<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1997
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 No. 1-9223
SERVICE MERCHANDISE COMPANY, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 62-0816060
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 24600, Nashville, TN
37202-4600
(Mailing Address)
7100 Service Merchandise Drive, Brentwood, TN
(Address of principal executive offices)
37027
(Zip code)
(615) 660-6000
(Registrant's telephone number including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- -----
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of the latest practicable date.
As of October 26, 1997, there were 100,425,657 shares of
Service Merchandise Company, Inc. common stock outstanding.
<PAGE> 2
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Consolidated Statements of Operations (Unaudited) - Three and Nine
Periods Ended September 28, 1997 and September 29, 1996 ................ 3
Consolidated Balance Sheets - September 28, 1997 (Unaudited),
September 29, 1996 (Unaudited) and December 29, 1996 ................... 4
Consolidated Statements of Cash Flows (Unaudited) - Nine Periods
Ended September 28, 1997 and September 29, 1996 ........................ 5
Notes to Consolidated Financial Statements (Unaudited) ................. 6-9
Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................. 10-16
PART II - OTHER INFORMATION
Other Information ...................................................... 17
Exhibits ............................................................... 18
SIGNATURES ..................................................................... 19
</TABLE>
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<PAGE> 3
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE PERIODS ENDED NINE PERIODS ENDED
-------------------------- -------------------------
SEPTEMBER 28 SEPTEMBER 29 SEPTEMBER 28 SEPTEMBER 29
------------ ------------ ------------ ------------
1997 1996 1997 1996
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales
Operations excluding closing facilities and remerchandising activities $ 646,518 $ 669,668 $ 2,029,351 $ 2,095,744
Closing facilities and remerchandising activities 9,626 68,660 190,554 218,196
--------- ----------- ----------- -----------
656,144 738,328 2,219,905 2,313,940
Costs and expenses:
Cost of merchandise sold and buying and occupancy expenses
Operations excluding closing facilities and remerchandising activities 495,114 506,441 1,543,548 1,590,081
Closing facilities and remerchandising activities 9,840 56,769 187,339 180,132
--------- ----------- ----------- -----------
504,954 563,210 1,730,887 1,770,213
Gross margin after cost of merchandise sold and buying and occupancy expenses
Operations excluding closing facilities and remerchandising activites 151,404 163,227 485,803 505,663
Closing facilities and remerchandising activities (214) 11,891 3,215 38,064
--------- ----------- ----------- -----------
151,190 175,118 489,018 543,727
Selling, general and administrative expenses
Operations excluding closing facilities and remerchandising activities 154,795 149,580 464,814 469,436
Closing facilities and remerchandising activities 100 12,212 32,462 39,185
--------- ----------- ----------- -----------
154,895 161,792 497,276 508,621
Restructuring charge -- -- 129,510 --
Depreciation and amortization
Operations excluding closing facilities and remerchandising activities 13,370 12,986 41,315 40,996
Closing facilities and remerchandising activities (3) 1,255 2,508 3,886
--------- ----------- ----------- -----------
13,367 14,241 43,823 44,882
Loss before interest and income taxes (17,072) (915) (181,591) (9,776)
Interest expense-debt 16,822 16,834 47,774 46,349
Interest expense-capitalized leases 1,883 2,128 6,034 6,554
--------- ----------- ----------- -----------
Loss before income taxes (35,777) (19,877) (235,399) (62,679)
Income taxes benefit (13,417) (7,553) (88,275) (23,818)
--------- ----------- ----------- -----------
Loss before extraordinary item (22,360) (12,324) (147,124) (38,861)
Extraordinary loss from early extinguishment of debt, net of $1,585 tax benefit (2,643) -- (2,643) --
========= =========== =========== ===========
Net loss ($ 25,003) ($ 12,324) ($ 149,767) ($ 38,861)
========= =========== =========== ===========
Weighted average common shares and common
share equivalents outstanding 99,959 101,337 100,008 101,364
========= =========== =========== ===========
Per common share:
Loss before extraordinary item ($ 0.22) ($ 0.12) ($ 1.47) ($ 0.38)
Extraordinary loss from early extinguishment of debt (0.03) -- (0.03) --
--------- ----------- ----------- -----------
Net loss ($ 0.25) ($ 0.12) ($ 1.50) ($ 0.38)
========= =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE> 4
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
------------------------------
SEPTEMBER 28 SEPTEMBER 29 DECEMBER 29,
1997 1996 1996(1)
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 45,900 $ 51,853 $ 329,993
Accounts receivable, net of allowance of
$2,541, $2,966 and $4,593, respectively 39,969 39,512 61,454
Income taxes 77,640 13,513 --
Inventories 1,165,586 1,328,761 1,052,969
Prepaid expenses 31,809 60,963 15,461
----------- ----------- -----------
TOTAL CURRENT ASSETS 1,360,904 1,494,602 1,459,877
Property and equipment:
Owned assets, net of accumulated depreciation of
$546,399, $515,340 and $530,170, respectively 500,327 556,546 567,056
Capitalized leases, net of accumulated amortization of
$76,740, $87,197 and $86,710 respectively 35,207 39,395 37,701
Other assets and deferred charges 38,378 22,384 22,818
----------- ----------- -----------
TOTAL ASSETS $ 1,934,816 $ 2,112,927 $ 2,087,452
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 125,400 $ 348,400 --
Accounts payable 447,356 574,827 $ 639,887
Accrued expenses 163,884 166,021 212,223
State and local sales taxes 25,190 31,918 62,690
Accrued restructuring costs - current 29,149 -- --
Income taxes -- -- 33,898
Current maturities of long-term debt 20,641 4,698 6,842
Current maturities of capitalized lease obligations 8,267 7,479 7,303
Deferred income taxes 7,437 10,841 7,437
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 827,324 1,144,184 970,280
Accrued restructuring costs 53,483 -- --
Long-term debt 715,470 555,625 623,615
Capitalized lease obligations 52,564 60,604 58,541
Deferred income taxes 7,922 3,886 7,922
----------- ----------- -----------
TOTAL LIABILITIES 1,656,763 1,764,299 1,660,358
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, authorized 4,600 shares, undesignated as to
rate and other rights, none issued
Series A Junior Preferred Stock, $1 par value, authorized 400 shares, none
issued
Common stock, $.50 par value, authorized 500,000 shares, issued
and outstanding 99,800, 99,748 and 99,758 shares, respectively 49,900 49,874 49,879
Additional paid-in capital 5,680 5,633 5,670
Deferred compensation (558) (1,484) (1,251)
Retained earnings 223,031 294,605 372,796
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 278,053 348,628 427,094
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,934,816 $ 2,112,927 $ 2,087,452
=========== =========== ===========
</TABLE>
(1) Derived from fiscal year ended December 29, 1996 audited consolidated
financial statements.
See Notes to Consolidated Financial Statements.
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<PAGE> 5
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE PERIODS ENDED
------------------------------
SEPTEMBER 28 SEPTEMBER 29
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($149,767) ($38,861)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 46,391 47,099
Deferred income taxes -- (1,876)
Gain on disposal of property and equipment (2,531) (4,650)
Write down of property and equipment due to restructuring 32,915 --
Write-off of debt issuance costs 2,111 --
Changes in assets and liabilities (net of disposition):
Accounts receivable, net 21,485 14,109
Inventories (112,617) (294,294)
Prepaid expenses (16,348) (35,686)
Accounts payable (192,531) (104,279)
Accrued expenses and state and local sales taxes (83,570) (56,301)
Accrued restructuring costs 82,632 --
Income taxes (111,538) (42,722)
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES (483,368) (517,461)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment - owned (23,576) (17,232)
Proceeds from the disposal of property and equipment 17,431 9,831
Other assets, net (2,555) (1,008)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (8,700) (8,409)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 125,400 348,400
Proceeds from long-term debt 206,560 2,600
Repayment of long-term debt (101,122) (1,643)
Repayment of capitalized lease obligations (6,124) (6,353)
Debt issuance costs (16,806) (1,084)
Exercise of stock options and forfeiture of restricted stock, net 67 52
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 207,975 341,972
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (284,093) (183,898)
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 329,993 235,751
--------- ---------
CASH AND CASH EQUIVALENTS-END OF PERIOD $ 45,900 $ 51,853
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE> 6
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. The consolidated financial statements, except for the consolidated
balance sheet as of December 29, 1996, have been prepared by the Company
without audit.
In management's opinion, the information and amounts furnished in this
report reflect all adjustments (consisting of normal recurring
adjustments) considered necessary for the fair presentation of the
consolidated financial position and consolidated results of operations
for the interim periods presented. Certain prior period amounts have
been reclassified to conform to the current year's presentation. These
consolidated financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the fiscal year ended December
29, 1996.
The Company has historically incurred a net loss for the first three
quarters of the year due to the seasonality of its business. The results
of operations for the quarters ended September 28, 1997 and September
29, 1996 are not necessarily indicative of the operating results for an
entire fiscal year.
B. The Company's income statement presentation has changed beginning with
the second quarter of 1997. This change was made to disclose the
financial statement impact of the inventory liquidations associated
with the closing facilities and remerchandising activities. The line
item "Closing facilities and remerchandising activities" represents
activity specifically identifiable to inventory liquidations conducted
in conjunction with (1) the Company's Restructuring Plan announced in
the first quarter of 1997 and (2) exiting the computer business and
certain components of the wireless communication business as part of a
remerchandising program. Selling, general and administrative expenses
for closing facilities and remerchandising activities does not include
any allocation of corporate overhead. The liquidation process was
initiated in the second quarter of 1997 when the Company began
liquidating 44 out of 60 stores planned for closure as part of the
restructuring plan adopted March 25, 1997 outlined in Note C below. As
of September 28, 1997, 44 stores, one distribution center and two
merchandise categories have completed the process of liquidation. All
activity for these items is classified in "Closing facilities and
remerchandising activities." Prior year amounts reflect operating
results for these same facilities and merchandise classifications.
C. On March 25, 1997, the Company adopted a business restructuring plan to
close 60 underperforming stores and one distribution center. As a
result, a pre-tax charge of $129.5 million for restructuring costs was
taken in the first quarter of 1997. The components of the restructuring
charge and an analysis of the amounts charged against the accrual
through September 28, 1997 are outlined in the following table:
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<PAGE> 7
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
<TABLE>
<CAPTION>
ACTIVITY TO DATE
---------------------------------------
ACCRUED
ORIGINAL RESTRUCTURING COSTS
CHARGE RESTRUCTURING ASSET AS OF
(In thousands) RECORDED COSTS PAID WRITE-DOWNS SEPTEMBER 28, 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lease termination and other real
estate costs $ 83,225 $ (7,051) $ - $ 76,174
Property and equipment write-downs 32,915 - (32,915) -
Employee severance 4,869 (2,865) - 2,004
Other exit costs 8,501 (4,047) - 4,454
-----------------------------------------------------------------------------------
Total $129,510 $(13,963) $ (32,915) 82,632
================== =================== ====================
Less: Current portion (29,149)
-----------------------
$ 53,483
=======================
</TABLE>
The 60 stores include both owned and leased properties. Lease
termination and other real estate costs consist principally of the
remaining rental payments required under the closing stores' lease
agreements, net of any actual or reasonably probable sublease income, as
well as early termination costs.
After taking into effect the above property and equipment write-downs,
the Company's carrying value of the property and equipment associated
with the closures is approximately $17.2 million as of September 28,
1997. Management anticipates selling substantially all owned property
and equipment associated with the closures.
The employee severance provision was recorded for the planned
termination of approximately 4,100 employees. As of September 28, 1997,
approximately 3,000 employees have been terminated with respect to the
restructuring plan. Other exit costs consist principally of professional
fees and miscellaneous costs associated with closing the stores and
distribution center.
In the second quarter of 1997, management began the process of closing
44 of the 60 stores and the distribution center. These 44 stores and the
distribution center were closed by the end of July 1997 with the
remaining closures expected to be completed by the first half of 1998.
Reduced margins and changes in selling, general and administrative
expenses are reflected in the Company's operating results as inventory
associated with the closing stores is liquidated.
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<PAGE> 8
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
Net sales associated with the planned 60 closing stores exclusive of
remerchandising activities were approximately $25.3 million and $73.8
million for the quarter ended September 28, 1997 and September 29, 1996,
respectively. The pre-tax operating losses associated with the closing
stores, excluding corporate allocations, were approximately ($13.4)
million and ($1.7) million for the quarter ended September 28, 1997 and
September 29, 1996, respectively. Net sales associated with the planned
60 closing stores were approximately $213.2 million and $234.5 million
for the nine periods ended September 28, 1997 and September 29, 1996,
respectively. The pre-tax operating losses associated with the closing
stores, excluding corporate allocations, were approximately ($34.5)
million and ($6.1) million for the nine periods ended September 28, 1997
and September 29, 1996, respectively. The increase in the closing
stores' pre-tax operating losses over 1996 for both the quarter ended
and nine periods ended is due primarily to the inventory liquidations
incurred in connection with the 44 closed stores and remerchandising
activities that occurred since the announcement of the restructuring
plan.
D. The third quarter ended September 28, 1997 and September 29, 1996 each
contained 91 selling days. The nine periods ended September 28, 1997 and
September 29, 1996 each contained 272 selling days.
E. The net loss per common share is computed by dividing the net loss by
the weighted average number of common shares and common share
equivalents outstanding.
F. Cash payments for interest for the nine periods ended September 28, 1997
and September 29, 1996 were $51.0 million and $43.9 million,
respectively. Cash payments for income taxes for the nine periods ended
September 28, 1997 and September 29, 1996 were $21.7 million and $17.2
million, respectively. Outstanding checks of $39.3 million, $30.5
million and $44.6 million as of September 28, 1997, September 29, 1996
and December 29, 1996, respectively, have been reclassified to Accounts
Payable.
G. In September 1997, the Company completed a new financing agreement with
a syndicate of lenders led by The Chase Manhattan Bank and Citibank.
The agreement provides a five-year, $900 million fully committed asset
based facility (the "Amended and Restated Credit Facility") to replace
the Company's existing bank lines and certain other obligations. The
lenders funded a $200 million term loan and will extend up to $700
million in revolving loans during the five-year agreement. The Amended
and Restated Credit Facility also includes a $175 million sub-facility
for letters of credit. The Amended and Restated Credit Facility replaced
the Company's Reducing Revolving Credit Facility which had a maximum
commitment level of $525 million. Short-term borrowings related to the
Amended and Restated Credit Facility were $125.4 million as of September
28, 1997. Short-term borrowings related to the Reducing Revolving Credit
Facility were $348.4 million as of September 29, 1996.
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<PAGE> 9
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
The Amended and Restated Credit Facility is designed to provide the
Company with long-term liquidity and operating flexibility. Borrowings
under the facility are subject to borrowing limits based on percentages
of certain current and fixed assets and borrowing limitations contained
in the Company's public subordinated debt indenture. The financial
covenants included in the definitive agreement relate to coverage and
leverage tests and are expected to enhance the Company's ability to
implement its strategic initiatives. The Amended and Restated Credit
Facility excludes from financial covenant calculations the impact of up
to $175 million in pre-tax charges and costs related to certain strategic
initiatives such as the closing facilities and remerchandising
activities. The effective interest rate for the revolving loans and the
term loan is subject to a financial performance-based grid, with initial
pricing set at LIBOR + 2.00% and LIBOR + 2.25%, respectively.
Additionally, there is an unused commitment fee of 3/8% on the undrawn
portion of the revolving loans.
The lenders have received a first-priority security interest on all
material unencumbered assets of the Company and its subsidiaries,
excluding mortgages on leasehold interests. These security interests
will automatically terminate when the Company either achieves an
investment grade credit rating on its implied senior debt or meets
certain operating performance targets.
H. In September 1997, the Company completed a tender and consent
solicitation of the Company's $100 million 8 3/8% Senior Notes Due 2001
which was commenced on July 21, 1997. A principal amount of $86.2 million
was retired with $13.8 million remaining outstanding as of September 28,
1997.
I. During the third quarter of 1997, the Company incurred an extraordinary
loss of $2.6 million after-tax, or $0.03 per share. This extraordinary
loss included a $2.0 million charge, for the write-off of debt issuance
costs, plus premiums and costs associated with the early retirement of
$86.2 million of the Company's $100 million 8 3/8% Senior Notes Due 2001.
Additionally, a non-cash extraordinary loss of $0.6 million was recorded
to write-off deferred finance charges associated with the replacement of
the Company's $525 million Reducing Revolving Credit Facility with the
Amended and Restated Credit Facility.
-9-
<PAGE> 10
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For comparative purposes, interim balance sheets are more meaningful when
compared to the balance sheets at the same point in time of the prior year.
Comparisons to balance sheets of the most recent fiscal year end may not be
meaningful due to the seasonal nature of the Company's business.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report includes certain forward-looking information that is based upon
management's beliefs as well as on assumptions made by and data currently
available to management. This information, which has been, or in the future may
be, included in reliance on the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, is subject to a number of risks and
uncertainties, including but not limited to the factors identified in the
Company's Form 10-K for the fiscal year ended December 29, 1996 filed with the
Securities and Exchange Commission. Actual results may differ materially from
those anticipated in such forward-looking statements even if experience or
future changes make it clear that any projected results expressed or implied
therein may not be realized. The Company disclaims any obligation to update any
information contained herein.
RESULTS OF OPERATIONS
The nature of the Company's business is highly seasonal. Historically, sales in
the fourth quarter have been substantially higher than sales achieved in each of
the first three quarters of the fiscal year. Thus expenses and, to a greater
extent, operating income vary greatly by quarter. Caution, therefore, is advised
when appraising results for a period shorter than a full year, or when comparing
any period other than to the same period of the previous year.
-10-
<PAGE> 11
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
THIRD QUARTER ENDED SEPTEMBER 28, 1997 VS. THIRD QUARTER ENDED
SEPTEMBER 29, 1996
Net sales for the Company were $656.1 million for the third quarter of 1997
compared to $738.3 million for the third quarter of 1996. The $82.2 million
decrease reflects the $59.0 million loss in sales associated with closed
facilities and a decrease in comp store sales.
Net sales from operations excluding closing facilities and remerchandising
activities for the third quarter of 1997 were $646.5 million versus $669.7
million for the same period in 1996. This represents a net sales decrease of
$23.2 million, or 3.5%, with comp store sales decreasing 3.4%. Affecting the net
sales decrease was the fact that the Company operated six fewer stores during
the third quarter of 1997 compared to last year (excluding the impact of the
restructuring store closings). Comp store sales in jewelry were up 4.2% due to
increased promotional activity and successes in building a stronger jewelry
sales organization. Hardlines comp sales were down 5.8% from last year due
primarily to lower fitness equipment, video and home office sales.
Net sales from closing facilities and remerchandising activities were $9.6
million for the third quarter of 1997 versus $68.7 million for these same
facilities and merchandise classifications for the same period last year. The 44
stores included in this line item closed operations on July 8, 1997.
GROSS MARGIN
Gross margin, after buying and occupancy expenses, for the third quarter was
$151.2 million, or 23.0% of net sales compared to $175.1 million, or 23.7% of
net sales for the prior year quarter.
Gross margin, after buying and occupancy expenses, from operations excluding
closing facilities and remerchandising activities was $151.4 million, or 23.4%
of sales from operations excluding closing facilities and remerchandising
activities for the third quarter of 1997 compared to $163.2 million, or 24.4% of
sales from operations excluding closing facilities and remerchandising
activities for the prior year quarter. The decrease in gross margin rate is the
result of increased jewelry promotional activities, which produced higher
jewelry sales and related gross margin dollars. Hardline margins were negatively
impacted by more aggressive clearance activity. Gross margins were also impacted
by an increase in inventory shrink rate.
Gross margin, after buying and occupancy expenses, from closing facilities and
remerchandising activities was ($0.2) million, or (2.2%) of sales from closing
facilities and remerchandising activities for the third quarter of 1997 compared
to $11.9 million, or 17.3% of sales from closing facilities and remerchandising
activities for the prior year quarter.
-11-
<PAGE> 12
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the third quarter of 1997 were
$154.9 million, or 23.6% of net sales, versus $161.8 million, or 21.9% of net
sales for the third quarter of 1996. The $6.9 million decrease reflects a
decrease in expenses from closing facilities and remerchandising activities as
the 44 stores closed operations in early July, which was partially offset by an
increase in expenses from operations excluding closing facilities and
remerchandising activities. The increase as a percentage of net sales was
attributable to an increase in expenses from operations excluding closing
facilities and remerchandising activities and lower net sales.
Selling, general and administrative expenses of operations excluding closing
facilities and remerchandising activities were $154.8 million, or 23.9% of sales
from operations excluding closing facilities and remerchandising activities for
the third quarter of 1997 compared to $149.6 million, or 22.3% of sales from
operations excluding closing facilities and remerchandising activities for the
prior year quarter. The increase is primarily due to the implementation of the
Company's planned changes in its marketing model. The new two-tiered marketing
program includes a weekly newspaper insert program in certain urban markets and
a reduction in catalog distribution. Additionally, a majority of these urban
markets will also receive a new television advertising campaign. The remaining
markets will receive a normal distribution of direct mail flyers and a reduced
level of catalog distribution. Employment expenses were also up during the
quarter due to implementation of a new pull ticket system designed to improve
the customers' shopping experience, which replaced our traditional clipboard
system of ordering merchandise.
Selling, general and administrative expenses of closing facilities and
remerchandising activities were $0.1 million, or 1.0% of sales from closing
facilities and remerchandising activities for the third quarter of 1997 compared
to $12.2 million, or 17.8% of sales from closing facilities and remerchandising
activities for the prior year quarter. This decrease in dollars and rate
reflects the closure of 44 underperforming stores in early July 1997.
INTEREST EXPENSE
Interest expense for the third quarter of 1997 was $18.7 million as compared to
$19.0 million for the third quarter of 1996. Interest expense remained
relatively flat for the quarter as lower average borrowings against the
Company's New Credit Facility was primarily offset by the issuance of $74.8
million in mortgage financing notes in the fourth quarter of 1996 and first
quarter of 1997.
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<PAGE> 13
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
INCOME TAXES
The Company recognized an income tax benefit of $13.4 million and $7.6 million
for the third quarter ended September 28, 1997 and September 29, 1996,
respectively. The effective tax rates for the quarter ended September 28, 1997
and September 29, 1996 were 37.5% and 38.0%, respectively. For the fiscal year
ended December 29, 1996 the effective income tax rate was 37.5%.
NINE PERIODS ENDED SEPTEMBER 28, 1997 VS. NINE PERIODS ENDED SEPTEMBER 29, 1996
NET SALES
Net sales for the Company were $2,219.9 million for the first nine months of
1997 compared to $2,313.9 million for the first nine months of 1996. The
decrease of $94.0 million, or 4.1% is the result of a decline in net sales from
operations excluding closing facilities and remerchandising activities of $66.4
million and a decline in net sales from closing facilities and remerchandising
activities, due to the closure of 44 underperforming stores of $27.6 million.
Comparable store sales from operations excluding closing facilities and
remerchandising activities decreased by 2.8% for the first nine months of 1997
compared to last year.
GROSS MARGIN
Gross margin, after buying and occupancy expenses, for the first nine months was
$489.0 million, or 22.0% of net sales compared to $543.7 million, or 23.5% of
net sales for the same period last year. A relatively flat comparison in gross
margin rate from operations excluding closing facilities and remerchandising
activities was offset by the impact of the Company's inventory liquidation
program associated with the closing facilities and remerchandising activities.
The Company's gross margin dollars were down due to the inventory liquidation
from closing facilities and remerchandising activities and lower sales from
operations excluding closing facilities and remerchandising activities compared
to last year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased to $497.3 million, or
22.4% of net sales, for the first nine periods of 1997 compared to $508.6
million, or 22.0% of net sales for the same period a year ago. The decrease in
selling, general and administrative dollars is partially attributable to the
lower operating expenses resulting from the closure of 44 underperforming stores
in early July. The remainder of the reduction resulted primarily from reduced
employment and other selling, general and administrative costs from operations
excluding closing facilities and remerchandising activities partially offset by
increased third quarter advertising expenses.
-13-
<PAGE> 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
INTEREST EXPENSE
Interest expense for the first nine periods of 1997 was $53.8 million as
compared to $52.9 million for the same period a year ago. Interest expense for
the year increased primarily due to the issuance of $74.8 million in mortgage
financing notes in the fourth quarter of 1996 and the first quarter of 1997.
This expense was partially offset by lower average borrowings against the
Company's Reducing Revolving Credit Facility.
INCOME TAXES
The Company recognized an income tax benefit of $88.3 million for the first nine
periods of 1997 compared to $23.8 million for the first nine periods of 1996.
The estimated annual effective tax rates for the nine periods ended September
28, 1997 and September 29, 1996 were 37.5% and 38.0%, respectively. For the
fiscal year ended December 29, 1996, the effective income tax rate was 37.5%.
RESTRUCTURING CHARGE, STORE LIQUIDATION AND REMERCHANDISING PROGRAM
On March 25, 1997, the Company adopted a business restructuring plan to close 60
underperforming stores and one distribution center. As a result, a pre-tax
charge of $129.5 million for restructuring costs was taken in the first quarter
of 1997. The components of the restructuring charge are outlined in a table in
Note C of the Notes to Consolidated Financial Statements.
The restructuring was based on an analysis of individual store performance based
on cash flow return on committed capital, fit within marketing demographic
profiles and strategic geographic positioning. After the effect of charges and
costs related specifically to the closings, the immediate ongoing impact of the
closings on net income will be immaterial because the stores to be closed are
near break-even contributors. The major benefit of the store closings will be
the release of capital associated with these operations, rather than a
short-term opportunity to improve earnings. This capital will be redirected in
an effort to produce more appropriate returns.
In the second quarter of 1997, management began the process of closing 44 of the
60 stores and the distribution center. These 44 stores and the distribution
center were closed by the end of July 1997, with the remaining closures expected
to be completed by the first half of 1998. Liquidation of the inventory
associated with these 44 closed stores began in April 1997 and was completed in
July 1997. Reduced margins and changes in selling, general and administrative
expenses are reflected in the Company's operating results as inventory
associated with the closing stores is liquidated.
During the second quarter of 1997, the Company also began implementing certain
remerchandising strategies, including the exit of the low margin computer
business and certain components of the wireless communication business.
-14-
<PAGE> 15
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $533.6 million at the end of the third quarter of
1997 from $350.4 million at September 29, 1996, an increase of $183.2 million or
52.3%. Short-term borrowings totaled $125.4 million ($327.7 million available
for borrowing) at September 28, 1997 compared to $348.4 million ($179.1 million
available for borrowing) at September 29, 1996, a decrease of $223.0 million.
The increase in working capital is due primarily to a $113.8 million shift from
short-term to long-term borrowings under the Company's Amended and Restated
Credit Facility and the completion of $74.8 million in mortgage financing notes
primarily in the fourth quarter of 1996. The shift to long term borrowings is
the net effect of the addition of a $200 million term loan as a part of the
Amended and Restated Credit Facility partially offset by the retirement of $86.2
million of Senior Notes Due 2001. Furthermore, income taxes classified as a
current asset increased by $64.1 million primarily due to the $129.5 million
restructuring charge recorded in the first quarter of 1997. Inventory levels,
accounts payable and short term borrowings were reduced as a result of inventory
liquidation from closing facilities and remerchandising activities. Prepaid
expenses decreased by $29.2 million primarily due to the reduction of Fall
Catalog circulation and number of pages. Current maturities of long-term debt
increased $15.9 million as the first installment payment on the Company's First
Mortgage Secured Notes is due on June 30, 1998.
Working capital requirements fluctuate significantly during the year due to the
seasonal nature of the jewelry, gift and home business. These requirements are
financed through a combination of internally generated cash flow from operating
activities, short-term seasonal borrowings and long-term financing. The current
ratio at September 28, 1997 and September 29, 1996 was 1.6:1 and 1.3:1,
respectively.
In September 1997, the Company completed a new financing agreement with a
syndicate of lenders led by The Chase Manhattan Bank and Citibank. The agreement
provides a five-year, $900 million fully committed asset based facility (the
"Amended and Restated Credit Facility") to replace the Company's existing bank
lines and certain other obligations. The lenders funded a $200 million term loan
and will extend up to $700 million in revolving loans during the five-year
agreement. The Amended and Restated Credit Facility also includes a $175 million
sub-facility for letters of credit. The Amended and Restated Credit Facility
replaced the Company's Reducing Revolving Credit Facility which had a maximum
commitment level of $525 million.
The Amended and Restated Credit Facility is designed to provide the Company with
long-term liquidity and operating flexibility. Borrowings under the facility are
subject to borrowing limits based on percentages of certain current and fixed
assets and borrowing limitations contained in the Company's public subordinated
debt indenture. The financial covenants included in the definitive agreement
relate to coverage and leverage tests and are expected to enhance the Company's
ability to implement its strategic initiatives. The Amended and Restated Credit
Facility excludes from financial covenant calculations the impact of up to $175
million in pre-tax charges and costs related to certain strategic initiatives
such as the closing facilities and remerchandising activities. The effective
interest rate for the revolving loans and the term loan is subject to a
financial performance-based grid, with initial pricing set at LIBOR + 2.00% and
LIBOR + 2.25%, respectively. Additionally, there is an unused commitment fee of
3/8% on the undrawn portion of the revolving loans.
-15-
<PAGE> 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The lenders have received a first-priority security interest on all material
unencumbered assets of the Company and its subsidiaries, excluding mortgages on
leasehold interests. These security interests will automatically terminate when
the Company either achieves an investment grade credit rating on its implied
senior debt or meets certain operating performance targets.
Total long-term debt, including current maturities and capitalized leases,
increased to $796.9 million at September 28, 1997 from $628.4 million at
September 29, 1996. The increase in total long-term debt was primarily
attributable to the $113.8 million shift from short-term to long-term borrowings
under the Company's Amended and Restated Credit Facility and the issuance of
$74.8 million in mortgage financing notes primarily in the fourth quarter of
1996. This increase was slightly offset by the early extinguishment of $8.9
million in mortgages and scheduled payments on capitalized leases, mortgages and
Industrial Revenue Bonds.
Additions to owned property and equipment were $23.6 million for the nine
periods ended September 28, 1997 compared to $17.2 million for the same period
last year. The Company operated 359 stores as of September 28, 1997, a net
decrease of 6 stores from September 29, 1996 (excluding the closing of 44 stores
as part of the Company's restructuring plan). The Company expects to incur
capital expenditures of approximately $50 million during fiscal 1997 and plans
to fund these expenditures through a combination of cash flows from operations
and borrowings under the Amended and Restated Credit Facility.
ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share". This pronouncement will be effective for financial statements for both
interim and annual periods ending after December 15, 1997. In June 1997, the
FASB issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." Both
statements shall be effective for fiscal years beginning after December 15,
1997. The Company anticipates that the adoption of these Statements will not
have a material impact on its operating results or financial position.
-16-
<PAGE> 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
The Company's amended and restated Credit Facility permits the
payment of dividends with respect to the Company's common stock,
$0.50 par value (a) payable solely in securities of the Company,
and (b) after June 30, 1999, payable in cash (if no Default or
Event of Default exists) in an aggregate amount by which the
following, when added to the amount of any cash dividends paid
or declared would exceed 25% of Consolidated Net Income of the
Company for the period of September 30, 1997 through the last
day of the fiscal quarter prior to the dividend payment date:
(i) Acquisitions and Investments under Section 8.8(m) of the
Credit Facility in excess of $80 million, or (ii) Investments
(other than Acquisitions under Section 8.8(m) of the Credit
Facility in excess of $30 million).
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
-17-
<PAGE> 18
PART II - OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8-K
6(a) Exhibits filed with this Form 10-Q
<TABLE>
<CAPTION>
Exhibit No. Under Items
601 of Regulation S-K Brief Description
----------------------- -----------------
<S> <C>
4 Amended and Restated Credit Agreement
dated as of September 10, 1997 among
Service Merchandise Co., Inc.,
Various Banks and The Chase
Manhattan Bank as Administrative
and Collateral Agent and Citibank
as Documentation Agent.
11 Statement re:
Computation of Net Loss
Per Common Share for the Three
Periods Ended and Nine Periods
Ended September 28, 1997 and
September 29, 1996.
27 Financial Data Schedule for the
Nine Periods Ended September 28, 1997
(for SEC use only).
</TABLE>
6(b) Reports on Form 8-K
As reported on Form 8-K dated July 21, 1997, the
Company signed a commitment letter with The Chase
Manhattan Bank and Citibank to provide a five-year,
$900 million bank facility to replace its existing bank
lines and other obligations. The financing was
completed on September 10, 1997.
-18-
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SERVICE MERCHANDISE
COMPANY, INC.
Date: November 10, 1997 /s/ Gary M. Witkin
----------------------------
Gary M. Witkin
President
(Chief Executive Officer)
Date: November 10, 1997 /s/ S. Cusano
----------------------------
S. Cusano
Executive Vice President and
Chief Financial Officer
(Chief Financial Officer)
(Chief Accounting Officer)
-19-
<PAGE> 1
================================================================================
SERVICE MERCHANDISE COMPANY, INC.
- --------------------------------------------------------------------------------
$900,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
September 10, 1997
- --------------------------------------------------------------------------------
THE CHASE MANHATTAN BANK
as Administrative Agent
and Collateral Agent
CITICORP USA, INC.
as Documentation Agent
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
as Arrangers
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS....................................................................... 1
1.1 Defined Terms................................................................... 1
1.2 Other Definitional Provisions................................................... 37
SECTION 2. AMOUNTS AND TERMS OF TERM LOAN COMMITMENTS........................................ 38
2.1 Term Loans...................................................................... 38
2.2 Procedure for Term Loan Borrowing............................................... 38
2.3 Repayment of Term Loans......................................................... 39
2.4 Commitment Fee.................................................................. 39
SECTION 3. AMOUNTS AND TERMS OF REVOLVING CREDIT COMMITMENTS................................. 39
3.1 Revolving Credit Commitments.................................................... 39
3.2 Procedure for Revolving Credit Borrowing........................................ 40
3.3 Commitment Fee.................................................................. 40
3.4 Termination or Reduction of Commitments......................................... 40
3.5 Repayment of Revolving Loans.................................................... 41
3.6 L/C Commitment.................................................................. 41
3.7 Procedure for Issuance of Letters of Credit..................................... 42
3.8 Letter of Credit Fees, Commissions and Other Charges............................ 42
3.9 L/C Participations.............................................................. 43
3.10 Letter of Credit Reimbursement Obligations..................................... 44
3.11 Obligations Absolute........................................................... 44
3.12 Letter of Credit Payments...................................................... 45
3.13 Letter of Credit Applications.................................................. 45
3.14 Swing Line Commitment.......................................................... 45
3.15 Procedure for Swing Line Borrowing............................................. 45
3.16 Refunding of Swing Line Loans; Participations in Swing Line Loans............. 46
3.17 Annual Revolving Credit Clean-Down............................................. 47
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT ..................... 47
4.1 Optional and Mandatory Prepayments.............................................. 47
4.2 Conversion and Continuation Options............................................. 51
4.3 Minimum Amounts and Maximum Number of Tranches.................................. 51
4.4 Interest Rates and Payment Dates................................................ 51
4.5 Computation of Interest and Fees................................................ 52
4.6 Inability to Determine Interest Rate............................................ 53
4.7 Pro Rata Treatment and Payments................................................. 53
4.8 Illegality...................................................................... 54
4.9 Requirements of Law............................................................. 54
4.10 Indemnification for Taxes...................................................... 55
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
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<S> <C> <C>
4.11 Indemnity...................................................................... 57
4.12 Change of Lending Office....................................................... 57
4.13 Evidence of Debt............................................................... 58
SECTION 5. REPRESENTATIONS AND WARRANTIES.................................................... 59
5.1 Financial Condition............................................................. 59
5.2 No Change....................................................................... 60
5.3 Corporate Existence; Compliance with Law........................................ 60
5.4 Corporate Power; Authorization; Enforceable Obligations......................... 60
5.5 No Legal Bar.................................................................... 60
5.6 No Material Litigation.......................................................... 61
5.7 No Default...................................................................... 61
5.8 No Burdensome Restrictions...................................................... 61
5.9 Taxes........................................................................... 61
5.10 Federal Regulations............................................................ 61
5.11 ERISA.......................................................................... 61
5.12 Investment Company Act; Other Regulations...................................... 62
5.13 Subsidiaries................................................................... 62
5.14 Environmental Matters.......................................................... 62
5.15 The Security Documents......................................................... 63
5.16 Ownership of Property; Liens................................................... 64
5.17 Intellectual Property.......................................................... 64
5.18 Pledged Stock.................................................................. 65
5.19 Real Estate Matters............................................................ 65
5.20 Continuing Letters of Credit................................................... 65
5.21 Purpose of Loans; Use of Proceeds.............................................. 65
5.22 Accuracy of Information........................................................ 65
5.23 Depositary Accounts............................................................ 66
5.24 Senior Indebtedness............................................................ 66
SECTION 6. CONDITIONS........................................................................ 66
6.1 Conditions to Effectiveness..................................................... 66
6.2 Conditions to Each Extension of Credit.......................................... 69
SECTION 7. AFFIRMATIVE COVENANTS............................................................. 70
7.1 Financial Statements............................................................ 70
7.2 Certificates; Other Information................................................. 71
7.3 Payment of Obligations.......................................................... 72
7.4 Maintenance of Existence; Compliance with Contractual Obligations and
Requirements of Law.......................................................... 72
7.5 Maintenance of Property; Insurance.............................................. 72
7.6 Inspection of Property; Books and Records; Discussions.......................... 72
7.7 Notices......................................................................... 73
7.8 Environmental Laws.............................................................. 73
7.9 Further Assurances.............................................................. 74
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
7.10 Mortgages; Etc................................................................. 74
7.11 Additional Collateral.......................................................... 74
7.12 Depositary Account and Payments System......................................... 76
SECTION 8. NEGATIVE COVENANTS................................................................ 76
8.1 Financial Condition Covenants................................................... 76
8.2 Limitation on Guarantee Obligations............................................. 76
8.3 Limitation on Liens............................................................. 77
8.4 Limitation on Fundamental Changes............................................... 80
8.5 Limitation on Sale of Assets.................................................... 80
8.6 Limitation on Dividends......................................................... 82
8.7 Limitation on Capital Expenditures.............................................. 82
8.8 Limitation on Investments, Loans and Advances................................... 82
8.9 Limitation on Optional Payments and Modifications of Debt Instruments........... 84
8.10 Limitation on Transactions with Affiliates..................................... 85
8.11 Limitation on Sales and Leasebacks............................................. 85
8.12 Fiscal Years and Quarters...................................................... 85
8.13 Limitation on Conduct of Business.............................................. 85
8.14 No Other Designated Senior Debt................................................ 85
8.15 Limitation on Issuances of Capital Stock....................................... 85
8.16 Foreign Holding Companies, Inactive Subsidiaries and Special Purpose
Subsidiaries................................................................. 85
SECTION 9. EVENTS OF DEFAULT................................................................. 86
SECTION 10. THE AGENTS....................................................................... 89
10.1 Appointment.................................................................... 89
10.2 Delegation of Duties........................................................... 89
10.3 Exculpatory Provisions......................................................... 89
10.4 Reliance by Agents............................................................. 90
10.5 Notice of Default.............................................................. 90
10.6 Non-Reliance on Agents and Other Lenders....................................... 90
10.7 Indemnification................................................................ 91
10.8 Agent in Its Individual Capacity............................................... 91
10.9 Successor Administrative Agent................................................. 91
SECTION 11. MISCELLANEOUS.................................................................... 91
11.1 Amendments and Waivers......................................................... 91
11.2 Notices........................................................................ 93
11.3 No Waiver; Cumulative Remedies................................................. 93
11.4 Survival of Representations and Warranties..................................... 94
11.5 Payment of Expenses and Taxes; Indemnity....................................... 94
11.6 Successors and Assigns; Participations and Assignments......................... 94
11.7 Replacement of Lenders under Certain Circumstances............................. 97
11.8 Adjustments; Set-off........................................................... 97
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
11.9 Counterparts................................................................... 98
11.10 Severability.................................................................. 98
11.11 Integration................................................................... 98
11.12 Termination................................................................... 98
11.13 Collateral Release............................................................ 98
11.14 GOVERNING LAW................................................................. 99
11.15 Submission To Jurisdiction; Waivers........................................... 99
11.16 Acknowledgements.............................................................. 99
11.17 WAIVERS OF JURY TRIAL......................................................... 99
11.18 Confidentiality...............................................................100
11.19 Section Headings..............................................................100
11.20 Judgment Currency.............................................................100
11.21 Special Provisions............................................................101
11.22 Amendments to Original Mortgages and Aircraft Mortgage........................101
</TABLE>
- iv -
<PAGE> 6
ANNEXES
Annex A Pricing Grid
SCHEDULES
Schedule 1.1(a) Commitments
Schedule 1.1(b) Real Estate Eligibility Conditions
Schedule 1.1(c) Subordination Provisions
Schedule 5.1 Charges and Changes
Schedule 5.4 Consents
Schedule 5.13 Subsidiaries
Schedule 5.14 Environmental Matters
Schedule 5.15 Filing Jurisdictions and Chief Executive Offices
Schedule 5.17 Intellectual Property Matters
Schedule 5.19 Material Real Property
Schedule 5.20 Continuing Letters of Credit
Schedule 5.23 Depositary Accounts
Schedule 6.1(j) Local Counsel Jurisdictions
Schedule 6.1(k) UCC Filings
Schedule 6.1(m) Lien Search Jurisdictions
Schedule 7.10(b) Excluded Properties
Schedule 8.2(b) Existing Guarantee Obligations
Schedule 8.3(f) Existing Liens
Schedule 8.10 Transactions with Affiliates
Schedule 11.2 Addresses
EXHIBITS
Exhibit A Form of Addendum
Exhibit B Form of Subsidiaries Guarantee
Exhibit C Form of Master Collateral Agreement
Exhibit D Form of Revolving Credit Note
Exhibit E Form of Term Loan Note
Exhibit F Form of Swing Line Note
Exhibit G Form of Borrower Closing Certificate
Exhibit H-1 Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
Exhibit H-2 Form of Opinion of Managing Attorney to Borrower
Exhibit H-3 Form of Opinion of Bass, Berry & Sims PLC
Exhibit H-4 Form of Opinion of Simpson Thacher & Bartlett
Exhibit H-5 Form of Opinion of Local Counsel
Exhibit I Form of Borrowing Base Certificate
Exhibit J Form of Assignment and Acceptance
Exhibit K Form of Swing Line Loan Participation Certificate
- v -
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of September
10, 1997, among SERVICE MERCHANDISE COMPANY, INC., a Tennessee corporation (the
"Borrower"), the several banks, financial institutions and other entities from
time to time parties to this Agreement (collectively, the "Lenders";
individually, a "Lender"), THE CHASE MANHATTAN BANK, a New York banking
corporation, as Administrative Agent and Collateral Agent (each as hereinafter
defined) for the Lenders hereunder, and CITICORP USA, INC., a Delaware
corporation, as Documentation Agent (as hereinafter defined) for the Lenders
hereunder.
