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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
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
FILENE'S BASEMENT CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 04-3016733
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
40 WALNUT ST, WELLESLEY, MA 02181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 617-348-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS
-------------------
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant on April 7, 1998 was $104,175,288.
The number of shares outstanding of the registrant's Common Stock, $.01 par
value as of April 7, 1998 was 20,894,114 shares.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED
JANUARY 31, 1998, TO BE FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION ARE
INCORPORATED BY REFERENCE IN PART II HEREOF. PORTIONS OF THE REGISTRANT'S PROXY
STATEMENT TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION RELATING TO
THE COMPANY'S 1998 ANNUAL MEETING OF STOCKHOLDERS ARE INCORPORATED BY REFERENCE
IN PART III HEREOF.
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FILENE'S BASEMENT CORP.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
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PAGE NO.
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Item 1. Business.................................................... 3
Item 2. Properties.................................................. 5
Item 3. Legal Proceedings........................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......... 7
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 8
Item 6. Selected Financial Data..................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation.................................. 8
Item 8. Financial Statements and Supplementary Data................. 8
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 8
Item 10. Directors and Executive Officers of the Registrant.......... 8
Item 11. Executive Compensation...................................... 8
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 9
Item 13. Certain Relationships and Related Transactions.............. 9
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 9
</TABLE>
2
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PART I
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ITEM 1. BUSINESS
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Filene's Basement Corp. ("Filene's Basement" or the "Company") operates
through its wholly-owned subsidiary Filene's Basement, Inc., a chain of
off-price specialty stores offering focused assortments of timely, fashionable,
branded and private label merchandise at prices typically 20% to 60% below
traditional department store prices. The Company operates 47 stores, primarily
in the Northeast and Midwest regions of the United States. The company's
business is seasonal, reflecting increased consumer buying in the fall season.
The second half of each fiscal year provides a greater portion of the Company's
annual sales and operating profit.
FILENE'S BASEMENT STORES
The Boston store is a landmark institution recognized by generations of New
England families and visitors as a source of quality off-price family apparel.
The downtown location is famous for a unique marketing concept -- the Automatic
Markdown Plan. The Company believes that the Automatic Markdown Plan generates a
sense of shopping urgency and creates customer excitement and loyalty. The
Boston store generated over $1,478 in sales per square foot of selling space in
Fiscal 1997.
In addition to its downtown Boston store, Filene's Basement operates 46
branch stores in twelve states with an average of approximately 24,400 square
feet of selling space per store. Generally, the branch store's selling space is
on a single level and uses a prototypical "racetrack" aisle layout for
merchandise. The branch stores are designed to be convenient and attractive in
their merchandise presentation, dressing rooms, checkouts and customer service
areas. The Company's branch stores open the full year of Fiscal 1997 generated
$440 in sales per square foot of selling space, a figure which management
believes is higher than the average of the off-price industry. The Company's
branch stores accounted for approximately 83% of net sales in Fiscal 1997.
The branch stores averaged $10.4 million in sales volume per store in
Fiscal 1997. Their merchandise mix is similar to that of the Boston flagship
store. Because of the operational complexities associated with transferring the
Automatic Markdown Plan to the branch stores, the branch stores do not operate
under the Automatic Markdown Plan, although markdowns are taken as required.
EXPANSION STRATEGY
A significant portion of the Company's growth since its inception has
resulted from, and the major component of the Company's future growth is
expected to result from, the addition of new stores. The Company's expansion
strategy historically targeted three demographic areas: existing markets, where
it can leverage advertising, purchasing, transportation, and other regional
expenses; new multi-store metropolitan markets, where Filene's Basement believes
it can successfully transport its positioning and strategy; and contiguous
markets, to take advantage of regional management and real estate opportunities.
In addition to pursuing its historical expansion strategy, the Company is
exploring geographic areas where it believes it can successfully implement its
marketing strategy.
The Company opened two new stores in Fiscal 1997, both located in the
existing market of suburban Chicago, and expects to open four to six additional
new stores in Fiscal 1998. Two of the new stores have opened in Fiscal 1998, one
in Berwyn, PA and a second in Rockville, MD. The remaining new stores will
primarily be located in existing markets. Subsequent to Fiscal 1998, the Company
currently expects to open eight to ten stores a year, assuming real estate
opportunities become available on favorable terms. The Company anticipates that
it will need additional capital to fund the new store openings.
The Company entered two major metropolitan markets outside of the
Northeast, Chicago in Fiscal 1991 and Minneapolis/St. Paul in Fiscal 1992. The
Company originally opened seven stores in the Chicago area, five of which have
since been closed, two in Fiscal 1994 and three in Fiscal 1995. In Fiscal 1997,
the Company opened two new stores in the suburban Chicago area. In
Minneapolis/St. Paul, the Company originally opened five stores, four of which
were closed in February 1995. The one remaining store, located in the Mall of
America, has remained profitable. The Company's business strategy is dependent
upon high sales volumes in the geographic markets in which it operates. The
closed stores in the Chicago and Minneapolis/St. Paul markets did not generate
the sales volumes that were expected and therefore did not produce the requisite
return on invested capital that the Company expects from its stores. Thus,
closing these stores was determined to be in the best strategic interest of the
Company.
3
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MERCHANDISING
Filene's Basement offers branded apparel, home goods and accessories,
retail stocks purchased directly from major upscale retailers and high quality
private label merchandise. The total merchandise assortment is typically priced
at levels 20% to 60% below regular prices at traditional department and
specialty stores. These discounts are achieved by buying pre-season programmed
merchandise, in-season overruns and end-of-season surpluses at advantageous
prices and offering them for sale at lower markups than those at traditional
department stores. The Company also keeps its cost of merchandise low because it
does not require markdown or advertising allowances, or anticipation of returns
from its vendors, all of which are typical in the department store industry.
The branded merchandise represents a focused assortment of fashionable,
nationally recognized family apparel and accessories bearing prominent
designers' and manufacturers' names. Branded merchandise constitutes a majority
of the product line and is obtained through opportunistic purchases from a
diverse group of quality manufacturers as well as through traditional up-front
buying programs like those employed by department stores and specialty store
chains. During Fiscal 1997, the Company expanded its merchandise assortment into
the home goods category. The customer response to this expansion was very
favorable and, as a result, the merchandising organization's infrastructure has
been enhanced to support further expansion into this area.
The branded offerings are complemented by "retail stocks" -- family apparel
and accessories purchased directly from major upscale retailers such as
Bloomingdale's, Bendel's and Neiman Marcus. Retail stocks are priced at
significant discounts to the original prices and allow Filene's Basement to
share in the reputation and image of these upscale department and specialty
stores. The Company has, for the past several years, reduced the percentage of
its sales represented by retail stocks, primarily because retail stocks are
unpredictable in supply and the least profitable category of merchandise sold in
Filene's Basement stores.
BUYING
Because of the longstanding relationships it enjoys with its vendors, the
Company receives quality buying opportunities at competitive prices. These
longstanding relationships make Filene's Basement a prime choice for vendors
with overruns, department store cancellations and unmet volume objectives. From
time to time, the Company commits to the future purchase of branded merchandise
from vendors at advantageous prices. These forward purchases allow for timely,
fashionable assortments. Based on its past experience, the Company believes that
the current supply of branded merchandise is adequate for the Company's needs.
Although certain vendors are important to the Company's business because of the
prestige of their names, the portfolio of vendors is broad, and new vendors
continue to be added. No branded merchandise vendor accounts for more than 3.0%
of the Company's total net sales, and the Company believes that its
relationships with its vendors are satisfactory.
ADVERTISING
The Company's primary advertising strategy stresses the offering of
nationally recognized branded merchandise at significant savings. The Company
employs a multi-media approach (print, broadcast and direct mail) in all
markets, but unlike most of its off-price competitors, relies primarily on
newspaper advertising. Recently, the Company has placed additional emphasis on
direct mail programs that, using the Company's expanded customer databases, are
expected to reach a high percentage of its targeted customers. The Company
promotes a series of special events throughout the year to generate traffic and
to maintain a sense of shopping excitement.
COMPETITION
Management believes that the Company occupies a market segment between
traditional department stores and typical off-price apparel chains. In this
segment, the merchandise mix consists of quality products typical of those found
in department stores and manufacturer-owned outlet stores, but at prices
competitive with those of other off-price chains. The Company nevertheless faces
intense competition for customers and for access to quality merchandise from
other offprice apparel chains, manufacturer-owned outlet stores and traditional
department stores. Many of these competitors are units of large national or
regional chains that have substantially greater resources than the Company. The
national apparel market is highly fragmented and competitive and the off-price
business may become even more competitive in the future. The Company also faces
intense competition from major retailers for employees and suitable store
locations.
The Company believes that the principal competitive factors in the retail
apparel industry are merchandise assortment, effective merchandise presentation,
quality of merchandise, store location, relationships with vendors, price, costs
of operations and customer service. Management believes that Filene's Basement
competes favorably on the basis of each of these factors.
EMPLOYEES
During Fiscal 1997, an average of approximately 3,000 40-hour-equivalent
employees were part of Filene's Basement's work force, including approximately
2,000 full-time employees and an additional 1,600 part-time employees.
Considerable seasonality in the retail apparel industry is associated with
employment levels.
A collective bargaining agreement between the Company and the United Food
and Commercial Workers
4
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Union (Local 1445) covers employees at the downtown Boston store. The agreement,
which was ratified in January 1998, extends through February 1, 2002. Employees
at the Company's Auburn, Massachusetts distribution center and the branch stores
are not represented by a union or other collective bargaining agent.
TRADEMARKS
As a result of its acquisition of the Filene's department store chain from
Federated Department Stores, Inc. ("Federated") in April 1988, May Department
Stores Company ("May") became the owner of certain Filene's Basement(TM) and
Filene's Basement of Boston(R) trademark and service mark registrations and
certain trade names previously owned by Federated and used by its Filene's
Basement division. May granted Federated an exclusive, perpetual, world-wide,
royalty-free license to use the trade names and registered marks, including the
right to file registrations in additional jurisdictions in May's name. In
connection with the acquisition of the Filene's Basement division of Federated
by the Company, Federated assigned the rights under this license to the Company.
The Company's exclusive licensee status with respect to these registered marks
has been recorded with the United States Patent and Trademark Office and
relevant state offices. In addition, the Company owns certain other federally
registered trademarks that the Company believes are not a critical element of
its merchandising strategy.
TECHNOLOGY
The Company relies extensively on computerized information systems in its
stores, distribution center and corporate offices. During Fiscal 1997, the
Company installed hand-held data terminals in all branch stores to process price
changes and ticketing in a more timely manner and with greater accuracy, while
reducing operating costs. Additionally, in conjunction with the Year 2000
problem (see below), the Company will be upgrading its point of sale,
communication and reporting systems. The Company expects the new point of sale
registers to increase the speed of its current registers and to allow price look
up, a feature not currently available. During the second half of Fiscal 1998 and
into Fiscal 1999, the Company will be upgrading its merchandising systems. The
Company believes this conversion will provide a better integrated system for
purchase order management, merchandise planning and allocation, distribution to
the stores, and inventory control through the open-to-buy reporting.
YEAR 2000 COMPLIANCE
The Company utilizes software and related technologies throughout its
business that will be affected by the "Year 2000" problem, which is common to
most corporations, and concerns the inability of information systems, primarily
computer software programs, to properly recognize and process date sensitive
information as the year 2000 approaches. The Company has completed a review of
its computer systems to identify the systems that could be affected by the "Year
2000" problem and is developing an implementation plan to resolve the issue. It
is expected that most non-compliant systems will be replaced with new systems
that will provide certain competitive benefits as well as ensure "Year 2000"
compliance in time to minimize any disruptive effects on operations. While it is
not possible, at present, to predict the total cost of this effort, the capital
investment in new software and equipment needed to achieve "Year 2000"
compliance and enhance existing systems, including the installation of a new
register system, is currently estimated at approximately $15 to 20 million.
Funding requirements have been incorporated into the Company's capital and
operating plans and are not expected to have a material adverse impact on the
Company's financial condition, results of operations or liquidity.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Annual Report contains forward-looking statements. For this purpose,
any statements contained herein that are not statements of historical fact may
be deemed to be forward-looking statements, including references to future
growth, improved margins and new store openings. Without limiting the foregoing,
the words "believes", "anticipates", "plans", "expects" and similar expressions
are intended to identify forward-looking statements. Factors which may cause
actual results to differ materially from those indicated by such forward-looking
statements include, among others: (i) economic and weather conditions which
affect the buying patterns of the Company's customers, (ii) actions of the
Company's competitors and the Company's ability to respond to such actions,
(iii) the continued support of the Company's numerous vendors and third party
factors in the form of short-term trade credit through extended payment terms
and letters of credit, (iv) a decrease in the Company's available funds under
its existing credit facility due to the impairment or ineligibility of a
significant portion of its borrowing base, (v) the continued success of the
Company's efforts to implement planned strategic initiatives, (vi) unexpected
store closings and the related higher markdowns associated with inventory
liquidations and (vii) the unanticipated impact of the "Year 2000" problem.
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ITEM 2. PROPERTIES
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DOWNTOWN BOSTON STORE
The downtown Boston Filene's Basement store is located in the basement of
the flagship store of the Filene's department store chain on Washington Street
in
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the "Downtown Crossing" shopping district. The building is occupied by Filene's
pursuant to a lease (the "Lease") which has been extended through 2009 (with
extension rights until 2024). As of April 1988, when Filene's was sold by
Federated to May, the Lease was assigned by Federated to May and the space
occupied by the Company's downtown Boston store was subleased (the "Sublease")
from May. The Company subleases 178,000 square feet (approximately 65,300 square
feet of selling space) on four floors. The Sublease terminates in 2009 with
rights on behalf of the Company to extend until 2024. Extension of the Sublease
in 2009 is subject to the extension of the Lease in 2009. Pursuant to the
Sublease, the Company has been delegated authority by May to extend the Lease on
May's behalf without further action by May. Any development with respect to the
Company's downtown Boston store that had the effect of interfering with the
Company's right to occupy those premises would have a material adverse effect on
the Company's business. In Fiscal 1997, the downtown Boston store represented
approximately 17% of the Company's net sales.
BRANCH STORES
The table below shows the location and opening dates of each of the
Company's 46 branch stores in existence as of April 15, 1998.
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<CAPTION>
STORE LOCATION OPENING DATE
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<S> <C>
Saugus, MA May 1978
Framingham, MA October 1978
Burlington, MA October 1981
Manchester, NH October 1981
Manhasset, NY August 1982
Huntington, NY August 1982
Fresh Meadows, NY May 1983
Corbin's Corner, CT October 1983
Dedham, MA October 1983
Braintree, MA November 1984
Warwick, RI November 1985
Scarsdale, NY November 1985
Willow Grove, PA August 1986
Holyoke, MA November 1986
Paramus, NJ (RT. 17) November 1986
Franklin Mills, PA August 1989
Portland, ME August 1989
Plymouth, MA November 1989
Carle Place, NY April 1990
Orange, CT April 1990
Attleboro, MA October 1990
Hyannis, MA October 1990
Newton, MA October 1990
Nashua NH March 1991
Salem, NH August 1991
Chicago, IL October 1991
Taunton, MA March 1992
</TABLE>
<TABLE>
<CAPTION>
STORE LOCATION OPENING DATE
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Mall of America, MN August 1992
St. Davids, PA September 1992
North Shore, MA November 1992
Watertown, MA March 1993
Jersey City, NJ April 1993
Washington, DC October 1993
Washington, DC October 1993
Philadelphia, PA November 1993
New York, NY November 1993
Manchester, CT March 1994
Moorestown, NJ September 1994
Falls Church, VA October 1994
Worcester, MA October 1994
Chicago, IL March 1995
New York, NY April 1995
Oak Brook, IL March 1997
Skokie, IL April 1997
Rockville, MD March 1998
Berwyn, PA April 1998
</TABLE>
All of the branch stores have remaining lease terms ranging from three to
twenty-five years with renewal options, in most cases, at higher fixed rates.
Most of the leases provide for rent payments as a percentage of sales over
certain sales levels.
DISTRIBUTION FACILITIES
The Company leases a 457,000 square-foot distribution center facility
situated on 32.8 acres with adjacent rail service in Auburn, Massachusetts. The
two-story building also contains the Company's data center and sales audit
functions. The lease term runs until 2002, with three five-year options to
renew.
The Company also leases a 55,230 square-foot warehouse in Northboro, MA.
This facility primarily serves as a satellite warehouse for the nearby Auburn
distribution center but also houses the Company's accounts payable department.
The lease term runs until September 2001, with one five-year option to renew.
During Fiscal 1996, after an assessment of its current needs, the Company
announced the closing of its Company-owned Somerville, Massachusetts
distribution center. The property was sold in November 1997 for approximately
$7.6 million. The Company has agreed to lease back from the buyer approximately
71,500 square feet for use as general storage space.
HEADQUARTERS BUILDING
Filene's Basement leases its corporate offices in Wellesley, Massachusetts,
where it occupies space in two office buildings (approximately 32,000 square
feet). The Company has extended the lease through 2001.
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CAPITAL EXPENDITURES
The following table summarizes the Company's capital expenditures for the
last five fiscal years:
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<TABLE>
<CAPTION>
Fiscal Year Ended (in thousands)
----------------------------------------------
Jan 31, Feb 1, Feb 3, Jan 28, Jan 29,
1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
New Stores........... $ 2,623 $ 0 $ 2,426 $ 4,204 $14,107
Existing Stores...... 3,653 2,416 2,230 2,259 1,243
Distribution, data
processing, central
office and other... 6,263 5,196 7,323 9,177 7,504
------- ------ ------- ------- -------
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Total............ $12,539 $7,612 $11,979 $15,640 $22,854
======= ====== ======= ======= =======
</TABLE>
During Fiscal 1997, the Company opened two new stores and expanded and
remodeled two existing stores. Additionally, the Company continued to upgrade
its management information systems.
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ITEM 3. LEGAL PROCEEDINGS
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The Company is involved in various routine legal proceedings incidental to
the conduct of its business. Management believes that none of these legal
proceedings will have a material adverse effect on the financial condition or
results of operations of the Company.
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ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of security holders of the Company
during the fourth quarter of Fiscal 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
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<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION
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<S> <C> <C>
Samuel J. Gerson... 56 Chairman, Chief Executive
Officer and Director
W. Jay Carothers... 46 President, Chief Operating
Officer and Director
Mone Anathan, Vice Chairman of the Board
III.............. 57 of Directors, Chairman of
the Executive Committee and
Director
Steven R. Siegel... 53 Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
</TABLE>
Samuel J. Gerson became Chairman, Chief Executive Officer and a director in
1988, having served as Chairman and Chief Executive Officer of the Filene's
Basement division of Federated Stores, Inc., from January 1984 until the
acquisition of that division by the Company in 1988. Mr. Gerson is a director of
Bon Ton Stores, Inc., and ASAHI America, Inc., as well as a trustee associate of
Boston College.
W. Jay Carothers joined the Company in June 1997 as President, Chief
Operating Officer and a director. Prior to joining the Company, he served as
President of Federated Merchandising Group (FMG). In 1990, he joined Macy's and
in 1992 was appointed Vice Chairman of Macy's Corporate Product Development and
World Wide Sourcing. Previously, he served at Crystal Brands as Vice President,
Operations for the Izod LaCoste Gant Eagle Division and Director and Chief
Financial Officer of Mast Industries -- Far East Division.
Mone Anathan, III became Vice Chairman of the Board of Directors and
Chairman of the Executive Committee in June 1997, after having previously served
as President, Treasurer and a director since 1988 and Chief Operating Officer
since 1992. Previously, he served as President of the Filene's Basement division
of Federated Department Stores, Inc. from February 1984 until the acquisition of
that division by the Company in 1988. Mr. Anathan is a director of Brookstone
Company, Inc.
Steven R. Siegel became Executive Vice President and Chief Financial
Officer in December 1994, Secretary in July 1994 and Treasurer in 1995. He
joined the Company in July 1994 as Executive Vice President Administration and
General Counsel. From 1989 to 1994, he was a partner with the law firm of Wayne,
Lazares & Chappell and from 1990 to 1994, president of Watermark Donut Company.
Officers serve until their successors are chosen and qualified.
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PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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The information required by this Item is incorporated by reference to the
Company's 1997 Annual Report to Stockholders. See the section entitled "Price
Range of Common Stock."
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ITEM 6. SELECTED FINANCIAL DATA
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The information required by this Item is incorporated by reference to the
Company's 1997 Annual Report to Stockholders. See the section entitled
"Financial Highlights."
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
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The information required by this Item is incorporated by reference to the
Company's 1997 Annual Report to Stockholders. See the section of the same name.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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The Company's Consolidated Financial Statements filed as a part of this
Annual Report on Form 10-K are indexed herein under Item 14 (a) (1) and are
incorporated by reference to the Company's 1997 Annual Report to Stockholders.
See also the consolidated Financial Statement Schedules indexed herein under
Item 14(a) (2).
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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None.
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PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------
The information required by this Item is included (in part) in Part I of
this Form 10-K. The information relating to the Directors of the Company is
incorporated by reference to the Company's Proxy Statement for its 1998 Annual
Meeting of Stockholders. See the section entitled "ELECTION OF DIRECTORS."
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ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 1998 Annual Meeting of Stockholders. See the
section entitled "EXECUTIVE COMPENSATION." The Compensation Committee Report and
the Performance Graph included in the Proxy Statement are not incorporated
herein.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 1998 Annual Meeting of Stockholders. See the
section entitled "BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, EXECUTIVE
OFFICERS AND DIRECTORS."
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
None.
- --------------------------------------------------------------------------------
C. PART IV
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C. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS
The following financial statements are incorporated herein by reference
from the Company's 1997 Annual Report to Stockholders.
<TABLE>
<CAPTION>
PAGE IN 1997
ANNUAL REPORT
TO STOCKHOLDERS
---------------
<S> <C>
Reports of Independent Accountants.......................... 20
Consolidated Statements of Operations for the fiscal years
ended January 31, 1998, February 1, 1997 and February 3,
1996...................................................... 7
Consolidated Balance Sheets as of January 31, 1998 and
February 1, 1997.......................................... 8
Consolidated Statements of Changes in Stockholder's Equity
for the fiscal years ended January 31, 1998, February 1,
1997 and February 3, 1996................................. 9
Consolidated Statements of Cash Flows for the fiscal years
ended January 31, 1998, February 1, 1997 and February 3,
1996...................................................... 10
Notes to Consolidated Financial Statements.................. 11
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted since they are not required, not applicable
or the information has been included in the financial statements or the notes
thereto.
3. EXHIBITS
Unless otherwise indicated, each of the Exhibits is incorporated herein by
reference to Filene's Basement, Inc. Registration Statement on Form S-1 No.
33-29010 filed with the Securities and Exchange Commission under the Securities
Act of 1933.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
3.1 Restated Articles of Organization (incorporated herein by
reference to the Company's ("FBC's") Registration Statement
on Form S-1 (No. 33-39901))
3.2 Amended and restated by-laws (incorporated herein by
reference to FBC's Registration Statement on Form S-1 (No.
33-39901))
4.3 Founders' Stock Agreement among the Registrant and certain
founding shareholders
4.3.1 Founders' Stock Assumption and Assignment Agreement among
FBA -- Delaware, FBA and the founding shareholders
4.4 Performance-Related Stock Agreement among the Registrant,
Samuel J. Gerson and Mone Anathan, III
4.4.1 Performance Stock Assumption and Assignment Agreement among
the Registrant, Samuel J. Gerson and Mone Anathan, III
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.5 Common Stock and Preferred Stock Subscription Agreement
among the Registrant and certain stock purchasers
4.6 Stockholders' Agreement among the Registrant and certain
stock purchasers
4.8 Specimen Common Stock Certificate (incorporated herein by
reference to FBC's Registration Statement on Form S-1 (No.
33-39901))
10.2 Sublease dated April 30, 1988 relating to downtown Boston
Filene's Basement location
10.3 Lease dated April 13, 1987 relating to the Auburn
distribution center
10.4 Lease dated December 21, 1983 relating to the Wellesley
central offices
10.5 Filene's Basement License Agreement between Federated and
May
10.6 Assignment of Trademarks and Service Marks from Federated to
May
10.7 1988 Stock Option Plan, as amended (incorporated herein by
reference to FBC's quarterly report on Form 10-Q for the
period ended November 2, 1996)
10.8 Filene's Basement, Inc. Pension Plan
10.8.1 Filene's Basement, Inc. Supplementary Executive Retirement
Plan
10.8.2 Form of Amendment to Filene's Basement, Inc. Supplementary
Executive Retirement Plan (incorporated herein by reference
to FBC's Registration Statement on Form S-1 (No. 33-39901))
10.8.3 Filene's Basement, Inc Supplemental Executive Retirement
Plan, Amendment No. 3 (incorporated herein by reference to
FBC's Annual Report on Form 10-K for the fiscal year ended
February 1, 1997)
10.9 Filene's Basement, Inc. Thrift Incentive Plan
10.9.1 Form of Amendment to Filene's Basement, Inc. Thrift
Incentive Plan (incorporated herein by reference to the
Registrant's Registration Statement on Form S-1 (No.
33-39901))
10.10 Agreement between United Food and Commercial Workers' Union
Local No. 1445 and Filene's Basement, Inc. dated February 1,
1998 (filed herewith)
10.11 American Express Card Service Agreement (filed herewith)
10.12 Amendment to American Express Card Service Agreement dated
January 1, 1993 (filed herewith)
10.17 1990 Equity Incentive Plan, as amended (incorporated herein
by reference to FBC's quarterly report on Form 10-Q for the
period ended November 2, 1996)
10.18 1990 Employee Stock Purchase Plan, as amended (incorporated
herein by reference to FBC's quarterly report on Form 10-Q
for the period ended November 2, 1996)
10.19 Tax Sharing Agreement (incorporated herein by reference to
FBC's Registration Statement on Form S-1 (No. 33-39901))
10.20 Form of Change-In-Control Agreement between Registrant and
Samuel J. Gerson (incorporated herein by reference to the
FBC's Registration Statement on Form S-1 (No. 33-39901))*
10.20.1 Amendment to Change-in-Control Agreement between Registrant
and Samuel J. Gerson (incorporated herein by reference to
FBC's Annual Report on Form 10-K for the fiscal year ended
January 29, 1994)*
10.21 Form of Change-In-Control Agreement between Registrant and
Mone Anathan, III (incorporated herein by reference to FBC's
Registration Statement on Form S-1 (No. 33-39901))*
10.21.1 Amendment to Change-in-Control Agreement between Registrant
and Mone Anathan, III (incorporated herein by reference to
FBC's Annual Report on Form 10-K for the fiscal year ended
January 29, 1994)*
10.23 1993 Stock Option Plan for Non-Employee Directors, as
amended (incorporated herein by reference to FBC's quarterly
report on Form 10-Q for the period ended November 2, 1996)
10.24 Employment Agreement among the Registrant, Filene's
Basement, Inc. and Samuel J. Gerson (incorporated herein by
reference to FBC's Annual Report on Form 10-K for the fiscal
year ended January 30, 1993)*
10.25 Employment Agreement among the Registrant, Filene's
Basement, Inc. and Mone Anathan, III (incorporated herein by
reference to FBC's Annual Report on Form 10-K for the fiscal
year ended January 30, 1993)*
10.25.1 Amendment to Employment Agreement dated August 22, 1997
between Filene's Basement Inc. and Mone Anathan, III
(incorporated herein by reference to FBC's quarterly report
on Form 10-Q for the period ended August 2, 1997)
10.26 Credit Card Program Agreement between Monogram Credit Card
Bank of Georgia and Filene's Basement, Inc. dated July 20,
1995 (filed herewith)
10.27 First Amendment to the Credit Card Program Agreement between
Monogram Credit Card Bank of Georgia and Filene's Basement,
Inc. dated October 6, 1995 (filed herewith)
10.28 Second Amendment to the Credit Card Program Agreement
between Monogram Credit Card Bank of Georgia and Filene's
Basement, Inc. dated June 7, 1996 (filed herewith)
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.37 Employment Agreement dated July 11, 1994 between Filene's
Basement, Inc and Steven Siegel (incorporated herein by
reference to FBC's Annual Report on Form 10-K for the fiscal
year ended January 28, 1995)*
10.37.1 First Amendment to Employment Agreement dated January 15,
1996 between Filene's Basement, Inc. and Steven R. Siegel
(incorporated herein by reference to FBC's Annual Report on
Form 10-K for the period ended February 3, 1996)*
10.37.2 Second Amendment to Employment Agreement dated April 1, 1998
between Filene's Basement, Inc. and Steven R. Siegel (filed
herewith)*
10.38 Employment agreement dated June 2, 1997 between Filene's
Basement, Inc. and W. Jay Carothers (incorporated herein by
reference to FBC's quarterly report on Form 10-Q for the
period ended August 2, 1997)
10.38.1 First Amendment to Employment Agreement dated March 17, 1998
between Filene's Basement, Inc. and W. Jay Carothers (filed
herewith)*
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
(incorporated herein by reference to FBC's quarterly report
on Form 10-Q for the period ended May 4, 1996)
10.39.1 First Amendment Agreement amending the 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 June 28, 1996 (incorporated herein by
reference to FBC's quarterly report on Form 10-Q for the
period ended August 3, 1996)
10.40 Amended and Restated Revolving Credit and Term Loan
Agreement dated as of January 30, 1998 among the Company,
Filene;'s Basement Inc. and Filene's Basement Corp. and
BankBoston, N.A. (filed herewith)
10.41 Executive Severence Plan Trust Agreement dated as of July
15, 1997 between FBC and State Street Bank and Trust Company
(filed herewith)
10.42 Form of Executive Severence Plan between FBC and each of
Samuel Gerson, Mone Anathan III and Steven Siegel (filed
herewith)
10.43 Form of Executive Split Dollar Life Insurance Agreement
between FBC and each of Samuel Gerson, Mone Anathan III and
Steven Siegel (filed herewith)
10.44 Form of Collateral Assignment and Acceptance of Split Dollar
Policy between FBC and each of Samuel Gerson, Mone Anathan
III and Steven Siegel (filed herewith)
10.45 Form of Assignment and Acceptance of Split Dollar Life
Insurance Policy and Agreement between FBC and each of
Samuel Gerson, Mone Anathan III and Steven Siegel (filed
herewith)
11 Computation of Net Income per Common Share (filed herewith)
13 The Company's 1997 Annual Report to Stockholders (not deemed
to be filed as part of this report except as to those parts
thereof specifically incorporated herein by reference)
21 Subsidiaries of the Company (filed herewith)
23 Consent of Arthur Andersen LLP(filed herewith)
23.1 Consent of Coopers & Lybrand L.L.P.(filed herewith)
24 Power of Attorney appointing Steven Siegel as
attorney-in-fact and representative for each of Samuel J.
Gerson, Mone Anathan, III, W. Jay Carothers, Robert P.
Henderson, Paul D. Paganucci, Dorsey R. Gardner, John Eyler
and Harold Leppo.
27 Financial Data Schedule (filed herewith)
</TABLE>
* Management contract or compensatory plan or arrangement.
(b) The Company filed no reports on Form 8-K during the fourth quarter of Fiscal
1997.
11
<PAGE> 12
- --------------------------------------------------------------------------------
FILENE'S BASEMENT CORP.
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Filene's Basement Corp.
By: /s/ SAMUEL J. GERSON
---------------------------------------
Samuel J. Gerson
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
and Director
Date: May 1, 1998
12
<PAGE> 13
- --------------------------------------------------------------------------------
FILENE'S BASEMENT CORP.
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on May 1, 1998 by the following persons on behalf
of the registrant and in the capacities indicated.
*
- ------------------------------------------------------------
Samuel J. Gerson
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer) and Director
*
- ------------------------------------------------------------
W. Jay Carothers
President, Chief Operating Officer
and Director
*
- ------------------------------------------------------------
Mone Anathan, III
Vice Chairman of the Board of Directors,
Chairman of the Executive Committee and Director
/s/ STEVEN SIEGEL
- ------------------------------------------------------------
Steven Siegel
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
(Principal Financial and Accounting Officer)
*
- ------------------------------------------------------------
Robert P. Henderson
Director
*
- ------------------------------------------------------------
Paul D. Paganucci
Director
*
- ------------------------------------------------------------
Dorsey R. Gardner
Director
*
- ------------------------------------------------------------
John Eyler
Director
*
- ------------------------------------------------------------
Harold Leppo
Director
*By: /s/ STEVEN SIEGEL
-----------------------------------------------------------
Steven Siegel
Attorney-In-Fact
13
<PAGE> 1
EXHIBIT 10.10
COLLECTIVE BARGAINING AGREEMENT
BETWEEN
FILENE'S BASEMENT INC.
AND
UNITED FOOD AND COMMERCIAL
WORKERS UNION LOCAL 1445, AFL-CIO
Effective: February 1, 1998
Expires: February 4, 2002
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I -- AGREEMENT...................................................... 3
ARTICLE II -- RECOGNITION................................................... 4
ARTICLE III -- JURISDICTION................................................. 5
ARTICLE IV -- CHECKOFF...................................................... 8
ARTICLE V -- COMPANY RIGHTS................................................. 9
ARTICLE VI -- WORKING SCHEDULES............................................. 10
ARTICLE VII -- OVERTIME..................................................... 23
ARTICLE VIII -- FUNERAL LEAVE............................................... 26
ARTICLE IX -- WAGES......................................................... 27
ARTICLE X -- PROMOTIONS, TRANSFERS & LAYOFFS................................ 35
ARTICLE XI -- SEPARATION ALLOWANCE.......................................... 39
ARTICLE XII -- USE OF COMPANY RECORDS....................................... 41
ARTICLE XIII -- VACATIONS................................................... 42
ARTICLE XIV -- LEAVE OF ABSENCE............................................. 45
ARTICLE XV -- DISCOUNTS..................................................... 47
ARTICLE XVI -- GRIEVANCE INVESTIGATION...................................... 48
ARTICLE XVII -- CONTRIBUTIONS............................................... 50
ARTICLE XVIII -- PUBLICITY & ANNOUNCEMENTS.................................. 50
ARTICLE XIX -- UNIFORMS..................................................... 50
ARTICLE XX -- INSURANCE..................................................... 52
-2-
<PAGE> 3
ARTICLE XXI -- CONTRACTUAL OBLIGATION....................................... 59
ARTICLE XXII -- VALIDITY.................................................... 60
ARTICLE XXIII -- GRIEVANCE PROCEDURE........................................ 61
ARTICLE XXIV -- ARBITRATION................................................. 63
-3-
<PAGE> 4
ARTICLE I
AGREEMENT
This collective bargaining agreement between Filene's Basement Inc.,
hereinafter referred to as the "Company", and the United Food and Commercial
Workers Union, Local 1445, AFL-CIO, its successors or assigns, hereinafter
referred to as the "Union", shall become effective on the date of its execution
and shall continue in full force and effect until February 4, 2002, and
thereafter, from year to year, unless notice of requested modifications or
termination is given by either of the parties hereto by notice in writing to the
other party mailed or delivered at least sixty (60) days prior to February 4,
2002, or February 1 of any subsequent year. Each party agrees that if such
notice is given, negotiations shall be started within thirty (30) days and that
the parties shall make every reasonable effort to reach an agreement before the
expiration of the contract. Should no renewal agreement be consummated by
February 4, 2002, or February 1 of an year thereafter, the terms of the
agreement shall be extended until ninety (90) days have expired from the date on
which notice was given, as herein above set forth, when by joint agreement of
both parties the unresolved issues may be referred to arbitration.
Notwithstanding the terms of this contract, its expiration date, or any
extensions thereof, Article XX(G) shall be construed as a separate contract
which shall continue in effect until such time as the Filene's Basement
Employees Retirement and Profit Sharing and Savings Plan may be terminated or
modified, in accordance with the Provisions of said Plan.
-4-
<PAGE> 5
ARTICLE II
RECOGNITION
A. The Company recognizes the Union as the sole collective bargaining
agent with respect to rates of pay, wages, hours of employment, or other terms,
tenure or conditions of employment for all employees coming under the
jurisdiction of the Union; as hereinafter provided, in the Boston store. This
agreement is limited to and embraces only such matters as are specifically set
forth herein, except as the parties in writing may add to or modify this
agreement.
The Company and the Union agree not to discriminate against any
individual with respect to hiring, compensation, and other terms and conditions
of employment because of an individual's race, color, religion, sex, national
origin or age, as provided by law, nor will they limit, segregate or classify
employees in any way to deprive any individual employment opportunities because
of race, color, religion, sex, national origin or age, as provided by law.
B. The Company agrees that they will not exercise or countenance any
discrimination, interference, restraint, or coercion by the Company, or any of
their agents, servants, or employees against any employee because of membership
in the Union or because of any lawful activities in behalf of the Union.
-5-
<PAGE> 6
ARTICLE III
JURISDICTION
A. The Union shall have jurisdiction over all employees sixty (60) days on
the Company's regular payroll with the following exceptions:
1. Members of the following Unions:
Carpenters' District Council of Boston and vicinity;
Brotherhood of Painters, Decorators, and Paper Hangers
District Council 35;
International Brotherhood of Fireman, Oilers, Local Number 3;
Boston Joint Board, Amalgamated Clothing Workers of America
when employed in the occupation in connection with which the
Company recognizes these Unions as collective bargaining
agents;
2. Officers of the Company, the Management Board and Executives,
Executive Trainees for the first six (6) months of their employment,
assistants
-6-
<PAGE> 7
and secretaries. A new incumbent shall have the same status with
respect to eligibility for Union membership as the employee whom he or
she replaces;
3. All employees in the following classifications: except
Manufacturers' Representatives whose salaries are paid either in whole
or in part by persons or corporations other than the Company,
Protection Department;
Special employees, except as provided in Subsection (4);
employees on Christmas seasonal payroll (employees hired between
October 15th through the first Monday following the January Inventory);
summer hires; other seasonal employees hired for (90) days or less,
Personnel Division, College Cooperative Students, except in cases where
employment continues beyond the regular Cooperative Student period,
Payroll Clerks, Architects' Staff, Copywriters, Advertising Agents,
Electrical Auxiliary Machine Operators; and,
4. There shall be a ninety (90) day limit on the continued use of
special employees, except in straight commission departments and
replacement of regular employees on disability or leave of absence.
Except as above provided when a job shall have been covered by one or
more special employees for a total of ninety (90) days within a period
of one hundred and twenty (120) working days, thereafter, such job
shall be filled with payroll status.
-7-
<PAGE> 8
B. Regular part-time employees under the jurisdiction of the Union shall
be guaranteed a minimum of four (4) hours daily and twelve (12) hours weekly
unless mutually agreed upon between the Company and the employee, to a maximum
of 29.9 hours per week.
C. Article XX of this agreement shall not be applicable to part-time
employees regularly scheduled to work less than fifteen (15) hours per week.
D. All employees, except those exempted in Section A above, shall be
required as a condition of employment to join the Union after sixty (60)
calendar days on the regular payroll of the Company, and to maintain such
membership in good financial standing in accordance with the provisions relating
to membership dues and initiation fees in the Constitution and Bylaws of the
Union during the life of the contract.
E. An employee who has been in an excluded classification or position and
is permanently transferred into one within the jurisdiction of the Union shall
be required to resume his/her Union membership, and, if he/she has not formerly
been a members of the Union, shall be required to join the Union within sixty
(60) calendar days after such permanent transfer. An employee permanently
transferred from a position under the jurisdiction of the Union to an excluded
position will become ineligible for membership in the Union on the satisfactory
completion of the
-8-
<PAGE> 9
trial period, if any, but in any case not later than one (1) month after the
transfer. Time spent over one (1) year in the excluded classification will not
be applied to bargaining unit seniority.
F. All full time employee shall be deemed to be on probation during the
first sixty (60) calendar days of employment on the regular payroll and all part
time employees shall be deemed to be on probation during the first ninety (90)
calendar days of employment on the regular payroll, during which time he/she may
be discharged within the sole discretion of the Company. The probationary period
may be extended by mutual agreement of the Company and the Union.
G. The Union agrees to indemnify the Company and save the Company harmless
from any claims made against the Company by employees or any other party which
may result directly or indirectly from the execution of this agreement or from
inclusion in the contract of any provisions which may be invalid under the Labor
Management Relations Act of 1947, as amended, or as a result of any action taken
by the Company at the request of the Union.
ARTICLE IV
CHECKOFF
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<PAGE> 10
The Company agrees to deduct weekly from the earned wages of employees
under the jurisdiction of the Union who individually authorize such deductions
in writing on a form acceptable to the Company, initiation fees and dues, and
once each calendar year a deduction for a political contribution, as provided
under the Bylaws of the Union, and to remit same by check to the president of
the Union each week.
ARTICLE V
COMPANY RIGHTS
It shall be the exclusive right and responsibility of the Company,
subject to and in conformity with the provisions of the agreement, to operate
the business under the established policies and rules; to open new departments,
stock new lines of merchandise, hire trained specialists to staff such
departments if not otherwise available, or to discontinue departments or lines
of merchandise; to hire, maintain order and efficiency, transfer, promote and
demote, to lay off, suspend or otherwise discipline, or to discharge for
reasonable cause, provided, however, that an aggrieved employee shall have the
right of appeal through the grievance procedure any such matter not specifically
excluded therein.
It shall be within the Company's sole discretion to revise, eliminate,
consolidate, or add job classifications; temporarily to transfer employees from
selling to non-selling duties and vice-versa; to add non-selling or selling
duties to an
-10-
<PAGE> 11
established job classification on a permanent or temporary basis, without
additional compensation and without a reduction in compensation, provided that
the added duties fall in the same or lower grade except that where less than all
of the employees in a job classification are affected by such an addition, the
change shall be applied to those employees with the least seniority. It is
understood that this exposition of management rights is not all inclusive and it
is agreed that it shall not be deemed to exclude other prerogatives generally
recognized as the functions of management which are not herein specifically
enumerated.
In consideration of this agreement, the Union agrees to cooperate with
the Company in maintaining and improving the skill, ability and production of
its members as employees and in eliminating waste and abuse of privilege.
The Union further agrees that full consideration shall be given to the
necessity for efficient operation of the business.
ARTICLE VI
WORKING SCHEDULES
A. The Company shall determine store open hours. Any changes in store open
hours other than those necessitated by Federal or State order shall be discussed
with the Union before announcement of such change is made.
-11-
<PAGE> 12
The Company agrees that when a permanent opening occurs in any
full-time sales job (thirty hours or more) or a part-time commission sales job
(under thirty hours), notice of such opening will be posted in the store.
Employees will have an opportunity to be considered for such openings. Job
posting will be a minimum of five (5) working days. The Company shall provide
copies of such postings to the appropriate stewards in the facility.
B. The regular schedule of hours for full-time status employees working
forty (40) hours shall be five (5) days with no day totaling more than eight (8)
hours.
C. Permanent changes in regular working schedules for classifications of
less than one (1) hour and for individuals may be made at the discretion of the
Company upon written notice of two (2) weeks to the Union, except that such
notice may be waived by mutual agreement of the Company, the Union and the
majority of the employees affected. The Company shall have sole right to make
temporary changes in schedules to conform with changes in store open hours.
D. For figuring wage deductions for tardiness or absence, the smallest
unit shall be six (6) minutes of any day. When there is a general problem with
public transportation, no employee will be charged with a tardy.
-12-
<PAGE> 13
E. All employees scheduled for more than six (6) hours may have at least
one-half (1/2) hour for lunch, and such lunch or other meal time shall be unpaid
and not included in the schedule of working hours.
F. The Company agrees that schedules shall be so arranged that the day's
work is continuous, except for regular meal periods, not to exceed one (1) hour
each, and for voluntary extra-duty assignments of employees in departments or
classifications other than their own. Such voluntary extra-duty assignments may
either precede or follow the employee's regular schedule for periods not to
exceed four (4) hours a day.
G. RELIEFS
Daily reliefs for employees on a work schedule of more than four and
one-half (4 1/2) hours shall be regularly scheduled as part of the working hours
in employment classifications requiring very close application to operating
equipment or necessitating actual station coverage. Other employees working on a
regular daily schedule of more than four and one-half (4 1/2) hours shall, on
request to the department head, be granted a daily relief period of twenty (20)
minutes, to be arranged by the department head at a time when it will interfere
least with operating or service requirements.
In departments, workrooms, or sections where there is no supervisor in
attendance, a daily relief period of twenty (20) minutes shall be regularly
scheduled
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<PAGE> 14
for every employee whose regular daily schedule exceeds four and one-half (4
1/2) hours.
H. PAID HOLIDAYS
New Year's Day * Washington's Birthday (or another
Memorial Day holiday to be designated by the
Labor Day Company)
Independence Day
*** Veterans' Day Columbus Day
** Christmas Day Thanksgiving Day
* A day off in lieu of this holiday may be scheduled by the Company for
each eligible employee within the period including the two (2) calendar
weeks before and the four (4) calendar weeks after the holiday.
** A day off in lieu of this holiday may be scheduled by the Company for
each eligible employee within the month of January.
*** Veterans' Day shall be a floating holiday with the following
guidelines: employees shall receive time and one-half (1 1/2) for all
hours worked on Veterans' Day; those employees who wish to participate
in Veterans' Day
-14-
<PAGE> 15
parades or meetings may do so with no penalty; employees may take off
another day with pay, mutually agreeable between the employee and the
Company, prior to the close of the year, or they may utilize that day
or a personal day for the purpose of taking Martin Luther King Day as a
paid holiday.
TWO (2) PERSONAL DAYS:
To be taken during the contract year at a time mutually agreeable
between the employee and his or her immediate supervisor. At the discretion of
the Company, associates will be permitted to utilize a personal day without
advance approval for emergencies, illness of family members, or when weather
conditions prevent the associates from reporting to work.
If the store is closed on Easter Sunday employees scheduled to work on
that Sunday will have an option to take a personal day or work those hours on
one of their days off.
Newly hired employees are eligible for two (2) personal days after
completing six (6) months of employment. An employee discharged for theft or
complicity in theft shall not be entitled to pay in lieu of unused Personal
Days.
I. HOLIDAYS AND DAYS OFF
-15-
<PAGE> 16
1. During the workweeks which include the eleven (11) holidays,
all employees, except as are hereinafter provided for in subsections
(2) and (3), who have been employed continuously on the regular payroll
of the Company for sixty (60) calendar days preceding such holiday
workweek and who work the regularly scheduled workdays immediately
preceding and immediately following the holiday, unless the Company
within its discretion waive such requirement for either of such
workdays, shall be paid for such unworked holidays at his or her base
rates. The Company shall have the right to change scheduled days off
for any employees during said eleven (11) holiday workweeks during the
period between Thanksgiving and Christmas, and in any week including a
holiday or half holiday on which a store is open. In any other week
containing a holiday or other regularly scheduled day of closing, the
closed day shall be the only day off. Holiday pay for employees on a
regular full-time schedule, except as hereinafter provided in
subsection (2) below, shall be the basic daily wage that the individual
employee would be paid if working his or her regular daily schedule.
Except for Washington's Birthday, Christmas Day, and the two
(2) Personal holidays, employees on a regular weekly schedule of less
than five (5) days, other than as provided in subsection (2) below,
shall receive holiday pay for the hours regularly scheduled to be
worked by any such employee on the day of the holiday. For the holidays
of Washington's Birthday, Christmas Day
-16-
<PAGE> 17
and the two (2) Personal holidays, whether they be scheduled workdays
or not, and when a holiday occurs on a day that is not a regularly
scheduled workday, the employee's holiday pay will be computed by
dividing the regularly scheduled hours in his/her workweek by the
regularly scheduled number of days in such week.
Anyone who works on a holiday automatically qualifies for the
holiday regardless if they work the scheduled day before or the
scheduled day after the holiday.
2. Subject to the same qualifying and eligibility provisions set
forth in Section (1), straight commission employees shall be paid for
such unworked holidays on the basis of average weekly earnings prorated
daily, as determined annually for the preceding twelve (12) month
fiscal period of the Company for the purpose of establishing the
vacation rate.
Such an employee who has qualified to receive holiday pay and
is required by the Company to work on his/her scheduled day off during
any one of the said eleven (11) holiday workweeks shall be paid for the
time worked in accordance with the provisions of Schedule (C).
-17-
<PAGE> 18
3. Any employee otherwise qualified to receive holiday pay who
takes his or her contractual vacation during a week in which any of the
paid holidays as above defined falls, shall receive either a
compensatory day off that is mutually agreeable between the employee
and the Company to be assigned during the vacation period, or straight
time pay for such holiday.
4. There shall be no day off on the days of the taking of
semi-annual inventories and any employee regularly scheduled to have
such a day off shall instead be assigned another day off during the
same week. The Company may also make changes in employees' scheduled
days off during weeks in which the inventory is taken.
5. Departmental working schedules shall be determined by the
Company and, except in emergency or on days of store closing, shall be
posted by 3:00 P.M. on Friday for the following workweek. Available
days off shall be selected based upon seniority by classification
within such supervisory areas as may be established by the Company.
6. Temporary changes in days off may be made when mutually
agreeable between the employee and his or her immediate supervisor no
later than the Friday previous to the week of the change. Temporary
changes in days off and work schedules may be made unilaterally by the
Company between
-18-
<PAGE> 19
Thanksgiving and Christmas, during holiday weeks, the two (2) weeks of
semi-annual inventories, and with notice in the preceding workweek,
once each calendar quarter the Company may temporarily change an
employee's day off and work schedule for one (1) week. This latter
provision shall apply to employees in sales and stock positions.
J. STOCKTAKING
For the taking of the semi-annual inventory, every regular employee
shall be expected to work beyond his or her regular schedule. On such
semi-annual stocktaking days the Company may arrange special schedules to meet
service requirements. All hours worked by an employee over the number of hours
in the regular full-time schedule will be paid for at the rate of time and
one-half (1 1/2). An inventory allowance of five dollars ($5.00) shall be added
to the compensation of any employee if he or she is assigned to work after 6:00
P.M. on semi-annual inventory as above set forth. Inventory night may be the
second regularly scheduled night in the workweek and all employees are required
to work until completion of inventory.
K. CLASSES
Such voluntary classes or courses of instruction, before or after store
hours as are offered by the Company's Training Department in preparation for
promotions, shall not be considered as working hours, nor included in the
working schedule.
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<PAGE> 20
L. SALES EMPLOYEES
Sales employee's duties will include the cleaning of tops of all glass
and outside of showcases (in their own departments), including mirrors and the
moving of racks and totes and the picking up of supplies.
M. TEMPORARY SCHEDULES
With the exception of employees classified as Merchandise Clerks, there
shall be no temporary change of schedules, either full-time or part-time,
without the assent of the Union, except in cases of emergency, during holiday
workweeks, during the period from Thanksgiving to Christmas, to conform with
store or department open hours, and as otherwise provided in this agreement and
in Article VI, Sections C, I, and J.
In the event of any temporary change in store open hours involving an
earlier night closing, the starting time for second shift employees on the
full-time schedule shall be changed by the Company as they deem necessary to
provide for a full work schedule for such nights of earlier store closing.
N. JURY DUTY
An employee called for and accepted for jury duty, including Grand Jury
duty, shall be granted leave of absence from work without loss of seniority for
the time so spent. Upon submission of appropriate court document or endorsed
check received
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for jury duty service, the employer shall pay the difference to the employee for
each day or hours of jury duty which occurs on the employee's regularly
scheduled workday between the straight time wages up to his/her regular schedule
of weekly hours that would normally be paid by the employer and that received
from such jury duty service, provided, however, the employee shall not be
required to work at such times during the day when he/she is not required to
perform jury duty service.
The Company will comply with the applicable Juror Compensation Laws.
Employees who are required to perform jury duty may be required to work a
maximum of five (5) days including both Company and jury requirements, unless it
is mutually agreeable between the employee and the supervisor to work the sixth
(6) day.
Commission employees will receive the difference between their vacation
average and jury duty pay.
O. AVAILABILITY LISTS
1. Extra hours in a classification on other than a permanent
basis will be offered to employees in their classifications in a
supervisor's area in Boston as follows:
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(a). An availability list will be posted by the first of the
preceding month, and by the fifteenth of the preceding month
employees must declare in writing their availability for hours
over their normal schedule;
(b). Such extra hours will not change an employee's
classification;
(c). Employees shall be chosen from the availability list by
seniority on a rotating basis if present at work, for work
performed on that day;
(d). The employee must take the entire schedule that provides
the extra hours;
(e). If an employee is unavailable when asked in turn, that
employee's name will be dropped from the list for the
remainder of that month and for the succeeding month, unless
previously excused;
(f). If no employee in a supervisor's area is available for
such extra hours, the extra hours will be offered by seniority
on a store-wide basis.
2. Sunday work will be offered as follows:
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(a). An availability list will be posted by the first of the
preceding month, and by the fifteenth of the preceding month
employees may declare themselves available for Sunday work in
their classifications;
(b). Interested employees must sign for at least one (1)
Sunday each month, except that for the months of June, July
and August they must sign up for two (2) Sundays for each
month, and the Company will provide work opportunity for that
number of Sundays each month. For seniority purposes, all
employees will be merged by classification. Preferential work
assignments (hours and departments) will be made as the
Company determines the need, by seniority on a rotating basis,
of those names on the list, and if such hours and departments
are available; and,
(c). If an employee is unavailable when asked in turn, that
employee's name will be dropped from the list for the
remainder of that month and for the succeeding month, unless
previously excused.
P. 1. The Company shall schedule a minimum of three (3) Monday
through Friday shifts for commission employees, two (2) of which shall
be for suits, and one (1) for sport coats and slacks.
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2. Sunday shifts for commission employees shall be 10:45 AM to
5:45 PM and 11:30 AM to 6:30 PM and 12:30 PM to 7:30 PM. These shifts
are subject to change if the opening and/or closing times of the store
changes.
3. During the regular work week, commission salespersons can work
a maximum of five (5) days.
ARTICLE VII
OVERTIME
A. All full-time employees, except straight commission salespersons, shall
be eligible for overtime compensation on a daily basis at the rate of time and
one-half (1 1/2) in cash for time worked over and above their regularly
scheduled working hours. Such overtime compensation shall not be paid for any
period less than six (6) minutes in excess of the individual employee's regular
daily schedule, but if overtime work runs to six (6) minutes or more,
compensation shall be paid from the end of such regular schedule and shall be
computed in six (6) minute units.
B. Except in cases of emergency, no employee shall be required to work
overtime unless notified on the preceding business day.
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C. The hourly overtime rate shall be computed on the basis of the average
weekly schedule.
D. A part-time employee may be scheduled to work full-time for a period of
a week or more at the employee's regular hourly rate, and such additional time
shall be on a voluntary basis.
E. Part-time employees who are required to work beyond their regular daily
schedule on a day-to-day basis shall be paid straight time for such work up to
the full-time schedule.
F. Overtime compensation at the rate of time and one-half (1 1/2) for work
performed in addition to regularly scheduled working hours shall be paid to
straight commission employees assigned to non-selling duties, with the exception
of inventory which will be paid at straight time, such compensation to be on the
basis of average hourly earnings of the employee's department, computed annually
on the last prior twelve (12) month departmental average ending the last
Saturday of each fiscal year.
G. An employee who is required to work either on a holiday, or on a
scheduled day off at times other than permitted under Article VI, Sections C, I
and J, shall be compensated at the rate of time and one-half (1 1/2) for the
time so worked in addition to holiday pay, if any. Overtime at premium time will
not be paid until the sixth (6)
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day worked of any regular workweek, and the fifth (5) day worked in a paid
holiday week.
H. An employee who volunteers and is scheduled to work on Sunday, shall be
guaranteed four (4) hours pay at the rate of time and one-half (1 1/2), unless
he or she has worked the six (6) days immediately preceding, in which event he
or she shall be given a day off within the next six (6) days when necessary to
comply with State Law. Employees hired who accept a schedule which included
Sunday hours will be required to adhere to this schedule.
I. In case of an emergency closing, employees will not be paid if the
Company has arranged for public notification by radio or telephone of such
closing before the start of their schedule for the day, provided, however,
employees who are in transit to work who missed the public notification of
emergency closing and sign in at their location will be paid for their full
scheduled shift.
J. The Company may require sales employees to work one (1) night which may
include one (1) Saturday night every four (4) weeks. This limitation to one (1)
Saturday night every four (4) weeks applies to all full-time sales associates.
All employees may be required to work two (2) nights per week during the period
between Thanksgiving Day and Christmas, and during the weeks in which
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semi-annual inventory is taken. Inventory night may be the second regularly
scheduled night in the workweek.
ARTICLE VIII
FUNERAL LEAVE
In the event of a death in the immediate family of a regular associate,
he or she shall be allowed five (5) consecutive calendar days absence from work,
beginning with the day after the date of death, to attend the funeral without
loss of regular straight time pay for the straight time hours he or she would
normally be scheduled to work.
Immediate family shall mean parent, child, spouse, brother, sister,
mother-in-law or father-in-law, step-parents, or any other permanent resident of
the household. If the death falls within an associate's vacation week, the
associate will be allowed that same five (5) calendar days in the following week
on the same conditions with the same pay.
Such associate will be given two (2) days off without loss of pay to
attend the funeral of a family member, including brother-in-law or
sister-in-law, son-in-law or daughter-in-law, aunt or uncle (if sister or
brother of associate's parent), grandparents, other than the immediate family,
in accordance with the Company's
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past practice. Such associate will be given one (1) day off without loss of pay
to attend the funeral of a niece or nephew. If the death falls within an
associate's vacation week, the associate will be allowed the same two (2) or one
(1) calendar days in the following week on the same conditions and with the same
pay.
ARTICLE IX
WAGES
A. RATE ADJUSTMENTS
All regular full-time and part-time associates with over five (5) years
of service on January 4, 1998, shall receive an increase of thirty-five cents
(35(cent)) per hour on that date. All regular full-time and part-time associates
with over one (1) year of service on January 4, 1998, shall receive an increase
of thirty cents (30(cent)) per hour on that date. All regular full-time and
part-time associates with less than one (1) year of service on February 6, 1998,
shall receive an increase of twenty cents (20(cent)) per hour on the employee's
first anniversary date.
All regular full-time and part-time associates with over five (5) years
of service on January 31, 1999, shall receive an increase of forty cents
(40(cent)) per hour on that date. All regular full-time and part-time associates
with over one (1) year of service on January 31, 1999, shall receive an increase
of thirty-five cents (35(cent)) per hour on that date. All regular full-time and
part-time associates with less than one (1) year of
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service on January 31 1999, shall receive an increase of twenty cents (20(cent))
per hour on the employee's first anniversary date.
All regular full-time and part-time associates with over five (5) years
of service on February 6, 2000, shall receive an increase of forty cents
(40(cent)) per hour on that date. All regular full-time and part-time associates
with over one (1) year of service on February 6, 2000, shall receive an increase
of thirty-five cents (35(cent)) per hour on that date. All regular full-time and
part-time associates with less than one (1) year of service on February 6, 2000,
shall receive an increase of twenty cents (20(cent)) per hour on the employee's
first anniversary date.
All regular full-time and part-time associates with over five (5) years
of service on February 4, 2001, shall receive an increase of forty-five cents
(45(cent)) per hour on that date. All regular full-time and part-time associates
with over one (1) year of service on February 4, 2001, shall receive an increase
of forty cents (40(cent)) per hour on that date. All regular full-time and
part-time associates with less than one (1) year of service on February 4, 2001,
shall receive an increase of twenty cents (20(cent)) per hour on the employee's
first anniversary date.
B. The Company shall have the sole discretion to hire new employees at a rate
either within or above the rate ranges based upon experience as determined by
the Company to be appropriate without effect on the wage rates of other
employees,
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provided, however, that each full-time new employee shall receive an automatic
increase of twenty-five cents (25(cent)) per hour after sixty (60) calendar days
on the regular payroll, and for all part time employees after ninety (90)
calendar days on the regular payroll.
C. COMMISSION RATES
1. A straight commission plan is one which pays an employee a
stated percentage of the net amount of sales made or services performed
by the employee.
