to BABC's Pro Rata
Share of such Revolving Loans. If, as of any Settlement Date,
payments received since the then immediately preceding Settlement
Date have been applied to BABC's Pro Rata Share of Revolving
Loans other than BABC Revolving Loans and Agent Advances, as
provided for in the immediately preceding sentence, then BABC
shall pay to the Agent, for the accounts of the Lenders, to be
applied to the outstanding Revolving Loans of such Lenders, an
amount such that each Lender shall have outstanding, as of such
Settlement Date, after giving effect to such payments, its Pro
Rata Share of such Revolving Loans; provided, that the Agent may
net payments due from BABC pursuant to this sentence against
payments due to BABC pursuant to Section 2.1(j)(1) on the
applicable Settlement Date, and require either BABC or the other
Lenders, as applicable, to make only the amount of the payment
due after such netting. As of each Settlement Date, each of (x)
BABC with respect to BABC Revolving Loans, (y) the Agent with
respect to Agent Advances, and (z) each Lender with respect to
the Loans other than BABC Revolving Loans and Agent Advances,
shall be entitled to interest at the applicable rate or rates
payable under this Agreement on the actual average daily amount
of funds employed by BABC, the Agent or such Lender since the
immediately preceding Settlement Date.
(k) Notation. The Agent shall record in the Register
the principal amount of the Revolving Loans owing to each Lender,
including the BABC Revolving Loans owing to BABC, and the Agent
Advances owing to the Agent, from time to time. In addition,
each Lender is authorized, at such Lender's option, to note the
date and amount of each payment or prepayment of principal of
such Lender's Revolving Loans in its books and records, including
computer records, such books and records constituting rebuttably
presumptive evidence, absent manifest error, of the accuracy of
the information contained therein.
(l) Lenders' Failure to Perform. All Revolving Loans
(other than BABC Revolving Loans and Agent Advances) shall be
made by the Lenders simultaneously and in accordance with their
Pro Rata Shares. It is understood that (a) no Lender shall be
responsible for any failure by any other Lender to perform its
obligation to make any Revolving Loans hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of
any failure by any other Lender to perform its obligation to make
any Revolving Loans hereunder, and (b) no failure by any Lender
to perform its obligation to make any Revolving Loans hereunder
shall excuse any other Lender from its obligation to make any
Revolving Loans hereunder.
2.2 Letters of Credit.
(a) Agreement to Cause Issuance. Subject to the terms
and conditions of this Agreement, and in reliance upon the
representations and warranties of the Borrower herein set forth,
the Agent agrees to (1) cause Letters of Credit to be issued by
Lenders under this Agreement, (2) in its discretion, provide
Shipper's Guaranties, and (3) provide credit support or
enhancement or otherwise confirm payment (any such credit
support, enhancement or payment confirmation being referred to as
"Credit Support") to banks other than Lenders, which banks are
acceptable to the Agent in the exercise of its reasonable
business judgment, which issue Letters of Credit for the account
of the Borrower in accordance with this Section 2.2 from time to
time during the term of this Agreement.
(b) Amounts; Outside Expiration Date. The Agent shall
not have any obligation to cause any Letter of Credit to be
issued by a Lender or to provide Credit Support for any Letter of
Credit at any time if: (1) the maximum undrawn face amount of
the Letter of Credit or Credit Support requested is greater than
the Unused Letter of Credit Subfacility at such time; (2) the
maximum undrawn face amount of the Letter of Credit to be issued
and all commissions, fees, and charges due from the Borrower in
connection with the opening thereof, are greater than
Availability at such time; or (3) such Letter of Credit has an
expiration date later than the Stated Termination Date, or more
than one (1) year from the date of issuance.
(c) Other Conditions. In addition to being subject to
the satisfaction of the applicable conditions precedent contained
in Article 9, the obligation of the Agent to cause any Letter of
Credit to be issued or to provide Credit Support for any Letter
of Credit is subject to the following conditions precedent having
been satisfied in a manner satisfactory to the Agent:
(1) the Borrower shall have delivered to the proposed
issuer of such Letter of Credit, at such times and in such
manner as such proposed issuer may prescribe, an application
in form and substance satisfactory to such proposed issuer
for the issuance of the Letter of Credit and such other
documents as may be required pursuant to the terms thereof,
and the form and terms of the proposed Letter of Credit
shall be satisfactory to the Agent and such proposed issuer;
and
(2) as of the date of issuance, no order of any court,
arbitrator or Public Authority shall purport by its terms to
enjoin or restrain money center banks generally from issuing
letters of credit of the type and in the amount of the
proposed Letter of Credit, and no law, rule or regulation
applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any
Public Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed
issuer of such Letter of Credit refrain from, the issuance
of letters of credit generally or the issuance of such
Letters of Credit.
(d) Issuance of Letters of Credit.
(1) Request for Letter of Credit. The Borrower shall
give the Agent three (3) Business Days' prior written notice
of the Borrower's request for the issuance of a Letter of
Credit. Such notice shall be irrevocable and shall specify
the original face amount of the Letter of Credit, the
effective date (which date shall be a Business Day) of
issuance of such proposed Letter of Credit, whether such
Letter of Credit may be drawn in a single or in partial
draws, the date on which such proposed Letter of Credit is
to expire (which date shall be a Business Day), the purpose
for which such Letter of Credit is to be issued, and the
beneficiary of such Letter of Credit. The Borrower shall
attach to such notice the form of the proposed Letter of
Credit.
(2) Responsibilities of the Agent; Issuance. The
Agent shall determine, as of the Business Day immediately
preceding the requested effective date of issuance of the
Letter of Credit set forth in the notice from the Borrower
pursuant to Section 2.2(d)(1), (i) the amount of the Unused
Letter of Credit Subfacility and (ii) the amount of
Availability as of such date. If (A) (i) the undrawn face
amount of the proposed Letter of Credit is not greater than
the Unused Letter of Credit Subfacility and (ii) the
issuance of such proposed Letter of Credit and all
commissions, fees, and charges due from the Borrower in
connection with the opening thereof, would not cause
Availability to be exceeded and (B) the Agent has received a
certificate from the Borrower stating that the applicable
conditions set forth in Article 9 have been satisfied, the
Agent shall cause such Letter of Credit to be issued on such
proposed effective date of issuance.
(3) Notice of Issuance. The Agent shall give each
Lender written notice, on each Settlement Date, of all
Letters of Credit issued since the preceding Settlement
Date.
(4) No Extensions or Amendment. No Letter of Credit
shall be extended or amended unless the requirements of this
Section 2.2(d) are met as though a new Letter of Credit were
being requested and issued.
(e) Payments Pursuant to Letters of Credit.
(1) Payment of Letter of Credit Obligations. The
Borrower agrees to reimburse the issuer for any draw under
any Letter of Credit, the Agent, for the account of the
Lenders, upon any payment pursuant to any Credit Support,
and the Agent for any payment made under a Shipper Guaranty,
immediately upon demand, and to pay the issuer of the Letter
of Credit the amount of all other Obligations and other
amounts payable to such issuer under or in connection with
any Letter of Credit immediately when due, irrespective of
any claim, set-off, defense or other right which the
Borrower may have at any time against such issuer or any
other Person.
(2) Revolving Loans to Satisfy Reimbursement
Obligations. In the event that the issuer of any Letter of
Credit honors a draw under such Letter of Credit, the Agent
or the Lenders shall have made any payment pursuant to any
Credit Support, or the Agent makes a payment under a Shipper
Guaranty, and the Borrower shall not have repaid such amount
to the issuer of such Letter of Credit or the Agent, as
applicable, pursuant to Section 2.2(e)(1), the Agent shall,
upon receiving notice of such failure, notify each Lender of
such failure, and each Lender shall unconditionally pay to
the Agent, for the account of such issuer, as and when
provided hereinbelow, an amount equal to such Lender's Pro
Rata Share of the amount of such payment in Dollars and in
same day funds. If the Agent so notifies the Lenders prior
to 11:00 a.m. (Chicago, Illinois time) on any Business Day,
each Lender shall make available to the Agent the amount of
such payment, as provided in the immediately preceding
sentence, on such Business Day. Such amounts paid by the
Lenders to the Agent shall constitute Revolving Loans which
shall be deemed to have been requested by the Borrower
pursuant to Section 2.1 as set forth in Section 4.5.
(f) Participations.
(1) Purchase of Participations. Immediately upon
issuance of any Letter of Credit in accordance with Section
2.2(d), or any Shipper Guaranty by the Agent pursuant to
Section 2.2(i)(7), each Lender shall be deemed to have
irrevocably and unconditionally purchased and received
without recourse or warranty, an undivided interest and
participation in such Letter of Credit, or the Credit
Support provided through the Agent to such issuer in
connection with the issuance of such Letter of Credit, or
such Shipper Guaranty, as applicable, equal to such Lender's
Pro Rata Share of the face amount of such Letter of Credit
or the amount of such Credit Support or Shipper Guaranty
(including, without limitation, all obligations of the
Borrower with respect thereto, and any security therefor or
guaranty pertaining thereto).
(2) Sharing of Reimbursement Obligation Payments.
Whenever the Agent receives a payment from the Borrower on
account of reimbursement obligations in respect of a Letter
of Credit, Credit Support or a Shipper Guaranty as to which
the Agent has previously received for the account of the
issuer thereof payment from a Lender pursuant to this
Section 2.2(f)(2), the Agent shall promptly pay to such
Lender such Lender's Pro Rata Share of such payment from the
Borrower in Dollars. Each such payment shall be made by the
Agent on the Business Day on which the Agent receives
immediately available funds paid to such Person pursuant to
the immediately preceding sentence, if received prior to
11:00 a.m. (Chicago, Illinois time) on such Business Day,
and otherwise on the next succeeding Business Day.
(3) Documentation. Upon the request of any Lender,
the Agent shall furnish to such Lender copies of any Letter
of Credit, reimbursement agreement executed in connection
therewith, application for any Letter of Credit and Credit
Support provided through the Agent in connection with the
issuance of any Letter of Credit, any Shipper Guaranty, and
such other documentation as may reasonably by requested by
such Lender.
(4) Obligations Irrevocable. The obligations of each
Lender to make payments to the Agent with respect to any
Letter of Credit, any Credit Support or enhancement provided
through the Agent with respect to a Letter of Credit, or any
Shipper Guaranty, and the obligations of the Borrower to
make payments to the Agent, for the account of the Lenders,
shall be irrevocable, not subject to any qualification or
exception whatsoever and shall be made in accordance with
the terms and conditions of this Agreement (assuming, in the
case of the obligations of the Lenders to make such
payments, that the Agent has provided Credit Support for
such Letter of Credit in accordance with the terms of
Section 2.2(d)), including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of
this Agreement or any of the other Loan Documents;
(ii) the existence of any claim, set-off, defense
or other right which the Borrower may have at any time
against a beneficiary named in a Letter of Credit or
any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting), any
Lender, the Agent, the issuer of such Letter of Credit,
or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions
(including any underlying transactions between the
Borrower or any other Person and the beneficiary named
in any Letter of Credit);
(iii) any draft, certificate or any other
document presented under the Letter of Credit proving
to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security
for the performance or observance of any of the terms
of any of the Loan Documents; or
(v) the occurrence of any Default or Event of
Default.
(g) Recovery or Avoidance of Payments. In the event
any payment by or on behalf of the Borrower received by the Agent
with respect to a Letter of Credit, Credit Support provided for
any Letter of Credit, or Shipper Guaranty (or any guaranty by the
Borrower or reimbursement obligation of the Borrower relating to
any of the foregoing) and distributed by the Agent to the Lenders
on account of their respective participations therein, is
thereafter set aside, avoided or recovered from the Agent in
connection with any receivership, liquidation or bankruptcy
proceeding, the Lenders shall, upon demand by the Agent, pay to
the Agent their respective Pro Rata Shares of such amount set
aside, avoided or recovered, together with interest at the rate
required to be paid by the Agent upon the amount required to be
repaid by it.
(h) Compensation for Letters of Credit.
(1) Letter of Credit Fee. The Borrower agrees to pay
to the Agent for such Letter of Credit (in the case of a
Letter of Credit issued by a Lender) or for the Credit
Support provided with respect to each Letter of Credit, in
each case for the account of the Lenders, the Letter of
Credit Fee specified in, and in accordance with the terms
of, Section 3.7.
(2) Issuer Fees and Charges. The Borrower shall pay
to issuer of any Letter of Credit, or to the Agent, for the
account of the issuer of any such Letter of Credit, solely
for such issuer's account, such fees and other charges as
are charged by such issuer for Letters of Credit issued by
it, including, without limitation, its standard fees for
issuing, administering, amending, renewing, paying and
canceling letters of credit and all other fees associated
with issuing or servicing letters of credit, as and when
assessed in accordance with such issuer's standard practice.
(i) Indemnification; Exoneration.
(1) Indemnification. In addition to amounts payable
as elsewhere provided in this Section 2.2, the Borrower
hereby agrees to protect, indemnify, pay and save the
Lenders and the Agent harmless from and against any and all
claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees)
which any Lender or the Agent may incur or be subject to as
a consequence, direct or indirect, of the issuance of any
Letter of Credit or the provision of any Credit Support in
connection therewith, or the execution and delivery of any
Shipper Guaranty; provided, that the Borrower shall have no
obligation hereunder with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of
any of the Agent or any Lender seeking such indemnification.
The foregoing indemnity shall survive the payment of the
Obligations and the termination of this Agreement.
(2) Assumption of Risk by the Borrower. As among the
Borrower, the Lenders and the Agent, the Borrower assumes
all risks of the acts and omissions of, or misuse of any of
the Letters of Credit by, the respective beneficiaries of
such Letters of Credit. In furtherance and not in
limitation of the foregoing, the Lenders and the Agent shall
not be responsible for: (A) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any
document submitted by any Person in connection with the
application for and issuance of and presentation of drafts
with respect to any of the Letters of Credit, even if it
should prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid
or ineffective for any reason; (C) the failure of the
beneficiary of any Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of
Credit; (D) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in
cipher; (E) errors in interpretation of technical terms; (F)
any loss or delay in the transmission or otherwise of any
document required in order make a drawing under any Letter
of Credit or of the proceeds thereof; (G) the misapplication
by the beneficiary of any Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (H) any
consequences arising from causes beyond the control of the
Lenders or the Agent, including, without limitation, any act
or omission, whether rightful or wrongful, of any present or
future de jure or de facto Public Authority. None of the
foregoing shall affect, impair or prevent the vesting of any
rights or powers of the Agent or any Lender under this
Section 2.2(i).
(3) Exoneration. In furtherance and extension, and
not in limitation, of the specific provisions set forth
above, any action taken or omitted by the Agent or any
Lender under or in connection with any of the Letters of
Credit or any related certificates, if taken or omitted in
good faith, shall not put the Agent or any Lender under any
resulting liability to the Borrower or relieve the Borrower
of any of its obligations hereunder to any such Person.
(4) Power of Attorney. In connection with all
Inventory financed by Letters of Credit, the Borrower hereby
appoints the Agent, or the Agent's designee, as its
attorney, with full power and authority, at any time that an
Event of Default is outstanding: (a) to sign and/or endorse
the Borrower's name upon any warehouse or other receipts;
(b) to sign the Borrower's name on bills of lading and other
negotiable and non-negotiable documents; (c) to clear
Inventory through customs in the Agent's or the Borrower's
name, and to sign and deliver to customs officials powers of
attorney in the Borrower's name for such purposes; (d) to
complete in the Borrower's or the Agent's name, any order,
sale, or transaction, obtain the necessary documents in
connection therewith, and collect the proceeds thereof; and
(e) to do such other acts and things as are necessary in
order to enable the Agent to obtain possession of the
Inventory and to obtain payment of the Obligations. Neither
the Agent nor its designee, as the Borrower's attorney, will
be liable for any acts or omissions, nor for any error of
judgement or mistakes of fact or law, absent the gross
negligence or willful misconduct of the Agent or such
designee. This power, being coupled with an interest, is
irrevocable until all Obligations have been paid and
satisfied.
(5) Account Party. The Borrower hereby authorizes and
directs any issuer of a Letter of Credit to name the
Borrower as the "Account Party" therein and to deliver to
the Agent all instruments, documents and other writings and
property received by the issuer pursuant to the Letter of
Credit, and to accept and rely upon the Agent's instructions
and agreements with respect to all matters arising in
connection with the Letter of Credit or the application
therefor.
(6) Control of Inventory. In connection with all
Inventory financed by Letters of Credit, the Borrower will,
at the Agent's request, instruct all suppliers, carriers,
forwarders, warehouses or others receiving or holding cash,
checks, Inventory, documents or instruments in which the
Agent holds a security interest to deliver them to the Agent
and/or subject to the Agent's order, and if they shall come
into the Borrower's possession, to deliver them, upon
request, to the Agent in their original form. The Borrower
shall also, at the Agent's request, designate the Agent as
the consignee on all bills of lading and other negotiable
and non-negotiable documents.
(7) Shipper Guaranties. Upon the request of the
Borrower, the Agent may, in its sole discretion, (a) execute
and deliver from time to time Shipper Guaranties, and (b)
negotiate to the Borrower bills of lading on which the Agent
is named as consignee, in any such case to enable the
Borrower to obtain possession of inventory from a shipper
prior to the applicable bill of lading or other title
documents being available for presentation. In no event
shall the Agent execute or deliver any Shipper Guaranty
unless the Borrower has executed and delivered to the Agent
the Shipper Guaranty Letter.
(j) Supporting Letter of Credit; Cash Collateral.
If, notwithstanding the provisions of Section 2.2(b)
and Section 11.1, any Letter of Credit is outstanding upon the
termination of this Agreement, then upon such termination the
Borrower shall cause the termination of such Letter of Credit.
If, at the Agent's election, any such Letter of Credit remains
outstanding, then the Borrower shall deposit with the Agent, for
the ratable benefit of the Agent and the Lenders, with respect to
each Letter of Credit then outstanding, as the Agent shall
specify, either (A) a standby letter of credit (a "Supporting
Letter of Credit") in form and substance satisfactory to the
Agent, issued by an issuer satisfactory to the Agent in an amount
equal to the greatest amount for which such Letter of Credit may
be drawn plus any fees and expenses associated with such Letter
Credit, under which Supporting Letter of Credit the Agent is
entitled to draw amounts necessary to reimburse the Agent and the
Lenders for payments made by the Agent and the Lenders under such
Letter of Credit or under any Credit Support provided through the
Agent with respect thereto, and any fees and expenses associated
with such Letter of Credit, or (B) cash in amounts necessary to
reimburse the Agent and the Lenders for payments made by the
Agent or the Lenders under such Letter of Credit or under any
Credit Support provided through the Agent with respect thereto,
and any fees and expenses associated with such Letter of Credit.
Such Supporting Letter of Credit or deposit of cash shall be held
by the Agent, for the ratable benefit of the Agent and the
Lenders, as security for, and to provide for the payment of, the
aggregate undrawn face amount of such Letters of Credit remaining
outstanding.
ARTICLE 3
INTEREST AND FEES
3.1 Interest.
(a) Interest Rates. All outstanding Obligations shall
bear interest on the unpaid principal amount thereof (including,
to the extent permitted by law, on interest thereon not paid when
due) from the date made until paid in full in cash at a rate
determined by reference to the Reference Rate or the LIBO Rate
and Sections 3.1(a)(1) or (2), as applicable, but not to exceed
the Maximum Rate described in Section 3.4. Subject to the
provisions of Section 3.2, any of the Loans may be converted
into, or continued as, Reference Rate Loans or LIBOR Loans in the
manner provided in Section 3.2. If at any time Loans are out-
standing with respect to which notice has not been delivered to
the Agent in accordance with the terms of this Agreement
specifying the basis for determining the interest rate applicable
thereto, then those Loans shall be Reference Rate Loans and shall
bear interest at a rate determined by reference to the Reference
Rate until notice to the contrary has been given to the Agent and
such notice has become effective. Except as otherwise provided
herein, the outstanding Obligations shall bear interest as
follows:
(1) For all Obligations other than LIBOR Loans,
including all Loans which are Reference Rate Loans,
then at a fluctuating per annum rate equal to the
Reference Rate plus the Applicable Reference Rate
Margin in effect from time to time; and
(2) If the Loans are LIBOR Loans, then at a per
annum rate equal to the LIBO Rate determined for the
applicable Interest Period plus the Applicable LIBOR
Margin on the first day of such Interest Period.
Each change in the Reference Rate shall be reflected in the
interest rate described in (1) above as of the effective date of
such change. All interest charges shall be computed on the basis
of a year of 360 days and actual days elapsed. Except as
otherwise provided herein, interest accrued on each LIBOR Loan
and Reference Rate Loan shall be payable in arrears on the first
day of each month hereafter.
(b) Applicable Margins. Upon receipt by the Agent of
the financial statements delivered pursuant to Section 6.2(b) for
the fiscal quarter ending nearest to July 31, 1997, and each set
of financial statements delivered pursuant to Section 6.2(a) or
(b) thereafter, together with the Compliance Certificate to be
delivered with such financial statements pursuant to Section
6.2(e), the Applicable Margins shall be adjusted on the basis of
the Leverage Ratio as set forth in such Compliance Certificate;
such adjustment being effective on the first Business Day after
receipt of such financial statements and Compliance Certificate;
provided, however, if the Borrower shall not have delivered such
Financial Statements within five (5) days of the date required
for such delivery pursuant to Section 6.2(a) or (b), as
applicable, then beginning with the date upon which such
financial statements should have been delivered and continuing
until such Financial Statements are delivered, the Applicable
Margins shall be adjusted (or shall continue, as applicable)
based on the assumption that the Leverage Ratio was greater than
5.50 to 1. In no event shall any adjustment which would reduce
the Applicable Margins be made pursuant to this Sections 3.1(b)
if on the date such adjustment would otherwise become effective a
Default or Event of Default exists.
(c) Default Rate. Without limiting any of the
foregoing, if an Event of Default occurs and the Agent in its
discretion so elects, then, while any such Event of Default is
outstanding and has not been cured or waived, all of the
Obligations shall bear interest at the Default Rate applicable
thereto.
