UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended June 30, 2000
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission file Number 1-11692
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Ethan Allen Interiors Inc.; Ethan Allen Inc.; Ethan Allen Marketing Corporation;
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Ethan Allen Manufacturing Corporation
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(Exact name of registrant as specified in its charter)
Delaware 06-1275288
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Ethan Allen Drive, Danbury, CT 06811
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 743-8000
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Securities registered pursuant to Section 12(b) of the Act: None
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Name of Each Exchange
Title of Each Class On Which Registered
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Common Stock, $.01 par value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [x]Yes [ ]No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [x]
The aggregate market value of Common Stock, par value $.01 per share held by
non-affiliates (based upon the closing sale price on the New York Stock
Exchange) on August 18, 2000 was approximately $1,157,464,476. As of August 18,
2000, there were 39,403,046 shares of Common Stock, par value $.01 outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: The definitive Proxy Statement for the 2000
Annual Shareholders Meeting is incorporated by reference into Part III hereof.
<PAGE>
TABLE OF CONTENTS
Item Page
---- ----
PART I
1. Business 2
2. Properties 10
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders 12
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
6. Selected Financial Data 14
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
7A. Quantitative and Qualitative Disclosure About Market Risk 22
8. Financial Statements and Supplementary Data 24
9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 43
PART III
10. Directors and Executive Officers of the Registrant 44
11. Executive Compensation 44
12. Security Ownership of Certain Beneficial Owners and Management 44
13. Certain Relationships and Related Transactions 44
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 45
Signatures
1
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PART I
ITEM 1. BUSINESS
Ethan Allen Interiors Inc. ("Ethan Allen"; together with its direct and
indirect subsidiaries, the "Company") is a leading manufacturer and retailer of
quality home furnishings, offering a full range of furniture products and home
accessories. The Company was founded in 1932 and has sold products since 1937
under the Ethan Allen brand name. Ethan Allen is a Delaware corporation,
incorporated in 1989.
Ethan Allen manufactures and distributes three principal product lines: (i)
case goods (wood furnishings), consisting primarily of bedroom and dining room
furniture, wall units and tables; (ii) upholstered products, consisting
primarily of sofas, loveseats, chairs, and recliners; and (iii) home accessories
and other, including carpeting and area rugs, lighting, clocks, wall decor,
bedding ensembles, draperies, decorative accessories and indoor\outdoor
furnishings. The following table shows the approximate percentage of wholesale
sales of home furnishing products for each of these product lines during the
three most recent fiscal years:
Fiscal Year Ended June 30:
-------------------------
2000 1999 1998
---- ---- ----
Case Goods 56% 57% 58%
Upholstered Products 29 28 28
Home Accessories and Other 15 15 14
--- --- ---
100% 100% 100%
=== === ===
Ethan Allen's product strategy has been to expand its home furnishings
collections to appeal to a broader consumer base while providing good quality
and value. Ethan Allen continuously monitors consumer demands through marketing
research and through consultation with its dealers and store designers who
provide valuable input on consumer tastes and needs. As a result, the Company is
able to react quickly to changing consumer tastes and has added or revised nine
major home furnishing collections and has discontinued five home furnishing
collections in the past five years. In addition, Ethan Allen continuously
refines and enhances its product lines by adding and redesigning pieces within
each collection. This allows the Company to maintain focused product lines
within each style category, which enhances efficiencies. In fiscal year 2000,
the Company's focus was on introducing the Horizon and EA Elements product lines
of home furnishings.
Current products are positioned in terms of selection, quality and value.
Management believes that the two most important style categories in home
furnishings today are the Classic and Casual product lines. Ethan Allen's
products are grouped into collections within these two lifestyle categories.
Each collection includes case goods, upholstered products and home accessories.
Each is styled with its own distinct design characteristics. Home accessories
play an important role in Ethan Allen's marketing program as this enables the
Company to provide a complete home furnishings collection. Ethan Allen's store
interiors are designed for the display of these categories in complete room
settings, which utilize the related collections to project the category
lifestyle.
2
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The following is a summary of Ethan Allen's major categories of home
furnishing collections that have been introduced at the wholesale level:
<TABLE>
<CAPTION>
PRINCIPAL CASE GOOD CALENDAR
STYLE HOME FURNISHING PRINCIPAL YEAR OF
CATEGORY CHARACTERISTICS COLLECTIONS WOOD TYPE INTRODUCTION
<S> <C> <C> <C> <C>
Classic An opulent style, which Georgian Court Cherry 1965
includes English 18th 18th Century Mahogany 1987
Century and 19th Century Medallion Cherry 1990
Neo-Classic styling. Avenue Cherry 1998
Collectors Classics Various Various
Legacy Collection Maple 1992
British Classics Maple 1995
Country French Birch 1998
Casual This style is based American Impressions Cherry 1991
on classic contemporary Radius Prima Vera 1994
design elements. Farmhouse Pine Pine 1988
Country Crossings Maple 1993
Country Colors Maple 1995
American Artisan Oak 1998
EA Elements Maple 1999
Horizon Ash 1999
</TABLE>
Industry Segments
The Company's operations are classified into two main businesses: wholesale
and retail home furnishings. The wholesale home furnishings business is
principally involved in the manufacture, sale and distribution of home
furnishing products to a network of independently-owned and Ethan Allen-owned
("Company-owned") stores. The wholesale business primarily consists of three
operating segments; case goods (wood furniture), upholstery, and home
accessories. The retail home furnishings business sells home furnishing products
through a network of Ethan Allen-owned stores.
Wholesale Home Furnishings:
Case Good Business. For fiscal year 2000, the Company's case good business
had net sales of $382.1 million (56% of the Company's wholesale net sales). The
case good segment is engaged in the manufacture and sale of wood furniture to
independent and company-owned retail stores. The Company currently has 13 case
good manufacturing locations, which includes 3 sawmill operations. Sales of wood
furniture include home furnishing items such as, beds, dressers, armoires, night
tables, dining room chairs and tables, buffets, sideboards, coffee tables,
entertainment units, and home offices.
Upholstery Business. For fiscal year 2000, the upholstery segment had net
sales of $194.7 million (29% of the Company's wholesale net sales). The
Upholstery segment is involved in the manufacture and sale of upholstered
frames, cut fabrics and leathers. Skilled craftsmen cut and sew custom-designed
upholstery items having a variety of frame and fabric options. Sales of
upholstery home furnishing items include sleepers, recliners, sofas and cut
fabrics.
Home Accessory Business. For fiscal year 2000, home accessories had net
sales of $98.4 million (14% of the Company's wholesale net sales). The home
accessory segment primarily sells home accent items such as wall decor,
lighting, clocks, wood accents, bedspreads, decorative accessories, area rugs,
and bedding.
3
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Retail Home Furnishings:
The retail business exclusively sells Ethan Allen's products through a
network of 305 retail stores. As of June 30, 2000, Ethan Allen owned and
operated 82 stores and independent dealers owned and operated 202 North American
stores and 21 stores abroad. In the past five years, Ethan Allen and its
independent dealers have opened over 90 new stores, many of them relocations.
Sales to independent dealer-owned stores accounted for approximately 56% of
total net sales of the Company in fiscal year 2000. The ten largest independent
dealers own a total of 43 stores, which accounted for approximately 22% of net
orders booked in fiscal year 2000.
Ethan Allen desires to maintain independent ownership of most of its retail
stores and has an active program to identify and develop new independent
dealers. Independent dealers are required to enter into license agreements with
Ethan Allen authorizing the use of certain Ethan Allen service marks and
requiring adherence to certain standards of operation. These standards include
the exclusive sale of Ethan Allen products. Additionally, dealers are required
to enter into warranty service agreements. Ethan Allen is not subject to any
territorial or exclusive dealer agreements in the United States. It is the
Company's intention to grow independent licensees as well as expand our company
owned retail business by opening new stores and by acquiring stores from our
existing independent dealers.
Company Retail Business. For fiscal year 2000, the retail segment had net
sales of $371.4 million (43% of the Company's net sales). As of June 30, 2000,
the Company-owned stores consisted of 82 locations as compared to 73 at the end
of the prior fiscal year. During 2000, the Company acquired 8 stores from
independent dealers, sold 1 to an independent retailer, opened 3 new stores,
relocated 1 store and closed 1 store.
For further information regarding operating segments, see Note 14 to the
Company's Consolidated Financial Statements for the year ended June 30, 2000.
Retail Store Concept. Ethan Allen's interior and exterior design is
dependent on the store's location and size. Depending on the opportunity in the
market, stores are located in busy urban settings, suburban strip malls and
free-standing destination stores. Although stores range in size from
approximately 6,000 square feet to 30,000 square feet, the average size of a
store is about 15,000 square feet.
Ethan Allen maximizes uniformity of store presentation throughout the
retail network through uniform standards of operation. These standards of
operation help each store present the same high quality image and offer retail
customers consistent levels of product selection and service. The stores are
staffed with a sales force of over 3,000 trained designers and professionals,
who assist customers at no additional charge in decorating their homes. Ethan
Allen believes this design service gives it an unusual competitive advantage
over other furniture retailers.
In 1992, Ethan Allen instituted a new image and logo program. Additionally,
Ethan Allen undertook a program to renovate the exterior of its stores. As of
June 30, 2000, this renovation program has been completed for all stores
(including Ethan Allen-owned stores and independent dealers). These stores have
4
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either implemented the new exterior design or are currently under renovation.
Ethan Allen provides display planning assistance to dealers to support them in
updating the interior projection of their stores. In 1997, the Company
implemented a new interior design format for its retail stores. The interior
design format positions Ethan Allen as a specialist in casual styles, classic
designs and decorative accessory retailing. The store interior's present
products in focused vignettes that are easy and relatively inexpensive to update
each season. Information displays also educate consumers as they travel
throughout the store. To date, 78 or 26% of all stores have incorporated or are
currently in the process of incorporating this new interior design. Consumer
response has been strong and Ethan Allen expects to have essentially all of its
Company-owned retail stores incorporate the new interior look over the next few
years and believes that many of its independent retail stores will also
incorporate this new strategy.
Ethan Allen recognizes the importance of its store network to its long-term
success and has developed and maintains a close ongoing relationship with its
dealers. Ethan Allen offers substantial services to the Ethan Allen stores in
support of their marketing efforts, including coordinated national advertising,
merchandising and display programs, and extensive dealer training seminars and
educational materials. Ethan Allen believes that the development of designers,
sales managers, service and delivery personnel and dealers is important for the
growth of its business. Ethan Allen has, therefore, committed to offer to all
dealers a comprehensive training program that will help to develop retail
managers/owners, designers and service and delivery personnel to their fullest
potential. Ethan Allen has offered dealers various assistance programs,
including long-term financial assistance in connection with the financing of
their inventory, the opening of new stores and the renovation of stores in
accordance with Ethan Allen's image and logo program.
5
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The Company introduced a new financing plan during fiscal year 2000 called
the Simple Finance Plan. Financing offered to consumers through this plan is
granted on a non-recourse basis to the Company. The plan provides credit lines
from $3,000 to $50,000 and has an annual interest rate of 9.99%. Consumers may
apply for this financing plan either at the retail stores or through the Company
website. Approximately 77% of applications submitted during fiscal year 2000
were approved and there are over 7,000 accounts currently outstanding. The
aggregate outstanding balances as of June 30, 2000 are over $30.0 million and
the average credit line is $14,400 with an average transaction size of $1,635.
This plan has been well received by the retail network and will be included in
the Company's national marketing campaign in fiscal year 2001.
Internet
In fiscal year 2000, the Company continued the development of its Internet
strategy. Phase I of this strategy, which was introduced in January 2000,
included web browsing capabilities that allows consumers to view most of the
Company's product line on the Company's website located at www.ethanallen.com.
Phase I also included the development of an extranet, which links the retail
stores with the consumer information captured on-line. This information includes
requests for design assistance and for copies of the Company's catalogue. In May
2000, Phase II of our strategy enabled e-commerce functionality to the website
so that consumers may purchase home accessory items. Phase III will extend
e-commerce functionality to the case good and upholstery product lines in the
fall of this year. The Company believes that the primary goal for the website is
to drive additional business to our retail network through lead generation.
Advertising and Promotion
Ethan Allen has developed a highly coordinated, nationwide advertising and
promotional campaign designed to increase consumer awareness of the breadth of
Ethan Allen's product offerings. Ethan Allen launched an expanded national
television campaign in January 1997 to increase the Company's projection at the
national level. In addition to its national television campaign, Ethan Allen
utilizes direct mail, magazine, newspaper and radio advertising. Ethan Allen
believes that its ability to coordinate its advertising efforts with those of
its dealers provides a competitive advantage over other home furnishing
manufacturers and retailers.
Ethan Allen's in-house staff, working with a leading advertising firm, has
developed and implemented what the Company believes is the most extensive
national television campaign in the home furnishings industry. This campaign is
designed to support the eight annual sale periods and to increase the flow of
traffic into stores during the sale periods. Ethan Allen television advertising
is aired approximately 25 weeks per year.
The Ethan Allen Interiors magazine, which features Ethan Allen's home
furnishing collections, is one of Ethan Allen's most important marketing tools.
Over 70 million copies of the magazine, which features sale products, are
distributed to consumers during the eight sale periods. The Company publishes
and sells the magazines to its dealers who, with demographic information
collected through independent market research, are able to target potential
consumers.
Ethan Allen's television advertising and direct mail efforts are supported
by strong print campaigns in various markets, and in leading home fashion
magazines using advertisements and public relations efforts. The Company
coordinates significant advertisements in major newspapers in its major markets.
The Ethan Allen Treasury, a complete catalogue of the Ethan Allen home
collection, which is distributed in the stores, is one of the most comprehensive
home furnishing catalogues in the industry.
6
<PAGE>
Manufacturing
Ethan Allen is one of the largest manufacturers of household furniture in
the United States. Ethan Allen manufactures and/or assembles approximately 83%
of its products at 20 manufacturing facilities which includes 3 saw mills,
thereby maintaining control over cost, quality and service to its consumers. The
case goods facilities are located close to sources of raw materials and skilled
craftsmen, predominantly in the Northeast and Southeast regions of the country.
Upholstery facilities are located across the country in order to reduce shipping
costs to stores and are located at sites where skilled craftsmanship is
available. Management believes that continued investment at its manufacturing
facilities, combined with selective acquisitions and outsourcing will
accommodate future sales growth.
To further strengthen case goods manufacturing capacity, the Company signed
a Letter of Intent on July 31, 2000 to purchase Pulaski Furniture Corporation's
Dublin, Virginia manufacturing facility. This plant which opened in 1973,
consists of 450,000 square feet of case good manufacturing space and 120,000
square feet of distribution space. The Company's objective is to retain most of
the employees and convert the operations to manufacture Ethan Allen product
lines. It is anticipated that the plant will increase case good production by
approximately 10% on an annual basis. The Company is also constructing a
dimensions plant at the saw mill plant in Andover, Maine, which will be
completed early in fiscal year 2001.
Distribution
Ethan Allen distributes its products primarily through six regional
distribution centers and terminals strategically located throughout the United
States. These distribution centers and terminals hold finished products received
from Ethan Allen's manufacturing facilities for shipment to Ethan Allen's
dealers or home delivery service centers. Ethan Allen stocks case goods and
accessories to provide for quick delivery of in-stock items and to allow for
more efficient production runs.
Approximately 33% of shipments are made to and from the distribution and
home delivery service centers by the Company's fleet of trucks and trailers. The
balance of Ethan Allen's shipments are subcontracted to independent carriers.
Approximately 80% of Ethan Allen-owned delivery vehicles are leased under two to
eight-year leases.
Ethan Allen's policy is to sell its products at the same delivered cost to
all dealers nationwide, regardless of their shipping point. The adoption of this
policy has discouraged dealers from carrying significant inventory in their own
warehouses. As a result, Ethan Allen obtains accurate information regarding
sales to dealers to better plan production runs and manage inventory.
Raw Materials and Suppliers
The most important raw materials used by Ethan Allen in furniture
manufacturing are lumber, veneers, plywood, particle board, hardware, glue,
finishing materials, glass, mirrored glass, laminates and fabrics. The various
types of wood used in Ethan Allen's products include cherry, oak, maple, prima
vera, mahogany, birch and pine, substantially all of which are purchased
domestically. Fabrics and other raw materials are purchased both domestically
and abroad. Ethan Allen has no significant long-term supply contracts, and has
experienced no significant problems in supplying its operations. Ethan Allen
maintains a number of sources for its raw materials which management believes
contribute to its ability to obtain competitive pricing for raw materials.
Lumber prices fluctuate over time depending on factors such as weather and
demand, which impact availability. Upward trends in prices could have a
short-term impact on margins. A sufficient inventory of lumber and fabric is
usually stocked to maintain approximately 8 to 19 weeks of production.
Management believes that its sources of supply for these materials are adequate
and that it is not dependent on any one supplier.
7
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Competition
The home furnishings industry at the retail level is highly competitive
and fragmented. Although Ethan Allen is among the ten largest furniture
manufacturers, industry estimates indicate that there are over 1,000
manufacturers of all types of furniture in the United States. Some of these
manufacturers produce furniture types not manufactured by Ethan Allen. Certain
of the companies, which compete directly with Ethan Allen, may have greater
financial and other resources than the Company.
Since Ethan Allen's products are sold primarily through stores which sell
exclusively Ethan Allen products, Ethan Allen's effort is focused primarily upon
obtaining and retaining independent dealers, increasing the volume of such
dealers' retail sales, and expanding our company-owned retail business by
opening new stores and, when appropriate, acquiring stores from our existing
independent dealers. The home furnishings industry competes primarily on the
basis of product styling and quality, personal service, prompt delivery, product
availability and price. Ethan Allen believes that it effectively competes on the
basis of each of these factors and believes that its store format provides it
with a competitive advantage because of the complete home furnishing product
selection and service available to the consumer.
Furniture Today (a leading industry publication) published a survey of
America's Top 100 Furniture Retailers on May 22, 2000. Ethan Allen was ranked
No. 2 in terms of furniture, bedding, and accessory sales for dealer-owned and
Company-owned stores and was ranked No. 1 as the largest single-source store
network for home furnishings in the country. According to the survey, sales for
the top 100 furniture stores approximated $20 billion, an increase of 11.9% over
the prior year. These stores accounted for 53% of all furniture sales in the
United States in 1999. Sales for the top 10 furniture retailers grew 6.4% to
approximately $8.0 billion, which represents a 22% share of all furniture
stores.
Trademarks
Ethan Allen currently holds numerous trademarks, service marks and design
patents for the Ethan Allen name, logos and designs in a broad range of classes
for both products and services. Ethan Allen also holds international
registrations for Ethan Allen trademarks in fifty-six foreign countries and has
applications for registration pending in twenty other foreign countries. Ethan
Allen has registered or has applications pending for many of its major
collection names as well as certain of its slogans coined for use in connection
with retail sales and other services. Ethan Allen views its trade and service
marks as valuable assets and has an ongoing program to diligently monitor their
unauthorized use through appropriate action.
Backlog and Net Orders Booked
As of June 30, 2000, Ethan Allen had a wholesale backlog of approximately
$75.4 million, compared to a backlog of $56.9 million as of June 30, 1999. The
backlog is anticipated to be serviced in the first quarter of fiscal year 2001.
Backlog at any point in time is primarily a result of net orders booked in prior
periods, manufacturing schedules and the timing of product shipments. Net orders
booked at the wholesale level from all Ethan Allen stores (including all
independently-owned and Ethan Allen-owned stores) for the twelve months ended
June 30, 2000 were $706.9 million, resulting in an increase of 14.3% over fiscal
year 1999. Net orders booked in any period are recorded based on wholesale
prices and do not reflect the additional retail margins produced by the Ethan
Allen-owned stores.
8
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Employees
Ethan Allen has 8,090 employees as of June 30, 2000. Approximately 7% of
the Company's employees are represented by unions under collective bargaining
agreements. The Company's labor contracts expire at various times in 2002. The
Company expects no significant changes in its relations with these unions and
Ethan Allen believes it has good relations with its employees.
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ITEM 2. PROPERTIES
The corporate headquarters of Ethan Allen, located in Danbury, Connecticut,
consists of one building containing 144,000 square feet, situated on
approximately 17.5 acres of land, all of which is owned by Ethan Allen. Located
adjacent to the corporate headquarters is the Ethan Allen Inn, a hotel
containing 195 guestrooms. This hotel, owned by a wholly-owned subsidiary of
Ethan Allen, is used for Ethan Allen functions and in connection with training
programs as well as for accommodations for the general public.
Ethan Allen has 20 manufacturing facilities, which includes 3 saw mills
located in 10 states, all of which are owned, with the exception of a leased
upholstery plant in California, totaling 122,300 square feet. These facilities
consist of 13 case goods manufacturing plants, totaling 3,192,000 square feet
(including three sawmills), 6 upholstery furniture plants, totaling 1,384,000
square feet and 1 plant involved in the manufacture and assembly of Ethan
Allen's non-furniture coordinates with 295,000 square feet. In addition, Ethan
Allen owns six and leases four distribution warehouses, totaling 1,012,500
square feet, and leases one home delivery service center with 52,000 square
feet. The Company's manufacturing and distribution facilities are located in
North Carolina, Vermont, Pennsylvania, Virginia, New York, Oklahoma, California,
New Jersey, Indiana, Maine and Massachusetts.
There are 82 Ethan Allen-owned retail stores in the United States, of which
29 stores are owned and 53 stores are leased.
Ethan Allen's manufacturing facility in Maiden, North Carolina and the Inn
at Ethan Allen in Danbury, Connecticut were financed with industrial revenue
bonds and the Beecher Falls, Vermont facility was financed in part by the State
of Vermont Economic Development Authority. In addition, one retail store is
subject to a mortgage loan agreement. Ethan Allen believes that all of its
properties are well maintained and in good condition.
Ethan Allen estimates that its case goods, upholstery, and home accessories
operating segments are currently operating at approximately 87% of capacity.
Management believes it has additional capacity at many facilities, which it
could utilize with minimal additional capital expenditures.
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ITEM 3. LEGAL PROCEEDINGS
Ethan Allen is a party to various legal actions with customers, employees
and others arising in the normal course of its business. Ethan Allen maintains
liability insurance, which Ethan Allen believes, is adequate for its needs and
commensurate with other companies in the home furnishings industry. Ethan Allen
believes that the final resolution of pending actions (including any potential
liability not fully covered by insurance) will not have a substantial adverse
effect on the Company's results of operations and financial position.
Environmental Matters
The Company has been named as a potentially responsible party ("PRP") for
the cleanup of three sites currently listed or proposed for inclusion on the
National Priorities List ("NPL") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"). With respect to all of these
sites, the Company believes that it is not a major contributor based on the very
small volume of waste generated by the Company in relation to total volume at
the site. The Company believes its share of waste contributed to these sites is
small in relation to the total, however, liability under CERCLA may be joint and
several. For two of the sites, the remedial investigation is ongoing. A volume
based allocation of responsibility among the parties has been prepared. Numerous
other parties have been identified as PRP's at these sites. The Company is also
a settling defendant for remedial design and construction activities at one of
the sites. Approximately two-thirds of the remedial work has been performed at
this site and Ethan Allen's portion of the remedial action will be completed
over the next several months. The Company believes that the resolution of such
matter will not have a material adverse effect on its financial condition,
results of operations, or cash flows.
Ethan Allen is subject to other federal, state and local environmental
protection laws and regulations and is involved from time to time in
investigations and proceedings regarding environmental matters. The Company is
regulated under several federal, state and local laws and regulations concerning
air emissions, water discharges, and management of solid and hazardous wastes.
The Company believes that its facilities are in material compliance with all
applicable laws and regulations. Regulations issued under the Clean Air Act
Amendments of 1990 required the Company to reformulate certain furniture
finishes or institute process changes to reduce emissions of volatile organic
compounds. These requirements have been implemented via high solids coating
technology and alternative formulations. Ethan Allen has implemented a variety
of technical and procedural controls, such as reformulating of finishing
materials to reduce toxicity, implementation of high velocity low pressure spray
systems, development of inspections/audit teams including coating emissions
reductions teams at all finishing factories and storm water protection plans and
controls, that have reduced emissions per unit of production. In addition, Ethan
Allen is currently reclassifying its waste as part of the factory waste
minimization programs, developing environment and safety job hazard analysis
programs on the shop floor to reduce emissions and safety risks, and developing
an auditing system to control and ensure consistent protocols and procedures are
applied. The Company will continue to evaluate the best applicable, cost
effective, control technologies for finishing operations and design hazardous
materials out of the manufacturing processes.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to security holders of the Company in
fiscal year 2000:
o Proposal for the election of M. Farooq Kathwari and Horace G. McDonell
as Directors.
o Proposal for ratification of KPMG LLP as Independent Auditors for
fiscal year 2000.
o Proposal of an amendment to the 1992 Stock Option Plan to award
options to purchase 2,000 shares of stock to each of the Independent
Directors.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange. The
following table indicates the high and low sales prices of the Company's Common
Stock as reported on the New York Stock Exchange Composite Tape:
Market Price
---------------------------
High Low
---------------------------
Fiscal 2000
Fourth Quarter $ 28 3/4 $ 23 1/16
Third Quarter 30 3/16 21 5/8
Second Quarter 36 13/16 29 3/8
First Quarter 33 1/16 26 7/16
Fiscal 1999
Fourth Quarter $ 37 3/4 $ 24 21/32
Third Quarter 33 13/16 25 1/2
Second Quarter 29 15 3/4
First Quarter 34 3/4 20
As of August 18, 2000, there were approximately 441 shareholders of record
of the Company's Common Stock.
On August 3, 2000, the Company declared a $0.04 per common share dividend
for all holders of record on October 10, 2000 and payment date of October 25,
2000. The Company expects to continue to declare quarterly dividends for the
foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth summary consolidated financial information
of the Company for the years and dates indicated (dollars in thousands, except
per share data):
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
-------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $ 856,171 $ 762,233 $ 679,321 $ 571,838 $ 509,776
Cost of sales 455,561 407,234 363,746 323,600 304,650
Selling, general and
administrative expenses 254,511 222,107 195,885 162,389 149,559
--------- --------- --------- --------- ---------
Operating income 146,099 132,892 119,690 85,849 55,567
Interest and other
miscellaneous income, net 1,925 1,707 3,449 1,272 1,039
--------- --------- --------- --------- ---------
Income before interest expense,
income taxes, and extraordinary
charge 148,024 134,599 123,139 87,121 56,606
Interest expense 1,254 1,882 4,609 6,427 9,616
Income tax expense 56,200 51,429 46,583 31,954 18,845(1)
--------- --------- --------- --------- ---------
Income before extraordinary
charge 90,570 81,288 71,948 48,740 28,145
Extraordinary charge (net of tax) -- -- (802)(3) -- --
--------- --------- --------- --------- ---------
Net income $ 90,570 $ 81,288 $ 71,146 $ 48,740 $ 28,145
========= ========= ========= ========= =========
Per Share Data: (2)
Net income per basic share $ 2.25 $ 1.97 $ 1.65 $ 1.13 $ 0.66
Basic weighted average shares
outstanding 40,301 41,278 43,050 43,190 42,936
Net income per diluted share $ 2.20 $ 1.92 $ 1.61 $ 1.11 $ 0.64
Diluted weighted average
shares outstanding 41,198 42,287 44,136 43,815 43,692
Cash dividends declared $ 0.16 $ 0.12 $ 0.09 $ 0.07 $ 0.03
Other information:
Depreciation and amortization $ 16,975 $ 16,344 $ 15,868 $ 16,411 $ 17,495
Capital expenditures 48,181 40,628 29,665 23,383 13,314
Balance Sheet Data (at end of period):
Total assets $ 543,571 $ 480,622 $ 433,123 $ 427,784 $ 395,981
Long-term debt including
capital lease obligations 9,487 9,919 12,496 66,766 82,681
Shareholders' equity $ 390,509 $ 350,535 $ 314,320 $ 265,434 $ 220,293
</TABLE>
Footnotes on following page.
14
<PAGE>
NOTES TO SELECTED FINANCIAL DATA
(Dollars in thousands)
(1) Includes a $1.7 million credit to income tax expense, resulting from the
restatement of deferred taxes to reflect the Company's expected future
effective tax rate upon the completion of the business reorganization in
1996.
(2) Amounts have been retroactively adjusted to reflect the two-for-one stock
split on September 2, 1997 and the three-for-two stock split on May 21,
1999.
(3) During fiscal 1998, the Company completed its optional early redemption of
all of its $52.4 million then-outstanding 8-3/4% Senior Notes, due on March
15, 2001, at 101.458% of par value. As a result of the early redemption, an
extraordinary charge of $0.8 million, net of tax benefit, was recorded. The
extraordinary charge included the write-off of unamortized deferred
financing costs associated with the Senior Notes and the premium related to
the early redemption.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of results of operations and financial condition
is based upon and should be read in conjunction with the Consolidated Financial
Statements of the Company and notes thereto included under Item 8 of this
Report.
Forward-Looking Statements
Management's discussion and analysis of financial condition and results of
operations and other sections of this annual report contain forward-looking
statements relating to future results of the Company. Such forward-looking
statements are identified by use of forward-looking words such as "anticipates",
"believes", "plans", "estimates", "expects", and "intends" or words or phrases
of similar expression. These forward-looking statements are subject to various
assumptions, risks and uncertainties, including but not limited to, changes in
political and economic conditions, demand for the Company's products, acceptance
of new products, technology developments affecting the Company's products and to
those discussed in the Company's filings with the Securities and Exchange
Commission. Accordingly, actual results could differ materially from those
contemplated by the forward-looking statements.
Basis of Presentation
The Company has no material assets other than its ownership of Ethan
Allen's capital stock and conducts all significant transactions through Ethan
Allen; therefore, substantially all of the financial information presented
herein is that of Ethan Allen.
Results of Operations:
Ethan Allen's revenues are comprised of wholesale sales to dealer-owned and
company-owned retail stores and retail sales of company-owned stores. The
Company's wholesale sales are mainly derived from its three reportable operating
segments; case goods, upholstery, and home accessories. See Note 14 to the
Company's Consolidated Financial Statements for the year ended June 30, 2000.
The components of consolidated revenues and operating income are as follows
(dollars in millions):
Fiscal Years Ended June 30,
----------------------------------
2000 1999 1998
------ ------ -------
Revenue:
Wholesale Revenue:
Case goods $ 382.1 $ 352.2 $ 328.6
Upholstery 194.7 174.6 160.1
Home accessories 98.4 90.1 71.4
Other 9.4 13.7 9.0
------ ------- ------
Total Wholesale Revenue 684.6 630.6 569.1
Total Retail Revenue 371.4 294.7 235.2
Other 6.4 6.4 6.7
Elimination of inter-segment sales (206.2) (169.5) (131.7)
------ ------ ------
Consolidated Revenue $ 856.2 $ 762.2 $ 679.3
====== ====== ======
Operating Income:
Wholesale Operating Income:
Case goods $ 131.5 $ 127.5 $ 120.3
Upholstery 59.2 53.2 51.2
Home accessories 30.9 29.2 22.9
Unallocated Corporate Expenses (90.5) (87.8) (86.4)
------ ------ -----
Total Wholesale Operating Income 131.1 122.1 108.0
Total Retail Operating Income 20.6 15.1 13.8
Other 0.5 1.4 1.7
Eliminations (6.1) (5.7) (3.8)
------ ----- ------
Consolidated Operating Income $ 146.1 $ 132.9 $ 119.7
====== ====== ======
16
<PAGE>
Fiscal 2000 Compared to Fiscal 1999
Consolidated revenue for fiscal year 2000 of $856.2 million increased by
$94.0 million or 12.3% from fiscal year 1999 consolidated revenue of $762.2
million. Overall sales growth resulted from new product offerings, new and
relocated stores, growth in the retail segment, a selected case good price
increase effective December 1, 1998 and to a lesser extent, an overall price
increase effective February 25, 2000.
Total wholesale revenue for fiscal year 2000 was $684.6 million as compared
to $630.6 million in fiscal year 1999. This represents a $54.0 million or 8.6%
increase from fiscal year 1999.
Case goods revenue increased $29.9 million or 8.5% to $382.1 million in
fiscal year 2000 as compared to the prior year of $352.2 million mainly due to
new product offerings and from the benefit of a selected price increase
effective December 1, 1998.
Upholstery revenue increased $20.1 million or 11.5% to $194.7 million in
fiscal year 2000 as compared to $174.6 million in fiscal year 1999. The
increase in revenue of $20.1 million is primarily attributable to new fabric
introductions, a focused marketing effort, and more attractive price points on
new products.
Home accessory revenue increased $8.3 million or 9.2% to $98.4 million in
fiscal year 2000. This increase resulted from new merchandising strategies and
expanded product lines.
Total retail revenue from Ethan Allen-owned stores during fiscal year 2000
increased by $76.7 million or 26.0% to $371.4 million from $294.7 million in
fiscal year 1999. The increase in retail sales by Ethan Allen-owned stores is
attributable to a 17.2% or $48.0 million increase in comparable store sales, and
an increase in sales generated by newly opened or acquired stores of $37.9
million, partially offset by closed stores, which generated $9.2 million less
sales in fiscal year 2000 as compared to fiscal year 1999. The number of Ethan
Allen-owned stores increased to 82 as of June 30, 2000 as compared to 73 as of
June 30, 1999. The Company acquired 8 stores from independent dealers, sold 1 to
an independent dealer, opened 3 new stores, relocated 1 store and closed 1
store.
Comparable stores are those which have been operating for at least 15
months. Minimal net sales, derived from the delivery of customer ordered
product, are generated during the first three months of operations of newly
opened stores. Stores acquired from dealers by Ethan Allen are included in
comparable store sales in their 13th full month of Ethan Allen-owned operations.
During fiscal year 2000, the Company and its independent dealers opened 15
new stores, of which 4 stores represented relocations. At June 30, 2000, there
were 305 total stores, of which 223 were dealer-owned stores. The Company's
objective is to continue the expansion of both the dealer-owned and Ethan
Allen-owned stores.
Gross profit for fiscal year 2000 increased by $45.6 million or 12.8% from
fiscal year 1999 to $400.6 million. This increase is attributable to higher
sales volume, combined with an increase in gross margin from 46.6% in fiscal
1999 to 46.8% in fiscal 2000. Gross margins have been favorably impacted by
higher sales volumes, a selected case good price increase effective December 1,
1998, a selected price increase effective February 25, 2000, and a higher
percentage of retail sales to total sales, partially offset by, higher
manufacturing costs, mainly raw materials and labor.
Operating expenses increased $32.4 million from $222.1 million or 29.1% of
net sales in fiscal year 1999 to $254.5 million or 29.7% of net sales in fiscal
year 2000. This increase is primarily attributable to the expansion of the
retail segment resulting in the addition of 9 net new Ethan Allen-owned stores
in fiscal year 2000.
Consolidated operating income for fiscal year 2000 was $146.1 million or
17.1% of net sales compared to $132.9 million or 17.4% of net sales in fiscal
year
17
<PAGE>
1999. This represents an increase of $13.2 million or 9.9%. This increase
is primarily attributable to higher sales volume, partially offset by a lower
wholesale and retail gross margin and higher operating expenses resulting from
the growth in the retail segment.
Total wholesale operating income for fiscal year 2000 was $131.1 million or
19.2% of wholesale net sales compared to $122.1 million or 19.4% of wholesale
net sales in fiscal year 1999. Wholesale operating income increased $9.0 million
or 7.4% in fiscal year 2000.
Case goods operating income increased $4.0 million or 3.1% to $131.5
million in fiscal year 2000 over the prior year mainly due to higher sales
volume, the impact of the price increases, offset by a lower gross margin
resulting from certain manufacturing inefficiencies.
Upholstery operating income increased $6.0 million or 11.3% to $59.2
million in fiscal year 2000 as compared to $53.2 million in fiscal year 1999.
The increase resulted from higher sales volume and improved gross margin
resulting from manufacturing efficiencies gained through increased production.
Home accessory operating income increased $1.7 million or 5.8% to $30.9
million in fiscal year 2000 from $29.2 million in the prior year. This increase
is attributable to higher sales volume, partially offset by, a slight reduction
in gross margin caused by higher manufacturing costs.
Operating income from the retail segment increased by $5.5 million or 36.4%
to $20.6 million or 5.5% of net sales from $15.1 million or 5.1% of net sales in
fiscal year 1999. The increase in retail operating income by Ethan Allen-owned
stores is primarily attributable to increased sales volume, offset by a
reduction in gross margin and higher operating expenses associated with the
addition of new stores.
Interest expense, including the amortization of deferred financing costs,
for fiscal 2000 decreased by $0.6 million to $1.3 million, due to lower debt
balances and lower amortization of deferred financing costs.
Income tax expense of $56.2 million was recorded in fiscal year 2000. The
Company's effective tax rate was 38.3% in fiscal year 2000 as compared to 38.8%
in fiscal year 1999. The decline in the effective income tax rate in 2000 as
compared to 1999 resulted from state income tax benefits realized in fiscal year
2000.
In fiscal year 2000, the Company recorded net income of $90.6 million, an
increase of 11.4%, compared to $81.3 million in fiscal year 1999.
Fiscal 1999 Compared to Fiscal 1998
Consolidated revenue for fiscal year 1999 increased by $82.9 million or
12.2% from fiscal year 1998 to $762.2 million. Overall sales growth resulted
from new product offerings, new and relocated stores and growth in the retail
segment.
Total wholesale revenue for fiscal year 1999 increased by $61.5 million or
10.8% to $630.6 million from $569.1 million in fiscal year 1998. Case goods
revenue increased $23.6 million or 7.2% to $352.2 million in fiscal year 1999 as
compared to the prior year of $328.6 million mainly due to new product offerings
and the benefit of a selected price increase effective December 1, 1998.
Upholstery revenue increased $14.5 million or 9.1% to $174.6 million in
fiscal year 1999 as compared to $160.1 million in fiscal year 1998. The
increase in revenue of $14.5 million is primarily attributable to new fabric
introductions and the impact of expanded national television advertising.
Home accessory revenue increased $18.7 million or 26.2% to $90.1 million in
fiscal year 1999. This increase resulted from enhanced merchandising strategies,
18
<PAGE>
new product introductions, and an improved in-stock inventory position, which
reduced customer lead time.
Total retail revenue from Ethan Allen-owned stores during fiscal year 1999
increased by $59.5 million or 25.3% to $294.7 million from $235.2 million in
fiscal year 1998. The increase in retail sales by Ethan Allen-owned stores is
attributable to a 14.3% or $30.9 million increase in comparable store sales, and
an increase in sales generated by newly opened or acquired stores of $35.2
million, partially offset by closed stores, which generated $6.6 million less
sales in fiscal year 1999 as compared to fiscal year 1998. The number of Ethan
Allen-owned stores increased to 73 as of June 30, 1999 as compared to 67 as of
June 30, 1998. The Company acquired 5 stores from independent dealers, opened 4
new stores, relocated 3 stores and closed 3 stores.
Comparable stores are those which have been operating for at least 15
months. Minimal net sales, derived from the delivery of customer ordered
product, are generated during the first three months of operations of newly
opened stores. Stores acquired from dealers by Ethan Allen are included in
comparable store sales in their 13th full month of Ethan Allen-owned operations.
During fiscal year 1999, the Company and its independent dealers opened 20
new stores, of which 9 stores represented relocations. At June 30, 1999, there
were 309 total stores, of which 236 were dealer-owned stores. The Company's
objective is to continue the expansion of both the dealer-owned and Ethan
Allen-owned stores.
Gross profit for fiscal year 1999 increased by $39.4 million or 12.5% from
fiscal year 1998 to $355.0 million. This increase is attributable to higher
sales volume, combined with an increase in gross margin from 46.5% in fiscal
1998 to 46.6% in fiscal 1999. Gross margins have been favorably impacted by
higher sales volumes, greater manufacturing efficiencies, improvements in
manufacturing technology, a selected case good price increase effective December
1, 1998, and a higher percentage of retail sales to total sales. These factors
are partially offset by higher raw material and labor costs.
Operating expenses increased $26.2 million from $195.9 million or 28.8% of
net sales in fiscal 1998 to $222.1 million or 29.1% of net sales in fiscal year
1999. This increase is attributable to an increase in operating expenses in the
Company's retail division of $23.1 million due the expansion of the retail
segment resulting in the addition of 7 new Ethan Allen-owned stores in 1999.
Consolidated operating income for fiscal year 1999 was $132.9 million or
17.4% of net sales compared to $119.7 million or 17.6% of net sales in fiscal
year 1998. This represents an increase of $13.2 million or 11.0%. This increase
is primarily attributable to higher sales volume, partially offset by a lower
wholesale and retail gross margin and higher operating expenses related to the
higher retail volume.
Total wholesale operating income for fiscal year 1999 was $122.1 million or
19.4% of net sales compared to $108.0 million or 19.0% of net sales in fiscal
year 1998. Wholesale operating income increased $14.1 million or 13.1%. Case
goods operating income increased $7.2 million or 6.0% to $127.5 million in
fiscal year 1999 over the prior year mainly due to higher sales volume and a
selected price increase, offset by a slight reduction in gross margin to 39.4%.
Upholstery operating income increased $2.0 million or 3.9% to $53.2 million
in fiscal year 1999 as compared to $51.2 million in fiscal year 1998. The
increase resulted from increased volume and continued management of expenses.
These factors are partially offset by a reduction in gross margin to 32.9% in
fiscal year 1999 as compared to 34.5% in the prior fiscal year.
19
<PAGE>
Home accessory operating income increased $6.3 million or 27.5% to $29.2
million in fiscal year 1999. This increase resulted from higher volume and lower
operating expenses, slightly offset by a 0.6% reduction in gross margin to
33.2%.
Operating income from the retail segment increased by $1.3 million or 9.4%
to $15.1 million or 5.1% of net sales from $13.8 million or 5.8% of net sales in
fiscal year 1998. The increase in retail operating income by Ethan Allen-owned
stores is primarily attributable to increased volume, slightly offset by a
reduction in gross margin from 44.6% in fiscal year 1998 to 44.0% in fiscal year
1999 and a higher composition of expenses related to the start-up of 7 retail
stores and the acquisition of 5 additional stores from independent dealers in
fiscal year 1999.
Interest expense, including the amortization of deferred financing costs,
for fiscal 1999 decreased by $2.7 million to $1.9 million, due to lower debt
balances and lower amortization of deferred financing costs.
Income tax expense of $51.4 million was recorded in fiscal year 1999. The
Company's effective tax rate was 38.8% in 1999 as compared to 39.3% in 1998. The
decline in the effective income tax rate in 1999 as compared to 1998 has
resulted from planning strategies initiated by the Company during fiscal year
1999.
During the year ended June 30, 1998, the Company recorded a $0.8 million
extraordinary charge (net of tax benefit) related to the early retirement of its
8-3/4% Senior Notes due 2001. The extraordinary charge included the write-off of
unamortized deferred financing costs and the premium paid related to the early
redemption.
In fiscal year 1999, the Company recorded net income of $81.3 million, an
increase of 14.3%, compared to $71.1 million in fiscal year 1998.
Financial Condition and Liquidity
The Company's principal sources of liquidity are cash flow from operations
and borrowing capacity under a revolving credit facility. Net cash provided by
operating activities totaled $104.9 million for fiscal year 2000 as compared to
$86.7 million in fiscal year 1999 and $87.6 million in fiscal year 1998. The
increase in net cash provided by operating activities principally resulted from
an increase of $9.3 million in net income and less of an increase in working
capital including inventories, which increased by $9.2 million in fiscal year
2000 as compared to $25.0 million in fiscal year 1999. The $9.2 million increase
in inventory in fiscal year 2000 was attributable to a $5.2 million increase in
Company-owned store inventory and a $3.5 million increase in manufacturing
inventory. These increases reflect the expansion of the business and an
improvement in the in-stock inventory position, thereby reducing lead times. The
current ratio was 2.18 to 1 in 2000 and 2.43 to 1 in 1999.
During fiscal year 2000, capital spending, exclusive of acquisitions,
totaled $42.1 million as compared to $40.6 million and $29.7 million in fiscal
1999 and 1998, respectively. The increased level of capital spending, which is
principally attributable to new store openings and relocations and expanding
manufacturing capacity, is expected to continue for the foreseeable future.
Capital expenditures in fiscal year 2001, exclusive of acquisitions, are
anticipated to be approximately $55.0 million. The Company anticipates that cash
from operations will be sufficient to fund this level of capital expenditures.
Total debt outstanding at June 30, 2000 was $17.9 million. At June 30,
2000, there was $8.0 million of revolving loans and $16.2 million of trade and
standby letters of credit outstanding under the Credit Agreement. The Company
had $100.8 million available under its revolving credit facility at June 30,
2000.
The Company may also, from time to time, either directly or through agents,
repurchase its common stock in the open market through negotiated purchases or
otherwise, at prices and on terms satisfactory to the Company. On January 27,
2000, the Board of Directors re-authorized the Company to repurchase up to
2,000,000 common shares. Through June 30, 2000, the Company repurchased 639,097
common shares at an average price of $23.20 per share. Depending on market
20
<PAGE>
prices and other conditions relevant to the Company, such purchases may be
discontinued at any time. During fiscal year 2000 and 1999, the Company
purchased 1,928,350 shares of its common stock on the open market at an average
price of $25.72 per share and 1,921,784 shares at an average price of $23.49,
respectively.
As of June 30, 2000, aggregate scheduled maturities of long-term debt for
each of the next five fiscal years are $8.1 million, and $0.1 million, $0.1
million, $0.1 million and $4.7 million, respectively. Management believes that
its cash flow from operations, together with its other available sources of
liquidity, will be adequate to make all required payments of principal and
interest on its debt, to permit anticipated capital expenditures and to fund
working capital and other cash requirements.
Impact of Inflation
The Company does not believe that inflation has had a material impact on
its profitability during the last three fiscal years. In the past, the Company
has generally been able to increase prices to offset increases in operating
costs.
Income Taxes
At June 30, 2000, the Company has approximately $18.5 million of net
operating loss carryovers ("NOL's") for federal income tax purposes. The
Recapitalization in 1993 triggered an "ownership change" of the Company, as
defined in Section 382 of the Internal Revenue Code of 1986, as amended,
resulting in an annual limitation on the utilization of the NOL's by the Company
of approximately $3.9 million.
New Accounting Pronouncements
In June 2000, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities". SFAS No. 138
amended SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities", which establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities. This pronouncement requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 and No. 138
are effective for fiscal years beginning after June 15, 2000. The Company will
adopt SFAS No. 133 and No. 138 in fiscal year 2001. However, the Company does
not expect these pronouncements to have a material impact on its financial
results.
21
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to interest rate risk primarily through its
borrowing activities. The Company's policy has been to utilize United States
dollar denominated borrowings to fund its working capital and investment needs.
Short term debt, if required, is used to meet working capital requirements and
long-term debt is generally used to finance long term investments. There is
inherent rollover risk for borrowings as they mature and are renewed at current
market rates. The extent of this risk is not quantifiable or predictable because
of the variability of future interest rates and the Company's future financing
requirements. At June 30, 2000, the Company had $8.4 million of short term debt
outstanding and $9.5 million of total long term debt outstanding.
The Company has one debt instrument outstanding with a variable interest
rate. This debt instrument has a principal balance of $4.6 million, which
matures in 2004. Based on the principal outstanding in 2000, a one-percentage
point increase in the variable interest rate would not have had a significant
impact on the Company's 2000 interest expense.
Currently, the Company does not enter into financial instruments
transactions for trading or other speculative purposes or to manage interest
rate exposure.
22
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Ethan Allen Interiors Inc.:
We have audited the accompanying consolidated balance sheets of Ethan Allen
Interiors Inc. and Subsidiary (the "Company") as of June 30, 2000 and 1999, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended June 30, 2000.
In connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule listed in the index under Item No.
14. The consolidated financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on the consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ethan Allen
Interiors Inc. and Subsidiary as of June 30, 2000 and 1999, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 2000, in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG LLP
Stamford, Connecticut
July 28, 2000
23
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 2000 and 1999
(Dollars in thousands)
2000 1999
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 14,024 $ 8,968
Accounts receivable, less allowance of
$2,751 and $2,460 at June 30, 2000 and
1999, respectively 34,336 34,302
Inventories 159,006 144,045
Prepaid expenses and other current assets 17,670 14,728
Deferred income taxes 10,751 7,783
--------- ---------
Total current assets $ 235,787 $ 209,826
--------- ---------
Property, plant and equipment, net 247,738 214,492
Intangibles, net 54,770 51,598
Other assets 5,276 4,706
--------- ---------
Total assets $ 543,571 $ 480,622
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and
capital lease obligations $ 8,420 $ 757
Accounts payable 65,879 59,378
Accrued expenses 11,003 9,174
Accrued compensation and benefits 22,966 16,937
--------- ---------
Total current liabilities 108,268 86,246
--------- ---------
Long-term debt 9,487 9,611
Other long-term liabilities 1,593 1,678
Deferred income taxes 33,714 32,552
--------- ---------
Total liabilities 153,062 130,087
Commitments and contingencies
Shareholders' equity:
Class A common stock, par value $.01, 150,000,000
shares authorized, 45,081,384 shares issued
at June 30, 2000, 44,666,791 shares issued at
June 30, 1999 451 447
Preferred stock, par value $.01, 1,055,000 shares
authorized, no shares issued and outstanding
at June 30, 2000 and 1999 -- --
Additional paid-in capital 272,710 267,286
--------- ---------
273,161 267,733
Less:
Treasury stock (at cost), 5,674,278 shares
at June 30, 2000 and 3,745,928 shares at
June 30, 1999 (128,493) (78,887)
--------- ---------
144,668 188,846
Retained earnings 245,841 161,689
--------- ---------
Total shareholders' equity 390,509 350,535
--------- ---------
Total liabilities and shareholders' equity $ 543,571 $ 480,622
========= =========
See accompanying notes to consolidated financial statements.
24
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the years ended June 30, 2000, 1999 and 1998
(Dollars in thousands, except per share data)
2000 1999 1998
--------- --------- ---------
Net sales $ 856,171 $ 762,233 $ 679,321
Cost of sales 455,561 407,234 363,746
--------- --------- ---------
Gross profit 400,610 354,999 315,575
Operating expenses:
Selling 140,760 123,742 110,240
General and administrative 113,751 98,365 85,645
--------- --------- ---------
Operating income 146,099 132,892 119,690
--------- --------- ---------
Interest and other miscellaneous
income, net 1,925 1,707 3,449
Interest and other related financing
costs 1,254 1,882 4,609
--------- --------- ---------
Income before income taxes
and extraordinary charge 146,770 132,717 118,530
Income tax expense 56,200 51,429 46,582
--------- --------- ---------
Income before extraordinary
charge 90,570 81,288 71,948
Extraordinary charge from early
retirement of debt, net of
income tax benefit of $527 -- -- 802
--------- --------- ---------
Net income $ 90,570 $ 81,288 $ 71,146
========= ========= =========
Per share data:
Net income per basic share:
Income before extraordinary charge $ 2.25 $ 1.97 $ 1.67
Extraordinary charge -- -- (0.02)
--------- --------- ---------
Net income per basic share $ 2.25 $ 1.97 $ 1.65
========= ========= =========
Net income per diluted share:
Income before extraordinary charge $ 2.20 $ 1.92 $ 1.63
Extraordinary charge -- -- (0.02)
--------- --------- ---------
Net income per diluted share $ 2.20 $ 1.92 $ 1.61
========= ========= =========
Dividends declared per common share $ 0.16 $ 0.12 $ 0.09
========= ========= =========
See accompanying notes to consolidated financial statements.
25
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the years ended June 30, 2000, 1999 and 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net income $ 90,570 $ 81,288 $ 71,146
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 16,975 16,344 15,868
Compensation expense related to
restricted stock award 898 1,819 2,136
Provision for deferred
income taxes (1,806) (20) 683
Extraordinary charge -- -- 802
Other non-cash (charge) benefit (424) 251 77
Change in assets and liabilities:
Accounts receivable (783) 1,222 (3,340)
Inventories (9,243) (25,040) (6,839)
Prepaid and other current assets (3,181) (3,353) (4,011)
Other assets (973) (1,064) (891)
Accounts payable 5,455 10,652 11,576
Accrued expenses 7,140 4,023 414
Other long-term liabilities 223 558 (3)
--------- --------- ---------
Net cash provided by operating
activities 104,851 86,680 87,618
--------- --------- ---------
Investing activities:
Proceeds from the disposal of property,
plant, and equipment 1,112 1,721 827
Capital expenditures (42,065) (40,628) (29,665)
Acquisition of businesses (12,631) (7,164) --
Payments received on long-term notes
receivable 941 799 1,538
Disbursements made for long-term notes
receivable (136) (255) (302)
Redemption of short-term securities -- -- 30,270
Investments in short-term securities -- -- (12,295)
--------- --------- ---------
Net cash used in investing activities (52,779) (45,527) (9,627)
--------- --------- ---------
Financing activities:
Borrowings on revolving credit facility 78,000 81,500 --
Payments on revolving credit facility (70,000) (81,500) --
Redemption of Senior Notes -- -- (52,543)
Premium paid on Senior Note redemption -- -- (461)
Other payments on long-term debt and
capital leases (768) (2,717) (2,079)
Other borrowings on long-term debt -- 18 111
Payments to acquire treasury stock (49,606) (45,137) (23,310)
Net proceeds from issuance of common stock 2,351 747 1,255
Increase in deferred financing costs (524) (55) --
Dividends paid (6,469) (4,421) (3,450)
--------- --------- ---------
Net cash used in financing activities (47,016) (51,565) (80,477)
--------- --------- ---------
Net (decrease)/increase in cash and cash
equivalents 5,056 (10,412) (2,486)
Cash and cash equivalents
at beginning of year 8,968 19,380 21,866
--------- --------- ---------
Cash and cash equivalents at end of year $ 14,024 $ 8,968 $ 19,380
========= ========= =========
Supplemental disclosure:
Cash payments for:
Income taxes $ 61,319 $ 50,331 $ 45,382
Interest 980 1,637 5,585
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
For the years ended June 30, 2000, 1999 and 1998
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Additional
Common Paid-in Treasury Retained
Stock Capital Stock Earnings Total
------ ------- ------ -------- -----
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1997 $ 442 $ 257,536 $ (10,440) $ 17,896 $ 265,434
Issuance of common stock 3 3,388 -- -- 3,391
Purchase of 774,096 shares of
treasury stock -- -- (23,310) -- (23,310)
Dividends declared -- -- -- (3,730) (3,730)
Tax benefit associated with the
exercise of employee stock
options and warrants -- 1,389 -- -- 1,389
Net income -- -- -- 71,146 71,146
--------- --------- --------- --------- ---------
Balance at June 30, 1998 445 262,313 (33,750) 85,312 314,320
Issuance of common stock 2 2,564 -- -- 2,566
Purchase of 1,921,784 shares of
treasury stock -- -- (45,137) -- (45,137)
Dividends declared -- -- -- (4,911) (4,911)
Tax benefit associated with the
exercise of employee stock
options and warrants -- 2,409 -- -- 2,409
Net income -- -- -- 81,288 81,288
--------- --------- --------- --------- ---------
Balance at June 30, 1999 447 267,286 (78,887) 161,689 350,535
Issuance of common stock 4 3,245 -- -- 3,249
Purchase of 1,928,350 shares of
treasury stock -- -- (49,606) -- (49,606)
Dividends declared -- -- -- (6,418) (6,418)
Tax benefit associated with the
exercise of employee stock
options and warrants -- 2,179 -- -- 2,179
Net income -- -- -- 90,570 90,570
--------- --------- --------- --------- ---------
Balance at June 30, 2000 $ 451 $ 272,710 $(128,493) $ 245,841 $ 390,509
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Basis of Presentation
Ethan Allen Interiors Inc. (the "Company") is a Delaware corporation
incorporated on May 25, 1989. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary Ethan Allen
Inc. ("Ethan Allen") and Ethan Allen's subsidiaries. All intercompany
accounts and transactions have been eliminated in the consolidated
financial statements. All of Ethan Allen's capital stock is owned by the
Company. The Company has no other assets or operating results other than
those associated with its investment in Ethan Allen.
Nature of Operations
The Company, through its wholly-owned subsidiary, is a leading manufacturer
and retailer of quality home furnishings and sells a full range of
furniture products and decorative accessories through an exclusive network
of 305 retail stores, of which 82 are Ethan Allen-owned and 223 are
independently owned. The Company's retail stores are primarily located in
North America, with 30 located abroad. Ethan Allen has 20 manufacturing
facilities and 3 sawmills throughout the United States.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Reclassifications
Certain reclassifications have been made to prior years' financial
statements to conform with the current year's presentation. These changes
did not have a material impact on previously reported results of operations
or shareholders' equity.
Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is provided over the estimated useful lives of the respective
assets on a straight-line basis. Estimated useful lives of the respective
assets generally range from twenty to forty years for buildings and
improvements and from three to twenty years for machinery and equipment.
28
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies (continued)
Intangible Assets
Intangible assets primarily represent goodwill, trademarks and product
technology and are amortized on a straight-line basis over forty years.
Goodwill represents the excess cost of acquired businesses. The Company
continuously assesses the recoverability of these intangible assets by
evaluating whether the amortization of the intangible asset balances over
the remaining lives can be recovered through expected future results.
Expected future results are based on projected undiscounted operating
results before the effects of intangible amortization. Product technology
is measured based upon wholesale operating income, while goodwill and
trademarks are assessed based upon total wholesale and retail operating
income. The amount of impairment, if any, is measured based on the fair
value or projected discounted future results.
Financial Instruments
The carrying value of the Company's financial instruments approximates fair
market value.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Revenue Recognition
Sales are recorded to dealers when goods are shipped, at which point title
has passed. Sales made through Ethan Allen-owned stores are recognized when
delivery is made to the customer.
Advertising Costs
Advertising costs are expensed when first aired or distributed. Advertising
costs for the fiscal years 2000, 1999, and 1998 were $44,379,664,
$43,215,000, and $40,035,000, respectively. Prepaid advertising costs at
June 30, 2000 and 1999 were $2,332,000 and $2,806,000, respectively.
Closed Store Expenses
Future expenses, such as rent and real estate taxes, net of expected lease
or sublease recovery, which will be incurred subsequent to vacating a
closed Ethan Allen-owned store, are charged to operations upon a formal
decision to close the store.
29
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies (continued)
Earnings Per Share
The Company computes basic earnings per share by dividing net income by the
weighted average number of common shares outstanding for the period.
Diluted earnings per share reflect the potential dilution that could occur
if all dilutive potential common shares were exercised.
Stock Compensation
As permitted by SFAS No. 123, the Company follows the provisions of APB No.
25, "Accounting for Stock Issued to Employees" and related interpretations
in accounting for compensation expense related to the issuance of stock
options.
Comprehensive Income
The Company does not have any components of comprehensive income as defined
under SFAS No. 130, "Reporting Comprehensive Income".
New Accounting Standards
In June 1998, the FASB issued SFAS No. 133, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities". SFAS No. 138 later
amended this pronouncement. Both provide guidance on accounting for
derivatives and hedging activities. The Company will adopt SFAS No. 133 and
No. 138 in fiscal year 2001. However, the Company does not expect these
pronouncements to have a material impact on its financial results.
(2) Inventories
Inventories at June 30 are summarized as follows (dollars in thousands):
2000 1999
-------- --------
Finished Goods $103,787 $ 92,304
Work in process 19,233 16,143
Raw materials 35,986 35,598
------- -------
$159,006 $144,045
======= =======
(3) Property, Plant and Equipment
Property, plant and equipment at June 30 are summarized as follows (dollars
in thousands):
2000 1999
-------- ---------
Land and improvements $ 40,839 $ 30,849
Buildings and improvements 192,256 201,543
Machinery and equipment 138,458 93,576
------- ------
371,553 325,968
Less accumulated depreciation (123,815) (111,476)
------- -------
$247,738 $214,492
======= =======
30
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) Intangibles
Intangibles at June 30 are summarized as follows (dollars in thousands):
2000 1999
-------- --------
Product technology $ 25,950 $ 25,950
Trademarks 28,200 28,200
Goodwill 18,795 13,855
Other 350 350
------- -------
73,295 68,355
Less accumulated amortization (18,525) (16,757)
------- -------
$ 54,770 $ 51,598
======= =======
(5) Borrowings
Total debt obligations at June 30 consists of the following (dollars in
thousands):
2000 1999
------- -------
Revolving Credit Facility $ 8,000 $ -
Industrial Revenue Bonds,
2.45%-7.50%, maturing at
various dates through 2011 8,455 8,455
Other 1,452 1,913
------ ------
Total debt 17,907 10,368
Less current maturities and
short-term capital lease
obligations 8,420 907
------ ------
Long-term debt $ 9,487 $ 9,611
====== ======
On August 25, 1999, the Company entered into a new $125.0 million unsecured
Revolving Credit Facility (the "Credit Agreement") with Chase Manhattan
Bank as agent. Proceeds from the Credit Agreement may be used for working
capital purposes or general corporate purposes.
The Credit Agreement includes sub-facilities for trade and standby letters
of credit of $25.0 million and swingline loans of $3.0 million. Loans under
the Credit Agreement bear interest at Chase Manhattan Bank's Alternative
Base Rate ("ABR"), or adjusted LIBOR plus 0.625%, which is subject to
adjustment arising from changes in the credit rating of Ethan Allen's
senior unsecured debt. The Credit Agreement provides for the payment of a
commitment fee equal to 0.15% per annum on the average daily unused amount
of the revolving credit commitment. The Company is also required to pay a
fee equal to 0.75% per annum on the average daily letters of credit
outstanding. For fiscal years ended June 30, 2000, 1999 and 1998 the
weighted-average interest rates were 6.22%, 6.17% and 8.13%, respectively.
The Credit Agreement matures in August of 2004 and there are no minimum
repayments required during the term of the facility. The revolving loans
may be borrowed, repaid and reborrowed over the term of the facility until
final maturity.
The Credit Agreement contains various covenants which limit the ability of
the Company and its subsidiaries to incur debt, engage in mergers and
consolidations, make restricted payments, make asset sales, make
investments and issue stock. The Company is required to meet certain
financial covenants including consolidated net worth, fixed charge coverage
and leverage ratios.
31
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Borrowings (continued)
The Company has loan commitments in the aggregate amount of approximately
$1.1 million related to the modernization of its Beecher Falls
manufacturing facility. Loans made pursuant to these commitments bear
interest at rates ranging from 3.0% to 5.5% and have maturities of 10 to 30
years. The loans have a first and second lien in respect of equipment
financed by such loans and a first and second mortgage interest in respect
of a building, the construction of which was financed by such loans.
During fiscal year 1998, the Company completed its optional early
redemption of all of its then-outstanding $52.4 million 8-3/4% Senior
Notes, due on March 15, 2001, at 101.458% of par value. As a result of the
early redemption, an extraordinary charge of $0.8 million or $0.02 a share,
net of tax benefit, was recorded. The extraordinary charge included the
write-off of unamortized deferred financing costs associated with the
Senior Notes and the premium related to the early redemption. During fiscal
year 1998, $0.1 million of Senior Notes was repurchased at 102.19% of face
value.
Aggregate scheduled maturities of long-term debt for each of the five
fiscal years subsequent to June 30, 2001, and thereafter are as follows
(dollars in thousands):
2002 . . . . . . . . . . . $ 131
2003 . . . . . . . . . . . 141
2004 . . . . . . . . . . . 61
2005 . . . . . . . . . . . 4,662
Subsequent to 2005 . . . . . 4,492
(6) Leases
Ethan Allen leases real property and equipment under various operating
lease agreements expiring through the year 2028. Leases covering retail
outlets and equipment generally require, in addition to stated minimums,
contingent rentals based on retail sales and equipment usage. Generally,
the leases provide for renewal for various periods at stipulated rates.
Future minimum payments by year and in the aggregate under non-cancelable
operating leases consisted of the following at June 30, 2000 (dollars in
thousands):
Fiscal Year Ending June 30:
---------------------------
2001 $ 12,599
2002 12,736
2003 12,595
2004 10,627
2005 8,160
Subsequent to 2005 24,384
-------
Total minimum lease payments $ 81,101
=======
The above amounts will be offset in the aggregate by minimum future rentals
from subleases of $20.4 million.