2. Commissions shall be paid to employees in the departments and
at the rates provided in Paragraph 5 of this section.
3. Straight commission employees shall be paid a weekly salary
against commission earnings in an amount not exceeding seventy percent
(70%) of their respective average weekly earnings as adjusted on June 1
of each year, computed on the basis of the average weekly earnings for
the twelve (12) month period ending the previous January 31 and
pro-rated daily for the current normal workweek. Employees on the
payroll February 22, 1977, in straight commission departments, will
have their deficits wiped out weekly. Employees hired after February
22, 1977, will have their deficits wiped out at the end of each fiscal
month. Employees hired after February 6, 1995 will have
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their deficits wiped out at the end of each fiscal quarter. Employees
hired after February 1, 1998 will have their deficits wiped out
seasonally twice a year.
4. Unidentified credits and debits will be charged against the
house key in all commission departments. Any remaining such credits and
debits will be apportioned on an equal basis among the salespersons in
the department. At no time will credits be reduced to less than zero.
STRAIGHT COMMISSION:
(a). Men's Clothing - Boston Basement Store
The straight commission plan will be as follows:
Regular price and first markdown merchandise 6.5%
During all sales, other than auto.markdown 6.5%
Top Coats, Rain Coats, All Outerwear 6.5%
Second markdown merchandise 50% off 5%
Third markdown merchandise 75% off 4%
The Company agrees to provide a "Long Term Disability Program" that
will be optional for commission personnel.
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Should these Men's Clothing Associates sell non-commission merchandise,
they shall be paid at the rate of three percent (3%).
Annual Incentive Bonus, based on the following schedule, will be paid
each April: the formula for the straight commission bonus in the commission
schedule will increase by .025%, to a maximum of one percent (1%) over the base
rate for every ten percent (10%) of net sales over the average of the following
areas:
Men's Clothing Boston Basement full-time
Men's Clothing Boston Basement part-time
The average annual net sales for each area will be totaled as soon as
the data is available after the close of business of the fiscal year. These
totals will be the base for calculating the progressive bonus schedule for the
following year.
Part-time employees will participate in the bonus schedule as follows:
Part-time employees will develop their own base figures for
the purpose of calculating the progressive bonus schedule. An
average net sales per hour for part-time employees will be
developed by taking the annual sum of all their sales and
dividing this by the total annual hours worked by part-timers.
The average sales per hour developed in Step 2
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will be multiplied by 1904 (comparable annual hours of
full-time sales employees). This will establish their annual
base sales for purposes of the bonus schedule. The individual
will have his/her annual sales divided by the number of hours
worked to develop his/her individual sales per hour. This will
then be multiplied by 1904 hours (comparable full-time
salesperson annual hours). This annual net sales figure will
be applied against the bonus schedule and the persons will
receive a prorated share of the earned bonus (i.e., if the
bonus on the schedule is $500.00 and the hours worked by the
individual is 952, one-half the annual full-time equivalent,
he/she will receive fifty percent (50%) of the bonus of
$250.00).
LUMP SUM PAYMENT
All full-time straight commission Men's Clothing associates shall
receive a lump sum payment in each of the years of the contract payable
semi-annually as follows:
<TABLE>
<CAPTION>
FEBRUARY AUGUST
-------- ------
<S> <C> <C>
1998 250.00 250.00
1999 250.00 250.00
2000 250.00 250.00
2001 250.00 250.00
</TABLE>
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Such payment shall be one half (1/2) for part-time associates.
D. PERMANENT CHANGES IN STATUS
1. PROMOTION
In the case of promotion, the employee's rate shall be
increased to not less than the minimum of the new job grade.
2. TRANSFERS
No change of rate shall result from a transfer within the same
grade, or to an excluded job classification having the same rate range;
the transferred employee carries with him or her service accumulated
toward the next salary advance. The employees seniority shall continue
during the period of the transfer.
3. DEMOTION
The rate of a demoted employee shall be determined by current
rates of like-service employees currently holding the same position,
and if above maximum of the new range it shall be decreased to the new
maximum. If the rate is within the new range, it shall not be
decreased. If there is a job vacancy
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which the employee is considered by the Company to be qualified to
fill, but which would result in a reduction to the lower wage of more
than ten percent (10%), the reduction to the lower wage shall be
deferred for the number of weeks that the employee has years of service
on the regular payroll.
E. TEMPORARY TRANSFERS
1. Temporary transfers of over one (1) hour to a higher grade
will be paid at the applicable rate of the higher rated job for the
number of hours worked in the new classification. There will be no
increased payments for such work less than one (1) hour.
(a). An employee transferred to sell in straight commission
department for the full scheduled shift shall receive the
commission rate for the department, but no other compensation.
An employee on straight commission transferred to sell in a
non-commission department shall receive his/her own commission
rate.
(b). In the case of temporary transfers for vacation relief
not to exceed two (2) weeks in each scheduled vacation period,
there shall be no change in rate except for heavier duties.
2. OTHER TRANSFERS
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A temporary transfer shall not cause a rate change. Time spent
on such temporary placement shall count as time spent on the permanent
assignment. Any rate change which would be granted to the employee, had
he/she been retained on his/her permanent assignment, shall be
effective on the date it would have otherwise become effective.
3. The above rules shall be applied in the cases indicated and in
similar situations which arise, so as to give due consideration both to
the employee's rights and to his/her duty to accept such temporary or
emergency assignments as the Company considers necessary to meet
operating conditions as they arise.
ARTICLE X
PROMOTIONS, TRANSFERS & LAYOFFS
In consideration of promotion or transfer, seniority by job
classification within a supervisor's area in Filene's Boston Basement Store
shall be the determining factor where ability and fitness are considered by the
Company to be substantially equal.
Consideration for promotional transfer shall be given first to
employees in the immediate department; next, to those in the supervisor's area;
next, to those in the same store; and lastly, to those in other stores of the
Company.
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For a period of thirty (30) days associates promoted or transferred
pursuant to this Article shall be in a trial period during which either the
Company or associate may effectuate a return of the associate to the associate's
previous job.
APPLICATION OF SENIORITY
1. Regular employees shall have their benefit date as their
seniority date for purpose of layoff or recall.
2. Separate shift seniority lists for each work group established
by the Company, i.e., sales, stock, etc., shall be maintained for
full-time employees, part-time day employees and part-time evening
employees. The second shift shall include any employee whose regular
schedule starts on or after 4:00 P.M.
3. Weekly work schedules will be selected on the above seniority
basis by those employees who are assigned within a department
manager/supervisor's work group.
4. If a layoff becomes necessary, the junior employee/employees
within the work group, by classification affected (full-time or
part-time) and shift that is being reduced, shall be laid off. Recalls
will be made in the reverse order of layoff. All associates have recall
rights after layoff for a period of time only
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equal to their length of employment, not to exceed one (1) year. An
employee will be terminated if he/she fails to report within one (1)
week of recall. The termination date will be the date of recall.
5. In the event of a layoff due to a discontinuance of a
department or reduction of force, the Company shall endeavor to arrange
a transfer to another job classification for which the employee may be
considered to be qualified. Otherwise, the employee will be transferred
to the job of the least senior employee in the store, on which job
he/she has prior satisfactory experience, and the displaced employee
shall be laid off so that there will be no bumping. If there is a job
vacancy which the employee is considered to be qualified to fill, but
which would result in a reduction in weekly wage of more than ten
percent (10%), the employee shall have the option of taking the
separation allowance or the transfer to the lower rated job. If such
transfer is made, the reduction to the lower wage shall be deferred for
the number of weeks that the employee has years of service on the
regular payroll.
6. Company benefits will not accrue during layoff status, except
as listed below:
(a). LIFE INSURANCE will cease on the day following the layoff
but there will be a thirty-one (31) day period of grace in
which the
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employee may convert all or part of this insurance. If the
employee returns to work within one (1) year after the date of
the layoff, his or her life insurance will be reinstated as of
the date of his or her return to work;
(b). SICK PAY will terminate on the first day of the layoff.
(c). HEALTH INSURANCE
In the event of a layoff, health insurance may be
continued in accordance with the provisions of Cobra. If the
employee returns to work within one (1) year after the date of
the layoff, his/her health insurance will be reinstated as of
the date of his/her return to work.
(d). VACATIONS
If a vacation with pay is due an employee on the date
of layoff, he or she will be given his or her vacation
entitlement on the date of layoff.
7. At each location the Union may designate one (1) employee as
Chief Shop Steward. Such employee will be the last to be laid off in
his/her work group and classification, provided that he/she is
qualified to perform the required work.
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8. If the layoff extends beyond one (1) year without recall to
the same job or a comparable (same pay and hours) job, the employee
will be terminated and separation allowance, if due, will be paid.
ARTICLE XI
SEPARATION ALLOWANCE
In the event of termination of employment due either to lack of work or
job elimination, an employee, subject to the exceptions hereinafter provided,
shall be entitled to a separation allowance based on his or her length of
continuous service on the regular payroll and on his or her basic weekly salary,
in accordance with the following schedule:
SERVICE SEPARATION ALLOWANCE
------- --------------------
1 year 1 week
2 years 2 weeks
and thereafter, an additional week's wages for each added year of service. An
employee shall not be entitled to separation allowance who:
1. Is discharged for just cause;
2. Has no break in employment with Filene's Basement
Inc., or a sub-contractor or lessee of Filene's Basement Inc.;
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3. Is discharged as a result of suspension or expulsion
from the Union under the procedure provided in Article III,
Section D of this agreement; and,
4. Resigns voluntarily, without action by the Company.
If the same employee is entitled to both dismissal wage and
vacation pay, he or she shall receive both.
ARTICLE XII
USE OF COMPANY RECORDS
The Company agrees to furnish the Union, or its duly constituted
representatives or attorneys, opportunity to inspect and to take copies of such
records as are required for the proper investigation of grievances under this
agreement.
In addition, the Company shall provide to the Union, on a timely basis,
a list of new hires, changes and terminations, and twice a year on February 1
and September 1 a seniority list by location.
ARTICLE XIII
VACATIONS
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All regular employees who, on June 1 of any year, have completed one
(1) full year of service shall receive a full two (2) weeks' vacation with pay.
All regular employees who on that date have been employed for more than six (6)
months, but less than one (1) year, shall receive one (1) week's vacation with
pay.
All regular employees who have completed five, six, seven, eight or
nine years of service prior to June 1 of any year, shall as of their anniversary
date be entitled to three (3) weeks' vacation with pay, and for ten (10) or more
years of service prior to June 1, four (4) weeks' vacation with pay.
All employees who have completed twenty-five (25) or more years of
service as of June 1st of any year shall receive five (5) weeks vacation with
pay.
In the event that June 1 of any year falls on a Sunday, entry on the
regular payroll on June 2 of that year shall be considered as qualifying such
employee for subsequent paid vacations in accordance with the schedule of
vacation eligibility set forth in the Article.
Employees who reach their fifth (5th) or tenth (10th) anniversary
before May 31 may take an additional week of vacation in that vacation year.
Such additional week of vacation may not be taken until the anniversary is
reached.
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For straight commission employees the average weekly earnings figure of
each employee, as computed annually to be effective on June 1 and pro-rated
daily for the number of days in the current normal workweek, shall be the
vacation pay base for vacations.
For all other employees, vacation pay of one (1) week shall be their
respective basic weekly wage. All vacations with pay shall be taken during
periods designated by the Company and shall be subject to the following
limitations for continuous absence; if an employee is absent sixty (60) days or
more consecutively, one (1) day for the first sixty (60) days of consecutive
absence and one (1) additional day for each subsequent thirty (30) days of
absence will be deducted from the next vacation due, except that if such absence
was due to illness or was the result of an injury incurred in the line of duty
where contributory negligence is not a factor, no vacation credits will be
withheld.
Unless an exception is made by the Vice-President of Personnel,
vacations shall begin on Sunday and be taken in one unbroken period. As far as
possible, vacations shall be arranged that it will not be necessary to fill the
place of any employee who is out. Vacation, therefore, shall not be grouped into
one (1) month, but spread over the entire vacation period.
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A list of available vacation weeks will be posted by the Company,
together with the number of employees in a supervisor's area who may take
vacations in each available vacation week, each May 1, and shall be determined
separately for full-time and part-time employees by total service on the shift,
within the classification. An employee shall have the right by seniority to
select his or her vacation period from the available weeks.
Exclusive of the week of Thanksgiving through the week of Christmas,
the Company may block out up to two (2) weeks per contract year in a
department/supervisor's area during which time that associate may not sign up
for a vacation. Employee selections shall be fixed by May 1; after which dates,
any employee who has not selected a vacation period may select a period only
from those vacation periods then available. Departmental employees will retain
their vacation preference if an employee is transferred into the department
after the vacations have been established for the vacation period.
No employee may take more than two (2) weeks' vacation between July 1st
and September 1st on the initial sign up in the spring. After all employees have
chosen, those employees above may choose any open weeks in the summer that are
still available.
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Employees absent due to illness or industrial accident, who fail to
return during the vacation period, must schedule owed vacation time within three
(3) months of their return to work. Pay cannot be taken in lieu of time off.
The Company will endeavor to maximize available vacation weeks during
prime vacation time, except during business emergencies.
When employees have left the location because of resignation or
dismissal and have then returned, the date of re-employment shall be considered
the date of employment for the purpose of calculating vacations, unless they
have been reinstated with credit for former service.
ARTICLE XIV
LEAVE OF ABSENCE
The Company may grant leaves of absence at their discretion to
employees with two (2) or more years of service without loss of rating on the
part of the employee on return to work, except that where an employee has been
on a leave of absence for over twelve (12) weeks for reasons other than
sickness, accident or maternity leave, the Company may assign the employee to
any job classification within the store which pays the same wage rate.
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Upon request of the Union, the Company agrees to grant leaves of
absence without pay, but with full seniority rights, up to one (1) year at a
time for not more than four (4) union officials.
The Company shall continue their present policies with respect to
granting leaves of absence for military service.
The Company shall comply with the Family Medical Leave Act.
While on unpaid leave of absence benefits such as employee discount and
paid holidays are suspended.
The Company shall permit one (1) steward per location to attend,
without loss of pay, one (1) annual steward's seminar conducted by the Union.
ARTICLE XV
DISCOUNTS
The Company agrees to maintain the cash discount policy, in effect on
the date of the signing of this agreement, on items of merchandise and service
on which employees were entitled to a discount on that date, as follows:
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A. BASIC DISCOUNT
1. Associates of Filene's Basement shall be eligible to
receive a twenty-five percent (25%) discount on Basement
merchandise subject to the exclusions and conditions stated in
the Basement's discount policy;
2. The Company will provide at least twice a year
(spring and fall) a minimum of thirty percent (30%) discount
on all items currently eligible for the twenty-five percent
(25%) discount;
3. Once each year the Company shall have a family
discount day in accordance with existing practice;
4. The employee discount will be provided to all
Basement retirees.
The Company further agrees to establish proper competitive discounts on
merchandise or service not now carried but which may be carried in the future.
The Union recognizes that this is a privilege which is to be guarded
and protected from abuse, and agrees to cooperate with the Company in such
action as may be necessary to the attainment of this end.
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ARTICLE XVI
GRIEVANCE INVESTIGATION
Activities of Business Agents on the premises of the Company shall be
confined to store open hours, except for such after hour meetings or conferences
as may be approved by the Vice-President of Personnel. Business Agents may
confer with the Labor Relations Manager at any time to secure information
essential to cases which they are investigating, but they shall secure the
permission of the Department Heads before talking with employees on their jobs,
which permission shall not be unduly withheld. When they are investigating
grievances, the settlement of which involves only equitable interpretation of a
provision of the contract, or any existing rule or practice, they shall be
recognized as empowered, under the direction of the Chief Business Agent, to
reach an understanding and settlement with the Company' s official
representative.
Other Union representative who receive complaints for adjustments may
transact such official business with the respective Department Heads as may be
considered necessary during store hours, under the same conditions as in the
preceding paragraph.
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It is understood and agreed that no deduction of wages shall be made by
the Company for time so taken by such union representatives from their regular
store duties for such conference with representatives of the Company.
Representatives of the Union employed on a straight commission basis on
the active payroll shall be compensated by the Company at their respective
vacation rate for time taken during store hours for conferences with
representatives of the Company.
ARTICLE XVII
CONTRIBUTIONS
All requests for store wide contributions of funds shall be voluntary.
Such requests for contributions from Union members shall be referred to the
Union for approval.
ARTICLE XVIII
PUBLICITY & ANNOUNCEMENTS
The Union shall be permitted to use for announcement of a
non-controversial nature such bulletin boards as are now in use, including the
exclusive use of a
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bulletin board in the employees' lounge corridor, and such other boards as may
be approved by the Company.
ARTICLE XIX
UNIFORMS
The Company agrees to furnish and keep in condition the major garments
(i.e., coat, trousers, dress or smock) of all uniforms or special apparel
prescribed and required as standard for a department or job classification.
Accessories such as shirts, ties, gloves, shoes and stockings, the
wearing of which is required to conform to a uniform or other prescribed dress,
will not be furnished by the Company, except in the case of an article which is
not recognized as a necessity of ordinary dress or which would not be otherwise
worn by the individual and which, therefore, would present an additional
expense.
When uniforms are worn not by requirement but by permission of the
Company on the employee's request, such obligation on the part of the Company
shall not apply.
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Nothing in this provision shall be construed as applying to the dress
rules which specify colors, types of dress, etc., in season, to be worn by
employees whose duties bring them in contact with customers.
The shipping and receiving dock personnel in the downtown Boston store
shall be provided appropriate winter vests or jackets and winter work gloves as
soon as possible. The Company agrees to provide safety steel toe boots to those
employees working on the Boston Store dock.
ARTICLE XX
INSURANCE
A. WORKER'S COMPENSATION PAY MAKE-UP
1. The Company shall compensate any regular employee injured in
performance of store duty, wherein contributory negligence or
disobedience of rules or orders is not established as a factor in such
injury or resulting disability, for the full amount of the employee's
financial loss, if any, between his or her net weekly straight time
take home salary and the amount of Worker's Compensation Insurance for
the period of disability only if such period of disability extends
beyond four (4) months. In such case, an employee will be eligible for
such pay make-up only for the fifth (5th) and sixth (6th) and seventh
(7th) month of continued disability. The Company will
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consider on its merits a case of permanent disability, partial or
total, extending more than six (6) months.
2. The Company will reimburse up to five (5) days to employees
who are absent due to an industrial accident and who return to work
prior to the statutory waiting period (currently 21 days).
B. SICK PAY
After six (6) months of employment, regular employees who are absent
from work because of non-occupational injuries or illness, shall receive
two-thirds (2/3) of their basic weekly pay up to a maximum benefit of two
hundred eighty dollars ($280.00) beginning February 1, 1998, three hundred
dollars ($300.00) beginning January 31, 1999, and three hundred twenty dollars
($320.00) beginning on February 6, 2000, three hundred forty dollars ($340.00)
beginning February 4, 2001. Benefits shall be paid after a two (2) day
continuous absence for employees on the regular payroll for less than eight (8)
years, after one (1) day continuous absence for employees who have been on the
regular payroll for more than eight (8) years but less than fifteen (15) years,
and employees who have less than one (1) year of service after three (3) days of
absence. Employees with fifteen (15) years or more of service will have no
waiting period. In cases where the Company deems it appropriate,
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proof of illness may be required. In either case, such payments will not exceed
fifteen (15) weeks total in any consecutive twelve (12) month period. This
benefit shall be provided for all regular employees whose regular work schedule
is fifteen (15) or more hours per week. The waiting period for illness pay of
one (1), two (2) or three (3) days will be eliminated for all eligible employees
who are confined to a hospital. The maximum weekly benefit listed in this
section is predicated on a five (5) day workweek. Eligible employees working
less than a regular five (5) day workweek are entitled to benefits not to exceed
the daily maximum benefits listed of $56.00, $60.00, $64.00 and $68.00 per day
of absence. Employees requesting to leave work due to illness before the end of
their scheduled workday will be paid only for all hours worked prior to leaving
if they have not worked one-half (1/2) of their scheduled hours for the day. If
they have worked over half of their scheduled hours, they will be paid for their
full schedule for the day.
C. LIFE INSURANCE
After six (6) months of employment regular employees (over 14.9 hours)
may participate in the Company's Life Insurance Program. An employee may
purchase Life Insurance in excess of annual earnings in five thousand dollar
($5,000.00) increments to a maximum of twenty thousand dollars ($20,000.00). The
Company will pay the premium for the first five thousand dollars ($5,000.00) of
coverage. The employee may purchase additional coverage up to ten thousand
dollars ($10,000.00) at a premium of forty-five cents (45) for each additional
thousand dollars. The
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Company will pay one-half (1/2) of the premium (45(cent) per thousand) for any
additional insurance beyond ten thousand dollars ($10,000.00) to a maximum of
twenty thousand dollars ($20,000.00).
Employees must enroll within thirty-one (31) days of date of
eligibility, which is either employment date or date of first eligibility
(schedule change).
D. HEALTH INSURANCE
Effective August 1, 1998, all regular employees on the payroll one (1)
year who wish to join the Company's health program and who work a schedule of
thirty (30) hours or more a week will contribute for family coverage an
additional weekly increase of:
$4.00 a week
Effective August 1, 1998, the eligible employees, thirty (30) hours or
more, shall have for a two (2) person plan an additional increase of:
$3.00 a week
Effective August 1, 1998, the eligible employees, thirty (30) hours or
more, shall have for individual coverage an additional increase of:
$1.50 a week
For eligible part-time employees, 15 to 29.9 hours, the Company's
contribution will be one-half (1/2) of its contributions for full-time
employees.
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For employees hired after February 5, 1995, twenty (20) hours shall be
required to participate in the health insurance program.
The Company agrees to pay one-half (1/2) of all increases in the health
insurance premiums in each of the last three (3) years effective August 1, 1999,
2000 and 2001.
E. The Company is currently investigating the feasibility of establishing
a Dental Plan for the Company. If such a plan is established Bargaining Unit
Employees will have the same opportunity to participate in the plan as all other
company employees.
F. HEALTH ENROLLMENT
Associates may enroll in the health insurance program at the following
times: within thirty (30) days of initial employment, thirty (30) days of first
eligibility, thirty (30) days of first anniversary, change of family status, or
during the open enrollment period.
Health insurance benefits shall remain at current levels for the life
of the agreement. The carrier may change during the life of the agreement.
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G. PENSION PLAN
The parties agree that the provisions of the Filene's Basement Inc.
Pension Plan and the Filene's Basement Inc. Thrift Incentive Plan, as
supplemented, restated and amended, and as the same may in the future be
supplemented or amended in accordance with their provisions, are included in and
made part of the agreement.
Notwithstanding the terms of this agreement or any other agreement
between the Company and the Union of any amendment, supplement or modification
thereof, and notwithstanding the termination date of this agreement or of any
future agreements between the parties, it is agreed that until such time as the
Pension or Thrift Plan may be terminated in accordance with its provisions, the
Company shall be under no obligation, legal or contractual, to bargain or
negotiate with the Union on any supplement or amendment of the Pension or Thrift
Plan, or any other pension, retirement or profit sharing plan. Notwithstanding
any other contractual or legal provisions, it is agreed that all questions
arising in the administration, interpretation and application of the Pension or
Thrift Plan shall be determined by the mechanism provided for in the plan, if
any, or by the Company, as the case may be, all such determinations shall be
final and binding on all persons. No disputes or disagreements with respect to
or arising in any way under the provisions of the Pension or Thrift Plan shall
be subject to the grievance procedures set forth in Article XXIII of this
agreement or the arbitration procedure set forth in Article XIV of this
agreement.
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All employees who were a participant of the Federated Department
Store's (FDS) RITI Program in effect on July 29, 1988, have automatically been
enrolled in the Filene's Basement, Inc. (FBI) Pension Plan. Those employees who
did not qualify for enrollment into the FDS Plan prior to July 31, 1988, or who
were hired after July 31, 1988, will automatically be enrolled into the FBI
Pension Plan on the January 1st nearest the date they complete the Plan's
eligibility requirement.
The eligibility requirement that must be satisfied in order to be
enrolled in the Plan is the completion of one thousand (1,000) hours of service
during the first twelve (12) months of employment or any subsequent calendar
year.
The Pension benefit is earned during an employee's career at FBI. The
accrued benefit is calculated using a defined formula that recognizes length of
service and final average salary. A participant becomes fully vested in the
accrued benefit upon the completion of five (5) years of service.
The Plan provides for the full benefit to commence payments upon normal
retirement age (age 65 for people born prior to 1937).
A participant with ten (10) or more years of service, who is within ten
(10) years of their normal retirement age, may elect to receive an early
retirement benefit.
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This will result in a reduction of 4.8% of the normal retirement benefit for
each year before normal retirement age that the pension starts.
The Plan also provides for a disability benefit and a death benefit
before retirement for eligible participants.
H. THRIFT
All employees who were enrolled in the FDS RITI Program are eligible to
participate in the FBI, T.I. Program. Those employees not enrolled prior to July
31, 1988, will be eligible to participate in the Plan at the start of the
quarter following the completion of the eligibility requirement.
The eligibility requirement is the completion of one thousand (1,000)
hours of service during the first twelve (12) months or any calendar year that
begins after the date of hire.
Employees of FBI, as of July 31, 1988, are automatically one hundred
percent (100%) vested towards any future Company contributions. Future
participants hired after July 31, 1988, will be subject to a three (3) year
vesting schedule in which they will become one-third (1/3) vested with each
completed year of service.
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ARTICLE XXI
CONTRACTUAL OBLIGATION
The Company shall not engage in any lockout, and the Union and the
employees shall not authorize, condone or engage in any strike, slowdown,
picketing or cessation of work or other interference with the business during
the life of the agreement by reason of any dispute or disagreement, (1) between
the two parties signatory hereto; (2) between either of the parties signatory
hereto and a third party; or (3) between individuals, corporations or unions not
signatory to this agreement.
In order to safeguard the Union from responsibility under the Labor
Management Relations Act of 1947, as amended, for violation of this clause by
irresponsible employees, it is agreed that where this clause has been breached
such breach shall be just cause of the Company to discipline the employee or
employees involved, provided, however, that the Union shall not be liable for
damages resulting from such violation, unless the Union has authorized the
violation or condoned it by failing to notify in writing the Company, other
unions and employees that such violation is an unauthorized breach of contract
and that picket lines should not be recognized, as well as to use all reasonable
means by personal contact and otherwise to stop an impending or actual breach of
this provision.
ARTICLE XXII
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VALIDITY
If any provision of this agreement or the application of such provision
to any person or circumstances shall be held invalid, the remainder of this
agreement or the application of such provision to other persons or circumstances
shall not be affected hereby.
ARTICLE XXIII
GRIEVANCE PROCEDURE
A. With reference to this agreement, a grievance is defined as any dispute
between parties or between the Company and employees under the jurisdiction of
the Union as to any matter involving the interpretation or application of this
agreement.
B. Changes in general business practice, the opening and closing,
transferring or leasing of departments, the stocking of lines of merchandise and
other matters of similar nature not relating primarily and directly to the
day-to-day working conditions of employees and the relations with supervisors,
the selection of employees for promotion to positions outside the jurisdiction
of the Union, and all matters involving Company rights as set forth in Article
V, shall not be subject to grievance procedure and shall not be arbitrable.
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C. In the event of a disagreement between the parties as to whether a
grievance is arbitrable, the matter at issue shall be referred to an impartial
arbitrator, as provided in Article XXIV, Section A, for final decision as to the
fact of arbitrability before consideration of the merits of the grievance.
D. Subject to the provisions of Section A to C, inclusive of this Article,
the following procedure shall be observed in the settlement of grievances and it
shall be the right of the aggrieved employee, on request, to be present in all
steps of the procedure.
E. The employee who is the grievant shall present the grievance in
writing, sign it and process it in Step 1 below within five (5) business days
after the incident giving rise to the alleged grievance.
1. The aggrieved employee and/or the Business Agent shall attempt
to adjust the matter at issue with the appropriate manager.
2. If the parties are unable to adjust the matter satisfactorily,
the grievance shall be submitted in writing by the Union to the Labor
Relations Manager within two (2) working days after its presentation in
Step 1. Within five (5) days thereafter, the Chief Business Agent
and/or the Business Agent of the respective division of the aggrieved
employee representing the Union, shall
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attempt to adjust the matter at issue with the Labor Relations Manager
representing the Company.
3. Failing satisfactory settlement between the parties within
seven (7) days after its presentation in Step 2, the matter shall be
referred to the Vice-President of Personnel and the Chief Business
Agent of the Union.
ARTICLE XXIV
ARBITRATION
A. If all the previous efforts have failed to adjust the grievance,
provided, however, that the question at issue is not in conflict with any other
provision of this agreement, upon written request of either party, mailed or
delivered within seven (7) business days after the completion of the
presentation of the grievance in Step 3, the matter shall be referred to an
impartial arbiter, to be selected by the Company and the Union in accordance
with the following procedure.
B. If the Company and the Union are unable to agree upon the selection of
an impartial arbiter within seven (7) business days after receipt by either
party of such written request by the other party, the matter at issue shall be
referred for adjudication to an arbitrator, to be selected under the rules and
procedures of the American Arbitration Association, whose authority shall be
final and binding on the
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parties. The cost of such arbitration proceeding shall be divided equally
between the Company and the Union, except that the party requesting any
postponement shall pay the costs, if any, charged by the arbitrator for such
postponement.
IN WITNESS WHEREOF the parties hereto have executed this agreement by
their duly authorized agents on the 15th day of April, 1998.
FILENE'S BASEMENT INCORPORATED
BY: /s/ DEBORAH FELIX
------------------------------
DEBORAH FELIX
UNITED FOOD & COMMERCIAL WORKERS UNION LOCAL 1445
BY: /s/ RICHARD CHARRETTE
------------------------------
RICHARD CHARRETTE
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INDEX
ARTICLE PAGE
Agreement 1
Arbitration 40
Checkoff 5
Company Rights 5
Contractual Obligation 38
Contributions 31
Discounts 29
Flex Force 46
Funeral Leave 16
Greater Boston Distribution Center 41
Grievance Investigation 30
Grievance Procedure 39
Insurance 32
Jurisdiction 2
Leave of Absence 29
Overtime 14
Promotions, Transfers & Layoffs 22
Publicity & Announcements 31
Recognition 1
Separation Allowance 25
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Uniforms 32
Use of Company Records 26
Vacations 26
Validity 38
Wages 17
Working Schedules/Holidays 6
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Exhibit 10.11
AMERICAN EXPRESS(R) CARD SERVICE AGREEMENT
FOR RETAIL ESTABLISHMENTS
This Agreement effective as of , 1989
("Effective Date"), covers your participation in the American Express(R) Card
Service ("Card Service"). This Agreement supersedes all previous agreements
covering your participation in the American Express Card Service. As you read
this Agreement, please note the words "you" and "your" mean Filene's Basement,
Inc., a Massachusetts corporation. The words "we", "our" and "us" refer to
American Express Travel Related Services Company, Inc. and its subsidiaries,
affiliates and licensees that issue Cards or participate in the Card Service.
For the purposes of this Agreement, a credit or charge card issued by us bearing
an American Express name, logo, trademark, service mark or copyright is called
the "Card" or "American Express Card", the person whose name is embossed on the
face of the Card is the "Cardmember", and all amounts payable by Cardmembers for
purchases made with the Card are called "Charges".
If all the provisions of this Agreement and all of our procedures and
rules are satisfied each time a Cardmember makes a purchase with the Card at any
of your establishments, we will accept Charges made at your establishment(s)
without Full Recourse.
"Full Recourse" shall mean that we are entitled to reimbursement from you
of the amount of any Charges in question to the extent of any payment made by us
to you, and that we can offset such amount by deducting the amounts of all such
Charges (less the discount you have previously paid us for such Charges) from
amounts due to you for Charges or, if such deduction is not
<PAGE> 2
possible, we can bill you for it. We will have Full Recourse for any Charges as
to which you have not complied with all the rules, procedures or conditions
stated in this Agreement, even if we had notice when we paid you that you did
not follow them. We also will have other rights to Full Recourse as specified in
this Agreement. Where we have the right to Full Recourse, we may delay asserting
this right during any period in which we or you are attempting to resolve a
dispute. Our rights to Full Recourse shall survive termination of this
Agreement.
1. PARTICIPATING ESTABLISHMENT
You agree that all retail establishments operated by you in the
United States (the fifty United States and Washington, D.C.), U.S. Virgin
Islands, Puerto Rico and Canada shall participate in the Card Service under the
terms of this Agreement.
2. ACCEPTING CARDS
You agree to permit Cardmembers to purchase goods and services
with the Card at your establishment(s) in accordance with the following terms
and conditions, except as otherwise provided in Section 14 hereof regarding
Charges made by mail or telephone:
a) the Card is presented on or subsequent to the beginning
date and on or prior to the expiration date shown on the
face of the Card;
b) you have obtained "Authorization" in the manner set forth
in Section 3 of this Agreement;
c) the Card is signed in the same name as that which is
embossed on its face;
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d) You have not been notified by us of the Cancellation of the
Card;
e) the Charge form is signed by the Cardmember in the presence
of your employee with what reasonably appears to be the
same signature as that written on the signature panel of
the Card (if there is a question about the validity of a
signature, a signed statement by the Cardmember stating
whether the signature is his/hers shall conclusively
determine whether this condition has been met);
f) the Card is not visibly altered or mutilated; and
g) all other relevant provisions of this Agreement are
complied with.
3. AUTHORIZATION
a) "Authorization" of a Charge means only that we have
approved the amount of the Charge to a Cardmember's Card account. You must still
comply with all provisions of this Agreement, particularly all those
requirements in the preceding Section entitled "Accepting Cards." If you do not
fully comply, we have the right of Full Recourse for the Charge(s) involved,
even if you obtained Authorization from us.
b) For the purposes of obtaining Authorizations from us, an
electronic communications interface ("CAS Link") shall be in place between (i)
the point of sale terminals or electronic cash registers (hereinafter referred
to collectively as "POS terminals") at your establishments; and (ii) our credit
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authorization system (CAS). You agree to execute our Supplemental Agreement for
access to American Express Charge Authorization System attached hereto as
Exhibit A in order to implement the CAS Link at your establishments. The parties
agree to use their best efforts to maintain the CAS Link in good working
condition. At all times when the CAS link is operable, you agree to obtain an
Authorization approval code from us electronically through your POS terminals
before you allow a Cardmember to make any Charge regardless of amount. You
represent that Authorizations will be obtained solely in conjunction with bona
fide sales transaction at your establishments, and will not be transferred,
sold, or used for the benefit of any other party.
c) However, if you are unable due to malfunctions or other
similar problems, to obtain Authorization through your POS terminals, or if no
such POS terminals have been installed at any particular establishment, you will
telephone us for an Authorization approval code number for any Charge of more
than one hundred dollars ($100.00) ("Downtime Floor Limit") or for any series of
Charges of more than one hundred dollars ($100.00) made at approximately the
same time in one day by a Cardmember at one point-of-sale position. You can
call us for Authorization at a toll free telephone authorization number. We will
make sure that at least one authorization center in Continental North America is
open to receive your calls twenty-four (24) hours a day, seven (7) days a week.
d) We have the right to change your Downtime Floor Limit. If
we do, we will notify you in writing of your new
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Downtime Floor Limit at least thirty (30) days in advance of the date it takes
effect.
e) We will have Full Recourse for any Charge or series of
Charges for which Authorization is not properly requested or obtained, or for
which Authorization is requested and refused or for which no Authorization
approval code number is shown, in accordance with the procedures and
requirements enumerated above.
4. CHARGE FORMS
You agree to follow our standard operating procedures for
completing American Express Charge forms for each Cardmember purchase. Except as
otherwise set forth herein, our Charge form or a Charge form approved by us
("Charge Form") shall be completed at the time of each sale and shall bear:
a) the imprint of the Card presented by the Cardmember or a
registration of the Cardmembers' Card account number made
from your point of sale terminal;
b) the date the Charge was incurred;
c) the amount of the Charge, including applicable taxes;
d) an Authorization approval code number, if necessary;
e) the Cardmember's signature as provided above;
f) your establishment's name, address and store number;
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g) a description of the goods or services purchased; and
h) all other relevant information reasonably required by us
from time to time to be included on the Charge form. Unless
otherwise required by applicable law, we will give you at
least thirty (30) days advance notice of the date on which
such other relevant information is required by us.
All information required by this Agreement shall be filled in legibly. We shall
assign to each of your establishments a unique service establishment number. All
Charges from each establishment shall be submitted according to its
establishment number.
5. ELECTRONIC TRANSMISSION OF CHARGE DATA
a) Until you establish a mutually agreeable procedure of
electronically transmitting Charges and Credits ("Charge Data") to us, you shall
use our paper Charge and Credit forms when submitting Charge Data to us.
b) As soon as a mutually agreeable telecommunications
interconnect has been satisfactorily established between you and us, you agree
to transmit electronically to us the Charge Data. For this purpose, you shall
execute the Electronic Submission and Transmission Addendum attached hereto as
Exhibit B. We shall not be obligated to accept any transmission of Charge Data
which does not conform with the Format or with the terms of Exhibit B, and shall
have Full Recourse with respect to any Charge for which the required information
is not given.
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c) Charges incurred in Canada, if applicable, must be batched
and submitted to us separately.
d) For all Charge Data electronically transmitted to us, you
agree to retain the original Charge or Credit forms or sales slips, or microfilm
copies thereof, for a period of time equal to the time you ordinarily retain
your own charge slips, or for twenty-five (25) months from the date the Charge
was incurred, whichever period is greater.
e) With respect to any such Charge Data which was
electronically transmitted to us, you agree that upon request from us for any
reason, you will provide a copy of the originally executed Charge form, sales
slip, or microfilm copy thereof, to us within seven (7) business days of your
receipt of our request therefor. In the event you fail to provide the Charge or
Credit form, sales slip or microfilm copy thereof within said seven (7) business
days, we shall have Full Recourse with respect to the entire amount of said
Charge.
6. OUR PAYMENT TO YOU
a) You agree to submit paper Charge and Credit forms or to
transmit electronically Charge Data to us at least once each week. You agree to
send us Charge Data to the office we designate. You agree to use your best
efforts to transmit Charge Data within ten (10) days of the date each Charge is
made. For those establishments where electronic transmission of Charge Data is
not feasible, you agree to use your best efforts
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to submit Charges on paper Charge Forms no later than thirty (30) days from the
date the Charge is made. In any case, if you do not send Charges or Charge Data
to us within said thirty (30) days, we will not be obligated to accept those
Charges and we will have Full Recourse if we do accept such Charges.
b) For the purpose of determining when Charges are required to
be submitted to us hereunder, Charges for goods which are not to be delivered or
shipped immediately ("Delayed Charges") shall be deemed to be incurred on the
date the Cardmember picks up said goods or on the date of shipment to the
address specified by the Cardmember. In the event the goods are picked up or
shipped more than sixty (60) days from the date the Charge was originally made,
you agree to obtain Authorization again prior to delivering or shipping the
goods or so purchased. You shall not submit Charges to us until the date the
goods are picked up or shipped to the address specified by the Cardmember.
c) We will accept Cardmembers' Charges from you at a price
equal to the total face amount, less our discount as explained below. You agree
to transfer all these Charges directly to us, and not to bill any Cardmember
directly. If you do receive such payment you agree to endorse it over to us and
mail it to us immediately. However, if a Charge (other than a fraudulent Charge)
is charged back to you pursuant to our rights of Full Recourse, you may seek
reimbursement directly from the Cardmember.
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7. PAYMENT PLANS
You may choose the payment plan that suits your needs best--a
Basic Payment Plan, an Economy Payment Plan, or an Extended Payment Plan. Your
discount rate depends in part on the payment plan you choose, so be sure to read
these options carefully. Indicate your choice by checking and initialing the box
on the signature page next to the plan you want before signing this Agreement.
Here is how these plans work:
- BASIC PAYMENT PLAN: If we receive your Charges submitted or
transmitted in accordance with the requirements of this
Agreement before the close of any business day, our payment to
you for all Charge transactions received by us will be
transmitted via the Automated Clearing House system ("ACH")
within three (3) business days after we receive said Charges.
For example, payment for Charges we receive before the close
of business on Monday will be transmitted via ACH on Thursday.
Payment for Charges we receive before the close of business on
Thursday will be transmitted via ACH on Tuesday.
- ECONOMY PAYMENT PLAN: We will transmit payment via ACH for all
Charges submitted or transmitted in accordance with the
requirements of this Agreement on the first business day
fifteen (15) calendar days after we receive said Charges.
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<PAGE> 10
- EXTENDED PAYMENT PLAN: We will transmit payment via ACH for
all Charges submitted or transmitted in accordance with the
requirements of this Agreement on the first business day
thirty (30) calendar days after we receive said Charges.
Payment for Charges will be transmitted to the bank(s) located in the United
States which you have designated in the Electronic Pay Addendum attached hereto
on Exhibit C hereto.
8. DISCOUNT RATE
Your discount rate depends on the Payment Plan you choose, and
the Net Annual Volume of Charges you had during the previous calendar year. This
"Net Annual Volume of Charges" means the total of all Cardmember Charges we
accepted from you during the previous calendar year, less any adjustments or
credits you issued or amounts for which we turned to you for payment. For the
purposes of this Agreement, the date we accept a Charge is the business day we
receive it at the office we have designated for the receipt of Charges from you.
You may qualify for a new discount rate based on the Net Annual
Volume of Charges we have received from all your establishments combined during
the previous calendar year. If you qualify for a new discount rate, we will
adjust your discount rate on April 1st following that calendar year, and the new
discount rate will be as indicated in the discount rate schedule below. The
calendar year runs from January through December, and you must be a participant
for a full calendar year before we make any adjustment. To illustrate, if you
start participating in the Card
- 10 -
<PAGE> 11
Service program in July, it will be twenty-one (21) months before your discount
rate could be adjusted.
Your initial discount rate will be:
3.00% under the Basic Payment Plan
2.75% under the Economy Payment Plan, or
2.50% under the Extended Payment Plan.
Here is the discount rate schedule showing how we compute your
discount rate after the first full calendar year:
<TABLE>
<CAPTION>
*
Basic Economy Extended
Net Annual Payment Payment Payment
Volume of Charges Plan Plan Plan
<S> <C> <C> <C>
$6,000,000-$10,000,000 3.40% 3.15% 2.90%
over $10,000,000-$20,000,000 3.25% 3.00% 2.75%
over $20,000,000 3.00% 2.75% 2.50%
</TABLE>
9. PAYMENT CURRENCY
We will make all payments to you in U.S. Dollars, except that
payment for charges incurred in Canada will be submitted and paid in Canadian
Dollars.
10. APPLYING CARDMEMBER PAYMENTS
All payments we receive from a Cardmember for Charges made at
your establishments(s) will first be used to satisfy any Charges for which we do
not have Full Recourse. Payments will then be applied to any Charges for which
we have Full Recourse. If the Cardmember pays us for Charges for which we have
already turned to you for payment, we will credit your account for this amount.
- 11 -
<PAGE> 12
11. PROCESSING CREDITS
You agree to issue credits to Cardmembers for returned goods or
services originally purchased with the Card in accordance with your ordinary
policy which shall be clearly disclosed to the Cardmember at the time of the
purchase. If you issue any credits to Cardmembers for services or returned
merchandise which they purchased with the Card, you shall process these credits
as a credit to the Cardmember's Card account ("Credit") and shall record these
Credits on our Credit Record forms. If you electronically transmit Credits, you
shall also electronically transmit such Credits to us, or, if such is not
possible, you shall submit such Credits to us on "hard copy" Credit Record
forms, in accordance with our instructions set forth in Section 5 hereof within
seven (7) days after you issue each Credit. We will deduct the full amount of
the Credit, minus the discount you paid us for the Charge being credited, from
subsequent payments to you or bill you for it.
You agree not to give cash refunds on Card Charges.
You agree to process credits to a Cardmember's Card account only
for goods and services the Cardmember purchased with the Card.
12. CHECK CASHING
We will not be responsible for checks you cash for Cardmembers.
- 12 -
<PAGE> 13
13. CARDMEMBER COMPLAINTS AND INQUIRIES
a) For purposes of this agreement a claim or complaint means:
(i) The Cardmember has made an inquiry or complaint to you
about a Charge and has made a good faith attempt to receive
reasonable satisfaction from you; or
(ii) The Cardmember has made an inquiry or complaint to us
concerning a Charge made at your establishment, stating the
approximate date and amount of the Charge, identifying the
merchandise or service purchased, and explaining the nature
of the dispute.
b) You agree to deal directly with the Cardmember to resolve
any claims or complaints about the nature, quality or quantity of merchandise or
services purchased with the Card at your establishment(s). If any Cardmember
refuses to make payment in full to us because of a claim or complaint, you shall
make a good faith effort to resolve the complaint within twenty-five (25) days
from the time you are notified of such refusal. If you and the Cardmember agree
to settle for less than the full amount of the original Charge, you shall submit
a Credit to us for the difference within seven (7) days of determining such
adjustment is due.
c) You also agree that you shall reply to all inquiries from
us about claims or complaints made to us by Cardmembers within twenty-five (25)
days after you receive our
- 13 -
<PAGE> 14
inquiry. Such a reply shall be a substantive reply containing a resolution of
the inquiry. If we do not receive said reply within said twenty-five (25) days,
we will have Full Recourse for the amount of the Charge involved. However, if
the Cardmember, despite your reply, continues to withhold payment from us for
the Charge involved in the inquiry, and the Cardmember has the right under
applicable law to withhold such payment, we shall have Full Recourse for the
amount of the Charge.
14. TELEPHONE AND MAIL ORDERS
a) If a Cardmember makes a purchase with the Card by mail or
phone, you must indicate this on the Charge Record form by writing the words
"Mail Order" or "Telephone Order" in the space provided for the customer's
signature. You agree not to submit or transmit Telephone or Mail Order Charges
to us until the goods or services so purchased are sent to the Cardmember. You
will then transmit or submit such Charge to us and we will process said Charge
in the usual manner. If the goods or services are not sent to the Cardmember
until sixty (60) days or more after the Charge was made by the Cardmember, you
agree to obtain a second Authorization for the amount of the Charge prior to
sending the goods or services to the Cardmember, and prior to submitting or
transmitting the Charge to us.
b) However, if a Cardmember makes an inquiry or complaint
concerning a Telephone or Mail Order Charge and the Cardmember has not signed
for such Charge or such Charge was made with a cancelled or otherwise invalid
Card, we will have Full Recourse for the Charge, even if you have received
- 14 -
<PAGE> 15
Authorization(s) from us. You agree to reimburse us for the full amount of the
Charge or we may deduct this amount from any future payments we make to you
under this Agreement.
c) We will accept Telephone or Mail Order Charges from you
without the right of Full Recourse (except as provided in Section 13 hereof
entitled "Cardmember Complaints and Inquiries") if you have followed all the
procedures and rules in this Agreement and, in addition:
(i) You have received an Authorization approval code number in
accordance with this Agreement for each Charge, regardless
of its amount; and
(ii) You have provided us with signed proof of delivery
indicating that you have delivered the goods or services
purchased by the Cardmember to the street address that we
have verified as that Cardmember's billing address.
15. DISPLAYING PROMOTIONAL MATERIAL/OPTIMA(SM) DIVIDEND
a) In each establishment, you agree to display prominently
American Express "Take-One" containers filled with our advertising material and
application forms within easy reach of your patrons. We will supply each
establishment with application forms coded with its respective establishment
number. You will receive a $7.00 commission when we issue a new Basic Card
(other than an Additional Card) based on an application coded with your
establishment number. You agree to provide us with a letter confirming your
approval of all your establishments' participation in this "Take One" program.
Such letter will be used by our
- 15 -
<PAGE> 16
independent contractors solely to facilitate their performance of the supply and
re-supply functions at your establishments.
b) You agree to display prominently American Express
identification such as signs, decals or other identification at each
establishment. Further, you agree to mention acceptance of Cards in your print
advertisements, catalogues and other forms whenever any other payment method,
other than Filene's Basement's card program is mentioned. Whenever you mention
the Card in your advertising, catalogues and/or order forms, you agree to use
the American Express name and logo only as set forth in our pre-approved logo
sheets which we will provide to your. You agree not to use any mail order forms
or cards which would reveal a Cardmember's Card account number while in transit
or in the mail.
c) The promotional activities set forth in subsections 15(a)
and (b) above are explained in more detail in the Retail Advertising and
Promotional Addendum annexed hereto as Exhibit D and made a part hereof.
d) In addition, you agree to let us list the name and address
of your establishment(s) in our Card Directory, our Guides and other materials
related to the Card Service.
e) You agree not to promote the use of other charge, credit or
debit cards, except for your own card which is used only in your
establishment(s), to your customers more actively than you promote the use of
the Card. If you do a special promotion in cooperation with any other charge,
credit or debit card, you agree that you will tell us after such special
promotion becomes public. You agree that we shall have the opportunity to
- 16 -
<PAGE> 17
offer a mutually acceptable similar promotion for the Card on no less favorable
terms and you will not unreasonably refuse to do such a promotion. When a
Cardmember presents the Card at the point of sale, you agree you will not
discourage the use of the Card or solicit Cardmembers for your own credit card
or charge program. You agree not to state or publish a preference for any other
charge, credit or debit cards or services except the Filene's Basement card over
the Card.
f) When Cardmembers choose to use the Optima Card in your
establishment(s) you will be paid an Optima Dividend. Provided you display
decals or logos and Take-One containers as required in this Agreement, you will
be paid an Optima Dividend calculated as a percentage of the Net U.S. Optima
Card Charge Volume that we received from your establishment(s). "Net U.S. Optima
Card Charge Volume" shall mean the aggregate of all Charges made by Cardmembers
with the Optima Card at your establishment(s) in the United States (the fifty
(50) states and the District of Columbia) and received by us less any credits
you issued, adjustments, and amounts for which we turned to you for payment. For
the purpose of this section, the amount of our Optima Dividend rate will be
based on your previous yearly Net Annual Volume of Charges, as defined in
Section 8 hereof. Your initial Optima Dividend rate shall be 1.25%. If you
qualify for a new Optima Dividend rate, based on your Net Annual Volume of
Charges for the previous calendar year such new rate will be effective on April
1st following that previous calendar year.
-17-
<PAGE> 18
Here is a schedule showing how we compute your Optima
Dividend rate:
<TABLE>
<CAPTION>
Net Annual Volume of Charges for Optima
All American Express Charges Dividend
Received from you Rate
-------------------------------- ---------
<S> <C>
$0 - 999,999 1.00%
$1,000,000 - $19,999,999 1.15%
$20,000,000 and over 1.25%
</TABLE>
16. ASSIGNMENT
You may not assign (transfer) this Agreement to anyone else
without written permission from us. We may assign this Agreement to our parent
or one of our subsidiaries or affiliates without your permission. But we cannot
assign it to anyone else without your written permission.
17. CHANGING THIS AGREEMENT
We and you have the right to amend this Agreement at any time. We
will notify each other in writing at least thirty (30) days in advance. If the
changes are materially unacceptable to the other, he may terminate this
Agreement by notifying the other in writing within thirty (30) days of receipt
of notice concerning such changes. Termination pursuant to this Section 17 shall
be effective sixty (60) days after notified of the termination. Pending
termination pursuant to this Section, your compliance with the change or changes
at issue will be waived by us, or else an earlier termination date will be
agreed upon.
- 18 -
<PAGE> 19
18. TERM AND TERMINATION OF THIS AGREEMENT
a) This Agreement shall commence and be effective upon the
date indicated on the first page hereof ("Effective Date"). This Agreement shall
thereafter remain in effect for an initial term of three (3) years from the
Effective Date. After the initial three (3) year term, this Agreement shall
continue unless and until terminated by either party in writing upon thirty (30)
days prior written notice, or unless terminated as set forth in Section 17
hereof.
b) You agree to honor our Cards and to follow all the terms of
this Agreement until the termination takes effect. The provisions governing the
processing of Charges will continue to apply if processing of Charges made prior
to the effective termination date takes place after the termination becomes
effective. Our rights to Full Recourse shall survive termination of this
Agreement.
c) If either party materially breaches its obligations
hereunder, and fails to cure such material breach within thirty (30) days after
written notice from the other party specifying such breach, then such other
party may, upon written notice, in addition to any other rights and remedies
such party has hereunder or in law or equity, immediately terminate this
Agreement.
d) Anything to the contrary contained in this Agreement
notwithstanding, if: (i) either party becomes insolvent or enters bankruptcy or
receivership proceedings voluntarily or involuntarily, or makes an assignment
for the benefit of its
- 19 -
<PAGE> 20
creditors; or (ii) there is an execution, attachment, repossession or
foreclosure on or of all or substantially all of such party's assets; or (iii)
such party ceases all or a substantial portion of its operations; then in any
such event, all debts and obligations owed to the other party hereunder shall be
deemed immediately due and payable and such other party shall have the right to
immediately terminate this Agreement on written notice and/or to take any other
action to which such other party believes it is entitled under this Agreement or
under applicable law or in equity including, but not limited to withholding
payments to such party. (iv) In addition, if a party in the good faith exercise
of its business judgment deems the other party to be incapable of performing its
obligations hereunder, then such party may withhold payments to the other party,
in addition to the other rights and remedies which such party has under this
Agreement or applicable law or equity. Each party's rights and obligations
hereunder shall survive termination of this Agreement.
19. NOTICES
All notices hereunder shall be in writing and shall be sent by
certified mail, return receipt requested, or overnight courier service, to the
addresses specified below, unless changed by written notice. Notice shall be
deemed given on the date such notice is delivered to such recipient.
If notice is sent by you to us, it is to be addressed to:
- 20 -
<PAGE> 21
American Express Travel Related Services Company, Inc.
Consumer Card Group -- USA
American Express Tower
World Financial Center
New York, NY 10285-3500
Attn: Vice President, Retail Marketing
with a copy to:
General Counsel's Office
American Express Tower
World Financial Center
New York, NY 10285-4900
If notice is sent by us to you, it is to be addressed to:
Filene's Basement, Inc.
40 Walnut Street
Wellesley, MA 02181
Attn: Peter D. Hughes
Chief Financial Officer
20. GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with laws of the State of New York.
21. AUTHORITY TO SIGN
You represent that the individual who signs this Agreement has
authority to sign. We represent that the individual who signs this Agreement is
authorized to sign on behalf of American Express Travel Related Services
Company, Inc. and on behalf of its subsidiaries, affiliates and licensees that
issue Cards or participate in the Card Service.
- --------------------------------------------------------------------------------
PAYMENT PLAN ELECTED
Please check and initial the Payment Plan you have elected.
- 21 -
<PAGE> 22
(X) Basic Payment Plan
( ) Economy Payment Plan
( ) Extended Payment Plan
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
FILENE'S BASEMENT, INC. AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.
/s/ Peter D. Hughes
- ---------------------------------- --------------------------------
Peter D. Hughes Edwin M. Cooperman
Chief Financial Officer President and Chief Executive
Officer
TRS North America
- 22 -
<PAGE> 1
Exhibit 10.12
AMENDMENT TO AMERICAN EXPRESS(R) CARD
SERVICE AGREEMENT FOR RETAIL ESTABLISHMENTS
This amendment ("Amendment"), effective as of the 1st day of January, 1993
(the "Effective Date"), hereby amends the Card Service Agreement(s) currently in
effect between, and relating only to, the entities listed on the signature page
hereof ("you", "your"), on the one hand, and American Express Travel Related
Services Company, Inc. and its subsidiaries, affiliates and licensees that issue
Cards or Card services ("we", "our" or "American Express") on the other hand,
governing Card acceptance by all of your establishments in the United States,
Canada, the U.S. Virgin Islands and Puerto Rico ("Establishments"). Except as
specifically described below, the terms of our Card Service Agreement and any
amendments, addenda or supplements thereto (the "Card Service Agreement") remain
in full force and effect.
1. DISCOUNT RATE. Your discount rate is the percentage rate which is to be
applied to calculate the deduction from the amount of each Charge we accept from
you and determines the price at which we accept Charges from you. Your discount
rate shall be determined according to the schedule appearing below based on your
"Net Annual Charge Volume". Your Net Annual Charge Volume is the aggregate of
Charges we accepted from all of your Establishments located in the United
States, Puerto Rico, the U.S. Virgin Islands and Canada during the preceding
calendar year, less Credits, adjustments and amounts charged back by us pursuant
to our rights of Full Recourse.
You may qualify for a new discount rate based on your Net Annual
Charge Volume for the previous full calendar year. If so, we will adjust your
discount rate on April 1st following that calendar year, and the new discount
rate will be as indicated in the schedule below.
<TABLE>
<CAPTION>
Net Annual Charge Volume Discount Rate
------------------------ -------------
<S> <C>
$20,000,000-$199,999,999 2.60%
$200,000,000 and over 2.50%
</TABLE>
2. STRATEGIC INVESTMENT FUND. Each year that all of your Establishments
comply with all of the provisions of the Card Service Agreement and this
Amendment, we shall establish a Strategic Investment Fund in an amount based on
your level of Net Annual Charge Volume for the previous calendar year as
indicated below.
<PAGE> 2
<TABLE>
<CAPTION>
Net Annual Charge Volume Strategic Investment Fund
------------------------ -------------------------
<S> <C>
$30,000,000-$49,999,999 .10%
$50,000,000-$399,999,999 .15%
$400,000,000-$699,999,999 .20%
$700,000,000-$999,999,999 .40%
$1,000,000,000-$1,299,999,999 .50%
</TABLE>
The Strategic Investment Fund shall be used during the calendar year
for which it is established to promote Card acceptance at your Establishments,
including but not limited to marketing, operational/technology enhancements,
database modeling/list access and other mutually-agreed upon and beneficial
business initiatives. Any monies in the Strategic Investment Fund that remain
unused at the end of such calendar year shall revert to us at that time and you
shall have no claim or right to such monies.
As an alternative to the Strategic Investment Fund, you may elect to
receive one half of the Strategic Investment Fund amount shown above in the form
of a reduction to your discount rate set forth in paragraph 1 above. If you wish
to elect this alternative, you must notify us in writing on or before November 1
of the year before you wish the election to take effect. You may change your
election for any year by notifying us in writing on or before November 1 of the
prior calendar year.
3. EQUAL ACCEPTANCE OF THE CARD. You agree that you will accept the Card
at each and every one of your Establishments. When a Cardmember asks to use or
presents the Card, you shall honor the Card and shall not attempt to persuade
the Cardmember to use any other payment method or payment instrument. You shall
not otherwise discourage the Cardmember from using the Card or disparage the
Card Service in any way. Except as provided in the section below entitled
"Proprietary Cards", you shall not state or publish a preference for any charge,
credit or debit card or service over the Card.
4. CARD ACCEPTANCE AWARENESS. You agree to display indicia of Card
acceptance at least as prominently in all your Establishments and advertising as
you display indicia of your acceptance of any other payment method, including
your Proprietary Card. These indicia of Card acceptance include, without
limitation, the display of Take-One applications, in-store signs and decals on
Establishment entrances, as well as reference to Card acceptance in all of your
print advertising and circulars and on all of your catalog order forms.
You agree not to promote the use of other charge, debit or credit cards or
services to your customers more actively than you
-2-
<PAGE> 3
promote the use of the Card, except as provided in the section entitled
"Proprietary Cards". You agree not to state or publish a preference for any
other charge, debit or credit card or service over the Card.
5. PROPRIETARY CARDS. If you issue your own proprietary card which is used
only in your Establishments ("Proprietary Card"), this Amendment does not limit
your ability to promote the use of that Proprietary Card more actively than you
promote the use of the Card; provided, however, that once a Cardmember presents
or asks to use the Card at the point of sale, you will not discourage the use of
the Card directly or indirectly and you will not verbally solicit the Cardmember
for your Proprietary Card until after the transaction is complete.