W I T N E S S E T H :
WHEREAS, the Borrower, certain of the Lenders and the
Administrative Agent are parties to that certain Credit Agreement, dated as of
June 8, 1994 (as amended pursuant to the First Amendment thereto, dated as of
April 13, 1995, the Second Amendment thereto, dated as of May 23, 1996, the
Third Amendment thereto, dated as of September 16, 1996, the Fourth Amendment
thereto, dated as of January 15, 1997 and the Fifth Amendment thereto, dated as
of March 25, 1997, the "Existing Credit Agreement");
WHEREAS, the Borrower has requested that the Lenders amend and
restate the Existing Credit Agreement to provide, among other things, for the
refinancing of the Borrower's outstanding 8-3/8% Senior Notes due 2001 and to
provide additional financing for the general corporate purposes of the Borrower
and its Subsidiaries; and
WHEREAS, subject to the terms and conditions of this
Agreement, the Borrower, the Lenders and the Administrative Agent wish to amend
and restate the Existing Credit Agreement in its entirety as provided herein;
NOW, THEREFORE, subject to the satisfaction of the conditions
set forth in subsection 6.1, the Borrower, the Lenders and the Administrative
Agent hereby agree to amend and restate the Existing Credit Agreement in its
entirety to read as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean
the rate of interest per annum publicly announced from time to time by
the Administrative Agent as its prime rate in effect at its principal
office in New York City (the Prime Rate not being intended to be the
lowest rate of interest charged by the Administrative Agent in
connection with extensions of credit to debtors); "Base CD Rate" shall
mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the CD Reserve Percentage and (b) the
CD Assessment Rate; "Three-Month Secondary CD Rate" shall mean, for any
day, the secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board of
Governors
<PAGE> 8
2
through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices
of the Board of Governors, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day), or, if such rate
shall not be so reported on such day or such next preceding Business
Day, the average of the secondary market quotations for three-month
certificates of deposit of major money center banks in New York City
received at approximately 10:00 A.M., New York City time, on such day
(or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York City
negotiable certificate of deposit dealers of recognized standing
selected by it; "CD Assessment Rate" shall mean, for any day, the
annual assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund maintained by the FDIC classified as
well-capitalized and within supervisory subgroup "B" (or a comparable
successor assessment risk classification) within the meaning of 12
C.F.R. ss. 327.4 (or any successor provision) to the FDIC for the
FDIC's insuring time deposits at offices of such institution in the
United States; "CD Reserve Percentage" shall mean, for any day, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors, for determining the maximum
reserve requirement for a Depositary Institution (as defined in
Regulation D of the Board of Governors or any successor provisions) in
respect of new non-personal time deposits in Dollars having a maturity
of 30 days or more; and "Federal Funds Effective Rate" shall mean, for
any day, 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 on the next succeeding Business Day
by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized
standing selected by it. Any change in the ABR due to a change in the
Prime Rate, the Three-Month Secondary CD Rate, the CD Assessment Rate,
the CD Reserve Percentage or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such
change in the Prime Rate, the Three-Month Secondary CD Rate, the CD
Assessment Rate, the CD Reserve Percentage or the Federal Funds
Effective Rate, respectively.
"ABR Loans": Term Loans or Revolving Loans the rate of
interest applicable to which is based upon the ABR.
"Account Debtor": any Person that is liable to make payments
with respect to an Account.
"Accounts Receivable Calculation Date": at any time, the last
day of the most recent fiscal month.
"Acquisition": as to any Person, the acquisition by such
Person of (a) Capital Stock of any other Person that is not a
Subsidiary of such Person if, after giving effect to the acquisition of
such Capital Stock, such other Person would be a Subsidiary of such
Person, (b) all or substantially all of the assets of any other Person
or (c) assets constituting one or more business units of any other
Person.
"Addendum": an instrument, substantially in the form of
Exhibit A, by which a Lender becomes a party to this Agreement.
<PAGE> 9
3
"Adjustment Date": the second Business Day following receipt
by the Administrative Agent of both (a) the financial statements (other
than copies of the Form 10-K or Form 10-Q for the relevant fiscal
period) required to be delivered pursuant to subsection 7.1(a) or
7.1(b), as the case may be, for the most recently completed fiscal
period and (b) the certificate required to be delivered pursuant to
subsection 7.2(b) with respect to such fiscal period.
"Administrative Agent": Chase, together with its affiliates,
as one of the Arrangers of the Commitments and as the administrative
agent for the Lenders under this Agreement and the other Loan
Documents.
"Affiliate": as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either
to (a) vote 5% or more of the securities having ordinary voting power
for the election of directors of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by
contract or otherwise. For the purposes of this Agreement, the Borrower
and its Restricted Subsidiaries shall not be deemed to be Affiliates of
each other.
"Agents": collectively, the Administrative Agent, the
Collateral Agent and the Documentation Agent.
"Aggregate Outstanding Extensions of Credit": at any time, an
amount equal to the sum of (a) the Aggregate Revolving Credit
Outstandings at such time and (b) the aggregate outstanding
principal amount of Term Loans of all the Term Lenders at such time.
"Aggregate Revolving Credit Outstandings": at any time, an
amount equal to the Revolving Credit Extensions of Credit of all the
Lenders at such time.
"Agreement": this Amended and Restated Credit Agreement, as
amended, supplemented or otherwise modified from time to time.
"Agreement Currency": as defined in subsection 11.20.
"Anticipated Reinvestment Amount": with respect to any
Reinvestment Event, the amount specified in the Reinvestment Notice
with respect thereto as the amount of the relevant Available Net Cash
Proceeds that the Borrower or any of its Restricted Subsidiaries
intends to use to purchase, construct or otherwise acquire Reinvestment
Assets.
"Applicable Commitment Fee Rate": 0.375%, provided that, from
and after the last day of the third fiscal quarter of the 1997 Fiscal
Year, the Applicable Commitment Fee Rate will be adjusted, on each
Adjustment Date, to the Commitment Fee Rate set forth on Annex A
opposite the Margin Level Status of the Borrower in effect on such
Adjustment Date, and, provided, further, that, in the event the
financial statements (other than copies of the Form 10-K or 10-Q for
the relevant fiscal period) required to be delivered pursuant to
subsection 7.1(a) or 7.1(b), as applicable, and the related certificate
required pursuant to subsection 7.2(b) are not delivered when due,
then, during the period from the date on which such financial
statements were required to be delivered until two Business Days
following the date upon which they actually are delivered, the
Applicable Commitment Fee Rate shall be 0.375%.
<PAGE> 10
4
"Applicant": with respect to any Letter of Credit, the
Borrower or any of its Subsidiaries.
"Application": an application or request, in such form as an
Issuing Bank may specify from time to time, requesting such Issuing
Bank to open a Letter of Credit.
"Arrangers": collectively, Chase Securities Inc. and Citicorp
Securities, Inc.
"Asset Sale": any sale, transfer or other disposition
(including any sales, transfers or other dispositions in connection
with Sale-Leasebacks or Securitization Transactions) by the Borrower or
any of its Restricted Subsidiaries to a Person (other than the Borrower
or a Subsidiary Guarantor) of ownership of any property of the Borrower
or any such Restricted Subsidiary (including property subject to any
Lien under any Security Document).
"Assignee": as defined in subsection 11.6(c).
"Assignment Financing Statement": with respect to each
Mortgage Assignment, a Uniform Commercial Code financing statement
naming the Administrative Agent as the "secured party", on the
appropriate state form, executed by the Borrower or a Subsidiary, as
appropriate, and describing the appropriate Mortgage Assignment.
"Available Accounts Receivable Amount": as of any Accounts
Receivable Calculation Date, an amount equal to 80% of the Eligible
Trade Accounts Receivable Amount as of such Accounts Receivable
Calculation Date.
"Available Cash Equivalents Amount": as of any Calculation
Date, an amount equal to 100% of all Cash Equivalents which have then
been pledged to the Collateral Agent pursuant to Section 9 of the
Securities Pledge Agreement.
"Available Inventory Amount": as of any Calculation Date, an
amount equal to (a) 65% of the Eligible Adjusted Inventory Amount
minus (b) the Gift Certificate Liability Amount, in each case as of
such Calculation Date.
"Available L/C Amount": as of any Calculation Date, an amount
equal to 50% of the sum of (a) the aggregate undrawn face amount of
Trade Letters of Credit issued to finance the purchase of Inventory
(excluding any Inventory included in the calculation of Eligible
Inventory Amount) and (b) the aggregate Inventory Value of Inventory
financed with Trade Letters of Credit which have been fully drawn and
the Reimbursement Obligations in respect of which have been fully paid
so long as, in the case of clause (a) and (b), (i) such Inventory shall
be in transit to properties owned or leased by the Borrower or the
Subsidiary Guarantors in the United States, (ii) such Inventory is not
included in the calculation of Eligible Inventory Amount and, upon
arrival in the United States, will be included in the determination of
the Eligible Inventory Amount (but not included in the determination of
the Ineligible Inventory Amount) and (iii) the Collateral Agent or its
agent or bailee shall be named as the consignee of the applicable bill
of lading or other document of title.
"Available Net Cash Proceeds": collectively, (a) the Net Cash
Proceeds of any Asset Sale pursuant to the 1997 Restructuring Program
and (b) up to $75,000,000 in the aggregate of Net Cash Proceeds (other
than Net Cash Proceeds described in clause (a) above) of Asset Sales
<PAGE> 11
5
of any parcels of Designated Material Real Property and Indebtedness
which is secured by a Lien on any parcels of Designated Material Real
Property.
"Available Revolving Amount": at any time, an amount equal to
the lesser of (a) the excess, if any, of (i) the aggregate Revolving
Credit Commitments of the Revolving Credit Lenders at such time over
(ii) the Aggregate Revolving Credit Outstandings at such time and (b)
the excess, if any of (i) the Borrowing Base at such time over (ii) the
Aggregate Outstanding Extensions of Credit at such time.
"Available Revolving Credit Commitment": as to any Lender, at
any time, an amount equal to the excess, if any, of (a) such Lender's
Revolving Credit Commitment at such time over (b) such Lender's
Revolving Credit Extensions of Credit at such time; collectively, as to
all the Lenders, the "Available Revolving Credit Commitments".
"Board of Governors": the Board of Governors of the Federal
Reserve System and any Governmental Authority which succeeds to the
powers and functions thereof.
"Borrowing Base": at any time, an amount, calculated based
upon the Borrowing Base Certificate delivered pursuant to subsection
6.1(n) and thereafter the most recent Borrowing Base Certificate
delivered pursuant to this Agreement, equal to the sum of (a) the
Available Inventory Amount as of the most recent Calculation Date, plus
(b) an amount equal to the lesser of (i) 60% of the excess of (A) the
aggregate Mortgage Value of all parcels of Eligible Mortgaged Real
Property as of the most recent Calculation Date over (B) the sum of (I)
the aggregate Real Property Amortization Amounts for all parcels of
Eligible Mortgaged Real Property at such time, (II) the Environmental
Reserve Amount at such time and (III) the aggregate Mechanics' Lien
Reserve Amounts for all parcels of Eligible Mortgaged Real Property at
such time and (ii) $200,000,000 plus (c) the Available Accounts
Receivable Amount as of the most recent Accounts Receivable Calculation
Date plus (d) the Available L/C Amount as of the most recent
Calculation Date, plus (e) the Available Cash Equivalents Amount as of
the most recent Calculation Date. The Borrowing Base established based
upon a particular Borrowing Base Certificate shall remain in effect
until the delivery of a subsequent Borrowing Base Certificate, provided
that the Borrower (i) in connection with the liquidation of any Cash
Equivalent included in the determination of the Available Cash
Equivalents Amount, shall deliver a written notice to the Collateral
Agent prior to 10:00 A.M., New York City time, on the date of such
liquidation specifying the amount of Cash Equivalents to be so
liquidated (and effective upon the date of liquidation specified in
such notice, the Available Cash Equivalents Amount shall be reduced by
the aggregate amount of Cash Equivalents to be so liquidated) and (ii)
in connection with the pledge of any additional Cash Equivalents
pursuant to the Securities Pledge Agreement, may deliver a written
notice to the Collateral Agent of such pledge specifying the date of
such pledge and the amount of Cash Equivalents to be so pledged (and
effective upon the later of (x) the date of such pledge specified in
such notice and (y) two Business Days after delivery of such notice,
the Available Cash Equivalents Amount shall be increased by the
aggregate amount of Cash Equivalents so pledged), provided, further,
that no such liquidation of a Cash Equivalent shall be permitted if,
after giving effect thereto and any prepayment of Loans (and the
cash-collateralization of any Letters of Credit) on such date, the then
Aggregate Outstanding Extensions of Credit would exceed the Borrowing
Base. The Collateral Agent shall have the right, in connection with any
periodic audit or appraisal of the Inventory performed by or on behalf
of the Collateral Agent and upon at least 30 days prior written notice
to the Borrower, to require that additional
<PAGE> 12
6
reserves of the types described below be included in the determination
of the Available Inventory Amount so long as such additional reserves
are consistent with the Agents' customary business practices and
generally applicable criteria for comparable asset based transactions
of an amount greater than or equal to $100,000,000: (a) additional
reserves relating to new categories of inventory (e.g. produce)
unrelated to the current or disclosed future business of the Borrower
and the Subsidiary Guarantors; (b) additional reserves to reflect
substantial changes in the overall composition or mix of the Inventory
which have the effect of materially reducing the Net Recoverable Value
of the Inventory taken as a whole; (c) additional reserves relating to
changes in the marketability of Inventory (including, for example, as
a result of a recession) which have the effect of materially reducing
the Net Recoverable Value of the Inventory taken as a whole; and (d)
additional reserves relating to a material negative variance between
the Borrower's or a Subsidiary Guarantor's cost and the market price
of a major product category (e.g., a decline in the price of gold).
"Borrowing Base Certificate": as defined in subsection
7.2(c).
"Borrowing Date": any Business Day specified in a notice
pursuant to subsection 2.2, 3.2, or 3.15 as a date on which the
Borrower requests the Lenders to make Loans hereunder.
"Business": as defined in subsection 5.14(b).
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close, provided, that, when used in connection with
a Eurodollar Loan, the term "Business Day" shall also exclude any day
on which banks are not open for dealings in Dollar deposits in the
London interbank market.
"Calculation Date": at any time, the last day of any period
covered by the most recent Borrowing Base Certificate.
"Capital Stock": any and all shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in
a Person (other than a corporation) and any and all warrants or
options to purchase any of the foregoing.
"Cash Collateral Account": as defined in subsection 4.1(b).
"Cash Dominion Trigger Event": shall occur upon the earlier of
(a) the occurrence of a Default (other than a Default under Section
9(d) (except in respect of a breach of subsections 7.5 and 7.7(a))) or
Event of Default and (b) the occurrence of a period of 30 consecutive
days during which the average daily Available Revolving Amount shall be
less than $150,000,000, provided that no Cash Dominion Trigger Event
shall occur or be deemed to have occurred at any time after the
occurrence of a Collateral Release Event.
"Cash Interest Expense": of any Person for any period,
Consolidated Interest Expense of such Person for such period minus, in
each case to the extent included in determining such Consolidated
Interest Expense for such period, the sum of the following:
(i) non-cash expenses for interest payable in kind and
(ii) amortization of debt discount and fees.
<PAGE> 13
7
"Chase": The Chase Manhattan Bank, a New York banking
corporation, and its successors.
"Citicorp": Citicorp USA, Inc., a Delaware corporation, and
its successors.
"Collateral": the collective reference to the Pledged Stock,
the Mortgaged Properties, the Mortgage Assignments, all Security (as
defined in each Security Agreement), all Pledged Securities (as defined
in the Pledge Agreement), the Collateral (as defined in the Aircraft
Mortgage) and all other property upon which a Lien is purported to be
created by any Security Document.
"Collateral Agent": Chase, in its capacity as Collateral
Agent under the Security Documents.
"Collateral Release Event": shall occur at any time, so long
as no Default or Event of Default shall have occurred and be continuing
at such time: (a) if the senior long-term unsecured debt of the
Borrower is rated (or has an implied rating or, in the case of any
rating by S&P, the Borrower has a general corporate debt rating of) at
least investment grade by at least two of Moody's, S&P and Duff &
Phelps; or (b) if, as of the end of any two consecutive fiscal quarters
of the Borrower: (i) the Fixed Charge Coverage Ratio is greater than or
equal to 2.0 to 1.0 and (ii) the Leverage Ratio is less than or equal
to 0.375 to 1.0, provided that, for purposes of determining the
Leverage Ratio in connection with clause (b)(ii) above, Consolidated
Total Debt shall include the average daily Aggregate Revolving Credit
Outstandings during the relevant period of four consecutive fiscal
quarters. For the purposes of this definition, "investment grade" means
a rating of BBB-, Baa3 and BBB- by S&P, Moody's and Duff & Phelps,
respectively. If the Borrower shall not have any senior unsecured
long-term debt outstanding, the Borrower may obtain a private rating
from Moody's, S&P and/or Duff & Phelps to satisfy the requirements of
clause (a) above.
"Commitment": with respect to any Lender, such Lender's Term
Loan Commitment and/or Revolving Credit Commitment, as the case may be;
collectively, as to all the Lenders, the "Commitments".
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414 of the Tax Code.
"Confidential Information": as defined in subsection 11.18.
"Consolidated": when used in connection with any defined
term, and not otherwise defined, means such term as it applies to any
Person and its Subsidiaries on a consolidated basis, after
eliminating all intercompany items.
"Continuing Directors": as defined in Section 9(j).
"Continuing Letter of Credit": each letter of credit
outstanding on the date hereof that was issued pursuant to the Existing
Credit Agreement by a Lender.
<PAGE> 14
8
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its material property is bound.
"Credit Card Issuer": any bank or other Person which issues
credit cards and extends credit to cardholders in connection with a
Credit Card Program.
"Credit Card Program": a private credit card program and/or
co-branded Visa, Mastercard or other credit card program created and
operated or maintained by the Credit Card Subsidiaries pursuant to (a)
the Private Label Credit Card Agreement, dated as of January 28, 1997,
among World Financial Network National Bank, the Borrower and Service
Merchandise Co. No. 80, Inc., or any similar agreement with any Credit
Card Issuer on substantially the same terms and conditions (as those
set forth in such Private Label Credit Card Agreement) or such other
terms and conditions as shall be reasonably satisfactory to the
Administrative Agent or (b) any other agreement or arrangement with
terms and conditions reasonably satisfactory to the Administrative
Agent.
"Credit Card Subsidiaries": any direct or indirect Subsidiary
of the Borrower, and any wholly-owned Subsidiaries of such Subsidiary,
existing from time to time that are created in connection with a Credit
Card Program, so long as (i) such Subsidiaries engage in no business or
transactions other than (x) the issuance (or providing for the
issuance) of credit cards, the extension of credit to cardholders
pursuant thereto, and other transactions arising from or related
thereto (including the sale or transfer of Accounts or credit card
receivables pursuant to asset backed financing transactions) and (y)
the entering into and performance of agreements with a Credit Card
Issuer that facilitate the Credit Card Issuer's doing business in
connection with a Credit Card Program and (ii) the liabilities of the
Credit Card Subsidiaries are without recourse to the Borrower and its
Restricted Subsidiaries (other than the Credit Card Subsidiaries),
provided that the Borrower and its Restricted Subsidiaries may enter
into customary commitments and/or underwriting agreements on behalf of
the Credit Card Subsidiaries for the purpose of customary securities
law or regulatory indemnifications.
"Debt": as to any Person at the date of any determination
thereof, the sum of the following to the extent such items should be
reflected as liabilities on the consolidated balance sheet of such
Person (excluding any items which appear only in the notes to such
consolidated balance sheet and except that Guarantee Obligations
described in clause (f) below shall be "Debt" of such Person to the
extent the liabilities in respect of such Guarantee Obligations would
be "Debt" of such Person if such liabilities were incurred directly by
such Person) at such date in accordance with GAAP (without
duplication): (a) all Indebtedness for borrowed money or the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with the Borrower's and its Restricted Subsidiaries'
customary practices), (b) any other Indebtedness which is evidenced by
a note, bond, debenture or similar instrument, (c) all obligations
under Financing Leases, (d) all obligations in respect of acceptances
issued or created for the account of such Person, (e) all liabilities
of the types described in the other clauses of this definition that are
secured by any Lien or any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment
thereof and (f) all Guarantee Obligations in respect of liabilities of
the types described in the other clauses of this definition of any
other Person (it being agreed that obligations under any lease which is
not a Financing Lease shall not in and of themselves constitute
Guarantee Obligations). It is understood and agreed that "Debt" of a
<PAGE> 15
9
Person shall not include (i) obligations of such Person in respect of
Floor Planning Facilities to the extent such obligations are reflected
as trade liabilities on the consolidated balance sheet of such Person
in accordance with GAAP, (ii) obligations of such Person in respect of
letters of credit to the extent such obligations are not reflected as
liabilities on the consolidated balance sheet of such Person (excluding
the notes to such balance sheet) in accordance with GAAP and (iii)
obligations of such Person in respect of consignments of Inventory to
such Person.
"Default": any of the events specified in Section 9 which,
with the giving of notice, the lapse of time, or both, or the
satisfaction of any other condition specified in Section 9, would
become an Event of Default.
"Deferred Repayment Amount": with respect to any Reinvestment
Event, the aggregate amount that (a) would have been applied to prepay
Term Loans pursuant to subsection 4.1(c) had the Borrower not delivered
a Reinvestment Notice with respect thereto and (b) is not so applied as
a result of being designated as an Anticipated Reinvestment Amount in
such Reinvestment Notice so delivered.
"Designated Lenders": as defined in subsection 6.1(a).
"Designated Material Real Property": collectively, at any
time, (a) all parcels of Material Real Property which are then subject
to a first priority Lien granted pursuant to a Mortgage, (b) the
Excluded Properties, (c) all parcels of Material Real Property deemed
to be parcels of Designated Material Real Property pursuant to
subsection 8.3(k) or 8.3(q) and (d) the parcels of real property
identified on Schedule 5.19 under the heading "Other Material Real
Property."
"Documentation Agent": Citicorp, together with its
affiliates, as one of the Arrangers of the Commitments and as the
documentation agent for the Lenders under this Agreement and the other
Loan Documents.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Dollar Equivalent": at any date of determination thereof with
respect to the face amount of any Letter of Credit issued in any
currency other than Dollars or any Reimbursement Obligations in respect
of any such Letter of Credit, an amount in dollars equivalent to such
face amount calculated at the rate of exchange quoted by the
Administrative Agent on such date of determination (at the hour on such
date of determination at which it customarily makes such determination)
to prime banks in the interbank market where its foreign currency
exchange operations in respect of the currency in which such Letter of
Credit is issued are then being conducted for the spot purchase of such
currency with Dollars.
"Domestic Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction (including territories)
within the United States of America, excluding the Inactive
Subsidiaries, Securitization Entities, Excluded Subsidiaries, Special
Purpose Subsidiaries and Foreign Holding Companies.
"Duff & Phelps": Duff & Phelps Inc.
<PAGE> 16
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"EBITDA": with respect to any period, EBITDAR for such period
minus, to the extent included in EBITDAR for such period, the
Consolidated Rental Expense of the Borrower for such period.
"EBITDAR": with respect to any period, Consolidated Net Income
of the Borrower for such period plus (a) in each case to the extent
deducted in determining such Consolidated Net Income for such period,
the sum of the following (without duplication): (i) Consolidated
Interest Expense of the Borrower, (ii) consolidated income tax expense
of the Borrower and its Consolidated Subsidiaries, (iii) consolidated
depreciation and amortization expense of the Borrower and its
Consolidated Subsidiaries, including, without limitation, depreciation
and amortization included in selling, general and administrative
expenses of the Borrower and its Consolidated Subsidiaries, (iv) any
non-cash expenses, non-cash losses or other non-cash charges resulting
from the write-down in the valuation of any assets and (v) Consolidated
Rental Expense of the Borrower minus (b) to the extent added in
determining such Consolidated Net Income for such period, any non-cash
gains resulting from the write-up in the valuation of any assets.
"Effective Date": the date on which the conditions set forth
in subsection 6.1 are satisfied.
"Eligible Adjusted Inventory Amount": as of any Calculation
Date, (a) the Eligible Inventory Amount minus (b) the Shrink Reserve,
in each case as of such Calculation Date.
"Eligible Assignee": as defined in subsection 11.6(c).
"Eligible Inventory Amount": as of any Calculation Date, (a)
the Inventory Value as of such Calculation Date of all Inventory of the
Borrower and the Subsidiary Guarantors that consists of finished goods,
loose diamonds or colored stones, minus (b) the sum of (i) the
Ineligible Inventory Amount as of such Calculation Date, (ii) the GOB
Inventory Amount as of such Calculation Date, and (iii) the Non-Current
Inventory Reserve as of such Calculation Date.
"Eligible Mortgaged Real Property": at any time, any parcel
of Material Real Property of the Borrower or any Subsidiary Guarantor
as to which each of the following conditions has been satisfied at
such time:
(a) (i) Such parcel of Material Real Property (A) is
comprised of a developed retail store, distribution center,
shopping center or office building with respect to which a
certificate of occupancy or temporary certificate of occupancy
or the local equivalent thereof (or any other similar proof of
completion) shall have been issued by the relevant
Governmental Authority or the Collateral Agent shall have
received other evidence reasonably satisfactory to it of the
completion of such retail store, distribution center, shopping
center or office building or (B) is undeveloped and has a book
value (excluding soft costs) of at least $1,000,000, (ii) a
Lien on such parcel of Material Real Property shall have been
granted by the Borrower or such Subsidiary Guarantor, as the
case may be, in favor of the Collateral Agent pursuant to a
Mortgage, (iii) such Mortgage shall be in full force and
effect in favor of the Collateral Agent at such time, (iv)
such Mortgage shall have been recorded in the appropriate
jurisdiction or jurisdictions to perfect the Lien granted
pursuant to such Mortgage and (v) all
<PAGE> 17
11
applicable mortgage recording taxes shall have been paid,
provided that such Mortgage need not have been so recorded
(and any such mortgage recording taxes need not have been so
paid) if an effective title insurance policy (naming the
Collateral Agent as the insured thereunder) shall have been
issued that otherwise complies with the requirements of
clause (c) (i) or (ii) of this definition and that provides
"gap" coverage insuring against any exceptions that may
arise prior to the actual recording of such Mortgage (and
the payment of any such recording taxes);
(b) the Collateral Agent and, in the case of clause
(i), the title insurance company issuing the policy referred
to in clause (c) of this definition shall have received (i)
maps or plats of an as-built survey of the sites of the
Material Real Property covered by such Mortgage certified to
the Collateral Agent and such title insurance company in a
manner reasonably satisfactory to them, dated a date
reasonably satisfactory to the Collateral Agent and such title
insurance company, by an independent professional licensed
land surveyor reasonably satisfactory to the Collateral Agent
and such title insurance company, which maps or plats and the
surveys on which they are based shall be made in accordance
with the Minimum Standard Detail Requirements for Land Title
Surveys jointly established and adopted by the American Land
Title Association and the American Congress on Surveying and
Mapping in 1992, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such maps,
plats or surveys the following: (A) the locations on such
sites of all the buildings, structures and other improvements
and the established building setback lines (where setback
information is readily obtainable); (B) the lines of streets
abutting such sites and the width thereof; (C) all access and
other easements appurtenant to such sites or necessary to use
such sites; (D) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar
encumbrances affecting such sites, whether recorded, apparent
from a physical inspection of such sites or otherwise known to
the surveyor; (E) any encroachments on any adjoining property
by the building structures and improvements on such sites; and
(F) if such sites are described as being on a filed map, a
legend or other information relating the survey to said map or
(ii) in the case of any such parcel of Material Real Property
listed on Part I of Schedule 5.19, a copy of either (A) an
as-built survey of such parcel of Material Real Property if
such parcel of Material Real Property was developed as of the
Effective Date or a boundary survey of such parcel of Material
Real Property if such parcel of Material Real Property was
undeveloped as of the Effective Date, in each case prepared
within five years prior to the Effective Date or (B) a copy of
a survey delivered pursuant to the Existing Credit Agreement
in connection with any Mortgage on such parcel of Material
Real Property delivered pursuant to the Existing Credit
Agreement;
(c) the Collateral Agent shall have received in
respect of such parcel of Material Real Property (i) a
mortgagee's title policy (or policies) or marked-up
unconditional binder (or binders) for such insurance dated a
date reasonably satisfactory to the Collateral Agent. Each
such policy shall (A) be in an amount not less than the
Mortgage Value (as of the date such parcel of Material Real
Property becomes a parcel of Eligible Mortgaged Real Property)
of such parcel of Material Real Property, (B) be issued at
ordinary rates, (C) insure that the Mortgage insured thereby
creates a valid first Lien on such parcel of Material Real
Property free and clear of all defects and encumbrances,
except such as may be approved by the Collateral Agent and
Permitted Mortgage Liens, (D) name the Collateral Agent for
the benefit of the
<PAGE> 18
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Lenders as the insured thereunder, (E) be in the form of
ALTA Loan Policy - 1992 (or such local equivalent thereof as
is reasonably satisfactory to the Collateral Agent), (F)
contain a comprehensive lender's endorsement and (G) be
issued by Chicago Title Insurance Company, First American
Title Insurance Company, Lawyers Title Insurance Corporation
or any other title company reasonably satisfactory to the
Collateral Agent (including any such title companies acting
as co-insurers or reinsurers) or (ii) in the case of any
such parcel of Material Real Property subject to a Mortgage
pursuant to the Existing Credit Agreement as of the
Effective Date, a date-down endorsement to the mortgagee's
title policy issued by Lawyers Title Insurance Corporation
in connection with the Existing Credit Agreement on the same
terms and conditions as such title policy was initially
issued. The Collateral Agent shall have received (x)
evidence satisfactory to it that all premiums in respect of
each such policy or endorsement, as the case may be, have
been paid and (y) a copy of all documents referred to, or
listed as exceptions to title, in such title policy (or
policies);
(d) the Collateral Agent shall have received a Final
Appraisal with respect to such parcel of Material Real
Property or, in the case of any such parcel of Material Real
Property listed on Part I of Schedule 5.19, a Preliminary
Appraisal with respect to such parcel of Material Real
Property;
(e) with respect to any such parcel of Material Real
Property upon which a Mortgage is granted pursuant to
subsection 7.10(a)(i) or which is designated as a "Phase I
Property" on Schedule 5.19, a Phase I environmental report
with respect to such parcel of Material Real Property, dated a
date not more than one year prior to the date of delivery of
the related Mortgage, showing no material condition of
environmental concern shall have been delivered to the
Collateral Agent and in form reasonably satisfactory to the
Collateral Agent;
(f) if such parcel of Material Real Property is
subject to a ground lease in favor of the Borrower or any
Subsidiary Guarantor as lessee, no consent shall be required
under such ground lease to mortgage or foreclose upon such
parcel of Material Real Property (or such consent shall have
been obtained); and
(g) such parcel of Material Real Property shall be in
compliance, or, as applicable, the Loan Party which is the
owner or lessee thereof, shall be in compliance, with all of
the terms, covenants, conditions, representations and
warranties set forth in Schedule 1.1(b), provided that, (i) if
any such term, covenant, condition, representation or warranty
shall reference any provision of this Agreement, such
reference shall be read without giving effect to any
qualification or limitation contained therein regarding a
Material Adverse Effect, and (ii) if such parcel of Material
Real Property or, as applicable, the Loan Party which is the
owner or lessee thereof ceases to be in compliance with any of
the terms, covenants, conditions, representations or
warranties set forth in Schedule 1.1(b), such parcel of
Material Real Property shall cease (effective as of the
delivery of the next succeeding Borrowing Base Certificate) to
be Eligible Mortgaged Real Property during the continuation of
such non-compliance if such non-compliance could reasonably be
expected to have a material adverse effect on the value of
such parcel of Material Real Property, but such non-compliance
shall not constitute, in and of itself, a Default or Event of
Default.
<PAGE> 19
13
If a parcel of Material Real Property of the type described in clause
(a)(i)(B) of this definition becomes a parcel of Eligible Mortgaged
Real Property and is thereafter subsequently developed such that such
parcel of Material Real Property satisfies the requirements of clause
(a)(i)(A) of this definition, the Borrower may, at its option, deliver
a notice to the Collateral Agent to the effect that the Borrower wishes
to cause such parcel of Material Real Property to satisfy the
requirements of this definition as if (x) such parcel of Material Real
Property became a parcel of Material Real Property as of the date of
such notice, (y) such parcel of Material Real Property was not then a
parcel of Eligible Mortgaged Real Property and (z) if applicable, such
parcel of Material Real Property was not subject to a Mortgage as of
the Effective Date. Upon delivery of any such notice, the Collateral
Agent shall commission a new Final Appraisal with respect to such
parcel of Material Real Property. Upon satisfaction of the conditions
set forth in this definition following such date with respect to such
parcel of Material Real Property (other than the condition set forth in
clause (e) above and, in satisfaction of clause (c) above, the Borrower
may provide a reasonably satisfactory endorsement to any previously
delivered mortgagee's title policy or binder on the same conditions as
such policy or binder and otherwise satisfying the requirements of such
clause as to title insurance), such parcel of Material Real Property
shall, without duplication, be deemed to become a parcel of Eligible
Mortgaged Real Property as of the date such conditions are satisfied
and the Mortgage Value of such parcel of Eligible Mortgaged Real
Property shall be included in the Borrowing Base effective as of the
delivery of the Borrowing Base Certificate in respect of the fiscal
month in which such conditions are satisfied.
