<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED May 4, 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 0-19149
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Filene's Basement Corp.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3016733
------------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
40 Walnut Street, Wellesley, MA 02181
-------------------------------------
(Address of principal executive offices)
(Zip Code)
(617) 348-7000
--------------
(Registrant's telephone number, including area code)
---------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicated 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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicated by check mark whether the registrant has filed all documents and
reports required to be filed by Section 2, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date: 20,499,189 shares of Common
Stock as of June 11, 1996.
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FILENE'S BASEMENT CORP.
INDEX
PART I FINANCIAL INFORMATION Page No.
--------
Consolidated Balance Sheets 3
May 4, 1996, February 3, 1996
and April 29, 1995
Consolidated Statements of Operations 4
Thirteen weeks ended May 4, 1996
and April 29, 1995
Consolidated Statements of Cash Flows 5
Thirteen weeks ended May 4, 1996
and April 29, 1995
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of 8 - 10
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 4 - Submission of Matter to a Vote 11
of Security Holders
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit 11 - Computation of Net Income per 13
Common Share
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<TABLE>
FILENE'S BASEMENT CORP.
(and its Wholly-Owned Subsidiaries)
(CONSOLIDATED BALANCE SHEETS)
(unaudited)
(dollars in thousands)
- ----------------------------------------------------------------------------------------
<CAPTION>
ASSETS
------
May 4, February 3, April 29,
1996 1996 1995
--------- ----------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 365 $ 464 $ 454
Inventories 91,109 85,777 129,657
Other current assets 19,323 26,534 14,889
Deferred income taxes - - 9,504
-------- -------- --------
Total current assets 110,797 112,775 154,504
Property, plant and equipment, net 62,535 67,278 69,772
Beneficial operating lease rights, net 15,797 16,125 17,111
Deferred income taxes 3,128 3,128 2,500
Intangible assets, net & other 10,592 10,746 5,498
-------- -------- --------
Total assets $202,849 $210,052 $249,385
======== ======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current liabilities:
Accounts payable 39,156 36,645 47,443
Accrued expenses 29,178 33,402 31,559
Short term debt 7,300 13,200 17,000
Obligations under capital leases, due
within one year 501 490 459
-------- -------- --------
Total current liabilities 76,135 83,737 96,461
Reserve for store closings 4,663 4,663 1,366
Deferred revenue 2,124 2,166 2,291
Long-term debt 35,000 35,000 35,000
Obligations under capital leases, less
portion due within one year 3,498 3,627 3,999
Stockholders' equity
Common stock, $.01 par value; authorized
70,000,000 shares; 20,577,715, 20,575,464
and 20,401,775 shares issued 206 206 204
Cost of 75,000 common shares in treasury (16) (16) (16)
Unamortized restricted stock compensation (6) (12) (31)
Additional paid-in capital 86,049 86,048 85,600
Retained earnings (4,804) (5,367) 24,511
-------- -------- --------
Total stockholders' equity 81,429 80,859 110,268
-------- -------- --------
Total liabilities and stockholders' equity $202,849 $210,052 $249,385
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<TABLE>
FILENE'S BASEMENT CORP.
(and its Wholly-Owned Subsidiaries)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands, except per share amounts)
- --------------------------------------------------------------------------------------
<CAPTION>
13 Weeks Ended - 13 Weeks Ended -
May 4, 1996 April 29, 1995
----------------- ----------------
$ % $ %
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Net Sales $124,032 100.0% $127,694 100.0%
-------- ----- -------- -----
Cost of Sales, including buying, receiving and
occupancy costs: 93,210 75.1% 97,812 76.6%
-------- ----- -------- -----
Gross profit 30,822 24.9% 29,882 23.4%
Selling, general and administrative expenses 28,248 22.8% 31,591 24.7%
Amortization of intangible assets and
beneficial operating lease rights 367 0.3% 338 0.3%
-------- ----- -------- -----
Operating income (loss) 2,207 1.8% (2,047) -1.6%
Interest expense, net 1,267 1.0% 942 0.7%
-------- ----- -------- -----
Income (loss) before income taxes 940 0.8% (2,989) -2.3%
Income tax provision (benefit) 376 0.3% (1,076) -0.8%
-------- ----- -------- -----
Net income (loss) 564 0.5% (1,913) -1.5%
======== ===== ======== =====
Primary and fully diluted income (loss) per
common share:
Net income (loss) $ 0.03 $ (0.09)
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<TABLE>
FILENE'S BASEMENT CORP.
(and its WHolly-Owned Subsidiaries)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
- ----------------------------------------------------------------------------------------------
<CAPTION>
13 Weeks Ended - 13 Weeks Ended -
May 4, 1996 April 29, 1995
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 564 $ (1,913)
Adjustments to reconcile net income (loss) to net cash
used in operations:
Depreciation and amortization 3,057 3,443
Amortization related to restricted stock compensation 6 6
Deferred income taxes 0 (243)
Changes in operating assets and liabilities:
Inventory (5,332) (12,153)
Other current assets 7,211 (4,178)
Accounts payable 2,511 (1,365)
Accrued expenses (1,460) (1,185)
-------- --------
Total adjustments 5,993 (15,675)
Net cash provided by (used in) operating activities 6,557 (17,588)
Cash flows from investing activities:
Purchase of property, plant and equipment & other (639) (3,536)
Proceeds from sale of leasehold interest 0 41
-------- --------
Net cash used in investing activities (639) (3,495)
Cash flows from financing activities:
Proceeds from short-term borrowings 26,585 32,050
Payments on short term borrowings (32,485) (15,050)
Principal payments of capital lease obligations (118) (109)
Proceeds from sale of common stock to employees 1 4
-------- --------
Net cash provided by (used in) financing activities (6,017) 16,895
Net increase (decrease) in cash and cash equivalents (99) (4,188)
Cash and cash equivalents at beginning of period 464 4,642
-------- --------
Cash and cash equivalents at end of period $ 365 $ 454
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 1,215 $ 191
Income taxes paid 199 119
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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FILENE'S BASEMENT CORP.
(and its Wholly-Owned Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results of the periods ended May 4, 1996 and April 29, 1995 are not
necessarily indicative of the results for a full fiscal year, because the
Company's business, in common with the businesses of retailers generally,
is subject to seasonal influences, with higher levels of sales and income
generally realized in the fall season.
2. The preceding data is unaudited but, in the opinion of management, includes
all adjustments (consisting of normally occurring accruals and deferrals)
necessary for the fair presentation of the results of operations for the
periods reported, in accordance with generally accepted accounting
principles and practices consistently applied.
3. On May 23, 1996, the Company entered into a Revolving Credit and Term Loan
Agreement (the "Agreement"), which replaced the existing Amended and
Restated Credit and Override Agreement dated October 13, 1995 and as
amended on October 31, 1995, December 8, 1995 and February 3, 1996. The
Agreement and all loans outstanding thereunder matures on June 30, 1999 and
includes a $65,000,000 revolving credit facility and a $10,000,000 term
loan, which replaced a $50,000,000 revolving credit facility and
$35,000,000 of fixed rate debt.
Advances against eligible inventory and receivables bear interest at either
prime plus 0.50% or LIBOR plus 2.50%. The term loan bears interest at
either prime plus 0.75% or LIBOR plus 2.75%. In the event the Company
achieves a predetermined financial target for the current fiscal year, the
interest rate on all loans will be decreased by 0.50%. Mandatory payments
of the term loan principal are required upon the occurrence of certain
events during the period preceding the first anniversary of the loan and
thereafter, based on the outstanding principal balance at that date, in
eight equal quarterly installments commencing September 30, 1997. In the
event the outstanding principal of the term loan on the first anniversary
is greater than $4 million, the interest rate on the term loan only will be
permanently increased by 1%. All assets of the Company serve to
collateralize borrowings under the Agreement.
The Agreement contains new financial covenants which are less restrictive
than the previous requirements thereby providing the Company with greater
operating flexibility. The most restrictive covenant of the new agreement
mandates cumulative
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FILENE'S BASEMENT CORP.
(and its Wholly-Owned Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
minimum earnings before interest, taxes, depreciation and amortization for
specified periods during the term of the Agreement.
4. In the fourth quarter of Fiscal 1995, the Company recorded a charge of
$10.6 million in connection with the planned closing of eight stores. One
store was closed in Fiscal 1995 and four stores were closed in the Fiscal
quarter ended May 4, 1996. During the current quarter, the Company used
$3.6 million of the reserve primarily for the write-off of abandoned
leasehold improvements and costs directly associated with the closing of
stores. Of the $3.6 million, $2.8 million were noncash related charges. The
Company believes that the reserve balances as of May 4, 1996 are adequate
to cover the estimated remaining obligations associated with this charge.
Page 7
<PAGE> 8
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MAY 4, 1996
RESULTS OF OPERATIONS
- ---------------------
Net sales for the fiscal quarter ended May 4, 1996 decreased $3.7 million, or
3%, to $124.0 million, as compared to the same period in the prior year.
Comparable store sales for the thirteen week period were flat versus the
comparable thirteen week period last year. The total number of stores in
operation on May 4, 1996 and April 29, 1995 were 43 and 52, respectively. For
the twelve fiscal month period April 30, 1995 to May 4, 1996 no new stores were
opened and nine locations were closed.
Cost of goods sold as a percentage of sales was 75.1% for the quarter compared
to 76.6% for the same period in the prior year. The decrease in cost of goods
sold as a percentage of sales was attributable to: a) lower markdown
requirements on current season merchandise b) continued liquidation in Fiscal
1996 of inventories related to the Fiscal 1995 strategic repositioning c)
assortment mix and d) buying and distribution related costs resulting primarily
from the reduction in store locations.
Selling, general and administrative expenses were $28.2 million, or 22.8% of net
sales for the current quarter compared to $31.6 million or 24.7% of net sales
for the same period in the prior year. Payroll and advertising expenses
accounted for the majority of the decrease. Payroll reductions were primarily
the result of the decreased number of stores in operation, as compared to the
same period in the prior year, while the decrease in advertising expense was the
result of the planned elimination of specific events.
For the fiscal quarter ended May 4, 1996, net income was $0.6 million, or 3
cents per share, on 20.9 million average shares outstanding, compared to a net
loss of $1.9 million, or 9 cents per share, on 20.8 million average shares
outstanding for the quarter ended April 29, 1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
On May 23, 1996, the Company entered into a Revolving Credit and Term Loan
Agreement (the "Agreement"), which replaced the existing Amended and Restated
Credit and Override Agreement dated October 13, 1995 and as amended on October
31, 1995, December 8, 1995 and February 3, 1996. The Agreement and all loans
outstanding thereunder matures on June 30, 1999 and includes a $65,000,000
revolving credit facility and a $10,000,000 term loan, which replaced a
$50,000,000 revolving credit facility and $35,000,000 of fixed rate debt.
Although the aggregate facility under the new Agreement is $10
Page 8
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MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MAY 4, 1996
million less than the previous arrangement, the Company's borrowing capacity
under the new Agreement has actually been enhanced as a result of a broader
borrowing base formula and lower overall debt levels. Subsequent to May 4, 1996,
the Company received federal tax refunds totalling $9.6 million related to net
operating losses carried back to offset prior years' taxable income, which was
applied to reduce outstanding debt. Availability under the new Agreement is
determined based on a higher advance rate against eligible inventory than under
the previous arrangement and also provides for advances against eligible
receivables, which previously were not included in the borrowing base. Further,
under the previous arrangement, the $35 million of fixed rate debt was a
standing use of availability, while under the new Agreement, the $10 million
term loan is not considered in the determination of availability.
Advances against eligible inventory and receivables bear interest at either
prime plus 0.50% or LIBOR plus 2.50%. The term loan bears interest at either
prime plus 0.75% or LIBOR plus 2.75%. Based on these current rates of interest
versus the previous credit facility, it is anticipated that the Company will
realize annual savings in excess of $1.5 million. In the event the Company
achieves a predetermined financial target for the current fiscal year, the
interest rate on all loans will be decreased by 0.50%.
Mandatory payments of the term loan principal are required upon the occurrence
of certain events during the period preceding the first anniversary of the loan
and thereafter, based on the outstanding principal balance at that date, in
eight equal quarterly installments commencing September 30, 1997. In the event
the outstanding principal of the term loan on the first anniversary is greater
than $4 million, the interest rate on the term loan only will be permanently
increased by 1%.
The Agreement contains new financial covenants which are less restrictive than
the previous requirements thereby providing the Company with greater operating
flexibility. The most restrictive covenant of the new agreement mandates
cumulative minimum earnings before interest, taxes, depreciation and
amortization for specified periods during the term of the Agreement. During the
fiscal quarter ended May 4, 1996 and as of May 4, 1996 the Company was in
compliance with all covenants of the previous arrangement.
As of May 4, 1996, the Company had over $34.7 million of working capital and
$11.8 million of remaining availability, including an allowable overadvance. As
of that date, outstanding obligations under the previous arrangement were $7.3
million and the Company had $18.4 million in letter of credit commitments.
Short term trade credit represents a significant source of
Page 9
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MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MAY 4, 1996
financing for inventory purchases and arises from the willingness of vendors to
grant extended payment terms. Merchandise inventories are financed either by the
vendors or third party factors.
The Company believes that internally generated working capital, existing vendor
and third party factor arrangements and funds available under the newly executed
Agreement will be adequate to meet its merchandise inventory and operating
expense needs, as well as anticipated capital expenditure requirements. However,
the Company's operating results and the adequacy of its working capital could be
adversely affected if, for any reason, the Company's borrowing base was to
become impaired, or otherwise be deemed ineligible, thereby diminishing the
level of available funds.
In the fourth quarter of Fiscal 1995, the Company recorded a charge of $10.6
million in connection with the planned closing of eight stores. One store was
closed in Fiscal 1995 and four stores were closed in the Fiscal quarter ended
May 4, 1996. During the current quarter, the Company used $3.6 million of the
reserve primarily for the write-off of abandoned leasehold improvements and
costs directly associated with the closing of stores. Of the $3.6 million, $2.8
million were noncash related charges. The Company believes that the reserve
balances as of May 4, 1996 are adequate to cover the estimated remaining
obligations associated with this charge.
The Company has never paid a cash dividend and has no plans to pay dividends on
its common stock.
The Company's business is seasonal, reflecting increased consumer demand in the
fall season. The second half of each fiscal year provides a greater portion of
the Company's annual sales and operating profit.
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MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MAY 4, 1996
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.39........ Revolving Credit and Term Loan Agreement among the Company,
Filene's Basement, Inc and Filene's Basement Corp and the First
National Bank of Boston. Dated as of May 23, 1996 (filed herewith)
- --------------------------------------------------------------------------------
(b) No reports on Form 8-K were filed during the quarter ended May 4, 1996 for
which this report is filed.
Page 11
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MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MAY 4, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized, being also its principal financial
officer.
FILENE'S BASEMENT CORP.
/s/ Steven Siegel
-------------------------------
Steven Siegel
Executive Vice President, CFO
DATE: June 14, 1996
Page 12
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EXHIBIT 10.39
REVOLVING
CREDIT AND TERM LOAN AGREEMENT
dated as of May 23, 1996
among
FILENE'S BASEMENT, INC.,
as Borrower,
FILENE'S BASEMENT CORP.,
as Guarantor,
THE FIRST NATIONAL BANK OF BOSTON
and
THE OTHER LENDING INSTITUTIONS LISTED ON SCHEDULE 1 HERETO,
as Banks
and
THE FIRST NATIONAL BANK OF BOSTON,
as Agent
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<TABLE>
TABLE OF CONTENTS
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<CAPTION>
PAGE
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<S> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION. ................................. 1
1.1. Definitions. ...................................................... 1
1.2. Rules of Interpretation. .......................................... 16
2. THE REVOLVING CREDIT FACILITY. ........................................... 17
2.1. Commitment to Lend. ............................................... 17
2.2. Commitment Fee. ................................................... 17
2.3. Reduction of Commitment. .......................................... 17
2.4. The Revolving Credit Notes. ....................................... 18
2.5. Interest on Revolving Credit Loans. ............................... 19
2.6. Requests for Revolving Credit Loans. .............................. 19
2.6.1. Loan Request. ............................................ 19
2.6.2. Swing Line. .............................................. 20
2.6.3. Reimbursement Obligations. ............................... 20
2.7. Conversion Options. ............................................... 20
2.7.1. Conversion to Different Type of Revolving Credit Loan. ... 20
2.7.2. Continuation of Type of Revolving Credit Loan. ........... 21
2.7.3. Eurodollar Rate Loans. ................................... 21
2.8. Funds for Revolving Credit Loan. .................................. 21
2.8.1. Funding Procedures. ...................................... 21
2.8.2. Advances by Agent. ....................................... 22
2.9. Change in Borrowing Base. ......................................... 23
2.10. Settlements; Failure to Make Funds Available. .................... 23
2.10.1. Notice to Banks. ........................................ 23
2.10.2. Delinquent Banks. ....................................... 23
2.10.3. Advances. ............................................... 24
3. REPAYMENT OF THE REVOLVING CREDIT LOANS. ................................. 24
3.1. Maturity. ......................................................... 24
3.2. Mandatory Repayments of Revolving Credit Loans. ................... 24
3.2.1. Outstandings in Excess of Commitment. .................... 24
3.2.2. Blocked Account Provisions. .............................. 25
4. THE TERM LOAN. ........................................................... 27
4.1. Commitment to Lend. ............................................... 27
4.2. The Term Notes. ................................................... 27
4.3. Mandatory Repayments of Term Loan. ................................ 27
4.3.1. Schedule of Installment Payments of Principal of Term
Loan. ........................................................... 27
4.3.2. Additional Mandatory Payments of Principal of Term
Loan. ........................................................... 28
4.4. Optional Prepayment of Term Loan. ................................. 28
4.5. Interest on Term Loan. ............................................ 29
4.5.1. Interest Rates. .......................................... 29
4.5.2. Interest Rate Options. ................................... 29
4.5.3. Amounts, etc. ............................................ 29
</TABLE>
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5. LETTERS OF CREDIT. ....................................................... 30
5.1. Letter of Credit Commitments. ..................................... 30
5.1.1. Commitment to Issue Letters of Credit. ................... 30
5.1.2. Letter of Credit Applications. ........................... 30
5.1.3. Terms of Letters of Credit. .............................. 30
5.1.4. Reimbursement Obligations of Banks. ...................... 31
5.1.5. Participations of Banks. ................................. 31
5.2. Reimbursement Obligation of the Borrower. ......................... 31
5.3. Letter of Credit Payments. ........................................ 32
5.4. Obligations Absolute. ............................................. 33
5.5. Reliance by Issuer. ............................................... 33
5.6. Letter of Credit Fee. ............................................. 34
6. CERTAIN GENERAL PROVISIONS. .............................................. 34
6.1. Closing Fee. ...................................................... 34
6.2. Funds for Payments. ............................................... 34
6.2.1. Payments to Agent. ....................................... 34
6.2.2. No Offset, etc. .......................................... 34
6.3. Computations. ..................................................... 35
6.4. Inability to Determine Eurodollar Rate. ........................... 35
6.5. Illegality. ....................................................... 35
6.6. Additional Costs, Etc. ............................................ 36
6.7. Capital Adequacy. ................................................. 37
6.8. Certificate. ...................................................... 38
6.9. Indemnity. ........................................................ 38
6.10. Interest After Default. .......................................... 38
6.10.1. Overdue Amounts. ........................................ 38
6.10.2. Amounts Not Overdue. .................................... 38
7. COLLATERAL SECURITY AND GUARANTIES. ...................................... 38
7.1. Security of Borrower. ............................................. 38
7.2. Guaranty and Security of Guarantor. ............................... 39
8. REPRESENTATIONS AND WARRANTIES. .......................................... 39
8.1. Corporate Authority. .............................................. 39
8.1.1. Incorporation; Good Standing. ............................ 39
8.1.2. Authorization. ........................................... 39
8.1.3. Enforceability. .......................................... 39
8.2. Governmental Approvals. ........................................... 40
8.3. Title to Properties; Leases. ...................................... 40
8.4. Financial Statements and Projections. ............................. 40
8.4.1. Financial Statements. .................................... 40
8.4.2. Projections. ............................................. 40
8.5. No Material Changes, Etc. ......................................... 41
8.6. Franchises, Patents, Copyrights, Etc. ............................. 41
8.7. Litigation. ....................................................... 41
8.8. No Materially Adverse Contracts, Etc. ............................. 41
8.9. Compliance with Other Instruments, Laws, Etc. ..................... 42
8.10. Tax Status. ...................................................... 42
8.11. No Event of Default. ............................................. 42
</TABLE>
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8.12. Holding Company and Investment Company Acts. .................... 42
8.13. Absence of Financing Statements, Etc. ........................... 42
8.14. Perfection of Security Interest. ................................ 42
8.15. Certain Transactions. ........................................... 43
8.16. Employee Benefit Plans. ......................................... 43
8.16.1. In General. ............................................ 43
8.16.2. Terminability of Welfare Plans. ........................ 43
8.16.3. Guaranteed Pension Plans. .............................. 43
8.16.4. Multiemployer Plans. ................................... 44
8.17. Regulations U and X. ............................................ 44
8.18. Environmental Compliance. ....................................... 44
8.19. Subsidiaries, etc. .............................................. 46
8.20. Bank Accounts. .................................................. 47
8.21. Fiscal Quarters. ................................................ 47
8.22. Chief Executive Office; Inventory Locations. .................... 47
8.23. Insurance. ...................................................... 47
8.24. Full Disclosure. ................................................ 47
9. AFFIRMATIVE COVENANTS OF THE BORROWER AND THE GUARANTOR. ................ 47
9.1. Punctual Payment. ................................................ 47
9.2. Maintenance of Office. ........................................... 47
9.3. Records and Accounts. ............................................ 48
9.4. Financial Statements, Certificates and Information. .............. 48
9.5. Notices. ......................................................... 50
9.5.1. Defaults. ............................................... 50
9.5.2. Environmental Events. ................................... 50
9.5.3. Notification of Claim against Collateral. ............... 51
9.5.4. Notice of Litigation and Judgments. ..................... 51
9.6. Corporate Existence; Maintenance of Properties. .................. 51
9.7. Insurance. ....................................................... 52
9.7.1. General Coverage. ....................................... 52
9.7.2. Business Interruption Insurance. ........................ 52
9.8. Taxes. ........................................................... 52
9.9. Inspection of Properties and Books, etc. ......................... 53
9.9.1. General. ................................................ 53
9.9.2. Appraisals. ............................................. 53
9.9.3. Environmental Assessments. .............................. 53
9.9.4. Communications with Accountants. ........................ 54
9.10. Comphance with Laws, Contracts, Licenses, and Permits. .......... 54
9.11. Employee Benefit Plans. ......................................... 54
9.12. Use of Proceeds. ................................................ 55
9.13. Additional Mortgaged Property. .................................. 55
9.14. Bank Accounts. .................................................. 55
9.15. Agency Account Agreements. ...................................... 55
9.16. Inventory Restrictions. ......................................... 56
9.17. Landlord Waivers. ............................................... 56
9.18. Further Assurances. ............................................. 56
</TABLE>
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10. CERTAIN NEGATIVE COVENANTS OF THE BORROVER AND THE GUARANTOR. .......... 56
10.1. Restrictions on Indebtedness. ..................................... 56
10.2. Restrictions on Liens. ............................................ 58
10.3. Restrictions on Investments. ...................................... 60
10.4. Distributions. .................................................... 62
10.5. Merger, Consolidation and Disposition of Assets. .................. 62
10.5.1. Mergers and Acquisitions. ............................... 62
10.5.2. Disposition of Assets. .................................. 62
10.6. Sale and Leaseback. ............................................... 63
10.7. Compliance with Environmental Laws. ............................... 64
10.8. Employee Benefit Plans. ........................................... 64
10.9. Bank Accounts. .................................................... 64
10.10. Amendments to Monogram Agreement. ................................ 65
10.11. Transactions with Affiliates. .................................... 65
10.12. Amendment to North Michigan Avenue Note. ......................... 65
11. FINANCIAL COVENANTS OF THE BORROWER AND THE GUARANTOR. ................. 66
11.1. Minimum EBITDA. ................................................... 66
11.2. Minimum Operating Cash Flow to Interest Ratio. .................... 66
12. CLOSING CONDITIONS. .................................................... 66
12.1. Loan Documents, etc. .............................................. 67
12.2. Certified Copies of Charter Documents. ............................ 67
12.3. Corporate, Action. ................................................ 67
12.4. Incumbency Certificate. ........................................... 67
12.5. Validity of Liens. ................................................ 67
12.6. Perfection Certificates and UCC Search Results. ................... 67
12.7. Title Insurance. .................................................. 68
12.8. Certificates of Insurance. ........................................ 68
12.9. Agency Account Agreements. ........................................ 68
12.10. Borrowing Base Report. ........................................... 68
12.11. Solvency Certificate. ............................................ 68
12.12. Opinion of Counsel. .............................................. 68
12.13. Payment of Fees. ................................................. 68
12.14. Termination of Existing Credit Agreement. ........................ 69
13. CONDITIONS TO ALL BORROWINGS. .......................................... 69
13.1. Representations True; No Event of Default. ........................ 69
13.2. No Legal Impediment. .............................................. 69
13.3. Governmental Regulation. .......................................... 69
13.4. Proceedings and Documents. ........................................ 69
13.5. Borrowing Base Report. ............................................ 70
14. EVENTS OF DEFAULT; ACCELERATION; ETC. .................................. 70
14.1. Events of Default and Acceleration. ............................... 70
14.2. Termination of Commitments. ....................................... 74
14.3. Remedies. ......................................................... 74
14.4. Distribution of Collateral Proceeds. .............................. 74
15. SETOFF. ................................................................ 75
</TABLE>
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<TABLE>
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16. THE AGENT. ............................................................. 76
16.1. Authorization. .................................................... 76
16.2. Employees and Agents. ............................................. 77
16.3. No Liability. ..................................................... 77
16.4. No Representations. ............................................... 77
16.5. Payments. ......................................................... 78
16.5.1. Payments to Agent. ...................................... 78
16.5.2. Distribution by Agent. .................................. 78
16.5.3. Delinquent Banks. ....................................... 78
16.6. Holders of Notes. ................................................. 79
16.7. Indemnity. ........................................................ 79
16.8. Agent as Bank. .................................................... 79
16.9. Resignation. ...................................................... 79
16.10. Notification of Defaults and Events of Default. .................. 80
16.11. Duties in the Case of Enforcement. ............................... 80
17. EXPENSES. .............................................................. 80
18. INDEMNIFICATION. ....................................................... 81
19. SURVIVAL OF COVENANTS, ETC. ............................................ 82
20. ASSIGNMENT AND PARTICIPATION. .......................................... 82
20.1. Conditions to Assignment by Banks. ................................ 82
20.2. Certain Representations and Warranties; Limitations;
Covenants. .............................................................. 83
20.3. Register. ......................................................... 84
20.4. New Notes. ........................................................ 84
20.5. Participations. ................................................... 85
20.6. Disclosure. ....................................................... 85
20.7. Assignee or Participant Affiliated with the Borrower. ............. 85
20.8. Miscellaneous Assignment Provisions. .............................. 86
20.9. Assignment by Borrower. ........................................... 86
21. NOTICES, ETC. .......................................................... 86
22. GOVERNING LAW. ......................................................... 87
23. HEADINGS. .............................................................. 88
24. COUNTERPARTS. .......................................................... 88
25. ENTIRE AGREEMENT, ETC. ................................................. 88
26. WAIVER OF JURY TRIAL. .................................................. 88
27. CONSENTS, AMENDMENTS, WAIVERS, ETC. .................................... 88
28. SEVERABILITY. .......................................................... 89
29. CONFIDENTIALITY. ....................................................... 89
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EXHIBITS AND SCHEDULES
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Exhibit A Form of Borrowing Base Report
Exhibit B Form of Revolving Credit Note
Exhibit C Form of Loan Request
Exhibit D Form of Term Note
Exhibit E Form of Compliance Certificate
Exhibit F Form of Assignment and Acceptance
Exhibit G Form of Landlord Waiver
Schedule 1 Banks; Commitments
Schedule 2 Permitted Inventory Locations
Schedule 3.2.2(a) Blocked Account Provisions - Agency Account
Institutions
Schedule 3.2.2(b) Blocked Account Provisions - Credit Cards
Schedule 8.3 Title to Properties; Leases
Schedule 8.4.1 Contingent Liabilities
Schedule 8.4.2 Balance Sheets, Income and Cash Flow
Statements
Schedule 8.7 Litigation
Schedule 8.8 Materially Adverse Contracts
Schedule 8.l0 Taxes
Schedule 8.14 Perfection
Schedule 8.15 Transactions with Affiliates
Schedule 8.18 Environmental Matters
Schedule 8.19 Joint Ventures; Partnerships
Schedule 8.20 Bank Accounts
Schedule 8.21 Borrower's Fiscal Quarters
Schedule 8.22 Location of Books and Records
Schedule 8.24 Documents and/or Statements filed with the
Securities and Exchange Commission
Schedule 9.15 Agency Agreements
Schedule 10.1 Existing Indebtedness; Tax Audits
Schedule 10.2 Existing Liens
Schedule 10.3 Existing Investments
Schedule 10.5.2 Permitted Dispositions
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<PAGE> 8
REVOLVING CREDIT
----------------
AND
---
TERM LOAN AGREEMENT
-------------------
This REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of the 23rd day of
May, 1996, by and among (a) FILENE'S BASEMENT, INC. (the "Borrower"), a
Massachusetts corporation having its principal place of business at 40 Walnut
Street, Wellesley, Massachusetts 02181, (b) FILENE'S BASEMENT CORP. (the
"Guarantor"), a Massachusetts corporation having its principal place of business
at 40 Walnut Street, Wellesley, Massachusetts 02181, (c) THE FIRST NATIONAL BANK
OF BOSTON and the other lending institutions listed on SCHEDULE 1 and (d) THE
FIRST NATIONAL BANK OF BOSTON as agent for itself and such other lending
institutions.
