<PAGE>
===============================================================================
THIS PROSPECTUS IS FILED
PURSUANT TO RULE 424(B)(3) OF THE SECURITIES ACT OF 1933
=============================
PROSPECTUS SUPPLEMENT
TO PROSPECTUS
DATED FEBRUARY 9, 1998
=============================
DUANE READE INC.
9-1/4% SENIOR SUBORDINATED NOTES DUE 2008
ATTACHED IS THE COMPANY'S REPORT ON FORM 8-K
===============================================================================
<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K
-----------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 11, 1998
----------------------------
Date of report (Date of earliest event reported)
DUANE READE INC.
(exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 001-13843 04-3164702
-------------------- -------------------- --------------------
<S> <C> <C>
(State or other jurisdiction of Commission File Number (I.R.S. Employer Identification
incorporation or organization) Number)
</TABLE>
440 NINTH AVENUE, NEW YORK, NEW YORK 10001
-----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 273-5700
-----------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
-----------------------------------------------------------------
(Former name or former address, if changed since last report.)
===============================================================================
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Duane Reade, a New York general partnership ("Duane Reade"), and a
wholly-owned subsidiary of Duane Reade Inc., a Delaware corporation,
consummated the acquisition of substantially all of the operating assets
(including inventory and store leases) of Rock Bottom Stores, Inc., a Delaware
corporation ("Rock Bottom"), on September 11, 1998, for a purchase price of
approximately $30 million plus approximately $31 million in inventory, subject
to certain purchase price adjustments.
Prior to the acquisition, Rock Bottom operated 38 retail stores in the
greater New York City area, including Nassau and Suffolk counties. Duane Reade
plans to continue to operate a number of the acquired stores as retail drug
stores, converting them from the "Rock Bottom" to the "Duane Reade" operating
name and format over the next few months and adding pharmacy departments to
Rock Bottom stores that currently do not have such departments. In addition,
Duane Reade may elect to sell or close certain of the acquired stores. Duane
Reade funded the purchase price for the acquisition through a concurrent
borrowing of an additional $70 million from DLJ Capital Funding, Inc., as
syndication agent for various lenders, through an amendment of its existing
credit facility.
Except for historical information contained herein, the statements in
this Report on Form 8-K are forward-looking and made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties,
which may cause the Company's actual results in future periods to differ
materially from forecasted or expected results. Those risks include, among
other things, the competitive environment in the drugstore industry in general
and in the Company's specific market area, inflation, changes in costs of goods
and services and economic conditions in general and in the Company's specific
market area.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) and (b) Financial Statements and Pro Forma Financial Statements.
To be filed by amendment.
(c) The following documents are furnished as Exhibits to this Current
Report on Form 8-K pursuant to Item 601 of Regulation S-K:
10.14 Amended and Restated Credit Agreement, dated as of September 11,
1998, among Duane Reade, Duane Reade Inc., DRI I Inc., various
financial institutions, as Lenders, DLJ Capital Funding, Inc., as
Syndication Agent, Fleet National Bank, as Administrative Agent,
and Credit Lyonnais New York Branch, as Documentation Agent.
10.15 Amended and Restated Partnership Agreement, dated as of September
11, 1998, among Duane Reade Inc., DRI I Inc. and Fleet National
Bank, as Administrative Agent.
10.16 Amended and Restated Borrower Security Agreement, dated as of
September 11, 1998, between Duane Reade and Fleet National Bank,
as Administrative Agent.
10.17 Amended and Restated Holdings Pledge Agreement, dated as of
September 11, 1998 between Duane Reade Inc. and Fleet National
Bank, as Administrative Agent.
10.18 Amendment Agreement to Credit Agreement, dated as of September
11, 1998, among Duane Reade, Duane Reade Inc., DRI I Inc.,
various financial institutions as Lenders, DLJ Capital Funding,
Inc., as Syndication Agent, Fleet National Bank, as
Administrative Agent, and Credit Lyonnais New York Branch, as
Documentation Agent.
*99.1 Press Release of the Company dated August 4, 1998.
99.2 Press Release of the Company dated September 15, 1998.
- --------
* Incorporated by reference from the Company's Current Report on Form 8-K,
dated August 7, 1998.
<PAGE>
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 hereunto duly authorized.
Date: September 24, 1998
DUANE READE INC.
By: /s/ William J. Tennant
--------------------------
Name: William J. Tennant
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
DOC. NO. DOCUMENT DESCRIPTION
- -------- ---------------------
10.14 Amended and Restated Credit Agreement, dated as of September 11, 1998,
among Duane Reade, Duane Reade Inc., DRI I Inc., various financial
institutions, as Lenders, DLJ Capital Funding, Inc., as Syndication
Agent, Fleet National Bank, as Administrative Agent, and Credit Lyonnais
New York Branch, as Documentation Agent.
10.15 Amended and Restated Partnership Agreement, dated as of September 11,
1998, among Duane Reade Inc., DRI I Inc. and Fleet National Bank, as
Administrative Agent.
10.16 Amended and Restated Borrower Security Agreement, dated as of September
11, 1998, between Duane Reade and Fleet National Bank, as Administrative
Agent.
10.17 Amended and Restated Holdings Pledge Agreement, dated as of September
11, 1998 between Duane Reade Inc. and Fleet National Bank, as
Administrative Agent.
10.18 Amendment Agreement to Credit Agreement, dated as of September 11, 1998,
among Duane Reade, Duane Reade Inc., DRI I Inc., various financial
institutions as Lenders, DLJ Capital Funding, Inc., as Syndication
Agent, Fleet National Bank, as Administrative Agent, and Credit Lyonnais
New York Branch, as Documentation Agent.
*99.1 Press Release of the Company dated August 4, 1998.
99.2 Press Release of the Company dated September 15, 1998.
- --------
* Incorporated by reference from the Company's Current Report on Form 8-K,
dated August 7, 1998.
<PAGE>
[EXECUTION COPY]
U.S. $240,000,000
AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of September 11, 1998
(amending and restating the Credit Agreement,
dated as of February 13, 1998),
among
DUANE READE,
as the Borrower,
DUANE READE INC.
(formerly known as Duane Reade Holding Corp.)
and
DRI I INC.
(formerly known as Duane Reade Inc.),
as the Parent Guarantors,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent for the Lenders,
FLEET NATIONAL BANK,
as the Administrative Agent for the Lenders,
and
CREDIT LYONNAIS NEW YORK BRANCH, as
the Documentation Agent for the Lenders.
LEAD ARRANGER:
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms........................................................................................ 4
1.2. Use of Defined Terms................................................................................. 37
1.3. Cross-References..................................................................................... 37
1.4. Accounting and Financial Determinations.............................................................. 38
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
NOTES AND LETTERS OF CREDIT
2.1. Commitments.......................................................................................... 38
2.1.1. Additional Term C Loan Commitments................................................................... 39
2.1.2. Revolving Loan Commitment and Swing Line Loan Commitment............................................. 39
2.1.3. Letter of Credit Commitment.......................................................................... 40
2.1.4. Lenders Not Permitted or Required to Make the Loans.................................................. 40
2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit.......................................... 40
2.2. Reduction of the Commitment Amounts.................................................................. 40
2.2.1. Optional............................................................................................. 41
2.2.2. Mandatory............................................................................................ 41
2.3. Borrowing Procedures and Funding Maintenance......................................................... 41
2.3.1. Additional Term C Loans and Revolving Loans.......................................................... 41
2.3.2. Swing Line Loans..................................................................................... 42
2.3.3. Existing Revolving Loans, Existing Term A Loans, Existing Term B Loans and
OriginalTerm C Loans................................................................................. 44
2.4. Continuation and Conversion Elections................................................................ 44
2.5. Funding.............................................................................................. 44
2.6. Issuance Procedures.................................................................................. 45
2.6.1. Other Lenders' Participation......................................................................... 45
2.6.2. Disbursements; Conversion to Revolving Loans......................................................... 46
2.6.3. Reimbursement........................................................................................ 46
2.6.4. Deemed Disbursements................................................................................. 47
2.6.5. Nature of Reimbursement Obligations.................................................................. 47
2.6.6. Indemnity............................................................................................ 48
2.6.7. Borrower's Guaranty of Reimbursement Obligations under Letters of Credit
Issued for the Account of its Subsidiaries........................................................... 48
2.6.8. Continued Letters of Credit.......................................................................... 52
2.7. Register; Notes...................................................................................... 52
<PAGE>
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments; Application.............................................................. 53
3.1.1. Repayments and Prepayments........................................................................... 53
3.1.2. Application.......................................................................................... 58
3.2. Interest Provisions.................................................................................. 59
3.2.1. Rates................................................................................................ 59
3.2.2. Post-Maturity Rates.................................................................................. 59
3.2.3. Payment Dates........................................................................................ 60
3.3. Fees................................................................................................. 60
3.3.1. Commitment Fee....................................................................................... 60
3.3.2. Syndication Agent's, Administrative Agent's and Arranger's Fees...................................... 61
3.3.3. Letter of Credit Fee................................................................................. 61
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful........................................................................... 61
4.2. Deposits Unavailable................................................................................. 62
4.3. Increased LIBO Rate Loan Costs, etc.................................................................. 62
4.4. Funding Losses....................................................................................... 62
4.5. Increased Capital Costs.............................................................................. 63
4.6. Taxes................................................................................................ 63
4.7. Payments, Computations, etc.......................................................................... 64
4.8. Sharing of Payments.................................................................................. 65
4.9. Setoff............................................................................................... 65
4.10. Replacement of Lenders............................................................................... 66
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
5.1. [INTENTIONALLY OMITTED].............................................................................. 67
5.2. All Credit Extensions................................................................................ 67
5.2.1. Compliance with Warranties, No Default, etc.......................................................... 67
5.2.2. Credit Extension Request............................................................................. 67
-ii-
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc.................................................................................... 68
6.2. Due Authorization, Non-Contravention, etc............................................................ 68
6.3. Government Approval, Regulation, etc................................................................. 68
6.4. Validity, etc........................................................................................ 69
6.5. Financial Information................................................................................ 69
6.6. No Material Adverse Change........................................................................... 69
6.7. Litigation, Labor Controversies, etc................................................................. 69
6.8. Subsidiaries......................................................................................... 70
6.9. Ownership of Properties.............................................................................. 70
6.10. Taxes................................................................................................ 70
6.11. Pension and Welfare Plans............................................................................ 70
6.12. Environmental Warranties............................................................................. 70
6.13. Regulations U and X.................................................................................. 72
6.14. Accuracy of Information.............................................................................. 72
6.15. Solvency............................................................................................. 73
6.16. Pharmaceutical Laws.................................................................................. 73
6.17. Seniority of the Obligations and Senior Debt under the Senior
Subordinated Indenture............................................................................... 73
6.18. Year 2000............................................................................................ 74
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants................................................................................ 75
7.1.1. Financial Information, Reports, Notices, etc......................................................... 75
7.1.2. Compliance with Laws, etc............................................................................ 77
7.1.3. Maintenance of Properties............................................................................ 78
7.1.4. Insurance............................................................................................ 78
7.1.5. Books and Records.................................................................................... 79
7.1.6. Environmental Covenant............................................................................... 79
7.1.7. Future Subsidiaries.................................................................................. 80
7.1.8. Future Leased Property and Future Acquisitions of Real Property;
Future Acquisition of Other Property................................................................. 81
7.1.9. Use of Proceeds, etc................................................................................. 82
7.1.10. Hedging Obligations.................................................................................. 83
7.1.11. [INTENTIONALLY OMITTED].............................................................................. 83
7.1.12. Maintenance of Corporate Separateness................................................................ 83
7.1.13. Borrower Indebtedness................................................................................ 83
7.1.14. Existing Mortgage.................................................................................... 83
7.2. Negative Covenants................................................................................... 84
7.2.1. Business Activities.................................................................................. 84
-iii-
<PAGE>
7.2.2. Indebtedness......................................................................................... 84
7.2.3. Liens................................................................................................ 86
7.2.4. Financial Covenants.................................................................................. 87
7.2.5. Investments.......................................................................................... 89
7.2.6. Restricted Payments, etc............................................................................. 91
7.2.7. Capital Expenditures, etc............................................................................ 92
7.2.8. Consolidation, Merger, etc........................................................................... 93
7.2.9. Asset Dispositions, etc.............................................................................. 93
7.2.10. Modification of Certain Agreements................................................................... 94
7.2.11. Transactions with Affiliates......................................................................... 95
7.2.12. Negative Pledges, Restrictive Agreements, etc........................................................ 95
7.2.13. Stock of Subsidiaries................................................................................ 95
7.2.14. Sale and Leaseback................................................................................... 95
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default......................................................................... 96
8.1.1. Non-Payment of Obligations........................................................................... 96
8.1.2. Breach of Warranty................................................................................... 96
8.1.3. Non-Performance of Certain Covenants and Obligations................................................. 96
8.1.4. Non-Performance of Other Covenants and Obligations................................................... 97
8.1.5. Default on Other Indebtedness........................................................................ 97
8.1.6. Judgments............................................................................................ 97
8.1.7. Pension Plans........................................................................................ 97
8.1.8. Change in Control.................................................................................... 97
8.1.9. Bankruptcy, Insolvency, etc.......................................................................... 97
8.1.10. Impairment of Security, etc.......................................................................... 98
8.2. Action if Bankruptcy, etc............................................................................ 99
8.3. Action if Other Event of Default..................................................................... 99
ARTICLE IX
GUARANTY
9.1. Guaranty............................................................................................. 99
9.2. Acceleration of Parent Guaranty......................................................................100
9.3. Guaranty Absolute, etc...............................................................................100
9.4. Reinstatement, etc...................................................................................101
9.5. Waiver, etc..........................................................................................101
9.6. Postponement of Subrogation, etc.....................................................................101
9.7. Successors, Transferees and Assigns; Transfers of Notes, etc.........................................102
ARTICLE X
-iv-
<PAGE>
THE AGENTS
10.1. Actions..............................................................................................103
10.2. Funding Reliance, etc................................................................................103
10.3. Exculpation..........................................................................................104
10.4. Successor............................................................................................104
10.5. Credit Extensions by each Agent......................................................................105
10.6. Credit Decisions.....................................................................................105
10.7. Copies, etc..........................................................................................105
10.8. The Swing Line Lender, the Issuer, the Documentation Agent,
the Syndication Agent and the Administrative Agent...................................................105
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Waivers, Amendments, etc.............................................................................106
11.2. Notices..............................................................................................107
11.3. Payment of Costs and Expenses........................................................................108
11.4. Indemnification......................................................................................108
11.5. Survival.............................................................................................110
11.6. Severability.........................................................................................110
11.7. Headings.............................................................................................110
11.8. Execution in Counterparts, Effectiveness, etc........................................................110
11.9. Governing Law; Entire Agreement......................................................................110
11.10. Successors and Assigns...............................................................................110
11.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes..............................111
11.11.1. Assignments..........................................................................................111
11.11.2. Participations.......................................................................................113
11.12. Other Transactions...................................................................................114
11.13. Independence of Covenants............................................................................114
11.14. Confidentiality......................................................................................114
11.15. Forum Selection and Consent to Jurisdiction..........................................................115
11.16. Waiver of Jury Trial.................................................................................116
</TABLE>
-v-
<PAGE>
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Percentages and Administrative Information
SCHEDULE III - Additional Term C Loan Commitment Percentages
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Term A Note
EXHIBIT A-3 - Form of Term B Note
EXHIBIT A-4 - Form of Existing Term C Note
EXHIBIT A-5 - Form of Additional Term C Note
EXHIBIT A-6 - Form of Registered Note
EXHIBIT A-7 - Form of Swing Line Note
EXHIBIT B-1 - Form of Borrowing Request
EXHIBIT B-2 - Form of Issuance Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Amendment Effective Date Certificate
EXHIBIT E - Form of Compliance Certificate
EXHIBIT F-1 - Form of Partnership Security Agreement
EXHIBIT F-2 - Form of Borrower Security Agreement
EXHIBIT F-3 - Form of Subsidiary Security Agreement
EXHIBIT G-1 - Form of Holdings Pledge Agreement
EXHIBIT G-2 - Form of Borrower Pledge Agreement
EXHIBIT G-3 - Form of Subsidiary Pledge Agreement
EXHIBIT H - Form of Subsidiary Guaranty
EXHIBIT I - Form of Perfection Certificate
EXHIBIT J - Form of Lender Assignment Agreement
EXHIBIT K - Form of Opinion of New York Counsel to the Obligors
EXHIBIT L-1 - Form of Holdings Solvency Certificate
EXHIBIT L-2 - Form of Borrower Solvency Certificate
-vi-
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of September 11,
1998, is made among DUANE READE, a New York general partnership (the
"Borrower"), DUANE READE INC. (formerly known as Duane Reade Holding Corp.), a
Delaware corporation ("Holdings"), DRI I INC. (formerly known as Duane Reade
Inc.), a Delaware corporation ("DRI I" and, together with Holdings,
collectively, the "Parent Guarantors"), the various financial institutions as
are or may become parties hereto (collectively, the "Lenders"), DLJ CAPITAL
FUNDING, INC. ("DLJ"), as syndication agent (in such capacity, the "Syndication
Agent") for the Lenders, FLEET NATIONAL BANK ("Fleet"), as administrative agent
(in such capacity, the "Administrative Agent") for the Lenders and CREDIT
LYONNAIS NEW YORK BRANCH ("Credit Lyonnais"), as the documentation agent (in
such capacity, the "Documentation Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of February 13,
1998 (together with all Loan Documents (as defined therein), in each case as
amended prior to the date hereof, the "Existing Credit Agreement"), among the
Borrower, the Parent Guarantors, the various financial institutions party
thereto (collectively, the "Existing Lenders"), the Syndication Agent, the
Administrative Agent and the Documentation Agent, the Existing Lenders made and
were committed to make Credit Extensions to the Borrower on the terms and
conditions set forth therein;
WHEREAS, the Borrower and the Parent Guarantors have requested that
the Existing Credit Agreement be amended and restated in its entirety to become
effective and binding on the Borrower and the Parent Guarantors pursuant to the
terms of this Agreement, and the Lenders (including the Existing Lenders) have
agreed (subject to the terms of this Agreement) to amend and restate the
Existing Credit Agreement in its entirety to read as set forth in this
Agreement, and it has been agreed by the parties to the Existing Credit
Agreement that (a) the commitments which the Existing Lenders have agreed to
extend to the Borrower under the Existing Credit Agreement shall be extended or
advanced upon the amended and restated terms and conditions contained in this
Agreement, and (b) any outstanding credit extensions made and other Obligations
outstanding under the Existing Credit Agreement shall be governed by and deemed
to be outstanding under the amended and restated terms and conditions contained
in this Agreement, with the intent that the terms of this Agreement shall
supersede the terms of the Existing Credit Agreement (which shall hereafter
have no further effect upon the parties thereto, other than for accrued fees
and expenses and other obligations arising under those provisions which by
their terms survive the termination of the Existing Credit Agreement);
provided, that any Rate Protection Agreements (as defined in the Existing
Credit Agreement) with any one or
<PAGE>
more Existing Lenders (or their respective Affiliates) shall continue unamended
and in full force and effect;
WHEREAS, Holdings and the Borrower refinanced (the "Refinancing")
their then outstanding Indebtedness, and in connection with such Refinancing,
Daboco Inc., a New York corporation, a Wholly-owned Subsidiary of Holdings and
a general partner of the Borrower ("Daboco"), merged with and into Holdings
(the "Merger"), with Holdings being the surviving corporation of the Merger;
WHEREAS, approximately $320,550,000 was required to consummate the
Refinancing including fees and expenses related to the Original Transaction (as
defined below), which Holdings and the Borrower raised through:
(a) the issuance by Holdings of 9 1/4% senior subordinated
notes due 2008 (the "Senior Subordinated Notes") for gross cash
proceeds of at least $80,000,000;
(b) the issuance and sale by Holdings of approximately
6,700,000 shares of its common stock in an initial public offering
(the "IPO") for gross cash proceeds of at least $110,550,000; and
(c) Borrowings of approximately $130,000,000 which were
comprised of (i) Existing Term A Loans in a principal amount of
$50,000,000 and (ii) Existing Term B Loans in a principal amount of
$80,000,000 which loans shall continue to remain outstanding hereunder
in accordance with the terms hereof (including such terms relating to
the amortization thereof (including Section 3.1.1));
WHEREAS, such proceeds were used:
(a) to defease and redeem Holdings' $123,368,000 aggregate
principal amount at maturity (approximately $100,100,000 Accreted
Value) of then outstanding 15% Senior Subordinated Zero Coupon Notes
due 2004 (the "Holdings Subordinated Notes");
(b) to defease and redeem the Borrower's $89,893,000
aggregate principal amount of then outstanding 12% Senior Notes due
September 15, 2002, Series B (the "Senior Notes");
(c) to refinance approximately $90,000,000 of Indebtedness
then outstanding under the Borrower's existing senior credit
facilities, evidenced by that certain credit agreement, dated as of
September 30, 1997 (as amended, supplemented, amended and restated or
otherwise modified prior to the Closing Date, the "Original Credit
Agreement"), among the Borrower, Holdings, Daboco, DRI I, the lenders
parties thereto, DLJ, as the syndication agent, Fleet, as the
administrative agent, and Credit Lyonnais New York Branch, as the
documentation agent; and
-2-
<PAGE>
(d) to pay accrued interest, prepayment premiums and
reasonable fees and expenses associated with the Refinancing, the
Merger, the issuance of the Senior Subordinated Notes, the IPO, the
financing contemplated under the Existing Credit Agreement and all
other transactions related thereto (collectively, the "Original
Transaction") of approximately $32,000,000;
WHEREAS, in connection with certain purchases of inventory, the
Borrower made Borrowings of Original Term C Loans on August 14, 1998 in a
principal amount of $10,000,000 which loans shall continue to remain
outstanding hereunder in accordance with the terms hereof (including such terms
relating to the amortization thereof (including Section 3.1.1));
WHEREAS, pursuant to an Asset Purchase Agreement, dated August 4, 1998
(the "Asset Purchase Agreement"), among the Borrower (as successor to Holdings
thereunder by an assignment dated as of September 10, 1998 between Holdings and
the Borrower), Rock Bottom Stores, Inc., a Delaware corporation ("Rock Bottom")
and Connrak Distributors, Inc., a Delaware corporation ("Connrak"; and,
together with Rock Bottom, the "Sellers"), the Borrower has agreed, subject to
the terms and conditions set forth therein, to acquire (the "Rock Bottom
Acquisition"; and together with the financings contemplated hereunder and all
other transactions related thereto, collectively, the "New Transaction"; and
together with the Original Transaction, collectively, the "Transaction")
substantially all of the assets (and certain liabilities related thereto) and
properties used by the Sellers in their retail health, beauty aid and drug
store business in various locations throughout the greater New York City area;
WHEREAS, in connection with the Rock Bottom Acquisition and the
ongoing working capital and general corporate needs of the Borrower, the
Borrower desires to obtain or continue the following financing facilities from
the Lenders:
(a) an Additional Term C Loan Commitment pursuant to which
Borrowings of Additional Term C Loans will be made to the Borrower on
the Amendment Effective Date in a maximum, original principal amount
of $70,000,000;
(b) a Revolving Loan Commitment (to include availability for
Revolving Loans, Swing Line Loans and Letters of Credit) pursuant to
which Borrowings of Revolving Loans, in a maximum aggregate
outstanding principal amount (together with the aggregate outstanding
amount of all Swing Line Loans and Letter of Credit Outstandings) not
to exceed $30,000,000 are and will continue to be made to the Borrower
from time to time on and subsequent to the Closing Date but prior to
the Revolving Loan Commitment Termination Date;
(c) a Letter of Credit Commitment pursuant to which the
Issuer does and will continue to issue Letters of Credit for the
account of the Borrower from time to time on and subsequent to the
Closing Date but prior to the Revolving Loan Commitment Termination
Date in a maximum aggregate Stated Amount at any one time outstanding
-3-
<PAGE>
not to exceed $10,000,000 (provided, that the aggregate outstanding
amount of all Revolving Loans, Swing Line Loans and Letter of Credit
Outstandings at any time shall not exceed the then existing Revolving
Loan Commitment Amount); and
(d) a Swing Line Loan Commitment pursuant to which Borrowings
of Swing Line Loans in an aggregate outstanding principal amount not
to exceed $5,000,000 were and will continue to be made to the Borrower
on and from time to time subsequent to the Closing Date but prior to
the Revolving Loan Commitment Termination Date (provided, that the
aggregate outstanding amount of all Swing Line Loans, Revolving Loans
and Letter of Credit Outstandings at any time shall not exceed the
then existing Revolving Loan Commitment Amount);
with the proceeds of the Credit Extensions to be used for the purposes set
forth in Section 7.1.9; and
WHEREAS, the Lenders and the Issuer are willing, on the terms and
subject to the conditions set forth in the Amendment Agreement (including
Article III thereof) and hereinafter set forth (including Article V), to so
amend and restate the Existing Credit Agreement and to extend the Commitments
and make the Loans described herein to the Borrower and issue (or participate
in) Letters of Credit for the account of the Borrower;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Accreted Value" is defined in the indenture relating to the Holdings
Subordinated Notes and entered into by and between Holdings and The Connecticut
National Bank, as trustee thereunder, as in effect on the Closing Date.
"Additional Term C Loan Commitment" is defined in Section 2.1.1.
"Additional Term C Loan Commitment Amount" means $70,000,000.
"Additional Term C Loans" is defined in Section 2.1.1.
-4-
<PAGE>
"Additional Term C Note" means a promissory note of the Borrower
payable to the order of any Lender, in the form of Exhibit A-5 hereto (as such
promissory note may be amended, endorsed or otherwise modified from time to
time in accordance with the terms hereof and thereof), evidencing the aggregate
Indebtedness of the Borrower to such Lender resulting from outstanding
Additional Term C Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Administrative Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 10.4.
"Administrative Agent's Fee Letter" means the confidential fee letter,
dated as of September 11, 1998, between the Borrower and the Administrative
Agent which supersedes the confidential fee letter, dated as of February 13,
1998, between the Borrower and the Administrative Agent.
"Affected Lender" is defined in Section 4.10.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power (a)
to vote 10% or more of the securities (on a fully diluted basis) having
ordinary voting power for the election of directors or managing general
partners, or (b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agent" means, as the context may require, the Administrative Agent
and/or the Syndication Agent.
"Agreement" means, on any date, the Existing Credit Agreement as
amended and restated as of the Amendment Effective Date and as the same may
thereafter from time to time be further amended, supplemented, amended and
restated, or otherwise modified and in effect on such date.
"Alternate Base Rate" means, for any day and with respect to all Base
Rate Loans, the higher of: (a) 0.50% per annum above the Federal Funds Rate
most recently determined by the Administrative Agent; and (b) the rate of
interest in effect for such day as most recently publicly announced or
established by the Administrative Agent in Boston, Massachusetts, as its "prime
rate." (The "prime rate" is a rate set by the Administrative Agent based upon
various factors including the Administrative Agent's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above or below such announced
rate.) Any change in the reference rate established or announced by the
Administrative Agent shall take effect at the opening of business on the day of
such establishment or announcement.
-5-
<PAGE>
"Amendment Effective Date" means the date all closing conditions set
forth in Section 3.1 of the Amendment Agreement are satisfied.
"Amendment Effective Date Certificate" is defined in Section 3.1.3 of
the Amendment Agreement.
"Amendment Agreement" means the Amendment Agreement, dated as of
September 11, 1998, among the Borrower, the Parent Guarantors, the Lenders
party thereto, the Documentation Agent and the Agents.
"Applicable Commitment Fee" means, (a) for each day from the Amendment
Effective Date through (but excluding) the date upon which the Compliance
Certificate for the second full Fiscal Quarter following the Amendment
Effective Date is delivered or required to be delivered by Holdings to the
Administrative Agent pursuant to clause (d) of Section 7.1.1, a fee which shall
accrue at a rate of 1/2 of 1% per annum, and (b) for each day thereafter, a fee
which shall accrue at the applicable rate per annum set forth below under the
column entitled "Applicable Commitment Fee", determined by reference to the
Leverage Ratio as in effect for the Fiscal Quarter last ended as of such time
of determination:
APPLICABLE
LEVERAGE RATIO COMMITMENT FEE
-------------- --------------
greater than or equal to 3.5 0.500%
less than 3.5 0.375%
With respect to any time of determining the Applicable Commitment Fee, the
Leverage Ratio used to compute the Applicable Commitment Fee shall be equal to
the Leverage Ratio set forth in the Compliance Certificate most recently
delivered by Holdings to the Administrative Agent, as of such time of
determination pursuant to clause (d) of Section 7.1.1. Changes in the
Applicable Commitment Fee resulting from a change in the Leverage Ratio shall
become effective upon delivery by Holdings to the Administrative Agent of a new
Compliance Certificate pursuant to clause (d) of Section 7.1.1. If Holdings
fails to deliver a Compliance Certificate within the number of days required
pursuant to clause (d) of Section 7.1.1, the Applicable Commitment Fee from and
including the first day after the date on which such Compliance Certificate was
required to be delivered through (but excluding) the date Holdings actually
delivers to the Administrative Agent an appropriately completed Compliance
Certificate shall conclusively equal the highest Applicable Commitment Fee set
forth above.
"Applicable Margin" means at all times during the applicable periods
set forth below,
(a) from the Amendment Effective Date through (but excluding)
the date upon which the Compliance Certificate for the second full
Fiscal Quarter following the Amendment Effective Date is delivered by
Holdings to the Administrative Agent pursuant to clause (d) of Section
7.1.1, with respect to the unpaid principal amount of (i)
-6-
<PAGE>
each Term B Loan, each Existing Term C Loan and each Additional Term C
Loan maintained as a (A) Base Rate Loan, 2.00% per annum and (B) LIBO
Rate Loan, 3.00% per annum, (ii) each Swing Line Loan (each of which
shall be borrowed and maintained only as a Base Rate Loan), 1.75% per
annum, and (iii) each Term A Loan and each Revolving Loan maintained
as (A) a Base Rate Loan, 1.75% per annum and (B) a LIBO Rate Loan,
2.75% per annum; and
(b) at all times after the date of such delivery of the
Compliance Certificate described in clause (a) above, with respect to
the unpaid principal amount of (i) each Swing Line Loan (each of which
shall be borrowed and maintained only as a Base Rate Loan) and each
Term A Loan and each Revolving Loan maintained as a Base Rate Loan, by
reference to the Leverage Ratio and at the applicable percentage per
annum set forth below under the column entitled "Applicable Margin for
Term A Loans, Revolving Loans and Swing Line Loans maintained as Base
Rate Loans"; (ii) each Term A Loan and each Revolving Loan maintained
as a LIBO Rate Loan, by reference to the Leverage Ratio and at the
applicable percentage per annum set forth below under the column
entitled "Applicable Margin for Term A Loans and Revolving Loans
Maintained as LIBO Rate Loans"; (iii) each Term B Loan, each Existing
Term C Loan and each Additional Term C Loan maintained as a Base Rate
Loan by reference to the Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for Term B Loans, Existing Term C Loan and
Additional Term C Loans maintained as Base Rate Loans"; and (iv) each
Term B Loan, each Existing Term C Loan and each Additional Term C Loan
maintained as a LIBO Rate Loan, by reference to the Leverage Ratio and
at the applicable percentage per annum set forth below under the
column entitled "Applicable Margin for Term B Loans, Existing Term C
Loan and Additional Term C Loans maintained as LIBO Rate Loans":
<TABLE>
<CAPTION>
APPLICABLE APPLICABLE APPLICABLE
MARGIN FOR TERM MARGIN FOR TERM MARGIN FOR TERM
A LOANS, APPLICABLE B LOANS, EXISTING B LOANS, EXISTING
REVOLVING LOANS MARGIN FOR TERM TERM C LOAN AND TERM C LOAN AND
AND SWING LINE A LOANS AND ADDITIONAL TERM ADDITIONAL TERM
LOANS MAINTAINED REVOLVING LOANS C LOANS C LOANS
AS MAINTAINED AS MAINTAINED AS MAINTAINED AS
LEVERAGE RATIO BASE RATE LOANS LIBO RATE LOANS BASE RATE LOANS LIBO RATE LOANS
-------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
greater than 5.00 1.75% 2.75% 2.00% 3.00%
less than or equal to 5.00 and greater than or equal to 4.00 1.50% 2.50% 1.75% 2.75%
less than or equal to 4.00 and greater than or equal to 3.50 1.00% 2.00% 1.75% 2.75%
less than or equal to 3.50 and greater than or equal to 3.00 0.50% 1.50% 1.75% 2.75%
less than or equal to 3.00 0.25% 1.25% 1.75% 2.75%
</TABLE>
-7-
<PAGE>
The Leverage Ratio used to compute the Applicable Margin for Swing Line Loans,
Term A Loans, Term B Loans, Existing Term C Loans, Additional Term C Loans and
Revolving Loans shall be equal to the Leverage Ratio set forth in the
Compliance Certificate most recently delivered by Holdings to the
Administrative Agent pursuant to clause (d) of Section 7.1.1. Changes in the
Applicable Margin for such Loans resulting from a change in the Leverage Ratio
shall become effective upon delivery by Holdings to the Administrative Agent of
a new Compliance Certificate pursuant to clause (d) of Section 7.1.1. If
Holdings fails to deliver a Compliance Certificate within the number of days
required pursuant to clause (d) of Section 7.1.1, the Applicable Margin for
Swing Line Loans, Term A Loans and Revolving Loans from and including the first
day after the date on which such Compliance Certificate was required to be
delivered through (but excluding) the date Holdings delivers to the
Administrative Agent an appropriately completed Compliance Certificate shall
conclusively equal the highest Applicable Margin for Swing Line Loans, Term A
Loans and Revolving Loans of the same type set forth above.
"Arranger" means Donaldson, Lufkin & Jenrette Securities Corporation,
a Delaware corporation.
"Asset Purchase Agreement" is defined in the seventh recital.
"Assigned Amount" is defined in Section 11.11.1.
"Assignee Lender" is defined in Section 11.11.1.
"Assignor Lender" is defined in Section 11.11.1.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders pursuant to Section 5.1.1 of the Existing
Credit Agreement or Section 3.1.3 of the Amendment Agreement.
"Base Financial Statements" is defined in clause (a) of Section 3.1.10
of the Amendment Agreement.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrower" is defined in the preamble.
"Borrower Defeasement/Redemption Documents" means the notices and
documentation pursuant to which the Borrower deposited at least $99,017,468.05
in an irrevocable trust for the purpose of defeasing the Senior Notes and
concurrently issued redemption notices pursuant to
-8-
<PAGE>
which the Borrower redeemed all such Senior Notes no later than March 16, 1998,
at a redemption price of no more than 104.5% of the principal amount thereof.
"Borrower Partnership Agreement" means the Second Amended and Restated
Agreement of Partnership of Duane Reade, dated as of September 25, 1992,
between Daboco and DRI I, as in effect on the Closing Date and as amended or
otherwise modified from time to time in accordance with the terms hereof and
thereof.
"Borrower Pledge Agreement" means the Pledge Agreement executed and
delivered by an Authorized Officer of the Borrower pursuant to Section 7.1.7,
substantially in the form of Exhibit G-2 hereto, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Borrower Security Agreement" means the Amended and Restated Security
Agreement, executed and delivered by an Authorized Officer of the Borrower
pursuant to Section 3.1.8 of the Amendment Agreement, amending and restating in
its entirety the Borrower Security Agreement, dated as of the Closing Date,
executed and delivered by an Authorized Officer of the Borrower pursuant to the
Existing Credit Agreement, substantially in the form of Exhibit F-2 hereto, as
amended, supplemented, amended and restated or otherwise modified from time to
time.
"Borrowing" means Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by the relevant Lenders on the same
Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.1.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit
B-1 hereto.
"Business Day" means any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be closed in New
York City or Boston, Massachusetts and, with respect to Borrowings of, interest
rate determinations with respect to, Interest Periods with respect to, payments
of principal and interest in respect of, conversions of Base Rate Loans into,
and continuations of LIBO Rate Loans as, LIBO Rate Loans, on which dealings in
Dollars are carried on in the London interbank market.
"Capital Expenditures" means, with respect to any Person, for any
period, the sum (without duplication) of (a) the aggregate amount of all
expenditures of such Person and its Subsidiaries for fixed or capital assets
made during such period which, in accordance with GAAP, would be classified as
capital expenditures, and (b) the aggregate amount of all Capitalized Lease
Liabilities incurred during such period by such Person and its Subsidiaries.
"Capital Stock" means, with respect to any Person, (a) any and all
shares, interests, participations, rights or other equivalents of or interests
in (however designated) corporate or capital stock, including shares of
preferred or preference stock of such Person, (b) all partnership
-9-
<PAGE>
interests (whether general or limited) in such Person, (c) all membership
interests or limited liability company interests in such Person, and (d) all
other equity or ownership interests in such Person of any other type.
"Capitalized Lease Liabilities" means (without duplication) all
monetary obligations of Holdings or any of its Subsidiaries under any leasing
or similar arrangement which, in accordance with GAAP, would be classified as
capitalized leases, and, for purposes of this Agreement and each other Loan
Document, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP, and the stated maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued directly, or guaranteed, by the United
States of America or any agency thereof;
(b) commercial paper, maturing not more than nine months from
the date of issue, which is issued by (i) a corporation (other than an
Affiliate of any Obligor) organized under the laws of any state of the
United States or of the District of Columbia and rated at least A-l by
S&P or P-l by Moody's, or (ii) any Lender (or its holding company);
(c) any time deposit, certificate of deposit or banker's
acceptance, maturing not more than one year after such time,
maintained with or issued by either (i) a commercial banking
institution (including U.S. branches of foreign banking institutions)
that is a member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than
$500,000,000, or (ii) any Lender;
(d) short-term tax-exempt securities rated not lower than
MIG-1/1+ by either Moody's or S&P with provisions for liquidity or
maturity accommodations of 183 days or less;
(e) repurchase agreements which (i) are entered into with any
entity referred to in clause (b) or (c) above or any other financial
institution whose unsecured long-term debt (or the unsecured long-term
debt of whose holding company) is rated at least A- or better by S&P
or Baa1 or better by Moody's and maturing not more than one year after
such time, (ii) are secured by a fully perfected security interest in
securities of the type referred to in clauses (a) through (c) above
and (iii) have a market value at the time of such repurchase agreement
is entered into of not less than 100% of the repurchase obligation
-10-
<PAGE>
of such counterparty entity with whom such repurchase agreement has
been entered into; or
(f) shares of investment companies that are registered under
the Investment Company Act of 1940, as amended and invest solely in
one or more of the types of securities described in clauses (a)
through (d) above.
"Casualty Event" means the damage, destruction or condemnation, as the
case may be, of any property of the Borrower, any Parent Guarantor or any of
their respective Subsidiaries.
"Casualty Proceeds" means, with respect to any Casualty Event, the
amount of any insurance proceeds or condemnation awards received by the
Borrower, any Parent Guarantor or any of their respective Subsidiaries in
connection therewith, but excluding any proceeds or awards required to be paid
to a creditor (other than the Lenders) which holds a first-priority Lien
permitted by Section 7.2.3 on the property which is the subject of such
Casualty Event.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means
(a) (i) the failure of Holdings or DRI I to be a general
partner of the Borrower, or (ii) the failure of Holdings or DRI I at
any time to own, free and clear of all Liens (other than the Liens
granted in favor of the Administrative Agent for the benefit of the
Secured Parties under the Loan Documents) and encumbrances, all right,
title and interest in 100% of the partnership interests of the
Borrower;
(b) the failure of Holdings at any time to own, free and
clear of all Liens (other than the Liens granted in favor of the
Administrative Agent for the benefit of the Secured Parties under the
Loan Documents) and encumbrances, all right, title and interest in
100% of the Capital Stock of DRI I on a fully diluted basis;
(c) a "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) (other than the DLJMB Entities
and their controlled Affiliates) (i) becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of more than 35% of
the total then outstanding voting power of the Voting Stock of
Holdings or (ii) has the right or the ability by voting right,
contract or otherwise to direct or control, directly or indirectly,
the management or policies of Holdings;
-11-
<PAGE>
(d) during any period of twenty-four months, individuals who
at the beginning of such period constituted the board of directors of
Holdings (together with any new directors whose election or
appointment by such board of directors, or whose nomination for
election by the shareholders of Holdings, as the case may be, was
approved by a vote of 662/3% of the directors then still in office who
were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the board of directors then
in office; or
(e) any "Change of Control" as such term is defined in the
Senior Subordinated Note Indenture.
"Closing Date" means February 13, 1998, the date the initial Credit
Extensions were made under the Existing Credit Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means, as the context may require, (a) a Lender's
Additional Term C Loan Commitment, Revolving Loan Commitment and/or Letter of
Credit Commitment and/or
(b) the Swing Line Lender's Swing Line Loan Commitment.
"Commitment Amount" means, as the context may require, the Additional
Term C Loan Commitment Amount, the Revolving Loan Commitment Amount, the Letter
of Credit Commitment Amount and/or the Swing Line Loan Commitment Amount.
"Commitment Letter" means the commitment letter, dated January 14,
1998, among the Borrower, the Arranger and the Syndication Agent, together with
all annexes thereto.
"Commitment Termination Event" means (a) the occurrence of any Event
of Default described in clauses (a) through (d) of Section 8.1.9, or (b) the
occurrence and continuance of any other Event of Default and either (i) the
declaration of the Loans to be due and payable pursuant to Section 8.3, or (ii)
in the absence of such declaration, the giving of notice to the Borrower by the
Administrative Agent, acting at the direction of the Required Lenders, that the
Commitments have been terminated.
"Compliance Certificate" means a certificate duly completed and
executed by the chief financial or accounting Authorized Officer of Holdings,
substantially in the form of Exhibit E hereto.
"Connrak" is defined in the seventh recital.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or
-12-
<PAGE>
otherwise to invest in, a debtor, or otherwise to assure a creditor against
loss) the indebtedness, obligation or any other liability of any other Person
(other than by endorsements of instruments in the course of collection), or
guarantees the payment of dividends or other distributions upon the shares of
any other Person. The amount of any Person's obligation under any Contingent
Liability shall (subject to any limitation set forth therein) be deemed to be
the outstanding principal amount of the debt, obligation or other liability
guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit C hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with
Holdings, are treated as a single employer under Section 414(b) or 414(c) of
the Code or Section 4001 of ERISA, or for purposes of Section 412 of the Code,
Section 414(m) or Section 414(o) of the Code.
"Credit Extension" means, as the context may require, (a) the making
of a Loan by a Lender and/or (b) the issuance of any Letter of Credit, or the
extension of any Stated Expiry Date of any previously issued Letter of Credit,
by the Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request and/or Issuance Request.
"Credit Lyonnais" is defined in the preamble.
"Daboco" is defined in the third recital.
"Debt" means (without duplication) the aggregate amount of all
Indebtedness of Holdings and its Subsidiaries that is of the type referred to
in clauses (a), (b), (c) and (f) of the definition of "Indebtedness" and any
Contingent Liability in respect of such Indebtedness.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would, unless cured or
waived, constitute an Event of Default.
"Defeasement/Redemption Documents" means the Holdings
Defeasement/Redemption Documents and the Borrower Defeasement/Redemption
Documents.
"Disbursement" is defined in Section 2.6.2.
"Disbursement Date" is defined in Section 2.6.2.
"Disbursement Due Date" is defined in Section 2.6.2.
-13-
<PAGE>
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Required Lenders.
"DLJ" is defined in the preamble.
"DLJMB Entities" means DLJMB Funding II, Inc., DLJ Merchant Banking
Partners II, L.P., DLJ Merchant Banking Partners II-A, L.P., DLJ Diversified
Partners, L.P., DLJ Diversified Partners-A, L.P., DLJ First ESC L.L.C., DLJ
Offshore Partners II, C.V., DLJ EAB Partners, L.P., DLJ Millennium Partners,
L.P., DLJ Millennium-A Partners, L.P. and UK Investment Plan 1997 Partners.
"Documentation Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Documentation Agent pursuant to Section 10.4.
"Dollar" and the symbol "$" mean lawful money of the United States.
"DRI I" is defined in the preamble.
"EBITDA" means, for any applicable period, the sum (without
duplication) for Holdings and its Subsidiaries on a consolidated basis of
(a) Net Income,
plus
(b) the amount deducted in determining Net Income
representing non-cash charges, including depreciation, amortization
and deferred rent,
plus
(c) the amount deducted in determining Net Income
representing income taxes (whether actually paid or deferred),
plus
(d) the amount deducted in determining Net Income
representing Interest Expense,
plus
-14-
<PAGE>
(e) the amount deducted in determining Net Income
representing extraordinary or non-recurring expenses,
minus
(f) an amount equal to the amount of all extraordinary or
non-recurring non-cash credits included in determining Net Income.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules and regulations (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means, for any applicable period, the excess (if
any), of
(a) EBITDA for such applicable period;
over
(b) the sum (without duplication) (for such applicable
period) of
(i) the cash portion of Interest Expense (net of
interest income) for such applicable period;
plus
(ii) scheduled payments and optional and mandatory
prepayments, to the extent actually made, of the principal
amount of the Term Loans or any other term Debt (including
the principal component of payments in respect of Capitalized
Lease Liabilities but excluding scheduled payments and
optional and mandatory prepayments of (A) Indebtedness
evidenced by the Holdings Subordinated Notes and the Senior
Notes and (B) the Term Loans (as defined in the Original
Credit Agreement)) and mandatory prepayments of the principal
amount of the Revolving Loans pursuant to clause (f) of
Section 3.1.1 in connection with a permanent reduction of the
Revolving Loan Commitment Amount, in each case for such
applicable period;
-15-
<PAGE>
plus
(iii) all federal, state and foreign income taxes
paid or payable by Holdings and its Subsidiaries during such
applicable period;
plus
(iv) Capital Expenditures of the Borrower and its
Subsidiaries actually made during such applicable period
pursuant to clause (a) of Section 7.2.7 (excluding Capital
Expenditures of the Borrower and its Subsidiaries
constituting Capitalized Lease Liabilities and by way of the
incurrence of Indebtedness permitted pursuant to clause (e)
of Section 7.2.2 to a vendor of any assets permitted to be
acquired pursuant to Section 7.2.7 to finance the acquisition
of such assets);
plus
(v) Investments permitted and actually made, in
cash, pursuant to clauses (d) and (i) of Section 7.2.5 during
such applicable period;
plus
(vi) the amount of the net increase (or minus a net
decrease) of current assets, other than cash and Cash
Equivalent Investments, over current liabilities of Holdings
and its Subsidiaries for such applicable period;
minus
(vii) the amount of tax refunds received by Holdings
and its Subsidiaries during such applicable period.
"Existing Credit Agreement" is defined in the first recital.
"Existing Mortgage" means the mortgage, dated as of the Original
Closing Date and executed and delivered pursuant to Section 5.1.7 of the
Existing Credit Agreement.
"Existing Revolving Loans" means the Revolving Loans as defined in the
Existing Credit Agreement.
"Existing Term A Loans" means the Term A Loans as defined in the
Existing Credit Agreement.
-16-
<PAGE>
"Existing Term B Loans" means the Term B Loans as defined in the
Existing Credit Agreement.
"Existing Term C Loans" means the Original Term C Loans held by the
Lenders under the Existing Credit Agreement which have been designated as
Existing Term C Loans hereunder pursuant to Section 2.3.3.
"Existing Term C Note" means a promissory note of the Borrower payable
to the order of any Lender, in the form of Exhibit A-4 hereto (as such
promissory note may be amended, endorsed or otherwise modified from time to
time in accordance with the terms hereof and thereof), evidencing the aggregate
Indebtedness of the Borrower to such Lender resulting from outstanding Existing
Term C Loans, and also means all other promissory notes accepted from time to
time in substitution therefor or renewal thereof.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to (a) the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or (b) if such rate is
not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by it.
"Fee Letter" means the confidential fee letter, dated September 11,
1998, between the Borrower and the Syndication Agent, which fee letter
superseded the confidential fee letter, dated February 6, 1998, among, inter
alia, such parties, which fee letter superseded the confidential fee letter,
dated January 14, 1998, among such parties.
"Fiscal Quarter" means any fiscal quarter of a Fiscal Year, which
fiscal quarters shall end on the last Saturday of each March, June, September
or December of such Fiscal Year.
"Fiscal Year" means any period of twelve consecutive months ending on
the last Saturday of December of any calendar year.
"Fixed Charge Coverage Ratio" means, at the end of any Fiscal Quarter,
the ratio computed for the period consisting of such Fiscal Quarter and each of
the three immediately prior Fiscal Quarters of
(a) EBITDA for all such Fiscal Quarters
to
(b) the sum (without duplication) of
-17-
<PAGE>
(i) Capital Expenditures of Holdings and its
Subsidiaries actually made during all such Fiscal Quarters
pursuant to clause (a) of Section 7.2.7 (excluding Capital
Expenditures of Holdings and its Subsidiaries constituting
Capitalized Lease Liabilities and by way of the incurrence of
Indebtedness permitted pursuant to clause (e) of Section
7.2.2 to a vendor of any assets permitted to be acquired
pursuant to Section 7.2.7 to finance the acquisition of such
assets);
plus
(ii) the cash portion of Interest Expense (net of
cash interest income) for all such Fiscal Quarters;
plus
(iii) all scheduled payments of principal of the
Term Loans and other term Debt (including the principal
component of payments in respect of any Capitalized Lease
Liabilities) during all such Fiscal Quarters;
plus
(iv) all federal, state and foreign income taxes
paid or payable by Holdings and its Subsidiaries during such
applicable period;
plus
(v) Restricted Payments of the types described in
clause (e) of Section 7.2.6 made during such applicable
period.
"Fleet" is defined in the preamble.
"Foreign Subsidiary" means any Subsidiary of the Borrower (a) which is
organized under the laws of any jurisdiction outside of the United States of
America, (b) which conducts the major portion of its business outside of the
United States of America and (c) all or substantially all of the property and
assets of which are located outside of the United States of America.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Guarantees" means, as the context may require, the Parent Guaranty
and/or the Subsidiary Guaranty.
-18-
<PAGE>
"Guarantors" means, collectively, the Parent Guarantors and the
Subsidiary Guarantors, if any.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Holdings" is defined in the preamble.