3.2 Conversion or Continuation. (a) Subject to the
provisions of Section 3.3, the Borrower shall have the option
(i) to convert all or any part of the outstanding Revolving
Loans, in a minimum amount of $5,000,000 and integral multiples
of $1,000,000 in excess of that amount, from Reference Rate Loans
to LIBOR Loans; (ii) to convert all or any part of the
outstanding Revolving Loans from LIBOR Loans to Reference Rate
Loans on the expiration of the Interest Period applicable
thereto; and (iii) upon the expiration of any Interest Period
applicable to any outstanding LIBOR Loan, to continue all or any
portion of such LIBOR Loan equal to $5,000,000 and integral
multiples of $1,000,000 in excess of that amount as a LIBOR Loan;
provided, however, that no outstanding Loans may be converted
into, or continued as, LIBOR Loans when any Default or Event of
Default has occurred and is continuing. Any conversion or
continuation made with respect to less than the entire
outstanding balance of the Revolving Loans constituting part of a
Borrowing must be applied pro rata to such Revolving Loans
according to the outstanding principal balance of each Revolving
Loan.
(b) Whenever the Borrower elects to convert to or con-
tinue LIBOR Loans under this Section 3.2, the Borrower shall
deliver to the Agent a written notice substantially in the form
of that attached hereto as Exhibit E (a "Notice of Conversion/
Continuation"), signed by an authorized officer of the Borrower
no later than 10:00 a.m (Chicago, Illinois time) three (3)
Business Days in advance of the requested conversion or continua-
tion date. The Notice of Conversion/Continuation shall specify
(1) the conversion or continuation date (which shall be a
Business Day), (2) the amount and type of the Loans to be
converted or continued, (3) the nature of the requested
conversion or continuation, and (4) the requested Interest
Period. Promptly after receipt of a Notice of
Conversion/Continuation pursuant to this Section 3.2(b), the
Agent shall notify the Lenders by telecopy, telephone or other
similar form of transmission, of the requested conversion or
continuation. In the event that the Borrower should fail to
provide a Notice of Conversion/Continuation with respect to any
LIBOR Loans as provided above, such Loans shall, on the last day
of the Interest Period with respect to such Loans, convert to
Reference Rate Loans.
(c) The officers of the Borrower authorized to request
Revolving Loans on behalf of the Borrower shall also be
authorized to request a conversion or continuation on behalf of
the Borrower. The Agent shall be entitled to rely on such
officers' authority until the Agent is notified to the contrary
in writing pursuant to Section 2.1(c). The Agent shall have no
duty to verify the identity of any individual representing
himself as one of the officers authorized to make such request on
behalf of the Borrower. The Agent shall incur no liability to
the Borrower in acting upon any notice referred to in this
Section 3.2, which notice the Agent reasonably believes to have
been given by an officer authorized to make such requests on
behalf of the Borrower, or for otherwise acting in a reasonable
manner under this Section 3.2 and, upon such conversion or
continuation by the Agent and the Lenders in accordance with this
Agreement, the Borrower shall have effected the conversion or
continuation of the applicable Loans hereunder.
(d) Any Notice of Conversion/Continuation for
conversion to, or continuation of, Loans made pursuant to this
Section 3.2 shall be irrevocable and the Borrower shall be bound
to convert or continue in accordance therewith.
3.3 Special Provisions Governing LIBOR Loans.
Notwithstanding any other provisions to the contrary contained in
this Agreement, the following provisions shall govern with
respect to LIBOR Loans as to the matters covered:
(a) Amount of LIBOR Loans. Each election of,
continuation of or conversion to LIBOR Loans, shall be in a
minimum amount of $5,000,000 and in integral multiples of
$1,000,000 in excess of that amount.
(b) Determination of Interest Period. By giving
notice as set forth in Section 3.2(b), the Borrower shall have
the option, subject to the other provisions of this Section 3.3,
to specify whether the Interest Period for such LIBOR Loan shall
be a one, two, three or six month period. The determination of
Interest Periods shall be subject to the following provisions:
(i) In the case of immediately successive
Interest Periods, each successive Interest Period shall
commence on the day on which the next preceding
Interest Period expires.
(ii) If any Interest Period would otherwise
expire on a day which is not a Business Day, the
Interest Period shall be extended to expire on the next
succeeding Business Day; provided, however, that if the
next succeeding Business Day occurs in the following
calendar month, then such Interest Period shall expire
on the immediately preceding Business Day.
(iii) The Borrower may not select an Interest
Period for any LIBOR Loan which Interest Period expires
later than the then effective Stated Termination Date.
(iv) There shall be no more than eight (8)
Interest Periods in effect at any one time.
(c) Determination of Interest Rate. As soon as prac-
ticable after 10:00 a.m. (Chicago, Illinois time) on the LIBOR
Interest Rate Determination Date, the Agent shall determine
(which determination, when made in the exercise of the Agent's
commercially reasonable judgment, shall, absent manifest error,
be presumptively correct) the Interest Rate for the LIBOR Loans
for which an Interest Rate is then being determined and shall
promptly give notice thereof (in writing or by telephone
confirmed in writing) to the Borrower. In the event that on any
LIBOR Interest Rate Determination Date the Agent shall have
determined (which determination, when made in the exercise of the
Agent's commercially reasonable judgment, shall, absent manifest
error, be presumptively correct and binding upon all parties)
that:
(i) adequate and fair means do not exist for
ascertaining the applicable interest rates by reference
to which the LIBO Rate then being determined is to be
fixed; or
(ii) the LIBO Rate for any Interest Period for
such Loans will not adequately reflect the cost to any
Lender of making, funding or maintaining its LIBOR Loan
for such Interest Period, the Agent shall forthwith so
notify the Borrower and the Lender, whereupon:
(A) each LIBOR Loan will automatically, on the last
day of the then existing Interest Period therefor,
convert into a Reference Rate Loan; and
(B) the obligation of the Lenders to make, or to
convert Loans into, LIBOR Loans shall be suspended
until the Agent shall notify the Borrower and the
Lenders that the circumstances causing such
suspension no longer exist.
(d) Illegality. Notwithstanding any other provision
of this Agreement, if any Lender shall notify the Agent that the
introduction of or any change in or in the interpretation of any
law or regulation makes it unlawful, or any central bank or other
Public Authority asserts that it is unlawful, for any Lender to
perform its obligations hereunder to make LIBOR Loans or to fund
or maintain LIBOR Loans hereunder, (i) the obligation of the
Lenders to make, or to convert Loans into or to continue Loans
as, LIBOR Loans shall be suspended until the Agent shall notify
the Borrower and the Lenders that the circumstances causing such
suspension no longer exist and (ii) the Borrower shall on the
termination of the Interest Period then applicable thereto, or on
such earlier date required by law, prepay in full all LIBOR Loans
then outstanding together with accrued interest thereon, or
convert all such LIBOR Loans into Reference Rate Loans in
accordance with Section 3.2.
(e) Increased Costs. If, due to either (i) the intro-
duction of or any change (other than any change by way of
imposition or increase of reserve requirements included in the
LIBOR Reserve Percentage) in or in the interpretation of any law
or regulation or (ii) the compliance with any guideline or
request from any central bank or other Public Authority (whether
or not having the force of law), there shall be any increase in
the cost to any Lender of agreeing to make or making, funding or
maintaining LIBOR Loans, then the Borrower agrees that it shall,
from time to time, upon demand by such Lender, pay to such Lender
additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased
cost, submitted to the Borrower by such Lender, shall, absent
manifest error, be rebuttably presumptive evidence of the
correctness of such amount.
(f) Compensation. In addition to such amounts as are
required to be paid by the Borrower pursuant to the other
Sections of this Article 3, the Borrower agrees to compensate any
Lender for all losses, expenses and liabilities, including,
without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired
by such Lender to fund or maintain such Lender's LIBOR Loans to
the Borrower, which such Lender may sustain (i) if for any reason
a funding of any LIBOR Loans does not occur on a date specified
therefor in a Notice of Borrowing or Notice of Conversion/Con-
tinuation, or a successive Interest Period does not commence
after notice therefor is given pursuant to Section 3.2, (ii) if
any voluntary or mandatory prepayment of any LIBOR Loans occurs
for any reason on a date which is not the last scheduled day of
an Interest Period, (iii) as a consequence of any required
conversion of LIBOR Loans to Reference Rate Loans as a result of
any of the events indicated in Section 3.3(e), or (iv) as a
consequence of any other failure by the Borrower to repay LIBOR
Loans when required by the terms of this Agreement.
(g) Booking of LIBOR Loans. The Lenders may make,
carry or transfer LIBOR Loans at, to, or for the account of, any
of their respective branch offices or the office of any of their
respective affiliates.
(h) LIBOR Loans After Event of Default. Unless the
Majority Lenders shall otherwise agree, after the occurrence of
and during the continuance of any Event of Default, the Borrower
may not borrow Revolving Loans as LIBOR Loans or elect to have
any Loans continued as, or converted to, LIBOR Loans after the
expiration of any Interest Period then in effect for such Loans.
3.4 Maximum Interest Rate. In no event shall any
interest rate provided for hereunder exceed the maximum rate
permissible for corporate borrowers under applicable law for
loans of the type provided for hereunder (the "Maximum Rate").
If, in any month, any interest rate, absent such limitation,
would have exceeded the Maximum Rate, then, to the extent
permitted by applicable law, the interest rate for that month
shall be the Maximum Rate, and, if in future months, that
interest rate would otherwise be less than the Maximum Rate, then
that interest rate shall remain at the Maximum Rate until such
time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been
limited by the Maximum Rate. In the event that, upon payment in
full of the Obligations under this Agreement, the total amount of
interest paid or accrued under the terms of this Agreement is
less than the total amount of interest which would, but for this
Section 3.4, have been paid or accrued if the interest rates
otherwise set forth in this Agreement had at all times been in
effect, then the Borrower shall, to the extent permitted by
applicable law, pay the Agent, for the account of the Lenders, an
amount equal to the difference between (a) the lesser of (i) the
amount of interest which would have been charged if the Maximum
Rate had, at all times, been in effect or (ii) the amount of
interest which would have accrued had the interest rates
otherwise set forth in this Agreement, at all times, been in
effect and (b) the amount of interest actually paid or accrued
under this Agreement. In the event that a court determines that
the Agent and/or any Lender has received interest and other
charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically
be applied to reduce, the Obligations other than interest, in the
inverse order of maturity, and if there are no Obligations
outstanding, the Agent and/or such Lender shall refund to the
Borrower such excess.
3.5 Closing Fee. The Borrower will pay to the Agent
on the Closing Date, for the account of the Lenders, ratably in
accordance with their respective Pro Rata Shares, a closing fee
(the "Closing Fee") in the amount of $1,125,000, which Closing
Fee shall be fully earned by the Lenders on the Closing Date.
The Agent, the Lenders and the Borrower agree that the Closing
Fee shall be financed by the Lenders as Revolving Loans.
3.6 Unused Line Fee. The Borrower shall pay to the
Agent, for the account of the Lenders, an unused line fee (the
"Unused Line Fee") equal to three eights of one percent (0.375%)
per annum on the average daily amount by which the Revolver
Facility exceeded the sum of outstanding Revolving Loans and the
undrawn face amount of all outstanding Letters of Credit, payable
on the first day of each month for the immediately preceding
month and on the Termination Date for the period from the last
date for which the fee was paid to and including the Termination
Date. The Unused Line Fee shall be computed on the basis of a
360-day year for the actual number of days elapsed. As provided
for in Section 5.8(b), all payments received by the Agent on
account of Accounts or as proceeds of other Collateral shall be
deemed to be credited to the Borrower's loan account immediately
upon receipt for purposes of calculating the Unused Line Fee
pursuant to this Section 3.6.
3.7 Letter of Credit Fee. (a) The Borrower will pay
the Agent, for the account of the Lenders, with respect to each
Letter of Credit, a fee ("Letter of Credit Fee") equal to one and
one-quarter percent (1.25%) per annum of the undrawn face amount
of each such Letter of Credit issued for the Borrower's account
at the Borrower's request, plus all reasonable out-of-pocket
costs, fees and expenses incurred by the Agent in connection with
the application for issuance of or amendment to any Letter of
Credit. The Letter of Credit Fee shall be payable monthly in
arrears commencing on the first day of the month following the
month in which such Letter of Credit was issued and thereafter,
on the first day of each month following a month during which
each such Letter of Credit remains outstanding, in each case, for
the number of days such Letter of Credit was outstanding in such
month. The Letter of Credit Fee shall be computed on the basis
of a 360-day year for the actual number of days elapsed.
3.8 Agency Fee. The Borrower shall pay to the Agent
on the Closing Date and an each Anniversary Date an agency fee
equal to $100,000. The agency fee payable on the Closing Date
and each Anniversary Date shall be fully earned as of each such
date.
3.9 Audit Fees. The Borrower shall pay to the Agent,
solely for its own account, all costs and fees reasonably
incurred by the Agent's internal auditors in connection with
audits of the Borrower performed by the Agent during the term of
this Agreement. The Agent's auditors shall be billed at a rate
of $500 per day plus reasonably incurred out-of-pocket expenses
(including travel expenses).
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans. The Borrower shall repay the
outstanding principal balance of the Revolving Loans, plus all
accrued but unpaid interest thereon, on the Termination Date.
The Borrower may prepay Revolving Loans at any time, and reborrow
subject to the terms of this Agreement; provided, however, that
with respect to any LIBOR Loans prepaid by the Borrower prior to
the expiration date of the Interest Period applicable thereto,
the Borrower agrees to pay to the Lenders the amounts described
in Section 3.3(f). In addition, and without limiting the
generality of the foregoing, the Borrower shall pay to the Agent,
for the account of the Lenders, on demand, the amount by which
the Aggregate Revolver Outstandings exceed the Maximum Revolver
Amount.
4.2 Termination of Revolver Facility. The Borrower
may terminate the Revolver Facility in whole, but not in part,
upon at least five (5) Business Days' notice to the Agent and the
Lenders, upon (a) the payment in full of all outstanding
Revolving Loans, together with accrued interest thereon, and the
cancellation of all outstanding Letters of Credit, (b) the
payment of the early termination fee set forth in the next
sentence, and (c) with respect to any LIBOR Loans prepaid in
connection with such termination prior to the expiration date of
the Interest Period applicable thereto, the payment of the
amounts described in Section 3.3(f). If the Revolver Facility is
terminated at any time prior to the second Anniversary Date,
whether pursuant to this Section or pursuant to Section 10.2, the
Borrower shall pay to the Agent, for the account of the Lenders,
an early termination fee determined as a percentage of the
Revolver Facility in accordance with the following table:
Period during which Early termination
early termination fee, as percentage
occurs of Revolver Facility
On or prior to first
Anniversary Date 0.75%
After first Anniversary Date but on or
prior to second
Anniversary Date 0.25%
Notwithstanding the foregoing, if the Revolver Facility is
terminated by the Borrower in connection with a refinancing of
the Obligations by Bank of America or any affiliate of Bank of
America (which could include BABC), or by a group of lenders for
which Bank of America or an affiliate of Bank of America is
acting as sole agent, such early termination fee shall not be
required to be paid.
4.3 Reduction of Revolver Facility. If the Borrower
shall issue any Medium Term Notes on or after the Closing Date,
the Borrower may reduce the Revolver Facility by an amount not to
exceed the net proceeds received by the Borrower as a result of
such Medium Term Note issuance; provided that the Revolver
Facility shall not be reduced to an amount which is less than the
Aggregate Revolver Outstandings at the time of such reduction.
Any such reduction shall be made on not less than five (5)
Business Days prior written notice to the Agent and the Lenders.
Any such reduction in the Revolver Facility shall result in the
reduction of the Commitment of each Lender in an amount equal to
such Lender's Pro Rata Share of the total reduction.
4.4 Place and Form of Payments; Extension of Time.
All payments of principal, interest, premium, and other sums due
to the Agent or the Lenders shall be made at the Agent's address
set forth in or specified pursuant to Section 14.7. Except for
proceeds received directly by the Agent, all such payments shall
be made in immediately available funds. If any payment of
principal, interest, premium, or other sum to be made hereunder
becomes due and payable on a day other than a Business Day, the
due date of such payment shall be extended to the next succeeding
Business Day and interest thereon shall be payable at the
applicable Interest Rate during such extension.
4.5 Payments as Revolving Loans. All payments of
principal, interest, reimbursement obligations in connection with
Letters of Credit, fees, premiums and other sums payable
hereunder, including all reimbursement for expenses pursuant to
Section 14.6, may, at the option of the Agent, in its sole
discretion, subject only to the terms of this Section 4.5, be
paid from the proceeds of Revolving Loans made hereunder, whether
made following a request by the Borrower pursuant to Section 2.1
or a deemed request as provided in this Section 4.5. The
Borrower hereby irrevocably authorizes the Lenders to make
Revolving Loans (including BABC Revolving Loans by BABC or Agent
Advances by the Agent), upon notice from the Agent as described
in the next succeeding sentence, for the purpose of paying
principal, interest, reimbursement obligations in connection with
Letters of Credit, fees, premiums and other sums payable
hereunder, including reimbursing expenses pursuant to
Section 14.6, and agrees that all such Revolving Loans so made
shall be Reference Rate Loans deemed to have been requested by it
pursuant to Section 2.1, as of the date of the aforementioned
notice. The Agent shall request Revolving Loans on behalf of the
Borrower as described in the immediately preceding sentence by
notifying the Lenders (or BABC, in the case of a BABC Revolving
Loan) by telecopy, telephone or other similar form of
transmission, of the amount and Funding Date of the requested
Borrowing and that such Borrowing is being requested on the
Borrower's behalf pursuant to this Section 4.5; provided,
however, that, subject to the terms of Section 2.2(f), the Agent
shall in no event so notify the Lenders if the Agent shall have
received written notice from any Lender that one or more of the
applicable conditions precedent contained in Article 9 will not
be satisfied on the requested Funding Date for the applicable
Borrowing. On the requested Funding Date, as applicable, the
Lenders will make the requested Revolving Loans in accordance
with the procedures and subject to the conditions specified in
Section 2.1.
4.6 Apportionment, Application and Reversal of
Payments. Aggregate principal and interest payments shall be
apportioned ratably among the Lenders (according to the unpaid
principal balance of the Loans to which such payments relate held
by each Lender) and payments of the fees shall, as applicable, be
apportioned ratably among the Lenders. All payments shall be
remitted to the Agent and all such payments not relating to
principal or interest of specific Loans, or not constituting
payment of specific fees, and all proceeds of Accounts or other
Collateral received by the Agent, shall be applied, ratably,
subject to the provisions of this Agreement, first, to pay any
fees, expense reimbursements or indemnities then due to the Agent
from the Borrower; second, to pay any fees, expense
reimbursements or indemnities then due to the Lenders from the
Borrower; third, to pay interest due in respect of the BABC
Revolving Loans and Agent Advances; fourth, to pay or prepay
principal of the BABC Revolving Loans and Agent Advances; fifth,
to pay interest due in respect of all Revolving Loans (other than
the BABC Revolving Loans and Agent Advances) and unpaid
reimbursement obligations in respect of Letters of Credit; sixth,
to pay or prepay principal of the Revolving Loans (other than the
BABC Revolving Loans and Agent Advances) and to pay, prepay or
provide cash collateral in respect of outstanding Letters of
Credit or any unpaid reimbursement obligations in respect
thereof, as applicable; and seventh, to the payment of any other
Obligation due to the Agent or any Lender by the Borrower.
Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by the Borrower, or unless an Event
of Default is outstanding, neither the Agent nor any Lender shall
apply any payments which it receives to any LIBOR Loan except (a)
on the expiration date of the Interest Period applicable to any
such LIBOR Loan, or (b) in the event, and only to the extent,
that there are no outstanding Revolving Loans that are Reference
Rate Loans. The Agent shall promptly distribute to each Lender,
pursuant to the applicable wire transfer instructions set forth
in Section 13.11, or pursuant to such other instructions as such
Lender may deliver to the Agent in writing, such funds as it may
be entitled to receive. The Agent and the Lenders shall have the
continuing and exclusive right to apply and reverse and reapply
any and all such proceeds and payments to any portion of the
Obligations.
4.7 Indemnity for Returned Payments. If after receipt
of any payment of, or proceeds applied to the payment of, all or
any part of the Obligations, the Agent or any Lender is for any
reason compelled to surrender such payment or proceeds to any
Person, because such payment or application of proceeds is
invalidated, declared fraudulent, set aside, determined to be
void or voidable as a preference, impermissible set-off, or a
diversion of trust funds, or for any other reason, then the
Obligations or part thereof intended to be satisfied shall be
revived and continue and this Agreement shall continue in full
force as if such payment or proceeds had not been received by the
Agent or such Lender, and the Borrower shall be liable to pay to
the Agent, and hereby does indemnify the Agent and the Lenders
and hold the Agent and the Lenders harmless for, the amount of
such payment or proceeds surrendered. The provisions of this
Section 4.7 shall be and remain effective notwithstanding any
contrary action which may have been taken by the Agent or any
Lender in reliance upon such payment or application of proceeds,
and any such contrary action so taken shall be without prejudice
to the Agent's and the Lenders' rights under this Agreement and
shall be deemed to have been conditioned upon such payment or
application of proceeds having become final and irrevocable. The
provisions of this Section 4.7 shall survive the termination of
this Agreement.