32
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Leases (continued)
Total rent expense for the fiscal years ended June 30 was as follows
(dollars in thousands):
2000 1999 1998
-------- -------- --------
Basic rentals under operating
leases $ 16,102 $ 16,761 $ 14,997
Contingent rentals under
operating leases 1,972 1,509 977
-------- -------- --------
18,074 18,270 15,974
Less sublease rent 3,314 2,812 2,173
-------- -------- --------
$ 14,760 $ 15,458 $ 13,801
======== ======== ========
(7) Shareholders' Equity
On April 28, 1999, the Company declared a three-for-two stock split to be
distributed on May 21, 1999 to shareholders of record on May 7, 1999. On
August 6, 1997, the Company declared a two-for-one stock split to be
distributed on September 2, 1997 to shareholders of record on August 18,
1997. All related amounts have been retroactively adjusted to reflect the
stock splits.
On May 20, 1996, the Board of Directors adopted a Stockholder Rights Plan
and declared a dividend of one Right for each outstanding share of common
stock as of July 10, 1996. Each Right entitles its holder, under certain
circumstances, to purchase one one-hundredth of a share of the Company's
Series C Junior Participating Preferred Stock at a price of $41.67 on a
post split basis. The Rights may not be exercised until 10 days after a
person or group acquires 15% or more of the Company's common stock, or 15
days after the commencement or the announcement of the intent to commence a
tender offer which, if consummated, would result in a 15% or more ownership
of the Company's common stock. Until then, separate Rights certificates
will not be issued, nor will the Rights be traded separately from the
stock. Should an acquirer become the beneficial owner of 15% of the
Company's common stock, and under certain additional circumstances, the
Company's stockholders (other than the acquirer) would have the right to
receive in lieu of the Series C Junior Participating Preferred Stock, a
number of shares of the Company's common stock, or in stock of the
surviving enterprise if the Company is acquired, having a market value
equal to two times the purchase price per share.
The Rights will expire on May 31, 2006, unless redeemed prior to that date.
The redemption price is $0.01 per Right. The Board of Directors may redeem
the Rights at its option any time prior to the announcement that a person
or group has acquired 15% or more of the Company's common stock.
The Company's authorized capital stock consists of (a) 150,000,000 shares
of Common Stock, par value $.01 per share, (b) 600,000 shares of Class B
Common Stock, par value $.01 per share, (c) 1,055,000 shares of Preferred
Stock, par value $.01 per share of which (i) 30,000 shares have been
designated Series A Redeemable Convertible Preferred Stock, (ii) 30,000
shares have been designated Series B Redeemable Convertible Preferred
Stock, (iii) 155,010 shares have been designated as Series C Junior
Participating Preferred Stock, and (iv) the remaining 839,990 shares may be
designated by the Board of Directors with such rights and preferences as
they determine (all such preferred stock, collectively, the "Preferred
Stock").
33
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) Shareholders' Equity (continued)
As of June 30, 2000, no shares of Preferred Stock or shares of Class B
Common Stock were issued or outstanding.
The Company has been authorized by its Board of Directors to repurchase its
common stock from time to time, either directly or through agents, in the
open market at prices and on terms satisfactory to the Company. The
Company's common stock repurchases are recorded as treasury stock and
result in a reduction of shareholders' equity. During fiscal years 2000 and
1999, the Company repurchased 1,928,350 and 1,921,784 shares of its Common
Stock for $49.6 million, an average of $25.72 per share and $45.1 million,
an average of $23.49 per share, respectively. The Company funded its
purchases through cash from operations and through revolver loan borrowings
under the Credit Agreement. As of June 30, 2000, the Company has a
remaining Board authorization to purchase 1.4 million shares.
(8) Earnings per Share
The following table sets forth the calculation of weighted average shares
for the fiscal years ended June 30 (shares in thousands):
2000 1999 1998
------- ------ -------
Weighted average common shares
outstanding for basic
calculation 40,301 41,278 43,050
Add: Effect of stock options
and warrants 897 1,009 1,086
------ ------ ------
Weighted average common shares
outstanding, adjusted for
diluted calculation 41,198 42,287 44,136
====== ====== ======
Stock options to purchase 986,600 shares of common stock had an exercise
price in excess of the average market price in fiscal year 2000. These
options have been excluded from the diluted earnings per share calculation
since their impact is anti-dilutive.
(9) Employee Stock Plans
The Company has reserved 7,419,699 shares of Common Stock for issuance
pursuant to the Company's stock option and warrant plans as follows:
1992 Stock Option Plan
The 1992 Stock Option Plan provides for the grant of options to employees
and non-employee directors to purchase shares of Common Stock that are
either qualified or non-qualified under Section 422 of the Internal Revenue
Code, as well as stock appreciation rights on such options. The awarding of
such options is determined by the Compensation Committee of the Board of
Directors after consideration of recommendations proposed by the Chief
Executive Officer. The options awarded to employees vest 25% per year over
a four-year period and are exercisable at the market value of the Common
Stock at the date of grant. The maximum number of shares of Common Stock
reserved for issuance under the 1992 Stock Option Plan is 5,490,597 shares.
34
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) Employee Stock Plans (continued)
Incentive Stock Option Plan
In 1991, pursuant to the Incentive Stock Option Plan, the Company granted
to members of management options to purchase 829,542 shares of Common Stock
at an exercise price of $5.50 per share. Such options vest twenty percent
per year over a five year period.
Management Warrants
Warrants to purchase 699,560 shares of Common Stock were granted to certain
key members of management during fiscal years 1991 and 1992. The warrants
have been fully earned and were exercisable at $1.23 per share.
Restricted Stock Award
Commencing in 1994 and for each of the four subsequent years, annual awards
of 30,000 shares of restricted stock were granted to Mr. Kathwari with the
vesting based on performance of the Company's stock price during the three
year period after grant as compared to the Standard and Poors 500 index. As
of June 30, 2000, 90,000 shares have been deemed vested.
Stock Unit Award
During fiscal year 1998, the Company established a book account for Mr.
Kathwari, which will be credited with 21,000 Stock Units as of July 1 of
each year, commencing July 1, 1997, for a total of up to 105,000 Stock
Units, with an additional 21,000 Stock Units to be credited in connection
with each of the two one-year extensions. Following the termination of Mr.
Kathwari's employment, Mr. Kathwari will receive shares of Common Stock
equal to the number of Stock Units credited to the account.
Stock option and warrant activity during fiscal years 2000, 1999 and 1998
is as follows:
Number of
Shares
---------------------------------------
92 Stock Incentive Management
Option Plan Options Warrants
----------- --------- -----------
Options Outstanding
at June 30, 1997 1,611,699 383,331 192,834
Granted in 1998 1,610,400 -- --
Exercised in 1998 (112,629) (55,210) (108,274)
Canceled in 1998 (6,900) (15) (15)
---------- ---------- ----------
Options Outstanding
at June 30, 1998 3,102,570 328,106 84,545
Granted in 1999 104,700 -- --
Exercised in 1999 (64,034) (32,247) (37,756)
Canceled in 1999 (33,761) (2) (2,101)
---------- ---------- ----------
Options Outstanding
at June 30, 1999 3,109,475 295,857 44,688
Granted in 2000 395,290 -- --
Exercised in 2000 (88,063) (281,850) (44,680)
Canceled in 2000 (33,112) (7) (8)
---------- ---------- ----------
Options Outstanding
at June 30, 2000 3,383,590 14,000 --
========== ========== ==========
35
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) Employee Stock Plans (continued)
The following table summarizes the stock awards outstanding at June 30,
2000:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Range of Number Remaining Exercise
Prices Outstanding Life Price
--------------- ----------- -------- --------
<S> <C> <C> <C> <C>
1992 Stock Option Plan $ 6.00 to $ 6.50 1,168,400 4.7 yrs $ 6.37
$14.50 to $18.21 157,800 6.7 yrs $ 15.10
$21.17 to $25.00 1,070,790 7.9 yrs $ 22.18
$26.25 to $27.81 856,450 7.4 yrs $ 27.41
$30.75 to $32.67 130,150 8.9 yrs $ 31.36
----------
3,383,590
Incentive Options $ 5.50 14,000 0.5 yrs $ 5.50
</TABLE>
The following table summarizes the number of shares exercisable at June 30,
2000:
Weighted
Number of Average
Range of Shares Exercise
Prices Exercisable Price
--------------- ----------- --------
1992 Stock Option Plan $ 6.00 to $ 6.50 808,400 $ 6.37
$14.50 to $18.21 112,013 $14.92
$21.17 to $25.00 536,000 $21.17
$26.25 to $27.81 529,738 $27.47
$30.75 to $32.67 18,524 $32.67
---------
2,004,675
Incentive Options $ 5.50 14,000 $ 5.50
Had compensation costs related to the issuance of stock options under the
Company's 1992 Stock Option Plan been determined based on the estimated
fair value at the grant dates for awards under SFAS No. 123, the Company's
net income end earnings per share for the fiscal years ended June 30, 2000,
1999 and 1998 would have been reduced to the proforma amounts listed below,
(dollars in thousands, except per share data):
2000 1999 1998
-------- -------- -------
Net Income
As reported $90,570 $81,288 $71,146
Proforma 86,630 77,840 67,945
Net Income per Basic Share
As reported $ 2.25 $ 1.97 $ 1.65
Proforma 2.15 1.89 1.58
Net Income per Diluted Share
As reported $ 2.20 $ 1.92 $ 1.61
Proforma 2.10 1.84 1.54
36
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) Employee Stock Plans (continued)
The per share weighted average fair value of stock options granted during
fiscal 2000, 1999 and 1998 was $12.24, $11.98, and $8.59, respectively. The
fair value of each stock option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions; weighted average risk-free interest rates of 6.22%, 5.15%, and
5.99% for fiscal 2000, 1999 and 1998, respectively, dividend yield of
0.61%, 0.60%, and 0.67% for fiscal 2000, 1999 and 1998, respectively,
expected volatility of 45.9%, 46.8%, and 43.3% in fiscal 2000, 1999 and
1998, respectively, and expected lives of five years for each.
(10) Income Taxes
Total income taxes were allocated as follows (dollars in thousands):
2000 1999 1998
------- ------- -------
Income from operations $ 56,200 $ 51,429 $ 46,582
Extraordinary charge -- -- (527)
Stockholders' equity (2,179) (2,409) (1,389)
-------- -------- --------
$ 54,021 $ 49,020 $ 44,666
======== ======== ========
The income taxes credited to stockholders' equity relate to the tax benefit
arising from the exercise of employee stock options.
Income tax expense attributable to income from operations consists of the
following for the fiscal years ended June 30 (dollars in thousands):
2000 1999 1998
-------- ------- --------
Current:
Federal $ 49,934 $ 44,478 $ 37,205
State 8,072 6,971 8,694
-------- -------- --------
Total current 58,006 51,449 45,899
-------- -------- --------
Deferred:
Federal (1,650) (17) 625
State (156) (3) 58
-------- -------- --------
Total deferred (1,806) (20) 683
-------- -------- --------
Income tax expense on income
before extraordinary charge $ 56,200 $ 51,429 $ 46,582
======== ======== ========
The following is a reconciliation of expected income taxes (computed by
applying the Federal statutory rate to income before taxes and
extraordinary charge) to actual income tax expense (dollars in thousands):
2000 1999 1998
------- ------- --------
Computed "expected" income
tax expense $ 51,370 $ 46,451 $ 41,486
State income taxes, net of
federal income tax benefit 5,247 4,529 4,786
Goodwill amortization 143 117 99
Other, net (560) 332 211
-------- -------- --------
Income tax expense on income
before extraordinary charge $ 56,200 $ 51,429 $ 46,582
======== ======== ========
37
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) Income Taxes (continued)
The significant components of the deferred tax expense (benefit) are as
follows (dollars in thousands):
2000 1999 1998
-------- ------- -------
Deferred tax (benefit) $(3,309) $(1,503) $ (825)
Utilization of net operating
loss carryforwards 1,503 1,483 1,508
------- ------- -------
$(1,806) $ (20) $ 683
======= ======= =======
The components of the net deferred tax liability as of June 30 are as
follows (dollars in thousands):
2000 1999
-------- -------
Deferred tax assets:
Accounts receivable $ 1,220 $ 1,045
Inventories 3,478 2,430
Other liabilities and reserves 6,049 4,308
Net operating loss carryforwards 7,234 8,737
------- -------
Total deferred tax asset 17,981 16,520
------- -------
Deferred tax liabilities:
Property, plant and equipment 24,380 24,335
Intangible assets other
than goodwill 14,199 14,697
Miscellaneous 2,365 2,257
------- -------
Total deferred tax liability 40,944 41,289
------- -------
Net deferred tax liability $22,963 $24,769
======= =======
The Company has tax operating loss carryforwards of approximately $18.5
million at June 30, 2000, of which $7.9 million expires in 2007 and $10.6
million expires in 2008. Pursuant to Section 382 of the Internal Revenue
Code, the Company's utilization of the net operating loss carryforwards are
subject to an annual limitation of approximately $3.9 million.
Management believes that the results of future operations will generate
sufficient taxable income to realize the deferred tax assets.
(11) Employee Retirement Programs
The Ethan Allen Retirement Savings Plan
The Ethan Allen Retirement Savings Plan (the "Plan") is a defined
contribution plan which is offered to substantially all employees of the
Company who have completed three consecutive months of service regardless
of hours worked.
Ethan Allen may, at its discretion, make a matching contribution to the
401(k) portion of the Plan on behalf of each participant, provided the
contribution does not exceed the lesser of 50% of the participant's
contribution or $1,000 per participant per Plan year. Total profit sharing
and 401(k) company match expense was $3,244,640 in 2000, $2,578,356 in
1999, and $2,287,549 in 1998.
38
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) Employee Retirement Programs (continued)
Other Retirement Plans and Benefits
Ethan Allen provides additional benefits to selected members of senior and
middle management in the form of previously entered deferred compensation
arrangements and a management incentive program. The total cost of these
benefits was $4,361,105, $3,806,708, and $3,105,000 in 2000, 1999 and 1998,
respectively.
(12) Wholly-Owned Subsidiary
The Company owns all of the outstanding stock of Ethan Allen and has no
material assets other than its ownership of Ethan Allen stock and conducts
all significant operating transactions through Ethan Allen. The Company has
guaranteed Ethan Allen's obligation under the Credit Agreement and has
pledged all the outstanding capital stock of Ethan Allen to secure its
guarantee.
The condensed balance sheets of Ethan Allen as of June 30 are as follows
(dollars in thousands):
2000 1999
--------- ---------
Assets
Current assets $235,782 $209,768
Non-current assets 448,059 357,237
-------- --------
Total assets $683,841 $567,005
======== ========
Liabilities
Current liabilities $106,595 $ 84,500
Non-current liabilities 44,794 43,841
-------- --------
Total liabilities $151,389 $128,341
======== ========
A summary of Ethan Allen's operating activity for each of the years in the
three-year period ended June 30, 2000, is as follows:
2000 1999 1998
-------- -------- --------
Net sales $856,171 $762,233 $679,321
Gross profit 400,610 354,999 315,575
Operating income 146,240 133,060 119,845
Interest expense 990 1,639 4,245
Income before income
taxes and extraordinary
charge 146,911 132,885 118,685
Net income $ 90,711 $ 81,456 $ 71,301
(13) Litigation
The Company has been named as a potentially responsible party ("PRP") for
the cleanup of three sites currently listed or proposed for inclusion on
the National Priorities List ("NPL") under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"). With respect
to all of these sites, the Company believes that it is not a major
contributor based on the very small volume of waste generated by the
Company in relation to total volume at the site.
39
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(13) Litigation (continued)
The Company believes its share of waste contributed to these sites is small
in relation to the total, however, liability under CERCLA may be joint and
several. For two of the sites, the remedial investigation is ongoing. A
volume based allocation of responsibility among the parties has been
prepared. Numerous other parties have been identified as PRP's at these
sites. The Company is also a settling defendant for remedial design and
construction activities at one of the sites. Approximately two-thirds of
the remedial work has been performed at this site and Ethan Allen's portion
of the remedial action will be completed over the next several months. The
Company believes that the resolution of such matter will not have a
material adverse effect on its financial condition, results of operations,
or cash flows.
(14) Segment Information
The Company's reportable segments are strategic business areas that are
managed separately and offer different products and services. The Company's
operations are classified into two main businesses: wholesale and retail
home furnishings. The wholesale home furnishings business is principally
involved in the manufacture, sale and distribution of home furnishing
products to a network of independently-owned and Ethan Allen-owned stores.
The wholesale business consists of three operating segments; case goods,
upholstery, and home accessories. Wholesale profitability includes the
wholesale gross margin, which is earned on wholesale sales to all retail
stores, including Ethan Allen-owned stores.
The retail home furnishings business sells home furnishing products through
a network of Ethan Allen-owned stores. Retail profitability includes the
retail gross margin, which is earned based on purchases from the wholesale
business. The Company evaluates performance of the respective segments
based upon revenues and operating income. Inter-segment eliminations
primarily comprise the wholesale sales and profit on the transfer of
inventory between segments. Inter-segment eliminations also include items
not allocated to reportable segments.
The following table presents segment information for the fiscal years ended
June 30, 2000, 1999, and 1998 (dollars in thousands):
2000 1999 1998
-------- -------- -------
Net Sales:
Case goods $ 382,144 $ 352,203 $ 328,637
Upholstery 194,740 174,599 160,058
Home accessories 98,371 90,130 71,411
Other (1) 9,378 13,712 9,039
--------- --------- ---------
Wholesale Net Sales 684,633 630,644 569,145
Retail 371,353 294,701 235,230
Other (2) 6,443 6,392 6,722
Eliminations (206,258) (169,504) (131,776)
--------- --------- ---------
Consolidated Total $ 856,171 $ 762,233 $ 679,321
========= ========= =========
40
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) Segment Information (continued)
2000 1999 1998
-------- ------- -------
Operating Income:
Case goods $ 131,482 $ 127,514 $ 120,277
Upholstery 59,220 53,250 51,150
Home accessories 30,958 29,166 22,966
Unallocated corporate expenses (3) (90,533) (87,788) (86,371)
--------- --------- ---------
Wholesale Operating Income 131,127 122,142 108,022
Retail 20,552 15,146 13,747
Other (2) 530 1,365 1,692
Eliminations (6,110) (5,761) (3,771)
--------- --------- ---------
Consolidated Total $ 146,099 $ 132,892 $ 119,690
========= ========= =========
Total Assets:
Case goods $ 118,525 $ 107,556 $ 90,403
Upholstery 35,952 30,861 27,820
Home accessories 6,137 7,033 5,521
Corporate (4) 282,265 255,125 245,697
--------- --------- ---------
Wholesale Total Assets 442,879 400,575 369,441
Retail 120,364 97,419 76,365
Other (2) 8,338 5,773 5,096
Inventory profit elimination (5) (28,010) (23,145) (17,779)
--------- --------- ---------
Consolidated Total $ 543,571 $ 480,622 $ 443,123
========= ========= =========
Capital Expenditures:
Case goods $ 12,387 $ 17,498 $ 8,263
Upholstery 4,211 3,073 1,814
Home accessories 378 459 21
Other (6) 19,383 15,542 16,778
--------- --------- ---------
Wholesale Capital Expenditures 36,359 36,572 26,876
Retail 3,921 2,893 2,390
Other (2) 1,785 1,163 399
Acquisition of businesses 12,631 7,164 --
--------- --------- ---------
Consolidated Total $ 54,696 $ 47,792 $ 29,665
========= ========= =========
(1) The Other category included in the wholesale business consists of the
operating activity for indoor/outdoor furniture and the corporate
office.
(2) The Other category includes miscellaneous operating activities.
(3) Unallocated corporate expenses primarily consist of corporate
advertising costs, unreimbursed training costs, system development
costs, and other corporate administrative charges.
(4) Corporate assets primarily include receivables from independent
dealers, finished goods inventory, property, plant and equipment,
intangible assets, deferred tax assets, and the Company's distribution
operations.
(5) Inventory profit elimination reflects the embedded wholesale profit in
the Company-owned store inventory that has not been realized. These
profits will be recorded when shipments are made to the retail
customer.
41
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) Segment Information (continued)
(6) The Other category includes unallocated capital expenditures made by
the corporate office.
There are 30 independent retail stores located outside the United States.
Approximately 3% of the Company's net sales are derived from sales to these
retail stores.
(15) Selected Quarterly Financial Data (Unaudited)
Tabulated below are certain data for each quarter of the fiscal years ended
June 30, 2000, 1999, and 1998 (dollar amounts in thousands, except per
share data):
Quarter Ended
---------------------------------------------------
September 30 December 31 March 31 June 30
------------ ----------- -------- -------
2000 Quarters:
Net sales $189,592 $217,486 $220,300 $228,793
Gross profit 88,521 103,899 103,148 105,042
Net income 18,733 24,833 23,171 23,833
Net income per basic
share 0.46 0.61 0.58 0.60
Net income per diluted
share 0.45 0.59 0.57 0.59
Dividend declared per
common share 0.04 0.04 0.04 0.04
1999 Quarters:
Net sales $166,226 $193,674 $194,571 $207,762
Gross profit 77,004 89,756 91,064 97,175
Net income 16,209 21,186 21,174 22,719
Net income per basic
share 0.39 0.51 0.52 0.56
Net income per diluted
share 0.38 0.50 0.50 0.54
Dividend declared per
common share 0.02 0.03 0.03 0.04
1998 Quarters:
Net sales $152,494 $172,743 $171,434 $182,650
Gross profit 70,766 80,713 80,404 83,692
Income before
extraordinary charge 14,034 19,091 18,793 20,030
Net income 14,034 19,091 17,991 20,030
Net income per basic share 0.33 0.44 0.41 0.47
Net income per diluted share 0.32 0.43 0.41 0.45
Dividend declared per common
share 0.02 0.02 0.02 0.03
42
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
No changes in or disagreements with accountants on accounting or
financial disclosure occurred in fiscal years 2000, 1999 and 1998.
43
<PAGE>
PART III
Part III is omitted as the Company intends to file with the Commission
within 120 days after the end of the Company's fiscal year a definitive proxy
statement pursuant to Regulation 14A which will involve the election of
directors.
ITEM 10. Directors and Executive Officers of the Registrant
See reference to definitive proxy statement under Part III.
ITEM 11. Executive Compensation
See reference to definitive proxy statement under Part III.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
See reference to definitive proxy statement under Part III.
ITEM 13. Certain Relationships and Related Transactions
See reference to definitive proxy statement under Part III.
44
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
I. LISTING OF DOCUMENTS
(1) Financial Statements. The Company's Consolidated Financial Statements
included in Item 8 hereof, as required at June 30, 2000 and 1999, and
for the years ended June 30, 2000, 1999 and 1998, consist of the
following:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules. Financial Statement Schedules of the
Company appended hereto, as required for the years ended June 30,
2000, 1999 and 1998, consist of the following:
Valuation and Qualifying Accounts
The schedules listed in Reg. 210.5-04, except those listed above, have
been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
(3) The following Exhibits are filed as part of this report on Form 10-K:
Exhibit
Number Exhibit
------- ----------------------------------------------------------------
*2(a) Agreement and Plan of Merger, dated May 20, 1989 among the
Company, Green Mountain Acquisition Corporation ("Merger
Sub"), INTERCO Incorporated, Interco Subsidiary, Inc. and
Ethan Allen
*2(b) Restructuring Agreement, dated as March 1, 1991, among Green
Mountain Holding Corporation, Ethan Allen, Chemical Bank,
General Electric Capital Corporation, Smith Barney Inc. and
the stockholder's name on the signature page thereof
*2(c) Purchase and Sale Agreement, dated March 28, 1997, between
the Company and Carriage House Interiors of Colorado, Inc.
*3(a) Restated Certificate of Incorporation for Green Mountain
Holding Corporation
*3(b) Restated and Amended By-Laws of Green Mountain Holding
Corporation
*3(c) Restated Certificate of Incorporation of the Company
*3(c)-1 Certificate of Designation relating to the Series C Junior
Participating Preferred Stock
*3(c)-2 Certificate of Amendment to Restated Certificate of
Incorporation as of August 5, 1997
*3(c)-3 Second Certificate of Amendment to Restated Certificate of
Incorporation as of March 27, 1998
*3(c)-4 Third Certificate of Amendment to Restated Certificate of
Incorporation as of April 28, 1999
*3(d) Amended and Restated By-laws of the Company
*3(e) Certificate of Designation relating to the New Convertible
Preferred Stock
*3(e)-1 Certificate of Designation relating to the Series C Junior
Participating Preferred Stock
*3(f) Certificate of Incorporation of Ethan Allen Finance
Corporation
*3(g) By-Laws of Ethan Allen Finance Corporation
*3(h) Certificate of Incorporation of Ethan Allen Manufacturing
Corporation
*3(i) By-Laws of Ethan Allen Manufacturing Corporation
*4(a) First Amendment to Management Non-Qualified Stock Option Plan
*4(b) Second Amendment to Management Non-Qualified Stock Option Plan
*4(c) 1992 Stock Option Plan
45
<PAGE>
Exhibit
Number Exhibit
------- ----------------------------------------------------------------
*4(c)-1 First Amendment to 1992 Stock Option Plan
*4(c)-2 Amended and Restated 1992 Stock Option Plan
*4(c)-3 First Amendment to Amended and Restated 1992 Stock Option Plan
*4(c)-4 Second Amendment to Amended and Restated 1992 Stock Option Plan
*4(d) Management Letter Agreement among the Management Investors
and the Company
*4(e) Management Warrant, issued by the Company to members of the
Management of Ethan Allen
*4(f) Form of Dealer Letter Agreement among Dealer Investors and
the Company
*4(g) Form of Kathwari Warrant, dated June 28, 1989
*4(j) Form of Indenture relating to the Senior Notes
*4(j)-1 First Supplemental Indenture dated as of March 23, 1995
between Ethan Allen and the First National Bank of Boston
for $75,000,000 8-3/4% Senior Notes due 2007
*4(k) Credit Agreement among the Company, Ethan Allen and Bankers
Trust Company
*4(k)-1 Amended Credit Agreement among the Company, Ethan Allen and
Bankers Trust Company
*4(k)-2 110,000,000 Senior Secured Revolving Credit Facility dated
March 10, 1995 between Ethan Allen and Chase Manhattan Bank
*4(k)-3 Amended and Restated Credit Agreement as of December 4, 1996
between Ethan Allen Inc. and the Chase Manhattan Bank
*4(k)-4 First Amendment to Amended and Restated Credit Agreement as
of August 27, 1997 between Ethan Allen Inc. and the Chase
Manhattan Bank
*4(k)-5 Second Amendment to Amended and Restated Credit Agreement as
of October 20, 1998 between Ethan Allen Inc. and the Chase
Manhattan Bank
*4(l) Catawba County Industrial Facilities Revenue Bond
*4(l)-1 Trust Indenture dated as of October 1, 1994 securing
$4,6000,000 Industrial Development Revenue Refunding Bonds,
Ethan Allen Inc. Series 1994 of the Catawba County
Industrial Facilities and Pollution Control Financing
Authority
*4(m) Lease for 2700 Sepulveda Boulevard Torrance, California
*4(n) Amended and Restated Warrant Agreement, dated March 1, 1991,
among Green Mountain Holding Corporation and First Trust
National Association
*4(o) Exchange Notes Warrant Transfer Agreement
*4(p) Warrant (Earned) to purchase shares of the Company's Common
Stock dated March 24, 1993
*4(q) Warrant (Earned-In) to purchase shares of the Company's
Common Stock, dated March 23, 1993
*4(r) Recapitalization Agreement among the Company, General
Electric Capital Corporation, Smith Barney Inc., Chemical
Fund Investments, Inc., Legend Capital Group, Inc., Legend
Capital International Ltd., Castle Harlan, Inc., M. Farooq
Kathwari, the Ethan Allen Retirement Program and other
stockholders named on the signature pages thereto, dated as
of March 24, 1993
*4(s) Preferred Stock and Common Stock Subscription Agreement,
dated March 24, 1993, among the Company, General Electric
Capital Corporation, and Smith Barney Inc.
*4(t) Security Agreement, dated as of March 10, 1995, between
Ethan Allen Inc. and Chase Manhattan Bank
*4(u) Rights Agreement, dated as of July 26, 1996, between the
Company and Harris Trust and Savings Bank
*4(v) Registration Rights Agreement, dated March 28, 1997, between
the Company and Carriage House Interiors of Colorado, Inc.
4(w) Credit Agreement as of August 24, 1999 by and among Ethan
Allen Inc., Ethan Allen Interiors Inc., the Chase Manhattan
Bank, Fleet Bank, N.A. and Wachovia Bank, N.A.
46
<PAGE>
Exhibit
Number Exhibit
-------- -----------------------------------------------------------------
*10(b) Employment Agreement, dated June 29, 1989, among Mr. Kathwari,
the Company and Ethan Allen
*10(c) Employment Agreement dated July 27, 1994 among Mr. Kathwari,
the Company and Ethan Allen
*10(d) Restated Directors Indemnification Agreement dated March
1993, among the Company and Ethan Allen and their Directors
*10(e) Registration Rights Agreement, dated March 1993, by and
among Ethan Allen, General Electric Capital Corporation and
Smith Barney Inc.
*10(f) Form of Management Bonus Plan, dated October 30, 1991
*10(g) Ethan Allen Profit Sharing and 401(k) Retirement Plan
*10(h) General Electric Capital Corporation Credit Card Program
Agreement dated August 25, 1995
10(h)-1 First Amendment to Credit Card Program Agreement dated
February 22, 2000
*10(i) Employment Agreement dated October 28, 1997 between Mr.
Kathwari and Ethan Allen Interiors, Inc.
10(j) Sales Finance Agreement dated June 25, 1999, between the
Company and MBNA America Bank, N.A.
10(k) Amended and Restated Consumer Credit Card Program Agreement
dated February 22, 2000, by and among the Company and Monogram
Credit Card Bank of Georgia
*21 List of wholly-owned subsidiaries of the Company
23 Consent of KPMG LLP
27 Financial Data Schedule
* Incorporated by reference to the exhibits filed with the Registration
Statement on Form S-1 of the Company and Ethan Allen Inc. filed with the
Securities and Exchange Commission on March 16, 1993 (Commission File No.
33-57216), the Registration Statement on Form S-3 of the Company filed with
the Securities and Exchange Commission on May 21, 1997 (Commission File No.
333-37545), the Annual Report on Form 10-K of the Company and Ethan Allen
Inc. filed with the Securities and Exchange Commission on September 24,
1993 (Commission File No. 1-11806), the Current Report on Form 8-K of the
Company and Ethan Allen Inc. filed with the Securities and Exchange
Commission on July 3, 1996 (Commission File No. 1-11806), the Quarterly
Report on Form 10-Q of the Company and Ethan Allen Inc. filed with the
Securities and Exchange Commission on February 13, 1997 (Commission File
No. 1-11806), the Quarterly Report on Form 10-Q of the Company and Ethan
Allen Inc. filed with the Securities and Exchange Commission on November
14, 1997 (Commission File No. 1-11806), the Quarterly Report on Form 10-Q
of the Company and Ethan Allen Inc. filed with the Securities and Exchange
Commission on February 12, 1999 (Commission File No. 1-11806), the
Quarterly Report on Form 10-Q of the Company and Ethan Allen Inc. filed
with the Securities and Exchange Commission on May 13, 1999 (Commission
File No. 1-11806), the Quarterly Report on Form 10-Q of the Company and
Ethan Allen Inc. filed with the Securities and Exchange Commission on
February 14, 2000 (Commission File No. 1-11806), and the Registration
Statement on Form S-3 of the Company, Ethan Allen, Ethan Allen
Manufacturing Corporation, Ethan Allen Finance Corporation and Andover Wood
Products Inc. filed with the Securities and Exchange Commission on October
23, 1994 (Commission File No. 33-85578-01) and all supplements thereto.
47
<PAGE>
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
As of and for the Fiscal Years Ended June 30, 2000, 1999 and 1998
(Dollars in thousands)
Balance at Additions Balance at
Beginning Charged to End of
of Period Income Adjustments Period
---------- ---------- ----------- ----------
Accounts Receivable
Allowance for doubtful accounts:
June 30, 2000 $ 2,460 $ 439 $ (148) $ 2,751
June 30, 1999 $ 1,961 $ 622 $ (123) $ 2,460
June 30, 1998 $ 1,902 $ 312 $ (253) $ 1,961
48
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ETHAN ALLEN INTERIORS INC.
(Registrant)
By /s/ M. Farooq Kathwari
----------------------------------------
Chairman, Chief Executive Officer
and Director
ETHAN ALLEN INC.
(Registrant)
By /s/ M. Farooq Kathwari
----------------------------------------
Chairman, Chief Executive Officer
and Director
49
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
/s/ M. Farooq Kathwari Chairman, Chief Executive
---------------------------------------- Officer, Acting Principal Financial
(M. Farooq Kathwari) Officer and Director
/s/ Clinton A. Clark Director
---------------------------------------
(Clinton A. Clark)
/s/ Kristin Gamble Director
---------------------------------------
(Kristin Gamble)
/s/ Horace McDonell Director
---------------------------------------
(Horace McDonell)
/s/ Edward H. Meyer Director
---------------------------------------
(Edward H. Meyer)
/s/ William W. Sprague Director
---------------------------------------
(William W. Sprague)
/s/ Michele Bateson Corporate Controller, Principal
--------------------------------------- Accounting Officer
(Michele Bateson)
50
<PAGE>
EXHIBIT 4(w)
CONFORMED COPY
================================================================================
CREDIT AGREEMENT
dated as of
August 25, 1999
among
ETHAN ALLEN INC.,
as Borrower,
ETHAN ALLEN INTERIORS INC.,
The Lenders Party Hereto,
THE CHASE MANHATTAN BANK,
as Administrative Agent,
FLEET BANK, N.A.,
as Co-Documentation Agent,
and
WACHOVIA BANK, N.A.,
as Co-Documentation Agent
---------------------------
CHASE SECURITIES INC.,
as Arranger
================================================================================
[CS&M Reference Number: 6700-868]
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms...................................................1
SECTION 1.02. Terms Generally................................................10
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments....................................................11
SECTION 2.02. Loans..........................................................11
SECTION 2.03. Borrowing Procedure; Interest Rate Elections...................12
SECTION 2.04. Evidence of Debt; Repayment of Loans...........................13
SECTION 2.05. Fees...........................................................13
SECTION 2.06. Interest on Loans..............................................14
SECTION 2.07. Default Interest...............................................14
SECTION 2.08. Alternate Rate of Interest.....................................14
SECTION 2.09. Termination and Reduction of Commitments.......................15
SECTION 2.10. Prepayment.....................................................15
SECTION 2.11. Reserve Requirements; Change in Circumstances..................15
SECTION 2.12. Change in Legality.............................................16
SECTION 2.13. Indemnity......................................................17
SECTION 2.14. Pro Rata Treatment.............................................17
SECTION 2.15. Sharing of Setoffs.............................................17
SECTION 2.16. Payments.......................................................18
SECTION 2.17. Taxes..........................................................18
SECTION 2.18. Assignment of Commitments Under Certain Circumstances..........20
SECTION 2.19. Swingline Loans................................................20
SECTION 2.20. Letters of Credit..............................................21
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers..........................................24
SECTION 3.02. Authorization.................................................25
SECTION 3.03. Enforceability................................................25
SECTION 3.04. Governmental Approvals........................................25
SECTION 3.05. Financial Statements..........................................25
SECTION 3.06. No Material Adverse Change....................................25
SECTION 3.07. Title to Properties; Possession Under Leases..................25
SECTION 3.08. Subsidiaries..................................................25
SECTION 3.09. Litigation; Compliance with Laws..............................25
SECTION 3.10. Agreements....................................................26
SECTION 3.11. Federal Reserve Regulations...................................26
SECTION 3.12. Investment Company Act; Public Utility Holding Company Act....26
SECTION 3.13. Use of Proceeds...............................................26
SECTION 3.14. Tax Returns...................................................26
SECTION 3.15. No Material Misstatements.....................................26
SECTION 3.16. Employee Benefit Plans........................................27
SECTION 3.17. Environmental Matters.........................................27
SECTION 3.18. Insurance.....................................................27
SECTION 3.19. Labor Matters.................................................27
SECTION 3.20. Patents, Trademarks, etc......................................28
SECTION 3.21. Year 2000.....................................................28
<PAGE>
ARTICLE IV
CONDITIONS
SECTION 4.01. All Credit Events.............................................28
SECTION 4.02. Effectiveness.................................................28
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01. Existence; Businesses and Properties..........................29
SECTION 5.02. Insurance.....................................................30
SECTION 5.03. Obligations and Taxes.........................................30
SECTION 5.04. Financial Statements, Reports, etc............................30
SECTION 5.05. Litigation and Other Notices..................................31
SECTION 5.06. Employee Benefits.............................................31
SECTION 5.07. Maintaining Records; Access to Properties and Inspections.....31
SECTION 5.08. Use of Proceeds...............................................32
SECTION 5.09. Further Assurances............................................32
SECTION 5.10. Environmental Matters.........................................32
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01. Indebtedness..................................................33
SECTION 6.02. Liens.........................................................34
SECTION 6.03. Certain Acquisitions..........................................34
SECTION 6.04. Mergers, Consolidations and Sales of Assets...................34
SECTION 6.05. Business of Holdings, Borrower and Subsidiaries...............34
SECTION 6.06. Consolidated Net Worth........................................35
SECTION 6.07. Consolidated Fixed Charge Coverage Ratio......................35
SECTION 6.08. Leverage Ratio................................................35
SECTION 6.09. Restrictive Agreements........................................35
ARTICLE VII
EVENTS OF DEFAULT
ARTICLE VIII
THE ADMINISTRATIVE AGENT
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices.......................................................39
SECTION 9.02. Survival of Agreement.........................................39
SECTION 9.03. Binding Effect................................................40
SECTION 9.04. Successors and Assigns........................................40
SECTION 9.05. Expenses; Indemnity...........................................42
SECTION 9.06. Right of Setoff...............................................43
SECTION 9.07. APPLICABLE LAW................................................43
<PAGE>
SECTION 9.08. Waivers; Amendment............................................43
SECTION 9.09. Interest Rate Limitation......................................43
SECTION 9.10. Entire Agreement..............................................44
SECTION 9.11. WAIVER OF JURY TRIAL..........................................44
SECTION 9.12. Severability..................................................44
SECTION 9.13. Counterparts..................................................44
SECTION 9.14. Headings......................................................44
SECTION 9.15. Jurisdiction; Consent to Service of Process...................44
SECTION 9.16. Confidentiality...............................................45
SECTION 9.17. Defaulting Lender.............................................45
SCHEDULES:
Schedule 2.01 -- Commitments
Schedule 3.08 -- Excluded Subsidiaries
Schedule 3.09 -- Litigation
Schedule 3.17 -- Environmental Matters
Schedule 3.18 -- Insurance
Schedule 6.02 -- Existing Liens
Schedule 6.09 -- Existing Restrictions
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of Roxanne Khazarian, Esq.
Exhibit C -- Form of Guarantee Agreement
Exhibit D -- Form of Indemnity, Subrogation and Contribution Agreement
<PAGE>
CREDIT AGREEMENT dated as of August 25, 1999, among
ETHAN ALLEN INC., a Delaware corporation (the
"Borrower"), ETHAN ALLEN INTERIORS INC., a Delaware
corporation ("Holdings"), the financial institutions
from time to time parties hereto (together with the
Swingline Lender (as defined below), the "Lenders"),
THE CHASE MANHATTAN BANK, a New York banking
corporation, as swingline lender (in such capacity,
the "Swingline Lender"), and as administrative agent
(in such capacity, the "Administrative Agent") for
the Lenders, and FLEET BANK, N.A., a national banking
association, and WACHOVIA BANK, N.A., a national
banking association, as co-documentation agents (in
such capacity, the "Co- Documentation Agents") for
the Lenders.
The parties hereto agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms
shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any Loan bearing interest at the Alternate Base Rate
in accordance with the provisions of Article II.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded, if necessary, to
the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in effect for
such Interest Period and (b) Statutory Reserves.
"Administrative Agent Fees" shall have the meaning assigned to such term in
Section 2.05(b).
"Administrative Questionnaire" shall mean an Administrative Questionnaire
in the form of Exhibit A.
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount of
the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded,
if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1%
and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
If for any reason the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any
reason, including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms thereof, the Alternate Base
Rate shall be determined without regard to clause (b) or (c), or both, of the
preceding sentence, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective
Rate, respectively.
"Applicable Fixed Charge Coverage Ratio" shall mean, at any time, the
Consolidated Fixed Charge Coverage Ratio for the most recent period of four
consecutive fiscal quarters of the Borrower for which financial statements have
been delivered to the Administrative Agent pursuant to Section 5.04.
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"Applicable Percentage" shall mean, with respect to any Eurodollar Loan or
ABR Loan, or with respect to the Commitment Fees or L/C Participation Fees, as
the case may be, the applicable percentage set forth below under the caption
"Eurodollar Spread" or "ABR Spread" or "Commitment Fee" or "L/C Participation
Fee", as the case may be, based upon the Borrower's senior, unsecured, noncredit
enhanced debt ratings by Moody's and S&P, respectively, applicable on such date:
Eurodollar ABR Commitment L/C Participation
Index Debt Ratings: Spread Spread Fee Fee
------------------- ---------- ------ ---------- ------------------
Category 1
----------
A-/A3 or better 0.500% 0.000% 0.125% 0.500%
--------------------------------------------------------------------------------
Category 2
----------
BBB+/Baa1 0.625% 0.000% 0.150% 0.625%
--------------------------------------------------------------------------------
Category 3
----------
BBB/Baa2 0.750% 0.000% 0.175% 0.750%
--------------------------------------------------------------------------------
Category 4
----------
BBB-/Baa3 1.00% 0.000% 0.200% 1.00%
------------------------------------------------------------- ------------------
Category 5 1.25% 0.250% 0.250% 1.25%
----------
Below BBB-/Baa3
For purposes of the foregoing, (i) if either Moody's or S&P shall not have
in effect a rating for the Borrower's senior, unsecured, noncredit enhanced debt
(other than by reason of the circumstances referred to in the last sentence of
this definition), then such rating agency shall be deemed to have established a
rating in Category 5; (ii) if the ratings established or deemed to have been
established by Moody's and S&P for the Borrower's senior, unsecured, noncredit
enhanced debt shall fall within different Categories, the Applicable Percentage
shall be based on the higher of the two ratings unless one of the two ratings is
two or more Categories lower than the other, in which case the Applicable
Percentage shall be determined by reference to the Category next below that of
the higher of the two ratings; and (iii) if the ratings established or deemed to
have been established by Moody's and S&P for the Borrower's senior, unsecured,
noncredit enhanced debt shall be changed (other than as a result of a change in
the rating system of Moody's or S&P), such change shall be effective as of the
date on which it is first announced by the applicable rating agency. Each change
in the Applicable Percentage shall apply during the period commencing on the
effective date of such change and ending on the date immediately preceding the
effective date of the next such change. If the rating system of Moody's or S&P
shall change, or if either such rating agency shall cease to be in the business
of rating corporate debt obligations, the Borrower and the Lenders shall
negotiate in good faith to amend this definition to reflect such changed rating
system or the unavailability of ratings from such rating agency and, pending the
effectiveness of any such amendment, the Applicable Percentage shall be
determined by reference to the rating most recently in effect prior to such
change or cessation.
"Assessment Rate" shall mean for any date the annual rate (rounded, if
necessary, to the next 1/100 of 1%) most recently estimated by the
Administrative Agent as the then current net annual assessment rate that will be
employed in determining amounts payable by the Administrative Agent to the
Federal Deposit Insurance Corporation (or any successor) for insurance by such
Corporation (or such successor) of time deposits made in Dollars at the
Administrative Agent's domestic offices.
"Assignment and Acceptance" shall mean an assignment and acceptance entered
into by a Lender and an assignee, and accepted by the Administrative Agent,
substantially in the form of Exhibit B or such other form as shall be approved
by the Administrative Agent.
"Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment Rate.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States.
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"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrower in accordance with
the terms of Section 2.03 and substantially in the form of Exhibit C.
"Business Day" shall mean any day other than a Saturday, Sunday or day on
which banks in New York City are authorized or required by law to close;
provided, however, that when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in Dollar deposits in the London interbank market.
"Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Cash Equivalents" shall mean (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed by the United
States or any agency or instrumentality thereof, (b) certificates of deposit,
banker's acceptances and time deposits with maturities of one year or less from
the date of acquisition and overnight bank deposits, in each case of any
commercial bank having a longterm unsecured debt rating of at least "A" by S&P
or "A2" by Moody's, (c) repurchase obligations with a term of not more than
twelve days for underlying securities of the types described in clauses (a) and
(b) above entered into with any of the Lenders and (d) commercial paper of a
domestic issuer with maturities of one year or less rated at least A-1 by S&P or
P-1 by Moody's; (e) commercial paper of any bank or other financial institution
meeting the qualifications in clause (b) above; and (f) investments in money
market funds, substantially all assets of which comprise securities of the types
described in clauses (a) through (e) above.
A "Change in Control" shall be deemed to have occurred if (a) Holdings
shall cease to own 100% of the capital stock of the Borrower, (b) any person or
group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934
as in effect on the date hereof) shall own directly or indirectly, beneficially
or of record, shares representing 30% or more of the aggregate ordinary voting
power represented by the issued and outstanding capital stock of Holdings; (c) a
majority of the seats (other than vacant seats) on the board of directors of
Holdings shall at any time have been occupied by persons who were neither (i)
nominated by the board of directors of Holdings, nor (ii) appointed by directors
so nominated; or (d) any person or group shall otherwise directly or indirectly
Control Holdings.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Commitment" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment and Swingline Commitment and, with respect to the
Issuing Bank, its L/C Commitment.
"Commitment Fee" shall have the meaning assigned to such term in Section
2.05(a).
"Consolidated Capital Expenditures" shall mean, for any period, the sum of
(a) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability) by the Borrower and its consolidated
Subsidiaries during such period that, in conformity with GAAP, should be
included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of the Borrower and its
consolidated Subsidiaries; provided that "Consolidated Capital Expenditures"
shall not include (i) any of the foregoing expenditures to the extent made with
the proceeds from property or casualty insurance or compensation with respect to
eminent domain or condem nation proceedings or (ii) any of the foregoing
expenditures to the extent constituting an acquisition made in reliance upon
clause (b) of Section 6.04; plus (b) the aggregate of all payments of Capital
Lease Obligations during such period (except to the extent allocable to
interest).
"Consolidated EBITDA" shall mean, for any period, Consolidated Net Income
for such period, before giving effect to any extraordinary gains or losses or
any gains or losses resulting from sales of assets (other than sales of
inventory in the ordinary course of business), plus, to the extent deducted in
computing such Consolidated Net Income, the sum of (a) income tax expense
(whether paid or deferred), (b) Consolidated Interest Expense, (c) depreciation
and amortization and (d) any non-cash charges resulting
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from any restructuring or consolidation of operations or any grant, exercise or
cancellation of stock options or warrants.
"Consolidated Fixed Charge Coverage Ratio" shall mean, for any period, the
ratio of (a) the sum of (i) Consolidated EBITDA plus (ii) Rental Expense minus
(iii) Consolidated Capital Expenditures to (b) the sum of (i) Consolidated
Interest Expense plus (ii) Rental Expense, in each case for such period.
"Consolidated Interest Expense" shall mean, for any period, the gross
consolidated interest expense of the Borrower for such period determined on a
consolidated basis in accordance with GAAP, and including, to the extent not
otherwise included, Capital Lease Obligations (to the extent allocable to
interest) and all commissions, discounts and other fees and charges with respect
to letters of credit and bankers' acceptances and the net costs (i.e. costs
minus benefits) under interest rate protection agreements and other interest
hedging arrangements, but excluding amortization of deferred financing costs to
the extent otherwise included.
"Consolidated Net Income" shall mean, for any period, the consolidated net
income or loss of the Borrower for such period determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Worth" shall mean, as of any date of determination, the
consolidated stockholders' equity of the Borrower determined on a consolidated
basis in accordance with GAAP less the amount of any Indebtedness of Holdings to
the Borrower included as an asset of the Borrower in determining such
consolidated stockholders' equity.
"Consolidated Total Assets" shall mean, as of any date of determination,
the total assets which would properly be classified as consolidated assets of
the Borrower and its Subsidiaries at such date in accordance with GAAP.
"Consolidated Total Debt" shall mean, as of any date of determination, all
Indebtedness (excluding (a) Guarantees of Indebtedness, to the extent the
Guaranteed Indebtedness is already included, (b) Indebtedness of the type
described in clause (i) of the definition of the term Indebtedness and (c) to
the extent such Indebtedness is contingent in nature, Indebtedness of the type
described in clause (j) of the definition of the term Indebtedness) of the
Borrower and its consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Control" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and "Controlling" and "Controlled" shall have meanings correlative thereto.
"Credit Event" shall have the meaning assigned to such term in Section
4.01.
"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"Dollars" or "$" shall mean lawful money of the United States of America.
"Effective Date" means the date on which the conditions specified in
Section 4.02 are satisfied (or waived in accordance with Section 9.08).
"Environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" means any written accusation, allegation, notice of
violation, claim, demand, order, directive, cost recovery action or other cause
of action by, or on behalf of, any Governmental Authority or any person for
damages, injunctive or equitable relief, personal injury (including sickness,
disease or death), Remedial Action costs, tangible or intangible property
damage, natural resource damages, nuisance, pollution, any adverse effect on the
environment caused by any Hazardous Material, or for fines, penalties or
restrictions, resulting from or based upon: (a) the existence, or the
continuation of the existence, of a Release (including sudden or non-sudden,
accidental or non-accidental Releases); (b) exposure to any Hazardous Material;
(c) the presence, use, handling, transportation,
4
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storage, treatment or disposal of any Hazardous Material; or (d) the violation
or alleged violation of any Environmental Law or Environmental Permit.
"Environmental Law" means any and all applicable present and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
Release or threatened Release of any Hazardous Material or to health and safety
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C.ss.ss. 9601 et seq. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Amendments of 1984, 42
U.S.C.ss.ss. 6901 et seq., the Federal Water Pollution Control Act, as amended
by the Clean Water Act of 1977, 33 U.S.C.ss.ss. 1251 et seq., the Clean Air Act
of 1970, as amended 42 U.S.C.ss.ss. 7401 et seq., the Toxic Substances Control
Act of 1976, 15 U.S.C.ss.ss. 2601 et seq., the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C.ss.ss. 651 et seq., the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C.ss.ss. 11001 et seq., the Safe
Drinking Water Act of 1974, as amended, 42 U.S.C.ss.ss. 300(f) et seq., the
Hazardous Materials Transportation Act, 49 U.S.C.ss.ss. 1801 et seq., and any
similar or implementing state or local law, and all amendments or regulations
promulgated thereunder.
"Environmental Permit" means any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environ mental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414 of the Code.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan" shall mean any Loan bearing interest at a rate determined
by reference to the Adjusted LIBO Rate in accordance with the provisions of
Article II.
"Event of Default" shall have the meaning assigned to such term in Article
VII.
"Excluded Subsidiary" shall mean, at any time, any Subsidiary of the
Borrower identified on Schedule 3.08 as an "Excluded Subsidiary" and that has
not ceased to be an "Excluded Subsidiary" as provided below; provided that such
Subsidiary (a) does not own assets or properties that, together with the assets
and properties owned by all other Subsidiaries that are treated as "Excluded
Subsidiaries", have a fair market value, in the aggregate, in excess of
$5,000,000, (b) did not, during the period of four consecutive fiscal quarters
of the Borrower ended on the most recent date for which quarterly or annual
financial statements of Holdings are available, have revenues that, together
with the revenues of all other Subsidiaries that are treated as "Excluded
Subsidiaries", accounted for more than 3% of the consolidated revenues of the
Borrower and its Subsidiaries during such period, and (c) does not have any
Indebtedness or any other material liabilities. At any time the Borrower may,
and shall if one or more Excluded Subsidiaries fail to satisfy one or more of
the conditions described in clauses (a) through (d) above, notify the
Administrative Agent that one or more Excluded Subsidiaries shall cease to
constitute an "Excluded Subsidiary", whereupon such Subsidiary or Subsidiaries
shall cease to constitute an "Excluded Subsidiary" for all purposes hereof. The
Borrower may not designate any Subsidiary that is not an Excluded Subsidiary as
an Excluded Subsidiary.
"Existing Credit Agreement" means the Amended and Restated Credit Agreement
dated as of March 10, 1995, as amended and restated as of December 4, 1996,
among the Borrower, Holdings, the financial institutions from time to time
parties thereto and The Chase Manhattan Bank, as administrative agent.
"Existing Letters of Credit" means any Letters of Credit that remain
outstanding under the Existing Credit Agreement on the Effective Date.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal
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funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" of any corporation shall mean the chief financial
officer, principal accounting officer, Treasurer or Controller of such
corporation, and the Assistant Treasurer and Assistant Controller for the
purpose of giving notice pursuant to Sections 2.03, 2.10, 2.19 and 2.20.
"Foreign Subsidiary" shall mean any Subsidiary organized outside of the
United States.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.
"Governmental Authority" shall mean any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.
"Guarantee Agreement " shall mean the Guarantee Agreement, substantially in
the form of Exhibit C, among the Guarantors and the Administrative Agent.
"Guarantors" shall mean Holdings and the Subsidiary Guarantors.
"Hazardous Materials" means all explosive or radioactive substances or
wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary or customary course of business), (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such person, whether or not the obligations secured thereby have
been assumed, (g) all Guarantees by such person of Indebtedness of others, (h)
all Capital Lease Obligations of such person, (i) all obligations of such person
in respect of Rate Protection Agreements and (j) all obligations of such person
as an account party in respect of letters of credit and bankers' acceptances.
The Indebtedness of any person shall include the Indebtedness of any partnership
in which such person is a general partner.
"Indemnity, Subrogation and Contribution Agreement" shall mean the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit D, among the Borrower, the Subsidiary Guarantors and the Administrative
Agent.
"Information Memorandum" shall mean the confidential information
memorandum, dated as of July 1999, prepared by the Borrower and distributed by
the Administrative Agent to the Lenders.
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"Interest Payment Date" shall mean, with respect to any Loan, the last day
of the Interest Period applicable to the Borrowing of which such Loan is a part
and, in the case of a Eurodollar Borrowing with an Interest Period of more than
three months' duration, each day that would have been an Interest Payment Date
had successive Interest Periods of three months' duration been applicable to
such Borrowing, and, in addition, any date on which such Loan shall be changed
to a different Type.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing or on the last day of the immediately
preceding Interest Period applicable to such Borrowing, as the case may be, and
ending on the numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is 1, 2, 3, 6 or
(if available, as determined by the Administrative Agent and the Lenders) 9 or
12 months thereafter, as the Borrower may elect and (b) as to any ABR Borrowing,
the period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the earliest of (i) the next succeeding March 31, June 30,
September 30 or December 31, (ii) the Revolving Credit Maturity Date and (iii)
the date such Borrowing is prepaid in accordance with Section 2.10(b); provided,
however, that if any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next succeeding Business Day
unless, in the case of a Eurodollar Borrowing only, such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day. Interest shall accrue from
and including the first day of an Interest Period to but excluding the last day
of such Interest Period.
"Issuing Bank" shall mean, as the context may require, (a) The Chase
Manhattan Bank or (b) any other Lender that may become an Issuing Bank pursuant
to Section 2.20(i) or 2.20(k), with respect to Letters of Credit issued by such
Lender. The Issuing Bank may, in its discretion, arrange for one or more Letters
of Credit to be issued by Affiliates of the Issuing Bank, in which case the term
"Issuing Bank" shall include any such Affiliate with respect to Letters of
Credit issued by such Affiliate.
"Issuing Bank Fees" shall have the meaning assigned to such term in Section
2.05(c).
"L/C Commitment" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.20.
"L/C Disbursement" shall mean a payment or disbursement made by the Issuing
Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time. The L/C Exposure of any Revolving Credit Lender at any time shall
mean its Pro Rata Percentage of the aggregate L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to such term in
Section 2.05(c).
"Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2.20.
"Leverage Ratio" shall mean, on any date, the ratio of (a) Consolidated
Total Debt to (b) the sum of (i) Consolidated Total Debt and (ii) Consolidated
Net Worth, in each case as of such date.
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing, the rate
(rounded, if necessary, to the next 1/16 of 1%) at which Dollar deposits
approximately equal in principal amount to the Administrative Agent's portion of
such Eurodollar Borrowing and for a maturity comparable to such Interest Period
are offered to the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.
"Loan Documents" shall mean this Agreement, the Guarantee Agreement, the
Indemnity, Subrogation and Contribution Agreement and the Notes, if any.
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"Loan Parties" shall mean the Borrower and the Guarantors.
"Loans" shall mean the Revolving Loans and the Swingline Loans.
"Margin Stock" shall have the meaning assigned to such term in Regulation
U.
"Material Adverse Effect" shall mean (a) a materially adverse effect on the
business, assets, operations, prospects or condition, financial or otherwise, of
Holdings, or the Borrower, or the Borrower and the Subsidiaries taken as a
whole, (b) material impairment of the ability of any Loan Party to perform any
of its obligations under any Loan Document to which it is or will be a party or
(c) material impairment of the rights of or benefits available to the Lenders
under any Loan Document.
"Moody's" shall mean Moody's Investors Service, Inc., and its successors.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code
Section 414) is making or accruing an obligation to make contributions, or has
within any of the preceding five plan years made or accrued an obligation to
make contributions.
"Non Wholly Owned Subsidiary" shall mean a Subsidiary that is not a Wholly
Owned Subsidiary.
"Note" shall mean a promissory note of the Borrower, substantially in the
form of Exhibit D.
"Obligations" shall mean all obligations defined as "Obligations" in the
Guarantee Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"Person" or "person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code that is maintained for current or former employees, or any
beneficiary thereof, of the Borrower or any ERISA Affiliate.
"Pro Rata Percentage" of any Revolving Credit Lender at any time shall mean
the percentage of the Total Revolving Credit Commitment represented by such
Lender's Revolving Credit Commitment.
"Prime Rate" shall mean the rate of interest per annum publicly announced
from time to time by the Administrative Agent as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective on the date such change is publicly announced as being effective.
"Rate Protection Agreements" shall mean interest rate protection
agreements, foreign currency exchange agreements, commodity price protection
agreements and other interest or currency exchange rate or commodity price
hedging arrangements.
"Register" shall have the meaning given such term in Section 9.04(d).
"Regulation T" shall mean Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
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"Regulation X" shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
"Remedial Action" means (a) "remedial action" as such term is defined in
CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in the environment;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the environment; or (iii) perform studies and
investigations in connection with, or as a precondition to, (i) or (ii) above.
"Rental Expense" shall mean, for any period, all payment obligations of
Borrower and its consolidated Subsidiaries accrued during such period under
agreements for rent, lease, hire or use of any real or personal property,
including obligations in the nature of operating leases but excluding Capital
Lease Obligations.
"Reportable Event" shall mean any reportable event as defined in Section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan
(other than a Plan maintained by an ERISA Affiliate that is considered an ERISA
Affiliate only pursuant to subsection (m) or (o) of Code Section 414).
"Required Lenders" shall mean, at any time, Lenders having Revolving Credit
Exposure and unused Revolving Credit Commitments representing in excess of 50%
of the sum of the Aggregate Revolving Credit Exposure and unused Revolving
Credit Commitments at such time.
"Responsible Officer" of any corporation shall mean any executive officer
or Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving
Loans.
"Revolving Credit Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans hereunder as set forth in
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Revolving Credit Commitment, as applicable, as the same may be
reduced from time to time pursuant to Section 2.09 and pursuant to assignments
by such Lender pursuant to Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any Lender at any
time, the aggregate principal amount at such time of all outstanding Revolving
Credit Loans of such Lender, plus the aggregate amount at such time of such
Lender's L/C Exposure, plus the aggregate amount at such time of such Lender's
Swingline Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment.
"Revolving Credit Maturity Date" shall mean August 25, 2004.
"Revolving Loans" shall mean the revolving loans made by the Lenders to the
Borrower pursuant to Section 2.01. Each Revolving Loan shall be a Eurodollar
Revolving Loan or an ABR Revolving Loan.
"S&P" shall mean Standard & Poor's Ratings Group and its successors.
"Statutory Reserves" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which the Administrative Agent or any Lender (including any branch,
Affiliate, or other Funding Office making or holding a Loan) is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal
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time deposits in Dollars of over $100,000 with maturities approximately equal to
three months, and (b) with respect to the Adjusted LIBO Rate, for Eurocurrency
Liabilities (as defined in Regulation D of the Board). Such reserve percentages
shall include those imposed pursuant to such Regulation D. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and to be subject to such
reserve requirements without benefit of or credit for proration, exemptions or
offsets which may be available from time to time to any Lender under such
Regulation D. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"subsidiary" shall mean, with respect to any person (herein referred to as
the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any determination
is being made, owned, controlled or held, or (b) which is, at the time any
determination is made, otherwise Controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.
"Subsidiary" shall mean any subsidiary of the Borrower.
"Subsidiary Guarantor" shall mean each Subsidiary that is not a Foreign
Subsidiary or an Excluded Subsidiary.
"Swingline Commitment" shall mean the commitment of the Swingline Lender to
make loans pursuant to Section 2.19, as the same may be reduced from time to
time pursuant to Section 2.09.
"Swingline Exposure" shall mean at any time the aggregate principal amount
at such time of all outstanding Swingline Loans. The Swingline Exposure of any
Revolving Credit Lender at any time shall equal its Pro Rata Percentage of the
aggregate Swingline Exposure at such time.
"Swingline Loan" shall mean any loan made by the Swingline Lender pursuant
to Section 2.19.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so reported
on such day or such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 a.m., New York City time,
on such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it.
"Total Revolving Credit Commitment" shall mean, at any time, the aggregate
amount of the Revolving Credit Commitments, as in effect at such time.
"Transactions" shall have the meaning assigned to such term in Section
3.02.
"Type", when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, "Rate" shall include the Adjusted
LIBO Rate and the Alternate Base Rate.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Wholly Owned Subsidiary" shall mean a Subsidiary of which securities
(except for directors' qualifying shares) or other ownership interests
representing 100% of the equity, including 100% of the ordinary voting power,
are, at the time any determination is being made, owned by the Borrower, either
directly or indirectly through other Subsidiaries that satisfy the requirements
of this definition.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and
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"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any Loan
Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that for purposes of determining compliance
with the covenants contained in Article VI, all accounting terms herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP as in effect on the date of this Agreement and applied on a
basis consistent with the application used in the financial statements referred
to in Section 3.05.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments. Subject to the terms and conditions and relying
upon the representations and warranties herein set forth, each Lender agrees,
severally and not jointly, to make Revolving Loans to the Borrower, at any time
and from time to time on or after the date hereof, and until the earlier of the
Revolving Credit Maturity Date and the termination of the Revolving Credit
Commitment of such Lender in accordance with the terms hereof, in an aggregate
principal amount at any time outstanding that will not result in (i) such
Lender's Revolving Credit Exposure exceeding (ii) such Lender's Revolving Credit
Commitment.
Within the limits set forth in the preceding sentence, the Borrower may
borrow, pay or prepay and reborrow Revolving Loans on or after the Effective
Date and prior to the Revolving Credit Maturity Date, subject to the terms,
conditions and limitations set forth herein.
SECTION 2.02. Loans. (a) Each Loan (other than a Swingline Loan, as to
which this Section 2.02 shall not apply) shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their
applicable Revolving Credit Commitments; provided, however, that the failure of
any Lender to make any Loan shall not in itself relieve any other Lender of its
obligation to lend hereunder (it being understood, however, that no Lender shall
be responsible for the failure of any other Lender to make any Loan required to
be made by such other Lender). The Loans comprising any Borrowing shall be in an
aggregate principal amount which is (i) not less than $500,000 and is an
integral multiple of $100,000, in the case of an ABR Borrowing, (ii) not less
than $500,000 and is an integral multiple of $500,000, in the case of a
Eurodollar Borrowing, or (iii) equal to the remaining available balance of the
Revolving Credit Commitments.
(b) Subject to Sections 2.08 and 2.12, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant
to Section 2.03. Each Lender may at its option make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement. Borrowings of more than one Type may be outstanding at the same time;
provided, however, that the Borrower shall not be entitled to request any
Borrowing which, if made, would result in more than 20 Eurodollar Borrowings
outstanding hereunder at any time. For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.