6. OPTIMA DIVIDEND DELETED. Upon the Effective Date of this Amendment, all
provisions regarding the Optima Dividend in your Card Service Agreement,
amendments and addenda thereto are deleted in their entirety and no Optima
Dividend shall be paid for Optima Card Charges made at your Establishments
thereafter.
7. WAIVER OF EXISTING MARKETING/ADVERTISING SUPPORT AND FEE-FREE
CARDMEMBER LISTS. In order to receive the benefits set forth in this Amendment,
you agree to waive any and all claim or right to receive any and all marketing
and/or advertising support and fee-free Cardmember Lists from which you may be
entitled to benefit during 1993 and thereafter pursuant to any agreement
currently in effect between you and us and between any of your divisions and
subsidiaries and us. Cardmember Lists, database reports/analyses and custom
models may be purchased at our standard rates.
8. WARRANTY. You represent and warrant that all indebtedness arising from
all Charges is genuine, free of any liens, claims or encumbrances, and results
from a Bona Fide sale of goods or services at your Establishment to a Cardmember
and that the amount of each Charge you submit represents the full and true value
of goods and services sold by you to such Cardmember. You further warrant that
all Authorizations you obtain and Charges you submit to us are only for the
purpose of making Bona Fide sales of goods and services at your Establishment.
You further warrant that you will not use or permit any third party (other than
leased departments within your Establishments that appear to the public to be
part of your Establishments and for which you are liable to us under your Card
Service Agreement) to benefit from your ability to accept the Card hereunder nor
will you use or permit any third party to use Card transaction information,
including but not limited to Card account numbers, for any purpose other than as
specified in the Card Service Agreement.
-3-
<PAGE> 4
9. INABILITY TO PERFORM. If you cease or adversely alter your operations,
or if you sell your assets or stock, or if you become insolvent, or if we
receive a disproportionate number of Cardmember inquiries or complaints relating
to Charges at your Establishments or if we have reasonable cause to believe that
you will not be able to perform your obligations under the Card Service
Agreement, we may, at our discretion, immediately terminate the Card Service
Agreement. If bankruptcy proceedings or similar state court proceedings are
filed with respect to your business, the Card Service Agreement and this
Amendment and all financial accommodations contained therein are automatically
terminated. You agree to notify us immediately if any of the above events occur.
You further agree that should any of the above events occur, or if the Card
Service Agreement is terminated for any reason, we may take other reasonable
actions, including but not limited to maintaining a reserve from payments
otherwise payable to you to protect our rights under the Card Service Agreement
or any other agreement between you and us.
10. AUTHORITY TO SIGN. You represent that the party who signs this
Amendment has authority to bind all of the entities listed below.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
Effective Date.
220-57-0156-8 AMERICAN EXPRESS TRAVEL RELATED
- -------------------------- SERVICES COMPANY, INC.
[MAP or CAP Entity]
By: Filene's Basement Inc. By: /s/ Kenneth I. Chenault
Name: /s/ Neil T. Watanabe Kenneth I. Chenault
Title: V.P. & Controller President
Date: 2/16/93 Consumer Card and Financial
Services Group USA
COVERED ENTITIES:
- -------------------------------------
- -------------------------------------
- -------------------------------------
CHECK ONE: Strategic Investment Fund YES X NO
---- ----
-4-
<PAGE> 1
Exhibit 10.26
CREDIT CARD PROGRAM AGREEMENT
BETWEEN
MONOGRAM CREDIT CARD BANK OF GEORGIA
AND
FILENE'S BASEMENT, INC.
JULY 20, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS
Section 1.1 Specific Terms .......................................... 1
Section 1.2 Interpretation of Terms ................................. 9
Section 1.3 Accounting Terms ........................................ 9
ARTICLE II ESTABLISHMENT OF PROGRAM
Section 2.1 Establishment of Program, Generally ..................... 9
Section 2.2 Extension of Credit by Bank; Maximum Investment ......... 10
Section 2.3 Filene's Basement to Honor Credit Card .................. 11
Section 2.4 Promotion and Implementation of Program ................. 11
Section 2.5 Conversion Costs ........................................ 12
Section 2.6 Competitive Programs .................................... 12
Section 2.7 Confidential Information ................................ 12
ARTICLE III ADMINISTRATION OF PROGRAM
Section 3.1 Preparation of Documents ................................ 13
Section 3.2 Credit Criteria and Credit Approval ..................... 14
Section 3.3 Credit Information; Ownership of Accounts and Customer
Lists ........................................................... 15
Section 3.4 Data Transmission Equipment ............................. 15
Section 3.5 Returns of Merchandise .................................. 16
Section 3.6 Collection of Accounts .................................. 16
Section 3.7 Credit Insurance ........................................ 16
Section 3.8 Value-Added Programs .................................... 17
Section 3.9 Transmittal and Retention of Documents .................. 17
Section 3.10 In-Store Payments ...................................... 17
Section 3.11 Bank's Right to Audit .................................. 18
Section 3.12 Filene's Basement's Right to Audit ..................... 18
ARTICLE IV OPERATING PROCEDURES
Section 4.1 General ................................................. 18
Section 4.2 New Customer Account Establishment Procedures ........... 18
Section 4.3 Purchase Authorization Procedures ....................... 18
Section 4.4 Settlement Procedures ................................... 19
ARTICLE V PAYMENT TO FILENE'S BASEMENT FOR CHARGE SLIPS;
OTHER CHARGES
Section 5.1 Payment to Filene's Basement ............................ 21
Section 5.2 Postage Rate Adjustment ................................. 21
Section 5.3 Business Reply Postage .................................. 21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 5.4 Base Rate Adjustment .................................... 21
Section 5.5 Application Fees ........................................ 22
Section 5.6 Payment by Filene's Basement ............................ 22
ARTICLE VI CHARGEBACK
Section 6.1 Bank's Right to Chargeback .............................. 22
ARTICLE VII FINANCE CHARGES, OTHER CHARGES, ACCOUNT PAYMENT
TERMS
Section 7.1 Bank's Rights ........................................... 23
Section 7.2 Base Finance Charge ..................................... 23
Section 7.3 Notice of Changes ....................................... 23
Section 7.4 Changes in Laws/Regulations; Renegotiation .............. 24
Section 7.5 Late Charges; Returned Check Charges; Other Charges ..... 24
ARTICLE VIII REPRESENTATIONS, WARRANTIES AND COVENANTS OF FILENE'S BASEMENT
Section 8.1 Corporate Existence; Compliance with Law ................ 24
Section 8.2 Executive Offices ....................................... 25
Section 8.3 Corporate Power; Authorization; Enforceable
Obligations ..................................................... 25
Section 8.4 Solvency ................................................ 25
Section 8.5 No Default .............................................. 25
Section 8.6 No Burdensome Restrictions .............................. 26
Section 8.7 Compliance With Law ..................................... 26
Section 8.8 No Litigation ........................................... 26
Section 8.9 Full Disclosure ......................................... 26
Section 8.10 Insurance .............................................. 26
Section 8.11 Accounts; Account Documentation ........................ 27
Section 8.12 First Time Buyer ....................................... 28
Section 8.13 Balance in Account ..................................... 28
Section 8.14 Maintenance of Existence and Conduct of Business ....... 28
Section 8.15 Books and Records ...................................... 28
Section 8.16 Litigation ............................................. 28
Section 8.17 Adverse Transactions ................................... 28
Section 8.18 Events of Default ...................................... 28
Section 8.19 Delivery ............................................... 28
Section 8.20 Services ............................................... 28
Section 8.21 Adjustments ............................................ 29
Section 8.22 Obligations ............................................ 29
Section 8.23 Advertisements ......................................... 29
Section 8.24 Account Documentation .................................. 29
Section 8.25 Trade Names; Trademarks ................................ 29
Section 8.26 Conflicts; Defaults; Etc ............................... 29
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IX REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANK
Section 9.1 Corporate Existence ..................................... 30
Section 9.2 Corporate Power, Authorization; Enforceable Obligation .. 30
Section 9.3 Solvency ................................................ 31
Section 9.4 No Default .............................................. 31
Section 9.5 No Burdensome Restrictions .............................. 31
Section 9.6 Compliance With Law ..................................... 31
Section 9.7 No Litigation ........................................... 31
Section 9.8 Purchase Representation ................................. 32
Section 9.9 Full Disclosure ......................................... 32
Section 9.10 Maintenance of Existence and Conduct of Business ....... 32
Section 9.11 Books and Records ...................................... 32
ARTICLE X FINANCIAL STATEMENTS AND INFORMATION
Section 10.1 Reports and Notices .................................... 32
ARTICLE XI EVENTS OF DEFAULT; RIGHTS AND REMEDIES
Section 11.1 Events of Default ...................................... 33
Section 11.2 Bank Events of Default ................................. 33
Section 11.3 Filene's Basement Events of Default .................... 34
Section 11.4 Remedies ............................................... 36
ARTICLE XII TERM/TERMINATION
Section 12.1 Term ................................................... 36
Section 12.2 Termination ............................................ 36
Section 12.3 Termination for Force Majeure .......................... 36
Section 12.4 Rights Upon Termination ................................ 37
Section 12.5 Survival ............................................... 38
ARTICLE XIII INDEMNIFICATION
Section 13.1 By Bank ................................................ 38
Section 13.2 By Filene's Basement ................................... 38
Section 13.3 Notice ................................................. 39
ARTICLE XIV USE OF FILENE'S BASEMENT MARKS
Section 14.1 Grant of Rights ........................................ 39
Section 14.2 Bank Acknowledgements .................................. 40
Section 14.3 Future Marks ........................................... 40
ARTICLE XV SUBSEQUENT OBLIGATIONS
Section 15.1 Representations and Warranties True .................... 40
Section 15.2 Obligations Performed .................................. 40
Section 15.3 No Events of Default ................................... 40
</TABLE>
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<TABLE>
<S> <C>
Section 15.4 Letter of Credit ....................................... 40
Section 15.5 FBC Guaranty ........................................... 41
Section 15.6 Resolutions ............................................ 41
Section 15.7 Officer's Certificate .................................. 41
Section 15.8 Financing Statements Executed .......................... 41
ARTICLE XVI PERFORMANCE COLLATERAL
Section 16.1 Letter of Credit ....................................... 41
Section 16.2 Size of LOC ............................................ 41
Section 16.3 Discount Letter of Credit .............................. 42
Section 16.4 Size of Discount LOC ................................... 43
Section 16.5 Cost of LOCs ........................................... 43
ARTICLE XVII FILENE'S BASEMENT PURCHASE OF ACCOUNTS
Section 17.1 Generally .............................................. 43
Section 17.2 Liquidation ............................................ 43
Section 17.3 Survival of Rights ..................................... 44
ARTICLE XVIII MISCELLANEOUS
Section 18.1 Assignability .......................................... 44
Section 18.2 Set-Off by Bank ........................................ 44
Section 18.3 Offsets ................................................ 44
Section 18.4 Securitization/Participation ........................... 44
Section 18.5 Cooperation in Event of Termination .................... 45
Section 18.6 Financial Reports; Right to Audit ...................... 45
Section 18.7 Entire Agreement; Amendments ........................... 45
Section 18.8 Termination of Account Purchase Agreement .............. 45
Section 18.9 Non-Waiver ............................................. 45
Section 18.10 Severability .......................................... 45
Section 18.11 Governing Law ......................................... 46
Section 18.12 Captions .............................................. 46
Section 18.13 Notices ............................................... 46
Section 18.14 Power of Attorney ..................................... 47
Section 18.15 Grant of Security Interest; Precautionary Filing ...... 47
Section 18.16 Further Assurances .................................... 48
Section 18.16 Chargeback ............................................ 47
</TABLE>
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CREDIT CARD PROGRAM AGREEMENT
This Credit Card Program Agreement (hereinafter "Agreement") is made as of
the 20th day of July, 1995 between Monogram Credit Card Bank of Georgia, a
Georgia banking corporation with its principal place of business at 7840 Roswell
Road, Building 100, Suite 210, Atlanta, Georgia 30350 ("Bank"), and Filene's
Basement, Inc., a Massachusetts Corporation with its principal place of business
at 40 Walnut Street, Wellesley, Massachusetts 02181 ("Filene's Basement").
RECITALS
A. Bank has established programs to extend customized revolving credit to
qualified buyers for the purchase of goods and services from various merchants.
B. Filene's Basement is engaged in, among other activities, the selling at
retail of Merchandise (as hereinafter defined) to buyers.
C. Pursuant to the Account Purchase Agreement (as hereinafter defined),
Filene's Basement and GE Capital (as hereinafter defined) established a
revolving charge financing program.
D. Filene's Basement desires that Bank extend credit to Cardholders (as
hereinafter defined) for the purchase of Merchandise at Stores (as hereinafter
defined), and Filene's Basement and GE Capital wish to supersede and terminate
the Account Purchase Agreement. Bank desires to acquire GECC Accounts (as
hereinafter defined) from GE Capital and convert such GECC Accounts to Bank
Accounts (as hereinafter defined) by notifying consumers in accordance with
applicable laws that GECC Accounts have been replaced by Bank Accounts and Bank
desires to extend credit to qualified persons holding GECC Accounts and
originate new Accounts under the Program (as hereinafter defined).
In consideration of the mutual covenants set forth below and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Bank and Filene's Basement agree as follows:
ARTICLE I DEFINITIONS
SECTION 1.1 SPECIFIC TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"Account" means and includes the following: (i) any open-end revolving
consumer credit account (including GECC Accounts and Bank Accounts) established
in favor of a Cardholder, pursuant to which a Cardholder may finance his/her
purchase of Merchandise from Stores on credit pursuant to the terms of a Credit
Card Agreement, together with any
<PAGE> 7
modifications or amendments which may be made to such Credit Card Agreement,
which is to be owned by Bank, and which is to be used for personal, family or
household purposes; (ii) any and all Account Documentation; (iii) all accounts,
accounts receivable, contract rights, chattel paper, choses in action,
Indebtedness, other receivables, general intangibles, documents, instruments and
notes, and the proceeds of the foregoing, relating to the retail purchase of
Merchandise billed in connection with that Credit Card Agreement, including any
of the foregoing that were owed to Persons other than Bank and purchased by
Bank; (iv) any and all goods or other property, contracts of indemnity,
guaranties or sureties, proceeds of insurance and other proceeds at any time
standing as security for the Account; and (v) any and all other rights,
remedies, benefits, interests and titles, both legal and equitable, to which GE
Capital or Bank, in their aforesaid capacities, may now or at any time hereafter
be entitled in respect to the foregoing.
"Account Documentation" means any and all documentation relating to an
Account, including, without limitation, Charge Transaction Data, Credit Card
Applications, Credit Card Agreements, Charge Slips, Credit Card Sales Invoices,
Credit Cards, Credit Slips, checks and stubs, and all correspondence, memoranda,
documents, instruments, certificates, agreements, invoices, sales or shipping
slips, delivery receipts, billing statements, applications, magnetic tapes,
disks, or hardcopy formats, or any other computer-readable data transmissions or
software, and all other materials including, without limitation, tangible and
intangible information arising therefrom or pertaining thereto.
"Account Purchase Agreement" shall mean the Account Purchase Agreement
between Filene's Basement and GE Capital, dated as of September 29, 1989,
including all amendments, modifications, supplements, exhibits and schedules
thereto.
"Active Account" shall mean, with respect to a Settlement Period, an
Account which has a debit or credit balance at any time during such Settlement
Period.
"Actual Interest Expense" means GE Capital's actual interest expense per
annum expressed as a rate calculated monthly by GE Capital's Treasury Operation
and as reported on GE Capital's internal M-11 report, or on any successor to
such report designated by GE Capital, should such report be discontinued during
the term hereof.
"Affiliate" shall mean, with respect to any Person, each Person that
controls, is controlled by or is under common control with such Person directly
or indirectly, or any Affiliate of such Person. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"Aggregate Investment" shall mean, at any time, the aggregate of all
Indebtedness on all Active Accounts as calculated on each relevant Billing Date
during a Settlement Period.
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<PAGE> 8
"Aggregate Outstanding Balance" means, with respect to an Account, the
total outstanding balance owed on any GECC Account converted by Bank, or Bank
Account established by Bank, in connection with the Program, including, without
limitation, finance charges, Credit Insurance Charges, Late Charges, Returned
Check Charges, charges for Value-Added Programs and Other Charges.
"Annual Percentage Rate" means the periodic rate applicable to
Cardholders' Aggregate Outstanding Balances times the number of periods in a
year.
"Applicant" means an individual who has submitted a Credit Card
Application to Bank for a Credit Card under the Program.
"Approved Form" has the meaning set forth in Section 3.1 hereof. Any
capitalized terms used in this Agreement referring to Account Documentation
shall refer to Approved Forms.
"Average Account Balance" means the Aggregate Investment as calculated on
any relevant Billing Date during a Settlement Period, divided by the number of
Active Accounts during such Settlement Period.
"Bank Account(s)" means any Account which either is acquired by Bank on
the Conversion Date or at any other time, or is originated by Bank pursuant to
Sections 2.1 and 2.2 of this Agreement.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978, as
amended, 11 U.S.C. SEC. 1101 ET SEQ., as the same may be amended from time to
time, and any similar successor statute that may be in effect from time to time.
"Bank Event of Default" shall mean any event described in Section 11.2
hereof.
"Base Rate" shall mean (i) 2.91% per annum, for periods prior to July 1,
1996, or (ii) 3.4%, on or after July 1, 1996.
"Billing Cycle" means the time interval between regular monthly Billing
Dates for an Account.
"Billing Date" means the last day of a Billing Cycle for an Account.
"Business Day" means any day except Saturday or Sunday, or a day on which
banks are required or permitted to be closed in the State of Georgia.
"Cardholder" means any natural person who is or may be obligated to Bank
with respect to an Account and for whom an Account has been opened or converted
by Bank under the Program and includes any natural person who is authorized to
purchase Merchandise from
3
<PAGE> 9
Filene's Basement at retail for personal, family or household purposes on credit
under or pursuant to an Account.
"Charge Slip" or "Credit Card Sales Invoice" means a sales receipt,
including but not limited to, an invoice or register tape, evidencing a purchase
of Merchandise from Filene's Basement that is to be charged to the Cardholder's
Account and which evidences an amount to be advanced by Bank to Filene's
Basement on behalf of the Cardholder.
"Charge Transaction Data" means Account/Cardholder identification and
transaction information with regard to each purchase of Merchandise for credit
to the Account/Cardholder, which data are required to be transmitted by Filene's
Basement to Bank in accordance with the Operating Procedures or any
modifications or amendments thereto.
"Code" shall mean the Uniform Commercial Code (or similar personal
property security law) of the jurisdiction with respect to which such term is
used, as in effect from time to time.
"Confidential Information" has the meaning set forth in Section 2.7
hereof.
"Conversion Date" means the date or dates designated by Bank upon which
the GECC Accounts assigned to GE Capital will be acquired by Bank.
"Credit Card" or "Card" means the plastic card issued and owned by Bank
under the Program exclusively for use in connection with the Program at Stores.
"Credit Card Agreement" means the open-end revolving credit agreement
between Bank and a Cardholder pursuant to which a Cardholder may finance the
purchase of Merchandise on credit from Filene's Basement, together with any
modifications or amendments which may be made to such agreement.
"Credit Card Application" means the credit application which must be
completed and submitted for review to Bank in Georgia by Applicants.
"Credit Criteria" means the standards used by Bank when evaluating
applications for Accounts under the Program, which standards may be modified by
Bank from time to time subject to the terms and conditions set forth in
subsection 3.2(b) hereof.
"Credit Insurance" has the meaning set forth in Section 3.7 hereof.
"Credit Insurance Charges" means any charges to a Cardholder as a premium
for Credit Insurance purchased by such Cardholder on an Account.
"Credit Limit" means the maximum amount of credit that will be extended to
a Cardholder by Bank under an Account as established and modified by Bank from
time to time.
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<PAGE> 10
"Credit Slip" means a credit receipt evidencing a return or exchange or
adjustment of Merchandise by Filene's Basement to a Cardholder, or other credit
on an Account.
"Customer List" means any list (whether in hard copy, in magnetic tape
format or other form) identifying Cardholders, including, without limitation,
any list of the names, addresses, telephone numbers and social security numbers
of any or all Cardholders.
"Data Transmission Equipment" shall mean equipment provided by Bank to
Filene's Basement for use with any data capture and transmission vehicle
employed by Bank, whether called "Hypercom" or not.
"Deferred Discount" shall have the meaning set forth in subsection 5.4(b)
of this Agreement.
"Discount" shall have the meaning set forth in subsection 5.1(b).
"Effective Date" means the date on which Bank first establishes a New Bank
Account under Article II of this Agreement.
"Event of Default" shall mean any event described in Article XI hereof.
"Execution Date" means the last date upon which this Agreement is signed
by a party hereto.
"Filene's Basement Event of Default" shall mean any event described in
Section 11.3 hereof.
"Filene's Basement Termination" shall have the meaning set forth in
Subsection 12.2(a).
"Floor Release" means the maximum amount of any charge (or related series
of charges) which Filene's Basement shall have the right to accept from a
Cardholder, in the event that the POS Network and/or Bank's authorization system
are not in operation, and authorizations for Cardholder purchases cannot be
obtained directly from Bank. The Floor Release limit as of the date of this
Agreement shall be $75; any adjustment to the Floor Release limit shall be
effected by mutual agreement between Bank and Filene's Basement.
"GE Capital" means General Electric Capital Corporation, a New York
corporation.
"GECC Account(s)" means any Account originated by Filene's Basement and
assigned to GE Capital pursuant to the terms of the Account Purchase Agreement,
or any predecessor agreement, that meets certain credit and other criteria set
by Bank in its discretion, except the following shall not constitute GECC
Accounts for the purpose of this Agreement: (i) such Accounts which have been
written off by GE Capital prior to the Conversion Date. (ii) such
5
<PAGE> 11
Accounts that are ninety (90) days or more past due, and (iii) those for which a
cardholder is bankrupt or deceased.
"Indebtedness" shall mean any obligation not written off by Bank incurred
by a Cardholder in respect of an Account, including, without limitation, any
charges for Merchandise, finance charges, Credit Insurance Charges, Late
Charges, Returned Check Charges, charges for Value-Added Programs and any other
charges in respect of an Account.
"Indemnified Party" has the meaning set forth in Article XIII hereof.
"Indemnifying Party" has the meaning set forth in Article XIII hereof.
"Initial Term" has the meaning set forth in Section 12.1 hereof.
"In-Store Payment" means a payment on an Account made by a Cardholder (or
any person acting on behalf of such Cardholder) at a Store.
"Late Charges" means charges or fees to Cardholders for late payments on
Accounts, which charges or fees are set by Bank from time to time and instituted
and implemented by Bank.
"Licensee" shall mean Jewelry Promotions, Inc., Evans Furs, Inc., Model
Imperial Supply Co., Inc., Liberty Richter, Inc. and Vacation Outlet-National
Leisure Group, Inc. and Persons who pursuant to any now existing or future
agreement with Filene's Basement, (i) are from time to time authorized by
Filene's Basement to make credit sales of Merchandise pursuant to Accounts, (ii)
lease space from Filene's Basement in one or more Stores, and (iii) are
designated by Filene's Basement to Bank in a written notice.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest
(including, without limitation, any interest of a buyer of accounts or chattel
paper which is subject to Article 9 of the Uniform Commercial Code),
encumbrance, preference, priority or other security or preferential arrangement
of any kind or nature whatsoever (including, without limitation, any lease or
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
file, any financing statement pursuant to the Uniform Commercial Code).
"LOC Termination" shall mean a termination of this Agreement pursuant to
Section 12.2, other than a Filene's Basement Termination.
"Mark(s)" has the meaning set forth in Article XIV hereof and Exhibit A
hereto.
6
<PAGE> 12
"Maximum Investment" shall mean an Aggregate Investment of seventy five
million dollars ($75,000,000) or such higher amount as Bank, in its sole
discretion, shall from time to time specify to Filene's Basement.
"Merchandise" shall mean those goods and services, including accessories
and delivery services sold in conjunction therewith, sold at retail by Filene's
Basement or a Licensee in a Store to the general public for personal, family, or
household use. Merchandise shall include only items that are new and unused at
the time of sale, however Merchandise may also include items that are returned
to Filene's Basement and restored to Filene's Basement inventory and
subsequently offered for resale as new and unused, to the extent permitted by
law. Merchandise shall also include work or labor to be performed by or at the
instance of Filene's Basement to or for the benefit of a Cardholder in the
ordinary course of business. Such work or labor may include Merchandise used or
to be used in the performance of such work or labor.
"Monthly Billing Cycle Outstandings" means the sum of the Aggregate
Outstanding Balances of all Accounts as calculated for each relevant Billing
Date in a Settlement Period.
"Net Credit Volume" for any period means total dollar amount of credit
sales of Merchandise made pursuant to Charge Slips less the total dollar amount
of any Credit Slips, as reflected in Charge Transaction Data received by Bank
during such period.
"New Bank Account(s)" means a Bank Account originated by Bank on or after
the Effective Date.
"New Mark(s) has the meaning set forth in Section 14.3 hereof.
"Obligations" shall mean any and all liabilities, obligations, covenants,
and duties owing by Filene's Basement or any Affiliate of Filene's Basement to
Bank arising under this Agreement (or any modification, alteration or amendment
thereof), of any kind or nature, present or future, now existing or hereafter
arising, and however acquired. The term includes, without limitation, any fee,
charge, expense, attorney's fee or other sum chargeable to Filene's Basement or
any Affiliate of Filene's Basement pursuant to this Agreement, as the same may
be modified, altered or amended.
"Operating Procedures" means the written instructions and procedures
established by Bank in connection with the Program, as the same may be
supplemented, amended or modified by Bank from time to time, including, without
limitation, any advertising guidelines, and which Operating Procedures shall be
consistent with Bank's standard practice for Bank's other private label credit
card programs.
"Other Charges" means any and all other charges on Accounts (other than
finance charges, Late Charges, and Returned Check Charges) set, instituted and
implemented by Bank to the extent permitted by law.
7
<PAGE> 13
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity, or government (whether federal,
state, county, city, municipal, or otherwise, including, without limitation, any
instrumentality, division, agency, body, or department thereof).
"Portfolio Average Daily Balance" shall mean the amount calculated as
follows: the sum of the daily aggregate Indebtedness during each Billing Cycle
in a Settlement Period divided by the number of days in that Billing Cycle, each
such quotient occurring in such Settlement Period then added together, and the
resulting total divided by the number of Billing Cycles in such Settlement
Period.
"POS Network" means the electronic communication system between Filene's
Basement and Bank to facilitate the operation of the Program.
"Program" means the credit card program established by this Agreement and
made available to qualified Cardholders for the purchase of Merchandise sold by
Filene's Basement. The term "Program" includes the extension of credit,
billings, collections, accounting between the parties, and all aspects of the
customized revolving credit plan established by Bank as contemplated herein.
"Program Accounts Portfolio" means all Accounts owned by Bank.
"Renewal Term" has the meaning set forth in Section 12.1 hereof.
"Returned Check Charges" means charges or fees to Cardholders for returned
checks received by Bank or Filene's Basement as payment on an Account, which
charges are set by Bank from time to time and instituted and implemented by
Bank.
"Settlement Date" shall mean a Business Day no later than the tenth day
after the last day of the last Billing Cycle in a Settlement Period.
"Settlement Period" shall mean a monthly period beginning on the first day
after the last day of the final Billing Cycle in a calendar month and ending on
the last day of the last Billing Cycle in the next calendar month, except that
the first Settlement Period under this Agreement shall begin upon the
establishment of the first New Bank Account hereunder, and if that first New
Bank Account shall be established on or after the 25th day of a calendar month,
the first Settlement Period shall end on the last day of the final Billing Cycle
in the next calendar month.
"Solvent" shall mean, when used with respect to an entity, that (a) the
present fair salable value of such entity's assets exceed the total amount of
its liabilities; and (b) such entity is able to pay its debts as they become
due; and (c) such entity does not have unreasonably
8
<PAGE> 14
small capital to carry on its business as theretofore operated and all
businesses in which such entity is about to engage.
"Stores" means retail stores now or hereafter operated by Filene's
Basement and located in the United States using one or more of the Marks;
"Store" shall also include (i) any location or operation which sells Merchandise
by mail order or over the telephone, and (ii) any department within a retail
store operated by Filene's Basement, which department is leased from Filene's
Basement by a Licensee.
"UCC" means the Uniform Commercial Code (or similar personal property law)
of the jurisdiction with respect to which such term is used, as in effect from
time to time.
"Value-Added Programs" means any program offered by or through Bank under
which Bank or a third party designated by Bank makes products or services
available to Cardholders as set forth in Section 3.8 hereof. Under no
circumstances shall Credit Insurance be considered a Value-Added Program.
SECTION 1.2 INTERPRETATION OF TERMS. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in the masculine, feminine, or
neuter gender shall include the masculine, the feminine, and the neuter.
SECTION 1.3 ACCOUNTING TERMS. Any accounting term used herein shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with Generally Accepted Accounting Procedures (GAAP). That certain
terms or computations are explicitly modified by the phrase "in accordance with
GAAP" shall in no way be construed to limit the foregoing. All other undefined
terms contained herein shall, unless the context indicates otherwise, have the
meanings provided for by the Code in the State of Georgia to the extent the same
are used or defined therein. The words "herein", "hereunder", and other words of
similar import refer to this Agreement as a whole, as the same may from time to
time be amended or supplemented, and not to any particular section, subsection,
or clause contained in this Agreement.
ARTICLE II ESTABLISHMENT OF PROGRAM
SECTION 2.1 ESTABLISHMENT OF PROGRAM, GENERALLY.
(a) Pursuant to the terms and conditions of this Agreement, Bank will
establish, and Filene's Basement will participate in, the Program for the
purpose of extending open-end credit accessed by Credit Cards available to
qualified Applicants (up to applicable Credit Limits) for the purchase of
Merchandise from Stores.
9
<PAGE> 15
(b) Bank will pay Filene's Basement the sum of $100,000, within five days
of the Effective Date, as a signing bonus.
(c) Any and all new Accounts opened in favor of Cardholders on or
subsequent to the Effective Date will be opened and maintained by Bank as Bank
Accounts.
(d) On the Conversion Date, Bank shall acquire from GE Capital all GECC
Accounts and thereafter convert said GECC Accounts into Bank Accounts.
(e) Filene's Basement agrees to cooperate fully with GE Capital and Bank
in undertaking the conversion described in subsection 2.1(d), such cooperation
to include, but not be limited to, the taking of any and all actions by Filene's
Basement which either Bank or GE Capital reasonably deems necessary or advisable
in order to give effect to the acquisition of GECC Accounts by Bank on the
Conversion Date, the conversion of such GECC Accounts into Bank Accounts, and
the implementation of any corresponding changes in the terms and conditions
governing Cardholders' subsequent usage of such Accounts. The costs incurred by
the parties in effecting the conversion shall be borne as provided in Section
2.5.
(f) With respect to each Applicant under the Program who qualifies for
credit under the Credit Criteria, Bank shall open an Account, issue a Credit
Card and extend credit on such Account (up to applicable Credit Limits) for the
purchase of Merchandise. The terms and conditions upon which a Cardholder may
use the Credit Card, and upon which Bank may extend credit to a Cardholder,
shall be governed by the Credit Card Agreement between such Cardholder and Bank.
SECTION 2.2 EXTENSION OF CREDIT BY BANK; MAXIMUM INVESTMENT.
(a) Subject to Credit Limits applicable to each Account and to the terms
and conditions in the Credit Card Agreement, Bank shall extend credit to
Cardholders in amounts set forth as the "total" for any purchase(s) reflected in
Charge Transaction Data received and accepted by Bank, provided that Bank shall
not be obligated to extend any credit to Cardholders if, after giving effect to
any such proposed extension of credit, the aggregate outstanding balance of all
Accounts owned by Bank would equal or exceed the Maximum Investment. Bank shall
have full recourse against Filene's Basement for all Accounts and transactions
not authorized by Bank.
(b) In the event that the aggregate unpaid balance of Accounts equals or
exceeds eighty percent (80%) of the Maximum Investment then in effect, Bank
shall notify Filene's Basement in writing that the aggregate of Indebtedness
under this Agreement has reached such level, and, within ninety (90) days after
the date of such notice, Bank shall elect any one of the following options and
give Filene's Basement written notice of such election within said ninety day
period:
10
<PAGE> 16
(i) Bank may, in its sole discretion, increase the Maximum
Investment to an amount Bank deems acceptable, but in any event to a sum
equal to or higher than the amount which, at the time of the election of
this option, would not then immediately trigger the provisions stated in
the preceding subsection. If Bank elects this option, Bank's written
notice to Filene's Basement shall include the amount of the increased
Maximum Indebtedness; or
(ii) Bank may obtain funds from one or more lending institutions, of
Bank's sole choice and in such manner as Bank deems appropriate and
consistent with the provisions of this Agreement, for the purpose of
securitizing or participating with Bank in funding a portion of the
Accounts, such portion to be unlimited in amount and at Bank's sole
expense and discretion (provided that Bank shall continue to be obligated
under this Agreement with respect to such Accounts as if Bank had not
securitized or participated out such Accounts); or
(iii) Bank may elect not to increase the Maximum Investment to an
amount required in subsection 2.2(b)(i); in such event, Filene's Basement
shall be entitled to terminate this Agreement in accordance with the
provisions of subsection 12.2(c).
(c) Filene's Basement expressly acknowledges Bank's right to establish a
Maximum Investment, and, in this regard, hereby releases Bank from any and all
losses incurred as a result of Bank taking any action contemplated under this
Section 2.2, including but not limited to any losses resulting from Bank's
refusal to approve any extensions of credit to Cardholders, or to increase the
Maximum Indebtedness, or losses sustained by Filene's Basement relating to a
lender liability claim.
SECTION 2.3 FILENE'S BASEMENT TO HONOR CREDIT CARD. Filene's Basement shall
honor the Credit Cards for purchase(s) of Merchandise at all Stores in
accordance with the Operating Procedures.
SECTION 2.4 PROMOTION AND IMPLEMENTATION OF PROGRAM.
(a) Bank and Filene's Basement shall cooperate with each other and
actively support and promote the Program to Cardholders, both existing and
potential, in order to encourage the acquisition and usage of Accounts by
Cardholders. Except as otherwise provided in Article XIV hereof, advertising,
including any direct marketing by Bank, shall be subject to the approval of both
parties hereto.
(b) Within 30 days after the last day of each calendar year, Filene's
Basement will provide Bank with an itemized accounting documenting expenses for
all Filene's Basement activities directly relating to the promotion of Accounts
during such calendar year. Within 30 days following Bank's receipt of such
itemized accounting, Bank will reimburse Filene's Basement for any such expenses
in an amount not to exceed .10% of the Net Credit Volume
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<PAGE> 17
during such calendar year (in addition to amounts paid by Bank to Filene's
Basement under Section 3.8.
(c) Filene's Basement will maintain, within each Filene's Basement Store,
in places prominent and readily accessible to the public, Credit Card
Applications and credit card application displays. Filene's Basement will
include in its advertising reference to the Program with a frequency and a size
and prominence at least equal to the reference made in such advertising to any
other credit card. All such advertising and promotional material stating any
consumer credit terms and/or conditions will be subject to Bank's prior written
approval. Filene's Basement will not, without Bank's prior consent, use Bank's
name or logo type in any advertisement or promotion materials.
(d) Subject to Filene's Basement approval, Bank may, at its option,
through mailings, or other advertising media, solicit Cardholders for the
purpose of promoting the usage of Accounts. Filene's Basement agrees to
cooperate with Bank in such solicitation, at Bank's expense.
(e) Filene's Basement may elect, at its option, to provide to Bank (at the
address so stated by Bank and using Bank's insert requirements) inserts for
placement into customer billing statements each month. Filene's Basement will be
responsible for ensuring that the delivery, size and weight requirements of
inserts are in accordance with the specifications set forth in the Operating
Procedures and for the supply of insert stock. Filene's Basement will also be
solely responsible for the costs of producing such inserts. The insertion
service by Bank will be at no cost to Filene's Basement as long as all insert
and weight requirements have been met by Filene's Basement and no additional
postage is required because of the inserts. Notwithstanding the foregoing, any
insert required by law, or regulation or the Operating Procedures as well as any
collection and/or customer service letters, will take precedence over any
Filene's Basement insert.
SECTION 2.5 CONVERSION COSTS. The first $100,000 of the combined costs of the
parties to effect the conversion of the Program from GE Capital to Bank shall be
borne by Filene's Basement; all costs in excess of $100,000 shall be borne by
Bank.
SECTION 2.6 COMPETITIVE PROGRAMS. Filene's Basement shall not, unless Bank
agrees in writing, make available, or enter into the provision of any credit
program, credit facility, or credit card program other than (i) credit provided
in connection with the Program hereunder; (ii) credit provided by generally
accepted multi-purpose credit or charge cards such as American Express,
Mastercard, Visa and Discover, including any cooperative marketing program
established to support such cards (except that any so called "co-branded" card,
even if issued by any of the foregoing, shall be prohibited); and (iii) credit
provided in connection with accounts for commercial or business customers.
SECTION 2.7 CONFIDENTIAL INFORMATION. All confidential material and information
supplied by one party to the other party hereunder, including but not limited to
information concerning the
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terms of this Agreement, the Program Accounts Portfolio, the Customer List
(including the names and addresses of Cardholders), or either party's marketing
plans, objectives and financial results, is confidential and proprietary
("Confidential Information"). Confidential Information shall not include
information in the other party's possession prior to disclosure, information
lawfully obtained from a third party not subject to a confidentiality agreement
with another party, or information in the public domain unless that Confidential
Information is in the public domain because of a party's breach of its
obligations hereunder. A party shall use the other's Confidential Information
solely in the exercise of its rights and performance of its obligations pursuant
to this Agreement. Each party shall receive the other party's Confidential
Information in confidence and not disclose Confidential Information to any third
party (other than Affiliates) except as (i) authorized by this Agreement, (ii)
may be agreed upon in writing by the other party, or (iii) otherwise required by
law (in which case, the disclosing party, to the extent possible, shall seek
confidential treatment thereof). Each party shall use its best efforts to ensure
that its officers, employees, and agents take such action as shall be necessary
or advisable to preserve and protect the confidentiality of Confidential
Information. Nothing contained in this Section 2.7 shall effect the rights and
obligations of the parties with respect to the Customer List as specified in
subsection 3.3(b) hereof.
ARTICLE III ADMINISTRATION OF PROGRAM
SECTION 3.1 PREPARATION OF DOCUMENTS.
(a) Filene's Basement agrees to provide at its expense: (i) all necessary
and proper imprinters, (ii) promotional material, and (iii) authorization
devices and the installation thereof (other than the equipment listed in Section
3.4), provided that such expense does not exceed $20,000 in any calendar year.
Any expense for such items in excess of $20,000 in any calendar year shall be
approved by Filene's Basement, and the payment of such expense shall be agreed
to by the parties.
(b) Bank agrees to provide at its expense: (i) billing and collection
forms, and Credit Card Application forms, (ii) Credit Cards for all customer
accounts approved by Bank from the date hereof, (iii) embossing service, (iv)
communication lines for authorization purposes, and (v) such internal forms as
Bank may require to implement this Agreement.
(c) Bank agrees to provide at Filene's Basement expense: (i) sales slip
forms, (ii) customer refund forms, and (iii) customer payment receipt forms.
(d) All forms to be used by Bank to evidence sales of Merchandise which
result in Accounts or to be used in the billing or collection of Accounts,
shall, at Bank's option, state that the Accounts are owned by and are serviced
by Bank, and shall be otherwise subject to approval by Bank prior to actual
usage. No change in such forms shall be effected without Bank's prior written
consent, which will not be unreasonably withheld.
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(e) All Account Documentation shall be in a form prepared and/or approved
by Bank (each an "Approved Form") and each Approved Form shall clearly disclose
that Bank is the creditor. Bank may prepare new Approved Forms and/or modify
Approved Forms at any time in its sole discretion.
(f) A Cardholder's minimum monthly payments initially shall be as set
forth below. Bank may change such minimum payment at any time after prior
consultation with Filene's Basement.
<TABLE>
<CAPTION>
New Balance Minimum Monthly Payment
----------- -----------------------
<S> <C>
Up to $20.00 New Balance
$20.01 to $200.00 $20.00
$200.01 to $250.00 $25.00
$250.01 to $300.00 $30.00
$300.01 to $350.00 $35.00
$350.01 to $400.00 $40.00
$400.01 to $450.00 $45.00
$450.01 to $500.00 $50.00
Over $500 1/10 of the new balance, rounded to
the next higher dollar
</TABLE>
SECTION 3.2 CREDIT CRITERIA AND CREDIT APPROVAL.
(a) Bank shall, in its sole discretion but in compliance with law,
establish the Credit Criteria used in evaluating Applicants in connection with
the Program and may, in its sole discretion but in compliance with law, modify
such Credit Criteria from time to time as it deems necessary subject to the
terms and conditions set forth in subsection 3.2(b) below.
(b) Unless otherwise agreed by Bank and Filene's Basement, to the extent
permitted by law, Filene's Basement will process all applications for credit,
strictly applying instructions and criteria supplied by Bank. Bank will review
all applications for credit submitted to Bank or Filene's Basement by or on
behalf of prospective Cardholders and will approve for credit those applicants
which Bank deems creditworthy in accordance with credit standards and other
reasonable criteria set initially by Bank and customarily used in its business
practice. Standards of acceptability and eligibility may be revised from time to
time by Bank in accordance with reasonable credit considerations customarily
used in its business practice, after consultation with Filene's Basement.
(c) Bank, in its sole discretion, shall determine the creditworthiness of
individual Applicants under the Program, and shall periodically review the
creditworthiness of Cardholders in order to determine the range of Credit Limits
to be made available to individual Cardholders and whether to suspend or
terminate credit privileges of any Cardholder. Bank shall be identified to
Cardholders as the creditor for all purposes. The rejection for credit of
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any Applicant, or any number of Applicants as a result of the application of the
agreed upon credit criteria, shall not give rise to any claim, liability,
demand, offset, defense or counterclaim by Filene's Basement against Bank,
including, but not limited to, any lender liability claim. Further, Bank shall
not assume any liability in regard to the range of credit availability
respecting a particular Cardholder.
(d) Specific credit approval shall be obtained from Bank by Filene's
Basement for each sale at the time of actual purchase.
SECTION 3.3 CREDIT INFORMATION; OWNERSHIP OF ACCOUNTS AND CUSTOMER LISTS.
(a) Bank may furnish credit information and other information concerning
creditworthiness with respect to any Applicant or Cardholder to credit bureaus,
credit interchanges and any others who may lawfully receive such information for
their own use. Bank is the sole and exclusive owner of the Program Accounts
Portfolio and each Account (including the names and addresses of Cardholders
incorporated therein), Charge Transaction Data, Charge Slips, Credit Card Sales
Invoices, Credit Slips, receipts or evidences of payment or purchases by
Cardholders and other Account Documentation. Bank as the sole and exclusive
owner of Accounts, shall be entitled to receive all payments made by Cardholders
on Accounts and Filene's Basement acknowledges and agrees that it has no right,
title or interest in, or rights to, the Program Accounts Portfolio, Accounts or
any payments made in connection with the same.
(b) Filene's Basement acknowledges and agrees that Bank is the sole and
exclusive owner of the Customer List, and agrees that both during the term of
this agreement and thereafter, Bank may use such Customer List in connection
with its administration and operation of the Program as provided in this
Agreement, provided that, if Filene's Basement purchases all Accounts upon the
termination of the Program, as described in this Agreement, Bank will make no
further use of the Customer List after all obligations of any Person to Bank or
GE Capital relating to the Program have been discharged and, in such event, all
right, title and interest to the Customer List shall be conveyed to Filene's
Basement. It also is acknowledged and agreed that, during the Initial Term and
any Renewal Term and subject both to customers' requests not to be solicited and
applicable law, Bank from time to time shall allow Filene's Basement to use the
Customer List to conduct mailings to promote Merchandise (provided that no such
communications shall include references to any financial products offered by a
Person other than Bank or an Affiliate). Filene's Basement shall return the
Customer List to Bank immediately upon completion of its use thereof and shall
not, and shall not allow any other Person to, copy, sell, rent or disclose the
Customer List.
SECTION 3.4 DATA TRANSMISSION EQUIPMENT. Data Transmission Equipment is provided
subject to the following conditions:
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(a) The Data Transmission Equipment is either owned by Bank or is under
lease to Bank from a financing or leasing source and all of the Data
Transmission Equipment is to be used solely in the operation of the Program
pursuant to this Agreement;
(b) Filene's Basement shall not have any right or interest in Data
Transmission Equipment other than as a permitted user during the term of this
Agreement;
(c) Upon the termination of this Agreement, all of the Data Transmission
Equipment shall be promptly returned by Filene's Basement, at its expense and in
good condition (ordinary wear and tear excepted), to Bank or its designated
agent pursuant to Bank's instructions;
(d) If Filene's Basement fails to promptly return the Data Transmission
Equipment furnished to Filene's Basement in good condition (ordinary wear and
tear excepted), Filene's Basement shall be responsible for the unamortized cost
of such Data Transmission Equipment, and shall reimburse Bank, either the
unamortized cost thereof, or if applicable, all rental due or to become due on
the Data Transmission Equipment.
The Data Transmission Equipment provided to Filene's Basement as of the
Effective Date is as follows: five (5) Telzon terminals and one (1) Hypercom
terminal; any further Data Transmission Equipment will be provided by Bank at a
cost to be negotiated by Bank and Filene's Basement.
SECTION 3.5 RETURNS OF MERCHANDISE. Filene's Basement is authorized to accept
returns of Merchandise and credit the Accounts of Cardholders effecting such
returns. Filene's Basement will pay Bank, daily, the amount of credits made to
Accounts by reason of such returns as evidenced by Credit Slips. Further,
Filene's Basement is authorized to make adjustments in the amount of finance
charges payable by Cardholders whose Accounts are credited for returned
Merchandise, provided that Filene's Basement promptly notifies Bank thereof.
Bank shall bill Filene's Basement for such adjusted finance charges.
SECTION 3.6 COLLECTION OF ACCOUNTS. The exclusive right to effect collection of
all Accounts shall be vested in Bank, which may use any collection strategy
allowed by applicable law.
SECTION 3.7 CREDIT INSURANCE.
(a) Bank or any Person authorized by Bank shall have the right to solicit
and offer to Cardholders and Applicants credit life, credit property and/or
other types of credit insurance (collectively "Credit Insurance") on the
Accounts under a credit insurance program. The Credit Insurance will be under a
master group plan with Bank or an Affiliate of Bank underwritten by an insurer
selected by Bank. To the extent permitted by applicable law, the monthly charges
incurred by a Cardholder under an Account for such Credit Insurance shall be
charged as an insurance service transaction to the applicable Cardholder's
Account, and Bank shall service and bill Cardholders who have purchased Credit
Insurance under Accounts. The
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Credit Insurance offers may be in direct mail or statement inserts or such other
manner determined by Bank in its sole discretion.
(b) Bank shall be listed as the loss payee under any Credit Insurance
policy/certificate sold in connection with Accounts.
(c) Bank and Filene's Basement understand that Credit Insurance is
regulated under applicable state laws and regulations. Bank makes no
representations or warranties with respect to the availability of Credit
Insurance on any Account(s).
(d) To the extent permitted by applicable law, Bank shall pay Filene's
Basement 50% of Bank's net annual income from the marketing of such insurance,
net of all claims incurred in connection with such insurance. To the extent that
is not permitted by applicable law, either because Filene's Basement does not
have the necessary licenses or otherwise, the parties will agree on another
equitable arrangement.
SECTION 3.8 VALUE-ADDED PROGRAMS. Bank or any Person authorized by Bank, may
from time to time in Bank's reasonable discretion solicit through mailings,
billing statements, promotional inserts, telemarketing and other advertising
media (including, but not limited to, bang tail envelopes) any or all
Cardholders for items other than Merchandise sold by Filene's Basement, offered
by Bank or a third party, including, without limitation, second mortgages,
savings and investment products, insurance (other than Credit Insurance), credit
card protection plans, legal services, auto clubs and extended warranties, and
such other products and services as Bank may determine. Such solicitation may be
conducted by Bank (or any Person authorized by Bank) in the name of Bank or
Filene's Basement with Filene's Basement's prior written approval, and as the
parties may agree; provided, however, that all such solicitations shall be
subject to the approval of Filene's Basement, which approval shall not be
unreasonably withheld. The parties shall each receive 50% of the net profits
from such Value-Added Programs, after Bank receives reimbursement for its
out-of-pocket expenses related thereto.
SECTION 3.9 TRANSMITTAL AND RETENTION OF DOCUMENTS. Filene's Basement shall
promptly transmit to Bank all Credit Card Applications. Filene's Basement
authorizes Bank to microfilm or otherwise copy all Account Documentation in its
possession with the identification of Accounts and destroy all original Account
Documentation in the ordinary course of business as Bank may see fit, in
accordance with applicable laws.
SECTION 3.10 IN-STORE PAYMENTS. Filene's Basement shall not advertise or
otherwise promote that Cardholders (or other persons acting on behalf of
Cardholders) may make In-Store Payments. Without derogating the restriction in
the preceding sentence, if any In-Store Payment is made, Filene's Basement shall
give the person making such In-Store Payment a receipt for such payment and
shall be deemed to hold such In-Store Payment in trust for such Cardholder until
such payment is either delivered to Bank or is applied by Bank to reduce amounts
payable by Bank to Filene's Basement. Filene's Basement shall transmit In-Store
Payment information to Bank. In-Store Payments shall be credited to the Account
of the
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relevant Cardholder as of the date of actual receipt by Bank. In the event that
In-Store Payments received by Filene's Basement exceed amounts so payable by
Bank to Filene's Basement at the time Filene's Basement informs Bank of such
In-Store Payments, Filene's Basement shall be required to transmit such excess
In-Store Payments to Bank within one (1) Business Day of the day received.
Filene's Basement shall notify Bank of any In-Store Payments within twenty-four
(24) hours of receipt thereof by providing such information with the Charge
Transaction Data.
SECTION 3.11 BANK'S RIGHT TO AUDIT. Bank shall have the right, during normal
business hours and on reasonable notice, to inspect and audit Filene's
Basement's records, from time to time, as it deems appropriate, as such records
pertain to Accounts, at Bank's expense.
SECTION 3.12 FILENE'S BASEMENT'S RIGHT TO AUDIT. Filene's Basement shall have
the right, during normal business hours and on reasonable notice, to inspect and
audit Bank's records, from time to time, as it deems appropriate, as such
records pertain to payments to be made by Bank to Filene's Basement under
Sections 3.7 and 3.8, at Filene's Basement's expense; provided that if any such
audit reveals a shortfall in payments during the period subject to the audit,
Bank will reimburse Filene's Basement for such shortfall.
ARTICLE IV OPERATING PROCEDURES
SECTION 4.1 GENERAL. Filene's Basement shall follow all applicable Operating
Procedures in connection with the Program including, but not limited to,
distributing Credit Card Applications, opening new Accounts, seeking
authorizations for charges, handling credit transactions with Cardholders and
transmitting Charge Transaction Data.
SECTION 4.2 NEW CUSTOMER ACCOUNT ESTABLISHMENT PROCEDURES.
(a) Bank will accept and process Credit Card Applications.
(b) All Credit Card Applications will be reviewed promptly by Bank and
decisioned for approval and credit line assignment, and all such decisions that
are made at the point of sale will promptly be reported by Bank to Filene's
Basement. Filene's Basement will use its reasonable best efforts to communicate
such point of sale credit decisions to applicants.
(c) Approved Accounts will be forwarded a customized Credit Card by Bank
within ten (10) days of the date of approval.
SECTION 4.3 PURCHASE AUTHORIZATION PROCEDURES.
(a) Filene's Basement must complete a Charge Slip. The Account number must
be printed or written on the Charge Slip. If such Cardholder does not have
his/her Credit Card,
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Filene's Basement must either (i) call Bank's Central Credit Office (via a toll
free number) and request the Account number by providing the operator with such
Cardholder's name, address and form of positive identification (preferably a
valid driver's license or other photo ID) to the extent the request or
recordation of such identification does not violate applicable law, or (ii)
otherwise access the necessary information through the POS Network.
(b) Filene's Basement must have the Cardholder sign the Charge Slip, once
all of the purchase information is filled in as requested. Filene's Basement
shall verify that the signing of the person signing the Charge Slip reasonably
appears to be the same as the signature appearing on the Credit Card being used.
(c) Subject to the provisions of subsection 4.3(e) below, Filene's
Basement must obtain authorization through the existing POS Network for all
purchases and record the authorization code on the Charge Slip. For
authorization on system referrals, Filene's Basement must call the Bank office
supporting this Agreement for an authorization code. Bank shall be responsible
for providing toll-free phone numbers for direct authorizations.
(d) Credit Slips need not be authorized but must be completely filled out
and signed by the Cardholder.
(e) Filene's Basement shall immediately input the Charge Transaction Data
into the POS Network, as applicable, at the time the transaction occurs. In the
event that the P0S Network and/or Bank's authorization system are not in
operation, and authorizations for Cardholder purchases cannot be obtained
directly from Bank, Filene's Basement shall have a Floor Release (as defined in
the Operating Procedures) per transaction and/or Cardholder. Any adjustment to
the Floor Release limit shall be effected by mutual agreement between Bank and
Filene's Basement.
(f) In connection with the Program, Filene's Basement shall make available
to Cardholders documents that have been approved by Bank.
SECTION 4.4 SETTLEMENT PROCEDURES.
(a) All Charge Transaction Data will be electronically transmitted to Bank
using POS Network settlement procedures. Filene's Basement will retain a copy of
the Charge Slip.
(b) All Charge Transaction Data presented to Bank will be reviewed and
processed by Bank. Bank will use its best efforts to review and forward the full
amount shown as the total of purchases reflected in Charge Slips included in
such Charge Transaction Data presented less (i) the Discount, (ii) the total
amount of any Credit Slips included in such Charge Transaction Data submitted by
Filene's Basement, (iii) the portion of any Charge Slip or Credit Slip to be
charged back to Filene's Basement under this Agreement, (iv) the total amount of
any In-Store Payments accepted and held by Filene's Basement, and (v) any other
amounts due and payable to Bank pursuant to this Agreement, via wire transfer
within the time
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provided herein. If the electronic data transmission or daily computer tape
reflecting such Charge Transaction Data sent by Filene's Basement is received by
Bank by 10:00 a.m. Eastern Time on a Business Day, Bank shall forward the funds
by initiating a wire transfer of funds on the next Business Day after the day of
receipt by Bank of the electronic data transmissions or daily computer tape
reflecting such Charge Transaction Data. If Bank receives electronic data
transmissions or daily computer tapes from Filene's Basement after 10:00 a.m.
Eastern Time on any Business Day, such electronic data transmissions or daily
computer tapes shall be deemed received by 10:00 a.m. Eastern Time the following
Business Day, and Bank shall forward the funds by initiating a wire transfer on
the Business Day following the Business Day on which such electronic data
transmissions or daily computer tapes are deemed received, except that if an
electronic transmission or daily computer tape for Charge Transaction Data are
received by Bank by midnight Eastern Time on any Saturday, Bank will initiate a
wire transfer of funds for such Charge Transaction Data on the next Business
Day.
(c) As provided in Sections 3.7 and 3.8 hereof, Filene's Basement is to
receive 50% of the net profits from Credit Insurance and Value-Added Programs,
after Bank receives reimbursement for its out-of-pocket expenses related
thereto. Bank shall send to Filene's Basement a statement, on the 15th day of
each month during the term of this Agreement, showing in reasonable detail all
items of income and expense relating to such Credit Insurance and Value-Added
Programs during the immediately preceding calendar month, together with payment
of the amount shown on such statement as the amount due to Filene's Basement
therefrom.
(d) In connection with the settlement procedures outlined above, the
parties agree that all settlements made hereunder shall be net of any and all
other adjustments contemplated by this Agreement, including but not limited to
credits, other adjustments and purchases pursuant to this Agreement, and in
connection therewith Bank shall have the right to set off any amounts due to it
pursuant to this Agreement against any amounts to be transmitted to Filene's
Basement hereunder.
(e) Any costs or expenditures by the parties to this Agreement other than
as explicitly set forth herein shall be at the sole expense of the party
incurring such costs or other expenditures and shall not entitle that party to
seek reimbursement of such costs or other expenditures from the other party to
this Agreement. Accordingly, subject to the reimbursement provisions of this
Agreement, if any, each of the parties alone shall be liable for the payment of
all sums due to third parties retained by such party in performing its
obligations hereunder.
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ARTICLE V PAYMENT TO FILENE'S BASEMENT FOR CHARGE SLIPS; OTHER
CHARGES
SECTION 5.1 PAYMENT TO FILENE'S BASEMENT.
(a) Subject to Bank's right to deduct certain sums in accordance with the
terms of this Agreement, Bank will pay Filene's Basement for each Charge Slip
submitted pursuant to this Agreement an amount equal to the unpaid cash balance
(i.e. unpaid principal indebtedness) thereunder, as provided in this Agreement,
less the Discount.
(b) Effective July 25, 1995, the Discount shall be an amount equal to 1.4%
of Net Credit Volume.
SECTION 5.2 POSTAGE RATE ADJUSTMENT. In the event the U.S. First Class postage
rate is increased after July 1, 1995, Filene's Basement shall pay to Bank on
each Settlement Date an amount equal to the product of (i) the excess of (x) the
weighted average unit price paid by Bank for U.S. First Class postage with
respect to the Filene's Basement Program on the last day of the previous
Settlement Period, over (y) the weighted average unit price paid by Bank for
U.S. First Class postage with respect to the Filene's Basement Program as of
July 1, 1995. MULTIPLIED BY (ii) the number of Cardholders to which Bank mailed
correspondence (including without limitation letters and billing statements)
during the previous Settlement Period. This provision shall apply to each
postage increase during the term of this Agreement.
SECTION 5.3 BUSINESS REPLY POSTAGE. Filene's Basement shall pay to Bank all
costs associated with postage-paid business reply postage on applications
submitted through the mail by Applicants to Bank. Bank shall render invoices for
such amount monthly.
SECTION 5.4 BASE RATE ADJUSTMENT.
(a) On each Settlement Date, Bank will calculate for the previous
Settlement Period the difference between the Actual Interest Expense and the
Base Rate (the "Base Rate Adjustment"). The Base Rate Adjustment will be divided
by twelve (12) and then multiplied by the Portfolio Average Daily Balance for
the previous Settlement Period. The product of the above calculation will be
paid by Bank to Filene's Basement to the extent Actual Interest Expense is less
than the Base Rate, or paid by Filene's Basement to Bank to the extent Actual
Interest Expense exceeds the Base Rate.
(b) Notwithstanding anything contained herein to the contrary, during the
first 18 months after the Effective Date, to the extent that on a Settlement
Date, the (x) sum of (i) the Discount multiplied by the Net Credit Volume for
the immediately preceding Settlement Period, plus (ii) the Base Rate Adjustment
on such Settlement Date multiplied by the Portfolio Average Daily Balance for
such Settlement Period divided by (y) the Net Credit Volume for such Settlement
Period is greater than 1.97%, Filene's Basement may defer up to $300,000 of
amounts payable by Filene's Basement under subsection 5.4(a) during such
18-month period
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until the end of such 18-month period. The amount so deferred shall be referred
to herein as the "Deferred Discount." In the event that the aggregate amount so
deferred at any time during the 18-month period under the Deferred Discount
exceeds $300,000, Filene's Basement shall pay Bank such excess amounts on a
monthly basis. Upon the expiration of such 18-month period, Filene's Basement
shall pay Bank the total amount of the Deferred Discount, and there shall be no
further deferral of such payment. To the extent that Bank changes the minimum
monthly payment schedule as set forth in subsection 3.1(f) in such a manner as
to have a material and adverse effect on Filene's Basement's costs as set forth
in this Section 5.4, then the parties agree to negotiate in good faith to make
any necessary changes in the provisions of this Section 5.4 to address such
effect.