1. DEFINITIONS AND RULES OF INTERPRETATION.
----------------------------------------
1.1. DEFINITIONS. The following terms shall have the meanings set forth in
this [Section]1 or elsewhere in the provisions of this Credit Agreement referred
to below:
ACCOUNTS RECEIVABLE. All rights of the Borrower to payment for goods sold,
leased or otherwise marketed in the ordinary course of business and all rights
of the Borrower to payment for services rendered in the ordinary course of
business and all sums of money or other proceeds due thereon pursuant to
transactions with account debtors, except for that portion of the sum of money
or other proceeds due thereon that relate to sales, use or property taxes in
conjunction with such transactions, recorded on books of account in accordance
with generally accepted accounting principles.
AFFILIATE. Any Person that would be considered to be an affiliate of the
Borrower under Rule 144(a) of the Rules and Regulations of the Securities and
Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
AGENCY ACCOUNTS. The depository accounts maintained by the Guarantor, the
Borrower and their Subsidiaries.
AGENCY ACCOUNT AGREEMENTS. The several Agency Account Agreements, dated or
to be dated on or prior to the Closing Date or such later date as set forth in
[Section]9.15 hereof, among the Guarantor and/or the Borrower, as the case may
be, the Agent and the Agency Account Institutions, each such agreement to be in
form and substance reasonably satisfactory to the Agent.
AGENCY ACCOUNT INSTITUTIONS. The financial institutions with which the
Guarantor or the Borrower, as the case may be, maintain Agency Accounts.
AGENT. The First National Bank of Boston acting as agent for the Banks.
<PAGE> 9
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AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal Street,
Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
AGENT'S SPECIAL COUNSEL. Bingham, Dana & Gould LLP or such other counsel as
may be approved by the Agent.
ASSIGNMENT AND ACCEPTANCE. See [Section]20.1.
BALANCE SHEET DATE. February 3, 1996.
BANKS. FNBB and the other lending institutions listed on SCHEDULE 1 hereto
and any other Person who becomes an assignee of any rights and obligations of a
Bank pursuant to [Section]20.
BASE RATE. The higher of (a) the annual rate of interest announced from
time to time by FNBB at its head office in Boston, Massachusetts, as its "base
rate" and (b) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum equal to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three funds brokers of recognized
standing selected by the Agent.
BASE RATE LOANS. Those Revolving Credit Loans and all or any portion of the
Term Loan bearing interest calculated by reference to the Base Rate.
BLOCKED ACCOUNT. See [Section]3.2.2 hereof.
BLOCKED ACCOUNT AGREEMENT. The Blocked Account Agreement, dated or to be
dated on or prior to the Closing Date, among the Guarantor and/or the Borrower,
as the case may be, and the Agent, and in form and substance satisfactory to the
Agent.
BORROWER. As defined in the preamble hereto.
BORROWING BASE. At the relevant time of reference thereto, an amount
determined by the Agent by reference to the most recent Borrowing Base Report
delivered to the Banks and the Agent pursuant to [Section]9.4(f), which is equal
to the sum of:
(a) 85% of Eligible Accounts Receivable; plus
----
(b) 60% of the net book value (determined on a first-in first-out
basis at cost on a generally accepted accounting principles basis) of
<PAGE> 10
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Eligible Inventory; plus
(c) 60% of the Maximum Drawing Amount of documentary Letters of Credit
issued in connection with the shipment of otherwise Eligible Inventory.
BORROWING BASE REPORT. A Borrowing Base Report signed by the chief
financial officer of the Borrower or any other authorized officer of the
Borrower and in substantially the form of EXHIBIT A hereto.
BUSINESS DAY. Any day on which banking institutions in Boston,
Massachusetts and New York, New York, are open for the transaction of banking
business and, in the case of Eurodollar Rate Loans, also a day which is a
Eurodollar Business Day.
CAPITAL ASSETS. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); PROVIDED that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
CAPITAL EXPENDITURES. Amounts paid or indebtedness incurred by the
Guarantor, the Borrower or any of their Subsidiaries in connection with the
purchase or lease by the Guarantor, the Borrower or any of their Subsidiaries of
Capital Assets that would be required to be capitalized and shown on the balance
sheet of such Person in accordance with generally accepted accounting
principles.
CAPITALIZED LEASES. Leases under which the Guarantor, the Borrower or any
of their Subsidiaries is the lessee or obligor, the discounted future rental
payment obligations under which are required to be capitalized on the balance
sheet of the lessee or obligor in accordance with generally accepted accounting
principles.
CASH COLLATERAL AGREEMENT. The cash collateral agreement, dated or to be
dated on or prior to the Closing Date among the Guarantor, the Borrower and the
Agent, such agreement to be in form and substance reasonably satisfactory to the
Agent.
CERCLA. See [Section]8.18.
CLOSING DATE. The first date on which the conditions set forth in
[Section]12 have been satisfied and any Revolving Credit Loans and the Term Loan
are to be made or any Letter of Credit is to be issued hereunder.
CODE. The Internal Revenue Code of 1986.
<PAGE> 11
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COLLATERAL. All of the property, rights and interests of the Guarantor. the
Borrower and their Subsidiaries that are or are intended to be subject to the
security interests and mortgages created by the Security Documents.
COMMITMENT. With respect to each Bank, the amount set forth on SCHEDULE 1
hereto as the amount of such Bank's commitment to make Revolving Credit Loans
to, and to participate in the issuance, extension and renewal of Letters of
Credit for the account of, the Borrower, as the same may be reduced from time to
time pursuant to the provisions of this Credit Agreement; or if such commitment
is terminated pursuant to the provisions hereof, zero.
COMMITMENT PERCENTAGE. With respect to each Bank, the percentage set forth
on SCHEDULE 1 hereto as such Bank's percentage of the aggregate Commitments of
all of the Banks.
COMPLIANCE CERTIFICATE. See [Section]9.4(d).
CONSOLIDATED or CONSOLIDATED. With reference to any term defined herein.
shall mean that term as applied to the accounts of the Guarantor, the Borrower
and their Subsidiaries, consolidated in accordance with generally accepted
accounting principles.
CONSOLIDATED NET INCOME (OR DEFICIT). The consolidated net income (or
deficit) of the Guarantor and its Subsidiaries, after deduction of all expenses,
taxes, and other proper charges, determined in accordance with generally
accepted accounting principles, after eliminating therefrom all extraordinary
items of income and excluding any gain or loss of the Guarantor and its
Subsidiaries from the sale of the Somerville Distribution Center. Any tax
refunds received by the Guarantor or any of its Subsidiaries during any period
shall not be included in Consolidated Net Income.
CONSOLIDATED OPERATING CASH FLOW. For any period an amount equal to EBITDA
for such period, LESS, Capital Expenditures made during such period, less, cash
payments for all taxes made by the Guarantor, the Borrower and their
Subsidiaries during such period.
CONSOLIDATED TOTAL INTEREST EXPENSE. For any period, the aggregate amount
of interest required to be paid or accrued by the Guarantor and its Subsidiaries
during such period on all Indebtedness of the Guarantor and its Subsidiaries
outstanding during all or any part of such period, whether such interest was or
is required to be reflected as an item of expense or capitalized, including
payments consisting of interest in respect of Capitalized Leases and including
commitment fees, agency fees, facility fees, balance deficiency fees and similar
fees or expenses in connection with the borrowing of money, but reduced for any
interest income paid to the Guarantor and its Subsidiaries.
CONVERSION REQUEST. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Loan in accordance with
[Section]2.7.
<PAGE> 12
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CREDIT AGREEMENT. This Revolving Credit and Term Loan Agreement, including
the Schedules and Exhibits hereto.
CREDIT CARD PROVIDERS. The banks and finance companies listed on SCHEDULE
3.2.2(b) hereto.
DEFAULT. See [Section]14.1.
DISTRIBUTION. The declaration or payment of any dividend on or in respect
of any shares of any class of capital stock of the Guarantor or the Borrower,
other than dividends payable solely in shares of common stock of the Guarantor
or the Borrower; the purchase, redemption, or other retirement of any shares of
any class of capital stock of the Guarantor or the Borrower, directly or
indirectly through a Subsidiary of the Guarantor or the Borrower or otherwise;
the return of capital by the Guarantor or the Borrower to its shareholders as
such; or any other distribution on or in respect of any shares of any class of
capital stock of the Guarantor or the Borrower.
DOLLARS or $. Dollars in lawful currency of the United States of America.
DOMESTIC LENDING OFFICE. Initially, the office of each Bank designated as
such in SCHEDULE 1 hereto; thereafter, such other office of such Bank, if any,
located within the United States that will be making or maintaining Base Rate
Loans.
DRAWDOWN DATE. The date on which any Revolving Credit Loan or the Term Loan
is made or is to be made, and the date on which any Revolving Credit Loan is
converted or continued in accordance with [Section]2.7 or all or any portion of
the Term Loan is converted or continued in accordance with [Section]4.5.2.
EBITDA. With respect to any fiscal period, an amount equal to the sum of
(a) Consolidated Net Income for such period plus (b) depreciation and
amortization for such period, plus (c) without duplication, other non-cash
charges (exclusive of current period accruals) made in calculating Consolidated
Net Income for such period, plus (d) tax expense for such period, plus (e)
Consolidated Total Interest Expense during such period to the extent deducted in
the calculation of Consolidated Net Income for such period, all as determined in
accordance with generally accepted accounting principles.
ELIGIBLE ACCOUNTS RECEIVABLE. The aggregate of the unpaid portions of
Accounts Receivable (net of any credits, rebates, offsets, holdbacks or other
adjustments or commissions payable to third parties that are adjustments to such
Accounts Receivable) (a) that the Borrower reasonably and in good faith
determines to be collectible; (b) that are with account debtors that (i) are not
Affiliates of the Borrower, (ii) are Credit Card Providers, (iii) are not
insolvent or involved in any case or proceeding, whether voluntary or
involuntary, under any bankruptcy, reorganization, arrangement, insolvency,
adjustment of debt, dissolution, liquidation or similar law of any jurisdiction
and (iv) are, in the
<PAGE> 13
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Agent's reasonable judgment, creditworthy; (c) that are in payment of
obligations that have been fully performed and are not subject to dispute or any
other similar claims that would reduce the cash amount payable therefor; (d)
that are not subject to any pledge, restriction, security interest or other lien
or encumbrance other than those created by the Loan Documents and Permitted
Liens which are subordinate to the liens of the Agent; (e) in which the Agent
has a valid and perfected first priority security interest; (f) that are not
outstanding for more than five (5) Business Days past the date the applicable
Credit Card Provider is required to make payment and that are not outstanding
for more than ten (10) Business Days past the date of sale of the underlying
goods to a retail customer in the ordinary course of business; (g) that are not
due from an account debtor located in Indiana, Minnesota or New Jersey unless
such Borrower (A) has received a certificate of authority to do business and is
in good standing in such state or (B) has filed a notice of business activities
report with the appropriate office or agency of such state for the current year;
(h) that are not due from any single account debtor if more than fifteen percent
(15%) of the aggregate amount of all Accounts Receivable owing from such account
debtor would otherwise not be Eligible Accounts Receivable; (i) that are payable
in Dollars; (j) that are not secured by a letter of credit unless the Agent has
a prior perfected security interest in such letters of credit; and (k) that are
not payable from an office outside of the United States.
ELIGIBLE ASSIGNEE. Any of (a) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, PROVIDED that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; and (e) if, but only if, any
Event of Default has occurred and is continuing, any other bank, insurance
company, commercial finance company or other financial institution approved by
the Agent, such approval not to be unreasonably withheld.
ELIGIBLE INVENTORY. With respect to the Borrower, finished goods inventory
owned by the Borrower; PROVIDED that Eligible Inventory shall not include any
inventory (a) held on consignment, or not otherwise owned by the Borrower, (b)
which is subject to any legal encumbrance other than Permitted Liens, (c) which
is not in the possession of the Borrower unless (i) the Agent has received a
waiver from the party in possession of such inventory in form and substance
reasonably satisfactory to the Agent or (ii) such inventory is in transit from
one Permitted Inventory Location to another Permitted Inventory Location, and
the total duration of such transit time is not more than two (2)
<PAGE> 14
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Business Days, (d) which is subject to any lien, encumbrance or security
interest which is prior to the liens granted to the Agent (other than landlord's
or lessor's liens under leases to which the Borrower is a party provided no
amount secured by such lien has become due and payable and not been paid), (e)
as to which appropriate Uniform Commercial Code financing statements showing the
Borrower as debtor and the Agent as secured party have not been filed in the
proper filing office or offices in order to perfect the Agent's security
interest therein, (f) which has been shipped to a customer of the Borrower
regardless of whether such shipment is on a consignment basis, (g) which is not
located at a Permitted Inventory Location unless such inventory is in transit
from one Permitted Inventory Location to another Permitted Inventory Location,
and the total duration of such transit time is not more than two (2) Business
Days, (h) which the Borrower reasonably deems to be obsolete or not marketable
consistent with its past practices, PROVIDED that such practices shall be
subject to the review and approval of the Agent after the occurrence and during
the continuance of an Event of Default, (i) which is Packaway Inventory to the
extent such inventory exceeds ten percent (10%) of Eligible Inventory or (j)
which has been owned by the Borrower for more than one (1) year (except to the
extent permitted in clause (i) of this definition).
EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of
[Section]3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
ENVIRONMENTAL LAWS. See [Section]8.18(a).
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA AFFILIATE. Any Person which is treated as a single employer with the
Borrower under [Section]414 of the Code.
ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of [Section]4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
EUROCURRENCY RESERVE RATE. For any day with respect to a Eurodollar Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
EURODOLLAR BUSINESS DAY. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or
<PAGE> 15
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such other Eurodollar interbank market as may be selected by the Agent in its
sole discretion acting in good faith.
EURODOLLAR LENDING OFFICE. Initially, the office of each Bank designated as
such in SCHEDULE 1 hereto; thereafter, such other office of such Bank, if any,
that shall be making or maintaining Eurodollar Rate Loans.
EURODOLLAR RATE. For any Interest Period with respect to a Eurodollar Rate
Loan, the rate of interest equal to (i) the rate per annum (rounded upwards to
the nearest 1/16 of one percent) at which the Reference Bank's Eurodollar
Lending Office is offered Dollar deposits two Eurodollar Business Days prior to
the beginning of such Interest Period in the interbank eurodollar market where
the eurodollar and foreign currency and exchange operations of such Eurodollar
Lending Office are customarily conducted, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Rate Loan of the Reference Bank to
which such Interest Period applies, divided by (ii) a number equal to 1.00 minus
the Eurocurrency Reserve Rate, if applicable.
EURODOLLAR RATE LOANS. Those Revolving Credit Loans and all or any portion
of the Term Loan bearing interest calculated by reference to the Eurodollar
Rate.
EVENT OF DEFAULT. See [Section]14.1.
EXISTING CREDIT AGREEMENT. The Amended and Restated Credit and Override
Agreement dated as of October 13, 1995, as amended, among the Borrower, the
Guarantor, the Banks as defined therein, the IC Lenders as defined therein and
FNBB as agent for itself and such Banks and as agent for such IC Lenders.
FNBB. The First National Bank of Boston, a national banking association, in
its individual capacity.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (a) When used in [Section]11,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(ii) to the extent consistent with such principles, the accounting practice of
the Guarantor and the Borrower reflected in its financial statements for the
year ended on the Balance Sheet Date, and (b) when used in general, other than
as provided above, means principles that are (i) consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, as in effect from time to time, and (ii) consistently applied with
past financial statements of the Guarantor and the Borrower adopting the same
principles, provided that in each case referred to in this definition of
"generally accepted accounting principles" a certified public accountant would,
insofar as the use of
<PAGE> 16
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such accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than a qualification regarding changes in generally
accepted accounting principles) as to financial statements in which such
principles have been properly applied.
GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of [Section]3(2) of ERISA maintained or contributed to by the Borrower
or any ERISA Affiliate the benefits of which are guaranteed on termination in
full or in part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer PLAN.
GUARANTOR. As defined in the preamble hereof.
GUARANTY. The Guaranty, dated or to be dated on or prior to the Closing
Date, made by the Guarantor in favor of the Banks and the Agent pursuant to
which the Guarantor guaranties to the Banks and the Agent the payment and
performance of the Obligations and in form and substance satisfactory to the
Banks and the Agent.
HAZARDOUS SUBSTANCES. See [Section]8.18(b).
INDEBTEDNESS. All obligations, contingent and otherwise, that in accordance
with generally accepted accounting principles should be classified upon the
obligor's balance sheet as liabilities, or to which reference should be made by
footnotes thereto, including in any event and whether or not so classified: (a)
all debt and similar monetary obligations, whether direct or indirect; (b) all
liabilities secured by any mortgage, pledge, security interest, lien, charge or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been assumed; and (c)
all guarantees, endorsements and other contingent obligations whether direct or
indirect in respect of indebtedness of others, including any obligation to
supply funds to or in any manner to invest in, directly or indirectly, the
debtor, to purchase indebtedness, or to assure the owner of indebtedness against
loss, through an agreement to purchase goods, supplies, or services for the
purpose of enabling the debtor to make payment of the indebtedness held by such
owner or otherwise, and the obligations to reimburse the issuer in respect of
any letters of credit.
INTEREST PAYMENT DATE. (a) As to any Base Rate Loan, the first day of the
calendar month which follows the Drawdown Date thereof and (b) as to any
Eurodollar Rate Loan, the last day of such Interest Period.
INTEREST PERIOD. With respect to each Revolving Credit Loan or all or any
relevant portion of the Term Loan, (a) initially, the period commencing on the
Drawdown Date of such Loan and ending on the last day of one of the periods set
forth below, as selected by the Borrower in a Loan Request (i) for any Base Rate
Loan, the last day of the calendar month; and (ii) for any Eurodollar Rate Loan,
1, 2 or 3 months; and (b) thereafter, each period commencing on the day
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after the last day of the next preceding Interest Period applicable to such
Revolving Credit Loan or all or such portion of the Term Loan and ending on the
last day of one of the periods set forth above, as selected by the Borrower in a
Conversion Request; PROVIDED that all of the foregoing provisions relating to
Interest Periods are subject to the following:
(A) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(B) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(C) if the Borrower shall fail to give notice as provided in
[Section]2.7, the Borrower shall be deemed to have requested a conversion
of the affected Eurodollar Rate Loan to a Base Rate Loan and the
continuance of all Base Rate Loans as Base Rate Loans on the last day of
the then current Interest Period with respect thereto;
(D) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Eurodollar
Business Day of a calendar month; and
(E) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond the Maturity Date shall end on the Maturity
Date.
INVESTMENTS. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether
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as dividends, interest or otherwise, except that accrued interest included as
provided in the foregoing clause (b) may be deducted when paid; and (e) there
shall not be deducted from the aggregate amount of Investments any decrease in
the value thereof.
LANDLORD WAIVER. A waiver from the lessor or sublessor of property leased
by the Borrower as lessee in substantially the form of EXHIBIT G hereto or
otherwise approved by the Agent in its sole reasonable discretion.
LEASED REAL ESTATE. See [Section]8.18.
LETTER OF CREDIT. See [Section]5.1.1.
LETTER OF CREDIT APPLICATION. See [Section]5.1.1.
LETTER OF CREDIT PARTICIPATION. See [Section]5.1.4.
LOAN DOCUMENTS. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit and the Security Documents.
LOAN REQUEST. See [Section]2.6.
LOANS. The Revolving Credit Loans and the Term Loan.
MAJORITY BANKS. As of any date, the Banks holding at least fifty-one
percent (51%) of the outstanding principal amount of the Notes on such date: and
if no such principal is outstanding, the Banks whose aggregate Commitments
constitutes at least fifty-one percent (51%) of the Total Commitment.
MATURITY DATE. June 30, 1999.
MAXIMUM DRAWING AMOUNT. The maximum aggregate amount that the beneficiaries
may draw at any time under outstanding Letters of Credit, as such aggregate
amount may be reduced from time to time pursuant to the terms of the Letters of
Credit.
MONOGRAM AGREEMENT. The Credit Card Program Agreement dated as of July 20,
1995 among the Borrower, Monogram Credit Card Bank of Georgia and General
Electric Capital Corporation, as in effect on the Closing Date and as amended in
accordance with the provisions of [Section]10.10.
MORTGAGED PROPERTY. Any Real Estate which is subject to any Mortgage.
MORTGAGES. The several mortgages and deeds of trust, dated or to be dated
on or prior to the Closing Date. from the Borrower to the Agent with respect to
the fee and leasehold interests of the Borrower in certain Real Estate and in
form and substance satisfactory to the Agent.
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MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of
[Section]3(37) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate.
NET PROCEEDS. With respect to any sale of any assets of the Guarantor, the
Borrower or any of their Subsidiaries, the gross consideration received by the
Guarantor, the Borrower or any of their Subsidiaries from such sale, net of
commissions, direct sales costs, normal closing adjustments, income taxes
attributable to such sale and professional fees and expenses incurred directly
in connection therewith, to the extent the foregoing are actually paid in
connection with such sale.
NORTH MICHIGAN AVENUE NOTE. The promissory note, dated November 19, 1993,
from LaSalle National Trust, N.A., as Trustee of Trust No. 118065 and as Trustee
of Trust No. 118066 to the Borrower, in the original principal amount of
$2,500,000.
NOTES. The Term Notes and the Revolving Credit Notes.
OBLIGATIONS. All indebtedness, obligations and liabilities of any of the
Guarantor, the Borrower and their Subsidiaries to any of the Banks and the
Agent, individually or collectively, whether arising or incurred under this
Credit Agreement or any of the other Loan Documents or in respect of any of the
Loans made or Reimbursement Obligations incurred or any of the Notes, Letter of
Credit Application, Letter of Credit or other instruments at any time evidencing
any thereof, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise.
OPERATING ACCOUNT. See [Section]2.6.2.
OUTSTANDING. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
OWNED REAL ESTATE. See [Section]8.18.
PACKAWAY INVENTORY. Inventory of the Borrower which the Borrower reasonably
determines to be "packaway inventory" in accordance with its past practices
which inventory would include preseason merchandise purchased from overseas or
domestic vendors and retail stocks and which would not include inventory
recalled from any Store.
PBGC. The Pension Benefit Guaranty Corporation created by [Section]4002 of
ERISA and any successor entity or entities having similar responsibilities.
PERFECTION CERTIFICATES. The Perfection Certificates as defined in the
Security Agreement.
<PAGE> 20
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PERMITTED CASH COLLATERAL INVESTMENTS. Investments of cash collateral made
in accordance with the provisions of [Section]10.3 hereof and the Cash
Collateral Agreement in which the Agent has a first priority perfected security
interest.
PERMITTED LIENS. Liens, security interests and other encumbrances permitted
by [Section]10.2.
PERMITTED INVENTORY LOCATIONS. The Stores and warehouse facilities of the
Borrower located in the United States of America and listed on SCHEDULE 2
hereto, as such SCHEDULE 2 may be supplemented from time to time in accordance
with the provisions of [Section]9.4(j).
PERSON. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
RCRA. See [Section]8.18(a).
REAL ESTATE. All real property at any time owned or leased (as lessee or
sublessee) by the Guarantor, the Borrower or any of their Subsidiaries.
RECORD. The grid attached to a Note, or the continuation of such grid, or
any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
REFERENCE BANK. FNBB.
REIMBURSEMENT OBLIGATION. The Borrower's obligation to reimburse the Agent
and the Banks on account of any drawing under any Letter of Credit as provided
in [Section]5.2.
REVOLVING CREDIT LOANS. Revolving credit loans made or to be made by the
Banks to the Borrower pursuant to [Section]2.
REVOLVING CREDIT NOTE RECORD. A Record with respect to a Revolving Credit
Note.
REVOLVING CREDIT NOTES. See [Section]2.4.
SARA. See [Section]8.18(a).
SECURITY AGREEMENT. The Security Agreement, dated or to be dated on or
prior to the Closing Date, among the Borrower, the Guarantor and the Agent and
in form and substance satisfactory to the Agent.
SECURITY DOCUMENTS. The Guaranty, the Security Agreement, the Mortgages,
the Trademark Assignment, the Cash Collateral Agreement and the Stock Pledge
Agreement.
<PAGE> 21
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SETTLEMENT. The making of, or receiving of payments, in immediately
available funds, by the Banks, to the extent necessary to cause each Bank's
actual share of the outstanding amount of Revolving Credit Loans to be equal to
such Bank's Commitment Percentage of the outstanding amount of such Revolving
Credit Loans, in any case where, prior to such event or action, the actual share
is not so equal.
SETTLEMENT AMOUNT. See [Section]2.10.1.