"Eligible Trade Accounts Percentage": as of any Accounts
Receivable Calculation Date, 85%, provided that, in connection with
each periodic audit or appraisal of the Accounts of the Borrower and
the Subsidiary Guarantors performed by or on behalf of the Collateral
Agent, the Collateral Agent shall have the right, upon at least 30 days
prior written notice to the Borrower, to change the "Eligible Trade
Accounts Percentage" to the percentage estimated to be the percentage
of the aggregate amount of the Accounts as of such Accounts Receivable
Calculation Date which satisfy each of the following criteria:
(a) such Account has been adjusted to reflect the
return or rejection of, or any loss of or damage to any of the
Inventory giving rise to such Account, and is not subject to
bona fide set-offs, counterclaims, defenses, or disputes
asserted with respect to such Account (it being understood
that such Account shall not include material financing
charges, or late or other fees);
(b) the Account Debtor with respect to such Account
is not insolvent or the subject of any bankruptcy case or
insolvency proceeding of any kind, unless such Account is due
from such Account Debtor as an administrative claim under the
Bankruptcy Code and the Collateral Agent, in the exercise of
its reasonable business judgment, deems the Account Debtor to
be creditworthy;
(c) the Account Debtor in respect of such an Account
has a place of business within the United States of America
(excluding Puerto Rico, the Virgin Islands and any other
territory of the United States);
(d) the Account Debtor in respect of such Account is
not the United States of America or any state, territory,
subdivision, department, or agency thereof, unless all
applicable requirements of the Assignment of Claims Act of
1940 have been satisfied;
<PAGE> 20
14
(e) such Account does not arise out of transactions
with an employee, officer, director, Subsidiary, or Affiliate
of the Borrower or any Subsidiary Guarantor;
(f) no amount payable in respect of such Account has
remained unpaid for a period exceeding sixty days after the
due date stated on the invoice therefor (excluding the amount
of any net credit balances relating to Accounts with invoice
dates more than 60 days from the due date);
(g) such Account is owed by an Account Debtor which
does not then have balances on its Accounts which are more
than 60 days past due which exceed 50% of the total balance of
all such Accounts owed by such Account Debtor;
(h) such Account has not been and is not required to
be charged off or written off as uncollectible in accordance
with the customary business practice of the Borrower and the
Subsidiary Guarantors;
(i) such Account does not arise out of any claim in
tort, is not evidenced by chattel paper, a promissory note, a
negotiable instrument, or any other instrument of any kind or,
if such Account is evidenced by chattel paper, a promissory
note, a negotiable instrument or any other instrument, such
chattel paper, promissory note, negotiable instrument or other
instrument has been delivered to the Collateral Agent and is
subject to a first priority security interest in favor of the
Collateral Agent;
(j) the amount of the face value of such Account
listed on any schedule of Accounts and shown on all invoices
and statements delivered to the Agent with respect to such
Account is not subject to any asserted bona fide retainages or
holdbacks of any type, is actually and absolutely owing, and
is not contingent on any condition, in each case, other than
in respect of repurchase or return agreements that (i) arise
in the ordinary course of the Borrower's business and (ii) are
consistent with the Borrower or such Subsidiary Guarantor's
historical business practice;
(k) such Account does not arise out of a cash on
delivery sale; and
(l) such Account does not arise out of the sale of
samples.
In addition, to the extent that any Accounts or credit card receivables
that arise in connection with a Credit Card Program are included in
Eligible Trade Accounts Receivable at the option of the Borrower, the
Eligible Trade Accounts Percentage shall include such reserves and the
Available Accounts Receivable Amount shall reflect eligibility criteria
as the Collateral Agent shall require in its sole discretion with
respect to such Accounts and credit card receivables as a separate
class of Accounts based upon the results of any periodic audit or
appraisal of the Accounts of the Borrower and the Subsidiary Guarantors
performed by or on behalf of the Collateral Agent, provided that no
such Accounts or credit card receivables shall be included in "Eligible
Trade Accounts Receivable" until a satisfactory audit or appraisal of
such Accounts and credit card receivables has been performed by or on
behalf of the Collateral Agent.
It is understood that, to the extent that information is not
available to determine the amount of Accounts which satisfy the
criteria described above, the Collateral Agent shall estimate the
amount of such Accounts which satisfy such criteria in determining the
Eligible
<PAGE> 21
15
Trade Accounts Percentage. The Borrower shall, at the request
of the Collateral Agent in connection with any periodic audit or
appraisal of the Accounts of the Borrower and the Subsidiary Guarantors
related to the Credit Card Program, deliver a calculation in reasonable
detail of all Accounts which satisfy the criteria described above to
the extent such information is reasonably available to the Borrower and
the Subsidiary Guarantors.
"Eligible Trade Accounts Receivable Amount": as of any
Accounts Receivable Calculation Date, an amount equal to the Eligible
Trade Accounts Percentage of the aggregate amount of all Accounts of
the Borrower and the Subsidiary Guarantors as of such Accounts
Receivable Calculation Date that satisfy all of the following criteria
as of such Accounts Receivable Calculation Date:
(a) such Account is owned solely by the Borrower or a
Subsidiary Guarantor and is evidenced by an invoice and has
arisen from the sale of goods which have been shipped or
delivered to an Account Debtor on an absolute sale basis, have
not been shipped or delivered on a consignment, approval, or
sale-or-return basis, and are not subject to any repurchase or
return agreement or arrangement, other than those repurchase
or return agreements or arrangements that (i) arise in the
ordinary course of the Borrower's business and (ii) are
consistent with the Borrower or such Subsidiary Guarantor's
historical business practices; and
(b) such Account is subject to a Lien in favor of the
Collateral Agent and is not subject to Liens other than
Permitted Account Liens.
"Environmental Laws": any and all foreign, federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority
or other Requirements of Law (including common law) regulating or
imposing liability or standards of conduct concerning protection of
human health or the environment, as are now or may at any time
hereafter be in effect.
"Environmental Reserve Amount": at any time, an amount equal
to the product of (a) $75,000 and (b) the number of parcels of Eligible
Mortgaged Real Property which are included in the Borrowing Base at
such time.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors or
other Governmental Authority having jurisdiction with respect thereto)
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board of Governors)
maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate for deposits in Dollars for the period commencing on
the first day of such Interest Period and ending on the last day of
such Interest Period which appears on Telerate Page 3750 as of 11:00
A.M., London time, two
<PAGE> 22
16
Business Days prior to the beginning of such Interest Period. If at
least two rates appear on such Telerate Page for such Interest Period,
the "Eurodollar Base Rate" shall be the arithmetic mean of such rates.
If the "Eurodollar Base Rate" cannot be determined in accordance with
the immediately preceding sentences with respect to any Interest
Period, the "Eurodollar Base Rate" with respect to each day during
such Interest Period shall be the rate per annum equal to the average
(rounded upward to the nearest 1/100th of 1%) of the respective rates
notified to the Administrative Agent by each of the Reference Lenders
as the rate at which such Reference Lender is offered Dollar deposits
at or about 10:00 A.M., New York City time, two Business Days prior to
the beginning of such Interest Period in the interbank eurodollar
market where the eurodollar and foreign currency and exchange
operations in respect of its Eurodollar Loans are then being 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
its Eurodollar Loan to be outstanding during such Interest Period.
"Eurodollar Loans": Term Loans and Revolving Loans the rate
of interest applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Excluded Properties": as defined in subsection 7.10(b).
"Excluded Subsidiaries": SMC-SPE-1, Inc., SMC-SPE-2, Inc. and
Service Merchandise Co. No. 80, Inc.
"Existing Issuing Bank": each Person that has issued one or
more Continuing Letters of Credit.
"Exiting Banks": as defined in subsection 6.1(p).
"Extension of Credit": with respect to any Lender, (a) the
making of a Loan by such Lender and (b) the issuance or extension of a
Letter of Credit in which such Lender has a participating interest;
collectively, as to all the Lenders, the "Extensions of Credit".
"FDIC": the Federal Deposit Insurance Corporation and any
Governmental Authority which succeeds to the powers and functions
thereof.
"Federal Funds Effective Rate": as defined in the definition
of "ABR" contained in this subsection 1.1.
<PAGE> 23
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"Final Appraisal": with respect to any parcel of Material Real
Property, a final complete appraisal of the value of such parcel of
Material Real Property, as the case may be, commissioned in connection
with the Existing Credit Agreement or this Agreement and valued on an
"alternative use" basis which in the reasonable judgment of the
Collateral Agent satisfies all applicable requirements of FIRREA and
the Uniform Standards of Professional Appraisal Practice.
"Financing Lease": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of such
lessee.
"FIRREA": the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended.
"First Union Permitted Mortgage Financing": all Indebtedness,
if any, and other obligations of the Borrower and its Subsidiaries, now
existing or hereafter arising, under or in connection with (a) that
certain Loan Agreement dated as of October 4, 1996 by and between
SMC-SPE-1, Inc., as borrower, and First Union National Bank of North
Carolina, as lender, and the guaranties, mortgage and security and
other agreements, instruments and other documents from time to time
executed and delivered in connection therewith and (b) that certain
Loan Agreement dated as of October 4, 1996 by and between SMC-SPE-2,
Inc., as borrower, and First Union National Bank of North Carolina, as
lender, and the guaranties, mortgage and security and other agreements,
instruments and other documents from time to time executed and
delivered in connection therewith, in each case, subject to compliance
with the terms hereof, as the same may now or hereafter be amended,
restated, modified, increased, extended, refinanced, replaced or
refunded.
"Fiscal Year": each fiscal year of the Borrower. Fiscal
Years are referred to herein by reference to the calendar year in
which a majority of the days comprising such Fiscal Year fall.
"Fixed Charge Coverage Ratio": as of the last day of any
fiscal quarter of the Borrower, the quotient of (A) EBITDAR for the
period of four fiscal quarters ending on the last day of such quarter
divided by (B) the sum of (i) Consolidated Cash Interest Expense of the
Borrower plus (ii) Consolidated Rental Expense of the Borrower, in each
case for such four fiscal quarter period.
"Floor Planning Facility": as to the Borrower or any
Restricted Subsidiary, (a) the facilities made available pursuant to
(i) the Restated Security Agreement, dated as of July 9, 1997, between
NationsCredit Commercial Corporation of America and the Borrower, as
the same may, subject to compliance with the terms hereof, be amended,
restated, modified, increased, extended, refinanced or refunded from
time to time, (ii) the Security Agreement, dated as of June 25, 1997,
between Transamerica Commercial Finance Corporation, the Borrower and
certain Subsidiaries, as the same may, subject to compliance with the
terms hereof, be amended, restated, modified, increased, extended,
refinanced or refunded from time to time, and (iii) the Inventory
Financing and Security Agreement, dated as of September 22, 1995, among
the Borrower, certain Subsidiaries and Whirlpool Financial Corporation,
as the same may, subject to compliance with the terms hereof, be
amended, restated, modified,
<PAGE> 24
18
increased, extended, refinanced or refunded from time to time, and
(b) any similar facility provided by such Persons or any other Person.
"Foreign Holding Company": any Subsidiary organized under the
laws of any jurisdiction (including territories) within the United
States of America whose sole assets (exclusive of assets with an
aggregate book value not exceeding $5,000,000 and assets consisting of
advances or loans to the Borrower or any of its Subsidiaries) consist
of the Capital Stock of one or more Foreign Subsidiaries or other
Foreign Holding Companies.
"Foreign L/C Commitment Sublimit": at any time, the lesser of
(a) $25,000,000 and (b) the Revolving Credit Commitments then in
effect.
"Foreign Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction outside the United States
of America, excluding Inactive Subsidiaries, but including in any
event Foreign Holding Companies.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time, provided that, solely
for purposes of determining compliance with subsection 8.1, "GAAP"
shall mean generally accepted accounting principles in the United
States of America in effect on the date hereof.
"Gift Certificate Liability Amount": as of any Calculation
Date, the aggregate amount of gift certificates then outstanding
entitling the holder thereof to use all or a portion thereof to pay all
or a portion of the purchase price for any Inventory as of such day
which are not being held for escheatment or which have not been
escheated as of such day.
"GOB Inventory Amount": as of any Calculation Date, the
Inventory Value of all Inventory located at stores which are in the
process of being liquidated pursuant to a going-out-of-business or
similar sale as of such Calculation Date.
"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), without duplication, any obligation, contingent or otherwise,
of the guaranteeing person (a) under a guarantee, reimbursement,
indemnity or similar obligation guaranteeing or in effect guaranteeing
any Indebtedness of any other Person, in any manner, whether directly
or indirectly, (b) to reimburse any other Person for drawings under
undrawn letters of credit issued by such other Person for the account
of the guaranteeing person, or (c) under a guarantee, reimbursement,
indemnity or similar obligation to the extent the obligations of the
guaranteeing person in respect thereof should be reflected as a
liability in a consolidated balance sheet of the guaranteeing person
(or should be reflected in the notes thereto) in accordance with GAAP,
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (i) an amount
equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (ii) the maximum
amount for which such guaranteeing person may be liable pursuant to the
terms of
<PAGE> 25
19
the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in which case the amount
of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as
determined by such guaranteeing person in good faith.
"Inactive Subsidiary": any Subsidiary of the Borrower which
(and only for so long as such Subsidiary) (a) does not own assets with
an aggregate book value in excess of $5,000,000 and (b) is not then
engaged in any business.
"Indebtedness": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities and current accounts payable incurred in the ordinary
course of business and payable in accordance with the Borrower's and
its Restricted Subsidiaries' customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations (to the extent
capitalized for accounting purposes) of such Person under Financing
Leases, (d) all obligations of such Person in respect of acceptances
issued or created for the account of such Person, (e) all obligations
of the types described in the other clauses of this definition secured
by any Lien on any property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment
thereof and (f) all obligations of such Person in respect of interest
rate and currency hedging agreements. For purposes of this Agreement,
(x) the amount of any Indebtedness referred to in clause (f) of the
preceding sentence shall be the net amounts (including by offset of
amounts payable thereunder), including any net termination payments,
required to be paid to a counterparty rather than any notional amount
with regard to which payments may be calculated and (y) any obligations
described in clauses (a) through (e) above denominated in a currency
other than Dollars shall be determined after giving effect to related
currency swap and hedging agreements. It is understood and agreed that
"Indebtedness" of a Person (i) shall include advances or loans to such
Person under Floor Planning Facilities and (ii) shall not include (A)
obligations of such Person in respect of letters of credit to the
extent such obligations are not reflected as liabilities on the
consolidated balance sheet of such Person (excluding the notes to such
balance sheet) in accordance with GAAP or (B) obligations of such
Person in respect of consignments of Inventory to such Person.
"Indemnified Liabilities": as defined in subsection 11.5.
"Ineligible Inventory Amount": as of any Calculation Date,
the Inventory Value of all Inventory of the Borrower and the Subsidiary
Guarantors that falls in any one or more of the following categories as
of such Calculation Date:
(a) Inventory that (i) is not owned solely by the
Borrower or any such Subsidiary Guarantor or (ii) is leased by
or on consignment or sale-or-return to the Borrower or any
such Subsidiary Guarantor;
(b) Inventory (including Inventory in transit from
vendors or located at photographer's studios, but excluding
Landed Inventory) that is not located at (or in transit
between) property that is owned or leased by the Borrower or
any Subsidiary Guarantor;
(c) Inventory that is subject to a layaway purchase
by any customer;
<PAGE> 26
20
(d) Inventory that is damaged or defective or has
otherwise been segregated for return to the vendor thereof;
(e) Inventory that is not located in the United
States of America;
(f) Inventory which is not subject to a Lien in favor
of the Collateral Agent or is subject to any Lien (other than
Permitted Inventory Liens);
(g) Inventory which is subject to a Lien in
connection with Floor Planning Facilities;
(h) Inventory that is being repaired or is used in
the repair of other Inventory;
(i) Inventory consisting of "Samples" which is not
included in the normal merchandising assortment but has been
supplied by vendors for consideration to be included in the
merchandising assortment; and
(j) Inventory that is special clearance Inventory.
"Initial Term Loan": as defined in subsection 2.1.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of
Section 4245 of ERISA.
"Intellectual Property": as defined in subsection 5.17.
"Interest Expense": of any Person for any period, (a) the
amount of interest expense, both expensed and capitalized, of such
Person and its Consolidated Subsidiaries determined on a consolidated
basis in accordance with GAAP for such period, plus, without
duplication, that portion of payments under Financing Leases of such
Person attributable to interest expense of such Person for such period
in accordance with GAAP minus (b) the amount of interest income of such
Person and its Consolidated Subsidiaries determined on a consolidated
basis in accordance with GAAP for such period.
"Interest Payment Date": (a) as to any ABR Loan, the last day
of each January, April, July and October, (b) as to any Eurodollar Loan
having an Interest Period of three months or less, the last day of such
Interest Period, (c) as to any Eurodollar Loan having an Interest
Period longer than three months, each day which is three months, or a
whole multiple thereof, after the first day of such Interest Period and
the last day of such Interest Period and (d) as to any Swing Line Loan,
the last day of each January, April, July and October.
"Interest Period": with respect to any Eurodollar Loan:
(a) initially, the period commencing on the
borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one,
two, three or six months thereafter, as selected by
the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect
thereto; and
<PAGE> 27
21
(b) thereafter, each period commencing on
the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one,
two, three or six months thereafter, as selected by
the Borrower by irrevocable notice to the
Administrative Agent not less than three Business
Days prior to the last day of the then current
Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to
Interest Periods are subject to the following:
(1) if any Interest Period would otherwise
end on a day that is not a Business Day, such
Interest Period shall be extended to the next
succeeding 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 Business Day;
(2) any Interest Period that would
otherwise extend beyond, in the case of Eurodollar
Loans which are Revolving Loans, the Revolving
Credit Termination Date or, in the case of
Eurodollar Loans which are Term Loans, beyond the
date final payment is due on such Term Loans shall
end on the Revolving Credit Termination Date or
such date of final payment, as the case may be; and
(3) any Interest Period that begins on the
last 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 Business Day of a
calendar month.
"Inventory Security Agreement": the Inventory Security
Agreement to be made by the Borrower and the Subsidiary Guarantors in
favor of the Collateral Agent, substantially in the form of Exhibit
A-2 to the Master Collateral Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Inventory Value": with respect to any Inventory of the
Borrower or any Subsidiary Guarantor, the value of such Inventory
valued at cost on a basis consistent with the Borrower's or such
Subsidiary Guarantor's current and historical accounting practice
(without giving effect to markdowns, intercompany profit, rebates and
discounts, accounts payable inventory accruals and capitalized
inventory costs on the consolidated balance sheet of the Borrower and
it's Consolidated Subsidiaries in respect of Inventory), plus freight
charges incurred in connection therewith, minus accruals for deferred
volume rebates (it being understood that the amount of freight charges
and accruals for deferred volume rebates shall be determined monthly as
of the end of the most recent fiscal month, notwithstanding the fact
that Borrowing Base Certificates may be delivered more frequently than
monthly pursuant to this Agreement). The value of the Inventory as set
forth above will, without duplication for any element of the Shrink
Reserve, be calculated net of the reserve established by the Borrower
or any Subsidiary Guarantor on a basis consistent with the Borrower's
or such Subsidiary Guarantor's current and historical accounting
practice in respect of lost, misplaced or stolen Inventory at such
time.
"Investment": as defined in subsection 8.8.
<PAGE> 28
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"Issuing Banks": initially, (a) each Lender specified on
Schedule 1.1(a) as an Issuing Bank and (b) each Existing Issuing Bank
listed on Schedule 5.20, in each case in its capacity as issuer of a
Letter of Credit. Additional Lenders may from time to time be
designated as "Issuing Banks" by the Borrower (with the consent of
such Lender and with the consent (which shall not be unreasonably
withheld) of the Administrative Agent) by written notice to such
effect from the Borrower to the Administrative Agent.
"Judgment Currency": as defined in subsection 11.20.
"Landed Inventory": any Inventory which has arrived in the
United States and cleared customs but which has not been delivered to
property that is owned or leased by the Borrower or any Subsidiary
Guarantor so long as such Inventory is (a) fully paid and subject only
to a Lien in favor of the Collateral Agent (other than Permitted
Inventory Liens), (b) is in the possession of the Borrower or any
Subsidiary Guarantor or any agent thereof and (c) such Inventory is
reported in a Borrowing Base Certificate separately from other
Inventory included in the calculation of the Available Inventory
Amount.
"L/C Commitment": the lesser of (a) $175,000,000 and (b) the
Revolving Credit Commitments then in effect.
"L/C Fee Payment Date": the last day of each January, April,
July and October and the Revolving Credit Termination Date.
"L/C Obligations": at any time, an amount equal to the sum
of (a) the Trade Letter of Credit Outstandings at such time and (b) the
Standby Letter of Credit Outstandings at such time.
"L/C Participants": the collective reference to all the
Revolving Credit Lenders.
"Lenders": as defined in the preamble to this Agreement.
"Letters of Credit": as defined in subsection 3.6(a).
"Leverage Ratio": as of any date of determination thereof,
the quotient of (a) Consolidated Total Debt of the Borrower as of such
date of determination divided by (b) Consolidated Total Capitalization
of the Borrower as of such date of determination.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"Loan": any Term Loan, Revolving Loan or Swing Line Loan, as
the case may be.
"Loan Documents": this Agreement, any Notes, the Master
Collateral Agreement, the Subsidiaries Guarantee, the Security
Documents and any Applications.
<PAGE> 29
23
"Loan Parties": the collective reference to the Borrower, the
Subsidiary Guarantors and any other Subsidiary from time to time party
to any Loan Document.
"LTCB Permitted Mortgage Financing": all Indebtedness, if any,
and other obligations of the Borrower and its Subsidiaries, now
existing or hereafter arising, under or in connection with (a) that
certain Indenture dated June 28, 1990 by and among the Borrower, H.J.
Wilson Co., Inc., The Long-Term Credit Bank of Japan, Limited, New York
Branch, as administrative agent, and The Bank of New York (as successor
trustee to Sovran Bank/Central South), as trustee, and (b) the
guaranties, mortgage and security and other agreements, instruments and
other documents from time to time executed and delivered in connection
therewith, in each case, subject to compliance with the terms hereof,
as the same may now or hereafter be amended, restated, modified,
increased, extended, refinanced, replaced or refunded.
"Majority Lenders": at any time, Lenders the Voting
Percentages of which aggregate more than 50%.
"Majority Revolving Credit Lenders": at any time, Revolving
Credit Lenders the Revolving Credit Commitment Percentages of which
aggregate more than 50%.
"Majority Term Loan Lenders": at any time, Term Loan Lenders
the Term Loan Commitment Percentages of which aggregate more than 50%.
"Mandatory Prepayment Event": any event which requires the
Borrower or any Restricted Subsidiary to make any mandatory prepayment
in respect of the principal of any Subordinated Debentures or any other
Subordinated Debt or to make (or offer to make) any mandatory
redemption, defeasance or purchase of any Subordinated Debentures or
any other Subordinated Debt, in any such case prior to the stated
maturity thereof.
"Margin Level Status": as to the Borrower, the existence of
Margin Level I Status, Margin Level II Status, Margin Level III Status,
Margin Level IV Status or Margin Level V Status, as the case may be.
"Margin Level I Status": as to the Borrower, shall exist on
an Adjustment Date if the Fixed Charge Coverage Ratio as of the last
day of the period covered by the financial statements relating to such
Adjustment Date is less than 1.50 to 1.00.
"Margin Level II Status": as to the Borrower, shall exist on
an Adjustment Date if the Fixed Charge Coverage Ratio as of the last
day of the period covered by the financial statements relating to such
Adjustment Date is greater than or equal to 1.50 to 1.00 but less than
2.00 to 1.00.
"Margin Level III Status": as to the Borrower, shall exist on
an Adjustment Date if the Fixed Charge Coverage Ratio as of the last
day of the period covered by the financial statements relating to such
Adjustment Date is greater than or equal to 2.00 to 1.00 but less than
2.125 to 1.00.
"Margin Level IV Status": as to the Borrower, shall exist on
an Adjustment Date if the Fixed Charge Coverage Ratio as of the last
day of the period covered by the financial
<PAGE> 30
24
statements relating to such Adjustment Date is greater than or equal
to 2.125 to 1.00 but less than 2.25 to 1.00.
"Margin Level V Status": as to the Borrower, shall exist on
an Adjustment Date if the Fixed Charge Coverage Ratio as of the last
day of the period covered by the financial statements relating to such
Adjustment Date is greater than or equal to 2.25 to 1.00.
"Master Collateral Agreement": the Master Collateral
Agreement to be made by the Borrower and each other Obligor in favor of
the Collateral Agent, in substantially the form of Exhibit C, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, property or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a whole or (b)
the validity or enforceability of any of the material terms of this
Agreement or any of the other Loan Documents or the material rights or
remedies, taken as a whole, of the Agents or the Lenders hereunder or
thereunder; it being understood that any past or future reduction in
the Borrower's or any Subsidiary's credit rating or decline in the
market price of the Borrower's or any Subsidiary's securities shall not
in and of themselves be deemed to constitute a Material Adverse Effect.
"Material Real Property": real property not subject to a
mortgage, deed of trust or other similar instrument (other than
pursuant hereto) that (a) (i) is owned in fee by the Borrower or any
Subsidiary Guarantor and is not subject to a ground lease in favor of
any other Person as lessee, (ii) is located in the United States or
Puerto Rico and (iii) (A) has been developed with a retail store,
distribution center, shopping center or office building with respect to
which a certificate of occupancy or temporary certificate of occupancy
or the local equivalent thereof (or any other similar proof of
completion) shall have been issued by the relevant Governmental
Authority, (B) is being developed with a retail store, distribution
center, shopping center or office building which is under construction
as of the Effective Date or (C) is undeveloped and has a book value
(excluding soft costs) of at least $1,000,000 or (b) (i) (A) consists
of a developed retail store, distribution center, shopping center or
office building with respect to which a certificate of occupancy or
temporary certificate of occupancy or the local equivalent thereof (or
any other similar proof of completion) shall have been issued by the
relevant Governmental Authority, or (B) is being developed with a
retail store, distribution center, shopping center or office building
which was under construction as of the Effective Date, (ii) is located
on property which is subject to a ground lease in favor of the Borrower
or any Subsidiary Guarantor as lessee and no consent shall be required
under such ground lease to mortgage or foreclose upon such property (or
such consent shall have been obtained), (iii) is or, upon completion,
will be classified as an owned retail store, distribution center,
shopping center or office building by the Borrower or such Subsidiary
Guarantor and (iv) is located in the United States or Puerto Rico.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
<PAGE> 31
25
"Mechanics' Lien Reserve Amount": with respect to any parcel
of Eligible Mortgaged Real Property at any time, an amount equal to the
excess, if any, of (a) the sum of all outstanding amounts which are
then secured by mechanics' liens on such parcel of Eligible Mortgaged
Real Property and which have been outstanding for a period in excess of
one year over (b) $200,000.
"Moody's": Moody's Investors Service, Inc.
"Mortgage Value": with respect to any parcel of Eligible
Mortgaged Real Property, the lesser of (a) the maximum stated amount
secured by the Lien on such parcel of Eligible Mortgaged Real Property
granted in favor of the applicable secured mortgagee pursuant to the
relevant Mortgage and (b) the value of such parcel of Eligible
Mortgaged Real Property set forth in the Final Appraisal delivered with
respect thereto or, in the case of any parcel of Eligible Mortgaged
Real Property listed on Part I of Schedule 5.19, set forth in the
Preliminary Appraisal with respect thereto, provided that, if a Final
Appraisal was not delivered with respect to any parcel of Eligible
Mortgaged Real Property as of the Effective Date, then upon delivery of
such Final Appraisal (i) the value of such parcel of Eligible Mortgaged
Real Property for purposes of clause (b) above shall be the value of
such parcel of Eligible Mortgaged Real Property set forth in such Final
Appraisal so long as the amount of the title insurance described in
clause (c) of the definition of Eligible Mortgaged Real Property is at
least equal to such value, and (ii) the Borrowing Base shall be
adjusted to reflect such value effective as of the delivery of the
Borrowing Base Certificate in respect of the fiscal month in which such
Final Appraisal is delivered to the Collateral Agent.
"Mortgages": the collective reference to the fee and ground
leasehold mortgages, deeds of trust and other similar documents
executed and delivered from time to time by the Borrower and the
Subsidiary Guarantors in favor of the Collateral Agent, pursuant to the
Master Collateral Agreement, the Existing Credit Agreement or this
Agreement, substantially in the form of Exhibit B to the Master
Collateral Agreement (other than in the case of a Mortgage delivered in
connection with the Existing Credit Agreement) or, if such Exhibit is
not appropriate under applicable law in the jurisdiction in which the
relevant real property is located, in such other form as shall be
reasonably satisfactory to the Borrower and the Collateral Agent, as
each of the same may be amended, supplemented or otherwise modified
from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) with respect to any Asset Sale (other
than Asset Sales in connection with a Securitization Transaction) of
Designated Material Real Property, the cash proceeds (including Cash
Equivalents and any cash payments received by way of deferred payment
of principal pursuant to a note or installment receivable or purchase
price adjustment receivable or the subsequent sale or disposition of
any non-cash consideration or Investments received in connection
therewith or otherwise, but only as and when received) of such Asset
Sale received by the Borrower or any of its Restricted Subsidiaries,
net of all attorneys' fees, accountants' fees, investment banking fees,
survey costs, title insurance premiums, and other customary fees and
expenses actually incurred by the Borrower or any of its Restricted
Subsidiaries and documented in connection therewith and net of taxes
paid or reasonably expected to be payable by the Borrower or any of its
Restricted Subsidiaries as a result
<PAGE> 32
26
thereof, and net of purchase price adjustments reasonably expected to
be payable by the Borrower or any of its Restricted Subsidiaries in
connection therewith and repayments of the principal amount of,
together with interest on, Indebtedness (other than the Loans) and any
make-whole payments related thereto, secured by and required to be
prepaid upon the sale of the assets so sold or otherwise disposed of,
(b) in connection with any issuance by the Borrower or any of its
Restricted Subsidiaries of debt securities or instruments, or the
incurrence of Indebtedness, in each case, that is secured by a Lien on
any parcel of Designated Material Real Property, the cash proceeds
(including Cash Equivalents) received by the Borrower or any of its
Restricted Subsidiaries from such issuance of securities or incurrence
of such Indebtedness net of all investment banking fees, legal fees,
accountants' fees, underwriting discounts and commissions, survey
costs, title insurance premiums, and other customary fees and
expenses, actually incurred by the Borrower or any of its Restricted
Subsidiaries and documented in connection therewith and, so long as no
Default or Event of Default shall have then occurred and be continuing
or would result therefrom, net of repayments of Indebtedness (other
than Loans) secured by a Lien on such parcel of Designated Material
Real Property and any interest or premiums thereon, and (c) with
respect to Asset Sales of Designated Material Real Property in
connection with a Securitization Transaction, the cash proceeds
(including Cash Equivalents) received by the Borrower or any of its
Restricted Subsidiaries from the issuance of securities or incurrence
of Indebtedness in connection with such Securitization Transaction net
of all investment banking fees, legal fees, accountants' fees,
underwriting discounts and commissions, survey costs, title insurance
premiums, and other customary fees and expenses actually incurred by
the Borrower or any of its Restricted Subsidiaries and documented in
connection therewith and repayments of the principal amount of,
together with interest on, Indebtedness (other than the Loans) and any
make whole payments related thereto, secured by and required to be
prepaid upon the sale of assets that are the subject of such
Securitization Transaction.
"Net Income": of any Person for any period, net income of such
Person and its Consolidated Subsidiaries, determined on a consolidated
basis in accordance with GAAP for such period, provided, that the
effects of (a) any extraordinary gains or losses (b) gains, losses or
charges in connection with sales of assets (other than Inventory sold
in the ordinary course of business) or the consummation of the Offer to
Purchase shall not be included for purposes of determining the Net
Income of the Borrower under this Agreement for any period and (c) any
gains, losses, expenses or other charges in connection with the 1997
Restructuring Program shall not be included for purposes of determining
the Net Income of the Borrower under this Agreement for any period.
"Net Recoverable Value": as to the Inventory of the Borrower
and the Subsidiary Guarantors, the amount determined based upon
periodic audits or appraisals of such Inventory to be equal to the
percentage of the cost of Inventory which could be realized (net of
disposal costs and expenses) in a liquidation sale of the Inventory at
such time.
"Net Worth": of any Person, as of the date of determination
thereof, the sum of all items which in conformity with GAAP (a) would
be included under shareholders' equity or (b) would reflect the amount
of redeemable preferred stock on a consolidated balance sheet of such
Person and its Consolidated Subsidiaries at such date of determination,
provided that the effects of any gains, losses, expenses or other
charges in connection with the 1997 Restructuring Program or the
consummation of the Offer to Purchase shall not be included in any
determination of the Net Worth of the Borrower under this Agreement.
<PAGE> 33
27
"1997 Related Expenses": those expenses incurred in
connection with the write-off of certain trademarks of the Borrower and
other miscellaneous expenses all in connection with the 1997
Restructuring Program.
"1997 Remerchandising Program": the write-down and
liquidation of inventory consisting of certain products, product lines
or merchandising categories of the Borrower and its Subsidiaries in
connection with the 1997 Restructuring Program.
"1997 Restructuring Program": collectively, (a) the 1997 Store
Closing Program, (b) the 1997 Remerchandising Program, (c) the
disposition of up to approximately 10 surplus and/or vacant properties
and (d) the 1997 Related Expenses, which 1997 Related Expenses,
together with losses, expenses and charges relating to the matters
described (a), (b) and (c), shall in no event aggregate more than $175
million in pre-tax losses, expenses and charges.
"1997 Store Closing Program": a program of the Borrower under
which approximately 65 stores of the Borrower and its Subsidiaries
shall be sold or closed, certain real property related to such stores
shall be sold or leased, certain store leases shall be terminated,
subleased or assigned, certain inventory located in the stores to be
sold shall be written down and liquidated and the furniture, fixtures
and equipment located in such stores shall be liquidated or
re-employed.
"Non-Excluded Taxes": as defined in subsection 4.10.
"Non-Executing Persons": as defined in subsection 6.1(a).
"Non-Current Inventory Reserve": as of any Calculation Date,
an amount equal to 50% of the Inventory Value of Inventory (other than
jewelry) that has been designated from time to time by the Borrower or
any Subsidiary Guarantor as "Non-Current Inventory" that will be
removed from the Borrower's or such Subsidiary Guarantor's current
catalog and assortment in the ordinary course of business, provided
that the Collateral Agent may review the practices of the Borrower and
the Subsidiary Guarantors in this regard in connection with any
periodic audit or appraisal of the Accounts of the Borrower and the
Subsidiary Guarantors and, in the event the Borrower or any such
Subsidiary Guarantor materially changes the manner in which Inventory
(other than jewelry) is designated as "Non-Current Inventory" the
Collateral Agent and the Borrower shall agree upon any appropriate
adjustments required in the determination of the Non-Current Inventory
Reserve as a result of such changes.
"Notes": the collective reference to any Term Notes,
Revolving Credit Notes and any Swing Line Notes.
"Offer to Purchase": the Offer to Purchase and Consent
Solicitation Statement dated July 21, 1997, as the same may be amended,
supplemented or otherwise modified from time to time.
"parcel": when used in connection with any parcel of real
property, means such parcel of real property, together with all of the
structures, buildings and other improvements located thereon and all
other property associated therewith and, when used in connection with
any parcel of real property subject to a ground lease in favor of the
Borrower or any Subsidiary Guarantor as lessee, means the leasehold
interest in such ground lease.
<PAGE> 34
28
"Participant": as defined in subsection 11.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any Governmental
Authority which succeeds to the powers and functions thereof.
"Permanent Mortgage Financing": collectively, the LTCB
Permitted Mortgage Financing and the First Union Permitted Mortgage
Financing.
"Permitted Account Liens": the collective reference to Liens
permitted by subsections 8.3(a), 8.3(b) and 8.3(l).
"Permitted Inventory Liens": the collective reference to
Liens permitted by subsections 8.3(a), 8.3(b) and 8.3(l).
"Permitted Mortgage Liens": the collective reference to Liens
permitted by subsections 8.3(a), 8.3(b), 8.3(e) and 8.3(l).
"Permitted Sale-Leaseback": as defined in subsection 8.11.
"Permitted Trade L/C Facility": all Indebtedness, if any, and
other obligations of the Borrower and its Subsidiaries, now existing or
hereafter arising, under or in connection with (a) any letters of
credit issued at any time for the account of the Borrower or any of its
Subsidiaries pursuant to that certain Letter of Credit Application
Agreement dated May 31, 1997 by and among Wholesale Supply Company,
Inc., the Borrower and First American National Bank and (b) the
commitment letters, security agreements, guarantees, instruments and
other documents executed and delivered from time to time in connection
therewith, in each case, subject to compliance with the terms hereof,
as the same may now or hereafter be amended, restated, modified,
increased, extended, refinanced, replaced or refunded from time to
time.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, limited liability company, Governmental Authority or other
entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Pledge Agreement": the Amended and Restated Securities Pledge
Agreement to be made by the Borrower and certain of the Subsidiary
Guarantors in favor of the Collateral Agent, in substantially the form
of Exhibit C to the Master Collateral Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Pledgors": the collective reference to the pledgors parties
to the Pledge Agreement.
<PAGE> 35
29
"Preliminary Appraisal": with respect to any parcel of
Material Real Property, as of the Effective Date, a preliminary
appraisal in summary form of the value of such parcel of Material Real
Property, as the case may be, commissioned in connection with this
Agreement or the Existing Credit Agreement and valued on an
"alternative use" basis which in the reasonable judgment of the
Collateral Agent satisfies all applicable requirements of FIRREA and
the Uniform Standards of Professional Appraisal Practice.
