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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-14146
CORT BUSINESS SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 54-1662135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4401 Fair Lakes Court, Fairfax, VA 22033
(Address of principal executive offices) (Zip Code)
(703) 968-8500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrants' 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. Yes [X] No [ ]
Non-affiliates of CORT Business Services Corporation held 6,780,760
shares of Common Stock as of March 17, 1998. The fair market value of the stock
held by non-affiliates is $301,743,820 based on the sale price of the shares on
March 17, 1998.
As of March 17, 1998, 12,998,546 shares of Common Stock, par value
$.01, were outstanding.
Documents Incorporated by Reference:
Document Part of Form 10-K
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Annual Report to Stockholders for the fiscal year Part II
ended December 31, 1997
Proxy Statement for the Annual Meeting of Part III
Stockholders to be held May 12, 1998
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PART I
ITEM 1. Business
Overview
CORT Business Services Corporation (the "Company" or "CORT") through its
wholly-owned subsidiary CORT Furniture Rental Corporation ("CFR") is the leading
national provider of rental furniture, accessories and related services in the
growing and fragmented "rent-to-rent" segment of the furniture rental industry.
The "rent-to-rent" segment serves both corporate and individual customers who
desire flexibility to meet their temporary and transitional needs. The Company
focuses on corporate customers by offering office and residential furniture and
related accessories through a direct sales force of approximately 700
salespeople and a network of 109 showrooms in 32 states and the District of
Columbia. The Company believes that approximately 80% of its rental revenue is
derived from its corporate customers, while the remainder is derived principally
from rentals to middle- and upper-income level individuals. The Company
maintains the showroom quality condition of its merchandise available for rent
by selling its previously rented merchandise through a network of 72
company-operated clearance centers, thereby enabling the Company to regularly
update its inventory with new styles and new merchandise. Sales of furniture
through clearance centers, at prices which for the last five years have averaged
109% of the furniture's original cost, allow the Company to maximize the
residual value of its rental merchandise. Furniture sales through clearance
centers and other sales accounted for approximately 17% of the Company's total
1997 revenue.
As the industry leader and the only "rent-to-rent" furniture rental company with
a national presence, CORT is well-positioned to take advantage of growing demand
for furniture rental services. This demand is believed to be driven by continued
growth in management and professional employment, the increasing importance to
American business of flexibility and outsourcing and the impact of a more mobile
and transitory population. The Company is called upon to meet furniture rental
needs of a corporate customer base which includes Fortune 500 companies, small
businesses and professionals, and owners and operators of apartment communities.
According to industry estimates, a significant portion of the "rent-to-rent"
furniture rental revenues is derived from single-location and small regional
rental businesses which present attractive consolidation opportunities for the
larger "rent-to-rent" furniture rental companies such as CORT. Since the
beginning of 1993, the Company has acquired two larger regional competitors,
General Furniture Leasing and Evans Rents, and has completed and successfully
integrated 15 small lease portfolio acquisitions. Management believes that CORT
is well-positioned to continue capitalizing on the industry's consolidation
trend due to its national presence, leading market share and financial capacity.
The Company's total revenue increased 22.0% on an annual basis, from $106.5
million in 1992 to $287.2 million in 1997, as a result of the acquisitions of
General Furniture Leasing and Evans Rents, small lease portfolio acquisitions,
start-up operations and new showroom and clearance center openings, as well as
growth in existing operations. Operating earnings increased 27.9% on an annual
basis from $13.5 million (excluding non-recurring charges of $10.0 million) in
1992 to $46.3 million in 1997.
Business Strategy
Management believes that CORT's size, national presence, consistently high-level
customer service, product quality and broad product selection, depth of
management and efficient clearance centers have been key contributors to the
Company's success. The Company's objective is to build on these fundamentals and
increase further its revenue and operating earnings and expand its margins by
continuing to pursue its growth strategy. The key components of this strategy
are (i) making selective acquisitions; (ii) initiating operations in new markets
and adding showrooms and clearance centers in existing markets; (iii) expanding
its corporate customer base and (iv) continuing to invest in the development of
various products and services.
Acquisitions
The primary focus of the Company's growth strategy has been and will continue to
be the selective acquisition of small lease portfolios and regional companies in
new and existing markets. Since the beginning of 1993, the Company has completed
15 small lease portfolio acquisitions which include entrance into the New York
City, Salt
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Lake City, Pittsburgh and Cleveland markets. In a typical lease portfolio
acquisition, the Company acquires existing leases and rental furniture.
Additionally, the Company retains sales personnel with strong local customer
relationships. The Company generally does not acquire showrooms, distribution
facilities or clearance centers in existing markets. However, in new markets,
the Company may choose to retain such real estate. The Company also believes
that there are a select number of opportunities to acquire larger regional
companies in order to enter new markets and increase its market share in
existing markets. For example, the Company has acquired two larger regional
companies: General Furniture Leasing in September 1993, which had total revenues
of approximately $41.5 million for fiscal year 1992, and Evans Rents in April
1996, which had total revenues of approximately $30.5 million for fiscal year
1995. The acquisition of General Furniture Leasing provided CORT with immediate
access to new market areas and additional critical mass in CORT's existing
markets. Evans Rents provided CORT with additional critical mass in the greater
Los Angeles and San Francisco areas, increased the percentage of rental revenue
derived from the rental of higher-margin office furniture products and
contributed additional expertise in the supply of furniture for trade shows and
conventions.
On March 6, 1997, the Company completed the purchase of three trade show
services companies: Levitt Investment Company, McGregor Corporation and the
assets of ALCO Trade Show Services. The three companies have been integrated to
create CORT's trade show furnishings business and will establish CORT as one of
the major players in this segment of the furniture rental industry. The trade
show furnishings business serves the major trade show contractors and corporate
exhibitors nationwide and provides specialty rental furniture for use at
conventions and trade shows. Major locations served include; Atlanta, Chicago,
Dallas, Las Vegas, Los Angeles, New Orleans, Orlando, New York City, San
Francisco, and Washington, D.C.
New Markets and Additional Facilities
The Company continues to expand the number of showrooms and clearance centers
within its existing markets as well as initiate new operations, including
showrooms, distribution facilities and clearance centers, in strategically
identified geographic locations where it currently does not conduct business and
where attractive acquisition opportunities do not exist. By increasing the
number of showrooms and clearance centers associated with existing distribution
facilities, the Company is able to distribute its real estate, personnel and
other fixed costs over a larger revenue base. Since the beginning of 1995, CORT
has begun operations in six new metropolitan markets: Birmingham, AL; Little
Rock, AR; Portland, OR; St. Louis, MO; Las Vegas, NV; and El Paso, TX.
Expanded Corporate Customer Base
The Company seeks to increase its corporate customer base in order to capitalize
on the longer lease terms, higher average lease amounts and multiple lease
transactions associated with corporate customers. In addition, corporate
customers more frequently enter into higher-margin office furniture leases. The
Company intends to grow revenue by increasing its corporate customer base
through expanded emphasis on national accounts, further development of sales
personnel with business-to-business sales experience and continued advertising.
In addition, the Company has introduced the high quality brand of office systems
furniture by Herman Miller. The Company continues to increase awareness among
its sales force of the benefits and breadth of its office product offerings
through expanded training programs and to focus the efforts of its sales force
on these products by increased incentive compensation for office product
rentals.
Development of Products and Services
The Company continues to invest in the development of other products and
services. Products and services in various stages of development include the
rental of housewares amenity packages, the supply of furniture for trade shows
and conventions, and a website that provides information for relocating
customers. Management believes that the gradual introduction of new products and
services allows the Company to experiment with such products and services at a
relatively low initial cost.
The "Rent-to-Rent" Industry
The "rent-to-rent" segment of the furniture rental industry serves both
corporate and individual customers who generally have immediate, temporary needs
for office or residential merchandise but who typically do not seek to own such
merchandise. Office product customers range from large corporations who desire
flexibility to meet their
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temporary and transitional needs, to small businesses and professionals who
require office furnishings but seek to conserve capital. Residential product
customers include corporations seeking to provide furnishings for corporate
employees who have been relocated or who are on temporary assignment, apartment
community managers seeking to provide furnished apartments and individual
residents seeking to rent furnishings for their own homes and apartments.
Management believes the traditional "rent-to-rent" furniture rental industry
generates approximately $750 million of annual revenue. The demand for rental
products is believed to be driven by continued growth in management and
professional employment levels, the changing trends in American business towards
flexibility and outsourcing and the impact of a more mobile and transitory
population. The industry is highly competitive and consolidating with many
participants operating single locations and small regional businesses.
The "rent-to-rent" business is differentiated from the "rent-to-own" business
primarily by the terms of the rental arrangements and the type of customer
served. "Rent-to-rent" customers generally desire high quality furniture to meet
temporary needs, have established credit, and pay on a monthly basis. Typically,
these customers do not seek to acquire the property rented. In the typical
"rent-to-rent" transaction, the customer agrees to rent merchandise for three to
six months, subject to extension by the customer on a month-to-month basis. By
contrast, "rent-to-own" arrangements are generally made by customers without
established credit whose objective is to acquire ownership of the property.
"Rent-to-own" arrangements are typically entered into on a month-to-month basis
and require weekly rental payments.
Products
The Company rents a full line of furniture and accessories throughout the United
States for office and residential purposes. The Company classifies its furniture
leases based on the type of furniture leased and the expected use of the
furniture.
Office Products
In order to capitalize on the significant profit potential available from the
longer average rental periods and the higher average monthly rent for office
products, the Company's strategy is to emphasize office furniture rentals. The
Company offers a full range of office, conference room and reception area
furniture, including desks, chairs, tables, credenzas, panel systems and
accessories. In order to promote longer office lease terms, the Company leases
furniture to its corporate customers at rates that reflect a premium on leases
that are less than six months and a discount on leases of more than six months.
The Company's office furniture customers consist primarily of large companies
that desire flexibility to satisfy temporary and transitional needs and small or
start-up businesses that have immediate and changing furniture requirements but
seek to minimize capital outlay. The Company emphasizes its ability to outfit an
entire office with high quality furniture in two business days, as well as its
ability to provide consistent customer service and product quality nationwide.
Residential Products
The Company leases residential products to corporate customers who are
temporarily or permanently relocating employees, to apartment managers and
owners who are providing furnished apartments and to individual end users of the
furniture. The Company offers a broad range of household furniture, including
dining room, living room and bedroom pieces, as well as certain electronic
products.
A significant portion of the Company's residential furniture rentals are derived
from corporate relocations and temporary assignments, as new and transferred
employees of the Company's corporate customers enter into leases for residential
furniture. The Company's sales personnel maintain contact with corporate
relocation departments and present the possibility of obtaining fully-furnished
rental apartments as a lower cost alternative to hotel accommodations. Thus, the
Company offers its corporate rental customers a way to reduce the costs of
corporate relocations while developing residential business with new and
transferred employees. The Company's ability to service both corporate and
individual needs creates a broad corporate customer base accompanied by an
increasing pool of employees utilizing the Company's residential services.
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Other Products and Services
CORT offers several other products and services in selected markets. The Company
offers houseware amenity packages (such as linens, towels, dishes, cookware and
other kitchen, bedroom and bath accessories) for rent to its furniture rental
customers. The Company had generally distributed houseware amenity packages
through third-party contractors either under subcontract arrangements or direct
referrals. The Company continues to expand the distribution of its own houseware
amenity packages to capture profits currently realized by third-party
contractors.
The Company has been providing rental specialty furniture for short term use at
trade shows and conventions through its operations in New Orleans and the
California operations acquired with Evans Rents. In March 1997, the Company
completed its acquisition of three trade show services businesses that operated
in nine major markets. The combination of CORT's national network with the
experience of these organizations should provide the Company with a competitive
advantage in the trade show and convention services business.
The Company established Relocation Central, a website that provides information
about major cities such as apartment finders, school systems, movers and local
recreation for relocating individuals. Relocation Central provides the Company
with an additional marketing tool while also providing valuable information to
potential customers.
Operations
Lease Terms
The Company typically leases furniture to individuals and corporate accounts for
three-, six- and twelve-month terms, which may be and often are extended by its
customers on a month-to-month basis. Management believes that, on average,
furniture remains on lease for approximately nine months at a time. Although
rental contracts may give the customer the option to purchase the merchandise
rented, only a small percentage of the Company's rental leases lead to customer
ownership.
The Company's strategy is to price rentals to recover the original cost of the
furniture over a ten-month rental "payout period." However, pricing and payout
periods often vary with the length of the leases. The Company frequently charges
a delivery fee and, in the absence of proof of insurance, a waiver fee. Within
general company guidelines, each district has discretion to set prices based
upon local market factors.
The Company may also require a customer security deposit which will be returned
at the end of the lease upon satisfactory compliance with the terms of the
lease. The Company requires applications from prospective rental customers and
performs credit investigations before approving such applications. In each of
the last five years, the Company's bad debt losses have been limited to 0.7% of
revenue or less.
Customer Services
CORT is dedicated to providing consistently high quality customer service
nationwide to its corporate and individual customers. Through its national
network, the Company more efficiently services its corporate clients by
providing a single point of contact for customers who have furniture needs in
multiple locations, offering consistent quality of products and services at all
CORT locations, and offering a broad spectrum of products to customers. Under
its Personal Service Guaranty, the Company ensures customers of CORT Furniture
Rental that they will be satisfied with the furniture they rent or the Company
will exchange it for similar furniture within two business days free of charge.
Additionally, the Company's employees assist customers with space planning,
interior design and apartment location services.
Furniture Sales
For the last five years, the Company has derived 71% of its furniture sales
revenue from clearance centers sales. The remaining furniture sales revenue is
derived primarily from lease conversions and sales of new furniture. Sales of
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rental furniture allow the Company to control inventory levels and maintain
showroom quality of rental inventory. On average, furniture is typically sold
through the clearance centers three years after its initial purchase by the
Company. For the last five years, sales of rental furniture through the
clearance centers have had an average recovery margin on the original cost of
furniture of approximately 109%, a price which is usually considerably lower
than the price of comparable new merchandise. Management believes that its
ability to recover the original cost of its furniture through its clearance
centers is a key contributor to the Company's profitability.
Sales, Marketing and Advertising
The Company employs a sales force of approximately 700 people, including
managers and supervisors, rental consultants, commercial account executives,
residential account executives, and clearance center personnel. In general,
rental consultants service walk-in showroom customers, clearance center sales
personnel are responsible for walk-in clearance center customers and commercial
and residential account executives work to develop office and residential
customers in their markets. Utilizing the Company's national distribution
network to emphasize its ability to serve customers throughout the country, the
Company employs fifteen national account representatives who are responsible for
customers with business in more than one district.
CORT's sales representatives receive professional, business-to-business sales
training through the Company's CORT University program, which was developed as
part of the Company's continuing effort to increase rental revenue and improve
customer service. Management believes that the program's emphasis on a problem
solving, value-added approach to clients' needs enhances its relationships with
customers and provides CORT with a competitive advantage in marketing to
corporate customers.
The Company markets its services through brochures, newspapers, periodicals,
yellow pages, radio, television and direct response media and over the internet
(http://www.cort1.com and http://www.relocationcentral.com). The Company designs
its marketing program both to promote the business and to increase awareness of
the advantages of renting in the residential and office furniture markets.
Purchasing and Distribution
The Company has a national product line chosen by its merchandising group. Each
district manager, in consultation with his or her regional merchandising
manager, selects from the national product line based on an analysis of customer
demand within such manager's specific market. Each district then places purchase
orders directly with the Company's vendors and shipment is arranged through the
Company's freight analyst directly to the district warehouse.
The Company acquires furniture from a large number of manufacturers and is not
dependent on any particular manufacturer as a source of supply. In 1997, no
furniture manufacturer accounted for more than 10% of the Company's furniture
purchases. Management believes that the Company is able to purchase furniture at
lower prices than its competitors due to the centralized selection of its
product line and large volume of purchases. The Company is generally able to
obtain prompt delivery of furniture from its suppliers and has not experienced
significant interruptions in its business resulting from delays in acquiring
furniture.
Merchandise is delivered to rental customers by Company employees via owned or
leased trucks after a rental agreement has been signed. At the end of the lease
term, rental furniture is returned to the Company's warehouses where it is
inspected, cleaned and/or repaired in preparation for future rental or sale. If
it is determined that the furniture is appropriate for sale rather than future
rental, the furniture is then transferred to a clearance center. Company
warehouses are typically located next to a clearance center, thereby allowing
the Company to reduce shipping expenses and realize efficiency gains.
Competition
The "rent-to-rent" segment of the furniture rental industry is highly
competitive. Management believes that Aaron Rents, Globe Business Resources and
Brook Furniture Rental are the Company's most significant competitors. In
addition, there are numerous smaller regional and local "rent-to-rent" furniture
companies as well as retailers
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offering residential and office furniture. Management believes that the
principal competitive factors in the furniture rental industry are product
value, furniture condition, extent of furniture selection, terms of rental
agreement, speed of delivery, exchange privilege, option to purchase, deposit
requirements and customer service level.
With respect to sales of furniture through its clearance centers, the Company
competes with numerous used and new furniture retailers, some of which are
larger than the Company and have greater financial resources. Management
believes that price and value are the principal competitive factors in its
furniture sales.
Employees
On December 31, 1997, the Company employed approximately 2,300 people, of whom
approximately 70 were employed at corporate headquarters. Approximately 700
people were employed as salespersons, 1,100 people were employed in the
warehouse and distribution portion of the business and the remainder in district
and regional administrative positions.
The Company's warehouse and delivery employees in Maryland (approximately 48
persons) are represented by independent union under a contract which expires in
December 1999. Additionally, 14 of the Company's warehouse and delivery
employees in New York City are represented by the Local 840 of the International
Brotherhood of Teamsters under a contract which expires in June 1999.
The Company believes that its relationships with its employees are good.
Trademarks and Name Recognition
The Company engages in business primarily under the CORT Furniture Rental
tradename, which has been used in the furniture rental business for over 20
years. The Company has established its reputation as a provider of quality
furniture and customer service using this name. The Company feels that
reputation and name recognition are important to customers. Therefore, following
an acquisition in a new market, the Company may use a combination of the CORT
and acquired business name to maintain customer recognition for a period of
time.
Regulatory Matters
Compliance with Federal, state and local laws and regulations governing
pollution and protection of the environment is not expected to have any material
effect upon the financial condition or results of operations of the Company.
ITEM 2. Properties
As of December 31, 1997, the Company carried out its rental, sales and warehouse
operations through 165 facilities, of which 21 were owned and 144 were leased.
The leased facilities have lease terms with expiration dates ranging from 1998
to 2014. Upon the expiration of its leases, the Company generally has been able
to either extend its leases or obtain suitable alternative facilities on
satisfactory terms. Management seeks to locate properties in new markets where
rental, clearance and warehouse operations can be combined in one facility. As
the Company expands in a particular district, the Company seeks to open
free-standing showrooms and clearance centers that can be serviced from
pre-existing warehouses. The Company's showrooms generally have 4,500 square
feet of floor space. The Company regularly reviews the presentation and
appearance of its furniture showrooms and clearance centers and periodically
improves or refurbishes them to enhance their attractiveness to customers.
The Company's decision to enter a new market is based upon its review of current
demographic information, short-and long-term population and business growth
projections and the level of existing competition. Once the decision is made to
enter a new market, management selects individual showroom locations by
reviewing demographic information, accessibility, visibility, customer traffic,
location of competitors and cost.
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The metropolitan areas in which the Company operates, together with the number
of showrooms in each metropolitan area, are set forth in the table below:
District Locations Number of Showrooms
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ALABAMA Birmingham 2
ARIZONA Phoenix 1
ARKANSAS Little Rock 1
CALIFORNIA Orange County 2
Los Angeles 6
Sacramento 1
San Diego 1
San Francisco 5
Santa Clara 2
COLORADO Denver 2
DISTRICT OF COLUMBIA (1) 6
FLORIDA Ft. Lauderdale 1
Jacksonville 1
Miami 2
Orlando 3
Pensacola 1
Tampa 2
GEORGIA Atlanta 6
ILLINOIS Chicago 3
INDIANA Indianapolis 1
KANSAS Kansas City 1
KENTUCKY Louisville 2
LOUISIANA Baton Rouge 2
New Orleans 1
MASSACHUSETTS Boston 3
MICHIGAN Detroit 3
MINNESOTA Minneapolis 2
MISSOURI St. Louis 1
NEW JERSEY Kearny 3
NEW MEXICO Albuquerque 1
NEW YORK New York 2
NORTH CAROLINA Raleigh 2
Charlotte 1
OHIO Cincinnati 2
Cleveland 1
Columbus 1
OKLAHOMA Oklahoma City 1
Tulsa 2
OREGON Portland 1
PENNSYLVANIA Philadelphia(2) 4
Pittsburgh 3
TENNESSEE Memphis 1
Nashville 1
TEXAS Austin 1
Corpus Christi 1
Dallas 4
El Paso(3) -
Houston 4
San Antonio 3
UTAH Salt Lake City 1
VIRGINIA Richmond 1
Virginia Beach 1
WASHINGTON Seattle 3
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TOTAL 109
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(1) Includes locations in Washington, D.C., Maryland and Virginia.
(2) Includes locations in Pennsylvania, New Jersey and Delaware.
(3) Distribution center in El Paso, Texas but no accompanying showroom at this
location.
The Company distributes its furniture using a fleet of approximately 212 leased
and 48 company-owned delivery trucks. The trucks are usually rented for a period
of five to six years under operating leases and typically display CORT's
tradenames.
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ITEM 3. Legal Proceedings
At December 31, 1997, the Company was involved in certain legal proceedings
arising in the normal course of its business. The Company believes the outcome
of these matters will not have a material adverse effect on the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 4a. Directors and Executive Officers of the Registrant
The names of the executive officers and directors of CORT and their respective
ages and positions with CORT are set forth in the following table. Directors are
elected at the annual meeting of stockholders to serve until the next annual
meeting and until their successors are elected and qualify.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Paul N. Arnold (3) 51 President, Chief Executive Officer & Director
Anthony J. Bellerdine 49 Group Vice President
Michael G. Connors 41 Vice President--Real Estate
Charles M. Egan (3) 61 Chairman & Director
Kenneth W. Hemm 43 Group Vice President
Steven D. Jobes 48 Vice President--Marketing, Merchandising, Sales & National Accounts
Lloyd Lenson 47 Group Vice President
Frank Martini 49 Group Vice President
Victoria L. Stiles 43 Vice President--Human Resources & Corporate Risk Management
Maureen C. Thune 32 Controller & Assistant Secretary
Frances Ann Ziemniak 47 Vice President--Finance, Chief Financial Officer & Secretary
Keith E. Alessi (2) 43 Director
Bruce C. Bruckmann (1)(2) 44 Director
Michael A. Delaney(1) 43 Director
Gregory B. Maffei(2) 37 Director
James A. Urry (1) 44 Director
</TABLE>
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(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Member of Directors Stock Option Committee
PAUL N. ARNOLD, President, Chief Executive Officer and Director. Mr. Arnold has
been with CORT and Mohasco Corporation, its former parent, for 29 years and has
held group management positions within CORT since 1976. He has held his current
position since July 1992. He is also a Director of Town Sports International,
Inc.
ANTHONY J. BELLERDINE, Group Vice President. Mr. Bellerdine has been with CORT
since July 1991. He was appointed to Group Vice President in December 1994,
having served as Area Vice President and Senior District Manager. Prior to
joining CORT, Mr. Bellerdine was Senior Vice President of Sales and Marketing of
Stern Office Furniture for eight years.
MICHAEL G. CONNORS, Vice President--Real Estate. Mr. Connors joined CORT in
February 1986, after nearly eight years in Real Estate and Marketing with Mobil
Oil Corporation and has served in his current position since March 1991.
CHARLES M. EGAN, Chairman and Director. Mr. Egan has been with CORT since the
acquisition of General Furniture Leasing Company in September 1993. Mr. Egan
joined General Furniture Leasing Company in 1989 and
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became its President and Chief Executive Officer in 1992. From 1985 to 1989, Mr.
Egan was Executive Vice President of Mohasco Corporation. Mr. Egan was President
of CORT from 1980 to 1985.
KENNETH W. HEMM, Group Vice President. Mr. Hemm has been with CORT for 17 years.
He was appointed Group Vice President in June 1992, having served as Group
Manager since January 1991.
STEVEN D. JOBES, Vice President--Marketing, Merchandising, Sales and National
Accounts. Mr. Jobes has been with CORT for 26 years and served as Group Vice
President prior to assuming his current position in May 1993.
LLOYD LENSON, Group Vice President. Mr. Lenson has been with CORT for 19 years
serving in his current position since May 1993. He previously served as Group
Vice President and as Vice President--Marketing, Sales and Acquisitions.
FRANK MARTINI, Group Vice President. Mr. Martini has been with CORT for 21 years
serving in his current position since July 1994. He previously served as Area
General Manager and District General Manager.
VICTORIA L. STILES, Vice President--Human Resources and Corporate Risk
Management. Ms. Stiles joined CORT in November 1987, after nearly eight years in
Personnel for the Hecht Company, a division of the May Company. She was
appointed to Vice President in July 1996, having served as Director of Human
Resources and Regional Manager of Human Resources.
MAUREEN C. THUNE, Controller and Assistant Secretary. Ms. Thune joined CORT in
August 1992 after five years with KPMG Peat Marwick LLP, having most recently
served as a Manager.
FRANCES ANN ZIEMNIAK, Vice President--Finance & Chief Financial Officer and
Secretary. Ms. Ziemniak joined the Company in March 1995 after three years as an
independent consultant focusing on risk-management and retail acquisition
analysis. Ms. Ziemniak was previously Vice President, Finance and Chief
Financial Officer for Federated Merchandising, a division of Federated
Department Stores, Inc. from 1987 to 1992 and Corporate Vice President,
Financial Services for The GAP, Inc. from 1982 to 1987. Before Ms. Ziemniak
joined The GAP, Inc. in 1979, she was employed by Ernst & Young LLP.
KEITH E. ALESSI, Director. Mr. Alessi has been a Director of the Company since
October 1993. Mr. Alessi is President, Chief Executive Officer and Chairman of
the Board of Directors of Telespectrum Worldwide, Inc. Mr. Alessi was President
and Chief Executive Officer of Jackson Hewitt Inc. from June 1996 through March
1998. He was Vice-Chairman and Chief Financial Officer of Farm Fresh, Inc.
(which filed voluntary bankruptcy as part of a sale of the Company in January
1998 and emerged from bankruptcy in February 1998) from June 1994 through June
1996. He had previously served in various executive capacities, including
President, with Farm Fresh from 1988 to 1992. Mr. Alessi was Chairman and Chief
Executive Officer of Virginia Supermarkets, Inc. from 1992 to 1994. Mr. Alessi
is also a Director of Farm Fresh, Inc., Shoppers Food Warehouse, Inc., and Town
Sports International, Inc.
BRUCE C. BRUCKMANN, Director. Mr. Bruckmann has been a Director of the Company
since March 1993. Mr. Bruckmann is currently Managing Director of Bruckmann,
Rosser, Sherrill & Co., Inc. Mr. Bruckmann was a Vice President of Citicorp
Venture Capital Ltd., which is an affiliate of the Company, through 1993 and a
Managing Director from 1993 through 1994. He is also a Director of Mohawk
Industries, Inc., AmeriSource Health Corporation, Chromcraft-Revington, Inc.,
Jitney-Jungle Stores of America, Inc., Anvil Knitwear, Inc. and Town Sports
International, Inc.
MICHAEL A. DELANEY, Director. Mr. Delaney has been a Director of the Company
since May 1995. Mr. Delaney is a Managing Director of Citicorp Venture Capital
Ltd., which is an affiliate of the Company. From 1989 through 1997, he was a
Vice President of Citicorp Venture Capital Ltd. From 1986 through 1989, he was
Vice President of Citicorp Mergers and Acquisitions. Mr. Delaney is also a
Director of Aetna Industries, Inc., AmeriSource Health Corporation, Ballentrae
Corporation, CLARK Material Handling Corporation, Delco Remy International,
Inc., Enterprise Media Inc., GVC Holdings, JAC Holdings, IKS Corporation,
Palomar Technologies, Inc., SC Processing, Inc., MSX International and Triumph
Group, Inc.
GREGORY B. MAFFEI, Director. Mr. Maffei has been a Director of the Company since
November 1995. Mr. Maffei is Chief Financial Officer of Microsoft Corporation.
He joined Microsoft in April 1993, served as Treasurer
-9-
<PAGE>
from 1994 to 1996, Vice President, Corporate Development from 1996 to 1997, and
was promoted to Chief Financial Officer in July 1997. Prior thereto, Mr. Maffei
was a Vice President of Citicorp Venture Capital Ltd., which is an affiliate of
the Company. Mr. Maffei is also a Director of Mobile Telecommunications
Technologies Corporation.
JAMES A. URRY, Director. Mr. Urry has been a Director of the Company since March
1993. Mr. Urry has been with Citibank, N.A. since 1981 serving as a Vice
President since 1986. He has been a Vice President of Citicorp Venture Capital
Ltd., which is an affiliate of the Company, since 1989. He is also a Director of
Airxcel, Inc. AmeriSource Health Corporation, CLARK Material Handling
Corporation, Hancor Holding Corporation, IKS Corporation, Palomar Products Inc.,
and York International Corporation.
-10-
<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information required for this item is incorporated by reference to page 28
of the Company's 1997 Annual Report to Stockholders.
ITEM 6. Selected Financial Data
The information required for this item is incorporated by reference to page 10
of the Company's 1997 Annual Report to Stockholders.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required for this item is incorporated by reference to pages 11
through 14 of the Company's 1997 Annual Report to Stockholders.
In addition to historic information, this Annual Report on Form 10-K includes
certain forward-looking statements as such term is defined in Section 27A of the
Securities Act and Section 21E of the Exchange Act. These forward-looking
statements involve certain risks and uncertainties, including but limited to
acquisitions, additional financing requirements, development of new products and
services, the effect of competitive products and pricing and the effect of
general economic conditions, that could cause actual results to differ
materially from those in such forward-looking statements.
ITEM 8. Financial Statements and Supplementary Data
The consolidated balance sheets of CORT Business Services Corporation and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1997, and the report dated
February 13, 1998 of KPMG Peat Marwick LLP, independent public accountants, are
incorporated by reference to pages 15 through 27 of the Company's 1997 Annual
Report to Stockholders.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
No response to this Item is required.
-11-
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information required by Item 401(b) of Regulation S-K is included in Part I,
Item 4a. Directors and Executive Officers of the Registrant.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
The information required for this part of Item 10 is incorporated by reference
to page 11 of the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held May 12, 1998.
ITEM 11. Executive Compensation
The information required for this item is incorporated by reference to pages 8
through 11 of the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held May 12, 1998.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required for this item is incorporated by reference to page 4 of
the Company's Proxy Statement for the Annual Meeting of Stockholders to be held
May 12, 1998.
ITEM 13. Certain Relationships and Related Transactions
The information required for this item is incorporated by reference to page 11
of the Company's Proxy Statement for the Annual Meeting of Stockholders to be
held May 12, 1998.
-12-
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) and (d) Financial Statements and Schedules (see Index on Page F-1)
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of
the period covered by this report.
(c) Exhibits (see Index on Page E-1)
-13-
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
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.
CORT BUSINESS SERVICES CORPORATION
By: /s/ Frances Ann Ziemniak
--------------------------------------
Frances Ann Ziemniak
(Principal financial and principal
accounting officer)
Date: March 31, 1998
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 dates indicated.
Signatures Title Date
---------- ----- ----
/s/ Paul N. Arnold President, Chief Executive Officer March 31, 1998
- ------------------------- (principal executive officer)
Paul N. Arnold and Director
/s/ Charles M. Egan Chairman and Director March 31, 1998
- -------------------------
Charles M. Egan
/s/ Frances Ann Ziemniak Vice President, Finance, Chief March 31, 1998
- ------------------------- Financial Officer and Secretary
Frances Ann Ziemniak
/s/ Keith E. Alessi Director March 31, 1998
- -------------------------
Keith E. Alessi
/s/ Bruce C. Bruckmann Director March 31, 1998
- -------------------------
Bruce C. Bruckmann
/s/ Michael A. Delaney Director March 31, 1998
- -------------------------
Michael A. Delaney
/s/ Gregory B. Maffei
- -------------------------
Gregory B. Maffei Director March 31, 1998
/s/ James A. Urry Director March 31, 1998
- -------------------------
James A. Urry
-14-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Financial Statements.................................................. 13
Financial Statement Schedules:
Schedule I - Condensed Financial Information of Registrant............ S-1
Schedule II - Valuation and Qualifying Accounts....................... S-3
F-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------ ----------- ----
<S> <C> <C>
2.1 Stock Purchase Agreement, dated June 22, 1993, by and among
the Company, Interfinancial, Inc., General Furniture Leasing
Company and Fortis, Inc.; incorporated by reference to Exhibit
2.1 to CFR's Registration Statement on Form S-1, No. 33-65094,
filed on June 25, 1993
2.2 First Amendment to Stock Purchase Agreement, dated as of
August 31, 1993, by and among the Company, Fortis, Inc.,
Interfinancial, Inc. and General Furniture Leasing Company;
incorporated by reference to Exhibit 2.2 to CFR's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30,
1993
2.3 Assignment and Assumption Agreement, dated as of August 31,
1993, between CFR and the Company; incorporated by reference
to Exhibit 2.3 to CFR's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1993
2.4 Acquisition Agreement, dated March 15, 1996, by and among the
Company, CE Merger Sub Inc. and Evans Rents; incorporated by
reference to Exhibit 2.4 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995
3.1 Restated Certificate of Incorporation of the Company;
incorporated by reference to Exhibit 3.1 to Amendment No. 3 to
the Company's Registration Statement on Form S-1, No. 33-97568
filed on November 13, 1995
3.2 Amendment to Restated Certificate of Incorporation;
incorporated by reference to Appendix A to the Company's
Definitive Proxy Statement on Schedule 14A, filed as of March
31, 1997
3.3 By-laws of the Company; incorporated by reference to Exhibit
3.2 to Amendment No. 3 to the Company's Registration Statement
on Form S-1, No. 33-97568 filed on November 13, 1995
4.1 Form of Indenture between CFR and United States Trust Company
of New York, as Trustee, with respect to CFR's 12% Senior
Notes due 2000; incorporated by reference to Exhibit 4.1 to
Amendment No. 3 to the Company's Registration Statement on
Form S-1, No. 33-65094, filed on August 20, 1993
4.2 First Supplemental Indenture between CFR and United States
Trust Company of New York, as Trustee, dated August 25, 1995;
incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-1, No. 33-97568 filed on
September 29, 1995
4.3 Second Supplemental Indenture between CFR and United States
Trust Company of New York, as Trustee, dated September 29,
1995; incorporated by reference to Exhibit 4.9 to Amendment
No. 1 to the Company's Registration Statement on Form S-1, No.
33-97568 filed on October 23, 1995
4.4 Warrant Agreement, dated September 1, 1993, between the
Company and United States Trust Company of New York, as
Warrant Agent; incorporated by reference to Exhibit 4.7 to the
Company's Registration Statement on Form S-1, No.
33-97568 filed on September 29, 1995
4.5 Amendment No. 1 to Warrant Agreement, dated February 1, 1994,
between the Company and United States Trust Company of New
York, as Warrant Agent; incorporated by reference to Exhibit
4.8 to the Company's Registration Statement on Form S-1, No.
33-97568 filed on September 29, 1995
</TABLE>
E-1
<PAGE>
10.1 Credit Agreement dated as of February 13, 1998 by and among
CFR, the Company, the lenders identified therein, and
NationsBank, N.A., as agent
10.2 Stock Option, Securities Purchase and Stockholders Agreement,
dated as of January 18, 1994, by and among the Company, CFR,
Citicorp Venture Capital Ltd. and certain investors named
therein; incorporated by reference to Exhibit 4.6 to the
Company's Registration Statement on Form S-8, No. 33-72724,
filed on December 9, 1993
10.3 Amendment 1 to New Cort Holdings Corporation and Subsidiaries
Employee Stock Option and Stock Purchase Plan as adopted by
the Board of Directors of the Company on December 21, 1993;
incorporated by reference to Exhibit 10.11 to CFR's Annual
Report on Form 10-K for the fiscal year ended December 31,
1993
10.4 New Cort Holdings Corporation and Subsidiaries Employee Stock
Option and Stock Purchase Plan (1995 Plan Distribution) as
adopted by the Board of Directors of the Company on December
16, 1994; incorporated by reference to Exhibit 10.13 to CFR's
Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1995
10.5 Form of First Amendment to Stockholders Agreement, dated as of
November 13, 1995, by and among the Company, Citicorp Venture
Capital Ltd., and certain investors named therein;
incorporated by reference to Exhibit 10.5 to Amendment No. 3
to the Company's Registration Statement on Form S-1, No.
33-97568 filed on November 13, 1995
10.6 Registration Rights Agreement for Common Stock, dated as of
January 18, 1994, by and among the Company, Citicorp Venture
Capital Ltd. and certain investors named therein; incorporated
by reference to Exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 1994
10.7 CFR's Supplemental Executive Retirement Plan, dated October
28, 1992, as revised effective January 1, 1993, restated
through the Second Amendment; incorporated by reference to
Exhibit 10.8 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996
10.8 Agreement for Irrevocable Trust Under CORT Furniture Rental
Supplemental Executive Retirement Plan, dated June 1, 1996,
between CFR and Mentor Trust Company; incorporated by
reference to Exhibit 10.9 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996
10.9 Letter Agreement, dated July 24, 1992, between CFR and Paul N.
Arnold; incorporated by reference to Exhibit 10.16 to CFR's
Registration Statement on Form S-1, No. 33-65094, filed on
June 25, 1993
10.10 Letter Agreement, dated August 18, 1993, between CFR and Paul
N. Arnold; incorporated by reference to Exhibit 10.26 to
Amendment No. 5 to the Company's Registration Statement on
Form S-1, No. 33-65094, filed on August 25, 1993
E-2
<PAGE>
10.11 Employment Agreement, dated September 1, 1994, between CFR and
Charles M. Egan; incorporated by reference to Exhibit 10.10 to
CFR's Annual Report on Form 10-K for the year ended December
31, 1994
10.12 Amended and Restated CORT Business Services Corporation 1995
Directors Stock Option Plan adopted by the Board of Directors
October 18, 1995 and amended and restated on May 14, 1997;
incorporated by reference to Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1997
10.13 Equity Share Agreement, between CFR and Lloyd and Eileen S.
Lenson, dated April 20, 1994; incorporated by reference to
Exhibit 10.17 to the Company's Registration Statement on Form
S-1, No. 33-97568 filed on September 29, 1995
10.14 Form of Senior Notes Purchase Agreement between CFR and
certain holders of CFR's 12% Senior Notes Due 2000, dated
September 28, 1995; incorporated by reference to Exhibit 10.18
to Amendment No. 2 to the Company's Registration Statement on
Form S-1, No. 33-97568 filed on November 1, 1995
10.15 Private Exchange Commitment Letter by and among the Company,
Citicorp Venture Capital Ltd. and certain investors, dated
September 28, 1995; incorporated by reference to Exhibit 10.19
to Amendment No. 1 to the Company's Registration Statement on
Form S-1, No. 33-97568 filed on October 23, 1995
10.16 Amended and Restated CORT Business Services Corporation 1995
Stock Based Incentive Compensation Plan as adopted by the
Board of Directors on July 25, 1995 and amended and restated
on May 14, 1997; incorporated by reference to Exhibit 10.17 to
the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997.