SETTLEMENT DATE. (a) The Business Day immediately following the Agent's
becoming aware of the existence of an Event of Default, (b) any Business Day on
which the amount of Revolving Credit Loans outstanding from FNBB in its
individual capacity and in its capacity as Agent PLUS FNBB's Commitment
Percentage of the sum of the Maximum Drawing Amount and any Unpaid
Reimbursement Obligations is equal to or greater than FNBB's Commitment
Percentage of the Total Commitment, (c) the Business Day following notice by
FNBB to the Banks of its intent to effect a Settlement, (d) any Business Day on
which (i) the amount of outstanding Revolving Credit Loans decreases and (ii)
the amount of FNBB's Revolving Credit Loans outstanding equals zero Dollars
($0), (e) any day on which any conversion of a Base Rate Loan to a Eurodollar
Rate Loan occurs, (f) the Maturity Date, (g) Friday of each week, or if Friday
is not a Business Day, the Business Day immediately following such Friday, and
(h) the Drawdown Date relating to any Loan Request.
SETTLING BANK. See [Section]2.10.1.
SOMERVILLE DISTRIBUTION CENTER. The Borrower's two parcels of land and
distribution center situated on 70 Inner Belt Road, Somerville, Massachusetts.
STOCK PLEDGE AGREEMENT. The Stock Pledge Agreement, dated or to be dated on
or prior to the Closing Date, between the Guarantor and the Agent and in form
and substance satisfactory to the Agent.
STORE. Any retail store currently owned or leased or hereafter acquired or
leased by the Guarantor, the Borrower or any of their Subsidiaries.
SUBSIDIARY. Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Collectively, (a) the Supplementary
Executive Retirement Plan of the Borrower effective as of August 1, 1988, as
amended by Amendment Number 1 dated as of August 1, 1988; (b) the Executive
Severance Plan for Samuel Gerson, dated as of August, 1995; (c) the Executive
Split Dollar Life Insurance Agreement (Collateral Assignment Method) between the
Borrower and Samuel Gerson, dated June 5, 1994; (d) the Executive Severance Plan
for Mone Anathan, III, dated August,
<PAGE> 22
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1995; (e) the Executive Split Dollar Life Insurance Agreement (Collateral
Assignment Method) between the Borrower and Mone Anathan, dated June 5, 1994;
and (f) the Executive Severance Plan Trust Agreement dated June 4, 1994 between
the Guarantor and the trustee thereof.
TERM LOAN. The term loan made or to be made by the Banks to the Borrower on
the Closing Date in the aggregate principal amount of $10,000,000 pursuant to
[Section]4.1.
TERM LOAN PERCENTAGE. With respect to each Bank, the percentage set forth
on SCHEDULE 1 hereto as such Bank's percentage of the Term Loan.
TERM NOTES. See [Section]4.2.
TERM NOTE RECORD. A Record with respect to a Term Note.
TITLE INSURANCE COMPANY. Commonwealth Land Title Insurance Company.
TITLE POLICY. In relation to each Mortgaged Property which constitutes
Owned Real Estate, an ALTA standard form title insurance policy issued by the
Title Insurance Company (with such reinsurance or co-insurance as the Agent may
require, any such reinsurance to be with direct access endorsements) in such
amount as may be determined by the Agent insuring the priority of the Mortgage
of such Mortgaged Property and that the Guarantor, the Borrower or one of their
Subsidiaries holds marketable fee simple title to such Mortgaged Property,
subject only to the encumbrances permitted by such Mortgage and which shall not
contain exceptions for mechanics liens or persons in occupancy (except as may be
permitted by such Mortgage), shall not insure over any matter except to the
extent that any such affirmative insurance is acceptable to the Agent in its
sole discretion, and shall contain such endorsements and affirmative insurance
as the Agent in its discretion may require, including but not limited to (a)
comprehensive endorsement, (b) variable rate of interest endorsement, (c) usury
endorsement, (d) revolving credit endorsement, (e) tie-in endorsement, and (f)
doing business endorsement.
TOTAL COMMITMENT. The sum of the Commitments of the Banks, as in effect
from time to time.
TRADEMARK ASSIGNMENT. The Trademark Assignment, dated or to be dated on or
prior to the Closing Date, made by the Borrower in favor of the Agent and in
form and substance satisfactory to the Agent.
TYPE. As to any Revolving Credit Loan or all or any portion of the Term
Loan, its nature as a Base Rate Loan or a Eurodollar Rate Loan.
UNIFORM CUSTOMS. With respect to any Letter of Credit, the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International
<PAGE> 23
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Chamber of Commerce Publication No. 500 or any successor version thereto adopted
by the Agent in the ordinary course of its business as a letter of credit issuer
and in effect at the time of issuance of such Letter of Credit.
UNPAID REIMBURSEMENT OBLIGATION. Any Reimbursement Obligation for which the
Borrower does not reimburse the Agent and the Banks on the date specified in,
and in accordance with, [Section]5.2.
VOTING STOCK. Stock or similar interests, of any class or classes (however
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
1.2. RULES OF INTERPRETATION.
-----------------------
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts, have the meanings
assigned to them therein, with the term "instrument" being that defined
under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "[Section]" refers to that section of
this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Credit Agreement as a whole and not to any
<PAGE> 24
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particular section or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITY.
--- --------- ------ --------
2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in
this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time
between the Closing Date and the Maturity Date upon notice by the Borrower to
the Agent given in accordance with [Section]2.6, such sums as are requested by
the Borrower up to a maximum aggregate amount outstanding (after giving effect
to all amounts requested) at any one time equal to such Bank's Commitment MINUS
such Bank's Commitment Percentage of the sum of the Maximum Drawing Amount and
all Unpaid Reimbursement Obligations, PROVIDED that the sum of the outstanding
amount of the Revolving Credit Loans (after giving effect to all amounts
requested) PLUS the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations shall not at any time exceed the lesser of (a) the Total Commitment
and (b) the Borrowing Base. The Revolving Credit Loans shall be made PRO RATA in
accordance with each Bank's Commitment Percentage. Each request for a Revolving
Credit Loan hereunder shall constitute a representation and warranty by the
Borrower that the conditions set forth in [Section]12 and [Section]13, in the
case of the initial Revolving Credit Loans to be made on the Closing Date, and
[Section]13, in the case of all other Revolving Credit Loans, have been
satisfied on the date of such request.
2.2. COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
accounts of the Banks in accordance with their respective Commitment Percentages
a commitment fee calculated at the rate of three-eighths of one percent (3/8%)
per annum on the average daily amount during each calendar quarter or portion
thereof from the Closing Date to the Maturity Date by which the Total Commitment
MINUS the sum of the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations exceeds the outstanding amount of Revolving Credit Loans during such
calendar quarter. The commitment fee shall be payable quarterly in arrears on
the first day of each calendar quarter for the immediately preceding calendar
quarter commencing on the first such date following the date hereof, with a
final payment on the Revolving Credit Maturity Date or any earlier date on which
the Commitments shall terminate.
2.3. REDUCTION OF COMMITMENT. The Borrower shall have the right, at any
time and from time to time upon five (5) Business Days' written notice to the
Agent, to reduce by $5,000,000 or an integral multiple of $1,000,000 or
terminate entirely the Total Commitment, whereupon the Commitments of the Banks
shall be reduced PRO RATA in accordance with their respective Commitment
Percentages of the amount specified in such notice, or as the ease may be,
terminated. Promptly after receiving any notice of the Borrower delivered
pursuant to this [Section]2.3, the Agent will notify the Banks of the substance
thereof. If the Borrower repays or prepays all outstanding Revolving Credit
Loans and the Total Commitment is terminated in its entirety by the Borrower,
whether in a single transaction or in a series of related transactions, the
Borrower shall pay to the Agent for the account of the Banks in accordance with
<PAGE> 25
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their Commitment Percentages a premium in an amount calculated as follows:
(a) if such repayment or prepayment and termination is concluded on or
prior to the first anniversary of the Closing Date, an amount equal to one
percent (1%) of the Total Commitment as of the Closing Date; and
(b) if such repayment or prepayment and termination is concluded after
the first anniversary of the Closing Date but on or prior to the second
anniversary of the Closing Date, an amount equal to one-half of one percent
(1/2%) of the Total Commitment of the Closing Date; and
(c) if such repayment or prepayment is concluded after the second
anniversary of the Closing Date, no premium shall be payable.
Notwithstanding the foregoing, no premium shall be payable under this
[Section]2.3 to any Bank which is offered continued participation in a
replacement credit facility due to the repayment or prepayment of the Revolving
Credit Loans and the termination of the Total Commitment if (i) such repayment
or prepayment is made from the proceeds of such replacement credit facility, and
(ii) if such replacement credit facility is not with the Agent, (A) such
replacement credit facility is not, directly or indirectly, secured by any
collateral and (B) the Agent has been offered and has declined the agency for
such replacement credit facility both prior to any other lender and after each
such other lender has submitted to the Borrower, and the Agent has reviewed, its
final term sheet for such replacement credit facility. Any Bank which is not
offered continued participation in such replacement credit facility shall
receive its Commitment Percentage of the premium applicable under paragraph (a)
or (b) of this [Section]2.3.
2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
evidenced by separate promissory notes of the Borrower in substantially the form
of EXHIBIT B hereto (each a "Revolving Credit Note"), dated as of the Closing
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all Revolving Credit Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Revolving Credit Loan or at the time
of receipt of any payment of principal on such Bank's Revolving Credit Note, an
appropriate notation on such Bank's Revolving Credit Note Record reflecting the
making of such Revolving Credit Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Revolving Credit Loans set forth on such
Bank's Revolving Credit Note Record shall, absent manifest error, be PRIMA FACIE
evidence of the principal amount thereof owing and unpaid to such Bank, but the
failure to record, or any error in so recording, any such amount on such Bank's
Revolving Credit Note Record shall not limit or otherwise affect the obligations
of the Borrower hereunder or under
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any Revolving Credit Note to make payments of principal of or interest on any
Revolving Credit Note when due.
2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided in
[Section]6.10,
(a) each Base Rate Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending on the last day of the Interest
Period with respect thereto at the rate of one-half of one percent (1/2%)
per annum above the Base Rate; and
(b) each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate of two and one-half of one
percent (2-1/2%) per annum above the Eurodollar Rate determined for such
Interest Period;
PROVIDED, HOWEVER, that, in the event that EBITDA for the Borrower's fiscal year
ending February 1, 1997 is greater than or equal to $22,000,000, then the
interest rate otherwise applicable to Revolving Credit Loans shall be decreased
by one-half of one percent (1/2%) per annum effective upon the Agent's receipt
of unaudited financial statements prepared by the Guarantor's management
confirming such EBITDA; provided further, however, that such effectiveness shall
be provisional until such time as the Agent has received audited financial
statements pursuant to [Section]9.4(a) confirming such EBITDA. The Borrower
promises to pay interest on each Revolving Credit Loan in arrears on each
Interest Payment Date with respect thereto.
2.6. REQUESTS FOR REVOLVING CREDIT LOANS.
2.6.1. LOAN REQUEST. The Borrower shall give to the Agent written
notice in the form of EXHIBIT C hereto (or telephonic notice confirmed in a
writing in the form of EXHIBIT C hereto) of each Revolving Credit Loan
requested hereunder (a "Loan Request") (a) no later than 11:00 a.m. (Boston
time) on the proposed Drawdown Date of any Base Rate Loan and (b) no later
than 10:30 a.m. two (2) Eurodollar Business Days prior to the proposed
Drawdown Date of any Eurodollar Rate Loan. Each such notice shall specify
(i) the principal amount of the Revolving Credit Loan requested, (ii) the
proposed Drawdown Date of such Revolving Credit Loan, (iii) if such
Revolving Credit Loan is a Eurodollar Rate Loan, the Interest Period for
such Revolving Credit Loan and (iv) the Type of such Revolving Credit Loan.
Promptly upon receipt of any such notice, the Agent shall notify each of
the Banks thereof. Each Loan Request shall be irrevocable and binding on
the Borrower and shall obligate the Borrower to accept the Revolving Credit
Loan requested from the Banks on the proposed Drawdown Date. Each Loan
Request for a Base Rate Loan shall be in a minimum aggregate amount of
$100,000 or an integral multiple thereof except that in the event that the
Agent has declined to make a Revolving Credit Loan pursuant to
[Section]2.6.2, there shall
<PAGE> 27
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be no minimum amount required for a Base Rate Loan requested in lieu of
such advance by the Agent. Each Loan Request for a Eurodollar Rate Loan
shall be in a minimum aggregate amount of $1,000,000 or an integral
multiple of $100,000 in excess thereof.
2.6.2. SWING LINE. Notwithstanding the notice and minimum amount
requirements set forth in [Section]2.6.1, but otherwise in accordance with
the terms and conditions of this Credit Agreement, the Agent may, in its
sole discretion and without conferring with the Banks, make Revolving
Credit Loans to the Borrower (a) by entry of credits to the Borrower's
operating account with the Agent (the "Operating Account") to cover checks
or other charges which the Borrower has drawn or made against such account
or (b) in an amount as otherwise requested by the Borrower. The Borrower
hereby requests and authorizes the Agent to make from time to time such
Revolving Credit Loans by means of appropriate entries of such credits
sufficient to cover checks and other charges then presented. The Borrower
acknowledges and agrees that the making of such Revolving Credit Loans
shall, in each case, be subject in all respects to the provisions of this
Credit Agreement as if they were Revolving Credit Loans covered by a Loan
Request including, without limitation, the limitations set forth in
[Section]2.1 and the requirements that the applicable provisions of
[Sections]12 and 13, in the case of Revolving Credit Loans made on
the Closing Date, and [Section]13, in the case of all Revolving Credit
Loans, be satisfied. All actions taken by the Agent pursuant to the
provisions of this [Section]2.6.2 shall be conclusive and binding on the
Borrower absent the Agent's gross negligence or willful misconduct. Prior
to a Settlement, interest payable on such Revolving Credit Loans shall be
for the account of the Agent and payment of principal on such Revolving
Credit Loans shall be for the account of FNBB.
2.6.3. REIMBURSEMENT OBLIGATIONS. In addition to requests pursuant to
[Sections]2.6.1 and 2.6.2, the Borrower shall be deemed to have
made a request for a Revolving Credit Loan equal to the amount of any
Reimbursement Obligations under any Letter of Credit which is presented to
and honored by the Agent. The Borrower acknowledges and agrees that the
making of such Revolving Credit Loans shall, in each case be subject in all
respects to the provisions of this Credit Agreement as if they were
Revolving Credit Loans covered by a Loan Request.
2.7. CONVERSION OPTIONS.
2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN. The
Borrower may elect from time to time to convert anv outstanding Revolving
Credit Loan to a Revolving Credit Loan of another Type, PROVIDED that (a)
with respect to any such conversion of a Revolving Credit Loan to a Base
Rate Loan, the Borrower shall give the Agent prior written notice of such
election no later than 11:00 a.m. (Boston time) on the date of such
election; (b) with respect to any such conversion of a
<PAGE> 28
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Base Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent
prior written notice of such election no later than 10:30 a.m. (Boston
time) two (2) Eurodollar Business Days prior to the effectiveness of such
election; (c) with respect to any such conversion of a Eurodollar Rate Loan
into a Revolving Credit Loan of another Type, such conversion shall, at the
Borrower's option, either be made on the last day of the Interest Period
with respect thereto or be made subject to the provisions of
[Section]6.9(c) of this Credit Agreement and (d) no Loan may be converted
into a Eurodollar Rate Loan when any Default or Event of Default has
occurred and is continuing. On the date on which such conversion is being
made each Bank shall take such action as is necessary to transfer its
Commitment Percentage of such Revolving Credit Loans to its Domestic
Lending Office or its Eurodollar Lending Office, as the case may be. All or
any part of outstanding Revolving Credit Loans of any Type may be converted
into a Revolving Credit Loan of another Type as provided herein, PROVIDED
that any partial conversion shall be in an aggregate principal amount of
$1,000,000 or a whole multiple of $100,000. Each Conversion Request
relating to the conversion of a Revolving Credit Loan to a Eurodollar Rate
Loan shall be irrevocable by the Borrower.
2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any Revolving
Credit Loan of any Type may be continued as a Revolving Credit Loan of the
same Type upon the expiration of an Interest Period with respect thereto by
compliance by the Borrower with the notice provisions contained in
[Section]2.7.1; PROVIDED that no Eurodollar Rate Loan may be continued as
such when any Default or Event of Default has occurred and is continuing,
but shall be automatically converted to a Base Rate Loan on the last day of
the first Interest Period relating thereto ending during the continuance of
any Default or Event of Default of which officers of the Agent active upon
the Borrower's account have actual knowledge. The Agent shall notify the
Banks and the Borrower promptly when any such automatic conversion
contemplated by this [Section]2.7 is scheduled to occur.
2.7.3. EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar
Rate Loans shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Rate Loans having the same Interest Period shall not be less
than $1,000,000 or a whole multiple of $100,000 in excess thereof.
2.8. FUNDS FOR REVOLVING CREDIT LOAN.
2.8.1. FUNDING PROCEDURES. Not later than 1:00 p.m. (Boston time) on
the proposed Drawdown Date of any Revolving Credit Loans, each of the Banks
will make available to the Agent, at its Head Office, in immediately
available funds, the amount of such Bank's Commitment
<PAGE> 29
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Percentage of the amount of the requested Revolving Credit Loans. Upon
receipt from one or more of the Banks of such amount, and upon receipt of
the documents required by [Sections]12 and 13 and the satisfaction
of the other conditions set forth therein, to the extent applicable, the
Agent will make available to the Borrower the aggregate amount of such
Revolving Credit Loans made available to the Agent by the Banks. The
failure or refusal of any Bank to make available to the Agent at the
aforesaid time and place on any Drawdown Date the amount of its Commitment
Percentage of the requested Revolving Credit Loans shall not relieve any
other Bank from its several obligation hereunder to make available to the
Agent the amount of such other Bank's Commitment Percentage of any
requested Revolving Credit Loans.
2.8.2. ADVANCES BY AGENT. The Agent may, unless notified in writing to
the contrary by any Bank prior to a Drawdown Date, assume that such Bank
has made available to the Agent on such Drawdown Date the amount of such
Bank's Commitment Percentage of the Revolving Credit Loans to be made on
such Drawdown Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such amount
on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (a) the average computed for the
period referred to in clause (c) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during each
day included in such period, TIMES (b) the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans, TIMES (c) a fraction, the
numerator of which is the number of days that elapse from and including
such Drawdown Date to the date on which the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans shall become
immediately available to the Agent, and the denominator of which is 365. A
statement of the Agent submitted to such Bank with respect to any amounts
owing under this paragraph shall be, absent manifest error, PRIMA FACIE
evidence of the amount due and owing to the Agent by such Bank. If the
amount of such Bank's Commitment Percentage of such Revolving Credit Loans
is not made available to the Agent by such Bank within three (3) Business
Days following such Drawdown Date, the Agent shall be entitled to recover
such amount from the Borrower on demand, with interest thereon at the rate
per annum applicable to the Revolving Credit Loans made on such Drawdown
Date; PROVIDED that such Bank shall indemnify the Agent and hold the Agent
harmless from and against any loss, cost or expense (including loss of
anticipated profits) that the Agent may sustain or incur as a consequence
of the Borrower's repayment, upon the Agent's demand, of such Revolving
Credit Loans, including any such loss or expense arising from interest or
fees payable by the Agent to lenders of funds obtained by it in order to
maintain its Eurodollar Rate Loans.
<PAGE> 30
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2.9. CHANGE IN BORROWING BASE. The Borrowing Base shall be determined
monthly (or at such other interval as may be specified pursuant to
[Section]9.4(f)) by the Agent by reference to the Borrowing Base Report
delivered to the Banks and the Agent pursuant to [Section]9.4(f).
2.10. SETTLEMENTS; FAILURE TO MAKE FUNDS AVAILABLE.
2.10.1. NOTICE TO BANKS. On each Settlement Date, the Agent shall, not
later than 12:00 noon (Boston time), give telephonic or facsimile notice
(a) to the Banks and the Borrower of the respective outstanding amount of
Revolving Credit Loans made by the Agent on behalf of the Banks pursuant to
[Section]2.6.2 from the immediately preceding Settlement Date through the
close of business on the prior day and (b) to the Banks of the amount (a
"Settlement Amount") that each Bank (the "Settling Bank") shall pay to
effect a Settlement of any Revolving Credit Loan. A statement of the Agent
submitted to the Banks and the Borrower with respect to any amounts owing
under this [Section]2.10 shall, absent manifest error, be PRIMA FACIE
evidence of the amount due and owing. The Settling Bank shall, not later
than 2:00 p.m. (Boston time) on such Settlement Date, effect a wire
transfer of immediately available funds to the Agent in the amount of the
Settlement Amount. All funds advanced by any Bank as a Settling Bank
pursuant to this [Section]2.10 shall for all purposes be treated as a
Revolving Credit Loan made by such Settling Bank to the Borrower and all
funds received by any Bank pursuant to this [Section]2.10 shall for all
purposes be treated as repayment of amounts owed with respect to Revolving
Credit Loans made by such Bank. In the event that any bankruptcy,
reorganization, liquidation, receivership or similar cases or proceedings
in which the Borrower is a debtor prevent a Settling Bank from making any
Revolving Credit Loan to effect a Settlement as contemplated hereby, such
Settling Bank will make such disposition and arrangements with the other
Banks with respect to such Revolving Credit Loans, either by way of
purchase of participations, distribution, PRO TANTO assignment of claims,
subrogation or otherwise as shall result in each Bank's share of the
outstanding Revolving Credit Loans being equal, as nearly as may be, to
such Bank's Commitment Percentage of the outstanding amount of the
Revolving Credit Loans.
2.10.2. DELINQUENT BANKS. If any Bank makes available to the Agent its
Settlement Amount on a date after such Settlement Date, such Bank shall pay
to the Agent on demand an amount equal to the product of (a) the average
computed for the period referred to in clause (c) below, of the weighted
average interest rate paid by the Agent for federal funds acquired by the
Agent during each day included in such period, times (b) the amount of such
Settlement Amount, times (c) a fraction, the numerator of which is the
number of days that elapse from and including such Settlement Date to the
date on which the amount of such Settlement Amount shall become immediately
available to the Agent, and the denominator of which is 360. A statement of
the Agent submitted to such
<PAGE> 31
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Bank with respect to any amounts owing under this paragraph shall be prima
facie evidence of the amount due and owing to the Agent by such Bank. If
such Bank's Settlement Amount is not made available to the Agent by such
Bank within three (3) Business Days following such Settlement Date the
Agent shall be entitled to recover such amount from the Borrower on demand,
with interest thereon at the rate per annum applicable to the Revolving
Credit Loans as of such Settlement Date: PROVIDED that such Bank shall
indemnify the Agent and hold the Agent harmless from and against any loss,
cost or expense (including loss of anticipated profits) that the Agent may
sustain or incur as a consequence of the Borrower's repayment, upon the
Agent's demand, of such Revolving Credit Loans, including any such loss or
expense arising from interest or fees payable by the Agent to lenders of
funds obtained by it in order to maintain its Eurodollar Rate Loans.
2.10.3. ADVANCES. The failure or refusal of any Bank to make available
to the Agent at the aforesaid time and place on any Settlement Date the
amount of its Settlement Amount (a) shall not relieve any other Bank from
its several obligations hereunder to make available to the Agent the amount
of such other Bank's Settlement Amount and (b) shall not impose upon such
other Bank any liability with respect to such failure or refusal or
otherwise increase the Commitment of such other Bank.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
--------- -- --- --------- ------ -----
3.1. MATURITY. The Borrower promises to pay on the Maturity Date, and there
shall become absolutely due and payable on the Maturity Date, all of the
Revolving Credit Loans outstanding on such date, together with any and all
accrued and unpaid interest thereon.
3.2. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS.
3.2.1. OUTSTANDINGS IN EXCESS OF COMMITMENT. If at any time the sum of
the outstanding amount of the Revolving Credit Loans, the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations exceeds the lesser of (a)
the Total Commitment and (b) the Borrowing Base, then the Borrower shall
immediately pay the amount of such excess to the Agent for the respective
accounts of the Banks for application: FIRST, to any Unpaid Reimbursement
Obligations and any other Obligations then due and payable; SECOND, to the
Revolving Credit Loans (first, to the payment of those Revolving Credit
Loans that are Base Rate Loans and second, to the payment of, or at the
Borrower's option, cash collateralization in accordance with the terms of
the Cash Collateral Agreement (which cash collateral may be invested in
Permitted Cash Collateral Investments) those Revolving Credit Loans that
are Eurodollar Rate Loans); and THIRD, to provide to the Agent cash
collateral (which cash collateral may be invested in Permitted Cash
Collateral
<PAGE> 32
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Investments) for Reimbursement Obligations as contemplated by
[Section]5.2(b) and (c) and for any other Obligations not then due and
payable, PROVIDED, HOWEVER, that notwithstanding anything to the contrary
contained in this [Section]3.2.1, any amounts which are to be applied to
the Revolving Credit Loans pursuant to this [Section]3.2.1. shall, to the
extent FNBB has advanced Revolving Credit Loans to the Borrower pursuant to
[Section]2.6.2 hereof for which a Settlement has not occurred, first be
paid to FNBB to be applied to any Revolving Credit Loans made by FNBB to
the Borrower pursuant to [Section]2.6.2 hereof and in which a Settlement
has not, at the time of such repayment, been effected. Each payment of any
Unpaid Reimbursement Obligations or prepayment of Revolving Credit Loans
shall be allocated among the Banks, in proportion, as nearly as
practicable, to each Reimbursement Obligation or (as the case may be) the
respective unpaid principal amount of each Bank's Revolving Credit Note,
with adjustments to the extent practicable to equalize any prior payments
or repayments not exactly in proportion.