4.8 Increased Capital. If any Lender determines that
compliance by such Lender with any guideline or request from any
central bank or other Public Authority (whether or not having the
force of law) adopted or promulgated after the Closing Date
affects or would affect the amount of capital required or
expected to be maintained by such Lender, or any corporation
controlling such Lender, and such Lender reasonably determines
that the amount of such capital is increased by or based upon its
Commitment or its making or maintaining Loans hereunder, or its
commitment to participate (as provided for in Section 2.2(f)) in
any Letter of Credit or Credit Support provided through the Agent
in connection with the issuance of any Letter of Credit, or to
otherwise extend credit to the Borrower hereunder, and other
commitments of this type, then, upon demand by such Lender, the
Borrower agrees to immediately pay to such Lender, from time to
time as specified by such Lender, additional amounts sufficient
to compensate such Lender in the light of such circumstances, to
the extent that such Lender reasonably determines such increase
in capital to be allocable to such Lender's commitment to
participate in any Letter of Credit or Credit Support or
commitment to make Loans hereunder. A certificate as to the
amount of such increased cost, submitted to the Borrower by the
applicable Lender shall, absent manifest error, be conclusive and
binding on the Borrower for all purposes.
4.9 Register; Agent's and Lenders' Books and Records;
Monthly Statements. The Borrower agrees that the Register and
each Lender's books and records showing the Obligations and the
transactions pursuant to this Agreement and the other Loan
Documents shall be admissible in any action or proceeding arising
therefrom, and shall, absent manifest error, constitute
rebuttably presumptive proof thereof, irrespective of whether any
Obligation is also evidenced by a promissory note or other
instrument. The Agent will provide to the Borrower a monthly
statement of Loans, payments, and other transactions pursuant to
this Agreement. Such statement shall be deemed correct,
accurate, and binding on the Borrower and an account stated
(except for reversals and reapplications of payments made as
provided in Section 4.6 and corrections of errors discovered by
the Agent), unless the Borrower notifies the Agent in writing to
the contrary within thirty (30) days after such statement is
rendered. In the event a timely written notice of objections is
given by the Borrower, only the items to which exception is
expressly made will be considered to be disputed by the Borrower.
ARTICLE 5
COLLATERAL
5.1 Grant of Security Interest. (a) As security for
all Obligations, the Borrower hereby grants to the Agent, for the
ratable benefit of the Agent and the Lenders, a continuing
security interest in, lien on, assignment of, and right of
set-off against all of the following property of the Borrower,
whether now owned or existing or hereafter acquired or arising
and regardless of where located:
(i) all Accounts, letters of credit, Assigned
Contracts, chattel paper, instruments, notes,
documents, and documents of title;
(ii) General Intangibles;
(iii) Inventory;
(iv) Equipment;
(v) all moneys, investment property, Securities
and other property of any kind of the Borrower in the
possession or under the control of the Agent or any
Lender, any assignee of or participant in the
Obligations, or a bailee of any such party or such
party's affiliates;
(vi) all of the Borrower's deposit accounts,
credits, and balances with and other claims against the
Agent or any Lender or any of its affiliates or any
other financial institution with which the Borrower
maintains deposits;
(vii) all books, records and other property
relating to or referring to any of the foregoing,
including, without limitation, all books, records,
ledger cards, data processing records, and other
General Intangibles at any time evidencing or relating
to any of the foregoing; and
(viii) all accessions to, substitutions for and
replacements, products and proceeds of any of the
foregoing, including, but not limited to, proceeds of
any insurance policies, claims against third parties,
and condemnation or requisition payments with respect
to all or any of the foregoing.
All of the foregoing, together with all other property in which
the Agent or any Lender may at any time be granted a Lien, is
herein collectively referred to as the "Collateral". Collateral
shall not include any interest in Real Estate, or in any lease,
sublease or license of real property, or any property which, on
the Closing Date, is leased to the Borrower as lessee by
Metropolitan Life Insurance Company pursuant to two leases dated
as of May 18, 1990.
(b) All of the Obligations shall be secured by all of
the Collateral. The Agent may, subject to the provisions of
Articles 12 and 13, in its sole discretion, (i) exchange, waive,
or release any of the Collateral, (ii) after the occurrence and
during the continuance of an Event of Default, apply Collateral
and direct the order or manner of sale thereof as the Agent may
determine, and (iii) after the occurrence and during the
continuance of an Event of Default, settle, compromise, collect,
or otherwise liquidate any Collateral in any manner, all without
affecting (x) the Obligations outstanding after any application
of Collateral proceeds to the reduction of the Obligations or (y)
the Agent's or any Lender's right to take any other action with
respect to any other Collateral.
5.2 Perfection and Protection of Security Interest.
The Borrower shall, at its expense, perform all steps requested
by the Agent at any time to perfect, maintain, protect, and
enforce the Agent's Liens, including, without limitation:
(a) executing and recording of the Copyright and Trademark
Agreements and executing and filing financing or continuation
statements, and amendments thereof, in form and substance
satisfactory to the Agent; (b) delivering to the Agent the
original certificates of title for motor vehicles with the
Agent's security interest properly endorsed thereon;
(c) delivering to the Agent the originals of all instruments,
documents, and chattel paper, and all other Collateral of which
the Agent reasonably determines it should have physical posses-
sion in order to perfect and protect the Agent's security
interest therein, duly endorsed or assigned to the Agent without
restriction; (d) delivering to the Agent warehouse receipts
covering any portion of the Collateral located in warehouses and
for which warehouse receipts are issued; (e) after the occurrence
and during the continuance of an Event of Default, transferring
Inventory to warehouses designated by the Agent; (f) placing
notations on the Borrower's books of account to disclose the
Agent's security interest; (g) delivering to the Agent all
letters of credit on which the Borrower is named beneficiary; and
(h) taking such other steps as are reasonably deemed necessary or
desirable by the Agent to maintain and protect the Agent's Liens.
To the extent permitted by applicable law, the Agent may file,
without the Borrower's signature, one or more financing
statements disclosing the Agent's Liens. The Borrower agrees
that a carbon, photographic, photostatic, or other reproduction
of this Agreement or of a financing statement is sufficient as a
financing statement.
If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of the Borrower's
agents or processors, then the Borrower shall notify the Agent
thereof and shall notify such Person of the Agent's security
interest in such Collateral and, upon the Agent's request,
instruct such Person to hold all such Collateral for the Agent's
account subject to the Agent's instructions. If at any time any
Collateral is located on any premises that are not owned by the
Borrower, then the Borrower shall use reasonable efforts to
obtain written waivers, in form and substance reasonably
satisfactory to the Agent, of all present and future Liens to
which the owner or lessor or any mortgagee of such premises may
be entitled to assert against the Collateral. The Agent
acknowledges that certain lessors and mortgagers do not have an
obligation to grant such waivers and may refuse to do so. The
Borrower's reasonable efforts to obtain such waivers shall not
include payment of money or consenting to changes in terms of any
lease or mortgage or instituting litigation to secure such
waivers.
From time to time, the Borrower shall, upon the Agent's
request, execute and deliver confirmatory written instruments
pledging to the Agent, for the ratable benefit of the Agent and
the Lenders, the Collateral, but the Borrower's failure to do so
shall not affect or limit the Agent's security interest or the
Agent's other rights in and to the Collateral. So long as this
Agreement is in effect and until all Obligations have been fully
satisfied, the Agent's Liens shall continue in full force and
effect in all Collateral (whether or not deemed eligible for the
purpose of calculating the Maximum Revolver Amount or as the
basis for any advance, loan, extension of credit, or other finan-
cial accommodation).
5.3 Location of Collateral. The Borrower represents
and warrants to the Agent and the Lenders that: (a) Schedule 5.3
is a correct and complete list of the Borrower's chief executive
office, the location of its books and records, the locations of
the Collateral, and the locations of all of its other places of
business, including any facilities no longer in use as so noted
thereon; and (b) Schedule 5.3 correctly identifies any of such
facilities and locations that are not owned by the Borrower and
sets forth, to the best of the Borrower's knowledge, the names of
the lessors, sublessors, owners and the holders of any mortgages
granted by the Borrower on, such facilities and locations. The
Borrower covenants and agrees that it will not (i) maintain any
Collateral at any location other than those listed on Schedule
5.3, (ii) otherwise change or add to any of such locations, or
(iii) change the location of its chief executive office from the
location identified in Schedule 5.3, unless, in each case, it
gives the Agent at least fifteen (15) days' written notice prior
to so maintaining any Collateral, or any such change or addition,
and executes any and all financing statements and other documents
that the Agent requests in connection therewith. Without
limiting the foregoing, the Borrower represents that all
Inventory (other than Inventory in transit) is, and covenants
that all Inventory will be, located either (a) on premises owned
by the Borrower, (b) on premises leased by the Borrower, or (c)
in a public warehouse, provided that the Agent has received an
executed bailee letter from the applicable public warehouseman in
form and substance satisfactory to the Agent.
5.4 Title to, Liens on, and Sale and Use of
Collateral. The Borrower represents and warrants to the Agent
and the Lenders and agrees with the Agent and the Lenders that:
(a) all Collateral is and will continue to be owned by the
Borrower free and clear of all Liens whatsoever, except for
Permitted Liens; (b) the Agent's Liens in the Collateral will not
be subject to any prior Lien except for those Permitted Liens, if
any, specifically identified on Schedule 7.2; (c) the Borrower
will use, store, and maintain the Collateral with all reasonable
care and will use the Collateral for lawful purposes only; and
(d) the Borrower will not, without the Agent's prior written
approval, sell, or dispose of or permit the sale or disposition
of any Collateral, except for sales of Inventory in the ordinary
course of business and as otherwise permitted under Sections 5.9,
5.10 and 5.11. The inclusion of proceeds in the Collateral shall
not be deemed to constitute the Agent's or any Lender's consent
to any sale or other disposition of the Collateral except as
expressly permitted herein.
5.5 Appraisals. Within six months after the Closing
Date, quarterly thereafter, and, at the option of the Agent,
whenever a Default or Event of Default exists, the Agent shall,
at the Borrower's expense, cause a going-out-of-business
appraisal of the Borrower's Inventory to be conducted by an
appraiser selected by the Agent. Each such appraisal shall
provide a determination of the going-out-of-business value of the
Borrower's Inventory, net of liquidation expenses, and shall be
of a scope and contain such detail as is reasonably acceptable to
the Agent. Each such appraisal shall promptly upon completion be
delivered to each Lender and the Borrower.
5.6 Access and Examination; Confidentiality. (a) The
Agent, accompanied by any Lender which so elects, may at all
reasonable times during regular business hours (and at any time
when a Default or Event of Default exists) have access to,
examine, audit, make extracts from or copies of and inspect any
of all of the Borrower's records, files, and books of account and
the Collateral, and discuss the Borrower's affairs with the
Borrower's officers and management. The Borrower will deliver to
the Agent any instrument necessary for the Agent to obtain
records from any service bureau maintaining records for the
Borrower. The Agent may, and at the direction of the Majority
Lenders shall, at any time when a Default or Event of Default
exists, during regular business hours, and at the Borrower's
expense, make copies of all of the Borrower's books and records,
or require the Borrower to deliver such copies to the Agent. The
Agent may, without expense to the Agent, use such of the
Borrower's personnel, supplies, and premises as may be reasonably
necessary for maintaining or enforcing the Agent's Liens.
(b) The Borrower agrees that, subject to the
Borrower's prior consent for uses other than in a traditional
tombstone, which consent shall not be unreasonably withheld or
delayed, the Agent and each Lender may use the Borrower's name in
advertising and promotional material and in conjunction therewith
disclose the general terms of this Agreement. The Agent and each
Lender agree to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by the
Borrower and provided to the Agent or such Lender by or on behalf
of the Borrower, under this Agreement or any other Loan Document,
and neither the Agent, nor such Lender nor any of their
respective affiliates shall use any such information other than
in connection with or in enforcement of this Agreement and the
other Loan Documents, except to the extent that such information
(i) was or becomes generally available to the public other than
as a result of disclosure by the Agent or such Lender, or (ii)
was or becomes available on a nonconfidential basis from a source
other than the Borrower, provided that such source is not bound
by a confidentiality agreement with the Borrower known to the
Agent or such Lender; provided, however, that the Agent and any
Lender may disclose such information (A) at the request or
pursuant to any requirement of any Public Authority to which the
Agent or such Lender is subject or in connection with an
examination of the Agent or such Lender by any such Public
Authority; (B) pursuant to subpoena or other court process; (C)
when required to do so in accordance with the provisions of any
applicable requirement of law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which
the Agent, any Lender or their respective affiliates may be
party; (E) to the extent reasonably required in connection with
the exercise of any remedy hereunder or under any other Loan
Document; (F) to the Agent's or such Lender's independent
auditors, accountants, attorneys and other professional advisors;
(G) to any affiliate of the Agent or such Lender, or to any
Participating Lender or assignee under any Assignment and
Acceptance, actual or potential, provided that such affiliate,
Participating Lender or assignee agrees to keep such information
confidential to the same extent required of the Agent and the
Lenders hereunder; and (H) as expressly permitted under the terms
of any other document or agreement regarding confidentiality to
which the Borrower is party or is deemed party with the Agent or
such Lender. In the case of clauses (A), (B), (C) and (H) of the
preceding proviso, and in the case of clause (D) if the Agent or
any Lender is not opposed to the Borrower in such litigation or
proceeding, the Agent or Lender requested to disclose such
confidential information shall use good faith efforts to notify
the Borrower of such request and disclosure.
5.7 Collateral Reporting. The Borrower will provide
the Agent with the following documents at the following times in
form satisfactory to the Agent: (a) with the exception of the
first week of each month, weekly inventory reports by category
and location, and showing inventory turnover by category and
location; (b) with the exception of the first week of each month,
weekly perpetual inventory reports on a cost and retail basis by
location; (c) weekly sales reports by store and department; (d)
weekly details of cash receipts by store; (e) weekly status
reports on imported inventory in transit; (f) monthly agings of
accounts payable; (g) upon request, copies of purchase orders,
invoices and delivery documents for Inventory and Equipment
acquired by the Borrower; (h) such other reports as to the
Collateral as the Agent or any Lender shall request from time to
time; and (i) with the delivery of each of the foregoing, a
certificate of the Borrower executed by a duly authorized officer
thereof certifying as to the accuracy and completeness of the
foregoing. Each weekly report referred to above shall be
delivered on the fourth Business Day of each week for the
preceding week, and the monthly report shall be delivered for
each month with the first weekly report delivered in the
succeeding month. If any of the Borrower's records or reports of
the Collateral are prepared by an accounting service or other
agent, the Borrower hereby authorizes such service or agent to
deliver such records, reports, and related documents to the
Agent, for distribution to the Lenders.
5.8 Collection of Accounts; Payments. (a) Until the
Agent notifies the Borrower to the contrary, the Borrower shall
make collection for the Agent of all Accounts and other
Collateral, and shall receive all payments and collections from
each store as the Agent's trustee. The Borrower shall establish
prior to the Closing Date a Blocked Account into which all
collected funds from all of the Borrower's collection accounts
are to be transferred. The Borrower shall deposit collections
from each store on each day in a collection account, the terms of
which collection account will provide that all collected funds
therein are to be transferred to a Blocked Account. At any time
after the occurrence of a Triggering Event, the Agent is
authorized to give notice to any Blocked Account Bank that all
amounts deposited or otherwise credited to the applicable Blocked
Account shall be wire transferred on a daily basis to, or at the
direction of, the Agent. The Agent will not give any such notice
prior to the occurrence of a Triggering Event.
If the Agent requests, based on its commercially
reasonable judgement, the Borrower shall establish a lock-box
service for collections of Accounts at a bank or banks mutually
acceptable to the Agent and the Borrower and pursuant to
documentation satisfactory to the Agent. If such lock-box
service is established, the Borrower shall instruct all account
debtors to make all payments directly to the address or addresses
established for such service. If, notwithstanding such
instructions, the Borrower receives any proceeds of Accounts, it
shall receive such payments as the Agent's and the Lenders'
trustee, and shall immediately deliver such payments to the Agent
in their original form duly endorsed in blank or deposit them
into a Blocked Account, as the Agent may direct. The Agent or
the Agent's designee may, at any time after the occurrence of an
Event of Default, notify obligors that the Accounts have been
assigned to the Agent and of the Agent's security interest
therein, and may collect them directly and charge the collection
costs and expenses to the Borrower's loan account as a Revolving
Loan as described in Section 4.5. At the Agent's request, the
Borrower shall execute and deliver to the Agent such documents as
the Agent shall require to grant the Agent access to any post
office box in which collections of Accounts are received.
(b) At any time that, pursuant to a Blocked Account
Agreement, funds in a Blocked Account are being delivered to or
at the direction of the Agent, all payments received by the Agent
from the Blocked Account or otherwise on account of Accounts or
as proceeds of other Collateral will be the Agent's sole property
and will be credited to the Borrower's loan account (conditional
upon final collection) after allowing one (1) Business Day for
collection; provided, however, that for purposes of (1)
determining Availability, (2) calculating the Unused Line Fee
pursuant to Section 3.6, and (3) calculating the amount of
interest to be distributed by the Agent to the Lenders, such
payments shall be deemed to be credited to the Borrower's loan
account immediately upon receipt. Prior to the occurrence of a
Triggering Event, the Borrower shall have full access and may
direct the Blocked Account Bank as to disbursements and deposits
with respect to the Blocked Account.
5.9 Inventory. The Borrower represents and warrants
to the Agent and the Lenders and agrees with the Agent and the
Lenders that all of the Inventory is and will be held for sale or
lease, or to be furnished in connection with the rendition of
services, in the ordinary course of the Borrower's business, and
is and will be fit for such purposes. The Borrower will keep the
Inventory in good and marketable condition, at its own expense.
The Borrower will not, without prior written notice to the Agent,
acquire or accept any Inventory on consignment or approval. The
Borrower will maintain a perpetual inventory reporting system at
all times. The Borrower will conduct a physical count of the
Inventory in at least five of its stores each month, and will
have conducted a physical count of the Inventory in each of its
stores at least once during each 18 consecutive month period,
and, at any time after the occurrence of an Event of Default, at
such other times as the Agent requests, and shall promptly supply
each Lender with a copy of such count accompanied by a report of
the value of such inventory (determined on a first-in-first-out
basis and valued at the lower of cost or market value). The
Borrower will not sell any Inventory on a bill-and-hold (other
than lay-away sales in the ordinary course of business),
guaranteed sale, sale on approval, consignment, or, except for
ordinary course retail sales, other repurchase or return basis.
5.10 Equipment. The Borrower represents and warrants
to the Agent and the Lenders and agrees with the Agent and the
Lenders that all of the Equipment is and will be used or held for
use in the Borrower's business, and is and will be fit for such
purposes. The Borrower shall keep and maintain the Equipment in
good operating condition and repair (ordinary wear and tear ex-
cepted) and shall make all necessary replacements thereof in its
reasonable judgment. The Borrower will not, without the Agent's
prior written consent, alter or remove any identifying symbol or
number on the Equipment. The Borrower shall not, without the
Agent's prior written consent, sell, lease as a lessor, or
otherwise dispose of any of the Equipment; provided, however,
that the Borrower may (i) dispose of obsolete or unusable
Equipment having an orderly liquidation value no greater than
$250,000 individually, and $1,000,000 in the aggregate in any
Fiscal Year, without the Agent's consent, subject to the
conditions set forth below; and (ii) transfer Equipment to any
Person which shall immediately upon the consummation of such
transfer agree to lease such Equipment to the Borrower in a
transaction not otherwise prohibited hereunder. Following the
occurrence of a Triggering Event, if any of the Equipment is
sold, transferred or otherwise disposed of, then the Borrower
shall deliver all of the cash proceeds of any such sale, transfer
or disposition to the Agent, which proceeds shall be applied to
the repayment of the Obligations; provided, that if such sale,
transfer or disposition is made prior to the occurrence of an
Event of Default and in connection with the contemporaneous
purchase by the Borrower of replacement Equipment then the
Borrower may use the proceeds of such sale, transfer or
disposition to finance the purchase by the Borrower of such
replacement Equipment and shall deliver to the Agent written
evidence of the use of the proceeds for such purchase. All
replacement Equipment purchased by the Borrower shall be free and
clear of all Liens, claims and encumbrances, other than Permitted
Liens.
5.11 Assigned Contracts. The Borrower shall fully
perform all of its obligations under each of the Assigned Con-
tracts, and shall enforce all of its rights and remedies there-
under, in each case, as it deems appropriate in its business
judgment; provided, however, that the Borrower shall not take any
action or fail to take any action with respect to the Assigned
Contracts which would cause the termination of a material
Assigned Contract or would result in a waiver or other loss of
any material right or remedy of the Borrower thereunder;
provided, further that the Borrower may cause the termination of
a non-material Assigned Contract. Without limiting the
generality of the foregoing, the Borrower shall take all action
necessary or appropriate in its reasonable business judgment to
permit, and shall not take any action which in its reasonable
business judgment would have any adverse effect upon, the full
enforcement of all indemnification rights under the Assigned
Contracts. The Borrower shall notify the Agent in writing,
promptly after the Borrower becomes aware thereof, of any event
or fact which could give rise to a claim by it for
indemnification under any of the Assigned Contracts, and shall,
in its reasonable business judgment, diligently pursue such right
and report to the Agent on all further developments with respect
thereto. Following the occurrence of a Triggering Event, the
Borrower shall remit directly to the Agent for application to the
Obligations in such order as the Majority Lenders shall
determine, all amounts received by the Borrower as
indemnification or otherwise pursuant to the Assigned Contracts.
Following the occurrence and during the continuance of an Event
of Default, if the Borrower shall fail after the Agent's demand
to pursue diligently any right under the Assigned Contracts, then
the Agent may, and at the direction of the Majority Lenders
shall, directly enforce such right in its own or the Borrower's
name and may enter into such settlements or other agreements with
respect thereto as the Agent or the Majority Lenders, as
applicable, shall determine. In any suit, proceeding or action
brought by the Agent under any Assigned Contract for any sum
owing thereunder or to enforce any provision thereof, the
Borrower shall indemnify and hold the Agent harmless from and
against all expense, loss or damage suffered by reason of any
defense, set-off, counterclaims, recoupment, or reduction of
liability whatsoever of the obligor thereunder arising out of a
breach by the Borrower of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time
owing from the Borrower to or in favor of such obligor or its
successors. All such obligations of the Borrower shall be and
remain enforceable only against the Borrower and shall not be
enforceable against the Agent. Notwithstanding any provision
hereof to the contrary, the Borrower shall at all times remain
liable to observe and perform all of its duties and obligations
under the Assigned Contracts, and the Agent's or any Lender's
exercise of any of their respective rights with respect to the
Collateral shall not release the Borrower from any of such duties
and obligations. Neither the Agent nor any Lender shall be
obligated to perform or fulfill any of the Borrower's duties or
obligations under the Assigned Contracts or to make any payment
thereunder, or to make any inquiry as to the nature or
sufficiency of any payment or property received by it thereunder
or the sufficiency of performance by any party thereunder, or to
present or file any claim, or to take any action to collect or
enforce any performance, any payment of any amounts, or any
delivery of any property.