"Qualified Stock": any stock of the Borrower which does not
by its terms mature or require repurchase or redemption thereof in
whole or in part on or prior to the first anniversary of the
Revolving Credit Termination Date.
"Real Property Amortization Amount": with respect to any
parcel of Eligible Mortgaged Real Property at any time, an amount equal
to the product of (a) an amount equal to 1.5% of the initial Mortgage
Value of such parcel of Eligible Mortgaged Real Property (after giving
effect to the delivery of any Final Appraisal with respect thereto),
times (b) the number of full three-month periods that have been elapsed
since such parcel of Eligible Mortgaged Real Property was first
included in the determination of the Borrowing Base hereunder.
"Reference Lenders": Chase, Citicorp and Bank of America
National Trust and Savings Association.
"Refinancing Date": any Business Day after the Effective Date
on which the Borrower requests the Term Loan Lenders to make
Refinancing Term Loans hereunder.
"Refinancing Term Loan": as defined in subsection 2.1.
"Register": as defined in subsection 11.6(d).
"Regulation U": Regulation U of the Board of Governors as in
effect from time to time.
"Reimbursement Obligation": the obligation of the Borrower
pursuant to subsection 3.10 to reimburse each Issuing Bank for amounts
drawn under any Letter of Credit issued by such Issuing Bank.
"Reinvestment Assets": with respect to any Reinvestment
Event, assets to be employed in, and/or the Capital Stock of any Person
engaged in, the business in which the Borrower or any of its
Subsidiaries is engaged on the Effective Date or is thereafter engaged
in accordance with this Agreement.
"Reinvestment Event": the receipt of any Available Net Cash
Proceeds of an Asset Sale of Designated Material Real Property and/or
the incurrence of Indebtedness (other than Loans) which is secured by a
Lien on Designated Material Real Property, to the extent the Borrower
has delivered, in connection therewith, a Reinvestment Notice as
permitted by subsection 4.1(c).
"Reinvestment Notice": a written notice signed by the
President, any Vice President, the Treasurer or any Assistant Treasurer
of the Borrower stating that the Borrower, in good
<PAGE> 36
30
faith, intends and expects to use (directly or through its Restricted
Subsidiaries) within a period of not in excess of one year all or a
specified portion equal to the Anticipated Reinvestment Amount of the
Available Net Cash Proceeds of an Asset Sale of Designated Material
Real Property and/or the incurrence of Indebtedness (other than Loans)
which is secured by a Lien on Designated Material Real Property to
purchase, construct or otherwise acquire Reinvestment Assets, which
notice must also set forth the aggregate amount of Available Net Cash
Proceeds of the type described in clause (b) of the definition thereof
used (or identified for use) to purchase, construct or otherwise
acquire Reinvestment Assets.
"Reinvestment Prepayment Amount": with respect to any
Reinvestment Event, the Deferred Repayment Amount relating thereto
less, in each case, any amount expended prior to the Reinvestment
Prepayment Date applicable thereto in furtherance of the purchase,
construction or other acquisition of Reinvestment Assets.
"Reinvestment Prepayment Date": with respect to any
Reinvestment Event, the earliest of (i) the Business Day next
succeeding the date, if any, upon which the Administrative Agent, on
behalf of the Majority Lenders, shall have delivered a written
termination notice to the Borrower terminating the Borrower's or the
relevant Subsidiary's right to purchase, construct or acquire
Reinvestment Assets with the Available Net Cash Proceeds of such
Reinvestment Event, provided, that such notice may only be given while
an Event of Default exists, (ii) the date occurring one year after such
Reinvestment Event to the extent there exists any Reinvestment
Prepayment Amount relating thereto and (iii) the fifth Business Day
following the date on which the Borrower or any of its Subsidiaries
shall have determined not to, or shall have otherwise ceased to,
proceed with the purchase, construction or other acquisition of
Reinvestment Assets.
"Rental Expense": of any Person for any period, (a) the
aggregate rental payments to lessors or their assignees (including,
without limitation, any property taxes paid as additional rent or lease
payments) by such Person for such period under agreements to rent or
lease any real or personal property (excluding payments in respect of
Financing Leases) as recorded in accordance with GAAP minus, without
duplication, (b) the aggregate rental income of such Person for such
period under agreements to rent or lease real or personal property as
recorded in accordance with GAAP.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043 of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .27, .28, .29, .30, .31,
.32, .34 or .35 of PBGC Reg. ss. 4043.
"Required Lenders": at any time, Lenders the Voting
Percentages of which aggregate more than 66-2/3%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, statute, ordinance, code,
decree, treaty, rule or regulation or determination of an arbitrator or
a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person
or any of its property is subject (including, without
<PAGE> 37
31
limitation, laws, ordinances and regulations pertaining to the zoning,
occupancy and subdivision of real property).
"Responsible Officer": the chief executive officer, the
president, any executive vice president, the chief financial officer or
the treasurer of the Borrower or, with respect to financial matters,
the chief executive officer, the president, the executive vice
president-finance, the chief financial officer or treasurer of the
Borrower, provided that, for purposes of subsection 6.3(f) of the
Master Collateral Agreement and subsection 7.7 and Section 9(d) only, a
"Responsible Officer" shall also include the managing attorney and any
assistant treasurer of the Borrower.
"Restricted Payments": as defined in subsection 8.6.
"Restricted Subsidiaries": collectively, the Domestic
Subsidiaries and Foreign Subsidiaries.
"Revolving Credit Applicable Margin": for each Type of
Revolving Loan, the rate per annum set forth under the relevant
column heading below:
ABR Loans Eurodollar Loans
--------- ----------------
1.00% 2.00%
provided that, from and after the last day of the third fiscal quarter
of the 1997 Fiscal Year, the Revolving Credit Applicable Margin for all
Types of Revolving Loans will be adjusted, on each Adjustment Date, to
the Revolving Credit Applicable Margin set forth on Annex A opposite
the Margin Level Status of the Borrower in effect on such Adjustment
Date, and provided, further, that, in the event that the financial
statements (other than the copies of the Form 10-K or 10-Q for the
relevant fiscal period) required to be delivered pursuant to subsection
7.1(a) or 7.1(b), as applicable, and the related certificate required
pursuant to subsection 7.2(b), are not delivered when due, then, during
the period from the date upon which such financial statements were
required to be delivered until two Business Days following the date
upon which they actually are delivered, the Revolving Credit Applicable
Margin for ABR Loans shall be 1.25% and the Revolving Credit Applicable
Margin for Eurodollar Loans will be 2.25%.
"Revolving Credit Commitment": as to any Lender, the
obligation of such Lender to make Revolving Loans to and/or
participate in Swing Line Loans to and/or issue or participate in
Letters of Credit issued on behalf of the Borrower hereunder in an
aggregate principal and/or face amount at any one time outstanding not
to exceed the amount set forth opposite such Lender's name on Schedule
1.1(a) under the heading "Revolving Credit Commitment", as such amount
may be reduced from time to time pursuant to this Agreement or as such
amount may be adjusted from time to time pursuant to subsection 11.6;
collectively, as to all such Lenders, the "Revolving Credit
Commitments".
"Revolving Credit Commitment Percentage": as to any Lender
(a) at any time prior to the termination of the Revolving Credit
Commitments, the percentage of the Revolving Credit Commitments then
constituted by such Lender's Revolving Credit Commitment and (b) at any
time after the termination of the Revolving Credit Commitments, the
percentage which (i) the
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32
sum of (x) such Lender's Revolving Loans then outstanding plus (y) the
product of such Lender's Revolving Credit Commitment Percentage
immediately prior to the termination of the Revolving Credit
Commitments (after giving effect to any permitted assignment pursuant
to subsection 11.6) times the sum of (1) the aggregate principal
amount of Swing Line Loans then outstanding plus (2) the L/C
Obligations then outstanding then constitutes of (ii) the sum of (x)
the aggregate principal amount of Revolving Loans of all the Lenders
then outstanding plus (y) the aggregate principal amount of all Swing
Line Loans then outstanding plus (z) the aggregate L/C Obligations
then outstanding.
"Revolving Credit Commitment Period": the period from and
including the date hereof to but not including the Revolving Credit
Termination Date or such earlier date on which the Revolving Credit
Commitments shall terminate as provided herein.
"Revolving Credit Extensions of Credit": as to any Lender at
any time, an amount equal to the sum of (a) the aggregate principal
amount of all Revolving Loans made by such Lender then outstanding and
(b) such Lender's Revolving Credit Commitment Percentage of the sum of
(i) the aggregate principal amount of Swing Line Loans then outstanding
and (ii) the L/C Obligations then outstanding.
"Revolving Credit Lender": any Lender with an unused
Revolving Credit Commitment hereunder and/or any Revolving Loans
outstanding hereunder; collectively, the "Revolving Credit Lenders".
"Revolving Loans": as defined in subsection 3.1.
"Revolving Credit Note": as defined in subsection 4.13(d).
"Revolving Credit Termination Date": the fifth anniversary of
the Effective Date.
"Sale-Leaseback": as defined in subsection 8.11.
"S&P": Standard & Poor's Ratings Group.
"SEC": the Securities and Exchange Commission and any
Governmental Authority which succeeds to the powers and functions
thereof.
"Securitization Entity": with respect to the Borrower or any
Subsidiary, a corporation, partnership, trust, limited liability
company or other entity that is formed by the Borrower or such
Subsidiary for the purpose of effecting or facilitating a
Securitization Transaction and which engages in no business and incurs
no Indebtedness or other liabilities other than those related to or
incidental to the Securitization Transaction.
"Securitization Transaction": a transaction or series of
related transactions pursuant to which a corporation, partnership,
trust, limited liability company or other entity incurs obligations or
issues interests, the proceeds of which are used to finance a discrete
pool (which may be fixed or revolving) of receivables, leases or other
financial assets, or a discrete portfolio of real property or
equipment.
<PAGE> 39
33
"Security Agreement": the Amended and Restated Security
Agreement and Collateral Assignment to be made by the Borrower and the
Subsidiary Guarantors in favor of the Collateral Agent, substantially
in the form of Exhibit A-1 to the Master Collateral Agreement, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Security Agreements": collectively, the Inventory Security
Agreement and the Security Agreement.
"Senior Notes": the Borrower's 8-3/8% Senior Notes due 2001
issued pursuant to the Senior Notes Indenture.
"Senior Notes Indenture": the Indenture, dated as of October
15, 1993, between the Borrower and State Street Bank and Trust Company
(as successor trustee to The First National Bank of Boston), as
trustee, as amended, supplemented or otherwise modified from time to
time.
"Senior Notes Tender Offer": the offer to purchase Senior
Notes and the related consent solicitation made by the Borrower
pursuant to the Offer to Purchase.
"Shrink Reserve": as of any Calculation Date, (a) so long as
the Borrower or the relevant Subsidiary Guarantor performs cycle counts
in accordance with historical practices, an amount equal to the greater
of (i) an amount equal to the product of (A) the average percentage of
Inventory which was identified as lost, misplaced or stolen Inventory
in connection with the then two most recent year-end physical
inventories conducted by the Borrower and Subsidiary Guarantors and (B)
the Eligible Inventory Amount and (ii) an amount equal to the product
of (A) the percentage of Inventory which was identified as lost,
misplaced or stolen Inventory in connection with the then most recent
year-end physical inventory conducted by the Borrower and Subsidiary
Guarantors and (B) the Eligible Inventory Amount or (b) if the Borrower
or the relevant Subsidiary Guarantor is not then performing cycle
counts in accordance with historical practices, the highest "Shrink"
that was or would have been applicable during the three year period
prior to such Calculation Date as determined in accordance with clause
(a) above (as used in this clause (b), "Shrink" means the percentage of
Inventory which was identified as lost, misplaced or stolen Inventory
in connection with year end physical Inventory and cycle count shrink
adjustments conducted by the Borrower and the Subsidiary Guarantors).
"Single Employer Plan": any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.
"Special Purpose Subsidiary": any Subsidiary of the Borrower
organized solely for the purpose of (a) holding a license or permit
issued by any Governmental Authority and used in connection with the
business of the Borrower and/or its Subsidiaries or (b) providing
employee services for use in the foreign operations of the Borrower or
any of its Subsidiaries, provided that such Subsidiary shall only be a
"Special Purpose Subsidiary" for so long as such Subsidiary does not
own any assets (other than any such license or permit and other than
any assets with a book value not exceeding $5,000,000 in the aggregate)
and does not engage in any business other than holding such license or
permit or providing such employee services and, in each case,
activities directly related thereto.
<PAGE> 40
34
"Standby L/C Fee Rate": at any time, the rate per annum equal
to the Revolving Credit Applicable Margin then in effect for
Eurodollar Loans.
"Standby Letter of Credit": as defined in subsection
3.6(b)(i).
"Standby Letter of Credit Outstanding": at any time, an
amount equal to the sum of (a) the aggregate then undrawn and
unexpired amount of the then outstanding Standby Letters of Credit
issued in Dollars, (b) the Dollar Equivalent of the aggregate then
undrawn and unexpired amount of then outstanding Letters of Credit
issued in currencies other than Dollars (such Dollar Equivalent to be
determined as of the date of issuance of such Standby Letter of
Credit), (c) the aggregate amount of Reimbursement Obligations in
respect of Standby Letters of Credit issued in Dollars which have not
then been paid pursuant to subsection 3.10(a) and (d) (i) the Dollar
Equivalent of the aggregate amounts of Reimbursement Obligations in
respect of Standby Letters of Credit issued in currencies other than
Dollars which have not been reimbursed pursuant to subsection 3.10(a)
(such Dollar Equivalent to be calculated as of the date such
Reimbursement Obligation becomes due and payable) and which have not
been converted into Dollars in accordance with subsection 3.10(a) and
(ii) the aggregate amount of Reimbursement Obligations in respect of
Standby Letters of Credit issued in currencies other than Dollars
which have not been reimbursed pursuant to subsection 3.10(a) and
which have been converted into Dollars in accordance with such
subsection.
"Subordinated Debentures": the Borrower's 9% Senior
Subordinated Debentures due 2004 issued pursuant to the Subordinated
Debt Indenture.
"Subordinated Debt": any unsecured Indebtedness of the
Borrower (other than the Subordinated Debentures), no part of the
principal of which is required to be paid (whether by way of mandatory
sinking fund, mandatory redemption or mandatory prepayment), prior to
December 15, 2005 (it being understood that any required offer to
purchase such Indebtedness as a result of change of control or asset
sale shall not violate the foregoing restriction); and the payment of
principal of and interest of which and other obligations of the
Borrower in respect thereof are subordinated to the prior payment in
full of the principal of and interest (including post-petition
interest) on the Loans and all other Credit Agreement Obligations on
terms and conditions no less favorable to the Agents and the Lenders in
any material respect than those set forth in Schedule 1.1(c).
"Subordinated Debt Indenture": the Indenture, dated as of
February 15, 1993, between the Borrower and First American National
Bank, as trustee, as amended, supplemented or otherwise modified from
time to time in accordance with the terms hereof.
"Subsidiaries Guarantee": the Amended and Restated Guarantee
to be executed and delivered by each Subsidiary Guarantor,
substantially in the form of Exhibit B, as the same may be amended,
supplemented or otherwise modified from time to time.
"Subsidiary": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
<PAGE> 41
35
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Guarantor": each Subsidiary set forth on Schedule
5.13 under the heading "Initial Subsidiary Guarantors", together with
each other Subsidiary that becomes a party to the Subsidiaries
Guarantee in compliance with subsection 7.11(b).
"Swing Line Commitment": the lesser of (a) $50,000,000 and
(b) the Revolving Credit Commitments then in effect.
"Swing Line Lenders": Chase and Citicorp, in each case in its
capacity as provider of the Swing Line Loans.
"Swing Line Loan Participation Certificate": a certificate,
substantially the form of Exhibit K.
"Swing Line Loans": as defined in subsection 3.14.
"Swing Line Note": as defined in subsection 4.13(e).
"Tax Code": the Internal Revenue Code of 1986, as amended
from time to time.
"Telerate Page 3750": the display page currently so
designated on the Dow Jones Telerate Service (or such other page as
may replace that service for the purpose of displaying comparable
rates or prices).
"Term Loan": as to any Lender, the collective reference to
the Initial Term Loan and any Refinancing Term Loans made by such
Lender.
"Term Loan Applicable Margin": for each Type of Term Loan,
the rate per annum set forth under the relevant column heading below:
ABR Loans Eurodollar Loans
--------- ----------------
1.00% 2.25%
provided that, from and after the last day of the third fiscal quarter
of the 1997 Fiscal Year, the Term Loan Applicable Margin for all Types
of Term Loan Loans will be adjusted, on each Adjustment Date, to the
Term Loan Applicable Margin set forth on Annex A opposite the Margin
Level Status of the Borrower in effect on such Adjustment Date, and
provided, further, that, in the event that the financial statements
(other than the copies of the Form 10-K or 10-Q for the relevant fiscal
period) required to be delivered pursuant to subsection 7.1(a) or
7.1(b), as applicable, and the related certificate required pursuant to
subsection 7.2(b), are not delivered when due, then, during the period
from the date upon which such financial statements were required to be
delivered until two Business Days following the date upon which they
actually are delivered, the Term Loan Applicable Margin for ABR Loans
shall be 1.25% and the Term Loan Applicable Margin for Eurodollar Loans
will be 2.50%.
<PAGE> 42
36
"Term Loan Commitment": as to any Lender, its obligation to
make an Initial Term Loan to the Borrower in an amount equal to the
amount set forth opposite such Lender's name in Schedule 1.1(a) under
the heading "Term Loan Commitment", as such amount may be reduced from
time to time pursuant to this Agreement or as such amount may be
adjusted from time to time pursuant to subsection 11.6; collectively,
as to all such Lenders, the "Term Loan Commitments".
"Term Loan Commitment Percentage": as to any Term Loan Lender
at any time, the percentage of the Term Loan Commitments then
constituted by such Term Loan Lender's Term Loan Commitment (or, after
the Term Loans are made, the percentage of the aggregate Term Loans
then constituted by such Term Loan Lender's Term Loan).
"Term Loan Lender": any Lender with an unused Term Loan
Commitment hereunder and/or any Term Loans outstanding hereunder;
collectively, the "Term Loan Lenders".
"Term Loan Maturity Date": the fifth anniversary of the
Effective Date.
"Term Note": as defined in subsection 4.13(e).
"Total Capitalization": of any Person, as of the date of
determination thereof, the sum of Consolidated Net Worth of such Person
at such date of determination and Consolidated Total Debt of such
Person at such date of determination.
"Total Debt": as to any Person, as of the date of
determination thereof, the sum of all Debt of such Person and its
Subsidiaries on a consolidated basis at such date of determination,
provided, that, except as otherwise expressly provided hereunder, for
the purposes of any determination of the Total Debt of the Borrower
under this Agreement the amount of Indebtedness attributable to the
Revolving Loans hereunder shall be excluded from the calculation of
Total Debt.
"Trade L/C Fee Rate": at any time, the rate per annum equal
to 50% of the Revolving Credit Applicable Margin then in effect for
Eurodollar Loans.
"Trade Letter of Credit": as defined in subsection
3.6(b)(i).
"Trade Letter of Credit Outstandings": at any time, an
amount equal to the sum of (a) the aggregate then undrawn and
unexpired amount of the then outstanding Trade Letters of Credit
issued in Dollars, (b) the Dollar Equivalent of the aggregate then
undrawn and unexpired amount of the then outstanding Trade Letters of
Credit issued in currencies other than Dollars (such Dollar Equivalent
to be calculated as of the date of issuance of such Letters of
Credit), (c) the aggregate amount of Reimbursement Obligations in
respect of Trade Letters of Credit issued in Dollars which have not
then been paid pursuant to subsection 3.10(a) and (d) (i) the Dollar
Equivalent of the aggregate amount of Reimbursement Obligations in
respect of Trade Letters of Credit issued in currencies other than
Dollars which have not then been paid pursuant to subsection 3.10(a)
(such Dollar Equivalent to be calculated as of the date such
Reimbursement Obligation becomes due and payable) and which have not
been converted into Dollars in accordance with subsection 3.10(a) and
(ii) the aggregate amount of Reimbursement Obligations in respect of
Trade Letters of Credit issued in currencies other than Dollars which
<PAGE> 43
37
have not been reimbursed pursuant to subsection 3.10(a) and which have
been converted into Dollars in accordance with such subsection.
"Tranche": the collective reference to Eurodollar Loans the
then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such
Eurodollar Loans shall originally have been made on the same day).
"Transferee": as defined in subsection 11.6(f).
"Type": as to any Term Loan or Revolving Loan, its nature as
an ABR Loan or a Eurodollar Loan.
"UCC": the Uniform Commercial Code as in effect in the State
of New York from time to time.
"UCC Filing Collateral": Collateral (other than fixtures) as
to which filing financing statements under the Uniform Commercial Code
of the applicable jurisdiction is an appropriate method of perfection
of a security interest in such Collateral.
"UCC Local Filing Collateral": with respect to any State, UCC
Filing Collateral located in such State as to which a security interest
may be perfected only by filing a Uniform Commercial Code financing
statement in each county or other local filing office of such State in
which such Collateral is located.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended or revised from time
to time.
"Voting Percentage": as to any Lender (a) at any time prior to
the termination of the Revolving Credit Commitments, the percentage
which (i) the sum of (x) such Lender's Revolving Credit Commitment plus
(y) such Lender's Term Loan Commitment (or, after the Term Loans are
made, the outstanding principal amount of such Lender's Term Loan) then
constitutes of (ii) the sum of (x) the Revolving Credit Commitments of
all the Lenders plus (y) the Term Loan Commitments of all the Lenders
(or, after the Term Loans are made, the aggregate principal amount of
Term Loans of all the Lenders then outstanding), and (b) at any time
after the termination of the Revolving Credit Commitments, the
percentage which (i) the sum of (x) the principal amount of such
Lender's Loans (other than Swing Line Loans) then outstanding plus (y)
the product of such Lender's Revolving Credit Commitment Percentage
times the L/C Obligations and Swing Line Loans then outstanding then
constitutes of (ii) the sum of (x) the aggregate principal amount of
Loans of all the Lenders then outstanding plus (y) the aggregate L/C
Obligations of all the Lenders then outstanding.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in any Loan Document or any certificate or other document
made or delivered pursuant hereto or thereto.
(b) As used herein and in any other Loan Document, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and
<PAGE> 44
38
its Subsidiaries not defined in subsection 1.1 and accounting terms partly
defined in subsection 1.1, to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(e) As used in this Agreement, the following terms defined in
the Master Collateral Agreement shall have the meanings set forth therein:
Accounts, Aircraft Mortgage, Cash Equivalents, Credit Agreement Obligations,
Depositary Bank, Instruments, Inventory, Investment Securities, Mortgage
Assignment, Mortgaged Property, Obligor, Original Mortgages, Pledged Securities,
Pledged Stock, Restricted Jurisdictions, Secured Obligations, Secured Parties
and Security Documents.
SECTION 2. AMOUNTS AND TERMS OF TERM LOAN COMMITMENTS
2.1 Term Loans. Subject to the terms and conditions hereof,
each Term Loan Lender severally agrees to make (a) a term loan (an "Initial Term
Loan") to the Borrower on the Effective Date in an amount equal to the Term Loan
Commitment of such Term Loan Lender and (b) term loans (each, a "Refinancing
Term Loan") to the Borrower from time to time after the Effective Date in an
amount not greater than the then unpaid principal balance of such Term Loan
Lender's Initial Term Loan, provided that, after giving effect thereto, the
Aggregate Outstanding Extensions of Credit do not exceed the Borrowing Base at
such time. The terms and conditions of any Refinancing Term Loans shall be the
same as those applicable to the Initial Term Loans. The Term Loans may from time
to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof,
as determined by the Borrower and notified to the Administrative Agent in
accordance with subsections 2.2 and 4.2.
2.2 Procedure for Term Loan Borrowing. The Borrower hereby
requests an Initial Term Loan borrowing on the Effective Date in an amount equal
to the aggregate amount of the Term Loan Commitments of the Term Loan Lenders.
Each Term Loan Lender will make the amount of its pro rata share of the Initial
Term Loans available to the Administrative Agent for the account of the Borrower
at the office of the Administrative Agent specified in subsection 11.2 prior to
11:00 A.M., New York City time, on the Effective Date in Dollars and in funds
immediately available to the Administrative Agent. The Administrative Agent
shall credit the account of the Borrower on the books of such office of the
Administrative Agent by 12:00 Noon, New York City time, on the Effective Date,
with the aggregate of the amounts made available to the Administrative Agent by
the Term Loan Lenders and in like funds as received by the Administrative Agent.
The Borrower may also request the Term Loan Lenders to make Refinancing Term
Loans on any Business Day on or prior to the fourth anniversary of the Effective
Date, provided that (x) the Borrower may only request up to three borrowings of
Refinancing Term Loans hereunder and (y) the Borrower shall give the
Administrative Agent irrevocable notice (which notice may be given by telephone
(to be promptly confirmed in writing, including by facsimile) and must be
received by the Administrative Agent prior to 11:00 A.M., New York City time,
(a) three Business Days prior to the requested Borrowing Date, if all or any
part of the requested Refinancing Term Loans are to be initially Eurodollar
Loans, or (b) on the requested Borrowing Date, otherwise) specifying (i) the
requested amount of Refinancing Term Loans and the requested Refinancing Date,
(ii) whether the Refinancing Term Loans will be
<PAGE> 45
39
Eurodollar Loans, ABR Loans or a combination thereof and (iii) if such
Refinancing Term Loans are to be entirely or partly Eurodollar Loans, the
respective lengths of the initial Interest Periods therefor. Upon receipt of any
such notice from the Borrower, the Administrative Agent shall promptly notify
each Term Loan Lender thereof. On the requested Refinancing Date, each Term Loan
Lender shall be deemed to have made a Refinancing Term Loan to the Borrower in
an amount equal to its Term Loan Commitment Percentage of the aggregate amount
of Refinancing Term Loans requested on such Refinancing Date, which shall not
exceed the then unpaid principal amount of such Term Loan Lender's Initial Term
Loan.
2.3 Repayment of Term Loans. The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
the Term Loan Lenders the principal amount of the Terms Loans in twenty
consecutive quarterly installments (or such earlier date on which the Term Loans
become due and payable pursuant to Section 9), payable on the last day of each
January, April, July and October, commencing January 31, 1998, with the first
nineteen installments being in an amount equal to $1,000,000 and the final
installment being equal to the then aggregate unpaid principal amount of the
Term Loans, provided that the final installment shall be due and payable on the
Term Loan Maturity Date. The Borrower hereby further agrees to pay interest on
the unpaid principal amount of the Term Loans from time to time outstanding from
the date hereof until payment in full thereof at the rates per annum, and on the
dates, set forth in subsection 4.4.
2.4 Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Term Loan Lender a commitment fee
for the period from and including the date hereof to but not including the
Effective Date or such earlier date on which the Term Loan Commitments shall
terminate as provided herein, computed at a rate per annum equal to the
Applicable Commitment Fee Rate then in effect on the amount of the Term Loan
Commitment of such Term Loan Lender, payable on the Effective Date or such
earlier date on which the Term Loan Commitments shall terminate as provided
herein.
SECTION 3. AMOUNTS AND TERMS OF REVOLVING CREDIT COMMITMENTS
3.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Loans") to the Borrower from time to time
during the Revolving Credit Commitment Period in an aggregate principal amount
at any one time outstanding which, when added to such Revolving Credit Lender's
Revolving Credit Commitment Percentage of an amount equal to the sum of (i) the
aggregate principal amount of Swing Line Loans then outstanding plus (ii) the
then outstanding L/C Obligations (in each case, after giving effect to the use
of proceeds of such Revolving Loans), does not exceed the amount of such
Revolving Credit Lender's Revolving Credit Commitment, provided that no
Revolving Credit Lender shall be required to make a Revolving Loan prior to the
occurrence of a Collateral Release Event to the extent that, after giving effect
thereto, the Aggregate Outstanding Extensions of Credit at such time would
exceed the Borrowing Base at such time. During the Revolving Credit Commitment
Period, the Borrower may use the Revolving Credit Commitments by borrowing,
prepaying and reborrowing the Revolving Loans in whole or in part, all in
accordance with the terms and conditions hereof.
(b) The Revolving Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Administrative Agent in accordance with
subsections 3.2 and 4.2, provided that no Revolving Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Revolving Credit
Termination Date.
<PAGE> 46
40
3.2 Procedure for Revolving Credit Borrowing. The Borrower
may borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business
Days prior to the requested Borrowing Date, if all or any part of the requested
Revolving Loans are to be initially Eurodollar Loans or (b) one Business Day
prior to the requested Borrowing Date, otherwise), which notice may be given by
telephone (to be promptly confirmed in writing, including by facsimile),
specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date,
(iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a
combination thereof and (iv) if the borrowing is to be entirely or partly of
Eurodollar Loans, the respective amounts of each such Type of Loan and the
respective lengths of the initial Interest Periods therefor. Each borrowing
under the Revolving Credit Commitments shall be in an amount equal to (x) in the
case of ABR Loans (except as otherwise provided in subsection 3.16(a)),
$5,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the then
Available Revolving Credit Commitments are less than $5,000,000, such lesser
amount) and (y) in the case of Eurodollar Loans, $10,000,000 or a whole multiple
of $1,000,000 in excess thereof. Upon receipt of any such notice from the
Borrower, the Administrative Agent shall promptly notify each Revolving Credit
Lender thereof. Each Revolving Credit Lender will make the amount of its pro
rata share of each borrowing available to the Administrative Agent for the
account of the Borrower at the office of the Administrative Agent specified in
subsection 11.2 prior to 1:00 P.M., New York City time, on the Borrowing Date
requested by the Borrower in Dollars and in funds immediately available to the
Administrative Agent. Such borrowing will be made available to the Borrower
promptly (but in no event later than 1:00 P.M., New York City time) by the
Administrative Agent crediting the account of the Borrower on the books of such
office of the Administrative Agent with the aggregate of the amounts made
available to the Administrative Agent by the Revolving Credit Lenders and in
like funds as received by the Administrative Agent.
3.3 Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the first day of the Revolving
Credit Commitment Period to but not including the Revolving Credit Termination
Date, computed at a rate per annum equal to the Applicable Commitment Fee Rate
then in effect on the average daily amount of the Available Revolving Credit
Commitment of such Revolving Credit Lender during the period (calculated as if
no Swing Line Loans were outstanding during such period) for which payment is
made, payable quarterly in arrears on the last day of each January, April, July
and October and on the Revolving Credit Termination Date or such earlier date as
the Revolving Credit Commitments shall terminate as provided herein, commencing
on the first of such dates to occur after the date hereof.
3.4 Termination or Reduction of Commitments. The Borrower
shall have the right, upon not less than two Business Days' notice to the
Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments, provided
that no such termination or reduction shall be permitted if, after giving effect
thereto and to any prepayments of the Revolving Loans made on the effective date
thereof, the aggregate principal amount of the Revolving Loans then outstanding,
when added to the then outstanding L/C Obligations and the aggregate principal
amount of then outstanding Swing Line Loans, would exceed the Revolving Credit
Commitments then in effect. Any such reduction shall be in an amount equal to
$10,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce
permanently the Revolving Credit Commitments then in effect. Upon receipt of any
notice pursuant to this subsection 3.4, the Administrative Agent shall promptly
notify each Revolving Credit Lender thereof.
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3.5 Repayment of Revolving Loans. The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Revolving Credit Lender the then unpaid principal amount of each Revolving
Loan of such Revolving Credit Lender on the Revolving Credit Termination Date
(or such earlier date on which the Revolving Loans become due and payable
pursuant to Section 9). The Borrower hereby further agrees to pay interest on
the unpaid principal amount of the Revolving Loans from time to time outstanding
from the date hereof until payment in full thereof at the rates per annum, and
on the dates, set forth in subsection 4.4.
3.6 L/C Commitment. (a) Subject to the terms and conditions
hereof, each Issuing Bank, in reliance on the agreements of the other Lenders
set forth in subsection 3.9, agrees to issue letters of credit ("Letters of
Credit") for the account of the Borrower on any Business Day during the
Revolving Credit Commitment Period in such form as may be approved from time to
time by such Issuing Bank; provided that no Issuing Bank shall have any
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations at such time would exceed the L/C Commitment,
(ii) the Standby Letter of Credit Outstandings at such time would exceed
$100,000,000, (iii) the Aggregate Revolving Credit Outstandings at such time
would exceed the aggregate amount of the Revolving Credit Commitments at such
time, (iv) in the case of Letters of Credit issued in currencies other than
Dollars only, the L/C Obligations in respect of Letters of Credit issued in
currencies other than Dollars would exceed the Foreign L/C Commitment Sublimit
at such time or (v) in the case of Letters of Credit issued prior to the
occurrence of a Collateral Release Event, the Aggregate Outstanding Extensions
of Credit at such time would exceed the Borrowing Base at such time. Each
Continuing Letter of Credit shall be deemed to be issued under this Agreement on
the Effective Date (to the extent such Continuing Letter of Credit has not been
fully drawn or has not expired or been terminated as of the Effective Date) and
shall be (x) a Letter of Credit for all purposes hereof (other than subsection
3.7) and the other Loan Documents and (y) a Trade Letter of Credit or a Standby
Letter of Credit, as applicable, for purposes of subsections 3.8(b) and 3.8(c),
respectively.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars or such other currency that
as of the date of issuance thereof is in the reasonable judgment of
the relevant Issuing Bank (which shall be binding on the L/C
Participants) freely convertible or exchangeable into Dollars as the
Borrower, the relevant Issuing Bank and the Administrative Agent may
from time to time agree, and shall be either (A) a standby letter of
credit issued to support obligations of the Borrower or a Subsidiary,
contingent or otherwise (a "Standby Letter of Credit"), or (B) a
commercial letter of credit issued in respect of the purchase of
inventory or other goods or services by the Borrower and its
Subsidiaries in the ordinary course of business (a "Trade Letter of
Credit"), and
(ii) expire no later than the earlier of (A) five
Business Days prior to the Revolving Credit Termination Date and (B)
one year after the date of issuance thereof, provided that, subject to
clause (A) above, any Letter of Credit may, at the request of the
Applicant as set forth in the applicable Application, be automatically
renewed on each anniversary of the issuance thereof for an additional
period of one year unless the Issuing Bank which issued such Letter of
Credit shall have given at least sixty days prior written notice to
the Borrower and the beneficiary of such Letter of Credit that such
Letter of Credit will not be renewed, in which case such Letter of
Credit may, at the option of the Borrower, provide that the
beneficiary of such Letter of Credit will be entitled to draw on such
Letter of Credit at any time during the thirty days prior to the
expiry thereof.
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(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(d) No Issuing Bank shall at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
such Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.7 Procedure for Issuance of Letters of Credit. An Applicant
may from time to time request that an Issuing Bank issue a Letter of Credit by
delivering (a) to such Issuing Bank at its address for notices specified herein
in such manner as may be agreed by or be reasonably acceptable to such Issuing
Bank (including by electronic transmission) an Application therefor, completed
to the satisfaction of such Issuing Bank, and such other certificates, documents
and other papers and information as such Issuing Bank may reasonably request and
(b) a notice to the Administrative Agent that such Letter of Credit has been
requested. Upon receipt of any Application, each Issuing Bank agrees to process
such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall such Issuing Bank be required to issue any Letter
of Credit earlier than two Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by such Issuing Bank
and the Borrower. Each Issuing Bank shall furnish a copy of each Letter of
Credit issued by such Issuing Bank to the Borrower and the Administrative Agent
promptly following the issuance thereof.
3.8 Letter of Credit Fees, Commissions and Other Charges.
(a) The Borrower shall pay to the relevant Issuing Bank with respect to each
Letter of Credit issued by such Issuing Bank under this Agreement, for the
account of such Issuing Bank, a fronting fee with respect to the period from the
date of issuance of such Letter of Credit to the expiration or termination date
of such Letter of Credit, computed at a rate per annum to be agreed upon by the
Borrower and such Issuing Bank on the average aggregate amount available to be
drawn under such Letter of Credit during the period for which such fee is
calculated. Such fronting fee shall be payable in arrears on each L/C Fee
Payment Date to occur after the issuance of such Letter of Credit and on the
Revolving Credit Termination Date (or on such earlier date as the Revolving
Credit Commitments shall terminate as provided herein) and shall be
nonrefundable.
(b) The Borrower shall pay to the Administrative Agent, for
the account of the L/C Participants, a letter of credit commission with respect
to each Trade Letter of Credit issued under this Agreement with respect to the
period from the date of issuance of such Trade Letter of Credit to the
expiration or termination date of such Letter of Credit, computed at a rate per
annum equal to the Trade L/C Fee Rate in effect from time to time on the average
aggregate amount available to be drawn under such Trade Letter of Credit during
the period for which such fee is calculated. Such commission shall be shared
ratably among the L/C Participants in accordance with their respective Revolving
Credit Commitment Percentages. Such commission shall be payable in arrears on
each L/C Fee Payment Date to occur after the issuance of such Letter of Credit
and on the Revolving Credit Termination Date (or on such earlier date as the
Revolving Credit Commitments shall terminate as provided herein) and shall be
nonrefundable.
(c) The Borrower shall pay to the Administrative Agent, for
the account of the L/C Participants, a letter of credit commission with respect
to each Standby Letter of Credit with respect to the period from the date of
issuance of such Standby Letter of Credit to the expiration or termination
<PAGE> 49
43
date of such Letter of Credit, computed at a rate per annum equal to the Standby
L/C Fee Rate in effect from time to time on the average aggregate amount
available to be drawn under such Standby Letter of Credit during the period for
which such fee is calculated. Such commission shall be shared ratably among the
L/C Participants in accordance with their respective Revolving Credit Commitment
Percentages. Such commission shall be payable in arrears on each L/C Fee Payment
Date to occur after the issuance of such Letter of Credit and on the Revolving
Credit Termination Date (or on such earlier date as the Revolving Credit
Commitments shall terminate as provided herein) and shall be nonrefundable.