3.2.2. BLOCKED ACCOUNT PROVISIONS. (a) Each of the Guarantor and its
Subsidiaries will (i) on or prior to the Closing Date, maintain a blocked
depository account (the "Blocked Account") with the Agent and under the
control of the Agent, as contemplated by the terms of the Blocked Account
Agreement, (ii) within seven (7) days of the Closing Date, direct (1) each
Agency Account Institution in writing to cause all funds in excess of the
amount set forth opposite such Agency Account Institutions' name on
SCHEDULE 3.2.2.(a) hereof (which amount is net of funds in the process of
transfer to the Agent) held by such Agency Account Institution in the
Agency Accounts to be transferred daily (or such other more frequent period
as the Agent or the Guarantor or such Subsidiary requests) to, and only to,
the Agent for application to the Revolving Credit Loans in accordance with
this [Section]3.2.2(a) and (2) each Person set forth on SCHEDULE 3.2.2(b)
hereto in writing to make all payments on or with respect to any of the
Collateral due or to become due to the Guarantor or any of its Subsidiaries
to the Guarantor or such Subsidiary directly to the Blocked Account or the
Agency Accounts, or immediately endorse and deposit any such payments
received directly into the Blocked Account, with each of the Guarantor and
the Borrower agreeing that any money, money orders, checks or other
payments received by the Guarantor or Borrower, as the case may be, will be
held by the Guarantor or Borrower, as the case may be, in trust for the
benefit of the Agent and the Banks and shall turn such proceeds promptly
over to the Agent in the identical form received (with appropriate
endorsements) by deposit to any Agency Account or the Blocked Account and
(iii) direct in writing its account debtors and obligors on instruments or
other obligors of the Guarantor or any of its Subsidiaries with respect to
any of the Collateral to make all payments on or with respect to any of the
Collateral due or to become due to the Guarantor or any of its Subsidiaries
to the Guarantor or such Subsidiary directly to the Blocked
<PAGE> 33
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Account or the Agency Accounts, or immediately endorse and deposit any such
payments received directly into the Blocked Account, with each of the
Guarantor and the Borrower agreeing that any money, money orders, checks or
other payments received by the Guarantor or Borrower, as the case may be,
will be held by the Guarantor or Borrower, as the case may be, in trust for
the benefit of the Agent and the Banks and shall turn such proceeds
promptly over to the Agent in the identical form received (with appropriate
endorsements) by deposit to any Agency Account or the Blocked Account. The
Agent shall, (i) on the same Business Day as receipt by the Agent of good
collected funds constituting cash proceeds from account debtors, obligors,
or (as the case may be) the Guarantor or such Subsidiary so deposited in
the Blocked Account, (ii) immediately following the receipt by the Agent of
any and all cash proceeds from any Agency Account (or such later or earlier
date as the Agent determines that good collected funds will be received by
the Agent), and (iii) on a provisional basis until final receipt of good
collected funds, apply all such cash proceeds which were deposited to the
Blocked Account in the form of money, checks or like items FIRST, to any
Unpaid Reimbursement Obligations and any other Obligations then due and
payable, SECOND, to the payment of any Revolving Credit Loans that are Base
Rate Loans, THIRD, to the payment or, at the Borrower's option, cash
collateralization in accordance with the terms of the Cash Collateral
Agreement (which cash collateral may be invested in Permitted Cash
Collateral Investments), of any Revolving Credit Loans that are Eurodollar
Rate Loans, and FOURTH, (A) so long as no Default or Event of Default has
occurred and is continuing, to the credit of the Operating Account or (B)
from and after the occurrence and during the continuance of a Default or an
Event of Default, to the cash collateralization in accordance with the
terms of the Cash Collateral Agreement (which cash collateral may be
invested in Permitted Cash Collateral Investments) of (I) Letters of Credit
in an amount equal to 103% of the Maximum Drawing Amount and (II) any other
Obligations not then due and payable and then, to the extent of any
surplus, to the credit of the Operating Account (it being understood that
any amounts which are to be applied to the Revolving Credit Loans pursuant
to this [Section]3.2.2. shall, to the extent FNBB has advanced Revolving
Credit Loans to the Borrower pursuant to [Section]2.6.2 hereof for which a
Settlement has not occurred, first be paid to FNBB to be applied to any
Revolving Credit Loans made by FNBB to the Borrower pursuant to
[Section]2.6.2 hereof and in which a Settlement has not, at the time of
such repayment, been effected). For purposes of the foregoing provisions of
this [Section]3.2.2, the Agent shall not be deemed to have received any
such cash proceeds on any day unless received by the Agent before 3:00 p.m.
(Boston time) on such day. Each of the Guarantor and its Subsidiaries
further acknowledges and agrees that any such provisional credit by the
Agent shall be subiect to reversal if final collection in good collected
funds of the related item is not received by the Agent in accordance with
the Agent's customary procedures and practices for
<PAGE> 34
-27-
collecting provisional items. The parties hereto hereby agree that the
Borrower shall be permitted to retain on any day an aggregate of $35,000 in
cash in each Store (with the Store located in Boston, Massachusetts
entitled to retain on any day an aggregate of $120,000 in cash).
(b) The Guarantor and the Borrower jointly and severally agree to pay
to the Agent any and all reasonable fees, costs and expenses which the
Agent incurs in connection with the opening and maintaining of the Blocked
Account and the depositing for collection by the Agent of any check or
other item of payment. Absent gross negligence or willful misconduct by the
Agent, the Guarantor and the Borrower jointly and severally agree to
indemnify the Agent and to hold the Agent harmless from and against any
loss, cost or expense sustained or incurred by the Agent on account of any
claims of third parties arising in connection with the Agent's operation of
the Blocked Account or in respect of the Blocked Account Agreement.
4. THE TERM LOAN.
--- ---- ----
4.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in
this Credit Agreement, each Bank also agrees to lend to the Borrower on the
Closing Date the amount of its Term Loan Percentage of the principal amount of
$10,000,000.
4.2. THE TERM NOTES. The Term Loan shall be evidenced by separate
promissory notes of the Borrower in substantially the form of EXHIBIT D hereto
(each a "Term Note"), dated the Closing Date and completed with appropriate
insertions. One Term Note shall be payable to the order of each Bank in a
principal amount equal to such Bank's Term Loan Percentage of the Term Loan and
representing the obligation of the Borrower to pay to such Bank such principal
amount or, if less, the outstanding amount of such Bank's Term Loan Percentage
of the Term Loan, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made a notation
on such Bank's Term Note Record reflecting the original principal amount of such
Bank's Term Loan Percentage of the Term Loan and, at or about the time of such
Bank's receipt of any principal payment on such Bank's Term Note, an appropriate
notation on such Bank's Term Note Record reflecting such payment. The aggregate
unpaid amount set forth on such Bank's Term Note Record shall, absent manifest
error, be PRIMA FACIE evidence of the principal amount thereof owing and unpaid
to such Bank, but the failure to record, or any error in so recording, any such
amount on such Bank's Term Note Record shall not affect the obligations of the
Borrower hereunder or under any Term Note to make payments of principal of and
interest on any Term Note when due.
4.3. MANDATORY REPAYMENTS OF TERM LOAN.
4.3.1. SCHEDULE OF INSTALLMENT PAYMENTS OF PRINCIPAL OF TERM LOAN. The
Borrower promises to pay to the Agent for the account of the
<PAGE> 35
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Banks the principal amount of the Term Loan in eight (8) consecutive
quarterly installments in an amount equal to one-eighth (1/8) of the
outstanding principal balance of the Term Loan on the first anniversary of
the Closing Date, such installments to be due and payable on the last day
of each calendar quarter of each calendar year, commencing on September 30,
1997, with a final payment on the Maturity Date in an amount equal to the
unpaid balance of the Term Loan.
4.3.2. ADDITIONAL MANDATORY PAYMENTS OF PRINCIPAL OF TERM LOAN. (a) If
at any time the Borrower receives any Net Proceeds from the sale or sale
and leaseback of its Somerville Distribution Center or any proceeds from
any principal payment in respect of the North Michigan Avenue Note, then
the Borrower shall immediately pay the amount of such proceeds to the Agent
for the respective accounts of the Banks for application: FIRST, to the
payment of that portion of the Term Loan that is a Base Rate Loan, SECOND,
to the payment or, at the Borrower's option, cash collateralization in
accordance with the terms of the Cash Collateral Agreement (which cash
collateral may be invested in Permitted Cash Collateral Investments), of
that portion of the Term Loan that is a Eurodollar Rate Loan, and THIRD, to
the payment of the other Obligations in the order specified in
[Section]3.2.2. Any payments of the Term Loan made pursuant to this
[Section]4.3.2(a) occurring after the first anniversary of the Closing Date
shall be applied against the scheduled installments of principal due on the
Term Loan pursuant to [Section]4.3.1 in the inverse order of maturity.
(b) In the event that the Total Commitment is terminated in its
entirety in accordance with the terms of this Credit Agreement, then the
Borrower shall immediately pay in full the Term Loan, together with any and
all accrued and unpaid interest thereon.
4.4. OPTIONAL PREPAYMENT OF TERM LOAN. The Borrower shall have the right at
any time to prepay the Term Notes on or before the Maturity Date, as a whole, or
in part, upon not less than five (5) Business Days' prior written notice to the
Agent, without premium or penalty, PROVIDED that (a) each partial prepayment
shall be in the principal amount of $100,000 or an integral multiple thereof,
(b) no portion of the Term Loan bearing interest at the Eurodollar Rate may be
prepaid pursuant to this [Section]4.4 except, at the Borrower's option, either
on the last day of the Interest Period relating thereto or subject to the
provisions of [Section]6.9(c) of the Credit Agreement, and (c) each partial
prepayment shall be allocated among the Banks, in proportion, as nearly as
practicable, to the respective outstanding amount of each Bank's Term Note, with
adjustments to the extent practicable to equalize any prior prepayments not
exactly in proportion. Any prepayment of principal of the Term Loan shall
include all interest accrued to the date of prepayment and shall, if made after
the first anniversary of the Closing Date, be applied against the scheduled
installments of principal due on the Term Loan pursuant to [Section]4.3.1 in the
inverse order of maturity. No amount repaid with respect to the Term Loan may be
reborrowed.
<PAGE> 36
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4.5. INTEREST ON TERM LOAN.
4.5.1. INTEREST RATES. Except as otherwise provided in [Section]6.10,
the Term Loan shall bear interest during each Interest Period relating to
all or any portion of the Term Loan at the following rates:
(a) to the extent that all or any portion of the Term Loan bears
interest during such Interest Period by reference to the Base Rate. the
Term Loan or such portion shall bear interest during such Interest Period
at the rate of three-quarters of one percent (3/4%) per annum above the
Base Rate; and
(b) to the extent that all or any portion of the Term Loan bears
interest during such Interest Period by reference to the Eurodollar Rate,
the Term Loan or such portion shall bear interest during such Interest
Period at the rate of two and three-quarters of one percent (2-3/4%) per
annum above the Eurodollar Rate;
PROVIDED, HOWEVER, that, in the event that the outstanding principal amount of
the Term Loan as of the first anniversary of the Closing Date is greater than
$4,000,000, then the interest rate(s) otherwise applicable to the Term Loan
shall be permanently increased by one percent (1%) per annum effective as of
such date until payment in full of the Term Loan; and PROVIDED FURTHER in the
event that EBITDA for the Borrower's fiscal year ending February 1, 1997 is
greater than or equal to $22,000,000, then the interest rate otherwise
applicable to the Term Loan shall be decreased by one-half of one percent (1/2%)
per annum effective upon the Agent's receipt of unaudited financial statements
prepared by the Guarantor's management confirming such EBITDA; provided further,
however, that such effectiveness shall be provisional until such time as the
Agent has received audited financial statements pursuant to [Section]9.4(a)
confirming such EBITDA.
The Borrower promises to pay interest on the Term Loan or any portion thereof
outstanding during each Interest Period in arrears on each Interest Payment Date
applicable to such Interest Period.
4.5.2. INTEREST RATE OPTIONS. On the initial Drawdown Date, the Term
Loan shall bear interest at the Base Rate. After the Term Loan has been
made, the provisions of [Section]2.7 shall apply MUTATIS MUTANDIS with
respect to all or any portion of the Term Loan so that the Borrower may
have the same interest rate options with respect to all or any portion of
the Term Loan as it would be entitled to with respect to the Revolving
Credit Loans.
4.5.3. AMOUNTS, ETC. Any portion of the Term Loan bearing interest at
the Eurodollar Rate relating to any Interest Period shall be in the amount
of $1,000,000 or an integral multiple of $100,000 in excess thereof or, if
the outstanding amount of the Term Loan is less than $1,000,000, an
integral multiple of $100,000. No Interest Period relating
<PAGE> 37
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to the Term Loan or any portion thereof bearing interest at the Eurodollar
Rate shall extend beyond the date on which a regularly scheduled
installment payment of the principal of the Term Loan is to be made unless
a portion of the Term Loan at least equal to such installment payment has
an Interest Period ending on such date or is then bearing interest at the
Base Rate.
5. LETTERS OF CREDIT.
------- -- ------
5.1. LETTER OF CREDIT COMMITMENTS.
5.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and
conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on the Agent's customary form (a "Letter of
Credit Application"), the Agent on behalf of the Banks and in reliance upon
the agreement of the Banks set forth in [Section]5.1.4 and upon the
representations and warranties of the Borrower contained herein, agrees, in
its individual capacity, to issue, extend and renew for the account of the
Borrower one or more standby or documentary letters of credit
(individually, a "Letter of Credit"), in such form as may be requested from
time to time by the Borrower and agreed to by the Agent; PROVIDED, HOWEVER,
that, after giving effect to such request, (a) the sum of the aggregate
Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not
exceed $25,000,000 at any one time and (b) the sum of (i) the Maximum
Drawing Amount on all Letters of Credit, (ii) all Unpaid Reimbursement
Obligations, and (iii) the amount of all Revolving Credit Loans outstanding
shall not exceed the lesser of (A) the Total Commitment and (B) the
Borrowing Base. Each of the "Letters of Credit" as defined in the Existing
Credit Agreement shall automatically be deemed to be a Letter of Credit
issued under this Credit Agreement for the account of the Borrower on the
Closing Date.
5.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the satisfaction of the Agent. In the
event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
5.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (a) provide for
the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, and (b) have an expiry date no later than the date which
is no later than one (1) year after the issuance date for standby Letters
of Credit and one hundred fifty (150) days after the issuance date for
documentary Letters of Credit, PROVIDED, HOWEVER, in the event the Borrower
requests a Letter of Credit be issued, extended or
<PAGE> 38
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renewed with an expiry date which will occur after the date which is
fourteen (14) days (or, if the Letter of Credit is confirmed by a confirmer
or otherwise provides for one or more nominated persons, forty-five (45)
days) prior to the Maturity Date, the Borrower shall, by not later than (a)
forty-five (45) days prior to the Maturity Date for standby Letters of
Credit and (b) twenty-one (21) days prior to the Maturity Date for
documentary Letters of Credit, deliver to the Agent for the benefit of the
Banks, cash in the amount of one hundred three percent (103%) of the
Maximum Drawing Amount, to be held as cash collateral by the Agent for the
Reimbursement Obligations pursuant to the terms of the Cash Collateral
Agreement (which cash collateral may be invested in Permitted Cash
Collateral Investments). Each Letter of Credit so issued, extended or
renewed shall be subject to the Uniform Customs.
5.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally agrees
that it shall be absolutely liable, without regard to the occurrence of any
Default or Event of Default or any other condition precedent whatsoever, to
the extent of such Bank's Commitment Percentage, to reimburse the Agent on
demand for the amount of each draft paid by the Agent under each Letter of
Credit to the extent that such amount is not reimbursed by the Borrower
pursuant to [Section]5.2 (such agreement for a Bank being called herein the
"Letter of Credit Participation" of such Bank).
5.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank shall
be treated as the purchase by such Bank of a participating interest in the
Borrower's Reimbursement Obligation under [Section]5.2 in an amount equal
to such payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to [Section]5.2.
5.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce the
Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrower hereby agrees to reimburse or pay to the
Agent, for the account of the Agent or (as the case may be) the Banks, with
respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder,
(a) except as otherwise expressly provided in [Sections]5.2(b) and
(c), on each date that any draft presented under such Letter of Credit is
honored by the Agent, or the Agent otherwise makes a payment with respect
thereto, (i) the amount paid by the Agent under or with respect to such
Letter of Credit, and (ii) the amount of any taxes, fees, charges or other
costs and expenses whatsoever incurred by the Agent or any Bank in
connection with any payment made by the Agent or any Bank under, or with
respect to, such Letter of Credit,
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(b) upon the reduction (but not termination) of the Total Commitment
to an amount less than the Maximum Drawing Amount, an amount equal to 103%
of the difference between the amount of the Maximum Drawing Amount and the
Total Commitment at such time, which amount shall be held by the Agent for
the benefit of the Banks and the Agent as cash collateral for all
Reimbursement Obligations in accordance with the terms of the Cash
Collateral Agreement (which cash collateral may be invested in Permitted
Cash Collateral Investments), and
(c) upon the termination of the Total Commitment, or the acceleration
of the Reimbursement Obligations with respect to all Letters of Credit in
accordance with [Section]14, an amount equal to 103% of the then Maximum
Drawing Amount on all Letters of Credit, which amount shall be held by the
Agent for the benefit of the Banks and the Agent as cash collateral for all
Reimbursement Obligations in accordance with the terms of the Cash
Collateral Agreement (which cash collateral may be invested in Permitted
Cash Collateral Investments).
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid by
the Borrower under this [Section]5.2 at any time from the date such amounts
become due and payable (whether as stated in this [Section]5.2, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Agent on demand at the rate specified in [Section]6.10 for
overdue principal on the Revolving Credit Loans.
5.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, the Agent shall
notify the Borrower of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor such
demand for payment. If the Borrower fails to reimburse the Agent as provided in
[Section]5.2 on or before the date that such draft is paid or other payment is
made by the Agent, the Agent may at any time thereafter notify the Banks of the
amount of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m.
(Boston time) on the Business Day next following the receipt of such notice,
each Bank shall make available to the Agent, at its Head Office, in immediately
available funds, such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, together with an amount equal to the product of (a) the average,
computed for the period referred to in clause (c) below, of the weighted average
interest rate paid by the Agent for federal funds acquired by the Agent during
each day included in such period, TIMES (b) the amount equal to such Bank's
Commitment Percentage of such Unpaid Reimbursement Obligation, TIMES (c) a
fraction, the numerator of which is the number of days that elapse from and
including the date the Agent paid the draft presented for honor or otherwise
made payment to the date on which such Bank's Commitment Percentage of such
Unpaid Reimbursement obligation shall become immediately available to the Agent,
and the denominator of which is
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360. The responsibility of the Agent to the Borrower and the Banks shall be only
to determine that the documents (including each draft) delivered under each
Letter of Credit in connection with such presentment shall be in conformity in
all material respects with such Letter of Credit.
5.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this [Section]5
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Agent, any Bank or any
beneficiary of a Letter of Credit. The Borrower further agrees with the Agent
and the Banks that the Agent and the Banks shall not be responsible for, and the
Borrower's Reimbursement Obligations under [Section]5.2 shall not be affected
by, among other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Agent and the Banks shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit unless caused by the Agent's or such Bank's gross
negligence or willful misconduct. The Borrower agrees that any action taken or
omitted by the Agent or any Bank under or in connection with each Letter of
Credit and the related drafts and documents shall, absent the Agent's or such
Bank's gross negligence or willful misconduct, be binding upon the Borrower and
shall not result in any liability on the part of the Agent or any Bank to the
Borrower.
5.5. RELIANCE BY ISSUER. To the extent not inconsistent with [Section]5.4,
the Agent shall be entitled to rely, and shall be fully protected in relying
upon, any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement unless it shall
first have received such advice or concurrence of the Majority Banks as it
reasonably deems appropriate or it shall first be indemnified to its reasonable
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement in accordance with a request of the Majority Banks,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon the Banks and all future holders of the Revolving Credit Notes
or of a Letter of Credit Participation.
<PAGE> 41
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5.6. LETTER OF CREDIT FEE. The Borrower shall, quarterly in arrears on the
first day of each calendar quarter for the immediately preceding calendar
quarter commencing on the first such date following the date hereof, with a
final payment on the Maturity Date, pay a fee (in each case, a "Letter of Credit
Fee") to the Agent in an amount equal to one and one-quarter of one percent
(1-1/4%) per annum of the average daily Maximum Drawing Amount during each
calendar quarter or portion thereof. The Agent shall, in turn, remit to each
Bank its PRO RATA portion of such Letter of Credit Fee LESS, in the case of
documentary Letters of Credit, one-eighth of one percent (1/8%) of such Letter
of Credit Fee. In addition, the Borrower shall pay to the Agent, for its own
account, on the date of issuance, or any extension or renewal of any Letter of
Credit and at such other time or times as such charges are customarily made by
the Agent, its standard issuance, processing, negotiation, settlement, amendment
and administrative fees, determined in accordance with customary fees and
charges for similar facilities.
6. CERTAIN GENERAL PROVISIONS.
------- ------- ----------
6.1. CLOSING FEE. The Borrower agrees to pay to the Agent on the Closing
Date the closing fee in the amount of $375,000.
6.2. FUNDS FOR PAYMENTS.
6.2.1. PAYMENTS TO AGENT. All payments of principal, interest,
Reimbursement Obligations, commitment fees, Letter of Credit Fees and any
other amounts due hereunder or under any of the other Loan Documents shall
be made to the Agent, for the respective accounts of the Banks and the
Agent, at the Agent's Head Office or at such other location in the Boston,
Massachusetts, area that the Agent may from time to time designate, in each
case in immediately available funds. The Borrower hereby authorizes the
Agent to debit its account with the Agent for payment of any principal,
interest, Reimbursement Obligations, commitment fees, Letter of Credit Fees
and any other amounts due hereunder or under any of the Loan Documents. The
Agent shall debit such accounts for the payment of such amounts on the date
which any of such amounts become due, whether at the stated date of
maturity or any accelerated date of maturity or at any other date fixed for
payment, and shall promptly thereafter notify the Borrower of the amount of
such debit.
6.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder, under
the Notes and under any of the other Loan Documents shall be made without
setoff or counterclaim and free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding. If
<PAGE> 42
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any such obligation is imposed upon the Borrower with respect to any amount
payable by it hereunder or under any of the other Loan Documents, the
Borrower will pay to the Agent, for the account of the Banks or (as the
case may be) the Agent, on the date on which such amount is due and payable
hereunder or under such other Loan Document, such additional amount in
Dollars as shall be necessary to enable the Banks or the Agent to receive
the same net amount which the Banks or the Agent would have received on
such due date had no such obligation been imposed upon the Borrower. The
Borrower will deliver promptly to the Agent certificates or other valid
vouchers for all taxes or other charges deducted from or paid with respect
to payments made by the Borrower hereunder or under such other Loan
Document.
6.3. COMPUTATIONS. All computations of interest on the Loans and of
commitment fees, Letter of Credit Fees or other fees shall, unless otherwise
expressly provided herein, be based on a 360-day year and paid for the actual
number of days elapsed. Except as otherwise provided in the definition of the
term "Interest Period" with respect to Eurodollar Rate Loans, whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day that is
not a Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Loans as reflected on the Revolving Credit Note
Records and the Term Note Records from time to time shall be considered correct
and binding on the Borrower absent manifest error unless within ten (10)
Business Days after the Borrower's receipt of any notice from the Agent or any
of the Banks of such outstanding amount, the Borrower shall notify the Agent or
such Bank to the contrary.
6.4. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would otherwise determine the rate of
interest to be applicable to any Eurodollar Rate Loan during any Interest
Period, the Agent shall forthwith give notice of such determination (which shall
be conclusive and binding on the Borrower and the Banks) to the Borrower and the
Banks. In such event (a) any Loan Request or Conversion Request with respect to
Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a
request for Base Rate Loans, (b) each Eurodollar Rate Loan will automatically,
on the last day of the then current Interest Period relating thereto, become a
Base Rate Loan, and (c) the obligations of the Banks to make Eurodollar Rate
Loans shall be suspended until the Agent, exercising reasonable due diligence
determines that the circumstances giving rise to such suspension no longer
exist, whereupon the Agent shall so notify the Borrower and the Banks.
6.5. ILLEGALITY. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
<PAGE> 43
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Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks (which notice shall be in
writing if the Borrower so requests) and thereupon (a) the commitment of such
Bank to make Eurodollar Rate Loans or convert Loans of another Type to
Eurodollar Rate Loans shall forthwith be suspended and (b) such Bank's Loans (or
portions thereof) then outstanding as Eurodollar Rate Loans, if any, shall be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such Eurodollar Rate Loans or within such earlier period as
may be required by law. The Borrower hereby agrees promptly to pay the Agent for
the account of such Bank, upon demand by such Bank, any additional amounts
necessary to compensate such Bank for any costs incurred by such Bank in making
any conversion in accordance with this [Section]6.5, including any interest or
fees payable by such Bank to lenders of funds obtained by it in order to make or
maintain its Eurodollar Loans hereunder.
6.6. ADDITIONAL COSTS, ETC. If any present or future applicable law, which
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter made upon or otherwise issued to any Bank or
the Agent by any central bank or other fiscal, monetary or other authority
(whether or not having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any Letters of Credit, such
Bank's Commitment or the Loans (other than taxes based upon or measured by
the income or profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Loans or any other amounts payable to any Bank or the
Agent under this Credit Agreement, the Notes or any of the other Loan
Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or Loans by, or Letters of Credit
issued by, or commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Commitment, or any
class of Loans, Letters of Credit or commitments of which any of the Loans
or such Bank's Commitment forms a part, and the result of any
<PAGE> 44
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of the foregoing is
(i) to increase the cost to any Bank of making, funding, issuing,
renewing, extending or maintaining any of the Loans or such Bank's
Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Bank or the Agent hereunder
on account of such Bank's Commitment, any Letter of Credit or any of
the Loans, or
(iii) to require such Bank or the Agent to make any payment or to
forego any interest or Reimbursement Obligation or other sum payable
hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by such Bank
or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, within ten (10) days following
presentation by such Bank or (as the case may be) the Agent of a certificate in
accordance with [Section]6.8, from time to time and as often as the occasion
therefor may arise, pay to such Bank or the Agent such additional amounts as
will be sufficient to compensate such Bank or the Agent for such additional
cost, reduction, payment or foregone interest or Reimbursement Obligation or
other sum.
6.7. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's on the Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's capital) by any
amount deemed by such Bank or (as the case may be) the Agent to be material,
then such Bank or the Agent may notify the Borrower of such fact. To the extent
that the amount of such reduction in the return on capital is not reflected in
the Base Rate, the Borrower agrees to pay such Bank or (as the case may be) the
Agent for the amount of such reduction in the return on capital within ten (10)
days following presentation by such Bank or (as the case may be) the Agent of a
certificate in accordance with [Section]6.8 hereof. Each Bank shall allocate
such cost increase among its customers in good faith and on an equitable basis.
<PAGE> 45
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6.8. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to [Sections]6.6 or 6.7 and a brief explanation of such
amounts which are due, submitted by any Bank or the Agent to the Borrower, shall
be conclusive, absent manifest error, that such amounts are due and owing.
6.9. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold each
Bank harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of (a)
default by the Borrower in payment of the principal amount of or any interest
on any Eurodollar Rate Loans as and when due and payable, including any such
loss or expense arising from interest or fees payable by such Bank to lenders of
funds obtained by it in order to maintain its Eurodollar Rate Loans, (b) default
by the Borrower in making a borrowing or conversion after the Borrower has given
(or is deemed to have given) a Loan Request, notice (in the case of all or any
portion of the Term Loans pursuant to [Section]4.5.2) or a Conversion Request
relating thereto in accordance with [Section]2.6, [Section]2.7 or [Section]4.5
or (c) the making of any payment of a Eurodollar Rate Loan or the making of any
conversion of any such Loan to a Base Rate Loan on a day that is not the last
day of the applicable Interest Period with respect thereto, including interest
or fees payable by such Bank to lenders of funds obtained by it in order to
maintain any such Loans.
6.10. INTEREST AFTER DEFAULT.
6.10.1. OVERDUE AMOUNTS. During the continuance of an Event of
Default, overdue principal and (to the extent permitted by applicable law)
interest on the Loans and all other overdue amounts payable hereunder or
under any of the other Loan Documents shall bear interest compounded
monthly and payable on demand at a rate per annum equal to two percent (2%)
above the rate of interest otherwise applicable to such Loans pursuant to
[Section]2.5 or [Section]4.5.1, as applicable, until such amount shall be
paid in full (after as well as before judgment).
6.10.2. AMOUNTS NOT OVERDUE. During the continuance of an Event of
Default the principal of the Revolving Credit Loans and the Term Loan not
overdue shall, until such Event of Default has been cured or remedied or
such Event of Default has been waived by the Majority Banks pursuant to
[Section]27, bear interest at a rate per annum equal to two percent (2%)
above the rate of interest otherwise applicable to such Revolving Credit
Loans pursuant to [Section]2.5 and the Term Loan pursuant to
[Section]4.5.1.
7. COLLATERAL SECURITY AND GUARANTIES.
---------- -------- --- ----------
7.1. SECURITY OF BORROWER. The Obligations shall be secured by a perfected
first priority security interest (subject only to Permitted Liens entitled to
priority under applicable law) in all of the assets of the Borrower, whether now
owned or hereafter acquired, pursuant to the terms of the Security
<PAGE> 46
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Documents to which the Borrower is a party.