5.12 Documents, Instruments, and Chattel Paper. The
Borrower represents and warrants to the Agent and the Lenders and
agrees with the Agent and the Lenders that (a) all documents,
instruments, and chattel paper describing, evidencing, or
constituting Collateral, and all signatures and endorsements
thereon, are and will be complete, valid, and genuine and (b) all
goods evidenced by such documents, instruments, and chattel paper
are and will be owned by the Borrower free and clear of all Liens
other than Permitted Liens.
5.13 Right to Cure. The Agent may, in its discretion
and at any time, and shall, at the direction of the Majority
Lenders, for the Borrower's account and at the Borrower's
expense, pay any amount or do any act required of the Borrower
hereunder to preserve, protect, maintain or enforce the
Obligations, the Collateral or the Agent's Liens therein, and
which the Borrower fails to pay or do, including, without
limitation, payment of any judgment against the Borrower, any
insurance premium, any warehouse charge, any finishing or
processing charge, any landlord's claim, and any other Lien upon
or with respect to the Collateral. The Agent agrees to provide
notice to the Borrower of the making of such payment or the
taking of such action, provided, that the Agent's failure to give
such notice shall not prejudice its rights to so act in
accordance with the preceding sentence. All payments that the
Agent makes under this Section 5.13 and all out-of-pocket costs
and expenses that the Agent pays or incurs in connection with any
action taken by it hereunder shall be charged to the Borrower's
loan account as a Revolving Loan as described in Section 4.5.
Any payment made or other action taken by the Agent under this
Section 5.13 shall be without prejudice to any right to assert an
Event of Default hereunder and to proceed thereafter as herein
provided.
5.14 Power of Attorney. The Borrower hereby appoints
the Agent and the Agent's designees as the Borrower's attorney,
with power: (a) at any time, (i) to endorse the Borrower's name
on any checks, notes, acceptances, money orders, or other forms
of payment or security that come into the Agent's or any Lender's
possession, for deposit to a Blocked Account; (ii) to sign the
Borrower's name on any invoice, bill of lading, warehouse receipt
or other document of title relating to any Collateral, on drafts
against customers, on assignments of Accounts, on notices of
assignment, financing statements and other public records; and
(iii) to clear Inventory, the purchase of which was financed with
Letters of Credit, through customs in the Borrower's name, the
Agent's name or the name of the Agent's designee, and to sign and
deliver to customs officials powers of attorney in the Borrower's
name for such purpose; and (b) following the occurrence and
during the continuation of any Event of Default, (i) to send
requests for verification of Accounts to customers or account
debtors, and (ii) to do all things necessary to carry out this
Agreement. The Borrower ratifies and approves all acts of such
attorney, other than those constituting gross negligence or
willful misconduct. None of the Lenders or the Agent nor the
attorneys will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law. This power, being
coupled with an interest, is irrevocable until this Agreement has
been terminated and the Obligations have been fully satisfied.
5.15 The Agent's and Lenders' Rights, Duties and
Liabilities. The Borrower assumes all responsibility and
liability arising from or relating to the use, sale or other
disposition of the Collateral. The Obligations shall not be
affected by any failure of the Agent or any Lender to take any
steps to perfect the Agent's Liens or to collect or realize upon
the Collateral, nor shall loss of or damage to the Collateral
release the Borrower from any of the Obligations. Following the
occurrence and during the continuation of an Event of Default,
the Agent may, and at the direction of the Majority Lenders
shall, without notice to or consent from the Borrower, sue upon
or otherwise collect, extend the time for payment of, modify or
amend the terms of, compromise or settle for cash, credit, or
otherwise upon any terms, grant other indulgences, extensions,
renewals, compositions, or releases, and take or omit to take any
other action with respect to the Collateral, any security
therefor, any agreement relating thereto, any insurance
applicable thereto, or any Person liable directly or indirectly
in connection with any of the foregoing, without discharging or
otherwise affecting the liability of the Borrower for the Obliga-
tions or under this Agreement or any other agreement now or here-
after existing between the Agent and/or any Lender and the
Borrower.
ARTICLE 6
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
6.1 Books and Records. The Borrower shall maintain,
at all times, correct and complete books, records and accounts in
which complete, correct and timely entries are made of its trans-
actions in accordance with GAAP applied consistently with the
audited Financial Statements required to be delivered pursuant to
Section 6.2(a). The Borrower shall, by means of appropriate
entries, reflect in such accounts and in all Financial Statements
proper liabilities and reserves for all taxes and proper provi-
sion for depreciation and amortization of property and bad debts,
all in accordance with GAAP. The Borrower shall maintain at all
times books and records pertaining to the Collateral in such
detail, form and scope as the Agent shall reasonably require,
including, but not limited to, records of (a) all payments
received and all credits and extensions granted with respect to
the Accounts; (b) the return, rejections, repossession, stoppage
in transit, loss, damage, or destruction of any Inventory; and
(c) all other dealings affecting the Collateral.
6.2 Financial Information. The Borrower shall
promptly furnish to each Lender all such financial information as
the Agent or any Lender shall reasonably request, and notify its
auditors and accountants that the Agent, on behalf of the
Lenders, is authorized to obtain such information directly from
them. Without limiting the foregoing, the Borrower will furnish
to each Lender, in such detail as the Agent or the Lenders shall
request, the following:
(a) As soon as available, but in any event not
later than ninety (90) days after the close of each
Fiscal Year, audited balance sheets, and statements of
income and expense, cash flow and of stockholders'
equity for the Borrower for such Fiscal Year, and the
accompanying notes thereto, setting forth in each case
in comparative form figures for the previous Fiscal
Year, all in reasonable detail, fairly presenting the
financial position and the results of operations of the
Borrower as at the date thereof and for the Fiscal Year
then ended, and prepared in accordance with GAAP. Such
statements shall be examined in accordance with
generally accepted auditing standards by and accom-
panied by a report thereon unqualified as to scope of
Arthur Andersen & Co. or such other independent
certified public accountants selected by the Borrower
and reasonably satisfactory to the Agent. The
Borrower, simultaneously with retaining such
independent public accountants to conduct such annual
audit, shall send a letter to such accountants, with a
copy to the Agent and the Lenders, notifying such
accountants that one of the primary purposes for
retaining such accountants' services and having audited
financial statements prepared by them is for use by the
Agent and the Lenders. The Borrower hereby authorizes
the Agent to communicate directly with its certified
public accountants and, by this provision, authorizes
those accountants to disclose to the Agent any and all
financial statements and other supporting financial
documents and schedules relating to the Borrower and to
discuss directly with the Agent the finances and
affairs of the Borrower.
(b) As soon as available, but in any event not
later than forty-five (45) days after the close of each
fiscal quarter other than the fourth quarter of a
Fiscal Year, unaudited balance sheets of the Borrower
as at the end of such quarter, and unaudited statements
of income and expense and cash flow for the Borrower
for such quarter and for the period from the beginning
of the Fiscal Year to the end of such quarter, together
with the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and
results of operations of the Borrower as at the date
thereof and for such period, prepared in accordance
with GAAP applied consistently with the audited
Financial Statements required to be delivered pursuant
to Section 6.2(a). Such statements shall be certified
by the chief financial or accounting officer of the
Borrower as fairly presenting the financial position
and results of operation of the Borrower as of the date
thereof and for such period, subject to normal year-end
adjustments.
(c) As soon as available, but in any event not
later than thirty (30) days after the end of each
month, unaudited balance sheets of the Borrower as at
the end of such month, and unaudited statements of
income and expense and cash flow for the Borrower for
such month and for the period from the beginning of the
Fiscal Year to the end of such month, all in reasonable
detail, fairly presenting the financial position and
results of operation of the Borrower as at the date
thereof and for such period, and prepared in accordance
with GAAP applied consistently with the audited
Financial Statements required to be delivered pursuant
to Section 6.2(a). Such statements shall be certified
by the chief financial or accounting officer of the
Borrower as fairly presenting the financial position
and results of operation of the Borrower as of the date
thereof and for such period, subject to normal
quarterly and year-end adjustments.
(d) With each of the audited Financial Statements
delivered pursuant to Section 6.2(a), a certificate of
the independent certified public accountants that exam-
ined such statement to the effect that they have re-
viewed and are familiar with this Agreement and that,
in examining such Financial Statements, they did not
become aware of any fact or condition which then con-
stituted a Default or Event of Default, except for
those, if any, described in reasonable detail in such
certificate.
(e) With each of the annual audited and quarterly
unaudited Financial Statements delivered pursuant to
Sections 6.2(a) and 6.2(b), a certificate of the chief
executive or chief financial officer of the Borrower
(each such Certificate, a "Compliance Certificate") (i)
setting forth in reasonable detail the calculations
required to establish the Fixed Charge Coverage Ratio
and the Leverage Ratio for the period covered in such
Financial Statements and as at the end thereof, and
(ii) stating that, except as explained in reasonable
detail in such certificate, (A) all of the repre-
sentations and warranties of the Borrower contained in
this Agreement and the other Loan Documents are correct
and complete as at the date of such certificate as if
made at such time, (B) the Borrower is, at the date of
such certificate, in compliance with all of its
covenants and agreements in this Agreement and the
other Loan Documents, and (C) no Default or Event of
Default then exists or existed during the period
covered by such Financial Statements. If such certifi-
cate discloses that a representation or warranty is not
correct or complete, or that a covenant has not been
complied with, or that a Default or Event of Default
existed or exists, such certificate shall set forth
what action the Borrower has taken or proposes to take
with respect thereto.
(f) No sooner than ninety (90) days and no fewer
than thirty (30) days prior to the beginning of each
Fiscal Year, projected balance sheets, statements of
income and expense, and statements of cash flow for the
Borrower as at the end of and for each month of such
Fiscal Year and the next succeeding Fiscal Year.
(g) Within forty-five (45) days after the end of
each fiscal quarter, a report of all sales of fixed
assets of the Borrower in such fiscal quarter, such
report to set forth the gross proceeds of any such sale
by the Borrower, minus any expenses or taxes applicable
to such sale, any Debt repayments or prepayments (other
than of the Obligations) made with the proceeds of such
sale, and the amount of any non-cash proceeds of such
sale.
(h) Promptly after their dissemination or filing,
as applicable, copies of any all proxy statements,
financial statements, reports filed with the Securities
and Exchange Commission, and reports which the Borrower
makes available to its stockholders or public debt
holders.
(i) Promptly after filing with the PBGC, DOL, or
IRS, (1) in the case of any Plan which is tax-qualified
under Code Section 401(a), a copy of each annual
report, and (2) any filing or notice (other than an
annual report) filed with respect to each Plan of the
Borrower or any ERISA Affiliate.
(j) Promptly after filing with the IRS, a copy of
each tax return filed by the Borrower.
(k) Each week, on the second Business Day of such
week, a Borrowing Base Certificate as of the end of the
preceding week.
(l) Such additional information as the Agent
and/or any Lender may from time to time reasonably
request regarding the financial and business affairs of
the Borrower, including, without limitation,
projections of future operations on both a consolidated
and consolidating basis.
6.3 Notices to the Lenders. The Borrower shall notify
the Agent in writing of the following matters at the following
times:
(a) Immediately after becoming aware thereof, any
Default or Event of Default.
(b) Immediately after becoming aware thereof, the
assertion by the holder of any capital stock of the
Borrower or of any Debt in an outstanding principal
amount in excess of $10,000,000 that a default exists
with respect thereto or that the Borrower is not in
compliance with the terms thereof, or the threat or
commencement by such holder of any enforcement action
because of such asserted default or non-compliance.
(c) Immediately after becoming aware thereof, any
material adverse change in the Borrower's property,
business, operations, or condition (financial or other-
wise).
(d) Immediately after becoming aware thereof, any
pending or threatened action, suit, proceeding, or
counterclaim by any Person, or any pending or
threatened investigation by a Public Authority, which
may materially and adversely affect the Collateral, the
repayment of the Obligations, the Agent's or any
Lender's rights under the Loan Documents, or the
Borrower's property, business, operations, or condition
(financial or otherwise).
(e) Immediately after becoming aware thereof, any
pending or threatened strike, work stoppage, material
unfair labor practice claim, or other material labor
dispute affecting the Borrower.
(f) Immediately after becoming aware thereof, any
violation of any law, statute, regulation, or ordinance of
Public Authority applicable to the Borrower, or its
properties which may materially and adversely affect the
Collateral, the repayment of the Obligations, the Agent's or
any Lender's rights under the Loan Documents, or the
Borrower's property, business, operations, or condition
(financial or otherwise).
(g) Immediately after becoming aware thereof, any
violation in any material respect by the Borrower of
any Environmental Law or, immediately upon its receipt
thereof, any notice that the Borrower receives
asserting that the Borrower is not in compliance with
any Environmental Law or that its compliance is being
investigated by a Public Authority.
(h) Immediately upon receipt thereof, any notice that
the Borrower is or may be liable to any Person as a result
of the Release or threatened Release of any Contaminant or
that the Borrower is subject to investigation by any Public
Authority evaluating whether any remedial action is needed
to respond to the Release or threatened Release of any
Contaminant.
(i) Immediately after becoming aware thereof, the
imposition of any Environmental Lien against any property of
the Borrower.
(j) Any change in the Borrower's name, state of
incorporation, or form of organization, trade names or
styles (other than private labels) under which the
Borrower will sell Inventory or create Accounts, or to
which instruments in payment of Accounts may be made
payable, in each case at least thirty (30) days prior
thereto.
(k) Within ten (10) Business Days after the
Borrower or any ERISA Affiliate knows or has reason to
know, that a Termination Event or a non-exempt
prohibited transaction (as defined in Sections 406 of
ERISA and 4975 of the Code) which could result in the
imposition on the Borrower or any ERISA Affiliate of
any material penalty or excise tax has occurred, and,
when known, any action taken or threatened by the IRS,
the DOL or the PBGC with respect thereto.
(l) Within three (3) Business Days (ten (10) Business
Days in the case of clause (i)) after the filing thereof
with the IRS, the DOL or the PBGC, as applicable, copies of
the following: (i) each annual report (form 5500 series),
including Schedule B thereto, filed with respect to each
Benefit Plan and (ii) a copy of each funding waiver request
filed with respect to any Benefit Plan and all
communications received by the Borrower or any ERISA
Affiliate from the IRS, the DOL or the PBGC with respect to
such request.
(m) Within three (3) Business Days (ten (10) Business
Days in the case of clause (i)) after receipt thereof by the
Borrower or any ERISA Affiliate, copies of the following:
(i) each actuarial report for any Benefit Plan or Multi-
employer Plan and annual report for any Multiemployer Plan;
(ii) any notices of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer
such Benefit Plan; (iii) any unfavorable determination
letter from the IRS regarding the qualification of a Plan
under Section 401(a) of the Code; or (iv) any notice from a
Multiemployer Plan regarding the imposition of withdrawal
liability.
(n) Within three (3) Business Days after the
occurrence thereof: (i) any increases in the benefits of any
existing Benefit Plan or Multiemployer Plan or the
establishment of any new Benefit Plan or Multiemployer Plan
or the commencement of contributions to any such Plan to
which the Borrower or any ERISA Affiliate was not previously
contributing which could reasonably be expected to have a
material adverse effect on the Borrower or any ERISA
Affiliate; or (ii) any failure by the Borrower or any ERISA
Affiliate to make a required installment or any other
required payment under Section 412 of the Code on or before
the due date for such installment or payment.
(o) Within three (3) Business Days after the Borrower
or any ERISA Affiliate knows or has reason to know that any
of the following events has or will occur: (i) a
Multiemployer Plan has been or will be terminated; (ii) the
administrator or plan sponsor of a Multiemployer Plan
intends to terminate a Multiemployer Plan; or (iii) the PBGC
has instituted or will institute proceedings under Section
4042 of ERISA to terminate a Multiemployer Plan.
For purposes of subsections (k) through (o) above, the Borrower
and any ERISA Affiliate shall be deemed to know all facts known
by the Plan administrator of any Plan of which the Borrower or
any ERISA Affiliate is the plan sponsor; provided, however, that
the Borrower shall not be deemed to have knowledge of any facts
known by any Plan administrator other than the Borrower or an
ERISA Affiliate which facts are not communicated to the Borrower
or its ERISA Affiliates as the result of the negligence, gross
negligence or willful misconduct of such Plan administrator.
Each notice given under this Section shall describe the subject
matter thereof in reasonable detail, and shall set forth the
action that the Borrower and any ERISA Affiliate, as applicable,
has taken or proposes to take with respect thereto.
ARTICLE 7
GENERAL WARRANTIES AND REPRESENTATIONS
The Borrower warrants and represents to the Agent and
the Lenders, that:
7.1 Authorization, Validity, and Enforceability of
this Agreement and the Loan Documents. The Borrower has the
corporate power and authority to execute, deliver and perform
this Agreement and other Loan Documents and the related financing
statements, to incur the Obligations, and to grant to the Agent
Liens upon and security interests in the Collateral. The
Borrower has taken all necessary corporate action (including,
without limitation, obtaining any necessary approval of its
stockholders) to authorize its execution, delivery, and
performance of this Agreement and the other Loan Documents. No
consent, approval, or authorization of, or declaration or filing
with, any Public Authority, and no consent of any other Person,
is required in connection with the Borrower's execution,
delivery, and performance of this Agreement and the other Loan
Documents, except for those already duly obtained. Each of this
Agreement and the other Loan Documents and each of the related
financing statements has been duly executed and delivered by the
Borrower, and constitutes the legal, valid and binding obligation
of the Borrower, enforceable against it in accordance with its
terms, subject to any limitations imposed by any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and similar laws affecting creditors' rights
generally. The Borrower's execution, delivery, and performance
of this Agreement and the other Loan Documents do not and will
not conflict with, or constitute a violation or breach of, or
constitute a default under, or result in the creation or
imposition of any Lien upon the property of the Borrower by
reason of the terms of (a) any contract, mortgage, Lien, lease,
agreement, indenture, or instrument to which the Borrower is a
party or which is binding upon it, (b) any judgment, law,
statute, rule or governmental regulation applicable to the
Borrower, or (c) the Certificate of Incorporation or By-laws of
the Borrower.
7.2 Validity and Priority of Security Interest. The
provisions of this Agreement and the other Loan Documents create
legal and valid Liens on all the Collateral in favor of the
Agent, for the ratable benefit of the Agent and the Lenders, and
such Liens constitute perfected and continuing Liens on all the
Collateral, having priority over all other Liens on the
Collateral except those Permitted Liens specifically identified
on Schedule 7.2, securing all the Obligations, and enforceable
against the Borrower and all third parties.
7.3 Organization and Qualification. The Borrower
(a) is duly incorporated and organized and validly existing and
in good standing under the laws of the State of Delaware, (b) is
qualified to do business as a foreign corporation and is in good
standing in the States of Illinois, Missouri, Indiana, Iowa,
Kansas, Oklahoma, Arkansas, Kentucky, and Texas, which are the
only states in which qualification is necessary in order for it
to own or lease its property and conduct its business, and
(c) has all requisite corporate power and authority to conduct
its business and to own its property.
7.4 Corporate Name; Prior Transactions. The Borrower
has not, during the past five (5) years, been known by or used
any other corporate or fictitious name, or been a party to any
merger or consolidation, or acquired all or substantially all of
the assets of any Person, or acquired any of its property outside
of the ordinary course of business, except as set forth on
Schedule 7.4.
7.5 Affiliates. The Borrower has no Subsidiaries.
Schedule 7.5 is a correct and complete list of the name and
relationship to the Borrower of each and all of the Borrower's
Affiliates.
7.6 Financial Statements and Projections. (a) The
Borrower has delivered to the Agent the audited balance sheet and
related statements of income, retained earnings, changes in
financial position, and changes in stockholders equity for the
Borrower as of January 27, 1996 and for the Fiscal Year then
ended, accompanied by the report thereon of the Borrower's
independent certified public accountants, Arthur Andersen & Co.
The Borrower has also delivered to the Agent the unaudited
balance sheet and related statements of income and changes in
financial position for the Borrower as of April 27, 1996 and for
the three months then ended. Such financial statements are
attached hereto as Exhibit B-1. All such financial statements
have been prepared in accordance with GAAP and fairly present the
Borrower's financial position as at the dates thereof and its
results of operations for the periods then ended.
(b) As of the Closing Date, the Latest Projections,
attached hereto as Exhibit B-2, represent the Borrower's estimate
of the Borrower's future financial performance for the periods
set forth therein. The Latest Projections have been prepared on
the basis of the assumptions set forth therein, which the
Borrower believes are fair and reasonable in light of current and
reasonably foreseeable business conditions.
7.7 Capitalization. As of the Closing Date, the
Borrower's authorized capital stock consists of 50,000,000 shares
of common stock, par value $1.00 per share, of which 17,345,557
shares are validly issued and outstanding, fully paid and non-
assessable, and 2,500,000 shares of preferred stock, par value
$1.00 per share, of which 76,930 shares of cumulative convertible
preferred stock are validly issued and outstanding, fully paid
and non-assessable.
7.8 Solvency. The Borrower is Solvent prior to and
after giving effect to the making of the Revolving Loans to be
made on the Closing Date and the issuance of the Letters of
Credit to be issued on the Closing Date, and shall remain Solvent
during the term of this Agreement.