10.17 CORT Business Services Corporation 1997 Directors Stock Option
Plan, as adopted by the stockholders of the Company at the
Annual Meeting of Stockholders on May 14, 1997; incorporated
by reference to Appendix C to the Company's Definitive Proxy
Statement on Schedule 14A, filed as of March 31, 1997
11.1 Statement re computation of per share earnings; incorporated
by reference to page 26 of the Company's 1997 Annual Report to
stockholders.
13.1 Portions of the Annual Report of the Company for the fiscal
year ended December 31, 1997 which are expressly incorporated
by reference herein
21.1 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedules
E-3
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(in thousands)
Condensed Balance Sheets:
As of December 31,
-----------------------
1996 1997
---- ----
Investment in CORT Furniture Rental .............. $125,152 $149,332
Other assets ..................................... -- --
-------- --------
Total assets ................................. 125,152 149,332
======== ========
Accrued expenses ................................. -- --
Long-term debt ................................... -- --
-------- --------
Total liabilities ............................ -- --
Stockholders' equity ............................. 125,152 149,332
-------- --------
Total liabilities and equity ................. $125,152 $149,332
======== ========
Condensed Statements of Operations:
Year Ended December 31,
---------------------------
1995 1996 1997
---- ---- ----
Equity in earnings of
CORT Furniture
Rental .......................... $ 3,705 $15,936 $22,326
Interest expense ................... 2,716 -- --
------- ------- -------
Income before income taxes ..... 989 15,936 22,326
Income tax benefit ................. 1,086 -- --
------- ------- -------
Net income ..................... $ 2,075 $15,936 $22,326
======= ======= =======
S-1
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(CONTINUED)
(in thousands)
Condensed Statements of Cash Flows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net income ....................................... $ 2,075 $ 15,936 $ 22,326
Adjustments to reconcile net income
to cash flows from operating activities:
Equity in earnings of CORT Furniture Rental .. (3,705) (15,936) (22,326)
Discount on junior subordinated debentures ... 65 -- --
Interest converted to long-term debt ......... 2,636 -- --
Changes in assets and liabilities, net ....... (1,689) -- --
-------- -------- --------
Cash used in operating activities ....... 618 -- --
-------- -------- --------
Cash flows from investing activities:
Investment in CORT Furniture Rental .......... (36,458) (33,224) (677)
-------- -------- --------
Cash used in investing activities ....... (36,458) (33,224) (677)
-------- -------- --------
Cash flows from financing activities:
Issuance of common stock ..................... 37,045 33,224 677
Net proceeds from issuance of long-term debt . 31 -- --
-------- -------- --------
Cash provided by financing activities ... 37,076 33,224 677
-------- -------- --------
Net increase in cash and cash equivalents ........ -- -- --
Cash and cash equivalents at beginning of period . -- -- --
-------- -------- --------
Cash and cash equivalents at end of period ....... $ -- $ -- $ --
======== ======== ========
Supplemental disclosures of cash flow information:
Noncash financing activities:
Tax benefit from exchange of debt for equity . $ 741 $ -- $ --
Exchange of debt for equity .................. 20,147 -- --
Tax benefit from exercise of stock options ... -- 571 1,177
</TABLE>
Note to Condensed Financial Statements of Registrant:
Basis of Presentation
The accompanying condensed financial statements represent the accounts of CORT
Business Services Corporation on a stand-alone basis. Substantially all footnote
disclosures are omitted. Reference is made to the audited consolidated financial
statements and footnotes of CORT Business Services Corporation and subsidiaries
as of December 31, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997, which appear in the Company's 1997 Annual Report
to stockholders.
S-2
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Deductions
Additions ------------
--------------------------- Write off of
Allowance for Beginning Charged to Uncollectible Ending
Doubtful Accounts Balance Expense Other(1) Accounts Balance
- ----------------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
December 31, 1995 917 582 -- (561) 938
December 31, 1996 938 1,234 334 (600) 1,906
December 31, 1997 1,906 2,107 -- (1,122) 2,891
(1) Other additions represent the balance of Evans Rents' allowance for
doubtful accounts, which was recorded April 24, 1996 in conjunction with
the acquisition.
</TABLE>
Exhibit 10.1
CREDIT AGREEMENT
Dated as of February 13, 1998
among
CORT FURNITURE RENTAL CORPORATION,
as Borrower,
CORT BUSINESS SERVICES CORPORATION
and
CERTAIN SUBSIDIARIES OF THE BORROWER FROM TIME TO TIME
PARTIES HERETO,
as Guarantors,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO
AND
NATIONSBANK, N.A.,
as Agent
<PAGE>
TABLE OF CONTENTS
SECTION 1
DEFINITIONS................................................................. 1
1.1 Definitions......................................................... 1
1.2 Other Definitional Provisions....................................... 23
1.3 Accounting Terms and Determinations................................. 23
SECTION 2
CREDIT FACILITIES........................................................... 24
2.1 Revolving Loans..................................................... 24
2.2 Letter of Credit Subfacility........................................ 27
2.3 Swingline Loan Subfacility.......................................... 30
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES.............................. 32
3.1 Default Rate........................................................ 32
3.2 Extension and Conversion............................................ 33
3.3 Reductions in Commitments and Prepayments........................... 33
3.4 Fees................................................................ 35
3.5 Capital Adequacy.................................................... 35
3.6 Inability To Determine Interest Rate................................ 36
3.7 Illegality.......................................................... 36
3.8 Requirements of Law................................................. 37
3.9 Taxes............................................................... 38
3.10 Indemnity........................................................... 41
3.11 Pro Rata Treatment.................................................. 41
3.12 Sharing of Payments................................................. 42
3.13 Place and Manner of Payments........................................ 43
3.14 Indemnification; Nature of Issuing Lender's Duties.................. 44
<PAGE>
SECTION 4
GUARANTY.................................................................... 44
4.1 The Guaranty........................................................ 44
4.2 Obligations Unconditional........................................... 45
4.3 Reinstatement....................................................... 46
4.4 Certain Additional Waivers.......................................... 46
4.5 Remedies............................................................ 46
4.6 Continuing Guarantee................................................ 47
SECTION 5
CONDITIONS.................................................................. 47
5.1 Conditions to Closing Date.......................................... 47
5.2 Conditions to All Extensions of Credit.............................. 49
SECTION 6
REPRESENTATIONS AND WARRANTIES.............................................. 50
6.1 Financial Condition................................................. 50
6.2 No Change........................................................... 51
6.3 Corporate Existence; Compliance with Law............................ 51
6.4 Corporate Power; Authorization; Enforceable Obligations............. 51
6.5 No Legal Bar; No Default............................................ 52
6.6 No Material Litigation.............................................. 52
6.7 Investment Company Act.............................................. 52
6.8 Federal Regulations................................................. 52
6.9 ERISA............................................................... 53
6.10 Environmental Matters............................................... 53
6.11 Use of Proceeds..................................................... 54
6.12 Subsidiaries........................................................ 54
6.13 Taxes............................................................... 55
6.14 Solvency............................................................ 55
SECTION 7
AFFIRMATIVE COVENANTS....................................................... 55
7.1 Financial Statements................................................ 55
7.2 Certificates; Other Information..................................... 56
7.3 Payment of Loans.................................................... 57
7.4 Conduct of Business and Maintenance of Existence.................... 57
7.5 Maintenance of Property; Insurance.................................. 58
7.6 Inspection of Property; Books and Records; Discussions.............. 58
7.7 Notices............................................................. 58
7.8 Environmental Laws.................................................. 59
7.9 Financial Covenants................................................. 60
7.10 Additional Subsidiary Guarantors.................................... 60
<PAGE>
SECTION 8
NEGATIVE COVENANTS.......................................................... 61
8.1 Indebtedness........................................................ 61
8.2 Liens............................................................... 62
8.3 Nature of Business.................................................. 62
8.4 Consolidation, Merger, Sale or Purchase of Assets................... 62
8.5 Advances, Investments and Loans..................................... 64
8.6 Transactions with Affiliates........................................ 64
8.7 Ownership of Subsidiaries........................................... 64
8.8 Fiscal Year......................................................... 64
8.9 Prepayments of Indebtedness, etc.................................... 64
8.10 Dividends........................................................... 65
SECTION 9
EVENTS OF DEFAULT........................................................... 66
9.1 Events of Default................................................... 66
SECTION 10
AGENCY PROVISIONS........................................................... 69
10.1 Appointment......................................................... 69
10.2 Delegation of Duties................................................ 70
10.3 Exculpatory Provisions.............................................. 70
10.4 Reliance on Communications.......................................... 70
10.5 Notice of Default................................................... 71
10.6 Non-Reliance on Agent and Other Lenders............................. 71
10.7 Indemnification..................................................... 72
10.8 Agent in its Individual Capacity.................................... 72
10.9 Successor Agent..................................................... 72
10.10 Termination of Securities Interests................................. 73
SECTION 11
MISCELLANEOUS............................................................... 73
11.1 Amendments and Waivers.............................................. 73
11.2 Notices............................................................. 74
11.3 No Waiver; Cumulative Remedies...................................... 75
11.4 Survival of Representations and Warranties.......................... 75
11.5 Payment of Expenses and Taxes....................................... 75
11.6 Successors and Assigns; Participations; Purchasing Lenders.......... 76
11.7 Adjustments; Set-off................................................ 79
11.8 Table of Contents and Section Headings.............................. 80
11.9 Counterparts........................................................ 80
11.10 Severability........................................................ 80
11.11 Integration......................................................... 81
11.12 Governing Law....................................................... 81
11.13 Consent to Jurisdiction and Service of Process...................... 81
11.14 Confidentiality..................................................... 82
11.15 Acknowledgments..................................................... 82
11.16 Waivers of Jury Trial............................................... 82
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 13, 1998 (the "Credit
Agreement"), is by and among CORT FURNITURE RENTAL CORPORATION, a Delaware
corporation (the "Borrower"), CORT BUSINESS SERVICES CORPORATION, a Delaware
corporation (the "Company") and those Subsidiaries of the Borrower identified as
a "Guarantor" on the signature pages hereto and such other Subsidiaries as may
from time to time become a party hereto (together with the Company, the
"Guarantors"), the several lenders identified on the signature pages hereto and
such other lenders as may from time to time become a party hereto (the
"Lenders"), and NATIONSBANK, N.A., as agent for the Lenders (in such capacity,
the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders provide a $75,000,000
credit facility (with the possibility of expansion to $150,000,000) for the
purposes hereinafter set forth; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Additional Credit Party" means each Person that becomes a Guarantor
after the Closing Date by execution of a Joinder Agreement in accordance
with Section 7.10.
"Affiliate" means, with respect to any Person, any other Person (i)
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person or (ii) directly or indirectly
owning or holding five percent (5%) or more of the equity interest in such
Person; provided, however, that for purposes hereof, none of Citibank,
N.A., Citicorp Venture Capital, Ltd. or their respective subsidiaries or
portfolio companies shall be considered to be an "Affiliate" of the Company
or the Borrower, except for purposes of the definition of "Permitted
Investments" herein and Section 8.6. For purposes of this definition,
"control" when used with respect to any Person means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
1
<PAGE>
"Agent" means NationsBank, N.A. and any successors and assigns in such
capacity.
"Agent's Fee Letter" means the letter agreement dated as of November
10, 1997 among NationsBank, N.A., NationsBanc Montgomery Securities, Inc.
and the Borrower as amended, modified, supplemented or replaced from time
to time.
"Agent's Fees" means such term as defined in Section 3.4(c).
"Aggregate Revolving Committed Amount" means the aggregate amount of
all of the Revolving Commitments in effect from time to time.
"Applicable Percentage" means, for any day, the rate per annum set
forth below opposite the applicable Pricing Level then in effect it being
understood that the Applicable Percentage for (i) Eurodollar Loans shall be
the percentage set forth under the column "Applicable Percentage for
Eurodollar Loans and Letter of Credit Fee", (ii) the Letter of Credit Fee
shall be the percentage set forth under the column "Applicable Percentage
for Eurodollar Loans and Letter of Credit Fee", and (iii) the Commitment
Fee shall be the percentage set forth under the column "Applicable
Percentage for Commitment Fee":
Applicable Percentage Applicable
Consolidated for Percentage
Pricing Funded Eurodollar Loan and for
Level Debt Ratio Letter of Credit Fee Commitment Fee
------- ------------ --------------------- --------------
V greater than 2.5 1.250% 0.300%
IV less than or equal to 2.5
but greater than 2.0 1.125% 0.250%
III less than or equal to 2.0
but greater than 1.5 1.000% 0.250%
II less than or equal to 1.5
but greater than 1.0 0.875% 0.250%
I less than or equal to 1.0 0.75% 0.200%
The Applicable Percentage shall, in each case, be determined quarterly by
the Agent as soon as practicable (but in any event within 5 days) after
delivery of the quarterly financial information required by Section 7.1
together with information relating to historical information on
Consolidated EBITDA for Persons or Assets acquired during the period of
four consecutive quarters ending as of the date of determination, provided
that the date of determination shall not be later than the date 5 days
after the date by which such quarterly financial information is required to
be delivered in accordance with Section 7.1 (each an "Interest
Determination Date") based on the information contained in such quarterly
financial information. Such Applicable Percentage shall be effective from
such Interest Determination Date until the next such Interest Determination
Date. The Agent shall determine the appropriate Pricing Level promptly upon
its receipt of the
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quarterly financial information and notify the Borrower and the Lenders of
any change thereof. Such determinations by the Agent shall be conclusive
absent manifest error. The initial Applicable Percentages shall be based on
Pricing Level III until the first Interest Determination Date to occur in
connection with the quarterly financial information relating to the first
fiscal quarter of 1998.
"Asset Disposition" means (i) the sale, lease or other disposition of
any property or asset by any Credit Party, other than Specified Sales and
other than to the extent permitted by Section 8.5, and (ii) receipt by any
Credit Party of any cash insurance proceeds or condemnation award payable
by reason of theft, loss, physical destruction or damage, taking or similar
event with respect to any of their property or assets.
"Base Rate" means, for any day, the rate per annum equal to the Prime
Rate in effect on such day less 1/2 of 1%. Any change in the Base Rate due
to a change in the Prime Rate shall be effective on the effective date of
such change in the Prime Rate.
"Base Rate Loan" means any Loan bearing interest at a rate determined
by reference to the Base Rate.
"Borrower" means the Person identified as such in the heading hereof,
together with any successors and permitted assigns.
"Borrowing Date" means in respect of any Loan, the date such Loan is
made.
"Business" means such term as defined in Section 6.10(b).
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in Charlotte, North Carolina or Fairfax, Virginia
are authorized or required by law to close, except that, when used in
connection with a rate determination, borrowing or payment in respect of a
Eurodollar Loan, such day shall also be a day on which dealings between
banks are carried on in U.S. dollar deposits in London, England.
"Capital Expenditures" means all expenditures (other than those which
are permitted by Section 8.4) which in accordance with GAAP would be
classified as capital expenditures, including without limitation, Capital
Lease Obligations, but excluding, in any event, expenditures made to
purchase or acquire furniture or equipment to be sold or leased in the
normal course of business.
"Capital Lease" means any lease of property, real or personal, the
obligations with respect to which are required to be capitalized on a
balance sheet of the lessee in accordance with GAAP.
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"Capital Lease Obligations" means the capital lease obligations
relating to a Capital Lease determined in accordance with GAAP.
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities
of not more than twelve months from the date of acquisition, (b) U.S.
dollar denominated time deposits and certificates of deposit of (i) any
Lender, (ii) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (iii) any bank whose
short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Bank"), in each case with
maturities of not more than 365 days from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved
Bank (or by the parent company thereof) or any variable rate notes issued
by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent
thereof) or better by S&P or P-1 (or the equivalent thereof) or better by
Moody's and maturing within six months of the date of acquisition, (d)
repurchase agreements with a bank or trust company (including any of the
Lenders) or recognized securities dealer having capital and surplus in
excess of $500,000,000 for direct obligations issued by or fully guaranteed
by the United States of America in which there shall be a perfected first
priority security interest (subject to no other Liens) and having, on the
date of purchase thereof, a fair market value of at least 100% of the
amount of the repurchase obligations, (e) obligations of any State of the
United States or any political subdivision thereof, the interest with
respect to which is exempt from federal income taxation under Section 103
of the Code, having a long term rating of at least Aa-3 or AA- by Moody's
or S&P, respectively, (f) Investments in municipal auction preferred stock
(i) rated AAA (or the equivalent thereof) or better by S&P or Aaa (or the
equivalent thereof) or better by Moody's and (ii) with dividends that reset
at least once every 365 days and (g) investments, classified in accordance
with GAAP as current assets, in money market investment programs registered
under the Investment Company Act of 1940, as amended, which are
administered by reputable financial institutions having capital of at least
$100,000,000 and the portfolios of which are limited to investments of the
character described in the foregoing subdivisions (a) through (f).
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commitment" means the Revolving Commitment, the LOC Commitment and
the Swingline Commitment, individually or collectively, as appropriate.
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"Commitment Fee" means such term as defined in Section 3.4(a).
"Commitment Percentage" means the Revolving Commitment Percentage or
the LOC Commitment Percentage, as appropriate.
"Commitment Period" means the period from and including the Closing
Date to but not including the Termination Date.
"Commitment Transfer Supplement" means a Commitment Transfer
Supplement, substantially in the form of Schedule 11.6(c).
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Company and which is treated as a single employer under Section 414 of the
Code.
"Company" means the Person identified as such in the heading hereof,
together with any successors and permitted assigns.
"Consolidated EBIT" means for any period, the sum of Consolidated Net
Income plus Consolidated Interest Expense plus all provisions for any
Federal, state and other income taxes for the Borrower and its Subsidiaries
on a consolidated basis, determined in each case in accordance with GAAP
applied on a consistent basis. Except as expressly provided otherwise, the
applicable period shall be for the four consecutive quarters ending as of
the date of determination.
"Consolidated EBITDA" means for any period, (i) the sum of
Consolidated EBIT plus depreciation, amortization and other non-cash
charges (exclusive of depreciation and amortization relating to furniture
or equipment held for sale or lease in the normal course of business) for
the Borrower and its Subsidiaries on a consolidated basis, and (ii) to the
extent not included in (i), then the sum of Consolidated EBIT plus
depreciation, amortization and other non-cash charges (exclusive of
depreciation and amortization relating to furniture or equipment held for
sale or lease in the normal course of business) for Persons or assets
acquired pursuant to Sections 8.4(a) or (c) hereof (net of any such items
relating to dispositions made pursuant to Section 8.4(b) hereof),
determined in each case in accordance with GAAP applied on a consistent
basis. Except as expressly provided otherwise, the applicable period shall
be for the four consecutive quarters ending as of the date of
determination.
"Consolidated Funded Debt" means Funded Debt of the Borrower and its
Subsidiaries on a consolidated basis determined in accordance with GAAP
applied on a consistent basis.
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<PAGE>
"Consolidated Funded Debt Ratio" means, as of the last day of any
fiscal quarter, the ratio of Consolidated Funded Debt on such day to
Consolidated EBITDA for the period of four consecutive fiscal quarters
ending as of such day.
"Consolidated Group" means the Company and its Subsidiaries.
"Consolidated Interest Expense" means for any period, all interest
expense, including the amortization of debt discount and premium the
amortization of deferred financing fees and the interest component under
Capital Leases for the Borrower and its Subsidiaries on a consolidated
basis determined in accordance with GAAP applied on a consistent basis.
Except as expressly provided otherwise, the applicable period shall be for
the four consecutive quarters ending as of the date of computation.
"Consolidated Net Income" means for any period, the net income of the
Borrower and its Subsidiaries on a consolidated basis determined in
accordance with GAAP applied on a consistent basis, but excluding for
purposes of determining the Consolidated Funded Debt Ratio and the Fixed
Charge Coverage Ratio any extraordinary gains or losses (including but not
limited to extraordinary losses relating to the redemption of the 12%
Senior Notes due 2000) and any taxes on such excluded gains and any tax
deductions or credits on account of any such excluded losses. Except as
expressly provided otherwise, the applicable period shall be for the four
consecutive quarters ending as of the date of computation.
"Consolidated Net Worth" means total stockholders' equity of the
Borrower and its Subsidiaries on a consolidated basis as determined in
accordance with GAAP applied on a consistent basis.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Credit Documents" means this Credit Agreement, the Notes, any Joinder
Agreement, the Agent's Fee Letter, and all other related agreements and
documents issued or delivered hereunder or thereunder or pursuant hereto or
thereto.
"Credit Party" means any of the Borrower, the Company and the other
Guarantors.
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<PAGE>
"Credit Party Obligations" means, without duplication, all of the
obligations of the Borrower and the other Credit Parties to the Lenders and
the Agent (including the obligations to pay principal of and interest on
the Loans, to pay all Fees, to pay certain expenses and the obligations
arising in connection with various indemnities) whenever arising, under
this Credit Agreement, the Notes or any other of the Credit Documents to
which the Borrower or any other Credit Party is a party.
"Default" means any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Defaulting Lender" means at any time, any Lender that, at such time
(a) has failed to make a Loan or advance required pursuant to the terms of
this Credit Agreement, including the funding of a Participation Interest in
accordance with the terms hereof, (b) has failed to pay to the Agent or any
Lender an amount owed by such Lender pursuant to the terms of this Credit
Agreement, or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or similar
official.
"Dividend" means any payment by the Borrower or any of its non-wholly
owned Subsidiaries of a payment, distribution or dividend (other than a
dividend or distribution payable solely in stock of the Person making such
payment, distribution or dividend) on, or any payment on account of the
purchase, redemption or retirement of, or any other distribution, any
shares of any class of stock or other ownership interest in the Borrower or
any of its Subsidiaries (including any such payment or distribution in cash
or in property or obligations of the Company or any of its Subsidiaries).
"Dollars" and "$" means dollars in lawful currency of the United
States of America.
"Domestic Lending Office" means the office or branch of the Lender
identified on Schedule 11.2, or such other office or branch as the Lender
may identify by written notice to the Borrower and the Agent.
"Domestic Subsidiary" means a Subsidiary which is organized and
existing under the laws of the United States or any state or commonwealth
thereof or under the laws of the District of Columbia.
"Eligible Transferee" means and includes a commercial bank, financial
institution or other "accredited investor" (as defined in Regulation D of
the Securities Act of 1933, as amended).
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"Environmental Laws" means any and all applicable foreign, Federal,
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority or
other Requirement of Law (including common law) regulating, relating to or
imposing liability or standards of conduct concerning protection of human
health or the environment, as now or may at any time be in effect during
the term of this Credit Agreement.
"Equity Transaction" means, with respect to any Credit Party, any
issuance of shares of its capital stock or other equity interest, other
than an issuance (i) to a member of the Consolidated Group, (ii) in
connection with a conversion of debt securities to equity, (iii) in
connection with exercise by a present or former employee, officer or
director under a stock incentive plan, stock option plan or other
equity-based compensation plan or arrangement or (iv) in connection with an
acquisition in compliance with Section 8.4(c).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"Eurodollar Lending Office" means the office or branch of the Lender
identified on Schedule 11.2, or such other office or branch as the Lender
may identify by written notice to the Borrower and the Agent.
"Eurodollar Loan" means any Loan bearing interest at a rate determined
by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate determined pursuant to
the following formula:
Interbank Offered Rate
Eurodollar Rate = ----------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that percentage
(expressed as a decimal) which is in effect from time to time under
Regulation D of the Board of Governors of the Federal Reserve System (or
any successor), as such regulation may be amended from time to time or any
successor regulation, as the maximum reserve requirement (including,
without limitation, any basic, supplemental, emergency, special, or
marginal reserves) applicable with respect to Eurocurrency liabilities as
that term is defined in Regulation D (or against any other category of
liabilities that includes deposits by reference to which the interest rate
of Eurodollar Loans is determined), whether or not Lender has any
Eurocurrency liabilities subject to such reserve requirement at that time.
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Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and
as such shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage. The parties hereto acknowledge and agree
that, as of the Closing Date, the Eurodollar Reserve Percentage is zero
(0).
"Event of Default" means such term as defined in Section 9.
"Existing Letters of Credit" means those Letters of Credit outstanding
on the Closing Date and identified on Schedule 2.2(a) .
"Extension of Credit" means, as to any Lender, the making of a Loan by
such Lender or the issuance or extension of, or participation in, a Letter
of Credit by such Lender.
"Federal Funds Rate" means, for any day, the rate of interest per
annum (rounded upwards, if necessary, to the nearest whole multiple of
1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day,
provided that (A) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day and (B) if no such rate is so published on such next preceding
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to the Agent on such day on such transactions as determined by the
Agent.
"Fee" means any fee payable pursuant to Section 3.4.
"Fixed Charge Coverage Ratio" means, with respect to the Borrower and
its Subsidiaries on a consolidated basis, the ratio of (a) the total of (i)
Consolidated EBITDA for the period of four consecutive fiscal quarters
ending as of the date of computation less (ii) Capital Expenditures not
relating to furniture and equipment held for lease or sale in the normal
course of business for a period of four consecutive fiscal quarters ending
as of the date of computation, to (b) the sum of (i) Consolidated Interest
Expense for the period of four consecutive fiscal quarters ending as of the
date of computation plus (ii) current maturities of Funded Debt (other than
the Revolving Loans) for the period of four consecutive fiscal quarters
beginning as of the day after the date of computation plus (iii) Dividends
paid or distributed during the period of four consecutive fiscal quarters
ending as of the date of computation. For purposes of determining the Fixed
Charge Coverage Ratio, Dividends shall not include (a) cash dividends of up
to
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$1,000,000 to the Company for the purpose of repurchasing the Company's
equity securities in any fiscal year pursuant to the Company's employee
benefit plans and (b) cash dividends of up to $2,500,000 to the Company for
the sole purpose of providing loans to officers, directors, employees or
Affiliates to pay, on behalf of such persons, any withholding taxes due and
payable by such persons as a result of the vesting of securities received
by such persons in connection with the exchange of certain debentures at
the time of the Company's initial public offering.
"Foreign Subsidiary" means a Subsidiary which is not a Domestic
Subsidiary.
"Funded Debt" means, for any Person, (i) all Indebtedness of such
Person for borrowed money (including without limitation, indebtedness
evidenced by promissory notes, bonds, debentures and similar instruments
and further any portion of the purchase price for assets or acquisitions
permitted hereunder which may be financed by the seller and Guarantee
Obligations by such Person of Funded Debt of Other Persons), (ii) all
purchase money Indebtedness of such Person, (iii) the principal portion of
Capital Lease Obligations, (iv) the maximum amount available to be drawn
under standby letters of credit and bankers' acceptances issued or created
for the account of such Person, (v) all preferred stock issued by such
Person and required by the terms thereto to be redeemed, or for which
mandatory sinking fund payments are due, by a fixed date, and (vi) the
aggregate amount of uncollected accounts receivable relating to a
structured financing program whereby such Person sells or securitizes its
receivable balances or portions thereof through the issuance of securities,
regardless of whether such transaction is made without recourse to such
Person or in a manner which would not be reflected on the balance sheet of
such Person in accordance with GAAP. For purposes hereof, Funded Debt shall
not include Subordinated Debt or intercompany Indebtedness owing by a
Credit Party to another Credit Party.
"GAAP" means generally accepted accounting principles in effect in the
United States of America applied on a consistent basis, subject, however,
in the case of determination of compliance with the financial covenants set
out in Section 7.9 to the provisions of Section 1.3.
"Government Acts" means such term as defined in Section 3.14.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
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"Guarantee Obligation" means, as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of credit)
to induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "primary obligations") of any other third Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee
Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by such Person in
good faith.
"Guarantor" means the Company and those Subsidiaries of the Borrower
identified as a "Guarantor" on the signature pages hereto, and each
Additional Credit Party which has executed a Joinder Agreement, together
with their successors and permitted assigns.
"Guaranty" means the guaranty of the Guarantors set forth in Section
4.
"Indebtedness" means, of any Person at any date, (a) all indebtedness
of such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices or other items incurred for the purchase of products and services
utilized in the ordinary course of business), (b) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under Capital Leases, (d)
all obligations of such Person in respect of acceptances issued or created
for the account of such Person,
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(e) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable
for the payment thereof, (f) all obligations of such Person under
conditional sale or other title retention agreements relating to property
purchased by such Person (other than customary reservations or retentions
of title under agreements with suppliers entered into in the ordinary
course of business), (g) all obligations of such Person under take-or-pay
or similar arrangements or under commodities agreements, (h) all Guarantee
Obligations of such Person, (i) all obligations of such Person in respect
of interest rate protection agreements, foreign currency exchange
agreements, commodity purchase or option agreements or other interest or
exchange rate or commodity price hedging agreements, (j) the maximum amount
of all letters of credit issued or bankers' acceptances created for the
account of such Person and, without duplication, all drafts drawn
thereunder (to the extent not theretofore reimbursed), (k) all preferred
stock issued by such Person and required by the terms thereto to be
redeemed, or for which mandatory sinking fund payments are due, by a fixed
date and (l) other obligations in the nature of Funded Debt or Guarantee
Obligations which would be shown as a liability on the balance sheet of
such Person (other than those which relate to obligations regularly
incurred in the ordinary course of business) and (m) the aggregate amount
of uncollected accounts receivable relating to a structured financing
program whereby such Person sells or securitizes its receivable balances or
portions thereof through the issuance of securities, regardless of whether
such transaction is made without recourse to such Person or in a manner
which would not be reflected on the balance sheet of such Person in
accordance with GAAP; but specifically excluding from the foregoing (A)
trade payables and accrued expenses arising or incurred in the ordinary
course of business, and (B) obligations in respect of judgments or awards
that have been in force for less than the applicable period for taking an
appeal so long as execution is not levied thereunder or in respect of which
any of the Credit Parties shall at the time in good faith be prosecuting an
appeal or proceedings for review and in respect of which a stay of
execution shall have been obtained pending such an appeal or review. For
purposes hereof, Indebtedness shall include Indebtedness of any partnership
in which such Person is a general partner (except for any such Indebtedness
with respect to which the holder is limited to the assets of such
partnership or joint venture).
"Insolvency" means with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of such term as
used in Section 4245 of ERISA.
"Insolvent" means pertaining to a condition of Insolvency.
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"Interbank Offered Rate" means, with respect to any Eurodollar Loan
for the Interest Period applicable thereto, the average (rounded upward to
the nearest one-sixteenth (1/16) of one percent) per annum rate of interest
determined by the office of the Agent (each such determination to be
conclusive and binding) as of two Business Days prior to the first day of
such Interest Period, as the effective rate at which deposits in
immediately available funds in U.S. dollars are being, have been, or would
be offered or quoted by the Agent to major banks in the applicable
interbank market for Eurodollar deposits at any time during the Business
Day which is the second Business Day immediately preceding the first day of
such Interest Period, for a term comparable to such Interest Period and in
the amount of the requested Eurodollar Loan. If no such offers or quotes
are generally available for such amount, then the Agent shall be entitled
to determine the Eurodollar Rate by estimating in its reasonable judgment
the per annum rate (as described above) that would be applicable if such
quote or offers were generally available.
"Interest Payment Date" means (a) as to any Base Rate Loan, the last
day of each March, June, September and December to occur while such Loan is
outstanding, (b) as to any Swingline Loan, the last day of each March,
June, September and December, or such other day as may be mutually agreed
upon by the Borrower and the Swingline Lender, but not less frequently than
once a quarter, (c) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period, and (d) as to
any Eurodollar Loan having an Interest Period longer than three months,
each day which is three months after the first day of such Interest Period
and the last day of such Interest Period.
"Interest Period" means with respect to any Eurodollar Loan,
(i) initially, the period commencing on the Borrowing Date or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months thereafter, as selected
by the Borrower in the notice of borrowing or notice of conversion
given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Eurodollar
Loan and ending one, two, three or six months thereafter, as selected
by the Borrower by irrevocable notice to the Agent not less than three
(3) Business Days prior to the last day of the then current Interest
Period with respect thereto;
provided that the foregoing provisions are subject to the following:
(A) if any Interest Period pertaining to a Eurodollar Loan would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
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(B) any Interest Period pertaining to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of the relevant calendar month;
(C) if the Borrower shall fail to give notice as provided above,
the Borrower shall be deemed to have selected a Base Rate Loan to
replace the affected Eurodollar Loan;
(D) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date; and
(E) no more than ten (10) Eurodollar Loans may be in effect at
any time. For purposes hereof, Eurodollar Loans with different
Interest Periods shall be considered as separate Eurodollar Loans,
even if they shall begin on the same date and have the same duration,
although borrowings, extensions and conversions may, in accordance
with the provisions hereof, be combined at the end of existing
Interest Periods to constitute a new Eurodollar Loan with a single
Interest Period.
"Issuing Lender" means as to the Existing Letters of Credit, the
Issuing Lenders identified on Schedule 2.2(a), and as to Letters of Credit
issued after the Closing Date, NationsBank.
"Joinder Agreement" means a Joinder Agreement substantially in the
form of Schedule 7.10, executed and delivered by an Additional Credit Party
in accordance with the provisions of Section 7.10.
"Lenders" means each of the Persons identified as a "Lender" on the
signature pages hereto, and each Person which may become a Lender by way of
assignment in accordance with the terms hereof, together with their
successors and permitted assigns.
"Letter of Credit" means the Existing Letters of Credit and any letter
of credit issued by an Issuing Lender pursuant to the terms hereof, as such
Letter of Credit may be amended, modified, extended, renewed or replaced
from time to time.
"Letter of Credit Fee" means such term as defined in Section 3.4(b).
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"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the
Uniform Commercial Code as adopted and in effect in the relevant
jurisdiction or other similar recording or notice statute).
"Loan" means a Revolving Loan and/or a Swingline Loan, as appropriate.
"LOC Commitment" means the commitment of the Issuing Lender to issue
Letters of Credit and with respect to each Lender, the commitment of such
Lender to purchase participation interests in the Letters of Credit up to
such Lender's LOC Committed Amount as specified in Schedule 2.1(a), as such
amount may be reduced from time to time in accordance with the provisions
hereof.
"LOC Commitment Percentage" means, for each Lender, the percentage
identified as its LOC Commitment Percentage on Schedule 2.1(a), as such
percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 11.6(c).
"LOC Committed Amount" means, collectively, the aggregate amount of
all of the LOC Commitments of the Lenders to issue and participate in
Letters of Credit as referenced in Section 2.2 and, individually, the
amount of each Lender's LOC Commitment as specified in Schedule 2.1(a).
"LOC Documents" means, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application
or applicable only to such Letter of Credit) governing or providing for (i)
the rights and obligations of the parties concerned or at risk or (ii) any
collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the maximum
amount which is, or at any time thereafter may become, available to be
drawn under Letters of Credit then outstanding, assuming compliance with
all requirements for drawings referred to in such Letters of Credit plus
(ii) the aggregate amount of all drawings under Letters of Credit honored
by the Issuing Lender but not theretofore reimbursed.
"Mandatory Borrowing" means such term as defined in Section 2.2(e) or
Section 2.3(b)(ii).
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"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property, financial condition or prospects of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower, the Company or the other Credit Parties to perform their
obligations, when such obligations are required to be performed, under this
Credit Agreement or any of the Notes or (c) the validity or enforceability
of this Credit Agreement, any of the Notes or any of the other Credit
Documents or the rights or remedies of the Agent or the Lenders hereunder
or thereunder.
"Materials of Environmental Concern" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Moody's" means Moody's Investors Service, Inc., or any successor or
assignee of the business of such company in the business of rating
securities.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"NationsBank" means NationsBank, N.A. and its successors.
"Net Proceeds" means gross cash proceeds (including any cash received
by way of deferred payment pursuant to a promissory note, receivable or
otherwise, but only as and when received) received in connection with an
Asset Disposition or Equity Transaction, net of (i) reasonable transaction
costs, including in the case of an Equity Transaction, underwriting
discounts and commissions and in the case of an Asset Disposition occurring
in connection with a claim under an insurance policy, costs incurred in
connection with adjustment and settlement of the claim, (ii) estimated
taxes payable in connection therewith, and (iii) any amounts payable in
respect of Funded Debt, including without limitation principal, interest,
premiums and penalties, in connection therewith to the extent that such
Funded Debt and any payments in respect thereof are paid with a portion of
the proceeds therefrom.
"Non-Excluded Taxes" means such term as is defined in Section 3.9.
"Non-Investment Grade" means (i) debt which is not rated by S&P or
Moody's or has a rating of less than "BBB-" by S&P or "Baa3" by Moody's and
(ii) equity interests.
"Note" or "Notes" means the Revolving Notes collectively, separately
or individually, as appropriate.
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"Notice of Borrowing" means the written notice of borrowing as
referenced and defined in Section 2.1(b)(i) or 2.3(b)(i), as appropriate.
"Notice of Extension/Conversion" means the written notice of extension
or conversion as referenced and defined in Section 3.2.
"Obligations" means, collectively, Loans and LOC Obligations.
"Participants" means such term as defined in Section 11.6.
"Participation Interest" means the purchase by a Lender of a
participation interest in Letters of Credit as provided in Section 2.2 or
in Swingline Loans as provided in Section 2.2(b)(ii).
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA, and any successor thereto.