(c) Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer to such account as the Administrative
Agent may designate in federal funds not later than 11:00 a.m., New York City
time, and the Administrative Agent shall by 12:00 (noon), New York City time,
credit the amounts so received to an account with the Administrative Agent
designated by the Borrower in the applicable Borrowing Request, which account
must be in the name of the Borrower or, if a Borrowing shall not occur on such
date because any condition precedent herein specified shall not have been met,
return the amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such
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Lender and the Borrower severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Administrative Agent at (i) in the case of
the Borrower, the interest rate applicable at the time to the Loans comprising
such Borrowing and (ii) in the case of such Lender, a rate determined by the
Administrative Agent to represent its cost of overnight or short-term funds
(which determination shall be conclusive absent manifest error). If such Lender
shall repay to the Administrative Agent such corresponding amount, such amount
shall constitute such Lender's Loan as part of such Borrowing for purposes of
this Agreement. Nothing in this paragraph shall be construed to relieve any
Lender of its obligation to make Loans hereunder or to prejudice any rights that
the Borrower may have against any Lender as a result of any failure by such
Lender to make Loans hereunder.
(e) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Borrowing if the Interest Period requested
with respect thereto would end after the Revolving Credit Maturity Date.
(f) If the Issuing Bank shall not have received from the Borrower any
payment required to be made under Section 2.20(e) by the time such payment is
required to be made, then, the Issuing Bank will promptly notify the
Administrative Agent of the L/C Disbursement and the Administrative Agent will
promptly notify each Revolving Credit Lender of such L/C Disbursement and its
Pro Rata Percentage thereof. Each Revolving Credit Lender shall pay by wire
transfer of immediately available funds to the Administrative Agent not later
than 2:00 p.m., New York City time, on such date (or, if such Revolving Credit
Lender shall have received such notice later than 12:00 (noon), New York City
time, on any day, not later than 10:00 a.m., New York City time, on the
immediately following Business Day), an amount equal to such Lender's Pro Rata
Percentage of such L/C Disbursement and the Administrative Agent will promptly
pay to the Issuing Bank amounts so received by it from the Revolving Credit
Lenders. The Administrative Agent will promptly pay to the Issuing Bank any
amounts received by it from the Borrower pursuant to Section 2.20(e) prior to
the time that any Revolving Credit Lender makes any payment pursuant to this
paragraph (f); any such amounts received by the Administrative Agent thereafter
will be promptly remitted by the Administrative Agent to the Revolving Credit
Lenders that shall have made such payments and to the Issuing Bank, as their
interests may appear. If any Revolving Credit Lender shall not have made its Pro
Rata Percentage of such L/C Disbursement available to the Administrative Agent
as provided above, such Lender and the Borrower severally agree to pay interest
on such amount, for each day from and including the date such amount is required
to be paid in accordance with this paragraph to but excluding the date such
amount is paid, to the Administrative Agent for the account of the Issuing Bank
at (i) in the case of the Borrower, the applicable rate per annum under Section
2.20(h), without duplication and (ii) in the case of such Lender, for the first
such day, the Federal Funds Effective Rate, and for each day thereafter, the
Alternate Base Rate. If (i) the Revolving Credit Lenders make the payments
required pursuant to this paragraph (f) in respect of any L/C Disbursement, (ii)
the Borrower notifies the Administrative Agent in accordance with Section
2.20(e) that all or any portion of such payments should be financed with ABR
Loans, specifying the amount thereof to be so financed, (iii) the amount so
specified is not less than $500,000 and is an integral multiple of $100,000, and
(iv) the conditions to Borrowing set forth in Section 4.01 are satisfied at the
time, then the amount of such payments so specified shall constitute ABR Loans
made on the date such payments were made for all purposes hereof and the
Administrative Agent shall promptly advise the Lenders thereof.
(g) Any Borrowing made on the Effective Date shall be made as an ABR
Borrowing.
SECTION 2.03. Borrowing Procedure; Interest Rate Elections. (a) In order to
request a Borrowing (other than a Swingline Loan, as to which this Section 2.03
shall not apply), the Borrower shall give to the Administrative Agent telephonic
notice of the contents of its Borrowing Request (promptly confirmed by hand
delivery or telecopy notice to the Administrative Agent of a duly completed
Borrowing Request substantially in the form of Exhibit C) (i) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before a proposed Borrowing, and (ii) in the case of an ABR
Borrowing, not later than 12:00 noon, New York City +time, one Business Day
before a proposed Borrowing; provided, however, that Borrowing Requests with
respect to Borrowings to be made on the Effective Date may, at the discretion of
the Administrative Agent, be delivered later than the times specified above.
Each Borrowing Request shall be irrevocable, signed by or on behalf of the
Borrower and shall specify the following information: (i) whether the Borrowing
then being requested is to be a Eurodollar Borrowing or an ABR Borrowing; (ii)
the date of such Borrowing (which shall be a Business Day), (iii) the number and
location of the account to which funds are to be disbursed (which shall be an
account that complies with the requirements of Section 2.02(c)); (iv) the amount
of such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing,
the Interest Period with respect thereto; provided, however,
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that, notwithstanding any contrary specification in any Borrowing Request, each
requested Borrowing shall comply with the requirements set forth in Section
2.02. If no election as to the Type of Borrowing is specified in any such
notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest
Period with respect to any Eurodollar Borrowing is specified in any such notice,
then the Borrower shall be deemed to have selected an Interest Period of one
month's duration. The Administrative Agent shall promptly (and in any event on
the same day that the Administrative Agent receives such notice, if received by
1:00 p.m., New York City time, on such day) advise the Lenders of any notice
given pursuant to this Section 2.03 (and the contents thereof) and of each
Lender's portion of the requested Borrowing.
(b) The Revolving Loans included in any Revolving Credit Borrowing shall
initially be of the Type and have the Interest Period determined as provided in
paragraph (a) above. Thereafter, the Borrower may from time to time elect to
change or continue the Type of all or a portion of the Loans included in such
Borrowing, as follows:
(i) if such Loans are ABR Loans, the Borrower may elect to change such
Loans to Eurodollar Loans; or
(ii) if such Loans are Eurodollar Loans, the Borrower may elect to change
such Loans to ABR Loans or to continue such Loans as Eurodollar Loans
for an additional Interest Period.
Each such election shall be made by delivering a notice to the Administrative
Agent at the time and in the manner applicable to a Borrowing Request under
paragraph (a) above, and specifying the information required to be specified in
such a Borrowing Request, and the contents thereof shall be communicated by the
Administrative Agent to the Lenders, in each case as though the Loans resulting
from such election were being advanced as a Borrowing on the date such election
is to become effective. In any event (i) the Borrower may not elect to change or
continue any Eurodollar Loans except pursuant to an election that is effective
on the last day of the Interest Period applicable thereto, (ii) each Borrowing
resulting from any such election (including each separate Borrowing resulting
from an election that applies to a portion of the Loans included in a Borrowing)
shall comply with the requirements set forth in Section 2.02, and (iii) if any
election applies to a portion of the Loans included in a Borrowing, such portion
shall be allocated ratably among the Loans included in such Borrowing. If the
Borrower shall not have delivered a notice in accordance with this paragraph
prior to 11:00 a.m., New York City time, three Business Days before the last day
of the Interest Period then in effect for any Borrowing, then, except to the
extent that the Borrower is required to repay or elects to prepay such Borrowing
in accordance with Section 2.04 or 2.10, the Loans included in such Borrowing
shall be converted into or continued as ABR Loans on the last day of such
Interest Period then if effect.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The outstanding
principal balance of each Revolving Loan and Swingline Loan shall be payable on
the Revolving Credit Maturity Date. Each Loan shall bear interest from the date
of the first Borrowing hereunder on the outstanding principal balance thereof as
set forth in Section 2.06.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness to such Lender resulting from
each Loan made by such Lender from time to time, including the amounts of
principal and interest payable and paid such Lender from time to time under this
Agreement.
(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type of each Loan made
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs (b)
and (c) of this Section 2.04 shall be prima facie evidence of the existence and
amounts of the obligations therein recorded, absent manifest error; provided,
however, that the failure of any Lender or the Administrative Agent to maintain
such accounts or any error therein shall not in any manner affect the
obligations of the Borrower to repay the Loans in accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the event any
Lender shall request and receive a Note payable to such Lender and its
registered assigns, the interests represented by that Note shall at all times
(including after any assignment of all or part of such interests pursuant to
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Section 9.04) be represented by one or more Notes payable to the payee named
therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender, through
the Administrative Agent, on the last day of March, June, September and December
in each year, and on the date on which the Revolving Credit Commitment of such
Lender shall be terminated as provided herein, a commitment fee (a "Commitment
Fee") equal to the Applicable Percentage per annum on the average daily unused
amount of the Revolving Credit Commitment of such Lender during the preceding
quarter (or other period commencing with the Effective Date or ending with the
Revolving Credit Maturity Date or the date on which the Revolving Credit
Commitment of such Lender shall be terminated). All Commitment Fees shall be
computed on the basis of the actual number of days elapsed in a year of 360
days. The Commitment Fee due to each Lender shall commence to accrue on the
Effective Date and shall cease to accrue on the date on which the Revolving
Credit Commitment of such Lender shall be terminated as provided herein. For
purposes of calculating Commitment Fees only, no portion of the Revolving Credit
Commitments shall be deemed utilized under Section 2.14 as a result of
outstanding Swingline Loans.
(b) The Borrower agrees to pay to the Administrative Agent, for its own
account, the administrative fees separately agreed to between the Borrower and
the Administrative Agent at the time so agreed to be payable (the
"Administrative Agent Fees").
(c) The Borrower agrees to pay (i) to each Revolving Credit Lender, through
the Administrative Agent, on the last day of March, June, September and December
of each year and on the date on which the Revolving Credit Commitment of such
Lender shall be terminated as provided herein, a fee (an "L/C Participation
Fee") equal to the Applicable Percentage per annum on such Lender's Pro Rata
Percentage of the average daily aggregate L/C Exposure (excluding the portion
thereof attributable to unreimbursed L/C Disbursements) during the preceding
quarter (or shorter period commencing with the Effective Date or ending with the
later of the date on which the Revolving Credit Commitment of such Lender shall
be terminated and the date on which such Lender ceases to have any L/C Exposure)
and (ii) to the Issuing Bank with respect to each Letter of Credit, on the last
day of March, June, September and December in each year and on the date on which
the L/C Commitment of such Issuing Bank shall be terminated as provided herein,
a fee equal to 0.125% per annum (or such other rate as the Borrower and such
Issuing Bank may agree) on the aggregate face amount of such Letter of Credit
during the preceding quarter (or shorter period commencing with the date of
issuance of such Letter of Credit or ending with the expiration or termination
such Letter of Credit) plus, in connection with the issuance, amendment,
extension, renewal or transfer of any Letter of Credit or any L/C Disbursement,
the Issuing Bank's customary documentary and processing charges (collectively,
the "Issuing Bank Fees"), provided, in each case, that any fees accruing after
the Revolving Credit Maturity Date shall be payable on demand. All L/C
Participation Fees and Issuing Bank Fees shall be computed on the basis of the
actual number of days elapsed in a year of 360 days.
(d) All fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Issuing Bank Fees shall be paid directly to
the Issuing Bank. Once paid, none of the fees shall be refundable under any
circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of Section
2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on
the basis of the actual number of days elapsed over a year of 365 or 366 days,
as the case may be, when determined by reference to the Prime Rate and over a
year of 360 days at all other times) at a rate per annum equal to the Alternate
Base Rate plus the Applicable Percentage.
(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Percentage.
(c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or
day within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.
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SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, the Borrower shall on demand from
time to time pay interest, to the extent permitted by law, on such defaulted
amount up to (but not including) the date of actual payment (after as well as
before judgment) at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to the sum of the
Alternate Base Rate plus the Applicable Percentage plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that Dollar deposits in the principal amount of the Loans comprising
such Borrowing are not generally available in the London interbank market, or
that the rates at which such Dollar deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making or maintaining
its Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall,
as soon as practicable thereafter, give written or telecopy notice of such
determination to the Borrower and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Borrower
and the Lenders that the circumstances giving rise to such notice no longer
exist, any request by the Borrower for a Eurodollar Borrowing pursuant to
Section 2.03 shall be deemed to be a request for an ABR Borrowing. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The Revolving
Credit Commitments and the Swingline Commitment shall be automatically
terminated on the Revolving Credit Maturity Date.
(b) Upon at least three Business Days' prior irrevocable telephonic notice
(promptly confirmed by hand delivery or telecopy notice) to the Administrative
Agent, the Borrower may at any time in whole permanently terminate, or from time
to time in part permanently reduce, the Revolving Credit Commitments or the
Swingline Commitment; provided, however, that (i) each partial reduction of the
Revolving Credit Commitments shall be in an integral multiple of $1,000,000 and
in a minimum principal amount of $1,000,000 and (ii) the Total Revolving Credit
Commitment shall not be terminated at any time that there is any Revolving
Credit Exposure, nor reduced to an amount that is less than the sum of the
Aggregate Revolving Credit Exposure at the time.
(c) Each reduction in the Revolving Credit Commitments hereunder shall be
made ratably among the Lenders in accordance with their respective Commitments.
The Borrower shall pay to the Administrative Agent for the account of the
Lenders, on the date of each termination or reduction, the Commitment Fees on
the amount of the Commitments so terminated or reduced accrued to the date of
such termination or reduction.
SECTION 2.10. Prepayment. (a) The Borrower shall have the right at any time
and from time to time to prepay any Borrowing, in whole or in part, upon prior
telephonic notice (promptly confirmed by hand delivery or telecopy notice) to
the Administrative Agent before 11:00 a.m., New York City time, on the date
three Business Days prior to the prepayment date, in the case of a Eurodollar
Borrowing, or one Business Day prior to the prepayment date, in the case of an
ABR Borrowing; provided, however, that each partial prepayment shall be in an
amount which is an integral multiple of $100,000 and not less than $500,000.
(b) In the event of any termination of the Revolving Credit Commitments,
the Borrower shall repay or prepay all its outstanding Revolving Credit
Borrowings on the date of such termination. In the event of any partial
reduction of the Revolving Credit Commitments, then (i) at or prior to the
effective date of such reduction, the Administrative Agent shall notify the
Borrower and the Revolving Credit Lenders of the Aggregate Revolving Credit
Exposure and (ii) if the Aggregate Revolving Credit Exposure would exceed the
Total Revolving Credit Commitment after giving effect to such reduction, then
the Borrower shall, on the date of such reduction, repay or prepay Revolving
Credit Borrowings or Swingline Loans (or a combination thereof) in an amount
sufficient to eliminate such excess.
(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such Borrowing by the amount
stated therein on the date stated therein. All prepayments under this Section
2.10 shall be subject to Section 2.13 but without premium or penalty. All
prepayments of Loans (other than ABR Loans prepaid pursuant to paragraph (a) of
this Section 2.10) under
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this Section 2.10 shall be accompanied by accrued interest on the principal
amount being prepaid to the date of payment.
SECTION 2.11. Reserve Requirements; Change in Circumstances. (a) If after
the date of this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation of payments to any Lender or
the Issuing Bank of the principal of or interest on any Eurodollar Loan made by
such Lender or any fees or other amounts payable hereunder (other than changes
in respect of taxes imposed on the overall net income of such Lender or the
Issuing Bank by the jurisdiction in which such Lender or the Issuing Bank has
its principal office or by any political subdivision or taxing authority
therein), or shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of or credit extended by such Lender or the Issuing Bank (except any
such reserve requirement which is reflected in the Adjusted LIBO Rate) or shall
impose on such Lender or the Issuing Bank or the London interbank market any
other condition affecting this Agreement or Eurodollar Loans made by such Lender
or any Letter of Credit or participation therein, and the result of any of the
foregoing shall be to increase the cost to such Lender or the Issuing Bank of
making or maintaining any Eurodollar Loan or of issuing or maintaining any
Letter of Credit or purchasing or maintaining a participation therein, or to
reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise) by an
amount deemed by such Lender or the Issuing Bank to be material, then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, upon
demand such additional amount or amounts as will compensate such Lender or the
Issuing Bank, as the case may be, for such additional costs incurred or
reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change after the date hereof in any
such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Issuing Bank or any Lender's or the
Issuing Bank's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Governmental Authority
has or would have the effect of reducing the rate of return on such Lender's or
the Issuing Bank's capital or on the capital of such Lender's or the Issuing
Bank's holding company, if any, as a consequence of this Agreement or the Loans
made or participation in Letters of Credit purchased by such Lender pursuant
hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company could have achieved but for such applicability,
adoption, change or compliance by an amount deemed by such Lender or the Issuing
Bank to be material, then from time to time the Borrower shall pay to such
Lender or the Issuing Bank, as the case may be, such additional amount or
amounts as will compensate such Lender or the Issuing Bank or such Lender's or
the Issuing Bank's holding company for any such reduction suffered. Any Lender
or Issuing Bank may utilize reasonable averaging and attribution methods in
determining any amount or amounts under this paragraph.
(c) A certificate of a Lender or the Issuing Bank setting forth the amount
or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as applicable, as specified in paragraph (a) or (b) above shall
be delivered to the Borrower, shall set forth in reasonable detail the
circumstances giving rise to such certificate and the basis for calculation of
the amount or amounts for which compensation is required, shall constitute
rebuttable presumptive evidence of such amount or amounts and, if not rebutted
within five Business Days, shall be conclusive and binding. The Borrower shall
pay each Lender or the Issuing Bank the amount shown as due on any such
certificate delivered by it within 10 days after its receipt of the same.
(d) The protection of this Section shall be available to each Lender and
the Issuing Bank regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, agreement, guideline or other
change or condition which shall have occurred or been imposed.
(e) Each Lender or Issuing Bank will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge that will entitle
such Lender or Issuing Bank to compensation pursuant to this Section (any such
event, a "Compensation Event"). No Lender or Issuing Bank shall be entitled to
compensation pursuant to this Section in respect of any Compensation Event for
any period of time in excess of 365 days prior to such notice; provided that, if
a Compensation Event by its
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terms is retroactive, such 365-day period shall be increased by the
duration of the retroactive effect of such Compensation Event.
SECTION 2.12. Change in Legality. (a) Notwithstanding any other provision
herein, if, after the date hereof, any change in any law or regulation or in the
interpretation thereof by any Gov ernmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not thereafter
(for the duration of such unlawfulness or impracticability) be made by such
Lender hereunder, whereupon such Lender will not make any further
Eurodollar Loans and any request for a Eurodollar Borrowing, shall, as to
such Lender only, be deemed a request for an ABR Loan unless such
declaration shall be subsequently withdrawn (or, if a Loan to the Borrower
cannot be made for the reasons specified above, such request shall be
deemed to have been withdrawn); and
(ii) such Lender may require that all outstanding Eurodollar Loans
made by it be converted to ABR Loans, in which event all such Eurodollar
Loans shall be automatically con verted to ABR Loans as of the effective
date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.12, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day
of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by the
Borrower.
SECTION 2.13. Indemnity. The Borrower shall indemnify each Lender against
any loss or expense which such Lender may sustain or incur as a consequence of
(a) any event, other than a default by such Lender in the performance of its
obligations hereunder, which results in (i) such Lender receiving or being
deemed to receive any amount on account of the principal of any Loan prior to
the end of the Interest Period in effect therefor or (ii) any Eurodollar Loan to
be made, continued or converted by such Lender not being made, continued or
converted after notice thereof shall have been given by the Borrower hereunder
(any of the events referred to in this clause (a) being called a "Breakage
Event") or (b) any default in the making of any payment or prepayment required
to be made hereunder. In the case of any Breakage Event, such loss shall include
an amount equal to the excess, as reasonably determined by such Lender, of (i)
its cost of obtaining funds for the Loan which is the subject of such Breakage
Event for the period from the date of such Breakage Event to the last day of the
Interest Period in effect (or which would have been in effect) for such Loan
over (ii) the amount of interest likely to be realized by such Lender in
redeploying the funds released or not utilized by reason of such Breakage Event
for such period. A certificate of any Lender setting forth any amount or
amounts which such Lender is entitled to receive pursuant to this Section shall
be delivered to the Borrower, shall set forth in reasonable detail the basis for
such amount or amounts, shall constitute rebuttable presumptive evidence of such
amount or amounts and, if not rebutted within five Business Days, shall be
conclusive and binding.
SECTION 2.14. Pro Rata Treatment. Except as required under Section 2.12,
each Borrowing, each reduction of the Revolving Credit Commitments and each
change of any Borrowing to a Borrowing of another Type shall be allocated pro
rata among the Lenders in accordance with their respective Revolving Credit
Commitments (or, if such Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of their outstanding Revolving
Loans) and each payment or prepayment of principal of any Borrowing, each
payment of interest on the Loans and each payment of Commitment Fees shall be
allocated pro rata among the Lenders entitled thereto. Each Lender agrees that
in computing such Lender's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round each Lender's percentage of
such Borrowing, computed in accordance with Section 2.01, to the next higher or
lower whole Dollar amount.
SECTION 2.15. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
any Loan Party, or pursuant to a secured
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claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, obtain payment (voluntary or involuntary) in
respect of any Loan or Loans or L/C Disbursement as a result of which the unpaid
principal portion of its Loans and participations in L/C Disbursements shall be
proportionately less than the unpaid principal portion of the Loans and
participations in L/C Disbursements of any other Lender, it shall be deemed
simultaneously to have purchased from such other Lender at face value, and shall
promptly pay to such other Lender the purchase price for, a participation in the
Loans and L/C Exposure of such other Lender, so that the aggregate unpaid
principal amount of the Loans and L/C Exposure and participations in Loans and
L/C Exposure held by each Lender shall be in the same proportion to the
aggregate unpaid principal amount of all Loans and L/C Exposure then outstanding
as the principal amount of its Loans and L/C Exposure prior to such exercise of
banker's lien, setoff or counterclaim or other event was to the principal amount
of all Loans and L/C Exposure outstanding prior to such exercise of banker's
lien, setoff or counterclaim or other event; provided, however, that, if any
such purchase or purchases or adjustments shall be made pursuant to this Section
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or adjustments shall be rescinded to the extent of such recovery
and the purchase price or prices or adjustment restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in a Loan or L/C Disbursement deemed to have been
so purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to such
Lender by reason thereof as fully as if such Lender had made a Loan directly to
the Borrower in the amount of such participation.
SECTION 2.16. Payments. (a) The Borrower shall make each payment (including
principal of or interest on any Borrowing or any L/C Disbursement or any fees or
other amounts) hereunder and under any other Loan Document not later than 12:00
(noon), New York City time, on the date when due in immediately available funds.
Each such payment (other than (i) Issuing Bank Fees, which shall be paid
directly to the Issuing Bank, and (ii) principal of and interest on Swingline
Loans, which shall be paid directly to the Swingline Lender except as otherwise
provided in Section 2.19(e)) shall be made to the Administrative Agent at its
offices at 270 Park Avenue, New York, New York. Each such payment shall be made
in Dollars.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, if applicable.
SECTION 2.17. Taxes. (a) Any and all payments by the Borrower hereunder and
under any other Loan Document shall be made, in accordance with Section 2.16,
free and clear of and without deduction for any and all current or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding (i) income taxes and interest and penalties thereon
imposed on the net income of the Administrative Agent, any Lender or the Issuing
Bank (or any transferee or assignee thereof, including a participation holder
(any such entity a "Transferee")) and (ii) franchise taxes imposed on the net
income of the Administrative Agent, any Lender or the Issuing Bank (or
Transferee), in each case by the jurisdiction under the laws of which the
Administrative Agent, such Lender or the Issuing Bank (or Transferee) is
organized or any political subdivision thereof (all such nonexcluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities and interest
and penalties thereon, collectively or individually, being called "Taxes"). If
the Borrower shall be required to deduct any Taxes from or in respect of any sum
payable hereunder or under any other Loan Document to the Administrative Agent,
any Lender or the Issuing Bank (or any Transferee), (i) the sum payable shall be
increased by the amount (an "additional amount") necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.17) the Administrative Agent, such Lender or the
Issuing Bank (or Transferee), as the case may be, shall receive an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrower agrees to pay to the relevant Governmental
Authority in accordance with applicable law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies (including, mortgage recording taxes and similar fees) and interest and
penalties thereon that arise from any payment made hereunder or under any other
Loan Document or
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from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or any other Loan Document ("Other Taxes").
(c) The Borrower will indemnify the Administrative Agent, each Lender and
the Issuing Bank (or Transferee) for the full amount of Taxes and Other Taxes
paid by the Administrative Agent, such Lender or the Issuing Bank (or
Transferee), as the case may be, and any liability (including penalties,
interest and expenses (including reasonable attorney's fees and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability prepared by the
Administrative Agent, a Lender or the Issuing Bank (or Transferee), or the
Administrative Agent on its behalf, absent manifest error, shall be final,
conclusive and binding for all purposes. Such indemnification shall be made
within 30 days after the date the Administrative Agent, any Lender or the
Issuing Bank (or Transferee), as the case may be, makes written demand therefor.
(d) If the Administrative Agent, a Lender or the Issuing Bank (or
Transferee) shall become aware that it is entitled to claim a refund from a
Governmental Authority in respect of Taxes or Other Taxes as to which it has
been indemnified by the Borrower, or with respect to which the Borrower has paid
additional amounts, pursuant to this Section 2.17, it shall promptly notify the
Borrower of the availability of such refund claim and shall, within 30 days
after receipt of a request by the Borrower, make a claim to such Governmental
Authority for such refund at the Borrower's expense. If the Administrative
Agent, a Lender or the Issuing Bank (or Transferee) receives a refund (including
pursuant to a claim for refund made pursuant to the preceding sentence) in
respect of any Taxes or Other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section 2.17, it shall within 30 days from the date of such
receipt pay over such refund to the Borrower (but only to the extent of
indemnity payments made, or additional amounts paid, by the Borrower under this
Section 2.17 with respect to the Taxes or Other Taxes giving rise to such
refund), net of all reasonable and necessary out-of-pocket expenses of the
Administrative Agent, such Lender or the Issuing Bank (or Transferee) and
without interest (other than interest paid by the relevant Governmental
Authority with respect to such refund); provided, however, that the Borrower,
upon the request of the Administrative Agent, such Lender or the Issuing Bank
(or Transferee), agrees to repay the amount paid over to the Borrower (plus
penalties, interest or other charges) to the Administrative Agent, such Lender
or the Issuing Bank (or Transferee) in the event the Administrative Agent, such
Lender or the Issuing Bank (or Transferee) is required to repay such refund to
such Governmental Authority.
(e) As soon as practicable after the date of any payment of Taxes or Other
Taxes by the Borrower to the relevant Governmental Authority, the Borrower will
deliver to the Administrative Agent, at its address referred to in Section 9.01,
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing payment thereof.
(f) Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this Section 2.17 shall
survive the payment in full of the principal of and interest on all Loans made
hereunder, the expiration or cancellation of all Letters of Credit and the
reimbursement of all draws thereunder.
(g) Each Lender (or Transferee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Lender") shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a
Form W-8, a certificate representing that such Non-U.S. Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S.
Federal withholding tax on payments by the Borrower under this Agreement and the
other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on
or before the date it becomes a party to this Agreement (or, in the case of a
Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding any other provision of this Section 2.17(g), a Non-U.S. Lender
shall not
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be required to deliver any form pursuant to this Section 2.17(g) that such
Non-U.S. Lender is not legally able to deliver.
(h) The Borrower shall not be required to indemnify any Non-U.S. Lender or
to pay any additional amounts to any Non-U.S. Lender in respect of United States
Federal withholding tax pursuant to paragraph (a) or (c) above to the extent
that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Non U.S. Lender became a party
to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan ; provided, however,
that this paragraph (h) shall not apply (x) to any Transferee or New Lending
Office that becomes a Transferee or New Lending Office as a result of an
assignment, participation, transfer or designation made at the request of the
Borrower and (y) to the extent the indemnity payment or additional amounts any
Transferee, or any Lender (or Transferee), acting through a New Lending Office,
would be entitled to receive (without regard to this paragraph (h)) do not
exceed the indemnity payment or additional amounts that the person making the
assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (g) above.
(i) Any Lender or Issuing Bank (or Transferee) claiming any indemnity
payment or additional amounts payable pursuant to this Section 2.17 shall use
reasonable efforts (consistent with legal and regulatory restrictions) to file
any certificate or document reasonably requested in writing by the Borrower or
to change the jurisdiction of its applicable lending office if the making of
such a filing or change would avoid the need for or reduce the amount of any
such indemnity payment or additional amounts that may thereafter accrue and
would not, in the sole determination of such Lender or Issuing Bank (or
Transferee), be otherwise disadvantageous to such Lender or Issuing Bank (or
Transferee).
(j) Nothing contained in this Section 2.17 shall require any Lender or the
Issuing Bank (or any Transferee) or the Administrative Agent to make available
any of its tax returns (or any other information that it deems to be
confidential or proprietary).
SECTION 2.18. Assignment of Commitments Under Certain Circumstances. (a) In
the event (i) any Lender or the Issuing Bank delivers a certificate requesting
compensation pursuant to Section 2.11, (ii) any Lender or the Issuing Bank
delivers a notice described in Section 2.12 or (iii) the Borrower is required to
pay any additional amount to any Lender or the Issuing Bank or any Governmental
Authority on account of any Lender or the Issuing Bank pursuant to Section 2.17,
the Borrower may, at its sole expense and effort, upon notice to such Lender or
the Issuing Bank and the Administrative Agent, require such Lender or the
Issuing Bank to transfer and assign, without recourse (in accordance with and
subject to the restrictions contained in Section 9.04), all of its interests,
rights and obligations under this Agreement to an assignee which shall assume
such assigned obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (w) no Default or Event of Default has
occurred and is continuing, (x) such assignment shall not conflict with any law,
rule or regulation or order of any court or other Governmental Authority having
jurisdiction, (y) the Borrower shall have received the prior written consent of
the Administrative Agent (and, if a Revolving Credit Commitment is being
assigned, of the Issuing Bank and Swingline Lender), which consent shall not
unreasonably be withheld, and (z) the Borrower or such assignee shall have paid
to the affected Lender or the Issuing Bank in immediately available funds an
amount equal to the sum of the principal of and interest accrued to the date of
such payment on the outstanding Loans and participations in L/C Disbursements
and Swingline Loans of such Lender or the Issuing Bank plus all fees and other
amounts accrued for the account of such Lender or the Issuing Bank hereunder
(including any amounts under Section 2.11 and Section 2.13); provided further
that if prior to any such transfer and assignment the circumstances or event
that resulted in such Lender's or the Issuing Bank's claim for compensation
under Section 2.11 or notice under Section 2.12 or the amounts paid pursuant to
Section 2.17, as the case may be, cease to cause such Lender or the Issuing Bank
to suffer increased costs or reductions in amounts received or receivable or
reduction in return on capital, or cease to have the consequences specified in
Section 2.12, or cease to result in amounts being payable under Section 2.17, as
the case may be (including as a result of any action taken by such Lender or the
Issuing Bank pursuant to paragraph (b) below), or if such Lender or the Issuing
Bank shall waive its right to claim further compensation under Section 2.11 in
respect of such circumstances or event or shall withdraw its notice under
Section 2.12 or shall waive its right to further payments under Section 2.17 in
respect of such circumstances or event, as the case may be, then such Lender or
the Issuing Bank shall not thereafter be
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required to make any such transfer and assignment hereunder. In the case of any
such assignment by an Issuing Bank, such assignment shall not affect the Issuing
Bank's rights under this Agreement in respect of any Letters of Credit issued by
it that remain outstanding.
(b) If (i) any Lender or the Issuing Bank shall request compensation under
Section 2.11, (ii) any Lender or the Issuing Bank delivers a notice described in
Section 2.12 or (iii) the Borrower is required to pay any additional amount to
any Lender or the Issuing Bank or any Governmental Authority on account of any
Lender or the Issuing Bank pursuant to Section 2.17, then such Lender or the
Issuing Bank shall exercise reasonable efforts (which shall not require such
Lender or the Issuing Bank to incur an unreimbursed loss or unreimbursed cost or
expense or otherwise take any action inconsistent with its internal policies or
suffer any disadvantage or burden deemed by it to be significant) to assign its
rights and delegate and transfer its obligations hereunder to another of its
offices, branches or affiliates, if such assignment would reduce its claims for
compensation under Section 2.11 or enable it to withdraw its notice pursuant to
Section 2.12 or would reduce amounts payable pursuant to Section 2.17, as the
case may be, in the future. The Borrower hereby agrees to pay all reasonable
costs and expenses incurred by any Lender or the Issuing Bank in connection with
any such assignment, delegation and transfer.
SECTION 2.19. Swingline Loans. (a) Swingline Commitment. Subject to the
terms and conditions and relying upon the representations and warranties herein
set forth, the Swingline Lender agrees to make loans to the Borrower at any time
and from time to time on and after the Effective Date and until the earlier of
the Revolving Credit Maturity Date and the termination of the Revolving Credit
Commitments in accordance with the terms hereof, in an aggregate principal
amount at any time outstanding that will not result in (i) the aggregate
principal amount of all Swingline Loans exceeding $3,000,000 in the aggregate or
(ii) the Aggregate Revolving Credit Exposure, after giving effect to any
Swingline Loan, exceeding the Total Revolving Credit Commitment. Each Swingline
Loan shall be in a principal amount that is not less than $100,000 and is an
integral multiple of $50,000. The Swingline Commitment may be terminated or
reduced from time to time as provided herein. Within the foregoing limits, the
Borrower may borrow, pay or prepay and reborrow Swingline Loans hereunder on and
after the Effective Date and prior to the Revolving Credit Maturity Date,
subject to the terms, conditions and limitations set forth herein.
(b) Swingline Loans. The Borrower shall notify the Administrative Agent by
telephonic notice (promptly confirmed by hand delivery or telecopy notice) not
later than 12:00 noon, New York City time, on the day of a proposed Swingline
Loan. Such notice shall be delivered on a Business Day, shall be irrevocable and
shall refer to this Agreement and shall specify the requested date (which shall
be a Business Day) and amount of such Swingline Loan. The Administrative Agent
will promptly advise the Swingline Lender of any notice received from the
Borrower pursuant to this paragraph (b). The Swingline Lender shall make each
Swingline Loan available to the Borrower by means of a credit to the general
deposit account of the Borrower with the Swingline Lender by 3:00 p.m. on the
date such Swingline Loan is so requested to be made.
(c) Prepayment. The Borrower shall have the right at any time and from time
to time to prepay any Swingline Loan, in whole or in part, upon giving
telephonic notice (promptly confirmed by hand delivery or telecopy notice) to
the Swingline Lender and to the Administrative Agent before 12:00 (noon), New
York City time on the date of prepayment at the Swingline Lender's address for
notices specified on Schedule 2.01; provided, however, that partial prepayments
shall be in a principal amount that is an integral multiple of $50,000. All
principal payments of Swingline Loans pursuant to Section 2.10(b) shall be
accompanied by accrued interest on the principal amount being repaid to the date
of payment.
(d) Interest. Each Swingline Loan shall be an ABR Loan and, subject to the
provisions of Section 2.07, shall bear interest as provided in Section 2.06(a).
(e) Participations. The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Revolving Credit Lenders to acquire participations in
all or a portion of the Swingline Loans outstanding. Such notice shall specify
the aggregate amount of Swingline Loans and accrued interest thereon in which
Revolving Credit Lenders will participate. The Administrative Agent will,
promptly upon receipt of such notice, give notice to each Revolving Credit
Lender, specifying in such notice such Lender's Pro Rata Percentage of such
Swingline Loan or Loans and accrued interest thereon. In consideration and in
furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to the
Administrative Agent, for the account of the Swingline Lender, such Revolving
Credit Lender's Pro Rata Percentage of such Swingline Loan or Loans and accrued
interest thereon. Each Lender acknowledges and agrees that its obligation to
acquire
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participations in Swingline Loans pursuant to this paragraph is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or an Event of Default,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever. Each Lender shall comply with its
obligation under this paragraph by wire transfer of immediately available funds,
in the same manner as provided in Section 2.02(c) with respect to Loans made by
such Lender (and Section 2.02(c) shall apply, mutatis mutandis, to the payment
obligations of the Lenders) and the Administrative Agent shall promptly pay to
the Swingline Lender amounts so received by it from the Lenders. The
Administrative Agent shall notify the Borrower of any participations in any
Swingline Loan acquired pursuant to this paragraph and thereafter payments in
respect of such Swingline Loan shall be made to the Administrative Agent and not
to the Swingline Lender. Any amounts received by the Swingline Lender from the
Borrower (or other party on behalf of the Borrower) in respect of a Swingline
Loan after receipt by the Swingline Lender of the proceeds of a sale of
participations therein shall be promptly remitted to the Administrative Agent;
any such amounts received by the Administrative Agent shall be promptly remitted
by the Administrative Agent to the Lenders that shall have made their payments
pursuant to this paragraph and to the Swingline Lender, as their interests may
appear. The purchase of participations in a Swingline Loan pursuant to this
paragraph shall not relieve the Borrower (or other party liable for obligations
of the Borrower) of its default in respect of the payment thereof.
SECTION 2.20. Letters of Credit. (a) General. The Borrower may request the
issuance of a Letter of Credit, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, appropriately completed, for the
account of the Borrower, at any time and from time to time while the Revolving
Credit Commitments remain in effect. This Section shall not be construed to
impose an obligation upon the Issuing Bank to issue any Letter of Credit that is
inconsistent with the terms and conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.
In order to request the issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), the Borrower shall hand deliver or
telecopy to the Issuing Bank and the Administrative Agent (reasonably in advance
of the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension, the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) below), the amount of such Letter of
Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare such Letter of Credit. Following
receipt of such notice and prior to the issuance of the requested Letter of
Credit or the applicable amendment, renewal or extension, the Administrative
Agent shall notify the Borrower and the Issuing Bank of the amount of the
Aggregate Revolving Credit Exposure after giving effect to (i) the issuance,
amendment, renewal or extension of such Letter of Credit, (ii) the issuance or
expiration of any other Letter of Credit that is to be issued or will expire
prior to the requested date of issuance of such Letter of Credit and (iii) the
borrowing or repayment of any Revolving Credit Loans or Swingline Loans that
(based upon notices delivered to the Administrative Agent by the Borrower) are
to be borrowed or repaid prior to the requested date of issuance of such Letter
of Credit. A Letter of Credit shall be issued, amended, renewed or extended only
if, and upon issuance, amendment, renewal or extension of each Letter of Credit
the Borrower shall be deemed to represent and warrant that, after giving effect
to such issuance, amendment, renewal or extension (A) the L/C Exposure shall not
exceed $25,000,000, and (B) the Aggregate Revolving Credit Exposure shall not
exceed the Total Revolving Credit Commitment. Promptly following the end of each
month, the Administrative Agent shall notify the Lenders of the L/C Exposure as
of the end of such month.
(c) Expiration Date. Each Letter of Credit shall expire at or prior to the
close of business on the date that is five Business Days prior to the Revolving
Credit Maturity Date or, if such Letter of Credit is a commercial letter of
credit, the earlier of such date and date 180 days after the date of issuance of
such Letter of Credit.
(d) Participations. By the issuance of a Letter of Credit and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Lender, and each such Lender hereby acquires from the
applicable Issuing Bank, a participation in such Letter of Credit equal to such
Lender's Pro Rata Percentage of the aggregate amount available to be drawn under
such Letter of Credit, effective upon the issuance of such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees to pay to the Administrative Agent, for the account
of the Issuing Bank, such Lender's Pro Rata Percentage of each L/C Disbursement
made by the Issuing Bank and not reimbursed by the Borrower (or, if applicable,
another party pursuant to its obligations under any other Loan Document)
forthwith on the date due as provided in Section 2.02(f). Each
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Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default or an Event of
Default, and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever; provided, however, that the foregoing shall
not be construed to impose an obligation of the Lenders to reimburse an L/C
Disbursement that the Borrower is not required to reimburse due to the gross
negligence or wilful misconduct of the Issuing Bank (determined as provided in
Section 2.20(f)).
(e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse such L/C
Disbursement by paying an amount equal to such L/C Disbursement to the
Administrative Agent not later than 12:00 (noon) on the date that such L/C
Disbursement is made or, if the Borrower shall have received notice of such L/C
Disbursement later than 10:00 a.m., New York City time, on the date that such
L/C Disbursement is made, not later than 12:00 (noon), New York City time, on
the immediately following Business Day; provided that the Borrower may, to the
extent that such L/C Disbursement is not less than $500,000 and is an integral
multiple of $100,000 and subject to the conditions to Borrowing set forth in
Section 4.01, request by notice to the Administrative Agent not later than the
time that payment would be required as aforesaid that such payment be financed
with ABR Loans as contemplated by Section 2.02(f) and, to the extent such
payment is so financed with ABR Loans in accordance with Section 2.02(f), such
payment shall not be required to be made by the Borrower under this Section
2.20(e).
(f) Obligations Absolute. The Borrower's obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or
any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or other right that
the Borrower, any other party guaranteeing, or otherwise obligated with,
the Borrower, any Subsidiary or other Affiliate thereof or any other person
may at any time have against the beneficiary under any Letter of Credit,
the Issuing Bank, the Administrative Agent or any Lender or any other
person, whether in connection with this Agreement, any other Loan Document
or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the
Issuing Bank, the Lenders, the Administrative Agent or any other person or
any other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of the Borrower's obligations
hereunder;
provided that the foregoing shall not be construed to impose an obligation upon
the Borrower to reimburse the Issuing Bank to the extent that neither the
Borrower nor any Subsidiary received any benefit from such L/C Disbursement as a
direct result of the Issuing Bank's gross negligence or wilful misconduct in
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof; it is understood that the Issuing Bank may
accept documents that are on their face in order, without responsibility for
further investigation, regardless of any notice or information to the contrary
and, in making any payment under any Letter of Credit (A) the Issuing Bank's
exclusive reliance on the documents presented to it under such Letter of Credit
as to any and all matters set forth therein, including reliance on the amount of
any draft presented under such Letter of Credit, whether or not the amount due
to the beneficiary thereunder equals the amount of such draft and whether or not
any document presented pursuant to such Letter of Credit proves to be
insufficient in any respect, if such document on its face appears to be
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in order, and whether or not any other statement or any other document presented
pursuant to such Letter of Credit proves to be forged or invalid or any
statement therein proves to be inaccurate or untrue in any respect whatsoever
and (B) any noncompliance in any immaterial respect of the documents presented
under such Letter of Credit with the terms thereof shall, in each case, be
deemed not to constitute wilful misconduct or gross negligence of the Issuing
Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as possible
give telephonic notification, confirmed by telecopy, to the Administrative Agent
and the Borrower of such demand for payment and whether the Issuing Bank has
made or will make an L/C Disbursement thereunder; provided that any failure to
give or delay in giving such notice shall not relieve the Borrower of its
obligation to reimburse the Issuing Bank and the Lenders with respect to any
such L/C Disbursement. The Administrative Agent shall promptly give each Lender
notice thereof.
(h) Interim Interest. If the Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Borrower shall reimburse such
L/C Disbursement in full not later than 12:00 (noon), New York City time, on the
date that such L/C Disbursement is made, the unpaid amount thereof shall bear
interest, for each day from and including the date of such L/C Disbursement to
but excluding the date of payment at the Alternate Base Rate; provided that to
the extent that such L/C Disbursement is not reimbursed by the Borrower prior to
12:00 (noon), New York City time on the third Business Day after the date such
L/C Disbursement is made and is not financed with ABR Loans in accordance with
Section 2.02(f), then such unpaid amount shall bear interest from and including
such third Business Day to but excluding the date of payment as provided in
Section 2.07.
(i) Resignation or Removal of the Issuing Bank. The Issuing Bank may resign
at any time by giving 180 days' prior written notice to the Administrative
Agent, the Lenders and the Borrower, and may be removed at any time by the
Borrower by notice to the Issuing Bank, the Administrative Agent and the
Lenders. Subject to the last sentence of this paragraph, upon the acceptance of
any appointment as the Issuing Bank hereunder by a successor Issuing Bank, such
successor shall succeed to and become vested with all the interests, rights and
obligations of the retiring Issuing Bank and the retiring Issuing Bank shall be
discharged from its obligations to issue additional Letters of Credit hereunder.
At the time such removal or resignation shall become effective, the Borrower
shall pay all accrued and unpaid Issuing Bank Fees. The acceptance of any
appointment as the Issuing Bank hereunder by a successor Lender shall be
evidenced by an agreement entered into by such successor, in a form satisfactory
to the Borrower and the Administrative Agent, and, from and after the effective
date of such agreement, (i) such successor Lender shall have all the rights and
obligations of the previous Issuing Bank under this Agreement and the other Loan
Documents and (ii) references herein and in the other Loan Documents to the term
"Issuing Bank" shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the resignation or removal of the Issuing Bank
hereunder, the retiring Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement and the other Loan Documents with respect to Letters of Credit issued
by it prior to such resignation or removal, but shall not be required to issue
additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, the Borrower shall, on the Business Day it receives notice from the
Administrative Agent or the Required Lenders thereof and the amount to be
deposited, deposit in an account with the Administrative Agent, for the benefit
of the Revolving Credit Lenders, an amount in cash equal to the L/C Exposure as
of such date. Such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the Obligations. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits in Cash Equivalents, which investments shall
be made at the option and sole discretion of the Administrative Agent, such
deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account shall (i)
automatically be applied by the Administrative Agent to reimburse the Issuing
Bank for L/C Disbursements for which it has not been reimbursed, (ii) be held
for the satisfaction of the reimbursement obligations of the Borrower for the
L/C Exposure at such time and (iii) if the maturity of the Loans has been
accelerated, be applied to satisfy the Obligations. If the Borrower is required
to provide an amount of cash collateral hereunder as a result of the occurrence
of an Event of Default, such amount (to the extent not applied as aforesaid)
shall be returned to the Borrower within three Business Days after all Events of
Default have been cured or waived.
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(k) Additional Issuing Banks. The Borrower may, at any time and from time
to time with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld) and such Lender, designate one or more additional Lenders
to act as an issuing bank under the terms of this Agreement. Any Lender
designated as an issuing bank pursuant to this paragraph (k) shall be deemed to
be an "Issuing Bank" (in addition to being a Lender) in respect of Letters of
Credit issued or to be issued by such Lender, and, with respect to any Letter of
Credit, such term shall thereafter apply to the Issuing Bank that shall have
issued such Letter of Credit.
(l) Existing Letters of Credit. All Existing Letters of Credit shall be
deemed to be Letters of Credit issued under this Agreement as of the Effective
Date and shall constitute Letters of Credit for all purposes of the Loan
Documents.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Each of Holdings and the Borrower represents and warrants to each of the
Lenders that:
SECTION 3.01. Organization; Powers. Each of Holdings and the Borrower and
each of the Subsidiaries (other than the Excluded Subsidiaries) (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, (b) has all requisite power and
authority to own its property and assets and to carry on its business as now
conducted and as proposed to be conducted, (c) is qualified to do business in
every jurisdiction where such qualification is required, except where the
failure so to qualify could not reasonably be expected to result in a Material
Adverse Effect, and (d) has the corporate power and authority to execute,
deliver and perform its obligations under each of the Loan Documents and each
other agreement or instrument contemplated thereby to which it is or will be a
party and, in the case of the Borrower, to borrow hereunder.
SECTION 3.02. Authorization. The execution, delivery and performance by
each Loan Party of each of the Loan Documents to which it is or will be a party
and, in the case of the Borrower, the borrowings hereunder (collectively, the
"Transactions") (a) have been duly authorized by all requisite corporate and, if
required, stockholder action and (b) will not (i) violate (A) any provision of
law, statute, rule or regulation, or of the certificate or articles of
incorporation or other constitutive documents or by- laws of Holdings, the
Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C)
any provision of any indenture, agreement or other instrument to which Holdings,
the Borrower or any Subsidiary is a party or by which any of them or any of
their property is or may be bound, (ii) be in conflict with, result in a breach
of or constitute (alone or with notice or lapse of time or both) a default under
any such indenture, agreement or other instrument or (iii) result in the
creation or imposition of any Lien upon or with respect to any property or
assets now owned or hereafter acquired by Holdings, the Borrower or any
Subsidiary.
SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by Holdings and the Borrower and constitutes, and each other Loan
Document when executed and delivered by each Loan Party party thereto will
constitute, a legal, valid and binding obligation of Holdings and the Borrower
and such Loan Party enforceable against Holdings and the Borrower and such Loan
Party in accordance with its terms.
SECTION 3.04. Governmental Approvals. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions, except for such as have
been made or obtained and are in full force and effect.
SECTION 3.05. Financial Statements. Holdings has heretofore furnished to
the Lenders its consolidated and consolidating balance sheet and statement of
operations and consolidated statement of cash flows as of and for the fiscal
year ended June 30, 1998, which consolidated statements were audited by and
accompanied by the opinion of KPMG Peat Marwick LLP, independent public
accountants, and its unaudited consolidated and consolidating balance sheet and
statement of operations and consolidated statement of cash flows as of and for
the nine month period ended March 31, 1999. Such financial state ments present
fairly the financial condition and results of operations and cash flows of
Holdings and its consolidated subsidiaries as of such dates and for such
periods. Each such balance sheet and the notes thereto disclose all material
liabilities, direct or contingent, of Holdings on a consolidated basis as of the
date thereof. Such financial statements were prepared in accordance with GAAP
applied on a consistent basis.
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SECTION 3.06. No Material Adverse Change. There has been no material
adverse change in the business, assets, operations, prospects or condition,
financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole,
since June 30, 1998.
SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of
Holdings, the Borrower and the Subsidiaries (other than the Excluded
Subsidiaries) has good and marketable title to, or valid leasehold interests in,
all its material properties and assets, except for minor defects in title that
do not interfere with its ability to conduct its business as currently conducted
or to utilize such properties and assets for their intended purposes. All such
material properties and assets are free and clear of Liens, other than Liens
expressly permitted by Section 6.02.
(b) Each of Holdings, the Borrower and the Subsidiaries (other than the
Excluded Subsidiaries) has complied with all obligations under all material
leases to which it is a party as a lessee and all such leases are in full force
and effect. Each of Holdings, the Borrower and the Subsidiaries (other than the
Excluded Subsidiaries) enjoys peaceful and undisturbed possession under all such
material leases.
SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Effective
Date a list of all Subsidiaries of the Borrower and the percentage ownership
interest of the Borrower therein. Each Subsidiary that is an "Excluded
Subsidiary" satisfies the conditions set forth in the definition of the term
"Excluded Subsidiary".
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth in
Schedule 3.09, there are not any actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the
knowledge of Holdings or the Borrower, threatened against or affecting Holdings
or the Borrower or any Subsidiary or any business, property or rights of any
such person (i) which involve any Loan Document or the Transactions or (ii) as
to which there is a reasonable possibility of an adverse determination and
which, if adversely determined, could, individually or in the aggregate, result
in a Material Adverse Effect.
(b) None of Holdings, the Borrower or any of the Subsidiaries or any of
their respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule or regulation (including any zoning, building,
Environmental and Safety Law, ordinance, code or approval or any building
permits), or is in default with respect to any judgment, writ, injunction or
decree of any Governmental Authority, except any such violations or defaults
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 3.10. Agreements. (a) None of Holdings, the Borrower or any of the
Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be anticipated to
result in a Material Adverse Effect.
(b) None of Holdings, the Borrower or any of the Subsidiaries is in default
in any manner under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, where such default could reasonably be anticipated
to result in a Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) None of Holdings, the
Borrower or any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, (i) to purchase
or carry Margin Stock or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including Regulation T, U or X.
SECTION 3.12. Investment Company Act; Public Utility Holding Company Act.
None of Holdings, the Borrower or any Subsidiary is (a) an "investment company"
as defined in, or subject to regulation under, the Investment Company Act of
1940 or (b) a "holding company" as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935.
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SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the
Loans and will request the issuance of Letters of Credit only for the purposes
specified in Section 5.08 of this Agreement.
SECTION 3.14. Tax Returns. Each of Holdings, the Borrower and the
Subsidiaries has filed or caused to be filed all Federal, state and local tax
returns required to have been filed by it and has paid or caused to be paid all
taxes due and payable by it and all assessments received by it, except taxes
that are being contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP.
SECTION 3.15. No Material Misstatements. (a) No factual information,
including factual information contained in the Information Memorandum or in any
report, financial statement, exhibit or schedule, furnished by or on behalf of
Holdings or the Borrower to the Administrative Agent or any Lender in connection
with the negotiation of any Loan Document or included therein or delivered
pursuant thereto (when considered as a whole with all other factual information
so furnished) contained, contains or will contain, as of the date so furnished,
any material misstatement of fact or omitted, omits or will omit to state, as of
the date so furnished, any material fact necessary to make the statements
therein, in the light of the circumstances under which they were, are or will be
made, not misleading.
(b) All financial projections furnished by or on behalf of Holdings or the
Borrower to the Administrative Agent or any Lender in connection with the
negotiation of any Loan Document have been and will be prepared in good faith
based upon estimates and assumptions believed by management of the Borrower to
be reasonable at the time of preparation thereof (except as otherwise disclosed
in writing therein), it being understood that projections as to future
performance are not to be viewed as facts and that actual results may differ
from projected results and such differences may be material.
SECTION 3.16. Employee Benefit Plans. Each of the Borrower and its ERISA
Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder. No Reportable Event has occurred in respect of any
Plan of the Borrower or any ERISA Affiliate. The present value of all benefit
liabilities under each Plan (based on those assumptions used to fund such Plan)
did not, as of the last annual valuation date applicable thereto, exceed by more
than $1,000,000 the value of the assets of such Plan, and the present value of
all benefit liabilities of all underfunded Plans (based on those assumptions
used to fund each such Plan) did not, as of the last annual valuation dates
applicable thereto, exceed by more than $5,000,000 the value of the assets of
all such underfunded Plans. Neither the Borrower nor any ERISA Affiliate has
incurred any Withdrawal Liability that materially adversely affects the
financial condition of the Borrower and its ERISA Affiliates taken as a whole.
Neither the Borrower nor any ERISA Affiliate has received any notification that
any Multiemployer Plan is in reorganization or has been terminated, within the
meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected
to be in reorganization or to be terminated, where such reorganization or
termination has resulted or can reasonably be expected to result in an increase
in the contributions required to be made to such Plan that would materially and
adversely affect the financial condition of the Borrower and its ERISA
Affiliates taken as a whole.
SECTION 3.17. Environmental Matters. Except as set forth in Schedule 3.17:
(a) The soils and groundwater beneath the properties owned or operated
by Holdings, the Borrower and the Subsidiaries (the "Properties") do not
contain any Hazardous Materials in amounts or concentrations which (i)
constitute a violation of, or (ii) give rise to liability under,
Environmental Laws, which violations and liabilities, in the aggregate,
could reasonably be anticipated to result in a Material Adverse Effect.
(b) The Properties and all operations of the Borrower and the
Subsidiaries are in compliance, and in the last three years have been in
compliance, with all Environmental Laws and all necessary Environmental
Permits have been obtained and are in effect, except to the extent that
such non- compliance or failure to obtain any necessary permits, in the
aggregate, could not reasonably be anticipated to result in a Material
Adverse Effect.
(c) There have been no Releases or threatened Releases at, from, under
or proximate to the Properties or otherwise in connection with the
operations of the Borrower or the Subsidiaries, which Releases or
threatened Releases, in the aggregate, could reasonably be anticipated to
result in a Material Adverse Effect.
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(d) None of Holdings, the Borrower or any of the Subsidiaries has
received any notice of an Environmental Claim in connection with the
Properties or the operations of the Borrower or the Subsidiaries or with
regard to any person whose liabilities for environmental matters Holdings,
the Borrower or the Subsidiaries has retained or assumed, in whole or in
part, contractually, by operation of law or otherwise, which, in the
aggregate, could reasonably be anticipated to result in a Material Adverse
Effect, nor do Holdings, the Borrower or the Subsidiaries have reason to
believe that any such notice will be received or is being threatened.
SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and
correct description of all insurance maintained by the Borrower or by the
Borrower for its Subsidiaries as of the Effective Date. As of each such date,
such insurance is in full force and effect and all premiums have been duly paid.
The Borrower and its Subsidiaries have insurance in such amounts and covering
such risks and liabilities as are in accordance with normal industry practice.
SECTION 3.19. Labor Matters. There are no significant strikes, lockouts,
slowdowns or other labor disputes against Holdings, the Borrower or any of its
Subsidiaries pending or, to the knowledge of Holdings or the Borrower,
threatened that could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect. The hours worked by and payment made
to employees of Holdings, the Borrower or any of its Subsidiaries have not been
in violation of the Fair Labor Standards Act or any other applicable Federal,
state, local or foreign law dealing with such matters, where such violations
could reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect. The consummation of the Transactions will not give rise
to a right of termination or right of renegotiation on the part of any union
under any collective bargaining agreement to which Holdings, the Borrower or any
of its Subsidiaries is a party or by which Holdings, the Borrower or any of its
Subsidiaries is bound.
SECTION 3.20. Patents, Trademarks, etc. Each of the Borrower and each of
its Subsidiaries owns, or is licensed to use, all patents, trademarks, trade
names, copyrights, technology, know- how and processes, service marks and rights
with respect to the foregoing that are (a) used in or necessary for the conduct
of their respective businesses as currently conducted and (b) material to the
business, assets, operations, properties, prospects or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a whole. The use of
such patents, trademarks, trade names, copyrights, technology, know-how,
processes and rights with respect to the foregoing by the Borrower and its
Subsidiaries does not infringe on the rights of any Person. Holdings and the
Excluded Subsidiaries do not own or license any such patents, trademarks, trade
names, copyrights, technology, know-how or processes, service marks or rights.
SECTION 3.21. Year 2000. All reprogramming required to permit the proper
functioning, in and following the year 2000, of (a) the computer systems of the
Borrower and the Subsidiaries and (b) equipment containing embedded microchips
(including systems and equipment supplied by others or with which the Borrower's
or any Subsidiary's systems interface) that are, in the case of (a) and (b),
material to the business, assets, operations, properties, prospects or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole,
and the testing of all such systems and equipment, as so reprogrammed, has been
completed, except as could not reasonably be expected to result in a Material
Adverse Effect.
ARTICLE IV. CONDITIONS
SECTION 4.01. All Credit Events. The obligations of the Lenders to make
Loans and of the Issuing Bank to issue Letters of Credit are subject to the
satisfaction, on the date of each Borrowing, including each Borrowing of a
Swingline Loan, and on the date of each issuance of a Letter of Credit (each
such event, a "Credit Event"), of each of the following conditions:
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 or, in the case of the issuance of a
Letter of Credit, the Issuing Bank and the Administrative Agent shall have
received a notice requesting the issuance of such Letter of Credit as
required by Section 2.20(b) or, in the case of the Borrowing of a Swingline
Loan, the Swingline Lender and the Administrative Agent shall have received
a notice requesting such Swingline Loan as required by Section 2.19(b).
(b) The representations and warranties set forth in Article III hereof
and in the other Loan Documents shall be true and correct in all material
respects on and as of the date of such Credit
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Event with the same effect as though made on and as of such date,
except to the extent such representations and warranties expressly relate
to an earlier date.
(c) Each Loan Party shall be in compliance with all the terms and
provisions set forth herein and in each other Loan Document on its part to
be observed or performed, and at the time of and immediately after such
Credit Event, no Event of Default or Default shall have occurred and be
continuing.
Each Credit Event shall be deemed to constitute a representation and warranty by
the Borrower on the date of such Credit Event as to the matters specified in
paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. Effectiveness. The effectiveness of this Agreement and the
obligations of the Lenders and the Issuing Bank hereunder are subject to the
satisfaction of the following conditions:
(a) The Administrative Agent shall have received counterparts of this
Agreement signed on behalf of Holdings, the Borrower, the Issuing Bank and
all the Lenders.
(b) The Administrative Agent shall have received a favorable written
opinion (addressed to the Lenders and dated the Effective Date) of Roxanne
Khazarian, Esq., counsel for the Loan Parties, substantially in the form of
Exhibit B and covering such other matters relating to the Loan Parties, the
Loan Documents or the Transactions as the Required Lenders shall reasonably
request. The Borrower hereby requests such counsel to deliver such opinion.
(c) All legal matters incident to this Agreement, the borrowings and
extensions of credit hereunder and the other Loan Documents shall be
reasonably satisfactory to the Lenders, to the Issuing Bank and to Cravath,
Swaine & Moore, counsel for the Administrative Agent.
(d) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of the
Loan Parties, the authorization of the Transactions and any other legal
matters relating to the Loan Parties, this Agreement or the Transactions,
all in form and substance satisfactory to the Administrative Agent and its
counsel.
(e) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the
conditions set forth in paragraphs (b) and (c) of Section 4.01.
(f) The Administrative Agent shall have received all fees, and other
amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder or under any
other Loan Document.
(g) The Administrative Agent shall have received from each Loan Party
a counterpart of each of the Guarantee Agreement and the Indemnity,
Subrogation and Contribution Agreement duly executed and delivered on
behalf of such Loan Party.
(h) All outstanding Loans, accrued and unpaid interest thereon and
accrued and unpaid fees (other than Administrative Agent Fees) under the
Existing Credit Agreement shall be paid in full (without prejudice to the
Borrower's right to borrow hereunder in order to finance such payment), all
Liens securing the obligations under the Existing Credit Agreement shall
have been released and all commitments under the Existing Credit Agreement
shall have been terminated.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 9.08) at
or prior to 5:00 p.m., New York City time, on August 31, 1999 (and, in the event
such conditions are not so satisfied or waived, the Commitments shall terminate
at such time).
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ARTICLE V. AFFIRMATIVE COVENANTS
Each of Holdings and the Borrower covenants and agrees with each Lender
that so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all fees
and all other expenses or amounts payable under any Loan Document shall have
been paid in full and all Letters of Credit have been canceled or have expired
and all amounts drawn thereunder have been reimbursed in full, unless the
Required Lenders shall otherwise consent in writing, each of Holdings and the
Borrower will, and will cause each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence, except as otherwise expressly permitted under Section 6.04
and except that the foregoing shall not apply to Excluded Subsidiaries.
(b) Do or cause to be done all things necessary to (i) obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; (ii) maintain and operate such business
in substantially the manner in which it is presently conducted and operated;
(iii) comply in all material respects with all applicable laws, rules,
regulations and orders of any Governmental Authority, whether now in effect or
hereafter enacted; and (iv) at all times maintain and preserve all property
material to the conduct of such business and keep such property in good repair,
working order and condition and from time to time make, or cause to be made, all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times; provided that (A) clauses (i), (ii), and
(iv) above shall not apply to Excluded Subsidiaries, (B) the foregoing shall not
prevent any transaction expressly permitted under Section 6.04, (C) the
foregoing shall not prevent Holdings, the Borrower or any Subsidiary from
withdrawing its qualification as a foreign corporation in any jurisdiction and
(D) the foregoing clause (i) shall not prevent Holdings, the Borrower or any
Subsidiary from taking or failing to take any action respecting any right,
license, permit, franchise, authorization, patent, copyright, trademark or trade
name determined by it to be in the best interest of the Borrower and the
Subsidiaries; provided further that the foregoing clauses (C) and (D) shall not
be construed to permit the taking of, or failure to take, any action that could
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.02. Insurance. Keep its insurable properties adequately insured
at all times by financially sound and reputable insurers; maintain such other
insurance, to such extent and against such risks, including fire and other risks
insured against by extended coverage, as is customary with companies in the same
or similar businesses, including public liability insurance against claims for
personal injury or death or property damage occurring upon, in, about or in
connection with the use of any properties owned, occupied or controlled by it;
and maintain such other insurance as may be required by law.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
material obligations promptly and in accordance with their terms and pay and
discharge promptly when due all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or in respect of its
property, before the same shall become delinquent or in default, as well as all
lawful claims for labor, materials and supplies or otherwise which, if unpaid,
might give rise to a Lien upon such properties or any part thereof; provided,
however, that such payment and discharge shall not be required with respect to
any such obligation, tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and the Borrower shall have set aside on its books adequate reserves
with respect thereto and such contest operates to suspend collection of the
contested obligation, tax, assessment charge, levy or claim and enforcement of a
Lien.