7.2. GUARANTY AND SECURITY OF GUARANTOR. The Obligations shall also be
guaranteed pursuant to the terms of the Guaranty. The obligations of the
Guarantor under the Guaranty shall be in turn secured by a perfected first
priority security interest (subject only to Permitted Liens entitled to priority
under applicable law) in all of the assets of the Guarantor, whether now owned
or hereafter acquired, pursuant to the terms of the Security Documents to which
the Guarantor is a party.
8. REPRESENTATIONS AND WARRANTIES. Each of the Guarantor and the Borrower
represents and warrants to the Banks and the Agent as follows:
8.1. CORPORATE AUTHORITY.
8.1.1. INCORPORATION; GOOD STANDING. Each of the Guarantor, the
Borrower and their Subsidiaries (a) is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation, (b) has all requisite corporate power to own its property
and conduct its business as now conducted and as presently contemplated,
and (c) is in good standing as a foreign corporation and is duly authorized
to do business in each jurisdiction where such qualification is necessary
except where a failure to be so qualified would not have a materially
adverse effect on the business, assets or financial condition of the
Guarantor, the Borrower or such Subsidiary.
8.1.2. AUTHORIZATION. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which the Guarantor, the
Borrower or any of their Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby (a) are within the corporate
authority of such Person, (b) have been duly authorized by all necessary
corporate proceedings, (c) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
the Guarantor, the Borrower or any of their Subsidiaries is subject or any
judgment, order, writ, injunction, license or permit applicable to the
Guarantor, the Borrower or any of their Subsidiaries and (d) do not
conflict with any provision of the corporate charter or bylaws of, or any
agreement or other instrument binding upon, the Guarantor, the Borrower or
any of their Subsidiaries.
8.1.3. ENFORCEABILITY. The execution and delivery of this Credit
Agreement and the other Loan Documents to which the Guarantor, the Borrower
or any of their Subsidiaries is or is to become a party will result in
valid and legally binding obligations of such Person enforceable against it
in accordance with the respective terms and provisions hereof and thereof,
except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
<PAGE> 47
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generally the enforcement of creditors' rights and except to the extent
that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
8.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by the
Guarantor, the Borrower and any of their Subsidiaries of this Credit Agreement
and the other Loan Documents to which the Guarantor, the Borrower or any of
their Subsidiaries is or is to become a party and the transactions contemplated
hereby and thereby do not require the approval or consent of, or filing with,
any governmental agency or authority other than those already obtained, and
other than the filing of UCC-1 financing statements and the Mortgages.
8.3. TITLE TO PROPERTIES; LEASES. Except as indicated on SCHEDULE 8.3
hereto, the Guarantor, the Borrower and their Subsidiaries own all of the assets
reflected in the consolidated balance sheet of the Guarantor and its
Subsidiaries as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date or in accordance with the terms of this Credit
Agreement), subject to no rights of others, including any mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
8.4. FINANCIAL STATEMENTS AND PROJECTIONS.
8.4.1. FINANCIAL STATEMENTS. There has been furnished to each of the
Banks a consolidated balance sheet of the Guarantor and its Subsidiaries as
at the Balance Sheet Date, and a consolidated statement of income of the
Guarantor and its Subsidiaries for the fiscal year then ended, certified by
Coopers & Lybrand LLP. Such balance sheet and statement of income have been
prepared in accordance with generally accepted accounting principles and
fairly present the financial condition of the Guarantor and its
Subsidiaries as at the close of business on the date thereof and the
results of operations for the fiscal year then ended. Except as set forth
on SCHEDULE 8.4.1, there are no contingent liabilities of the Guarantor or
any of its Subsidiaries as of such date involving material amounts, known
to the officers of the Borrower, which were not disclosed in such balance
sheet and the notes related thereto.
8.4.2. PROJECTIONS. Copies of the projections of the annual operating
budgets of the Guarantor, the Borrower and their Subsidiaries on a
consolidated basis, balance sheets, income statements and cash flow
statements for the 1996 and (other than cash flow statements) 1997 fiscal
years, have been delivered to each Bank, all of which are attached hereto
as SCHEDULE 8.4.2. To the knowledge of the Guarantor, the Borrower or any
of their Subsidiaries, no facts exist that (individually or in the
aggregate) would result in any material change in any of such projections.
The projections are based upon reasonable estimates and assumptions,
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have been prepared on the basis of the assumptions stated therein and
reflect the reasonable estimates of the Guarantor, the Borrower and their
Subsidiaries of the results of operations and other information projected
therein.
8.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date there has
occurred no materially adverse change in the financial condition or business of
the Guarantor and its Subsidiaries as shown on or reflected in the consolidated
balance sheet of the Guarantor and its Subsidiaries as at the Balance Sheet
Date, or the consolidated statement of income for the fiscal year then ended,
other than changes in the ordinary course of business that have not had any
materially adverse effect either individually or in the aggregate on the
business or financial condition of the Guarantor or any of its Subsidiaries.
Since the Balance Sheet Date, neither the Guarantor nor the Borrower has made
any Distribution.
8.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Guarantor, the
Borrower and their Subsidiaries possesses all franchises, patents, copyrights,
trademarks, trade names, licenses and permits, and rights in respect of the
foregoing, adequate for the conduct of its business substantially as now
conducted without known conflict with any rights of others.
8.7. LITIGATION. Except as set forth in SCHEDULE 8.7 hereto, there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against the Guarantor, the Borrower or any of their Subsidiaries before any
court, tribunal or administrative agency or board that, if adversely determined,
might, either in any case or in the aggregate, materially adversely affect the
properties, assets, financial condition or business of the Guarantor, the
Borrower and their Subsidiaries or materially impair the right of the Guarantor,
the Borrower and their Subsidiaries, considered as a whole, to carry on business
substantially as now conducted by them, or result in any substantial liability
not adequately covered by insurance, or for which adequate reserves are not
maintained on the consolidated balance sheet of the Guarantor and its
Subsidiaries, or which question the validity of this Credit Agreement or any of
the other Loan Documents, or any action taken or to be taken pursuant hereto or
thereto.
8.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Guarantor, the
Borrower nor any of their Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation that
has or is expected in the future to have a materially adverse effect on the
business, assets or financial condition of the Guarantor, the Borrower or any of
their Subsidiaries. Except as set forth on SCHEDULE 8.8 hereto, neither the
Guarantor, the Borrower nor any of their Subsidiaries is a party to any contract
or agreement that has or is expected, in the judgment of the Guarantor's or the
Borrower's officers, to have any materially adverse effect on the business of
the Guarantor, the Borrower or any of their Subsidiaries.
<PAGE> 49
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8.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Guarantor,
the Borrower nor any of their Subsidiaries is in violation of any provision of
its charter documents, bylaws, or any agreement or instrument to which it may be
subject or by which it or any of its properties may be bound or any decree,
order, judgment, statute, license, rule or regulation, in any of the foregoing
cases in a manner that could result in the imposition of substantial penalties
or materially and adversely affect the financial condition, properties or
business of the Guarantor, the Borrower or any of their Subsidiaries.
8.10. TAX STATUS. The Guarantor, the Borrower and their Subsidiaries (a)
have made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which any of them is
subject, (b) have paid all taxes and other governmental assessments and charges
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith and by appropriate proceedings and (c) have
set aside on their books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. Except as set forth on SCHEDULE 8.10, there are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Borrower know of no basis for any such
claim.
8.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and
is continuing.
8.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Guarantor,
the Borrower nor any of their Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935; nor is it an "investment company", or an "affiliated company" or a
"principal underwriter" of an "investment company", as such terms are defined in
the Investment Company Act of 1940.
8.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Guarantor, the Borrower or any of their
Subsidiaries or any rights relating thereto.
8.14. PERFECTION OF SECURITY INTEREST. Except for required filings set
forth on SCHEDULE 8.14 hereto (which are to be made promptly after the Closing
Date), all filings, assignments, pledges and deposits of documents or
instruments have been made and all other actions have been taken that are
necessary or advisable, under applicable law, to establish and perfect the
Agent's first priority (except with respect to Permitted Liens which have
priority under applicable law) security interest in the Collateral. The
Collateral and the
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Agent's rights with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Guarantor and Borrower are the
owners of the Collateral free from any lien, security interest, encumbrance and
any other claim or demand, except for Permitted Liens.
8.15. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 8.15 hereto and
except for arm's length transactions pursuant to which the Guarantor, the
Borrower or any of their Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Guarantor, the Borrower or such
Subsidiary could obtain from third parties, none of the officers, directors, or
employees of the Guarantor, the Borrower or any of their Subsidiaries is
presently a party to any transaction with the Guarantor, the Borrower or any of
their Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Guarantor or the Borrower,
any corporation, partnership, trust or other entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
8.16. EMPLOYEE BENEFIT PLANS.
8.16.1. IN GENERAL. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of
ERISA and, to the extent applicable, the Code, including but not limited to
the provisions thereunder respecting prohibited transactions. The Borrower
has heretofore delivered to the Agent the most recently completed annual
report, Form 5500, with all required attachments, and actuarial statement
required to be submitted under [Section]103(d) of ERISA, with respect to
each Guaranteed Pension Plan.
8.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit
Plan which is an employee welfare benefit plan within the meaning of
[Section]3(1) or [Section]3(2)(B) of ERISA, no benefits are due unless the
event giving rise to the benefit entitlement occurs prior to plan
termination (except as required by Title I, Part 6 of ERISA). The Borrower
or an ERISA Affiliate, as appropriate, may terminate each such Plan at any
time (or at any time subsequent to the expiration of any applicable
bargaining agreement) in the discretion of the Borrower or such ERISA
Affiliate without liability to any Person.
8.16.3. GUARANTEED PENSION PLANS. Each contribution required to be
made to a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien
provisions of [Section]302(f) of ERISA, or otherwise, has been timely made.
No waiver of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed
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Pension Plan. No liability to the PBGC (other than required insurance
premiums, all of which have been paid) has been incurred by the Borrower or
any ERISA Affiliate with respect to any Guaranteed Pension Plan and there
has not been any ERISA Reportable Event, or any other event or condition
which presents a material risk of termination of any Guaranteed Pension
Plan by the PBGC. Based on the latest valuation of each Guaranteed Pension
Plan (which in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed for
that valuation, the aggregate benefit liabilities of all such Guaranteed
Pension Plans within the meaning of [Section]4001 of ERISA did not exceed
the aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
8.16.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under [Section]4201 of ERISA or as
a result of a sale of assets described in [Section]4204 of ERISA. Neither
the Borrower nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under and within the
meaning of [Section]4241 or [Section]4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated under
[Section]4041A of ERISA.
8.17. REGULATIONS U and X. The proceeds of the Loans shall be used solely
to refinance in their entirety all "Obligations" as defined in the Existing
Credit Agreement and for working capital and general corporate purposes. The
Borrower will obtain Letters of Credit solely for working capital and general
corporate purposes. No portion of any Loan is to be used, and no portion of any
Letter of Credit is to be obtained, for the purpose of purchasing or carrying
any "margin security" or "margin stock" as such terms are used in Regulations U
and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts
221 and 224.
8.18. ENVIRONMENTAL COMPLIANCE. Each of the Guarantor, the Borrower and
their Subsidiaries has taken all necessary steps to investigate the past and
present condition and usage of the Real Estate owned by the Borrower, the
Guarantor or such Subsidiary (the "Owned Real Estate"), as the case may be, and
the operations conducted thereon and have taken all reasonable steps of a lessee
of real property (which steps may include reliance upon the representations and
warranties of lessors of such real property) to investigate the past and present
condition and usage of the Real Estate so leased (the "Leased Real Estate") and
the operations conducted thereon, and, based upon such diligent or, as the case
may be, reasonable investigation, has determined that, except as set forth on
SCHEDULE 8.18:
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(a) none of the Guarantor, the Borrower, their Subsidiaries or any
operator of the Owned Real Estate or any operations thereon, and, to the
actual knowledge of the Guarantor, the Borrower or their Subsidiaries, any
operator of the Leased Real Estate or any operations thereon, are in
violation, or alleged violation, of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters, including
without limitation, those arising under the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or
any state or local statute, regulation, ordinance, order or decree relating
to health, safety or the environment (hereinafter "Environmental Laws"),
which violation would have a material adverse effect on the environment or
the business, assets or financial condition of the Guarantor, the Borrower
or any of their Subsidiaries;
(b) neither the Guarantor, the Borrower nor any of their Subsidiaries
has received notice from any third party including, without limitation: any
federal, state or local governmental authority, (i) that any one of them
has been identified by the United States Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B;
(ii) that any hazardous waste, as defined by 42 U.S.C. [Section]6903(5),
any hazardous substances as defined by 42 U.S.C. [Section]9601(14), any
pollutant or contaminant as defined by 42 U.S.C. [Section]9601(33) and any
toxic substances, oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws ("Hazardous Substances")
which any one of them has generated, transported or disposed of has been
found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that the Guarantor, the Borrower or any
of their Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that it is or
shall be a named party to any claim, action, cause of action, complaint, or
legal or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release of Hazardous
Substances;
(c) (i) no portion of the Owned Real Estate or, to the Guarantor's,
the Borrower's or such Subsidiary's actual knowledge, the Leased Real
Estate, has been used for the handling, processing, storage or disposal of
Hazardous Substances except in accordance with applicable Environmental
Laws; and no underground tank or other underground storage receptacle for
Hazardous Substances is located on any portion of the Owned Real Estate or,
to the Guarantor's, the Borrower's or such Subsidiary's actual knowledge,
the Leased Real Estate; (ii) in the course
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of any activities conducted by the Guarantor, the Borrower, their
Subsidiaries or operators of its properties, no Hazardous Substances have
been generated or are being used on the Owned Real Estate or, to the
Guarantor's, the Borrower's or such Subsidiary's actual knowledge, the
Leased Real Estate except in accordance with applicable Environmental Laws;
(iii) there have been no releases (i.e. any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping) or threatened releases of
Hazardous Substances on, upon, into or from the properties of the
Guarantor, the Borrower or their Subsidiaries, which releases would have a
material adverse effect on the value of any of the Owned Real Estate or
adjacent properties or, to the Guarantor's, the Borrower's or such
Subsidiary's actual knowledge, with respect to the Leased Real Estate or
the environment; (iv) to the best of the Guarantor's and Borrower's
knowledge, with respect to the Owned Real Estate or, to the Guarantor's,
the Borrower's or such Subsidiary's actual knowledge, the Leased Real
Estate, there have been no releases on, upon, from or into any real
property in the vicinity of any of the Real Estate which, through soil or
groundwater contamination, may have come to be located on, and which would
have a material adverse effect on the value of, the Real Estate; and (v) in
addition, any Hazardous Substances that have been generated on any of the
Owned Real Estate or, to the Guarantor's, the Borrower's or such
Subsidiary's actual knowledge, the Leased Real Estate, have been
transported offsite only by carriers having an identification number issued
by the EPA, treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental Laws,
which transporters and facilities have been and are, to the best of the
Guarantor's and the Borrower's knowledge, operating in compliance with such
permits and applicable Environmental Laws; and
(d) none of the Guarantor, the Borrower and their Subsidiaries, any
Mortgaged Property or any of the other Owned Real Estate or, to the
Guarantor's, the Borrower's or such Subsidiary's actual knowledge, the
Leased Real Estate, is subject to any applicable environmental law
requiring the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of notice to
any governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a condition to
the recording of any Mortgage or to the effectiveness of any other
transactions contemplated hereby.
8.19. SUBSIDIARIES, ETC. The Borrower is a wholly-owned Subsidiary of the
Guarantor. Except for the Borrower, the Guarantor has no Subsidiaries and the
Borrower has no Subsidiaries. Except as set forth on SCHEDULE 8.19 hereto,
neither the Guarantor, the Borrower nor any of their Subsidiaries is engaged in
any joint venture or partnership with any other Person.
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8.20. BANK ACCOUNTS. SCHEDULE 8.20 sets forth the account numbers and
location of all bank accounts of the Guarantor, the Borrower or any of their
Subsidiaries.
8.21. FISCAL QUARTERS. Attached hereto as SCHEDULE 8.21 is a list of each
fiscal quarter end of each of the Guarantor and the Borrower from the Closing
Date to the Maturity Date.
8.22. CHIEF EXECUTIVE OFFICE; INVENTORY LOCATIONS. Each of the Guarantor's
and the Borrower's chief executive office is at 40 Walnut Street, Wellesley,
Massachusetts, at which location its corporate books and records are kept. In
addition, SCHEDULE 8.22 hereto sets forth the additional locations where books
and records are kept. All Eligible Inventory is located solely at Permitted
Inventory Locations.
8.23. INSURANCE. The Guarantor, the Borrower and each of their Subsidiaries
maintains with financially sound and reputable insurers insurance with respect
to its properties and business against such casualties and contingencies as are
in accordance with sound business practices.
8.24. FULL DISCLOSURE. The financial statements referred to in
[Section]8.4.1, the warranties and representations and factual disclosures made
by the Guarantor and the Borrower in this Credit Agreement and the other Loan
Documents, and all documents or statements filed with the Securities and
Exchange Commission since the Balance Sheet Date set forth on SCHEDULE 8.24
hereto do not, taken as a whole, contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained therein and
herein not materially misleading.
9. AFFIRMATIVE COVENANTS OF THE BORROWER AND THE GUARANTOR.
-------------------------------------------------------
Each of the Guarantor and the Borrower covenants and agrees that, so long
as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Bank has any obligation to make any Loans or the Agent has
any obligation to issue, extend or renew any Letters of Credit:
9.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or cause
to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the commitment fees and all other
amounts provided for in this Credit Agreement and the other Loan Documents to
which the Guarantor, the Borrower or any of their Subsidiaries is a party, all
in accordance with the terms of this Credit Agreement and such other Loan
Documents.
9.2. MAINTENANCE OF OFFICE. Each of the Guarantor and the Borrower will
maintain its chief executive office at 40 Walnut Street, Wellesley,
Massachusetts, or at such other place in the United States of America as the
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Guarantor or the Borrower, as the case may be, shall designate upon written
notice to the Agent, where notices, presentations and demands to or upon the
Guarantor or the Borrower in respect of the Loan Documents to which the
Guarantor or the Borrower is a party may be given or made.
9.3. RECORDS AND ACCOUNTS. Each of the Guarantor and the Borrower will (a)
keep, and cause each of its Subsidiaries to keep, true and accurate records and
books of account in which full, true and correct entries will be made in
accordance with generally accepted accounting principles and (b) maintain
adequate accounts and reserves for all taxes (including income taxes),
depreciation, depletion, obsolescence and amortization of its properties and the
properties of its Subsidiaries, contingencies, and other reserves.
9.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Guarantor and
the Borrower will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than ninety
(90) days after the end of each fiscal year of the Guarantor and the
Borrower, the consolidated balance sheet of the Guarantor and its
Subsidiaries as at the end of such year, and the related consolidated
statement of income and consolidated statement of cash flow for such year,
setting forth in comparative form the figures for the previous fiscal year,
and all such consolidated statements to be in reasonable detail, prepared
in accordance with generally accepted accounting principles, and certified
without qualification by Coopers & Lybrand LLP or by other independent
certified public accountants reasonably satisfactory to the Agent, together
with a written statement from such accountants to the effect that they have
read a copy of this Credit Agreement, and that, in making the examination
necessary to said certification, they have obtained no knowledge of any
Default or Event of Default, or, if such accountants shall have obtained
knowledge of any then existing Default or Event of Default they shall
disclose in such statement any such Default or Event of Default; PROVIDED
that such accountants shall not be liable to the Banks for failure to
obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than forty-five
(45) days after the end of each of the first three fiscal quarters of the
Guarantor and the Borrower in any fiscal year of the Guarantor and the
Borrower, copies of the unaudited consolidated balance sheet of the
Guarantor and its Subsidiaries as at the end of such quarter, and the
related consolidated statement of income and consolidated statement of cash
flow for the portion of the Guarantor's fiscal year then elapsed, all in
reasonable detail and prepared in accordance with generally accepted
accounting principles, together with a certification by the principal
financial or accounting officer of the Borrower that the information
contained in such financial statements fairly presents the financial
position of the Guarantor and its Subsidiaries on the date thereof (subject
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to year-end adjustments), which statements shall set forth in comparative
form the figures from the projections for such quarter most recently
delivered to the Banks;
(c) as soon as practicable, but in any event within thirty (30) days
after the end of each fiscal month, in each fiscal year of the Borrower,
unaudited monthly consolidated financial statements of the Guarantor and
its Subsidiaries for such fiscal month, as well as a report of sales at
each Store for such fiscal month, compared to sales at such Store for the
same fiscal month of the previous fiscal year prepared in accordance with
generally accepted accounting principles, together with a certification by
the principal financial or accounting officer of the Borrower that the
information contained in such financial statements fairly presents the
financial condition of the Guarantor and its Subsidiaries on the date
thereof (subject to year-end adjustments), which statements shall set forth
in comparative form the figures from the projections, if any, for such
fiscal month most recently delivered to the Banks;
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
principal financial or accounting officer of the Borrower in substantially
the form of EXHIBIT E (a "Compliance Certificate") hereto and setting forth
in reasonable detail computations evidencing compliance with the covenants
contained in [Section]11 and (if applicable) reconciliations to reflect
changes in generally accepted accounting principles since the Balance Sheet
Date;
(e) within two (2) Business Days of the filing or mailing thereof,
copies of all material of a financial nature filed with the Securities and
Exchange Commission or sent to the stockholders of the Borrower or the
Guarantor;
(f) within fifteen (15) days after the end of each fiscal month or at
such other time as the Agent may reasonably request after reasonable
notice, a Borrowing Base Report setting forth the Borrowing Base as at end
of such fiscal month or other date so requested by the Agent; PROVIDED that
during the fiscal months of November through January, inclusive, the
Borrower will deliver to the Banks within five (5) days after the end of
each calendar week, a weekly update of the most recently delivered
Borrowing Base Report with respect to Eligible Accounts Receivable; and
PROVIDED FURTHER that in any fiscal month the Borrower may, at its option,
deliver a Borrowing Base Report with respect to both Eligible Inventory and
Eligible Accounts Receivable on a weekly basis so long as during such
fiscal month in which the Borrower has delivered a weekly Borrowing Base
Report, the Borrower continues to deliver a weekly Borrowing Base Report
for the remainder of such fiscal month;
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(g) from time to time upon the reasonable request of the Agent,
projections of the Guarantor, the Borrower and their Subsidiaries updating
those projections delivered to the Banks and referred to in [Section]9.4.2
or, if applicable, updating any later such projections delivered in
response to a request pursuant to this [Section]9.4(g);
(h) by not later than the last Business Day of the Borrower's fiscal
year, the Borrower's business plan for the next fiscal year;
(i) as soon as practicable, but in any event not later than ninety
(90) days after the end of each fiscal year of the Guarantor and the
Borrower, the consolidated balance sheet of the Guarantor and its
Subsidiaries as at the end of such year, and the related consolidated
statement of income and consolidated statement of cash flow for such year,
setting forth in comparative form the figures from the projections for such
fiscal year most recently delivered to the Banks;
(j) prior to the opening by the Borrower of any new Store or warehouse
facility at which Eligible Inventory is to be located, a supplement to
SCHEDULE 2 hereto, listing any additions or deletions to the list of Stores
and warehouse facilities of the Borrower located in the United States,
which supplement, together with SCHEDULE 2 hereto and any prior
supplements, shall be deemed to constitute SCHEDULE 2 for all purposes of
this Credit Agreement; and
(k) from time to time such other financial data and information
(including accountants' management letters) as the Agent or any Bank may
reasonably request.
9.5. NOTICES.
9.5.1. DEFAULTS. The Guarantor and the Borrower will promptly notify
the Agent in writing of the occurrence of any Default (of which they have
actual knowledge) or Event of Default. If any Person shall give any notice
or take any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Credit Agreement or any other
note, evidence of indebtedness, indenture or other obligation to which or
with respect to which the Guarantor and the Borrower or any of their
Subsidiaries is a party or obligor, whether as principal, guarantor, surety
or otherwise, the Guarantor and the Borrower shall give prompt written
notice thereof to the Agent, describing the notice or action and the nature
of the claimed default.
9.5.2. ENVIRONMENTAL EVENTS. The Guarantor and the Borrower will
promptly give notice to the Agent (a) of any violation of any Environmental
Law that the Guarantor, the Borrower or any of their Subsidiaries reports
in writing or is reportable by such Person in writing (or for which any
written report supplemental to any oral report is made)
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to any federal, state or local environmental agency and (b) upon
becoming aware thereof, of any inquiry, proceeding, investigation, or
other action, including a notice from any agency of potential
environmental liability, of any federal, state or local environmental
agency or board, that has the potential to materially affect the
assets, liabilities, financial conditions or operations of the
Guarantor, the Borrower or any of their Subsidiaries, or the Agent's
mortgages, deeds of trust or security interests pursuant to the
Security Documents.
9.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Guarantor
and the Borrower will, promptly upon becoming aware thereof, notify the
Agent in writing of any setoff, claims (including, with respect to the
Real Estate, environmental claims), withholdings or other defenses in
an amount in excess of $100,000 to which any of the Collateral, or the
Agent's rights with respect to the Collateral, are subject.
9.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Guarantor and
the Borrower will, and will cause each of their Subsidiaries to, give
notice to the Agent in writing within fifteen (15) days of becoming
aware of any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting the Guarantor, the
Borrower or any of their Subsidiaries or to which the Guarantor, the
Borrower or any of their Subsidiaries is or becomes a party involving
an uninsured claim against the Guarantor, the Borrower or any of their
Subsidiaries that could reasonably be expected to have a materially
adverse effect on the Guarantor, the Borrower or any of their
Subsidiaries and stating the nature and status of such litigation or
proceedings. The Guarantor and the Borrower will, and will cause each
of their Subsidiaries to, give notice to the Agent, in writing, in form
and detail satisfactory to the Agent, within ten (10) days of any
judgment not covered by insurance, final or otherwise, against the
Guarantor and the Borrower or any of their Subsidiaries in an amount in
excess of $1,000,000.
9.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. Each of the
Guarantor and the Borrower will do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence,
rights and franchises and those of its Subsidiaries, except as otherwise
permitted by [Section]10.5.1 hereof, and will not, and will not cause or
permit any of its Subsidiaries to, convert to a limited liability company.
Each (a) will cause all of its properties and those of its Subsidiaries
used or useful in the conduct of its business or the business of its
Subsidiaries to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment, (b) will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Guarantor or the
Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and
(c) will, and will cause each of its Subsidiaries to, continue to engage
primarily in the businesses now conducted by them and in related
businesses; PROVIDED that
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nothing in this [Section]9.6 shall prevent the Guarantor or the Borrower
from discontinuing the operation and maintenance of any of its properties
or any of those of its Subsidiaries (other than discontinuing the
operations of the Borrower) if such discontinuance is, in the judgment of
the Guarantor or the Borrower, as the case may be, desirable in the conduct
of its or their business and that do not in the aggregate materially
adversely affect the business of the Guarantor, the Borrower and their
Subsidiaries on a consolidated basis.