7.9 Debt. After giving effect to the making of the
Revolving Loans to be made on the Closing Date, the Borrower has
no Debt, except (a) the Obligations, (b) Debt evidenced by the
Medium Term Notes, (c) Debt evidenced by the Mortgage Notes, (d)
Debt set forth on the Schedule 7.9, (e) Debt permitted by Section
8.13, and (f) accounts payable and other contractual obligations
arising in the ordinary course of business.
7.10 Distributions. Between January 27, 1996 through
the Closing Date, no Distribution has been declared, paid, or
made upon or in respect of any capital stock or other Securities
of the Borrower, other than regularly scheduled cash dividends on
the Borrower's outstanding cumulative convertible preferred
stock.
7.11 Title to Property. With respect to the Real
Estate listed on Schedule 7.12, the Borrower has good and
insurable title in fee simple free of all Liens except Permitted
Liens and title exceptions customarily encountered in the case of
retail shopping centers, and the Borrower has good, indefeasible,
and merchantable title to all of its other property (including,
without limitation, the assets reflected on the January 27, 1996
Financial Statements delivered to the Agent and the Lenders,
except as disposed of in the ordinary course of business since
the date thereof or as otherwise expressly permitted hereby),
free of all Liens except Permitted Liens.
7.12 Real Estate; Leases. Schedule 7.12 sets forth a
correct and complete list of all Real Estate owned by the
Borrower as of the Closing Date, and all leases and subleases of
real property by the Borrower as lessee, sublessee, lessor or
sublessor, other than leases or subleases of real property on
which the Borrower is lessor or sublessor covering less than
10,000 square feet. To the best of Borrower's knowledge, each of
such leases and subleases is valid and enforceable in accordance
with its terms (subject to any limitations imposed by any
applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and similar laws affecting creditors'
rights generally) and is in full force and effect, and, except as
set forth in Schedule 7.12(a), no material, uncured default by
any party exists under any lease or sublease of real property to
which the Borrower is a party.
7.13 Proprietary Rights. Schedule 7.13 sets forth a
correct and complete list of all of the Proprietary Rights as of
the Closing Date. None of the Proprietary Rights is subject to
any licensing agreement or similar arrangement as of the Closing
Date except as set forth on Schedule 7.13. Except as set forth
on Schedule 7.13, to the best of the Borrower's knowledge, none
of the Proprietary Rights infringes on or conflicts with any
other Person's property, and no other Person's property infringes
on or conflicts with the Proprietary Rights. The Proprietary
Rights described on Schedule 7.13 constitute all of the property
of such type material to the current and currently anticipated
future conduct of the Borrower's business, and all of such
Proprietary Rights are assignable.
7.14 Trade Names. All trade names or styles (other
than private labels) under which the Borrower will sell Inventory
or create Accounts, or to which instruments in payment of
Accounts may be made payable, are listed on Schedule 7.14.
7.15 Litigation. Except as set forth on Schedule
7.15, there is no pending or (to the best of the Borrower's
knowledge) threatened, action, suit, proceeding, or counterclaim
by any Person, or investigation by any Public Authority, or any
basis for any of the foregoing, which could reasonably be
expected to materially and adversely affect the Collateral, the
repayment of the Obligations, the Agent's or any Lender's rights
under the Loan Documents, or the Borrower's property, business,
operations, or condition (financial or otherwise).
7.16 Restrictive Agreements. The Borrower is not a
party to any contract or agreement, and is not subject to any
charter or other corporate restriction, which adversely affects
its ability to execute, deliver, and perform the Loan Documents
and repay the Obligations or which materially and adversely
affects or, insofar as the Borrower can reasonably foresee, could
reasonably be expected to materially and adversely affect, the
Borrower's property, business, operations, or condition
(financial or otherwise), or would in any respect materially and
adversely affect the Collateral, the repayment of the
Obligations, the Agent's or any Lender's rights under the Loan
Documents, or the Borrower's property, business, operations, or
condition (financial or otherwise).
7.17 Labor Disputes. Except as set forth on
Schedule 7.17, (a) there is no collective bargaining agreement or
other labor contract covering employees of the Borrower, (b) no
such collective bargaining agreement or other labor contract is
scheduled to expire during the term of this Agreement and (c) to
the best of the Borrower's knowledge, no union or other labor
organization is seeking to organize, or to be recognized as, a
collective bargaining unit of employees of the Borrower or for
any similar purpose, and (d) there is no pending or (to the best
of the Borrower's knowledge) threatened, strike, work stoppage,
material unfair labor practice claim, or other material labor
dispute against or affecting the Borrower, or any of its
employees.
7.18 Environmental Laws. As of the Closing Date,
except as otherwise disclosed on Schedule 7.18:
(a) Each of the Borrower, and, to the best of its
knowledge, each of its predecessors in interest, has
complied in all material respects with all Environmental
Laws and health and safety laws applicable to the Borrower's
property and business, and neither the Borrower nor any of
its present property or operations, or to the best of
Borrower's knowledge, its past property or operations, are
subject to any order from or agreement with any Public
Authority or private Person respecting (i) compliance with
any Environmental Law or health or safety requirements of
law, or (ii) any potential liabilities and costs or remedial
action arising from the Release or threatened Release of a
Contaminant.
(b) The Borrower has obtained all environmental, health
and safety permits necessary for its operation, and all such
permits are in good standing and the Borrower is in material
compliance with all terms and conditions of such permits.
(c) Neither the Borrower, nor, to the best of the
Borrower's knowledge, any of its predecessors in interest,
has generated, handled, used, stored or disposed of any
hazardous or toxic waste or substance, as defined pursuant
to 40 CFR Part 261 or any equivalent Environmental Law, on
or off the Borrower's property (whether or not owned by it),
nor has the Borrower filed any notice with any Public
Authority indicating such generation, handling, use, storage
or disposal.
(d) The Borrower has no material contingent liability
with respect to non-compliance with any Environmental Laws
or any Release or threatened Release of a Contaminant or the
generation, handling, use, storage, or disposal of hazardous
or toxic wastes or substances.
(e) Neither the Borrower, nor to the best of the
Borrower's knowledge, any of its predecessors in interest,
has received any summons, complaint, order or similar notice
that it is not in compliance with, or that any Public
Authority is investigating its compliance with, any
Environmental Laws or health and safety laws or that it is
or may be liable to any other Person as a result of a
Release or threatened Release of a Contaminant.
(f) None of the present or past operations of the
Borrower is the subject of any investigation by any Public
Authority evaluating whether any remedial action is needed
to respond to a Release or threatened Release of a
Contaminant.
(g) There is not now, nor to the best of the
Borrower's knowledge has there ever been on or in the
Premises:
(i) any generation, treatment, recycling, storage or
disposal of any hazardous waste, as that term is
defined under 40 CFR Part 261 or any equivalent
Environmental Law,
(ii) any underground storage tanks or surface
impoundments,
(iii) any asbestos containing material, or
(iv) any polychlorinated biphenyls (PCB) used in
hydraulic oils, electrical transformers or other equip-
ment.
(h) The Borrower has not filed any notice under any
applicable Environmental Law reporting a Release of a
Contaminant into the environment.
(i) The Borrower has not entered into any negotiations
or agreements with any Person (including, without
limitation, the prior owner of its property) relating to any
remedial action in response to the Release of a Contaminant
or environmentally related claim.
(j) To the best of the Borrower's knowledge, none of
the products manufactured, distributed or sold by the
Borrower contains asbestos containing material.
(k) No Environmental Lien has attached to any property
of the Borrower or any Subsidiary.
7.19 No Violation of Law. The Borrower is not in
violation of any law, statute, regulation, ordinance, judgment,
order, or decree applicable to it which violation would in any
respect materially and adversely affect the Collateral, the
repayment of the Obligations, the Agent's or any Lender's rights
under the Loan Documents, or the Borrower's property, business,
operations, or condition (financial or otherwise).
7.20 No Default. The Borrower is not in default with
respect to any note, indenture, loan agreement, mortgage, lease,
deed, or other agreement (other than leases covered by
Section 7.12 above) to which the Borrower is a party or by which
it is bound, which default would materially and adversely affect
the Collateral, the repayment of the Obligations, the Agent's or
any Lender's rights under the Loan Documents, or the Borrower's
or any Subsidiary's property, business, operations, or condition
(financial or otherwise).
7.21 ERISA. (a) Neither the Borrower nor any ERISA
Affiliate maintains or contributes to any Plan intended to be
qualified under Code Section 401(a) other than those listed on
Schedule 7.21.
(b) No Benefit Plan or Multiemployer Plan has been
terminated or partially terminated or is insolvent or in
reorganization, nor have any proceedings been instituted to
terminate or reorganize any Plan.
(c) Neither the Borrower nor any ERISA Affiliate has
any withdrawal liability to any Benefit Plan or Multiemployer
Plan pursuant to Title IV of ERISA, and neither the Borrower nor
any ERISA Affiliate has knowledge of any condition or event which
could reasonably be expected to result in the imposition of such
liability.
(d) Neither the Borrower nor any ERISA Affiliate has
incurred any liability to the PBGC which remains outstanding
other than the payment of premiums, and there are no premium
payments which have become due which are unpaid.
(e) No Benefit Plan has incurred any accumulated
funding deficiency (as defined in Sections 302(a)(2) of ERISA and
412(a) of the Code), whether or not waived.
(f) Neither the Borrower nor any ERISA Affiliate has
breached any of the responsibilities, obligations or duties
imposed on it by ERISA, the Code or regulations promulgated
thereunder with respect to any Plan. Each Plan is in substantial
compliance with ERISA, the Code and regulations promulgated
thereunder and neither the Borrower nor any ERISA Affiliate has
received any notice within the six (6) year period immediately
preceding the date hereof asserting that a Plan is not in compli-
ance with ERISA, and no governmental agency is currently
investigating or auditing any Plan.
(g) Other than as set forth on Schedule 7.21, each
Plan which is intended to be a qualified Plan has been determined
by the IRS to be qualified under Section 401(a) of the Code as
currently in effect and each trust related to such Plan has been
determined to be exempt from federal income tax under
Section 501(a) of the Code, as currently in effect, or if such
determination has not been made, the remedial amendment period
under Code Section 401(b) has not expired.
(h) Except as provided on Schedule 7.21, neither the
Borrower nor any ERISA Affiliate maintains or contributes to any
employer welfare benefit plan within the meaning of Section 3(1)
of ERISA which provides health, medical or life insurance
benefits to employees after termination of employment other than
as required by Section 601 et. seq. of ERISA or Section 4980B of
the Code.
(i) Schedule B to the most recent annual report filed
with the IRS with respect to each Benefit Plan and furnished to
the Agent is complete and accurate. Since the date of each such
Schedule B, there has been no material adverse change in funding
status or financial condition of the Benefit Plan relating to
such Schedule B.
(j) Neither the Borrower nor any ERISA Affiliate has
failed to make a required installment under subsection (m) of
Section 412 of the Code or any other payment required under
Section 412 of the Code on or before the due date for such
installment or other payment.
(k) Neither the Borrower nor any ERISA Affiliate is
required to provide security to a Plan under Section 401(a)(29)
of the Code due to a Plan amendment that results in an increase
in current liability for the plan year.
(l) Neither the Borrower nor any ERISA Affiliate, nor
to the best of the Borrower's knowledge, any fiduciary of any
Plan which is not a Multiemployer Plan (i) has engaged in a
nonexempt prohibited transaction described in Sections 406 of
ERISA or 4975 of the Code which could reasonably be expected to
result in the imposition of any material penalty or excise tax or
(ii) has taken or failed to take any action which would
constitute or result in a Termination Event.
(m) Neither the Borrower nor any ERISA Affiliate has
failed to make a required contribution or payment to a Multi-
employer Plan nor has the Borrower or any ERISA Affiliate made a
complete or partial withdrawal under Sections 4203 or 4205 of
ERISA from a Multiemployer Plan.
(n) The Borrower has given to the Agent copies of all
of the following: each Benefit Plan and related trust agreement
(including all amendments to such Plan and trust) in existence or
committed to as of the date hereof and the most recent summary
plan description, actuarial report, determination letter issued
by the IRS and Form 5500 filed in respect of each such Benefit
Plan in existence; a listing of all of the Multiemployer Plans
with the aggregate amount of the most recent annual contributions
required to be made by the Borrower and all ERISA Affiliates to
each such Multiemployer Plan, any information which has been
provided to Borrower or an ERISA Affiliate regarding withdrawal
liability under any Multiemployer Plan and the collective
bargaining agreement pursuant to which such contribution is
required to be made; each employee welfare benefit plan within
the meaning of Section 3(1) of ERISA which provides health,
medical, or life insurance benefits to employees after
termination of employment other than as required by Section 601
et. seq. of ERISA or Section 4980B of the Code, the most recent
summary plan description for such plan and the aggregate amount
of the most recent annual payments made to terminated employees
by the Borrower or any ERISA Affiliate under each such Plan.
(o) Neither the Borrower nor any ERISA Affiliate has,
or would reasonably be expected to have, any liability under
Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA.
7.22 Taxes. As of the Closing Date, except as set
forth on Schedule 7.22, the Borrower has filed all tax returns
and other reports which it was required by law to file on or
prior to the date hereof, and has paid all taxes, assessments,
fees, and other governmental charges, and any related penalties
and interest, if any, against it or its property, income, or
franchise, that are due and payable.
7.23 Investment Company Act, etc. The Borrower is not
an "investment company" nor an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act
of 1940, as amended (15 U.S.C. Section 80(a)(l), et seq.), nor is the
Borrower subject to any other state or federal regulation
limiting its ability to incur Debt. The making of the Revolving
Loans and other financial accommodations hereunder by the Agent
and the Lenders, the application of the proceeds and repayment
thereof by the Borrower and the consummation of the other
transactions contemplated by this Agreement and the Loan
Documents do not violate any provisions of such laws or any rule,
regulation or order issued by the Securities and Exchange Commis-
sion or other Public Authority thereunder.
7.24 Public Utility Holding Company. The Borrower is
not a "holding company" or a "subsidiary company" of a "holding
company" or an Affiliate of a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as
amended.
7.25 Margin Securities. The Borrower does not own any
"margin security," as that term is defined in Regulations G and U
of the Federal Reserve Board, and the proceeds of the Revolving
Loans, and the other financial accommodations made pursuant to
this Agreement will be used only for the purposes contemplated
hereunder. None of the Revolving Loans or the other financial
accommodations hereunder will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security,
for the purpose of reducing or retiring any Debt or other
Person's indebtedness which was originally incurred to purchase
or carry any margin security, or for any other purpose which
might cause any such loan or other financial accommodation to be
considered a "purpose credit" within the meaning of Regulation G,
U or X of the Federal Reserve Board. The Borrower will neither
take nor permit any agent acting on its behalf to take any action
which might cause any transaction, obligation or right created by
this Agreement, or any document or instrument delivered pursuant
hereto, to violate any regulation of the Federal Reserve Board.
7.26 Broker's Fees. No broker or finder is entitled
to receive compensation for services rendered with respect to the
transactions described in this Agreement.
7.27 No Material Adverse Change. As of the Closing
Date, no material adverse change has occurred in the Borrower's
property, business operations, or conditions (financial or
otherwise) since April 27, 1996.
7.28 Bank Accounts. Schedule 7.28 contains a complete
and accurate list of all bank accounts maintained by the Borrower
with any bank or other financial institution.
ARTICLE 8
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants to the Agent and each Lender
that, so long as any of the Obligations remain outstanding or
this Agreement is in effect:
8.1 Taxes and Other Obligations. The Borrower shall
(a) file when due all tax returns and other reports which it is
required to file, (b) pay, or provide for the payment, when due,
of all taxes, fees, assessments and other governmental charges
against it or upon its property, income and franchises, make all
required withholding and other tax deposits, and establish
adequate reserves as required under GAAP for the payment of all
such items, and provide to the Agent and the Lenders, upon
request, satisfactory evidence of its timely compliance with the
foregoing and (c) pay when due all claims of materialmen,
mechanics, carriers, warehousemen, landlords and other like
Persons, and all other indebtedness owed by it and perform and
discharge in a timely manner all other obligations undertaken by
it; provided, however, that the Borrower need not pay any tax,
fee, assessment, governmental charge, or Debt, or discharge any
other obligation, that it is contesting in good faith by
appropriate proceedings diligently pursued, and for which
adequate reserves are maintained, so long as no Lien, other than
a Permitted Lien, results from such non-payment.
8.2 Corporate Existence and Good Standing. The
Borrower shall (a) maintain its corporate existence, and (b)
maintain its qualification and good standing in all states
necessary to conduct its business and own its property, and (c)
obtain and maintain all material licenses, permits, franchises
and governmental authorizations necessary to conduct its business
and own its property.
8.3 Compliance with Law and Agreements. The Borrower
shall comply with the terms and provisions of each material
judgment, law, statute, rule, and governmental regulation
applicable to it and each material contract, mortgage, lien,
lease, indenture, order, instrument, agreement, or document to
which it is a party or by which it is bound.
8.4 Maintenance of Property. The Borrower shall
maintain or replace all of its property necessary and useful in
its business, such that all such property remains in good
operating condition and repair, ordinary wear and tear, insured
casualty and condemnation excepted.
8.5 Insurance. The Borrower shall maintain with
financially sound and reputable insurers, insurance against loss
or damage by fire with extended coverage; theft, burglary,
pilferage and loss in transit; public liability and third party
property damage; larceny, embezzlement or other criminal
liability; business interruption; public liability and third
party property damage; and such other hazards or of such other
types as is customary for Persons engaged in the same or similar
business, as the Agent, in its reasonable discretion, or acting
at the direction of the Majority Lenders, shall specify, in
amounts, and under policies reasonably acceptable to the Agent
and the Majority Lenders. As of Closing Date, the deductibles in
effect with respect to the Borrower's insurance policies as
disclosed to the Agent, are acceptable to the Agent. Without
limiting the foregoing, the Borrower shall also maintain flood
insurance, in the event of a designation of the area in which any
Real Estate is located in a "flood plain" or a "flood risk area,"
as defined by the Flood Disaster Protection Act of 1973, in an
amount to be reasonably determined by the Agent, and shall comply
with the additional requirements of the National Flood Insurance
Program as set forth in said Act.
The Borrower shall cause the Agent, for the ratable
benefit of the Agent and the Lenders, to be named in each such
policy as secured party and loss payee or additional insured, in
a manner acceptable to the Agent. Each policy of insurance shall
contain a clause or endorsement requiring the insurer to give not
less than thirty (30) days' prior written notice to the Agent in
the event of cancellation of the policy for any reason whatsoever
and a clause or endorsement stating that the interest of the
Agent shall not be impaired or invalidated by any act or neglect
of the Borrower or the owner of any premises for purposes more
hazardous than are permitted by such policy. All premiums for
such insurance shall be paid by the Borrower when due, and
certificates of insurance and, if requested by the Agent or any
Lender, photocopies of the policies shall be delivered to the
Agent, in each case in sufficient quantity for distribution by
the Agent to each of the Lenders. If the Borrower fails to
procure such insurance or to pay the premiums therefor when due,
the Agent may, and at the direction of the Majority Lenders
shall, do so from the proceeds of Revolving Loans as described in
Section 4.5.
8.6 Condemnation. The Borrower shall, immediately
upon learning of the institution of any proceeding for the
condemnation or other taking of any of its property that includes
Collateral, notify the Agent and the Lenders of the pendency of
such proceeding, and agrees that the Agent may participate in any
such proceeding, and the Borrower from time to time will deliver
to the Agent all instruments reasonably requested by the Agent to
permit such participation.
8.7 Environmental Laws. The Borrower shall conduct
its business in material compliance with all Environmental Laws
applicable to it, including, without limitation, those relating
to the generation, handling, use, storage, and disposal of
hazardous and toxic wastes and substances. The Borrower shall
take prompt and appropriate action to respond to any non-
compliance with Environmental Laws and shall regularly report to
the Agent and the Lenders on such response. Without limiting the
generality of the foregoing, whenever the Borrower gives notice
to the Agent pursuant to Section 6.3(g), the Borrower shall, at
the request of the Agent or the Majority Lenders, and the
Borrower's expense (a) cause an independent environmental
engineer reasonably acceptable to the Agent or the Majority
Lenders to conduct such tests of the site where the non-compli-
ance or alleged non-compliance with Environmental Laws has
occurred and prepare and deliver to the Agent, in sufficient
quantity for distribution by the Agent to the Lenders, a report
setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and
an estimate of the costs thereof and (b) provide to the Agent and
the Lenders a supplemental report of such engineer whenever the
scope of the environmental problems, or the response thereto or
the estimated costs thereof, shall change.
8.8 ERISA. (a) The Borrower shall, and shall cause
each of its ERISA Affiliates to, establish, maintain and operate
all Plans to comply in all material respects with the provisions
of ERISA, the Code, all regulations and interpretations
promulgated thereunder, and all other applicable laws and
regulations.
(b) The Borrower shall not, and shall not permit any
ERISA Affiliate, to:
(i) Engage in any prohibited transaction
described in Sections 406 of ERISA or 4975 of the Code
for which a statutory or class exemption is not
available or a private exemption has not been
previously been obtained from the DOL which could
reasonably be expected to result in any material
penalty or excise tax;
(ii) Permit to exist any accumulated funding
deficiency (as defined in Section 302 of ERISA and Sec-
tion 412 of the Code) whether or not waived;
(iii) Fail to pay timely required contributions
or annual installments due with respect to any waived
funding deficiency to any Benefit Plan;
(iv) Terminate any Benefit Plan which would
result in any material liability of the Borrower or an
ERISA Affiliate under Title IV of ERISA;
(v) Fail to make any contribution or payment to
any Multiemployer Plan which Borrower or any ERISA
Affiliate may be required to make under any agreement
relating to such Multiemployer Plan, or any law
pertaining thereto;
(vi) Fail to pay any required installment under
section (m) of Section 412 of the Code or any other
payment required under Section 412 of the Code on or
before the due date for such installment or other
payment; or
(vii) Amend a Plan resulting in an increase in
current liability for the plan year such that the
Borrower or any ERISA Affiliate is required to provide
security to such Plan under Section 401(a)(29) of the
Code.