"Permitted Investments" means (i) cash and Cash Equivalents, (ii)
receivables owing to the Company or any of its Subsidiaries or any
receivables and advances to suppliers, in each case if created, acquired or
made in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms, (iii) investments in and to a
domestic Credit Party other than the Company, (iv) investments in and to a
Foreign Subsidiary in an aggregate amount not to exceed $5,000,0000, (v)
loans (other than (a) relocation loans to officers and employees made in
the ordinary course of business in an aggregate amount not to exceed
$2,000,000 at any time outstanding and (b) loans made to officers,
directors, employees or Affiliates, in an aggregate amount not to exceed
$2,500,000, to pay, on behalf of such persons, any withholding taxes due
and payable by such persons as a result of the vesting of securities
received by such persons in connection with the exchange of certain
debentures at the time of the Company's initial public offering) and
advances to officers, directors, employees and Affiliates in an aggregate
amount not to exceed $1,000,000 at any time outstanding, (vi) investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in
the ordinary course of business, (vii) investments, acquisitions or
transactions permitted under Section 8.4(c)(ii), (viii) investments
received in connection with a merger or disposition permitted by Sections
8.4(a) and 8.4(b), (ix) purchase or redemption of equity securities of the
Borrower to the extent permitted by Section 8.10, (x) investments in and
loans to entities engaged in the apartment locator business or other
businesses related to the business of the Borrower and its Subsidiaries in
an aggregate amount not to exceed $10,000,000 at any time outstanding, and
(xi) additional loan advances and/or investments of a nature not
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contemplated by the foregoing clauses hereof, provided that such loans,
advances and/or investments made pursuant to this clause (xi) shall not
exceed an aggregate amount of $5,000,000. As used herein, "investment"
means all investments, in cash or by delivery of property made, directly or
indirectly in, to or from any Person, whether by acquisition of shares of
capital stock, property, assets, indebtedness or other obligations or
securities or by loan advance, capital contribution or otherwise.
"Permitted Liens" means
(iii) Liens created by or otherwise existing, under or in
connection with this Credit Agreement or the other Credit Documents in
favor of the Lenders;
(iv) Liens in favor of a Lender hereunder as the provider of
interest rate protection relating to the Loans hereunder, but only (A)
to the extent such Liens secure obligations under such interest rate
protection agreements permitted under Section 8.1, (B) to the extent
such Liens are on the same collateral as to which the Lenders also
have a Lien and (C) if such provider and the Lenders shall share pari
passu in the collateral subject to such Liens;
(v) purchase money Liens securing purchase money indebtedness
(and refinancings thereof) to the extent permitted under Section
8.1(c);
(vi) Liens for taxes, assessments, charges or other governmental
levies not yet due or as to which the period of grace (not to exceed
60 days), if any, related thereto has not expired or which are being
contested in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained on the books of
the Company or its Subsidiaries, as the case may be, in conformity
with GAAP (or, in the case of Subsidiaries with significant operations
outside of the United States of America, generally accepted accounting
principles in effect from time to time in their respective
jurisdictions of incorporation);
(vii) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
(viii) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers
under insurance or self-insurance arrangements;
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(ix) deposits to secure the performance of bids, trade contracts,
(other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(x) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any
Lien referred to in the foregoing clauses; provided that such
extension, renewal or replacement Lien shall be limited to all or a
part of the property which secured the Lien so extended, renewed or
replaced (plus improvements on such property);
(xi) liens on properties in respect of judgment or award, the
Indebtedness with respect to which is in respect of judgments or
awards that have been in force for less than the applicable period for
taking an appeal so long as execution is not levied thereunder or in
respect of which any of the Credit Parties shall at the time in good
faith be prosecuting an appeal or proceedings for review and in
respect of which a stay of execution shall have been obtained pending
such an appeal or review and is permitted under the Credit Agreement;
and
(xii) encumbrances on real property consisting of easements,
rights of way, zoning restrictions, restrictions on the use of real
property and defects and irregularities in the title thereto,
landlord's or lessor's liens under leases to which a Credit Party is a
party, and other minor liens or encumbrances none of which materially
interferes with the use or value of the property affected in the
ordinary course of business.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated) or any Governmental Authority.
"Plan" means at any particular time, any employee benefit plan which
is covered by Title IV of ERISA and in respect of which the Borrower or a
Commonly Controlled Entity is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Prime Rate" means the per annum rate of interest established from
time to time by the Agent at its principal office in Charlotte, North
Carolina as its Prime Rate. Any change in the interest rate resulting from
a change in the Prime Rate shall become effective as of 12:01 a.m. of the
Business Day on which each change in the Prime Rate is
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announced by the Agent. The Prime Rate is a reference rate used by the
Agent in determining interest rates on certain loans and is not intended to
be the lowest rate of interest charged on any extension of credit to any
debtor.
"Pro Forma Basis" means, with respect to any transaction, that such
transaction shall be deemed to have occurred as of the first day of the
four-fiscal quarter period ending as of the end of the fiscal quarter most
recently ended prior to the date of such transaction with respect to which
the Agent has received the financial information required under Section
7.1. As used herein, "transaction" means any merger, consolidation or
acquisition as referenced in Sections 8.4(a) and (c) and any Dividend as
referred in Section 8.10.
"Properties" means such term as defined in subsection 6.10(a).
"Purchasing Lender" means such term as defined in Section 11.6(c).
"Register" means such term as defined in Section 11.6(d).
"Reorganization" means with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of such
term as used in Section 4241 of ERISA.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC
Reg. 2615.
"Required Lenders" means Lenders holding more than fifty percent (50%)
of the Revolving Commitments, or if the Revolving Commitments have been
terminated, more than fifty percent (50%) of the Obligations then
outstanding (taking into account in the case of LOC Obligations and
Swingline Loans, and Participation Interests therein); provided, however,
that if any Lender shall be a Defaulting Lender at such time, then there
shall be excluded from the determination of Required Lenders the
Commitments of, and after termination of the Commitments, the Obligations
(including Participation Interests therein) owing to, such Defaulting
Lender.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its material property
is subject.
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"Responsible Officer" means the President, Chief Executive Officer,
Chief Financial Officer, the Controller, any Vice President, the Treasurer
or any Assistant Treasurer or other duly authorized officer.
"Revolving Commitment" means with respect to each Lender, the
commitment of such Lender to make Revolving Loans in an aggregate principal
amount at any time outstanding up to such Lender's Revolving Committed
Amount as specified in Schedule 2.1(a), as such amount may be increased or
reduced from time to time in accordance with the provisions hereof.
"Revolving Commitment Percentage" means for each Lender, the
percentage identified as its Revolving Commitment Percentage on Schedule
2.1(a), as such percentage may be modified in connection with any
assignment made in accordance with the provisions of Section 11.6(c).
"Revolving Committed Amount" means collectively, the aggregate amount
of all of the Revolving Commitments as referenced in Section 2.1(a) and,
individually, the amount of each Lender's Revolving Commitment as specified
in Schedule 2.1(a).
"Revolving Loans" means as defined in Section 2.1.
"Revolving Note" or "Revolving Notes" means the promissory notes of
the Borrower in favor of each of the Lenders evidencing the Revolving Loans
and Swingline Loans in substantially the form attached as Schedule 2.1(f),
individually or collectively, as appropriate, as such promissory notes may
be amended, modified, supplemented, extended, renewed or replaced from time
to time.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., or any successor or assignee of the business of such division
in the business of rating securities.
"Single Employer Plan" means any Plan which is not a Multi-Employer
Plan.
"Solvent" means, with respect to any Credit Party as of a particular
date, that on such date (i) such Credit Party is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and
other commitments as they mature in the normal course of business, (ii)
such Credit Party does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Credit Party's ability to pay as
such debts and liabilities mature in their ordinary course, (iii) such
Credit Party is not engaged in a business or a transaction, and is not
about to engage in a business or a transaction, for which such Credit
Party's property would constitute unreasonably small capital after
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giving due consideration to the prevailing practice in the industry in
which such Credit Party is engaged or is to engage, (vi) the fair value of
the property of such Credit Party is greater than the total amount of
liabilities, including, without limitation, contingent liabilities, of such
Credit Party and (v) the present fair saleable value of the assets of such
Credit Party is not less than the amount that will be required to pay the
probable liability of such Credit Party on its debts as they become
absolute and matured. In computing the amount of contingent liabilities at
any time, it is intended that such liabilities will be computed at the
amount which, in light of all the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Specified Sales" means (i) the sale, transfer, lease or other
disposition of inventory and materials in the ordinary course of business,
and (ii) the sale, transfer, lease, sub-lease or other disposition of
machinery, parts, equipment, real property and other assets no longer
useful in the conduct of the business of the Company or any of its
Subsidiaries, as appropriate, (iii) sale, transfer, lease or other
disposition from one Credit Party to another Credit Party and (iv) the
sale, transfer or other disposition of Permitted Investments.
"Subordinated Debt" means such term as defined in Section 8.9.
"Subsidiary" means, as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Credit Agreement shall refer to a Subsidiary or Subsidiaries of the
Borrower.
"Swingline Commitment" means the commitment of the Swingline Lender to
make Swingline Loans in an aggregate principal amount at any time
outstanding up to the Swingline Committed Amount, and the commitment of the
Lenders to purchase participation interests in the Swingline Loans as
provided in Section 2.3(b)(ii), as such amounts may be reduced from time to
time in accordance with the provisions hereof.
"Swingline Committed Amount" means the amount of the Swingline
Lender's Swingline Commitment as specified in Section 2.3(a).
"Swingline Lender" means NationsBank, in its capacity as such.
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"Swingline Loan" or "Swingline Loans" means such terms as are defined
in Section 2.3(a).
"Termination Date" means the earlier of (a) the date which is the
fourth (4th) anniversary of the Closing Date or (b) the date on which the
Revolving Commitments shall terminate in accordance with the provisions of
this Credit Agreement.
"Tranche" means the collective reference to Eurodollar Loans whose
Interest Periods begin and end on the same day. A Tranche may sometimes be
referred to as a "Eurodollar Tranche".
"Transfer Effective Date" means such term as defined in the Commitment
Transfer Supplement.
"Transferee" means such term as defined in Section 11.6(f).
"Type" means, as to any Loan, its nature as a Base Rate Loan,
Eurodollar Loan or Swingline Loan, as the case may be.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in this
Credit Agreement shall have the defined meanings when used in the Notes or
other Credit Documents or any certificate or other document made or
delivered pursuant hereto.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Credit Agreement shall refer to this Credit
Agreement as a whole and not to any particular provision of this Credit
Agreement, and Section, subsection, Schedule and Exhibit references are to
this Credit Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean
"to but excluding".
1.3 Accounting Terms and Determinations.
Unless otherwise specified herein, all terms of an accounting character
used herein shall be interpreted, all accounting determinations hereunder shall
be made, and all financial
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statements required to be delivered hereunder shall be prepared, in accordance
with GAAP, applied on a basis consistent (except for changes concurred in by the
Company's independent public accountants or otherwise required by a change in
GAAP) with the most recent audited consolidated financial statements of the
Company and its consolidated Subsidiaries delivered to the Lenders unless with
respect to any such change concurred in by the Company's independent public
accountants or required by GAAP, in determining compliance with any of the
provisions of this Credit Agreement or any of the other Credit Documents: (i)
the Company or the Borrower shall have objected to determining such compliance
on such basis at the time of delivery of such financial statements, or (ii) the
Required Lenders shall so object in writing within 30 days after the delivery of
such financial statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been made (which,
if objection is made in respect of the first financial statements delivered
under Section 7.1 hereof, shall mean the financial statements referred to in
Section 6.1).
At any time that there is no material difference (other than intercompany
transactions which eliminate in the consolidation of the Company's financial
statements) between the financial information of the Company and it Subsidiaries
and the financial information of the Borrower and its Subsidiaries, the Borrower
may use any financial information of the Company and its Subsidiaries in full
satisfaction of any provision of this Credit Agreement (including, but not
limited to, the delivery of financial information pursuant to Section 7.1 and
the determination of compliance with the financial covenants pursuant to Section
7.9).
SECTION 2
CREDIT FACILITIES
2.1 Revolving Loans.
(a) Revolving Commitment. During the Commitment Period, subject to the
terms and conditions hereof, each Lender severally agrees to make revolving
credit loans ("Revolving Loans") to the Borrower from time to time for the
purposes hereinafter set forth; provided, however, that (i) with regard to
each Lender individually, the sum of such Lender's share of outstanding
Revolving Loans plus such Lender's LOC Commitment Percentage of outstanding
LOC Obligations plus such Lender's Revolving Commitment Percentage of
Swingline Loans shall not exceed such Lender's Revolving Committed Amount,
and (ii) with regard to the Lenders collectively, the sum of the aggregate
amount of outstanding Revolving Loans plus LOC Obligations plus Swingline
Loans shall not exceed SEVENTY-FIVE MILLION DOLLARS ($75,000,000) (as such
aggregate maximum amount may be reduced or increased from time to time as
provided
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herein, the "Revolving Committed Amount"). Revolving Loans may consist of
Base Rate Loans or Eurodollar Loans, or a combination thereof, as the
Borrower may request, and may be repaid and reborrowed in accordance with
the provisions hereof. Eurodollar Loans shall be made by each Lender at its
Eurodollar Lending Office and Base Rate Loans at its Domestic Lending
Office.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall request a Revolving
Loan borrowing by written notice (or telephone notice promptly
confirmed in writing which confirmation may be by fax) to the Agent
not later than 11:00 A.M. (Charlotte, North Carolina time) on the
Business Day of the requested borrowing in the case of Base Rate
Loans, and on the third Business Day prior to the date of the
requested borrowing in the case of Eurodollar Loans. Each such request
for borrowing shall be irrevocable and shall specify (A) that a
Revolving Loan is requested, (B) the date of the requested borrowing
(which shall be a Business Day), (C) the aggregate principal amount to
be borrowed, and (D) whether the borrowing shall be comprised of Base
Rate Loans, Eurodollar Loans or a combination thereof, and if
Eurodollar Loans are requested, the Interest Period(s) therefor. A
form of Notice of Borrowing (a "Notice of Borrowing") is attached as
Schedule 2.1(b)(i). If the Borrower shall fail to specify in any such
Notice of Borrowing (I) an applicable Interest Period in the case of a
Eurodollar Loan, then such notice shall be deemed to be a request for
an Interest Period of one month, or (II) the type of Revolving Loan
requested, then such notice shall be deemed to be a request for a Base
Rate Loan hereunder. The Agent shall give notice to each Lender
promptly upon receipt of each Notice of Borrowing, the contents
thereof and each such Lender's share thereof.
(ii) Minimum Amounts. Each Revolving Loan borrowing shall be in a
minimum aggregate amount of $3,000,000 and integral multiples of
$1,000,000, in the case of Eurodollar Loans, and $1,000,000 and
integral multiples of $1,000,000 in excess thereof (or the remaining
amount of the Revolving Commitment, if less) in the case of Base Rate
Loans.
(iii) Advances. Each Lender will make its Revolving Commitment
Percentage of each Revolving Loan borrowing available to the Agent for
the account of the Borrower at the office of the Agent specified in
Schedule 11.2, or at such other office as the Agent may designate in
writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date
specified in the applicable Notice of Borrowing in Dollars and in
funds immediately available to the Agent. Such borrowing will then be
made available to the Borrower by the Agent by crediting the account
of the Borrower on the books of such office with the aggregate of the
amounts made available to the Agent by the Lenders and in like funds
as received by the Agent.
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(c) Repayment. The principal amount of all Revolving Loans shall be
due and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1, Revolving
Loans shall bear interest as follows:
(i) Base Rate Loans. During such periods as Revolving Loans shall
be comprised of Base Rate Loans, each such Base Rate Loan shall bear
interest at a per annum rate equal to the Base Rate; and
(ii) Eurodollar Loans. During such periods as Revolving Loans
shall be comprised of Eurodollar Loans, each such Eurodollar Loan
shall bear interest at a per annum rate equal to the sum of the
Eurodollar Rate plus the Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each Interest
Payment Date.
(e) Increase in Revolving Commitments. Subject to the terms and
conditions set forth herein, upon twelve (12) days advance written notice
to the Agent, the Borrower shall have the right, at any time and from time
to time from the Closing Date until the Termination Date, to increase the
Revolving Committed Amount by an amount up to $75,000,000 in the aggregate;
provided that (i) any such increase shall be in a minimum principal amount
of $15,000,000 and integral multiples of $5,000,000 in excess thereof (or
the remaining amount, if less), (ii) if any Revolving Loans are outstanding
at the time of any such increase, the Borrower shall make such payments and
adjustments on the Revolving Loans (including payment of any break-funding
amount owing under Section 3.10) as necessary to give effect to the revised
commitment percentages and commitment amounts of the Lenders and (iii) the
conditions to Extensions of Credit in Sections 5.2 shall be true and
correct. An increase in the Revolving Committed Amount hereunder shall be
subject to satisfaction of the following: (A) in the case of any such
request for an increase in the Revolving Committed Amount, the amount of
such increase shall be offered first to the existing Lenders, and in the
event the additional commitments which existing Lenders are willing to take
shall exceed the amount requested by the Borrower, then in proportion to
the commitments of such existing Lenders willing to take additional
commitments, and (B) in the case of any such request for an increase in the
Revolving Committed Amount, the amount of the additional commitments
requested by the Borrower shall exceed the additional commitments which the
existing Lenders are willing to take, then the Borrower may invite other
commercial banks and financial institutions reasonably acceptable to the
Agent to join this Credit Agreement as Lenders hereunder for the portion of
commitments not taken by existing Lenders, provided that such other
commercial banks and financial institutions shall enter into such joinder
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agreements to give effect thereto as the Agent and the Borrower may
reasonably request. In connection with any increase in the Revolving
Commitments pursuant to this Section, Schedule 2.1(a) shall be revised to
reflect the modified commitment percentages and commitments of the Lenders.
Upon payment of the one time Expandability Syndication Fee (as such term is
defined in the Agent's Fee Letter), NationsBank shall use reasonable
efforts to obtain additional commitments to accommodate any request by the
Borrower to increase the Revolving Commitments.
(f) Revolving Notes. The Revolving Loans shall be evidenced by the
Revolving Notes.
2.2 Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof and of the
LOC Documents, if any, and any other terms and conditions which the Issuing
Lender may reasonably require, the Issuing Lender shall issue, and the
Lenders shall participate in, Letters of Credit for the account of the
Borrower from time to time upon request from the Closing Date until the
Termination Date in a form acceptable to the Issuing Lender; provided,
however, that (i) the aggregate amount of LOC Obligations shall not at any
time exceed SEVEN MILLION DOLLARS ($7,000,000) (the "LOC Committed
Amount"), (ii) with regard to each Lender individually, such Lender's LOC
Commitment Percentage of the outstanding LOC Obligations shall not exceed
such Lender's LOC Commitment, (iii) with regard to the Lenders
collectively, the sum of the aggregate amount of outstanding Revolving
Loans plus LOC Obligations plus Swingline Loans shall not exceed the
Revolving Committed Amount and (iv) standby Letters of Credit shall be
issued for the purpose of supporting workers' compensation and other
insurance programs and other purposes arising from the ordinary course of
the Borrower's business. Except as otherwise expressly agreed upon by all
the Lenders, no Letter of Credit shall have an original expiry date more
than one year from the date of issuance; provided, however, so long as no
Default or Event of Default has occurred and is continuing and subject to
the other terms and conditions to the issuance of Letters of Credit
hereunder, the expiry dates of Letters of Credit may be extended annually
on each anniversary date of their date of issuance for an additional one
year period; provided, further, that no Letter of Credit, as originally
issued or as extended, shall have an expiry date extending beyond the
Termination Date unless, but only to the extent that, the Borrower shall
provide cash collateral to the Issuing Lender on the date of issuance or
extension in an amount equal to the maximum amount available to be drawn
under such Letter of Credit. Each Letter of Credit shall comply with the
related LOC Documents. The issuance and expiry date of each Letter of
Credit shall be a Business Day.
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(b) Notice and Reports. The request for the issuance of a Letter of
Credit shall be submitted to the Issuing Lender at least three (3) Business
Days prior to the requested date of issuance. The Issuing Lender will, at
least quarterly and more frequently upon request, provide to the Agent for
dissemination to the Lenders a detailed report specifying the Letters of
Credit which are then issued and outstanding and any activity with respect
thereto which may have occurred since the date of the prior report, and
including therein, among other things, the account party, the beneficiary,
the face amount, expiry date as well as any payments or expirations which
may have occurred. The Agent will promptly provide copies of such reports
to the Lenders. The Issuing Lender will further provide to the Agent
promptly upon request copies of the Letters of Credit. The Issuing Lender
will provide to the Agent at least weekly, and more frequently upon
request, a summary report of the nature and extent of LOC Obligations then
outstanding.
(c) Participations. Each Lender, with respect to the Existing Letters
of Credit, hereby purchases a participation interest in such Existing
Letters of Credit and with respect to Letters of Credit issued on or after
the Closing Date, upon issuance of a Letter of Credit, shall be deemed to
have purchased without recourse a risk participation from the Issuing
Lender in such Letter of Credit and the obligations arising thereunder and
any collateral relating thereto, in each case in an amount equal to its LOC
Commitment Percentage of the obligations under such Letter of Credit and
shall absolutely, unconditionally and irrevocably assume, as primary
obligor and not as surety, and be obligated to pay to the Issuing Lender
therefor and discharge when due, its LOC Commitment Percentage of the
obligations arising under such Letter of Credit. Without limiting the scope
and nature of each Lender's participation in any Letter of Credit, to the
extent that the Issuing Lender has not been reimbursed as required
hereunder or under any such Letter of Credit, each such Lender shall pay to
the Issuing Lender its LOC Commitment Percentage of such unreimbursed
drawing in same day funds on the day of notification by the Issuing Lender
of an unreimbursed drawing pursuant to the provisions of subsection (d)
hereof. The obligation of each Lender to so reimburse the Issuing Lender
shall be absolute and unconditional and shall not be affected by the
occurrence of a Default, an Event of Default or any other occurrence or
event. Any such reimbursement shall not relieve or otherwise impair the
obligation of the Borrower to reimburse the Issuing Lender under any Letter
of Credit, together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any Letter of
Credit, the Issuing Lender will promptly notify the Borrower. Unless the
Borrower shall immediately notify the Issuing Lender of its intent to
otherwise reimburse the Issuing Lender, the Borrower shall be deemed to
have requested a Revolving Loan in the amount of the drawing as provided in
subsection (e) hereof, the proceeds of which will be used to satisfy the
reimbursement obligations. The Borrower shall reimburse the Issuing Lender
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on the day of drawing under any Letter of Credit (either with the proceeds
of a Revolving Loan obtained hereunder or otherwise) in same day funds as
provided herein or in the LOC Documents. If the Borrower shall fail to
reimburse the Issuing Lender as provided hereinabove, the unreimbursed
amount of such drawing shall bear interest at a per annum rate equal to the
Base Rate plus two percent (2%). The Borrower's reimbursement obligations
hereunder shall be absolute and unconditional under all circumstances
irrespective of any rights of set-off, counterclaim or defense to payment
the Borrower may claim or have against the Issuing Lender, the Agent, the
Lenders, the beneficiary of the Letter of Credit drawn upon or any other
Person, including without limitation any defense based on any failure of
the Borrower to receive consideration or the legality, validity, regularity
or unenforceability of the Letter of Credit. The Issuing Lender will
promptly notify the other Lenders of the amount of any unreimbursed drawing
and each Lender shall promptly pay to the Agent for the account of the
Issuing Lender in Dollars and in immediately available funds, the amount of
such Lender's LOC Commitment Percentage of such unreimbursed drawing. Such
payment shall be made on the day such notice is received by such Lender
from the Issuing Lender if such notice is received at or before 2:00 P.M.
(Charlotte, North Carolina time), otherwise such payment shall be made at
or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day
next succeeding the day such notice is received. If such Lender does not
pay such amount to the Issuing Lender in full upon such request, such
Lender shall, on demand, pay to the Agent for the account of the Issuing
Lender interest on the unpaid amount during the period from the date of
such drawing until such Lender pays such amount to the Issuing Lender in
full at a rate per annum equal to, if paid within two (2) Business Days of
the date of drawing, the Federal Funds Rate and thereafter at a rate equal
to the Base Rate. Each Lender's obligation to make such payment to the
Issuing Lender, and the right of the Issuing Lender to receive the same,
shall be absolute and unconditional, shall not be affected by any
circumstance whatsoever and without regard to the termination of this
Credit Agreement or the Commitments hereunder, the existence of a Default
or Event of Default or the acceleration of the Obligations hereunder and
shall be made without any offset, abatement, withholding or reduction
whatsoever.
(e) Repayment with Revolving Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, a Revolving Loan
borrowing to reimburse a drawing under a Letter of Credit, the Agent shall
give notice to the Lenders that a Revolving Loan has been requested or
deemed requested in connection with a drawing under a Letter of Credit, in
which case a Revolving Loan borrowing comprised solely of Base Rate Loans
(each such borrowing, a "Mandatory Borrowing") shall be immediately made
from all Lenders (without giving effect to any termination of the
Commitments pursuant to Section 9.1) pro rata based on each Lender's
respective Revolving Commitment Percentage (determined before giving effect
to any termination of the Commitments pursuant to Section 9.1) and the
proceeds thereof shall be paid
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directly to the Issuing Lender for application to the respective LOC
Obligations. Each such Lender hereby irrevocably agrees to make such
Revolving Loans immediately upon any such request or deemed request on
account of each Mandatory Borrowing in the amount and in the manner
specified in the preceding sentence and on the same such date
notwithstanding (i) the amount of Mandatory Borrowing may not comply with
the minimum amount for borrowings of Revolving Loans otherwise required
hereunder, (ii) whether any conditions specified in Section 5.2 are then
satisfied, (iii) whether a Default or an Event of Default then exists, (iv)
failure for any such request or deemed request for Revolving Loan to be
made by the time otherwise required in Section 2.1(b), (v) the date of such
Mandatory Borrowing, or (vi) any reduction in the Revolving Committed
Amount after any such Letter of Credit may have been drawn upon; provided,
however, that in the event any such Mandatory Borrowing should be less than
the minimum amount for borrowings of Revolving Loans otherwise provided in
Section 2.1(b)(ii), the Borrower shall pay to the Agent for its own account
an administrative fee of $500. In the event that any Mandatory Borrowing
cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower or any
other Credit Party), then each such Lender hereby agrees that it shall
forthwith fund (as of the date the Mandatory Borrowing would otherwise have
occurred, but adjusted for any payments received from the Borrower on or
after such date and prior to such purchase) its Participation Interests in
the outstanding LOC Obligations; provided, further, that in the event any
Lender shall fail to fund its Participation Interest on the day the
Mandatory Borrowing would otherwise have occurred, then the amount of such
Lender's unfunded Participation Interest therein shall bear interest
payable to the Issuing Lender upon demand, at the rate equal to, if paid
within two (2) Business Days of such date, the Federal Funds Rate, and
thereafter at a rate equal to the Base Rate.
(f) Modification, Extension. The issuance of any supplement,
modification, amendment, renewal, or extension to any Letter of Credit
shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Lender may have the
Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP may be
incorporated therein and deemed in all respects to be a part thereof.
2.3 Swingline Loan Subfacility.
(a) Swingline Commitment. During the Commitment Period, subject to the
terms and conditions hereof, the Swingline Lender, in its individual
capacity, agrees to
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make certain revolving credit loans to the Borrower (each a "Swingline
Loan" and, collectively, the "Swingline Loans") for the purposes
hereinafter set forth; provided, however, (i) the aggregate amount of
Swingline Loans outstanding at any time shall not exceed FOUR MILLION
DOLLARS ($4,000,000) (the "Swingline Committed Amount"), and (ii) the sum
of the aggregate amount of outstanding Revolving Loans plus LOC Obligations
plus Swingline Loans shall not exceed the Aggregate Revolving Committed
Amount. Swingline Loans hereunder may be repaid and reborrowed in
accordance with the provisions hereof.
(b) Swingline Loan Borrowings.
(i) Notice of Borrowing and Disbursement. The Borrower may
request a Swingline Loan borrowing by written notice (or telephone
notice promptly confirmed in writing which confirmation may be by fax)
to the Swingline Lender and a copy to the Agent not later than 12:00
Noon (Charlotte, North Carolina time) on the Business Day of the
requested Swingline borrowing. Each such notice shall be irrevocable
and shall specify (A) that a Swingline Loan borrowing is requested,
(B) the date of the requested Swingline Loan borrowing (which shall be
a Business Day) and (C) the aggregate principal amount of the
Swingline Loan borrowing. A form of Notice of Borrowing (a "Notice of
Borrowing") is attached as Schedule 2.1(b)(i). Requests for Swingline
Loans made in accordance with this Section 2.3 will be honored by the
end of the date of the requested borrowing specified in the Notice of
Borrowing. Each Swingline Loan borrowing shall be in a minimum
aggregate amount of $100,000 and integral multiples of $100,000 in
excess thereof (or the remaining amount of the Swingline Commitment,
if less).
(ii) Repayment of Swingline Loans. Each Swingline Loan borrowing
shall be due and payable on the earlier of (A) the date of the next
Revolving Loan borrowing, or (B) the Termination Date. If, and to the
extent, any Swingline Loans shall be outstanding on the date of any
Revolving Loan borrowing, such Swingline Loans shall first be repaid
from the proceeds of such Revolving Loan borrowing prior to
disbursement to the Borrower. In addition, the Swingline Lender may,
at any time, in its sole discretion, by written notice to the Borrower
and the Agent, demand repayment of its Swingline Loans by way of a
Revolving Loan borrowing, in which case the Borrower shall be deemed
to have requested a Revolving Loan borrowing comprised entirely of
Base Rate Loans in the amount of such Swingline Loans; provided,
however, that, in the following circumstances, any such demand shall
also be deemed to have been given one Business Day prior to each of
(i) the Termination Date, (ii) the occurrence of any Event of Default
described in Section 9.1(e), (iii) upon
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acceleration of the Obligations hereunder, whether on account of an
Event of Default described in Section 9.1(e) or any other Event of
Default, and (iv) the exercise of remedies in accordance with the
provisions of Section 9 hereof (each such Revolving Loan borrowing
made on account of any such deemed request therefor as provided herein
being hereinafter referred to as a "Mandatory Borrowing"). Each Lender
hereby irrevocably agrees to make such Revolving Loans promptly upon
any such request or deemed request on account of each Mandatory
Borrowing in the amount and in the manner specified in the preceding
sentence and on the same such date notwithstanding (I) the amount of
Mandatory Borrowing may not comply with the minimum amount for
borrowings of Revolving Loans otherwise required hereunder, (II)
whether any conditions specified in Section 5.2 are then satisfied,
(III) whether a Default or an Event of Default then exists, (IV)
failure of such request or deemed request for Revolving Loans to be
made by the time otherwise required in Section 2.1(b)(i), (V) the date
of such Mandatory Borrowing, or (VI) any reduction in the Revolving
Committed Amount or termination of the Revolving Commitments relating
thereto immediately prior to such Mandatory Borrowing or
contemporaneous therewith. In the event that any Mandatory Borrowing
cannot for any reason be made on the date otherwise required
above(including, without limitation, as a result of the commencement
of a proceeding in bankruptcy with respect to the Borrower), then each
Lender hereby agrees that it shall forthwith purchase (as of the date
the Mandatory Borrowing would otherwise have occurred, but adjusted
for any payments received from the Borrower on or after such date and
prior to such purchase) from the Swingline Lender such participations
in the outstanding Swingline Loans as shall be necessary to cause each
such Lender to share in such Swingline Loans ratably based upon its
respective Revolving Commitment Percentage (determined before giving
effect to any termination of the Revolving Commitments pursuant to
Section 9), provided that (A) all interest payable on the Swingline
Loans shall be for the account of the Swingline Lender until the date
as of which the respective participation is purchased, and (B) at the
time any purchase of participations pursuant to this sentence is
actually made, the purchasing Lender shall be required to pay to the
Swingline Lender interest on the principal amount of such
participation purchased for each day from and including the day upon
which the Mandatory Borrowing would otherwise have occurred to but
excluding the date of payment for such participation, at the rate
equal to, if paid within two (2) Business Days of the date of the
Mandatory Borrowing, the Federal Funds Rate, and thereafter at a rate
equal to the Base Rate.
(c) Interest on Swingline Loans. Subject to the provisions of Section
3.1, Swingline Loans shall bear interest at a per annum rate equal to the
Base Rate. Interest on Swingline Loans shall be payable in arrears on each
Interest Payment Date.
(d) Swingline Note. The Swingline Loans shall be evidenced by the
Revolving Notes
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 Default Rate.
Upon the occurrence, and during the continuance, of an Event of Default,
the principal of and, to the extent permitted by law, interest on the Loans and
any other amounts owing hereunder or under the other Credit Documents shall bear
interest, payable on demand, at a per annum rate 2% greater than the rate which
would otherwise be applicable (or if no rate is applicable, whether in respect
of interest, fees or other amounts, then 2% greater than the Base Rate).
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3.2 Extension and Conversion.
The Borrower shall have the option, on any Business Day, to extend existing
Loans into a subsequent permissible Interest Period or to convert Loans into
Loans of another Type; provided, however, that (i) except as provided in Section
3.7, Eurodollar Loans may be converted into Base Rate Loans only on the last day
of the Interest Period applicable thereto, (ii) Eurodollar Loans may be
extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no
Default or Event of Default is in existence on the date of extension or
conversion, (iii) Loans extended as, or converted into, Eurodollar Loans shall
be subject to the terms of the definition of "Interest Period" set forth in
Section 1.1 and shall be in such minimum amounts as provided in Section
2.1(b)(ii), (iv) no more than ten (10) separate Eurodollar Loans shall be
outstanding hereunder at any time, (v) any request for extension or conversion
of a Eurodollar Loan which shall fail to specify an Interest Period shall be
deemed to be a request for an Interest Period of one month and (vi) Swingline
Loans may not be extended or converted pursuant to this Section 3.2. Each such
extension or conversion shall be effected by the Borrower by giving a Notice of
Extension/Conversion (or telephone notice promptly confirmed in writing) to the
Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day
of, in the case of the conversion of a Eurodollar Loan into a Base Rate Loan and
on the third Business Day prior to, in the case of the extension of a Eurodollar
Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of
the proposed extension or conversion, specifying the date of the proposed
extension or conversion, the Loans to be so extended or converted, the types of
Loans into which such Loans are to be converted and, if appropriate, the
applicable Interest Periods with respect thereto. Each request for extension or
conversion shall constitute a representation and warranty by the Borrower of the
matters specified in subsections as appropriate (a) and (b), and in (c) or (d)
of Section 5.2. In the event the Borrower fails to request extension or
conversion of any Eurodollar Loan in accordance with this Section, or any such
conversion or extension is not permitted or required by this Section, then such
Loans shall be automatically converted into Base Rate Loans at the end of their
Interest Period. The Agent shall give each Lender notice as promptly as
practicable of any such proposed extension or conversion affecting any Loan.
3.3 Reductions in Commitments and Prepayments.
(a) Voluntary Reduction in Revolving Commitment. The Borrower may from
time to time permanently reduce the aggregate amount of the Revolving
Commitments in whole or in part without premium or penalty except as
provided in Section 3.10 upon three (3) Business Days' prior written notice
to the Agent; provided that after giving effect to any such voluntary
reduction the sum of Revolving Loans plus LOC Obligations plus Swingline
Loans then outstanding shall not exceed the Aggregate Revolving Committed
Amount. Partial reductions in the aggregate Revolving Commitment shall in
each case be in a minimum aggregate amount of $5,000,000 and integral
multiples of $1,000,000 in excess thereof.
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(b) Mandatory Reductions in Revolving Commitments and Mandatory
Prepayments.
(i) Asset Sales and Dispositions. The Aggregate Revolving
Committed Amount shall be automatically and permanently reduced by an
aggregate amount equal to 100% of the Net Proceeds received by the
Borrower or any of its Subsidiaries from any Asset Disposition where
and to the extent (A) such Net Proceeds are not reinvested in similar
property or assets within 120 days of the date of such Asset
Disposition (or any series of related sales, transfers or
dispositions), and (B) such Net Proceeds that are not reinvested in
the aggregate in any fiscal year constitute more than fifteen percent
(15%) of the consolidated assets for the Consolidated Group as of the
end of the immediately preceding fiscal year. Where a payment shall be
owing on account of a reduction of the Aggregate Revolving Committed
Amount hereunder in accordance with the provisions of Section
3.3(b)(iii), any such payment shall be made to the Agent promptly (but
in any event within two (2) Business Days) following receipt by the
Borrower or a Subsidiary of the Net Proceeds therefrom (taking into
account any periods permitted for reinvestment thereof).
(ii) Mandatory Prepayments. If at any time (A) the sum of the
aggregate amount of Revolving Loans plus LOC Obligations plus
Swingline Loans then outstanding shall exceed the Aggregate Revolving
Committed Amount, (B) the aggregate amount of LOC Obligations shall
exceed the aggregate LOC Committed Amount, or (C) the aggregate amount
of Swingline Loans shall exceed the Swingline Committed Amount, then
in any such instance the Borrower shall immediately make payment on
the Loans or provide cash collateral in respect of the LOC Obligations
in an amount sufficient to eliminate the deficiency. In the case of a
mandatory prepayment required on account of subsection (B) or (C) in
the foregoing sentence, the amount required to be paid shall serve to
temporarily reduce the Aggregate Revolving Committed Amount (for
purposes of borrowing availability hereunder, but not for purposes of
computation of fees) by the amount of the payment required until such
time as the situation shall no longer exist. Payments hereunder shall
be applied first to Swingline Loans, then to Revolving Loans, and then
to a cash collateral account in respect of the LOC Obligations.
(c) Voluntary Prepayments. Loans may be prepaid in whole or in part
without premium or penalty; provided that (i) Eurodollar Loans may not be
prepaid other than at the end of the Interest Period applicable thereto,
and (ii) each such partial prepayment shall be in a minimum aggregate
principal amount of $1,000,000 and integral multiples of $500,000 in excess
thereof, in the case of Revolving Loans, and $100,000 and integral
multiples thereof, in the case of Swingline Loans. Amounts prepaid on the
Revolving Loans may be reborrowed in accordance with the provisions hereof.
(d) Notice and Application. Except as otherwise provided herein, the
Borrower will provide notice to the Agent of any prepayment by 11:00 A.M.
(Charlotte, North Carolina time) on the date of prepayment. Unless
otherwise expressly provided by the Borrower, amounts paid hereunder shall
be applied first to Base Rate Loans and then to Eurodollar Loans in direct
order of their Interest Period maturities.
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3.4 Fees.
(a) Commitment Fee. In consideration of the Revolving Commitments by
the Lenders hereunder, the Borrower agrees to pay to the Agent for the
ratable benefit of the Lenders a commitment fee (the "Commitment Fee") in
an amount equal to the Applicable Percentage per annum on the average daily
unused portion of the Revolving Committed Amount in effect from time to
time. For purposes of computing the Commitment Fee, Swingline Loans shall
not be considered usage under the Revolving Committed Amount. The
Commitment Fee shall be payable quarterly in arrears on the 15th day
following the last day of each calendar quarter for the prior calendar
quarter.
(b) Letter of Credit Fees. In consideration of the LOC Commitments,
the Borrower agrees to pay to the Issuing Lender a fee (the "Letter of
Credit Fee") equal to the Applicable Percentage per annum on the average
daily maximum amount available to be drawn under each Letter of Credit from
the date of issuance to the date of expiration. The Issuing Lender shall
promptly pay the Letter of Credit Fee over to the Agent for the ratable
benefit of the Lenders (including the Issuing Lender). In addition to such
Letter of Credit Fee, the Borrower agrees to pay to the Issuing Lender for
its own account without sharing by the other Lenders one-eighth of one
percent (1/8%) per annum on the average daily maximum amount available to
be drawn under each such Letter of Credit issued by it. The Letter of
Credit Fee shall be payable quarterly in arrears on the 15th day following
the last day of each calendar quarter.