9.7. INSURANCE.
9.7.1. GENERAL COVERAGE. Each of the Guarantor and the
Borrower will, and will cause each of its Subsidiaries to, maintain
with financially sound and reputable insurers insurance with respect to
its properties and business against such casualties and contingencies
as shall be in accordance with the general practices of businesses
engaged in similar activities in similar geographic areas and in
amounts, containing such terms, in such forms and for such periods as
may be reasonable and prudent and in accordance with the terms of the
Security Agreements. The Borrower will maintain insurance on the
Mortgaged Properties in accordance with the terms of the Mortgages. The
Agent shall be named as loss payee and additional insured on all such
insurance policies.
9.7.2. BUSINESS INTERRUPTION INSURANCE. Without limiting the
generality of the foregoing, each of the Guarantor and the Borrower
will, and will cause each of their Subsidiaries to, maintain, with
financially sound and reputable insurers business interruption
insurance with respect to their business and each Store, including,
without limitation, any Store located in Boston, Massachusetts, against
such casualties and contingencies as shall be in accordance with the
general practices of businesses engaged in similar activities in
similar geographic areas and in amounts containing such terms, in such
forms and for such periods as may be reasonable and prudent.
9.8. TAXES. Each of the Guarantor and the Borrower will, and will cause
each of its Subsidiaries to, duly pay and discharge, or cause to be paid
and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges imposed upon it and its real
properties, sales and activities, or any part thereof, or upon the income
or profits therefrom, as well as all claims for labor, materials, or
supplies that if unpaid might by law become a lien or charge upon any of
its property; PROVIDED that any such tax, assessment, charge, levy or claim
need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings and if the Guarantor,
the Borrower or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto; and PROVIDED FURTHER that the Guarantor, the
Borrower and each of their Subsidiaries will pay all such taxes,
assessments, charges, levies or claims forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security
therefor.
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9.9. INSPECTION OF PROPERTIES .AND BOOKS, ETC.
-----------------------------------------
9.9.1. GENERAL. No more frequently than thrice each calendar
year, or more frequently as reasonably determined by the Agent if an
Event of Default shall have occurred and be continuing, each of the
Guarantor and the Borrower shall permit the Banks, through the Agent
or any of the Banks' other designated representatives, if accompanied
by the Agent, to visit and inspect any of the properties of the
Guarantor, the Borrower or any of their Subsidiaries, to examine the
books of account of the Guarantor, the Borrower and their Subsidiaries
(and to make copies thereof and extracts therefrom), and to discuss
the affairs, finances, Collateral and accounts of the Guarantor, the
Borrower and their Subsidiaries with, and to be advised as to the same
by, its and their officers, all at such reasonable times and intervals
as the Agent may reasonably request, and, prior to the occurrence of a
Default or Event of Default, upon reasonable advance notice to the
Guarantor, the Borrower or such Subsidiary. All reasonable expenses
incurred by the Agent with respect to any such inspection shall be
promptly reimbursed by the Borrower; PROVIDED, HOWEVER for
examinations done prior to the occurrence of any Event of Default, the
Borrower shall be responsible for expenses for only two examinations
per calendar year and such expenses for which the Borrower shall be
responsible shall not exceed $5,000 for each such examination.
9.9.2. APPRAISALS. If an Event of Default shall have occurred
and be continuing, upon the request of the Agent, the Guarantors and
the Borrower will obtain and deliver to the Agent appraisal reports in
form and substance and from appraisers satisfactory to the Agent,
stating (a) the then current fair market, orderly liquidation and
forced liquidation values of all or any portion of the inventory,
equipment, real estate or other assets owned by the Guarantor, the
Borrower or any of their Subsidiaries and (b) the then current
business value of each of the Guarantor, the Borrower and their
Subsidiaries. All such appraisals shall be conducted and made at the
expense of the Borrower.
9.9.3. ENVIRONMENTAL ASSESSMENTS. If an Event of Default
shall have occurred and be continuing, the Agent may, from time to
time, in its discretion for the purpose of assessing and ensuring the
value of any Mortgaged Property, obtain one or more environmental
assessments or audits of such Mortgaged Property prepared by a
hydrogeologist, an independent engineer or other qualified consultant
or expert approved by the Agent to evaluate or confirm (a) whether any
Hazardous Materials are present in the soil or water at such Mortgaged
Property and (b) whether the use and operation of such Mortgaged
Property complies with all Environmental Laws; PROVIDED, HOWEVER, the
Agent shall only be permitted to obtain such assessments for Leased
Real Estate to the extent the conduct of such assessments does not
violate the terms of any lease agreement. Environmental assessments
may include without
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limitation detailed visual inspections of such Mortgaged Property
including any and all storage areas, storage tanks, drains, dry wells
and leaching areas, and the taking of soil samples, surface water
samples and ground water samples, as well as such other investigations
or analyses as the Agent deems appropriate. All such environmental
assessments shall be conducted and made at the expense of the
Borrower.
9.9.4. COMMUNICATIONS WITH ACCOUNTANTS. Each of the Guarantor
and the Borrower authorizes the Agent, after consultation with the
Guarantor and the Borrower, and, if accompanied by the Agent, the Banks
to communicate directly with the Guarantor's and the Borrower's
independent certified public accountants and authorizes such
accountants to disclose to the Agent and the Banks any and all
financial statements and other supporting financial documents and
schedules including copies of any management letter with respect to the
business, financial condition and other affairs of the Guarantor, the
Borrower or any of their Subsidiaries. At the request of the Agent, the
Guarantor or the Borrower, as the case may be, shall deliver a letter
addressed to such accountants instructing them to comply with the
provisions of this [Section]9.9.4.
9.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. Each of
the Guarantor and the Borrower will, and will cause each of its
Subsidiaries to, comply with (a) the applicable laws and regulations
wherever its business is conducted, including all Environmental Laws,
within five (5) days following the Guarantor's, the Borrower's or such
Subsidiary's becoming aware thereof, except where the failure to do so
would not have a materially adverse effect on the financial condition,
properties or business of the Guarantor, the Borrower or any of their
Subsidiaries, (b) the provisions of its charter documents and by-laws, (c)
all agreements and instruments by which it or any of its properties may be
bound and (d) all applicable final and non-appealable decrees, orders, and
judgments. If any authorization, consent, approval, permit or license from
any officer, agency or instrumentality of any government shall become
necessary or required in order that the Guarantor, the Borrower or any of
their Subsidiaries may fulfill any of its obligations hereunder or any of
the other Loan Documents to which the Guarantor, the Borrower or such
Subsidiary is a party, the Guarantor or the Borrower will, or (as the ease
may be) will cause such Subsidiary to, immediately take or cause to be
taken all reasonable steps within the power of the Guarantor, the Borrower
or such Subsidiary to obtain such authorization, consent, approval, permit
or license and furnish the Agent and the Banks with evidence thereof.
9.11. EMPLOYEE BENEFIT PLANS. The Borrower will (a) promptly upon
filing the same with the Department of Labor or Internal Revenue Service
upon request of the Agent, furnish to the Agent a copy of the most recent
actuarial statement required to be submitted under [Section] 103(d) of
ERISA and Annual Report, Form 5500, with all required attachments, in
respect of each Guaranteed Pension Plan and (b) promptly upon receipt or
dispatch, furnish to the Agent any notice, report or demand sent or
received in respect of a Guaranteed
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Pension Plan under [Sections]302, 4041, 4042, 4043, 4063, 4065, 4066
and 4068 of ERISA, or in respect of a Multiemployer Plan, under
[Sections]4041A, 4202, 4219, 4242, or 4245 of ERISA.
9.12. USE OF PROCEEDS. The Borrower will use the proceeds of the
Revolving Credit Loans solely to refinance in their entirety all
"Obligations" as defined in the Existing Credit Agreement and for working
capital and general corporate purposes. The Borrower will obtain Letters of
Credit solely for working capital and general corporate purposes.
9.13. ADDITIONAL MORTGAGED PROPERTY. If, after the Closing Date, the
Guarantor, the Borrower or any of their Subsidiaries acquires or leases for
a term in excess of five (5) years real estate used as a manufacturing or
warehouse facility or Store, the Guarantor or the Borrower, as the case may
be, shall, or shall cause such Subsidiary to, forthwith deliver to the
Agent a fully executed mortgage or deed of trust over such real estate
(except to the extent such mortgage would violate the terms of any lease
agreement between the Guarantor, the Borrower or any of their Subsidiaries
as the lessee and an independent third party as the lessor as to any Leased
Real Estate), in form and substance satisfactory to the Agent (which form
shall be in substantially the same form as the existing Mortgages),
together with title insurance policies for Owned Real Estate, surveys for
Owned Real Estate, evidences of insurances with the Agent named as loss
payee and additional insured, legal opinions and other documents and
certificates with respect to such real estate as required by the Agent.
Each of the Guarantor and the Borrower further agrees that, following the
taking of such actions with respect to such real estate, the Agent shall
have for the benefit of the Banks and the Agent a valid and enforceable
first priority mortgage or deed of trust over such real estate, free and
clear of all defects and encumbrances except for Permitted Liens.
9.14. BANK ACCOUNTS. Each of the Guarantor and the Borrower will, and
will cause each of its Subsidiaries to, together with the employees, agents
and other Persons acting on behalf of the Guarantor and the Borrower or
such Subsidiary, receive and hold in trust for the Agent and the Banks all
payments constituting proceeds of the Collateral which come into their
possession or under their control and, immediately upon receipt thereof,
deposit such payments in the form received, with any appropriate
endorsements, into any Agency Account or the Blocked Account and will
otherwise comply with the requirements of [Section]3.2.2 hereof.
9.15. AGENCY ACCOUNT AGREEMENTS. As soon as practicable, but in any
event not later than forty-five (45) days after the Closing Date, the
Borrower shall use its best efforts to have delivered to the Agent those
Agency Account Agreements from each Agency Account Institution set forth on
SCHEDULE 9.15 hereto concerning the Agent's interest for the benefit of the
Banks and the Agent in such accounts.
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9.16. INVENTORY RESTRICTIONS. The Borrower shall cause all Eligible
Inventory to be located at all times solely at Permitted Inventory
Locations, and to be sold or otherwise disposed of in the ordinary course
of such Borrower's business, consistent with past practices, in connection
with the closing of any Store or as otherwise permitted in [Section]10.5.2.
Prior to the opening by the Borrower of any new Store or warehouse facility
at which Eligible Inventory is to be located, the Borrower shall take all
actions necessary or advisable as requested by the Agent under applicable
law, to establish and perfect the Agent's security interest in the
Collateral located or to be located at such Store or warehouse facility.
9.17. LANDLORD WAIVERS. The Borrower will use its reasonable best
efforts, including making written requests and follow-up telephone calls,
to obtain Landlord Waivers from the applicable landlord for each lease by
the Borrower as lessee of Real Estate at which Eligible Inventory is held
and as to which the Agent has not received evidence, in form and substance
satisfactory to the Agent that based upon then existing law (as determined
by the Agent in the exercise of its reasonable discretion and on the advice
of counsel), the landlord of such property would not have a lien on
inventory superior to the security interest granted under the Security
Documents, securing rent obligations more than thirty (30) days past due or
securing future rent obligations accruing after the Closing Date. The
Borrower will use its best efforts in negotiating any new lease or renewal
or extension entered into after the Closing Date to obtain Landlord Waivers
from the applicable landlord.
9.18. FURTHER ASSURANCES. Each of the Guarantor and the Borrower will,
and will cause each of its Subsidiaries to, cooperate with the Banks and
the Agent and execute such further instruments and documents as the Banks
or the Agent shall reasonably request to carry out to their satisfaction
the transactions contemplated by this Credit Agreement and the other Loan
Documents.
10. CERTAIN NEGATIVE COVENANTS OF THE BORROWER AND THE GUARANTOR.
-------------------------------------------------------------
Each of the Guarantor and the Borrower covenants and agrees that, so
long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note
is outstanding or any Bank has any obligation to make any Loans or the
Agent has any obligations to issue, extend or renew any Letters of Credit:
10.1. RESTRICTIONS ON INDEBTEDNESS. The Guarantor and the Borrower
will not, and will not permit any of their Subsidiaries to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under any
of the Loan Documents;
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(b) current liabilities of the Guarantor, the Borrower or such
Subsidiary incurred in the ordinary course of business not incurred
through (i) the borrowing of money, or (ii) the obtaining of credit
except for credit on an open account basis customarily extended and in
fact extended in connection with normal purchases of goods and
services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges (including any taxes, assessments, governmental
charges or levies arising or resulting from the audits being conducted
as of the Closing Date by state revenue authorities and described on
SCHEDULE 10.1 hereto) or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of [Section]9.8;
(d) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which
the Guarantor, the Borrower or such Subsidiary shall at the time in
good faith be prosecuting an appeal or proceedings for review and in
respect of which a stay of execution shall have been obtained pending
such appeal or review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(f) obligations under Capitalized Leases not exceeding, in the
aggregate, $10,000,000 MINUS the amount of obligations under
Capitalized Leases set forth on SCHEDULE 10.1 hereto at any time
outstanding;
(g) Indebtedness incurred in connection with the acquisition
after the date hereof of any real or personal property by the
Guarantor, the Borrower or such Subsidiary, PROVIDED that the aggregate
principal amount of such Indebtedness of the Guarantor, the Borrower
and their Subsidiaries shall not exceed the aggregate amount of
$4,000,000 at any one time;
(h) Indebtedness existing on the date hereof and listed and
described on SCHEDULE 10.1 hereto, including, but not limited to
obligations under Capitalized Leases listed and described thereon;
(i) Indebtedness, in an aggregate outstanding amount not to
exceed $1,000,000 at any time, to any federal or state chartered bank
which is an Agency Account Institution (other than any of the Banks) in
respect of overdrafts on demand deposit accounts maintained with such
bank;
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(j) Indebtedness in respect of reserves established on the
books and records of the Guarantor and the Borrower in accordance with
generally accepted accounting principles with respect to unresolved
litigation;
(k) Indebtedness consisting of guaranties by the Guarantor or
the Borrower of obligations or liabilities of employees of either of
the Guarantor or the Borrower, to the extent that payment under such
guaranties is permitted by [Section] 10.3(f) hereof;
(1) Indebtedness of the Borrower to the Guarantor, or the
Guarantor to the Borrower;
(m) Indebtedness in respect of the Borrower's obligations to
fund the Supplemental Executive Retirement Plan not to exceed
$3,000,000 in the aggregate on any day prior to the payment in full of
all the Obligations;
(n) Indebtedness (including guaranties of the Borrower) in
respect of the Monogram Agreement; and
(o) Indebtedness of the Borrower or the Guarantor (including
guaranties by the Borrower or the Guarantor) in respect of the
obligations of any Person, the business of which Person is of strategic
importance in the business plan of the Borrower previously delivered to
the Agent and the Banks, so long as the maximum contingent or actual
liability of the Borrower and the Guarantor in respect of all such
Indebtedness, together with the Investments described in
[Section]10.3(h), does not exceed $1,000,000 in the aggregate at any
one time.
10.2. RESTRICTIONS ON LIENS. Neither the Guarantor nor the Borrower
will, and neither will permit any of its Subsidiaries to, (i) create or
incur or suffer to be created or incurred or to exist any lien,
encumbrance, mortgage, pledge, charge, restriction or other security
interest of any kind upon any of its property or assets of any character
whether now owned or hereafter acquired, or upon the income or profits
therefrom; (ii) transfer any of such property or assets or the income or
profits therefrom for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment
of its general creditors; (iii) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement; (iv)
suffer to exist for a period of more than sixty (60) days after the same
shall have been due any Indebtedness or claim or demand against it that if
unpaid might by law or upon bankruptcy or insolvency, or otherwise, be
given any priority whatsoever over its general creditors; or (v) sell,
assign, pledge or otherwise transfer any accounts, contract rights, general
intangibles, chattel paper or instruments, with or without recourse;
PROVIDED that the Guarantor, the Borrower and any Subsidiary of the
Guarantor or the Borrower may create or incur or suffer to be
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created or incurred or to exist:
(a) liens in favor of the Guarantor or the Borrower on all or
part of the assets of Subsidiaries of the Guarantor or the Borrower
securing Indebtedness owing by Subsidiaries of the Guarantor or the
Borrower to the Guarantor or the Borrower;
(b) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties to
secure claims for labor, material or supplies in respect of obligations
not overdue or otherwise discharged or bonded over within sixty (60)
days following the imposition of such liens;
(c) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(d) liens on properties in respect of judgments or awards,
the Indebtedness with respect to which is permitted by
[Section]10.1(d);
(e) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties, in existence less than
120 days from the date of creation thereof in respect of obligations
not overdue or otherwise discharged or bonded over within sixty (60)
days following the imposition of such liens;
(f) encumbrances on Real Estate consisting of easements,
rights of way, zoning restrictions, restrictions on the use of real
property and defects and irregularities in the title thereto,
landlord's or lessor's liens under leases to which the Guarantor or the
Borrower or a Subsidiary of the Guarantor or the Borrower is a party,
and other minor liens or encumbrances none of which in the opinion of
the Guarantor or the Borrower interferes materially with the use of the
property affected in the ordinary conduct of the business of the
Guarantor, the Borrower and their Subsidiaries, which defects do not
individually or in the aggregate have a materially adverse effect on
the business of the Guarantor or the Borrower individually or of the
Guarantor, the Borrower and their Subsidiaries on a consolidated
basis;
(g) liens existing on the date hereof and listed on SCHEDULE
10.2 hereto;
(h) purchase money security interests in or purchase money
mortgages on real or personal property acquired after the date hereof
to secure purchase money Indebtedness of the type and amount permitted
by [Section]10.1(g), incurred in connection with the acquisition of
such property, which security interests or mortgages cover only the
real or personal property so acquired;
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(i) liens and encumbrances on each Mortgaged Property as and
to the extent permitted by the Mortgage applicable thereto;
(j) liens in favor of the Agent for the benefit of the Banks
and the Agent under the Loan Documents;
(k) liens (other than judgments and awards) created by or
resulting from any litigation or legal proceeding which is currently
being contested in good faith by appropriate proceedings and with
respect to which adequate reserves (in accordance with generally
accepted accounting principles) have been set aside for the payment
thereof on the books and records of the Guarantor and the Borrower,
unless proceedings to foreclose such liens have been commenced and have
not been withdrawn or bonded;
(1) security deposits and liens to secure obligations owed to
landlords or lessors under leases or other rental agreements made in
the ordinary course of business and confined to the premises or
property rented;
(m) security interests in documents presented, or in the
goods to which such documents relate, in connection with a Letter of
Credit permitted by [Section] 10.1(a);
(n) liens created by Capitalized Leases up to the amount
permitted by [Section] 10.1(f);
(o) liens in favor of Monogram Credit Card Bank of Georgia
created by the Monogram Agreement as an effect on the Closing Date;
and.
(p) liens arising from the consignment of goods (where the
Borrower is the consignee) consigned to the Borrower in the ordinary
course of business, consistent with past practices, PROVIDED the net
book value of such consigned goods does not exceed $8,000,000 at any
one time.
10.3. RESTRICTIONS ON INVESTMENTS. Neither the Guarantor nor the
Borrower will, and neither will permit any of its Subsidiaries to, make or
permit to exist or to remain outstanding any Investment except Investments
in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of
purchase by the Borrower or the Guarantor, so long as at the time of
the making of such Investment, there are no Revolving Credit Loans
outstanding except for Eurodollar Rate Loans that are cash
collateralized in accordance with the terms of the Cash Collateral
Agreement (which cash collateral may be invested in Permitted Cash
Collateral Investments);
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(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of the Banks that mature within thirty
(30) days from the date of purchase by the Guarantor, the Borrower or
such Subsidiary, so long as at the time of the making of such
Investment, there are no Revolving Credit Loans outstanding except for
Eurodollar Rate Loans that are cash collateralized in accordance with
the terms of the Cash Collateral Agreement (which cash collateral may
be invested in Permitted Cash Collateral Investments);
(c) securities commonly known as "commercial paper" issued by
the Banks or a corporation organized and existing under the laws of the
United States of America or any state thereof that at the time of
purchase have been rated and the ratings for which are not less than "P
1" if rated by Moody's Investors Services, Inc., and not less than "A
1" if rated by Standard and Poor's, so long as at the time of the
making of such Investment, there are no Revolving Credit Loans
outstanding except for Eurodollar Rate Loans that are cash
collateralized in accordance with the terms of the Cash Collateral
Agreement (which cash collateral may be invested in Permitted Cash
Collateral Investments);
(d) Investments existing on the date hereof and listed on
SCHEDULE 10.3 hereto;
(e) Investments consisting of the Guaranty or Investments by
the Guarantor or the Borrower in Subsidiaries of the Guarantor or the
Borrower or Investments by the Guarantor or the Borrower in each other
existing on the Closing Date;
(f) Investments consisting of loans and advances to employees
or guarantees of such loans and advances for moving, entertainment,
travel and other similar expenses in the ordinary course of business
not to exceed $500,000 in the aggregate at any time outstanding;
(g) Investments by the Borrower in a demand deposit located at
an Agency Account Institution, provided that the amount of such
Investments does not exceed, in the aggregate, that amount set forth
opposite such Agency Account Institution's name on SCHEDULE 3.2.2(a);
and
(h) other Investments of strategic importance to the business
plan of the Borrower previously delivered to the Agent and the Banks,
the amount of which, when combined with all outstanding obligations
permitted by [Section]10.1(o), shall not exceed $1,000,000 in the
aggregate at any one time;
PROVIDED, HOWEVER, that, with the exception of loans and advances referred
to in [Section]10.3(d) - (h), (a) such Investments will be considered
Investments permitted by this [Section]10.3 only if such Investments are
made through one of the Banks, and all
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actions have been taken to the satisfaction of the Agent to provide to the
Agent, for the benefit of the Banks and the Agent, a first priority
perfected security interest in all of such Investments free of all
encumbrances other than Permitted Liens, and (b) such Investments are
subject to the terms and conditions of the Cash Collateral Agreement.
10.4. DISTRIBUTIONS. Neither the Guarantor nor the Borrower will make
any Distributions.
10.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
10.5.1. MERGERS AND ACQUISITIONS. Neither the Guarantor nor
the Borrower will, and neither will permit any of its Subsidiaries to,
become a party to any merger or consolidation, or agree to or effect
any asset acquisition or stock acquisition (other than the acquisition
of assets in the ordinary course of business consistent with past
practices) except (a) the merger or consolidation of one or more of the
Subsidiaries of the Borrower with and into the Borrower, (b) the merger
or consolidation of two or more Subsidiaries of the Borrower, (c) the
merger of the Borrower with the Guarantor, (d) the Guarantor and/or the
Borrower shall be permitted to enter into an agreement to effect a
merger so long as (i) the Guarantor and/or the Borrower, as the case
may be, provide the Banks with written notice promptly after entering
into such merger agreement, which notice shall set forth the terms of
such agreement in reasonable detail; (ii) such merger agreement
provides for the indefeasible repayment in full, in cash, of all of the
Obligations and a termination of the Total Commitment immediately upon
the consummation of the contemplated merger; and (iii) the Guarantor or
the Borrower, as the case may be, shall incur no liability or expense
under the terms of the merger agreement, other than reasonable expenses
for professional fees related thereto or (e) subject to the other
requirements of this Credit Agreement, the acquisition of new Stores by
the Borrower PROVIDED that (i) the Borrower acquires no more than five
new Stores per fiscal year and (ii) in the case of a stock acquisition,
the acquired Person is immediately merged with and into the Borrower
with the Borrower being the surviving entity.
10.5.2. DISPOSITION OF ASSETS. Subject at all times to the
requirements of [Section]3.2.2, the Borrower and the Guarantor will
not, and will not permit any of its Subsidiaries to, become a party to
or agree to or effect any disposition of assets, other than (a) the
disposition of assets in the ordinary course of business, consistent
with past practices, (b) the sale or other disposition of furnishings,
fixtures and equipment which have become worn out, obsolete or no
longer used or useful in the ordinary course of business, (c) the
disposition of assets of any Store, including but not limited to
leasehold rights , fixtures and inventory, in connection with the
closing of such Store, (d) the disposition of the Borrower's Somerville
Distribution Center for a commercially reasonable
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price with gross proceeds of not less than $6,000,000 and provided that
the Net Proceeds of such disposition are applied to reduce (i) the Term
Loan in accordance with [Section]4.3.2, or (ii) in the event no Term
Loan is outstanding, the Revolving Credit Loans (first, to the payment
of those Revolving Credit Loans that are Base Rate Loans and second, to
the payment or, at the Borrower's option, cash collateralization in
accordance with the terms of the Cash Collateral Agreement (which cash
collateral may be invested in Permitted Cash Collateral Investments),
of those Revolving Credit Loans that are Eurodollar Rate Loans); (e)
any sale or other disposition described on SCHEDULE 10.5.2 hereof; (f)
the licensing in the ordinary course of business of intangible assets,
including trade names, trademarks, service marks and copyrights, of the
Borrower, provided that such licenses do not individually or in the
aggregate materially impair the usefulness and value of any of such
intangible asset(s) used or to be used in the business or operations of
the Borrower as now conducted or as proposed to be conducted; and (g)
the disposition of assets constituting inventory in connection with the
discontinuation or partial discontinuation of a product line, provided
such inventory is disposed of in the ordinary course of the Borrower's
business operations. In the event of a disposition of the Somerville
Distribution Center or inventory or other assets other than in the
ordinary course of business, consistent with past practices, which
disposition is permitted by this [Section]10.5.2, the Agent shall
release its security interest and liens on, as the case may be, such
permitted disposed assets, including without limitation, the Mortgage
on the Somerville Distribution Center, upon receipt and use by the
Agent of the Net Proceeds from such disposition to prepay the Loans in
accordance with the provisions of (x) [Section]3.2.2, or (y) in the
case of the disposition of the Somerville Distribution Center,
[Section]10.5.2(d).
10.6. SALE AND LEASEBACK. Neither the Guarantor nor the Borrower will,
and will not permit any of its Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby the Guarantor, the Borrower or any
Subsidiary of the Guarantor or the Borrower shall sell or transfer any
property owned by it in order then or thereafter to lease such property or
lease other property that the Guarantor or the Borrower or any Subsidiary of
the Guarantor or the Borrower intends to use for substantially the same
purpose as the property being sold or transferred; PROVIDED, HOWEVER, that
at any time after January 1, 1997, the Borrower may enter into a sale and
leaseback transaction with respect to the Somerville Distribution Center in
the event that (a) the sales price for such property is commercially
reasonable and for gross proceeds of not less than $6,000,000, (b) the
rental obligations of the Borrower under such lease shall be commercially
reasonable, and (c) the Net Proceeds of such sale and leaseback transaction
are applied to reduce (i) the Term Loan in accordance with [Section]4.3.2,
or (ii) in the event no Term Loan is outstanding, the Revolving Credit Loans
(first, to the payment of those Revolving Credit Loans that are Base Rate
Loans and second, to the payment or, at the Borrower's option, cash
collateralization in
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accordance with the terms of the Cash Collateral Agreement (which cash
collateral may be invested in Permitted Cash Collateral Investments), of
those Revolving Credit Loans that are Eurodollar Rate Loans).
10.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. Neither the Guarantor nor the
Borrower will, and neither will permit any of its Subsidiaries to, in any
manner that would violate any Environmental Law or bring any of the Real
Estate in violation of any Environmental Law, which violation would have a
material adverse effect on the business, assets or financial condition of
the Guarantor, the Borrower or any of their Subsidiaries after taking into
consideration any applicable business interruption insurance, (a) use any of
the Real Estate or any portion thereof for the handling, processing, storage
or disposal of Hazardous Substances, (b) cause to be located on any of the
Real Estate any underground tank or other underground storage receptacle for
Hazardous Substances, (c) generate any Hazardous Substances on any of the
Real Estate, (d) conduct any activity at any Real Estate or use any Real
Estate in any manner so as to cause a release (i.e. releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping) or threatened release of Hazardous
Substances on, upon or into the Real Estate or (e) otherwise conduct any
activity at any Real Estate or use any Real Estate.