(d) In addition to the foregoing fees and commissions, the
Borrower shall pay or reimburse each Issuing Bank for such normal and customary
costs and expenses as may be agreed upon by the Borrower and such Issuing Bank
in connection with issuing, effecting payment under, amending or otherwise
administering any Letter of Credit issued by such Issuing Bank.
(e) The Administrative Agent shall, promptly following its
receipt thereof, distribute to each Issuing Bank and the L/C Participants all
fees and commissions received by the Administrative Agent for their respective
accounts pursuant to this subsection.
3.9 L/C Participations. (a) Each Issuing Bank irrevocably
agrees to grant and hereby grants to each L/C Participant (other than such
Issuing Bank), and, to induce such Issuing Bank to issue Letters of Credit
hereunder, each such L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from such Issuing Bank, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's Revolving Credit
Commitment Percentage in such Issuing Bank's obligations and rights under each
Letter of Credit issued by such Issuing Bank hereunder and the amount of each
draft paid by such Issuing Bank thereunder. Each such L/C Participant
unconditionally and irrevocably agrees with each Issuing Bank that, if a draft
is paid under any Letter of Credit issued by such Issuing Bank for which such
Issuing Bank is not reimbursed in full by the Borrower in accordance with the
terms of this Agreement, such L/C Participant shall pay to the Administrative
Agent for the account of such Issuing Bank upon demand an amount equal to such
L/C Participant's Revolving Credit Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to any Issuing Bank pursuant to subsection 3.9 in respect of any unreimbursed
portion of any payment made by such Issuing Bank under any Letter of Credit
issued by such Issuing Bank is paid to such Issuing Bank within three Business
Days after the date such payment is due, such L/C Participant shall pay to such
Issuing Bank on demand an amount equal to the product of (i) such amount, times
(ii) the daily average Federal Funds Effective Rate, during the period from and
including the date such payment is required to the date on which such payment is
immediately available to such Issuing Bank, times (iii) a fraction the numerator
of which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by any L/C
Participant pursuant to subsection 3.9 is not in fact made available to any
Issuing Bank by such L/C Participant within three Business Days after the date
such payment is due, such Issuing Bank shall be entitled to recover from such
L/C Participant, on demand, such amount with interest thereon calculated from
such due date at the rate per annum applicable to Revolving Credit Loans that
are ABR Loans hereunder. A certificate of any Issuing Bank submitted to any L/C
Participant with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error.
(c) Whenever, at any time after any Issuing Bank has made
payment under any Letter of Credit issued by such Issuing Bank and has received
from any L/C Participant its pro rata share of
<PAGE> 50
44
such payment in accordance with subsection 3.9, such Issuing Bank receives any
payment related to such Letter of Credit (whether directly from the Borrower or
otherwise, including proceeds of collateral applied thereto by such Issuing
Bank), or any payment of interest on account thereof, such Issuing Bank will
distribute to such L/C Participant its pro rata share thereof.
(d) If any payment received by any Issuing Bank pursuant to
subsection 3.10 with respect to any Letter of Credit issued by it shall be
required to be returned by such Issuing Bank, each L/C Participant shall pay to
such Issuing Bank its pro rata share thereof.
3.10 Letter of Credit Reimbursement Obligations. (a) The
Borrower agrees to reimburse each Issuing Bank for the amount of (i) any draft
paid by such Issuing Bank under any Letter of Credit issued by such Issuing Bank
and (ii) any taxes, fees, charges or other costs or expenses reasonably incurred
by such Issuing Bank in connection with such payment (including any such costs
and expenses related to any conversion of any such amount into Dollars as
contemplated by the next succeeding sentence). Except as otherwise agreed by the
Borrower and the relevant Issuing Bank, each such payment shall be made to the
relevant Issuing Bank at its address for notices specified herein in the
currency in which the relevant Letter of Credit was issued in immediately
available funds in such currency, provided that if the Borrower does not
reimburse the relevant Issuing Bank for any draft paid by such Issuing Bank
under any Letter of Credit issued by such Issuing Bank in a currency other than
Dollars on the date required pursuant to subsection 3.10(b), such Issuing Bank
shall convert such amount into Dollars at the rate of exchange then available to
such Issuing Bank in the interbank market where its foreign currency exchange
operations in respect of such currency are then being conducted and the Borrower
shall thereafter be required to reimburse in Dollars such Issuing Bank for such
amount with interest pursuant to subsection 3.10(b).
(b) If any draft shall be presented for payment under any
Letter of Credit issued by any Issuing Bank, such Issuing Bank shall promptly
notify the Borrower of the date and amount thereof. The Borrower shall reimburse
each Issuing Bank pursuant to subsection 3.10(a) with respect to any drawing
under any Letter of Credit issued by such Issuing Bank on (i) the Business Day
on which such drawing is paid by such Issuing Bank, if notice of such drawing is
given to the Borrower by such Issuing Bank prior to 12:00 Noon, New York City
time, on the date such drawing is paid, or (ii) the first Business Day after
notice of such drawing is given to the Borrower by the Issuing Bank, if such
notice is given after 12:00 Noon, New York City time, on the date such drawing
is paid, and, if such drawing is reimbursed after the date of such drawing,
interest shall be payable on the amount of such drawing for the period from the
date such drawing is paid by the Issuing Bank until reimbursed by the Borrower
at the rate then applicable to Revolving Credit Loans that are ABR Loans
hereunder. If any amount payable under this subsection is not paid when due,
interest shall be payable on such amount from the date such amount becomes
payable under this subsection until payment in full thereof at the rate which
would be payable on any outstanding ABR Loans which were then overdue.
3.11 Obligations Absolute. (a) The Borrower's obligations
under this Section 3 in respect of Letters of Credit shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Borrower or any Applicant may have
or have had against any Issuing Bank or any beneficiary of any Letter of Credit.
(b) The Borrower also agrees with each Issuing Bank that such
Issuing Bank shall not be responsible for, and the Borrower's Reimbursement
Obligations shall not be affected by, among other things, (i) the validity or
genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any
dispute between or
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among the Borrower, any Applicant and any beneficiary of any Letter of Credit or
any other party to which such Letter of Credit may be transferred or (iii) any
claims whatsoever of the Borrower or any Applicant against any beneficiary of
such Letter of Credit or any such transferee.
(c) No Issuing Bank shall 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 issued by
such Issuing Bank, except for errors or omissions caused by such Issuing Bank's
gross negligence or willful misconduct.
(d) The Borrower agrees that any action taken or omitted by
any Issuing Bank under or in connection with any Letter of Credit issued by such
Issuing Bank or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards of care
specified in the UCC and the Uniform Customs, shall be binding on the Borrower
and shall not result in any liability of such Issuing Bank to the Borrower.
3.12 Letter of Credit Payments. The responsibility of each
Issuing Bank to the Borrower in connection with any draft presented for payment
under any Letter of Credit issued by such Issuing Bank shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.
3.13 Letter of Credit Applications. To the extent that any
provision of any Application related to any Letter of Credit is inconsistent
with the provisions of this Section 3 or any other terms of this Agreement or
any other Loan Document, the provisions of this Section 3 shall apply and such
inconsistent provision of such Application shall be of no force and effect.
3.14 Swing Line Commitment. Subject to the terms and
conditions hereof, each Swing Line Lender, in reliance on the agreements of the
other Lenders set forth in subsection 3.16, agrees to make swing line loans
("Swing Line Loans") to the Borrower from time to time during the Revolving
Credit Commitment Period, provided that (a) no Swing Line Lender shall have any
obligation to make a Swing Line Loan if, after giving effect to any such Swing
Line Loans and the use of proceeds thereof, (i) the aggregate principal amount
of Swing Line Loans then outstanding would exceed the Swing Line Commitment,
(ii) the Aggregate Revolving Credit Outstandings at such time would exceed the
Revolving Credit Commitments in effect at such time or (iii) in the case of
Swing Line Loans made prior to the occurrence of a Collateral Release Event, the
Aggregate Outstanding Extensions of Credit at such time would exceed the
Borrowing Base at such time and (b) all borrowings and prepayments of Swing Line
Loans shall be made such that the aggregate principal amount of Swing Line Loans
of each Swing Line Lender outstanding at any time shall be equal. During the
Revolving Credit Commitment Period, the Borrower may use the Swing Line
Commitment by borrowing, prepaying and reborrowing the Swing Line Loans in whole
or in part, all in accordance with the terms and conditions hereof.
3.15 Procedure for Swing Line Borrowing. The Borrower may
borrow under the Swing Line Commitment during the Revolving Credit Commitment
Period on any Business Day, provided that the Borrower shall give the relevant
Swing Line Lender and the Administrative Agent irrevocable notice (which notice
may be given by telephone (to be promptly confirmed in writing, including by
facsimile) and must be received by the Swing Line Lender prior to 2:00 P.M., New
York City time) on the requested Borrowing Date specifying the amount of the
requested Swing Line Loan which shall be in an aggregate minimum amount of
$1,000,000 or a whole multiple of $100,000 in excess thereof (or, if less, the
unused portion of the Swing Line Commitment). The proceeds of the
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Swing Line Loan will be made available by the relevant Swing Line Lender to the
Borrower at the office of the Swing Line Lender by 4:00 P.M., New York City
time, on the Borrowing Date by crediting the account of the Borrower at such
office with such proceeds. The Borrower may at any time and from time to time,
subject to subsection 3.14, prepay the Swing Line Loans, in whole or in part,
without premium or penalty, by notifying (which notice may be given by telephone
(to be promptly confirmed in writing, including by facsimile)) the relevant
Swing Line Lender and the Administrative Agent prior to 2:00 P.M., New York City
time, on any Business Day of the date and amount of prepayment. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein. Partial prepayments shall be in an aggregate
principal amount of $100,000 or a whole multiple of $100,000 in excess thereof.
3.16 Refunding of Swing Line Loans; Participations in Swing
Line Loans. (a) In the event that (i) the aggregate average daily outstanding
principal amount of Swing Line Loans during any weekly period ending on Thursday
(or, in the event Thursday is not a Business Day, on the next succeeding
Business Day) of any week exceeds $15,000,000, and (ii) the principal amount of
Swing Line Loans outstanding on the last day of such period exceeds $15,000,000,
the Borrower shall, or the Administrative Agent may, on behalf of the Borrower
(which hereby irrevocably authorizes the Administrative Agent to act on its
behalf in such regard) request each Revolving Credit Lender to make a Revolving
Loan (which shall be an ABR Loan, unless the Borrower notified the
Administrative Agent pursuant to subsection 3.2 that such Revolving Loans shall
be Eurodollar Loans) in an amount equal to such Lender's Revolving Credit
Commitment Percentage of the amount by which the aggregate outstanding principal
amount of Swing Line Loans on the last day of such period exceeds $10,000,000,
regardless of whether the conditions set forth in subsection 6.2 have been
satisfied in connection therewith. The Swing Line Lenders may, on behalf of the
Borrower (which hereby authorizes the Swing Line Lenders to act on its behalf in
such regard), at any time request each Revolving Credit Lender (including the
Swing Line Lenders) to make a Revolving Credit Loan (which shall be an ABR Loan)
in an amount equal to such Lender's Revolving Credit Commitment Percentage of
the aggregate principal amount of Swing Line Loans then outstanding, regardless
of whether the conditions set forth in subsection 6.2 have been satisfied in
connection therewith. Unless any of the events described in paragraph (f) of
Section 9 shall have occurred with respect to the Borrower (in which event the
procedures of paragraph (c) of this subsection 3.16 shall apply) each Lender
shall make the proceeds of its Revolving Loan available to the Administrative
Agent for the account of the relevant Swing Line Lender at the Administrative
Agent's office specified in or pursuant to subsection 11.2 prior to 11:00 A.M.,
New York City time, in funds immediately available in Dollars on the Business
Day next succeeding the date such notice is given. The proceeds of such
Revolving Loans shall be immediately applied to repay the relevant Swing Line
Loan. Effective on the day such Revolving Loans are made, the relevant Swing
Line Loan so paid shall no longer be outstanding as a Swing Line Loan and shall
no longer be due under the Swing Line Note. The Borrower authorizes each Swing
Line Lender, upon written notice to the Borrower, to charge the Borrower's
accounts with such Swing Line Lender (up to the amount available in each such
account) in order to immediately pay the amount of its outstanding Swing Line
Loans to the extent amounts received from the Lenders are not sufficient to
repay in full such outstanding Swing Line Loans.
(b) Notwithstanding anything herein to the contrary, no Swing
Line Lender shall make any Swing Line Loans if the Swing Line Lender has
received written notice that the conditions set forth in subsection 6.2 have not
been satisfied in connection with the making of such Swing Line Loans.
(c) If prior to the making of a Revolving Loan pursuant to
paragraph (a) of this subsection 3.16 one of the events described in paragraph
(f) of Section 9 shall have occurred and be
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continuing with respect to the Borrower, each Lender will, on the date such
Revolving Loan was to or would have been made pursuant to the notice in
paragraph (a) of this subsection 3.16, purchase an undivided participating
interest in the outstanding Swing Line Loans in an amount equal to (i) its
Revolving Credit Commitment Percentage times (ii) the aggregate principal amount
of Swing Line Loans then outstanding. Each Lender will immediately transfer to
the relevant Swing Line Lender, in immediately available funds, the amount of
its participation, and upon receipt thereof such Swing Line Lender will deliver
to such Lender a Swing Line Loan Participation Certificate dated the date of
receipt of such funds and in such amount.
(d) Whenever, at any time after any Lender has purchased a
participating interest in a Swing Line Loan, any Swing Line Lender receives any
payment on account thereof, such Swing Line Lender will distribute to such
Lender its participating interest in such amount (appropriately adjusted, in the
case of interest payments, to reflect the period of time during which such
Lender's participating interest was outstanding and funded), provided, however,
that in the event that such payment received by such Swing Line Lender is
required to be returned, such Lender will return to such Swing Line Lender any
portion thereof previously distributed by such Swing Line Lender to it.
(e) Each Lender's obligation to make the Revolving Loans
referred to in subsection 3.16(a) and to purchase participating interests
pursuant to subsection 3.16(c) shall be absolute and unconditional and shall not
be affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Lender or the
Borrower may have against the relevant Swing Line Lender, the Borrower or any
other Person for any reason whatsoever, (ii) the occurrence or continuance of a
Default or an Event of Default, (iii) any adverse change in the condition
(financial or otherwise) of the Borrower, (iv) any breach of this Agreement or
any other Loan Document by the Borrower, any Subsidiary or any other Lender, or
(v) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
3.17 Annual Revolving Credit Clean-Down. The Borrower agrees
that during the period beginning on December 1 of each calendar year and ending
on the following February 28 of the next calendar year, there shall be a period
of at least 30 consecutive days during which the sum of the aggregate principal
amount of all outstanding Revolving Loans and Swing Line Loans shall not exceed
$150,000,000.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT
4.1 Optional and Mandatory Prepayments. (a) The Borrower may,
at any time and from time to time, prepay the Loans, in whole or in part,
without premium or penalty (except, with respect to Eurodollar Loans that are
prepaid on a date other than the last day of the Interest Period with respect
thereto, as provided under subsection 4.11), upon (i) in the case of prepayments
of Eurodollar Loans, at least three Business Days' irrevocable notice (which
notice may be given by telephone (to be promptly confirmed in writing, including
by facsimile) to the Administrative Agent and (ii) in the case of prepayments of
ABR Loans (other than Swing Line Loans), irrevocable notice (which notice may be
given by telephone (to be promptly confirmed in writing, including by
facsimile)) to the Administrative Agent prior to 11:30 A.M., New York City time,
on the date of such prepayment, in each case specifying the date and amount of
prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each. Upon receipt of any such notice the Administrative Agent shall promptly
notify each affected Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified therein,
together with any amounts payable pursuant to
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subsection 4.11 in connection therewith and, in the case of prepayments of the
Term Loans only, accrued interest to such date on the amount prepaid. Amounts
prepaid on account of the Term Loans may not be reborrowed and will be applied
to the installments thereof in the scheduled order of maturity thereof. Partial
prepayments under this subsection 4.1(a) shall be, in the case of Eurodollar
Loans, in an aggregate principal amount of $10,000,000 or a whole multiple of
$1,000,000 in excess thereof and, in the case of ABR Loans, in an aggregate
principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof.
(b) Unless a Collateral Release Event shall have occurred, if,
at any time, the Aggregate Outstanding Extensions of Credit at such time exceed
the Borrowing Base at such time, the Borrower shall, without notice or demand,
immediately repay Swing Line Loans then outstanding and/or, after the Swing Line
Loans have been paid in full, Revolving Loans in an aggregate principal amount
equal to the lesser of (i) the amount of such excess and (ii) the aggregate
principal amount of Swing Line Loans and Revolving Loans then outstanding,
together with interest accrued to the date of such payment or prepayment on the
principal so prepaid and any amounts payable under subsection 4.11 in connection
therewith. To the extent that after giving effect to any prepayment of Swing
Line Loans and Revolving Loans required by the preceding sentence, the Aggregate
Outstanding Extensions of Credit at such time exceed the Borrowing Base at such
time, the Borrower shall, without notice or demand, immediately deposit in a
Cash Collateral Account upon terms reasonably satisfactory to the Administrative
Agent an amount equal to the lesser of (i) the aggregate then outstanding L/C
Obligations and (ii) the amount of such remaining excess. The Administrative
Agent shall apply any cash deposited in the Cash Collateral Account (to the
extent thereof) to pay any Reimbursement Obligations which become due
thereafter, provided that the Administrative Agent shall release to the Borrower
from time to time such portion of the amount on deposit in the Cash Collateral
Account which is equal to the amount by which the Borrowing Base at such time
plus the amount on deposit in the Cash Collateral Account exceeds the Aggregate
Outstanding Extensions of Credit at such time. "Cash Collateral Account" means
an account established by the Borrower with the Administrative Agent and over
which the Administrative Agent shall have been granted a first priority Lien and
the right of withdrawal for application in accordance with this subsection
4.1(b). To the extent that after giving effect to any prepayment of the
Revolving Loans and cash deposits required by the preceding sentences, the
Aggregate Outstanding Extensions of Credit at such time exceed the Borrowing
Base at such time, the Borrower shall, without notice or demand, immediately
repay the Term Loans in the scheduled order of maturity thereof in an aggregate
principal amount equal to the lesser of (i) the amount of such excess and (ii)
the aggregate principal amount of Term Loans then outstanding, together with
interest accrued to the date of such payment or prepayment on the principal so
prepaid and any amounts payable under subsection 4.11 in connection therewith.
The Borrower shall also prepay the Revolving Loans to the extent required to
comply with subsection 3.17.
(c) The Borrower shall prepay the Term Loans in an amount
equal to:
(i) in the case of an Asset Sale (including, without
limitation, in connection with a Permitted Sale-Leaseback, but
excluding, without limitation, Asset Sales in connection with
a Securitization Transaction) of any parcel of Designated
Material Real Property, the greater of (A) 80% of the Net Cash
Proceeds of such Asset Sale and (B) in the event such parcel
of Designated Material Real Property is a parcel of Eligible
Mortgaged Real Property, 60% of the excess of (x) the Mortgage
Value of such parcel of Eligible Mortgaged Real Property, over
(y) the sum of the Environmental Reserve Amount, the Real
Property Amortization Amount and the Mechanics' Lien Reserve
Amount, in each case for such parcel of Eligible Mortgaged
Real Property, provided
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that, in no event shall the Borrower be required to prepay
Term Loans in an amount in excess of 100% of the Net Cash
Proceeds of any such Asset Sale; and
(ii) a portion of the Net Cash Proceeds of any Indebtedness
(other than Loans, but including any Indebtedness incurred in
connection with a Securitization Transaction) incurred after
the Effective Date which is secured by a Lien on any parcel of
Designated Material Real Property equal to (A) in the event
such parcel of Designated Material Real Property is a parcel
of Eligible Mortgaged Real Property, 60% of the excess of (x)
the Mortgage Value of such Eligible Mortgaged Real Property,
over (y) the sum of the Environmental Reserve Amount, the Real
Property Amortization Amount and the Mechanics' Lien Reserve
Amount, in each case for such parcel of Eligible Mortgaged
Real Property, and (B) in the event such parcel of Designated
Material Real Property is not a parcel of Eligible Mortgaged
Real Property, 60% of the fair market value of such parcel of
Designated Material Real Property (as determined by the
Borrower in good faith), provided that, in the case of
Indebtedness incurred in connection with a Securitization
Transaction, in no event shall the Borrower be required to
prepay Term Loans in an amount in excess of 100% of the Net
Cash Proceeds of any such Indebtedness incurred in connection
with such Securitization Transaction (it being understood that
upon the incurrence of any such Indebtedness secured by a Lien
on a parcel of Designated Material Real Property, such parcel
of Designated Material Real Property shall cease to be a
parcel of Designated Material Real Property for purposes of
this Agreement);
provided that, (a) to the extent that such amounts, together with any other
amounts (other than Available Net Cash Proceeds) which have not previously been
applied to prepay Term Loans in accordance with this subsection 4.1(c), do not
exceed $10,000,000, no prepayment shall be required under this subsection 4.1(c)
in respect thereof unless and until the aggregate of all such amounts which have
not then been applied to prepay Term Loans in accordance with this subsection
4.1(c) shall exceed $10,000,000, at which time the Borrower shall be required to
make the prepayment required by this subsection 4.1(c) in an amount equal to the
aggregate of all such amounts which have not previously been so applied, (b) so
long as no Default under Section 9(a) or Event of Default shall have then
occurred and be continuing or would result therefrom, if (x) the Net Cash
Proceeds of such Asset Sale or incurrence of Indebtedness are Available Net Cash
Proceeds and (y) the Borrower delivers a Reinvestment Notice to the
Administrative Agent within five Business Days after the date of consummation of
such Asset Sale or incurrence of Indebtedness resulting in such Available Net
Cash Proceeds, the Borrower may use or cause the appropriate Restricted
Subsidiary to use such Available Net Cash Proceeds to purchase, construct or
otherwise acquire Reinvestment Assets and, upon delivery of such Reinvestment
Notice, the Borrower shall not be required to prepay the Term Loans pursuant to
clause (i) or (ii) above to the extent of the Anticipated Reinvestment Amount
specified in such Reinvestment Notice and (c) the initial aggregate amount of
any such Indebtedness secured by a Lien on any parcel of Designated Material
Real Property shall be at least equal to the amount of the prepayment of Term
Loans required pursuant to this subsection in respect of such Indebtedness
(other than Indebtedness in connection with a Securitization Transaction) and
such Indebtedness shall not be due prior to the first anniversary of the
Revolving Credit Termination Date. Each prepayment pursuant to this subsection
shall be made on the fifth Business Day following receipt of the Net Cash
Proceeds requiring a prepayment pursuant to this subsection. Amounts prepaid
pursuant to this subsection 4.1(c) may not be reborrowed and shall be applied to
the remaining installments thereof in the scheduled order of maturity.
<PAGE> 56
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(d) Within five Business Days of the delivery of a
Reinvestment Notice as described in paragraph (c) above, the Borrower shall
either, at its option, (i) deposit the applicable Anticipated Reinvestment
Amount with the Collateral Agent in a Cash Collateral Account pursuant to
agreements in form and substance reasonably satisfactory to the Collateral
Agent, and any amounts needed to be expended prior to the Reinvestment
Prepayment Date applicable thereto in furtherance of the purchase, construction
or other acquisition of Reinvestment Assets shall be released from the Cash
Collateral Account to the Borrower or (ii) in the event the Available Revolving
Credit Commitments at such time exceed the applicable Anticipated Reinvestment
Amount, deliver a notice to the Administrative Agent to the effect that all or a
portion of the Available Revolving Credit Commitments equal to the Anticipated
Reinvestment Amount shall be reserved for borrowings of Revolving Loans to
finance the purchase, construction or other acquisition of Reinvestment Assets,
provided that, in the event that the Available Revolving Credit Commitments
reserved pursuant to this paragraph at any time are greater than the Available
Revolving Amount at such time, the Borrower shall deposit and maintain the
amount of such excess in a Cash Collateral Account pursuant to clause (i) above
during the period and to the extent such excess continues to exist (and the
amount of Available Revolving Credit Commitments reserved pursuant to this
paragraph shall be decreased by the amount so deposited and maintained). The
Borrower may, at any time after the delivery of any notice pursuant to clause
(ii) of the immediately preceding sentence but prior to the occurrence of the
relevant Reinvestment Repayment Date, (x) deliver a notice of borrowing pursuant
to subsection 3.2 the proceeds of which will be used to finance the purchase,
construction or other acquisition of Reinvestment Assets or make a prepayment
pursuant to subsection 4.1(e) (which notice shall specify the amount to be so
used and any remaining portion of the Available Revolving Credit Commitments
reserved pursuant to this subsection 4.1(d)) and, in connection with such
borrowing, a portion of the Available Revolving Credit Commitments reserved
pursuant to this paragraph equal to the amount of such borrowing shall not
thereafter be reserved pursuant to this paragraph or (y) deliver a notice to the
effect that amounts have been expended towards the purchase, construction or
acquisition of Reinvestment Assets without any borrowing hereunder (so long as
such purchase, construction or acquisition of Reinvestment Assets shall not be
used to satisfy any other obligation to purchase, construct or acquire
Reinvestment Assets pursuant to this subsection), upon delivery of which a
portion of the Available Revolving Credit Commitments reserved pursuant to this
paragraph equal to the amount so expended shall not thereafter be reserved
pursuant to this paragraph. In addition, upon any prepayment of Term Loans
pursuant to subsection 4.1(e), a portion of the Available Revolving Credit
Commitments reserved pursuant to this paragraph equal to the amount of such
prepayment shall, without duplication of clause (x) of the preceding sentence,
not thereafter be reserved pursuant to this paragraph. The Borrower acknowledges
that its right to borrow any portion of the Available Revolving Credit
Commitments reserved pursuant to this paragraph shall be suspended unless and
until such portion of the Available Revolving Credit Commitments are no longer
reserved pursuant to this paragraph.
(e) In addition to, but without duplicating any other
prepayment required pursuant to this subsection, the Borrower shall prepay the
Term Loans on each Reinvestment Prepayment Date in an amount equal to the
Reinvestment Prepayment Amount with respect to the applicable Reinvestment Event
(it being understood that any applicable amounts on deposit in the Cash
Collateral Account shall be applied for such purpose), provided that to the
extent any such Reinvestment Prepayment Amount, together with all other
Reinvestment Prepayment Amounts which have not previously been applied to prepay
Term Loans in accordance with this subsection 4.1(e) do not exceed $10,000,000,
no prepayment shall be required under this subsection 4.1(e) in respect thereof
unless and until the aggregate of all Reinvestment Prepayment Amounts which have
not been applied to prepay Term Loans in accordance with this subsection 4.1(e)
shall exceed $10,000,000, at which time the Borrower shall be required to make
the prepayment required by this subsection 4.1(e) in an amount equal to the
aggregate of all Reinvestment Prepayment Amounts which have not been so applied.
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4.2 Conversion and Continuation Options. (a) The Borrower may,
subject to paragraph (b) below, elect from time to time to convert Eurodollar
Loans to ABR Loans by giving the Administrative Agent irrevocable notice of such
election prior to 1:00 P.M., New York City time, one Business Day prior to the
date of conversion, which notice may be given by telephone (to be promptly
confirmed in writing, including by facsimile), provided that any such conversion
of Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. The Borrower may elect from time to time to convert ABR Loans
to Eurodollar Loans by giving the Administrative Agent irrevocable notice of
such election prior to 1:00 P.M., New York City time, three Business Days prior
to the date of conversion, which notice may be given by telephone (to be
promptly confirmed in writing, including by facsimile). Any such notice of
conversion to Eurodollar Loans shall specify the length of the initial Interest
Period or Interest Periods therefor. Upon receipt of any such notice the
Administrative Agent shall promptly notify each affected Lender thereof. All or
any part of outstanding Eurodollar Loans and ABR Loans may be converted as
provided herein, provided that (i) no ABR Loan may be converted into a
Eurodollar Loan when any Event of Default has occurred and is continuing and the
Administrative Agent has notified the Borrower that it has determined that such
a conversion is not appropriate and (ii) no ABR Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Revolving Credit
Termination Date (in the case of conversions of Revolving Loans) or prior to the
Term Loan Maturity Date (in the case of conversions of Term Loans).
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1.1,
of the length of the next Interest Period to be applicable to such Eurodollar
Loans, which notice may be given by telephone (to be promptly confirmed in
writing, including by facsimile), provided that no Eurodollar Loan may be
continued as such (i) when any Event of Default has occurred and is continuing
and the Administrative Agent has notified the Borrower that it has determined
that such a continuation is not appropriate or (ii) after the date that is one
month prior to the Revolving Credit Termination Date (in the case of
continuations of Revolving Loans) or prior to the Term Loan Maturity Date (in
the case of continuations of Term Loans), and provided, further, that if the
Borrower shall fail to give such notice or if such continuation is not permitted
such Eurodollar Loans shall be automatically converted to ABR Loans on the last
day of such then expiring Interest Period. Upon receipt of any notice pursuant
to this subsection 4.2(b), the Administrative Agent shall notify each affected
Lender thereof.
4.3 Minimum Amounts and Maximum Number of Tranches. All
borrowings, conversions and continuations of Eurodollar Loans hereunder and all
selections of Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, the aggregate
principal amount of Eurodollar Loans comprising each Tranche shall be equal to
$10,000,000 or a whole multiple of $1,000,000 in excess thereof. In no event
shall there be more than 25 Tranches outstanding at any time.
4.4 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
Interest Period plus (i) in the case of Eurodollar Loans which are Revolving
Loans, the Revolving Credit Applicable Margin or (ii) in the case of Eurodollar
Loans which are Term Loans, the Term Loan Applicable Margin.
<PAGE> 58
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(b) Each ABR Loan shall bear interest at a rate per annum
equal to the ABR plus (i) in the case of ABR Loans which are Revolving Loans,
the Revolving Credit Applicable Margin or (ii) in the case of ABR Loans which
are Term Loans, the Term Loan Applicable Margin.
(c) Each Swing Line Loan shall bear interest at a rate per
annum equal to (i) the ABR plus the Revolving Credit Applicable Margin for ABR
Loans minus (ii) the Applicable Commitment Fee Rate then in effect.
(d) If all or a portion of any principal of any Loan shall not
be paid when due (whether at the stated maturity, by acceleration or otherwise),
the principal of such Loan shall bear interest at a rate per annum which is the
rate that would otherwise be applicable thereto pursuant to this Agreement plus
2% from the date of such non-payment until such overdue principal is paid in
full (as well after as before judgment). If all or a portion of (i) any interest
payable on any Loan, (ii) any commitment fee or (iii) any other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), any such overdue interest, commitment fee or other
amount shall bear interest at a rate per annum which is the rate described in
paragraph (b)(i) of this subsection plus 2%, in each case from the date of such
non-payment until such overdue interest, commitment fee or other amount is paid
in full (as well after as before judgment).
(e) Interest shall be payable in arrears on each Interest
Payment Date, provided that (i) interest accruing pursuant to subsection 4.4(d)
shall be payable from time to time on demand, (ii) interest on the Term Loans
shall also be payable on the Term Loan Maturity Date (or such earlier date on
which the Term Loans become due and payable pursuant to Section 9) and (iii)
interest on the Revolving Loans shall also be due and payable on the Revolving
Credit Termination Date (or such earlier date on which the Revolving Loans
become due and payable pursuant to Section 9).
4.5 Computation of Interest and Fees. (a) Commitment fees
and, whenever it is calculated on the basis of the Prime Rate, interest shall
be calculated on the basis of a 365- (or 366-, as the case may be) day year for
the actual days elapsed; and, otherwise, interest and fees and commissions in
respect of Letters of Credit shall be calculated on the basis of a 360-day year
for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the affected Lenders of each determination
of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from
a change in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the affected Lenders of the effective date and the amount of each
such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
presumed correct in the absence of manifest error.
(c) If any Reference Lender shall for any reason no longer
have a Commitment or any Loans, such Reference Lender shall thereupon cease to
be a Reference Lender, and if, as a result, there shall only be one Reference
Lender remaining, the Administrative Agent (after consultation with the Lenders
and with the consent of the Borrower (which shall not be unreasonably withheld))
shall, by notice to the Borrower and the Lenders, designate another Lender that
is a commercial bank as a Reference Lender so that there shall at all times be
at least two Reference Lenders.
(d) Each Reference Lender shall use its best efforts to
furnish quotations of rates to the Administrative Agent as contemplated hereby.
If any of the Reference Lenders shall be unable or shall otherwise fail to
supply such rates to the Administrative Agent upon its request, the rate of
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interest shall, subject to the provisions of this subsection 4.5, be determined
on the basis of the quotations of the remaining Reference Lenders or Reference
Lender.
4.6 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from
any Lender that the making or continuation of any Eurodollar Loan has
become impracticable as a result of a contingency occurring after the
date hereof which materially and adversely affects the London interbank
market,
the Administrative Agent shall give facsimile or telephonic notice thereof to
the Borrower and the affected Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans requested to be made on the first day
of such Interest Period shall be made as ABR Loans, (y) any ABR Loans that were
to have been converted on the first day of such Interest Period to Eurodollar
Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans
which the Borrower has requested to continue as such pursuant to subsection
4.2(b) shall be converted, on the first day of such Interest Period, to ABR
Loans, provided that, in the case of clause (b) above, only the Eurodollar Loan
of a Lender which delivers a notice pursuant to such clause shall be subject to
this sentence and the following sentence. Until such notice has been withdrawn
by the Administrative Agent, no further Eurodollar Loans shall be made or
continued as such, nor shall the Borrower have the right to convert ABR Loans to
Eurodollar Loans.
4.7 Pro Rata Treatment and Payments. (a) Except as otherwise
provided in subsections 3.6 through 3.16, all payments (including prepayments)
to be made by the Borrower hereunder, whether on account of principal, interest,
fees or otherwise, shall be made without set off or counterclaim and shall be
made prior to 1:00 P.M., New York City time, on the due date thereof to the
Administrative Agent, for the account of the Revolving Credit Lenders or the
Term Loan Lenders, as the case may be, at the Administrative Agent's office
specified in or pursuant to subsection 11.2 (except as otherwise provided
herein) in Dollars and in immediately available funds. The Administrative Agent
shall distribute such payments to the Lenders entitled to receive the same
promptly upon receipt in like funds as received. If any payment hereunder (other
than payments on Eurodollar Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. If any payment on a
Eurodollar Loan becomes due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day (and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension) unless the result of such extension
would be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its portion of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent
<PAGE> 60
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may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this subsection shall be conclusive in the
absence of manifest error. If such Lender's portion of such borrowing is not
made available to the Administrative Agent by such Lender within three Business
Days of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
ABR Loans hereunder, on demand, from the Borrower.
(c) Each borrowing by the Borrower of Term Loans and Revolving
Loans shall be made ratably from the Term Loan Lenders and Revolving Credit
Lenders in accordance with their respective Term Loan Commitment Percentages and
Revolving Credit Commitment Percentages. Any reduction of the Revolving Credit
Commitments shall be made ratably among the Lenders, in accordance with their
respective Revolving Credit Commitment Percentages. Each payment (including each
prepayment) by the Borrower on account of principal of and interest on the
Revolving Loans shall be made pro rata according to the respective outstanding
principal amounts of the Revolving Loans then held by the Revolving Credit
Lenders. Each payment (including each prepayment) by the Borrower on account of
principal of and interest on the Term Loans shall be made pro rata according to
the respective outstanding principal amounts of the Term Loans then held by the
Term Loan Lenders.
4.8 Illegality. Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, such Lender
shall give prompt notice thereof to the Borrower and the Administrative Agent
and thereafter (a) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar
Loans shall forthwith be suspended during the period of illegality and (b) such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 4.11.
4.9 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof shall increase the cost to such Lender, by an
amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or reduce any amount receivable hereunder in respect thereof
including any such cost or reduced amount receivable resulting from (i) any tax
of any kind whatsoever with respect to this Agreement, any Note, any Eurodollar
Loan, any Letter of Credit issued or participated in by it or any Application,
or change the basis of taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by subsection 4.10 and changes in the
rate of tax on the overall gross or net income of such Lender) or (ii) any
reserve, special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other
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acquisition of funds by, any office of such Lender which is not otherwise
included in the determination of the Eurodollar Rate hereunder, then, in any
such case, within 15 days after demand therefor (accompanied by the certificate
contemplated by subsection 4.9(c) with respect thereto) the Borrower shall pay
such Lender such additional amount or amounts as will compensate such Lender for
such increased cost or reduced amount receivable,
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time,
within 15 days after demand therefor (accompanied by the certificate
contemplated by subsection 4.9(c) with respect thereto), the Borrower shall pay
to such Lender such additional amount or amounts as will compensate such Lender
for such reduction.