"Holdings Defeasement/Redemption Documents" means the notices and
documentation pursuant to which Holdings deposited at least $106,427,535.00 in
an irrevocable trust for the purpose of defeasing the Holdings Subordinated
Notes and concurrently issued redemption notices pursuant to which Holdings
redeemed all such Holdings Subordinated Notes no later than March 16, 1998, at
a redemption price of no more than 107.5% of the Accreted Value thereof.
"Holdings Pledge Agreement" means the Amended and Restated Pledge
Agreement executed and delivered by an Authorized Officer of Holdings pursuant
to Section 3.1.7 of the Amendment Agreement, amending and restating in its
entirety the Holdings Pledge Agreement, dated as of the Closing Date, executed
and delivered by an Authorized Officer of Holdings pursuant to the Existing
Credit Agreement, substantially in the form of Exhibit G-1 hereto, as amended,
supplemented, amended and restated or otherwise modified from time to time.
-19-
<PAGE>
"Holdings Subordinated Notes" is defined in clause (a) of the fifth
recital.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of any Obligor, any qualification or exception to such opinion or
certification (a) which is of a "going concern" or similar nature, (b) which
relates to the limited scope of examination of matters relevant to such
financial statement, or (c) which relates to the treatment or classification of
any item in such financial statement and which, as a condition to its removal,
would require an adjustment to such item the effect of which would be to cause
such Obligor to be in default of any of its obligations under Section 7.2.4.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means (without duplication):
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the deferred purchase
price of property or services, and indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being
purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited
in recourse; provided, however, that, to the extent such Indebtedness
is limited in recourse to the assets securing such Indebtedness, the
amount of such Indebtedness shall be limited to the fair market value
of such assets;
-20-
<PAGE>
(g) Redeemable Capital Stock; and
(h) all Contingent Liabilities of such Person in respect of
any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer (to the extent such Person is
liable for such Indebtedness).
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Interest Coverage Ratio" means, at the end of any Fiscal Quarter, the
ratio computed for the period consisting of such Fiscal Quarter and each of the
three immediately prior Fiscal Quarters of:
(a) EBITDA (for all such Fiscal Quarters)
to
(b) the cash portion of Interest Expense (for all such Fiscal
Quarters).
"Interest Expense" means, for any applicable period, the aggregate
consolidated interest expense of Holdings and its Subsidiaries for such
applicable period, as determined in accordance with GAAP, including the portion
of any payments made in respect of Capitalized Lease Liabilities allocable to
interest expense.
"Interest Period" means, as to any LIBO Rate Loan, the period
commencing on the Borrowing date of such Loan or on the date on which the Loan
is converted into or continued as a LIBO Rate Loan, and ending on the date one,
two, three or six months thereafter as selected by the Borrower in its
Borrowing Request or its Conversion/Continuation Notice; provided, however
that:
(a) if any Interest Period would otherwise end on a day that
is not a Business Day, that Interest Period shall be extended to the
following 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;
(b) 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 the calendar month at
the end of such Interest Period;
-21-
<PAGE>
(c) no Interest Period for any Loan shall extend beyond the
Stated Maturity Date for such Loan;
(d) no Interest Period applicable to a Term Loan or any
portion thereof shall extend beyond any date upon which is due any
scheduled principal payment in respect of the Term Loans unless the
aggregate principal amount of Term Loans represented by Base Rate
Loans, or by LIBO Rate Loans having Interest Periods that will expire
on or before such date, equals or exceeds the amount of such principal
payment; and
(e) there shall be no more than five Interest Periods in
effect at any one time.
"Investment" means, relative to any Person, (a) any loan or advance
made by such Person to any other Person (excluding commission, travel and
similar advances to officers, directors and employees (or individuals acting in
similar capacities) made in the ordinary course of business), and (b) any
ownership or similar interest held by such Person in any other Person. The
amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made
by the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property at the time of such transfer or exchange.
"IPO" is defined in clause (b) of the fourth recital.
"Issuance Request" means a Letter of Credit request and certificate
duly executed by an Authorized Officer of the Borrower, substantially in the
form of Exhibit B-2 hereto.
"Issuer" means Fleet, in its capacity as issuer of Letters of Credit
and any Lender as may be designated by the Borrower (and consented to by the
Agents and such Lender, such consent by the Agents not to be unreasonably
withheld), in its capacity as issuer of Letters of Credit.
"Lender Assignment Agreement" means a Lender Assignment Agreement,
substantially in the form of Exhibit J hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 2.1.3.
"Letter of Credit Commitment" means, with respect to the Issuer, the
Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.3 and,
with respect to each of the other Lenders that has a Revolving Loan Commitment,
the obligation of each such Lender to participate in such Letters of Credit
pursuant to Section 2.6.1.
-22-
<PAGE>
"Letter of Credit Commitment Amount" means, on any date, $10,000,000,
as such amount may be reduced from time to time pursuant to Section 2.2.
"Letter of Credit Outstandings" means, on any date, an amount equal to
the sum of
(a) the then aggregate amount which is undrawn and available
under all issued and outstanding Letters of Credit,
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations in respect of such Letters of Credit.
"Leverage Ratio" means, at the end of any Fiscal Quarter, the ratio of
(a) total Debt of Holdings and its Subsidiaries on a
consolidated basis outstanding at such time;
to
(b) EBITDA for the period of four consecutive Fiscal Quarters
ended on such date.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate
Loans, the interest rate per annum for deposits in Dollars, if any, for a
period equal to the relevant Interest Period which appears on Telerate Page
3750 at approximately 11:00 a.m., London time, prior to the commencement of
such Interest Period. If such a rate does not appear on Telerate Page 3750, the
LIBO Rate shall be the rate of interest per annum determined by the
Administrative Agent to be the arithmetic mean (rounded upward to the next
1/16th of 1%) of the rates of interest per annum at which dollar deposits in
the approximate amount of the Loan to be made or continued as, or converted
into, a LIBO Rate Loan by the Administrative Agent and having a maturity
comparable to such Interest Period would be offered to the Administrative Agent
in the London interbank market at its request at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any
Interest Period, the rate of interest per annum (rounded upwards to the next
1/16th of 1%) determined by the Administrative Agent as follows:
-23-
<PAGE>
LIBO Rate LIBO Rate
(Reserve = ---------------------------------
Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be adjusted automatically as to all LIBO Rate Loans then outstanding
as of the effective date of any change in the LIBOR Reserve Percentage.
"LIBOR Office" means, relative to any Lender, the office of such
Lender designated as such on Schedule II hereto or designated in the Lender
Assignment Agreement pursuant to which such Lender became a Lender hereunder or
such other office of a Lender as shall be so designated from time to time by
notice from such Lender to the Borrower and the Administrative Agent, which
shall be making or maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Loans, the percentage (expressed as a decimal, rounded upward to the
next 1/16th of 1%) in effect on such day (whether or not applicable to any
Lender) under regulations issued from time to time by the F.R.S. Board for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to
Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the F.R.S. Board).
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or any filing or recording of any
instrument or document in respect of the foregoing, to secure payment of a debt
or performance of an obligation or any other priority or preferential treatment
of any kind or nature whatsoever that has the practical effect of creating a
security interest in property.
"Loan" means, as the context may require, a Revolving Loan, a Term
Loan and/or a Swing Line Loan, of any type.
"Loan Document" means this Agreement, the Amendment Agreement, the
Notes, the Letters of Credit, each Rate Protection Agreement, each Borrowing
Request, each Issuance Request, the Fee Letter, each Pledge Agreement, the
Subsidiary Guaranty, each Mortgage (upon execution and delivery thereof), each
Security Agreement and each other agreement, document or instrument delivered
in connection with this Agreement or any other Loan Document, whether or not
specifically mentioned herein or therein.
"Material Adverse Effect" means (a) a material adverse effect on the
business, assets, debt service capacity, tax position, environmental liability,
financial condition, operations, properties or prospects of the Borrower and
its Subsidiaries, taken as a whole, or Holdings and its Subsidiaries, taken as
a whole, (b) a material impairment of the ability of the Borrower or any
-24-
<PAGE>
other Obligor to perform its respective material obligations under the Loan
Documents to which it is or will be a party, or (c) an impairment of the
validity or enforceability of, or a material impairment of the rights, remedies
or benefits available to the Issuer, the Agents, the Documentation Agent, the
Arranger or the Lenders under this Agreement or any other Loan Document.
"Material Documents" means the Merger Documents, the Senior
Subordinated Note Documents, the Recapitalization Agreement, the
Defeasement/Redemption Documents, the Rapid Remit Program Documents, the Rock
Bottom Acquisition Documents and the Borrower Partnership Agreement, each as
amended or otherwise modified from time to time in accordance with the terms
thereof and hereof.
"Merger" is defined in the third recital.
"Merger Documents" means the Agreement and Plan of Merger, dated as of
February 2, 1998, between Holdings and Daboco and the Certificate of Merger of
Daboco Inc. into Duane Reade Inc. referred to therein, in each case as in
effect on the Closing Date and as the same may be amended or otherwise modified
from time to time thereafter in accordance with the terms hereof and thereof.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means, collectively, the Existing Mortgage and each
Mortgage or Deed of Trust executed and delivered pursuant to the terms of this
Agreement (including Section 7.1.8(b)), in form and substance reasonably
satisfactory to the Agents.
"Net Debt Proceeds" means, with respect to the incurrence, sale or
issuance by the Borrower, any Parent Guarantor or any of their respective
Subsidiaries of any Debt (other than Debt permitted by Section 7.2.2 as in
effect on the date hereof), the excess of:
(a) the gross cash proceeds received by the Borrower, any
Parent Guarantor or any of their respective Subsidiaries from such
incurrence, sale or issuance,
over
(b) all reasonable and customary underwriting commissions and
legal, investment banking, brokerage and accounting and other
professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred
in connection with such incurrence, sale or issuance.
"Net Disposition Proceeds" means, with respect to any sale, transfer
or other disposition of any assets of the Borrower, any Parent Guarantor or any
of their respective Subsidiaries (other than sales permitted pursuant to clause
(a), (b) or (c) of Section 7.2.9), the excess of
-25-
<PAGE>
(a) the gross cash proceeds received by the Borrower, any
Parent Guarantor or any of their respective Subsidiaries from any such
sale, transfer or other disposition and any cash payments received in
respect of promissory notes or other non-cash consideration delivered
to the Borrower, such Parent Guarantor or such Subsidiary in respect
thereof,
less
(b) the sum (without duplication) of (i) all reasonable and
customary fees and expenses with respect to legal, investment banking,
brokerage, accounting and other professional fees, sales commissions
and disbursements and all other reasonable fees, expenses and charges,
in each case actually incurred in connection with such sale, transfer
or other disposition, (ii) all taxes and other governmental costs and
expenses actually paid or estimated by Holdings (in good faith) to be
payable in cash in connection with such sale, transfer or other
disposition, and (iii) payments made by the Borrower, any Parent
Guarantor or any of their respective Subsidiaries to retire
Indebtedness (other than the Credit Extensions) of the Borrower, such
Parent Guarantor or such Subsidiary where payment of such Indebtedness
is required in connection with such sale, transfer or other
disposition;
provided, however, that if, after the payment of all taxes with respect to such
sale, transfer or other disposition, the amount of estimated taxes, if any,
pursuant to clause (b)(ii) above exceeded the tax amount actually paid in cash
in respect of such sale, transfer or other disposition, the aggregate amount of
such excess shall, at such time, constitute Net Disposition Proceeds.
"Net Equity Proceeds" means with respect to the sale or issuance by
the Borrower, any Parent Guarantor or any of their respective Subsidiaries to
any Person, whether pursuant to a public or private offering, of any of its
Capital Stock or any warrants or options with respect to its Capital Stock or
the exercise of any such warrants or options after the Closing Date (other than
pursuant to any subscription agreement, incentive plan or similar arrangement
with any officer, employee or director of the Borrower, such Parent Guarantor
or such Subsidiary), the excess of:
(a) the gross cash proceeds received by the Borrower, such
Parent Guarantor or such Subsidiary from such sale, exercise or
issuance,
over
(b) all reasonable and customary underwriting commissions and
legal, investment banking, brokerage, accounting and other
professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred
in connection with such sale, exercise or issuance.
-26-
<PAGE>
"Net Income" means, for any period, the net income of Holdings and its
Subsidiaries for such period on a consolidated basis, excluding extraordinary
and non-recurring gains and extraordinary losses incurred in connection with
the Transaction.
"Net Worth" means the consolidated net worth of Holdings and its
Subsidiaries.
"New Transaction" is defined in the seventh recital.
"Note" means, as the context may require, a Revolving Note, a Term
Note, a Swing Line Note and/or a Registered Note.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement, any Rate Protection Agreement, the Notes, each Letter of Credit and
each other Loan Document.
"Obligor" means the Borrower or any other Person (other than any
Agent, the Documentation Agent, the Arranger, the Issuer or any Lender)
obligated under any Loan Document.
"Organic Document" means, relative to any Obligor, its partnership
agreement, its certificate of incorporation, its by-laws and all shareholder or
equity holder agreements, voting trusts and similar arrangements to which such
Obligor is a party or which is applicable to any of its Capital Stock, its
partnership agreement and all other arrangements relating to the control or
management of such entity.
"Original Credit Agreement" is defined in clause (c) of the fifth
recital.
"Original Term C Loans" means the Term C Loans as defined in the
Existing Credit Agreement.
"Original Transaction" is defined in clause (d) of the fifth recital.
"Paid Visit" is defined in Section 7.1.5.
"Parent Guarantors" is defined in the preamble.
"Parent Guaranty" means the Obligations of the Parent Guarantors under
Article IX.
"Participant" is defined in Section 11.11.2.
"Partnership Security Agreement" means the Amended and Restated
Security Agreement executed and delivered by an Authorized Officer of each of
Holdings and DRI I pursuant to Section 3.1.8 of the Amendment Agreement,
amending and restating in its entirety the
-27-
<PAGE>
Partnership Security Agreement, dated as of the Closing Date, executed and
delivered by an Authorized Officer of each of Holdings and DRI I pursuant to
the Existing Credit Agreement, substantially in the form of Exhibit F-1 hereto,
as amended, supplemented, amended and restated or otherwise modified from time
to time.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor entity.
"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which
Holdings or any corporation, trade or business that is, along with Holdings, a
member of a Controlled Group, has or within the prior six years has had any
liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a contributing sponsor
under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the applicable percentage
relating to Term A Loans, Term B Loans, Existing Term C Loans, Additional Term
C Loans or Revolving Loans, as the case may be, as set forth opposite its name
on Schedule II hereto under the applicable column heading or set forth in
Lender Assignment Agreement(s) under the applicable column heading, as such
percentage may be adjusted from time to time pursuant to Lender Assignment
Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered
pursuant to Section 11.11 A Lender shall not have any Commitment to make
Additional Term C Loans or Revolving Loans (as the case may be) if its
percentage under the applicable column heading on Schedule II is zero. As used
herein, "Percentage" as it relates to a Lender's Percentage of Letter of Credit
Outstandings or Swing Line Loans shall be equal to such Lender's Percentage of
Revolving Loans.
"Perfection Certificate" means the Perfection Certificate executed and
delivered by an Authorized Officer of each Obligor that is a party to a
Security Agreement pursuant to Section 3.1.16 of the Amendment Agreement or
Section 7.1.7, substantially in the form of Exhibit I hereto, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Pharmaceutical Laws" means Federal, state and local laws, rules or
regulations, codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered, relating to dispensing, storing or
distributing prescription medicines or products, including laws, rules or
regulations relating to the qualifications of Persons employed to do the same.
-28-
<PAGE>
"Pharmacy Fund" means Pharmacy Fund Receivables, Inc., a New York
corporation, and any successor thereto.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means, as the context may require, the Holdings
Pledge Agreement, the Borrower Pledge Agreement and/or the Subsidiary Pledge
Agreement.
"Prescription Receivables" is defined in clause (b) of Section 7.2.9.
"Pro Forma Balance Sheets" is defined in clause (b) of Section 3.1.10
of the Amendment Agreement.
"Property Waiver" means, with respect to premises leased by an
Obligor, a waiver and release in favor of the Agents for the benefit of the
Lenders relating to any liens the lessor of such premises may have with respect
to the assets of such Obligor located on or at such premises, in form and
substance reasonably satisfactory to the Agents.
"Quarterly Payment Date" means the fifteenth day of each February,
May, August and November, or, if any such day is not a Business Day, the next
succeeding Business Day.
"Rapid Remit Program" shall mean the program pursuant to which
Prescription Receivables are sold by the Borrower to Pharmacy Fund for cash
pursuant to the Rapid Remit Program Documents.
"Rapid Remit Program Documents" shall mean (a) the Purchase Agreement,
dated as of March 10, 1997, between the Borrower and Pharmacy Fund and each
other document or agreement entered into in connection therewith, in each case
as in effect on the Closing Date and as the same may be amended or otherwise
modified from time to time thereafter in accordance with the terms hereof and
thereof, and (b) each of the other documents and agreements entered into in
connection therewith after the Closing Date in form and substance satisfactory
to the Syndication Agent, and as each such other document and agreement may be
amended or otherwise modified from time to time thereafter in accordance with
the terms hereof and thereof.
"Rate Protection Agreement" means, collectively, any interest rate
swap, cap, collar or similar agreement entered into by the Borrower in respect
of the Loans pursuant to the terms of this Agreement under which the
counterparty to such agreement is (or at the time such Rate Protection
Agreement was entered into, was) a Lender or an Affiliate of a Lender.
"Real Property" means, with respect to any Person, all of the right,
title and interest of such Person in and to lands, improvements and fixtures,
including all of the rights, title and interest of such Person as Lessee or
licensee in, to and under leases or licenses of land, improvements and
fixtures.
-29-
<PAGE>
"Recapitalization Agreement" shall mean the Recapitalization
Agreement, dated as of June 18, 1997, among the DLJMB Entities and the
stockholders parties thereto and Holdings and each other document or agreement
entered into in connection therewith, in each case as in effect on the Closing
Date and as the same may be amended or otherwise modified from time to time
thereafter in accordance with the terms hereof and thereof.
"Redeemable Capital Stock" means, with respect to any Person, any
class of Capital Stock of such Person or any of its Subsidiaries which, either
by its terms, by the terms of any security into which it is convertible or
exchangeable or otherwise, (a) is or upon the happening of an event or passage
of time would be required to be redeemed on or prior to the first anniversary
of the Stated Maturity Date for the Existing Term C Loans and Additional Term C
Loans, (b) is redeemable at the option of the holder thereof at any time prior
to such anniversary or (c) is convertible into or exchangeable for debt
securities of such Person or any of its Subsidiaries at any time prior to such
anniversary; provided, however, that for purposes of clauses (a) and (b) of
this definition, any issuances of equity interests or the right to directly or
indirectly acquire any equity interests of such Person pursuant to any director
or employee stock option or similar plan of such Person shall be deemed not to
be Redeemable Capital Stock.
"Refinancing" is defined in the third recital.
"Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2.
"Register" is defined in clause (b) of Section 2.7.
"Registered Note" means a promissory note of the Borrower payable to
the order of any Lender, in the form of Exhibit A-6 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time in
accordance with the terms hereof and thereof), evidencing the aggregate
Indebtedness of the Borrower to such Lender resulting from outstanding Term A
Loans, Term B Loans, Existing Term C Loans or Additional Term C Loans, and also
means all other promissory notes accepted from time to time in substitution
therefor or renewal thereof.
"Reimbursement Obligation" is defined in Section 2.6.3.
"Reinstatement Date" is defined in Section 4.1.
"Related Fund" means, with respect to any Lender that is a fund that
invests in loans, any other fund that invests in loans and is managed by the
same investment advisor or investment manager as such Lender.
"Release" means a "release", as such term is defined in CERCLA.
"Replacement Lender" is defined in Section 4.10.
-30-
<PAGE>
"Replacement Notice" is defined in Section 4.10.
"Required Lenders" means, at any time, Lenders holding greater than
50% of (a) the Total Exposure Amount or (b) if the Revolving Loan Commitments
shall have been terminated or expired for purposes of acceleration pursuant to
Section 8.3, the then outstanding Loans and Letter of Credit Outstandings.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect
from time to time.
"Restricted Payments" is defined in Section 7.2.6.
"Revolving Loan" is defined in clause (a) of Section 2.1.2 and shall
include the Existing Revolving Loans held by the Lenders under the Existing
Credit Agreement which have been designated as Revolving Loans hereunder
pursuant to Section 2.3.3.
"Revolving Loan Commitment" is defined in clause (a) of Section 2.1.2.
"Revolving Loan Commitment Amount" means, on any date, $30,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Revolving Loan Commitment Termination Date" and "Commitment
Termination Date" mean the earliest of (a) February 15, 2004, (b) the date on
which the Revolving Loan Commitment Amount is terminated in full or reduced to
zero pursuant to Section 2.2, and (c) the date on which any Commitment
Termination Event occurs.
"Revolving Note" means a promissory note of the Borrower payable to
any Lender, substantially in the form of Exhibit A-1 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time in
accordance with the terms hereof and thereof), evidencing the aggregate
Indebtedness of the Borrower to such Lender resulting from outstanding
Revolving Loans, and also means all other promissory notes accepted from time
to time in substitution therefor or renewal thereof.
"Rock Bottom" is defined in the seventh recital.
"Rock Bottom Acquisition" is defined in the seventh recital.
"Rock Bottom Acquisition Documents" means the Asset Purchase
Agreement, all schedules and exhibits thereto and each other agreement,
document or instrument delivered in connection therewith.
"Rock Bottom Subsidiaries" means Connrak, RB Lindenhurst Corp., a
Delaware corporation, and RB Yonkers Corp., a Delaware corporation.
-31-
<PAGE>
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc.
"Sale and Leaseback Transaction" is defined in Section 7.2.14.
"Secured Parties" means the Lenders, the Issuer, the Agents, the
Documentation Agent, each counterparty to a Rate Protection Agreement that is
(or at the time such Rate Protection Agreement was entered into, was) a Lender
or an Affiliate thereof and in each case, each of their respective successors,
transferees and assigns.
"Security Agreement" means, as the context may require, the
Partnership Security Agreement, the Borrower Security Agreement and/or the
Subsidiary Security Agreement.
"Sellers" is defined in the seventh recital.
"Senior Notes" is defined in clause (b) of the fifth recital.
"Senior Subordinated Note Documents" means the Senior Subordinated
Note Indenture, the Senior Subordinated Notes Guarantee and the Senior
Subordinated Notes, in each case as in effect on the Closing Date and as the
same may be amended or otherwise modified from time to time thereafter in
accordance with the terms hereof and thereof.
"Senior Subordinated Note Indenture" means that certain indenture
among Holdings and the Borrower and DRI I, as subsidiary guarantors, and State
Street Bank and Trust Company of Connecticut, N.A., as Trustee, as in effect on
the Closing Date and as the same may be amended or otherwise modified from time
to time thereafter in accordance with the terms hereof and thereof.
"Senior Subordinated Notes" is defined in clause (a) of the fourth
recital.
"Senior Subordinated Notes Guarantee" means the joint and several
guarantees of the Borrower, DRI I and each other Subsidiary of Holdings in
favor of the holders of the Senior Subordinated Notes as set forth in Article
11 of the Senior Subordinated Note Indenture and each Subsidiary Guarantee
delivered substantially in the form of Exhibit B to such indenture and, in each
case, subject to the Subordination provisions of Article 12 of such indenture
and as in effect on the Closing Date and as the same may be amended or
otherwise modified from time to time thereafter in accordance with the terms
hereof and thereof.
"Solvency Certificate" means, as the context may require, a Solvency
Certificate to be executed and delivered by the chief financial or accounting
Authorized Officer of Holdings, substantially in the form of Exhibit L-1 hereto
and/or a Solvency Certificate to be executed and delivered by the chief
financial or accounting Authorized Officer of the Borrower, substantially in
the form of Exhibit L-2 hereto.
-32-
<PAGE>
"Solvent" means, with respect to any Person and its Subsidiaries on a
particular date, that on such date (a) the fair value of the property of such
Person and its Subsidiaries on a consolidated basis is greater than the total
amount of liabilities, including contingent liabilities, of such Person and its
Subsidiaries on a consolidated basis, (b) the present fair salable value of the
assets of such Person and its Subsidiaries on a consolidated basis is not less
than the amount that will be required to pay the probable liability of such
Person and its Subsidiaries on a consolidated basis on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not believe
that it or its Subsidiaries will, incur debts or liabilities beyond the ability
of such Person and its Subsidiaries to pay as such debts and liabilities
mature, and (d) such Person and its Subsidiaries on a consolidated basis is not
engaged in business or a transaction, and such Person and its Subsidiaries on a
consolidated basis is not about to engage in business or a transaction, for
which the property of such Person and its Subsidiaries on a consolidated basis
would constitute an unreasonably small capital. The amount of Contingent
Liabilities at any time shall be computed as the amount that, in light of all
the facts and circumstances existing at such time, can reasonably be expected
to become an actual or matured liability.
"Stated Amount" of each Letter of Credit means the total amount
available to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Expiry Date" is defined in Section 2.6.
"Stated Maturity Date" means (a) in the case of any Revolving Loan or
any Term A Loan, February 15, 2004, (b) in the case of any Term B Loan,
February 15, 2005 and (c) in the case of any Existing Term C Loan or Additional
Term C Loan, February 15, 2006.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which more than 50% of the outstanding
Capital Stock (or other ownership interest) having ordinary voting power to
elect a majority of the board of directors, managers or other voting members of
the governing body of such entity (irrespective of whether at the time Capital
Stock (or other ownership interests) of any other class or classes of such
entity shall or might have voting power upon the occurrence of any contingency)
is at the time directly or indirectly owned by such Person, by such Person and
one or more other Subsidiaries of such Person, or by one or more other
Subsidiaries of such Person.
"Subsidiary Guarantor" means any Subsidiary of the Borrower that,
pursuant to Section 7.1.7, executes and delivers a Subsidiary Guaranty or a
supplement to a Subsidiary Guaranty.
"Subsidiary Guaranty" means the Guaranty executed and delivered by an
Authorized Officer of a Subsidiary Guarantor pursuant to Section 7.1.7,
substantially in the form of Exhibit H hereto, as amended, supplemented,
amended and restated or otherwise modified from time to time.
-33-
<PAGE>
"Subsidiary Pledge Agreement" means the Pledge Agreement executed and
delivered by an Authorized Officer of each Subsidiary of the Borrower that is
not a Foreign Subsidiary pursuant to Section 7.1.7, substantially in the form
of Exhibit G-3 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"Subsidiary Security Agreement" means the Security Agreement executed
and delivered by an Authorized Officer of each Subsidiary of the Borrower that
is not a Foreign Subsidiary pursuant to Section 7.1.7, substantially in the
form of Exhibit F-3 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"Subject Property" is defined Section 7.1.8.
"Swing Line Lender" means Fleet, in its capacity as Swing Line Lender
hereunder.
"Swing Line Loan" is defined in clause (b) of Section 2.1.2.
"Swing Line Loan Commitment" is defined in clause (b) of Section 2.1.2.
"Swing Line Loan Commitment Amount" means, on any date, $5,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Swing Line Note" means a promissory note of the Borrower payable to
the Swing Line Lender, in the form of Exhibit A-7 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to the Swing Line Lender
resulting from outstanding Swing Line Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"Syndication Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor Syndication
Agent pursuant to Section 10.4.
"Taxes" is defined in Section 4.6.
"Telerate Page 3750" means the display designated as "Page 3750" on
the Telerate Service (or such other page as may replace Page 3750 on the
service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association interest settlement rates for Dollar deposits).
"Term A Loans" means the Existing Term A Loans held by the Lenders
under the Existing Credit Agreement which have been designated as Term A Loans
hereunder pursuant to Section 2.3.3.
"Term A Note" means a promissory note of the Borrower payable to the
order of any Lender, in the form of Exhibit A-2 hereto (as such promissory note
may be amended, endorsed or
-34-
<PAGE>
otherwise modified from time to time in accordance with the terms hereof and
thereof), evidencing the aggregate Indebtedness of the Borrower to such Lender
resulting from outstanding Term A Loans, and also means all other promissory
notes accepted from time to time in substitution therefor or renewal thereof.
"Term B Loans" means the Existing Term B Loans held by the Lenders
under the Existing Credit Agreement which have been designated as Term B Loans
hereunder pursuant to Section 2.3.3.
"Term B Note" means a promissory note of the Borrower payable to the
order of any Lender, in the form of Exhibit A-3 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time in accordance
with the terms hereof and thereof), evidencing the aggregate Indebtedness of
the Borrower to such Lender resulting from outstanding Term B Loans, and also
means all other promissory notes accepted from time to time in substitution
therefor or renewal thereof.
"Term Loan" means, as the context may require, a Term A Loan, a Term B
Loan, an Existing Term C Loan and/or an Additional Term C Loan.
"Term Note" means, as the context may require, a Term A Note, a Term B
Note, an Existing Term C Note and/or an Additional Term C Note.
"Total Exposure Amount" means, on any date of determination, the then
outstanding principal amount of all Term Loans and the Revolving Loan
Commitment Amount then in effect.
"Tranche" means, as the context may require, the Loans constituting
Term A Loans, Term B Loans, Existing Term C Loans, Additional Term C Loans,
Revolving Loans and/or Swing Line Loans.
"Transaction" is defined in the seventh recital.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York.
"United States" or "U.S." means the United States of America, its
fifty states and the District of Columbia.
"Valuation Amount" means, with respect to any real property, the
greater of the fair market value or the purchase price of such real property.
-35-
<PAGE>
"Waiver" means an agreement in favor of the Agents for the benefit of
the Lenders in form and substance reasonably satisfactory to the Agents.
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA, and to which the Borrower has any liability.
"Wholly-owned Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person all of the Capital Stock (and all rights and options
to purchase such Capital Stock) of which, other than directors' qualifying
shares, are owned, beneficially and of record, by such Person and/or one or
more wholly-owned Subsidiaries of such Person.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each other Loan Document, notice and other communication delivered from time to
time in connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in
any Article, Section or definition to any clause are references to such clause
of such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. (a) Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder (including under Section 7.2.4) shall be made, and all
financial statements required to be delivered hereunder or thereunder shall be
prepared in accordance, and in a manner consistent, with those generally
accepted accounting principles ("GAAP"), as in effect on December 28, 1996 and
as used to prepare the audited consolidated financial statements of Holdings
and its Subsidiaries for the Fiscal Year ending on such date and, unless
otherwise expressly provided herein, shall be computed or determined on a
consolidated basis and without duplication.
(b) For purposes of calculating each of the Fixed Charge Coverage
Ratio, the Interest Coverage Ratio and the Leverage Ratio, each such ratio
shall be calculated giving pro forma effect to any acquisition, disposition,
merger, consolidation or discontinued operation (including any related
financing transaction) made by the Borrower or any of its Subsidiaries during
the period comprised of the Fiscal Quarters that are the subject of such
calculation as if such acquisition, disposition, merger, consolidation or
discontinued operation (including such related financing transaction) had been
made at the beginning of such period. Not in limitation of the immediately
preceding sentence but in furtherance thereof, for purposes of such
calculation, EBITDA for such period shall be calculated to (i) include the
EBITDA (adjusted to exclude the cost of any compensation, remuneration or other
benefit paid or provided to any employee,
-36-
<PAGE>
consultant, Affiliate or equity owner of the acquired entities to the extent
such costs are eliminated and not replaced and as determined in good faith by
the chief financial or accounting Authorized Officer of Holdings) attributable
to any business or assets acquired by the Borrower or any of its Subsidiaries
utilizing the actual revenues attributable to such business or assets for such
and the expenses that would have been attributable to such business or assets
had the Borrower acquired such business or assets at the beginning of such
period and (ii) exclude the EBITDA attributable to discontinued operations, as
determined in accordance with GAAP, and operations, businesses and assets
disposed of prior to the end of such period from such calculation, in each
case, as determined in good faith by the chief financial or accounting
Authorized Officer of Holdings.
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions
of this Agreement (including Sections 2.1.4 and 2.1.5) and the Amendment
Agreement (including Article III thereof),
(a) each Lender severally agrees to make Loans (other than
Swing Line Loans) pursuant to the Commitments and the Swing Line
Lender agrees to make Swing Line Loans pursuant to the Swing Line Loan
Commitment, in each case as described in this Section 2.1; and
(b) the Issuer agrees that it will issue Letters of Credit
pursuant to Section 2.1.3, and each other Lender that has a Revolving
Loan Commitment severally agrees that it will purchase participation
interests in such Letters of Credit pursuant to Section 2.6.1.
SECTION 2.1.1. Additional Term C Loan Commitments. Subject to
compliance by the Borrower with the terms hereof (including Section 2.1.4, and
5.2) and the terms of the Amendment Agreement (including Article III thereof),
on (but solely on) the Amendment Effective Date each Lender that has a
Percentage in excess of zero of the Additional Term C Loan Commitment Amount
will make loans (relative to such Lender, its "Additional Term C Loans") to the
Borrower equal to such Lender's Percentage of the aggregate amount of the
Borrowing or Borrowings of Additional Term C Loans requested by the Borrower to
be made on the Amendment Effective Date (the commitment of each such Lender
described in this Section 2.1.1 is herein referred to as its "Additional Term C
Loan Commitment"). No amounts paid or prepaid with respect to any Additional
Term C Loans may be reborrowed.
SECTION 2.1.2. Revolving Loan Commitment and Swing Line Loan
Commitment. Subject to compliance by the Borrower with the terms hereof
(including Section 2.1.4 and 5.2)
-37-
<PAGE>
and the Amendment Agreement (including Article III thereof), from time to time
on any Business Day prior to the Revolving Loan Commitment Termination Date,
(a) each Lender that has a Percentage in excess of zero of
the Revolving Loan Commitment Amount will make loans (relative to such
Lender, its "Revolving Loans") to the Borrower equal to such Lender's
Percentage of the aggregate amount of the Borrowing or Borrowings of
Revolving Loans requested by the Borrower to be made on such day. The
Commitment of each Lender described in this clause (a) is herein
referred to as its "Revolving Loan Commitment". On the terms and
subject to the conditions hereof, the Borrower may from time to time
borrow, prepay and reborrow Revolving Loans.
(b) the Swing Line Lender will make loans (each a "Swing Line
Loan") to the Borrower equal to the principal amount of the Swing Line
Loan requested by the Borrower to be made on such day. The Commitment
of the Swing Line Lender described in this clause (b) is herein
referred to as its "Swing Line Loan Commitment". On the terms and
subject to the conditions hereof, the Borrower may from time to time
borrow, prepay and reborrow Swing Line Loans.
SECTION 2.1.3. Letter of Credit Commitment. Subject to compliance by
the Borrower with the terms hereof (including Section 2.1.4 and 5.2) and the
Amendment Agreement (including Article III thereof), from time to time on any
Business Day prior to the Revolving Loan Commitment Termination Date, the
Issuer will (a) issue one or more standby or commercial letters of credit (each
referred to as a "Letter of Credit") for the account of the Borrower in the
Stated Amount requested by the Borrower on such day, or (b) extend the Stated
Expiry Date of an existing standby or commercial Letter of Credit previously
issued hereunder.
SECTION 2.1.4. Lenders Not Permitted or Required to Make the Loans. No
Lender shall be permitted or required to, and the Borrower shall not request
any Lender to, make
(a) any Additional Term C Loan if, after giving effect
thereto, the aggregate original principal amount of all the Additional
Term C Loans (i) of all Lenders would exceed the Additional Term C
Loan Commitment Amount, or (ii) of such Lender would exceed such
Lender's Percentage of the Additional Term C Loan Commitment Amount;
or
(b) any Revolving Loan if, after giving effect thereto, the
aggregate outstanding principal amount of all the Revolving Loans (i)
of all Lenders, together with all Letter of Credit Outstandings and
the aggregate outstanding principal amount of all Swing Line Loans,
would exceed the Revolving Loan Commitment Amount, or (ii) of such
Lender (other than the Swing Line Lender), together with its
Percentage of all Letter of Credit Outstandings, would exceed such
Lender's Percentage of the Revolving Loan Commitment Amount; or
-38-
<PAGE>
(c) any Swing Line Loan if, after giving effect thereto, the
aggregate outstanding principal amount of all Swing Line Loans (i)
would exceed the Swing Line Loan Commitment Amount, or (ii) together
with all Letter of Credit Outstandings and the aggregate outstanding
principal amount of all Revolving Loans, would exceed the Revolving
Loan Commitment Amount.
SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of
Credit. No Issuer shall be permitted or required to issue any Letter of Credit
if, after giving effect thereto, (a) the aggregate amount of all Letter of
Credit Outstandings would exceed the Letter of Credit Commitment Amount or (b)
the sum of the aggregate amount of all Letter of Credit Outstandings plus the
aggregate principal amount of all Revolving Loans and all Swing Line Loans then
outstanding would exceed the Revolving Loan Commitment Amount.
SECTION 2.2. Reduction of the Commitment Amounts. The Commitment
Amounts are subject to reductions from time to time pursuant to this Section
2.2.
SECTION 2.2.1. Optional. The Borrower may, from time to time on any
Business Day occurring after the time of the initial Credit Extension
hereunder, voluntarily reduce the Revolving Loan Commitment Amount; provided,
however, that all such reductions shall require at least three Business Days'
prior notice to the Administrative Agent and be permanent, and any partial
reduction of any Commitment Amount shall be in an aggregate amount of
$5,000,000 or any larger integral multiple of $1,000,000. Any such reduction of
the Revolving Loan Commitment Amount which reduces the Revolving Loan
Commitment Amount below the Letter of Credit Commitment Amount or the Swing
Line Loan Commitment Amount shall result in an automatic and corresponding
reduction of the Letter of Credit Commitment Amount or the Swing Line Loan
Commitment Amount, as the case may be, to an aggregate amount not in excess of
the Revolving Loan Commitment Amount, as so reduced, without any further action
on the part of the Issuer or the Swing Line Lender.
SECTION 2.2.2. Mandatory. The Revolving Loan Commitment Amount shall,
without any further action, automatically and permanently be reduced
(a) on the Revolving Loan Commitment Termination Date so that
the Revolving Loan Commitment Amount equals $0; and
(b) following the prepayment in full of the Term Loans, on
the date the Term Loans would otherwise have been required to be
prepaid pursuant to clause (b), (c), (d), (e) or (f) of Section 3.1.1,
in an amount equal to the amount by which the Term Loans would
otherwise have been required to be prepaid if any Term Loans had been
outstanding. Any such reduction of the Revolving Loan Commitment
Amount which reduces the Revolving Loan Commitment Amount below the
Letter of Credit Commitment Amount or the Swing Line Loan Commitment
Amount shall result in an automatic and corresponding permanent
reduction of the Letter of Credit Commitment
-39-
<PAGE>
Amount or the Swing Line Loan Commitment Amount, as the case may be,
to an aggregate amount not in excess of the Revolving Loan Commitment
Amount, as so reduced, without any further action on the part of the
Issuer or the Swing Line Lender.
SECTION 2.3. Borrowing Procedures and Funding Maintenance. Loans
(other than Swing Line Loans) shall be made by the Lenders in accordance with
Section 2.3.1, and Swing Line Loans shall be made by the Swing Line Lender in
accordance with Section 2.3.2.
SECTION 2.3.1. Additional Term C Loans and Revolving Loans. By
delivering a Borrowing Request to the Administrative Agent on or before 12:00
noon, New York City time, on a Business Day, the Borrower may from time to time
irrevocably request, on not less than one Business Day's notice (in the case of
Base Rate Loans) or three Business Days' notice (in the case of LIBO Rate
Loans) nor more than five Business Days' notice (in the case of any Loans),
that a Borrowing be made, in the case of LIBO Rate Loans, in an aggregate
amount of $1,000,000 or any larger integral multiple of $500,000, and in the
case of Base Rate Loans, in an aggregate amount of $500,000 or any larger
integral multiple of $100,000, or, in either case, in the unused amount of the
applicable Commitment. No Borrowing Request shall be required, and the minimum
aggregate amounts specified under this Section 2.3.1 shall not apply, in the
case of Revolving Loans made under clause (b) of Section 2.3.2 to refund
Refunded Swing Line Loans or deemed made under Section 2.6.2 in respect of
unreimbursed Disbursements. On the terms and subject to the conditions of this
Agreement, each Borrowing shall be comprised of the type of Loans, and shall be
made on the Business Day, specified in such Borrowing Request. On or before
11:00 a.m., New York City time, on such Business Day each Lender shall deposit
with the Administrative Agent same day funds in an amount equal to such
Lender's Percentage of the requested Borrowing. Such deposit will be made to an
account which the Administrative Agent shall specify from time to time by
notice to the Lenders. To the extent funds are received from the Lenders, the
Administrative Agent shall make such funds available to the Borrower by wire
transfer to the accounts the Borrower shall have specified in its Borrowing
Request. No Lender's obligation to make any Loan shall be affected by any other
Lender's failure to make any Loan.
SECTION 2.3.2. Swing Line Loans. (a) By telephonic notice, promptly
followed (within one Business Day) by the delivery of a confirming Borrowing
Request, to the Swing Line Lender and the Administrative Agent on or before
12:00 noon, New York City time, on the Business Day the proposed Swing Line
Loan is to be made, the Borrower may from time to time irrevocably request that
a Swing Line Loan be made by the Swing Line Lender in a minimum principal
amount of $100,000 or any larger integral multiple of $50,000. All Swing Line
Loans shall be made as Base Rate Loans and shall not be entitled to be
converted into LIBO Rate Loans. The proceeds of each Swing Line Loan shall be
made available by the Swing Line Lender, by 5:00 p.m., New York City time, on
the Business Day telephonic notice is received by it as provided in this clause
(a), to the Borrower by wire transfer to the account the Borrower shall have
specified in its notice therefor.
-40-
<PAGE>
(b) If (i) any Swing Line Loan (A) shall be outstanding for more than
four Business Days or (B) is or will be outstanding on a date when the Borrower
requests that a Revolving Loan be made or (ii) any Default (other than a
Default of the nature set forth in Section 8.1.9) shall occur and be
continuing, each Lender with a Revolving Loan Commitment (other than the Swing
Line Lender) irrevocably agrees that it will, at the request of the Swing Line
Lender and upon notice from the Administrative Agent, make a Revolving Loan
(which shall initially be funded as a Base Rate Loan) in an amount equal to
such Lender's Percentage of the aggregate principal amount of all such Swing
Line Loans then outstanding (such outstanding Swing Line Loans hereinafter
referred to as the "Refunded Swing Line Loans"); provided, that the Swing Line
Lender shall not request, and no Lender with a Revolving Loan Commitment shall
make, any Refunded Swing Line Loan if, after giving effect to the making of
such Refunded Swing Line Loan, the sum of all Swing Line Loans and Revolving
Loans made by such Lender, plus such Lender's Percentage of the aggregate
amount of all Letter of Credit Outstandings, would exceed such Lender's
Percentage of the then existing Revolving Loan Commitment Amount. On or before
11:00 a.m. (New York City time) on the first Business Day following receipt by
each Lender of a request to make Revolving Loans as provided in the preceding
sentence, each such Lender with a Revolving Loan Commitment shall deposit in an
account specified by the Swing Line Lender the amount so requested in same day
funds and such funds shall be applied by the Swing Line Lender to repay the
Refunded Swing Line Loans. At the time the aforementioned Lenders make the
above referenced Revolving Loans, the Swing Line Lender shall be deemed to have
made, in consideration of the making of the Refunded Swing Line Loans, a
Revolving Loan in an amount equal to the Swing Line Lender's Percentage of the
aggregate principal amount of the Refunded Swing Line Loans. Upon the making
(or deemed making, in the case of the Swing Line Lender) of any Revolving Loans
pursuant to this clause (b), the amount so funded shall become outstanding
under such Lender's Revolving Note and shall no longer be owed under the Swing
Line Note. All interest payable with respect to any Revolving Loans made (or
deemed made, in the case of the Swing Line Lender) pursuant to this clause (b)
shall be appropriately adjusted to reflect the period of time during which the
Swing Line Lender had outstanding Swing Line Loans in respect of which such
Revolving Loans were made.
(c) If, at any time prior to the making of Revolving Loans to replace
any outstanding Swing Line Loans pursuant to clause (b) above, any Default of
the nature of the nature set forth in Section 8.1.9 shall have occurred, each
Lender with a Revolving Loan Commitment (other than the Swing Line Lender)
irrevocably agrees that it will, at the request of the Swing Line Lender and
upon notice from the Administrative Agent, purchase an undivided participation
interest in all such Swing Line Loans in an amount equal to its Percentage of
the aggregate outstanding amount of such Swing Line Loans and transfer
immediately to an account identified by the Swing Line Lender, in immediately
available funds, the amount of its participation. The Swing Line Lender will
deliver to each such Lender, promptly following receipt of such funds, a
participation certificate, dated the date of receipt of such funds and in the
amount of such Lender's participation if requested to do so by such Lender.
-41-
<PAGE>
(d) The Borrower expressly agrees that, in respect of each Lender's
funded participation interest in any Swing Line Loan, such Lender shall be
deemed to be in privity of contract with the Borrower and have the same rights
and remedies against the Borrower under the Loan Documents as if such funded
participation interest in such Swing Line Loan were a Revolving Loan.
(e) Each Lender's obligation (in the case of Lenders with a Revolving
Loan Commitment) to make Revolving Loans or purchase participation interests in
Swing Line Loans, as contemplated by clause (b) or (c) above, shall be absolute
and unconditional and without recourse to the Swing Line Lender and shall not
be affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Revolving Lender may have against
the Swing Line Lender, the Borrower or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of a Default, an Event of
Default or a Material Adverse Effect; (iii) the acceleration or maturity of any
Loans or the termination of any Commitment after the making of any Swing Line
Loan; (iv) any breach of this Agreement or any other Loan Document by the
Borrower, any other Obligor or any Lender; or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
SECTION 2.3.3. Existing Revolving Loans, Existing Term A Loans,
Existing Term B Loans and Original Term C Loans. As of the Amendment Effective
Date, the Existing Revolving Loans, the Existing Term A Loans, the Existing
Term B Loans and the Original Term C Loans originally made under the Existing
Credit Agreement shall continue to remain outstanding hereunder as Revolving
Loans, Term A Loans, Term B Loans and Existing Term C Loans, respectively, in
each case, as if made hereunder on the Amendment Effective Date.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
noon, New York City time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than one Business Day's notice (in the case of a
conversion of LIBO Rate Loans to Base Rate Loans) or three Business Days'
notice (in the case of a continuation of LIBO Rate Loans or a conversion of
Base Rate Loans into LIBO Rate Loans) nor more than five Business Days' notice
(in the case of any Loans) that all, or any portion (a) in a minimum amount of
$1,000,000 or any larger integral multiple of $500,000, be, in the case of Base
Rate Loans, converted into LIBO Rate Loans or, in the case of LIBO Rate Loans,
continued as LIBO Rate Loans or (b) in a minimum amount of $500,000 or any
larger integral multiple of $100,000, be, in the case of LIBO Rate Loans,
converted into Base Rate Loans (in the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan at least
three Business Days before the last day of the then current Interest Period
with respect thereto, such LIBO Rate Loan shall, on such last day,
automatically convert to a Base Rate Loan); provided, however, that (x) each
such conversion or continuation shall be pro rated among the applicable
outstanding Loans of the relevant Lenders, and (y) no portion of the
outstanding principal amount of any Loans may be continued as, or be converted
into, LIBO Rate Loans when any Default or Event of Default has occurred and is
continuing.
-42-
<PAGE>
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing
one of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan, so long as
such action does not result in increased costs to the Borrower; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the Borrower to repay such
LIBO Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility; provided further,
however, that, except for purposes of determining whether any such increased
costs are payable by the Borrower, such Lender shall cause such foreign branch,
Affiliate or international banking facility to comply with the applicable
provisions of clause (b) of Section 4.6 with respect to such LIBO Rate Loan. In
addition, the Borrower hereby consents and agrees that, for purposes of any
determination to be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall
be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by
purchasing Dollar deposits in its LIBOR Office's interbank Eurodollar market.
SECTION 2.6. Issuance Procedures. By delivering to the Administrative
Agent an Issuance Request on or before 12:00 noon, New York City time, on a
Business Day, the Borrower may, from time to time irrevocably request, on not
less than three nor more than ten Business Days' notice (or such shorter or
longer notice as may be acceptable to the Issuer), in the case of an initial
issuance of a Letter of Credit, and not less than three nor more than ten
Business Days' notice (unless a shorter or longer notice period is acceptable
to the Issuer) prior to the then existing Stated Expiry Date of a Letter of
Credit, in the case of a request for the extension of the Stated Expiry Date of
a Letter of Credit, that the Issuer issue, or extend the Stated Expiry Date of,
as the case may be, an irrevocable Letter of Credit on behalf of the Borrower
(whether the account party on such Letter of Credit is the Borrower or a
Subsidiary of the Borrower) in such form as may be requested by the Borrower
and approved by the Issuer, for the purposes described in Section 7.1.9;
provided, however, that no extension of the Stated Expiry Date of an
outstanding Letter of Credit may provide for a Stated Expiry Date subsequent to
the earlier of (i) the Revolving Loan Commitment Termination Date and (ii) one
year from the date of such extension. Notwithstanding anything to the contrary
contained herein or in any separate application for any Letter of Credit, the
Borrower hereby acknowledges and agrees that it shall be obligated to reimburse
the Issuer upon each Disbursement paid under a Letter of Credit, and it shall
be deemed to be the obligor for purposes of each such Letter of Credit issued
hereunder (whether the account party on such Letter of Credit is the Borrower
or a Subsidiary of the Borrower). Upon receipt of an Issuance Request, the
Administrative Agent shall promptly notify the Issuer and each Lender thereof.
Each Letter of Credit shall by its terms be stated to expire on a date (its
"Stated Expiry Date") no later than the earlier to occur of (i) the Revolving
Loan Commitment Termination Date or (ii) one year from the date of its
issuance. The Issuer will make available to the beneficiary thereof the
original of each Letter of Credit which it issues hereunder.
