FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the fiscal year ended February 1, 1997.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
----------------
Commission file number 1-5392
AMERICAN STORES COMPANY
(Exact name of registrant as specified in its charter)
Delaware 87-0207226
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
709 East South Temple
Salt Lake City, Utah 84102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 539-0112
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock ($1 par value) Chicago Stock Exchange, Inc.
and New York Stock Exchange, Inc.
Preferred Share Purchase Rights Pacific Exchange, Inc.
Registered on: Philadelphia Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
None
Indicate by checkmark 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
AMERICAN STORES COMPANY
FORM 10-K
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 29, 1997:
Common Stock, $1 Par Value -- $5,991,112,220.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of March 29, 1997:
Common Stock, $1 Par Value -- 145,927,196.
Documents Incorporated by Reference:
Portions of the registrant's 1996 Annual Report to its shareholders for the
fiscal year ended February 1, 1997 (Annual Report), to the extent specifically
incorporated herein, are incorporated by reference into Parts I, II and IV.
Portions of the Proxy Statement to be filed with the Securities and Exchange
Commission relating to the registrant's Annual Meeting of Shareholders to be
held on June 17, 1997 (Proxy Statement), to the extent specifically incorporated
herein, are incorporated by reference into Part III.
AMERICAN STORES COMPANY
FORM 10-K
TABLE OF CONTENTS
PART I
Page Number
Cautionary Note...............................................4
Item 1 Business......................................................4
Item 2 Properties....................................................7
Item 3 Legal Proceedings.............................................10
Item 4 Submission of Matters to a Vote of Security Holders...........10
PART II
Item 5 Market for the Registrant's Common Equity and
Related Shareholder Matters.................................10
Item 6 Selected Financial Data.......................................10
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................10
Item 8 Financial Statements and Supplementary Data...................11
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.........................11
PART III
Item 10 Directors and Executive Officers of the Registrant............11
Item 11 Executive Compensation........................................14
Item 12 Security Ownership of Certain Beneficial Owners
and Management..............................................14
Item 13 Certain Relationships and Related Transactions................14
PART IV
Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K..........................................14
Signatures.......................................................19
AMERICAN STORES COMPANY
FORM 10-K
PART I
Cautionary Note
This report and certain of the documents incorporated herein by reference
contain certain forward-looking statements about the future performance of the
Company which are based on management's assumptions and beliefs in light of the
information currently available to it. These forward-looking statements are
subject to uncertainties and other factors that could cause actual results to
differ materially from such statements including, but not limited to:
competitive practices and pricing in the food and drug industries generally and
particularly in the Company's principal markets; the ability of the Company to
implement the Company's Delta initiatives in accordance with the currently
contemplated schedule and budget; changes in the financial markets which may
affect the Company's cost of capital and the ability of the Company to access
the public debt and equity markets to refinance indebtedness and fund the
Company's capital expenditure program on satisfactory terms; supply or quality
control problems with the Company's vendors; and changes in economic conditions
which affect the buying patterns of the Company's customers.
Item 1 Business
HISTORY
American Stores Company (the Company), a Delaware corporation, traces
its roots to 1939 with the purchase of four drug stores in Utah, Idaho
and Montana and was incorporated in Delaware in 1965 under the name of
Skaggs Drug Centers, Inc. The Company grew initially through the
acquisition of additional drug stores and, from 1969 through 1977,
through a partnership with Albertson's that developed food and drug
combination stores. In 1979, in order to enhance its food retailing
capabilities, the Company acquired American Stores Company, including
Acme Markets, and adopted the American Stores Company name. In 1984
Jewel Companies, Inc. was acquired by the Company, adding Jewel Food
Stores and the Osco and Sav-on drug stores. In 1988, the Company
acquired Lucky Stores, Inc. which currently operates stores in
California and Nevada.
After each acquisition mentioned above, the Company has reviewed the
consolidated group and disposed of selected stores and divisions to
reduce debt as well as to focus on growth opportunities available to the
remaining entities. Past major dispositions have included: the Rea &
Derick drug chain, two groups of food stores in Arizona, Kash n' Karry,
Buttrey Food and Drug, Alpha Beta Company, 74 Jewel Osco combination
stores in Texas, Florida, Oklahoma and Arkansas, 51 Osco drug stores in
the intermountain region, the 33-store Star Market food division and 45
Acme Markets stores.
PART I - (Continued)
Item 1 Business - (Continued)
OPERATIONS
The Company is principally engaged in a single industry segment, the
retail sale of food and drug merchandise. The Company's principal food
operations are Acme Markets, Jewel Food Stores, Lucky Stores Northern
California Division and Southern California Division and Jewel Osco
Southwest (the food store operations). The Company's drug stores
operate under the Osco Drug and Sav-on names (the drug store
operations).
The Company is one of the nation's leading food and drug retailers,
operating stand-alone food and drug stores and combination food/drug
store units. The Company's operations are generally located in major
metropolitan markets where they hold leading market positions (generally
first or second in overall market share). At year-end 1996, the Company
operated 1,695 stores in 27 states, including 166 combination stores
which are jointly operated by a food store division and a drug store
division and are counted as two separate stores.
The following is a summary of stores by state and operating company as
of February 1, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jewel Lucky Stores Lucky Stores
Acme Food Northern CA Southern CA Jewel Osco Osco
State Markets Stores Division Division Southwest Drug Sav-on Total
Arizona 68 68
Arkansas 5 5
California 186 225 281 692
Delaware 15 15
Illinois 176 230 406
Indiana 6 61 67
Iowa 2 25 27
Kansas 26 26
Kentucky 1 1
Maine 1 1
Maryland 12 12
Massachusetts 47 47
Michigan 1 1
Minnesota 1 1
Missouri 31 31
Montana 8 8
Nebraska 14 14
Nevada 22 5 25 52
New Hampshire 19 19
New Jersey 78 78
New Mexico 12 12
North Dakota 6 6
Pennsylvania 77 77
South Dakota 3 3
Vermont 1 1
Utah 1 1
Wisconsin 1 23 24
Total Stores 182 185 186 247 13 576 306 1,695
</TABLE>
PART I - (Continued)
Item 1 Business - (Continued)
See "Item 2 Properties" for additional information concerning properties
of the registrant.
The Company tailors the merchandising and advertising of its stores to
the demographics in each area it serves. The merchandise sold by the
Company's retail food and combination food/drug stores includes food and
drug items, such as prescription drugs, health and beauty aids and
sundry merchandise.
The combination stores and many of the food stores include specialty
departments such as delicatessens, bakeries, seafood departments and
pharmacies. The Company's private label programs include such brands as
"Lady Lee" at Lucky stores, "Lancaster" meats and "Acme" groceries at
Acme, "Jewel" at Jewel stores and "Osco" and "Sav-on" at Osco and Sav-on
stores, respectively. "President's Choice" in the food store operations
and "American Premier" in the drug store operations are used as premium
brands while "Value Wise" is now the budget brand across all the food
and drug operations.
COMPETITION
In all areas in which the Company operates, the business is highly
competitive, with competition from local and national supermarket and
drug store chains, as well as independent stores. Competition also
includes such retailers as convenience stores, warehouse stores and
membership or club stores. Some of the Company's largest competitors in
various regions are Dominicks, Long's, Pathmark, Ralphs, Safeway,
Thrifty-PayLess, Vons and Walgreens. Principal competitive factors in
the industry include store location, the price and quality of products,
variety of selection, quality of service and store image, including
cleanliness and promotions.
The Company's business is characterized by narrow profit margins and,
accordingly, its successful financial performance depends primarily on
its ability to maintain relatively high sales volume and control
operating costs. The Company's geographic diversity allows it to reduce
the risk that competitive pressures in individual markets may have on
its overall operating results. The Company's food and drug stores
collectively operate in nine of the 25 largest U.S. metropolitan areas
(Source: Progressive Grocer 1997 Market Scope) and hold a leading market
position (generally first or second in overall market share) in each.
These market areas include: Los Angeles-Long Beach, Chicago,
Philadelphia, Boston, Riverside-San Bernardino, San Diego, Orange
County, Phoenix and Oakland.
SEASONALITY
The Company is subject to effects of seasonality. Food and drug store
sales are higher in the Company's fourth quarter than other quarters due
to the holiday season. The Company's drug store sales
PART I - (Continued)
Item 1 Business - (Continued)
are also generally higher in the Company's fourth quarter in connection
with the increase in cold and flu occurrences.
EMPLOYEES
At year-end 1996, the Company had approximately 127,000 full and part-
time employees. Approximately 76% of the Company's employees are
covered by collective bargaining agreements negotiated with local unions
affiliated with one of seven different international unions. There are
approximately 118 such agreements, typically having three to five-year
terms. Accordingly, the Company renegotiates a significant number of
these agreements every year.
INCORPORATION BY REFERENCE
The section entitled "Fiscal Year" in the Notes to Consolidated
Financial Statements on page 36, the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" on pages 26 through 29 and the section entitled
"Contingencies" on page 45 of the Annual Report are incorporated herein
by reference.
Item 2 Properties
The Company categorizes its retail stores into the following types:
supermarkets, combination food/drug stores and drug stores. At year-end
1996, the Company operated 577 supermarkets, 399 combination stores and
719 drug stores. The 399 combination stores include 166 combination
stores which are jointly operated by a food store division and a drug
store division and are counted as two separate stores. The remaining 67
combination stores are operated solely by the Company's food store
operations.
The supermarket category includes grocery stores and expanded stores
that offer service departments but do not meet the definition of a
combination store. Combination stores are stores with 40,000 or more
square feet; they include a pharmacy department and have an expanded
selection of food, drug and general merchandise. Supermarkets average
approximately 32,700 square feet. Combination stores average
approximately 58,300 square feet. Stand-alone drug stores average
approximately 18,900 square feet.
The Company owns approximately 28% of its retail locations; the
remaining retail locations are leased under capitalized or operating
leases. The Company also owns, or controls through long-term leases,
its distribution, warehouse and maintenance support facilities. At
year-end 1996, owned property with a net book value of approximately
$186.8 million was collateralized by loans secured by real estate of
approximately $77.4 million. The Company currently finances new
construction of owned stores through internally generated funds and
borrowings under existing credit facilities.
PART I - (Continued)
Item 2 Properties - (Continued)
Throughout the country, the Company leases and owns distribution
centers, fleet maintenance shops and warehouses for merchandise such as
dry grocery, produce, frozen foods and general merchandise. These
facilities support the Company's retail outlets.
The Company also owns or leases office space, owns land for future
development and operates dairies, bakeries and other manufacturing or
processing facilities that supply many of its retail outlets with a
variety of private label merchandise. Manufacturing facilities operate
at levels of production required to meet the demands of customers at the
Company's retail locations.
At year-end 1996, the store counts by various types of stores and total
square footage were as follows:
Store Count by Type of Stores
<TABLE>
<S> <C> <C> <C> <C>
Super-
markets Combination Drug Total
Food Store Operations:
Acme Markets 136 46 182
Jewel Food Stores (1) 32 153 185
Lucky Stores - North(1) 180 6 186
Lucky Stores - South(1) 228 19 247
Jewel Osco Southwest 1 9 3 13
Total Food Store Operations 577 233 3 813
Drug Store Operations:
Osco Drug (1) 153 423 576
Sav-on (1) 13 293 306
Total Drug Store Operations 0 166 716 882
Total 577 399 719 1,695
</TABLE>
(1) The 399 combination stores include 166 combination stores which are
jointly operated by a food store division and a drug store division and
are counted as two separate stores. The remaining 67 combination stores
are operated solely by the Company's food store operations.
PART I - (Continued)
Item 2 Properties - (Continued)
<TABLE>
<S> <C>
Total
Square Feet
Retail Locations in Thousands
Food Store Operations:
Acme Markets 6,056
Jewel Food Stores 6,576
Lucky Stores - North 6,278
Lucky Stores - South 9,611
Jewel Osco Southwest 665
Total Food Store Operations 29,186
Drug Store Operations:
Osco Drug 10,425
Sav-on 6,227
Total Drug Store Operations 16,652
Total Retail Locations 45,838
</TABLE>
At year-end 1996, the location and type of the Company's warehouse,
distribution and maintenance facilities and their respective sizes were
as follows:
<TABLE>
<S> <C> <C> <C>
Total
Square Feet
Location Type in Thousands
Arizona Phoenix Home Health Care 10
California Vacaville Grocery 871
San Leandro Meat, Produce, Frozen Food, Bulk 744
Buena Park Grocery, Non-Food, Meat, Frozen Food 1,160
Irvine Grocery, Produce 994
Anaheim General Merchandise, Liquor 474
La Habra General Merchandise, Liquor, Bulk 418
Ontario General Merchandise, Bulk 262
Fontana Liquor, Wine & Tobacco 219
Fullerton General Merchandise 216
Illinois Melrose Park Grocery, Fresh Food, Storage 1,618
Elk Grove General Merchandise, Health & Beauty 478
Alsip Paper, Promotional 256
Franklin Park General Merchandise 48
Indiana Indianapolis Liquor, Wine & Tobacco 22
Nevada Las Vegas Liquor, Wine & Tobacco 30
Pennsylvania Philadelphia Grocery, Produce 1,089
Lancaster General Merchandise 537
Utah Payson Fixtures 80
Total Warehouse, Distribution and Maintenance Facilities 9,526
</TABLE>
PART I - (Continued)
Item 2 Properties - (Continued)
The Company operated 9 manufacturing or processing facilities at year-
end 1996 as follows:
Type of Facility Number of Plants and Locations
Bakery 3-Melrose Park, Illinois; San Leandro, California;
Buena Park, California
Dairy 4-Sacramento, California; San Leandro, California;
Buena Park, California; Escondido, California
Ice Cream 1-Buena Park, California
Fixture Shop 1-Payson, Utah
See also Item 1, Business, for Additional Information on Properties of
the Registrant.
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 26 through 29 of the
Annual Report is incorporated herein by reference.
Item 3 Legal Proceedings
The section entitled "Legal Proceedings" on page 45 of the Annual Report
is incorporated herein by reference.
Item 4 Submission of Matters to a Vote of Security Holders
There were no matters submitted to the security holders of the Company
for a vote during the quarter ended February 1, 1997.
PART II
Item 5 Market for the Registrant's Common Equity and Related Shareholder
Matters
The section entitled "Common Stock Market Prices and Dividends" on the
bottom of page 1 of the Annual Report is incorporated herein by
reference.
Item 6 Selected Financial Data
The section entitled "Selected Financial Data" on page 25 of the Annual
Report is incorporated herein by reference.
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 26 through 29 of the
Annual Report is incorporated herein by reference.
PART II - (Continued)
Item 8 Financial Statements and Supplementary Data
The Company's consolidated financial statements and related notes
thereto, together with the Report of Independent Auditors and the
selected quarterly financial data of the Company presented on pages 30
to 47 of the Annual Report, are incorporated herein by reference.
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10 Directors and Executive Officers of the Registrant
There is hereby incorporated by reference the information under the
captions "Election of Directors", "Information Regarding the Nominees
Standing for Election in 1997" in the Proxy Statement.
In addition to the information regarding Directors and Executive
Officers set forth above, the following represents information regarding
Executive Officers of the registrant as of March 29, 1997:
Officer Offices Held Age
David L. Maher Chief Operating Officer of the registrant 57
since March 1995 and President since June
1995; Senior Executive Vice President and
Chief Operating Officer-Drug from March 1993
to March 1995; Chairman of the Board and Chief
Executive Officer of American Drug Stores, Inc.
from prior to February 1992 to March 1993.
Kent T. Anderson Chief Operating Officer - Strategy and 43
Development of the registrant since August
1995; Chief Strategy Officer from March 1995
to August 1995; Executive Vice President and
General Manager - American Stores Properties,
Inc. from March 1993 to March 1995; Executive
Vice President and General Counsel from prior
to February 1992 to March 1993.
Teresa Beck Chief Financial Officer of the registrant 42
since March 1995; Executive Vice President
and Chief Financial Officer from June 1994
to March 1995; Executive Vice President Finance
from March 1994 to June 1994; Executive Vice
President Administration from March 1992 to
March 1994. Assistant Secretary from June
1989 until March 1995.
PART III - (Continued)
Item 10 Directors and Executive Officers of the Registrant - (Continued)
Officer Offices Held Age
James R. Clark Chief Planning Officer of the registrant since 53
March 1995; Senior Vice President Strategy and
Change Management from December 1993 to March
1995. Senior Vice President Marketing and
Planning, Lucky Stores, Inc. from prior to
February 1992 to December 1993.
Kathleen E. McDermott Chief Legal Officer of the registrant since 47
May 1995 and Assistant Secretary since June
1993; Executive Vice President and General
Counsel from June 1993 to May 1995; Partner
of the law firm of Collier, Shannon, Rill &
Scott from prior to 1992 to June 1993.
Edward J. McManus Chief Operating Officer - Procurement & 51
Logistics since March 1997; Senior Vice
President and General Manager - Jewel Food
Stores from April 1995 to March 1997; Senior
Vice President Operations of Jewel Food
Stores, Inc. from July 1994 to April 1995;
Vice President - Distribution of Jewel Food
Stores, Inc. from April 1992 to July 1994.
Stephen L. Mannschreck Chief Human Resources Officer of the registrant 51
since March 1995; Executive Vice President
Human Resources from June 1994 to March 1995;
Executive Vice President and General Manager
- Osco Drug from March 1993 to June 1994;
Executive Vice President and Chief Operating
Officer of the Osco Division of American Drug
Stores, Inc. from prior to February 1992 to
March 1993.
Francis J. Raucci Chief Labor Officer of the registrant since 60
May 1995; Executive Vice President Chief Labor
Counsel from June 1994 to May 1995; Senior Vice
President and Chief Labor Counsel from December
1993 to June 1994; Senior Vice President and
Assistant General Counsel from prior to February
1992 to December 1993.
PART III - (Continued)
Item 10 Directors and Executive Officers of the Registrant - (Continued)
Officer Offices Held Age
Martin A. Scholtens Chief Operating Officer - Retail of the 54
registrant since March 1995; Executive Vice
President and General Manager - Lucky Southern
California Division from March 1994 to March
1995; Executive Vice President and General
Manager - Acme from March 1993 to March 1994;
President of Acme Markets, Inc. from prior to
February 1992 to March 1993.
Jack Lunt Senior Vice President of the registrant since 52
March 1993; Vice President from April 1989 to
March 1993. Assistant General Counsel and
Secretary since April 1989.
J. Greg Spencer Senior Vice President, Treasurer and Assistant 40
Secretary of the registrant since June 1995;
Vice President, Corporate Transactions and
Senior Counsel from March 1992 to June 1995.
Bradley M. Vierig Senior Vice President of the registrant since 39
June 1995 and Controller since March 1994;
Vice President and Assistant Treasurer from
August 1992 to March 1994; Vice President
Corporate Financial Planning from prior to
February 1992 to August 1992.
PART III - (Continued)
Item 11 Executive Compensation
There is hereby incorporated by reference the information under the
captions "Directors' Compensation", "Executive Compensation",
"Options/SAR Grants in Last Fiscal Year", "Aggregated Option/SAR
Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Value",
"Long-Term Incentive Plans-Awards in Last Fiscal Year", "Pension Plans",
"Employment Agreements" and "Other Information Pertaining to Directors
and Executive Officers" in the Proxy Statement.
Item 12 Security Ownership of Certain Beneficial Owners and Management
There is hereby incorporated by reference the information under the
caption "Beneficial Ownership of Securities" and "Other Information
Pertaining to Directors and Executive Officers" in the Proxy Statement.
Item 13 Certain Relationships and Related Transactions
There is hereby incorporated by reference the information under the
captions "Information Regarding the Nominees Standing for Election in
1997", "Footnotes to the Foregoing Information Regarding Nominees for
Director of the Company", "Directors' Compensation", and "Other
Information Pertaining to Directors and Executive Officers" in the Proxy
Statement.
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
Item 14(a)(1) - Financial Statements
The following consolidated financial statements of the registrant and
its subsidiaries, included in the Annual Report, are incorporated by
reference in Item 8:
Consolidated Statements of Earnings for the fiscal years 1996, 1995 and
1994;
Consolidated Balance Sheets as of the end of fiscal years 1996, 1995 and
1994;
Consolidated Statements of Cash Flows for the fiscal years 1996, 1995
and 1994;
Consolidated Statements of Shareholders' Equity for the fiscal years
1996, 1995 and 1994;
Notes to Consolidated Financial Statements.
PART IV - (Continued)
Item 14(a)(2) - Supplementary Data and Financial Statement Schedules
The supplementary data entitled "Quarterly Results (Unaudited)" on page
47 of the Annual Report is incorporated by reference in Item 8.
In response to Item 14(d), all schedules for which provision is made in
the applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or are
inapplicable, and therefore have been omitted.
Item 14(a)(3) - Exhibits
In response to Item 14(c), the following exhibits are submitted as a separate
section of this report:
3.1 The restated Certificate of Incorporation of American Stores Company, as
amended is incorporated herein by reference to Exhibit 3.1 of the Company's
Form 10-K for the fiscal year ended February 3, 1996 as filed with the
Commission on April 14, 1996.
3.2 The By-Laws of American Stores Company as amended, are incorporated herein
by reference to Form 8-K filed with the Commission on September 29, 1996.
4.1 The Rights Agreement dated March 8, 1988 between the Company and First
Chicago Trust Company of New York, formerly Morgan Shareholder Services
Trust Company, as Rights Agent, and the amendments thereto, are
incorporated by reference to the Registrant's Registration Statement on
Form 8-A as filed with the Commission on March 16, 1988, and Amendment Nos.
1, 2, 3, 4 and 5 to such Registration Statement filed on March 28, 1990,
July 17, 1991, May 17, 1994, July 3, 1996 and February 25, 1997,
respectively.
4.2 Senior Indenture dated May 1, 1995 between the Company and the First
National Bank of Chicago, as Trustee, is incorporated herein by
reference to Exhibit 4.1 of Form 10-Q as filed with the Commission on
June 12, 1995.
4.3 Form of 7-1/4% Debenture due 2005 is incorporated herein by reference to
Exhibit 4.2 of Form 10-Q as filed with the Commission on June 12, 1995.
4.4 Form of 8.0% Debenture Due 2026 is incorporated herein by reference to
Exhibit 4.1 of Form 10-Q as filed with the Commission on September 17,
1996.
10.1 Credit Agreement ($1.5 billion five-year revolving credit facility) dated
as of March 28, 1997 among the Company, the banks listed therein and Morgan
Guaranty Trust Company of New York as Agent.
PART IV - (Continued)
Item 14(a)(3) - Exhibits (Continued)
10.2 Credit Agreement ($500 million 364-day revolving credit facility) dated as
of March 28, 1997 among the Company, the banks listed therein and Morgan
Guaranty Trust Company of New York as Agent.
10.3 Amended and Restated Retirment Plan for Non-Employee Directors is
incorporated herein by reference to Exhibit 10.2 of Form 10-K as filed with
the Commission on April 26, 1995. *
10.4 Non-Employee Directors' Deferred Fee Plan is incorporated herein by
reference to Exhibit 10.3 to Form 8 as filed with the Commission on July
12, 1991. *
10.5 Supplemental Executive Retirement Plan as amended and restated on June 24,
1994 is incorporated herein by reference to Exhibit 10.4 of Form 10-K as
filed with the Commission on April 26, 1995. *
10.6 Third Amendment to the American Stores Company Supplemental Executive
Retirement Plan dated August 16, 1996 is incorporated herein by reference
to Exhibit 10.3 of Form 10-Q as filed with the Commission on September 17,
1996.
10.7 1989 Stock Option and Stock Award Plan is incorporated herein by reference
to the Registrant's S-8 Registration Statement (Registration No. 33-32150)
filed with the Commission on November 16, 1989. *
10.8 Amendment to the 1989 Stock Option and Stock Award Plan, dated as of
September 17, 1996 is incorporated herein by reference to Exhibit 10.3 of
Form 10-Q as filed with the Commission on December 17, 1996.
10.9 Amendment to the 1989 Stock Option and Stock Award Plan, dated April 7,
1997. *
10.10 The 1985 Stock Option and Stock Award Plan is incorporated herein by
reference to the Registrant's S-8 Registration Statement (Registration No.
33-08801) filed with the Commission on September 22, 1986. *
10.11 Amendment to the 1985 Stock Option and Stock Award Plan, dated as of
September 17, 1996 is incorporated herein by reference to Exhibit 10.2 of
Form 10-Q as filed with the Commission on December 17, 1996.
10.12 American Stores Company Key Executive Stock Purchase Incentive Plan is
incorporated herein by reference to Exhibit A to the Registrant's 1992
Proxy Statement filed with the Commission on May 7, 1992. *
10.13 American Stores Company Board of Directors Stock Purchase Incentive
Plan as Amended and Restated is incorporated herein by reference to Exhibit
10.11 of Form 10-K as filed with the Commission on April 26, 1995. *
* Constitutes a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this report pursuant to Item 14(c) of
this report
PART IV - (Continued)
Item 14(a)(3) - Exhibits (Continued)
10.14 Description of Key Management Long-Term Performance Incentive Plan
(1995-1997) is incorporated by reference to Exhibit 10.13 of Form 10-K as
filed with the Commission on April 26, 1995. *
10.15 Amendment to the Key Management Long-Term Performance Incentive Plan
(1995-1997) and (1994-1996) dated July 25, 1996 is incorporated herein by
reference to Exhibit 10.1 of Form 10-Q as filed with the Commission on
September 17, 1996. *
10.16 Form of Employment Agreement together with Schedule of eighteen
officers who entered into Employment Agreements with Company is
incorporated herein by reference to Exhibit 10.14 of Form 10-K as filed
with the Commission on April 26, 1995. *
10.17 Form of Amendment to Employment Agreement together with Schedule of
fifteen officers who entered into Amendment to Employment Agreements with
the Company is incorporated herein by reference to Exhibit 10.4 of Form 10-
Q as filed with the Commission on September 17, 1996. *
10.18 Consulting agreement between the Company and L.S. Skaggs is
incorporated herein by reference to Exhibit 10.1 of Form 10-Q as filed with
the Commission on December 11, 1995.*
10.19 Form of Employment Agreement together with Schedule of eleven officers
who entered into Employment Agreements with the Company dated as of July
25, 1996 is incorporated herein by reference to Exhibit 10.5 of Form 10-Q
as filed with the Commission on September 17, 1996. *
10.20 Description of Key Management Long-Term Performance Incentive Plan
(1996-1998) is incorporated herein by reference to Exhibit 10.6 of Form 10-
Q as filed with the Commission on September 17, 1996. *
10.21 Form of Employment Agreement together with Schedule of two executive
officers who entered into Employment Agreements with the Company dated as
of July 25, 1996 is incorporated herein by reference to Exhibit 10.7 of
Form 10-Q as filed with the Commission on September 17, 1996. *
10.22 Amendment to the Employment Agreement with Victor L. Lund, dated as of
September 17, 1996 is incorporated herein by reference to Exhibit 10.1 of
Form 10-Q as filed with the Commission on December 17, 1996. *
* Constitutes a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this report pursuant to Item 14(c) of
this report
PART IV - (Continued)
Item 14(a)(3) - Exhibits (Continued)
11. Calculation of earnings per share.
12. Computation of ratio of earnings to fixed charges.
13. Exhibit 13 consists of pages 25 to 47 and page 1 of American Stores
Company's 1996 Annual Report to Shareholders which are numbered as pages 1
to 31 of Exhibit 13. Such report, except to the extent incorporated hereby
by reference, has been sent to and furnished for the information of the
Securities and Exchange Commission only and is not to be deemed filed as
part of this Annual Report on Form 10-K. The references to the pages
incorporated by reference are to the printed Annual Report. The references
to the pages of Exhibit 13 are as follows: Item 1--pages 17, 3 through 10
and 29; Item 2--pages 3 through 10; Item 3--page 29 ; Item 5--page 1; Item
-6--page 2; Item 7--pages 3 through 10; Item 8--pages 11 through 31; and
Item 14--pages 12 through 31.
22. Subsidiaries of the Registrant.
24. Consent of Ernst & Young LLP.
27. Financial Data Schedule.
All other exhibits for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instruction or are inapplicable, and therefore have been
omitted.
Item 14(b) - Reports on Form 8-K filed during the last quarter of 1996-
None.
AMERICAN STORES COMPANY
FORM 10-K
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.
(Registrant): American Stores Company
By (Signature and Title): /s/Kathleen McDermott April 14, 1997
Kathleen McDermott,
Chief Legal Officer and
Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
/s/Victor L. Lund Chairman of the Board and April 14, 1997
Victor L. Lund Chief Executive Officer
(Principal Executive Officer)
/s/Teresa Beck Chief Financial Officer April 14, 1997
Teresa Beck (Principal Financial Officer)
/s/Bradley M. Vierig Senior Vice President and April 14, 1997
Bradley M. Vierig Controller
(Principal Accounting Officer)
AMERICAN STORES COMPANY
FORM 10-K
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
/s/ Victor L. Lund Director, Chairman of April 14, 1997
Victor L. Lund the Board and Chief
Executive Officer
/s/ Henry I. Bryant Director April 14, 1997
Henry I. Bryant
/s/ Louis H. Callister Director April 14, 1997
Louis H. Callister
/s/ Arden B. Engebretsen Director April 14, 1997
Arden B. Engebretsen
/s/ James B. Fisher Director April 14, 1997
James B. Fisher
/s/ Fernando R. Gumucio Director April 14, 1997
Fernando R. Gumucio
/s/ Leon G. Harmon Director April 14, 1997
Leon G. Harmon
/s/ Donald B. Holbrook Director April 14, 1997
Donald B. Holbrook
/s/ John E. Masline Director April 14, 1997
John E. Masline
AMERICAN STORES COMPANY
FORM 10-K
Signatures (Continued)
/s/ Barbara S. Preiskel Director April 14, 1997
Barbara S. Preiskel
/s/ J. L. Scott Director April 14, 1997
J. L. Scott
/s/ Arthur K. Smith Director April 14, 1997
Arthur K. Smith
AMERICAN STORES COMPANY
FORM 10-K
Signatures (Continued)
/s/ Pamela G. Bailey Director April 14, 1997
EXECUTION COPY
$1,500,000,000
MULTI-YEAR CREDIT AGREEMENT
dated as of
March 28, 1997
among
American Stores Company,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
J.P. Morgan Securities Inc.,
Arranger
Bank of America NT & SA
Bank of Montreal
The Chase Manhattan Bank
Nationsbank of Texas, N.A.
The Fuji Bank, Limited Los Angeles Agency
The Long Term Credit Bank of Japan, Ltd., Los Angeles Agency
Union Bank of California, N.A.
Wachovia Bank of Georgia, N.A.,
Managing Agents
TABLE OF CONTENTS*
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.............................. 1
1.02 Accounting Terms and Determinations...... 14
1.03 Types of Borrowings...................... 15
ARTICLE II
THE CREDITS
SECTION 2.01 Commitments to Lend...................... 15
2.02 Notice of Committed Borrowing............ 16
2.03 Money Market Borrowings.................. 16
2.04 Notice to Banks; Funding of Loans........ 21
2.05 Notes.................................... 21
2.06 Maturity of Loans; Mandatory
Prepayments.............................. 22
2.07 Interest Rates........................... 22
2.08 Facility Fee............................. 26
2.09 Optional Termination or
Reduction of Commitments................. 26
2.10 Method of Electing Interest
Rates.................................... 27
2.11 Optional Prepayments..................... 28
2.12 General Provisions as to Payments........ 29
2.13 Funding Losses........................... 30
2.14 Computation of Interest and Fees......... 30
2.15 Regulation D Compensation................ 30
*
The Table of Contents is not a part of this Aggrement
ARTICLE III
CONDITIONS
SECTION 3.01 Effectiveness. . . ...................... 31
3.02 Borrowings............................... 33
3.03 Outstanding "Money Market Loans"......... 33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Corporate Existence and Power............ 34
4.02 Corporate and Governmental
Authorization; No Contravention.......... 34
4.03 Binding Effect........................... 34
4.04 Financial Information.................... 34
4.05 Litigation............................... 35
4.06 Compliance with ERISA.................... 35
4.07 Environmental Matters.................... 36
4.08 Taxes.................................... 36
4.09 Subsidiaries............................. 37
4.10 Not an Investment Company................ 37
4.11 Full Disclosure.......................... 37
ARTICLE V
COVENANTS
SECTION 5.01 Information.............................. 37
5.02 Payment of Obligations................... 39
5.03 Maintenance of Property; Insurance....... 39
5.04 Conduct of Business and
Maintenance of Existence................. 40
5.05 Compliance with Laws..................... 40
5.06 Inspection of Property,
Books and Records........................ 40
5.07 Cash Flow/Total Debt Ratio............... 41
5.08 Subsidiary Debt Restriction.............. 41
5.09 Negative Pledge.......................... 41
5.10 Consolidations, Mergers and
Sales of Assets.......................... 43
5.11 Use of Proceeds.......................... 43
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default........................ 43
6.02 Notice of Default........................ 46
ARTICLE VII
THE AGENT
SECTION 7.01 Appointment and Authorization............ 46
7.02 Agent and Affiliates..................... 46
7.03 Action by Agent.......................... 46
7.04 Consultation with Experts................ 47
7.05 Liability of Agent....................... 47
7.06 Indemnification.......................... 47
7.07 Credit Decision.......................... 47
7.08 Successor Agent.......................... 48
7.09 Agent's Fee.............................. 48
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest
Rate Inadequate or Unfair................ 48
8.02 Illegality............................... 49
8.03 Increased Cost and Reduced Return........ 50
8.04 Taxes.................................... 52
8.05 Base Rate Loans Substituted for
Affected Fixed Rate Loans................ 54
8.06 Substitution of a Bank................... 55
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices.................................. 55
9.02 No Waivers............................... 56
9.03 Expenses; Indemnification................ 56
9.04 Sharing of Set-Offs...................... 57
9.05 Amendments and Waivers................... 57
9.06 Successors and Assigns................... 58
9.07 Collateral............................... 60
9.08 Governing Law; Submission to
Jurisdiction............................. 61
9.09 Counterparts; Integration................ 61
9.10 WAIVER OF JURY TRIAL..................... 61
9.11 Confidentiality.......................... 61
Pricing Schedule
Exhibit A - Note
Exhibit B - Form of Money Market Quote Request
Exhibit C - Form of Invitation for Money Market Quotes
Exhibit D - Form of Money Market Quote
Exhibit E - Opinion of General Counsel for the Borrower
Exhibit F - Opinion of Special Counsel for the Borrower
Exhibit G - Opinion of Davis Polk & Wardwell, Special Counsel for the
Agent
Exhibit H - Assignment and Assumption Agreement
MULTI-YEAR CREDIT AGREEMENT
AGREEMENT dated as of March 28, 1997 among AMERICAN STORES COMPANY,
the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank (or
Designated Lender), (i) in the case of its Domestic Loans, its Domestic Lending
Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending
Office and (iii) in the case of its Money Market Loans, its Money Market Lending
Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day or (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means (i) a Committed Loan which bears interest at
the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice
of Interest Rate Election or the provisions of Article VIII or (ii) an overdue
amount which was a Base Rate Loan immediately before it became overdue.