(c) If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection 4.9, it shall promptly notify the Borrower
(with a copy to the Administrative Agent) of the event by reason of which it has
become so entitled, provided that no Lender shall be entitled to claim any such
additional amount (i) with respect to the period which is more than 180 days
prior to the delivery of such notice or (ii) if such Lender shall not seek as a
result of such event payment of any similar amounts from at least one other
borrower to whom it has extended credit. A certificate as to any additional
amounts payable pursuant to this subsection 4.9 submitted by such Lender to the
Borrower (with a copy to the Administrative Agent) setting forth in reasonable
detail the calculation of such amounts and the basis therefor shall be
conclusive in the absence of manifest error. The agreements in this subsection
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
4.10 Indemnification for Taxes. (a) All payments made by the
Borrower under this Agreement and any Notes shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding net income taxes and franchise
and excise taxes (imposed in lieu of net income taxes) imposed on the
Administrative Agent or any Lender as a result of a present or former connection
between the Administrative Agent or such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
the Administrative Agent or such Lender having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement or any
Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder or
under any Note, the amounts so payable to the Administrative Agent or such
Lender shall be increased to the extent necessary to yield to the Administrative
Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this subsection 4.10. Whenever
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any Non-Excluded Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) in the case of a Lender or a Transferee that is a
"bank" under Section 881(c)(3)(A) of the Tax Code:
(A) on or before the date it becomes a party to this
Agreement (or, in the case of a Participant, on or before the
date such Participant becomes a Participant hereunder),
deliver to the Borrower and the Administrative Agent (I) two
duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as
the case may be, and (II) an Internal Revenue Service Form W-8
or W-9, or successor applicable form, as the case may be;
(B) deliver to the Borrower and the Administrative
Agent two further copies of any such form or certification on
or before the date that any such form or certification expires
or becomes obsolete and after the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Borrower; and
(C) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Borrower or the Administrative Agent; and
(ii) in the case of a Lender or a Transferee that is not
a "bank" under Section 881(c)(3)(A) of the Tax Code:
(A) on or before the date it becomes a party to this
Agreement (or, in the case of a Participant, on or before the
date such Participant becomes a Participant hereunder),
deliver to the Borrower and the Administrative Agent (I) a
statement under penalties of perjury that such Lender or
Transferee (x) is not a "bank" under Section 881(c)(3)(A) of
the Tax Code, is not subject to regulatory or other legal
requirements as a bank in any jurisdiction, and has not been
treated as a bank for purposes of any tax, securities law or
other filing or submission made to any Governmental Authority,
any application made to a rating agency or qualification for
any exemption from tax, securities law or other legal
requirements, (y) is not a 10-percent shareholder within the
meaning of Section 881(c)(3)(B) of the Tax Code and (z) is not
a controlled foreign corporation receiving interest from a
related person within the meaning of Section 881(c)(3)(C) of
the Tax Code and (II) a properly completed and duly executed
Internal Revenue Service Form W-8 or applicable successor
form;
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(B) deliver to the Borrower and the Administrative
Agent two further properly completed and duly executed copies
of such Form W-8, or any successor applicable form, on or
before the date that any such Form W-8 expires or becomes
obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to
the Borrower or upon the request of the Borrower; and
(C) obtain such extensions of time for filing and
completing such forms or certifications as may be reasonably
requested by the Borrower or the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the
Administrative Agent. Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall certify (i) in the case of a
Form 1001 or 4224, that it is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes and
(ii) in the case of a Form W-8 or W-9 provided pursuant to subsection
4.10(b)(i)(A)(II), that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Participant
pursuant to subsection 11.6 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements to the Lender
from which the related participation shall have been purchased.
4.11 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or reasonable expense which such
Lender may sustain or incur as a consequence of (a) default by the Borrower in
making a borrowing of, conversion into or continuation of Eurodollar Loans,
after the Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment of a Eurodollar Loan, after the Borrower has given a notice thereof
in accordance with the provisions of this Agreement or (c) the making of a
prepayment or conversion of Eurodollar Loans on a day which is not the last day
of an Interest Period with respect thereto, which loss shall be equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
amount so prepaid or converted, or not so borrowed, converted or continued, for
the period from the date of such prepayment or conversion or of such failure to
borrow, convert or continue to the last day of such Interest Period (or proposed
Interest Period), respectively, in each case at the applicable Eurodollar Rate
(exclusive of any Revolving Credit Applicable Margin or Term Loan Applicable
Margin) for such Eurodollar Loans provided for herein over (ii) the amount of
interest (as reasonably determined by such Lender) which would have accrued to
such Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank eurodollar market (it being
understood that the Borrower shall not be required to indemnify any Lender for
lost profits). A certificate as to any amounts payable pursuant to this
subsection 4.11 submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.
4.12 Change of Lending Office. Each Lender agrees that if it
makes any demand for payment under subsection 4.9 or 4.10(a), or if any adoption
or change of the type described in subsection 4.8 shall occur with respect to
it, it will use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions and so long as such efforts would not be
disadvantageous
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to it, as determined in its sole discretion) to designate a different lending
office if the making of such a designation would reduce or obviate the need for
the Borrower to make payments under subsection 4.9 or 4.10(a), or would
eliminate or reduce the effect of any adoption or change described in subsection
4.8.
4.13 Evidence of Debt. (a) Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing
indebtedness of the Borrower to such Lender resulting from the Loans of such
Lender, including the amounts of principal and interest payable and paid to such
Lender from time to time under this Agreement.
(b) The Administrative Agent shall maintain the Register
pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in
which shall be recorded (i) the amount of each Loan made hereunder, the Type
thereof and each Interest Period (if any) applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(c) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 4.13(a) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans in
accordance with the terms of this Agreement.
(d) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and deliver to
such Lender a promissory note of the Borrower evidencing the Revolving Loans of
such Lender, substantially in the form of Exhibit D (a "Revolving Credit Note"),
payable to the order of such Lender and in a principal amount equal to the
Revolving Credit Commitment of such Lender on the date of issuance of such
Revolving Credit Note. Each Lender is hereby authorized to record the date, Type
and amount of each Revolving Loan of such Lender, the date and amount of each
payment or prepayment of principal thereof, each continuation of all or a
portion thereof as the same Type, each conversion of all or a portion thereof to
another Type and, in the case of Eurodollar Loans, the length of each Interest
Period and Eurodollar Rate with respect thereto, on the schedule (or any
continuation of the schedule) annexed to and constituting a part of its
Revolving Credit Note, as the case may be, and any such recordation shall, to
the extent permitted by applicable law, constitute prima facie evidence of the
accuracy of the information so recorded, provided that the failure to make any
such recordation (or any error therein) shall not affect the obligation of the
Borrower to repay (with applicable interest) the Revolving Loans in accordance
with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Term Loan Lender, the Borrower will execute and
deliver to such Term Loan Lender a promissory note of the Borrower evidencing
the Term Loan of such Term Loan Lender, substantially in the form of Exhibit E
(a "Term Note"), payable to the order of such Term Loan Lender and in a
principal amount equal to, the outstanding Term Loan of such Term Loan Lender.
Each Term Loan Lender is hereby authorized to record the date, Type and amount
of the Term Loan of such Term Loan Lender, the date and amount of each payment
or prepayment of principal thereof, each continuation of all or a portion
thereof as the same Type, each conversion of all or a portion thereof to another
Type and, in the case of Eurodollar Loans, the length of each Interest Period
and Eurodollar Rate with respect
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thereto, on the schedule (or any continuation of the schedule) annexed to and
constituting a part of its Term Note, as the case may be, and any such
recordation shall, to the extent permitted by applicable law, constitute prima
facie evidence of the accuracy of the information so recorded, provided that the
failure to make any such recordation (or any error therein) shall not affect the
obligation of the Borrower to repay (with applicable interest) the Term Loans in
accordance with the terms of this Agreement.
(f) The Borrower agrees that, upon the request to the
Administrative Agent by any Swing Line Lender, the Borrower will execute and
deliver to such Swing Line Lender a promissory note of the Borrower evidencing
the Swing Line Loans of such Swing Line Lender, substantially in the form of
Exhibit F (a "Swing Line Note"), payable to the order of such Swing Line Lender
and in a principal amount equal to the Swing Line Commitment. Each Swing Line
Lender is hereby authorized to record the date and amount of each Swing Line
Loan made by it and the date and amount of each payment or prepayment of
principal thereof on the schedule (or any continuation of the schedule) annexed
to and constituting a part of its Swing Line Note, as the case may be, and any
such recordation shall, to the extent permitted by applicable law, constitute
prima facie evidence of the accuracy of the information so recorded, provided
that the failure to make any such recordation (or any error therein) shall not
affect the obligation of the Borrower to repay (with applicable interest) the
Swing Line Loans in accordance with the terms of this Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter
into this Agreement and to make the Extensions of Credit, the Borrower hereby
represents and warrants to the Administrative Agent and each Lender that:
5.1 Financial Condition. The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at December 29, 1996 and the
related consolidated statements of income and retained earnings and cash flows
for the Fiscal Year ended on such date, reported on by Deloitte & Touche, copies
of which have heretofore been furnished to each Lender, are complete and correct
in all material respects and present fairly the consolidated financial condition
of the Borrower and its Consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows for
the Fiscal Year then ended. The unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at June 29, 1997 and the related
unaudited consolidated statements of, financial condition, income and retained
earnings and cash flows for the six-month period ended on such date, certified
by a Responsible Officer, copies of which have heretofore been furnished to each
Lender, are complete and correct and present fairly the consolidated financial
condition of the Borrower and its consolidated Subsidiaries as at such date, and
the consolidated results of their operations and their consolidated cash flows
for the six-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein). Except as
set forth on Schedule 5.1, neither the Borrower nor any of its Consolidated
Subsidiaries had, at the date of the most recent balance sheet referred to
above, any material Guarantee Obligation not permitted under subsection 8.2,
material contingent liability or liability for taxes, or any material long-term
lease or unusual forward or long-term commitment, including, without limitation,
any interest rate or foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto. Except as set
forth on Schedule 5.1, during the period from December 29, 1996 to and including
the date hereof,
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other than pursuant to the 1997 Restructuring Program, there has been no sale,
transfer or other disposition by the Borrower or any of its Consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the consolidated financial condition
of the Borrower and its Consolidated Subsidiaries at December 29, 1996.
5.2 No Change. Since December 29, 1996, there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect, except to the extent the 1997 Restructuring Program
might be deemed to have caused a Material Adverse Effect.
5.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Restricted Subsidiaries (a) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, (b)
has the power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law except, in each case, where the failure to be so organized, existing, in
good standing or qualified, or the failure to have such power or authority or to
so comply, could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
5.4 Corporate Power; Authorization; Enforceable Obligations.
Each of the Borrower and its Restricted Subsidiaries has the power and
authority, and the legal right, to make, deliver and perform the Loan Documents
to which it is a party and (in the case of the Borrower) to borrow and obtain
the other Extensions of Credit hereunder and has taken all necessary corporate
or other action to authorize the Extensions of Credit on the terms and
conditions of this Agreement and any Notes and to authorize the execution,
delivery and performance of the Loan Documents to which it is a party. No
consent or authorization of, filing with, notice to, or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Extensions of Credit hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents to which
the Borrower or any of its Restricted Subsidiaries is a party except as may be
necessary to perfect the Liens created pursuant to the Security Documents,
except as described on Schedule 5.4 and except those which have been obtained,
made or waived. This Agreement has been, and each other Loan Document will be,
duly executed and delivered on behalf of the Borrower and each of its Restricted
Subsidiaries that is a party thereto. This Agreement constitutes, and each other
Loan Document when executed and delivered will constitute, a legal, valid and
binding obligation of the Borrower and each of its Restricted Subsidiaries that
is a party thereto enforceable against the Borrower and each such Restricted
Subsidiary in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
5.5 No Legal Bar. The execution, delivery and performance of
the Loan Documents to which the Borrower or any of its Restricted Subsidiaries
is a party, the Extensions of Credit hereunder and the use of the proceeds
thereof will not violate any Requirement of Law or Contractual Obligation of the
Borrower or of any of its Restricted Subsidiaries and will not result in, or
require, the creation or imposition of any Lien on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation (other than pursuant to the Loan Documents), except to
the extent that any such violations (individually or in the aggregate) could not
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reasonably be expected to have a Material Adverse Effect or that any such Liens
would be permitted under subsection 8.3.
5.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of its Restricted Subsidiaries or against any of its or their respective
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby or (b) which could reasonably be
expected to have a Material Adverse Effect.
5.7 No Default. Neither the Borrower nor any of its Restricted
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
5.8 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the Borrower or any of its Restricted Subsidiaries
could reasonably be expected to have a Material Adverse Effect.
5.9 Taxes. Each of the Borrower and its Restricted
Subsidiaries has filed or caused to be filed all tax returns which, to the
knowledge of the Borrower, are required to be filed and has paid all taxes shown
to be due and payable on said returns or on any assessments made against it or
any of its property (including, without limitation, any Material Real Property)
and all other taxes, fees or other charges imposed on it or any of its property
by any Governmental Authority (other than any such tax returns, taxes, fees or
other charges (i) the amount or validity of which are then being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Borrower or its
Subsidiaries, as the case may be, or (ii) which, if not paid or filed, could not
reasonably be expected to have a Material Adverse Effect); no tax Lien has been
filed, and, to the knowledge of the Borrower, no claim is being asserted, with
respect to any such tax, fee or other charge (other than with respect to any
such tax, fee or other charge the amount or validity of which is then being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the Borrower
or its Subsidiaries, as the case may be) which could reasonably be expected to
have a Material Adverse Effect.
5.10 Federal Regulations. No part of the proceeds of any
Extension of Credit will be used in violation of Regulation G or Regulation U of
the Board of Governors as now and from time to time hereafter in effect and in
no event shall "margin stock" constitute 25% or more of the assets of the
Borrower and its Restricted Subsidiaries that are subject to the restrictions
contained in Section 8. If requested by any Lender or the Administrative Agent,
the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-1 or FR Form U-1 referred to in said Regulation G or Regulation U, as the case
may be.
5.11 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Tax Code or
Section 302 of ERISA) which could reasonably be expected to have a Material
Adverse Effect has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan. Each
Plan has complied in all material respects with the applicable provisions of
ERISA and the Tax Code, except where the failure to so comply could not
reasonably be expected to have a Material Adverse
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Effect. No termination of a Single Employer Plan has occurred, except where such
a termination could not reasonably be expected to have a Material Adverse
Effect, and no Lien in favor of the PBGC or a Plan has arisen, during such
five-year period. The present value of all accrued benefits under each Single
Employer Plan (based on those assumptions used to fund such Plan) did not, as of
the last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits, except to the extent any such excess (individually or in
the aggregate) could not reasonably be expected to have a Material Adverse
Effect. Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, except where such
withdrawal could not reasonably be expected to have a Material Adverse Effect,
and neither the Borrower nor any Commonly Controlled Entity would become subject
to any liability under ERISA if the Borrower or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made, except where such liability could not reasonably be
expected to have a Material Adverse Effect. No such Multiemployer Plan is in
Reorganization or Insolvency.
5.12 Investment Company Act; Other Regulations. The Borrower
is not an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
To the best knowledge of the Borrower, the Borrower is not subject to regulation
under any federal or state statute or regulation (other than Regulation X of the
Board of Governors) which limits its ability to incur Indebtedness.
5.13 Subsidiaries. Schedule 5.13 sets forth all the
Subsidiaries of the Borrower at the date hereof.
5.14 Environmental Matters. To the knowledge of the Borrower,
except as set forth on Schedule 5.14:
(a) The Mortgaged Properties do not contain any Materials of
Environmental Concern in amounts or concentrations or under such
conditions which (i) constitute a violation of, or (ii) could
reasonably be expected to give rise to liability under, any
Environmental Law, except in either case insofar as such
violation or liability, or any aggregation thereof, could not
reasonably be expected to have a Material Adverse Effect.
(b) The Mortgaged Properties and all operations at the
Mortgaged Properties are in compliance, and have within the
periods covered by the applicable statute of limitations been in
compliance, in all material respects with all applicable
Environmental Laws, and there is no contamination at, under or
about the Mortgaged Properties or violation of any Environmental
Law with respect to the Mortgaged Properties or the business
operated by the Borrower or any of its Restricted Subsidiaries at
the Mortgaged Properties (the "Business"), except for any such
non-compliance, contamination or violation (or any aggregation
thereof) which could not reasonably be expected to have a
Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with
regard to any of the Mortgaged Properties or the Business, nor
does the Borrower have knowledge or reason to believe that any
such notice will be received or is being threatened, except
insofar as such notice or threatened notice, or any aggregation
thereof, does not involve a matter or matters that could
reasonably be expected to have a Material Adverse Effect.
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(d) Materials of Environmental Concern have not been
transported or disposed of from the Mortgaged Properties in
violation of, or in a manner or to a location which could
reasonably be expected to give rise to liability under, any
Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at, on or
under any of the Mortgaged Properties in violation of, or in a
manner that could reasonably be expected to give rise to
liability under, any applicable Environmental Law except insofar
as any such violation or liability referred to in this paragraph,
or any aggregation thereof, could not reasonably be expected to
have a Material Adverse Effect.
(e) No judicial proceeding or governmental or administrative
action is pending or threatened under any Environmental Law to
which the Borrower or any Restricted Subsidiary is or could
reasonably be expected to be named as a party with respect to the
Mortgaged Properties or the Business, nor are there any consent
decrees or other decrees, consent orders, administrative orders
or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the
Mortgaged Properties or the Business except insofar as such
proceeding, action, decree, order or other requirement, or any
aggregation thereof, could not reasonably be expected to have a
Material Adverse Effect.
(f) There has been no release or threat of release of
Materials of Environmental Concern at or from the Mortgaged
Properties, or arising from or related to the operations of the
Borrower or any Restricted Subsidiary in connection with the
Mortgaged Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that could
reasonably give rise to liability under Environmental Laws except
insofar as any such violation or liability referred to in this
paragraph, or any aggregation thereof, could not reasonably be
expected to have a Material Adverse Effect.
(g) Each of the representations and warranties set forth in
subsections 5.14(a) through (f) is true and correct with respect
to each parcel of real property owned or operated by the Borrower
or any of its Restricted Subsidiaries (other than the Mortgaged
Properties) except to the extent that the facts and circumstances
giving rise to any such failure to be so true and correct could
not reasonably be expected to have a Material Adverse Effect.
5.15 The Security Documents. (a) When executed and delivered,
the provisions of the Security Agreements will be effective to create in favor
of the Collateral Agent a legal and valid security interest in all right, title
and interest of the Borrower or any Subsidiary Guarantor party thereto in the
collateral described therein (subject to Section 10 thereof), and when the
financing statements referred to on Schedule 5.15 and subsection 7.11(a)(ii)
have been filed as specified in Schedule 5.15 and subsection 7.11(a)(ii), the
Collateral Agent shall have a fully perfected security interest in all right,
title and interest of the Borrower or such Subsidiary Guarantor, as the case may
be, in all "accounts", "chattel paper", "inventory" or "general intangibles"
(each as defined in the applicable Uniform Commercial Code) described in such
financing statements, all other UCC Filing Collateral (other than UCC Local
Filing Collateral) described in such financing statements and, to the best
knowledge of the Borrower, all UCC Local Filing Collateral described in such
financing statements, in each case superior (to the extent that priority can be
obtained by filing Uniform Commercial Code financing statements) in right to any
Liens of any third person against such collateral or interests therein, subject
only to Liens permitted under subsection 8.3;
(b) When executed and delivered, the provisions of the Pledge
Agreement, together with possession by the Collateral Agent (or any agent acting
on its behalf) of the Pledged Securities described therein (or, in the case of
Pledged Securities constituting "securities" (as defined in the
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applicable Uniform Commercial Code), together with the "transfer" to the
Collateral Agent (or any agent acting on its behalf) of such Pledged Securities
in accordance with the applicable Uniform Commercial Code) (or any other
appropriate method for the perfection of the security interest in such Pledged
Securities in accordance with the applicable Uniform Commercial Code), will be
effective to create in favor of the Collateral Agent a legal and valid security
interest in all right, title and interest of the Borrower or any Subsidiary
Guarantor party thereto, as the case may be, in the Pledged Securities (subject
to Section 14 of the Pledge Agreement). Thereafter, the Administrative Agent
will have a fully perfected security interest in the Pledged Stock and all other
Pledged Securities described in the Pledge Agreement which are then in the
possession of the Collateral Agent (or any agent acting on its behalf) (or, in
the case of Pledged Securities constituting "securities" (as defined in the
applicable Uniform Commercial Code), which have been "transferred" to the
Collateral Agent (or any agent acting on its behalf) in accordance with the
applicable Uniform Commercial Code (or the security interest in which has
otherwise been perfected in accordance with the applicable Uniform Commercial
Code)), which security interest is (i) in the case of Pledged Stock, superior in
right to any Liens of any third person against such collateral or interests
therein, subject to Section 14 of the Pledge Agreement and to Liens permitted
under subsection 8.3(a) and (ii) in the case of all other Pledged Securities,
superior (to the extent that priority can be obtained by possession or
"transfer" (or any other appropriate method for the perfection in accordance
with the applicable Uniform Commercial Code) of such other Pledged Securities)
in right to any Liens of any third person against such collateral or interests
therein, subject to Section 14 of the Pledge Agreement and to Liens permitted by
subsection 8.3(a); and
(c) When executed and delivered, each Mortgage will be
effective to create in favor of the Collateral Agent, a legal, valid and
enforceable Lien on all right, title and interest of the Borrower or any
Subsidiary Guarantor party thereto, as the case may be, in the Mortgaged
Property thereunder. When each Mortgage and the related fixture filings are duly
recorded in the appropriate office or offices and the mortgage recording fees
and taxes in respect thereof are paid and compliance is otherwise had with the
formal requirements of state law applicable to the recording of real estate
mortgages generally, such Mortgage shall constitute a fully perfected Lien on
and security interest in that portion of the Mortgaged Property constituting
real property or fixtures (prior to all mortgages on the Mortgaged Property
other than those which have been assigned to the Collateral Agent and those in
existence on the Effective Date), subject only to the encumbrances and
exceptions to title expressly set forth or referred to in such Mortgage, and to
Liens permitted by subsection 8.3;
subject, in the case of clauses (a) through (c) above, to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and to principles of equity whether considered in
a proceeding in equity or at law.
5.16 Ownership of Property; Liens. Each of the Borrower and
each Restricted Subsidiary has good title in fee simple to, or valid ground
leasehold interests in, their respective Material Real Properties and has good
title in fee simple to their other owned real property and valid ownership
interests in their owned personal property, in each case that is material to the
operation of their respective businesses, subject to defects in title and
leasehold and other interests which are not material to the business, operations
and financial condition of the Borrower and its Restricted Subsidiaries taken as
a whole and other than those items referred to in the applicable Mortgages or in
the schedules to the applicable Mortgages, and none of such property is subject
to any Lien other than Liens permitted under subsection 8.3.
5.17 Intellectual Property. The Borrower and each of its
Restricted Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and
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processes necessary for the conduct of its business as currently conducted
except for those the failure to own or license which could not reasonably be
expected to have a Material Adverse Effect (the "Intellectual Property"). Except
as set forth on Schedule 5.17, no claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, which could
reasonably be expected to have a Material Adverse Effect, nor does the Borrower
know of any valid basis for any such claim. Except as set forth on Schedule
5.17, to the Borrower's knowledge, the use of such Intellectual Property by the
Borrower and its Restricted Subsidiaries does not infringe on the rights of any
Person, except for such claims and infringements that, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
5.18 Pledged Stock. On the Effective Date, the shares of
Capital Stock listed on Schedule A to the Pledge Agreement will constitute all
the issued and outstanding shares of Capital Stock of the issuers thereof listed
on said Schedule that are owned by the Borrower or the Subsidiary Guarantors
party to the Pledge Agreement; all such shares have been duly and validly issued
and are fully paid and nonassessable; the relevant Pledgor of said shares is the
record and beneficial owner of said shares; and said shares are free of any
Liens or options in favor of, or claims of, any other Person, except the Lien of
the Pledge Agreement (subject to Section 14 thereof) and Liens permitted under
subsection 8.3(a).
5.19 Real Estate Matters. The real property described on
Schedule 5.19 constitutes all of the Material Real Property of the Borrower or
any Subsidiary Guarantor on the date hereof.
5.20 Continuing Letters of Credit. Schedule 5.20 is a true and
complete list, by reference to the aggregate face amounts of letters of credit
issued by the Persons listed thereon that are also Lenders (but which are not
designated as Issuing Banks pursuant to clause (a) or the last sentence of the
definition of Issuing Bank) of letters of credit issued by such Persons under
the Existing Credit Agreement that are outstanding as of the dates set forth in
such Schedule.
5.21 Purpose of Loans; Use of Proceeds. The proceeds of the
Initial Term Loans shall be used to purchase the Senior Notes pursuant to the
Senior Notes Tender Offer, to pay related fees and expenses, to refinance loans
outstanding under the Existing Credit Agreement, to finance capital expenditures
and for other general corporate purposes of the Borrower and its Subsidiaries.
The proceeds of the Refinancing Term Loans shall be used to refinance the
Initial Term Loans. The proceeds of the Revolving Loans and Swing Line Loans
shall be used to refinance loans outstanding under the Existing Credit
Agreement, to finance capital expenditures and for other general corporate
purposes of the Borrower and its Subsidiaries.
5.22 Accuracy of Information. All statements and other
information (other than statements and information constituting projections)
contained in any written documents or other materials provided to the
Administrative Agent and the Lenders by the Borrower, including all such
statements and other information contained in the Confidential Information
Memorandum dated August 1997 (as supplemented through the date hereof, the
"Information Memorandum"), are, when taken as a whole, correct in all material
respects and do not contain any untrue statements of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not materially misleading in light of the circumstances under which such
statements were made. All statements and other information constituting
projections which are contained in any written documents or other materials
provided to the Administrative Agent and the Lenders by the Borrower, including
the Information Memorandum, were prepared based on good faith estimates and
assumptions of the Borrower believed to be reasonable at the time such
projections were prepared.
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5.23 Depositary Accounts. Schedule 5.23 sets forth a true and
complete list of all bank accounts maintained by the Borrower and its Restricted
Subsidiaries as of the date hereof.
5.24 Senior Indebtedness. All Secured Obligations owing by the
Borrower under the Loan Documents constitute "Senior Indebtedness" under and as
defined in the Subordinated Debt Indenture and under any Indenture with respect
to Subordinated Debt the proceeds of which are used to refinance the
Subordinated Debentures. No Indebtedness (other than the Secured Obligations
owing by the Borrower under the Loan Documents) has been designated as
"Designated Senior Debt" under the Subordinated Debt Indenture.
SECTION 6. CONDITIONS
6.1 Conditions to Effectiveness. This Agreement shall become
effective upon the satisfaction or waiver of the following conditions (except
that subsection 11.21(b) shall become effective upon satisfaction of the
condition set forth in subsection 6.1(q)):
(a) Execution of Loan Documents and Addenda. The
Administrative Agent shall have received (i) this Agreement,
executed and delivered by a duly authorized officer of the
Borrower, with a counterpart for the Administrative Agent and
each Lender, (ii) an executed Addendum (or a copy thereof by
facsimile transmission) from each Person listed on Schedule
1.1(a), provided, that, notwithstanding the foregoing, in the
event that an Addendum has not been duly executed and delivered
by each Person listed on Schedule 1.1(a) on the date (which shall
be no earlier than the date hereof) on which this Agreement shall
have been executed and delivered by each of the Borrower and the
Administrative Agent, the condition set forth in this subsection
6.1(a)(ii) shall, subject to satisfaction of the other conditions
precedent set forth in this subsection 6.1, nevertheless be
satisfied on such date with respect to those Persons which have
executed and delivered an Addendum on or before such date if on
such date the Borrower and the Administrative Agent shall have
designated one or more banks, financial institutions or other
entities ("Designated Lenders") to assume, in the aggregate, all
of the Commitments which would have been held by the Persons
listed on Schedule 1.1(a) (the "Non-Executing Persons") which
have not so executed an Addendum (subject to each such Designated
Lender's prior written consent in its sole discretion and its
execution of an Addendum) (Schedule 1.1(a) shall automatically be
deemed to be amended to reflect the respective Commitments of the
Designated Lenders and the omission of the Non-Executing Persons
as Lenders hereunder), (iii) each of the Security Documents, each
executed and delivered by a duly authorized officer of each Loan
Party that is a party thereto, with a copy for each Lender, and
(iv) the Subsidiaries Guarantee, executed and delivered by a duly
authorized officer of each Subsidiary Guarantor that is a party
thereto, with a copy for each Lender.
(b) Senior Notes Tender Offer. The Agents shall have
received evidence in form and substance satisfactory to them that
the amendments to the Senior Notes Indenture described in the
Offer to Purchase shall have been or shall concurrently become
effective.
(c) Related Agreements. The Agents shall have received, with
a copy for each Lender, true and correct copies, certified as to
authenticity by the Borrower, of the Offer to Purchase and the
Supplemental Indenture referred to therein and such other
documents or instruments delivered in connection therewith as may
be reasonably requested by the Agents.
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(d) Closing Certificate. The Agents shall have received,
with a copy for each Lender, a certificate of the Borrower, dated
the Effective Date, substantially in the form of Exhibit G, with
appropriate insertions and attachments, executed by the President
or any Vice President and the Secretary or any Assistant
Secretary of the Borrower.
(e) Corporate Proceedings of the Borrower. The Agents shall
have received, with a copy for each Lender, a copy of the
resolutions, in form and substance reasonably satisfactory to the
Agents, of the Board of Directors of the Borrower authorizing (i)
the execution, delivery and performance of this Agreement and the
other Loan Documents to which it is a party, (ii) the Extensions
of Credit contemplated hereunder and (iii) the granting by it of
the Liens created pursuant to the Security Documents, certified
by the Secretary or an Assistant Secretary of the Borrower as of
the Effective Date, which certificate shall be in form and
substance reasonably satisfactory to the Agents and shall state
that the resolutions thereby certified have not been amended,
modified, revoked or rescinded.
(f) Borrower Incumbency Certificate. The Agents shall have
received, with a copy for each Lender, a certificate of the
Borrower, dated the Effective Date, as to the incumbency and
signature of the officers of the Borrower executing any Loan
Document reasonably satisfactory in form and substance to the
Agents, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of the Borrower.
(g) Corporate Proceedings of Subsidiaries. The Agents shall
have received, with a copy for each Lender, a copy of the
resolutions, in form and substance reasonably satisfactory to the
Agents, of the Board of Directors or sole shareholder of each
Restricted Subsidiary which is a party to a Loan Document
authorizing (i) the execution, delivery and performance of the
Loan Documents to which it is a party and (ii) the granting by it
of the Liens created pursuant to the Security Documents to which
it is a party, certified by the Secretary or an Assistant
Secretary of each such Subsidiary as of the Effective Date, which
certificate shall be in form and substance reasonably
satisfactory to the Agents and shall state that the resolutions
thereby certified have not been amended, modified, revoked or
rescinded.
(h) Subsidiary Incumbency Certificates. The Agents shall
have received, with a copy for each Lender, a certificate of each
Restricted Subsidiary of the Borrower which is a party to a Loan
Document, dated the Effective Date, as to the incumbency and
signature of the officers of such Subsidiary acknowledging and
consenting to the execution and delivery of this Agreement by the
Borrower, reasonably satisfactory in form and substance to the
Agents, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of such Subsidiary.
(i) Fees. The Administrative Agent, the Documentation Agent
and each Lender shall have received or concurrently receive the
fees to be paid to them by the Borrower on or prior to the
Effective Date and the Agents shall have been reimbursed for all
expenses for which invoices have been presented at least two
Business Days prior to the Effective Date.
(j) Legal Opinions. The Agents shall have received, with a
copy for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Skadden,
Arps, Slate, Meagher & Flom LLP, counsel to the Borrower and
the other Loan Parties, substantially in the form of Exhibit
H-1;
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(ii) the executed legal opinion of C. Steven
Moore, managing attorney of the Borrower, substantially in the
form of Exhibit H-2;
(iii) the executed legal opinion of Bass, Berry &
Sims PLC, counsel to the Borrower and the other Loan Parties,
substantially in the form of Exhibit H-3;
(iv) the executed legal opinion of Simpson
Thacher & Bartlett, counsel to the Agents and the Lenders,
substantially in the form of Exhibit H-4;
(v) the executed legal opinion of counsel in
each of the jurisdictions listed on Schedule 6.1(j), which
opinions shall be substantially to the effect set forth in
Exhibit H-5 (with such modifications thereto as are reasonably
acceptable to the Administrative Agent) and otherwise be
reasonably satisfactory in form and substance to the
Administrative Agent (it being understood that certain matters
of New York, Illinois and Tennessee law required to be covered
pursuant to this clause (v) may be covered by one or more of
the opinions delivered pursuant to clause (i) or (iii) above);
and
(vi) such other legal opinions as the
Administrative Agent may reasonably require.
(k) UCC Filings. The Agents shall have received evidence in
form and substance reasonably satisfactory to them that all the
filings described in Schedule 6.1(k) shall have been completed
(or arrangements, reasonably satisfactory to the Agents, for the
completion thereof shall have been made).
(l) Mortgages. The Administrative Agent shall have received
Mortgages each executed and delivered by a duly authorized
officer of the party thereto, with respect to each parcel of
Material Real Property listed in Part I of Schedule 5.19 other
than with respect to a parcel of Material Real Property not
subject to an Original Mortgage to the extent the Administrative
Agent so agrees (any such parcel of Material Real Property to
become subject to a Mortgage as soon after the Effective Date as
the Administrative Agent shall reasonably require) (it being
understood and agreed that certain Mortgages executed in
connection with the Existing Credit Agreement are being amended
in connection with this Agreement (such amendments to be in form
and substance reasonably satisfactory to the Agents) and that all
Mortgages delivered pursuant to the Existing Credit Agreement, as
amended, shall satisfy the requirements of this Agreement with
respect to the parcels of Material Real Property subject
thereto).
(m) Lien Searches. The Agents shall have received the
results of a recent search in the jurisdictions listed on
Schedule 6.1(m) of the Uniform Commercial Code, judgment and tax
lien filings (as indicated on such Schedule) which may have been
filed with respect to personal property of the Borrower and the
Subsidiary Guarantors, and the results of such search shall be
reasonably satisfactory to the Agents.
(n) Borrowing Base Certificate. The Agents shall have
received a Borrowing Base Certificate, executed and delivered by
a duly authorized officer of the Borrower.
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(o) Flood Insurance. To the extent required by applicable
law, the Administrative Agent shall have received (i) evidence of
a policy of flood insurance which (A) covers any parcel of
Material Real Property subject to a first priority Mortgage
located in an area identified as an area having special flood
hazards by the Secretary of Housing and Urban Development or
other applicable agency, and (B) otherwise complies with such
applicable law and (ii) confirmation that the Borrower has
received the notice required pursuant to Section 208(e)(3) of
Regulation H of the Board of Governors.
(p) Repayment of Loans under Existing Credit Agreement;
Exiting Banks. The Administrative Agent shall have received
evidence reasonably satisfactory to it that (i) all Revolving
Loans (as defined in the Existing Credit Agreement) outstanding
under the Existing Credit Agreement shall have been or shall
concurrently be repaid in full, together with any accrued
interest thereon and any accrued fees payable under the Existing
Credit Agreement to but excluding the Effective Date, and (ii)
the Banks (as defined in the Existing Credit Agreement) which
will not execute and deliver an Addendum (and will not have a
Revolving Credit Commitment or a Term Loan Commitment hereunder)
with respect to this Agreement ("Exiting Banks") shall have been
or shall concurrently be relieved of all obligations in respect
of their Commitments (as defined in the Existing Credit
Agreement).
(q) Required Banks under Existing Credit Agreement. The
Administrative Agent shall have written consents from Banks (as
defined in the Existing Credit Agreement) which constitute
Required Banks (as such terms are defined in the Existing Credit
Agreement) under the Existing Credit Agreement to the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby (it being agreed that the
delivery of an Addendum to this Agreement shall constitute such
written consent).
(r) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement
and the other Loan Documents shall be reasonably satisfactory in
form and substance to the Administrative Agent, and the
Administrative Agent shall have received such other documents and
legal opinions in respect of any aspect or consequence of the
transactions contemplated hereby or thereby as it shall
reasonably request.
6.2 Conditions to Each Extension of Credit. The agreement of
each Lender to make any Extension of Credit requested to be made by it on any
date (including, without limitation, its initial Extension of Credit) is subject
to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Loan Parties (i) in or
pursuant to subsections 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9,
5.10, 5.11, 5.12, 5.14, 5.15, 5.16, 5.17 and 5.24 hereof
(excluding those set forth on Schedule 1.1(b) and excluding, at
any time after the occurrence of a Collateral Release Event, the
representations and warranties contained in subsection 5.15)
shall be true and correct in all material respects on and as of
such date as if made on and as of such date, (ii) in or pursuant
to subsections 5.1, 5.13, 5.18, 5.19, 5.20, 5.22, and 5.23 shall
be true and correct in all material respects as of the date
specified therein (excluding, at any time after the occurrence of
a Collateral Release Event the representations and warranties in
subsections 5.18 and 5.19) and (iii) in or pursuant to the other
Loan Documents (so long as such Loan Documents remain in effect)
shall be true and correct in all material respects and as of such
date as if made on and as of such date, except to the extent such
representations and warranties related to a specific
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earlier date in which case such representations and warranties
shall be true and correct in all material respects as of such
earlier date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to
the Extension of Credit requested to be made on such date.
(c) Borrowing Base. After giving effect to the Extensions of
Credit requested to be made on any such date prior to the
occurrence of a Collateral Release Event and the use of proceeds
thereof, the Aggregate Outstanding Extensions of Credit at such
time shall not exceed the Borrowing Base at such time.
Each Extension of Credit to the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date thereof that, except
to the extent waived in accordance with this Agreement, the conditions contained
in this subsection have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect or any Letter of Credit remains outstanding or any amount is
owing to any Lender or the Administrative Agent hereunder or under any other
Loan Document, the Borrower shall and (except in the case of delivery of
financial information, reports and notices) shall cause each of its Restricted
Subsidiaries to:
7.1 Financial Statements. Furnish to the Administrative Agent
with a copy for each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each Fiscal Year of the Borrower, a copy of the
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as at the end of such year and the related
consolidated statements of income and retained earnings and of
cash flows for such year, setting forth in each case in
comparative form the figures as of the end of and for the
previous Fiscal Year, reported on without a qualification as to
the scope of the audit, by Deloitte & Touche or other independent
certified public accountants of nationally recognized standing,
together with a copy of the Borrower's Form 10-K filed with the
SEC for such Fiscal Year;
(b) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods
of each Fiscal Year of the Borrower, the unaudited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries
as at the end of such quarter and the related unaudited
consolidated statements of income and retained earnings and of
cash flows of the Borrower and its Consolidated Subsidiaries for
such quarter and the portion of the Fiscal Year through the end
of such quarter, setting forth in each case in comparative form
the figures for the previous Fiscal Year as set forth in the
Borrower's Form 10-Q filed with the SEC for such quarterly
period, certified by a Responsible Officer as being fairly stated
in all material respects (subject to normal year-end audit
adjustments);
(c) as soon as available, but in any event not later than 30
days after the end of each fiscal month (other than a fiscal
month which is also the end of a quarterly period), an unaudited
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries in summary form as at the end of such fiscal month
and the related unaudited consolidated
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statement of income of the Borrower and its Consolidated
Subsidiaries in summary form for such fiscal month, certified by
a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments); and
(d) as soon as available, but in any event not later than 40
days after the commencement of each Fiscal Year, an annual review
of the results of operations for the preceding Fiscal Year
setting forth a comparison to the projections of the operating
budget and cash flow budget for such preceding Fiscal Year
delivered to the Lenders and containing a discussion in
reasonable detail of any material differences therein.