-43-
<PAGE>
SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each
Letter of Credit issued by the Issuer pursuant hereto, and without further
action, each Lender (other than the Issuer) that has a Revolving Loan
Commitment shall be deemed to have irrevocably purchased from the Issuer, to
the extent of its Percentage in respect of Revolving Loans, and the Issuer
shall be deemed to have irrevocably granted and sold to such Lender a
participation interest in such Letter of Credit (including the Contingent
Liability and any Reimbursement Obligation and all rights with respect
thereto), and such Lender shall, to the extent of its Percentage in respect of
Revolving Loans, be responsible for reimbursing promptly (and in any event
within one Business Day) the Issuer for Reimbursement Obligations which have
not been reimbursed by the Borrower in accordance with Section 2.6.3. In
addition, such Lender shall, to the extent of its Percentage in respect of
Revolving Loans, be entitled to receive a ratable portion of the Letter of
Credit fees payable pursuant to Section 3.3.3 with respect to each Letter of
Credit and of interest payable pursuant to Section 3.2 with respect to any
Reimbursement Obligation. To the extent that any Lender has reimbursed the
Issuer for a Disbursement as required by this Section, such Lender shall be
entitled to receive its ratable portion of any amounts subsequently received
(from the Borrower or otherwise) in respect of such Disbursement.
SECTION 2.6.2. Disbursements; Conversion to Revolving Loans. The
Issuer will notify the Borrower and the Administrative Agent promptly of the
presentment for payment of any drawing under any Letter of Credit issued by the
Issuer, together with notice of the date (the "Disbursement Date") such payment
shall be made (each such payment, a "Disbursement"). Subject to the terms and
provisions of such Letter of Credit and this Agreement, the Issuer shall make
such payment to the beneficiary (or its designee) of such Letter of Credit.
Prior to 12:00 noon, New York City time, on the first Business Day following
the Disbursement Date (the "Disbursement Due Date"), the Borrower will
reimburse the Administrative Agent, for the account of the Issuer, for all
amounts which the Issuer has disbursed under such Letter of Credit, together
with interest thereon at the rate per annum otherwise applicable to Revolving
Loans (made as Base Rate Loans) from and including the Disbursement Date to but
excluding the Disbursement Due Date and, thereafter (unless such Disbursement
is converted into a Revolving Loan made as a Base Rate Loan on the Disbursement
Due Date), at a rate per annum equal to the rate per annum then in effect with
respect to overdue Revolving Loans (made as Base Rate Loans) pursuant to
Section 3.2.2 for the period from the Disbursement Due Date through the date of
such reimbursement; provided, however, that, if no Default shall have then
occurred and be continuing, unless the Borrower has notified the Administrative
Agent no later than one Business Day prior to the Disbursement Due Date that it
will reimburse the Issuer for the applicable Disbursement, then the amount of
the Disbursement shall be deemed to be a Borrowing of Revolving Loans
constituting Base Rate Loans and following the giving of notice thereof by the
Administrative Agent to the Lenders, each Lender with a Revolving Loan
Commitment (other than the Issuer) will deliver to the Issuer on the
Disbursement Due Date immediately available funds in an amount equal to such
Lender's Percentage of such Borrowing. Each conversion of Disbursement amounts
into Revolving Loans shall constitute a representation and warranty by the
Borrower that on the date of the making of such Revolving Loans all of the
statements set forth in Section 5.2.1 are true and correct.
-44-
<PAGE>
SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of the Borrower under Section 2.6.2 to reimburse the Issuer with
respect to each Disbursement (including interest thereon) not converted into a
Revolving Loan made as a Base Rate Loan pursuant to Section 2.6.2, and, upon
the failure of the Borrower to reimburse the Issuer and the giving of notice
thereof by the Administrative Agent to the Lenders, each Lender's (to the
extent it has a Revolving Loan Commitment) obligation under Section 2.6.1 to
reimburse the Issuer or fund its Percentage of any Disbursement converted into
a Revolving Loan made as a Base Rate Loan, shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower or such Lender, as the case may be, may
have or have had against the Issuer or any such Lender, including any defense
based upon the failure of any Disbursement to conform to the terms of the
applicable Letter of Credit (if, in the Issuer's good faith opinion, such
Disbursement is determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of such Letter of Credit;
provided, however, that after paying in full its Reimbursement Obligation
hereunder, nothing herein shall adversely affect the right of the Borrower or
such Lender, as the case may be, to commence any proceeding against the Issuer
for any wrongful Disbursement made by the Issuer under a Letter of Credit as a
result of acts or omissions constituting gross negligence or willful misconduct
on the part of the Issuer.
SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during
the continuation of any Event of Default of the type described in clauses (a)
through (d) of Section 8.1.9 or, with notice from the Administrative Agent
acting at the direction of the Required Lenders, upon the occurrence and during
the continuation of any other Event of Default,
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is
undrawn and available under all Letters of Credit issued and
outstanding shall, without demand upon or notice to the Borrower or
any other Person, be deemed to have been paid or disbursed by the
Issuer under such Letters of Credit (notwithstanding that such amount
may not in fact have been so paid or disbursed); and
(b) upon notification by the Administrative Agent to the
Borrower of its obligations under this Section, the Borrower shall be
immediately obligated to reimburse the Issuer for the amount deemed to
have been so paid or disbursed by the Issuer.
Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in cash with the Administrative Agent and held as collateral security
for the Obligations in connection with the Letters of Credit issued by the
Issuer. At such time as the Events of Default giving rise to the deemed
disbursements hereunder shall have been cured or waived, the Administrative
Agent shall return to the Borrower all amounts then on deposit with the
Administrative Agent pursuant to this Section, together with accrued interest
at the Federal Funds Rate, which have not been applied to the satisfaction of
such Obligations.
-45-
<PAGE>
SECTION 2.6.5. Nature of Reimbursement Obligations. The Borrower and,
to the extent set forth in Section 2.6.1, each Lender with a Revolving Loan
Commitment, shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. The Issuer (except to the extent
of its own gross negligence or willful misconduct) shall not be responsible for
(i) the form, validity, sufficiency, accuracy, genuineness or legal effect of
any Letter of Credit or any document submitted by any party in connection with
the application for and issuance of a Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged, (ii) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may prove to be
invalid or ineffective for any reason, (iii) failure of the beneficiary to
comply fully with conditions required in order to demand payment under a Letter
of Credit, (iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, or (v)
any loss or delay in the transmission or otherwise of any document or draft
required in order to make a Disbursement under a Letter of Credit. None of the
foregoing shall affect, impair or prevent the vesting of any of the rights or
powers granted to the Issuer or any Lender with a Revolving Loan Commitment
hereunder. In furtherance and extension and not in limitation or derogation of
any of the foregoing, any action taken or omitted to be taken by the Issuer in
good faith (and not constituting gross negligence or willful misconduct) shall
be binding upon the Borrower, each Obligor and each such Lender, and shall not
put the Issuer under any resulting liability to the Borrower, any Obligor or
any such Lender, as the case may be.
SECTION 2.6.6. Indemnity. In addition to amounts payable as elsewhere
provided herein, the Borrower hereby agrees to protect, indemnify, pay and save
the Issuer harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys'
fees and allocated costs of internal counsel) which the Issuer may incur or be
subject to as a consequence, direct or indirect, of (a) the issuance of the
Letters of Credit, other than as a result of the gross negligence or wilful
misconduct of the Issuer as determined by a court of competent jurisdiction, or
(b) the failure of the Issuer to honor a drawing under any Letter of Credit as
a result of any act or omission, whether rightful or wrongful, of any present
or future de jure or de facto government or governmental authority.
SECTION 2.6.7. Borrower's Guaranty of Reimbursement Obligations under
Letters of Credit Issued for the Account of its Subsidiaries. The Borrower
agrees as follows in respect of the reimbursement obligations under Letters of
Credit issued for the account of its Subsidiaries:
(a) The Borrower hereby absolutely, unconditionally and irrevocably
-46-
<PAGE>
(i) guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all such reimbursement
obligations now or hereafter existing, of each of its Subsidiaries
(the "Account Parties") that is an account party to a Letter of Credit
which arise out of, or are incurred in connection with, such Letters
of Credit, whether for principal, interest, fees, expenses or
otherwise (including all such amounts which would become due but for
the operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11
U.S.C. ss.502(b) and ss.506(b)), and
(ii) indemnifies and holds harmless each Secured Party and
each holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Secured
Party or such holder, as the case may be, in enforcing any rights
under the guaranty set forth in this Section 2.6.7.
The guaranty set forth in this Section 2.6.7 constitutes a guaranty of payment
when due and not of collection, and the Borrower specifically agrees that it
shall not be necessary or required that any Secured Party or any holder of any
Note exercise any right, assert any claim or demand or enforce any remedy
whatsoever against any Account Party or any other Obligor (or any other Person)
before or as a condition to the obligations of the Borrower under the guaranty
set forth in this Section 2.6.7 (such obligations hereinafter referred to as
the "Guaranteed Obligations").
(b) The Borrower agrees that upon the occurrence of an Event of
Default of the nature set forth in clauses (a) through (d) of Section 8.1.9, at
a time when any of the Guaranteed Obligations of any Account Party may not then
be due and payable, then the Borrower agrees that it will pay to the
Administrative Agent for the account of the Secured Parties forthwith the full
amount which would be payable under the guaranty set forth in this Section
2.6.7 by the Borrower if all such Guaranteed Obligations were then due and
payable.
(c) The guaranty set forth in this Section 2.6.7 shall in all respects
be a continuing, absolute, unconditional and irrevocable guaranty of payment,
and shall remain in full force and effect until all Guaranteed Obligations of
the Account Parties have been paid in full in cash, all Obligations of the
Borrower and each other Obligor hereunder have been paid in full in cash, all
Letters of Credit have been terminated or expired, all Rate Protection
Agreements have been terminated or expired and all Commitments shall have
terminated. The Borrower guarantees that the Guaranteed Obligations of the
Account Parties will be paid strictly in accordance with the terms of this
Agreement and each other Loan Document under which they arise, regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Note with respect thereto. The liability of the Borrower under the guaranty
set forth in this Section 2.6.7 shall be absolute, unconditional and
irrevocable irrespective of:
-47-
<PAGE>
(i) any lack of validity, legality or enforceability of this
Agreement, any Note or any other Loan Document;
(ii) the failure of any Secured Party or any holder of any
Note
(A) to assert any claim or demand or to enforce any
right or remedy against any Account Party, any other Obligor
or any other Person (including any other guarantor (including
the Borrower)) under the provisions of this Agreement, any
Note, any other Loan Document or otherwise, or
(B) to exercise any right or remedy against any
other guarantor (including the Borrower) of, or collateral
securing, any Guaranteed Obligations of any Account Party;
(iii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Guaranteed Obligations of
any Account Party, or any other extension, compromise or renewal of
any Guaranteed Obligation of any Account Party;
(iv) any reduction, limitation, impairment or termination of
any Guaranteed Obligations of any Account Party for any reason,
including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to (and the Borrower hereby
waives any right to or claim of) any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity,
illegality, nongenuineness, irregularity, compromise, unenforceability
of, or any other event or occurrence affecting, any Guaranteed
Obligations of any Account Party or otherwise;
(v) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
this Agreement, any Note or any other Loan Document;
(vi) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by any Secured Party or any holder of any Note securing
any of the Guaranteed Obligations of any Account Party; or
(vii) any other circumstance which might otherwise constitute
a defense available to, or a legal or equitable discharge of, any
Account Party any surety or any guarantor.
(d) The Borrower agrees that the guaranty set forth in this Section
2.6.7 shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Guaranteed
Obligations is rescinded or must otherwise be restored by any Secured Party or
any holder of any Note, upon the insolvency, bankruptcy or reorganization of
any Account Party or otherwise, all as though such payment had not been made.
-48-
<PAGE>
(e) The Borrower hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations of any Account Party or any other Obligor and the guaranty set
forth in this Section 2.6.7 and any requirement that the Administrative Agent,
any other Secured Party or any holder of any Note protect, secure, perfect or
insure any security interest or Lien, or any property subject thereto, or
exhaust any right or take any action against any Account Party, any other
Obligor or any other Person (including any other guarantor) or entity or any
collateral securing the Guaranteed Obligations of any Account Party.
(f) The Borrower agrees that it will not exercise any rights which it
may acquire by way of rights of subrogation under the guaranty set forth in
this Section 2.6.7, by any payment made under the guaranty set forth in this
Section 2.6.7 or otherwise, until the prior payment in full in cash of all
Guaranteed Obligations of each Account Party, the prior payment in full in cash
of all Obligations of the Borrower, the termination or expiration of all
Letters of Credit, the termination or expiration of all Rate Protection
Agreements and the termination of all Commitments. Any amount paid to the
Borrower on account of any such subrogation rights prior to the payment in full
in cash of all Guaranteed Obligations of each Account Party shall be held in
trust for the benefit of the Secured Parties and each holder of a Note and
shall immediately be paid to the Administrative Agent for the benefit of the
Secured Parties and each holder of a Note and credited and applied against the
Guaranteed Obligations of each Account Party, whether matured or unmatured, in
accordance with the terms of this Agreement; provided, however, that if
(i) the Borrower has made payment to the Secured Parties and
each holder of a Note of all or any part of the Guaranteed Obligations
of any Account Party, and
(ii) all Guaranteed Obligations of each Account Party have
been paid in full in cash, all Obligations of the Borrower have been
paid in full in cash, all Letters of Credit have been terminated or
expired and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Borrower's
request, the Administrative Agent, on behalf of the Secured Parties and the
holders of the Notes, will execute and deliver to the Borrower appropriate
documents (without recourse and without representation or warranty) necessary
to evidence the transfer by subrogation to the Borrower of an interest in the
Guaranteed Obligations of each Account Party resulting from such payment by the
Borrower. In furtherance of the foregoing, for so long as any Obligations
(including Guaranteed Obligations) or Commitments remain outstanding, the
Borrower shall refrain from taking any action or commencing any proceeding
against any Account Party(or its successors or assigns, whether in connection
with a bankruptcy proceeding or otherwise) to recover any amounts in the
respect of payments made under the guaranty set forth in this Section 2.6.7 to
any Secured Party or any holder of a Note.
-49-
<PAGE>
(g) The guaranty set forth in this Section 2.6.7 shall:
(i) be binding upon the Borrower, and its successors,
transferees and assigns; and
(ii) inure to the benefit of and be enforceable by the
Administrative Agent and each other Secured Party.
Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including the guaranty set forth in
this Section 2.6.7) or otherwise, subject, however, to any contrary provisions
in such assignment or transfer, and to the provisions of Section 11.11 and
Article X.
SECTION 2.6.8. Continued Letters of Credit. Notwithstanding anything
to the contrary herein, the Letters of Credit (as defined in the Existing
Credit Agreement) shall be deemed to be Letters of Credit issued hereunder by
the Issuer on the Closing Date.
SECTION 2.7. Register; Notes.
(a) Each Lender may maintain in accordance with its usual
practice an account or accounts evidencing the Indebtedness of the
Borrower to such Lender resulting from each Loan made by such Lender,
including the amounts of principal and interest payable and paid to
such Lender from time to time hereunder. In the case of a Lender that
does not request, pursuant to clause (b)(ii) below, execution and
delivery of a Note evidencing the Loans made by such Lender to the
Borrower, such account or accounts shall, to the extent not
inconsistent with the notations made by the Administrative Agent in
the Register, be conclusive and binding on the Borrower absent
manifest error; provided, however, that the failure of any Lender to
maintain such account or accounts shall not limit or otherwise affect
any Obligations of the Borrower or any other Obligor.
(b)(i) The Borrower hereby designates the Administrative
Agent to serve as the Borrower's agent, solely for the purpose of this
clause (b), to maintain a register (the "Register") on which the
Administrative Agent will record each Lender's Commitment, the Loans
made by each Lender and each repayment in respect of the principal
amount of the Loans of each Lender and annexed to which the
Administrative Agent shall retain a copy of each Lender Assignment
Agreement delivered to the Administrative Agent pursuant to Section
11.11.1. Failure to make any recordation, or any error in such
recordation, shall not affect the Borrower's obligation in respect of
such Loans. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent
and the Lenders shall treat each Person in whose name a Loan (and as
provided in clause (ii) the Note evidencing such Loan, if any) is
registered as the owner thereof for all purposes of this Agreement,
notwithstanding notice
-50-
<PAGE>
or any provision herein to the contrary. A Lender's Commitment and the
Loans made pursuant thereto may be assigned or otherwise transferred
in whole or in part only by registration of such assignment or
transfer in the Register. Any assignment or transfer of a Lender's
Commitment or the Loans made pursuant thereto shall be registered in
the Register only upon delivery to the Administrative Agent of a
Lender Assignment Agreement duly executed by the assignor thereof and
the compliance by the parties thereto with the other requirements of
Section 11.11.1. No assignment or transfer of a Lender's Commitment or
the Loans made pursuant thereto shall be effective unless such
assignment or transfer shall have been recorded in the Register by the
Administrative Agent as provided in this Section.
(ii) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and
deliver to such Lender, as applicable, a Revolving Note, a Term Note
(or Registered Note) and/or a Swing Line Note evidencing the Loans
made by such Lender. The Borrower hereby irrevocably authorizes each
Lender to make (or cause to be made) appropriate notations on the grid
attached to such Lender's Notes (or on any continuation of such grid),
which notations, if made, shall evidence, inter alia, the date of, the
outstanding principal amount of, and the interest rate and Interest
Period applicable to the Loans evidenced thereby. Such notations
shall, to the extent not inconsistent with the notations made by the
Administrative Agent in the Register, be conclusive and binding on the
Borrower absent manifest error; provided, however, that the failure of
any Lender to make any such notations shall not limit or otherwise
affect any Obligations of the Borrower or any other Obligor. The Loans
evidenced by any Registered Note and interest thereon shall at all
times (including after assignment pursuant to Section 11.11.1) be
payable to the order of the payee named therein and its registered
assigns. A Registered Note and the obligation evidenced thereby may be
assigned or otherwise transferred in whole or in part only by
registration of such assignment or transfer of such Registered Note
and the obligation evidenced thereby in the Register (and each
Registered Note shall expressly so provide). Any assignment or
transfer of all or part of an obligation evidenced by a Registered
Note shall be registered in the Register only upon surrender for
registration of assignment or transfer of the Registered Note
evidencing such obligation, accompanied by a Lender Assignment
Agreement duly executed by the assignor thereof and the compliance by
the parties thereto with the other requirements of Section 11.11.1,
and thereupon, if requested by the assignee, one or more new Notes
shall be issued to the designated assignee and the old Registered Note
shall be returned by the Administrative Agent to the Borrower marked
"exchanged". No assignment of a Registered Note and the obligation
evidenced thereby shall be effective unless it shall have been
recorded in the Register by the Administrative Agent as provided in
this Section.
-51-
<PAGE>
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.
SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding
principal amount of any
(i) Loans (other than Swing Line Loans); provided,
however, that
(A) any such prepayment of the Term Loans
shall be made pro rata among the Term Loans of the
same type and, if applicable, having the same
Interest Period of all Lenders that have made such
Term Loans, and any such prepayment of Revolving
Loans shall be made pro rata among the Revolving
Loans of the same type and, if applicable, having
the same Interest Period of all Lenders that have
made such Revolving Loans;
(B) the Borrower shall comply with Section
4.4 in the event that any LIBO Rate Loan is prepaid
on any day other than the last day of the Interest
Period for such Loan;
(C) all such voluntary prepayments shall
require at least one Business Day's notice in the
case of Base Rate Loans, three Business Days' notice
in the case of LIBO Rate Loans, but no more than
five Business Days' notice in the case of any Loans,
in each case in writing to the Administrative Agent;
and
(D) all such voluntary partial prepayments
shall be, in the case of LIBO Rate Loans, in an
aggregate amount of $1,000,000 or any larger
integral multiple of $500,000, and, in the case of
Base Rate Loans, in an aggregate amount of $500,000
or any larger integral multiple of $100,000, or, in
either case, in the aggregate principal amount of
all Loans of the applicable Tranche and type then
outstanding; or
(ii) Swing Line Loans; provided, however, that
(A) all such voluntary prepayments shall
require prior telephonic notice to the Swing Line
Lender on or before 12:00 noon, New York City
-52-
<PAGE>
time, on the day of such prepayment (such notice to
be confirmed in writing by the Borrower within 24
hours thereafter); and
(B) all such voluntary partial prepayments
shall be in an aggregate amount of $100,000 and an
integral multiple of $50,000 or in the aggregate
principal amount of all Swing Line Loans then
outstanding;
(b) shall, no later than five Business Days following the
delivery by the Borrower of its annual audited financial reports
required pursuant to clause (c) of Section 7.1.1 (beginning with the
financial reports delivered in respect of the 1998 Fiscal Year),
deliver to the Administrative Agent a calculation of the Excess Cash
Flow for the Fiscal Year last ended and, no later than five Business
Days following the delivery of such calculation, make a mandatory
prepayment of the Term Loans in an amount equal to 75% of the Excess
Cash Flow (if any) for such Fiscal Year, to be applied as set forth in
Section 3.1.2;
(c) shall, not later than one Business Day following the
receipt of any Net Debt Proceeds by the Borrower, any Parent Guarantor
or any of their respective Subsidiaries, deliver to the Administrative
Agent a calculation of the amount of such Net Debt Proceeds and make a
mandatory prepayment of the Term Loans in an amount equal to 100% of
such Net Debt Proceeds to be applied as set forth in Section 3.1.2;
(d) shall, concurrently with the receipt of any Net Equity
Proceeds by the Borrower, any Parent Guarantor or any of their
respective Subsidiaries, deliver to the Administrative Agent a
calculation of the amount of such Net Equity Proceeds, and no later
than five Business Days following the delivery of such calculation,
make a mandatory prepayment of the Term Loans in an amount equal to
50% of such Net Equity Proceeds to be applied as set forth in Section
3.1.2;
(e) shall, following the receipt by the Borrower, any Parent
Guarantor or any of their respective Subsidiaries of any Casualty
Proceeds in excess of $500,000 (individually or in the aggregate (when
taken together with Net Disposition Proceeds) over the course of a
Fiscal Year), deliver to the Administrative Agent a calculation of the
amount of such Casualty Proceeds and make a mandatory prepayment of
the Term Loans in an amount equal to 100% of such Casualty Proceeds
within 60 days of the receipt thereof to be applied as set forth in
Section 3.1.2; provided, however, that no mandatory prepayment on
account of Casualty Proceeds shall be required under this clause if
the Borrower informs the Agents in writing no later than 60 days
following the occurrence of the Casualty Event resulting in such
Casualty Proceeds of its, such Parent Guarantor's or such Subsidiary's
good faith intention to apply such Casualty Proceeds to the rebuilding
or replacement of the damaged, destroyed or condemned assets or
property and the Borrower, such Parent Guarantor or such Subsidiary in
fact uses such Casualty Proceeds to rebuild or replace such assets or
property within 365 days following the receipt of such Casualty
Proceeds, with the amount of such Casualty Proceeds unused after such
365-day
-53-
<PAGE>
period being applied to the Term Loans pursuant to Section 3.1.2;
provided, further, however, that (i) at any time when any Default or
Event of Default shall have occurred and be continuing, all Casualty
Proceeds (together with Net Disposition Proceeds not applied as
provided in clause (f) below) shall be deposited in an account
maintained with the Administrative Agent to pay for such rebuilding or
replacement whenever no Default or Event of Default is then continuing
or except as otherwise agreed to by the Agents for disbursement at the
request of the Borrower, such Parent Guarantor or such Subsidiary, as
the case may be, or (ii) if all such Casualty Proceeds (together with
Net Disposition Proceeds not applied as provided in clause (f) below)
aggregating in excess of $1,000,000 have not yet been applied as
described in the notice required above (or in accordance with clause
(f) below), all such Casualty Proceeds and Net Disposition Proceeds
shall be deposited in an account maintained with the Administrative
Agent for disbursement at the request of the Borrower, such Parent
Guarantor or such Subsidiary, as the case may be, to be used for the
purpose(s) set forth in such written notice(s);
(f) shall, following the receipt by the Borrower, any Parent
Guarantor or any of their respective Subsidiaries of any Net
Disposition Proceeds in excess of $500,000 (individually or in the
aggregate (when taken together with Casualty Proceeds) over the course
of a Fiscal Year), deliver to the Administrative Agent a calculation
of the amount of such Net Disposition Proceeds and make a mandatory
prepayment of the Term Loans in an amount equal to 100% of such Net
Disposition Proceeds within one Business Day of the receipt thereof to
be applied as set forth in Section 3.1.2; provided, however, that no
mandatory prepayment on account of Net Disposition Proceeds shall be
required under this clause if the Borrower informs the Agents in
writing no later than one Business Day following the receipt of such
Net Disposition Proceeds of its, such Parent Guarantor's or such
Subsidiary's good faith intention to apply such Net Disposition
Proceeds to the replacement of the sold, conveyed or transferred
assets or property and the Borrower, such Parent Guarantor or such
Subsidiary in fact uses such Net Disposition Proceeds to replace such
assets or property within 365 days following the receipt of such Net
Disposition Proceeds, with the amount of such Net Disposition Proceeds
unused after such 365-day period being applied to the Term Loans
pursuant to Section 3.1.2; provided, further, however, that (i) at any
time when any Default or Event of Default shall have occurred and be
continuing, all Net Disposition Proceeds (together with Casualty
Proceeds not applied as provided in clause (e) above) shall be
deposited in an account maintained with the Administrative Agent to
pay for such replacement whenever no Default or Event of Default is
then continuing or except as otherwise agreed to by the Agents for
disbursement at the request of the Borrower, such Parent Guarantor or
such Subsidiary, as the case may be, or (ii) if all such Net
Disposition Proceeds (together with Casualty Proceeds not applied as
provided in clause (e) above) aggregating in excess of $1,000,000 have
not yet been applied as described in the notice required above (or in
accordance with clause (e) above), all such Net Disposition Proceeds
and Casualty Proceeds shall be deposited in an account maintained with
the Administrative Agent for
-54-
<PAGE>
disbursement at the request of the Borrower, such Parent Guarantor or
such Subsidiary, as the case may be, to be used for the purpose(s) set
forth in such written notice(s);
(g) shall, on each date when any reduction in the Revolving
Loan Commitment Amount shall become effective, make a mandatory
prepayment of Revolving Loans and Swing Line Loans and (if necessary)
deposit with the Administrative Agent cash collateral for Letter of
Credit Outstandings in an aggregate amount equal to the excess, if
any, of the sum of (i) the aggregate outstanding principal amount of
all Revolving Loans and Swing Line Loans and (ii) the aggregate amount
of all Letter of Credit Outstandings over the Revolving Loan
Commitment Amount as so reduced;
(h) shall on each Quarterly Payment Date occurring during any
period set forth below, make a scheduled repayment of the outstanding
principal amount, if any, of Term A Loans in an amount equal to the
amount set forth below opposite such period (in each case as such
amounts may have otherwise been reduced pursuant to this Agreement):
SCHEDULED
PERIOD PRINCIPAL REPAYMENT
------ -------------------
November 15, 1998 $250,000
February 15, 1999 through
November 15, 1999 $1,000,000
February 15, 2000 through
November 15, 2000 $2,000,000
February 15, 2001 through
November 15, 2002 $2,500,000
February 15, 2003 through
November 15, 2003 $3,000,000
February 15, 2004 $5,250,000;
(i) shall on each Quarterly Payment Date occurring during any
period set forth below, make a scheduled repayment of the outstanding
principal amount, if any, of Term B Loans in an amount equal to the
amount set forth below opposite period (in each case as such amounts
may have otherwise been reduced pursuant to this Agreement):
SCHEDULED
PERIOD PRINCIPAL REPAYMENT
------ -------------------
November 15, 1998 through
February 15, 2004 $200,000
-55-
<PAGE>
May 15, 2004 through $18,800,000;
February 15, 2005
(j) shall on each Quarterly Payment Date occurring during any
period set forth below, make a scheduled repayment of the outstanding
principal amount, if any, of Existing Term C Loans in an amount equal
to the amount set forth below opposite such period (in each case as
such amounts may have otherwise been reduced pursuant to this
Agreement):
SCHEDULED
PERIOD PRINCIPAL REPAYMENT
------ -------------------
November 15, 1998 through
February 15, 2005 $25,000
May 15, 2005 through $2,337,500; and
February 15, 2006
(k) shall on each Quarterly Payment Date occurring during any
period set forth below, make a scheduled repayment of the outstanding
principal amount, if any, of Additional Term C Loans in an amount
equal to the amount set forth below opposite such period (in each case
as such amounts may have otherwise been reduced pursuant to this
Agreement):
SCHEDULED
PERIOD PRINCIPAL REPAYMENT
------ -------------------
November 15, 1998 through
February 15, 2005 $175,000
May 15, 2005 through $16,362,500; and
February 15, 2006
(l) shall, immediately upon the occurrence of the Stated
Maturity Date of any Loans or Obligations, whether by way of
acceleration pursuant to Section 8.2 or 8.3 or otherwise, repay all
outstanding Loans and other Obligations, unless, pursuant to
Section 8.3, only a portion of all Loans and other Obligations are so
accelerated (in which case the portion so accelerated shall be so
prepaid).
Each prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by Section 4.4. No
prepayment of principal of any Revolving
-56-
<PAGE>
Loans or Swing Line Loans pursuant to clause (a) of this Section 3.1.1 shall
cause a reduction in the Revolving Loan Commitment Amount or the Swing Line
Loan Commitment Amount, as the case may be.
SECTION 3.1.2. Application. (a) Subject to clause (b) below, each
prepayment or repayment of principal of the Loans of any Tranche shall be
applied, to the extent of such prepayment or repayment, first, to the principal
amount thereof being maintained as Base Rate Loans, and second, to the
principal amount thereof being maintained as LIBO Rate Loans.
(b) Each prepayment of Term Loans made pursuant to clauses (a), (b),
(c), (d), (e) and (f) of Section 3.1.1 shall be applied, on a pro rata basis,
to the outstanding principal amount of all remaining Term Loans and the
remaining scheduled quarterly amortization payments in respect thereof, until
all such Term Loans have been paid in full; provided, however, that in the case
of any such prepayment of Term B Loans, Existing Term C Loans or Additional
Term C Loans made pursuant to clause (b), (c), (d), (e) and (f) of Section
3.1.1, any Lender that has Term B Loans, Existing Term C Loans or Additional
Term C Loans may elect not to have such Loans prepaid by delivering a notice to
the Administrative Agent at least one Business Day prior to the date that such
prepayment is to be made in which notice such Lender shall decline to have such
Loans prepaid with the amounts set forth above, in which case the amounts that
would have been applied to a prepayment of such Lender's Term B Loans, Existing
Term C Loans or Additional Term C Loans shall instead be applied to a
prepayment of the principal amount (if any) of all outstanding Term A Loans
until all outstanding Term A Loans have been prepaid in full, then applied to a
prepayment of the principal amount (if any) of all outstanding Swing Line Loans
until all outstanding Swing Line Loans have been prepaid in full and then
applied to a prepayment of the principal amount (if any) of all outstanding
Revolving Loans until all outstanding Revolving Loans have been prepaid in
full, with the balance (if any) being returned by the Administrative Agent to
the Borrower. No prepayment of principal of any Revolving Loans or Swing Line
Loans pursuant to the proviso of the immediately preceding sentence shall cause
a reduction in the Revolving Loan Commitment Amount or the Swing Line Loan
Commitment Amount, as the case may be.
SECTION 3.2. Interest Provisions. Interest on the outstanding
principal amount of the Loans shall accrue and be payable in accordance with
this Section 3.2.
SECTION 3.2.1. Rates. Each Base Rate Loan shall accrue interest on the
unpaid principal amount thereof for each day from and including the day upon
which such Loan was made or converted to a Base Rate Loan to but excluding the
date such Loan is repaid or converted to a LIBO Rate Loan at a rate per annum
equal to the sum of the Alternate Base Rate for such day plus the Applicable
Margin for such Loan on such day. Each LIBO Rate Loan shall
accrue interest on the unpaid principal amount thereof for each day from and
including the first day of the Interest Period applicable thereto to but
excluding the date such Loan is repaid or converted to a Base Rate Loan at a
rate per annum equal to the sum of the LIBO Rate (Reserve Adjusted) for such
Interest Period plus the Applicable Margin for such Loan on such day.
-57-
<PAGE>
SECTION 3.2.2. Post-Maturity Rates. After the date any principal
amount of any Loan shall have become due and payable (whether on the applicable
Stated Maturity Date, upon acceleration or otherwise), or any other monetary
Obligation (other than overdue Reimbursement Obligations which shall bear
interest as provided in Section 2.6.2) of the Borrower shall have become due
and payable, the Borrower shall pay, but only to the extent permitted by law,
interest (after as well as before judgment) on such amounts at a rate per annum
equal to (a) in the case of any overdue principal of Loans, overdue interest
thereon, overdue commitment fees or other overdue amounts in respect of Loans
or other obligations (or the related Commitments) under a particular Tranche,
the rate that would otherwise be applicable to Base Rate Loans under such
Tranche pursuant to Section 3.2.1 plus 2% and (b) in the case of other overdue
monetary Obligations, the rate that would otherwise be applicable to Revolving
Loans made as Base Rate Loans plus 2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Loan, to the extent of the
unpaid interest accrued through such date on the principal so paid or
prepaid;
(c) with respect to Base Rate Loans, on each Quarterly
Payment Date occurring after the Amendment Effective Date hereunder;
(d) with respect to LIBO Rate Loans, on the last day of the
applicable Interest Period (and, if such Interest Period shall exceed
three months, at intervals of three months after the first day of such
Interest Period);
(e) with respect to the principal amount of any Base Rate
Loans converted into LIBO Rate Loans on a day when interest would not
otherwise have been payable pursuant to clause (c), on the date of
such conversion; and
(f) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 8.2 or 8.3, immediately upon
such acceleration.
Interest accrued on Loans, Reimbursement Obligations or other monetary
Obligations arising under this Agreement or any other Loan Document after the
date such amount is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.3. All such fees shall be non-refundable.
-58-
<PAGE>
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender that has a Revolving Loan
Commitment, for each day during the period (including any portion thereof when
any of the Lenders' Revolving Loan Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V) commencing on the
Amendment Effective Date and continuing to but excluding the Revolving Loan
Commitment Termination Date, a commitment fee on such Lender's Percentage of
the unused portion of the Revolving Loan Commitment Amount, whether or not then
available, for such day at a rate per annum equal to the Applicable Commitment
Fee for such day. Such commitment fees shall be payable by the Borrower in
arrears on each Quarterly Payment Date, commencing with the first such day
following the Amendment Effective Date, and on the Revolving Loan Commitment
Termination Date. The making of Swing Line Loans by the Swing Line Lender shall
not constitute usage under the Revolving Loan Commitment for the purpose of
calculating the commitment fees to be paid by the Borrower to the Lenders
(other than the Swing Line Lender) pursuant to this Section 3.3.1.
SECTION 3.3.2. Syndication Agent's, Administrative Agent's and
Arranger's Fees. The Borrower agrees to pay to each of the Syndication Agent,
the Administrative Agent and the Arranger for each such Person's own account,
the fees set forth in the Fee Letter and the Administrative Agent's Fee Letter
in accordance with their respective terms.
SECTION 3.3.3. Letter of Credit Fee. The Borrower agrees to pay to
(a) the Administrative Agent, for the pro rata account of the
Issuer and each other Lender that has a Revolving Loan Commitment, a
Letter of Credit fee for each day on which there shall be any Letters
of Credit outstanding in an amount equal to the product of (i) a rate
per annum equal to the then Applicable Margin for Revolving Loans
maintained as LIBO Rate Loans multiplied by (ii) the Stated Amount of
each such Letter of Credit; and
(b) the Issuer (i) a Letter of Credit fronting fee for each
day on which there shall be any Letters of Credit outstanding in an
amount equal to 0.25% per annum on the Stated Amount of each such
Letter of Credit, and (ii) from time to time promptly after demand,
the normal issuance, presentation, amendment and other processing
fees, and other standard administrative costs and charges of the
Issuer relating to Letters of Credit as from time to time in effect.
Fees payable pursuant to this Section shall be payable quarterly in arrears on
each Quarterly Payment Date and on the Revolving Loan Commitment Termination
Date.
-59-
<PAGE>
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, upon notice thereof to the Borrower and the
Lenders, be conclusive and binding on the Borrower) that the introduction of or
any change in or in the interpretation of any law makes it unlawful, or any
central bank or other governmental authority asserts that it is unlawful, for
such Lender to make, continue or maintain any Loan as, or to convert any Loan
into, a LIBO Rate Loan, the obligations of such Lender to make, continue,
maintain or convert any Loans as or to LIBO Rate Loans shall, upon such
determination, forthwith be suspended until such Lender shall notify the
Administrative Agent that the circumstances causing such suspension no longer
exist (with the date of such notice being the "Reinstatement Date"), and (a)
all LIBO Rate Loans previously made by such Lender shall automatically convert
into Base Rate Loans at the end of the then current Interest Periods with
respect thereto or sooner, if required by such law or assertion and (b) all
Loans thereafter made by such Lender and outstanding prior to the Reinstatement
Date shall be made as Base Rate Loans, with interest thereon being payable on
the same date that interest is payable with respect to the corresponding
Borrowing of LIBO Rate Loans made by Lenders not so affected.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall
have determined that (a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to the Administrative Agent in its
relevant market, or (b) by reason of circumstances affecting the Administrative
Agent's relevant market, adequate means do not exist for ascertaining the
interest rate applicable hereunder to LIBO Rate Loans, then, upon notice from
the Administrative Agent to the Borrower and the Lenders, the obligations of
all Lenders under Sections 2.3 and 2.4 to make or continue any Loans as, or to
convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees
to reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, LIBO Rate Loans. Such Lender shall promptly notify the
Administrative Agent and the Borrower in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Lender for such increased
cost or reduced amount. Such additional amounts shall be payable by the
Borrower directly to such Lender within five days of its receipt of such
notice, and such notice shall, in the absence of manifest error, be conclusive
and binding on the Borrower.
-60-
<PAGE>
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan) as a result of (i) any conversion or repayment or prepayment of the
principal amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to Section 3.1
or otherwise, (ii) any Loans not being made as LIBO Rate Loans in accordance
with the Borrowing Request therefor, or (iii) any Loans not being continued as,
or converted into, LIBO Rate Loans in accordance with the
Continuation/Conversion Notice therefor, then, upon the written notice of such
Lender to the Borrower (with a copy to the Administrative Agent), the Borrower
shall, within five days of its receipt thereof, pay directly to such Lender
such amount as will (in the reasonable determination of such Lender) reimburse
such Lender for such loss or expense. Such written notice (which shall include
calculations in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender, the Issuer or any Person
controlling such Lender or the Issuer, and such Lender or the Issuer determines
(in its sole and reasonable discretion) that the rate of return on its or such
controlling Person's capital as a consequence of its Commitments, participation
in, or the issuance or extension of, any Letter of Credit or any Loan made by
such Lender or the Issuer is reduced to a level below that which such Lender,
the Issuer or such controlling Person could have achieved but for the
occurrence of any such circumstance, then, in any such case upon notice from
time to time by such Lender or the Issuer to the Borrower, the Borrower shall
immediately pay directly to such Lender or the Issuer additional amounts
sufficient to compensate such Lender, the Issuer or such controlling Person for
such reduction in rate of return. A statement of such Lender or the Issuer as
to any such additional amount or amounts (including calculations thereof in
reasonable detail) shall, in the absence of manifest error, be conclusive and
binding on the Borrower. In determining such amount, such Lender or the Issuer
may use any method of averaging and attribution that it (in its sole and
absolute discretion) shall deem applicable.
SECTION 4.6. Taxes. (a) All payments by the Borrower of principal of,
and interest on, the Loans and all other amounts payable hereunder (including
Reimbursement Obligations, fees and expenses) shall be made free and clear of
and without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other charges of
any nature whatsoever imposed by any taxing authority, but excluding franchise
taxes and other taxes imposed on or measured by any Agent's, the Documentation
Agent's, the Issuer's or any Lender's net income or receipts (such non-excluded
items being called "Taxes"). In the event that any withholding or deduction
from any payment to be made by the Borrower
-61-
<PAGE>
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Borrower will (i) pay directly to the relevant
taxing authority the full amount required to be so withheld or deducted, (ii)
promptly forward to the Administrative Agent an official receipt or other
documentation satisfactory to the Administrative Agent evidencing such payment
to such authority, and (iii) pay to the Administrative Agent for the account of
such Agent, the Documentation Agent, the Issuer or such Lender such additional
amount or amounts as is necessary to ensure that the net amount actually
received by such Agent, the Documentation Agent, the Issuer or such Lender will
equal the full amount such Agent, the Documentation Agent, the Issuer or such
Lender would have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against any Agent, the
Documentation Agent, the Issuer or any Lender with respect to any payment
received by such Agent, the Documentation Agent, the Issuer or such Lender
hereunder, such Agent, the Documentation Agent, the Issuer or such Lender may
pay such Taxes and the Borrower will promptly pay to such Person such
additional amounts (including any penalties, interest or expenses) as is
necessary in order that the net amount received by such Person after the
payment of such taxes (including any Taxes on such additional amount) shall
equal the amount such Person would have received had such Taxes not been
asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the account
of the respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this Section 4.6, a distribution hereunder by the
Administrative Agent or any Lender to or for the account of any Lender shall be
deemed a payment by the Borrower.
(b) Upon the request of the Borrower or the Administrative Agent, each
Lender that is organized under the laws of a jurisdiction other than the United
States shall, on or prior to the due date of any payments under this Agreement
to such Lender, provide two or more (as the Borrower or the Administrative
Agent may reasonably request) United States Internal Revenue Service Forms 4224
or Forms 1001 or, solely if such Lender is claiming exemption from United
States withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest", United States Internal Revenue Service
Forms W-8 and a certificate signed by a duly authorized officer of such Lender
representing that such Lender is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code, or such other forms or documents (or successor forms
or documents), appropriately completed, as may be applicable to establish the
extent, if any, to which a payment to such Lender are exempt from withholding
or deduction of Taxes.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by or on behalf of the Borrower pursuant to this
Agreement, the Notes or any other Loan Document shall be made by the Borrower
to the Administrative Agent for the pro rata
-62-
<PAGE>
account of the Lenders, the Documentation Agent, the Agents or the Arranger, as
applicable, entitled to receive such payment. All such payments required to be
made to the Administrative Agent shall be made, without setoff, deduction or
counterclaim, not later than 11:00 a.m., New York City time, on the date due,
in same day or immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to the Borrower.
Funds received after that time shall be deemed to have been received by the
Administrative Agent on the next succeeding Business Day. The Administrative
Agent shall promptly remit in same day funds to each Lender, the Documentation
Agent, each Agent or the Arranger, as the case may be, its share, if any, of
such payments received by the Administrative Agent for the account of such
Lender, the Documentation Agent, such Agent or the Arranger, as the case may
be. All interest and fees shall be computed on the basis of the actual number
of days (including the first day but excluding the last day) occurring during
the period for which such interest or fee is payable over a year comprised of
360 days (or, in the case of interest on a Base Rate Loan that is not
calculated at the Federal Funds Rate, 365 days or, if appropriate, 366 days).
Whenever any payment to be made shall otherwise be due on a day which is not a
Business Day, such payment shall (except as otherwise required by clause (a) of
the definition of the term "Interest Period") be made on the next succeeding
Business Day and such extension of time shall be included in computing interest
and fees, if any, in connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan or Reimbursement Obligations (other
than pursuant to the terms of Sections 4.3, 4.4 and 4.5) in excess of its pro
rata share of payments then or therewith obtained by all Lenders entitled
thereto, such Lender shall purchase from the other Lenders such participations
in the Credit Extensions made by them as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender the purchase
price to the ratable extent of such recovery together with an amount equal to
such selling Lender's ratable share (according to the proportion of (i) the
amount of such selling Lender's required repayment to the purchasing Lender in
respect of such recovery, to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section may, to the fullest extent permitted by law, exercise
all its rights of payment (including pursuant to Section 4.9) with respect to
such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a setoff to which this Section applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders entitled under this Section
to share in the benefits of any recovery on such secured claim.
-63-
<PAGE>
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any
Event of Default described in clauses (a) through (d) of Section 8.1.9 or, with
the consent of the Required Lenders, upon the occurrence of any other Event of
Default, to the fullest extent permitted by law, have the right to appropriate
and apply to the payment of the Obligations then owing to it (whether or not
then due), and (as security for such Obligations) the Borrower hereby grants to
each Lender a continuing security interest in, any and all balances, credits,
deposits, accounts or moneys of the Borrower then or thereafter maintained with
or otherwise held by such Lender; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
4.8. Each Lender agrees promptly to notify the Borrower and the Administrative
Agent after any such setoff and application made by such Lender; provided,
however, that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of each Lender under this Section are
in addition to other rights and remedies (including other rights of setoff
under applicable law or otherwise) which such Lender may have.
SECTION 4.10. Replacement of Lenders. Each Lender hereby severally
agrees as set forth in this Section. If any Lender (an "Affected Lender") makes
demand upon the Borrower for (or if the Borrower is otherwise required to pay)
amounts pursuant to Section 4.3, 4.5 or 4.6 and the payment of such additional
amounts are, and are likely to continue to be, more onerous in the reasonable
judgment of the Borrower than with respect to the other Lenders, the Borrower
may, within 30 days of receipt by the Borrower of such demand or notice (or the
occurrence of such other event causing the Borrower to be required to pay such
compensation), as the case may be, give notice (a "Replacement Notice") in
writing to the Agents and such Affected Lender of its intention to replace such
Affected Lender with a financial institution (a "Replacement Lender")
designated in such Replacement Notice. If the Agents shall, in the exercise of
their reasonable discretion and within 30 days of their receipt of such
Replacement Notice, notify the Borrower and such Affected Lender in writing
that the designated financial institution is satisfactory to the Agents (such
consent not being required where the Replacement Lender is already a Lender),
then such Affected Lender shall, subject to the payment of any amounts due
pursuant to Section 4.4, assign, in accordance with Section 11.11.1, all of its
Commitments, Loans, Notes and other rights and obligations under this Agreement
and all other Loan Documents (including Reimbursement Obligations, if
applicable) to such designated financial institution; provided, however, that
(i) such assignment shall be without recourse, representation or warranty and
shall be on terms and conditions reasonably satisfactory to such Affected
Lender and such designated financial institution, (ii) the purchase price paid
by such designated financial institution shall be in the amount of such
Affected Lender's Loans and its Percentage of outstanding Reimbursement
Obligations, together with all accrued and unpaid interest and fees in respect
thereof, plus all other amounts (including the amounts demanded and
unreimbursed under Sections 4.3, 4.5 and 4.6), owing to such Affected Lender
hereunder and (iii) the Borrower shall pay to the Affected Lender and the
Agents all reasonable out-of-pocket expenses incurred by the Affected Lender
and the Agents in connection with such assignment and assumption (including the
processing fees described in Section 11.11.1). Upon the effective date of an
assignment described above, the Replacement Lender shall become a "Lender" for
all purposes under this Agreement and the other Loan Documents.
-64-
<PAGE>
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION 5.1. [INTENTIONALLY OMITTED].
SECTION 5.2. All Credit Extensions. The obligation of each Lender and,
if applicable, the Issuer, to make any Credit Extension shall be subject to the
satisfaction of each of the conditions precedent set forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both
before and after giving effect to any Credit Extension the following statements
shall be true and correct:
(a) the representations and warranties set forth in Article
VI (excluding, however, those contained in Section 6.7) and each other
Loan Document shall, in each case, be true and correct with the same
effect as if then made (unless stated to relate solely to an earlier
date, in which case such representations and warranties shall be true
and correct as of such earlier date);
(b) except as disclosed by the Borrower or any Parent
Guarantor to the Agents, the Documentation Agent and the Lenders
pursuant to Section 6.7
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding (including any
relating to any Pharmaceutical Law) shall be pending or, to
the knowledge of the Borrower or any Parent Guarantor,
threatened against the Borrower, any Parent Guarantor or any
of their respective Subsidiaries which could reasonably be
expected to have a Material Adverse Effect or which purports
to affect the legality, validity or enforceability of this
Agreement, the Notes or any other Loan Document; and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental
investigation or proceeding (including any relating to any
Pharmaceutical Law) disclosed pursuant to Section 6.7 which
could reasonably be expected to have a Material Adverse
Effect; and
(c) no Default shall have then occurred and be continuing,
and neither the Borrower, any Parent Guarantor nor any of their
respective Subsidiaries are in material violation of any law or
governmental regulation or court order or decree (including any
Pharmaceutical Law).
SECTION 5.2.2. Credit Extension Request. The Agents shall have
received a Borrowing Request if Loans are being requested, or an Issuance
Request if a Letter of Credit is being
-65-
<PAGE>
requested or extended. Each of the delivery of a Borrowing Request or Issuance
Request and the acceptance by the Borrower of proceeds of any Credit Extension
shall constitute a representation and warranty by the Borrower that on the date
of such Credit Extension (both immediately before and after giving effect
thereto and the application of the proceeds thereof) the statements made in
Section 5.2.1 are true and correct.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Documentation Agent, the Issuer
and the Agents to enter into this Agreement and to make Credit Extensions
hereunder, each of the Borrower and each Parent Guarantor represents and
warrants unto the Agents, the Documentation Agent, the Issuer and each Lender
as set forth in this Article VI.
SECTION 6.1. Organization, etc. Each of the Borrower, each Parent
Guarantor and each of their respective Subsidiaries (a) is a corporation or
partnership validly organized and existing and in good standing to the extent
required under the laws of the jurisdiction of its incorporation or formation,
is duly qualified to do business and is in good standing as a foreign
corporation or partnership to the extent required under the laws of each
jurisdiction where the nature of its business requires such qualification, and
(b) has full power and authority and holds all requisite material governmental
licenses, permits and other approvals to (i) enter into and perform its
Obligations in connection with the Rock Bottom Acquisition and under this
Agreement, the Notes and each other Loan Document to which it is a party and
(ii) own and hold under lease its property and to conduct its business
substantially as currently conducted by it.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by each of the Borrower, each Parent Guarantor and
each of their respective Subsidiaries of this Agreement, the Notes and each
other Loan Document executed or to be executed by it, and the Borrower's and,
where applicable, each such other Obligor's participation in the consummation
of the Rock Bottom Acquisition, are within the Borrower's and each such
Obligor's corporate or partnership powers, have been duly authorized by all
necessary corporate or partnership action, and do not (i) contravene the
Borrower's or any such Obligor's Organic Documents, (ii) contravene any
contractual restriction, law or governmental regulation or court decree or
order binding on or affecting the Borrower or any such Obligor, or (iii) result
in, or require the creation or imposition of, any Lien on any of the Borrower's
or any other Obligor's properties, except pursuant to the terms of a Loan
Document.