"Borrower" means American Stores Company, a Delaware corporation, and
its successors.
"Borrower's 1995 Form 10-K" means the Borrower's annual report on Form
10-K for the fiscal year ended February 3, 1996, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"Borrower's Latest Form 10-Q" means the Borrower's quarterly report on
Form 10-Q for the quarter ended November 2, 1996, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"Borrowing" has the meaning set forth in Section 1.03.
"Capital Lease" means any lease of property which, in accordance with
United States generally accepted accounting principles, should be capitalized on
the lessee's balance sheet or for which the amount of the asset and liability
thereunder as if so capitalized should be disclosed in a note to such balance
sheet; and "Capitalized Lease Obligation" means the amount of the liability
which should be so capitalized or disclosed.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means (i) a Committed Loan which bears interest at a CD Rate
pursuant to the applicable Notice of Committed Borrowing or Notice of Interest
Rate Election or (ii) an overdue amount which was a CD Loan immediately before
it became overdue.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Rate" means a rate of interest determined pursuant to Section
2.07(b) on the basis of an Adjusted CD Rate.
"CD Reference Banks" means Wachovia Bank of Georgia, N.A., Credit
Suisse First Boston and Morgan Guaranty Trust Company of New York.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof, as such amount may
be reduced from time to time pursuant to Section 2.09.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01;
provided that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "Committed
Loan" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"Consolidated Assets" means at any date the consolidated assets of the
Borrower and its Consolidated Subsidiaries determined as of such date.
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Net Tangible Assets" means the total amounts of assets
(less depreciation and valuation reserves and other reserves and items
deductible from gross book value of specific asset accounts under generally
accepted accounting principles) which under United States generally accepted
accounting principles would be included on a consolidated balance sheet after
deducting therefrom (a) all liability items except Funded Debt, Capitalized
Lease Obligations, stockholders' equity and reserves for deferred income taxes
and (b) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, which in each case would be so
included on such balance sheet.
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries
determined as of such date.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date.
"Consolidated Tangible Assets" means at any date Consolidated Assets
less goodwill of the Borrower and its Consolidated Subsidiaries, each determined
as of such date.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with United States generally accepted accounting principles, (v) all
non-contingent obligations (and, for purposes of Section 5.09 and the
definitions of Material Debt and Material Financial Obligations, all contingent
obligations) of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt
secured by a Lien on any asset of such Person, whether or not such Debt is
otherwise an obligation of such Person, and (vii) all Debt of others Guaranteed
by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"Designated Lender" means with respect to each Designating Bank, each
Eligible Designee designated by such Designating Bank pursuant to Section
9.06(e).
"Designating Bank" means, with respect to each Designated Lender, the
Bank that designated such Designated Lender pursuant to Section 9.06(e).
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank (or Designated
Lender), its office located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its Domestic
Lending Office) or such other office as such Bank (or Designated Lender) may
hereafter designate as its Domestic Lending Office by notice to the Borrower and
the Agent; provided that any Bank (or Designated Lender) may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank (or Designated Lender) shall be deemed to
refer to either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.01.
"Eligible Designee" means a special purpose corporation which is
engaged in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business and which issues (or the parent of which issues)
commercial paper rated at least A-1 or the equivalent thereof by Standard &
Poor=s Ratings Services or P-1 or the equivalent thereof by Moody=s Investors
Service, Inc. and that is organized under the laws of the United States or any
State thereof.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to
each Bank (or Designated Lender"), its office, branch or affiliate located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Euro-Dollar Lending Office) or such other
office, branch or affiliate of such Bank (or Designated Lender) as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Agent.
"Euro-Dollar Loan" means (i) a Committed Loan which bears interest at
a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-
Dollar Loan immediately before it became overdue.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.07(c) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal London offices of
Wachovia Bank of Georgia, N.A., Credit Suisse First Boston and Morgan Guaranty
Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.15.
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreement" means the Credit Agreement dated as of
June 28, 1994 among the Borrower, the banks parties thereto and Morgan Guaranty
Trust Company of New York, as agent, as amended to the Effective Date.
"Facility Fee" has the meaning set forth in Section 2.08.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th 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 Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01(a)) or any combination of the foregoing.
"Funded Debt" means any Debt maturing by its terms more than one year
from the date of the determination thereof, including any Debt renewable or
extendable at the option of the obligor to a date later than one year from the
date of the determination thereof.
"Group of Loans" means at any time a group of Loans consisting of (i)
all Committed Loans which are Base Rate Loans at such time or (ii) all Committed
Loans which are Fixed Rate Loans of the same type having the same Interest
Period at such time; provided that, if a Committed Loan of any particular Bank
is converted to or made as a Base Rate Loan pursuant to Article VIII, such Loan
shall be included in the same Group or Groups of Loans from time to time as it
would have been in if it had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the holder of such Debt of the
payment thereof or to protect such holder against loss in respect thereof (in
whole or in part), provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business; and
provided further that the contingent liabilities of the Borrower or any
Subsidiary in respect of lease obligations of other Persons shall not be deemed
Guarantees if (x) the lease obligation was assumed by such other Person in
connection with the sale, transfer or other disposition of assets of the
Borrower or such Subsidiary to such other Person, (y) such lease obligation,
when initially incurred as a non-contingent liability of the Borrower or such
Subsidiary, was not incurred in contemplation of the sale, transfer or other
disposition referred to in clause (x) above, and (z) neither the Borrower nor
such Subsidiary shall have received notice of default by the primary obligor
under such lease obligation. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, a
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Borrower
may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Loan, a period commencing on the date of borrowing
specified in the applicable Notice of Borrowing or on the date specified in the
applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180 days
thereafter, as the Borrower may elect in the applicable Notice of Borrowing;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Money Market LIBOR Loan, the period commencing on the
date of borrowing specified in the applicable Notice of Borrowing and ending
such whole number of months thereafter as the Borrower may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market Absolute Rate Loan, the period commencing
on the date of borrowing specified in the applicable Notice of Borrowing and
ending such number of days thereafter (but not less than 7 days) as the Borrower
may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"Loan" means a Committed Loan or a Money Market Loan and "Loans" means
Committed Loans or Money Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Major Subsidiary" at any time shall mean a Subsidiary of the Borrower
that either (i) has revenues in excess of $250,000,000 in the Borrower's most
recent fiscal year prior to such time or assets in excess of $50,000,000 in the
Borrower's most recent fiscal year prior to such time or (ii) has been
designated a Major Subsidiary by the Board of Directors of the Borrower at or
prior to such time. Additionally, if the Subsidiaries of the Borrower that are
not described in the preceding sentence have in the aggregate either (1)
revenues in excess of 20% of the consolidated revenues of the Borrower and its
Consolidated Subsidiaries in the Borrower's most recent fiscal year prior to
such time or (2) assets in excess of 20% of the Consolidated Assets of the
Borrower and its Consolidated Subsidiaries in the Borrower's most recent fiscal
year prior to such time, each such Subsidiary will constitute a Major
Subsidiary.
"Margin Regulations" means Regulations G, T, U and X of the Board of
Governors of The Federal Reserve System, as in effect from time to time.
"Material Debt" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal or face amount exceeding
$25,000,000.
"Material Financial Obligations" means a principal or face amount of
Debt and/or payment obligations in respect of Derivatives Obligations of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, exceeding in the aggregate $25,000,000.
"Minimum Net Rental Expense" means, for any period, the aggregate
minimum rental expenses (net of sub- lease income) of the Borrower and its
Consolidated Subsid- iaries under operating leases for such period.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
(or Designated Lender) pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank (or Designated
Lender), its Domestic Lending Office or such other office, branch or affiliate
of such Bank (or Designated Lender) as it may hereafter designate as its Money
Market Lending Office by notice to the Borrower and the Agent; provided that any
Bank (or Designated Lender) may from time to time by notice to the Borrower and
the Agent designate separate Money Market Lending Offices for its Money Market
LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the
other hand, in which case all references herein to the Money Market Lending
Office of such Bank (or Designated Lender) shall be deemed to refer to either or
both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank (or
Designated Lender) pursuant to a LIBOR Auction (including such a loan bearing
interest at the Base Rate pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)).
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.10.
"Operating Cash Flow" means, for any period, the consolidated net
income of the Borrower and its Consolidated Subsidiaries (before extraordinary
items and changes in accounting principles) for such period, (a) plus, to the
extent deducted in determining such consolidated net income, the sum of (i)
interest expense, (ii) income tax expense, (iii) depreciation and amortization
expense, (iv) non-operating expenses in excess of non-operating income and (v)
any LIFO charge, and (b) minus, to the extent included in determining such
consolidated net income, non-operating income in excess of non-operating
expense. For this purpose, "non-operating income" means interest income, gain
on sale of assets outside the ordinary course of business and any other unusual
or non-recurring item of income or gain which is so classified in the Borrower's
financial statements, and "non-operating expense" means loss on sale of assets
outside the ordinary course of business and any other unusual or non-recurring
item of expense or loss which is so classified in the Borrower's financial
statements.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pricing Schedule" means the Schedule attached hereto identified as
such.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Quarterly Date" means the last Euro-Dollar Business Day of each
March, June, September and December.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having more than 55% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, Banks holding Notes (or Designating Banks of Designated Lenders
holding Notes) evidencing more than 55% of the aggregate unpaid principal amount
of the Loans.
"Revolving Credit Period" means the period from and including the
Effective Date to but excluding the Termination Date.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.
"Termination Date" means the Quarterly Date falling in March, 2002.
"Total Debt" of any Person means at any date the sum of (i)
Consolidated Debt at such date and (ii) eight times the Minimum Net Rental
Expense for the period of four consecutive fiscal quarters then most recently
ended.
"Transferee" has the meaning set forth in Section 9.06(e).
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"Wholly Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with United
States generally accepted accounting principles as in effect, from time to time,
applied on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks; provided that, if the Borrower notifies the Agent that the
Borrower wishes to amend any covenant in Article V to eliminate the effect of
any change in such generally accepted accounting principles on the operation of
such covenant (or if the Agent notifies the Borrower that the Required Banks
wish to amend Article V for such purpose), then the Borrower's compliance with
such covenant shall be determined on the basis of such generally accepted
accounting principles in effect immediately before the relevant change in such
generally accepted accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article II on the same date, all of which Loans are of the same type (subject to
Article VIII) and, except in the case of Base Rate Loans, have the same Interest
Period or initial Interest Period. Borrowings are classified for purposes of
this Agreement either by reference to the pricing of Loans comprising such
Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of
Euro-Dollar Loans) or by reference to the provisions of Article II under which
participation therein is determined (i.e., a "Committed Borrowing" is a
Borrowing under Section 2.01 in which all Banks participate in proportion to
their Commitments, while a "Money Market Borrowing" is a Borrowing under Section
2.03 in which the Bank participants are determined on the basis of their bids in
accordance therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. During the Revolving Credit
Period each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower pursuant to this Section from time to
time in amounts such that the aggregate principal amount of Committed Loans by
such Bank (including its Designated Lenders, if any) at any one time outstanding
shall not exceed the amount of its Commitment. Each Borrowing under this
Section shall be in an aggregate principal amount of $25,000,000 or any larger
multiple of $5,000,000 (except that any such Borrowing may be in the aggregate
amount available in accordance with Section 3.02(b)) and shall be made from the
several Banks (and their Designated Lenders, if any) ratably in proportion to
their respective Commitments. Within the foregoing limits, the Borrower may
borrow under this Section, prepay Loans to the extent permitted by Section 2.11,
and reborrow at any time during the Revolving Credit Period under this Section.
The Commitments shall terminate on the Termination Date.
SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give
the Agent notice (a "Notice of Committed Borrowing") not later than 12:00 Noon
(New York City time) on (x) the date of each Base Rate Borrowing, (y) the second
Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate or at a CD Rate or a Euro-Dollar Rate, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in this Section,
request the Banks during the Revolving Credit Period to make offers to make
Money Market Loans to the Borrower. The Banks may, but shall have no obligation
to, make such offers and the Borrower may, but shall have no obligation to,
accept any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received no later than
12:00 Noon (New York City time) on (x) the fifth Euro-Dollar Business Day prior
to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y)
the Domestic Business Day next preceding the date of Borrowing proposed therein,
in the case of an Absolute Rate Auction (or, in either case, such other time or
date as the Borrower and the Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$25,000,000 or a larger multiple of $5,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within three Euro-Dollar Business Days (or such other
number of days as the Borrower and the Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank
(including its Designated Lenders, if any) may submit a Money Market Quote
containing an offer or offers to make Money Market Loans in response to any
Invitation for Money Market Quotes. Each Money Market Quote must comply with
the requirements of this subsection (d) and must be submitted to the Agent by
telex or facsimile transmission at its offices specified in or pursuant to
Section 9.01 not later than (x) 2:00 P.M. (New York City time) on the fourth
Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of
a LIBOR Auction or (y) 11:00 A.M. (New York City time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified the Banks not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective); provided that Money Market Quotes submitted by the
Agent (or any affiliate of the Agent) in the capacity of a Bank may be
submitted, and may only be submitted, if the Agent or such affiliate notifies
the Borrower of the terms of the offer or offers contained therein not later
than (x) one hour prior to the deadline for the other Banks, in the case of a
LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in
the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money
Market Quote so made shall be irrevocable except with the written consent of the
Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Bank (or of the Designating Bank, in the
case of a quote made by a Designated Lender), (x) must be $3,000,000 or a
larger multiple of $1,000,000, (y) may not exceed the principal amount of
Money Market Loans for which offers were requested and (z) may be subject
to an aggregate limitation as to the principal amount of Money Market Loans
for which offers being made by such quoting Bank or Designated Lender may
be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank or Designated Lender.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the Borrower
of the terms (x) of any Money Market Quote submitted by a Bank or Designated
Lender that is in accordance with subsection (d) and (y) of any Money Market
Quote that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Bank or Designated Lender with respect to the
same Money Market Quote Request. Any such subsequent Money Market Quote shall
be disregarded by the Agent unless such subsequent Money Market Quote is
submitted solely to correct a manifest error in such former Money Market Quote.
The Agent's notice to the Borrower shall specify (A) the aggregate principal
amount of Money Market Loans for which offers have been received for each
Interest Period specified in the related Money Market Quote Request, (B) the
respective principal amounts and Money Market Margins or Money Market Absolute
Rates, as the case may be, so offered and (C) if applicable, limitations on the
aggregate principal amount of Money Market Loans for which offers in any single
Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 12:00 Noon
(New York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Agent shall have mutually agreed
and shall have notified the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective), the Borrower shall notify the Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money
Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$25,000,000 or a larger multiple of $5,000,000,
(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be,
and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks (or
Designated Lenders) with the same Money Market Margins or Money Market Absolute
Rates, as the case may be, for a greater aggregate principal amount than the
amount in respect of which such offers are accepted for the related Interest
Period, the principal amount of Money Market Loans in respect of which such
offers are accepted shall be allocated by the Agent among such Banks (or
Designated Lenders) as nearly as possible (in multiples of $1,000,000, as the
Agent may deem appropriate) in proportion to the aggregate principal amounts of
such offers. Determinations by the Agent of the amounts of Money Market Loans
shall be conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share (if any) of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable by
the Borrower.
(b) Not later than 2:00 P.M. (New York City time) on the date of each
Borrowing, each Bank participating therein shall make available (directly or
through its Designated Lenders) its share of such Borrowing, in Federal or other
funds immediately available in New York City, to the Agent at its address
referred to in Section 9.01. Unless the Agent determines that any applicable
condition specified in Article III has not been satisfied, the Agent will
promptly make the funds so received from the Banks (and Designated Lenders, if
any) available to the Borrower at the Agent's aforesaid address.
(c) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing (directly
or through its Designated Lender(s)) in accordance with subsection (b) of this
Section 2.04 and the Agent may, in reliance upon such assumption, make available
to the Borrower on such date a corresponding amount. If and to the extent that
such Bank shall not have so made such share available to the Agent, such Bank
and the Borrower severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal
to the higher of the Federal Funds Rate and the interest rate applicable thereto
pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds
Rate. If such Bank shall repay to the Agent such corresponding amount, such
amount so repaid shall constitute such Bank's Loan included in such Borrowing
for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank (or Designated
Lender) shall be evidenced by a single Note payable to the order of such Bank
(or Designated Lender) for the account of its Applicable Lending Office in an
amount equal to the aggregate unpaid principal amount of such Bank's (or
Designated Lender's) Loans.
(b) Each Bank (or Designated Lender) may, by notice to the Borrower
and the Agent, request that its Loans of a particular type be evidenced by a
separate Note in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type. Each reference in this Agreement to the
"Note" of such Bank (or Designated Lender) shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's (or Designated Lender's) Note
pursuant to Section 3.01(b) (or Section 9.06(e)), the Agent shall forward such
Note to such Bank (or Designated Lender). Each Bank (or Designated Lender)
shall record the date, amount and type of each Loan made by it and the date and
amount of each payment of principal made by the Borrower with respect thereto,
and may, if such Bank so elects in connection with any transfer or enforcement
of its Note, endorse on the schedule forming a part thereof appropriate
notations to evidence the foregoing information with respect to each such Loan
then outstanding; provided that the failure of any Bank (or Designated Lender)
to make any such recordation or endorsement shall not affect the obligations of
the Borrower hereunder or under the Notes. Each Bank (and Designated Lender) is
hereby irrevocably authorized by the Borrower so to endorse its Note and to
attach to and make a part of its Note a continuation of any such schedule as and
when required.
SECTION 2.06. Maturity of Loans. (a) Each Committed Loan shall
mature, and the principal amount thereof shall be due and payable together with
accrued interest thereon, on the Termination Date.
(b) Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable,
together with accrued interest thereon, on the last day of the Interest Period
applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable quarterly in arrears on each
Quarterly Date and, with respect to the principal amount of any Base Rate Loan
converted to a CD Loan or a Euro-Dollar Loan, on each date a Base Rate Loan is
so converted. Any overdue principal of or interest on any Base Rate Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 1% plus the rate otherwise applicable to Base Rate Loans for
such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan shall, as a result of clause (2)(b) of the definition of Interest Period,
have an Interest Period of less than 30 days, such CD Loan shall bear interest
during such Interest Period at the rate applicable to Base Rate Loans during
such period. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue principal of or
interest on any CD Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 1% plus the higher of (i) the
rate applicable to Base Rate Loans for such day and (ii) the sum of the CD
Margin for such day plus the Adjusted CD Rate applicable to the Interest Period
for such Loan at the date such payment was due.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such Interest
Period applies and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. ' 327.4(a) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the United States. The
Adjusted CD Rate shall be adjusted automatically on and as of the effective date
of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the higher of (i) the sum of 1% plus the Euro-Dollar Margin for
such day plus the quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum at which one
day (or, if such amount due remains unpaid more than three Euro-Dollar Business
Days, then for such other period of time not longer than six months as the Agent
may select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market for the applicable
period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
8.01 shall exist, at a rate per annum equal to the sum of 1% plus the rate
applicable to Base Rate Loans for such day) and (ii) the sum of 1% plus the
Euro-Dollar Margin for such day plus the London Interbank Offered Rate
applicable to such Loan at the date such payment was due.
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank (or Designated Lender) making such Loan in accordance with Section 2.03.
Each Money Market Absolute Rate Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the Money Market Absolute Rate quoted by the Bank (or
Designated Lender) making such Loan in accordance with Section 2.03. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than three months, at intervals of three
months after the first day thereof. Any overdue principal of or interest on any
Money Market Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.08. Facility Fee. The Borrower shall pay to the Agent for
the account of the Banks ratably in proportion to their Commitments a facility
fee at the Facility Fee Rate (determined daily in accordance with the Pricing
Schedule). Such facility fee shall accrue (i) from and including the Effective
Date to but excluding the Termination Date (or earlier date of termination of
the Commitments in their entirety), on the daily aggregate amount of the
Commitments (whether used or unused) and (ii) from and including the Termination
Date or such earlier date of termination to but excluding the date the Loans
shall be repaid in their entirety, on the daily aggregate outstanding principal
amount of the Loans. Accrued fees under this Section shall be payable quarterly
on each Quarterly Date and upon the date of termination of the Commitments in
their entirety and, if later, the date the Loans shall be repaid in their
entirety.
SECTION 2.09. Optional Termination or Reduction of Commitments.
During the Revolving Credit Period, the Borrower may, upon at least three
Domestic Business Days' notice to the Agent, (i) terminate the Commitments at
any time, if no Loans are outstanding at such time or (ii) ratably reduce from
time to time by an aggregate amount of $25,000,000 or any larger multiple
thereof, the aggregate amount of the Commitments in excess of the aggregate
outstanding principal amount of the Loans.
SECTION 2.10. Method of Electing Interest Rates. (a) The Loans
included in each Committed Borrowing shall bear interest initially at the type
of rate specified by the Borrower in the applicable Notice of Committed
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in each
case to the provisions of Article VIII and subsection (d) below), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to CD Loans as of any Domestic Business Day or to Euro-
Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to convert
such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue
such Loans as CD Loans for an additional Interest Period, in each case
effective on the last day of the then current Interest Period applicable to
such Loans;
(iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or CD Loans or elect to continue such
Loans as Euro-Dollar Loans for an additional Interest Period, in each case
effective on the last day of the then current Interest Period applicable to
such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Agent at least three Euro-Dollar Business Days before the
conversion or continuation selected in such notice is to be effective (unless
the relevant Loans are to be converted from Domestic Loans to Domestic Loans of
the other type or continued as Domestic Loans of the same type for an additional
Interest Period, in which case such notice shall be delivered to the Agent at
least three Domestic Business Days before such conversion or continuation is to
be effective). A Notice of Interest Rate Election may, if it so specifies,
apply to only a portion of the aggregate principal amount of the relevant Group
of Loans; provided that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such Notice applies, and the
remaining portion to which it does not apply, are each $25,000,000 or any larger
multiple of $5,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new
type of Loans and, if such new Loans are Fixed Rate Loans, the duration of
the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans
for an additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Agent shall promptly notify each
Bank of the contents thereof and such notice shall not thereafter be revocable
by the Borrower. If the Borrower fails to deliver a timely Notice of Interest
Rate Election to the Agent for any Group of Fixed Rate Loans, such Loans shall
be converted into Base Rate Loans on the last day of the then current Interest
Period applicable thereto.
(d) No Committed Loan may be continued as or converted into a Euro-
Dollar Loan or a CD Loan at any time that a Default shall have occurred and be
continuing.
SECTION 2.11. Optional Prepayments. (a) The Borrower may, upon at
least one Domestic Business Day's notice to the Agent, prepay the Group of Base
Rate Loans (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 8.01(a)) in whole at any time, or from time to time in part
in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Group or
Borrowing.
(b) Subject to Section 2.13, the Borrower may, upon at least three
Domestic Business Days' notice to the Agent, in the case of a Group of CD Loans
or upon at least three Euro-Dollar Business Days' notice to the Agent, in the
case of a Group of Euro-Dollar Loans, prepay the Loans comprising such a Group,
in whole at any time, or from time to time in part in amounts aggregating
$25,000,000 or any larger multiple of $5,000,000, by paying the principal amount
to be prepaid together with accrued interest thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay ratably the Loans of
the several Banks (or Designated Lenders) included in such Group.
(c) Except as provided in subsection (a) above, the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan prior
to the maturity thereof.
(d) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 2:00 P.M. (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of principal of, or interest on,
the Domestic Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted to a Base Rate Loan (pursuant to Article II, VI or VIII or otherwise)
on any day other than the last day of an Interest Period applicable thereto, or
the last day of an applicable period fixed pursuant to Section 2.07(d), or if
the Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loans
after notice has been given to any Bank in accordance with Section 2.04(a),
2.10(c) or 2.11(d), the Borrower shall reimburse each Bank within 15 days after
demand for any resulting loss or expense incurred by it (or by an existing or
prospective Participant in the related Loan), including (without limitation) any
loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment or
conversion or failure to borrow, prepay, convert or continue, provided that such
Bank shall have delivered to the Borrower a certificate as to the amount of such
loss or expense, which certificate shall be conclusive in the absence of
manifest error.
SECTION 2.14. Computation of Interest and Fees. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.15. Regulation D Compensation. Each Bank (or Designated
Lender) may require the Borrower to pay, contemporaneously with each payment of
interest on the Euro-Dollar Loans, additional interest on the related
Euro-Dollar Loan of such Bank (or Designated Lender) at a rate per annum
determined by such Bank up to but not exceeding the excess of (i) (A) the
applicable London Interbank Offered Rate divided by (B) one minus the
Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered
Rate. Any Bank (or Designated Lender) wishing to require payment of such
additional interest (x) shall so notify the Borrower and the Agent, in which
case such additional interest on the Euro-Dollar Loans of such Bank shall be
payable to such Bank (or Designated Lender) at the place indicated in such
notice with respect to each Interest Period commencing at least three
Euro-Dollar Business Days after such Bank (or Designated Lender) gives such
notice and (y) shall notify the Borrower at least five Euro-Dollar Business Days
before each date on which interest is payable on the Euro-Dollar Loans of the
amount then due it under this Section.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective
on the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent of a duly executed Note for the account of
each Bank dated on or before the Effective Date complying with the
provisions of Section 2.05;
(c) receipt by the Agent of an opinion of the General Counsel of the
Borrower, given upon the express instructions of the Borrower,
substantially in the form of Exhibit E hereto and covering such additional
matters relating to the transactions contemplated hereby as the Required
Banks may reasonably request;
(d) receipt by the Agent of an opinion of Wachtell, Lipton, Rosen &
Katz, Special Counsel for the Borrower, given upon the express instructions
of the Borrower, substantially in the form of Exhibit F hereto and covering
such additional matters relating to the transactions contemplated hereby as
the Required Banks may reasonably request;
(e) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit G
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(f) receipt by the Agent of all documents the Agent may reasonably
request relating to the existence of the Borrower, the corporate authority
for and the validity of this Agreement and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent; and
(g) receipt by the Agent of evidence satisfactory to it of the
payment of all principal of and interest on any loans outstanding under,
and of all other amounts payable under, the Existing Credit Agreement
(subject to Section 3.03 below);
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later than
April 15, 1997. The Agent shall promptly notify the Borrower and the Banks of
the Effective Date, and such notice shall be conclusive and binding on all
parties hereto. The Banks that are parties to the Existing Credit Agreement,
comprising the "Required Banks" as defined therein, and the Borrower agree (i)
that the commitments under the Existing Credit Agreement shall terminate in
their entirety simultaneously with and subject to the effectiveness of this
Agreement, (ii) that the Borrower shall be obligated to pay the accrued
commitment and facility fees thereunder to but excluding the date of such
effectiveness and (iii) that the Borrower may prepay outstanding Money Market
Loans as contemplated by Section 3.03 below.
SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan
on the occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments;
(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing;
(d) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Borrowing; and
(e) the fact that the Agent shall not have notified the Borrower of a
determination by the Required Banks (which determination shall be made in
good faith) that there has been a material adverse change in the business,
prospects, financial position or results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole since November 2,
1996.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
SECTION 3.03. Outstanding "Money Market Loans". Each "Money Market
Loan" outstanding under the Existing Credit Agreement made by a Bank party to
this Agreement shall be deemed prepaid in full on the Effective Date and
reloaned by such Bank as a Money Market Loan hereunder, with a maturity and
interest rate as determined under the Existing Credit Agreement. No payments in
respect of such Money Market Loans pursuant to Section 2.13 of the Existing
Credit Agreement shall be due or payable as a result of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Borrower or
of any agreement or instrument evidencing or governing Material Debt or of any
other material agreement, judgment, injunction, order, decree or other material
instrument binding upon the Borrower or any of its Subsidiaries or result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms except as
the same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of February 3, 1996 and the related consolidated
statements of earnings, common shareholders' equity and cash flows for the
fiscal year then ended, reported on by independent public accountants and set
forth in the Borrower's 1995 Form 10-K, a copy of which has been delivered to
each of the Banks, fairly present, in conformity with United States generally
accepted accounting principles, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal year.
(b) The unaudited consolidated condensed balance sheet of the
Borrower and its Consolidated Subsidiaries as of November 2, 1996 and the
related unaudited consolidated statements of earnings and cash flows for the
thirty-nine weeks then ended, set forth in the Borrower's Latest Form 10-Q, a
copy of which has been delivered to each of the Banks, fairly present, in
conformity with United States generally accepted accounting principles applied
on a basis consistent with the financial statements referred to in subsection
(a) of this Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such thirty-nine week period (subject to normal
year-end adjustments).
(c) Since November 2, 1996 there has been no material adverse change
in the business, prospects, financial position or results of operations of the
Borrower and its Consolidated Subsidiaries, considered as a whole, which has not
been disclosed in Borrower=s 1995 Form 10-K or Borrower=s Latest Form 10-Q,
copies of which have been delivered to the Banks, or disclosed in Borrower=s
Current Report on Form 8-K dated February 20, 1997 filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.
SECTION 4.05. Litigation. Except as disclosed in the Borrower's 1995
Form 10-K or Borrower's Latest Form 10-Q or as otherwise disclosed in writing to
the Banks, there is no action, suit or proceeding pending against, or to the
knowledge of the Borrower threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the business, consolidated
financial position or consolidated results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole, or which in any manner draws
into question the validity of this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or made any amendment
to any Plan which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security under ERISA or the Internal Revenue Code
or (iii) incurred any liability under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Borrower and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or operating
expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site disposal
of wastes or Hazardous Substances, and any actual or potential liabilities to
third parties, including employees, and any related costs and expenses). On
the basis of this review, the Borrower has reasonably concluded that such
associated liabilities and costs, including the costs of compliance with
Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition or results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. The Borrower and its Subsidiaries have filed
all United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all material taxes due
pursuant to such returns or pursuant to any assessment received by the Borrower
or any Subsidiary, except where the same may be contested in good faith by
appropriate proceedings. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes or other governmental charges
are, in the opinion of the Borrower, adequate.
SECTION 4.09. Subsidiaries. Each of the Borrower's Major
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 4.10. Not an Investment Company. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.11. Full Disclosure. All information heretofore furnished
by the Borrower to the Agent or any Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Agent or any Bank will
be, true, accurate and complete in every material respect or based on reasonable
estimates on the date as of which such information is stated or certified. The
Borrower has disclosed to the Banks in writing any and all facts which
materially and adversely affect or may materially and adversely affect (to the
extent the Borrower can now reasonably foresee), the business, operations,
prospects or condition, financial or otherwise, of the Borrower and its
Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower to
perform its obligations under this Agreement.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, a consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of the end of such fiscal
year and the related consolidated statements of earnings, common
shareholders' equity and cash flows for such fiscal year, setting forth in
each case in comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission by independent public accountants of nationally recognized
standing;
(b) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the
Borrower, a consolidated condensed balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated condensed statements of earnings for such quarter and for the
portion of the Borrower's fiscal year ended at the end of such quarter and
the related consolidated condensed statement of cash flows for the portion
of the Borrower's fiscal year ended at the end of such quarter, setting
forth in the case of such statements of earnings and cash flows in
comparative form the figures for the corresponding quarter and the
corresponding portion of the Borrower's previous fiscal year, all certified
(subject to normal year-end adjustments) as to fairness of presentation,
United States generally accepted accounting principles and consistency by
the chief financial officer or the chief accounting officer of the
Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections
5.07 to 5.09, inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above;
(e) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate
of the chief financial officer or the chief accounting officer of the
Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Borrower shall have filed with the Securities
and Exchange Commission;
(h) if and when the Borrower or any Subsidiary or any plan
administrator gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with respect to
any Plan which might constitute grounds for a termination of such Plan
under Title IV of ERISA or, with respect to any Multiemployer Plan,
receives notice as prescribed in ERISA of any material withdrawal liability
assessed against the Borrower or any Subsidiary, a copy of such notice; and
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Major Subsidiary to pay and discharge, at or
before maturity, all their respective material obligations and liabilities,
including, without limitation, material tax liabilities, except where the same
may be contested in good faith by appropriate proceedings, and will maintain,
and will cause each Subsidiary to maintain, in accordance with United States
generally accepted accounting principles, appropriate reserves for the accrual
of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower
will keep, and will cause each Major Subsidiary to keep, all material property
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted.