(c) Administrative Fees. The Borrower agrees to pay to the Agent, for
its own account, the annual administrative fee (the "Agent's Fees")
referred to in the Agent's Fee Letter.
3.5 Capital Adequacy.
If, after the date hereof, any Lender has determined that the adoption or
effectiveness of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Lender or its parent company with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender's or its parent company's capital or assets as a
consequence of its commitments or obligations hereunder to a level below that
which such Lender could have achieved but for such adoption, effectiveness,
change or compliance (taking into consideration the policies of such Lender and
its parent company with respect to capital adequacy), then, within 10 Business
Days after the Borrower's receipt of the certificate referred to in the next
sentence, the Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender and its parent company for such
reduction; provided, however, that a Lender will not request any amounts
hereunder unless it is generally requesting amounts under comparable provisions
from similarly situated borrowers, and provided, further, that no such amounts
shall be payable with respect to reduction in rate of return incurred more than
three (3) months before such Lender demands compensation under this Section 3.5.
A certificate as to the amount of such reduction in rate of return, the basis
therefor and setting forth in reasonable detail the calculations used by the
applicable Lender to arrive at the amount or amounts claimed to be due, shall be
submitted to the Borrower and the Agent. Each determination by a Lender of
amounts owing under this Section shall be rebuttably presumptive evidence of the
matters set forth therein.
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3.6 Inability To Determine Interest Rate.
If prior to the first day of any Interest Period, the Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, the Agent shall give telecopy or telephonic notice
thereof to the Borrower and the Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans requested to be made on the first
day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that
were to have been converted on the first day of such Interest Period to or
continued as Eurodollar Loans shall be converted to or continued as Base Rate
Loans and (z) any outstanding Eurodollar Loans shall be converted, on the last
day of the applicable Interest Periods, to Base Rate Loans. Until such notice
has been withdrawn by the Agent, no further Eurodollar Loans shall be made or
continued as such, nor shall the Borrower have the right to convert Base Rate
Loans to Eurodollar Loans.
3.7 Illegality.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Agent (which notice shall be withdrawn whenever such circumstances no
longer exist), (b) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Lender to make or maintain Eurodollar Loans, such
Lender shall then have a commitment only to make a Base Rate Loan when a
Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on
the respective last days or the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to subsection
3.10.
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3.8 Requirements of Law.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, or compliance by
any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
(i) shall subject such Lender to any tax of any kind whatsoever on or
in respect of any letter of credit application or any Eurodollar Loans made
by it or its obligation to make Eurodollar Loans, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by subsection 3.9 (including Non-Excluded Taxes
imposed solely by reason of any failure of such Lender to comply with its
obligations under subsection 3.9(b)) and changes in taxes measured by or
imposed upon the overall net income, or franchise tax (imposed in lieu of
such net income tax), of such Lender or its applicable lending office,
branch, or any affiliate thereof);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition (excluding any
tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, upon notice to the
Borrower from such Lender, through the Agent, in accordance herewith, the
Borrower shall promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender for such increased cost or reduced amount
receivable, provided that, in any such case, the Borrower may elect to convert
the Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving
the Agent at least one Business Day's notice of such election, in which case the
Borrower shall promptly pay to such Lender, upon demand, without duplication,
such amounts, if any, as may be required pursuant to subsection 3.10. If any
Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall provide prompt notice thereof to the Borrower, through the
Agent, certifying (x) that one of the events described in this paragraph has
occurred and describing in reasonable detail the nature of such event, (y) as to
the increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof. Such a certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender, through the Agent,
to the Borrower shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Credit Agreement and the payment
of the Loans and all other amounts payable hereunder.
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3.9 Taxes.
(a) Except as provided below in this subsection, all payments made by
the Borrower under this Credit Agreement and any Notes shall be made free
and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding taxes measured by or imposed upon the overall net
income of any Lender or its applicable lending office, or any branch or
affiliate thereof, and all franchise taxes, branch taxes, taxes on doing
business or taxes on the overall capital or net worth of any Lender or its
applicable lending office, or any branch or affiliate thereof, in each case
imposed in lieu of net income taxes, imposed: (i) by the jurisdiction under
the laws of which such Lender, applicable lending office, branch or
affiliate is organized or is located, or in which its principal executive
office is located, or any nation within which such jurisdiction is located
or any political subdivision thereof; or (ii) by reason of any connection
between the jurisdiction imposing such tax and such Lender, applicable
lending office, branch or affiliate other than a connection arising solely
from such Lender having executed, delivered or performed its obligations,
or received payment under or enforced, this Credit Agreement or any Notes.
If any such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings ("Non-Excluded Taxes") are required to be
withheld from any amounts payable to the Agent or any Lender hereunder or
under any Notes, (A) the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Credit Agreement and any Notes, provided, howeve , that the Borrower shall
be entitled to deduct and withhold any Non-Excluded Taxes and shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state thereof
if such Lender fails to comply with the requirements of paragraph (b) of
this subsection whenever any Non-Excluded Taxes are payable by the
Borrower, and (B) as promptly as possible thereafter the Borrower shall
send to the Agent for its own account or for the account of such Lender, as
the case may be, a certified copy of an original official receipt received
by the Borrower showing payment thereof. If the Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Agent and the Lenders for any
incremental taxes, interest or penalties that may become payable by the
Agent or any Lender as a result of any such failure. The agreements in this
subsection shall survive the termination of this Credit Agreement and the
payment of the Loans and all other amounts payable hereunder.
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(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(X) (i) on or before the date of any payment by the Borrower
under this Credit Agreement or Notes to such Lender, deliver to the
Borrower and the Agent (A) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor applicable
form, as the case may be, certifying that it is entitled to receive
payments under this Credit Agreement and any Notes without deduction
or withholding of any United States federal income taxes and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be, certifying that it is entitled to an
exemption from United States backup withholding tax;
(ii) deliver to the Borrower and the Agent two further copies of
any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower
or the Agent; or
(Y) in the case of any such Lender that is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Code, (i) represent to the
Borrower (for the benefit of the Borrower and the Agent) that it is
not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(ii) agree to furnish to the Borrower on or before the date of any
payment by the Borrower, with a copy to the Agent (A) a certificate
substantially in the form of Schedule 3.10 (any such certificate a
"U.S. Tax Compliance Certificate") and (B) two accurate and complete
original signed copies of Internal Revenue Service Form W-8, or
successor applicable form certifying to such Lender's legal
entitlement at the date of such certificate to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Code
with respect to payments to be made under this Credit Agreement and
any Notes (and to deliver to the Borrower and the Agent two further
copies of such form on or before the date it expires or becomes
obsolete and after the occurrence of any event requiring a change in
the most recently provided form and, if necessary, obtain any
extensions of time reasonably requested by the Borrower or the Agent
for filing and completing such forms), and (iii) agree, to the extent
legally entitled to do so, upon reasonable request by the Borrower, to
provide to the Borrower (for the benefit of the Borrower and the
Agent) such other forms as may be reasonably required in order to
establish the legal entitlement of such Lender to an exemption from
withholding with respect to payments under this Credit Agreement and
any Notes;
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unless in any such case any change in treaty, law or regulation has
occurred after the date such Person becomes a Lender hereunder which
renders all such forms inapplicable or which would prevent such Lender from
duly completing and delivering any such form with respect to it and such
Lender so advises the Borrower and the Agent. Each Person that shall become
a Lender or a participant of a Lender pursuant to subsection 11.6 shall,
upon the effectiveness of the related transfer, be required to provide all
of the forms, certifications and statements required pursuant to this
subsection, provided that in the case of a participant of a Lender the
obligations of such participant of a Lender pursuant to this subsection (b)
shall be determined as if the participant of a Lender were a Lender except
that such participant of a Lender shall furnish all such required forms,
certifications and statements to the Lender from which the related
participation shall have been purchased.
(c) In the event that any Lender requests payment by the Borrower of
any additional amounts pursuant to subsection (a) of this Section 3.9,
then, provided that no Default or Event of Default has occurred and is
continuing at such time, the Borrower may, at its own expense (such expense
to include any transfer fee payable to the Agent under Section 11.6(b)),
and in its sole discretion require such Lender to transfer and assign in
whole or in part, without recourse (in accordance with and subject to the
terms and conditions of Section 11.6(b)), all or part of its interests,
rights and obligations under this Credit Agreement to an Eligible
Transferee which shall assume such assigned obligations; provided that (i)
such assignment shall not relieve the Borrower from its obligations to pay
such additional amounts that may be due in accordance with subsection (a)
of this Section 3.9, (ii) such assignment shall not conflict with any law,
rule or regulation or order of any court or other Governmental Authority
and (iii) the Borrower or such Eligible Transferee shall have paid to the
assigning Lender in immediately available funds the principal of and
interest accrued to the date of such payment on the Loans made by it
hereunder and all accrued Fees and other amounts owed to it hereunder.
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3.10 Indemnity.
The Borrower agrees to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur (other
than through such Lender's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrower in making any prepayment of a Eurodollar Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement or (c) the making of a prepayment of Eurodollar Loans on a
day which is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Loans provided for herein (excluding, however, the Applicable Percentage
included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market. This covenant shall survive the
termination of this Credit Agreement and the payment of the Loans and all other
amounts payable hereunder.
3.11 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Loans. Except to the extent otherwise provided herein, each
Revolving Loan, each payment or prepayment of principal of any Revolving
Loan, each payment of interest on the Revolving Loans, each payment of
Commitment Fees, each reduction of the Revolving Committed Amount and each
conversion or extension of any Revolving Loan, shall be allocated pro rata
among the Lenders in accordance with the respective principal amounts of
their outstanding Loans and Participation Interests.
(b) Letters of Credit. Each payment of the Letter of Credit Fee (other
than the portion retained by the Issuing Bank for its own account) and of
unreimbursed drawings in respect of LOC Obligations shall be allocated to
each Lender entitled thereto pro rata in accordance with its LOC Commitment
Percentage; provided that, if any Lender shall have failed to pay its
applicable pro rata share of any drawing under any Letter of Credit, then
any amount to which such Lender would otherwise be entitled pursuant to
this subsection (b) shall instead be payable to the Issuing Lender;
provided further, that in the event any amount paid to any Lender pursuant
to this subsection (b) is rescinded or must otherwise be returned by the
Issuing Lender, each Lender shall, upon the request of the Issuing Lender,
repay to the Agent for the account of the Issuing Lender the amount so paid
to such Lender, with interest for the period commencing on the date such
payment is returned by the Issuing Lender until the date the Issuing Lender
receives such repayment at a rate per annum equal to, during the period to
but excluding the date two (2) Business Days after such request, the
Federal Funds Rate, and thereafter, the Base Rate plus two percent (2%).
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(c) Advances. Unless the Agent shall have been notified in writing by
any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its Revolving Commitment Percentage of such borrowing
available to the Agent, the Agent may assume that such Lender is making
such amount available to the Agent, and the Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount. If
such amount is not made available to the Agent by such Lender within the
time period specified therefor hereunder, such Lender shall pay to the
Agent, on demand, such amount with interest thereon at a rate equal to the
Federal Funds Rate for the period until such Lender makes such amount
immediately available to the Agent. A certificate of the Agent submitted to
any Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's Revolving
Commitment Percentage of such borrowing is not made available to the Agent
by such Lender within two Business Days of the date of the related
borrowing, the Agent shall notify the Borrower of the failure of such
Lender to make such amount available to the Agent and the Agent shall also
be entitled to recover such amount with interest thereon at the rate per
annum applicable to Base Rate Loans hereunder, on demand, from the
Borrower.
3.12 Sharing of Payments.
The Lenders agree among themselves that, in the event that any Lender shall
obtain payment in respect of any Loan, any unreimbursed drawing with respect to
any LOC Obligations or any other obligation owing to such Lender under this
Credit Agreement through the exercise of a right of setoff, banker's lien or
counterclaim, or pursuant to a secured 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, in excess
of its pro rata share of such payment as provided for in this Credit Agreement,
such Lender shall promptly purchase from the other Lenders a participation in
such Loans, LOC Obligations and other obligations in such amounts, and make such
other adjustments from time to time, as shall be equitable to the end that all
Lenders share such payment in accordance with their respective ratable shares as
provided for in this Credit Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of a
participation theretofore sold, return its share of that benefit (together with
its share of any accrued interest payable with respect thereto) to each Lender
whose payment shall have been rescinded or otherwise restored. The Borrower
agrees that any Lender so purchasing such a participation may, to the fullest
extent permitted by law, exercise all rights of payment, including setoff,
banker's lien or counterclaim, with respect to such participation as fully as if
such Lender were a holder of such Loan, LOC Obligation or other obligation in
the amount of such participation. Except as otherwise expressly provided in this
Credit Agreement, if any Lender or the Agent shall fail to remit to the Agent or
any other Lender an amount payable by such Lender or the Agent to the Agent or
such other Lender pursuant to this Credit Agreement
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on the date when such amount is due, such payments shall be made together with
interest thereon for each date from the date such amount is due until the date
such amount is paid to the Agent or such other Lender at a rate per annum equal
to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section 3.12 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders under this Section 3.12 to share in the benefits of
any recovery on such secured claim.
3.13 Place and Manner of Payments.
Except as otherwise specifically provided herein, all payments hereunder
shall be made to the Agent in Dollars in immediately available funds, without
offset, deduction, counterclaim or withholding of any kind, at its offices at
the Agent's office specified in Schedule 11.2 not later than 2:00 P.M.
(Charlotte, North Carolina time) on the date when due. Payments received after
such time shall be deemed to have been received on the next succeeding Business
Day. The Agent may (but shall not be obligated to) debit the amount of any such
payment which is not made by such time to any ordinary deposit account of the
Borrower maintained with the Agent (with notice to the Borrower). The Borrower
shall, at the time it makes any payment under this Credit Agreement, specify to
the Agent the Loans, LOC Obligations, Fees or other amounts payable by the
Borrower hereunder to which such payment is to be applied (and in the event that
it fails so to specify, or if such application would be inconsistent with the
terms hereof, the Agent shall distribute such payment to the Lenders in such
manner as the Agent may determine to be appropriate in respect of obligations
owing by the Borrower hereunder, subject to the terms of Section 3.11). The
Agent will distribute such payments to such Lenders, if any such payment is
received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day
in like funds as received prior to the end of such Business Day and otherwise
the Agent will distribute such payment to such Lenders on the next succeeding
Business Day. Whenever any payment hereunder shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and Fees for the period
of such extension), except that in the case of Eurodollar Loans, if the
extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day. Except as expressly provided otherwise herein, all computations of interest
and fees shall be made on the basis of actual number of days elapsed over a year
of 360 days, except with respect to computation of interest on Base Rate Loans
which shall be calculated based on a year of 365 or 366 days, as appropriate.
Interest shall accrue from and include the date of borrowing, but exclude the
date of payment.
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3.14 Indemnification; Nature of Issuing Lender's Duties.
In addition to its other obligations under Sections 2.2, the Borrower
hereby agrees to protect, indemnify, pay and save each Issuing Lender harmless
from and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees) that the
Issuing Lender may incur or be subject to as a consequence, direct or indirect,
of (A) the issuance of any Letter of Credit or (B) the failure of the Issuing
Lender to honor a drawing under a Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or governmental authority (all such acts or omissions, herein
called "Government Acts"). As between the Borrower and the Issuing Lender, the
Borrower shall assume all risks of the acts, omissions or misuse of any Letter
of Credit by the beneficiary thereof.
SECTION 4
GUARANTY
4.1 The Guaranty.
Each of the Credit Parties hereby jointly and severally guarantees to each
Lender and the Agent as hereinafter provided the prompt payment of the Credit
Party Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Credit Parties hereby further
agree that if any of the Credit Party Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise), the Credit Parties will, jointly
and severally, promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any of
the Credit Party Obligations, the same will be promptly paid in full when due
(whether at extended maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise) in accordance with the terms of
such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents, the obligations of each Credit Party hereunder
shall be limited to an aggregate amount equal to the largest amount that would
not render its obligations hereunder subject to avoidance under Section 548 of
the U.S. Bankruptcy Code or any comparable provisions of any applicable state
law.
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4.2 Obligations Unconditional.
The obligations of the Credit Parties under Section 4.1 hereof are joint
and several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents, or any
other agreement or instrument referred to therein, or any substitution, release
or exchange of any other guarantee of or security for any of the Credit Party
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 4.2 that the obligations of the Credit
Parties hereunder shall be absolute and unconditional under any and all
circumstances. Without limiting the generality of the foregoing, it is agreed
that the occurrence of any one or more of the following shall not alter or
impair the liability of any Credit Party hereunder which shall remain absolute
and unconditional as described above:
(i) at any time or from time to time, without notice to any Credit
Party, the time for any performance of or compliance with any of the Credit
Party Obligations shall be extended, or such performance or compliance
shall be waived;
(ii) any of the acts mentioned in any of the provisions of any of the
Credit Documents or any other agreement or instrument referred therein
shall be done or omitted;
(iii) the maturity of any of the Credit Party Obligations shall be
accelerated, or any of the Credit Party Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents or any other agreement or instrument referred to therein
shall be waived or any other guarantee of any of the Credit Party
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Agent or any Lender or
Lenders as security for any of the Credit Party Obligations shall fail to
attach or be perfected; or
(v) any of the Credit Party Obligations shall be determined to be void
or voidable (including, without limitation, for the benefit of any creditor
of any Credit Party) or shall be subordinated to the claims of any Person
(including, without limitation, any creditor of any Credit Party).
With respect to its obligations hereunder, each Credit Party hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents
or any other agreement or instrument referred to therein, or against any other
Person under any other guarantee of, or security for, any of the Credit Party
Obligations.
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4.3 Reinstatement.
The obligations of the Credit Parties under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Credit Party agrees that it will indemnify
each of the Agent and each Lender on demand for all reasonable costs and
expenses (including, without limitation, fees of counsel) incurred by the Agent
or such Lender in connection with such rescission or restoration, including any
such costs and expenses incurred in defending against any claim alleging that
such payment constituted a preference, fraudulent transfer or similar payment
under any bankruptcy, insolvency or similar law.
4.4 Certain Additional Waivers.
Without limiting the generality of the provisions of any other Section of
this Section 4, each Credit Party hereby specifically waives the benefits of
N.C. Gen. Stat. ?? 26-7 through 26-9, inclusive. Each Credit Party further
agrees that such Guarantor shall have no right of recourse to security for the
Credit Party Obligations. Each of the Credit Parties further agrees that it
shall have no right of subrogation, reimbursement or indemnity, nor any right of
recourse to security, if any, for the Credit Party Obligations so long as any
amounts payable to the Agent and the Lenders in respect of the Credit Party
Obligations shall remain outstanding and until all of the Revolving Commitments
shall have expired or been terminated.
4.5 Remedies.
The Credit Parties agree that, as between the Credit Parties, on the one
hand, and the Agent and the Lenders, on the other hand, the Credit Party
Obligations may be declared to be forthwith due and payable as provided in
Section 9 hereof (and shall be deemed to have become automatically due and
payable in the circumstances provided in said Section 9) for purposes, of
Section 4.1 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing such Credit Party Obligations from
becoming automatically due and payable) as against any other Person and that, in
the event of such declaration (or such Credit Party Obligations being deemed to
have become automatically due and payable), such Credit Party Obligations
(whether or not due and payable by any other Person) shall forthwith become due
and payable by the Credit Parties for purposes of said Section 4.1.
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4.6 Continuing Guarantee.
The guarantee in this Section 4 is a continuing guarantee, and shall apply
to all Credit Party Obligations whenever arising.
SECTION 5
CONDITIONS
5.1 Conditions to Closing Date.
This Credit Agreement shall become effective upon the satisfaction of the
following conditions precedent:
(a) Execution of Agreement. The Agent shall have received (i) multiple
counterparts of this Credit Agreement for each Lender executed by a duly
authorized officer of each party hereto and (ii) for the account of each
Lender (including the Swingline Lender) a Revolving Note.
(b) Liability and Casualty Insurance. Receipt by the Agent of copies
of insurance policies or certificates of insurance evidencing liability and
casualty insurance meeting the requirements set forth herein, together with
evidence of payment of premiums thereon.
(c) Financial Information. Receipt by the Agent of copies of audited
consolidated financial statements for the Company and its Subsidiaries for
fiscal years 1995 and 1996; and interim quarterly company-prepared
consolidated financial statements for the Company and its Subsidiaries
dated as of September 30, 1997.
(d) Corporate Documents. Receipt by the Agent of the following:
(i) Certificate of Incorporation. Copies of the certificates of
incorporation or charter documents of the Borrower and each of the
other Credit Parties certified to be true and complete as of a recent
date by the appropriate governmental authority of the state of its
incorporation.
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(ii) Resolutions. Copies of resolutions of the Board of Directors
of the Borrower and each of the other Credit Parties approving and
adopting the Credit Documents, the transactions contemplated therein
and authorizing execution and delivery thereof, certified by a
secretary or assistant secretary as of the Closing Date to be true and
correct and in force and effect as of such date.
(iii) Bylaws. A copy of the bylaws of the Borrower and each of
the other Credit Parties certified by a secretary or assistant
secretary as of the Closing Date to be true and correct and in force
and effect as of such date.
(iv) Good Standing. Copies of (i) certificates of good standing,
existence or its equivalent with respect to the Borrower and each of
the other Credit Parties certified as of a recent date by the
appropriate governmental authorities of the state of incorporation and
each other state in which the failure to so qualify and be in good
standing would have a material adverse effect on the business or
operations of the Borrower or other Credit Party in such state and
(ii) a certificate indicating payment of all corporate franchise taxes
certified as of a recent date by the appropriate governmental taxing
authorities.
(e) Officer's Certificate. The Agent shall have received, with a
counterpart for each Lender, a certificate of a duly authorized officer of
each of the Borrower and each of the other Credit Parties dated the
Effective Date, substantially in the form of Schedule 5.1(g) with
appropriate insertions and attachments.
(f) Legal Opinion of Counsel. The Agent shall have received, with a
copy for each Lender, an opinion of Dechert Price & Rhoads, counsel for the
Borrower, the Company and the other Guarantors, dated the Closing Date and
addressed to the Agent and the Lenders, in form and substance satisfactory
to the Agent and the Required Lenders.
(g) Fees. The Agent shall have received all fees, if any, owing
pursuant to the Agent's Fee Letter and Section 3.4.
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(h) Subsection 5.2 Conditions. The conditions specified in subsections
5.2(a) and (b) shall be satisfied on the Closing Date as if the initial
Extensions of Credit were to be made on such date.
(i) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Credit Agreement
shall be reasonably satisfactory in form and substance to the Agent and its
counsel.
5.2 Conditions to All Extensions of Credit.
The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the date of making
such Extension of Credit:
(a) Representations and Warranties. The representations and warranties
made by the Borrower, the Company and the other Credit Parties herein or
which are contained in any certificate of a Responsible Officer furnished
at any time under or in connection herewith shall be true and correct in
all material respects on and as of the date of such Extension of Credit as
if made on and as of such date.
(b) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing on such date or after giving effect
to the Extension of Credit to be made on such date unless such Default or
Event of Default shall have been waived in accordance with this Credit
Agreement.
(c) Additional Conditions to Revolving Loans. If such Extension of
Credit is made pursuant to subsection 2.1, all conditions set forth in such
subsection shall have been satisfied.
(d) Additional Conditions to Letters of Credit. If such Extension of
Credit is made pursuant to subsection 2.2, all conditions set forth in such
subsection shall have been satisfied.
(e) Additional Conditions to Swingline Loan. If such Extension of
Credit is made pursuant to subsection 2.3, all conditions set forth in such
subsection shall have been satisfied.
Each request for an Extension of Credit and each acceptance by the Borrower
of an Extension of Credit shall be deemed to constitute a representation and
warranty by the Borrower as of the date of such Extension of Credit that the
applicable conditions in paragraphs (a) and (b), and in (c), (d) or (e) of this
subsection have been satisfied.
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SECTION 6
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Extension of Credit herein provided for, each of the Credit Parties hereby
represents and warrants to the Agent and to each Lender that:
6.1 Financial Condition.
(a) The consolidated balance sheet of the Company and its consolidated
Subsidiaries as at December 31, 1995, December 31, 1996 and September 30,
1997, and the related consolidated statements of income and of cash flows
for the fiscal year or nine month period ended on such date, reported on
(only in the case of such annual statements) by KPMG Peat Marwick LLP,
copies of which have heretofore been furnished to each Lender, are complete
and correct in all material respects in accordance with GAAP and fairly
present in all material respects the consolidated financial condition of
the Company and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows
for the fiscal year or nine month period then ended, subject in the case of
the September 30, 1997 statements to normal year end adjustments. All such
financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP applied consistently throughout
the periods involved (except as disclosed therein). Neither the Company nor
any of its consolidated Subsidiaries had, at the date of the balance sheets
referred to above, any material Guarantee Obligation, contingent
liabilities or liability for taxes, long-term lease or unusual forward or
long-term commitment, including, without limitation, any material interest
rate or foreign currency swap or exchange transaction, which are not
reflected in the foregoing statements or in the notes thereto.
(b) The consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at December 31, 1995, December 31, 1996 and
September 30, 1997, and the related consolidated statements of income and
of cash flows for the fiscal year or nine month period ended on such date,
reported on (only in the case of such annual statements) by KPMG Peat
Marwick LLP, copies of which have heretofore been furnished to each Lender,
are complete and correct in all material respects in accordance with GAAP
and fairly present in all material respects the consolidated financial
condition of the Borrower and its consolidated Subsidiaries as at such
date, and the consolidated results of their operations and their
consolidated cash flows for the fiscal year or nine month period then
ended, subject in the case of the September 30, 1997 statements to normal
year end adjustments. All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as disclosed
therein). Neither the Borrower nor any of its consolidated Subsidiaries
had, at the date of the balance sheets referred to above, any material
Guarantee Obligation, contingent liabilities or liability for taxes,
long-term lease or unusual forward or long-term commitment, including,
without limitation, any material interest rate or foreign currency swap or
exchange transaction, which are not reflected in the foregoing statements
or in the notes thereto.
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6.2 No Change.
Since September 30, 1997, there has been no development or event which has
had a Material Adverse Effect.
6.3 Corporate Existence; Compliance with Law.
Except as disclosed on Schedule 6.3, each of the Company and its
Subsidiaries, including the Borrower, (a) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, (b)
has the corporate or partnership power and authority and the legal right to own
and operate all its material property, to lease the material property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation or partnership and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
except to the extent that the failure to so qualify or be in good standing would
not, in the aggregate, have a Material Adverse Effect and (d) is in compliance
with all Requirements of Law except to the extent that the failure to comply
therewith would not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.4 Corporate Power; Authorization; Enforceable Obligations.
Each of the Borrower and the other Credit Parties has full power and
authority and the legal right to make, deliver and perform the Credit Documents
to which it is party and has taken all necessary corporate action to authorize
the execution, delivery and performance by it of the Credit Documents to which
it is party. No consent or authorization of, filing with, notice to or other act
by or in respect of, any Governmental Authority or any other Person is required
in connection with the borrowings hereunder or with the execution, delivery or
performance of any Credit Document by the Borrower or the other Credit Parties
(other than those which have been obtained) or with the validity or
enforceability of any Credit Document against the Borrower or the Guarantors
(except such filings as are necessary in connection with the perfection of the
Liens created by such Credit Documents). Each Credit Document to which it is a
party has been duly executed and delivered on behalf of the Borrower or the
other Credit Parties, as the case may be. Each Credit Document to which it is a
party constitutes a legal, valid and binding obligation of the Borrower or the
other Credit Parties, as the case may be, enforceable against the Borrower or
the other Credit Parties, as the case may be, in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
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6.5 No Legal Bar; No Default.
The execution, delivery and performance of the Credit Documents, the
borrowings thereunder and the use of the proceeds of the Loans will not violate
any Requirement of Law or any Contractual Obligation of the Company or its
Subsidiaries, including the Borrower (except those as to which waivers or
consents have been obtained), and will not result in, or require, the creation
or imposition of any Lien on any of its or their respective properties or
revenues pursuant to any Requirement of Law or Contractual Obligation other than
the Liens arising under or contemplated in connection with the Credit Documents.
Neither the Company nor any of its Subsidiaries, including the Borrower, is in
default under or with respect to any of its Contractual Obligations in any
respect which would reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
6.6 No Material Litigation.
Except as set forth in Schedule 6.6, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best knowledge of the Borrower and the other Credit Parties, threatened
by or against the Company or any of its Subsidiaries, including the Borrower, or
against any of its or their respective properties or revenues (a) with respect
to the Credit Documents or any Loan or any of the transactions contemplated
hereby, or (b) which, if adversely determined, would reasonably be expected to
have a Material Adverse Effect.
6.7 Investment Company Act.
Neither the Borrower nor any of the other Credit Parties is an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
6.8 Federal Regulations.
No part of the proceeds of any Extension of Credit hereunder will be used
directly or indirectly for any purpose which violates, or which would be
inconsistent with, the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect. The Company and its Subsidiaries, including the Borrower, taken as a
group do not own "margin stock" except as identified in the financial statements
referred to in Section 6.1 and the aggregate value of all "margin stock" owned
by the Company and its Subsidiaries taken as a group does not exceed 25% of the
value of their assets.
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6.9 ERISA.
Neither a Reportable Event nor an "accumulated funding deficiency" (within
the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred
during the five-year period prior to the date on which this representation is
made or deemed made with respect to any Plan, and each Plan has complied in all
material respects with the applicable provisions of ERISA and the Code, except
to the extent that any such occurrence or failure to comply would not reasonably
be expected to have a Material Adverse Effect. No termination of a Single
Employer Plan has occurred resulting in any liability that has remained
underfunded, and no Lien in favor of the PBGC or a Plan has arisen, during such
five-year period which would reasonably be expected to have a Material Adverse
Effect. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits by an amount which, as determined in accordance with GAAP,
would reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Commonly Controlled Entity is currently subject to any liability
for a complete or partial withdrawal from a Multiemployer Plan which would
reasonably be expected to have a Material Adverse Effect.
6.10 Environmental Matters.
Except to the extent that all of the following, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect:
(a) To the best knowledge of the Borrower and the other Credit
Parties, the facilities and properties owned, leased or operated by the
Company or any of its Subsidiaries (the "Properties") do not contain any
Materials of Environmental Concern in amounts or concentrations which (i)
constitute a violation of, or (ii) could give rise to liability under, any
Environmental Law.
(b) To the best knowledge of the Borrower and the other Credit
Parties, the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, in all
material respects with all applicable Environmental Laws, and there is no
contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated
by the Borrower or any of its Subsidiaries (the "Business").
(c) Neither the Borrower nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Business,
nor do the Borrower nor the other Credit Parties have knowledge or reason
to believe that any such notice will be received or is being threatened.
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(d) To the best knowledge of the Borrower and the other Credit
Parties, Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a
location which could give rise to liability under any Environmental Law,
nor have any Materials of Environmental Concern been generated, treated,
stored or disposed of at, on or under any of the Properties in violation
of, or in a manner that could give rise to liability under, any applicable
Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Borrower and the other Credit Parties,
threatened, under any Environmental Law to which the Company or any
Subsidiary, including the Borrower, is or will be named as a party with
respect to the Properties or the Business, nor are there any consent
decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under
any Environmental Law with respect to the Properties or the Business.
(f) To the best knowledge of the Borrower and the other Credit
Parties, there has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related
to the operations of the Company or any Subsidiary, including the Borrower,
in connection with the Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that could give rise
to liability under Environmental Laws.
6.11 Use of Proceeds.
The Loans hereunder may be used solely for acquisitions, certain senior
debt prepayment (including redemption of the 12% Senior Notes due 2000), capital
expenditures, working capital and other general corporate purposes not
prohibited by this Credit Agreement.
6.12 Subsidiaries.
Set forth on Schedule 6.12 is a complete and accurate list of all
Subsidiaries of the Company and the Borrower as of the Closing Date. Information
on the attached Schedule includes state of incorporation; the number of shares
of each class of capital stock or other equity interests outstanding; the number
and percentage of outstanding shares of each class of stock; and the number and
effect, if exercised, of all outstanding options, warrants, rights of conversion
or purchase and similar rights. The outstanding capital stock and other equity
interests of all such Subsidiaries is validly issued, fully paid and
non-assessable and is owned, free and clear of all Liens. The Company and the
Borrower will provide an updated Schedule 6.12 to the Agent quarterly as needed
to reflect changes. Reaffirmation of the representations set out in this Section
6.12 after the Closing Date shall be on the basis of the information contained
in the most recently delivered Schedule 6.12 provided to the Agent hereunder.
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6.13 Taxes.
Each of the Company and its Subsidiaries, including the Borrower, has
filed, or caused to be filed, all material tax returns (Federal, state, local
and foreign) required to be filed and paid all taxes shown thereon to be due
(including interest and penalties) and has paid all other taxes, fees,
assessments and other governmental charges (including mortgage recording taxes,
documentary stamp taxes and intangibles taxes) owing (or necessary to preserve
any Liens in favor of the Lenders) by them, except for such taxes (i) which are
not yet delinquent or (ii) as are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. Except as otherwise disclosed in the financial statements
delivered pursuant to Section 6.1, the Company is not aware of any proposed
material tax assessments against it or any of its Subsidiaries, including the
Borrower.
6.14 Solvency.
The Company and its Subsidiaries, including the Borrower, both collectively
and individually, is and, after execution of this Credit Agreement and after
giving effect to the Indebtedness and Guarantee Obligations incurred hereunder
and the other transactions contemplated hereby, including the transactions
described in subsections 5.1(c) and 5.1(d), will be Solvent.
SECTION 7
AFFIRMATIVE COVENANTS
The Company and the Borrower hereby covenant and agree that on the Closing
Date, and thereafter for so long as this Credit Agreement is in effect and until
the Revolving Commitments have terminated, no Note remains outstanding and
unpaid and the Obligations, together with interest, Commitment Fees and all
other amounts owing to the Agent or any Lender hereunder, are paid in full, the
Borrower shall, and in the case of subsections 7.3, 7.4, 7.5, 7.6, 7.7, 7.8 and
7.10 shall cause each of its Subsidiaries, to:
7.1 Financial Statements.
Furnish to the Agent and each of the Lenders:
(a) Annual Financial Statements. As soon as available, but in any
event within 90 days after the end of each fiscal year of each of the
Company and the Borrower, a copy of the consolidated balance sheet of the
Company or the Borrower, as appropriate, and its respective consolidated
Subsidiaries as at the end of such fiscal year and the related consolidated
statements of income and retained earnings and of cash flows of the Company
or the Borrower, as appropriate, and its respective consolidated
Subsidiaries for such year, audited by KPMG Peat Marwick LLP or other firm
of independent certified public accountants of nationally recognized
standing reasonably acceptable to the Required Lenders, setting forth in
each case in comparative form the figures for the previous year, reported
on without a "going concern" or like qualification or exception, or
qualification indicating that the scope of the audit was inadequate to
permit such independent certified public accountants to certify such
financial statements without such qualification; and
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(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of each of the first three fiscal
quarters of each of the Company and the Borrower, a company-prepared
consolidated balance sheet of the Company or the Borrower, as appropriate,
and its respective consolidated Subsidiaries as at the end of such period
and related company-prepared statements of income and retained earnings and
of cash flows for the Company or the Borrower, as appropriate, and its
respective consolidated Subsidiaries for such quarterly period and for the
portion of the fiscal year ending with such period, in each case setting
forth in comparative form consolidated figures for the corresponding period
or periods of the preceding fiscal year (subject to normal recurring
year-end audit adjustments).
all such financial statements to be complete and correct in all material
respects in accordance with GAAP (subject, in the case of interim statements, to
normal recurring year-end audit adjustments) and to be prepared in reasonable
detail and, in the case of the annual and quarterly financial statements
provided in accordance with subsections (a) and (b) above, in accordance with
GAAP applied consistently throughout the periods reflected therein (except as
approved by such accountants or Responsible Officer, as the case may be, and
disclosed therein) and further accompanied by a description of, and an
estimation of the effect on the financial statements on account of, a change in
the application of accounting principles as provided in Section 1.3.
7.2 Certificates; Other Information.
Furnish to the Agent and each of the Lenders:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a) above, a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of (i) any Default or Event of Default, except as specified in such
certificate, and (ii) any material difference (other than intercompany
transactions which eliminate in the consolidation of the Company's
financial statements) between the financial statements of the Company and
its Subsidiaries and the financial statements of the Borrower and its
Subsidiaries, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 7.1(a) and 7.1(b) above, a certificate of a
Responsible Officer stating that, to the best of such Responsible Officer's
knowledge, the Company or the Borrower, as appropriate, during such period
observed or performed in all material respects all of its covenants and
other agreements, and satisfied in all material respects every material
condition, contained in this Credit Agreement to be observed, performed or
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satisfied by it, and that such Responsible Officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate and, in the case of the Borrower, such certificate shall
include the calculation required to indicate compliance with Section 7.9;
(c) within thirty days after the same are sent, copies of all reports
(other than those otherwise provided pursuant to subsection 7.1) and other
financial information which the Borrower sends to its stockholders, and
within thirty days after the same are filed, copies of all financial
statements and non-confidential reports which the Company may make to, or
file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(d) promptly, such additional financial and other information as the
Agent, on behalf of any Lender, may from time to time reasonably request.
7.3 Payment of Loans.
Pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, in accordance with industry practice
(subject, where applicable, to specified grace periods) all its material
obligations of whatever nature and any additional costs that are imposed as a
result of any failure to so pay, discharge or otherwise satisfy such
obligations, except when the amount or validity of such obligations and costs is
currently being contested in good faith by appropriate proceedings and reserves,
if applicable, in conformity with GAAP with respect thereto have been provided
on the books of the Company or the Borrower, as appropriate, or its respective
Subsidiaries, as the case may be.
7.4 Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now conducted by
it on the date hereof and, except as permitted by Section 8.4, preserve, renew
and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business; comply with all Contractual
Obligations and Requirements of Law applicable to it except to the extent that
failure to comply therewith would not, in the aggregate, have a Material Adverse
Effect.
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7.5 Maintenance of Property; Insurance.
Keep all material property useful and necessary in its business in good
working order and condition (ordinary wear and tear excepted); maintain with
financially sound and reputable insurance companies insurance on all its
material property in at least such amounts and against at least such risks as
are usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to the Agent, upon written request, full
information as to the insurance carried; provided, however, that the Company and
its Subsidiaries, including the Borrower, may maintain self insurance plans to
the extent companies of similar size and in similar businesses do so.