SECTION 6.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person, is required for the due
execution, delivery or performance by any of the Borrower, any Parent Guarantor
or any of their respective Subsidiaries of this Agreement, the Notes or any
-66-
<PAGE>
other Loan Document to which it is a party, or for the Borrower's and each such
other Obligor's participation in the consummation of the Rock Bottom
Acquisition, except as have been duly obtained or made and are in full force
and effect. None of the Borrower, any Parent Guarantor or any of their
respective Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and the Notes
and each other Loan Document executed, or to be executed, by any of the
Borrower, any Parent Guarantor or any of their respective Subsidiaries, as the
case may be, constitutes, or will on the due execution and delivery thereof
constitute, the legal, valid and binding obligations of the Borrower and such
other Obligor enforceable in accordance with their respective terms.
SECTION 6.5. Financial Information. Holdings has delivered to the
Agents, the Documentation Agent and each Lender copies of each of (a) the Base
Financial Statements and (b) the Pro Forma Balance Sheets. Each of the
financial statements described in clause (a) above has been prepared in
accordance with GAAP consistently applied and presents fairly the consolidated
financial condition of the corporations and partnerships covered thereby as at
the date thereof and the results of their operations for the periods then
ended, and each of the financial statements described in clause (b) above has
been prepared on a basis substantially consistent with the basis used to
prepare the financial statements referred to in clause (a), and includes
appropriate pro forma adjustments to give pro forma effect to the New
Transaction.
SECTION 6.6. No Material Adverse Change. Except as set forth in Item
6.6 ("Material Adverse Change") of the Disclosure Schedule, since December 27,
1997, there has been no material adverse change in the business, assets, debt
service capacity, tax position, environmental liability, financial condition,
operations, properties or prospects of the Borrower and its Subsidiaries, taken
as a whole, or Holdings and its Subsidiaries, taken as a whole.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of the Borrower or any Parent Guarantor, threatened
litigation, action, proceeding, labor controversy, arbitration or governmental
investigation or proceeding (including any relating to any Pharmaceutical Law)
affecting the Borrower, any Parent Guarantor or any of their respective
Subsidiaries, or any of their respective properties, businesses, assets or
revenues, which might have a Material Adverse Effect or which purports to
affect the legality, validity or enforceability of this Agreement, the Notes or
any other Loan Document, except as disclosed in Item 6.7 ("Litigation") of the
Disclosure Schedule.
SECTION 6.8. Subsidiaries. Holdings has no direct Subsidiaries other
than DRI I and the Borrower (of which it is a general partner and directly
holds a 99% general partnership interest). DRI I has no direct Subsidiaries
other than the Borrower (of which it is a general
-67-
<PAGE>
partner and holds a 1% general partnership interest). The Borrower has no
Subsidiaries, except for (a) immediately following the consummation of the Rock
Bottom Acquisition, the Rock Bottom Subsidiaries and (b) those Subsidiaries
which are permitted to have been acquired in accordance with Section 7.2.5 or
7.2.8.
SECTION 6.9. Ownership of Properties. Each of the Borrower, each
Parent Guarantor and each of their respective Subsidiaries owns (except where
the failure to own such property would not reasonably be expected to have a
Material Adverse Effect) good and marketable title to all of its properties and
assets, real and personal, tangible and intangible, of any nature whatsoever
(including patents, trademarks, trade names, service marks and copyrights),
free and clear of all Liens, charges or claims (including infringement claims
with respect to patents, trademarks, copyrights and the like), except as
permitted pursuant to Section 7.2.3. All Real Property owned or leased by any
of the Borrower, each Parent Guarantor and each of their respective
Subsidiaries and the nature of the interest therein is described in Item 6.9
("Real Property") of the Disclosure Schedule.
SECTION 6.10. Taxes. Each of the Borrower, each Parent Guarantor and
each of their respective Subsidiaries has filed all tax returns and reports
required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
SECTION 6.11. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the Amendment Effective Date, no steps have been
taken to terminate any Pension Plan (other than pursuant to a "standard
termination" in accordance with section 4041(B) of ERISA), and no contribution
failure has occurred with respect to any Pension Plan sufficient to give rise
to a Lien under section 302(f) of ERISA. No condition exists or event or
transaction has occurred with respect to any Pension Plan which could
reasonably be expected to result in the incurrence by Holdings or any member of
the Controlled Group of any material liability, fine or penalty. Except as
disclosed in Item 6.11 ("Employee Benefit Plans") of the Disclosure Schedule,
neither Holdings nor any member of the Controlled Group has any contingent
liability with respect to any post-retirement benefit under a Welfare Plan,
other than liability for continuation coverage described in Part 6 of Title I
of ERISA.
SECTION 6.12. Environmental Warranties. Except as set forth in Item 6.12
("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower, any Parent Guarantor or
any of their respective Subsidiaries have been, and continue to be,
owned or leased by the Borrower, such Parent Guarantor or such
Subsidiary in material compliance with all Environmental Laws;
-68-
<PAGE>
(b) there have been no past, and there are no pending or, to
the best of each of the Borrower's and each Parent Guarantor's
knowledge after due inquiry, threatened
(i) claims, complaints, notices or requests for
information received by the Borrower, any Parent Guarantor or
any of their respective Subsidiaries with respect to any
alleged violation of any Environmental Law, or
(ii) complaints, notices or inquiries to the
Borrower, any Parent Guarantor or any of their respective
Subsidiaries regarding potential liability under any
Environmental Law;
(c) there have been no Releases of Hazardous Materials at, on
or under any property now or previously owned or leased by the
Borrower, any Parent Guarantor or any of their respective Subsidiaries
that, singly or in the aggregate, have, or could reasonably be
expected to have, a Material Adverse Effect;
(d) the Borrower, each Parent Guarantor and each of their
respective Subsidiaries have been issued and are in material
compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary
or desirable for their businesses;
(e) no property now or previously owned or leased by the
Borrower, any Parent Guarantor or any of their respective Subsidiaries
is listed or, to the best of each of the Borrower's and each Parent
Guarantor's knowledge after due inquiry, proposed for listing (with
respect to owned property only) on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list of
sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower, any Parent
Guarantor or any of their respective Subsidiaries that, singly or in
the aggregate, have, or could reasonably be expected to have, a
Material Adverse Effect;
(g) neither the Borrower, any Parent Guarantor nor any of
their respective Subsidiaries has directly transported or directly
arranged for the transportation of any Hazardous Material to any
location which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar
state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims
against the Borrower, such Parent Guarantor or such Subsidiary thereof
for any remedial work, damage to natural resources or personal injury,
including claims under CERCLA that, singly or in the aggregate, have,
or could reasonably be expected to have, a Material Adverse Effect;
-69-
<PAGE>
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased by
the Borrower, any Parent Guarantor or any of their respective
Subsidiaries that, singly or in the aggregate, have, or could
reasonably be expected to have, a Material Adverse Effect; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Borrower, any Parent Guarantor or
any of their respective Subsidiaries which, with the passage of time,
or the giving of notice or both, would give rise to liability under
any Environmental Law that could reasonably be expected to have a
Material Adverse Effect.
SECTION 6.13. Regulations U and X. Neither the Borrower, any Parent
Guarantor nor any of their respective Subsidiaries is engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock, and
no proceeds of any Credit Extension will be used to acquire any "margin stock".
Terms for which meanings are provided in F.R.S. Board Regulation U or X or any
regulations substituted therefor, as from time to time in effect, are used in
this Section with such meanings.
SECTION 6.14. Accuracy of Information. All material factual
information concerning the financial condition, operations or prospects of the
Borrower, each Parent Guarantor and their respective Subsidiaries heretofore or
contemporaneously furnished by or on behalf of the Borrower, any Parent
Guarantor or any of their respective Subsidiaries in writing to the Agents, the
Documentation Agent, the Arranger, the Issuer or any Lender for purposes of or
in connection with this Agreement or any transaction contemplated hereby or
with respect to the New Transaction is, and all other such factual information
hereafter furnished by or on behalf of the Borrower, any Parent Guarantor or
any of their respective Subsidiaries to the Agents, the Documentation Agent,
the Arranger, the Issuer or any Lender will be, taken as a whole, true and
accurate in all material respects on the date as of which such information is
dated or certified and such information is not, or shall not be, taken as a
whole, as the case may be, incomplete by omitting to state any material fact
necessary to make such information not misleading at such time in light of the
circumstances under which such statements were made. Any term or provision of
this Section to the contrary notwithstanding, insofar as any of the factual
information described above includes assumptions, estimates, projections or
opinions, no representation or warranty is made herein with respect thereto;
provided, however, that to the extent any such assumptions, estimates,
projections or opinions are based on factual matters, the Borrower and each
Parent Guarantor have reviewed such factual matters and nothing has come to the
attention of any such Person in the context of such review which would lead it
to believe that such factual matters were not or are not true and correct in
all material respects or that such factual matters omit to state any material
fact necessary to make such assumptions, estimates, projections or opinions not
misleading in any material respect.
SECTION 6.15. Solvency. The New Transaction (including, among other
things, the incurrence of the initial Credit Extension hereunder and the
execution and delivery by the
-70-
<PAGE>
Guarantors of the Guarantees) will not involve or result in any fraudulent
transfer or fraudulent conveyance under the provisions of Section 548 of the
Bankruptcy Code (11 U.S.C. ss.101 et seq., as from time to time hereafter
amended, and any successor or similar statute) or any applicable state law
respecting fraudulent transfers or fraudulent conveyances. On the Amendment
Effective Date, after giving effect to the New Transaction Holdings and its
Subsidiaries and the Borrower and its Subsidiaries, in each case taken as a
whole, are Solvent.
SECTION 6.16. Pharmaceutical Laws. (a) The Borrower, each Parent
Guarantor and each of their respective Subsidiaries has obtained all permits,
licenses and other authorizations which are required with respect to the
ownership and operations of its business under any Pharmaceutical Law, except
where the failure to obtain such permits, licenses or other authorizations
would not reasonably be expected to have a Material Adverse Effect.
(b) The Borrower, each Parent Guarantor and each of their respective
Subsidiaries is in compliance with all terms and conditions of all such
permits, licenses, orders and authorizations, and is also in compliance with
all Pharmaceutical Laws, including all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Pharmaceutical Laws, except where the failure to
comply with such terms, conditions or laws would not reasonably be expected to
have a Material Adverse Effect.
(c) Other than as set forth in Item 6.16(c) ("Pharmaceutical
Liabilities") of the Disclosure Schedule, none of the Borrower, any Parent
Guarantor nor any of their respective Subsidiaries has any liabilities, any
claims against it and presently any outstanding notices imposed or based upon
any provision of any Pharmaceutical Law, except for such liabilities, claims,
citations or notices which individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect.
SECTION 6.17. Seniority of the Obligations and Senior Debt under the
Senior Subordinated Indenture. (a) The Senior Subordinated Notes have been
issued and sold to the underwriters thereof on the Closing Date in accordance
with and pursuant to the Senior Subordinated Note Indenture and the other
Senior Subordinated Note Documents and in compliance with all laws, including
the Securities Act of 1933, as amended and all other applicable federal and
state securities laws. The issuance of the Senior Subordinated Notes and the
execution of the Senior Subordinated Note Indenture and the other Senior
Subordinated Note Documents have been duly authorized by all necessary
corporate action on the part of Holdings, the Borrower and DRI I and will not
require any consent or approval of any governmental agency or authority that
has not been obtained prior to the Closing Date. The issuance of the Senior
Subordinated Notes and the execution of the Senior Subordinated Note Indenture
and the other Senior Subordinated Note Documents do not conflict with (i) any
material provision of any material law, (ii) the Organic Documents of Holdings,
the Borrower or DRI I, (iii) any material agreement binding upon Holdings, the
Borrower or DRI I, or (iv) any material court or administrative order or decree
applicable to Holdings, the Borrower or DRI I, and do not and will not require,
or result in, the creation or imposition of any Lien on any asset of Holdings,
the
-71-
<PAGE>
Borrower or DRI I. All representations and warranties of Holdings, the Borrower
or DRI I contained in the Senior Subordinated Note Indenture and the other
Senior Subordinated Note Documents are true and correct in all material
respects as of the Closing Date.
(b) Each Senior Subordinated Note Document (including the Senior
Subordinated Notes and the Senior Subordinated Notes Guarantee) constitutes the
legal, valid and binding obligation of each of Holdings and the Borrower, as
the case may be, enforceable against each of Holdings and the Borrower, as the
case may be, in accordance with its terms. The subordination provisions of each
such Senior Subordinated Note Document will be enforceable against the holders
of the Senior Subordinated Notes by the holder of any "Senior Debt" (as defined
in the Senior Subordinated Note Indenture). All Obligations, including those to
pay principal of and interest (including post-petition interest) on the Loans
and Reimbursement Obligations, and fees and expenses in connection therewith,
constitute "Senior Debt" (as defined in the Senior Subordinated Note Indenture)
and all such Obligations are entitled to the benefits of the subordination
created by such Senior Subordinated Note Document. Each of Holdings and the
Borrower acknowledges that the Agents, the Documentation Agent, the Issuer and
each Lender is entering into this Agreement, and is extending its Commitments,
in reliance upon the subordination provisions of such Senior Subordinated Note
Documents and this Section.
SECTION 6.18. Year 2000. Each Obligor has reviewed the areas within
its business and operations which could be adversely affected by, and has
developed or is developing a program to address on a timely basis, the "Year
2000 Problem" (that is, the risk that computer applications used by such
Obligor may be unable to recognize and properly perform date- sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on such review and program, each Obligor believes that the "Year
2000 Problem" could not reasonably be expected to have a Material Adverse
Effect.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. Each of the Borrower and each
Parent Guarantor agrees with the Agents, the Documentation Agent, the Issuer
and each Lender that, until all Commitments have terminated, all Letters of
Credit have terminated or expired and all Obligations have been paid and
performed in full, each of the Borrower and each Parent Guarantor will perform,
or cause to be performed by their respective Subsidiaries, the obligations set
forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. Holdings
will furnish, or will cause to be furnished, to each Lender, the Documentation
Agent, the Issuer and each Agent copies of the following financial statements,
reports, notices and information:
-72-
<PAGE>
(a) as soon as available and in any event within 30 days
after the end of each fiscal month other than the last such month of
any Fiscal Quarter of Holdings, a consolidated balance sheet of
Holdings and its Subsidiaries as at the end of such month, together,
in each case, with the related consolidated statements of income and
cash flows for such month and for the period commencing at the end of
the previous Fiscal Year and ending with the last day of such month,
certified by the chief financial or accounting Authorized Officer of
Holdings;
(b) as soon as available and in any event within 60 days
after the end of each of the first three Fiscal Quarters of each
Fiscal Year of Holdings (or, if Holdings is required to file such
information on a Form 10-Q with the Securities and Exchange
Commission, promptly following such filing), a consolidated balance
sheet of Holdings and its Subsidiaries as of the end of such Fiscal
Quarter, together, in each case, with the related consolidated
statements of income and cash flows for such Fiscal Quarter and for
the period commencing at the end of the previous Fiscal Year and
ending with the end of such Fiscal Quarter, certified by the chief
financial or accounting Authorized Officer of Holdings;
(c) as soon as available and in any event within 90 days
after the end of each Fiscal Year of Holdings (or, if Holdings is
required to file such information on a Form 10-K with the Securities
and Exchange Commission, promptly following such filing), a copy of
the annual audit report for such Fiscal Year for Holdings and its
Subsidiaries, including therein a consolidated balance sheet for
Holdings and its Subsidiaries as of the end of such Fiscal Year,
together with the related consolidated statements of income and cash
flows for such Fiscal Year certified (without any Impermissible
Qualification) by Price Waterhouse LLP or another nationally
recognized firm of independent public accountants acceptable to the
Agents, together with a certificate from such accountants as to
whether, in making the examination necessary for the signing of such
annual report by such accountants, they have not become aware of any
Default that has occurred and is continuing or, if in the opinion of
such accounting firm such a Default has occurred and is continuing, a
statement as to the nature thereof;
(d) together with the delivery of the financial information
required pursuant to clauses (b) and (c), a Compliance Certificate, in
substantially the form of Exhibit E, executed by the chief financial
or accounting Authorized Officer of Holdings, showing (in reasonable
detail and with appropriate calculations and computations in all
respects satisfactory to the Agents) compliance with, among other
things, the financial covenants set forth in Section 7.2.4;
(e) (i) as soon as available and in any event no later than
60 days after the first day of each Fiscal Year of Holdings, an annual
budget, setting forth on a monthly basis and in reasonable detail for
such Fiscal Year of Holdings and its Subsidiaries containing
consolidated and consolidating projected statements of earnings and
cash flow and (ii)
-73-
<PAGE>
together with the delivery of financial statements pursuant to clause
(a), (b) or (c) above, a comparison of the current year to date
financial results (other than in respect of the balance sheets
included therein) against the budgets required to be submitted
pursuant to this clause (e);
(f) as soon as possible and in any event within five Business
Days after obtaining knowledge of the occurrence of any Default, a
statement of the president, chief executive officer, treasurer,
assistant treasurer, controller or chief financial or accounting
Authorized Officer of the Borrower or Holdings setting forth details
of such Default and the action which the Borrower or Holdings, as the
case may be, has taken or proposes to take with respect thereto;
(g) as soon as possible and in any event within five Business
Days after (x) the occurrence of any material adverse development with
respect to any litigation, action, proceeding, labor controversy,
arbitration or governmental investigation or proceeding described in
Section 6.7 or (y) the commencement of any labor controversy,
litigation, action, proceeding of the type described in Section 6.7,
notice thereof and of the action which the Borrower or Holdings has
taken or proposes to take with respect thereto;
(h) promptly after the sending or filing thereof, copies of
all reports and registration statements (other than exhibits thereto
and any registration statement on Form S-8 or its equivalent) which
the Borrower, any Parent Guarantor or any of their respective
Subsidiaries files with the Securities and Exchange Commission or any
national securities exchange;
(i) as soon as practicable after the chief executive or chief
financial or accounting Authorized Officer of Holdings or the chief
executive or chief financial or accounting officer of a member of
Holdings' Controlled Group becomes aware of (i) formal steps in
writing to terminate any Pension Plan or (ii) the occurrence of any
event with respect to a Pension Plan which, in the case of (i) or
(ii), could reasonably be expected to result in a contribution to such
Pension Plan by (or a liability to) Holdings or a member of the
Holdings' Controlled Group in excess of $1,000,000, (iii) the failure
to make a required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under section 302(f) of ERISA, (iv)
the taking of any action with respect to a Pension Plan which could
reasonably be expected to result in the requirement that Holdings or
any of its Subsidiaries furnish a bond to the PBGC or such Pension
Plan or (v) any material increase in the contingent liability of
Holdings or any of its Subsidiaries with respect to any
post-retirement Welfare Plan benefit, notice thereof and copies of all
documentation relating thereto;
(j) as soon as possible and in any event within five Business
Days after the delivery thereof, copies of all notices, agreements or
documents delivered pursuant to the Senior Subordinated Note Documents
and each other agreement for borrowed money to
-74-
<PAGE>
which any Parent Guarantor, the Borrower or any their respective
Subsidiaries is a party and with a commitment or outstandings
exceeding $3,000,000, except for such notices, agreements or documents
delivered pursuant to the terms hereof;
(k) on November 30, 2002, a certificate from an Authorized
Officer of the Borrower, dated as of such date, in which certificate
such Authorized Officer shall certify that all actions necessary for
the continued perfection of the Administrative Agent's Liens on all
Collateral (as defined in each Loan Document) for the period from the
fifth anniversary of the Closing Date until the Stated Maturity Date
for Existing Term C Loans and Additional Term C Loans have been taken
(including all recordings, registerings, filings, re-recordings,
re-registerings and refilings of all financing statements,
continuation statements or other instruments of further assurance as
is necessary to ensure such continued perfection); and
(l) such other information respecting the condition or
operations, financial or otherwise, of the Borrower, any Parent
Guarantor or any of their respective Subsidiaries as any Lender
through any Agent may from time to time reasonably request.
SECTION 7.1.2. Compliance with Laws, etc. Each of the Borrower and
each Parent Guarantor will, and will cause each of their respective
Subsidiaries to, comply in all material respects with all applicable laws,
rules, regulations, orders, decrees, judgments and injunctions, such compliance
to include (a) the maintenance and preservation of its corporate or partnership
existence and qualification as a foreign corporation or partnership, (b) the
payment, before the same become delinquent, of all material taxes, assessments
and governmental charges imposed upon it or upon its property except to the
extent being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books and (c) compliance with all Pharmaceutical Laws.
SECTION 7.1.3. Maintenance of Properties. Each of the Borrower and
each Parent Guarantor will, and will cause each of their respective
Subsidiaries to, maintain, preserve, protect and keep its material properties
in good repair, working order and condition (ordinary wear and tear excepted),
and make necessary and proper repairs, renewals and replacements so that its
business carried on in connection therewith may be properly conducted at all
times unless the Borrower determines in good faith that the continued
maintenance of any of such properties is no longer economically desirable.
SECTION 7.1.4. Insurance. Each of the Borrower and each Parent
Guarantor will, and will cause each of their respective Subsidiaries to,
maintain or cause to be maintained with insurance companies rated A- or better
by A.M. Best Company insurance with respect to its properties and business
against such casualties and contingencies and of such types and in such amounts
as is customary in the case of similar businesses in similar geographic
locations and with such provisions and endorsements as the Agents may
reasonably request (provided that in no event will any deductible or
self-insured retention in respect of liability claims or in respect of
-75-
<PAGE>
casualty damage exceed, in each such case, $500,000 per occurrence) and will,
upon request of the Agents, furnish to the Agents, the Documentation Agent and
each Lender a certificate of an Authorized Officer of the Borrower setting
forth the nature and extent of all insurance maintained by each of the
Borrower, each Parent Guarantor and each of their respective Subsidiaries in
accordance with this Section. Without limiting the foregoing, each of the
Borrower and each Parent Guarantor will, and will cause each of their
respective Subsidiaries to, ensure that:
(a) Each policy for property insurance shall show the
Administrative Agent as loss payee.
(b) Each policy for liability insurance shall show the
Administrative Agent as an additional insured.
(c) With respect to each life insurance policy, the Borrower,
such Parent Guarantor or such Subsidiary, as the case may be, shall
execute and deliver to the Administrative Agent a collateral
assignment, notice of which has been acknowledged in writing by the
insurer.
(d) Each insurance policy shall provide that at least 30
days' prior written notice of cancellation or of lapse shall be given
to the Administrative Agent by the insurer.
(e) The Borrower, such Parent Guarantor or such Subsidiary,
as the case may be, shall, if so requested by the Administrative
Agent, deliver to the Administrative Agent a copy of each insurance
policy.
SECTION 7.1.5. Books and Records. Each of the Borrower and each Parent
Guarantor will, and will cause each of their respective Subsidiaries to, (a)
keep books and records which accurately reflect in all material respects all of
its business affairs and transactions and (b) permit the Agents, the
Documentation Agent, the Issuer and each Lender or any of their respective
representatives, at reasonable times and intervals, and upon reasonable notice,
(i) to visit all of its offices, (ii) to discuss its financial matters with its
officers and, after notice to the Borrower and provision of an opportunity for
the Borrower to participate in such discussion, its independent public
accountant (and each of the Borrower and each Parent Guarantor hereby
authorizes, and will cause each of their respective Subsidiaries to authorize,
such independent public accountant to discuss the Borrower's, such Parent
Guarantor's or such Subsidiary's financial matters with the Issuer and each
Lender or its representatives whether or not any representative of the
Borrower, such Parent Guarantor or such Subsidiary is present, so long as the
Borrower, such Parent Guarantor or such Subsidiary has been afforded a
reasonable opportunity to be present) and (iii) to examine, and photocopy
extracts from, any of its books or other corporate or partnership records. The
cost and expense of one such visit (the "Paid Visit") by each Agent in each
Fiscal Year shall be borne by the Borrower; provided, however, that the cost
and expenses of any visit made by such Agent after a Default or an Event of
Default has occurred and is then
-76-
<PAGE>
continuing shall be for the account of the Borrower and shall not count as the
Paid Visit made by such Agent.
SECTION 7.1.6. Environmental Covenant. Each of the Borrower and each
Parent Guarantor will, and will cause each of their respective Subsidiaries to,
(a) use and operate all of its facilities and properties in
material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Agents and provide copies upon
receipt of all written claims, complaints, notices or inquiries
relating to the condition of its facilities and properties or
compliance with Environmental Laws; and
(c) provide such information and certifications which the
Agents may reasonably request from time to time to evidence compliance
with this Section 7.1.6.
SECTION 7.1.7. Future Subsidiaries. Each of the Borrower and each
Parent Guarantor hereby covenants and agrees that, upon any Person becoming,
after the Amendment Effective Date, a Subsidiary of the Borrower, or (in the
case of clause (b) below only) upon the Borrower or any Subsidiary acquiring
additional Capital Stock of any existing Subsidiary, the Borrower shall notify
the Agents of such acquisition, and
(a) the Borrower shall promptly cause such Subsidiary to
execute and deliver to the Administrative Agent, with counterparts for
each Lender, a Subsidiary Guaranty (or a supplement thereto in the
form of the exhibit thereto), the Subsidiary Security Agreement (or a
supplement thereto in the form of the exhibit thereto) (and, if such
Subsidiary owns any real property, a Mortgage) and a Perfection
Certificate, together with Uniform Commercial Code financing
statements (form UCC-1) executed and delivered by the Subsidiary
naming the Subsidiary as the debtor and the Administrative Agent as
the secured party, or other similar instruments or documents, in
appropriate form for filing under the Uniform Commercial Code and any
other applicable recording statutes, in the case of real property, of
all jurisdictions as may be necessary or, in the opinion of the
Administrative Agent, desirable to perfect the security interest of
the Administrative Agent pursuant to the Subsidiary Security Agreement
or a Mortgage, as the case may be; and
(b) the Borrower shall promptly deliver the Borrower Pledge
Agreement to the Agents, duly executed and delivered by an Authorized
Officer of the Borrower (unless so executed and delivered previously),
and shall promptly deliver, or cause to be delivered, the Subsidiary
Pledge Agreement to the Agents, duly executed and delivered by an
-77-
<PAGE>
Authorized Officer of the relevant Subsidiary (unless so executed and
delivered previously), and shall promptly deliver, or cause to be
delivered, to the Administrative Agent under a Pledge Agreement (or a
supplement thereto) certificates (if any) representing all of the
issued and outstanding shares of Capital Stock of such Subsidiary
owned by the Borrower or any Subsidiary of the Borrower, as the case
may be, along with undated stock powers for such certificates,
executed in blank, or, if any securities subject thereto are
uncertificated securities or are held through a financial
intermediary, confirmation and evidence satisfactory to the Agents
that appropriate book entries have been made in the relevant books or
records of a financial intermediary or the issuer of such securities,
as the case may be, or other appropriate steps shall have been taken
under applicable law resulting in the perfection of the security
interest granted in favor of the Administrative Agent pursuant to the
terms of a Pledge Agreement;
together, in each case, with such opinions, in form and substance and from
counsel satisfactory to the Agents, as the Agents may reasonably request;
provided, however, that notwithstanding the foregoing, no Foreign Subsidiary
shall be required to execute and deliver (x) a Mortgage or the Subsidiary
Security Agreement (or a supplement thereto) or (y) the Subsidiary Guaranty (or
a supplement thereto) in the event that such execution and delivery thereof
would result in a material increase in tax or similar liabilities for the
Borrower and its Subsidiaries, on a consolidated basis, nor will the Borrower
or any Subsidiary of the Borrower be required to deliver in pledge pursuant to
a Pledge Agreement in excess of 65% of the total combined voting power of all
classes of Capital Stock of a Foreign Subsidiary entitled to vote in the event
that such pledge would result in a material increase in tax or similar
liabilities for the Borrower and its Subsidiaries, on a consolidated basis;
provided further, however, that the Rock Bottom Subsidiaries do not have to
comply with clause (a) of this Section so long as (1) their only assets are
their respective interests in the leases to which they are a party and (2) each
such Subsidiary has transferred its assets to the Borrower and been dissolved
within 90 days following the Amendment Effective Date.
SECTION 7.1.8. Future Leased Property and Future Acquisitions of Real
Property; Future Acquisition of Other Property. (a) Prior to entering into any
new lease of real property or renewing any existing lease of real property
following the Amendment Effective Date (including any lease entered into in
connection with a Sale and Leaseback Transaction), each of the Borrower and
each Parent Guarantor shall, and shall cause each of their respective
Subsidiaries that is not a Foreign Subsidiary to, use its (and their)
commercially reasonable best efforts (which shall not require the expenditure
of cash or the making of any material concessions under the relevant lease) to
deliver to the Administrative Agent a Property Waiver executed by the lessor of
any real property that is to be leased by the Borrower, such Parent Guarantor
or such Subsidiary for a term in excess of one year in any state which by
statute grants such lessor a "landlord's" (or similar) Lien which is superior
to the Administrative Agent's.
(b) In the event that the Borrower, any Parent Guarantor or any of
their respective Subsidiaries that is not a Foreign Subsidiary shall acquire
any real property having a value as
-78-
<PAGE>
determined in good faith by the Agents in excess of $1,000,000 in the
aggregate, the Borrower, such Parent Guarantor or such Subsidiary shall,
promptly after such acquisition, execute a Mortgage and provide the Agents with
(i) evidence of the completion (or satisfactory arrangements for the
completion) of all recordings and filings of such Mortgage as may be necessary
or, in the reasonable opinion of the Agents, desirable effectively to create a
valid, perfected first priority Lien, subject to Liens permitted by Section
7.2.3, against the properties purported to be covered thereby, (ii) mortgagee's
title insurance policies in favor of the Administrative Agent for the benefit
of the Secured Parties in amounts and in form and substance and issued by
insurers, reasonably satisfactory to the Agents, with respect to the property
purported to be covered by such Mortgage, insuring that title to such property
is marketable and that the interests created by the Mortgage constitute valid
first Liens thereon free and clear of all defects and encumbrances other than
as approved by the Agents, and such policies shall also include a revolving
credit endorsement and such other endorsements as the Agents shall request and
shall be accompanied by evidence of the payment in full of all premiums
thereon, and (iii) such other approvals, opinions, or documents as the Agents
may reasonably request; provided, however, that the Borrower or any of its
Subsidiaries that is not a Foreign Subsidiary will not have to execute and
deliver a Mortgage in respect of such property under the terms of this clause
(b) if (A) the Borrower or such Subsidiary acquires such property for the
purposes of entering into a Sale and Leaseback Transaction pursuant to Section
7.2.14 (such property a "Subject Property"), (B) such Subject Property is sold
within one year of the date of its purchase, and (C) the Valuation Amount of
such Subject Property when taken together with the Valuation Amount of each
other Subject Property owned by the Borrower and its Subsidiaries does not
exceed $7,000,000 at any time.
(c) In accordance with the terms and provisions of the Security
Documents, provide the Agents with evidence of all recordings and filings as
may be necessary or, in the reasonable opinion of the Agents, desirable to
create a valid, perfected first priority Lien, subject to the Liens permitted
by Section 7.2.3, against all property acquired after the Amendment Effective
Date (excluding leases of real property) and not otherwise subject to Section
3.1.9 of the Amendment Agreement.
SECTION 7.1.9. Use of Proceeds, etc. The Borrower shall, and each
Parent Guarantor shall cause the Borrower to,
(a) apply the proceeds of
(i) the Additional Term C Loans, to
consummate the Rock Bottom Acquisition (which shall
include the repayment in full and termination of the
Bank Credit Facility (as defined in the Asset
Purchase Agreement), to pay all fees and expenses
associated with the New Transaction and, to the
extent of any remaining proceeds, to repay the
outstanding principal of any Revolving Loans; and
-79-
<PAGE>
(ii) the Revolving Loans and the Swing Line
Loans, for the general corporate purposes of (A) the
Borrower and its Subsidiaries, including working
capital needs and financing for store expansions and
acquisitions and (B) Holdings, to the extent
permitted under Section 7.2.6; and
(b) use Letters of Credit only for purposes of supporting
working capital and general corporate purposes of the Borrower and its
Subsidiaries.
SECTION 7.1.10. Hedging Obligations. Within nine months following the
Closing Date, the Syndication Agent shall have received evidence satisfactory
to it that the Borrower has entered into Rate Protection Agreements designed to
protect the Borrower against fluctuations in
interest rates with respect to the Term A Loans or Term B Loans with terms
reasonably satisfactory to the Syndication Agent.
SECTION 7.1.11. [INTENTIONALLY OMITTED].
SECTION 7.1.12. Maintenance of Corporate Separateness. Each Parent
Guarantor will satisfy customary corporate formalities, including the
maintenance of corporate records. Each Parent Guarantor shall not make any
payment to a creditor of any other Obligor in respect of any liability of such
Obligor (other than pursuant to a Contingent Liability permitted hereunder),
and no bank account of such Parent Guarantor shall be commingled with any bank
account of any other Obligor. Any financial statements distributed to any
creditors of any Parent Guarantor shall, to the extent permitted by GAAP,
clearly establish the corporate separateness of such Parent Guarantor from each
other Obligor. Finally, each Parent Guarantor shall not take any action, or
conduct its affairs in a manner, which is likely to result in the corporate
existence of such Parent Guarantor on the one hand and of any other Obligor on
the other hand being ignored, or in the assets and liabilities of such other
Obligor being substantively consolidated with those of such Parent Guarantor in
a bankruptcy, reorganization or other insolvency proceeding.
SECTION 7.1.13. Borrower Indebtedness. Any Indebtedness of the
Borrower now or hereafter held by any Parent Guarantor or any of their
respective Subsidiaries (other than the Borrower) is hereby subordinated to the
Indebtedness of the Borrower to the Agents, the Issuer and the Lenders; and
such indebtedness of the Borrower to such Parent Guarantor or such Subsidiary,
if the Agents, after an Event of Default has occurred, so requests, shall be
collected, enforced and received by such Parent Guarantor or such Subsidiary as
trustee for the Agents, the Issuer and the Lenders and be paid over to the
Administrative Agent on behalf of the Agents, the Issuer and the Lenders on
account of the indebtedness of the Borrower to the Agents, the Issuer and the
Lenders, but without affecting or impairing in any manner the obligations of
such Parent Guarantor or such Subsidiary hereunder or under each other Loan
Document to which it is a party. Prior to the transfer by any Parent Guarantor
or any their respective Subsidiaries (other than the Borrower) of any note or
negotiable instrument evidencing any indebtedness of the Borrower to such
Parent Guarantor or such Subsidiary, such Parent Guarantor or such Subsidiary
-80-
<PAGE>
shall mark such note or negotiable instrument with a legend that the same is
subject to this subordination.
SECTION 7.1.14. Existing Mortgage. If the Borrower has not sold the
real property described in the Existing Mortgage by December 31, 1998, the
Borrower shall fulfill its obligations under clause (b) of Section 7.1.8 as if
such real property were acquired after the date hereof.
SECTION 7.2. Negative Covenants. Each of the Borrower and each Parent
Guarantor agrees with the Agents, the Documentation Agent, the Issuer and each
Lender that, until all Commitments have terminated, all Letters of Credit have
terminated or expired and all Obligations have been paid and performed in full,
each of the Borrower and each Parent Guarantor will perform the obligations set
forth in this Section 7.2.
SECTION 7.2.1. Business Activities. (a) The Borrower will not, and
will not permit any of its Subsidiaries to, engage in any business activity,
except business activities of the type in which the Borrower and its
Subsidiaries are engaged on the Closing Date and such activities as may be
incidental, similar or related thereto.
(b) No Parent Guarantor will engage in any business activity other
than (i) its continuing ownership of (A) in the case of Holdings, its 99%
general partnership interest in the Borrower and all the shares of Capital
Stock of DRI I and (B) in the case of DRI I, its 1% general partnership
interest in the Borrower, and (ii) its compliance with all applicable laws,
rules and regulations (including SEC reporting requirements) and the
obligations applicable to it under the Loan Documents and the Material
Documents to which such Parent Guarantor is a party. Without limiting the
generality of the immediately preceding sentence, no Parent Guarantor will take
any action, including the filing of any income tax return, that would result in
the Borrower ceasing to be treated as a partnership within meaning of Section
761(a) of the Code for Federal income tax purposes.
SECTION 7.2.2. Indebtedness. Each of the Borrower and each Parent
Guarantor will not, and will not permit any of their respective Subsidiaries
to, create, incur, assume or suffer to exist or otherwise become or be liable
in respect of any Indebtedness, other than, without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and
other Obligations;
(b) [INTENTIONALLY OMITTED];
(c) Indebtedness identified in Item 7.2.2(c) ("Ongoing
Indebtedness") of the Disclosure Schedule;
-81-
<PAGE>
(d) (i) Indebtedness of Holdings evidenced by the Senior
Subordinated Notes and (ii) Indebtedness of the Borrower, DRI I and
each other Subsidiary of Holdings consisting of Contingent Liabilities
under the Senior Subordinated Notes Guarantees in respect of the
Indebtedness described in clause (d)(i);
(e) Indebtedness in an aggregate principal amount not to
exceed $15,000,000 at any time outstanding which is, or has been,
incurred by the Borrower or any of its Subsidiaries (i) to a vendor of
any assets permitted to be acquired pursuant to Section 7.2.7 to
finance its acquisition of such assets or (ii) in respect of
Capitalized Lease Liabilities to the extent permitted by Section
7.2.7;
(f) Indebtedness of the Borrower owing to any Subsidiary
Guarantor;
(g) Indebtedness of Subsidiary Guarantors that are
Wholly-owned Subsidiaries of the Borrower owing to the Borrower or any
other Subsidiary Guarantor;
(h) Indebtedness of Subsidiaries of the Borrower owing to the
Borrower or a Subsidiary Guarantor to the extent permitted by clause
(e) of Section 7.2.5;
(i) Hedging Obligations of the Borrower in respect of the
Loans;
(j) unsecured Indebtedness of the Borrower or any of its
Subsidiaries incurred in the ordinary course of business (including
open accounts extended by suppliers on normal trade terms in
connection with purchases of goods and services, but excluding
Indebtedness incurred through the borrowing of money or Contingent
Liabilities);
(k) Indebtedness of the Borrower incurred under the Rapid
Remit Program in an aggregate amount at any time outstanding not to
exceed $5,000,000;
(l) Indebtedness which refinances Indebtedness permitted by
clause (c) and (d) above; provided, however, that after giving effect
to such refinancing, (i) the principal amount of outstanding
Indebtedness is not increased (other than in the case of a refinancing
of Indebtedness permitted by clause (d) above by the amount of
reasonable fees and expenses incurred in connection with such
refinancing), (ii) neither the tenor nor the average life thereof is
reduced, (iii) the respective obligor or obligors shall be the same on
the refinancing Indebtedness as on the Indebtedness being refinanced,
(iv) the security, if any, for the refinancing Indebtedness shall be
the same as that for the Indebtedness being refinanced (except to the
extent that less security is granted to holders of such refinancing
Indebtedness), (v) the holders of such refinancing Indebtedness are
not afforded covenants, defaults, rights or remedies more burdensome
to the obligor or obligors than those contained in the Indebtedness
being refinanced and (vi) the refinancing Indebtedness is subordinated
to the same degree, if any, as the Indebtedness being refinanced; and
-82-
<PAGE>
(m) other unsecured Indebtedness of the Borrower and its
Subsidiaries in an aggregate amount at any time outstanding not to
exceed $7,500,000;
provided, however, that (i) no Indebtedness otherwise permitted by clause (e)
or (m) may be incurred if, after giving effect to the incurrence thereof, any
Default shall have occurred and be continuing and (ii) no Indebtedness
otherwise permitted hereunder by any of clauses (a) through (m) may be incurred
if, after giving effect to the application thereof, there shall be a "Default"
or "Event of Default" under and as defined in the Senior Subordinated Note
Indenture, as in effect on the Closing Date.
SECTION 7.2.3. Liens. Each of the Borrower and each Parent Guarantor
will not, and will not permit any of their respective Subsidiaries to, create,
incur, assume or suffer to exist any Lien upon any of its property, revenues or
assets, whether now owned or hereafter acquired, except:
(a) Liens securing payment of the Obligations or any Hedging
Obligations owed to any Lender or any Affiliate of any Lender, granted
pursuant to any Loan Document;
(b) [INTENTIONALLY OMITTED];
(c) Liens granted prior to the Closing Date to secure payment
of Indebtedness of the type permitted and described in clause (c) of
Section 7.2.2;
(d) Liens granted to secure payment of Indebtedness of the
type permitted and described in clause (e) of Section 7.2.2 and
covering only those assets acquired with the proceeds of such
Indebtedness;
(e) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable
without penalty or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books;
(f) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not
overdue or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(g) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory obligations, leases and contracts
(other than for borrowed money) entered into in the ordinary course of
business or to secure obligations on surety or appeal bonds;
-83-
<PAGE>
(h) judgment Liens in existence less than 15 days after the
entry thereof or with respect to which execution has been stayed or
the payment of which is covered in full (subject to a customary
deductible) by insurance maintained with insurance companies of the
nature described in Section 7.1.4;
(i) Liens granted by the Borrower in favor of Pharmacy Fund
(A) securing the recourse obligations owing to Pharmacy Fund pursuant
to the Rapid Remit Program for rejected or adjusted Prescription
Receivables, (B) consisting of the right of set-off granted to
Pharmacy Fund in connection with rejected or adjusted receivables,
other payments owing to Pharmacy Fund and administrative fees and
expenses pursuant to the Rapid Remit Program and (C) consisting of
precautionary liens on receivables, chattel paper, general intangibles
and the proceeds thereof directly related to the Rapid Remit Program;
and
(j) Liens with respect to minor imperfections of title and
easements, rights-of-way, restrictions, reservations, permits,
servitudes and other similar encumbrances on real property and
fixtures which do not materially detract from the value or materially
impair the use by the Borrower or any of its Subsidiaries in the
ordinary course of their business of the property subject thereto.
SECTION 7.2.4. Financial Covenants. (a) Net Worth. Each of the
Borrower and each Parent Guarantor will not permit Net Worth at any time from
and after the last day of the 1998 Fiscal Year to be less than an amount equal
to 50% of the cumulative Net Income (in excess of zero) for the period from the
first day of the 1998 Fiscal Year to the end of the Fiscal Quarter most
recently ended on or prior to such date of determination.
(b) Leverage Ratio. Each of the Borrower and each Parent Guarantor
will not permit the Leverage Ratio as of the end of any Fiscal Quarter ending
after the Amendment Effective Date and occurring during any period set forth
below to be greater than the ratio set forth opposite such period:
Period Leverage Ratio
------ --------------
Amendment Effective Date
through the third Fiscal
Quarter of the 1998 Fiscal
Year 5.65:1
fourth Fiscal Quarter of the 1998
Fiscal Year 5.50:1
-84-
<PAGE>
Period Leverage Ratio
------ --------------
first Fiscal Quarter of the 1999
Fiscal Year through the second
Fiscal Quarter of the 1999
Fiscal Year 5.00:1
third Fiscal Quarter of the 1999
Fiscal Year 4.75:1
fourth Fiscal Quarter of the 1999
Fiscal Year 4.50:1
first Fiscal Quarter of the 2000
Fiscal Year through the fourth
Fiscal Quarter of the 2000
Fiscal Year 3.25:1
first Fiscal Quarter of the 2001 3.00:1
Fiscal Year and each Fiscal
Quarter thereafter
(c) Interest Coverage Ratio. Each of the Borrower and each Parent
Guarantor will not permit the Interest Coverage Ratio as of the end of any
Fiscal Quarter ending after the Amendment Effective Date and occurring during
any period set forth below to be less than the ratio set forth opposite such
period:
Period Interest Coverage Ratio
------ -----------------------
Amendment Effective Date
through the third Fiscal
Quarter of the 1998 Fiscal
Year 1.85:1
fourth Fiscal Quarter of the 1998
Fiscal Year 2.00:1
first Fiscal Quarter of the 1999
Fiscal Year through the third
Fiscal Quarter of the 1999
Fiscal Year 2.10:1
-85-
<PAGE>
Period Interest Coverage Ratio
------ -----------------------
fourth Fiscal Quarter of the 1999
Fiscal Year 2.25:1
first Fiscal Quarter of the 2000
Fiscal Year and each Fiscal 3.00:1
Quarter thereafter
(d) Fixed Charge Coverage Ratio. Each of the Borrower and each Parent
Guarantor will not permit the Fixed Charge Coverage Ratio as of the end of any
Fiscal Quarter ending after the Amendment Effective Date and occurring during
any period set forth below to be less than the ratio set forth opposite such
period:
Period Fixed Charge Coverage Ratio
------ ---------------------------
third Fiscal Quarter of the 1998
Fiscal Year 0.95:1
fourth Fiscal Quarter of the 1998
Fiscal Year through the fourth
Fiscal Quarter of the 1999
Fiscal Year 1.00:1
first Fiscal Quarter of the 2000
Fiscal Year and each Fiscal
Quarter thereafter 1.10:1
SECTION 7.2.5. Investments. Each of the Borrower and each Parent
Guarantor will not, and will not permit any of their respective Subsidiaries
to, make, incur, assume or suffer to exist any Investment in any other Person,
except:
(a) Investments existing on the Closing Date and identified
in Item 7.2.5(a) ("Ongoing Investments") of the Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as
Indebtedness pursuant to Section 7.2.2;
(d) without duplication, Investments permitted as Capital
Expenditures of the Borrower and its Subsidiaries pursuant to Section
7.2.7;
-86-
<PAGE>
(e) Investments by any Parent Guarantor, the Borrower or any
Subsidiary Guarantor in the Borrower or Subsidiary Guarantors that are
Wholly-owned Subsidiaries of the Borrower;
(f) Investments to the extent the consideration received
pursuant to clause (c)(i) of Section 7.2.9 is not all cash;
(g) Investments in the form of loans to officers, directors
and employees of Holdings and its Subsidiaries for the sole purpose of
purchasing Capital Stock of Holdings (or purchases of such loans made
by others) in an aggregate amount at any time outstanding not to
exceed $3,000,000;
(h) other Investments made by the Borrower or any of its
Subsidiaries, by way of contributions to capital, the making of loans
or advances or the incurrence of Contingent Liabilities, in an
aggregate amount not to exceed
(i) to the extent such Investments are made with the
Capital Stock of Holdings, $30,000,000 since the Closing Date
(such amounts in this clause (h)(i) to be determined based on
the fair market value of such Capital Stock at the time of
such Investments); and
(ii) to the extent such Investments are not made
with the Capital Stock of Holdings, $20,000,000 since the
Closing Date,
which Investments shall result in the Borrower or the relevant
Subsidiary acquiring (subject to Section 7.2.1) a majority controlling
interest in the Person in which such Investment was made or increasing
any such controlling interest maintained by it in such Person; or
(i) other Investments made by the Borrower or any of its
Subsidiaries in an aggregate amount not to exceed $1,000,000 at any
time outstanding;
provided, however, that
(j) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent
Investment" may continue to be held notwithstanding that such
Investment if made thereafter would not comply with such requirements;
(k) no Investment otherwise permitted by clause (c) (except
to the extent permitted under Section 7.2.2), (f), (g), (h) or (i)
shall be permitted to be made if, immediately before or after giving
effect thereto, any Default shall have occurred and be continuing; and
-87-
<PAGE>
(l) no Investment otherwise permitted by clauses (a) through
(i) may be made if, after giving effect to the application thereof,
there shall be a "Default" or "Event of Default" under and as defined
in the Senior Subordinated Note Indenture, in each case as in effect
on the Closing Date.
SECTION 7.2.6. Restricted Payments, etc. On and at all times after the
date hereof;
(a) each of the Borrower and each Parent Guarantor will not,
and will not permit any of their respective Subsidiaries to, declare,
pay or make any dividend, distribution or exchange (in cash, property
or obligations) on or in respect of any shares of any class of Capital
Stock (now or hereafter outstanding) of the Borrower or any Parent
Guarantor or on any warrants, options or other rights with respect to
any shares of any class of Capital Stock (now or hereafter
outstanding) of the Borrower or any Parent Guarantor (other than (i)
dividends or distributions payable in its common stock or warrants to
purchase its common stock and (ii) splits or reclassifications of its
stock into additional or other shares of its common stock) or apply,
or permit any of its Subsidiaries to apply, any of its funds, property
or assets to the purchase, redemption, exchange, sinking fund or other
retirement of, or agree or permit any of its Subsidiaries to purchase,
redeem or exchange, any shares of any class of Capital Stock (now or
hereafter outstanding) of the Borrower or any Parent Guarantor,
warrants, options or other rights with respect to any shares of any
class of Capital Stock (now or hereafter outstanding) of the Borrower
or any Parent Guarantor;
(b) each of the Borrower and each Parent Guarantor will not,
and will not permit any of their respective Subsidiaries to, (i) make
any payment or prepayment of principal of, or make any payment of
interest on, any subordinated note (including any Senior Subordinated
Note) on any day other than the stated, scheduled date for such
payment or prepayment set forth in the documents and instruments
memorializing such subordinated note, or which would violate the
subordination provisions of such subordinated note, or (ii) redeem,
purchase or defease any subordinated note (including any Senior
Subordinated Note) (the foregoing prohibited acts referred to in
clauses (a) and (b) above are herein collectively referred to as
"Restricted Payments");
provided, however, that
(c) notwithstanding the provisions of clause (a) above, the
Borrower shall be permitted to make Restricted Payments to DRI I
(which shall in turn utilize all of any such Restricted Payment to
make Restricted Payments to Holdings) and to Holdings to the extent
necessary to enable Holdings to pay interest on the Senior
Subordinated Notes, so long as (i) no Default or Event of Default
exists or would result therefrom and (ii) the Restricted Payments
referred to below are permitted to be paid at such time under the
Senior Subordinated Note Indenture;
-88-
<PAGE>
(d) notwithstanding the provisions of clause (a) above, the
Borrower shall be permitted to make Restricted Payments to Holdings
and to DRI I (which may in turn utilize all or part of any such
Restricted Payment to make Restricted Payments to Holdings), in each
case to the extent necessary to enable Holdings and DRI I
(i) to pay their overhead expenses to the extent
permitted under the Senior Subordinated Note Indenture as in
effect on the Closing Date; provided, that the aggregate
amount of Restricted Payments paid by the Borrower pursuant
to this clause (d)(i) in any Fiscal Year shall not exceed
$2,000,000; and
(ii) to pay their respective taxes based on income
and franchise taxes and other similar licensure expenses; and
(iii) to defease and redeem the Holdings
Subordinated Notes, as contemplated by Section 7.1.9(a); and
(e) so long as (i) no Default or Event of Default shall have
occurred and be continuing on the date such Restricted Payment is
declared or to be made, nor would a Default or an Event of Default
result from the making of such Restricted Payment, (ii) after giving
effect to the making of such Restricted Payment, Holdings shall be in
pro forma compliance with the covenants set forth in Section 7.2.4 for
the most recent fully ended Fiscal Quarter preceding the date of the
making of such Restricted Payment for which the relevant financial
information has been delivered pursuant to clause (b) or (c) of
Section 7.1.1, and (iii) an Authorized Officer of Holdings shall have
delivered a certificate to the Administrative Agent in form and
substance satisfactory to the Administrative Agent (including a
calculation of Holdings' compliance with the covenants set forth in
Section 7.2.4 in reasonable detail) certifying as to the accuracy of
subclauses (i) and (ii) above, the Borrower shall be permitted to make
Restricted Payments to Holdings and to DRI I (which shall in turn
utilize all of any such Restricted Payment to make Restricted Payments
to Holdings), in each case to the extent necessary to enable Holdings
to repurchase, redeem or otherwise acquire or retire for value any
Capital Stock of Holdings held by any member of management of Holdings
or any of its Subsidiaries pursuant to any management equity
subscription agreement or stock option agreement, in each case as in
effect on the Closing Date; provided, however, that (A) the aggregate
price paid for all such repurchased, redeemed, acquired or retired
Capital Stock shall not exceed an amount equal to $2,000,000 in any
twelve month period plus (B) the aggregate cash proceeds received by
Holdings during such twelve month period from any reissuance of
Capital Stock of Holdings by Holdings to members of management of
Holdings or any of its Subsidiaries.