SECTION 5.5 APPLICATION FEES. Filene's Basement shall pay to Bank on each
Settlement Date (i) a one-time $5.50 fee per Credit Card Application phoned to
Bank during the Settlement Period by Filene's Basement, and (ii) a one-time
$3.80 fee per Credit Card Application faxed to Bank during the Settlement Period
by Filene's Basement.
SECTION 5.6 PAYMENT BY FILENE'S BASEMENT. Any amounts payable by Filene's
Basement to Bank hereunder shall be paid within fifteen (15) days after billings
are rendered by Bank.
ARTICLE VI CHARGEBACK
SECTION 6.1 BANK'S RIGHT TO CHARGEBACK.
(a) Bank shall have the right, at its option, to chargeback to Filene's
Basement the amount of any Charge Slip or Credit Slip if with respect to such
Charge Slip or Credit Slip, or the underlying transaction:
(i) Any warranty made by Filene's Basement pursuant to Section 8.11
proves to be false or inaccurate in any respect, and as a result thereof,
the Charge Slip or Credit Slip is otherwise unbillable or uncollectible,
in each case as reasonably determined by Bank;
(ii) The Cardholder asserts any claim or defense against Bank as a
result of any act or omission of Filene's Basement allegedly in violation
of any applicable law, statute, ordinance, rule or regulation;
(iii) The Cardholder disputes the amount or existence of such
Account or refuses to pay alleging dissatisfaction with Merchandise
received, a breach of any warranty or representation by Filene's Basement
in connection with the transaction, or an offset or counterclaim against
Bank based on an act or omission of Filene's Basement, provided any
disputes constitute bona fide claims presented by Cardholders in good
faith in the reasonable opinion of Bank, after inquiry to Filene's
Basement; and
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(iv) If the Cardholder disputes a Charge Slip and Filene's Basement
cannot supply Bank with a copy of the Charge Slip as soon as reasonably
practicable, but in no event later than ten (10) days of Bank's written
request.
(b) Bank shall have the right, at its option, to chargeback to Filene's
Basement the amount of any Charge Slip or Credit Slip relating to a GECC Account
if with respect to such Charge Slip or Credit Slip, or the underlying
transaction, GE Capital would have had the right to chargeback such amount under
the terms of the Account Purchase Agreement.
(c) Bank may compromise and settle any claim made by any Cardholder if
such claim may give Bank a right to chargeback in accordance with subsection
6.1(a) above up to the face amount of any Charge Slip or Credit Slip. With
respect to chargebacks pursuant to Subparagraphs 6.l(a)(ii) and 6.l(a)(iii)
above, Bank agrees to use commercially reasonable efforts to cooperate with
Filene's Basement in resolving such disputes.
(d) If Bank exercises its rights of chargeback in accordance with this
Agreement, Bank shall set off amounts charged back against any sums due Filene's
Basement under this Agreement or, if chargebacks exceed sums due Filene's
Basement, Bank may demand payment from Filene's Basement for the full amount of
such excess by netting such amounts against amounts due to Filene's Basement
pursuant to Section 4.4. Bank shall give Filene's Basement five (5) days'
written notice prior to charging back any amounts to Filene's Basement, or such
other lesser notice as the parties may agree. If the full face amount or any
portion thereof of any Charge Slip is charged back, Bank shall assign, without
recourse, all right to payment for such Charge Slip or portion thereof to
Filene's Basement.
ARTICLE VII FINANCE CHARGES, OTHER CHARGES, ACCOUNT PAYMENT
TERMS
SECTION 7.1 BANK'S RIGHTS. Bank will have the sole right and obligation to
establish the rate and other terms of Cardholder's finance charges in accordance
with all applicable state and federal banking and consumer credit laws and to
modify such rates or terms in its sole discretion from time to time. Bank shall
retain all finance charges.
SECTION 7.2 BASE FINANCE CHARGE. Bank and Filene's Basement agree that, subject
to the last sentence of this Section 7.2, the rate of finance charges on
Accounts shall initially be established at 21% Annual Percentage Rate. Bank may
change the method of compounding following consultation with Filene's Basement.
The rate of finance charges on Accounts shall not be changed prior to
consultation with Filene's Basement, provided that if such change is required by
applicable state and federal banking and consumer credit laws, Bank may change
such rate, consulting with Filene's Basement as soon as reasonably practicable.
SECTION 7.3 NOTICE OF CHANGES. Bank shall notify Filene's Basement of any
intended change in finance charge rate(s) other than the changes referred to in
Section 7.2 above, not less than
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ten (10) days prior to the intended effective date of such change unless such
change is mandated by law or regulation (in which case prior notice need not be
given).
SECTION 7.4 CHANGES IN LAWS/REGULATIONS; RENEGOTIATION. Notwithstanding anything
to the contrary contained in this Agreement, Bank may engage Filene's Basement
in renegotiation of this Agreement if (i) usury rates of the State of Georgia
change, (ii) laws regulating Bank, affecting the Program, change, or (iii)
federal or state regulation preempts the exportation of Bank's credit card rate
structure, which changes negatively affect Bank's yield requirements under this
Agreement and in Bank's reasonable judgment could have a material adverse effect
on Bank. In the event of a renegotiation pursuant to this Section 7.4, if new
terms acceptable to the parties are not agreed upon in writing within ninety
(90) days after the date renegotiations begin, this Agreement shall terminate on
the one hundred eighty-first (181st) day after such renegotiation begins, or at
Bank's option, the date Bank would be required to make changes to the Program to
comply with applicable law or regulation.
SECTION 7.5 LATE CHARGES; RETURNED CHECK CHARGES; OTHER CHARGES. The right and
obligation to establish and from time to time modify the rate(s) and other terms
of Late Charges, Returned Check Charges and Other Charges on Accounts is solely
that of Bank, which has and unilaterally shall establish and modify such rate(s)
under this Agreement (within applicable legal parameters); provided that in
setting any such charges, Bank shall take into consideration the rates
prevailing among major retailers. Bank shall retain all such charges or fees.
ARTICLE VIII REPRESENTATIONS, WARRANTIES AND COVENANTS OF
FILENE'S BASEMENT
To induce Bank to establish and administer the Program, to originate and
administer Accounts, to extend credit to Cardholders and to pay funds to
Filene's Basement, which funds shall constitute an advance by Bank to
Cardholders in connection with Accounts, Filene's Basement makes the following
representations, warranties and covenants to Bank, each and all of which shall
survive the execution and delivery of this Agreement, and each and all of which
shall be deemed to be restated and remade on each date on which Bank extends
credit, originates, administers or remits funds with respect to Accounts or
administers the Program:
SECTION 8.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Filene's Basement is a
corporation duly organized, validly existing and in good standing under the laws
of the state in which it was incorporated, and (a) is duly qualified as a
foreign corporation and in good standing under the laws of each jurisdiction
where its ownership or lease of property or the conduct of its business requires
such qualification, (b) has a perpetual existence, (c) has the requisite power
and authority and the legal right to own, pledge, mortgage, and operate its
properties, to lease the properties it operates under lease, and to conduct its
business as now, heretofore, and proposed to be conducted, (d) has all necessary
licenses, permits, consents, or approvals from or by, and has made all necessary
filings with, and has given all necessary
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notices to, all governmental authorities having jurisdiction, to the extent
required for such ownership, operation, and conduct; and (e) is in compliance
with its articles of incorporation and its by-laws.
SECTION 8.2 EXECUTIVE OFFICES. The chief executive office and principal place of
business of Filene's Basement where records with respect to Accounts are kept is
at 40 Walnut Street, Wellesley, Massachusetts 02181, or at such other place as
Filene's Basement shall, from time to time, specify to Bank. Without thirty (30)
days' prior written notice to Bank, Filene's Basement shall not transfer its
chief executive offices or change its principal mailing address. Filene's
Basement shall inform Bank within thirty (30) days after it becomes aware of any
change of address of a Store. Filene's Basement shall not change its corporate
name without first providing Bank thirty (30) days' prior written notice.
SECTION 8.3 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery, and performance of this Agreement by Filene's Basement and
all instruments and documents to be delivered by Filene's Basement pursuant to
this Agreement: (a) are within Filene's Basement corporate power; (b) have been
duly authorized by all necessary or proper corporate action, including the
consent of shareholders where required; (c) are not in contravention of any
provision of Filene's Basement articles of incorporation or bylaws; (d) will not
violate any law or regulation or any order or decree of any court or
governmental instrumentality applicable to Filene's Basement; (e) will not
conflict with or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, lease, agreement, or other instrument to
which Filene's Basement is a party or by which Filene's Basement or any of its
property is bound; and (f) do not require of Filene's Basement any filing or
registration with or the consent or approval of any governmental body, agency,
authority, or any other Person which has not been made or obtained previously.
This Agreement has been duly executed and delivered by Filene's Basement and
constitutes the legal, valid, and binding obligation of Filene's Basement,
enforceable against Filene's Basement in accordance with its terms, except as
such enforcement may be limited by applicable bankruptcy, moratorium,
reorganization, or other laws affecting the rights of creditors generally.
Filene's Basement has obtained or will obtain (as provided in Article XV hereof)
any and all necessary consents of third parties required of it in order to enter
into this Agreement and to consummate the transactions contemplated hereby, and
the execution and delivery of this Agreement and performance by Filene's
Basement of the transactions contemplated hereby will not result in Filene's
Basement being in default under any of the provisions of its Certificate of
Incorporation, By-Laws, other corporate or legal documents, or of any material
credit or other agreement to which it is a party.
SECTION 8.4 SOLVENCY. Filene's Basement is Solvent.
SECTION 8.5 NO DEFAULT. Filene's Basement (i) is not in default with respect to
any contract, agreement, document, lease, or other instrument to which it or any
Affiliate of it is a party or by which it or any of its property may be bound,
and (ii) has not received any notice of default pursuant to any such contract,
agreement, lease, or other instrument, which, in either case,
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would have a material adverse effect on the business, operations, property, or
financial or other condition of it or any of its Affiliates. No Event of Default
by Filene's Basement, or Filene's Basement Event of Default, or event which,
with the giving of notice, the lapse of time, or both, would be an Event of
Default by Filene's Basement or Filene's Basement Event of Default, has occurred
and is continuing. There are no corporate entities, other than subsidiaries and
Filene's Basement Corp. (the parent corporation of Filene's Basement) which
constitute Affiliates of Filene's Basement.
SECTION 8.6 NO BURDENSOME RESTRICTIONS. No contract, lease, agreement, or other
instrument to which Filene's Basement is a party or is bound and no provision of
applicable law or governmental regulation materially and adversely affects or
may be reasonably likely to so affect its business, operations, property, or
financial or other condition, the Accounts or the value thereof, the
Indebtedness or the value thereof, Bank's right, title and interest and Lien in
and to the Accounts and Indebtedness, or the priority of such Lien.
SECTION 8.7 COMPLIANCE WITH LAW. (i) The Merchandise description, pricing,
charges and related wording and content of the Approved Forms where such wording
and content is furnished by Filene's Basement, (ii) Filene's Basement sales
materials or practices, including, but not limited to, the sales order form,
sales invoice, promotional materials and similar forms, and/or (iii) actions of
Filene's Basement employees, sales representatives or agents, will be in
material compliance with all applicable provisions of federal and state laws and
implementing regulations.
SECTION 8.8 NO LITIGATION. No action, claim, or proceeding is now pending or, to
the knowledge of Filene's Basement, threatened against Filene's Basement at law,
in equity, or otherwise, before any court, board, commission, agency, or
instrumentality of any federal, state, or local government or of any agency or
subdivision thereof or before any arbitrator or panel of arbitrators which, if
adversely determined, might affect the validity or enforceability of any
Account, which might result in any material adverse change in the value of any
Account or which might have a material adverse effect on the ability of Filene's
Basement to perform its obligations hereunder nor, to the knowledge of Filene's
Basement, does a state of facts exist which might give rise to any such
proceedings.
SECTION 8.9 FULL DISCLOSURE. No information contained in this Agreement or any
other agreement or writing executed or issued by Filene's Basement or any
statement furnished by or on behalf of Filene's Basement in connection with this
Agreement or any other agreement or writing executed or issued in connection
with this Agreement, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading.
SECTION 8.10 INSURANCE. Filene's Basement maintains, and at all times has
maintained and will maintain, insurance policies with solvent insurers in such
amounts and insuring it against such types of loss or damage as are customarily
maintained by corporations engaged in similar businesses with respect to its
property.
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SECTION 8.11 ACCOUNTS; ACCOUNT DOCUMENTATION.
(a) Each Charge Slip, Credit Slip and Account and each sale of Merchandise
in connection with such Charge Slip, Credit Slip and/or Account (1) is free and
clear of any and all Liens in favor of any Person other than Bank or GE Capital,
as the case may be, (2) arises in connection with a bona fide final sale and
delivery of Merchandise by Filene's Basement in the ordinary course of business
(subject to usual return policies); (3) is for a liquidated amount as stated in
the Account Documentation relating thereto; (4) is authorized and created in
accordance with this Agreement and Bank's instructions as communicated to
Filene's Basement by Bank; (5) is valid and enforceable against the Cardholder
in accordance with its terms; (6) is not subject to any defense, deduction,
offset, counterclaim or recoupment assertable by the Cardholder or any other
Person obligated therefor or by Filene's Basement creditors or assigns, except
for those defenses, offsets, counterclaims or recoupments created as a result of
acts, or an omission to act where there is a duty to act, by Bank; (7) is for
new and unused Merchandise; however, items of Merchandise which are returned by
a Cardholder to Filene's Basement, and which are accepted for return by Filene's
Basement and restored to Filene's Basement inventory of Merchandise held for
resale, will, except as prohibited by law, be deemed either "new and unused" or
"used and reconditioned", as contemplated by this provision, and, in any event,
such Merchandise has been or will be delivered by Filene's Basement to the
Cardholder and accepted by the Cardholder; (8) is not in excess of the amount of
credit approved by Bank for such Cardholder; (9) bears a signature of a
Cardholder which is genuine and not forged or unauthorized; and (10) the
Merchandise relating to such transaction is primarily for personal, family or
household purposes.
(b) Each transaction did not involve a cash advance or Merchandise not
listed in the Charge Transaction Data and only Merchandise sold by Filene's
Basement is the subject of the transaction.
(c) Filene's Basement has not received, directly or indirectly, and will
refuse to accept, any reimbursement, payment or trade-in for the charges listed
in such Charge Transaction Data (other than from Bank) and has not and will not,
either directly or indirectly, take or grant any right or security interest in
any Charge Transaction Data (other than to Bank) which is the subject of the
transaction.
(d) The transaction giving rise to the Charge Transaction Data was
conducted by Filene's Basement in accordance with all material laws and
regulations that pertain to the sales of Merchandise by Filene's Basement
hereunder and that the Charge Transaction Data are not invalid, illegible,
inaccurate or incomplete.
(e) There is no fact nor any claim or defense of the Cardholder, that
would impair the validity, enforceability, or collectibility of the obligation
of the Cardholder evidenced by the Charge Transaction Data.
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SECTION 8.12 FIRST TIME BUYER. Whenever the POS Network indicates first-time
card usage. Filene's Basement will verify Cardholder identification by
requesting a valid driver's license and printing the license number on a sales
slip, unless prohibited by applicable law. If a driver's license is
unobtainable, Filene's Basement may substitute a major credit card or other form
of identification, all as specified by Bank, to the extent permitted by
applicable law.
SECTION 8.13 BALANCE IN ACCOUNT. Filene's Basement has taken, and will take, no
action, and has not failed to take and will not fail to take any action, which
would cause the balance in each Account not to be valid and enforceable against
the Cardholder.
SECTION 8.14 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Filene's Basement
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence. Filene's Basement shall transact
business so as not to misrepresent itself as the owner of Accounts or
Indebtedness owned by Bank hereunder.
SECTION 8.15 BOOKS AND RECORDS. Filene's Basement shall keep adequate records
and books of account with respect to its business activities, in which proper
entries, reflecting all of Filene's Basement financial transactions, are made in
accordance with GAAP.
SECTION 8.16 LITIGATION. Filene's Basement shall notify Bank in writing,
promptly upon learning thereof, (i) of any litigation, against Filene's
Basement, whether or not the claim shall be considered to be covered by
insurance and (ii) of the institution of any suit or administrative proceeding
against any Person, that as to either (i) or (ii), if adversely determined,
would have a material adverse effect on Filene's Basement business, operations
or financial or other condition, the Accounts or the value thereof, the
Indebtedness or the value thereof, Bank's rights, title and interest and Lien in
and to the Accounts and the Indebtedness, or the priority of such Lien.
SECTION 8.17 ADVERSE TRANSACTIONS. Filene's Basement shall not permit or agree
to any extension, compromise, or settlement, or make any changes or modification
of any kind or nature with respect to any Account, including any of the terms
relating thereto.
SECTION 8.18 EVENTS OF DEFAULT. Filene's Basement shall not take or omit to take
any action, which act or omission would constitute an Event of Default by
Filene's Basement or a Filene's Basement Event of Default pursuant hereto.
SECTION 8.19 DELIVERY. Filene's Basement has delivered, or will deliver on a
timely basis, all Merchandise covered by each Charge Slip, and the Cardholder
has accepted or is willing to accept such delivery, and such Merchandise has
been installed (if Filene's Basement contractually assumes the responsibility
for installation) and accepted by such Cardholder.
SECTION 8.20 SERVICES. Filene's Basement shall provide and maintain adequate
services with respect to the Merchandise covered by an Account and shall comply
with all of its warranties
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and other obligations with respect to the Merchandise, the sale of which has
been charged to an Account.
SECTION 8.21 ADJUSTMENTS. Each Credit Slip delivered by Filene's Basement to
Bank represents a bona fide adjustment by Filene's Basement of a credit sale for
which Bank has accepted the Charge Slip.
SECTION 8.22 OBLIGATIONS. Filene's Basement has fulfilled all of its material
obligations to Cardholders under the terms of all Credit Card sales of
Merchandise.
SECTION 8.23 ADVERTISEMENTS. Filene's Basement advertisements that refer to
credit terms under the Program are in conformity with the Operating Procedures
and applicable programs approved by Bank. Filene's Basement covenants that,
other than with respect to matters required therein by Bank, any such
advertisements shall be in conformity with and not in violation of, any
applicable law, rule, regulation, or consent decree entered into by or with any
governmental department or agency.
SECTION 8.24 ACCOUNT DOCUMENTATION. On and after the Execution Date, Filene's
Basement shall not use, with respect to new Cardholders, any Account
Documentation, other than Approved Forms.
SECTION 8.25 TRADE NAMES; TRADEMARKS. Filene's Basement is the owner or licensee
of the Marks and has the sole and exclusive right, power and authority to
license to Bank the use of the Marks as set forth in Article XIV hereof and the
use of the Marks by Bank in a manner approved (or deemed approved) by Filene's
Basement shall not (i) violate any applicable Federal, state or local law, rule
or regulation or (ii) infringe upon the right(s) of any third party. Filene's
Basement shall execute such documents as Bank reasonably may request from time
to time to ensure that right, title and interest in the Marks resides in
Filene's Basement.
SECTION 8.26 CONFLICTS; DEFAULTS; ETC. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby by
Filene's Basement will (i) conflict with, violate, result in the breach of,
constitute an event which would, or with the lapse of time or action by a third
party or both would result in a default under, or accelerate Filene's Basement's
performance required by, the terms of any material contracts, instruments or
agreements to which Filene's Basement is a party or by which it is bound, or by
which Filene's Basement's assets are bound, except for conflicts, breaches and
defaults which would not have a material adverse effect upon Filene's Basement,
the Program or Filene's Basement's ability to perform its obligations under this
Agreement, (ii) conflict with or violate the articles of incorporation or
by-laws, or any other equivalent organizational document(s) of Filene's
Basement, (iii) except for any lien that may be created by this Agreement,
result in the creation of any lien, restriction, charge or encumbrance upon any
of the Accounts, (iv) violate any law or conflict with, or require any consent
or approval under, any judgment, order, writ, decree, permit or license, to
which Filene's Basement is a party or by which it is bound or affected, except
to the extent that such violation or the failure to obtain such consent or
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approval would not have a material adverse effect upon Filene's Basement, the
Program or Filene's Basement's obligation under this Agreement, (v) require the
consent or approval of any party to any material contract, instrument or
commitment to which Filene's Basement is a party or by which it is bound, other
than the approvals of regulatory authorities which will be applied for, or (vi)
except for the filing of UCC financing statements and notices, if any, require
any filing with, notice to, consent or approval of, or any other action to be
taken with respect to, any regulatory authority, other than the approval of
regulatory authorities which have been previously obtained.
ARTICLE IX REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANK
To induce Filene's Basement to enter into this Agreement and participate
in the Program, all as herein provided for, Bank makes the following
representations and warranties to Filene's Basement, each and all of which will
survive the execution and delivery of this Agreement, and each and all of which
will be deemed to be restated and remade on each day on which Bank establishes
or remits funds, with respect to Accounts and/or administers the Program:
SECTION 9.1 CORPORATE EXISTENCE. Bank is a bank duly organized, validly existing
and in good standing under the laws of the State of Georgia, and (a) is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, (b) has a perpetual existence, (c) has the
requisite power and authority and the legal right to own, pledge, mortgage, and
operate its properties, to lease the properties it operates under lease, and to
conduct its business as now, heretofore, and proposed to be conducted, (d) has
all necessary licenses, permits, consents, or approvals from or by, and has made
all necessary filings with, and has given all necessary notices to, all
governmental authorities having jurisdiction, to the extent required for such
ownership, operation, and conduct; and (e) is in compliance with its articles of
incorporation and its by-laws.
SECTION 9.2 CORPORATE POWER, AUTHORIZATION; ENFORCEABLE OBLIGATION. The
execution, delivery, and performance of this Agreement and all instruments and
documents to be delivered to Bank hereunder: (i) are within Bank's power, (ii)
have been duly authorized by all necessary or proper action, including the
consent of shareholders where required; (iii) are not in contravention of any
provisions of Bank's articles of incorporation or by-laws; (iv) will not violate
any law or regulation or any order or decree of any court or governmental
instrumentality; (v) will not conflict with or result in the breach of, or
constitute a default under any indenture, mortgage, deed of trust, lease
agreement, or other instrument to which Bank is a party or by which Bank or any
of its property is bound; and (vi) do not require any filing or registration
with or the consent or approval of any governmental body, agency, authority, or
any other person which has not been made or obtained previously. This Agreement
has been duly executed and delivered by Bank, and constitutes the legal, valid,
and binding obligation of Bank, enforceable against Bank in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
moratorium, reorganization, or
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other laws affecting the rights of creditors generally. Bank has obtained any
and all necessary consents of third parties required of it in order to enter
into this Agreement and to consummate the transactions contemplated hereby, and
the execution and delivery of this Agreement and performance by Bank of the
transactions contemplated hereby will not result in Bank being in default under
any of the provisions of its Certificate of Incorporation, By-Laws, other
corporate or legal documents, or of any material credit or other agreement to
which it is a party.
SECTION 9.3 SOLVENCY. Bank is Solvent.
SECTION 9.4 NO DEFAULT. Bank (i) is not in default with respect to any contract,
agreement, document, lease, or other instrument to which it or any Affiliate of
it is a party or by which it or any of its property may be bound, and (ii) has
not received any notice of default pursuant to any such contract, agreement,
lease, or other instrument, which, in either case, would have a material adverse
effect on the business, operations, property, or financial or other condition of
it or any of its Affiliates. No Event of Default by Bank, or Bank Event of
Default, or event which, with the giving of notice, the lapse of time, or both,
would be an Event of Default by Bank or a Bank Event of Default, has occurred
and is continuing.
SECTION 9.5 NO BURDENSOME RESTRICTIONS. No contract, lease, agreement, or other
instrument to which Bank is a party or is bound and no provision of applicable
law or governmental regulation materially and adversely affects or may be
reasonably likely to so affect its business, operations, property, or financial
or other condition in a way which reasonably may have a material and adverse
effect on the Program.
SECTION 9.6 COMPLIANCE WITH LAW. All actions of Bank taken in administering the
Program, preparing the Operating Procedures and Approved Forms, setting credit
terms and finance charge rates, and in the Credit Application evaluation process
and billing and collection of Accounts will be in material compliance with all
applicable provisions of federal and state laws and implementing regulations,
including but not limited to, the federal Truth-In-Lending Act, Equal Credit
Opportunity Act and Fair Credit Reporting Act and implementing regulations,
provided that Bank does not make any representation or warranty as to (i) the
Merchandise description, pricing, charges and related wording and content that
appears in the Approved Forms where such wording and content is furnished by a
Person other than Bank or a Person retained by Bank, including Filene's
Basement, (ii) Filene's Basement sales materials or practices, including, but
not limited to, the sales order form, sales invoice, promotional materials and
similar forms, and/or (iii) actions of Filene's Basement employees, sales
representatives or agents.
SECTION 9.7 NO LITIGATION. There are no judgments, orders or decrees in effect
or legal action pending or threatened against Bank or of which it has knowledge,
which, if determined adversely, would have a material adverse effect on the
financial condition of Bank or its ability to perform its obligations under this
Agreement.
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SECTION 9.8 PURCHASE REPRESENTATION. Upon any purchase of any Accounts by
Filene's Basement from Bank under the terms of this Agreement, Bank warrants
that all information provided to Filene's Basement is, to the best of Bank's
knowledge, information and belief, true and correct in all material respects.
SECTION 9.9 FULL DISCLOSURE. No information contained in this Agreement or any
other agreement or writing executed or issued by Bank or any statement furnished
by or on behalf of Bank in connection with this Agreement or any other agreement
or writing executed or issued in connection with this Agreement, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading.
SECTION 9.10 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Bank shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence.
SECTION 9.11 BOOKS AND RECORDS. Bank shall keep adequate records and books of
account with respect to its business activities, in which proper entries,
reflecting all of Bank's financial transactions, are made in accordance with
applicable accounting procedures.
ARTICLE X FINANCIAL STATEMENTS AND INFORMATION
SECTION 10.1 REPORTS AND NOTICES. As long as this Agreement remains in effect,
Filene's Basement shall deliver to Bank:
(a) Within ninety (90) days after the close of each fiscal year, a copy of
the annual financial statements of Filene's Basement, consisting of a balance
sheet and related statements of income and changes in financial position, all
prepared in accordance with GAAP, certified by independent certified public
accountants. Quarterly financial statements will also be submitted upon
completion to Bank, but not on an audited basis unless available.
(b) Within two (2) Business Days after Filene's Basement becomes aware of
the existence of any Event of Default, Filene's Basement Event of Default or any
event which. with the giving of notice or passage of time or both, would
constitute an Event of Default or Filene's Basement Event of Default, or any
development or other information which is likely to have material adverse effect
on the business, operations, property, or financial or other condition of
Filene's Basement, the Accounts or the value thereof, the Indebtedness or the
value thereof, Bank's rights, title and interest and Lien in and to the Accounts
and Indebtedness, the priority of such Lien, or Filene's Basement ability to
perform its obligations pursuant to this Agreement, telephonic or telegraphic
notice specifying the nature of such Event of Default or Filene's Basement Event
of Default, or event, development, or information, including the anticipated
effect thereof, which notice shall be promptly confirmed in writing within five
(5) days.
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(c) Such other information respecting the Accounts or the value thereof,
the Indebtedness or the value thereof, or Filene's Basement business or
financial condition or prospects, as Bank may, from time to time, reasonably
request.
ARTICLE XI EVENTS OF DEFAULT; RIGHTS AND REMEDIES
SECTION 11.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an Event
of Default hereunder:
(a) A party hereto shall fail to make any payment of any amount due
pursuant to this Agreement when due and payable or declared due and payable
pursuant to the terms of this Agreement, and the same shall remain unremedied
for a period of ten (10) days after the non-defaulting party shall have made
written demand therefor.
(b) Except as provided in subsection 11.1(a) above, a party hereto shall
materially fail or neglect to perform, keep, or observe any item, provision,
condition, or covenant contained in this Agreement that is required to be
performed, kept, or observed, and the same shall remain unremedied for a period
of thirty (30) days after the non-defaulting party shall have given written
notice thereof.
(c) Any material representation, warranty or statement made or delivered
by a party hereto or any of its respective officers, employees, agents or
representatives shall not be true and correct in any material respect as of the
date when made or reaffirmed.
SECTION 11.2 BANK EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute a Bank
Event of Default hereunder:
(a) The Federal Deposit Insurance Corporation or any other regulatory
authority having jurisdiction over Bank shall order the appointment of a
custodian, receiver, liquidator, assignee, trustee, or sequestrator (or similar
official) of Bank or of any substantial part of its properties, or order the
winding up or liquidation of the affairs of Bank, and such order shall not be
vacated, discharged, stayed, or bonded within thirty (30) days (or such shorter
time period as provided by applicable law) from the date of entry thereof.
(b) Bank shall (i) consent to the institution of proceedings specified in
(a) above or to the filing of any such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee, or
sequestrator (or similar official) of Bank or any substantial part of its
properties, (ii) fail generally to pay its debts as such debts become due, or
(iii) take corporate action in furtherance of any such action.
(c) There shall be entered a court order which enjoins, restrains or in
any material way prevents Bank from conducting all or any part of its business
affairs in the ordinary
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course or concerning any failure to pay any federal, state or local tax or other
debt of Bank unless the same is being contested in good faith.
SECTION 11.3 FILENE'S BASEMENT EVENTS OF DEFAULT. The occurrence of any one or
more of the following events (regardless of the reason therefor) shall
constitute a Filene's Basement Event of Default hereunder:
(a) Any material adverse change in the operations, assets, condition
(financial or otherwise) or business of Filene's Basement including without
limitation, if Filene's Basement shall cease, or substantially change the nature
of, its business or if there shall be a substantial cessation of Filene's
Basement regular course of business. If Bank elects to terminate this Agreement
solely based on the occurrence of a material adverse change as provided in this
subsection 11.3(a), Filene's Basement shall have the right to request that a
determination be made by an independent arbitrator or other mediator (the
"Arbitrator") that a material adverse change has occurred. The identity of such
Arbitrator shall be determined by mutual agreement of Bank and Filene's Basement
within five days of the date of Bank's notice electing to terminate this
Agreement. If the parties fail to agree on the identity of the Arbitrator during
such period, each of Bank and Filene's Basement shall request its respective
independent certified public accountants to each nominate three persons to serve
as the Arbitrator, and the accountants shall agree upon one person identified on
such lists. To the extent that an Arbitrator is not appointed and a final
decision rendered by him within thirty (30) days of the delivery of Bank's
notice of termination (based on this subsection 11.3(a)) or to the extent such
Arbitrator renders a decision that the notice of termination was effective based
upon the occurrence of a material adverse change, such notice shall be deemed
effective as of the date issued by Bank. To the extent the Arbitrator renders a
decision that the notice of termination was not effective because a material
adverse change has not occurred, such notice of termination shall not be deemed
effective and the Program shall continue. All costs and expenses incurred in
connection with the Arbitrator shall be borne by the party against whom the
Arbitrator's decision is made.
(b) If Filene's Basement shall wind up or dissolve its operations or is
wound up or dissolved.
(c) If Filene's Basement or Filene's Basement Corp. shall be acquired
(whether by merger, consolidation, change of control (as defined below) or
otherwise) by any Person not an Affiliate of Filene's Basement or Filene's
Basement Corp., as the case may be, as of the Effective Date of this Agreement.
For purposes of this Section, a "change of control" shall mean any sale of all
or substantially all of the assets of an entity (whether in one or a series of
transactions) or if an entity is merged or consolidated into another corporation
or more than 50% of the capital stock of an entity is transferred or offered for
sale other than in the course of daily trading activity.
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(d) Filene's Basement shall no longer be Solvent or a petition under the
Bankruptcy Code or similar law shall be filed by Filene's Basement or a petition
shall be filed against Filene's Basement and such shall not be dismissed within
ninety (90) days.
(e) A decree or order by a court having jurisdiction (i) for relief in
respect of Filene's Basement or pursuant to the Bankruptcy Code or any other
applicable bankruptcy or other similar law, (ii) for appointment of a custodian,
receiver, liquidator, assignee, trustee, or sequestrator (or similar official)
of Filene's Basement or of any substantial part of its properties, or (iii)
ordering the winding tip or liquidation of the affairs of Filene's Basement,
shall be entered, and shall not be vacated, discharged, stayed, or bonded within
thirty (30) days from the date of entry thereof.
(f) Filene's Basement shall (i) file a petition seeking relief pursuant to
the Bankruptcy Code or any other applicable bankruptcy or other similar law,
(ii) consent to the institution of proceedings pursuant thereto or to the filing
of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, or sequestrator (or similar
official) of Filene's Basement or of any substantial part of its properties,
(iii) fail generally to pay its debts as such debts become due, or (iv) take
corporate action in furtherance of any such action.
(g) Any events shall arise which result in the acceleration due to default
of the maturity of any indebtedness in a principal amount in excess of $500,000
of Filene's Basement or any guarantor or surety of the obligations of Filene's
Basement to others under any instrument, agreement or undertaking with respect
to such indebtedness.
(h) Final judgment or judgments for the payment of money in amounts
greater than $500,000 shall be rendered against Filene's Basement and the same
shall not be either (x) covered by insurance or the insurer shall not have
accepted liability therefor or (y) vacated, stayed, bonded, paid, or discharged
prior to expiration of the applicable appeal period.
(i) There shall, due to any action or failure to act by Filene's Basement,
occur any loss, theft, damage, destruction, sale or encumbrance to or of any of
the Accounts, or any levy, seizure, or attachment thereof or thereon shall be
made which Filene's Basement shall not have either cured or reimbursed Bank
within thirty (30) days after written notice thereof to Filene's Basement;
provided, however, that Filene's Basement may, at its option, purchase the
affected Accounts within such thirty (30) day period in lieu of cure or
reimbursement. The purchase price payable for any Account purchased pursuant
hereto shall be the aggregate of the balance of the Account, including (x) the
unpaid principal balance plus finance charges earned but unpaid, and (y)
out-of-pocket costs and reasonable expenses paid or incurred by Bank in any
attempted collection of such Account, including reasonable attorneys' fees.
(j) Filene's Basement shall fail to provide a new LOC or Discount LOC at
least 45 days before expiration of the existing LOC or Discount LOC (during the
time period that such Discount LOC is required).
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(k) Any of the conditions subsequent set forth in Article XV shall not
have occurred on or before the date specified therein with respect to each such
condition.
SECTION 11.4 REMEDIES. Upon the occurrence of an Event of Default, or Filene's
Basement Event of Default, or Bank Event of Default, all of the defaulting
party's obligations hereunder may, in the non-defaulting party's sole
discretion, be deemed immediately due and payable without notice or demand. The
non-defaulting party will have the right to declare this Agreement terminated
and/or to discontinue originating or offering Accounts and establishing
Indebtedness as applicable.
ARTICLE XII TERM/TERMINATION
SECTION 12.1 TERM. This Agreement will continue in full force and effect until
the close of business on June 30, 2000 (the "Initial TERM") and shall be
automatically renewed for successive one (1) year terms (each a "Renewal Term")
thereafter, unless terminated as provided in other provisions of this Agreement.
SECTION 12.2 TERMINATION. The following termination provisions shall also apply:
(a) Filene's Basement shall have the right to terminate this Agreement
upon fifteen (15) days' written notice if any Bank Event of Default or Event of
Default with respect to Bank shall occur (a "Filene's Basement Termination"),
and upon Filene's Basement Termination, Bank shall not draw down on the LOC and
shall return the LOC.
(b) Bank shall have the right to terminate this Agreement upon fifteen
(15) days' written notice if any Filene's Basement Event of Default or Event of
Default with respect to Filene's Basement shall occur.
(c) Filene's Basement shall have the right, upon fifteen (15) days' prior
written notice to Bank, to terminate this Agreement, if Bank makes an election
pursuant to Section 2.2(b)(iii) hereof.
(d) Either party may terminate this Agreement effective at the end of the
Initial Term or any Renewal Term by giving at least six (6) months prior written
notice to the other party.
SECTION 12.3 TERMINATION FOR FORCE MAJEURE.
(a) This Agreement may be terminated by either Bank or Filene's Basement
without penalty after the passing of one hundred eighty (180) days following the
notice by one party to the other that its performance hereunder is prevented or
materially impeded, without the ability to cure, by one of the following force
majeure events: acts of God, fire, earthquake, explosion, accident, computer
failure, war, nuclear disaster, riot or material changes in
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applicable laws or regulations, including, but not limited to, a change in state
or federal law rendering it illegal, impossible or untenable for the notifying
party or its ultimate parent corporation to perform as contemplated in this
Agreement.
(b) Any such disability will not be considered a breach of this Agreement
during the period of such disability (i.e., prior to one hundred eighty (180)
days), if the disabled party promptly advises the other party in writing that it
is unable to perform due to such a force majeure event, setting forth: (i) the
nature of the event; (ii) its expected effect(s) and duration; (iii) any
expected development which may further affect performance hereunder; and (iv)
the efforts which in the sole reasonable judgment and discretion of such
notifying party will be made to cure such force majeure event or provide
substitute performance.
(c) Such one hundred eighty (180) day period may be shortened upon written
agreement executed by duly authorized officers of both parties or if required by
applicable law or regulation.
SECTION 12.4 RIGHTS UPON TERMINATION.
(a) Except as otherwise expressly provided herein, upon termination of
this Agreement, each party shall be required to fulfill its respective
obligations hereunder (unless prohibited by law), including without limitation,
its obligations to provide customer service and Account Documentation, until all
Accounts are liquidated or otherwise disposed of by the parties hereto.
(b) Notwithstanding any other provision of this Agreement, Bank shall be
deemed the sole owner of the Program Accounts Portfolio, including, without
limitation, the Customer List, and upon termination of this Agreement, and
should Filene's Basement not purchase the Program Accounts Portfolio from Bank
as provided in Article XVII hereof, Bank shall have the right, in addition to
and retaining all other rights it may have under this Agreement or applicable
law, to liquidate the Program Accounts Portfolio in any lawful manner which may
be expeditious or economically advantageous to Bank, including, without
limitation, using the Customer List for the sale of new and existing items under
Value-Added Programs pursuant to Section 3.8 hereof, issuing a replacement or
substitute card, and transferring and/or selling the Customer List, or any part
thereof, with or without the Program Accounts Portfolio, to a third party.
During such liquidation, Bank may use the Marks in communicating with
Cardholders. Filene's Basement agrees to cooperate with Bank and take any
reasonable action requested by Bank to effectuate such liquidation in an orderly
manner (provided that Filene's Basement shall not be required to incur
out-of-pocket expenses in so doing), including accepting existing Credit Cards
or replacement or substitute cards for twelve (12) months following the
effective date of termination. All gross finance charges billed on Accounts to
Cardholders will be retained by Bank, and Bank will absorb all finance charge
credits on Accounts and finance charges associated with write-offs on Accounts,
and all losses, including losses on the sale, if any, of Accounts.
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SECTION 12.5 SURVIVAL. The covenants, agreements, representations, warranties
and obligations of the parties contained herein or in any certificate or other
writing or Exhibits delivered pursuant hereto or in connection herewith shall
survive the termination of this Agreement according to the following schedule:
The following Sections shall survive indefinitely--Article I; Section 2.7;
Section 3.3; Section 3.6; Section 3.10; Section 4.4; Section 5.1 (provided
that there will be no Discount after termination); Section 7.1; Section 7.2;
Section 7.3; Section 7.5 (provided that none of Article VII will survive in the
event Filene's Basement purchases the Accounts as provided in Article XVII);
Article VIII; Article IX; Section 11.4; Section 12.4; Article XIII; Article XIV;
Article XVII; and Article XVIII (except that Section 18.6 will survive for only
24 months after termination, and, with respect to Section 18.15, the security
interest will survive only so long as Bank has Accounts still on its books, and
Bank will terminate the security in the event Filene's Basement purchases the
Accounts as provided in Article XVII); the following Sections shall survive for
24 months after such termination: Section 3.5; Section 3.11; Section 3.12;
Article VI; and Section 18.6; the following Sections shall survive for 12 months
after such termination: Section 2.1; Section 2.3; paragraphs 2.4(b) and (e);
Section 3.4; Section 4.3; and Section 5.6. All other Sections will not survive
the termination of this Agreement.
ARTICLE XIII INDEMNIFICATION
SECTION 13.1 BY BANK. Bank agrees to protect, indemnify and hold Filene's
Basement and its Affiliates and their officers, directors and employees harmless
against and in respect of any and all liabilities, expenses (including attorney
fees), judgments, damages, claims, actions or proceedings by whomsoever asserted
arising out of, connected with or resulting from any act or omission of any of
Bank's employees, officers, directors, agents or licensees, or any breach by
Bank of the terms, covenants, warranties, conditions or other provisions hereof
or obligations hereunder, or contained in any other instrument or document
delivered by Bank in connection herewith, or pursuant hereto, or, if made by a
non-party to this Agreement, any claim, demand, allegation, offset, defense or
counterclaim which, if true or proven, would constitute such a breach.
SECTION 13.2 BY FILENE'S BASEMENT. Filene's Basement agrees to protect,
indemnify and hold Bank and its Affiliates and their officers, directors and
employees harmless against and in respect of any and all liabilities, expenses
(including attorneys' fees), judgments, damages, claims, actions or proceedings
by whomsoever asserted arising out of, connected with or resulting from any act
or omission of any of Filene's Basement employees, officers, directors, agents
or licensees, or the sale of Merchandise including any breach by Filene's
Basement of any warranty given in connection with the sale of Merchandise or any
breach of the terms, covenants, warranties, conditions or other provisions
hereof or obligations hereunder, or contained in any other instrument or
document delivered by Filene's Basement in connection herewith, or pursuant
hereto or, if made by a non-party to this Agreement, any claim, demand,
allegation, offset, defense or counterclaim which, if true or proven, would
constitute such a breach.
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SECTION 13.3 NOTICE. In the event that any legal proceeding shall be instituted
or that any claim or demand shall be asserted by any Person in respect of which
payment may be sought by one party hereto from another party hereto pursuant to
this Article XIII, the party seeking indemnification (the "Indemnified Party")
shall promptly cause written notice of the assertion of any claim of which it
has knowledge which is covered by this indemnity to be forwarded to the other
party or parties (the "Indemnifying Party"), which notice shall be given within
sufficient time to respond to such proceeding, claim, or demand. The
Indemnifying Party shall have the right, to the extent of its indemnification,
at its option and its own expense, to be represented by counsel of its choice,
which counsel must be reasonably satisfactory to the Indemnified Party, and to
defend against, negotiate, settle, or otherwise deal with any proceeding, claim,
or demand which is related to any loss, liability, damage, or deficiency
indemnified against hereunder; provided, however, that no settlement shall be
made without the prior written consent of the Indemnified Party, which consent
shall not be unreasonably withheld; and provided, further, that the Indemnifying
Party shall keep the Indemnified Party advised as to the status of the matter.
The Indemnified Party may participate in any such proceeding with counsel of its
choice at its own expense. If the Indemnified Party refuses to approve a
proposed settlement that is acceptable to the claimant, the Indemnifying Party
may, at its option, deposit the proposed settlement with the Indemnified Party
and thereupon be relieved of any further indemnity obligation with respect to
such proceeding, claim or demand, including, without limitation, attorneys'
fees, costs and expenses thereafter incurred. If the Indemnifying Party defends
against a claim that is ultimately settled or adjudicated for an amount which is
not recoverable by the Indemnified Party, the Indemnified Party shall promptly
reimburse the Indemnifying Party for all costs and expenses incurred in
defending such claim. The parties hereto agree to cooperate fully with the
defense, negotiation, or settlement of any such legal proceeding, claim or
demand.
ARTICLE XIV USE OF FILENE'S BASEMENT MARKS
SECTION 14.1 GRANT OF RIGHTS. Filene's Basement hereby grants to Bank a
non-exclusive, royalty-free, non-transferable right and license to use the
service mark "Filene's Basement" and any other mark listed on Exhibit A attached
hereto (the "Marks") in the United States in connection with the creation,
establishment, marketing and administration of, and the provision of services
related to, the Program, all pursuant to, and in accordance with, this
Agreement. Those services shall include, without limitation, the solicitation of
Cardholders, acceptance of Credit Card Applications, issuance and reissuance of
Credit Cards, the provision of accounting services to Cardholders, the provision
of billing statements and other correspondence relating to Accounts to
Cardholders, the extension of credit to Cardholders, the advertisement or
promotion of the Program and the collection and liquidation of the Program
Accounts Portfolio. The license granted hereby shall terminate upon the later of
(i) the termination of this Agreement or (ii) the date on which the Aggregate
Investment is zero. The foregoing notwithstanding, it is understood that in no
event shall the termination of this Agreement affect the rights of Bank (or any
authorized purchaser of Accounts) to liquidate the Accounts after
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termination, which liquidation may include, without limitation, the billing of
such Accounts using the Marks.
SECTION 14.2 BANK ACKNOWLEDGEMENTS. Bank acknowledges and agrees that: (i) the
Marks and all good will associated therewith are the property of Filene's
Basement, (ii) Bank shall not acquire any right, title or interest to the Marks
through its use thereof pursuant to this Agreement, and (iii) any rights which
arise from use of the Marks by Bank shall inure to the benefit of Filene's
Basement, and Bank hereby assigns any such rights to Filene's Basement. Bank
further acknowledges and agrees that it shall not attack the title or interest
of Filene's Basement in or to the Marks and shall assist Filene's Basement, at
Filene's Basement expense, in protecting Filene's Basement rights in the Marks
(to the extent necessary).
SECTION 14.3 FUTURE MARKS. If Filene's Basement adopts a trademark, trade name,
service mark, logo or other proprietary mark which used by Filene's Basement in
connection with its retail business but which is not listed on Exhibit A hereto
(a "New Mark") and Bank requests that Filene's Basement add such New Mark to
Exhibit A hereto and license its use hereunder, Filene's Basement shall not
unreasonably fail to do so, and such New Mark shall be added to Exhibit A by
amendment of this Agreement.
ARTICLE XV SUBSEQUENT OBLIGATIONS
Notwithstanding any other provision of this Agreement, Bank shall be
obligated to originate Accounts and this Agreement shall become operative upon
its execution. Nevertheless, Filene's Basement covenants to satisfy all of the
following conditions specified to be complied with:
SECTION 15.1 REPRESENTATIONS AND WARRANTIES TRUE. All representations and
warranties of Filene's Basement contained in this Agreement shall be true in all
material respects on the date hereof and the date all other subsequent
obligations have been satisfied or waived.
SECTION 15.2 OBLIGATIONS PERFORMED. Filene's Basement shall have performed or
observed all terms, conditions, covenants and obligations hereunder to be
performed or observed by Filene's Basement as of the date hereof and the date
all other conditions precedent have been satisfied or waived.
SECTION 15.3 NO EVENTS OF DEFAULT. There shall have been no Filene's Basement
Event of Default or Event of Default by Filene's Basement under this Agreement
or an event which would constitute such Filene's Basement Event of Default or
Event of Default by Filene's Basement after a period of notice, the lapse of
time, or both, on the date hereof and the date all other conditions precedent
have been satisfied or waived.
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SECTION 15.4 LETTER OF CREDIT. Bank shall have received, in a form and from a
bank satisfactory to Bank, the Letters of Credit further described in Article
XVI not later than August 8, 1995.
SECTION 15.5 FBC GUARANTY. Bank has received a guaranty of Filene's Basement's
obligations hereunder from Filene's Basement Corp., a Massachusetts corporation,
substantially in the form of Schedule 15.5 attached hereto.
SECTION 15.6 RESOLUTIONS. Bank has received a copy of resolutions not later than
July 25, 1995, of the board of directors of Filene's Basement, certified by the
Secretary or an Assistant Secretary of Filene's Basement to be duly adopted and
in full force and effect as of the date hereof, authorizing (i) the execution,
delivery and performance by Filene's Basement of this Agreement and (ii)
specific officers to execute and deliver this Agreement on behalf of Filene's
Basement.
SECTION 15.7 OFFICER'S CERTIFICATE. Bank has received a certificate not later
than August 31, 1995, executed by the chief financial officer of Filene's
Basement and Filene's Basement Corporation in the form of Schedule 15.8 attached
hereto.
SECTION 15.8 FINANCING STATEMENTS EXECUTED. Appropriate financing statements
have been executed, which, upon filing, will properly perfect Bank's security
interests under this Agreement.
ARTICLE XVI PERFORMANCE COLLATERAL
SECTION 16.1 LETTER OF CREDIT. Filene's Basement shall provide Bank with, and
shall at all times have in effect, an irrevocable letter of credit ("LOC") in a
form and issued by a bank satisfactory to Bank, each one valid for a period of
not less than twelve (12) months, upon which Bank may draw as an amount due and
payable by Filene's Basement to Bank in the event: (i) Filene's Basement does
not elect to purchase all Accounts upon any termination of this Agreement, other
than a Filene's Basement Termination, as specified in Article XVII or (ii) such
LOC is not renewed within forty-five days of its scheduled expiration.
SECTION 16.2 SIZE OF LOC. The LOC as of the Effective Date shall be $4.4
million, and shall be adjusted quarterly at the end of each calendar quarter to
equal at least 13% of the reasonable estimate by Bank of the highest calculation
of the Aggregate Investment as of each Billing Date during the next calendar
quarter; PROVIDED that:
(a) The term of such LOC shall begin on January 1 of a calendar year, and
shall expire at the end of such calendar year; PROVIDED that the terms of such
LOC shall provide for adjustment of the amount of such LOC in accordance with
the provisions of subsections 16.2(b) and 16.2(c) below.
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(b) Bank shall provide to Filene's Basement its estimate of the highest
calculation of the Aggregate Investment as of each Billing Date during the next
calendar quarter no later than sixty (60) days prior to the next calendar
quarter, and Filene's Basement shall notify the bank which has issued the LOC to
adjust the LOC amount thirty (30) days prior to the next calendar quarter, such
adjustment to be effective on the first day of the next calendar quarter;
PROVIDED that with respect to the first calendar quarter of each year, Bank
shall provide to Filene's Basement by January 1 its estimate of the highest
calculation of the Aggregate Investment as of each Billing Date during the next
calendar quarter, and the amount of the LOC shall be adjusted by Filene's
Basement no later than January 31 of such year.
(c) Bank may require Filene's Basement to adjust the amount of the LOC at
any time during the calendar quarter should Bank's reasonable estimate of such
Aggregate Investment calculations underestimate the Aggregate Investment during
such calendar quarter, in which case Filene's Basement shall make such
adjustment within five (5) business days of Bank's notice that such adjustment
is required.
(d) The quarterly financial statements to be submitted by Filene's
Basement to Bank pursuant to Section 10.1 of this Agreement shall include,
without limitation, projections of Filene's Basement's sales for such next
quarter.
(e) The amount of the LOC shall be adjusted as set forth in the next
sentence for the remaining term of this Agreement: (i) upon Bank's reasonable
determination that the financial condition of Filene's Basement has
significantly deteriorated, (ii) if Filene's Basement does not renew the LOC at
least forty-five days before such LOC is due to expire, or (iii) if Filene's
Basement fails to maintain the amount of the LOC in accordance with the
provisions of this Section 16.2, including without limitation in accordance with
the adjustments set forth in subsections 16.2(b) and 16.2(c) above. The amount
of the LOC shall be adjusted quarterly at the end of each calendar quarter to
equal at least 13% of the reasonable estimate by Bank of the Aggregate
Investment as of the end of the calendar year in which such LOC is scheduled to
expire.
(f) In the event that Filene's Basement is unable to comply or does not
comply with the provisions of this Article XVI as to the amount of the LOC, and
if Filene's Basement does not cure such lack of compliance within five (5) days
of Bank's notice to Filene's Basement thereof, Bank shall have the sole right
and option to draw on the LOC and retain the proceeds thereof and, if the
proceeds thereof are not equal to thirteen percent (13%) of the reasonable
estimate by Bank of the Aggregate Investment as of the end of the calendar year
in which such LOC is scheduled to expire, Bank may deduct from the amount to be
paid to Filene's Basement under the various provisions of this Agreement the
difference between the proceeds of the LOC received by Bank and such thirteen
percent (13%).
SECTION 16.3 DISCOUNT LETTER OF CREDIT. Filene's Basement shall provide Bank
with, and shall at all times have in effect, an irrevocable letter of credit
("Discount LOC") in a form and issued by a bank satisfactory to Bank, each one
valid for a period of not less than twelve (12)
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months, upon which Bank may draw as an amount due and payable by Filene's
Basement to Bank in the event that (i) Filene's Basement does not pay to Bank
the Deferred Discount when due or (ii) such Discount LOC is not renewed within
forty-five days of its scheduled expiration OR (iii) the amount of such Discount
LOC is not maintained in accordance with the provisions of Section 16.4. In the
event that Filene's Basement is unable to comply or does not comply with the
provisions of Section 16.4 as to the amount of the Discount LOC, and if Filene's
Basement does not cure such lack of compliance within five (5) days of Bank's
written notice to Filene's Basement thereof, Bank shall have the sole right and
option to draw on the Discount LOC and retain the proceeds thereof to pay the
outstanding amount of the Deferred Discount. Notwithstanding anything contained
herein to the contrary, Filene's Basement shall have no responsibility for
maintaining the Discount LOC following its payment in full of the Deferred
Discount.
SECTION 16.4 SIZE OF DISCOUNT LOC. The discount LOC as of the Effective Date
shall be $100,000, and shall be adjusted thereafter as follows: (i) as of the
date upon which the Deferred Discount reaches $90,000, the amount of the
Discount LOC shall be $200,000 and shall remain in effect until the Deferred
Discount reaches $180,000 and (ii) as of the date upon which the Deferred
Discount reaches $180,000, the amount of the Discount LOC shall be $300,000.
SECTION 16.5 COST OF LOCS. Within fifteen (15) Business Days after its receipt
of written notice from Filene's Basement advising Bank of the actual annual fee
paid by Filene's Basement with respect to the LOC and the Discount LOC, Bank
will reimburse Filene's Basement for such amount, provided that in no event will
the amount reimbursable by Bank hereunder in respect of the LOC or the Discount
LOC exceed two percent (2%) of the face amount of the LOC or the Discount LOC,
as the case may be.
ARTICLE XVII FILENE'S BASEMENT PURCHASE OF ACCOUNTS
SECTION 17.1 GENERALLY. Upon termination of this Agreement by either party for
any reason, Filene's Basement shall have the option, by written notice given to
Bank within fifteen (15) days of the date of such notice of termination, to
purchase all Accounts held by Bank on the date of such purchase for an amount in
cash equal to the aggregate of (i) the unpaid principal indebtedness under such
Accounts as of the date of purchase plus (ii) finance charges on all such
Accounts accrued but unpaid to the date of purchase, (iii) all out-of-pocket
costs and expenses paid or incurred by Bank in any attempted collection of such
Accounts, including reasonable attorneys' fees.
SECTION 17.2 LIQUIDATION. If upon the expiration or termination of this
Agreement by either party for any reason, Filene's Basement shall not exercise
its option to purchase Accounts then held by Bank for the purchase price
pursuant to Section 17. 1, appropriate notices that the Program has been
discontinued shall be sent to all Cardholders, provided Bank will pay such
expense. Bank shall then have the right to elect one of the following courses of
action:
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(a) To liquidate the remaining Accounts by collection and servicing
thereof in the normal course; or
(b) To convert the remaining Accounts into an existing MasterCard, Visa or
similar charge card program sponsored by any Affiliate of General Electric
Company, at the end of which no further fees shall accrue relating to the
Program; or
(c) To liquidate the remaining Accounts in any other lawful manner which
may be expeditious or economically advantageous to Bank.
In any of the foregoing events, Filene's Basement shall not be further liable
for any charges under Article V of the Agreement, nor shall Filene's Basement be
responsible to Bank for damages specifically resulting from such liquidation
pursuant to Section 17.2.
SECTION 17.3 SURVIVAL OF RIGHTS. The rights and obligations of the parties
hereto shall survive termination of this Agreement except as specifically set
forth in this Agreement.
ARTICLE XVIII MISCELLANEOUS
SECTION 18.1 ASSIGNABILITY. Neither Filene's Basement nor Bank may assign its
respective rights or delegate its obligations under this Agreement without the
prior written consent of the other party, which consent will not be unreasonably
withheld; provided, however, that either party may assign all or part of its
rights or delegate all or part of its duties under this Agreement to Affiliates
without such prior written consent.
SECTION 18.2 SET-OFF BY BANK. Bank shall have the right, after the occurrence of
an Event of Default and without further notice to set-off against, appropriate
and apply any and all money or property of Filene's Basement in its possession
in payment of amounts owed to Bank or its Affiliates by Filene's Basement, to
deduct the amounts due Filene's Basement from Bank pursuant to this Agreement,
charge any reserve or to draw on the Letter of Credit by presenting the Letter
of Credit to the issuer thereof for payment in such amounts with a corresponding
reduction in the Letter of Credit for such payment.
SECTION 18.3 OFFSETS. At any time Bank is obligated to make a payment to
Filene's Basement hereunder, Bank shall have the right to offset against such
payment any amounts then due and owing by Filene's Basement to Bank, regardless
of the origin of such indebtedness.
SECTION 18.4 SECURITIZATION/PARTICIPATION. Bank will have the right to
securitize or participate all of any portion of the Accounts at any time
(provided that Bank shall continue to be obligated under this Agreement with
respect to such Accounts as if Bank had not securitized or participated out such
Accounts).
44
<PAGE> 50
SECTION 18.5 COOPERATION IN EVENT OF TERMINATION. Both Bank and Filene's
Basement agree to fully cooperate with each other in the event of termination of
this Agreement, regardless of the cause of such termination, in the orderly
transfer of Accounts. Bank shall provide computer tapes and other such support
to expedite the transfer.
SECTION 18.6 FINANCIAL REPORTS; RIGHT TO AUDIT. Filene's Basement shall submit
to Bank annually, an audited balance sheet. Further, Bank shall have the right
to inspect and audit Filene's Basement records, from time to time, as it deems
appropriate, on reasonable notice during normal business hours, as such records
pertain to Accounts. Filene's Basement shall have the right to inspect and audit
Bank's records, from time to time, as it deems appropriate, on reasonable notice
during normal business hours, as such records pertain to the assessment of
finance charges on Accounts and the credit or payment to Filene's Basement
relating to Accounts. Bank agrees to provide Filene's Basement with reports
relating to the Accounts containing such information or data as agreed to by
Bank and Filene's Basement, and the frequency of delivery of such reports shall
be agreed to by the parties hereto.
SECTION 18.7 ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the entire
understanding of the parties relative to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings, whether
oral or written, relating to the subject matter hereof. This Agreement may not
be varied, altered, amended or supplemented, nor may any of its provisions be
waived, except by a writing duly executed by an authorized officer of the party
to be obligated. This Agreement shall be binding upon and inure to the benefit
of the permitted successors and assigns of Bank and the permitted successors or
assigns of Filene's Basement.
SECTION 18.8 TERMINATION OF ACCOUNT PURCHASE AGREEMENT. Effective as of the
Conversion Date, the Account Purchase Agreement shall be terminated. As provided
therein, certain provisions of the Account Purchase Agreement survive such
termination. and the parties have additionally agreed that the confidentiality
provisions of the Account Purchase Agreement shall survive such termination.
SECTION 18.9 NON-WAIVER. No delay by either party hereto in exercising any of
its rights hereunder, or partial or single exercise of such rights, will operate
as a waiver of that or any other right. The exercise of one or more of either
party's rights hereunder will not be a waiver of, nor preclude the exercise of,
any rights or remedies available to such party under this Agreement or in law or
at equity.
SECTION 18.10 SEVERABILITY. If at any time subsequent to the date hereof, any
provision of this Agreement shall be held by any court of competent jurisdiction
to be illegal, void or unenforceable, such provision shall be of no force and
effect, but the illegality or unenforceability of such provision shall have no
effect upon and shall not impair the enforceability of any other provision of
this Agreement.