All such financial statements referred to in paragraphs (a) and (b) above shall
be complete and correct in all material respects (subject to, in the case of the
financial statements referred to in paragraph (b) above, normal year-end
adjustments) and shall be prepared in reasonable detail and in accordance with
GAAP applied consistently throughout the periods reflected therein and with
prior periods (except as approved by such accountants or officer, as the case
may be, and disclosed therein). The financial statements referred to in
paragraph (c) above shall be prepared in summary form and otherwise in a manner
consistent with the Borrower's current internal reporting practices.
7.2 Certificates: Other Information. Furnish to the
Administrative Agent with a copy for each Lender:
(a) concurrently with the delivery of the financial
statements referred to in subsection 7.1(a), a certificate of the
independent certified public accountants reporting on such
financial statements stating that in making the examination
necessary therefor no knowledge was obtained of any Default or
Event of Default under subsection 8.1, except as specified in
such certificate;
(b) concurrently with the delivery of the financial
statements referred to in subsections 7.1(a) and (b), a
certificate of a Responsible Officer (i) stating that such
Responsible Officer has obtained no knowledge of any Default or
Event of Default with respect to the period covered by such
financial statements except as specified in such certificate and
(ii) setting forth, in reasonable detail, a calculation of the
financial covenants set forth in subsection 8.1 for the period
corresponding to such financial statements;
(c) unless a Collateral Release Event shall have occurred,
on or prior to the 20th day (or if such day is not a Business
Day, the next succeeding Business Day) following the end of each
fiscal month, an officer's certificate substantially in the form
of Exhibit I (a "Borrowing Base Certificate"), certified by a
Responsible Officer as true and correct, provided that (i) the
Borrower may, at its option, deliver additional Borrowing Base
Certificates at any time during any fiscal month (but in no event
more frequently than weekly) and (ii) the Administrative Agent
may require the Borrower to deliver additional Borrowing Base
Certificates at any time (but in no such event more frequently
than weekly) during the months of November, December or January
or during the continuation of a Cash Dominion Trigger Event by
written notice to such effect delivered on or prior to the
Thursday of the relevant week (with such Borrowing Base
Certificate to be as of the following Sunday and delivered on or
prior to Wednesday of the following week, except if the Borrower
is conducting its annual physical inventory, in which event such
Borrowing Base Certificate shall be delivered as soon as
practicable);
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(d) concurrently with the delivery of the financial
statements referred to in subsections 7.1(a) and (b), unless a
Collateral Release Event shall have occurred, a certificate of a
Responsible Officer setting forth a list of all stores and
distribution centers owned or leased and classified as owned by
the Borrower or any of its Restricted Subsidiaries for which a
certificate of occupancy or a temporary certificate of occupancy
has been issued during the period covered by such financial
statements;
(e) not later than (i) 90 days after the beginning of each
Fiscal Year of the Borrower, a copy of the projections by the
Borrower of the operating budget and cash flow budget of the
Borrower and its Subsidiaries for such Fiscal Year, such
projections to be accompanied by a certificate of a Responsible
Officer to the effect that such projections have been prepared on
the basis of assumptions believed to have been reasonable when
made and (ii) 45 days after the first day of the third fiscal
quarter of such fiscal year, a certificate of a Responsible
Officer updating such projections and budgets for any significant
changes since the delivery thereof;
(f) promptly after the same are sent, copies of all
financial statements and reports which the Borrower sends to its
stockholders, and promptly after the same are filed, copies of
all reports on Form 8-K which the Borrower may make to, or file
with, the SEC; and
(g) promptly, such additional financial and other
information as the Administrative Agent (on behalf of itself or
any Lender) may from time to time reasonably request.
7.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower or its Subsidiaries, as the case may be, and except
where the failure to so pay, discharge or otherwise satisfy such obligation
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
7.4 Maintenance of Existence; Compliance with Contractual
Obligations and Requirements of Law. Preserve, renew and keep in full force and
effect its corporate existence and take all w reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of its business except as otherwise permitted pursuant to subsection 8.4 and
except where the failure to maintain such rights, privileges and franchises
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect; comply with all Contractual Obligations and Requirements of Law except
to the extent that failure to comply therewith could not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
7.5 Maintenance of Property; Insurance. Keep its property
necessary in its business in good working order and condition, ordinary wear and
tear excepted, if the failure to do so could reasonably be expected to have a
Material Adverse Effect; maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and against at
least such risks as are usually insured against in the same general area by
similar companies of comparable size engaged in the same or a similar business
and owning or operating similar properties in localities where the Borrower and
its Restricted Subsidiaries operate and furnish upon the written request of the
Administrative Agent information as to the insurance carried.
7.6 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all
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Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities; and, upon reasonable prior written notice,
permit representatives of the Administrative Agent or the Majority Lenders to
visit and inspect any of its properties and examine and make abstracts from the
books of account of the Borrower and its Restricted Subsidiaries at any
reasonable time and as often as may reasonably be desired and, during normal
business hours, to discuss the business, operations, properties and financial
and other condition of the Borrower and its Restricted Subsidiaries with
officers and employees of the Borrower and its Restricted Subsidiaries and in
the presence of a Responsible Officer with its independent certified public
accountants.
7.7 Notices. Promptly upon a Responsible Officer becoming
aware thereof, give notice to the Administrative Agent (which shall promptly
give notice thereof to each Lender) of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
Contractual Obligation of the Borrower or any of its Restricted
Subsidiaries which could reasonably be expected to have a
Material Adverse Effect or (ii) litigation, investigation or
proceeding which may exist at any time between the Borrower or
any of its Subsidiaries and any Governmental Authority, which
could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or
any of its Subsidiaries in which the amount involved is
$20,000,000 or more to the extent not covered by insurance or in
which injunctive or similar relief is sought which, in any such
case, could reasonably be expected to have a Material Adverse
Effect;
(d) the following events, as soon as administratively
practicable and in any event within 30 days after the Borrower
knows or has reason to know thereof: (i) the occurrence or
expected occurrence of any Reportable Event with respect to any
Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan which, in any case, could reasonably
be expected to have a Material Adverse Effect or (ii) the
institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan which, in
any case, could reasonably be expected to have a Material Adverse
Effect; and
(e) if the Borrower or any of the Subsidiary Guarantors
cease to perform cycle counts in accordance with historical
practices.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
7.8 Environmental Laws. (a) Comply with all applicable
Environmental Laws and obtain and comply in all material respects with and
maintain any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except in any such case to the
extent that failure to do so could not be reasonably expected to have a Material
Adverse Effect.
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(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions required
under Environmental Laws, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect, and promptly comply
in all material respects with all lawful orders and directives of all
Governmental Authorities regarding Environmental Laws except to the extent that
the same are being contested in good faith by appropriate proceedings and the
pendency of such proceedings could not be reasonably expected to have a
Material Adverse Effect.
7.9 Further Assurances. Upon the request of the
Administrative Agent at any time prior to the occurrence of a Collateral
Release Event, promptly perform or cause to be performed any and all acts and
execute or cause to be executed any and all documents (including, without
limitation, financing statements and continuation statements) for filing under
the provisions of the Uniform Commercial Code or any other Requirement of Law
which are necessary or, in the reasonable opinion of the Administrative Agent,
advisable to maintain in favor of the Administrative Agent Liens on the
Collateral that are duly perfected (to the extent that the same are
contemplated to be so perfected under the terms of the Loan Documents) in
accordance with all applicable Requirements of Law.
7.10 Mortgages; Etc. Unless a Collateral Release Event shall
have occurred:
(a) With respect to any parcel of Material Real Property
acquired after the Effective Date or any parcel of property that initially
qualifies as a parcel of Material Real Property after the Effective Date (other
than any parcel of Excluded Property), within 90 days thereafter (or, if the
Borrower intends to incur secured Indebtedness permitted under subsection
8.3(g), within 180 days thereafter), execute and deliver to the Collateral Agent
a Mortgage with respect to such parcel of Material Real Property unless a Lien
is granted in favor of third parties on such parcel of Material Real Property
pursuant to subsection 8.3(g), (i), (j), (k), (q) or (r) or such parcel of
Material Real Property has been sold.
(b) With respect to each parcel of real property described on
Schedule 7.10(b) ("Excluded Properties") that is not disposed of pursuant to the
1997 Restructuring Program on or prior to December 31, 1998, execute and deliver
to the Collateral Agent a Mortgage with respect to such parcel of Excluded
Property unless a Lien is granted in favor of one or more third parties on such
parcel of Excluded Property pursuant to subsection 8.3 (f), (g), (i), (j), (k),
(q) or (r) or the consent of any lessor of such parcel of Excluded Property that
is subject to a ground lease is required and not obtained.
7.11 Additional Collateral. Unless a Collateral Release Event
shall have occurred:
(a) With respect to any assets acquired after the Effective
Date by the Borrower or any Subsidiary Guarantor that are intended to be subject
to the Lien created by any of the Security Documents but which are not so
subject (other than any assets described in subsection 7.10 or paragraph (b),
(c) or (d) of this subsection), promptly (and in any event within 30 days after
the acquisition thereof): (i) execute and deliver to the Collateral Agent such
amendments to the relevant Security Documents or such other documents as the
Administrative Agent shall reasonably deem necessary or advisable to grant to
the Collateral Agent a Lien on such assets, (ii) take all actions reasonably
deemed necessary or advisable by the Collateral Agent to cause such Lien to be
duly perfected (to the extent contemplated therein and in the other Loan
Documents) in accordance with all applicable Requirements of Law, including,
without limitation, the filing of financing statements in such jurisdictions as
may be requested by the Collateral Agent (it being agreed that no action shall
be required pursuant to this clause (ii) to perfect a Lien (1) in assets that
would not constitute UCC Filing Collateral or (2) in assets constituting UCC
Filing Collateral if such perfection relates to assets constituting UCC Filing
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Collateral with an aggregate book value of less than $1,000,000), and (iii) with
respect to assets constituting UCC Filing Collateral with a book value in excess
of $1,000,000 that are perfected under the laws of any jurisdiction, if
requested by the Collateral Agent, deliver to the Collateral Agent legal
opinions relating to the matters described in clauses (i) and (ii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
(b) With respect to any Person that, subsequent to the
Effective Date, becomes a Domestic Subsidiary (other than a Credit Card
Subsidiary) promptly: (i) execute and deliver to the Collateral Agent a new
pledge agreement or such amendments to the relevant Pledge Agreement as the
Administrative Agent shall deem necessary or advisable to grant to the
Collateral Agent a Lien on the Capital Stock of such Domestic Subsidiary which
is owned by the Borrower or any of its Subsidiaries, (ii) deliver to the
Collateral Agent the certificates representing such Capital Stock, together with
undated stock powers executed and delivered in blank by a duly authorized
officer of the pledgor thereof, (iii) cause such new Domestic Subsidiary (A) to
become a party to the Subsidiaries Guarantee and the Subsidiaries Security
Agreement, in each case pursuant to documentation which is in form and substance
satisfactory to the Collateral Agent, and (B) to take all actions reasonably
deemed necessary or advisable by the Collateral Agent to cause the Lien created
by the Subsidiaries Security Agreement to be duly perfected (to the extent
contemplated therein and in the other Loan Documents) in accordance with all
applicable Requirements of Law, including, without limitation, the filing of
financing statements in such jurisdictions as may be requested by the Collateral
Agent (it being agreed that no action shall be required pursuant to this clause
(iii) to perfect a Lien in assets that would not constitute UCC Filing
Collateral or in assets constituting UCC Filing Collateral if such perfection
relates to assets constituting UCC Filing Collateral with an aggregate book
value of less than $1,000,000) and (iv) with respect to assets of any such
Domestic Subsidiary with a book value in excess of $1,000,000 that are perfected
under the laws of any jurisdiction, if requested by the Collateral Agent,
deliver to the Collateral Agent legal opinions relating to the matters described
in clauses (i), (ii) and (iii) immediately preceding, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the Collateral
Agent.
(c) With respect to any Person that, subsequent to the
Effective Date, becomes a Foreign Subsidiary with a net worth in excess of
$1,000,000, promptly upon the request of the Administrative Agent: (i) execute
and deliver to the Collateral Agent a new pledge agreement or such amendments to
the relevant Pledge Agreement as the Collateral Agent shall deem necessary or
advisable to grant to the Collateral Agent a Lien on the Capital Stock of such
Subsidiary which is owned by the Borrower or any of its Subsidiaries (provided
that in no event shall more than 65% of the Capital Stock of any such Subsidiary
be required to be so pledged) and (ii) deliver to the Collateral Agent any
certificates representing such Capital Stock, together with undated stock powers
executed and delivered in blank by a duly authorized officer of the Borrower or
such Subsidiary, as the case may be, and take or cause to be taken all such
other actions under the law of the jurisdiction of organization of such Foreign
Subsidiary as may be necessary or advisable to perfect such Lien on such Capital
Stock.
(d) If the Borrower or any Subsidiary Guarantor shall acquire
any Investment Securities (other than Investment Securities of any issuer
aggregating less than $1,000,000) prior to the occurrence of a Collateral
Release Event, such Loan Party shall deliver certificates representing such
Investment Securities to the Administrative Agent or its agent or custodian (or
otherwise "transfer" such Investment Security (within the meaning of the
applicable Uniform Commercial Code) to the Collateral Agent or its agent or
custodian (or take such other action as shall be required to perfect the
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security interest of the Collateral in accordance with the applicable Uniform
Commercial Code)), together with, when necessary or appropriate, undated powers
as provided in Section 2(b) of the Pledge Agreement, to be held by the
Collateral Agent (or its agent or custodian) as Pledged Securities, subject to
the terms of the Pledge Agreement, as collateral security for the Secured
Obligations.
7.12 Depositary Account and Payment System. On or prior to the
ninetieth day following the Effective Date (or such later date as may from time
to time be consented to by the Collateral Agent), establish a depository
accounts and payments system reasonably satisfactory to the Collateral Agent,
all as more fully described in the Master Collateral Agreement.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect or any Letter of Credit remains outstanding or any amount is
owing to any Lender or the Administrative Agent hereunder or under any other
Loan Document, the Borrower shall not, and (except in the case of subsection
8.1) shall not permit any of its Restricted Subsidiaries to, directly or
indirectly:
8.1 Financial Condition Covenants
(a) Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio as of the last day of any fiscal quarter to be less
than 1.25 to 1.00.
(b) Leverage Ratio. Permit at any time the Leverage Ratio to
exceed 0.75 to 1.00.
8.2 Limitation on Guarantee Obligations. Create, incur, assume
or suffer to exist any Guarantee Obligation except:
(a) the Subsidiaries Guarantee and any Guarantee Obligations
arising under any of the other Loan Documents;
(b) Guarantee Obligations in existence on the Effective Date
and (i) set forth on Schedule 8.2(b) or (ii) otherwise not exceeding
$10,000,000 in the aggregate;
(c) Guarantee Obligations of the Borrower or any Restricted
Subsidiary of obligations (other than the Subordinated Debentures) of
any Restricted Subsidiary or the Borrower which obligations are
otherwise permitted under this Agreement, provided that, if any such
Guarantee Obligations shall guarantee any Subordinated Debt, such
Guarantee Obligations shall be subordinated to the Subsidiaries
Guarantee on terms and conditions no less favorable to the Agents and
the Lenders in any material respect than those contained in Schedule
1.1(c);
(d) Guarantee Obligations entered into in connection with
surety, appeal, payment and performance bonds (and other obligations
of a like nature) incurred in the ordinary course of business;
(e) subject to subsection 8.8(e), Guarantee Obligations of the
Borrower or any Restricted Subsidiary of Indebtedness or other
obligations incurred in the ordinary course of business of
Subsidiaries that are not Subsidiary Guarantors (including, without
limitation, obligations in respect of indemnifications on behalf of
Credit Card Subsidiaries as
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contemplated by the proviso to the definition of Credit Card
Subsidiaries, to the extent such obligations constitute Guarantee
Obligations);
(f) Guarantee Obligations in respect of obligations of vendors to
the Borrower and its Restricted Subsidiaries created in the ordinary
course of business;
(g) Guarantee Obligations of the Borrower or any Restricted
Subsidiary of Indebtedness or other obligations of Securitization
Entities incurred in connection with Securitization Transactions;
(h) Guarantee Obligations in respect of (i) the Permitted Trade
L/C Facility and (ii) other obligations in respect of letters of
credit, provided that the aggregate outstanding amount of all such
Guarantee Obligations (not otherwise permitted pursuant to this
subsection 8.2) shall at no time exceed $175,000,000; and
(i) Guarantee Obligations of the Borrower or any Restricted
Subsidiary incurred in the ordinary course of business in respect of
obligations (other than Indebtedness) of others and other Guarantee
Obligations (in each case not otherwise permitted pursuant to this
subsection 8.2) incurred after the Effective Date, provided that the
aggregate amount of all such Guarantee Obligations for the Borrower
and its Restricted Subsidiaries shall not exceed $25,000,000 at any
one time outstanding.
8.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate reserves
with respect thereto are maintained on the books of the Borrower or
its Subsidiaries, as the case may be, in conformity with GAAP (or, in
the case of Foreign Subsidiaries, generally accepted accounting
principles in effect from time to time in their respective
jurisdictions of incorporation);
(b) carriers', warehousemen's, mechanics', landlord's,
materialmen's, repairmen's or other like Liens (including statutory
Liens and other Liens arising by operation of law) arising in the
ordinary course of business securing amounts which do not in the
aggregate impair the use thereof in the operation of the business of
the Borrower and its Restricted Subsidiaries, which are not overdue
for a period of more than 60 days or which are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or assets subject to
any such Lien;
(c) (i) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers
under insurance or self-insurance arrangements and (ii) Liens granted
to banks in the ordinary course of business in connection with
deposit, disbursement or concentration accounts (other than in
connection with borrowed money) maintained with such banks on funds
and other items in such accounts;
(d) Liens granted and deposits made in connection with the
performance of bids, trade arrangements and real estate related
contracts entered into in the ordinary course of business (in each
case, other than for borrowed money), utilities, leases, statutory
obligations, surety
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and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions, subdivisions,
parcelizations and other similar encumbrances incurred in the ordinary
course of business which do not in any case materially detract from
the value of the property subject thereto or materially interfere with
the ordinary conduct of the business of the Borrower or such
Restricted Subsidiary;
(f) Liens in existence on the date hereof (or arising at any time
during the period from the date hereof through the Effective Date) and
(i) listed on Schedule 8.3(f) securing Indebtedness or other
obligations described on such Schedule or (ii) otherwise securing
Indebtedness or other obligations not exceeding $10,000,000 in the
aggregate;
(g) Liens securing Indebtedness or other obligations of the
Borrower and its Restricted Subsidiaries incurred after the Effective
Date to finance the acquisition, construction or completion of fixed
or capital assets (whether pursuant to a loan, a Financing Lease or
otherwise), including, without limitation, improvements, provided that
(i) such Liens are created within 180 days after such acquisition,
construction or completion and (ii) such Liens do not at any time
encumber any property other than the property financed by such
Indebtedness or other obligations and the proceeds thereof;
(h) Liens on assets of any Foreign Subsidiary securing
Indebtedness of such Foreign Subsidiary and other obligations incurred
in the ordinary course of business;
(i) Liens on the property or assets of a corporation which
becomes a Restricted Subsidiary after the Effective Date and Liens
existing on assets acquired by the Borrower or a Restricted Subsidiary
after the Effective Date, in either case securing Indebtedness or
other obligations, provided that (i) such Liens existed at the time
such corporation became a Restricted Subsidiary or such asset was
acquired and were not created in anticipation thereof, (ii) any such
Lien is not spread to cover any additional property or assets of such
corporation after the time such corporation becomes a Restricted
Subsidiary or such asset is acquired, and (iii) the amount of
Indebtedness or other obligations secured thereby is not increased;
(j) Liens securing Indebtedness or other obligations which
refunds, refinances extends or otherwise restructures any other
Indebtedness or other obligations to the extent such refunded or
refinanced Indebtedness or other obligation was originally permitted
to be secured pursuant to this subsection, provided that the principal
amount of such Indebtedness is not increased (other than by an amount
equal to any costs and expenses incurred in connection with such
refunding or refinancing) and that no such Lien is spread to cover
additional property;
(k) Liens (not otherwise permitted hereunder) which secure
Indebtedness or other obligations not exceeding (as to the Borrower
and all its Restricted Subsidiaries) $25,000,000 in aggregate
principal or face amount at any time outstanding, provided that (i) no
such Liens shall cover any current assets (including Accounts
or Inventory) of the Borrower or any Restricted Subsidiary, the
Capital Stock of any Subsidiary (including, without limitation, any
Securitization Entity or Credit Card Subsidiary) or any Indebtedness
of the Borrower or any Subsidiary and (ii) if any such Lien is granted
after the Effective Date to secure Indebtedness incurred prior to the
Effective Date and covers a parcel of Material Real Property then, for
the purposes of subsection 4.1(c), such Indebtedness shall be deemed
to be Indebtedness secured
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by a Lien on a parcel of Designated Material Real Property incurred as
of the date such Lien is created;
(l) Liens created pursuant to the Security Documents;
(m) Liens created in favor of any Person who delivers goods under
a consignment to the Borrower or a Restricted Subsidiary, provided
that the Borrower or such Restricted Subsidiary treats and designates
on its books and records such goods as "goods on consignment" for all
purposes and such goods are not included as Inventory of the Borrower
or such Restricted Subsidiary, as the case may be, on the books of the
Borrower or such Restricted Subsidiary, as the case may be;
(n) Liens granted to secure the Borrower's or any Restricted
Subsidiary's obligations under any Floor Planning Facility, provided
that such Liens are limited to the goods financed pursuant to such
Floor Planning Facility and the proceeds of such goods;
(o) Liens covering Accounts, credit card receivables and related
assets owned or that may be deemed owned by the Borrower and its
Restricted Subsidiaries in connection with a Credit Card Program;
(p) Liens arising from offsets, deposits or restricted assets
granted by any Credit Card Subsidiary in respect of a Credit Card
Program;
(q) Liens on (i) real property (and related fixtures and leases)
owned or leased by the Borrower or any Restricted Subsidiary securing
Indebtedness including, Designated Material Real Property, and (ii)
other assets not constituting real property securing Indebtedness to
the extent such Liens on such other assets are purchase money security
interests in such assets, provided that if any such Lien is granted on
a parcel of Designated Material Real Property to replace (x) any then
existing Lien on any parcel of real property which secures any
Permanent Mortgage Financing or (y) any letter of credit issued after
the Effective Date to replace a Lien on any parcel of real property
which previously secured any Permanent Mortgage Financing, in each
case in accordance with the terms thereof, then (1) such parcel of
Designated Material Real Property shall cease to be a parcel of
Designated Material Real Property for purposes of this Agreement and
(2) the parcel of real property which is then or was previously
subject to a Lien to secure any Permanent Mortgage Financing (A) must
have a fair market value valued on an "alternative use" basis (as
determined in good faith by the Borrower) approximately equal to the
fair market value valued on an "alternative use" basis (as determined
in good faith by the Borrower) of the relevant parcel of Designated
Material Real Property and (B) shall be deemed to be (i) a parcel of
Designated Material Real Property for all purposes of this Agreement
and (ii) a parcel of Material Real Property acquired after the
Effective Date for purposes of subsection 7.10 of this Agreement
unless such parcel of real property shall have been the subject of an
Asset Sale or shall then be subject to a Lien to secure Indebtedness
(other than the Loans), in which case such Asset Sale or Indebtedness
shall be deemed to have been made or incurred, as the case may be, for
purposes of subsection 4.1(c) as of the date the replacement Lien is
granted on the relevant parcel of Designated Material Real Property
and, provided, further that if any such Lien is granted after the
Effective Date to secure Indebtedness incurred prior to the Effective
Date (other than a Lien described in the immediately preceding
proviso) and covers a parcel of Material Real Property, then, for
purposes of subsection 4.1(c), such Indebtedness shall be deemed to be
Indebtedness secured
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by a Lien on a parcel of Designated Material Real Property incurred
as of the date such Lien is created;
(r) Liens arising under or in connection with Permitted
Sale-Leasebacks;
(s) Liens (including possessory Liens) on cash (and corresponding
Liens on cash collateral accounts and all investments of amounts on
deposit therein), commercial documents relating to goods financed
under the relevant facility or trade letters of credit, such goods and
the proceeds thereof, in each case securing the Permitted Trade L/C
Facility and other obligations in respect of trade letters of credit,
provided that no such Lien may extend to or cover such commercial
documents, goods or related proceeds after such goods are
delivered to a warehouse, distribution center or store owned or leased
by the Borrower or a Restricted Subsidiary (it being understood that
the Collateral Agent may (and, to the extent the same is reasonably
satisfactory to it, shall) enter into one or more intercreditor
agreements with respect to the Permitted Trade L/C Facility or other
letters of credit with respect to the foregoing); and
(t) Liens arising out of the deposit arrangement described on
Schedule 5.4;
provided that, notwithstanding the foregoing, no Lien created, incurred, assumed
or suffered to exist pursuant to this subsection 8.3 (other than Permitted
Inventory Liens and Liens permitted under subsections 8.3(h), 8.3(m), 8.3(n) and
8.3(s)) shall be a Lien on Inventory of the Borrower or any of its Restricted
Subsidiaries.
8.4 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets except:
(a) any Restricted Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or with or into any
one or more wholly owned Subsidiaries of the Borrower (provided that a
Subsidiary Guarantor or wholly owned Restricted Subsidiary or
Restricted Subsidiaries shall be the continuing or surviving
corporation and provided, further, that if one of the parties to such
transaction (i) is a Subsidiary Guarantor then the continuing or
surviving corporation shall be a Subsidiary Guarantor or (ii) is not a
Restricted Subsidiary, no Default shall result therefrom);
(b) any Restricted Subsidiary may convey, sell, lease, transfer,
assign or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Borrower or any Subsidiary
Guarantor or any wholly owned Restricted Subsidiary of the Borrower
(provided that if such selling Restricted Subsidiary is a Subsidiary
Guarantor then the acquiring Restricted Subsidiary shall be a
Subsidiary Guarantor); and
(c) any Restricted Subsidiary may be merged or consolidated with
or into, or convey, sell, lease, transfer, assign or otherwise dispose
of any or all of its assets to, any Person to the extent that the sale
or other disposition of the assets of such Restricted Subsidiary would
be permitted under subsection 8.5.
8.5 Limitation on Sale of Assets. Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or
assets (including, without limitation, receivables and
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leasehold interests), whether now owned or hereafter acquired, or, in the case
of any Restricted Subsidiary, issue or sell any shares of such Restricted
Subsidiary's Capital Stock to any Person (other than the Borrower or any
Subsidiary Guarantor or, if such Restricted Subsidiary is not (x) a wholly-owned
Restricted Subsidiary, pro-rata to the owners of the equity securities of such
Restricted Subsidiary or (y) a Subsidiary Guarantor, to any Restricted
Subsidiary), except:
(a) the sale or other disposition of uneconomical, obsolete,
surplus or worn out assets in the ordinary course of business,
including, without limitation, in connection with store closures and
real estate development or divestiture activities;
(b) the sale or other disposition of inventory, materials and
equipment in the ordinary course of business (including sales of
inventory, materials and equipment in connection with closed stores
and sales of discontinued inventory) and transfers of assets among the
Borrower and the Subsidiary Guarantors pursuant to reasonable business
requirements;
(c) (i) the sale or discount of accounts receivable arising in
the ordinary course of business in connection with the compromise or
collection thereof and (ii) sales or other dispositions of Cash
Equivalents in the ordinary course of business;
(d) as permitted by subsection 8.4(b);
(e) Asset Sales of any assets (other than, directly or
indirectly, Inventory) in connection with Permitted Sale-Leasebacks or
Securitization Transactions, provided that (i) in the case of an Asset
Sale in connection with a Permitted Sale-Leaseback (other than an
Asset sale in connection with a Securitization Transaction), the
proceeds of any such Permitted Sale-Leaseback shall be entirely in
cash and shall be not less than 100% of the fair market value of the
assets being sold (as determined by the Borrower in good faith) and
(ii) in the case of an Asset Sale in connection with a Securitization
Transaction (which may be in the form of a capital contribution to the
relevant Securitization Entity), the purchase price (including the
Capital Stock of any Securitization Entity owned by the Borrower or
any Restricted Subsidiary) with respect to the assets sold or disposed
shall be not less than the fair market value of such assets (as
determined by the Borrower in good faith);
(f) the sale or other disposition of any property (other than,
directly or indirectly, Inventory and other than any sale or other
disposition which is otherwise permitted under this subsection 8.5),
provided that at the time of and after giving effect to such sale or
disposition, the aggregate fair market value of all assets so sold or
disposed of in any Fiscal Year pursuant to this paragraph (f) shall
not exceed an amount equal to $75,000,000;
(g) subject to the other terms and provisions hereof, leases or
subleases (or assignments of leases) or licenses or sublicenses (or
assignments of licenses or sublicenses) of any assets in the ordinary
course of business;
(h) sales and other dispositions of (i) Excluded Properties, (ii)
other assets pursuant to the 1997 Restructuring Program and (iii)
assets received in exchange for any and all of the foregoing;
(i) sales and other dispositions of assets in connection with
Investments permitted under subsection 8.8;
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(j) sales or other dispositions of Accounts, credit card
receivables and related assets in connection with a Credit Card
Program; and
(k) issuances, sales and other dispositions of Capital Stock by
any Credit Card Subsidiary to any Person so long as after giving
effect thereto, such Credit Card Subsidiary remains a Subsidiary.
8.6 Limitation on Dividends. Declare or pay any dividend
(other than dividends payable solely in common stock or Qualified Stock of the
Borrower or options or warrants with respect thereto) on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any shares
of any class of Capital Stock (including Qualified Stock) of the Borrower or any
warrants or options to purchase any such Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Restricted Subsidiary (such declarations, payments, setting apart,
purchases, redemptions, defeasances, retirements, acquisitions and distributions
being herein called "Restricted Payments"), except that:
(a) the Borrower may (i) purchase or exchange then-existing
employee stock options for consideration consisting solely of (subject
to subsection 8.15) Capital Stock of the Borrower and (ii) may
purchase Capital Stock (including, without limitation, options to
acquire the same) from directors, officers and employees of the
Borrower and its Restricted Subsidiaries in connection with stock
option plans and employment and severance arrangements so long as, in
the case of this clause (ii) only, either (A) no Default or Event of
Default shall have then occurred and be continuing or would result
therefrom or (B) such purchases are made in the ordinary course of
business consistent with past practice; and
(b) so long as after giving effect thereto (or the declaration
thereof, in the case of dividends) no Default or Event of Default
shall have occurred and be continuing, the Borrower may make
Restricted Payments with respect to its Capital Stock at any time on
or after June 30, 1999, provided that no Restricted Payment may be
made pursuant to this paragraph (b) if, after giving effect thereto
(or the declaration thereof, in the case of dividends), the aggregate
amount of all Restricted Payments made pursuant to this paragraph (b),
together with the aggregate outstanding amount (without duplication)
of all Acquisitions and other Investments made pursuant to subsection
8.8(m) in excess of $80,000,000 in the aggregate or all Investments
(other than Acquisitions) made pursuant to subsection 8.8(m) in excess
of $30,000,000 in the aggregate, would exceed 25% of the Consolidated
Net Income of the Borrower for the period (taken as one accounting
period) from September 30, 1997 through the last day of the most
recent fiscal quarter ended prior to the date such Restricted Payment
is made.
8.7 Limitations on Capital Expenditures. Make (by way of the
acquisition of securities of a Person or otherwise, in each case, other than any
expenditure constituting an Investment permitted under subsection 8.8) any
expenditure in respect of the purchase or other acquisition of fixed or capital
assets (excluding any such asset acquired in connection with normal replacement
and maintenance programs properly charged to current operations) except for
expenditures not exceeding, in the aggregate for the Borrower and its Restricted
Subsidiaries during any Fiscal Year of the Borrower, $125,000,000, provided that
(a) up to 100% of any amount permitted to be expended in any Fiscal Year
(without giving effect to this clause (a)) if not so expended in the Fiscal Year
for which it is permitted above, may be carried over for expenditure in the next
following Fiscal Year and (b) the
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amount for the 2002 Fiscal Year shall be prorated for the period from the
beginning of such Fiscal Year to the Revolving Credit Termination Date.
8.8 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or
purchase any stock, bonds, notes, debentures or other securities of any Person
or consummate any Acquisition (an "Investment"), except for:
(a) extensions of trade credit and prepaid expenses made in
the ordinary course of business;
(b) Investments in Cash Equivalents;
(c) (i) loans to officers of the Borrower or any Subsidiary,
(ii) loans and advances to employees of the Borrower or its
Subsidiaries for travel, entertainment and relocation expenses in
the ordinary course of business, and (iii) loans by the Borrower
to its employees (other than to officers of the Borrower or any
Subsidiary) in connection with management incentive plans,
provided that the aggregate outstanding principal amount of all
such loans and advances shall not exceed $5,000,000 at any time;
(d) Investments by the Borrower in Subsidiary Guarantors and
Investments by Restricted Subsidiaries in the Borrower and in
Subsidiary Guarantors;
(e) Investments not otherwise permitted hereunder by the
Borrower and Restricted Subsidiaries in Subsidiaries that are not
Subsidiary Guarantors, provided that, after giving effect to such
Investments, the aggregate then outstanding amount of all such
Investments (including Investments in such Subsidiaries in the
nature of sales and transfers of assets (including, pursuant to a
transaction permitted under subsection 8.4) for less than fair
market value and Guarantee Obligations pursuant to subsection
8.2(e)) made subsequent to the Effective Date pursuant to this
paragraph (e) shall not exceed $5,000,000, provided, further,
that the conversion of any Indebtedness owed to the Borrower or
any Restricted Subsidiary by any Subsidiary into equity of such
Subsidiary shall not constitute an additional Investment in such
Subsidiary by the Borrower or such Restricted Subsidiary for
purposes of the limitation contained in the immediately preceding
proviso;
(f) Investments in Reinvestment Assets financed with the
proceeds of any Reinvestment Event not required to prepay Term
Loans pursuant to subsection 4.1(c) or 4.1(e);
(g) Investments received in connection with the creation and
collection of accounts receivable in the ordinary course of
business;
(h) Investments received as consideration in connection with
any Asset Sale or other disposition of assets permitted
hereunder;
(i) Investments not otherwise permitted hereunder in Credit
Card Subsidiaries in an amount not to exceed $50,000,000
outstanding at any time;
(j) Investments by Credit Card Subsidiaries in connection
with the Credit Card Program;
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(k) loans and advances to suppliers in the ordinary course
of business consistent with past practice;
(l) purchases of Accounts, credit card receivables and
related assets by Credit Card Subsidiaries in connection with the
Credit Card Program;
(m) Acquisitions and other Investments not otherwise
permitted hereunder made by the Borrower or any of its Restricted
Subsidiaries, provided that, after giving effect thereto, (i) the
aggregate outstanding amount of all such Investments (other than
Acquisitions) made at any time after the Effective Date, together
with any Restricted Payments made at any time pursuant to
subsection 8.6(b), shall not exceed the sum of (A) $30,000,000
and (B) in the case of any such Investment made after June 30,
1999, 25% of the Consolidated Net Income of the Borrower for the
period (taken as one accounting period) from September 30, 1997
through the last day of the most recent fiscal quarter ended
prior to the date any such Investment is made, and (ii) the
aggregate outstanding amount of all such Acquisitions (including
assumed Indebtedness) and other Investments made at any time
after the Effective Date, together with any Restricted Payments
made at any time pursuant to subsection 8.6(b), shall not exceed
the sum of (A) $80,000,000 and (B) in the case of any such
Acquisition or other Investment made after June 30, 1999, 25% of
the Consolidated Net Income of the Borrower for the period (taken
as one accounting period) from September 30, 1997 through the
last day of the most recent fiscal quarter ended prior to the
date any such Acquisition or other Investment is made;
(n) Acquisitions and other Investments to the extent made
with common stock or Qualified Stock of the Borrower; and
(o) Investments resulting from the capital contribution of
assets to a Securitization Entity in connection with a
Securitization Transaction.
8.9 Limitation on Optional Payments and Modifications of Debt
Instruments. (a) At any time prior to the repayment in full of the Term Loans,
make any optional payment or prepayment on or optionally redeem or purchase any
Indebtedness (other than the Loans, the Senior Notes and Indebtedness of the
Borrower or any Restricted Subsidiary to the Borrower or any Restricted
Subsidiary) of the Borrower or any Subsidiary, (b) make any optional payment or
prepayment on account of the principal of or interest on, or optionally redeem
or purchase, any Subordinated Debentures, provided that the Borrower may pay
interest on the Subordinated Debentures pursuant to the terms of the
Subordinated Debt Indenture or (c) amend, modify or change, or consent or agree
to any amendment, modification or change to any of the terms relating to the
payment or prepayment of principal of or interest on, any such Indebtedness (if
such amendment, modification, change, consent or agreement is entered into prior
to the repayment in full of the Term Loans) or the Subordinated Debentures or
the Subordinated Debt Indenture (other than any such amendment, modification or
change which would extend the maturity or reduce the amount of any payment of
principal thereof or which would reduce the rate or extend the date for payment
of interest thereon); provided, that the Borrower and its Restricted
Subsidiaries may prepay (i) Indebtedness (other than the Subordinated
Debentures) (A) from the proceeds of new Indebtedness incurred to refinance such
Indebtedness, (B) under Financing Leases for stores and other property no longer
occupied or used by the Borrower or such Restricted Subsidiary in connection
with the settlement, termination or assignment of such Financing Lease, (C)
secured by assets in connection with any sale or other disposition of such
assets permitted under subsection 8.5, (D) in an aggregate amount, in addition
to payments otherwise permitted under this subsection 8.9, not to exceed
$25,000,000, (E) consisting of Floor Planning Facilities, (F) incurred after the
Effective Date and otherwise permitted hereunder to the extent such
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prepayment is financed with the proceeds of other Indebtedness (other than
Loans) permitted hereunder, (G) consisting of Financing Leases so long as such
Financing Leases are paid in full in connection with any such prepayment and
such prepayment is made in connection with the closure or sale of a parcel of
real property subject to such Financing Lease, (H) secured by a Lien on any
parcel of Material Real Property so long as such Indebtedness is paid in full in
connection with any such prepayment and such prepayment is financed with the
proceeds of other Indebtedness (other than Loans) permitted hereunder, and (I)
that is short term Indebtedness and unsecured, and (ii) the Subordinated
Debentures to the extent prepaid from the proceeds of Subordinated Debt and/or
(subject to subsection 8.15) Capital Stock of the Borrower.