7.6 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its businesses and activities; and
permit, during regular business hours and upon reasonable notice by the Agent,
the Agent to visit and inspect any of its properties and examine and make
abstracts from any of its books and records (other than materials protected by
the attorney-client privilege and materials which the Company or the Borrower
may not disclose without violation of a confidentiality obligation binding upon
it) at any reasonable time and as often as may reasonably be desired, and to
discuss the business, operations, properties and financial and other condition
of the Company or the Borrower, as appropriate, and its respective Subsidiaries
with officers and employees of the Company or the Borrower, as appropriate, and
its respective Subsidiaries and with its independent certified public
accountants.
7.7 Notices.
Give notice to the Agent (which shall promptly transmit such notice to each
Lender) of:
(a) immediately (and in any event within two (2) Business Days) after
the Company or the Borrower knows or has reason to know thereof, the
occurrence of any Default or Event of Default;
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(b) promptly, any default or event of default under any Contractual
Obligation of the Company or the Borrower or any of their respective
Subsidiaries, which would reasonably be expected to have a Material Adverse
Effect;
(c) promptly, any litigation, or any investigation or proceeding known
to the Company or the Borrower, affecting the Company or any of their
respective Subsidiaries, including the Borrower which, if adversely
determined, would reasonably be expected to have a Material Adverse Effect;
(d) as soon as possible and in any event within 30 days after the
Company or the Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any Multiemployer Plan
or (ii) the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan;
(e) promptly (and in any event within thirty (30) days) after a
transaction which gives rise to a material difference (other than
intercompany transactions which eliminate in the consolidation of the
Company's financial statements) between the financial information of the
Company and its Subsidiaries and the financial information of the Borrower
and its Subsidiaries; and
(f) promptly, any other development or event which would reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company or the Borrower proposes to take with
respect thereto.
7.8 Environmental Laws.
(a) Comply in all material respects with, and ensure compliance in all
material respects by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply in all material
respects with and maintain, and ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that failure to do so
would not reasonably be expected to have a Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all
lawful orders and directives of all Governmental Authorities regarding
Environmental Laws except to the extent that the same are being contested
in good faith by appropriate proceedings and the pendency of such
proceedings would not reasonably be expected to have a Material Adverse
Effect; and
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(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and
against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known
or unknown, contingent or otherwise, arising out of, or in any way relating
to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Company, any of its
Subsidiaries, including the Borrower, or the Properties, or any orders,
requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and
litigation expenses, except to the extent that any of the foregoing arise
out of the gross negligence or willful misconduct of the party seeking
indemnification therefor. The agreements in this paragraph shall survive
repayment of the Notes and all other amounts payable hereunder.
7.9 Financial Covenants.
(a) Fixed Charge Coverage Ratio. There shall be maintained as of the
end of each fiscal quarter a Fixed Charge Coverage Ratio of not less than
1.5:1.0.
(b) Consolidated Funded Debt Ratio. There shall be maintained as of
the end of each fiscal quarter a Consolidated Funded Debt Ratio of not
greater than 3.0:1.0.
(c) Consolidated Net Worth. There shall be maintained as of the end of
each fiscal quarter a Consolidated Net Worth of at least 85% of
Consolidated Net Worth at December 31, 1997 as shown on the annual audited
financial statements of the Borrower as of such date; provided, however,
that the minimum Consolidated Net Worth required hereunder shall be
increased (but not decreased) on the last day of each fiscal year by an
amount equal to (i) 50% of Consolidated Net Income for the fiscal year then
ended beginning with fiscal year 1998 (including the effect, if any, of
extraordinary losses relating to the redemption of the 12% Senior Notes due
2000) and (ii) 50% of the Net Proceeds from any Equity Transaction.
7.10 Additional Subsidiary Guarantors.
Where Domestic Subsidiaries of the Company which are not Credit Parties
hereunder (the "Non-Guarantor Subsidiaries") shall at any time (the "Threshold
Requirement"):
(i) in any instance for any such Non-Guarantor Subsidiary, have assets
in excess of $5,000,000, or
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(ii) in the aggregate for all such Non-Guarantor Subsidiaries,
constitute more than fifteen percent (15%) of consolidated assets for the
Consolidated Group,
then the Company shall within 90 days (A) notify the Agent thereof and cause
such Domestic Subsidiary or Subsidiaries to become a Guarantor by execution of a
Joinder Agreement, such that immediately after joinder as a Guarantor, the
remaining Non-Guarantor Subsidiaries shall not in any instance, or collectively,
exceed the Threshold Requirement, and (B) deliver with the Joinder Agreement,
supporting resolutions, incumbency certificates, corporate formation and
organizational documentation and opinions of counsel as the Agent may reasonably
request.
SECTION 8
NEGATIVE COVENANTS
Each of the Credit Parties hereby covenants and agrees that on the Closing
Date, and thereafter for so long as this Agreement is in effect and until the
Revolving Commitments have terminated, no Note remains outstanding and unpaid
and the Obligations, together with interest, Commitment Fees and all other
amounts owing to the Agent or any Lender hereunder, are paid in full, the
Borrower shall, and shall cause each of its Subsidiaries, to:
8.1 Indebtedness.
The Borrower will not, nor will it permit any Subsidiary to, contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising or existing under this Credit Agreement and
the other Credit Documents;
(b) Indebtedness existing as of the Closing Date as referenced in the
financial statements referenced in Section 5.1 (and set out more
specifically in Schedule 8.1(b)) and renewals, refinancings or extensions
thereof in a principal amount not in excess of that outstanding as of the
date of such renewal, refinancing or extension;
(c) Indebtedness incurred after the Closing Date consisting of Capital
Leases or Indebtedness incurred to provide all or a portion of the purchase
price or cost of construction, expansion or improvement of an asset
provided that (i) such Indebtedness when incurred shall not exceed the
purchase price or cost of construction of such asset; (ii) no such
Indebtedness shall be refinanced for a principal amount in excess of the
principal balance outstanding thereon at the time of such refinancing plus
reasonable costs and expenses; and (iii) the total aggregate amount of all
such Capital Leases and Indebtedness of the Borrower and its Subsidiaries,
as a group, shall not exceed $4,000,000 at any time outstanding;
(d) Unsecured intercompany Indebtedness between a Credit Party and
another Credit Party;
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(e) Indebtedness and obligations owing under interest rate protection
agreements and currency protection agreements and commodity purchase or
option agreements entered into in order to manage existing or anticipated
interest rate, exchange rate or commodity price risks and not for
speculative purposes;
(f) Subordinated Indebtedness, the terms of subordination and other
terms and provisions of which are acceptable to the Required Lenders in
their discretion;
(g) other Indebtedness of the Borrower which does not exceed
$10,000,000 in the aggregate at any time outstanding.
8.2 Liens.
The Borrower will not, nor will it permit any Subsidiary to, contract,
create, incur, assume or permit to exist any Lien with respect to any of its
property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or hereafter acquired, except for Permitted
Liens.
8.3 Nature of Business.
The Borrower will not, nor will it permit any Subsidiary to, alter the
character of its business in any material respect from that conducted as of the
Closing Date.
8.4 Consolidation, Merger, Sale or Purchase of Assets.
The Borrower will not, nor will it permit any Subsidiary to:
(a) Enter into a transaction of merger or consolidation, except
(i) a Credit Party may be a party to a transaction of merger or
consolidation with another Credit Party, provided that (A) if the
Borrower is a party thereto, it is the surviving corporation , (B) if
a Guarantor is a party thereto, a Guarantor shall be the surviving
corporation or the surviving corporation shall be a Domestic
Subsidiary and shall become a Guarantor hereunder as an Additional
Credit Party pursuant to Section 7.10 concurrently therewith, and (C)
no Default or Event of Default shall exist either immediately prior to
or immediately after giving effect thereto; and
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(ii) a Credit Party may be a party to a transaction of merger or
consolidation with any other Person, provided that (A) the provisions
of Section 7.10 regarding joinder of certain Subsidiaries as
Additional Credit Parties hereunder shall be complied with, (B) no
Default or Event of Default shall exist either immediately prior to or
immediately after giving effect thereto, and (C) the provisions of
Section 8.4(c) shall be complied with.
(b) Sell, lease, transfer or otherwise dispose of assets, property
and/or operations (including any sale-leaseback transaction, but excluding
Specified Sales), except for any such sale, lease, transfer or other
disposition for fair value in the reasonable determination of the Borrower,
so long as
(i) no Default or Event of Default shall exist, either
immediately prior to or immediately after giving effect thereto, and
(ii) no more than 25% of the gross consideration received in
connection therewith shall consist of Non-Investment Grade debt or
equity interests.
without the prior written consent of the Required Lenders (which consent
shall not be unreasonably withheld or delayed).
(c) Acquire all or any portion of the capital stock or other ownership
interest in any Person which is not a Subsidiary or all or any substantial
portion of the assets, property and/or operations of a Person which is not
a Subsidiary, without the prior written consent of the Required Lenders
(which consent shall not be unreasonably withheld or delayed), unless
(i) in the case of an acquisition of capital stock or other
ownership interest, if after giving effect thereto such Person will
not be a Subsidiary, then such acquisition will not cause a violation
of Section 8.5;
(ii) in the case of an acquisition of capital stock or other
ownership interest, if after giving effect thereto such Person will be
a Subsidiary, or in the case of an acquisition of assets, property
and/or operations, then
(A) the Board of Directors of the Person which is the
subject of the acquisition shall have approved the acquisition;
(B) the Person, division, operations or property which is
the subject of the acquisition is in a reasonably related line of
business to that of the Borrower,
(C) no Default or Event of Default would exist after giving
effect thereto on a Pro Forma Basis; and
(D) the cost of any such acquisition (or series of related
transactions) shall not exceed $50,000,000 in any instance.
(d) in the case of the Company and the Borrower, wind-up or dissolve,
whether voluntarily or involuntarily (or suffer to permit any such
liquidation or dissolution).
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8.5 Advances, Investments and Loans.
Except as otherwise permitted hereunder, the Borrower will not, nor will it
permit any Subsidiary to, lend money or extend credit or make advances to any
Person, or purchase or acquire any stock, obligations or securities of, or any
other interest in, or make any capital contribution to, any Person except for
Permitted Investments.
8.6 Transactions with Affiliates.
Except as permitted in subsection (v) of the definition of Permitted
Investments, the Borrower will not, nor will it permit any Subsidiary to, enter
into any transaction or series of transactions, whether or not in the ordinary
course of business, with any officer, director, shareholder or Affiliate (other
than a Credit Party) other than on terms and conditions substantially as
favorable as would be obtainable in a comparable arm's-length transaction with a
Person other than an officer, director, shareholder or Affiliate (other than a
Credit Party).
8.7 Ownership of Subsidiaries.
The Borrower will not, nor will it permit any Subsidiary to, create, form
or acquire a Subsidiary, unless any such Domestic Subsidiary shall comply with
the provisions of Section 7.10 or the investment in any such Foreign Subsidiary
shall constitute a Permitted Investment.
8.8 Fiscal Year.
The Borrower will not, nor will it permit any Subsidiary to, change its
fiscal year, except with the prior written consent of the Agent.
8.9 Prepayments of Indebtedness, etc.
The Borrower will not, nor will it permit any Subsidiary to,
(a) amend or modify, or permit the amendment or modification of, any
of the terms of subordination or other terms or provisions relating to any
Subordinated Debt with an aggregate principal amount in excess of
$1,000,000 if such amendment or modification is reasonably adverse to
interests of the Lenders hereunder as holders of indebtedness senior
thereto as determined by Required Lenders in their discretion;
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(b) make (or give notice with respect thereto) any voluntary or
optional payment or prepayment or redemption or acquisition for value
(including, without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of paying
when due) or exchange of any senior Indebtedness for borrowed money or any
Subordinated Debt, except for (i) any senior Indebtedness for borrowed
money with an aggregate principal amount not in excess of $1,000,000 or any
Subordinated Debt with an aggregate principal amount not in excess of
$1,000,000, or (ii) the payment on or redemption of the 12% Senior Notes
due 2000;
(c) make any prepayment, redemption, acquisition for value (including,
without limitation, by way of depositing money or securities with the
trustee with respect thereto before due for the purpose of paying when
due), refund, refinance or exchange of any Subordinated Debt with an
aggregate principal amount in excess of $1,000,000.
As used herein, "Subordinated Debt" means any indebtedness for borrowed money
which by its terms is, or upon the happening of certain events may become,
subordinated in right of payment to the Obligations hereunder and other amounts
owing hereunder or in connection herewith.
8.10 Dividends.
The Borrower will not make or pay, nor will it permit any non-wholly owned
Subsidiary to make or pay, any Dividend, unless (i) no Default or Event of
Default shall exist either immediately prior to or immediately after giving
effect thereto, and (ii) the Borrower shall have demonstrated compliance with
the financial covenants set out in Section 7.9 on a Pro Forma Basis after giving
effect thereto, except that notwithstanding the foregoing, so long as no Default
or Event of Default shall exist either than immediately prior to or immediately
after giving effect thereto, the Borrower may pay (a) cash dividends of up to
$1,000,000 to the Company for the purpose of repurchasing the Company's equity
securities in any fiscal year pursuant to the Company's employee benefit plans
and (b) cash dividends of up to $2,500,000 to the Company for the sole purpose
of providing loans to officers, directors, employees or Affiliates to pay, on
behalf of such persons, any withholding taxes due and payable by such persons as
a result of the vesting of securities received by such persons in connection
with the exchange of certain debentures at the time of the Company's initial
public offering.
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SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the following
specified events (each an "Event of Default):
(a) The Borrower shall fail to pay any principal on any Note when due
in accordance with the terms thereof or hereof; or the Borrower shall fail
to reimburse the Issuing Lender for any LOC Obligations when due in
accordance with the terms hereof; or the Borrower shall fail to pay any
interest on any Note or any fee or other amount payable hereunder when due
in accordance with the terms thereof or hereof and such failure shall
continue unremedied for five (5) Business Days (or any Guarantor shall fail
to pay on the Guaranty in respect of any of the foregoing or in respect of
any other Guarantee Obligations thereunder); or
(b) Any representation or warranty made or deemed made by the Company,
the Borrower or other Credit Party herein or in any of the other Credit
Documents or which is contained in any certificate, document or financial
or other statement furnished at any time under or in connection with this
Credit Agreement shall prove to have been incorrect, false or misleading in
any material respect on or as of the date made or deemed made; or
(c) The Company or the Borrower shall (i) default in the due
performance or observance of Section 7.9, or (ii) default in any material
respect in the observance or performance of any other term, covenant or
agreement contained in this Agreement (other than as described in
subsections 9.1(a) or 9.1(c)(i) above), and such default shall continue
unremedied for a period of 30 days or more; or
(d) The Borrower or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Notes) in a principal amount outstanding of at least $10,000,000 in the
aggregate for the Borrower and its Subsidiaries or in the payment by any
Credit Party of any matured Guarantee Obligation in a principal amount
outstanding of at least $10,000,000 in the aggregate for the Borrower and
its Subsidiaries beyond the period of grace (not to exceed 30 days), if
any, provided in the instrument or agreement under which such Indebtedness
or Guarantee Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness in a principal amount outstanding of at least $10,000,000 in
the aggregate for the Borrower and its Subsidiaries or Guarantee Obligation
in a principal amount outstanding of at least $10,000,000 in the aggregate
for the Borrower and its Subsidiaries or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation
(or a trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable; or
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(e) (i) The Company or any of its Subsidiaries, including the
Borrower, shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the Company or
any Subsidiary, including the Borrower, shall make a general assignment for
the benefit of its creditors; or (ii) there shall be commenced against the
Company or any Subsidiary, including the Borrower, any case, proceeding or
other action of a nature referred to in clause (i) above which (A) results
in the entry of an order for relief or any such adjudication or appointment
or (B) remains undismissed, undischarged or unbonded for a period of 60
days; or (iii) there shall be commenced against the Company or any
Subsidiary, including the Borrower, any case, proceeding other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) the Company or any Subsidiary, including
the Borrower, shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) the Company or any Subsidiary,
including the Borrower, shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become due;
or
(f) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability
(to the extent not paid when due or covered by insurance) of $2,000,000 or
more and all such judgments or decrees shall not have been paid and
satisfied, vacated, discharged, stayed or bonded pending appeal within 45
days from the entry thereof; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Company or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a Trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Company, any of its
Subsidiaries or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Required Lenders is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of,
any Multiemployer Plan or (vi) any other similar event or condition shall
occur or exist with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other such
events or conditions, if any, could have a Material Adverse Effect; or
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(h) Either (i) a "person" or a "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934 other than
members of management of the Company as of the Closing Date and other than
Citicorp Venture Capital, Ltd. or its subsidiaries or portfolio companies)
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of more than 30% of the then outstanding
voting stock of the Company or (ii) a majority of the Board of Directors of
the Company shall consist of individuals who are not Continuing Directors;
"Continuing Director" means, as of any date of determination, (A) an
individual who on the date two years prior to such determination date was a
member of the Company's Board of Directors and (B) any new Director whose
nomination for election by the Company's shareholders was approved by a
vote of at least 75% of the Directors then still in office who either were
Directors on the date two years prior to such determination date or whose
nomination for election was previously so approved; or
(i) The Guaranty or any provision thereof shall cease to be in full
force and effect or any Credit Party or any Person acting by or on behalf
of any Credit Party shall deny or disaffirm any Credit Party's obligations
under the Guaranty; or
(j) Any other Credit Document shall fail to be in full force and
effect or to give the Agent and/or the Lenders the security interests,
liens, rights, powers and privileges purported to be created thereby
(except as such documents may be terminated or no longer in force and
effect in accordance with the terms thereof, other than those indemnities
and provisions which by their terms shall survive);
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (e) above, automatically the Revolving Commitments shall
immediately terminate and the Loans and LOC Obligations (with accrued interest
thereon), and all other amounts under the Credit Documents (including without
limitation the maximum amount of all contingent liabilities under Letters of
Credit) shall immediately become due and payable, and (B) if such event is any
other Event of Default, either or both of the following actions may be taken:
(i) the Agent may, and upon the written request of the Required Lenders, the
Agent shall, by notice to the Borrower declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) the
Agent may, or upon the written request of the Required Lenders, the Agent shall,
by notice of default to the Borrower, declare the Loans and LOC Obligations
(with accrued interest thereon) and all other amounts owing under this Agreement
and the Notes to be due and payable forthwith and direct the Borrower to pay to
the Agent cash collateral as security for the LOC Obligations for subsequent
drawings under then outstanding Letters of Credit an amount equal to the maximum
amount of which may be drawn under Letters of Credit then outstanding, whereupon
the same shall immediately become due and payable. Except as expressly provided
above in this Section 9, presentment, demand, protest and all other notices of
any kind are hereby expressly waived.
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SECTION 10
AGENCY PROVISIONS
10.1 Appointment.
Each Lender hereby designates and appoints NationsBank, N.A. as
administrative agent (in such capacity as Agent hereunder, the "Agent") of such
Lender to act as specified herein and the other Credit Documents, and each such
Lender hereby authorizes the Agent as the agent for such Lender, to take such
action on its behalf under the provisions of this Credit Agreement and the other
Credit Documents and to exercise such powers and perform such duties as are
expressly delegated by the terms hereof and of the other Credit Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere herein and in the other
Credit Documents, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein and therein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agent. The provisions of this Section are solely for the benefit of
the Agent and the Lenders and none of the Credit Parties shall have any rights
as a third party beneficiary of the provisions hereof. In performing its
functions and duties under this Credit Agreement and the other Credit Documents,
the Agent shall act solely as agent of the Lenders and does not assume and shall
not be deemed to have assumed any obligation or relationship of agency or trust
with or for the Borrower or any other Credit Party.
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10.2 Delegation of Duties.
The Agent may execute any of its duties hereunder or under the other Credit
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions.
Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Credit Documents (except for its
or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any of the Credit Parties contained herein
or in any of the other Credit Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by the Agent under
or in connection herewith or in connection with the other Credit Documents, or
enforceability or sufficiency herefor of any of the other Credit Documents, or
for any failure of the Borrower or the other Credit Parties to perform their
obligations hereunder or thereunder. The Agent shall not be responsible to any
Lender for the effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Credit Agreement, or any of the other
Credit Documents or for any representations, warranties, recitals or statements
made herein or therein or made by the Borrower or any Credit Party in any
written or oral statement or in any financial or other statements, instruments,
reports, certificates or any other documents in connection herewith or therewith
furnished or made by the Agent to the Lenders or by or on behalf of the Credit
Parties to the Agent or any Lender or be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or of the existence or possible existence of any Default
or Event of Default or to inspect the properties, books or records of the Credit
Parties.
10.4 Reliance on Communications.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower or any of the other Credit Parties,
independent accountants and other experts selected by the Agent with reasonable
care). The Agent may deem and treat the Lenders as the owner of their respective
interests hereunder for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent in
accordance with Section 11.6(d). The Agent shall be fully justified in failing
or refusing to take any action under this Credit Agreement or under any of the
other Credit Documents unless it shall first receive such advice or concurrence
of the Required Lenders as it deems appropriate or it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or under any of the other Credit Documents in
accordance with a request of the Required Lenders (or to the extent specifically
provided in Section 11.1, all the Lenders) and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders
(including their successors and assigns).
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10.5 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the Agent has received
notice from a Lender or a Credit Party referring to the Credit Document,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Agent receives such a notice, the
Agent shall give prompt notice thereof to the Lenders. The Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders.
10.6 Non-Reliance on Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent or any
affiliate thereof hereinafter taken, including any review of the affairs of the
Company or the Borrower, shall be deemed to constitute any representation or
warranty by the Agent to any Lender. Each Lender represents to the Agent that it
has, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of the
Borrower and the other Credit Parties and made its own decision to make its
Loans hereunder and enter into this Credit Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Credit Agreement, and to
make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrower and the other Credit Parties.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Borrower and the other
Credit Parties which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
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10.7 Indemnification.
The Lenders agree to indemnify the Agent in its capacity as such (to the
extent not reimbursed by the Borrower and the other Credit Parties and without
limiting the obligation of the Borrower and the other Credit Parties to do so),
ratably according to their respective Revolving Commitment Percentages (or if
the Revolving Commitments have expired or been terminated, in accordance with
the respective principal amounts of outstanding Loans and Participation
Interests of the Lenders), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following the termination of this
Credit Agreement) be imposed on, incurred by or asserted against the Agent in
its capacity as such in any way relating to or arising out of this Credit
Agreement or the other Credit Documents or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or any action taken or omitted by the Agent under or in connection with any of
the foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of the Agent. If any indemnity furnished to the
Agent for any purpose shall, in the opinion of the Agent, be insufficient or
become impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.
10.8 Agent in its Individual Capacity.
The Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower or any other Credit
Party as though the Agent were not Agent hereunder. With respect to its Loans
and Participation Interests, the Agent shall have the same rights and powers
under this Credit Agreement as any Lender and may exercise the same as though
they were not Agent, and the terms "Lender" and "Lenders" shall include the
Agent in its individual capacity.
10.9 Successor Agent.
The Agent may, at any time, resign upon 20 days written notice to the
Lenders. Upon any such resignation, the Required Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment, within 30 days
after the notice of resignation, as appropriate, then the retiring Agent shall
select a successor Agent provided such successor is a Lender hereunder or a
commercial bank organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor, such successor Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations as Agent,
as appropriate, under this Credit Agreement and the other Credit Documents and
the provisions of this Section 10.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Credit
Agreement.
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10.10 Termination of Securities Interests. On the Closing Date, the
security interests granted pursuant to the Security Agreement dated November 21,
1995 given by the Borrower, the Company and the other Guarantors to the Agent
(the "Security Agreement"), and any joinders thereto, will be released by the
Agent and the Lenders and the Security Agreement shall terminate. The Agent is
authorized and directed to take any action as is necessary or appropriate to
give effect to the foregoing sentence.
SECTION 11
MISCELLANEOUS
11.1 Amendments and Waivers.
Neither this Credit Agreement, nor any of the Notes, nor any of the other
Credit Documents, nor any terms hereof or thereof may be amended, supplemented,
waived or modified except in accordance with the provisions of this subsection.
The Required Lenders may, or, with the written consent of the Required Lenders,
the Agent may, from time to time, (a) enter into with the Borrower written
amendments, supplements or modifications hereto and to the other Credit
Documents for the purpose of adding any provisions to this Credit Agreement or
the other Credit Documents or (b) waive, on such terms and conditions as the
Required Lenders may specify in such instrument, any of the requirements of this
Credit Agreement or the other Credit Documents or any Default or Event of
Default and its consequences; provided, however, that no such waiver and no such
amendment, waiver, supplement, modification or release shall (i) reduce the
amount or extend the scheduled date of maturity of any Loan or Note or any
installment thereon, or reduce the stated rate of any interest or fee or any
other amounts payable hereunder (other than interest at the increased
post-default rate) or extend the scheduled date of any payment thereof or
increase the amount or extend the expiration date of any Lender's Revolving
Commitment, in each case without the written consent of each Lender directly
affected thereby, or (ii) amend, modify or waive any provision of this
subsection or modify the percentage specified in the definition of Required
Lenders, or consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Credit Agreement, in each case without the
written consent of all the Lenders, or (iii) amend, modify or waive any
provision of Section 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.14, 9.1(a), 11.4, 11.5,
11.6 or 11.7 without the written consent of each Lender directly affected
thereby, or (iv) amend, modify or waive any provision of Section 10 without the
written consent of the then Agent, or (v) release all or substantially all of
the Guarantors without the written consent of all of the Lenders. Any such
waiver, any such amendment, supplement or modification and any such release
shall apply equally to each of the Lenders and shall be binding upon the
Borrower, the other Credit Parties, the Lenders, the Agent and all future
holders of the Notes. In the case of any waiver, the Borrower, the Lenders and
the Agent shall be restored to their former position and rights hereunder and
under the outstanding Loans and Notes and other Credit Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
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<PAGE>
11.2 Notices.
Except as otherwise provided in Section 2, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made (i) when delivered by
hand, (ii) when transmitted via telecopy (or other facsimile device) on a
Business Day between the hours of 8:30 A.M. and 7:00 P.M. (EST or EDT, as
appropriate) (or on the following Business Day if sent after 7:00 P.M.) to the
number set out herein, (iii) the day following the day on which the same has
been delivered prepaid to a reputable national overnight air courier service, or
(iv) the third Business Day following the day on which the same is sent by
certified or registered mail, postage prepaid, in each case, addressed as
follows in the case of the Borrower and the Agent, and as set forth on Schedule
11.2 in the case of the Lenders, or to such other address as may be hereafter
notified by the respective parties hereto and any future holders of the Notes:
The Credit Parties: c/o Cort Furniture Rental Corporation
4401 Fair Lakes Court, Suite 300
Fairfax, Virginia 22033-3839
Attn: Frances Ann Ziemniak
Phone: (703) 968-8554
Fax: (703) 968-8503
The Agent: NationsBank, N.A.
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Ret Taylor
Phone: (704) 388-1108
Fax: (704) 388-9436
with a copy to:
NationsBank, N.A.
1111 East Main Street
4th Floor Pavilion
Richmond, VA 23219
Attn: Marty Mitchell
Phone: (804) 788-2285
Fax: (804) 788-3669
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<PAGE>
11.3 No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of the Agent
or any Lender, any right, remedy, power or privilege hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
11.4 Survival of Representations and Warranties.
All representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Credit Agreement and the Notes
and the making of the Loans, provided that all such representations and
warranties shall terminate on the date upon which the Revolving Commitments have
been terminated and all amounts owing hereunder and under any Notes have been
paid in full.
11.5 Payment of Expenses and Taxes.
The Borrower agrees (a) to pay or reimburse the Agent for all its
reasonable out-of-pocket costs and expenses incurred in connection with the
preparation and execution of, and any amendment, supplement or modification to,
the Credit Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, together with the reasonable fees and
disbursements of counsel to the Agent, (b) to pay or reimburse each Lender and
the Agent for all its costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Credit Agreement, the Notes
and any such other documents, including, without limitation, the reasonable fees
and disbursements of counsel to the Agent and to the Lenders (including
reasonable allocated costs of in-house legal counsel), and (c) on demand, to
pay, indemnify, and hold each Lender and the Agent harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, the Credit Documents and any
such other documents, and (d) to pay, indemnify, and hold each Lender and the
Agent and their Affiliates harmless from and against, any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of the
Credit Documents and any such other Documents and the use, or proposed use, of
proceeds of the Loans (all the foregoing, collectively, the "indemnified
liabilities"); provided, however, that the Borrower shall not have any
obligation hereunder to the Agent or any Lender, as the case may be, with
respect to indemnified liabilities arising from (i) the gross negligence or
willful misconduct of the Agent or any such Lender, as the case may be, (ii)
legal proceedings commenced against the Agent or any Lender by any other Lender
or the Agent or its participants or (iii) a breach of any of the Credit
Documents by the Lenders. The agreements in this subsection shall survive
repayment of the Loans, Notes and all other amounts payable hereunder.
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<PAGE>
11.6 Successors and Assigns; Participations; Purchasing Lenders.
(a) This Credit Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Agent, all future holders of the
Notes and their respective successors and assigns, except that the Borrower
may not assign or transfer any of its rights or obligations under this
Credit Agreement or the other Credit Documents without the prior written
consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or
more banks or other entities ("Participants") participating interests in
any Loan owing to such Lender, any Note held by such Lender, any Revolving
Commitment of such Lender, or any other interest of such Lender hereunder.
In the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under this Credit Agreement to the
other parties to this Credit Agreement shall remain unchanged, such Lender
shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Note for all purposes under this Credit
Agreement, and the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Credit Agreement. No Lender shall transfer or grant
any participation under which the Participant shall have rights to approve
any amendment to or waiver of this Credit Agreement or any other Credit
Document except to the extent such amendment or waiver would (i) extend the
scheduled maturity of any Loan or Note or any installment thereon in which
such Participant is participating, or reduce the stated rate or extend the
time of payment of interest or Fees thereon (except in connection with a
waiver of interest at the increased post-default rate) or reduce the
principal amount thereof, or increase the amount of the Participant's
participation over the amount thereof then in effect (it being understood
that a waiver of any Default or Event of Default shall not constitute a
change in the terms of such participation, and that an increase in any
Revolving Commitment or Loan shall be permitted without consent of any
Participant if the Participant's participation is not increased as a result
thereof), (ii) release all or substantially all of the Guarantors, or (iii)
consent to the assignment or transfer by the Borrower of any of its rights
and obligations under this Credit Agreement. In the case of any such
participation, the Participant shall not have any rights under this Credit
Agreement or any of the other Credit Documents (the Participant's rights
against such Lender in respect of such participation to be those set forth
in the agreement executed by such Lender in favor of the Participant
relating thereto) and all amounts payable by the Borrower hereunder shall
be determined as if such Lender had not sold such participation, provided
that each Participant shall be entitled to the benefits of subsections 3.6,
3.7, 3.8, 3.9 and 11.5 with respect to its participation in the Revolving
Commitments and the Loans outstanding from time to time; provided, that no
Participant shall be entitled to receive any greater amount pursuant to
such subsections than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred by such
transferor Lender to such Participant had no such transfer occurred.
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<PAGE>
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell or assign
to any Lender or any affiliate thereof and with the consent of the Agent
(which consent shall not be unreasonably withheld), to one or more
additional banks or financial institutions ("Purchasing Lenders"), all or
any part of its rights and obligations under this Credit Agreement and the
Notes in minimum amounts of $5,000,000 (or, if less, the entire amount of
such Lender's obligations) if the Purchasing Lender is not a Lender
hereunder, or with no minimum amount if the Purchasing Lender is a Lender
hereunder, pursuant to a Commitment Transfer Supplement, executed by such
Purchasing Lender, such transferor Lender (and, in the case of a Purchasing
Lender that is not then a Lender or an affiliate thereof so long as no
Event of Default has occurred and is continuing, by the Borrower and the
Agent), and delivered to the Agent for its acceptance and recording in the
Register. Upon such execution, delivery, acceptance and recording, from and
after the Transfer Effective Date specified in such Commitment Transfer
Supplement, (x) the Purchasing Lender thereunder shall be a party hereto
and, to the extent provided in such Commitment Transfer Supplement, have
the rights and obligations of a Lender hereunder with a Revolving
Commitment as set forth therein, and (y) the transferor Lender thereunder
shall, to the extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Credit Agreement (and, in the case
of a Commitment Transfer Supplement covering all or the remaining portion
of a transferor Lender's rights and obligations under this Credit
Agreement, such transferor Lender shall cease to be a party hereto). Such
Commitment Transfer Supplement shall be deemed to amend this Credit
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of
Revolving Commitment Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Credit Agreement and the Notes. On or prior to
the Transfer Effective Date specified in such Commitment Transfer
Supplement, the Borrower, at its own expense, shall execute and deliver to
the Agent in exchange for the Note delivered to the Agent pursuant to such
Commitment Transfer Supplement a new Note to the order of such Purchasing
Lender in an amount equal to the Revolving Commitment assumed by it
pursuant to such Commitment Transfer Supplement and, unless the transferor
Lender has not retained a Revolving Commitment hereunder, a new Note to the
order of the transferor Lender in an amount equal to the Revolving
Commitment retained by it hereunder. Such new Note shall be dated the
Closing Date and shall otherwise be in the form of the Note replaced
thereby. The Note surrendered by the transferor Lender shall be returned by
the Agent to the Borrower marked "canceled".
(d) The Agent shall maintain at its address referred to in subsection
11.2 a copy of each Commitment Transfer Supplement delivered to it and a
register (the "Register") for the recordation of the names and addresses of
the Lenders and the Revolving Commitment of, and principal amount of the
Loans owing to, each Lender from time to time.
77
<PAGE>
The entries in the Register shall be conclusive, in the absence of manifest
error, and the Borrower, the Agent and the Lenders may treat each Person
whose name is recorded in the Register as the owner of the Loan recorded
therein for all purposes of this Credit Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement executed by a
transferor Lender and a Purchasing Lender (and, in the case of a Purchasing
Lender that is not then a Lender or an affiliate thereof, by the Borrower
and the Agent) together with payment to the Agent (by the transferor Lender
or the Purchasing Lender, as agreed between them) of a registration and
processing fee of $2,500 for each Purchasing Lender listed in such
Commitment Transfer Supplement, and the Notes subject to such Commitment
Transfer Supplement, the Agent shall (i) accept such Commitment Transfer
Supplement, (ii) record the information contained therein in the Register
and (iii) give prompt notice of such acceptance and recordation to the
Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any Participant
or Purchasing Lender (each, a "Transferee") and any prospective Transferee
any and all financial information in such Lender's possession concerning
the Borrower and its Affiliates which has been delivered to such Lender by
or on behalf of the Borrower pursuant to this Credit Agreement or which has
been delivered to such Lender by or on behalf of the Borrower in connection
with such Lender's credit evaluation of the Borrower and its Affiliates
prior to becoming a party to this Credit Agreement; in each case subject to
subsection 11.14.
(g) At the time of each assignment pursuant to this subsection 11.6 to
a Person which is not already a Lender hereunder and which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
for Federal income tax purposes, the respective assignee Lender shall
provide to the Borrower and the Agent the appropriate Internal Revenue
Service Forms (and, if applicable, a U.S. Tax Compliance Certificate)
described in Section 3.9.
(h) Nothing herein shall prohibit any Lender from pledging or
assigning any of its rights under this Credit Agreement (including, without
limitation, any right to payment of principal and interest under any Note)
to any Federal Reserve Bank in accordance with applicable laws.
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<PAGE>
11.7 Adjustments; Set-off.
(a) Each Lender agrees that if any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of its Loans, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings
of the nature referred to in clause (e) of Section 9.1, or otherwise) in a
greater proportion than any such payment to or collateral received by any
other Lender, if any, in respect of such other Lender' Loans, or interest
thereon, such benefitted Lender shall purchase for cash from the other
Lenders a participating interest in such portion of each such other
Lender's Loan, or shall provide such other Lenders with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause
such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such benefitted Lender, such purchase shall be rescinded,
and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that each Lender so
purchasing a portion of another Lender's Loans may exercise all rights of
payment (including, without limitation, rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such
portion.
(b) In addition to any rights and remedies of the Lenders provided by
law (including, without limitation, other rights of set-off), each Lender
shall have the right, without prior notice to the Borrower or any other
Credit Party, any such notice being expressly waived by the Borrower or any
other Credit Party to the extent permitted by applicable law, upon the
occurrence of any Event of Default, to setoff and appropriate and apply any
and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender
or any branch or agency thereof to or for the credit or the account of the
Borrower or any other Credit Party, or any part thereof in such amounts as
such Lender may elect, against and on account of the obligations and
liabilities of the Borrower or any other Credit Party to such Lender
hereunder and claims of every nature and description of such Lender against
the Borrower or any other Credit Party, in any currency, whether arising
hereunder, under the Notes or under any documents contemplated by or
referred to herein or therein, as such Lender may elect, whether or not
such Lender has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The aforesaid right
of set-off may be exercised by such Lender against the Borrower or any
other Credit Party or against any trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver or execution,
judgment or attachment creditor of the Borrower or any other Credit Party,
or against anyone else claiming through or against the Borrower or any
other Credit Party or any such trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, receiver, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of set-off
shall not have been exercised by such Lender prior to the occurrence of any
Event of Default. Each Lender agrees promptly to notify the Borrower and
the Agent after any such set-off and application made by such Lender;
provided, however, that the failure to give such notice shall not affect
the validity of such set-off and application.
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<PAGE>
11.8 Table of Contents and Section Headings.
The table of contents and the Section and subsection headings herein are
intended for convenience only and shall be ignored in construing this Credit
Agreement.
11.9 Counterparts.
This Credit Agreement may be executed by one or more of the parties to this
Credit Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Credit Agreement signed by all the
parties shall be lodged with the Borrower and the Agent.
11.10 Severability.
Any provision of this Credit Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
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<PAGE>
11.11 Integration.
This Credit Agreement, the Notes and the other Credit Documents represent
the agreement of the Borrower, the other Credit Parties, the Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Agent, the Borrower, the
other Credit Parties, or any Lender relative to the subject matter hereof not
expressly set forth or referred to herein or in the Notes.
11.12 Governing Law.
This Credit Agreement and the Notes and the rights and obligations of the
parties under this Credit Agreement and the Notes shall be governed by, and
construed and interpreted in accordance with, the law of the State of North
Carolina.