SECTION 5.04. Financial Statements, Reports, etc. In the case of Holdings
and the Borrower, furnish to the Administrative Agent and each Lender:
(a) within 95 days after the end of each fiscal year, its consolidated
and consolidating balance sheets and related consolidated and consolidating
statements of operations and consolidated statements of shareholders'
equity and cash flows showing the financial condition of Holdings and its
consolidated subsidiaries as of the close of such fiscal year and the
results of its operations and the operations of such subsidiaries during
such year, all audited (in the case of such consolidated and consolidating
statements) by any "Big 5" accounting firm or other independent public
accountants of recognized national standing reasonably acceptable to the
Required Lenders, and accompanied by an opinion of such accountants (which
shall not contain any "going concern"
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or other materially adverse qualification) to the effect that such
consolidated financial statements fairly present the financial condition
and results of operations of Holdings on a consolidated basis in accordance
with GAAP consistently applied;
(b) within 50 days after the end of each of the first three fiscal
quarters of each fiscal year, its consolidated and consolidating balance
sheets and related consolidated and consolidating statements of operations
and consolidated statements of shareholders' equity and cash flows showing
the financial condition of Holdings and its consolidated subsidiaries as of
the close of such fiscal quarter and the results of its operations and the
operations of such subsidiaries during such fiscal quarter and the then
elapsed portion of the fiscal year, all certified by one of its Financial
Officers as fairly presenting the financial condition and results of
operations of Holdings on a consolidated basis in accordance with GAAP
consistently applied, subject to the absence of footnotes and normal
year-end reserves, accruals and audit adjustments;
(c) concurrently with any delivery of financial statements under (a)
or (b) above, a certificate of a Financial Officer (i) certifying that no
Event of Default or Default has occurred or, if such an Event of Default or
Default has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto and
(ii) setting forth computations in reasonable detail satisfactory to the
Administrative Agent demonstrating compliance with the covenants contained
in Sections 6.06, 6.07 and 6.08;
(d) concurrently with any delivery of financial statements under
paragraph (a) above, a certificate of the accounting firm opining on such
statements (which certificate may be limited to accounting matters and
disclaim responsibility for legal interpretations) certifying (i) whether
in connection with its audit examination any Default or Event of Default
has come to its attention and, if such event has come to its attention, the
nature and extent thereof and (ii) that based on its audit examination and
its review of the computations referred to in clause (ii) of paragraph (c)
above, nothing has come to its attention that leads it to believe that the
information contained in the certificate delivered therewith pursuant to
paragraph (c) above is not correct; provided that the requirements of this
clause (d) shall be subject to any limitations and qualifications adopted
after the date hereof by any professional association or organization or
any Governmental Authority, in each case that affects the content of, or
ability of accounting firms to deliver, certificates of the type
contemplated by this paragraph;
(e) promptly after the same become publicly available or are filed or
distributed, as applicable, copies of all periodic and other reports, proxy
statements and other materials filed by Holdings or the Borrower or any
Subsidiary with the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of or all the functions of said Commission, or
with any national securities exchange, or distributed to the holders of any
Indebtedness with a then outstanding principal amount of $15,000,000 or
more (or any trustee, agent or representative for any such holders) or to
Holdings' shareholders, as the case may be;
(f) promptly upon the occurrence of any change of rating of the
Borrower's senior, unsecured, noncredit enhanced senior debt by Moody's or
S&P, a certificate of a Financial Officer setting forth the new rating, the
effective date thereof and, if applicable, notice of any change in the
Applicable Percentage as a result thereof; and
(g) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of Holdings and the
Borrower or any Subsidiary, or compliance with the terms of any Loan
Document, as the Administrative Agent or any Lender may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative
Agent and each Lender prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) proposed to be taken with
respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against the Borrower or any Affiliate thereof which could
reasonably be expected to result in a Material Adverse Effect; and
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(c) any other development that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect.
SECTION 5.06. Employee Benefits. (a) Comply in all material respects with
the applicable provisions of ERISA and the Code and (b) furnish to the
Administrative Agent (i) as soon as possible after, and in any event within 30
days after any Responsible Officer of the Borrower or any ERISA Affiliate knows
or has reason to know that, any Reportable Event has occurred that alone or
together with any other Reportable Event could reasonably be expected to result
in liability of the Borrower to the PBGC in an aggregate amount exceeding
$5,000,000, a statement of a Financial Officer setting forth details as to such
Reportable Event and the action that the Borrower proposes to take with respect
thereto, together with a copy of the notice, if any, of such Reportable Event
given to the PBGC, (ii) promptly after receipt thereof, a copy of any notice
that the Borrower or any ERISA Affiliate may receive from the PBGC relating to
the intention of the PBGC to terminate any Plan or Plans (other than a Plan
maintained by an ERISA Affiliate that is considered an ERISA Affiliate only
pursuant to subsection (m) or (o) of Code Section 414) or to appoint a trustee
to administer any such Plan, (iii) within 10 days after the due date for filing
with the PBGC pursuant to Section 412(n) of the Code a notice of failure to make
a required installment or other payment with respect to a Plan, a statement of a
Financial Officer setting forth details as to such failure and the action that
the Borrower proposes to take with respect thereto, together with a copy of any
such notice given to the PBGC and (iv) promptly and in any event within 30 days
after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of
a Multiemployer Plan, a copy of each notice received by the Borrower or any
ERISA Affiliate concerning (A) the imposition of Withdrawal Liability or (B) a
determination that a Multiemployer Plan is, or is expected to be, terminated or
in reorganization, both within the meaning of Title IV of ERISA.
SECTION 5.07. Maintaining Records; Access to Properties and Inspections.
Maintain all financial records in accordance with GAAP and permit any
representatives designated by any Lender, upon reasonable prior notice, to visit
and inspect the financial records and the properties of Holdings, the Borrower
or any Subsidiary at reasonable times (during normal business hours) and as
often as requested and to make extracts from and copies of such financial
records, and permit any representatives designated by any Lender to discuss the
affairs, finances and condition of Holdings, the Borrower or any Subsidiary with
the officers thereof and independent accountants therefor; provided that any
such visitation and inspection rights shall be exercised in a reasonable manner
that does not disrupt the business activities of the Borrower and its
Subsidiaries.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and request
the issuance of Letters of Credit only for (i) working capital purposes of the
Borrower and its Subsidiaries or (ii) general corporate purposes (including all
proper and legitimate business purposes) of the Borrower and its Subsidiaries.
SECTION 5.09. Further Assurances. (a) Cause each Subsidiary (including any
Subsidiary that becomes a Subsidiary after the date hereof, but excluding (i)
any Foreign Subsidiary so long as such Foreign Subsidiary has not entered into
any Guarantee with respect to any other Indebtedness of the Borrower and (ii)
any Excluded Subsidiary that has not ceased to qualify as an "Excluded
Subsidiary") to undertake the obligations of and to become a Subsidiary
Guarantor pursuant to the Guarantee Agreement and a party to the Indemnity,
Subrogation and Contribution Agreement pursuant to one or more instruments or
agreements satisfactory in form and substance to the Administrative Agent.
SECTION 5.10. Environmental Matters. (a) Promptly give notice to the
Administrative Agent upon becoming aware of (i) any violation of any
Environmental Law, (ii) any claim, inquiry, proceeding, investigation or other
action, including a request for information or a notice of an actual or
threatened Environmental Claim or (iii) the discovery of the Release of any
Hazardous Material at, on, under or from any of the properties owned or occupied
by the Borrower or any Subsidiary in excess of reportable or allowable
standards, threshold amounts or levels under any Environmental Law, or in a
manner or amount that could reasonably be expected to result in liability under
any Environmental Law.
(b) Upon discovery of the presence on any of the properties owned or
occupied by the Borrower or any Subsidiary of any Hazardous Material that is in
violation of, or that could reasonably be expected to result in liability under,
any Environmental Law, take all necessary steps to initiate and expeditiously
complete all Remedial Action to eliminate any such adverse effect, and keep the
Administrative Agent informed of such actions and the results thereof.
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ARTICLE VI. NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the principal of and
interest on each Loan, all fees and all other expenses or amounts payable under
any Loan Document have been paid in full and all Letters of Credit have been
cancelled or have expired and all amounts drawn thereunder have been reimbursed
in full, unless the Required Lenders shall otherwise consent in writing, each of
Holdings and the Borrower covenants and agrees that:
SECTION 6.01. Indebtedness. (a) The Borrower will not permit any Subsidiary
to incur, create, assume or permit to exist any Indebtedness, except:
(i) intercompany Indebtedness, including open accounts, incurred by
Subsidiaries from the Borrower or from other Subsidiaries;
(ii) unsecured Indebtedness in an aggregate principal amount at any
time outstanding not to exceed 10% of Consolidated Net Worth; and
(iii) Indebtedness consisting of Guarantees of the Obligations.
(b) The Borrower will not incur, create, assume or permit to exist any
Indebtedness in respect of letters of credit or bankers' acceptances other than
(i) Indebtedness in respect of Letters of Credit and (ii) Indebtedness in
respect thereof in an aggregate principal amount not to exceed $10,000,000 at
any one time outstanding.
SECTION 6.02. Liens. Neither Holdings nor the Borrower will, nor will they
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and its Subsidiaries
existing on the Effective Date and set forth in Schedule 6.02;
(b) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary; provided that (i)
such Lien is not created in contemplation of or in connection with such
acquisition, and (ii) such Lien does not apply to any other property or
assets of the Borrower or any Subsidiary;
(c) Liens for taxes, assessments or governmental charges or levies not
yet due or which are being contested in compliance with Section 5.03;
(d) Liens imposed by law that do not secure Indebtedness for borrowed
money and were incurred in the ordinary course of business, such as
carriers', warehousemen's, mechanic's, materialmen's, repairmen's or other
like Liens arising in the ordinary course of business; provided that such
Liens either (i) do not in the aggregate materially detract from the value
of the property or assets to which such Liens apply or materially impair
the use thereof in the operation of the business of Holdings, the Borrower
and the Subsidiaries or (ii) are being contested in compliance with Section
5.03;
(e) Liens upon equipment, machinery or real property (including
improvements thereto and fixtures thereon), assets subject to Capital Lease
Obligations and assets financed with industrial revenue bonds; provided
that (i) such Liens only secure Indebtedness incurred (A) to finance the
acquisition of such equipment, machinery or real property, or the
improvement of such real property, (B) in respect of Capital Lease
Obligations or (C) in respect of industrial revenue bonds, (ii) such Liens
(other than Liens securing Capital Lease Obligations) are incurred, and the
related Indebtedness is created, within 180 days after the acquisition or
construction of the assets financed thereby and (iii) in each case, such
Liens do not encumber any other assets or properties;
(f) leases or subleases granted to other persons not materially
interfering with the conduct of the business of the Borrower and its
Subsidiaries taken as a whole;
(g) easements, licenses, rights-of-way, zoning or other restrictions,
encroachments and other similar charges or encumbrances, and minor title
deficiencies, statutory and common law
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landlords' liens under leases to which Holdings, the Borrower or any of its
Subsidiaries is a party, in each case not securing Indebtedness and not
materially interfering with the conduct of the business of Holdings, the
Borrower or any of its Subsidiaries;
(h) Liens (other than any Lien imposed by ERISA) for worker's
compensation, unemployment compensation and other forms of government
insurance incurred in the ordinary course of business;
(i) Liens to secure (i) performance of tenders, statutory obligations,
bids, leases and contracts or other similar obligations (other than for
borrowed money) entered into in the ordinary course of business or (ii)
obligations on surety or appeal bonds, provided that the obligations
secured by such Liens (and, to the extent (without duplication) the value
of cash or property (other than Letters of Credit) forming a part of the
security with respect to such surety or appeal bonds exceeds the
obligations so secured, the amount of such excess) do not exceed in the
aggregate $5,000,000;
(j) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases otherwise permitted hereunder;
(k) any interest or title of a lessor under any operating lease of
property to, or of any consignor of goods consigned to, or any creditor of
any consignee in goods consigned to such consignee by, the Borrower or any
of its Subsidiaries, in each case in the ordinary course of business;
(l) Liens arising out of judgments or awards, which have been in
existence for less than 45 days from the date of creation thereof or which
have been stayed or bonded pending appeal or fully covered by insurance
(subject to applicable deductibles) and for which no enforcement action has
been commenced, provided that the aggregate amount of all such judgments or
awards (and, to the extent (without duplication) the value of cash or
property (other than Letters of Credit) forming a part of the security with
respect to such judgment or award exceeds the obligations so secured, the
amount of such excess) does not exceed $5,000,000 at any time outstanding;
and
(m) Liens securing obligations under any Rate Protection Agreement
consisting solely of an assignment of the Borrower's rights under such Rate
Protection Agreement.
SECTION 6.03. Certain Acquisitions. Neither Holdings nor the Borrower will,
nor will they permit any Subsidiary to, purchase, lease or otherwise acquire (in
one transaction or a series of related transactions) any property or assets
outside the ordinary course of business, except acquisitions by the Borrower of
the capital stock of a Person (the "Issuer") or of property or assets outside
the ordinary course of business, provided that (i) the aggregate consideration
paid in connection with all such acquisitions does not exceed $450,000,000; (ii)
the Issuer shall be engaged in, or the property and assets acquired shall be
used in connection with, the same or related (ancillary or complementary) line
of business as the Borrower; (iii) all necessary governmental approvals and
third party consents for the acquisition have been obtained without imposing
burdensome conditions, all appeal periods have expired and there shall be no
governmental or judicial action, pending or threatened, restraining or imposing
burdensome conditions on such acquisition; (iv) after giving effect to the
acquisition, and on a pro forma basis (including the financial results of the
Borrower and the Subsidiaries and the Issuer or the property and assets to be
acquired, as the case may be, and giving pro forma effect to any Indebtedness to
be incurred in connection with such acquisition) for the period of four
consecutive fiscal quarters ending immediately prior to such acquisition, no
Event of Default or Default shall have occurred and be continuing and the
Borrower shall have delivered to the Administrative Agent a certificate of a
Financial Officer certifying compliance with the conditions set forth in this
clause (iv) and setting forth pro forma calculations demonstrating such
compliance; and (v) in the case of any such acquisition of capital stock, the
Issuer shall become a Subsidiary Guarantor under the Guarantee Agreement.
SECTION 6.04. Mergers, Consolidations and Sales of Assets. (a) Neither
Holdings nor the Borrower will, nor will they permit any Subsidiary to, merge
into or consolidate with any other person, or permit any other person to merge
into or consolidate with it, or sell, transfer, lease or otherwise dispose of
(in one transaction or in a series of transactions) all or any substantial part
of its assets (whether now owned or hereafter acquired), including any capital
stock of any Subsidiary; provided, however, that if at the time thereof and
immediately after giving effect thereto no Default or Event of Default shall
have occurred and be continuing, (i) any Person may be liquidated into or may
merge into or with the Borrower
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in a transaction in which the Borrower is the surviving corporation, (ii) any
Person may merge into or with or consolidate with any Wholly Owned Subsidiary of
the Borrower in a transaction in which the surviving entity is a Wholly Owned
Subsidiary of the Borrower, provided in each case that (x) no Person other than
the Borrower or a Wholly Owned Subsidiary of the Borrower receives any
consideration (except in the case of a merger or consolidation that is permitted
by Section 6.03) and (y) in the event that any Loan Party is a party to such
merger or consolidation and is not the surviving entity, the surviving entity
shall, simultaneously with such merger or consolidation, assume all the
obligations of such Loan Party hereunder and under the other Loan Documents, and
(iii) any Excluded Subsidiary may be liquidated or may sell, transfer or
otherwise dispose of its assets to the Borrower or to another Subsidiary.
(b) Notwithstanding the provisions of paragraph (a) above:
(i) the Borrower and its Subsidiaries may sell, transfer or otherwise
dispose of assets to each other; and
(ii) the Borrower and its Subsidiaries may sell, transfer or otherwise
dispose of assets; provided that (A) such dispositions are made for fair
value and (B) after giving effect to any such sale, transfer or disposition
the aggregate fair market value of all assets disposed of on and after the
Effective Date in reliance upon this clause (ii) would not exceed 15% of
the Consolidated Total Assets determined by reference to the most recent
quarterly or annual balance sheet of the Borrower which precedes such sale,
transfer or disposition that is delivered to the Administrative Agent
pursuant to Section 5.04.
SECTION 6.05. Business of Holdings, Borrower and Subsidiaries. Neither
Holdings nor the Borrower will, nor will they permit any Subsidiary to, engage
at any time in any business or business activity other than the business
currently conducted by the Borrower and its Subsidiaries and business activities
reasonably related, supportive or incidental thereto. Without limiting the
generality of the foregoing, Holdings will not engage in any business or
business activity other than the ownership of the capital stock of the Borrower.
SECTION 6.06. Consolidated Net Worth. Neither Holdings nor the Borrower
will, nor will they permit any Subsidiary to, permit Consolidated Net Worth at
any time to be less than the sum of (a) $300,000,000, plus (b) 50% of
Consolidated Net Income for each fiscal quarter of the Borrower for which
Consolidated Net Income is positive, commencing with the fiscal quarter ended
June 30, 1999, plus (c) 50% of any increase in Consolidated Net Worth after June
30, 1999, attributable to capital contributions or the issuance of additional
shares of capital stock.
SECTION 6.07. Consolidated Fixed Charge Coverage Ratio. Neither Holdings
nor the Borrower will, nor will they permit any Subsidiary to, permit the
Consolidated Fixed Charge Coverage Ratio for any period of four consecutive
fiscal quarters of the Borrower ended on or after June 30, 1999, to be less than
2.50 to 1.
SECTION 6.08. Leverage Ratio. Neither Holdings nor the Borrower will, nor
will they permit any Subsidiary to, permit the Leverage Ratio at any time to be
greater than 0.40 to 1.
SECTION 6.09. Restrictive Agreements. Neither Holdings nor the Borrower
will, nor will they permit any Subsidiary to, enter into, incur or permit to
exist, directly or indirectly, any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of Holdings,
the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon
any of its property or assets, or (b) the ability of any Subsidiary to pay
dividends or other distributions with respect to any shares of its capital stock
or to make or repay loans or advances to the Borrower or any other Subsidiary or
to Guarantee Indebtedness of the Borrower or any other Subsidiary, provided that
(i) the foregoing shall not apply to restrictions and conditions imposed by law
or by any Loan Document, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 6.09 (but shall
apply to any extension or renewal of, or any amendment or modification if it
expands the scope of, any such restriction or condition), (iii) the foregoing
shall not apply to customary restrictions and conditions contained in agreements
relating to the sale of a Subsidiary pending such sale, provided such
restrictions and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (v) clause
(a) of the foregoing shall not apply to customary
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provisions in leases or other contracts entered into in the ordinary course of
business restricting the assignment thereof.
ARTICLE VII. EVENTS OF DEFAULT
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made in or in
connection with any Loan Document or the borrowings or issuances of Letters
of Credit hereunder, or any representation, warranty, statement or
information contained in any report, certificate, financial statement or
other instrument furnished in connection with or pursuant to any Loan
Document, shall prove to have been false or misleading in any material
respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the reimbursement with respect to any L/C
Disbursement or the payment of any Fee or any interest on any Loan or on
L/C Disbursement or any other amount (other than an amount referred to in
(b) above) due under any Loan Document, when and as the same shall become
due and payable, and such default shall continue unremedied for a period of
three Business Days;
(d) default shall be made in the due observance or performance by
Holdings, the Borrower or any Subsidiary of any covenant, condition or
agreement contained in Section 5.01(a), or 5.08 or in Article VI;
(e) default shall be made in the due observance or performance by
Holdings, the Borrower or any Subsidiary of any covenant, condition or
agreement contained in any Loan Document (other than those specified in
(b), (c) or (d) above) and such default shall continue unremedied for a
period of (i) in the case of a default under Section 5.05, three Business
Days after any Responsible Officer of the Borrower has actual knowledge of
any matter required to be disclosed to the Administrative Agent and the
Lenders pursuant to such Section that has not been so disclosed or (ii) in
the case of any other such default, 30 days after notice thereof from the
Administrative Agent or any Lender to the Borrower;
(f) Holdings, the Borrower or any Subsidiary shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $5,000,000, when and as the
same shall become due and payable, or (ii) fail to observe or perform any
other term, covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any such Indebtedness referred to in
clause (i) if the effect of any failure referred to in this clause (ii) is
to cause, or to permit the holder or holders of such Indebtedness or a
trustee on its or their behalf (with or without the giving of notice, the
lapse of time or both) to cause, such Indebtedness to become due prior to
its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of Holdings, the Borrower or any Subsidiary (other than
an Excluded Subsidiary), or of a substantial part of the property or assets
of Holdings, the Borrower or a Subsidiary (other than an Excluded
Subsidiary), under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for Holdings, the
Borrower or any Subsidiary (other than an Excluded Subsidiary) or for a
substantial part of the property or assets of Holdings, the Borrower or a
Subsidiary (other than an Excluded Subsidiary) or (iii) the winding-up or
liquidation of Holdings, the Borrower or any Subsidiary (other than an
Excluded Subsidiary); and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of
the foregoing shall be entered;
(h) Holdings, the Borrower or any Subsidiary (other than an Excluded
Subsidiary) shall (i) voluntarily commence any proceeding or file any
petition seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal or state
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bankruptcy, insolvency, receivership or similar law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in (g) above, (iii)
apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for Holdings, the Borrower or
any Subsidiary (other than an Excluded Subsidiary) or for a substantial
part of the property or assets of Holdings, the Borrower or any Subsidiary
(other than an Excluded Subsidiary), (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding,
(v) make a general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally to pay its debts
as they become due or (vii) take any corporate action for the purpose of
effecting any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against Holdings, the
Borrower, any Subsidiary (other than an Excluded Subsidiary) or any
combination thereof and the same shall remain undischarged for a period of
30 consecutive days during which execution shall not be effectively stayed,
or any action shall be legally taken by a judgment creditor to levy upon
assets or properties of Holdings, the Borrower or any Subsidiary (other
than an Excluded Subsidiary) to enforce any such judgment;
(j) (i) a Reportable Event or Reportable Events, or a failure to make
a required installment or other payment (within the meaning of Section
412(n)(1) of the Code), shall have occurred with respect to any Plan or
Plans that reasonably could be expected to result in liability of the
Borrower to the PBGC or to a Plan in an aggregate amount exceeding
$5,000,000 and, within 30 days after the reporting of any such Reportable
Event to the Administrative Agent or after the receipt by the
Administrative Agent of a statement required pursuant to Section
5.06(b)(iii) hereof, the Administrative Agent shall have notified the
Borrower in writing that (A) the Required Leaders have made a determination
that, on the basis of such Reportable Event or Reportable Events or the
failure to make a required payment, there are reasonable grounds for the
termination of such Plan or Plans by the PBGC, the appointment by the
appropriate United States district court of a trustee to administer such
Plan or Plans or the imposition of a lien in favor of a Plan and (B) as a
result thereof an Event of Default exists hereunder; or (ii) a trustee
shall be appointed by a United States district court to administer any such
Plan or Plans; or (iii) the PBGC shall institute proceedings (including
giving notice of intent thereof) to terminate any such Plan or Plans;
(k) (i) the Borrower or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan, (ii) the Borrower or such ERISA
Affiliate does not have reasonable grounds for contesting such With drawal
Liability or is not contesting such Withdrawal Liability in a timely and
appropriate manner and (iii) the amount of such Withdrawal Liability
specified in such notice, when aggregated with all other amounts required
to be paid to Multiemployer Plans in connection with Withdrawal Liabilities
(determined as of the date or dates of such notification), either (A)
exceeds $5,000,000 or requires payments exceeding $1,000,000 in any year or
(B) is less than $5,000,000 but any Withdrawal Liability payment remains
unpaid 30 days after such payment is due;
(l) the Borrower or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, if solely as a result of such reorganization or termination the
aggregate annual contributions of the Borrower and its ERISA Affiliates to
all Multiemployer Plans that are then in reorganization or have been or are
being terminated have been or will be increased over the amounts required
to be contributed to such Multiemployer Plans for their most recently
completed plan years by an amount exceeding $1,000,000;
(m) at any time after the Effective Date, the Guarantee Agreement
shall cease to be, or shall be asserted by any Guarantor not to be, a
valid, binding and enforceable agreement;
(n) there shall have occurred a Change in Control; or
(o) it is discovered that (i) Hazardous Materials have been
transported from any of the Properties or generated, treated, stored or
disposed of at, on or under any of the Properties in a manner that has
resulted in, or could reasonably be anticipated to result in, an
Environmental Claim, or (ii) the Borrower or any of its Subsidiaries has
retained or assumed any liability, contractually, by operation of law or
otherwise, with respect to the generation, treatment, storage or disposal
of Hazardous Materials, and, in any such case described in clause (i) or
(ii) above, the
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Administrative Agent shall have notified the Borrower in writing that the
Required Lenders have determined that such Environmental Claims and other
liabilities, in the aggregate, have resulted in, or could reasonably be
anticipated to result in, a Material Adverse Effect and, as a result
thereof, an Event of Default exists hereunder;
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times: (i) terminate forthwith
the Commitments and (ii) declare the Loans then outstanding to be forthwith due
and payable in whole or in part, whereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and any
unpaid accrued fees and all other liabilities of the Borrower accrued hereunder
and under any other Loan Document, shall become forthwith due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein or
in any other Loan Document to the contrary notwithstanding; and in any event
with respect to the Borrower described in paragraph (g) or (h) above, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued fees
and all other liabilities of the Borrower accrued hereunder and under any other
Loan Document, including the obligation to provide cash collateral pursuant to
Section 2.20(j), shall automatically become due and payable, without present-
ment, demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in any other Loan
Document to the contrary notwithstanding.
ARTICLE VIII. THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this Agreement, The
Chase Manhattan Bank is hereby appointed to act as Administrative Agent on
behalf of the Lenders and the Issuing Bank. Each of the Lenders and each
assignee of any such Lender hereby irrevocably authorizes the Administrative
Agent to take such actions on behalf of such Lender or assignee or the Issuing
Bank and to exercise such powers as are specifically delegated to the
Administrative Agent by the terms and provisions hereof and of the other Loan
Documents, together with such actions and powers as are reasonably incidental
thereto. The Administrative Agent is hereby expressly authorized by the Lenders
and the Issuing Bank, without hereby limiting any implied authority, (a) to
receive on behalf of the Lenders and the Issuing Bank all payments of principal
of and interest on the Loans, all payments in respect of L/C Disbursements and
all other amounts due to the Lenders hereunder, and promptly to distribute to
each Lender or the Issuing Bank its proper share of each payment so received;
(b) to give notice on behalf of each of the Lenders to the Borrower of any Event
of Default specified in this Agreement of which the Administrative Agent has
actual knowledge acquired in connection with its agency hereunder; and (c) to
distribute to each Lender copies of all notices, financial statements and other
materials delivered by the Borrower pursuant to this Agreement as received by
the Administrative Agent.
Neither the Agent nor any of its directors, officers, employees or agents
shall be liable as such for any action taken or omitted by any of them except
for its or his own gross negligence or wilful misconduct, or be responsible for
any statement, warranty or representation herein or the contents of any document
delivered in connection herewith, or be required to ascertain or to make any
inquiry concerning the performance or observance by the Borrower or any other
Loan Party of any of the terms, conditions, covenants or agreements contained in
any Loan Document. The Administrative Agent shall not be responsible to the
Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or any other Loan Documents or other instruments
or agreements. The Administrative Agent shall in all cases be fully protected in
acting, or refraining from acting, in accordance with written instructions
signed by the Required Lenders and, except as otherwise specifically provided
herein, such instructions and any action or inaction pursuant thereto shall be
binding on all the Lenders. The Administrative Agent shall, in the absence of
knowledge to the contrary, be entitled to rely on any instrument or document
believed by it in good faith to be genuine and correct and to have been signed
or sent by the proper person or persons. Neither the Administrative Agent nor
any of its directors, officers, employees or agents shall have any
responsibility to the Borrower or any other Loan Party on account of the failure
of or delay in performance or breach by any Lender or the Issuing Bank of any of
its obligations hereunder or to any Lender or the Issuing Bank on account of the
failure of or delay in performance or breach by any other Lender or the Issuing
Bank or the Borrower or any other Loan Party of any of their respective
obligations hereunder or under any other Loan Document or in connection herewith
or therewith. The Administrative Agent may execute any and all duties hereunder
by or through agents or employees and shall be entitled to rely upon the advice
of legal counsel selected by it with respect to all matters arising
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hereunder and shall not be liable for any action taken or suffered in good faith
by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that the Administrative Agent shall not be
under any duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement unless it shall be requested in
writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided below, the Administrative Agent may resign at any time by
notifying the Lenders and the Borrower. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor reasonably acceptable to the
Borrower (it being understood that any Lender is deemed to be acceptable to the
Borrower). If no successor shall have been so appointed by the Required Lenders
and shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent reasonably acceptable to the Borrower (it being understood
that any Lender is deemed to be acceptable to the Borrower) which shall be
either a Lender or a bank with an office in New York, New York, having a
combined capital and surplus of at least $500,000,000 or an Affiliate of any
such bank. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor bank, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After the Administrative Agent's
resignation hereunder, the provisions of this Article and Section 9.05 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.
With respect to the Loans made or Letters of Credit issued by it hereunder,
the Administrative Agent in its individual capacity and not as Administrative
Agent shall have the same rights and powers as any other Lender and may exercise
the same as though it were not the Administrative Agent, and the Administrative
Agent and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrower or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent.
Each Lender agrees (i) to reimburse the Administrative Agent, on demand, in
the amount of its Pro Rata Percentage of any expenses incurred for the benefit
of the Lenders by the Administrative Agent, including counsel fees and
compensation of agents and employees paid for services rendered on behalf of the
Lenders, which shall not have been reimbursed by the Borrower and (ii) to
indemnify and hold harmless the Administrative Agent and any of its directors,
officers, employees or agents, on demand, in the amount of such Pro Rata
Percentage, from and against any and all liabilities, taxes, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against it in its capacity as Administrative Agent or any of them
in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by it or any of them under this
Agreement or any other Loan Document, to the extent the same shall not have been
reimbursed by the Borrower; provided that no Lender shall be liable to the
Administrative Agent for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or wilful misconduct of the Administrative
Agent or any of its directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement or any other Loan Document, any
related agreement or any document furnished hereunder or thereunder.
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ARTICLE IX. MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower or Holdings, to it at Ethan Allen Drive,
Danbury, CT 06811, Attention of Chief Financial Officer or Treasurer
(Telecopy No. (203) 743-8341), with copies to (i) in the case of any notice
or communication other than routine notices and communications under
Article II, the attention of General Counsel at the aforesaid address and
(ii) in the case of any notice or communication relating to a Default or an
Event of Default, Mayer, Brown & Platt, 1675 Broadway, New York, NY 10019,
Attention of James B. Carlson, Esq. (Telecopy No. (212) 262-1910);
(b) if to the Administrative Agent, to The Chase Manhattan Bank Loan
and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York,
NY 10081, Attention of Jackie Carter (Telecopy No. (212) 552-7500), with a
copy to The Chase Manhattan Bank, at 270 Park Avenue, New York 10017,
Attention of Margaret T. Lane (Telecopy No. (212) 270-5646); and
(c) if to a Lender, to it at its address (or telecopy number) set
forth in Schedule 2.01 or in the Assignment and Acceptance pursuant to
which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower or Holdings herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated.
SECTION 9.03. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower, Holdings and the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and the conditions to effectiveness set forth in Section 4.02 have been
satisfied or waived, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the Borrower, Holdings, the Administrative Agent,
the Issuing Bank or the Lenders that are contained in this Agreement shall bind
and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided,
however, that (i) except in the case of an assignment to a Lender or an
Affiliate of such Lender, the Borrower and the Administrative Agent (and, in the
case of any assignment of a Revolving Credit Commitment, the Issuing Bank and
the Swingline Lender) must give their prior written consent to such assignment
(which consent shall not be unreasonably withheld), (ii) the amount of the
Commitment of the assigning Lender subject to each such assignment of less than
all its Commitment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Administrative Agent) shall not
be less than $5,000,000, (iii) the parties to each such assignment shall
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execute and deliver to the Administrative Agent an Assignment and Acceptance,
together with a processing and recordation fee of $3,500 and (iv) the assignee,
if it shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire. Upon acceptance and recording pursuant to
paragraph (e) of this Section 9.04, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be at least five
Business Days after the execution thereof, (A) the assignee thereunder shall be
a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this Agreement
and (B) the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender's rights and obligations
under this Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.11, 2.13, 2.17 and 9.05,
as well as to any fees accrued for its account and not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the assignee thereunder shall be deemed to confirm to and
agree with each other and the other parties hereto as follows: (i) such
assigning Lender warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim and that its
Revolving Credit Commitment, and the outstanding balance of its Revolving Loans,
in each case without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except as
set forth in (i) above, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto, or the financial condition of the Borrower
or any Subsidiary or the performance or observance by the Borrower or any
Subsidiary of any of its obligations under this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance; (iv) such assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements, if any, delivered pursuant to Section 5.04 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (v) such
assignee will independently and without reliance upon the Administrative Agent,
such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (vi) such
assignee appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Administrative Agent, respectively, by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be
conclusive and the Borrower, the Administrative Agent, the Issuing Bank and the
Lenders may treat each person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for
inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Borrower, the Swingline
Lender, the Issuing Bank and the Administrative Agent to such assignment, the
Administrative Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Lenders, the Issuing Bank and the Swingline Lender. No
assignment shall be effective unless it has been recorded in the Register as
provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the Swingline
Lender, the Issuing Bank or the Administrative Agent sell participations to one
or more banks or other entities in all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided, however, that (i) such Lender's
obligations under this Agreement shall
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remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participating
banks or other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.11, 2.13 and 2.17 to the same extent as if
they were Lenders and (iv) the Borrower, the Administrative Agent, the Issuing
Bank and the Lenders shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement,
and such Lender shall retain the sole right to enforce the obligations of the
Borrower relating to the Loans or L/C Disbursements and to approve any
amendment, modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers decreasing any fees payable hereunder or
the amount of principal of or the rate at which interest is payable on the
Loans, extending any scheduled principal payment date or date fixed for the
payment of interest on the Loans or changing or extending the Commitments.
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to any Loan Party furnished to such Lender
by or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.16.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agree ment to a Federal Reserve Bank to secure extensions of credit
by such Federal Reserve Bank to such Lender; provided that no such assignment
shall release a Lender from any of its obligations hereunder or substitute any
such Bank for such Lender as a party hereto. In order to facilitate such an
assignment to a Federal Reserve Bank, the Borrower shall, at the request of the
assigning Lender, duly execute and deliver to the assigning Lender a promissory
note or notes evidencing the Loans made to the Borrower by the assigning Lender
hereunder.
(i) Neither Holdings nor the Borrower shall assign or delegate any of its
rights or duties hereunder without the prior written consent of the
Administrative Agent, the Issuing Bank and each Lender, and any attempted
assignment without such consent shall be null and void.
(j) 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
becomes a Lender, downgrade the long-term certificate deposit ratings of such
Lender, and the resulting ratings shall be below BBB-, Baa3 and C (or BB, in the
case of a Lender that is an insurance company (or B, in the case of an insurance
company not rated by InsuranceWatch Ratings Service)), then the Issuing Bank or
the Swingline Lender shall have the right, but not the obligation, at its own
expense, upon notice to such Lender and the Administrative Agent, to replace (or
to request the Borrower to use its reasonable efforts to replace) such Lender
with an assignee (in accordance with and subject to the restrictions contained
in paragraph (b) above), and such Lender hereby agrees to transfer and assign
without recourse (in accordance with and subject to the restrictions contained
in paragraph (b) above) all its interests, rights and obligations in respect of
its Revolving Credit Commitment to such assignee; provided, however, that (i) no
such assignment shall conflict with any law, rule and regulation or order of any
Governmental Authority and (ii) the Issuing Bank or the Swingline Lender or such
assignee, as the case may be, shall pay to such Lender in immediately available
funds on the date of such assignment the principal of and interest accrued to
the date of payment on the Loans made by such Lender hereunder and all other
amounts accrued for such Lender's account or owed to it hereunder.
(k) Notwithstanding anything to the contrary contained herein, any Lender
(a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC")
of such Granting Lender, identified as such in writing from time to time by the
Granting Lender to the Administrative Agent and the Borrower, the option to
provide to the Borrower all or any part of any Loan that such Granting Lender
would otherwise be obliged to make to the Borrower pursuant to Section 2.01,
provided that (i) nothing herein shall constitute a commitment to make any Loan
by any SPC and (ii) if an SPC elects not to exercise such option or otherwise
fails to provide all or any part of such Loan, the Granting Lender shall be
obligated to make such Loan pursuant to the terms hereof. The making of a Loan
by an SPC hereunder shall utilize the Commitment of the Granting Lender to the
same extent, and as if, such Loan were made by the Granting Lender. Each party
hereto hereby agrees that no SPC shall be liable for any payment or indemnity
obligation under this Agreement for which a Lender would otherwise be liable,
for so long as, and to the extent, the related
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Granting Lender makes such payment or gives such indemnity. In furtherance of
the foregoing, each party hereto hereby agrees that, prior to the date that is
one year and one day after the payment in full of all outstanding senior
indebtedness of any SPC, it will not institute against, or join any other person
in instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or similar proceedings under the laws of
the United States or any State thereof with respect to any claim arising under
or related to this Agreement. In addition, notwithstanding anything to the
contrary contained in this Section 9.04 any SPC may (i) with notice to, but
without the prior written consent of, the Borrower or the Administrative Agent
and without paying any processing fee therefor, assign all or a portion of its
interests in any Loans to its Granting Lender or to any financial institutions
(if consented to by the Borrower and the Administrative Agent) providing
liquidity and/or credit facilities to or for the account of such SPC to fund the
Loans made by such SPC or to support the securities (if any) issued by such SPC
to fund such Loans and (ii) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of a surety, guarantee or credit or liquidity enhancement to such
SPC.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all
out-of-pocket expenses reasonably incurred by the Administrative Agent, the
Issuing Bank and the Swingline Lender in connection with the preparation and
administration of this Agreement and the other Loan Documents or in connection
with any amendments, modifications or waivers of the provisions hereof or
thereof (whether or not the transactions hereby contemplated shall be
consummated) or incurred by the Administrative Agent, the Issuing Bank or any
Lender in connection with the enforcement or protection of their rights in
connec tion with this Agreement and the other Loan Documents or in connection
with the Loans made or Letters of Credit issued hereunder, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel
for the Administrative Agent, and, in connection with any such enforcement or
protection, the reasonable fees, charges and disbursements of not more than one
other counsel for the Administrative Agent, the Issuing Bank and the Lenders in
each jurisdiction where enforcement is sought.
(b) The Borrower agrees to indemnify the Administrative Agent, each Lender
and the Issuing Bank, each Affiliate of any of the foregoing persons and each of
their respective directors, officers, employees and agents (each such person
being called an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (i) the execution or delivery of this Agreement or any other Loan
Document or any agreement or instrument contemplated thereby, the performance by
the parties thereto of their respective obligations thereunder or the
consummation of the Transactions and the other transactions contemplated
thereby, (ii) the use of the proceeds of the Loans or issuance of Letters of
Credit, (iii) any claim, litigation, investigation or proceeding relating to any
of the foregoing, whether or not any Indemnitee is a party thereto, or (iv) any
actual or alleged presence or Release of Hazardous Materials on any property
owned or operated by the Borrower or any of the Subsidiaries, or any
Environmental Claim related in any way to the Borrower or the Subsidiaries;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
resulted from the gross negligence or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contem plated hereby, the repayment of any of
the Loans, the expiration of the Commitments, the expiration of any Letter of
Credit, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Administrative Agent, any Lender or the Issuing Bank. All amounts due
under this Section 9.05 shall be payable on written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any of and all the obligations of
the Borrower now or hereafter existing under this Agreement and other Loan
Documents held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement or such other Loan Document and
although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) which such Lender may have.
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SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, any Lender or the Issuing Bank in exercising any power or
right hereunder or under any Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the Issuing
Bank and the Lenders hereunder and under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies which they would otherwise have.
No waiver of any provision of this Agreement or any other Loan Document or
consent to any departure by the Borrower, Holdings or any other Loan Party
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on the Borrower or Holdings in any case shall entitle the Borrower or Holdings
to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement, the other Loan Documents, nor any provision
thereof may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Borrower, Holdings and the Required
Lenders; provided, however, that no such agreement shall (i) decrease the
principal amount of, or extend the maturity of or any scheduled principal
payment date or date for the payment of any interest on any Loan or any date for
reimbursement of an L/C Disbursement, or waive or excuse any such payment or any
part thereof, or decrease the rate of interest on any Loan or L/C Disbursement,
without the prior written consent of each Lender affected thereby, (ii) increase
or extend the Commitment or decrease or extend the date for payment of any of
the fees of any Lender without the prior written consent of such Lender, or
(iii) amend or modify the provisions of Section 2.14 or 2.15, the provisions of
this Section, the definition of "Required Lenders" or any provision of any Loan
Document that by its terms expressly requires the consent or approval of all the
Lenders, without the prior written consent of each Lender; provided further that
no such agreement shall amend, modify or otherwise affect the rights or duties
of the Administrative Agent, the Issuing Bank or the Swingline Lender hereunder
or under any other Loan Document without the prior written consent of the
Administrative Agent, the Issuing Bank or the Swingline Lender.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all fees, charges and other
amounts which are treated as interest on such Loan or participation in such L/C
Disbursement under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan or participation in
accordance with applicable law, the rate of interest payable in respect of such
Loan or participation hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect of such Loan or
participation but were not payable as a result of the operation of this Section
shall be cumulated and the interest and Charges payable to such Lender in
respect of other Loans or participations or periods shall be increased (but not
above the Maximum Rate therefor) until such cumulated amount, together with
interest thereon at the Federal Funds Effective Rate to the date of repay ment,
shall have been received by such Lender.
SECTION 9.10. Entire Agreement. This Agreement and the other Loan Documents
constitute the entire contract between the parties relative to the subject
matter hereof. Any previous agreement among the parties with respect to the
subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT,
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IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original but all of which when taken together shall constitute a
single contract, and shall become effective as provided in Section 9.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each of
Holdings and the Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that any Lender may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against the Borrower,
Holdings or their respective properties in the courts of any jurisdiction.
(b) Each of Holdings and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this agreement or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 9.01. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 9.16. Confidentiality. The Administrative Agent, the Issuing Bank
and each of the Lenders agrees to keep confidential (and to use its best efforts
to cause its respective agents and representatives to keep confidential) the
Information (as defined below) and all copies thereof, extracts therefrom and
analyses or other materials based thereon, except that the Administrative Agent,
the Issuing Bank or any Lender shall be permitted to disclose Information (a) to
such of its respective officers, directors, employees, agents and
representatives as need to know such Information, (b) to the extent requested by
any regulatory authority, (c) to the extent otherwise required by applicable
laws and regulations or by any subpoena or similar legal process, (d) in
connection with any suit, action or proceeding relating to the enforcement of
its rights hereunder or under the other Loan Documents, (e) to any other party
to this Agreement or (f) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Agreement or (ii) becomes
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis from a source other than the Borrower or Holdings. For the
purposes of this Section, "Information" shall mean all financial statements,
certificates, reports, agreements and information (including all analyses,
compilations and studies prepared by the Administrative Agent, the Issuing Bank
or any Lender based on any of the foregoing) that are received from the Borrower
or Holdings
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and related to the Borrower or Holdings, any shareholder of the Borrower or
Holdings or any employee, customer or supplier of the Borrower or Holdings,
other than any of the foregoing that were available to the Administrative Agent,
the Issuing Bank or any Lender on a nonconfidential basis prior to its
disclosure thereto by the Borrower or Holdings, and which are in the case of
Information provided after the date hereof, clearly identified at the time of
delivery as confidential. The provisions of this Section 9.16 shall remain
operative and in full force and effect regardless of the expiration and term of
this Agreement.
SECTION 9.17. Defaulting Lender. If any Lender shall refuse to make any
Loan required to be made by it hereunder or to fund its participation in any L/C
Disbursement or Swingline Loan hereunder, or shall notify the Borrower or the
Administrative Agent in writing that it does not intend to make any such Loan or
fund any such participation, in either case as a result of any takeover of such
Lender by any regulatory authority or agency (any such Lender, a "Defaulting
Lender"), then, unless and until such Defaulting Lender retracts in writing any
such notice and cures all defaults on its part in respect of the funding of its
Pro Rata Percentage of all outstanding Loans, L/C Disbursements and Swingline
Loans, (a) any of the Borrower, the Administrative Agent, the Issuing Bank and
the Swingline Lender may require such Defaulting Lender to transfer and assign
all of its interests, rights and obligations under this Agreement to an assignee
in the same manner and effect as provided in Section 2.18(a), the provisions of
which shall apply, mutatis mutandis, to any such assignment, (b) such Defaulting
Lender shall not be entitled to exercise any right of setoff under Section 9.06
and (c) to the maximum extent permitted by applicable law, such Defaulting
Lender shall be deemed not to be a "Lender", the Revolving Credit Commitment of
such Defaulting Lender shall be deemed not to be in effect and such Defaulting
Lender's Revolving Credit Exposure shall be deemed not to exist, in each case
solely for purposes of the definition of the term "Required Lenders" and
determining whether any waiver, amendment or modification has been approved by
the requisite Lenders in accordance with Section 9.08 or any other applicable
provision of the Loan Documents. In no event shall the provisions of this
Section be construed to release any Defaulting Lender from its obligations
hereunder to any other party hereto, including its obligations to make Loans and
participate in Letters of Credit and Swingline Loans, and such provisions shall
not prejudice any claims, or be construed to waive any rights, including any
rights to bring legal proceedings against such Defaulting Lender, which the
Administrative Agent, any Lender, the Issuing Bank or any Loan Party may
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have against such Defaulting Lender as a result of any failure by such
Defaulting Lender to honor its obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
ETHAN ALLEN INC.,
by /s/ M. Farooq Kathwari
---------------------------------
Name: M. Farooq Kathwari
Title: Chairman, CEO & President
ETHAN ALLEN INTERIORS INC.,
by /s/ Gerardo Burdo
----------------------------------
Name: Gerardo Burdo
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent and Swingline Lender,
by /s/ Margaret T. Lane
----------------------------------
Name: Margaret T. Lane
Title: Vice President
FLEET BANK, N.A., individually and as
Co-Documentation Agent,
by /s/ Allison R. Walk
----------------------------------
Name: Allison R. Walk
Title: Senior Vice President
WACHOVIA BANK, N.A., individually and as
Co-Documentation Agent,
by /s/ Jane C. Deaver
----------------------------------
Name: Jane C. Deaver
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK,
by /s/ Sovonna L. Day
----------------------------------
Name: Sovonna L. Day
Title: Vice President
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BANK OF NEW YORK,
by /s/ Lucille Cuttone
----------------------------------
Name: Lucille Cuttone
Title: Assistant Vice President
SUNTRUST BANK, ATLANTA
by /s/ W. David Wisdom
----------------------------------
Name: W. David Wisdom
Title: Vice President
<PAGE>
EXHIBIT 10(h)-1
FIRST AMENDMENT TO
CREDIT CARD PROGRAM AGREEMENT
This First Amendment to Credit Card Program Agreement dated as of February
22, 2000 ("Amendment") amends the Credit Card Program Agreement dated as of
August 25, 1995 (as amended, modified and supplemented from time to time, the
"Agreement") by and among GE Capital Canada Limited ("GECC"), Ethan Allen Inc.
("Ethan Allen") and Ethan Allen Interiors, Inc. ("Ethan Allen Interiors" and
together with Ethan Allen, the "Retailers"). Capitalized terms used herein and
not otherwise defined have the meaning given in the Agreement. This Amendment
shall become effective on April 5, 2000.
The parties hereby agree as follows:
I. AMENDMENTS TO THE AGREEMENT
1.1 DEFINITION OF "MAXIMUM INVESTMENT." The definition of "Maximum
Investment" is hereby deleted in its entirety and replaced with the following:
"Maximum Investment" shall mean One Million United States Dollars
(U.S. $1,000,000) (converted on any material date at the U.S. Dollar
exchange rate quoted by Royal Bank of Canada at Toronto, Ontario for
purchasing U.S. funds in Canada on such date) or such higher amounts
as GECC, in its sole discretion, shall from time to time specify to
Ethan Allen Inc.
1.2 DEFINITION OF "U.S. PROGRAM AGREEMENT." The definition of "U.S.
Program Agreement" is hereby deleted in its entirety and replaced with
the following:
"U.S. Program Agreement" means that certain Amended and Restated
Consumer Credit Card Program Agreement dated as of February 22, 2000
between Monogram Credit Card Bank of Georgia and Retailer, as amended
or restated from time to time, which governs the terms and conditions
of the credit card program provided to Company-Owned Stores and
Authorized Dealers located in the United States.
II. GENERAL
2.1 AUTHORITY FOR AMENDMENT. The execution, delivery and performance of
this Amendment has been duly authorized by all requisite corporate
action on the part of Retailer and GECC and upon execution by all
parties, will constitute a legal, binding obligation thereof.
2.2 EFFECT OF AMENDMENT. Except as specifically amended hereby, the
Agreement, and all terms contained therein, remains in full force and
effect. The Agreement, as amended by this Amendment, constitutes the
entire understanding of the parties with respect to the subject matter
hereof.
2.3 BINDING EFFECT. Each reference herein to a party hereto shall be
deemed to include its successors and assigns, all of whom shall be
bound by this Amendment and in whose favor the provisions of this
Amendment shall inure.
2.4 FURTHER ASSURANCES. The parties hereto agree to execute such other
documents and instruments and to do such other and further things as
may be necessary or desirable for the execution and implementation of
this Amendment and the consummation of the transactions contemplated
hereby and thereby.
2.5 GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the Province of Ontario.
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2.6 COUNTERPARTS. This Amendment may be executed in counterparts, each of
which shall constitute an original, but all of which, when taken
together, shall constitute but one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, all as of the day and year first
above written.
ETHAN ALLEN INC. GE CAPITAL CANADA LIMITED
By: By:
--------------------------- ---------------------------
Its: Its:
----------------------- ----------------------
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EXHIBIT 10(j)
ETHAN ALLEN INC.
SALES FINANCE AGREEMENT
This Agreement is entered into as of this 25th day of June 1999 (the "Effective
Date") by and between MBNA America Bank, N.A., a national banking association
having its principal place of business in Wilmington, Delaware ("MBNA America"),
and Ethan Allen Inc., a home furnishings company, having its principal place of
business in Danbury, Connecticut, along with each of its subsidiaries and
affiliates (collectively, "Ethan Allen") for themselves, and their respective
successors and assigns.
WHEREAS, Ethan Allen is and will be engaged in the business of selling home
furnishings to its customers both through retail stores which are owned and
operated by Ethan Allen and through independent retailers; and
WHEREAS, MBNA America is engaged in the business of providing various consumer
credit products; and
WHEREAS, Ethan Allen and MBNA America desire that MBNA America provide various
Loan Accounts to Ethan Allen Customers, certain of which shall be offered in
conjunction with a purchase financing program for Ethan Allen Products; and
WHEREAS, the Program will be started on the Effective Date with a limited number
of Ethan Allen Stores and Independent Retailer Stores (as described on Schedule
E) during the Test Phase, and shall be gradually rolled out to all Stores
thereafter throughout the term of this Agreement, starting one hundred and
twenty (120) days after the Effective Date.
1. DEFINITIONS
All Whereas clauses are hereby incorporated by reference and made a part of this
Agreement.
When used in this Agreement,
(a) "Agreement" means this agreement and Schedules A, B, C, D, E and F.
(b) "Annual Percentage Rate" or "APR" shall mean the Annual Percentage Rate
applicable to a Loan Account.
(c) "Annual Percentage Rate Buydown" or "APR Buydown" shall mean the Annual
Percentage Rate subsidy provided by Ethan Allen and the Independent
Retailers to create a reduced Annual Percentage Rate offered under the
Program as described in Section 2.
(d) "Customer" means any Ethan Allen Customer who is a participant in the
Program.
(e) "Customer Information" means information within each Customer List to the
extent that such information in any way relates to MBNA America, the
Program, or Loan Accounts.
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(f) "Customer List" means information (e.g., names and addresses) about
Customers as may be mutually agreed upon by the parties. When used in this
Agreement, the term "Customer List" includes any whole or partial copies or
compilations of a Customer List in any form or any medium, any information
derived solely from a Customer List, and all Customer Information, as
defined herein.
(g) "Ethan Allen" shall mean Ethan Allen Inc., and each subsidiary and
affiliate of Ethan Allen Inc., whether existing now or in the future,
including Ethan Allen Interiors Inc., Ethan Allen Marketing Corp. and
ethanallen.com inc. The term "Ethan Allen shall also include the Ethan
Allen Stores.
(h) "Ethan Allen Customer" means any end-user purchaser or potential purchaser
of Ethan Allen Products, and other potential participants mutually agreed
to by the parties, all of whom, for purposes of this Agreement shall be
limited to those persons to whom MBNA America is permitted to lend (e.g.
not Canadian citizens resident in Canada).
(i) "Ethan Allen Products" means home furnishings sold by Ethan Allen, its
employees, agents and representatives (including Independent Retailers) and
other items financed with a Loan Account.
(j) "Ethan Allen Stores" means those retail stores selling solely Ethan Allen
Products which are fully owned and operated by Ethan Allen, and shall
exclude Independent Retailer Stores.
(k) "Financial Service Products" means installment loan programs and revolving
loan programs.
(l) "Independent Retailer" means an authorized U.S. retail seller of only Ethan
Allen Products to end-users pursuant to an unrevoked written agreement with
Ethan Allen.
(m) "Independent Retailer Contract" means an executed contract between an
Independent Retailer and MBNA America, substantially in the form of
Schedule F hereto, pursuant to which the Program will be offered at such
Independent Retailer's Stores.
(n) "Independent Retailer Store" means those retail stores selling solely Ethan
Allen Products which are owned and operated by an Independent Retailer, and
shall exclude Ethan Allen Stores.
(o) "Loan Account" or an "Ethan Allen Simple Financing Plan" means a loan
account opened by an Ethan Allen Customer in response to marketing efforts
made pursuant to the Program.
(p) "Mailing Lists" means updated and current lists and/or magnetic tapes (in a
format designated by MBNA America ) containing names, postal addresses and,
when available, telephone numbers of Ethan Allen Customers segmented by zip
codes or reasonably selected characteristics.
(q) "Program" means those programs and services of the Financial Service
Products MBNA America agrees to offer pursuant to this Agreement to the
Ethan Allen Simple Finance Plan Customers from time to time.
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(r) "Referral Procedures" means the procedures pursuant to which Ethan Allen
Customers interested in Loan Accounts will be referred to MBNA America or
otherwise offered Loan Accounts, as the Procedures may be amended from time
to time.
(s) "Royalties" means the compensation set forth in Schedule B.
(t) "Settlement Account" means a banking account designated by Ethan Allen and
described on Schedule C hereto, to be used for receipt of certain Loan
Account proceeds.
(u) "Stores" means all Independent Retailer Stores and Ethan Allen Stores, but
excluding any stores outside of the U.S. During the Test Phase, the stores
listed on Schedule E shall constitute the Stores, unless otherwise agreed
to by the parties.
(v) "Test Phase" shall mean the first ninety (90) days of the term of this
Agreement.
(w) "Trademarks" means any design, image, visual representation, logo, service
mark, trade dress, trade name, or trademark used or acquired by Ethan Allen
during the term of this Agreement.
2. RIGHTS AND RESPONSIBILITIES OF ETHAN ALLEN
(a) Lowest Annual Percentage Rate: During the term of this Agreement, and
subject to the other conditions set forth herein in this Agreement, such as
MBNA America's right to amend the Annual Percentage Rate, and subject to
the exceptions outlined below, the Program described hereunder shall have
the lowest Annual Percentage Rate, by a margin of at least 99 (ninety nine)
basis points, applicable to any new account marketing under an endorsed
sales finance (non credit card) program offered by MBNA America which has
the financing of home furnishings as its primary purpose; so long as the
Program achieves the following Loan Account goals ("Account Plan Goals"):
ACCOUNT PLAN GOALS
Time Period Number of Activiated Accounts
----------- -----------------------------
Effective Date - 3/31/2000 9,915
4/1/2000 - 6/30/2000 8,200
Each calendar quarter thereafter The immediately previous calendar
quarter's account goal plus
fifteen percent (15%).
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The parties shall conduct a meeting shortly after the end of each calendar
quarter to discuss the results, starting with a meeting to discuss the results
of the first calendar quarter of 2000. If the goal is not met in any calendar
quarter during the term of this Agreement, the lowest Annual Percentage Rate
restrictions described herein shall no longer be applicable to the Program,
effective no sooner than ninety (90) days after the meeting relating to the
calendar quarter in which the goal was not met.
(i) The restriction above shall no longer be applicable to the Program,
regardless of whether the Account Plan Goal was achieved, in the event
that: (a) the prime rate increases above eight percent (8.00%) anytime
after June 30, 2000; and (b) MBNA America raises the Annual Percentage
Rate on new account Program marketing to an Annual Percentage Rate
higher than nine and ninety-nine one-hundredths of one percent
(9.99%). The restriction shall be inapplicable effective ninety (90)
days after MBNA America provides notice of an increase in the Annual
Percentage Rate. The parties acknowledge that MBNA America's right to
increase the Annual Percentage Rate is subject to Ethan Allen's right
to initiate negotiations to further buydown the Annual Percentage Rate
or accept reduced Royalties, as described in Section 2(m) hereof.
(ii) The restriction above shall not apply to any Home Depot and EXPO sales
finance programs offered by MBNA America, and as such programs may be
amended or expanded from time to time.
(iii)The restriction above shall apply to short term promotional rates for
any such home furnishings sales finance program, but shall be
inapplicable to any such program in the event that the sales finance
partner wishes to financially subsidize the short term promotional
rate (and MBNA America does not directly subsidize the promotional
rate). Short term promotions shall include time periods up to and
including approximately twelve (12) months.
(iv) The restriction above shall apply to such home furnishings sales
finance programs offering fixed and variable Annual Percentage Rates
(including programs where the accounts are individually risk based
priced), but shall be inapplicable to any other type of fee pricing
structures and other sales finance program options that do not impact
the Annual Percentage Rate amount, including, without limitation, same
as cash and deferred payment arrangements.
(v) Ethan Allen Customers may use credit cards which are not endorsed by
Ethan Allen or the Independent Retailers to effect purchases of Ethan
Allen Products performed via the Ethan Allen Internet website. The
selling entity for all such sales shall be Ethan Allen, not an
Independent Retailer.
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(b) Referral Procedures: Ethan Allen will conduct all Ethan Allen Customer
referrals for Loan Accounts in accordance with the Referral Procedures. The
Referral Procedures may be amended from time to time by MBNA America upon
prior notice to and consultation with Ethan Allen. All materials, including
educational and marketing materials, prepared by MBNA America shall be
promptly distributed by Ethan Allen in accordance with MBNA's instructions.
Ethan Allen agrees to provide MBNA America with such information,
assistance and further assurances as may be reasonably requested by MBNA
America in connection with the Program.
(c) Program Promotional and Educational Materials: (See Section 3(b)).
(d) Ethan Allen Product Marketing: In connection with the promotion of Ethan
Allen Products, Ethan Allen may refer to MBNA America, the Program, or the
Loan Accounts, provided, however, that should any Ethan Allen Product
advertising, solicitation or marketing materials make such reference, MBNA
America shall have the right of prior approval over all such materials;
such approval shall not be unreasonably withheld or delayed. All such
marketing shall be at Ethan Allen's sole cost and expense.
(e) Compliance with Applicable Law: Ethan Allen shall comply with MBNA
America's instructions (which will be provided so as to be in compliance
with applicable laws, including, without limitation, the Truth in Lending
Act and the Equal Credit Opportunity Act, with respect to the offering of
Loan Accounts), and MBNA America will use commercially reasonable efforts
to make such instructions reasonable. Ethan Allen shall use its best
efforts to ensure that each of its employees, agents or representatives
(including Independent Retailers) and all other persons who assist with
offering Loan Accounts are educated and knowledgeable regarding the
Referral Procedures, Loan Accounts and the laws, rules and regulations
applicable to the offering of Loan Accounts, and comply with the same. MBNA
America may monitor any telephone credit solicitation process by Ethan
Allen employees, agents or representatives (including Independent
Retailers) through off-site listening and on-site visitation of Stores.
(f) Authority to Solicit Ethan Allen Customers: Ethan Allen authorizes MBNA
America to solicit all Ethan Allen Customers by mail, direct promotion,
advertisements and/or telephone for participation in the Program.
(g) Prior Approval of Trademark Usage: Ethan Allen shall have the right of
prior approval of all Program advertising and solicitation materials to be
used by MBNA America, which contain Ethan Allen's Trademark; such approval
shall not be unreasonably withheld or delayed.
(h) Mailing Lists: Upon the mutual agreement of MBNA America and Ethan Allen,
Ethan Allen shall provide MBNA America with Mailing Lists free of any
charge. These mailing lists will be used for purposes mutually agreed upon
by both Ethan Allen and MBNA America, and shall be returned promptly to
Ethan Allen after use.
(i) Prior Approval of Ethan Allen Program Description: Ethan Allen shall only
provide information to or otherwise communicate about the Program with
Independent Retailers, Ethan Allen
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Customers or potential Ethan Allen Customers with MBNA America's prior
written approval, except for current advertising and solicitation materials
provided by MBNA America to Ethan Allen. Notwithstanding the above, Ethan
Allen may respond to individual inquiries about the Program from
Independent Retailers and Ethan Allen Customers on an individual basis,
provided that said responses are accurate and consistent with the
then-current materials provided by MBNA America to Ethan Allen. Any
correspondence received by Ethan Allen that is intended for MBNA America
(e.g., applications, payments, billing inquiries, etc.) shall be forwarded
to MBNA America via overnight courier within 24 hours of receipt. All
charges incurred for this service will be paid by MBNA America. The parties
agree that they will advise Independent Retailers that all such
correspondence received by an Independent Retailer shall be handled in the
same manner.
(j) Use of Ethan Allen Trademarks: Ethan Allen hereby grants MBNA America and
its affiliates a limited right to use the Trademarks solely in connection
with the Program, including the marketing and implementation thereof, only
in accordance with the Ethan Allen Retail Identity Manual (as provided by
Ethan Allen to MBNA America from time to time promptly after the manual is
modified). This right to use shall be transferred upon permitted assignment
of this Agreement. This right to use shall remain in effect for the
duration of this Agreement, and shall apply to the Trademarks,
notwithstanding the transfer of such Trademarks by operation of law or
otherwise to any permitted successor, corporation, organization or
individual.
(k) Settlement of Loan Accounts: Payment of funds owing to Ethan Allen and
Independent Retailers as the result of Ethan Allen Products financed by
Loan Accounts shall be handled in the following manner. Ethan Allen shall
use the Internet settlement screen to transmit not more than once daily to
MBNA America Hallmark Information Systems, Inc. (or other entity designated
by MBNA America ), the account number or the account reference number, the
dollar amount of the charge, and any other agreed upon information
pertaining to purchases made on Loan Accounts. MBNA America shall credit
the master Ethan Allen settlement account described on Schedule C hereto
for all Ethan Allen Stores, and such other settlement accounts for the
Independent Retailers as are necessary, within a commercially reasonable
period of time after receipt of such charges, provided however that MBNA
America may delay crediting such settlement account until it reasonably
believes that the relevant Customers have received the legally required
disclosures. MBNA America may deduct from the settlement account any
amounts already credited which related to the Customer's legitimate
rejection of the Loan Accounts, as permitted pursuant to federal law, rule
or regulation. Ethan Allen shall have sole responsibility to identify a
central account that will act as a clearing house to conduct settlement
with the Ethan Allen Stores owed money arising from the sale of Ethan Allen
Products financed with a Loan Account.
(l) Independent Retailers:
(i) Ethan Allen shall have sole responsibility for handling all Program
correspondence and administrative matters between Ethan Allen and the
Independent Retailers. Ethan Allen shall have no responsibility to
distribute payments to and conduct settlement with Independent
Retailers owed money arising from the sale of Ethan Allen Products
financed with a Loan Account. MBNA America shall have no
responsibility regarding Independent Retailers, except as described in
the Referral Procedures.