(b) The Borrower will maintain, and will cause each Major Subsidiary
to maintain (either in the name of the Borrower or in such Major Subsidiary's
own name) with financially sound and reputable insurance companies, insurance on
all their property in at least such amounts and against at least such risks as
are usually insured against in the same general area by companies of established
repute engaged in the same or a similar business, it being understood that a
program of self-insurance in such amounts and against such risks as the Borrower
reasonably deems prudent and consistent with practices of other comparable
companies is not inconsistent with this Section. The Borrower will furnish to
the Banks, upon written request from the Agent, full information as to the
insurance carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
Subject to Section 5.10, the Borrower will continue, and will cause each Major
Subsidiary to continue, to engage in business of the same general type as now
conducted by the Borrower and its Subsidiaries, and will preserve, renew and
keep in full force and effect, and will cause each Major Subsidiary to preserve,
renew and keep in full force and effect their respective corporate existence and
their respective material rights, privileges and franchises necessary or
desirable in the normal conduct of business; provided that nothing in this
Section 5.04 shall prohibit (i) the merger of a Subsidiary into the Borrower or
the merger or consolidation of a Subsidiary with or into another Person if the
corporation surviving such consolidation or merger is a Subsidiary and if, in
each case, after giving effect thereto, no Default shall have occurred and be
continuing or (ii) the abandonment or termination of the corporate existence,
rights, privileges or franchises of any Subsidiary when deemed by the Borrower
in the best interests of its overall business.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and
cause each Major Subsidiary to comply, in all material respects with all
applicable material laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws and
ERISA and the rules and regulations thereunder) except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Major Subsidiary to keep, proper books
of record and account in which full, true and correct entries in conformity with
United States generally accepted accounting principles shall be made of all
dealings and transactions in relation to its business and activities; and will
permit, and will cause each Major Subsidiary to permit, representatives of any
Bank at such Bank's expense to visit and inspect any of their respective
properties, to examine and make abstracts (or, in the case of financial
information, copies) from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all as arranged by the
Borrower and the Agent at such reasonable times and as often as may reasonably
be desired. The Banks will use reasonable efforts, consistent with their normal
business practices, to maintain the confidentiality of any information so
received.
SECTION 5.07. Cash Flow/Total Debt Ratio. As of the last day of any
fiscal quarter, the ratio of (i) the sum of Operating Cash Flow plus Minimum Net
Rental Expense for the period of four consecutive fiscal quarters then ended to
(ii) Total Debt at such date will not be less than .23.
SECTION 5.08. Subsidiary Debt Restriction. The Borrower will not
permit any Subsidiary to incur, assume or suffer to exist any Debt except for
(i) Debt of a Subsidiary to the Borrower or another Subsidiary, (ii) other Debt
not included under clauses (iii) and (iv) of this Section 5.08 outstanding on
the date of this Agreement in aggregate principal amount not exceeding
$75,000,000, (iii) Debt incurred by a Subsidiary to finance or refinance real
estate owned by it, or the development thereof, (iv) Debt incurred by a
Subsidiary in connection with industrial revenue and industrial development bond
financing and (v) Debt secured by a Lien permitted by Section 5.09, provided
that the aggregate outstanding principal amount of Debt of Subsidiaries of the
types described in clauses (iii), (iv) and (v) (including Debt of such nature
outstanding on the date of this Agreement) shall at no time exceed 25% of
Consolidated Tangible Assets and provided further that Debt permitted by clause
(ii) does not include any extension, renewal or refunding of any such
outstanding Debt.
SECTION 5.09. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal or face
amount not exceeding $150,000,000;
(b) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring or improving
such asset, provided that such Lien attaches to such asset concurrently
with or within 180 days after the later of the acquisition or completion of
improvement thereof;
(d) any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a Subsidiary
and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien securing (i) Debt of the Borrower to a Subsidiary or
(ii) Debt of a Subsidiary to the Borrower or another Subsidiary;
(g) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is
not secured by any additional assets;
(h) Liens arising in the ordinary course of its business which (i) do
not secure Debt or Derivatives Obligations, (ii) do not secure any
obligation in an amount exceeding $100,000,000 and (iii) do not in the
aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business;
(i) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $50,000,000; and
(j) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount at any time
outstanding not to exceed the greater of (i) $250,000,000 or (ii) 10% of
the Borrower's Consolidated Net Tangible Assets.
SECTION 5.10. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person or (ii)
sell, lease or otherwise transfer, directly or indirectly, all or substantially
all of the assets of the Borrower and its Subsidiaries, taken as a whole, to any
other Person, provided that the Borrower may merge with another Person if (A)
the Borrower is the corporation surviving such merger and (B) immediately after
giving effect to such merger, no Default shall have occurred and be continuing.
SECTION 5.11. Use of Proceeds. The proceeds of the Loans made under
this Agreement will be used by the Borrower for its general corporate purposes.
None of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of buying or carrying any "margin
stock" within the meaning of Regulation U or in violation of any Margin
Regulations.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any
Loan, or shall fail to pay within five Domestic Business Days of the due
date any interest on any Loan, any fees or any other amount payable
hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.07 to 5.11, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a) or (b) above) for 30 days after written notice thereof has been given
to the Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
the Borrower in this Agreement or in any certificate, financial statement
or other document delivered pursuant to this Agreement shall prove to have
been incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any
applicable grace period), provided that such failure to make any payment in
respect of any capital lease shall not constitute an Event of Default so
long as the Borrower or such Subsidiary shall be contesting on reasonable
grounds and in good faith the obligation to make such payment;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables the holder of
such Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof (in each case, any applicable grace or cure period having
elapsed);
(g) the Borrower or any Major Subsidiary (i) shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or (ii) shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Major Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Subsidiary under the federal bankruptcy laws as
now or hereafter in effect;
(i) the Borrower or any Subsidiary shall fail to pay when due any
material amount which is either uncontested or if contested is the subject
of a final non-appealable decision and which it shall have become liable to
pay to the PBGC or to a Plan under Title IV of ERISA, or notice of intent
to terminate a Plan or Plans shall be filed under Title IV of ERISA by the
Borrower, any Subsidiary, any plan administrator or any combination of the
foregoing which could give rise to a material liability of the Borrower or
any Subsidiary under Title IV of ERISA, or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee to
be appointed to administer any Plan or Plans which could give rise to a
material liability of the Borrower or any Subsidiary under Title IV of
ERISA; or the Borrower or any Subsidiary shall incur any material
withdrawal liability with respect to any Multiemployer Plan which is
uncontested or, if contested, is the subject of a final non-appealable
decision and the Borrower fails to discharge, satisfy or otherwise
eliminate such liability with respect to any Multiemployer Plan within the
time required by such judgment;
(j) a judgment or order for the payment of money in excess of
$25,000,000 (net of applicable insurance coverage) shall be rendered
against the Borrower or any Major Subsidiary and such judgment or order
shall continue unsatisfied and unstayed for a period of 60 days; or
(k) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under said Act) of 30% or more of
the outstanding shares of common stock of the Borrower; or, during any
period of 12 consecutive calendar months, individuals who were directors of
the Borrower on the first day of such period and any successor directors
the election of whom was approved by a majority of such individuals or
their successors so approved shall cease to constitute a majority of the
board of directors of the Borrower;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Borrower
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding Notes (or by Designating Banks of Designated Lenders
holding Notes) evidencing more than 50% in aggregate principal amount of the
Loans, by notice to the Borrower declare the Notes (together with accrued
interest thereon) to be, and the Notes shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; provided that in the case of any
of the Events of Default specified in paragraph (g)(i) or (h) above with respect
to the Borrower, without any notice to the Borrower or any other act by the
Agent or the Banks, the Commitments shall thereupon automatically terminate and
the Notes (together with accrued interest thereon) shall automatically become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the Borrower as if
it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks (or, if pursuant to
the terms of this Agreement the consent or request is required to be given or
made by a percentage of the Banks other than that which comprises the Required
Banks, then with such consent or request) or (ii) in the absence of its own
gross negligence or willful misconduct. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in connection with this
Agreement or any borrowing hereunder; (ii) the performance or observance of any
of the covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article III, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the Notes or any other instrument or writing furnished in
connection herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile transmission or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this Agreement or any action
taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent with the
prior approval of the Borrower, which approval shall not be unreasonably
withheld; provided, however, that such successor Agent shall be a Bank
hereunder. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a commercial bank
organized or licensed under the laws of the United States of America or of any
State thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Borrower and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any CD Loan,
Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or
more of the aggregate principal amount of the affected Loans advise the
Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as
the case may be, as determined by the Agent will not adequately and fairly
reflect the cost to such Banks of funding their CD Loans or Euro-Dollar
Loans, as the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be, or to convert
outstanding Loans into CD Loans or Euro-dollar Loans, as the case may be, shall
be suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case
may be, shall be converted into a Base Rate Loan on the last day of the then
current Interest Period applicable thereto. Unless the Borrower notifies the
Agent at least two Domestic Business Days before the date of any Fixed Rate
Borrowing for which a Notice of Borrowing has previously been given that it
elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a
Committed Borrowing, such Borrowing shall instead be made as a Base Rate
Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR
Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear
interest for each day from and including the first day to but excluding the last
day of the Interest Period applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any change
in any applicable law, rule or regulation, 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 any Bank (or its Euro-Dollar Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for any
Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its
Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans,
shall be suspended. Before giving any notice to the Agent pursuant to this
Section, such Bank shall designate a different Euro-Dollar Lending Office if
such designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such
notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be
converted to a Base Rate Loan either (a) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully
continue to maintain and fund such Loan to such day or (b) immediately if such
Bank shall determine that it may not lawfully continue to maintain and fund such
Loan to such day.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or Designated Lender) (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
impose, modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding (i) with respect to any CD Loan any such requirement
included in an applicable Domestic Reserve Percentage and (ii) with respect to
any Euro-Dollar Loan any such requirement with respect to which such Bank (or
Designated Lender) is entitled to compensation during the relevant Interest
Period under Section 2.15), special deposit, insurance assessment (excluding,
with respect to any CD Loan, any such requirement reflected in an applicable
Assessment Rate) or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Bank (or Designated Lender) (or its
Applicable Lending Office) or shall impose on any Bank (or Designated Lender)
(or its Applicable Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate
Loans and the result of any of the foregoing is to increase the cost to such
Bank (or Designated Lender) (or its Applicable Lending Office) of making or
maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or
receivable by such Bank (or Designated Lender) (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Bank (or Designated Lender) to be material, then, within
15 days after demand by such Bank (or Designated Lender) (with a copy to the
Agent), the Borrower shall pay to such Bank (or Designated Lender) such
additional amount or amounts as will compensate such Bank (or Designated Lender)
for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, 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 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 capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days after
demand by such Bank (with a copy to the Agent), the Borrower shall pay to such
Bank such additional amount or amounts as will compensate such Bank (or its
Parent) for such reduction.
(c) Each Bank (or Designated Lender) will promptly notify the
Borrower and the Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Bank (or Designated Lender) to
compensation pursuant to this Section and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such Bank (or Designated
Lender), be otherwise disadvantageous to such Bank (or Designated Lender) or
contrary to such Bank's (or Designated Lender=s) policies. A certificate of any
Bank (or Designated Lender) claiming compensation under this Section shall be
conclusive in the absence of manifest error. Such certificate shall set forth
the nature of the occurrence giving rise to such compensation, the additional
amount or amounts to be paid to it hereunder and the method by which such
amounts were determined. In determining such amount, such Bank (or Designated
Lender) may use any reasonable averaging and attribution methods.
SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank (or Designated Lender)
and the Agent, taxes imposed on its income, and franchise or similar taxes
imposed on it, by a jurisdiction under the laws of which such Bank (or
Designated Lender) or the Agent (as the case may be) is organized or in which
its principal executive office is located or, in the case of each Bank (or
Designated Lender), in which its Applicable Lending Office is located and
(ii) in the case of each Bank (or Designated Lender), any United States
withholding tax imposed on such payments except as a result of a change in the
applicable law from the applicable law in effect at the time such Bank (or
Designating Bank) first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or from
the execution or delivery of, or otherwise with respect to, this Agreement or
any Note.
(b) Any and all payments by the Borrower to or for the account of any
Bank (or Designated Lender) or the Agent hereunder or under any Note shall be
made without deduction for any Taxes or Other Taxes; provided that, if the
Borrower shall be required by law to deduct any Taxes or Other Taxes from any
such payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 8.04) such Bank (or Designated Lender) or the
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable law
and (iv) the Borrower shall furnish to the Agent, at its address referred to in
Section 9.01, the original or a certified copy of a receipt evidencing payment
thereof.
(c) The Borrower agrees to indemnify each Bank (or Designated Lender)
and the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 8.04) paid by such Bank (or Designated
Lender) or the Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be paid within 15 days after such Bank (or Designated
Lender) or the Agent (as the case may be) makes demand therefor.
(d) Each Bank (or Designated Lender) organized under the laws of a
jurisdiction outside the United States, on or prior to the date of its execution
and delivery of this Agreement in the case of each Bank listed on the signature
pages hereof and on or prior to the date on which it becomes a Bank (or
Designated Lender) in the case of each other Bank (or Designated Lender), shall
provide the Borrower with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank (or Designated Lender) is entitled to benefits under
an income tax treaty to which the United States is a party which exempts the
Bank (or Designated Lender) from United States withholding tax or reduces the
rate of withholding tax on payments of interest for the account of such Bank (or
Designated Lender) or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or business in
the United States. Each Bank (or Designated Lender) which is so required to
deliver a form 1001 or 4224 further undertakes to deliver to the Borrower
additional copies of the most recent form delivered by such Bank (or Designated
Lender) (or a successor form) before the date that such form expires or becomes
obsolete or promptly after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Borrower or the Agent,
unless an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Bank (or Designated Lender) from duly completing and delivering any
such form with respect to it and such Bank (or Designated Lender) advises the
Borrower and the Agent that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
(e) For any period with respect to which a Bank (or Designated
Lender) has failed to provide the Borrower with the appropriate form pursuant to
Section 8.04(d) (unless such failure is due to a change in treaty, law or
regulation occurring subsequent to the date on which such form originally was
required to be provided), such Bank (or Designated Lender) shall not be entitled
to indemnification under Section 8.04(b) or (c) with respect to Taxes imposed by
the United States; provided that if a Bank (or Designated Lender), which is
otherwise exempt from or subject to a reduced rate of withholding tax, becomes
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Bank (or Designated Lender) shall
reasonably request to assist such Bank (or Designated Lender) to recover such
Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank (or Designated Lender) pursuant to this Section 8.04
then such Bank (or Designated Lender) will change the jurisdiction of its
Applicable Lending Office if, in the judgment of such Bank (or Designated
Lender), such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Bank (or Designated Lender) or contrary to its policies.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans
has been suspended pursuant to Section 8.02 or (ii) any Bank (or its Designated
Lender(s)) has demanded compensation under Section 8.03 or 8.04 with respect to
its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank (or the
portion thereof which would otherwise be made by its Designated Lender(s))
as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as
the case may be, shall instead be Base Rate Loans (on which interest and
principal shall be payable contemporaneously with the related Fixed Rate
Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid (or converted to a Base Rate Loan), all payments of
principal which would otherwise be applied to repay such Fixed Rate Loans
shall be applied to repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable to the related CD
Loans or Euro-Dollar Loans of the other Banks.
SECTION 8.06. Substitution of a Bank. If any Bank (or its Designated
Lender(s)) has demanded compensation under Section 8.03 or 8.04 or has exercised
any remedy under Section 8.02, the Borrower shall have the right, with the
assistance of the Agent, to seek a mutually satisfactory substitute bank or
banks (which may be one or more of the Banks) to purchase the Note of such Bank
(or the Note held by its Designated Lender) and assume the Commitment of such
Bank. Such purchase and assumption may be made only upon payment of any amounts
due the original Bank (or its Designated Lender(s)) under Sections 2.13, 8.03
and 8.04, and the Borrower's obligation to pay or reimburse the original Bank
(or its Designated Lender(s)) under Sections 8.03 and 8.04 shall, as to amounts
accrued or payable with respect to any period prior to such assumption and
purchase, survive any such assumption and purchase.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Borrower or the Agent, at its address, facsimile
number or telex number set forth on the signature pages hereof, (y) in the case
of any Bank, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Agent under
Article II or Article VIII shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any
Bank (or Designated Lender) in exercising any right, power or privilege
hereunder or under any Note shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all out-of-pocket expenses of the Agent, including fees and disbursements of
special counsel for the Agent, in connection with the preparation and
administration of this Agreement, any waiver or consent hereunder or any
amendment hereof or any Default or alleged Default hereunder and (ii) if an
Event of Default occurs, all out-of-pocket expenses incurred by the Agent and
each Bank, including (without duplication) the fees and disbursements of outside
counsel and the allocated cost of inside counsel, in connection with such Event
of Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel and allocated cost of inside counsel, which may be
incurred by such Indemnitee in connection with any investigative, administrative
or judicial proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened relating to or arising out of this
Agreement or any actual or proposed use of proceeds of Loans hereunder; provided
that no Indemnitee shall have the right to be indemnified hereunder for such
Indemnitee's own gross negligence, willful misconduct or violation of any
express provision of this Agreement as determined by a court of competent
jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank (and Designated Lender)
agrees that if it shall, by exercising any right of set-off or counterclaim or
otherwise, receive payment of a proportion of the aggregate amount of principal
and interest due with respect to any Note held by it which is greater than the
proportion received by any other Bank (or Designated Lender) in respect of the
aggregate amount of principal and interest due with respect to any Note held by
such other Bank (or Designated Lender), the Bank (or Designated Lender)
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks (and Designated Lenders, if
any), and such other adjustments shall be made, as may be required so that all
such payments of principal and interest with respect to the Notes held by the
Banks (and Designated Lenders, if any) shall be shared by the Banks (and
Designated Lenders, if any) pro rata; provided that nothing in this Section
shall impair the right of any Bank (or Designated Lender) to exercise any right
of set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness hereunder. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Note, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrower and the Required Banks
(and, if the rights or duties of the Agent are affected thereby, by the Agent);
provided that no such amendment or waiver shall, unless signed by all the Banks,
(i) increase or decrease the Commitment of any Bank (except for a ratable
decrease in the Commitments of all Banks) or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for any reduction or termination
of any Commitment, (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause (i),
(ii), (iii) or (iv) of Section 9.05 without the consent of the Participant. The
Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article VIII with
respect to its participating interest. An assignment or other transfer which is
not permitted by subsection (c) or (d) below shall be given effect for purposes
of this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $20,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit H hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Borrower,
which shall not be unreasonably withheld; provided that if an Assignee is an
affiliate of such transferor Bank or was a Bank immediately prior to such
assignment, no such consent shall be required; and provided further that such
assignment may, but need not, include rights of the transferor Bank in respect
of outstanding Money Market Loans. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower
shall make appropriate arrangements so that, if required, a new Note is issued
to the Assignee. In connection with any such assignment, the transferor Bank
shall pay to the Agent an administrative fee for processing such assignment in
the amount of $2,500. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall deliver to the Borrower
and the Agent certification as to exemption from deduction or withholding of any
United States federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank, which may enforce
such assignment in any manner allowed by law. No such assignment shall release
the transferor Bank from its obligations hereunder.
(e) Each Bank shall have the right from time to time, with the
consent of each of the Borrower and the Agent (provided that the consent of the
Agent shall not be unreasonably withheld) to designate up to two Eligible
Designees to purchase or make, as the case may be, all or a portion of the Loans
to be made by such Bank pursuant to this Agreement. Upon the execution by any
such Bank and such Eligible Designee of an instrument effecting such designation
and the acceptance thereof by the Borrower and the Agent, the Borrower shall
execute and deliver to such Eligible Designee a Note complying with the
requirements of Section 2.05, and such Eligible Designee shall become a
Designated Lender for purposes of this Agreement. Such Designating Bank shall
thereafter have the right to permit such Designated Lender to make all or a
portion of the Loans to be made by such Designating Bank pursuant to Section
2.01 or 2.03, and the making of such Loans or portion thereof by such Designated
Lender shall satisfy the obligation of the Designating Bank to that extent. In
order to permit any Designated Lender designated by it to make all or any
portion of a Loan to be made by it on the date of any Borrowing, a Designating
Bank shall give notice to the Agent and the Borrower not later than 2:00 P.M.,
New York City time, (x) on the Domestic Business Day before each Base Rate
borrowing, (y) on the second Domestic Business Day before each CD Borrowing or
(z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing (or, in
the case of a Money Market Borrowing pursuant to (aa) an Absolute Rate Auction,
at 5:00 P.M. on the Domestic Business Day before such proposed Borrowing or (bb)
a LIBOR Auction, at 5:00 P.M. on the fifth Euro-Dollar Business Day before such
proposed Borrowing), identifying each such Designated Lender and, in the case of
a Committed Borrowing, setting forth the amount of the Loan to be purchased or
made by such Designated Lender on such date. As to any Loan made by it, each
Designated Lender shall have all the rights and be subject to all obligations
including, without limitation Section 9.11, a Bank making such Loan would have
had under this Agreement and otherwise; provided, that (i) all voting and
consensual rights under this Agreement in respect of such Loans shall be
exercised solely by the Designating Bank and (ii) no Designated Lender shall be
entitled to recover a greater amount under Sections 2.15, 8.03 and 8.04 than the
Designating Bank would have been entitled to recover had such Loan been made by
it. In the event that any Designating Bank shall cease to be a Bank having a
Commitment hereunder, all Designated Lenders designated by such Designating Bank
shall cease to be Designated Lenders (but shall retain their rights hereunder
with respect to Loans at the time outstanding). Notwithstanding the designation
by any Bank of one or more Designated Lenders, such Bank shall retain its
Commitment and all obligations hereunder related thereto, and such Designated
Lender shall not be a party to this Agreement and shall not have any Commitment
hereunder.
(f) No Participant, Assignee or other transferee (each a
"Transferee") of any Bank's rights shall be entitled to receive any greater
payment under Section 8.03 or 8.04 than such Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made
with the Borrower's prior written consent or by reason of the provisions of
Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different
Applicable Lending Office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT
AND THE BANKS (AND DESIGNATED LENDERS) HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Confidentiality. Each Bank agrees to keep any
information delivered or made available by the Borrower to it confidential from
anyone other than persons employed or retained by such Bank who are expected to
become engaged in evaluating, approving, structuring or administering the Loans;
provided that nothing herein shall prevent any Bank from disclosing such
information (a) to any other Bank or to the Agent, (b) to any other person if
reasonably incidental to the administration of the Loans, (c) upon the order of
any court or administrative agency, (d) upon the request or demand of any
regulatory agency or authority, (e) which had been publicly disclosed other than
as a result of a disclosure by the Agent or any Bank prohibited by this
Agreement, (f) in connection with any litigation to which the Agent, any Bank or
its subsidiaries or Parent may be a party, (g) to the extent necessary in
connection with the exercise of any remedy hereunder, (h) to such Bank's or
Agent's legal counsel and independent auditors, (i) subject to provisions
substantially similar to those contained in this Section, to any actual or
prospective Transferee and (j) otherwise with the written consent of the
Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
AMERICAN STORES COMPANY
By: /s/ J. Greg Spencer
Title:
709 East South Temple
Salt Lake City, UT 84102
Telex number:
Facsimile number: (801) 531-0768
Commitments
$84,750,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Adam J. Silver
Title: Associate
$67,500,000 BANK OF AMERICA NT & SA
By: /s/ James P. Johnson
Title: Managing Director
$67,500,000 BANK OF MONTREAL
By: /s/ Brenda L. Buttner
Title: Director
$67,500,000 THE CHASE MANHATTAN BANK
By: /s/ William P. Rindfuss
Title: Vice President
$67,500,000 NATIONSBANK OF TEXAS, N.A.
By: /s/ Kimberly Knop
Title: Vice President
$67,500,000 THE FUJI BANK, LIMITED
LOS ANGELES AGENCY
By:/s/ N. Umemura
Title: Joint General Manager
$67,500,000 THE LONG TERM CREDIT BANK
OF JAPAN, LTD., LOS ANGELES AGENCY
By: /s/ T. Morgan Edwards II
Title: Deputy General Manager
$67,500,000 UNION BANK OF CALIFORNIA, N.A.
By:/s/ Timothy P. Streb
Title: Vice President
$67,500,000 WACHOVIA BANK OF GEORGIA, N.A
By:/s/ William F. Hamlett
Title: Senior Vice President
$52,500,000 CIBC INC.
By: /s/ Chris Kleczkowski
Title: Director, CIBC Wood Gundy Securities Corp.
AS AGENT
$52,500,000 THE FIRST NATIONAL BANK
OF CHICAGO
By: /s/ John Runger
Title: Managing Director
$52,500,000 FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By: /s/ A. Kimball Collins
Title: Vice President
$52,500,000 MELLON BANK, N.A.
By:/s/ Richard Spelke
Title: First Vice President
$52,500,000 THE DAI-ICHI KANGYO BANK, LTD.
LOS ANGELES AGENCY
By: /s/ Masatsugu Morishita
Title: Sr. Vice President &
Joint General Manager
$52,500,000 THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By: /s/ Vincente L. Timiraos
Title: Senior Vice President
and Senior Manager
$52,500,000 THE NORTHERN TRUST COMPANY
By: /s/ Michelle D. Griffin
Title: Vice President
$52,500,000 WELLS FARGO BANK, N.A.
By:/s/ Mathew Harvey
Title: Vice President
$37,500,000 CREDIT LYONNAIS
LOS ANGELES BRANCH
By: /s/ Robert Ivosevich
Title: Senior Vice President
$37,500,000 CREDIT SUISSE FIRST BOSTON
By: /s/ David J. Worthington
Title: Managing Director
By: /s/ Deborah A. Shea
Title: Associate
$37,500,000 THE SAKURA BANK, LIMITED
By: /s/ Fernando Buesa
Title: Vice President
By: /s/ Ofusa Sato
Title:Senior Vice President &
Assistant General Manager
$30,000,000 ABN AMRO BANK, N.V.
By: /s/ Dianne D. Barkley
Title: Group Vice President
By: /s/ Gina M. Brusatori
Title: Vice President
$30,000,000 BANQUE NATIONALE DE PARIS
By: /s/ D. Guy Gibb
Title: Vice President
By: /s/ Jeffrey S. Kajisa
Title: Assistant Vice President
$30,000,000 COMMERZBANK AG
LOS ANGELES BRANCH
By:/s/ Christian Jagenberg
Title: SVP & Manager
By:/s/ Steven F. Larsen
Title: Vice President
$30,000,000 CORESTATES BANK, N.A.
By: /s/ Thomas McDonnell
Title: Vice President
$30,000,000 FIRST SECURITY BANK, N.A.
By: /s/ Dick van Klaveren
Title: Vice President
$30,000,000 FLEET NATIONAL BANK
By:/s/ Richard Seufert
Title: Vice President
$30,000,000 PNC BANK, NATIONAL ASSOCIATION
By: /s/ Karen C. Brogan
Title: Commercial Banking Officer
$30,000,000 THE SANWA BANK, LIMITED
LOS ANGELES BRANCH
By: /s/ Gill S. Realon
Title: Vice President
$30,000,000 UNION BANK OF SWITZERLAND
By: /s/ Daniel R. Strickford
Title: Assistant Vice President
By: /s/ Samuel Azizo
Title: Vice President
$15,000,000 BANK ONE, UTAH, NA
By:/s/ M. Craig Zollinger
Title: Executive Vice President
$15,000,000 THE TOYO TRUST & BANKING CO.,
LTD., LOS ANGELES AGENCY
By:/s/ Kenji Fujikawa
Title: General Manager
$12,750,000 THE BANK OF YOKOHAMA, LTD.
By:/s/ Michiro Asaba
Title: Executive Vice President
& General Manager
$11,250,000 THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter L. Griswold
Title: Director
$11,250,000 THE YASUDA TRUST & BANKING CO.,
LTD.
By: /s/ Makoto Tagawa
Title: Deputy General Manager
$7,500,000 THE MITSUI TRUST AND BANKING CO.,
LTD., NEW YORK BRANCH
By: /s/ Margaret Holloway
Title: Vice President & Manager
Total Commitments
$1,500,000,000
==============
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: /s/ Adam J. Silver
Title: Associate
60 Wall Street
New York, New York 10260-0060
Attention: David Ellis
Telex number: 177615
Facsimile number:
PRICING SCHEDULE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Status* Level Level Level Level Level Level
I II III IV V VI
Euro-Dollar 13.00 15.00 16.50 21.50 31.25 42.50
Margin**
CD Margin** 25.50 27.50 29.00 34.00 43.75 55.00
Facility Fee 7.00 7.50 8.50 11.00 13.75 20.00
Rate**
</TABLE>
*
In the event that the Borrower would (but for this provision) qualify for
Level I Status, Level II Status, Level III Status or Level IV Status on the
basis of a rating from either S&P or Moody's, but the rating from the other such
rating agency is more than one rating category lower than that required by such
Status, the applicable status shall be the next greater level to that for which
the Borrower would otherwise qualify on the basis of the higher rating (e.g., if
the Borrower were rated BBB+/Baa3, Level IV Status - the next greater level to
the Level III Status for which the Borrower would otherwise qualify on the basis
of its BBB+ rating - would apply).
**
Basis points per annum.
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the Borrower's
senior unsecured debt is rated A or higher by S&P or A2 or higher by Moody's.
"Level II Status" exists at any date if, at such date, (i) the
Borrower's senior unsecured debt is rated A- by S&P or A3 by Moody's and (ii)
Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the
Borrower's senior unsecured debt is rated BBB+ by S&P or Baa1 by Moody's and
(ii) neither Level I Status nor Level II Status exists.
"Level IV Status" exists at any date if, at such date, (i) the
Borrower's senior unsecured debt is rated BBB by S&P or Baa2 by Moody's and (ii)
none of Level I Status, Level II Status and Level III Status exists.
"Level V Status" exists at any date if, at such date, (i) the
Borrower's senior unsecured debt is rated BBB- by S&P and Baa3 by Moody's and
(ii) none of Level I Status, Level II Status, Level III Status and Level IV
Status exists.
"Level VI Status" exists at any date if, at such date, no other Status
exists.
"Moody's" means Moody's Investors Service, Inc.
"S&P" means Standard & Poor's Ratings Services.
"Status" refers to the determination of which of Level I Status, Level
II Status, Level III Status, Level IV Status, Level V Status or Level VI Status
exists at any date.
The credit ratings to be utilized for purposes of this Schedule are those
assigned to the senior unsecured long-term debt securities of the Borrower
without third-party credit enhancement, and any rating assigned to any other
debt security of the Borrower shall be disregarded. The rating in effect at any
date is that in effect at the close of business on such date.
EXHIBIT A
NOTE
New York, New York
, 19
For value received, American Stores Company, a Delaware corporation
(the "Borrower"), promises to pay to the order of (the
-----------------------
"Bank"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the maturity date provided for in the Credit
Agreement. The Borrower promises to pay interest on the unpaid principal amount
of each such Loan on the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and interest shall be made in
lawful money of the United States in Federal or other immediately available
funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Bank, the respective types thereof and all
repayments of the principal thereof shall be recorded by the Bank and, if the
Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the Notes referred to in the Multi-Year Credit
Agreement dated as of March 28, 1997 among the Borrower, the banks listed on the
signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the mandatory and
optional prepayment hereof and the acceleration of the maturity hereof.
AMERICAN STORES COMPANY
By
------------------------
Title:
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Amount of
Amount of Type of Principal Maturity Notation
Loan Repaid Date Made By
EXHIBIT B
Form of Money Market Quote Request
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: American Stores Company
Re: Multi-Year Credit Agreement (the "Credit Agreement") dated as of
March 28, 1997 among the Borrower, the Banks listed on the
signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing:
------------------
Principal Amount* Interest Period**
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
*
Amount must be $25,000,000 or a larger multiple of $5,000,000.
**
Not less than one month (LIBOR Auction) or not less than 7 days (Absolute
Rate Auction), subject to the provisions of the definition of Interest Period.
Terms used herein have the meanings assigned to them in the Credit
Agreement.
AMERICAN STORES COMPANY
By
------------------------
Title:
EXHIBIT C
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes to American Stores Company
(the "Borrower")
Pursuant to Section 2.03 of the Multi-Year Credit Agreement dated as
of March 28, 1997 among the Borrower, the Banks parties thereto and the
undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to
submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing:
------------------
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [11:00
A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
----------------------
Authorized Officer
EXHIBIT D
Form of Money Market Quote
To: Morgan Guaranty Trust Company of New York,
as Agent
Re: Money Market Quote to American Stores Company (the
"Borrower")
In response to your invitation on behalf of the Borrower dated
, 19 , we hereby make the following Money Market Quote on the
- ------------- --
following terms:
1. Quoting Bank:
--------------------------------
2. Person to contact at Quoting Bank:
3. Date of Borrowing: *
--------------------
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
$
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed $ .]**
------------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal amount
requested. Specify aggregate limitation if the sum of the individual offers
exceeds the amount the Bank is willing to lend. Bids must be made for
$3,000,000 or a larger multiple of $1,000,000.
(notes continued on following page)
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Multi-Year Credit
Agreement dated as of March 28, 1997 among the Borrower, the Banks listed on the
signature pages thereof and yourselves, as Agent, irrevocably obligates us to
make the Money Market Loan(s) for which any offer(s) are accepted, in whole or
in part.
Very truly yours,
[NAME OF BANK]
Dated: By:
--------------- --------------------------
Authorized Officer
*** Not less than one month or not less than 7 days, as specified in the related
Invitation. No more than five bids are permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
EXHIBIT E
OPINION OF
GENERAL COUNSEL OF THE BORROWER
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I have acted as counsel for American Stores Company (the "Borrower")
in connection with the Multi-Year Credit Agreement (the "Credit Agreement")
dated as of March 28, 1997 among the Borrower, the Banks from time to time
parties thereto and Morgan Guaranty Trust Company of New York, as Agent. Terms
defined in the Credit Agreement are used herein as therein defined. This
opinion is being rendered to you at the request of our client pursuant to
Section 3.01(c) of the Credit Agreement.
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware, and has all corporate powers
and all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other agreement or
instrument evidencing or governing Material Debt or of any other material
instrument binding upon the Borrower or any of its Subsidiaries or result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
4. Except as set forth in the Borrower's 1995 Form 10-K, there is no
action, suit or proceeding pending against, or to the best of my knowledge
threatened against or affecting, the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, consolidated financial position or consolidated
results of operations of the Borrower and its Consolidated Subsidiaries,
considered as a whole, or which in any manner draws into question the validity
of the Credit Agreement or the Notes.