SECTION 7.2.7. Capital Expenditures, etc. Each of the Borrower and
each Parent Guarantor will not, and will not permit any of their respective
Subsidiaries to, make or commit to make Capital Expenditures in any Fiscal
Year, except Capital Expenditures of the Borrower and
-89-
<PAGE>
its Subsidiaries which do not aggregate in excess of $30,000,000 in the 1998
Fiscal Year and $25,000,000 in each Fiscal Year thereafter; provided, however,
that, to the extent the amount of Capital Expenditures permitted to be made in
any Fiscal Year pursuant to this Section exceeds the aggregate amount of
Capital Expenditures actually made by the Borrower and its Subsidiaries during
such Fiscal Year, up to 50% of such excess amount may be carried forward to
(but only to) the next succeeding Fiscal Year (any such amount to be certified
by Holdings to the Agents in the Compliance Certificate delivered for the last
Fiscal Quarter of such Fiscal Year), and any such amount carried forward to a
succeeding Fiscal Year shall be deemed to be used prior to the Borrower and its
Subsidiaries using the amount of Capital Expenditures permitted by this Section
in such succeeding Fiscal Year, without giving effect to such carryforward;
provided further, however, that the Borrower and its Subsidiaries may make or
commit to make additional Capital Expenditures solely attributable to the Rock
Bottom Acquisition in an aggregate amount of $7,000,000 from the date hereof.
SECTION 7.2.8. Consolidation, Merger, etc. Each of the Borrower and
each Parent Guarantor will not, and will not permit any of their respective
Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or
with, any other corporation, or purchase or otherwise acquire all or
substantially all of the assets of any Person (or of any division thereof)
except
(a) any Subsidiary of the Borrower may liquidate or dissolve
voluntarily into, and may merge with and into, the Borrower (so long
as the Borrower is the surviving entity of such combination or merger)
or any other Subsidiary, and the assets or stock of any such
Subsidiary may be purchased or otherwise acquired by the Borrower or
any other Subsidiary; provided, that notwithstanding the above, a
Subsidiary may only liquidate or dissolve into, or merge with and
into, another Subsidiary of the Borrower if, after giving effect to
such combination or merger, the Borrower continues to own (directly or
indirectly), and the Administrative Agent continues to have pledged to
it pursuant to a Pledge Agreement, a percentage of the issued and
outstanding shares of Capital Stock (on a fully diluted basis) of the
Subsidiary surviving such combination or merger that is equal to or in
excess of the percentage of the issued and outstanding shares of
Capital Stock (on a fully diluted basis) of the Subsidiary that does
not survive such combination or merger that was (immediately prior to
the combination or merger) owned by the Borrower or pledged to the
Administrative Agent;
(b) so long as no Default has occurred and is continuing or
would occur after giving effect thereto, the Borrower or any of its
Subsidiaries may purchase all or substantially all of the assets of
any Person (or any division thereof) not then a Subsidiary, or acquire
such Person by merger, if permitted (without duplication) pursuant to
Section 7.2.7 or clause (i) of Section 7.2.5; and
(c) so long as no Default has occurred and is continuing or
would occur after giving effect thereto, the Borrower or any of its
Subsidiaries may purchase all or substantially all of the assets of
the Sellers pursuant to the Asset Purchase Agreement.
-90-
<PAGE>
SECTION 7.2.9. Asset Dispositions, etc. Each of the Borrower and each
Parent Guarantor will not, and will not permit any of their respective
Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or
grant options, warrants or other rights with respect to, all or any part of its
assets, whether now owned or hereafter acquired (including accounts receivable
and Capital Stock of Subsidiaries) to any Person, unless:
(a) such sale, transfer, lease, contribution or conveyance of
such assets is (i) in the ordinary course of its business (and does
not constitute a sale, transfer, lease, contribution or other
conveyance of all or a substantial part of the Borrower's and its
Subsidiaries' assets, taken as a whole) or is of obsolete or worn out
property, (ii) permitted by Section 7.2.8 or 7.2.14, or (iii) between
the Borrower and one of its Subsidiary Guarantors or between
Subsidiary Guarantors of the Borrower;
(b) such sale, transfer, lease, contribution or conveyance
consists of the sale by the Borrower of third party prescription
receivables resulting from the sale of pharmaceutical products to
customers covered by third party insurance or payment programs (the
"Prescription Receivables") to Pharmacy Fund, in each case pursuant
to, and in accordance with the terms of the Rapid Remit Program
Documents;
(c) such sale, transfer, lease, contribution or conveyance by
(i) the Borrower or any of its Subsidiaries constitutes (A) an
Investment permitted under Section 7.2.5 or (B) a Lien permitted under
Section 7.2.3 or (ii) any Parent Guarantor constitutes an Investment
permitted under clause (b), (c) or (e) of Section 7.2.5; or
(d) (i) such sale, transfer, lease, contribution or
conveyance by the Borrower or any of its Subsidiaries of such assets
is for fair market value and the consideration consists of no less
than 80% in cash (other than assets sold, transferred, leased,
contributed or conveyed in an individual amount not to exceed $50,000
and in an aggregate amount not to exceed $500,000 since the Closing
Date), (ii) the Net Disposition Proceeds received from such assets,
together with the Net Disposition Proceeds of all other assets sold,
transferred, leased, contributed or conveyed pursuant to this clause
(d) since the Closing Date, does not exceed (individually or in the
aggregate) $10,000,000 over the term of this Agreement and (iii) an
amount equal to the Net Disposition Proceeds generated from such sale,
transfer, lease, contribution or conveyance is applied to prepay the
Loans pursuant to the terms of Sections 3.1.1 and 3.1.2.
SECTION 7.2.10. Modification of Certain Agreements. Without the prior
written consent of the Required Lenders, each of the Borrower and each Parent
Guarantor will not, and will not permit any of their respective Subsidiaries
to, consent to any amendment, supplement, amendment and restatement, waiver or
other modification of any of the terms or provisions contained in, or
applicable to, any Material Document or any schedules, exhibits or agreements
related thereto, in each case which does not comply with the requirements set
forth in the proviso
-91-
<PAGE>
to clause (l) of Section 7.2.2 or would adversely affect the rights or remedies
of the Lenders, or the Borrower's, such Parent Guarantor's or such Subsidiary's
ability to perform hereunder or under any Loan Document.
SECTION 7.2.11. Transactions with Affiliates. Each of the Borrower and
each Parent Guarantor will not, and will not permit any of their respective
Subsidiaries to, enter into, or cause, suffer or permit to exist any
arrangement or contract with any of its other Affiliates unless such
arrangement or contract is fair and equitable to the Borrower, such Parent
Guarantor or such Subsidiary and is an arrangement or contract of the kind
which would be entered into by a prudent Person in the position of the
Borrower, such Parent Guarantor or such Subsidiary with a Person which is not
one of its Affiliates; provided, however that the Borrower, the Parent
Guarantors and their respective Subsidiaries shall be permitted to enter into
and perform their obligations under the Material Documents to which each is a
party as of the Closing Date and arrangements with DLJ and its Affiliates for
underwriting, investment banking and advisory services on usual and customary
terms.
SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc. Each of
the Borrower and each Parent Guarantor will not, and will not permit any of
their respective Subsidiaries to, enter into any agreement prohibiting
(a) the (i) creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter
acquired (other than, in the case of any assets acquired with the
proceeds of any Indebtedness, or subject to Capitalized Lease
Liabilities, permitted under clause (e) of Section 7.2.2, customary
limitations and prohibitions contained in such Indebtedness or
Capitalized Lease), or (ii) ability of the Borrower, any Parent
Guarantor or any other Obligor to amend or otherwise modify this
Agreement or any other Loan Document; or
(b) any Subsidiary from making any payments, directly or
indirectly, to the Borrower by way of dividends, advances, repayments
of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower.
SECTION 7.2.13. Stock of Subsidiaries. Each of the Borrower and each
Parent Guarantor will not permit any Subsidiary of the Borrower to issue any
Capital Stock (whether for value or otherwise) to any Person other than the
Borrower or another Wholly-owned Subsidiary of the Borrower.
SECTION 7.2.14. Sale and Leaseback. Each of the Borrower and each
Parent Guarantor will not, and will not permit any of its Subsidiaries to,
enter into any agreement or arrangement with any other Person providing for the
leasing by the Borrower or any of its Subsidiaries of real
-92-
<PAGE>
or personal property which has been or is to be sold or transferred by the
Borrower or any of its Subsidiaries to such other 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 any of its Subsidiaries
(a "Sale and Leaseback Transaction"); provided, however, that the Borrower or
any of its Subsidiaries may enter into Sale and Leaseback Transactions so long
as (a) each such Sale and Leaseback Transaction is consummated no more than one
year after the original date of purchase of the Subject Property, (b) the
Borrower or such Subsidiary receives cash in an amount greater than or equal to
the Valuation Amount of such Subject Property concurrent with the sale thereof,
(c) each lease entered into in connection with each such Sale and Leaseback
Transaction is a true operating lease in accordance with GAAP, and (d) the
proceeds of such sale under such Sale and Leaseback Transaction are applied in
accordance with the terms of clause (f) of Section 3.1.1.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 8.1 shall constitute an "Event
of Default".
SECTION 8.1.1. Non-Payment of Obligations. (a) The Borrower shall
default in the payment or prepayment of any principal of any Loan when due or
any Reimbursement Obligations or any deposit of cash for collateral purposes
pursuant to Section 2.6.2 or Section 2.6.4, as the case may be, or (b) any
Obligor (including the Borrower) shall default (and such default shall continue
unremedied for a period of three Business Days) in the payment when due of any
interest or commitment fee with respect to the Loans or Commitments or of any
other monetary Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
the Borrower or any other Obligor made or deemed to be made by it hereunder or
under any other Loan Document or any other writing or certificate furnished by
or on behalf of the Borrower or any other Obligor to the Agents, the
Documentation Agent, the Issuer, the Arranger or any Lender for the purposes of
or in connection with this Agreement or any such other Loan Document (including
any certificates delivered pursuant to Article V) is or shall be incorrect when
made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower or any Parent Guarantor shall default in the due performance and
observance of any of its obligations under Section 7.1.4, 7.1.6(b), 7.1.9,
7.1.10, 7.1.11 or 7.2 (other than clause (a) of Section 7.2.1), or any other
Obligor shall default in the performance of any of its obligations in respect
of such Sections as such Sections are incorporated by reference or otherwise in
any Loan Document to which such Obligor is a party.
-93-
<PAGE>
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. Any
Obligor shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document executed by it, and
such default shall continue unremedied for a period of 30 days from the earlier
of the date an Authorized Officer of such Obligor has actual knowledge thereof
and the receipt by such Obligor of written notice thereof from the
Administrative Agent.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur
(i) in the payment when due (subject to any applicable grace period), whether
by acceleration or otherwise, of any Indebtedness, other than Indebtedness
described in Section 8.1.1, of the Borrower or any of its Subsidiaries or any
other Obligor having a principal amount, individually or in the aggregate, in
excess of $3,000,000, or (ii) a default shall occur in the performance or
observance of any obligation or condition with respect to such Indebtedness if
the effect of such default is to accelerate the maturity of any such
Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such Indebtedness,
or any trustee or agent for such holders, to cause such Indebtedness to become
due and payable prior to its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money in excess of $3,000,000 (not covered by insurance from an insurance
company rated A- or better by A.M. Best Company that is not denying its
liability with respect thereto) shall be rendered against the Borrower or any
of its Subsidiaries or any other Obligor and remain unpaid and either (a)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order, or (b) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan (a) the institution of any steps by Holdings,
any member of its Controlled Group or any other Person to terminate a Pension
Plan if, as a result of such termination, Holdings or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan, in excess of
$1,000,000, or (b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION 8.1.8. Change in Control. Any Change in Control shall occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of its
Subsidiaries or any other Obligor shall
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness to pay, debts as they become
due;
-94-
<PAGE>
(b) apply for, consent to, or acquiesce in, the appointment
of a trustee, receiver, sequestrator or other custodian for the
Borrower or any of its Subsidiaries or any other Obligor or any
property of any thereof, or make a general assignment for the benefit
of creditors;
(c) in the absence of such application, consent, acquiescence
or assignment, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower or any of
its Subsidiaries or any other Obligor or for a substantial part of the
property of any thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within 60 days, provided that
the Borrower, each Subsidiary and each other Obligor hereby expressly
authorizes the Agents, the Documentation Agent, the Arranger, the
Issuer and each Lender to appear in any court conducting any relevant
proceeding during such 60-day period to preserve, protect and defend
their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Borrower or
any of its Subsidiaries or any other Obligor, and, if any such case or
proceeding is not commenced by the Borrower or such Subsidiary or such
other Obligor, such case or proceeding shall be consented to or
acquiesced in by the Borrower or such Subsidiary or such other Obligor
or shall result in the entry of an order for relief or shall remain
for 60 days undismissed, provided that the Borrower, each Subsidiary
and each other Obligor hereby expressly authorizes the Agents, the
Documentation Agent, the Arranger, the Issuer and each Lender to
appear in any court conducting any such case or proceeding during such
60-day period to preserve, protect and defend their rights under the
Loan Documents; or
(e) take any action (partnership, corporate or otherwise)
authorizing, or in furtherance of, any of the foregoing.
SECTION 8.1.10. Impairment of Security, etc. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be in full force and effect or cease to be the
legally valid, binding and enforceable obligation of any Obligor party thereto;
the Borrower or any other Obligor shall, directly or indirectly, contest in any
manner the effectiveness, validity, binding nature or enforceability thereof;
or any Lien securing any Obligation shall, in whole or in part, cease to be a
perfected first priority Lien, subject only to those exceptions expressly
permitted by the Loan Documents.
SECTION 8.2. Action if Bankruptcy, etc. If any Event of Default
described in clauses (a) through (d) of Section 8.1.9 shall occur, the
Commitments (if not theretofore terminated) shall automatically terminate and
the outstanding principal amount of all outstanding Loans and all other
Obligations (including Reimbursement Obligations) shall automatically be
-95-
<PAGE>
and become immediately due and payable, without notice or demand and the
Borrower shall automatically and immediately be obligated to deposit with the
Administrative Agent cash collateral in an amount equal to the undrawn amount
of all Letters of Credit outstanding.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than an Event of Default described in clauses (a), through (d) of
Section 8.1.9) shall occur for any reason, whether voluntary or involuntary,
and be continuing, the Administrative Agent, upon the direction of the Required
Lenders, shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations (including
Reimbursement Obligations) to be due and payable, require the Borrower to
provide cash collateral to be deposited with the Administrative Agent in an
amount equal to the undrawn amount of all Letters of Credit outstanding and/or
declare the Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans and other Obligations which
shall be so declared due and payable shall be and become immediately due and
payable, without further notice, demand or presentment, and/or, as the case may
be, the Commitments shall terminate and the Borrower shall deposit with the
Administrative Agent cash collateral in an amount equal to the undrawn amount
of all Letters of Credit outstanding.
ARTICLE IX
GUARANTY
SECTION 9.1. Guaranty. Each Parent Guarantor hereby jointly and
severally, absolutely, unconditionally and irrevocably
(a) guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all Obligations of the Borrower
now or hereafter existing, whether for principal, interest, fees,
expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a)
of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the
operation of Sections 502(b) and 506(b) of the United States
Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and
each holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Secured
Party or such holder, as the case may be, in enforcing any rights
under the guaranty set forth in this Article IX.
The guaranty set forth in this Article IX constitutes a guaranty of payment
when due and not of collection, and each Parent Guarantor specifically agrees
that it shall not be necessary or required that any Secured Party or any holder
of any Note exercise any right, assert any claim or demand or enforce any
remedy whatsoever against the Borrower or any other Obligor (or any other
-96-
<PAGE>
Person) before or as a condition to the obligations of each Parent Guarantor
under the guaranty set forth in this Article IX.
SECTION 9.2. Acceleration of Parent Guaranty. Each Parent Guarantor
agrees that upon the occurrence of an Event of Default of the nature set forth
in clauses (a) through (d) of Section 8.1.9, at a time when any of the
Obligations of the Borrower and each other Obligor may not then be due and
payable, then each Parent Guarantor agrees that it will pay to the
Administrative Agent for the account of the Secured Parties forthwith the full
amount which would be payable under the guaranty set forth in this Article IX
by each Parent Guarantor if all such Obligations were then due and payable.
SECTION 9.3. Guaranty Absolute, etc. The guaranty set forth in this
Article IX shall in all respects be a continuing, absolute, unconditional and
irrevocable guaranty of payment, and shall remain in full force and effect
until all Obligations of the Borrower and each other Obligor have been paid in
full in cash, all obligations of each Parent Guarantor under the guaranty set
forth in this Article IX shall have been paid in full in cash, all Letters of
Credit have been terminated or expired, all Rate Protection Agreements have
been terminated or expired and all Commitments shall have terminated. Each
Parent Guarantor guarantees that the Obligations of the Borrower will be paid
strictly in accordance with the terms of this Agreement and each other Loan
Document under which they arise, regardless of any law, regulation or order now
or hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Secured Party or any holder of any Note with respect thereto. The
liability of each Parent Guarantor under the guaranty set forth in this Article
IX shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of this
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any
Note
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or
any other Person (including any other guarantor (including
any Parent Guarantor)) under the provisions of this
Agreement, any Note, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor (including any Parent Guarantor) of, or
collateral securing, any Obligations of the Borrower;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of the Borrower,
or any other extension, compromise or renewal of any Obligation of the
Borrower;
-97-
<PAGE>
(d) any reduction, limitation, impairment or termination of
any Obligations of the Borrower for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be
subject to (and the each Parent Guarantor hereby waives any right to
or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or any
other event or occurrence affecting, any Obligations of the Borrower
or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
this Agreement, any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by any Secured Party or any holder of any Note securing
any of the Obligations of the Borrower; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the
Borrower, any surety or any guarantor.
SECTION 9.4. Reinstatement, etc. Each Parent Guarantor agrees that the
guaranty set forth in this Article IX shall continue to be effective or be
reinstated, as the case may be, if at any time any payment (in whole or in
part) of any of the Obligations is rescinded or must otherwise be restored by
any Secured Party or any holder of any Note, upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such payment had not
been made.
SECTION 9.5. Waiver, etc. Each Parent Guarantor hereby waives
promptness, diligence, notice of acceptance and any other notice with respect
to any of the Obligations of the Borrower and the guaranty set forth in this
Article IX and any requirement that the Administrative Agent, any other Secured
Party or any holder of any Note protect, secure, perfect or insure any security
interest or Lien, or any property subject thereto, or exhaust any right or
take any action against the Borrower, any other Obligor or any other Person
(including any other guarantor) or entity or any collateral securing the
Obligations of the Borrower.
SECTION 9.6. Postponement of Subrogation, etc. Each Parent Guarantor
agrees that it will not exercise any rights which it may acquire by way of
rights of subrogation under the guaranty set forth in this Article IX, by any
payment made under the guaranty set forth in this Article IX or otherwise,
until the prior payment in full in cash of all Obligations of the Borrower and
each other Obligor, the termination or expiration of all Letters of Credit, the
termination or expiration of all Rate Protection Agreements and the termination
of all Commitments. Any amount paid to any Parent Guarantor on account of any
such subrogation rights prior to the payment in full in cash of all Obligations
of the Borrower and each other Obligor shall be held in trust for the benefit
of the Secured Parties and each holder of a Note and shall immediately be
-98-
<PAGE>
paid to the Administrative Agent for the benefit of the Secured Parties and
each holder of a Note and credited and applied against the Obligations of the
Borrower and each other Obligor, whether matured or unmatured, in accordance
with the terms of this Agreement; provided, however, that if
(a) each Guarantor has made payment to the Secured Parties
and each holder of a Note of all or any part of the Obligations of the
Borrower, and
(b) all Obligations of the Borrower and each other Obligor
have been paid in full in cash, all Letters of Credit have been
terminated or expired, all Rate Protection Agreements have been
terminated or expired and all Commitments have been permanently
terminated,
each Secured Party and each holder of a Note agrees that, at any Parent
Guarantor's request, the Administrative Agent, on behalf of the Secured Parties
and the holders of the Notes, will execute and deliver to the applicable Parent
Guarantor appropriate documents (without recourse and without representation or
warranty) necessary to evidence the transfer by subrogation to such Parent
Guarantor of an interest in the Obligations of the Borrower resulting from such
payment by such Parent Guarantor. In furtherance of the foregoing, for so long
as any Obligations or Commitments remain outstanding, each Parent Guarantor
shall refrain from taking any action or commencing any proceeding against the
Borrower (or its successors or assigns, whether in connection with a bankruptcy
proceeding or otherwise) to recover any amounts in the respect of payments made
under the guaranty set forth in this Article IX to any Secured Party or any
holder of a Note.
SECTION 9.7. Successors, Transferees and Assigns; Transfers of Notes,
etc. The guaranty set forth in this Article IX shall:
(a) be binding upon each Parent Guarantor and its successors,
transferees and assigns; and
(b) inure to the benefit of and be enforceable by the
Administrative Agent and each other Secured Party.
Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including the guaranty set forth in
this Article IX) or otherwise, subject, however, to any contrary provisions in
such assignment or transfer, and to the provisions of Section 11.11 and Article
X.
-99-
<PAGE>
ARTICLE X
THE AGENTS
SECTION 10.1. Actions. Each Lender hereby appoints DLJ as its
Syndication Agent and Fleet as its Administrative Agent under and for purposes
of this Agreement, the Notes and each other Loan Document. Each Lender
authorizes the Agents to act on behalf of such Lender under this Agreement, the
Notes and each other Loan Document and, in the absence of other written
instructions from the Required Lenders received from time to time by the Agents
(with respect to which each of the Agents agrees that it will comply, except as
otherwise provided in this Section or as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of the Agents by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. Each Lender hereby indemnifies
(which indemnity shall survive any termination of this Agreement) the Agents,
ratably in accordance with their respective Term Loans outstanding and
Commitments (or, if no Term Loans or Commitments are at the time outstanding
and in effect, then ratably in accordance with the principal amount of Term
Loans held by such Lender, and their respective Commitments as in effect in
each case on the date of the termination of this Agreement), from and against
any and all liabilities, obligations, losses, damages, claims, costs or
expenses of any kind or nature whatsoever which may at any time be imposed on,
incurred by, or asserted against, any of the Agents in any way relating to or
arising out of this Agreement, the Notes and any other Loan Document, including
reasonable attorneys' fees, and as to which any Agent is not reimbursed by the
Borrower or any other Obligor (and without limiting the obligation of the
Borrower or any other Obligor to do so); provided, however, that no Lender
shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, claims, costs or expenses which are determined by
a court of competent jurisdiction in a final proceeding to have resulted solely
from such Agent's gross negligence or willful misconduct. The Agents shall not
be required to take any action hereunder, under the Notes or under any other
Loan Document, or to prosecute or defend any suit in respect of this Agreement,
the Notes or any other Loan Document, unless it is indemnified hereunder to its
satisfaction. If any indemnity in favor of any of the Agents shall be or
become, in such Agent's determination, inadequate, such Agent may call for
additional indemnification from the Lenders and cease to do the acts
indemnified against hereunder until such additional indemnity is given.
SECTION 10.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m., New York City time, on the day prior to a Borrowing that such Lender
will not make available the amount which would constitute its Percentage of
such Borrowing on the date specified therefor, the Administrative Agent may
assume that such Lender has made such amount available to the Administrative
Agent and, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If and to the extent that such Lender shall not have made
such amount available to the Administrative Agent, such Lender severally agrees
and the Borrower agrees to repay the
-100-
<PAGE>
Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date the Administrative Agent made
such amount available to the Borrower to the date such amount is repaid to the
Administrative Agent, at the interest rate applicable at the time to Loans
comprising such Borrowing.
SECTION 10.3. Exculpation. None of the Agents, the Swing Line Lender,
the Issuer or the Arranger nor any of their respective directors, officers,
employees or agents shall be liable to any Lender for any action taken or
omitted to be taken by it under this Agreement or any other Loan Document, or
in connection herewith or therewith, except for its own willful misconduct or
gross negligence, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due execution
of this Agreement or any other Loan Document, nor for the creation, perfection
or priority of any Liens purported to be created by any of the Loan Documents,
or the validity, genuineness, enforceability, existence, value or sufficiency
of any collateral security, nor to make any inquiry respecting the performance
by the Borrower of its obligations hereunder or under any other Loan Document.
Any such inquiry which may be made by any Agent, the Swing Line Lender or the
Issuer shall not obligate it to make any further inquiry or to take any action.
The Agents, the Swing Line Lender and the Issuer shall be entitled to rely upon
advice of counsel concerning legal matters and upon any notice, consent,
certificate, statement or writing which the Agents, the Swing Line Lender or
the Issuer, as applicable, believe to be genuine and to have been presented by
a proper Person.
SECTION 10.4. Successor. The Syndication Agent may resign as such upon
one Business Day's notice to the Borrower and the Administrative Agent. The
Administrative Agent may resign as such at any time upon at least 30 days'
prior notice to the Borrower and all Lenders. If the Administrative Agent at
any time shall resign, the Required Lenders may, with the prior consent of the
Borrower (which consent shall not be unreasonably withheld), appoint another
Lender as a successor Administrative Agent which shall thereupon become the
Administrative Agent hereunder. If no successor Administrative Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent's giving
notice of resignation, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be one of
the Lenders or a commercial banking institution organized under the laws of the
United States or a United States branch or agency of a commercial banking
institution, and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall be entitled to receive from the retiring Administrative Agent such
documents of transfer and assignment as such successor Administrative Agent may
reasonably request, and shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as the Administrative Agent, the provisions of (i) this
Article X shall inure to its benefit as to any actions taken or omitted to be
taken by it while it
-101-
<PAGE>
was the Administrative Agent under this Agreement, and (ii) Section 11.3 and
Section 11.4 shall continue to inure to its benefit.
SECTION 10.5. Credit Extensions by each Agent. Each Agent, the Swing
Line Lender and the Issuer shall have the same rights and powers with respect
to (x) (i) in the case of the Agents and the Swing Line Lender, the Credit
Extensions made by it or any of its Affiliates and (ii) in the case of the
Issuer, the Loans made by it or any of its Affiliates, and (y) the Notes held
by such Agent, the Swing Line Lender, the Issuer or any of their respective
Affiliates as any other Lender and may exercise the same as if it were not an
Agent or the Issuer. Each Agent, the Swing Line Lender, the Issuer and each and
their respective Affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any Subsidiary or
Affiliate of the Borrower as if such Agent, the Swing Line Lender or Issuer
were not an Agent, the Swing Line Lender or the Issuer hereunder.
SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has,
independently of each Agent, the Documentation Agent, the Arranger, the Swing
Line Lender, the Issuer and each other Lender, and based on such Lender's
review of the financial information of the Borrower, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such Lender
has deemed appropriate, made its own credit decision to extend its Commitments.
Each Lender also acknowledges that it will, independently of each Agent, the
Documentation Agent, the Arranger, the Swing Line Lender, the Issuer and each
other Lender, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights and
privileges available to it under this Agreement or any other Loan Document.
SECTION 10.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender and the Issuer of each notice or request required or
permitted to be given to the Administrative Agent by the Borrower pursuant to
the terms of this Agreement (unless concurrently delivered to the Lenders and
the Issuer by the Borrower). The Administrative Agent will distribute to each
Lender and the Issuer each document or instrument received for such Lender's or
the Issuers's account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Lenders and/or
the Issuer by the Administrative Agent in accordance with the terms of this
Agreement.
SECTION 10.8. The Swing Line Lender, the Issuer, the Documentation
Agent, the Syndication Agent and the Administrative Agent. Notwithstanding
anything else to the contrary contained in this Agreement or any other Loan
Document, the Swing Line Lender, the Issuer, the Documentation Agent and the
Agents, in their respective capacities as such, each in such capacity, shall
have no duties or responsibilities under this Agreement or any other Loan
Document nor any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or otherwise exist against the Swing Line
Lender, the Issuer, the Documentation Agent or any Agent, as
-102-
<PAGE>
applicable, in such capacity except as are explicitly set forth herein or in
the other Loan Documents.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and each Obligor party thereto and by the Required
Lenders; provided, however, that no such amendment, modification or waiver
which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 11.1, or clause (a) of Section 11.10,
change the definition of "Required Lenders", increase any Commitment
Amount or the Percentage of any Lender, reduce, or extend the due date
for, any fees described in Section 3.3 (other than any fee referred to
in Section 3.3.2), release any Guarantor from its obligations under
any Guaranty, or release all or substantially all of the collateral
security (except in each case as otherwise specifically provided in
this Agreement, any such Guaranty, a Security Agreement or a Pledge
Agreement) or extend any Commitment Termination Date shall be made
without the consent of each Lender adversely affected thereby;
(c) extend the due date for, or reduce the amount of, (i) any
scheduled repayment or prepayment of principal of or interest on any
Loan (or reduce the principal amount of or rate of interest on any
Loan) or (ii) any repayment of any Reimbursement Obligation (or reduce
the amount of or rate of interest on any Reimbursement Obligation)
shall be made without the consent of the holder of the Note evidencing
such Loan or, in the case of a Reimbursement Obligation, the Issuer
owed, and those Lenders participating in, such Reimbursement
Obligation;
(d) affect adversely the interests, rights or obligations of
any Agent, the Swing Line Lender, the Issuer or the Arranger (in its
capacity as Agent, the Swing Line Lender, the Issuer or the Arranger),
unless consented to by such Agent, the Swing Line Lender, the Issuer
or the Arranger, as the case may be; or
(e) have the effect (either immediately or at some later
time) of enabling the Borrower to satisfy a condition precedent to the
making of a Revolving Loan, the Swing
-103-
<PAGE>
Line Loan or the issuance of a Letter of Credit without the consent of
Lenders holding at least 51% of the Revolving Loan Commitments; or
(f) amend, modify or waive the provisions of clause (a)(i) of
Section 3.1.1 or clause (b) of Section 3.1.2 or effect any amendment,
modification or waiver that by its terms adversely affects the Lenders
participating in any Tranche differently from those of Lenders
participating in other Tranches, without the consent of the holders of
the Notes evidencing greater than 50% of the aggregate amount of Loans
outstanding under each Tranche affected by such modification, or, in
the case of a modification affecting the Revolving Loan Commitment
Amount, the Lenders holding greater than 50% of the Revolving Loan
Commitments.
No failure or delay on the part of any Agent, the Issuer, any Lender or the
holder of any Note in exercising any power or right under this Agreement or any
other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by any Agent, the Issuer,
any Lender or the holder of any Note under this Agreement or any other Loan
Document shall, except as may be otherwise stated in such waiver or approval,
be applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
SECTION 11.2. Notices. All notices and other communications provided
to any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party
at its address or facsimile number set forth on its signature page hereto or on
Schedule II hereto or, in the case of a Lender that becomes a party hereto
after the date hereof, as set forth in the Lender Assignment Agreement pursuant
to which such Lender becomes a Lender hereunder or at such other address or
facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or
if properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any notice, if transmitted by facsimile, shall be deemed
given when transmitted (and electronic confirmation of receipt thereof has been
received).
SECTION 11.3. Payment of Costs and Expenses. The Borrower agrees to
pay on demand all reasonable expenses of each of the Agents and the Arranger
(including the reasonable fees and out-of-pocket expenses of counsel to the
Agents and the Arranger and of local or foreign counsel, if any, who may be
retained by counsel to the Agents) in connection with
(a) the syndication by the Syndication Agent and the Arranger
of the Loans, the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules
and exhibits, and any amendments, waivers, consents, supplements or
other modifications to this Agreement or any other Loan Document as
-104-
<PAGE>
may from time to time hereafter be required, whether or not the
transactions contemplated hereby are consummated;
(b) the filing, recording, refiling or rerecording of each
Pledge Agreement and each Security Agreement and/or any Uniform
Commercial Code financing statements relating thereto and all
amendments, supplements and modifications to any thereof and any and
all other documents or instruments of further assurance required to be
filed or recorded or refiled or rerecorded by the terms hereof or of
such Pledge Agreement, Security Agreement or Uniform Commercial Code
financial statements; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Agents, the Documentation
Agent, the Arranger, the Issuer and the Lenders harmless from all liability
for, any stamp or other similar taxes which may be payable in connection with
the execution or delivery of this Agreement, the Credit Extensions made
hereunder or the issuance of the Notes or Letters of Credit or any other Loan
Documents. The Borrower also agrees to reimburse each Agent, the Documentation
Agent, the Arranger, the Issuer and each Lender upon demand for all reasonable
out-of-pocket expenses (including reasonable attorneys' fees and legal
expenses) incurred by such Agent, the Documentation Agent, the Arranger, the
Issuer or such Lender in connection with (x) the negotiation of any
restructuring or "work-out", whether or not consummated, of any Obligations and
(y) the enforcement of any Obligations.
SECTION 11.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby, to the fullest extent permitted under applicable law,
indemnifies, exonerates and holds each Agent, the Documentation Agent, the
Arranger, the Issuer, and each Lender and each of their respective Affiliates,
and each of their respective partners, officers, directors, trustees, employees
and agents, and each other Person controlling any of the foregoing within the
meaning of either Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as amended (collectively,
the "Indemnified Parties"), free and harmless from and against any and all
actions, causes of action, suits, losses, costs, liabilities and damages, and
expenses actually incurred in connection therewith (irrespective of whether any
such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(collectively, the "Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit
Extension;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (including
any action brought by or on
-105-
<PAGE>
behalf of the Borrower as the result of any determination by any
Lender to make any Credit Extension hereunder);
(c) any investigation, litigation or proceeding related to
any acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not such Agent, the Documentation Agent, the
Issuer, the Arranger or such Lender is party thereto;
(d) any investigation, litigation or proceeding related to
any environmental cleanup, audit, compliance or other matter relating
to the Borrower's or any of its Subsidiaries' compliance with or
liability under Environmental Law or the Release by the Borrower or
any of its Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission or release from, any real
property owned or operated by the Borrower or any Subsidiary thereof
of any Hazardous Material present on or under such property in a
manner giving rise to liability at or prior to the time the Borrower
or such Subsidiary owned or operated such property (including any
losses, liabilities, damages, injuries, costs, expenses or claims
asserted or arising under any Environmental Law), regardless of
whether caused by, or within the control of, the Borrower or such
Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or willful misconduct. The Borrower and its permitted
successors and assigns hereby waive, release and agree not to make any claim,
or bring any cost recovery action against, any Agent, the Documentation Agent,
the Issuer, the Arranger or any Lender under CERCLA or any state equivalent, or
any similar law now existing or hereafter enacted, except to the extent arising
out of the gross negligence or willful misconduct of any Indemnified Party. It
is expressly understood and agreed that to the extent that any of such Persons
is strictly liable under any Environmental Laws, the Borrower's obligation to
such Person under this indemnity shall likewise be without regard to fault on
the part of the Borrower, to the extent permitted under applicable law, with
respect to the violation or condition which results in liability of such
Person. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
SECTION 11.5. Survival. The obligations of the Borrower under Sections
2.6.7(a)(ii), 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4, the obligations of each Parent
Guarantor under Section 9.1(b) and the obligations of the Lenders under
Sections 4.8 and 10.1, shall in each case survive any assignment or
participation pursuant to Section 11.11, any termination of this Agreement, the
payment in full of all Obligations and the termination of all Commitments. The
representations and warranties made by the Borrower and each other Obligor in
this Agreement and in each other
-106-
<PAGE>
Loan Document shall survive the execution and delivery of this Agreement and
each such other Loan Document.
SECTION 11.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 11.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 11.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE
NOTES AND, EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED THEREIN, EACH
OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement, the
Notes and the other Loan Documents constitute the entire understanding among
the parties hereto with respect to the subject matter hereof and supersede any
prior agreements, written or oral, with respect thereto.
SECTION 11.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that (a) the Borrower may not assign
or transfer its rights or obligations hereunder without the prior written
consent of each of the Agents and all Lenders, and (b) the rights of sale,
assignment and transfer of the Lenders are subject to Section 11.11.
SECTION 11.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, or sell participations in, its Loans
and Commitments to one or more other Persons, on a non pro rata basis (except
as provided below), in accordance with this Section 11.11.
SECTION 11.11.1. Assignments. Any Lender (the "Assignor Lender"),
(a) with the written consents of the Borrower, the Agents and
(in the case of any assignment of participations in Letters of Credit
or Revolving Loan Commitments) the Issuer (which consents shall not be
unreasonably delayed or withheld and which consents of the Agents and
the Issuer shall not be required in the case of assignments made by or
to
-107-
<PAGE>
DLJ or any of its Affiliates and which consent of the Borrower shall
not be required if a Default or an Event of Default shall have
occurred and be continuing), may at any time assign and delegate to
one or more commercial banks or other financial institutions or funds
which are regularly engaged in making, purchasing or investing in
loans or securities, and
(b) with notice to the Borrower, the Agents, and (in the case
of any assignment of participations in Letters of Credit or Revolving
Loan Commitments) the Issuer, but without the consent of the Borrower,
the Agents or the Issuer, may assign and delegate to any of its
Affiliates or Related Funds or to any other Lender
(each Person described in either of the foregoing clauses as being the Person
to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignee Lender"), all or any fraction of such Lender's
total Loans, participations in Letters of Credit and Letter of Credit
Outstandings with respect thereto and Commitments (which assignment and
delegation shall be, as among Revolving Loan Commitments, Revolving Loans and
participations in Letters of Credit, of a constant, and not a varying,
percentage) (the "Assigned Amount") in a minimum aggregate amount of (i)
$1,000,000 in the case of an assignment to an existing Lender or an Affiliate
or Related Fund thereof and $5,000,000 in the case of an assignment to an
Assignee Lender that is not an existing Lender or an Affiliate or Related Fund
thereof or (ii) the then remaining amount of such Lender's Loans and
Commitments; provided, however, that any such Assignee Lender will comply, if
applicable, with the provisions contained in Section 4.6 and the Borrower, each
other Obligor, the Agents and the Issuer shall be entitled to continue to deal
solely and directly with such Assignor Lender in connection with the interests
so assigned and delegated to an Assignee Lender until
(c) written notice of such assignment and delegation,
together with payment instructions, addresses and related information
with respect to such Assignee Lender, shall have been given to the
Borrower and the Agents by such Assignor Lender and such Assignee
Lender;
(d) such Assignee Lender shall have executed and delivered to
the Borrower and the Agents a Lender Assignment Agreement, accepted by
the Agents;
(e) the processing fees described below shall have been paid;
and
(f) the Administrative Agent shall have registered such
assignment and delegation in the Register pursuant to clause (b) of
Section 2.7.
From and after the date that the Agents accept such Lender Assignment Agreement
and such assignment and delegation is registered in the Register pursuant to
clause (b) of Section 2.7, (i) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such
-108-
<PAGE>
Assignee Lender in connection with such Lender Assignment Agreement, shall have
the rights and obligations of a Lender hereunder and under the other Loan
Documents, and (ii) the Assignor Lender, to the extent that rights and
obligations hereunder have been assigned and delegated by it in connection with
such Lender Assignment Agreement, shall be released from its obligations
hereunder and under the other Loan Documents. Subject to the provisions of
Section 2.7, within ten Business Days after its receipt of notice that the
Agent has received an executed Lender Assignment Agreement, the Borrower shall
execute and deliver to the Administrative Agent (for delivery to the relevant
Assignee Lender) new Notes evidencing such Assignee Lender's assigned Loans and
Commitments and, if the Assignor Lender has retained Loans and Commitments
hereunder, replacement Notes in the principal amount of the Loans and
Commitments retained by the Assignor Lender hereunder (such Notes to be in
exchange for, but not in payment of, those Notes then held by such Assignor
Lender). Each such Note requested shall be dated the date of the predecessor
Notes, if any. The Assignor Lender shall mark such predecessor Notes
"exchanged" and deliver them to the Borrower. Unless otherwise specified in the
Lender Assignment Agreement, interest and fees in respect of the Assigned
Amount that (A) have accrued prior to the date of such assignment shall be for
the account of the Assignor Lender and (B) accrue on and subsequent to the date
of such assignment shall be for the account of the Assignee Lender. Accrued
interest and fees shall be paid at the same time or times provided in this
Agreement. Such Assignor Lender or such Assignee Lender (unless the Assignor
Lender or the Assignee Lender is DLJ or any of its Affiliates) must also pay a
processing fee to the Administrative Agent upon delivery of any Lender
Assignment Agreement in the amount of $3,500, unless such assignment and
delegation is by a Lender to its Affiliate or Related Fund or if such
assignment and delegation consists of a pledge by a Lender to a Federal Reserve
Bank (or in the case of a Lender that is an investment fund, to the trustee
under the indenture to which such fund is a party), as provided below or is
otherwise consented to by the Administrative Agent. Any attempted assignment
and delegation not made in accordance with this Section 11.11.1 shall be null
and void. Nothing contained in this Section 11.11.1 shall prevent or prohibit
any Lender from pledging its rights (but not its obligations to make Loans or
participate in Letters of Credit or Letter of Credit Outstandings) under this
Agreement and/or its Loans and/or its Notes hereunder (i) to a Federal Reserve
Bank in support of borrowings made by such Lender from such Federal Reserve
Bank, or (ii) in the case of a Lender that is an investment fund, to the
trustee under the indenture to which such fund is a party in support of its
obligations to such trustee, in either case without notice to or consent of the
Borrower or the Agents; provided, however, that (A) such Lender shall remain a
"Lender" under this Agreement and shall continue to be bound by the terms and
conditions set forth in this Agreement and the other Loan Documents, and (B)
any assignment by such trustee shall be subject to the provisions of clause (a)
of this Section 11.11.1. In the event that S&P, Moody's or Thompson's BankWatch
(or InsuranceWatch Ratings Service, in the case of Lenders that are insurance
companies (or Best's Insurance Reports, if such insurance company is not rated
by Insurance Watch Ratings Service)) shall, after the date that any Lender with
a Commitment to make Revolving Loans or participate in Letters of Credit
becomes a Lender, downgrade the long-term certificate of deposit rating or
long-term senior unsecured debt rating of such Lender, and the resulting rating
shall be below BBB-, Baa3 or C (or BB, in the case of Lender that is an
insurance company (or B, in the
-109-
<PAGE>
case of an insurance company not rated by InsuranceWatch Ratings Service))
respectively, then the Issuer or the Borrower (with the consent of the Agents
and the Issuer) shall have the right, but not the obligation, upon notice to
such Lender and the Agents, to replace such Lender with an Assignee Lender in
accordance with and subject to the restrictions contained in this Section, and
such Lender hereby agrees to transfer and assign without recourse (in
accordance with and subject to the restrictions contained in this Section) all
its interests, rights and obligations in respect of its Revolving Loan
Commitment under this Agreement to such Assignee Lender; provided, however,
that (i) no such assignment shall conflict with any law, rule and regulation or
order of any governmental authority and (ii) such Assignee Lender shall pay to
such Lender in immediately available funds on the date of such assignment the
principal of and interest and fees (if any) accrued to the date of payment on
the Loans made, and Letters of Credit participated in, by such Lender hereunder
and (iii) the Borrower shall have paid such Lender all other amounts accrued
for such Lender's account or owed to it hereunder or under any other Loan
Document.
SECTION 11.11.2. Participations. Any Lender may at any time sell to
one or more commercial banks or other financial institution (each such
commercial bank and other financial institution being herein called a
"Participant") participating interests in any of the Loans, Commitments,
participations in Letters of Credit and Letters of Credit Outstandings or other
interests of such Lender hereunder; provided, however, that
(a) no participation contemplated in this Section shall
relieve such Lender from its Commitments or its other obligations
hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) the Borrower and each other Obligor, the Agents and the
Issuer shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate
or Related Fund of such Lender, or is itself a Lender, shall be
entitled to require such Lender to take or refrain from taking any
action hereunder or under any other Loan Document, except that such
Lender may agree with any Participant that such Lender will not,
without such Participant's consent, agree to (i) any reduction in the
interest rate or amount of fees that such Participant is otherwise
entitled to, (ii) a decrease in the principal amount, or an extension
of the final Stated Maturity Date, of any Loan in which such
Participant has purchased a participating interest or (iii) a release
of all or substantially all of the collateral security under the Loan
Documents or any Guarantor under any Guaranty, in each case except as
otherwise specifically provided in a Loan Document; and
-110-
<PAGE>
(e) the Borrower shall not be required to pay any amount
under Sections 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4 that is greater than
the amount which it would have been required to pay had no
participating interest been sold.
The Borrower acknowledges and agrees, subject to clause (e) above, that, to the
fullest extent permitted under applicable law, each Participant, for purposes
of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 11.3 and 11.4, shall be considered a
Lender.
SECTION 11.12. Other Transactions. Nothing contained herein shall
preclude any Agent, the Documentation Agent, the Issuer, the Arranger or any
other Lender from engaging in any transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Borrower or
any of its Affiliates in which the Borrower or such Affiliate is not restricted
hereby from engaging with any other Person.
SECTION 11.13. Independence of Covenants. All covenants contained in
this Agreement and each other Loan Document shall be given independent effect
such that, in the event a particular action or condition is not permitted by
any of such covenants, the fact that it would be permitted by an exception to,
or be otherwise within the limitations of, another covenant shall not, unless
expressly so provided in such first covenant, avoid the occurrence of a Default
or an Event of Default if such action is taken or such condition exists.
SECTION 11.14. Confidentiality. The Agents, the Documentation Agent,
the Issuer, the Arranger and the Lenders shall hold all non-public information
obtained pursuant to or in connection with this Agreement or obtained by them
based on a review of the books and records of Holdings or any of its
Subsidiaries in accordance with their customary procedures for handling
confidential information of this nature, but may make disclosure to any of
their examiners, regulators (including the National Association of Insurance
Commissioners), Affiliates, outside auditors, counsel and other professional
advisors in connection with this Agreement or as reasonably required by any
potential bona fide transferee, participant or assignee, or in connection with
the exercise of remedies under a Loan Document, or as requested by any
governmental agency or representative thereof or pursuant to legal process;
provided, however, that
(a) unless specifically prohibited by applicable law or court
order, each Agent, the Documentation Agent, the Issuer, the Arranger
and each Lender shall promptly notify the Borrower of any request by
any governmental agency or representative thereof (other than any such
request in connection with an examination of the financial condition
of such Agent, the Documentation Agent, the Issuer, Arranger and
Lender by such governmental agency) for disclosure of any such
non-public information and, where practicable, prior to disclosure of
such information;
(b) prior to any such disclosure pursuant to this Section
11.14, each Agent, the Documentation Agent, the Issuer, the Arranger
and each Lender shall require any such
-111-
<PAGE>
bona fide transferee, participant and assignee receiving a disclosure
of non-public information to agree, for the benefit of Holdings and
its Subsidiaries, in writing
(i) to be bound by this Section 11.14; and
(ii) to require such Person to require any other
Person to whom such Person discloses such non-public
information to be similarly bound by this Section 11.14;
(c) disclosure may, with the consent of the Agents and the
Borrower, be made by any Lender to any direct or indirect contractual
counterparties of such Lender in swap agreements or such contractual
counterparties' professional advisors; provided that such contractual
counterparty or professional advisor agrees in writing to keep such
information confidential to the same extent required of the Lenders
hereunder; and
(d) except as may be required by an order of a court of
competent jurisdiction and to the extent set forth therein, no Lender
shall be obligated or required to return any materials furnished by
the Borrower or any Subsidiary.
SECTION 11.15. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE
DOCUMENTATION AGENT, THE ARRANGER, THE LENDERS, THE ISSUER, THE BORROWER OR ANY
PARENT GUARANTOR RELATING THERETO SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY
(TO THE EXTENT PERMITTED UNDER APPLICABLE LAW) IN THE COURTS OF THE STATE OF
NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK, IN EACH CASE LOCATED IN NEW YORK COUNTY OF THE STATE OF NEW YORK;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT THE AGENTS' OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER
AND EACH PARENT GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EACH CASE LOCATED IN
NEW YORK COUNTY OF THE STATE OF NEW YORK, FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER AND
EACH PARENT GUARANTOR IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR
-112-
<PAGE>
BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BORROWER AND
EACH PARENT GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH ANY OF THEM MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH
COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER OR ANY PARENT
GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE BORROWER AND EACH PARENT GUARANTOR HEREBY
IRREVOCABLY WAIVE (TO THE EXTENT PERMITTED UNDER APPLICABLE LAW) SUCH IMMUNITY
IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
SECTION 11.16. Waiver of Jury Trial. THE AGENTS, THE DOCUMENTATION
AGENT, THE ARRANGER, THE ISSUER, THE LENDERS, THE BORROWER AND THE PARENT
GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE AGENTS, THE DOCUMENTATION AGENT, THE ARRANGER,
THE LENDERS, THE BORROWER OR THE PARENT GUARANTORS RELATING THERETO. THE
BORROWER AND THE PARENT GUARANTORS ACKNOWLEDGE AND AGREE THAT EACH SUCH PERSON
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH SUCH PERSON IS A PARTY)
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS, THE
DOCUMENTATION AGENT, THE ARRANGER, THE ISSUER AND THE LENDERS ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
-113-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
BORROWER:
DUANE READE
By Duane Reade Inc., a general partner
By /s/ William J. Tennant
-----------------------------------
Title: Senior Vice President and
Chief Financial Officer
By DRI I Inc., a general partner
By /s/ William J. Tennant
-----------------------------------
Title: Senior Vice President and
Chief Financial Officer
PARENT GUARANTORS:
DUANE READE INC.