45
<PAGE> 51
SECTION 18.11 GOVERNING LAW. This agreement and all rights and obligations
hereunder, including, but not limited to, matters of construction, validity and
performance, will be governed and construed in accordance with the laws of the
State of Georgia.
Section 18.12 CAPTIONS. Captions of the Sections of this Agreement are for
convenient reference only and are not intended as a summary of such Sections and
do not affect, limit, modify or construe the contents thereof.
SECTION 18.13 NOTICES. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, by
recognized carrier of overnight mail or by prepaid telegram (with messenger
delivery specified), or by facsimile (receipt confirmed). Notice given by
registered or certified mail, postage prepaid, shall be deemed to be given for
purposes of this Agreement three (3) Business Days after the date sent. Notice
given by recognized carrier of overnight mail shall be deemed to have been given
on the second Business Day after delivery thereof to the carrier. Notice given
by personal delivery shall be deemed to be given when delivered. Notice given by
prepaid telegram or facsimile shall be deemed to be given when sent, if properly
addressed to the party to whom sent. Unless otherwise specified in a notice in
writing sent or delivered in accordance with the foregoing provisions of this
Section 18.13, notices, demands, instructions and other communications shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective facsimile number) indicated below:
If to Bank: Monogram Credit Card Bank of Georgia
7840 Roswell Road, Building 100, Suite 200
Atlanta, Georgia 30350
Attention: Richard F. Brewer
President
Facsimile No. (404) 353-2464
With copy to: General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06927
Attention: Monogram Credit Card Bank of
Georgia Counsel
Facsimile No. (203) 357-3353
If to Filene's Basement: 40 Walnut Street
Wellesley, Massachusetts 02181
Attention: Chief Financial Officer
Facsimile No.: 617-348-7130
With a copy to: Wayne, Lazares & Chappell
200 State Street
46
<PAGE> 52
Boston, MA 02109
Attention: Robert Zinnershine, Esq.
Either party may change the person, address or facsimile number to which
notice shall be sent by giving written notice of such change to the other
party in the manner provided herein.
SECTION 18.14 POWER OF ATTORNEY. Filene's Basement authorizes and empowers Bank
(a) to sign and endorse Filene's Basement name on all checks, drafts, money
orders or other forms of payment with regard to Accounts under the Agreement;
(b) to sue Cardholders for collection of Accounts in the name of Bank; (c) to
use the Marks in any collection action on an Account; (d) to do all the things
reasonably necessary to carry out or enforce the Account; and (e) to do any and
all other things which Bank determines as necessary or advisable to do to carry
out the terms of this Agreement. This limited power of attorney conferred hereby
will be deemed a power coupled with an interest and will be irrevocable while
any Account remains unpaid.
SECTION 18.15 GRANT OF SECURITY INTEREST; PRECAUTIONARY FILING. The parties
hereto agree that the transactions contemplated herein shall constitute a credit
card program operated by Bank, and Bank is the absolute owner of all Accounts,
except as otherwise set forth herein. To secure payment of and performance by
Filene's Basement of any and all indebtedness, liabilities or obligations
whatsoever of Filene's Basement to Bank, however arising, pursuant to this
Agreement, including but not limited to liabilities and obligations that may be
deemed to exist in the event of any recharacterization of any transactions
contemplated hereby, Filene's Basement hereby grants to Bank a first priority
continuing security interest in and to the following property or interests in
property of Filene's Basement, whether now existing or hereafter created or
acquired, together with the proceeds thereof: (i) all Accounts and Account
Documentation which may from time to time become subject to this Agreement; (ii)
returned Merchandise relating to all Accounts; (iii) Filene's Basement's books
and records evidencing, securing or relating to Accounts; (iv) all deposits,
credit balances and reserves on Bank's books relative to any Accounts; and (v)
all proceeds of the foregoing. All creditors of Filene's Basement seeking to
obtain a security interest in any of the foregoing collateral shall be required
to subordinate their security interests to the security interest of Bank in the
foregoing collateral as a condition precedent to obtaining any such security
interest, except for creditors who obtain priority by operation of law. With
respect to creditors who obtain and perfect security interests in the collateral
referred to above by a means other than the grant of a security interest and the
filing of a financing statement on form UCC-1 or otherwise, Filene's Basement
shall use commercially reasonable efforts to cause any liens obtained by such
persons that may have priority over Bank with respect to the collateral referred
to above to be released or subordinated to Bank's lien. In furtherance and not
in limitation of any of the foregoing. Filene's Basement agrees to cooperate
fully with Bank as Bank may reasonably request in order to give effect to the
security interest granted by this Section 18.15, including, without limitation,
the execution of UCC-1 or comparable statements in order to perfect such
security interest. For filing purposes, Filene's Basement agrees to provide Bank
with prior written notice of any change in location of its principal executive
offices.
47
<PAGE> 53
SECTION 18.16 FURTHER ASSURANCES. Filene's Basement and Bank each agree to
produce or execute such other documents or agreements as may be necessary or
desirable for the execution and implementation of this Agreement and the
consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, Bank and Filene's Basement have set their hands hereto
as of the date of this Agreement.
MONOGRAM CREDIT CARD BANK OF GEORGIA
By: /s/ William Nutting
----------------------------------
Name: William Nutting
Title: Vice-Chairman
FILENE'S BASEMENT, INC.
By: /s/ Steven Siegel
----------------------------------
Name: STEVEN SIEGEL
Title: EXECUTIVE VICE PRESIDENT AND CFO
General Electric Capital Corporation is executing this Agreement solely for the
purpose of ratifying the terms of Section 18.8 of this Agreement:
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ THOMAS [illegible]
- ----------------------------------
48
<PAGE> 54
SCHEDULE 15.5
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT made this 24th day of August, 1995, by and between
Filene's Basement Corp. (hereinafter referred to as "Guarantor"), and Monogram
Credit Card Bank of Georgia (hereinafter referred to as "Bank").
RECITALS
A. Filene's Basement, Inc. ("Basement") is desirous of entering into that
certain Credit Card Program Agreement dated July 20, 1995 between Bank and
Basement ("Program Agreement").
B. Guarantor owns all of the outstanding capital stock of Basement and has
consented to Basement's entering into the Program Agreement.
C. Bank has declined to enter the Program Agreement unless Guarantor
guarantees the obligations of Basement thereunder and further undertakes the
obligations set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties hereby agree as follows:
1. UNCONDITIONAL GUARANTY. Guarantor unconditionally guarantees separately
to Bank and its successors and assigns the full and punctual payment,
performance and observance by Basement of all the terms, covenants, conditions
and indemnifications in the Program Agreement contained on Basement's part to be
kept, performed or observed with respect to Bank. If, at any time, default
beyond any applicable notice and cure periods shall be made by Basement in the
performance or observance of any of the terms, covenants, conditions or
indemnifications in the Program Agreement contained on Basement's part to be
kept, performed or observed Guarantor will keep, perform and observe the same,
as the case may be, in place and stead of Basement.
2. WAIVER OF NOTICE; NO RELEASE OF LIABILITY. Any act of Bank, or the
successors or assigns of Bank, consisting of a waiver of any of the terms or
conditions of the Program Agreement, or the giving of any consent to any matter
or thing relating to the Program Agreement, or the granting of any indulgences
or extensions of time to Basement, may be done without notice to Guarantor and
without releasing the obligations of Guarantor hereunder, except where Bank
expressly or clearly through its actions has released Basement of its
obligations under the Program Agreement. The obligations of Guarantor hereunder
shall not be released by Bank's receipt, application
<PAGE> 55
or release of any security given for the performance and observance of covenants
and conditions in the Program Agreement contained on Basement's part to be
performed or observed, nor by any modification of the Program Agreement. The
liability of Guarantor hereunder shall in no way be affected by (a) the release
or discharge of Basement in any creditors, receivership, bankruptcy or other
proceedings; (b) the impairment, limitation or modification of liability of
Basement or the estate of Basement in bankruptcy, or of any remedy for the
enforcement of Basement's liability under the Program Agreement, resulting from
the operation of any present or future provision of the Federal Bankruptcy Code
or other statute or from the decision in any court; (c) the rejection or
disaffirmance of the Program Agreement in any such proceedings; (d) any
disability or other defense of Basement except as otherwise provided in the
Program Agreement; (e) the cessation from any cause whatsoever of the liability
of Basement under the Program Agreement, except as otherwise provided in or
permitted by the Program Agreement; or (f) the exercise by Basement of any
rights or remedies reserved to Basement under the Program Agreement.
3. JOINDER; STATUTE OF LIMITATIONS. Guarantor agrees that it may be joined
in any action against Basement in connection with the obligations of Basement
under the Program Agreement as guaranteed by this Guaranty and recovery may be
had against Guarantor in any action or proceeding against Basement and Bank may
enforce the obligations of Guarantor hereunder without first taking any action
whatsoever against Basement or its successors and assigns, or pursue any other
remedy or apply any security it may hold.
4. DE FACTO SUBSTITUTION. In the event this Guaranty shall be held
ineffective or unenforceable by any court of competent jurisdiction, or in the
event of any limitation of liability of Guarantor hereon other than as expressly
provided herein, then Guarantor shall be deemed to be a party under the Program
Agreement with the same force and effect as if Guarantor were expressly named as
a joint and several party with Basement therein with respect to the obligations
of Basement thereunder hereby guaranteed.
5. AMENDMENT OR ASSIGNMENT OF AGREEMENT. The provisions of the Program
Agreement may be changed, modified, amended or waiver by agreement between Bank
and Basement at any time, or by course of conduct, without the consent of or
without notice to Guarantor thereunder. This Guaranty shall guarantee the
performance of the Program Agreement as so changed, modified, amended or waived.
Any assignment of the Program Agreement shall not affect this Guaranty and Bank
if Bank disposes of its interest in the Program Agreement. "Bank", as used in
this Guaranty, shall include Bank's successors and assigns.
6. REPLACEMENT OF GUARANTOR. In the event that, at any time during the
term of this Guaranty, Guarantor should cease to transact business or cease to
be duly organized, validly existing and/or in good standing, Guarantor shall
obtain a substitute Guaranty to the benefit of Bank, substantially in accordance
with the terms and
2
<PAGE> 56
conditions of this Guaranty, from a guarantor acceptable to Bank whose capital
and overall financial condition is generally comparable to that of Guarantor.
7. REPRESENTATION AND WARRANTIES. Guarantor represents, warrants and
covenants to Bank as follows:
(i) Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Massachusetts and has all
requisite corporate power and authority to own, operate and carry on its
business as now being conducted.
(ii) Guarantor has the corporate right, power and authority to enter
into this Guaranty and all agreements entered into in connection with the
contemplated transaction.
(iii) Neither the execution and delivery of this Guaranty nor the
consummation of the transactions contemplated hereby will constitute (i) a
default under or a breach of any of the terms or provisions of the Certificate
of Incorporation or By-laws of Guarantor, or (ii) a breach of any agreement to
which Guarantor is a party or by which Guarantor is bound.
(iv) There is no action, suit, proceeding or investigation pending,
or to the knowledge of Guarantor threatened against or affecting Guarantor
before any court, arbitrator or administrative or governmental body which if
decided adversely will affect adversely Guarantor's ability to perform its
obligations under this Agreement; Guarantor is not subject to any injunction,
order or decree of any court or administrative agency which relates to the
Accounts (as defined in the Program Agreement) or this Guaranty.
(v) the principal place of business and chief executive offices of
Guarantor are located at 40 Walnut Street, Wellesley, Massachusetts 02181.
(vi) This Guaranty and any other documents to be executed by
Guarantor in connection therewith have been duly and validly executed and
delivered by Guarantor and constitute valid and binding obligations of Guarantor
enforceable in accordance with the terms thereof and hereof, except to the
extent enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws in force from to time to time which affect creditor's
rights generally and by legal and equitable limitations on the enforceability of
specific remedies.
8. WAIVERS OF PRESENTMENT AND NOTICES. Guarantor waives any defense by
reason of any legal disability of Basement, and further waives any presentments
and notices of acceptance of this Guaranty as well as all notices of the
existence, creation, or incurring of new or additional obligations under the
Program Agreement.
3
<PAGE> 57
9. NO WAIVER BY BASEMENT. No delay on the part of Bank in exercising any
right hereunder or under the Program Agreement, if permitted under the Program
Agreement, shall operate as a waiver of such right or of any other right of Bank
hereunder or under the Program Agreement, if permitted under the Program
Agreement, nor shall any delay, omission or waiver on any one occasion be deemed
a waiver of the same or any other right on any other future occasion.
10. WHOLE AGREEMENT. This instrument constitutes the entire agreement
between Bank and Guarantor with respect to the subject matter hereof, supersedes
all prior oral or written agreements or understandings with respect thereto and
may not be changed, modified, discharged or terminated orally or in any matter
other than by an agreement in writing signed by Guarantor and Bank.
11. APPLICABLE LAW. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Georgia.
12. GUARANTOR'S SUCCESSORS. Guarantor's obligations under this Guaranty
shall be binding on the successors, legal representatives and assigns of
Guarantor. Guarantor shall not be released by any assignment or delegation by it
of its obligations hereunder.
13. ATTORNEYS' FEES. If Bank is required to enforce Guarantor's
obligations hereunder, Guarantor shall pay to Bank all reasonable costs incurred
by it in connection with such enforcement, including without limitation,
reasonable attorneys' fees.
14. CAPTIONS. The paragraph headings appearing herein are for purposes of
identification and reference only and shall not be used in interpreting this
Guaranty.
15. INTERPRETATIONS; SEVERABILITY. It is agreed that if any provision of
this Guaranty or the application of any provision to any person (including Bank)
or any circumstance shall be determined to be invalid or unenforceable, such
determination shall not affect any other provisions of this Guaranty or the
application of such provision to any other person (including Bank) or
circumstance, all of which other provision shall remain in full force and
effect. It is the intention of the parties hereto that if any provision of this
Guaranty is capable of two constructions, one of which would render the
provision valid, the provision shall have the meaning which renders it valid.
16. AMENDMENT, EXTENSION AND RENEWALS. This Guaranty shall apply to the
Program Agreement, any amendment, extension or renewal thereof, and to any
extended term following the term granted in such Agreement, or any amendment,
extension or renewal thereof.
4
<PAGE> 58
17 NOTICES. All notices, demands, instructions and other communications
required or permitted to be given to or made upon any party thereto shall be in
writing and shall be personally delivered or sent by registered or certified
mail, postage prepaid, return receipt requested, by recognized carrier of
overnight mail or by prepaid telegram (with messenger delivery specified).
Notice given by registered or certified mail, postage prepaid, shall deemed to
have been given on the second business day after delivery thereof to the
carrier. Notice given by personal delivery shall be deemed to be given when
delivered. Notice given by prepaid telegram shall be deemed to be given when
sent, it properly addressed to the party to who sent. Unless otherwise specified
in a notice in writing sent or delivered in accordance with the foregoing
provisions of this Section 17, notices, demands, instructions and
communications shall be given to or made upon the respective parties hereto at
their respective addresses indicated below:
If to Guarantor: Filene's Basement Corp.
40 Walnut Street
Wellesley, MA 02181
Attn: Chief Financial Officer
With a copy to: Wayne, Lazares & Chappell
200 State Street
Boston, MA 02109
Attn: Robert Zinnershine, Esq.
If to Bank: Monogram Credit Card Bank
of Georgia
7840 Roswell Road
Building 100, Suite 210
Atlanta, GA 30350
Attn: President
Either party may change the person or address to which notice shall be sent by
giving written notice of such change to the other party in the manner provided
herein.
18. FINANCIAL STATEMENTS. Guarantor shall furnish to Bank, as requested by
Bank, annual and quarterly financial statements of Guarantor, including balance
sheets and earnings statements. Bank agrees that Forms 10-K and 10-Q filed by
Guarantor with the Securities and Exchange Commission shall meet these
requirements.
ACKNOWLEDGMENT: ENFORCEABILITY. GUARANTOR REPRESENTS AND WARRANTS THAT
GUARANTOR HAS READ THIS GUARANTY AND UNDERSTANDS THE CONTENTS HEREOF AND THAT
THIS GUARANTY IS ENFORCEABLE AGAINST GUARANTOR IN ACCORDANCE WITH ITS TERMS.
5
<PAGE> 59
IN WITNESS WHEREOF, the parties have executed this Guaranty Agreement as
of the day and year first above written.
Guarantor:
FILENE'S BASEMENT CORP.
By:
----------------------------------
Name: Steven R. Siegel
-------------------------
Title: Executive Vice President
-------------------------
and Chief Financial Officer
Bank:
MONOGRAM CREDIT CARD BANK
OF GEORGIA
By:
----------------------------------
Name:
-------------------------
Title:
-------------------------
6
<PAGE> 60
Officer's Certificate
Section 15.8
Reference is hereby made to that certain Credit Card Program
Agreement (the "Agreement"), dated as of July 20, 1995, between Monogram Credit
Card Bank of Georgia ("Bank") and Filene's Basement, Inc.
This is to certify that all the obligations set forth in Article XV
of the Agreement have been fulfilled as of the date hereof.
--------------------------------
[ ] Steven R. Siegel
Chief Financial Officer,
Filene's Basement, Inc.
--------------------------------
[ ] Steven R. Siegel
Chief Financial Officer,
Filene's Basement Corp.
<PAGE> 61
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT made this 24th day of August, 1995, by and between
Filene's Basement Corp. (hereinafter referred to as "Guarantor"), and Monogram
Credit Card Bank of Georgia (hereinafter referred to as "Bank").
RECITALS
A. Filene's Basement, Inc. ("Basement") is desirous of entering into that
certain Credit Card Program Agreement dated July 20, 1995 between Bank and
Basement ("Program Agreement").
B. Guarantor owns all of the outstanding capital stock of Basement and has
consented to Basement's entering into the Program Agreement.
C. Bank has declined to enter the Program Agreement unless Guarantor
guarantees the obligations of Basement thereunder and further undertakes the
obligations set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties hereby agree as follows:
1. UNCONDITIONAL GUARANTY. Guarantor unconditionally guarantees separately
to Bank and its successors and assigns the full and punctual payment,
performance and observance by Basement of all the terms, covenants, conditions
and indemnifications in the Program Agreement contained on Basement's part to be
kept, performed or observed with respect to Bank. If, at any time, default
beyond any applicable notice and cure periods shall be made by Basement in the
performance or observance of any of the terms, covenants, conditions or
indemnifications in the Program Agreement contained on Basement's part to be
kept, performed or observed Guarantor will keep, perform and observe the same,
as the case may be, in place and stead of Basement.
2. WAIVER OF NOTICE; NO RELEASE OF LIABILITY. Any act of Bank, or the
successors or assigns of Bank, consisting of a waiver of any of the terms or
conditions of the Program Agreement, or the giving of any consent to any matter
or thing relating to the Program Agreement, or the granting of any indulgences
or extensions of time to Basement, may be done without notice to Guarantor and
without releasing the obligations of Guarantor hereunder, except where Bank
expressly or clearly through its actions has released Basement of its
obligations under the Program Agreement. The obligations of Guarantor hereunder
shall not be released by Bank's receipt, application
<PAGE> 62
or release of any security given for the performance and observance of covenants
and conditions in the Program Agreement contained on Basement's part to be
performed or observed, nor by any modification of the Program Agreement. The
liability of Guarantor hereunder shall in no way be affected by (a) the release
or discharge of Basement in any creditors, receivership, bankruptcy or other
proceedings; (b) the impairment, limitation or modification of liability of
Basement or the estate of Basement in bankruptcy, or of any remedy for the
enforcement of Basement's liability under the Program Agreement, resulting from
the operation of any present or future provision of the Federal Bankruptcy Code
or other statute or from the decision in any court; (c) the rejection or
disaffirmance of the Program Agreement in any such proceedings; (d) any
disability or other defense of Basement except as otherwise provided in the
Program Agreement; (e) the cessation from any cause whatsoever of the liability
of Basement under the Program Agreement, except as otherwise provided in or
permitted by the Program Agreement; or (f) the exercise by Basement of any
rights or remedies reserved to Basement under the Program Agreement.
3. JOINDER; STATUTE OF LIMITATIONS. Guarantor agrees that it may be joined
in any action against Basement in connection with the obligations of Basement
under the Program Agreement as guaranteed by this Guaranty and recovery may be
had against Guarantor in any action or proceeding against Basement and Bank may
enforce the obligations of Guarantor hereunder without first taking any action
whatsoever against Basement or its successors and assigns, or pursue any other
remedy or apply any security it may hold.
4. DE FACTO SUBSTITUTION. In the event this Guaranty shall be held
ineffective or unenforceable by any court of competent jurisdiction, or in the
event of any limitation of liability of Guarantor hereon other than as expressly
provided herein, then Guarantor shall be deemed to be a party under the Program
Agreement with the same force and effect as if Guarantor were expressly named as
a joint and several party with Basement therein with respect to the obligations
of Basement thereunder hereby guaranteed.
5. AMENDMENT OR ASSIGNMENT OF AGREEMENT. The provisions of the Program
Agreement may be changed, modified, amended or waiver by agreement between Bank
and Basement at any time, or by course of conduct, without the consent of or
without notice to Guarantor thereunder. This Guaranty shall guarantee the
performance of the Program Agreement as so changed, modified, amended or waived.
Any assignment of the Program Agreement shall not affect this Guaranty and Bank
if Bank disposes of its interest in the Program Agreement. "Bank", as used in
this Guaranty, shall include Bank's successors and assigns.
6. REPLACEMENT OF GUARANTOR. In the event that, at any time during the
term of this Guaranty, Guarantor should cease to transact business or cease to
be duly organized, validly existing and/or in good standing, Guarantor shall
obtain a substitute Guaranty to the benefit of Bank, substantially in accordance
with the terms and
2
<PAGE> 63
conditions of this Guaranty, from a guarantor acceptable to Bank whose capital
and overall financial condition is generally comparable to that of Guarantor.
7. REPRESENTATION AND WARRANTIES. Guarantor represents, warrants and
covenants to Bank as follows:
(i) Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Massachusetts and has all
requisite corporate power and authority to own, operate and carry on its
business as now being conducted.
(ii) Guarantor has the corporate right, power and authority to enter
into this Guaranty and all agreements entered into in connection with the
contemplated transaction.
(iii) Neither the execution and delivery of this Guaranty nor the
consummation of the transactions contemplated hereby will constitute (i) a
default under or a breach of any of the terms or provisions of the Certificate
of Incorporation or By-laws of Guarantor, or (ii) a breach of any agreement to
which Guarantor is a party or by which Guarantor is bound.
(iv) There is no action, suit, proceeding or investigation pending,
or to the knowledge of Guarantor threatened against or affecting Guarantor
before any court, arbitrator or administrative or governmental body which if
decided adversely will affect adversely Guarantor's ability to perform its
obligations under this Agreement; Guarantor is not subject to any injunction,
order or decree of any court or administrative agency which relates to the
Accounts (as defined in the Program Agreement) or this Guaranty.
(v) the principal place of business and chief executive offices of
Guarantor are located at 40 Walnut Street, Wellesley, Massachusetts 02181.
(vi) This Guaranty and any other documents to be executed by
Guarantor in connection therewith have been duly and validly executed and
delivered by Guarantor and constitute valid and binding obligations of Guarantor
enforceable in accordance with the terms thereof and hereof, except to the
extent enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws in force from to time to time which affect creditor's
rights generally and by legal and equitable limitations on the enforceability of
specific remedies.
8. WAIVERS OF PRESENTMENT AND NOTICES. Guarantor waives any defense by
reason of any legal disability of Basement, and further waives any presentments
and notices of acceptance of this Guaranty as well as all notices of the
existence, creation, or incurring of new or additional obligations under the
Program Agreement.
3
<PAGE> 64
9. NO WAIVER BY BASEMENT. No delay on the part of Bank in exercising any
right hereunder or under the Program Agreement, if permitted under the Program
Agreement, shall operate as a waiver of such right or of any other right of Bank
hereunder or under the Program Agreement, if permitted under the Program
Agreement, nor shall any delay, omission or waiver on any one occasion be deemed
a waiver of the same or any other right on any other future occasion.
10. WHOLE AGREEMENT. This instrument constitutes the entire agreement
between Bank and Guarantor with respect to the subject matter hereof, supersedes
all prior oral or written agreements or understandings with respect thereto and
may not be changed, modified, discharged or terminated orally or in any matter
other than by an agreement in writing signed by Guarantor and Bank.
11. APPLICABLE LAW. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Georgia.
12. GUARANTOR'S SUCCESSORS. Guarantor's obligations under this Guaranty
shall be binding on the successors, legal representatives and assigns of
Guarantor. Guarantor shall not be released by any assignment or delegation by it
of its obligations hereunder.
13. ATTORNEYS' FEES. If Bank is required to enforce Guarantor's
obligations hereunder, Guarantor shall pay to Bank all reasonable costs incurred
by it in connection with such enforcement, including without limitation,
reasonable attorneys' fees.
14. CAPTIONS. The paragraph headings appearing herein are for purposes of
identification and reference only and shall not be used in interpreting this
Guaranty.
15. INTERPRETATIONS; SEVERABILITY. It is agreed that if any provision of
this Guaranty or the application of any provision to any person (including Bank)
or any circumstance shall be determined to be invalid or unenforceable, such
determination shall not affect any other provisions of this Guaranty or the
application of such provision to any other person (including Bank) or
circumstance, all of which other provision shall remain in full force and
effect. It is the intention of the parties hereto that if any provision of this
Guaranty is capable of two constructions, one of which would render the
provision valid, the provision shall have the meaning which renders it valid.
16. AMENDMENT, EXTENSION AND RENEWALS. This Guaranty shall apply to the
Program Agreement, any amendment, extension or renewal thereof, and to any
extended term following the term granted in such Agreement, or any amendment,
extension or renewal thereof.
4
<PAGE> 65
17 NOTICES. All notices, demands, instructions and other communications
required or permitted to be given to or made upon any party thereto shall be in
writing and shall be personally delivered or sent by registered or certified
mail, postage prepaid, return receipt requested, by recognized carrier of
overnight mail or by prepaid telegram (with messenger delivery specified).
Notice given by registered or certified mail, postage prepaid, shall deemed to
have been given on the second business day after delivery thereof to the
carrier. Notice given by personal delivery shall be deemed to be given when
delivered. Notice given by prepaid telegram shall be deemed to be given when
sent, it properly addressed to the party to who sent. Unless otherwise specified
in a notice in writing sent or delivered in accordance with the foregoing
provisions of this Section 17, notices, demands, instructions and
communications shall be given to or made upon the respective parties hereto at
their respective addresses indicated below:
If to Guarantor: Filene's Basement Corp.
40 Walnut Street
Wellesley, MA 02181
Attn: Chief Financial Officer
With a copy to: Wayne, Lazares & Chappell
200 State Street
Boston, MA 02109
Attn: Robert Zinnershine, Esq.
If to Bank: Monogram Credit Card Bank
of Georgia
7840 Roswell Road
Building 100, Suite 210
Atlanta, GA 30350
Attn: President
Either party may change the person or address to which notice shall be sent by
giving written notice of such change to the other party in the manner provided
herein.
18. FINANCIAL STATEMENTS. Guarantor shall furnish to Bank, as requested by
Bank, annual and quarterly financial statements of Guarantor, including balance
sheets and earnings statements. Bank agrees that Forms 10-K and 10-Q filed by
Guarantor with the Securities and Exchange Commission shall meet these
requirements.
ACKNOWLEDGMENT: ENFORCEABILITY. GUARANTOR REPRESENTS AND WARRANTS THAT
GUARANTOR HAS READ THIS GUARANTY AND UNDERSTANDS THE CONTENTS HEREOF AND THAT
THIS GUARANTY IS ENFORCEABLE AGAINST GUARANTOR IN ACCORDANCE WITH ITS TERMS.
5
<PAGE> 66
IN WITNESS WHEREOF, the parties have executed this Guaranty Agreement as
of the day and year first above written.
Guarantor:
FILENE'S BASEMENT CORP.
By: /s/ Steven R. Siegel
---------------------------------
Name: Steven R. Siegel
-----------------------
Title: Executive Vice President
-----------------------
and Chief Financial Officer
Bank:
MONOGRAM CREDIT CARD BANK
OF GEORGIA
By: /s/ William Nutting
---------------------------------
Name: William Nutting
-----------------------
Title: Vice-Chairman
-----------------------
6
<PAGE> 67
Officer's Certificate
Reference is hereby made to that certain Credit Card Program
Agreement (the "Agreement"), dated as of July 20, 1995, between Monogram Credit
Card Bank of Georgia ("Bank") and Filene's Basement, Inc.
This is to certify that all the obligations set forth in Article XV
of the Agreement have been fulfilled as of the date hereof.
/s/ Steven R. Siegel
---------------------------------
[ ] Steven R. Siegel
Chief Financial Officer,
Filene's Basement, Inc.
/s/ Steven R. Siegel
---------------------------------
[ ] Steven R. Siegel
Chief Financial Officer,
Filene's Basement Corp.
<PAGE> 1
Exhibit 10.27
AMENDMENT TO CREDIT CARD PROGRAM AGREEMENT
AMENDMENT, made and entered into as of October 6, 1995 by and between
Monogram Credit Card Bank of Georgia, a Georgia banking corporation with its
principal place of business at 7840 Roswell Road, Atlanta, Georgia 30350
("Bank") and Filene's Basement, Inc., a Massachusetts corporation with its
principal place of business at 40 Walnut Street, Wellesley, Massachusetts 02181
("Filene's Basement").
W I T N E S S E T H
WHEREAS, Bank and Filene's Basement are parties to a Credit Card
Program Agreement dated as of July 20, 1995 (the "Program Agreement") pursuers
to which Bank has agreed to extend credit to customers of Filene's Basement for
the purchase of Merchandise at Stores subject to the terms and conditions set
forth in the Program Agreement; and
WHEREAS, it is the mutual desire of Bank and Filene's Basement that the
Program Agreement be further amended in accordance with the terms and conditions
hereafter set forth.
NOW THEREFORE, in consideration of the mutual promises and subject to
the terms and conditions hereinafter set forth, the parties hereto hereby agree
as follows:
1. Capitalized terms used herein which are not otherwise defined shall
have the same meaning as in the program Agreement.
2. The definition of "GECC Account(s)" is deleted and substituted in its
place is the following:
"GECC Account(s)" means any Account originated by Filene's Basement and
assigned to GE Capital pursuant to the terms of the Account Purchase Agreement,
or any predecessor agreement, that meets certain credit and other criteria set
by Bank in its discretion, except the following shall not constitute GECC
Accounts for the purpose of this Agreement: (i) Accounts which have been written
off by GE Capital prior to the Conversion Date, (ii) Accounts that are one
hundred eighty (180) days or more past due, and (iii) Accounts where GE Capital
has received notice prior to the Conversion Date that the Cardholder is deceased
or shall have filed a petition under the Bankruptcy Code or similar state law,
or had filed against it any such petition.
3. All references in Section 16.2 to "thirteen percent (13%)" or "13%" are
deleted and substituted in their place shall be "sixteen percent (16%)" or
"16%", respectively as the case may be.
<PAGE> 2
4. Section 16.5 is amended by deleting the period at the end of the
sentence and substituting in its place the following:
"and; provided further, that Filene's Basement will pay all costs associated
with increasing the LOC from thirteen percent (13%) of Bank's reasonable
estimate of the Aggregate Investment as of the end of the calendar year in which
the LOC is scheduled to expire to sixteen percent (16%) of such amount and
Bank's reimbursable amount under this Section in respect of the LOC shall be
capped at two percent (2%) of the face amount of the LOC not to exceed thirteen
percent (13%) at Bank's reasonable estimate of the Aggregate Investment as of
the end of the calendar year in which the LOC is scheduled to expire."
5. The second sentence of Section 18.15 is deleted and substituted in its
place is the following:
"To secure payment of and performance by Filene's Basement of any and all
indebtedness, liabilities or obligations whatsoever of Filene's Basement to
Bank, however arising, pursuant to this Agreement, including but not limited to
liabilities and obligations that may be deemed to exist in the event of any
recharacterization of any transactions contemplated hereby, Filene's Basement
hereby grants to Bank a first priority continuing security interest in and to
the following property or interests in property of Filene's Basement, whether
now existing or hereafter created or acquired, together with the proceeds
thereof: (i) all Accounts and Account Documentation which may from time to time
become subject by this Agreement; (ii) Filene's Basement's books and records
evidencing, securing or relating to Accounts; (iii) all deposits, credit
balances and reserves on Bank's books relative to any Accounts; (iv) all
proceeds of the foregoing."
6. Except as specifically provided herein, the terms and conditions of the
Program Agreement shall continue in full force and effect and shall be binding
in the parties hereto. Upon the execution of this Agreement, such reference in
the Program Agreement to "this Agreement", "hereunder", "hereof, or words of
like import, shall mean and be a reference to the Program Agreement as amended
hereby. In the event of any conflict between the terms of the Program Agreement
and the terms of this Amendment, the terms of this Amendment shall prevail.
7. This Amendment may be executed in any number of counterparts, all of
which together shall constitute one and the same mandatory instrument, and any
of the parties hereto may execute this Amendment by signing any such
counterpart.
<PAGE> 3
IN WITNESS WHEREOF, Bank and Filene's Basement have executed this
Amendment as of the date first set forth above.
FILENE'S BASEMENT, INC.
By: \s\ Steven Siegel
---------------------------
Name: Steven Siegel
Title: E.V.P. & CFO
MONOGRAM CREDIT CARD
BANK OF GEORGIA
By: \s\ William Nutting
---------------------------
Name: William Nutting
Title: Vice Chairman
Filene's Basement Corp., as guarantor of Filene's Basement's obligations under
the Program Agreement, hereby approves the terms of this Amendment, and agrees
that its Guaranty is not invalidated by this Amendment to the Program Agreement
and that its Guaranty continues in full force and effect in accordance with its
terms with respect to the program Agreement as so amended.
FILENE'S BASEMENT CORP.
By: \s\ Steven Siegel
---------------------------
Name: Steven Siegel
Title: E.V.P. & CFO
<PAGE> 1
Exhibit 10.28
SECOND AMENDMENT TO CREDIT CARD PROGRAM AGREEMENT
This Second Amendment to Credit Card Program Agreement is entered into as
of this 7 day of June, 1996 between Monogram Credit Card Bank of Georgia, a
Georgia banking corporation with its principal place of business at 7840 Roswell
Road, Building 100, Suite 210, Atlanta, Georgia 30350 (the "Bank"), and Filene's
Basement, Inc., a Massachusetts corporation with its principal place of business
at 40 Walnut Street, Wellesley, Massachusetts 02181 ("Filene's Basement").
WITNESSETH:
WHEREAS, the Bank and Filene's Basement are parties to a certain Credit
Card Program Agreement dated as of July 20, 1995, as amended by a certain
Amendment to Credit Card Program Agreement dated as of October 6, 1995 (as
amended, the "Program Agreement"); and
WHEREAS, the Bank and Filene's Basement are desirous of amending the
Program Agreement as set forth herein,
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Bank and Filene's Basement
agree as follows:
1. Capitalized terms used herein which are not otherwise defined shall
have the same meaning as in the Program Agreement.
2. The Program Agreement is hereby amended by deleting Subsection 3.7(d)
thereof in its entirety.
3. The Program Agreement is further amended by adding the following
immediately after Section 3.12 thereof:
"Section 3.13 SUPPLEMENTAL MARKETING FUND. The Bank shall
establish a fund (hereinafter, the "Supplemental Marketing Fund") to be
used by Filene's Basement for the marketing and promotion of the Credit
Cards. Upon the execution hereof, the Bank shall credit the
Supplemental Marketing Fund an amount equal to fifty percent (50%) of
the Bank's Net Income (as defined below) from the sale of Credit
Insurance during the period from July 20, 1995 through April 30, 1996.
Commencing June 15, 1996 and on the like day of each month thereafter,
the Bank shall credit the Supplemental Marketing Fund an amount equal
to fifty percent (50%) of the Bank's Net Income from the sale of Credit
Insurance for the prior calendar month. As used herein, "Net Income"
for any period means and refers to
<PAGE> 2
gross insurance premiums received by the Bank for Credit Insurance
during such period, less (a) all claims paid under such Credit
Insurance during such period, and (b) all out-of-pocket expenses
incurred or paid by the Bank during such period in connection with the
sale of Credit Insurance. Filene's Basement may from time to time
submit to the Bank evidence of expenses incurred by Filene's Basement
in marketing and/or promoting the Credit Cards, and the Bank shall
reimburse Filene's Basement for such costs and expenses to the extent
of funds then available in the Supplemental Marketing Fund. All amounts
reimbursed to Filene's Basement from the Supplemental Marketing Fund as
provided herein shall be supplemental and in addition to all other
amounts required to be paid by the Bank to Filene's Basement in
connection with the promotion of the Credit Cards and/or Accounts
including, but not limited to, amounts payable by the Bank to Filene's
Basement under Section 2.4 of the Program Agreement."
4. The reference in Section 2.4(b) of the Program Agreement to "Section
3.8" shall be amended to refer to "Sections 3.8 and 3.13".
5. The Program Agreement is further amended by adding the following
sentence at the end of Section 3.10 thereof:
"To the extent permitted by applicable law, Filene's Basement shall
cease to accept In-Store Payments immediately upon the Bank directing
Filene's Basement to cease to accept In-Store Payments."
6. Except as specifically provided herein, the terms and conditions of the
Program Agreement shall continue in full force and effect and shall be binding
on the parties hereto. Upon the execution of this Agreement, such reference in
the Program Agreement to "this Agreement", "hereunder", "hereof", or words of
like import, shall mean and be a reference to the Program Agreement as amended
hereby. In the event of any conflict between the terms of the Program Agreement
and the terms of this Second Amendment, the terms of this Second Amendment shall
prevail.
7. This Second Amendment may be executed in any number of counterparts,
all of which together shall constitute one and the same instrument, and any of
the parties hereto may execute this Second Amendment by signing any such
counterpart.
<The remainder of this page intentionally left blank.>
2
<PAGE> 3
IN WITNESS WHEREOF, the Bank and Filene's Basement have executed this
Second Amendment as of the date first set forth above.
Filene's Basement
By: /s/ Steven Siegel
---------------------------
Steven Siegel
Executive Vice President
and Chief Financial Officer
Monogram Credit Card Bank of Georgia
By: /s/ Richard A. Hayes
----------------------------
Print Name: Richard A. Hayes
Title: Vice Chairman
Filene's Basement Corp., as guarantor of Filene's Basement's obligations
under the Program Agreement hereby approves the terms of this Second Amendment,
and agrees that its Guaranty is not invalidated by this Second Amendment to the
Program Agreement and that its Guaranty continues in full force and effect in
accordance with its terms with respect to the Program Agreement as so amended.
Filene's Basement
By: /s/ Steven Siegel
---------------------------
Steven Siegel
Executive Vice President
and Chief Financial Officer
3
<PAGE> 1
Exhibit 10.37.2
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
Second Amendment to Employment Agreement made as of the 1st day of April,
1998, between Filene's Basement, Inc., a Massachusetts corporation, having its
executive offices and a principal place of business in Wellesley, Massachusetts
(the "Employer") and Steven R. Siegel of Weston, Massachusetts (the "Employee")
WHEREAS, the Employer and the Employee have entered into an agreement
dated as of July 11, 1994, and which was amended by an instrument in writing
dated as of January 15, 1996, relating to the employment of the Employee by the
Employer (the entire document as amended to be referred to as the "Employment
Agreement" and amendment dated as of January 15, 1996 to be referred to as the
"First Amendment"); and
WHEREAS, the Employee and Employer have agreed to further modify the terms
of the Employment Agreement as set forth in this Second Amendment;
NOW, THEREFORE, the Employer and Employee hereby agree as follows:
1. Section 1 of the First Amendment is amended by changing the reference
to "twenty-four (24) months" wherever it appears so that it shall instead be a
reference to "thirty-six (36) months", so that any payment due or any benefits
that are to be continued under the Employment Agreement shall be determined with
respect to and continued for a period of thirty-six (36) months.
2. Article I of the Employment Agreement is amended by adding a new
Section 1.4 that shall read as follows in its entirety:
1.4 Termination. If the Employee's employment is terminated without cause
(as defined in Section 1.3(a)) then the Employer shall (a) pay Employee (i) any
accrued but unpaid compensation, including any bonus, and (ii) the base
compensation the Employee was receiving prior to such termination, until the
Expiration Date under Section 2.4; and (b) cause all the Employee's stock
options to become immediately and fully vested and exercisable until the
Expiration Date. In addition until the Expiration Date, all benefits, including,
without limitation, medical, life insurance, accident, disability or health
benefits, shall be continued for Employee (and his family) in a manner
substantially similar those provided prior to such termination.
3. Section 2.4 of the Employment Agreement shall be restated in its
entirety as follows:
"2.4 Commencing on July 11, 1995 and on each day thereafter ("Renewal
Date") the Expiration Date shall be automatically extended to the third
anniversary of
<PAGE> 2
such Renewal Date (the "Extension Period"). References herein to the Expiration
Date shall be deemed to refer to the Expiration Date as extended from time to
time and references to the Extension Period shall be deemed to refer to the
period ending on the Expiration Date as so extended."
IN WITNESS WHEREOF, this Second Amendment has been executed as of the date
first above written.
FILENE'S BASEMENT, INC.
BY: /s/ Samuel Gerson
-------------------
/s/ Steven R. Siegel
--------------------
Steven R. Siegel
-2-
<PAGE> 1
Exhibit 10.38.1
WILLIAM J. CAROTHERS EMPLOYMENT AGREEMENT
AMENDMENT NO. 1
WHEREAS, William J. Carothers (the "Employee") and Filene's Basement, Inc. (the
"Employer") entered into an employment agreement (the "Agreement"); and
WHEREAS, the Employer and the Employee mutually desire to amend the terms of
said Agreement.
NOW, THEREFORE, said Agreement is hereby amended as follows:
1. Section 1.1 of said Agreement shall be amended by deleting that portion of
the section which begins with the words "Notwithstanding the foregoing,..." and
ends with the phrase "...the date such notice is given.)" and inserting the
following language in its place:
"Notwithstanding the foregoing and except as otherwise expressly limited herein,
the Term shall be extended each day beginning February 1, 1998 and every day
thereafter (the "Renewal Date") for a three year period ending on the third
anniversary of such Renewal Date. However, the Employer may give written notice
of termination of employment to the Employee ("Termination Notice") in which
case the Term shall end on the third anniversary of the Renewal Date just prior
to receipt of such Termination Notice by the Employee. In addition, the Employer
shall cause all the Employee's stock options to become immediately and fully
vested and exercisable."
2. Section 1.7 of said Agreement shall be amended by deleting the language of
that section and inserting the following new language:
"1.7 TERMINATION OF EMPLOYMENT WITHOUT CAUSE. If the Employee receives a
Termination Notice other than a Notice of Termination for Cause under Section
1.9, the Employer will pay the Employee (a) any accrued but unpaid bonuses or
other incentive payment, and (b) monthly continuation of the Employee's Base
Salary until the end of the Term, and (c) all fringe benefits for Employee (and
his beneficiaries) which he (and they) received just prior to the receipt of the
Notice of Termination; provided that such benefits may be modified during the
balance of the Term to the same extent as the benefits for to the Chief
Executive Officer of the Employer are modified. Thereafter the death or
disability of the Employee shall not alter the payments and benefits being
provided under this section. All payments under this section shall be paid to
the Employee while living, and to his estate after death;
<PAGE> 2
provided that the proceeds of any life insurance or other death benefit shall be
paid to the designated beneficiary or in accordance with the terms of such
benefit plan or contract.
3. Section 3.1 is deleted.
IN WITNESS WHEREOF, the parties have executed this document this 17th day of
March, 1998.
FILENE'S BASEMENT, INC.
Employer
By: /s/ Samuel Gerson
-----------------
Employee
/s/ William J. Carothers
------------------------
William J. Carothers
<PAGE> 1
Exhibit 10.40
AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
dated as of January 30, 1998
among
FILENE'S BASEMENT, INC.,
as Borrower,
FILENE'S BASEMENT CORP.,
as Guarantor,
BANKBOSTON, N.A.
(F/K/A THE FIRST NATIONAL BANK OF BOSTON)
and
THE OTHER LENDING INSTITUTIONS LISTED ON SCHEDULE 1 HERETO,
as Banks
and
BANKBOSTON, N.A.
(F/K/A THE FIRST NATIONAL BANK OF BOSTON),
as Agent
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS AND RULES OF INTERPRETATION...........................1
1.1. Definitions. ...........................................1
1.2. Rules of Interpretation..................................17
2. THE REVOLVING CREDIT FACILITY....................................17
2.1. Commitment to Lend. ....................................17
2.2. Commitment Fee. ........................................18
2.3. Reduction of Commitment. ...............................18
2.4. The Revolving Credit Notes. ............................19
2.5. Interest on Revolving Credit Loans. ....................19
2.6. Requests for Revolving Credit Loans......................20
2.6.1. Loan Request. ..................................20
2.6.2. Swing Line. ....................................20
2.6.3. Reimbursement Obligations. .....................21
2.7. Conversion Options.......................................21
2.7.1. Conversion to Different Type of Revolving
Credit Loan. ............................................21
2.7.2. Continuation of Type of Revolving
Credit Loan..............................................22
2.7.3. Eurodollar Rate Loans. .........................22
2.8. Funds for Revolving Credit Loan..........................22
2.8.1. Funding Procedures. ............................22
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. .............................24
2.10.3. Advances. .....................................24
3. REPAYMENT OF THE REVOLVING CREDIT LOANS..........................25
3.1. Maturity. ..............................................25
3.2. Mandatory Repayments of Revolving Credit Loans...........25
3.2.1. Outstandings in Excess of Commitment or
Borrowing Base. .........................................25
3.2.2. Blocked Account Provisions. ....................26
4. THE TERM LOAN....................................................28
4.1. Commitment to Lend. ....................................28
4.2. The Term Notes. ........................................28
4.3. Mandatory Repayments of Term Loan. .....................28
4.3.1. Schedule of Installment Payments of Principal
of Term Loan. ...........................................28
4.3.2. Additional Mandatory Payments if Outstandings
Exceed the Borrowing Base. .............................28
4.4. Optional Prepayment of Term Loan. ......................29
4.5. Interest on Term Loan....................................30
4.5.1. Interest Rates. ................................30
4.5.2. Interest Rate Options. .........................30
4.5.3. Amounts, etc. ..................................30
5. LETTERS OF CREDIT................................................30
<PAGE> 3
-ii-
PAGE
----
5.1. Letter of Credit Commitments.............................30
5.1.1. Commitment to Issue Letters of Credit. .........30
5.1.2. Letter of Credit Applications. .................31
5.1.3. Terms of Letters of Credit. ....................31
5.1.4. Reimbursement Obligations of Banks. ............32
5.1.5. Participations of Banks. .......................32
5.2. Reimbursement Obligation of the Borrower. ..............32
5.3. Letter of Credit Payments. .............................33
5.4. Obligations Absolute. ..................................33
5.5. Reliance by Issuer. ....................................34
5.6. Letter of Credit Fee. ..................................34
6. CERTAIN GENERAL PROVISIONS.......................................35
6.1. Amendment Fee. .........................................35
6.2. Funds for Payments.......................................35
6.2.1. Payments to Agent. .............................35
6.2.2. No Offset, etc. ................................35
6.3. Computations. ..........................................36
6.4. Inability to Determine Eurodollar Rate. ................36
6.5. Illegality. ............................................36
6.6. Additional Costs, Etc. .................................37
6.7. Capital Adequacy. ......................................38
6.8. Certificate. ...........................................38
6.9. Indemnity. .............................................38
6.10. Interest After Default..................................39
6.10.1. Overdue Amounts. ..............................39
6.10.2. Amounts Not Overdue. ..........................39
7. COLLATERAL SECURITY AND GUARANTIES...............................39
7.1. Security of Borrower. ..................................39
7.2. Guaranty and Security of Guarantor. ....................39
8. REPRESENTATIONS AND WARRANTIES...................................40
8.1. Corporate Authority......................................40
8.1.1. Incorporation; Good Standing. ..................40
8.1.2. Authorization. .................................40
8.1.3. Enforceability. ................................40
8.2. Governmental Approvals. ................................41
8.3. Title to Properties; Leases. ...........................41
8.4. Financial Statements and Projections.....................41
8.4.1. Financial Statements. ..........................41
8.4.2. Projections. ...................................41
8.5. No Material Changes, Etc. ..............................42
8.6. Franchises, Patents, Copyrights, Etc. ..................42
8.7. Litigation. ............................................42
8.8. No Materially Adverse Contracts, Etc. ..................42
8.9. Compliance with Other Instruments, Laws, Etc. ..........42
8.10. Tax Status. ...........................................43
8.11. No Event of Default. ..................................43
8.12. Holding Company and Investment Company Acts. ..........43
<PAGE> 4
-iii-
PAGE
----
8.13. Absence of Financing Statements, Etc. .................43
8.14. Perfection of Security Interest. ......................43
8.15. Certain Transactions. .................................44
8.16. Employee Benefit Plans..................................44
8.16.1. In General. ...................................44
8.16.2. Terminability of Welfare Plans. ...............44
8.16.3. Guaranteed Pension Plans. .....................44
8.16.4. Multiemployer Plans. ..........................45
8.17. Regulations U and X. ...................................45
8.18. Environmental Compliance. .............................45
8.19. Subsidiaries, etc. ....................................47
8.20. Bank Accounts. ........................................47
8.21. Fiscal Quarters. ......................................48
8.22. Chief Executive Office; Inventory Locations. ..........48
8.23. Insurance. ............................................48
8.24. Full Disclosure. ......................................48
9. AFFIRMATIVE COVENANTS OF THE BORROWER AND THE GUARANTOR. .......48
9.1. Punctual Payment. ......................................48
9.2. Maintenance of Office. .................................48
9.3. Records and Accounts. ..................................49
9.4. Financial Statements, Certificates and Information. ....49
9.5. Notices. ...............................................51
9.5.1. Defaults. ......................................51
9.5.2. Environmental Events. ..........................51
9.5.3. Notification of Claim against Collateral. .......52
9.5.4. Notice of Litigation and Judgments. ............52
9.6. Corporate Existence; Maintenance of Properties. ........52
9.7. Insurance. .............................................53
9.7.1. General Coverage. ..............................53
9.7.2. Business Interruption Insurance. ...............53
9.8. Taxes. .................................................53
9.9. Inspection of Properties and Books, etc. ................53
9.9.1. General. .......................................53
9.9.2. Appraisals. ....................................54
9.9.3. Environmental Assessments. .....................54
9.9.4. Communications with Accountants. ...............55
9.10. Compliance with Laws, Contracts, Licenses,
and Permits.............................................55
9.11. Employee Benefit Plans. ...............................55
9.12. Use of Proceeds. ......................................56
9.13. Additional Mortgaged Property. ........................56
9.14. Bank Accounts. ........................................56
9.15. Agency Account Agreements; Credit Card Providers. .....56
9.16. Inventory Restrictions. ...............................57
9.17. Landlord Waivers. .....................................57
9.18. Further Assurances. ...................................57
10. CERTAIN NEGATIVE COVENANTS OF THE BORROWER AND
THE GUARANTOR...........................................57
<PAGE> 5
-iv-
PAGE
----
10.1. Restrictions on Indebtedness. .........................57
10.2. Restrictions on Liens. ................................59
10.3. Restrictions on Investments. ..........................61
10.4. Distributions. ........................................63
10.5. Merger, Consolidation and Disposition of Assets. ......63
10.5.1. Mergers and Acquisitions. .....................63
10.5.2. Disposition of Assets. ........................63
10.6. Sale and Leaseback. ...................................64
10.7. Compliance with Environmental Laws. ...................64
10.8. Employee Benefit Plans. ...............................65
10.9. Bank Accounts. ........................................65
10.10. Amendments to Monogram Agreement. ....................65
10.11. Transactions with Affiliates. ........................65
11. FINANCIAL COVENANTS OF THE BORROWER AND THE GUARANTOR. ........66
11.1. Minimum EBITDA. .......................................66
11.2. Minimum Operating Cash Flow to Fixed
Obligations Ratio.......................................66
12. CLOSING CONDITIONS. ...........................................67
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. ....................................68
12.6. Perfection Certificates and UCC Search Results. .......68
12.7. Certificates of Insurance. ............................68
12.8. Borrowing Base Report. ................................68
12.9. Solvency Certificate. .................................68
12.10. Opinion of Counsel. ..................................68
12.11. Payment of Fees. .....................................68
12.12. Delivery of Gordon Brothers Report. ..................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
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
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PAGE
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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. .................................83
20.1. Conditions to Assignment by Banks. ....................83
20.2. Certain Representations and Warranties;
Limitations; Covenants. .......................................83
20.3. Register. .............................................84
20.4. New Notes. ............................................85
20.5. Participations. .......................................85
20.6. Disclosure. ...........................................85
20.7. Assignee or Participant Affiliated with
the Borrower............................................86
20.8. Miscellaneous Assignment Provisions. ..................86
20.9. Assignment by Borrower. ...............................87
21. NOTICES, ETC. .................................................87
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. ...........................89
28. SEVERABILITY. .................................................90
29. CONFIDENTIALITY. ..............................................90
30. TRANSITIONAL ARRANGEMENTS .....................................90
30.1. Original Credit Agreement Superseded. .................90
30.2. Return and Cancellation of Notes. .....................90
30.3. Interest and Fees Under Superseded Agreement. .........90
<PAGE> 7
EXHIBITS AND SCHEDULES
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 1(a) Charges relating to Write-downs
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 8.9 Compliance with Laws
Schedule 8.10 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(a) Agency Agreements (to be executed)
Schedule 9.15(b) Credit Card Provider Notices (to be executed)
Schedule 10.1 Existing Indebtedness; Tax Audits
Schedule 10.2 Existing Liens
Schedule 10.3 Existing Investments
Schedule 10.5.2 Permitted Dispositions
<PAGE> 8
AMENDED AND RESTATED
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
This AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT is made
as of the 30th day of January, 1998, 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) BANKBOSTON, N.A. (f/k/a The First National Bank of Boston) and the other
lending institutions listed on SCHEDULE 1 and (d) BANKBOSTON, N.A. (f/k/a The
First National Bank of Boston) as agent for itself and such other lending
institutions.
WHEREAS, pursuant to a Revolving Credit and Term Loan Agreement dated as
of May 23, 1996 (as amended from time to time, the "Original Credit Agreement")
by and among the Borrower, the Guarantor, the Banks and the Agent, the Banks
made available loans and other extensions of credit to the Borrower; and
WHEREAS, the Borrower has requested certain amendments to the Original
Credit Agreement, including the making of a new Term Loan thereunder, and each
of the Banks and the Agent are willing to amend certain provisions of the
Original Credit Agreement on the terms and conditions set forth herein; and
NOW, THEREFORE, the Borrower, the Guarantor, the Banks and the Agent agree
that on the Closing Date the Original Credit Agreement is hereby amended and
restated in its entirety as set forth herein.
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. DEFINITIONS. The following terms shall have the meanings set forth in
this sec.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.
<PAGE> 9
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AGENCY ACCOUNT AGREEMENTS. The several Agency Account Agreements, dated as
of the Original Closing Date or such later date as set forth in sec.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. BankBoston, N.A. (f/k/a The First National Bank of Boston) acting
as agent for the Banks.
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 LLP or such other counsel as may be
approved by the Agent.
ASSIGNMENT AND ACCEPTANCE. See sec.20.1.
BALANCE SHEET DATE. February 1, 1997.
BANKS. BKB 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 sec.20.
BASE RATE. The higher of (a) the annual rate of interest announced from
time to time by BKB 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.
BKB. BankBoston, N.A. (f/k/a The First National Bank of Boston), a
national banking association, in its individual capacity.
BLOCKED ACCOUNT. See sec.3.2.2 hereof.
BLOCKED ACCOUNT AGREEMENT. The Blocked Account Agreement, dated as of the
Original Closing Date, and amended and ratified as of 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.
<PAGE> 10
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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 sec.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
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 as of the
Original Closing Date and amended and ratified as of 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 sec.8.18.
CLOSING DATE. The first date on which the conditions set forth in sec.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.
<PAGE> 11
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CODE. The Internal Revenue Code of 1986.
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 sec.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 FIXED OBLIGATIONS. With respect to any period of four
consecutive fiscal quarters, an amount equal to the sum of all regularly
scheduled payments of principal and interest on Indebtedness that become due and
payable or that are to become due and payable during such fiscal period pursuant
to any agreement or instrument to which the Guarantor or any of its Subsidiaries
is a party relating to the borrowing of money or the obtaining of credit or in
respect of any Capitalized Lease. Demand obligations shall be deemed to be due
and payable during any fiscal period during which such obligations are
outstanding.
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, excluding
Capital Expenditures made during the fiscal year ending January 30, 1999 for the
opening of new Stores or the remodeling of existing Stores up to an aggregate
amount not to exceed $12,500,000, LESS, cash payments for all current income
taxes made by the Guarantor, the Borrower and their Subsidiaries during such
period. Notwithstanding the foregoing and subject to the other requirements of
the Credit Agreement, Capital Expenditures for the opening of new Stores or the
remodeling of existing of Stores are not limited to $12,500,000 in any fiscal
year.
<PAGE> 12
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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 sec.2.7.
CREDIT AGREEMENT. This Amended and Restated 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 sec.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 sec.2.7 or all or any portion of
the Term Loan is converted or continued in accordance with sec.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, including, without limitation, the charges described
on SCHEDULE 1(a) hereto incurred in the fiscal quarters referred to on such
Schedule relating to the write-down of inventory, equipment and other related
assets, 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
<PAGE> 13
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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 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
<PAGE> 14
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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) 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
sec.3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
ENVIRONMENTAL LAWS. See sec.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 sec.414 of the Code.
ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of sec.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 such
other
<PAGE> 15
-8-
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 sec.14.1.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (a) When used in sec.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 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 sec.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 as of the Original Closing Date and amended
and ratified as of 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
<PAGE> 16
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performance of the Obligations and in form and substance satisfactory to the
Banks and the Agent.
HAZARDOUS SUBSTANCES. See sec.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. For avoidance of
doubt, it is agreed amongst the parties hereto that "Indebtedness" does not
include obligations in respect of operating leases.
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 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;
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(C) if the Borrower shall fail to give notice as provided in
sec.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 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 sec.8.18.
LETTER OF CREDIT. See sec.5.1.1.
LETTER OF CREDIT APPLICATION. See sec.5.1.1.
LETTER OF CREDIT PARTICIPATION. See sec.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 sec.2.6.
LOANS. The Revolving Credit Loans and the Term Loan.
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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. February 3, 2001.
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 amended and in effect on the Closing Date and
as further amended in accordance with the provisions of sec.10.10.
MORTGAGED PROPERTY. Any Real Estate which is subject to any Mortgage.
MORTGAGES. The several mortgages and deeds of trust, dated as of the
Original Closing Date, and amended and ratified as of the Closing Date, from the
Borrower to the Agent with respect to the leasehold interests of the Borrower in
certain Real Estate and in form and substance satisfactory to the Agent.
MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of sec.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.
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, or arising or incurred in connection with any interest rate
protection arrangements, 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 sec.2.6.2.
ORIGINAL CLOSING DATE. May 23, 1996.
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ORIGINAL CREDIT AGREEMENT. See preamble.
OUTSTANDING. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
OWNED REAL ESTATE. See sec.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 sec.4002 of
ERISA and any successor entity or entities having similar responsibilities.
PERFECTION CERTIFICATES. The Perfection Certificates as defined in the
Security Agreement.
PERMITTED CASH COLLATERAL INVESTMENTS. Investments of cash collateral made
in accordance with the provisions of sec.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 sec.10.2.
PERMITTED INVENTORY LOCATIONS. The Stores and warehouse facilities of the
Borrower located in the United States of America and listed on SCHEDULE 8.22
hereto, as such SCHEDULE 2 may be supplemented from time to time in accordance
with the provisions of sec.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 sec.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. BKB.