8.9 Mergers, Consolidations, Acquisitions, or Sales.
The Borrower shall not enter into any transaction of merger,
reorganization, or consolidation, or transfer, sell, assign,
lease, or otherwise dispose of all or any part of its property,
or wind up, liquidate or dissolve its business, or agree to do
any of the foregoing, except (a) for sales of Inventory in the
ordinary course of its business, (b) for sales of real property
to any Person which shall immediately upon the consummation of
such transfer agree to lease such property to the Borrower in a
transaction not otherwise prohibited hereunder, (c) for the sale
of assets which do not include Collateral or on which Collateral
is not located, or (d) as otherwise expressly permitted hereby,
including, without limitation, pursuant to any of Sections 5.9,
5.10 or 5.11. The Borrower shall not close any of its stores.
8.10 Distributions; Capital Change. The Borrower
shall not (a) directly or indirectly declare or make, or incur
any liability to make, any Distribution, other than, so long as
no Event of Default is outstanding, regularly scheduled dividends
on its preferred stock, or (b) make any change in its capital
structure which could adversely affect the repayment of the
Obligations.
8.11 Transactions Affecting Collateral or Obligations.
The Borrower shall not enter into any transaction which
materially and adversely affects the Collateral or the Borrower's
ability to repay the Obligations.
8.12 Guaranties. The Borrower shall not make, issue,
or become liable on any Guaranty, except Guaranties in favor of
the Agent.
8.13 Debt. The Borrower shall not incur or maintain
any Debt, other than: (a) the Obligations; (b) accounts payable
and contractual obligations to suppliers and customers incurred
in the ordinary course of business; (c) contractual obligations
to developers and landlords incurred in the ordinary course of
business; (d) Debt incurred to finance the purchase of Equipment
or real property constituting Capital Expenditures, so long as
the principal amount of Debt incurred for any such purchase of
Equipment or real property is not less than eighty percent
(80.0%) of the purchase price of such Equipment or real property;
(e) Debt evidenced by Medium Term Notes outstanding on the
Closing Date; (f) Debt evidenced by Medium Term Notes issued
after the Closing Date in an aggregate principal amount not to
exceed $94,000,000, provided that the proceeds of any such
issuance of Medium Term Notes are used only (x) to repay or
prepay any then outstanding Medium Term Notes or (y) to prepay
Revolving Loans, with the Revolver Facility to be reduced by the
amount of such prepayment as provided in Section 3.3; (g) Debt
evidenced by the Mortgage Notes; (h) Debt incurred under any
lease or sublease of real property or Equipment by the Borrower
as lessee or sublessee entered into in connection with the
transfer of such real property or Equipment by the Borrower to
the lessor or sublessor of such real property or Equipment; (i)
other Debt existing on the Closing Date and reflected on Schedule
7.9; and (j) Debt incurred for the purpose of refinancing any
then outstanding Debt described in clauses (d), (g) or (i) above,
provided, that such Debt shall be in an amount not greater than
the amount of the Debt being refinanced and shall be incurred
under terms and conditions no less favorable to the Borrower,
which will not have an adverse effect on its ability to perform
it obligations hereunder and, solely in the case of the
refinancing of any Debt described in clause (d), any Liens
granted to secured such Debt shall be identical to those securing
the refinanced Debt.
8.14 Prepayment. The Borrower shall not voluntarily
prepay any Debt, except (i) the Obligations in accordance with
their terms, (ii) the Medium Term Notes with the proceeds of the
issuance of additional Medium Term Notes as provided in Section
8.13(f), and (iii) Debt evidenced by the Mortgage Notes or Debt
existing on the Closing Date and reflected on Schedule 7.9,
provided that such Debt is prepaid in accordance with a
refinancing permitted by Section 8.13(j).
8.15 Transactions with Affiliates. Except as set
forth below, the Borrower shall not, sell, transfer, distribute,
or pay any money or property, including, but not limited to, any
fees or expenses of any nature (including, but not limited to,
any fees or expenses for management services), except actual
expenses incurred and approved in advance in writing by the Agent
and the Majority Lenders, to any Affiliate, or lend or advance
money or property to any Affiliate, or invest in (by capital
contribution or otherwise) or purchase or repurchase any stock or
indebtedness, or any property, of any Affiliate, or become liable
on any Guaranty of the indebtedness, dividends, or other
obligations of any Affiliate. Notwithstanding the foregoing, the
Borrower may grant stock or stock options to, and pay
compensation and other benefits to, executive officers and
directors of the Borrower and may engage in other transactions
with Affiliates in the ordinary course of business, in amounts
and upon terms fully disclosed to the Agent and the Lenders, and
no less favorable to the Borrower than would obtain in a
comparable arm's-length transaction with a third party who is not
an Affiliate.
8.16 Investment Banking and Finder's Fees. The
Borrower shall not pay or agree to pay, or reimburse any other
party with respect to, any investment banking or similar or
related fee, underwriter's fee, finder's fee, or broker's fee to
any Person in connection with this Agreement. The Borrower shall
defend and indemnify the Agent and the Lenders against and hold
them harmless from all claims of any Person for any such fees,
and all costs and expenses (including without limitation,
attorneys' fees) incurred by the Agent and/or any Lender in
connection therewith.
8.17 Business Conducted. The Borrower shall not
engage, directly or indirectly, in any line of business other
than the businesses in which the Borrower is engaged on the
Closing Date, provided, that the Borrower may open certain stores
in accordance with its plans disclosed to the Agent and the
Lenders prior to the Closing Date, provided, however, that the
aggregate direct and indirect costs, excluding the cost of any
inventory, incurred in connection with the opening of such stores
shall in no event exceed $1,000,000. In addition, the Borrower
shall not sublease or license space in its stores or permit any
other party to sell merchandise in any of its stores, except for
subleases, licenses or third-party sale arrangements existing on
the Closing Date and any further subleases, licenses or third-
party sale arrangements, provided that the Borrower shall require
any Person so subletting or licensing space or selling
merchandise in any store to (i) maintain its own employees in the
conduct of its business, and (ii) segregate all of its assets,
including any inventory and cash, from those of the Borrower.
8.18 Liens. The Borrower shall not create, incur,
assume, or permit to exist any Lien on any Collateral, except
Permitted Liens.
8.19 Subsidiaries. The Borrower shall not, directly
or indirectly, organize, create, acquire or permit to exist any
Subsidiary.
8.20 Restricted Investments. The Borrower shall not
make any Restricted Investment.
8.21 Fixed Charge Coverage Ratio. The Borrower will
maintain a ratio (the "Fixed Charge Coverage Ratio") of (a)
EBITDA to (b) the sum of (i) net interest expense (whether such
interest is paid or accrued), (ii) Distributions, (iii) principal
payments or prepayments on Debt for borrowed money less, in the
case of any payment or prepayment of Debt in connection with the
refinancing of such Debt, the net cash proceeds of any such
refinancing Debt permitted under Section 8.13(j), and (iv)
Capital Expenditures, minus (v) the lesser of (x) the amount set
forth in clause (iv) above and (y) the net proceeds received by
the Borrower from the sale of fixed assets, including, without
limitation, any sale-leaseback transactions (in all cases such
net proceeds to be the gross proceeds of any such sale, minus any
expenses or taxes applicable to such sale, any Debt repayments or
prepayments (other than of the Obligations) made with the
proceeds of such sale, and the amount of any non-cash proceeds),
of not less than the following determined for the following
periods:
Minimum
Period Ratio
Fiscal quarter ending
nearest July 31, 1996 .43 to 1
Two fiscal quarter period
ending nearest October 31, 1996 .61 to 1
Three fiscal quarter period
ending nearest January 31, 1997 1.0 to 1
Four fiscal quarter
period ending at each fiscal
quarter thereafter 1.0 to 1
8.22 Fiscal Year. The Borrower will not change its
Fiscal Year from a Fiscal Year ending on the last Saturday of
each January.
8.23 Further Assurances. The Borrower shall execute
and deliver, or cause to be executed and delivered, to the Agent
and/or the Lenders such documents and agreements, and shall take
or cause to be taken such actions, as the Agent may, from time to
time, reasonably request to carry out the terms and conditions of
this Agreement and the other Loan Documents.
ARTICLE 9
CONDITIONS OF LENDING
9.1 Conditions Precedent to Making of Loans on the
Closing Date. Neither the Agent nor the Lenders shall have any
obligation hereunder if all of the conditions precedent set forth
in this Section 9.1 have not been satisfied on or before July 30,
1996. The obligation of the Lenders to make the initial
Revolving Loans on the Closing Date and the obligation of the
Agent to cause to be issued or provide Credit Support for any
Letter of Credit on the Closing Date and the obligation of the
Lenders to participate in Letters of Credit issued on the Closing
Date, or in Credit Support for any such Letters of Credit on the
Closing Date, are subject to the following conditions precedent
having been satisfied in a manner satisfactory to the Agent and
the Lenders:
(a) The Borrower shall have performed and
complied with all covenants, agreements and conditions
contained herein which are required to be performed or
complied with by the Borrower before or on such Closing
Date.
(b) Following the payment in full of all Debt
outstanding under the Former Credit Agreement, the payment
of all fees, costs and expenses payable hereunder on the
Closing Date, and the making of the Revolving Loans and the
provision of Letters of Credit to be made or provided on the
Closing Date, the Borrower would have Availability of not
less than $30,000,000.
(c) The Borrower shall have had net income of not less
than $1,415,500 for the month of May 1996, and a net loss
for the month of June (up to the Closing Date) of not
greater than $861,000.
(d) There is no pending or threatened action, suit,
investigation by any Public Authority or proceeding that
reasonably could be expected to have a material adverse
effect on the business, condition (financial or otherwise),
operations, performance or properties of the Borrower or
which could reasonably be expected to impair the Borrower's
ability to perform its obligations under this Agreement and
the other Loan Documents, or which in the Agent's judgment,
could materially adversely affect the financing contemplated
by this Agreement.
(e) The Agent and the Lenders shall have received all
items on the List of Closing Documents attached hereto as
Exhibit C which are not elsewhere identified in this
Article 9, such items to be in form and substance
satisfactory to the Agent and the Lenders, and to be
executed by all parties thereto when the nature of such
items so requires.
(f) The Agent and the Lenders shall have received a
certificate dated such Closing Date and signed by the
President or an Executive Vice President and the Chief
Financial Officer, Treasurer or the Vice President-Treasury
& Finance of the Borrower, certifying that the conditions
specified in Section 9.1(a) have been fulfilled, and setting
forth the components of the Maximum Revolver Amount and
Aggregate Revolver Outstandings to demonstrate that
Availability, after giving effect to the transactions
contemplated on the Closing Date, would equal or exceed
$30,000,000, as set forth in paragraph (b) above.
The acceptance by the Borrower of any Loans made on the Closing
Date shall be deemed to be a representation and warranty made by
the Borrower to the effect that all of the conditions to the
making of such Loans set forth in this Sections 9.1(a),(b),(c),
and (d) have been satisfied, with the same effect as delivery to
the Agent and the Lenders of a certificate signed by the Presi-
dent and the Chief Financial Officer, Treasurer or the Vice
President-Treasury & Finance of the Borrower, dated the Closing
Date, to such effect.
Execution and delivery to the Agent by a Lender of a
counterpart to this Agreement shall be deemed confirmation by
such Lender that (i) all conditions precedent in this Section 9.1
have been fulfilled to the satisfaction of such Lender and (ii)
the decision of such Lender to execute and deliver to the Agent
an executed counterpart of this Agreement was made by such Lender
independently and without reliance on the Agent or any other
Lender as to the satisfaction of any condition precedent set
forth in this Section 9.1.
9.2 Conditions Precedent to Each Loan. The obligation
of the Lenders to make each Loan, including the initial Revolving
Loans on the Closing Date, and the obligation of the Agent to
cause to be issued or provide Credit Support for any Letter of
Credit and the obligation of the Lenders to participate in
Letters of Credit or Credit Support for Letters of Credit, shall
be subject to the further conditions precedent that on the date
of any such extension of credit;
(a) the following statements shall be true, and
the acceptance by the Borrower of any extension of
credit shall be deemed to be a statement to the effect
set forth in clauses (i) and (ii), with the same effect
as the delivery to the Agent and the Lenders of a
certificate signed by the president and chief financial
officer of the Borrower, dated the date of such
extension of credit, stating that:
(i) The representations and warranties
contained in this Agreement and the other
Loan Documents are correct in all material
respects on and as of the date of such exten-
sion of credit as though made on and as of
such date, other than any such representation
or warranty which relates to a specified
prior date and except to the extent the Agent
and the Lenders have been notified by the
Borrower that any representation or warranty
is not correct and the Majority Lenders have
explicitly waived in writing compliance with
such representation or warranty; and
(ii) No event has occurred and is con-
tinuing, or would result from such extension
of credit, which constitutes a Default or an
Event of Default; and
(b) the Agent and the Lenders shall have received
such other approvals, opinions or documents as they may
reasonably request;
(c) no order, judgment or decree of any Public
Authority and no law, rule or regulation applicable to
Lender shall purport by its terms to enjoin, restrain or
otherwise prohibit the making of such Loan; and
(d) Since the date of the Financial Statements most
recently delivered to the Lenders, no material adverse
change shall have occurred with respect to the business,
operations, assets or condition (financial or otherwise) of
the Borrower;
provided, however, that the foregoing conditions precedent are
not conditions to each Lender participating in or reimbursing
BABC or the Agent for such Lender's Pro Rata Share of any BABC
Revolving Loan or Agent Advance as provided in Sections 2.1(h),
(i) and (j).
ARTICLE 10
DEFAULT; REMEDIES
10.1 Events of Default. It shall constitute an event
of default ("Event of Default") if any one or more of the
following shall occur for any reason:
(a) any failure to pay the principal of or
interest or premium on any of the Obligations when due,
whether upon demand or otherwise;
(b) any representation or warranty made by the
Borrower in this Agreement, any of the other Loan
Documents, any Financial Statement, or any certificate
furnished by the Borrower or any Subsidiary at any time
to the Agent or any Lender shall prove to be untrue in
any material respect as of the date on which made;
(c) the Borrower shall fail to comply with any of
the covenants set forth in (i) Sections 8.1, 8.2(b),
8.3, 8.4, 8.6, 8.7, 8.8(a), or 8.23 and such failure
shall continue unremedied for ten (10) days; or (ii)
any other provision of Article 8 or Section 5.8 , in
which case no grace period shall be applicable;
(d) any failure by the Borrower to comply with
any of the other covenants and agreements contained in
this Agreement or any of the other Loan Documents for
more than (i) twenty (20) days after notice of such
failure by the Agent to the Borrower, (ii) thirty (30)
days after the date that the Borrower discovers, or
reasonably should have discovered, such failure, or
(iii) if such failure shall have existed for more than
forty-five (45) days, five (5) days after the earlier
of (A) written notice thereof from the Agent to the
Borrower or (B) the Borrower's discovery of such
failure; provided, however, that no such grace period
shall apply, and an Event of Default shall exist
promptly upon such failure to comply, if such failure
to comply may not, in the Majority Lenders' reasonable
determination, be cured by the Borrower during such
grace period; or if any such Loan Document shall
terminate (other than in accordance with its terms or
the terms hereof or with the written consent of the
Majority Lenders) or become void or unenforceable
without the written consent of the Majority Lenders;
(e) default shall occur with respect to any Debt
for borrowed money (other than the Obligations) in an
outstanding principal amount in excess of $2,500,000 or
under any agreement or instrument under or pursuant to
which any such Debt or indebtedness may have been
issued, created, assumed, or guaranteed by the
Borrower, and such default shall continue for more than
the period of grace, if any, therein specified, if the
effect thereof (with or without the giving of notice or
further lapse of time or both) is to accelerate, or to
permit the holders of any such Debt or indebtedness to
accelerate, the maturity of any such Debt; or any such
Debt or indebtedness shall be declared due and payable
or be required to be prepaid (other than by a regularly
scheduled required prepayment) prior to the stated
maturity thereof;
(f) the Borrower shall (i) file a voluntary
petition in bankruptcy or file a voluntary petition or
an answer or otherwise commence any action or
proceeding seeking reorganization, arrangement or
readjustment of its debts or for any other relief under
the federal Bankruptcy Code, as amended, or under any
other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing, or consent to,
approve of, or acquiesce in, any such petition, action
or proceeding; (ii) apply for or acquiesce in the
appointment of a receiver, assignee, liquidator,
sequestrator, custodian, trustee or similar officer for
it or for all or any material part of its property;
(iii) make a general assignment for the benefit of
creditors; or (iv) be unable generally to pay its debts
as they become due;
(g) an involuntary petition shall be filed
against the Borrower or an action or proceeding
otherwise commenced seeking reorganization, arrangement
or readjustment of the Borrower's debts or for any
other relief under the federal Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency
act or law, state or federal, now or hereafter existing
and either (i) such petition, action or proceeding
shall not have been dismissed within a period of thirty
(30) days after its commencement or (ii) an order for
relief against the Borrower shall have been entered in
such proceeding;
(h) a receiver, assignee, liquidator, seque-
strator, custodian, trustee or similar officer for the
Borrower or for all or any material part of its
property shall be appointed; or a warrant of
attachment, execution or similar process shall be
issued against any material part of the property of the
Borrower and shall remain unsatisfied and unstayed for
ten (10) days;
(i) the Borrower shall file a certificate of
dissolution under applicable state law or shall be
liquidated, dissolved or wound-up or shall commence or
have commenced against it any action or proceeding for
dissolution, winding-up or liquidation, or shall take
any corporate action in furtherance thereof;
(j) all or any material part of the property of
the Borrower shall be nationalized, expropriated or
condemned, seized or otherwise appropriated, or custody
or control of such property or of the Borrower shall be
assumed by any Public Authority or any court of
competent jurisdiction at the instance of any Public
Authority, except where contested in good faith by
proper proceedings diligently pursued where a stay of
enforcement is in effect;
(k) any guaranty of the Obligations shall be
terminated, revoked or declared void or invalid;
(l) one or more judgments or orders for the pay-
ment of money aggregating in excess of $2,500,000
(whether or not covered by insurance) shall be rendered
against the Borrower and either (i) enforcement
proceedings shall have been commenced by any creditor
upon any such judgment or order, or (ii) there shall be
any period of 10 consecutive days during which such
judgment remains unpaid or a stay of enforcement of
such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect;
(m) any loss, theft, damage or destruction of any
item or items of Collateral occurs which (i) materially
and adversely affects the operation of the Borrower's
business; or (ii) is material in amount and is not
adequately covered by insurance;
(n) there occurs any material adverse change in
the Borrower's property, business, operation, or condi-
tion (financial or otherwise) from date of the
Financial Statements most recently delivered to the
Lenders;
(o) Any Termination Event occurs which the Agent
believes could subject the Borrower or any ERISA Affiliate
to a liability in excess of $5,000,000;
(p) there is filed against the Borrower any civil or
criminal action, suit or proceeding under any federal or
state racketeering statute (including, without limitation,
the Racketeer Influenced and Corrupt Organization Act of
1970), which action, suit or proceeding (1) is not dismissed
within one hundred eighty (180) days, and (2) could result
in the confiscation or forfeiture of any material portion of
the Collateral; or
(q) for any reason other than the failure of the Agent
to take any action available to it to maintain perfection of
the Agent's Liens, pursuant to the Loan Documents, any Loan
Document ceases to be in full force and effect or any Lien
with respect to any material portion of the Collateral
intended to be secured thereby ceases to be, or is not,
valid, perfected and prior to all other Liens (other than
Permitted Liens) or is terminated, revoked or declared void.
10.2 Remedies. (a) Following the occurrence and
during the continuance of a Default or an Event of Default, the
Agent may, in its discretion, or, at the direction of the
Majority Lenders, shall, without notice to or demand on the
Borrower, do one or more of the following at any time or times
and in any order: (i) reduce the Maximum Revolver Amount, or the
amount of the Revolver Facility, or the advance rates against
Eligible Inventory used in computing the Maximum Revolver Amount,
or reduce or increase one or more of the other elements used in
computing the Maximum Revolver Amount; (ii) restrict the amount
of or refuse to make Revolving Loans; and (iii) restrict or
refuse to arrange for or provide Letters of Credit, Credit
Support or Shipper Guaranties. If an Event of Default exists,
the Agent may, in its discretion, or shall, at the direction of
the Majority Lenders, without notice to or demand on the
Borrower, do one or more of the following, in addition to the
actions described in the preceding sentence, at any time or times
and in any order: (i) terminate the Commitments and this
Agreement and (ii) declare any or all Obligations to be
immediately due and payable; provided, however, that upon the
occurrence of any Event of Default described in Sections 10.1(f),
10.1(g), 10.1(h), or 10.1(i), the Commitments shall automatically
and immediately expire and all Obligations shall automatically
become immediately due and payable without notice or demand of
any kind. In the event the Agent takes any such action described
in this paragraph, the Agent agrees that it will use its best
efforts to provide notice of such action to the Borrower, but the
Agent's failure to deliver any such notice shall not limit its
right to take such action or the efficacy of such action, or
otherwise result in any liability for its failure to deliver such
notice.
(b) Following the occurrence and during the
continuance of an Event of Default: (i) the Agent shall have, in
addition to all other rights, the rights and remedies of a
secured party under the UCC; (ii) the Agent may, at any time,
take possession of the Collateral and keep it on the Borrower's
premises, at no cost to the Agent or any Lender, or remove any
part of it to such other place or places as the Agent may desire,
or the Borrower shall, upon the Agent's demand, at the Borrower's
cost, assemble the Collateral and make it available to the Agent
at a place reasonably convenient to the Agent; and (iii) the
Agent may sell and deliver any Collateral at public or private
sales, for cash, upon credit or otherwise, at such prices and
upon such terms as the Agent deems advisable, in its sole dis-
cretion, and may, if the Agent deems it reasonable, postpone or
adjourn any sale of the Collateral by an announcement at the time
and place of sale or of such postponed or adjourned sale without
giving a new notice of sale. Without in any way requiring notice
to be given in the following manner, the Borrower agrees that any
notice by the Agent of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the UCC
or otherwise, shall constitute reasonable notice to the Borrower
if such notice is mailed by registered or certified mail, return
receipt requested, postage prepaid, or is delivered personally
against receipt, at least five (5) days prior to such action to
the Borrower's address specified in or pursuant to Section 14.7.