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(ii) All Independent Retailers shall be eligible to participate in the
Program. MBNA America may, in its sole discretion, conduct due
diligence on such Independent Retailer, including verification of
Independent Retailer status, performance of a satisfactory credit
check and other items, and may terminate the agreement between it and
the Independent Retailer in the circumstances described in the
Independent Retailer Master Contract. Ethan Allen will provide
information, assistance and further assurances as may be reasonably
required by MBNA America in connection with such due diligence.
(iii)The Program will become available to an Independent Retailer only
upon execution by such Independent Retailer of an Independent Retailer
Master Contract satisfactory to MBNA America. A form of such
Independent Retailer Master Contract shall be attached hereto as
Schedule F. Ethan Allen shall advise all Independent Retailers that
the Independent Retailer Master Contract is non-negotiable, provided
however, that MBNA America in its sole discretion may make any changes
to the document in connection with negotiations with an Independent
Retailer. Ethan Allen shall prepare and deliver to each Independent
Retailer a Program enrollment kit containing an introductory letter
approved in advance by MBNA America, the Independent Retailer Master
Contract form, and any other materials agreed upon between the parties
hereto.
(m) Annual Percentage Rate "Buydown"/Royalty Reduction:
(i) In return for MBNA America offering the initial Annual Percentage Rate
of 9.99% (nine and ninety-nine one-hundredths of one percent) on Loan
Accounts, Ethan Allen and all Independent Retailers will pay MBNA
America a 1.5% (one and one-half percent) Annual Percentage Rate
Buydown fee on all retail purchase transactions for Ethan Allen
products made directly to a Loan Account (excluding transactions that
relate to credits, other purchases, unauthorized transactions and all
other non-purchase charges and fees) generated by Customers using a
Loan Account. Ethan Allen shall be responsible for payment of this fee
on behalf of each Ethan Allen Store for all Loan Accounts generated
thereby. Each Independent Retailer shall be responsible for payment of
this fee for each Store operated by such Independent Retailer and the
Loan Accounts generated thereby.
(ii) MBNA America reserves the right to debit on a monthly basis in the
amount stated above from each such settlement account of Ethan Allen
Stores and Independent Retailers established pursuant to Section 2(k).
In furtherance of this, Ethan Allen shall maintain such sums in its
settlement account of not less than the aggregate applicable to the
Loan Accounts established each month relating to the Ethan Allen
Stores, until such time as MBNA America has debited the settlement
account for that month.
(iii)After receipt of any notice from MBNA America regarding an increase
in the Annual Percentage Rate being offered via new Program marketing,
Ethan Allen may contact MBNA America to institute discussions
regarding increasing the Annual Percentage
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Rate Buydown amount or decreasing Royalties so as to maintain the
existing Annual Percentage Rate or limit the increase in the Annual
Percentage Rate. The parties shall negotiate in good faith, and shall
have thirty days from the date of the notice by MBNA America in which
to come to written agreement about any such further Annual Percentage
Rate Buydown amount or Royalty reduction. In the event that the Annual
Percentage Rate Buydown amount is changed in any way through this
process, such change will become automatically applicable to all
Stores, including all Independent Retailer Stores, such that all
Stores subsidize an identical APR Buydown percentage. A reduction in
Royalties shall not alter the Stores APR Buydown.
3. RIGHTS AND RESPONSIBILITIES OF MBNA AMERICA
(a) Program Design and Administration: MBNA America shall design, develop and
administer the Program for the Ethan Allen Customers in accordance with all
applicable Delaware and federal consumer credit law. MBNA America will
design at no charge for Ethan Allen, an Internet web site containing a
customized application screen and settlement screen, which will be used to
transmit such information to MBNA America. Ethan Allen and the Independent
Retailers will be responsible for ensuring that each Store has a working
personal computer with Internet access and an attached working printer kept
in good repair. The Program will offer Customers the right to make
additional purchases on their Ethan Allen Loan Account. MBNA America
reserves the right to evaluate the Program periodically to determine its
compliance with applicable laws, rules and regulations and make all
adjustments to the Loan Accounts and the Program, as deemed necessary and
advisable by MBNA America, or its legal advisors, in their sole discretion.
For example, but without limitation, MBNA America may evaluate whether the
Loan Accounts generated hereunder are deemed to be open-end lines of credit
or closed-end loans under the Truth In Lending Act, as implemented by
Regulation Z, and whether the Loan Accounts offered under the Program are
covered by the Federal Trade Commission's "Holder Rule"
(16 C.F.R. ss.443).
(b) Program Promotional and Educational Materials: During the Test Phase, Ethan
Allen will bear the cost of all Program advertising and marketing materials
(including store signage, tip cards and buttons for sales associates, etc)
and sales associates payment charts and MBNA America will bear the cost of
all education materials and applications. After the Test Phase, MBNA
America will bear all reasonable cost of all applications, sales associates
payment charts, and training manuals. Ethan Allen and MBNA America may
design and produce all advertising, solicitation, promotional and
educational materials with regard to the Program; provided, however, that
prior to any costs being incurred, the parties shall reach mutual agreement
regarding the responsibilities in design, production, and distribution of
each material and the cost allocation among the parties. Statement messages
and statement inserts may be used to advertise the Programs, as permitted
by applicable law, rule and regulation and in accordance with MBNA
America's policies and procedures. MBNA America and Ethan Allen reserve the
right of prior written approval of all advertising, solicitation and
promotional materials concerning or related to the Program, which may be
developed by or on behalf of the other party. Such approval shall not be
unreasonably withheld or delayed.
(c) Credit Decisions/Risks: MBNA America shall make all credit decisions and
shall bear all
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credit risks with respect to each Customer's account(s) independently of
Ethan Allen. Section 5 hereto describes the circumstances in which MBNA
America may chargeback certain amounts borrowed pursuant to the Loan
Accounts to Ethan Allen and the Independent Retailers. After the Test
Phase, MBNA America may develop and implement a process to offer accounts
to customers who would otherwise be declined under the standard program
described in Schedule A. These customers may be offered accounts using a
risk-based pricing credit process which features higher Annual Percentage
Rates and such other different account terms as is necessary or advisable.
(d) Mailing Lists: Upon mutual agreement by MBNA America and Ethan Allen, MBNA
America shall use the Ethan Allen Mailing Lists for agreed upon marketing
purposes and shall not permit those entities handling these Mailing Lists
to use them for any other purpose. MBNA America shall have the sole right
to designate Ethan Allen Customers on these Mailing Lists to whom
promotional material will not be sent. These Mailing Lists are and shall
remain the sole property of Ethan Allen, and will be returned promptly to
Ethan Allen after use thereof. However, MBNA America may maintain
separately all information, which it obtains as a result of an account
relationship or an application for an account relationship. This
information becomes a part of MBNA America's own files and shall not be
subject to this Agreement; provided however that MBNA America will not use
this separate information in a manner that would imply an endorsement by
Ethan Allen.
4. CUSTOMER LIST
(a) Restrictions on Transfer: The Customer Lists and Customer Information are
confidential and proprietary to MBNA America. Ethan Allen expressly
acknowledges and agrees that Ethan Allen has no property right or interest
whatsoever in any Customer List or the Customer Information. Ethan Allen
shall hold the Customer Lists and Customer Information in strict and
absolute confidence and shall not provide, trade, give away, barter, lend,
send, sell or otherwise disclose (collectively "transfer") any Customer
List or Customer Information and shall not make any copies of the same of
any type whatsoever except as expressly approved in a separate writing by
MBNA America. This Section 4 prohibits, by means of example only, Ethan
Allen from compiling and transferring a list of MBNA America account
holders to any third party during the term of the Agreement or after the
termination of the Agreement.
(b) Customer List Upon Termination: After termination of this Agreement, MBNA
America shall provide Ethan Allen with a current Customer List containing
Customer names, addresses and telephone numbers (if available). Ethan Allen
may use the Customer in any manner whatsoever, including specifically, for
the sale of other Ethan Allen products and services. All use shall be
subject to the provisions of this Section 4.
(c) Internal Ethan Allen Access/Use of Customer List and Customer Information:
Ethan Allen shall have no authority to use the Customer Lists and Customer
Information for any purpose not (i) directly necessary for its performance
under this Agreement; or (ii) expressly permitted by MBNA America in a
separate writing. Ethan Allen shall comply with any reasonable request of
MBNA America with respect to security precautions to maintain the security
of the Customer List and Customer Information. Ethan Allen shall only
permit access to these
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materials to those Independent Retailers, employees, volunteers, agents
and/or representatives who need such access to perform their duties. Ethan
Allen warrants that it and all its employees, volunteers, agents and/or
representatives who work with the disclosed material shall be made aware of
the obligations contained in this Section and shall be under strict legal
obligation not to copy, transfer or make any use of any disclosed material
other than as specifically approved by this Section. Ethan Allen shall not
re-create or reconstruct any Customer Information, or construct any list
using Customer Information. Ethan Allen shall not segregate Customers from
other persons in Ethan Allen's files, systems or data storage, or
separately identify such persons in any manner or in any medium, except as
expressly permitted hereunder and in compliance with the provisions of this
Section 4.
(d) Applicable Law: Ethan Allen may not use any Customer Information or
Customer List in a manner which violates applicable law, rule or
regulation, or causes MBNA America to be deemed a consumer reporting agency
under the Fair Credit Reporting Act, regardless of any provision to the
contrary herein.
5. DISPUTES and Refunds.
(a) Ethan Allen Responsibilities:
(i) Ethan Allen Consumer Affairs Department: Ethan Allen shall follow its
standard business practices to resolve Customer complaints arising
from the purchase of Ethan Allen Products purchase with a Loan
Account. Each Store, whether an Independent Retailer Store or an Ethan
Allen Store, has primary responsibility to resolve such disputes. In
the event that a dispute is not resolved, either MBNA America or the
Store may request that Ethan Allen's Consumer Affairs department
participate in the dispute resolution process. In such event, Ethan
Allen's Consumer Affairs department shall use commercially reasonable
efforts to assist MBNA America and the Store to promptly resolve bona
fide Ethan Allen Customer disputes regarding Ethan Allen Products,
including any objection by a Customer to repayment of a Loan Account,
whether arising directly or indirectly through MBNA America or Ethan
Allen or the Independent Retailers, in a manner in satisfaction of
applicable laws, rules and regulations, and without loss (including
loss of anticipated revenue to MBNA America on the Loan Accounts),
damage or expense to MBNA America.
(ii) Ethan Allen Stores: With respect to the Ethan Allen Stores, Ethan
Allen (via the personnel at the Ethan Allen Stores) shall promptly
resolve bona fide Ethan Allen Customer disputes regarding Ethan Allen
Products purchased with a Loan Account, including any objection by a
Customer to repayment of a Loan Account, whether arising directly or
indirectly through MBNA America, Ethan Allen, or the Independent
Retailers in a manner in satisfaction of applicable laws, rules and
regulations, and without loss (including loss of anticipated revenue
to MBNA America on the Loan Accounts), damage or expense to MBNA
America.
(b) MBNA America Responsibilities: MBNA America shall promptly resolve bona
fide Customer disputes regarding the grant or denial of an application for
a Loan Accounts by MBNA America, whether arising directly or indirectly
through MBNA America, Ethan Allen, or the
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Independent Retailers in a manner in satisfaction of applicable laws, rules
and regulations.
(c) Mutual Responsibilities: In the event a Customer dispute encompasses
matters set forth in both subsections (a) and (b) above, Ethan Allen and
MBNA America shall use their reasonable efforts to jointly resolve such
complaint, in accordance with their respective duties described above.
(d) Refunds: All refunds resulting from a return, rejection or cancellation of
Ethan Allen Products purchased via a Loan Account shall be remitted
directly to MBNA America. MBNA America acknowledges that refund policy may
vary among the Stores.
(e) Chargeback/Recourse: MBNA America may chargeback to Ethan Allen's
settlement account certain amounts borrowed under a Loan Account in the
circumstances specified below. The chargeback amount shall be the total
purchase price of the Ethan Allen Products impacted by the following
circumstances, including accrued finance charges and fees relating to such
goods. All such amounts shall be payable upon demand. These chargeback
rights in no way limit other remedies and rights hereunder, including the
right to indemnity specified in Section 9 hereof. All such circumstances
listed below pertain to Ethan Allen Products sold by Ethan Allen Stores or
via the Internet, but do not include sales by Independent Retailers, except
as expressly specified below.
1. Ethan Allen fails to follow the Referral Procedures, including without
limitation, providing the required Loan Account initial disclosures,
verifying the Customer's motor vehicle license, and obtaining
authorization for subsequent transactions on each Loan Account.
2. An Ethan Allen employee or representative (not including Independent
Retailers) commits fraud, has knowledge of fraud by another person, or
takes any action or inaction which has the effect of creating a false
impression regarding any aspect of the Referral Procedures or the use
of the Loan Accounts.
3. Ethan Allen fails to deliver to the Customer the Ethan Allen Products
purchased using the Loan Account without bona fide justification for
failing to deliver, which bona fide justification shall mean events
out of the reasonable control of Ethan Allen.
4. In the event that an Independent Retailer fails to deliver to the
Customer the Ethan Allen Products purchased using the Loan Account,
Ethan Allen will tender delivery to the Customer such goods, so long
as the Customer's deposit on such goods does not exceed thirty-three
percent (33%) of the cost of the goods; and the Customer accepts or is
willing to accept delivery. There shall be chargeback rights against
Ethan Allen in these circumstances if Ethan Allen fails to tender
delivery.
5. Ethan Allen fails to comply with any of the terms of the Ethan Allen
"Manufacturers Limited Warranty" and that failure results in refusal
to repay amounts owed under a Loan Account.
6. REPRESENTATIONS AND WARRANTIES
Mutual Representations: Ethan Allen and MBNA America each represents and
warrants to the other that as of the Effective Date and throughout the term of
this Agreement:
(i) It is duly organized, validly existing and in good standing.
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(ii) It has all necessary power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement.
(iii) This Agreement constitutes a legal, valid and binding obligation of
such party, enforceable against such party in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, receivership, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by
general principles of equity.
(iv) No consent, approval or authorization from any third party is required
in connection with the execution, delivery and performance of this
Agreement, except such as have been obtained and are in full force and
effect.
(v) The execution, delivery and performance of this Agreement by such
party will not constitute a violation of any law, rule, regulation,
court order or ruling applicable to such party.
(vi) It has established a strategic plan and budgeted a reasonably
sufficient amount of capital and resources to modify or replace its
existing software systems so that such systems will not generate
invalid or incorrect results or yield abnormal software operations in
connection with processing dates after December 31, 1999
(collectively, "Year 2000 Errors"). Notwithstanding the foregoing,
neither party represents that its plan and budget will successfully
correct all Year 2000 Errors, or that its software systems will not
generate Year 2000 Errors when operating with third party computer
systems or data.
(b) Ethan Allen Representations: Ethan Allen additionally represents and
warrants to MBNA America that:
(i) as of the date hereof and throughout the term of this Agreement, Ethan
Allen has the right and power to grant to MBNA America the right to
use Trademarks as contemplated by this Agreement.
(ii) Chase Bank (as successor in interest pursuant to merger with Chemical
Bank), and/or its affiliates which have a corporate lending
relationship with Ethan Allen, have either consented in writing to
permit the Program contemplated hereunder, or do not have any
contractual right to prohibit or limit the Program, including the
right to use the Trademarks granted herein.
(iii) Ethan Allen will comply in all material respects with the terms of
all statements of warranty liability applicable to the Ethan Allen
Products financed or otherwise offered in connection with the Program.
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(iv) Monogram Credit Card Bank of Georgia and NationsBank, and their
respective affiliates which participate in any program with Ethan
Allen, have either consented in writing to permit the Program or do
not have any contractual right to prohibit or limit the Program.
7. ROYALTIES
(a) Duration: During the term of this Agreement (including the Test Phase),
MBNA America shall pay Royalties to Ethan Allen, subject to the Royalty
Advance conditions set forth below. Royalties will not be paid without a
completed Schedule D (IRS Form W-9), which is necessary to enable MBNA
America to report compensation paid to Ethan Allen to the appropriate tax
authorities in a timely manner. Except as otherwise provided in Schedule B,
payment of Royalties then due shall be made no earlier than fifteen (15)
business days after the end of each calendar month. No Royalties will be
payable to Independent Retailers.
(b) Advance Against Royalties:
(i) MBNA America shall pay to Ethan Allen the sum of two hundred and fifty
thousand dollars ($250,000) (the "Advance"), as an advance against
future Royalties, subject to the provisions set forth below. The
Advance shall be deemed due and payable upon the expiration of the
full Test Period plus an additional thirty (30) days in which no
termination notice was provided. The Advance may be used only for the
television campaign, which "Television Campaign" consists of the
production of a television commercial regarding the Program.
(ii) Royalties will accrue, but no Royalties shall be paid during the
period of time from the Effective Date until December 31, 2000
("Advance Recoupment Period"). All Royalties accrued during the
Advance Recoupment Period and thereafter shall, in lieu of direct
payment to Ethan Allen, be offset against the Advance until such time
as the Advance is fully recouped. After such Advance Recoupment
Period, MBNA America shall review the Program performance to determine
whether and how much of the Advance will be deemed to be a bonus
amount in addition to Royalties. Such review shall be done according
to the following schedule:
(a) The Advance shall be deemed to be a complete bonus in the event
that the Program has generated (fifty thousand) 50,000 or more
activated accounts within such Advance Recoupment Period. All
Royalties which accrued during such period shall be paid to Ethan
Allen as set forth in this Agreement, and Ethan Allen may also
retain the full amount of the Advance as a bonus. Any Royalties
accrued thereafter shall be paid to Ethan Allen as set forth in
this Agreement.
(b) The Advance shall be deemed to be a partial bonus, to be retained
prorata by Ethan Allen as follows based on the number of
activated Loan Accounts. All remaining Advance amounts shall be
offset against Royalties owing under this Agreement:
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--------------------------------------------------------------
Number of Activated Amount of Royalty
Accounts Bonus Amount offset
--------------------------------------------------------------
50,000 $250,000 $0
40,000 $200,000 $50,000
30,000 $150,000 $100,000
25,000 or less $0 $250,000
All Royalties which accrued during such Advance Recoupment Period
shall be paid to Ethan Allen as set forth in this Agreement, subject
to offset against Royalties based upon the amount of the bonus. Any
Royalties accrued thereafter shall be paid to Ethan Allen as set
forth in this Agreement.
(c) If twenty-five thousand (25,000) or less activated accounts were
generated during the Advance Recoupment Period, there shall be no
bonus, and all amounts of the Advance will continue to be treated
as an Advance against Royalties, which shall be subject to offset
until the entire Advance amount is generated in Royalties. Any
Royalties accrued thereafter shall be paid to Ethan Allen as set
forth in this Agreement.
(iii) Notwithstanding the foregoing, Ethan Allen hereby promises to pay MBNA
America upon demand an amount equal to the difference between the
amount of the Advance and the total amount of accrued Royalties
credited by MBNA America against the Advance as of the date of such
demand, in the event any of the conditions set forth below should
occur:
(a) the Agreement terminates and the amount of the Advance has not
been fully recouped by MBNA America; or
(b) Ethan Allen breaches any of its obligations under this Agreement.
(c) Reports: No earlier than the fifteenth (15th) business day after the
end of each calendar month during the term of this Agreement, MBNA
America will provide Ethan Allen with a statement showing the direct
retail purchase dollar volume and cash advance dollar volume
(excluding those transactions that relate to refunds, returns and
unauthorized transactions), made during the preceding calendar month.
8. PROGRAM ADJUSTMENTS
A summary of the current features of the Program are set forth in Schedule A.
MBNA America reserves the right to make periodic adjustments to the Program and
its terms and features. Delaware and applicable federal law currently require
each open-end credit account Customer be given the opportunity to reject a
proposed change and pay the existing balance under the prior terms if the
proposed adjustment increases the Annual Percentage Rate on such account. In the
event of a material change, MBNA America shall give prior notice to and consult
with Ethan Allen. MBNA America shall use its best efforts to provide Ethan Allen
ninety (90) days prior notice to any increase in the Annual Percentage Rate on
new accounts under the Program.
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9. CROSS INDEMNIFICATION
Ethan Allen and MBNA America each will indemnify, defend and hold harmless the
other party, its directors, officers, agents, employees, affiliates, insurers,
successors and assigns (the "Indemnitees") from and against any and all
liability, causes of action, claims, and the reasonable and actual costs
incurred in connection therewith ("Losses"), resulting from the material breach
of this Agreement by Ethan Allen or MBNA America, respectively as the case may
be, or its directors, officers or employees. Ethan Allen will indemnify and hold
harmless MBNA America and its Indemnitees from and against any and all Losses
arising from (i) the right to use the Trademarks granted herein or from MBNA
America's use of the Trademarks as approved by Ethan Allen in reliance thereon;
(ii) the nonperformance of Ethan Allen's obligations to third parties arising
out of or in connection with the conduct of retail operations through the Ethan
Allen Store and relating to any Ethan Allen Product sold by Ethan Allen,
including the failure by a Customer to pay all amounts owing under a Loan
Account; (iii) any actual or alleged property damages or physical injury to any
person or property arising from any Ethan Allen Product obtained, sold or
provided by or to Ethan Allen; and (iv) damages to any third person, other than
as provided by (ii) and (iii), caused by negligence or willful misconduct on the
part of Ethan Allen. Each party shall promptly notify the other party in the
manner provided herein upon learning of any claims or complaints that may
reasonably result in the indemnification by the other party.
10. CONFIDENTIALITY OF AGREEMENT
The terms of this Agreement, any proposal, financial information and proprietary
information provided by or on behalf of one party to the other party prior to,
contemporaneously with, or subsequent to, the execution of this Agreement
("Information") are confidential as of the date of disclosure. Such Information
will not be disclosed by such other party to any other person or entity, except
as permitted under this Agreement or as mutually agreed in writing. MBNA America
and Ethan Allen shall be permitted to disclose such Information (i) to their
accountants, legal, financial and marketing advisors, and employees as necessary
for the performance of their respective duties, provided that said persons agree
to treat the Information as confidential in the above described manner and (ii)
as required by law or by any governmental regulatory authority.
11. TERM OF AGREEMENT
The initial term of this Agreement will begin on the Effective Date and end at
midnight on three (3) years after such Effective Date, and shall include the
Test Phase. This Agreement may be extended at the end of the initial term or any
renewal term for successive three-year periods, upon written notice by both
parties of intention to renew given at least ninety (90) days prior to the last
date of such term or renewal term, as applicable.
12. STATE LAW GOVERNING AGREEMENT
This Agreement shall be governed by and subject to the laws of the State of
Delaware (without regard to its conflict of laws principles) and shall be deemed
for all purposes to be made and fully performed in Delaware.
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13. TERMINATION
(a) Breach; Notice; Cure: At any time during the term of this Agreement, in the
event of any material breach of this Agreement by MBNA America or Ethan
Allen, the other party may terminate this Agreement by giving notice, as
provided herein, to the breaching party. This notice shall (i) describe the
material breach; and (ii) state the party's intention to terminate this
Agreement. If the breaching party does not cure or substantially cure such
breach within sixty (60) days after receipt of notice, as provided herein
(the "Cure Period"), then this Agreement shall terminate sixty (60) days
after the Cure Period.
(b) Termination; Test Phase: After the Test Phase expires, either MBNA America
or Ethan Allen may terminate this Agreement for any reason or no reason by
giving notice, as provided herein, within thirty (30) days after the Test
Phase expires, as provided herein, to the breaching party. This notice
shall state the party's intention to terminate this Agreement. In the event
such notice is delivered, this Agreement shall terminate sixty (60) days
after the Test Phase ends.
(c) Insolvency: To the extent permitted by applicable federal bankruptcy law,
if either MBNA America or Ethan Allen becomes insolvent in that its
liabilities exceed its assets, or is adjudicated insolvent, or takes
advantage of or is subject to any insolvency proceeding, or makes an
assignment for the benefit of creditors or is subject to receivership,
conservatorship or liquidation then the other party may immediately
terminate this Agreement.
(c) Post-Termination Account Servicing/Trademark Usage: Six (6) months after
the termination of this Agreement, MBNA America shall cease to use the
Trademarks, in a manner consistent with this Section of this Agreement. For
a period of six (6) months after the termination of this Agreement, MBNA
America shall continue to market and service all Loan Accounts in
accordance with its normal business practices and procedures, including
using the Trademarks in accordance with this Agreement, provided, however,
that no Royalties will be payable post-termination. During such period of
time, Ethan Allen will continue to owe the APR Buydown Amount and may
solicit such Customers for alternative financing arrangements, so long as
all such solicitation is done in accordance with applicable law and the
provisions of this Agreement. At the end of such period of time, MBNA
America may, in its discretion, reissue or otherwise remove the Trademarks
from any person's credit devices or checks, or the records of any Customer.
The Loan Account associated with any credit device, check or record
reissued or replaced in this manner shall not be eligible for Royalty
compensation. MBNA America agrees that upon such termination it will not
claim any right, title, or interest in or to the Trademarks or to the
Mailing Lists provided pursuant to this Agreement. However, MBNA America
may conclude all solicitation that is required by law.
(e) MBNA America Right of Prior Review: MBNA America shall have the right to
prior review and approval of any notice in connection with, relating or
referring to the termination of this Agreement to be communicated by Ethan
Allen to the Ethan Allen Customers. Such notice shall be factually accurate
and MBNA America's approval shall be limited to remarks that could be
considered disparaging to MBNA America, its affiliates, the Program or the
Agreement. Such
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approval shall not be unreasonably withheld. Upon termination of this
Agreement, Ethan Allen shall not attempt to cause the removal of Ethan
Allen's identification or Trademarks from any person's credit devices,
checks or records of any Customer existing as of the effective date of
termination of this Agreement.
14. MISCELLANEOUS
(a) This Agreement cannot be amended except by written agreement signed by the
authorized agents of both parties hereto.
(b) The obligations in Sections 2(c), 2(d), 2 (e), 2(i), 2(j), 2(l), 2(m), 4,
5, 6(b), 9, 10, 13(d) and 13(e) shall survive any termination of this
Agreement.
(c) The failure of any party to exercise any rights under this Agreement shall
not be deemed a waiver of such right or any other rights.
(d) The section captions are inserted only for convenience and are in no way to
be construed as part of this Agreement.
(e) If any part of this Agreement shall for any reason be found or held invalid
or unenforceable by any court or governmental agency of competent
jurisdiction, such invalidity or unenforceability shall not affect the
remainder of this Agreement which shall survive and be construed as if such
invalid or unenforceable part had not been contained herein.
(f) All notices relating to this Agreement shall be in writing and shall be
deemed given (i) upon receipt by hand delivery, facsimile or overnight
courier, or (ii) three (3) business days after mailing by registered or
certified mail, postage prepaid, return receipt requested. All notices
shall be addressed as follows:
<TABLE>
<CAPTION>
(1) If to Ethan Allen: (2) If to MBNA America:
<S> <C> <C>
Ethan Allen Inc. MBNA America Bank, N.A.
Ethan Allen Drive 400 Christinana Road, MS 1522
Danbury, Connecticut 06811 Newark, Delaware 19713
Attention: Director, Consumer Lending Attention: Director, Sales Finance
Fax #: 203-743-8214 Fax #: (302( 458-3516
</TABLE>
Any party may change the address to which communications are to be sent by
giving notice, as provided herein, of such change of address.
(g) This Agreement contains the entire agreement of the parties with respect to
the matters covered herein and supersedes all prior promises and
agreements, written or oral, with respect to the matters covered herein.
Without the prior written consent of MBNA America, which shall not be
unreasonably withheld, Ethan Allen may not assign any of its rights or
obligations under or arising from this Agreement. MBNA America may assign
or transfer its rights and/or obligations under this
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Agreement without the written consent of Ethan Allen, but shall provide
Ethan Allen with prior written notice. MBNA America may utilize the
services of any third party in fulfilling its obligations under this
Agreement.
(h) MBNA America and Ethan Allen are not agents, representatives or employees
of each other and neither party shall have the power to obligate or bind
the other in any manner except as otherwise expressly provided by this
Agreement.
(i) Nothing expressed or implied in this Agreement is intended or shall be
construed to confer upon or give any person, including Independent
Retailers, other than Ethan Allen and MBNA America, their successors and
assigns, any rights or remedies under or by reason of this Agreement.
(j) Neither party shall be in breach hereunder by reason of its delay in the
performance of or failure to perform any of its obligations herein if such
delay or failure is caused by strikes, acts of God or the public enemy,
riots, incendiaries, interference by civil or military authorities,
compliance with governmental laws, rules, regulations, delays in transit or
delivery, or any event beyond its reasonable control or without its fault
or negligence.
(k) This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, each of the parties, by its representative, has executed
this Agreement as of the Effective Date.
MBNA AMERICA BANK, N.A. ETHAN ALLEN INC.
By: ________________________ By: ________________________
Name: ________________________ Name: ________________________
Title: ________________________ Title: ________________________
Date: ________________________ Date: ________________________
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SCHEDULE A
TERMS AND FEATURES
Subject to (i) MBNA America's right to vary the Program and its terms and
features, and (ii) the applicable agreement entered into between MBNA America
and each Customer:
ETHAN ALLEN SIMPLE FINANCING PLAN ACCOUNTS
1. There is no annual fee.
2. The current Annual Percentage Rate is a fixed rate of 9.99%. MBNA America
shall maintain this rate until June 30, 2000. Thereafter, if the prime rate
increases to greater than 8.00%, MBNA America reserves the right to change
the Annual Percentage Rate offered via new Program marketing or the Annual
Percentage Rate applicable to existing customers in a manner consistent
with MBNA America's standard pricing policies in effect as of the time of
the increase.
3. If a Customer is delinquent, MBNA America reserves the right to increase
their Annual Percentage Rate to a rate that is determined by MBNA, not to
exceed their current rate + 10 percentage points.
4. The current account term parameters for the Program are: approximate terms
of 12-84 months; a minimum credit line of $5000 and a minimum additional
advance of $500.
5. The accounts are intended for use at all Stores or via the Ethan Allen
Internet website only for Ethan Allen Products.
6. Financing for additional purchases of Ethan Allen Products using a
Customer's Ethan Allen simple financing plan account may be requested at
any time.
7. Credit insurance may be offered to Customers, subject to Ethan Allen's
prior approval.
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SCHEDULE B
ROYALTY ARRANGEMENT
During the term of this Agreement, MBNA America will pay Ethan Allen a Royalty
calculated as follows, for those accounts with active charging privileges. All
Royalty payments due hereunder are subject to all provisions of Section 7 hereof
and to adjustment by MBNA America for any prior overpayment of Royalties by MBNA
America.
Ethan Allen Simple Financing Plan Accounts
.40 basis points (Forty one hundredths of one percent) of
all retail purchase charges and cash advance transactions
for Ethan Allen Products made directly to a Loan Account
(excluding transactions that relate to credits, other
purchases, unauthorized transactions and all other
non-purchase charges and fees) generated by Customers using
a Loan Account.
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SCHEDULE C
SETTLEMENT INFORMATION FOR ALL ACH TRANSMISSIONS TO ETHAN ALLEN
Name of Account Holder: Ethan Allen, Inc.
Name of Bank: Chase Manhattan
Account #: 323-125697
ABA #: 021000021
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SCHEDULE D
ATTACH IRS FORM W-9 WHICH HAS BEEN EXECUTED BY ETHAN ALLEN
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SCHEDULE E
ETHAN ALLEN STORES AND INDEPENDENT RETAILER STORES PARTICIPATING IN TEST PHASE
PITTSBURGH, PA MARKET
o ETHAN ALLEN HOME INTERIORS - MCMURRY
o ETHAN ALLEN HOME INTERIORS - MONROEVILLE
o ETHAN ALLEN HOME INTERIORS - WEXFORD
ATLANTA, GA MARKET
o ETHAN ALLEN HOME INTERIORS - BUCKHEAD
o ETHAN ALLEN HOME INTERIORS - GWINNET
o ETHAN ALLEN HOME INTERIORS - KENNESAW
o ETHAN ALLEN HOME INTERIORS - MARIETTA
o ETHAN ALLEN HOME INTERIORS - NORTHPOINT
o ETHAN ALLEN HOME INTERIORS - BOISE
O MOTTSINGER'S ETHAN ALLEN - YOUNGSTOWN
MILWAUKEE, WI MARKET
o CARRIAGE HOUSE - BROOKFIELD
o CARRIAGE HOUSE - GREENFIELD
o CARRIAGE HOUSE - MEQUON
DENVER MARKET
o ETHAN ALLEN HOME INTERIORS - AURORA
o ETHAN ALLEN HOME INTERIORS - FT. COLLINS
o ETHAN ALLEN HOME INTERIORS - LITTLETON
o ETHAN ALLEN HOME INTERIORS - WESTMINSTER
o ETHAN ALLEN HOME INTERIORS - COLORADO SPRINGS
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SCHEDULE F
FORM OF INDEPENDENT RETAILER CONTRACT
24
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Exhibit 10(k)
AMENDED AND RESTATED
CONSUMER CREDIT CARD PROGRAM AGREEMENT
BY AND AMONG
ETHAN ALLEN INC.
AND
MONOGRAM CREDIT CARD BANK OF GEORGIA
DATED AS OF
February 22, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS .........................................................1
Section 1.01 Certain Defined Terms.............................................1
Section 1.02 Miscellaneous.....................................................9
ARTICLE II CONTINUATION OF PROGRAM.............................................9
Section 2.01 Continuation of Program; Retailer and Authorized Dealers to
Honor Credit Cards..............................................9
Section 2.02 Bank to Extend Credit............................................10
Section 2.03 Promotion of Program.............................................11
Section 2.04 Absentee Transactions............................................11
ARTICLE III ADMINISTRATION OF PROGRAM.........................................11
Section 3.01 Preparation of Documents.........................................12
Section 3.02 Account Administration; Credit Criteria..........................12
Section 3.03 Ownership of Accounts, Etc.......................................12
Section 3.04 Ownership and Use of Cardholder List.............................12
Section 3.05 Credit Insurance and Value-Added Programs........................13
Section 3.06 Direct Payments; Payments at Participating Stores................13
Section 3.07 Inserts; Statement Messages......................................13
Section 3.08 Point-of-Sale Terminals..........................................14
Section 3.09 Program Manager..................................................14
ARTICLE IV OPERATING PROCEDURES...............................................14
Section 4.01 General..........................................................14
Section 4.02 New Cardholder Account Establishment Procedures..................14
Section 4.03 Purchase Authorization Procedures................................15
ARTICLE V SETTLEMENTS AND ADJUSTMENTS.........................................15
Section 5.01 Settlement Procedures............................................15
ARTICLE VI CREDIT TERMS; LOSSES ON ACCOUNTS; SECURITY.........................15
Section 6.01 Credit Terms.....................................................15
Section 6.02 Credit-based Promotions and Service Fees.........................16
Section 6.03 Incentive Bonus Payment; Promotional Fee.........................17
Section 6.04 Increases in Service Fee and/or Decreases in Promotional Fee.....17
Section 6.05 Marketing and Training Support; Alternative Credit Programs......18
Section 6.06 Money Cost Fee; Money Cost Premium...............................18
Section 6.07 Losses on Accounts...............................................18
Section 6.08 Grant of Security Interest; Precautionary Filing.................18
Section 6.09 Returns of Merchandise...........................................19
Section 6.10 Letter of Credit.................................................19
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ARTICLE VII CHARGEBACK........................................................20
Section 7.01 Bank's Right to Chargeback.......................................20
Section 7.02 Exercise and Amount of Chargeback................................21
Section 7.03 Limitation of Chargeback.........................................21
ARTICLE VIII WARRANTIES AND COVENANTS OF RETAILER.............................21
Section 8.01 Presentment Warranties...........................................21
Section 8.02 Account Covenants................................................22
Section 8.03 General Representations and Warranties...........................23
Section 8.04 Additional Affirmative Covenants of Retailer.....................24
Section 8.05 Exclusivity and Rights of First Offer and Refusal................25
ARTICLE IX WARRANTIES OF BANK.................................................27
Section 9.01 Representations and Warranties of Bank...........................28
ARTICLE X EVENTS OF DEFAULT; RIGHTS AND REMEDIES..............................28
Section 10.01 Events of Default...............................................29
Section 10.02 Remedies........................................................29
ARTICLE XI TERM/TERMINATION...................................................29
Section 11.01 Operation Period................................................29
Section 11.02 Termination.....................................................29
Section 11.03 Purchase of Accounts by Retailer Upon Termination...............30
Section 11.04 Termination for Force Majeure...................................31
Section 11.05 Rights upon Termination of Operation Period; Liquidation
of Accounts...................................................31
Section 11.06 Return of Equipment.............................................32
Section 11.07 License of Cardholder List......................................32
ARTICLE XII INDEMNIFICATION...................................................33
Section 12.01 Indemnification by Retailer.....................................33
Section 12.02 Indemnification by Bank.........................................34
Section 12.03 Payment of Indemnified Amounts..................................34
Section 12.04 Notice..........................................................34
ARTICLE XIII OTHER AGREEMENTS.................................................35
Section 13.01 Retailer Acquisitions; New Retailer Subsidiaries................35
Section 13.02 Retailer Primary Divestitures...................................35
Section 13.03 Retailer Secondary Divestitures.................................36
ARTICLE XIV MISCELLANEOUS.....................................................37
Section 14.01 Payment Terms and Rights of Set Off and Recoupment..............37
Section 14.02 Assignability...................................................37
Section 14.03 Amendment.......................................................37
Section 14.04 Non-Waiver......................................................37
Section 14.05 Severability....................................................37
Section 14.06 Governing Law...................................................38
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Section 14.07 Captions........................................................38
Section 14.08 Use of Retailer Names and Marks.................................38
Section 14.09 Securitization/Participation....................................38
Section 14.10 Further Assurances..............................................38
Section 14.11 Entire Agreement................................................38
Section 14.12 Notices.........................................................38
Section 14.13 Power of Attorney...............................................38
Section 14.14 Confidential Information........................................39
Section 14.15 No Partnership..................................................39
Section 14.16 Third Parties...................................................39
Section 14.17 Interpretation..................................................39
Section 14.18 Multiple Counterparts...........................................39
Section 14.19 Other Documents.................................................39
EXHIBITS
Exhibit A - Bank Dealer Agreement
Exhibit B - Intercreditor Agreement
Exhibit C - Parent Guarantee
Exhibit D - Subsidiary Guarantee--Ethan Allen Marketing Corporation
Exhibit E - Subsidiary Guarantee--Ethan Allen Manufacturing Corporation
Exhibit F - Officer's Certificate Regarding Financial Statement
Exhibit G - Officer's Certificate Regarding Ownership of Retailer
SCHEDULES
Schedule 1 - Legal Name/Principal Place of Business for Retailer
Schedule 2 - Names
Schedule 3 - Notice Addresses
Schedule 4 - Promotional Sales Matrix
Schedule 5 - Service Level Performance Measurement
Schedule 6 - Geographic Areas
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AMENDED AND RESTATED
CONSUMER CREDIT CARD PROGRAM AGREEMENT
This AMENDED AND RESTATED CONSUMER CREDIT CARD PROGRAM AGREEMENT
(hereinafter the "Agreement") is entered into as of February 22, 2000 by and
among Monogram Credit Card Bank of Georgia, a Georgia banking corporation with
its principal place of business at 7840 Roswell Road, Building 100, Suite 210,
Atlanta, Georgia 30350 (together with its successors, assigns and transferees,
the "Bank"), Ethan Allen Inc. ("Ethan Allen"), a Delaware corporation having its
principal place of business at Ethan Allen Drive, P.O. Box 1966, Danbury,
Connecticut 06813-1966 ("Retailer") and shall be effective as of April 5, 2000
(the "Effective Date").
W I T N E S S E T H
WHEREAS, Bank has established a program to extend customized, open-end
credit to qualified customers of Ethan Allen and its Authorized Dealers for the
purchase of goods and services for personal, family or household purposes
pursuant to that certain Monogram Credit Card Bank of Georgia Program Agreement
between Bank and Ethan Allen dated as of November 9, 1993, as amended by that
certain Amendment to Monogram Credit Card Bank of Georgia Program Agreement
dated as of October 16, 1996 (as further amended from time to time, the
"Original Program Agreement");
WHEREAS, Retailer, through its Retailer Stores and its Dealers, is engaged
in, among other activities, the manufacture, distribution and sale of furniture
and related accessories and services at retail; and
WHEREAS, the parties desire to amend and restate the Original Program
Agreement on the terms set forth herein, to be effective as of the Effective
Date.
NOW, THEREFORE, in consideration of the terms, conditions and mutual
covenants contained herein, and for good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged, Bank and Retailer agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ABSENTEE TRANSACTION" means any Telephone Purchase.
"ACCOUNT" means and includes any and all of the following, whether now
existing or hereafter arising: (i) Credit Card Agreements; (ii) Account
Documentation; (iii) accounts, accounts receivable, Indebtedness, other
receivables, contract rights, choses in action, general intangibles, chattel
paper, instruments, documents and notes, Program Documents and contract rights
related to, comprising, securing or evidencing the obligations under or the
receivables from any Credit Card Agreements or Account Documentation and all
proceeds of all of the foregoing; (iv) rights as to any goods or other property
which is represented thereby or is security or collateral therefor; (v)
guarantees, claims, security interests, or other security held by or granted to
Bank to secure payment by any person with respect thereto; (vi) proceeds
relating to Insurance Programs and Value-Added Programs; and (vii) other rights,
remedies, benefits, interests and titles, both legal and equitable, to which
Bank may now or at anytime hereafter be entitled in respect of the foregoing.
"ACCOUNT DOCUMENTATION" means with respect to an Account, any and all
documentation relating to such Account, including without limitation, Program
Documents, Credit Cards, Credit Card Applications, Credit Card Agreements,
Charge Transaction Data, Charge Slips, Credit Slips, checks and stubs, credit
bureau reports, adverse action information, change of terms notices,
correspondence, memoranda, documents, instruments, certificates,
1
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agreements, invoices, and any other written information relating to such
Account, in each case including any and all amendments or modifications thereto,
and in each case, however stored or kept, provided however, that "Account
Documentation" shall not include materials used for advertising or solicitations
including, without limitation, advertising or solicitations of Credit-based
Promotions.
"ACTIVE ACCOUNT" means, as of any given date, any Account other than a
Defaulted Account which had a debit or credit balance at any time after the
first day of the complete Billing Period immediately preceding such date.
"AFFILIATE" means, with respect to any person, each person that controls,
is controlled by or is under common control with such person. For the purpose of
this definition, "control" of a person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"AFTER-THE-FACT FREE/SKIP FREE PROMOTIONS" shall have the meaning given to
such term in Section 6.02(d) hereof.
"AGGREGATE OUTSTANDING INDEBTEDNESS" means, at any time, the aggregate
Indebtedness on all Active Accounts, including Finance Income subject to
possible reversal due to unexpired Credit-based Promotions.
"ALTERNATIVE CREDIT PROGRAM" means a credit program offered or sponsored by
Bank or any of its Affiliates other than the Program and shall include, without
limitation, a co-branded generally accepted multi-purpose bank credit card,
closed-end installment credit, leasing or home equity products.
"ALTERNATE DEBT RATING" means the KMV EDF rating program or any other
rating program accepted in the credit card industry for rating the financial
strength of retailers.
"ANNUAL PERCENTAGE RATE" means the periodic rate applicable to Accounts
times the number of periods in a year and, if more than one periodic rate is
applicable to different portions of Accounts, the Annual Percentage Rate shall
be calculated separately as to each portion.
"AUTHORIZED DEALER" means a Dealer: (i) that is authorized by Retailer to
operate an Authorized Dealer Store and to participate in the Program; and (ii)
that executed a Bank Dealer Agreement except that a Dealer shall cease to be an
Authorized Dealer if its Bank Dealer Agreement expires or is terminated or such
Dealer's authority to participate in the Program is otherwise terminated in
accordance with the terms of this Agreement.
"AUTHORIZED DEALER STORE" means a Participating Store operated by an
Authorized Dealer at which such Authorized Dealer sells principally "Ethan
Allen" brand products.
"AVERAGE NET RECEIVABLES" means, for any Billing Period, the sum of the
aggregate Indebtedness for all Active Accounts for each day during such period
divided by the number of days in such period.
"BANK" means Monogram Credit Card Bank of Georgia and its permitted
successors, transferees and assigns.
"BANK DEALER AGREEMENT" means any Ethan Allen Credit Card Program Dealer
Agreement entered into by a Dealer with Bank, substantially in the form attached
hereto as Exhibit A, as such form may be amended or restated from time to time.
"BANK PARTIES" shall have the meaning given to such term in Section 3.02(b)
hereof.
"BANK TERMINATION EVENT" means any of the following events: (i) Bank shall
fail to pay any amount when due hereunder and the same shall remain unpaid for a
period of fifteen (15) days after the Retailer shall have made written demand
therefor provided, however, that the failure to make a payment due hereunder
shall not
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constitute a "Bank Termination Event" if the amount which Bank has failed to pay
is less than Twenty-five Thousand Dollars ($25,000) and Bank, acting in good
faith, has delivered a written notice to Retailer contesting its obligation to
make such payment; (ii) Bank shall materially fail or neglect to perform, keep,
or observe any other term, provision, condition, or covenant contained in this
Agreement that is required to be performed, kept, or observed by it, and such
failure or neglect shall continue for a period of thirty (30) days after
Retailer shall have given written notice thereof; (iii) any representation,
warranty or statement, made, delivered or deemed made by Bank hereunder shall
prove not to have been true and correct in all material respects as of the date
when made, delivered or deemed made and such failure to be true and correct has
a material adverse effect on Bank's ability to perform its obligations
hereunder; or (iv) Bank (A) shall no longer be Solvent; (B) shall generally not
pay its debts as such debts become due or shall admit in writing its inability
to pay its debts generally; (C) shall make a general assignment for the benefit
of its creditors; (D) shall institute or have instituted against it any
proceeding seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property; or (E)
shall take any corporate action to authorize any of the actions set forth above
in this subclause (iv); or (v) a Bank Termination Event shall occur as set forth
in Schedule 5 hereto.
"BILLING DATE" means the last day of a Billing Period for an Account.
"BILLING PERIOD" means the elapsed time between the dates on which Bank
elects to send billing statements in respect of Accounts, which time is usually
between twenty-eight (28) and thirty-two (32) days in length.
"BUSINESS DAY" means any day, except Saturday, Sunday, or a day on which
banks are required or permitted to be closed in Georgia.
"CARDHOLDER" means any person who has entered into a Credit Card Agreement
with Bank or who is or may become obligated under or with respect to an Account.
"CARDHOLDER LIST" shall have the meaning given to such term in Section
3.04(a) hereof.
"CHANGE OF CONTROL" shall have the meaning given to such term in Section
10.01(f) hereof.
"CHARGE SLIP" means a sales receipt, register receipt tape or other invoice
or documentation, in each case in either physical or electronic form, which
evidences a Purchase that gives rise to an Account or the imposition of a
Restocking Fee.
"CHARGE TRANSACTION DATA" means Account/Cardholder identification and
transaction information with regard to each Purchase by a Cardholder on credit
and each return of a Purchase for credit to the Account/Cardholder, which data
will be transmitted by Retailer and its Authorized Dealers to Bank in accordance
with the applicable Operating Procedures.
"CLOSURE" means, with respect to any Participating Store, the cessation of
sales of Goods and Services from such Participating Store for at least sixty
(60) consecutive days for any reason, including without limitation, the
occurrence of a "force majeure" event of the sort described in Section 11.04
hereof, unless prior to the expiry of such 60-day period, Retailer or an
Authorized Dealer opens a new Participating Store within the same city or
municipality offering substantially the same Goods and Services for sale.
"CP RATE" means, as of any date, the then most-recent (annual) commercial
paper interest rate for 60-day high grade commercial paper sold through dealers
by major corporations (other than a Bank Affiliate), as published in the Wall
Street Journal, or if not published therein, as published or made available by
such other source as Bank shall determine.
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"CREDIT-BASED PROMOTIONS" means any promotional credit and billing term
promotions offered pursuant to Section 6.02 and such other credit-based
promotions as may be agreed to from time to time in writing by Bank and
Retailer.
"CREDIT CARD" or "CARD" means the plastic card issued and owned by Bank
under the Program exclusively for use with the Program which evidences a
Cardholder's right to make Purchases under the Program.
"CREDIT CARD AGREEMENT" means the open-end revolving credit agreement,
either in physical or electronic form, between Bank and each Cardholder pursuant
to which such Cardholder may make Purchases on credit provided by Bank, together
with any modifications or amendments which may be made to such agreement.
"CREDIT CARD APPLICATION" means Bank's credit application form, either in
physical or electronic form, which must be completed by applicants who wish to
become Cardholders and must be submitted to Bank for its review and approval.
"CREDIT REVIEW POINT" means One Hundred Forty Nine Million Dollars
($149,000,000) or such other higher amount as Bank, in its sole discretion,
shall from time to time specify to Retailer in writing.
"CREDIT SLIP" means a physical or electronic sales credit receipt
evidencing a return or exchange of Goods, an adjustment for Services rendered or
not rendered by Retailer to a Cardholder or a correction of a misposting, in
each case for credit on an Account.
"CURRENT ASSETS" means all items classified as current assets on the
consolidated financial statements of Ethan Allen Interiors, Inc. and its
consolidated subsidiaries (including Retailer) prepared in accordance with
generally accepted accounting procedures.
"CURRENT LIABILITIES" means all items classified as current liabilities on
the consolidated financial statements of Ethan Allen Interiors, Inc. and its
consolidated subsidiaries (including Retailer) prepared in accordance with
generally accepted accounting procedures.
"CURRENT RATIO" means Current Assets divided by Current Liabilities.
"DEALER" means all independent dealers that are authorized by Retailer to
operate a retailer furniture store using the service mark "Ethan Allen Home
Interiors."
"DEFAULT" means any event the occurrence of which, with the passage of time
or the giving of notice or both, would constitute an Event of Default.
"DEFAULTED ACCOUNT" means an Account which has been written off in
accordance with Bank's write-off policies.
"DELIVERY OBLIGATIONS" means, as of any date, the sum of (i) all amounts
owing under Sections 2.01(f), 7.01(e) or 7.01(f) hereof plus (ii) all amounts
owing under Section 12.01 hereof to the extent, in the case of this clause (ii)
only, such amounts arise from Retailer's failure to deliver in a timely fashion
Goods and/or Services purchased in connection with Special Order Deposits at
Retailer Stores or to deliver Goods and/or Services purchased in connection with
Qualified Special Order Deposits at current or former Authorized Dealer Stores
as provided in Section 2.01(f).
"DIRECT PAYMENTS" means any payment on an Account made by a Cardholder (or
by any person acting on behalf of a Cardholder) to Retailer at a Participating
Store, by mail or otherwise.
"EFFECTIVE DATE" shall have the meaning given in the first paragraph of
this Agreement.
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"ELIGIBLE LETTER OF CREDIT" means a standby irrevocable Letter of Credit in
form reasonably acceptable to Bank, satisfying the following conditions:
(i) the Letter of Credit shall not expire earlier than the first
anniversary of the date of issuance or the date of any renewal thereof;
(ii) the Letter of Credit shall be issued or confirmed by a bank reasonably
acceptable to Bank which is chartered under the laws of the United States
and maintains offices located in the continental United States;
(iii) the Letter of Credit shall expressly permit multiple draws;
(iv) the Letter of Credit shall be assignable and transferable;
(v) payment under the Letter of Credit shall be made at the issuing or
confirming bank's counters at one or more offices located in the
continental United States upon presentation of a draft with an accompanying
certificate from any officer of the Letter of Credit beneficiary to the
effect either:
(A) that Retailer has failed to renew the Letter of Credit or provide
a substitute Letter of Credit in accordance with Section 6.10 of the
Agreement and that the amount of the draft is less than or equal to
the full undrawn amount of the Letter or Credit; or
(B) that an Event of Default has occurred under Section 10.01(d) or
Retailer has failed to pay when due any Delivery Obligations and, in
either case, that the amount of the draft is less than or equal to the
amount of the Delivery Obligations then owing.
"EVENT OF DEFAULT" shall have the meaning given to such term in Section
10.01 hereof.
"FINAL LIQUIDATION DATE" shall mean the first date after the termination or
expiration of the Operation Period on which Bank no longer owns any Active
Accounts.
"FINANCE INCOME" means, with respect to any Billing Period, the amount
equal to (a) the sum of finance charges assessed to Accounts as of the
applicable Billing Date, net of finance charges assessed on Accounts ninety (90)
days or more past due, minus (b) the sum of other concessions and adjustments on
Accounts in the normal course of business during the Billing Period.
"GE CANADA PROGRAM" means the Credit Card Program Agreement dated as of
August 25, 1995 between General Electric Capital Canada Inc. and Retailer, as
amended from time to time.
"GOODS" and/or "SERVICES," separately or cumulatively, means (i) all new
merchandise and services, respectively, which may be purchased by a Cardholder
from Retailer or any Authorized Dealer; (ii) all Value-Added Programs to the
extent that the purchase thereof is charged to an Account; and (iii) all
Insurance Programs to the extent that the purchase thereof is charged to an
Account.
"INDEBTEDNESS" means any and all amounts owing from time to time with
respect to an Account whether or not billed, including, without limitation, any
unpaid balance, finance charges (inclusive of finance charges subject to
possible reversals due to unexpired Credit-based Promotions), late charges, NSF
fees, charges for Value-Added and Insurance Programs, over-limit fees and any
other charges with respect to an Account.
"INITIAL TERM" shall have the meaning given to such term in Section 11.01
hereof.
"INSURANCE PROGRAM" means any program which may be offered through Bank
pursuant to Section 3.05 under which Bank, any insurance company, or any other
third party makes available insurance coverage to Cardholders.
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"INSURANCE NET INCOME" shall have the meaning given to such term in Section
3.05 hereof.
"LETTER OF CREDIT" means each letter of credit provided by Retailer to Bank
in support of Retailer's obligations under this Agreement, as the same may be
amended from time to time.
"LETTER OF CREDIT EVENT" means either: (i) the first day when the Moody's
Debt Rating has been at or below Ba3 for 270 consecutive days and the S&P Debt
Rating has been at or below BB for 270 consecutive days; or (ii) if either the
Moody's Debt Rating or the S&P Debt Rating is unavailable, then the first day
when the Alternate Debt Rating has been more than three (3) rating levels below
its level as of the date hereof (or the most nearly equivalent rating level in
the Alternate Debt Rating then employed by Bank) for 270 consecutive days.
"LETTER OF CREDIT PERIOD" means any time period between the occurrence of a
Letter of Credit Event and the first day thereafter when (i) either the Moody's
Debt Rating is at or above Ba2 or the S&P Debt Rating is at or above BB+; or
(ii) if either the Moody's Debt Rating or the S&P Debt Rating is unavailable,
the Alternate Debt Rating is at or above three (3) rating levels below its level
as of the date hereof (or the most nearly equivalent rating level in the
Alternate Debt Rating then employed by Bank).
"LOSSES" shall have the meaning given to such term in Section 12.01 hereof.
"MONTHLY BILLING PERIOD OUTSTANDINGS" means the sum of the Aggregate
Outstanding Indebtedness of all Accounts as calculated for each relevant Billing
Date in a Billing Period.
"MOODY'S" means Moody's Investors Service, Inc.
"MOODY'S DEBT RATING" means, as of any date of determination, the rating as
determined by Moody's of Retailer's senior unsecured long-term debt or, if such
rating is not available, Retailer's corporate credit rating. If neither rating
is available from Moody's, then "Moody's Rating" shall mean Retailer's senior
unsecured long-term debt rating or comparable rating as determined by another
nationally recognized rating agency selected by Bank or, if such rating is not
available, Retailer's corporate credit rating as determined by such other rating
agency.
"NEW RETAILER" means any person engaged in the operation of retail stores
or the making of direct sales in the United States, together with any other
person directly or indirectly controlled by such person and any franchisees of
such person using such person's name, logo, trademarks and service marks or
similar proprietary designations.
"OPERATING PROCEDURES" means the instructions and procedures (currently
entitled "EA Credit Card Operations Manual" and dated December 1998) to be
followed by Retailer and its Authorized Dealers in connection with the Program,
as such instructions and procedures may have been or may hereafter be amended
from time to time.
"OPERATION PERIOD" means the period commencing on the Program Commencement
Date and ending on the termination or expiration date established pursuant to
Section 11.01 or 11.02 hereof. References in this Agreement to the termination
or expiration of the Operation Period mean the date when such termination or
expiration is effective whether or not that date is the same as the Termination
Notice Date.
"PARTICIPATING STORES" means all retail stores within the continental
United States that are operated by Retailer or its Authorized Dealers, in either
case, under the service mark "Ethan Allen Home Interiors."
"PERMITTED CREDIT PROGRAM" has the meaning set forth in Section 8.05(a)
hereof.
"PROGRAM COMMENCEMENT DATE" means the Effective Date.
"PROGRAM" means the credit card program established by Bank pursuant to the
Original Agreement and continued by this Agreement and made available to
qualified customers of Retailer and its Authorized Dealers to
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make Purchases. The term "Program" includes the extension of credit by Bank to
Cardholders, billings, collections, accounting between the parties, and all
aspects of the customized revolving credit plan contemplated herein.
"PROGRAM DOCUMENTS" shall have the meaning given to such term in Section
3.01 hereof.
"PROGRAM MANAGER" shall have the meaning given to such term in Section 3.09
hereof.
"PROMOTIONAL CREDIT SALE CHARGE SLIP" means a Charge Slip evidencing a
purchase on an Account under a Credit-based Promotion.
"PROMOTIONAL FEE" has the meaning set forth in Section 6.03 hereof.
"PROMOTIONAL SALES MIX" means that percentage of sales of Goods and/or
Services which are based on any Credit-based Promotion offered by Retailer and
its Authorized Dealers.
"PURCHASE" means a Store Purchase or a Telephone Purchase.
"QUALIFIED CREDIT-BASED PROMOTIONS" means: (i) those promotional credit and
billing term promotions set forth in Section 6.02, as such promotions may be
modified or replaced from time to time by Bank as a result of changes in law or
changes in operational procedures or systems capabilities of Bank or its agents;
provided that such modifications or replacements may not be implemented until at
least six (6) months after Bank has given Retailer written notice thereof unless
an earlier implementation is required by law; and (ii) such other credit-based
promotions as may be agreed to from time to time in writing by Bank and
Retailer.
"QUALIFIED SPECIAL ORDER DEPOSIT" means a Special Order Deposit which does
not exceed one third (1/3) of the total purchase price of the Goods and/or
Services with respect to which such Special Order Deposit is made.
"RESTOCKING FEE" means any Credit Card surcharge, Credit Card Application
fees, cancellation or restocking fees or any similar processing fees to an
Account.
"RETAILER NAMES" shall have the meaning given to such term in Section 14.08
hereof.
"RETAILER STORE" means a Participating Store operated by Retailer.
"RETAILER PRIMARY DIVESTITURE" means the (i) sale, transfer or Closure of
any Participating Store where the sum of the net sales from such Participating
Store plus the net sales from all other Participating Stores which are being
sold, transferred or Closed at the same time or which have previously been sold,
transferred, or Closed since the Program Commencement Date minus the net sales
from all Participating Stores acquired or opened since the Program Commencement
Date account for twenty percent (20%) or more of Retailer's and Authorized
Dealers' net sales proceeds from sales of Goods and/or Services; (ii) the sale
or transfer of all of the assets, or fifty percent (50%) or more of the
outstanding voting securities, of Retailer or any subsidiary which hereafter
becomes a "Retailer" hereunder; or (iii) all or substantially all of the
Participating Stores located in a single geographic area shall be sold,
transferred or Closed. For purposes of calculating net sales proceeds from
Participating Stores in clause (i) above, "net sales proceeds" shall mean the
net sales proceeds during the twelve month period immediately preceding the
applicable sale, transfer or Closure or, in the case of Participating Stores
acquired or opened during such twelve month period, the annualized net sales
proceeds of such Participating Stores since the date such stores were acquired
or opened. For purposes of clause (iii) above, a "geographic region" means one
of the multi-state regions identified on Schedule 6 hereto.
"RETAILER SECONDARY DIVESTITURE" means the sale, transfer or Closure of any
Participating Store where the sum of the net sales from such Participating Store
plus the net sales from all other Participating Stores which are being sold,
transferred or Closed at the same time or which have previously been sold,
transferred, or Closed since the Program Commencement Date minus the net sales
from all Participating Stores acquired or opened since the Program Commencement
Date account for ten percent (10%) or more of Retailer's and Authorized Dealers'
net
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sales proceeds from sales of Goods and/or Services. For purposes of calculating
net sales proceeds from Participating Stores in clause (i) above, "net sales
proceeds" shall mean the net sales proceeds during the twelve month period
immediately preceding the applicable sale, transfer or Closure or, in the case
of Participating Stores acquired or opened during such twelve month period, the
annualized net sales proceeds of such Participating Stores since the date such
stores were acquired or opened.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"S&P DEBT RATINGS" means, as of any date of determination, the rating as
determined by either S&P of Retailer's senior unsecured long-term debt or, if
such rating is not available, Retailer's corporate credit rating. If neither
rating is available from S&P, then "S&P's Rating" shall mean Retailer's senior
unsecured long-term debt rating or comparable rating as determined by another
nationally recognized rating agency selected by Bank or, if such rating is not
available, Retailer's corporate credit rating as determined by such other rating
agency.
"SERVICE FEE(S)" means the amount(s) owing by Retailer and Authorized
Dealers in respect of funds advanced to Retailer and Authorized Dealers on
behalf of Cardholders for their Charge Slips and other amounts paid to Bank as
set forth in Section 6.03.
"SETTLEMENT DATE" means a date selected by Bank after each Billing Period
which date shall be no more than fifteen (15) days after the last day of such
Billing Period.
"SOLVENT" means, as to any person, (a) that the present fair salable value
of such person's assets is in excess of the total amount of its liabilities, (b)
that such person is presently generally able to pay its debts as they become
due, and (c) that such person does not have unreasonably small capital to carry
on such person's business as theretofore operated and/or the business in which
such person is about to engage. The phrase "present fair salable value" of a
person's assets is intended to mean that value which could be obtained if the
assets were sold within a reasonable time in arm's-length transactions in an
existing and not theoretical market.
"SPECIAL ORDER" means an order by a Cardholder in connection with an
Account for Goods and/or Services from a factory or distribution center owned by
Retailer and neither in the inventory of, or a floor sample at, a Participating
Store nor, with respect to an order placed with an Authorized Dealer, in the
inventory of, or floor sample at, any other store owned or operated by such
Authorized Dealer.
"SPECIAL ORDER DEPOSIT" means a deposit made in connection with a Special
Order which is charged to an Account prior to delivery of the related Goods
and/or Services.
"STORE PURCHASE" means a purchase of any of the Goods and/or Services from
Retailer or an Authorized Dealer where the Account information necessary to
effect the purchase is provided when the customer is present at a Participating
Store (and not over the Internet or through a Retailer website).
"TAPE" has the meaning set forth in Section 11.07 hereof.
"TAPE INFORMATION" has the meaning set forth in Section 11.07 hereof.
"TELEPHONE PURCHASE" means a purchase of any of the Goods and/or Services
from Retailer or an Authorized Dealer where the Account information necessary to
effect the purchase is provided on the telephone or by mail (and not over the
Internet or through a Retailer website).
"TERMINATION NOTICE DATE" means the first date on which any party hereto
shall deliver a notice of non-extension under Section 11.01 or a notice of
termination under Section 11.02 to the other party hereto.
"THREE-YEAR TREASURY RATE" means, on any date, the asking yield on a United
States treasury note that matures three (3) years from such date, as published
in The Wall Street Journal on the last Business Day that The Wall Street Journal
is published prior to such date, whether or not any such rate is actually the
lowest rate asked by
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any entity. If publication of The Wall Street Journal is discontinued, another
publication of similar type publishing such rate shall be designated by Bank
and, if such rate is no longer published, Bank shall designate a similar index.
"UCC" means the Uniform Commercial Code of Georgia as in effect from time
to time.
"UNAMORTIZED INCENTIVE BONUS" means, on any date, an amount equal to (x)
one thirty-sixth (1/36) multiplied by (y) the number of months, if any, rounded
up to the next integer, remaining before the end of the Initial Term.