10.8. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
Affiliate will:
(a) engage in any "prohibited transaction" within the meaning
of [Section]406 of ERISA or [Section]4975 of the Code which could result
in a material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in
[Section]302 of ERISA, whether or not such deficiency is or may be
waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Borrower or any of its Subsidiaries pursuant to
[Section]302(f) or [Section]4068 of ERISA; or
(d) permit or take any action which would result in the
aggregate benefit liabilities (within the meaning of [Section]4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess of
benefit liabilities.
10.9. BANK ACCOUNTS. Neither the Guarantor nor the Borrower will, and
neither will permit any of its Subsidiaries to, (a) establish any bank
accounts other than those listed on SCHEDULE 8.20 without the Agent's
prior written
<PAGE> 72
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consent, which consent will not be unreasonably withheld, (b) violate
directly or indirectly any Agency Account Agreement or Blocked Account
Agreement in favor of the Agent for the benefit of the Banks and the Agent
with respect to such account, or (c) deposit into any of the payroll
accounts listed on SCHEDULE 8.20 any amounts in excess of amounts necessary
to pay current payroll obligations from such accounts.
10.10. AMENDMENTS TO MONOGRAM AGREEMENT. The Borrower shall not amend
the Monogram Agreement unless such amendment (a) does not provide for any
net increase of any costs or expenses to the Borrower; (b) will not cause a
material adverse effect on the Collateral; and (c) will not in any other
manner materially adversely effect the Agent or the Banks, or the Borrower's
ability to perform its obligations hereunder or under the other Loan
Documents.
10.11. TRANSACTIONS WITH AFFILIATES. Neither the Guarantor nor the
Borrower will, nor will they permit any of their Subsidiaries to, enter
into, or cause, suffer or permit to exist any transaction or agreement with
any Affiliate except:
(a) employment agreements entered into in the ordinary course
of business by the Guarantor, the Borrower or any of their Subsidiaries
and loans and advances to employees of the Guarantor, the Borrower or
any of their Subsidiaries in the ordinary course of business for travel
expenses, drawing accounts or other similar business related expenses;
(b) any transaction or agreement having terms not less
favorable to the Guarantor, the Borrower and their Subsidiaries than
would be the case if such transaction or agreement had been entered
into with a Person that is not an Affiliate, PROVIDED that the
aggregate potential value payable or receivable by the Guarantor, the
Borrower and their Subsidiaries in connection with all such
transactions during any fiscal year of the Borrower (excluding
transactions or agreements exclusively among or between the Guarantor,
the Borrower and their Subsidiaries) shall not exceed $500,000; and
(c) as set forth on SCHEDULE 8.15.
10.12. AMENDMENT TO NORTH MICHIGAN AVENUE NOTE. The Borrower shall not
amend the North Michigan Avenue Note without the prior written consent of
the Agent unless such amendment (a) does not reduce the principal amount of
the North Michigan Avenue Note and (b) does not extend the maturity of the
North Michigan Avenue Note beyond June 30, 1997. The Borrower shall be
permitted to amend the promissory note, dated November 19, 1993, from
LaSalle National Trust, N.A., as Trustee of Trust No. 118065 and as Trustee
of Trust No. 118066 to the Borrower, in the original principal amount of
$1,483,000, and the other agreements described on SCHEDULE 10.5.2.
<PAGE> 73
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11. FINANCIAL COVENANTS OF THE BORROWER AND THE GUARANTOR.
------------------------------------------------------
Each of the Guarantor and the Borrower covenants and agrees that, so
long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note
is outstanding or any Bank has any obligation to make any Loans or the Agent
has any obligation to issue, extend or renew any Letters of Credit:
<TABLE>
11.1. MINIMUM EBITDA. The Guarantor and the Borrower will not, as of
the end of any period described in the table set forth below, permit EBITDA
for such period, to be less than the amount set forth opposite such period
in such table:
<CAPTION>
Period Amount
------ ------
<S> <C>
Two consecutive fiscal quarters ending in $ 6,000,000
August 1996
Three consecutive fiscal quarters $12,000,000
ending in November 1996
Four consecutive fiscal quarters ending $15,000,000
in each of February 1997, May 1997
and August 1997
Four consecutive fiscal quarters ending $14,750,000
in November 1997
Four consecutive fiscal quarters ending $14,500,000
in January 1998
Four consecutive fiscal quarters ending $15,000,000
in May 1998 and thereafter
</TABLE>
<TABLE>
11.2. MINIMUM OPERATING CASH FLOW TO INTEREST RATIO. The Guarantor and
the Borrower will not permit the ratio of Consolidated Operating Cash Flow
to Consolidated Total Interest Expense for any period of four consecutive
fiscal quarters ending during the month set forth in the table below to be
less than the amount set forth opposite such month:
<CAPTION>
Period Ending Ratio
------------- -----
<S> <C>
February 1997 1.10:1.00
May 1997 1.20:1.00
August 1997 1.20:1.00
November 1997 1.20:1.00
January 1998 1.40:1.00
May 1998 and thereafter 1.50:1.00
</TABLE>
12. CLOSING CONDITIONS.
-------------------
The obligations of the Banks to make the Term Loan and the initial
<PAGE> 74
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Revolving Credit Loans and of the Agent to issue any initial Letters of
Credit shall be subject to the satisfaction of the following conditions
precedent:
12.1. LOAN DOCUMENTS, ETC. Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto, shall be in
full force and effect and shall be in form and substance satisfactory to
each of the Banks. Each Bank shall have received a fully executed copy of
each such document.
12.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Banks shall
have received from the Guarantor and the Borrower a copy, certified by a
duly authorized officer of such Person to be true and complete on the
Closing Date, of each of (a) its charter or other incorporation documents as
in effect on such date of certification, and (b) its by-laws as in effect on
such date.
12.3. CORPORATE, ACTION. All corporate action necessary for the valid
execution, delivery and performance by the Guarantor and the Borrower of
this Credit Agreement and the other Loan Documents to which it is or is to
become a party shall have been duly and effectively taken, and evidence
thereof satisfactory to the Banks shall have been provided to each of the
Banks.
12.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received
from the Guarantor and the Borrower an incumbency certificate, dated as of
the Closing Date, signed by a duly authorized officer of the Guarantor and
the Borrower, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (a) to sign, in the name and on behalf
of each of the Guarantor and the Borrower, each of the Loan Documents which
the Guarantor or the Borrower is or is to become a party; (b) in the case of
the Borrower, to make Loan Requests and Conversion Requests and to apply for
Letters of Credit; and (c) to give notices and to take other action on its
behalf under the Loan Documents.
12.5. VALIDITY OF LIENS. The Security Documents shall be effective to
create in favor of the Agent for the benefit of the Agent and the Banks a
legal, valid and enforceable first (except for Permitted Liens entitled to
priority under applicable law) security interest in and lien upon the
Collateral. All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Agent to protect and
preserve such security interests shall have been duly effected. The Agent
shall have received evidence thereof in form and substance satisfactory to
the Agent.
12.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Agent shall
have received from each of the Guarantor and the Borrower a completed and
fully executed Perfection Certificate and the results of UCC searches with
respect to the Collateral, indicating no liens other than Permitted Liens
and otherwise in form and substance satisfactory to the Agent.
<PAGE> 75
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12.7. TITLE INSURANCE. The Agent shall have received a Title Policy
covering each Mortgaged Property which is Owned Real Estate (or commitments
to issue such policies, with all conditions to issuance of the Title Policy
deleted by an authorized agent of the Title Insurance Company) together with
proof of payment of all fees and premiums for such policies, from the Title
Insurance Company and in amounts satisfactory to the Agent, insuring the
interest of the Agent and each of the Banks as mortgagee under the
Mortgages.
12.8. CERTIFICATES OF INSURANCE. The Agent shall have received (a) a
certificate of insurance from an independent insurance broker dated as of
the Closing Date, identifying insurers, types of insurance, insurance
limits, and policy terms, and otherwise describing the insurance obtained in
accordance with the provisions of the Security Agreements and [Section]9.7
and (b) certified copies of all policies evidencing such insurance (or
certificates therefore signed by the insurer or an agent authorized to bind
the insurer).
12.9. AGENCY ACCOUNT AGREEMENTS. The Agent shall have received the
Agency Account Agreements from each Agency Account Institution (other than
those set forth on Schedule 9.15) concerning the Agent's interest for the
benefit of the Bank and the Agent in such accounts.
12.10. BORROWING BASE REPORT. The Agent shall have received from the
Borrower the initial Borrowing Base Report dated as of the Closing Date.
12.11. SOLVENCY CERTIFICATE. Each of the Banks shall have received an
officer's certificate of the Guarantor and the Borrower dated as of the
Closing Date as to the solvency of the Guarantor and the Borrower and their
Subsidiaries following the consummation of the transactions contemplated
herein and in form and substance reasonably satisfactory to the Agent.
12.12. OPINION OF COUNSEL. Each of the Banks and the Agent shall have
received a favorable legal opinion addressed to the Banks and the Agent,
dated as of the Closing Date, in form and substance satisfactory to the
Banks and the Agent, from:
(a) Wayne, Lazares & Chappell, counsel to the Guarantor and
the Borrower and its Subsidiaries; and
(b) Steven Siegel, Esq., in-house counsel to the Guarantor
and the Borrower.
12.13. PAYMENT OF FEES. The Borrower shall have paid to the Banks or
the Agent, as appropriate, the fees required pursuant to [Section]6.1, as
well as all reasonable fees and expenses of the Agent in excess of the
$100,000 deposit previously paid by the Borrower, including, without
limitation, the fees and expenses of the Agent's Special Counsel in an
aggregate amount not to exceed $50,000 in connection with the preparation of
the Loan Documents and the closing of this Credit Agreement and the costs
and expenses of appraisals,
<PAGE> 76
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commercial finance examinations and the Agent's out-of-pocket expenses.
12.14. TERMINATION OF EXISTING CREDIT AGREEMENT. The Existing Credit
Agreement shall have been terminated in its entirety as all "Obligations" as
defined therein shall have been paid in full.
13. CONDITIONS TO ALL BORROWINGS.
-----------------------------
The obligations of the Banks to make any Loan, including Revolving
Credit Loans and the Term Loan, and of the Agent to issue, extend or renew
any Letter of Credit, in each case whether on or after the Closing Date,
shall also be subject to the satisfaction of the following conditions
precedent:
13.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of any of the Guarantor, the Borrower and
their Subsidiaries contained in this Credit Agreement, the other Loan
Documents or in any document or instrument delivered pursuant to or in
connection with this Credit Agreement shall be true as of the date as of
which they were made and shall also be true at and as of the time of the
making of such Loan or the issuance, extension or renewal of such Letter of
Credit, with the same effect as if made at and as of that time (except to
the extent of changes resulting from transactions contemplated or permitted
by this Credit Agreement and the other Loan Documents and changes occurring
in the ordinary course of business that singly or in the aggregate are not
materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date) and no Default or Event of
Default shall have occurred and be continuing.
13.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable
opinion of any Bank in reliance on advice of counsel to such Bank would make
it illegal for such Bank to make such Loan or to participate in the
issuance, extension or renewal of such Letter of Credit or in the reasonable
opinion of the Agent in reliance on advice of counsel to the Agent would
make it illegal for the Agent to issue, extend or renew such Letter of
Credit.
13.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
statements in substance and form reasonably satisfactory to such Bank as
such Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of
the Federal Reserve System.
13.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with
the transactions contemplated by this Credit Agreement, the other Loan
Documents and all other documents incident thereto shall be reasonably
satisfactory in substance and in form to the Banks and to the Agent and the
Agent's Special Counsel, and the Banks, the Agent and such counsel shall
have received all information and such counterpart originals or certified or
other copies of such documents as they may reasonably request.
<PAGE> 77
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13.5. BORROWING BASE REPORT. The Agent shall have received the most
recent Borrowing Base Report required to be delivered to the Agent in
accordance with [Section]9.4(f).
14. EVENTS OF DEFAULT; ACCELERATION; ETC.
-------------------------------------
14.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time
or both is required, then, prior to such notice or lapse of time,
"Defaults") shall occur:
(a) the Borrower shall fail to pay (i) any principal of the
Loans or any Reimbursement Obligation when the same shall become due and
payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment or (ii) any interest
on the Loans within one (1) Business Day following the date when the
same shall become due and payable, whether at the stated date of
maturity or any accelerated date of maturity or at any other date fixed
for payment;
(b) the Borrower shall fail to pay the commitment fee, any
Letter of Credit Fee, or other sums due hereunder or under any of the
other Loan Documents, when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of
maturity or at any other date fixed for payment;
(c) the Guarantor or the Borrower shall fail to comply with
any of its covenants contained in [Section]9 (other than the covenants
contained in [Section]9.1 (which are governed by [Sections]14.1(a) and
(b)), 9.6(b) or 9.8 (only with respect to state and local taxes,
assessments, and other governmental charges)), 10 (other than the
covenants contained in [Section]10.8) or 11 or any of the covenants
contained in any of the Mortgages (after all applicable grace periods
contained therein have elapsed);
(d) the Guarantor or the Borrower or any of their Subsidiaries
shall fail to perform any term, covenant or agreement contained herein
or in any of the other Loan Documents (other than those specified
elsewhere in this [Section]14.1) for thirty (30) days after written
notice of such failure has been given to the Guarantor or the Borrower
by the Agent or any Bank; PROVIDED, HOWEVER, that in the event that any
such failure to perform any such term, covenant or agreement (other than
the covenants contained in [Section]9.8 (only with respect to state and
local taxes, assessments and other governmental charges) and
[Section]10.8) is capable of cure and so long as the Guarantor or the
Borrower, as the case may be, is using its best efforts to effect such
cure, the Guarantor or the Borrower, as the case may be, shall have
forty-five (45) days after the notice referred to above has been given
to cure such failure to perform; and PROVIDED, FURTHER, that with
respect to the covenants contained in [Section]9.6(b), in the event that
any such failure to perform such covenant is not susceptible to cure
within thirty (30) days and so long as the Guarantor or the Borrower, as
the case may be, is
<PAGE> 78
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using its best efforts to effect such cure, the Guarantor or the
Borrower, as the case may be, shall have such additional time as may be
necessary to cure such failure to perform;
(e) any representation or warranty of the Guarantor or the
Borrower or any of their Subsidiaries in this Credit Agreement or any of
the other Loan Documents or in any other document or instrument
delivered pursuant to or in connection with this Credit Agreement shall
prove to have been false or incorrect in any material respect upon the
date when made or deemed to have been made or repeated;
(f) the Guarantor or the Borrower or any of their
Subsidiaries shall fail to pay when due, or within any applicable
period of grace, any obligation for borrowed money or credit received
or in respect of any Capitalized Leases in excess of $250,000, or fail
to observe or perform any material term, covenant or agreement
contained in any agreement by which it is bound, evidencing or securing
borrowed money or credit received or in respect of any Capitalized
Leases in excess of $250,000 for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder or
holders thereof or of any obligations issued thereunder to accelerate
the maturity thereof;
(g) the Guarantor or the Borrower or any of their Subsidiaries
shall make an assignment for the benefit of creditors, or admit in
writing its inability to pay or generally fail to pay its debts as they
mature or become due, or shall petition or apply for the appointment of
a trustee or other custodian, liquidator or receiver of the Guarantor or
the Borrower or any of their Subsidiaries or of any substantial part of
the assets of the Guarantor or the Borrower or any of their Subsidiaries
or shall commence any case or other proceeding relating to the Guarantor
or the Borrower or any of their Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or
hereafter in effect, or shall take any action to authorize or in
furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall be
commenced against the Guarantor or the Borrower or any of their
Subsidiaries and the Guarantor or the Borrower or any of their
Subsidiaries shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not have been
dismissed within ninety (90) days following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Guarantor or the
Borrower or any of their Subsidiaries bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a decree
or order for relief is entered in respect of the Guarantor or the
Borrower or any Subsidiary in an involuntary case under federal
bankruptcy laws as now or hereafter constituted;
<PAGE> 79
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(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than sixty (60) days, whether or not consecutive, any
final judgment against the Guarantor or the Borrower or any of their
Subsidiaries that, with other outstanding final judgments, undischarged,
against the Guarantor or the Borrower or any of their Subsidiaries
exceeds in the aggregate $1,000,000 (net of insurance coverage to the
extent that the Guarantor or the Borrower has filed a claim under
applicable insurance policies and reasonably and in good faith believes
that the insurer is obligated under the terms of such policy to pay such
judgment) at any one time;
(j) if any of the Loan Documents shall be cancelled,
terminated, revoked or rescinded or the Agent's security interests,
mortgages or liens in a substantial portion of the Collateral shall
cease to be perfected, or shall cease to have the priority contemplated
by the Security Documents, in each case otherwise than in accordance
with the terms thereof or with the express prior written agreement,
consent or approval of the Banks, or any action at law, suit or in
equity or other legal proceeding to cancel, revoke or rescind any of the
Loan Documents shall be commenced by or on behalf of the Guarantor or
the Borrower or any of their Subsidiaries party thereto or any of their
respective stockholders (other than the Guarantor's stockholders), or
any court or any other governmental or regulatory authority or agency of
competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more
material provisions of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
(k) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Banks shall have
determined in their reasonable discretion that such event reasonably
could be expected to result in liability of the Borrower or any of its
Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate
amount exceeding $5,000,000 and such event in the circumstances
occurring reasonably could constitute grounds for the termination of
such Guaranteed Pension Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such
Guaranteed Pension Plan; or a trustee shall have been appointed by the
United States District Court to administer such Plan; or the PBGC shall
have instituted proceedings to terminate such Guaranteed Pension Plan;
(1) the Guarantor, the Borrower or any of their Subsidiaries
shall be enjoined, restrained or in any way prevented by the order of
any court or any administrative or regulatory agency from conducting any
material part of its business and such order shall continue in effect
for more than thirty (30) days (unless such incident is covered by
business interruption insurance and the Guarantor, the Borrower or such
Subsidiary has filed a claim under applicable insurance policies and
reasonably and in good
<PAGE> 80
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faith believes that the insurer is obligated under the terms of such
policy or policies to pay such claim);
(m) there shall occur any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any
strike, lockout, labor dispute, embargo, condemnation, act of God or
public enemy, or other casualty, which in any such case causes, for more
than thirty (30) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of the
Guarantor, the Borrower or any of their Subsidiaries, and such
occurrence has a material adverse effect on the business, financial
condition or assets of the Guarantor, the Borrower or any of their
Subsidiaries;
(n) there shall occur the loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter
acquired by the Guarantor, the Borrower or any of their Subsidiaries if
such loss, suspension, revocation or failure to renew would have a
material adverse effect on the business or financial condition of the
Guarantor, the Borrower or such Subsidiary;
(o) the Guarantor, the Borrower or any of their Subsidiaries
shall be indicted for a state or federal crime classified as a felony,
or any civil or criminal action shall otherwise have been brought
against the Guarantor, the Borrower or any of their Subsidiaries, a
punishment for which in any such case could include the forfeiture of
any assets of the Guarantor, the Borrower or such Subsidiary having a
fair market value in excess of $1,000,000; or
(p) (i) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of thirty percent (30%) or more of the outstanding shares of common
stock of the Guarantor, (ii) the Guarantor shall at any time legally or
beneficially own less than 100(degree)?o of the capital stock of the
Borrower or (iii) during any period of twelve (12) consecutive calendar
months, individuals who were directors of the Guarantor or the Borrower
on the first day of such period shall cease to constitute a majority of
the board of directors of the Guarantor or the Borrower, as the case may
be;
then, and in any such event, so long as the same may be continuing, the
Agent, upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing to the Banks with respect to this
Credit Agreement, the Notes and the other Loan Documents and all
Reimbursement Obligations to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the
Borrower; PROVIDED that in the event of any Event of Default specified in
[Sections]14.1(g) or 14.1(h), all such amounts
<PAGE> 81
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shall become immediately due and payable automatically and without any
requirement of notice from the Agent or any Bank.
14.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
Default specified in [Section]14.1(g) or [Section]14.1(h) shall occur, any
unused portion of the credit hereunder shall forthwith terminate and each of
the Banks shall be relieved of all further obligations to make Revolving
Credit Loans to the Borrower and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. If any other Event
of Default shall have occurred and be continuing, the Agent may and, upon
the request of the Majority Banks, shall, by notice to the Borrower,
terminate the unused portion of the credit hereunder, and upon such notice
being given such unused portion of the credit hereunder shall terminate
immediately and each of the Banks shall be relieved of all further
obligations to make Loans and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. No termination of
the credit hereunder shall relieve the Guarantor, Borrower or any of their
Subsidiaries of any of the Obligations.
14.3. REMEDIES. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Agent shall have
accelerated the maturity of the Loans pursuant to [Section]14.1, each Bank,
if owed any amount with respect to the Loans or the Reimbursement
Obligations, may, with the consent of the Majority Banks but not otherwise,
proceed to protect and enforce its rights by suit in equity, action at law
or other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Credit Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations to such Bank
are evidenced, including as permitted by applicable law the obtaining of the
EX PARTE appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or
any other legal or equitable right of such Bank. No remedy herein conferred
upon any Bank or the Agent or the holder of any Note or purchaser of any
Letter of Credit Participation is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or any other provision of law.
14.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following
the occurrence or during the continuance of any Event of Default, the Agent
or any Bank, as the case may be, applies any cash held pursuant to the Cash
Collateral Agreement or receives any monies in connection with the
enforcement of any of the Security Documents or otherwise with respect to
the realization upon any of the Collateral, or by voluntary payment, setoff
in accordance with [Section]15 hereof or otherwise, such monies shall be
distributed for application as follows (it being understood that any amounts
which are to be applied to the Revolving Credit Loans pursuant to this
[Section]14.4. shall, to the extent FNBB has advanced Revolving Credit Loans
to the Borrower pursuant to [Section]2.6.2 hereof for which a Settlement has
not occurred, first be paid to FNBB to be applied to any
<PAGE> 82
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Revolving Credit Loans made by FNBB to the Borrower pursuant to
[Section]2.6.2 hereof and in which a Settlement has not, at the time of such
repayment, been effected):
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses (to the extent such costs, expenses,
disbursements or losses are reimbursable expenses by the Borrower
pursuant to the terms of this Credit Agreement) which shall have been
incurred or sustained by the Agent in connection with the collection of
such monies by the Agent, for the exercise, protection or enforcement by
the Agent of all or any of the rights, remedies, powers and privileges
of the Agent on behalf of the Banks under this Credit Agreement or any
of the other Loan Documents or in respect of the Collateral or in
support of any provision of adequate indemnity to the Agent against any
taxes or liens which by law shall have, or may have, priority over the
rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or
preference as the Majority Banks may determine; PROVIDED, HOWEVER, that
distributions in respect of Obligations owing to the Banks with respect
to each type of Obligation such as interest, principal, fees and
expenses, shall be made among the Banks PRO RATA; and PROVIDED, FURTHER,
that the Agent may in its discretion make proper allowance to take into
account any Obligations not then due and payable, such amounts to be
cash collateralized in accordance with the Cash Collateral Agreement
(which cash collateral may be invested in Permitted Cash Collateral
Investments);
(c) Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the Banks and the Agent
of all of the Obligations, to the payment of any obligations required to
be paid pursuant to [Section]9-504(1)(c) of the Uniform Commercial Code
of the Commonwealth of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the
Borrower or to such other Persons as are entitled thereto.
15. SETOFF.
-------
Regardless of the adequacy of any Collateral, during the continuance of
any Event of Default, any deposits or other sums credited by or due from any
of the Banks to the Borrower and any securities or other property of the
Borrower in the possession of any Bank may be applied to or set off by any
Bank against the payment of Obligations and any and all other liabilities,
direct, or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, of the Borrower to any Bank. Each of the
Banks agrees with each other Bank that (a) if an amount to be set off is to
be applied to Indebtedness of the
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Borrower to any Bank, other than Indebtedness evidenced by the Notes held by
any Bank or constituting Reimbursement Obligations owed to any Bank, such
amount shall be applied ratably to such other Indebtedness and to the
Indebtedness evidenced by all such Notes held by any Bank or constituting
Reimbursement Obligations owed to any Bank, and (b) if any Bank shall
receive from the Borrower, whether by voluntary payment, exercise of the
right of setoff, counterclaim, cross action, enforcement of the claim
evidenced by the Notes held by, or constituting Reimbursement Obligations
owed to, any Bank by proceedings against the Borrower at law or in equity or
by proof thereof in bankruptcy, reorganization, liquidation, receivership or
similar proceedings, or otherwise, and shall retain and apply to the payment
of the Note or Notes held by such Bank, or Reimbursement Obligations owed
to, any Bank any amount in excess of its ratable portion of the payments
received by all of the Banks with respect to the Notes held by, and
Reimbursement Obligations owed to, all of the Banks, such Bank will make
such disposition and arrangements with the other Banks with respect to such
excess, either by way of distribution, PRO TANTO assignment of claims,
subrogation or otherwise as shall result in each Bank receiving in respect
of the Notes held by it or Reimbursement Obligations owed it, its
proportionate payment as contemplated by this Credit Agreement; PROVIDED
that if all or any part of such excess payment is thereafter recovered from
such Bank, such disposition and arrangements shall be rescinded and the
amount restored to the extent of such recovery, but without interest.
16. THE AGENT.
----------
16.1. AUTHORIZATION.
--------------
(a) The Agent is authorized to take such action on behalf of
each of the Banks and to exercise all such powers as are hereunder and
under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably
incident thereto, provided that no duties or responsibilities not
expressly assumed herein or therein shall be implied to have been
assumed by the Agent.
(b) The relationship between the Agent and each of the Banks
is that of an independent contractor. The use of the term "Agent" is
for convenience only and is used to describe, as a form of convention,
the independent contractual relationship between the Agent and each of
the Banks. Nothing contained in this Credit Agreement nor the other
Loan Documents shall be construed to create an agency, trust or other
fiduciary relationship between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to
exercise certain rights and perform certain duties and responsibilities
hereunder and under the other Loan Documents, the Agent is nevertheless
a "representative" of the Banks, as that term is defined in Article 1
of the Uniform Commercial Code, for purposes of actions for the benefit
of the Banks and the Agent with respect to all collateral security
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and guaranties contemplated by the Loan Documents. Such actions include
the designation of the Agent as "secured party", "mortgagee" or the
like on all financing statements and other documents and instruments,
whether recorded or otherwise, relating to the attachment, perfection,
priority or enforcement of any security interests, mortgages or deeds
of trust in collateral security intended to secure the payment or
performance of any of the Obligations, all for the benefit of the Banks
and the Agent.
16.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled
to take, and to rely on, advice of counsel concerning all matters pertaining
to its rights and duties under this Credit Agreement and the other Loan
Documents. The Agent may utilize the services of such Persons as the Agent
in its sole discretion may reasonably determine, and all reasonable fees and
expenses of any such Persons shall be paid by the Borrower.
16.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in
their duties nor any agent or employee thereof, shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be
taken, in good faith by it or them hereunder or under any of the other Loan
Documents, or in connection herewith or therewith, or be responsible for the
consequences of any oversight or error of judgment whatsoever, except that
the Agent or such other Person, as the case may be, may be liable for losses
due to its willful misconduct or gross negligence.