5. Each of the Borrower's Major Subsidiaries is a corporation validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
Very truly yours,
EXHIBIT F
OPINION OF
SPECIAL COUNSEL FOR THE BORROWER
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have acted as counsel for American Stores Company (the "Borrower")
in connection with the Multi-Year Credit Agreement (the "Credit Agreement")
dated as of March 28, 1997 among the Borrower, the Banks from time to time
parties thereto and Morgan Guaranty Trust Company of New York, as Agent. Terms
defined in the Credit Agreement are used herein as therein defined. This
opinion is being rendered to you at the request of our client pursuant to
Section 3.01(d) of the Credit Agreement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
The Credit Agreement constitutes a valid and binding agreement of the
Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
EXHIBIT G
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Multi-Year Credit
Agreement (the "Credit Agreement") dated as of March 28, 1997 among American
Stores Company, a Delaware corporation (the "Borrower"), the Banks from time to
time parties thereto (the "Banks") and Morgan Guaranty Trust Company of New
York, as Agent (the "Agent"), and have acted as special counsel for the Agent
for the purpose of rendering this opinion pursuant to Section 3.01(e) of the
Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
EXHIBIT H
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of , 19 among [ASSIGNOR] (the
--------- --
"Assignor"), [ASSIGNEE] (the "Assignee"), [BORROWER] (the "Borrower") and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Multi-Year Credit Agreement dated as of March 28, 1997 among the
Borrower, the Assignor and the other Banks party thereto, as Banks and the Agent
(the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower in an aggregate principal amount at any
time outstanding not to exceed $ ;
----------
WHEREAS, Committed Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $ are
----------
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $ (the "Assigned Amount"),
----------
together with a corresponding portion of its outstanding Committed Loans, and
the Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, the Borrower and
the Agent and the payment of the amounts specified in Section 3 required to be
paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed
to the rights and be obligated to perform the obligations of a Bank under the
Credit Agreement with a Commitment in an amount equal to the Assigned Amount,
and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced
by a like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.* It is
understood that commitment and/or facility fees accrued to the date hereof are
for the account of the Assignor and such fees accruing from and including the
date hereof are for the account of the Assignee. Each of the Assignor and the
*
Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be
preferable in an appropriate case to specify these amounts generically or by
formula rather than as a fixed sum.
Assignee hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
SECTION 4. Consent of the Borrower. This Agreement is conditioned
upon the consent of the Borrower pursuant to Section 9.06(c) of the Credit
Agreement. The execution of this Agreement by the Borrower is evidence of this
consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver
a Note payable to the order of the Assignee to evidence the assignment and
assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the obligations of the Borrower
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By
-------------------------
Title:
[ASSIGNEE]
By
--------------------------
Title:
AMERICAN STORES COMPANY
By
--------------------------
Title:
EXECUTION COPY
$500,000,000
364-DAY CREDIT AGREEMENT
dated as of
March 28, 1997
among
American Stores Company,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
J.P. Morgan Securities Inc.,
Arranger
Bank of America NT & SA
Bank of Montreal
The Chase Manhattan Bank
Nationsbank of Texas, N.A.
The Fuji Bank, Limited Los Angeles Agency
The Long Term Credit Bank of Japan, Ltd., Los Angeles Agency
Union Bank of California, N.A.
Wachovia Bank of Georgia, N.A.,
Managing Agents
TABLE OF CONTENTS*
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.............................. 1
1.02 Accounting Terms and Determinations...... 14
1.03 Types of Borrowings...................... 15
ARTICLE II
THE CREDITS
SECTION 2.01 Commitments to Lend...................... 15
2.02 Notice of Committed Borrowing............ 16
2.03 Money Market Borrowings.................. 16
2.04 Notice to Banks; Funding of Loans........ 20
2.05 Notes.................................... 21
2.06 Maturity of Loans; Mandatory
Prepayments.............................. 22
2.07 Interest Rates........................... 22
2.08 Facility Fee............................. 26
2.09 Optional Termination or
Reduction of Commitments................. 26
2.10 Method of Electing Interest
Rates.................................... 26
2.11 Optional Prepayments..................... 28
2.12 General Provisions as to Payments........ 29
2.13 Funding Losses........................... 30
2.14 Computation of Interest and Fees......... 30
2.15 Regulation D Compensation................ 30
*
The Table of Contents is not a part of this Agreement.
ARTICLE III
CONDITIONS
SECTION 3.01 Effectiveness. . . ...................... 31
3.02 Borrowings............................... 33
3.03 Outstanding "Money Market Loans"......... 33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Corporate Existence and Power............ 34
4.02 Corporate and Governmental
Authorization; No Contravention.......... 34
4.03 Binding Effect........................... 34
4.04 Financial Information.................... 34
4.05 Litigation............................... 35
4.06 Compliance with ERISA.................... 35
4.07 Environmental Matters.................... 36
4.08 Taxes.................................... 36
4.09 Subsidiaries............................. 37
4.10 Not an Investment Company................ 37
4.11 Full Disclosure.......................... 37
ARTICLE V
COVENANTS
SECTION 5.01 Information.............................. 37
5.02 Payment of Obligations................... 39
5.03 Maintenance of Property; Insurance....... 39
5.04 Conduct of Business and
Maintenance of Existence................. 40
5.05 Compliance with Laws..................... 40
5.06 Inspection of Property,
Books and Records........................ 40
5.07 Cash Flow/Total Debt Ratio............... 41
5.08 Subsidiary Debt Restriction.............. 41
5.09 Negative Pledge.......................... 41
5.10 Consolidations, Mergers and
Sales of Assets.......................... 43
5.11 Use of Proceeds.......................... 43
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default........................ 43
6.02 Notice of Default........................ 46
ARTICLE VII
THE AGENT
SECTION 7.01 Appointment and Authorization............ 46
7.02 Agent and Affiliates..................... 46
7.03 Action by Agent.......................... 46
7.04 Consultation with Experts................ 47
7.05 Liability of Agent....................... 47
7.06 Indemnification.......................... 47
7.07 Credit Decision.......................... 47
7.08 Successor Agent.......................... 48
7.09 Agent's Fee.............................. 48
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest
Rate Inadequate or Unfair................ 48
8.02 Illegality............................... 49
8.03 Increased Cost and Reduced Return........ 50
8.04 Taxes.................................... 52
8.05 Base Rate Loans Substituted for
Affected Fixed Rate Loans................ 54
8.06 Substitution of a Bank................... 55
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices.................................. 55
9.02 No Waivers............................... 56
9.03 Expenses; Indemnification................ 56
9.04 Sharing of Set-Offs...................... 57
9.05 Amendments and Waivers................... 57
9.06 Successors and Assigns................... 58
9.07 Collateral............................... 60
9.08 Governing Law; Submission to
Jurisdiction............................. 61
9.09 Counterparts; Integration................ 61
9.10 WAIVER OF JURY TRIAL..................... 61
9.11 Confidentiality.......................... 61
Exhibit A - Note
Exhibit B - Form of Money Market Quote Request
Exhibit C - Form of Invitation for Money Market Quotes
Exhibit D - Form of Money Market Quote
Exhibit E - Opinion of General Counsel for the Borrower
Exhibit F - Opinion of Special Counsel for the Borrower
Exhibit G - Opinion of Davis Polk & Wardwell, Special Counsel for the
Agent
Exhibit H - Assignment and Assumption Agreement
364-DAY CREDIT AGREEMENT
AGREEMENT dated as of March 28, 1997 among AMERICAN STORES COMPANY,
the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank (or
Designated Lender), (i) in the case of its Domestic Loans, its Domestic Lending
Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending
Office and (iii) in the case of its Money Market Loans, its Money Market Lending
Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day or (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means (i) a Committed Loan which bears interest at
the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice
of Interest Rate Election or the provisions of Article VIII or (ii) an overdue
amount which was a Base Rate Loan immediately before it became overdue.
"Borrower" means American Stores Company, a Delaware corporation, and
its successors.
"Borrower's 1995 Form 10-K" means the Borrower's annual report on Form
10-K for the fiscal year ended February 3, 1996, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"Borrower's Latest Form 10-Q" means the Borrower's quarterly report on
Form 10-Q for the quarter ended November 2, 1996, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"Borrowing" has the meaning set forth in Section 1.03.
"Capital Lease" means any lease of property which, in accordance with
United States generally accepted accounting principles, should be capitalized on
the lessee's balance sheet or for which the amount of the asset and liability
thereunder as if so capitalized should be disclosed in a note to such balance
sheet; and "Capitalized Lease Obligation" means the amount of the liability
which should be so capitalized or disclosed.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means (i) a Committed Loan which bears interest at a CD Rate
pursuant to the applicable Notice of Committed Borrowing or Notice of Interest
Rate Election or (ii) an overdue amount which was a CD Loan immediately before
it became overdue.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Rate" means a rate of interest determined pursuant to Section
2.07(b) on the basis of an Adjusted CD Rate.
"CD Reference Banks" means Wachovia Bank of Georgia, N.A., Credit
Suisse First Boston and Morgan Guaranty Trust Company of New York.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof, as such amount may
be reduced from time to time pursuant to Section 2.09.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01;
provided that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "Committed
Loan" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"Consolidated Assets" means at any date the consolidated assets of the
Borrower and its Consolidated Subsidiaries determined as of such date.
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Net Tangible Assets" means the total amounts of assets
(less depreciation and valuation reserves and other reserves and items
deductible from gross book value of specific asset accounts under generally
accepted accounting principles) which under United States generally accepted
accounting principles would be included on a consolidated balance sheet after
deducting therefrom (a) all liability items except Funded Debt, Capitalized
Lease Obligations, stockholders' equity and reserves for deferred income taxes
and (b) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, which in each case would be so
included on such balance sheet.
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries
determined as of such date.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date.
"Consolidated Tangible Assets" means at any date Consolidated Assets
less goodwill of the Borrower and its Consolidated Subsidiaries, each determined
as of such date.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with United States generally accepted accounting principles, (v) all
non-contingent obligations (and, for purposes of Section 5.09 and the
definitions of Material Debt and Material Financial Obligations, all contingent
obligations) of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt
secured by a Lien on any asset of such Person, whether or not such Debt is
otherwise an obligation of such Person, and (vii) all Debt of others Guaranteed
by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"Designated Lender" means with respect to each Designating Bank, each
Eligible Designee designated by such Designating Bank pursuant to Section
9.06(e).
"Designating Bank" means, with respect to each Designated Lender, the
Bank that designated such Designated Lender pursuant to Section 9.06(e).
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank (or Designated
Lender), its office located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its Domestic
Lending Office) or such other office as such Bank (or Designated Lender) may
hereafter designate as its Domestic Lending Office by notice to the Borrower and
the Agent; provided that any Bank (or Designated Lender) may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank (or Designated Lender) shall be deemed to
refer to either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.01.
"Eligible Designee" means a special purpose corporation which is
engaged in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business and which issues (or the parent of which issues)
commercial paper rated at least A-1 or the equivalent thereof by Standard &
Poor=s Ratings Services or P-1 or the equivalent thereof by Moody=s Investors
Service, Inc. and that is organized under the laws of the United States or any
State thereof.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to
each Bank (or Designated Lender"), its office, branch or affiliate located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Euro-Dollar Lending Office) or such other
office, branch or affiliate of such Bank (or Designated Lender) as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Agent.
"Euro-Dollar Loan" means (i) a Committed Loan which bears interest at
a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-
Dollar Loan immediately before it became overdue.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.07(c) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal London offices of
Wachovia Bank of Georgia, N.A., Credit Suisse First Boston and Morgan Guaranty
Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.15.
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreement" means the Credit Agreement dated as of
June 28, 1994 among the Borrower, the banks parties thereto and Morgan Guaranty
Trust Company of New York, as agent, as amended to the Effective Date.
"Facility Fee" has the meaning set forth in Section 2.08.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th 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 Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01(a)) or any combination of the foregoing.
"Funded Debt" means any Debt maturing by its terms more than one year
from the date of the determination thereof, including any Debt renewable or
extendable at the option of the obligor to a date later than one year from the
date of the determination thereof.
"Group of Loans" means at any time a group of Loans consisting of (i)
all Committed Loans which are Base Rate Loans at such time or (ii) all Committed
Loans which are Fixed Rate Loans of the same type having the same Interest
Period at such time; provided that, if a Committed Loan of any particular Bank
is converted to or made as a Base Rate Loan pursuant to Article VIII, such Loan
shall be included in the same Group or Groups of Loans from time to time as it
would have been in if it had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the holder of such Debt of the
payment thereof or to protect such holder against loss in respect thereof (in
whole or in part), provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business; and
provided further that the contingent liabilities of the Borrower or any
Subsidiary in respect of lease obligations of other Persons shall not be deemed
Guarantees if (x) the lease obligation was assumed by such other Person in
connection with the sale, transfer or other disposition of assets of the
Borrower or such Subsidiary to such other Person, (y) such lease obligation,
when initially incurred as a non-contingent liability of the Borrower or such
Subsidiary, was not incurred in contemplation of the sale, transfer or other
disposition referred to in clause (x) above, and (z) neither the Borrower nor
such Subsidiary shall have received notice of default by the primary obligor
under such lease obligation. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, a
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Borrower
may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Loan, a period commencing on the date of borrowing
specified in the applicable Notice of Borrowing or on the date specified in the
applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180 days
thereafter, as the Borrower may elect in the applicable Notice of Borrowing;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Money Market LIBOR Loan, the period commencing on the
date of borrowing specified in the applicable Notice of Borrowing and ending
such whole number of months thereafter as the Borrower may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market Absolute Rate Loan, the period commencing
on the date of borrowing specified in the applicable Notice of Borrowing and
ending such number of days thereafter (but not less than 7 days) as the Borrower
may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"Loan" means a Committed Loan or a Money Market Loan and "Loans" means
Committed Loans or Money Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Major Subsidiary" at any time shall mean a Subsidiary of the Borrower
that either (i) has revenues in excess of $250,000,000 in the Borrower's most
recent fiscal year prior to such time or assets in excess of $50,000,000 in the
Borrower's most recent fiscal year prior to such time or (ii) has been
designated a Major Subsidiary by the Board of Directors of the Borrower at or
prior to such time. Additionally, if the Subsidiaries of the Borrower that are
not described in the preceding sentence have in the aggregate either (1)
revenues in excess of 20% of the consolidated revenues of the Borrower and its
Consolidated Subsidiaries in the Borrower's most recent fiscal year prior to
such time or (2) assets in excess of 20% of the Consolidated Assets of the
Borrower and its Consolidated Subsidiaries in the Borrower's most recent fiscal
year prior to such time, each such Subsidiary will constitute a Major
Subsidiary.
"Margin Regulations" means Regulations G, T, U and X of the Board of
Governors of The Federal Reserve System, as in effect from time to time.
"Material Debt" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal or face amount exceeding
$25,000,000.
"Material Financial Obligations" means a principal or face amount of
Debt and/or payment obligations in respect of Derivatives Obligations of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, exceeding in the aggregate $25,000,000.
"Minimum Net Rental Expense" means, for any period, the aggregate
minimum rental expenses (net of sub- lease income) of the Borrower and its
Consolidated Subsidiaries under operating leases for such period.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
(or Designated Lender) pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank (or Designated
Lender), its Domestic Lending Office or such other office, branch or affiliate
of such Bank (or Designated Lender) as it may hereafter designate as its Money
Market Lending Office by notice to the Borrower and the Agent; provided that any
Bank (or Designated Lender) may from time to time by notice to the Borrower and
the Agent designate separate Money Market Lending Offices for its Money Market
LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the
other hand, in which case all references herein to the Money Market Lending
Office of such Bank (or Designated Lender) shall be deemed to refer to either or
both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank (or
Designated Lender) pursuant to a LIBOR Auction (including such a loan bearing
interest at the Base Rate pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)).
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.10.
"Operating Cash Flow" means, for any period, the consolidated net
income of the Borrower and its Consolidated Subsidiaries (before extraordinary
items and changes in accounting principles) for such period, (a) plus, to the
extent deducted in determining such consolidated net income, the sum of (i)
interest expense, (ii) income tax expense, (iii) depreciation and amortization
expense, (iv) non-operating expenses in excess of non-operating income and (v)
any LIFO charge, and (b) minus, to the extent included in determining such
consolidated net income, non-operating income in excess of non-operating
expense. For this purpose, "non-operating income" means interest income, gain
on sale of assets outside the ordinary course of business and any other unusual
or non-recurring item of income or gain which is so classified in the Borrower's
financial statements, and "non-operating expense" means loss on sale of assets
outside the ordinary course of business and any other unusual or non-recurring
item of expense or loss which is so classified in the Borrower's financial
statements.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Quarterly Date" means the last Euro-Dollar Business Day of each
March, June, September and December.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having more than 55% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, Banks holding Notes (or Designating Banks of Designated Lenders
holding Notes) evidencing more than 55% of the aggregate unpaid principal amount
of the Loans.
"Revolving Credit Period" means the period from and including the
Effective Date to but excluding the Termination Date.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.
"Termination Date" means March 27, 1998, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Total Debt" of any Person means at any date the sum of (i)
Consolidated Debt at such date and (ii) eight times the Minimum Net Rental
Expense for the period of four consecutive fiscal quarters then most recently
ended.
"Transferee" has the meaning set forth in Section 9.06(e).
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"Wholly Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with United
States generally accepted accounting principles as in effect, from time to time,
applied on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks; provided that, if the Borrower notifies the Agent that the
Borrower wishes to amend any covenant in Article V to eliminate the effect of
any change in such generally accepted accounting principles on the operation of
such covenant (or if the Agent notifies the Borrower that the Required Banks
wish to amend Article V for such purpose), then the Borrower's compliance with
such covenant shall be determined on the basis of such generally accepted
accounting principles in effect immediately before the relevant change in such
generally accepted accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article II on the same date, all of which Loans are of the same type (subject to
Article VIII) and, except in the case of Base Rate Loans, have the same Interest
Period or initial Interest Period. Borrowings are classified for purposes of
this Agreement either by reference to the pricing of Loans comprising such
Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of
Euro-Dollar Loans) or by reference to the provisions of Article II under which
participation therein is determined (i.e., a "Committed Borrowing" is a
Borrowing under Section 2.01 in which all Banks participate in proportion to
their Commitments, while a "Money Market Borrowing" is a Borrowing under Section
2.03 in which the Bank participants are determined on the basis of their bids in
accordance therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. During the Revolving Credit
Period each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower pursuant to this Section from time to
time in amounts such that the aggregate principal amount of Committed Loans by
such Bank (including its Designated Lenders, if any) at any one time outstanding
shall not exceed the amount of its Commitment. Each Borrowing under this
Section shall be in an aggregate principal amount of $25,000,000 or any larger
multiple of $5,000,000 (except that any such Borrowing may be in the aggregate
amount available in accordance with Section 3.02(b)) and shall be made from the
several Banks (and their Designated Lenders, if any) ratably in proportion to
their respective Commitments. Within the foregoing limits, the Borrower may
borrow under this Section, prepay Loans to the extent permitted by Section 2.11,
and reborrow at any time during the Revolving Credit Period under this Section.
The Commitments shall terminate on the Termination Date.
SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give
the Agent notice (a "Notice of Committed Borrowing") not later than 12:00 Noon
(New York City time) on (x) the date of each Base Rate Borrowing, (y) the second
Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate or at a CD Rate or a Euro-Dollar Rate, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in this Section,
request the Banks during the Revolving Credit Period to make offers to make
Money Market Loans to the Borrower. The Banks may, but shall have no obligation
to, make such offers and the Borrower may, but shall have no obligation to,
accept any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received no later than
12:00 Noon (New York City time) on (x) the fifth Euro-Dollar Business Day prior
to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y)
the Domestic Business Day next preceding the date of Borrowing proposed therein,
in the case of an Absolute Rate Auction (or, in either case, such other time or
date as the Borrower and the Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$25,000,000 or a larger multiple of $5,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within three Euro-Dollar Business Days (or such other
number of days as the Borrower and the Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank
(including its Designated Lenders, if any) may submit a Money Market Quote
containing an offer or offers to make Money Market Loans in response to any
Invitation for Money Market Quotes. Each Money Market Quote must comply with
the requirements of this subsection (d) and must be submitted to the Agent by
telex or facsimile transmission at its offices specified in or pursuant to
Section 9.01 not later than (x) 2:00 P.M. (New York City time) on the fourth
Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of
a LIBOR Auction or (y) 11:00 A.M. (New York City time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified the Banks not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective); provided that Money Market Quotes submitted by the
Agent (or any affiliate of the Agent) in the capacity of a Bank may be
submitted, and may only be submitted, if the Agent or such affiliate notifies
the Borrower of the terms of the offer or offers contained therein not later
than (x) one hour prior to the deadline for the other Banks, in the case of a
LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in
the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money
Market Quote so made shall be irrevocable except with the written consent of the
Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Bank (or of the Designating Bank, in the
case of a quote made by a Designated Lender), (x) must be $3,000,000 or a
larger multiple of $1,000,000, (y) may not exceed the principal amount of
Money Market Loans for which offers were requested and (z) may be subject
to an aggregate limitation as to the principal amount of Money Market Loans
for which offers being made by such quoting Bank or Designated Lender may
be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank or Designated Lender.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the Borrower
of the terms (x) of any Money Market Quote submitted by a Bank or Designated
Lender that is in accordance with subsection (d) and (y) of any Money Market
Quote that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Bank or Designated Lender with respect to the
same Money Market Quote Request. Any such subsequent Money Market Quote shall
be disregarded by the Agent unless such subsequent Money Market Quote is
submitted solely to correct a manifest error in such former Money Market Quote.
The Agent's notice to the Borrower shall specify (A) the aggregate principal
amount of Money Market Loans for which offers have been received for each
Interest Period specified in the related Money Market Quote Request, (B) the
respective principal amounts and Money Market Margins or Money Market Absolute
Rates, as the case may be, so offered and (C) if applicable, limitations on the
aggregate principal amount of Money Market Loans for which offers in any single
Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 12:00 Noon
(New York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Agent shall have mutually agreed
and shall have notified the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective), the Borrower shall notify the Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money
Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$25,000,000 or a larger multiple of $5,000,000,
(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be,
and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks (or
Designated Lenders) with the same Money Market Margins or Money Market Absolute
Rates, as the case may be, for a greater aggregate principal amount than the
amount in respect of which such offers are accepted for the related Interest
Period, the principal amount of Money Market Loans in respect of which such
offers are accepted shall be allocated by the Agent among such Banks (or
Designated Lenders) as nearly as possible (in multiples of $1,000,000, as the
Agent may deem appropriate) in proportion to the aggregate principal amounts of
such offers. Determinations by the Agent of the amounts of Money Market Loans
shall be conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share (if any) of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable by
the Borrower.
(b) Not later than 2:00 P.M. (New York City time) on the date of each
Borrowing, each Bank participating therein shall make available (directly or
through its Designated Lenders) its share of such Borrowing, in Federal or other
funds immediately available in New York City, to the Agent at its address
referred to in Section 9.01. Unless the Agent determines that any applicable
condition specified in Article III has not been satisfied, the Agent will
promptly make the funds so received from the Banks (and Designated Lenders, if
any) available to the Borrower at the Agent's aforesaid address.
(c) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing (directly
or through its Designated Lender(s)) in accordance with subsection (b) of this
Section 2.04 and the Agent may, in reliance upon such assumption, make available
to the Borrower on such date a corresponding amount. If and to the extent that
such Bank shall not have so made such share available to the Agent, such Bank
and the Borrower severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal
to the higher of the Federal Funds Rate and the interest rate applicable thereto
pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds
Rate. If such Bank shall repay to the Agent such corresponding amount, such
amount so repaid shall constitute such Bank's Loan included in such Borrowing
for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank (or Designated
Lender) shall be evidenced by a single Note payable to the order of such Bank
(or Designated Lender) for the account of its Applicable Lending Office in an
amount equal to the aggregate unpaid principal amount of such Bank's (or
Designated Lender's) Loans.
(b) Each Bank (or Designated Lender) may, by notice to the Borrower
and the Agent, request that its Loans of a particular type be evidenced by a
separate Note in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type. Each reference in this Agreement to the
"Note" of such Bank (or Designated Lender) shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's (or Designated Lender's) Note
pursuant to Section 3.01(b) (or Section 9.06(e)), the Agent shall forward such
Note to such Bank (or Designated Lender). Each Bank (or Designated Lender)
shall record the date, amount and type of each Loan made by it and the date and
amount of each payment of principal made by the Borrower with respect thereto,
and may, if such Bank so elects in connection with any transfer or enforcement
of its Note, endorse on the schedule forming a part thereof appropriate
notations to evidence the foregoing information with respect to each such Loan
then outstanding; provided that the failure of any Bank (or Designated Lender)
to make any such recordation or endorsement shall not affect the obligations of
the Borrower hereunder or under the Notes. Each Bank (and Designated Lender) is
hereby irrevocably authorized by the Borrower so to endorse its Note and to
attach to and make a part of its Note a continuation of any such schedule as and
when required.
SECTION 2.06. Maturity of Loans. (a) Each Committed Loan shall
mature, and the principal amount thereof shall be due and payable together with
accrued interest thereon, on the Termination Date.
(b) Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable,
together with accrued interest thereon, on the last day of the Interest Period
applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable quarterly in arrears on each
Quarterly Date and, with respect to the principal amount of any Base Rate Loan
converted to a CD Loan or a Euro-Dollar Loan, on each date a Base Rate Loan is
so converted. Any overdue principal of or interest on any Base Rate Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 1% plus the rate otherwise applicable to Base Rate Loans for
such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan shall, as a result of clause (2)(b) of the definition of Interest Period,
have an Interest Period of less than 30 days, such CD Loan shall bear interest
during such Interest Period at the rate applicable to Base Rate Loans during
such period. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue principal of or
interest on any CD Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 1% plus the higher of (i) the
rate applicable to Base Rate Loans for such day and (ii) the sum of the CD
Margin for such day plus the Adjusted CD Rate applicable to the Interest Period
for such Loan at the date such payment was due.
"CD Margin" means a rate per annum equal to 0.310%.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such Interest
Period applies and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. ' 327.4(a) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the United States. The
Adjusted CD Rate shall be adjusted automatically on and as of the effective date
of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum equal to 0.185%.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the higher of (i) the sum of 1% plus the Euro-Dollar Margin for
such day plus the quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum at which one
day (or, if such amount due remains unpaid more than three Euro-Dollar Business
Days, then for such other period of time not longer than six months as the Agent
may select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market for the applicable
period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
8.01 shall exist, at a rate per annum equal to the sum of 1% plus the rate
applicable to Base Rate Loans for such day) and (ii) the sum of 1% plus the
Euro-Dollar Margin for such day plus the London Interbank Offered Rate
applicable to such Loan at the date such payment was due.
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank (or Designated Lender) making such Loan in accordance with Section 2.03.
Each Money Market Absolute Rate Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the Money Market Absolute Rate quoted by the Bank (or
Designated Lender) making such Loan in accordance with Section 2.03. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than three months, at intervals of three
months after the first day thereof. Any overdue principal of or interest on any
Money Market Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.08. Facility Fee. The Borrower shall pay to the Agent for
the account of the Banks ratably in proportion to their Commitments a facility
fee at the rate of 0.065%. Such facility fee shall accrue (i) from and
including the Effective Date to but excluding the Termination Date (or earlier
date of termination of the Commitments in their entirety), on the daily
aggregate amount of the Commitments (whether used or unused) and (ii) from and
including the Termination Date or such earlier date of termination to but
excluding the date the Loans shall be repaid in their entirety, on the daily
aggregate outstanding principal amount of the Loans. Accrued fees under this
Section shall be payable quarterly on each Quarterly Date and upon the date of
termination of the Commitments in their entirety and, if later, the date the
Loans shall be repaid in their entirety.
SECTION 2.09. Optional Termination or Reduction of Commitments.
During the Revolving Credit Period, the Borrower may, upon at least three
Domestic Business Days' notice to the Agent, (i) terminate the Commitments at
any time, if no Loans are outstanding at such time or (ii) ratably reduce from
time to time by an aggregate amount of $25,000,000 or any larger multiple
thereof, the aggregate amount of the Commitments in excess of the aggregate
outstanding principal amount of the Loans.
SECTION 2.10. Method of Electing Interest Rates. (a) The Loans
included in each Committed Borrowing shall bear interest initially at the type
of rate specified by the Borrower in the applicable Notice of Committed
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in each
case to the provisions of Article VIII and subsection (d) below), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to CD Loans as of any Domestic Business Day or to Euro-
Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to convert
such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue
such Loans as CD Loans for an additional Interest Period, in each case
effective on the last day of the then current Interest Period applicable to
such Loans;
(iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or CD Loans or elect to continue such
Loans as Euro-Dollar Loans for an additional Interest Period, in each case
effective on the last day of the then current Interest Period applicable to
such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Agent at least three Euro-Dollar Business Days before the
conversion or continuation selected in such notice is to be effective (unless
the relevant Loans are to be converted from Domestic Loans to Domestic Loans of
the other type or continued as Domestic Loans of the same type for an additional
Interest Period, in which case such notice shall be delivered to the Agent at
least three Domestic Business Days before such conversion or continuation is to
be effective). A Notice of Interest Rate Election may, if it so specifies,
apply to only a portion of the aggregate principal amount of the relevant Group
of Loans; provided that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such Notice applies, and the
remaining portion to which it does not apply, are each $25,000,000 or any larger
multiple of $5,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new
type of Loans and, if such new Loans are Fixed Rate Loans, the duration of
the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans
for an additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Agent shall promptly notify each
Bank of the contents thereof and such notice shall not thereafter be revocable
by the Borrower. If the Borrower fails to deliver a timely Notice of Interest
Rate Election to the Agent for any Group of Fixed Rate Loans, such Loans shall
be converted into Base Rate Loans on the last day of the then current Interest
Period applicable thereto.
(d) No Committed Loan may be continued as or converted into a Euro-
Dollar Loan or a CD Loan at any time that a Default shall have occurred and be
continuing.
SECTION 2.11. Optional Prepayments. (a) The Borrower may, upon at
least one Domestic Business Day's notice to the Agent, prepay the Group of Base
Rate Loans (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 8.01(a)) in whole at any time, or from time to time in part
in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Group or
Borrowing.
(b) Subject to Section 2.13, the Borrower may, upon at least three
Domestic Business Days' notice to the Agent, in the case of a Group of CD Loans
or upon at least three Euro-Dollar Business Days' notice to the Agent, in the
case of a Group of Euro-Dollar Loans, prepay the Loans comprising such a Group,
in whole at any time, or from time to time in part in amounts aggregating
$25,000,000 or any larger multiple of $5,000,000, by paying the principal amount
to be prepaid together with accrued interest thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay ratably the Loans of
the several Banks (or Designated Lenders) included in such Group.
(c) Except as provided in subsection (a) above, the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan prior
to the maturity thereof.
(d) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 2:00 P.M. (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of principal of, or interest on,
the Domestic Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted to a Base Rate Loan (pursuant to Article II, VI or VIII or otherwise)
on any day other than the last day of an Interest Period applicable thereto, or
the last day of an applicable period fixed pursuant to Section 2.07(d), or if
the Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loans
after notice has been given to any Bank in accordance with Section 2.04(a),
2.10(c) or 2.11(d), the Borrower shall reimburse each Bank within 15 days after
demand for any resulting loss or expense incurred by it (or by an existing or
prospective Participant in the related Loan), including (without limitation) any
loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment or
conversion or failure to borrow, prepay, convert or continue, provided that such
Bank shall have delivered to the Borrower a certificate as to the amount of such
loss or expense, which certificate shall be conclusive in the absence of
manifest error.
SECTION 2.14. Computation of Interest and Fees. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.15. Regulation D Compensation. Each Bank (or Designated
Lender) may require the Borrower to pay, contemporaneously with each payment of
interest on the Euro-Dollar Loans, additional interest on the related
Euro-Dollar Loan of such Bank (or Designated Lender) at a rate per annum
determined by such Bank up to but not exceeding the excess of (i) (A) the
applicable London Interbank Offered Rate divided by (B) one minus the
Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered
Rate. Any Bank (or Designated Lender) wishing to require payment of such
additional interest (x) shall so notify the Borrower and the Agent, in which
case such additional interest on the Euro-Dollar Loans of such Bank shall be
payable to such Bank (or Designated Lender) at the place indicated in such
notice with respect to each Interest Period commencing at least three
Euro-Dollar Business Days after such Bank (or Designated Lender) gives such
notice and (y) shall notify the Borrower at least five Euro-Dollar Business Days
before each date on which interest is payable on the Euro-Dollar Loans of the
amount then due it under this Section.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective
on the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent of a duly executed Note for the account of
each Bank dated on or before the Effective Date complying with the
provisions of Section 2.05;
(c) receipt by the Agent of an opinion of the General Counsel of the
Borrower, given upon the express instructions of the Borrower,
substantially in the form of Exhibit E hereto and covering such additional
matters relating to the transactions contemplated hereby as the Required
Banks may reasonably request;
(d) receipt by the Agent of an opinion of Wachtell, Lipton, Rosen &
Katz, Special Counsel for the Borrower, given upon the express instructions
of the Borrower, substantially in the form of Exhibit F hereto and covering
such additional matters relating to the transactions contemplated hereby as
the Required Banks may reasonably request;
(e) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit G
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(f) receipt by the Agent of all documents the Agent may reasonably
request relating to the existence of the Borrower, the corporate authority
for and the validity of this Agreement and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent; and
(g) receipt by the Agent of evidence satisfactory to it of the
payment of all principal of and interest on any loans outstanding under,
and of all other amounts payable under, the Existing Credit Agreement
(subject to Section 3.03 below);
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later than
April 15, 1997. The Agent shall promptly notify the Borrower and the Banks of
the Effective Date, and such notice shall be conclusive and binding on all
parties hereto. The Banks that are parties to the Existing Credit Agreement,
comprising the "Required Banks" as defined therein, and the Borrower agree (i)
that the commitments under the Existing Credit Agreement shall terminate in
their entirety simultaneously with and subject to the effectiveness of this
Agreement, (ii) that the Borrower shall be obligated to pay the accrued
commitment and facility fees thereunder to but excluding the date of such
effectiveness and (iii) that the Borrower may prepay outstanding Money Market
Loans as contemplated by Section 3.03 below.
SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan
on the occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments;
(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing;
(d) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Borrowing; and
(e) the fact that the Agent shall not have notified the Borrower of a
determination by the Required Banks (which determination shall be made in
good faith) that there has been a material adverse change in the business,
prospects, financial position or results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole since November 2,
1996.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
SECTION 3.03. Outstanding "Money Market Loans". Each "Money Market
Loan" outstanding under the Existing Credit Agreement made by a Bank party to
this Agreement shall be deemed prepaid in full on the Effective Date and
reloaned by such Bank as a Money Market Loan hereunder, with a maturity and
interest rate as determined under the Existing Credit Agreement. No payments in
respect of such Money Market Loans pursuant to Section 2.13 of the Existing
Credit Agreement shall be due or payable as a result of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Borrower or
of any agreement or instrument evidencing or governing Material Debt or of any
other material agreement, judgment, injunction, order, decree or other material
instrument binding upon the Borrower or any of its Subsidiaries or result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms except as
the same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of February 3, 1996 and the related consolidated
statements of earnings, common shareholders' equity and cash flows for the
fiscal year then ended, reported on by independent public accountants and set
forth in the Borrower's 1995 Form 10-K, a copy of which has been delivered to
each of the Banks, fairly present, in conformity with United States generally
accepted accounting principles, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal year.
(b) The unaudited consolidated condensed balance sheet of the
Borrower and its Consolidated Subsidiaries as of November 2, 1996 and the
related unaudited consolidated statements of earnings and cash flows for the
thirty-nine weeks then ended, set forth in the Borrower's Latest Form 10-Q, a
copy of which has been delivered to each of the Banks, fairly present, in
conformity with United States generally accepted accounting principles applied
on a basis consistent with the financial statements referred to in subsection
(a) of this Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such thirty-nine week period (subject to normal
year-end adjustments).
(c) Since November 2, 1996 there has been no material adverse change
in the business, prospects, financial position or results of operations of the
Borrower and its Consolidated Subsidiaries, considered as a whole, which has not
been disclosed in Borrower's 1995 Form 10-K or Borrower's Latest Form 10-Q,
copies of which have been delivered to the Banks, or disclosed in Borrower=s
Current Report on Form 8-K dated February 20, 1997 filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.
SECTION 4.05. Litigation. Except as disclosed in the Borrower's 1995
Form 10-K or Borrower's Latest Form 10-Q or as otherwise disclosed in writing to
the Banks, there is no action, suit or proceeding pending against, or to the
knowledge of the Borrower threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the business, consolidated
financial position or consolidated results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole, or which in any manner draws
into question the validity of this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or made any amendment
to any Plan which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security under ERISA or the Internal Revenue Code
or (iii) incurred any liability under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Borrower and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or operating
expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site disposal
of wastes or Hazardous Substances, and any actual or potential liabilities to
third parties, including employees, and any related costs and expenses). On
the basis of this review, the Borrower has reasonably concluded that such
associated liabilities and costs, including the costs of compliance with
Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition or results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. The Borrower and its Subsidiaries have filed
all United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all material taxes due
pursuant to such returns or pursuant to any assessment received by the Borrower
or any Subsidiary, except where the same may be contested in good faith by
appropriate proceedings. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes or other governmental charges
are, in the opinion of the Borrower, adequate.
SECTION 4.09. Subsidiaries. Each of the Borrower's Major
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 4.10. Not an Investment Company. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.11. Full Disclosure. All information heretofore furnished
by the Borrower to the Agent or any Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Agent or any Bank will
be, true, accurate and complete in every material respect or based on reasonable
estimates on the date as of which such information is stated or certified. The
Borrower has disclosed to the Banks in writing any and all facts which
materially and adversely affect or may materially and adversely affect (to the
extent the Borrower can now reasonably foresee), the business, operations,
prospects or condition, financial or otherwise, of the Borrower and its
Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower to
perform its obligations under this Agreement.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, a consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of the end of such fiscal
year and the related consolidated statements of earnings, common
shareholders' equity and cash flows for such fiscal year, setting forth in
each case in comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission by independent public accountants of nationally recognized
standing;
(b) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the
Borrower, a consolidated condensed balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated condensed statements of earnings for such quarter and for the
portion of the Borrower's fiscal year ended at the end of such quarter and
the related consolidated condensed statement of cash flows for the portion
of the Borrower's fiscal year ended at the end of such quarter, setting
forth in the case of such statements of earnings and cash flows in
comparative form the figures for the corresponding quarter and the
corresponding portion of the Borrower's previous fiscal year, all certified
(subject to normal year-end adjustments) as to fairness of presentation,
United States generally accepted accounting principles and consistency by
the chief financial officer or the chief accounting officer of the
Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections
5.07 to 5.09, inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above;
(e) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate
of the chief financial officer or the chief accounting officer of the
Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Borrower shall have filed with the Securities
and Exchange Commission;
(h) if and when the Borrower or any Subsidiary or any plan
administrator gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with respect to
any Plan which might constitute grounds for a termination of such Plan
under Title IV of ERISA or, with respect to any Multiemployer Plan,
receives notice as prescribed in ERISA of any material withdrawal liability
assessed against the Borrower or any Subsidiary, a copy of such notice; and
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Major Subsidiary to pay and discharge, at or
before maturity, all their respective material obligations and liabilities,
including, without limitation, material tax liabilities, except where the same
may be contested in good faith by appropriate proceedings, and will maintain,
and will cause each Subsidiary to maintain, in accordance with United States
generally accepted accounting principles, appropriate reserves for the accrual
of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower
will keep, and will cause each Major Subsidiary to keep, all material property
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted.
(b) The Borrower will maintain, and will cause each Major Subsidiary
to maintain (either in the name of the Borrower or in such Major Subsidiary's
own name) with financially sound and reputable insurance companies, insurance on
all their property in at least such amounts and against at least such risks as
are usually insured against in the same general area by companies of established
repute engaged in the same or a similar business, it being understood that a
program of self-insurance in such amounts and against such risks as the Borrower
reasonably deems prudent and consistent with practices of other comparable
companies is not inconsistent with this Section. The Borrower will furnish to
the Banks, upon written request from the Agent, full information as to the
insurance carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
Subject to Section 5.10, the Borrower will continue, and will cause each Major
Subsidiary to continue, to engage in business of the same general type as now
conducted by the Borrower and its Subsidiaries, and will preserve, renew and
keep in full force and effect, and will cause each Major Subsidiary to preserve,
renew and keep in full force and effect their respective corporate existence and
their respective material rights, privileges and franchises necessary or
desirable in the normal conduct of business; provided that nothing in this
Section 5.04 shall prohibit (i) the merger of a Subsidiary into the Borrower or
the merger or consolidation of a Subsidiary with or into another Person if the
corporation surviving such consolidation or merger is a Subsidiary and if, in
each case, after giving effect thereto, no Default shall have occurred and be
continuing or (ii) the abandonment or termination of the corporate existence,
rights, privileges or franchises of any Subsidiary when deemed by the Borrower
in the best interests of its overall business.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and
cause each Major Subsidiary to comply, in all material respects with all
applicable material laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws and
ERISA and the rules and regulations thereunder) except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Major Subsidiary to keep, proper books
of record and account in which full, true and correct entries in conformity with
United States generally accepted accounting principles shall be made of all
dealings and transactions in relation to its business and activities; and will
permit, and will cause each Major Subsidiary to permit, representatives of any
Bank at such Bank's expense to visit and inspect any of their respective
properties, to examine and make abstracts (or, in the case of financial
information, copies) from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all as arranged by the
Borrower and the Agent at such reasonable times and as often as may reasonably
be desired. The Banks will use reasonable efforts, consistent with their normal
business practices, to maintain the confidentiality of any information so
received.
SECTION 5.07. Cash Flow/Total Debt Ratio. As of the last day of any
fiscal quarter, the ratio of (i) the sum of Operating Cash Flow plus Minimum Net
Rental Expense for the period of four consecutive fiscal quarters then ended to
(ii) Total Debt at such date will not be less than .23.
SECTION 5.08. Subsidiary Debt Restriction. The Borrower will not
permit any Subsidiary to incur, assume or suffer to exist any Debt except for
(i) Debt of a Subsidiary to the Borrower or another Subsidiary, (ii) other Debt
not included under clauses (iii) and (iv) of this Section 5.08 outstanding on
the date of this Agreement in aggregate principal amount not exceeding
$75,000,000, (iii) Debt incurred by a Subsidiary to finance or refinance real
estate owned by it, or the development thereof, (iv) Debt incurred by a
Subsidiary in connection with industrial revenue and industrial development bond
financing and (v) Debt secured by a Lien permitted by Section 5.09, provided
that the aggregate outstanding principal amount of Debt of Subsidiaries of the
types described in clauses (iii), (iv) and (v) (including Debt of such nature
outstanding on the date of this Agreement) shall at no time exceed 25% of
Consolidated Tangible Assets and provided further that Debt permitted by clause
(ii) does not include any extension, renewal or refunding of any such
outstanding Debt.
SECTION 5.09. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal or face
amount not exceeding $150,000,000;
(b) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring or improving
such asset, provided that such Lien attaches to such asset concurrently
with or within 180 days after the later of the acquisition or completion of
improvement thereof;
(d) any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a Subsidiary
and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien securing (i) Debt of the Borrower to a Subsidiary or
(ii) Debt of a Subsidiary to the Borrower or another Subsidiary;
(g) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is
not secured by any additional assets;
(h) Liens arising in the ordinary course of its business which (i) do
not secure Debt or Derivatives Obligations, (ii) do not secure any
obligation in an amount exceeding $100,000,000 and (iii) do not in the
aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business;
(i) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $50,000,000; and
(j) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount at any time
outstanding not to exceed the greater of (i) $250,000,000 or (ii) 10% of
the Borrower's Consolidated Net Tangible Assets.
SECTION 5.10. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person or (ii)
sell, lease or otherwise transfer, directly or indirectly, all or substantially
all of the assets of the Borrower and its Subsidiaries, taken as a whole, to any
other Person, provided that the Borrower may merge with another Person if (A)
the Borrower is the corporation surviving such merger and (B) immediately after
giving effect to such merger, no Default shall have occurred and be continuing.
SECTION 5.11. Use of Proceeds. The proceeds of the Loans made under
this Agreement will be used by the Borrower for its general corporate purposes.
None of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of buying or carrying any "margin
stock" within the meaning of Regulation U or in violation of any Margin
Regulations.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any
Loan, or shall fail to pay within five Domestic Business Days of the due
date any interest on any Loan, any fees or any other amount payable
hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.07 to 5.11, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a) or (b) above) for 30 days after written notice thereof has been given
to the Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
the Borrower in this Agreement or in any certificate, financial statement
or other document delivered pursuant to this Agreement shall prove to have
been incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any
applicable grace period), provided that such failure to make any payment in
respect of any capital lease shall not constitute an Event of Default so
long as the Borrower or such Subsidiary shall be contesting on reasonable
grounds and in good faith the obligation to make such payment;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables the holder of
such Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof (in each case, any applicable grace or cure period having
elapsed);
(g) the Borrower or any Major Subsidiary (i) shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or (ii) shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Major Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Subsidiary under the federal bankruptcy laws as
now or hereafter in effect;
(i) the Borrower or any Subsidiary shall fail to pay when due any
material amount which is either uncontested or if contested is the subject
of a final non-appealable decision and which it shall have become liable to
pay to the PBGC or to a Plan under Title IV of ERISA, or notice of intent
to terminate a Plan or Plans shall be filed under Title IV of ERISA by the
Borrower, any Subsidiary, any plan administrator or any combination of the
foregoing which could give rise to a material liability of the Borrower or
any Subsidiary under Title IV of ERISA, or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee to
be appointed to administer any Plan or Plans which could give rise to a
material liability of the Borrower or any Subsidiary under Title IV of
ERISA; or the Borrower or any Subsidiary shall incur any material
withdrawal liability with respect to any Multiemployer Plan which is
uncontested or, if contested, is the subject of a final non-appealable
decision and the Borrower fails to discharge, satisfy or otherwise
eliminate such liability with respect to any Multiemployer Plan within the
time required by such judgment;
(j) a judgment or order for the payment of money in excess of
$25,000,000 (net of applicable insurance coverage) shall be rendered
against the Borrower or any Major Subsidiary and such judgment or order
shall continue unsatisfied and unstayed for a period of 60 days; or
(k) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under said Act) of 30% or more of
the outstanding shares of common stock of the Borrower; or, during any
period of 12 consecutive calendar months, individuals who were directors of
the Borrower on the first day of such period and any successor directors
the election of whom was approved by a majority of such individuals or
their successors so approved shall cease to constitute a majority of the
board of directors of the Borrower;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Borrower
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding Notes (or by Designating Banks of Designated Lenders
holding Notes) evidencing more than 50% in aggregate principal amount of the
Loans, by notice to the Borrower declare the Notes (together with accrued
interest thereon) to be, and the Notes shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; provided that in the case of any
of the Events of Default specified in paragraph (g)(i) or (h) above with respect
to the Borrower, without any notice to the Borrower or any other act by the
Agent or the Banks, the Commitments shall thereupon automatically terminate and
the Notes (together with accrued interest thereon) shall automatically become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the Borrower as if
it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks (or, if pursuant to
the terms of this Agreement the consent or request is required to be given or
made by a percentage of the Banks other than that which comprises the Required
Banks, then with such consent or request) or (ii) in the absence of its own
gross negligence or willful misconduct. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in connection with this
Agreement or any borrowing hereunder; (ii) the performance or observance of any
of the covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article III, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the Notes or any other instrument or writing furnished in
connection herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile transmission or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this Agreement or any action
taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent with the
prior approval of the Borrower, which approval shall not be unreasonably
withheld; provided, however, that such successor Agent shall be a Bank
hereunder. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a commercial bank
organized or licensed under the laws of the United States of America or of any
State thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Borrower and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any CD Loan,
Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or
more of the aggregate principal amount of the affected Loans advise the
Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as
the case may be, as determined by the Agent will not adequately and fairly
reflect the cost to such Banks of funding their CD Loans or Euro-Dollar
Loans, as the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be, or to convert
outstanding Loans into CD Loans or Euro-dollar Loans, as the case may be, shall
be suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case
may be, shall be converted into a Base Rate Loan on the last day of the then
current Interest Period applicable thereto. Unless the Borrower notifies the
Agent at least two Domestic Business Days before the date of any Fixed Rate
Borrowing for which a Notice of Borrowing has previously been given that it
elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a
Committed Borrowing, such Borrowing shall instead be made as a Base Rate
Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR
Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear
interest for each day from and including the first day to but excluding the last
day of the Interest Period applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any change
in any applicable law, rule or regulation, 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 any Bank (or its Euro-Dollar Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for any
Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its
Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans,
shall be suspended. Before giving any notice to the Agent pursuant to this
Section, such Bank shall designate a different Euro-Dollar Lending Office if
such designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such
notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be
converted to a Base Rate Loan either (a) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully
continue to maintain and fund such Loan to such day or (b) immediately if such
Bank shall determine that it may not lawfully continue to maintain and fund such
Loan to such day.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or Designated Lender) (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
impose, modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding (i) with respect to any CD Loan any such requirement
included in an applicable Domestic Reserve Percentage and (ii) with respect to
any Euro-Dollar Loan any such requirement with respect to which such Bank (or
Designated Lender) is entitled to compensation during the relevant Interest
Period under Section 2.15), special deposit, insurance assessment (excluding,
with respect to any CD Loan, any such requirement reflected in an applicable
Assessment Rate) or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Bank (or Designated Lender) (or its
Applicable Lending Office) or shall impose on any Bank (or Designated Lender)
(or its Applicable Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate
Loans and the result of any of the foregoing is to increase the cost to such
Bank (or Designated Lender) (or its Applicable Lending Office) of making or
maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or
receivable by such Bank (or Designated Lender) (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Bank (or Designated Lender) to be material, then, within
15 days after demand by such Bank (or Designated Lender) (with a copy to the
Agent), the Borrower shall pay to such Bank (or Designated Lender) such
additional amount or amounts as will compensate such Bank (or Designated Lender)
for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, 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 any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency (including any determination by any such authority, central
bank or comparable agency that, for purposes of capital adequacy requirements,
the Commitments hereunder do not constitute commitments with an original
maturity of one year or less, which shall be deemed to be a change in the
interpretation and administration of such requirements), has or would have the
effect of reducing the rate of return on capital of such Bank (or its Parent) as
a consequence of such Bank's obligations hereunder to a level below that which
such Bank (or its Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank (with a copy to the
Agent), the Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank (or Designated Lender) will promptly notify the
Borrower and the Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Bank (or Designated Lender) to
compensation pursuant to this Section and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such Bank (or Designated
Lender), be otherwise disadvantageous to such Bank (or Designated Lender) or
contrary to such Bank's (or Designated Lender=s) policies. A certificate of any
Bank (or Designated Lender) claiming compensation under this Section shall be
conclusive in the absence of manifest error. Such certificate shall set forth
the nature of the occurrence giving rise to such compensation, the additional
amount or amounts to be paid to it hereunder and the method by which such
amounts were determined. In determining such amount, such Bank (or Designated
Lender) may use any reasonable averaging and attribution methods.
SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank (or Designated Lender)
and the Agent, taxes imposed on its income, and franchise or similar taxes
imposed on it, by a jurisdiction under the laws of which such Bank (or
Designated Lender) or the Agent (as the case may be) is organized or in which
its principal executive office is located or, in the case of each Bank (or
Designated Lender), in which its Applicable Lending Office is located and
(ii) in the case of each Bank (or Designated Lender), any United States
withholding tax imposed on such payments except as a result of a change in the
applicable law from the applicable law in effect at the time such Bank (or
Designating Bank) first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or from
the execution or delivery of, or otherwise with respect to, this Agreement or
any Note.
(b) Any and all payments by the Borrower to or for the account of any
Bank (or Designated Lender) or the Agent hereunder or under any Note shall be
made without deduction for any Taxes or Other Taxes; provided that, if the
Borrower shall be required by law to deduct any Taxes or Other Taxes from any
such payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 8.04) such Bank (or Designated Lender) or the
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable law
and (iv) the Borrower shall furnish to the Agent, at its address referred to in
Section 9.01, the original or a certified copy of a receipt evidencing payment
thereof.
(c) The Borrower agrees to indemnify each Bank (or Designated Lender)
and the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 8.04) paid by such Bank (or Designated
Lender) or the Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be paid within 15 days after such Bank (or Designated
Lender) or the Agent (as the case may be) makes demand therefor.
(d) Each Bank (or Designated Lender) organized under the laws of a
jurisdiction outside the United States, on or prior to the date of its execution
and delivery of this Agreement in the case of each Bank listed on the signature
pages hereof and on or prior to the date on which it becomes a Bank (or
Designated Lender) in the case of each other Bank (or Designated Lender), shall
provide the Borrower with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank (or Designated Lender) is entitled to benefits under
an income tax treaty to which the United States is a party which exempts the
Bank (or Designated Lender) from United States withholding tax or reduces the
rate of withholding tax on payments of interest for the account of such Bank (or
Designated Lender) or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or business in
the United States. Each Bank (or Designated Lender) which is so required to
deliver a form 1001 or 4224 further undertakes to deliver to the Borrower
additional copies of the most recent form delivered by such Bank (or Designated
Lender) (or a successor form) before the date that such form expires or becomes
obsolete or promptly after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Borrower or the Agent,
unless an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Bank (or Designated Lender) from duly completing and delivering any
such form with respect to it and such Bank (or Designated Lender) advises the
Borrower and the Agent that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
(e) For any period with respect to which a Bank (or Designated
Lender) has failed to provide the Borrower with the appropriate form pursuant to
Section 8.04(d) (unless such failure is due to a change in treaty, law or
regulation occurring subsequent to the date on which such form originally was
required to be provided), such Bank (or Designated Lender) shall not be entitled
to indemnification under Section 8.04(b) or (c) with respect to Taxes imposed by
the United States; provided that if a Bank (or Designated Lender), which is
otherwise exempt from or subject to a reduced rate of withholding tax, becomes
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Bank (or Designated Lender) shall
reasonably request to assist such Bank (or Designated Lender) to recover such
Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank (or Designated Lender) pursuant to this Section 8.04
then such Bank (or Designated Lender) will change the jurisdiction of its
Applicable Lending Office if, in the judgment of such Bank (or Designated
Lender), such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Bank (or Designated Lender) or contrary to its policies.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans
has been suspended pursuant to Section 8.02 or (ii) any Bank (or its Designated
Lender(s)) has demanded compensation under Section 8.03 or 8.04 with respect to
its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank (or the
portion thereof which would otherwise be made by its Designated Lender(s))
as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as
the case may be, shall instead be Base Rate Loans (on which interest and
principal shall be payable contemporaneously with the related Fixed Rate
Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid (or converted to a Base Rate Loan), all payments of
principal which would otherwise be applied to repay such Fixed Rate Loans
shall be applied to repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable to the related CD
Loans or Euro-Dollar Loans of the other Banks.
SECTION 8.06. Substitution of a Bank. If any Bank (or its Designated
Lender(s)) has demanded compensation under Section 8.03 or 8.04 or has exercised
any remedy under Section 8.02, the Borrower shall have the right, with the
assistance of the Agent, to seek a mutually satisfactory substitute bank or
banks (which may be one or more of the Banks) to purchase the Note of such Bank
(or the Note held by its Designated Lender) and assume the Commitment of such
Bank. Such purchase and assumption may be made only upon payment of any amounts
due the original Bank (or its Designated Lender(s)) under Sections 2.13, 8.03
and 8.04, and the Borrower's obligation to pay or reimburse the original Bank
(or its Designated Lender(s)) under Sections 8.03 and 8.04 shall, as to amounts
accrued or payable with respect to any period prior to such assumption and
purchase, survive any such assumption and purchase.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Borrower or the Agent, at its address, facsimile
number or telex number set forth on the signature pages hereof, (y) in the case
of any Bank, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Agent under
Article II or Article VIII shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any
Bank (or Designated Lender) in exercising any right, power or privilege
hereunder or under any Note shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all out-of-pocket expenses of the Agent, including fees and disbursements of
special counsel for the Agent, in connection with the preparation and
administration of this Agreement, any waiver or consent hereunder or any
amendment hereof or any Default or alleged Default hereunder and (ii) if an
Event of Default occurs, all out-of-pocket expenses incurred by the Agent and
each Bank, including (without duplication) the fees and disbursements of outside
counsel and the allocated cost of inside counsel, in connection with such Event
of Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel and allocated cost of inside counsel, which may be
incurred by such Indemnitee in connection with any investigative, administrative
or judicial proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened relating to or arising out of this
Agreement or any actual or proposed use of proceeds of Loans hereunder; provided
that no Indemnitee shall have the right to be indemnified hereunder for such
Indemnitee's own gross negligence, willful misconduct or violation of any
express provision of this Agreement as determined by a court of competent
jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank (and Designated Lender)
agrees that if it shall, by exercising any right of set-off or counterclaim or
otherwise, receive payment of a proportion of the aggregate amount of principal
and interest due with respect to any Note held by it which is greater than the
proportion received by any other Bank (or Designated Lender) in respect of the
aggregate amount of principal and interest due with respect to any Note held by
such other Bank (or Designated Lender), the Bank (or Designated Lender)
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks (and Designated Lenders, if
any), and such other adjustments shall be made, as may be required so that all
such payments of principal and interest with respect to the Notes held by the
Banks (and Designated Lenders, if any) shall be shared by the Banks (and
Designated Lenders, if any) pro rata; provided that nothing in this Section
shall impair the right of any Bank (or Designated Lender) to exercise any right
of set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness hereunder. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Note, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrower and the Required Banks
(and, if the rights or duties of the Agent are affected thereby, by the Agent);
provided that no such amendment or waiver shall, unless signed by all the Banks,
(i) increase or decrease the Commitment of any Bank (except for a ratable
decrease in the Commitments of all Banks) or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for any reduction or termination
of any Commitment, (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause (i),
(ii), (iii) or (iv) of Section 9.05 without the consent of the Participant. The
Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article VIII with
respect to its participating interest. An assignment or other transfer which is
not permitted by subsection (c) or (d) below shall be given effect for purposes
of this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $20,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit H hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Borrower,
which shall not be unreasonably withheld; provided that if an Assignee is an
affiliate of such transferor Bank or was a Bank immediately prior to such
assignment, no such consent shall be required; and provided further that such
assignment may, but need not, include rights of the transferor Bank in respect
of outstanding Money Market Loans. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower
shall make appropriate arrangements so that, if required, a new Note is issued
to the Assignee. In connection with any such assignment, the transferor Bank
shall pay to the Agent an administrative fee for processing such assignment in
the amount of $2,500. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall deliver to the Borrower
and the Agent certification as to exemption from deduction or withholding of any
United States federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank, which may enforce
such assignment in any manner allowed by law. No such assignment shall release
the transferor Bank from its obligations hereunder.
(e) Each Bank shall have the right from time to time, with the
consent of each of the Borrower and the Agent (provided that the consent of the
Agent shall not be unreasonably withheld) to designate up to two Eligible
Designees to purchase or make, as the case may be, all or a portion of the Loans
to be made by such Bank pursuant to this Agreement. Upon the execution by any
such Bank and such Eligible Designee of an instrument effecting such designation
and the acceptance thereof by the Borrower and the Agent, the Borrower shall
execute and deliver to such Eligible Designee a Note complying with the
requirements of Section 2.05, and such Eligible Designee shall become a
Designated Lender for purposes of this Agreement. Such Designating Bank shall
thereafter have the right to permit such Designated Lender to make all or a
portion of the Loans to be made by such Designating Bank pursuant to Section
2.01 or 2.03, and the making of such Loans or portion thereof by such Designated
Lender shall satisfy the obligation of the Designating Bank to that extent. In
order to permit any Designated Lender designated by it to make all or any
portion of a Loan to be made by it on the date of any Borrowing, a Designating
Bank shall give notice to the Agent and the Borrower not later than 2:00 P.M.,
New York City time, (x) on the Domestic Business Day before each Base Rate
borrowing, (y) on the second Domestic Business Day before each CD Borrowing or
(z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing (or, in
the case of a Money Market Borrowing pursuant to (aa) an Absolute Rate Auction,
at 5:00 P.M. on the Domestic Business Day before such proposed Borrowing or (bb)
a LIBOR Auction, at 5:00 P.M. on the fifth Euro-Dollar Business Day before such
proposed Borrowing), identifying each such Designated Lender and, in the case of
a Committed Borrowing, setting forth the amount of the Loan to be purchased or
made by such Designated Lender on such date. As to any Loan made by it, each
Designated Lender shall have all the rights and be subject to all obligations
including, without limitation Section 9.11, a Bank making such Loan would have
had under this Agreement and otherwise; provided, that (i) all voting and
consensual rights under this Agreement in respect of such Loans shall be
exercised solely by the Designating Bank and (ii) no Designated Lender shall be
entitled to recover a greater amount under Sections 2.15, 8.03 and 8.04 than the
Designating Bank would have been entitled to recover had such Loan been made by
it. In the event that any Designating Bank shall cease to be a Bank having a
Commitment hereunder, all Designated Lenders designated by such Designating Bank
shall cease to be Designated Lenders (but shall retain their rights hereunder
with respect to Loans at the time outstanding). Notwithstanding the designation
by any Bank of one or more Designated Lenders, such Bank shall retain its
Commitment and all obligations hereunder related thereto, and such Designated
Lender shall not be a party to this Agreement and shall not have any Commitment
hereunder.
(f) No Participant, Assignee or other transferee (each a
"Transferee") of any Bank's rights shall be entitled to receive any greater
payment under Section 8.03 or 8.04 than such Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made
with the Borrower's prior written consent or by reason of the provisions of
Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different
Applicable Lending Office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT
AND THE BANKS (AND DESIGNATED LENDERS) HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Confidentiality. Each Bank agrees to keep any
information delivered or made available by the Borrower to it confidential from
anyone other than persons employed or retained by such Bank who are expected to
become engaged in evaluating, approving, structuring or administering the Loans;
provided that nothing herein shall prevent any Bank from disclosing such
information (a) to any other Bank or to the Agent, (b) to any other person if
reasonably incidental to the administration of the Loans, (c) upon the order of
any court or administrative agency, (d) upon the request or demand of any
regulatory agency or authority, (e) which had been publicly disclosed other than
as a result of a disclosure by the Agent or any Bank prohibited by this
Agreement, (f) in connection with any litigation to which the Agent, any Bank or
its subsidiaries or Parent may be a party, (g) to the extent necessary in
connection with the exercise of any remedy hereunder, (h) to such Bank's or
Agent's legal counsel and independent auditors, (i) subject to provisions
substantially similar to those contained in this Section, to any actual or
prospective Transferee and (j) otherwise with the written consent of the
Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
AMERICAN STORES COMPANY
By: /s/ J. Greg Spencer
Title: Senior Vice President and Treasurer
709 East South Temple
Salt Lake City, UT 84102
Telex number:
Facsimile number: (801) 531-0768
Commitments
$28,250,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Adam J. Silver
Title: Associate
$22,500,000 BANK OF AMERICA NT & SA
By: /s/ James P. Johnson
Title: Managing Director
$22,500,000 BANK OF MONTREAL
By: /s/ Brenda L. Buttner
Title: Director
$22,500,000 THE CHASE MANHATTAN BANK
By: /s/ William P. Rindfuss
Title: Vice President
$22,500,000 NATIONSBANK OF TEXAS, N.A.
By: /s/ Kimberly Knop
Title: Vice President
$22,500,000 THE FUJI BANK, LIMITED
LOS ANGELES AGENCY
By: /s/ N. Umemura
Title: Joint General Manager
$22,500,000 THE LONG TERM CREDIT BANK
OF JAPAN, LTD., LOS ANGELES AGENCY
By: /s/ T. Morgan Edwards II
Title: Deputy General Manager
$22,500,000 UNION BANK OF CALIFORNIA, N.A.
By:/s/ Timothy P. Streb
Title: Vice President
$22,500,000 WACHOVIA BANK OF GEORGIA, N.A
By:/s/ William F. Hamlet
Title: Senior Vice President
$17,500,000 CIBC INC.
By: /s/ Chris Kleczkowski
Title: Director, CIBC Wood Gundy Securities Corp.
AS AGENT
$17,500,000 THE FIRST NATIONAL BANK
OF CHICAGO
By: /s/ John Runger
Title: Managing Director
$17,500,000 FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By: /s/ A. Kimball Collins
Title: Vice President
$17,500,000 MELLON BANK, N.A.
By:/s/ Richard Spelke
Title: First Vice President
$17,500,000 THE DAI-ICHI KANGYO BANK, LTD.
LOS ANGELES AGENCY
By: /s/ Masatsugu Morishita
Title: Sr. Vice President &
Joint General Manager
$17,500,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY
By: /s/ Vincente L. Timiraos
Title: Senior Vice President
and Senior Manager
$17,500,000 THE NORTHERN TRUST COMPANY
By: /s/ Michelle D. Griffin
Title: Vice President
$17,500,000 WELLS FARGO BANK, N.A.
By: /s/ Mathew Harvey
Title: Vice President
$12,500,000 CREDIT LYONNAIS
LOS ANGELES BRANCH
By: /s/ Robert Ivosevich
Title: Senior Vice President
$12,500,000 CREDIT SUISSE FIRST BOSTON
By: /s/ David J. Worthington
Title: Managing Director
By: /s/ Deborah A. Shea
Title: Associate
$12,500,000 THE SAKURA BANK, LIMITED
By: /s/ Fernando Buesa
Title: Vice President
By: /s/ Ofusa Sato
Title: Senior Vice President &
Assistant General Manager
$10,000,000 ABN AMRO BANK, N.V.
By: /s/ Dianne D. Barkley
Title: Group Vice President
By: /s/ Gina M. Brusatori
Title: Vice President
$10,000,000 BANQUE NATIONALE DE PARIS
By: /s/ D. Guy Gibb
Title: Vice President
By: /s/ Jeffrey S. Kajisa
Title: Assistant Vice President
$10,000,000 COMMERZBANK AG
LOS ANGELES BRANCH
By:/s/ Christian Jagenberg
Title: SVP & Manager
By:/s/ Steven F. Larsen
Title: Vice President
$10,000,000 CORESTATES BANK, N.A.
By: /s/ Thomas McDonnell
Title: Vice President
$10,000,000 FIRST SECURITY BANK, N.A.
By: /s/ Dick van Klaveren
Title: Vice President
$10,000,000 FLEET NATIONAL BANK
By:/s/ Richard Seufert
Title: Vice President
$10,000,000 PNC BANK, NATIONAL ASSOCIATION
By: /s/ Karen C. Brogan
Title: Commercial Banking Officer
$10,000,000 THE SANWA BANK, LIMITED
LOS ANGELES BRANCH
By: /s/ Gill S. Realon
Title: Vice President
$10,000,000 UNION BANK OF SWITZERLAND
By: /s/ Daniel R. Strickford
Title: Assistant Vice President
By: /s/ Samuel Azizo
Title: Vice President
$5,000,000 BANK ONE, UTAH, NA
By:/s/ M. Craig Zollinger
Title: Executive Vice President
$5,000,000 THE TOYO TRUST & BANKING CO.,
LTD., LOS ANGELES AGENCY
By:/s/ Kenji Fujikawa
Title: General Manager
$4,250,000 THE BANK OF YOKOHAMA, LTD.
By:/s/ Michiro Asaba
Title: Executive Vice President
& General Manager
$3,750,000 THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter L. Griswold
Title: Director
$3,750,000 THE YASUDA TRUST & BANKING CO., LTD.