"UNPAID RETURNED GOODS" means any Goods that are returned to Retailer if
such return results in an obligation of Retailer to make any payment to Bank
under this Agreement (including, without limitation, any obligation to
repurchase any Account which arose in connection with the sale of such Goods) or
gives Bank any right to reduce the amount of any payments which would otherwise
have been made under Section 5.01 hereof; provided, however, that such Goods
shall cease to be "Unpaid Returned Goods" when Bank has received from Retailer
full payment of such obligation or has reduced a payment made under Section 5.01
in respect thereof.
"VALUE-ADDED NET INCOME" shall have the meaning given to such term in
Section 3.05 hereof.
"VALUE-ADDED PROGRAM" means any products or services which may be offered
by or through Bank to Cardholders pursuant to Section 3.05 hereof including,
without limiting the foregoing, credit card protection plans, continuity
memberships, legal services plans, and auto clubs; provided, however, that
"Value-Added Programs" shall not include credit insurance or any other Insurance
Program.
SECTION 1.02 MISCELLANEOUS. As used herein, (i) all references to the
plural number shall include the singular number (and vice versa); (ii) all
references to the masculine gender shall include the feminine gender (and vice
versa) and (iii) all references to "herein," "hereof," "hereunder,"
"hereinbelow," "hereinabove" or like words shall refer to this Agreement as a
whole and not to any particular section, subsection or clause contained in this
Agreement. References herein to any document including, without limitation, this
Agreement shall be deemed a reference to such document as it now exists, and as
from time to time hereafter the same may be amended. References herein to a
"person" or "persons" shall be deemed to be references to an individual,
corporation, limited liability company, partnership, trust, unincorporated
association, joint venture, joint-stock company, or any other form of entity.
All other undefined terms contained herein shall, unless the context indicates
otherwise, have the meanings provided for by the UCC to the extent the same are
used or defined therein.
ARTICLE II
CONTINUATION OF PROGRAM
SECTION 2.01 CONTINUATION OF PROGRAM; RETAILER AND AUTHORIZED DEALERS TO
HONOR CREDIT CARDS.
(a) Pursuant to the terms and conditions of this Agreement, Retailer
and Bank hereby continue the Program for the purpose of making open-end credit
available during the Operation Period (up to such credit limits as Bank may from
time to time establish and modify) to qualified customers of Retailer and its
Authorized Dealers for Purchases for personal, family and household use.
Retailer understands that Bank will enter into Bank Dealer Agreements with
Dealers, and that Bank deems such agreements necessary for Dealer participation
in the Program. Retailer will be responsible for making the Program available to
Dealers and encouraging Dealers to participate. As Dealers agree to participate
in the Program and to execute Bank Dealer Agreements, Bank will provide Retailer
with, and periodically update, a listing of all such Authorized Dealers.
(b) During the Operation Period, and provided no Default or Event of
Default shall have occurred and be continuing, with respect to each applicant
under the Program who qualifies for credit under the standards unilaterally
established by Bank, Bank will open an Account, issue to such applicant a Credit
Card, activate such applicant's Credit Card in accordance with the Operating
Procedures and grant credit to such applicant for any Purchases. The terms and
conditions upon which a Cardholder may use the Credit Card and upon which
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Bank may extend credit to a Cardholder shall be governed by the Credit Card
Agreement between the Cardholder and Bank.
(c) Retailer and its Authorized Dealers will participate in the
Program and honor any valid Credit Card issued by Bank for Purchases (including
taxes), in accordance with applicable Operating Procedures provided by Bank, as
such may be updated from time to time, at each Participating Store. Only the
cash selling price (including applicable taxes) of Goods and/or Services sold or
rendered by Retailer or its Authorized Dealers to consumers shall be charged to
Accounts. Sales and services to commercial enterprises shall not be charged to
Accounts. Retailer and its Authorized Dealers shall permit customers with
Accounts to charge Goods and/or Services to their Accounts subject to and in
accordance with the Operating Procedures.
(d) It is understood and agreed that this Program has been designed to
assist Retailer and its Authorized Dealers in selling Goods and/or Services to
Cardholders on credit. Participation in the Program by any Dealer pursuant to
the terms and conditions of the Bank Dealer Agreement, execution of which shall
be a prerequisite to such Dealer's participation, will be wholly voluntary and
neither Retailer nor Bank will represent otherwise. Retailer understands that
Authorized Dealers will honor the Credit Card for the purchase of Goods and/or
Services at Authorized Dealer Stores.
(e) Retailer has reviewed, and shall continue to review on a regular
basis, the creditworthiness of all Dealers who are, or are eligible to become,
Authorized Dealers under Retailer's credit review policies. Retailer shall
notify Bank within one Business Day of all instances where (i) Retailer ceases
accepting orders for Goods and/or Services from any Dealer or (ii) the
relationship between Retailer and a Dealer is terminated, in which event Bank
shall, if such Dealer is an Authorized Dealer, promptly give written notice of
termination consistent with the terms of the Bank Dealer Agreement with such
Dealer and will thereafter discontinue such Dealer's participation in the
Program. The effect of any such termination on such Dealer's obligations under
its Bank Dealer Agreement shall be governed by the terms of such agreement.
Notwithstanding anything to the contrary contained herein, Bank, in its sole
discretion, shall have the right to terminate any Authorized Dealer's
participation in the Program at any time.
(f) In the event that a current or former Authorized Dealer which (a)
is bankrupt or no longer engaged in business as the same form of entity, (b) has
received a Qualified Special Order Deposit on an Account, (c) did not deliver to
the Cardholder the Goods and/or Services purchased in connection with such
Qualified Special Order Deposit, and (d) did not submit to Bank a Charge Slip
for the balance of the purchase exclusive of such Qualified Special Order
Deposit, Retailer shall make commercially reasonable and good faith efforts to
provide such Goods and/or Services (and, if so provided, may submit a Charge
Slip to Bank for the amount of the purchase less the amount of such Qualified
Special Order Deposit). If Retailer does not make commercially reasonable and
good faith efforts to deliver such Goods and/or Services to the Cardholder,
Retailer will pay Bank the amount of such Qualified Special Order Deposit
immediately upon Bank's demand if the Cardholder refuses to pay such amount to
Bank. Retailer shall cooperate with Bank in Bank's efforts with resolving
Cardholder disputes with current and former Authorized Dealers arising out of
bona fide claims of dissatisfaction with the Goods and/or Services purchased
from such current and former Authorized Dealers.
SECTION 2.02 BANK TO EXTEND CREDIT.
(a) Subject to (i) the terms of this Agreement, (ii) the credit limits
applicable to each Account, (iii) the terms and conditions in the Bank Dealer
Agreements, and (iv) the terms and conditions in the Credit Card Agreements,
Bank shall extend credit to Cardholders during the Operation Period for
personal, family or household purposes, in amounts set forth as the total for
any Purchases reflected in Charge Transaction Data received and accepted by Bank
during the Operation Period.
(b) Under no circumstances shall Bank be required to advance funds in
respect of Charge Transaction Data submitted to it by Retailer, if, after giving
effect to such advance, the then-outstanding aggregate Indebtedness with respect
to all Accounts would exceed the Credit Review Point. If on any date the
aggregate
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Indebtedness with respect to all Accounts equals or exceeds 85% of the Credit
Review Point then in effect, Bank shall promptly so advise Retailer and within
one hundred and twenty (120) days of such date, Bank shall give Retailer written
notice of its election of one of the following options:
(i) Bank may, in its sole discretion, increase the Credit Review
Point to an amount Bank deems acceptable, but in any event to an amount higher
than 118% of the aggregate Indebtedness with respect to all Accounts as of the
date of the election of this option. If Bank elects this option, then Bank's
written notice to Retailer shall include the amount of the increased Credit
Review Point.
(ii) Bank may elect not to increase the Credit Review Point to
the amount required by Section 2.02(b)(i); in such event, Retailer shall be
entitled to terminate this Agreement in accordance with the provisions of
Section 11.02.
(c) Retailer hereby releases Bank from, and indemnifies Bank against,
any and all Losses incurred (i) as a result of Bank's refusal to advance credit
to a Cardholder if such advance would cause the then-outstanding aggregate
Indebtedness with respect to all Accounts to exceed the Credit Review Point; or
(ii) as a result of Bank's refusal to increase the Credit Review Point.
SECTION 2.03 PROMOTION OF PROGRAM.
(a) During the Operation Period, Retailer agrees to offer the Program
to Cardholders and Authorized Dealers including, without limitation, (i)
providing proper training to its respective employees and to the employees of
the Authorized Dealers in the use and marketing of the Program to their
customers, (ii) providing Authorized Dealers with Credit Card Applications,
Credit Card Agreements, point-of-sale credit solicitation displays, training
materials, advertising materials developed by Retailer and approved by Bank,
(iii) enrolling Dealers in the Program and encouraging Authorized Dealers to
offer and accept the Credit Card, and (iv) in any other manner the parties agree
to from time to time.
(b) Retailer may include Program information and/or actual Credit Card
Applications and Credit Card Agreements in its general and specialized
advertising brochures. Retailer shall make, and shall cause Authorized Dealers
to make, Credit Card Applications and Credit Card Agreements to be used in
connection with the Program, conspicuously available at all Participating
Stores. No Account Documentation shall be publicly distributed or disseminated
without the prior written consent of Bank. Retailer may not, without Bank's
prior written consent, use Bank's name or logo type (or the name or logo type of
any Affiliate of Bank) in any advertisement, press release or promotional
materials. The Bank's approval of any billing and credit terms for any
Credit-based Promotion is not intended to be and will not be construed to be an
approval of any materials used in advertising or soliciting participation in
such promotions.
SECTION 2.04 ABSENTEE TRANSACTIONS.
Retailer shall not, after May 31, 2000, honor Credit Cards or submit Charge
Transaction Data to Bank for Telephone Purchases unless and until Bank and
Retailer have agreed on and are ready to implement modifications to the
Operating Procedures applicable to Telephone Purchases.
ARTICLE III
ADMINISTRATION OF PROGRAM
SECTION 3.01 PREPARATION OF DOCUMENTS.
(a) Bank shall provide Retailer with the form and content of Credit
Card Applications, Credit Card Agreements, Credit Cards, credit card mailers,
Bank Dealer Agreements and such other documents as are required by law
(hereinafter collectively, the "Program Documents"). Bank shall establish the
nature and quantities
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of any such documents. All Account Documentation (including, without limitation,
the Program Documents) and all other documents, advertisements or promotional
materials used by Retailer in connection with the Program shall clearly disclose
that Bank is the creditor on the Accounts and is extending credit directly to
Cardholders.
(b) Retailer shall be responsible for the costs of creating,
developing, printing and supplying all Credit Card Applications, Charge Slips,
Credit Slips and the mailers in which Credit Cards are enclosed, as well as for
the costs of the plastic for, and production (other than embossing) of Credit
Cards. Bank shall be responsible for the costs of creating, developing, printing
and supplying all billing statements, collection notices, Bank Dealer Agreements
and adverse action notices and of embossing and mailing Credit Cards and for the
cost of maintaining and servicing Hypercom units provided to Retailer and its
Authorized Dealers hereunder.
(c) Except as otherwise provided herein, Retailer shall be solely
responsible for all other costs and expenses of preparing and distributing the
Account Documentation. Retailer shall be solely responsible for all costs and
expenses of credit advertising, in-store point-of-sale promotional materials,
store signage, credit marketing, and other expenses related to the promotion of
the Program.
(d) Any costs or expenses of the parties to this Agreement other than
as expressly set forth herein shall be at the sole expense of the party
incurring such costs or expenses and shall not entitle that party to seek
reimbursement of such costs or expenses from the other parties to this
Agreement. Accordingly, subject to the reimbursement provisions of this
Agreement, if any, each of the parties shall be liable for the payment of all
sums due third parties retained by such party in performing its obligations
hereunder.
SECTION 3.02 ACCOUNT ADMINISTRATION; CREDIT CRITERIA.
(a) Bank, in its sole discretion, (i) shall determine the
creditworthiness of individual applicants under the Program, the range of credit
limits to be made available to individual Cardholders, whether to suspend or
terminate credit privileges of any Cardholder, the credit criteria to be used in
evaluating applicants in connection with the Program and the appropriate
collection strategies and procedures for collecting Accounts; (ii) shall
establish the terms and conditions of the Credit Card Agreements and the terms
and conditions under which credit will be extended to Cardholders; and (iii) may
modify such terms and conditions from time to time in accordance with Section
6.01. Notwithstanding the foregoing, Bank shall provide Retailer with prior
notice of any modification of any credit criteria that Bank deems material
(unless law or circumstances indicate to Bank that the modification be
instituted immediately).
(b) The rejection for credit of any applicant under the Program, or
any number of applicants, shall not give rise to any claim, liability, demand,
offset, defense, counterclaim or other right or action by Retailer or its
Authorized Dealers against Bank, its Affiliates, and the employees, officers and
directors of Bank or its Affiliates ("Bank Parties"), and Retailer hereby waives
and releases any such claim that it may have against any Bank Party.
SECTION 3.03 OWNERSHIP OF ACCOUNTS, ETC. Bank shall be the sole and
exclusive owner of all Accounts and Account Documentation, including without
limitation, all Program Documents, Cardholder data, Charge Transaction Data,
Charge Slips, Credit Slips, and receipts or evidences of payments or purchases
by Cardholders. Bank shall be entitled to receive all payments made by
Cardholders on Accounts. Retailer acknowledges and agrees that it has no right,
title or interest in any of the foregoing and no right to any payments made by
Cardholders on Accounts or any proceeds in respect of the Accounts. All
collection procedures shall be under the sole control and discretion of Bank and
may be modified from time to time by Bank.
SECTION 3.04 OWNERSHIP AND USE OF CARDHOLDER LIST.
(a) Bank is also the sole owner of all lists of applicants and
Cardholders (including without limitation, names, addresses, related credit
information and other information), but Retailer may use the list of Cardholder
names and addresses (the "Cardholder List") during the Operation Period for
promotion of the Program
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and of Goods and Services available for purchase under the Program (except
products and services offered by Bank or its Affiliates) and, thereafter, in
accordance with Section 11.07 hereof if Retailer licenses the Tape Information
as provided therein, but for no other purposes. Upon the purchase of the
Accounts pursuant to Section 11.03 hereof, Bank shall license the use of the
Cardholder List to Retailer for the purpose of collecting any Indebtedness owing
on such purchased Accounts. In no event may Retailer transfer or disclose the
Cardholder List to a third party without Bank's prior written consent.
(b) Bank may, with Retailer's prior written consent, market additional
products and services to Cardholders, via direct mail, telemarketing, billing
inserts and otherwise, provided that no such additional products and services
directly compete with products and services offered by Retailer at Participating
Stores, and provided further that Bank may utilize the Cardholder List to
solicit certain inactive Cardholders for various financial services or products
issued by any Affiliate of Bank.
(c) Nothing in this Section 3.04 is intended to grant Bank ownership
rights in any general, undifferentiated listing of both credit and non-credit
customers maintained by Retailer.
SECTION 3.05 CREDIT INSURANCE AND VALUE-ADDED PROGRAMS. Bank or its
designees may offer Insurance Programs and, with Retailer's prior written
consent, Value-Added Programs to Cardholders and may process credit insurance
and other charges to Accounts associated with such Programs for Cardholders who
elect enrollment. Unless otherwise requested in writing by Retailer, no
Insurance Program shall state or imply that such Insurance Program is offered or
endorsed by Retailer. Bank shall be entitled to retain for its account all
proceeds of Insurance and Value-Added Programs and Retailer shall have no rights
with respect thereto. Notwithstanding the foregoing, and provided that no
Default or Event of Default shall have occurred and be continuing, Bank shall
pay to Retailer as an administrative fee, on each Settlement Date occurring
prior to the Termination Notice Date, an amount equal to twenty-five percent
(25%) of Insurance Net Income received during the immediately preceding Billing
Period and an amount equal to twenty-five percent (25%) of the Value-Added Net
Income received during the immediately preceding Billing Period. As used herein,
"Insurance Net Income" shall mean charges billed each month to Cardholders for
credit insurance offered pursuant to an Insurance Program, less claims,
reversals, waivers, cancellations and all Insurance Program-related expenses. As
used herein, "Value-Added Net Income" shall mean the net proceeds received by
Bank in respect of Value-Added Programs (the calculation of which shall include
deductions for related costs, expenses, waivers, reversals, cancellations and
claims).
SECTION 3.06 DIRECT PAYMENTS; PAYMENTS AT PARTICIPATING STORES. Retailer
shall not accept any Direct Payments. Retailer shall make available to
Cardholders at all Participating Stores the address to be used for making
payments on Accounts directly to Bank. If, notwithstanding the foregoing,
Retailer inadvertently receives any Direct Payment, Retailer agrees that it
shall receive and hold such payment in trust for Bank and shall notify Bank of
the receipt thereof (together with the corresponding Account information) no
later than 8:00 a.m. on the next succeeding Business Day in accordance with the
requirements of the Operating Procedures. Upon notification of Retailer's
receipt of any Direct Payment, Bank may, in its sole discretion require Retailer
to deliver same to Bank not later than one (1) Business Day after receipt
thereof in the form received together with such endorsements or other documents
of assignment as may be necessary to permit Bank to receive the benefit thereof
to the same extent as if payment had been made directly to Bank. If Bank does
not notify Retailer to deliver the Direct Payment in the form received, Bank
will deduct the amount of any such Direct Payment from any amounts otherwise
payable to Retailer under Section 5.01(b) hereof. If there are insufficient
Charge Slips included in the Charge Transaction Data to permit the deduction of
the amount of such Direct Payments under Section 5.01, Retailer shall pay to
Bank an amount equal to any such Direct Payment within one (1) Business Day of
the date on which such Direct Payment is first received by Retailer.
SECTION 3.07 INSERTS; STATEMENT MESSAGES.
(a) Retailer may elect to provide to Bank (at the address so stated by
Bank and using Bank's insert requirements) up to five (5) inserts per billing
statement generated by Bank in respect of the Accounts. Retailer is solely
responsible for the costs of producing such inserts. Retailer is responsible for
the proper delivery,
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size and weight requirements of inserts and for the supply of insert stock, all
as specified in the Operating Procedures. The insertion service by Bank will be
at no cost to Retailer (up to a maximum of five (5) inserts, per billing
statement per month) as long as all insert requirements set forth in the
Operating Procedures have been met by Retailer provided, however, that if the
inserts cause the postage payable to exceed the postage otherwise payable by
Bank, then Retailer shall reimburse Bank for such excess postage cost.
Notwithstanding the foregoing, any insert required by law or regulation shall
take precedence over any or all inserts provided by Retailer. The Bank's
insertion service will not be available after the termination or expiration of
the Operation Period.
(b) Subject to any statement message utilization requirements that
Bank deems advisable or appropriate, during the Operation Period, Bank shall
make available to Retailer space for two (2) messages to be provided by Retailer
on each billing statement generated by Bank in respect of Accounts sent to a
Cardholder during such month; provided, however, that in the case of any
Accounts that are not Active Accounts, Retailer will bear all costs associated
with such messages including the costs of production and mailing. Any such
messages shall be included at no charge to Retailer. Bank agrees to use
reasonable efforts to advise Retailer if billing statement messages will not be
available to Retailer during any Billing Period.
SECTION 3.08 POINT-OF-SALE TERMINALS. Bank shall provide, or shall cause a
third-party to provide, Retailer and each Authorized Dealer with Hypercom units
for installation at each Participating Store and with hardware, software,
modems, training and assistance in using such system. Retailer acknowledges that
Bank, or such third-party provider, is and will remain the sole owner of such
equipment at all times and upon the termination or expiration of the Operation
Period. Retailer and Authorized Dealers, at their sole cost and expense, shall
establish dedicated phone lines for each Hypercom unit and shall provide all
necessary personnel and supplies including paper.
SECTION 3.09 PROGRAM MANAGER. Throughout the Operation Period, Bank
directly or through a Bank Affiliate, shall provide a person ("Program Manager")
at no cost to Retailer, who will administer Bank's obligations under this
Agreement and serve as Retailer's primary contact for all matters relating to
the Program and this Agreement. The Program Manager who is assigned and may be
changed by Bank from time to time and may also serve in such capacity for such
other Bank or Bank Affiliate program as Bank or Bank Affiliate may direct during
the Operation Period, however Retailer shall remain the primary client of the
Program Manager with a minimum of sixty percent (60%) of the Program Manager's
time allocated to the Program. The Program Manager shall work with Authorized
Dealer Stores and Retailer Stores with the goal of improving all aspects of the
Program for their stores in accordance with Section 6.03(b)(3) of this
Agreement. If the Program Manager changes, Bank will use commercially reasonable
efforts to provide at least forty-five (45) days of training to the new Program
Manager before he or she assumes sole responsibility for that position.
ARTICLE IV
OPERATING PROCEDURES
SECTION 4.01 GENERAL. Retailer shall follow, and shall cause its agents and
Authorized Dealers and their agents to follow, all applicable Operating
Procedures relative to the Program including, but not limited to, procedures for
distributing Credit Card Applications, seeking authorization for the
establishment of Accounts, seeking authorization for the financing of any
Purchase of Goods and Services under the Program, handling credit transactions
with Cardholders and transmitting Charge Transaction Data. The Operating
Procedures may be amended from time to time by Bank in its sole discretion. For
example, the parties recognize and agree that from time to time modifications
and improvements will be made in hardware, software, and data communications
facilities that may, in Bank's sole discretion, require changes in the Operating
Procedures. Bank shall provide Retailer and each Authorized Dealer with prior
notice of material modifications to the Operating Procedures.
SECTION 4.02 NEW CARDHOLDER ACCOUNT ESTABLISHMENT PROCEDURES. During the
Operation Period, all Credit Card Applications will be reviewed by Bank for
approval and credit line assignment and Bank will deliver Credit Cards to, and
activate Credit Cards for, all approved Cardholders. Neither Retailer nor any
Authorized Dealer shall submit any Credit Card Applications for corporate or
business accounts.
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SECTION 4.03 PURCHASE AUTHORIZATION PROCEDURES. Retailer shall obtain
authorizations for all Purchases in accordance with the Operating Procedures.
Without limiting the foregoing, Retailer will not include in any Charge
Transaction Data any Charge Slips for Accounts arising from purchases of goods
or services for other than personal, family or household purposes or for
transactions other than Store Purchases or Telephone Purchases.
ARTICLE V
SETTLEMENTS AND ADJUSTMENTS
SECTION 5.01 SETTLEMENT PROCEDURES. The following settlement procedures
apply only to Store Purchases made from Retailer Stores and Telephone Purchases.
Settlement procedures with respect to Store Purchases made from Authorized
Dealer Stores shall be governed by the Bank Dealer Agreements.
(a) All Charge Transaction Data will be electronically transmitted to
Bank using an electronic communication system established between Retailer and
Bank to facilitate the operation of the Program. Retailer, or an agent of
Retailer, will retain copies of all Charge Slips for not less than 25 months.
(b) Upon receipt, verification and processing of any Charge
Transaction Data by Bank during the Operation Period and provided no Default or
Event of Default shall have occurred and be continuing, Bank will remit to
Retailer in respect of such Charge Transaction Data, an amount equal to the
total of the Purchases on Accounts identified in such Charge Transaction Data
less the sum of (i) the total amount reflected on any Credit Slips included in
such Charge Transaction Data; (ii) the amount of any Direct Payments which Bank
elects to deduct from payments in accordance with Section 3.06 hereof; (iii) at
Bank's election, any other amounts due and owing by Retailer to Bank, including,
without limitation, amounts owing under Sections 5.02, 6.05(a) and 7.01 hereof;
and (iv) Service Fees.
(c) Bank will transfer funds payable under Section 5.01(b) hereof via
wire transfer to an account maintained in the name of Retailer and designated in
a writing delivered to Bank by Retailer. If Charge Transaction Data is received
by Bank's processing center before 9:00 a.m. (Atlanta, Georgia time) on a
Business Day, Bank will initiate such wire transfer on the same Business Day. In
the event that the Charge Transaction Data is received after 9:00 a.m. (Atlanta,
Georgia time) or on a day other than a Business Day, then Bank will initiate
such transfer on the next Business Day.
Retailer acknowledges that Bank may microfilm (or copy using any other
reasonable method) all Account Documentation and destroy all original Account
Documentation in the ordinary course of business. To the extent required,
Retailer consents to the making of such copies and the destruction of the
corresponding original documents.
ARTICLE VI
CREDIT TERMS; LOSSES ON ACCOUNTS; SECURITY
SECTION 6.01 CREDIT TERMS. Bank shall have the sole right to establish the
rate, annual fees, late fees and all other terms and conditions relating to the
Accounts, and to amend or modify such rate, fees and/or other terms and
conditions from time to time. At any time after the date of this Agreement and
upon sending written notice to Retailer thereof, Bank shall establish as the
regular finance charge rate the following:
All jurisdictions:
Periodic Rate - 1.55%
Annual Percentage Rate - 18.60%
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Bank may modify such rates from time to time, provided that, if Bank
increases the Annual Percentage Rate(s), Retailer may terminate this Agreement
on ninety (90) days notice to Bank by providing written notice to Bank within
thirty (30) days of the date Retailer learns of such increase, if the increase
in the Annual Percentage Rate(s) results in an Annual Percentage Rate that
exceeds the Three-Year Treasury Rate plus thirteen percent (13%) on the last day
of the third Billing Period immediately preceding the Billing Period in which
such increase will be effective.
SECTION 6.02 CREDIT-BASED PROMOTIONS AND SERVICE FEES.
(a) Bank, at the request of Retailer or an Authorized Dealer, shall
offer to Cardholders Qualified Credit-based Promotions and, subject to the
conditions set forth in this Section 6.02(a) and in Section 6.02(b) below, Bank
shall collect from each Authorized Dealer that participates in a Credit-based
Promotion and/or from Retailer (for its Retailer Stores) if its Retailer Stores
participate in a Credit-based Promotion, a Service Fee on the total face amount
of each Promotional Credit Sale Charge Slip submitted by them in connection with
such Credit-based Promotions (provided, that Retailer may in its discretion,
direct Bank to collect all such Service Fees from Retailer) as follows:
Service Fee
Promotional for Credit-based
Type of Promotion Period Promotions
----------------- ----------- ----------------
(i) "After the Fact Free" with no Account 90 days 1.25%
Ethan Allen payments due during specified
promotional period, with finance charges 6 months 3.00%
and Credit Insurance Charges assessed during
specified promotional period, and full rebate 12 months 8.00%
of finance charges if total cash price of the
purchase is paid in full on or before expiration
expiration of the specified promotional period.
Plan 1, Promotion Code F.
(ii) Minimum monthly payments required, from 90 days 2.75%
Account Ethan Allen during specified promotional
period, with no finance charges assessed during 6 months 5.50%
specified promotional period but with Credit
Insurance Charges assessed at all times. 12 months 10.00%
Plan 1, Promotion Code 2.
(iii) No Account Ethan Allen payments required 90 days 3.00%
during specified promotional period and no
finance charge assessed during specified 6 months 6.00%
promotional deferral period but with Credit
Insurance Charges assessed at all times. 12 months 12.00%
Plan 1, Promotion Code 3.
Bank may, subject to Section 6.02(b), offer to Cardholders Qualified
Credit-based Promotions but Bank may, from time to time, in its sole discretion,
modify the Service Fee charged by Bank in connection therewith. Bank shall give
Retailer not less than sixty (60) days prior written notice of Bank's intention
to modify the Service Fee(s), which notice shall include details of the Bank's
basis for such proposed modifications, and in the event Retailer is then running
a pre-planned national advertising event offering the Credit-based Promotions
for which Bank has designated a modified Service Fee, the modified Service
Fee(s) shall not become effective until after the expiration date of such
national advertising event.
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(b) From and after the date Bank gives Retailer written notice
requiring the following procedure, at least fifteen (15) days prior to the
proposed commencement of any Credit-based Promotion, Retailer and/or an
Authorized Dealer(s) shall submit the proposal for such Credit-based Promotion
to Bank for prior approval and acceptance by Bank of the type, promotional offer
period, and terms of any such promotional offer. Upon approval by Bank, and
subject to compliance with applicable law, Bank and Retailer and/or such
Authorized Dealer(s) shall complete and execute an addendum to this Agreement,
in the form and substance required by Bank, confirming the terms of any such
offer.
(c) Subject to Section 6.02(a) and 6.04, the Service Fee to be paid by
Retailer or Authorized Dealers for Credit-based Promotions of the type described
in Section 6.02(a)(i) ("After the Fact Free/Skip Promotions") shall be
determined in accordance with the discount matrix set forth on Schedule 4
attached hereto (the "Discount Matrix") depending on the corresponding
Promotional Sales Mix adjusted quarterly and calculated on a rolling six (6)
month basis.
SECTION 6.03 INCENTIVE BONUS PAYMENT; PROMOTIONAL FEE.
(a) One Business Day after the Effective Date, Bank shall pay Retailer
by wire transfer an incentive bonus in the amount of One Hundred Fifty Thousand
Dollars ($150,000) (the "Incentive Bonus") as an incentive to Retailer to enter
into this Agreement.
(b) Bank shall pay Retailer each month a promotional fee in an amount
equal to one and one-half percent (1.50%) of the Monthly Billing Period
Outstandings, divided by twelve (the "Promotional Fee"), or such decreased
Promotional Fee determined in accordance with Section 6.04 and calculated in
accordance with the promotional fee matrix set forth on Schedule 4 attached
hereto (the "Promotional Fee Matrix").
SECTION 6.04 INCREASES IN SERVICE FEE AND/OR DECREASES IN PROMOTIONAL FEE.
At the end of each consecutive third Billing Period, Bank shall calculate the
Promotional Sales Mix based on a previous consecutive six (6) month rolling
average. Bank's first calculation of the Promotional Sales Mix shall occur after
the first three (3) consecutive Billing Periods following the date of this
Agreement. Without limiting Bank's right to modify the Service Fee in accordance
with Section 6.02(a), if the Promotional Sales Mix exceeds sixty percent (60%)
of sales of Goods and/or Services charged to Credit Cards, then Bank shall so
notify Retailer and, within thirty (30) days of receipt of such notice, Retailer
shall elect in writing to either (a) pay an increased Service Fee in respect of
After the Fact Free/Skip Promotions to Bank calculated in accordance with the
Discount Matrix, or (b) receive a reduced Promotional Fee calculated in
accordance with the Promotional Fee Matrix. At the end of such thirty (30) day
period, Bank will implement Retailer's election, and, if Retailer fails to make
an election, implement the applicable Service Fee calculated in accordance with
the Discount Matrix to be paid by Retailer or Authorized Dealers in respect of
After the Fact Free/Skip Promotions given the Promotional Sales Mix in effect at
such time. Retailer and Bank shall be jointly responsible for promptly notifying
Authorized Dealers of any increases to the Service Fee hereunder.
SECTION 6.05 MARKETING AND TRAINING SUPPORT; ALTERNATIVE CREDIT PROGRAMS.
(a) Bank agrees to investigate and propose effective marketing
strategies for the current Program and will use its best efforts to present to
Retailer Alternative Credit Programs, in order to grow the overall credit
portfolio.
(b) Bank and Retailer shall jointly market the Program. The Bank's
marketing efforts shall include without limitation, making a good faith effort
to perform the following:
(i) Present alternative financial programs with the goal of
making Retailer's Goods and/or Services more affordable and accessible to an
increasing base of consumers.
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(ii) Propose and develop, with Retailer's written approval,
marketing programs with a goal of growing the total Accounts under the Program.
This effort will address both the current Program as well as any new programs
which are implemented by Bank or Bank's Affiliates.
(iii) Provide field services training support in order to ensure
that all credit programs provided by Bank or Bank's Affiliates are properly
explained and understood by Retailer Store and Authorized Dealer Store personnel
so that programs can be effectively implemented. New Retailer Stores and new
Authorized Dealer Stores will be first priority and high potential Authorized
Dealer Stores will be the second priority. The ultimate goal will be to visit
all high volume and high potential volume Participating Stores on an annual
basis. Retailer shall work with Bank in order to identify high volume and high
potential volume Participating Stores.
(iv) Participate in business reviews, the timing of which shall
be mutually agreed upon, in which Bank will meet in person with Retailer's
senior management and in a format which shall be mutually agreed upon between
Bank and Retailer prior to meeting. These reviews will cover:
(A) A review of the portfolio status, with updates,
analysis, relevant statistics and trends, and recommended actions as to what
course of action should be taken given then current conditions;
(B) Analysis and review of credit promotions including
impact, return and sales growth by promotion and recommended course of action;
(C) Providing competitive review of other credit programs
including description and analysis if such information is generally available in
the trade and industry;
(D) Providing updates on all aspects of the Program and
Alternative Credit Programs, if any, (if provided and serviced by Bank or its
Affiliates), including performance of following operational areas: cardholder
and dealer dispute activity, application process, sales authorizations, billing
statement issues, payment processing, card production and other customer service
issues;
(E) Identifying and presenting marketing/promotional
strategies with the goal of increasing credit sales without reducing Retailer's
margins; and
(F) Updates on priority projects, as mutually agreed upon by
Bank and Retailer.
SECTION 6.06 MONEY COST FEE; MONEY COST PREMIUM.
(a) If the CP Rate as of the last day of any Billing Period during the
Operation Period exceeds 5.15%, then Retailer shall pay Bank monthly an amount
equal to ninety-two and one half percent (92.5 %) of (i) the amount by which the
CP Rate as of the last day of any Billing Period during the Operation Period
exceeds 5.15%, multiplied by (ii) the Average Net Receivables for such Billing
Period and (iii) divided by twelve (12); or
(b) If the CP Rate as of the last day of any Billing Period during the
Operation Period is less than 5.15%, then Bank shall pay Retailer monthly an
amount equal to ninety-two and one half percent (92.5 %) of (i) the amount by
which 5.15 % exceeds the CP Rate as of the last day of any Billing Period during
the Operation Period multiplied by (ii) the Average Net Receivables for such
Billing Period and (iii) divided by twelve (12).
SECTION 6.07 LOSSES ON ACCOUNTS. Except for (i) losses incurred in respect
of Accounts charged back pursuant to Section 7.01 hereof; and (ii) losses
incurred after the Accounts are purchased by Retailer in accordance with Section
11.03 hereof, all losses on Accounts shall be borne solely by Bank.
SECTION 6.08 GRANT OF SECURITY INTEREST; PRECAUTIONARY FILING.
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(a) The parties hereto agree that the transactions contemplated herein
shall constitute a program for the extension of consumer credit and service to
customers of Retailer and its Authorized Dealers and that neither Retailer nor
its current or former Authorized Dealers have any interest in the Accounts or
Indebtedness created in connection with the Program. Both (i) against the
possibility that it is determined that Article 9 of the UCC applies or may apply
to the transactions contemplated hereby, and (ii) to secure payment of and
performance by Retailer and its current and former Authorized Dealers of any and
all indebtedness, liabilities or obligations, now existing or hereafter arising
pursuant to this Agreement, including indebtedness, liabilities and obligations
that may be deemed to exist in the event of the applicability of Article 9 of
the UCC to, and any recharacterization of, any transactions contemplated hereby,
Retailer hereby grants to Bank a first priority continuing security interest in
and to all of Retailer's right, title and interest, if any, now owned or
existing or hereafter acquired or arising in, to and under the following
property (in each case, existing at any time, past, present or future)
(collectively, the "Bank Property"): (A) all Accounts, Account Documentation and
Indebtedness; (B) all deposits, credit balances and reserves, if any, on Bank's
books relative to any Accounts, including, without limitation, the Collateral
Account; (C) all Unpaid Returned Goods; and (D) all proceeds of the foregoing.
Retailer represents and warrants that Retailer has not, on or before the date of
this Agreement, granted any Potentially Competing Security Interests or signed
any Potentially Competing Financing Statements other than any security interests
or financing statements that have lapsed or been terminated. Retailer agrees
that it will not, on or after the date of this Agreement, grant any Potentially
Competing Security Interest or sign any Potentially Competing Financing
Statement unless the secured party thereunder first signs an intercreditor
agreement in substantially the form of Exhibit B hereto. As used herein,
"Potentially Competing Security Interest" means any security interest in favor
of any person that attaches to any of the Bank Property or, in the case of any
Bank Property other than Unpaid Returned Goods, that would attach to such
property if, contrary to the intent of the parties hereto, Retailer was
determined to have any rights therein. As used herein, "Potentially Competing
Financing Statement" means any financing statement in favor of any person that
covers any of the Bank Property or, in the case of any Bank Property other than
Unpaid Returned Goods, that would cover any such property if, contrary to the
intent of the parties hereto, Retailer was determined to have any rights
therein.
(b) Retailer agrees to, and will use its best efforts to cause its
current and former Authorized Dealers to, cooperate fully with Bank as Bank may
reasonably request in order to give effect to the security interests granted by
this Section 6.08, including, without limitation, the filing of UCC-l or
comparable statements in order to perfect such security interests. Retailer
agrees to provide Bank with not less than thirty (30) days prior written notice
of any change in location of the executive offices or principal place of
business of Retailer or of any change of Retailer's corporate name and,
notwithstanding the foregoing, no such change shall be effected before Retailer
shall have supplied Bank with signed copies of all filings and shall have taken
such actions as Bank may reasonably determine to be necessary or appropriate to
preserve and maintain at all times the perfection and priority of the security
interests granted or purported to be granted to Bank hereunder. Unless Bank
shall have otherwise consented in writing, Retailer shall not create, assume or
suffer to exist any lien on any of its right, title or interest under this
Agreement or in the proceeds thereof.
SECTION 6.09 RETURNS OF MERCHANDISE. Retailer may settle or adjust any
dispute or claim, grant any discount, credit, or allowance, or accept any return
of Goods the purchase of which was financed under a Credit Card Agreement in the
ordinary course of business. Retailer shall notify Bank of each such credit
issued to a Cardholder by Retailer and shall provide Bank with a Credit Slip
properly identifying the related Account within one (1) Business Day of the date
on which such credit is given. The amount of all such credits shall be deducted
from the daily settlement amounts payable under Section 5.01 hereof. If there
are insufficient Charge Slips included in the Charge Transaction Data to permit
the deduction of such credits under Section 5.01, Retailer shall pay to Bank an
amount equal to any credit given within one (1) Business Day of the date on
which such credit is given. When Retailer receives Unpaid Returned Goods in
respect of Accounts, it shall hold the same in trust for the benefit of Bank and
subject to the Bank's interest therein. If the return of any Goods and/or
Services results in the imposition of a Restocking Fee, then Retailer shall
issue a Credit Slip in the full amount of the Purchase that gave rise to such
fee and shall submit to Bank a Charge Slip in the amount of such Restocking Fee.
SECTION 6.10 LETTER OF CREDIT. At any time during any Letter of Credit
Period, Bank may require that Retailer deliver an Eligible Letter of Credit to
Bank in the amount requested by Bank, which amount shall not
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exceed Twelve Million Dollars ($12,000,000) (such requested amount being
referred to herein as the "Letter of Credit Amount"). If, at any time, an event
shall occur which would cause any Letter of Credit previously delivered to Bank
to cease to be an Eligible Letter of Credit, within ten (10) days of the earlier
of (i) the date on which Retailer first learns of the occurrence of such event;
or (ii) the date on which Retailer first receives notice thereof from Bank,
Retailer shall cause a substitute Eligible Letter of Credit to be issued and
delivered to Bank in a face amount equal to or greater than the Letter of Credit
Amount. On or before forty-five (45) days prior to the expiration of each Letter
of Credit provided to Bank, Retailer shall cause a substitute Eligible Letter of
Credit to be issued and delivered to Bank in a face amount equal to or greater
than the Letter of Credit Amount. The obligations under this Section 6.10 shall
apply at all times until a day ninety (90) days after the expiration of the
Operation Period, at which time, Bank shall surrender any outstanding Letter of
Credit to Retailer. Any amounts drawn under a Letter of Credit hereunder in
excess of the Delivery Obligations then due to Bank shall be held by Bank in a
non-interest bearing account on Bank's books (the "Collateral Account") and
shall secure Retailer's full and prompt payment of the Delivery Obligations then
or thereafter owing. If Retailer fails to pay any Delivery Obligation when due,
Bank may immediately, and without prior notice to Retailer, debit such unpaid
amount from the amounts then remaining in the Collateral Account. Bank's
security interest in the Collateral Account shall be in addition to any right of
setoff or recoupment that Bank may otherwise have under this Agreement or
applicable law. If Retailer purchases or arranges for the purchase of all of the
Accounts and related Indebtedness from Bank in accordance with Section 11.03
hereof, and if as of the date of such purchase, Retailer has paid all Delivery
Obligations, Bank shall simultaneously pay to Retailer, an amount equal to the
amount remaining in the Collateral Account on the date of such purchase. If
Retailer does not purchase or arrange for the purchase of all of the Accounts
and related Indebtedness in accordance with Section 11.03 hereof, and if as of
the Final Liquidation Date, Retailer has paid all Delivery Obligations, Bank
shall pay to Retailer an amount equal to the amounts remaining in the Collateral
Account on the Final Liquidation Date.
ARTICLE VII
CHARGEBACK
SECTION 7.01 BANK'S RIGHT TO CHARGEBACK. Bank shall have the right, at its
option, to charge back to Retailer any Account, Charge Slip or Credit Slip if
with respect to such Account, Charge Slip or Credit Slip or the underlying
transaction:
(a) Any presentment warranty made by Retailer pursuant to Section 8.01
proves to have been false or inaccurate in any respect, as determined by Bank
after notice to and review with Retailer as provided in the Operating
Procedures;
(b) The Cardholder asserts any claim or defense against Bank as a
result of any act or omission of Retailer allegedly in violation of any
applicable law, statute, ordinance, rule or regulation provided any such claim
or defense constitutes a bona fide claim or defense presented by the Cardholder
in good faith in the reasonable opinion of Bank after notice to and review with
Retailer as provided in the Operating Procedures;
(c) The Cardholder (i) disputes the existence of such Account and
Retailer has failed to follow the applicable Operating Procedures; (ii) disputes
the amount of such Account or (iii) refuses to pay alleging dissatisfaction with
Goods or Services received, a breach of any warranty or representation made by
Retailer in connection with the transaction, or an offset or counterclaim
against Bank based on an act or omission of Retailer, provided any such dispute
constitutes a bona fide claim presented by Cardholders in good faith in the
reasonable opinion of Bank after notice to and review with Retailer as provided
in the Operating Procedures; or (iv) refuses to pay alleging dissatisfaction
with the timeliness of the delivery of the Goods or Services and such Good or
Services were not delivered within five months after the estimated delivery date
stated in the related invoice;
(d) If Cardholder disputes an Account and Retailer cannot supply Bank
with a legible copy of the Charge Slip within ten (10) days of Bank's written
request;
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(e) Retailer fails to deliver Goods and/or Services purchased in
connection with Special Order Deposits at Retailer Stores;
(f) Retailer fails to deliver Goods and/or Services purchased in
connection with Qualified Special Order Deposits at current or former Authorized
Dealer Stores as provided in Section 2.01(f);
(g) In respect of any Absentee Transaction, (i) the Cardholder asserts
that the Cardholder did not make or authorize the purchase in dispute, or (ii)
any person asserts that such person's name, social security number or other
identifying information was used to make any purchase (or open an Account on
which such purchase was made) and that such person did not make or authorize the
purchase or open the Account in dispute;
(h) Retailer or any current or former Authorized Dealer submitting the
transaction breached this Agreement or the Bank Dealer Agreement, as applicable,
or failed to comply with the Operating Procedures or a default or event of
default (however defined) has occurred and is continuing hereunder or thereunder
(provided, however, that this Section 7.01(h) shall not apply to Charge Slips
submitted by any current or former Authorized Dealer more than two (2) Business
Days after Bank has received notice from Retailer that such Dealer not longer an
Authorized Dealer); or
(i) The Charge Slip includes any amount which represents a Restocking
Fee.
SECTION 7.02 EXERCISE AND AMOUNT OF CHARGEBACK. The amount of the
chargeback pursuant to this Article VII shall be the aggregate of: (a) the
balance of the Account plus finance charges accrued to the date of chargeback of
such Account or, if a Charge Slip or Credit Slip, the amount of such Charge Slip
or Credit Slip plus finance charges accrued to the date of chargeback of such
Charge Slip or Credit Slip (the "Chargeback Balance"); plus (b) reasonable
out-of-pocket costs and expenses paid or incurred by Bank in the attempted
collection of such Account (including, without limitation, reasonable attorney's
fees, collection agency fees and court costs). Notwithstanding the foregoing
sentence, if Bank fails to use reasonable diligence in complying with any
obligations it may have under this Agreement or the Operating Procedures to seek
recovery of any Account, Charge Slip or Credit Slip that is subject to
chargeback, then (i) the Chargeback Balance of such Account, Charge Slip or
Credit Slip referred to in clause (a) shall not include any finance charges for
more than six months and (ii) the costs and expenses referred to in clause (b)
with respect to such Account shall not exceed twenty percent (20%) of the
Chargeback Balance for such Account except that the limit set forth in this
clause (ii) shall not apply to compromises or settlements which are governed by
Section 7.03 below. Bank will assign to Retailer, without recourse, all right to
payment with respect to the amount of chargebacks, upon the request of Retailer.
SECTION 7.03 LIMITATION OF CHARGEBACK. In its reasonable discretion, Bank
may compromise and settle any claim made by any Cardholder in respect of his
Account or any related Indebtedness. No such compromise or settlement will
impair Bank's rights to charge back under Section 7.01 hereof provided that the
amount Bank will be entitled to charge back to Retailer following any such
compromise or settlement is limited to the amount of the Indebtedness on the
Account being charged back, including any reasonable out-of-pocket costs and
expenses paid or incurred by Bank in the attempted collection of such
Indebtedness (including without limitation, reasonable attorney's fees,
collection agency fees and court costs), after taking into account all amounts
actually received by Bank from Cardholder in compromise or settlement thereof.
ARTICLE VIII
WARRANTIES AND COVENANTS OF RETAILER
SECTION 8.01 PRESENTMENT WARRANTIES. Retailer represents and warrants to
Bank with respect to each Account and the related Charge Slips and Charge
Transaction Data (and the following shall be deemed restated, renewed and
reaffirmed each time Bank receives Charge Transaction Data from Retailer):
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(a) That the Charge Slip represents a bona fide sale by Retailer of
the Goods and/or Services described in such Charge Slip that the Charge Slip has
not been included in any Charge Transaction Data previously transmitted to Bank,
and that: (i) in the case of Store Purchases from Retailer, Retailer has
delivered all the Goods and fully performed all the Services listed on such
Charge Slip; and (ii) in the case of Telephone Purchases, Retailer has shipped
all the Goods listed on such Charge Slip (except that clauses (i) and (ii) do
not apply to any Purchase for which the amount appearing on the Charge Slip
constitutes solely a Qualified Special Order Deposit);
(b) (i) Except with respect to Absentee Transactions or a Charge Slip
containing only a Restocking Fee, that the Charge Slip is signed and that the
signature on the Charge Slip is similar to the signature of the Cardholder, is
similar to the signature on the Credit Card or the signature on another item of
valid identification examined by Retailer, is genuine, and is not forged or
unauthorized and (ii) that all Charge Slips, Account information and Charge
Transaction Data are bona fide, accurate and not fraudulent;
(c) That the Charge Slip has not been materially altered;
(d) That the transaction did not involve a cash advance of Goods or
Services not listed on the Charge Slip and only Goods and Services sold by
Retailer are the subject of the transaction;
(e) That the transaction giving rise to the Charge Transaction Data
was conducted by Retailer in accordance with the Operating Procedures and
constituted either a Store Purchase at a Retailer Store or a Telephone Purchase;
(f) That none of the Goods and/or Services listed on such Charge Slip
is an extended warranty;
(g) That the Account number of the Cardholder has been accurately
printed on each Charge Slip with the authorization number provided to Retailer
by Bank;
(h) That Retailer has not received, directly or indirectly, and that
Retailer will refuse to accept, any reimbursement, payment or trade-in for the
charges listed on such Charge Slip (other than from Bank) and that Retailer not
has or will, either directly or indirectly, take or grant or purport to take or
grant any right or security interest in such Charge Slip or any related Credit
Slip (other than to Bank);
(i) That the transactions giving rise to the Charge Transaction Data
were conducted by Retailer in accordance with all applicable laws and
regulations that pertain to the sales of Goods and/or Services by Retailer
(including, but not limited to, any laws, regulations, licensing or registration
requirements applicable to the sale or distribution of such Goods and/or
Services) and that the Charge Transaction Data is not invalid, illegible,
inaccurate or incomplete;
(j) That the balance in each such Account is valid and enforceable
against the Cardholder and that there is no fact, nor any claim or defense of a
Cardholder, that would impair the validity, enforceability, or collectibility of
the obligation of the Cardholder evidenced by the Charge Slip;
(k) That the Cardholder for such Account is a natural person and the
Goods and/or Services were sold by Retailer in the ordinary course of business
to Cardholders for personal, family or household purposes; and
(l) That (i) to the best of Retailer's knowledge, no petition under
any bankruptcy or insolvency laws has been filed by or against any Cardholder
identified in such Charge Transaction Data, (ii) no such Cardholder is deceased
or incompetent, and (iii) such Cardholder has a valid United States address.
SECTION 8.02 ACCOUNT COVENANTS. Until the Final Liquidation Date, Retailer
covenants to do the following with respect to each transaction involving an
Account or the Program:
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(a) Retailer shall respond to, and cooperate with, Bank promptly in
connection with the resolution of disputes with Cardholders;
(b) Retailer shall maintain a policy for the exchange and return of
Goods and adjustments for Services rendered or not rendered that is in
accordance with all applicable laws and shall promptly deliver a Credit Slip to
the Cardholder and include credit for such return or adjustment in the Charge
Transaction Data in accordance with the terms of this Agreement and the
Operating Procedures in the event the return/exchange has been authorized in
accordance with Retailer's policies;
(c) Retailer shall not seek or obtain any special agreement or
condition from, nor discriminate in any way against, Cardholders with respect to
the terms of any transaction;
(d) Retailer shall comply with all Retailer's warranties, if any, with
respect to Goods and Services sold under an Account; and
(e) Retailer shall do nothing to prevent an Account from being valid
and enforceable against any Cardholder otherwise obligated in respect thereof
(f) Retailer will not submit any Charge Slip that includes a
Restocking Fee unless Retailer's policy and practice of charging a Restocking
Fee was disclosed the Cardholder who made the Purchase with respect to which
such Restocking Fee is being imposed and such disclosure was in compliance with
applicable law.
SECTION 8.03 GENERAL REPRESENTATIONS AND WARRANTIES. To induce Bank to
originate Accounts and permit Purchases thereon, Retailer makes the following
representations and warranties to Bank, each of which shall survive the
execution and delivery of this Agreement, and each of which shall be deemed to
be restated and remade on each date on which Bank originates any Account or
extends any credit hereunder:
(a) Retailer (i) is duly organized, validly existing, and in good
standing under the laws of the state of its incorporation, (ii) is duly
qualified and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification; (iii) has the requisite power and authority and the legal right
to own and operate its properties, to lease the properties it operates under
lease, and to conduct its business as now conducted and as it is contemplated to
be conducted hereafter; (iv) has all necessary licenses, permits, consents, or
approvals from or by, and has made all necessary notices to, all governmental
authorities having jurisdiction, to the extent required for such current
ownership and operations or for such further operations as are proposed to be
conducted; and (v) is in compliance with its organizational documents.
(b) The execution, delivery, and performance of this Agreement and all
instruments and documents to be delivered by Retailer hereunder: (i) are within
its corporate power; (ii) have been duly authorized by all necessary and proper
corporate action; (iii) do not and will not contravene any provisions of its
organizational documents; (iv) do not and will not violate any law or regulation
or any order or decree of any court or governmental instrumentality; (v) do not
and will not conflict with or result in the breach of, or constitute a default
under any indenture, mortgage, deed of trust, lease, agreement, or other
instrument to which it is a party or by which it or any of its assets or
property are bound; and (vi) do not require any filing or registration with or
the consent or approval of any governmental body, agency, authority, or any
other person which has not been made or obtained. This Agreement has been duly
executed and delivered by Retailer and constitutes a legal, valid, and binding
obligation of Retailer, enforceable against Retailer in accordance with its
terms.
(c) Retailer is Solvent.
(d) Retailer is not in default with respect to any material contract,
agreement, lease or other instrument to which it is a party nor has Retailer
received any notice of default under any material contract,
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agreement, lease or other instrument where such default or notice of default has
a material adverse effect on Retailer's ability to perform its obligations under
this Agreement.
(e) No contract, agreement, lease, or other instrument to which
Retailer is a party or by which Retailer is bound, and no provision of any
applicable law or governmental regulation, materially and adversely affects or
may affect the business, operations, prospects, property, or financial or other
condition of Retailer or Retailer's ability to perform its obligations under
this Agreement.
(f) All information furnished by Retailer to Bank for purposes of or
in connection with this Agreement or any information hereafter furnished by
Retailer to Bank, is and will be true and correct in all material respects and
no such information omits to state a material fact necessary to make the
information so furnished not misleading. There is no fact known to Retailer
which Retailer has not disclosed to Bank which could materially and adversely
affect the financial condition, business, operations, property, or prospects of
Retailer.
(g) No Default or Event of Default has occurred and is continuing.
(h) The chief executive office of Retailer is accurately set forth on
Schedule 1 hereto and has been located at such address since November 1993. The
address of each of the Retailer Stores and the correct legal name of Retailer is
accurately set forth on Schedule 1 hereto. Such legal name, together with the
other Retailer Names are the only names under which Retailer currently conducts
or has, since November 1993, conducted business.
(i) There are no actions, suits or proceedings existing or pending
before any court, arbitrator or governmental administrative body or agency, or,
to the knowledge of Retailer, threatened against Retailer which could affect the
validity or enforceability of any Account, which could affect the validity or
enforceability of this Agreement or which could have a material adverse effect
on the ability of Retailer to perform its obligations hereunder.
(j) Retailer has not licensed the use of all or any portion of any
Retailer Store for the sale of goods or services by any person other than
Retailer and Retailer sells any goods or services which it has received on
consignment from any person.
(k) Neither Ethan Allen Interiors, Inc. nor any other Affiliate of
Retailer owns or operates any store that does business under the service mark
"Ethan Allen Home Interiors."
SECTION 8.04 ADDITIONAL AFFIRMATIVE COVENANTS OF RETAILER. Until the Final
Liquidation Date, unless Bank shall otherwise consent in writing, Retailer will:
(a) So long as Retailer is subject to the reporting requirements of
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended,
to the extent such information is not available to the public on the Internet:
(i) as soon as reasonably available and in any event within ninety (90) days
after the close of its fiscal year, submit to Bank an audited annual report of
Retailer's annual earnings, including its audited consolidated balance sheets,
income statements and statement of cash flows and changes in financial position
and (ii) promptly after the filing thereof, submit to Bank copies of all proxy
statements and all reports on Forms 10-K, 10-Q, and 8-K filed with the
Securities and Exchange Commission by Retailer.
(b) So long as Retailer is not subject to the reporting requirements
of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended (i) as soon as reasonably available and in any event within ninety (90)
days after the close of its fiscal year, submit to Bank an audited annual report
of Retailer's annual earnings, including its audited consolidated balance sheet,
income statement and statement of cash flows and changes in financial position
and (ii) as soon as reasonably available and in any event within forty-five (45)
days after the close of each of its fiscal quarters, submit to Bank an unaudited
quarterly report of Retailer's earnings,
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including its consolidated balance sheet, income statement and statement of cash
flows and changes in financial position, accompanied by the certification on
behalf of Retailer by Retailer's chief financial officer, substantially in the
form attached hereto as Exhibit F, that such financial statements were prepared
in accordance with generally accepted accounting principles applied on a
consistent basis and present fairly the consolidated financial position and the
results of operations of Retailer as of the end of such fiscal quarter.
(c) Comply in all material respects with all laws, regulations, rules
and orders applicable to Retailer, its respective businesses, or its respective
properties including, without limitation, all laws, regulations, rules and
orders relating to (i) descriptions of Goods and/or Services, pricing, charges,
and related wording and content of the Program Documents where such wording or
content is furnished by Retailer, (ii) Retailer's sales material or practices,
including, but not limited to, the sales order forms, sales invoices,
promotional and advertising materials and similar forms or (iii) actions or
omissions (at the point-of-sale or otherwise) of Retailer or its employees,
agents or representatives.
(d) Promptly upon receipt, deliver to Bank copies of any
communications relating to an Account received from a Cardholder or from any
governmental or regulatory authority.
(e) Permit Bank, from time to time, during normal business hours and
upon reasonable notice, to visit the offices of Retailer, to discuss the Program
with Retailer and its officers, directors and employees and to examine the books
and records of Retailer relating to the Program or to have the same examined by
Bank's attorneys and/or accountants. In connection therewith, Retailer agrees,
subject to applicable privacy and other laws, to make data regarding the Program
available to Bank and in connection therewith to permit Bank to make copies of
such documentation.
(f) Provide all assistance reasonably requested by Bank relating to,
in connection with or arising out of any dealings with any current or former
Authorized Dealer, and cooperate with Bank in all respects in connection with
any such matters. In determining assistance Retailer may be reasonably expected
to provide, Bank acknowledges that current and former Authorized Dealers are not
under Retailer's corporate control and that Retailer may or may not have any
contractual right to insist that current and former Authorized Dealers take or
refrain from taking any particular action that Bank may request.
(g) Pay when due any sales taxes relating to the sale of Goods and/or
Services and, at Bank's expense, shall reasonably cooperate with Bank to
recover, and pay to Bank the amount of any refund received with respect thereto,
any sales tax charged to an Account which Bank has notified Retailer has been
written-off.
(h) Notify Bank in writing of any change in Retailer's Moody's Debt
Rating or S&P Debt Rating within five (5) days after the occurrence thereof.
(i) Within ten (10) days after the end of the first and third fiscal
quarters in each fiscal year of Retailer, cause to by duly executed and
delivered to Bank a certificate substantially in the form of Exhibit G hereto.
SECTION 8.05 EXCLUSIVITY AND RIGHTS OF FIRST OFFER AND REFUSAL. From and
after the Program Commencement Date and continuing until the expiration or
termination of the Operation Period, other than the GE Canada Program, Retailer
will not promote, sponsor, solicit, permit solicitation of, or make available to
customers of Retailer or otherwise provide:
(a) at any Participating Store any open-end consumer credit program,
credit facility, credit card program, charge program or debit or secured card
program or facility other than a Permitted Credit Program. As used herein,
"Permitted Credit Program" means (i) the Program; (ii) Alternative Credit
Programs; (iii) credit provided by generally accepted multi-purpose credit or
charge cards such as American Express, Mastercard, Visa and the Discover card or
by any generally accepted multi-purpose debit or secured cards (provided that
none of the cards referred to in this clause (iii) may be "co-branded",
"sponsored" or "co-sponsored" with Retailer and provided that no Retailer Name
or any variation thereof may appear on such cards); and (iv) the closed-end
credit program
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currently in effect between Retailer and MBNA America Bank N.A. as such program
may be extended, amended or supplemented from time to time but only so long as
such credit program remains solely a closed-end program;
(b) at any stores (other than a Participating Store) owned or operated
by Retailer or any Affiliate of Retailer any credit program, credit facility,
credit card program, charge program or debit or secured card program or facility
(whether open-end, closed-end, private label or third party) other than a
Permitted Credit Program unless Retailer gives Bank prior written notice of, and
a reasonable opportunity to present a bid to provide, such proposed program
through Bank or any Affiliate of Bank. Retailer shall give Bank such notice
before Retailer has begun any negotiations or reached any agreement or
understanding with any other credit provider regarding such proposed program,
and the conditions under which Bank is allowed to develop and present its own
bid must provide Bank and its Affiliates an opportunity that is no less
favorable than the opportunity Retailer provides to any other potential credit
provider.
(c) (i) any commercial or business credit program or facility for use
at Participating Stores, (ii) any closed-end credit program or facility for use
at Participating Stores or (iii) any credit program or facility for use outside
of the United States, in each case, other than a Permitted Credit Program,
unless Retailer has complied with this Section 8.05(c). Prior to accepting or
entering into any agreement, arrangement or understanding with any Person
regarding a proposed program or facility of the types described in clauses (i),
(ii) and (iii) of this Section 8.05(c) (a "Proposed New Program"), Retailer
shall provide a written notice to Bank (an "Offer Notice") setting forth in
reasonable detail the terms and conditions of such Proposed New Program. Bank
shall have thirty (30) days from the date it receives such Offer Notice (the
"Review Period") to determine whether it or one of its Affiliates desires to
provide the Proposed New Program on terms and conditions no less favorable to
Retailer than those set forth in such Offer Notice. If Bank or one of its
Affiliates delivers a written notice within such Review Period stating that it
or one of its Affiliates agrees to provide the Proposed New Program, then
Retailer shall not enter into any other arrangements or agreements with any
other Person regarding such Proposed New Program, and Bank and Retailer shall
promptly enter into good faith negotiations for the New Proposed Program on
terms substantially similar to those set forth in the Offer Notice. If,
notwithstanding each party's good faith efforts to negotiate a definitive
agreement governing, and to implement, such New Proposed Program, such program
has not become effective within one hundred twenty (120) days after the date
when Bank provided notice that it wished to provide the Proposed New Program
(the "Implementation Period"), then Bank's right to provide such program based
on that Offer Notice shall lapse. If Bank does not, within the Review Period,
deliver a written notice to Retailer stating that it or one of its Affiliates
agrees to provide the Proposed New Program or if Bank's right to provide such
program lapses at the end of the Implementation Period, then Retailer shall be
entitled, at the end of the Review Period or the Implementation Period (as
applicable), to enter into the arrangements set forth in the Offer Notice (a
"Third Party Arrangement"). If within nine months after the expiration of any
such Review Period or Implementation Period, Retailer has not commenced the
credit program described in the applicable Offer Notice, then, at the expiration
of such nine-month period, Retailer's right to enter into such Proposed New
Program based on such notice shall lapse. If Retailer continues to wish to enter
into such Proposed New Program (or any other Proposed New Program), then
Retailer shall provide a separate written notice to Bank, which notice shall be
deemed to be a new "Offer Notice" under this Section 8.05(c) subject to the
terms hereof. This procedure shall continue indefinitely until the earlier of
(a) the date on which Bank or one of its Affiliates delivers a written notice
within any such 30-day period stating that it or one of its
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Affiliates agrees to provide the Proposed New Program, or (b) the date on which
Retailer commences the Proposed New Program with another provider within any
such nine-month period. The provisions of this Section 8.05(c) shall also apply
to any successive proposed arrangements by Retailer regarding any such Proposed
New Program.
ARTICLE IX
WARRANTIES OF BANK
SECTION 9.01 REPRESENTATIONS AND WARRANTIES OF BANK. To induce Retailer to
participate in the Program and to promote the extension of credit thereunder,
Bank makes the following representations and warranties to Retailer, each of
which shall survive the execution and delivery of this Agreement, and each of
which shall be deemed to be restated and remade on each date on which Bank
originates Accounts or extends credit hereunder:
(a) Bank (i) is a banking corporation duly organized, validly
existing, and in good standing under the laws of the State of Georgia; (ii) has
the requisite corporate power and authority and the legal right to own, pledge,
mortgage, and operate its properties, to lease the properties it operates under
lease, and to conduct its business as now conducted and as it is contemplated to
be conducted hereafter; and (iii) is in compliance with its articles of
incorporation and bylaws.
(b) The execution, delivery, and performance of this Agreement and all
instruments and documents to be delivered by Bank hereunder: (i) are within
Bank's corporate power; (ii) have been duly authorized by all necessary and
proper corporate action; (iii) do not and will not contravene any provision of
Bank's certificate of incorporation or bylaws; (iv) do not and will not violate
any law or regulation or an order or decree of any court or governmental
instrumentality to which Bank is subject; (v) do not and will not conflict with
or result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, lease, agreement, or other instrument to which Bank is
a party or by which Bank or any of its assets or property are bound; and (vi) do
not require any filing or registration by Bank with or the consent or approval
of any governmental body, agency, authority, or any other person which has not
been made or obtained. This Agreement has been duly executed and delivered by
Bank and constitutes the legal, valid, and binding obligation of Bank,
enforceable against Bank in accordance with its terms.
(c) Bank is Solvent.