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 sec.5.2.
REVOLVING CREDIT LOANS. Revolving credit loans made or to be made by the
Banks to the Borrower pursuant to sec.2.
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REVOLVING CREDIT NOTE RECORD. A Record with respect to a Revolving Credit
Note.
REVOLVING CREDIT NOTES. See sec.2.4.
SARA. See sec.8.18(a).
SECURITY AGREEMENT. The Security Agreement, dated as of the Original
Closing Date and ratified and confirmed as of 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, the Blocked Account
Agreement, the Stock Pledge Agreement and the Security Documents Amendment.
SECURITY DOCUMENTS AMENDMENT. The Security Documents Amendment dated as of
the Closing Date, among the Borrower, the Guarantor and the Agent, and in form
and substance satisfactory to the Agent.
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 sec.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 BKB in its
individual capacity and in its capacity as Agent PLUS BKB's Commitment
Percentage of the sum of the Maximum Drawing Amount and any Unpaid Reimbursement
Obligations is equal to or greater than BKB's Commitment Percentage of the Total
Commitment, (c) the Business Day following notice by BKB 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 BKB'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 sec.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 as of the
Original Closing Date and amended and ratified as of the Closing Date, between
the Guarantor and the Agent and in form and substance satisfactory to the Agent.
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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, by a
Second Amendment dated as of August 1, 1995 and by Amendment No. 3 dated January
7, 1997; (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, 1995; (e)
the Executive Split Dollar Life Insurance Agreement (Collateral Assignment
Method) between the Borrower and Mone Anathan, dated June 5, 1994; (f) the
Executive Severance Plan Trust Agreement dated June 4, 1994 between the
Guarantor and the trustee thereof; (g) the Executive Severance Plan for Steven
R. Siegel, Esq., dated July 15, 1997; (h) the Executive Split Dollar Life
Insurance Agreement (Collateral Assignment Method) between the Borrower and
Steven R. Siegel, Esq., dated July 15, 1997; and (i) plans of a similar type and
nature which may hereafter be created for the benefit of W. Jay Carothers.
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 $12,500,000 pursuant to
sec.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 sec.4.2.
TERM NOTE RECORD. A Record with respect to a Term Note.
TOTAL COMMITMENT. The sum of the Commitments of the Banks, as in effect
from time to time.
TRADEMARK ASSIGNMENT. The Trademark Assignment, dated as of the Original
Closing Date and amended and ratified as of 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 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.
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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, sec.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 "sec." 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
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 sec.2.6, such sums as are requested by the
Borrower up to a maximum aggregate amount outstanding (after giving
<PAGE> 23
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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 MINUS the outstanding amount of the Term Loan, and
PROVIDED FURTHER that in no event shall the sum of the outstanding amount of the
Term Loan PLUS the outstanding amount of Revolving Credit Loans PLUS the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations exceed 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 sec.12 and sec.13, in the case of the initial Revolving
Credit Loans to be made on the Closing Date, and sec.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 case may be,
terminated. Promptly after receiving any notice of the Borrower delivered
pursuant to this sec.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
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
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(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 sec.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 sec.2.3.
2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
evidenced by separate amended and restated promissory notes of the Borrower in
substantially the form of EXHIBIT B hereto (each a "Revolving Credit Note"),
dated as of the Closing Date (or such other date as a Bank may become a party
hereto in accordance with sec.20 hereof) 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 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
sec.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 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 percent (2%)
per annum above the Eurodollar Rate determined for such Interest Period.
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.
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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 sec.2.6.2, there shall 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 sec.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 sec.2.1 and
the requirements that the applicable provisions of sec.sec.12 and 13, in
the case of Revolving Credit Loans made on the Closing Date, and sec.13,
in the case of all Revolving Credit Loans, be satisfied. All actions taken
by the Agent pursuant to the provisions of this sec.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
BKB.
2.6.3. REIMBURSEMENT OBLIGATIONS. In addition to requests pursuant
to sec.sec.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
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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 any 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 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 sec.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
sec.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 sec.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.
<PAGE> 27
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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 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 sec.sec.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.
2.9. CHANGE IN BORROWING BASE. The Borrowing Base shall be determined
monthly (or at such other interval as may be specified pursuant to sec.9.4(f))
by the Agent by reference to the Borrowing Base Report delivered to the Banks
and the Agent pursuant to sec.9.4(f).
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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 sec.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 sec.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 sec.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 sec.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 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,
<PAGE> 29
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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 OR BORROWING BASE. 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
MINUS the outstanding amount of the Term Loan, 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); THIRD, to the payment of that portion of the
Term Loan that is a Base Rate Loan; FOURTH, 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 FIFTH, to provide to the Agent cash
collateral (which cash collateral may be invested in Permitted Cash
Collateral Investments) for Reimbursement Obligations as contemplated by
sec.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 sec.3.2.1, any amounts which are to be applied to the Revolving
Credit Loans pursuant to this sec.3.2.1. shall, to the extent BKB has
advanced Revolving Credit Loans to the Borrower pursuant to sec.2.6.2
hereof for which a Settlement has not occurred, first be paid to BKB to be
applied to any Revolving Credit Loans made by BKB to the Borrower pursuant
to sec.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.
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3.2.2. BLOCKED ACCOUNT PROVISIONS. (a) Each of the Guarantor and its
Subsidiaries will (i) 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) direct or
has directed (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 sec.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 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, pursuant to
arrangements satisfactory to the Agent, (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
<PAGE> 31
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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 sec.3.2.2.
shall, to the extent BKB has advanced Revolving Credit Loans to the
Borrower pursuant to sec.2.6.2 hereof for which a Settlement has not
occurred, first be paid to BKB to be applied to any Revolving Credit Loans
made by BKB to the Borrower pursuant to sec.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 sec.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 subject 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 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
$12,500,000; PROVIDED that in no event shall the sum of the outstanding amount
of the Term Loan PLUS the outstanding amount of Revolving Credit Loans PLUS the
Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceed the
Borrowing Base.
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
<PAGE> 32
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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 Banks the
principal amount of the Term Loan in nine (9) consecutive quarterly
installments in an amount equal to $500,000, such installments to be due
and payable on the last day of each fiscal quarter of each fiscal year of
the Borrower set forth on SCHEDULE 8.21 hereto, commencing on October 31,
1998, 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 IF OUTSTANDINGS EXCEED THE
BORROWING BASE. (a) In the event that the outstanding amount of the Term
Loan exceeds the result of the Borrowing Base LESS the sum of the
outstanding amount of the Revolving Credit Loans, the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations, then the Borrower shall
immediately pay the amount of such excess to the Agent for the respective
account 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); THIRD, to the payment of that portion of the
Term Loan that is a Base Rate Loan; FOURTH, 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 FIFTH, to provide to the Agent cash
collateral (which cash collateral may be invested in Permitted Cash
Collateral Investments) for Reimbursement Obligations as contemplated by
sec.5.2(b) and (c) and for any other Obligations not then due and payable.
Any payments of the Term Loan made pursuant to this sec.4.3.2(a) shall be
applied against the scheduled installments of principal due on the Term
Loan pursuant to sec.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.
<PAGE> 33
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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 sec.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
sec.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 sec.4.3.1 in the inverse order of maturity. No amount
repaid with respect to the Term Loan may be reborrowed.
4.5. INTEREST ON TERM LOAN.
4.5.1. INTEREST RATES. Except as otherwise provided in sec.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 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 percent (2%) per annum above the Eurodollar
Rate.
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 sec.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 to the Term
Loan or any portion thereof bearing interest at the Eurodollar Rate shall
extend beyond the date on which a regularly scheduled
<PAGE> 34
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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 sec.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 MINUS the outstanding Term Loan, PROVIDED
FURTHER that in no event shall the sum of the outstanding amount of the
Term Loan PLUS the outstanding amount of Revolving Credit Loans PLUS the
Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceed 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 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
<PAGE> 35
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(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 sec.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 sec.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 sec.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 sec.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,
(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 sec.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
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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 sec.5.2 at any time from the date such amounts become
due and payable (whether as stated in this sec.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 sec.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
sec.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 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 sec.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 sec.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
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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 sec.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.
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. AMENDMENT FEE. The Borrower agrees to pay to the Agent for the
account of the Banks on the Closing Date a fee as set forth in the letter
agreement dated as of the Closing Date between the Agent and the Borrower.
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
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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 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
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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
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 sec.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
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(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 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 sec.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 sec.6.8 hereof. Each Bank shall allocate such
cost increase among its customers in good faith and on an equitable basis.
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6.8. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to sec.sec.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 sec.4.5.2) or a Conversion Request
relating thereto in accordance with sec.2.6, sec.2.7 or sec.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 sec.2.5 or sec.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
sec.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 sec.2.5 and the Term Loan pursuant to sec.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 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
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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 (i) 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 and (ii) in the state of
Illinois in which jurisdiction the appropriate applications for
qualification have been filed prior to the Closing Date.
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 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
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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 Arthur Andersen 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 1998 fiscal year, 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, 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,
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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.
8.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Except as set forth on
SCHEDULE 8.9 hereto, 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.
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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 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 sec.103(d) of ERISA, with respect
to each Guaranteed Pension Plan.
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8.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit
Plan which is an employee welfare benefit plan within the meaning of
sec.3(1) or sec.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 sec.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 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 sec.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 sec.4201 of ERISA or as a
result of a sale of assets described in sec.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
sec.4241 or sec.4245 of ERISA or that any Multiemployer Plan intends to
terminate or has been terminated under sec.4041A of ERISA.
8.17. REGULATIONS U AND X. The proceeds of the Loans shall be used solely
for working capital and general corporate purposes, including, without
limitation, capital expenditures for new Store openings. 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
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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:
(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. sec.6903(5), any hazardous substances as defined by 42 U.S.C.
sec.9601(14), any pollutant or contaminant as defined by 42 U.S.C.
sec.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 of any activities
conducted by the Guarantor, the Borrower, their Subsidiaries or operators
of its
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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.
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.
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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 sec.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
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.
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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 Arthur Andersen 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 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
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"Compliance Certificate") hereto and setting forth in reasonable detail
computations evidencing compliance with the covenants contained in sec.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;
(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 sec.9.4.2 or,
if applicable, updating any later such projections delivered in response
to a request pursuant to this sec.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.
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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)
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 sec.10.5.1
hereof, and will not, and will not cause or permit any of its
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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 nothing in this sec.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
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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.
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 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
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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 sec.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 case 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 sec.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 Pension Plan under
secs. 302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect
of a Multiemployer Plan, under secs. 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 for working capital and general corporate purposes,
including, without limitation, for capital expenditures for new Store openings.
The Borrower will obtain Letters of Credit solely for working capital and
general corporate purposes.
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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 sec.3.2.2
hereof.
9.15. AGENCY ACCOUNT AGREEMENTS; CREDIT CARD PROVIDERS. 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(a) hereto concerning the Agent's interest for the benefit
of the Banks and the Agent in such accounts. The Borrower shall use its best
efforts to enter into Agency Account Agreements with each bank at which it
establishes a bank account after the Closing Date pursuant to sec.10.9. 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 copies of the notices required pursuant to sec.3.2.2 hereof to be made to
each of the Credit Card Providers listed on SCHEDULE 9.15(b) hereto, executed
and delivered by each Credit Card Provider.
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 sec.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
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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 or in respect of interest rate protection arrangements;
(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 sec.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
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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;
(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 sec.10.3(f) hereof;
(l) 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
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Indebtedness, together with the Investments described in sec.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 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 sec.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
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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
sec.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;
(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;
(l) 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 sec.10.1(a);
(n) liens created by Capitalized Leases up to the amount permitted
by sec.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:
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(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);
(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 sec.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
sec.10.3(d) - (h), (a) such Investments will be considered Investments permitted
by this sec.10.3 only if such
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Investments are made through one of the Banks, and all 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) or open
any new Stores 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 or opening of new Stores by the Borrower
PROVIDED that (i) the Borrower acquires or opens no more than six 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 sec.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) any sale or other
disposition described on SCHEDULE 10.5.2 hereof; (e) 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 (f)
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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 inventory or other
assets other than in the ordinary course of business, consistent with past
practices, which disposition is permitted by this sec.10.5.2, the Agent
shall release its security interest and liens on, as the case may be, such
permitted disposed assets upon receipt and use by the Agent of the Net
Proceeds from such disposition to prepay the Loans in accordance with the
provisions of sec.3.2.2.
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.
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
sec.406 of ERISA or sec.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 sec.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 sec.302(f) or sec.4068 of
ERISA; or
<PAGE> 64
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(d) permit or take any action which would result in the aggregate
benefit liabilities (within the meaning of sec.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 providing prior written notice
thereof to the Agent and complying with sec.9.15 hereof as it relates to such
bank account, (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.
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
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has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letters of Credit:
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:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Four consecutive fiscal quarters ending
on January 31, 1998 $14,500,000
Four consecutive fiscal quarters
ending on each of May 2, 1998 and
August 1, 1998 $15,000,000
Four consecutive fiscal quarters ending
on October 31, 1998 $17,500,000
Four consecutive fiscal quarters ending
on January 30, 1999 and thereafter $20,000,000
</TABLE>
11.2. MINIMUM OPERATING CASH FLOW TO FIXED OBLIGATIONS RATIO. The
Guarantor and the Borrower will not permit the ratio of Consolidated Operating
Cash Flow to Consolidated Fixed Obligations for any period of four consecutive
fiscal quarters ending on the date set forth in the table below to be less than
the amount set forth opposite such date:
<TABLE>
<CAPTION>
Period Ending Ratio
------------- -----
<S> <C>
January 31, 1998 1.40:1.00
May 2, 1998 1.00:1.00
August 1, 1998 0.90:1.00
October 31, 1998 and
thereafter 1.50:1.00
</TABLE>
12. CLOSING CONDITIONS.
The obligations of the Banks to make the Term Loan and the initial
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 certificate from a duly
authorized officer of such Person certifying to the effect that the copies of
each of its charter or other incorporation
<PAGE> 66
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documents and its by-laws delivered to the Agent on May 23, 1996 in connection
with the Original Credit Agreement are true, correct and complete, remain in
full force and effect and there have been no amendments or revisions thereto.
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 an update of the Perfection
Certificate delivered by such Person on the Original Closing Date certified to
be true, correct and complete by such Person 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.
12.7. 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 sec.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).
12.8. BORROWING BASE REPORT. The Agent shall have received from the
Borrower the initial Borrowing Base Report dated as of January 3, 1998.
12.9. 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
<PAGE> 67
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transactions contemplated herein and in form and substance reasonably
satisfactory to the Agent.
12.10. 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) Chappell Cohen DiFronzo & Zinnershine LLP, counsel to the
Guarantor and the Borrower and its Subsidiaries; and
(b) Steven Siegel, Esq., in-house counsel to the Guarantor and the
Borrower.
12.11. PAYMENT OF FEES. The Borrower shall have paid to the Banks or the
Agent, as appropriate, the fees required pursuant to sec.6.1, as well as all
reasonable fees and expenses of the Agent, including, without limitation, the
fees and expenses of the Agent's Special Counsel and the costs and expenses of
appraisals, commercial finance examinations and the Agent's out-of-pocket
expenses.
12.12. DELIVERY OF GORDON BROTHERS REPORT. The Agent shall have received a
report from Gordon Brothers Partners, Inc. analyzing the Borrower's inventory,
which analysis shall be in form and substance reasonably satisfactory to the
Agent and the Banks.
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.
<PAGE> 68
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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.
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
sec.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 three (3) Business Days 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, within five (5) Business Days 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;
(c) the Guarantor or the Borrower shall fail to comply with any of
its covenants contained in sec.sec.9 (other than the covenants contained
in secs.9.1 (which are governed by sec.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
sec.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
sec.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
<PAGE> 69
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in sec.9.8 (only with respect to state and local taxes, assessments and
other governmental charges) and sec.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 sec.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 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
<PAGE> 70
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Borrower or any Subsidiary in an involuntary case under federal bankruptcy
laws as now or hereafter constituted;
(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;
(l) 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 faith
believes that the insurer is obligated under the terms of such policy or
policies to pay such claim);
<PAGE> 71
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(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% 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 secs.14.1(g) or 14.1(h), all such
amounts 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 sec.14.1(g) or sec.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
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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 sec.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
sec.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 sec.14.4. shall, to the extent BKB has
advanced Revolving Credit Loans to the Borrower pursuant to sec.2.6.2 hereof for
which a Settlement has not occurred, first be paid to BKB to be applied to any
Revolving Credit Loans made by BKB to the Borrower pursuant to sec.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;
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(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 sec.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 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.
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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 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
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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 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 sec.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,
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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 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 sec.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, BKB 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.
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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 sec.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, 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 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
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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 filings or mortgage recordings contemplated by the Loan Documents and UCC
searches conducted (i) prior to the Closing Date, (ii) on one occasion after the
Closing Date with respect to any new UCC-1 filings and (iii) after the
occurrence of an Event of Default. The covenants of this sec.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 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 sec.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
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covenants contained in this sec.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
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 (or
the entire interest of such assigning Bank, if 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 sec.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.
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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;
(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 sec.8.4 and sec.9.4 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance;
(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
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(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 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 sec.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.
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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
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 sec.14.1
or sec.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 sec.14.1 or sec.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 sec.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 sec.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 sec.4 of the Federal Reserve Act, 12 U.S.C. sec.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.
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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 postal service, addressed as follows:
(a) if to the Guarantor or the Borrower, at 40 Walnut Street,
Wellesley, Massachusetts 02181, Attention: President and a separate copy
to Steven Siegel, Esq., at the Borrower's address, with a copy to Robert
Zinnershine, Esq., Chappell Cohen DiFronzo & Zinnershine LLP, 99 Summer
Street, Boston, Massachusetts 02110, 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, Mailstop 01-09-06,
Boston, Massachusetts 02110, USA, Attention: Paul G. Feloney, Vice
President with a copy to David J. Murphy, Esq., Bingham Dana LLP, 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
<PAGE> 84
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SEC.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 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 understanding 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
sec.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
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
<PAGE> 85
-78-
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 sec.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 Borrower's Obligations under the
Credit Agreement to pay principal and/or interest on account of the Loans may
not be forgiven in whole or in part without the written consent of all of the
Banks and the Borrower; this sec.27 may not be changed without the written
consent of all of the Banks and the Borrower; 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 sec.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 sec.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 sec.5.5 or sec.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
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
sec.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
<PAGE> 86
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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
sec.29.
30. TRANSITIONAL ARRANGEMENTS
30.1. ORIGINAL CREDIT AGREEMENT SUPERSEDED. This Credit Agreement shall on
the Closing Date supersede the Original Credit Agreement in its entirety, except
as provided in this sec.30. On the Closing Date, the rights and obligations of
the parties evidenced by the Original Credit Agreement shall be evidenced by the
Credit Agreement and other Loan Documents, the "Revolving Credit Loans" as
defined in the Original Credit Agreement shall be converted to Revolving Credit
Loans as defined herein, and all outstanding letters of credit issued by the
Agent for the account of the Borrower prior to the Closing Date shall, for the
purposes of this Credit Agreement, be Letters of Credit.
30.2. RETURN AND CANCELLATION OF NOTES. As soon as reasonably practicable
after its receipt of its Notes hereunder on the Closing Date, the Banks will
promptly return to the Borrower, marked "Substituted" or "Cancelled", as the
case may be, any notes of the Borrower held by the Banks pursuant to the
Original Credit Agreement.
30.3. INTEREST AND FEES UNDER SUPERSEDED AGREEMENT. All interest and fees
and expenses, if any, owing or accruing under or in respect of the Original
Credit Agreement through the Closing Date shall be calculated as of the Closing
Date (prorated in the case of any fractional periods), and shall be paid at the
times set forth in the Original Credit Agreement as if the Original Credit
Agreement were still in effect. In addition, any Loans (as defined in the
Original Credit Agreement) bearing interest at the Eurodollar Rate (as defined
in the Original Credit Agreement) shall continue as Eurodollar Rate Loans until
the end of the Interest Period (as defined in the Original Credit Agreement)
applicable to such Loans.
<PAGE> 87
-80-
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
BANKBOSTON, N.A. (f/k/a The First National
Bank of Boston), individually and as Agent
By: /s/ Paul G. Feloney
----------------------------------
Paul G. Feloney,
Vice President
HELLER FINANCIAL, INC.
By: /s/ Steven M. Metivier
-----------------------------------
Name: Steven M. Metivier
Title: Assistant Vice President
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/ Richard Levenson
-----------------------------------
Name: Richard Levenson
Title: Vice President
<PAGE> 88
SCHEDULE 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COMMITMENT TERM LOAN AMOUNT OF
BANK PERCENTAGE COMMITMENT PERCENTAGE TERM LOAN
---- ---------- ---------- ---------- ---------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANKBOSTON, N.A.
(F/K/A THE FIRST NATIONAL BANK OF BOSTON)
Domestic and Eurodollar Lending Office:
100 Federal Street
Boston, MA 02110
Telephone: 617-434-7241
Fax: 617-434-2309
Attn: Paul G. Feloney,
Vice President 33.333333334% $21,666,666.66 33.333333334% $4,166,666.68
- ---------------------------------------------------------------------------------------------------------------------------
HELLER FINANCIAL, INC.
Domestic and Eurodollar Lending Office:
150 East 42nd Street
New York, NY 10017
Telephone: 212-880-2961
Fax: 212-880-7002
Attn: Steve Metivier, Vice President 33.333333333% $21,666,666.67 33.333333333% $4,166,666.66
- ---------------------------------------------------------------------------------------------------------------------------
BANKAMERICA BUSINESS CREDIT, INC.
Domestic and Eurodollar Lending Office:
East Division
40 East 52nd Street
New York, NY 10022
Telephone: 212-836-5358
Fax: 212-836-5169
Attn: Division Manager 33.333333333% $21,666,666.67 33.333333333% $4,166,666.66
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 100% $65,000,000 100% $ 12,500,000
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 89
EXHIBIT A
FORM OF
BORROWING BASE REPORT
__________ __, 199_
BankBoston, N.A., as Agent
100 Federal Street
Boston, Massachusetts 02110
Ladies and Gentlemen:
Reference is made to the Amended and Restated Revolving Credit and Term
Loan Agreement, dated as of January 30, 1998 (as amended and in effect from time
to time, the "Credit Agreement"), between the undersigned, Filene's Basement
Corp. (the "Guarantor"), BankBoston, N.A. (f/k/a The First National Bank of
Boston) and the other lending institutions listed on SCHEDULE 1 thereto (the
"Banks"), and BankBoston, N.A. as agent for the Banks (the "Agent"). Capitalized
terms which are used herein without definition and which are defined in the
Credit Agreement shall have the same meanings herein as therein.
The undersigned hereby certifies as follows: (a) the information furnished
in the materials attached hereto was true, correct and complete as of the last
day of the calendar week immediately preceding the date of this certificate; (b)
as of the date hereof, there exists no Default or Event of Default; and (c) the
representations and warranties contained in sec.8 of the Credit Agreement were
correct when made and are correct at and as of the date hereof except to the
extent any such representation or warranty expressly relates to an earlier date.
IN WITNESS WHEREOF, the undersigned has executed this Borrowing Base
Certificate on behalf of Filene's Basement, Inc. as of the date first written
above.
FILENE'S BASEMENT, INC.
By:______________________________
Title:
<PAGE> 90
[worksheet to be provided by Borrower]
<PAGE> 91
EXHIBIT B
FORM OF AMENDED AND RESTATED
REVOLVING CREDIT NOTE
$________________________ as of January 30, 1998
FOR VALUE RECEIVED, the undersigned FILENE'S BASEMENT, INC., a
Massachusetts corporation (the "Borrower"), hereby promises to pay to the order
of _______________________________, a _______________________ (the "Bank") at
the Agent's Head Office (as defined in the Credit Agreement, as hereinafter
defined):
(a) prior to or on the Maturity Date the principal amount of
_______________________ Dollars ($_______________) or, if less, the
aggregate unpaid principal amount of Revolving Credit Loans advanced by
the Bank to the Borrower pursuant to the Amended and Restated Revolving
Credit and Term Loan Agreement dated as of January 30, 1998 (as amended
and in effect from time to time, the "Credit Agreement"), among the
Borrower, the Bank and other parties thereto;
(b) the principal outstanding hereunder from time to time at the
times provided in the Credit Agreement; and
(c) interest on the principal balance hereof from time to time
outstanding from the Closing Date under the Credit Agreement through and
including the final payment in full hereof at the times and at the rate
provided in the Credit Agreement.
This Amended and Restated Revolving Credit Note (this "Note") evidences
borrowings under and has been issued by the Borrower in accordance with the
terms of the Credit Agreement. This Note has been issued in substitution for,
but not in satisfaction of, the Revolving Credit Note issued by the Borrower on
June 28, 1996 to the order of the Bank. The Bank and any holder hereof is
entitled to the benefits of the Credit Agreement, the Security Documents and the
other Loan Documents, and may enforce the agreements of the Borrower contained
therein, and any holder hereof may exercise the respective remedies provided for
thereby or otherwise available in respect thereof, all subject to and in
accordance with the respective terms thereof. All capitalized terms used in this
Note and not otherwise defined herein shall have the same meanings herein as in
the Credit Agreement.
The Borrower irrevocably authorizes the 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 of this Note, an appropriate
notation on the grid attached to this Note, or the continuation of such grid, or
any other similar record, including computer records, 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 the grid
attached to this Note, or the continuation of such grid, or any other similar
record, including computer records, maintained by the Bank with respect to any
Revolving Credit Loans shall be, absent manifest error, PRIMA FACIE evidence of
the principal amount thereof
<PAGE> 92
-2-
owing and unpaid to the Bank, but the failure to record, or any error in so
recording, any such amount on any such grid, continuation or other record shall
not limit or otherwise affect the obligation of the Borrower hereunder or under
the Credit Agreement to make payments of principal of and interest on this Note
when due.
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to prepay the whole or part of the principal
of this Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon may
become or be declared due and payable in the manner and with the effect provided
in the Credit Agreement.
No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Bank or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar or waiver of the same or any other right on
any further occasion.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY
FEDERAL COURT SITTING THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION
OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SEC.21 OF THE CREDIT AGREEMENT. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under the
laws of the Commonwealth of Massachusetts.
<PAGE> 93
-3-
IN WITNESS WHEREOF, the undersigned has caused this Amended and Restated
Revolving Credit Note to be signed in its corporate name and its corporate seal
to be impressed thereon by its duly authorized officer as of the day and year
first above written.
[Corporate Seal]
FILENE'S BASEMENT, INC.
By: ________________________________
Steven R. Siegel, Executive Vice President
and Chief Financial Officer
<PAGE> 94
EXHIBIT C
FORM OF
LOAN REQUEST
Date: __________
BankBoston, N.A.,
as Agent
100 Federal Street
Boston, MA 02110
Attention: Paul G. Feloney, Vice President
Ladies and Gentlemen:
The undersigned authorized officer of Filene's Basement, Inc. (the
"Borrower"), refers to the Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of January 30, 1998 (the "Credit Agreement", the terms
defined therein being used herein as therein defined), among the Borrower,
Filene's Basement Corp. (the "Guarantor"), BankBoston, N.A. (f/k/a The First
National Bank of Boston) and the other lending institutions listed on SCHEDULE 1
thereto (the "Banks"), and BankBoston, N.A. as agent for the Banks (hereinafter
in such capacity, the "Agent"), and hereby [gives you notice] [confirms the
telephonic notice previously given] pursuant to sec.2.6 of the Credit Agreement
that the Borrower hereby requests a Revolving Credit Loan under the Credit
Agreement, and in that connection sets forth below the information relating to
such Loan (the "Proposed Loan") as required by sec.2.6 of the Credit Agreement:
(i) The requested Drawdown Date of the Proposed Loan is ________;
(ii) The aggregate amount of the Proposed Loan is $___________;
(iii) The Type of the Proposed Loan is _______; and
(iv) If such Proposed Loan is a Eurodollar Rate Loan, the Interest Period
is ___________.
The undersigned authorized officer of the Borrower hereby certifies on
behalf of the Borrower that:
(i) no Default or Event of Default under the Credit Agreement exists on
the date of this Loan Request, or shall occur as a result of the
Proposed Loan to which this Loan Request relates;
<PAGE> 95
-2-
(ii) the representations and warranties contained in the Credit Agreement
were true and correct as of the date on which made and are true and
correct as of the date hereof with the same effect as if made at and
as of such time, except to the extent that the facts upon which such
representations and warranties are based may have changed in the
ordinary course as a result of transactions permitted or
contemplated by the Credit Agreement and to the extent such
representations and warranties relate expressly to an earlier time;
(iii) the Borrower has performed all obligations and complied with all
covenants and conditions required by the Credit Agreement to be
performed or complied with by it on or prior to the date hereof; and
(iv) the matters certified herein shall remain true from and after the
date hereof through the date of the Proposed Loan unless the
Borrower shall deliver to the Agent a certificate as to any change
in any such matters, which the Borrower hereby agrees to give
promptly after obtaining knowledge thereof.
We hereby authorize you to disburse the proceeds of the Proposed Loan as
follows:
[insert applicable disbursement instructions]
The undersigned does not assume any personal liability for the accuracy of
this certificate.
Very truly yours,
FILENE'S BASEMENT, INC.
By:____________________________________
Title:
<PAGE> 96
-3-
The Borrower hereby confirms that the above-requested Loan was funded on
________, __, ____ by the Banks in accordance with the Credit Agreement.
FILENE'S BASEMENT, INC.
By:____________________________________
Title:
<PAGE> 97
EXHIBIT D
FORM OF
TERM NOTE
$_____________________ as of January 30, 1998
FOR VALUE RECEIVED, the undersigned FILENE'S BASEMENT, INC., a
Massachusetts corporation, (the "Borrower"), hereby promises to pay to the order
of ___________________________, a ____________________________ (the "Bank") at
the Agent's Head Office (as defined in the Credit Agreement, as hereinafter
defined):
(a) prior to or on the Maturity Date the principal amount of
_________________ Dollars ($_____________), evidencing the Term Loan made
by the Bank to the Borrower pursuant to the Amended and Restated Revolving
Credit and Term Loan Agreement dated as of January 30, 1998 (as amended
and in effect from time to time, the "Credit Agreement"), by and among the
Borrower, the Bank and other parties thereto;
(b) the principal outstanding hereunder from time to time at the
times provided in the Credit Agreement; and
(c) interest from the date hereof on the principal amount from time
to time outstanding to and including the maturity hereof at the rates and
times and in all cases in accordance with the terms of the Credit
Agreement.
This Term Note (this "Note") evidences borrowings under and has been
issued by the Borrower in accordance with the terms of the Credit Agreement. The
Bank and any holder hereof is entitled to the benefits of the Credit Agreement,
the Security Documents and the other Loan Documents, and may enforce the
agreements of the Borrower contained therein, and any holder hereof may exercise
the respective remedies provided for thereby or otherwise available in respect
thereof, all in accordance with the respective terms thereof. All capitalized
terms used in this Note and not otherwise defined herein shall have the same
meanings herein as in the Credit Agreement.
The Borrower irrevocably authorizes the Bank to make or cause to be made,
at the time of receipt of any payment of principal of this Note, an appropriate
notation on the grid attached to this Note, or the continuation of such grid, or
any other similar record, including computer records, reflecting the receipt of
such payment. The outstanding amount of the Term Loan set forth on the grid
attached to this Note, or the continuation of such grid, or any other similar
record, including computer records, maintained by the Bank with respect to the
Term Loan shall be, absent manifest error, PRIMA FACIE evidence of the principal
amount of the Term Loan owing and unpaid to the Bank, but the failure to record,
or any error in so recording, any such amount on any such grid, continuation or
other record shall not limit or otherwise affect the obligation of the Borrower
hereunder or under the Credit Agreement to make payments of principal of and
interest on this Note when due.
<PAGE> 98
-2-
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to prepay the whole or part of the principal
of this Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon may
become or be declared due and payable in the manner and with the effect provided
in the Credit Agreement.
No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Bank or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar or waiver of the same or any other right on
any future occasion.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY
FEDERAL COURT SITTING THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION
OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SEC.21 OF THE CREDIT AGREEMENT. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under the
laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has caused this Note to be signed in
its corporate name and its corporate seal to be impressed thereon by its duly
authorized officer as of the day and year first above written.
[Corporate Seal]
<PAGE> 99
-3-
FILENE'S BASEMENT, INC.
By: _______________________________
Steven R. Siegel, Executive Vice
President and Chief Financial Officer
<PAGE> 100
EXHIBIT E
FORM OF
COMPLIANCE CERTIFICATE
Pursuant to sec.9.4 of the Amended and Restated Revolving Credit and Term
Loan Agreement (the "Credit Agreement") dated as January 30, 1998, among
Filene's Basement Corp. (the "Guarantor"), Filene's Basement, Inc. (the
"Borrower"), BankBoston, N.A. (f/k/a The First National Bank of Boston) and the
lending institutions referred to therein as Banks (collectively, the "Banks"),
BankBoston, N.A. as agent for the Banks (the "Agent"), the undersigned [INSERT
NAME], the duly elected and qualified [CHIEF FINANCIAL OFFICER] [CHIEF
ACCOUNTING OFFICER] [TREASURER] of the Borrower, hereby certifies as of the date
hereof the following:
NO DEFAULTS: I have read the Credit Agreement and, to the best of my
knowledge and belief, neither the Borrower nor the Guarantor is in default in
the performance or observance of any of the covenants, terms or provisions of
the Credit Agreement. [IF THE BORROWER OR GUARANTOR IS IN DEFAULT, THE SIGNER OF
THIS CERTIFICATE SHALL SPECIFY ALL SUCH DEFAULTS AND THE NATURE THEREOF.]
Attached hereto is SCHEDULE A, on which are set forth all relevant calculations
needed to determine whether the Borrower and the Guarantor are in compliance
with the covenants set forth in sec.11 of the Credit Agreement, which
calculations are based on the most recent financial statements required to be
supplied by the Borrower and the Guarantor under the Credit Agreement. I have no
knowledge of the occurrence of any event since the date of such financial
statements which would render this certificate incorrect as of the date hereof.
REPRESENTATIONS AND WARRANTIES: The representations and warranties
contained in the Credit Agreement were true and correct as of the date on which
made and are true and correct as of the date hereof with the same effect as if
made at and as of such time, except to the extent that the facts upon which such
representations and warranties are based may have changed in the ordinary course
as a result of transactions permitted or contemplated by the Credit Agreement
and to the extent such representations and warranties relate expressly to an
earlier time.
The undersigned does not assume any personal liability for the accuracy of
this certificate.
____________________________________
Name:
Title:
____________________________________
Date:
<PAGE> 101
SCHEDULE A
TO
COMPLIANCE CERTIFICATE
For the period ended ________________________.
The computations which produced the figures set forth on this SCHEDULE A
are set forth on ANNEX A hereto. Capitalized terms used herein without
definition shall have the meanings assigned to such terms in the Credit
Agreement.
SEC.11.1 MINIMUM EBITDA
(a) EBITDA $__________
(b) Minimum permissible EBITDA
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Four consecutive fiscal quarters ending
on January 31, 1998 $14,500,000
Four consecutive fiscal quarters
ending on May 2, 1998 $15,000,000
Four consecutive fiscal quarters ending
on August 1, 1998 $15,000,000
Four consecutive fiscal quarters ending
on October 31, 1998 $17,500,000
Four consecutive fiscal quarters ending
on January 30, 1999 and thereafter $20,000,000
</TABLE>
<PAGE> 102
SEC.11.2 MINIMUM OPERATING CASH FLOW TO FIXED OBLIGATIONS
(a) Ratio of Consolidated Operating Cash
Flow to Fixed Obligations ____:1:00
(b) Minimum permissible ratio:
<TABLE>
<CAPTION>
Period Ending Ratio
------------- -----
<S> <C>
January 31, 1998 1.40:1.00
May 2, 1998 1.00:1.00
August 1, 1998 .90:1.00
October 31, 1998 and thereafter 1.50:1.00
</TABLE>
<PAGE> 103
ANNEX A
For the period ended __________.
Capitalized items used herein without definition shall have the meanings
assigned to such terms in the Credit Agreement.
SEC.11.1 MINIMUM EBITDA
(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) per
definition 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 $___________
<PAGE> 104
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SEC.11.2 MINIMUM OPERATING CASH FLOW TO FIXED OBLIGATIONS
(a) Consolidated Operating Cash Flow:
(i) EBITDA for such four fiscal
quarters $___________
(ii) the aggregate amount of Capital Expenditures
made during such four fiscal quarters $___________
(iii) Expenditures made during FYE 1/30/99 for the
opening of new stores or remodeling of existing
stores up to a maximum amount of $12,500,000 $___________
(iv) cash payments for all taxes made during such
period $___________
(v) Consolidated Operating Cash Flow $___________
((i) MINUS (ii) PLUS (iii) MINUS (iv))
(b) Consolidated Fixed Obligations:
(i) regularly scheduled principal payments
for such four fiscal quarters $___________
(ii) regularly scheduled interest payments
for such four fiscal quarters $___________
(iii) Consolidated Fixed Obligations
((i) PLUS (ii)) $___________
(c) Ratio of Consolidated Operating Cash Flow to
Consolidated Fixed Obligations
(ratio of (a)(v) to (b)(iii)) _____:1.00
<PAGE> 105
EXHIBIT F
FORM OF
ASSIGNMENT AND ACCEPTANCE
Dated as of ____, 19__
Reference is made to the Amended and Restated Revolving Credit and Term
Loan Agreement, dated as of January 30, 1998 (as from time to time amended and
in effect, the "Credit Agreement"), by and among Filene's Basement, Inc. (the
"Borrower"), Filene's Basement Corp. (the "Guarantor"), each a Massachusetts
corporation, BankBoston, N.A. (f/k/a The First National Bank of Boston), a
national banking association and the other lending institutions listed on
SCHEDULE 1 thereto (the "Banks"), and BankBoston, N.A. as agent for the Banks
(hereinafter in such capacity, the "Agent"). Capitalized terms used herein and
not otherwise defined shall have the meanings assigned to such terms in the
Credit Agreement.
[NAME OF ASSIGNOR] (the "Assignor") and [NAME OF ASSIGNEE] (the
"Assignee") hereby agree as follows:
1. ASSIGNMENT. Subject to the terms and conditions of this Assignment and
Acceptance, the Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes without recourse to the Assignor, a
$___________ interest in and to the rights, benefits, indemnities and
obligations of the Assignor under the Credit Agreement equal to ____________% in
respect of the Total Commitment with respect to Revolving Credit Loans and
Letter of Credit Participations and the same percentage in respect of the Term
Loan, each as in effect immediately prior to the Effective Date (as hereinafter
defined).
2. ASSIGNOR'S REPRESENTATIONS. The Assignor (a) represents and warrants
(i) that it is legally authorized to enter into this Assignment and Acceptance,
(ii) as of the date hereof, its Commitment (with respect to Revolving Credit
Loans and Letter of Credit Participations) is $______________, its Commitment
Percentage is __________%, the aggregate outstanding principal balance of its
Revolving Credit Loans equals $_____________, the aggregate amount of its Letter
of Credit Participations equals $_____________ and the aggregate outstanding
balance of its Term Loan equals $______________ (in each case after giving
effect to the assignment contemplated hereby but without giving effect to any
contemplated assignments which have not yet become effective), and (iii)
immediately after giving effect to all assignments which have not yet become
effective, the Assignor's Commitment Percentage will be sufficient to give
effect to this Assignment and Acceptance, (b) 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 the
Credit Agreement or any of the other Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant thereto or the attachment, perfection or priority of any
security interest or mortgage, other than that it is the legal and beneficial
owner of the
<PAGE> 106
-2-
interest being assigned by it hereunder free and clear of any claim or
encumbrance; (c) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Guarantor,
Borrower or any of 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, Borrower or any of their Subsidiaries or any other
Person primarily or secondarily liable in respect of any of the Obligations of
any of its obligations under the Credit Agreement or any of the other Loan
Documents or any other instrument or document delivered or executed pursuant
thereto; and (d) attaches hereto the Amended and Restated Revolving Credit Note
(the "Revolving Credit Note") and the Term Note (the "Term Note") delivered to
it under the Credit Agreement.
The Assignor requests that the Borrower exchange the Assignor's Revolving
Credit Note and Term Note for new Revolving Credit Notes and Term Notes payable
to the Assignor and the Assignee as follows:
<TABLE>
<CAPTION>
Notes Payable to Amount of Revolving Amount of
The Order of: Credit Note Term Note
------------- ----------- ---------
<S> <C> <C>
Assignor $______________ $______________
Assignee $______________ $______________
</TABLE>
3. ASSIGNEE'S REPRESENTATIONS. The Assignee (a) represents and warrants
that (i) it is duly and legally authorized to enter into this Assignment and
Acceptance, (ii) the execution, delivery and performance of this Assignment and
Acceptance do not conflict with any provision of law or of the charter or
by-laws of the Assignee, or of any agreement binding on the Assignee, (iii) all
acts, conditions and things required to be done and performed and to have
occurred prior to the execution, delivery and performance of this Assignment and
Acceptance, and to render the same the legal, valid and binding obligation of
the Assignee, enforceable against it in accordance with its terms, have been
done and performed and have occurred in due and strict compliance with all
applicable laws; (b) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to sec.sec.8.4 and 9.4 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, 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 the Credit Agreement; (d) represents and warrants that it is an
Eligible Assignee; (e) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement and
the other Loan Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (f) agrees that
it will perform in accordance with their terms all the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Bank; (g)
represents and warrants that it is legally authorized to enter into such
Assignment and Acceptance and (h) acknowledges that it has made arrangements
with the Assignor satisfactory to the Assignee with respect to its PRO RATA
share of Letter of Credit Fees in respect of outstanding Letters of Credit.
<PAGE> 107
-3-
4. EFFECTIVE DATE. The effective date for this Assignment and Acceptance
shall be ___________" \@ "MMMM d, yyyy" \* charformat ___________ (the
"Effective Date"). Following the execution of this Assignment and Acceptance,
each party hereto shall deliver its duly executed counterpart hereof to the
Agent for acceptance by the Agent and recording in the Register by the Agent.
SCHEDULE 1 to the Credit Agreement shall thereupon be replaced as of the
Effective Date by the SCHEDULE 1 annexed hereto.
5. RIGHTS UNDER CREDIT AGREEMENT. Upon such acceptance and recording, from
and after the Effective Date, (a) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment and Acceptance, have
the rights and obligations of a Bank thereunder, and (b) the Assignor shall,
with respect to that portion of its interest under the Credit Agreement assigned
hereunder, relinquish its rights and (subject to the terms of sec.20.1 of the
Credit Agreement) be released from its obligations under the Credit Agreement;
PROVIDED, HOWEVER, that the Assignor shall retain its rights to be indemnified
pursuant to sec.18 of the Credit Agreement with respect to any claims or actions
arising prior to the Effective Date.
6. PAYMENTS. Upon such acceptance of this Assignment and Acceptance by the
Agent and such recording, from and after the Effective Date, the Agent shall
make all payments in respect of the rights and interests assigned hereby
(including payments of principal, interest, fees and other amounts) to the
Assignee. The Assignor and the Assignee shall make any appropriate adjustments
in payments for periods prior to the Effective Date by the Agent or with respect
to the making of this assignment directly between themselves.
7. GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE IS INTENDED TO TAKE
EFFECT AS A SEALED INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO
CONFLICT OF LAWS).
8. COUNTERPARTS. This Assignment and Acceptance may be executed in any
number of counterparts which shall together constitute but one and the same
agreement.
<PAGE> 108
-4-
IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned
has caused this Assignment and Acceptance to be executed on its behalf by its
officer thereunto duly authorized, as of the date first above written.
[NAME OF ASSIGNOR]
By:________________________________
Title:
[NAME OF ASSIGNEE]
By:________________________________
Title:
CONSENTED TO:
BANKBOSTON, N.A. (F/K/A THE
FIRST NATIONAL BANK OF BOSTON),
as Agent
By:___________________________
Title:
FILENE'S BASEMENT, INC.
By:___________________________
Title:
<PAGE> 109
EXHIBIT G
FORM OF LANDLORD WAIVER
The undersigned person, or corporation, business trust, joint venture,
association, company, partnership, government or other entity, named on the
first signature page hereto on the line above the word Lessor (the "Lessor")
represents and warrants that he, she or it, as the case may be, is the owner and
lessor of the leased premises related to the Lease/Leases (as defined below),
with the buildings thereon (the "Premises"), leased to Filene's Basement, Inc.,
a Massachusetts corporation (such corporation and its successors in interest
being hereinafter referred to as the "Lessee") under the terms and conditions of
a lease or leases identified on SCHEDULE A attached hereto (together with all
amendments thereto, the "Lease/Leases"). The Lessee has entered into a revolving
credit and term loan facility (the "Credit Facility") with certain lenders (the
"Lenders") under the terms of which the Lessee may grant a security interest to
the Lenders in all assets of the Lessee located upon the Premises and in all
proceeds and products thereof (such assets and such proceeds and products being
collectively referred to as the "Collateral"). Notwithstanding anything to the
contrary contained herein, Collateral shall not include leasehold improvements
and fixtures (other than removable trade fixtures which can be removed without
damage to the premises). In recognition and acknowledgment thereof, the Lessor,
for good and valuable consideration, the receipt and sufficiency which are
hereby acknowledged, does hereby:
(1) Agree that any and all Collateral located upon the Premises is and
will remain personal property of the Lessee or its affiliates and
will not become part of the Premises; and
(2) Waive, relinquish and release any and all rights of distraint,
attachment, lien, levy or execution against or upon, or security
interest in, the Collateral for any rent or other sum now or
hereinafter due Lessor under the terms and conditions of the
Lease/Leases or otherwise, and all claims and demands of every kind
and nature whatsoever against the Collateral during the term of the
Credit Facility and any renewals, restatements, amendments,
extensions or modifications thereof or substitutions therefor (and
the Lessor hereby represents and warrants that he, she or it, as the
case may be, has not previously assigned, pledged or otherwise
transferred any such rights, claims or demands).
<PAGE> 110
-2-
IN WITNESS WHEREOF, the Lessor has executed this Lessor's Waiver as of
this ___ day of ________________19__.
Signed and delivered
in the presence of:
___________________________ __________________________________
Lessor
___________________________ By:_______________________________
Name:
Title:
<PAGE> 111
EXHIBIT 3
FILENE'S BASEMENT CORP.
EXECUTIVE SEVERANCE PLAN TRUST AGREEMENT
DIRECTION TO PAY PREMIUMS
Date:__________
To:____________________________
____________________________
____________________________
as Trustee of the Filene's Basement Corp.
Executive Severance Plan Trust
Deposited herewith is the sum of ___________________ dollars and
______________ cents ($________). You are directed to hold and invest such
amount pursuant to the terms of the Filene's Basement Corp. Executive Severance
Plan Trust Agreement ("Trust Agreement"), and to apply trust assets to the
payment of premiums on Policies as follows:
Policy #______________
Amount to be applied to premium payment: $____________
Premium due date: _____________________
Name and address of insurer:
_______________________________
_______________________________
_______________________________
_______________________________
Wire transfer instructions:
You are hereby directed to transmit the designated amount to the insurer
by U.S. mail, first class, postage prepaid, five (5) business days prior to the
premium due date; provided that if wire transfer instructions have been provided
above, you shall wire transfer such amount to the insurer on the premium due
date.
Filene's Basement Corp.
By____________________________________
____________________________________
Title
-16-
<PAGE> 112
EXHIBIT 4
FILENE'S BASEMENT CORP.
EXECUTIVE SEVERANCE PLAN TRUST AGREEMENT
CERTIFICATE OF TERMINATION OF EXECUTIVE'S
EMPLOYMENT UNDER CONDITIONS THAT
DO NOT RELEASE THE REFUND RIGHT TO EXECUTIVE
Date:______________________
To: ________________________
________________________
________________________
as Trustee of the Filene's Basement Corp.
Executive Severance Plan Trust
You are hereby directed, pursuant to Section 6.2 of the Trust Agreement,
to release the Refund Right to Filene's Basement Corp. upon receipt of this
certificate in properly completed form.
The undersigned, under penalties of perjury, hereby certify that
Executive's employment with Filene's Basement Corp. terminated on
_________________________ under conditions that do not require the release of
the Refund Right with respect to the Policies listed below to the Executive.
This certificate must be executed by Filene's Basement Corp. and (a)
executed by Executive, (b) executed by Executive's executor or personal
representative and accompanied by evidence that the signatory is Executive's
personal representative, or (c) accompanied by a certified death certificate of
Executive showing a date of death no later than the above-stated date of
termination of Executive's employment.
Name of Executive:________________________
Affected Policy Nos.____________________
FILENE'S BASEMENT CORP.
By:_____________________________
Name:___________________________
________________________________ Title:__________________________
Executive or Executive's
Executor or Personal Representative
NOTARY STATEMENT
-17-
<PAGE> 1
Exhibit 10.41
FILENE'S BASEMENT CORP.
EXECUTIVE SEVERANCE PLAN TRUST AGREEMENT
AGREEMENT OF TRUST, made effective the 15th day of JULY, 1997, by and between
Filene's Basement Corp., a Massachusetts corporation (the "Employer"), and State
Street Bank and Trust Company, as Trustee (together with its successors in
trust, the "Trustee");
W I T N E S S E T H:
WHEREAS, the Employer wishes to secure for itself the services of one or more
senior executives (each individually the "Executive");
WHEREAS, the Employer has adopted for each Executive an Executive Severance Plan
(each individually the "Plan") as set forth in Exhibit 2 attached hereto;
WHEREAS, the Employer hereafter may adopt additional Plans for additional
Executives;
WHEREAS, the Employer wishes to establish a separate trust (each individually
the "Trust") for each Executive for whom a Plan has been adopted and to make
contributions to the Trust as a source of benefits to the Executive as provided
in the Plan;
WHEREAS, the Employer hereafter may establish separate Trusts for each
additional Executive for whom a Plan is hereafter adopted; and
WHEREAS, the Trustee is willing and able to serve as trustee of each separate
Trust for the purposes and on the terms and conditions set forth in this
Agreement of Trust ("Trust Agreement").
NOW THEREFORE, effective upon the acceptance of this Trust Agreement by the
Trustee, the Employer and the Trustee agree as follows:
BACKGROUND AND DEFINITIONS
As used in this Trust Agreement:
"Administrator" means the administrator of the Plan within the meaning
of ERISA.
"Agent" means the agent of the Employer appointed from time to time
pursuant to the provisions of Section 7.5 hereof.
<PAGE> 2
"Authorized Representative" means the authorized representative of the
Employer identified from time to time pursuant to the provisions of
Section 7.4 hereof.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Employer" means Filene's Basement Corp. and any affiliate thereof that
has established one or more Plans.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Executive" means each executive of the Employer for whom the Employer
adopts a Plan.
"Plan" means each Filene's Basement Corp. Executive Severance Plan adopted
by the Employer, which shall be a separate and distinct welfare plan
within the meaning of ERISA for the benefit of each Executive for whom it
is adopted.
"Policies" means one or more life insurance policies on the life of the
Executive subject to the Filene's Basement Corp. Executive Split Dollar
Plan.
"Refund Right" means the property identified as the Refund Right pursuant
to the Split Dollar Agreement.
"Release Date" means the date so described pursuant to the Plan.
"Split Dollar Agreement" means each Filene's Basement Corp. Executive
Split Dollar Life Insurance Agreement executed by the Employer and the
Executive whereunder the Employer pays premiums on certain Policies and
pursuant to which the Employer is entitled, under certain circumstances,
to receive from the proceeds of the Policies certain amounts constituting
the Refund Right, as security for which the Executive has executed a
collateral assignment of the Policies.
"Trust" means each trust created by the Employer with the Trustee by the
execution of an Executive Severance Plan Trust Agreement, which shall be a
separate and distinct trust for the benefit of each Executive.
-2-
<PAGE> 3
ARTICLE 1. ESTABLISHMENT OF TRUST.
1.1. CREATION OF TRUST. The Employer hereby establishes with the Trustee a
separate Trust for each Executive for whom a Plan has been adopted consisting of
all property transferred to the Trustee in trust and identified by the Employer
as intended to form part of the Trust, which together with all earnings,
dividends, proceeds, or other income derived therefrom (the "Trust Assets"),
shall be held, administered and disposed of by the Trustee as provided herein.
The Employer shall by separate writing assign to the Trustee all of the
Employer's right, title, and interest constituting the Refund Right, which shall
become part of the Trust Assets. With the consent of the Trustee, the Employer
may at any time, or from time to time, make additional transfers of cash or
other property in trust to the Trustee to augment the Trust. Neither the Trustee
nor the Executive shall have any right to compel any additional transfers to the
Trust by the Employer.
1.2. IRREVOCABILITY. The Trust hereby established shall be irrevocable, subject
to Article 6.
1.3. EXCLUSIVE PURPOSE. Prior to the termination of the Plan the Trust Assets
shall be used for the exclusive purpose of: (i) providing benefits to the
Executive and his beneficiary; and (ii) defraying reasonable expenses of
administering the Plan.
ARTICLE 2. APPLICATION OF THE TRUST ASSETS.
2.1. PAYMENT OF BENEFITS. The Trustee shall pay benefits from the Trust as
directed by the Executive's certificate in accordance with the provisions of the
Plan.
2.2. RELIANCE ON EXECUTIVE'S CERTIFICATE. The Trustee shall rely conclusively on
the Executive's certificate as to the reason for paying benefits from the Trust
and the calculation of thereof and shall be forever protected in so doing.
2.3. TRUSTEE NOT RESPONSIBLE FOR PLAN ADMINISTRATION. The Trustee shall not be
responsible hereunder, or otherwise, in any way respecting the determination,
computation, payment or application of any benefit, for the form, terms, payment
provisions or issue of any insurance contract, for performing any functions
under any such insurance contract which it may be directed to purchase and/or
hold as contract holder thereunder (other than the execution of any documents
incidental thereto, including but not limited to certifying to the insurer upon
direction from Employer that the Employer has released the Refund Right, or
transfer or receipt of funds thereunder upon direction of the Executive's
certificate, and other than as provided in Section 2.5), or for any other matter
affecting the administration of the Plan by the Administrator or any other
person to whom such responsibility is allocated or delegated pursuant to the
terms of the Plan. Notwithstanding the foregoing, the Trustee shall forward
copies of all premium notices and other materials it receives
-3-
<PAGE> 4
from an insurance company regarding the Policies to the Executive and the
Employer.
2.4. TRUSTEE NOT RESPONSIBLE FOR TAX WITHHOLDING. The Trustee shall make
payments to the Executive in accordance with the terms hereof and the Trustee
shall report such payments to the Employer so that the Employer may make
provision for the reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the distribution hereunder
and shall pay amounts withheld to the appropriate taxing authorities.
2.5. TRUSTEE'S LIMITED RESPONSIBILITIES FOR PAYMENT OF PREMIUMS. The Employer
may, but shall not be required to, deposit funds, in cash, into the Trust at any
time, together with directions to the Trustee in the form attached hereto as
Exhibit 3 to apply such funds to the payment of premiums on the Policies. The
Trustee shall act in accordance with such directions and shall be protected in
doing so. The Trustee shall have no responsibility for payment of premiums on
the Policies except the obligation to apply such funds in accordance with such
directions.
ARTICLE 3. POWERS AND RESPONSIBILITIES OF THE TRUSTEE.
3.1. SAFEKEEPING. The Trustee shall take possession of the Policies and the
evidences of assignment constituting the Refund Right and shall keep same safe.
The Trustee shall have no duty to require or pursue contributions from the
Employer, or to inquire into the value of Refund Rights or benefits to be paid
under the Plan as evidenced by the Executive's certificate. Except as provided
in Section 5.4, the Trustee shall have no right to hold or apply the assets of
the Trust to the payment or settlement of any claims against the Employer that
the Trustee or any of its affiliates may have.
3.2. INVESTMENT. The purpose of this Trust is to use the Refund Right in the
Policies already purchased as a source of welfare benefits to the Executive. In
light of that purpose the Trustee shall not dispose of the Refund Right except
(i) to release it to the Executive as directed by the certificate of Executive
or (ii) to distribute the Employer's reversionary interest in it as provided in
Article 6. Notwithstanding the foregoing, on the written instruction of the
Employer and the Executive, the Trustee shall cooperate in the substitution of
assets agreed upon by them for the Refund Right. The Trustee shall have no duty
to inquire into the financial condition of any insurance company which issues a
Policy with respect to which a Refund Right is held hereunder. Any notice of
appointment of an insurance company or any substitute thereto shall constitute a
representation and warranty that the insurance company has been appointed in
accordance with the provisions of any underlying plan or agreement, that such
instrument or document is in proper form for execution by the Trustee, is in
accordance with ERISA, the Securities Exchange Act of 1934, and
-4-
<PAGE> 5
other applicable law, and the Trustee will have no duty to make any independent
inquiry or investigation as to any of the foregoing before acting upon such
direction.
3.3. ADMINISTRATIVE POWERS. In addition to the foregoing, and in addition to any
powers granted the Trustee by operation of law, the Trustee shall have the power
to take such other actions as may be necessary to accomplish the purposes of
this Trust. Without limiting the general powers of the Trustee hereunder, the
Trustee shall specifically have the power:
(a) To receive and administer cash or other Trust Assets (including Policies
and Refund Rights) delivered to the Trustee in accordance with this Trust
Agreement;
(b) To invest and reinvest funds held in the Trust. If not specifically
directed by the Employer, the Trustee shall invest cash balances of the
Trust Assets in short-term cash equivalents, including, but not limited
to, units of its short-term collective investment funds, shares of
regulated investment companies commonly known as money market funds,
Treasury Bills, certificates of deposit, commercial paper, demand notes
(including such collective investment funds, regulated investment
companies and forms of commercial paper and demand notes which may be
available through, or managed, Sponsored or invested by, the Trustee or
any affiliate thereof) and similar types of securities with maturities
not exceeding two years;
(c) To execute, acknowledge, and deliver all necessary and proper contracts or
other instruments, whether or not under seal, incident to the Trustee's
rights, powers and authorities hereunder;
(d) To commingle the Trust Assets with other assets held by the Trustee,
allotting to the Trust Assets an undivided interest in the commingled
property, which undivided interest shall always be equal to the
proportionate contribution of the Trust Assets to the commingled property;
and
(e) To invest in any investment company for which the Trustee or any affiliate
of the Trustee receives a fee for investment advisory services, custodial
services or other services the Trustee is permitted to perform for such
investment company and which fee is in addition to the fees payable
hereunder.
3.4. ACCOUNTING BY THE TRUSTEE. The Trustee shall keep accurate and detailed
records of all investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be agreed upon in
writing between the Employer and the Trustee. Provided that any necessary
information is forthcoming from any insurance company in a timely fashion,
within sixty (60) days following the close of each calendar year and within
sixty (60) days after the removal
-5-
<PAGE> 6
or resignation of the Trustee, the Trustee shall deliver to the Employer and the
Executive a written account of its administration of the Trust during such year
or during the period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it and showing all property
held in the Trust at the end of such year or as of the date of such removal or
resignation as the case may be. Anything herein to the contrary notwithstanding,
the Trustee may rely for all purposes hereunder on the latest valuation and
transaction information submitted to it by any insurance company. The Employer
will cause any insurance company to provide the Trustee with all information
needed by the Trustee to discharge its obligations to value the Trust Assets and
to account hereunder.
3.5. ACCOUNT STATED. Upon the expiration of ninety (90) days from the date of
filing its annual account with the Employer and the Executive, the Trustee shall
be forever released and discharged from all liability and further accountability
to the Employer, the Administrator, the Executive, or any other interested
person with respect to the accuracy of such accounting and the propriety of all
acts and failures to act of the Trustee reflected in such account, except with
respect to any such acts or transactions as to which the Employer,
Administrator, or Executive shall, within such 90-day period, file with the
Trustee specific written objections.