By: /s/ Makoto Tagawa
Title: Deputy General Manager
$2,500,000 THE MITSUI TRUST AND BANKING CO.,
LTD., NEW YORK BRANCH
By: /s/ Margaret Holloway
Title: Vice President & Manager
Total Commitments
$500,000,000
============
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: /s/ Adam J. Silver
Title: Associate
60 Wall Street
New York, New York 10260-0060
Attention: David Ellis
Telex number: 177615
Facsimile number:
EXHIBIT A
NOTE
New York, New York
, 19
For value received, American Stores Company, a Delaware corporation
(the "Borrower"), promises to pay to the order of (the
-----------------------
"Bank"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the maturity date provided for in the Credit
Agreement. The Borrower promises to pay interest on the unpaid principal amount
of each such Loan on the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and interest shall be made in
lawful money of the United States in Federal or other immediately available
funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Bank, the respective types thereof and all
repayments of the principal thereof shall be recorded by the Bank and, if the
Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the Notes referred to in the 364-Day Credit
Agreement dated as of March 28, 1997 among the Borrower, the banks listed on the
signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the mandatory and
optional prepayment hereof and the acceleration of the maturity hereof.
AMERICAN STORES COMPANY
By
------------------------
Title:
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Amount of
Amount of Type of Principal Maturity Notation
Loan Repaid Date Made By
EXHIBIT B
Form of Money Market Quote Request
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: American Stores Company
Re: 364-Day Credit Agreement (the "Credit Agreement") dated as of
March 28, 1997 among the Borrower, the Banks listed on the
signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing:
------------------
Principal Amount* Interest Period**
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
*
Amount must be $25,000,000 or a larger multiple of $5,000,000.
**
Not less than one month (LIBOR Auction) or not less than 7 days (Absolute
Rate Auction), subject to the provisions of the definition of Interest Period.
Terms used herein have the meanings assigned to them in the Credit
Agreement.
AMERICAN STORES COMPANY
By
------------------------
Title:
EXHIBIT C
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes to American Stores Company
(the "Borrower")
Pursuant to Section 2.03 of the 364-Day Credit Agreement dated as of
March 28, 1997 among the Borrower, the Banks parties thereto and the
undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to
submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing:
------------------
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [11:00
A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
----------------------
Authorized Officer
EXHIBIT D
Form of Money Market Quote
To: Morgan Guaranty Trust Company of New York,
as Agent
Re: Money Market Quote to American Stores Company (the
"Borrower")
In response to your invitation on behalf of the Borrower dated
, 19 , we hereby make the following Money Market Quote on the
- ------------- --
following terms:
1. Quoting Bank:
--------------------------------
2. Person to contact at Quoting Bank:
3. Date of Borrowing: *
--------------------
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
$
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed $ .]**
------------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal amount
requested. Specify aggregate limitation if the sum of the individual offers
exceeds the amount the Bank is willing to lend. Bids must be made for
$3,000,000 or a larger multiple of $1,000,000.
(notes continued on following page)
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the 364-Day Credit
Agreement dated as of March 28, 1997 among the Borrower, the Banks listed on the
signature pages thereof and yourselves, as Agent, irrevocably obligates us to
make the Money Market Loan(s) for which any offer(s) are accepted, in whole or
in part.
Very truly yours,
[NAME OF BANK]
Dated: By:
--------------- --------------------------
Authorized Officer
*** Not less than one month or not less than 7 days, as specified in the related
Invitation. No more than five bids are permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
EXHIBIT E
OPINION OF
GENERAL COUNSEL OF THE BORROWER
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I have acted as counsel for American Stores Company (the "Borrower")
in connection with the 364-Day Credit Agreement (the "Credit Agreement") dated
as of March 28, 1997 among the Borrower, the Banks from time to time parties
thereto and Morgan Guaranty Trust Company of New York, as Agent. Terms defined
in the Credit Agreement are used herein as therein defined. This opinion is
being rendered to you at the request of our client pursuant to Section 3.01(c)
of the Credit Agreement.
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware, and has all corporate powers
and all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other agreement or
instrument evidencing or governing Material Debt or of any other material
instrument binding upon the Borrower or any of its Subsidiaries or result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
4. Except as set forth in the Borrower's 1995 Form 10-K, there is no
action, suit or proceeding pending against, or to the best of my knowledge
threatened against or affecting, the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, consolidated financial position or consolidated
results of operations of the Borrower and its Consolidated Subsidiaries,
considered as a whole, or which in any manner draws into question the validity
of the Credit Agreement or the Notes.
5. Each of the Borrower's Major Subsidiaries is a corporation validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
Very truly yours,
EXHIBIT F
OPINION OF
SPECIAL COUNSEL FOR THE BORROWER
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have acted as counsel for American Stores Company (the "Borrower")
in connection with the 364-Day Credit Agreement (the "Credit Agreement") dated
as of March 28, 1997 among the Borrower, the Banks from time to time parties
thereto and Morgan Guaranty Trust Company of New York, as Agent. Terms defined
in the Credit Agreement are used herein as therein defined. This opinion is
being rendered to you at the request of our client pursuant to Section 3.01(d)
of the Credit Agreement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
The Credit Agreement constitutes a valid and binding agreement of the
Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
EXHIBIT G
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the 364-Day Credit
Agreement (the "Credit Agreement") dated as of March 28, 1997 among American
Stores Company, a Delaware corporation (the "Borrower"), the Banks from time to
time parties thereto (the "Banks") and Morgan Guaranty Trust Company of New
York, as Agent (the "Agent"), and have acted as special counsel for the Agent
for the purpose of rendering this opinion pursuant to Section 3.01(e) of the
Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
EXHIBIT H
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of , 19 among [ASSIGNOR] (the
--------- --
"Assignor"), [ASSIGNEE] (the "Assignee"), [BORROWER] (the "Borrower") and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the 364-Day Credit Agreement dated as of March 28, 1997 among the
Borrower, the Assignor and the other Banks party thereto, as Banks and the Agent
(the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower in an aggregate principal amount at any
time outstanding not to exceed $ ;
----------
WHEREAS, Committed Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $ are
----------
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $ (the "Assigned Amount"),
----------
together with a corresponding portion of its outstanding Committed Loans, and
the Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, the Borrower and
the Agent and the payment of the amounts specified in Section 3 required to be
paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed
to the rights and be obligated to perform the obligations of a Bank under the
Credit Agreement with a Commitment in an amount equal to the Assigned Amount,
and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced
by a like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.* It is
understood that commitment and/or facility fees accrued to the date hereof are
for the account of the Assignor and such fees accruing from and including the
date hereof are for the account of the Assignee. Each of the Assignor and the
*
Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be
preferable in an appropriate case to specify these amounts generically or by
formula rather than as a fixed sum.
Assignee hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
SECTION 4. Consent of the Borrower. This Agreement is conditioned
upon the consent of the Borrower pursuant to Section 9.06(c) of the Credit
Agreement. The execution of this Agreement by the Borrower is evidence of this
consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver
a Note payable to the order of the Assignee to evidence the assignment and
assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the obligations of the Borrower
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By
-------------------------
Title:
[ASSIGNEE]
By
--------------------------
Title:
AMERICAN STORES COMPANY
By
--------------------------
EXHIBIT 10.9
AMERICAN STORES COMPANY
1989 STOCK OPTION AND STOCK AWARD PLAN,
AS AMENDED SEPTEMBER 18, 1990, SEPTEMBER 17, 1996,
FEBRUARY 24, 1997, AND APRIL 7, 1997
1. Adoption and Purpose of Plan. American Stores Company, a Delaware
corporation (the "Company"), hereby adopts a stock option, stock appreciation
rights and stock award plan providing for the granting of stock options, stock
appreciation rights and stock awards to key management employees (the "Plan").
The general purpose of the Plan is to promote the interests of the Company and
its shareholders in attracting, maintaining and developing a management capable
of assuring the future success of the Company and by providing to key employees
of the Company and its subsidiaries and affiliates additional incentives to
continue and increase their efforts with respect to, and to remain in the employ
of, the Company or its subsidiaries or affiliates. So that maximum incentive
can be provided each particular employee participating in the Plan by granting
him an option or options best suited to his circumstances, the Plan provides for
granting both incentive (as defined in Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code")) and nonqualified stock options. The Plan also
provides for the grant of stock appreciation rights, and for the grant of shares
to eligible participants, subject to forfeiture restrictions which will lapse
upon the passage of time, the participant's continued employment with the
Company, and certain other events.
2. Administration. The Plan shall be administered by a committee (the
"Committee") of not less than three Directors of the Company who shall be
appointed by the Board of Directors of the Company, none of whom shall be
eligible (or shall have been eligible within one year prior to the date of their
appointments) to participate in the Plan or to be selected as a participant
under any other discretionary plan of the Company or any of its affiliates
entitling them to acquire stock, stock options or stock appreciation rights of
the Company or any of its affiliates. The Committee shall be authorized to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it and to make all other determinations necessary or advisable for
its administration.
3. Shares Subject to Plan. The Committee, from time to time, may,
pursuant to the Plan, provide for the grant of options for the purchase of
common stock of the Company upon the exercise thereof, and may grant stock
appreciation rights and make restricted stock awards, for an aggregate of up to
1,200,000 shares, subject to adjustment as provided in Section 8 hereof. The
Committee, from time to time, may also grant stock appreciation rights for up to
an aggregate of 767,450 shares to be issued in connection with options
outstanding as of February 1, 1989 under the Company's 1974 Stock Option Plan
and the Company's 1975 Employees' Stock Option Plan, said stock appreciation
rights to have the same terms as the stock appreciation rights which are
provided in connection with options granted hereunder pursuant to Section 19 of
the Plan. If an option ceases to be exercisable in whole or in part for any
reason, the shares which were subject to such option, but as to which the option
had not been exercised or exercisable at the time of the termination of the
option, shall continue to be available under the Plan to be granted to other
participants. Shares subject to restricted stock awards which are forfeited to
the Company shall also be available under the Plan to be granted to other
participants. Shares shall be made available under the Plan from authorized and
unissued stock or from treasury stock.
Exercise of an option in any manner, including an exercise involving an
election of a stock appreciation right with respect to an option, shall result
in a decrease in the number of shares which thereafter may be available under
the Plan by the number of shares as to which the option is exercised.
4. Time of Granting of Options. The effective date of the granting of an
option (the "Granting Date") shall be the date specified by the Committee in its
determination or designation relating to the award of such option.
5. Eligibility. Options, stock appreciation rights and restricted stock
awards may be granted only to key employees (which term shall include officers)
who on the Granting Date are in the employ of the Company or any of its present
and future subsidiary corporations, as defined in Section 425(f) of the Code
("Subsidiaries"), provided that nonqualified options may also be granted to key
employees of any business entity in which the Company shall have a substantial
interest (an "Affiliate"). A director of the Company or of a Subsidiary or
Affiliate who is not also such an employee shall not be eligible to receive an
option or restricted stock award. Options, stock appreciation rights and
restricted stock awards may be granted to eligible employees whether or not they
hold or have held options, stock appreciation rights or grants of restricted
stock under the Plan or under previously adopted plans.
6. Option Prices. The option price per share to be specified in each
option agreement shall be (i) with respect to incentive stock options, the mean
between the high and low prices of the common stock on the New York Stock
Exchange on the Granting Date, or such other price as the Committee shall
determine to be not less than 100% of fair market value of the common stock on
the Granting Date, provided, however, that with respect to any incentive stock
option granted to a person who on the Granting Date owns, either directly or
within the meaning of the attribution rules contained in section 425(d) of the
Code, stock possessing more than 10% of the total combined voting power of all
classes of stock of his or her employer corporation or of its parent or
subsidiary corporations, as defined respectively in sections 425(e) and (f) of
the Code (a "Ten Percent Shareholder"), the option price per share shall not be
less than 110% of the fair market value of the common stock on the Granting
Date; and (ii) with respect to nonqualified stock options, such price as the
Committee shall in its sole discretion determine.
7. Certain Terms of Options
(a) Nontransferability. No option (or related stock appreciation rights,
if any) granted under the Plan shall be transferable by the optionee other than
(i) by will or by the laws of descent and distribution; (ii) in the case of a
Non-Qualified Stock Option, pursuant to a qualified domestic relations order (as
defined in the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder); or (iii) pursuant to approval by the
Committee on the terms set forth below. The Committee may, in its discretion,
authorize all or a portion of the options granted or to be granted to an
optionee to be on terms which permit transfer by such optionee to (i) the
spouse, children or grandchildren of the optionee (`Immediate Family
Members'), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family members, or (iii) a partnership in which such Immediate Family Members
are the only partners, provided that (x) there may be no consideration for any
such transfer, (y) the stock option agreement pursuant to which such options are
granted must be approved by the Committee, and must expressly provide for
transferability in a manner consistent with this Section 7(a), and (z)
subsequent transfers of transferred options shall be prohibited except those in
accordance with this Section 7(a). Following transfer, any such options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Section 7(a) hereof
the term `optionee'' shall be deemed to refer to the transferee. The events of
termination of employment of Section 7(b) hereof shall continue to be applied
with respect to the original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the periods specified
in Section 7(b). All options shall be exercisable, subject to the terms of the
Plan, during the optionee's lifetime only by the optionee or by the transferee.
In the event an option or options are transferred by an optionee in the manner
provided herein, the original optionee shall remain subject to withholding taxes
for the amount of the income realized upon exercise of the options, and the
Company shall have no obligation to provide notice to the transferee of the
termination of the option due to termination of the original optionee's
employment or the death, disability or retirement of such original optionee.
Further, the Company shall be under no obligation to file a registration
statement under the Securities Act of 1933, as amended, with respect to the
shares issuable upon exercise of the options that have been transferred.
(b) Period of Exercise; Termination. An option may be exercised in whole
at any time or in part from time to time during the option period, subject to
such limitations and restrictions as may be included in the option, provided,
however, that no option may be exercised within a period of one year from the
Granting Date thereof. In the case of termination of employment by reason of
retirement at or after age 57, the employee may, (i) within three months of said
retirement date in the case of incentive stock options, or (ii) within twelve
months of said retirement date in the case of nonqualified stock options,
exercise all of the option rights which were exercisable on the day before said
retirement date and any such options not so exercised shall thereupon terminate.
In the case of termination of employment by reason of death, the employee's
legal representative may, within one year of the date of death (subject to the
limitation on the exercise of incentive stock options contained in Section
7(g)), exercise all of the option rights of the employee (whether or not such
options were exercisable on the day before the employee's death), and any such
options not so exercised shall thereupon terminate. In the case of termination
of employment by reason of disability (within the meaning of Section 22(e)(3) of
the Code), the employee or his legal representative, as the case may be, may (i)
with regard to stock options granted with an exercise price equal to or greater
than the fair market value of the applicable shares on the date such options are
granted, within one year of the date of disability (subject to the limitation on
the exercise of incentive stock options contained in Section 7(g)), exercise all
of such option rights of the employee (whether or not such options were
exercisable on the day before such termination), and any such options not so
exercised shall thereupon terminate; and (ii) with regard to stock options
granted with an exercise price less than the fair market value of the applicable
shares on the date such options are granted, the employee shall be deemed not to
have terminated his employment by reason of his disability for the purpose of
determining when such options become exercisable and whether the employee may
exercise such options, whether or not such options were exercisable on the day
before such disability, and the options shall terminate one year from the date
which all of the options become exercisable, unless the employee's disability
terminates and he accepts employment with an employer other than the Company, in
which case the employee's right to exercise options pursuant to this alternative
shall cease immediately, and any of such option rights not so exercised shall
terminate. In all other cases all rights to exercise options shall terminate
once the employee ceases to be an employee of the Company or any of its
Subsidiaries ( or, in the case of a nonqualified option, an Affiliate),
provided, however, that the Committee shall have the discretion to permit
options to be exercised in such circumstances for a period of up to nine months
after termination of employment. Each incentive stock option shall expire not
more than ten years (or, if granted to a Ten Percent Shareholder, five years)
after the Granting Date (or, if earlier, within the above-stated period after
death, disability or retirement). Each nonqualified option shall expire not
more than ten years after the Granting Date (or if earlier, within the above-
stated period after death, disability or retirement). Notwithstanding the
foregoing exercise rules relating to death, disability or retirement, all
options shall expire not more than 10 years (or, in the case of an incentive
stock option granted to a Ten Percent Shareholder, five years) after the
Granting Date.
(c) Payment for Shares. Full payment for shares purchased upon the
exercise of an option shall be made in cash or, at the election of the optionee
and as the Committee may, in its sole discretion, approve, by surrendering
shares of common stock of the Company with an aggregate fair market value
(determined in accordance with Section 6, above) equal to the aggregate option
price, or by delivering such combination of shares of common stock and cash as
the Committee shall, in its sole discretion, approve.
(d) Delivery of Shares; Withholding. Upon payment of the option price, a
certificate for the number of whole shares to which the participant is entitled
shall be delivered to such participant by the Company, provided, however, that
in the case of the exercise of a nonqualified option, the participant has
remitted to his employer an amount, determined by such employer, necessary to
satisfy applicable federal, state or local tax withholding requirements, or made
other arrangements with his or her employer for the satisfaction of such tax
withholding requirements.
(e) Stock Appreciation Rights. As an alternative to the payment by the
holder for the number of shares in respect of which an option is exercised, the
Committee may provide alternative settlement methods (hereinafter referred to as
stock appreciation rights) as follows:
(i) The Committee, in its discretion, may provide that any stock
option by its terms may permit the holder to elect any of the stock appreciation
rights set forth in subsection (iii) below.
(ii) The Committee, in its discretion, may at the request of an
employee holding a nonqualified option under the Plan which does not by its
terms include stock appreciation rights, amend the option to permit the election
of such rights by the holder.
(iii) The stock appreciation rights permit the holder to receive
from the Company: (A) cash in an amount equal to the excess of the value of
one share over the option price times the number of shares as to which the stock
appreciation right is exercised; (B) the number of whole shares having an
aggregate value not greater than the cash amount calculated under alternative
(A); or (C) any combination of cash and stock having an aggregate value not
greater than the cash amount calculated under alternative (A). For purposes of
determining the value of a stock appreciation right, the value per share shall
be determined as of the exercise date in the manner specified in Section 6
above.
(iv) The exercise of a stock appreciation right with respect to an
option shall result in the expiration of such related option to the extent of
the number of stock appreciation rights exercised. In addition, all stock
appreciation rights related to incentive stock options shall be subject to the
following terms: (A) such stock appreciation rights shall be exercisable only
when the fair market value of the stock subject to the related option exceeds
the option price of the related option, and such option is otherwise
exercisable; (B) such stock appreciation rights are transferable only when the
related option is otherwise transferable, and (C) such other terms as the
Committee shall in its discretion determine to be necessary to enable the
related option to qualify as an incentive stock option within the meaning of
section 422A of the Code.
(v) Any election of any stock appreciation rights provided for under
this Section 7 shall be subject to the consent or disapproval of the Committee
at any time after the election is made and the Committee shall have sole
discretion to determine whether, and to what extent, the stock appreciation
right elected shall be paid in cash, in common stock, or partially in cash and
partially in common stock.
(vi) Any shares of common stock due upon exercise of a stock
appreciation right shall be delivered to the participant by the Company and any
payment of cash shall be made by the employer of the participant. The employer
of the participant shall deduct from the amount of any cash so payable an amount
necessary to satisfy applicable federal, state, or local tax withholding
requirements. If no cash is payable (or if the amount of cash payable is
insufficient to satisfy applicable tax withholding requirements), no shares
shall be delivered by the Company to the participant until the participant
remits to his or her employer an amount, determined by such employer, necessary
to satisfy applicable federal, state, or local tax withholding requirements or
makes other arrangements for the satisfaction of such tax withholding
requirements.
(f) No Fractional Shares. Only whole shares shall be issuable upon
exercise of options and stock appreciation rights. Any right to a fractional
share shall be satisfied in cash, or shall be eliminated, in the sole discretion
of the Committee.
(g) Limitation on Exercise of Incentive Stock Options. The aggregate fair
market value (determined as of the time options are granted) of the shares with
respect to which incentive stock options may first become exercisable by a
holder in any one calendar year under the Plan and any other plan of his
employer corporation and its parent and subsidiary corporations, as defined
respectively in section 425(e) and (f) of the Code, shall not exceed $100,000.
The foregoing limitation shall apply only to incentive stock options granted
under the Plan, and not to nonqualified options granted under the Plan.
8. Adjustments Upon Changes in Capitalization. Except as may be
determined in the sole discretion of the Committee and provided in the option
agreement with respect to any option, in the event of changes in the outstanding
common stock of the Company by reason of stock dividends, stock splits,
recapitalizations, combinations or exchanges of shares, split-ups, split-offs,
spin-offs, or other similar changes in capitalization, or any distribution to
common stockholders other than cash dividends, the number and class of shares
subject to each outstanding option, the option prices, the number and class of
shares subject to stock appreciation rights or restricted stock awards, and the
aggregate number and class of shares available under the Plan shall be
appropriately adjusted by the Committee; provided that, in the event the
outstanding shares of common stock shall be changed into or exchanged for any
other class or series of capital stock or cash, securities or other property
pursuant to a recapitalization, reclassification, merger, consolidation,
combination or similar transaction, then each option shall thereafter become
exercisable for the number and/or kind of capital stock, and/or the amount of
cash, securities or other property so distributed, into which the shares of
common stock subject to the option would have been changed or exchanged had the
option been exercised in full prior to such transaction, provided further that,
if the kind or amount of capital stock or cash, securities or other property
received in such transaction is not the same for each outstanding share of
common stock, then the kind or amount of capital stock or cash, securities or
other property for which the option shall thereafter become exercisable shall be
the kind and amount so receivable per share by a plurality of the shares, and
provided further that if necessary, the provisions of the option shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of capital stock, cash, securities or other property thereafter
issuable or deliverable upon exercise of the option.
9. Option Agreements. Each option and agreement (and amendments thereof)
shall contain such terms and provisions, consistent with the requirements of
this Plan, as the Committee in its discretion shall determine, including without
limitation such terms and provisions as shall be requisite to cause certain
stock options to qualify as incentive stock options under Section 422A of the
Code. Option agreements need not be identical.
10. Restricted Stock Awards. The Committee, in its sole discretion, may
award to eligible participants shares of common stock of the Company (such
shares, while subject to such restrictions to be hereinafter referred to as
"Restricted Stock"). All shares of Restricted Stock awarded to participants
under the Plan shall be subject to the following terms and conditions and to
such other terms, restrictions and conditions (including, but not limited to,
conditions and restrictions relating to the attainment of performance goals),
not inconsistent with the Plan, as shall be prescribed by the Committee in its
sole discretion and as shall be contained in the Agreement referred to in
Section 10(d) hereof.
(a) Restrictions. At the time of an award of Restricted Stock, the
Committee shall establish for each participant a Restricted Period. Shares of
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered by the participant, except as hereinafter provided, during the
Restricted Period. Except for such restrictions, and subject to Sections 10(c)
, 10(d), 10(e) and 10(f) hereof, the participant as owner of such shares shall
have all the rights of a stockholder including but not limited to the right to
receive all dividends paid on such shares and the right to vote such shares.
The Committee shall have the authority, in its discretion, to accelerate the
time at which any or all of the restrictions shall lapse with respect to any
shares of Restricted Stock prior to the expiration of the Restricted Period with
respect thereto, or to remove any or all of such restrictions, whenever it may
determine that such action is appropriate.
(b) Termination of Employment. If a participant ceases to be an
employee of the Company for any reason (including death, disability or
retirement), all shares of Restricted Stock theretofore awarded to him shall
upon such termination of employment be forfeited and returned to the Company,
unless otherwise provided in the restricted stock agreement, provided, however,
that the Committee may, but need not, within 120 days of such termination of
employment, determine that some or all of such shares shall be free of
restrictions and shall not be forfeited.
(c) Legended Certificates. Each certificate issued in respect of
shares of Restricted Stock awarded under the Plan shall be registered in the
name of the participant and deposited by the participant, together with a stock
power endorsed in blank, with the Company and shall bear the following (or
similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the 1989 Stock Option and Stock Award Plan of American
Stores Company and an Agreement entered into between the registered owner and
American Stores Company. Copies of such Plan and Agreement are on file in the
offices of the Secretary of American Stores Company."
(d) Agreements. At the time of an award of shares of Restricted
Stock, the participant shall enter into an Agreement with the Company, in a form
specified by the Committee, agreeing to the terms and conditions of the award
and such other matters as the Committee shall in its sole discretion determine.
(e) Withholding. At the time of vesting of any shares of Restricted
Stock, and as a further condition to such vesting, the participant shall remit
to his employer an amount, determined by such employer, necessary to satisfy
applicable federal, state or local tax withholding requirements, or shall make
other arrangements with his or her employer for the satisfaction of such tax
withholding requirements.
(f) Delivery of Certificates. At the expiration of the restrictions
imposed by Section 10(a) hereof, the Company shall redeliver to the participant
(or where the relevant provision of Section 10(b) hereof applies, in the case of
a deceased participant, his or her legal representative, beneficiary or heir)
the certificate(s) and stock power deposited with it pursuant to Section 10(c)
hereof and the shares of Common Stock represented by such certificate(s) shall
be free of the restrictions referred to in Section 10(a) hereof and the legend
referred to in Section 10(c) hereof.
11. Securities Laws. The Committee may make each grant of an option or a
stock appreciation right or award of Restricted Stock under the Plan subject to
such conditions as shall cause the award of Restricted Stock and the grant and
exercise of any option or stock appreciation right to comply with the then-
existing requirements of Rule 16b-3 (or any similar rule) of the Securities and
Exchange Commission ("Rule 16b-3").
12. Government and Other Regulations. The obligation of the Company to
issue shares under the Plan shall be subject to (i) all applicable laws, rules
and regulations, and such approvals by any governmental agencies as may be
required, including, but not by way of limitation, the effectiveness of a
Registration Statement under the Securities Act of 1933 as deemed necessary or
appropriate by counsel for the Company and (ii) the condition that the shares of
common stock reserved for issuance upon the exercise of options granted under
the Plan shall have been duly listed upon the New York Stock Exchange or any
other stock exchange on which the Company's common stock is actively traded.
13. Non-Exclusivity of the Plan. Neither the adoption of the Plan by the
Board of Directors nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations on the power
of the Board of Directors to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangement may be either generally
applicable or applicable only in specific cases.
14. Rights As Shareholder. Neither an optionee nor a holder of a stock
appreciation right shall have any right as a shareholder with respect to any
shares subject to his or her options or stock appreciation rights until the date
of the issuance of a stock certificate to him or her for such shares.
15. Plan Not To Affect Employment. Neither the Plan nor any option or
stock appreciation right shall confer upon any employee of the Company any right
to continue in the employment of the Company.
16. Transfer of Employment. For purposes of the Plan, a transfer of a
participant between the Company, a Subsidiary (or, in the case of a holder of a
nonqualified option, an Affiliate) shall not be deemed a termination of
employment.
17. Termination and Amendment. Unless the Plan shall theretofore have
been terminated as hereinafter provided, it shall terminate on, and no option
shall be granted thereunder after, December 6, 1998. The Board of Directors may
also terminate the Plan or make such modifications or amendments thereof as it
shall deem advisable; provided, however, that the Board of Directors may not,
without further approval by the holders of a majority of the outstanding stock
of the Company having general voting power, (a) increase the maximum number of
shares for which options may be granted under the Plan in the aggregate, (b)
change the requirements as to the class of employees eligible to receive
options, or (c) make any other change that requires the approval of shareholders
in order to maintain the exemption under Rule 16b-3. The Committee may,
however, authorize amendments of outstanding options including without
limitation the reduction of the option prices specified therein (or the granting
of new options at lower prices upon cancellation of outstanding options), so
long as all options granted hereunder outstanding at any one time shall not call
for issuance of more shares of common stock than those provided for in Section 3
hereof and so long as the provisions of any amended option would have been
permissible under the Plan if such option had been originally granted as of the
date of such amendment with such amended terms. No termination, modification,
or amendment of the Plan or any option may, without the consent of the employee
to whom any option shall theretofore have been granted, adversely affect the
rights of such employee under such option.
18. Effectiveness of the Plan. The Plan shall become effective as of
December 6, 1988; provided, however, that no option granted thereunder may be
exercised until the stockholders of the Company approve the Plan at their 1989
Annual Meeting. If the stockholders fail to give such approval, the Plan and
any and all options granted thereunder shall be null and void. Approval of
stockholders shall require the affirmative votes of the holders of a majority of
the outstanding common stock of the Company voting at a meeting where a quorum
is present, in person or by proxy.
19. Change in Control. The Board of Directors of the Company may, at its
discretion, accelerate the right to exercise all or any part of any
unexercisable option granted under the Plan or accelerate the time at which any
or all of the restrictions shall lapse with respect to any shares of Restricted
Stock awarded under the Plan; provided, however, that notwithstanding the
foregoing, unless otherwise provided at the time of grant, from and after a
Change of Control (as hereinafter defined) each unexercisable option shall vest
and each option shall become immediately exercisable to the full extent of the
original grant and all of the restrictions (including the Restricted Period)
with respect to any shares of Restricted Stock (including any provision
providing for the forfeiture of any Restricted Stock under any circumstances)
shall terminate immediately and share certificates relating to the Restricted
Stock shall be delivered to participants pursuant to the terms of Section 10(f)
hereof.
Notwithstanding anything contained in Section 7 hereof to the contrary, if
an optionee's employment is terminated (i) by action of his employer, other than
discharge for Cause (as hereinafter defined), or (ii) by voluntary resignation
of the optionee, in either case within 18 months following a Change of Control,
any options that are then exercisable held by the optionee may be exercised by
him until the earlier of six months and one day after such termination or the
expiration of such options in accordance with their terms. "Cause" for the
purposes of this paragraph shall mean an act or acts of dishonesty on employee's
part which are intended or result in his substantial personal enrichment at the
expense of the Company or his conviction for commission of a felony.
Notwithstanding anything contained in the Plan to the contrary, unless
otherwise provided at the time of grant, during the 60-day period from and after
a Change of Control an optionee (other than an optionee who initiated a Change
of Control in a capacity other than as an officer or director of the Company)
with respect to an option that is unaccompanied by a stock appreciation right
shall, unless the Committee shall determine otherwise at the time of grant, have
the right, in lieu of the payment of the full purchase price of the shares of
common stock being purchased under the option and by giving written notice to
the Company, to elect (within such 60-day period) to surrender all or part of
the option to the Company and to receive in cash an amount equal to the amount
by which the fair market value per share of the common stock on the date of
exercise shall exceed the purchase price per share under the option multiplied
by the number of shares of common stock granted under the option as to which the
right granted by this paragraph shall have been exercised. The fair market
value of the common stock on the date of exercise shall mean: (a) with respect
to an election by an optionee to receive cash in respect of an option which is
not an incentive stock option, the "Change of Control Fair Market Value," as
defined below; and (b) with respect to an election by an optionee to receive
cash in respect of an option which is an incentive stock option, the mean of the
high and low prices of the common stock on the New York Stock Exchange on such
date.
Notwithstanding anything contained in the Plan to the contrary, the payment
in settlement of a stock appreciation right during the 60-day period from and
after a Change of Control shall be entirely in cash and during the 60-day period
from and after a Change of Control the value of a share of common stock on the
date of exercise shall mean (i) with respect to the exercise of a stock
appreciation right accompanying an option which is not an incentive stock
option, the `Change of Control Fair Market Value'' and (ii) with respect to the
exercise of a stock appreciation right accompanying an incentive stock option,
the mean of the high and low prices of the common stock on the New York Stock
Exchange on such date.
For the purpose of the Plan, a "Change of Control" shall mean any of the
following events:
(i) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than
L.S. Skaggs, his affiliates and associates, his heirs and any trust or
foundation to which he has transferred or may transfer shares of common stock,
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the "Company Voting
Securities"), provided, however, that any acquisition by the Company or its
subsidiaries, or any employee benefit plan (or related trust) of the Company or
its subsidiaries, or any corporation with respect to which, following such
acquisition, more than 80% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Company Voting Securities immediately
prior to such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the Outstanding Company
Common Stock and Company Voting Securities, as the case may be, shall not
constitute a Change of Control; or
(ii) Individuals who, as of February 1, 1989, constitute the Board of
Directors of the Company (as of February 1, 1989, as adjusted below, the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided that any individual becoming a director subsequent to February
1, 1989 whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which the
individuals and entities who were the respective beneficial owners of the common
stock and voting securities of the Company immediately prior to such
reorganization, merger or consolidation do not, following such reorganization,
merger or consolidation, beneficially own, directly or indirectly, more than 80%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation, or a complete
liquidation or dissolution of the Company or of the sale or other disposition of
all or substantially all of the assets of the Company.
For purposes of the Plan, the "Change of Control Fair Market Value" shall
mean the higher of (x) the highest reported sales price, regular way, of a share
of common stock on the Composite Tape for New York Stock Exchange Listed Stocks
during the 60-day period prior to the date of the Change of Control and (y) if
the Change of Control is the result of a transaction or series of transactions
described in paragraphs (i) or (iii) of the definition of Change of Control set
forth in this Section, the highest price per share of common stock paid in such
transaction or series of transactions (in the case of a Change of Control
described in such paragraph (i) of such definition), as reflected in a Schedule
13D filed by the person having made the acquisition.
Exhibit 11
AMERICAN STORES COMPANY
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share data)
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Primary Earnings Per Share
Primary earnings applicable to shareholders $287,221 $316,809 $345,184
Primary earnings per share $1.97 $2.16 $2.42
Average shares outstanding 145,888 146,943 142,767
Fully Diluted Earnings Per Share
Earnings applicable to shareholders $287,221 $316,809 $345,184
Plus interest on convertible debentures 7,612
Fully diluted earnings applicable to shareholders $287,221 $316,809 $352,796
Fully diluted earnings per share $1.97 (1) $2.16 (1) $2.33
Fully diluted average shares outstanding 146,854 147,425 151,211
Calculation of Fully Diluted Average Shares Outstanding
Effect of assumed exercise of stock options:
Proceeds from assumed exercise $71,671 $40,485 $13,773
Shares under options outstanding 2,655 1,974 1,213
Shares assumed acquired with proceeds under the
treasury stock method (1,689) (1,492) (547)
Incremental shares due to assumed exercise
of stock options 966 482 666
Fully diluted average shares outstanding:
Average shares outstanding 145,888 146,943 142,767
Assumed exercise of stock options 966 482 666
Assumed conversion of debentures 7,778
Total 146,854 147,425 151,211
</TABLE>
(1) Dilution is less than 3%.