If any Collateral is sold on terms other than payment in full at
the time of sale, no credit shall be given against the Obli-
gations until the Agent or the Lenders receive payment, and if
the buyer defaults in payment, the Agent may resell the
Collateral without further notice to the Borrower. In the event
the Agent seeks to take possession of all or any portion of the
Collateral by judicial process, the Borrower irrevocably waives:
(a) the posting of any bond, surety or security with respect
thereto which might otherwise be required; (b) any demand for
possession prior to the commencement of any suit or action to
recover the Collateral; and (c) any requirement that the Agent
retain possession and not dispose of any Collateral until after
trial or final judgment. The Borrower agrees that the Agent has
no obligation to preserve rights to the Collateral or marshall
any Collateral for the benefit of any Person. The Agent is
hereby granted a license or other right to use, without charge,
the Borrower's labels, patents, copyrights, name, trade secrets,
trade names, trademarks, and advertising matter, or any similar
property, in completing production of, advertising or selling any
Collateral, and the Borrower's rights under all licenses and all
franchise agreements shall inure to the Agent's benefit. The
proceeds of sale shall be applied first to all expenses of sale,
including reasonable attorneys' fees, and second, in whatever
order the Majority Lenders shall elect, to all Obligations. The
Agent will return any excess to the Borrower or such other Person
as shall be legally entitled thereto and the Borrower shall
remain liable for any deficiency.
(c) Following the occurrence and during the continuance
of an Event of Default, the Borrower hereby waives all rights to
notice and hearing prior to the exercise by the Agent of the
Agent's rights to repossess the Collateral without judicial
process or to replevy, attach or levy upon the Collateral without
notice or hearing.
ARTICLE 11
TERM AND TERMINATION
11.1 Term and Termination. The term of this Agreement
shall end on June 27, 1999 (the "Initial Stated Termination
Date"), or if the term of this Agreement shall have been extended
as provided in this Section, on such subsequent date to which
this Agreement shall have been extended (each such date, together
with the Initial Stated Termination Date, being a "Stated
Termination Date"). The Majority Lenders may terminate this
Agreement without notice to the Borrower upon the occurrence of
an Event of Default.
At least 120 but no more than 360 days prior to the
then effective Stated Termination Date, the Borrower may request
in writing to the Agent (an "Extension Request") an extension of
the term of the Agreement of one year, and the Agent shall
promptly notify each Lender of the Extension Request. No later
than 95 days prior to the then effective Stated Termination Date,
each Lender shall notify the Agent whether such Lender wishes to
extend its Commitment for an additional one year period from such
then effective Stated Termination Date. Failure to notify the
Agent shall be deemed a election by a Lender not to extend its
Commitment. At least 90 days prior to the then effective Stated
Termination Date, the Agent shall notify the Borrower whether or
not all of the Lenders have agreed to extend their Commitments
for an additional year. If all the Lenders have agreed to such
an extension, the Borrower shall notify the Agent within 10 days
thereafter whether it desires to extend the term of the Agreement
for an additional year. If the Borrower and all of the Lenders
have agreed to an extension of the term of this Agreement, then
the Stated Termination Date shall become the date to which such
term has been extended (an "Extended Stated Termination Date")
upon the Borrower's notifying the Agent of its agreement to the
extension. If fewer than all of the Lenders have agreed to an
extension, then the Agreement shall terminate on the then
effective Stated Termination Date.
Upon the effective date of termination of this
Agreement, all Obligations owing to the Lenders (including,
without limitation, all unpaid principal of, accrued interest on
and early termination fees, if any) shall become immediately due
and payable and the Borrower shall cause the termination of any
outstanding Letters of Credit. Notwithstanding the termination
of this Agreement, until all Obligations are paid and performed
in full in cash, the Borrower shall remain bound by the terms of
this Agreement and shall not be relieved of any of its
obligations hereunder, and the Agent and the Lenders shall retain
all their rights and remedies hereunder (including, without
limitation, the security interest of the Agent, for the ratable
benefit of the Agent and the Lenders, in and all rights and
remedies with respect to all then existing and after-arising
Collateral). On or after the effective date of termination of
this Agreement and upon full payment in cash and the discharge of
all of the Obligations, the Borrower shall no longer have any
obligations hereunder, other than its indemnification obligations
under Sections 2.2(i), 4.7, 14.8, and 14.15, which shall survive
any such termination.
ARTICLE 12
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
12.1 No Implied Waivers. No act, failure or delay by
the Agent or the Lenders shall constitute a waiver of any of
their rights and remedies. No single or partial waiver by the
Agent or the Lenders of any provision of this Agreement or any
other Loan Document, or of breach or default hereunder or
thereunder, or of any right or remedy which the Agent or the
Lenders may have, shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same
provisions, breach, default, right or remedy on a future
occasion. No waiver by the Agent or the Lenders shall affect
their rights to require strict performance of this Agreement.
12.2 Amendments and Waivers. No amendment or
modification of any provision of this Agreement shall be
effective without the written agreement of the Majority Lenders
and the Borrower, and no termination or waiver of any provision
of this Agreement, or consent to any departure by the Borrower
therefrom, shall in any event be effective without the written
concurrence of the Majority Lenders, which concurrence the
Majority Lenders shall have the right to grant or withhold at
their sole discretion. Notwithstanding the immediately preceding
sentence, any amendment, modification or waiver of (a) any
provision of Articles 2, 3 or 4, which amendment, modification or
waiver provides for any increase of the Commitments, the
reduction of the interest rates applicable to any Loans and/or
the amount of fees payable hereunder, the postponement of the due
date for the payment of interest, principal or fees hereunder, or
the forgiveness of any of the Obligations, shall be effective if,
and only if, evidenced by a writing agreed to and signed by all
Lenders, and (b) the definitions of "Majority Lenders", "Pro Rata
Share", "Required Lenders", "Unused Letter of Credit
Subfacility", and "Stated Termination Date" and the provisions
contained in this Section 12.2 shall be effective if, and only
if, evidenced by a writing agreed to and signed by all Lenders.
No amendment, modification, termination, or waiver of any
provision of Article 13 or any other provision referring to the
Agent shall be effective without the written concurrence of the
Agent, and no amendment to Section 13.8 shall be effective unless
agreed to in writing by all Lenders. The Agent may, but shall
have no obligation to, with the written concurrence of any
Lender, execute amendments, modifications, waivers or consents on
behalf of such Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on the Borrower in
any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances. Any
amendment, modification, waiver or consent effected in accordance
with this Section 12.2 shall be binding on the Agent and each
Lender, and, if signed by the Borrower, on the Borrower.
12.3 Assignments; Participations.
(a) Each Lender shall have the right, with the Agent's
and the Borrower's consent, which, in the case of the Borrower,
shall not be unreasonably withheld, at any time to assign to one
or more commercial banks or other financial institutions all or a
portion of its Commitment, the Loans owing to it and its rights
and obligations with respect to Letters of Credit, Credit Support
and Shipper Guaranties; provided, however, that (i) each such
assignment shall be of a constant, and not a varying percentage
of all of the assigning Lender's corresponding rights and
obligations under this Agreement and the assignment shall apply
the same percentage to the Lender's Commitment and Loans, (ii)
the aggregate amount of the outstanding Commitment of the
assigning Lender being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance
entered into with respect to such assignment by the assigning
Lender and the assignee, and accepted by the Agent, in
substantially the form of Exhibit F ("Assignment and
Acceptance")) shall in no event be less than $5,000,000 and
integral multiples of $1,000,000 in excess of that amount, except
that such limitation shall not apply to an assignment by any
Lender of all of its rights and obligations under this Agreement
or to an assignment by an original signatory to this Agreement to
another such signatory, (iii) except in the case of an assignment
in whole of a Lender's rights and obligations under this
Agreement or an assignment by an original signatory to this
Agreement to another such signatory, immediately after giving
effect to any assignment the aggregate amount of the outstanding
Commitment still held by the assigning Lender in its own name
shall in no event be less than $5,000,000, and (iv) the parties
to each such assignment shall execute and deliver to the Agent,
for its acceptance and recording in the Register, an Assignment
and Acceptance, together with a processing and recordation fee of
$2,000. Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least two (2)
Business Days after the execution thereof, (A) the assignee
thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to
such Assignment and Acceptance, have the rights and obligations
(including, but not limited to, the obligation to participate in
Letters of Credit, Credit Support and Shipper Guaranties pursuant
to Section 2.2(f)) of a Lender hereunder and (B) the assigning
Lender thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in
or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of
this Agreement or any other Loan Document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under this
Agreement or any other Loan Document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as
it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent,
such assigning Lender or any other Lender, and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Agreement; (v) such assignee appoints
and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are
delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement
are required to be performed by it as a Lender.
(c) The Agent shall maintain at its address set forth
in Section 14.7 a copy of each Assignment and Acceptance
delivered to and accepted by it and books and records, including
computer records, in which it shall record the names and
addresses of the Lenders and the Commitment of, and principal
amount of the Loans owing to, each Lender from time to time (the
"Register"). The entries in the Register shall constitute
rebuttably presumptive evidence, absent manifest error, of the
accuracy of the information contained therein, and the Borrower,
the Agent and the Lenders may treat each Person the name of which
is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee, the Agent shall,
if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit F, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in
the Register, and (iii) give prompt notice thereof to the
Borrower.
(e) Each Lender may sell participations in all or any
part of its rights and obligations under this Agreement (includ-
ing, without limitation, all or any part of its Commitment, the
Loans or its rights in connection with Letters of Credit, as
applicable) to one or more other Persons; provided, however, that
(i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to
the other parties hereto for the performance of such obligations,
and (iii) the Agent, the Borrower and the other Lenders shall
continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement. Notwithstanding anything to the contrary in the
foregoing sentence, any Participating Lender may be given the
right to require the Lender granting such Participating Lender's
participation to vote against (1) the release of all or
substantially all of the Collateral, (2) any amendment,
modification or waiver of any provision of Articles 2, 3, or 4 or
11 relating to the principal amount of the Loans or Letters of
Credit, the maturity dates of the Loans, the interest rates borne
by the Loans and the amounts of any fees payable to such Lender
under Sections 3.6 and 3.7. No Participating Lender shall be a
"Lender" for any purpose under this Agreement; provided, however,
that each Participating Lender shall have the rights and
obligations of a Lender (including any right to receive payment)
under Sections 3.3(e) or (f), 3.6, 3.7, 4.2, 4.7, 4.8, 12.3(f),
13.5, 13.9, 14.8 and 14.9; provided, further, that all requests
for any such payments shall be made by any Participating Lender
through the Lender granting such participation. The right of
each Participating Lender to receive payment pursuant to the
immediately preceding sentence shall be limited to the lesser of
(i) the amounts actually incurred by such Participating Lender
for which payment is provided under such Sections and (ii) the
amounts that would have been payable under such Sections to the
Lender granting the participation had such participation not been
granted. It is expressly agreed that, in connection with
prospective offers for the sale and transfer of any participation
pursuant to this Section 12.3(e), any Lender may provide to any
prospective Participating Lender such information pertaining to
the Borrower as such Lender may deem appropriate.
(f) If a Participating Lender shall at any time with
the Borrower's knowledge participate with any Lender in the
Loans, the Borrower hereby grants to such Participating Lender,
and such Lender and such Participating Lender shall have and are
hereby given, a continuing Lien on and security interest in any
money, Securities and other property of the Borrower in the
custody or possession of the Participating Lender, including the
right of set-off, to the extent of the Participating Lender's
participation in the Obligations, and such Participating Lender
shall be deemed to have the same right of set-off to the extent
of Participating Lender's participation in the Obligations under
this Agreement as it would have if it were a direct lender.
(g) Notwithstanding any other provision in this
Agreement, any Lender may at any time create a security interest
in, or pledge, all or any portion of its rights under and
interest in this Agreement, in favor of any Federal Reserve Bank,
in accordance with Regulation A of the Federal Reserve Board or
U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal
Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
12.4 Binding Effect; Assignment. The provisions of
this Agreement shall be binding upon and inure to the benefit of
the respective representatives, successors and assigns of the
parties hereto; provided, however, that no interest herein may be
assigned by the Borrower without the prior written consent of the
Agent and the Lenders. With respect to the Borrower, successors
and assigns shall include, without limitation, any receiver,
trustee or debtor-in-possession of or for the Borrower. The
rights and benefits of any Lender hereunder shall, if such Lender
so agrees, inure to any party acquiring any interest in the
Obligations or any part thereof, subject to the provisions of
Section 12.3.
ARTICLE 13
THE AGENT
13.1 Appointment. Each Lender hereby designates and
appoints BankAmerica Business Credit, Inc. as its Agent under
this Agreement and the other Loan Documents, and each Lender
hereby irrevocably authorizes the Agent to take such action on
its behalf under the provisions of this Agreement and the other
Loan Documents and to exercise such powers as are set forth
herein or therein, together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such
on the express conditions contained in this Article 13. The
provisions of this Article 13 are solely for the benefit of the
Agent and the Lenders, and the Borrower shall have no rights as a
third party beneficiary of any of the provisions hereof (other
than as expressly set forth in Section 13.7). In performing its
functions and duties under this Agreement, the Agent shall act
solely as agent of the Lenders and does not assume and shall not
be deemed to have assumed any obligation toward or relationship
of agency or trust with or for the Borrower. The Agent may
perform any of its duties under this Agreement, or under the
other Loan Documents, by or through its agents or employees.
13.2 Nature of Duties. The Agent shall have no duties
or responsibilities except those expressly set forth in this
Agreement or in the other Loan Documents. Except as expressly
otherwise provided in this Agreement, the Agent shall have and
may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or
refraining from taking any actions which the Agent is expressly
entitled to take or assert under this Agreement and the other
Loan Documents, including, without limitation, (a) the
determination of the applicability of ineligibility criteria with
respect to the calculation of the Maximum Revolver Amount, (b)
the making of Agent Advances pursuant to Section 2.1(i), and (c)
the exercise of remedies pursuant to Section 10.2, and any action
so taken or not taken shall be deemed consented to by the
Lenders. The Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Nothing in this
Agreement or any of the other Loan Documents, express or implied,
is intended to or shall be construed to impose upon the Agent any
obligations in respect of this Agreement or any of the other Loan
Documents except as expressly set forth herein or therein. Each
Lender shall make its own independent investigation of the
financial condition and affairs of the Borrower in connection
with the making and the continuance of the Loans hereunder, and
shall make its own appraisal of the creditworthiness of the
Borrower, and the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto,
whether coming into its possession before the date of this
Agreement or at any time or times thereafter. If the Agent seeks
the consent or approval of the Majority Lenders to the taking or
refraining from taking any action hereunder, the Agent shall send
notice thereof to each Lender. The Agent shall promptly notify
each Lender any time that the Majority Lenders have instructed
the Agent to act or refrain from acting pursuant hereto. The
Agent may employ agents, co-agents and attorneys-in-fact and
shall not be responsible to the Lenders or the Borrower, except
as to money or securities received by it or its authorized
agents, for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
13.3 Rights, Exculpation, Etc. Neither the Agent nor
any of its officers, directors, employees or agents shall be
liable to any Lender for any action taken or omitted by it or any
of them under this Agreement or under any of the other Loan Docu-
ments, or in connection herewith or therewith, except that (i)
the Agent shall be obligated on the terms set forth herein for
performance of its express obligations under this Agreement; (ii)
the Agent shall not be entitled to exercise any of the powers
granted to it under this Agreement or the other Loan Documents in
any way inconsistent with its express obligations to the Lenders
under this Agreement; and (iii) no Person shall be relieved of
any liability imposed by law for intentional tort. The Agent
shall not be liable for any apportionment or distribution of
payments made by it in good faith pursuant to Section 4.6, and if
any such apportionment or distribution is subsequently determined
to have been made in error, the sole recourse of any Lender to
whom payment was due but not made shall be to recover from the
other Lenders any payment in excess of the amount to which it is
determined to have been entitled. The Agent shall not be
responsible to any Lender for any recitals, statements, repre-
sentations or warranties contained in this Agreement or for the
execution, effectiveness, genuineness, validity, enforceability,
collectibility, or sufficiency of this Agreement or any of the
other Loan Documents or any of the transactions contemplated
thereby, or for the financial condition of the Borrower. The
Agent shall not be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or
conditions of this Agreement or any of the other Loan Documents
or the financial condition of the Borrower, or the existence or
possible existence of any Default or Event of Default. The Agent
may at any time request instructions from the Lenders or Majority
Lenders with respect to any actions or approvals which by the
terms of this Agreement or of any of the other Loan Documents the
Agent is permitted or required to take or to grant, and if such
instructions are promptly requested, the Agent shall be
absolutely entitled to refrain from taking any action or to
withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or
withholding any approval under any of the Loan Documents until it
shall have received such instructions from the Lenders or
Majority Lenders, as applicable. Without limiting the foregoing,
no Lender shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting
under this Agreement or any of the other Loan Documents in
accordance with the instructions of the Lenders or Majority
Lenders, as applicable.
13.4 Reliance. The Agent shall be entitled to rely
upon any written notices, statements, certificates, orders or
other documents or any telephone message believed by it in good
faith to be genuine and correct and to have been signed, sent or
made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the other Loan Documents
and its duties hereunder or thereunder, upon advice of counsel
selected by it.
13.5 Indemnification of the Agent by the Lenders. To
the extent that the Agent is not reimbursed and indemnified by
the Borrower, the Lenders will reimburse and indemnify the Agent
for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses,
advances or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of this Agreement or any of
the other Loan Documents or any action taken or omitted by the
Agent under this Agreement or any of the other Loan Documents, in
proportion to each Lender's Pro Rata Share, including, without
limitation, Agent Advances; provided, however, that no Lender
shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses, advances or disbursements resulting from the Agent's
recklessness or willful misconduct. The obligations of the
Lenders under this Section 13.5 shall survive the resignation of
an Agent pursuant to Section 13.7, the payment in full of the
Loans and reimbursement obligations with respect to Letters of
Credit, the termination of all outstanding Letters of Credit and
the termination of this Agreement.
13.6 Agent in Individual Capacity. BABC and its
affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with the Borrower and
any of its Subsidiaries and Affiliates as though BABC were not
the Agent hereunder, and without notice to or the consent of the
other Lenders. The Lenders acknowledge that, pursuant to such
activities, BABC or its affiliates may receive information
regarding the Borrower or its Subsidiaries or Affiliates
(including information that may be subject to confidentiality
obligations in favor of the Borrower or any such Subsidiary or
Affiliate) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to
its Commitment and the Loans made by it and the Letters of Credit
in connection with which it has purchased a participation
interest, BABC shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though
it were not the Agent.
13.7 Successor Agent.
(a) The Agent may resign from the performance of all
of its functions and duties under this Agreement at any time by
giving at least thirty (30) Business Days' prior written notice
to the Borrower and each Lender. Such resignation shall take
effect upon the acceptance by a successor Agent of appointment
pursuant to clause (b) or (c) below.
(b) Upon any such notice of resignation, the Majority
Lenders shall appoint a successor Agent who shall be reasonably
satisfactory to the Borrower.
(c) If the Majority Lenders agree on a successor Agent
within such thirty (30) Business Day period, but the Borrower
unreasonably objects to such successor Agent, then such successor
shall be appointed as Agent hereunder notwithstanding such
objection. If a successor Agent shall not have been so appointed
within such thirty (30) Business Day period because the Majority
Lenders have not agreed on such successor, the retiring Agent,
with the consent of the Borrower, shall then appoint a successor
Agent who shall serve as Agent until such time, if any, as the
Majority Lenders shall appoint a successor Agent as provided
above.
13.8 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Agent
to provide Shipper Guaranties upon the Borrower's request and
negotiate to the Borrower bills of lading on which the Agent is
named as consignee, as provided in Section 2.2(i)(7), and at its
option and in its discretion, to release any Agent's Lien upon
any Collateral (i) upon the termination of the Commitments,
payment and satisfaction of all Loans and reimbursement
obligations in respect of Letters of Credit, Credit Support and
Shipper Guaranties, and the termination of all outstanding
Letters of Credit, Credit Support and Shipper Guaranties (whether
or not any of such obligations are due) and all other Obligations
which have matured and which the Agent has been notified in
writing are then due and payable; (ii) constituting property
being sold or disposed of if the Borrower certifies to the Agent
that the sale or disposition is made in compliance with Section
5.10 or 8.9 (and the Agent may rely conclusively on any such
certificate, without further inquiry); (iii) constituting
property in which the Borrower owned no interest at the time the
Lien was granted or at any time thereafter; (iv) constituting
property leased to the Borrower under a lease which has expired
or been terminated in a transaction permitted under this Agree-
ment or which will expire imminently and which has not been, and
is not intended by the Borrower to be, renewed or extended; or
(v) in any instance not covered by clauses (i) through (iv), with
a value of less than $1,000,000 in any instance or series of
related instances and, when aggregated with other Collateral on
which a Lien was released in the same Fiscal Year, with a value
of less than $2,500,000. Except as provided above, the Agent
will not release any of the Agent's Liens without the prior
written authorization of all of the Lenders. Upon request by the
Agent or the Borrower at any time, the Lenders will confirm in
writing the Agent's authority to release any Agent's Liens upon
particular types or items of Collateral pursuant to this
Section 13.8(a).
(b) So long as no Event of Default has occurred and is
then continuing, upon the Agent's determination that it is
authorized to release any of the Agent's Liens upon particular
types or items of Collateral pursuant to the terms of
Section 13.8(a), and upon at least five (5) Business Days' prior
written request by the Borrower, the Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents
as may be necessary to evidence the release of the Agent's Liens
upon such Collateral; provided, however, that (i) the Agent shall
not be required to execute any such document on terms which, in
the Agent's opinion, would expose the Agent to liability or
create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty, and (ii) such
release shall not in any manner discharge, affect or impair the
Obligations or any Liens (other than those expressly being
released) upon (or obligations of the Borrower in respect of) all
interests retained by the Borrower, including (without limita-
tion) the proceeds of any sale, all of which shall continue to
constitute part of the Collateral.