16.4. NO REPRESENTATIONS. The Agent shall not be responsible for the
execution or validity or enforceability of this Credit Agreement, the Notes,
the Letters of Credit, any of the other Loan Documents or any instrument at
any time constituting, or intended to constitute, collateral security for
the Notes, or for the value of any such collateral security or for the
validity, enforceability or collectibility of any such amounts owing with
respect to the Notes, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or instrument hereafter furnished to it by or on behalf of the
Guarantor, the Borrower or any of their Subsidiaries, or be bound to
ascertain or inquire as to the performance or observance of any of the
terms, conditions, covenants or agreements herein or in any instrument at
any time constituting, or intended to constitute, collateral security for
the Notes or to inspect any of the properties, books or records of the
Guarantor, the Borrower or any of their Subsidiaries. The Agent shall not be
bound to ascertain whether any notice, consent, waiver or request delivered
to it by the Guarantor, the Borrower or any holder of any of the Notes shall
have been duly authorized or is true, accurate and complete. The Agent has
not made nor does it now make any representations or warranties, express or
implied, nor does it assume any liability to the Banks with respect to the
credit worthiness or financial conditions of the Guarantor, the Borrower or
any of their Subsidiaries. Each Bank acknowledges that it has, independently
and without
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reliance upon the Agent or any other Bank, and based upon such information
and documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Credit Agreement.
16.5. PAYMENTS.
---------
16.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the
Agent hereunder or any of the other Loan Documents for the account of
any Bank shall constitute a payment to such Bank. The Agent agrees
promptly to distribute to each Bank such Bank's PRO RATA share of
payments received by the Agent for the account of the Banks except as
otherwise expressly provided herein or in any of the other Loan
Documents.
16.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent
the distribution of any amount received by it in such capacity
hereunder, under the Notes or under any of the other Loan Documents
might involve it in liability, it may refrain from making distribution
until its right to make distribution shall have been adjudicated by a
court of competent jurisdiction. If a court of competent jurisdiction
shall adjudge that any amount received and distributed by the Agent is
to be repaid, each Person to whom any such distribution shall have been
made shall either repay to the Agent its proportionate share of the
amount so adjudged to be repaid or shall pay over the same in such
manner and to such Persons as shall be determined by such court.
16.5.3. DELINQUENT BANKS. Notwithstanding anything to the
contrary contained in this Credit Agreement or any of the other Loan
Documents, any Bank that fails (a) to make available to the Agent its
PRO RATA share of any Loan or to purchase any Letter of Credit
Participation or (b) to comply with the provisions of [Section]15 with
respect to making dispositions and arrangements with the other Banks,
where such Bank's share of any payment received, whether by setoff or
otherwise, is in excess of its PRO RATA share of such payments due and
payable to all of the Banks, in each case as, when and to the full
extent required by the provisions of this Credit Agreement, shall be
deemed delinquent (a "Delinquent Bank") and shall be deemed a
Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments
due to it from the Borrower, whether on account of outstanding Loans,
Unpaid Reimbursement Obligations, interest, fees or otherwise, to the
remaining nondelinquent Banks for application to, and reduction of,
their respective PRO RATA shares of all outstanding Loans and Unpaid
Reimbursement Obligations. The Delinquent Bank hereby authorizes the
Agent to distribute such payments to the nondelinquent Banks in
proportion to their respective PRO RATA shares of all outstanding Loans
and Unpaid Reimbursement Obligations. A Delinquent Bank shall be deemed
to have satisfied in full a delinquency when and if, as a result of
application of
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the assigned payments to all outstanding Loans and Unpaid Reimbursement
Obligations of the nondelinquent Banks, the Banks' respective PRO RATA
shares of all outstanding Loans and Unpaid Reimbursement Obligations
have returned to those in effect immediately prior to such delinquency
and without giving effect to the nonpayment causing such delinquency.
16.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any
Note or the purchaser of any Letter of Credit Participation as the absolute
owner or purchaser thereof for all purposes hereof until it shall have been
furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.
16.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses
(including any expenses for which the Agent has not been reimbursed by the
Borrower as required by [Section]17), and liabilities of every nature and
character arising out of or related to this Credit Agreement, the Notes, or
any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly
caused by the Agent's willful misconduct or gross negligence.
16.8. AGENT AS BANK. In its individual capacity, FNBB shall have the
same obligations and the same rights, powers and privileges in respect to
its Commitment and the Loans made by it, and as the holder of any of the
Notes and as the purchaser of any Letter of Credit Participations, as it
would have were it not also the Agent.
16.9. RESIGNATION. The Agent may resign at any time by giving sixty
(60) days' prior written notice thereof to the Banks and the Borrower. Upon
any such resignation, the Majority Banks shall have the right to appoint a
successor Agent. Unless a Default or Event of Default shall have occurred
and be continuing, such successor Agent shall be reasonably acceptable to
the Borrower. If no successor Agent shall have been so appointed by the
Majority Banks and shall have accepted such appointment within thirty (30)
days after the retiring Agent's giving of notice of resignation, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be a financial institution having a rating of not less than A or its
equivalent by Standard & Poor's Corporation. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation, the provisions of this Credit Agreement and the other
Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
<PAGE> 87
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16.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank
hereby agrees that, upon learning of the existence of a Default or an Event
of Default, it shall promptly notify the Agent thereof. The Agent hereby
agrees that upon receipt of any notice under this [Section]16.10 it shall
promptly notify the other Banks of the existence of such Default or Event of
Default.
16.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events of
Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a)
so requested by the Majority Banks and (b) the Banks have provided to the
Agent such additional indemnities and assurances against expenses and
liabilities as the Agent may reasonably request, proceed to enforce the
provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any
such other legal and equitable and other rights or remedies as it may have
in respect of such Collateral. The Majority Banks may direct the Agent in
writing as to the method and the extent of any such sale or other
disposition, the Banks hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, PROVIDED that the Agent need not
comply with any such direction to the extent that the Agent reasonably
believes the Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
17. EXPENSES.
---------
The Guarantor and the Borrower jointly and severally agree to pay (a)
the reasonable costs of producing and reproducing this Credit Agreement, the
other Loan Documents and the other agreements and instruments mentioned
herein; (b) any taxes (including any interest and penalties in respect
thereto) payable by the Agent or any of the Banks (other than taxes based
upon the Agent's or any Bank's net income) on or with respect to the
transactions contemplated by this Credit Agreement (the Guarantor and the
Borrower hereby agreeing to indemnify the Agent and each Bank with respect
thereto); (c) the reasonable fees, expenses and disbursements of the Agent's
Special Counsel, (which shall not exceed $50,000 in connection with the
preparation of the Loan Documents and closing of this Credit Agreement) or
any local counsel to the Agent incurred in connection with the preparation,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, each closing hereunder, and amendments, modifications,
approvals, consents or waivers hereto or hereunder; (d) the reasonable fees,
expenses and disbursements (but excluding internal overhead costs and
expenses) of the Agent incurred by the Agent in connection with the
preparation, administration or interpretation of the Loan Documents and
other instruments mentioned herein, including all title insurance premiums
and appraisal charges; (e) any reasonable fees, costs, expenses and bank
charges, including bank charges for returned checks, incurred by the Agent
in establishing, maintaining or handling Agency Accounts, Blocked Accounts
and other accounts for the collection of any of the Collateral; (f) all
reasonable out-of-pocket expenses (including without
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limitation reasonable attorneys' fees and costs, which attorneys may be
employees of any Bank or the Agent, and reasonable consulting, accounting,
appraisal, investment banking and similar professional fees and charges)
incurred by any Bank or the Agent in connection with (i) the enforcement of
or preservation of any rights under any of the Loan Documents against the
Guarantor, the Borrower or any their Subsidiaries or the administration
thereof after the occurrence of a Default or Event of Default and (ii) any
litigation, proceeding or dispute whether arising hereunder or otherwise, in
any way related to any Bank's or the Agent's relationship with the
Guarantor, the Borrower or any of their Subsidiaries; (g) without
duplication, all reasonable expenses incurred by the Banks (including
counsel and investment banking or financial consultant fees) in connection
with any investigation of any Default or Event of Default, the enforcement
and collection of the Notes and in connection with any amendment or
requested amendment of, or waiver or consent under or with respect to any of
the Loan Documents, whether or not such amendment or waiver becomes
effective; and (h) all reasonable fees, expenses and disbursements of any
Bank or the Agent incurred in connection with UCC searches conducted prior
to the Closing Date and conducted after the Closing Date and then after the
occurrence of an Event of Default, UCC filings or mortgage recordings
contemplated by the Loan Documents. The covenants of this [Section]17 are
joint and several and shall survive payment or satisfaction of all other
Obligations.
18. INDEMNIFICATION.
----------------
Each of the Guarantor and the Borrower agrees to indemnify and hold
harmless the Agent and the Banks (and each of such Person's employees,
officers, directors, agents, attorneys or other advisors and shareholders)
from and against any and all claims, actions and suits whether groundless or
otherwise, and from and against any and all liabilities, losses, damages and
expenses of every nature and character arising out of this Credit Agreement
or any of the other Loan Documents or the transactions contemplated hereby
including, without limitation, (a) any actual or proposed use by the
Borrower of the proceeds of any of the Loans or Letters of Credit, (b) the
reversal or withdrawal of any provisional credits granted by the Agent upon
the transfer of funds from Agency Accounts or Blocked Accounts or in
connection with the provisional honoring of checks or other items, (c) any
actual or alleged infringement of any patent, copyright, trademark, service
mark or similar right of the Guarantor or the Borrower comprised in the
Collateral, (d) the Guarantor or Borrower entering into or performing this
Credit Agreement or any of the other Loan Documents or (e) with respect to
the Guarantor or the Borrower and their respective properties and assets,
the violation of any Environmental Law, the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, release or threatened
release of any Hazardous Substances or any action, suit, proceeding or
investigation brought or threatened with respect to any Hazardous Substances
(including, but not limited to, claims with respect to wrongful death,
personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and
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allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding; PROVIDED, HOWEVER, that such
indemnity shall not apply to the portion, if any, of such losses, claims,
damages, liabilities or related expenses of any Person seeking
indemnification that is determined by a court of competent jurisdiction by
final and non-appealable judgment to have resulted from the gross negligence
or willful misconduct of the Person seeking indemnification; and PROVIDED,
FURTHER, that such indemnity shall not apply to the portion, if any, of any
losses, claims, damages, liabilities or related expenses of any Bank
resulting directly from any breach by such Bank of its obligations under
this Credit Agreement. In litigation, or the preparation therefor, the Banks
and the Agent shall be entitled to select their own counsel and, in addition
to the foregoing indemnity, the Guarantor and the Borrower jointly and
severally agree to pay promptly the reasonable fees and expenses of such
counsel. If, and to the extent that the obligations of Guarantor or the
Borrower under this [Section]18 are unenforceable for any reason, the
Guarantor and the Borrower each hereby agree to make the maximum
contribution to the payment in satisfaction of such obligations which is
permissible under applicable law. The covenants contained in this
[Section]18 shall survive payment or satisfaction in full of all other
Obligations.
19. SURVIVAL OF COVENANTS, ETC.
---------------------------
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or
other papers delivered by or on behalf of the Guarantor, the Borrower or any
of their Subsidiaries pursuant hereto shall be deemed to have been relied
upon by the Banks and the Agent, notwithstanding any investigation
heretofore or hereafter made by any of them, and shall survive the making by
the Banks of any of the Loans and the issuance, extension or renewal of any
Letters of Credit, as herein contemplated, and shall continue in full force
and effect so long as any Letter of Credit or any amount due under this
Credit Agreement or the Notes or any of the other Loan Documents remains
outstanding or any Bank has any obligation to make any Loans or the Agent
has any obligation to issue, extend or renew any Letter of Credit, and for
such further time as may be otherwise expressly specified in this Credit
Agreement. All statements contained in any certificate or other paper
delivered TO ANY Bank or the Agent at any time by or on behalf of the
Guarantor, the Borrower or any of their Subsidiaries pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Guarantor, the Borrower or such
Subsidiary hereunder.
20. ASSIGNMENT AND PARTICIPATION.
-----------------------------
20.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein,
each Bank may assign to one or more Eligible Assignees all or a portion of
its interests, rights and obligations under this Credit Agreement (including
all or a portion of its Commitment Percentage and Commitment and the same
portion of the Loans at the time owing to it, the Notes held by it and its
participating
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interest in the risk relating to any Letters of Credit); PROVIDED that (a)
the Agent and, so long as no Default or Event of Default has occurred and is
continuing, the Borrower shall have given their prior written consent to
such assignment, which consent will not be unreasonably withheld, (b) each
such assignment shall be of a constant, and not a varying, percentage of all
the assigning Bank's rights and obligations under this Credit Agreement, (c)
each partial assignment shall be in an amount that is not less than
$10,000,000, and (d) the parties to such assignment shall execute and
deliver to the Agent, for recording in the Register (as hereinafter
defined), an Assignment and Acceptance, substantially in the form of EXHIBIT
F hereto (an "Assignment and Acceptance"), together with any Notes subject
to such assignment. 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 five (5) Business Days
after the execution thereof, (i) the assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have
the rights and obligations of a Bank hereunder, and (ii) the assigning Bank
shall, to the extent provided in such assignment and upon payment to the
Agent of the registration fee referred to in [Section]20.3, be released from
its obligations under this Credit Agreement. The Borrower, the Agent and the
Banks shall retain any claims or actions against the assigning Bank to the
extent that such claims or actions accrued or arose prior to the effective
date specified in such Assignment and Acceptance.
20.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS.
By executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other
parties hereto as follows:
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, the assigning Bank makes no
representation or warranty, express or implied, and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or the
attachment, perfection or priority of any security interest or
mortgage,
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
the Guarantor, the Borrower and their Subsidiaries or any other Person
primarily or secondarily liable in respect of any of the Obligations,
or the performance or observance by the Guarantor, the Borrower and
their Subsidiaries or any other Person primarily or secondarily liable
in respect of any of the Obligations of any of their obligations under
this Credit Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto;
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(c) such assignee confirms that it has received a copy of
this Credit Agreement, together with copies of the most recent
financial statements referred to in [Section]8.4 and [Section]9.4 and
such othe documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such
Assignment and Acceptance;
(d) such assignee will, independently and without reliance
upon the assigning Bank, the Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under this Credit Agreement;
(e) such assignee represents and warrants that it is an
Eligible Assignee;
(f) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under
this Credit Agreement and the other Loan Documents as are delegated to
the Agent by the terms hereof or thereof, together with such powers as
are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Credit Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements
with the assigning Bank satisfactory to such assignee with respect to
its pro rata share of Letter of Credit Fees in respect of outstanding
Letters of Credit.
20.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register")
for the recordation of the names and addresses of the Banks and the
Commitment Percentage of, and principal amount of the Loans owing to and
Letter of Credit Participations purchased by, the Banks from time to time.
The entries in the Register shall be conclusive, in the absence of manifest
error, and the Borrower, the Agent and the Banks may treat each Person whose
name is recorded in the Register as a Bank hereunder for all purposes of
this Credit Agreement. The Register shall be available for inspection by the
Borrower and the Banks at any reasonable time and from time to time upon
reasonable prior notice. Upon each such recordation, the assigning Bank
agrees to pay to the Agent a registration fee in the sum of $3,500.
20.4. New Notes. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject
to
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such assignment, the Agent shall (a) record the information contained
therein in the Register, and (b) give prompt notice thereof to the Borrower
and the Banks (other than the assigning Bank). Within five (5) Business Days
after receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Agent, in exchange for each surrendered Note, a
new Note to the order of such Eligible Assignee in an amount equal to the
amount assumed by such Eligible Assignee pursuant to such Assignment and
Acceptance and, if the assigning Bank has retained some portion of its
obligations hereunder, a new Note to the order of the assigning Bank in an
amount equal to the amount retained by it hereunder. Such new Notes shall
provide that they are replacements for the surrendered Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be substantially in the form of the assigned
Notes. Within five (5) days of issuance of any new Notes pursuant to this
[Section]20.4, the Borrower shall deliver an opinion of counsel (which
counsel may be the Borrower's internal counsel), addressed to the Banks and
the Agent, relating to the due authorization, execution and delivery of such
new Notes and the legality, validity and binding effect thereof, in a form
substantially similar to the opinions of counsel delivered on the Closing
Date and otherwise in form and substance reasonably satisfactory to the
Banks. The surrendered Notes shall be cancelled and returned to the
Borrower.
20.5. PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents;
PROVIDED that (a) any such sale or participation shall not affect the rights
and duties of the selling Bank hereunder to the Borrower and (b) the only
rights granted to the participant pursuant to such participation
arrangements with respect to waivers, amendments or modifications of the
Loan Documents shall be the rights to approve waivers, amendments or
modifications that would reduce the principal of or the interest rate on any
Loans, extend the term or increase the amount of the Commitment of such Bank
as it relates to such participant or extend any regularly scheduled payment
date for principal or interest.
20.6. DISCLOSURE. Each of the Guarantor and the Borrower agrees that in
addition to disclosures made in accordance with standard and customary
banking practices any Bank may disclose information obtained by such Bank
pursuant to this Credit Agreement to assignees or participants and potential
assignees or participants hereunder; provided that such assignees or
participants or potential assignees or participants shall agree (a) to treat
in confidence such information unless such information otherwise becomes
public knowledge, (b) not to disclose such information to a third party,
except as required by law or legal process and (c) not to make use of such
information for purposes of transactions unrelated to such contemplated
assignment or participation.
20.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
assignee Bank is an Affiliate of the Guarantor or the Borrower, then any
such
<PAGE> 93
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assignee Bank shall have no right to vote as a Bank hereunder or under any
of the other Loan Documents for purposes of granting consents or waivers or
for purposes of agreeing to amendments or other modifications to any of the
Loan Documents or for purposes of making requests to the Agent pursuant to
[Section]14.1 or [Section]14.2, and the determination of the Majority Banks
shall for all purposes of this Credit Agreement and the other Loan Documents
be made without regard to such assignee Bank's interest in any of the Loans.
If any Bank sells a participating interest in any of the Loans or
Reimbursement Obligations to a participant, and such participant is the
Guarantor or the Borrower or an Affiliate of the Guarantor or the Borrower,
then such transferor Bank shall promptly notify the Agent of the sale of
such participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or
modifications to any of the Loan Documents or for purposes of making
requests to the Agent pursuant to [Section]14.1 or [Section]14.2 to the
extent that such participation is beneficially owned by the Guarantor or the
Borrower or any Affiliate of the Guarantor or the Borrower, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to the
interest of such transferor Bank in the Loans to the extent of such
participation.
20.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
retain its rights to be indemnified pursuant to [Section]18 with respect to
any claims or actions arising prior to the date of such assignment. If any
assignee Bank is not incorporated under the laws of the United States of
America or any state thereof, it shall, prior to the date on which any
interest or fees are payable hereunder or under any of the other Loan
Documents for its account, deliver to the Borrower and the Agent
certification as to its exemption from deduction or withholding of any
United States federal income taxes. Anything contained in this [Section]20
to the contrary notwithstanding, any Bank may at any time pledge all or any
portion of its interest and rights under this Credit Agreement (including
all or any portion of its Notes) to any of the twelve Federal Reserve Banks
organized under [Section]4 of the Federal Reserve Act, 12 U.S.C.
[Section]341. No such pledge or the enforcement thereof shall release the
pledgor Bank from its obligations hereunder or under any of the other Loan
Documents.
20.9. ASSIGNMENT BY BORROWER. Neither the Guarantor nor the Borrower
shall assign or transfer any of its rights or obligations under any of the
Loan Documents without the prior written consent of each of the Banks.
21. NOTICES, ETC.
-------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to
this Credit Agreement or the Notes or any Letter of Credit Applications
shall be in writing and shall be delivered in hand, mailed by United States
registered or certified first class mail, postage prepaid, sent by overnight
courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by
delivery via courier or
<PAGE> 94
-87-
postal service, addressed as follows:
(a) if to the Guarantor or the Borrower, at 40 Walnut Street,
Wellesley, Massachusetts 02181, Attention: Mone Anathan, III and a
separate copy to Steven Siegel, Esq., at the Borrower's address, with a
copy to Robert Zinnershine, Esq., Wayne, Lazares & Chappell, 200 State
Street, Boston, Massachusetts 02109, or at such other address for
notice as the Guarantor or the Borrower shall last have furnished in
writing to the Person giving the notice;
(b) if to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, USA, Attention: Elizabeth A. Ratto, Vice President
with a copy to David J. Murphy, Esq., Bingham, Dana & Gould, 150
Federal Street, Boston, Massachusetts 02110 or such other address for
notice as the Agent shall last have furnished in writing to the Person
giving the notice; and
(c) if to any Bank, at such Bank's address set forth on
SCHEDULE 1 hereto, or such other address for notice as such Bank shall
have last furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
22. GOVERNING LAW.
--------------
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
EACH OF THE GUARANTOR AND THE BORROWER AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY
BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL
COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON GUARANTOR OR
THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN [Section]21. EACH OF THE
GUARANTOR AND THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
<PAGE> 95
-88-
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
23. HEADINGS.
---------
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
24. COUNTERPARTS.
-------------
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of
which when executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Credit Agreement
it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
25. ENTIRE AGREEMENT, ETC.
----------------------
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire un.derstanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit
Agreement nor any term hereof may be changed, waived, discharged or
terminated, except as provided in [Section]27.
26. WAIVER OF JURY TRIAL.
---------------------
Each of the Guarantor and the Borrower hereby waives its right to a
jury trial with respect to any action or claim arising out of any dispute in
connection with this Credit Agreement, the Notes or any of the other Loan
Documents, any rights or obligations hereunder or thereunder or the
performance of which rights and obligations. Except as prohibited by law,
each of the Guarantor and the Borrower hereby waives any right it may have
to claim or recover in any litigation referred to in the preceding sentence
any special, exemplary, punitive or consequential damages or any damages
other than, or in addition to, actual damages. Each of the Guarantor and the
Borrower (a) certifies that no representative, agent or attorney of any Bank
or the Agent has represented, expressly or otherwise, that such Bank or the
Agent would not, in the event of litigation, seek to enforce the foregoing
waivers and (b) acknowledges that the Agent and the Banks have been induced
to enter into this Credit Agreement, the other Loan Documents to which it is
a party by, among other things, the waivers and certifications contained
herein.
27. CONSENTS, AMENDMENTS, WAIVERS, ETC.
-----------------------------------
Any consent or approval required or permitted by this Credit Agreement
to be given by all of the Banks may be given, and any term of this Credit
Agreement, the other Loan Documents or any other instrument related hereto
or
<PAGE> 96
-89-
mentioned herein may be amended, and the performance or observance by the
Guarantor or the Borrower or any of their Subsidiaries of any terms of this
Credit Agreement, the other Loan Documents or such other instrument or the
continuance of any Default or Event of Default may be waived (either
generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Borrower and
the written consent of the Majority Banks. Notwithstanding the foregoing,
the rate of interest on the Notes (other than interest accruing pursuant to
[Section]6.10.2 following the effective date of any waiver by the Majority
Banks of the Default or Event of Default relating thereto), the term of the
Notes, the amount of the Commitments of the Banks, and the amount of
commitment fee or Letter of Credit Fees hereunder may not be changed without
the written consent of the Borrower and the written consent of each Bank
affected thereby; the definition of Majority Banks may not be amended
without the written consent of all of the Banks and the Borrower; the
release of any Guarantor or the release of any Collateral (other than
releases required by applicable law or in connection with dispositions
permitted under [Section] 10.5.2), if the aggregate value of all such
Collateral released from and after the Closing Date exceeds $10,000,000, may
not be consented to without the consent of all of the Banks; and the amount
of any Letter of Credit Fees payable for the Agent's account and [Section]16
may not be amended without the written consent of the Agent and the
Borrower. No waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon. No course of dealing or delay
or omission on the part of or the Agent or any Bank in exercising any right
shall operate as a waiver thereof or otherwise be prejudicial thereto. No
notice to or demand upon the Borrower shall entitle the Borrower to other or
further notice or demand in similar or other circumstances. Nothing
contained in [Section]5.5 or [Section]16.1 shall be deemed to waive or
impair any claims that the Borrower may have against any of the Banks for
any failure by such Bank to comply with its obligations under this Credit
Agreement.
28. SEVERABILITY.
-------------
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in
any other jurisdiction, or any other clause or provision of this Credit
Agreement in any jurisdiction.
29. CONFIDENTIALITY.
----------------
Each of the parties hereto acknowledges and agrees that, pursuant to
the Credit Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby, it may be the recipient of proprietary and
confidential information of the other parties hereto (any such information,
the "Confidential Information"). Each of the parties hereto agrees that it
will hold any Confidential Information of any other party hereto in
confidence and will not disclose such Confidential Information other than
(a) to its employees or
<PAGE> 97
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professional advisors to the extent necessary for them to perform their
duties as employees or professional advisors, (b) disclosures by any of the
Banks in accordance with standard and customary practices, (c) to the extent
permitted by [Section]20.6, (d) in the event that such party may be required
to effect such disclosure by order of a court of competent jurisdiction, or
(e) any Confidential Information which is or becomes general public
knowledge for a reason other than such party's failure to comply with the
provisions of this [Section]29.
<PAGE> 98
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
FILENE'S BASEMENT, INC.
By: /s/ Steven R. Siegel
-------------------------------------
Steven R. Siegel,
Executive Vice President
and Chief Financial Officer
FILENE'S BASEMENT CORP.
By: /s/ Steven R. Siegel
-------------------------------------
Steven R. Siegel,
Executive Vice President
and Chief Financial Officer
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Agent
By: /s/ Elizabeth A. Ratto
-------------------------------------
Elizabeth A. Ratto,
Vice President
<PAGE> 1
EXHIBIT 11
FILENE'S BASEMENT CORP.
<TABLE>
Computation Of Net Income Per Common Share
(dollars in thousands)
Thirteen Weeks Thirteen Weeks
Ended Ended
May 4, 1996 April 29, 1995
-------------- --------------
<S> <C> <C>
The computation of net income
available and adjusted
shares outstanding follows:
Net (loss) income as
reported................... $ 564 $ (1,913)
========== ==========
Net income used for
primary and fully diluted
computations.................... $ 564 $ (1,913)
========== ==========
Weighted average number
of common shares
outstanding..................... 20,500,589 20,325,756
Add (where dilutive):
Assumed exercise of those
options that are common
stock equivalents net of
treasury shares deemed to
have been repurchased at
average market price for
the period................. 412,742 449,270
---------- ----------
Weighted average number of
common and common
equivalent shares outstanding
used for primary and fully
diluted computations............ 20,913,331 20,775,026
========== ==========
</TABLE>
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> MAY-04-1996
<CASH> 365
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 91,109
<CURRENT-ASSETS> 110,797
<PP&E> 122,302
<DEPRECIATION> 59,766
<TOTAL-ASSETS> 202,849
<CURRENT-LIABILITIES> 76,135
<BONDS> 35,000
<COMMON> 206
0
0
<OTHER-SE> 81,223
<TOTAL-LIABILITY-AND-EQUITY> 202,849
<SALES> 124,032
<TOTAL-REVENUES> 124,032
<CGS> 93,210
<TOTAL-COSTS> 93,210
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 28,615
<INTEREST-EXPENSE> 1,267
<INCOME-PRETAX> 940
<INCOME-TAX> 376
<INCOME-CONTINUING> 564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 564
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