11.13 Consent to Jurisdiction and Service of Process.
All judicial proceedings brought against the Borrower or any other Credit
Party with respect to this Credit Agreement, any Note or any of the other Credit
Documents may be brought in any state or federal court of competent jurisdiction
in the State of North Carolina, and, by execution and delivery of this Credit
Agreement, each of the Borrower and the other Credit Parties accepts, for itself
and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any final judgment rendered thereby in connection with this Credit
Agreement from which no appeal has been taken or is available. Each of the
Borrower and the other Credit Parties irrevocably agrees that all process in any
such proceedings in any such court may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to it at its address set forth in subsection 11.2 or at such
other address of which the Agent shall have been notified pursuant thereto, such
service being hereby acknowledged by the Borrower and the other Credit Parties
to be effective and binding service in every respect. The Borrower, the other
Credit Parties, the Agent and the Lenders irrevocably waive any objection,
including, without limitation, any objection to the laying of venue or based on
the grounds of forum non conveniens which it may now or hereafter have to the
bringing of any such action or proceeding in any such jurisdiction. Nothing
herein shall affect the right to serve process in any other manner permitted by
law or shall limit the right of any Lender to bring proceedings against the
Borrower or any other Credit Party in the court of any other jurisdiction.
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<PAGE>
11.14 Confidentiality.
The Agent and each of the Lenders agrees that it will use its best efforts
not to disclose without the prior consent of the Company (other than to its
employees, Subsidiaries, Affiliates, auditors or counsel or to another Lender)
any information with respect to the Company and its Subsidiaries which is
furnished pursuant to this Credit Agreement, any other Credit Document or any
documents contemplated by or referred to herein or therein and which is
designated by the Company to the Lenders in writing as confidential or as to
which it is otherwise reasonably clear such information is not public, except
that any Lender may disclose any such information (a) as has become generally
available to the public other than by a breach of this subsection 11.14, (b) as
may be required or appropriate in any report, statement or testimony submitted
to any municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Lender or to the Federal Reserve Board or the Federal
Deposit Insurance Corporation or the OCC or similar organizations (whether in
the United States or elsewhere) or their successors or the National Association
of Insurance Commissioners, (c) as may be required or appropriate in response to
any summons or subpoena or any law, order, regulation or ruling applicable to
such Lender, or (d) to any prospective Participant or assignee in connection
with any contemplated transfer pursuant to Section 11.6, provided that such
prospective transferee shall have been made aware of this Section 11.14 and
shall have agreed to be bound by its provisions as if it were a party to this
Credit Agreement.
11.15 Acknowledgments.
Each of the Credit Parties hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of each Credit Document;
(b) neither the Agent nor any Lender has any fiduciary relationship
with or duty to the Credit Parties arising out of or in connection with
this Credit Agreement and the relationship between Agent and Lenders, on
one hand, and the Credit Parties, on the other hand, in connection herewith
is solely that of debtor and creditor; and
(c) no joint venture exists among the Lenders or among the Credit
Parties and the Lenders.
11.16 Waivers of Jury Trial.
Each of the Credit Parties, the Agent and the Lenders hereby irrevocably
and unconditionally waive, to the extent permitted by applicable law, trial by
jury in any legal action or proceeding relating to this Credit Agreement or any
other Credit Document and for any counterclaim therein.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: CORT FURNITURE RENTAL CORPORATION,
a Delaware corporation
By /s/ Frances Ann Ziemniak
Title: Vice President, Finance, Chief
Financial Officer and Secretary
GUARANTORS:
CORT BUSINESS SERVICES CORPORATION,
a Delaware corporation
By /s/ Frances Ann Ziemniak
Title: Vice President, Finance, Chief
Financial Officer and Secretary
LENDERS:
NATIONSBANK, N.A.,
in its capacity as Agent and as
a Lender
By /s/ Marty V. Mitchell
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ Frank S. Taulbact
Title: Senior Vice President
MELLON BANK, N.A.
By /s/ George A. Hennessy
Title: Vice President
COMERICA BANK
By /s/ Kimberly S. Kersten
Title: Vice President
CORESTATES BANK, N.A.
By /s/ John D. Brady
Title: Vice President
THE FIRST NATIONAL BANK OF MARYLAND
By /s/ Lauren D. Johnston
Title: Vice President
HIBERNIA NATIONAL BANK
By /s/ Karen S. De Blieux
Title: Senior Vice President
THE SUMITOMO BANK, LTD.
By /s/ James L. Hogan
Title: Vice President and Manager
THE SUMITOMO BANK, LTD.
By /s/ Nancy Z. Reimann
Title: Vice President
83
<PAGE>
Schedule 2.1(a)
Schedule of Lenders and
Revolving Commitments
<TABLE>
<CAPTION>
Revolving Revolving LOC LOC
Committed Commitment Committed Commitment
Lender Amount Percentage Amount Percentage
------ -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
NationsBank, N.A. $17,500,000 23.33% $1,633,333.31 23.33%
Mellon Bank, N.A. $12,500,000 16.67% $1,166,666.67 16.67%
First Union National Bank $12,500,000 16.67% $1,166,666.67 16.67%
Comerica Bank $ 6,500,000 8.67% $ 606,666.67 8.67%
CoreStates Bank, N.A. $ 6,500,000 8.67% $ 606,666.67 8.67%
The First National Bank of Maryland $ 6,500,000 8.67% $ 606,666.67 8.67%
Hibernia National Bank $ 6,500,000 8.67% $ 606,666.67 8.67%
The Sumitomo Bank, Ltd. $ 6,500,000 8.67% $ 606,666.67 8.67%
----------- ----- ------------- -----
$75,000,000 100.0% $7,000,000.00 100.0%
</TABLE>
<PAGE>
SCHEDULE 2.1(b)(i)
Form of Borrowing Notice for Revolving Loans and Swingline Loans
[Date]
NationsBank, N.A., NationsBank, N.A.,
as Agent under the Credit as Swingline Lender under the
Agreement referred to below Credit Agreement referred to below
101 N. Tryon Street 101 N. Tryon Street
Independence Center, 15th Floor Independence Center, 15th Floor
NC1-001-15-04 NC1-001-15-04
Charlotte, North Carolina 28255 Charlotte, North Carolina 28255
Attention: Corporate Credit Support
Gentlemen:
Pursuant to subsection 2.1(b) or 2.2(b) of the Credit Agreement (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") dated as of February 13, 1998 among CORT FURNITURE RENTAL
CORPORATION, a Delaware corporation (the "Borrower"), CORT BUSINESS SERVICES
CORPORATION, a Delaware corporation (the "Company") and certain of its
Subsidiaries as guarantors (together with the Company, the "Guarantors"), the
banks and other financial institutions from time to time parties thereto (the
"Lenders") and NationsBank, N.A., as Agent for the Lenders, the Borrower hereby
requests that the following Revolving Loans or Swingline Loans be made on [date]
as follows (the "Proposed Borrowing"):
Loan Requested:
_______ Revolving Loan
_______ Swingline Loan
(1) Total Amount of Loans............................ $
(2) Amount of (1) to be allocated
to Eurodollar Loans.............................. $
(REVOLVING LOANS ONLY)
(3) Amount of (1) to be allocated
to Base Rate Loans............................... $
(4) Interest Periods and amounts to be allocated
thereto in respect of Eurodollar Tranches
(amounts must total (2)):
(i) one month.................................. $
(ii) two months................................. $
(iii) three months............................... $
(iv) six months................................. $
Total Eurodollar Loans..................... $
NOTE: REVOLVING LOAN BORROWINGS MUST BE IN MINIMUM AMOUNTS OF $3,000,000 AND
$1,000,000 INCREMENTS IN EXCESS THEREOF IN THE CASE OF EURODOLLAR LOANS
AND $1,000,000 AND $1,000,000 INCREMENTS IN EXCESS THEREOF, IN THE CASE
OF BASE RATE LOANS.
<PAGE>
Terms defined in the Credit Agreement shall have the same meanings when
used herein.
The undersigned hereby certifies that the following statements are true on
the date hereof and will be true on the-date of the Proposed Borrowing:
(A) the representations and warranties contained in the Credit
Agreement and in the other Credit Documents are and will be true and
correct in all material respects, both before and after giving effect to
the Proposed Borrowing and to the application of the proceeds thereof, with
the same effect as though such representations and warranties had been made
on and as of the date of such Proposed Borrowing (it being understood that
any representation or warranty which by its terms is made as of a specified
date shall be required to be true and correct in all material respects only
as of such specified date); and
(B) no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Borrowing or from the application of the
proceeds thereof.
Very truly yours,
CORT FURNITURE RENTAL CORPORATION
By:
Title:
<PAGE>
SCHEDULE 2.1(f)
Form of Revolving Note
February __, 1998
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the
order of ______________________, and its successors and assigns, on or before
the Termination Date to the office of the Administrative Agent in immediately
available funds as provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Lender's Revolving Committed
Amount or, if less, the aggregate unpaid principal amount of all Revolving
Loans made by such Lender to the undersigned; and
(ii) in the case of Swingline Loans, if such lender is the Swingline
Lender, the aggregate Swingline Committed Amount or, if less, the aggregate
unpaid principal amount of all Swingline Loans made to the undersigned;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of February __, 1998 (as amended and modified, the "Credit Agreement")
among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation, the Guarantors
and Lenders identified therein and NationsBank, N.A., as Administrative Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
CORT FURNITURE RENTAL CORPORATION,
a Delaware corporation
By:
Name:
Title:
<PAGE>
Revolving Note
February 13, 1998
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the
order of NATIONSBANK, N.A., and its successors and assigns, on or before the
Termination Date to the office of the Administrative Agent in immediately
available funds as provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Lender's Revolving Committed
Amount or, if less, the aggregate unpaid principal amount of all Revolving
Loans made by such Lender to the undersigned; and
(ii) in the case of Swingline Loans, if such lender is the Swingline
Lender, the aggregate Swingline Committed Amount or, if less, the aggregate
unpaid principal amount of all Swingline Loans made to the undersigned;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of February 13, 1998 (as amended and modified, the "Credit Agreement")
among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation, the Guarantors
and Lenders identified therein and NationsBank, N.A., as Administrative Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
CORT FURNITURE RENTAL CORPORATION,
a Delaware corporation
By: /s/ Frances A. Ziemniak
Name: Frances A. Ziemniak
Title: Vice President - Finance
Chief Financial Officer and
Secretary
<PAGE>
Revolving Note
February 13, 1998
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the
order of CORESTATES BANK, N.A., and its successors and assigns, on or before the
Termination Date to the office of the Administrative Agent in immediately
available funds as provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Lender's Revolving Committed
Amount or, if less, the aggregate unpaid principal amount of all Revolving
Loans made by such Lender to the undersigned; and
(ii) in the case of Swingline Loans, if such lender is the Swingline
Lender, the aggregate Swingline Committed Amount or, if less, the aggregate
unpaid principal amount of all Swingline Loans made to the undersigned;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of February 13, 1998 (as amended and modified, the "Credit Agreement")
among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation, the Guarantors
and Lenders identified therein and NationsBank, N.A., as Administrative Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
CORT FURNITURE RENTAL CORPORATION,
a Delaware corporation
By: /s/ Frances A. Ziemniak
Name: Frances A. Ziemniak
Title: Vice President - Finance
Chief Financial Officer and
Secretary
<PAGE>
Revolving Note
February 13, 1998
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the
order of COMERICA BANK, and its successors and assigns, on or before the
Termination Date to the office of the Administrative Agent in immediately
available funds as provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Lender's Revolving Committed
Amount or, if less, the aggregate unpaid principal amount of all Revolving
Loans made by such Lender to the undersigned; and
(ii) in the case of Swingline Loans, if such lender is the Swingline
Lender, the aggregate Swingline Committed Amount or, if less, the aggregate
unpaid principal amount of all Swingline Loans made to the undersigned;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of February 13, 1998 (as amended and modified, the "Credit Agreement")
among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation, the Guarantors
and Lenders identified therein and NationsBank, N.A., as Administrative Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
CORT FURNITURE RENTAL CORPORATION,
a Delaware corporation
By: /s/ Frances A. Ziemniak
Name: Frances A. Ziemniak
Title: Vice President - Finance
Chief Financial Officer and
Secretary
<PAGE>
Revolving Note
February 13, 1998
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the
order of HIBERNIA NATIONAL BANK, and its successors and assigns, on or before
the Termination Date to the office of the Administrative Agent in immediately
available funds as provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Lender's Revolving Committed
Amount or, if less, the aggregate unpaid principal amount of all Revolving
Loans made by such Lender to the undersigned; and
(ii) in the case of Swingline Loans, if such lender is the Swingline
Lender, the aggregate Swingline Committed Amount or, if less, the aggregate
unpaid principal amount of all Swingline Loans made to the undersigned;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of February 13, 1998 (as amended and modified, the "Credit Agreement")
among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation, the Guarantors
and Lenders identified therein and NationsBank, N.A., as Administrative Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
CORT FURNITURE RENTAL CORPORATION,
a Delaware corporation
By: /s/ Frances A. Ziemniak
Name: Frances A. Ziemniak
Title: Vice President - Finance
Chief Financial Officer and
Secretary
<PAGE>
Revolving Note
February 13, 1998
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the
order of SUMITOMO BANK, LTD., and its successors and assigns, on or before the
Termination Date to the office of the Administrative Agent in immediately
available funds as provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Lender's Revolving Committed
Amount or, if less, the aggregate unpaid principal amount of all Revolving
Loans made by such Lender to the undersigned; and
(ii) in the case of Swingline Loans, if such lender is the Swingline
Lender, the aggregate Swingline Committed Amount or, if less, the aggregate
unpaid principal amount of all Swingline Loans made to the undersigned;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of February 13, 1998 (as amended and modified, the "Credit Agreement")
among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation, the Guarantors
and Lenders identified therein and NationsBank, N.A., as Administrative Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
CORT FURNITURE RENTAL CORPORATION,
a Delaware corporation
By: /s/ Frances A. Ziemniak
Name: Frances A. Ziemniak
Title: Vice President - Finance
Chief Financial Officer and
Secretary
<PAGE>
Revolving Note
February 13, 1998
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the
order of MELLON BANK, N.A., and its successors and assigns, on or before the
Termination Date to the office of the Administrative Agent in immediately
available funds as provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Lender's Revolving Committed
Amount or, if less, the aggregate unpaid principal amount of all Revolving
Loans made by such Lender to the undersigned; and
(ii) in the case of Swingline Loans, if such lender is the Swingline
Lender, the aggregate Swingline Committed Amount or, if less, the aggregate
unpaid principal amount of all Swingline Loans made to the undersigned;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of February 13, 1998 (as amended and modified, the "Credit Agreement")
among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation, the Guarantors
and Lenders identified therein and NationsBank, N.A., as Administrative Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
CORT FURNITURE RENTAL CORPORATION,
a Delaware corporation
By: /s/ Frances A. Ziemniak
Name: Frances A. Ziemniak
Title: Vice President - Finance
Chief Financial Officer and
Secretary
<PAGE>
Revolving Note
February 13, 1998
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the
order of FIRST NATIONAL BANK OF MARYLAND, and its successors and assigns, on or
before the Termination Date to the office of the Administrative Agent in
immediately available funds as provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Lender's Revolving Committed
Amount or, if less, the aggregate unpaid principal amount of all Revolving
Loans made by such Lender to the undersigned; and
(ii) in the case of Swingline Loans, if such lender is the Swingline
Lender, the aggregate Swingline Committed Amount or, if less, the aggregate
unpaid principal amount of all Swingline Loans made to the undersigned;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of February 13, 1998 (as amended and modified, the "Credit Agreement")
among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation, the Guarantors
and Lenders identified therein and NationsBank, N.A., as Administrative Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
CORT FURNITURE RENTAL CORPORATION,
a Delaware corporation
By: /s/ Frances A. Ziemniak
Name: Frances A. Ziemniak
Title: Vice President - Finance
Chief Financial Officer and
Secretary
<PAGE>
Revolving Note
February 13, 1998
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the
order of FIRST UNION NATIONAL BANK, and its successors and assigns, on or before
the Termination Date to the office of the Administrative Agent in immediately
available funds as provided in the Credit Agreement,
(i) in the case of Revolving Loans, such Lender's Revolving Committed
Amount or, if less, the aggregate unpaid principal amount of all Revolving
Loans made by such Lender to the undersigned; and
(ii) in the case of Swingline Loans, if such lender is the Swingline
Lender, the aggregate Swingline Committed Amount or, if less, the aggregate
unpaid principal amount of all Swingline Loans made to the undersigned;
together with interest thereon at the rates and as provided in the Credit
Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of February 13, 1998 (as amended and modified, the "Credit Agreement")
among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation, the Guarantors
and Lenders identified therein and NationsBank, N.A., as Administrative Agent.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by this
Note may, or shall, become immediately due and payable as provided in the Credit
Agreement without presentment, demand, protest or notice of any kind, all of
which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of North Carolina.
In WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
CORT FURNITURE RENTAL CORPORATION,
a Delaware corporation
By: /s/ Frances A. Ziemniak
Name: Frances A. Ziemniak
Title: Vice President - Finance
Chief Financial Officer and
Secretary
<PAGE>
SCHEDULE 2.2(a)
Existing Letters of Credit
<TABLE>
<CAPTION>
Outstanding
Issuing Bank LC # Beneficiary Type Amount Issue Date Expiry Date
- ------------ ---- ----------- ---- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
NationsBank L900830 Hartford Fire Insurance S $1,822,795.00 12-18-95 12-18-98
NationsBank L901050 American MFG Mutual S $ 197,145.00 12-22-95 12-22-98
NationsBank L901060 Home Insurance Co S $ 96,457.00 12-22-95 12-22-98
NationsBank L972034 Lumbermans Mutual S $ 675,000.00 01-29-98 01-29-99
</TABLE>
<PAGE>
SCHEDULE 3.2
Form of Notice for Conversion/Extension of Revolving Loans
[Date]
NationsBank, N.A.,
as Agent under the Credit Agreement
referred to below
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Corporate Support Services
Gentlemen:
Pursuant to subsection 3.2 of the Credit Agreement (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement")
dated as of February 13, 1998 among CORT FURNITURE RENTAL CORPORATION, a
Delaware corporation (the "Borrower"), CORT BUSINESS SERVICES CORPORATION, a
Delaware corporation (the "Company") and certain of its Subsidiaries as
guarantors (together with the Company, the "Guarantors"), the banks and other
financial institutions from time to time parties thereto (the "Lenders") and
NationsBank, N.A., as Agent for the Lenders, the Borrower hereby requests
conversion or extension of the following Revolving Loans be made on [date] as
follows (the "Proposed Conversion/Extension"):
(1) Total Amount of Loans to be
converted/extended....................................... $
(2) Amount of (1) to be allocated
to Eurodollar Loans...................................... $
(3) Amount of (1) to be allocated
to Base Rate Loans....................................... $
(4) Interest Periods and amounts to be allocated thereto in
respect of Eurodollar Tranches (amounts must total (2)):
(i) one month.......................................... $
(ii) two months......................................... $
(iii) three months....................................... $
(iv) six months......................................... $
Total Eurodollar Loans............................. $
NOTE: EACH AMOUNT APPEARING IN EACH LINE ABOVE MUST BE AT LEAST EQUAL TO
$3,000,000 AND IN WHOLE MULTIPLES OF $1,000,000 IN EXCESS THEREOF
<PAGE>
Terms defined in the Credit Agreement shall have the same meanings when
used herein.
The undersigned hereby certifies that the following statements are true on
the date hereof and will be true on the-date of the Proposed
Conversion/Extension:
(A) the representations and warranties contained in the Credit
Agreement and in the other Credit Documents are and will be true and
correct in all material respects, both before and after giving effect to
the Proposed Conversion/Extension and to the application of the proceeds
thereof, with the same effect as though such representations and warranties
had been made on and as of the date of such Proposed Conversion/Extension
(it being understood that any representation or warranty which by its terms
is made as of a specified date shall be required to be true and correct in
all material respects only as of such specified date); and
(B) no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Conversion/Extension or from the
application of the proceeds thereof.
Very truly yours,
CORT FURNITURE RENTAL CORPORATION
By:
Title:
<PAGE>
SCHEDULE 3.10
Section 3.10 Certificate
Reference is hereby made to the Credit Agreement, dated as of February 13,
1998, among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation, (the
"Borrower"), CORT BUSINESS SERVICES CORPORATION, a Delaware corporation (the
"Company") and certain of its Subsidiaries, as guarantors (together with the
Company, the "Guarantors"), the several banks and other financial institutions
from time to time parties to this Agreement (collectively, the "Lenders";
individually, a "Lender") and as agent for the Lenders hereunder (in such
capacity, the "Agent") (as amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"). Pursuant to the provisions of Section 3.10 of
the Credit Agreement, the undersigned hereby certifies that it is not a "bank"
as such term is used in Section 881(c)(3)(A) of the Internal Revenue Code of
1986, as amended.
(NAME OF LENDER]
By:
Name:
Title:
<PAGE>
SCHEDULE 5.1(g)
Form of Certificate of Secretary of the Borrower
SECRETARY'S CERTIFICATE
Pursuant to Section 5.1(g) of the Credit Agreement (the "Credit
Agreement"), dated as of February 13, 1998, among CORT FURNITURE RENTAL
CORPORATION, a Delaware corporation (the "Borrower"), CORT BUSINESS SERVICES
CORPORATION, a Delaware corporation (the "Company") and certain of its
Subsidiaries as guarantors (together with the Company, the "Guarantors"), the
banks and other financial institutions from time to time parties thereto (the
"Lenders") and NationsBank, N.A., as agent for the Lenders (in such capacity,
the "Agent"), the undersigned ____________ of _________________ hereby certifies
as follows:
1. Attached hereto as Annex I is a true and complete copy of resolutions
duly adopted by the Board of Directors of ______________ on ___________ 199__,
and such resolutions have not in any way been rescinded or modified and have
been in full force and effect since their adoption to and including the date
hereof and are now in full force and effect; and such resolutions are the only
corporate proceedings of _____________________ now in force relating to or
affecting the matters referred to therein.
2. Attached hereto as Annex II is a true and complete copy of the By-laws
of _____________________ as in effect at all times since _______________ to and
including the date hereof.
3. Attached hereto as Annex III is a true and complete copy of the Restated
Certificate of Incorporation of _____________________ and all amendments thereto
as in effect on the date hereof.
4. The following person is now a duly elected and qualified officer of
____________________________, holding the office indicated next to his name
below, and such officer has held such office with ____________________ at all
times since ___________ to and including the date hereof, and the signature
appearing opposite his name below is his true and genuine signature, and such
officer is duly authorized to execute and deliver on behalf of _____________ the
Credit Agreement [and the Notes to be issued pursuant thereto] and to act as a
Responsible Officer on behalf of _____________________ under the Credit
Agreement:
Name Office Signature
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his/her name and
affixed the corporate seal of ______________________.
____________________________ of
________________________
(CORPORATE SEAL)
Date: _______________, 199__
I, ________________, _______________ of ______________________, hereby
certify that ______________, whose genuine signature appears above, is, and has
been at all times since ______________, a duly elected, qualified and acting
_______________ of ____________________________.
____________________________ of
________________________
_________________, 199__
<PAGE>
Schedule 6.3
The Borrower is in the process of merging the McGreggor Corporation
("McGreggor") and Levitt Investment Company ("Levitt") into the Borrower, with
the Borrower as the surviving corporation. The mergers have been approved by the
State of Delaware, but the mergers are pending in the states of Mississippi and
Arizona (for McGreggor and Levitt, respectively) until annual reports for each
McGreggor and Levitt are filed and the companies are in good standing. It is
expected that the mergers will be completed shortly after the Closing.
<PAGE>
Schedule 6.6
None other than as described in the Company's reports filed with the Securities
and Exchange Commission.
<PAGE>
Schedule 6.12
Subsidiaries of the Company
- ---------------------------
No. Shares of Percentage
Name State of Incorp. Capital Stock Owner Ownership
- ---- ---------------- ------------- ----- ---------
Cort Furniture Delaware Cort Business 100%
Rental Corporation Services
("Borrower") Corporation
Subsidiaries of Borrower
- ------------------------
None, pending the mergers described on Schedule 6.3
<PAGE>
Schedule 7.10
Form of Joinder Agreement
THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________, 19__,
is by and between _____________________, a ___________________ (the
"Subsidiary"), and NATIONSBANK, N.A., in its capacity as Agent under that
certain Credit Agreement (as it may be amended, modified, extended or restated
from time to time, the "Credit Agreement"), dated as of February 13, 1998, by
and among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation (the
"Borrower"), CORT BUSINESS SERVICES CORPORATION, a Delaware corporation (the
"Company") and certain other Credit Parties party thereto, the Lenders party
thereto and NationsBank, N.A., as Agent. All of the defined terms in the Credit
Agreement are incorporated herein by reference.
The Subsidiary is an Additional Credit Party, and, consequently, the
Borrower and the other Credit Parties are required by Section 7.10 of the Credit
Agreement to cause the Subsidiary to become a "Guarantor".
Accordingly, the Subsidiary hereby agrees as follows with the Agent, for
the benefit of the Lenders:
1. The Subsidiary hereby acknowledges, agrees and confirms that, by
its execution of this Agreement, the Subsidiary will be deemed to be a
party to the Credit Agreement and a "Guarantor" for all purposes of the
Credit Agreement and the other Credit Documents, and shall have all of the
obligations of a Guarantor thereunder as if it had executed the Credit
Agreement and the other Credit Documents. The Subsidiary hereby ratifies,
as of the date hereof, and agrees to be bound by, all of the terms,
provisions and conditions contained in the Credit Documents, including
without limitation (i) all of the representations and warranties of the
Credit Parties set forth in Section 6 of the Credit Agreement, (ii) all of
the affirmative and negative covenants set forth in Sections 7 and 8 of the
Credit Agreement and (iii) all of the undertakings and waivers set forth in
Section 4 of the Credit Agreement. Without limiting the generality of the
foregoing terms of this paragraph 1, the Subsidiary hereby (i) jointly and
severally together with the other Guarantors, guarantees to each Lender and
the Agent, as provided in Section 4 of the Credit Agreement, the prompt
payment and performance of the Credit Party Obligations in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as
a mandatory cash collateralization or otherwise) strictly in accordance
with the terms thereof and (ii) agrees that if any of the Credit Party
Obligations are not paid or performed in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise), the Subsidiary will, jointly and severally
together with the other Guarantors, promptly pay and perform the same,
without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Credit Party
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise) in accordance with the terms
of such extension or renewal.
<PAGE>
2. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together
shall constitute one contract.
IN WITNESS WHEREOF, the Subsidiary has caused this Agreement to be duly
executed by its authorized officers, and the Agent, for the benefit of the
Lenders, has caused the same to be accepted by its authorized officer, as of the
day and year first above written.
[SUBSIDIARY]
By
Title
Acknowledged and accepted:
NATIONSBANK, N.A.
as Agent
By
Title
<PAGE>
Schedule 8.1(b)
Borrower's 12% Senior Notes due 2000 in aggregate principal amount of
$49,932,000.
<PAGE>
Schedule 11.2
Lenders and Addresses
<TABLE>
<CAPTION>
Eurodollar
Address Domestic Lending
Lender for Notices Lending Office Office
------ ----------- -------------- ----------
<S> <C> <C> <C>
NationsBank, N.A. NationsBank, N.A. NationsBank, N.A. NationsBank, N.A.
101 N. Tryon Street 101 N. Tryon Street 101 N. Tryon Street
NC1-001-15-04 NC1-001-15-04 NC1-001-15-04
Charlotte, North Carolina 28255 Charlotte, North Carolina 28255 Charlotte, North Carolina 28255
Attn: Ret Taylor Attn: Ret Taylor Attn: Ret Taylor
Phone: (704) 388-1108 Phone: (704) 388-1108 Phone: (704) 388-1108
Fax: (704) 388-9436 Fax: (704) 388-9436 Fax: (704) 388-9436
with a copy to:
NationsBank, N.A.
1111 East Main Street
4th Floor Pavilion
Richmond, Virginia 23219
Attn: Marty Mitchell
Phone: (804) 788-2285
Fax: (804) 788-3669
Mellon Bank, N.A. Mellon Bank, N.A. Mellon Bank, N.A. Mellon Bank, N.A.
10 S. Second Street 10 S. Second Street 10 S. Second Street
Harrisburg, Pennsylvania 17101-1010 Harrisburg, Pennsylvania 17101 Harrisburg, Pennsylvania 17101
Attn: George Hennessy Attn: George Hennessy Attn: George Hennessy
Phone: (717) 777-3359 Phone: (717) 777-3359 Phone: (717) 777-3359
Fax: (717) 777-3363 Fax: (717) 777-3363 Fax: (717) 777-3363
First Union National Bank First Union National Bank First Union National Bank First Union National Bank
1970 Chain Bridge Road 1970 Chain Bridge Road One Bishopsgate
McLean, Virginia 22102 McLean, Virginia 22102 London, EC2N3AB England
Attn: Frank S. Kaulback, III Attn: Frank S. Kaulback, III Attn:
Phone: (703) 760-6259 Phone: (703) 760-6259 Phone:
Fax: (703) 760-5457 Fax: (703) 760-5457 Fax:
Comerica Bank Comerica Bank Comerica Bank Comerica Bank
U.S. Banking East U.S. Banking East U.S. Banking East
500 Woodward Avenue, 9th Floor 500 Woodward Avenue, 9th Floor 500 Woodward Avenue, 9th Floor
MC 3280 MC 3280 MC 3280
Detroit, Michigan 48275-3280 Detroit, Michigan 48275-3280 Detroit, Michigan 48275-3280
Attn: Tamara J. Gurne Attn: Tamara J. Gurne Attn: Tamara J. Gurne
Phone: (313) 222-7806 Phone: (313) 222-7806 Phone: (313) 222-7806
Fax: (313) 222-3330 Fax: (313) 222-3330 Fax: (313) 222-3330
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Eurodollar
Address Domestic Lending
Lender for Notices Lending Office Office
------ ----------- -------------- ----------
<S> <C> <C> <C>
CoreStates Bank, N.A. CoreStates Bank, N.A. CoreStates Bank, N.A. CoreStates Bank, N.A.
1339 Chestnut Street 1339 Chestnut Street 1339 Chestnut Street
FC 1-8-3-16 FC 1-8-3-16 FC 1-8-3-16
Philadelphia, Pennsylvania 19102 Philadelphia, Pennsylvania 19102 Philadelphia, Pennsylvania 19102
Attn: John D. Brady Attn: John D. Brady Attn: John D. Brady
Phone: (215) 786-2160 Phone: (215) 786-2160 Phone: (215) 786-2160
Fax: (215) 973-6745 Fax: (215) 973-6745 Fax: (215) 973-6745
The First National The First National Bank of Maryland The First National Bank of MD The First National Bank of MD
Bank of Maryland 601-13th Street N.W. 601-13th Street N.W. 601-13th Street N.W.
Suite 1000 North Suite 1000 North Suite 1000 North
Washington, D.C. 20005 Washington, D.C. 20005 Washington, D.C. 20005
Attn: Lauren D. Johnston Attn: Lauren D. Johnston Attn: Lauren D. Johnston
Phone: (202) 661-7227 Phone: (202) 661-7227 Phone: (202) 661-7227
Fax: (202) 661-7238 Fax: (202) 661-7238 Fax: (202) 661-7238
Hibernia National Bank Hibernia National Bank Hibernia National Bank Hibernia National Bank
313 Carondelet Street 313 Carondelet Street 313 Carondelet Street
New Orleans, Louisiana 70130 New Orleans, Louisiana 70130 New Orleans, Louisiana 70130
Attn: Troy J. Villafarra Attn: Troy J. Villafarra Attn: Troy J. Villafarra
Phone: (504) 533-2738 Phone: (504) 533-2738 Phone: (504) 533-2738
Fax: (504) 533-5344 Fax: (504) 533-5344 Fax: (504) 533-5344
The Sumitomo Bank, Ltd. The Sumitomo Bank, Ltd. The Sumitomo Bank, Ltd. The Sumitomo Bank, Ltd.
120 E. Baltimore Street 233 South Wacker Drive 233 South Wacker Drive
Suite 1920 Suite 5400 Suite 5400
Baltimore, Maryland 21202 Chicago, Illinois 60606 Chicago, Illinois 60606
Attn: James L. Hogan Attn: Maria Martinez Attn: Maria Martinez
Phone: (410) 332-4050 Phone: (312) 993-6233 Phone: (312) 993-6233
Fax: (410) 332-4058 Fax: (312) 876-1955 Fax: (312) 876-1955
</TABLE>
<PAGE>
SCHEDULE 11.6(c)
Form of Commitment Transfer Supplement
COMMITMENT TRANSFER SUPPLEMENT
Reference is made to the Credit Agreement, dated as of February 13, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CORT FURNITURE RENTAL CORPORATION, a Delaware corporation
(the "Borrower"), CORT BUSINESS SERVICES CORPORATION, a Delaware corporation
(the "Company") and certain of its Subsidiaries as guarantors (together with the
Company, the "Guarantors"), the banks and financial institutions from time to
time parties thereto and NationsBank, N.A., as agent for the Lenders (in such
capacity, the "Agent"). Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
___________________________________ (the "transferor Lender") and
_________________________ the "Purchasing Lender") agree as follows:
1. The transferor Lender hereby irrevocably sells and assigns to the
Purchasing Lender without recourse to the transferor Lender, and the Purchasing
Lender hereby irrevocably purchases and assumes from the transferor Lender
without recourse to the transferor Lender, as of the Transfer Effective Date (as
defined below), a _____% interest (the "Assigned Interest") in and to the
transferor Lender's rights and obligations under the Credit Agreement and the
other Credit Documents with respect to those credit facilities contained in the
Credit Agreement as are set forth on Schedule 1 attached hereto (individually,
an "Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
amount for each Assigned Facility as set forth on such Schedule 1.
2. The transferor Lender (a) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or with
respect to the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Loan Document or any
other instrument or document furnished pursuant thereto, other than that the
transferor Lender has not created any adverse claim upon the interest being
assigned by it hereunder and that such interest is free and clear of any such
adverse claim; (b) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower, any of
its Subsidiaries or any other obligor or the performance or observance by the
Borrower, any of its Subsidiaries or any other obligor of any of their
respective obligations under the Credit Agreement or any other Loan Document or
any other instrument or document furnished pursuant hereto or thereto; and (c)
attaches hereto any Notes held by it evidencing the Assigned Facilities and (i)
requests that the Agent exchange the attached Note for a new Note payable to the
Purchasing Lender and (ii) if the transferor Lender has retained any interest in
the Assigned Facility, requests that the Agent exchange the attached Note for a
new Notes payable to the transferor Lender and to the Purchasing Lender, as
applicable, in each case in amounts which reflect the assignment being made
hereby (and after giving effect to any other assignments which have become
effective on the Transfer Effective Date).
<PAGE>
3. The Purchasing Lender (a) represents and warrants that it is legally
authorized to enter into this Commitment Transfer Supplement and has not relied
on the Agent or transferor Lender in making any credit decision; (b) confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements referred to in subsection 3.1 thereof, the financial
statements delivered pursuant to subsection 5.1 thereof, if any, and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Commitment Transfer Supplement; (c)
agrees that it will, independently and without reliance upon the transferor
Lender, the Agent 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 the Credit Agreement, the
other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; (d) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers and discretion under the Credit
Agreement, the other loan documents or any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Agent by the terms
thereof, together with such powers as are incidental thereto; and (e) agrees
that it will be bound by the provisions of the Credit Agreement and will perform
in accordance with its terms all the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender including, if it
is organized under the laws of a jurisdiction outside the United States, its
obligations pursuant to subsection 2.18 of the Credit Agreement.
4. The effective date of this Commitment Transfer Supplement shall be
________ ___, 19__ (the "Transfer Effective Date"). Following the execution of
this Commitment Transfer Supplement, it will be delivered to the Agent for
acceptance by it and recording by the Agent pursuant to the Credit Agreement,
effective as of the Transfer Effective Date (which shall not, unless otherwise
agreed to by the Agent, be earlier than five Business Days after the date of
such acceptance and recording by the Agent).
5. Upon such acceptance and recording, from and after the Transfer
Effective Date, the Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Purchasing Lender whether such amounts have accrued prior to the Transfer
Effective Date or accrue subsequent to the Transfer Effective Date. The
transferor Lender and the Purchasing Lender shall make all appropriate
adjustments in payments by the Agent for periods prior to the Transfer Effective
Date or, with respect to the making of this assignment, directly between
themselves.
6. From and after the Transfer Effective Date, (a) the Purchasing Lender
shall be a party to the Credit Agreement and, to the extent provided in this
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder and under the other Credit Documents and shall be bound by the
provisions thereof and (b) the transferor Lender shall, to the extent provided
in this Commitment Transfer Supplement, relinquish its rights (except for its
rights of indemnity to the Transfer Effective Date which shall survive) and be
released from its obligations under the Credit Agreement.
7. This Commitment Transfer supplement shall be governed by and construed
in accordance with the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer
Supplement to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>
SCHEDULE 1
TO COMMITMENT TRANSFER SUPPLEMENT
RELATING TO THE CREDIT AGREEMENT, DATED AS OF NOVEMBER 21, 1995,
AMONG
CORT FURNITURE RENTAL CORPORATION,
CERTAIN OF ITS SUBSIDIARIES,
THE LENDERS NAMED THEREIN
AND
NATIONSBANK, N.A., AS AGENT FOR THE LENDERS
(IN SUCH CAPACITY, THE "AGENT")
- --------------------------------------------------------------------------------
Name of transferor Lender:
Name of Purchasing Lender:
Transfer Effective Date of Assignment:
Credit Principal Revolving Commitment Percentage
Facility Assigned Amount Assigned Assigned(1)
- ----------------- --------------- -----------
$-------------- ----.--------------%
[NAME OF PURCHASING LENDER] [NAME OR TRANSFEROR LENDER]
By___________________________ By___________________________
Name: Name:
Title: Title:
Accepted: Consented to:
NATIONSBANK, N.A. CORT FURNITURE RENTAL CORPORATION
By___________________________ By___________________________
Name: Name:
Title: Title:
(1) Calculate the Commitment Percentage that is assigned to at least 15 decimal
places and show as a percentage of the aggregate commitments of all
Lenders.