By /s/ William J. Tennant
-----------------------------------
Title: Senior Vice President and
Chief Financial Officer
DRI I INC.
By /s/ William J. Tennant
-----------------------------------
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
AGENTS AND LENDERS:
DLJ CAPITAL FUNDING, INC., as the
Syndication Agent and as a Lender
By /s/ Authorized Signatory
----------------------------------------
Title:
FLEET NATIONAL BANK, as the Administrative
Agent and as a Lender
By /s/ Authorized Signatory
----------------------------------------
Title:
CREDIT LYONNAIS NEW YORK BRANCH, as
the Documentation Agent and as a
Lender
By /s/ Authorized Signatory
----------------------------------------
Title:
LENDERS:
SUMMIT BANK
By /s/ Authorized Signatory
----------------------------------------
Title:
BHF-BANK AKTIENGESELLSCHAFT
By /s/ Authorized Signatory
----------------------------------------
Title:
By /s/ Authorized Signatory
----------------------------------------
Title:
<PAGE>
HELLER FINANCIAL, INC.
By /s/ Authorized Signatory
----------------------------------------
Title:
ORIX USA CORPORATION
By /s/ Authorized Signatory
----------------------------------------
Title:
OSPREY INVESTMENTS PORTFOLIO
By Citibank, N.A., as Manager
By /s/ Authorized Signatory
----------------------------------------
Title:
MORGAN STANLEY DEAN WITTER PRIME
INCOME TRUST
By /s/ Authorized Signatory
----------------------------------------
Title:
VAN KAMPEN CLO I, LIMITED
By Van Kampen American Capital Management,
Inc., as Collateral Manager
By /s/ Authorized Signatory
----------------------------------------
Title:
<PAGE>
Merrill Lynch Global Investment Series: INCOME
STRATEGIES PORTFOLIO
By Merrill Lynch Asset Management, L.P., as
Investment Advisor
By /s/ Authorized Signatory
----------------------------------------
Title:
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By Merrill Lynch Asset Management, L.P., as
Investment Advisor
By /s/ Authorized Signatory
----------------------------------------
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By Merrill Lynch Asset Management, L.P. as
Investment Advisor
By /s/ Authorized Signatory
----------------------------------------
Title:
DEBT STRATEGIES FUND, INC.
By /s/ Authorized Signatory
----------------------------------------
Title:
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By /s/ Authorized Signatory
----------------------------------------
Title:
SENIOR HIGH INCOME PORTFOLIO
By /s/ Authorized Signatory
----------------------------------------
Title:
<PAGE>
DEEPROCK & CO.
By Eaton Vance Management, as Investment
Advisor
By /s/ Authorized Signatory
----------------------------------------
Title:
SENIOR DEBT PORTFOLIO
By Boston Management and Research, as
Investment Advisor
By /s/ Authorized Signatory
----------------------------------------
Title:
PAM CAPITAL FUNDING LP
By Highland Capital Management, L.P., as
Collateral Manager
By /s/ Authorized Signatory
----------------------------------------
Title:
<PAGE>
SCHEDULE I
DISCLOSURE SCHEDULE
ITEM 6.6 - MATERIAL ADVERSE CHANGE
None
<PAGE>
ITEM 6.7--LITIGATION
NONE
<PAGE>
ITEM 6.8 - EXISTING SUBSIDIARIES
NONE
<PAGE>
ITEM 6.9 - PROPERTIES
Duane Reade currently leases the following properties:
New York
- --------
1 Whitehall Street
New York, New York
World Trade Center
New York, New York
4 Park Avenue
New York, New York
20 East 46th Street
New York, New York
37 Broadway
New York, New York
225 Broadway
New York, New York
49 East 52nd Street
New York, New York
50 Pine Street
New York, New York
67 Broad Street
New York, New York
90 John Street
New York, New York
95 Wall Street
New York, New York
144 East 44th Street
New York, New York
215-221 West 34th Street
New York, New York
<PAGE>
51 West 51st Street
New York, New York
224 West 57th Street
New York, New York
40 West 57th Street
New York, New York
300 Park Avenue South
New York, New York
304-308 Madison Avenue
New York, New York
305 Broadway
New York, New York
350 Fifth Avenue
New York, New York
360 Park Avenue South
New York, New York
370 Lexington Avenue
New York, New York
415 Fifth Avenue
New York, New York
485 Lexington Avenue
New York, New York
509 Fifth Avenue
New York, New York
525 Seventh Avenue
New York, New York
1146-1150 Avenue of the Americas
New York, New York
<PAGE>
1 Port Authority
New York, New York
1412 Broadway
New York, New York
1633 Broadway
New York, New York
505 Eighth Avenue
New York, New York
80 Maiden Lane
New York, New York
157 East 42nd Street
New York, New York
866 Third Avenue
New York, New York
71 West 23rd Street
New York, New York
598 Broadway
New York, New York
200 East 74th Street
New York, New York
378 Avenue of the Americas
New York, New York
2307 Broadway
New York, New York
<PAGE>
2465 Broadway
New York, New York
279 West 125th Street
New York, New York
115-117 West 42nd Street
New York, New York
122 East 42nd Street
New York, New York
333 Seventh Avenue
New York, New York
979 Third Avenue
New York, New York
22-26 East 14th Street
New York, New York
22 West 48th Street
New York, New York
464 Fulton Street
New York, New York
108-110 West 34th Street
New York, New York
Pennsylvania Station
New York, New York
1191 Second Avenue
New York, New York
150 East 18th Street
New York, New York
306 East Fordham Road
Bronx, New York
<PAGE>
963 Southern Boulevard
Bronx, New York
386 Fulton Street
Brooklyn, New York
749 Broadway
Brooklyn, New York
44 Court Street
Brooklyn, New York
39-15 Main Street
Flushing, New York
8101 Broadway
Queens (Elmhurst), New York
251 East 86th Street
New York, New York
200 West 79th Street
New York, New York
50-02 55th Avenue (warehouse)
Maspeth, New York
1185 Avenue of the Americas
New York, New York
1467 First Avenue
New York, New York
1430 Broadway
New York, New York
155 East 34th Street
New York, New York
19 Park Place
New York, New York
<PAGE>
440 Ninth Avenue (corporate headquarters)
New York, New York
1179-81 Liberty Avenue
Brooklyn, New York
131 East 23rd Street
New York, New York
1290 Amsterdam Avenue
New York, New York
57-11 Myrtle Avenue
Ridgewood, New York
4 Amsterdam Avenue
New York, New York
41 East 58th Street
New York, New York
55 East 55th Street
New York, New York
416 Knickerbocker Avenue
Brooklyn, New York
48-01 Queens Boulevard
Long Island City, New York
40 Fulton Street
New York, New York
29-33 7th Avenue
New York, New York
1450 Rockaway Parkway
Brooklyn, New York
2108 Third Avenue
New York, New York
190 West 231st Street
Bronx, New York
<PAGE>
1520 Avenue J
Brooklyn, New York
724 Flatbush Avenue
Brooklyn, New York
98 Delancey Street
New York, New York
322 Eighth Avenue
New York, New York
60-02 Roosevelt Avenue
Woodside, New York
93-01 Sutphin Boulevard
Jamaica, New York
617 West 181st Street
New York, New York
2887-9 Third Avenue
Bronx, New York
1231 Madison Avenue
New York, New York
3612 Nostrand Avenue
Brooklyn, New York
138 Hillside Avenue
Williston Park, New York
2681-7 Broadway
New York, New York
<PAGE>
2111 White Plains Road
Bronx, New York
2914 3rd Avenue
Bronx, New York
585 2nd Avenue
New York, New York
3730 Junction Boulevard
Rego Park, New York
107-14 71st Street
Forest Hills, New York
501 2nd Avenue
New York, New York
700 Columbus Avenue
New York, New York
405 Lexington Avenue
New York, New York
678 McLean Avenue
Yonkers, New York
42 West Broad Street
Mt. Vernon, New York
113-03 Rockaway Beach Boulevard
Far Rockaway, New York
4363 Amboy & Richmond
Staten Island, New York
2025 Broadway
New York, New York
609 Columbus Avenue
New York, New York
<PAGE>
New Jersey
- ----------
707 Broad Street
Newark, New Jersey
Duane Reade currently subleases the following properties:
New York
- --------
1. Sublease Agreement between Fitness Assessment and Prescription Inc.
(D/B/A Equinox Fitness Club), as Sub-Lessee, and Duane Reade, as
Sub-Lessor, for the portion of Ground Floor and Basement space at
2465 Broadway, New York, New York for the term February 1, 1995 to
May 25, 2014.
2. Sublease Agreement between Duane Reade (Sublandlord) and Elmhurst
Computer & Communications Inc. (Subtenant) for a portion of ground
floor and basement space at 81-01 Broadway, Elmhurst, New York for
the term July 28, 1998 to April 29, 2007.
3. Sublease Agreement between Duane Reade (Sublandlord) and 14th
Street Donut Inc. for a portion of the basement space at 22-26 East
14th Street, New York, New York for the term May 1, 1998 to
December 31, 2008.
Duane Reade currently owns the following properties:
New York
- --------
1. *Duane Reade Warehouse
49-29 30th Place
Long Island City, New York 11101
2. **1417 Avenue U
Brooklyn, New York
* Subject to the Existing Mortgage.
** Purchased on June 29, 1998 in connection with a Sale and Leaseback
Transaction.
<PAGE>
ITEM 6.11--EMPLOYEE BENEFIT PLANS
WELFARE PLANS
1. Duane Reade Medical Plan.
2. Duane Reade Flexible Compensation Plan.
3. Duane Reade Life Insurance Plan.
SEVERANCE ARRANGEMENT
1. Under his Employment Agreement, Tony Cuti is eligible
for certain severance payments, SERP benefits and other
employee benefits.
2. The following employees are entitled to certain
severance payments: William Tennant, Joe Lacko, Gary
Charbonneau, Hyman Needleman, Karen Durham and Maureen
Page.
3. Under his Termination Agreement, dated as of June 18,
1997, Bruce Weitz agreed to terminate any rights he
possessed under a certain Executive Stock Agreement,
dated as of January 31, 1997, between Bruce Weitz and
Holdings.
4. Under his Option Repurchase and Cancellation Agreement,
dated as of June 18, 1997, Barry Weston sold Holdings
the portion of his options that vested upon the
consummation of a sale of Holdings.
<PAGE>
ITEM 6.12 - ENVIRONMENTAL MATTERS
None
<PAGE>
ITEM 6.16(C) - PHARMACEUTICAL LIABILITIES
None
<PAGE>
ITEM 7.2.2(b) INDEBTEDNESS TO BE PAID
None
<PAGE>
ITEM 7.2.2(c) - ONGOING INDEBTEDNESS
1. $80,000,000 in aggregate principal amount of 9-1/4% Senior Subordinated
Notes due 2008 of Duane Reade Inc. (and the guarantees thereof by Duane
Reade Inc.'s subsidiaries).
2. $37,500 Letter of Credit issued by Chase Manhattan Bank, L/C/
No.T-240153 to C.S.C. Fulton Associates to secure lease payments.
3. $64,146 Letter of Credit issued by Chase Manhattan Bank, L/C/ No.
L-275717 to 1290 Associates LLC to secure lease payments.
4. $28,503 Letter of Credit issued by Chase Manhattan Bank to Nineteen
New York Properties Limited Partnership to secure lease payments.
5. Intercompany indebtedness, in an amount not to exceed $200,000.00,
between the Borrower, as borrower, and Holdings, as lender.
<PAGE>
ITEM 7.2.5(a) - ONGOING INVESTMENTS
1. Promissory Note for $250,000 dated June 28, 1993 from Gary Charbonneau
in favor of Holdings ($121,243 current outstanding principal balance).
2. Promissory Note for $75,000 dated April 10, 1995 from Jerry Ray in favor
of Holdings ($45,000 current outstanding principal balance).
3. $10,000 advance to Karen Durham.
4. $10,000 advance to Mike Cirilli.
5. Intercompany indebtedness, in an amount not to exceed $200,000.00,
between the Borrower, as borrower, and Holdings, as lender.
<PAGE>
SCHEDULE II to
Credit Agreement
<TABLE>
<CAPTION>
PERCENTAGES
-----------
REVOLVING LOAN EXISTING ADDITIONAL
COMMITMENT TERM A LOANS TERM B LOANS TERM C LOANS TERM C LOANS
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
DLJ Capital Funding, Inc. 6.2500000000% 6.2500000000% 0% 0% 100%
Fleet National Bank 25.0000000000% 25.0000000000% 0% 0% 0%
Credit Lyonnais New 18.7500000000% 18.7500000000% 0% 0% 0%
York Branch
Summit Bank 18.7500000000% 18.7500000000% 0% 0% 0%
BHF-Bank 15.6250000000% 15.6250000000% 0% 0% 0%
Aktiengesellschaft
Heller Financial, Inc. 15.6250000000% 15.6250000000% 0% 0% 0%
Orix USA Corporation 0% 0% 8.1250000000% 8.1250000000% 0%
Osprey Investments 0% 0% 5.0000000000% 5.0000000000% 0%
Portfolio
Morgan Stanley Dean 0% 0% 12.5000000000% 12.5000000000% 0%
Witter Prime Income
Trust
Merrill Lynch Global 0% 0% 9.3750000000% 9.3750000000% 0%
Investment Series:
Income Strategies
Portfolio
<PAGE>
REVOLVING LOAN EXISTING ADDITIONAL
COMMITMENT TERM A LOANS TERM B LOANS TERM C LOANS TERM C LOANS
---------- ------------ ------------ ------------ ------------
Merrill Lynch Debt 0% 0% 6.2500000000% 6.2500000000% 0%
Strategies Portfolio
Merrill Lynch Prime Rate 0% 0% 6.2500000000% 6.2500000000% 0%
Portfolio
Debt Strategies Fund Inc. 0% 0% 3.1250000000% 3.1250000000% 0%
Senior Debt Portfolio 0% 0% 14.3750000000% 14.3750000000% 0%
Deeprock & Co. 0% 0% 1.2500000000% 1.2500000000% 0%
Merrill Lynch Senior 0% 0% 6.2500000000% 6.2500000000% 0%
Floating Rate Fund Inc.
Senior High Income 0% 0% 3.1250000000% 3.1250000000% 0%
Portfolio
Van Kampen CLO I 0% 0% 18.7500000000% 18.7500000000% 0%
Limited
PAM Capital Funding LP 0% 0% 5.6250000000% 5.6250000000% 0%
</TABLE>
-2-
<PAGE>
ADMINISTRATIVE INFORMATION
Notice Information
BORROWER:
Duane Reade
440 Ninth Avenue
New York, New York 10001
Telecopier: 212-273-5795
Attention: Bill Tennant
PARENT GUARANTORS:
Duane Reade Inc.
440 Ninth Avenue
New York, New York 10001
Telecopier: 212-273-5795
Attention: Bill Tennant
DRI I Inc.
440 Ninth Avenue
New York, New York 10001
Telecopier: 212-273-5795
Attention: Bill Tennant
-3-
<PAGE>
AGENTS:
DLJ Capital Funding, Inc.,
as Syndication Agent
277 Park Avenue
New York, New York 10172
Telecopier: 212-892-7272
Attention: Tania Holman
Fleet National Bank,
as Administrative Agent
1 Federal Street
Boston, Massachusetts 02211
Telecopier: 617-346-4806
Attention: Eric Vander Mel
Credit Lyonnais New York Branch,
as Documentation Agent
1301 Avenue of the Americas
New York, New York 10019
Telecopier: 212-459-3176
Attention: John J. D'Angelo
-4-
<PAGE>
LENDERS:
<TABLE>
<CAPTION>
Name of Lender Domestic Office LIBOR Office
- -------------- --------------- ------------
<S> <C> <C>
DLJ Capital Funding, Inc. 525 Washington Blvd. 525 Washington Blvd.
Jersey City, NJ 07310 Jersey City, NJ 07310
Telecopier: 201-610-1965 Telecopier: 201-610-1965
Attention: Ed Vowinkel Attention: Ed Vowinkel
Fleet National Bank 1 Federal Street 1 Federal Street
Boston, MA 02211 Boston, MA 02211
Telecopier: 617-346-4806 Telecopier: 617-346-4806
Attention: Eric Vander Mel Attention: Eric Vander Mel
Credit Lyonnais New York 1301 Avenue of the Americas 1301 Avenue of the Americas
Branch New York, NY 10019 New York, NY 10019
Telecopier: 212-261-3776 Telecopier: 212-261-3776
Attention: Allison L. Adams Attention: Allison L. Adams
Summit Bank 750 Walnut Ave., 3rd Floor 750 Walnut Ave., 3rd Floor
Cranford, NJ 07016 Cranford, NJ 07016
Telecopier: 908-709-6433 Telecopier: 908-709-6433
Attention: Wayne R. Trotman Attention: Wayne R. Trotman
BHF-Bank NY Branch Grand Cayman Branch
Aktiengesellschaft 590 Madison Ave. c/o 590 Madison Ave.
New York, NY 10022 New York, NY 10022
Telecopier: 212-756-5536 Telecopier: 212-756-5536
Attention: Tom Scifo Attention: Tom Scifo
Heller Financial, Inc. 500 W. Monroe St. 500 W. Monroe St.
Chicago, IL 60661 Chicago, IL 60661
Telecopier: 312-441-7357 Telecopier: 312-441-7357
Attention: Linda Wolf Attention: Linda Wolf
Van Kampen CLO I One Parkview Plaza One Parkview Plaza
Limited Oakbrook Terrace, IL Oakbrook Terrace, IL
Telecopier: 630-684-6384 Telecopier: 630-684-6384
Attention: Jeffrey Maillet Attention: Jeffrey Maillet
-5-
<PAGE>
Senior High Income c/o Merrill Lynch Asset c/o Merrill Lynch Asset
Portfolio Management Management
800 Scudders Mill Road - 800 Scudders Mill Road -
Area 1B Area 1B
Plainsboro, NJ 08536 Plainsboro, NJ 08536
Telecopier: 609-282-2769 Telecopier: 609-282-2769
Attention: Colleen Cunniffee Attention: Colleen Cunniffee
Merrill Lynch Global c/o Merrill Lynch Asset c/o Merrill Lynch Asset
Investment Series: Income Management Management
Strategies Portfolio 800 Scudders Mill Road - 800 Scudders Mill Road -
Area 1B Area 1B
Plainsboro, NJ 08536 Plainsboro, NJ 08536
Telecopier: 609-282-2769 Telecopier: 609-282-2769
Attention: Colleen Cunniffee Attention: Colleen Cunniffee
Merrill Lynch Debt c/o Merrill Lynch Asset c/o Merrill Lynch Asset
Strategies Portfolio Management Management
800 Scudders Mill Road - 800 Scudders Mill Road -
Area 1B Area 1B
Plainsboro, NJ 08536 Plainsboro, NJ 08536
Telecopier: 609-282-2769 Telecopier: 609-282-2769
Attention: Colleen Cunniffee Attention: Colleen Cunniffee
Merrill Lynch Prime Rate c/o Merrill Lynch Asset c/o Merrill Lynch Asset
Portfilio Management Management
800 Scudders Mill Road - 800 Scudders Mill Road -
Area 1B Area 1B
Plainsboro, NJ 08536 Plainsboro, NJ 08536
Telecopier: 609-282-2769 Telecopier: 609-282-2769
Attention: Colleen Cunniffee Attention: Colleen Cunniffee
Debt Strategies Fund c/o Merrill Lynch Asset c/o Merrill Lynch Asset
Management Management
800 Scudders Mill Road - 800 Scudders Mill Road -
Area 1B Area 1B
Plainsboro, NJ 08536 Plainsboro, NJ 08536
Telecopier: 609-282-2769 Telecopier: 609-282-2769
Attention: Colleen Cunniffee Attention: Colleen Cunniffee
-6-
<PAGE>
ML Senior Floating Rate c/o Merrill Lynch Asset c/o Merrill Lynch Asset
Management Management
800 Scudders Mill Road - 800 Scudders Mill Road -
Area 1B Area 1B
Plainsboro, NJ 08536 Plainsboro, NJ 08536
Telecopier: 609-282-2769 Telecopier: 609-282-2769
Attention: Colleen Cunniffee Attention: Colleen Cunniffee
Morgan Stanley Dean c/o Dean Witter Intercapital c/o Dean Witter Intercapital
Witter Prime Income Trust 2 World Trade Center - 2 World Trade Center -
72nd Floor 72nd Floor
New York, NY 10048 New York, NY 10048
Telecopier: 212-392-5345 Telecopier: 212-392-5345
Attention: Kevin Egan Attention: Kevin Egan
Deeprock & Company c/o Eaton Vance Management c/o Eaton Vance Management
24 Federal Street - 6th Floor 24 Federal Street - 6th Floor
Boston, MA 02110 Boston, MA 02110
Telecopier: 617-654-9594 Telecopier: 617-654-9594
Attention: Scott Page Attention: Scott Page
Senior Debt Portfolio c/o Eaton Vance Management c/o Eaton Vance Management
24 Federal Street - 6th Floor 24 Federal Street - 6th Floor
Boston, MA 02110 Boston, MA 02110
Telecopier: 617-654-9594 Telecopier: 617-654-9594
Attention: Scott Page Attention: Scott Page
Osprey Investmements c/o Citibank N.A. c/o Citibank N.A.
Portfolio 599 Lexington Ave. - 599 Lexington Ave. -
26th Floor 26th Floor
New York, NY 10043 New York, NY 10043
Telecopier: 212-793-1871 Telecopier: 212-793-1871
Attention: Hans Christenson Attention: Hans Christenson
Orix USA Corporation 1177 Avenue of the Americas, 1177 Avenue of the
10th Floor Americas, 10th Floor
New York, NY 10036 New York, NY 10036
Telcopier: 212-739-1705 Telcopier: 212-739-1705
Attention: Paula Penkal Attention: Paula Penkal
-7-
<PAGE>
PAM Capital Funding LP c/o Highland Capital c/o Highland Capital
Management L.P. Management L.P.
1150 Two Galleria Tower 1150 Two Galleria Tower
13455 Noel Road 13455 Noel Road
Telcopier: 972-233-6143 Telcopier: 972-233-6143
Attention: Davis Deadman Attention: Davis Deadman
</TABLE>
-8-
<PAGE>
AMENDED AND RESTATED PARTNERSHIP SECURITY AGREEMENT
This AMENDED AND RESTATED PARTNERSHIP SECURITY AGREEMENT (as amended,
supplemented, amended and restated or otherwise modified from time to time,
this "Security Agreement"), dated as of September 11, 1998 (amending and
restating the Partnership Security Agreement, dated as of February 13, 1998
(the "Existing Security Agreement")), is made by each of the parties identified
on the signature pages hereto as a "Grantor" (each, individually, a "Grantor",
and collectively, the "Grantors") in favor of FLEET NATIONAL BANK, as
administrative agent (together with its successor(s) thereto, in such capacity,
the "Administrative Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to an Amended and Restated Credit Agreement, dated
as of September 11, 1998 (amending and restating in its entirety that certain
Credit Agreement, dated as of February 13, 1998 (as amended prior to the
Amendment Effective Date, the "Existing Credit Agreement") (as so amended and
restated, and together with all amendments, supplements, restatements and other
modifications, if any, from time to time thereafter made thereto, the "Credit
Agreement"), among Duane Reade, a New York general partnership (the "Borrower"
or the "Partnership"), each of the Grantors, the various financial institutions
as are, or may from time to time become, parties thereto (each, individually, a
"Lender", and collectively, the "Lenders"), DLJ Capital Funding, Inc., as the
Syndication Agent, Fleet National Bank, as the Administrative Agent and Credit
Lyonnais New York Branch, as the Documentation Agent, the Lenders and the
Issuer have extended Commitments to make Credit Extensions to the Borrower;
WHEREAS, as a condition precedent to the making of the Credit
Extensions under the Existing Credit Agreement, each Grantor was required to
execute and deliver the Existing Security Agreement; and
WHEREAS, each Grantor has requested that the Existing Security
Agreement be amended and restated in its entirety to read as hereinafter set
forth;
WHEREAS, it is in the best interests of each Grantor to execute this
Security Agreement inasmuch as such Grantor will derive substantial direct and
indirect benefits from the Credit Extensions made and maintained from time to
time to the Borrower by the Lenders and the Issuer pursuant to the Credit
Agreement;
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the
Lenders and the Issuer to make and maintain Credit Extensions to the Borrower
pursuant to the Credit Agreement, and to induce the Secured Parties to enter
into Rate Protection Agreement(s), each Grantor agrees, for the benefit of each
Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Existing Credit Agreement" is defined in the first recital.
"Existing Security Agreement" is defined in the first recital.
"Grantor" and "Grantors" are defined in the preamble.
"Lender" and "Lenders" are defined in the first recital.
"Partnership" is defined in the first recital.
"Partnership Agreement" means the Borrower Partnership Agreement as
defined in the Credit Agreement.
"Secured Obligations" is defined in Section 2.2.
"Security Agreement" is defined in the preamble.
"U.C.C." means the Uniform Commercial Code, as in effect from time to
time in the State of New York.
-2-
<PAGE>
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in
the Credit Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Security Agreement,
including its preamble and recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. Each Grantor hereby hereby (x)
confirms the assignments, pledges and grants that it previously made to the
Administrative Agent for its benefit and the ratable benefit of each of the
Secured Parties pursuant to the Existing Security Agreement and (y) not in
limitation of such assignments, pledges and grants but as a supplement thereto,
assigns and pledges to the Administrative Agent for its benefit and the ratable
benefit of each of the Secured Parties, and hereby grants to the Administrative
Agent for its benefit and the ratable benefit of each of the Secured Parties, a
security interest in all of the following, whether now or hereafter existing or
acquired by such Grantor (the "Collateral"):
(a) all right, title and interest of such Grantor, whether
now existing or hereafter arising or acquired, in, to and under the
Partnership Agreement, including such Grantor's rights, now existing
or hereafter arising or acquired, to receive from time to time its
share of profits, income, surplus, compensation, return of capital,
distributions and other reimbursements and payments from the
Partnership (including specific properties of the Partnership upon
dissolution and otherwise and all rights and interests as general
partner to operate the Partnership);
(b) all general or limited partnership interests now owned or
hereafter acquired by such Grantor in the Partnership as a result of
exchange offers, direct investments or contributions or otherwise;
(c) such Grantor's accounts, general intangibles and other
rights to payment or reimbursement, now existing or hereafter arising
or acquired, from the Partnership, existing or arising from loans,
advances or other extensions of credit by such Grantor from time to
time to or for the account of the Partnership, or from services
rendered by such Grantor from time to time to or for the account of
the Partnership; and
(d) all products, offspring, rents, issues, profits, returns,
income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in clauses (a), (b) and (c), and, to the extent not
otherwise
-3-
<PAGE>
included, all payments under insurance (whether or not the
Administrative Agent is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral).
SECTION 2.2. Security for Obligations. This Security Agreement secures
the payment of all Obligations of the Borrower now or hereafter existing under
the Credit Agreement, the Notes and each other Loan Document to which the
Borrower is or may become a party, whether for principal, interest, costs,
fees, expenses or otherwise, and all obligations of each Grantor and each other
Obligor now or hereafter existing under this Security Agreement and each other
Loan Document to which such Grantor or such other Obligor is or may become a
party (all such obligations of the Borrower and such Grantor and such other
Obligor being the "Secured Obligations").
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This
Security Agreement shall create a continuing security interest in the
Collateral and shall
(a) remain in full force and effect until payment in full in
cash of all Secured Obligations, the termination of all Letters of
Credit, the termination or expiration of all Rate Protection
Agreements and the termination of all Commitments,
(b) be binding upon each Grantor, its successors, transferees
and assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative
Agent and each other Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Section 11.11 and Article X of
the Credit Agreement. Upon the payment in full in cash of all Secured
Obligations, the termination or expiration of all Letters of Credit, the
termination of all Rate Protection Agreements and the termination of all
Commitments, the security interest granted herein shall terminate and all
rights to the Collateral shall revert to such Grantor. Upon any such
termination, the Administrative Agent will, at such Grantor's sole expense,
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.
SECTION 2.4. Grantors Remain Liable. Anything herein to the contrary
notwithstanding
(a) each Grantor shall remain liable under the Partnership
Agreement and the contracts and agreements included in the Collateral
to the extent set forth therein, and shall perform all of its duties
and obligations under the Partnership Agreement and such
-4-
<PAGE>
contracts and agreements to the same extent as if this Security
Agreement had not been executed,
(b) the exercise by the Administrative Agent of any of its
rights hereunder shall not release any Grantor from any of its duties
or obligations under the Partnership Agreement and any such contracts
or agreements included in the Collateral, and
(c) neither the Administrative Agent nor any other Secured
Party shall have any obligation or liability under the Partnership
Agreement and any such contracts or agreements included in the
Collateral by reason of this Security Agreement, nor shall the
Administrative Agent or any other Secured Party be obligated to
perform any of the obligations or duties of any Grantor thereunder or
to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the
Administrative Agent and the security interests granted to the Administrative
Agent hereunder, and all obligations of each Grantor hereunder, shall be
absolute and unconditional, irrespective of
(a) any lack of validity or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any
Note
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or
any other Person under the provisions of the Credit
Agreement, any Note, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Secured
Obligations;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations or any
other extension, compromise or renewal of any Secured Obligations;
(d) any reduction, limitation, impairment or termination of
any Secured Obligations for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject
to (and each Grantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Secured Obligations or otherwise;
-5-
<PAGE>
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Credit Agreement, any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or
non-perfection of any collateral (including the Collateral), or any
amendment to or waiver or release of or addition to or consent to
departure from any guaranty, for any of the Secured Obligations; or
(g) any other circumstances which might otherwise constitute
a defense available to, or a legal or equitable discharge of, the
Borrower, any other Obligor, any surety or any guarantor.
SECTION 2.6. Postponement of Subrogation, etc. Each Grantor hereby
agrees that it will not exercise any rights which it may acquire by reason of
any payment made hereunder, whether by way of subrogation, reimbursement or
otherwise, until the prior payment in full in cash of all Secured Obligations,
the termination or expiration of all Letters of Credit, the termination of all
Rate Protection Agreements and the termination of all Commitments. Any amount
paid to any Grantor on account of any payment made hereunder prior to the
payment in full in cash of all Secured Obligations shall be held in trust for
the benefit of the Secured Parties and each holder of a Note and shall
immediately be paid to the Administrative Agent for the benefit of the Secured
Parties and each holder of a Note and credited and applied against the Secured
Obligations, whether matured or unmatured, in accordance with the terms of the
Credit Agreement; provided, however, that if
(a) such Grantor has made payment to the Administrative Agent
for the benefit of the Secured Parties and each holder of a Note of
all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full in cash,
all Letters of Credit have been terminated or expired, all Rate
Protection Agreements have been terminated and all Commitments have
been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the requesting
Grantor's request, the Administrative Agent, on behalf of the Secured Parties
and the holders of the Notes, will execute and deliver to such Grantor
appropriate documents (without recourse and without representation or warranty)
necessary to evidence the transfer by subrogation to such Grantor of an
interest in the Secured Obligations resulting from such payment by such
Grantor. In furtherance of the foregoing, for so long as any Secured
Obligations, Commitments or Letters of Credit remain outstanding or any Rate
Protection Agreement remains in full force and effect, each Grantor shall
refrain from taking any action or commencing any proceeding against the
Borrower or any other Obligor (or its successors or assigns, whether in
connection with a bankruptcy proceeding or otherwise) to recover any amounts in
respect of payments made under this Security Agreement to any Secured Party or
any holder of a Note.
-6-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. Each Grantor represents
and warrants to each Secured Party insofar as the representations and
warranties contained herein are applicable to such Grantor and its properties,
as set forth in this Article III.
SECTION 3.2. Ownership, No Liens, etc. Such Grantor owns its
Collateral free and clear of any Lien, security interest, charge or encumbrance
except for the security interest created by this Security Agreement and except
as permitted by the Credit Agreement. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of
the Administrative Agent relating to this Security Agreement or as to which a
duly executed termination statement relating to such financing statement or
other similar instrument has been delivered to the Administrative Agent on the
Closing Date.
SECTION 3.3. Validity, etc. This Security Agreement creates a valid
security interest in the Collateral securing the payment of the Secured
Obligations, and upon the filing of the Uniform Commercial Code financing
statements delivered by each Grantor to the Administrative Agent with respect
to such Collateral, such security interest will be a first priority perfected
security interest. The Partnership Agreement (and all amendments thereto)
constitutes the valid, binding and enforceable obligations of each Grantor a
party thereto, sets forth the entire agreement of the parties thereto with
respect to the subject matter thereof, has not been further amended or modified
and remains in full force and effect.
SECTION 3.4. Partnership Interests, Profits. The character (general
and/or limited partner) of each Grantor's interest in the Partnership and each
Grantor's percentage interest in the Partnership's profits (with profit
interests as a general and as a limited partner separately stated) are as set
forth in Schedule I hereto, as amended, supplemented or otherwise modified from
time to time with the prior written consent of the Administrative Agent.
SECTION 3.5. Certificate. No interest of such Grantor in the
Partnership is represented by a certificate of interest or similar instrument,
except such certificates or instruments, if any, as have been delivered to the
Administrative Agent and are held in its possession (and such Grantor covenants
and agrees that any such certificates or instruments hereafter received by such
Grantor with respect to any of the Collateral will be promptly delivered to the
Administrative Agent, together with all necessary instruments or transfer or
assignment, duly executed in blank).
SECTION 3.6. Interest in Partnership Agreements. Such Grantor had and
has the power and legal capacity to execute and carry out the provisions of the
Partnership Agreement. Such Grantor has substantially performed all of its
obligations to date under the Partnership Agreement and has not received notice
of the failure of any other party thereto to perform substantially its
obligations thereunder.
-7-
<PAGE>
SECTION 3.7. Location, Records, etc. The chief executive office of
such Grantor and the office where such Grantor keeps its records concerning the
Collateral are located at the addresses specified in Schedule II hereto. During
the four months preceding the Closing Date, such Grantor has not been known by
any legal name different from the one set forth on the signature page hereto
(except as listed on the signature page hereto), nor has such Grantor been the
subject of any merger or other corporate reorganization.
SECTION 3.8. Authorization, Approval, etc. Except as have been
obtained or made and are in full force and effect (or otherwise provided for to
the satisfaction of the Agents), no authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required either
(a) for the grant by such Grantor of the security interest
granted hereby or for the execution, delivery and performance of this
Security Agreement by such Grantor, or
(b) for the perfection of or the exercise by the
Administrative Agent of its rights and remedies hereunder.
SECTION 3.9. Compliance with Laws. Such Grantor is in compliance with
the requirements of all applicable laws (including the provisions of the Fair
Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which could reasonably be expected to have a
Material Adverse Effect or which could reasonably be expected to materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. Each Grantor covenants and agrees
that, so long as any portion of the Secured Obligations shall remain unpaid,
any Rate Protection Agreements shall remain in full force and effect, any
Letters of Credit shall be outstanding or any Lender shall have any outstanding
Commitment, such Grantor will, unless the Required Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Article IV.
SECTION 4.2. Covenants from Other Agreements. Such Grantor will take
all actions necessary to cause the Partnership to perform, comply with and be
bound by all of the agreements, covenants and obligations contained in Article
VII of the Credit Agreement and in any other Loan Document applicable to the
Partnership and its properties. Each such agreement, covenant and obligation
contained in such Article or in any other Loan Document and all other terms of
the Credit Agreement and the Loan Documents to which reference is made therein,
together with all related definitions and ancillary provisions, is hereby
incorporated into this
-8-
<PAGE>
Security Agreement by reference as though specifically set forth in this
Section, and each such agreement, covenant and obligation shall, for purposes
hereof, survive the termination of the Credit Agreement and the Loan Documents
(other than this Security Agreement).
SECTION 4.3. Maintenance of Records. Such Grantor will keep, at its
address indicated on Schedule II hereto, all of its records concerning the
Collateral, which records will be of such character as will enable the
Administrative Agent or its designees to determine at any time the status
thereof, or, upon 30 days' prior written notice to the Administrative Agent, at
such other locations in a jurisdiction where all actions necessary to (a)
perfect, preserve and protect any security interest granted or purported to be
granted hereby and (b) enable the Administrative Agent to exercise and enforce
its rights and remedies hereunder, shall have been taken. Such Grantor shall
not change its name except upon 30 days' prior written notice to the
Administrative Agent and shall hold and preserve such records concerning the
Collateral and permit representatives of the Administrative Agent at any time
during normal business hours to inspect and make abstracts from such records.
SECTION 4.4. Amendment of Partnership Agreement. Such Grantor will not
amend, supplement or otherwise modify, or permit, consent or suffer to occur
any amendment, supplement or modification of any terms or provisions contained
in, or applicable to, the Partnership Agreement, if the effect thereof is to
impair, or is in any manner adverse to, the rights or interests of any Secured
Party under the Credit Agreement or any other Loan Document, without the prior
written consent of the Administrative Agent and the Required Lenders.
SECTION 4.5. Withdraw from Partnership. No Grantor will, without the
express written consent of the Administrative Agent and the Lenders, actively
cause itself to withdraw as a general partner or limited partner, as the case
may be, of the Partnership.
SECTION 4.6. Transfers and Other Liens. Such Grantor shall not
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral; or
(b) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to secure
Indebtedness of any Person or entity, except for the security interest
created by this Security Agreement and except as permitted by the
Credit Agreement.
SECTION 4.7. Further Assurances, etc. Such Grantor agrees that, from
time to time at its own expense, such Grantor will promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Administrative Agent may request, in order
to perfect, preserve and protect any security interest granted or purported to
be granted hereby or to enable the Administrative Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, such Grantor will
-9-
<PAGE>
(a) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices (including any assignment of claim form under or pursuant to
the federal assignment of claims statute, 31 U.S.C. ss. 3726, any
successor or amended version thereof or any regulation promulgated
under or pursuant to any version thereof), as may be necessary or
desirable, or as the Administrative Agent may request, in order to
perfect and preserve the security interests and other rights granted
or purported to be granted to the Administrative Agent hereby; and
(b) furnish to the Administrative Agent, from time to time at
the Administrative Agent's request, statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
such Grantor hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all
or any part of the Collateral without the signature of such Grantor where
permitted by law. A carbon, photographic or other reproduction of this Security
Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. Each
Grantor hereby irrevocably appoints the Administrative Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor
and in the name of such Grantor or otherwise, from time to time in the
Administrative Agent's discretion, following the occurrence and continuation of
a Default of the nature set forth in Section 8.1.9 of the Credit Agreement or
an Event of Default, to take any action and to execute any instrument which the
Administrative Agent may deem necessary or advisable to accomplish the purposes
of this Security Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above;
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Administrative Agent with respect to any of
the Collateral; and
-10-
<PAGE>
(d) to perform the affirmative obligations of such Grantor
hereunder (including all obligations of such Grantor pursuant to
Section 4.7).
Such Grantor hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section is irrevocable and coupled with an
interest.
SECTION 5.2. Administrative Agent May Perform. If any Grantor fails to
perform any agreement contained herein, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by such
Grantor pursuant to Section 6.2.
SECTION 5.3. Administrative Agent Has No Duty. In addition to, and not
in limitation of, Section 2.4, the powers conferred on the Administrative Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral, if it takes such action for that purpose as any Grantor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the U.C.C. (whether or not the U.C.C.
applies to the affected Collateral) and also may
(i) require each Grantor to, and such Grantor hereby
agrees that it will, at its expense and upon request of the
Administrative Agent forthwith, assemble all or part of the
Collateral as directed by the Administrative Agent and
make it
-11-
<PAGE>
available to the Administrative Agent at a place to be
designated by the Administrative Agent which is reasonably
convenient to all parties, and
(ii) without notice except as specified below, sell
the Collateral or any part thereof at public or private sale,
at any of the Administrative Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such
other terms as the Administrative Agent may deem commercially
reasonable. Each Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten days' prior
notice to such Grantor of the time and place of any public
sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Administrative
Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made
at the time and place to which it was so adjourned.
(b) All cash proceeds received by the Administrative Agent in
respect of any sale of, collection from, or other realization upon,
all or any part of the Collateral shall be applied by the
Administrative Agent against, all or any part of the Obligations as
follows:
(i) first, to the payment of any amounts payable to
the Administrative Agent pursuant to Section 11.3 of the
Credit Agreement and Section 6.2;
(ii) second, to the equal and ratable payment of
Obligations, in accordance with each Secured Party's
Obligations owing to it under or pursuant to the Credit
Agreement or any other Loan Document, or under or pursuant to
any Hedging Obligation included in the Obligations as to each
Secured Party, applied
(A) first to fees and expense
reimbursements then due to such Secured Party,
(B) then to interest due to such Secured
Party,
(C) then to pay or prepay principal of the
Loans owing to, or to reduce the "credit exposure"
of, such Secured Party under such Hedging
Obligation, as the case may be, and
(D) then to pay the remaining outstanding
Obligations and cash collateralize all Letter of
Credit Outstandings;
(iii) third, without duplication of any amounts paid
pursuant to clause (b)(ii) above, to the Indemnified Parties
to the extent of any amounts owing pursuant to Section 11.4
of the Credit Agreement; and
-12-
<PAGE>
(iv) fourth, to be held as additional collateral
security until the payment in full in cash of all of the
Obligations, the termination or expiration of all Letters of
Credit, the termination of all Rate Protection Agreements and
the termination of all Commitments, after which such
remaining cash proceeds shall be paid over to the applicable
Grantor or to whomsoever may be lawfully entitled to receive
such surplus.
For purposes of this Security Agreement, the "credit exposure" at any
time of any Secured Party with respect to a Hedging Obligation to
which such Secured Party is a party shall be determined at such time
in accordance with the customary methods of calculating credit
exposure under similar arrangements by the counterparty to such
arrangements, taking into account potential interest rate movements
and the respective termination provisions and notional principal
amount and term of such Hedging Obligation.
-13-
<PAGE>
SECTION 6.2. Indemnity and Expenses.
(a) Each Grantor jointly and severally agrees to indemnify
the Administrative Agent from and against any and all claims, losses
and liabilities arising out of or resulting from this Security
Agreement (including enforcement of this Security Agreement), except
claims, losses or liabilities resulting from the Administrative
Agent's gross negligence or wilful misconduct.
(b) Each Grantor will upon demand pay to the Administrative
Agent the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts
and agents, which the Administrative Agent may incur in connection
with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon,
any of the Collateral,
(iii) the exercise or enforcement of any of the
rights of the Administrative Agent or the Secured Parties
hereunder, and
(iv) the failure by any Grantor to perform or
observe any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by any
Grantor herefrom, shall in any event be effective unless the same shall be in
writing and signed by the Administrative Agent (on behalf of the Lenders or the
Required Lenders, as the case may be) and by the Guarantor in the case of an
amendment, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other
communications provided for hereunder to any party hereto shall be in writing
(including telegraphic communication) and mailed or telecopied or delivered to
such party, addressed to such party at its address specified in the Credit
Agreement. All such notices and other communications, when mailed and properly
-14-
<PAGE>
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any such notice or
communication, if transmitted by telecopier, shall be deemed given when
transmitted and electronically confirmed.
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS SECURITY
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
-15-
<PAGE>
IN WITNESS WHEREOF, each Grantor has caused this Security Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
GRANTORS:
DUANE READE INC., a Delaware
corporation
By /s/ William J. Tennant
------------------------------
Name: William J. Tennant
Title: Senior Vice President
and Chief Financial
Officer
DRI I INC., a Delaware corporation
By /s/ William J. Tennant
------------------------------
Name: William J. Tennant
Title: Senior Vice President
and Chief Financial
Officer
FLEET NATIONAL BANK,
as Administrative Agent
By /s/ Authorized Signatory
------------------------------
Name:
Title:
-16-
<PAGE>
SCHEDULE I to
Partnership Security
Agreement
TYPE OF PERCENTAGE OF
PARTNERSHIP ALL INTERESTS
NAME OF GRANTOR INTEREST PLEDGED PLEDGED
- --------------- ---------------- -------------
Duane Reade Inc. General 99%
DRI I Inc. General 1%
<PAGE>
SCHEDULE II to
Partnership Security
Agreement
Chief Executive Office
----------------------
DUANE READE INC. 440 NINTH AVENUE
NEW YORK, NEW YORK 10001
DRI I INC. 440 NINTH AVENUE
NEW YORK, NEW YORK 10001
<PAGE>
[EXECUTION COPY]
AMENDED AND RESTATED BORROWER SECURITY AGREEMENT
This AMENDED AND RESTATED BORROWER SECURITY AGREEMENT (as amended,
supplemented, amended and restated or otherwise modified from time to
time, this "Security Agreement"), dated as of September 11, 1998 (amending and
restating the Borrower Security Agreement, dated as of February 13, 1998 (the
"Existing Security Agreement")), is made by DUANE READE, a New York general
partnership (the "Grantor"), in favor of FLEET NATIONAL BANK, as administrative
agent (together with its successor(s) thereto, in such capacity the
"Administrative Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to an Amended and Restated Credit Agreement, dated
as of September 11, 1998 (amending and restating in its entirety that certain
Credit Agreement, dated as of February 13, 1998 (as amended prior to the
Amendment Effective Date, the "Existing Credit Agreement") (as so amended and
restated, and together with all amendments, supplements, restatements and other
modifications, if any, from time to time thereafter made thereto, the "Credit
Agreement"), among the Grantor, each of the Parent Guarantors named therein,
the various financial institutions as are, or may from time to time become,
parties thereto (each individually a "Lender" and collectively the "Lenders"),
DLJ Capital Funding, Inc., as the Syndication Agent, Fleet National Bank, as
the Administrative Agent and Credit Lyonnais New York Branch, as the
Documentation Agent, the Lenders and the Issuer have extended Commitments to
make Credit Extensions to the Grantor;
WHEREAS, as a condition precedent to the making of the Credit
Extensions under the Existing Credit Agreement, the Grantor was required to
execute and deliver the Existing Security Agreement; and
WHEREAS, the Grantor has requested that the Existing Security
Agreement be amended and restated in its entirety to read as hereinafter set
forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the
Lenders and the Issuer to make and maintain Credit Extensions to the Grantor
pursuant to the Credit Agreement and to induce the Secured Parties to enter
into Rate Protection Agreement(s), the Grantor agrees, for the benefit of each
Secured Party, as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Collateral" is defined in Section 2.1.
"Collateral Account" is defined in Section 4.3(b).
"Computer Hardware and Software Collateral" means:
(a) all computer and other electronic data processing
hardware, integrated computer systems, central processing units,
memory units, display terminals, printers, features, computer
elements, card readers, tape drives, hard and soft disk drives,
cables, electrical supply hardware, generators, power equalizers,
accessories and all peripheral devices and other related computer
hardware;
(b) all software programs (including both source code, object
code and all related applications and data files), whether now owned,
licensed or leased or hereafter acquired by the Grantor, designed for
use on the computers and electronic data processing hardware described
in clause (a) above;
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to such hardware,
software and firmware described in the preceding clauses (a) through
(c); and
(e) all rights with respect to all of the foregoing,
including any and all copyrights, licenses, options, warranties,
service contracts, program services, test rights, maintenance rights,
support rights, improvement rights, renewal rights and
indemnifications and any substitutions, replacements, additions or
model conversions of any of the foregoing.
"Copyright Collateral" means all copyrights (including all copyrights
for semiconductor chip product mask works) of the Grantor, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout
the world including all of the Grantor's right, title and interest in and to
all copyrights registered in the United States Copyright Office or anywhere
else in the world and also including the copyrights referred to in Item A of
Schedule IV
-2-
<PAGE>
attached hereto, and all applications for registration thereof, whether pending
or in preparation, all copyright licenses, including each copyright license
referred to in Item B of Schedule IV attached hereto, the right to sue for
past, present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and
all proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.
"Credit Agreement" is defined in the first recital.
"Equipment" is defined in clause (a) of Section 2.1.
"Existing Credit Agreement" is defined in the first recital.
"Existing Security Agreement" is defined in the preamble.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1
"Lender" and "Lenders" are defined in the first recital.
"Patent Collateral" means:
(a) all letters patent and applications for letters patent
throughout the world, including all patent applications in preparation
for filing anywhere in the world and including each patent and patent
application referred to in Item A of Schedule II attached hereto;
(b) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any
of the items described in clause (a);
(c) all patent licenses, including each patent license
referred to in Item B of Schedule II attached hereto; and
(d) all proceeds of, and rights associated with, the
foregoing (including license royalties and proceeds of infringement
suits), the right to sue third parties for past, present or future
infringements of any patent or patent application, including any
patent or patent application referred to in Item A of Schedule II
attached hereto, and for breach or
-3-
<PAGE>
enforcement of any patent license, including any patent license
referred to in Item B of Schedule II attached hereto, and all
rights corresponding thereto throughout the world.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos, other
source of business identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general intangibles of
a like nature (all of the foregoing items in this clause (a) being
collectively called a "Trademark"), now existing anywhere in the world
or hereafter adopted or acquired, whether currently in use or not, all
registrations and recordings thereof and all applications in
connection therewith, whether pending or in preparation for filing,
including registrations, recordings and applications in the United
States Patent and Trademark Office or in any office or agency of the
United States of America or any State thereof or any foreign country,
including those referred to in Item A of Schedule III attached hereto;
(b) all Trademark licenses, including each Trademark license
referred to in Item B of Schedule III attached hereto;
(c) all reissues, extensions or renewals of any of the items
described in clauses (a) and (b);
(d) all of the goodwill of the business connected with the
use of, and symbolized by the items described in, clauses (a) and (b);
and
(e) all proceeds of, and rights associated with, the
foregoing, including any claim by the Grantor against third
parties for past, present or future infringement or dilution of
any Trademark, Trademark registration or Trademark license,
including any Trademark, Trademark registration or Trademark
license referred to in Item A and Item B of Schedule III attached
hereto, or for any injury to the goodwill associated with the use
of any such Trademark or for breach or enforcement of any
Trademark license.