3.6. PRUDENCE. The Trustee shall act with the care, skill, prudence and due
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Employer and the Executive which
is contemplated by, and in conformity with, the terms of this Trust and is given
in writing by the Employer and the Executive. In the event of a dispute between
the Employer and the Executive, the Trustee may apply to a court of competent
jurisdiction to resolve the dispute, with the Employer having responsibility to
pay for such expenses.
3.7. LITIGATION. The Trustee shall have authority to commence or maintain any
action, suit or legal proceeding on behalf of the Trust on account of or growing
out of any insurance contract or any payment made or withheld by the Trustee
hereunder, at the direction of the Employer or the Executive or in its own
discretion; provided that the Trustee is either in possession of Trust Assets
sufficient for such purpose or has been indemnified to its satisfaction by the
Employer for counsel fees, costs and other expenses and liabilities to which it,
in its sole judgment, may be subjected by beginning or maintaining such action,
suit or legal proceeding.
3.8. NECESSARY PARTIES. Except to the extent that Sections 502 and 504 of ERISA
may provide otherwise, in order to protect the Trust from the expense of
litigation, no person other than the Employer and Executive shall be a necessary
party in any
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proceeding or may require the Trustee to account or may institute any other
action or proceeding against the Trustee or the Trust.
3.9. LEGAL ADVICE, ETC. The Trustee may consult with legal counsel (who may also
be counsel for the Employer generally) with respect to any of its duties or
obligations hereunder and shall be protected for any action taken or omitted by
it in good faith pursuant to or on the basis of the opinion of any such expert.
The Trustee may hire agents, accountants, actuaries, investment advisors,
financial consultants or other professionals to assist it in performing any of
its duties or obligations hereunder.
3.10. INDEMNIFICATION. In consideration of the Trustee agreeing to enter into
and accept this Agreement of Trust, the Employer hereby indemnifies and shall
hold harmless the Trustee, individually and as Trustee, and the Trustee's
directors, officers, employees and agents (the "Indemnified Parties") from and
against all amounts, including without limitation taxes, expenses (including
reasonable counsel fees), liabilities, claims, damages, actions, suits, or other
charges, incurred by or assessed against each Indemnified Party ("Claims")
unless such Claims arise from the Trustee's own negligence or the Trustee's
breach of any fiduciary duty under ERISA.
3.11. SURVIVAL. The undertakings made in this Article 3 shall be binding on and
inure to the benefit of the Employer and the Executive, and their respective
successors, assigns, heirs, executors, or administrators and shall survive
termination, amendment or restatement of this Trust Agreement or the resignation
or removal of the Trustee.
ARTICLE 4. COMPENSATION AND EXPENSES OF THE TRUSTEE.
4.1. PAYMENT BY THE EMPLOYER. The Employer shall pay all administrative and
Trustee's fees and expenses, including, but not limited to, fees for legal
services rendered to the Trustee (whether or not rendered in connection with a
judicial or administrative proceeding). The Trustee's entitlement to
reimbursement hereunder shall not be affected by the resignation or removal of
the Trustee or by the termination of the Trust.
4.2. DEPOSITS BY THE EMPLOYER. The Employer and the Trustee may agree on deposit
of funds in the Trust to defray expenses of the Trustee. If not specifically
directed by the Employer, the Trustee shall invest cash balances of the Trust
Assets in short-term cash equivalents, including, but not limited to, units of
its short-term collective investment funds, shares of regulated investment
companies commonly known as money market funds, Treasury Bills, certificates of
deposit, commercial paper, demand notes (including such collective investment
funds, regulated investment companies and forms of commercial paper and demand
notes which may be available through, or managed, sponsored or invested by, the
Trustee or any affiliate thereof) and similar types of securities with
maturities not exceeding two
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years. The Trustee may apply the amounts so deposited against any amounts due
the Trustee from the Employer hereunder.
4.3. TAXES. All taxes of any and all kinds whatsoever that may be levied or
assessed under existing or future laws, domestic or foreign, upon the Trust or
the income thereof shall be paid by the Employer and not by the Trust or
Trustee. The Trustee shall notify the Employer of any taxes that may be
assessed. In the event that the Employer shall determine that the taxes are not
lawfully assessed, it may elect to direct the Trustee to, at the expense of the
Employer, or may itself, contest such assessment.
ARTICLE 5. RESIGNATION OR REMOVAL OF THE TRUSTEE.
5.1. RESIGNATION. The Trustee may resign at any time by written notice to the
Employer and the Executive, which shall be effective ninety (90) days after
receipt of such notice unless the Employer and the Trustee agree otherwise.
5.2. REMOVAL. The Trustee may, with the consent of the Executive, be removed by
the Employer on thirty (30) days notice or upon shorter notice accepted by
Trustee.
5.3. SUCCESSOR TRUSTEE. If the Trustee resigns or is removed, the Employer, with
the consent of the Executive, shall appoint any third party as successor
Trustee. Appointment of a new Trustee shall be effective when accepted in
writing by the new Trustee, who shall then have all of the rights and powers of
the former Trustee, including ownership rights in the Trust Assets. The former
Trustee shall execute any instrument necessary or reasonably requested by the
Employer or the successor Trustee to evidence the transfer. If no successor
Trustee is appointed, the Trustee may apply to any court of competent
jurisdiction for appointment of a successor or for instructions. All expenses of
the Trustee in connection with the proceeding shall be paid by the Employer.
5.4. RESERVE FOR EXPENSES. The Trustee is authorized to reserve such amount as
it may deem advisable solely for payment of its fees and expenses hereunder, and
any balance of such reserve remaining after the payment of such fees and
expenses shall be paid over in accordance with the directions of the Employer
under Section 5.3. If not specifically directed by the Employer, the Trustee
shall invest cash balances of the Trust Assets in short-term cash equivalents,
including, but not limited to, units of its short-term collective investment
funds, shares of regulated investment companies commonly known as money market
funds, Treasury Bills, certificates of deposit, commercial paper, demand notes
(including such collective investment funds, regulated investment companies and
forms of commercial paper and demand notes which may be available through, or
managed, sponsored or invested by, the Trustee or any affiliate thereof) and
similar types of securities with maturities not exceeding two years.
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<PAGE> 9
ARTICLE 6. AMENDMENT.
6.1. AMENDMENT. This Trust Agreement may be amended by a written instrument
executed by the Trustee, the Employer and the Executive.
6.2. AUTOMATIC TERMINATION. This Trust shall terminate immediately upon (i) the
release of the Refund Right to the Executive in accordance with the Plan or (ii)
the termination of the Executive's employment with the Employer under conditions
that do not release the Refund Right. Any assets remaining in the Trust after
the release, if any, of the Refund Right to the Executive pursuant to the Plan,
shall revert to the Employer, its successors, or assigns. The Trustee shall rely
conclusively on a certificate in the form attached as Exhibit 4, executed by the
Employer and the Executive (except that, in the event of termination of the
Executive's employment by death, such certificate shall be either executed by
the Employer and Executive's executor or personal representative, or executed
solely by the Employer and accompanied by a properly certified death
certificate) that Executive's employment has terminated under conditions that do
not release the Refund Right, and shall be protected in so doing. Upon
termination of this Trust under circumstances that do not release the Refund
Right to the Executive, the Trustee shall release the Refund Right to the
Employer.
6.3. TERMINATION BY THE EMPLOYER AND THE EXECUTIVE. By written notice to the
Trustee prior to the occurrence of an automatic termination described in Section
6.2, the Employer and the Executive may terminate this Trust, provided, that
neither party shall be under any obligation to do so. Upon such termination, the
assets of the Trust shall be distributed as directed by the Employer and
Executive.
6.4. TRUSTEE'S AUTHORITY TO SURVIVE TERMINATION. Until the final distribution of
the Trust, the Trustee shall continue to have and may exercise all of the powers
and discretion conferred upon it hereunder.
ARTICLE 7. MISCELLANEOUS.
7.1. ADDITIONAL EXECUTIVES. Employer may designate this Trust to hold Refund
Rights with respect to more than one individual, in which case it is the
intention of the parties that the Trust be one taxpayer but in all other
respects operate as a separate trust for each plan of each individual.
Accordingly, if the Employer assigns to the Trustee its Refund Right with
respect to more than one individual:
(a) The term "Executive" shall apply to each such individual;
(b) Each and every provision of this Trust Agreement, including the
termination provisions of Article 6, shall apply separately to each
Executive (and the Refund Right with respect to such Executive) as if such
Executive were the
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only Executive described herein, and each Executive's rights and interests
hereunder shall constitute a separate plan for purposes of Title I of
ERISA;
(c) The Trustee shall hold each Refund Right as a separate account within the
meaning of Section 404(a)(5) of the Code;
(d) The Employer may allocate any additional deposits it makes to the Trust to
the account of such Executive or Executives and in such amounts as it may
determine in its sole discretion. Only expenses properly allocable to an
Executive may be allocated to his account; and
(e) The Employer shall provide to the Trustee (i) a certified copy of the Plan
executed by the Executive and (ii) a list of Policies in respect of the
Executive.
7.2. SEVERABILITY. Any provision of these Standard Provisions prohibited by law
shall be ineffective to the extent of any such prohibition, without invalidating
the remaining provisions hereof or thereof.
7.3. ALIENATION. Except in connection with termination of this Trust as provided
in Section 6.3, benefits payable to the Executive hereunder may not be
anticipated, assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment levy, execution or other
legal or equitable process of any kind. Neither the Trust nor any benefit
hereunder shall in any manner be subject to the debts or liabilities of any
person or entity entitled to such benefit.
7.4. AUTHORIZED REPRESENTATIVE. At all times during the term of this Trust the
Employer shall identify in writing one or more individuals to act as the
Employer's Authorized Representative (the "Authorized Representative")
hereunder. The individual or individuals initially so identified are set forth
on the Employer Fact Sheet attached hereto as Exhibit 1. The Employer may from
time to time add, delete or replace Authorized Representatives by notice to the
Trustee and the Executive. Each Authorized Representative acting alone may
exercise any and all rights and powers of the Employer hereunder. Until the
Trustee receives notice that any Authorized Representative is no longer serving,
the Trustee shall have no responsibility for any act or failure to act on the
part of such Authorized Representative and no responsibility to inquire into the
authority of such Authorized Representative to act for the Employer. The Trustee
shall be entitled to rely upon a certificate signed by an Authorized
Representative to the same extent as if it had been signed by the Employer.
7.5. AGENT. The Employer may from time to time appoint one or more individuals
or business concerns to act as its Agent (the "Agent") hereunder. Such
appointment shall be made by notice to the Trustee and the Executive identifying
the Agent and one or more individuals associated with the Agent who are each
designated an
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Authorized Representative, each of whom shall have the same power to act on
behalf of the Employer as any other Authorized Representative. Until advised by
the Employer that any such Agent is no longer serving, the Trustee shall have no
responsibility for any act or failure to act on the part of such Agent and no
responsibility to inquire into the authority of such Agent to act for the
Employer. The Agent and the individual or individuals associated with the Agent
initially so identified are set forth on the Employer Fact Sheet.
7.6. EMPLOYER. Whenever the provisions of this Trust Agreement specifically
require or permit any action to be taken by "the Employer", such action must be
authorized by the Board of Directors or authorized by a person authorized to
take such action by the Board of Directors. Any resolution adopted by the Board
of Directors or other evidence of such authorization shall be certified to the
Trustee by the Secretary or an Assistant Secretary of the Employer under the
corporate seal, and the Trustee may rely upon any authorization so certified
until revoked or modified by a further action of the Board of Directors
similarly certified to the Trustee.
7.7. AFTER EXECUTIVE'S DEATH. Except as otherwise specifically provided, in the
event Executive dies prior to taking any action required or permitted hereunder
to be taken by Executive or upon the Executive's certificate, such action may be
taken following Executive's death by (or upon the certificate of) Executive's
executor or personal representative.
7.8. ENTIRE AGREEMENT. This Trust Agreement and any attachments hereto, embody
the entire agreement and understanding between the Employer, the Executive and
the Trustee with respect to the subject matter hereof and supersede all prior
agreement and understandings related thereto.
7.9. EFFECT. All persons, including the Employer, Administrator, Executive,
insurance company, or any other party at any time interested in the Trust shall
be bound by the provisions of this Trust Agreement, and in the event of any
conflict between this Trust Agreement and the provisions of any insurance policy
or any instrument or agreement forming part of any underlying Plan, the
provisions of this Trust Agreement shall control.
7.10. NOTICES. Any notice, material or information that either party is required
t o provide to the other party hereunder shall be given in person, by facsimile
or shall be deemed to have been given to such other party five (5) business days
after its mailing by registered mail, return receipt requested, postage prepaid:
If to the Employer, at the address and to the attention of the person set forth
in the Employer Fact Sheet.
or
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If to the Trustee:
State Street Bank and Trust, as Trustee
Special Investor Group
225 Franklin Street, M-3
Boston, MA 02110
or
If to the Executive:
Steven R. Siegel, as Executive
45 Jericho Road
Weston, MA 02193
The Trustee shall incur no liability hereunder for any failure to act pursuant
to any notice, direction or any other communication from any insurance company,
the Employer, the Administrator, or any other person or the designee of any of
them unless and until it shall have receive instructions in form specified in
this Section 7.10.
7.11. GOVERNING LAW. To the extent not preempted by federal law, the Trust
Agreement shall be governed by and construed in accordance with the substantive
and procedural laws of the State of Illinois, including its conflicts of laws
provisions.
7.12. SUCCESSOR TO THE TRUSTEE. Any successor, by merger or otherwise, to
substantially all of the trust business of the Trustee shall automatically and
without further action become the Trustee hereunder, subject to all the terms
and conditions and entitled to all the benefits and immunities hereof.
7.13. DESCRIPTIVE HEADINGS. The captions in these Standard Provisions
are solely for convenience of reference and shall not define or limit the
provisions hereof.
Executed, sealed and attested to by the Trustee as of the 15th day of July,
1997.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed and its corporate seal to be hereunto affixed and attested as of the
day and year first above stated.
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<PAGE> 13
FILENE'S BASEMENT CORP.
Attest: /s/ Deborah Felix By: /s/ Samuel Gerson
----------------------- -------------------------------
Name: Deborah Felix Name: Samuel Gerson
Title: Vice President, Title: Chief Executive Officer
Human Resources
[seal]
State Street Bank and Trust Company,
as Trustee
Attest: By: /s/ Mark P. Bergin
------------------------ -------------------------------
Name: Name: Mark P. Bergin
Title: Title: Vice President
[seal]
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<PAGE> 14
EXHIBIT 1
EMPLOYER FACT SHEET
Date: July 15, 1997
Employer [FILENE'S BASEMENT CORP]
State of Incorporation [MASSACHUSETTS]
E.I.N. [04-3016731]
Address: [40 WALNUT STREET]
[WELLESLEY, MA 02181]
Attention: name: [SAMUEL GERSON]
title: [CHIEF EXECUTIVE OFFICER]
Telephone: [(781) 348-7100]
Facsimile: [(781) 348-7130]
Authorized Representative(s):
Deborah Felix
Kim Ahlholm
Samuel Gerson
Agent:
The Coventry Group
7111 Valley Green Road
Fort Washington, PA 19034-2204
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EXHIBIT 2
CERTIFIED COPY OF EXECUTIVE SEVERANCE PLAN
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<PAGE> 1
Exhibit 10.42
FILENE'S BASEMENT CORP.
EXECUTIVE SEVERANCE PLAN
FOR
------------------
ARTICLE I
PURPOSE AND DEFINITIONS
SECTION 1.1 PURPOSE OF THE PLAN.
This Executive Severance Plan (the "Plan") is intended to secure for
Filene's Basement Corp. (the "Employer") the services of the individual named
above ("Executive"), whose efforts, abilities and accomplishments are highly
valued by Employer. The Plan is intended to be treated as an "employee welfare
benefit plan" within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), by reason of being a
"severance pay arrangement" within the meaning of sec. 3(2)(B)(i) of ERISA,
i.e., a "severance pay plan" within the meaning of regulations published by the
Secretary of Labor at Title 29, Code of Federal Regulations, sec. 2510.3-2(b).
SECTION 1.2 DEFINITIONS
As used herein the following terms shall have the meaning set forth
below:
"ADMINISTRATOR" means Employer, acting as "administrator" of the Plan
within the meaning of ERISA. The business address and telephone number of
Administrator are:
FILENE'S BASEMENT CORP.
40 Walnut Street
Wellesley, MA 02181
Phone: 617-348-7000
"BENEFITS" means the amount or other benefits that Executive is entitled
to receive pursuant to Article II of the Plan.
"BOARD OF DIRECTORS" means the Board of Directors of Employer, or any
successor thereto.
"CAUSE" means dishonesty, conviction of a felony, gross neglect of duties
(other than as a result of disability or death), or conflict of interest which
conflict shall continue for 30 days after the Employer gives written notice to
Executive requesting the cessation of such conflict. Executive shall not be
deemed to have been terminated for Cause until the later to
<PAGE> 2
occur of (i) the 30th day after notice of termination is given and (ii) the
delivery to Executive of a copy of a resolution duly adopted by the unanimous
affirmative vote of all of the Employer's directors (excluding Executive if
Executive is a director) at a meeting called and held for that purpose (after
reasonable notice to Executive), and at which Executive together with his
counsel was given an opportunity to be heard, finding that Executive was guilty
of conduct described in the definition of "Cause" above, and specifying the
particulars thereof in detail.
"Cause" does not include Involuntary Termination or termination for Good
Reason, as those terms are defined herein.
"CHANGE IN CONTROL" means the occurrence of any one of the following
events:
(a) any "person" as such term is used in Sections 13(d) and 14(d) of
the 1934 Act (other than (i) the Employer, (ii) any subsidiary of the
Employer, (iii) any trustee or other fiduciary holding securities under
an employee benefit plan of the Employer or of any subsidiary of the
Employer, or (iv) any company owned, directly or indirectly, by the
stockholders of the Employer in substantially the same proportions as
their ownership of stock of the Employer), becomes the "beneficial owner"
(as defined in Section 13(d) of the 1934 Act), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the
General Rules and Regulations under the 1934 Act) of such person,
directly or indirectly, of securities of the Employer representing 35% or
more of the combined voting power of the Employer's then outstanding
securities;
(b) the stockholders of the Employer approve a merger or
consolidation of the Employer with any other company, other than (1) a
merger or consolidation which would result in the voting securities of
the Employer outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Employer or any subsidiary of the Employer,
at least 65% of the combined voting securities of the Employer or such
surviving entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation effected to implement a
recapitalization of the Employer (or similar transaction) in which no
"person" (with the exception given and the method of determining
"beneficial ownership" used in clause (a) of this definition) acquires
more than 50% of the combined voting power of the Employer's then
outstanding securities;
(c) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors, and any
new director (other than a director designated by a person who has
entered into an agreement with the Employer to effect a transaction
described in clause (a), (b) or (d) of this
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<PAGE> 3
definition) whose election by the Employer's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors at the beginning of
the period or whose election or nomination for election was previously so
approved cease for any reason to constitute at least a majority thereof;
or
(d) the stockholders of the Employer approve a plan of complete
liquidation of the Employer or an agreement for the sale or disposition
by the Employer of all or substantially all of the Employer's assets.
A termination occurring within six (6) months after a Change in Control,
unless for Cause, shall be conclusively presumed to have resulted from such
Change in Control.
"EMPLOYER" means Filene's Basement Corp., and any successor thereto.
"GOOD REASON" means any one of the following events:
(a) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles, reporting requirements or responsibilities), authority or duties
as of the date of this Plan, without the Executive's written consent or
any other action by the Employer which results in a diminution in such
position, authority, duties, or in Executive's compensation (including
bonus opportunity) without the Executive's written consent, excluding for
this purpose (1) such actions taken when factual grounds exist for
termination of Executive's employment for Cause or incapacity and (2) an
isolated, insubstantial and inadvertent action which is not taken in bad
faith and which is remedied by the Employer promptly after receipt of
notice thereof given by the Executive;
(b) any failure by the Employer to comply with any of the provisions
of Executive's written employment agreement, if any, as from time to time
amended, other than an isolated, insubstantial and inadvertent failure
which is not taken in bad faith and which is remedied by the Employer
promptly after receipt of notice thereof given by the Executive; or
(c) any other circumstances which constitute "Good Reason" for
Executive to terminate employment with Employee under Executive's
employment contract with Employer (if Executive has an employment
contract with Employer which explicitly defines "Good Reason" for
Executive to terminate employment with Employer).
PROVIDED, HOWEVER, that "Good Reason" shall not mean any action or failure to
act to which the Board of Directors of the Employer and the Executive agree in
writing.
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<PAGE> 4
"INVOLUNTARY TERMINATION" means (a) a termination of employment initiated
entirely by Employer for reasons other than for Cause and (b) a termination of
employment by the Executive for Good Reason.
"PART ONE OF EACH POLICY" means an amount equal to the lesser of the cash
value of the Policy or the premiums paid by Employer on the Policy. The Employer
and the insurance company issuing the Policy each shall properly certify the
extent of Part One of the Policy.
"PLAN YEAR" means the period commencing on each January 1 during which
the Plan is in effect and ending on the subsequent December 31.
"POLICIES" means the life insurance policy or policies on the life of
Executive that are subject to a Split Dollar Agreement.
"REFUND RIGHT" means the specific limited right to receive Part One of
each Policy upon the lapse, surrender, maturity or other termination of the
Policy, as defined in the Split Dollar Agreement.
"RELEASE DATE" means as soon as possible following receipt by the trustee
of a certificate in accordance with the terms of the agreement creating the
Trust to release the Refund Right to the Executive, but in no event more than
ten (10) days following receipt of such certificate.
"TRUST" means the trust created by a duly executed and binding Trust
Agreement between Employer, as grantor, and Trustee, as trustee, intended to
provide a source of Benefits under the Plan.
"TRUSTEE" means the duly appointed trustee of a Trust in connection with
the Plan, and its successors in trust.
"VOLUNTARY RESIGNATION" means, a termination of employment that is a
voluntary, permanent separation initiated by Executive, including voluntary
retirement, but not including (a) a termination resulting from a Change in
Control or (b) a termination for Good Reason.
ARTICLE II
ELIGIBILITY FOR BENEFITS
SECTION 2.1 SEVERANCE.
If Executive's employment by Employer (or any successor thereto, if the
transfer of Employer's rights and obligations thereto is not a Change in
Control) terminates for any
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<PAGE> 5
reason other than Voluntary Resignation, death of Executive, or termination of
Executive's employment by Employer for Cause, the Executive, by certificate in
the form attached hereto as Exhibit A, shall direct Trustee to release the
Refund Right to the Executive on the Release Date to the extent the Refund Right
relates to an amount that does not exceed the limitation set forth in Section
2.3 hereof.
SECTION 2.2 TERMINATION OF SPLIT DOLLAR AGREEMENT.
Upon receipt of notice from the insurance company, the Employer or the
Executive that any Policy has terminated because of Employer's failure to pay
premiums, the Trustee shall release the Refund Right to Executive on the Release
Date.
SECTION 2.3 SEVERANCE BENEFIT LIMIT.
The portion of the Refund Right which shall be released to Executive
pursuant to this Article II shall not exceed twice Executive's annual
compensation (as defined in Department of Labor Regulations Section
2510.3-2(b)(2)(i), or corresponding provision of subsequent regulations) for the
year immediately preceding the year of termination, as determined by certificate
of the Executive. The Employer shall certify to Executive annually and at such
other times as the Executive reasonably requests the amount of such accrued
vested benefit.
SECTION 2.4 VOLUNTARY RESIGNATION.
If Executive's employment is terminated by death, by Voluntary
Resignation, or for Cause, no Benefits shall be paid hereunder.
ARTICLE III
METHOD AND DURATION OF BENEFIT PAYMENTS
SECTION 3.1 FUNDING.
Employer and Executive have heretofore entered into an Executive Split
Dollar Life Insurance Agreement (the "Split Dollar Agreement"), whereunder
Employer pays premiums on one or more Policies on Executive's life, and pursuant
to which Employer is entitled, upon termination of Executive's employment with
Employer (by death or otherwise), to receive certain amounts constituting the
Refund Right, as security for which Executive has executed a collateral
assignment of the Policies. Employer has assigned the Refund Right or Refund
Rights applicable to Executive to the Trustee, to be held in a separate Trust
for Executive's benefit as a source of benefits to Executive in case of certain
events.
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<PAGE> 6
SECTION 3.2 METHOD OF PAYMENT.
The Benefits to which Executive is entitled, as calculated pursuant to
Article II hereof, shall be paid by Trustee as directed by Executive pursuant
to a certificate in the form of Exhibit A hereto, delivered to the last address
provided by Executive to Employer or such other address as Executive may
provide to the Trustee. Payment shall be made on the Release Date.
ARTICLE IV
THE ADMINISTRATOR'S AUTHORITY AND DUTIES
SECTION 4.1 AUTHORITY AND DUTIES.
Executive shall certify the amount of Benefits to which Executive is
entitled and shall direct Trustee to take such actions as are consistent
therewith.
SECTION 4.2 RECORDS, REPORTING AND DISCLOSURE.
Administrator shall keep records necessary for the proper operation of the
Plan. Such records shall be made available to Trustee and Executive for
examination during business hours. Administrator shall prepare and shall file as
required by law or regulation all reports, forms, documents and other items
required by ERISA, the Internal Revenue Code, and every other relevant statute,
each as amended, and all regulations thereunder except that Employer, as such,
shall prepare and distribute to the proper recipients all forms relating to
withholding of income or wage taxes, Social Security taxes, and other amounts
which may be similarly reportable.
SECTION 4.3 BONDING.
Administrator shall arrange any bonding that may be required by law, but
no amount in excess of the amount required by law (if any) shall be required by
the Plan.
ARTICLE V
CLAIMS PROCEDURES
SECTION 5.1 APPLICATION FOR BENEFITS.
If for any reason Executive is not paid all his Benefits pursuant to his
certificate on the Release Date, the Executive may claim such Benefits by
written request addressed to Employer.
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<PAGE> 7
SECTION 5.2 APPEALS OF DENIED CLAIMS.
If Employer denies a claim by Executive, Executive shall be notified of
such denial in writing by Administrator. The notice advising of the denial shall
specify the reason or reasons for denial, make specific reference to pertinent
Plan provisions, describe any additional material or information necessary for
Executive to perfect the claim (explaining why such material or information is
needed), and shall advise Executive of the procedure for the appeal of such
denial. All appeals shall be made by the following procedure:
(a) Executive shall file with Administrator a notice of desire to appeal
the denial. Such notice shall be filed within sixty (60) days of
notification by Administrator of claim denial, shall be made in
writing, and shall set forth all of the facts upon which the appeal
is based.
(b) Administrator shall, within thirty (30) days of receipt of
Executive's notice of appeal, establish a hearing date on which
Executive may make an oral presentation to a Committee (the
"Committee") of the Board of Directors in support of his/her appeal.
Executive shall be given not less than ten (10) days' notice of the
date set for the hearing.
(c) The Committee shall consider the merits of the claimant's written
and oral presentations, the merits of any facts or evidence in
support of the denial of Benefits, and such other facts and
circumstances as the Committee shall deem relevant.
(d) The Committee shall render a determination upon the appealed claim
which determination shall be accompanied by a written statement as
to the reasons therefor.
(e) The Plan is intended to provide security for Executive. Accordingly,
Employer intends that the decisions of Administrator and the
Committee be subject to judicial review with due recognition of the
inherent interest of the parties. Notwithstanding the foregoing, the
Plan shall not impose upon Trustee any duty to pay benefits other
than as directed by Executive or by a court of competent
jurisdiction.
-7-
<PAGE> 8
ARTICLE VI
AMENDMENT AND TERMINATION
SECTION 6.1 AMENDMENT, SUSPENSION AND TERMINATION.
Employer and Executive may amend or terminate the Plan by mutual written
agreement. In all other respects, the obligations of Employer hereunder are
irrevocable.
SECTION 6.2 TERM OF THE PLAN.
The Plan will continue until no further benefits may be paid by its terms,
or Employer and Executive agree, to modify, supersede or terminate it.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 NONALIENATION OF BENEFITS.
None of the payments, Benefits or Executive's rights shall be subject to
any claim of any creditor, and, in particular, to the fullest extent permitted
by law, all such payments, Benefits and rights shall be free from attachment,
garnishment, trustee's process, or any other legal or equitable process
available to any creditor of Executive or Employer. Executive shall have no
power or right to alienate, anticipate, commute, pledge, encumber or assign any
of the Benefits or payments which may be paid under the Plan.
SECTION 7.2 NO CONTRACT OF EMPLOYMENT.
Neither the establishment of the Plan, nor any modification thereof, nor
the creation of any fund, trust or account, nor the payment of any Benefits
shall be construed as giving Executive the right to be retained in the service
of Employer, and Executive shall remain subject to discharge to the same extent
as if the Plan has never been adopted.
SECTION 7.3 AFTER EXECUTIVE'S DEATH. Except as otherwise specifically
provided, in the event Executive dies prior to taking any action required or
permitted hereunder to be taken by Executive or upon the Executive's
certificate, such action may be taken following Executive's death by (or upon
the certificate of) Executive's executor or personal representative.
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<PAGE> 9
SECTION 7.4 SEVERABILITY OF PROVISIONS.
If any provision of the Plan shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions hereof, and
the Plan shall be construed and enforced as if such provisions has not been
included.
SECTION 7.5 EFFECT ON OTHER BENEFITS.
Except as provided herein, or by specific reference elsewhere, benefits
under the Plan shall be in addition to any other benefits available to Executive
in connection with Executive's employment by Employer under any employment
agreement relating thereto, or otherwise, provided, however, that any benefits
payable to Executive by Employer pursuant to any Supplemental Executive
Retirement Plan shall be reduced by the actuarial value of any Benefits
hereunder.
SECTION 7.6 HEIRS, ASSIGNS, AND PERSONAL REPRESENTATIVES.
The Plan shall be binding upon the heirs, executors, administrators,
successors and assigns of the parties; provided that nothing in this Section 7.6
shall be construed to affect the determination of whether a Change in Control
has occurred.
SECTION 7.7 PAYMENTS TO INCOMPETENT PERSONS, ETC.
Any Benefits payable to or for the benefit of a minor, an incompetent
person or other person incapable of receiving such Benefits, shall be deemed
paid when paid to such person's guardian of the estate, to a custodian for a
minor under a Uniform Transfers or Gifts to Minors Act of any jurisdiction, or
to the party providing or reasonably appearing to provide for the care of such
person, and such payment shall fully discharge Employer, Administrator and all
other parties with respect thereto.
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<PAGE> 10
SECTION 7.8 CONTROLLING LAW.
The Plan shall be construed and enforced according to the laws of the
State of Massachusetts except to the extent preempted by federal law.
IN WITNESS WHEREOF, and as evidence of its adoption of the Plan, Employer
has caused the same to be executed by its duly authorized officers and its
corporate seal to be affixed thereto this ____ day of ______________.
FILENE'S BASEMENT CORP.
Attest
By:
- ----------------------------- ------------------------------
Name: Name:
Title: Title:
[seal]
Agreed to and accepted as set forth above.
Witness:
/s/
------------------------- ----------------------
Name:
Date:
-10-
<PAGE> 11
EXHIBIT A
Certificate of Direction to Trustee
To Release Refund Right to Executive
Date
------------------------
To:
- ----------------------------------
as Trustee of the Filene's
Basement Corp. Executive
Severance Plan Trust
dated
------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
You are hereby directed to release to me, at the address indicated below.
------------------------------
------------------------------
------------------------------
the portion ("Executive's Portion") of the Refund Right on Policy Nos.__________
with a value not in excess of $_____________, in accordance with the Release
Instructions below:
RELEASE INSTRUCTIONS
1. You shall deliver a copy of this certificate immediately to
Filene's Basement Corp.
40 Walnut Street
Wellesley, Massachusetts 02181
Attn:
------------------------
and shall release the Executive's Portion of such Refund Right as follows:
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<PAGE> 12
2. If, within ten (10) days after the date hereof (such ten-day period
hereinafter referred to as the "Waiting Period"), you have not received an
Employer Certificate described in instruction 3 or 4 below, you shall release
the Executive Portion of such Refund Right to me immediately after the close of
the Waiting Period.
3. If, prior to the close of the Waiting Period you have received a
certificate ("Employer Certificate") from Filene's Basement Corp., executed
under penalties of perjury, certifying that there is no reasonable basis to
support my claim to any portion of the Executive's Portion of such Refund Right,
you shall immediately provide me a copy of such Employer Certificate and you
shall not release any portion of such Refund Right to anyone except pursuant to
the joint direction of Filene's Basement Corp. and me.
4. If, prior to the close of the Waiting Period you have received an
Employer Certificate from Filene's Basement Corp., executed under penalties of
perjury, certifying that there is no reasonable basis to support my claim to a
stated amount (the "Disputed Amount") of the Executive's Portion of such Refund
Right, you shall immediately provide me a copy of such Employer Certificate, and
you shall release to me immediately (even if prior to the close of the Waiting
Period) the Executive's Portion of such Refund Right, less the Disputed Amount.
Thereafter you shall not release any additional portion of such Refund Right to
anyone except pursuant to the joint direction of Filene's Basement Corp. and me.
The Waiting Period shall not be extended by reason of ending on a weekend
or holiday.
CERTIFICATION
I, ___________________, hereby certify, under penalties of perjury, that
1. I am (a) the Executive covered by that certain Filene's Basement Corp.
Executive Severance Plan dated ___________ ("Severance Plan") pursuant to which
the Refund Right on Policy Nos.________________ have been assigned to you, as
Trustee of the above-referenced Severance Plan Trust by Filene's Basement Corp.
(the "Employer"), or (b) the executor or personal representative of such
Executive.
2. I am authorized pursuant to the terms of the Severance Plan to issue
this certificate to you.
3. My/Executive's employment with the Employer terminated on
_______________ for a reason other than Voluntary Resignation, other than for
Cause, and other than by death.
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<PAGE> 13
4. My/Executive's annual compensation (as defined in Department of Labor
Regulations Section 2510.3-2(b)(2)(i) or corresponding provision of subsequent
regulations) for the year immediately preceding the year of termination was
$_______________; therefore twice such annual compensation was $_______________.
------------------------
Executive
Notary statement
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<PAGE> 1
Exhibit 10.43
FILENE'S BASEMENT CORP.
EXECUTIVE SPLIT DOLLAR LIFE INSURANCE AGREEMENT
(COLLATERAL ASSIGNMENT METHOD)
This AGREEMENT made effective this [ ] of [ ], by and
between Filene's Basement Corp., a Massachusetts corporation (the "Employer"),
and [ ] (the "Executive").
WITNESSETH
WHEREAS, the Employer highly values the efforts, abilities and
accomplishments of the Executive, and
WHEREAS, the Executive is deemed a member of a select group of management
and/or one of the highly compensated employees of the Employer, and
WHEREAS, the Employer, as an inducement of such continued employment,
wishes to assist the Executive with his or her personal life insurance program,
and
WHEREAS, the Executive agrees to participate in such program to the extent
hereinafter provided.
NOW, THEREFORE, the parties named above (the "Parties") hereby agree as
follows:
ARTICLE 1. LIFE INSURANCE POLICIES.
1.1 ISSUANCE. In furtherance of the purposes of this Agreement, one or
more life insurance contracts (each referred to as a "Policy," and all referred
to collectively as the "Policies") have been applied for on the life of the
Executive from AETNA LIFE INSURANCE COMPANY (the "Insurer"). Schedule A hereto
contains particulars on the Policies. This Agreement is effective as to each
Policy upon execution hereof or upon issuance and acceptance of such Policy
whichever is later.
1.2 PAYMENT OF PREMIUMS. The Executive shall not contribute to pay
premiums on the Policy. The Employer shall contribute an amount equal to the
annual premium due to the Insurer. The payment of the premium shall be made on
or before the date the premium is due. Premiums shall be paid in accordance with
the Policies. To the extent consistent with the Insurer's billing practices, all
premium notices shall be sent both to the Employer and to the Executive.
1.3 DIVIDENDS. All dividends attributable to the Policies shall be applied
to the purchase of Paid-Up Additions thereunder.
<PAGE> 2
1.4 POLICY COMPONENTS. As used herein:
(a) "Part One" of each Policy is an amount equal to the lesser of the
cash value of the Policy or the premiums paid by the Employer on the
Policy. The Employer shall properly certify, as required by the
Insurer, and the Insurer shall properly certify the extent of Part
One of the Policy and payment of such amount shall release the
Insurer from any liability to the Employer.
(b) "Part Two" of each Policy is an amount equal to the excess of the
proceeds or cash value of the Policy over Part One of the Policy.
1.5 EMPLOYER'S RIGHTS IN THE POLICIES. The Employer shall have the
specific, limited right to receive from the Insurer Part One of each the Policy
upon the lapse, surrender, maturity, or other termination of the Policy. Such
right is referred to herein as the "Refund Right".
1.6 EXECUTIVE'S RIGHTS IN THE POLICIES. The Executive shall retain and may
exercise all incidents and rights of ownership with respect to the Policies
except that:
(a) The Executive's right to receive the cash surrender value of the
Policy on lapse, surrender, or other termination of the Policy and
to name a beneficiary to receive death proceeds shall be subject to
the Refund Right.
(b) The Executive may not surrender, cancel, or borrow upon the security
of the Policies while this Agreement is in effect.
1.7 CUSTODY AND SAFEKEEPING. The Employer shall hold and be responsible
for safeguarding the Policies; provided, that if the Employer assigns its rights
under this Agreement with respect to any Policy as provided in Section 4.1 of
this Agreement, the Employer shall deliver the Policies to the assignee, and the
assignee shall be responsible for safeguarding the Policies.
1.8 ADMINISTRATIVE COOPERATION. The Parties shall execute and forward
promptly and without unreasonable delay, changes in beneficiary designations
forms and documents, including the Policies, as required by the Insurer, to
facilitate the exercise of any rights of the parties hereto. The Parties shall
not be required by this Section 1.8 to execute any documents or take any action
that would impair their own interests under the Policies.
ARTICLE 2. COLLATERAL ASSIGNMENT.
2.1 ASSIGNMENT BY THE EXECUTIVE. For the purposes of securing the Refund
Right with respect to each the Policy, concurrently with the execution of this
Agreement, the Executive shall execute a Collateral Assignment of each Policy in
the form of Exhibit A as
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<PAGE> 3
security for the premium advances made by the Employer with respect to such the
Policy. Such Collateral Assignment shall not be inconsistent with the rights of
the Parties under this Agreement.
ARTICLE 3. TERMINATION OF AGREEMENT.
3.1 DATE OF TERMINATION. This Agreement shall terminate upon any of the
following events:
(a) Performance of its terms, following death of the Executive;
(b) Termination of the Executive's employment with Employer for reasons
other than death;
(e) Any action by one party that would defeat or impair the interest of
such other party other than death or termination of employment;
provided that this Section 3.1(c) shall not give the Employer any
right to defeat or impair the interest of Executive. Such action
shall include, but is not limited to failure to pay premiums as
agreed or cancellation of a Policy by any party hereto.
(d) Release of the Employer's rights hereunder by the Employer or its
assignee.
3.2 REFUND RIGHT. In all instances of termination other than by release of
the Refund Right to the Executive or action of the Employer described in Section
3.1(c), the Employer (or, if the Employer has assigned its rights with respect
to a policy pursuant to Section 4.1, the Employer's assignee) shall be entitled
to an amount equal to Part One of each Policy. Any action of the Employer
described in Section 3.1(c) shall cause a release of the Refund Right to the
Executive. In the event the Employer is entitled to an amount equal to Part One
of each Policy, the Executive shall elect whether such amount shall be paid by
policy loan or whole or partial surrender of the Policy; provided, that if the
Executive does not notify the Employer of the Executive's election within thirty
(30) days after the date this Agreement terminated, the Employer may, in its
option: (i) surrender the Policy; (ii) partially surrender the Policy to the
extent necessary to withdraw Part One of the Policy; or (iii) satisfy its
entitlement to Part One of the policy by a combination of transactions described
in (i) through (iii). In each case, the Employer shall certify, as required by
the Insurer, the extent of Part One of the Policy, and payment of such amount
shall release the Insurer from any liability to the Employer. All Parties shall
execute the documents necessary to facilitate such use of the total cash value,
regardless of any rights any party may have in such total cash values.
3.3 RELEASE OF REFUND RIGHT. Upon release of the Refund Right, the
Executive shall have full ownership rights in the Policies, and all claims,
options, privileges, benefits, right,
-3-
<PAGE> 4
title, or interest of the Employer (to the extent not previously assigned) or
its assignee shall end.
3.4 DISPOSITION OF POLICY UPON TERMINATION OF AGREEMENT. Except as
provided in Section 3.2 of this Agreement, the Executive may dispose of all or
any portion of the Policy upon termination of this Agreement by sale or
otherwise except that no disposition of such the Policy shall take place unless:
(i) the Employer, or if Employer has assigned its rights under this Agreement,
the Employer's assignee, has certified to the Insurer that its interest in such
the Policy has been satisfied or released; or (ii) the Executive so certifies
with written notice to the Employer (or its assignee), and the Employer (or its
assignee) does not, within thirty (30) days after such notice, contest such
certification.
ARTICLE 4. TRUST.
4.1 ASSIGNMENT BY EMPLOYER. With the written consent of the Executive, the
Employer may assign its rights under this Agreement, including its interest in
the Policies created by the collateral assignment described in Section 2.1 of
this Agreement and its Refund Right described in Section 3.2 of this Agreement,
to such bank trust department or trust company as the Employer shall select in
its sole discretion (together with its successors in trust, the "Trustee"), as
trustees of the Filene's Basement Corp. Executive Severance Plan Trust, provided
that the Trustee thereof agrees to assume responsibility for safeguarding the
Policies. Except as may be provided in the governing instrument of such Trust,
such assignment to the Trustee shall terminate all interest of the Employer in
the Policies, and all of its right to receive any portion of the proceeds of the
Policies on maturity or surrender or pursuant to the Refund Right described in
Section 3.2 of this Agreement, or otherwise; provided, that such assignment to
the Trustee shall not relieve the Employer of any of its duties (including the
duty to advance premiums) or responsibilities under this Agreement.
ARTICLE 5. ADMINISTRATION.
5.1 PLAN NAME. This Agreement and other similar agreements constitute the
Filene's Basement Corp. Executive Split Dollar Plan (the "Plan").
5.2 ADMINISTRATOR. The Employer shall be the Administrator of the Plan for
purposes of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). The business address and telephone number of the Administrator are:
Filene's Basement Corp.
40 Walnut Street
Wellesley, MA 02181
Phone: 617-348-7000
-4-
<PAGE> 5
5.3 RESPONSIBILITY FOR ADMINISTRATION. The Employer shall have the
authority to control and manage the operation and administration of the Plan.
However, the Employer may allocate its responsibilities for the operation and
administration of the Plan, including the designation of persons who are not
named fiduciaries, to carry out fiduciary responsibilities. The Employer shall
effect such allocation of responsibilities by a written instrument signed by any
appropriate corporate officer. The Employer shall be responsible for making
timely delivery of any required premiums to the Insurer. All Plan documents
shall be retained by the Employer and made available for examination at the
Employer's business address. Upon written request, the Plan document and other
information shall be provided to the parties to the Plan.
5.4 CLAIMS PROCEDURE. Benefits shall be payable in accordance with the
Plan provisions. Should the Executive or any beneficiary fail to receive
benefits to which the Executive or any beneficiary believes he or she is
entitled, a claim may be filed. Any claim for a Plan benefit hereunder shall be
filed by the Executive or any beneficiary ("Claimant") or a duly authorized
representative of the Claimant of the Plan by written communication delivered to
the Employer (or its assignee) which is reasonably calculated to bring the claim
to the attention of the Employer.
If a claim for a Plan benefits is wholly or partially denied by the
Employer or its assignee, a written notice of the decision shall be furnished to
the Claimant or his or her duly authorized representative by the Employer or its
assignee within a reasonable period of time after receipt of the claim by the
Plan, which notice shall include the following information;
(a) The specific reason(s) for the denial;
(b) Special reference to the pertinent Plan provisions upon which the
denial is based;
(c) A description of any additional material or information necessary
for the Claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) An explanation of the Plan's claim review procedures.
In order that a Claimant may appeal a denial of a claim, a Claimant or his or
her duly authorized representative:
(a) May request a review by written application to the Employer or its
assignee not later than sixty (60) days after receipt by the
Claimant of written notification of denial of a claim;
(b) May review pertinent documents; and
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<PAGE> 6
(c) May submit issues and comments in writing.
A decision on review of a denied claim shall be made by the Employer or
its assignee not later than sixty (60) days after the Plan's receipt of a
request for review, unless special circumstances require an extension of time
for processing, in which case a decision shall be rendered by the Employer or
its assignee within a reasonable period of time, but not later than one hundred
twenty (120) days after receipt of a request for review. The decision on review
shall be in writing and shall include the specific reason(s) for the decision
and the specific reference(s) to the pertinent Plan provisions on which the
decision is based.
Notwithstanding anything contained in this section to the contrary, any
claim for a death benefit under a Policy shall be filed with the Insurer by the
Claimant or his or her duly authorized representative on the form or forms
prescribed for such purpose by the Insurer. The Insurer shall have sole
authority for determining whether a death claim shall or shall not be paid,
either in whole or in part, in accordance with the terms of such Policy.
ARTICLE 6. AMENDMENT OF AGREEMENT.
6.1 AMENDMENT BY PARTIES. This Agreement may be altered, amended or
modified, including the addition of any extra Policy provisions, by a written
agreement signed by the Employer and the Executive. It shall be the obligation
of the Employer to notify the Insurer of any amendments or changes to this
Agreement.
ARTICLE 7. INSURER.
7.1 LIABILITY OF INSURER. No Insurer shall be a party to this Agreement.
With respect to any Policy of insurance issued pursuant to this Agreement, the
issuing Insurer shall have no liability except as set forth in the Policy. Such
Insurer shall not be bound to inquire into or take notice of any of the
covenants herein contained as to policies of life insurance, or as to the
application of the proceeds of such policies. The Insurer shall be discharged
from all liability in making payments of the proceeds of Part One of the Policy
to the Employer or Employer's designee or assignee and of Part Two of the Policy
to Executive or Executive's designee and in permitting rights and privileges
under a Policy to be exercised pursuant to the provisions of the Policy.
ARTICLE 8. MISCELLANEOUS.
8.1 GOVERNING LAW. To the extent not preempted by federal law, this
Agreement shall be governed by and construed in accordance with the laws of
Massachusetts.
8.2 INTERPRETATION OR AGREEMENT. Where appropriate in this Agreement,
words used in the singular shall include the plural and words used in the
masculine shall include the feminine and vice versa.
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<PAGE> 7
8.3 BINDING AGREEMENT. This Agreement shall bind all Parties, their
successors and assigns and any Policy beneficiary.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the day
and year above stated.
Attest FILENE'S BASEMENT CORP.
By:
- ------------------------- -----------------------------
Name: Name:
Title: Title:
[seal]
Agreed to and accepted as set forth above.
Witness
- ------------------------- -----------------------------
Name:
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<PAGE> 8
SCHEDULE A
(LIST OF POLICIES)
-8-
<PAGE> 9
EXHIBIT A
(FORM OF COLLATERAL ASSIGNMENT)
-9-
<PAGE> 1
Exhibit 10.44
COLLATERAL ASSIGNMENT AND ACCEPTANCE OF
SPLIT DOLLAR POLICY
This ASSIGNMENT AND ACCEPTANCE is made effective [ ], by [ ]
(the "Executive") to Filene's Basement Corp. (the "Employer"), its successors
and assigns.
1. The subject of this Assignment and Acceptance is a certain life insurance
policy, No. [ ] (the "Policy"), issued by AETNA LIFE INSURANCE
COMPANY ("Insurer").
2. The Policy is subject to an Executive Split Dollar Life Insurance
Agreement (the "Agreement"), dated [ ], between the Employer and
the Executive. The Agreement was created to assist the Executive with his
or her personal life insurance program as an employee benefit for a valued
key employee. Such Agreement is hereby incorporated into and made a part
of this Assignment and Acceptance by reference.
3. Subject to the Agreement and the further terms and provisions of this
Assignment and Acceptance, the Executive hereby assigns, transfers and
sets over to the Employer and the Employer hereby accepts and acknowledges
receipt of the specific, limited right to receive Part One of the Policy,
as defined in the Agreement, upon lapse, surrender, maturity or other
termination of the Policy.
4. This Assignment and Acceptance is made and the Policy is held as
collateral security for the collection by the Employer of the Refund Right
described in paragraph 3.2 of the Agreement under the terms of the
Agreement.
5. Prior to termination of the Agreement, the Employer shall not
(a) surrender the Policy for cancellation; or
(b) except as provided in the Agreement, assign its interest hereunder
to any person other than to the Executive or to such other person as
the Executive may direct; and
(c) take any other action with respect to the Policy that would
adversely affect the interests of the Executive in the Policy or
impair the payment of the death proceeds or cash value in excess of
Employer's interest in the Policy.
Notwithstanding any provisions of this Assignment and Acceptance to the
contrary, the Employer shall, when its interest has been satisfied,
release this Assignment and Acceptance or reassign its interest in the
Policy to the Executive or the Executive's successors or assigns.
<PAGE> 2
6. Except as specifically provided herein or in the Agreement, the Executive
shall retain and possess all other incidents of ownership in the Policy,
including, but not limited to
(a) the right to cancel or surrender the Policy for its cash surrender
value, if any;
(b) the right to designate and change the beneficiary of the death
proceeds on the Policy; and
(c) the right to elect and exercise any optional mode of settlement
permitted by the Policy.
7. The Insurer shall have no duty or obligation to inquire into or
investigate the reason or validity of the request of the Employer or its
assignee to exercise any of its rights hereunder; provided that nothing
herein shall permit the Insurer to pay more than Part One of the Policy to
the Employer. The Insurer shall be fully protected in recognizing a
request by the Executive to exercise any right of ownership, whether or
not the Employer has notice of such request including, but not limited to,
the right to surrender the Policy.
8. Upon request, the Employer, or if the Employer has assigned its rights
pursuant to Section 4.1 of the Agreement, the Employer's assignee shall
forward the Policy to the Insurer for endorsement of any designation or
change of the Policy beneficiary, or any election of an optional plan for
payment of the proceeds. The Employer or its assignee shall forward the
Policy for these purposes without unreasonable delay.
9. The exercise of any right given herein to the Employer, or retained by the
Executive, shall be solely at the option of each party respectively and
shall not require notice or consent of one party to the other.
10. The Employer shall release and reassign all of its specific rights in the
Policy transferred by this Assignment and Acceptance upon receipt of
payment or performance of the Refund Right without unreasonable delay.
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<PAGE> 3
11. The Insurer is not a party to the Agreement or to this Assignment and
Acceptance.
IN WITNESS WHEREOF, the Executive and the Employer have executed this Assignment
and Acceptance on the day and year above stated.
Witness:
- -------------------------------------- -----------------------------------
Name:
FILENE'S BASEMENT CORP.
Attest: By:
----------------------------- -------------------------------
Name: Name:
Title: Title:
[seal]
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<PAGE> 1
Exhibit 10.45
ASSIGNMENT AND ACCEPTANCE OF SPLIT DOLLAR
LIFE INSURANCE POLICY AND AGREEMENT
This ASSIGNMENT AND ACCEPTANCE is made effective this [ ], as to
the Employee and the Employer, and effective this [ ], 1995 as
to the Trustee by Filene's Basement Corp. (the "Employer") to FIRST NATIONAL
BANK OF CHICAGO, as Trustee (together with its successors in trust, the
"Trustee") under the Filene's Basement Corp. Executive Severance Plan Trust
Agreement (the "Trust Agreement") effective [ ], between Employer
and Trustee for the benefit of [ ] ("the Executive") (the "Trust").
WITNESSETH:
WHEREAS, the Employer and the Executive have procured the issuance of one or
more life insurance contracts (each referred to as the "Policy" and all referred
to collectively as the "Policies") on the life of the Executive from AETNA LIFE
INSURANCE COMPANY (the "Insurer") owned by the Executive which are described on
Schedule A attached hereto and made a part hereof by reference; and
WHEREAS, the Employer and the Executive have entered into that certain Executive
Split Dollar Life Insurance Agreement dated [ ] with respect thereto
(the "Agreement", providing, among other things, for the specific limited right
of the Employer to receive Part One of each Policy, as defined in the Agreement,
upon lapse, surrender, maturity or other termination of the Policy (the "Refund
Right"); and
WHEREAS, the Executive has made a collateral assignment of each Policy to the
Employer to secure the Refund Right; and
WHEREAS, the Employer has created the Trust to provide certain severance
benefits to the Executive; and
WHEREAS, this Assignment and Acceptance is made by the Employer and the Trustee
to carry out the intention of the Agreement and the Trust.
NOW, THEREFORE, on consideration of the premises:
1. The Employer hereby transfers and assigns to the Trustee, in trust, and
the Trustee hereby accepts and acknowledges assignment of: (a) all
claims, options, privileges, benefits, right, title and interest of
Employer in, to and under the Policies, and each of them; and (b) the
Employer's rights under the Agreement including, without limitation, the
Refund Right.
<PAGE> 2
2. The Trustee shall hold and distribute all rights and interests assigned
hereby in accordance with the Trust Agreement.
3. The Insurer shall have no duty or obligation to inquire into or
investigate the reason or validity of the Trustee's request to exercise
any of its rights hereunder, or whether the Executive has notice of it.
The Insurer may treat any such request by the Trustee as an affirmation
that the request conforms to this Assignment and Acceptance and the
Agreement and is thereby authorized to act upon such requests; provided
the Insurer shall be fully protected in recognizing a request by the
Executive to exercise any right of ownership, whether or not the Trustee
has notice of such request including, but not limited to, the right to
surrender the Policy.
4. Upon request, the Trustee shall forward the Policy to the insurer for
endorsement of any designation or change of the Policy beneficiary, or any
election of an optional plan for payment of the proceeds. The Trustee
shall forward the Policy for these purposes without unreasonable delay.
5. The Insurer is not a party to the Agreement or to this Assignment and
Acceptance.
IN WITNESS WHEREOF, the Executive and the Employer have executed this Assignment
and Acceptance on the day and year above stated.
FILENE'S BASEMENT CORP.:
Attest: By:
--------------------------------- --------------------------------
Name: Name:
Title: Title:
[seal]
IN WITNESS WHEREOF, the Trustee has executed this Assignment and Acceptance on
the [ ]
THE FIRST NATIONAL BANK OF CHICAGO,
As Trustee
Attest: By:
-------------------------------- -------------------------------
Name: Name:
Title: Title:
[seal]
-2-
<PAGE> 3
SCHEDULE A
(LIST OF POLICIES)
EXECUTIVE INSURER POLICY NUMBER
- --------- ------- -------------
-3-
<PAGE> 1
FILENE'S BASEMENT CORP. Exhibit 11
Computation of Net Income per Common Share
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
January 31, 1998 February 1, 1997 February 3, 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
The computation of net income (loss)
available and adjusted shares outstanding
follows:
Net income (loss) as
reported ....................................... $ (5,760,000) $ 6,466,000 $(31,791,000)
============ ============ ============
Net income (loss) used for
basic and diluted
computations ........................................ $ (5,760,000) $ 6,466,000 $(31,791,000)
============ ============ ============
Weighted average number
of common shares outstanding
used for basic computations ......................... 20,757,494 20,534,129 20,402,543
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 ............ 0 316,980 0
------------ ------------ ------------
Weighted average number of
common and common equivalent
shares outstanding used for
diluted computations ................................ 20,757,494 20,851,109 20,402,543
============ ============ ============
</TABLE>
<PAGE> 1
EXHIBIT 13
FILENE'S
BASEMENT
ANNUAL REPORT
1997
<PAGE> 2
FILENE'S BASEMENT CORP. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended Ended Ended
January 31, February 1, February 3, January 28, January 29,
Dollars in millions, except per share amounts 1998 1997 1996(1) 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales ........................................... $ 554.3 $ 545.0 $ 582.5 $ 608.3 $ 578.8
Operating income (loss) (2) ......................... (3.2) 14.2 (27.3) 5.8 (1.7)
Income (loss) before extraordinary item
and cumulative effect of a change in
accounting principle (2) ........................... (5.8) 6.5 (31.8) 1.1 (4.2)
Net income (loss) (2) ............................... $ (5.8) $ 6.5 $ (31.8) $ (1.2) $ (3.2)
========== ========== ========== ========== ==========
Basic and diluted income (loss) per common share:
Income (loss) before extraordinary item
and cumulative effect of a change in
accounting principle (2) ........................... $ (0.28) $ 0.31 $ (1.56) $ 0.05 $ (0.21)
Extraordinary item .................................. -- -- -- (0.11) --
Cumulative effect of a change in
accounting principle ............................... -- -- -- -- 0.05
---------- ---------- ---------- ---------- ----------
Net income (loss) (2) ............................... $ (0.28) $ 0.31 $ (1.56) $ (0.06) $ (0.16)
========== ========== ========== ========== ==========
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Data:
Number of stores in operation at end
of period .......................................... 45 43 47 55 54
Comparable store net sales increase (decrease) (1.4%) 0.7% (5.7%) (0.5%) (2.3%)
========== ========== ========== ========== ==========
- ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
Total assets ........................................ $ 175.3 $ 183.2 $ 210.1 $ 238.9 $ 237.0
Long term debt (including capital lease
obligations) ....................................... 14.3 10.7 38.6 39.1 25.7
Total stockholders' equity .......................... 82.5 87.5 80.9 112.2 112.5
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fiscal year ended February 3, 1996 included 53 weeks.
(2) The fiscal year ended January 31, 1998 included a $6.9 million depreciation
charge for system replacements related to the year 2000 (Note D). The
fiscal year ended February 3, 1996 included a $30.1 million charge for
store closures and other charges (Note L). The fiscal year ended January
28, 1995 included a $4.9 million ($3.2 million after tax) charge for store
closures. The fiscal year ended January 29, 1994 included a $14.0 million
($9.4 million after tax) charge for store closures.
1
<PAGE> 3
SHAREHOLDER LETTER
We are disappointed with the results for 1997. Fiscal 1997's sales increased by
2%, while same store sales decreased by 1%. An overall weak ready-to-wear
environment, coupled with the disappointing performance of a few key
ready-to-wear vendors, was responsible for almost the entire decline in sales.
We expect that 1998 will bring a much broader assortment of American and
European manufacturers and designers to our ready-to-wear areas. We will
continue to focus on enhancing the better, designer mix of all parts of our
offering. Additionally, we hope that the home business will be dramatically
increased. To date, the results have been most gratifying. We view 1997 as a
minor correction in the continuing repositioning of the Company that started in
1995.
Our financial position remains strong. We repaid our long-term debt in December,
and, in January 1998, we entered into a new three-year revolving credit and term
loan facility that reduced our overall cost of borrowing.
1997 marked the beginning of the new management team at Filene's Basement and
with it some modifications in the operation of our business. Changes have been
implemented in logistics and store operations. As a result, we expect a
smoother, more efficient flow of merchandise to the stores. Additionally, the
installation of new equipment will make the taking of price changes and
re-ticketing of merchandise more accurate, timely and less expensive.
Many businesses face a year 2000 computer programming problem. As announced in
January 1998, we will write down approximately $9.4 million of MIS assets of
which $6.9 million was written down in 1997. Current software will be upgraded
with Year 2000 compliant software. Filene's Basement is taking advantage of this
Year 2000 solution to also upgrade its point of sale registers and its
communication and reporting systems. The new point of sale registers will be at
least twice as fast as the current ones and will have many additional features
including price look-up.
In keeping with our goal of measured growth, we have opened two new stores in
Spring 1998. Our Rockville, Maryland store and our Devon, Pennsylvania store
have opened very successfully. We anticipate opening an additional three new
stores this fall and extensively remodeling and increasing the size of our very
successful Chevy Chase, Maryland store.