(d) Bank is not in default with respect to any material contract,
agreement, lease, or other instrument to which it is a party nor has Bank
received any notice of default under any such material contract, agreement,
lease, or other instrument which such default or notice of default would
materially and adversely affect the performance by Bank of its obligations under
this Agreement.
(e) All actions taken by Bank in administering the Program, preparing
the Operating Procedures and any Account Documentation prepared by Bank, setting
credit terms and finance rates, and the Credit Application evaluation process
and billing and collection of Accounts will be in material compliance with all
applicable federal and state laws and implementing regulations, including but
not limited to the federal Truth-in-Lending Act, Equal Credit Opportunity Act
and Fair Credit Reporting Act and implementing regulations, provided that Bank
does not make any representation or warranty as to (i) the merchandise
description, pricing, charges and related wording and content of any Account
Documentation where such wording and content is furnished by a Person other than
Bank, including Retailer, Authorized Dealers, or any credit insurance carrier or
used by Bank in preparation of the Account Documentation, or (ii) Retailer's and
Authorized Dealers' sales materials or practices, including, but not limited to,
the sales order form, sales invoice, promotional materials and similar forms,
and/or actions of Retailer's and Authorized Dealers' employees or sales
representatives.
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ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
SECTION 10.01 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Retailer shall fail to pay Bank any amount when due and payable
and the same shall remain unpaid for a period of fifteen (15) days after Bank
shall have made written demand therefor.
(b) Except as otherwise provided in Section 10.01(c), Retailer shall
fail or neglect to perform, keep, or observe any term, provision, condition, or
covenant contained in this Agreement that is required to be performed, kept, or
observed by it and such failure or neglect shall continue for a period of thirty
(30) days after Bank shall have given written notice thereof.
(c) Any representation, warranty or statement, made, delivered or
deemed made by Retailer or by any officer of Retailer shall prove not to have
been true and correct in all material respects as of the date when made,
delivered or deemed made.
(d) Retailer (i) shall no longer be Solvent; (ii) shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally; (iii) shall make a general assignment for the
benefit of its creditors; or (iv) any proceeding shall be instituted by or
against it seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in the
case of a proceeding instituted against Retailer, such proceeding has not been
dismissed within ninety (90) days after its commencement; or (v) Retailer shall
take any corporate action to authorize any of the actions set forth above in
this paragraph (d).
(e) Retailer shall be in default under any loan agreement, indenture
or other instrument relating to any indebtedness for borrowed money in an amount
greater than Fifteen Million Dollars ($15,000,000), and such default gives any
party, either with or without notice and without giving effect to any extension
of any grace period, the right to accelerate such indebtedness.
(f) A final judgment or judgments for the payment of money in an
amount in excess of Fifteen Millions Dollars ($15,000,000) shall be rendered
against Retailer and the same shall not be either (i) covered by insurance where
the insurer has affirmatively and expressly accepted liability therefor or (ii)
vacated, stayed, bonded, paid, or discharged prior to expiration of the
applicable appeal period.
(g) A material adverse change has occurred in the operations,
financial condition, business or prospects of Retailer which Bank has reasonably
determined has impaired or is reasonably likely to impair, the ongoing operation
or continued viability of the Program.
(h) Any Accounts, Indebtedness, Charge Slips or proceeds thereof shall
be (or shall purportedly be) (i) attached, seized, levied upon or subject to a
writ by a creditor of Retailer, or shall come within the possession of any
receiver, trustee, custodian, or assignee for the benefit of creditors of
Retailer or (ii) subject to any lien or right of any third party directly or
indirectly arising by, through or on account of Retailer or any creditor
thereof.
(i) Retailer shall fail to deliver or amend an Eligible Letter of
Credit as required pursuant to Section 6.10(a)
(j) Ethan Allen Interiors, Inc. shall fail to execute and deliver a
guarantee to Bank as and when required by its undertaking on the signature page
of this Agreement.
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SECTION 10.02 REMEDIES.
(a) If any Event of Default shall have occurred and be continuing, all
of the Retailer's payment obligations hereunder shall, in the Bank's sole
discretion, be deemed immediately due and payable.
(b) If any Event of Default shall have occurred and be continuing,
Bank shall have the right to (i) discontinue originating or offering new
Accounts; (ii) discontinue accepting Charge Slips and Charge Transaction Data,
or otherwise extending credit, (iii) give notice terminating the Operation
Period and/or (iv) exercise all such other rights and remedies as Bank may have
under this Agreement and under all applicable laws.
ARTICLE XI
TERM/TERMINATION
SECTION 11.01 OPERATION PERIOD. The Operation Period shall continue from
the Effective Date until April 5, 2003 (the "Initial Term"). Unless a party
shall provide written notice of non-extension to the other parties hereto at
least six (6) months prior to the expiration of the Initial Term (or, where
applicable, the expiration of any extension term) the Operation Period shall
thereafter be extended automatically for successive one-year periods. If any
party does provide written notice of non-extension in a timely manner to the
other parties hereto, the Operation Period will expire at the end of the Initial
Term or any extension term then in effect.
SECTION 11.02 TERMINATION. Notwithstanding anything in Section 11.01 to the
contrary, the Operation Period may be terminated as provided below without need
of any prior judicial declaration:
(a) Retailer shall have the right to terminate the Operation Period
immediately upon written notice if a Bank Termination Event shall occur and be
continuing except that, in the case of a termination based on a Bank Termination
Event under clause (v) of the definition thereof, such termination shall not be
effective until ninety (90) days after Retailer has given written notice
thereof.
(b) Bank shall have the right to terminate the Operation Period
immediately upon written notice if an Event of Default shall occur and be
continuing.
(c) Retailer, shall have the right, upon thirty (30) days prior
written notice, to terminate the Operation Period at any time after Bank makes
an election pursuant to Section 2.02(b)(ii) hereof.
(d) As provided in Section 13.02, Bank shall have the right to
terminate the Operation Period upon one hundred eighty (180) days' prior written
notice if a Retailer Primary Divestiture shall occur.
(e) As provided in Section 11.04, either Retailer, or Bank shall have
the right to terminate the Operation Period if a force majeure event shall
occur.
(f) Bank shall have the right to terminate the Operation Period upon
written notice if (i) usury rates for the State of Georgia change, laws
regulating Bank's rate structure change, or federal or state laws, regulations
or other authority preempt the exportation of Bank's rate structure; (ii) Bank
has sought to engage Retailer in a good faith renegotiation of the terms of this
Agreement; (iii) the parties hereto have not agreed to modifications to the
terms of this Agreement which Bank reasonably believes necessary to prevent a
material adverse effect on Bank (or on its ability to perform the transactions
contemplated by this Agreement) resulting from the change in usury rates or
other laws regulating Bank's rate structure or the exportation thereof; and (iv)
either Bank is required to initiate changes to the Program to comply with
applicable law or more than one hundred eighty (180) days have passed since Bank
first sought to engage Retailer in a good faith renegotiation of the terms of
this Agreement.
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(g) Bank shall have the right to terminate the Operation Period upon
written notice if any of the following events (each a "Change of Control") shall
occur: (i) Any person or group of persons shall acquire beneficial ownership of
fifty percent (50%) or more of the combined voting power of the then outstanding
voting securities of Retailer entitled to vote generally in the election of
directors; (ii) the stockholders of Retailer shall approve a reorganization,
merger or consolidation (each a "Reorganization"), in each case through which
all or substantially all the persons who were the respective beneficial owners
of the voting securities of Retailer immediately prior to such Reorganization do
not beneficially own, following such Reorganization, directly or indirectly,
more than fifty percent (50%) of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the corporation, as a result of such Reorganization; or (iii) all
or substantially all the assets or property of Retailer shall be sold or
otherwise disposed of in one transaction or series of related transactions
(h) Bank shall have the right to terminate the Operation Period if
Retailer's Current Ratio as of the end of any fiscal quarter is less than .8 to
1 except that, in the case of the first such shortfall during any period of four
(4) consecutive fiscal quarters, Bank shall not be entitled to terminate the
Operation Period under this Section 11.02(h) if Retailer causes its Current
Ratio to be greater than or equal to .8 to 1 within seventy-five (75) days after
the end of such fiscal quarter
(i) Either Bank or Retailer shall have the right immediately to
terminate the Operation Period if Bank requests Retailer to cause an Eligible
Letter of Credit to be issued under Section 6.10 and such Eligible Letter of
Credit has not been issued and delivered to Bank within twenty-five (25) day
after Bank's request.
SECTION 11.03 PURCHASE OF ACCOUNTS BY RETAILER UPON TERMINATION.
(a) Subject to Section 14.09 hereof, Retailer, shall have the option,
exercisable as provided below, to purchase or to arrange for the purchase by a
third party of the portfolio of Active Accounts upon the termination or
expiration of the Operation Period for a purchase price payable in immediately
available funds and in an amount equal to the sum of (i) one hundred and one and
one-half percent (101.5%) of the then aggregate Indebtedness of all Active
Accounts; minus (ii) any amounts previously paid under Section 13.02(e)(ii) or
Section 13.03(d)(ii) hereof; plus (iii) if the Operation Period has been
terminated prior to the end of the Initial Term under Sections 11.02(b), (g),
(h) or (i), the Unamortized Incentive Bonus; provided, however, that such right
to purchase or arrange for the purchase of Active Accounts shall not apply to
Accounts in which Bank has sold participations or to Accounts that have been
securitized by Bank. Notwithstanding the foregoing, in the case of a termination
under Section 11.02(h), the portion of the purchase price referred to in clause
(i) of this Section 11.03(a) shall equal one hundred percent (100%) of the then
aggregate Indebtedness of all Active Accounts
(b) If the Operation Period is expiring or terminating as a result of
a notice of non-extension given by Bank or by Retailer under Section 11.01
hereof, Retailer, shall exercise its option to purchase or arrange for the
purchase of the Accounts as set forth in 11.03(a) by giving notice of such
election not later than the ninetieth (90th) day following the Termination
Notice Date. Retailer shall thereafter complete such purchase on the first
Business Day after the expiration or termination of the Operation Period.
(c) If the Operation Period is terminating as a result of a notice of
termination given under Section 11.02 (other than a notice given in respect of a
Retailer Primary Divestiture), Retailer, shall exercise its option to purchase
or arrange for the purchase of the Accounts as set forth in 11.03(a) by giving
notice of such election not later than the thirtieth (30th) day following the
date on which the Operation Period terminates, which notice shall specify a date
for the purchase of such Accounts which is not more than ninety (90) days after
the date Retailer first gives its notice exercising its option to purchase.
Retailer shall thereafter complete such purchase on the date specified in the
notice exercising its option to purchase.
(d) If the Operation Period is terminating as a result of a notice of
termination given by Bank in respect of a Retailer Primary Divestiture,
Retailer, shall exercise its option to purchase the Accounts or arrange for
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the purchase of the Accounts as set forth in Section 11.03(a) by giving notice
of such election as provided in Section 13.02 hereof. Retailer shall thereafter
complete such purchase on the Primary Divestiture Date.
(e) If Retailer:
(i) fails to deliver a notice within the times required by this
Section 11.03;
(ii) fails to complete a purchase of the Accounts on the date
designated for the closing of such purchase; or
(iii) prior to completing a purchase of the Accounts, makes
available to its customers or otherwise provides at any Participating Store any
credit program, credit facility, credit card program, charge program or debit or
secured card program or facility (whether open-end, closed-end, private label or
third party), other than (A) credit provided in connection with the Program
hereunder, (B) credit provided in connection with an Alternative Credit Program,
(C) credit provided by generally accepted multi-purpose credit or charge cards
such as American Express, Mastercard, Visa and the Discover card or by any
generally accepted multi-purpose debit or secured cards (provided that none of
the cards referred to in this clause (C) may be "co-branded", "sponsored" or
"co-sponsored" with Retailer and provided that no Retailer Name or any variation
thereof may appear on such cards), and (D) the closed-end credit program
currently in effect between Retailer and MBNA America Bank N.A. as such program
may be extended, amended or supplemented from time to time but only so long as
such credit program remains solely a closed-end program;
then the option to purchase the Active Accounts shall immediately expire.
SECTION 11.04 TERMINATION FOR FORCE MAJEURE.
(a) The Operation Period may be terminated by Retailer, by written
notice to Bank, or by Bank by written notice to Retailer without penalty after
the passing of sixty (60) days following the notice by one party to the others
that its performance hereunder is prevented or materially impeded, without the
ability to cure, by one of the following force majeure events: acts of God,
fire, explosion, accident, war, nuclear disaster, riot or material changes in
applicable laws or regulations rendering it illegal or impossible for the
notifying party to perform as contemplated in this Agreement. Such sixty (60)
day period may be shortened upon written agreement executed by duly-authorized
officers of each party or if required by applicable law or regulation. This
Agreement may also be terminated by any party hereto on thirty (30) days' prior
written notice to the other parties hereto if the performance of another party
has been prevented by such a force majeure event for a period of at least sixty
consecutive (60) days.
(b) Any failure to perform caused by a force majeure event shall not
be considered a breach of this Agreement during the period of such disability if
the disabled party promptly advises the other parties in writing that it is
unable to perform due to such a force majeure event, setting forth: (i) the
nature of the event; (ii) its expected effect(s) and duration; (iii) any
expected development which may further affect performance hereunder; and (iv)
the efforts, if any, which will be made to cure such force majeure or provide
substitute performance.
SECTION 11.05 RIGHTS UPON TERMINATION OF OPERATION PERIOD; LIQUIDATION OF
ACCOUNTS.
(a) Except as is expressly provided to the contrary in this Agreement
all of the terms, conditions and covenants of this Agreement shall continue in
effect following the expiration or termination of the Operation Period until the
Final Liquidation Date. Upon the termination or expiration of the Operation
Period, Bank shall continue to own the Accounts unless and until Retailer shall
have purchased or caused such Accounts to be purchased pursuant to Section 11.03
hereof. As is expressly provided elsewhere in this Agreement, and without
limiting other express provisions of this Agreement, following the expiration or
termination of the Operation Period, Bank shall have no further obligation to
originate any Accounts, extend further credit or pay Retailer the
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Promotional Fee described in Section 6.03 and shall not be required to provide
insert or message services in connection with any billings statements. In
addition, from and after the Termination Notice Date, Bank shall have no
obligation to pay any portion of the Insurance Net Income or the Value-Added Net
Income to Retailer. Notwithstanding anything herein to the contrary, however,
(i) all indemnities contained herein and (ii) Retailer's obligations under
Section 14.13 shall survive the termination of the Agreement and the Final
Liquidation Date and shall continue indefinitely.
(b) If the Operation Period terminates or expires and Retailer does
not exercise its option to purchase or arrange for a purchase of all Active
Accounts from Bank, then on the later of (i) the first Business Day after the
Operation Period terminates or expires; or (ii) the first Business Day after
Retailer's option to purchase the Active Accounts under Section 11.03 expires,
Retailer shall pay to Bank an amount equal to the Unamortized Incentive Bonus.
(c) Upon any termination or expiration of the Operation Period, if
Retailer does not exercise its option to purchase or arrange for a purchase of
all Active Accounts from Bank, then Bank shall have the right, in addition to
and retaining all other rights it may have under the terms of this Agreement or
applicable law to:
(i) liquidate the remaining Accounts in any lawful manner which
may be expeditious or economically advantageous to Bank including the issuance
of a replacement or substitute credit card;
(ii) in connection with such liquidation, use the Retailer Names
in accordance with the provisions of this Agreement in communicating with
existing Cardholders; and/or
(iii) transfer or sell any or all of the Accounts to any person
(with or without a corresponding assignment of Bank's chargeback and indemnity
rights under this Agreement) or solicit Cardholders to transfer balances to
other credit vehicles.
SECTION 11.06 RETURN OF EQUIPMENT. At any time after the termination or
expiration of the Operation Period, or in connection with any Partial
Termination Notice given in respect of a Retailer Primary Divestiture or a
Retailer Secondary Divestiture pursuant to Sections 13.02 and 13.03 hereof, Bank
may provide written notice to Retailer requesting the return of any Hypercom
units and related printers previously delivered by Bank to Retailer that have
been used to process transactions under this Program within the twelve (12)
months immediately preceding such termination or expiration (such units and
printers being collectively referred to as the "Applicable Units"). Within
thirty (30) days of receipt of such notice, Retailer shall cause the Applicable
Units to be returned to Bank at such location in the continental United States
as Bank may specify all at Retailer's sole cost and expense. The Applicable
Units shall be returned by Retailer in substantially the same condition as when
first delivered by Bank to Retailer, ordinary wear and tear excepted. Bank shall
have the right to the return of the Applicable Units whether or not Retailer
elects to purchase or arrange for the purchase of the Accounts under Section
11.03 hereof. If any Applicable Units are lost, stolen or not otherwise returned
as required herein, Retailer shall pay to Bank an amount of $666 for each such
damaged or unreturned Applicable Unit.
SECTION 11.07 LICENSE OF CARDHOLDER LIST. If requested in writing by
Retailer on or before the expiration or termination of the Operation Period,
Bank shall, promptly after such expiration or termination, provide to Retailer a
computer tape (the "Tape") containing the name and address for the Cardholder
under each Account that is an Active Account on such expiration or termination
date, together with such other pertinent information regarding such Cardholder
or Account as may be agreed to by Bank and Retailer. All information on the Tape
is collectively referred to herein as the "Tape Information." Notwithstanding
the foregoing, Retailer shall be entitled to make such request only if Retailer
has not exercised its option purchase the Active Accounts under Section 11.03
and such option has either lapsed or been waived in writing. Retailer
acknowledges and agrees that, notwithstanding Bank's delivery of the Tape to
Retailer, Bank shall remain the sole owner of the Tape Information and, as set
forth in Section 3.04 hereof, the Cardholder List and Bank shall retain all of
its rights under this Agreement or applicable law with respect to the Tape
Information and the Cardholder List. Bank's delivery of the Tape shall
constitute Bank's grant to Retailer of a perpetual non-exclusive license to use
the Tape and the Tape
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Information for the limited purpose of soliciting the Cardholders identified on
the Tape for such products or services as Retailer may elect. Retailer shall
not, without Bank's prior written consent, disclose, sell, assign, sublicense or
otherwise transfer all or any portion of the Tape, the Tape Information or the
Customer List to any third party. In exchange for such license, Retailer shall
pay Bank an amount (the "License Price") equal to Fifty Thousand Dollars
($50,000) plus $0.50 for each Cardholder identified on the Tape. Retailer shall
pay such amount at delivery of the Tape. The Tape and the Tape Information shall
be delivered AS IS and WHERE IS without any representation or warranty of any
kind, including, without limitation, WITHOUT ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE and without any warranty as
to the accuracy of any of the information contained thereon. If the Tape is
corrupted or otherwise non-functional or does not contain substantially all the
Tape Information, then Bank will use commercially reasonable efforts to replace
the Tape with a functional tape that contains substantially all the Tape
Information. If Bank, notwithstanding its commercially reasonable efforts, is
unable to provide such a replacement tape, Retailer's sole remedy shall be a
refund of the License Price.
ARTICLE XII
INDEMNIFICATION
SECTION 12.01 INDEMNIFICATION BY RETAILER. Retailer agrees to protect,
indemnify, and hold harmless Bank, its Affiliates, and their respective
employees, officers, and directors, from and against any and all losses,
damages, liabilities, costs, and expenses (including reasonable attorneys' fees
and expenses), judgments, damages, claims, demands, offsets, defenses,
counterclaims, actions, or proceedings ("Losses") by whomsoever asserted,
including, without limitation: (i) the Cardholders or other persons responsible
for the payment of Accounts; (ii) any person or persons who prosecute or defend
any proceedings as representatives of or on behalf of a class or interest group;
(iii) any governmental instrumentality; or (iv) any other third party
(including, without limitation, any current or former Authorized Dealers), to
the extent such Losses arise out of, are connected with, or result from:
(a) any transaction, contract, understanding, promise, representation,
or any other relationship, actual, asserted, or alleged, between Retailer and
any Cardholder relating to an Account;
(b) any Goods and/or Services the purchase of which was financed under
an Account (including, without limitation, the sale thereof, and compliance with
any laws, regulations, licensing or registration requirements applicable
thereto, and any product liability or warranty claims with respect to any Goods
and Services) whether purchases from Retailer or a current or former Authorized
Dealer;
(c) any act, or any omission where there was a duty to act, by
Retailer or its employees, officers, directors, shareholders, agents, lessees,
franchisees or independent contractors relating to an Account or any item of
Indebtedness;
(d) any breach by Retailer of any of the terms, covenants, or other
provisions contained in this Agreement or any other instrument or document
delivered by Retailer to Bank in connection herewith;
(e) any representation or warranty made by Retailer in this Agreement
or in any other instrument or document delivered by Retailer to Bank which
proves to have been untrue or incorrect in any material respect as of the date
when made or deemed made hereunder;
(f) the failure of Retailer to comply with any law, rule or regulation
applicable to Retailer;
(g) any advertisements, solicitations or other promotions of the
Program including Credit-based Promotions; or
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(h) the Tape or any of the Tape Information to the extent such Loss
arose, or any of the events or circumstances from which such Loss arose,
occurred on or after Bank's delivery of the Tape or the Tape Information
pursuant to Section 11.07.
Excluded from the indemnity in this Section 12.01 shall be any Loss to the
extent such Loss results from any violation or breach by Bank or any of its
Affiliates of any applicable law, this Agreement, any Credit Card Agreement or
any agreement, understanding or promise between Bank and any Cardholder relating
to such Cardholder's Account.
SECTION 12.02 INDEMNIFICATION BY BANK. Bank agrees to protect, indemnify,
and hold harmless Retailer, its Affiliates, and their respective employees,
officers, and directors, from and against any and all Losses by whomsoever
asserted, including, but not limited to, (i) the Cardholders or other persons
responsible for the payment of Accounts; (ii) any person or persons who
prosecute or defend any proceedings as representatives of or on behalf of a
class or interest group; (iii) any governmental instrumentality; or (iv) any
other third party, to the extent such Losses arise out of, are connected with or
result from:
(a) any breach by Bank of any of the terms, covenants, or other
provisions contained in this Agreement;
(b) any representation or warranty made by Bank in this Agreement
which proves to have been untrue or incorrect in any material respect as of the
date when made or deemed made hereunder;
(c) any act, or omission where there was a duty to act, by Bank or its
employees, officers, directors, shareholders, agents, subservicers, licensees or
independent contractors relating to an Account or any item of Indebtedness; or
(d) the failure of Bank to comply with any law, rule or regulation
applicable to Bank.
Excluded from the indemnity in this Section 12.02 shall be: (A) any Loss to
the extent such Loss results from any violation or breach by Retailer, any
current or former Authorized Dealer or any of their respective Affiliates of any
applicable law, this Agreement, any Credit Card Agreement or any agreement,
understanding or promise between Retailer or any current or former Authorized
Dealer, on the one hand, and any Cardholder, on the other hand, relating to such
Cardholder's Account; and (B) any Loss that results from or relate to the claims
released by Retailer under Section 3.02(b) hereof.
SECTION 12.03 PAYMENT OF INDEMNIFIED AMOUNTS. After any final judgment or
award shall have been rendered by a court, arbitration board, or administrative
agency of competent jurisdiction and the time for an appeal of such judgment or
award has expired without an appeal being taken by any party, or after any
settlement agreed to by the parties shall have been consummated, the party
seeking indemnification shall forward to the other party notice of any sums due
and owing by such other party with respect to such matter and such party shall
be required to pay all of the sums so owing to the party seeking indemnification
within thirty (30) days after the date of such notice unless otherwise mutually
agreed to in writing by the parties.
SECTION 12.04 NOTICE. Each party shall promptly notify the other parties of
any claim, demand, suit or threat of suit of which that party becomes aware
(except with respect to a threat of suit any party might institute against
another party hereto) which may give rise to a right of indemnification pursuant
to this Agreement. The indemnifying party will be entitled to participate in the
settlement or defense thereof and, if the indemnifying party elects, to take
over and control the settlement or defense thereof with counsel satisfactory to
the indemnified party. In any case, the indemnifying party and the indemnified
party shall cooperate (at no cost to the indemnified party) in the settlement or
defense of any such claim, demand, suit or proceeding.
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ARTICLE XIII
OTHER AGREEMENTS
SECTION 13.01 RETAILER ACQUISITIONS; NEW RETAILER SUBSIDIARIES.
(a) In the event that Retailer or any of its Affiliates, directly or
indirectly, acquires (i) all or substantially all of the assets of a New
Retailer, (ii) more than 50% of the outstanding voting securities of a New
Retailer or (iii) the power to direct or cause the direction of any New
Retailer's management or policies, whether through the ownership of securities,
control of its board of directors, contract or otherwise, then, unless Bank
otherwise indicates in writing, Retailer shall cause such New Retailer to
execute and deliver to Bank instruments satisfactory to Bank pursuant to which
such New Retailer shall agree to be bound by the terms and conditions of this
Agreement, provided that such obligations shall be subject to the terms and
conditions of any private label credit card program to which a New Retailer is
party as of the date it is acquired by Retailer, it being agreed that Retailer
shall use its best efforts to terminate any such program as soon as possible
after any such acquisition.
(b) In the event that any direct or indirect subsidiary of Retailer
that is not a party to this Agreement on the date hereof (whether such
subsidiary is now existing or hereafter created) shall be engaged in the
ownership or operation of a retail store or the sale of goods and/or services
through retail stores, mail orders or otherwise, unless Bank otherwise indicates
in writing, Retailer shall cause such subsidiary to execute and deliver to Bank
instruments satisfactory to Bank pursuant to which such subsidiary shall agree
to join the Program and be bound by the terms and conditions of this Agreement.
Upon the execution and delivery of such documents, such subsidiary shall be an
additional "Retailer" for all purposes of this Agreement and shall be jointly
and severally liable for all obligations of a "Retailer" hereunder.
SECTION 13.02 RETAILER PRIMARY DIVESTITURES.
(a) Retailer shall deliver written notice to Bank not later than one
hundred twenty (120) days prior to the consummation of any Retailer Primary
Divestiture (the date of such consummation being referred to as the "Primary
Divestiture Date"). Such notice (the "Primary Divestiture Notice") shall set
forth in reasonable detail the circumstances of the impending Retailer Primary
Divestiture (including, without limitation, the identity of all proposed
acquirors).
(b) Bank shall deliver written notice to Retailer not later than sixty
(60) days after receipt from Retailer of the Primary Divestiture Notice, which
notice shall either (i) state that Bank shall, simultaneously with the
consummation of the Retailer Primary Divestiture, require Retailer or the
Authorized Dealer(s), as the case may be, to cause the acquiror(s) to enter into
an agreement on the same terms as this Agreement (with such changes to
non-financial terms as may be necessary to reflect changes in facts) pursuant to
which the acquiror(s) will assume all of Retailer's obligations under this
Agreement or the Authorized Dealer's obligations under the Dealer Agreement, as
applicable, with respect to Primary Divestiture Stores, or (ii) include a notice
of termination of the Operation Period pursuant to Section 11.02(c) or (iii)
include a notice of termination of the Operation Period with respect to the
Active Accounts from the Primary Divestiture Stores (a "Partial Termination
Notice"). As used herein, "Primary Divestiture Stores" shall mean, in the case
of a Retailer Primary Divestiture resulting from the sale, transfer or Closure
of Participating Stores, the Participating Store being sold, transferred or
Closed that gives rise to the Retailer Primary Divestiture and all other
Participating Stores being sold, transferred or Closed with such Participating
Store as part of one transaction or in a series of related transactions, or in
the case of a Retailer Primary Divestiture resulting from the sale of all or
substantially all of the assets, or fifty percent (50%) or more of the
outstanding voting securities, of Retailer or such Authorized Dealer(s), as the
case may be, the Participating Stores at which Retailer or such Authorized
Dealer(s) makes or has made sales of Goods and Services.
(c) If Bank's notice states that Bank intends to require Retailer or
the Authorized Dealer(s) to cause the acquiror(s) to assume all of Retailer's
obligations under this Agreement or the Authorized Dealer's obligations under
the Dealer Agreement, as applicable, with respect to the Primary Divestiture
Stores, Retailer or
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the Authorized Dealer(s) shall not consummate the Retailer Primary Divestiture
unless all documents and agreements reasonably required by Bank to effect such
assumption have been executed and delivered by the applicable parties.
Notwithstanding any such assumption, Retailer shall remain liable for all
obligation under the Program Agreement that arose prior to the date of such
assumption or that relate to Accounts opened, Purchases made or other events or
circumstances that occurred or existed prior to the date of such assumption.
(d) If Bank's notice includes a notice of termination of the Operation
Period, Retailer shall have the option to purchase or arrange for the purchase
of all Active Accounts owned by Bank in accordance with the terms of Section
11.03 on the Primary Divestiture Date.
(e) If Bank's notice includes a Partial Termination Notice, then, with
respect to the Active Accounts owned by Bank as of the Primary Divestiture Date
and relating to the Primary Divestiture Stores (the "Affected Accounts"), Bank
shall have the right, in addition to and retaining all other rights it may have
under the terms of this Agreement or applicable law to:
(i) liquidate all or any portion of the Affected Accounts in any
lawful manner which may be expeditious or economically advantageous to Bank
including the issuance of a replacement or substitute credit card;
(ii) in connection with such liquidation, use the Retailer Names
in accordance with the provisions of this Agreement in communicating with
existing Cardholders under the Affected Accounts; and/or
(iii) transfer or sell any or all of the Affected Accounts to any
person (with or without a corresponding assignment of Bank's chargeback and
indemnity rights under this Agreement) or solicit Cardholders to transfer
balances to other credit vehicles).
SECTION 13.03 RETAILER SECONDARY DIVESTITURES.
(a) Retailer shall deliver written notice to Bank not later than
forty-five (45) days prior to the consummation of any Retailer Secondary
Divestiture (the date of such consummation being referred to as the "Secondary
Divestiture Date"). Such notice (the "Secondary Divestiture Notice") shall set
forth in reasonable detail the circumstances of the impending Retailer Secondary
Divestiture (including, without limitation, the identity of all acquirors).
(b) Bank shall deliver written notice to Retailer not later than
thirty (30) days after receipt from Retailer of the Secondary Divestiture
Notice, which notice shall either (i) state that Bank shall, simultaneously with
the consummation of the Retailer Secondary Divestiture, require Retailer or the
Authorized Dealer(s), as the case may be, to cause the acquiror(s) to enter into
an agreement on the same terms as this Agreement (with such changes to
non-financial terms as may be necessary to reflect changes in facts) pursuant to
which the acquiror(s) will assume all of Retailer's obligations under this
Agreement or the Authorized Dealer's obligations under the Dealer Agreement, as
applicable, with respect to the Participating Stores that are the subject of the
Retailer Secondary Divestiture (the "Secondary Divestiture Stores"), or (ii)
include a notice of termination of the Operation Period with respect to the
Active Accounts from the Secondary Divestiture Stores (a "Partial Termination
Notice").
(c) If Bank's notice states that Bank intends to require Retailer or
the Authorized Dealer(s) to cause the acquiror(s) to assume all of Retailer's
obligations under this Agreement or the Authorized Dealer's obligations under
the Dealer Agreement, as applicable, with respect to the Secondary Divestiture
Stores, Retailer or the Authorized Dealer(s) shall not consummate the Retailer
Secondary Divestiture unless all documents and agreements reasonably required by
Bank to effect such assumption have been executed and delivered by the
applicable parties.
(d) If Bank's notice includes a Partial Termination Notice, then, with
respect to the Active Accounts owned by Bank as of the Secondary Divestiture
Date and relating to the Secondary Divestiture Stores (the
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<PAGE>
"Secondary Affected Accounts"), Bank shall have the right, in addition to and
retaining all other rights it may have under the terms of this Agreement or
applicable law to:
(i) liquidate all or any portion of the Secondary Affected
Accounts in any lawful manner which may be expeditious or economically
advantageous to Bank including the issuance of a replacement or substitute
credit card;
(ii) in connection with such liquidation, use the Retailer Names
in accordance with the provisions of this Agreement in communicating with
existing Cardholders under the Secondary Affected Accounts; and/or
(iii) transfer or sell any or all of the Secondary Affected
Accounts to any person (with or without a corresponding assignment of Bank's
chargeback and indemnity rights under this Agreement) or solicit Cardholders to
transfer balances to other credit vehicles.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01 PAYMENT TERMS AND RIGHTS OF SET OFF AND RECOUPMENT. Unless
specifically provided for in another Section of this Agreement, any amount(s)
payable by Retailer to Bank under this Agreement shall be paid within ten (10)
Business Days of Retailer's receipt of an invoice rendered by Bank. Any such
payments shall be made by wire transfer to Bank to an account designated in
writing by Bank from time to time. Notwithstanding the foregoing, Bank may at
any time deduct, net against, set-off, recoup, or appropriate and apply, any
amounts owing to Bank from Retailer hereunder or any money or other property of
Retailer held by Bank from any amounts otherwise payable by Bank hereunder. Bank
may exercise such rights of deduction, netting, recouping and set-off without
regard to whether an invoice for the amounts owing from the Retailer has been
sent, and, if such an invoice has been sent, without regard to whether the ten
(10) Business Day period referred to in the first sentence of this Section shall
have expired. Neither the issuance of the Letter of Credit under Section 6.10 or
any drawing thereunder shall limit Bank's rights under this Section 14.01.
SECTION 14.02 ASSIGNABILITY. Neither Bank nor Retailer may assign its
rights and obligations under this Agreement without the prior written consent of
the other parties, which consent shall not be unreasonably withheld; provided
that Bank may, without such prior written consent (i) assign all or part of its
rights and obligations under this Agreement to an Affiliate; (ii) engage third
parties to perform services pursuant to this Agreement and assign or sublicense
to such third party all or any portion of the right granted to Bank under
Section 14.08 hereof to use Retailer names but only if Bank remains responsible
for such delegated performance or such third party assumes those provisions of
this Agreement that govern the rights or obligations assigned or delegated; and
(iii) securitize all or any portion of the Accounts or any related rights under
this Agreement or sell participation interests therein.
SECTION 14.03 AMENDMENT. This Agreement may not be amended except by
written instrument signed by the parties hereto.
SECTION 14.04 NON-WAIVER. No delay by any party hereto in exercising any of
its rights hereunder, or in the partial or single exercise of such rights, shall
operate as a waiver of that or any other right. The exercise of one or more of
any party's rights hereunder shall not be a waiver of, nor preclude the exercise
of, any other rights or remedies available to such party under this Agreement or
in law or equity.
SECTION 14.05 SEVERABILITY. If any provision of this Agreement is held to
be invalid, void or unenforceable, all other provisions shall remain valid and
be enforced and construed as if such invalid provision were never a part of this
Agreement.
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SECTION 14.06 GOVERNING LAW. This Agreement and all rights and obligations
hereunder, including, but not limited to, matters of construction, validity and
performance, shall be governed by and construed in accordance with the laws of
the state of Georgia without regard to internal principles of conflict of laws.
SECTION 14.07 CAPTIONS. Captions of the Sections of this Agreement are for
convenient reference only and are not intended as a summary of such Sections and
do not affect, limit, modify or construe the contents thereof.
SECTION 14.08 USE OF RETAILER NAMES AND MARKS. Subject to the provisions of
this Agreement, Retailer hereby grants Bank a non-exclusive license to create,
develop, market and administer the Program and to use the names set forth on
Schedule 2 hereto, and the related marks, tradestyles, trademarks, service
marks, logos or similar proprietary designations and such additional names,
marks, tradestyles, logos and other designations as may be adopted by Retailer
from time to time (collectively, the "Retailer Names"), in the creation,
development, marketing, liquidation and administration of the Program. If from
time to time prior to the Final Liquidation Date, Retailer should change its
names, marks, tradestyles, trademarks, service marks, logos or similar
proprietary designations, Retailer agrees to promptly inform Bank thereof and,
at Bank's election, Bank and Retailer shall cooperate to make the appropriate
changes and additions to the Program Documents and other Account Documentation
in a timely and cost efficient manner. This license shall extend to all aspects
of Bank's operation and administration of the Program and the discharge of its
obligations under the Agreement, including but not limited to its use in
connection with Cardholder services; adverse action letters; billing statements
and inquiries; credit card applications, agreements, mailers, and card carriers;
and matters incidental to collection and recovery.
SECTION 14.09 SECURITIZATION/PARTICIPATION. Any rights to purchase or
arrange for the purchase of the Accounts which Retailer may have hereunder shall
be subject to Bank's right to securitize or participate the Accounts and related
Indebtedness. Purchase rights shall be available to Retailer or its assignee
only with respect to Accounts and Indebtedness owned by Bank at the time
Retailer elects to exercise its option to purchase pursuant to Section 11.03
hereof.
SECTION 14.10 FURTHER ASSURANCES. Each party hereto agrees to execute all
such further documents and instruments and to do all such further things as any
other party may reasonably request in order to give effect to and to consummate
the transactions contemplated hereby.
SECTION 14.11 ENTIRE AGREEMENT. This Agreement is the entire agreement of
the parties with respect to the subject matter hereof and supersedes all other
prior understandings and agreements whether written or oral.
SECTION 14.12 NOTICES. All notice, demands and other communications
provided for in this Agreement shall be in writing or (unless otherwise
specified) by telephonic facsimile transmission and shall be sent by certified
mail or nationally-recognized overnight courier, or delivered to the other party
at the address set forth opposite its name on Schedule 3 hereof, or at such
other address as shall be designated by such party in a written notice given to
all other parties in accordance with the terms of this Section 14.12. All such
notices and communications if duly given or made, when sent by certified mail,
shall be effective three (3) Business Days after deposit in the mails, when sent
by overnight courier shall be effective one (1) Business Day after delivery to
such overnight courier, and otherwise shall be effective upon receipt.
SECTION 14.13 POWER OF ATTORNEY. Retailer authorizes and empowers Bank and
grants to Bank a power of attorney (i) to sign and endorse Retailer's name on
checks, drafts, money orders or other forms of payment in respect of Accounts;
(ii) to do all the things reasonably necessary to carry out or enforce the
Accounts; (iii) to sign Retailer's name on any notices to any Cardholder in
connection with the collection of Accounts; (iv) to send requests for
verification of any Account to Cardholders; (v) to sue Cardholders for the
collection of Accounts in the name of Retailer; (vi) to do any and all things
Bank determines may be necessary or appropriate to carry out or enforce the
obligations of Cardholders under Credit Card Agreements; (vii) to execute and
file Uniform Commercial Code financing statements, and (viii) to take any action
which Retailer is obligated to take hereunder if Retailer fails
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<PAGE>
to take such action. This limited power of attorney conferred hereby is deemed a
power coupled with an interest and shall be irrevocable. [15.09]
SECTION 14.14 CONFIDENTIAL INFORMATION.
(a) All proprietary and non-public material and information supplied
by Retailer to Bank or vice versa heretofore or hereafter, or supplied to
Retailer or Bank by Cardholders or applicants for Credit Cards, including,
without limitation, (i) the pricing and other financial terms of this Agreement
and (ii) information concerning the parties' marketing plans, objectives,
financial results and employee compensation and benefits is confidential and
proprietary ("Confidential Information"). Notwithstanding the foregoing,
however, Confidential Information shall not include any information which (i) at
the time of disclosure by one party hereto or thereafter is generally available
or known to the public (other than as a result of an unauthorized disclosure by
another party hereto); (ii) was available to one party on a non-confidential
basis from a source other than another party (provided that such source, to the
best of such party's knowledge, was not obligated to another party to keep such
information confidential); or (iii) was in one party's possession prior to
disclosure by another party to it.
(b) Confidential Information shall be used by each party solely in the
performance of its obligations or the exercise of its rights pursuant to this
Agreement. Each party shall receive Confidential Information in confidence and
not disclose Confidential Information to any third party, except (i) as may be
necessary to perform its obligations or exercise its rights pursuant to this
Agreement or to effect a securitization or participation, (ii) as may be agreed
upon in writing by the other parties, or (iii) as otherwise required by law or
judicial or administrative process. Each party will use its best efforts to
ensure that its officers, employees, and agents take such action as shall be
necessary or advisable to preserve and protect the confidentiality of
Confidential Information. Upon written request or upon the termination of this
Agreement, each party shall destroy or return to the other party all
Confidential Information in its possession or control, subject to each party's
respective document retention policies with respect to information required to
be maintained by regulatory authorities and subject to Bank's rights to retain
information and documents necessary to administer and operate the Program.
SECTION 14.15 NO PARTNERSHIP. Nothing contained in this Agreement shall be
construed to constitute Bank and Retailer as partners, joint venturers,
principal and agent, or employer and employee.
SECTION 14.16 THIRD PARTIES. Bank shall have the right to engage third
parties to perform services pursuant to this Agreement. Notwithstanding the
foregoing, this Agreement is not for the benefit of any third party and shall
not be deemed to give any right or remedy to any such third party.
SECTION 14.17 INTERPRETATION. As each of the parties have contributed to
the drafting of the language of this Agreement, it is agreed and understood that
in any interpretation of this Agreement, the language utilized will be construed
equally as and between the parties without regard to which party provided the
language of any particular provision.
SECTION 14.18 MULTIPLE COUNTERPARTS. This Agreement may be executed in any
number of multiple counterparts, all of which shall constitute but one and the
same original.
SECTION 14.19 OTHER DOCUMENTS. Retailer shall execute and deliver or cause
to be executed and delivered together with this Agreement, an intercreditor
agreement substantially in the form of Exhibit B, the Subsidiary Guaranty from
Ethan Allen Marketing Corporation substantially in the form of Exhibit D, and
the Subsidiary Guaranty from Ethan Allen Manufacturing Corporation substantially
in the form of Exhibit E.
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<PAGE>
IN WITNESS WHEREOF, Bank and Retailer have caused this Agreement to be
executed by their respective officers thereunto duly authorized as the date
first above written.
ETHAN ALLEN INC.
By ------------------------------------
Its --------------------------------
MONOGRAM CREDIT CARD BANK OF GEORGIA
By ------------------------------------
Its --------------------------------
Ethan Allen Interiors, Inc. ("Parent") represents and warrants to Bank
that: (a) Parent has no material assets other than its equity ownership of
Retailer and any other subsidiaries of Parent that are consolidated on Parent's
consolidated financial statements referred to in Section 8.04(a) of this
Agreement; and (b) Parent's ownership interest in Retailer constitutes not less
than 100% of Parent's total assets. Parent agrees that, if at any time during
the Operation Period, either of the foregoing representations ceases to be
correct, then Parent shall, within 10 days thereafter, execute and deliver to
Bank a guarantee in substantially the form of Exhibit C hereto.
ETHAN ALLEN INTERIORS, INC.
By ------------------------------------
Its --------------------------------
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<PAGE>
Schedule 1
to
Amended and Restated
Consumer Credit Card Program Agreement
LEGAL NAMES AND PRINCIPAL PLACE OF BUSINESS
Retailer's full legal name is: Ethan Allen Inc.
The chief executive office and principal place of business of
Retailer is Ethan Allen Inc., Ethan Allen Drive, Danbury, CT 06811.
41
<PAGE>
Schedule 2
to
Amended and Restated
Consumer Credit Card Program Agreement
RETAILER NAMES
Ethan Allen
Ethan Allen Home Interiors
42
<PAGE>
Schedule 3
to
Amended and Restated
Consumer Credit Card Program Agreement
NOTICE ADDRESSES
To Monogram Credit Card
Bank of Georgia: 7840 Roswell Road
Building 100, Suite 200
Atlanta, GA 30350
Attn: President
Telefax: (770) 353-2464
with a copy to: 7840 Roswell Road
Building 100, Suite 200
Attn: Counsel
Telefax: (203) 961-5149
To Retailer: Ethan Allen Inc.
Ethan Allen Drive
Danbury, CT 06811
Attn: Chairman, President and CEO
Telefax: (203) 743-8524
with a copy to: Ethan Allen Inc.
Ethan Allen Drive
Danbury, CT 06811
Attn: Director of Credit Programs
Telefax: (203) 743-8214
43
<PAGE>
Schedule 4
to
Amended and Restated
Consumer Credit Card Program Agreement
DISCOUNT AND PROMOTIONAL FEE MATRICES
Options:
Option A
--------------------------------------------------------------------------------
DISCOUNT MATRIX
Promotional 3 Month 6 Month 12 Month
Sales Mix Aff/Skp Aff/Skp Aff/Skp
--------- ------- ------- -------
0.00% - 60.00% 1.00% 2.50% 7.00%
60.01% - 65.00% 1.25% 3.00% 8.00%
65.01% - 70.00% 1.50% 3.50% 9.00%
70.01% - 80.00% 1.75% 4.00% 10.00%
80.01% + 2.00% 4.50% 11.00%
* Discount adjusted quarterly predicated on previous six month rolling
promotional mix average.
Option B
--------------------------------------------------------------------------------
PROMOTIONAL FEE MATRIX
Promotional Promotional Promotional Promotional
Sales Mix Fee Sales Mix Fee
--------- --- --------- ---
0.00% - 60.00% 1.50% 70.01 - 71.00% 0.95%
60.01 - 61.00 1.45% 71.01 - 72.00 0.90%
61.01 - 62.00 1.40% 72.01 - 73.00 0.85%
62.01 - 63.00 1.35% 73.01 - 74.00 0.80%
63.01 - 64.00 1.30% 74.01 - 75.00 0.75%
64.01 - 65.00 1.25% 75.01 - 76.00 0.70%
65.01 - 66.00 1.20% 76.01 - 77.00 0.65%
66.01 - 67.00 1.15% 77.01 - 78.00 0.60%
67.01 - 68.00 1.10% 78.01 - 79.00 0.55%
68.01 - 69.00 1.05% 79.01 - 90.00 0.50%
69.01 - 70.00 1.00% 90.00 + 0.00%
* Mix would be calculated monthly with any corresponding adjustment reflected
on the monthly billing invoice.
44
<PAGE>
Schedule 5
to
Amended and Restated
Consumer Credit Card Program Agreement
SERVICE LEVEL PERFORMANCE MEASUREMENT
A. DEFINED TERMS.
As used in this Schedule 5, the following terms shall be defined as
set forth below:
"Applicable Calls" means telephone calls regarding the Program
received from Cardholders or in-store employees of Retailer or
Authorized Dealers, including calls resolved by the automated
Intelligent Voice Response (IVR) technology but excluding calls that
are abandoned within five seconds or are affected by a system outage
at Bank.
"Average Response Time" means, with respect to any calendar month, the
mean average time for a Bank employee to answer Applicable Calls
during such month.
"Excluded Call Percentage" means, with respect to any calendar month
during which the Average Response Time is greater than 25 seconds, a
fraction (expressed as a percentage) (i) whose numerator is the
minimum number of Applicable Calls that that must be excluded from the
calculation of Average Response Time during such month to reduce the
Average Response Time to 25 seconds; and (ii) whose denominator is the
total number of Applicable Calls during such month.
B. SERVICE LEVEL PERFORMANCE COMMITMENT.
The occurrence of any of the following shall constitute a Bank
Termination Event:
(i) The Excluded Call Percentage for any calendar month is greater
than 20% and the Excluded Call Percentage for the immediately
following calendar month is greater than 15%; or
(ii) The Excluded Call Percentage for any calendar month is greater
than 15% but less than or equal to 20% and the Excluded Call
Percentage for each of the next two calendar months is greater than
15%; or
(iii) The Excluded Call Percentage for any two calendar months during
any period of 12 consecutive months is greater than 20%; or
(iv) The Excluded Call Percentage for any calendar month is greater
than 15% if, earlier during the period of 12 consecutive months ending
with the end of such calendar month, Bank has twice corrected excess
Excluded Call Percentages pursuant to clause (ii) hereof; or
(v) Bank fails to use its reasonable best efforts to do any of the
following and such failure continues for a period of 60 days after
Bank's receipt of notice thereof from Retailer:
(A) provide report monthly to Retailer stating the inventory
quantities and estimated number of months remaining for the
Credit Card carriers, terms and conditions, and Credit Card
plastic in Bank's possession;
(B) provide report monthly to Retailer identifying customer
account merchandise disputes that have remained unresolved for
more than 60 days and stating the status of Fair Credit Reporting
Act inquiries; or
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<PAGE>
(C) acknowledge the receipt of inquiries regarding Accounts
received by Bank from Cardholders in Bank's Internet e-mail inbox
within one Business Day of Bank's receipt of such inquiries; or
(D) provide to all of Bank's customer service/credit associates
at least two hours of specific training regarding the Program and
the applicable procedures before such associates begin accepting
Retailer store or customer calls; and
(E) provide appropriate updates for inclusion in the Operating
Procedures except that Retailer shall continue to be solely
responsible for the production and distribution of the Operating
Procedures and any updates to all Participating Stores.
Retailer and Bank have discussed possible changes in Bank's IVR menu for
responding to Cardholder inquiries. Bank will use reasonable efforts to
experiment with various of these changes for a period of up to 90 days and to
review the effect such changes had on response time and workload. Retailer
agrees that, during such test period, Bank shall be excused from complying with
the service level standards set forth in this Schedule 5. Bank agrees to
implement appropriate changes to its IVR menu if Bank and Retailer agree that
the results of such test were successful.
46
<PAGE>
Schedule 6
to
Amended and Restated
Consumer Credit Card Program Agreement
GEOGRAPHIC AREAS
WEST NORTHEAST
---------------- -----------------
Alaska Maine
Hawaii New York
Washington New Jersey
Oregon New Hampshire
California Maryland
Idaho Massachusetts
Montana Pennsylvania
Nevada Vermont
Wyoming Connecticut
Utah Delaware
Colorado Virginia
Arizona West Virginia
New Mexico Rhode Island
Washington D.C.
MIDWEST SOUTHEAST
----------------- ------------------
North Dakota Texas
South Dakota Oklahoma
Nebraska Arkansas
Kansas Louisiana
Minnesota Kentucky
Iowa Tennessee
Missouri Mississippi
Wisconsin Alabama
Illinois Georgia
Michigan Florida
Indiana North Carolina
Ohio South Carolina
47
<PAGE>
EXHIBIT A
(to Program Agreement)
BANK DEALER AGREEMENT
AMENDED AND RESTATED
ETHAN ALLEN CREDIT CARD PROGRAM DEALER AGREEMENT
To: Monogram Credit Card Bank of Georgia ("Bank" or "you")
As an Authorized Dealer of Ethan Allen, Inc. ("Ethan Allen"), we, the
undersigned ("Dealer," "us," "we" or "our"), would like to participate in the
program, which has been established by Bank in connection with Ethan Allen,
under which consumers can use credit extended by Bank to purchase Goods and/or
Services sold in stores operated under the service mark Ethan Allen Home
Interiors (the "Program"). While we are participating in the Program, we shall
submit to Bank (among other things) Charge Slips of Cardholders directing Bank
to pay us for Goods and/or Services purchased in our Authorized Dealer Stores.
We acknowledge and agree that our execution and delivery of this Amended and
Restated Ethan Allen Credit Card Program Dealer Agreement (this "Agreement") is
a material condition to our participation in the Program.
1. DEFINITIONS. Terms used in this Agreement, unless elsewhere defined in this
Agreement, shall have the meanings specified in Paragraph 26 hereof.
2. NON-RECOURSE. Credit extended to Cardholders by Bank shall be without
recourse to us, except in the event of breach of any of our
representations, warranties or covenants specified in Paragraphs 3, 4, 6,
7, 8 or 15 hereof, in which case Bank will have the right to charge back to
us at any time, upon the terms set forth in Paragraph 12 hereof, any Charge
Slip (or other debit to an Account), Credit Slip (or other credit to an
Account) or Account.
3. SERVICE ON GOODS AND/OR SERVICES. We warrant that we have provided required
service on Goods and/or Services and will continue to provide any required
service after the sale of any Goods and/or Services: (i) sold by us on
Charge Slips submitted to you or (ii) otherwise debited to an Account and,
moreover, that you shall have the right to charge back to us at any time,
upon the terms set forth in Paragraph 12 hereof, any such Charge Slip (or
other debit to an Account) or Account with respect to which the
Cardholder(s) fails to pay you as a result of any bona fide claim by a
Cardholder that there has been a failure on our part to provide adequate
service regarding such Goods and/or Services sold in connection therewith,
including, but not limited to, our failure to perform under any service
agreement.
4. BANK OWNERSHIP OF ACCOUNTS. It is expressly acknowledged and agreed that:
(a) Bank shall establish and be the sole and exclusive owner of all
Accounts, including the name and address of each Cardholder and the
Cardholder List, and shall be entitled to receive all payments made by
Cardholders on Accounts, and that we have no right, title or interest in
Accounts or payments thereon, (b) Bank shall be identified as the creditor
and owner of the Accounts for all purposes, and we shall in no way
represent that we are the creditor or owner of any Account or owner of the
name or address of any Cardholder or of the Cardholder List, and (c) Bank,
in its sole discretion, shall establish Credit Criteria and other criteria
relating to Accounts and may modify such Credit Criteria and other criteria
from time to time. The foregoing notwithstanding, Bank recognizes that we
have an ownership interest in any general, undifferentiated listing of both
credit and non-credit customers maintained by us.
5. FINANCIAL RECORDS. Bank may from time to time inspect our records in order
to ascertain our financial condition. We shall furnish Bank with financial
statements within a reasonable time after any Bank request therefor.
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6. PRESENTMENT WARRANTIES. We represent and warrant with respect to each
Charge Slip (or other debit on an Account), Credit Slip (or other credit on
an Account) and Credit Card Application that we submit to Bank hereunder,
as appropriate, that:
(a) That the Charge Slip represents a bona fide sale by Dealer of the
Goods and/or Services described in such Charge Slip that the Charge Slip
has not been included in any Charge Transaction Data previously transmitted
to Bank, and that: (i) in the case of Store Purchases from Dealer, Dealer
has delivered all the Goods and fully performed all the Services listed on
such Charge Slip; and (ii) in the case of Absentee Transactions, Dealer has
shipped all the Goods listed on such Charge Slip (except that clauses (i)
and (ii) do not apply to any Purchase for which the amount appearing on the
Charge Slip constitutes solely a Qualified Special Order Deposit);
(b) (i) Except with respect to Absentee Transactions or a Charge Slip
containing only a Restocking Fee, that the Charge Slip is signed and that
the signature on the Charge Slip is similar to the signature of the
Cardholder, is similar to the signature on the Credit Card or the signature
on another item of valid identification examined by Dealer, is genuine, and
is not forged or unauthorized and (ii) that all Charge Slips, Account
information and Charge Transaction Data are bona fide, accurate and not
fraudulent;
(c) That the Charge Slip has not been materially altered;
(d) That the transaction did not involve a cash advance of Goods or
Services not listed on the Charge Slip and only Goods and Services sold by
Dealer are the subject of the transaction;
(e) That the transaction giving rise to the Charge Transaction Data
was conducted by Dealer in accordance with the Operating Procedures and
constituted either a Store Purchase at an Authorized Dealer Store or an
Absentee Transaction;
(f) That none of the Goods and/or Services listed on such Charge Slip
is an extended warranty;
(g) That the Account number of the Cardholder has been accurately
printed on each Charge Slip with the authorization number provided to
Dealer by Bank;
(h) That Dealer has not received, directly or indirectly, and that
Dealer will refuse to accept, any reimbursement, payment or trade-in for
the charges listed on such Charge Slip (other than from Bank) and that
Dealer not has or will, either directly or indirectly, take or grant or
purport to take or grant any right or security interest in such Charge Slip
or any related Credit Slip (other than to Bank);
(i) That the transactions giving rise to the Charge Transaction Data
were conducted by Dealer in accordance with all applicable laws and
regulations that pertain to the sales of Goods and/or Services by Dealer
(including, but not limited to, any laws, regulations, licensing or
registration requirements applicable to the sale or distribution of such
Goods and/or Services) and that the Charge Transaction Data is not invalid,
illegible, inaccurate or incomplete;
(j) That the balance in each such Account is valid and enforceable
against the Cardholder and that there is no fact, nor any claim or defense
of a Cardholder, that would impair the validity, enforceability, or
collectibility of the obligation of the Cardholder evidenced by the Charge
Slip;
(k) That the Cardholder for such Account is a natural person and the
Goods and/or Services were sold by Dealer in the ordinary course of
business to Cardholders for personal, family or household purposes;
(l) That (i) to the best of Dealer's knowledge, no petition under any
bankruptcy or insolvency laws has been filed by or against any Cardholder
identified in such Charge Transaction Data, (ii) no such Cardholder is
deceased or incompetent, and (iii) such Cardholder has a valid United
States address;
(m) all Goods sold in connection therewith were new and unused at the
time of sale; and
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(n) the amount of credit extended by Bank in connection therewith was
not in excess of the amount of credit approved by Bank for such Cardholder.
7. ACCOUNT COVENANTS. We covenant to do the following with respect to each
transaction involving an Account under the Program: (a) promptly submit
Credit Card Applications; (b) retain all other Account Documentation in
accordance with the Operating Procedures and for not less than twenty-five
(25) months ; (c) use only Approved Forms when taking any action with
regard to the Program; (d) cooperate with Bank promptly to resolve all
disputes with Cardholders; (e) maintain a fair and equitable policy for the
exchange and return of Goods and/or Services, promptly deliver a Credit
Slip to the Cardholder when credit is given and notify Bank each day in
connection with transmitting Account Documentation of any credits and
adjustments that were made, all in accordance with the Operating
Procedures; (f) if the return of any Goods and/or Services results in the
imposition of a Restocking Fee, then we shall issue a Credit Slip in the
full amount of the Purchase that gave rise to such fee and submit to Bank a
Charge Slip in the amount of such Restocking Fee; (g) deliver all Goods
and/or Services purchased by Cardholders on Accounts by Special Order
Deposit; (g) conduct our business in accordance with all applicable state
and federal laws, rules and regulations and the Operating Procedures; (h)
sell Goods and/or Services on Accounts only in our Authorized Dealer
Stores, a list of which will be furnished by Ethan Allen or us to you in
connection with the execution of this Agreement and will be supplemented or
modified by Ethan Allen us from time to time as we open or close Authorized
Dealer Stores; (i) not seek or obtain any special agreement or condition
from, nor discriminate in any way against, Applicants or Cardholders; (j)
we will not submit any Charge Slip that includes a Restocking Fee unless
our policy and practice of charging a Restocking Fee was disclosed to the
Cardholder who made the Purchase with respect to which such Restocking Fee
is being imposed and such disclosure was in compliance with applicable
law.; (k) not accept In-Store Payments or direct that Cardholders make
In-Store Payments (but, to the extent any are received, transmit them
immediately to Bank); (l) accept and transmit to Bank Credit Card
Applications only from natural persons; (m) the Goods and/or Services
charged to an Account shall include only items that are new and unused at
the time of sale or that are returned to Ethan Allen or an Authorized
Dealer and restored to Ethan Allen's or an Authorized Dealer's inventory
and subsequently offered for resale as new and unused, to the extent
permitted by law; and (n) we shall not, after May 31, 2000, honor Credit
Cards or submit Charge Transaction Data to Bank for Absentee Transactions
unless and until Bank and Ethan Allen have agreed on and are ready to
implement modifications to the Operating Procedures applicable to Absentee
Transactions.
8. EXCLUSIVITY. We may accept any general purpose bank credit cards and travel
and entertainment charge cards presented to us in payment for Goods and/or
Services. However, during the term of this Agreement, we shall not
participate in, or accept any credit cards in connection with, programs
involving acceptance or promotion of credit accounts other than this
Program, the Current Closed-end Program and other programs offered by Bank
or its Affiliates, including GE Capital, but we may retain, or we may offer
to any alternative financing source, the opportunity to finance Accounts
and provide credit requested when the Credit Card Application or credit
extension for such sales initially have been rejected by you. In no event
shall we submit to Bank any Credit Card Applications or Charge Slips for
credit sales that have been submitted to and/or rejected by another credit
grantor. The term the "Current Closed-end Program" means the closed-end
credit program currently in effect between Ethan Allen and MBNA America
Bank N.A. as such program may be extended, amended or supplemented from
time to time but only so long as such credit program remains solely a
closed-end program. In addition to foregoing, we may participate in other
credit programs sponsored by Ethan Allen if, and only if, such programs are
established in compliance with the Program Agreement and we have received
written notice from Bank acknowledging such compliance.
9. POWER OF ATTORNEY. We authorize Bank to sign and endorse our name upon any
checks, drafts, money orders or other forms of payment that may come into
its possession as payment to Bank of or on account of any Account and to
sign and endorse our name on any other instrument necessary to carry out
the intent of this Agreement. This limited power of attorney is deemed a
power coupled with an interest and shall be irrevocable and shall survive
for as long as any Account held by Bank remains unpaid. If Bank should deem
it necessary or advisable or if required by applicable law or regulation,
we authorize Bank to state and refer to our name and address in contacting,
sending notifications and corresponding with Applicants and Cardholders and
in the billing and collection of Accounts. If Bank should deem the
institution of legal action against any Cardholder necessary or
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advisable, we will cooperate with Bank and assist in the action, and we
authorize Bank to refer to our name in such action as the seller of the
Goods and/or Services.
10. PAYMENTS. (a) Bank will pay us a sum equal to the total amount financed
(unpaid cash balance for Goods and/or Services) by Cardholders shown on
Charge Slips for which we request payment less the amount of any Credit
Slips, refunds, and/or Service Fees owed by us, each at the time we request
payment from Bank with respect to such Charge Slip; and (b) Bank has the
sole and exclusive right and option to establish the rate or rates of
finance charges, and the amounts of Late Charges, Returned Check Charges
and Other Charges to be assessed on Accounts, to the extent permitted under
applicable law, and Bank shall retain all such finance charges, Late
Charges, Returned Check Charges and Other Charges on Accounts.
11. SERVICE FEES. (a) Bank, at our request, may offer to Cardholders purchasing
in our Authorized Dealer Stores the Credit-based Promotions described in
this paragraph in accordance with subsection (b) below. If we participate
in a Credit-based Promotion, we shall pay a Service Fee on the total face
amount of each Promotional Credit Sale Charge Slip submitted by us in
connection with such Credit-based Promotions minus any amount that Ethan
Allen may in its discretion determine to pay to Bank on our behalf as
follows:
Type of Promotion Promotional Period Service Fee
----------------- ------------------ -----------
(1) "After the Fact Free" with no Account
Debtor payments due during specified 90 Days 1.25%
promotional period, with finance charges
and Credit Insurance Charges assessed
during specified promotional period,
and full rebate of finance charges if 6 months 3.00%
total cash price of the purchase is paid
in full on or before expiration of the
specified promotional period. Plan 1,
Promotion Code F. 12 months 8.00%
(2) Minimum monthly payments required from 90 days 2.75%
Account Debtor during specified
promotional period, with no finance
charges assessed during specified 6 months 5.50%
promotional period but with Credit
Insurance Charges assessed at all
times. Plan 1, Promotion Code 2. 12 months 10.00%
(3) No Account Debtor payments required 90 days 3.00%
during specified promotional period and
no finance charge assessed during
specified promotional deferral period 6 months 6.00%
but with Credit Insurance Charges
assessed at all times. Plan 1,
Promotion Code 3 12 months 12.00%
Bank, at our request, may offer to Cardholders purchasing in our Authorized
Dealer Stores Credit-based Promotions of the type specified above but,
notwithstanding anything contained herein to the contrary, Bank may, from
time to time, in its sole discretion, modify the Service Fees charged in
connection with such Credit-based Promotions. If we participate in such a
Credit-based Promotion, we shall pay the Service Fee set by you on the
total amount of each Promotional Credit Sale Charge Slip submitted by us in
connection therewith minus any amount that Ethan Allen may in its
discretion determine to pay on our behalf.
(b) From and after the date Bank gives us written notice requiring the
following procedure, at least fifteen (15) days prior to the proposed
commencement of any Credit-based Promotion initiated by us and described in
Paragraph 11(a) above, we shall submit the proposal
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for such Credit-based Promotion to Bank for prior approval and acceptance
to Bank of the type, promotional offer period, and terms of any such
promotional offer. Upon approval by Bank, you and we shall complete and
execute an addendum to this Agreement, in the form and substance required
by you, confirming the Service Fee in effect for such Credit-based
Promotion, subject to the permitted modifications thereof described in
Paragraph 11(a) and (d), and other terms of any such promotional offer.