"Trade Secrets Collateral" means all common law and statutory trade
secrets and all other confidential or proprietary or useful information and all
know-how obtained by or used in or contemplated at any time for use in the
business of the Grantor (all of the foregoing being
-4-
<PAGE>
collectively called a "Trade Secret"), whether or not such Trade Secret has
been reduced to a writing or other tangible form, including all documents and
things embodying, incorporating or referring in any way to such Trade Secret,
all Trade Secret licenses, including each Trade Secret license referred to in
Schedule V attached hereto, and including the right to sue for and to enjoin
and to collect damages for the actual or threatened misappropriation of any
Trade Secret and for the breach or enforcement of any such Trade Secret
license.
"U.C.C." means the Uniform Commercial Code, as in effect from time to
time in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in
the Credit Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Security Agreement,
including its preamble and recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. The Grantor hereby (x) confirms the
assignments, pledges and grants that it previously made to the Administrative
Agent for its benefit and the ratable benefit of each of the Secured Parties
pursuant to the Existing Security Agreement and (y) not in limitation of such
assignments, pledges and grants but as a supplement thereto, assigns and
pledges to the Administrative Agent for its benefit and the ratable benefit of
each of the Secured Parties, and hereby grants to the Administrative Agent for
its benefit and the ratable benefit of each of the Secured Parties, a security
interest in all of the following, whether now or hereafter existing or acquired
by the Grantor (the "Collateral"):
(a) all equipment in all of its forms of the Grantor,
wherever located, including all parts thereof and all accessions,
additions, attachments, improvements, substitutions and
replacements thereto and therefor and all accessories related thereto
(any and all of the foregoing being the "Equipment");
(b) all inventory in all of its forms of the Grantor,
wherever located, including
(i) all raw materials and work in process therefor,
finished goods thereof, and materials used or consumed in the
manufacture or production thereof,
-5-
<PAGE>
(ii) all goods in which the Grantor has an interest
in mass or a joint or other interest or right of any kind
(including goods in which the Grantor has an interest or
right as consignee), and
(iii) all goods which are returned to or repossessed
by the Grantor,
and all accessions thereto, products thereof and documents therefor
(any and all such inventory, materials, goods, accessions, products
and documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (including tax
refunds) of the Grantor, whether or not arising out of or in
connection with the sale or lease of goods or the rendering of
services, and all rights of the Grantor now or hereafter existing in
and to all security agreements, guaranties, leases and other contracts
securing or otherwise relating to any such accounts, contracts,
contract rights, chattel paper, documents, instruments, and general
intangibles (any and all such accounts, contracts, contract rights,
chattel paper, documents, instruments, and general intangibles being
the "Receivables" (provided, however, that Receivables shall not
include Prescription Receivables sold to Pharmacy Fund pursuant to the
Rapid Remit Program), and any and all such security agreements,
guaranties, leases and other contracts being the "Related Contracts")
(provided, however, that Related Contracts shall not include the Rapid
Remit Program Documents);
(d) all Intellectual Property Collateral of the Grantor;
(e) all books, records, writings, data bases, information and
other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing in this Section 2.1;
(f) all of the Grantor's other property and rights of every
kind and description and interests therein; and
(g) all products, offspring, rents, issues, profits, returns,
income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in clauses (a), (b), (c), (d), (e) and (f), proceeds
deposited from time to time in the Collateral Account and in any lock
boxes of the Grantor, and, to the extent not otherwise included, all
payments under insurance (whether or not the Administrative Agent is
the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would
constitute a violation of a valid and enforceable restriction in favor of
-6-
<PAGE>
a third party on such grant, unless and until any required consents shall have
been obtained. The Grantor agrees to use its commercially reasonable best
efforts to obtain any such required consent.
SECTION 2.2. Security for Obligations. This Security Agreement secures
the payment of all Obligations of the Grantor now or hereafter existing under
the Credit Agreement, the Notes and each other Loan Document to which the
Grantor is or may become a party, whether for principal, interest, costs, fees,
expenses or otherwise.
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This
Security Agreement shall create a continuing security interest in the
Collateral and shall
(a) remain in full force and effect until payment in full in
cash of all Obligations, the termination or expiration of all Letters
of Credit, the termination of all Rate Protection Agreements and the
termination of all Commitments,
(b) be binding upon the Grantor, its successors, transferees
and assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative
Agent and each other Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Section 11.11 and Article X of
the Credit Agreement. Upon the payment in full in cash of all Obligations, the
termination or expiration of all Letters of Credit, the termination of all Rate
Protection Agreements and the termination of all Commitments, the security
interest granted herein shall terminate and all rights to the Collateral shall
revert to the Grantor. Upon any such termination, the Administrative Agent
will, at the Grantor's sole expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such termination.
Upon any sale or other transfer of Collateral permitted by the terms of Section
7.2.9 of the Credit Agreement, the security interest created hereunder in such
Collateral (but not in the proceeds thereof) shall be deemed to be
automatically released and the Administrative Agent will, at the Grantor's sole
expense, execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such release.
SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein,
and shall perform all of its duties and
-7-
<PAGE>
obligations under such contracts and agreements to the same extent as
if this Security Agreement had not been executed,
(b) the exercise by the Administrative Agent of any of its
rights hereunder shall not release the Grantor from any of its duties
or obligations under any such contracts or agreements included in the
Collateral, and
(c) neither the Administrative Agent nor any other Secured
Party shall have any obligation or liability under any such contracts
or agreements included in the Collateral by reason of this Security
Agreement, nor shall the Administrative Agent or any other Secured
Party be obligated to perform any of the obligations or duties of the
Grantor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents
and warrants to each Secured Party as set forth in this Article III.
SECTION 3.2. Location of Collateral, etc. All of the Equipment,
Inventory and lock boxes of the Grantor are located at the places specified in
Item A, Item B and Item C, respectively, of Schedule I hereto. None of the
Equipment and Inventory has, within the four months preceding the Closing Date
(if then owned by the Grantor), been located at any place other than the places
specified in Item A and Item B, respectively, of Schedule I hereto except as
set forth in a footnote thereto. The place(s) of business and chief executive
office of the Grantor and the office(s) where the Grantor keeps its records
concerning the Receivables, and all originals of all chattel paper which
evidence Receivables, are located at the address set forth in Item D of
Schedule I hereto. The Grantor has no trade names other than those set forth in
Item E of Schedule I hereto. During the four months preceding the Closing Date,
the Grantor has not been known by any legal name different from the one set
forth on the signature page hereto, nor has the Grantor been the subject of any
merger or other corporate reorganization, except as set forth in Item F of
Schedule I hereto. If the Collateral includes any Inventory located in the
State of California, the Grantor is not a "retail merchant" within the meaning
of Section 9102 of the Uniform Commercial Code - Secured Transactions of the
State of California. All Receivables evidenced by a promissory note or other
instrument, negotiable document or chattel paper have been duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to the Administrative Agent and delivered and
pledged to the Administrative Agent pursuant to Section 4.8. The Grantor is not
a party to any Federal, state or local government contract except as set forth
in Item G of Schedule I hereto.
-8-
<PAGE>
SECTION 3.3. Ownership, No Liens, etc. The Grantor owns its Collateral
free and clear of any Lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement and except as
permitted by the Credit Agreement. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of
the Administrative Agent relating to this Security Agreement or as have been
filed in connection with Liens permitted pursuant to Section 7.2.3 of the
Credit Agreement or as to which a duly executed termination statement relating
to such financing statement or other instrument has been delivered to the
Administrative Agent on the Closing Date.
SECTION 3.4. Possession and Control. The Grantor has exclusive
possession and control of its Equipment and Inventory.
SECTION 3.5. Negotiable Documents, Instruments and Chattel Paper. The
Grantor has, contemporaneously herewith, delivered to the Administrative Agent
possession of all originals of all negotiable documents, instruments and
chattel paper currently owned or held by the Grantor (duly endorsed in blank,
if requested by the Administrative Agent).
SECTION 3.6. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral the loss, impairment or infringement of which
might have a Material Adverse Effect:
(a) such Intellectual Property Collateral is subsisting and
has not been adjudged invalid or unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and
enforceable;
(c) the Grantor has made all necessary filings and
recordations to protect its interest in such Intellectual Property
Collateral, including recordations of all of its interests in the
Patent Collateral and Trademark Collateral in the United States Patent
and Trademark Office and in corresponding offices in countries in
which the failure to so file and/or record could reasonably be
expected to have a Material Adverse Effect and its claims to the
Copyright Collateral in the United States Copyright Office and in
corresponding offices in countries in which the failure to so file
and/or record could reasonably be expected to have a Material Adverse
Effect;
(d) the Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to such Intellectual
Property Collateral and no claim has been made that the use of such
Intellectual Property Collateral does or may violate the asserted
rights of any third party; and
(e) the Grantor has performed and will continue to perform
all acts and has paid and will continue to pay all required fees and
taxes to maintain each and every such item
-9-
<PAGE>
of Intellectual Property Collateral in full force and effect
throughout the world, as applicable.
The Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of the Grantor's
business.
SECTION 3.7. Validity, etc. This Security Agreement creates a valid
first priority security interest in the Collateral securing the payment of the
Obligations, and
(a) in the case of Collateral comprised of certificated
securities or instruments, upon the delivery of such Collateral to the
Administrative Agent, such security interest will be a first priority
perfected security interest;
(b) in the case of Collateral comprised of uncertificated
securities with respect to which a security interest therein may not
be perfected under applicable law by the filing of a Uniform
Commercial Code financing statement, upon a "transfer" (as such term
is used in Section 8-313 of the U.C.C.) of such Collateral to the
Administrative Agent, such security interest will be a first priority
perfected security interest; and
(c) in the case of all other Collateral, upon the filing of
the Uniform Commercial Code financing statements delivered by the
Grantor to the Administrative Agent with respect to such Collateral,
such security interest will be a first priority perfected security
interest.
The Grantor has filed all Uniform Commercial Code financing statements referred
to above in the appropriate offices therefor (or has provided the
Administrative Agent with copies thereof suitable for filing in such offices),
and has taken all of the other actions referred to above necessary to create
perfected, first-priority security interests in the applicable Collateral.
SECTION 3.8. Authorization, Approval, etc. Except as have been
obtained or made and are in full force and effect (or otherwise provided for to
the satisfaction of the Agents), no authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required either
(a) for the grant by the Grantor of the security interest
granted hereby or for the execution, delivery and performance of this
Security Agreement by the Grantor, or
(b) for the perfection of or the exercise by the
Administrative Agent of its rights and remedies hereunder.
-10-
<PAGE>
SECTION 3.9. Compliance with Laws. The Grantor is in compliance with
the requirements of all applicable laws (including the provisions of the Fair
Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which could reasonably be expected to have a
Material Adverse Effect or which could reasonably be expected to materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and agrees that,
so long as any portion of the Obligations shall remain unpaid, any Letters of
Credit shall be outstanding, any Rate Protection Agreements shall remain in
full force and effect, or any Lender shall have any outstanding Commitment, the
Grantor will, unless the Required Lenders shall otherwise consent in writing,
perform, comply with and be bound by the obligations set forth in this Article
IV.
SECTION 4.2. As to Equipment and Inventory. The Grantor hereby
agrees that it shall
(a) keep all the Equipment and Inventory (other than
Inventory sold in the ordinary course of business) at the places
therefor specified in Section 3.2 or, upon 30 days' prior written
notice to the Administrative Agent, at such other places in a
jurisdiction where all representations and warranties set forth in
Article III (including Section 3.7) shall be true and correct, and all
action required pursuant to the first sentence of Section 4.8 shall
have been taken with respect to the Equipment and Inventory;
(b) cause the Equipment to be maintained and preserved as
required by Section 7.1.3 of the Credit Agreement; and promptly
furnish to the Administrative Agent a statement respecting any loss or
damage to any of such material Equipment; and
(c) pay promptly when due all property and other material
taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies)
against, the Equipment and Inventory, except to the extent the
validity thereof is being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
have been set aside.
SECTION 4.3. As to Receivables.
(a) The Grantor shall keep its place(s) of business and chief
executive office and the office(s) where it keeps its records
concerning the Receivables, and all originals of all chattel paper
which evidences Receivables, located at the address(es) set forth in
Item D
-11-
<PAGE>
of Schedule I hereto, or, upon 30 days' prior written notice to the
Administrative Agent, at such other locations in a jurisdiction
where all actions required by the first sentence of Section 4.8 shall
have been taken with respect to the Receivables; not change its name
except upon 30 days' prior written notice to the Administrative Agent;
hold and preserve such records and chattel paper; and permit
representatives of the Administrative Agent at any time during normal
business hours to inspect and make abstracts from such records and
chattel paper. In addition, the Grantor shall give the Administrative
Agent a supplement to Schedule I hereto on each date a Compliance
Certificate is required to be delivered to the Administrative Agent
under the Credit Agreement, which shall set forth any changes to the
information set forth in Section 3.2.
(b) Upon written notice by the Administrative Agent to the
Grantor pursuant to this Section 4.3(b), all proceeds of Collateral
received by the Grantor shall be delivered in kind to the
Administrative Agent for deposit to a deposit account (the "Collateral
Account") of the Grantor maintained with the Administrative Agent, and
the Grantor shall not commingle any such proceeds, and shall hold
separate and apart from all other property, all such proceeds in
express trust for the benefit of the Administrative Agent until
delivery thereof is made to the Administrative Agent. The
Administrative Agent will not give the notice referred to in the
preceding sentence unless there shall have occurred and be continuing
a Default of the nature set forth in Section 8.1.9 of the Credit
Agreement or an Event of Default.
(c) The Administrative Agent shall have the right to apply
any amount in the Collateral Account to the payment of any Obligations
which are due and payable or payable upon demand, or to the payment of
any Obligations at any time that an Event of Default shall exist.
SECTION 4.4. As to Collateral.
(a) Until the occurrence and continuance of a Default of
the nature set forth in Section 8.1.9 of the Credit Agreement or
an Event of Default, and such time as the Administrative Agent
shall notify the Grantor of the revocation of such power and
authority the Grantor (i) may in the ordinary course of its
business (except as otherwise permitted under the Credit
Agreement), at its own expense, sell, lease or furnish under the
contracts of service any of the Inventory normally held by the
Grantor for such purpose, and use and consume, in the ordinary
course of its business (except as otherwise permitted under the
Credit Agreement), any raw materials, work in process or
materials normally held by the Grantor for such purpose, (ii)
will, at its own expense, endeavor to collect, as and when due,
all amounts due with respect to any of the Collateral, including
the taking of such action with respect to such collection as the
Administrative Agent may reasonably request following the
occurrence of a Default of the nature set forth in Section 8.1.9
of the Credit Agreement or an Event of Default or, in the absence
of such request, as the Grantor may deem advisable, and (iii) may
grant, in the ordinary course of
-12-
<PAGE>
business (except as otherwise permitted under the Credit Agreement),
to any party obligated on any of the Collateral, any rebate, refund
or allowance to which such party may be lawfully entitled, and
may accept, in connection therewith, the return of goods, the
sale or lease of which shall have given rise to such Collateral.
The Administrative Agent, however, may, at any time following a
Default of the nature set forth in Section 8.1.9 of the Credit
Agreement or an Event of Default, whether before or after any
revocation of such power and authority or the maturity of any of
the Obligations, notify any parties obligated on any of the
Collateral to make payment to the Administrative Agent of any
amounts due or to become due thereunder and enforce collection of
any of the Collateral by suit or otherwise and surrender,
release, or exchange all or any part thereof, or compromise or
extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder or evidenced
thereby. Upon request of the Administrative Agent following a
Default of the nature set forth in Section 8.1.9 of the Credit
Agreement or an Event of Default, the Grantor will, at its own
expense, notify any parties obligated on any of the Collateral to
make payment to the Administrative Agent of any amounts due or to
become due thereunder.
(b) Following a Default of the nature set forth in Section
8.1.9 of the Credit Agreement or an Event of Default, the
Administrative Agent is authorized to endorse, in the name of the
Grantor, any item, howsoever received by the Administrative Agent,
representing any payment on or other proceeds of any of the
Collateral.
SECTION 4.5. As to Intellectual Property Collateral. The Grantor
covenants and agrees to comply with the following provisions as such provisions
relate to any Intellectual Property Collateral of the Grantor:
(a) the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Administrative Agent)
that any of the Patent Collateral is of negligible economic value to
the Grantor, or (ii) have a valid business purpose to do otherwise, do
any act, or omit to do any act, whereby any of the Patent Collateral
may lapse or become abandoned or dedicated to the public or
unenforceable.
(b) the Grantor shall not, and the Grantor shall not permit
any of its licensees to, unless the Grantor shall either (i)
reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Administrative Agent)
that any of the Trademark Collateral is of negligible economic value
to the Grantor, or (ii) have a valid business purpose to do otherwise,
(i) fail to continue to use any of the Trademark
Collateral in order to maintain all of the Trademark
Collateral in full force free from any claim of abandonment
for non-use,
-13-
<PAGE>
(ii) fail to maintain as in the past the quality of
products and services offered under all of the Trademark
Collateral,
(iii) fail to employ all of the Trademark Collateral
registered with any Federal or state or foreign authority
with an appropriate notice of such registration,
(iv) adopt or use any other Trademark which is
confusingly similar or a colorable imitation of any of the
Trademark Collateral,
(v) use any of the Trademark Collateral registered
with any Federal or state or foreign authority except for the
uses for which registration or application for registration
of all of the Trademark Collateral has been made, and
(vi) do or permit any act or knowingly omit to do
any act whereby any of the Trademark Collateral may lapse or
become invalid or unenforceable.
(c) the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Administrative Agent)
that any of the Copyright Collateral or any of the Trade Secrets
Collateral is of negligible economic value to the Grantor, or (ii)
have a valid business purpose to do otherwise, do or permit any act or
knowingly omit to do any act whereby any of the Copyright Collateral
or any of the Trade Secrets Collateral may lapse or become invalid or
unenforceable or placed in the public domain except upon expiration of
the end of an unrenewable term of a registration thereof.
(d) the Grantor shall notify the Administrative Agent
immediately if it knows, or has reason to know, that any application
or registration relating to any material item of the Intellectual
Property Collateral may become abandoned or dedicated to the public or
placed in the public domain or invalid or unenforceable, or of any
adverse determination or development (including the institution of, or
any such determination or development in, any proceeding in the United
States Patent and Trademark Office, the United States Copyright Office
or any foreign counterpart thereof or any court) regarding the
Grantor's ownership of any of the Intellectual Property Collateral,
its right to register the same or to keep and maintain and enforce the
same.
(e) in no event shall the Grantor or any of its agents,
employees, designees or licensees file an application for the
registration of any Intellectual Property Collateral with the United
States Patent and Trademark Office, the United States Copyright Office
or any similar office or agency in any other country or any political
subdivision thereof, unless it promptly informs the Administrative
Agent, and upon request of the Administrative Agent, executes and
delivers any and all agreements, instruments, documents and papers as
the Administrative Agent may reasonably request to evidence
-14-
<PAGE>
the Administrative Agent's security interest in such Intellectual
Property Collateral and the goodwill and general intangibles of the
Grantor relating thereto or represented thereby.
(f) the Grantor shall take all necessary steps, including in
any proceeding before the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in
any other country or any political subdivision thereof, to maintain
and pursue any application (and to obtain the relevant registration)
filed with respect to, and to maintain any registration of, the
Intellectual Property Collateral, including the filing of applications
for renewal, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings and the payment
of fees and taxes (except to the extent that dedication, abandonment
or invalidation is permitted under the foregoing clauses (a), (b) and
(c)).
(g) the Grantor shall, contemporaneously herewith, execute
and deliver to the Administrative Agent a Trademark Security Agreement
in the form of Exhibit B hereto, and shall execute and deliver to the
Administrative Agent any other document required to acknowledge or
register or perfect the Administrative Agent's interest in any part of
the Intellectual Property Collateral.
SECTION 4.6. Insurance. The Grantor will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Inventory) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Credit Agreement and will, upon the request of the
Administrative Agent, furnish a certificate of a reputable insurance broker
setting forth the nature and extent of all insurance maintained by the Grantor
in accordance with this Section.
SECTION 4.7. Transfers and Other Liens. The Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in the
ordinary course of business or as permitted by the Credit Agreement;
or
(b) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to secure
Indebtedness of any Person or entity, except for the security interest
created by this Security Agreement and except as permitted by the
Credit Agreement.
SECTION 4.8. Further Assurances, etc. The Grantor agrees that, from
time to time at its own expense, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Administrative Agent may request, in order
to perfect, preserve and protect any security interest granted or purported to
be granted hereby or to enable the Administrative Agent to exercise and enforce
its rights and
-15-
<PAGE>
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor will
(a) mark conspicuously each document included in the
Inventory, each chattel paper included in the Receivables and each
Related Contract and, at the request of the Administrative Agent, each
of its records pertaining to the Collateral with a legend, in form and
substance satisfactory to the Administrative Agent, indicating that
such document, chattel paper, Related Contract or Collateral is
subject to the security interest granted hereby;
(b) if any Receivable shall be evidenced by a promissory note
or other instrument, negotiable document or chattel paper, deliver and
pledge to the Administrative Agent hereunder such promissory note,
instrument, negotiable document or chattel paper duly endorsed and
accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Administrative Agent;
(c) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices (including any assignment of claim form under or pursuant to
the federal assignment of claims statute, 31 U.S.C. ss. 3726, any
successor or amended version thereof or any regulation promulgated
under or pursuant to any version thereof), as may be necessary or
desirable, or as the Administrative Agent may request, in order to
perfect and preserve the security interests and other rights granted
or purported to be granted to the Administrative Agent hereby; and
(d) furnish to the Administrative Agent, from time to time at
the Administrative Agent's request, statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all
or any part of the Collateral without the signature of the Grantor where
permitted by law. A carbon, photographic or other reproduction of this Security
Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. The
Grantor hereby irrevocably appoints the Administrative Agent the Grantor's
attorney-in-fact, with full authority
-16-
<PAGE>
in the place and stead of the Grantor and in the name of the Grantor or
otherwise, from time to time in the Administrative Agent's discretion,
following the occurrence and continuation of a Default of the nature set forth
in Section 8.1.9 of the Credit Agreement or an Event of Default, to take any
action and to execute any instrument which the Administrative Agent may deem
necessary or advisable to accomplish the purposes of this Security Agreement,
including:
(a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above;
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Administrative Agent with respect to any of
the Collateral; and
(d) to perform the affirmative obligations of the Grantor
hereunder (including all obligations of the Grantor pursuant to
Section 4.8).
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Administrative Agent May Perform. If the Grantor fails to
perform any agreement contained herein, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by the
Grantor pursuant to Section 6.2.
SECTION 5.3. Administrative Agent Has No Duty. In addition to, and not
in limitation of, Section 2.4, the powers conferred on the Administrative Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral, if it takes such action for that purpose as the Grantor
reasonably requests in writing at times other than upon the occurrence and
during the
-17-
<PAGE>
continuance of any Event of Default, but failure of the Administrative Agent to
comply with any such request at any time shall not in itself be deemed a
failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the U.C.C. (whether or not the U.C.C.
applies to the affected Collateral) and also may
(i) require the Grantor to, and the Grantor hereby
agrees that it will, at its expense and upon request of the
Administrative Agent forthwith, assemble all or part of the
Collateral as directed by the Administrative Agent and make
it available to the Administrative Agent at a place to be
designated by the Administrative Agent which is reasonably
convenient to both parties, and
(ii) without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Administrative Agent's
offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Administrative
Agent may deem commercially reasonable. The Grantor agrees
that, to the extent notice of sale shall be required by law,
at least ten days' prior notice to the Grantor of the time
and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable
notification. The Administrative Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale
having been given. The Administrative Agent may adjourn any
public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was
so adjourned.
(b) All cash proceeds received by the Administrative Agent in
respect of any sale of, collection from, or other realization upon,
all or any part of the Collateral shall be applied by the
Administrative Agent against, all or any part of the Obligations as
follows:
(i) first, to the payment of any amounts payable to
the Administrative Agent pursuant to Section 11.3 of the
Credit Agreement and Section 6.2;
-18-
<PAGE>
(ii) second, to the equal and ratable payment of
Obligations, in accordance with each Secured Party's
Obligations owing to it under or pursuant to the Credit
Agreement or any other Loan Document, or under or pursuant to
any Hedging Obligation included in the Obligations as to each
Secured Party, applied
(A) first to fees and expense
reimbursements then due to such Secured Party,
(B) then to interest due to such Secured
Party,
(C) then to pay or prepay principal of the
Loans owing to, or to reduce the "credit exposure"
of, such Secured Party under such Hedging
Obligation, as the case may be, and
(D) then to pay the remaining outstanding
Obligations and cash collateralize all Letter of
Credit Outstandings;
(iii) third, without duplication of any amounts paid
pursuant to clause (b)(ii) above, to the Indemnified Parties
to the extent of any amounts owing pursuant to Section 11.4
of the Credit Agreement; and
(iv) fourth, to be held as additional collateral
security until the payment in full in cash of all of the
Obligations, the termination or expiration of all Letters of
Credit, the termination of all Rate Protection Agreements and
the termination of all Commitments, after which such
remaining cash proceeds shall be paid over to the Grantor or
to whomsoever may be lawfully entitled to receive such
surplus.
For purposes of this Security Agreement, the "credit exposure" at any
time of any Secured Party with respect to a Hedging Obligation to
which such Secured Party is a party shall be determined at such time
in accordance with the customary methods of calculating credit
exposure under similar arrangements by the counterparty to such
arrangements, taking into account potential interest rate movements
and the respective termination provisions and notional principal
amount and term of such Hedging Obligation.
SECTION 6.2. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Administrative Agent
from and against any and all claims, losses and liabilities arising
out of or resulting from this Security Agreement (including
enforcement of this Security Agreement), except claims, losses or
liabilities resulting from the Administrative Agent's gross negligence
or wilful misconduct.
-19-
<PAGE>
(b) The Grantor will upon demand pay to the Administrative
Agent the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts
and agents, which the Administrative Agent may incur in connection
with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon,
any of the Collateral,
(iii) the exercise or enforcement of any of the
rights of the Administrative Agent or the Secured Parties
hereunder, and
(iv) the failure by the Grantor to perform or
observe any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by the
Grantor herefrom, shall in any event be effective unless the same shall be in
writing and signed by the Administrative Agent (on behalf of the Lenders or the
Required Lenders, as the case may be), and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 7.3. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic communication) and mailed or telecopied or delivered to either
party hereto, addressed to such party at the address of such party specified in
the Credit Agreement. All such notices and other communications, when mailed
and properly addressed with postage prepaid or if properly addressed and sent
by pre-paid courier service, shall be deemed given when received; any such
notice or communication, if transmitted by telecopier, shall be deemed given
when transmitted and electronically confirmed.
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
-20-
<PAGE>
SECTION 7.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by
the parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS SECURITY
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
-21-
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
DUANE READE
By Duane Reade Inc., a
general Partner
By /s/ William J. Tennant
---------------------------
Name: William J. Tennant
Title: Senior Vice President
and Chief Financial
Officer
By DRI I Inc., a general partner
By /s/ William J. Tennant
---------------------------
Name: William J. Tennant
Title: Senior Vice President
and Chief Financial
Officer
FLEET NATIONAL BANK,
as Administrative Agent
By /s/ Authorized Signatory
-------------------------------
Name:
Title:
-22-
<PAGE>
SCHEDULE I
to Borrower
Security Agreement
Item A. Location of Equipment
Description Location
----------- --------
1.
2.
3.
Item B. Location of Inventory
Description Location
----------- --------
1.
2.
3.
Item C. Location of Lock Boxes
Contact
Bank Name and Address Account Number Person
--------------------- -------------- ------
1.
2.
3.
Item D. Place(s) of Business and Chief Executive Office
1.
2.
3.
<PAGE>
Item E. Trade Names
1.
2.
3.
Item F. Merger or Other Corporate Reorganization
1.
2.
3.
Item G. Government Contracts
1.
2.
3.
<PAGE>
SCHEDULE II
to Borrower
Security Agreement
Item A. Patents
Issued Patents
--------------
*Country Patent No. Issue Date Inventor(s) Title
- -------- ---------- ---------- ----------- -----
Pending Patent Applications
---------------------------
*Country Serial No. Filing Date Inventor(s) Title
- -------- ---------- ----------- ----------- -----
Patent Applications in Preparation
----------------------------------
Expected
*Country Docket No. Filing Date Inventor(s) Title
- -------- ---------- ----------- ----------- -----
Item B. Patent Licenses
*Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
- ----------- -------- -------- --------- ---------- --------
- --------
* List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
<PAGE>
SCHEDULE III
to Borrower
Security Agreement
Item A. Trademarks
Registered Trademarks
---------------------
*Country Trademark Registration No. Registration Date
- -------- --------- ---------------- -----------------
Pending Trademark Applications
------------------------------
*Country Trademark Serial No. Filing Date
- -------- --------- ---------- -----------
Trademark Applications in Preparation
-------------------------------------
Expected Products/
*Country Trademark Docket No. Filing Date Services
- -------- --------- ---------- ----------- ---------
Item B. Trademark Licenses
*Country or Effective Expiration
Territory Trademark Licensor Licensee Date Date
- ----------- --------- -------- -------- --------- ----------
- --------
* List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
<PAGE>
SCHEDULE IV
to Borrower
Security Agreement
Item A. Copyrights/Mask Works
Registered Copyrights/Mask Works
--------------------------------
*Country Registration No. Registration Date Author(s) Title
- -------- ---------------- ----------------- --------- -----
Copyright/Mask Work Pending Registration Applications
-----------------------------------------------------
*Country Serial No. Filing Date Author(s) Title
- -------- ---------- ----------- --------- -----
Copyright/Mask Work Registration Applications in Preparation
------------------------------------------------------------
Expected
*Country Docket No. Filing Date Author(s) Title
- -------- ---------- ----------- ---------- -----
Item B. Copyright/Mask Work Licenses
*Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
- ----------- -------- -------- ---------- ----------- -------
- --------
* List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
<PAGE>
SCHEDULE V
to Borrower
Security Agreement
Trade Secret or Know-How Licenses
---------------------------------
*Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
- ----------- -------- -------- --------- ----------- -------
- --------
* List items related to the United States first for ease of
recordation. List items related to other countries next, grouped by
country and in alphabetical order by country name.
<PAGE>
EXHIBIT A
to Borrower
Security Agreement
PATENT SECURITY AGREEMENT
This PATENT SECURITY AGREEMENT (this "Agreement"), dated as of
__________ __, ____, is made between DUANE READE, a New York general
partnership (the "Grantor"), and FLEET NATIONAL BANK, as Administrative Agent
(together with its successor(s) thereto in such capacity, the "Administrative
Agent") for each of the Secured Parties;
W I T N E S S E T H :
WHEREAS, pursuant to an Amended and Restated Credit Agreement, dated
as of September 11, 1998 (amending and restating in its entirety that certain
Credit Agreement, dated as of February 13, 1998 (as amended prior to the
Amendment Effective Date, the "Existing Credit Agreement") (as so amended and
restated, and together with all amendments, supplements, restatements and other
modifications, if any, from time to time thereafter made thereto, the "Credit
Agreement"), among the Grantor, each of the Parent Guarantors named therein,
the various financial institutions as are, or may from time to time become,
parties thereto (each individually a "Lender" and collectively the "Lenders"),
DLJ Capital Funding, Inc., as the Syndication Agent, Fleet National Bank, as
the Administrative Agent and Credit Lyonnais New York Branch, as the
Documentation Agent, the Lenders and the Issuer have extended Commitments to
make Credit Extensions to the Grantor;
WHEREAS, in connection with the Credit Agreement, the Grantor has
executed and delivered an Amended and Restated Borrower Security Agreement,
dated as of September 11, 1998 (amending and restating in its entirety that
certain Borrower Security Agreement, dated as of February 13, 1998 (as amended
prior to the Amendment Effective Date, the "Existing Security Agreement") (as
so amended and restated, and together with all amendments, supplements,
restatements and other modifications, if any, from time to time thereafter made
thereto, the "Security Agreement");
WHEREAS, as a condition precedent to the making and maintenance of the
Credit Extensions under the Credit Agreement, the Grantor is required to
execute and deliver this Agreement and to grant to the Administrative Agent a
continuing security interest in all of the Patent Collateral (as defined below)
to secure all Obligations; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement;
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Lenders and the Issuer
to make and maintain Credit Extensions to the Grantor pursuant to the Credit
Agreement, and to induce the Secured Parties to enter into Rate Protection
Agreements, the Grantor agrees, for the benefit of each Secured Party, as
follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided (or incorporated by reference) in the
Security Agreement.
SECTION 2. Grant of Security Interest. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Obligations, the Grantor does hereby mortgage, pledge and
hypothecate to the Administrative Agent, and grant to the Administrative Agent
a security interest in, for its benefit and the benefit of each Secured Party,
all of the following property (the "Patent Collateral"), whether now owned or
hereafter acquired or existing by it:
(a) all letters patent and applications for letters patent
throughout the world, including all patent applications in preparation
for filing anywhere in the world and including each patent and patent
application referred to in Item A of Attachment 1 attached hereto;
(b) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any
of the items described in clause (a);
(c) all patent licenses, including each patent license
referred to in Item B of Attachment 1 attached hereto; and
(d) all proceeds of, and rights associated with, the
foregoing (including license royalties and proceeds of infringement
suits), the right to sue third parties for past, present or future
infringements of any patent or patent application, including any
patent or patent application referred to in Item A of Attachment 1
attached hereto, and for breach or enforcement of any patent license,
including any patent license referred to in Item B of Attachment 1
attached hereto, and all rights corresponding thereto throughout the
world.
SECTION 3. Security Agreement. This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest
of the Administrative Agent in the Patent Collateral with the United States
Patent and Trademark Office and corresponding offices in other countries of the
world. The security interest granted hereby has been granted as a supplement
to, and not in limitation of, the security interest granted to the
Administrative Agent for its benefit and the benefit of each Secured Party
under the Security Agreement. The Security Agreement (and all rights and
remedies of the Administrative Agent and each Secured Party thereunder) shall
remain in full force and effect in accordance with its terms.
-2-
<PAGE>
SECTION 4. Release of Security Interest. Upon payment in full in cash
of all Obligations, the termination or expiry of all Letters of Credit, the
termination of all Rate Protection Agreements and the termination of all
Commitments, the Administrative Agent shall, at the Grantor's expense, execute
and deliver to the Grantor all instruments and other documents as may be
necessary or proper to release the lien on and security interest in the Patent
Collateral which has been granted hereunder.
SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge
and affirm that the rights and remedies of the Administrative Agent with
respect to the security interest in the Patent Collateral granted hereby are
more fully set forth in the Security Agreement, the terms and provisions of
which (including the remedies provided for therein) are incorporated by
reference herein as if fully set forth herein.
SECTION 6. Loan Document, etc. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
DUANE READE
By Duane Reade Inc., a general partner
By
-------------------------------
Name:
Title:
By DRI I Inc., a general partner
By
-------------------------------
Name:
Title:
FLEET NATIONAL BANK, as
Administrative Agent
By
-----------------------------------
Name:
Title:
-4-
<PAGE>
ATTACHMENT 1
to Borrower Patent
Security Agreement
Item A. Patents
Issued Patents
--------------
*Country Patent No. Issue Date Inventor(s) Title
- -------- ---------- ---------- ----------- -----
Pending Patent Applications
---------------------------
*Country Serial No. Filing Date Inventor(s) Title
- -------- ---------- ----------- ----------- -----
Patent Applications in Preparation
----------------------------------
Expected
*Country Docket No. Filing Date Inventor(s) Title
- -------- ---------- ----------- ----------- -----
Item B. Patent Licenses
*Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
- ----------- -------- -------- --------- ---------- -------
<PAGE>
EXHIBIT B
to Borrower
Security Agreement
TRADEMARK SECURITY AGREEMENT
This TRADEMARK SECURITY AGREEMENT (as amended, supplemented, amended
and restated or otherwise modified from time to time, this "Agreement"), dated
as of September 11, 1998 (amending and restating the Trademark Security
Agreement, dated as of February 13, 1998 (the "Existing Agreement")), is made
between DUANE READE, a New York general partnership (the "Grantor"), and FLEET
NATIONAL BANK, as Administrative Agent (together with its successor(s) thereto
in such capacity, the "Administrative Agent") for each of the Secured Parties;
W I T N E S S E T H :
WHEREAS, pursuant to an Amended and Restated Credit Agreement, dated
as of September 11, 1998 (amending and restating in its entirety that certain
Credit Agreement, dated as of February 13, 1998 (as amended prior to the
Amendment Effective Date, the "Existing Credit Agreement") (as so amended and
restated, and together with all amendments, supplements, restatements and other
modifications, if any, from time to time thereafter made thereto, the "Credit
Agreement"), among the Grantor, each of the Parent Guarantors named therein,
the various financial institutions as are, or may from time to time become,
parties thereto (each individually a "Lender" and collectively the "Lenders"),
DLJ Capital Funding, Inc., as the Syndication Agent, Fleet National Bank, as
the Administrative Agent and Credit Lyonnais New York Branch, as the
Documentation Agent, the Lenders and the Issuer have extended Commitments to
make Credit Extensions to the Grantor;
WHEREAS, in connection with the Credit Agreement, the Grantor has
executed and delivered an Amended and Restated Borrower Security Agreement,
dated as of September 11, 1998 (amending and restating in its entirety that
certain Borrower Security Agreement, dated as of February 13, 1998 (as amended
prior to the Amendment Effective Date, the "Existing Security Agreement") (as
so amended and restated, and together with all amendments, supplements,
restatements and other modifications, if any, from time to time thereafter made
thereto, the "Security Agreement");
WHEREAS, as a condition precedent to the making of the Credit
Extensions under the Existing Credit Agreement, the Grantor was required to
execute and deliver this Agreement and to grant to the Administrative Agent a
continuing security interest in all of the Trademark Collateral (as defined
below) to secure all Obligations; and
<PAGE>
WHEREAS, the Grantor has requested that the Existing Agreement be
amended and restated in its entirety to read as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Lenders and the Issuer
to make and maintain Credit Extensions to the Grantor pursuant to the Credit
Agreement, and to induce the Secured Parties to enter into Rate Protection
Agreements, the Grantor agrees, for the benefit of each Secured Party, as
follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided (or incorporated by reference) in the
Security Agreement.
SECTION 2. Grant of Security Interest. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Obligations, the Grantor does hereby (x) confirm the
mortgage, pledge and grant that it previously made to the Administrative Agent
for its benefit and the ratable benefit of each of the Secured Parties pursuant
to the Existing Agreement and (y) not in limitation of such assignments,
pledges and grants but as a supplement thereto, assigns and pledges to the
Administrative Agent for its benefit and the ratable benefit of each of the
Secured Parties, and hereby grants to the Administrative Agent for its benefit
and the ratable benefit of each of the Secured Parties, a security interest in
all of the following property (the "Trademark Collateral"), whether now owned
or hereafter acquired or existing by it:
(a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos, other
source of business identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general intangibles of
a like nature (all of the foregoing items in this clause (a) being
collectively called a "Trademark"), now existing anywhere in the world
or hereafter adopted or acquired, whether currently in use or not, all
registrations and recordings thereof and all applications in
connection therewith, whether pending or in preparation for filing,
including registrations, recordings and applications in the United
States Patent and Trademark Office or in any office or agency of the
United States of America or any State thereof or any foreign country,
including those referred to in Item A of Attachment 1 attached hereto;
(b) all Trademark licenses, including each Trademark license
referred to in Item B of Attachment 1 attached hereto;
(c) all reissues, extensions or renewals of any of the items
described in clauses (a) and (b);
-2-
<PAGE>
(d) all of the goodwill of the business connected with the
use of, and symbolized by the items described in, clauses (a) and (b);
and
(e) all proceeds of, and rights associated with, the
foregoing, including any claim by the Grantor against third parties
for past, present or future infringement or dilution of any Trademark,
Trademark registration or Trademark license, including any Trademark,
Trademark registration or Trademark license referred to in Item A and
Item B of Attachment 1 attached hereto, or for any injury to the
goodwill associated with the use of any such Trademark or for breach
or enforcement of any Trademark license.
SECTION 3. Security Agreement. This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest
of the Administrative Agent in the Trademark Collateral with the United States
Patent and Trademark Office and corresponding offices in other countries of the
world. The security interest granted hereby has been granted as a supplement
to, and not in limitation of, the security interest granted to the
Administrative Agent for its benefit and the benefit of each Secured Party
under the Security Agreement. The Security Agreement (and all rights and
remedies of the Administrative Agent and each Secured Party thereunder) shall
remain in full force and effect in accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full in cash
of all Obligations, the termination or expiry of all Letters of Credit, the
termination of all Rate Protection Agreements and the termination of all
Commitments, the Administrative Agent shall, at the Grantor's expense, execute
and deliver to the Grantor all instruments and other documents as may be
necessary or proper to release the lien on and security interest in the
Trademark Collateral which has been granted hereunder.
SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge
and affirm that the rights and remedies of the Administrative Agent with
respect to the security interest in the Trademark Collateral granted hereby are
more fully set forth in the Security Agreement, the terms and provisions of
which (including the remedies provided for therein) are incorporated by
reference herein as if fully set forth herein.
SECTION 6. Loan Document, etc. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
DUANE READE
By Duane Reade Inc., a general partner
By
-------------------------------
Name:
Title:
By DRI I Inc., a general partner
By
-------------------------------
Name:
Title:
FLEET NATIONAL BANK,
as Administrative Agent
By
------------------------------------
Name:
Title:
-4-
<PAGE>
ATTACHMENT 1
to Borrower Trademark
Security Agreement
Item A. Trademarks
Registered Trademarks
---------------------
*Country Trademark Registration No. Registration Date
- -------- --------- ---------------- -----------------
Pending Trademark Applications
------------------------------
*Country Trademark Serial No. Filing Date
- -------- --------- ---------- -----------
Trademark Applications in Preparation
-------------------------------------
Expected Products/
*Country Trademark Docket No. Filing Date Services
- -------- --------- ---------- ----------- ---------
- --------
* List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
<PAGE>
Item B. Trademark Licenses
*Country or Effective Expiration
Territory Trademark Licensor Licensee Date Date
- ----------- --------- -------- -------- --------- -----------
<PAGE>
EXHIBIT C
to Borrower
Security Agreement
COPYRIGHT SECURITY AGREEMENT
This COPYRIGHT SECURITY AGREEMENT (this "Agreement"), dated as of
__________ __, ____, is made between DUANE READE, a New York general
partnership (the "Grantor"), and FLEET NATIONAL BANK, as Administrative Agent
(together with its successor(s) thereto in such capacity, the "Administrative
Agent") for each of the Secured Parties;
W I T N E S S E T H :
WHEREAS, pursuant to an Amended and Restated Credit Agreement, dated
as of September 11, 1998 (amending and restating in its entirety that certain
Credit Agreement, dated as of February 13, 1998 (as amended prior to the
Amendment Effective Date, the "Existing Credit Agreement") (as so amended and
restated, and together with all amendments, supplements, restatements and other
modifications, if any, from time to time thereafter made thereto, the "Credit
Agreement"), among the Grantor, each of the Parent Guarantors named therein,
the various financial institutions as are, or may from time to time become,
parties thereto (each individually a "Lender" and collectively the "Lenders"),
DLJ Capital Funding, Inc., as the Syndication Agent, Fleet National Bank, as
the Administrative Agent and Credit Lyonnais New York Branch, as the
Documentation Agent, the Lenders and the Issuer have extended Commitments to
make Credit Extensions to the Grantor;
WHEREAS, in connection with the Credit Agreement, the Grantor has
executed and delivered an Amended and Restated Borrower Security Agreement,
dated as of September 11, 1998 (amending and restating in its entirety that
certain Borrower Security Agreement, dated as of February 13, 1998 (as amended
prior to the Amendment Effective Date, the "Existing Security Agreement") (as
so amended and restated, and together with all amendments, supplements,
restatements and other modifications, if any, from time to time thereafter made
thereto, the "Security Agreement");
WHEREAS, as a condition precedent to the making and maintenance of the
Credit Extensions under the Credit Agreement, the Grantor is required to
execute and deliver this Agreement and to grant to the Administrative Agent a
continuing security interest in all of the Copyright Collateral (as defined
below) to secure all Obligations; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement;
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Lenders and the Issuer
to make and maintain Credit Extensions to the Grantor pursuant to the Credit
Agreement, and to induce the Secured Parties to enter into Rate Protection
Agreements, the Grantor agrees, for the benefit of each Secured Party, as
follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided (or incorporated by reference) in the
Security Agreement.
SECTION 2. Grant of Security Interest. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Obligations, the Grantor does hereby mortgage, pledge and
hypothecate to the Administrative Agent, and grant to the Administrative Agent
a security interest in, for its benefit and the benefit of each Secured Party,
all of the following property (the "Copyright Collateral"), whether now owned
or hereafter acquired or existing by it, being all copyrights (including all
copyrights for semi-conductor chip product mask works) of the Grantor, whether
statutory or common law, registered or unregistered, now or hereafter in force
throughout the world including all of the Grantor's right, title and interest
in and to all copyrights registered in the United States Copyright Office or
anywhere else in the world and also including the copyrights referred to in
Item A of Attachment 1 attached hereto, and all applications for registration
thereof, whether pending or in preparation, all copyright licenses, including
each copyright license referred to in Item B of Attachment 1 attached hereto,
the right to sue for past, present and future infringements of any thereof, all
rights corresponding thereto throughout the world, all extensions and renewals
of any thereof and all proceeds of the foregoing, including licenses,
royalties, income, payments, claims, damages and proceeds of suit.
SECTION 3. Security Agreement. This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest
of the Administrative Agent in the Copyright Collateral with the United States
Copyright Office and corresponding offices in other countries of the world. The
security interest granted hereby has been granted as a supplement to, and not
in limitation of, the security interest granted to the Administrative Agent for
its benefit and the benefit of each Secured Party under the Security Agreement.
The Security Agreement (and all rights and remedies of the Administrative Agent
and each Secured Party thereunder) shall remain in full force and effect in
accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full in cash
of all Obligations, the termination or expiry of all Letters of Credit, the
termination of all Rate Protection Agreements and the termination of all
Commitments, the Administrative Agent shall, at the Grantor's expense, execute
and deliver to the Grantor all instruments and other documents as may be
necessary or proper to release the lien on and security interest in the
Copyright Collateral which has been granted hereunder.
-2-
<PAGE>
SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge
and affirm that the rights and remedies of the Administrative Agent with
respect to the security interest in the Copyright Collateral granted hereby are
more fully set forth in the Security Agreement, the terms and provisions of
which (including the remedies provided for therein) are incorporated by
reference herein as if fully set forth herein.
SECTION 6. Loan Document, etc. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
DUANE READE
By Duane Reade Inc., a general partner
By
------------------------------
Name:
Title:
By DRI I Inc., a general partner
By
------------------------------
Name:
Title:
FLEET NATIONAL BANK,
as Administrative Agent
By
----------------------------------
Name:
Title:
-4-
<PAGE>
ATTACHMENT 1
to Borrower Copyright
Security Agreement
Item A. Copyrights/Mask Works
Registered Copyrights/Mask Works
--------------------------------
*Country Registration No. Registration Date Author(s) Title
- -------- ---------------- ----------------- --------- -----
Copyright/Mask Work Pending Registration Applications
-----------------------------------------------------
*Country Serial No. Filing Date Author(s) Title
- -------- ---------- ----------- --------- -----
Copyright/Mask Work Registration Applications in Preparation
------------------------------------------------------------
Expected
*Country Docket No. Filing Date Author(s) Title
- -------- ---------- ----------- --------- -----
- --------
* List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
<PAGE>
Item B. Copyright/Mask Work Licenses
*Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
- ----------- -------- -------- --------- ---------- -------
<PAGE>
[EXECUTION COPY]
AMENDED AND RESTATED HOLDINGS PLEDGE AGREEMENT
This AMENDED AND RESTATED HOLDINGS PLEDGE AGREEMENT (as
amended, supplemented, amended and restated or otherwise modified from time to
time, this "Pledge Agreement"), dated as of September 11, 1998 (amending and
restating the Holdings Pledge Agreement, dated as of February 13, 1998 (the
"Existing Pledge Agreement")), is made by DUANE READE INC., a Delaware
corporation (the "Pledgor"), in favor of FLEET NATIONAL BANK, as administrative
agent (together with its successor(s) thereto, in such capacity the
"Administrative Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement, dated as of September 11, 1998, amending and restating in its
entirety that certain Credit Agreement, dated as of February 13, 1998 (as
amended prior to the Amendment Effective Date, the "Existing Credit Agreement")
(as so amended and restated or otherwise modified, and together with all
amendments, supplements, restatements and other modifications, if any,
thereafter made thereto, the "Credit Agreement"), among Duane Reade, a New York
general partnership (the "Borrower"), each of the Parent Guarantors named
therein (including the Pledgor), the various financial institutions as are, or
may from time to time become, parties thereto (each, individually, a "Lender",
and collectively, the "Lenders"), DLJ Capital Funding, Inc., as the Syndication
Agent, Fleet National Bank, as the Administrative Agent and Credit Lyonnais New
York Branch, as the Documentation Agent, the Lenders and the Issuer have
extended Commitments to make Credit Extensions to the Borrower;
WHEREAS, as a condition precedent to the making and maintaining of the
Credit Extensions under the Credit Agreement, the Pledgor was required to
execute and deliver the Existing Pledge Agreement;
WHEREAS, the Pledgor has requested that the Existing Pledge Agreement
be amended and restated in its entirety to read as hereinafter set forth; and
WHEREAS, it is in the best interests of the Pledgor to execute this
Pledge Agreement inasmuch as the Pledgor will derive substantial direct and
indirect benefits from the Credit Extensions made from time to time to the
Borrower by the Lenders and the Issuer pursuant to the Credit Agreement;
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the
Lenders and the Issuer to make and maintain Credit Extensions to the Borrower
pursuant to the Credit Agreement, and to induce Secured Parties to enter into
Rate Protection Agreement(s), the Pledgor agrees, for the benefit of each
Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect
to any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender" and "Lenders" are defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of
Attachment 1 hereto as the issuer of the Pledged Note identified opposite the
name of such Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
in substantially the form of Exhibit A hereto which are delivered by the
Pledgor to the Administrative Agent as
-2-
<PAGE>
Pledged Property hereunder, as such promissory notes, in accordance with
Section 4.6, are amended, modified or supplemented from time to time, together
with any promissory note of any Pledged Note Issuer taken in extension or
renewal thereof or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and
all other pledged shares of capital stock or promissory notes, all other
securities, all assignments of any amounts due or to become due, all other
instruments which are now being delivered by the Pledgor to the Administrative
Agent or may from time to time hereafter be delivered by the Pledgor to the
Administrative Agent for the purpose of pledge under this Pledge Agreement or
any other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of
Attachment 1 hereto as the issuer of the Pledged Shares identified opposite the
name of such Person.