Exhibit 12
AMERICAN STORES COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
In the computation of the ratio of earnings to fixed charges for the Company,
earnings consist of pre-tax income from continuing operations, plus fixed
charges (adjusted for capitalized interest). Fixed charges consist of interest,
whether expensed or capitalized (including the amortization of debt expense),
plus the amount of rental expense which is representative of the interest factor
in the particular case.
<TABLE>
<S> <C> <C> <C>
(In thousands of dollars) 1996 1995 1994
Earnings before income taxes $504,552 $550,916 $606,263
Fixed charges (detail below) 282,355 259,648 265,529
Adjusted for:
Capitalized interest (10,567) (8,542) (3,900)
Previously capitalized interest
amortized during the period 1,612 1,231 1,269
Earnings $777,952 $803,253 $869,161
Interest expense $171,558 $159,545 $170,703
Capitalized interest 10,567 8,542 3,900
Interest factor for rental expense
of operating leases 100,230 91,561 90,926
Fixed charges $282,355 $259,648 $265,529
Ratio of earnings to fixed charges 2.76 to 1 3.09 to 1 3.27 to 1
</TABLE>
Exhibit 13
Common Stock Market Prices and Dividends
The following table sets forth the high and low reported sales prices for the
Company's common stock for the fiscal periods indicated as reported on the New
York Stock Exchange Composite Tape and dividends paid on the common stock during
such periods. The common shares of the Company are listed on the New York,
Philadelphia, Chicago and Pacific stock exchanges under the trading symbol
"ASC". The number of shareholders of record of the Company's common stock at
March 29, 1997, was 31,755.
<TABLE>
1996 1995 1994
Market Price Market Price Market Price
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Cash Cash
Dividends Dividends Dividends
High Low Paid High Low Paid High Low Paid
First Quarter $34 1/4 $25 3/8 $.16 $26 1/8 $23 1/4 $.14 $27 3/16 $20 7/8 $.12
Second Quarter $41 1/4 $32 .16 $29 3/4 $24 3/4 .14 $26 1/8 $23 1/4 .12
Third Quarter $42 3/4 $37 1/2 .16 $30 3/4 $28 1/8 .14 $27 1/8 $23 3/4 .12
Fourth Quarter $45 3/8 $38 3/8 .16 $30 3/4 $24 7/8 .14 $27 3/4 $24 .12
Annual Dividend $.64 $.56 $.48
</TABLE>
Selected Financial Data
The following consolidated selected financial data of the Company for the last
five years should be read in conjunction with the consolidated financial
statements and related notes appearing on pages 12 to 30.
Comparisons of the results of operations between fiscal years 1992 to 1996 are
rendered difficult due to the Company's disposition of stores. These include
the disposition of 45 Acme Markets stores in the fourth quarter of 1994, the 33-
store Star Market food division in the third quarter of 1994 and 74 Jewel Osco
combination food and drug stores in the first quarter of 1992. These disposed
of stores generated sales in the amounts of $.8 billion, $1.2 billion and $1.4
billion in 1994, 1993 and 1992, respectively. In addition, all years included
52 weeks except for 1995, which included 53 weeks.
<TABLE>
<S> <C> <C> <C> <C> <C>
(In thousands of dollars, except per share data)
1996 1995 (1) 1994 1993 1992
Sales $18,678,129 $18,308,894 $18,355,126 $18,763,439 $19,051,180
Earnings before extraordinary item $287,221 $316,809 $345,184 $262,090 $207,466
Extraordinary item - early retire-
ment of debt - net of taxes (15,000)
Net earnings $287,221 $316,809 $345,184 $247,090 $207,466
Average common shares outstanding 145,888 146,943 142,767 142,202 140,314
Earnings per common share before extra-
ordinary item $1.97 $2.16 $2.42 $1.85 $1.48
Extraordinary item - early retirement
of debt - net of taxes (.11)
Net earnings per common share $1.97(5) $2.16 $2.42(6) $1.74 $1.48
Fully diluted earnings per common share $1.97(5) $2.16 $2.33(6) $1.69 $1.44
Cash dividends declared per common share $.64 $.56 $.48 $.40 $.36
Total assets $7,881,405 $7,362,964 $7,031,566 $6,927,434 $6,763,793
Total debt and obligations under
capital leases $2,679,147 $2,240,168 $2,205,291 $2,167,999 $2,248,316
Total capital expenditures (2) $999,986 $801,371 $565,313 $652,928 $476,617
Total stores (3) 1,695 1,650 1,597 1,695 1,672
Selling area square footage (000's) (4) 33,823 32,523 31,179 32,727 32,320
</TABLE>
(1) 53-week fiscal year
(2) Amount includes capitalized leases and the net present value of property,
plant and equipmentleased under operating leases
(3) Includes jointly operated combination stores which are each counted as two
separate stores
(4) Selling area square footage was 74% of total retail square footage in 1996
(5) Includes special charges totaling $.41 per share of expense
(6) Includes non-recurring items totaling $.39 per share of income
NOTE: The fiscal year of the Company ends on the Saturday nearest to January
31. All references herein to `1996'', ``1995'', `1994'', "1993" and "1992"
represent the fiscal years ended February 1, 1997, February 3, 1996, January 28,
1995, January 29, 1994 and January 30, 1993, respectively. All years include 52
weeks except for 1995, which included 53 weeks.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Comparisons between years are rendered difficult due to (i) the fact that not
all fiscal years being compared were the same length; the 1995 fiscal year
included 53 weeks while the 1996 and 1994 fiscal years included 52 weeks, and
(ii) the disposition of the 33-store Star Market food division in the third
quarter of 1994 and the 45 Acme Markets stores in the fourth quarter of 1994
(disposed of operations).
Total sales and the percentage change in comparable store sales (sales from
stores that have been open at least one year, including replacement stores) for
the 1996 52-week fiscal year, the 1995 53-week fiscal year and the 1994 52-week
fiscal year, are set forth in the tables below. Sales from continuing
operations increased 2.0% in 1996 and 4.5% in 1995. Adjusting for the extra
week in 1995, total sales from continuing operations would have increased 4.0%
in 1996 and 2.6% in 1995. The improvement in total and comparable food store
operations sales in 1996 is primarily a result of increased capital spending and
more effective marketing efforts, including customer loyalty cards and targeted
marketing promotions. Total and comparable sales in 1996 also increased due to
the impact of a nine-day labor dispute in the first quarter of 1995 in the food
store operations. Drug store operations total and comparable sales increased in
1996 due primarily to capital spending and increased pharmacy sales. The
increase in 1995 sales from continuing operations is primarily a result of
improved performance at both operating divisions and the extra week of
operations.
<TABLE>
Total Sales
<S> <C> <C> <C>
52 weeks 53 weeks 52 weeks
(In millions of dollars) 1996 1995 1994
Food store operations $13,420 $13,302 $12,959
Drug store operations 5,227 4,995 4,544
Other 31 12 12
Continuing operations 18,678 18,309 17,515
Disposed of operations 840
Total sales $18,678 $18,309 $18,355
</TABLE>
<TABLE>
Comparable Store Sales
<S> <C> <C> <C>
52 weeks 53 weeks 52 weeks
(Percentage change) 1996 1995 1994
Eastern food operations 2.2% 1.5 % 0.7 %
Western food operations 2.4% (0.8)% (1.8)%
Drug store operations 5.8% 4.8 % 4.2 %
Total change 3.3% 1.4 % 0.5 %
</TABLE>
Beginning in the first quarter of 1996, the Company, in connection with its
consolidation efforts, classified advertising expense as a cost of merchandise
sold. Previously, these expenses were classified as operating expenses. Prior
years have been reclassified to conform to the current year presentation.
Gross profit as a percent of sales increased to 26.6% in 1996, compared to 25.9%
in 1995 and 1994. The increase in 1996 gross profit over 1995 is primarily due
to benefits realized from centralized procurement, better product mix and lower
warehousing costs. Advertising expense also decreased due to the shift from
newspaper and print advertising to direct mail targeted marketing. These
improvements were partially offset by lower pharmacy margins due to a shift from
cash to lower margin third-party customers and a $10.0 million ($.04 per share)
special charge to adjust inventories to a common inventory valuation method.
Gross profit in 1995 was essentially flat compared to 1994. Gross profit was
favorably impacted in 1995 primarily as a result of the disposed of operations,
which produced lower margins than the continuing operations, and improvements in
the food store operations due to improved product mix and promotional
strategies. However, these increases were adversely affected by competitive
drug store pharmacy gross margins and the impact of a nine-day labor dispute in
the first quarter of 1995 in the food store operations. The annual pre-tax LIFO
charge to earnings amounted to $11.4 million in 1996, $12.8 million in 1995 and
$8.2 million in 1994.
Operating expense as a percent of sales increased to 22.5% in 1996, compared to
22.1% in 1995 and decreased compared to 23.3% in 1994. The increase in 1996 is
primarily due to special charges of $15.5 million ($.06 per share) for severance
costs related primarily to the consolidation of certain warehouse and office
facilities and increased costs associated with new stores, offset in part by
lower self-insurance costs, better overall cost control and improved sales. In
1995, operating expense in the food store operations benefited from the
renegotiation of a labor contract with the United Food and Commercial Workers
International. The new contract will expire in 1999, and replaced a contract
scheduled to expire in 1996. As a result of the early termination of the
contract, certain health and welfare savings, which were being recognized over
the life of the old contract, were immediately recognized in the third quarter
of 1995. Operating expense in the food store operations also decreased in 1995
due to lower self-insurance costs, productivity improvements and better overall
cost control, which were partially offset by the impact of the nine-day labor
dispute. In addition, improved sales, lower insurance costs and better overall
cost control in the drug store operations helped lower 1995 operating expense as
a percent of sales. Operating expense in 1994 included charges of $23.9 million
($.10 per share) for centralization of administrative functions, including
information technology and accounting and expenses for the consolidation of the
computer data centers and a voluntary severance program initiated at Acme
Markets, totaling $11.2 million ($.05 per share).
Total operating profit for the last three fiscal years is set forth in the
following table. Operating profit from continuing operations increased 7.8% in
1996, 11.9% in 1995 and 4.4% in 1994. Total operating profit was 4.1% of sales
in 1996, 3.9% of sales in 1995 and 3.5% of sales in 1994. The increase in 1996
operating profit is primarily due to stronger sales and improved gross profit
margins. The increase in 1995 operating profit and operating profit as a
percent of sales is primarily due to strong performances from the Company's core
operations and the extra week of operations included in 1995. In addition,
operating profit in the food store operations improved in 1995 due to successful
joint marketing of the combination stores, and lower health and welfare costs
associated with the renegotiated labor contract. Operating profit in the drug
store operations improved in 1995 due to lower insurance costs and better cost
control slightly offset by the start-up costs of 71 new stores, including 17
acquired Clark drug stores.
<TABLE> Operating Profit
<S> <C> <C> <C>
52 weeks 53 weeks 52 weeks
(In millions of dollars) 1996 1995 1994
Food store operations $608.3 $542.9 $504.1
Drug store operations 260.0 245.4 228.5
LIFO charge (11.4) (12.8) (8.2)
Purchase accounting amortization (78.7) (76.8) (78.6)
Other (16.5) 8.1 (14.1)
Continuing operations 761.7 706.8 631.7
Disposed of operations 18.4
Total operating profit $761.7 $706.8 $650.1
</TABLE>
Interest expense increased in 1996 due to increased borrowings including the
addition of the $350 million principal amount of 30-year, 8% debentures which
partially replaced short-term variable rate debt. Interest expense decreased in
1995 and 1994 due to lower average interest rates resulting from the refinancing
of high coupon borrowings at lower rates and lower average debt levels.
Interest expense also benefited from the conversion of a portion of the
convertible notes from debt to equity in the first quarter of 1995. The caption
`Other'' in 1996 of $85.6 million included special charges of $74.5 million
($.31 per share) for expenses related mainly to the closure of certain stores,
warehouses and offices, and asset impairment charges. The caption `Other'' in
1994 of $126.9 million included non-recurring gains of $121.0 million on the
sale of the Star Market food division, $41.2 million on the sale of 45 Acme
Markets stores and a charge of $31.3 million for closed store costs (totaling
$.54 per share).
The Company's effective income tax rates were 43.1% in 1996, 42.5% in 1995 and
43.1% in 1994. The increase in the 1996 effective tax rate is due to lower
earnings caused by the special charges, the impact of goodwill charges and lower
tax credits. The disposition of assets during 1995 and 1994 in states with
higher tax rates resulted in lower effective income tax rates in 1995.
The Company recorded special charges aggregating approximately $100.0 million,
before taxes, or $.41 per share, during 1996 related primarily to its Delta
initiatives. The Delta initiatives are designed to transform the Company from a
holding company to a unified operating company.
The components of the charge include: warehouse consolidation costs,
administrative office consolidation costs, closed store costs, asset impairment
costs and other miscellaneous charges. The cost of consolidating four general
merchandise warehouses into one in southern California totaled $26.4 million and
is primarily related to lease termination costs, a reserve for the anticipated
loss on the sale of owned facilities (based on management's estimated fair
market value) and adjusting inventories to a common inventory valuation method.
The cost of consolidating administrative offices in Salt Lake City and Chicago
totaled $26.3 million and relates to asset write-offs, lease termination costs
and severance costs. The severance components resulted from the Company's
commitment to restructure and consolidate human resources, payroll, Drug Store
administration and general merchandise buying functions. Closed store costs
included mainly lease termination costs and fixed asset write-offs totaling
$12.9 million. Asset impairment charges totaling $26.4 million consist of
replacements of outdated computer systems and impairment of groups of stores and
other assets that do not fit the long-term strategic plan of the Company. In
addition, other reserves totaling $8.0 million were recorded. The special
charges are included in cost of merchandise sold ($10.0 million), operating and
administrative expenses ($15.5 million) and other non-operating expense ($74.5
million). As of year-end 1996, the Company charged $18.0 million against the
reserve, of which $12.3 million related to asset impairment. Disposal of
impaired assets is expected to be complete in fiscal 1998.
Liquidity and Capital Resources
Cash provided by operating activities decreased by $111.3 million from 1995 to
1996 primarily due to increased inventory related to new warehouses and
increased store square footage related to the Company's capital program. Cash
and cash equivalents and accounts payable at the end of 1996 were lower than the
end of 1995 and 1994 due primarily to the timing of vendor payments at the end
of the fiscal year.
Cash capital expenditures amounted to $877.6 million in 1996, $750.9 million in
1995 and $538.0 million in 1994. Additional capital expenditures represented by
the net present value of leases amounted to $122.4 million in 1996, $50.5
million in 1995 and $27.3 million in 1994. The increase in capital expenditures
in 1996 reflects the Company's commitment to its expanded capital expenditure
program announced in 1992.
The following table shows store counts for new, remodeled and closed stores in
total and net of jointly operated combination stores, which are counted in a
food store division and a drug store division as two separate stores:
<TABLE>
Store Counts
Projected
<S> <C> <C> <C> <C>
1997 1996 1995 1994
Gross 100 122 92 49
Combination stores 20 23 5 4
Net new stores 80 99 87 45
Remodels
Gross 100 94 223 166
Combination stores 20 10 25 11
Net remodels 80 84 198 155
Closed
Gross 77 39 147
Combination stores 10 1 3
Net closed stores 67 38 144
</TABLE>
Capital expenditures for fiscal 1997, including the net present value of leases,
are expected to approximate $1.0 billion and will be funded through cash flow
from operations, credit facilities and other long-term borrowings.
In June of 1996, the Company issued $350 million, 8.0% debentures due June 1,
2026 at 99.3% to yield 8.1% under an $800 million shelf registration statement
filed on February 18, 1994. The Company received net proceeds of approximately
$344 million which were used to pay off financings totaling $100 million at an
average interest rate of 8.25% and to refinance additional short-term variable
rate borrowings under the Company's principal bank credit agreement.
The net increase in debt, including capitalized leases, was $439.0 million and
$34.9 million in 1996 and 1995, respectively. The increases are due to changes
in working capital, increased capital spending and repurchases of common stock
in 1996 and 1995.
The Company's principal bank credit agreement at year-end 1996 was a $1.0
billion revolving credit facility which expires in 1999 and is used for direct
borrowings and as backup support for commercial paper. The Company also has
$250 million of 364-day committed bank lines and $320 million of uncommitted
bank lines, which are used for overnight and short-term bank borrowings and $250
million in availability under a shelf registration statement. At year-end 1996,
the Company had $957 million of debt supported by the credit facility and $183
million outstanding under bank lines, leaving unused committed borrowing
capacity of $110 million.
On March 28, 1997, the Company increased the capacity of its existing revolving
credit facility from $1 billion to $2 billion, which includes a $1.5 billion
five-year revolving credit facility and a $500 million 364-day revolving credit
facility (the Amended Credit Facilities). See Subsequent Events discussion
following.
In June of 1996, the Company replaced its existing stock repurchase program with
a new repurchase program which authorizes the repurchase of up to two million
shares of common stock. During 1996 the Company repurchased 1.1 million shares
of its common stock at an average price of $34.67 per share in accordance with
the Company's stock repurchase programs. As of February 1, 1997, an additional
1.9 million shares remained authorized for repurchase.
Working capital amounted to $364.8 million at year-end 1996 compared to $96.3
million at year-end 1995 and $200.7 million at year-end 1994. Cash and cash
equivalents and accounts payable at the end of 1996 were lower than at the end
of 1995 primarily due to the timing of vendor payments at the end of the fiscal
year. Inventory increased due to new warehouses and increased store square
footage related to the Company's capital program.
The Company's ratio of total debt (debt plus obligations under capital leases)
to total capitalization (total debt plus common shareholders' equity) amounted
to 51.4%, 48.8% and 51.8% at year-end 1996, 1995 and 1994, respectively.
The Company believes that its cash flow from operations, supplemented by the
Amended Credit Facilities, committed and uncommitted credit facilities, other
long-term borrowings, $250 million in availability under a shelf registration
statement, as well as its ability to refinance debt, will be adequate to meet
its presently identifiable cash requirements.
During 1996, the Company entered into an interest rate swap agreement with a
notional amount of $200 million, for the purpose of hedging the interest rate on
debt the Company anticipates issuing in 1997 under the shelf registration
statement. The estimated fair value of the interest rate swap agreement based
on market quotes at year-end 1996 was $2.8 million.
The Company also uses derivative financial instruments to manage interest and
currency risks on a foreign borrowing, due in 1999, that had an outstanding
principal balance of $160 million at year-end 1996.
The Company is exposed to credit losses in the event of nonperformance by the
counterparties to its swap agreements. Such counterparties are highly-rated
financial institutions and the Company anticipates they will be able to satisfy
their obligations under the contracts.
Contingencies
The Company has identified environmental contamination sites related primarily
to underground petroleum storage tanks at various store, warehouse, office and
manufacturing facilities (related to current operations as well as previously
disposed of businesses). Although the ultimate outcome and expense of
environmental remediation is uncertain, the Company believes that the required
costs of remediation and continuing compliance with environmental laws, in
excess of current reserves, will not have a material adverse effect on the
financial condition or operating results of the Company.
Inflation
In recent years, the impact of inflation on the Company's results of operations
has been moderate. As operating expenses and inventory costs have increased,
the Company, to the extent permitted by competition, has recovered these
increases in costs by increasing prices over time.
The Company uses the LIFO (last-in, first-out) method of accounting for the
majority of its inventories. Under this method, the cost of merchandise sold
reported in the financial statements approximates current costs and thus reduces
the distortion in reported earnings due to increasing costs.
The historical costs of property, plant and equipment recorded by the Company
were incurred over a period of many years. The cost of replacing property,
plant and equipment is generally greater than the cost on the books of the
Company as a result of inflation that has occurred over the years since the
property, plant and equipment were placed in service.
Delta Initiatives
Delta is a series of initiatives designed as a self-consolidation and re-
engineering program that is transforming the Company from a holding company to
an operating company. Prior to Delta, the Company operated as seven autonomous
companies with different systems and processes. The goal of Delta is to build
on the size of the Company and to develop common business processes and systems
to best manage growth for the future. Delta is designed to improve the
Company's ability to purchase products and move them through the supply-chain
more quickly, efficiently and cost-effectively, which also results in more
efficient store operations. It seeks to achieve these goals through changes in
the Company's purchasing, warehousing, inventory control and distribution
systems. The information gathered from the common systems and processes assists
the Company's marketing and merchandising programs. Each Delta initiative has a
different timeline, but the majority of the supply-chain initiatives are
targeted for completion by the end of 1997. Management believes the benefits of
Delta will begin to exceed costs for the second half of 1997. To continue to
meet customer needs, the Company intends to maintain store operations, marketing
and merchandising on a local level. Some examples of how Delta has been
implemented into the business are: (i) centralization of the procurement and
logistics groups; (ii) execution of national contracts with selected vendors for
greeting cards, photo-finishing, spices, magazines and, most recently, whole-
bean coffee; (iii) installation of computerized warehouse systems in over 90% of
the Company's warehouses, reducing labor cost and increasing the efficiency of
replenishment; (iv) consolidation of four general merchandise warehouses in
southern California into a single facility; and (v) consolidation of
administrative, real estate, construction and information technology functions.
Subsequent Events
On February 20, 1997, the Company and the family of L. S. Skaggs entered into an
agreement for the repurchase by the Company of 12.2 million shares of its common
stock from the Skaggs family and certain family and charitable trusts for $45
per share, the closing price on the date of the agreement (the Repurchase).
Pursuant to the agreement, the Company filed, at its cost, a registration
statement to enable such shareholders to sell 15.4 million additional shares in
a secondary offering. The closing of the secondary offering, at $43 per share,
and the Repurchase was consummated on April 8, 1997. In addition, the Company
has granted the underwriters for the offering an option to purchase an
additional 2.3 million shares to cover over-allotments. If the option is
exercised, these additional shares would be primary shares to be issued by the
Company. The Company has agreed to reimburse the selling shareholders for
underwriting fees, legal fees and other expenses incurred by them in connection
with the transactions.
The selling shareholders have agreed to enter into a 10-year standstill
agreement restricting purchases and sales of the Company's shares, proxy fights
and other actions.
The Company plans to finance the $550 million Repurchase initially through the
Amended Credit Facilities. Subject to market conditions, the Company expects to
refinance the indebtedness incurred in connection with the Repurchase through
public equity and/or debt issuances over the next six to 12 months.
In anticipation of the expiration of the 1992 Key Executive Stock Purchase
Incentive Plan, the Board of Directors recently approved a new stock-based
management incentive program. A total of approximately 3.1 million shares were
granted under a new plan and an existing plan at an exercise price of $45 per
share.
Cautionary Note
This report contains certain forward-looking statements about the future
performance of the Company which are based on management's assumptions and
beliefs in light of the information currently available to it. These forward-
looking statements are subject to uncertainties and other factors that could
cause actual results to differ materially from such statements including, but
not limited to: competitive practices and pricing in the food and drug
industries generally and particularly in the Company's principal markets; the
ability of the Company to implement the Company's Delta initiatives in
accordance with the currently contemplated schedule and budget; changes in the
financial markets which may affect the Company's cost of capital and the ability
of the Company to access the public debt and equity markets to refinance
indebtedness and fund the Company's capital expenditure program on satisfactory
terms; supply or quality control problems with the Company's vendors; and
changes in economic conditions which affect the buying patterns of the Company's
customers.
Report of Independent Auditors
Shareholders and Board of Directors
American Stores Company
We have audited the accompanying consolidated balance sheets of American Stores
Company and subsidiaries as of February 1, 1997, February 3, 1996 and January
28, 1995, and the related consolidated statements of earnings, shareholders'
equity and cash flows for each of the three fiscal years in the period ended
February 1, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American Stores
Company and subsidiaries at February 1, 1997, February 3, 1996 and January 28,
1995, and the consolidated results of their operations and their cash flows for
each of the three fiscal years in the period ended February 1, 1997, in
conformity with generally accepted accounting principles.
(Signature)
March 14, 1997, except for the
Subsequent Events Note, as to
which the date is April 8, 1997
Salt Lake City, Utah
<TABLE>
Consolidated Statements of Earnings
<S> <C> <C> <C>
52 weeks 53 weeks 52 weeks
(In thousands, except per share data) 1996 1995 1994
Sales $18,678,129 $18,308,894 $18,355,126
Cost of merchandise sold, including ware-
housing and transportation expenses 13,713,151 13,558,690 13,603,882
Gross profit 4,964,978 4,750,204 4,751,244
Operating and administrative expenses 4,203,302 4,043,381 4,101,176
Operating profit 761,676 706,823 650,068
Other income (expense):
Interest expense (171,558) (159,545) (170,703)
Other (85,566) 3,638 126,898
Total other income (expense) (257,124) (155,907) (43,805)
Earnings before income taxes 504,552 550,916 606,263
Federal and state income taxes (217,331) (234,107) (261,079)
Net earnings $ 287,221 $ 316,809 $ 345,184
Average shares outstanding 145,888 146,943 142,767
Net earnings per share $1.97 $2.16 $2.42
Fully diluted earnings per share $1.97 $2.16 $2.33
See notes to consolidated financial statements
</TABLE>
<TABLE>
Consolidated Balance Sheets
Year-end
<S> <C> <C> <C>
(In thousands of dollars, except per share data) 1996 1995 1994
ASSETS
Current Assets
Cash and cash equivalents $ 37,467 $ 102,422 $ 195,689
Receivables 318,878 319,688 291,760
Inventories 1,725,542 1,572,242 1,526,770
Prepaid expenses 66,510 69,098 48,711
Deferred income tax benefits 18,099 20,517 69,165
Total Current Assets 2,166,496 2,083,967 2,132,095
Property, Plant and Equipment, at cost
Land 636,068 597,804 522,014
Buildings 1,803,752 1,399,561 1,221,871
Fixtures and equipment 2,616,633 2,415,326 2,168,826
Leasehold improvements 781,454 736,682 654,441
5,837,907 5,149,373 4,567,152
Less accumulated depreciation and
amortization 2,250,876 2,019,557 1,800,714
Net Property, Plant and Equipment 3,587,031 3,129,816 2,766,438
Property Under Capital Leases, less
accumulated amortization of $110,379
in 1996, $106,993 in 1995 and $103,760
in 1994 66,682 76,084 84,690
Goodwill, less accumulated amortization
of $471,150 in 1996, $418,006 in 1995
and $365,271 in 1994 1,665,242 1,722,892 1,771,121
Other Assets 395,954 350,205 277,222
Total Assets $7,881,405 $7,362,964 $7,031,566
</TABLE>
<TABLE>
Consolidated Balance Sheets (concluded)
Year-end
<S> <C> <C> <C>
(In thousands of dollars, except per share data) 1996 1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 56,703 $ 125,413 $ 132,019
Current obligations under capital leases 9,300 9,739 9,195
Accounts payable 851,285 996,354 883,329
Accrued payroll and benefits 325,806 331,843 350,637
Current portion of self-insurance reserves 121,144 153,464 179,595
Income taxes payable 21,290 17,292 46,170
Other current liabilities 416,153 353,598 330,486
Total Current Liabilities 1,801,681 1,987,703 1,931,431
Long-term Debt,
less current maturities 2,556,734 2,038,636 1,988,710
Obligations Under Capital Leases,
less current obligations 56,410 66,380 75,367
Self-insurance Reserves, less current portion 403,981 434,028 464,119
Deferred Income Taxes 348,846 365,978 320,814
Other Liabilities 178,326 115,743 200,204
Shareholders' Equity
Common stock of $1.00 par value, authorized
325,000,000 shares; issued 149,889,236
shares in 1996 and 1995 and 144,542,156
shares in 1994 149,889 149,889 144,542
Additional paid-in capital 362,561 345,118 216,418
Retained earnings 2,136,744 1,942,874 1,708,672
Less cost of treasury stock; 3,974,595 shares
in 1996, 3,441,451 shares in 1995 and
1,571,094 shares in 1994 (113,767) (83,385) (18,711)
Total Shareholders' Equity 2,535,427 2,354,496 2,050,921
Total Liabilities and Shareholders' Equity $7,881,405 $7,362,964 $7,031,566
See notes to consolidated financial statements
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows
<S> <C> <C> <C>
52 weeks 53 weeks 52 weeks
(In thousands of dollars) 1996 1995 1994
Cash flows from operating activities:
Net earnings $287,221 $316,809 $345,184
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 440,445 404,562 407,286
Net loss (gain) on asset sales 265 (3,219) (158,448)
Self-insurance reserves (62,367) (56,222) (22,229)
Other 59,654 (92,688) (88,160)
(Increase) decrease in current assets:
Receivables 810 (32,694) (26,037)
Inventories (152,920) (54,645) (46,149)
Prepaid expenses 5,006 28,164 (10,347)
(Decrease) increase in current liabilities:
Accounts payable (145,069) 124,750 (44,369)
Other current liabilities 66,759 23,305 (49,866)
Accrued payroll and benefits (6,037) (18,794) 41,108
Income taxes payable 3,998 (30,249) (66,611)
Total adjustments 210,544 292,270 (63,822)
Net cash provided by operating activities 497,765 609,079 281,362
Cash flows from investing activities:
Expended for property, plant and equipment (877,630) (750,914) (538,033)
Proceeds from disposition of operations 377,618
Proceeds from sale of assets 47,670 50,511 21,680
Land investments (65,450) (21,697) (7,262)
Net cash used in investing activities (895,410) (722,100) (145,997)
Cash flows from financing activities:
Proceeds from long-term borrowing 350,000 278,500 530,000
Net addition to (reduction of) existing
long-term debt 99,388 (114,869) (479,967)
Principal payments for obligations under
capital leases (10,409) (10,332) (12,741)
Proceeds from exercise of stock options, other 24,860 22,049 31,996
Repurchase of common stock (37,798) (72,987)
Cash dividends (93,351) (82,607) (68,544)
Net cash provided by financing activities 332,690 19,754 744
Net (decrease) increase in cash and cash
equivalents (64,955) (93,267) 136,109
Cash and cash equivalents:
Beginning of year 102,422 195,689 59,580
End of year $ 37,467 $102,422 $195,689
See notes to consolidated financial statements
</TABLE>
<TABLE>
Consolidated Statements of Shareholders' Equity
<S> <C> <C> <C> <C> <C>
Additional
(In thousands of dollars, Common Paid-In Retained Treasury
except per share data) Stock Capital Earnings Stock Total
Balances at beginning of 1994 $144,542 $190,173 $1,432,032 $ (24,462) $1,742,285
Net earnings -- 1994 (52 weeks) 345,184 345,184
Issuance of 427,512 shares of
stock for stock options and awards 2,629 5,259 7,888
Dividends ($.48 per share) (68,544) (68,544)
Stock Purchase Incentive Plans including
issuance of 40,000 shares 21,245 496 21,741
Purchase of 152 shares for treasury (4) (4)
Other 2,371 2,371
Balances at year-end 1994 $144,542 $216,418 $1,708,672 $ (18,711) $2,050,921
Net earnings -- 1995 (53 weeks) 316,809 316,809
Issuance of 592,143 shares of
stock for stock options and awards 914 7,583 8,497
Dividends ($.56 per share) (82,607) (82,607)
Stock Purchase Incentive Plans including
issuance of 60,000 shares 3,869 733 4,602
Conversion of convertible notes 5,347 119,215 124,562
Purchase of 124 shares for treasury (3) (3)
Stock Repurchase Program
2,522,500 shares (72,987) (72,987)
Other 4,702 4,702
Balances at year-end 1995 $149,889 $345,118 $1,942,874 $ (83,385) $2,354,496
Net earnings -- 1996 (52 weeks) 287,221 287,221
Issuance of 563,664 shares of
stock for stock options, awards and
Employee Stock Purchase Plan (ESPP) 7,891 7,497 15,388
Dividends ($.64 per share) (93,351) (93,351)
Stock Purchase Incentive Plans 8,856 8,856
Purchase of 6,562 shares for treasury,
including ESPP buybacks (103) (78) (181)
Stock Repurchase Program 1,090,000 shares (37,798) (37,798)
Other 799 (3) 796
Balances at year-end 1996 $149,889 $362,561 $2,136,744 $(113,767) $2,535,427
See notes to consolidated financial statements
</TABLE>
Notes to Consolidated Financial Statements
Nature of Operations
American Stores Company is one of the nation's leading food and drug retailers,
operating 1,695 stores in 27 states, including 166 combination stores which are
jointly operated by a food store division and a drug store division and are
counted as two separate stores. The Company operates in a single industry
segment and its principal lines of business are food, drug and combination
food/drug stores. Food stores account for more than two-thirds of the Company's
sales and operating profit. Principal markets include California, Illinois, New
Jersey, Pennsylvania, Indiana and Arizona, where products are sold primarily to
retail customers.
Significant Accounting Policies
Fiscal Year. The fiscal year of the Company ends on the Saturday nearest to
January 31. All references herein to `1996'', ``1995'' and "1994" represent the
52-week fiscal year ended February 1, 1997, the 53-week fiscal year ended
February 3, 1996, and the 52-week fiscal year ended January 28, 1995,
respectively.
Basis of Consolidation. The consolidated financial statements include the
accounts of American Stores Company and all subsidiaries. Accordingly, all
references herein to "American Stores Company" include the consolidated results
of its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents. The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
The carrying amounts reported in the balance sheet for cash and cash equivalents
approximate those assets' fair value. The balance of cash was higher at year-
end 1994 due to proceeds held from the sale of the Star Market food division and
45 Acme Markets stores.
Depreciation and Amortization. Depreciation and amortization are provided on a
straight-line basis over the estimated useful lives of owned assets. Leasehold
improvements and leased properties under capital leases are amortized over the
estimated useful life of the property or over the term of the lease, whichever
is shorter. The depreciable lives are primarily 20 to 40 years for buildings, 3
to 10 years for fixtures and equipment and 10 to 30 years for leasehold
improvements and property under capital lease, depending on the life of the
lease. Depreciation expense related to property, plant and equipment amounted
to $359.9 million, $324.5 million and $316.2 million in fiscal 1996, 1995 and
1994, respectively.