(c) Subject to Paragraph 11(a), if the Promotional Sales Mix exceeds sixty
percent (60%), then the Service Fee to be paid by Authorized Dealers for
the Credit-based Promotion described in Paragraph 11(a)(1) above may be
determined in accordance with the matrix set forth on Schedule 11(c)
attached hereto at the direction of Ethan Allen and Bank given the
corresponding Promotional Sales Mix adjusted quarterly and calculated on a
rolling six (6) month basis. We acknowledge and agree we may receive
notices of any increases in the Service Fee hereunder from either Ethan
Allen or Bank.
(d) You may deduct amounts due and payable by us to you from any sums or
obligations you owe to us, including the payments due for any Charge Slips.
12. CHARGEBACK. (a) You shall have the right to chargeback to us any Charge
Slip (or other debit to an Account), Credit Slip (or other credit to an
Account) or Account, if: (i) any warranty or covenant made by us in this
Agreement proves to be false or inaccurate in any respect, as determined by
you; (ii) a Cardholder asserts any bona fide claim or defense against you
as a result of any act or omission by us allegedly in violation of any
applicable law, statute, ordinance, rule or regulation; (iii) a Cardholder
disputes the amount or existence of such Account and we have not followed
the Operating Procedures or a Cardholder refuses to pay alleging
dissatisfaction with Goods and/or Services received, a breach of any
warranty or representation by us in connection with the transaction, or an
offset or counterclaim against you based on an act or omission of us,
provided any such disputes, in your reasonable opinion, constitute bona
fide claims presented by Cardholders; (iv) a Cardholder refuses to pay
alleging dissatisfaction with the timeliness of the delivery of the Goods
or Services and such Good or Services were not delivered within five months
after the estimated delivery date stated in the related invoice; (v) we
cannot supply you with a copy of a valid Charge Slip or Credit Slip within
ten (10) days of your written request; (vi) a Cardholder cancels the
purchase of, or we fail to deliver in a timely manner, Goods and/or
Services purchased in connection with Special Order Deposits; (vii) in the
case of an Absentee Transaction, the Cardholder asserts that the Cardholder
did not make or authorize the purchase in dispute, or any person asserts
that such person's name, social security number or other identifying
information was used to make any purchase (or open an Account on which such
purchase was made) and that such person did not make or authorize the
purchase or open the Account in dispute; (viii) the Charge Slip includes
any amount which represents any Credit Card surcharge, Credit Card
Application fees, cancellation or restocking fees or any similar processing
fees to an Account; or (ix) the Charge Slip includes any amount which
represents a Restocking Fee.
(b) The amount of the chargeback pursuant to this Paragraph 12 shall be the
aggregate of: (i) the balance of an Account plus finance charges accrued to
the date of chargeback of such Account or, if a Charge Slip (or other debit
to an Account) or Credit Slip (or other credit to an Account), the amount
thereof plus finance charges accrued to the date of chargeback thereof; and
(ii) reasonable out-of-pocket costs and expenses paid or incurred by you in
the attempted collection of such Account, including reasonable attorneys'
fees, collection agency fees and court costs (the sum of the amounts in (i)
and (ii) being referred to collectively as the "Chargeback Balance").
Notwithstanding the foregoing sentence, if Bank fails to use reasonable
diligence in complying with any obligations it may have under this
Agreement or the Operating Procedures to seek recovery of any Account,
Charge Slip or Credit Slip that is subject to chargeback, then (A) the
Chargeback Balance of such Account, Charge Slip or Credit Slip referred to
in clause (i) shall not include any finance charges for more than six
months and (B) the costs and expenses referred to in clause (ii) with
respect to such Account shall not exceed twenty percent (20%) of the
Chargeback Balance for such Account except that the limit set forth in this
clause (B) shall not apply to compromises or settlements which are governed
by Paragraph 12(c) below. You shall have the right, without any further
notice, to deduct the amount of the Chargeback Balance from any amounts due
us from you pursuant to this Agreement, and/or bill us for the Chargeback
Balance, which amount shall be payable within five (5) Business Days
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of billing. You will assign to us, without recourse, all right to payment
with respect to the amount of chargebacks, upon our request. Our
obligations under this Paragraph 12 shall be unconditional and shall not be
waived, released or affected by any settlement, extension, compromise,
forbearance or other indulgence or agreement made or granted by you with or
to any Cardholders or other Persons obligated for an Account. Additionally,
your retention of an Account, Charge Slip or Credit Slip (or other debit or
credit to an Account) with knowledge of a breach of warranty or other
infirmity, whether or not communicated to us, shall not be deemed a waiver
of any of your rights with respect to an Account. You shall not be
obligated to exhaust your remedies against Cardholders, other Persons or
Goods and/or Services as a condition precedent to requiring performance by
Dealer under this Paragraph 12.
(c) In its reasonable discretion, Bank may compromise and settle any claim
made by any Cardholder in respect of his Account or any related
Indebtedness. No such compromise or settlement will impair Bank's rights to
charge back under Paragraph 12(a) hereof provided that the amount Bank will
be entitled to charge back to Dealer following any such compromise or
settlement is limited to the amount of the Indebtedness on the Account
being charged back, including any reasonable out-of-pocket costs and
expenses paid or incurred by Bank in the attempted collection of such
Indebtedness (including without limitation, reasonable attorney's fees,
collection agency fees and court costs), after taking into account all
amounts actually received by Bank from Cardholder in compromise or
settlement thereof.
13. OPERATING WAIVER. Our liability hereunder shall not be affected by any
settlement, extension, forbearance, or variation in terms that you may
grant in connection with any Charge Slip and/or Account or by the discharge
or release of the obligation of the Cardholder(s), the guarantor, or any
other Person responsible thereunder, by operation of law or otherwise. We
hereby waive any failure or delay on your part in asserting or enforcing
any right that you may have at any time hereunder and under any Charge
Slip, Credit Slip or Account. All of your rights and remedies hereunder,
whether derived from this Agreement or otherwise, shall be cumulative and
not alternative.
14. INDEMNIFICATION. (a) We agree to mutually protect, indemnify and hold Bank
and its employees, officers, directors and agents and Bank's Affiliates and
their respective officers, directors, agents and employees harmless against
any and all claims, demands, actions or proceedings, liabilities, costs and
expenses (including, but not limited to attorney's fees), judgments,
amounts paid in settlement, damages and awards, by whomsoever asserted or
recovered, arising out of, connected with or resulting from (i) any act or
failure to act where there is a duty to act, (ii) any breach of a
representation or warranty by us in relation to the Charge Slips or Credit
Slips, (iii) any claim, demand, allegation, action, offset, defense or
counterclaim which, if true or proven, would constitute a ground for
indemnification under (i) and/or (ii) above, (iv) Goods and/or Services
sold on Accounts (including breach of warranty, tort or product liability
claims related thereto), (v) any breach by us of any of the terms,
covenants, warranties, representations, conditions or other provisions
contained in this Agreement, or any other instrument or document delivered
by us to Bank in connection therewith; (vi) any transaction, contract,
understanding, promise, representation, or any other relationship, actual,
asserted, or alleged, between us and any Cardholder relating to an Account;
(vii) the failure by us to comply with any law, rule or regulation
applicable to us; and (viii) any advertisements, solicitations or other
promotions of the Program including Credit-based Promotions. The actions
referred to in clauses (i) through (viii) shall include, without
limitation, actions taken by employees and agents.
(b) Bank agrees to mutually protect, indemnify and hold us and our
employees, officers, directors and agents, and our Affiliates and their
respective officers, directors, agents and employees harmless against any
and all claims, demands, actions or proceedings, liabilities, costs and
expenses (including, without limitation, attorney's fees), judgments,
amounts paid in settlement, damages and awards, by whomsoever asserted or
recovered, arising out of, connected with or resulting from (i) any act or
failure to act by Bank where there is a duty to act, (ii) any breach of a
representation or warranty by Bank in relation to the Charge Slips or
Credit Slips, (iii) any claim, demand, allegation, action, offset, defense
or counterclaim which, if true or proven, would constitute a ground for
indemnification under (i) and/or (ii) above, or (iv) any breach by Bank of
any of the terms, covenants, warranties, representations, conditions or
other provisions contained in this Agreement, or any other instrument or
document delivered by Bank to us in connection therewith.
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(c) In the event that any legal proceeding shall be instituted or that any
claim or demand shall be asserted by any party in respect of which payment
may be sought by one party hereto from the other party hereto pursuant to
this Paragraph 14, the party seeking indemnification (the "Indemnified
Party") shall promptly cause written notice of the assertion of any claim
of which it has knowledge which is covered by this indemnity to be
forwarded to the other party (the "Indemnifying Party"), which notice shall
be given within sufficient time to respond to such proceeding, claim or
demand. The Indemnifying Party shall have the right, to the extent of its
indemnification, at its option and its own expense, to be represented by
counsel of its choice, which counsel must be reasonably satisfactory to the
Indemnified Party, and to defend against, negotiate, settle, or otherwise
deal with any proceeding, claim or demand which is related to any loss,
liability, damage or deficiency indemnified against hereunder; provided,
however, that no settlement shall be made without the prior written consent
of the Indemnified Party, which consent shall not be unreasonably withheld;
and provided, further, that the Indemnifying Party shall keep the
Indemnified Party advised as to the status of the matter. The Indemnified
Party may participate in any such proceeding with counsel of its choice at
its own expense. If the Indemnified Party refuses to approve a proposed
settlement that is acceptable to the claimant, the Indemnifying Party may,
at its option, deposit the proposed settlement with the Indemnified Party
and thereupon be relieved of any further indemnity obligation with respect
to such proceeding, claim or demand, including, without limitation,
attorneys' fees, costs and expenses thereafter incurred. If the
Indemnifying Party defends against a claim that is ultimately settled or
adjudicated for an amount which is not recoverable by the Indemnified Party
by reason of this Paragraph 14, the Indemnified Party shall promptly
reimburse the Indemnifying Party for all costs and expenses incurred in
defending the claim. The parties hereto agree to cooperate fully with the
defense, negotiation, or settlement of any such legal proceeding, claim or
demand.
15. REPRESENTATIONS. (a) If we are a corporation, we are duly organized,
validly existing and in good standing under the laws of the state of our
incorporation and will furnish you satisfactory evidence of same upon
request; are duly qualified as a foreign corporation and in good standing
under the laws of each jurisdiction where the conduct of our business
requires such qualification, except where failure to be so qualified will
not have a material adverse effect on our business, operations, property or
financial or other conditions, or on the Program or the value thereof; have
the requisite corporate power and authority and the legal right to conduct
our business as now, heretofore, and proposed to be conducted; and are in
compliance with our articles of incorporation and by-laws; (b) we have all
the necessary licenses, permits, consents and approvals; have made all
necessary filings with, and have given all necessary notices to all
governmental authorities having jurisdiction, to the extent required for
ownership, operation and conduct of our business except where failure to
obtain such licenses, permits, consents or approvals, or to make such
filings or give such notices does not have a material adverse effect on our
business, operations, property, financial or other condition, or on the
Program or the value thereof, (c) we have taken all necessary corporate
action (if a corporation, or all other necessary organization action, if
not) to authorize the execution and consummation of this Agreement and will
furnish you satisfactory evidence of same upon your request; (d) we
represent that as to us this Agreement constitutes a valid and binding
obligation, enforceable in accordance with its terms (except as such
enforceability may be limited by equitable limitations on the availability
of equitable remedies and applicable bankruptcy, insolvency, and other
similar laws relating to or affecting the enforcement of creditors' rights
generally); and (e) we and you each agree to execute such other documents
or agreements as may be necessary or desirable for the implementation of
this Agreement and the consummation of the transactions contemplated
hereby.
16. CREDIT INSURANCE; VALUE-ADDED PROGRAMS. (a) Subject to applicable law or
regulations, Bank (or its agents) shall have the right to solicit and offer
to Cardholders credit life, credit property or other types of credit
insurance (collectively, "Credit Insurance") on the Accounts under a credit
insurance program; and (b) with the prior approval of Ethan Allen, Bank,
either directly or indirectly, may promote and market a list including some
or all of the names and addresses of Cardholders and may promote and market
items other than furniture, home furnishings and related products to
Cardholders. Bank may retain all income derived under subsection (a) or
(b).
17. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "Event of
Default" by us under this Agreement: (a) any warranty, representation, or
covenant by us, under this Agreement or any supplement or amendment hereto
shall be untrue and
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shall not be made true within ten (10) days after notice to us thereof; (b)
we shall breach or default in the performance of any of the terms,
covenants or conditions, including payment terms, of this Agreement, and
such default or breach shall not be cured within ten (10) days after notice
to us thereof; (c) we shall suspend or go out of business, substantially
reduce our business operations or change our mix of Goods and/or Services,
become insolvent or unable to meet our debts as they mature, call a meeting
of our creditors, send notice of a proposed bulk sale of all or part of our
business, make any general assignment or trust mortgage for the benefit of
our creditors, or commit any act of bankruptcy; (d) any petition shall be
filed by or against us initiating a bankruptcy, arrangement,
reorganization, or other proceeding under any provision of the Bankruptcy
Code, or any receiver or trustee shall be appointed for us or any or all of
our property; (e) any material change in the control, ownership or
management of our business; or (f) we cease being an Authorized Dealer.
18. TERM; TERMINATION. (a) This Agreement shall be effective as of the date
hereof and continue for one year (the "Initial Term") and thereafter for
successive one year renewal terms (each, a "Renewal Term"). The foregoing
notwithstanding, this Agreement may be terminated (i) by us upon thirty
(30) days prior written notice to you, which notice, to be effective, must
be given at least thirty (30) days prior to the end of the Initial Term or
any Renewal Term, in which event the Agreement will terminate at the end of
the Initial Term or the Renewal Term, as appropriate, (ii) by Bank,
immediately concurrent with the termination of the Program Agreement, (iii)
by Bank, immediately if Ethan Allen ceases accepting orders for Goods
and/or Services from us or the relationship between Ethan Allen and us is
terminated, (iv) by Bank, immediately upon written notice to us, if Bank,
in its sole discretion, determines at any time and for any reason that we
should not be permitted to participate in the Program, and (v) immediately
(if you choose to do so) upon the occurrence of an Event of Default, but
any such termination by either of us shall in no way affect our obligations
under this Agreement, which obligations shall survive termination, except
for Subparagraph 7(a), including, without limitation, the survival of our
obligations relating to Bank's right of charge back pursuant to Paragraph
12 hereof and our obligations relating to Charge Slips and Credit Slips.
This Agreement shall terminate automatically if any petition is filed by or
against us initiating a bankruptcy proceeding or any receiver or trustee is
appointed for us.
(b) Upon termination of this Agreement, Bank shall have the right, in
addition to and retaining all other rights it may have under this Agreement
or applicable law, to liquidate the Program Accounts Portfolio in any
lawful manner which may be expeditious or economically advantageous to
Bank, including, without limitation, transferring and/or selling the
Accounts in the Program Accounts Portfolio and/or the Cardholder List or
any part thereof to a third party and/or an Affiliate of Bank, each of
which may issue a replacement or substitute card. During such liquidation,
Bank may use our name in communicating with existing customers. We agree to
cooperate with Bank and take any action requested by Bank to effectuate
such liquidation in an orderly manner.
19. INTEGRATION; NO WAIVER. This Agreement supersedes and incorporates all
representations, promises and statements oral or written made in
conjunction with the subject matter of this Agreement and the negotiation
thereof and no such representation, promise or statement not written herein
shall be binding on the parties. Any failure by Bank at any time or times
to require strict compliance with or performance of any provision of this
Agreement shall not waive, affect or diminish any right of Bank thereafter
to demand strict compliance with and performance of such provision. None of
our undertakings, agreements, warranties, covenants and representations
under this Agreement and no Event of Default under this Agreement shall be
deemed suspended or waived unless such suspension or waiver is by agreement
in writing. This Agreement may not be varied, amended or altered nor its
provisions waived except by mutual agreement between us and Bank. We will
be deemed to have agreed to any such amendment, variation, alteration or
waiver ("change") if (a) a writing is duly executed by one of our
authorized representatives, or (b) we submit Charge Slips or Credit Slips
to Bank for approval or payment after the effective date of any change set
forth in a notice of such change mailed or delivered to us by Bank. This
Agreement shall also be binding upon and inure to the benefit of our
respective heirs, administrators, executors, successors, legal
representatives and permitted assigns and the successors and assigns of
Bank.
20. CHOICE OF LAW. This Agreement shall be in all respects (including, without
limitation, all matters of construction, validity and performance) governed
by and construed in accordance with the laws of the State of Georgia
applicable to contracts made and performed in Georgia and any applicable
laws of the United States of America.
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21. NOTICES. Whenever we or you shall be required or shall have the right to
give notice to the other, such notice may be given by (a) mailing, any such
notice, postage prepaid, by registered or certified mail, return receipt
required, to the other party at its address as stated below or such other
addresses as may be specified in writing to the other, and shall be
effective three (3) days after mailing, or (b) delivery to Federal Express
or another carrier of similar reputation, and shall be effective the day
after such delivery if addressed as specified herein.
22. SECURITY INTEREST. (a) The parties hereto agree that the transactions
contemplated herein shall constitute a Program for the extension of
consumer credit and service by Bank directly to individuals who wish to
obtain financing from Bank to purchase Goods and/or Services from Dealer.
As a result, Authorized Dealer has no "rights" (as that term is used in
Article 9 of the UCC) in any Bank Property. As a precaution, however,
Authorized Dealer hereby grants to Bank a first priority continuing
interest in any right, title and interest that Authorized Dealer may be
deemed to have at any time in the property referred to in clauses (i)
through (iv) below (collectively, the "Bank Property") notwithstanding the
parties' intent that Authorized Dealer has no such right, title or interest
whatsoever: (i) all Accounts (including all amounts now or hereafter owing
thereunder) now existing or hereafter arising whether categorized as
accounts, chattel paper, general intangibles, instruments or otherwise
under Article 9 of the UCC; (ii) all Account Documentation, now existing or
hereafter arising, relating to any such Accounts; (iii) all deposits,
credit balances and reserves, if any, relating to such Accounts, (iv) all
Credit Insurance policies and/or certificates sold in connection with the
Accounts; (v) all Unpaid Returned Goods; and (vi) all proceeds of the
foregoing. The security interest granted under this Paragraph 22 shall
secure payment of and performance by Authorized Dealer of all indebtedness,
liabilities and obligations that may be deemed to exist in the event of the
applicability of Article 9 of the UCC to, and any recharacterization of,
any transactions contemplated hereby.
(b) Authorized Dealer represents and warrants that it has not, on or before
the date of this Agreement, granted any Potentially Competing Security
Interests or signed any Potentially Competing Financing Statements other
than any security interests that have lapsed or been terminated and other
than security interests and financing statements, if any, granted in this
Paragraph 22(a), granted in favor of Ethan Allen or identified on Schedule
22(b) hereto. Authorized Dealer agrees that it will not, on or after the
date of this Agreement grant any Potentially Competing Security Interest or
sign any Potentially Competing Financing Statement unless the secured party
thereunder first signs an intercreditor agreement with Bank disclaiming
such secured party's interest in the Bank Property. Such intercreditor
agreement shall be in form and substance acceptable to Bank. As used
herein, "Potentially Competing Security Interest" means any security
interest in favor of any Person that attaches to any of Bank Property or
that would attach, if, contrary to the intent of the parties hereto, Dealer
were determined to have any rights therein. As used herein, "Potentially
Competing Financing Statement" means any financing statement in favor of
any Person that covers any of the Bank Property or that would cover any of
the Bank Property if, contrary to the intent of the parties hereto,
Authorized Dealer were determined to have any rights therein. Authorized
Dealer shall not create, assume or suffer to exist any Lien that would
affect Bank Property if, contrary to the intent of the parties hereto,
Authorized Dealer were determined to have any rights therein.
(c) Authorized Dealer agrees, if and when requested by Bank, to cooperate
fully with Bank to perfect and otherwise give effect to the security
interests granted by this Paragraph 22, including, without limitation,
signing and filing such financing statements, amendments, assignments or
other comparable documents. Authorized Dealer hereby grants Bank an
irrevocable power of attorney authorizing Bank to sign any such documents
on Authorized Dealer's behalf. Authorized Dealer agrees to provide Bank
with not less than thirty (30) days prior written notice of any change in
its state of incorporation, the location of its executive offices or
principal place of business or any change in its corporate name or
structure. Authorized Dealer shall not effect any such change before
Authorized Dealer has taken all such actions as Bank may determine to be
necessary or advisable to preserve and maintain at all times the perfection
and priority of the security interests granted or purported to be granted
to Bank under Paragraph 22.
23. SEVERABILITY. If at any time subsequent to the acceptance date hereof, any
provision of this Agreement, or any supplement or amendment hereto shall be
held by any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon
and shall not impair the enforceability of any other provision of this
Agreement or any supplement or amendment hereto.
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24. ASSIGNABILITY. Neither you nor we may assign its respective rights and
obligations under this Agreement without the prior written consent of the
other party, except that you may without such prior written consent (i)
assign all or part of this Agreement to any of your Affiliate(s); (ii)
engage third parties to perform services pursuant to this Agreement and
assign or sublicense to such third party all or any portion of the right
granted to Bank under Paragraph 9 hereof to use Dealer names but only if
Bank remains responsible for such delegated performance or such third party
assumes those provisions of this Agreement that govern the rights or
obligations assigned or delegated; and (iii) securitize all or any portion
of the Accounts or any related rights under this Agreement or sell
participation interests therein.
25. RETURN OF EQUIPMENT. At any time after the termination or expiration of
this Agreement, Bank may provide written notice to Dealer requesting the
return of any Hypercom units and related printers previously delivered by
Bank to Dealer that have been used to process transactions under this
Program within the twelve (12) months immediately preceding such
termination or expiration (such units and printers being collectively
referred to as the "Applicable Units"). Within thirty (30) days of receipt
of such notice, Dealer shall cause the Applicable Units to be returned to
Bank at such location in the continental United States as Bank may specify
all at Dealer's sole cost and expense. The Applicable Units shall be
returned by Dealer in substantially the same condition as when first
delivered by Bank to Dealer, ordinary wear and tear excepted. Bank shall
have the right to the return of the Applicable Units whether or not Dealer
elects to purchase or arrange for the purchase of the Accounts under
Paragraph 11.03 hereof. If any Applicable Units are lost, stolen or not
otherwise returned as required herein, Dealer shall pay to Bank an amount
of $666 for each such damaged or unreturned Applicable Unit.
26. DEFINITIONS. As used in this Agreement, the following terms shall have the
following meanings:
"Absentee Transaction" means a purchase of any of the Goods and/or Services
from us where the Account information necessary to effect the purchase is
provided on the telephone or by mail (and not over the Internet or through
our website).
"Account" means and includes the following: (i) any open-end revolving
consumer credit account established in favor of a Cardholder, pursuant to
which a Cardholder may finance his/her purchase of Goods and/or Services
from Ethan Allen and/or Authorized Dealers (with respect to Authorized
Dealer Stores) on credit pursuant to the terms of a Credit Card Agreement,
together with any modifications or amendments which may be made to such
Credit Card Agreement; (ii) any and all Account Documentation; (iii) all
accounts, accounts receivable, contract rights, chattel paper, choses in
action, indebtedness, other receivables, general intangibles, documents,
instruments and notes, and the proceeds of the foregoing, now existing or
hereafter arising and wherever located, relating to the retail purchase of
Goods and/or Services billed in connection with or related to that Credit
Card Agreement, including any of the foregoing that were owed to Persons
other than Bank and purchased by Bank; (iv) any and all goods or other
property, contracts of indemnity, guaranties or sureties, proceeds of
insurance and other proceeds at any time standing as security for the
Account; and (v) any and all other rights, remedies, benefits, interests
and titles, both legal and equitable, to which Bank may now or at any time
hereafter be entitled in respect to the foregoing;
"Account Documentation" means any and all documentation relating to an
Account, including, without limitation, Charge Transaction Data, Credit
Card Applications, Credit Card Agreements, Charge Slips, Credit Cards,
Credit Slips, checks and stubs, and all correspondence, memoranda,
documents, instruments, certificates, agreements, invoices, sales or
shipping slips, delivery receipts, billing statements, applications,
magnetic tapes, disks, hardcopy formats, or any other computer readable
data transmission or software, and all other materials, including, without
limitation, tangible and intangible information arising therefrom or
pertaining thereto.
"Affiliate" means any entity that controls, is controlled by, or is under
common control with, a party hereto.
"Applicant" means an individual who has submitted a Credit Card Application
to Bank for a Credit Card under the Program.
"Approved Form" means one of the forms prepared and approved by Bank for
use by Authorized Dealer and which Bank may modify at any time in its sole
discretion.
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"Authorized Dealer" shall mean an independent business operator that (1)
sells predominantly Ethan Allen Goods and/or Services, (2) is authorized by
Ethan Allen to operate a retail furniture store using the service mark
"Ethan Allen Home Interiors", (3) has (i) executed a Bank Dealer Agreement
(which agreement is in effect) or (ii) submitted Accounts to Bank subject
to the terms of a Bank Dealer Agreement, and (4) is authorized by both
Ethan Allen and Bank to participate in the Program.
"Authorized Dealer Stores" means a retail store or stores operated by
Authorized Dealers and located in the United States and operating or making
sales under the service mark "Ethan Allen Home Interiors" at which
Authorized Dealers sell principally "Ethan Allen" brand products.
"Cardholder" means any Person who is obligated to Bank with respect to an
Account and for whom an Account has been opened by Bank under the Program
and includes any Person who is authorized to purchase Goods and/or Services
from Ethan Allen or an Authorized Dealer at retail for personal, family or
household purposes on credit under or pursuant to an Account.
"Cardholder List" means any identification (whether in hard copy, magnetic
tape format or other form) of Cardholders, including, without limitation,
any list of the names, addresses, telephone numbers and social security
numbers of any or all of the Cardholders.
"Chargeback Balance" has the meaning set forth in Subparagraph 12(b)
hereof.
"Charge Slip" means a sales receipt, register receipt tape or other invoice
or documentation, in each case in either physical or electronic form, which
evidences a Purchase that gives rise to an Account or the imposition of a
Restocking Fee.
"Charge Transaction Data" means Account/Cardholder identification and
transaction information with regard to each Purchase by a Cardholder on
credit and each return of a Purchase for credit to the Account/Cardholder,
which data will be transmitted by Authorized Dealer to Bank in accordance
with the applicable Operating Procedures.
"Credit-based Promotions" means the promotions described in Paragraph 11
and any other promotions involving special credit terms that the parties
may agree to conduct from time to time.
"Credit Card" means the plastic card issued and owned by Bank under the
Program exclusively for use in connection with the Program at Authorized
Dealer Stores.
"Credit Card Agreement" means the open-end revolving credit agreement
between Bank and a Cardholder pursuant to which a Cardholder may finance
the purchase of Goods and/or Services on credit from Authorized Dealers,
together with any modifications or amendments which may be made to such
agreement.
"Credit Card Application" means the credit application, which must be
completed and submitted for review to Bank in Georgia by Applicants.
"Credit Criteria" means the standards used by Bank when evaluating
applications for Accounts, which standards may be modified by Bank from
time to time.
"Credit Insurance" has the meaning set forth in Paragraph 16 hereof.
"Credit Slip" means a credit receipt evidencing a return or exchange or
adjustment of Goods and/or Services by a Dealer to a Cardholder or other
credit on an Account.
"Dealer" means the merchant listed below who has executed and submitted
this Agreement to Bank.
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"Ethan Allen Goods and/or Services" means those goods and services sold
under the mark "Ethan Allen," including accessories and delivery services
sold in conjunction therewith, sold at retail by any Dealer in a Dealer
Store to the general public for personal, family and household use.
"Events of Default" shall mean any event described in Paragraph 17 hereof.
"GE Capital" means General Electric Capital Corporation.
"Goods and/or Services" means those new good and services, including
accessories and delivery services sold in conjunction therewith, sold at
retail by any Authorized Dealer in an Authorized Dealer Store, including,
without limitation, Ethan Allen Goods and/or Services. "
"In-Store Payment(s)" means a payment on an Account made by a Cardholder
(or any person acting on behalf of such Cardholder) to an Authorized Dealer
whether at an Authorized Dealer Store or otherwise.
"Late Charges" means charges or fees to Cardholders for late payments on
Accounts which charges or fees are set by Bank from time to time and
instituted and implemented by Bank.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest
(including, without limitation, any interest of a buyer of accounts or
chattel paper which is subject to Article 9 of the UCC), encumbrance,
preference, priority or other security or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any lease or
title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of, or
agreement to file, any financing statement pursuant to the UCC).
"Operating Procedures" means the written instructions and procedures in
connection with the Program set forth in the Operating Manual, as
established by Bank and as the same may be supplemented, amended or
modified by Bank from time to time, including, without limitation, any
advertising guidelines.
"Other Charges" means any and all other charges on an Account (other than
finance charges, Late Charges, and Returned Check Charges) set, instituted
and implemented by Bank to the extent permitted by law.
"Person" means and includes any individual, sole proprietor, partnership,
limited liability company, joint venture, corporation, trust, association,
corporation, institution, public benefit corporation, entity,
unincorporated organization or government (whether federal, state, county,
city municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Program" means the credit card program established by this Agreement and
the Program Agreement and made available to qualified Cardholders for the
purchase of Goods and/or Services sold or supplied by Ethan Allen or
Authorized Dealers. The term "Program" includes the extension of credit,
billings, collections, accounting between the parties, and all aspects of
the customized revolving credit plan established by Bank as contemplated
herein.
"Program Accounts Portfolio" means the aggregate of all outstanding
Accounts established and owned by Bank under this Agreement.
"Program Agreement" means the Amended and Restated Consumer Credit Card
Program Agreement by between Bank and Ethan Allen establishing the
customized revolving credit plan described herein for Ethan Allen and all
Authorized Dealers.
"Promotional Credit Sale Charge Slip" means a Charge Slip evidencing a
purchase on an Account under a Credit-based Promotion specified in
Paragraph 11 hereof.
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"Promotional Sales Mix" means that percentage of sales of Goods and/or
Services which are based on any Credit-based Promotion taken in the
aggregate offered by Ethan Allen or an Authorized Dealer in connection with
any Purchases.
"Purchase" means any Store Purchase and any Absentee Transaction.
"Qualified Special Order Deposit" means a Special Order Deposit which does
not exceed one third (1/3) of the total purchase price of the Goods and/or
Services with respect to which such Special Order Deposit is made.
"Restocking Fee" means any Credit Card surcharge, Credit Card Application
fees, cancellation or restocking fees or any similar processing fees to an
Account.
"Returned Check Charges" means charges or fees to Cardholders for returned
checks received by Bank or Authorized Dealers as payment on an Account,
which charges are set by Bank from time to time and instituted and
implemented by Bank.
"Service Fees" means the amount(s) owed to Bank by Dealer in respect of
funds advanced to Dealer on behalf of Cardholders as the same may be
changed by Bank from time to time in its sole discretion.
"Special Order" means an order by a Cardholder in connection with an
Account for Goods and/or Services from a factory or distribution center
owned by Ethan Allen and not from Dealer's inventory or a floor sample at
the Authorized Dealer's premises nor in the inventory of, or a floor sample
at, any other store owned or operated by Dealer.
"Special Order Deposit" means a deposit made in connection with a Special
Order which deposit is advanced by Bank on a Special Order prior to
delivery thereof.
"Store Purchase" means a purchase of any of the Goods and/or Services from
an Authorized Dealer where the Account information necessary to effect the
purchase is provided when the customer is present at an Authorized Dealer
Store (and not over the Internet or through a Dealer website).
"UCC" means the Uniform Commercial Code, as now constituted or hereafter
amended, as in effect in the state of Georgia.
"Unpaid Returned Goods" means any Goods that are returned to Dealer if such
return results in an obligation of Dealer to make any payment to Bank under
this Agreement (including, without limitation, any obligation to repurchase
any Account which arose in connection with the sale of such Goods) or gives
Bank any right to reduce the amount of any payments which would otherwise
have been made under Paragraph 10; provided, however, that such Goods shall
cease to be "Unpaid Returned Goods" when Bank has received from Dealer full
payment of such obligation or has reduced a payment made under Paragraph 10
thereof.
27. ACCEPTANCE BY BANK AND DEALER; EFFECTIVE DATE. This Agreement may be
accepted by Bank in Georgia either by signing and returning to us a copy
hereof or by issuing a check or draft or otherwise advancing funds in
connection with the first Account or Charge Transaction Data submitted to
Bank after Bank receives in Georgia a copy of this Agreement executed by
us. In the latter case, the date of acceptance will be the date of the
check, draft or other advance. This Agreement may be accepted by us either
by signing and returning to Bank in Georgia a copy hereof or by submitting
an Account or any Charge Transaction Data to Bank after we have received a
copy of this Agreement executed by Bank. In the latter case, the date of
acceptance will be the date of submission of the Account or Charge
Transaction Data to Bank. The amendments to our existing Dealer Agreement
effected through this Agreement shall become effective on the later of
April 5, 2000 or the date when this Agreement has been accepted by both
parties hereto. Any Accounts or Charge Transaction Data submitted, and any
settlements effected, prior to such effective date shall be governed by our
existing Dealer Agreement.
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IN WITNESS WHEREOF this Agreement is executed and submitted to the Bank by
the undersigned this _____ day of _______________.
[NAME OF DEALER]
DEALERSHIP STREET ADDRESS
By:-------------------------------------------------
Title:----------------------------------------------
By:-------------------------------------------------
Title:----------------------------------------------
ACCEPTED: Date:------------------------------------
MONOGRAM CREDIT CARD BANK OF GEORGIA
7840 Roswell Road, Building 100, Suite 200
Atlanta, GA 30350
By:-------------------------------------------------
Title:----------------------------------------------
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Schedule 11(c)
To
Amended and Restated Ethan Allen Credit Card Program Dealer Agreement
-------------------------------------------------------------------------
Discount Matrix
Promotional 3 Month 6 Month 12 Month
Sales Mix Aff/Skp Aff/Skp Aff/Skp
--------- ------- ------- -------
0.00% - 60.00% 1.00% 2.50% 7.00%
60.01% - 65.00% 1.25% 3.00% 8.00%
65.01% - 70.00% 1.50% 3.50% 9.00%
70.01% - 80.00% 1.75% 4.00% 10.00%
80.01% + 2.00% 4.50% 11.00%
* Discount adjusted quarterly predicated on previous six month rolling
promotional mix average.
---------------------------------------------------------------------------
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Schedule 22(b)
To
Amended and Restated Ethan Allen Credit Card Program Dealer Agreement
Potentially Competing Security Interests and Potentially
Competing Financing Statements
None.
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EXHIBIT B
(to Program Agreement)
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this "Agreement") is entered into as of
_____________ by ETHAN ALLEN INC., a Delaware corporation ("Creditor"), in favor
of MONOGRAM CREDIT CARD BANK OF GEORGIA, a Georgia banking corporation
("Monogram"). Capitalized terms used in this Agreement and not otherwise defined
herein shall have the definitions set forth in Section 7 hereof.
RECITALS
A. ___________________ ("Retailer") and Monogram are parties to that
certain Amended and Restated Consumer Credit Card Program Agreement dated
February 22, 2000, which creates a program under which Monogram will establish
credit card accounts and extend credit to persons buying merchandise and
services from Retailer ("Customers"). Such program, as it may be modified from
time to time, is referred to in this Agreement as the "Program," and such
agreement, as amended from time to time, is referred to in this Agreement as the
"Program Agreement."
B. Retailer has granted to Creditor a security interest in certain of
Retailer's inventory and the proceeds thereof.
C. Creditor's execution and delivery of this Agreement is a material
condition to the continuation and performance of the Program and Monogram's
continued extensions of credit to consumers of Retailer thereunder.
NOW, THEREFORE, Creditor hereby agrees as follows:
1. DISCLAIMER AND SUBORDINATION OF INTEREST. Creditor agrees that it does
not and shall not have or assert any security or other interests in, or any
rights with respect to, any Bank Property (other than any Unpaid Returned
Goods), and Creditor hereby waives any and all such rights and interests.
Creditor hereby subordinates any security or other interest it may now have or
hereafter acquire in any Unpaid Returned Goods to the security and other
interests that Monogram may now have or hereafter acquire in such Unpaid
Returned Goods.
2. RIGHTS OF SETOFF AND RECOUPMENT. Creditor agrees that any right, title
or interest it may now assert of hereafter acquire in or with respect to any
Contractual Rights shall be subject and subordinate to all right of setoff,
recoupment, netting or other adjustment in amounts owing that Monogram may now
have or hereafter acquire with respect to any Contractual Rights.
3. GOVERNING LAW; ENTIRE AGREEMENT; AMENDMENT. This Agreement shall be
governed by and construed in accordance with the laws of the State of Georgia
(other than its choice of law rules). This Agreement embodies the entire
agreement between the parties regarding the subject matter of this Agreement. No
modification, amendment, or waiver of any provision of this Agreement shall be
effective unless signed in writing by the party against whom such modification,
amendment or waiver is sought to be enforced.
4. CONTINUATION OF AGREEMENT. Creditor acknowledges that, in reliance on
this Agreement, Monogram has or will acquire rights in Bank Property and will
extend credit to Customers. Unless Monogram agrees in writing to an earlier
termination of this Agreement, this Agreement shall continue in effect until the
later of the termination of the Program Agreement and the payment in full of all
amounts owing thereunder or with respect to any Bank Property.
5. LIMIT ON ASSIGNMENTS. Creditor shall not assign any or all of the
Creditor Filings or any such other financing statements it has or hereafter may
file against Retailer, or any of them, unless prior to such assignment, such
assignment is made subject to the terms of this Agreement and Monogram is
provided a copy of
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such assignment or the assignee executes in favor of Monogram an intercreditor
agreement substantially similar to this Agreement.
6. AMENDMENT OF FINANCING STATEMENTS. Upon the request of Monogram,
Creditor shall file amendments to the Creditor Filings, which amendment shall
clarify that the security interests established therein are subject to the terms
of this Agreement. Bank shall be responsible for preparing any such amendment.
7. CERTAIN DEFINED TERMS. As used herein, the following terms shall have
the following meanings:
"Bank Property" means all of the property referred to in Exhibit A
attached hereto.
"Contractual Rights" means all deposits, escrow accounts, credit
balances and/or reserves now or hereafter on the books of Monogram relating to
the Bank Property and any other amounts now or hereafter owing by Monogram under
or in connection with the Program Agreement.
"Creditor Filings" means and includes any and all financing statements
filed in any jurisdictions under which Creditor is secured party and Retailer is
debtor and which covers or purports to cover any of the Bank Property.
"Unpaid Returned Goods" has the meaning set forth on Exhibit A hereto.
IN WITNESS WHEREOF, Creditor executed this Agreement as of the date first
above written.
-----------------------------------
(Creditor)
-----------------------------------
By: _____________________________
Its: _____________________________
Address: _____________________________
_____________________________
_____________________________
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EXHIBIT A
(to Intercreditor Agreement)
All of Retailer's right, title and interest, if any, now owned or existing or
hereafter acquired or arising in, to and under the following property (in each
case, existing at any time, past, present or future): (A) all Accounts, Account
Documentation and Indebtedness; (B) all deposits, credit balances and reserves,
if any, on Monogram's books relative to any Accounts, including, without
limitation, the Collateral Account; (C) all Unpaid Returned Goods; and (D) all
proceeds of the foregoing.
Capitalized terms used in the foregoing collateral description (or in the
following definitions) shall have the meanings set forth below.
"ACCOUNT" means and includes any and all of the following, whether now existing
or hereafter arising: (i) Credit Card Agreements; (ii) Account Documentation;
(iii) accounts, accounts receivable, Indebtedness, other receivables, contract
rights, choses in action, general intangibles, chattel paper, instruments,
documents and notes, Program Documents and contract rights related to,
comprising, securing or evidencing the obligations under or the receivables from
any Credit Card Agreements or Account Documentation and all proceeds of all of
the foregoing; (iv) rights as to any goods or other property which is
represented thereby or is security or collateral therefor; (v) guarantees,
claims, security interests, or other security held by or granted to Monogram to
secure payment by any person with respect thereto; (vi) proceeds relating to
Insurance Programs and Value-Added Programs; and (vii) other rights, remedies,
benefits, interests and titles, both legal and equitable, to which Monogram may
now or at anytime hereafter be entitled in respect of the foregoing.
"ACCOUNT DOCUMENTATION" means with respect to an Account, any and all
documentation relating to such Account, including without limitation, Program
Documents, credit cards, credit card applications, Credit Card Agreements,
charge transaction data, charge slips, credit clips, checks and stubs, credit
bureau reports, adverse action information, change of terms notices,
correspondence, memoranda, documents, instruments, certificates, agreements,
invoices, and any other written information relating to such Account, in each
case including any and all amendments or modifications thereto, and in each
case, however stored or kept, provided however, that "Account Documentation"
shall not include materials used for advertising or solicitations including,
without limitation, advertising or solicitations of credit-based promotions.
"BANK DEALER AGREEMENT" means any Ethan Allen Credit Card Program Dealer
Agreement entered into by an Ethan Allen dealer with Monogram in connection with
the program established under the Program Agreement, as such Bank Dealer
Agreement may be amended, restated, supplemented or replaced from time to time.
"COLLATERAL ACCOUNT" means the account established by Monogram pursuant to the
Program Agreement upon certain draws under the letter of credit issued for the
account of Retailer in connection with the Program Agreement and any similar
account established by Monogram pursuant to the Program Agreement.
"CREDIT CARD AGREEMENT" means the open-end revolving credit agreement, either in
physical or electronic form, between Monogram and each cardholder pursuant to
which such cardholder may make purchases on credit provided by Monogram,
together with any modifications or amendments which may be made to such
agreement.
"INDEBTEDNESS" means any and all amounts owing from time to time with respect to
an Account whether or not billed, including, without limitation, any unpaid
balance, finance charges (inclusive of finance charges subject to possible
reversals due to unexpired credit-based promotions), late charges, NSF fees,
charges for Value-Added and Insurance Programs, over-limit fees and any other
charges with respect to an Account.
"INSURANCE PROGRAM" means any program which may be offered through Monogram
pursuant to the Program Agreement under which Monogram, any insurance company,
or any other third party makes available insurance coverage to cardholders.
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"PROGRAM AGREEMENT" means that certain Amended and Restated Consumer Credit Card
Program Agreement dated as of February 22, 2000 between Retailer and Monogram,
as amended, supplemented, modified or replaced from time to time.
"PROGRAM DOCUMENTS" means credit card applications, Credit Card Agreements,
credit cards, credit card mailers, Bank Dealer Agreements and such other
documents as are required by law.
"UNPAID RETURNED GOODS" means any means any merchandise that is returned by
Customers to any Retailer if such return results in an obligation of any
Retailer to make any payment to Monogram under the Program Agreement (including,
without limitation, any obligation to repurchase any Account which arose in
connection with the sale of such merchandise) or gives Monogram any right to
reduce the amount of any payment which would otherwise have been made under to
Retailer under the Program Agreement; provided, however, that such merchandise
shall cease to be "Unpaid Returned Goods" when Monogram has received from
Retailer full payment of such obligation or has reduced a payment made to
Retailer under the Program Agreement in respect of such obligation.
"VALUE-ADDED PROGRAM" means any products or services which may be offered by or
through Monogram to Cardholders pursuant to the Program Agreement including,
without limiting the foregoing, credit card protection plans, continuity
memberships, legal services plans, and auto clubs; provided, however, that
"Value-Added Programs" shall not include credit insurance or any other Insurance
Program.
67
<PAGE>
EXHIBIT C
(to Program Agreement)
PARENT GUARANTEE
For value received and to induce Monogram Credit Card Bank of Georgia
(herein called the "Bank") to extend financial accommodations to or for the
benefit of Ethan Allen Inc. ("Ethan Allen"), a Delaware corporation with offices
located at Ethan Allen Drive, P.O. Box 1966, Danbury, Connecticut 06813-1966,
the undersigned ("Guarantor") hereby absolutely and unconditionally guarantees
payment to the Bank when due (whether at scheduled maturity, by declaration or
otherwise) of any and all indebtedness, liabilities and obligations now or
hereafter owing by Ethan Allen to Bank under or in connection with that certain
Amended and Restated Consumer Credit Card Program Agreement of even date
herewith, as such agreement may be amended, restated, supplemented or replaced
from time to time (the "Program Agreement"), including interest, penalties,
and/or damages thereon (collectively herein called the "Guaranteed Debt"). This
Guaranty is a guaranty of payment and not merely of collection.
Guarantor owns a majority of the common stock of Ethan Allen, and Guarantor
will derive substantial direct and indirect benefit from its execution and
delivery of this Guarantee. In addition, Guarantor is entering into this
Guarantee pursuant to its obligation to doso under the Program Agreement and
with the understanding that this Guarantee is a material condition to Bank's
continuation of the credit program established by the Program Agreement.
Guarantor hereby waives presentment, demand and protest; notice of
acceptance of this Guaranty; notice of the creation of any Guaranteed Debt, of
any default and of protest, dishonor, or other action taken in reliance hereon;
all demands and notices of any kind in connection with this guaranty of the
Guaranteed Debt; and all diligence in collection or protection of or realization
upon any of the Guaranteed Debt.
Bank may, from time to time, either before or after any notice of
discontinuance of this Guaranty, without notice to or consent of Guarantor and
without in any way affecting any of Guarantor's liability or Bank's rights
hereunder: (a) alter, accelerate, extend, renew, or change the time, place,
manner or terms of payment of, or grant indulgences with respect to, any of the
Guaranteed Debt; (b) increase or decrease the rate of interest on any of the
Guaranteed Debt; (c) obtain the primary or secondary liability of any party or
parties, in addition to Guarantor, with respect to any of the Guaranteed Debt;
(d) release or compromise any liability of Guarantor hereunder or any other
party or parties primarily or secondarily liable on any of the Guaranteed Debt;
(e) release, foreclose on or otherwise enforce Bank's liens on any collateral
securing any of the obligation of Ethan Allen to Bank, whether or not covered
hereby; (f) apply to the Guaranteed Debt in such manner as Bank shall determine
any sums received by it from Ethan Allen or from any other source to be applied
to Ethan Allen's obligations; or (g) resort to Guarantor for payment of any or
all of the Guaranteed Debt, whether or not Bank shall have resorted to any
property securing any of the Guaranteed Debt or shall have proceeded against
Ethan Allen, any other guarantor or any other party primarily or secondarily
liable on any of the Guaranteed Debt.
This Guaranty shall be a continuing guaranty and shall be binding upon
Guarantor regardless of how long before or after the date hereof any Guaranteed
Debt was or is incurred.
Guarantor agrees that this Guaranty shall continue to be effective, or
shall be reinstated as the case may be, if at any time any payment to Bank of
any of the Guaranteed Debt is rescinded or must be restored or returned by Bank
upon the insolvency, bankruptcy or reorganization of Ethan Allen, all as though
such payment had not been made. Guarantor hereby irrevocably waives all claims
he or she has or may acquire against Ethan Allen in respect of the Guaranteed
Debt, including rights of exoneration, reimbursement and subrogation.
This Guaranty is assignable by Bank and shall inure to the benefit of Bank,
its successors and assigns. This Guaranty may not be assigned by Guarantor
without the express written consent of Bank, which consent will be given or
withheld in Bank's sole discretion.
68
<PAGE>
Guarantor understands, agrees, and hereby authorizes Bank to periodically
request, receive, and to exchange references and data that Bank, in its sole
discretion, deems pertinent to Guarantor's creditworthiness and/or financial
condition, including requesting reports from credit reporting agencies.
This Guaranty may not be amended except by written instrument signed by
Bank and Guarantor. No delay by Bank in exercising any of its rights or partial
or single exercise of its rights shall operate as a waiver of that or any other
right. The exercise of one or more of Bank's rights shall not be a waiver of,
nor preclude the exercise of, any rights or remedies available under this
Guaranty, in law, or in equity.
All notices, demands and other communications hereunder shall be in writing
and shall be sent by facsimile or nationally recognized overnight courier
service addressed to the party to whom such notice or other communication is to
be given or made at such party's address as set forth below, or to such other
address as such party may designate in writing to the other party from time to
time in accordance with the provisions hereof and shall be deemed effective upon
actual receipt.
This Guaranty and all rights and obligations hereunder shall be governed by
and construed in accordance with the substantive laws of the State of Georgia.
If any provision of this Guaranty is held to be invalid, void or unenforceable,
all other provisions shall remain valid and be enforced and construed as if such
invalid provision were never a part of this Guaranty. Guarantor agrees to pay
all expenses (including reasonable attorneys' fees and legal expenses) incurred
by Bank to collect the Guaranteed Debt and in enforcing this Guaranty.
ETHAN ALLEN INTERIORS, INC.
Date:----------------------------------- By:-----------------------------
Title:--------------------------
Addresses for Notices:
To Bank:
7840 Roswell Road
To Retailer:
Building 100, Suite 200
Atlanta, GA 30350
Attn: President
Telefax: (770) 353-2464
with a copy to:
7840 Roswell Road
Building 100, Suite 200
Attn: Counsel
Telefax: (203) 961-5149
To Guarantor:
Ethan Allen Interiors, Inc.
Ethan Allen Drive
Danbury, CT 06811
Attn: Chairman, President and CEO
Telefax: (203) 743-8524
69
<PAGE>
with a copy to:
Ethan Allen Interiors Inc.
Ethan Allen Drive
Danbury, CT 06811
Attn: Director of Credit Programs
Telefax: (203) 743-8214
70
<PAGE>
EXHIBIT D
(to Program Agreement)
SUBSIDIARY GUARANTEE
For value received and to induce Monogram Credit Card Bank of Georgia
(herein called the "Bank") to extend financial accommodations to or for the
benefit of Ethan Allen Inc. ("Ethan Allen"), a Delaware corporation with offices
located at Ethan Allen Drive, P.O. Box 1966, Danbury, Connecticut 06813-1966,
the undersigned ("Guarantor") hereby absolutely and unconditionally guarantees
payment to the Bank when due (whether at scheduled maturity, by declaration or
otherwise) of any and all indebtedness, liabilities and obligations now or
hereafter owing by Ethan Allen to Bank under or in connection with that certain
Amended and Restated Consumer Credit Card Program Agreement of even date
herewith, as such agreement may be amended, restated, supplemented or replaced
from time to time (the "Program Agreement"), including interest, penalties,
and/or damages thereon (collectively herein called the "Guaranteed Debt"). This
Guaranty is a guaranty of payment and not merely of collection.
Guarantor will derive substantial direct and indirect benefit from its
execution and delivery of this Guarantee. In addition, Guarantor is entering
into this Guarantee with the understanding that this Guarantee is a material
condition to Bank's entry into the Program Agreement.
Guarantor hereby waives presentment, demand and protest; notice of
acceptance of this Guaranty; notice of the creation of any Guaranteed Debt, of
any default and of protest, dishonor, or other action taken in reliance hereon;
all demands and notices of any kind in connection with this guaranty of the
Guaranteed Debt; and all diligence in collection or protection of or realization
upon any of the Guaranteed Debt.
Bank may, from time to time, either before or after any notice of
discontinuance of this Guaranty, without notice to or consent of Guarantor and
without in any way affecting any of Guarantor's liability or Bank's rights
hereunder: (a) alter, accelerate, extend, renew, or change the time, place,
manner or terms of payment of, or grant indulgences with respect to, any of the
Guaranteed Debt; (b) increase or decrease the rate of interest on any of the
Guaranteed Debt; (c) obtain the primary or secondary liability of any party or
parties, in addition to Guarantor, with respect to any of the Guaranteed Debt;
(d) release or compromise any liability of Guarantor hereunder or any other
party or parties primarily or secondarily liable on any of the Guaranteed Debt;
(e) release, foreclose on or otherwise enforce Bank's liens on any collateral
securing any of the obligation of Ethan Allen to Bank, whether or not covered
hereby; (f) apply to the Guaranteed Debt in such manner as Bank shall determine
any sums received by it from Ethan Allen or from any other source to be applied
to Ethan Allen's obligations; or (g) resort to Guarantor for payment of any or
all of the Guaranteed Debt, whether or not Bank shall have resorted to any
property securing any of the Guaranteed Debt or shall have proceeded against
Ethan Allen, any other guarantor or any other party primarily or secondarily
liable on any of the Guaranteed Debt.
This Guaranty shall be a continuing guaranty and shall be binding upon
Guarantor regardless of how long before or after the date hereof any Guaranteed
Debt was or is incurred. Notwithstanding the foregoing, however, Guarantor may
limit his or her obligations hereunder by delivery of a written notice of
discontinuance to Bank. Such notice of discontinuance will limit Guarantor's
obligations hereunder to (a) Guaranteed Debt outstanding or contracted or
committed for (whether or not outstanding) on or before Bank's receipt of such
notice; (b) any extensions, renewals or modifications of such Guaranteed Debt;
and (c) any additional fees and expenses incurred by Bank (including reasonable
attorneys' fees and costs in seeking to enforce or collect such Guaranteed
Debt).
Guarantor agrees that this Guaranty shall continue to be effective, or
shall be reinstated as the case may be, if at any time any payment to Bank of
any of the Guaranteed Debt is rescinded or must be restored or returned by Bank
upon the insolvency, bankruptcy or reorganization of Ethan Allen, all as though
such payment had not been made. Guarantor hereby irrevocably waives all claims
he or she has or may acquire against Ethan Allen in respect of the Guaranteed
Debt, including rights of exoneration, reimbursement and subrogation.
71
<PAGE>
This Guaranty is assignable by Bank and shall inure to the benefit of Bank,
its successors and assigns. This Guaranty may not be assigned by Guarantor
without the express written consent of Bank, which consent will be given or
withheld in Bank's sole discretion.
Guarantor understands, agrees, and hereby authorizes Bank to periodically
request, receive, and to exchange references and data that Bank, in its sole
discretion, deems pertinent to Guarantor's creditworthiness and/or financial
condition, including requesting reports from credit reporting agencies.
This Guaranty may not be amended except by written instrument signed by
Bank and Guarantor. No delay by Bank in exercising any of its rights or partial
or single exercise of its rights shall operate as a waiver of that or any other
right. The exercise of one or more of Bank's rights shall not be a waiver of,
nor preclude the exercise of, any rights or remedies available under this
Guaranty, in law, or in equity.
All notices, demands and other communications hereunder shall be in writing
and shall be sent by facsimile or nationally recognized overnight courier
service addressed to the party to whom such notice or other communication is to
be given or made at such party's address as set forth below, or to such other
address as such party may designate in writing to the other party from time to
time in accordance with the provisions hereof and shall be deemed effective upon
actual receipt.
This Guaranty and all rights and obligations hereunder shall be governed by
and construed in accordance with the substantive laws of the State of Georgia.
If any provision of this Guaranty is held to be invalid, void or unenforceable,
all other provisions shall remain valid and be enforced and construed as if such
invalid provision were never a part of this Guaranty. Guarantor agrees to pay
all expenses (including attorneys' fees and legal expenses) incurred by Bank to
collect the Guaranteed Debt and in enforcing this Guaranty.
ETHAN ALLEN MARKETING CORPORATION
Date: February 22, 2000 By:--------------------------------------
Title:-----------------------------------
Addresses for Notices:
To Bank:
7840 Roswell Road
Building 100, Suite 200
Atlanta, GA 30350
Attn: President
Telefax: (770) 353-2464
with a copy to:
7840 Roswell Road
Building 100, Suite 200
Attn: Counsel
Telefax: (203) 961-5149
72
<PAGE>
To Guarantor:
Ethan Allen Marketing Corporation
Ethan Allen Drive
Danbury, CT 06811
Attn: Chairman, President and CEO
Telefax: (203) 743-8524
with a copy to:
Ethan Allen Marketing Corporation
Ethan Allen Drive
Danbury, CT 06811
Attn: Director of Credit Programs
Telefax: (203) 743-8214
73
<PAGE>
EXHIBIT E
(to Program Agreement)
SUBSIDIARY GUARANTEE
For value received and to induce Monogram Credit Card Bank of Georgia
(herein called the "Bank") to extend financial accommodations to or for the
benefit of Ethan Allen Inc. ("Ethan Allen"), a Delaware corporation with offices
located at Ethan Allen Drive, P.O. Box 1966, Danbury, Connecticut 06813-1966,
the undersigned ("Guarantor") hereby absolutely and unconditionally guarantees
payment to the Bank when due (whether at scheduled maturity, by declaration or
otherwise) of any and all indebtedness, liabilities and obligations now or
hereafter owing by Ethan Allen to Bank under or in connection with that certain
Amended and Restated Consumer Credit Card Program Agreement of even date
herewith, as such agreement may be amended, restated, supplemented or replaced
from time to time (the "Program Agreement"), including interest, penalties,
and/or damages thereon (collectively herein called the "Guaranteed Debt"). This
Guaranty is a guaranty of payment and not merely of collection.
Guarantor will derive substantial direct and indirect benefit from its
execution and delivery of this Guarantee. In addition, Guarantor is entering
into this Guarantee with the understanding that this Guarantee is a material
condition to Bank's entry into the Program Agreement.
Guarantor hereby waives presentment, demand and protest; notice of
acceptance of this Guaranty; notice of the creation of any Guaranteed Debt, of
any default and of protest, dishonor, or other action taken in reliance hereon;
all demands and notices of any kind in connection with this guaranty of the
Guaranteed Debt; and all diligence in collection or protection of or realization
upon any of the Guaranteed Debt.
Bank may, from time to time, either before or after any notice of
discontinuance of this Guaranty, without notice to or consent of Guarantor and
without in any way affecting any of Guarantor's liability or Bank's rights
hereunder: (a) alter, accelerate, extend, renew, or change the time, place,
manner or terms of payment of, or grant indulgences with respect to, any of the
Guaranteed Debt; (b) increase or decrease the rate of interest on any of the
Guaranteed Debt; (c) obtain the primary or secondary liability of any party or
parties, in addition to Guarantor, with respect to any of the Guaranteed Debt;
(d) release or compromise any liability of Guarantor hereunder or any other
party or parties primarily or secondarily liable on any of the Guaranteed Debt;
(e) release, foreclose on or otherwise enforce Bank's liens on any collateral
securing any of the obligation of Ethan Allen to Bank, whether or not covered
hereby; (f) apply to the Guaranteed Debt in such manner as Bank shall determine
any sums received by it from Ethan Allen or from any other source to be applied
to Ethan Allen's obligations; or (g) resort to Guarantor for payment of any or
all of the Guaranteed Debt, whether or not Bank shall have resorted to any
property securing any of the Guaranteed Debt or shall have proceeded against
Ethan Allen, any other guarantor or any other party primarily or secondarily
liable on any of the Guaranteed Debt.
This Guaranty shall be a continuing guaranty and shall be binding upon
Guarantor regardless of how long before or after the date hereof any Guaranteed
Debt was or is incurred. Notwithstanding the foregoing, however, Guarantor may
limit his or her obligations hereunder by delivery of a written notice of
discontinuance to Bank. Such notice of discontinuance will limit Guarantor's
obligations hereunder to (a) Guaranteed Debt outstanding or contracted or
committed for (whether or not outstanding) on or before Bank's receipt of such
notice; (b) any extensions, renewals or modifications of such Guaranteed Debt;
and (c) any additional fees and expenses incurred by Bank (including reasonable
attorneys' fees and costs in seeking to enforce or collect such Guaranteed
Debt).
Guarantor agrees that this Guaranty shall continue to be effective, or
shall be reinstated as the case may be, if at any time any payment to Bank of
any of the Guaranteed Debt is rescinded or must be restored or returned by Bank
upon the insolvency, bankruptcy or reorganization of Ethan Allen, all as though
such payment had not been made. Guarantor hereby irrevocably waives all claims
he or she has or may acquire against Ethan Allen in respect of the Guaranteed
Debt, including rights of exoneration, reimbursement and subrogation.
74
<PAGE>
This Guaranty is assignable by Bank and shall inure to the benefit of Bank,
its successors and assigns. This Guaranty may not be assigned by Guarantor
without the express written consent of Bank, which consent will be given or
withheld in Bank's sole discretion.
Guarantor understands, agrees, and hereby authorizes Bank to periodically
request, receive, and to exchange references and data that Bank, in its sole
discretion, deems pertinent to Guarantor's creditworthiness and/or financial
condition, including requesting reports from credit reporting agencies.
This Guaranty may not be amended except by written instrument signed by
Bank and Guarantor. No delay by Bank in exercising any of its rights or partial
or single exercise of its rights shall operate as a waiver of that or any other
right. The exercise of one or more of Bank's rights shall not be a waiver of,
nor preclude the exercise of, any rights or remedies available under this
Guaranty, in law, or in equity.
All notices, demands and other communications hereunder shall be in writing
and shall be sent by facsimile or nationally recognized overnight courier
service addressed to the party to whom such notice or other communication is to
be given or made at such party's address as set forth below, or to such other
address as such party may designate in writing to the other party from time to
time in accordance with the provisions hereof and shall be deemed effective upon
actual receipt.
This Guaranty and all rights and obligations hereunder shall be governed by
and construed in accordance with the substantive laws of the State of Georgia.
If any provision of this Guaranty is held to be invalid, void or unenforceable,
all other provisions shall remain valid and be enforced and construed as if such
invalid provision were never a part of this Guaranty. Guarantor agrees to pay
all expenses (including attorneys' fees and legal expenses) incurred by Bank to
collect the Guaranteed Debt and in enforcing this Guaranty.
ETHAN ALLEN MANUFACTURING CORPORATION
Date: February 22, 2000 By:--------------------------------------
Title:-----------------------------------
Addresses for Notices:
To Bank:
7840 Roswell Road
Building 100, Suite 200
Atlanta, GA 30350
Attn: President
Telefax: (770) 353-2464
with a copy to:
7840 Roswell Road
Building 100, Suite 200
Attn: Counsel
Telefax: (203) 961-5149
To Guarantor:
75
<PAGE>
Ethan Allen Manufacturing Corporation
Ethan Allen Drive
Danbury, CT 06811
Attn: Chairman, President and CEO
Telefax: (203) 743-8524
with a copy to:
Ethan Allen Manufacturing Corporation
Ethan Allen Drive
Danbury, CT 06811
Attn: Director of Credit Programs
Telefax: (203) 743-8214
76
<PAGE>
EXHIBIT F
(to Program Agreement)
OFFICER'S CERTIFICATE
To: Monogram Credit Card Bank of Georgia
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Consumer Credit Card
Program Agreement dated as of February 22, 2000 between Monogram Credit Card
Bank of Georgia, a Georgia banking corporation (together with its successors,
assigns and transferees, the "Bank") and Ethan Allen Inc., a Delaware
corporation ("Retailer") (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, the "Agreement;" the terms
defined therein being used herein as therein defined).
The undersigned chief financial officer of Retailer hereby certifies as of the
date hereof that the attached (unaudited) financial statements of Ethan Allen
Inc. ("Retailer") were prepared in accordance with generally accepted accounting
principles applied on a consistent basis and present fairly the consolidated
financial position and the results of operations of Retailer for the period
ended _____________, 200__.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
-------------------, ------------.
ETHAN ALLEN INC.
By:--------------------------------------
Name:------------------------------------
Title:-----------------------------------
77
<PAGE>
EXHIBIT G
(to Program Agreement)
OFFICER'S CERTIFICATE
To: Monogram Credit Card Bank of Georgia
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Consumer Credit Card
Program Agreement dated as of February 22, 2000 between Monogram Credit Card
Bank of Georgia, a Georgia banking corporation (together with its successors,
assigns and transferees, the "Bank") and Ethan Allen Inc., a Delaware
corporation ("Retailer") (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, the "Agreement;" the terms
defined therein being used herein as therein defined).
The undersigned chief financial officer of Retailer hereby certifies as of the
date hereof that the representations and warranties of Ethan Allen Interiors,
Inc. below the signature page of the Program Agreement are true and correct.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
-------------------, ------------.
ETHAN ALLEN INC.
By:--------------------------------------
Name:------------------------------------
Title:-----------------------------------
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Ethan Allen Interiors Inc:
We consent to the incorporation by reference in the registration statements
(Nos. 333-47935 and 333-26949) on Form S-8 of Ethan Allen Interiors Inc. of our
report dated July 28, 2000, relating to the consolidated balance sheets of Ethan
Allen Interiors Inc. and Subsidiary as of June 30, 2000 and 1999, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended June 30, 2000, and
related financial statement schedule, which report appears in the June 30, 2000
annual report on Form 10-K of Ethan Allen Interiors Inc.
/s/ KPMG LLP
Stamford, Connecticut
September 11, 2000