8.10 Limitation on Transactions with Affiliates. Except as
set forth on Schedule 8.10, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate unless such transaction is (a) otherwise
permitted under this Agreement or (b) upon fair and reasonable terms no less
favorable to the Borrower or such Restricted Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate.
8.11 Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by the Borrower or any
Restricted Subsidiary of real or personal property (other than Capital Stock)
which has been or is to be sold or transferred by the Borrower or such
Restricted Subsidiary to such Person or to any other Person to whom funds have
been or are to be advanced by such Person on the security of such property or
rental obligations of the Borrower or such Restricted Subsidiary (such
arrangement, a "Sale-Leaseback") except for Sale-Leasebacks in the ordinary
course of the Borrower's or such Restricted Subsidiary's business, consistent
with past practice and at market rates and subject to compliance with subsection
8.5(e), or Sale-Leasebacks in connection with Securitization Transactions
("Permitted Sale-Leasebacks"). For the avoidance of doubt, Sale-Leasebacks that
result in a Financing Lease shall be treated as Indebtedness for all purposes of
this Agreement.
8.12 Fiscal Years and Quarters. Change the last day of the
Fiscal Year of the Borrower (other than to a day on or about January 31 of any
calendar year) or permit any Fiscal Year to be less than a period of
approximately 365 days or permit any fiscal quarter to be less than a period of
approximately 90 days.
8.13 Limitation on Conduct of Business. Enter into any
business either directly or through any Restricted Subsidiary except for
businesses in which the Company and its Subsidiaries are engaged on the date of
this Agreement and businesses related or similar thereto or entered into in
connection with any of the foregoing.
8.14 No Other Designated Senior Debt. Create any "Designated
Senior Debt" other than the Indebtedness of the Borrower hereunder pursuant to
the Subordinated Debt Indenture or any Indenture with respect to Subordinated
Debt the proceeds of which are used to refinance the Subordinated Debentures, in
each case without the prior written consent of the Majority Lenders.
8.15 Limitation on Issuances of Capital Stock. Issue (a) any
preferred stock or (b) any class of redeemable common stock, provided, however,
that the Borrower may issue Qualified Stock.
8.16 Foreign Holding Companies, Inactive Subsidiaries and
Special Purpose Subsidiaries. Permit the aggregate book value of the assets of
all Foreign Holding Companies
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(exclusive of assets consisting of advances or loans to the Borrower or any of
its Subsidiaries and Capital Stock of Foreign Subsidiaries and other Foreign
Holding Companies), Inactive Subsidiaries and Special Purpose Subsidiaries
(exclusive of assets consisting of licenses or permits) to exceed $15,000,000 at
any time.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan when due
in accordance with the terms hereof; or the Borrower shall fail to pay any
Reimbursement Obligation within two Business Days after such Reimbursement
Obligation becomes due in accordance with the terms hereof; or the Borrower
shall fail to pay any interest on any Loan, or any other amount payable
hereunder, within five days after any such interest or other amount becomes
due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by the Borrower
or any other Loan Party herein or in any other Loan Document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or
any such other Loan Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) The Borrower shall default in the observance or performance of any
agreement contained in subsection 7.7(a) or Section 8 or the Borrower shall
fail to deliver a Borrowing Base Certificate pursuant to subsection 7.2(c)
within 10 days after such Borrowing Base Certificate was due pursuant to
such subsection; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
(a) through (c) of this Section), and such default shall continue
unremedied for a period of 30 days after the earlier of (i) the date upon
which written notice thereof is given to the Borrower by the Administrative
Agent or the Majority Lenders or (ii) the date upon which a Responsible
Officer becomes aware of such default; or
(e) The Borrower or any of its Restricted Subsidiaries shall (i)
default in any payment of principal of or interest on any Indebtedness
(other than the Loans) or in the payment of any Guarantee Obligation,
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness or Guarantee Obligation was created; or (ii)
default in the observance or performance of any other agreement or
condition relating to any such Indebtedness or Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Guarantee Obligation (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required (but after the expiration of all grace periods
applicable thereto), such Indebtedness to become due prior to its stated
maturity or such Guarantee Obligation to become payable; provided, however,
that (x) no Default or Event of Default shall exist under this paragraph
(A) unless the aggregate amount of Indebtedness (other than Indebtedness in
respect of Floor Planning Facilities) and/or Guarantee Obligations in
respect of which any
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default or other event or condition referred to in this paragraph shall
have occurred shall be equal to at least $20,000,000 or (B) unless the
aggregate amount of Indebtedness in respect of Floor Planning Facilities in
respect of which any default or other event or condition referred to in
this paragraph shall have occurred shall be equal to at least $40,000,000
and (y) clause (ii) above shall not apply to Indebtedness that becomes due
solely as a result of the voluntary sale or transfer of property or assets
or prepayments that become due as a result of any issuance of Capital Stock
or incurrence of Indebtedness (in each case to the extent such, sale,
transfer, issuance or incurrence is permitted by the terms of such
Indebtedness); or
(f) (i) The Borrower or any of its Restricted Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the Borrower or
any of its Restricted Subsidiaries shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against the
Borrower or any of its Restricted Subsidiaries any case, proceeding or
other action of a nature referred to in clause (i) above which (A) results
in the entry of an order for relief or any such adjudication or appointment
or (B) remains undismissed, undischarged or unbonded for a period of 60
days; or (iii) there shall be commenced against the Borrower or any of its
Restricted Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or (iv) the Borrower or any of its Restricted
Subsidiaries shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) the Borrower or any of its
Restricted Subsidiaries shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become due;
or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Tax Code) involving
any Plan, (ii) any "accumulated funding deficiency" (as defined in Section
302 of ERISA), whether or not waived, shall exist with respect to any Plan
or any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Majority Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Majority Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if any,
could reasonably be expected to have a Material Adverse Effect; or
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(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Restricted Subsidiaries involving in the aggregate a
liability (to the extent not paid or covered by insurance) of $20,000,000
or more, and such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or
(i) (i) For any reason (other than any act on the part of the
Administrative Agent or any Lender or any act or failure to act (except to
the extent such act or failure to act constitutes a breach of the relevant
Blocked Account Agreement or Lockbox Agreement on the part of any
Depositary Bank) the Subsidiaries Guarantee or any Security Document ceases
to be or is not in full force and effect (except in accordance with its
terms or pursuant to subsection 11.13) in any material respect and such
default shall continue unremedied for 30 days after the earlier of receipt
by the Borrower of notice of such default from the Administrative Agent or
actual knowledge of such default by a Responsible Officer, (ii) the
Borrower or any of its Restricted Subsidiaries shall assert in writing that
the Subsidiaries Guarantee or any Security Document has ceased to be or is
not in full force and effect (except in accordance with its terms or
pursuant to subsection 11.13) or (iii) the Lien created by any of the
Security Documents shall cease to be enforceable and of the same effect and
priority purported to be created thereby except to the extent contemplated
hereunder and under the other Loan Documents; or
(j) (i) Any Person or "group" (within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended) (A) shall have
acquired beneficial ownership of 50% or more of any outstanding class of
Capital Stock having ordinary voting power in the election of directors of
the Borrower or (B) shall obtain the power (whether or not exercised) to
elect a majority of the Borrower's directors, or (ii) (A) the Board of
Directors of the Borrower shall not consist of a majority of Continuing
Directors; "Continuing Directors" shall mean the directors of the Borrower
on the Effective Date and each other director, if such other director's
nomination for election to the Board of Directors of the Borrower is
recommended by a majority of the then Continuing Directors and (B) the
Chief Executive Officer of the Borrower shall resign or be removed during
the period commencing three months prior to the date the Board of Directors
shall not consist of a majority of Continuing Directors and ending six
months after such date; or
(k) the occurrence of a Mandatory Prepayment Event with respect to the
Subordinated Debentures or any other Subordinated Debt;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to the
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken: (i) with the consent of
the Majority Lenders, the Administrative Agent may, or upon the request of the
Majority Lenders, the Administrative Agent shall, by notice to the Borrower
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the consent of the Majority Lenders,
the Administrative Agent may, or upon the request of the Majority Lenders, the
Administrative Agent shall, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all
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amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit in
a cash collateral account opened by the Collateral Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Collateral Agent, for the benefit of each Issuing
Bank and the L/C Participants, a security interest in such cash collateral to
secure all obligations of the Borrower under this Agreement and the other Loan
Documents. Amounts held in such cash collateral account shall be applied by the
Collateral Agent to the payment of drafts drawn under such Letters of Credit,
and the unused portion thereof after all such Letters of Credit shall have
expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrower hereunder and under the Notes. After all such
Letters of Credit shall have expired or been fully drawn upon, all Reimbursement
Obligations shall have been satisfied and all other obligations of the Borrower
hereunder and under the Notes shall have been paid in full, the balance, if any,
in such cash collateral account shall be returned to the Borrower. The Borrower
shall execute and deliver to the Collateral Agent, for the account of each
Issuing Bank and the L/C Participants, such further documents and instruments as
the Administrative Agent may reasonably request to evidence the creation and
perfection of the security interest in such cash collateral account.
SECTION 10. THE AGENTS
10.1 Appointment. Each Lender hereby irrevocably designates
and appoints each Agent as the agent of such Lender under this Agreement and the
other Loan Documents, and each Lender irrevocably authorizes each Agent, in such
capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to such Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto, including, without limitation, all powers, rights
and remedies provided in the Master Collateral Agreement. Notwithstanding any
provision to the contrary elsewhere in this Agreement, neither Agent shall have
any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the either
Agent.
10.2 Delegation of Duties. Each Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
10.3 Exculpatory Provisions. No Agent nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by such Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan
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Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. No Agent shall be under any obligation to any Lender to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Borrower.
10.4 Reliance by Agents. Each Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, facsimile, telex or teletype
message, statement, order or other document or conversation 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 (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by such Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. Each Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of Lenders entitled to so act in
accordance with the terms of this Agreement as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of Lenders entitled to so act
in accordance with the terms of this Agreement, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Loans.
10.5 Notice of Default. No Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall
promptly give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by Lenders entitled to so act in accordance with the terms
of this Agreement; provided that unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
10.6 Non-Reliance on Agents and Other Lenders. Each Lender
expressly acknowledges that no Agent nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by either Agent hereafter
taken, including any review of the affairs of the Borrower, shall be deemed to
constitute any representation or warranty by such Agent to any Lender. Each
Lender represents to the Agents that it has, independently and without reliance
upon the Agents or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agents or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or
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not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Administrative Agent hereunder, no Agent
shall have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Borrower which
may come into the possession of such Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
10.7 Indemnification. The Lenders agree to indemnify each
Agent in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective Voting Percentages in effect on the date on which
indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against such Agent in any way relating to
or arising out of, the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by such Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. The agreements in this subsection shall survive the payment
of the Loans and all other amounts payable hereunder. Each Agent shall have the
right to deduct any amount owed to it by any Lender under this Agreement from
any payment made by it to such Lender hereunder.
10.8 Agent in Its Individual Capacity. Each Agent and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from and generally engage in any kind of business with the Borrower as
though such Agent were not an Agent hereunder and under the other Loan
Documents. With respect to the Loans made by it or any Letter of Credit issued
or participated in by it, each Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Lender and may exercise the
same as though it were not an Agent hereunder, and the terms "Lender" and
"Lenders" shall include such Agent in its individual capacity.
10.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 25 Business Days' notice to the Borrower
and the Lenders. If the Administrative Agent shall resign as Administrative
Agent under this Agreement and the other Loan Documents, then the Majority
Lenders shall appoint from among the Lenders a successor agent for the Lenders,
which successor agent (provided that it shall have been approved by the
Borrower), shall succeed to the rights, powers and duties of the Administrative
Agent hereunder. Effective upon such appointment and approval, the term
"Administrative Agent" shall mean such successor agent, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
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SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement nor any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection. The Majority Lenders may, or, with the written consent of the
Majority Lenders, the Administrative Agent or Collateral Agent, as applicable,
may, from time to time, (a) enter into with the applicable Loan Party or Parties
written amendments, supplements or modifications hereto and to the other Loan
Documents for the purpose of adding, deleting or revising any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such
terms and conditions as the Majority Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) reduce the amount or extend the scheduled
date of maturity of any Loan or of any installment thereof, or reduce the stated
rate of any interest or fee payable hereunder or extend the scheduled date of
any payment thereof or increase the amount or extend the expiration date of any
Lender's Commitments, in each case without the consent of each Lender adversely
affected thereby, (ii) (A) amend, modify or waive any provision of this
subsection or of subsection 11.13, or amend, modify or waive the definition of
Collateral Release Event, or consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement and the other
Loan Documents or, except as provided in subsection 11.13 or any other provision
of any other Loan Document, release or subordinate the interest of the
Collateral Agent in all or substantially all of the Collateral or the Subsidiary
Guarantors, in each case without the written consent of all the Lenders, or (B)
reduce the percentage specified in the definition of Majority Lenders or
Required Lenders without the written consent of all the Lenders, (iii) increase
(A) any percentage set forth in the definition of Borrowing Base, Available
Inventory Amount or Available Accounts Receivable Amount or Available L/C Amount
without the consent of all the Lenders, (B) the amount set forth in clause
(b)(ii) of the definition of Borrowing Base without the consent of the Required
Lenders, or (C) the maximum aggregate amount of Commitments hereunder without
the consent of the Required Lenders, (iv) amend, modify or waive any provision
of Section 2 or subsection 4.1(c) without the written consent of the Majority
Term Loan Lenders or reduce the percentage specified in the definition of
Majority Term Loan Lenders without the consent of all the Term Loan Lenders, (v)
amend, modify or waive any provision of Section 3 or of subsection 6.2 without
the prior written consent of the Majority Revolving Credit Lenders or reduce the
percentage specified in the definition of Majority Revolving Credit Lenders
without the consent of all the Revolving Credit Lenders, (vi) amend, modify or
waive any provision of subsection 4.7(c) of this Agreement or of Section 3.5(a)
or 3.5(b) of the Master Collateral Agreement without the written consent of the
Majority Term Loan Lenders and the Majority Revolving Credit Lenders, (vii)
amend, modify or waive any provision of subsections 3.6 through 3.13 without the
consent of each Issuing Bank adversely affected in any material respect thereby,
(viii) amend, modify or waive any provision of subsections 3.14, 3.15 or 3.16
without the consent of each Swing Line Lender, and (ix) amend, modify or waive
any provision of Section 10 without the written consent of each Agent adversely
affected thereby. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Borrower, the Lenders, the Agents and all future holders of the Loans.
In the case of any waiver, the Borrower, the Lenders, and the Agents shall be
restored to their former positions and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon. If, in
connection with any proposed amendment, supplement, modification, consent or
waiver of any provisions of this Agreement or any other Loan Documents as
contemplated by this subsection 11.1,
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the consent of Lenders whose Voting Percentages aggregate at least 90% is
obtained but the consent of one or more of the other Lenders is not obtained,
then the Borrower may replace each such non-consenting Lender or Lenders with
one or more replacement Lenders pursuant to subsection 11.7 so long as at the
time of such replacement, each replacement Lender consents to the proposed
amendment, supplement, modification, consent or waiver, provided, that the
Borrower shall not have the right to replace any Lender solely as a result of
the exercise of such Lender's rights (and the withholding of any required
consent of such Lender) pursuant to clauses (i), (ii) or (iii) of the first
proviso of this subsection 11.1.
11.2 Notices. Unless otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by facsimile transmission) and shall be
deemed to have been duly given or made (a) in the case of delivery by hand
(including by overnight courier), when delivered, (b) in the case of delivery by
mail, three days after being deposited in the mails, postage prepaid, or (c) in
the case of delivery by facsimile transmission, when sent and receipt has been
confirmed, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in Schedule 11.2 in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
The Borrower: Service Merchandise Company, Inc.
7100 Service Merchandise Drive
Brentwood, TN 37027
Attention: Treasurer
Fax: (615) 660-3667
Telephone: (615) 660-3477
The Administrative
Agent: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: William Rindfuss
Fax: (212) 270-1474
Telephone: (212) 270-4565
With a copy to: Chase Agent Bank Services
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Joseph Brusco
Fax: (212) 552-7500
Telephone: (212) 552-7319
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 3.2, 3.4, 3.6, 3.15, 4.1, 4.2 or 4.7
shall not be effective until received. Whenever the Administrative Agent sends a
notice by mail, the Administrative Agent will use reasonable efforts to also
send such notice by one of the other means of notice permitted hereunder,
provided that the failure to do so shall not affect in any way the validity of
any delivery by mail pursuant to this subsection or otherwise result in any
liability to the Administrative Agent or the Lenders.
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11.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
11.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
11.5 Payment of Expenses and Taxes; Indemnity. The Borrower
agrees (a) to pay or reimburse each Agent for all its reasonable out-of-pocket
costs and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of one counsel for all of the Agents together,
(b) (i) to pay or reimburse the Administrative Agent for all its reasonable
out-of-pocket costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, including, without limitation, the fees and
disbursements of counsel to the Administrative Agent, and (ii) to pay or
reimburse each Lender for all its reasonable out-of-pocket costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement, the other Loan Documents and any such other documents following
the occurrence and during the continuation of a Default or an Event of Default,
including, without limitation, the fees and disbursements of counsel to each
Lender, (c) to pay, indemnify, and hold each Lender and Agent (and their
respective directors, officers, employees and agents) harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise (other than excise taxes
imposed in lieu of net income taxes) and other similar taxes, if any, which may
be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold each Lender and
Agent (and their respective directors, officers, employees and agents) harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and reasonable out-of-pocket costs,
expenses or disbursements (including, without limitation, the reasonable fees
and expenses of the same counsel for all of the Lenders or Agents (absent a
conflict of interest or inability to join the relevant actions or proceedings,
in which additional counsel may be retained by the relevant Agents and Lenders))
of any kind or nature whatsoever with respect to any claim, litigation,
investigation or proceeding relating to the execution, delivery, enforcement,
performance and administration of this Agreement and the other Loan Documents
and any such other documents or any use of any of the Extensions of Credit,
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Borrower, any of its Subsidiaries or any of the Properties
(all the foregoing in this clause (d), collectively, the "Indemnified
Liabilities"), provided that the Borrower shall have no obligation hereunder to
any Agent or any Lender (or their respective directors, officers, employees or
agents) with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of any such Agent or any such Lender (or their
respective directors, officers,
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95
employees or agents, as the case may be). The agreements in this subsection
shall survive the termination of this Agreement and the repayment of the Loans
and all other amounts payable hereunder.
11.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agents and their respective successors and assigns,
except that the Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating interests in any
Loan owing to such Lender, any interest of such Lender in any Letter of Credit,
any Commitment of such Lender or any other interest of such Lender hereunder and
under the other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Loan for all purposes under this Agreement
and the other Loan Documents, and the Borrower and the Administrative Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Loan
Documents. No Lender shall be entitled to create in favor of any Participant, in
the participation agreement pursuant to which such Participant's participating
interest shall be created or otherwise, any right to vote on, consent to or
approve any matter relating to this Agreement or any other Loan Document except
for those specified in clauses (i) and (ii) of the proviso to subsection 11.1.
The Borrower agrees that if amounts outstanding under this Agreement are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, provided that, in purchasing
such participating interest, such Participant shall be deemed to have agreed to
share with the Lenders the proceeds thereof as provided in subsection 11.8(a) as
fully as if it were a Lender hereunder. The Borrower also agrees that each
Participant shall be entitled to the benefits of subsections 4.9, 4.10 and 4.11
with respect to its participation in the Commitments and the Loans outstanding
from time to time as if it were a Lender; provided that, in the case of
subsection 4.10, such Participant shall have complied with the requirements of
said subsection and provided, further, that no Participant shall be entitled to
receive any greater amount pursuant to any such subsection than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender may, in the ordinary course of its business of
making or investing in loans and in accordance with applicable law, at any time
and from time to time assign to any Lender or any affiliate thereof or, with the
consent of the Borrower and the Administrative Agent (which in each case shall
not be unreasonably withheld), to an additional bank, financial institution or
other entity that is then engaged in the business of lending money (an
"Assignee") all or any part of its rights and obligations under this Agreement
and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit J, executed by such Assignee and such
assigning Lender (and, in the case of an Assignee that is not then a Lender or
an affiliate thereof, by the Borrower and the Administrative Agent) and
delivered to the Administrative Agent for its acceptance and recording in the
Register, with a copy thereof to the Borrower, provided that (a) in the case of
any such assignment (other than to a Lender or an Affiliate of a Lender), the
sum of the aggregate
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principal amount of the Loans, the aggregate amount of the L/C Obligations and
the aggregate amount of the unused Commitments being assigned and, if such
assignment is of less than all of the rights and obligations of the assigning
Lender, the sum of the aggregate principal amount of the Loans, the aggregate
amount of the L/C Obligations and the aggregate amount of the unused Commitments
remaining with the assigning Lender are each not less than $10,000,000 (or such
lesser amount as may be agreed to by the Borrower and the Administrative Agent),
(b) assignments shall not be required to be made on a ratable basis between the
Commitments and/or Loans held by any Lender, (c) assignments by a Revolving
Credit Lender of all or a portion of its Revolving Loans and/or Revolving Credit
Commitment must be to either (i) a commercial bank having total assets in excess
of $5,000,000,000 or any of its Affiliates, or (ii) a finance company, insurance
company or other financial institution or fund which is regularly engaged in the
making of, purchasing or investing in loans and having total assets in excess of
$300,000,000 ("Eligible Assignee"), (d) any Lender may make an assignment
consisting solely of Term Loans (without regard to the requirements of clause
(a) above) so long as the aggregate principal amount of Term Loans so assigned
is at least $7,500,000, and (e) the consent of the Borrower shall be required in
connection with any assignment to a Lender or an Affiliate of a Lender to the
extent that after giving effect thereto such Lender or Affiliate would be
entitled to receive any greater payment under subsection 4.9, 4.10 or 4.11 at
such time than the assigning Lender is entitled to receive at such time. Upon
such execution, delivery, acceptance and recording, from and after the effective
date determined pursuant to such Assignment and Acceptance, (x) 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 Lender hereunder
with a Commitment as set forth therein, and (y) the assigning Lender thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Notwithstanding any provision of this paragraph (c) and paragraph
(e) of this subsection, the consent of the Borrower shall not be required (other
than as to the minimum amount of any assignment required under this paragraph),
and, unless requested by the Assignee and/or the assigning Lender, new Notes
shall not be required to be executed and delivered by the Borrower, for any
assignment which occurs at any time when any of the events described in Section
9(f) with respect to the Borrower shall have occurred and be continuing.
(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in subsection
11.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the Lenders
and the Commitments of, and principal amounts of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent and the
Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder shall be effective only upon appropriate entries with
respect thereto being made in the Register. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an affiliate thereof, by the Borrower and the
Administrative Agent) together with payment to the Administrative Agent of a
registration and processing fee of $3,000, the Administrative Agent shall (i)
promptly
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accept such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
subject to the provisions of subsection 11.18, any and all financial information
in such Lender's possession concerning the Borrower and its Affiliates which has
been delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection do not prohibit any pledge or
assignment by a Lender of any Loan or Note to any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors or other applicable law
or the creation of a security interest by any Lender other than a commercial
bank.
(h) So long as no Default or Event of Default shall have then
occurred and be continuing, no assignment by a Lender pursuant to this
subsection 11.6 shall be permitted without the consent of the Administrative
Agent and the Borrower if, after giving effect thereto, any Lender would hold in
excess of 25% of the aggregate Voting Percentages at any such time.
11.7 Replacement of Lenders under Certain Circumstances. The
Borrower shall be permitted to replace any Lender which (a) requests
reimbursement for amounts owing pursuant to subsection 4.9 or 4.10, (b) has
received a written notice from the Borrower of an impending change in law that
would entitle such Lender to payment of additional amounts under subsection 4.9
or 4.10(a), unless such Lender designates a different lending office before such
change in law becomes effective and such alternate lending office obviates the
need for the Borrower to make payments of additional amounts under subsection
4.9 or 4.10(a), (c) is affected in the manner described in subsection 4.6(b) or
4.8 and as a result thereof any of the actions described in subsection 4.6 or
4.8, as the case may be, are required to be taken, (d) does not consent to any
proposed amendment, supplement, modification, consent or waiver of any
provisions of this Agreement or any other Loan Document as contemplated by the
last sentence of subsection 11.1, or (e) defaults in its obligation to make
Loans or issue, or participate in, any Letter of Credit, provided that (i) such
replacement does not conflict with any Requirement of Law, (ii) no Event of
Default shall have occurred and be continuing at the time of such replacement,
(iii) the Borrower shall repay (or the replacement bank or institution shall
purchase, at par) all Loans and other amounts owing to such replaced Lender
prior to the date of replacement, (iv) the Borrower shall be liable to such
replaced Lender under subsection 4.11 if any Eurodollar Loan owing to such
replaced Lender shall be prepaid (or purchased) other than on the last day of
the Interest Period relating thereto, (v) the replacement bank or institution,
if not already a Lender, and the terms and conditions of such replacement, shall
be reasonably satisfactory to the Administrative Agent, (vi) the replaced Lender
shall be obligated to make such replacement in accordance with the provisions of
subsection 11.6 (provided that the Borrower or replacement Lender shall be
obligated to pay the registration and processing fee referred to therein), (vii)
until such time as such replacement shall be consummated, the Borrower shall pay
all additional amounts (if any) required pursuant to subsection 4.9 or 4.10, as
the case may be, and (viii) any such replacement shall not be deemed to be a
waiver of any rights which the Borrower, the Administrative Agent or any other
Lender shall have against the replaced Lender.
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11.8 Adjustments; Set-off. (a) If any Lender (a "benefitted
Lender") shall at any time receive any payment of all or part of its Loans or
the Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 9(f), or
otherwise), and, after giving effect to any such payment or the receipt of any
such collateral, such benefitted Lender shall have received a greater
proportionate payment (determined in accordance with subsection 4.7) or interest
in collateral than that received by any other relevant Lender, if any, in
respect of such other relevant Lender's relevant Loans or, if applicable, the
Reimbursement Obligations owing to it, or interest thereon, such benefitted
Lender shall purchase for cash from the other relevant Lenders a participating
or other similar interest in such portion of each such other relevant Lender's
relevant Loans or, if applicable, the Reimbursement Obligations owing to it, or
shall provide such other relevant Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders entitled to the same under this
subsection, provided, however, that if all or any portion of such excess payment
or benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower but subject to the prior consent of the Administrative Agent or the
Majority Lenders, any such notice being expressly waived by the Borrower to the
extent permitted by applicable law, upon any amount becoming due and payable by
the Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) which is not paid when due to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof to or for the credit or the account of the
Borrower. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such set-off and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
11.9 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be lodged with the
Borrower and the Administrative Agent.
11.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.11 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to the subject matter hereof or thereof not
expressly set forth or referred to herein or in the other Loan Documents.
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11.12 Termination. This Agreement shall terminate when the
Commitments have terminated or expired, no Loan or Letter of Credit is
outstanding (other than Letters of Credit which have been cash collateralized in
a manner substantially the same as the manner described pursuant to the
penultimate paragraph of Section 9) and the other then unpaid or accrued Credit
Agreement Obligations have been paid in full.
11.13 Collateral Release. Upon the occurrence of a Collateral
Release Event, the Liens on the Collateral granted pursuant to the Security
Documents or otherwise securing Secured Obligations shall be released
automatically.
11.14 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.15 Submission To Jurisdiction Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action
or proceeding relating to this Agreement and the other Loan
Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of
New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any
thereof;
(b) to the extent permitted by applicable law, consents that
any such action or proceeding may be brought in such courts and
waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court
and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to the Borrower at its address set
forth in subsection 11.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other court of competent
jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary,
punitive or consequential damages.
11.16 Acknowledgements. The Borrower hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan
Documents;
(b) neither any Agent nor any Lender has any fiduciary
relationship with or fiduciary duty to the Borrower arising out
of or in connection with this Agreement or any of the other
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Loan Documents, and the relationship between the Agents and the
Lenders, on the one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of debtor and
creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and
the Lenders or among the Borrower and the Agents.
11.17 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.
11.18 Confidentiality. Each Agent and Lender agrees to keep
confidential all information provided to it by the Borrower or any Agent
pursuant to or in connection with this Agreement that is designated by the
Borrower in writing as confidential (the "Confidential Information"); provided
that nothing herein shall prevent any Lender or Agent from disclosing any such
Confidential Information (i) to any Agent or any other Lender, (ii) to any
Transferee or prospective Transferee which receives such Confidential
Information having been made aware of the confidential nature thereof and which
has agreed in writing to be bound by the terms of this subsection 11.18, (iii)
to its directors, officers, employees, employees of affiliates, examiners and
professional advisers who have a need to know such Confidential Information in
accordance with customary banking practices and who receive such Confidential
Information having been made aware of the restrictions of this subsection and,
in the case of professional advisers, having agreed to be bound thereby, (iv)
upon the request or demand of any Governmental Authority having jurisdiction
over such Lender, (v) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (vi) in connection with the exercise of any remedy
hereunder, (vii) which is now or hereafter becomes generally available to the
public other than as a result of a disclosure by such Lender or Agent or a
disclosure known to such Lender or Agent to have been made by any person or
entity to which such Lender or Agent has delivered such Confidential
Information, (viii) which was available to such Lender or Agent prior to its
disclosure to such Lender or Agent by the Borrower, or (ix) which becomes
available to such Lender or Agent from a source other than the Borrower,
provided that such source is not (1) known to such Lender or Agent to be bound
by a confidentiality agreement with the Borrower or (2) known to such Lender or
Agent to be otherwise prohibited from transmitting the information to such
Lender or Agent by a contractual, legal or fiduciary obligation.
11.19 Section Headings. The Section and subsection headings in
this Agreement are for convenience in reference only and shall not deemed to
alter or affect the interpretation of any provisions hereof.
11.20 Judgment Currency. The obligation of the Borrower under
this Agreement to make payments in respect of each Reimbursement Obligation in
the currency in which it is outstanding (the "Agreement Currency") shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any other currency (the "Judgment Currency")
except to the extent that such tender or recovery of the Judgment Currency
results in the effective receipt by the Lenders or the relevant Issuing Banks,
as the case may be, of the full amount of the Agreement Currency payable under
this Agreement and the Borrower agrees to indemnify the Lenders or the relevant
Issuing Banks, as the case may be (and the Lenders or the relevant Issuing
Banks, as the case may be, shall have an additional legal claim) for any
difference between such full amount and the
<PAGE> 107
101
amount effectively received by such Lenders or such Issuing Banks, as the case
may be, pursuant to any such tender or recovery. Each Lender's or Issuing Bank's
determination of amounts effectively received by such Lender or Issuing Bank
shall be presumed correct absent manifest error. If a judgment in respect of the
obligations of the Borrower hereunder is rendered in a currency other than the
Agreement Currency and if, upon receipt of the full amount of such judgment in
such currency and the conversion into, and receipt of such amount in the
Agreement Currency, such amount of the Agreement Currency exceeds the
obligations of the Borrower hereunder, such excess amount shall be remitted to
the Borrower by the Lenders or the relevant Issuing Banks, as the case may be.
The obligations of the Borrower under this subsection shall survive the
termination of this Agreement and the repayment of the Loans and all other
amounts payable hereunder.
11.21 Special Provisions. (a) From and after the Effective
Date, (i) each Exiting Bank shall cease to be a party to this Agreement, (ii) no
Exiting Bank shall have any obligations or liabilities under this Agreement with
respect to the period from and after the Effective Date and, without limiting
the foregoing, no Exiting Bank shall have any Revolving Credit Commitment under
this Agreement or any participation in any Letter of Credit outstanding
hereunder and (iii) no Exiting Bank shall have any rights under the Existing
Credit Agreement, this Agreement or any other Loan Document (other than rights
under the Existing Credit Agreement expressly stated to survive the termination
of the Existing Credit Agreement and the repayment of amounts outstanding
thereunder).
(b) The Lenders (which are Revolving Credit Lenders under the
Existing Credit Agreement) hereby waive any requirements for notice of
prepayment, commitment terminations, minimum amounts of prepayments of Revolving
Loans (as defined in the Existing Credit Agreement), ratable reductions of
Revolving Credit Commitments (as defined in the Existing Credit Agreement) and
ratable payments on account of the principal or interest of any Revolving Loan
(as defined in the Existing Credit Agreement) under the Existing Credit
Agreement to the extent such prepayment, reductions or payments are required
pursuant to subsection 6.1(p).
(c) The Lenders hereby confirm that, from and after the making
of the initial Loans, all participations of the Lenders in respect of Letters of
Credit outstanding hereunder pursuant to subsection 3.9(a) shall be based upon
the Revolving Credit Commitment Percentages of the Lenders (after giving effect
to this Agreement).
(d) The Borrower hereby releases, effective as of the making
of the initial Loans, in full the Exiting Banks from their obligations in
respect of the Revolving Credit Commitments (as defined in the Existing Credit
Agreement) and, effective as of the Effective Date, the Lenders hereby assume
such obligations, it being understood that such assumption is reflected in the
Commitments of the Lenders hereunder.
11.22 Amendments to Original Mortgages and Aircraft Mortgage.
The Borrower, the Agents and the Lenders acknowledge that certain provisions of
the Original Mortgages and the Aircraft Mortgage are being amended and modified
as provided in the Master Collateral Agreement.
<PAGE> 1
EXHIBIT 11
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER COMMON SHARE (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE PERIODS ENDED NINE PERIODS ENDED
--------------------------- ----------------------------
SEPTEMBER 28 SEPTEMBER 29 SEPTEMBER 28 SEPTEMBER 29
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PRIMARY
Loss before extraordinary item ($ 22,360) ($ 12,324) ($147,124) ($ 38,861)
Extraordinary loss from early extinguishment of debt,
net of tax benefit of $1,585 (2,643) -- (2,643) --
--------- --------- --------- ---------
Net loss ($ 25,003) ($ 12,324) ($149,767) ($ 38,861)
========= ========= ========= =========
Shares:
Weighted average common shares outstanding 99,317 99,216 99,290 99,200
Weighted average shares of restricted
stock outstanding 493 524 497 522
Additional shares assuming exercise of stock options 149 1,597 221 1,642
--------- --------- --------- ---------
Weighted average common shares and common
share equivalents outstanding - primary 99,959 101,337 100,008 101,364
========= ========= ========= =========
Loss before extraordinary item ($ 0.22) ($ 0.12) ($ 1.47) ($ 0.38)
Extraordinary loss from early extinguishment of debt,
net of tax benefit (0.03) -- (0.03) --
--------- --------- --------- ---------
Primary net loss per common share ($ 0.25) ($ 0.12) ($ 1.50) ($ 0.38)
========= ========= ========= =========
ASSUMING FULL DILUTION
Loss before extraordinary item ($ 22,360) ($ 12,324) ($147,124) ($ 38,861)
Extraordinary loss from early estinguishment of debt,
net of tax benefit of $1,585 (2,643) -- (2,643) --
--------- --------- --------- ---------
Net loss ($ 25,003) ($ 12,324) ($149,767) ($ 38,861)
========= ========= ========= =========
Shares:
Weighted average common shares outstanding 99,317 99,216 99,290 99,200
Weighted average shares of restricted
stock outstanding 493 524 497 522
Additional shares assuming exercise of stock options 220 1,597 259 1,666
--------- --------- --------- ---------
Weighted average common shares and common
share equivalents outstanding - fully diluted 100,030 101,337 100,046 101,388
========= ========= ========= =========
Loss before extraordinary item ($ 0.22) ($ 0.12) ($ 1.47) ($ 0.38)
Extraordinary loss from early extinguishment of debt,
net of tax benefit (0.03) -- (0.03) --
--------- --------- --------- ---------
Fully diluted net loss per common share ($ 0.25) ($ 0.12) ($ 1.50) ($ 0.38)
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SERVICE
MERCHANDISE COMPANY, INC. FORM 10-Q FOR THE NINE PERIODS ENDED SEPTEMBER 28,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
DETAILED IN PART I OF THE FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> SEP-28-1997
<CASH> 45,900
<SECURITIES> 0
<RECEIVABLES> 42,510
<ALLOWANCES> 2,541
<INVENTORY> 1,165,586
<CURRENT-ASSETS> 1,360,904
<PP&E> 1,158,673
<DEPRECIATION> 623,139
<TOTAL-ASSETS> 1,934,816
<CURRENT-LIABILITIES> 827,324
<BONDS> 768,034
0
0
<COMMON> 99,800<F1>
<OTHER-SE> 228,153
<TOTAL-LIABILITY-AND-EQUITY> 1,934,816
<SALES> 2,219,905
<TOTAL-REVENUES> 2,219,905
<CGS> 1,730,887
<TOTAL-COSTS> 1,730,887
<OTHER-EXPENSES> 670,609<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,808
<INCOME-PRETAX> (235,399)
<INCOME-TAX> (88,275)
<INCOME-CONTINUING> (147,124)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,643)
<CHANGES> 0
<NET-INCOME> (149,767)
<EPS-PRIMARY> (1.50)
<EPS-DILUTED> (1.50)
<FN>
<F1>AMOUNT REPRESENTS THE NUMBER OF SHARES OF $0.50 PAR VALUE COMMON STOCK
ISSUED AND OUTSTANDING.
<F2>AMOUNT INCLUDES I) DEPRECIATION AND AMORTIZATION II) SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES AND III) RESTRUCTURING CHARGE INCURRED IN THE FIRST
QUARTER OF 1997.
</FN>
</TABLE>