Goodwill. Goodwill, principally from the acquisition of Lucky Stores, Inc. in
1988, represents the excess of cost over fair value of net assets acquired and
is being amortized over 40 years using the straight-line method.
Costs of Opening and Closing Stores. The costs of opening new stores are
charged against earnings as incurred. When operations are discontinued and a
store is closed, the remaining investment, net of salvage value, is charged
against earnings and, for leased stores, a provision is made for the remaining
lease liability, net of expected sublease income.
Income Taxes. The Company provides for deferred income taxes or credits as
temporary differences arise in recording income and expenses between financial
reporting and tax reporting. Amortization of goodwill is not deductible for
purposes of calculating income tax provisions.
Net Earnings Per Share. Net earnings per share are determined by dividing the
weighted average number of shares outstanding during the year into net earnings.
Common share equivalents in the form of stock options are excluded from the
calculation of net earnings per share since they do not have a material dilutive
effect on per share figures. Fully diluted earnings per share in 1994 include
the assumed conversion of subordinated convertible debt.
Environmental Remediation Costs. Costs incurred to investigate and remediate
contaminated sites, caused primarily by defective underground petroleum storage
tanks and ground water contamination, are accrued when identified and estimable.
The related costs are expensed unless the remediation extends the economic
useful life of the assets employed at the site.
Self-insurance. The Company is self-insured for property loss, workers'
compensation, general liability and automotive liability, subject to specific
retention levels. The Company is required in certain cases to obtain letters of
credit to support its self-insured status. At year-end 1996, the Company's
self-insured liabilities were supported by approximately $221.1 million of
undrawn letters of credit. The Company is also self-insured for health care
claims for eligible active and retired associates. Consulting actuaries assist
the Company in determining its liability for self-insured claims. Self-insured
liabilities, with the exception of postretirement health care benefits, are not
discounted.
Impairment. Impairment is recognized on long-lived assets when indicators of
impairment are present and the undiscounted cash flows are less than the related
assets' carrying value.
Stock-based Compensation. The Company continues to account for stock-based
compensation using the intrinsic value method and provides pro forma footnote
disclosure of the impact of the fair value method.
Inventories
Approximately 94% of inventories are accounted for using the LIFO (last-in,
first-out) method for inventory valuation. If the FIFO and average cost methods
had been used, inventories would have been $324.5 million, $313.1 million and
$300.3 million higher at year-end 1996, 1995 and 1994, respectively. The LIFO
charge to earnings was $11.4 million in 1996, $12.8 million in 1995 and $8.2
million in 1994. Under this method, the cost of merchandise sold that is
reported in the financial statements approximates current costs and thus reduces
the distortion in reported earnings due to increasing cost.
Advertising Expense
Beginning in the first quarter of 1996, the Company, in connection with its
consolidation efforts, classified advertising expense as a cost of merchandise
sold. Previously these expenses were classified as operating and administrative
expenses. Prior years have been reclassified to conform to the current year
presentation.
The Company expenses advertising costs when the advertisement occurs. Total
advertising expense amounted to $133.2 million, $168.3 million and $167.2
million in 1996, 1995 and 1994, respectively. Capitalized advertising costs are
immaterial for the periods presented.
Disposition of Operations
On September 8, 1994, the Company sold its 33-store Star Market food division
with a basis of $167.0 million for $288.0 million and the assumption of
substantially all of its outstanding liabilities. On January 19, 1995, the
Company sold 45 of its Acme Markets stores with a basis of $48.4 million for
$89.6 million. The assets sold consisted primarily of property, plant,
equipment and inventories.
Debt
In June of 1996, the Company issued $350 million, 8.0% debentures due June 1,
2026 at 99.3% to yield 8.1% under an $800 million shelf registration statement
filed on February 18, 1994. The Company received net proceeds of approximately
$344 million which were used to pay off financings totaling $100 million at an
average interest rate of 8.25% and to refinance additional short-term variable
rate borrowings under the Company's principal bank credit agreement.
The Company's principal bank credit agreement at year-end 1996 was a $1.0
billion revolving credit facility, which expires in 1999. Interest rates for
borrowings under the facility are established at the time of borrowing through
four different pricing options. Terms of the revolving credit facility provide
for borrowings from participating banks or borrowings through issuance of
commercial paper that is supported by the facility. The credit facility
provides for a covenant of cash flow to total debt. The Company also has $250
million of 364-day committed bank lines and $320 million of uncommitted bank
lines, which are used for overnight and short-term bank borrowings. At year-end
1996, the Company had $957 million of debt supported by the credit facility and
$183 million outstanding under bank lines, leaving unused committed borrowing
capacity of $110 million. The Company has classified short-term borrowings as
long-term due to its intent and ability to refinance these borrowings on a long-
term basis.
The Company capitalized interest costs associated with construction projects of
$10.6 million, $8.5 million and $3.9 million in 1996, 1995 and 1994,
respectively. The Company made cash payments for interest (net of amounts
capitalized) of $160.8 million, $169.5 million and $172.0 million in 1996, 1995
and 1994, respectively.
The aggregate amounts of debt maturing in each of the next five fiscal years are
listed below:
<TABLE>
<S> <C>
(In thousands of dollars)
1997 $ 56,703
1998 72,786
1999 1,323,382
2000 148,484
2001 23,383
Thereafter 988,699
Total debt $2,613,437
</TABLE>
The Company's various loans secured by real estate are collateralized by
properties with a net book value of $186.8 million at year-end 1996.
A summary of debt is as follows:
<TABLE>
<S> <C> <C> <C>
(In thousands of dollars) 1996 1995 1994
Public Debt (unsecured):
8.0% Debentures due 2026 $ 350,000
7.4% Notes due 2005 200,000 $ 200,000
Medium Term Notes--fixed interest rates due
1997 through 2003--average interest rate 7.9% 250,000 250,000 $ 250,000
9-1/8% Notes due 2002 249,191 249,075 248,966
7-1/4% Convertible Subordinated Notes due 2001 174,997
Bank Borrowings (unsecured):
Revolving credit facility--variable
interest rates, effectively due 1999--
average interest rates 5.7% in 1996,
6.2% in 1995 and 4.8% in 1994 957,000 865,000 645,000
Lines of credit and commercial paper--
variable interest rates, effectively
due 1999--average interest rates 5.6%
in 1996, 6.4% in 1995 and 4.7% in 1994 183,000 69,000 210,000
Other borrowings--due 2000--average
interest rates 6.6% in 1996, 6.5%
in 1995 and 8.8% in 1994 75,000 125,000 175,000
Other Unsecured Debt:
9.8% due in 1999 160,000 210,000 210,000
10.6% due in 2004 108,893 108,893 108,893
Other--due through 2001 2,988 3,625 4,211
Debt Secured by Real Estate:
Fixed interest rates--due through 2014--
average interest rate 13.3% in 1996,
13.3% in 1995 and 13.4% in 1994 77,365 83,456 93,662
Outstanding debt 2,613,437 2,164,049 2,120,729
Less current maturities 56,703 125,413 132,019
Long-term debt $2,556,734 $2,038,636 $1,988,710
</TABLE>
During 1996, the Company entered into an interest rate swap agreement with a
notional amount of $200 million, for the purpose of hedging the interest rate on
a portion of the debt the Company anticipates issuing in 1997 under the shelf
registration statement. The 10-year swap calls for the payment of a fixed
interest rate of 6.7% (comprised of a 10-year treasury rate of 6.3% plus the
swap rate) and the receipt of a variable interest rate. Net interest paid or
received related to such agreement at the time of the debt issuance will be
recorded using the accrual method and will be amortized in interest expense over
the life of the financing. As of year-end 1996, the estimated fair value of the
swap agreement based on market quotes was $2.8 million.
The Company also uses derivative financial instruments to manage interest and
currency risks on the 9.8% unsecured debt due in 1999, and accounts for it as a
hedge. The borrowing totaled 22 billion yen at a yen interest rate of 6.0%. At
the time the loan originated, the Company entered into an interest rate and
currency exchange swap agreement (swap) that matches the interest and principal
payments of the yen loan. Under the swap agreement, the Company makes fixed
rate interest payments of 9.8% and principal payments totaling $160 million and
receives payments equal to the underlying yen loan obligation. The proceeds, in
yen, from this swap are used to satisfy the yen-based interest and will be used
to satisfy the principal payment. As of year-end 1996, the estimated fair value
of the remaining swap agreement based on market quotes was approximately $28
million and equaled the loss on the yen loans due to currency and interest rate
movements, resulting in an aggregate fair value of zero.
The Company is exposed to credit losses in the event of nonperformance by the
counterparties to its swap agreements. Such counterparties are highly-rated
financial institutions and the Company anticipates they will be able to satisfy
their obligations under the contracts.
The carrying amounts of the Company's bank borrowings with variable interest
rates approximate fair value. The fair value of the Company's borrowings with
fixed interest rates is estimated using discounted cash flow analyses, based on
current market rates where available, or on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. The fair value of
outstanding debt as of year-end 1996 was $2.7 billion compared to the carrying
value of $2.6 billion.
Leases
The Company leases retail stores, offices, warehouses and distribution
facilities. Initial lease terms average approximately 20 years, plus renewal
options, and may provide for contingent rent based on sales volume in excess of
specified levels.
The summary below shows the aggregate future minimum rent commitments at year-
end 1996 for both capital and operating leases. Operating leases are shown net
of an aggregate $76.5 million of minimum rent income receivable under non-
cancellable subleases. Operating leases also exclude the amortization of
acquisition-related fair value adjustments.
<TABLE>
<S> <C> <C>
Operating Capital
(In thousands of dollars) Leases Leases
1997 $ 172,144 $15,008
1998 154,317 13,655
1999 144,341 12,016
2000 131,477 9,775
2001 118,327 8,316
Thereafter 944,774 51,030
Total minimum rent commitments $1,665,380 109,800
Less executory costs (such as taxes, insurance
and maintenance) included in capital leases 1,008
Net minimum lease payments 108,792
Less amount representing interest 43,082
Obligations under capital leases, including $9.3
million due within one year $ 65,710
</TABLE>
Rent expense, excluding the amortization of acquisition-related fair value
adjustments of $14.2 million in 1996, $14.3 million in 1995 and $14.5 million in
1994, was as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Minimum Sublease Contingent Total
(In thousands of dollars) Rent Rent Net Rent Rent
1996 $189,105 $15,663 $173,442 $24,305 $197,747
1995 $180,933 $14,782 $166,151 $26,003 $192,154
1994 $184,116 $ 9,064 $175,052 $26,508 $201,560
</TABLE>
Income Taxes
Federal and state income taxes charged to earnings are summarized below:
<TABLE>
<S> <C> <C> <C>
52 weeks 53 weeks 52 weeks
(In thousands of dollars) 1996 1995 1994
Current:
Federal $206,313 $124,317 $229,052
State 25,731 15,979 34,906
Deferred:
Federal (12,948) 81,859 (2,469)
State (1,765) 11,952 (410)
Federal and state income taxes $217,331 $234,107 $261,079
</TABLE>
Cash payments of income taxes were $226.8 million, $169.2 million and $354.6
million in 1996, 1995 and 1994, respectively.
The Company's effective income tax rate differs from the statutory federal
income tax rate as follows:
<TABLE>
<S> <C> <C> <C>
52 weeks 53 weeks 52 weeks
(Percent of earnings before income taxes) 1996 1995 1994
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income tax rate, net of federal
income tax effect 4.8 5.1 5.7
Goodwill amortization 4.2 3.8 3.6
Tax credits (0.1) (0.4) (0.6)
Other (0.8) (1.0) (0.6)
Effective income tax rate 43.1% 42.5% 43.1%
</TABLE>
Deferred tax benefits and liabilities as of year-end 1996 related to the
following temporary differences:
<TABLE>
<S> <C> <C> <C>
(In thousands of dollars) Benefits Liabilities Total
Basis in fixed assets $ 33,678 $(259,105) $(225,427)
Self-insurance reserves 191,391 191,391
Purchase accounting valuation 48,546 (327,530) (278,984)
Compensation and benefits 45,609 (62,121) (16,512)
Other, net 91,415 (92,630) (1,215)
Deferred tax benefits and liabilities $410,639 $(741,386) $(330,747)
</TABLE>
No valuation allowances have been considered necessary in the calculation of
deferred tax benefits.
Stock Compensation Plans
The Company has two stock-based compensation plans, which are described below.
Fixed Stock Option Plans
The Company's 1989 Stock Option and Stock Awards Plan (1989 Plan) provides for
the grant of options to purchase shares of common stock and the issuance of
restricted stock awards for an aggregate of up to 4.8 million shares of common
stock, subject to certain antidilution adjustments. At year-end 1996, there
were 1.8 million shares reserved for future grants under the 1989 Plan.
A summary of the Company's stock option activity and related information for
1996, 1995 and 1994 follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1994
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
(Options in thousands) Options Price Options Price Options Price
Outstanding at beginning of year 1,920 $22.73 1,360 $11.24 2,183 $11.20
Granted 1,356 $35.81 1,548 $24.40
Exercised (135) $17.40 (826) $ 7.28 (610) $12.14
Forfeited / Expired (126) $25.99 (162) $21.01 (213) $ 8.26
Outstanding at end of year 3,015 $28.71 1,920 $22.73 1,360 $11.24
Exercisable at end of year 212 237 457
Reserved for future grants 1,798 3,117 4,503
</TABLE>
At year-end 1996, there were stock options for 2.4 million shares outstanding
under the 1989 Plan, which expire in 2004 and 0.6 million options outstanding
under an expired plan, which expire through 2002. Exercise prices for
outstanding options as of year-end 1996 ranged from $13.69 to $35.81 and the
weighted-average remaining contractual life of those options is 5.9 years.
Compensation expense related to other options decreased pre-tax earnings by $3.4
million in 1995 and $2.9 million in 1994.
Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan (ESPP), which began January 1, 1996
enables eligible employees of the Company to subscribe for shares of common
stock on quarterly offering dates at a purchase price which is the lesser of 85%
of the fair market value of the shares on the first day or the last day of the
quarterly offering period. For financial reporting purposes, the discount of
15% is treated as equivalent to the cost of issuing stock. During 1996,
employees contributed $13.6 million into the ESPP program and 0.5 million shares
were issued. There were no shares issued in 1995. At year-end 1996, 6.5
million shares were available for future issuances.
Fair Value Disclosures
The Company's pro forma compensation expense under the fair value method,
utilizing the Black-Scholes option valuation model, for fixed stock options
granted in 1996 and 1995 and for the ESPP in 1996, after income taxes, was $4.8
million for 1996 and $.8 million for 1995. Pro forma net income would have been
$282.4 million in 1996 and $316.0 million in 1995. Earnings per share would have
been $1.94 per share for 1996 and $2.15 per share for 1995 for primary earnings
per share and $1.93 per share for 1996 and $2.15 per share for 1995 for fully
diluted earnings per share.
The fair value for these options was estimated at the date of grant assuming an
expected volatility of 21% and a dividend yield of 1.9%. Other assumptions for
1996 and 1995 are as follows:
1996 1996 ESPP 1995
Average risk-free interest rate 6.1% 5.1% 6.8%
Average life of options (years) 4.0 0.25 5.0
Average vesting date (years) 3.0 2.0 5.0
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of fair value of its employee stock options.
Because the fair value method of accounting for stock-based compensation has not
been applied to options granted prior to January 1, 1995, the preceding pro
forma compensation cost may not be representative of that to be expected in
future years.
Stock Purchase Incentive Plans
In 1992, the Company's shareholders approved both the American Stores Company
Key Executive Stock Purchase Incentive Plan and the American Stores Company
Board of Directors Stock Purchase Incentive Plan (Plans). The Plans are
intended to promote the long-term growth and financial success of the Company,
and to strengthen the link between management and shareholders. The Board of
Directors Plan was terminated on March 21, 1995, however the termination does
not affect the terms of any awards outstanding on the date of termination.
Since the Plans' inception, the Company has awarded to certain directors and key
executive officers the right to purchase a specified number of shares of the
Company's stock and extended to such directors and officers full recourse
interest bearing purchase loans to acquire the stock. The stock purchased by
the directors and officers with the purchase loans was issued from treasury
shares. The purchase loans have an eight-year term and accrue interest at rates
ranging from 5.3% to 7.8%. The acquisition price of the stock was the average
of the high and low value on the day acquired, as reported on the New York Stock
Exchange. Shares held by the executives and directors pursuant to the Plans
were 1.8 million for 1996, 2.1 million for 1995 and 1994, with corresponding
loan balances of $40.7 million, $42.6 million and $40.3 million, respectively.
The aggregate principal of these notes outstanding is recorded as a reduction of
additional paid-in capital in the balance sheet.
Participants purchasing stock under the Plans are eligible for a deferred cash
incentive award, which is generally payable at the end of a five-year
performance cycle. One-half of the deferred award will be based on the
continuation of service with the Company (Service Component), and the other half
will be based on the Company's relative stock price performance versus a
selected group of companies in the retail food and drug industry (Performance
Component). The maximum combined Performance Component and Service Component
payable to participants will not exceed the original principal amount of the
purchase loan plus accrued but unpaid interest. The estimated deferred cash
incentive award is recorded as compensation expense on the income statement and
amounts earned to date are recognized as a credit to the note balances in
additional paid-in capital in the balance sheet. See Subsequent Events note,
following.
Preferred Share Purchase Rights
During March 1988, the Board of Directors of the Company declared a distribution
of one Preferred Share Purchase Right (Right) for each outstanding share of the
Company's common stock. The Rights were issued pursuant to a Rights Agreement
between the Company and First Chicago Trust Company of New York as Rights Agent,
which agreement has been amended from time to time.
Each Right as amended entitles shareholders to purchase one four-hundredth of a
share of a new series of preferred stock at an exercise price of $62.50. The
Rights will be exercisable only if a person or group acquires 10% or more of the
Company's common stock or announces a tender offer, the consummation of which
would result in ownership by a person or group of 10% or more of the Company's
common stock. The Rights will generally not apply to a 10% or greater position
held by Mr. L. S. Skaggs, the Company's former Chairman, or certain other
related parties unless such entities increase their aggregate beneficial
ownership of the Company's common stock by more than 1% over the amount of their
percentage holdings on June 21, 1996, other than increases resulting from an
acquisition of common stock by the Company or the execution, delivery and
performance of the Stock Purchase Agreement and Registration Rights Agreement
dated February 20, 1997 entered into between the Company and Mr. Skaggs and
certain family members and trusts. The Company will be entitled to redeem the
Rights at one-quarter cent per Right any time before a 10% or greater position
has been acquired. The authorized capital of the Company includes 10 million
shares of preferred stock, par value $1.00, of which 0.4 million shares have
been designated Series A Junior Participating Preferred Stock.
If the Company is acquired in a merger or other business combination
transaction, each Right will "flip over" and entitle its holder to purchase, at
the Right's then current exercise price, a number of the acquiring company's
common shares having a market value at that time of twice the Right's exercise
price.
In addition, if a person or group acquired 10% or more of the outstanding
Company common stock, each Right will "flip in" and entitle all other holders to
purchase, at the Right's then current exercise price, a number of shares of the
Company's common stock having a market value of twice the Right's exercise
price. Further, at any time after a person or group acquires 10% or more of the
outstanding Company common stock but prior to the acquisition of 50% of such
stock, the Board of Directors may, at its option, exchange part or all of the
Rights (other than Rights held by the acquiring person or group) for shares of
the Company's common stock at an exchange rate of one share of common stock for
each Right.
On February 22, 1995, the Board of Directors expressed its intent, subject to
the exercise of its fiduciary duties, to allow the Rights Agreement pertaining
to the Company's preferred share purchase rights, dated March 18, 1988, as
amended, to expire in accordance with its terms on March 18, 1998, without
renewal or extension.
Repurchase of Common Stock
In June 1996 the Company replaced its existing stock repurchase program with a
new repurchase program which authorizes the repurchase of up to two million
shares of common stock. During 1996 the Company repurchased 1.1 million shares
of its common stock at an average price of $34.67 per share in accordance with
the Company's stock repurchase programs. As of February 1, 1997, an additional
1.9 million shares remained authorized for repurchase. See Subsequent Events
note, following.
Postretirement Health Care Benefits
The Company provides certain health care benefits to eligible retirees of
certain defined employee groups under two unfunded plans, a defined dollar and a
full coverage plan.
The accumulated postretirement health care benefit obligation is as follows:
<TABLE>
<S> <C> <C> <C>
(In thousands of dollars) 1996 1995 1994
Current retirees $38,107 $37,396 $35,787
Current active employees 14,776 14,275 13,521
Unrecognized gain 12,969 14,390 16,819
Accumulated postretirement
benefit obligation (`APBO'') $65,852 $66,061 $66,127
Discount rate 7.5% 8.5% 8.5%
<C>
The components of postretirement health care benefit expense are as follows:
</TABLE>
<TABLE>
<S> <C> <C> <C>
52 weeks 53 weeks 52 weeks
(In thousands of dollars) 1996 1995 1994
Service cost - benefits earned during
the year $ 671 $ 768 $1,013
Interest cost on APBO 3,896 4,006 3,730
Adjustment of APBO (789) (465) (598)
Net postretirement health care
benefit expense $3,778 $4,309 $4,145
</TABLE>
The Company assumed no increase in the cost of the defined dollar benefit plan
in any year presented. Changes in assumptions do not impact the defined dollar
plan. The assumed health care cost trend rates used to measure the expected
cost of benefits included a rate of increase of 9% for 1997 decreasing to 6% by
the year 2000. Increasing the assumed health care cost trend rates for the full
coverage plan by one percentage point in each year would have resulted in an
increase of $2.4 million in the APBO and no material increase in annual health
care expense.
Retirement Plans
The Company sponsors and contributes to a defined contribution retirement plan,
American Stores Retirement Estates (ASRE). This plan was authorized by the
Board of Directors for the purpose of providing retirement benefits for
associates of American Stores Company and its subsidiaries. The plan covers
associates meeting age and service eligibility requirements, except those
represented by a labor union, unless the collective bargaining agreement
provides for participation. Contributions to ASRE are made at the discretion of
the Board of Directors.
The Company also contributes to multi-employer defined benefit retirement plans
in accordance with the provisions of the various labor contracts that govern the
plans. The multi-employer plan contributions are generally based on the number
of hours worked. Information about these plans as to vested and non-vested
accumulated benefits and net assets available for benefits is not available.
Retirement plans expense was as follows:
<TABLE>
<S> <C> <C> <C>
52 weeks 53 weeks 52 weeks
(In thousands of dollars) 1996 1995 1994
Company sponsored plans $ 88,106 $ 81,704 $ 84,149
Multi-employer plans 95,822 86,723 67,391
Retirement plans expense $183,928 $168,427 $151,540
</TABLE>
During 1994, the Company entered into Employment Agreements (Agreements) with 17
of the Company's key executive officers. During 1995 the Company entered into
an Agreement with an additional employee. The Agreements are for terms of
either three or five years, may be renewed by the Company for subsequent three-
year or five-year terms, contain usual and customary terms of employment
agreements and provide the officers with a special long-range retirement plan.
Under the retirement plan, the executives are entitled to receive an annual
payment for a period of 20 years beginning at age 57 or upon termination of
employment, whichever occurs later. The retirement benefit is calculated as a
percentage of the executive's average target compensation objective during the
last two years of his or her employment under the Agreement. The benefit ranges
from 9% to 40% based on years of service with the Company. The retirement
benefit will be forfeited if the executive enters into competition with the
Company. At year-end 1996 17 of the Agreements remained in effect.
Special Charges
The Company recorded special charges aggregating approximately $100.0 million,
before taxes, or $.41 per share, during 1996 related primarily to its Delta
initiatives. The Delta initiatives are designed to transform the Company from a
holding company to a unified operating company.
The components of the charge include: warehouse consolidation costs,
administrative office consolidation costs, closed store costs, asset impairment
costs and other miscellaneous charges. The cost of consolidating four general
merchandise warehouses into one in southern California totaled $26.4 million and
is primarily related to lease termination costs, a reserve for the anticipated
loss on the sale of owned facilities (based on management's estimated fair
market value) and adjusting inventories to a common inventory valuation method.
The cost of consolidating administrative offices in Salt Lake City and Chicago
totaled $26.3 million and relates to asset write-offs, lease termination costs
and severance costs. Closed store costs included mainly lease termination costs
and fixed asset write-offs totaling $12.9 million. Asset impairment charges
totaling $26.4 million consist of replacements of outdated computer systems and
impairment of groups of stores and other assets that do not fit the long-term
strategic plan of the Company. In addition, other reserves totaling $8.0
million were recorded. The special charges are included in cost of merchandise
sold ($10.0 million), operating expenses ($15.5 million) and other non-operating
expense ($74.5 million). As of year-end 1996, the Company charged $18.0 million
against the reserve, of which $12.3 million related to asset impairment.
Disposal of impaired assets is expected to be complete in fiscal 1998.
Severance costs included above resulted from the Company's commitment to
restructure and consolidate operations. During the fourth quarter 1996,
consolidation of human resources, payroll, Drug Store administration and general
merchandise buying functions were announced and the related costs were
measurable and recognized. The Company recorded a charge to operating and
administrative expense of $15.5 million, related to termination benefits to be
paid to an estimated 445 employees. There were no payments made nor employees
terminated during the year. The consolidation is expected to be complete in
fiscal 1998.
Contingencies
The Company has identified environmental contamination sites related primarily
to underground petroleum storage tanks at various store, warehouse, office and
manufacturing facilities (related to current operations as well as previously
disposed of businesses). At most such locations, remediation is either underway
or completed. Undiscounted reserves have been established for each
environmental contamination site unless an unfavorable outcome is remote.
Although the ultimate outcome and expense of environmental remediation is
uncertain, the Company believes that required remediation and continuing
compliance with environmental laws, in excess of current reserves, will not have
a material adverse effect on the financial condition or results of operations of
the Company. Charges against earnings for environmental remediation were not
material in 1996, 1995 or 1994.
Legal Proceedings
The Company is involved in various claims, administrative proceedings and other
legal proceedings which arise from time to time in connection with the conduct
of the Company's business. In the opinion of management, such proceedings will
not have a material adverse effect on the Company's financial condition or
results of operations.
Subsequent Events
On February 20, 1997, the Company and the family of L. S. Skaggs entered into an
agreement for the repurchase by the Company of 12.2 million shares of its common
stock from the Skaggs family and certain family and charitable trusts for $45
per share, the closing price on the date of the agreement (the Repurchase).
Pursuant to the agreement, the Company filed, at its cost, a registration
statement to enable such shareholders to sell 15.4 million additional shares in
a secondary offering. The closing of the secondary offering, at $43 per share,
and the Repurchase was consummated on April 8, 1997. In addition, the Company
has granted the underwriters for the offering an option to purchase an
additional 2.3 million shares to cover over-allotments. If the option is
exercised, these additional shares would be primary shares to be issued by the
Company. The Company has agreed to reimburse the selling shareholders for
underwriting fees, legal fees and other expenses incurred by them in connection
with the transactions.
The selling shareholders have agreed to enter into a 10-year standstill
agreement restricting purchases and sales of the Company's shares, proxy fights
and other actions.
On March 28, 1997, the Company increased the capacity of its existing revolving
credit facility from $1 billion to $2 billion, which includes a $1.5 billion
five-year revolving credit facility and a $500 million 364-day revolving credit
facility (the Amended Credit Facilities). The Company plans to finance the $550
million Repurchase initially through the Amended Credit Facilities. Subject to
market conditions, the Company expects to refinance the indebtedness incurred in
connection with the Repurchase through public equity and/or debt issuances over
the next six to 12 months.
In anticipation of the expiration of the 1992 Key Executive Stock Purchase
Incentive Plan, the Board of Directors recently approved a new stock-based
management incentive program. The new program will continue to link executive
incentive compensation to shareholder return. The program involves the grant of
market-priced stock options that would ordinarily begin to vest on the fifth
anniversary of the grant date but which will vest on an accelerated basis, in
part, if stock ownership requirements are satisfied and, in part, if the Company
achieves annual performance goals. A total of approximately 1.8 million options
were granted to 16 senior officers under the 1989 Stock Option and Stock Award
Plan in connection with the new incentive program on February 24, 1997 and a
total of approximately 1.3 million options were granted to an additional 30
senior officers under a new plan on March 27, 1997, in each case with an
exercise price of $45 per share.
Quarterly Results (Unaudited)
In the opinion of management, all adjustments necessary for a fair presentation
have been included:
<TABLE>
<S> <C> <C> <C> <C> <C>
(In thousands of dollars, First Second Third Fourth (4) Fiscal
except per share data) Quarter Quarter Quarter Quarter Year
1996 (1)
Sales $4,580,028 $4,625,066 $4,563,362 $4,909,673 $18,678,129
Gross profit 1,195,176 1,226,328 1,216,966 1,326,508 4,964,978
Operating profit 156,814 187,654 177,562 239,646 761,676
Other (5,747) (1,163) (1,550) (77,106) (85,566)
Net earnings 64,240 83,129 75,757 64,095 287,221
Net earnings per share $.44 $.57 $.52 $.44 $1.97
Fully diluted earnings per share .44 .57 .52 .44 1.97
1995 (2)(3)
Sales $4,362,237 $4,494,890 $4,361,183 $5,090,584 $18,308,894
Gross profit (5) 1,120,869 1,150,890 1,145,142 1,333,303 4,750,204
Operating profit 134,576 165,277 154,632 252,338 706,823
Other (852) 3,188 1,435 (133) 3,638
Net earnings 53,883 73,937 67,445 121,544 316,809
Net earnings per share $.37 $.50 $.46 $.83 $2.16
Fully diluted earnings per share .37 .50 .46 .83 2.16
1994
Sales $4,607,652 $4,669,018 $4,431,863 $4,646,593 $18,355,126
Gross profit (5) 1,179,552 1,193,243 1,140,242 1,238,207 4,751,244
Operating profit 131,756 169,830 120,982 227,500 650,068
Other (584) (562) 89,767 38,277 126,898
Net earnings 47,963 69,034 97,934 130,253 345,184
Net earnings per share $.34 $.48 $.69 $.91 $2.42
Fully diluted earnings per share .33 .47 .66 .87 2.33
</TABLE>
(1) Fourth quarter 1996 includes special charges totaling $100.0 million, pre-
tax ($.41 per share, after tax) included in Gross Profit ($10.0 million),
Operating Profit ($25.5 million) and Other ($74.5 million).
(2) 53-week year
(3) The fourth quarter of fiscal 1995 is a 14-week quarter, compared to 13-week
quarters for fiscal 1996 and 1994.
(4) Operating profit in the fourth quarter has exceeded the prior three quarters
in each of the three years presented due to the seasonality of the food and
drug retail business and LIFO inventory adjustments. The holiday season
in the fourth quarter benefits the food and drug retail business. Increased
cold and flu occurrences during this quarter also benefit the drug store
operations.
(5) Beginning in the first quarter of 1996, the Company, in connection with its
consolidation efforts, classified advertising expense as a cost of
merchandise sold. Previously, these expenses were classified as operating
expenses. Prior years have been reclassified to conform to the current year
presentation.
Exhibit 22
AMERICAN STORES COMPANY
PRINCIPAL SUBSIDIARIES
YEAR END 1996
<TABLE>
<S> <C>
State of
Subsidiary Incorporation
Jewel Companies, Inc. DE
Acme Markets, Inc. DE
Jewel Food Stores, Inc. NY
American Drug Stores, Inc., dba IL
Osco Drug
Sav-on
RxAmerica, Inc. DE
Health `n' Home Corporation DE
The Open Pharmacy Network, Inc. DE
American Food and Drug, Inc. DE
Jewel Osco Southwest, Inc. IL
Lucky Stores, Inc. DE
American Stores Properties, Inc. DE
American Stores Realty Corp. PA
Skaggs Telecommunications Service, Inc. UT
American Procurement and Logistics Company DE
ASC Services, Inc. DE
Kap's KITCHEN AND PANTRY, INC. DE
</TABLE>
Exhibit 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of American Stores Company of our report dated March 14, 1997, except for the
Subsequent Events Note, as to which the date is April 8, 1997, included in the
1996 Annual Report to Shareholders of American Stores Company.
We also consent to the incorporation by reference in the Registration Statements
(Forms S-8 Nos. 33-25613; 2-94235; 33-48203; 33-48204;
33-08801; 33-32150; 33-63869 and S-3 Nos. 33-52331 and 333-22701) of our report
dated March 14, 1997, except for the Subsequent Events Note, as to which the
date is April 8, 1997, with respect to the consolidated financial statements
incorporated by reference in the Annual Report (Form 10-K) for the year ended
February 1, 1997.
ERNST & YOUNG LLP
Salt Lake City, Utah
April 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and income statements for the Fifty-two week period ended February 1,
1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-1-1997
<PERIOD-END> FEB-1-1997
<CASH> 37,467<F1>
<SECURITIES> 0
<RECEIVABLES> 318,878
<ALLOWANCES> 0
<INVENTORY> 1,725,542
<CURRENT-ASSETS> 2,166,496
<PP&E> 5,837,907
<DEPRECIATION> 2,250,876
<TOTAL-ASSETS> 7,881,405
<CURRENT-LIABILITIES> 1,801,681
<BONDS> 2,613,144
0
0
<COMMON> 149,889
<OTHER-SE> 2,385,538
<TOTAL-LIABILITY-AND-EQUITY> 7,881,405
<SALES> 18,678,129
<TOTAL-REVENUES> 18,678,129
<CGS> 13,713,151
<TOTAL-COSTS> 13,713,151
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171,558
<INCOME-PRETAX> 504,552
<INCOME-TAX> 217,331
<INCOME-CONTINUING> 287,221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 287,221
<EPS-PRIMARY> 1.97
<EPS-DILUTED> 1.97
<FN>
<F1>All numbers except EPS are in (000's).
</FN>
</TABLE>