(c) The Agent shall have no obligation whatsoever to
any of the Lenders to assure that the Collateral exists or is
owned by the Borrower or is cared for, protected or insured or
has been encumbered, or that the Agent's Liens have been properly
or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of
care, disclosure or fidelity, or to continue exercising, any of
the rights, authorities and powers granted or available to the
pursuant to this Section 13.8 or pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the
Agent may act in any manner it may deem appropriate, in its sole
discretion, given the Agent's own interest in the Collateral in
its capacity as one of the Lenders and that the Agent shall have
no duty or liability whatsoever to any Lender as to any of the
foregoing.
13.9 Restrictions on Actions by Lenders; Sharing of
Payments. (a) Each of the Lenders agrees that it shall not,
without the express consent of the Agent, and that it shall, to
the extent it is lawfully entitled to do so, upon the request of
the Agent, set-off against the Obligations, any amounts owing by
such Lender to the Borrower or any accounts of the Borrower now
or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested
to do so by the Agent, take or cause to be taken any action,
including, without limitation, the commencement of any legal or
equitable proceedings, to foreclose any Lien on, or otherwise
enforce any security interest in, any of the Collateral, the
purpose of which is, or could be, to give such Lender any
preference or priority against the other Lenders with respect to
the Collateral.
(b) Subject to Section 4.6, if, at any time or times
any Lender shall receive (i) by payment, foreclosure, set-off or
otherwise, any proceeds of Collateral or any payments with
respect to the Obligations of the Borrower to such Lender arising
under, or relating to, this Agreement or the other Loan
Documents, except for any such proceeds or payments received by
such Lender from the Agent pursuant to the terms of this Agree-
ment, or (ii) payments from the Agent in excess of such Lender's
ratable portion of all such distributions by the Agent, such
Lender shall promptly (1) turn the same over to the Agent, in
kind, and with such endorsements as may be required to negotiate
the same to the Agent, or in same day funds, as applicable, for
the account of all of the Agent and the Lenders and for
application to the Obligations in accordance with the applicable
provisions of this Agreement, or (2) purchase, without recourse
or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment
received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if
all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without
interest except to the extent that such purchasing party is
required to pay interest in connection with the recovery of the
excess payment.
13.10 Agency for Perfection. Each Lender hereby
appoints each other Lender as agent for the purpose of perfecting
the Lenders' security interest in assets which, in accordance
with Article 9 of the UCC can be perfected only by possession.
Should any Lender (other than the Agent) obtain possession of any
such Collateral, such Lender shall notify the Agent thereof, and,
promptly upon the Agent's request therefor shall deliver such
Collateral to the Agent or in accordance with the Agent's
instructions.
13.11 Payments by Agent to Lenders. All payments to
be made by the Agent to the Lenders in respect of the Obligations
owing under this Agreement shall be made by bank wire transfer or
internal transfer of immediately available funds pursuant to the
instructions set forth on Schedule 13.11, or pursuant to such
other wire transfer instructions as each party may designate for
itself by written notice to the Agent. Concurrently with each
such payment, the Agent shall identify whether such payment (or
any portion thereof) represents principal, premium or interest on
the Revolving Loans, or otherwise.
13.12 Concerning the Collateral and the Related Loan
Documents. Each Lender authorizes and directs the Agent to enter
into this Agreement and the other Loan Documents relating to the
Collateral, for the ratable benefit of the Agent and the Lenders.
Each Lender agrees that any action taken by the Agent, Majority
Lenders or Required Lenders, as applicable, in accordance with
the terms of this Agreement or the other Loan Documents relating
to the Collateral, and the exercise by the Agent, Majority
Lenders or Required Lenders, as applicable, of their respective
powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be
authorized by and binding upon all of the Lenders.
13.13 Field Audit Reports; Disclaimers by Lenders. By
its execution and delivery of this Agreement, each Lender
(a) is deemed to have requested that the Agent furnish
such Lender, and the Agent has agreed to furnish to each
Lender, promptly after it becomes available, a copy of each
field audit report (each, a "Report" and collectively,
"Reports") prepared by the Agent pursuant to Section 5.6;
(b) expressly agrees and acknowledges that neither BABC
nor the Agent (1) makes any representation or warranty as to
the accuracy of any Report, or (2) shall be liable for any
information contained in any Report;
(c) expressly agrees and acknowledges that the Reports
are not comprehensive audits, that the Agent or other party
performing any audit will inspect only specific information
regarding the Borrower and will rely significantly upon the
Borrower's books and records, as well as on representations
of the Borrower's personnel;
(d) agrees to keep all Reports confidential and
strictly for its internal use, and agrees not to distribute
or use any Report in any other manner, except to a
Participating Lender; and
(e) without limiting the generality of any other
indemnification provisions contained in this Agreement,
agrees (1) to hold BABC and the Agent harmless from any
action such Lender may take based upon, or the consequences
of any conclusion such Lender may reach as a result of, the
information contained in any Report, in connection with any
Loan or other credit accommodations that such Lender has
made or shall make to the Borrower, or in which such Lender
may purchase a participation interest, and (2) to pay,
protect, indemnify, defend and hold BABC and the Agent
harmless from and against, any claims, actions, proceedings,
damages, costs, expenses and other amounts (including,
without limitation, reasonable attorneys' fees) incurred by
BABC and/or the Agent as the direct or indirect result of
the actions of any third parties which might obtain all or
part of any Report through such Lender.
13.14 Relations Among Lenders.
(a) Except with respect to the exercise of set-off
rights of any Lender in accordance with Section 14.14, the
proceeds of which are applied in accordance with this Agreement,
each Lender agrees that it will not take any action, nor
institute any actions or proceedings, against the Borrower or any
other obligor hereunder or with respect to any Collateral or Loan
Document, without the prior written consent of the Majority
Lenders or, as may be provided in this Agreement or the other
Loan Documents, at the direction of the Agent.
(b) The Lenders are not partners or co-venturers, and
no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent)
authorized to act for, any other Lender.
ARTICLE 14
MISCELLANEOUS
14.1 Cumulative Remedies; No Prior Recourse to
Collateral. The enumeration herein of the Agent's and each
Lender's rights and remedies is not intended to be exclusive, and
such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Agent and the
Lenders may have under the UCC or other applicable law. The
Agent and the Lenders shall have the right, in their sole
discretion, to determine which rights and remedies are to be
exercised and in which order. The exercise of one right or
remedy shall not preclude the exercise of any others, all of
which shall be cumulative. The Agent and the Lenders may,
without limitation, proceed directly against the Borrower to
collect the Obligations without any prior recourse to the
Collateral.
14.2 Severability. If any provision of this Agreement
shall be prohibited or invalid, under applicable law, it shall be
is ineffective only to such extent, without invalidating the
remainder of this Agreement.
14.3 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver. (a) THIS AGREEMENT SHALL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS.
(b) SUBJECT ONLY TO THE EXCEPTION IN THE NEXT
SENTENCE, THE BORROWER, THE AGENT AND THE LENDERS HEREBY AGREE TO
THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURT OF THE NORTHERN
DISTRICT OF ILLINOIS AND THE STATE COURTS OF ILLINOIS LOCATED IN
COOK COUNTY, ILLINOIS AND WAIVE ANY OBJECTION BASED ON VENUE OR
FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED
THEREIN, AND AGREE THAT ANY DISPUTE CONCERNING THE RELATIONSHIP
AMONG THE AGENT, THE LENDERS AND THE BORROWER OR THE CONDUCT OF
ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE SHALL
BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE. NOTWITHSTANDING THE
FOREGOING: (1) THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO
BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE
LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE
COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF
THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS
DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.
(c) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED)
DIRECTED TO THE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 14.7
AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS
AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS,
OR, AT THE AGENT'S AND/OR THE LENDERS' OPTION, BY SERVICE UPON CT
CORPORATION SYSTEM, 208 SOUTH LASALLE STREET, CHICAGO, ILLINOIS
60604 WHICH THE BORROWER IRREVOCABLY APPOINTS AS THE BORROWER'S
AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS WITHIN THE
STATE OF ILLINOIS. IN ADDITION, THE AGENT AND THE LENDERS AGREE
TO PROMPTLY FORWARD BY REGISTERED MAIL ANY PROCESS SO SERVED UPON
SAID AGENT TO THE BORROWER AT ITS ADDRESS SET FORTH IN SEC-
TION 14.7. THE BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS AS
AFORESAID.
(d) THE BORROWER, THE AGENT AND THE LENDERS EACH
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR (ii) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR EITHER OF
THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED, IN CONNECTION
HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE. EACH OF THE BORROWER, THE AGENT
AND THE LENDERS HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT EITHER MAY FILE AN ORIGINAL COUNTERPART
OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) NOTHING IN THIS SECTION 14.3 SHALL AFFECT THE
RIGHT OF THE AGENT OR THE LENDERS TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE AGENT OR
THE LENDERS TO BRING ANY ACTION OR PROCEEDING AGAINST THE
BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
14.4 Survival of Representations and Warranties. All
of the Borrower's representations, and warranties contained in
this Agreement shall survive the execution, delivery, and accept-
ance thereof by the parties, notwithstanding any investigation by
the Agent or the Lenders or their respective agents.
14.5 Other Security and Guaranties. Without affecting
the Borrower's obligations hereunder, the Agent may from time to
time: (a) take from any Person and hold collateral (other than
the Collateral) for the payment of all or any part of the Obliga-
tions and exchange, enforce or release such collateral or any
part thereof; and (b) accept and hold any endorsement or guaranty
of payment of all or any part of the Obligations and release or
substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the
payment of all or any part of the Obligations, or any other
Person in any way obligated to pay all or any part of the
Obligations.
14.6 Fees and Expenses. The Borrower shall pay to the
Agent, for its benefit and/or the benefit of the Lenders, on
demand all reasonable costs and expenses that the Agent pays or
incurs in connection with the negotiation, preparation, consumma-
tion, administration, enforcement, and termination of this Agree-
ment and the other Loan Documents, including, without limitation:
(a) reasonable attorneys' and paralegals' fees (including
allocated in-house counsel fees) and disbursements of counsel to
the Agent; (b) reasonable costs and expenses (including
reasonable attorneys' and paralegals' fees (including allocated
in-house counsel fees) and disbursements) for any amendment,
supplement, waiver, consent, or subsequent closing in connection
with the Loan Documents and the transactions contemplated
thereby; (c) costs and expenses of lien searches; (d) taxes, fees
and other charges for filing financing statements and
continuations, and other actions to perfect, protect, and
continue the Agent's Liens; (e) sums paid or incurred to pay any
amount or take any action required of the Borrower under the Loan
Documents that the Borrower fails to pay or take; (f) reasonable
costs of appraisals, inspections, and verifications of the
Collateral, including, without limitation, travel, lodging, and
meals for inspections of the Collateral and the Borrower's
operations by the Agent's agents up to four (4) times per year
and whenever an Event of Default exists; (g) costs and expenses
of forwarding loan proceeds, collecting checks and other items of
payment, and establishing and maintaining Blocked Accounts; and
(h) costs and expenses of preserving and protecting the
Collateral. The Borrower shall pay on demand all reasonable
costs and expenses (including attorneys' and paralegals' fees
(including allocated in-house counsel fees) and disbursements)
paid or incurred by the Agent or any Lender to obtain payment of
the Obligations, enforce the Agent's Liens, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions
of the Loan Documents, or to defend any claims made or threatened
against the Agent or any Lender arising out of the transactions
contemplated hereby (including without limitation, preparations
for and consultations concerning any such matters). The fore-
going shall not be construed to limit any other provisions of the
Loan Documents regarding costs and expenses to be paid by the
Borrower. All of the foregoing costs and expenses shall be
charged to the Borrower's loan account as Revolving Loans as
described in Section 4.5.
14.7 Notices. Except as otherwise provided herein,
all notices, demands and requests that any party is required or
elects to give to the other shall be in writing, or by a
telecommunications device capable of creating a written record,
and any such notice shall become effective (a) upon personal
delivery thereof, including, but not limited to, delivery by
overnight mail and courier service, (b) five (5) days after it
shall have been mailed by United States mail, first class, cer-
tified or registered, with postage prepaid, or (c) in the case of
notice by such a telecommunications device, when properly
transmitted, in each case addressed to the party to be notified
at the address set forth on Schedule 14.7, or to such other
address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to
the persons designated above to receive copies shall not
adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other communication.
14.8 Indemnity of the Agent and the Lenders by the
Borrower. The Borrower agrees to (i) reimburse the Agent and the
Lenders for any reasonable costs and expenses (including, without
limitation, attorneys' and paralegals' fees and expenses,
including allocated in-house counsel fees) incurred by the Agent
or any Lender in defending any suit brought against it by the
Borrower or any other Person in connection with the transactions
contemplated by this Agreement, provided, however, in the event
the Borrower brings or defends a suit against the Agent or any
Lender and is successful in such suit, the Borrower shall not be
liable for reimbursement of the above-described expenses of the
Agent or such Lender incurred in defending such suit, and
(ii) indemnify and hold the Agent and the Lenders and their
respective officers, directors, employees, attorneys and agents
(collectively, the "Indemnitees") harmless from and against any
and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever incurred by the Indemnitees,
whether direct, indirect or consequential, as a result of or
arising from or relating to any proceeding by any Person, whether
threatened or initiated, asserting any claim for legal or
equitable remedy against any Person under any statute or
regulation (including, without limitation, any federal or state
securities or commercial laws or under any common law or
equitable cause or otherwise, including any liability and costs
under Environmental Laws or common law principles arising from or
in connection with the past, present or future operations of the
Borrower or its predecessors in interest, or the past, present or
future environmental condition of the Borrower's property, the
presence of asbestos-containing materials at or on such property,
or the Release or threatened Release of any Contaminant from such
property), in any way arising from or in connection with the
negotiation, preparation, execution, delivery, enforcement,
performance and administration of this Agreement or any other
document executed in connection herewith, provided that the
Borrower shall have no obligation hereunder with respect to
indemnified liabilities arising from the gross negligence or
willful misconduct of any Indemnitee seeking such
indemnification. To the extent that the indemnity set forth in
this Section may be unenforceable because it is violative of any
law or public policy, the Borrower shall pay the maximum portion
which it is permitted to pay under applicable law. Any
Indemnitee will promptly notify the Borrower of the commencement
of any legal proceeding which may give rise to any indemnified
liability under the foregoing indemnity and shall permit the
Borrower to participate in the defense of such Indemnitee in any
such proceeding. The foregoing indemnity shall survive the
resignation of an Agent pursuant to Section 13.7, the payment of
the Obligations and the termination of this Agreement. All of
the foregoing fees, costs and expenses shall be part of the Obli-
gations, payable upon demand, and secured by the Collateral.
14.9 Limitation of Liability. No claim may be made by
the Borrower, any Lender or other Person against the Agent, any
Lender, or the affiliates, directors, officers, employees, or
agents of any of them for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or any other Loan
Document, or any act, omission or event occurring the connection
therewith, and the Borrower and each Lender hereby waives,
releases and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or
suspected to exist in its favor.
14.10 Waiver of Notices. Unless otherwise expressly
provided herein, the Borrower waives presentment, protest and
notice of demand or dishonor and protest as to any instrument, as
well as any and all other notices to which it might otherwise be
entitled. No notice to or demand on the Borrower which the Agent
or any Lender may elect to give shall entitle the Borrower to any
or further notice or demand in the same, similar or other
circumstances.
14.11 Final Agreement; No Strict Construction. This
Agreement is intended by the Borrower, the Agent and the Lenders
to be the final, complete, and exclusive expression of the
agreement between them. This Agreement supersedes any and all
prior oral or written agreements relating to the subject matter
hereof. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event that an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any
provisions of this Agreement
14.12 Counterparts. This Agreement may be executed in
any number of counterparts, and by the Agent, each Lender and the
Borrower in separate counterparts, each of which shall be an
original, but all of which shall together constitute one and the
same agreement.
14.13 Captions. The captions contained in this Agree-
ment are for convenience of reference only, are without
substantive meaning and should not be construed to modify,
enlarge, or restrict any provision.
14.14 Right of Set-Off. Whenever an Event of Default
exists, the Agent and each Lender are hereby authorized at any
time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held
and other indebtedness at any time owing by the Agent or such
Lender or any affiliate of the Agent or such Lender to or for the
credit or the account of the Borrower against any and all of the
Obligations, whether or not then due and payable. The Agent and
each Lender agree promptly to notify Borrower after any such set-
off and application made by the Agent or such Lender, as
applicable, provided that the failure to give such notice shall
not affect the validity of such set-off and application.
14.15 Taxes.
(a) Any and all payments by the Borrower hereunder
shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, taxes
imposed on its income, and franchise taxes imposed on it, by the
United States of America or any Public Authority of the
jurisdiction under the laws of which such Lender or the Agent (as
the case may be) is organized or any political subdivision
thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum
payable hereunder to any Lender or the Agent, (i) the sum payable
shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to
additional sums payable under this Section 14.15) such Lender or
the 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 and (iii) the Borrower
shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise
or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or
any other Loan Documents (hereinafter referred to as "Other
Taxes").
(c) The Borrower will indemnify each Lender and the
Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 14.15) paid by
such Lender or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes
were correctly or legally asserted. This indemnification shall
be made within 30 days from the date such Lender or the Agent (as
the case may be) makes written demand therefor. Each Lender
shall, at the time of any written demand for indemnification
under this subsection (c), provide to the Borrower a receipt for,
or other evidence of the payment of, the Taxes or Other Taxes for
which indemnification is sought.
(d) Within 30 days after the date of any payment of
Taxes, the Borrower will furnish to the Agent, at its address
referred to in Section 14.7, the original or a certified copy of
a receipt or other item evidencing payment thereof. If no Taxes
are payable in respect of any payment hereunder and with respect
to which a claim for indemnity has been made hereunder, the
Borrower will furnish to the Agent, at such address, a
certificate from each appropriate taxing authority, or an opinion
of counsel acceptable to the Agent, in either case stating that
such payment is exempt from or not subject to Taxes.
(e) Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and
obligations of the Borrower contained in this Section 14.15 shall
survive the payment in full of principal and interest hereunder.
IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.
VENTURE STORES, INC.
By:/s/Russell E. Solt
Title: E.V.P.
BANKAMERICA BUSINESS CREDIT, INC.,
as the Agent
By:/s/Gregory R. Eck
Vice President
THE LENDERS
Commitment: $205,000,000 BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By:/s/Gregory R. Eck
Vice President
Commitment: $20,000,000 THE CIT GROUP/BUSINESS CREDIT,
INC., as a Lender
By:/s/Mitchell J. Tarvid
Title: Vice President
Venture Stores, Inc.
Computation of Earnings Per Share
(thousands, except per share data) EXHIBIT 11
13 WEEKS ENDED 26 WEEKS ENDED
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
Net earnings (loss) $ (3,810) $ (17,341) $ (2,073) $ (20,533)
Less Preferred dividend (625) (625) (1,250) (1,250)
Net earnings (loss) avail.
to common shareowners $ (4,435) $ (17,966) $ (3,323) $ (21,783)
Average outstanding shares 18,113 17,310 17,792 17,286
Earnings (Loss) per common
share $ (0.24) $ (1.04) $ (0.19) $ (1.26)
PRIMARY:
Net earnings (loss) $ (3,810) $ (17,341) $ (2,073) $ (20,533)
Less Preferred dividend (625) (625) (1,250) (1,250)
Net earnings (loss) avail.
to common shareowners $ (4,435) $ (17,966) $ (3,323) $ (21,783)
Average outstanding shares 18,113 17,310 17,792 17,286
Net effect of dilutive
stock options - based on
the treasury method 70 11 64 21
Average shares for primary
earnings per share 18,183 17,321 17,856 17,307
Primary earnings (loss) per
common share $ (0.24) $ (1.04) $ (0.19) $ (1.26)
Venture Stores, Inc.
Computation of Earnings Per Share
(thousands, except per share data) Exhibit 11 (continued)
13 WEEKS ENDED 26 WEEKS ENDED
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
FULLY DILUTED:
Net earnings (loss) $ (3,810) $ (17,341) $ (2,073) $ (20,533)
Less Preferred dividend (625) (625) (1,250) (1,250)
Net earnings (loss) avail.
to common shareowners $ (4,435) $ (17,966) $ (3,323) $ (21,783)
Average outstanding shares 18,113 17,310 17,792 17,286
Net effect of dilutive
stock options - based on
the treasury method 70 11 64 21
Average shares for
fully diluted
earnings per share 18,183 17,321 17,856 17,307
Fully diluted earnings
(loss) per common share $ (0.24) $ (1.04) $ (0.19) $ (1.26)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Balance Sheet as of July 27, 1996 and the Condensed Statement of
Earnings for the 26 weeks ended July 27, 1996 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000864968
<NAME> VENTURE STORES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> JUL-27-1996
<CASH> 20,938
<SECURITIES> 0
<RECEIVABLES> 13,827
<ALLOWANCES> 0
<INVENTORY> 302,618
<CURRENT-ASSETS> 335,850
<PP&E> 534,552
<DEPRECIATION> 161,415
<TOTAL-ASSETS> 736,322
<CURRENT-LIABILITIES> 258,945
<BONDS> 181,292
0
77
<COMMON> 18,285
<OTHER-SE> 221,269
<TOTAL-LIABILITY-AND-EQUITY> 736,322
<SALES> 680,663
<TOTAL-REVENUES> 680,663
<CGS> 506,554
<TOTAL-COSTS> 165,425
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,611
<INCOME-PRETAX> (3,927)
<INCOME-TAX> (1,854)
<INCOME-CONTINUING> (2,073)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,073)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