In February 1998, we suffered a fire in our Auburn Distribution Center. Our
associates reacted in quick order and the amount of damage to our facility was
minimized. We are insured for both the replacement value of the merchandise and
for lost profits resulting from business interruption. The fiscal effect of this
event will be a write-off of merchandise and the incurrence of extra expense in
the first quarter of 1998, but we are confident that the Company will be fully
reimbursed later in fiscal 1998.
Our mission remains to increase same store sales, add controlled growth with new
stores and enhance profitability by making our operations more efficient.
The support of our customers, shareholders and associates has been truly
appreciated.
Sincerely,
Samuel J. Gerson W. Jay Carothers
2
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
RESULTS OF OPERATION
The following table sets forth, for the periods indicated, the Company's
statement of operations expressed as a percentage of sales. This table and
subsequent discussions should be read in conjunction with the Consolidated
Financial Statements and related Notes. The Company's fiscal year ends on the
Saturday closest to January 31 in each year. The fiscal years ended January 31,
1998 (Fiscal 1997) and February 1, 1997 (Fiscal 1996) included 52 weeks versus
the year ended February 3, 1996 (Fiscal 1995) that included 53 weeks.
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Net sales ................... 100.0% 100.0% 100.0%
Cost of sales, including
buying, receiving and
occupancy costs .......... 77.1% 75.6% 79.7%
----- ----- -----
Gross profit .......... 22.9% 24.4% 20.3%
Selling, general and
administrative expenses .. 23.2% 21.5% 22.8%
Amortization of intangible
assets and beneficial
operating lease rights . 0.3% 0.3% 0.2%
Charge for store closings ... -- -- 2.0%
----- ----- -----
Operating income (loss) (0.6%) 2.6% (4.7%)
Interest expense, net ....... 0.4% 0.7% 0.8%
----- ----- -----
Income (loss) before
income taxes ........... (1.0%) 1.9% (5.5%)
Income tax
provision (benefit) ...... -- 0.7% (0.1%)
----- ----- -----
Net income (loss) ........... (1.0%) 1.2% (5.4%)
===== ===== =====
</TABLE>
NET SALES
Net sales for Fiscal 1997 increased $9.3 million, or 2%, from Fiscal 1996 to
$554.3 million. Comparable store sales for Fiscal 1997 decreased 1% versus the
same period last year primarily due to the shortfall in demand for women's
sportswear and a general decline in the retail stocks business, which was
partially offset by gains in the home goods category. Two new stores were opened
during the first quarter of Fiscal 1997, bringing the total number of stores in
operation at the end of the year to 45.
Net sales for Fiscal 1996 decreased $37.5 million, or 6%, from Fiscal 1995 to
$545.0 million. Comparable store sales for Fiscal 1996 increased 1% versus the
prior year comparable 52 week period. During the first quarter of Fiscal 1996,
four of the stores included in the Fiscal 1995 charge for store closings were
closed. The four closed stores accounted for net sales of $1.4 million and $20.6
million in Fiscal 1996 and Fiscal 1995, respectively, and direct store
contribution losses of $0.2 million and $0.5 million, respectively. In addition,
the Braintree, MA store was closed from May 1996 through mid-August 1996 for a
major remodeling in connection with a reconstruction of the shopping mall by its
owners. No new stores were opened during Fiscal 1996. The total number of stores
in operation at the end of Fiscal 1996 was 43 versus 47 for Fiscal 1995.
During Fiscal 1995, ten stores were closed based on their inability to achieve
and maintain profitability objectives and an assessment of their future
prospects for positive contribution. Two stores were opened during Fiscal 1995.
The total number of stores in operation at the end of Fiscal 1995 was 47. The
ten closed stores accounted for net sales of $14.0 million in Fiscal 1995 and
direct store contribution losses of $2.1 million.
GROSS PROFIT
Gross profit as a percentage of sales was 22.9% for Fiscal 1997 compared with
24.4% in Fiscal 1996, a decrease of 1.5%. This decrease was primarily due to an
increased level of markdowns, particularly in the women's sportswear categories.
During the fourth quarter, the Company recorded a $3.0 million charge to
write-down this inventory due to a weakening demand in the fall season. In
addition, buying, receiving and occupancy costs as a percentage of sales
increased 0.4%.
Gross profit as a percentage of sales was 24.4% for Fiscal 1996 compared with
20.3% in Fiscal 1995, an increase of 4.1%. This improvement in profitability was
primarily the result of a significant reduction in the
3
<PAGE> 5
number of promotional sales events in combination with improved same store sales
performance and a lower mix of low margin retail stocks. In addition, Fiscal
1995 gross profit was impacted by $15.9 million of cost markdowns in the fourth
quarter related to the exiting of certain lines of apparel and the Fiscal 1995
store closing plan.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $11.5 million in Fiscal
1997 to $128.8 million from $117.2 million in Fiscal 1996. As a percentage of
sales, this represented an increase of 1.7%. The increase was mainly due to
additional depreciation, as discussed below.
As a result of the Company's review of its "Year 2000" exposure, it was
determined that certain computer software, hardware and other related assets
will need to be replaced with "Year 2000" compliant systems. The Company has
adjusted its depreciation rates to reflect the useful lives of these assets
which resulted in an additional depreciation charge of $6.9 million in the
fourth quarter of Fiscal 1997. The net book value of these assets at January 31,
1998 totaled $3.5 million and will be fully depreciated in Fiscal 1999. See
Liquidity and Capital Resources.
Selling, general and administrative expenses decreased $15.4 million in Fiscal
1996 from $132.7 million in Fiscal 1995, a decrease of 1.3% as a percentage of
sales. This decrease was primarily due to the elimination of operating expenses
directly related to closed stores as well as the favorable effects of the
Company's continuing overall expense control initiatives. In addition, $2.8
million was charged during the fourth quarter of Fiscal 1995 for the write-off
of certain impaired assets, including computer hardware that previously
supported systems that have been displaced in connection with the ongoing
information systems development program.
CHARGE FOR STORE CLOSINGS
During the fourth quarter of Fiscal 1995, the Company recorded an $11.4 million
charge in connection with planned store closures, including an additional $0.8
million related to Fiscal 1994 planned closures not covered by the original
reserve. The $11.4 million charge included reserves for estimated costs
associated with remaining lease obligations, write-offs and losses related to
leasehold improvements and severance costs. See Note L of Notes to Consolidated
Financial Statements.
The eight stores included in the Fiscal 1995 closing reserve and the nine stores
included in the Fiscal 1994 closing reserve recorded sales in Fiscal 1995 of
$46.3 million and $10.0 million, respectively, and direct store contribution
losses of $0.0 million and $1.8 million, respectively.
NET INTEREST EXPENSE
Net interest expense was $2.6 million in Fiscal 1997 compared with $3.7 million
in Fiscal 1996, a 30.2% decrease. This $1.1 million decrease was primarily
attributable to lower average borrowings and reduced interest rates in Fiscal
1997 versus Fiscal 1996.
Net interest expense decreased 24.2% to $3.7 million in Fiscal 1996 from $4.9
million in Fiscal 1995. This decrease was the result of the Company's
refinancing in May 1996 of its previously existing revolving credit facility and
fixed rate debt with a new revolving credit and term loan agreement at
substantially more favorable interest rates than the previous arrangement.
INCOME TAXES
For Fiscal 1997, the loss before income taxes was $5.8 million, or $.28 per
share, compared with income before income taxes of $10.4 million, or $.50 per
share for Fiscal 1996. The Fiscal 1997 income tax benefit was reduced to zero by
an increase in the valuation allowance necessary to bring the net deferred tax
assets to a level that would, more likely than not, be realized. The income tax
provision for Fiscal 1996 was $4.0 million, an effective rate of 38.0%.
For Fiscal 1995, the loss before income taxes was $32.2 million, or $1.58 per
share. The income tax benefit of $0.4 million was net of a write-off of $6.3
million of deferred tax assets which reduced those assets to a level which,
based on information available at the time, would more likely than not be
realized.
LIQUIDITY AND CAPITAL RESOURCES
During Fiscal 1997, net cash used in operations was $1.1 million, compared with
cash provided by operations of $44.9 million in the prior year. Operating cash
in Fiscal 1996 included net positive cash flow from the receipt in May 1996 of
$9.6 million of federal income tax refunds resulting from the carryback of net
operating losses, the replacement of approximately $10.5 million of cash on
deposit with factors with standby letters of credit and an increase in
merchandise payables of approximately $10.3 million. In addition to these items
from Fiscal 1996, the earnings before interest, taxes, depreciation and
amortization was down approximately $10.6 million from Fiscal 1996.
4
<PAGE> 6
Net cash used in investing activities during Fiscal 1997 decreased $3.6 million
over the comparable period in Fiscal 1996. The net decrease was attributable to
an $8.5 million increase in proceeds from the sale of property and leasehold
interests, which was partially offset by increased capital expenditures of $4.9
million for new and remodeled stores.
During Fiscal 1997, net cash provided by financing activities increased $42.4
million over Fiscal 1996. This increase was primarily due to an increase in
proceeds from term loans of $2.5 million, a $25.0 million decrease in long-term
debt repayments, and a $14.3 million increase in net borrowings under the
revolving credit facility.
On January 30, 1998, the Company entered into an Amended and Restated Revolving
Credit and Term Loan Agreement (the "Agreement") which replaced the Revolving
Credit and Term Loan Agreement dated May 23, 1996, as amended June 28, 1996. The
Agreement includes a $65.0 million revolving credit facility and a $12.5 million
term loan. The new facility, which continued a security interest in all of the
Company's assets, expires on February 3, 2001 when all outstanding loans
thereunder mature. Principal payments of the term loan are due in nine quarterly
installments of $500,000 commencing on October 31, 1998, with a final payment
due at maturity. See Note F of the Notes to Consolidated Financial Statements.
In February 1998, the Company entered into an interest rate swap agreement for
varying notional amounts, commencing at $12.5 million with reductions matching
the amortization of the term loan. In addition, the Company entered into an
interest rate swap agreement for varying notional amounts relating to the
revolving credit facility. These agreements were entered into as a hedge against
increasing LIBOR rates and carry an interest rate of 5.73% through February 3,
2001.
As of January 31, 1998, the Company had $31.0 million of working capital and
$30.1 million of remaining credit availability versus $18.0 million and $40.7
million, respectively, as of February 1, 1997. As of January 31, 1998,
outstanding obligations under the Agreement were $15.6 million, including the
$12.5 million term loan, and the Company had $9.3 million in letter of credit
commitments. As of February 1, 1997, the Company had outstanding loans and
letter of credit commitments of $27.0 million, including a $10.0 million term
loan. Maximum loan usage under the $65 million revolving loan facilities during
Fiscal 1997 was $38.9 million.
Short term trade credit represents a significant source of financing for
merchandise inventories. Trade credit arises from the willingness of the
Company's vendors to grant certain payment terms for inventory purchases.
The Company believes it has in place arrangements involving short term lines and
letter of credit commitments with vendors and third party factors that, in
addition to the aforementioned Agreement and internally generated working
capital, are adequate to meet its seasonal inventory needs, operating expenses
and anticipated capital expenditure requirements for Fiscal 1998.
The Company has never paid a cash dividend and has no plans to pay dividends on
its Common Stock in the foreseeable future. The Agreement prohibits the payment
of any dividends.
The Company's business is seasonal, reflecting increased consumer demand in the
fall season. Accordingly, the second half of each fiscal year provides a greater
portion of the Company's annual sales and operating profit than does the first
half. The Company increases its inventory levels throughout the spring and early
fall, with such levels peaking during the Christmas season.
YEAR 2000 COMPLIANCE
The Company utilizes software and related technologies throughout its business
that will be affected by the "Year 2000" problem, which is common to most
corporations, and concerns the inability of information systems, primarily
computer software programs, to properly recognize and process date sensitive
information as the year 2000 approaches. The Company has completed a review of
its computer systems to identify the systems that could be affected by the "Year
2000" problem and is developing an implementation plan to resolve the issue. It
is expected that most non-compliant systems will be replaced with new systems
that will provide certain competitive benefits as well as ensure "Year 2000"
compliance in time to minimize any disruptive effects on operations. While it is
not possible, at present, to predict the total cost of this effort, the capital
investment, whether leased or purchased, in new software and equipment needed to
achieve "Year 2000" compliance and enhance existing systems, including the
installation of a new register system, is currently estimated at approximately
$15.0 to $20.0 million. Funding requirements have been incorporated into the
Company's capital and operating plans and are not expected to have a material
adverse impact on the Company's financial condition, results of operations or
liquidity.
5
<PAGE> 7
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Annual Report contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements, including references to future growth
and improved margins. Without limiting the foregoing, the words "believes",
"anticipates", "plans", "expects" and similar expressions are intended to
identify forward-looking statements. Factors which may cause actual results to
differ materially from those indicated by such forward-looking statements
include, among others: (i) economic and weather conditions which affect the
buying patterns of the Company's customers, (ii) actions of the Company's
competitors and the Company's ability to respond to such actions, (iii) the
continued support of the Company's numerous vendors and third party factors in
the form of short-term trade credit through extended payment terms and letters
of credit, (iv) a decrease in the Company's available funds under its existing
credit facility due to the impairment or ineligibility of a significant portion
of its borrowing base, (v) the continued success of the Company's efforts to
implement planned strategic initiatives, (vi) unexpected store closings and the
related higher markdowns associated with inventory liquidations and (vii) the
unanticipated impact of the "Year 2000" problem.
6
<PAGE> 8
FILENE'S BASEMENT CORP. CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the fiscal years ended January 31, February 1, February 3,
Dollars in thousands, except per share amounts 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales (Note B) .................................................... $ 554,321 $ 545,025 $ 582,509
Cost of sales, including buying, receiving and occupancy costs ........ 427,244 412,155 464,411
------------ ----------- ------------
Gross profit ..................................................... 127,077 132,870 118,098
Selling, general and administrative expenses .......................... 128,764 117,238 132,666
Amortization of intangible assets and beneficial
operating lease rights ............................................... 1,467 1,467 1,352
Charge for store closings (Note L) .................................... -- -- 11,377
------------ ----------- ------------
Operating income (loss) .......................................... (3,154) 14,165 (27,297)
Interest expense, net of $47, $213 and $227 of interest income (Note F) 2,606 3,735 4,927
------------ ----------- ------------
Income (loss) before income taxes ..................................... (5,760) 10,430 (32,224)
Income tax provision (benefit) (Note H) ............................... -- 3,964 (433)
------------ ----------- ------------
Net income (loss) ..................................................... $ (5,760) $ 6,466 $ (31,791)
============ =========== ============
Basic and diluted earnings per share :
Net income (loss) ..................................................... $ (0.28) $ 0.31 $ (1.56)
============ =========== ============
Weighted average number of common shares outstanding:
Basic 20,757,494 20,534,129 20,402,543
Diluted 20,757,494 20,851,109 20,402,543
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
7
<PAGE> 9
FILENE'S BASEMENT CORP. CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
January 31, February 1,
Dollars in thousands 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................................... $ 475 $ 462
Inventories .................................................................. 93,021 88,763
Other current assets (Note C) ................................................ 11,162 9,363
--------- ---------
Total current assets ........................................................... 104,658 98,588
Property, plant and equipment, net (Note D) .................................... 48,341 53,305
Beneficial operating lease rights, net of $12,481 and $11,167 of accumulated
amortization (Note B) ......................................................... 13,497 14,811
Assets held for sale (Note D) .................................................. -- 7,962
Intangible assets, goodwill and other, net of $15,053 and $14,900 of accumulated
amortization .................................................................. 8,842 8,555
--------- ---------
Total assets ................................................................. $ 175,338 $ 183,221
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade ...................................................... $ 42,698 $ 44,887
Accrued expenses (Note E) .................................................... 26,455 31,730
Short-term debt (Note F) ..................................................... 3,100 1,000
Current portion of long-term debt (Note F) ................................... 1,000 2,500
Obligations under capital leases, due within one year (Note G) ............... 414 437
--------- ---------
Total current liabilities ...................................................... 73,667 80,554
Reserve for store closings and other liabilities (Note L) ...................... 3,096 2,492
Deferred revenue (Note M) ...................................................... 1,832 1,999
Long-term debt (Note F) ........................................................ 11,500 7,500
Obligations under capital leases (Note G) ...................................... 2,777 3,191
Commitments and contingencies (Note G)
Stockholders' equity (Note J):
Common stock, $.01 par value; authorized 70,000,000 shares;
20,959,338 and 20,658,533 shares issued ..................................... 210 207
Additional paid-in capital ................................................... 86,933 86,195
Retained earnings (accumulated deficit) ...................................... (4,661) 1,099
Cost of 75,000 common shares in treasury ..................................... (16) (16)
--------- ---------
Total stockholders' equity ..................................................... 82,466 87,485
--------- ---------
Total liabilities and stockholders' equity ..................................... $ 175,338 $ 183,221
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
8
<PAGE> 10
FILENE'S BASEMENT CORP. CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
For the fiscal years ended January 31, 1998, February 1, 1997 and February 3,
1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Unamortized
Additional Restricted Total
Common Paid-in Retained Stock Treasury Stockholders'
Dollars in thousands Stock Capital Earnings Compensation Stock Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 28, 1995 ........... $ 204 $ 85,596 $ 26,424 $(37) $(16) $112,171
Issuance of 122,546 and 53,144 shares
through exercise of stock options
and employee stock purchase plan,
respectively ......................... 2 316 318
Amortization related to 5,480 shares of
restricted stock ..................... 25 25
Tax benefit from exercise of stock
options .............................. 136 136
Net loss .............................. (31,791) (31,791)
-------- -------- -------- ---- ---- --------
Balance at February 3, 1996 ........... 206 86,048 (5,367) (12) (16) 80,859
Issuance of 42,659 and 40,731
shares through exercise
of stock options and employee
stock purchase plan,
respectively ......................... 1 147 148
Amortization related to 5,480 shares
of restricted stock .................. 12 12
Net income ............................ 6,466 6,466
-------- -------- -------- ---- ---- --------
Balance at February 1, 1997 ........... 207 86,195 1,099 0 (16) 87,485
Issuance of 263,501 and 37,304
shares through exercise
of stock options and employee
stock purchase plan,
respectively ......................... 3 738 741
Net loss .............................. (5,760) (5,760)
-------- -------- -------- ---- ---- --------
Balance at January 31, 1998 ........... $ 210 $ 86,933 $ (4,661) $ 0 $(16) $ 82,466
======== ======== ======== ==== ==== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
9
<PAGE> 11
FILENE'S BASEMENT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
For the fiscal years ended January 31, February 1, February 3,
Dollars in thousands 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .............................................. $ (5,760) $ 6,466 $(31,791)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operations:
Charge for store closings ................................... -- -- 11,377
Depreciation and amortization ............................... 19,009 12,271 13,255
Deferred income taxes ....................................... (137) 3,436 8,633
Other ....................................................... (167) (155) (142)
Changes in operating assets and liabilities:
(Increase) decrease in inventory ............................. (4,258) (2,986) 31,727
(Increase) decrease in other current assets .................. (3,905) 18,943 (15,932)
Increase (decrease) in accounts payable ...................... (2,189) 9,730 (14,409)
Decrease in accrued expenses and other liabilities ........... (3,707) (2,820) (6,404)
-------- -------- --------
Net cash provided by (used in) operating activities ............ (1,114) 44,885 (3,686)
Cash flows from investing activities:
Purchase of property, plant and equipment .................... (12,539) (7,612) (11,979)
Proceeds from sale of property ............................... 7,135 -- --
Proceeds from sale of leasehold interest ..................... 2,106 728 572
Other ........................................................ (479) (462) (2,289)
-------- -------- --------
Net cash used in investing activities .......................... (3,777) (7,346) (13,696)
Cash flows from financing activities:
Short term borrowings, net ................................... 2,100 (12,200) 13,200
Principal payments on capital lease obligations .............. (437) (489) (450)
Net proceeds from (payments of) long-term debt ............... 2,500 (25,000) --
Proceeds from sale of common stock to employees .............. 741 148 318
Tax benefit resulting from exercise of stock options ......... -- -- 136
-------- -------- --------
Net cash provided by (used in) financing activities ............ 4,904 (37,541) 13,204
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ........... 13 (2) (4,178)
Cash and cash equivalents at beginning of period ............... 462 464 4,642
-------- -------- --------
Cash and cash equivalents at end of period ..................... $ 475 $ 462 $ 464
======== ======== ========
Supplemental disclosure of cash flow information:
Interest paid ............................................... $ 2,392 $ 3,398 $ 5,528
Income taxes paid ........................................... 1,654 257 164
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
10
<PAGE> 12
FILENE'S BASEMENT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ORGANIZATION AND BASIS OF
PRESENTATION
In June 1988, Filene's Basement Corp. (the "Company"), which was organized by
the management of the Filene's Basement division of Federated Department Stores,
Inc. ("Federated"), entered into a stock purchase agreement with Federated
whereby, on July 29, 1988, the Company purchased all of the outstanding capital
stock of Filene's Basement, Inc. The transaction was treated as a purchase and
the excess of the purchase price over the book value of the net assets acquired
was allocated to the acquired assets based on their relative fair values.
Filene's Basement, Inc. operates a chain of off-price specialty apparel stores
located primarily in the Northeast and Midwest.
The Company's fiscal year ends on the Saturday closest to January 31. The fiscal
years ended on January 31, 1998 (Fiscal 1997), February 1, 1997 (Fiscal 1996)
and February 3, 1996 (Fiscal 1995). Fiscal 1997 and Fiscal 1996 included 52
weeks versus Fiscal 1995, which included 53 weeks.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions have
been eliminated. Certain prior year amounts were reclassified to conform to
current year presentations.
B. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, demand deposits and short-term
investments with maturities less than three months at the time of the initial
investment. The carrying amount approximates fair value because of the short
maturity of these investments.
MERCHANDISE INVENTORIES
Merchandise inventories are stated at the lower of cost (determined by the
retail method on a first-in, first-out basis) or market.
SALES
The net sales amounts include approximately $32,086,000, $30,349,000 and
$32,263,000 of leased departments sales for the fiscal years ended January 31,
1998, February 1, 1997, and February 3, 1996, respectively.
DEPRECIATION AND AMORTIZATION
For financial reporting purposes, the Company provides for depreciation by use
of the straight-line method over the estimated useful lives of the assets. Any
gain or loss from the disposal of assets is included in income when realized.
Leasehold improvements are amortized over the shorter of their useful lives or
the lease period.
BENEFICIAL OPERATING LEASE RIGHTS
Beneficial operating lease rights represent the benefit assigned to favorable
lease terms on existing operating leases at the date of acquisition. In
accordance with purchase accounting requirements, the Company recorded an asset
of $26,128,000 at the acquisition date, which represented the benefit related to
favorable lease terms on then existing operating leases. Beneficial operating
lease rights are amortized over the remaining terms of the leases (from 4 to 15
years) by use of the straight-line method.
INTANGIBLE ASSETS AND GOODWILL
The Company has recorded goodwill and certain intangible assets at their fair
value when acquired. The intangible assets are amortized on a straight line
basis over their estimated lives ranging from six months to five years while
goodwill is amortized over 40 years. The Company accounts for long-lived and
intangible assets in accordance with Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of." The Company reviews its intangible assets
for events or changes in circumstances which might indicate the carrying amount
of the assets may not be recoverable. The Company assesses the recoverability of
the assets by determining whether the
11
<PAGE> 13
amortization of such long-lived and intangible assets can be recovered over
their remaining lives through projected undiscounted future cash flows. The
amount of impairment, if any, is measured based on projected discounted future
cash flows using a discount rate reflecting the Company's average cost of funds.
At January 31, 1998, no such impairment of assets was indicated.
STOCK-BASED COMPENSATION
Effective February 4, 1996, the Company adopted the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company has elected to continue
to account for stock options at the intrinsic value with disclosure of the
effects of the fair value accounting on net income and earnings per share on a
pro-forma basis.
OTHER
Pre-opening costs are charged to expense within the fiscal year that a new store
opens.
Advertising costs, included in selling, general and administrative expenses, are
expensed when incurred. Advertising expense was $20.7 million, $20.4 million and
$22.2 million for Fiscal 1997, Fiscal 1996 and Fiscal 1995, respectively.
COMPUTATION OF INCOME PER COMMON SHARE
In accordance with SFAS No. 128, "Earnings per Share", basic earnings per share
is computed using the weighted average number of shares outstanding during each
period. Diluted earnings per share is computed using the weighted average number
of outstanding shares plus the weighted average number of dilutive common
equivalent shares (stock options) outstanding during each period.
The following is a reconciliation of the outstanding shares used in calculating
net income (loss) per share for the years ended January 31, 1998, February 1,
1997 and February 3, 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
January 31, February 1, February 3,
1998 1997 1996
- --------------------------------------------------------------------
<S> <C> <C> <C>
Average shares
outstanding ........ 20,757,494 20,534,129 20,402,543
Dilutive common
equivalent shares .. -- 316,980 --
---------- ---------- ----------
Dilutive shares
outstanding ........ 20,757,494 20,851,109 20,402,543
========== ========== ==========
</TABLE>
Common stock equivalents for the fiscal years ended January 31, 1998 and
February 3, 1996 of 1,116,658 shares and 449,930 shares, respectively, were not
included in the computation of diluted earnings per share because to do so would
have been antidilutive for these periods.
C. OTHER CURRENT ASSETS
The major components of other current assets are as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------
January 31, February 1,
1998 1997
- --------------------------------------------------------------
<S> <C> <C>
Accounts receivable, trade $ 2,031 $ 1,940
Notes receivable .......... -- 2,106
Other accounts receivable . 3,432 978
Prepaid expenses .......... 5,699 4,339
------- -------
Total other current assets $11,162 $ 9,363
======= =======
</TABLE>
D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost less accumulated depreciation
and amortization. Major additions and improvements are capitalized, while
repairs and maintenance are expensed as incurred. Property, plant and equipment
at January 31, 1998 and February 1, 1997 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Estimated
Remaining
Useful Life January 31, February 1,
(Years) 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Leasehold costs and
improvements ............... 1 to 15 $ 45,616 $ 39,739
Furniture, fixtures
and equipment .............. 3 to 6 59,950 62,430
Capital leases .............. 1 to 6 6,347 6,347
Construction in
progress ................... -- 430 6,720
--------- ---------
112,343 115,236
Less accumulated depreciation
and amortization ........... (64,002) (61,931)
--------- ---------
Net property plant
and equipment .............. $ 48,341 $ 53,305
========= =========
</TABLE>
Depreciation expense for the fiscal years ended January 31, 1998, February 1,
1997, and February 3, 1996 aggregated approximately $17,151,000, $10,327,000 and
$11,426,000, respectively. As a result of the Company's review of its "Year
2000" exposure, it was determined that certain computer software, hardware and
other related assets will need to be replaced with "Year 2000" compliant
systems.
12
<PAGE> 14
The Company has adjusted its depreciation rates to reflect the useful lives of
these assets which resulted in an additional depreciation charge of $6.9 million
in the fourth quarter of Fiscal 1997.
Accumulated depreciation and amortization includes accumulated amortization of
capital leases of approximately $4,301,000 and $3,911,000 at January 31, 1998
and February 1, 1997, respectively.
In November 1997, the Company sold the land, building and fixtures related to
the closing of its Somerville Distribution Center. These assets were previously
recorded at February 1, 1997 as assets held for sale. The Company incurred a net
loss on this transaction of approximately $776,000, which was recorded against
the store closing reserve (Note L).
E. ACCRUED EXPENSES
The major components of accrued expenses are as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
January 31, February 1,
1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
Accrued rent .................... $ 7,825 $ 7,362
Employee compensation
and benefits ................... 6,606 9,563
Accrued income taxes ............ 3,728 4,053
Liability for merchandise credits
and gift certificates .......... 3,003 2,761
Accrued insurance ............... 1,910 1,843
Taxes other than
income taxes ................... 1,778 1,221
Reserve for store closings ...... 200 2,777
Other ........................... 1,405 2,150
------- -------
Total accrued expenses .......... $26,455 $31,730
======= =======
</TABLE>
F. SHORT-TERM BORROWINGS AND
LONG-TERM DEBT
On January 30, 1998, the Company entered into an Amended and Restated Revolving
Credit and Term Loan Agreement (the "Agreement") which replaced the Revolving
Credit and Term Loan Agreement (the "Original Agreement") dated May 23, 1996, as
amended June 28, 1996. The Agreement includes a $65.0 million revolving credit
facility and a $12.5 million term loan. The new facility, which continued a
security interest in all of the Company's assets, expires on February 3, 2001
when all outstanding loans thereunder mature. Principal payments of the term
loan are due in nine quarterly installments of $500,000 commencing on October
31, 1998, with final payment due at maturity. The carrying amount of the
Company's long-term debt approximates the fair value.
Interest rates under the Agreement for revolving loans remained at prime or
LIBOR plus 2.00%. Interest rates for the term loan were reduced by 25 basis
points versus the Original Agreement. Interest rates for the term loan are also
at prime or LIBOR plus 2.00%. In addition, the Company must pay commitment fees
at an annual rate of 0.375% on the average unused portion of the commitment.
During Fiscal 1997, under the Original Agreement advances against eligible
inventory and receivables were at interest rates of either prime or LIBOR plus
2.00%. The interest rates on the term loan were at prime plus 0.25% or LIBOR
plus 2.25%. Effective February 4, 1997, interest rates on the revolver and term
loans were reduced 0.5% from those used in Fiscal 1996 due to the Company's
achievement of a predetermined financial target for Fiscal 1996.
Covenants under the new Agreement contain requirements for cumulative minimum
earnings before interest, taxes, depreciation and amortization for specified
periods and cash flow requirements in excess of predetermined levels. As of
January 31, 1998, the Company was in compliance with all covenants under the
Agreement. In addition, the Agreement prohibits the payment of any dividends.
As of January 31, 1998, the Company had $30.1 million of remaining credit
availability under the Agreement. As of that date, outstanding obligations under
the Agreement were $15.6 million, including the $12.5 million term loan and $9.3
million in letter of credit commitments. As of February 1, 1997, the Company had
outstanding revolving loans, term loan and letter of credit commitments under
the Original Agreement of $1.0 million, $10.0 million and $16.0 million,
respectively. During Fiscal 1997 and Fiscal 1996, average revolver borrowings
outstanding were $20.5 million and $17.0 million, respectively, at average
interest rates of 8.0% and 8.5%, respectively. Maximum loan usage under the
revolving credit facilities during Fiscal 1997 and Fiscal 1996 was $38.9 million
and $32.8 million, respectively.
In February 1998, the Company entered into an interest rate swap agreement for
varying notional amounts, commencing at $12.5 million with reductions matching
the amortization of the term loan. In addition, the Company entered into an
interest rate swap agreement for varying notional amounts relating to the
revolving credit facility. These agreements were entered into as a hedge against
increasing LIBOR rates and carry an interest rate of 5.73% through February 3,
2001.
G. COMMITMENTS
The Company is committed under long-term operating leases for the rental of
certain real estate, fixtures and equipment. The leases range from 2 to 25 years
and have varying
13
<PAGE> 15
renewal options. The Company is generally required to pay insurance, real estate
taxes and other operating expenses and in some cases rentals based on a
percentage of sales. The Company also leases real estate under a capital lease
with a remaining term of six years.
Future minimum lease payments as of January 31, 1998 are as follows (in
thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Capital Operating
Fiscal years ended Leases Leases
- ------------------------------------------------------------------
<S> <C> <C>
1999 ............................ $ 700 $ 28,325
2000 ............................ 700 29,144
2001 ............................ 700 27,638
2002 ............................ 700 24,441
2003 ............................ 700 18,989
Later years ..................... 700 120,512
------- --------
Total ........................... 4,200 $249,049
========
Less amount representing interest (1,009)
-------
Net total ....................... 3,191
Current portion ................. (414)
-------
Long-term portion ............... $ 2,777
=======
</TABLE>
Rent expense for the years ended January 31, 1998, February 1, 1997, and
February 3, 1996 was approximately $33,168,000, $30,364,000 and $33,051,000,
respectively. Rent expense for these periods includes approximately $2,952,000,
$2,221,000 and $2,598,000, respectively, for contingent rent based on sales.
H. INCOME TAXES
The provision (benefit) for income taxes on income (loss) for the years ended
January 31, 1998, February 1, 1997 and February 3, 1996 includes the following
(in thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
January 31, February 1, February 3,
1998 1997 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
Federal
Current ............ $(1,967) $ 436 $(9,331)
Deferred ........... 1,967 2,514 8,719
State
Current ............ (574) 91 265
Deferred ........... 574 923 (86)
------- ------ -------
Total provision
(benefit) for income
taxes .............. $ -- $3,964 $ (433)
======= ====== =======
</TABLE>
In May 1996 the Company received federal tax refunds totaling $9.6 million
related to net operating losses carried back to prior years' taxable income.
The following is a reconciliation between the statutory federal income tax rate
and the effective income tax rate for the years ended January 31, 1998, February
1, 1997 and February 3, 1996:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
January 31, February 1, February 3,
1998 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate .... (35.0)% 35.0% (35.0)%
State income taxes,
net of federal
benefit .......... (6.4) 6.6 2.0
Permanent
differences ...... (5.1) 0.4 4.0
Other ............. (2.2) -- --
Change in valuation
allowance ........ 48.7 (4.0) 27.7
---- ---- ----
Effective rate .... -- % 38.0% (1.3)%
==== ==== ====
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of January 31, 1998,
February 1, 1997 and February 3, 1996 were as
14
<PAGE> 16
follows (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
January 31, February 1, February 3,
1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net operating losses
and credit
carryforwards ............ $ 2,856 $ -- $ --
Deferred tax assets
Rent ....................... 1,136 1,051 2,112
Insurance .................. 799 801 950
Inventory .................. 3,303 3,177 4,928
Compensation ............... 2,413 3,302 3,093
Fixed assets ............... 1,093 -- --
Contributions
carryforward ............. 2,021 1,361 --
Reserves for store
closings ................. 1,376 2,407 5,028
Other ...................... 858 711 805
-------- -------- --------
15,855 12,810 16,916
Valuation allowance ........ (14,129) (11,644) (12,065)
-------- -------- --------
Net deferred assets ........ 1,726 1,166 4,851
Deferred tax liabilities:
Fixed assets and
Intangibles ............. (1,897) (1,474) (1,723)
-------- -------- --------
Net deferred taxes ......... $ (171) $ (308) $ 3,128
======== ======== ========
</TABLE>
Federal income tax carryforwards at January 31, 1998 consisted of $6.2 million
of net operating loss which expires January 2013 and approximately $315,000 of
general business and alternative minimum tax credits.
During the year ended February 3, 1996 the Company settled an audit examination
with the Internal Revenue Service. The total tax and interest paid as a result
of this examination was $5.0 million. The adjustments related to the purchase
price allocations established in 1989 when the Company was acquired. To the
extent the assessment resulted in adjustments to the original purchase price
allocation, goodwill was adjusted in accordance with SFAS No. 109 "Accounting
for Income Taxes."
I. PENSION AND THRIFT INCENTIVE PLANS
The Company has a non-contributory defined benefit pension plan covering all of
its employees who have completed 1,000 hours of credited service in a given
year. Benefits are based on final average compensation and years of service. The
Company's funding policy is to contribute annually an amount at least necessary
to satisfy the ERISA funding requirements. The plan's assets consist of
investments in collective trust funds.
In addition, certain key employees of the Company participate in a supplementary
executive retirement plan which is indirectly funded through life insurance
policies.
Net pension cost for the Company's plans included the following components (in
thousands) for the years ended:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
January 31, February 1, February 3,
1998 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost --
benefits earned
during the period ... $ 586 $ 624 $ 577
Interest cost
on projected
benefit obligation .. 683 632 598
Actual return on
plan assets ......... (1,277) (941) (839)
Net amortization
and deferral ........ 684 603 626
------- ----- -----
Net periodic
pension cost ........ $ 676 $ 918 $ 962
======= ===== =====
</TABLE>
The following table sets forth the plans' funded status (in thousands) as of:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
January 31, February 1,
1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation ..................... $ (9,078) $(6,804)
======== =======
Accumulated benefit
obligation ................................... $ (9,174) $(6,902)
======== =======
Projected benefit obligation .................. $(10,381) $(8,603)
Plan assets at fair value ..................... 8,304 6,421
-------- -------
Projected benefit obligation in
excess of plan assets ........................ (2,077) (2,182)
Unrecognized net gain (loss) ................. 252 (65)
Unrecognized net
obligation ................................... 198 223
Unrecognized prior service cost ............... 260 292
-------- -------
Accrued pension cost .......................... $ (1,367) $(1,732)
======== =======
</TABLE>
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation were 7.0% and 4.0%, respectively, for Fiscal 1997 and 7.75% and 4.0%,
respectively, for Fiscal 1996. The expected long-term rate of return on plan
assets was 9.0%.
The Company has a thrift incentive plan to which eligible employees may make
pre-tax contributions of up to 10% of their salary, as allowed under Section
401(k) of the Internal
15
<PAGE> 17
Revenue Code. The Company contributed approximately $201,000, $250,000 and
$167,000 in matching contributions to this plan for the years ended January 31,
1998, February 1, 1997 and February 3, 1996, respectively.
J. CAPITAL STOCK AND STOCK OPTION AND STOCK PURCHASE PLANS
The Company's Restated Articles of Organization (the "Restated Articles")
increased the Company's authorized capital stock to 70,000,000 shares of common
stock and 2,500,000 shares of preferred stock. Under the Restated Articles, the
Board of Directors (the "Board") is authorized, subject to any limitations
prescribed by law, from time to time to issue up to 2,000,000 shares of
preferred stock, issuable in one or more classes or series, each of such class
or series to have such preferences, voting powers, qualifications and special or
relative rights or privileges as shall be determined by the Board. Any class or
series may have full voting rights with the common stock or superior or limited
voting rights, be convertible into common stock or another security of the
Company, and have such other preferences, relative rights and limitations as the
Company's Board shall determine. As a result, any class or series of preferred
stock could have rights that would adversely affect the voting power of the
common stock. The shares of any class or series of preferred stock need not be
identical.
The Company has three stock option plans: the 1988 Stock Option Plan, the 1990
Equity Incentive Plan and the 1993 Stock Option Plan for Non-Employee Directors.
Under such plans, the Company initially reserved for issuance 2,106,786,
1,100,000 and 250,000 shares of Common Stock, respectively.
The 1988 Stock Option Plan provides for the grant of both incentive stock
options and non-statutory options. The term of options may not exceed 10 years
and, unless otherwise specified by the Board, each option will become
exercisable as determined by the Board.
The 1990 Equity Incentive Plan provides for the grant of incentive stock
options, non-statutory options, stock appreciation rights, restricted stock,
unrestricted stock, deferred stock grants and performance awards. Option terms
may not exceed 10 years and options will become exercisable as determined by the
Board. In 1994, the stockholders approved an amendment to the 1990 Equity
Incentive Plan authorizing the issuance under the Plan of an additional
1,000,000 shares of Common Stock.
The 1993 Stock Option Plan for Non-Employee Directors provides for the grant of
stock options to Directors who are not employees of the Company or of any
subsidiary of the Company. The term of options may not exceed 10 years and,
unless otherwise specified, the option will become exercisable in cumulative
installments of 20% beginning on the first anniversary of the grant date.
In addition to grants from the 1993 Stock Option Plan for Non-Employee
Directors, each non-employee director serving on the Board on December 6, 1996
was granted an option to purchase 5,000 shares of common stock with an exercise
price equal to the market price on the date of the grant, which was $4.81 per
share.
Incentive stock options under all of these plans may not be issued at less than
100% (110% in the case of owners of more than 10% of all classes of stock) of
the fair market value of the common stock at time of issuance and non-statutory
options may not be issued at less than 50% of fair market value.
On February 7, 1995, a total of 1,235,750 non-vested stock options, granted
under the Company's 1988 Stock Option Plan and 1990 Equity Incentive Plan, were
re-priced at an exercise price equal to the fair market value of the Company's
Common Stock on that day, which was $3.69 per share.
The following table summarizes stock option transactions:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Options Weighted
Activity Average Price
- ----------------------------------------------------------------
<S> <C> <C>
Balance at
January 28, 1995 ............ 2,419,830 $ 6.66
Options granted ............. 38,000 3.27
Options exercised ........... (122,546) 1.54
Options canceled ............ (342,790) 6.78
---------
Balance as of
February 3, 1996 ............ 1,992,494 3.74
Options granted . ........... 927,800 4.21
Options exercised ........... (42,659) 0.75
Options canceled ............ (115,426) 5.55
---------
Balance as of
February 1, 1997 ............ 2,762,209 3.87
Options granted . ........... 496,500 6.07
Options exercised ........... (263,501) 2.32
Options canceled ............ (125,875) 4.16
---------
Balance as of
January 31, 1998 ............ 2,869,333 $ 4.38
=========
</TABLE>
16
<PAGE> 18
The following table summarizes information about the options outstanding and
exercisable at January 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding
- ---------------------------------------------------------
Range of Weighted Weighted
Exercise Number Remaining Exercise
Prices Outstanding Life/Years Price
------ ----------- ---------- -----
<S> <C> <C> <C>
$0.21-3.69 1,304,008 5.11 $3.19
$4.00-7.34 1,481,550 7.79 5.16
$8.13-10.25 83,775 5.14 9.02
</TABLE>
<TABLE>
<CAPTION>
Options Exercisable
- ---------------------------------------------------------
Range of Weighted
Exercise Number Exercise
Prices Outstanding Price
------ ----------- -----
<S> <C> <C>
$0.21-3.69 1,079,083 $3.10
$4.00-7.34 413,763 5.30
$8.13-10.25 71,275 9.06
</TABLE>
As of January 31, 1998 and February 1, 1997 the number of shares of common stock
reserved for granting future stock options was 713,334 and 1,083,959,
respectively. As of January 31, 1998, February 1, 1997 and February 3, 1996,
options for 1,564,121, 1,138,428 and 973,727 shares, respectively, were
exercisable under option plans at a weighted average exercise price of $3.95,
$3.61 and $3.61, respectively.
The exercise of non-statutory stock options results in state and federal income
tax benefits to the Company arising from the difference between the market price
at the date of exercise and the option price. During the year ended February 3,
1996, $136,000 was credited to additional paid-in-capital due to such exercises.
In 1994, the Company issued, at no cost, restricted stock to a key employee
under the 1990 Equity Incentive Plan. The restrictions on the transferability of
these shares lapsed ratably over two years, and the market price of this
restricted stock was charged to income ratably over the period during which the
restrictions lapsed. The Company also canceled 105,000 shares of restricted
stock as a result of the resignation of a key employee. These shares are
included in the number of common stock shares reserved for granting future stock
options.
The Company offers an employee stock purchase plan (the "purchase plan") through
which all regular employees with more than six months of continuous service
(excluding those owning 5% or more of the Company's stock) are eligible to
participate. Purchases of common stock occur twice at the end of six-month
periods at 85% of the lesser of the value of the common stock at the beginning
or the end of the period. A total of 450,000 shares of stock were reserved under
the purchase plan. As of January 31, 1998 and February 1, 1997, the number of
shares reserved under this plan for future issuance was 82,639 and 119,943,
respectively.
Effective February 4, 1996, the Company adopted the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company has elected to continue
to account for stock options at the intrinsic value with disclosure of the
effects of the fair value accounting on net income and earnings per share on a
pro-forma basis. Had compensation cost for the stock option plans been
determined using the fair value method, the Company's Fiscal 1997, Fiscal 1996
and Fiscal 1995 pro-forma net income (loss) and earnings (loss) per share would
have been as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fiscal year ended January 31, February 1, February 3,
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss)
As reported ......... $ (5,760) $ 6,466 $ (31,791)
Pro-forma ........... $ (6,975) $ 5,652 $ (32,373)
Basic earnings (loss) per
share
As reported ......... $ (0.28) $ 0.31 $ (1.56)
Pro-forma ........... $ (0.34) $ 0.28 $ (1.59)
Diluted earnings (loss)
per share
As reported ......... $ (0.28) $ 0.31 $ (1.56)
Pro-forma ........... $ (0.34) $ 0.27 $ (1.59)
</TABLE>
Consistent with SFAS No. 123, pro-forma net income (loss) and earnings (loss)
per share have not been calculated for options granted prior to January 29,
1995. Pro-forma compensation cost may not be representative of that to be
expected in future years.
The weighted average fair value of options granted during Fiscal 1997, Fiscal
1996 and Fiscal 1995 was $4.79, $3.50 and $2.81, respectively. The values were
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions used for grants in Fiscal 1997,
Fiscal 1996 and Fiscal 1995, respectively; risk-free interest rate of 6.58%,
7.0% and 6.1%, expected lives of ten years for all periods, expected volatility
of 65.7%, 73.2% and 81.7% and expected dividend yield of the stock over the
options life of 0%.
17
<PAGE> 19
K. SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal year ending January 31, 1998
Net sales ......................... $ 120,451 $ 126,329 $ 152,471 $ 155,070
Gross profit (a) ................. 29,242 29,422 38,129 30,284
Net income (loss) ................. $ 557 $ 1,193 $ 3,228 $ (10,738)
Basic EPS (b) ..................... $ 0.03 $ 0.06 $ 0.16 $ (0.51)
Diluted EPS (b) ................... $ 0.03 $ 0.06 $ 0.15 $ (0.51)
Fiscal year ending February 1, 1997
Net sales ......................... $ 124,032 $ 120,101 $ 147,203 $ 153,689
Gross profit (a) ................. 30,822 29,017 38,152 34,879
Net income ........................ $ 564 $ 1,215 $ 3,513 $ 1,174
Basic EPS (b) ..................... $ 0.03 $ 0.06 $ 0.17 $ 0.06
Diluted EPS (b) ................... $ 0.03 $ 0.06 $ 0.17 $ 0.06
</TABLE>
(a) Gross profit equals net sales less cost of sales, including buying,
receiving and occupancy costs.
(b) In accordance with Accounting Principles Board Opinion No. 15, the
quarterly per share earnings do not necessarily aggregate to the annual
per share earnings.
L. RESTRUCTURING CHARGES
During the fourth quarter of Fiscal 1995, the Company recorded an $11.4 million
charge in connection with planned store closures, including $0.8 million related
to Fiscal 1994 planned closures not covered by the original reserve. The $11.4
million charge included reserves for estimated costs associated with remaining
lease obligations, write-offs and losses related to leasehold improvements and
severance costs.
In addition, in the fourth quarter of Fiscal 1995, $15.9 million was charged for
inventory cost markdowns relating to exiting certain lines of apparel and $2.8
million was charged for the write-off of certain impaired assets, including
computer hardware that previously supported systems that have been displaced in
connection with the ongoing system development program.
The charges for store closings in Fiscal 1995 consisted of the following
components (in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------
February 3,
1996
- -----------------------------------------------------------
<S> <C>
Write-off of leasehold
improvements and fixtures ........... $ 3,868
Estimated costs associated with
obligations for leased properties
after closing date offset by expected
sublease income ..................... 6,637
Costs of severance arrangements
and related expenses ................ 872
-------
Total ........................... $11,377
=======
</TABLE>
The following is an analysis of the activity within the store closing reserve
during the years ended January 31, 1998, February 1, 1997 and February 3, 1996:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
January 31, February 1, February 3,
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning
of year ........................ $5,265 $11,502 $ 9,242
Charges:
Store closing charge ......... -- -- 11,377
Distribution center charge ... -- 750 1,362
Reductions:
Write-off leasehold
improvements and fixtures .. -- 2,731 2,332
Severance arrangements and
related expenses ........... -- 132 932
Obligations for leased
properties ................. 1,080 3,704 5,801
Markdowns .................... -- -- 1,414
Distribution center closing .. 1,648 420 --
------ ------- -------
Balance, end
of year ........................ $2,537 $ 5,265 $11,502
====== ======= =======
</TABLE>
The $2.5 million remaining as of January 31, 1998 is expected to be utilized
over the remaining lease term of one of the stores closed in Fiscal 1995. The
lease expires in Fiscal 2009.
The eight stores included in the Fiscal 1995 closing reserve recorded sales in
Fiscal 1995 of $46.3 million.
The nine stores included in the Fiscal 1994 closing reserve recorded sales in
Fiscal 1995 of $10.0 million, and direct store contribution losses of $1.8
million.
18
<PAGE> 20
M. DEFERRED REVENUE
On November 24, 1993 the Company sold its leasehold interest in a retail
property located on North Michigan Avenue in Chicago, Illinois in exchange for a
combination of cash and notes receivable. Simultaneously, the Company entered
into a fifteen year lease of this property with the new owner. Deferred revenue
represents the excess of the Company's proceeds from the sale over the cost of
its investment in the related property and is being amortized over the life of
the lease. The Company amortized $167,000 during each of Fiscal 1997, Fiscal
1996 and Fiscal 1995. Under the terms of the sale agreement, the Company is
entitled to a percentage of the net cash flow that may be generated by the new
owner's development of this property. To date, the Company has not recognized
any revenues related to this project.
19
<PAGE> 21
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Filene's Basement Corp.:
We have audited the accompanying consolidated balance sheets of Filene's
Basement Corp. and subsidiary (a Massachusetts corporation) as of January 31,
1998 and February 1, 1997, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the
fiscal years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Filene's Basement
Corp. and subsidiary as of January 31, 1998 and February 1, 1997 and the
consolidated results of their operations and their cash flows for each of the
fiscal years then ended in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 16, 1998
To the Board of Directors and Stockholders of Filene's Basement Corp.:
We have audited the accompanying consolidated balance sheet of Filene's
Basement Corp. and its wholly-owned subsidiaries as of February 3, 1996 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the fiscal year ended February 3, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Filene's Basement
Corp. and its wholly-owned subsidiaries as of February 3, 1996 and the
consolidated results of their operations and their cash flows for the fiscal
year ended February 3, 1996 in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 20, 1996
20
<PAGE> 22
PRICE RANGE OF COMMON STOCK (UNAUDITED)
Since April 30, 1991, the Company's common stock has been available for
quotation on the Nasdaq National Market under the Symbol "BSMT". The following
table sets forth, for the periods indicated the high and low sale prices per
share of the Company's common stock as quoted through the Nasdaq National
Market:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Fiscal year ended Fiscal year ended
January 31, 1998 February 1, 1997
High Low High Low
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $ 8 11/16 5 5/8 $ 4 3/16 $ 2 1/8
Second Quarter 7 1/4 5 5/8 5 3/4 3 15/16
Third Quarter 9 3/4 6 5/8 5 3/4 4
Fourth Quarter 7 5/8 4 5 3/4 3 7/8
</TABLE>
The last reported sale price per share of the Company's common stock as quoted
on the Nasdaq National Market on April 7, 1998 was $5.25. As of April 7, 1998
the Company had 1,521 shareholders of record.
The Company has never paid dividends on its Common Stock. The Company currently
intends to retain earnings, if any, and does not anticipate paying cash
dividends in the foreseeable future. Payments of future dividends, if any, will
be at the discretion of the Board of Directors after taking into account various
factors, including the Company's financial condition, operating results, and
current anticipated cash needs. The Company's credit agreement prohibits the
payment of any dividends.
21
<PAGE> 23
FILENE'S BASEMENT INVESTOR INFORMATION
INVESTOR RELATIONS
Investor inquiries are most welcome, and individuals are invited to contact us
by letter to request Company information. A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 1998 MAY ALSO BE OBTAINED
WITHOUT CHARGE.
Filene's Basement
40 Walnut Street
Wellesley, Massachusetts 02181
(617) 348-7000
STOCK TRANSFER AGENT AND REGISTRAR
Stockholders with inquiries about stock ownership or changes of address, may
contact:
Boston EquiServe
Shareholder Services
PO Box 8200
Boston, Massachusetts 02266-8200
1-800-426-5523
Please mention Filene's Basement, your name as printed on your stock
certificate, your social security number and include your address and telephone
number in all correspondence.
ANNUAL MEETING
The Annual Meeting of Stockholders will be held Thursday, June 25, 1998 at 2:00
p.m. at BankBoston, N.A., 100 Federal Street, Boston, Massachusetts. All
stockholders are invited to attend.
STOCK LISTING
Filene's Basement Corp. common stock is listed on the Nasdaq National Market,
under the symbol BSMT.
<TABLE>
<S> <C>
CORPORATE OFFICERS
Samuel J. Gerson............... Chairman, Chief Executive Officer and Director
W. Jay Carothers............... President, Chief Operating Officer and Director
Mone Anathan, III.............. Chairman of Executive Committee and Director
Steven Siegel.................. Executive Vice President, Chief Financial Officer, Treasurer and Secretary
OUTSIDE DIRECTORS
John Eyler..................... President and Chief Executive Officer, FAO Schwartz, New York, New York
Robert P. Henderson............ General Partner, Greylock Management Corporation, Boston, Massachusetts
Harold Leppo................... Chief Executive Officer, Harold Leppo and Co., Retail Consultants, Stamford, Connecticut
Paul D. Paganucci.............. Chairman of the Board, Ledyard National Bank, Hanover, New Hampshire
Dorsey R. Gardner.............. President, Kelso Management Company, Inc., Boston, Massachusetts
GENERAL COUNSEL
Hale and Dorr LLP.............. Boston, Massachusetts
INDEPENDENT AUDITORS
Arthur Andersen LLP ........... Boston, Massachusetts
</TABLE>
22
<PAGE> 24
FILENE'S BASEMENT CORP. STORE LOCATIONS
CONNECTICUT
Corbin's Corner, CT 06110
Corbin's Corner Shopping Center
Orange, CT 06477
550-560 Boston Post Road
Manchester, CT
1510 Pleasant Valley Road
ILLINOIS
Chicago, IL 60602
1 North State Street
Chicago, IL 60611
830 North Michigan Ave
Oak Brook, IL 60521
Shops at Oak Brook Place
2155 West 22nd Street
Skokie, IL 60077
Orchard Place
4831 Golf Road
MAINE
Portland, ME 04106
The Maine Mall
MARYLAND
Rockville Pike , MD 20852
Mid Pike Plaza
11840 Rockville Pike Road
MASSACHUSETTS
Boston, MA 02101
426 Washington Street
North Attleboro, MA 02762
Fashion Crossing
1250 S. Washington St.
Braintree, MA 02184
South Shore Plaza
250 Granite St.
Burlington, MA 01803
Route 3A & Winn St.
Dedham, MA 02026
688 Providence Highway
Framingham, MA 01701
Rte 30, Cochituate Rd.
Holyoke, MA 01040
Holyoke Mall at Ingelside
Whiting Farms Road
Hyannis, MA 02601
Cape Town Plaza
768 Ivanough Road
Newton, MA 02164
215-227 Needham St.
Peabody, MA 01960
Northshore Mall
Route 114 and Route 128
Plymouth, MA 02364
Independence Mall
Smith Lane
Saugus, MA 01906
Square One Mall
Route 1
Taunton, MA 02718
2 West Stevens St.
Watertown, MA 02172
485 Arsenal St.
Worcester, MA 01608
200 Front St.
MINNESOTA
Bloomington, MN 55425
124 West Market Street
NEW HAMPSHIRE
Manchester, NH 03103
South Willow St.
Nashua, NH 03060
262 Daniel Webster Hwy.
Salem, NH 03079
99 Rockingham Park Blvd.
NEW JERSEY
Jersey City, NJ 07310-1603
Newport Center
30 Mall Drive West
Moorestown, NJ 08057
Moorestown Mall
Rte 38 - Lenola Road
Paramus, NJ 07652
651 Route 17
NEW YORK
Carle Place, NY 11514
99 Old Country Road
Flushing, NY 11365
187-04 Horace Harding
Expressway
Huntington, NY 11745
350 Route 110
Manhasset, NY 11030
1400 Northern Blvd.
New York, NY 10011
620 Avenue of Americas
New York, NY 10024
2222-2226 Broadway
Scarsdale, NY 10583
Midway Shopping Center
935 Central Park Ave.
PENNSYLVANIA
Berwyn, PA 19312
254 West Swedesford Road
Philadelphia, PA 19154
1477 Franklin Mills Circle
Philadelphia, PA 19103
1608-1610 Chestnut St.
St. Davids, PA 19087
550 Lancaster Avenue
Willow Grove, PA 19090
Moreland Road
RHODE ISLAND
Warwick, RI 02886
399 Bald Hill Road
VIRGINIA
Fairfax, VA 22041
Bailey's Crossroads Center
5850 Crossroads Center
WASHINGTON, DC
Washington, DC 20036
1133 Connecticut Avenue
Washington, DC 20015
5300 Wisconsin Avenue
23
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF REGISTRANT
Name Jurisdiction of Incorporation
---- -----------------------------
Filene's Basement, Inc. Massachusetts
<PAGE> 1
Exhibit No. 23
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report, dated March 16, 1998, incorporated by reference in
Filene's Basement Corp.'s Annual Report on Form 10-K for the year ended January
31, 1998 into the Company's previously filed Registration Statements on Form S-8
(File No. 33-41513), Form S-8 (File No. 33-40667), Form S-8 (File No. 33-40668),
and Form S-8 (File No. 33-40669).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 30, 1998
<PAGE> 1
Exhibit 23.1
COOPERS & LYBRAND LLP
INDEPENDENT ACCOUNTANT'S CONSENT
We consent to the incorporation by reference in this Annual Report on Form 10-K
of our report dated March 20, 1996 on our audit of the Consolidated Financial
Statements of Filene's Basement Corp. as of February 3, 1996 and for the year
ended February 3, 1996, which report is included in the 1997 Annual Report to
Stockholders.
/s/ Coopers & Lybrand LLP
COOPERS & LYBRAND LLP
Boston, Massachusetts
April 28, 1998
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
The undersigned do hereby appoint Steven Siegel, whose principal
business address is Filene's Basement Corp., 40 Walnut Street, Wellesley,
Massachusetts 02181, as my attorney-in-fact and representative, to act, in my
name, place and stead in any way which I myself could do, if I were personally
present, with respect to the execution and filing of any and all documents and
papers pursuant to Section 16 of the Securities Exchange Act of 1934 and the
rules thereunder in respect of the relationship of the undersigned to Filene's
Basement Corp., a Massachusetts corporation. This power of attorney shall not be
affected by the subsequent disability or incompetence of the principal.
IN WITNESS WHEREOF, I have hereunto signed my name as of the date
indicated.
/s/ Samuel J. Gerson July 20, 1994
--------------------------- ----------------------
/s/ Mone Anathan, III July 19, 1994
--------------------------- ----------------------
/s/ W. Jay Carothers June 30, 1997
--------------------------- ----------------------
/s/ Robert P. Henderson July 19, 1994
--------------------------- ----------------------
/s/ Paul D. Paganucci July 21, 1994
--------------------------- ----------------------
/s/ Dorsey R. Gardner October 23, 1996
--------------------------- ----------------------
/s/ John Eyler July 22, 1994
--------------------------- ----------------------
/s/ Harold Leppo July 22, 1994
--------------------------- ----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FILENE'S BASEMENT CORP. AND SUBSIDIARIES, FINANCIAL DATA SCHEDULE,
FOR THE FIFTY-TWO WEEKS ENDED JANUARY 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 475
<SECURITIES> 0
<RECEIVABLES> 2,031
<ALLOWANCES> 0
<INVENTORY> 93,021
<CURRENT-ASSETS> 104,658
<PP&E> 112,343
<DEPRECIATION> (64,002)
<TOTAL-ASSETS> 175,338
<CURRENT-LIABILITIES> 73,667
<BONDS> 14,277
0
0
<COMMON> 210
<OTHER-SE> 82,256
<TOTAL-LIABILITY-AND-EQUITY> 175,338
<SALES> 554,321
<TOTAL-REVENUES> 554,321
<CGS> 427,244
<TOTAL-COSTS> 427,244
<OTHER-EXPENSES> 130,231
<LOSS-PROVISION> 378
<INTEREST-EXPENSE> 2,606
<INCOME-PRETAX> (5,760)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,760)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,760)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