CORT BUSINESS SERVICES
1997 Annual Report
Our people
...our strength
<PAGE>
Office Furniture Rental
National Accounts Program
Residential Furniture Rental
Retail
CORT BUSINESS SERVICES
Trade Show Furnishings
Internet & Relocation Services
Housewares Rental
Customized Product
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS TOTAL REVENUE
(dollars in thousands, except per share data) (in millions)
Chart
Year ended December 31, 1995 1996 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Furniture rental revenue ................ $141,988 $191,560 $237,212
Furniture sales revenue ................. 37,321 42,589 50,006
Total revenue ......................... 179,309 234,149 287,218
Gross profit ............................ 129,156 171,984 211,327
Operating earnings ...................... 26,721 35,448 46,308
Income before extraordinary loss ........ 6,218 15,936 22,326 RENTAL REVENUE
Per diluted share ..................... 1.11 1.31 1.67 (in millions)
Chart
As of December 31,
- --------------------------------------------------------------------------------
Total assets ............................ $173,722 $247,199 $277,841
Total debt .............................. 53,800 65,600 63,132
Stockholders' equity .................... 75,421 125,152 149,332
GROSS PROFIT
(in millions)
Chart
CORT TODAY
The Company is the largest, and only national, provider of high-quality office
and residential rental furniture and related accessories. CORT meets the needs
of corporations, corporate employees, small businesses and individuals for
temporary office, residential and trade show furniture and furnishings. CORT's OPERATING EARNINGS
coast-to-coast network, covering 32 states and the District of Columbia, (in millions)
includes 109 rental showrooms, 72 clearance centers and 72 distribution centers. Chart
The Company's business is operated under the CORT Furniture Rental, General
Furniture Leasing, CORT Furniture Rental Clearance Center, CORT Housewares, CORT
Trade Show Furnishings, CORT Special Projects and Relocation Central names.
</TABLE>
1
<PAGE>
TO OUR INVESTORS:
In 1997, CORT Business Services completed its best year ever.
CORT has now reported record revenues and operating earnings every year for the
past five years. During this period, revenues have grown at a compounded annual
rate of 22%, and operating earnings at 28%, even after making significant
investments for the future. In 1997, CORT achieved increases in revenues and
operating earnings of 23% and 31%, respectively. This strong and consistent
performance confirms the soundness of our strategic plan.
Our impressive results reflect a variety of factors, including business
demographics that favor CORT's type of corporate-oriented service; a sound and
consistent operating strategy; investments in new markets and services with
significant growth potential, and a management group that is the most
experienced and innovative in the industry. As stockholders themselves, these
managers are dedicated to building value for all investors.
These factors have been among the traditional reasons for our business success.
But there is another important factor: our approximately 2,300 employees. They
bring commitment, energy and enthusiasm to their jobs. Their performance enabled
CORT to achieve results that met the criteria for inclusion in Forbes Magazine's
most recent compilation of "America's 200 Best Small Companies."
In other highlights of an active and productive year, we:
o Acquired businesses that moved us deeper into the trade show market.
o Completed the integration of last year's Evans Rents acquisition.
o Established the Relocation Central web site as a value-added source of
information for customers.
o Expanded our distribution of Herman Miller office furniture systems.
As a result, CORT further solidified its role as the leader of the rent-to-rent
furniture industry.
AN OUTSTANDING YEAR
Revenues for the year ended December 31, 1997 increased by 23%, to a record
$287.2 million, from $234.1 million in 1996. Income performance was even more
impressive. Operating earnings increased 31% to $46.3 million, from $35.4
million the year before. Net income was $22.3 million, equal to $1.67 per
diluted share, compared with $15.9 million, or $1.31 per diluted share, one year
ago. The percentage gains were 40% and 27%, respectively.
2
<PAGE>
Operating margins, a key measurement of productivity, increased to 16.1% from
15.1% in 1996. This improvement reflects the consistent implementation of proven
operating strategies; enhanced efficiencies from the successful integration of
Evans Rents in California, and growth and improved productivity in startup
operations.
This overall performance, to which so many CORT people contributed, met our
goals for dynamic growth and enhanced investor values.
Our expansion program continues to be an important platform for growth and even
stronger customer service. Late in 1997, we entered the Pittsburgh and Cleveland
markets through acquisition. Earlier this year, we purchased another business
that expands our presence in two other prime corporate areas--New Jersey and New
York.
CORT is actively filling the remaining gaps in its national network. Within the
past few years, through strategic acquisitions and startups, we also expanded in
Los Angeles, San Francisco and other California cities, and entered new markets
in Salt Lake City, UT, St. Louis, MO, Birmingham, AL, Portland, OR, Las Vegas,
NV and New York City.
CORT has targeted the growing trade show furnishings business as a logical
extension of its rental services. To significantly expand our ability to serve
trade show exhibitors, and to quickly establish a broader national presence,
CORT acquired three affiliated businesses early in 1997.
This multi-pronged expansion strategy is our gateway to untapped markets. It
also provides access to established customer bases and creates opportunities for
cross-selling of related services.
WHAT'S AHEAD
CORT plans to widen its leadership position in the highly fragmented
rent-to-rent furniture industry. We intend to be a major consolidator in an
industry where many undercapitalized entrepreneurs are candidates for
consolidation.
For a focused, well managed company like ours, rent-to-rent offers the prospect
of above-average returns and accelerated growth. We anticipate that an
aggressive combination of geographically driven acquisitions, plus strong
internal growth, will enhance our one-third market share.
Today, CORT is a quality organization. We have vast financial, operational and
managerial resources, a world-class employee team and a proven growth strategy.
We look to 1998 and beyond with confidence and enthusiasm.
Paul N. Arnold
President and Chief Executive Officer
In a fast-changing
environment, CORT
people make the
difference. They are
the reason for
our extraordinary
performance and our future
expectations.
3
<PAGE>
Our people
CORT's business revolves
around people serving
people. Our people
pride themselves on
providing solutions
to customers'
furniture needs.
4
<PAGE>
THE MARKET WE SERVE
CORT serves corporations, businesses of all sizes, and individuals. The
corporate sector, which accounts for approximately 80% of our rental revenues,
is experiencing another growth cycle. Strong corporate profits, appreciated
stock prices and low interest rates are enabling corporations to make
acquisitions, open facilities and build sales bases. This puts people in motion,
as hirees, transferees, outside contractors or independent workers. They need
office furniture and furnished living quarters. CORT is the only company that
can meet these furniture rental needs throughout the United States.
This is why we have attracted customers like EDS, MCI, Warner Bros., TCI,
ConAgra, TRANSAMERICA, Great West-Life Assurance, and Exxon Company USA.
The concept of renting rather than owning furniture appeals to both corporations
and individuals with an eye on the bottom line. Among the other benefits are
flexible lease lengths, immediate order fulfillment, extensive product choices
and convenient one-stop shopping. This preference for renting has contributed to
the increase in our monthly base rent of nearly $17.5 million at year end. Just
five years ago, our monthly base rent was $6.3 million.
SERVING THE OFFICE MARKET
CORT rents a full line of branded, top quality furniture to businesses and
entrepreneurs whose needs are immediate but temporary.
During periods of expansion or shifting needs, corporations require work space
for task force teams, fully- furnished rooms for training classes and office
suites for employees on temporary assignment. Flexibility is just as important
to start-up companies, home businesses and entrepreneurial ventures.
Whether a company is a multinational giant or a small home-based business, CORT
can provide customized plans to meet their furniture needs.
SERVING THE RESIDENTIAL MARKET
As computer and communications technology have
fostered greater mobility, workers spend more time away from their home cities.
They may be contract employees, members of consultant teams or task forces,
corporate employees temporarily assigned to different locations for training or
to handle special projects, or employees who are changing jobs or relocating.
5
<PAGE>
For individuals who must forego the comforts of home, a pleasant and relaxing
away-from-work environment is often a key to productivity. Corporate employers
and employees are bypassing impersonal, cramped and expensive hotel rooms in
favor of spacious fully-furnished apartments. CORT provides all the furniture,
housewares and accessories needed to feel at home.
SERVING THE AFTERMARKET
CORT is able to generate income beyond the furniture rental stream. Customers
can purchase previously rented furniture at any of our 72 clearance centers, at
significant reductions from conventional retail pricing. Even at these
discounted prices, we generally recover more than 100% of our original furniture
costs.
Through the timely disposal of previously rented furniture, CORT maintains high
quality standards in its 109 showrooms and its rental inventories. To prolong
product life, we concentrate on styles that are attractive, durable and appeal
to universal tastes.
HOW CORT IS PLANNING FOR THE FUTURE
One of CORT's most valuable qualities is our own capacity for change. We have a
vast appetite for new ideas, approaches and concepts that help customers meet
their business goals.
For example, one of our growth strategies has revolved around "incubator"
businesses. These complement our core furniture rental activities, extend the
CORT brand name, anticipate customers' evolving needs and create opportunities
for cross selling. As these fledgling services mature, we are able to provide
customers with yet another reason to do business with CORT.
In 1996, we focused our efforts to grow our housewares unit, which provides
kitchen, bedroom and bathroom accessories. It is now approaching the status of a
full-fledged business. We see the trade show and convention services business as
a high-potential market. Some new initiatives work while others may fall short
of expectations. But the cost of the occasional disappointment is modest while
the winners return our investment many times over.
6
<PAGE>
... our strength
CORT people bring
dedication, teamwork
and a sense of
empowerment to the
implementation of a
sound strategic plan.
7
<PAGE>
PEOPLE-OUR KEY STRENGTH
CORT's customers--the nation's manufacturing, service and financial
companies--have experienced economic, social and infrastructural upheaval of
great proportions.
CORT has successfully risen to this challenge. Not just because we had the right
strategic plan...which we did, and not just because we had the resources to
carry out our plan...which we did, and not just because we had the benefit of
good luck and good timing...which we did.
Important as they are, these elements alone would not have been enough. What
made it work was CORT people.
Our 700 local market sales consultants provide furniture solutions, complete
with space planning and design assistance. They are also invaluable sources of
information about neighborhoods, schools and other demographics important to a
businessperson new to the area. A team of national account specialists, chosen
for their professionalism and problem-solving ability, serves the rental needs
of our largest, multi-location customers and coordinates local market efforts.
Our team of 1,100 warehousing and distribution personnel oversee furniture
deliveries that arrive on time, in quality condition. Our 200-person
administrative staff of customer service, finance and quality control
specialists is stationed in local markets so that customer needs can be met
promptly.
Many employees, including most of our managers, began at entry levels and
learned the business as they moved upward. Along the way, they acquired a
feeling of shared accomplishment and team pride that is our most valuable asset
today and into the future.
<PAGE>
FINANCIAL REVIEW
Selected Consolidated Financial Data ...................................... 10
Management's Discussion and Analysis of
Financial Condition and Results of Operations ........................... 11
Consolidated Balance Sheets ............................................... 15
Consolidated Statements of Operations ..................................... 16
Consolidated Statements of Stockholders' Equity ........................... 17
Consolidated Statements of Cash Flows ..................................... 18
Notes to Consolidated Financial Statements ................................ 19
Independent Auditors' Report .............................................. 27
Market for Common Stock of the Registrant and
Related Stockholders' Matters ........................................... 28
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA(1)
(in thousands, except per share data)
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Predecessor CORT Business Services Corporation
----------- ----------------------------------------------------------------------------
Three Nine
months months
ended ended Year ended December 31,
March 31, December 31, Combined -------------------------------------------------
--------- ------------ --------
1993 1993(2) 1993(2) 1994 1995 1996(3) 1997
---- ------- ------- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Furniture rental revenue ................. $ 21,497 $ 79,002 $100,499 $130,026 $141,988 $191,560 $237,212
Furniture sales revenue .................. 6,228 21,846 28,074 34,534 37,321 42,589 50,006
----- ------ ------ ------ ------ ------ ------
Total revenue .......................... 27,725 100,848 128,573 164,560 179,309 234,149 287,218
Furniture rental gross profit ............ 17,451 63,318 80,769 104,255 114,038 154,602 191,578
Furniture sales gross profit ............. 2,548 8,716 11,264 13,885 15,118 17,382 19,749
----- ----- ------ ------ ------ ------ ------
Total gross profit ..................... 19,999 72,034 92,033 118,140 129,156 171,984 211,327
Selling, general and
administrative expenses ................ 16,779 58,990 75,769 95,526 102,435 136,536 165,019
------ ------ ------ ------ ------- ------- -------
Operating earnings ....................... 3,220 13,044 16,264 22,614 26,721 35,448 46,308
Interest expense(4) ...................... 879 8,941 9,820 16,246 15,917 8,251 8,374
Income (loss) before
extraordinary loss ..................... 1,976 2,313 4,289 3,546 6,218 15,936 22,326
Net income (loss) ........................ $ 1,976 $ 2,313 $ 4,289 $ 3,546 $ 2,075 $ 15,936 $ 22,326
Earnings per common share
before extraordinary loss(5) ........... $ 0.91 $ 1.26 $ 1.40 $ 1.74
Earnings per common share before
extraordinary loss--assuming dilution .. $ 0.85 $ 1.11 $ 1.31 $ 1.67
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1993 1994 1995 1996 1997
- ------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total assets .................................................... $169,777 $178,275 $173,722 $247,199 $277,841
Total debt ...................................................... 120,269 123,645 53,800 65,600 63,132
Stockholders' equity ............................................ 3,341 6,963 75,421 125,152 149,332
</TABLE>
(1) The table above sets forth the selected consolidated financial data of the
Company since its formation and acquisition of CORT Furniture Rental
Corporation ("CFR" or "Predecessor") on March 31, 1993, and the selected
financial data of CFR prior to the acquisition by the Company. The
consolidated financial data of the Company as of and for the nine months
ended December 31, 1993 and as of and for the years ended December 31,
1994, 1995, 1996 and 1997 have been derived from the consolidated financial
statements of the Company. The financial data of CFR for the three months
ended March 31, 1993 have been derived from the financial statements of
CFR. The combined financial data for the year ended December 31, 1993
represent CFR information for the three months ended March 31, 1993
combined with information for the Company for the nine months ended
December 31, 1993. The selected historical consolidated financial data
should be read in conjunction with the Company's consolidated financial
statements and notes thereto included elsewhere in this Annual Report.
(2) Income statement data for the nine months ended and combined year ended
December 31, 1993 include the results of operations of General Furniture
Leasing Company ("General Furniture") for the four months ended December
31, 1993. The September 1, 1993 acquisition of General Furniture was
accounted for as a purchase business combination. Revenue of General
Furniture for the four months ended December 31, 1993 was approximately
$13,438,000.
(3) Income statement data for the year ended December 31, 1996 include the
results of operations of Evans Rents from the date of acquisition, April
24, 1996. The acquisition of Evans Rents was accounted for as a purchase
business combination. Revenue of Evans Rents for the period of April 25,
1996 through December 31, 1996 was approximately $22,500,000.
(4) Interest expense for the three months ended March 31, 1993 reflects the
impact of a restructuring of CFR on June 30, 1992. Interest expense for the
three months ended March 31, 1993 was recognized at an effective rate of
1.8% as a result of applying the accounting principles of a troubled debt
restructuring.
(5) Earnings per common share before extraordinary loss is computed by dividing
income before extraordinary loss by the weighted average number of shares
of common stock outstanding during the year. In connection with the
Company's initial public offering of common stock, the Company exchanged
all subordinated debentures for 2,728,167 shares of common stock. For
purposes of the computations of earnings per common share for 1994 and
1995, the Company has assumed that the exchange occurred as of January 1,
1994 for 2,090,591 shares of common stock.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
The following information should be read together with the consolidated
financial statements and notes thereto appearing elsewhere in this Annual Report
(dollars in thousands, except per share data).
RESULTS OF OPERATIONS
CORT Business Services Corporation was formed on March 29, 1993 and
contemporaneously acquired all of the stock of CORT Furniture Rental Corporation
("CFR") in a business combination accounted for using the purchase method. The
Company is a holding company with no assets other than its investment in CFR.
The following analysis compares the results of operations of the Company for the
years ended December 31, 1995, 1996 and 1997. The following table sets forth,
for the period indicated, certain income statement data as a percentage of total
revenue, unless otherwise indicated.
Year ended December 31,
-----------------------------
1995 1996 1997
---- ---- ----
Rental revenue ..................... 79.2% 81.8% 82.6%
Sales revenue ...................... 20.8 18.2 17.4
Total revenue .................... 100.0 100.0 100.0
Cost of rental(1) .................. 19.7 19.3 19.2
Cost of sales(1) ................... 59.5 59.2 60.5
Gross margin ....................... 72.0 73.4 73.6
Selling, general and
administrative expenses .......... 57.1 58.3 57.5
Operating earnings ................. 14.9 15.1 16.1
Interest ........................... 8.9 3.5 2.9
Income taxes ....................... 2.6 4.8 5.4
Income before extraordinary loss ... 3.4% 6.8% 7.8%
Net income ......................... 1.2% 6.8% 7.8%
- ------------
(1) Cost of rental is calculated as a percentage of rental revenue. Cost of
sales is calculated as a percentage of sales revenue.
COMPONENTS OF OPERATING EARNINGS
Revenue. Substantially all of the Company's revenue is derived from base rent
and fees from its outstanding furniture leases and from the sale of rental
furniture. Rental revenue is recognized in the month in which it is due.
Furniture sales revenue is recognized in the month of furniture delivery.
Cost of Furniture Rental. The primary component of cost of furniture rental is
depreciation of rental furniture which is a noncash charge included in the
statements of cash flows as a component of cash provided by operating
activities. The Company depreciates most of its rental furniture on a
declining-balance method over five years, with an estimated salvage value of 25%
to 40% of original cost. The Company also records the net book value of other
disposals, primarily inventory shrinkage, as a component of the cost of
furniture rental revenue.
Cost of Furniture Sales. When furniture is sold, the depreciated book value of
such furniture is recorded as cost of furniture sales and is also included in
the statements of cash flows as a component of cash provided by operating
activities.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses include employee, delivery, advertising, occupancy,
utilities and other operating expenses, nonrental depreciation, and amortization
of goodwill.
YEAR ENDED DECEMBER 31, 1997 AS COMPARED
TO YEAR ENDED DECEMBER 31, 1996
Revenue. Total revenue increased 22.7% to $287,218 in 1997 from $234,149 in
1996. Furniture rental revenue for the year was $237,212, a 23.8% increase from
$191,560 in 1996. Rental revenue growth before the impact of acquisitions and
merged markets is estimated to be approximately 13% which reflects growth in the
number of leases as well as revenue per lease. Furniture sales increased 17.4%
to $50,006 in 1997 from $42,589 in 1996. Excluding the impact of an unusually
large corporate sale in the second quarter of 1997, furniture sales would have
shown an increase of 13.3%. This increase reflects the Company's continued
efforts to maintain the quality of its rental furniture line-up.
<PAGE>
Gross Profit. Gross profit margin on total revenue increased to 73.6% for the
year ended December 31, 1997 from 73.4% for the year ended December 31, 1996.
The gross profit margin on furniture rental revenue was 80.8% in 1997 and 80.7%
in 1996. Gross profit margin on furniture sales revenue decreased to 39.5% in
1997 from 40.8% in 1996. The gross profit margin on furniture sales revenue for
1997 would have been 40.1% without the unusually large corporate sale.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Selling, General and Administrative Expenses. Selling, general and
administrative expenses totaled $165,019 or 57.5% of total revenue in 1997 as
compared to $136,536 or 58.3% of total revenue in 1996. This percentage decrease
is attributed to the efficiencies gained in California by integrating Evans
Rents, as well as the growth and productivity of the startups the Company opened
in prior years. In addition, 1996 included $425 of certain charges associated
with duplicate showroom closings related to the acquisition of Evans Rents.
Operating Earnings. As a result of the changes in revenue, gross margin and
selling, general and administrative expenses discussed above, operating earnings
increased to $46,308, or 16.1% of total revenue in 1997 from $35,448, or 15.1%
of total revenue in 1996.
Interest Expense, Net. Interest expense increased to $8,374 in 1997 from $8,251
in 1996.
Furniture Purchases. Furniture purchases totaled $76,010 in 1997, a decrease of
1.7% from the $77,323 purchased in 1996. Purchases in 1996 were significantly
higher as the Company converted the Evans Rents business to the CORT furniture
line. In 1997, furniture purchases supported normal growth and replenishment of
furniture which has been sold or disposed.
YEAR ENDED DECEMBER 31, 1996 AS COMPARED
TO YEAR ENDED DECEMBER 31, 1995
Revenue. Total revenue increased 30.6% to $234,149 in 1996 from $179,309 in
1995. Furniture rental revenue for the year was $191,560, a 34.9% increase from
$141,988 in 1995. Rental revenue growth before the impact of the acquisitions of
Evans Rents and certain assets and liabilities of AFRA Enterprises, Inc. and
Apartment Furniture Rental Associates ("AFR"), estimated by excluding all of the
Company's California and New York operations, was approximately 17.0% which
reflects growth in the number of leases as well as revenue per lease. Furniture
sales increased 14.1% to $42,589 in 1996 from $37,321 in 1995. Excluding the
impact of an unusually large corporate sale in the first quarter of 1995,
furniture sales would have shown an increase of 18.6%. This increase in
furniture sales is an effort of the Company to maintain a quality line-up of
rental furniture.
Gross Profit. Gross profit margin on total revenue increased to 73.4% for the
year ended December 31, 1996 from 72.0% for the year ended December 31, 1995.
The gross profit margin on furniture rental revenue increased to 80.7% in 1996
from 80.3% in 1995. Gross profit margin on furniture sales revenue increased to
40.8% in 1996 from 40.5% in 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses totaled $136,536 or 58.3% of total revenue in 1996 as
compared to $102,435 or 57.1% of total revenue in 1995. However, excluding $425
of certain charges associated with duplicate showroom closings related to the
acquisition of Evans Rents, selling, general and administrative expenses would
have been 58.1% of total revenue in 1996. The percentage increase is primarily
due to the impact of start-up operations in new markets.
Operating Earnings. As a result of the changes in revenue, gross margin and
selling, general and administrative expenses discussed above, operating earnings
increased to $35,448, or 15.1% of total revenue in 1996 from $26,721, or 14.9%
of total revenue in 1995. Excluding the second quarter charges related to the
acquisition of Evans Rents operating earnings would have been 15.3% of total
revenue in 1996.
Interest Expense, Net. Interest expense decreased to $8,251 in 1996 from $15,917
in 1995. The decrease is primarily the result of the early retirement of $50,000
in Senior Notes and the exchange of the Company's and CFR's subordinated
debentures for Common Stock, both of which occurred in the last quarter of 1995,
net of borrowings under the Revolving Credit Facility.
Furniture Purchases. Furniture purchases totaled $77,323 in 1996, an increase of
46.8% from the $52,677 purchased in 1995. Approximately $10,000 of purchases is
attributable to the acquisitions of Evans Rents and AFR and start-up operations
in new markets. The remaining increase supports the growth in furniture rental
revenue and replenishes furniture which has been sold or disposed.
12
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements are for purchases of rental
furniture. The Company purchases furniture throughout each year to replace
furniture which has been sold and to maintain adequate levels of rental
furniture to meet existing and new customer needs. Furniture purchases were
$52,677, $77,323 and $76,010 in 1995, 1996 and 1997, respectively. As the
Company's growth strategies continue to be implemented, furniture purchases are
expected to increase accordingly.
The Company's other capital requirements consist of purchases of property, plant
and equipment, including leasehold improvements, warehouse and office equipment,
standard programming enhancements and computer hardware necessary for
installation of the management information system in additional districts. Net
purchases of property, plant and equipment were $4,108, $5,652 and $7,638 in
1995, 1996 and 1997, respectively.
During 1995, 1996 and 1997, net cash provided by operations was $55,563, $78,374
and $100,639, respectively. During 1995, 1996 and 1997, net cash used in
investing activities was $54,237, $122,927 and $100,665, respectively,
consisting primarily of purchases of rental furniture and portfolio acquisitions
and in 1996, the acquisitions of Evans Rents and AFR. During 1995, 1996 and
1997, net cash provided (used) by financing activities was ($14,108), $44,297
and ($97), respectively. In 1995, $36,995 was provided by the initial public
offering, net of expenses, which was used along with other cash resources to pay
off $50,000 of the Senior Notes. In 1996, $32,672 was provided by the public
offering of common stock, net of expenses, which was used to repay indebtedness
under the revolving credit facility primarily due to the acquisition of Evans
Rents.
CFR entered into a revolving credit facility concurrently with the consummation
of the Company's initial public offering in November 1995. The revolving credit
facility provides a $70,000 line of credit, subject to certain borrowing base
restrictions, to meet acquisition and expansion needs as well as seasonal
working capital and general corporate requirements. In February 1998, the term
of the revolving credit facility was extended from November 1998 to February
2002, the amount of credit increased to $75 million and the borrowing base
restrictions were released. The revolving credit facility is no longer
collateralized by substantially all of CFR's assets but does restrict the
ability of CFR to pledge its assets as security. Borrowings under the revolving
credit facility bear interest at a fluctuating rate based on, at the Company's
option, either the lead lender's base rate or the London Interbank Offer Rate
(LIBOR). The average interest rate paid by CFR during 1995, 1996, and 1997 on
the revolving credit facility was 7.90%, 7.30% and 7.25%, respectively. A
commitment fee calculated based upon the unused portion of the revolving credit
facility is payable quarterly in arrears. The Company had $54,628 available
under the revolving credit facility at December 31, 1997.
The net proceeds from the initial public offering of the Company, together with
available cash and borrowings of $4,800 under the revolving credit facility were
used to retire $50,000 in aggregate principal amount of the Senior Notes in
1995. The Company is required to make annual interest payments on the remaining
$49,932 in aggregate principal amount of the Senior Notes outstanding totaling
approximately $6,000 annually, payable on March 1 and September 1, in arrears.
The Company will not be required to make principal repayments on the Senior
Notes until maturity.
The revolving credit facility and indenture governing the Senior Notes restricts
the ability of CFR to make advances and pay dividends to the Company.
The Company believes that future cash flows from operations, together with the
borrowings available under the revolving credit facility will provide the
Company with sufficient liquidity and financial resources to finance its growth
and satisfy its working capital requirements through the term of the revolving
credit facility. The Company may not be able to generate sufficient cash flows
from operations to pay the entire principal amount of the remaining $49,932 of
Senior Notes when due in September 2000. In such event, the Company intends to
refinance such amount primarily through additional equity offerings or
alternative forms
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
of debt financing. However, there can be no assurance that the Company will be
able to obtain financing on acceptable terms.
The Internal Revenue Service ("IRS") has proposed the disallowance of certain
deductions taken by Fairwood Corporation for a consolidated tax group of which
CFR was previously a member (the "Former Group") through the year ended December
31, 1988. The IRS challenge includes the assertion that certain interest
deductions taken by the Former Group should be recharacterized as non-deductible
dividend distributions and that deductions for certain expenses related to the
acquisition of Mohasco Corporation (now Consolidated Furniture Corporation
("Consolidated")), CFR's former shareholder, be disallowed. Under IRS
regulations, the Company and each other member of the Former Group is severally
liable for the full amount of any Federal income tax liability of the Former
Group while CFR was a member of the Former Group, which could be as much as
approximately $35 million for such periods (including interest through December
31, 1997). Under the agreement of sale for CFR, Consolidated agreed to indemnify
the Company in full for any consolidated tax liability of the Former Group for
the years during which CFR was a member of the Former Group. In addition, the
Company may have rights of contribution against other members of the Former
Group if the Company were required to pay more than its equitable share of any
consolidated tax liability. Fairwood Corporation has indicated to the Company
that it has tentatively reached an agreement in principle with the IRS Appeals
Officer handling the case regarding a settlement of the principal issues in the
case. A final settlement on that basis would be substantially less than the
liability that would result from the proposed adjustments. The terms of such a
tentative settlement are subject to further review by the IRS and by the Joint
Committee on Taxation, and no assurance can be given that any settlement will be
reached with the IRS. The Company is not in a position to determine the probable
outcome and its impact on the Company's consolidated financial statements, if
any.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income" ("Statement 130"). Statement 130 establishes
standards for the reporting and display of comprehensive income and its
components in the financial statements. The Company is required to adopt the
provisions of Statement 130 for the year ending December 31, 1998. Earlier
application is permitted; however, upon adoption of Statement 130, CORT will be
required to reclassify previously reported annual and interim financial
statements. CORT believes that the disclosure of comprehensive income in
accordance with the provisions of Statement 130 will impact the manner of
presentation of its financial statements as currently and previously reported.
YEAR 2000 COMPLIANCE
The Company has evaluated the costs necessary to make its computer systems Year
2000 compliant. The bulk of these costs are expected to be incurred during 1998
and are not expected to have a material impact on the Company's cash flows,
results of operations or financial condition.
INFLATION AND GENERAL ECONOMIC CONDITIONS
Historically, the Company has been able to offset increases in furniture prices
with increases in rental rates. Management believes that increases in new
furniture prices have averaged less than the overall inflation rate over the
last five years. In periods of high inflation, the Company has historically
achieved higher margins on its clearance center sales. A sustained recession
with little or no new job growth may have a material adverse affect on the
Company's future opportunities for sustained growth.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report includes certain
forward-looking statements as such term is defined in Section 27A of the
Securities Act and Section 21E of the Exchange Act. These forward-looking
statements involve certain risks and uncertainties, including but not limited to
acquisitions, additional financing requirements, development of new products and
services, the effect of competitive products and pricing and the effect of
general economic conditions, that could cause actual results to differ
materially from those in such forward-looking statements.
14
<PAGE>
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
December 31,
---------------------
1996 1997
---- ----
ASSETS
Cash and cash equivalents .............................. $ 123 $ --
Accounts receivable, less allowance for
doubtful accounts
of $1,906 and $2,891 in 1996 and 1997,
respectively ......................................... 11,011 13,521
Prepaid expenses ....................................... 4,224 4,127
Rental furniture, net (note 2) ......................... 147,161 164,323
Property, plant and equipment, net (note 4) ............ 35,667 38,777
Other receivables and assets, net (note 6) ............. 3,815 3,183
Goodwill, net of accumulated amortization
of $2,678 and $4,224 in 1996 and 1997,
respectively (note 12) ............................... 45,198 53,910
------ ------
$247,199 $277,841
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ....................................... $ 4,157 $ 5,551
Rental security deposits ............................... 7,184 7,978
Accrued expenses (note 10) ............................. 27,491 27,936
Deferred rental revenue ................................ 7,174 9,239
Long-term debt (note 6) ................................ 65,600 63,132
Deferred income taxes (note 5) ......................... 10,441 14,673
------ ------
122,047 128,509
------- -------
Commitments and contingencies
(notes 5, 7 and 9)
Stockholders' equity (notes 3, 6, 8, and 11):
Common stock, voting, $.01 par value,
20,000,000 shares authorized, 12,674,381
and 12,869,306 shares issued and outstanding ....... 127 129
Common stock, Class B, nonvoting, $.01 par
value, 20,000,000 shares authorized, none
issued and outstanding ............................. -- --
Additional paid-in capital ........................... 101,155 103,007
Retained earnings .................................... 23,870 46,196
------ ------
Total stockholders' equity ...................... 125,152 149,332
------- -------
$247,199 $277,841
======== ========
See accompanying notes to consolidated financial statements.
15
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
Year ended December 31,
--------------------------------
1995 1996 1997
---- ---- ----
Revenue:
Furniture rental ........................... $141,988 $191,560 $237,212
Furniture sales ............................ 37,321 42,589 50,006
------ ------ ------
Total revenue ............................ 179,309 234,149 287,218
------- ------- -------
Operating costs and expenses:
Cost of furniture rental ................... 27,950 36,958 45,634
Cost of furniture sales .................... 22,203 25,207 30,257
Employee, delivery and advertising
expenses ................................. 72,379 95,204 114,674
Occupancy, utilities and nonrental
depreciation ............................. 16,724 22,722 27,747
Amortization of goodwill ................... 662 961 1,546
Other operating expenses ................... 12,670 17,649 21,052
------ ------ ------
Total costs and expenses ................. 152,588 198,701 240,910
------- ------- -------
Operating earnings ....................... 26,721 35,448 46,308
Interest expense, net ........................ 15,917 8,251 8,374
------ ----- -----
Income before income taxes and
extraordinary loss ...................... 10,804 27,197 37,934
Income tax expense (note 5) .................. 4,586 11,261 15,608
----- ------ ------
Income before extraordinary loss ......... 6,218 15,936 22,326
Extraordinary loss on early retirement
of debt, net of income tax benefit
of $2,762 (notes 5 and 6) .................. 4,143 -- --
----- ------ ------
Net income ............................... $ 2,075 $ 15,936 $ 22,326
======== ======== ========
Earnings per common share before
extraordinary loss (note 13) ............... $ 1.26 $ 1.40 $ 1.74
Extraordinary loss per common share .......... .62 -- --
-------- -------- --------
Earnings per common share .................... $ .64 $ 1.40 $ 1.74
======== ======== ========
Weighted average number of common
shares used in computation ................. 6,688 11,416 12,804
----- ------ ------
Earnings per common share before
extraordinary loss--assuming dilution ...... $ 1.11 $ 1.31 $ 1.67
Extraordinary loss per common
share--assuming dilution ................... .55 -- --
-------- -------- --------
Earnings per common
share--assuming dilution ................... $ .56 $ 1.31 $ 1.67
======== ======== ========
Weighted average number of common
shares used in computation--
assuming dilution .......................... 7,578 12,144 13,378
----- ------ ------
See accompanying notes to consolidated financial statements.
16
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Retained Stockholders'
Stock Capital Earnings Equity
----- ------- -------- ------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 ..............$ 42 $ 1,062 $ 5,859 $ 6,963
Net income ............................ -- -- 2,075 2,075
Issuance of common stock from public
offering, net of expenses ........... 34 36,961 -- 36,995
Issuance of common stock from
exercise of stock options ........... -- 32 -- 32
Issuance of common stock from
exercise of warrants ............... 1 17 -- 18
Issuance of common stock in debt
to equity exchange .................. 27 29,311 -- 29,338
----- ------ ------ ------
Balance, December 31, 1995 .............. 104 67,383 7,934 75,421
----- ------ ----- ------
Net income ............................ -- -- 15,936 15,936
Income tax benefit from stock
options exercised ................... -- 571 -- 571
Issuance of common stock from
public offering, net of expenses .... 19 32,653 -- 32,672
Issuance of common stock from
exercise of stock options ........... 1 487 -- 488
Issuance of common stock from
exercise of warrants ................ 3 61 -- 64
---- ------- ------ -------
Balance, December 31, 1996 .............. 127 101,155 23,870 125,152
---- ------- ------ -------
Net income ............................ -- -- 22,326 22,326
Income tax benefit from stock
options exercised ................... -- 1,177 -- 1,177
Issuance of common stock from
exercise of stock options ........... 1 660 -- 661
Issuance of common stock from
exercise of warrants ................ 1 15 -- 16
---- -------- ------ -------
Balance, December 31, 1997 ..............$ 129 $103,007 $ 46,196 $149,332
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1995 1996 1997
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net income ..................................... $ 2,075 $ 15,936 $ 22,326
Proceeds of disposals of rental
furniture in excess of gross profit ........... 21,455 24,118 27,697
Adjustments to reconcile net income
to net cash provided by operating activities:
Extraordinary loss on early
retirement of debt .......................... 4,143 -- --
Depreciation and amortization:
Rental furniture ........................... 19,551 26,887 33,704
Other depreciation and amortization ........ 2,601 3,804 4,871
Goodwill ................................... 662 961 1,546
Deferred financing fees .................... 729 698 726
Discount on junior subordinated debentures . 65 -- --
Rental furniture inventory shrinkage ......... 1,838 2,261 3,567
Deferred income taxes ........................ 2,811 2,990 3,972
Pay-in-kind interest converted to
long-term debt .............................. 3,598 -- --
Changes in assets and liabilities:
Accounts receivable ........................ (547) (2,795) (364)
Prepaid expenses ........................... (998) (8) 195
Other receivables and assets ............... (1,190) 27 83
Accounts payable, accrued expenses
and rental security deposits, net ......... (1,768) 1,746 262
Deferred rental revenue .................... 538 1,749 2,054
------ ----- -----
Net cash provided by
operating activities .................... 55,563 78,374 100,639
------ ------ -------
Cash flows from investing activities:
Purchases of rental furniture .................. (52,677) (77,323) (76,010)
Purchases of portfolio acquisitions ............ (1,476) (2,790) (16,851)
Purchases of property, plant and equipment ..... (4,521) (6,238) (8,628)
Sale of property, plant and equipment .......... 413 586 990
Purchase of Evans Rents ........................ -- (27,778) --
Purchase of AFR ................................ -- (9,384) (166)
Purchase of short-term investments ............. (1,024) -- --
Sale of short-term investments ................. 5,048 -- --
----- ------ ------
Net cash used in
investing activities .................... (54,237) (122,927) (100,665)
Cash flows from financing activities:
Repayments of Senior Notes ..................... (50,287) (573) (68)
Payments to retire Senior Notes ................ (4,998) -- --
Payment of deferred financing fees ............. -- (154) --
Proceeds from issuance of long-term debt ....... 332 -- --
Borrowings on the line of credit ............... 4,800 87,400 54,200
Repayments on the line of credit ............... (1,000) (75,600) (56,600)
Issuance of common stock ....................... 37,045 33,224 677
Other .......................................... -- -- 1,694
------ ------ -----
Net cash provided (used) by
financing activities .................... (14,108) 44,297 (97)
------- ------ ------
Net increase (decrease) in
cash and cash equivalents ............... (12,782) (256) (123)
Cash and cash equivalents at
beginning of year .............................. 13,161 379 123
------ ------ ------
Cash and cash equivalents at end of year ......... $ 379 $ 123 --
========= ========= ======
Supplemental disclosures of cash flow
information:
Cash paid for:
Interest ....................................... $ 13,408 $ 7,487 $ 7,664
Income taxes ................................... 2,161 8,089 11,626
Noncash financing activities:
Tax benefit from exercise of stock options ..... $ -- $ 571 $ 1,177
Tax benefit from exchange of debt for equity ... 741 -- --
Exchange of debt for equity (note 6) ........... 28,597 -- --
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
(1) FORMATION AND DESCRIPTION OF THE COMPANY
CORT Business Services Corporation, formerly New Cort Holdings Corporation (the
"Company"), was formed on March 29, 1993 and contemporaneously acquired all of
the stock of CORT Furniture Rental Corporation ("CFR"). The Company is a holding
company with no independent operations and no material assets other than its
ownership of all the outstanding capital stock of CFR. The Company is largely
dependent on the receipt of dividends or distributions from CFR to fund its
obligations. CFR is a provider of rental furniture, accessories and related
services to both corporate and individual customers. In addition, CFR sells
previously rented furniture.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation and Presentation
The consolidated financial statements as of December 31, 1996 and 1997, and for
the years ended December 31, 1995, 1996 and 1997, include the accounts of CORT
Business Services Corporation and its wholly owned subsidiaries. All significant
intercompany transactions have been eliminated.
(b) Accounting Estimates
The preparation of consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reported periods. Actual results could differ from these estimates.
(c) Rental Furniture
Rental furniture includes residential and office furniture which is rented to
customers or is available for rental and/or sale and is recorded at the lower of
depreciated cost or market value. Rental furniture is depreciated primarily on a
declining-balance method over 3 to 6 years, with an estimated salvage value of
25 to 40 percent of original cost. Accumulated depreciation on rental furniture
was $53,582,000 and $66,797,000 at December 31, 1996 and 1997, respectively.