"Pledged Shares" means all shares of capital stock of any Pledged
Share Issuer which are delivered by the Pledgor to the Administrative Agent as
Pledged Property hereunder.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code, as in effect from time to
time in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or
in the Credit Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Pledge Agreement,
including its preamble and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby (x) confirms
the pledge, hypothecation, assignment, charge, mortgage, delivery, and transfer
to the Administrative Agent, for its benefit and the ratable benefit of each of
the Secured Parties pursuant to the
-3-
<PAGE>
Existing Pledge Agreement and (y) not in limitation of such pledge,
hypothecation, assignment, charge, mortgage, delivery, and transfer but as a
supplement thereto, and hereby grants to the Administrative Agent, for its
benefit and the ratable benefit of the Secured Parties, a continuing security
interest in, all of the following property of the Pledgor (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer
identified in Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of capital stock of
each Pledged Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter
delivered to the Administrative Agent in connection with this Pledge
Agreement;
(f) all Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures
the payment in full in cash of all Obligations of the Borrower now or hereafter
existing under the Credit Agreement, the Notes and each other Loan Document to
which the Borrower is or may become a party, whether for principal, interest,
costs, fees, expenses, or otherwise, and all obligations of the Pledgor and
each other Obligor whether now or hereafter existing under this Pledge
Agreement and each other Loan Document to which the Pledgor or such other
Obligor is or may become a party (all such obligations of the Borrower, the
Pledgor and such other Obligor being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares and all Pledged Notes, shall be delivered to and held by or on behalf of
(and, in the case of the Pledged Notes, endorsed to the order of) the
Administrative Agent pursuant hereto, shall be in suitable form for transfer by
delivery, and shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged
Notes. In the event that any Dividend is to be paid on any Pledged Share or any
payment of principal or interest is to be made on any Pledged Note at a time
when no Default of the nature referred to in Section 8.1.9 of the Credit
Agreement or Event of Default has occurred and is continuing or
-4-
<PAGE>
would result therefrom, such Dividend or payment may be paid directly to the
Pledgor. If any such Default or Event of Default has occurred and is
continuing, then any such Dividend or payment shall be paid directly to the
Administrative Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in
cash of all Secured Obligations, the termination or expiration of all
Letters of Credit, the termination of all Rate Protection Agreements
and the termination of all Commitments,
(b) be binding upon the Pledgor and its successors,
transferees and assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative
Agent and each other Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the
provisions of Section 11.11 and Article X of the Credit Agreement. Upon (i) the
sale, transfer or other disposition of Collateral in accordance with the Credit
Agreement or (ii) the payment in full in cash of all Secured Obligations, the
termination or expiration of all Letters of Credit, the termination of all Rate
Protection Agreements and the termination of all Commitments, the security
interests granted herein shall automatically terminate with respect to (x) such
Collateral (in the case of clause (i)) or (y) all Collateral (in the case of
clause (ii)). Upon any such sale, transfer, disposition or termination, the
Administrative Agent will, at the Pledgor's sole expense, deliver to the
Pledgor, without any representations, warranties or recourse of any kind
whatsoever, all certificates and instruments representing or evidencing all
Pledged Shares and all Pledged Notes, together with all other Collateral held
by the Administrative Agent hereunder, and execute and deliver to the Pledgor
such documents as the Pledgor shall reasonably request to evidence such
termination.
SECTION 2.6. Security Interest Absolute. All rights of the
Administrative Agent and the security interests granted to the Administrative
Agent hereunder, and all obligations of the Pledgor hereunder, shall be
absolute and unconditional, irrespective of
(a) any lack of validity or enforceability of the Credit
Agreement, any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any
Note
-5-
<PAGE>
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or
any other Person under the provisions of the Credit
Agreement, any Note, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Secured
Obligations,
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations or any
other extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of
any Secured Obligations for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject
to (and the Pledgor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Credit Agreement, any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or
non-perfection of any collateral (including the Collateral), or any
amendment to or waiver or release of or addition to or consent to
departure from any guaranty, for any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute
a defense available to, or a legal or equitable discharge of, the
Borrower, any other Obligor, any surety or any guarantor.
SECTION 2.7. Postponement of Subrogation, etc. The Pledgor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, the termination of all Rate Protection
Agreements and the termination of all Commitments. Any amount paid to the
Pledgor on account of any payment made hereunder prior to the payment in full
in cash of all Secured Obligations shall be held in trust for the benefit of
the Secured Parties and each holder of a Note and shall immediately be paid to
the Secured Parties and each holder of a Note and credited and applied against
the Secured Obligations, whether matured or unmatured, in accordance with the
terms of the Credit Agreement; provided, however, that if
-6-
<PAGE>
(a) the Pledgor has made payment to the Secured Parties and
each holder of a Note of all or any part of the Secured Obligations,
and
(b) all Secured Obligations have been paid in full in cash,
all Letters of Credit have been terminated or expired, all Rate
Protection Agreements have been terminated and all Commitments have
been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation
to the Pledgor of an interest in the Secured Obligations resulting from such
payment by the Pledgor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding or any
Rate Protection Agreement remains in full force and effect, the Pledgor shall
refrain from taking any action or commencing any proceeding against the
Borrower or any other Obligor (or its successors or assigns, whether in
connection with a bankruptcy proceeding or otherwise) to recover any amounts in
respect of payments made under this Pledge Agreement to any Secured Party or
any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor
represents and warrants to each Secured Party, as at the date of each pledge
and delivery hereunder (including each pledge and delivery of Pledged Shares
and each pledge and delivery of a Pledged Note) by the Pledgor to the
Administrative Agent of any Collateral, as set forth in this Article III.
SECTION 3.2. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all
liens, security interests, options, or other charges or encumbrances, except
any lien or security interest granted pursuant hereto in favor of the
Administrative Agent.
SECTION 3.3. Valid Security Interest. The delivery of such Collateral
to the Administrative Agent is effective to create a valid, perfected, first
priority security interest in such Collateral and all proceeds thereof,
securing the Secured Obligations. No filing or other action will be necessary
to perfect or protect such security interest.
SECTION 3.4. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized
and validly issued, fully paid, and non-assessable, and constitute all of the
issued and outstanding shares of capital stock of each
-7-
<PAGE>
Pledged Share Issuer. The Pledgor has no Subsidiaries other than the Pledged
Share Issuers, except as set forth in Item C of Attachment 1.
SECTION 3.5. As to Pledged Notes. In the case of each Pledged Note,
all of such Pledged Notes have been duly authorized, executed, endorsed, issued
and delivered, and are the legal, valid and binding obligation of the issuers
thereof, and are not in default.
SECTION 3.6. Authorization, Approval, etc. No authorization, approval,
or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant
to this Pledge Agreement or for the execution, delivery, and
performance of this Pledge Agreement by the Pledgor, or
(b) for the exercise by the Administrative Agent of the
voting or other rights provided for in this Pledge Agreement, or,
except with respect to any Pledged Shares, as may be required in
connection with a disposition of such Pledged Shares by laws affecting
the offering and sale of securities generally, the remedies in respect
of the Collateral pursuant to this Pledge Agreement.
SECTION 3.7. Compliance with Laws. The Pledgor is in compliance with
the requirements of all applicable laws (including the provisions of the Fair
Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which could reasonably be expected to have a
Material Adverse Effect or which could reasonably be expected to materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Pledgor covenants and agrees that,
so long as any portion of the Secured Obligations shall remain unpaid, any
Letters of Credit shall be outstanding, any Rate Protection Agreement shall
remain in full force and effect or any Secured Party shall have any outstanding
Commitment, the Pledgor will, unless the Required Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Article IV.
SECTION 4.2. Protect Collateral; Further Assurances, etc. The Pledgor
agrees and covenants that it will not sell, assign, transfer, pledge, or
encumber in any other manner the Collateral (except in favor of the
Administrative Agent hereunder). The Pledgor will warrant and
-8-
<PAGE>
defend the right and title herein granted unto the Administrative Agent in and
to the Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all Persons whomsoever. The
Pledgor agrees that at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further instruments,
and take all further action, that may be necessary or desirable, or that the
Administrative Agent may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable
the Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral.
SECTION 4.3. Stock Powers, etc. The Pledgor agrees that all Pledged
Shares (and all other shares of capital stock constituting Collateral)
delivered by the Pledgor pursuant to this Pledge Agreement will be accompanied
by duly executed undated blank stock powers, or other equivalent instruments of
transfer acceptable to the Administrative Agent. The Pledgor will, from time to
time upon the request of the Administrative Agent, promptly deliver to the
Administrative Agent such stock powers, instruments, and similar documents,
satisfactory in form and substance to the Administrative Agent, with respect to
the Collateral as the Administrative Agent may reasonably request and will,
from time to time upon the request of the Administrative Agent after the
occurrence of any Event of Default, promptly transfer any Pledged Shares or
other shares of common stock constituting Collateral into the name of any
nominee designated by the Administrative Agent.
SECTION 4.4. Continuous Pledge. The Pledgor will, at all times, keep
pledged to the Administrative Agent pursuant hereto all Pledged Shares and all
other shares of capital stock constituting Collateral, all Dividends and
Distributions with respect thereto, all Pledged Notes, all interest, principal
and other proceeds received by the Administrative Agent with respect to the
Pledged Notes, and all other Collateral and other securities, instruments,
proceeds, and rights from time to time received by or distributable to the
Pledgor in respect of any Collateral and will not permit any Pledged Share
Issuer to issue any capital stock which shall not have been immediately duly
pledged hereunder on a first priority perfected basis.
SECTION 4.5. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Default of the nature referred to in Section
8.1.9 of the Credit Agreement or any Event of Default shall have
occurred and be continuing, promptly upon receipt of notice thereof by
the Pledgor and without any request therefor by the Administrative
Agent, to deliver (properly endorsed where required hereby or
requested by the Administrative Agent) to the Administrative Agent all
Dividends, Distributions, all interest, all principal, all other cash
payments, and all proceeds of the Collateral, all of which shall be
held by the Administrative Agent as additional Collateral for use in
accordance with Section 6.4; and
-9-
<PAGE>
(b) after any Event of Default shall have occurred and be
continuing and the Administrative Agent has notified the Pledgor of
the Administrative Agent's intention to exercise its voting power
under this Section 4.5(b)
(i) the Administrative Agent may exercise (to the
exclusion of the Pledgor) the voting power and all other
incidental rights of ownership with respect to any Pledged
Shares or other shares of capital stock constituting
Collateral and the Pledgor hereby grants the Administrative
Agent an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other
Collateral; and
(ii) promptly to deliver to the Administrative Agent
such additional proxies and other documents as may be
necessary to allow the Administrative Agent to exercise such
voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which
the Pledgor is then obligated to deliver to the Administrative Agent, shall,
until delivery to the Administrative Agent, be held by the Pledgor separate and
apart from its other property in trust for the Administrative Agent. The
Administrative Agent agrees that unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given the notice
referred to in Section 4.5(b), the Pledgor shall have the exclusive voting
power with respect to any shares of capital stock (including any of the Pledged
Shares) constituting Collateral and the Administrative Agent shall, upon the
written request of the Pledgor, promptly deliver such proxies and other
documents, if any, as shall be reasonably requested by the Pledgor which are
necessary to allow the Pledgor to exercise voting power with respect to any
such share of capital stock (including any of the Pledged Shares) constituting
Collateral; provided, however, that no vote shall be cast, or consent, waiver,
or ratification given, or action taken by the Pledgor that would impair any
Collateral or be inconsistent with or violate any provision of the Credit
Agreement or any other Loan Document (including this Pledge Agreement).
SECTION 4.6. Additional Undertakings. The Pledgor will not, without the
prior written consent of the Administrative Agent:
(a) enter into any agreement amending, supplementing, or
waiving any provision of any Pledged Note (including any underlying
instrument pursuant to which such Pledged Note is issued) or
compromising or releasing or extending the time for payment of any
obligation of the maker thereof; or
(b) take or omit to take any action the taking or the
omission of which would result in any impairment or alteration of any
obligation of the maker of any Pledged Note or other instrument
constituting Collateral.
-10-
<PAGE>
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. The
Pledgor hereby irrevocably appoints the Administrative Agent the Pledgor's
attorney-in-fact, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise, from time to time in the
Administrative Agent's discretion, to take any action and to execute any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Pledge Agreement, including after the
occurrence and during the continuance of a Default of the nature referred to in
Section 8.1.9 of the Credit Agreement or an Event of Default:
(a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Administrative Agent with respect to any of
the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Administrative Agent May Perform. If the Pledgor fails to
perform any agreement contained herein, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by the
Pledgor pursuant to Section 6.4.
SECTION 5.3. Administrative Agent Has No Duty. The powers conferred on
the Administrative Agent hereunder are solely to protect its interest (on
behalf of the Secured Parties) in the Collateral and shall not impose any duty
on it to exercise any such powers. Except for reasonable care of any Collateral
in its possession and the accounting for moneys actually received by it
hereunder, the Administrative Agent shall have no duty as to any Collateral or
responsibility for
(a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative
to any Pledged Property, whether or not the Administrative Agent has
or is deemed to have knowledge of such matters, or
-11-
<PAGE>
(b) taking any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral, if it takes such action for that purpose as the Pledgor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the U.C.C. (whether or not the U.C.C.
applies to the affected Collateral) and also may, without notice
except as specified below, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of the
Administrative Agent's offices or elsewhere, for cash, on credit or
for future delivery, and upon such other terms as the Administrative
Agent may deem commercially reasonable. The Pledgor agrees that, to
the extent notice of sale shall be required by law, at least ten days'
prior notice to the Pledgor of the time and place of any public sale
or the time after which any private sale is to be made shall
constitute reasonable notification. The Administrative Agent shall not
be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Administrative Agent may adjourn any
public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) The Administrative Agent may
(i) transfer all or any part of the Collateral into
the name of the Administrative Agent or its nominee, with or
without disclosing that such Collateral is subject to the
lien and security interest hereunder,
(ii) notify the parties obligated on any of the
Collateral to make payment to the Administrative Agent of any
amount due or to become due thereunder,
-12-
<PAGE>
(iii) enforce collection of any of the Collateral by
suit or otherwise, and surrender, release or exchange all or
any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any
obligations of any nature of any party with respect thereto,
(iv) endorse any checks, drafts, or other writings
in the Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral,
and
(vi) execute (in the name, place and stead of the
Pledgor) endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or
any of the Collateral.
SECTION 6.2. Securities Laws. If the Administrative Agent shall
determine to exercise its right to sell all or any of the Collateral pursuant
to Section 6.1, the Pledgor agrees that, upon request of the Administrative
Agent, the Pledgor will, at its own expense:
(a) execute and deliver, and cause each issuer of the
Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents,
and do or cause to be done all such other acts and things, as may be
necessary or, in the opinion of the Administrative Agent, advisable to
register such Collateral under the provisions of the Securities Act of
1933, as from time to time amended (the "Securities Act"), and to
cause the registration statement relating thereto to become effective
and to remain effective for such period as prospectuses are required
by law to be furnished, and to make all amendments and supplements
thereto and to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable
thereto;
(b) use its best efforts to qualify the Collateral under the
state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by
the Administrative Agent;
(c) cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will
satisfy the provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part
thereof valid and binding and in compliance with applicable law.
-13-
<PAGE>
The Pledgor further acknowledges the impossibility of ascertaining the amount
of damages that would be suffered by the Administrative Agent or the Secured
Parties by reason of the failure by the Pledgor to perform any of the covenants
contained in this Section and, consequently, agrees that, if the Pledgor shall
fail to perform any of such covenants, it shall pay, as liquidated damages and
not as a penalty, an amount equal to the value (as determined by the
Administrative Agent) of the Collateral on the date the Administrative Agent
shall demand compliance with this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Administrative Agent is hereby authorized to
comply with any limitation or restriction in connection with such sale as it
may be advised by counsel is necessary in order to avoid any violation of
applicable law (including compliance with such procedures as may restrict the
number of prospective bidders and purchasers, require that such prospective
bidders and purchasers have certain qualifications, and restrict such
prospective bidders and purchasers to persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or resale of such Collateral), or in order to obtain any
required approval of the sale or of the purchaser by any governmental
regulatory authority or official, and the Pledgor further agrees that such
compliance shall not result in such sale being considered or deemed not to have
been made in a commercially reasonable manner, nor shall the Administrative
Agent be liable nor accountable to the Pledgor for any discount allowed by the
reason of the fact that such Collateral is sold in compliance with any such
limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by
the Administrative Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral shall be applied by the
Administrative Agent against, all or any part of the Secured Obligations as
follows:
(a) first, to the payment of any amounts payable to the
Administrative Agent pursuant to Section 11.3 of the Credit Agreement
and Section 6.5;
(b) second, to the equal and ratable payment of Secured
Obligations, in accordance with each Secured Party's Secured
Obligations owing to it under or pursuant to the Credit Agreement or
any other Loan Document, or under or pursuant to any Hedging
Obligation included in the Secured Obligations as to each Secured
Party, applied
(i) first to fees and expense reimbursements then
due to such Secured Party,
(ii) then to interest due to such Secured Party,
-14-
<PAGE>
(iii) then to pay or prepay principal of the Loans
owing to, or to reduce the "credit exposure" of, such Secured
Party under such Hedging Obligation, as the case may be, and
(iv) then to pay the remaining outstanding Secured
Obligations and cash collateralize all Letter of Credit
Outstandings;
(c) third, without duplication of any amounts paid pursuant
to clause (b) above, to the Indemnified Parties to the extent of any
amounts owing pursuant to Section 11.4 of the Credit Agreement; and
(d) fourth, to be held as additional collateral security
until the payment in full in cash of all of the Secured Obligations,
the termination or expiration of all Letters of Credit, the
termination of all Rate Protection Agreements and the termination of
all Commitments, after which such remaining cash proceeds shall be
paid over to the Pledgor or to whomsoever may be lawfully entitled to
receive such surplus.
For purposes of this Pledge Agreement, the "credit exposure" at any time of any
Secured Party with respect to a Hedging Obligation to which such Secured Party
is a party shall be determined at such time in accordance with the customary
methods of calculating credit exposure under similar arrangements by the
counterparty to such arrangements, taking into account potential interest rate
movements and the respective termination provisions and notional principal
amount and term of such Hedging Obligation.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies
and holds harmless the Administrative Agent from and against any and all
claims, losses, and liabilities arising out of or resulting from this Pledge
Agreement (including enforcement of this Pledge Agreement), except claims,
losses, or liabilities resulting from the Administrative Agent's gross
negligence or wilful misconduct. Upon demand, the Pledgor will pay to the
Administrative Agent the amount of any and all reasonable expenses, including
the reasonable fees and disbursements of its counsel and of any experts and
agents, which the Administrative Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit
Agreement and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the
sale of, collection from, or other realization upon, any of the
Collateral;
(c) the exercise or enforcement of any of the rights of the
Administrative Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of
the provisions hereof.
-15-
<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
herefrom shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent (on behalf of the Lenders or the
Required Lenders, as the case may be) and the Pledgor in the case of an
amendment, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Administrative Agent may
from time to time, at its option, perform any act which the Pledgor agrees
hereunder to perform and which the Pledgor shall fail to perform after being
requested in writing so to perform (it being understood that no such request
need be given after the occurrence and during the continuance of an Event of
Default) and the Administrative Agent may from time to time take any other
action which the Administrative Agent reasonably deems necessary for the
maintenance, preservation or protection of any of the Collateral or of its
security interest therein.
SECTION 7.4. Addresses for Notices. All notices and other
communications provided for hereunder to any party hereto shall be in writing
(including telegraphic communication) and mailed or telecopied or delivered to
such party, addressed to such party at its address specified in the Credit
Agreement. All such notices and other communications, when mailed and properly
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any such notice or
communication, if transmitted by telecopier, shall be deemed given when
transmitted and electronically confirmed.
SECTION 7.5. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
-16-
<PAGE>
SECTION 7.7. Counterparts. This Pledge Agreement may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement.
SECTION 7.8. Governing Law, Entire Agreement, etc. THIS PLEDGE
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
DUANE READE INC.
By /s/ William J. Tennant
----------------------------------
Name: William J. Tennant
Title: Senior Vice President and
Chief Financial Officer
FLEET NATIONAL BANK,
as Administrative Agent
By /s/ Authorized Signatory
----------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
to Holdings
Pledge Agreement
PROMISSORY NOTE
$--------------- -------- --, ----
FOR VALUE RECEIVED, the undersigned, ______________, a _______________
corporation (the "Maker"), promises to pay to the order of DUANE READE INC., a
Delaware corporation (the "Payee"), in equal ________ installments, commencing
__________ __, ____ to and including __________ __, ____, the principal sum of
DOLLARS ($ ), representing the aggregate principal amount of
an intercompany loan made by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "Note") from
time to time outstanding shall bear interest at a rate of interest equal to
____________, which the Maker represents to be a lawful and commercially
reasonable rate, payable __________, and all payments of principal of and
interest on this Note shall be payable in lawful currency of the United States
of America. All such payments shall be made by the Maker to an account
established by the Payee at _______________ and shall be recorded on the grid
attached hereto by the holder hereof (including the Administrative Agent
(hereinafter defined) as pledgee). Upon notice from the Administrative Agent
that a Default (as defined in the Amended and Restated Credit Agreement, dated
as of September 11, 1998 amending and restating in its entirety that certain
Credit Agreement, dated as of February 13, 1998 (as amended prior to the
Amendment Effective Date) (as so amended and restated or otherwise modified,
and together with all amendments, supplements, restatements and other
modifications, if any, thereafter made thereto, the "Credit Agreement"), among
Duane Reade, a New York general partnership (the "Borrower"), the Payee and the
other Parent Guarantors named therein, the various financial institutions as
are, or may from time to time become, parties thereto (each, individually, a
"Lender", and collectively, the "Lenders"), DLJ Capital Funding, Inc., as
Syndication Agent, Fleet National Bank, as the administrative agent (in such
capacity, the "Administrative Agent") and Credit Lyonnais New York Branch, as
the documentation agent (in such capacity, the "Documentation Agent") as of the
nature referred to in Section 8.1.9 of the Credit Agreement or an Event of
Default (as defined in the Credit Agreement) has occurred and is continuing
under the Credit Agreement, the Maker shall make such payments, in same day
funds, to such other account as the Administrative Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in the Pledge
Agreement. Upon the occurrence and continuance of an Event of Default under the
Credit Agreement, and notice thereof by the Administrative Agent to the Maker,
the Administrative Agent shall have all rights of the Payee to collect and
accelerate, and enforce all rights with respect to, the Indebtedness
<PAGE>
evidenced by this Note. Unless otherwise defined herein or the context
otherwise requires, terms used herein have the meanings provided in the Credit
Agreement.
Reference is made to the Credit Agreement for a description of the
Pledge Agreement pursuant to which this Note has been pledged to the
Administrative Agent as security for the Secured Obligations outstanding from
time to time under the Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker
further agrees to pay all expenses, including reasonable attorneys' fees and
legal expenses, incurred by the holder (including the Administrative Agent as
pledgee) of this Note endeavoring to collect any amounts payable hereunder
which are not paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
-2-
<PAGE>
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON
THIS NOTE. THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
----------------------------------
Name:
Title:
Pay to the order of FLEET NATIONAL
BANK, as Administrative Agent
DUANE READE INC.
By
----------------------------------
Name:
Title:
-3-
<PAGE>
GRID
Intercompany Loans made by Duane Reade Inc. to [Name of Maker] and
payments of principal of such Loans.
Amount of Amount of Outstanding
Intercompany Principal Principal Notation
Date Loan Payment Balance Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
==============================================================================
<PAGE>
ATTACHMENT 1
to Holdings
Pledge Agreement
DUANE READE INC.
Item A. Pledged Notes
Pledged Note Issuer Description
- ------------------- ------------
None.
Item B. Pledged Shares
Common Stock
------------------------------------------------
Authorized Outstanding % of
Pledged Share Issuer Shares Shares Shares
- -------------------- ---------- ----------- --------
DRI I Inc. 1,000 1,000 Pledged
100%
Item C. Additional Subsidiaries
None.
<PAGE>
[EXECUTION COPY]
AMENDMENT AGREEMENT TO CREDIT AGREEMENT
Amendment Agreement to Credit Agreement, dated as of September 11,
1998 (this "Amendment Agreement"), among DUANE READE, a New York general
partnership (the "Borrower"), DUANE READE INC., a Delaware corporation
("Holdings"), DRI I INC., a Delaware corporation ("DRI I" and, together with
Holdings, collectively, the "Parent Guarantors"), the Lenders parties hereto,
DLJ CAPITAL FUNDING, INC., as syndication agent (in such capacity, the
"Syndication Agent") for the Lenders, FLEET NATIONAL BANK, as administrative
agent (in such capacity, the "Administrative Agent") for the Lenders, and
CREDIT LYONNAIS NEW YORK BRANCH, as the documentation agent (in such capacity,
the "Documentation Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, the Parent Guarantors, various financial
institutions (the "Lenders"), the Agents and the Documentation Agent have
heretofore entered into the Credit Agreement, dated as of February 13, 1998 (as
amended prior to the date hereof, the "Existing Credit Agreement"; and
WHEREAS, the Borrower and Parent Guarantors have requested, and the
Lenders have agreed, subject to the terms and conditions hereinafter set forth,
to amend and restate the Existing Credit Agreement (together with all schedules
and exhibits thereto) in its entirety in the form of the Amended and Restated
Credit Agreement (as defined below);
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Definitions. The following terms (whether or not
underscored) when used in this Amendment shall have the following meanings
(such meanings to be equally applicable to the singular and plural form
thereof):
"Amended and Restated Credit Agreement" is defined in Section 2.1.
<PAGE>
"Amendment Agreement" is defined in the preamble.
"Amendment Effective Date" is defined in Section 3.1.
"Borrower" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"DRI I" is defined in the preamble.
"Existing Credit Agreement" is defined in the first recital.
"Holdings" is defined in the preamble.
"Parent Guarantors" is defined in the preamble.
SECTION 1.2. Other Definitions. Terms for which meanings are provided
in the Amended and Restated Credit Agreement are, unless otherwise defined
herein or the context otherwise requires, used in this Amendment Agreement with
such meanings.
ARTICLE II
AMENDMENT AND RESTATEMENT
OF EXISTING CREDIT AGREEMENT
SECTION 2.1. Amendment and Restatement of Existing Credit Agreement.
On the Amendment Effective Date, the Existing Credit Agreement (including all
schedules and exhibits thereto) shall be and is hereby amended and restated to
read in its entirety as set forth in Annex I hereto (as set forth in such Annex
I, the "Amended and Restated Credit Agreement"), and as so amended and restated
is hereby ratified, approved and confirmed in each and every respect. The
rights and obligations of the parties to the Existing Credit Agreement with
respect to the period prior to the Amendment Effective Date shall not be
affected by such amendment and restatement.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
SECTION 3.1. Amendment Effective Date; Conditions Precedent to
Borrowing of Additional Term C Loans. This Amendment Agreement (and the
amendments and modifications contained herein) shall become effective on the
date (the "Amendment Effective Date") when each of the conditions set forth in
this Article III shall have been fulfilled to the reasonable
-2-
<PAGE>
satisfaction of the Agents on or before September 30, 1998. The obligation of
each Lender having an Additional Term C Loan Commitment to make an Additional
Term C Loan shall be subject to the prior or concurrent satisfaction of each of
the conditions precedent set forth in this Article in addition to those set
forth in Section 5.2 of the Amended and Restated Credit Agreement.
SECTION 3.1.1. Execution of Counterparts. The Agents shall have
received executed counterparts of this Amendment Agreement, duly executed and
delivered on behalf of each of the Borrower, the Parent Guarantors and the
Required Lenders (which shall include (a) those Lenders holding greater than
50% of the aggregate amount of the Loans outstanding under each Tranche and (b)
each Lender that has an Additional Term C Loan Commitment).
SECTION 3.1.2. [INTENTIONALLY OMITTED].
SECTION 3.1.3. Resolutions, etc. The Agents shall have received, with
a copy for each Lender, from each Obligor a certificate, dated the Amendment
Effective Date, of its Secretary, Assistant Secretary or general partners, as
applicable, as to (i) resolutions of its Board of Directors or all partnership
action, as applicable, then in full force and effect authorizing the execution,
delivery and performance of this Amendment Agreement, the Amended and Restated
Credit Agreement and each other Loan Document to be executed by it, (ii) the
incumbency and signatures of those of its officers or general partners, as
applicable, authorized to act with respect to this Amendment Agreement, the
Amended and Restated Credit Agreement and each such other Loan Document
executed by it and (iii) the full force and validity of its Organic Documents
and true and complete copies of all amendments thereto since August 14, 1998,
upon which certificate each Agent, the Documentation Agent, the Issuer and each
Lender may conclusively rely until it shall have received a further certificate
of the Secretary, Assistant Secretary or general partners, as applicable, of
such Obligor canceling or amending such prior certificate.
SECTION 3.1.4. Asset Purchase Agreement; Rock Bottom Acquisition
Consummated. The Agents shall have received prior to the Amendment Effective
Date true and complete executed copies of the Asset Purchase Agreement and all
amendments thereto, in form and substance reasonably satisfactory to the
Agents. The conditions provided for in the Asset Purchase Agreement to the
obligations of the Buyer (as defined therein) to consummate the Rock Bottom
Acquisition shall have been satisfied in full (without amendment, modification
or waiver of, or other forbearance to exercise any rights with respect to, any
of the terms or provisions thereof by such Buyer, except as disclosed to the
Lenders) and the Rock Bottom Acquisition shall have been consummated in
accordance with the terms of the Asset Purchase Agreement.
SECTION 3.1.5. Delivery of Amendment Effective Date Certificate. The
Agents shall have received executed counterparts of the Amendment Effective
Date Certificate, dated the Amendment Effective Date and duly executed and
delivered by the chief executive, financial or accounting (or equivalent
thereof) Authorized Officer of Holdings, in which certificate Holdings shall
agree and acknowledge that the statements made therein shall be deemed to be
true and
-3-
<PAGE>
correct representations and warranties of Holdings made as of such date under
this Amendment Agreement, and, at the time such certificate is delivered, such
statements shall in fact be true and correct in all material respects.
SECTION 3.1.6. Delivery of Notes. The Agents shall have received, for
the account of each Lender that shall have requested a replacement Note not
less than two Business Days prior to the Amendment Effective Date, a
replacement Note in respect of each applicable Tranche duly executed and
delivered by an Authorized Officer of the Borrower (and each such replacement
Note shall represent an amendment and restatement of, and shall be issued in
substitution and exchange for, and not in satisfaction or payment of, the
original Note (as defined in, and issued pursuant to, the Existing Credit
Agreement, an "Original Note") of such Lender and the indebtedness (together
with the obligation to pay accrued interest thereon) originally evidenced by
such Lender's Original Notes which are now to be evidenced by such Lender's new
replacement Notes delivered pursuant to this Amendment Agreement shall be (and
the Borrower hereby acknowledges and agrees that such indebtedness is) a
continuing indebtedness, and nothing herein contained shall be construed to
deem any such Original Notes paid, or to release or terminate any Lien or
security interest given to secure such Original Notes, which Liens and security
interests shall continue to secure such indebtedness as evidenced by such
Lender's new Notes).
SECTION 3.1.7. Pledge Agreements. The Agents shall have received
executed counterparts of each of the Holdings Pledge Agreement and the Borrower
Pledge Agreement, each dated as of the Amendment Effective Date and duly
executed and delivered by an Authorized Officer of Holdings and the Borrower,
respectively, together with, to the extent not previously delivered pursuant to
the Existing Credit Agreement, the certificates evidencing all of the issued
and outstanding shares of Capital Stock (or similar equity interests) of each
direct Subsidiary of Holdings (in which a security interest is not concurrently
granted and perfected under the Partnership Security Agreement) and the
Borrower, as the case may be, which shall be pledged pursuant to the Holdings
Pledge Agreement or the Borrower Pledge Agreement, as the case may be, which
certificates shall in each case be accompanied by undated stock powers duly
executed in blank.
SECTION 3.1.8. Security Agreements. The Agents shall have received
executed counterparts of the Partnership Security Agreement and the Borrower
Security Agreement, each dated as of the Amendment Effective Date and duly
executed and delivered by an Authorized Officer of each of Holdings and DRI I
and the Borrower, together with
(a) to the extent not previously filed pursuant to the
Existing Credit Agreement, executed Uniform Commercial Code financing
statements (Form UCC-1) naming Holdings, DRI I or the Borrower as the
debtor and the Administrative Agent as the secured party, or other
similar instruments or documents, to be filed under the Uniform
Commercial Code of all jurisdictions as may be necessary or, in the
opinion of the
-4-
<PAGE>
Administrative Agent, desirable to perfect the security interest of the
Administrative Agent pursuant to the Security Agreements;
(b) certified copies of Uniform Commercial Code Requests for
Information or Copies (Form UCC-11), or a similar search report
certified by a party acceptable to the Agents, dated a date reasonably
near to the Amendment Effective Date, listing all effective financing
statements which name Holdings, DRI I, the Borrower, Rock Bottom or
Connrak as the debtor and which are filed in the jurisdictions in
which filings were made pursuant to clause (a) above, together with
copies of such financing statements; and
(c) executed copies of proper Uniform Commercial Code
termination statements (Form UCC-3) and other suitable instruments or
documents, if any, necessary to release and/or, in the Agents'
discretion, assign all Liens and other rights of any Person (other
than Liens permitted under Section 7.2.3 of the Amended and Restated
Credit Agreement or those granted under any Loan Document to the
Administrative Agent for the benefit of the Secured Parties) in any
collateral described in any Security Agreement relating to Holdings,
DRI I, the Borrower, Rock Bottom or Connrak, together with such other
Uniform Commercial Code Form UCC-3 termination statements or other
suitable instruments or documents as the Agents may reasonably request
from such Persons.
SECTION 3.1.9. Borrowing Request. The Administrative Agent shall have
received a Borrowing Request duly executed and delivered by the Borrower
pursuant to which Additional Term C Loans are made to the Borrower for the
purposes set forth in the Section 7.1.9 of the Amended and Restated Credit
Agreement.
SECTION 3.1.10. Financial Information, etc. The Agents shall have
received, with counterparts for each Lender,
(a) the (i) audited consolidated financial statements of (A)
Holdings and its Subsidiaries and Daboco and its Subsidiaries for the
Fiscal Years ended on December 30, 1995, December 28, 1996 and
December 27, 1997 and (B) Rock Bottom and its Subsidiaries for the
Fiscal Years ended on January 31, 1996, January 31, 1997 and January
31, 1998, (ii) unaudited consolidated financial statements of (A)
Holdings and its Subsidiaries and Daboco and its Subsidiaries for the
Fiscal Quarters ended on March 28, 1998 and June 27, 1998 and (B) Rock
Bottom and its Subsidiaries for the Fiscal Quarters ended on April 30,
1998 and (iii) unaudited consolidated financial statements of Holdings
and its Subsidiaries and Borrower and its Subsidiaries for the fiscal
months ended on July 25, 1998 (collectively, the "Base Financial
Statement"); and
(b) pro forma consolidated balance sheets of Holdings and its
Subsidiaries and the Borrower and its Subsidiaries, as at December 27,
1997 (the "Pro Forma Balance Sheets"), certified by the chief
financial or accounting Authorized Officers of Holdings and the
Borrower, respectively, giving effect to the consummation of the
Transaction.
-5-
<PAGE>
SECTION 3.1.11. Solvency The Agents shall have received executed
counterparts of the Solvency Certificates, dated as of the Amendment Effective
Date, duly executed and delivered by the chief financial or accounting
Authorized Officer of each of Holdings and the Borrower.
SECTION 3.1.12. Payment of Outstanding Indebtedness, etc. All
Indebtedness of Rock Bottom identified in Schedule I hereto, together with all
interest, prepayment premiums and other amounts due and payable with respect
thereto, shall have been paid or defeased in full (including, to the extent
necessary, from proceeds of the Additional Term C Loans); and all Liens
securing payment of any such Indebtedness have been released or, in each
Agent's discretion, assigned to the Administrative Agent, and the
Administrative Agent shall have received all Uniform Commercial Code Form UCC-3
termination statements or other instruments or documents as may be suitable or
appropriate in connection therewith in the determination of the Agents.
SECTION 3.1.13. Litigation. There shall exist no pending or threatened
material litigation, proceedings or investigations which (x) contests the
consummation of the New Transaction or the legality or validity of the Amended
and Restated Credit Agreement, any other Loan Document or any Material Document
or (y) could reasonably be expected to have a Material Adverse Effect.
SECTION 3.1.14. Material Adverse Change. Except as set forth in Item
6.6 ("Material Adverse Change") of the Disclosure Schedule, there shall have
occurred no material adverse change in the business, assets, debt service
capacity, tax position, environmental liability, financial condition,
operations, properties or prospects of the Borrower and its Subsidiaries, taken
as a whole, or Holdings and its Subsidiaries, taken as a whole, in each case
since December 27, 1997.
SECTION 3.1.15. Insurance. The Agents shall have received satisfactory
evidence of the existence of insurance in compliance with Section 7.1.4 of the
Amended and Restated Credit Agreement (including all endorsements included
therein), and the Administrative Agent shall be named additional insured or
loss payee, on behalf of the Lenders, pursuant to documentation reasonably
satisfactory to the Syndication Agent.
SECTION 3.1.16. Perfection Certificate. The Agents shall have received
Perfection Certificates, dated as of the Amendment Effective Date, duly
executed and delivered by an Authorized Officer of each of Holdings, DRI I, the
Borrower and each other Obligor that is a party to a Security Agreement.
SECTION 3.1.17. Approvals. All necessary governmental, shareholders'
and third-party approvals in connection with the New Transaction, the financing
contemplated hereby, the continued operations of any Parent Guarantor, the
Borrower and each of their respective Subsidiaries and the execution, delivery
and performance of this Amendment Agreement, the Amended and Restated Credit
Agreement and the other Loan Documents shall have been duly obtained and all
applicable waiting periods shall have expired without, in all such cases, any
-6-
<PAGE>
action being taken or threatened by any competent authority that would
restrain, prevent or otherwise imposes adverse conditions on the New
Transaction, the financing contemplated hereby or the continued operations of
any Parent Guarantor, the Borrower or any of their respective Subsidiaries.
SECTION 3.1.18. Opinions of Counsel. The Agents shall have received
(a) an opinion, dated the Amendment Effective Date and
addressed to the Agents, the Documentation Agent and all of the
Lenders from Latham & Watkins, special New York counsel to each of the
Obligors, in form and substance reasonably satisfactory to the Agents
and their counsel; and
(b) such reliance letters as they may reasonably request with
respect to opinions delivered in connection with the Rock Bottom
Acquisition, in each case dated the Amendment Effective Date and
addressed to the Agents and all of the Lenders.
SECTION 3.1.19. Fees, Expenses, etc. The Administrative Agent shall
have received for its own account or for the account of each other Agent or
each Lender, as the case may be, all fees, costs and expenses due and payable
pursuant to Sections 3.3 and 11.3 of the Amended and Restated Credit Agreement
to the extent then invoiced.
SECTION 3.1.20. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries or any other Obligors shall be satisfactory in form and substance
to the Agents and their counsel. The Agents and their counsel shall have
received all information, approvals, opinions, documents or instruments as the
Agents or their counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties. In order to induce the
Lenders to execute and deliver this Amendment Agreement, each of the Borrower
and each Parent Guarantor hereby represents and warrants as set forth below:
(a) The execution, delivery and performance by each of the
Borrower, each Parent Guarantor and each of their respective
Subsidiaries of this Amendment Agreement, the Amended and Restated
Credit Agreement, the Notes and each other Loan Document executed or
to be executed by it are within the Borrower's and each such Obligor's
corporate or partnership powers, have been duly authorized by all
necessary corporate or partnership action, and do not (i) contravene
the Borrower's or any such Obligor's Organic Documents, (ii)
contravene any contractual restriction, law or
-7-
<PAGE>
governmental regulation or court decree or order binding on or
affecting the Borrower or any such Obligor, or (iii) result in, or
require the creation or imposition of, any Lien on any of the
Borrower's or any other Obligor's properties, except pursuant to the
terms of a Loan Document.
(b) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body or other Person, is required for the due execution, delivery or
performance by any of the Borrower, any Parent Guarantor or any of
their respective Subsidiaries of this Amendment Agreement, the Amended
and Restated Credit Agreement, the Notes, any other Loan Document or
any of the Rock Bottom Acquisition Documents to which it is a party or
the consummation by any such Obligor of the Rock Bottom Acquisition,
except as have been duly obtained or made and are in full force and
effect or, with respect to UCC-1 financing statements as have been
delivered to the Agents pursuant to clause (a) of Section 3.1.8.
(c) This Amendment Agreement and the Amended and Restated
Credit Agreement constitute, and the Notes and each other Loan
Document executed, or to be executed, by any of the Borrower, any
Parent Guarantor or any of their respective Subsidiaries, as the case
may be, constitutes, or will on the due execution and delivery thereof
constitute, the legal, valid and binding obligations of the Borrower
and such other Obligor enforceable in accordance with their respective
terms.
(d) After giving effect to this Amendment Agreement, neither
the amendment and restatement of the Existing Credit Agreement
effected pursuant to this Amendment Agreement nor the execution,
delivery, performance or effectiveness of this Amendment Agreement,
the Amended and Restated Credit Agreement, any Loan Document or any
Rock Bottom Acquisition Document impairs the validity, effectiveness
or priority of the Liens granted pursuant to the Pledge Agreement and
the Security Agreement (as such terms are defined in the Existing
Credit Agreement, collectively, the "Security Documents"), and such
Liens continue unimpaired with the same priority to secure repayment
of all Obligations (including any Obligations arising in connection
with the making of the Additional Term C Loan Commitments or the
Additional Term C Loans), whether heretofore or hereafter incurred.
Neither the amendment and restatement of the Existing Credit Agreement
effected pursuant to this Amendment Agreement nor the execution,
delivery, performance or effectiveness of this Amendment Agreement,
the Amended and Restated Credit Agreement, any Security Agreement or
any Pledge Agreement requires that any new filings be made or other
action taken to perfect or to maintain the perfection of such Liens.
Under the foregoing circumstances, the position of the Lenders with
respect to such Liens, the Collateral (as defined in the Security
Documents) in which a security interest was granted pursuant to the
Security Documents, and the ability of the Administrative Agent to
realize upon such Liens pursuant to the terms of the Security
Documents have not been adversely affected in any material respect by
the amendment and restatement of the Existing Credit Agreement
effected pursuant to
-8-
<PAGE>
this Amendment Agreement or by the execution, delivery, performance or
effectiveness of this Amendment Agreement, the Amended and Restated
Credit Agreement, any Security Agreement or any Pledge Agreement.
(e) The only assets that each Rock Bottom Subsidiary has are
its interests in the leases to which such Rock Bottom Subsidiary is a
party.
(f) Both before and immediately after giving effect to this
Amendment Agreement, no Default has (or will have) occurred and is (or
will be) continuing, and all of the statements set forth in Section
5.2.1 of the Amended and Restated Credit Agreement are true and
correct.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Cross-References. References in this Amendment Agreement
to any Article or Section are, unless otherwise specified or otherwise required
by the context, to such Article or Section of this Amendment Agreement.
SECTION 5.2. Loan Document Pursuant to Credit Agreement. This
Amendment Agreement is a Loan Document executed pursuant to the Amended and
Restated Credit Agreement and shall be construed, administered and applied in
accordance with all of the terms and provisions of the Amended and Restated
Credit Agreement.
SECTION 5.3. Successors and Assigns. This Amendment Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
SECTION 5.4. Counterparts. This Amendment Agreement may be executed by
the parties hereto in several counterparts, each of which when executed and
delivered shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SECTION 5.5. Governing Law. THIS AMENDMENT AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
SECTION 5.6. Release of Mortgage. The Lenders hereby acknowledges that
the Administrative Agent may release the Liens created by the Existing Mortgage
upon the sale of the property described in the Existing Mortgage so long as the
proceeds of such sale are applied in accordance with clause (f) of Section
3.1.1 of the Amended and Restated Credit Agreement.
-9-
<PAGE>
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-10-
<PAGE>
IN WITNESS WHEREOF, the signatories hereto have caused this Amendment
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
BORROWER:
DUANE READE
By Duane Reade Inc., a general partner
By /s/ William J. Tennant
-----------------------------
Title: Senior Vice President
and Chief Financial
Officer
By DRI I Inc., a general partner
By /s/ William J. Tennant
-----------------------------
Title: Senior Vice President
and Chief Financial
Officer
PARENT GUARANTORS:
DUANE READE INC.
By /s/ William J. Tennant
-----------------------------------
Title: Senior Vice President and
Chief Financial Officer
DRI I INC.
By /s/ William J. Tennant
----------------------------------
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
AGENTS AND LENDERS:
DLJ CAPITAL FUNDING, INC., as the
Syndication Agent and as a Lender
By /s/ Authorized Signatory
---------------------------------------
Title:
FLEET NATIONAL BANK, as the Administrative
Agent and as a Lender
By /s/ Authorized Signatory
---------------------------------------
Title:
CREDIT LYONNAIS NEW YORK BRANCH, as
the Documentation Agent and as a Lender
By /s/ Authorized Signatory
---------------------------------------
Title:
LENDERS:
SUMMIT BANK
By /s/ Authorized Signatory
---------------------------------------
Title:
BHF-BANK AKTIENGESELLSCHAFT
By /s/ Authorized Signatory
---------------------------------------
Title:
By /s/ Authorized Signatory
---------------------------------------
Title:
<PAGE>
HELLER FINANCIAL, INC.
By /s/ Authorized Signatory
---------------------------------------
Title:
ORIX USA CORPORATION
By /s/ Authorized Signatory
---------------------------------------
Title:
OSPREY INVESTMENTS PORTFOLIO
By Citibank, N.A., as Manager
By /s/ Authorized Signatory
---------------------------------------
Title:
MORGAN STANLEY DEAN WITTER PRIME
INCOME TRUST
By /s/ Authorized Signatory
---------------------------------------
Title:
VAN KAMPEN CLO I, LIMITED
By Van Kampen American Capital Management,
Inc., as Collateral Manager
By /s/ Authorized Signatory
----------------------------------
Title:
<PAGE>
Merrill Lynch Global Investment Series: INCOME
STRATEGIES PORTFOLIO
By Merrill Lynch Asset Management, L.P., as
Investment Advisor
By /s/ Authorized Signatory
--------------------------------------
Title:
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By Merrill Lynch Asset Management, L.P., as
Investment Advisor
By /s/ Authorized Signatory
--------------------------------------
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By Merrill Lynch Asset Management, L.P. as
Investment Advisor
By /s/ Authorized Signatory
--------------------------------------
Title:
DEBT STRATEGIES FUND, INC.
By /s/ Authorized Signatory
-----------------------------------------
Title:
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By /s/ Authorized Signatory
-----------------------------------------
Title:
SENIOR HIGH INCOME PORTFOLIO
By /s/ Authorized Signatory
-----------------------------------------
Title:
<PAGE>
DEEPROCK & CO.
By Eaton Vance Management, as Investment
Advisor
By /s/ Authorized Signatory
-----------------------------------
Title:
SENIOR DEBT PORTFOLIO
By Boston Management and Research, as
Investment Advisor
By /s/ Authorized Signatory
-----------------------------------
Title:
<PAGE>
SCHEDULE I
See the payout letter attached hereto for a description of the Bank
Credit Facility (as defined in the Asset Purchase Agreement) and the
Indebtedness to be paid thereunder.
<PAGE>
[DUANE READE LETTERHEAD]
For: Duane Reade Inc.
Approved by: William Tennant
SVP - Chief Financial Officer
(212) 273-5709
Contact: Naomi Rosenfeld/Carolyn Capaccio
Michele Loguidice
Press: Stacy Berns/Lauren Gargano
(212) 850-5600
Morgen-Walke Associates, Inc.
FOR IMMEDIATE RELEASE
- ---------------------
DUANE READE COMPLETES ACQUISITION OF ROCK BOTTOM STORES
NEW YORK, NEW YORK, SEPTEMBER 15, 1998 - DUANE READE INC. (NYSE: DRD)
announced today that it has completed its acquisition of the operating assets
of Rock Bottom Stores, Inc., a leading drug retailer operating 38 stores
primarily in the outerboroughs of New York City. As previously announced, the
purchase price of the transaction was approximately $30 million dollars plus
approximately $31 million in inventory. Rock Bottom's stores, located
throughout Brooklyn, Queens, Staten Island, Nassau and Suffolk counties,
generated approximately $225 million in sales during the fiscal year ended
January 1998.
Founded in 1960, Duane Reade is the largest drug store chain in the
metropolitan New York City area. As of June 27, 1998 the Company operated 84
full service stores.
Except for historical information contained herein, the statements in
this release are forward-looking and made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties,
which may cause the Company's actual results in future periods to differ
materially from forecasted or expected results. Those risks include, among
other things, the competitive environment in the drugstore industry in general
and in the Company's specific market area, inflation, changes in costs of goods
and services and economic conditions in general and in the Company's specific
market area. Those and other risks are more fully described in the Company's
filings with the Securities and Exchange Commission.
# # #
The Number One Drug Chain in New York
Executive Offices: 440 9th Avenue, New York, N.Y. 10001, Telephone 212-273-5700
Member of NACDS o National Association of Chain Drug Stores