Reserves for purchase options and shrinkage on rental furniture were $2,768,000
and $4,406,000 at December 31, 1996 and 1997, respectively. Furniture no longer
meeting rental standards is held for sale.
Furniture rentals are recognized as revenue in the month they are due. Rental
payments received prior to the month due are recorded as deferred rental
revenue. Cost of furniture rental includes depreciation expense, inventory
losses, repairs and maintenance, net book value of furniture sold under lease
purchase options and costs of accessories.
Certain of CFR's leases include purchase options whereby the customer can
receive title to the furniture upon satisfaction of certain conditions.
Generally, these leases are short term and must be extended by the customer in
order for the purchase option to apply.
CFR provides reserves to reduce the net book value of furniture under such
leases based on the length of time the furniture has been out on lease and the
likelihood of the exercise of the options.
The Company considers the proceeds from the sale of rental furniture as an
element of cash flow from operations. Accordingly, the proceeds received in
excess of the gross profit recognized on sales of rental furniture are added to
net income in deriving cash flow from operations in the accompanying
consolidated statements of cash flows.
(d) Property, Plant and Equipment
Property, plant and equipment is recorded at cost, or fair value if acquired
through a purchase business combination. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets as follows:
buildings 50 years; major roof renovations 10 years; furniture, fixtures,
machinery and equipment from 5 to 10 years; and leasehold improvements over the
term of the related leases.
(e) Goodwill
The excess of purchase cost over the fair value of net assets acquired
(goodwill) is amortized using the straight-line method over 20 to 40 years. The
Company evaluates the recoverability of its goodwill annually. In making such
evaluation, the Company compares certain financial indicators such as expected
undiscounted future revenues and net cash flows to the carrying amount of
goodwill. Impairment losses, if any, are measured as the excess of the carrying
amount of goodwill over estimated fair market value.
(f) Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and investments having a
maturity of three months or less on the date of purchase. Cash and cash
equivalents at December 31, 1996 consisted primarily of overnight repurchase
funds.
(g) Rental Security Deposits
The Company may require a non-interest bearing security deposit of one month's
rent based on the Company's evaluation of the credit worthiness of the customer.
The security deposit is returned at the end of the lease provided that all lease
terms have been satisfied.
(h) Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," encourages, but does not require companies to record stock-based
employee compensation plans at fair value. The Company has elected to account
for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation cost for
employee stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of the grant over the exercise price an
employee must pay to acquire the stock.
19
<PAGE>
(i) Income Taxes
Income taxes are reported under the asset and liability method, whereby 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. 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 as income in the period that includes the
enactment date.
(j) Deferred Financing Fees
Costs incurred with the issuance of long-term debt are capitalized and amortized
over the term of the related debt using a method which approximates the
effective interest method.
(k) Earnings Per Common Share
Earnings per common share is computed by dividing net income available to common
stockholders by the weighted average number of shares of common stock
outstanding during the year. Earnings per common share--assuming dilution is
computed by dividing net income available to common stockholders by the weighted
average number of shares of common stock and dilutive potential common stock.
Dilutive securities are comprised entirely of stock options and warrants. The
Company has no other potentially dilutive securities.
In connection with the Company's initial public offering of Common Stock, the
Company exchanged CFR's 14% Senior Subordinated Pay-In-Kind Notes, the Company's
14.5% Subordinated Debentures, the Company's 15% Junior Subordinated Debentures,
including the unamortized discount, and accrued interest on all such debentures
for 2,728,167 shares of Common Stock. For purposes of the computations of
earnings per common share for 1995, the Company has assumed that the exchange
occurred as of January 1, 1994 for 2,090,591 shares of Common Stock.
(l) Advertising costs
Costs incurred for producing advertising are generally expensed when incurred.
Costs of yellow pages and brochures are deferred and amortized over the period
the material is in use. At December 31, 1996 and 1997, approximately $1,642,000
and $1,962,000 of deferred advertising expenses were reported in prepaid
expenses. Advertising expenses were approximately $9,676,000, $10,983,000 and
$12,632,000 for December 31, 1995, 1996 and 1997, respectively.
(3) PUBLIC OFFERINGS OF COMMON STOCK
In November 1995, the Company sold, through an underwritten initial public
offering, 3,402,260 common shares at $12.00 per share. The net proceeds of
approximately $36,995,000, net of associated underwriting discounts and other
expenses of the offering, were used to retire a portion of the Senior Notes (see
note 6).
In July 1996, the Company sold, through an underwritten public offering,
1,865,100 common shares at $18.75 per share. The net proceeds of approximately
$32,672,000, net of associated underwriting discounts and other expenses of the
offering, were used to repay indebtedness under the revolving credit facility
primarily due to the acquisition of Evans Rents (see note 12).
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
December 31, December 31,
1996 1997
---- ----
Land and land improvements .......... $ 7,003 $ 6,772
Buildings and improvements .......... 15,169 15,418
Machinery, equipment
and computers ..................... 9,142 12,500
Leasehold improvements .............. 11,515 14,657
Furniture and fixtures .............. 1,590 1,793
Other ............................... 1,371 2,391
----- -----
45,790 53,531
Accumulated depreciation
and amortization ................... 10,123 14,754
------ ------
$35,667 $38,777
======= =======
<PAGE>
(5) INCOME TAXES
Components of the expense for income taxes are summarized as follows (in
thousands):
Year ended Year ended Year ended
December 31, December 31, December 31,
1995 1996 1997
---- ---- ----
Current:
Federal ................ $ 1,257 $ 6,117 $ 9,037
State and local ........ 494 1,489 2,453
--- ----- -----
1,751 7,606 11,490
----- ----- ------
Deferred:
Federal ................ 2,410 3,107 3,515
State and local ........ 425 548 603
--- --- ---
2,835 3,655 4,118
----- ----- -----
Total expense before
extraordinary loss ..... $ 4,586 $11,261 $15,608
Income tax benefit from
extraordinary loss on early
retirement of debt ..... (2,762) -- --
------ ------ ------
Total income tax expense . $ 1,824 $11,261 $15,608
======= ======= =======
20
<PAGE>
The difference between the actual expense for taxes and taxes computed at the
Federal income tax rate of 34 percent in 1995, and 35 percent in 1996 and 1997
is summarized as follows (in thousands):
Year ended Year ended Year ended
December 31, December 31, December 31,
1995 1996 1997
---- ---- ----
Tax expense computed
at Federal rate ........... $3,673 $ 9,519 $13,277
State and local taxes, net
of Federal benefit ........ 607 1,324 1,986
Effects of goodwill
amortization .............. 225 336 395
Other, net .................. 81 82 (50)
----- ------ ------
Total expense before
extraordinary loss ...... $4,586 $11,261 $15,608
====== ======= =======
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below (in
thousands):
December 31, December 31,
1996 1997
---- ----
Deferred tax assets:
Accounts receivable, principally
due to allowance
for doubtful accounts ...................... $ 762 $ 1,156
Compensated absences, principally
due to accrual for financial
reporting purposes ......................... 748 845
Deferred financing fees ...................... 495 352
Deferred rental revenue ...................... 2,999 3,715
Reserve for unfavorable operating
lease and duplicate facilities ............. 3,592 2,829
Reserve for purchase options and
shrinkage on rental property ............... 1,107 1,762
Net operating loss carryforwards ............. 600 205
AMT credit carryforward ...................... 3,388 394
Other ........................................ 1,396 1,836
----- -----
Total gross deferred tax assets ............ 15,087 13,094
------ ------
Deferred tax liabilities:
Rental furniture, principally due
to differences in depreciation ............. 20,179 22,387
Property, plant and equipment,
principally due to differences
in depreciation ............................ 5,306 5,140
Other ........................................ 43 240
------ ------
Total gross deferred tax
liabilities .............................. 25,528 27,767
------ ------
Net deferred tax liability ................. $10,441 $14,673
======= =======
At December 31, 1997, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $500,000 which are available to
offset future Federal taxable income, if any, through 2007. In addition, the
Company has alternative minimum tax credit carryforwards of approximately
$394,000 which are available to reduce future Federal regular income taxes, if
any, over an indefinite period.
The Internal Revenue Service ("IRS") has proposed the disallowance of certain
deductions taken by Fairwood Corporation for a consolidated tax group of which
CFR was previously a member (the "Former Group") through the year ended December
31, 1988. The IRS challenge includes the assertion that certain interest
deductions taken by the Former Group should be recharacterized as non-deductible
dividend distributions and that deductions for certain expenses related to the
acquisition of Mohasco Corporation (now Consolidated Furniture Corporation
("Consolidated")), CFR's former shareholder, be disallowed. Under IRS
regulations, the Company and each other member of the Former Group is severally
liable for the full amount of any Federal income tax liability of the Former
Group while CFR was a member of the Former Group, which could be as much as
approximately $35 million for such periods (including interest through December
31, 1997). Under the agreement of sale for CFR, Consolidated agreed to indemnify
the Company in full for any consolidated tax liability of the Former Group for
the years during which CFR was a member of the Former Group. In addition, the
Company may have rights of contribution against other members of the Former
Group if the Company were required to pay more than its equitable share of any
consolidated tax liability. Fairwood Corporation has indicated to the Company
that it has tentatively reached an agreement in principle with the IRS Appeals
Officer handling the case regarding a settlement of the principal issues in the
case. A final settlement on that basis would be substantially less than the
liability that would result from the proposed adjustments. The terms of such a
tentative settlement are subject to further review by the IRS and by the Joint
Committee on Taxation, and no assurance can be given that any settlement will be
reached with the IRS. The Company is not in a position to determine the probable
outcome and its impact on the Company's consolidated financial statements, if
any.
(6) LONG-TERM DEBT
The outstanding long-term debt was as follows (in thousands):
December 31, December 31,
1996 1997
---- ----
Revolving credit facility .......... $15,600 $13,200
Senior Notes ....................... 50,000 49,932
------ ------
$65,600 $63,132
======= =======
CFR entered into a revolving credit facility with a group of banks concurrently
with the consummation of the initial public offering of the Company. The
revolving credit facility, for which the Company is guarantor, provides a $70
million line of credit, subject to certain borrowing base restrictions, to meet
acquisition and expansion needs as well as seasonal working capital and general
corporate requirements. The revolving credit facility is collateralized by
substantially all of CFR's assets. In February 1998,
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the term of the revolving credit facility was extended from November 1998 to
February 2002, the amount of credit increased to $75 million and the borrowing
base restrictions were released. The revolving credit facility is no longer
collateralized by substantially all of CFR's assets but does restrict the
ability of CFR to pledge its assets as security. Borrowings under the revolving
credit facility bear interest at a fluctuating rate based on, at the Company's
option, either the lead lender's base rate or the London Interbank Offer Rate
(LIBOR). The average interest rate paid by CFR during 1995, 1996 and 1997 on the
revolving credit facility was 7.90%, 7.30% and 7.25%, respectively. A commitment
fee calculated based upon the unused portion of the revolving credit facility is
payable quarterly in arrears.
The Senior Notes bear interest at 12 percent with interest payable semi-annually
on March 1 and September 1. The Senior Notes are unsecured and are due September
1, 2000. The Company may not redeem the Senior Notes prior to September 1, 1998
except in certain circumstances. Early redemptions must be made at a premium.
With the proceeds of the initial public offering, borrowings under the revolving
credit facility and cash on hand, $20 million in aggregate principal amount of
Senior Notes were retired at a repurchase price of 108% of the principal amount,
plus accrued and unpaid interest thereon, and $30 million in aggregate principal
amount of Senior Notes were retired at a redemption price of 110% of the
principal amount plus accrued and unpaid interest thereon.
The revolving credit facility and indenture governing the Senior Notes restrict
the ability of CFR to make advances and pay dividends to the Company.
As a result of the early retirement of the Senior Notes in 1995, the Company
recognized a loss of $4,143,000, net of taxes, which has been reflected in the
Company's consolidated statements of operations as an extraordinary loss for the
year ended December 31, 1995. The extraordinary loss includes $4,600,000 of
redemption premiums on the Senior Notes retirement, the write-off of
approximately $1,907,000 of deferred financing fees and approximately $398,000
of other associated costs.
Contemporaneously with the initial public offering, CFR's 14% Senior
Subordinated Pay-In-Kind Notes, the Company's 14.5% Subordinated Debentures and
the Company's 15% Junior Sub-ordinated Debentures (collectively the "Debt
Securities"), due to controlling and certain other stockholders of the Company,
were exchanged for an aggregate of 2,728,167 shares of Common Stock, which
represented all principal, accrued interest and unamortized discount of the Debt
Securities. During the year ended December 31, 1995, the aggregate interest
expense incurred on the Debt Securities was approximately $3,598,000, all of
which was settled through the issuance of additional debentures.
The estimated fair value of the Company's consolidated long-term debt based on
the quoted market price and other available information was approximately
$71,100,000 and $68,100,000 at December 31, 1996 and 1997, respectively.
Other assets include debt issuance costs, net of accumulated amortization, of
$1,990,000 and $1,264,000 at December 31, 1996 and 1997, respectively.
(7) EMPLOYEE BENEFIT PLANS
The Company maintains an investment and profit-sharing defined contribution
retirement plan. All the Company's employees are eligible to participate after
one year of service. The Company makes a 50 percent matching contribution on the
first four percent of employee contributions to the plan. The Company may, at
its discretion, make additional contributions based on the Company's
performance. The aggregate plan contributions were approximately $940,000,
$1,080,000, and $1,215,000 for the years ended December 31, 1995, 1996, and
1997, respectively.
The Company maintains a Supplemental Executive Retirement Plan ("SERP") for
certain key present and former management executives. The SERP consists of both
a defined benefit and a defined contribution plan. The annual costs of the plan
were approximately $148,000, $119,000, and $152,000 for the years ended December
31, 1995, 1996, and 1997, respectively. The accrued, unfunded liability under
the plan as of December 31, 1997 was not significant.
The Company has maintained an employee stock purchase plan, since July 1, 1997.
All employees are eligible to participate in the plan after 90 days of service.
The price of the shares purchased in the open market is the average price paid
for all the shares purchased by the broker on the investment date. The Company
assumes the cost of brokerage commissions and service charges for all purchases
made under the plan. During 1997, 3,174 shares of Common Stock were purchased
through the plan at an average price of $37.30 per share.
(8) STOCK OPTIONS
At December 31, 1997, the Company had four stock-based compensation plans, which
were adopted by the Board of Directors and approved by the Company's
stockholders. These plans are described below. The Company applies APB Opinion
No. 25 and related Interpretations in accounting for its plans. Accordingly, as
all options have been granted at exercise prices equal to the fair market value
as of the date of grant, no compensation cost has been recognized under these
plans in the accompanying consolidated financial statements. Had compensation
cost for the Company's four stock-based compensation plans been determined
consistent with FASB Statement No. 123, the Company's net income and earnings
per common share would have been reduced to the pro forma amounts indicated
below (in thousands, except per share data):
22
<PAGE>
Year ended Year ended Year ended
December 31, December 31, December 31,
1995 1996 1997
---- ---- ----
Net income
As reported ............... $2,075 $15,936 $22,326
Pro forma ................. $1,697 $15,327 $21,461
Earnings per common share
As reported ............... $ .64 $ 1.40 $ 1.74
Pro forma ................. $ .25 $ 1.34 $ 1.68
Earnings per common share
assuming dilution
As reported ............. $ .56 $ 1.31 $ 1.67
Pro forma ............... $ .22 $ 1.26 $ 1.60
The effects of compensation cost as determined under FASB Statement No. 123 on
net income in 1995, 1996 and 1997 may not be representative of the effects on
pro forma net income for future periods.
Stock Option and Stock Purchase Plan
Under the terms of the Stock Option and Stock Purchase Plan (the "1994 Plan"),
certain key employees were granted, at the discretion of the Board of Directors,
the right to purchase varying amounts of Debt Securities and options to purchase
Common Stock. Concurrent with the adoption of the 1994 Plan, all members of
management who previously held Common Stock of the Company gave up their rights
to such stock.
At the date of grant, each employee had the option to purchase immediately in
cash all granted amounts of the Debt Securities, or defer purchase of these
securities, plus interest, over a five-year vesting period. In either case,
assuming all obligations to purchase the Debt Securities were fulfilled, the
exercise price of the options to purchase Common Stock was fixed and the options
are exercisable over a ten-year period.
Contemporaneously with the initial public offering, all Debt Securities were
exchanged for Common Stock (see note 6). There is no further obligation to
purchase Debt Securities under the 1994 Plan.
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in 1995: dividend yield of 0%,
expected volatility of 30%, risk-free interest rate of 7.63%, and expected life
of six years.
1995 Stock-Based Incentive Compensation Plan
The 1995 Stock-Based Incentive Compensation Plan (the "1995 Plan") became
effective on October 31, 1995. The 1995 Plan was amended in May 1997 to increase
the number of stock options available for grant. The 1995 Plan provides for the
granting of a maximum of 1,210,000 stock options to key employees of the
Company. The shares granted under the 1995 Plan may be in the form of deferred
stock, restricted stock, incentive stock options, non-qualified stock options or
stock appreciation rights. All awards made in 1995, 1996 and 1997 were in the
form of non-qualified stock options. The exercise price of an option under the
1995 Plan is equal to the fair market value of common stock on the date the
option is granted. An option under the 1995 Plan vests over a three-year period
and the expiration period may not exceed ten years.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1995, 1996 and 1997 respectively: 0% dividend
yield for all years; expected volatility of 30% for all years; risk-free
interest rates of 5.65%, 6.29% and 6.25%; expected lives of four years, five
years and six years, respectively.
1995 Directors Stock Option Plan
The 1995 Directors Stock Option Plan (the "1995 Director Plan") became effective
on October 18, 1995. The 1995 Director Plan provided for the granting of a
maximum of 50,000 stock options to non-employee directors of the Company. The
1995 Director Plan provided for automatic grants of options to purchase shares
of Common Stock on November 16, 1995 and 1996. The option exercise price per
share was equal to the fair market value of common stock on the date the option
was granted. All options granted will be vested on November 16,
1998. The expiration period may not exceed ten years.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1995 and 1996, respectively: 0% dividend yield
for both years; expected volatility of 30% for both years; risk-free interest
rates of 5.89% and 6.43%; and expected lives of seven years for both years.
1997 Directors Stock Option Plan
The 1997 Directors Stock Option Plan (the "1997 Director Plan") became effective
on May 14, 1997. The 1997 Director Plan provides for the granting of a maximum
of 50,000 stock options to non-employee directors of the Company. The 1997
Director Plan provides for automatic grants of options to purchase 2,000 shares
of Common Stock for each of the Company's non-employee directors on the business
day immediately following the Company's Annual Meeting of stockholders for
calendar years 1997, 1998, 1999, 2000 and 2001. The option price per share is
equal to the fair market value of common stock on the date the option is
granted. An option under the 1997 Director Plan vests over a three-year period
and the expiration period may not exceed ten years.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1997: 0% dividend yield; expected volatility of
30%; risk-free interest rate of 6.54% and expected life of seven years.
23
<PAGE>
Stock Option Activity Summary
The following table summarizes the Company's stock option plans:
<TABLE>
<CAPTION>
1994 Plan 1995 Plan 1995 Directors Plan 1997 Directors Plan
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted
Shares Average Shares Average Shares Average Shares Average
Under Exercise Under Exercise Under Exercise Under Exercise
Option Price Option Price Option Price Option Price
--------------------------------------------------------------------------------------------
Outstanding at
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1994 ................. 435,838 $0.26 -- -- -- -- -- --
Granted ........................... 245,794 1.10 439,800 $12.00 21,000 $12.00 -- --
Exercised ......................... (37,977) 0.86 -- -- -- -- -- --
Forfeited ......................... (16,099) 0.82 -- -- -- -- -- --
------- ----- ------- ------ ------ ------ ------ ------
Outstanding at
December 31, 1995 ................. 627,556 $0.57 439,800 $12.00 21,000 $12.00 -- --
Granted ........................... -- -- 131,300 19.87 10,000 22.75 -- --
Exercised ......................... (52,558) 0.33 (39,501) 12.00 -- -- -- --
Forfeited ......................... -- -- -- -- -- -- -- --
------- ----- ------- ------ ------ ------ ------ ------
Outstanding at
December 31, 1996 ................. 574,998 $0.59 531,599 $13.94 31,000 $15.47 -- --
Granted ........................... -- -- 106,500 25.68 -- -- 10,000 $25.50
Exercised ......................... (70,565) 0.55 (50,115) 12.55 -- -- -- --
Forfeited ......................... (17,937) 0.79 (2,833) 18.31 -- -- -- --
------- ----- ------- ------ ------ ------ ------ ------
Outstanding at
December 31, 1997 ................. 486,496 $0.59 585,151 $16.18 31,000 $15.47 10,000 $25.50
------- ----- ------- ------ ------ ------ ------ ------
Options exercisable at:
December 31, 1995 ................. 627,556 -- -- --
December 31, 1996 ................. 574,998 120,280 7,003 --
December 31, 1997 ................. 486,496 255,420 19,002 --
Weighted average fair value
at date of grant of options
granted during the year ended:
December 31, 1995 ............... $ 0.57 $ 3.90 $ 5.43 --
December 31, 1996 ............... -- 7.58 10.59 --
December 31, 1997 ............... -- 11.01 -- $12.00
</TABLE>
The following table summarizes information about the Company's stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------------------------- ----------------------------------------
Weighted Average
Range of Remaining Contractual Weighted Average Weighted Average
Exercise Prices Number Outstanding Life (years) Exercise Price Number Exercisable Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.2587-1.0980 486,496 6.45 $ 0.59 486,496 $ 0.59
12.00 373,794 7.88 12.00 228,794 12.00
18.00- 22.75 252,357 9.32 22.65 45,628 20.28
--------- -------
1,112,647 760,918
--------- -------
</TABLE>
24
<PAGE>
(9) RENTAL COMMITMENTS
The Company leases certain warehouse and showroom facilities and equipment.
Future minimum lease payments at December 31, 1997 under all noncancelable
operating leases are as follows (in thousands):
1998 .............................................. $16,507
1999 .............................................. 15,698
2000 .............................................. 13,410
2001 .............................................. 11,594
2002 .............................................. 9,636
Thereafter ........................................ 26,729
------
Total minimum lease payments .................... 93,574
Less sublease rentals ............................. 1,929
------
Net minimum operating lease payments ............ $91,645
=======
Rental expense, net of sublease income, was approximately $9,177,000,
$12,145,000 and $15,964,000 for the years ended December 31, 1995, 1996 and
1997, respectively, (including approximately $1,826,000, $2,460,000 and
$3,880,000 for short-term vehicle leases).
(10) ACCRUED EXPENSES
Accrued expenses are comprised of (in thousands):
December 31, December 31,
1996 1997
---------------------------
Accrued salaries, wages
and incentives ..................... $ 6,301 $ 7,478
Accrued interest ..................... 2,078 2,065
Accrued vacation ..................... 1,871 2,113
Reserves for unfavorable operating
lease and duplicate facilities .... 8,981 7,073
Accrued property, payroll, sales
and use taxes ..................... 1,971 2,350
Acquisition holdbacks ............... 846 887
Other accrued expenses .............. 5,443 5,970
----- -----
$27,491 $27,936
======= =======
(11) WARRANTS TO PURCHASE COMMON STOCK
At December 31, 1996 and 1997, 908,410 and 433,800 warrants to purchase an
aggregate of 148,070 and 75,915 shares of Common Stock, respectively, were
outstanding. For the years ended December 31, 1996 and 1997, 1,853,790 and
474,610 warrants were exercised for an aggregate of 302,164 and 78,504 shares of
the Common Stock, respectively. Each warrant is exercisable at a price of
$.0345. The warrants are subject to certain anti-dilution provisions relating to
future issuances of the Common Stock.
(12) ACQUISITIONS
Evans Rents
On April 24, 1996, the Company acquired Evans Rents, a provider of rental
furniture in California, for approximately $27,778,000, including costs of
acquisition, in a transaction accounted for as a purchase business combination.
As such, the fair value of Evans Rents' assets and liabilities were recognized
as of April 24, 1996, and the Company's results of operations include Evans
Rents' operations subsequent to that date. The Company financed the acquisition
of Evans Rents with borrowings under the revolving credit facility.
The fair value allocated to the identifiable assets and liabilities of Evans
Rents was determined by independent appraisal. As part of the purchase price
allocation, the Company recorded a reserve for estimated costs to be incurred in
the consolidation of duplicate Evans Rents' facilities and termination of
employment of certain members of Evans Rents' management who were not replaced.
Based on the allocation of the purchase price to the net assets acquired,
goodwill of approximately $14,220,000 was recorded. Such goodwill is being
amortized on a straight-line basis over 40 years. The purchase price has been
allocated as follows (in thousands):
<PAGE>
Cash ................................................. $ 25
Accounts receivable .................................. 1,967
Prepaid expenses and other assets .................... 182
Rental property ...................................... 15,066
Property, plant and equipment ........................ 1,932
Deferred income taxes ................................ 2,600
Goodwill ............................................. 14,220
Accounts payable and accrued expenses ................ (2,235)
Notes payable ........................................ (573)
Deferred revenue ..................................... (1,543)
Other liabilities, including reserves for duplicate
facilities and employee severance .................. (3,863)
------
$27,778
=======
The following unaudited pro forma condensed consolidated financial information
presents the combined results of operations of the Company and Evans Rents as if
the acquisition had occurred as of January 1, 1995. This information gives
effect to certain adjustments including amortization of goodwill, elimination of
certain compensation expense, interest expense on borrowings and related income
tax effects. The pro forma consolidated financial information does not
necessarily reflect the results of operations that would have occurred had the
Company and Evans Rents constituted a single entity during the periods.
25
<PAGE>
Year ended Year ended
December 31, December 31,
1995 1996
----------------------------------------
(in thousands, except per share amounts)
Total revenue ........................ $209,814 $244,069
Income before extraordinary loss ..... 7,176 16,432
Earnings before extraordinary loss
per common share .................... $ 1.40 $ 1.44
Weighted average number of shares
used in computation ................. 6,688 11,416
Earnings before extraordinary
loss per common share--
assuming dilution ................... $ 1.24 $ 1.35
Weighted average number of shares
used in computation--
assuming dilution ................... 7,578 12,144
AFR
On August 5, 1996, the Company acquired certain assets of AFR, a provider of
rental furniture in the New York City metropolitan area, for $9,384,000,
including costs of acquisition, in a transaction accounted for as a purchase
business combination. Based on the allocation of the purchase price to the net
assets acquired, goodwill of approximately $6,183,000 was recorded. Such
goodwill is being amortized on a straight-line basis over 40 years.
Other Acquisitions
In 1997, the Company acquired certain assets of Alco Trade Show Services, Delta
Furniture Rentals, Inc. and Integrity Furniture Inc. In addition, the Company
acquired the stock of Levitt Investment Company and the McGregor Corporation.
Each of these transactions were accounted for as a purchase business
combination. Based on the allocation of the purchase price to the net assets
acquired, a total of approximately $10,092,000 of goodwill was recorded. Such
goodwill is being amortized on a straight line basis over 20-40 years.
(13) EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
Year ended Year ended Year ended
December 31, December 31, December 31,
1995 1996 1997
---- ---- ----
(in thousands, except per share amounts)
Income before
extraordinary loss ............. $6,218 $15,936 $22,326
Increase in earnings, net
of taxes, resulting from
the Exchange of Common
Stock (note 1) ................. 2,200 -- --
----- ------ ------
Income applicable to common
shares before
extraordinary loss ............. 8,418 15,936 22,326
Extraordinary loss,
net of taxes ................... 4,143 -- --
----- ------ ------
Net income applicable to
common shares .................. $4,275 $15,936 $22,326
====== ======= =======
Weighted average shares
outstanding .................... 6,688 11,416 12,804
Effect of dilutive securities:
Stock options .................. 527 457 489
Warrants ....................... 363 271 85
----- ------ ------
Weighted average shares and
assumed conversions ............ 7,578 12,144 13,378
===== ====== ======
Earnings per common share
before extraordinary loss ...... $ 1.26 $ 1.40 $ 1.74
Extraordinary loss
per share ...................... 0.62 -- --
----- ------ ------
Earnings per common share ........ $ 0.64 $ 1.40 $ 1.74
======= ======== ========
Earnings per common share
before extraordinary loss--
assuming dilution .............. $ 1.11 $ 1.31 $ 1.67
Extraordinary loss per share--
assuming dilution .............. $ 0.55 -- --
----- ------ ------
Earnings per common share--
assuming dilution .............. $ 0.56 $ 1.31 $ 1.67
======= ======== ========
26
<PAGE>
(14) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
------------------------------------------------------------------
March 31, June 30, September 30, December 31,
1997 1997 1997 1997
---- ---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Furniture rental revenue ................................ $55,553 $59,679 $61,135 $60,845
Furniture sales revenue ................................. 11,748 14,802 12,253 11,203
Operating earnings ...................................... 10,411 11,743 12,103 12,051
Income before income taxes .............................. 8,426 9,490 9,978 10,040
Net income .............................................. 4,930 5,607 5,876 5,913
Earnings per common share ............................... $ .39 $ .44 $ .46 $ .46
Earnings per common share--assuming dilution ............ $ .37 $ .42 $ .44 $ .44
Three months ended
------------------------------------------------------------------
March 31, June 30, September 30, December 31,
1996 1996 1996 1996
---- ---- ---- ----
(in thousands, except per share amounts)
Furniture rental revenue ................................. $38,555 $46,882 $53,707 $52,416
Furniture sales revenue .................................. 10,214 11,226 10,900 10,249
Operating earnings ....................................... 7,172 8,205 10,030 10,041
Income before income taxes ............................... 5,391 5,941 7,838 8,027
Net income ............................................... 3,160 3,483 4,591 4,702
Earnings per common share ................................ $ .30 $ .33 $ .38 $ .37
Earnings per common share--assuming dilution ............. $ .28 $ .31 $ .36 $ .35
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
CORT Business Services Corporation and subsidiaries:
We have audited the accompanying consolidated balance sheets of CORT Business
Services Corporation and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 CORT Business
Services Corporation and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Washington, D.C.
February 13, 1998
27
<PAGE>
MARKET FOR COMMON STOCK OF THE REGISTRANT AND RELATED STOCKHOLDERS' MATTERS
COMMON STOCK
The Company's Common Stock, par value $.01 per share (the "Common Stock") trades
on the New York Stock Exchange under the symbol "CBZ". The following table sets
forth, for the period indicated, the high and low sales price per share of
Common Stock.
1996 1997
------------------------------------------
High Low High Low
------------------------------------------
1st Quarter ................ 19 1/2 15 3/4 25 1/2 20 3/4
2nd Quarter ................ 19 1/2 17 30 14/16 21 1/4
3rd Quarter ................ 20 3/4 18 1/4 43 1/4 27 13/16
4th Quarter ................ 22 7/8 19 3/4 41 6/16 32 7/16
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock to date. The
payment of dividends, if any, in the future is within the discretion of the
Board of the Directors and will depend on the Company's earnings, its capital
requirements and financial condition. It is the present intention of the Board
of Directors to retain all earnings, if any, for use in the Company's business
operations and accordingly, the Board of Directors does not expect to declare or
pay any dividends in the foreseeable future. In addition, as a holding company,
the Company's ability to pay dividends is dependent on the receipt of dividends
or advances from its wholly owned subsidiary, CFR. The revolving credit facility
and indenture governing the Senior Notes restrict the ability of CFR to make
advances and pay dividends to the Company.
HOLDERS
As of March 11, 1998, the Company had approximately 222 holders of record of its
Common Stock. The Company believes there are in excess of 1,400 beneficial
owners of its Common Stock.
CORT would like to express its appreciation to the following employees pictured
in the Annual Report:
Rick Bell Dwayne Elam Sue Leslie Britt Moser
Tony Bowden Stacy Ford Tom Mattingly James Nichols
Yleana Cordoves Brian Jones Crystal McCormick Bill Plasencia
Anthony D'Ali Saundra Howell Philip Miller Sophie Ou
Lynda Decker Peggy Krajewski Charles Mitchell Teri Waller
28
<PAGE>
<TABLE>
<CAPTION>
CORT BUSINESS SERVICES CORPORATION
<S> <C>
DIRECTORS
Keith E. Alessi
Chairman, President & CEO
TeleSpectrum Worldwide Inc.
Paul N. Arnold
President & Chief
Executive Officer of
CORT Business
Services Corporation
Bruce C. Bruckmann Officers of the Company: Front Row (left to right): Victoria L. Stiles, Michael
Managing Director of G. Connors, Frances Ann Ziemniak; Second Row (left to right): Paul N. Arnold,
Bruckmann, Rosser, Frank Martini, Lloyd Lenson; Back Row (left to right): Charles M. Egan, Kenneth
Sherrill & Co., Inc. W. Hemm, Anthony J. Bellerdine, Steven D. Jobes; Not pictured: Maureen C. Thune.
Michael A. Delaney
Managing Director of Citicorp
Venture Capital Ltd.
Charles M. Egan
Chairman of CORT Business
Services Corporation
Gregory B. Maffei
Chief Financial Officer
of Microsoft Corporation
James A. Urry
Vice President of Citicorp
Venture Capital Ltd.
</TABLE>
<TABLE>
<CAPTION>
OFFICERS CORPORATE DIRECTORY
<S> <C> <C>
Paul N. Arnold
President & Chief Executive Officer CORPORATE LEGAL COUNSEL CORPORATE HEADQUARTERS
Dechert Price & Rhoads 4401 Fair Lakes Court
Anthony J. Bellerdine Philadelphia, PA Suite 300
Group Vice President Fairfax, VA 22033
INDEPENDENT ACCOUNTANTS 703-968-8500
Michael G. Connors KPMG Peat Marwick LLP
Vice President--Real Estate Washington, DC STOCKHOLDER INQUIRIES
A copy of the annual report as filed
Charles M. Egan ANNUAL MEETING with the Securities and Exchange
Chairman CORT Business Services Commission on Form 10-K is
Corporation's Annual Meeting of available without charge, exclusive of
Kenneth W. Hemm Stockholders will be held on exhibits, upon written request to:
Group Vice President Tuesday, May 12, 1998 at 2:00 p.m. Vice President--Finance
at the Holiday Inn Fair Oaks, CORT Business Services Corporation
Steven D. Jobes 11787 Lee Jackson Highway, 4401 Fair Lakes Court
Vice President--Marketing, Fairfax, VA 22033. Suite 300
Merchandising, Sales & Fairfax, VA 22033
National Accounts REGISTRAR AND TRANSFER AGENT FAX: 703-968-8503
American Stock Transfer &
Lloyd Lenson Trust Company
Group Vice President 40 Wall Street Designed by Curran & Connors, Inc.
New York, NY 10005
Frank Martini
Group Vice President
Victoria L. Stiles
Vice President--Human Resources &
Corporate Risk Management
Maureen C. Thune
Controller & Assistant Secretary
Frances Ann Ziemniak Vice President--Finance,
Chief Financial Officer and Secretary
</TABLE>
<PAGE>
America's
National Furniture
Rental Company\tm
One hundred nine showrooms serving the following metropolitan areas:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
o Birmingham, AL o Orlando, FL o St. Paul, MN o Portland, OR
o Huntsville, AL o Pensacola, FL o St. Louis, MO o Philadelphia, PA
o Little Rock, AR o Tampa, FL o Charlotte, NC o Pittsburgh, PA
o Phoenix, AZ o Atlanta, GA o Durham, NC o Memphis, TN
o Los Angeles, CA o Chicago, IL o Raleigh, NC o Nashville, TN
o Orange County, CA o Indianapolis, IN o Newark, NJ o Austin, TX
o Sacramento, CA o Kansas City, KS o Albuquerque, NM o Corpus Christi, TX
o San Diego, CA o Lexington, KY o Las Vegas, NV o Dallas, TX
o San Francisco, CA o Louisville, KY o New York, NY o El Paso, TX
o San Jose, CA o Baton Rouge, LA o Westchester County, NY o Ft. Worth, TX
o Denver, CO o Lafayette, LA o Cincinnati, OH o Houston, TX
o Washington, DC o New Orleans, LA o Cleveland, OH o San Antonio, TX
o Wilmington, DE o Boston, MA o Columbus, OH o Salt Lake City, UT
o Clearwater, FL o Baltimore, MD o Dayton, OH o Richmond, VA
o Ft. Lauderdale, FL o Detroit, MI o Oklahoma City, OK o Virginia Beach, VA
o Jacksonville, FL o Minneapolis, MN o Tulsa, OK o Seattle, WA
o Miami, FL
</TABLE>
4401 Fair Lakes Court, Suite 300, Fairfax, Virginia 22033
Phone: 1-800-962-CORT
Internet Address: http://www.CORTI.com
EXHIBIT 21.1
LIST OF SUBSIDIARIES
CORT Furniture Rental Corporation
Levitt Investment Company
McGregor Corporation
EXHIBIT 23.1
ACCOUNTANTS' CONSENT AND REPORT ON SCHEDULES
The Board of Directors and Stockholders
CORT Business Services Corporation and subsidiaries:
The audits referred to in our report dated February 13, 1998 included the
related financial statement schedules as of December 31, 1997 and 1996, and for
each of the years in the three-year period ended December 31, 1997, included
herein. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits. In our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We consent to incorporation by reference in the registration statements on Form
S-3 (No. 33-99008) and on Forms S-8 (Nos. 33-72724, 333-15611, 333-15613) of
CORT Business Services Corporation of our reports dated February 13, 1998,
relating to the consolidated balance sheets of CORT Business Services
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1997, and all
related schedules, which reports appear, or are incorporated by reference, in
the December 31, 1997 annual report on form 10-K of CORT Business Services
Corporation.
KPMG Peat Marwick LLP
Washington, DC
March 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 0 123
<SECURITIES> 0 0
<RECEIVABLES> 16,412 12,917
<ALLOWANCES> 2,891 1,906
<INVENTORY> 164,323 147,161
<CURRENT-ASSETS> 0 0
<PP&E> 53,531 45,790
<DEPRECIATION> 14,754 10,123
<TOTAL-ASSETS> 277,841 247,199
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 129 127
<OTHER-SE> 149,203 125,025
<TOTAL-LIABILITY-AND-EQUITY> 277,841 247,199
<SALES> 50,006 42,589
<TOTAL-REVENUES> 287,218 234,149
<CGS> 30,257 25,207
<TOTAL-COSTS> 75,891 62,165
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 2,107 640
<INTEREST-EXPENSE> 8,374 8,251
<INCOME-PRETAX> 37,934 27,197
<INCOME-TAX> 15,608 11,261
<INCOME-CONTINUING> 22,326 15,936
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,326 15,936
<EPS-PRIMARY> 1.74 1.40
<EPS-DILUTED> 1.67 1.31
</TABLE>
